Morgan Stanley & Company International Plc v China Haisheng Juice Holdings Company Ltd
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Teare |
| Judgment Date | 05 October 2009 |
| Neutral Citation | [2009] EWHC 2409 (Comm) |
| Docket Number | Case No: 2009 FOLIO 619 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 05 October 2009 |
[2009] EWHC 2409 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Before: Mr. Justice Teare
Case No: 2009 FOLIO 619
Daniel Toledano QC (instructed by Allen & Overy LLP) for the Claimant
Andrew Onslow QC and William Edwards (instructed by Stephenson Harwood) for the Defendant
Hearing dates: 20 and 21 July 2009
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
MR.JUSTICE TEARE
Mr. Justice Teare:
Introduction
This is a claim by Morgan Stanley & Co. International Plc (“MSIP”) for a declaration and a final anti-suit injunction against China Haisheng Juice Holdings Co. Ltd. (“CH”). The claim is based upon an exclusive jurisdiction clause in favour of the English court contained in an ISDA Master Agreement (2002 form) as amended by a Schedule and dated as of 2 July 2008 (the “Master Agreement”) between MSIP and CH. The application has been brought because CH commenced proceedings in the Intermediate Peoples' Court of Xi'an, Shaanxi Province in the PRC on 2 April 2009. Those proceedings were brought against not only MSIP but also Morgan Stanley Asia Limited (“MSAL”).
On 13 May 2009 MSIP issued proceedings in the English Commercial Court against CH claiming sums due under the Master Agreement. In those proceedings MSIP also included its claim for declaratory and injunctive relief to which I have referred. MSIP contends that by the terms of the exclusive jurisdiction clause CH has agreed to bring its claims against both MSIP and MSAL in England and that there is no strong reason for refusing an anti-suit injunction. The grant of an anti-suit injunction would ensure that all claims and counterclaims take place in one jurisdiction, namely, England. If, on the true construction of the exclusive jurisdiction clause, CH has only agreed to bring its claims against MSIP in England, MSIP seeks an anti-suit injunction in relation to CH's proceedings against MSIP in China. No relief is sought in respect of CH's claims against MSAL in that event (provided that those claims do not include any claim for rescission of the Master Agreement).
CH accepts that it cannot prevent MSIP from pursuing its claim against CH for sums due under the Master Agreement in the English Commercial Court. However, CH maintains that the exclusive jurisdiction clause only extends to the claims it has brought against MSIP and does not extend to the claims it has brought against MSAL. CH contends that in those circumstances there is strong reason for not granting an anti-suit injunction in relation to the claims against MSIP in China because, in particular, refusal of an injunction affords the better prospect of all claims being pursued in China. In this regard reliance is placed on the possibility that at some future stage this court may, on case management grounds, stay MSIP's claim in this court pending the determination of the claims by CH in China. If CH is wrong on the construction of the excusive jurisdiction clause so that the clause applies to the claims brought against MSIP and MSAL no positive case is advanced as to there being strong reasons for not granting an anti-suit injunction in respect of CH's claims against MSIP and MSAL in China.
There are therefore two principal issues. First, what is the true construction of the exclusive jurisdiction clause and second, whether and in what terms an anti-suit injunction should be granted. Before resolving those two issues it is necessary to recount the factual background.
The parties
MSIP is an English company within the Morgan Stanley investment and financial group. MSAL is a Hong Kong company within the Morgan Stanley group. CH is a Cayman Islands company which is listed on the Hong Kong stock exchange. It is the holding company for the Haisheng Group which is principally concerned in the manufacture, distribution and export of fruit juice concentrate related product and has subsidiaries in the BVI, the USA and the PRC. One of those subsidiaries is Shaanxi Haisheng Fresh Fruit Juice Co. Ltd. which operates in Xi'an, PRC.
The dealings between the parties
In late 2007 and 2008 CH was considering ways of securing external investment. MSAL sought to assist CH in that regard, first, by means of a secondary share issue and, second, by means of a bond issue. However, neither issue went ahead, though an engagement letter dated 22 July 2008 was sent by MSAL to CH with regard to such issues. It provided for an exclusive jurisdiction clause in favour of the courts of Hong Kong.
