IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO 958 of 2014
||BETTER MARINE INTERNATIONAL LIMITED
||ZHONG SHAN COMPANY LIMITED
|Before: Deputy High Court Judge Seagroatt in Court
|Dates of Hearing: 16 18 and 22 23 November 2016
|Date of Judgment: 30 November 2016
J U D G M E N T
1. This is a dispute over the commission to be paid to the plaintiff by the defendant arising out of a ship brokerage contract between the parties and at varying stages, their respective associated companies.
2. It is far less complicated than the pleadings from both parties appear to make out. However the opening skeleton submission by the plaintiff’s counsel has come to terms with the pleadings and set out the case in simpler terms. Its outcome is determined by oral evidence from the respective servants or agents of the parties, supplemented by some significant documents and a few incontrovertible facts.
3. The argument is over the liability to pay the second instalment of the commission, the first instalment of 20% of the commission having been paid in accordance with the terms of a commission agreement. The balance of 80% was to be paid after the tonnage of the shipbuilding had been assessed following completion of the ship‑building contract.
4. The plaintiff company is a ship brokerage owned or controlled by a Mr Ren. I will refer to it as Better Marine.
5. There is another company associated with it known, for short, as Beijing Better Marine, which Mr Ren also effectively controls.
6. The defendant company, owned and/or controlled by a Mr Yang Dawei, is also a subsidiary of Jiangsu Overseas Group of which Mr Yang is also the Chairman of its Board of Directors, and a Mr Cai is a director.
7. There is also another subsidiary of Jiangsu Overseas called Jiangsu Overseas Corporation International Technical Engineering Co Ltd (Jiangsu International for short) whose business is shipbuilding. Amongst its employees are a Ms Lin (General Manager), Mr Luo, manager of its Ship Engineering Dept from September 2007 to September 2008, and a Mr Zhang who was the Project Manager of that department, from July 2008, as Mr Luo’s successor.
8. The defendant attempted to suggest that it was not a subsidiary of the Jiangsu Overseas Group or controlled by it but was a wholly separate entity. This was really a form of subterfuge in order to try and be consistent with the defence, which itself soon proved to be a sham.
9. The agreed diagram showing the corporate structure of these Jiangsu businesses, effectively under the overall direction and responsibility of the Jiangsu provincial government, made it clear that the defence and the contended for nature of Zhong Shan Company Limited, a company incorporated in Hong Kong, was a fiction.
10. Jiangsu Overseas appears to be the holding company with Jiangsu International as its subsidiary and Zhong Shan in a similar capacity. Although the manoeuvrings of these companies in relation to the ship‑building contract with Concordia, and the commission agreement with the plaintiff, resembled a form of corporate musical chairs, it was apparent that Zhong Shan’s role was principally, though not exclusively, that of a financial facilitator.
11. The common factor in all the Jiangsu companies, and the defendant company, was Mr Yang Dawei to whom I referred a little earlier. He was the Legal Representative and Chairman of the Board of Directors of Jiangsu Overseas. He was the Chairman of the Board of Jiangsu International. He was also Chairman of the Board of Zhong Shan and its principal shareholder holding 96% of the equity, with Mr Cai Fei Yun holding the remaining 4% [See Exhibit P1].
12. If there remained an iota of doubt as to the real position of Zhong Shan in this little corporate empire ultimately controlled by the Jiangsu provincial government, it is consigned to irrelevance by the website of Jiangsu Overseas Group, the text of which is worth repeating for its comprehensive statement about Zhong Shan:
“ZhongShan Hong Kong Ltd, Co.
Zhongshan Hong Kong Ltd Co is a subsidiary of JOC Group, registered and founded in Hong Kong in March 1955. The company specialises in the marketing of goods and services overseas, with branches in Hanjing, Japan and America. Additionally, the company has properties in Hong Kong, Macau and Guangzhou.
