UES INTERNATIONAL (HK) LTD v. MARITIMA MARUBA S.A.

HCA632/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 632 OF 2011

------------------------

BETWEEN

-------------------------

------------------------

D E C I S I O N

------------------------

1.  This is the defendant’s (“Maruba”) application under Order 14A for 3 questions to be determined. Before I set out the questions, I should briefly describe the background to this action.

Background

2.  The plaintiff (“UES”) is a Hong Kong company whose business includes that of container leasing.  Maruba is a shipping company based in Argentina.  There are 2 companies related to Maruba called South Atlantic Container Line Ltd (“SACL”) and Nexxus Leasing Co Ltd (“Nexxus”).  Between April 2006 and September 2008, UES entered into 9 container leasing agreements with SACL and 3 such agreements with Nexxus (“Leasing Agreements”). 

3.  Essentially, under the Leasing Agreements, UES as lessor leased various containers to SACL and Nexxus at specified rental and miscellaneous charges.  In respect of each of the Leasing Agreements, Maruba had issued a guarantee letter (“Guarantee Contract”) to UES unconditionally guaranteeing the due and prompt payment and performance of obligations on the part of SACL or Nexxus. 

4.  At about the same time when some the SCAL Leasing Agreements were executed, UES served on SACL a written notice of assignment of its interest in the Leasing Agreement (“Notices of Assignment”). Altogether 7 such notices were served, 6 of them did not name any assignee and 1 named Cosmos Palace Investments Ltd (“Cosmos”) as the assignee.  Those notices were duly acknowledged by SACL. 

5.  In about early 2009, SCAL and Nexxus began to default on their pay obligations under the Leasing Agreements.  Subsequently, there was a restructuring of the debts owed by those companies and other companies related to them which was agreed by their creditors, including UES. A number of documents were signed for the purpose of the restructuring, including a Creditors Agreement dated 29 September 2010 (“Creditors Agreement”). 

6.  In about November 2012, the payment obligations under the Creditors Agreement were not honoured.  On 25 January 2011, UES cancelled the Creditors Agreement.  As at 31 March 2011, the outstanding rental and contractual interest owed by SACL and Nexxus to UES amounted to about US$9.06 million and US$1.33 million respectively. 

7.  Pursuant to the terms of the Guarantee Contracts, UES commenced these proceedings on 8 April 2011 against Maruba as the guarantor of the liabilities of SACL and Nexxus. 

8.  This action has been set down for trial on 18 December 2013.

The questions

9.  According to Maruba’s O.14A Summons dated 29 October 2012 (“Summons”), the following questions of law and/or construction are to be determined:

“(1) Whether the 12 Guarantee Contracts and/or the Defendant’s liability thereunder were discharged:

(a) upon execution of the Creditors Agreement and the Side Letter; or

(b) alternatively, by operation of the rule in Holme v Brunskill (1878) 3 QBD 495 (‘Question One’)

(2)     Whether the Plaintiff has locus to sue the Defendant under the Guarantee Contracts in respect of the 7 Leasing Agreements numbers GVC/MRB-07-016-LA, GVC/MRB-07-026-LA, GVC/MRB-07-037-LA, GVC/MRB-07-068-LA, UES/MRB-08-052-LA, UES/MRB-08-053-LA and UES/MRB-08-062-LA (‘Question Two’).”

10.  Mr Manzoni SC, who appeared for Maruba, has rightly accepted that the 2^nd question (para 1(b) of the Summons) is not fit for determination under O.14A because of the factual issue raised by UES, namely, that Maruba had at the material time consented to the variations made to the Leasing Agreements. 

11.  Hence, I need to deal only with the 1^st and 3^rd questions.  I propose to deal firstly with the latter.

3^rd question

12.  I must confess to having a good deal of difficulty in understanding why this application is pursued when the trial is a little over 7 months away.  In my experience, an O.14A application is rarely a useful exercise.  More often than not it is an unnecessary distraction and a waste of time and costs, because the cases where there is a point of law which is suitable for determination without a trial (putting aside the requirement that the determination will finally determine at least an issue in the case) is relatively rare.  

13.  Mr Nip, who appeared for UES, has submitted, quite rightly, that the court has a discretion to decline an O.14A application if it takes the view that there is no great saving of time and costs in acceding to the same (see Rockwin Enterprises Ltd v Shui Yee Ltd & Ors [2003] 3 HKC 174 at 185A-B). 

14.  Putting aside the discretion, I am not convinced that it is appropriate to resolve the 3^rd question simply as a construction exercise by examining solely the terms of the Notices of Assignment.  The case of UES, and the evidence advanced by it, is that there was no assignment created in respect of the 6 documents which did not state the name of the assignee.  Those Notices of Assignment were sent out to SACL as a matter of procedure by the staff of UES.  As regards the 7^th document, it was not in truth an assignment but a charge which was created with the use of that document in favour of Cosmos, which was a company related to UES.  I do not believe that this court can ignore the evidence that there was no assignment created in respect of at least the said 6 Notices of Assignment in deciding the effect of those documents.  For that reason alone, I would dismiss the Summons in respect of the 3^rd question.

15.  Further, it has been rightly accepted by Mr Manzoni that the determination of the 3^rd question will only deal with 7 of the 12 Leasing Agreements.  I am unconvinced that this court should entertain this application at this stage of the proceedings.  It has not been demonstrated that there will be any great saving of costs by doing so.

1^st question

16.  In short, Mr Manzoni’s submission is that, on a proper construction of the Creditors Agreement and the related documents, the liabilities under the Leasing Agreements as of 31 May 2010 (the restructuring of debts only concerned those incurred as of that date – about US$6.7 million) had been extinguished and replaced by the obligations under the Creditors Agreement.  Maruba was not a party to the Creditors Agreement and therefore, there can be no proper cause of action against it in respect of the US$6.7 million. 

17.  In answer to the court whether the construction exercise will have to be carried out in the context of the factual matrix, Mr Manzoni submitted that the contractual provisions are so clear that no doubt can be entertained.  I believe that unless Mr Manzoni can make good his case to that high threshold, I cannot see how it can be right to ignore the factual matrix (part of which is disputed). 

18.  Despite Mr Manzoni’s attractive submissions, I do not see that the point is adequately clear based on the contractual provisions alone.  The weakness in Maruba’s case is that, as accepted by Mr Manzoni, there is no express provision to the effect that UES’ rights to the US$6.7 million would be extinguished and replaced by the Creditors Agreement. It is arguable that UES would be entitled to sue for those outstanding obligations if the Creditors Agreement is breached.  Mr Manzoni may ultimately succeed on his submission at the trial, but that will be after consideration of the relevant facts by the court.  For that reason, the Summons must be dismissed in respect of the 1^st question as well.

19.  Further, like the determination of the 3^rd question, the determination of the 1^st question will only resolve part of UES’ claim in this action.  Again, I do not see any great saving of costs and why this application should be entertained at this stage of the proceedings.

Conclusion

20.  For these reasons, the Summons is dismissed with costs to UES.