Marubeni Hong Kong and South China Ltd v Government of Mongolia
| Jurisdiction | England & Wales |
| Judge | Mr Justice Cresswell: |
| Judgment Date | 12 March 2004 |
| Neutral Citation | [2004] EWHC 472 (Comm) |
| Docket Number | Case No: 2001 Folio 946 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 12 March 2004 |
[2004] EWHC 472 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Cresswell
Case No: 2001 Folio 946
David Joseph QC and Jessica Mance (instructed by Ashurst) for the Claimant
Antony White QC (instructed by Richards Butler) for the Defendant
The claim is brought by a Hong Kong company ("MHK") that carries on business as an import/export and general trading company. It is a wholly owned subsidiary of Marubeni Corporation ("Marubeni") a Japanese company with its principal place of business in Japan. The defendant is the Mongolian Government acting through its Ministry of Finance ("MMOF").
The claim is made on a letter dated 11 May 1996 ("the MMOF Letter" or "the guarantee"), which was addressed to MHK and signed by the Minister of Finance at the time, Mr Byambajav.
On about 29 March 1996 MHK entered into a Deferred Payment Sales Contract (the "DPS1 Contract") with Buyan Holding Company Limited ("Buyan"), a Mongolian company. Pursuant to the DPS 1 Contract Buyan agreed to buy and the claimant agreed to sell machinery, equipment and materials for a cashmere processing plant. The purchase price was US$18,811,670. The first instalment of the price was to be paid within 60 days of the signature of the DPS 1 Contract, and the remaining amount was to be paid in 12 equal semi-annual instalments. The first of these was due on 19 October 1998.
Pursuant to Article 7 of the DPS 1 Contract Buyan arranged the provision of the MMOF Letter dated 11 May 1996 in the following terms:
"To: MARUBENI HONG KONG LTD
In consideration of you entering into the Deferred Payment Sales Contract No 258500 (hereinafter called the "agreement") with Buyan Holding Company Ltd, a company duly organized and existing under the laws of Mongolia, with its principal office at I-4000–68–4 Ulaanbaatar, Mongolia (hereinafter called the "Buyer") for sales and purchase of a textile plant the contact (sic) price of which is United States Dollars Eighteen Million Eight Hundred Eleven Thousand Six Hundred Seventy (USD18, 811,670. -), the undersigned Ministry of Finance of Mongolia unconditionally pledges to pay to you upon your simple demand all amounts payable under the Agreement if not paid when the same becomes due (whether at stated maturity, by acceleration or otherwise) and further pledges the full and timely performance and observance by the Buyer of all the terms and conditions of the Agreement. Further Ministry of Finance undertakes to hold indemnify and hold you harmless from and against any cost and damage which may be incurred by or asserted against you in connection with any obligations of the Buyer to pay any amount under the Agreement when the same becomes due and payable (whether at stated maturity, by acceleration or otherwise) or to perform or observe any term or condition of the Agreement or in connection with any invalidity or unenforceability of or impossibility of performance of any such obligations of the Buyer.
This covenant shall come to force from the date of implementation of this agreement and remain in full force and effect until all amounts due to you by the Buyer under the Agreement have been paid in full and all the terms and conditions of the Agreement have been fully performed and observed by the Buyer.
The Ministry of Finance hereby waives any right to require you to proceed against the Buyer or against any security received from the Buyer or any third party or to pursue any other remedy available to you.
All payments under this pledge shall be made in United States Dollars by means of telegraphic transfer remittance to the mutually agreed bank account.
All disputes related to this pledge shall correlate in accordance with the jurisdiction courts of England. The Ministry of Finance shall not participate in any legal action which may arise out of or relating to obligation of the Seller and Buyer."
It is common ground that the putative proper law of this contract is English law.
The defendant says that Mr Byambajav did not have authority to bind the defendant, and that the guarantee has not subsequently been adopted or ratified by the Mongolian Government. The claimant says that the MMOF Letter was issued on behalf of the defendant with express actual authority, alternatively that Mr Byambajav had usual authority or the defendant held him out as having apparent/ostensible authority, or the defendant ratified the MMOF Letter. The claimant says that on a true construction of the MMOF Letter, the defendant undertook a primary liability (joint and/or several) to the claimant. The defendant says that on a true construction of the MMOF Letter it did not undertake a primary liability. The defendant says that it was discharged from liability under the guarantee. The claimant disputes this.
