Nisshin Shipping Co Ltd v Cleaves & Co Ltd & Ors [2003] EWHC 2602

Contract - Arbitration - Repudiation - Commission


Cleaves negotiated nine time charters on behalf of Nisshin. The contract between Cleaves and Nisshin stated that Cleaves was to receive a commission as a broker and contained an arbitration clause which was wide enough to entitle a claim by the charterers against the owners for failing to pay the promised commission. After Nisshan refused to pay the commission to Cleaves, the matter went to arbitration. Nisshin claimed that Cleaves had repudiated the contract by having an interest with one of Nisshan’s competitors, taking this as a termination of contract and cancellation of any entitled commission.


Whether the commission clauses conferred a benefit on the part of the brokers and whether the parties intended the commission clause to be enforceable by the brokers under s 1 of the Contracts (Rights of Third Parties) Act 1999 (the Act).


Nisshin's application was dismissed. The commission clauses were for the purposes of conferring a benefit on Cleaves, namely an entitlement to a commission as a broker. It was held that s 1(2) of the Act did not provide that s 1(b) did not also apply if s 1(2) applied to the wording of the contract, unless under the construction of the contract it was clear that the parties intended for the benefit of a commission to be enforceable by a third party. This was said to only be determined by having regard for all the relevant circumstances at the time. The charter parties were neutral in that they did not express any intention not to allow the brokers to claim a commission. Thus, Cleaves were entitled to claim a commission in its own right under s 1 of the Act.