Standard Bank Plc v Via Mat International Ltd & Anor

This is an appeal against the order of Popplewell J. giving summary judgment for the first defendant against the claimant and setting aside service of the claim form and particulars of claim on the second defendant out of the jurisdiction in Hong Kong. It was common ground before us, as it had been before the judge, that the two applications stand or fall together.

The claimant, Standard Bank Plc (“the Bank”), is a well-known company which carries on investment banking operations in many countries around the world, including China, where it operates through its subsidiary Standard Bank Asia Ltd which has its offices in Hong Kong. The defendants are associated companies in the Via Mat Group, both being subsidiaries of Via Mat Management A.G., a company incorporated in Switzerland, which is itself owned by the group holding company, Via Mat Holdings A.G., also incorporated in Switzerland. Other companies forming part of the Via Mat group have been incorporated in various countries, each being a subsidiary of Via Mat Management A.G. It will be necessary at a later stage to consider the relationship between the first defendant, Via Mat International Ltd (“Via Mat UK”), and its associated companies, in particular Via Mat International (Hong Kong) Ltd (“Via Mat HK”). The Via Mat group as a whole carries on the business of providing secure transport and storage services worldwide.

On 9^th July 2001 the Bank entered into what was described as an international transport agreement (“ITA”) with Via Mat UK under which Via Mat UK agreed to undertake the carriage and incidental storage of goods for the Bank on the terms of its General Trading Conditions (“the General Conditions”), the current edition then being that which had been published in January 2000. The General Conditions were amended with effect from January 2002 and again with effect from January 2005. It was common ground that by the date of the events with which this appeal is concerned the 2005 edition of the General Conditions governed all dealings between the parties. They provided, so far as is material, as follows:

“In these General Trading Conditions “the Company” is VIA MAT INTERNATIONAL LTD. The Company (whether by itself or the agents referred to at the end of this document) is engaged in various services relating to valuables or special consignments, such as precious . . . metals . . .

The party with whom the company trades and/or otherwise contracts is referred to as “the Principal”.

Subject to what follows, these General Trading Conditions apply to all activities and business undertaken by the Company for and on behalf of the Principal

. . .

2.

Contract Services

. . . The Company shall be entitled to perform any of its obligations by itself, agents, parent companies, subsidiary companies, associated companies or sub-contractors and all such parties, through the agency of the Company, shall be entitled to the benefit of these General Trading Conditions. . . .

. . .

4.

Liability and duration of responsibility: goods

. . .

C. Storage only

Where the Company agrees to arrange or perform storage of goods which is either unconnected to carriage and other services or is connected to carriage but extends beyond 30 days, the Company shall, subject to the exclusions and limitations herein, only be liable for partial and/or total physical loss and damage to goods whilst they are in the actual physical custody of the Company, its employees or authorised warehouse operators and in no other circumstances. . . .”

At the end of the document was a page headed “VIA MAT International Ltd” which read as follows:

“Represented in:

. . .

Hong Kong Via Mat International (Hong Kong) Ltd

. . .

The above are acting as agents for Via Mat International Ltd, United Kingdom”

In about 2005 the Bank began purchasing silver in the form of bullion and electronic contact parts from refineries in mainland China. Between about 2005 and 2009 silver bought by the Bank from mainland Chinese refiners was transported to Hong Kong for storage pending its disposal by the Bank on the open market. Some of the goods were stored in a vault operated by Via Mat HK and some in a vault operated by one of its competitors, Brink’s. Practical arrangements for the receipt, storage and delivery of the silver were made in Hong Kong between employees of Standard Bank Asia and representatives of Via Mat HK. The head of the Precious Metals department at Standard Bank Asia was Mr. Ellison Chu. His primary point of contact at Via Mat HK was the general manager, Mr. Chen Guo-xing (also referred to as Mr. Gilbert Chan).

