England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice 7 The Rolls Building,
		28/11/2014

JUDGE PURLE:

1. The application before me is to set aside the order of the master giving permission to serve these proceedings out of the jurisdiction on the first defendant HSBC Private Bank (Monaco) SA (HSBC Monaco) in Monaco. That order was made on 30th January 2014. The proceedings were issued on 1st May 2013, at which time HSBC Monaco was the only defendant. However, a week or so before the application to the master, two additional defendants were added, both being English companies, namely HSBC Private Bank (UK) Limited and HSBC Holdings plc. I shall call these the English defendants. It will be seen that all the defendants are members of the HSBC Group of companies.
2. One of the advantages of joining the English defendants is that they can be sued in this jurisdiction as of right and the proceedings against them cannot be stayed on forum conveniens grounds (see Owusu v Jackson [2005] ECR I-1383). Another advantage is that their presence opened up a gateway for permission to serve out of the jurisdiction upon HSBC Monaco. There were other gateways relied upon, but I need not consider them because it is conceded by HSBC Monaco that one way or another the claimant ("Ms. Jong") has passed through a relevant gateway. I shall assume for present purposes that all three gateways she relies upon were properly open to her, whilst noting that that is a matter of dispute so far as Mr. Quest, who appears for HSBC Monaco, is concerned.
3. The real issue before me is whether or not service out of the jurisdiction was justified as a matter of discretion. It is accepted that there is a properly arguable case against HSBC Monaco. What is in issue is whether Monaco is, as is contended by HSBC Monaco, the more appropriate jurisdiction.
4. The claim arises out of foreign exchange (or forex as it is known for short) dealings between Ms. Jong and HSBC Monaco, in Monaco. Ms. Jong, who had previous connections through a family trust with Monaco, chose to open, as she was fully entitled to do, an account with HSBC Monaco in Monaco and to conduct her foreign exchange dealings through that account. With the minor exceptions of a few trades conducted for administrative reasons via Geneva, all the dealings which ensued over a period of approximately three years were with HSBC Monaco in Monaco, though very often the contract would be initiated by telephone from Ms. Jong in London, where she has a residence.
5. There is an issue between the parties as to the extent to which standard terms and conditions of HSBC Monaco applied to their dealings. That is relevant for this reason. One of the standard terms is in the following form:

"Any litigation between the client and the bank shall be submitted to the exclusive jurisdiction of the competent Monaco courts at the offices of the bank location where the account is open. Nevertheless the bank reserves the right to take action at the place of the client's residence or in any other court which would have been competent in the absence of the preceding election of jurisdiction".

