Tetronics (International) Ltd v HSBC Bank Plc
| Jurisdiction | England & Wales |
| Judge | Mr Justice Fraser |
| Judgment Date | 12 April 2018 |
| Neutral Citation | [2018] EWHC 201 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-2018-000017 |
| Date | 12 April 2018 |
[2018] EWHC 201 (TCC)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (QBD)
Royal Courts of Justice
Strand, London, WC2A 2LL
THE HON Mr Justice Fraser
Case No: HT-2018-000017
and
Isabel Hitching (instructed by BPE Solicitors LLP) for the Claimant
Paul Downes QC (only on 20 February and 19 March 2018) together with Nicola Allsop (instructed by Eversheds Sutherland (International) LLP) for the Defendant
Michael Lazarus (instructed by Stewarts) for the Intervener
Hearing dates: 31 January 2018, 20 February 2018 and 19 March 2018
Judgment Approved
I. Introduction
This case concerns a call on a bank guarantee, and the first hearing date on 31 January 2018 was the return date for an ex parte injunction which had been granted by me on an urgent (but with extremely short notice) basis against HSBC Bank plc (“the Bank”) on 18 January 2018. The notice given to the Bank was only about one hour, and the Bank did not appear. As will be seen, following the hearing on 31 January 2018 and after distribution on 7 February 2018 of what was to become the first draft judgment, two further hearings were required, and the draft judgment was changed as a result. Those further hearings were on 20 February 2018 and 19 March 2018. This is dealt with further in the penultimate section of this judgment, namely “Events since distribution of the first draft judgment”. The ex parte injunction granted on 18 January 2018 prevented the Bank from making any payment in respect of a call on a guarantee that had been received by the Bank the day before, 17 January 2018. Although the alternative word “bond” has been used from time to time in the evidence, the instrument in question is actually entitled a guarantee (although the descriptive term used on the instrument is not determinative, as is well known). The call had been made dated 11 January 2018 by BlueOak Arkansas LLC (“Blue Oak”), the beneficiary under the instrument, and was received by the Bank a few days later on 17 January 2018 as original documents (rather than electronically transmitted copies of documents) were required for a valid call. The claimant, Tetronics (International) Ltd (“Tetronics”) and Blue Oak had existing contractual relations between them concerning work performed by Tetronics at a plant owned and operated by Blue Oak in Arkansas in the United States of America. The amount of the guarantee is £3.08 million.
The grant of the injunction prevented the Bank from honouring that guarantee, and the return date was set for 31 January 2018. On 25 January 2018 Blue Oak issued an application notice to the court using form N244. This application was issued by the solicitors acting for Blue Oak and in box 2 of the form, in response to the question “if you are a legal representative whom do you represent?” the following appeared: “BlueOak Arkansas LLC, an intervening party pursuant to CPR 19.2(2)”. In box 3, in response to the question “What order are you asking the court to make and why?” the answer given was “An order that the injunction granted on 18.01.18 be discharged because there was no proper basis for the grant of such an order”. No evidence was lodged in respect of the application, which stated in box 10 “the Applicant does not currently intend to rely on any factual evidence”.
Blue Oak was indeed a party with sufficient interest to be joined under CPR Part 19.2(2), as it is the beneficiary of the instrument itself. Neither of the other parties to this litigation, Tetronics or the Bank, opposed Blue Oak being joined as an Intervener, and I heard that application first on the return date on 31 January 2018. However, Mr Lazarus for Blue Oak stated in his skeleton for that hearing that “by participating in these proceedings for the purpose of opposing the continuation of the Order and seeking its discharge, [Blue Oak] does not submit to the jurisdiction of the English court.”