In about August 2009 with the support of the Bank Via Mat HK opened a secure vault in Hunan, hoping to attract more business from refiners operating in mainland China. In a letter to the Bank dated 14^th August 2009 Mr. Chen said:

“We would confirm that we are ready to receive, store and process your first shipment of silver shipment [sic] at the above silver storage facility and all your silver shipments in the storage facility will be fully covered by our full liability cargo insurance policy for handling, transit and storage.”

Between September 2009 and November 2010 many parcels of silver were delivered into the vault at Hunan by various Chinese refineries from whom the Bank had agreed to buy goods. They included over 150 parcels delivered by two particular refineries, Yongxing Xihe Lead Industry Co Ltd (“Xihe”) and Yongxing Jin Rong Materials Technology Co. Ltd (“Jin Rong”). In respect of each parcel received into the vault Via Mat HK issued a document described as a warehouse receipt addressed to the Bank stating that a shipment comprising a certain number of boxes said to contain pure silver and of a certain weight and bearing certain identification marks had been received into the Hunan warehouse and was being held to the irrevocable order of the Bank. There followed an undertaking not to release the shipment or any part of it before receiving written release instructions from the Bank. Via Mat HK advised the Bank each day of the quantity of silver held for its account, which included silver held in Hunan.

In September 2010 the Bank was informed that eight parcels of silver weighing together a little over 20 metric tons that had, or had apparently, been deposited in the vault in Hunan on various occasions between June and November that year were not available for delivery, despite the fact that warehouse receipts had been issued in respect of them. It now appears that some may have been redelivered to the refiner and that others may not have been received in the first place. However, on this, as on many other aspects of the case, the evidence remains unclear. The manager of the vault in Hunan, Mr. Qi Yong-quan, subsequently confessed to the Chinese police that he had been bribed to issue warehouse receipts in respect of goods that were not held in the vault at the behest of representatives of the two refineries. The Bank, which paid the refineries on receipt of confirmation from Via Mat HK that the silver had been received into the vault in Hunan, claims to have suffered a loss of about US$20 million as a result of the fraud.

On 23^rd July 2011 the Bank issued proceedings against Via Mat UK and Via Mat HK in respect of the loss it had sustained in relation to the eight parcels of silver. Both in its claim form and in its particulars of claim it claimed against both defendants damages for breach of contract and breach of duty as bailees on the basis that Via Mat HK had been acting as agent of Via Mat UK in providing services under or pursuant to the ITA. It also made a claim against both defendants for delivery up of the missing silver. On 21^st July 2011 Burton J. had given the Bank permission to serve the claim form on Via Mat HK out of the jurisdiction on the grounds, among others, that it was a necessary or proper party to the claim against Via Mat UK. On 16^th August 2011 the claim form was served on Via Mat HK in Hong Kong in accordance with that order which led in due course to the applications that came before Popplewell J. in March last year. Via Mat UK sought summary judgment under CPR Part 24 dismissing the Bank’s claim against it; Via Mat HK sought to set aside service of the claim form on the grounds that there was no real issue between the Bank and Via Mat UK to which it could be a necessary or proper party. The judge acceded to both applications.

It is necessary at this point to say a little more about the relationships between the various parties. The evidence currently before the court indicates that the Bank started buying silver from Xihe under a contract dated 27^th April 2005 for delivery between 1^st May 2005 and 30^th April 2006. The contract expressly provided for delivery to be made to a security agent in Hong Kong nominated by the Bank. Property passed on receipt by the Bank of written confirmation by the security agent that it had received the goods. The price therefore covered carriage to Hong Kong. Although we were not provided with copies of any purchase contracts between the Bank and Xihe relating to subsequent years, the evidence suggests that the Bank continued to buy silver from Xihe on the same or very similar terms, including delivery in Hong Kong.

