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Union Bank Of India v Glory Universal Group Inc And Others

Judgment Cited authorities 11 Cited in Precedent Map Related
Vincent
Judgment Date14 December 2020
Neutral Citation[2020] HKCFI 3057
Year2020
Judgement NumberHCA1218/2019
Subject MatterCivil Action
CourtCourt of First Instance (Hong Kong)
HCA1218/2019 UNION BANK OF INDIA v. GLORY UNIVERSAL GROUP INC AND OTHERS

HCA 1218/2019

[2020] HKCFI 3057

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1218 OF 2019

________________________

BETWEEN
UNION BANK OF INDIA Plaintiff
and
GLORY UNIVERSAL GROUP INC 1st Defendant
S K SARAWAGI & COMPANY PRIVATE LIMITED 2nd Defendant
MURARI LAL SARAWAGI 3rd Defendant

________________________

Before: Master Connie Lee in Chambers
Date of Hearing: 17 September 2020
Date of Decision: 14 December 2020

_________________________________

DECISION

_________________________________

A. Introduction

1. On 8 July 2019, the Plaintiff commenced this action against the Defendants for a sum of US$26,364,311.89 together with interest. In simple terms, the claim against the 1st Defendant is based on a Facility Agreement and the Plaintiff is pursuing the claim against the 2nd and 3rd Defendants pursuant to the guarantees.

2. By an order dated 27 August 2019, Master Grace Chan granted leave to serve a concurrent writ of summons (the “Writ”) out of the jurisdiction on the 1st Defendant in Panama and the 2nd to 3rd Defendants in India (the “Order”).

3. There are now before the Court the following applications: -

(1) The 1st Defendant’s application by Summons dated 12 November 2019, which essentially seeks to set aside the Order and to dismiss the action on the ground that the Court has no jurisdiction or should not exercise any jurisdiction over the claim or alternatively, the action be stayed on the ground of forum non conveniens.

(2) The 2nd and 3rd Defendants’ application by Summons dated 27 December 2019 seeking essentially the same relief as well as a declaration that the Writ was not duly served on them.

4. At the hearing, the Defendants’ Counsel ie Mr Kwok indicated that they are no longer pursuing the stay application on the ground of forum non conveniens.

B. Background and Parties’ Respective Positions

5. The Plaintiff is a banking corporation incorporated in India. Through its Hong Kong Branch, the Plaintiff provides banking and financing services.

6. The Plaintiff’s pleaded case can be summarised as follows: -

(1) By a facility letter (the “Facility Letter”) dated 12 May 2010, the Plaintiff agreed to grant a term loan facility of up to US$29,200,000 (the “Facility”) to the 1st Defendant, a Panamanian company, for the purpose of acquiring the vessel M/V “Glory One” (the “Vessel”).

(2) The facility documentation also included, inter alia, the Facility Agreement dated 19 July 2010 as amended by the Supplemental Agreement dated 31 August 2012; and the First Preferred Liberian Ship Mortgage dated 27 July 2010 as amended on 12 September 2012.

(3) Pursuant to the Facility Letter, the Facility Agreement and the Supplemental Agreement: -

(a) The Facility was made available to the 1st Defendant;

(b) The loan shall be paid to the Plaintiff by 109 consecutive monthly instalments with interest;

(c) The 2nd Defendant, an associated company of the 1st Defendant incorporated in India, as well as, the 3rd Defendant ie an Indian national and a director of the 1st Defendant agreed to guarantee the performance of the 1st Defendant under the Facility Letter and the facility documents;

(d) The 1st Defendant shall, upon default of payment, pay interest at the default rate of interest.

(4) Each of the Defendants signed on the Facility Letter and the 1st and 2nd Defendant also signed the Facility Agreement and the Supplemental Agreement.

(5) Pursuant to clause 17.1 of the Facility Agreement, the 2nd Defendant guaranteed to the Plaintiff punctual performance by the 1st Defendant of all its obligations under the facility documents; and undertook that whenever the 1st Defendant did not pay any amount when due, the 2nd Defendant would immediately on demand pay that amount as principal obligor.

(6) The 3rd Defendant executed a continuing guarantee in favour of the Plaintiff dated 19 July 2010 (the “Continuing Guarantee”) to guarantee all sums of money due to the Plaintiff by the 1st Defendant.

(7) Since about September 2015, the 1st Defendant has failed or refused to repay all sums due.

