ON THE HORIZON - Lost in Transit: Navigating Broker Authority

Introduction

Shipping is a fast-moving industry, with fixtures sometimes concluded quickly and with various moving parts and parties involved, including shipbrokers who can be fundamental to managing and executing the process, often acting on the authority of others. Due to their role, their identity and the scope of their authority is of great importance and, if not properly documented or understood, can lead to potential issues as to the validity of a charter party, a key issue in this recent High Court decision.

The Facts

The dispute concerns an alleged voyage charterparty for the vessel “IDA” (the “Vessel”), owned by the Claimant, Urania Shipping Company Ltd (“Urania”) and purportedly entered into between Urania and BFT Wood Products Agriculture Food Machinery Medical Industry and Foreign Trade LLC (“BFT”). The purported charter was for the carriage of wood pellets (the “Cargo”) from St Petersburg to Turkey.

Nordtrade Sia, a Latvian company (“Nortrade Latvia”), and Nordtrade Tasimacilik Tic. AS’, a Turkish company (“Nortrade Turkey”) are part of the Nortrade Group which provides shipbroking and related services. Nortrade purportedly acted on behalf of BFT as broker.

On 23 March 2023, Urania received a clean fixture recap confirming all subjects lifted. The recap named BFT as charterer and receiver. The email circulating the recap was sent from a generic Nordtrade address, with the sender’s email signature referring to “Nortrade Ltd” as broker and containing Russian and Latvian contact numbers.

However, there was no legal entity named “Nortrade Ltd”, though Nortrade Turkey submitted in the hearing that “Ltd” was a direct translation of “SIA” in Nordtrade Sia’s (Latvia) title.

A signed charterparty was later circulated naming Nordtrade Latvia as broker and BFT as charterer. Two identical signatures were included, purportedly included on BFT’s behalf (and were also identical to an earlier sale contract) which eventually raised questions from Urania about their origin.

Cargo was loaded in April 2023 in two stages (at two different ports), with two sets of bills of lading issued:

• First bill (15 April): the shipper was named as Transport Logistics Business Service LLC (Uzbekistan) and the notify party was 2NFB Hijyen Urunleri Sanaya Ve Ticaret Limited (Turkey) (“2NFB”).
• Second bill (19 April): the shipper was named as BFT and 2NFB was again named as notify party.

There was also an uncertainty as to the precise quantity of the Cargo loaded so a letter of indemnity was issued, purportedly on behalf of BFT, indemnifying the Vessel against any consequences flowing the discrepancies between the shore scale figures and figures in the bills of lading with the Vessel’s quantity figures. BFT’s signature was apparently different to the one on the purported charterparty.

Once loaded, the Vessel’s commercial manager issued an invoice for the payment of freight in accordance with the terms of the alleged charterparty.

Upon arrival in Izmir in early May 2023, freight remained unpaid. Urania refused to berth until payment had been made. Eventually, arrangements were made for 2NFB to put Nortrade Turkey in funds in order to pay the unpaid freight. This was for practical reasons due to the currencies involved.

Despite this, freight remained outstanding with demurrage disputes arising which caused months of delay before discharge could take place (and did not take place until September 2023 following a settlement agreement being entered into by Urania and BFT to procure the release of the Cargo).

In July 2023, BFT issued a declaration to state that, among other things, they were not a party to the recap and/or any charterparty. However, BFT stated that it had purchased the Cargo from 2NFP. No reference was made to the bill of lading which named BFT as shipper of the Cargo.

In response to this, Urania’s lawyers sent the Nortrade broker a number of detailed questions about their authority to conclude the charterparty and asserted that if these questions remained unanswered Urania would take this as an admission that the declarations were true and the Nortrade broker was not authorised to contract on behalf of BFT. Nortrade did not respond to this.

In March 2024, Urania issued proceedings in the English High Court against both Nordtrade Latvia and Nordtrade Turkey, alleging (i) breach of warranty of authority in concluding a charterparty on BFT’s behalf; and/or (ii) liability for deceit.

Permission was granted to serve out of the jurisdiction on both defendants (Latvia and Turkey). By the date of the hearing, Nordtrade Latvia had not been served.

