LAMMAS GLOBAL CORPORATION v. BARCLAYS BANK (SUISSE) S.A. AND OTHERS

HCA 2411/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2411 OF 2009

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REASONS FOR DECISION

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The orders:

1.  On 30 March 2011, I made orders in terms of summonses filed by the defendants in this matter thereby disposing of these proceedings.  At the request of Mr Maurellet I made an order extending time to make application for leave to appeal my decision, that time to commence to run on the handing down of these reasons.  These are my reasons for those orders.

The facts:

2.  The facts relevant to these interlocutory applications on the part of the defendants are not in dispute.

3.  In November 2002, the plaintiff, (Lammas), a BVI company, opened a bank account with the 1^st defendant, (Barclays Suisse).  Lammas is the investment vehicle of the ultimate owner of the account, Mr David Peabody, a wealthy Australian resident in the Philippines.  The account was opened following meetings in Hong Kong between representatives of Lammas and representatives of the 2^nd defendant (Barclays plc).  At the time the account was opened Lammas was offered the option of opening the account in the United Kingdom, or in Switzerland.  Lammas elected to open the account in Switzerland.

4.  At the time the account was opened Barclays plc did not have an office in Hong Kong, and did not carry out a banking business in Hong Kong, although in 2005, a local representative office was established in Hong Kong, with the appropriate licences from the Monetary Authority.  That office was merely a representative office and did not carry out banking business in the sense of the holding of customers accounts in Hong Kong.

5.  Lammas placed a substantial sum of money with Barclays Suisse in the account.  The account was a US dollar account.  A Hong Kong company, Tengis International Ltd was authorised to manage the account as Lammas’ agent, and appropriate authority was given to Barclays Suisse and Barclays plc, who were to be the Hong Kong liaison in respect of the account, to exchange information concerning the account notwithstanding the usual rules of bank secrecy.

6.  In the usual way, the account opening documents included certain conditions in relation to the account.  These included Article 26 of the General Conditions in the following terms:

“All legal relations between the Account Holder and the Bank shall be governed by Suisse law. The place of execution and the exclusive place of jurisdiction for any form of proceeding, and the place for debt collection proceedings for Account Holders domiciled abroad, shall be the place where the office of the Bank with which the Account Holder maintains his account is located. The Bank retains the right to file an action in the country of domicile of the Account Holder or before any other competent court.”

It is not in dispute that the documents defined “the Bank” as Barclays Suisse, and “the Account Holder” as Lammas.

7.  In April 2004, a meeting took place in Hong Kong between representatives of Lammas and representatives of Barclays Suisse and Barclays plc.  At that meeting the representatives of Barclays plc recommended an investment being made in a particular hedge fund, the FairfieldSentry Feeder Fund.  Subsequently, allegedly acting in reliance on that advice, Lammas invested a sum in excess of US$3.5 million in that fund.  Unfortunately the fund was one which accepted funds for the purpose of investment with Mr Bernard L Madoff.  The investment has been a complete failure and appears to be a total loss.

8.  At least by October 2006, the Barclays group of companies marketed their ability to give investment advice to wealthy individuals under the collective title “Barclays Wealth”.  It is common ground that Barclays Wealth is not a legal entity, but a brand that refers to some 145 entities including each of the defendants.  There is no evidence, and no suggestion at all that Lammas has had any dealings directly with the 3^rd to 6^th defendants inclusive.

The issue of proceedings:

9.  When Lammas learned of the loss of its funds in the Madoff Ponzi scheme, Hong Kong solicitors were instructed to advise.  On 2 December 2009, the solicitors issued a writ with a general endorsement of claim alleging loss and damage due to the failed investment arising from breach-of-contract, negligence, negligent misrepresentation and breach of good faith obligations on the part of the six defendants.

10.  Upon an ex parte application to the Master, on 24 February 2010 leave was given to issue the writ, and serve it outside the jurisdiction on the 1^st and 3^rd to 6^th defendants.