CH also had a significant currency exchange rate risk because its revenue was primarily paid in US dollars whereas its costs were primarily incurred in Renmibi, the Chinese currency. MSAL (who, under the engagement letter, had an exclusive right to arrange related hedging transactions and a right to provide pricing and to match bids to arrange other hedging transactions) discussed with CH how that risk might be hedged. To this end a US$/Renmibi currency swap was proposed on 22 June 2008. The Indicative Terms and Conditions sent on 25 June identified MSIP and CH as the two contracting parties. In due course MSIP and CH entered into an ISDA Master Agreement (2002 form) as amended by a Schedule and dated as of 2 July 2008. They also entered into a Credit Support Annex dated as of 2 July 2008 pursuant to which CH was liable to pay to MSIP collateral in respect of any transaction where the exposure under the transaction exceeded a threshold of US$10m.
CH maintains that it was plain to MSAL from the start that CH was looking to MSAL to guide and advise it, CH having no experience of international capital markets, complex derivatives or the contractual documentation which such transactions characteristically involve. CH contends that Mr. Ng Hoi of MSAL took on the task of guiding and advising CH through the proposed hedging transactions, that he made misleading statements and failed to draw the attention of CH to any of the disadvantages and pitfalls inherent in the transaction and that Mr. Hoi was reckless. These allegations are rejected by MSIP.
The initial currency swap was executed in two tranches on 10 July 2008 and 7 August 2008 and a second swap was executed on 7 August 2008. They involved in total US$8m. In September 2008 the US$/Renmibi exchange rate moved against CH and, according to MSIP, CH became liable to provide collateral. CH did not do so. On 17 October 2008 the transactions were restructured.
On 30 March 2009 MSIP notified CH that it was required to provide collateral in the sum of US$14.5m. CH did not do so.
On 2 April 2009 CH commenced proceedings in China against MSIP and MSAL. In those proceedings CH claims rescission of the currency swap transactions and compensation for the losses suffered by CH. The complaint of CH has been summarised by its counsel as follows: “…..the swaps, purportedly bespoke-designed for its benefit, were unsuited to CH and its business, and exposed CH to enormous hidden risks.……it was induced to expose itself to those risks by a combination of misleading statements on the part of Mr. Hoi and overall failure on the part of MSAL and MSIP to advise them fairly and clearly (as they were obliged to do).”
By letter dated 17 April 2009 MSIP informed CH that it was bound to pay an Early Termination Amount of US$26,250,000 together with interest and out of pocket expenses. On 13 May 2009 MSIP issued proceedings in the English Commercial Court claiming such sums.
The exclusive jurisdiction clause
It is necessary to set out section 13 of the Master Agreement, as amended by the Schedule, in full.
13. (a) Governing Law. This Agreement will be governed by and construed in accordance with the laws of England and Wales.
(b) Jurisdiction and Third Party Rights.
(i) Jurisdiction. With respect to any suit, action or proceedings relating to any dispute arising out of or in connection with this Agreement (“Proceedings”), each party:
(1) irrevocably submits to the exclusive jurisdiction of the English courts; and
(2) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party.
(ii) Third Party Rights.
(1) Subject to this clause, a person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Agreement.
(2) Notwithstanding the foregoing, an Affiliate may enforce the rights expressly granted to an Affiliate under this Agreement, if any, subject to and in accordance with this clause, Section 13(a) and (b) of this Agreement and the provisions of the Contracts (Rights of Third Parties) Act 1999. However, such an Affiliate may not bring proceedings to enforce any of those terms unless it has first given written notice to the parties (in accordance with Section 12 of this Agreement) agreeing to the provisions of Section 13 of this Agreement. The parties to this Agreement do not require the consent of any Affiliate or other third party to rescind or vary this Agreement.
(c) Service of Process. Each party irrevocably appoints the Process Agent, if any, specified opposite its name in the Schedule to receive, for it and on its behalf, service of process in any Proceedings. If for any reason any party's Process Agent is unable to act as such, such party will promptly notify the...
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