Shagang Shipping Company Ltd v HNA Group Company Ltd

In civil proceedings, the balance-of-probabilities standard is binary: if torture is not proved, it must be treated as not having occurred. A judge must then admit the statements as hearsay and assess their weight under the Civil Evidence Act 1995, considering all relevant circumstances. Rejection of torture does not make admissions conclusive or establish bribery. The judge must evaluate each admission, explain its reliability, and exclude irrelevant doubts about torture. An appellate court may intervene where those steps are omitted or the reasoning contains legal error. The appeal was therefore allowed and the bribery issue remitted for reconsideration.

Shagang, in liquidation, claimed approximately US$68.6 million from HNA under a guarantee of Grand China's charterparty obligations. HNA alleged that the charterparty had been procured by bribery and relied on admissions made by three individuals to Chinese Public Security Bureau officers, including a guilty plea by one of them. Shagang denied bribery and alleged torture.

Knowles J rejected the bribery allegation and held HNA liable under the guarantee in a judgment delivered on 16 May 2016. He stated that torture could not be ruled out and that this reduced confidence in the confessions. HNA appealed on evidential, factual-evaluation, comity and legal grounds. The central issues were whether residual doubts about torture could affect the weight of admissible admissions, whether the admissions had been properly assessed, and whether the matter should be remitted.

The court allowed HNA’s appeal. It did not finally determine whether bribery occurred. The weight of the admissions and the bribery issue were remitted to another Commercial Court judge, on the basis that torture had not been proved and without a full retrial.

1. Appellate review. The court applied the principles in Assicurazioni Generali SpA v Arab Insurance Group (Practice Note) [2002] EWCA Civ 1642 and Datec Electronics Holdings Ltd v UPS Ltd [2007] UKHL 23. The primary facts were not challenged. The Court of Appeal could reconsider inferences from undisputed primary facts and correct errors of law, while respecting any trial judge’s advantage in assessing evidence.
2. Torture and admissibility. A civil judge should decide first whether torture was proved. If it was not proved on the balance of probabilities, the law treats it as not having occurred. The admissions were therefore admissible hearsay. The binary approach in Re B (Children) (Standard of Proof) [2008] UKHL 35 applied. The SIAC-specific approach in A and Others v Secretary of State for the Home Department (No 2) [2005] UKHL 71, allowing residual doubts to affect evaluation, was distinguished.
3. Weight of the admissions. Admissibility did not make the admissions conclusive. The judge had to assess the weight of each admission under section 4 of the Civil Evidence Act 1995 and in the light of all relevant evidence. Relevant matters included the terms, consistency, timing and provenance of the admissions, their retraction, absence of legal representation, incentives of leniency, and the commercial evidence. A general denial of bribery was freestanding, and the pleadings did not require every evidential point to be pleaded.
4. Error in the first-instance approach. Knowles J failed directly to assess the weight of the admissions and failed to explain why they were unreliable. He also treated the absence of testing of the Public Security Bureau officers’ accounts as relevant to bribery, and allowed lingering doubts about torture to influence that issue. These combined errors made the conclusion unsustainable.
5. Conditional legal observations. The court approved the approach in Novoship (UK) Limited v Mikhayluk [2012] EWHC 3586 (Comm): a bribe may be paid to a third party close to a fiduciary, and actual influence need not be proved. The Patel v Mirza [2016] UKSC 42 illegality questions remained for the judge deciding bribery, on the basis that the individuals had not been tortured. The comity submission would have been rejected because the civil court had additional evidence of denials.
6. Remittal. The matter was sent to a different Commercial Court judge for reconsideration of the admissions’ weight and the bribery issue. No further new evidence was permitted beyond the evidence admitted on appeal.

• Court of Appeal (Civil Division) — [2018] EWCA Civ 1732: allowed HNA’s appeal and remitted the weight of the admissions and bribery issues to another Commercial Court judge, without a full retrial.
• High Court, Commercial Court — Knowles J, judgment dated 16 May 2016: found that bribery had not been proved and awarded Shagang approximately US$68.6 million under the guarantee.