ICBC Financial Leasing Co Ltd v Consultants Group Commercial Funding Corporation (t/a CG Commercial Finance)

As already noted, in late 2012 and 2013 Golar had on order 11 LNG carriers and two FSRUs. These were under construction in Korean yards and were due for delivery between August 2013 and 2015. It had financed from its own resources or from existing credit lines the pre-delivery instalments due under the Shipbuilding Contracts, and would if necessary have been able to finance the delivery instalments by means of Korean export credit agencies. However, it was seeking finance for the vessels from other sources with a view to obtaining more competitive terms, not only for the delivery instalments, but also to release the credit lines which it had so far utilised. It was also interested more generally in widening its banking relationships.

The existence of the Golar newbuilding programme (including the approximate timing of deliveries and the main details of the vessels concerned) and the fact that Golar was seeking such finance was well known in the shipping and ship finance market. It had been the subject of presentations at shipping conferences and other public disclosures by Golar. The information was also available on Golar’s website. I accept the evidence of Mr Yang that this information was also known to ICBCL’s Shipping Department. It would be surprising if it was not.

In January 2013 Mr Longhurst who was based in the United States advised Mr Sawyer that he had “stumbled across a ‘bank’ over here who have little knowledge of shipping but lots of appetite”. This was CGCF. Mr Sawyer and Mr Longhurst agreed to approach CGCF to see whether it was interested in providing finance for the first vessel in the Golar programme.

Generally speaking conditions in the ship finance market in 2013 were difficult. Many of the traditional lenders had left the market or were still suffering from the consequences of the 2008 financial crisis. It was a challenge to find new entrants to the market prepared to provide new capital. The attraction of CGCF to Mr Sawyer and Mr Longhurst was that it might be a new source of such capital, or have access to such new sources.

On 13 February 2013 Mr Tienzo sent Mr Sawyer a summary of the newbuilding programme and a copy of a presentation given by Golar in December 2012. None of this material was confidential. It was sent by Mr Sawyer to Mr Longhurst and by him to CGCF. Mr Longhurst told CGCF that “the first potential deal” was a lease for an LNG tanker for delivery in August 2013 at a delivered cost of US $200 million and that if CGCF was interested, Golar would like to see an offer of finance in the form of a Letter of Intent as a first step. Although the material provided to CGCF referred by way of background to the newbuilding programme as a whole, and although CGCF had in mind the possibility of future deals if a first transaction could be successfully concluded, what CGCF was asked to provide was a Letter of Intent for a single specific vessel. CGCF responded that it was definitely interested.

However, despite chasing by Mr Sawyer and Mr Longhurst and promises and expressions of confidence by CGCF, no Letter of Intent was forthcoming for some six weeks. Eventually, on 25 March 2013, CGCF provided a draft Letter of Intent to Mr Longhurst for his review proposing a 12 year loan. CGCF was identified as the proposed lender although in fact it never intended to use its own money to lend on this transaction. On the following day, 26 March 2013, the draft Letter of Intent was sent to Mr Sawyer. CGCF stated that it had identified partners to help provide this finance, although none who were interested in a lease structure. In fact CGCF had not identified any partner who had shown any serious interest at all. Such conversations as it had already had with potential sources of finance had been extremely general and did not justify CGCF’s claim. A typical conversation was described in his evidence by Mr Hibma:

“So, for example, I might have talked to – I think his name was Alan at HSH and said ‘Hey Alan, I have got this transaction, we are interested in it. What are your thoughts? Can you do this tenor or are you interested in LNG?’ And he may go, ‘Hey Jonathan, you know, yes, once that is awarded, let me know’.”

Mr Sawyer sent the draft Letter of Intent to Mr Tienzo at Golar on 27 March 2013 with the comment that CGCF “is very confident that it can place this business based on relevant market research”. That was an accurate reflection of what CGCF was saying, although there was no sound basis for that confidence, which proved to be misplaced. Any “market research” done by CGCF amounted to nothing more than the very general “Hey Alan” conversations with banking contacts described above. However, CGCF was concerned that if it did not come up with something, Golar would “jump ship”. The reference to placing the business was explained in Mr Sawyer’s email on the basis that CGCF would “share” the business with other financial institutions, the implication being that it would be part of a syndicate of lending institutions and not merely an intermediary. That was what Mr Sawyer was given to understand, but was not CGCF’s intention. The email indicated that although the Letter of Intent was concerned with one LNG carrier, CGCF was keen to finance other vessels in the programme if the first deal could be agreed. Golar’s approach, however, was to proceed one step at a time.

There followed some negotiation between Golar and CGCF as to the terms of the Letter of Intent which included, for example, a reduction in the proposed interest rate margin from 3.75% to 3% over LIBOR. As the Letter of Intent did not create any commitment by CGCF, what this negotiation amounted to was (on Golar’s side) an indication of the terms which it would be prepared to accept and (on CGCF’s side) an indication of the terms on which it believed that it would be able to place the business. There was no point in CGCF agreeing to more competitive terms in the Letter of Intent in order to secure a mandate from Golar unless it had grounds for believing that it could secure finance on these terms from others in the market.

Finalising the terms of the Letter of Intent took some time. When it provided a revised version on 11 April 2013, CGCF sought to excuse the delay by explaining that “on large transactions every modification/change has to be cleared internally and with our partners”. This was an odd thing for CGCF to say as it had no “partners”, either actual or prospective, and had not cleared the terms with anyone. Mr Hibma described the reference to partners as “a stretch”. It was in fact a straightforward lie, intended to convey the impression that CGCF had lined up other lenders for this transaction and was much further advanced than was in fact the case. This was typical of CGCF’s tendency throughout this transaction to overstate its role and the progress it was making.

Mr Tienzo was interested to know more about the proposed lenders so that he could present the proposal to his board. He asked Mr Sawyer to obtain information from CGCF about the lenders’ business. CGCF responded by providing a presentation of its corporate profile, which included a list of previous transactions which it had arranged, none of which involved ship finance deals, but it ignored the request for information about the identity or business of the lenders. The requests were repeated but no answers were provided. CGCF had no lenders lined up but was not prepared to admit this, fearing that if it did so Golar would rapidly lose interest. CGCF did say, however, that it would identify the lenders (described as its “partners”) once a mandate been agreed. It described itself in an email dated 18 April 2013 as a “Master Arranger” of lease and loan debt, adding that “in Maritime we generally take no direct interest in the transaction but act purely as a Master Arranger”. It would have been more accurate to say that CGCF had no experience at all of maritime transactions. The email did indicate, however, that on this proposed transaction CGCF would be acting as an intermediary and not as a lender.

The email dated 18 April 2013 was sent in response to an enquiry, not only about how much of “this deal” (i.e. the first vessel) CGCF itself planned to lend, but also “if you would do 2 ships”. The response on this latter point was that “of course we would be interested, but as you stated let’s get this first one complete”. This confirms that what was under discussion between CGCF and Golar was the financing of a single vessel, albeit with the possibility that further deals might follow. Financing by CGCF of the whole Golar programme was not at this stage on the table.

The information provided by CGCF proved sufficient for the Golar board to approve the instruction of CGCF to arrange financing for the first vessel in the programme, despite reservations on the part of some board members as to CGCF’s ability to deliver. The final “Indicative Terms and Conditions” document dated 24 April 2013 (“the April Terms”) was signed on 29 April and was for a single LNG carrier currently under construction. The April Terms did not include a deadline by which an offer of funding had to be provided, but it contemplated that an offer would be forthcoming within 30 business days and the parties knew that the vessel for which the funding was needed was due to be delivered from the shipyard in August or September 2013.

With the April Terms signed, Mr Sawyer and Mr Longhurst asked again for the identity of the funders arranged by CGCF. CGCF did not provide any names. It could not do so as there were none.

On 1 May 2013 CGCF asked to be provided with vessel specifications. A summary was provided the following day. Mr Tienzo’s evidence was that it was not “in any meaningful sense confidential particularly given that the vessel was a standard LNG carrier the specifications for which were well known in the LNG market”. Mr Tienzo also provided Mr Sawyer with a cash flow spreadsheet for the company which was to own the vessel. This was confidential information, but there is no evidence that it was passed on to CGCF. It was never seen by ICBCL. Mr Tienzo’s evidence, which I accept, is that this was the only document of a confidential nature that he ever provided.

In the meantime Mr Hibma started to sound out the market. The pro forma message which he used for this purpose sought financing for a single vessel with delivery in August or September 2013. The message said that the transaction had been awarded to CGCF “and secured with a deposit”. That was untrue. No deposit had been paid.

Mr Hibma set out the results of his “Golar shopping” in an internal email dated 8 May 2013. That email identifies 19 different financial institutions to whom Mr Hibma had proposed or intended to propose the transaction. With one exception (Wells, which had asked for further information but in the event did not take the matter further) none of them were interested. This was distinctly unpromising. CGCF was conscious that Golar would be concerned about the lack of progress.

Accordingly a conference call with Golar was organised for 9 May 2013. This was the first direct contact between CGCF and Golar. Mr Sawyer and Mr Longhurst were also on the call. A note records that after introductions, the CGCF representatives (including Mr Hibma) told Mr Tienzo that “…we do have SP’s [Syndication Participants], virtually program agreements in place”. CGCF did not identify these participants, but assured Mr Tienzo that they were “various banks you may be familiar with” and also “investors you are not familiar with – even hedge funds … foreign commercial and US banks too”. They claimed that they were “focused on a handful” and “hope[d] to find that we are in an oversubscriber situation”. All this was complete fantasy.

During the call Mr Tienzo referred to the fact that 13 vessels were due to be delivered to Golar in the next few years and that it was a good thing to widen the sources of finance for those vessels. However, it remained the position that the only transaction for which CGCF was being asked to provide finance was the single vessel referred to in the April Terms.

By mid-May 2013 CGCF had drawn a blank with all of its usual financing contacts. It was at this stage that on 16 May 2013 Polly Ho, a Mandarin speaking employee of CGCF, wrote to ICBCL’s Xing Tao on behalf of Mr Hibma about a possible LNG transaction. This was following up a contact which had previously been made with ICBCL but which had not at that time resulted in any business. The potential transaction was identified as being the financing of up to US $160 million for one LNG tanker, with approval requested in May or June 2013, and vessel delivery in August or September 2013. Golar was not mentioned. Nor was the fact that this was one vessel from a larger programme. Mr Xing was in ICBCL’s Asset Finance Department and forwarded the email internally to Han Song within the Shipping Department, although he appears to have taken no action. However, this contact caused CGCF to begin thinking further about ICBCL and, by doing some research on the internet, to ascertain that ICBCL was a leasing company which wanted to expand its portfolio and that the appropriate contact was Mr Yang.