11.  Before taking any other step in the proceedings the defendants applied under O 12 r 8 for the following orders:

(i) Barclays Suisse:

(i) that a declaration be made that in the circumstances of the case the Court has no jurisdiction over Barclays Suisse in respect of the subject-matter of Lammas’ claim;

(ii) an order that service of the writ on Barclays Suisse be set aside; and

(iii) an order that the order of the Master giving leave to serve the writ out of the jurisdiction on Barclays Suisse be discharged;

(ii) Barclays plc:

(i) a declaration that the circumstances of the case the Court should not exercise any jurisdiction it may have over Barclays plc in respect of the subject-matter of Lammas’ claim;

(ii) an order that the proceedings against Barclays plc be stayed on the ground of forum non conveniens in favour of the courts of Switzerland;

(iii) The 3^rd to 6^th defendants:

(i) an order that service of the writ of summons be set aside

(ii) a declaration that the writ has not been duly served on the 3^rd to 6^th defendants; and

(iii) an order that the order of the Master giving leave to serve the writ out of the jurisdiction on the 3^rd to 6^th defendants be discharged.

The issue:

12.  The principal issue between the parties is the proper interpretation of the exclusive jurisdiction clause contained in Article 26 of the banking contract made between Lammas and Barclays Suisse, and set out in paragraph 6 above.  The case for Lammas is that the place where the account was maintained is in Hong Kong and that accordingly the proceedings were properly brought in Hong Kong.  The case for Barclays Suisse is that the place where the account was maintained was Switzerland and that Switzerland is accordingly the proper venue for proceedings against Barclays Suisse.

13.  Barclays plc and the remaining defendants have all agreed to submit to the jurisdiction of the Swiss courts in the event that this Court should determine that the proper venue for the proceedings against Barclays Suisse should be Switzerland.

Swiss law:

14.  The parties are also agreed that the exclusive jurisdiction clause is to be interpreted according to Swiss law.  I am satisfied that the Swiss law experts were agreed on the following matters of Swiss law:

(a) This case would be treated as an “international matter” by the Swiss court, so that questions of jurisdiction would be determined pursuant to the Swiss Private International Law Act of 18 December 1987;

(b) There is no issue as to the validity of Article 26 of the General Conditions of the banking contract;

(c) In interpreting the exclusive jurisdiction clause, the Swiss judge will first have regard to the subjective intentions of the parties;

(d) In the case of an inability to elicit a common intention from the subjective intentions of the parties, the Swiss judge will try to objectively determine the common intention using various criteria governed by the “principle of confidence/trust”;

(e) There exists in Swiss law principle “in dubio contra stipulatorem”, by which in the case of doubt as to the meaning of a clause, the clause can be interpreted against the party who drafted the clause.

15.  There is a primary difference between the experts as to the application of the in dubio principle.  Professor Jeandin, for Barclays Suisse, argues it is a principle to be applied only as a last resort, where the objective interpretation process is unsuccessful.  Mr Marguerat for Lammas contends that principle is used as part of the objective interpretation process.

16.  Where there is a difference as to foreign law evidence, it is for the judge to resolve that difference if he can: Rouyer Guillet et Cie v Rouyer Guillet & Co [1949] 1 All ER 244.

17.  I prefer the evidence of Professor Jeandin.  I do so first, because I am satisfied that he has approached his task on a properly independent basis, as an expert intending to assist the court as to the law.  I recognise that he has, as has Mr Marguerat, given an opinion on the ultimate issue for the court, that is the interpretation of Article 26, and that strictly such opinions are inadmissible.  That is a common error made by experts not familiar with our system and in any event such opinions may be simply disregarded by the court.  It is not a basis upon which I could reject his evidence.

18.  Second, I regret to say that I find Mr Bleach’s criticism of Mr Marguerat, that he has entered into the arena in a partisan manner, to be justified.  I refer particularly to paragraphs 29-32 of Mr Marguerat’s opinion where he comments upon what he describes as behaviour of the defendants, asserting that that behaviour calls into question the defendants’ good faith.

