Shagang Shipping Company Ltd ((in Liquidation)) v HNA Group Company Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Knowles CBE,Mr Justice Knowles |
| Judgment Date | 16 May 2016 |
| Neutral Citation | [2016] EWHC 1103 (Comm) |
| Docket Number | Case No: CL-2012000243 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 16 May 2016 |
2016 EWHC 1103 (Comm)
Mr Justice Knowles CBE
Case No: CL-2012000243
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Luke Parsons QC and Ms Caroline Pounds (instructed by Holman Fenwick Willan LLP) for the Claimant
Mr Philip Edey QC and Mr Alexander Wright (instructed by Wikborg Rein LLP) for the Defendant
Hearing dates: 26, 27, 28, 29 January and 1, 2, 3, 4, 5 and 9 February 2016
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
In 2008 Grand China Shipping Co Ltd ("Grand China") chartered a Cape size bulk carrier, the Dong-A Astrea ("the Vessel") from the Claimant, Shagang Shipping Co Ltd ("Shagang").
A few months earlier, Shagang itself had chartered the Vessel from head owners, Dong-A Tanker Corporation. The Vessel was then under construction and would be newly-built at delivery into the charterparties in 2010. The charterparties were for a period of 82–86 months.
The charterparty between Shagang and Grand China ("the Charterparty") was dated 6 August 2008. By a guarantee dated the same date ("the Guarantee") Grand China's obligations under the Charterparty were guaranteed by the Defendant, HNA Group Company Ltd ("HNA"). Grand China and HNA were in the same group of companies, but Grand China was new. HNA, on the other hand, was well established and the ultimate parent of Grand China.
In the event Grand China failed to comply with its obligations under the Charterparty. It was in repudiatory breach and the Charterparty was terminated in 2012 on Shagang accepting that repudiatory breach. Shagang looked to HNA for payment under the Guarantee, but HNA declined to pay. It is now agreed that, subject to determination at this trial of the remaining allegations between the parties, the sum due is US$68,641,712. There is a small admitted money counterclaim.
The remaining allegations between the parties are of a very serious nature. It is HNA's case, argued by Mr Philip Edey QC and Mr Alexander Wright of Counsel, that the Charterparty was procured by bribery and is therefore unenforceable. The allegation of bribery is founded on confession evidence. It is Shagang's case, argued by Mr Luke Parsons QC and Ms Caroline Pounds of Counsel, that the confession evidence was obtained by torture and is therefore inadmissible in legal proceedings.
The alleged bribery
Mr Shen Wenfu ("Mr Shen") was general manager of Shagang. Mr Xu Wenxhong ("Mr Xu") also worked for Shagang.
Mr Xu knew Mr Jia Tingsheng ("Mr Jia T") from college. Mr Jia Hongxiang ("Mr Jia H") was Mr Jia T's father and a general manager or chairman in the same group of companies as Grand China and HNA, including Grand China itself.
It is HNA's case that in 2008 payment of RMB 300,000 was made in two tranches by Mr Xu, at the instigation of Mr Shen, to Mr Jia T and in order to induce Mr Jia T to persuade Mr Jia H to approve the Charterparty.
Haikou is the capital of Hainan province in the People's Republic of China. Meilan is a district within Hainan. On 17 February 2014 the Meilan Sub-Bureau of the Public Security Bureau for Haikou ("PSB") wrote to HNA in reply to a letter from HNA. The reply included these passages:
"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 the … 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 approving this deal according to Mr Xu's request. At last, [Mr Jia H] approved this deal.
In December 2013, our Bureau opened file for [Mr Xu] and took criminal enforcement measures against him on grounds of suspected crime of offering [b]ribery to non-state staff, and meanwhile he admitted the fact that he had bribed [Mr Jia T] with RMB 300,000, and claimed that he did so because he was instructed by [Mr Shen].
…
On 15 th February 2014 [Mr Shen] … was filed and placed criminal enforcement measures, and [Mr Shen] confessed that he had [Mr Xu] to bribe [Mr Jia T and Mr Jia H] with RMB 300,000 …"
Evidence at trial
There was little first-hand oral evidence available at the trial. None of Mr Xu, Mr Jia T, Mr Jia H or Mr Shen was available to give oral evidence at trial, and nor was any officer from the PSB.