Meanwhile Mr Tienzo was pressing for news. On 19 May 2013 Mr Hibma told him that CGCF had been “co-processing the credit and transaction with our syndication participants (SP) who have indicated interest in this transaction. … Specifically, we have now culled the interest and have identified 5 SP’s with interest and best fit criteria. We are currently in discussion with these SP’s many whom have provided initial due diligence questions and others who are in the process of providing CG with questions”. This email gave the impression, as no doubt it was intended to, that the problem was not (as in fact it was) to find somebody who was prepared to lend on this transaction on anything like the April Terms, but to select the “best fit” out of all those who were “interested”, with others having been “culled”.

Under pressure to come up with something, on 20 May 2013 CGCF emailed ICBCL again, this time to Mr Yang, requesting a telephone conversation. This was arranged for 24 May 2013. Mr Yang spoke to Mr McCullum and Mr Hibma. The discussion was very general, with the parties introducing each other and discussing the possibility of CGCF introducing transactions to ICBCL. I reject the evidence of Mr McCullum that there was discussion of “a major LNG player with 13 vessels that need finance”. As it was well known that there was only one such “LNG player” in the market, this would have been tantamount to identifying Golar, something which CGCF was very careful not to do before a Confidentiality Letter was in place. Although some broad parameters of a potential transaction may have been discussed, I accept the evidence of Mr Yang that there was no mention of any specific transaction, let alone any newbuilding programme.

On 25 May 2013, Mr Hibma emailed Mr Yang outline details of three possible financings, including a US $160 million funding request for a 160,000 dwt LNG tanker. (The other two possibilities were for completely different vessels and need not be further considered). There was no reference to the time by which the financing had to be approved. Mr Hibma also emailed a draft “NDA” (which would then become the Confidentiality Letter) and asked Mr Yang to sign it, whereupon further details of the transactions would be provided. After some amendments, principally to the law and jurisdiction clause, the Confidentiality Letter was signed on 6 June 2013.

Thus at the date of the Confidentiality Letter:

On 7 June 2013 Mr Hibma sent Mr Yang details of the Golar transaction. His email and the attached Lease Transaction Summary described the “transaction” which had been awarded to CGCF (and secured with a deposit) as being financing for up to US $160 million for a single LNG tanker to be delivered in August or September 2013, with approval requested in June 2013. The structure of the proposed transaction was to be a “traditional ship lease based on a profile with a 12 year term and a 24 year amortization schedule”. The material sent included also extensive material about Golar and its newbuilding programme (including the vessels’ scheduled delivery dates) which, it said, would be funded by a combination of (a) Korean and Norwegian export credit funding, (b) bank funding which was being discussed and (c) capital market transactions such as bond issues. None of this information was confidential. Despite the assertion in Mr Hibma’s covering email that the information being sent was both confidential and privileged (it was certainly not privileged), it was in fact an assembly of publicly available documents such as presentations made at shipping conferences, documents from Golar’s website and financial information from Golar’s public filings.

ICBCL reviewed this material internally and was interested in pursuing it further. However, Mr Yang and Mr Zhao agreed that it would not be possible to provide a response within June as requested, in part because of public holidays in China and because Mr Yang was travelling and in part because of the procedures which ICBCL would need to follow. There is an issue whether Mr Yang told Mr Hibma in a conversation on 12 June 2013 that this would not be possible. I think it likely that he did. Nevertheless Mr Hibma chased ICBCL for a response on 17 June 2013 but in the event there was no communication of substance between ICBCL and CGCF during June.

Mr Yang’s travelling in June included a business trip to Norway which had been organised some time beforehand. It had been arranged by Mr Wu and Mr Severinsen who were working with ICBCL on other ship financing transactions, including two in the LNG sector for Awilco and Dynagas. It included a meeting with a Mr Magnus Valeburg of Ship Finance International, a company in the same Frederiksen group as Golar, where a presentation was given on the financing requirements of various companies in the group, including Golar’s newbuilding programme.

Meanwhile Mr Sawyer and Mr Longhurst, as well as Mr Tienzo, were becoming increasingly disillusioned with CGCF and frustrated by the failure of CGCF to live up to its promises. Mr Longhurst’s exasperated comment to Mr Sawyer on 14 June 2013 was that he had “been all over these guys this week like a cheap suit. They now have a perfect 100% record of missing self-imposed deadlines”. Mr Sawyer commented that the situation “is becoming quite embarrassing”. By 28 June 2013 he was coming to the conclusion “that CG are chasing shadows and that we are just living in hope”. That assessment was correct. On the same day he told CGCF that “the fuse is getting shorter by the day and if things are not working out as planned we should at least tell Golar precisely where we stand so that they can consider alternative arrangements, if appropriate”.

By 1 July 2013 Golar had lost patience. On that day Mr Tienzo sent an important email:

“This is very frustrating. We cannot continue to be hooked on this deal (whatever that might be) purely on the basis that someone is interested. As you will remember, we agreed in the initial call that we should be signing a deal by end of June, it is now July and I still don’t know what the deal/structure is while newbuild deliveries are due imminently.

I suggest you tell them to stop working as I have now instructed the ECA structuring bank to now cover the first 8 deliveries as the risk of not being able to finance the first deliveries grows each day that we continue to wait.

I am very disappointed by the way that this has (not) progressed because I personally pushed this through board consensus despite some board members doubting that they could deliver on time. …”

There is an issue whether the instruction (or as CGCF would have it, “suggestion”, although in my judgment that is in this context a distinction with no real difference) that CGCF should stop work was passed on to CGCF. I find that it was. Mr McCullum gave clear evidence in response to a question from me that the substance of the message was communicated to him although the email itself was not:

“We looked at page 6, which is the one you reference in your paragraph 73. That’s the message where Mr Tienzo tells Mr Sawyer to tell you to stop working. Was that message conveyed to you either in those words or to the same effect?

A. To the same effect.”

Despite the clarity of this answer, Mr McCullum was re-examined on this question. He confirmed what he had said:

“Q. Is that a message that was passed on to you, as you recall it now?

A. I’m certain that I didn’t get this email. I’m certain that someone on the team mentioned this to me. But it’s very clear from the date on these two pieces of correspondence that they still wanted us to continue working. That is Sawyer and Longhurst through their contact with Mr Tienzo.”

In my judgment it is implausible that an instruction by Mr Tienzo that CGCF should stop work would not have been passed on to CGCF. Whether CGCF chose nevertheless to continue working, or whether Mr Sawyer and Mr Longhurst wanted it to do so, was a separate matter. If it did continue, however, it did so on a speculative basis by its own choice and at its own risk, just as any broker or intermediary in the market knowing that Golar was looking for finance might have attempted to put together a deal which it could then present to Golar.

In fact Mr Sawyer and Mr Longhurst not only passed on the message that CGCF should stop work, but made clear that so far as Golar was concerned CGCF had lost all credibility. Indeed when CGCF indicated that it was still attempting to make headway, Mr Sawyer, who valued his relationship with Golar and who was in effect Golar’s “gatekeeper”, refused to allow CGCF to have contact with Mr Tienzo unless it could produce an approved term sheet from a realistic source of finance. On 4 July 2013 Mr Longhurst reported to Mr Sawyer that “they [CGCF] are under no illusions that you, me and Golar are fed up and their credibility is shot". Mr Longhurst said that he had conveyed this to CGCF in no uncertain terms. Mr McCullum confirmed this.

Mr Hibma was also well aware of the situation. He accepted in response to a question from me that the position from about the beginning of July could fairly be summarised in four propositions:

“… can I see if I can, as it were, summarise what the position may be. This may or may not turn out to be important so if I’ve got it wrong, you need to tell me. Would this be fair or not: from about the beginning of July, four points.

Number 1, you had no existing mandate from Golar.

Number 2, you were not being requested by Golar to do anything.

Number 3, you believed that there was a prospect that you could get them interested again as there were other vessels still to be financed which had been talked about.

Number 4, that in order to do that, there was recognition on your team, in particular Mr Sawyer and Mr Longhurst, that you would need to provide them with a realistic term sheet because without that showing that there was somebody who was a real prospect, they were not going to be interested in talking to you further.

Is that fair or not?

A. Yes my Lord, you are up to speed.”

Mr Sawyer’s view, expressed slightly later in an email dated 22 August 2013, was that “in Golar’s mind we have been written off”. He explained in evidence that what he meant by this was that whatever might happen in the future, there was at that stage no subsisting relationship between Golar and CGCF. This provides an example of the “glossing" of Mr Sawyer’s witness statement to which I referred earlier. Mr Sawyer commented in his witness statement that Mr Tienzo “never stated when we spoke that CGCF were not ‘in the game’ …”. No doubt there were many things which Mr Tienzo did not say, but as Mr Sawyer’s email correctly recorded, it was clear that Mr Tienzo had written off CGCF. The email, as explained by Mr Sawyer in evidence, represented the true position.

Mr Tienzo stated his view of the position succinctly. Asked by Mr George whether he would have been prepared to consider “a genuinely attractive deal" if CGCF had been able to propose one, he said that he would have been very cautious, having lost confidence in CGCF’s ability to deliver what it said it was going to be able to do, and that if he had agreed to consider any such proposal, it would have been purely as a matter of courtesy. The next exchange was accurate and telling:

“Q. Let me put it this way. You were happy for them to keep trying, but you didn’t want your time to be taken up.

A.

I didn’t care what they did, to be honest with you. I was concerned with the first delivery, the financing, and the completion of that eight-vessel financing.”

[Although the transcript records Mr Tienzo saying “I don’t care …”, my own note is that he said “I didn’t care …” which clearly makes better sense.]

CGCF submitted that the suggestion to stop working was subsequently revoked by Mr Tienzo. I reject that submission. It is not a fair reflection of the evidence.

As is apparent from the foregoing summary, up to the time when CGCF was told to stop work on 1 July 2013, the scope of what was under discussion had not changed. That is to say, Golar had requested CGCF to arrange finance for a single vessel which was due for delivery in August or September 2013, and that was the only transaction which CGCF had presented to ICBCL.

In fact CGCF did not abandon the project. On 4 July 2013 Mr Longhurst reported to Mr Sawyer that CGCF had a “new investor who are apparently close to Golar’s terms” and could provide a term sheet “would you believe, ‘next week’”. That turned out to be a reference to CIT Finance LLC, a United States company, with whom Mr Hibma was discussing a possible loan (not a lease) to be provided by CIT and at least two other as yet unidentified financial institutions for the purchase of the first LNG vessel which was to be delivered in the third quarter of 2013. Mr Longhurst and Mr Sawyer were sceptical about this and did not even report it to Mr Tienzo, regarding it as pointless to do so. That scepticism proved well-founded. The terms contained in the CIT term sheet “for discussion only” produced on 10 July 2013 were far removed from those set out in the April Terms.

