Payward, Inc & Ors v Maxim Chechetkin
[2023] EWHC 1780 (Comm)
Eternity Sky Investments Ltd v Xiaomin Zhang
28 July 2023
[2023] EWHC 1964 (Comm)
High Court
A woman guaranteed her husband's company's debt. The company sued her in Hong Kong, and she lost. She tried to stop the UK court from enforcing the judgment, claiming she was a consumer and the contract was unfair. The court said she wasn't a consumer because it was a personal matter, not business, and that the contract was fair. The judgment against her was upheld.
Key Facts
- •Eternity Sky Investments Ltd (Claimant) sought enforcement of a Hong Kong arbitration award against Mrs Xiaomin Zhang (Defendant) for HK$500,000,000 plus interest and costs under a personal guarantee.
- •Mrs Zhang, a UK resident, argued enforcement would violate UK public policy under the Consumer Rights Act 2015 (CRA 2015) as she was a consumer, and the guarantee's terms were unfair.
- •The arbitration award found Mrs Zhang liable, rejecting her claims of lack of agreement, undue influence, and unconscionable bargain.
- •Mrs Zhang signed the guarantee without reading it, relying on her husband's instructions; the arbitrator found her negligent.
- •The guarantee contained a Hong Kong governing law and arbitration clause.
- •Mrs Zhang subsequently argued illegality in the underlying transaction, but this argument was not fully developed.
Legal Principles
Enforcement of a New York Convention award may be refused if contrary to public policy.
Arbitration Act 1996, s. 103(3)
A 'consumer' is an individual acting for purposes wholly or mainly outside their trade, business, craft, or profession.
Consumer Rights Act 2015, s. 2(3)
Whether a guarantor is a 'consumer' depends on whether they acted for purposes relating to their trade or profession or due to functional links with the company, or for private purposes.
CJEU case law (Tarcău, Dumitraş)
CRA 2015 applies to consumer contracts even with a foreign choice of law clause if there's a close connection with the UK.
Consumer Rights Act 2015, s. 74(1)
Unfair terms in consumer contracts are not binding; a term is unfair if, contrary to good faith, it causes a significant imbalance in parties' rights and obligations to the detriment of the consumer.
Consumer Rights Act 2015, s. 62
Core terms (specifying main subject matter) cannot be assessed for fairness unless not transparent and prominent.
Consumer Rights Act 2015, s. 64
The 'average consumer' is reasonably well-informed, observant, and circumspect, but this standard varies based on the contract's nature and context.
Consumer Rights Act 2015, s. 64(5); CMA Guidance
In assessing fairness, consider whether a properly informed consumer would have agreed to the term or sought its deletion.
Director General of Fair Trading v First National Bank; Aziz v Caixa d´Estalvis de Catalunya
Outcomes
Mrs Zhang's application to set aside the enforcement order was dismissed.
The court found Mrs Zhang was not a consumer under CRA 2015 because her involvement with Chong Sing was primarily due to her marital relationship, not a functional link. Further, the contract did not have a 'close connection' with the UK. Finally, the terms of the guarantee were not substantively unfair.