Spliethoff's Bevrachtingskantoor BV v Bank of China Ltd
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Carr DBE,Mrs Justice Carr |
| Judgment Date | 17 April 2015 |
| Neutral Citation | [2015] EWHC 999 (Comm) |
| Docket Number | Case No: 2012 Folio 442/2013 Folio 748 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 17 April 2015 |
[2015] EWHC 999 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mrs Justice Carr DBE
Case No: 2012 Folio 442/2013 Folio 748
Mr Christopher Smith Q.C. and Mr Neil Hart (instructed by Hill Dickinson LLP) for the Claimant
Mr Richard Handyside Q.C. and Mr Adam Zellick (instructed by Allen & Overy LLP) for the Defendant
Hearing dates: 17th, 18th, 19th, 23rd, 24th, 25th, 26th March 2015
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
This is the trial of two actions brought by Spliethoff's Bevrachtingskantoor BV ("SBV"), one of the largest ship operating companies in the Netherlands, against Bank of China Limited ("BOC"). Each claim arises out of a refund guarantee issued by BOC ("the Guarantees" collectively). Counterclaims originally raised by BOC have not been pursued.
The Guarantees were provided in support of two shipbuilding contracts ("the Contracts") between SBV as buyer and Rongcheng Xixiakou Shipyard Co Ltd ("XXK") and China National Electronics Import and Export Shandong Company ("Electronics") (together "the Sellers") as sellers for the construction of two ships with hull numbers XXK06–038 and XXK06–039 ("Hull 38" and "Hull 39" respectively, "the Ships" collectively). By order of Cooke J dated 7 th August 2013 the two claims are tried jointly.
Pursuant to the Contracts, between October 2006 and July 2011 SBV paid a total of some US$28.68 million to the Sellers by way of advance instalments towards the purchase prices due for the Ships, but on terms that the instalments would be refunded with interest if the Contracts were cancelled. The Guarantees secured the Sellers' obligation to refund.
The Ships were not delivered on time and SBV claimed repayment of the instalments from XXK and Electronics. The Contracts provided for dispute resolution by way of arbitration in London. Two sets of arbitration proceedings (one for each of Hull 38 and Hull 39) ensued. SBV obtained arbitral awards against XXK and Electronics in its favour. It claims that it is entitled to payment from BOC under the Guarantees.
Subject to a discrete defence raised in relation to the validity of SBV's demand under the Hull 39 Guarantee, BOC's defence and application for a stay in the event of liability essentially arise out of events in China, and specifically out of various interim orders and two judgments which have been made by the Qingdao Maritime Court ("the QMC") in two sets of proceedings brought by XXK against the Ships' engine manufacturers and suppliers, Wartsila Finland Oy and Wartsila Engines (Shanghai) Co Ltd ("Wartsila"), and SBV relating to Hull 38 and Hull 39 ("the XXK proceedings"). There XXK advanced claims in fraud, alleging that Wartsila and SBV agreed to provide second-hand and defective refurbished engines to the Sellers for installation in the Ships while concealing the fact that the engines were second-hand from XXK and passing them off as new.
XXK obtained ex parte interim orders in July, August and September 2011 against SBV and BOC ("the XXK orders"), the overall effect of which so far as material was to:
a) require SBV to provide a cash or other guarantee in the amount of US$16,392,000;
b) prohibit BOC and any domestic Chinese or overseas branch of BOC from making any payment anywhere under the Guarantees to SBV.
The XXK orders would be discharged in the event that SBV were to pay the amounts set out in the orders into the QMC.
Electronics obtained ex parte interim orders against SBV and BOC in similar terms (albeit for lesser sums) in May 2013 (in the context of similar proceedings that it had by then also commenced against Wartsila and SBV) ("the Electronics orders") ("the Electronics proceedings").
SBV unsuccessfully challenged the jurisdiction of the Chinese courts by reference to the arbitration clauses in the Contracts. Thereafter it fully defended the claims in the XXK proceedings. In April 2013 the QMC found Wartsila and SBV liable for fraud in respect of both Hull 38 and Hull 39 and awarded substantial damages against Wartsila and SBV. In April 2014 those findings were upheld by the Shandong High Court on appeal (though the award of interest was reduced). Although judgment on an application for retrial by SBV in the Supreme Court of the People's Republic of China ("the Supreme Court") in the XXK proceedings remains outstanding, it is common ground that the conclusion of the Shandong High Court is effective and enforceable.