Mr Zhang Jie ("Mr Zhang") of Shagang gave oral evidence, but he was not at Shagang at the time of the alleged bribe. Mr Xu's lawyer from August 2014, Mr Guo Zhilain ("Mr Guo") gave oral evidence and I refer to this below. Mr Wu Lie ("Mr Wu"), General Manager of Audit and Legal Affairs at HNA gave oral evidence and I refer to this below.
I am invited by HNA to draw adverse inferences against Shagang from, in particular, Mr Xu's absence at trial and from the absence of his wife, Mrs Li Xueping ("Mrs Xue") at trial. I decline to do so. I am unpersuaded that Shagang could realistically be expected to procure their presence at this trial. Shagang is now in liquidation and Mr Xu is no longer employed by it. I am unpersuaded that the reason for their absence is because, as HNA suggested, they fear the truth.
The documentation available was substantially incomplete, and the reliability was challenged of some of what there was. To some extent it is a position that it is only realistic to expect in a case of this nature. HNA criticised Shagang's approach to disclosure and suggested that Shagang's witnesses had deliberately withheld or deleted documents, but I am not persuaded that that was the case.
The documentation included some documentation from records of the PSB or from records of the relevant Criminal Court in China. Assistance given in response to official letters of request from England to China helped in making this documentation available, and the assistance given is appreciated by this Court. The focus was on Mr Xu; there was substantially less of this documentation in relation to Mr Jia T, Mr Shen and Mr Jia H.
Both Shagang and HNA adduced a substantial quantity of expert evidence at trial. This included expert evidence in relation to Chinese criminal law and procedure, and also in relation to experience in China of confession evidence. This expert evidence took the form of written expert reports, which often relied on further published reports. In the event neither party sought to cross examine any expert. I have considered the expert evidence and have done so with the assistance of lists (provided at my invitation) of key propositions that each party seeks to derive from that expert evidence.
I have found the expert evidence valuable. However there are two important limitations. First, its value at this trial is limited to context or background. In the end it is the facts of the present case that matter for the decisions that I have to reach. Second, the issues addressed by the experts are issues that would benefit from access to far more materials and information than can realistically be available to this trial.
A substantial proportion of the evidence at trial, documentary and oral, was in Chinese in the original, and translated into English. Many of the quotations in this judgment (including from the law of the People's Republic of China) are translated from original text in Chinese. I am grateful for the contribution made by the translators and interpretors.
Commercial context
August 2008 was at the height of the relevant chartering market. It was an active market in which owners (including head charterers like Shagang) held the dominant bargaining position.
The rates for the Vessel, agreed in the Charterparty, were in line with the market.
The points just made were well established by factual and expert evidence and not seriously in issue between the parties.
The financial crisis in and from Autumn 2008 would change things dramatically. By 2010 market rates were very considerably lower than those seen in August 2008.
HNA is of major commercial and economic importance to Hainan and Haikou. Some clear, straightforward propositions to this effect were put to Mr Wu by Mr Parsons QC. Making every allowance for the language difference, I regret that I found him here (and in other parts of his evidence) choosing to attempt to avoid giving a straightforward answer.
Approval of the Charterparty within Grand China and HNA
An initial requirement for board approval was "lifted" within Grand China. The Charterparty was not submitted for a legal and financial review within HNA, although that had been required by the Vice Chairman of HNA.
The Charterparty did go through various levels of approval within Grand China, including, among others, Mr Jia H. It was also approved by a main board director of HNA (and Chairman of Grand China's immediate parent Grand China Logistics Holding Company Limited), and also by the Chairman of HNA.
Confession by Mr Xu
The Chinese criminal process, by Article 3 of the Criminal Procedure Law 2012 ("the 2012 Law") has three parts. First, "public security authorities are responsible for criminal investigation, detention, execution of arrest warrants and interrogation". Second, "People's Protectorates are responsible for procuratorial supervision, approval of arrests, investigation of cases directly accepted by procuratorial authorities, and initiation of public prosecution". Third, "People's Courts are responsible for trial and...
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Shagang HNA: A Non-binary Approach To The Weighing Of Evidence In A Civil Trial And Taking Into Account The Risk That Evidence May Have Been Obtained By The Use Of Torture (Video)
...in its claim, the Judge finding that the alleged bribery had not been proved on the balance of probabilities. In his short judgment ([2016] EWHC 1103 (Comm)), which ran to only 16 pages after a 10-day trial, the Judge dealt first with his 'Conclusions on bribery' (explaining - albeit very s......