Armed with this draft term sheet, CGCF felt able to tell ICBCL that it had “interested investors here in the US” who were “looking for syndication partners for the Golar transaction”. It chose not to tell ICBCL that the only Golar transaction previously discussed, for a vessel to be delivered in August or September 2013, was now to be awarded elsewhere and that it had been told to stop work. Mr Hibma’s email went on to ask whether ICBCL would “prefer to be the lead on a larger transaction, something closer to 10 vessels at $160MM each”. It was Mr Yang’s evidence, which I accept, that this was the first reference to a potential transaction with ICBCL involving ten vessels.

Mr Zhao responded on 15 July 2013. He confirmed ICBCL’s interest in such a project, saying that it could deal with all those vessels itself (i.e. without needing syndication partners). He asked Mr Hibma a number of questions, including how many vessels would be delivered in 2013. Mr Hibma’s response was that there were eight vessels to be delivered in 2013, a strange response as only five such vessels were due that year and all of them were being financed by the Korean banks. He also set out what purported to be “responses from Golar’s management team”, the implication being that CGCF was currently in contact with Golar about this proposed 10 vessel transaction, although the information was in fact taken from material in the Lease Transaction Summary.

On 17 July 2013 Mr Zhao and Mr Hibma spoke. Mr Hibma’s evidence, supported by an internal CGCF email, is that he was promised “a term sheet for up to eight vessels” within two days, but I do not accept this. Mr Zhao is not fluent in English and it is likely that whatever he said was misunderstood by Mr Hibma. Certainly no such term sheet was provided and it was Mr Zhao’s view that he needed more information before being able to provide one. When the conversation was reported to Mr Longhurst, his response was that more would be needed in order to approach Golar and “re-attract attention from Golar’s board”. He outlined what he thought would be required. An internal CGCF email from Mr Jody Sharp, a significant and influential shareholder in the company, which commented on Mr Longhurst’s response displayed annoyance that Mr Longhurst had been told that CGCF was speaking to a Chinese bank, even though the bank was not identified. It stated among other things that “we have no award and no deposit so we can easily be circumvented.” This recognised, as was the case, that CGCF had no mandate to act on behalf of Golar and was seeking on its own initiative to put together a proposal which could be presented to Golar.

On 18 July 2013 Mr Hibma chased Mr Zhao for a term sheet for eight vessels. This must have been intended as a reference to the eight vessels which Mr Hibma had wrongly said were due to be delivered in 2013 as no others had been mentioned. CGCF urged Mr Longhurst and Mr Sawyer to set up a meeting with Golar, but Mr Sawyer responded firmly that this was premature without an agreed term sheet. He added that even if Golar liked any terms proposed, it would need an assurance that CGCF could meet its timetable.

Mr Zhao did not provide a term sheet, but on 22 July 2013 he did provide Mr Hibma with what was described as “a draft structure” for the Golar project. This was of a very general nature which did not include detailed financing terms. Nor did it say how many vessels were intended to be financed in this way. Mr Zhao added that if the structure was confirmed, he would need between one and two months for ICBCL’s internal processes. On 23 July 2013 Mr Zhao spoke with Mr Hibma, who followed the conversation with an email summary. This confirmed that ICBCL was “interested in financing all 8 vessels” (again, this must have been a reference to the eight vessels supposedly due for delivery in 2013) and said that Mr Zhao had also said that financing would be ready in time for the first delivery in early September 2013. Mr Zhao denies saying this and I think it unlikely that he did. It would have been inconsistent with his earlier statement that up to two months for ICBCL’s approval would be needed. Instead he made it clear, in this or a follow-up conversation, that he needed further information before he could provide any term sheet. For his part Mr Hibma did not explain that financing of the first eight vessels in Golar’s programme had already been awarded to the Korean export credit banks, although he did refer to the Korean banks as “our competition”.

Somewhat surprisingly, on 25 July 2013 Mr McCullum wrote to Mr Yang to emphasise four points. The first was that “Golar indicated to CGCF that they are able to work with KEXIM in Korea, yet prefer the ICBC terms we have discussed, if the timing is right". In truth Golar had indicated no such preference, nor did Mr McCullum have any basis for thinking that it had. Indeed, it is not clear what Mr McCullum meant by “the ICBC terms”. The parties had not even got as far as discussing the financial terms which might be included in any deal. The second point was that “the client is requesting a term sheet from CGCF/ICBC Leasing as soon as possible”. This was not true either. The client, Golar, had told CGCF to stop work and was not requesting anything. The third point was that “the client is also requesting an approval within the next few weeks". Again, this was not true. Finally, Mr McCullum said that “funding will be in late September or October". That assumed, however, not only that the terms which ICBCL would propose would be acceptable to Golar, but that CGCF would be able to persuade Golar to abandon the Korean banks and award the transaction to ICBCL instead, a prospect which was entirely speculative.

In response, on 25 July 2013, Mr Yang told Mr McCullum that ICBCL would prepare an indicative term sheet, but warned that his colleagues would have some questions. Mr Zhao and Mr Hibma spoke again that day. An internal CGCF summary of the conversation records that ICBCL was “interested in financing all 8 vessels” but would commit to two vessels first; and that it would have to “receive more information on the vessels” as well as a commitment from Golar to buy them back at the end of the term before providing the detailed terms (term, amortisation period, rate and advance) on which it would be prepared to provide funding. Mr Zhao then set out in an email the further information which he needed. His email reiterated that “for making sure to finish this project we plan to deal with first two vessels first, and after first two vessels close we can continue the others”.

At this point a more senior member of ICBCL became involved. This was Paul Chang, who had extensive experience of international transactions. On 26 July 2013 Mr Chang wrote to Mr Zhao, copying in Mr Yang. He criticised Mr Zhao for asking for information, for example about the existing Golar fleet, which was publicly available. More importantly, he questioned whether CGCF had any mandate from Golar and expressed incredulity as to whether ICBCL could provide funding in time for drawdown in September 2013 against competition from the Korean Export Bank. He was “concerned that we are wasting our time”. Later that day Mr Chang forwarded to Mr Zhao a press release announcing the Korean banks’ financing of the first eight vessels and asking whether these were the same vessels that CGCF was asking ICBCL to consider.

This caused Mr Zhao to ask Mr Hibma whether Golar had already got a loan for the eight vessels which were being discussed. Mr Hibma’s response on 29 July 2013 was that it was true that the eight vessels were funded but there were five more vessels to approve and fund, and that if ICBCL was able to provide a quick turnaround then Golar might give ICBCL and CGCF some of the eight vessels already funded. He provided also some further information about the vessels, although this was no more than a repetition of material already provided in the Lease Transaction Summary.

Prompted by Mr Chang’s concerns, on 2 August 2013 Mr Zhao asked CGCF for a copy of its authorisation from Golar. This posed a problem for CGCF as it had no such authorisation. Instead, on 4 August 2013, Mr Hibma provided a copy of the April Terms. He added that “fortunately our salesperson on this account knows John Fredriksen” who was “the ultimate decision maker” and that “our sales person has been waiting for the Term Sheet from ICBC to present to Mr Fredriksen”. That was an inaccurate description of Mr Sawyer, who did know Mr Fredriksen but who was not CGCF’s “sales person”. Be that as it may, Mr Hibma’s email acknowledged that CGCF’s credibility with Golar had been damaged (although he sought to blame ICBCL for that) and that without a term sheet from ICBCL, CGCF had no current role or authority in the financing of any of the vessels.

Taking stock of the position at this stage:

It is not surprising that ICBCL was concerned by Mr Hibma’s message, which added weight to Mr Chang’s view that ICBCL was wasting its time discussing this matter with CGCF. It was now apparent to ICBCL that the April Terms which were put forward as CGCF’s authority were in respect of a single vessel that had already been funded elsewhere. On 5 August 2013 Mr Zhao sent to Mr Wu what is said by CGCF to be an important email:

“… We got to know about the Golar new build vessel project. Could you please find out for us from indirect sources whether Golar has any financing requirement and whether there is any chance that we could cooperate with them?”

It is CGCF’s case that this was an attempt by ICBCL to circumvent it, that is to say to arrange financing directly with Golar, thereby cutting out CGCF from the deal, and that this attempt was prompted by the collapse at a late stage of negotiations of a proposed transaction, namely the sale and lease back financing of LNG vessels for Awilco which had been brokered by Mr Severinsen of Northcape and Mr Wu of Landmark. It is true that the proposed Awilco transaction failed at about this time, and that ICBCL was extremely disappointed by this. Indeed it was annoyed because it believed (mistakenly, as was subsequently clarified) that Mr Severinsen and Mr Wu had also been acting for Awilco in its dealings with Teekay, the financiers who succeeded in arranging the deal.

However, I do not accept either aspect of CGCF’s case. The email was not intended to be an approach to Golar at all. It was simply an attempt to find out, “from indirect sources” and not by contacting Golar directly, what was the current status of Golar’s financing requirement for its newbuilding programme. It is not surprising in the light of the confusing information emanating from CGCF that ICBCL should have thought it desirable to obtain some independent confirmation of the position. I accept Mr Yang’s evidence that the purpose of this email was not to cut out CGCF but was merely to obtain reliable information. Moreover, although the Awilco transaction also collapsed on 5 August 2013, the sending of this email was unrelated to the Awilco transaction. In fact ICBCL only learned of the collapse of the Awilco transaction after Mr Zhao’s email was sent to Mr Wu. Indeed, because ICBCL was annoyed with Mr Wu when the Awilco transaction collapsed, it would not have enlisted his assistance in this way if it had known that this transaction had failed or was about to do so.

Nevertheless, the Awilco transaction is relevant, and even important, for two reasons. First, having lost the Awilco transaction at a late stage, ICBCL was concerned thenceforth not only that any intermediary with whom it dealt was authorised to do so, but that such authority should be exclusive, in order to ensure that its Awilco experience was not repeated. Second, the loss of the Awilco transaction affected Mr Wu’s response to the email request to obtain information. Having been involved in what had proved to be an abortive transaction, Mr Wu was anxious not to raise ICBCL’s hopes or expectations concerning any future deal. He took the view (mistakenly as it turned out) that it was unrealistic to suppose that ICBCL would be able to finance the Golar vessels and therefore decided to take no action in response to ICBCL’s request. He did not make enquiries in the market and did not even mention the matter to Mr Severinsen. This was the evidence of both Mr Wu and Mr Severinsen and I accept it. Thus, even if Mr Zhao’s email had been an attempt to cut out CGCF, it was not acted upon in any way, either by Mr Wu or by ICBCL, who continued to speak to CGCF. It played no part in what Mr Severinsen did later because he never knew about it.

