Shagang Shipping Company Ltd ((in Liquidation)) v HNA Group Company Ltd
| Jurisdiction | England & Wales |
| Judge | Sir Geoffrey Vos,Lord Justice Newey,Dame Elizabeth Gloster DBE |
| Judgment Date | 23 July 2018 |
| Neutral Citation | [2018] EWCA Civ 1732 |
| Date | 23 July 2018 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2016/2338 |
[2018] EWCA Civ 1732
Sir Geoffrey Vos, CHANCELLOR OF THE HIGH COURT
Lord Justice Newey
and
Dame Elizabeth Gloster DBE
Case No: A3/2016/2338
IN THE COURT OF APPEAL
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
THE HONOURABLE MR JUSTICE KNOWLES CBE
Rolls Building
7 Rolls Buildings
Fetter Lane
London, EC4A 1NL
Mr Joe Smouha QC, Mr Michael Fordham QC, Mr Edward Brown and Ms Jessica Boyd (instructed by Hogan Lovells International LLP) appeared for the Appellant
Ms Dinah Rose QC, Ms Ruth Hosking and Ms Caroline Pounds (instructed by Holman Fenwick Willan LLP) appeared for the Respondent
Hearing dates: 26 th and 27 th June 2018
APPROVED JUDGMENT
Sir Geoffrey Vos, Chancellor of the High Court, Lord Justice Newey, and
Introduction
Some 70% of the cases that come before the Commercial Court, which is now part of the Business and Property Courts, have at least one overseas party. But even by those standards this was an unusual case. The judge was asked to decide on allegations of bribery and torture that took place entirely in the People's Republic of China (the “PRC”), when none of the individuals with first-hand knowledge of the events in question attended the trial to give evidence.
The appeal is entirely concerned with the facts. Mr Justice Robin Knowles decided, in an action brought by Shagang Shipping Company Limited (“Shagang”) against a guarantor, that a charterparty had not been procured by a bribe paid by employees of Shagang to an individual connected with an employee of the charterer. The judge was faced with signed admissions 1 given by the main participants to the alleged bribe to officers of the relevant Chinese Public Security Bureau. Despite those admissions, he decided “on the limited evidence at this trial, and after careful consideration, on the balance of probabilities … that there was no bribe”. The judge decided at a later stage of his judgment that “torture [could not] be ruled out as a reason for the confessions”, and that “[t]he fact that [he could not] rule out torture further reduce[d] the confidence that [he could] put in the confessions”.
It was common ground that this approach meant that the judge had, in fact, determined that the admissions had not been procured by torture. There was, however, very much an issue as to whether the judge had been entitled to take his doubts about whether torture had in fact taken place into account when deciding upon the reliability of the admissions.
Against this background, and in addition to the issue just described, the central issues between the parties resolved themselves into whether the judge had been justified in deciding the issue of bribery first and the issue of torture thereafter, whether he had provided sufficient reasons for rejecting the reliability of admissible admissions, and whether the Court of Appeal could or should interfere with his evaluation of the agreed primary facts.
Mr Joe Smouha QC, leading counsel for the appellant defendant guarantor, HNA Group Company Limited (“HNA”), submitted that the judge had not properly addressed the question of the reliability of the admissions and had provided no sufficient reasons for rejecting them. Ms Dinah Rose QC, leading counsel for the respondent claimant, Shagang, submitted that the judge had properly balanced the competing facts and that this court should not interfere with his reasoned conclusions.
The factual nature of the appeal entails a somewhat more detailed treatment of how the judge dealt with the issues than might be usual. The judge's judgment was concise, running only to some 16 pages after a 10-day trial.
Factual background
Shagang and HNA are both companies based in the PRC. Shagang, which is in liquidation, is located in Hong Kong, and HNA in Haikou, which is the capital of Hainan province.
HNA's allegation of bribery was the foundation for its defences of fraudulent non-disclosure and illegality. It was contended that Mr Shen Wenfu (“Mr Shen”), then General Manager of Shagang, was the instigator of the bribe. Mr Shen had allegedly asked Mr Xu Wenxhong (“Mr Xu”), another employee of Shagang, to pay RMB 300,000 to his college acquaintance Mr Jia Tingsheng (“Mr Jia T”), so that Mr Jia T would persuade his father Mr Jia Hongxiang (“Mr Jia H”) to approve the charterparty. Mr Jia H was a General Manager within HNA and the Chief Executive Officer of Grand China Shipping Co Ltd (“Grand China”), which was the charterer of the vessel and a subsidiary of HNA. Mr Jia T was not employed directly by HNA or Grand China, but was employed by an associate company, GCS Development Company.