19.  First, on the evidence the assertion that an important fact was hidden was simply unjustified.  The circumstances surrounding the fact were properly explained and Mr Marguerat did not resile from the assertion.  Second, when one has regard to the principle of confidence/trust, the fact of which Mr Marguerat complained was entirely irrelevant.  Third, in an affidavit filed by Lammas, Mr Marguerat was described as “(Lammas) Swiss legal counsel”.  The defendants’ solicitors sought clarification of this expression, seeking to know whether Mr Marguerat was employed Lammas as its legal counsel on a regular basis, in which case the necessary element of independence required of an expert may be absent, or whether he had been retained as a true expert, completely independent of Lammas.  The complaint was raised again in the course of the argument by Mr Bleach.  No explanation was ever forthcoming.

20.  Having regard to these matters, where there is a difference between the experts, I reject that of Mr Marguerat, and prefer that of Professor Jeandin.

21.  Professor Jeandin’s evidence was that the criteria to be applied at the objective interpretation stage will involve the Swiss judge:

(a) seeking to identify how the clause would have been understood by a person in good faith placed in the same circumstances taking into account the wording, the context and the circumstances;

(b) having regard to (inter alia) the context of Article 26, the General Conditions of the Bank, which a client would be considered to know, would apply to all clients who accepted them, not just Lammas;

(c) having regard not only to the literal meaning, but also what the parties really had in mind by virtue of the principle of confidence, which follows the principle of good faith;

(d) having regard, (if necessary), to other relevant circumstances such as:

(i) the location of the office where the account holders’ assets are located, Swiss jurisprudence presuming that the assets are located at the seat of the head office; and

(ii) the place of jurisdiction being the same place as the place for debt collection proceedings, as Swiss law makes special provision for account holders domiciled abroad to maintain an account at a branch outside Switzerland.

The factual arguments:

22.  Mr Maurellet for Lammas relied on the following facts to contend that the account was maintained in Hong Kong:

(a) The account opening documents were prepared and provided by Barclays Suisse, and signed by the officers of Lammas, first in New Zealand on 30 October 2002, and then in Hong Kong on 5 November 2002;

(b) The account, Mr Maurellet said, was operated solely and exclusively by and through Barclays plc;

(c) Lammas’ representatives in Hong Kong dealt with representatives of Barclays plc in Hong Kong and not with representatives of Barclays Suisse;

(d) All of the contact, including correspondence communications and meetings made by the Lammas’ representatives concerning the account, was, Mr Maurellet said, in Hong Kong;

(e) Throughout the whole history of the account, Mr Maurellet said, Lammas had no direct or indirect contact with Barclays Suisse, with everything being done through Barclays plc in Hong Kong.

23.  As will be seen from the matters relied upon by Mr Bleach the assertions in paragraphs (b), (d) and (e) above are simply incorrect.

24.  Mr Bleach argued that construction on an objective good-faith basis, having regard to Swiss law principles be based upon the following factors:

(a) It was common ground that Lammas made a deliberate decision to open a Swiss bank account, and not an account in the United Kingdom, that decision being made in the knowledge that it was not possible to open an account in Hong Kong;

(b) The account when opened was made on the terms contained in Article 26, which is plainly intended to establish a geographical link between Barclays Suisse and the forum for any proceedings;

(c) Article 26, by using the expression “the place where the office of the Bank with which the Account Holder maintains his account is located” specifically refers to the location of the office of Barclays Suisse;

(d) The expression “the Bank” is defined in the account opening documentation incorporating General Conditions as Barclays Suisse;

(e) It follows from (c) and (d) above that Article 26 refers to the location of the office of Barclays Suisse;

(f) Lammas opened its account with the Barclays Suisse head office in Geneva, and the assets in the account were located in Geneva;

(g) Correspondence including the contract note in respect of the April 2004  investment was sent to Lammas from Geneva;

(h) The contract notes in respect of the April 2000 for investment was endorsed with a Swiss stamp tax;

(i) Any banking client must (on the basis of the principle of good faith) be aware that a jurisdiction clause in the bank’s general conditions aims to provide the same forum for all customers;

(j) Similarly, a client would be aware that it would be intended that the jurisdiction should be certain and not capable of changing depending merely upon the location of receipt of advice at the place of giving instructions for investments;

(k) When interpreting Article 26, it is important to bear in mind that the expression “the place where the office of the Bank with which the Account Holder maintains his account is located” determines not just the place of jurisdiction, but also the place of execution and the place of debt collection proceedings for account holders domiciled abroad.