The Bank’s contract with Jin Rong was dated 11^th August 2009. It was for 72 minimum 240 maximum metric tons of silver electrical contact parts, wires and other products for delivery between September 2009 and August 2011. Delivery was to be made first to the vault of the Bank of China, Chenzhou Branch for subsequent export to Hong Kong and delivery to a security agent nominated by the Bank. Payment was to be made following receipt by the Bank of China, subject to a satisfactory quality report. The contract incorporated the Bank’s standard terms of business which provided that property was to pass on delivery. Once again, carriage from Chenzhou to Hong Kong appears to have been included in the purchase price.

By the summer of 2009 the Bank had for some time been using the services of Via Mat in Hong Kong to store some of the silver bought from Chinese refiners pending its disposal. It is clear from the documents that Via Mat HK was keen to promote the vault in Hunan and that it persuaded the Bank that it could be used to take in silver coming from refineries in mainland China. That was obviously beneficial to the refineries, who could expect to obtain payment sooner than would be the case if they had to wait for the goods to reach Hong Kong. (The benefit to the Bank is less clear, but it may have been thought that the opportunity for refineries to receive payment earlier than would otherwise have been the case would make it more attractive as a buyer.)

On the face of it, the use of the vault in Hunan called for some changes in the contractual arrangements between the Bank and the refineries, if only in relation to the terms of delivery and payment. It may also have required some reconsideration, or at any rate clarification, of the terms relating to the carriage of the goods from Hunan to Hong Kong. It is difficult to see why the Bank should have assumed the cost of transport, but if delivery were to be made in Hunan rather than Hong Kong one might have expected the position to be made clear. It is said on behalf of the Bank that the contracts with the refineries were varied orally or by conduct, but the Bank has produced very little by way of concrete evidence to support that assertion. Mr. McDonald says that after the vault opened the Bank took delivery of the goods in Hunan instead of Hong Kong, but he says nothing about when or how the variation of the original agreements was brought about.

The opening of the vault in Hunan must also have called for some modification of the relationship between the Bank and Via Mat, or at least some clarification of Via Mat’s role. It is regrettable, however, that the evidence in relation to that question is also very limited. That may be due in part to the restrictions placed on Mr. Chu while the circumstances surrounding the operation of the vault were under investigation by the Chinese authorities, but it does nothing to advance the Bank’s case.

Finally, there is the relationship between Via Mat HK and the refineries, as to which the position is also rather obscure. The only person who appears to have had direct contact with the refineries on behalf of Via Mat HK is Mr. Qi. There is evidence from Mr. Chen which suggests that Via Mat HK’s operations in Hunan were entirely under the control of Mr. Qi, who resented, and to a very considerable extent obstructed, any involvement on the part of those in the Hong Kong office, including Mr. Chen. However, the statements Mr. Chen has made thus far are not altogether consistent and it should not be overlooked that he has an obvious interest in casting all the blame on Mr. Qi. Mr. Qi has made a number of statements to the Chinese police admitting his part in frauds committed against both the Bank and the refineries. If the matter comes to trial the court may well view the evidence of both witnesses with some caution, but at the moment it is all that there is to go on.

The judge concentrated very much on the contractual arrangements between the various parties, perhaps because that reflected the emphasis which the Bank put on that aspect of its case. In short, in his paragraph [30] he accepted the submission made on behalf of the defendants that the contract between the Bank and Via Mat UK was a framework agreement, which was intended to apply if and when services were contracted for in relation to specific shipments or goods by further dealings directly between Via Mat UK (or someone on its behalf) and the Bank. He found that there was no evidence of any agreement between Via Mat UK, or anyone on its behalf, and the Bank for the provision of storage services in relation to the eight consignments of silver. On the contrary, he considered that the evidence was inconsistent with any such agreement, because it was clear, in his view, that Via Mat HK had contracted with the refineries, not with the Bank, for the provision of such services as they had agreed to provide in Hunan in relation to the silver. In other words, he held that the services provided by Via Mat HK at the Hunan vault and in relation to the carriage of the goods from Hunan to Hong Kong were provided exclusively under contracts with the refineries made by Via Mat HK acting purely on its own behalf. The judge explained the undertaking given by Via Mat HK in the warehouse receipts not to release shipments without the written instructions of the Bank by saying that it was not to be understood as referring to releasing the shipment from the vault, but to releasing it otherwise than in accordance with its own contractual arrangements with the refineries for the transport of the goods from the vault to Hong Kong.