This is a curious stance for a party to take in circumstances where it has in fact issued an application using form N244 as drafted in this case, and I am not sure that the two positions are consistent; indeed, I consider them to be contradictory. There was no reservation as to the jurisdiction on form N244 itself, which was issued on 25 January 2018, some days prior to the skeleton being served. Further, positively asking the court to make oneself a party to existing litigation is contrary to not submitting to the court's jurisdiction. When explored in oral submissions, Mr Lazarus drew analogies with parties who challenge service of proceedings out of the jurisdiction, appearing at such applications whilst not submitting to the jurisdiction of the court; and also parties against whom freezing orders are made, who may seek to challenge the basis of such orders, again not submitting to the jurisdiction. However, in my judgment such analogies do not assist Blue Oak in this instance. In each of those other situations, a company or individual resident overseas is sought to be made a party to proceedings by a claimant, but this is obviously subject to the court having jurisdiction to do so, and this can be challenged by that party in argument. A challenge to the basis of jurisdiction goes to the heart of their involvement in the proceedings at all, and goes to the basis upon which the court can make any order against that party at all – in other words, and as the phrase itself makes clear, it goes to the court's jurisdiction over that party. A party in those circumstances is permitted to appear and make submissions without submitting formally to the jurisdiction of the court. In the instant case, however, Blue Oak was positively seeking to be joined itself as a party to the existing proceedings under CPR Part 19.2(2). It expressly asked the court to make it a party when it issued form N244. It thereby invoked, and submitted to, the jurisdiction of the court itself. Once its application to be joined as an Intervener succeeded, it had clearly submitted to the court's jurisdiction and the court had exercised its jurisdiction by acceding to the application, and making it a party. I do not see how this can be done, yet at the same time Blue Oak could sensibly maintain it had not submitted to the jurisdiction.
Ultimately, in this case, it may not matter (at least for present purposes). In any event, after the hearing of 20 February 2018, Blue Oak issued another application seeking to have the return date relisted for further evidence and argument. The same analysis applies to that step, in my judgment, so far as submitting to the court's jurisdiction is concerned. Regardless of that, on 31 January 2018 I granted the unopposed application by Blue Oak to be joined as a party. Tetronics relied upon the same evidence on 31 January 2018 as it had for the urgent application, namely the witness statement of Graeme Rumbol, its Chief Executive Officer, dated 17 January 2018. The Bank relied upon a witness statement from Geoffrey Weaser, the Centre Manager of the Global Trade and Receivables Finance Services (Trade) team at the Bank, which was dated 29 January 2018. Blue Oak had served no evidence at all at that stage (as stated on form N244), and Mr Lazarus accepted that for the purposes of the substantive application “the facts on which [Tetronics] relied at the without notice hearing should be taken to be true for the purpose of” the application. Technically, there were at that stage two applications, one by Tetronics to continue the injunction and one by Blue Oak to discharge the injunction. In essence, however, those two applications were simply mirror images of one another and were effectively treated as one. The Bank expressed itself as being “neutral”.
The position regarding evidence changed after the first draft judgment was distributed to the parties on 7 February 2018. In that draft judgment, and as explained further below, my decision was that the injunction would be continued. As explained further, I reached the point in the analysis where consideration of the balance of convenience was required, and on the evidence then available I concluded that as a matter of discretion it ought to be continued, having satisfied myself to the necessary standard that the second call was fraudulent, and that the fraud was known to the Bank. These two findings led to the balance of convenience being considered. Failure on either of those points, as identified below in the analysis of principles, would have led to discharge of the injunction in any event.
The first draft judgment was circulated with the usual embargo, and an invitation to the parties to submit typographical and clerical errors for potential incorporation into the final judgment. These were invited by 15 February 2018. However, on 14 February 2018 a further skeleton was received from Mr Lazarus, together with a letter from his instructing solicitors (but at that stage no application). That skeleton argument and letter together invited the court to re-list the return date hearing for further argument on three points which were dealt with in the draft judgment, but which were said not to have been fully argued on 31 January 2018. Yet further, on 19 February 2018, a witness statement was served on behalf of Blue Oak by Mr Hawarth, a Senior Associate of Stewarts, Blue Oak's solicitors in the UK. This was the first evidence that had been served by Blue Oak. The contents of this statement are dealt with further in the penultimate section, but concerned fresh matters that had arisen on 12 February 2018 and were said to found justification for re-listing the return date in any event. Although I had intended to hand down the first draft judgment on 20 February 2018, I...
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