7. The Plaintiff therefore commenced the present claim against the Defendants.

8. The Defendants’ position is that the claim should not be brought in Hong Kong as the established Order 11 benchmarks have not been met and the Order should be set aside: -

(1) The Plaintiff only expressly relied on the gateway of Order 11 rule 1(1)(e) ie the claim is brought in respect of a breach committed within the jurisdiction of a contract made within or out of the jurisdiction but there was in fact no breach committed in Hong Kong.

(2) The Plaintiff cannot now try to rely on another gateway, namely Order 11 rule 1(1)(d)(i) ie the claim is brought in respect of a breach of contract, being a contract which was made within the jurisdiction.

(3) The Plaintiff has not discharged the burden of showing that Hong Kong is clearly the most appropriate forum for the trial of the action. In particular, the Facility Agreement and other facility documents including the Continuing Guarantee all contained a jurisdiction clause in favour of the courts of England; and the parties’ express agreement that “the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary”.

(4) There was material non-disclosure on the part of the Plaintiff in seeking leave to serve the Defendants out of jurisdiction.

(5) Additionally, the Writ was not properly served upon the 2nd and 3rd Defendants in India as the Plaintiff had bypassed the provisions of the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters of 15 November 1965 (the “Hague Convention”).

C. Relevant Legal Principles

9. The relevant legal principles were summarised by Ma CJHC (as he then was) in Noble Power Investments Ltd v Nissei Stomach Tokyo Co Ltd [1]:-

(1) The Court must be satisfied there is a good arguable case that the claim does fall within one of the requisite sub-heads (or “gateways”) under Order 11 rule 1(1). This test is applicable when there are disputes of fact or issues of mixed law and fact. Where the dispute is a succinct one of law, this ought to be resolved by the court even at the O 11 stage.[2]

(2) It must also be shown that the case is a proper one for the exercise of discretion by the court. This requirement is mandated by Order 11 rule 4(2). Questions of jurisdiction and forum (that is, the appropriate forum to hear the dispute) are relevant in the exercise of the court’s discretion in this regard and, in most cases, this is perhaps the most important factor to be considered by the court when deciding whether or not to grant leave to serve out of the jurisdiction.[3]

(3) Where, a plaintiff institutes proceedings in Hong Kong not as of right (and the present case is one since leave to serve out of the jurisdiction was required), the approach of the court to questions of forum is quite different. Although this point will often only be raised by a defendant who seeks to set aside any order granting leave to serve out, the burden will not be on the defendant to demonstrate that there is an alternative forum which ought to entertain the action. Rather, the legal burden is all along on the plaintiff to show, in seeking to persuade the court to grant an order to serve out, that Hong Kong is clearly the appropriate forum for the trial of the action.[4]

10. In this respect, a good arguable case reflects that one side has a much better argument on the material available. It is the concept of the court being satisfied, or as satisfied as it can be having regard to the limitations which an interlocutory process imposes, that factors exist which allow it to take jurisdiction.[5]

11. Further, because an application for leave to serve out of the jurisdiction was made on an ex parte basis, the Plaintiff also had to make full and frank disclosure: Wo Fung Paper Making Factory Ltd v Sappi Kraft (Pty) Ltd[6]

D. Whether The Claim Falls Within The Gateway of Order 11

D1. Order 11 rule 1(1)(e): A Breach Committed in Hong Kong?

12. The Plaintiff expressly relied on the gateway of Order 11 rule 1(1)(e) in seeking leave to serve out of jurisdiction. It was asserted in the ex parte affidavit evidence that “pursuant to the terms of the Facility Documents, the 1st Defendant shall make repayment of all or any sums due under the Facility Documents to the Plaintiff in Hong Kong. Thus, the breach of non-repayment is committed in Hong Kong.”

13. The Defendants rely on Clause 27.1(b) of the Facility Agreement which provided that “payment shall be made to such account in New York with such bank as the Lender specifies”. The Defendants contend that the performance of the contract ie the contractual obligation to pay was not in Hong Kong but in New York and Order 11 rule 1(1)(e) is therefore not engaged: The Eider.[7]

14. The Eider was concerned with one single payment of salvage money to a German salvage company but the place of payment was not specified.[8] As the contract was worded and framed as to confine the obligation to pay to the German company, the obligation to pay was to be performed in Germany and it was not necessary to hold that the contract to pay might not be discharged by payment elsewhere than where the creditor was.[9]

15. In the present case, it is not disputed that the New York account specified is but a nostro bank account in New York. It was a conduit for the funds in US currency to be received into the bank account with the Plaintiff in Hong Kong. This is reinforced by the demand letter issued by the...

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