It is as well to remind oneself at this stage that the court is concerned with an application for summary judgment. It follows that in order for the defendants to succeed it is necessary for them to satisfy the court that the Bank’s claim has no real prospect of success. That inevitably involves a degree of judgment, but it is important to recognise that the purpose of Part 24 is to enable the court to dispose summarily of cases that are fanciful, hopeless or bound to fail, not to conduct an abbreviated form of trial on the basis of incomplete evidence. When the relationship between the parties involved in or connected to the dispute is contained or reflected in a series of documents, the court may be able to see without further evidence that the claim or defence has no substance. However, documents do not always speak clearly for themselves and it is not at all uncommon to find that it is not possible to appreciate their true significance without a clear understanding of the context in which they were created. In the present case an important part of that context is the business relationship between Mr. Chu of Standard Bank Asia and Mr. Chen of Via Mat HK and what passed between them in relation to the use of the vault in Hunan. After all, if Via Mat HK wanted to provide a service on its own behalf to the refineries alone for the receipt and carriage of the silver to Hong Kong (as the judge held it did), it is not clear why it needed the agreement or support of the Bank in order to do so or why it should have issued warehouse receipts to the Bank in respect of goods deposited in Hunan. A clear understanding of the relationship between the Bank and the refineries and between the refineries and Via Mat HK is also likely to shed some light on the matter.

It is a striking feature of this case that Via Mat HK did issue warehouse receipts to the Bank in respect of the silver deposited in Hunan. (No separate warehouse receipts appear to have been issued when the goods reached the vault in Hong Kong.) It also sent daily stock inventory reports to the Bank showing the quantity of goods which it was holding on behalf of the Bank, which also reflected the goods covered by the warehouse receipts. It is true that the warehouse receipts themselves were qualified in terms of the actual contents of the cases (though not as to their number or marks), but it is clearly arguable (to put it no higher) that they created a relationship of bailor and bailee between the Bank and Via Mat HK. The copies of the warehouse receipts before the court do not refer to any terms of business, but they were issued in the overall context of the business relationship between Via Mat HK and the Bank and it would be surprising if the parties had not intended the relationship to be governed by contractual terms of some kind. Other formal documents issued by Via Mat HK (for example the contracts and invoices issued to the Chinese refiners) expressly stated that the General Conditions (in some cases the General Conditions of Via Mat UK) applied to the business being undertaken and the Bank’s witnesses say it was their understanding that the General Conditions applied to all their dealings with the Via Mat companies. In the circumstances it seems to me at least arguable that that was the case, but for present purposes it may not matter greatly. What does seem to me important is that it is at least arguable that Via Mat HK became a bailee to the order of the Bank of the goods described in the warehouse receipts and is liable for the failure to deliver them up. In this context it must be remembered that the Bank paid for the goods against the warehouse receipts.

None of that will enable the Bank to succeed, however, unless it can show that it has a real prospect of establishing that Via Mat UK is liable for any breach of contract or duty committed by Via Mat HK and that depends on the terms of the contract between them, in particular the General Conditions. As far as one can tell, the General Conditions are intended to govern all business undertaken by the Via Mat group anywhere in the world, apart from activities performed entirely within Switzerland, to which separate conditions apply. Moreover, the opening paragraph makes it clear that the contracting party is Via Mat UK, even if some or all of the services are provided by one of the local Via Mat companies acting as its agent. If, therefore, as appears possible from most of the documentation issued by Via Mat HK, local Via Mat companies contract on those same terms, it is arguable that they all contract as agents for Via Mat UK rather than as principals.