HNA relied, to support its bribery allegation, on admissions that had been made by Mr Xu, Mr Jia T and Mr Shen to officers of the Public Security Bureau for Haikou (the “PSB”) and, in the case of Mr Xu, on a plea of guilty in the Chinese criminal courts. The court did not see any confession by Mr Jia H, but the judge found that there was such a confession, based on the oral evidence of Mr Xu's lawyer, Mr Guo Zhilian (“Mr Guo”), who said he had seen it. He was not satisfied that Mr Jia H was prosecuted for Mr Xu's alleged bribe. Curiously, all the judge said as to the contents of the confession was that Mr Jia H mentioned he did not receive the RMB 300,000.
HNA is appealing Knowles J's order dated 16 th May 2016, which awarded Shagang damages of some US$68.6 million, which was the amount payable under its guarantee securing the obligations of Grand China.
The chronological background can be summarised as follows.
In 2008, a charterparty was concluded between Dong-A Tanker Corporation (“Dong-A”), which owned the vessel the Dong-A Astrea (the “vessel”), and Shagang, pursuant to which Shagang would charter the vessel from Dong-A in 2010 for a period of 82–86 months.
On 6 th August 2008, a further charterparty (the “charterparty”) was concluded between Shagang and Grand China, whereby Grand China chartered the vessel from Shagang for the same period of time. HNA's guarantee of Grand China's obligations under the charterparty was also dated 6 th August 2008 (the “guarantee”).
On 9 th December 2010, Shagang's solicitors made a demand to HNA under the guarantee, after Grand China had defaulted in making the payments due. HNA declined to pay, and on 17 th January 2012, the charterparty was terminated by Shagang on the basis of Grand China's repudiatory breach.
On 13 th September 2012, Shagang issued this claim against HNA under the guarantee. HNA filed its defence on 4 th November 2013, initially not referring to any alleged bribery. By the time of the trial, it was agreed between the parties that the quantum of the claim was US$68,641,712.
On 11 th November 2013, Mr Jia H was detained for suspected embezzlement. The precise nature of the charges against him at that time, and the extent to which they involved the bribery alleged by HNA, remains unclear.
On 22 nd January 2014, Mr Xu was detained in Shanghai by the PSB on the charge of bribing a non-public servant. He was then taken to Meilan, where he was questioned by PSB officers overnight and during 23 rd January 2014. According to the interrogation record, he gave an account of being asked by Mr Shen to use his relationship with Mr Jia T to cause Mr Jia H to charter the vessel from Shagang as soon as possible. He said that he was given RMB 100,000 in cash by Mr Shen, which he delivered to Mr Jia T in a single instalment. The record shows that his account was given voluntarily, and that he was willing to confess his involvement “for leniency”. A document entitled “confession note”, which was dated 24 th January 2014 and was in Mr Xu's name, gave a similar account but with different details. It referred to a sum of RMB 300,000 being paid by Mr Xu to Mr Jia T in two instalments, one before and one after the signing of the charterparty.
Around the same time, Mr Jia T was detained on bribery charges. On 23 rd January 2014, he was questioned by the same PSB officers as had interrogated Mr Xu. The interrogation record states that he said that Mr Xu gave him RMB 150,000 in the hope that his father would communicate with HNA to arrange the guarantee as quickly as possible. His father responded that he could only communicate with HNA according to the company's normal rules, and told Mr Jia T to send the money back. Mr Jia T did not do so, but rather met with Mr Xu again and received another RMB 150,000, about which he did not tell his father. A subsequent “confession note” recorded the same. The interrogation record shows that Mr Jia T's account was given voluntarily, without torture or deceit.
Mr Shen was then detained on bribery charges. On 16 th February 2014, he was questioned by the PSB. According to the interrogation record, Mr Shen said that he had offered a bribe of RMB 300,000 to Mr Jia T. Mr Xu had suggested to him that Mr Jia T be approached. The same account was given in an undated “confession note”.
Meanwhile, on 10 th February 2014, HNA had written to the PSB requesting information on the PSB's investigation of the bribery charges, so that it could “explain and prove the facts” in the English court proceedings. On 17 th February 2014, the PSB replied to HNA (the “PSB letter”), saying:-
“In October 2013, we filed a case regarding [Mr Jia H's and Mr Jia T's] suspected offences and took criminal coercive measures accordingly. They confessed. And [Mr Jia T] confessed that: in July and August, 2008, during the negotiation of … charter party between [Grand China and Shagang], took bribes in amount of 300,000 RMB from [Mr Xu] … and persuaded his father [Mr Jia H] into...
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