Moving ahead a little, what Mr Wu in fact did was to report back to Mr Zhao on 16 August 2013. He said that he had spoken with Golar’s CFO (i.e. Mr Tienzo) and that Golar had found all the finance for its newbuildings, so that no finance was needed at the moment. This was not true. Mr Wu had not spoken to Mr Tienzo or to anyone at Golar.

Meanwhile on 7 August 2013 CGCF was reviewing its position with Mr Sawyer and Mr Longhurst. Mr McCullum’s record of this discussion describes CGCF as “essentially working for free as an insurance policy for Golar” and noted Mr Sawyer’s advice that the situation was “tense at best re: our ability to perform” and that in order “to get [Golar] re-interested” CGCF would have to be able to propose terms which were a dramatic improvement on those available from the Korean banks. CGCF recognised, therefore, that as matters stood Golar was not interested in whatever CGCF was doing and that CGCF had no authority of any kind from Golar, albeit that it was hoping to change this situation. Mr McCullum listed the delivery dates of the first eight vessels and added that “we are targeting the October and December 2013 deliveries for our funding with any of our lenders”.

On the same day, 7 August 2013, Mr Yang emailed Mr Hibma referring to “our past experience with other LNG owners”, in fact a reference to the Awilco transaction, and asking “do you think we can have an exclusiveness if Golar is happy with our proposal, which we agree to provide to you”. CGCF’s evidence is that there were also telephone conversations at about this time in which Mr Zhao told CGCF that he was not supposed to be talking to CGCF. In view of Mr Yang’s message this seems unlikely. It may have been another example of miscommunication due to language difficulties even though CGCF was now speaking to Mr Zhao with the assistance of a Mandarin speaker on its staff. In any event, it is apparent that ICBCL was prepared to continue discussing with CGCF although it wanted an assurance of exclusivity.

On 12 August 2013 Mr Hibma responded to Mr Yang, stating that “we will proceed with the following structure and pricing to obtain an updated mandate from the client which will provide for at least 2 vessel fundings for 2013. This will provide an exclusive mandate to CG/ICBC which will allow ICBC to proceed with internal credit approval”. Details of the proposed terms were then set out. The terms proposed were for the same two vessels which CGCF had identified in its discussions with Mr Sawyer and Mr Longhurst on 7 August. They were both due for delivery in 2013 and were, therefore, vessels for which financing had already been obtained from the Korean banks. This message confirmed that CGCF had no existing mandate from Golar, though the prospect of obtaining an exclusive mandate for these two vessels was held out. Mr Zhao responded on behalf of ICBCL, confirming its interest in “at least 2 vessel at beginning” but reiterating its need for exclusivity. Mr Hibma picked up the reference to ICBCL’s interest, asking what would be its maximum number of vessels during the next 12 months, but ignored the request for exclusivity which, of course, was something which CGCF could not provide. He pressed Mr Zhao to provide a term sheet.

It was at this point that ICBCL received Mr Wu’s email reporting that, according to the Golar CFO, Golar had no need for finance. Mr Yang and Mr Zhao discussed this, but decided to continue the discussions with CGCF as they were under the impression that CGCF was in direct contact with Golar and that (as CGCF had indicated) an exclusive mandate could be provided to ICBCL once terms were agreed in principle for at least two ships. Mr Yang’s attitude was that he was prepared to continue to talk to CGCF, but would not have been prepared to issue a comprehensive term sheet without seeing evidence that CGCF had a mandate from Golar.

Accordingly, between 16 and 21 August 2013 Mr Zhao and Ms Zhang (who became involved in the further discussions with CGCF following the collapse of the Awilco transaction on which she had previously been working) began to discuss with CGCF the financing terms which ICBCL would be able to offer. Ms Zhang set out what she described as the “key terms” in an email dated 21 August 2013. These included net funding of US $165 million, being 75% of the vessel cost, by means of a five-year lease with a monthly lease payment of US $1,935,000, a guaranteed buyback after five years at a price of US $92 million and an upfront fee of 1.5% of the vessel cost. Ms Zhang requested a confirmation email from Golar so that ICBCL “can prepare a termsheet with the exclusiveness clause for both parties to sign”. Although it was suggested to Ms Zhang that this email shows that ICBCL had been prepared to negotiate these terms without CGCF having a mandate in place from Golar, let alone an exclusive mandate, the reality is that she was making clear that any further progress was dependent on confirmation from Golar that CGCF did have a mandate and that by the stage of any term sheet this mandate would have to be exclusive.

CGCF did not send these proposed terms to Golar. Mr Sawyer made it clear that it should not do so. He advised on 22 August 2013 that “in Golar’s mind we’ve been written off” and that “we should not remind them after all this time that we’re still unable to give them a term sheet”. Mr Longhurst added on 23 August 2013 that CGCF’s problem was that it had “a credibility issue” with Golar and that “there is nothing to discuss with Golar unless we can give them some terms”, by which he meant a proper term sheet and not merely the summary of “key terms” provided by Ms Zhang. Mr Sawyer and Mr Longhurst did suggest, however, that if CGCF was able to present Golar with a term sheet containing materially better terms than had been offered by the Korean banks, there was still a prospect that it could obtain the vessel due for delivery in December 2013.

Instead on 27 August 2013 Mr Hibma sent Mr Zhao three different proposals of “key terms” which were said to be based on the terms provided by Ms Zhang. His email concluded with the statement that “the client is awaiting this confirmation to allow us to fund the vessel delivering in December 2013”. This was not correct. As Mr Hibma knew, by this stage CGCF had not been in contact with Golar for almost two months. Golar was not waiting for anything from CGCF. However, the statement made clear that what was being discussed with ICBCL was funding for the December vessel. There was no indication that anything else was being proposed.

The terms proposed by Mr Hibma were of no interest to ICBCL, as Ms Zhang’s response, also on 27 August 2013, made clear:

“We have run the figures regard to the below options you raised. Unfortunately, it’s way beyond our internal return requirement. We appreciate the hard work you have done for this project and client and we are looking forward to having deals with you.

Please kindly note that the funding cost for Leasing company like us higher than the banks but we have advantage on the design and leverage ratio. Maybe this is some guidelines for future cooperation.”

This was a polite way of bringing the discussions with CGCF to an end. CGCF recognised this and decided that a better route would be to reactivate its earlier discussions with CIT. However, that attempt proved unsuccessful as CIT explained that it was “nowhere near” being able to deliver the terms which CGCF claimed would be necessary, as it had “made clear from day one”.

For almost two weeks nothing further happened. Then, on 10 September 2013, at a time when ICBCL and CIT had both effectively terminated any negotiations, CGCF put forward to Mr Longhust and Mr Sawyer its own mixture of the terms which ICBCL and CIT had indicated although without identifying them, stating that it required direct contact with Golar and, if the terms were acceptable to Golar, “a formal mandate from the client identifying a specific hull number for a funding during 2013”. Mr Sawyer’s reaction was to become, in his words, “progressively depressed as I read down the terms … and after all this considerable time lag”. He regarded the requirement of a five year time charter included by Mr Hibma as “the killer, which stops it dead in its tracks” and regarded the terms suggested as a waste of time. He did pass Mr Hibma’s email on to Mr Tienzo, but only with the damning comment that “I’ve told Andy [Mr Longhurst] they’d be wasting their time by phoning you. I’m not even sure that it’s underwritten!!” This was the first that Mr Tienzo had heard about CGCF since his email telling it to stop work. He responded that he agreed with Mr Sawyer’s assessment, adding that “I suggest a termsheet indicating parties involved, who will finance/underwrite it, pricing, covenants etc before we have a discussion”. Far from being an encouragement to CGCF to proceed further, this was Mr Tienzo’s minimum requirement before he was even prepared to discuss any proposal.

Nevertheless Mr Hibma felt able to tell Mr Zhao on 10 September 2013 that “we have been in discussions with Golar and they are interested in funding one of their vessels this year with CG and potentially ICBC”. This was not true. There had been no expression of such interest by Golar. However, it is clear that the discussion with ICBCL which Mr Hibma was seeking to resurrect was a discussion limited to the December vessel. He suggested that what was needed was an increase in the amortisation period to 12-15 years and/or a reduced pricing.

On 11 September 2013 Mr Longhurst, following up Mr Sawyer’s doubts, asked Mr Hibma whether the proposal of the previous day was underwritten (of course it was not) and if so by whom.

Meanwhile CGCF was pushing ICBCL to improve on the terms which it had offered in August. In a telephone conversation on 11 September 2013 Ms Zhang obtained the impression from Mr Hibma that CGCF had been discussing the position with Golar and that, although it did not yet have a mandate for a specific funding, the exclusive mandate which ICBCL required in order to produce a term sheet could be obtained. Understanding that to be the position, on 12 and 13 September 2013, ICBCL provided two sets of improved terms to CGCF. Mr Hibma responded with some questions, in response to which Ms Zhang indicated that some of the terms were open to negotiation. In response to a question as to the total number of vessels that ICBCL was interested in funding, she responded that there was “no limitation on high end if we find it’s a worthwhile counterparty”. It was clear, however, that this was for the future and that the terms actively being discussed were for the December 2013 vessel to which Mr Hibma had referred in resurrecting the discussions on 10 September 2013.

Still there was no term sheet and these terms were not put to Golar. So far as ICBCL was concerned, there was no reaction from CGCF.

Although CGCF did not put the latest ICBCL terms to Golar, it did make some further suggestions. These included a term sheet based (somewhat loosely) on the CIT terms which Mr Tienzo rejected on 3 October 2013 as being worse than the terms which Golar had obtained from the Korean banks and also a US $1 billion loan facility. This latter idea appears to have been based on the suggestion that there was no limit to the number of vessels which ICBCL would be interested in funding. If so, that was a misunderstanding. ICBCL was a leasing company and there had been no discussion of it providing a loan facility, which it would not have been prepared to do. In the event this idea was not put to Golar.

On 25 September 2013 Mr Hibma emailed Ms Zhang to say that CGCF was having conversations with Golar that week “to finalize the terms of the deal that they will accept” (this was wishful thinking on CGCF’s part) and asking whether she was available to speak on that Thursday or Friday. Ms Zhang confirmed she was, but no conversation took place. At this stage CGCF was focusing on a modification of the CIT proposal and had nothing to say to ICBCL. Having heard nothing further, on 8 October 2013 Ms Zhang asked whether there were any updates on the Golar project. This was a routine enquiry, unrelated to the approach from Northcape at about the same time. Mr Hibma said that CGCF was planning a call with Golar that week, but that call did not happen and there was no further follow-up. Ms Zhang assumed that neither CGCF nor Golar wished to continue discussions based on the terms which ICBCL had offered and, in the event, ICBCL heard nothing further from CGCF.