I think the judge was right to view the ITA as a framework agreement which established the terms on which individual consignments would be handled as and when required pursuant to instructions from the Bank. However, there is nothing in the ITA which prevents the Bank giving instructions by one of its agents and the evidence suggests that Mr. Chu of Standard Bank Asia, acting as agent for the Bank, regularly gave instructions to Via Mat HK in relation to silver delivered to, and held in, the vault in Hong Kong. Given that the ITA identified Via Mat UK as the sole contracting party but entitled it to provide services through agents abroad, I think the Bank has a real prospect of persuading the court, particularly having regard to the way in which the business was conducted, that on a correct understanding of the ITA local Via Mat companies (in this case Via Mat HK) were to be treated as the agents of Via Mat UK for the purpose of receiving instructions from the customer or its agents and carrying them out. I do not think it by any means fanciful, therefore, for the Bank to assert that, when Via Mat HK issued a warehouse receipt in respect of a particular parcel of goods, it did so as agent for Via Mat UK and not simply as a principal in its own right.

The letter dated 14^th August 2001 from Via Mat HK to Standard Bank Asia strongly suggests that there had been some discussions between Mr. Chen and Mr. Chu about the opening of the Hunan vault under which Via Mat HK had offered to provide services of some kind to the Bank. That would not be surprising, since according to one of the statements made by Mr. Chen, the operation would not have been commercially feasible without the support of the Bank. The judge was heavily influenced by the fact that Via Mat HK had entered into agreements with individual refineries for the carriage of silver from Hunan to Hong Kong and had invoiced them rather than the Bank for the cost. He thought that those agreements excluded the possibility that Via Mat HK was providing services to the Bank in Hunan, either on its own behalf or as agent for Via Mat UK, but I do not think that is necessarily the case. Much may depend on the terms on which the Bank had agreed to buy the goods.

As I have already mentioned, the judge thought that the undertaking in the warehouse receipts not to release the goods without written instructions from the Bank meant no more than that it would not release them otherwise than in accordance with the contracts of carriage with the refineries. They do not say that, however, and I do not think it is obvious that they were intended to, or did, have such a restricted meaning. In any event, they too need to be evaluated in the context of a full understanding of the relationships between the different parties. For example, although there is evidence that instructions for the carriage of the goods were routinely given to Via Mat HK by the refineries, it is not clear in what capacity the refineries acted or whether the goods were in fact released from the vault without the approval of the Bank, written or otherwise. It seems certain that the contracts between the Bank and the refineries were varied in some respects following the opening of the Hunan vault, if only in relation to the time of payment; as I have said, whether they were varied in relation to delivery, carriage to Hong Kong, risk and the passing of property remains unclear. However, that may not ultimately matter greatly, given that, as Mr. Qi has accepted, Via Mat HK was aware that the Bank would pay for the silver against the issue of the warehouse receipts and would suffer a corresponding loss if the goods either did not exist or were misdelivered in the way he has described. For present purposes what is important is whether in issuing the warehouse receipts Via Mat HK was acting as agent for Via Mat UK.

It is regrettable that the Bank’s evidence relating to its dealings both with the Via Mat companies and the refiners is less complete than it might be, although the police investigations into the operation of the Hunan vault and the restrictions imposed on Mr. Chu in connection with them have obviously given rise to some difficulties and continue to do so. As a result, many aspects of this matter remain obscure. It may be that when they have been further investigated it will become apparent that Via Mat HK was not acting an agent for Via Mat UK in relation to the warehousing of the goods in Hunan and the issuing of the warehouse receipts and other documents relating to them. However, I do not think that the position is clear enough at this stage to enable one to say that the claim has no real prospect of success.

For those reasons I would allow the appeal and set aside the judge’s order.

Before leaving this matter I wish to say something about the skeleton arguments in this case. Although there were two applications before the judge, they were complementary and in substance this was a relatively straightforward application for summary judgment. The hearing before the judge was completed within a day, as was the hearing of the appeal and although a large amount of evidence was filed, it proved possible as a result of co-operation between the parties to produce a single core bundle of moderate length which included all the important documents. In those circumstances it is a matter of concern that the skeleton arguments produced for the appeal run to a total of 116 pages, of which by far the greater part (93 pages in all) is made up of the appellant’s skeleton and supplementary skeleton arguments.