25.  The indisputable facts in paragraph 24(a), (f), (g) and (h), demonstrate that the assertions in paragraph 22(b), (d) and (e) are wrong.

26.  In order to apply the subjective intention test, (see paragraph 14(c) above), regard must be had to the foregoing facts, particularly items in paragraph 25(a), (f), (g)and (h).  On that subjective basis I am left in no doubt at all that the Swiss courts would find, just as an English or Hong Kong court would find, that the place where the office of Barclays Suisse, at with which Lammas maintained its account, is Switzerland.  That finding is sufficient to dispose of the matter.

27.  In case I am wrong in that respect I have given consideration to the objective criteria, (see paragraph 14(d) above).  In that circumstance, the whole of the matters set out in both paragraphs 22 and 24, (with the exception of paragraph 23(b), (d) and (e), which were wrong), are relevant.   Having regard to those facts, again, I am left in no doubt whatsoever that on an objective analysis of Article 26, the place where the office Barclays  Suisse, at which Lammas maintained its account, is Switzerland.

28.  In those circumstances there is no need at all to have recourse to the in dubio principle.

29.  I accordingly conclude that the exclusive place of jurisdiction of any form of proceeding between Lammas and Barclays Suisse is Switzerland.

The consequences of the exclusive jurisdiction being Switzerland:

30.  There was no dispute between the parties as to the principles to be applied.  Where a plaintiff has brought proceedings in one jurisdiction in breach of an agreement to refer disputes to a foreign court and the defendant applies for a stay, the court was not bound to grant a stay but has a discretion whether to do so or not (assuming the claim to be otherwise within court’s jurisdiction), but will generally grant a stay unless strong cause for not doing so is shown: The Eleftheria [1969] 1 Lloyd’s Rep 237, The Pioneer Container [1994] 2 AC 324 and Noble Power Investment Ltd v Nissei Stomach Tokyo Co [2008] 5 HKLRD 631.

31.  The court does not approach a jurisdiction challenge based on an exclusive jurisdiction clause by embarking upon a Spiliada, balancing exercise.  That is because the view taken both in England and Hong Kong is that a party should not be released from a contractual agreement as to jurisdiction on the basis of matters of convenience which were foreseeable at the time of making the agreement.

32.  Although it is relevant to take into account whether or not the effect of the enforcement of the exclusive jurisdiction clause will lead potentially to a multiplicity of proceedings, for example where the proceedings involve parties not covered by the exclusive jurisdiction clause, in this case the 2^nd and 6^th defendants, that is a matter which may be anticipated and appreciated by the plaintiff at the time he agreed to the exclusive jurisdiction clause.

33.  The burden is on Lammas to show strong cause, unforeseeable at the time of entering into the banking contract containing the exclusive jurisdiction clause, in November 2002, why full effect should not be given to Article 26.  I accept Mr Bleach’s submission that at the time the account was opened it was foreseeable that dealings in respect of the account would be in Hong Kong and that any claims made against Barclays Suisse in respect of the account may well be accompanied by claims against Barclays plc which could be brought in Hong Kong.

34.  If the proceedings continue in Hong Kong against the 2^nd to 6^th defendants, and also proceed against Barclays Suisse in Switzerland, there is a risk of multiplicity of judgments. That risk can be avoided by staying the proceedings against the remaining defendants, to enable proceedings to be brought against them in Switzerland.

35.  Subject therefore to the comments below as to the positions of Barclays plc, and the 3^rd to 6^th defendants, I am satisfied that the exclusive jurisdiction clause contained in Article 26 of the banking contract should be enforced, and consequently there should be a declaration that the court has no jurisdiction in those proceedings.