As to serving on Nordtrade Turkey:

• In May 2024, Urania instructed Turkish lawyers to write to Nortrade Turkey enclosing a copy of the claim form and related documents. Subsequently, in June 2024, Urania’s English solicitors wrote to Nortrade Turkey’s English solicitors to advise that proceedings had been commenced and had been sent to Nortrade in Turkey on an informal basis, with formal service via the Hague Service Convention underway. Nortrade Turkey’s English solicitors were asked if they were authorised to accept service who, in turn, replied to indicate that they were not.
• The claim documents were served at Nortrade Turkey’s registered addressed via a substitute service procedure and purportedly in accordance with Turkish court orders. Certificates of service notifying the court of the same were filed in mid-September and late November 2024. Service of the particulars of claim (which followed the claim form) triggered the time limits for Nortrade Turkey to file its defence.
• No defence was filed and Urania applied for and obtained default judgment in January 2025. The default judgment came to Nortrade Turkey’s attention in the course of unrelated arbitration proceedings.

Nordtrade Turkey applied under CPR r.13.3 to have the default judgment set aside, asserting a real prospect of defending the claim.

In short, its position was that (i) Nordtrade Latvia (not Turkey) acted as broker, which was supported by the broker entity named in the charterparty; and (ii) BFT did authorise the charterparty, contrary to its own declarations.

The Court's Decision

Owing to the nature of the application, the court did not need to make any findings of fact as to the allegations made by Urania on whether or not Nortrade Turkey had breached any warranties of authority (as this is a point for fuller investigation at trial) but only whether Nordtrade Turkey had a realistic prospect of defending the claim.

The are various English cases which outline what is meant by a “realistic prospect”. In short, the court ultimately had to consider whether there was a realistic, as opposed to fanciful, prospect of Nortrade Turkey succeeding. This has previously been held to mean being something more than merely arguable.

The court granted the application to set aside. In doing so, the court found that:

• Correspondence under the “Nortrade Ltd” name could reasonably be seen relating to one entity, not two as Urania alleged. This, combined with the plausible translation of “Ltd” from Nordtrade Latvia’s name rather than Nordtrade Turkey’s, provided a reasonable defence that Nortrade Latvia was the proper defendant.
• The documents were stamped by BFT, and there was no current evidence of forgery, which would become an issue for trial. There was also the fact that the LOI included a different stamp to the charterparty, raising questions as to origin.
• BFT’s position as shipper in one bill of lading and eventual acquirer of the cargo made its lack-of-authority claim less straightforward.
• Although there was some procedural delay, Nordtrade Latvia, possibly the key defendant, had still not been served. Given the events dated back to mid 2023, the court did not consider that there was any overriding impact on a fair trial being able to take place.

The court also acknowledged that as Nortrade Turkey had not instructed its English solicitors to accept service, it should have ensured legal documents delivered to its registered office were properly received and acted on. Further, whilst Urania had no duty to inform Nordtrade Turkey’s English solicitors about service, the court commented that if they had done so the situation the parties now found themselves in may have been avoidable.

Comments

Whilst the allegations surrounding liability and the purported breach of a warranty of authority and/or for deceit have not been dealt with at this stage, but will be decided at trial, the court’s decision provides important commercial and practical considerations for chartering managers and shipbrokers during the process of fixing a charter.

In particular, where multiple affiliated entities are operating under similar names, parties should take care to ensure any entity involved that is giving any warranties of authority is properly identified. Otherwise, parties involved may face difficulties in commencing proceedings and enforcing any awards should the need arise. Parties should therefore ensure that clear written confirmations of authority with supporting evidence is provided.

Finally, from a procedural perspective, this case also highlights that judgments in default are not always a slam dunk to success. Whilst substituted methods of service (i.e., non-Hague service) can be attractive for apparent time and cost efficiencies, if not done properly it can lead to wide reaching consequences on the road to recovery and enforcement.

We have significant experience advising clients on procedural aspects of commencing proceedings and serving out of the jurisdiction. Should you need any advice or assistance on this, do get in touch and we would be more than happy to help.