For over 20 years, the company has invested in more than 50 Joint ventures in 11 cities in towns of Jiangsu, spread across industries as diverse as machinery, electricity, chemicals, building materials, real estate and the service industry. On behalf of Jiangsu province, Zhongshan Hong Kong Ltd Co, maintains investments of over 120 million US dollars. The company is at the forefront of relations between Jiangsu and Hong Kong attracting investment of 1 billion KH [sic] dollars.
Address: 49/F A & 50/F Office Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong
13. Although I have only dealt with Mr Yang Dawei as the common feature of all these companies, one other person’s position needs to be highlighted in the corporate picture and that is the manager, Madam Lin Min, who is also described as the Legal Representative of Jiangsu Overseas, and was the personality who delivered an important address published on 11 January 2008 to celebrate the 5th birthday of JOC International Technical Engineering Co Ltd. She was also the General Manager and a director, probably the No 2 in the hierarchy. She is an assertive and dogmatic lady and it was easy for me to see, having heard her evidence and that of Mr Luo, how there may well have been a clash of personalities.
14. I am quite satisfied that she gave instructions to Mr Cai Fei, the No 2 director of Zhong Shan, as to what he should do, and that she signed documents on behalf of Zhong Shan, well‑knowing what she was doing, not caring whether or not she had the requisite authority to do so. Within the group which included Zhong Shan I am sure that she considered that her powerful position entitled her to control such matters. I am equally sure that in view of the way that these companies operated within the group that each was accustomed to being controlled in such a way as to service the requirements of others in the group.
15. Mr Yang Dawei, the common feature as Chairman of all the Boards within the group, was not called to give evidence even though he is still involved with one or more of the companies.
THE PLAINTIFF’S CASE
Preliminary oral agreements
16. These started in early 2008. The first was been referred to as the Nanjing East agreement. A Mr Yang Yue on behalf of Nanjing East agreed with Mr Ren of the Beijing Better Marine, a subsidiary of the plaintiff, the following:
(1) Nanjing East would pay Beijing Better Marine a commission of €50 per tonne for referring a shipbuilding project involving the construction of 17 hulls and one vessel (totalling approximately 15,000 tonnes). That meant a commission fee of €750,000.
(2) The first instalment of the commission would be 20% to be paid from the inception of the shipbuilding project, with the 80% balance to be paid on delivery of the hulls and vessel.
(3) Since the exact final tonnage would not be calculated until delivery, the commission would be adjusted pro rata on delivery.
17. At about the same time as this preliminary agreement was a supplemental agreement, as I term it, by which Jiangsu Overseas through Mr Luo, its manager of the Ship Building Engineering Department, became Nanjing East’s partner in the project, and thus also liable for the commission to be paid, in accepting the terms of the original oral agreement. Jiangsu Overseas agreed to send the commission to the plaintiff’s foreign currency accounts.
The shipbuilding project
18. The actual marine building contract was facilitated by the plaintiff and/or its subsidiary Beijing Better Marine (through Mr Ren their owner). Jiangsu International, and Nanjing East were the anticipated builders/sellers and Concordia was the buyer.
19. Then Jiangsu International signed the contract in the name of Jiangsu Overseas — the former is the subsidiary of the latter.
20. The principal terms were:
(1) Jiangsu Overseas agreed to sell the 17 hulls and one vessel to be built by Nanjing East to Concordia, totalling approximately 15,000 tonnes.
(2) The provisional price to be paid by Concordia to the seller was €1.26 per kilogram based on 15,000 tonnes to be finalised once the total tonnage provided had been assessed.
On the 20 March 2008 at the request of Jiangsu Overseas the contracting party (with Nanjing East) reverted to Jiangsu International. Mr Ren was asked by Mr Luo of Jiangsu to draft a commission agreement.
21. On the 21 March Mr Ren forwarded what has been described as the first commission agreement to Jiangsu International and Nanjing East.
The first written commission agreement