TMT Asia Ltd v Marine Trade SA

On a summary judgment application, the claimant must show that the defendant has no real prospect of successfully defending the claim. The court should avoid a mini-trial where an arguable issue requiring evidence remains.

Under an ISDA Event of Default provision, a general failure to pay debts on time may itself constitute a default, rather than merely evidence of inability to pay. A party may also arguably be unable to pay its debts where its financial arrangements leave it without sufficient cash to meet liabilities as they fall due. Where competing authorities have expressed only obiter views on whether the resulting consequence is suspension or extinction of a claim, that issue should not ordinarily be finally determined summarily.

TMT Asia Limited entered into freight forward agreements with Marine Trade S.A. incorporating a modified 1992 ISDA Master Agreement. After Marine Trade stopped making payments, TMT terminated the agreements and claimed US$52,731,642.

TMT sought summary judgment. Marine Trade advanced arguable defences based on misrepresentation, TMT’s alleged Events of Default, restitution of payments made during such defaults, and estoppel. The central questions were whether TMT arguably had been subject to an Event of Default and, if so, whether that affected Marine Trade’s liability.

1. Summary judgment. The burden on the applicant was heavy. TMT had to show that Marine Trade had no real prospect of successfully defending the claim. The court should not prejudge the merits by conducting a mini-trial.
2. Misrepresentation. There was an arguable case that TMT’s repeated ISDA representation that no Event of Default or Potential Event of Default had occurred was inaccurate when the agreements were entered into. Leave to amend the defence and counterclaim was therefore appropriate, and the issue required trial.
3. Failure generally to pay debts. The Event of Default clause arguably elevated a general failure to pay debts on time from evidence of inability to pay into a default in itself. The evidence that approximately 70–90 per cent of TMT’s debts were paid late, commonly by two to four weeks, supported an arguable case that TMT had generally failed to pay its debts as they became due.
4. Inability to pay debts. It was also arguable that TMT was unable to pay its debts as they became due. The evidence included widespread defaults, insufficient cash despite favourable freight-market movements, transfers of profits to related companies, and a continuing lack of funds to pay FFA counterparties on time.
5. Suspension or extinction. The court declined to determine summarily whether an Event of Default suspended or extinguished Marine Trade’s liability. The competing views in Marine Trade v Pioneer Freight Futures, [2009] 1 Lloyd’s Rep 631, the Lehman Brothers litigation, [2010] EWHC 3372 (Ch), and Pioneer Freight Futures v TMT Asia, [2011] EWHC 778 (Comm), were obiter, and the issue might not arise once the relevant default months had been identified.
6. Estoppel and disposition. The estoppel argument was not developed and had not appealed to Flaux J in Marine Trade v Pioneer Freight Futures. TMT’s application for summary judgment was dismissed.