Matthew Hardwick KC success for HSBC in US$165m claim

In an emphatic win for HSBC, Matthew Hardwick KC (instructed by Walkers, and appearing with Rosalind Nicholson) succeeded in persuading the BVI Commercial Court to make liquidation orders against NewOcean (Shenzhen) Energy Investment Limited and Soung Hong Kong Limited (collectively, “the Guarantors”) in respect of a USD165m Facility Agreement made to their parent company, New Ocean Energy Holdings Ltd (Bermuda) (“the Borrower”).

The purpose of the USD165 Facility Agreement was to fund the Borrower’s investment in significant oil and gas projects. HSBC was the lead arranger and the original lender in a consortium of lenders. The Borrower failed to make repayment and, following unsuccessful restructuring attempts, was wound up in Bermuda. However the Bermudan liquidators subsequently discovered a series of complex and unlawful share and asset transfers (among a group of in excess of 100 companies) that significantly complicated recovery against the Borrower.

HSBC’s subsequent attempts to appoint liquidators over the Guarantors in the BVI were met with equal obstructiveness: a raft of objections (purportedly supported by Hong Kong law expert evidence) including that: (1) the Guarantors’ liability had been discharged by reason of HSBC’s improper conduct in attempting to influence the Bermudan liquidators; (2) there were a number of fatal defects in the purported service of the guarantor demands; and (3) the disputes were the subject of an exclusive jurisdiction clause in the Facility Agreement in favour of the Courts of Hong Kong.

In a careful and robust judgment handed down on 16 September 2024, Wallbank J. dismissed each of the Guarantors’ objections: (1) commencing with a review of the practical implications of the well-known Sparkasse test as to a dispute which is “genuine in both a subjective and objective sense” (Judgment/150-156: “the Court must always remain firmly anchored in objective reality and not flinch from firmly rejecting – politely of course – nonsense when the Court encounters it. To do otherwise is to empower pernicious abuse”); (2) rejecting the various service points as “utterly incredible” (Judgment/157), “opportunistic” (Judgment/161) and “typical snatching at picayune technical points” which are “symptomatic of the proverbial could of objections which the Court should disregard” (Judgment/174); (3) observing that the allegations of HSBC’s improper conduct were contradicted by and inconsistent with existing findings of the Bermudan Court of Appeal (Judgment/183-184 & 188); and (4) concluding that the Guarantors’ allegations of improper conduct on the part of HSBC were “frivolous” and not “substantial” (Judgment/190) and the discharge arguments “desperate and ill-thought-out lawyers’ constructs” (Judgment/191).

The case provides another striking modern example, in a high value case, of the Court’s readiness to inquire as to the substance of voluminous evidence and a raft of arguments (even apparently supported by expert evidence) and to reject the same where disclosing no “genuine” or “substantial” defence.

The Judgment can be found here.