In Jong v HSBC Private Bank (Monaco) SA and others1 the Chancery Division of the High Court considered an application by the defendants to set aside permission to serve proceedings outside the jurisdiction on a defendant domiciled in Monaco, in proceedings where the two remaining defendants were domiciled   in England.

Background

The claimant, Mrs Jong, conducted foreign exchange dealings through the first defendant, HSBC Private Bank (Monaco) SA (HSBC Monaco). On 1 May 2013, Mrs Jong issued High Court proceedings against HSBC Monaco, alleging that it had failed properly to give effect to her instructions, either by not executing trades which it had agreed to execute or by executing trades for which  it had no instructions. She claimed to have suffered substantial losses, estimated to be in the region of £20m, as a result.

Subsequently, Mrs Jong added as defendants to the proceedings two additional members of HSBC corporate group, both domiciled in England (the English defendants). Her claims against the English defendants were based on the English defendants’ investigation of complaints she had made in July 2008 about the handling of her account by HSBC Monaco. In summary, she alleged that her complaints were improperly investigated by the English defendants and that they covered up the failings of HSBC Monaco, with the effect that she continued trading with HSBC Monaco until March 2009, suffering additional losses.

A week after the addition of the English defendants, Mrs Jong made an application for permission to serve the proceedings on HSBC Monaco in Monaco  (for the avoidance of doubt, Mrs Jong was entitled to sue the English defendants in England as of right.) Permission was granted by a master in January 2014. The defendants applied to set aside the order granting permission on the basis that Monaco would be the more appropriate jurisdiction for the claim against HSBC Monaco.

Jurisdiction: a recap on the non-EU position

Since Monaco falls outside of the European jurisdiction regime (and the dispute was not covered by any of the exclusive jurisdiction provisions in that regime), jurisdiction was  to be determined on the basis of the residual common law provisions. At common law, for the court to accept jurisdiction, the proceedings must first be properly served on the defendant.

Except in limited circumstances, the court’s permission is required to serve proceedings outside of the jurisdiction. The court will only grant permission where:

  • the claimant has passed through one of the “gateways” in CPR Practice Direction 6B, paragraph 3.1
  • the claim has a real prospect of success
  • England is the proper place to bring the claim.

The addition of the English defendants meant that Mrs Jong did pass through one of the jurisdictional gateways (although she also relied on other gateways which were independent of that) and the defendants accepted that Mrs Jong’s claim had a real prospect of success. The court was therefore left to decide whether England was the proper place to bring the claim against HSBC Monaco.

Decision

HSBC Monaco’s standard terms and conditions contained a clause submitting any litigation between Mrs Jong and HSBC Monaco to the exclusive jurisdiction of the Monacan court (whilst reserving the right for HSBC Monaco only to bring proceedings elsewhere). The parties agreed that these terms and conditions applied to at least 90% of the relevant transactions.

The court recognised the importance of enforcement of exclusive jurisdiction clauses and said that the starting point was that they should be enforced. However, the court also noted that an exclusive jurisdiction clause was not binding on it and that there may be exceptions to their enforcement where justice requiresit.

It was common ground that Mrs Jong’s claims against HSBC Monaco were subject to Monacan law. However, the court did not consider, given the subject matter of the dispute, that this weighed significantly in favour of Monacan jurisdiction. That was because the dispute would be likely to turn  almost entirely on its facts – ie whether HSBC Monaco acted in accordance with its instructions or not. It was not suggested to the court that, in the event that this factual basis was made out, HSBC Monaco “could wriggle out of liability on some basis only available under the law of Monaco”.

In asserting that England would be the proper place for the claim against HSBC Monaco, Mrs Jong argued, first, that given that the claims against HSBC Monaco and the English defendants involved substantially the same issues, there was a risk of irreconcilable judgments in Monaco and in England (as noted above, Mrs Jong was entitled as of right to sue the English defendants in England).

The court did not consider this to be a relevant consideration, since there were no proceedings in Monaco, and might not ever be. It also noted, following Pacific International Sport Clubs v Soccer Marketing International2 that to avoid that risk, it might be possible to stay the English proceedings against the English defendants as a matter of effective case management, rather than on jurisdictional grounds.

The defendants’ position was that the claim against HSBC Monaco was clearly Mrs Jong’s real focus and that the claims against the English defendants were “parasitic” on that claim and had been introduced only to bolster the jurisdictional case against HSBC Monaco.

The court agreed with the defendants that HSBC Monaco was the main defendant and that the English defendants were “bit- players, having little, if anything, to add to the main claim against HSBC Monaco”. After all, Mrs Jong’s losses arising from any unauthorised trades after the date of her complaints should be recoverable from HSBC Monaco and her residual claim in respect of  losses incurred under authorised trades faced “obvious causation difficulties” (since the losses would seem principally to result from her own trading decisions) and appeared to have “taxed Counsel’s ingenuity to the full” and left the impression that they had indeed been introduced only to support the jurisdictional argument.

Mrs Jong also sought to rely on issues with the courts of Monaco, including an alleged lack of experience (and even impartiality) of its judiciary, procedural differences (including the lack of cross-examination), the reduced scope for costs recovery and the potential for excessive delay (which the court acknowledged might be five years). The court noted, following the decision of the House of Lords in The Spiliada3, that if all other factors pointed to Monaco as the appropriate forum, then that is where the proceedings against HSBC Monaco should be heard unless substantial justice could not be achieved there. The court considered that Mrs Jong had fallen some way short of establishing that, disregarding her comments about the judiciary and noting that the procedural differences were “a fact of life in any comparison between common law and civil law systems”. The potential delay was “regrettable”, but “not such to amount to a denial of justice”.

Accordingly, the court decided that there was no basis on which not to give effect to the exclusive jurisdiction clause and granted the defendants’ application, setting aside permission for Mrs Jong to serve the proceedings on HSBC Monaco.

Conclusion

This decision serves as a useful reminder that the court will be guided by the substance, and not the form, of proceedings when considering questions of jurisdiction. Whilst including English-domiciled defendants in a claim against a foreign entity may get a claimant through one of jurisdictional gateways in CPR Practice Direction 6B, paragraph 3.1, that is of little value if the claimant nevertheless has poor prospects of establishing that England is that proper place for the claim.

Also noteworthy is the court’s apparent endorsement of a potential stay of parallel English proceedings on case management, rather than jurisdictional, grounds. Although the court said that, in doing so, care would have to be taken not to “evade the impact of Owusu v Jackson4 through the back door” it is not entirely obvious how that could be achieved, unless one construes “case management” broadly, to encompass related disputes in other jurisdictions, rather than simply the proceedings before the English courts.