The Commercial Court handed down judgment on 8 February 2019 in HSBC Bank Plc v Pearl Corp & Ors. [2019] EWHC 231 (Comm), upholding HSBC Bank Plc’s $9 million claim against the personal guarantor of two $15 million facility agreements.
HSBC had advanced $30 million to finance the acquisition of two bulk carrier vessels in 2010. The historic fall in the freight markets which followed caused the two ship-owning SPVs to become unprofitable. The corresponding fall in value of the vessels caused breaches of the Asset Cover Ratio covenants in the facility agreements. These developments led to a restructuring of both loans in 2015. When the market fell still further, the vessels’ beneficial owner, Mr. Dimitrios Kritsas, sold the ship-owning SPVs to an affiliate of Newlead Holdings Ltd (a company led by Mr. Michael Zolotas), in breach of further covenants in the facility agreements. This led to enforcement action against both financed vessels in 2016.
The personal guarantees of the loans by Mr. Kritsas were subject to English jurisdiction, but unlike the facility agreements and other finance documents, they were governed by Greek law. When HSBC claimed on the guarantees in the Commercial Court, Mr. Kritsas resisted its claim, alleging inter alia that HSBC’s approach to the 2015 restructuring had been inconsistent with Articles 862 and 281 of the Greek Civil Code, which recognise inter alia a civilian “good faith” principle, demanding that consideration be given to the interests of a contracting counterparty.
Sir Ross Cranston, sitting as a Deputy High Court Judge, dismissed all of Mr. Kritsas’s defences, including his criticism of HSBC’s approach to the restructuring, and upheld HSBC’s claim in full. The judgment contains a discussion of Articles 862 and 281 of the Greek Civil Code, which is a useful complement to the analysis of Deputy Judge Andrew Henshaw QC in HSBC Bank Plc v Antaeus and Ors [2018] EWHC 1733 (Comm).
HSBC Bank Plc was represented by Adam Turner, instructed by Watson Farley & Williams.
To view the judgment please click here.
