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$1.6 Million Arbitration Award Caught Shipping Company by Surprise

Ship22All legal proceedings start with the service of documents and a failure in that respect is very often fatal. In one case, the High Court came to the aid of a shipping company which was surprised to be landed with a $1.6 million arbitration award – without having heard anything about the proceedings.

Company A was in dispute with company B in respect of a freight contract and appointed an arbitrator. The former took steps to serve notice of the proceedings on the latter. The notice was in fact served on an employee of another company in the belief that he was an authorised representative of company B. After no response was received from company B, the arbitration proceeded and the award was made.

Company B had heard nothing about the proceedings before it was served with a copy of the award at its offices in Hong Kong. In declaring the award invalid, the High Court found that the man who received the notice did not have actual, or implied, authority to accept service on behalf of company B. There had also been no express or implied representation by company B that he did have such authority.