In the opening paragraphs of his judgment in Khader v Aziz [2010] EWCA Civ 716, [2010] 1 W.L.R. 2673 Sir Anthony May PQBD sounded a clear warning about the risks to our tradition of oral advocacy posed by excessively long skeleton arguments. He did so following complaints of a similar nature voiced by the members of this court in Tombstone Limited v Raja [2008] EWCA Civ 1444, [2009] 1 WLR 1143 and Midgulf International Limited v Groupe Chimique Tunisien [2010] EWCA Civ 66, [2010] 2 Lloyd's Rep. 543. I expressly associated myself with the President’s remarks, pointing out that the purpose of skeleton arguments is to inform the court of the essential elements of the parties’ submissions and thereby enable it to understand the issues and arguments arising on the appeal. I also expressed the view that the best way in which to alleviate the increasingly onerous burden imposed by unduly long and complex skeleton arguments is for the court to be far more willing than it has been in the past to disallow all or part of the costs of any skeleton that fails to serve that essential purpose.

It is important that both practitioners and their clients understand that skeleton arguments are not intended to serve as vehicles for extended advocacy and that in general a short, concise skeleton is both more helpful to the court and more likely to be persuasive than a longer document which seeks to develop every point which the advocate would wish to make in oral argument. In this context I wish to draw attention to the provisions of Practice Directions 52A and 52C, both of which apply to proceedings in this court. Each of those Practice Directions contains important provisions relating to the nature and content of skeleton arguments. Practice Direction 52C, in particular, contains specific provisions governing their length and presentation. The court will expect the requirements of both Practice Directions to be rigorously observed. Failure to comply with them is likely to be penalised in costs.

I agree. Although we are differing from the learned judge, there is no point in my simply repeating, in different words, the reasoning and conclusions that Moore-Bick LJ has reached with which I am in total agreement, so, without intending any disrespect, I will not add anything further on the substance of the appeal.

I would, however, like specifically to endorse all Moore-Bick LJ has said in his postscript. Overlong pleadings and written submissions – the true “skeleton argument” of bye-gone days no longer exists – which are manufactured by parties and their lawyers have become the bane of commercial litigation in England and Wales. This prolixity only adds unnecessary costs; it does nothing to clarify and simplify the issues or to shorten proceedings, which aims should be the objectives of both pleadings and written submissions. I recognise that this is not a new problem. In a reported case, Mylward v Weldon(1596) Tothill 102, 21 ER 136, [1595] ECHR Ch 1, it is stated that in 1595 the son of a litigant (the report does not say whether the miscreant was a barrister) produced a pleading (a replication, ie. reply) of “six score sheets of paper” which the Lord Keeper deemed could have been “well contrived” in 16 sheets. The Lord Keeper (Egerton) ordered that the miscreant be imprisoned in the Fleet until he paid a fine of £10 (a huge sum) to Her Majesty and 20 nobles to the defendant. In addition the Lord Keeper ordered:

“…that the Warden of the Fleet shall take the said Richard Mylward…and shall bring him into Westminster Hall on Saturday next, about ten of the clock in the forenoon and then and there shall cut a hole in the myddest of the same engrossed replication…and put the said Richard’s head through the same hole and so let the same replication hang about his shoulders with the written side outward; and then, the same so hanging, shall lead the same Richard, bare headed and bare faced, round about Westminster Hall, whilst the Courts are sitting and shall shew him at the bar of every of the three Courts within the Hall and shall then take him back to the Fleet….”.

That sanction against prolix pleaders and submission authors may not be available today, but failure to comply with the letter of the Practice Direction on written submissions and the failure to heed the need for brevity in pleadings may well lead to strict adverse costs orders.

I also agree.