Beyond BOC's challenge to the validity of the Hull 39 demand, the central issue in the actions is whether the XXK judgments granted in China afford BOC a defence to SBV's claims under the Guarantees, alternatively whether the XXK and Electronics orders justify a stay.
BOC is and was not at any stage a party to the XXK proceedings (nor to the subsequent Electronics proceedings). It is common ground that BOC has taken every step available to it in China to have the XXK orders against it set aside, to no avail. BOC contends that it could face criminal and/or civil sanction and would be at risk of double payment in the event of an immediate judgment against it here and in the absence of a resolution in China.
SBV contends that, as a matter of construction of the Guarantees, the judgments against it in the XXK proceedings are not capable of affecting BOC's liability to it under the Guarantees. Additionally the judgments (and the XXK and Electronics orders) should not be recognised by this Court, having been obtained and maintained in breach of arbitration clauses and/or arbitral anti-suit findings and orders (which followed an earlier anti-suit injunction granted by Eder J on 11 th November 2011). Finally, the XXK orders (which SBV contends have in any event lapsed) and the Electronics orders are irrelevant because the Guarantees are governed by English (not Chinese) law and do not specify a place of performance, meaning that any illegality under Chinese law is irrelevant.
The Contracts and the Guarantees
The Contracts were in materially identical terms and were entered into on 3rd June 2006. Each identified a defined Delivery Date (namely, 30th September 2008 for Hull 38 and 31st January 2009 for Hull 39) and specified that if the Ship was not delivered within 210 days of the Delivery Date, SBV would be entitled to cancel the contract whereupon the Sellers would become obliged to refund the instalments paid.
Specifically, Articles II 4 and 5 of each Contract provided as follows:
" 4. CURRENCY
Any and all payments by the BUYER to the SELLER under this Contract shall be made in United States Dollars in freely transferable funds. Any refunds made by the SELLER to the BUYER for any reason whatsoever shall be made in United States Dollars in freely transferable funds.
5. METHOD OF PAYMENT
The BUYER shall remit the instalments in accordance with Article II, Pararaph 3a,)b),c) and d) by telegraphic transfer to a BANK as receiving bank nominated by the SELLER and accepted by the refundment guarantor, for credit to the account of the SELLER with the BUYER requesting SWIFT advice."
Article II 6 of each Contract provided as follows:—
" 6. REFUND GUARANTEE
All payments made by the BUYER to the SELLER prior to delivery of the VESSEL shall be in the nature of advance to the SELLER, and in the event this Contract is cancelled by the BUYER, all in accordance with the specific terms of this Contract permitting such cancellation, the SELLER shall refund to the BUYER in United States Dollars the full amount of all sums already paid by the BUYER to the SELLER under this Contract, if applicable, together with interest (at the rate set out in the respective provisions hereof) from the respective payment date(s) to the date of remittance by telegraphic transfer of such refund to the account specified by the BUYER. All transfer and other bank charges shall be for the SELLER'S account. As security to the BUYER, the SELLER shall deliver to the BUYER a Refund Guarantee to be issued by Bank of China, Shandong branch or EXIM bank, and or other first class international bank acceptable to the BUYER's bank in it's absolute discretion substantially in the form as attached in Exhibit "A"".
Article III 1 (c) of each Contract provided as follows:—
" (c) If delay in delivery of the VESSEL should continue for a period of one hundred eighty (180) days after the thirty (30) days allowance from the Delivery Date as defined in Article VII, Paragraph 1(a) of this CONTRACT as extended by any period of permissible delay as defined in Paragraph 3 of Article VIII, not by any period of Force Majeure and/or non-permissible delay each as defined in Paragraphs 4 and 5 respectively of Article VIII then in such event and after the aforementioned one hundred eighty days period has expired the BUYER may terminate this CONTRACT in accordance with the provisions of Article X of this CONTRACT."
Articles XIII A and C(1) and (5) of each Contract provided as follows:—
" A. Law and jurisdiction of this CONTRACT
The terms and conditions of this CONTRACT and all other agreements relating thereto and any disputes arising out of or in connection therewith shall be subject to and governed by English law.
[…]
C. Arbitration
(1) Save as expressly provided elsewhere in this CONTRACT any dispute arising under or by virtue of this CONTRACT, may be referred to arbitration in England by either party. In any such arbitration, the laws and rules of England shall govern as to all matters of substantive...
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