Mr Hibma had also emailed Mr Tienzo on 7 October 2013 but Mr Tienzo was adamant that there was no basis for discussion. After Mr Tienzo had ignored at least one attempt by CGCF to speak to him directly, a further and somewhat desperate plea was made to Golar by CGCF on 4 November 2013 for “a few minutes (10) if possible to discuss an updated/more aggressive financing arrangement for one of the LNGs”. Nothing came of this or of some limited further discussions between CGCF and Mr Longhurst in late November 2013, although Mr Tienzo never excluded completely the possibility that he might be prepared to speak to CGCF. However, by this stage, although in reality by long before, CGCF was merely whistling in the dark.

In summary, therefore, from the beginning of August 2013 onwards:

It will be recalled that Mr Severinsen of Northcape was one of the intermediaries who had been acting in the abortive Awilco transaction. He and Mr Wu were keen to restore their relationship with ICBCL (and to earn some fees) by proposing some new transaction. However, it was Mr Severinsen’s idea to contact Ship Finance International, a part of the Fredriksen group, with a view to obtaining an introduction to Golar. This was the result of his own investigation in the market, knowing as he did and as was public knowledge, that Golar had a newbuilding programme of LNG vessels for which it had been seeking finance. In late August 2013 (by which time funding of the first eight vessels had been announced) Mr Valeburg of Ship Finance International (who had given a presentation to Mr Severinsen and Mr Yang back in June) told Mr Severinsen that Golar was still seeking finance for a number of the vessels. This was also publicly reported in Golar’s second-quarter interim results at about this time. Mr Severinsen discussed with Mr Wu the possibility of an approach to Golar with a view to bringing Golar and ICBCL together. Mr Wu was sceptical when they discussed this possibility on 12 September 2013, doubting whether Golar would be interested as ICBCL was not an established funder of LNG vessels and did not have international shipping clients of the calibre of Golar. However, they agreed that there was nothing to be lost by making an approach to Golar and, as a result, Mr Severinsen asked Mr Valeburg to provide an introduction to Mr Tienzo.

I accept the evidence of Mr Severinsen that the genesis of the November transaction was as just set out. It had nothing to do with the email dated 5 August 2013 which Mr Zhao had sent to Mr Wu, and which Mr Wu had never mentioned to Mr Severinsen. The idea of an approach to Golar with a view to arranging a transaction between Golar and ICBCL was Mr Severinsen’s alone. He was not aware, and indeed never became aware until after this dispute arose, that ICBCL had been speaking to CGCF about the possible funding of Golar vessels. Nor did Golar ever know, because CGCF was careful not to tell it, that the “Chinese investor” about which CGCF had spoken was ICBCL. Mr Severinsen’s approach to Golar was therefore entirely separate from the discussions which had taken place involving CGCF. Mr Severinsen would have made exactly the same approach even if the discussions involving CGCF had never occurred.

Mr Severinsen and Mr Tienzo spoke on 18 September 2013. Mr Severinsen asked about Golar’s financing needs for its newbuilding programme. Mr Tienzo told him that five vessels were not yet financed. Mr Severinsen said that he was confident that a Chinese lease provider with which he had worked (a reference to the Awilco transaction) would be interested in providing finance and would be able to do so on competitive terms. Mr Tienzo expressed interest and asked Mr Severinsen to send him a proposal for funding of two or more vessels, for delivery in June and July 2014, as well as a proposal to refinance an existing Golar vessel, the “Golar Maria”. Thus the new buildings to be financed were later vessels in the programme than the 2013 vessels which CGCF was “targeting”. Mr Severinsen reported this conversation to Mr Wu and they agreed to develop a term sheet with which to approach ICBCL or other potential funders.

Mr Severinsen and Mr Wu wasted no time. On 19 September 2013 Mr Severinsen presented a draft term sheet to Mr Tienzo and, after further exchanges, on 27 September 2013 Mr Tienzo set out the terms that he considered should be put by Mr Severinsen to the proposed financiers. An amended set of terms was drawn up on 1 October 2013.

In early October 2013 Mr Wu called Mr Yang to tell him that Golar was looking to finance four LNG carriers being built in Korea with delivery from June 2014 onwards. Mr Yang confirmed ICBCL’s interest and asked Mr Wu to send the term sheet to Ms Zhang, which Mr Wu did on 5 October 2013. There was some discussion of these terms, which Ms Zhang calculated did not provide ICBCL with a sufficient return, but the critical development was a meeting between ICBCL and Golar which took place in Beijing on 17 October 2013. This meeting went well and convinced each party of the other’s seriousness, as well as demonstrating to ICBCL the authority of Mr Severinsen and Mr Wu. The approach of Mr Severinsen and Mr Wu in promoting such a meeting was in marked contrast to that of CGCF, which had been concerned almost to the point of paranoia to keep the two principals apart and even to keep Golar ignorant of the identity of the sources of finance to which CGCF was speaking.

Despite the success of this Beijing meeting, much hard bargaining remained. At one stage it was CGCF’s case that ICBCL had misrepresented the terms on which it was prepared to provide finance, offering much more onerous terms through CGCF than it eventually agreed with Golar. This was described in CGCF’s Defence as “deliberate ‘stalling tactics’ … designed to facilitate its circumvention of” CGCF. However, that allegation was based on a misunderstanding (despite the explanation which ICBCL had provided) of the various proposals. CGCF eventually admitted this. No allegation of deliberate stalling was put to Ms Zhang or indeed any ICBCL witness in cross examination. I am satisfied that there is nothing in it. The terms proposed through CGCF were genuine and sensible terms which, as ICBCL made clear, were subject to negotiation. Equally the terms negotiated with Golar were the result of straightforward commercial bargaining. That being so, it is unnecessary to trace the detail of those negotiations. It is sufficient to record that the parties were able to reach agreement on terms of the financing of four vessels due for delivery between July and November 2014. Credit approval for the transaction was given in late November 2013 and a term sheet was signed on 9 December 2013. It provided for a loan advance of about 90% of the vessels’ values, a 10 year lease term, daily bareboat charter hire of US $46,850 per day, and a buyback obligation at the end of the term of US $116,669,000.

On occasion during the negotiation of the November transaction Northcape or Landmark would impress upon ICBCL that it faced “strong competition for this transaction”. It was suggested to ICBCL witnesses in cross examination that this was a reference to competition from CGCF, but that was not the case. Nor was it how ICBCL understood the matter. By this stage (October and November 2013) there was no competition from CGCF at all. So far as ICBCL was concerned, CGCF had been interested in arranging finance for different vessels (to be delivered in 2013) but that interest had by now fallen away. The reference to competition was in reality nothing more than a recognition of the fact that Golar had other options for raising finance, either the Korean export credit banks or a possible bond issue. It was, as Ms Zhang pointed out, the kind of thing which brokers say.

As already indicated CGCF’s principal claim is that by entering into the November transaction ICBCL “circumvented” it with respect to a “Financing” in breach of clause A3(iv) of the Confidentiality Letter. Its case is encapsulated in three propositions, namely:

This gives rise to six issues:

As already set out above, clause A3 contains four obligations:

“ICBCL and its Representatives all agree (i) to hold Confidential Information of the Company and/or Customer in confidence, (ii) not to disclose Confidential Information to any third party, except as specifically authorized herein or as specifically authorized by the Company in writing, (iii) not to use any Confidential Information for any purpose other than in connection with participating with the Company in the Finance, and (iv) not to circumvent the Company with respect to the Financing.”

ICBCL contends that on a fair reading of the agreement as a whole, the obligation in clause A(3)(iv) was not to circumvent CGCF by misusing Confidential Information. Thus circumvention is permitted, or at any rate is not prohibited by clause A3(iv), provided that it does not use Confidential Information provided by CGCF. CGCF disputes this. It says that there is nothing in clause A3(iv) which restricts the meaning of “not to circumvent” to circumvention by the use of Confidential Information; that the contrast with the first three obligations in the clause, each of which refers expressly to use or disclosure of Confidential Information, is striking and deliberate; and that to construe the clause as permitting circumvention so long as this can be done without using Confidential Information would be uncommercial, particularly in view of the vulnerability of CGCF as an intermediary to being cut out of a deal which its efforts have brought about.

The proper approach to questions of construction is not in dispute. It was conveniently summarised by the Supreme Court in Arnold v Britton [2015] UKSC 36, [2015] AC 1619 at [15]:

“When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to ‘what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean’, to quote Lord Hoffmann in Chartbrook Ltd v Persimmon Homes [2009] AC 1101, para 14. And it does so by focussing on the meaning of the relevant words … in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the [contract], (iii) the overall purpose of the clause and the [contract], (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party’s intentions”.

Other cases have emphasised the importance of reading a contract as a whole, for example In re Sigma Finance Corp [2009] UKSC 2, [2010] 1 All ER 571 at [10] and [12].

I accept that clause A3(iv), taken on its own, contains no reference to Confidential Information, in contrast with the obligations in paragraphs (i) to (iii) of the clause. However, the obligation not to circumvent CGCF in paragraph (iv) must be seen in its context. That context consists, not only of the remainder of clause A3, but of the Confidentiality Letter as a whole, including what it says about its overall purpose.

The agreement is headed “Confidentiality Letter” and begins with a preamble which explains its subject matter and purpose:

“In connection with discussions between ICBCL Financial Leasing Co Ltd (for itself and its subsidiaries and affiliates) (collectively ‘ICBCL’) and Consultants Group Commercial Funding Corporation, a California corporation dba CG Commercial Finance and its affiliates (the ‘Company’) concerning one or more possible loan or lease financings (each of which will be referred to hereinafter separately as the ‘Financing’) for Company’s customers and subsidiaries and affiliates (each of which will be referred to hereinafter separately as the ‘Customer’), the Company proposes to make certain non-public disclosures to ICBCL regarding the Company and/or Customer. In order for ICBCL and the Company to have free, open and candid discussions and for ICBCL to make an unimpeded evaluation of this opportunity, it is necessary to reach an understanding now as to how any ‘Confidential Information’ (as defined below) shall be treated. ICBCL and the Company each acknowledge that the discussions between ICBCL and the Company would not occur without the execution of this agreement (the ‘Agreement’) to prohibit disclosure and to ensure proper use of confidential and proprietary information.”