On the same date as the MMOF Letter (11 May 1996), the Deputy Minister of Justice of Mongolia, Mr Dulamyn Sugar, signed a document entitled "Legal Opinion of the Minister of Justice of the Government of Mongolia". This document was addressed to the claimant (then called: Marubeni Hong Kong Limited). The letter stated:
"LEGAL OPINION OF THE MINISTER OF JUSTICE OF THE GOVERNMENT OF MONGOLIA
To: MARUBENI HONG KONG LTD
I am Minister of Justice of the Government of Mongolia and as such have advised upon a Guarantee dated May, 1996 given by the Ministry of Finance of Mongolia, acting for and on behalf of the Government of Mongolia to you (the Guarantee). All terms and expressions defined in the Guarantee shall bear the same respective meanings herein save where the context otherwise requires. This legal opinion is furnished to you pursuant to the Guarantee.
In connection therewith, I have examined executed copies of each of Guarantee and the agreement documents as I have deemed necessary or advisable.
I am accordingly of the opinion that:
(1) The Guarantor and the Buyer each has full power and authority to enter into, and to perform their terms and conditions of the Guarantee and the Agreement, respectively.
The Guarantor and the Buyer each has taken and completed all necessary legal action to authorize it to execute, deliver and perform the Guarantee and the agreement, respectively and has obtained or completed all authorizations, licenses, approvals or consents of and all registrations, recordations or filings with the Guarantor's country or any agency, department or commission thereof or therein necessary or advisable for the execution, delivery and performance of the Guarantee and the agreement, respectively and for the validity and enforceability thereof
(2) The Guarantee and the agreement have been duly executed and delivered by the duly authorized representatives of the Guarantor and Buyer, respectively, and constitute the legal, valid and binding obligations of the Guarantor and the Buyer, respectively, enforceable in accordance with their terms.
(3) The executions, delivery and performance of the Guarantee or the agreement do not and will not contravene, violate or constitute a default under the Constitution of the Guarantor's country or any treaty, law or regulation applicable to the Guarantor or the Buyer or any provision of any agreement or other instrument to which the Guarantor or the Buyer is or may be bound, nor will the same result in the creation of any encumbrance on any asset or right of the Guarantor or the Buyer.
(4) Their representatives and warranties set out in the Guarantee are true."
The claimant relies on this document as proof of the authority of the Minister of Finance, Mr Byambajav, to sign the MMOF Letter on behalf of the Government.
The original copies of the MMOF Letter and the Legal Opinion (the MMOJ Letter) were handed over to MHK on 14 May 1996. A letter dated 27 May 1996 from MHK to the Minister of Finance referring to the guarantee was signed by Mr Byambajav (Minister of Finance) and by Mr Sugar (for the Minister of Justice). An Assignment and Security Agreement was entered into between Buyan, MHK and Bank of Tokyo-Mitsubishi Trust Company on 3 June 1996. The DPS 1 Contract became effective on 18 June 1996.
By an agreement between (i) the Ministry of Finance (ii) the Ministry of Trade and Industry and (iii) Buyan ("the Trilateral Agreement") made in about April or May 1996 it was provided: -
"4.3. Loan should be paid back in time with company's own income, as agreed with Japanese side upon pay back schedule and its term. Demanded amount of fine or interest from Japanese side shall be paid by the company in case of deferred payment.
4.4. By this contract the Ministry of Finance is given the right to take the company's means from its accounts through closing the company's accounts in the commercial banks in case of full or part default of contract and, furthermore if it fails to pay back the loan or its interest in due time as agreed with Japanese side. (appendix).
4.5. Items listed in the appendix of this contract are possessed by the Ministry of Finance as guarantee and the Ministry of Finance is granted to pay the amount through seizing property except those in 4.4 provision of this contract, if the company fails to pay the amount in time."
The Appendix to the Trilateral Agreement listed Buildings, Structures, Houses, Automobiles and Equipment of Buyan.
Between October 1996 and May 1997 the claimant supplied machinery, equipment and materials to Buyan under the DPS 1 Contract. A dispute arose as to the quality and fitness for purpose of Mitsuboshi machines supplied by MHK to Buyan.
In 1998 there was a Rescheduling contained in six agreements dated 4 February...
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