England or France? High Court finds for Canara Bank in recent decision concerning an application to contest jurisdiction
The High Court in London has dismissed an application filed by MacCom Supply International (a.k.a. M.C.S. International France S.A.S (MCS France)) seeking to contest the jurisdiction of the English Courts to hear a claim issued by Canara Bank in June last year. RWK Goodman’s Milan Kapadia and Chloe Howes represented Canara Bank in its pursuit to recover a debt due totalling over £1.5 million.
Canara Bank is the third largest nationalised bank in India, with offices located in London, New York, Dubai, Russia and India. MCS France is a company registered in France which, together with its subsidiary in the UK (M.C.S. International), operated an international trading and distribution business with a focus on trade with business in Africa in plastics, cosmetics and food products.
Over time, the UK based borrower, M.C.S. International entered into a number of facility arrangements with Canara Bank, for several million dollars. MCS France guaranteed the debts of its UK subsidiary as a corporate guarantor and as comfort to the bank. The facility arrangements and the guarantee were governed by English Law and therefore, subject to the jurisdiction of the English Courts.
Following the UK subsidiary’s failure to repay the amounts due under the facility arrangements, Canara Bank served formal demand letters for the sums due to it on the borrower and the French guarantor. The default continued and Canara Bank commenced a court claim against both MCS France and its subsidiary in the UK.
The Claim against the UK based borrower concluded with judgment obtained swiftly followed by its winding up. However, the French Guarantor attempted to oppose the claim by contesting the UK court’s jurisdiction to preside over the dispute.
MCS France, through its English solicitors filed an application to contest jurisdiction asserting that it was not a party to the guarantee and on the basis that the guarantee was not enforceable against it because of the way French law treats authority given to Chairmen of companies and how assets and liabilities are transferred when French companies enter into restructuring and sale arrangements.
The guarantor essentially argued that:
- MCS France was not a party to the guarantee. The guarantor was a different company and therefore, no liability has been transferred to it as a result of a merger.
- The person who signed the guarantee, namely the Chairman, did not have the authority when signing the guarantee to enter into an open-ended guarantee;
- Entering into the guarantee was an ultra vires act for the guarantor and therefore, not enforceable against the Corporate Guarantor; and
- Canara Bank is unable to show a good arguable case that its claim against MCS France falls within any of the grounds permitting service out of the UK without permission of the court.
For the above reasons, MCS France sought to argue, unsuccessfully, that Canara Bank’s claim should be struck out.
The issues considered by the court related to the laws surrounding jurisdiction and governing law clauses, which one would often find in any form of UK agreement/ guarantee, but also apparent authority, estoppel, ratification and detailed expert evidence on French law. The Judgment handed down by Mr Nigel Cooper K.C., runs to almost 50 pages in which he carefully considered these points of law and the expert opinions before him.
Contact our Dispute Resolution lawyers:
Our strong team of Dispute Resolution solicitors based in our offices in London, the Thames Valley and South West England are some of the most experienced in their field. We provide specialist legal advice across numerous industry sectors in order to arrive at tailored and pragmatic solutions that best fit our clients’ needs.