Six points may be noted:

Section A of the letter, comprising nine paragraphs, is headed “Non-Disclosure”. Clauses 1 and 2 contain a wide definition of “Confidential Information”, but they make clear that the definition does not extend to information which “at the time of disclosure or thereafter is in the public domain or generally known by the public (other than as a result of its disclosure by ICBCL … in violation of this Agreement)” or which is already known to ICBCL prior to disclosure by CGCF. The definition is therefore in accordance with the ordinary law of confidence pursuant to which information is regarded as being in the public domain if it is so generally accessible that in all the circumstances it cannot be regarded as confidential (see Attorney General v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109 at 282).

Clause A3 has already been set out. The remaining clauses of Section A are all concerned with different aspects of the obligation of confidence undertaken by ICBCL, including such matters as the standard of care to be used in safeguarding the information, disclosure pursuant to compulsory powers and delivery of the information back to CGCF or its destruction at CGCF’s request. Thus, if CGCF’s construction is correct, the only part of Section A which is not concerned with confidentiality is the non-circumvention provision in clause A3(iv).

Clause A8 provides:

“ICBCL agrees that it will not use the Confidential Information submitted by the Company in order to solicit a finance transaction in any amount and structure with Customer on a direct basis, for a period of two years measured from the date of submission, including, but not limited to, the Financing or any other subsequent financing transactions in any amount. This Agreement disallows ICBCL or its Representatives to directly contact clients, vendors, funding sources, or customers disclosed by the Company unless either (a) the Company has granted permission, and only in the case that the contact is mutually beneficial to both the Company and ICBCL or (b) the Customer and other disclosed parties already have an existing business relationship with ICBCL in which case such contact shall exclude any communication regarding the Financing and Confidential Information.”

Section B of the letter is headed “Miscellaneous”. It contains paragraphs dealing with a variety of topics, including some further provisions relating to confidentiality. One of these is clause B4 which begins:

“Except for confidentiality on the above terms, the commencement of discussions shall not create any other obligation either (i) to or of the Company of any kind, or (ii) to or of ICBCL or its Representatives of any kind, and ICBCL and the Company agree that no such obligation can be created except by a duly authorized, executed and delivered written agreement signed by each of the parties affected. …”

This reiterates that the obligations concerned in Section A of the letter are concerned with confidentiality. The creation of any other kind of obligation is expressly excluded.

The background to the letter is also relevant. It included the following features:

In my judgment a fair reading of the agreement as a whole which takes account of the matters set out above leads to the conclusion that the obligation in clause A3(iv) is not to circumvent CGCF by misusing Confidential Information. The obligation is not a stand-alone obligation not to circumvent CGCF regardless of such misuse.

That is not an uncommercial construction. I accept that CGCF had a legitimate interest in protecting its business connections and ensuring that it was not cut out of any deal. But that interest should not be taken too far. If the identity of the Customer or the fact that it is looking for finance is not generally known and only comes to ICBCL’s attention as a result of disclosure by CGCF, a direct approach by ICBCL to the Customer cutting out CGCF will involve a misuse of Confidential Information and will fall foul of the clause. But if the fact that a shipowner is looking for finance is widely known in the market and there is nothing special or distinctive about its requirements, there is no necessary commercial reason why ICBCL should not deal with that shipowner without CGCF, at any rate if (as in the present case) it is the recipient of an entirely separate approach authorised by the Customer through another intermediary. There is no valid reason to approach the construction of the Confidentiality Letter with a predisposition to find that it prevents ICBCL from doing so in such circumstances.

Put another way, if CGCF brings nothing to the table over and above what everybody already knows, it will have failed to do what it claimed that it would (i.e. “to make certain non-public disclosures” which will provide ICBCL with an “opportunity”) and it has no legitimate interest to prevent ICBCL from doing what it would always have been free to do. CGCF is sufficiently protected by having had the opportunity to negotiate exclusivity with its Customer or by a right to be paid a commission by its Customer if it can fairly be regarded as the effective cause of whatever financing transaction is concluded.

Nor does this construction do violence to the language of clause A3(iv). CGCF cites Dorchester Project Management Ltd v BNP Paribas Real Estate Advisory & Property Management UK Ltd [2013] EWCA Civ 176 where Arden LJ said at [30] that there was no requirement in the non-circumvention clause in that case for the name of the seller to be confidential information. However, the clause in that case as well as the contract in which it was contained was very different from the contractual provisions in this case. While “circumvention” considered in the abstract does not necessarily involve use of confidential information, in an appropriate context it may do so.

CGCF contends that the negotiation and conclusion of the November transaction involved a misuse of Confidential Information disclosed to ICBCL pursuant to the Confidentiality Letter. It relies on six items of allegedly Confidential Information, although in the course of oral submissions these were condensed into two broad categories, namely (1) “opportunity information”, that is to say the identity of a Customer who was seeking new sources of finance for a number of vessels and (2) “technical information” as to the terms which Golar was seeking. I deal in turn with the six items identified in CGCF’s written submissions.

The first is the fact that Golar was in the marketplace and was the potential borrower (or lessee). However, the fact that Golar was seeking finance for its new building programme was widely known in the market. It was “in the public domain or generally known by the public” (which must mean, the relevant public). It was also known by ICBCL. It was therefore excluded from being “Confidential Information” by clause A2 of the Confidentiality Letter.

The second is the fact that Golar had a preference for funding without a long-term time charter being in place from the outset, and that, once such a time charter was concluded, the guarantor of the bareboat charter hire would be replaced by an entity called Golar LNG Partners LP. However, the funding terms of the November transaction were the result of negotiation with Golar through Mr Severinsen and Mr Wu. It was Northcape who included in its initial draft term sheet a provision allowing a change of guarantor to Golar LNG Partners LP once a long-term charter was concluded. That concept had previously been discussed between ICBCL and CGCF. However, even assuming it to be confidential, ICBCL made no use of anything which CGCF had told it about this in negotiating the November transaction.

The third is the cashflow spreadsheet of the company which was to own Hull 2021. However, this was never provided to ICBCL. It was not suggested to any ICBCL witness that it had been.

The fourth is the technical specification of the newbuild vessels. However, these were standard vessels and there was nothing unusual about the specification provided. CGCF has not explained how ICBCL is supposed to have made use of this information in negotiating the November transaction.

The fifth is Golar’s view of the anticipated daily hire rate which the vessels could command in the spot and long-term charter markets. However, what was actually provided was not any special insight from Golar but merely a statement about “the market consensus” as to the premium which new vessels could command and the current market indications as to spot or long-term time charter rates. Such market information was widely reported and was not confidential. In any event it was not suggested to any witness that this information was used by ICBCL and it is doubtful anyway whether a market consensus as to the position at the end of May 2013 would have been much use in October or November.

Finally, CGCF relies on what is said to be information about Golar’s preferences for the funding structure, including the terms which would be acceptable to it. This appears to be a reference to Golar’s preference for as long an amortisation period as possible, the effect of which would be to reduce the hire payments during the term of the bareboat charter and to increase correspondingly the repayment at the end of the term, thus assisting Golar’s cashflow. It is hard to see anything confidential about that. As Ms Zhang observed, “those are the requests every client wanted”. In any event the request for a long amortisation period came from Northcape because it knew that this would be attractive to Golar. It had nothing to do with anything which CGCF had disclosed. Golar was well able to and did make clear its preferences for the funding structure during the negotiations which led to the November transaction.

I conclude that there was no misuse by ICBCL of Confidential Information and that the claim for breach of clause A3(iv) therefore fails. However, in case I am wrong in my conclusion that the obligation in clause A3(iv) is not to circumvent CGCF by misusing Confidential Information, I go on to deal with the other issues arising under this clause. For the purpose of these issues, I assume that clause A3(iv) imposes an obligation not to circumvent CGCF which does not require such misuse.

The question whether Golar was a “Customer” of CGCF at the material time is closely related to the further questions, whether the “Financing” which the parties discussed extended to the Golar newbuilding programme as a whole and whether what ICBCL did in concluding the November transaction amounted to “circumventing” CGCF. That is because the obligation “not to circumvent” CGCF does not apply without limitation, but only “with respect to the Financing”, while a “Financing” is something that is undertaken for a “Customer”. What matters is not merely whether an entity is a “Customer” but whether CGCF has a “Customer” for a particular “Financing”. If it does not, it is hard to see how it could be “circumvented” with respect to that Financing.

Although “Customer” is capitalised in the preamble to the Confidentiality Letter and purports to be a defined term, in fact the definition does no more than clarify that the term extends to subsidiaries and affiliates of CGCF’s customers. The letter does not explain the nature of the relationship which must exist between CGCF and the entity for which it is seeking to arrange finance in order for that entity to qualify as a “Customer”, although it is common ground that in order for an entity to be a “Customer” of CGCF there must be some such relationship. Thus if CGCF were to act on its own initiative in arranging a speculative financing proposal which it could then put forward to a shipowner without ever having been requested to do so, that shipowner could not be regarded as a “Customer” of CGCF.

The focus here is on the relationship which must exist between the Customer and CGCF. In my judgment it is not necessary for CGCF to have a written mandate or (perhaps) even a legally binding contract with the Customer, but there must at least be a request by the Customer that CGCF should seek to arrange to finance a transaction for the Customer so that, in that sense, CGCF is acting with the Customer’s authority. This much is common ground. That being so, it is unnecessary to explore further the precise nature of the relationship which must exist, including whether anything more is required, because in this case, on the detailed findings of fact set out above, four points are clear. These are that (a) CGCF had a written mandate from Golar, namely the April Terms, (b) that mandate applied only to the first vessel in the Golar programme, (c) it had expired by 1 July 2013 when CGCF was told to stop work, and (d) there was thereafter never any relationship at all between CGCF and Golar and certainly no request by Golar for CGCF to do anything, but only a hope on the part of CGCF that the relationship could be reinstated which, as time went by, became increasingly forlorn.

In these circumstances it is clear that Golar was a Customer of CGCF when CGCF first made contact with ICBCL and remained a Customer at the date of the Confidentiality Letter and for some time thereafter, but that it had ceased to be a Customer after 1 July 2013. It was, moreover, only ever a Customer for the financing of the first vessel, due for delivery in September 2013.

The non-circumvention obligation in clause A3(iv) does not apply in the abstract but only “with respect to the Financing”. It is therefore necessary to identify the “Financing” in question. Like “Customer”, the term “Financing” is capitalised and purports to be defined, but the definition does no more than make clear that each possible loan or lease financing discussed is referred to separately as the “Financing”.

