Banco San Juan Internacional, Inc. v Petroleos De Venezuela, S.A.

Contractual process-agent clauses should be construed purposively to secure a speedy and certain method of serving proceedings. Where the contract permits the lender to appoint an agent after the borrower fails to appoint or replace one, the appointed agent is authorised under the contract. The clause may operate even where no original agent was appointed, and the agent-service obligation continues after the lending relationship has broken down while repayment obligations remain outstanding. The borrower should not obtain a procedural advantage from its own breach. An adjournment of a substantial summary-judgment application may nevertheless be granted where the defendant has sought its first procedural indulgence, the hearing has already involved a substantial issue, and a short delay is proportionate to ensuring a merits judgment rather than a default judgment.

Banco San Juan Internacional, Inc. applied for summary judgment against Petróleos de Venezuela, S.A. in proceedings concerning approximately $80 million under two credit agreements. PDVSA had not participated until shortly before the hearing and sought an adjournment.

The preliminary issue was whether service through process agents appointed by BSJI was valid under the 2016 and 2017 agreements. Under the 2016 agreement, PDVSA had appointed an agent whose appointment later expired. Under the 2017 agreement, PDVSA had never appointed an original agent. The court also had to decide whether to adjourn the summary-judgment application to allow PDVSA to advance its proposed defences.

1. Service under the 2016 agreement. The contractual requirement for an authorised agent was satisfied when BSJI appointed a replacement agent under the agreement after PDVSA failed to do so. “Authorised” meant authorised by the contractual mechanism. Imposing additional requirements of advance notification, consultation or approval would make the lender’s contractual right ineffective and introduce delay into a clause intended to facilitate speedy service (paras [3]-[7]).
2. Continuing operation. The process-agent obligations survived the alleged termination or breakdown of the lending relationship. Repayment, the borrower’s characteristic continuing obligation, remained outstanding. It was commercially rational for the clause to remain available precisely when proceedings became necessary (para [7]).
3. Service under the 2017 agreement. The reference to appointing a “new” agent was construed purposively as covering an agent appointed for the first time. A contrary construction would allow PDVSA to frustrate the clause by breaching its initial appointment obligation and would place it in a better position because of its own breach. The court relied on the approach summarised in Cargill International Trading Pte Ltd v Uttam Galva Steels Ltd [2018] EWHC 974 (Comm) (paras [8]-[13]).
4. Both proceedings had therefore been properly served (para [14]).
5. Adjournment. Despite serious doubts about the likely merits of PDVSA’s proposed sanctions defence, the court granted a short adjournment. PDVSA had sought its first procedural indulgence, the hearing had already required full argument on service, the claim was substantial, and BSJI had chosen merits judgment rather than judgment in default. The application was re-fixed for a half-day hearing on or as soon as possible after 16 October 2020 (paras [15]-[20]).