The Court of Appeal has overturned a decision by a Commercial Court judge who appeared to take into account “residual concerns” that admissions of bribery might have been obtained by torture despite deciding that torture was not proven on the balance of probabilities.

Background

In Shagang Shipping Company Ltd v HNA Group Co Ltd [2018] EWCA Civ 1732, Shagang made a demand on HNA in its capacity as a guarantor under a charterparty. HNA declined to pay on the basis that the charter had been secured by payment of a bribe. It relied on confessions made by various individuals to the Chinese authorities. Before the Commercial Court, Shagang claimed that the confessions had been obtained by torture and were therefore inadmissible.

As the documentation available from the Chinese proceedings was incomplete and there was no first-hand witness evidence of the bribe, Knowles J formed the view that, even leaving aside the allegations of torture, the evidence before him did not establish that bribery had occurred. On that basis, he held that HNA was liable under the guarantee. He noted that in light of this finding, it was not necessary for him to express a firm view as to whether or not torture had occurred; instead, he stated that he could not rule it out, but that the evidence did not allow him to reach a firmer conclusion.

The decision

HNA appealed on the grounds that the judge’s failure to give weight to the confessions amounted to an error of law.

The Court of Appeal considered two previous authorities on unproven allegations. In one, Re A (No 2) [2005] UKHL 71, the House of Lords held that where the Special Immigration Appeals Commission (SIAC) had doubts as to whether or not material was obtained by torture, it should admit the material, but bear its doubts in mind when evaluating it as evidence. In the other, Re B [2008] UKHL 35, the House of Lords stated that where a judge in care proceedings was unable to determine whether or not a child was telling the truth about alleged abuse, he was not entitled to take the possibility of abuse into account in making his order; if the abuse was not proved, it had to be treated as not having happened.

The Court of Appeal found that SIAC proceedings took place in an entirely different context to ordinary civil proceedings, and therefore the approach in Re B was the correct one to take in the present case. On that basis, the conclusions of Knowles J as to the insufficiency of the evidence had to be treated as a finding that there was no torture. That finding had to be applied both to the question of whether or not the confessions were admissible and to the question of the weight which should be given to them once they were admitted. Any residual doubts as to whether or not torture had occurred must not be allowed to “infect” the court’s findings as to whether or not there was bribery.

After reviewing the first-instance judgment, the Court of Appeal considered that it did not state clearly enough what other grounds the judge had taken into account in deciding that the confessions were unreliable and that no bribery had occurred. The Court of Appeal expressed concern that relevant evidence supporting the confessions might not have been taken into account and concluded that the judge appeared to have been influenced by the torture allegations in considering the bribery issue, despite his statements to the contrary. The case was remitted to the Commercial Court for consideration by a different judge.

This case illustrates the evidential difficulties that can arise where an issue in English proceedings turns on the outcome of an overseas criminal investigation in a jurisdiction where it is difficult to ensure the completeness or accuracy of court records or to secure the cooperation of witnesses. In such circumstances, the English court can be called upon to make difficult findings upon evidence that is partial at best. Nonetheless, the judgment of the Court of Appeal calls for a decisive approach from judges, with no room to “hedge their bets” as to what has occurred.

For guarantors, the message must be to conduct thorough due diligence at the time of entering into a contract; after the event, only very cogent evidence will suffice to discharge the burden of proving that the contract was procured by some form of illegality.

In particular, allegations of torture, whilst very rare in commercial proceedings, will by definition almost always be very difficult to prove, as the only other witnesses apart from the victim would usually be the perpetrators, who are very unlikely to confess. Therefore, although allegations of torture in a pleading will undoubtedly embarrass the defendants, without the requisite evidence to back them up they are always likely to fail to achieve the claimant’s legal objectives.