6. That means that HSBC Monaco is entitled, if it wishes (as it does) to do so, to insist as a matter of contract upon Monaco as the exclusive jurisdiction. HSBC Monaco has the right to sue elsewhere, but has not exercised that right. The court is not bound to accede to HSBC Monaco's wish to enforce the exclusive jurisdiction clause, but it is clearly a relevant factor.
7. Although there is, as I have said, a dispute as to whether, and if so to what extent, that clause was incorporated, for the purposes of the jurisdiction hearing before me it was accepted that I should proceed on the basis that that clause did apply from a date in 2007. The result is that well in excess of 90% of all the transactions with which this case is concerned (in number and value) are for the purposes of this application to be treated as caught by the jurisdiction clause. Were HSBC Monaco the only defendant, that would almost certainly be conclusive of the issue as to where these proceedings are more conveniently to be heard. However, there are the two English defendants who have now been sued alongside HSBC Monaco. That engages wider discretionary considerations.
8. The importance of an exclusive jurisdiction clause is has been recognised repeatedly and often enforced by the courts (see Donohue v Armco Inc. [2002] 1 All ER 749), but there may be exceptions to their enforcement where justice so requires. One such exception has in many cases been held to arise where there are multiple defendants, some of whom cannot be sued in the foreign jurisdiction otherwise covered by the exclusive jurisdiction clause. Factually that is not this case because the two English defendants could be sued in Monaco for the very simple reason that they are willing to submit to the jurisdiction of the courts there. Ms. Jong does not wish to sue in Monaco, however.
9. There have been some cases (I refer to Pacific International Sports Clubs Ltd. v Soccer Marketing International Ltd. [2009] EWHC 1389 as one) where the courts have set aside permission to serve out of the jurisdiction so as to enforce an exclusive jurisdiction clause, even when there are other defendants within the jurisdiction. What the court in such a case often does is look at the importance of the defendants and the reality of the claims made against the local defendants. It is not suggested, at least not yet at this stage of the proceedings, that there are no viable claims of any kind against the English defendants, though Mr. Quest for HSBC Monaco has addressed me in unflattering terms as to their sustainability.
10. What Mr. Quest effectively invites me to infer is that the claims made against the English defendants have been introduced so as to bolster the claim that this court should exercise jurisdiction, but that the real defendant is HSBC Monaco, the two English defendants having at best a subsidiary role to play.
11. That involves looking at the claims against the various defendants. So far as HSBC Monaco is concerned, it is sued in broad outline for the way in which it either did or did not give effect to Ms. Jong's instructions over the period of forex trading in question. It is said that they failed to give effect to her instructions in some respects by not executing trades which they had agreed to execute or that they executed trades for which they had no instructions at all from Ms. Jong. These are essentially factual allegations which go to the state of account between the parties and, unsurprisingly, what is sought is an account. The volume of dealings was very substantial, running into hundreds of millions of pounds. The losses are somewhat less but are said to be £20 million or more.
12. The issues arising out of that claim are largely factual. Various provisions of Monaco law are pleaded. Under the claim as originally drafted and, indeed, as it still stands, there were alleged breaches of the regulatory requirements of Monaco law which it was said of themselves gave rise to a claim for damages. It is common ground that the claim against HSBC Monaco is governed by the law of Monaco
13. Those references to the law of Monaco are to remain on the pleadings, but the damages claim arising from breach of the local regulatory law appears to have evaporated in the proposed amended particulars of claim. I should say that everyone was content that I should consider the issues before me on the basis of the proposed amendments, though Mr. Quest has not consented to any amendment.
14. It is often said, and it is an obvious point, that, all other things being equal, matters of foreign law are best left to the courts of that foreign jurisdiction. There is therefore this additional reason over and above the jurisdiction clause for leaving the claim against HSBC Monaco to be dealt with by the Monaco courts. The Monaco courts are better equipped to deal with the pleaded issues of Monaco law. I think it would be wrong, however, to place any significant weight upon that because in the case as it is proposed to be amended, the issues are now simpler. The only pleaded facts said to give rise to any loss are the trading issues to which I have alluded -- that is to say, not acting in accordance with proper instructions. It seems fairly obvious to me that if a bank enters into trades which it has no authority to enter into, or fails to carry out instructions which it agrees to execute, then any system of law is going to see that as wrongful. It is not suggested that HSBC Monaco, assuming (which it does not incidentally accept) that the allegations against it are factually correct, could wriggle out of liability on some basis available only under the law of Monaco.
15. I also have had regard to, but discount entirely, criticisms made implicitly or explicitly about the judiciary in Monaco and their supposed lack of experience and, perhaps on one faint suggestion, partiality. It seems to me that those allegations merely reflect the fact that Monaco is a different civil law system and do not go to demonstrating that Monaco is an unsatisfactory forum.
16. If on all other connecting factors Monaco is the appropriate forum, then that is where the proceedings should be heard as against HSBC Monaco unless substantial justice cannot be achieved in that forum. That has been clear since Spiliada Maritime Corp. v Cansulex Ltd., The Spiliada [1987] AC 460, 478-9, if not before, and is routinely applied every day in the courts.
17. I turn now to consider Ms. Jong's case against the English defendants. She raised complaints about the way her account was being managed in July 2008, but carried on trading through HSBC Monaco down to March 2009 despite being told that if she was unhappy with the way her account was being handled she should stop using HSBC Monaco. Eventually in March 2009 she did stop (or was barred from) using them. She says that her complaints were improperly considered, and that the two English defendants, who investigated the complaints from London, covered up the misdeeds of HSBC Monaco. I put that colloquially, but that is in a nutshell what the claim is.
18. It will be seen straightaway that there is a clear link between the claims against HSBC Monaco and the claims against the English defendants. The alleged breaches of duties relate to what the English defendants discovered or should have discovered about HSBC Monaco and failed to report back to Ms. Jong or to take any adequate action over. It is common ground that this claim is governed by English law. The draft amended particulars of claim, reflecting in this respect what is in the existing particulars of claim, though there are some minor alterations, plead this in paragraph 82:

"By reason of the matters pleaded above, Ms. Jong has suffered loss and damage in particular:

82.1. If HSBC UK and/or HSBC Holdings [I interpose to say

they are the English defendants] had identified the accounting discrepancies arising as a result of the Missing Trades and Unauthorised Trades and/or the Unauthorised Swaps and/or the Account Management Issues in or shortly after July 2008 Ms. Jong would likely have ceased trading with HSBC Monaco at that point and avoided any losses that were subsequently suffered by her as a result of continued trading with HSBC Monaco; and/or

82.2 Ms. Jong was deprived of the opportunity to receive

early payment of the damages suffered by her, because if HSBC UK and/or HSBC Holdings had identified the aforesaid accounting discrepancies during the period of their investigations in 2008 or 2009, HSBC Monaco would have provided full compensation to Ms. Jong at that stage".