The position of Barclays plc:

36.  So far as Barclays plc is concerned, they have been properly served in Hong Kong, and consequently apply on the basis of forum non conveniens to stay the Hong Kong proceedings.  The principles are well known and are established in The Adniguna Meranti [1987] HKLR 904 and The Lanka Muditha [1991] HKCU 75.

37.  I am satisfied that Switzerland is an available forum for Lammas to sue Barclays plc.  The Swiss law experts are agreed that the Swiss courts can accept jurisdiction over Barclays plc if they submit to that jurisdiction, but that the Swiss courts are not obliged to do so.  I prefer the opinion of Professor Jeandin that, having regard to the fact that the Swiss courts are obliged to accept jurisdiction of the claim against Barclays Suisse, and Lammas’ assets, that is the bank account, is located in Switzerland, the Swiss courts would not decline jurisdiction over the claim against Barclays plc.

38.  Having regard to the fact that Barclays Suisse must be sued in Switzerland, and that because the claims against Barclays Suisse and Barclays plc are so inter-related that they should be heard together to avoid a risk of inconsistent decisions, Hong Kong is not the natural and appropriate forum for the action against Barclays plc by Lammas.

39.  For the reasons given in paragraph 31 above, Switzerland is an available forum.

40.  There is no suggestion that Lammas would be deprived of any legitimate personal or juridical advantages by being forced to undertake its proceedings in Switzerland.  That Lammas’ witnesses are located principally in Hong Kong and it will be more convenient for them to attend a court in Hong Kong carries little weight.

41.  I am accordingly satisfied that the appropriate forum for the action by Lammas against Barclays plc is Switzerland.

The position of the 3^rd to 6^th defendants:

42.  The basis of the action against the 3^rd to 6^th defendants is the tort of professional negligence, which is brought against a financial adviser.  A fundamental allegation in any statement of claim alleging professional negligence is the basis for the existence of a duty of care, either the existence of a retainer, or facts showing an assumption of responsibility towards the claimant: see Bullen & Leake & Jacobs, Precedents of Pleadings Vol II, para 77-08.

43.  As long ago as September 2010, the solicitors for the defendants drew the attention of the solicitors for Lammas to the fact that there was no pleaded allegation that any of the 3^rd to 6^th defendants made any representation to Lammas or in any other way held out to Lammas that “the Barclays Wealth Focus List was constantly monitored and adjusted” by all defendants, “in order to maintain the highest possible standards” (see paragraph 31 statement of claim).  Neither, it was pointed out, was there any pleaded basis showing either a retainer or facts showing an assumption of responsibility on the part of the 3^rd to 6^th defendants towards Lammas.

44.  I accept Mr Bleach’s submission that in the absence of those pleadings it cannot be successfully argued by Lammas that there is a complete cause of action pleaded against the 3^rd to 6^th defendants.  In the absence of a complete cause of action, there can be no serious issue to be tried, and the leave given by the Master to serve the proceedings out of the jurisdiction must be set aside.

Enforcement of the exclusive jurisdiction clause:

45.  Having concluded that Hong Kong is not the proper forum for the action against Barclays plc, and that the leave to serve the proceedings out of the jurisdiction in respect of the 3^rd to 6^th defendants must be set aside, it inevitably follows that there is no basis at all upon which the exclusive jurisdiction clause contained in Article 26 should not be enforced.

Costs:

46.  In so far as Barclays Suisse and Barclays plc are concerned there will be an order nisi that Lammas must pay the costs of the applications, to be taxed if not agreed, on a party and party basis.

47.  As to the 3^rd to 6^th defendants, Lammas was warned many months ago of the basis upon which their involvement in the proceedings would be challenged.  In clear correspondence the fundamental deficiencies in the pleadings were demonstrated.  Lammas were invited to amend their pleadings but elected not to do so.  Instead they tried to justify the terms of the proceedings but have been quite unable to do so.

48.  In those circumstances, I am satisfied that there should be an order nisi that Lammas must pay the costs of the 3^rd to 6^th defendants on a common fund basis.

49.  There will be a certificate for two counsel.