Nevertheless it is apparent from the preamble as a whole that a Financing has three elements: (a) it is a possible loan or lease financing, (b) for a Customer of CGCF, (c) for which there have been or are to be discussions between the parties. Moreover the proposed transaction must be sufficiently defined that it can properly be regarded as an identified opportunity. Hence the reference to “an unimpeded evaluation of this opportunity”. Something which is too vague to be regarded as an opportunity capable of being evaluated cannot be a “Financing”. Equally, the phrase “one or more possible loan or lease financings” must refer to financings which represent a real possibility as distinct from something which is merely speculative on CGCF’s part. The parties cannot sensibly be taken to have intended that ICBCL should incur obligations preventing it from competing for future business otherwise than through CGCF merely because CGCF had canvassed ICBCL’s interest in theoretical transactions which it had no authority to offer.

ICBCL says that the “opportunity”, and hence the “Financing”, must be identified from discussions which have already occurred prior to the conclusion of the agreement. It says that this is fair because it enables ICBCL to know what obligation it is undertaking and that an open ended commitment would not make commercial sense. In the present case the only relevant potential transaction which had been identified by the execution of the Confidentiality Letter was the financing of a 160,000 dwt new build LNG tanker for which funding of US $160 million was required for an as yet unidentified Customer. There had been no discussion with ICBCL of financing the newbuilding programme as a whole. This had not been mentioned. If ICBCL’s submission that the “Financing” must be identified only by reference to discussions which have already occurred is correct, it must follow that the only “Financing” discussed in the present case was for the first vessel.

In principle, however, I consider that identification of the “Financing” may be affected by discussions which take place after the date of the agreement. The Confidentiality Letter is clearly a standard CGCF document intended to apply in a range of circumstances. It is possible to envisage a situation in which what is said before the agreement is executed is too general to enable any opportunity to be identified, but in which the parties go on to discuss a prospective transaction which is identified after execution. There is no difficulty in regarding that transaction as the “Financing” referred to in the agreement. The “discussions” referred to in the second and third sentences of the preamble (“In order … to have free, open and candid discussions …”; “the discussions … would not occur without the execution of this agreement …”) can only be discussions which are to take place in the future. The discussions referred to in the first sentence (“In connection with discussions … concerning one or more possible loan or lease financings …”) are equally capable of referring to future as well as past discussions. If the parties choose to have discussions about a wider range of transactions than had originally been contemplated, I do not see why the obligations in the Confidentiality Letter should not apply to those discussions.

ICBCL protests that this would expose it to a risk that CGCF may send it a plethora of speculative financings based on publicly available information, which will then disable it from competing for such business otherwise than through CGCF. In my view that risk is overstated. ICBCL is protected by three considerations. The first is that it can always decline to enter into discussions going beyond whatever transaction was originally contemplated if it does not wish to undertake more extensive obligations. The second is that the discussions must concern loan or lease financings which are a real possibility. The third is that ICBCL will not incur obligations unless CGCF has the Customer’s authority to arrange finance for the wider transactions now being discussed. If it does not, the discussions will not concern a “Financing” for a “Customer”.

ICBCL says that even after the agreement was concluded, the only “Financing” discussed between the parties, and thus the only non-circumvention obligation undertaken by it, was with respect to the financing of the first Golar vessel due for delivery in August or September 2013, while CGCF says that the relevant “Financing” extended to the whole Golar newbuilding programme. In my view, as indicated in the narrative above, several stages of the parties’ discussions can be identified:

Thus, although there were at times very general enquiries about the number of vessels which ICBCL was interested in financing, there was never anything close to the presentation by CGCF of an “opportunity” for ICBCL to finance the newbuilding programme as a whole or, specifically, any of the four 2014 vessels which became the subject of the November transaction. CGCF never had any authority from Golar to offer such an opportunity. It was never a real possibility. It was merely speculation and wishful thinking on CGCF’s part.

In these circumstances it is clear that the “Financing” which the parties discussed did not extend to the financing either of the Golar newbuilding programme as a whole or of any of the four 2014 vessels which became the subject of the November transaction. To the limited extent that the financing of vessels other than the first vessel was canvassed at all, Golar was never a Customer of CGCF so far as those vessels were concerned. Such exchanges as took place cannot be regarded as amounting to discussion of a real possibility of financing those vessels.

Various questions as to the meaning of circumvention were touched on in argument. For example, it is ICBCL’s case that there can be no circumvention unless (a) there is an intention to circumvent and (b) the approach to CGCF’s Customer is instigated by ICBCL. Reference was made to various dictionary definitions, some but not all of which include an element of trickery or sharp practice.

However, it is unnecessary to lengthen this judgment further by considering these questions. The core concept of circumvention, common to all the definitions and in accordance with the natural meaning of the term, is that it involves an element of going around or avoiding an obstacle of some sort. If there is no obstacle to be avoided, it is hard to see that any question of circumvention could arise. That is the straightforward position which applied here. The November transaction was entirely independent of any discussions which had taken place with CGCF. When it was first proposed to ICBCL by Mr Severinsen and Mr Wu in early October 2013, there had for several weeks been no response by CGCF to the terms proposed by ICBCL in mid September for the December 2013 vessel. That period of silence contrasted markedly with CGCF’s pressure for ICBCL to provide a term sheet at an earlier stage. It was reasonable to infer that CGCF was not interested. In any event, Mr Severinsen and Mr Wu were proposing a different transaction, the financing of four vessels for delivery from June 2014 onwards. CGCF did not in fact have any mandate from Golar to arrange the financing of those vessels, had never had such a mandate, and had never engaged in any discussion about financing those vessels with ICBCL going beyond the most general enquiries about the number of vessels in which ICBCL was interested. Moreover, it had made clear to ICBCL that the only mandate it had ever had, the April Terms, was for the first vessel which by now had been delivered, and that if it was to arrange financing for later vessels a new mandate would need to be obtained.

In these circumstances no question arose of circumventing CGCF. So far as these four vessels were concerned, it was not there to be circumvented and never had been.

Accordingly CGCF’s principal claim, that by entering into the November transaction ICBCL was in breach of clause A3(iv), must fail. ICBCL’s conduct involved no use of Confidential Information disclosed by CGCF. Golar was not and never had been a Customer of CGCF for the vessels concerned. The financing of those vessels was not a “Financing” within the meaning of the Confidentiality Letter. ICBCL did not in any meaningful sense circumvent CGCF.

In the light of my conclusions so far, the issue whether clause A3(iv) is void as being in restraint of trade does not arise. That issue can arise only if I am mistaken as to the construction of the clause. I will therefore deal with it only briefly. The issue in summary is whether the clause is reasonable by reference to the interests of the parties and of the public, which will depend on whether the clause is no more than is reasonably required by CGCF to protect its legitimate interests: Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269 at 301.

I would accept that, as CGCF submits, (a) the parties are in general the best judges of their own interests, (b) the court should be slow to conclude that a term which is freely agreed between substantial commercial entities with equal bargaining power is not in their interests and (c) an intermediary such as CGCF has a legitimate interest in protecting its business connections in order to ensure that it is not cut out of deals which it is arranging for clients. Nevertheless if the effect of the clause is to prevent ICBCL from providing finance to Golar otherwise than through CGCF in circumstances where (a) the fact that Golar was seeking finance was not only in the public domain but was known to ICBCL, (b) ICBCL did not use any Confidential Information provided by CGCF, (c) the transaction which ICBCL concluded was not one which CGCF had ever been asked by Golar to arrange or which ICBCL had ever discussed with CGCF and (d) the transaction which ICBCL concluded was brought to it by another intermediary independently of anything do with CGCF, that would go considerably beyond anything reasonably required to protect CGCF’s legitimate interests. It is one thing for a clause to prevent an intermediary from being cut out of a deal which it is arranging pursuant to a request from its customer, thereby depriving it of its opportunity to earn commission. It is something else again for a clause in effect to give CGCF an exclusive status in a transaction for which it does not even have a mandate.

If necessary, therefore, if I had concluded that clause A3(iv) is to be construed as contended by CGCF, I would have held it to be void as being in restraint of trade. I would add that this view provides some support for the construction which I have held to be correct, in view of the principles stated in cases concerned with the construction of clauses which are prima facie in restraint of trade. For example, in Haynes v Doman [1899] 2 Ch 13 Lindley MR said at 25:

“Agreements in restraint of trade, like other agreements must be construed with reference to the object sought to be attained by them. In cases such as the one before us, the object is the protection of one of the parties against rivalry in trade. Such agreements cannot be properly held to apply to cases which, although covered by the words of the agreement, cannot be reasonably supposed ever to have been contemplated by the parties, and which on a rational view of the agreement are excluded from its operation by falling, in truth, outside, and not within, its real scope.”

A similar approach has been adopted in more recent cases: see for example Turner v Commonwealth & British Minerals Ltd [2000] IRLR 114 [14] per Waller LJ; TFS Derivatives Ltd v Morgan [2004] EWHC 3181 (QB) at [41] to [43] per Cox J; and Beckett v Hall [2007] EWCA Civ 613, [2007] ICR 1539 at [16] per Maurice Kay LJ.

The real scope of the Confidentiality Letter is the protection of Confidential Information. If the scope of clause A3(iv) extends at all beyond the protection of confidentiality, it is limited to protecting CGCF against being cut out of deals which it is arranging for clients. The clause should if possible (and I consider that it is possible) be construed accordingly.

CGCF’s next claim is that the November transaction was the result of ICBCL contacting its client or customer directly, in breach of the second sentence of clause A8. Clause A8 provides (with the relevant words emphasised):

“ICBCL agrees that it will not use the Confidential Information submitted by the Company in order to solicit a finance transaction in any amount and structure with Customer on a direct basis, for a period of two years measured from the date of submission, including but not limited to, the Financing or any other subsequent financing transactions in any amount. This Agreement disallows ICBCL or its Representatives to directly contact clients, vendors, funding sources, or customers disclosed by the Company unless either (a) the Company has granted permission, and only in the case that the contact is mutually beneficial to both the Company and ICBCL or (b) the Customer and other disclosed parties already have an existing business relationship with ICBCL in which case such contact shall exclude any communication regarding the Financing and Confidential Information.”

It is not suggested that either of the exceptions in (a) or (b) applies.

Undoubtedly ICBCL had direct contact with Golar. The meeting in Beijing on 17 October 2013 played a material part in the negotiations which resulted in the November transaction. However, even if those negotiations had taken place entirely through Mr Severinsen and Mr Wu, they may well have constituted direct contact for the purpose of the clause which is really concerned that CGCF should not be excluded from such contact.