19. It was explained to me orally by Mr. Chapman who appeared for Ms. Jong that the plea in 82.1 was directed to all trades following the expiry of the period "shortly after July 2008", whether authorised or unauthorised. That is to say, on the assumption that there were authorised trades made by Ms. Jong in the exercise of her own judgment executed through HSBC Monaco resulting in loss, she is entitled to recover those losses from the two English entities, even though she on that hypothesis has no claim against HSBC Monaco, and the immediate cause of her loss was her own bad investment decisions. To that extent there is a separate claim which faces obvious causation difficulties but which I must (at this stage at any rate) assume might limp home. It is not, however, a strong claim and one is left with the clear impression that the claims themselves have taxed counsel's ingenuity to the full and that one significant motive behind the introduction of these claims is to bolster the jurisdictional argument by having English defendants here.
20. However, before one gets to any question of loss, one has to identify the breach of duty. That involves this court first looking at precisely the same facts as will be in issue in the claim against HSBC Monaco. On that footing Mr. Chapman argued that in order to avoid the risk of conflicting judgments it is vital that the claims all be heard together here, as Ms. Jong is entitled as of right to sue the English defendants here.
21. So far as 82.2 is concerned, Mr. Chapman also explained to me that Ms Jong would wish to recover the cost of investigations, even though these are not expressly pleaded under 82.2. All that appears at the moment to be pleaded is loss of interest. It is not suggested that the Monaco courts could not award interest. One would expect, at least as regards the bulk of the claim and the damage pleaded in paragraph 82, success against the English defendants to replicate any success that might be achieved against HSBC Monaco in Monaco, if proceedings were brought there.
22. In my judgment, the existence of the claim against the English defendants does not persuade me that it would be right to ignore the exclusive jurisdiction clause which affects, as is common ground, at least over 90% of the claim against HSBC Monaco. The starting point must be an inclination to enforce the jurisdiction clause. The claims against the English defendants are subsidiary to or, as Mr. Quest puts it, "parasitic" in large part upon the claims against HSBC Monaco, as well as having been introduced in an attempt to bolster the jurisdictional case.
23. Against that Mr. Chapman points to pre-action correspondence from Ms. Jong personally stating her clear intention to sue one or more of the English defendants here in England. However, the claim form as originally issued did not do so and I have had no explanation why that was so, whether from Ms. Jong or from any other source; I am therefore left to inference. The inference I draw, which is obvious anyway, is that HSBC Monaco is seen as the main defendant, as the main complaints are against HSBC Monaco and the English defendants are, in litigation terms, bit-players having little, if anything, to add to the main claim against HSBC Monaco.
24. In the Pacific International case to which I have referred, Blackburne J also set aside service when the defendant served here (referred to as "SMI") was "a relatively minor player" in the dispute. The principal dispute was between the claimant on the one hand and two foreign individuals on the other. He said this:

"To allow the fact that the doctrine of forum non conveniens cannot be applied to SMI to dictate where the dispute as a whole must be tried would be, in my view, to allow the tail to wag the dog"

25. In my judgment, that applies here as well and I should give greater weight to the exclusive jurisdiction clause and the fact that all the trades were carried out through HSBC Monaco in Monaco than to other connecting factors.
26. In paragraph 115 of the same judgment, Blackburne J considered that it might subsequently be possible to order a stay, not on forum conveniens grounds, but as a matter of case management, so that the claims between the competing jurisdictions would come on in an orderly fashion. That is a possibility that may remain for consideration here, though the court must be careful not to evade the impact of Owusu v Jackson through the back door. Sensible case management does not seem to me necessarily to amount to that. The point does not yet arise, as there are no proceedings in Monaco, and may not be.
27. There are various other objections to Monaco as a jurisdiction, but they do not, in my judgment, come anywhere near to overriding the importance of the exclusive jurisdiction clause.
28. At the end of the day the onus, as was accepted before me, is upon Ms. Jong to show that this jurisdiction is clearly the more appropriate forum. She has failed to satisfy that onus.
29. It is said that procedurally Monaco has serious deficiencies: there is little scope for oral evidence (especially cross examination) and there is no automatic right to disclosure. As it happens, there is no automatic right to disclosure in this jurisdiction either nowadays, though it is normal. Additionally, disclosure is possible in Monaco. Moreover Ms. Jong, who has prepared her claim with the benefit of expert input, appears already to have more than sufficient documentation to make out a case to answer against HSBC Monaco. I do not consider that the procedural differences between this jurisdiction and Monaco are significant. That is a fact of life in any comparison between common law and civil law systems, and has long been recognised as not without more sufficient to justify departing from the natural forum, as affirmed in Spiliada (at 482) and since.
30. I have already mentioned that the criticisms of the judiciary should not be taken into account. It is also said that there is less scope for costs recovery in Monaco, which I am prepared to accept is the case. That may be a relevant factor, but not a determinative one, especially in the face of an exclusive jurisdiction clause which it is accepted applies to the bulk of the trades in this case.
31. It is also said, which again may be a relevant factor, that there will be excessive delay in Monaco and that enforcement of a first instance judgment can be delayed by an appeal. On the most gloomy estimate, the first instance and appeal proceedings might cumulatively take up to nine years, though a more realistic estimate might be something like five years. Delays in the law are always regrettable, but those figures are not such as to amount to a denial of justice in Monaco and do not persuade me to override the exclusive jurisdiction clause.
32. Accordingly, I will set aside permission to serve out of the jurisdiction and will now hear from counsel on any further matters.
(See separate transcript for proceedings after judgment)
- - - - - -