Nisshin Shipping v Cleaves [2003]
Share
Nisshin Shipping Co Ltd v Cleaves & Co Ltd & Ors [2003] EWHC 2602 involves issues related to a contract, arbitration, repudiation, and commission. It also delves into the application of the Contracts (Rights of Third Parties) Act 1999.
Cleaves & Co Ltd (Cleaves) negotiated nine time charters on behalf of Nisshin Shipping Co Ltd (Nisshin). The contract between Cleaves and Nisshin outlined that Cleaves was entitled to receive a commission as a broker. Additionally, the contract contained an arbitration clause, broad enough to allow a claim by the charterers (Cleaves) against the owners (Nisshin) for failure to pay the agreed commission. Dispute arose when Nisshin refused to pay the commission, alleging that Cleaves had repudiated the contract by having an interest with one of Nisshin’s competitors. Nisshin considered this a termination of the contract and cancellation of any entitled commission, leading to arbitration.
Nisshin's application was dismissed. The court held that the commission clauses were designed to confer a benefit on Cleaves, specifically entitling them to a commission as a broker. It was emphasised that Section 1(2) of the Act did not provide that Section 1(b) did not apply if Section 1(2) applied to the wording of the contract. The court clarified that for Section 1(b) to apply, it must be clear under the construction of the contract that the parties intended the benefit of a commission to be enforceable by a third party. This determination should be made by considering all the relevant circumstances at the time.
The court found that the charter parties were neutral, meaning they did not express any intention to disallow the brokers (Cleaves) from claiming a commission. Consequently, Cleaves was deemed entitled to claim a commission in its own right under Section 1 of the Act. The court rejected Nisshin's argument that Cleaves had repudiated the contract, allowing Cleaves to pursue its claim for the unpaid commission through arbitration.
The decision underscores the importance of contractual language and the intention of the parties in determining the enforceability of contractual terms by third parties under the Contract (Rights of Third Parties) Act 1999. In this case, the court found that the contracts were neutral on the question of third-party enforcement, leading to the application of the presumption under Section 1(1)(b) in favour of the chartering broker.
Cleaves & Co Ltd (Cleaves) negotiated nine time charters on behalf of Nisshin Shipping Co Ltd (Nisshin). The contract between Cleaves and Nisshin outlined that Cleaves was entitled to receive a commission as a broker. Additionally, the contract contained an arbitration clause, broad enough to allow a claim by the charterers (Cleaves) against the owners (Nisshin) for failure to pay the agreed commission. Dispute arose when Nisshin refused to pay the commission, alleging that Cleaves had repudiated the contract by having an interest with one of Nisshin’s competitors. Nisshin considered this a termination of the contract and cancellation of any entitled commission, leading to arbitration.
Nisshin's application was dismissed. The court held that the commission clauses were designed to confer a benefit on Cleaves, specifically entitling them to a commission as a broker. It was emphasised that Section 1(2) of the Act did not provide that Section 1(b) did not apply if Section 1(2) applied to the wording of the contract. The court clarified that for Section 1(b) to apply, it must be clear under the construction of the contract that the parties intended the benefit of a commission to be enforceable by a third party. This determination should be made by considering all the relevant circumstances at the time.
The court found that the charter parties were neutral, meaning they did not express any intention to disallow the brokers (Cleaves) from claiming a commission. Consequently, Cleaves was deemed entitled to claim a commission in its own right under Section 1 of the Act. The court rejected Nisshin's argument that Cleaves had repudiated the contract, allowing Cleaves to pursue its claim for the unpaid commission through arbitration.
The decision underscores the importance of contractual language and the intention of the parties in determining the enforceability of contractual terms by third parties under the Contract (Rights of Third Parties) Act 1999. In this case, the court found that the contracts were neutral on the question of third-party enforcement, leading to the application of the presumption under Section 1(1)(b) in favour of the chartering broker.
