Global 5000 Ltd v Wadhawan (Rev 1)

For service out of the jurisdiction in a contractual claim, the claimant must establish a good arguable case that the relevant contract exists and that the claim falls within a jurisdictional gateway. Where the claim relies on an alleged collateral guarantee, the existence of that guarantee must itself satisfy that test before the court considers whether it is governed by English law or is sufficiently connected with another qualifying contract.

A director’s assurance that he wishes a company to proceed with a transaction does not readily amount to a personal guarantee. The court must construe the document objectively, considering its wording, form, surrounding circumstances and commercial context. If the gateway is not established, service out must be set aside.

Global 5000 Ltd, a Jersey company, sought damages from Mr Sarang Wadhawan in respect of the purchase by Privilege Airways Pvt Ltd of an aircraft. Mr Wadhawan had signed a letter expressing his intention to proceed with the transaction and stating that he would pay for the aircraft in full by the end of August.

The claimant alleged that the letter constituted an offer of a collateral contract of guarantee, accepted when the claimant entered into the purchase and sale agreement with Privilege. Permission to serve proceedings out of the jurisdiction had been granted, and Mr Wadhawan applied to set aside service. The issues included the jurisdictional gateway, merits, forum conveniens and alleged non-disclosure.

1. Service set aside. The claimant had not shown a good arguable case that the alleged guarantee contract existed. Service of the proceedings on Mr Wadhawan in India was therefore set aside.
2. For a contractual claim, the court may need to ask three questions: whether the alleged contract exists; whether a claim under it satisfies a jurisdictional gateway; and, if not, whether the claim is made in respect of another contract satisfying a gateway. Each question is addressed by the good arguable case test.
3. The relevant standard requires the claimant to show that it has the better of the argument on the jurisdictional issue. It is more demanding than a serious issue to be tried or a real prospect of success, but less demanding than proof on the balance of probabilities. Where an ingredient of the cause of action is also part of the jurisdictional gateway, the higher jurisdictional standard subsumes the lower merits standard.
4. A classic guarantee involves an undertaking to see to it that the principal debtor performs its obligations. The letter was objectively construed in its commercial context. It was written on Privilege’s letterhead and signed by Mr Wadhawan as its managing director. References to the purchase agreement and payment were naturally referable to Privilege’s obligations. The expressions of personal assurance and intention did not identify an assumption of personal liability, and the document did not refer to a guarantee, guarantor or Privilege’s obligation.
5. The court did not need to decide whether entry into the purchase and sale agreement would have accepted a guarantee, or whether England was the clearly appropriate forum. Had the guarantee been established, England would have been the appropriate forum because the purchase and sale agreement was governed by English law, the guarantee was closely connected with it, and related arbitration and legal work were centred in England.
6. There had been no material non-disclosure sufficient to justify setting aside the permission order. The decisive ground was failure to establish the jurisdictional gateway.