CANARA BANK v M.C.S INTERNATIONAL LIMITED

For the purposes of establishing jurisdiction under CPR 6.33(2B)(b), a claimant must show a good arguable case that the defendant is party to and bound by the relevant contract and jurisdiction agreement.

The test requires a plausible evidential basis for the jurisdictional gateway. Where factual or legal issues can reliably be assessed on the interlocutory material, the court must take a view. Where reliable assessment is impossible, a plausible but contested evidential basis is sufficient.

The court must assess the issues in their commercial context and may consider whether obligations were transferred on a corporate merger, whether an agent had authority, and whether subsequent conduct gives rise to apparent authority, estoppel or ratification.

Canara Bank claimed sums due under banking facilities made available to M.C.S International Limited. It also claimed the same sums from M.C.S International France S.A.S under an English-law parent company guarantee.

The alleged guarantor, MCS International France SAS, had merged with MCS France under French law and ceased to exist. MCS France challenged the English court’s jurisdiction, contending that it was not party to the guarantee, that the signatory lacked authority, and that the guarantee was ultra vires.

Canara relied on automatic transfer on merger, actual or apparent authority, estoppel and ratification. The central issue was whether Canara had a good arguable case that MCS France was party to and bound by the jurisdiction agreement in the guarantee.

1. Outcome. The application by MCS France challenging jurisdiction was dismissed. Canara established a good arguable case that MCS France was party to, and bound by, the guarantee and its jurisdiction agreement.
2. Applicable jurisdiction test. Under CPR 6.33(2B)(b), the claimant had to establish a good arguable case that MCS France was party to the guarantee as a whole, not merely that the guarantee arguably contained a jurisdiction clause. The three-limb test required: a plausible evidential basis for the jurisdictional gateway; a view on disputed facts where the court could reliably reach one; and, where reliable assessment was impossible at the interlocutory stage, a plausible albeit contested evidential basis.
3. Transfer on merger. French law governed the status of the dissolved foreign corporation and the transfer issue. Canara had a plausible evidential basis that the guarantee was an autonomous guarantee, rather than a contract of suretyship, and that its obligations transferred to MCS France on the merger. The competing expert evidence could not reliably be resolved at this stage.
4. Authority. Actual authority was governed by French law, while the effect of any known limitation on authority was governed by English law. Canara had the better argument, and at least a plausible case, that Mr Maurel had actual or apparent authority. There was no sufficient evidence that Canara knew of any relevant limitation.
5. Ultra vires. Canara had a good arguable case that the guarantee fell within MIF’s corporate purposes. Alternatively, there was insufficient evidence that Canara knew that the guarantee exceeded those purposes or would disrupt MIF’s activities.
6. Estoppel and ratification. MCS France’s conduct after the merger, including signing facility documents which treated the guarantee as continuing security, was capable of estopping it from denying that it was bound by the guarantee. The same conduct plainly supported ratification if the guarantee had initially been signed without authority.
7. Overall assessment. The issues had to be assessed cumulatively and in their commercial context. Even if one issue were decided against Canara, the evidence supported a good arguable case overall.