Four issues arise, some of which overlap with issues already considered under clause A3(iv):

Whether the clause is limited to the misuse of Confidential Information raises similar issues to those already considered above in relation to clause A3(iv). Here too the clause must be construed as a whole and in the context of the agreement as a whole. I will not repeat the matters considered above. So far as this clause is concerned, the first sentence is expressly limited to the use of Confidential Information in order to solicit a finance transaction directly with the Customer. It would be surprising if the second sentence imposed a separate and much wider obligation, not to contact the Customer directly at all. Indeed if the second sentence is to be read independently of the first sentence, it prohibits any contact and is not even limited to contact for the purpose of soliciting a finance transaction. However, if the two sentences are read together to make a coherent whole, it is apparent that the purpose of the second sentence is to clarify the effect of the first. In other words, it spells out that the effect of the prohibition on soliciting a finance transaction in the first sentence is that ICBCL must not make direct contact with clients and others identified in the second sentence unless one or other of the exceptions in (a) or (b) applies. However, it remains the case that there is no breach of clause A8 unless the contact in question involves a use of confidential information. In my judgment this is the natural meaning of the second sentence. It is written in explanatory terms (“This Agreement disallows …”) rather than in terms which impose a new and separate obligation.

In view of my conclusion above that ICBCL made no use of Confidential Information in the negotiation of the November transaction, the claim for breach of the second sentence of clause A8 must fail.

It is therefore unnecessary to consider in any detail the remaining issues arising under this clause. If the second sentence is considered in isolation, to construe the words “disallows … to directly contact … clients” as limited to a prohibition on contact initiated by ICBCL might seem unduly formalistic. However, the phrase must be read in the context of the first sentence which prohibits solicitation of a finance transaction by ICBCL. As Dillon LJ explained in Hanover Insurance Brokers Ltd v Schapiro [1993] EWCA Civ 2, [1994] IRLR 82, a prohibition on canvassing or soliciting does not apply if the prohibited party or its agents do not make the approach in question. Thus the first sentence is concerned to prohibit a transaction which is the result of at least some element of initiative on the part of ICBCL. That being so, it is natural to read the second sentence also as a prohibition on ICBCL making contact with CGCF’s customers as distinct from responding favourably to approaches made by them. The position would be different if such approaches were encouraged by ICBCL in some way, but on my findings that is not the position here. For this reason also the claim under the second sentence of clause A8 must fail.

It follows from my conclusion above that ICBCL made no use of Confidential Information in the negotiation of the November transaction that CGCF’s claims for breach of clause A3(iii) and of the first sentence of clause A8 must fail.

If I had found that ICBCL was in breach of the Confidentiality Letter in any of the respects alleged, the question would have arisen whether that breach caused CGCF to suffer any loss. CGCF claims damages on three bases, the first two of which are alternative to each other:

Developing these submissions, CGCF identified five questions, some of which it submits fall to be answered on the balance of probabilities, while others require the application of “loss of a chance” principles in accordance with cases such as Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602. These questions, which have to be considered on the hypothetical basis that ICBCL had declined to negotiate the November transaction with Golar, were as follows:

The damages claimed are then the likely amount of the fee multiplied by the overall chance of success.

This issue can be dealt with shortly. While I have sought to deal fully above with the arguments on liability which took up most of the trial, it is a complete answer to CGCF’s damages claim in this case that, as I find, even if the negotiations which led to the November transaction had never taken place, there was never any significant or substantial prospect that CGCF would have arranged successful financing of any of the remaining vessels in the Golar programme. Addressing the first four of the questions identified by CGCF, the position is as follows:

It follows that each of the first two alternative ways on which CGCF puts its claim for damages must fail. In those circumstances the third basis of claim (i.e. the prospect of repeat business in future) does not arise. There was in any event no evidence to support it. It piles one speculation upon another.

The likely amount of the fee that CGCF would have received from Golar if it had succeeded in arranging a financing was the subject of expert evidence. The experts agreed that there is no standard or fixed rate scale of commission payable to intermediaries in circumstances such as the present case, but that the fee or commission is negotiated in each case between the intermediary and the party for whom finance is sought. They agreed also that the fee is generally agreed towards the end of any negotiations, once the structure and terms of the deal have become clear and the intermediary’s contribution to the negotiations can be assessed. Mr Tienzo gave evidence to the same effect.

CGCF’s expert, Mr George Tonks, gave evidence that the likely level of fee to be agreed for CGCF would have been between 0.8% and 1% of the total facility amount. ICBCL’s expert, Mr Edvard Aaby, drew a distinction between an “arranger” and a “broker”, saying that an arranger could expect a fee between 0.5% and 2%, depending on the total value of the transaction, while a broker would be paid no more than 0.5% for a single vessel deal and 0.25% for a four vessel deal. With due respect to the experts, I did not find their evidence particularly helpful. Mr Tonks’ experience of ship finance was somewhat out of date, while Mr Aaby struggled in his oral evidence to explain the distinction between an arranger and a broker on which he relied. Some parts of his evidence suggested that in order to be an arranger it was necessary to contribute funds to the transaction as a lender, while at other times he accepted that this was not necessary.

Once it is accepted that there is no standard fee and that the fee payable will depend upon an ad hoc negotiation in every case, the likely fee if (contrary to my findings) CGCF had succeeded in arranging a deal equivalent to the November transaction is a matter of fact rather than expertise. CGCF would clearly have been pushing for as high a fee as possible and would have been able to point to the 1% figure agreed in the April Terms. For his part Mr Tienzo had agreed that figure in principle back in April. He was not committed to it and would in all probability have sought to reduce it in any final deal, but it would nevertheless have been the starting point for negotiation. Mr Tienzo’s evidence was that a multi vessel deal would not necessarily command a lower percentage rate than a single vessel deal. It might be the case that a multi vessel deal was more complex to put together, so that a higher rate could be justified. While there is no reason to think that this would have been the case here, that does at least confirm that the April Terms figure would have represented a realistic starting point. Taking account of all the evidence in the case, I find that there would have been some scope in any negotiation for a reduction in the percentage payable to CGCF, and that the likely fee payable would have been 0.8% of the value of the transaction.

It remains to deal with ICBCL’s claim for a declaration that the law and jurisdiction clause in the Confidentiality Letter provides for the exclusive jurisdiction of the English court. Clause B8 provides as follows:

“This Agreement shall remain effective for a minimum term of twelve (12) months from the date hereof and thereafter remain in effect until either party provides thirty (30) days written notice (by certified mail or overnight mail by a major US overnight mail service) of termination to the receiving party. All matters of construction, validity and performance of this Agreement shall be governed by, and construed and enforced in accordance with English law and is subject to the jurisdiction of the London Courts. The parties hereby waive the right to a jury trial in any dispute regarding this agreement. This Agreement may only be modified or waived by a writing signed by the parties. ICBCL agrees that each of the provisions herein shall survive the termination of this Agreement.”

ICBCL contends that the clause provides for exclusive jurisdiction, relying on the word “shall”. It says that just as the choice of English law is clearly mandatory, so too is the subjection of the agreement to the jurisdiction of the English court which is contained in the same sentence. It cites the decision of the Court of Appeal in Compania Sud Americana de Vapores SA v Hin-Pro International Logistics Ltd [2015] EWCA Civ 401, [2015] 2 Lloyd’s Rep 1 in support of this construction. CGCF contends that the clause provides for non-exclusive jurisdiction. It relies on the waiver of a right to jury trial which, it says, makes little sense if disputes were intended to be exclusively subject to English jurisdiction and on the decision of Hobhouse J in S&W Berisford Plc v New Hampshire Insurance Co [1990] 2 QB 631 at 637 that a clause “This insurance is subject to English jurisdiction” was not apt to create any obligation and did no more than tell the assured that its rights were capable of enforcement in the English courts.

In my judgment clause B8 provides for the exclusive jurisdiction of the English court. It provides that the agreement (strictly, “all matters of construction, validity and performance” rather than the agreement itself, but that makes no difference to the present issue) “is subject to” the jurisdiction of this court rather than that it “shall be”, but in my view, in the context of this clause, that is not a material distinction. If proceedings are commenced and pursued in California, the effect is that the agreement is not subject to the jurisdiction of this court, but rather to the jurisdiction of the Californian court. That is not what the parties have agreed. In my judgment this reading of the clause is in accordance with the approach adopted in the CSAV case at [60] to [67] and [77] to [78], albeit that the clauses are not identical and that some aspects of the reasoning of the Court of Appeal are not applicable here. As is apparent from CSAV, a clause providing that an agreement is subject to English jurisdiction is at least capable of being read as providing for exclusive jurisdiction and there will often be powerful commercial arguments for concluding that it should be. It is also in accordance with the approach suggested in BNP Paribas SA v Anchorage Capital Europe LLP [2013] EWHC 3073 (Comm) at [88], which is that the relevant question to ask is whether the commencement and pursuit of the foreign proceedings in question are things which a party has promised not to do.

The factors emphasised by CGCF do not detract from this conclusion.

I accept that a waiver of the right to jury trial suggests at first sight that the parties had United States proceedings in mind. However, the Confidentiality Letter is clearly a standard form agreement produced by a US company, which might be expected in its usual form to provide for US law and jurisdiction. It would not be surprising to find that if the parties choose to amend the standard form to provide for English law and jurisdiction, a waiver of the right to jury trial which is no longer necessary but can do no harm is left untouched. That should not affect the meaning of the operative part of the clause, to the effect that the agreement is subject to English jurisdiction.

The decision of Hobhouse J in the S&W Berisford case does not stand in the way of the conclusion which I have reached. His decision was considered in CSAV and, as pointed out by Christopher Clarke LJ at [56], was dependent on the nature of the contract in question, an insurance contract, and on what was in practice the limited mutuality of the clause in that case.

I conclude, therefore, that the Confidentiality Letter provides for the exclusive jurisdiction of the English court and that the commencement by CGCF of the Californian proceedings was a breach of clause B8. It follows that CGCF’s claim to recover costs incurred in those proceedings must fail.

I note that the present proceedings were commenced in September 2014, before the coming into effect of EU Council Regulation 1215/2012 which applies to legal proceedings instituted on or after 10 January 2015. If the Regulation had applied, the effect of Article 25 would have been to provide expressly that the jurisdiction provided for in clause B8 is exclusive unless the parties agree otherwise, notwithstanding the absence of any EU element in this case where the parties are domiciled in China and the United States respectively. As it is, however, Article 25 does not apply.

If I had reached a different conclusion as to the construction of clause B8, I would not have permitted ICBCL to advance a claim for rectification. Although there was some evidence to suggest grounds for such a claim, in the event a claim for rectification was foreshadowed but was never pleaded.

For the reasons set out above: