Case of dispute over marine container lease agreement filed by Textainer Equipment Management Limited against Shenzhen Lianfu Transportation Industrial Co. Ltd. and Shenzhen Agricultural Products Transportation Co., Ltd. and the case of counterclaim over

Updated：2014-10-22 Views：2818 
Guangzhou Maritime Court of People??s Republic of China



Civil Judgment 

(2006)GHFCZ No.422

 (2007)GHFCZ No.269

Plaintiff (Defendant in the counterclaim)??Textainer Equipment Management Limited

Address??Century House, 16 Par-La-Ville Road Hmilton HM, Bermuda

Legal Representative??Dudley R. Cottingham, Chairman of Board

Agent ad litem??ZHAO Shuzhou, attorney from Wang Jing & Co.,

Agent ad litem??HAN Yongdong, attorney from Wang Jing & Co.,



Defendant??Shenzhen Lianfu Transportation Industrial Co. Ltd.

Address??Rm.18-20, F/27, Southern International Plaza B, No.3013, Yi Tian Road, Futian District, Shenzhen City, Guangdong Province, China

Legal Representative??LU Xun, Chairman

Agent ad litem??FU Qi, legal counsel

Agent ad litem??LIU Yang, legal counsel



Defendant (plaintiff in the counterclaim)??Shenzhen Agricultural Products Transportation Co., Ltd.

Address??Buji Agricultural Products Wholesale Market, Luohu District, Shenzhen City, Guangdong Province, People??s Republic of China

Legal Representative??LENG Siguang, Chairman

Agent ad litem??ZHENG Tao, attorney from Guangdong Chenggong Law Firm

Agent ad litem??ZHONG Songmin, attorney from Guangdong Chenggong Law Firm

The third party: CHEN Yao, Male, Han Nationality, born on 16 August 1972, address: F/21, Tian Le Building, Bu Ji Road, Luohu District, Shenzhen, Guangdong Province, China





With respect to the case of dispute over marine container lease agreement filed by the Plaintiff, Textainer Equipment Management Limited (hereinafter referred to as ?°Textainer?±) against Shenzhen Lianfu Transportation Industrial Co. Ltd. (hereinafter referred to as ?°Shenzhen Lianfu?±) and Shenzhen Agricultural Products Transportation Co., Ltd. (hereinafter referred to as ?°Shenzhen Agricultural Products?±) and the case of counterclaim over guaranty contract dispute filed by the Defendant, Shenzhen Agricultural Products, against the Plaintiff, Textainer, this Court accepted them on 16 November, 2006 and 27 June, 2007 respectively and formed a collegial panel in accordance with the law for trial. Shenzhen Agricultural Products raised an objection to the jurisdiction of this court over the subject case within the period for filing defense. Through investigation, on 13 December, 2006, this Court ruled to dismiss the objection raised by Shenzhen Agricultural Products pursuant to the law. Shenzhen Agricultural Products was dissatisfied and filed an appeal. The Higher People??s Court of Guangdong Province on 15 May, 2007 overruled the appeal and sustained the original ruling. On 30 July, this Court approved the application filed by CHEN Yao, who is not involved in this case, to participate in court trial of the cases as a third party. On 6 November, this Court summoned the parties hereto to carry out pre-trial evidence exchange and conducted an open trial on both cases. Mr. ZHAO Shuzhou, agent ad litem of Textainer, Mr. ZHENG Tao and Mr. ZHONG Songmin, agents ad litem of Shenzhen Agricultural Products and Mr. CHEN Yao, the third party, appear before this court to participate in the court trial; Shenzhen Lianfu, after being duly summoned, failed to attend the trial without justified reasons. The trial of this case is hereby closed. 



The Plaintiff alleged that: on 16 November, 2005, a Container Lease Agreement was concluded by and between Textainer and Shenzhen Lianfu, under which Textainer should lease out to Shenzhen Lianfu 350 containers, including 200 dry-cargo containers of 20 feet (hereinafter referred to as standard containers) and 150 high-cube dry-cargo containers of 40 feet (hereinafter referred to as high-cube containers), at a daily rental of USD1.22 and USD2.08 respectively; Shenzhen Lianfu should, within 30 days of the date of the invoice issued by Textainer per month, pay the amount indicated on the invoice. To ensure the performance of the Lease Agreement, Shenzhen Agricultural Products signed a Guaranty Agreement on 16 November 2005, to guarantee unconditionally to Textainer the payment of any debt which may incur under the Lease Agreement. Due to the fact that Shenzhen Lianfu had failed in paying to Textainer any rental of the leased containers as agreed in the Lease Agreement since March 2006, Textainer terminated the Lease Agreement on 15 September of the same year and demanded Shenzhen Lianfu to promptly redeliver the leased containers and pay the outstanding rental of leased containers and other relevant expenses; besides, Textainer had also demanded Shenzhen Agricultural Products to bear joint and several liabilities for payment of the outstanding rental of containers and other relevant expenses but Shenzhen Agricultural Products refused to assume any liability. The failure of fulfillment of relevant obligations under the Lease Agreement and the Guaranty Agreement by both Shenzhen Lianfu and Shenzhen Agricultural Products infringeD on the legitimate rights of Textainer. The court was requested by Textainer to order: 1. Shenzhen Lianfu and Shenzhen Agricultural Products to bear joint and several liability for compensating Textainer for the outstanding rental of containers and other relevant expenses at a total amount of USD640,556.08, plus interest thereof; 2. Shenzhen Lianfu and Shenzhen Agricultural Products to bear all litigation fees and other legal fees in relation to this case.



On 23 October, 2007, Textainer applied for modifying the first item of the above litigation requests as follows: to order Shenzhen Lianfu and Shenzhen Agricultural Products to bear joint and several liability for compensating Textainer for the outstanding rental of containers at an amount of USD353,960.57 and other relevant expenses (including loss of rental amounting to USD305,467.08 and service fee of USD48,463.49 calculated till 23 October 2007) as well as a service fee calculated from 24 October, 2007 till the day of actual payment (at an annual interest rate of 18% of the outstanding amount) plus corresponding interest of the aforesaid amounts. 



The Plaintiff provided the following evidences within the period of adducing evidence: 1.Notarized Container Lease Agreement; 2.Guaranty Agreement; 3.delivery certifications of and gate-out records of 200 standard containers of 20 feet and 100 high-cube containers of 40 feet; 4. correspondences on delivery of 50 containers of 40 feet by Textainer and those exchanged between Textainer and Shenzhen Lianfu; 5.Lawyer??s Letter issued on 7 August 2006 by Textainer to Shenzhen Lianfu and Shenzhen Agricultural Products; 6. Lawyer??s Letter issued on 15 September 2006 by Textainer to Shenzhen Lianfu and Shenzhen Agricultural Products; 7. correspondences on redelivery of 4 high-cube containers of 40 feet between Textainer and Shenzhen Lianfu and Equipment Interchange Receipts; 8. correspondences on redelivery of 2 standard containers of 20 feet and 4 high-cube containers of 40 feet between the Container Yard and Textainer /Shenzhen Lianfu; 9.correspondences on redelivery of 107 standard containers of 20 feet and 7 high-cube containers of 40 feet between the Container Yard and Textainer/Shenzhen Lianfu; 10.Equipment Interchange Receipts for redelivery of 4 high-cube containers of 40 feet; 11.Damage Assessment Form; 12.Notarized correspondences on confirmation of container repair fees between the Container Yard and Shenzhen Lianfu; 13.Notarized statements, instructions on collecting containers, and Equipment Interchange Receipts; 14.Notarized Damage Assessment Form; 15.Notarized correspondences on confirmation of container repair fees between the Container Yard and Shenzhen Lianfu; 16.Notarized statements, records of the Container Yard and correspondences provided by Shenzhen Lianfu; 17.Invoices of Rental; 18.Invoices of Repair Fees; 19.Invoices of Replacement; 20.Invoice of Trailer Fees; 21.information announced by the Bureau of International Container Registration. 



The Defendant Shenzhen Lianfu defended in writing that: 1.Shenzhen Lianfu has kept redelivering the leased containers and paying for the rental thereof. The amount of outstanding rental and other relevant expenses owed by Shenzhen Lianfu is far less than the amount claimed by Textainer. All the containers leased-in by Shenzhen Lianfu have been redelivered and the outstanding amount has been substantially paid. Shenzhen Lianfu agreed to settle the dispute out of court with Textainer on the conditions that the outstanding amount should be correct or substantially correct and Shenzhen Agricultural Products was not held liable; 2. As stipulated in Paragraph (K) of Article 17 of the Container Lease Agreement, the Agreement shall be interpreted pursuant to the laws of the State of California USA; this case shall be governed by the laws of the State of California USA. Shenzhen Lianfu didn??t agree to change the governing law; 3. The rental income earned by Textainer from Shenzhen Lianfu has neither been taxed within the territory of China nor been withheld by Shenzhen Lianfu for tax payment; Textainer signed the Lease Agreement in the name of a foreign company and then commissioned a domestic Chinese enterprise to perform the Agreement in China before collecting the income through a Canadian bank aiming to evade taxes in China; therefore, the Lease Agreement shall be deemed as an invalid contract; 4. ZHANG Kai, general manager of Shenzhen Lianfu, told a lie when the person in charge of Shenzhen Agricultural Products was absent; he took advantage of the fact that CHEN Yao, keeper of the company??s official seal, couldn??t understand English, and mislead Chen Yao to believe that the Guaranty Agreement was the one which was to be signed for guaranteeing the contract between Shenzhen Lianfu and Xiamen Hongxin Development Container Leasing Co., Ltd., thus deceiving CHEN Yao into affixing the official seal on the Guaranty Agreement involving in this case, and also forged CHEN Yao??s signature on the Guaranty Agreement. Textainer failed to confirm the signature with Shenzhen Agricultural Products. Shenzhen Agricultural Products was made the guarantor of Shenzhen Lianfu without knowledge of the actual circumstances. Shenzhen Lianfu expressed its apologies for any harm incurred to Shenzhen Agricultural Products and the third party CHEN Yao. 



The Defendant Shenzhen Lianfu didn??t provide any evidential material within the period of adducing evidence. 



The Defendant Shenzhen Agricultural Products defended that: 1. The Lease Agreement involved in this case was actually a financial lease contract. Textainer was unqualified to conduct the business operation activities thereunder in Mainland China; judging from performance of the Agreement by both parties thereto, evasion of taxes in China are involved and thus the Lease Agreement shall be deemed as an invalid contract; as provided for in the PRC Guaranty Law, if the master contract is invalid, the guaranty contract shall also be invalid. 2. The amount claimed by Textainer is inconsistent with the facts. Shenzhen Agricultural Products affirmed with ZHANG Kai, who was from Shenzhen Lianfu and handled conclusion of the Agreement, that the amount owed by Shenzhen Lianfu was less than the amount claimed by Textainer. 3. The Guaranty Agreement in this case was concluded through malicious and fraudulent means by Textainers and ZHANG Kai, general manager of Shenzhen Lianfu and has not been approved by the State Administration of Foreign Exchange; therefore, it is invalid or voidable. There is no fault on the part of Shenzhen Agricultural Products who thus shall not be held liable therefor. 4. Even though the Agreement is valid, the security thereunder is provided in a general form. Shenzhen Agricultural Products has the right of discussion and is entitled to refuse assuming guaranty liabilities. To sum up, the Court was requested to dismiss all litigation requests by Textainer against Shenzhen Agricultural Products. 



The Defendant Shenzhen Agricultural Products provided the following evidential materials within the period for adducing evidence: 1. Customer Advice??2. Phone Calls Records.



The third party CHEN Yao alleged that: Shenzhen Lianfu deceived me into affixing the seal on the Guaranty Agreement by taking advantage of the facts that: I couldn??t understand English; Shenzhen Agricultural Products had previously dealt with a similar business requiring provision of security; and I trusted ZHANG Kai, general manager of Shenzhen Lianfu. The official seal was affixed thereon under the circumstance that the third party was deceived. I agreed upon the opinions of defense by Shenzhen Agricultural Products. 



The Plaintiff in the counterclaim ?°Shenzhen Agricultural Products?± counterclaimed that: On 19 August 2005, with respect to the container lease transaction conducted between Shenzhen Lianfu and Xiamen Hongxin Development Container Leasing Co., Ltd. (hereinafter referred to as Hongxin), Shenzhen Agricultural Products issued a letter of guarantee to guarantee Shenzhen Lianfu??s contract obligation. On 16 November, ZHANG Kai, general manager of Shenzhen Lianfu, lied that the Guaranty Agreement in this case was an Annex in English to the Container Lease Contract concluded with Hongxin and that ?°I forgot to submit this Annex together with the original Contract to LIN Zhihua, general manager, for approval and signature; now the business urgently requires a signature but Manager LIN is absent?±. CHEN Yao, keeper of the official seal of Shenzhen Agricultural Products was requested to affix the seal onto the Guaranty Agreement which was entirely in English and beyond CHEN Yao??s understanding. CHEN Yao knew that LIN Zhihua had not long ago reviewed and approved the Container Lease Contract concluded with Hongxin, and thus believed what ZHANG Kai said and affixed the official seal onto the Guaranty Agreement without signing thereon. Shenzhen Agricultural Products didn??t know about the existence of the Guaranty Agreement until 7 August, 2006 when it received the Lawyer??s Letter sent by the agent ad litem of the Plaintiff demanding Shenzhen Agricultural Products to jointly and severally assume liabilities for outstanding rental of containers owed by Shenzhen Lianfu. On 9 August, Shenzhen Agricultural Products urgently submitted a report on the situations to its parent company Shenzhen Agricultural Products Holdings Ltd. (hereinafter referred to as ?°Agricultural Products Holdings?±), a state-owned assets administration entity at a higher level, and subsequently provided it with further information. The company seal of Shenzhen Agricultural Products on the Guaranty Agreement was affixed as a result of deception through malicious and fraudulent means by Textainer and Zhenzhen Lianfu and was not the true intention of Shenzhen Agricultural Products. Pursuant to the provision of Paragraph 2, Article 54 of the Contract Law of the People??s Republic of China and Paragraph 3, Article 58, and Paragraph 1 Article 59 of the General Principles of the Civil Law of the People's Republic of China, Shenzhen Agricultural Products is entitled to request the court to annul the Guaranty Agreement. The third party CHEN Yao??s act of sealing without authorization directly led to Textainer??s initiation of lawsuits against Shenzhen Agricultural Products. To respond to the lawsuit initiated by Textainer, Shenzhen Agricultural Products has spent RMB2,400 for translation, RMB780 for notarization and RMB251 for searching industrial and commercial information. The court was requested to annual the Guaranty Agreement, confirming that the Agreement is invalid, and order the Defendant in the counterclaim ?°Textainer?± and the third party CHEN Yao to jointly and severally compensate for the defense costs incurred from Shenzhen Agricultural Products?? responding to the lawsuit in the amount of RMB3,431 and bear the litigation fee for counterclaim. 



The Plaintiff in the counterclaim, Shenzhen Agricultural Products provided the following evidential materials within the period of adducing evidence for counterclaim: 1.Statement of Facts written by the third party CHEN Yao; 2.Situation Report submitted by Shenzhen Agricultural Products to its superior entity; 3.Container Lease Agreement, Supplementary Agreement thereto and Warranty entered into by and between Hongxin and Shenzhen Lianfu; 4.Civil Judgment (2006)XHFSCZ No.274 rendered by Xiamen Maritime Court; 5.Invoice of Defense Costs; 6.Guaranty Agreement; 7. Police Report and Acknowledgement Receipt of Police Report; 8.Customer Call Records; 9.Graduation Certificate of CHEN Yao; 10.Official Seal Comparison Table and Attachment thereto.



The Defendant in the counterclaim, Textainer defended that: the seal affixed onto the Guaranty Agreement was the official seal of Shenzhen Agricultural Products; Shenzhen Lianfu was the subsidiary of or controlled subsidiary of Shenzhen Agricultural Products, thus Shenzhen Agricultural Products should have had knowledge of all business activities conducted by Shenzhen Lianfu. There was no evidence available in this case to prove that Shenzhen Agricultural Products had disapproved the act of providing security or that the Guaranty Agreement had been sealed through coercion. 2. Even though the allegation by Shenzhen Agricultural Products that the employee wouldn??t have affixed the seal thereon if he could understand English was true, it shall not prejudice the legal effect of the official seal onto the Guaranty Agreement and liabilities arisen from the sealing shall be borne by Shenzhen Agricultural Products. To sum up, the Guaranty Agreement was legitimate and valid and the court was requested to dismiss the counterclaim filed by Shenzhen Agricultural Products against Textainer.



The third party CHEN Yao alleged that: the third party was deceived into affixing the seal onto the Guaranty Agreement and shall not be held liable for the defense costs incurred by Shenzhen Agricultural Products. 



The third party CHEN Yao didn??t provide any evidential material within the period of adducing evidence.



Shenzhen Lianfu, after being summoned, refused to attend the trial without justified reasons and shall be deemed as having given up its right of cross-examination on evidence and making defense. 



Based on the evidences provided by Textainer and through hearing and cross-examination, the collegial bench ascertains the following: Shenzhen Agricultural Products and CHEN Yao raised objections to Evidences No.1-3, Evidence No.5, Evidence No.6, Evidence 10, Evidence No.11 and Evidences No.13-16 provided by Textainer without presenting any sufficient evidences to the contrary. In accordance with the provisions of Paragraph (1), Article 70 of Some Rules of the Supreme People's Court on Evidence in Civil Procedures (hereinafter referred to as ?°Evidence Rules?±), the truthfulness of the above 11 evidences provided by Textainer are confirmed. Evidences No.4, Evidences No.7-9, Evidences No.12, Evidence No.17-21 provided by Textainer could be cross-proved by Evidences 1-3, Evidence No.5, Evidence No.6, Evidence No.10, Evidence No.11 and Evidences No.13-16 provided by Textainer; Shenzhen Agricultural Products and CHEN Yao raised objections thereto but failed to provide any sufficient evidences to the contrary. In accordance with the provisions of Paragraph (1) of Article 72 of the Evidence Rules, the truthfulness of the above 10 evidences provided by Textainer is admitted. 



Based on the evidences provided by Shenzhen Agricultural Products and through hearing and cross-examination, the collegial bench makes the following ascertainments: The third party CHEN Yao affirmed the truthfulness of Evidence No.1 ?°copy of Customer Advice?± provided by Shenzhen Agricultural Products; Textainer denied the truthfulness thereof on the grounds that it is only a duplicate copy without the original for verification. The collegial bench holds that the aforesaid evidence shall not be ascertained as true in the absence of its original or any other evidence in corroboration thereof. The third party CHEN Yao affirmed the truth of Evidence No.2 ?°Phone Calls Records?± provided by Shenzhen Agricultural Products; while Textainer denied the truthfulnes thereof by the reason that the recording had not been consent by the party receiving the calls. The collegial bench holds that the aforesaid phone calls records have neither infringed on the legitimate rights and interests of the receiving party nor violated prohibitive provisions of laws, and thus shall be ascertained as true. The truthfulness of the Counterclaim Evidences No.1, No.3-6 and No.9 provided by Shenzhen Agricultural Products has not been objected by the third party CHEN Yao. In accordance with the provisions of Paragraph 1, Article 72 of the Evidence Rules, the aforesaid 6 evidences provided by Shenzhen Agricultural Products shall be ascertained as true. The Counterclaim Evidences No.2, No.7, No.8 and No.10 provided by Shenzhen Agricultural Products could be cross-proved by other evidences provided by the same company; the third party CHEN Yao raised no objection thereto while Textainer has an objection thereto without providing any sufficient evidence to the contrary. In accordance with the provisions of Paragraph 1, Article 72 of the Evidence Rules, the aforesaid 4 evidences provided by Shenzhen Agricultural Products shall be ascertained as truthful. 



Based on the above analysis and ascertainments, and taking into consideration of the hearing situations, the collegial bench ascertains the following facts:



1.	Facts about the Container Lease Agreement



On 16 November, 2005, a Container Lease Agreement was concluded by and between Textainer and Shenzhen Lianfu which was signed by ZHANG Kai, general manager of Shenzhen Lianfu, and affixed with the official seal of Shenzhen Lianfu; under the Agreement, Textainer is the Lessor and Shenzhen Lianfu is the Lessee. As stipulated in Article 1 of the Agreement, the ?°Redelivery Period?± refers to the period specified in Annex 1 during which, after termination of the Agreement, the Lessee remains liable for paying the rental for the leased-in containers at an agreed rate until the leased containers are actually redelivered; the ?°Handling Charges?± means charges levied by Lessor based upon movement of the Containers into and out of Lessor??s depot; ?°In Service Charges?± refers to all charges incurred in ports, depots, storage areas or otherwise arising out of the use of the Containers, including without limitation, customs charges, wharf fees, all taxes, fees, penalties and charges levied on or in connection with the Containers subsequent to delivery, including without limitation, property, sales, use and all further government levies, fees or charges, including without limitation, fines, penalties and interest thereon; ?°Location Charges?± means charges, including but not limited to pick-up, drop-of, off-hire Service, Direct Interchange and handling Charges levied by Lessor whenever any Container is delivered from or returned to a Lessor??s depot or to another lessee; ?°On-Hire Date?± means the date upon which any Container is delivered to the Lessee by Lessor or Lessor??s agent; ?°Return Date?± means the date of physical return of any Container to a depot designated by Lessor. 



According to Clause 5 of the Agreement, after the return of the leased containers, the Lessee shall be responsible for any container repair expenses under Clauses 9 & 10. Clause 6 of the Agreement provides that payment of all charges must be made in accordance with instructions state on each invoice issued by Lessor. All charges invoiced by Lessor are due and payable within 30 days from the date of each invoice. If Lessor??s invoice is not paid when due, Lessor may charge, as additional rental, a service charge at the rate of 1% per month (18% per annum) on the unpaid balance. Lessor??s depots may mail or dispatch to Lessee invoices for repair and other charges for the containers. All charges invoiced by Lessor??s depots are due and payable to such depots within 30 days from the date of each invoice. If such invoice is not paid when due and Lessor is required to pay such invoice to its depot on behalf of Lessee, Lessor may charge Lessee, as additional rental, a service charge at the rate of 1.5% per month (18% per annum) on the unpaid balance: (a) Rental Handling and Location Charges. During the Term, Lessee will be invoiced on a monthly basls for specified Rental, Handling and Location Charges; (b) Repair Charges. If repairs are required to Containers pursuant to either Section 9 or 10 of this lease, and Lessee fails to make such repairs, Lessor will charge Lessee and Lessee will pay Lessor all costs and expenses incurred by Lessor in making such repairs; (c) Replacement Value. In the event thar Lessee shall become responsible under the Lease for the Replacement Value of Containers, Lessor will charge Lessee, and Lessee will pay Lessor for the Replacement Value of such Containers; (d) In-Service Charges. During the Term, Lessee will be responsible for, and shall pay directly, all In-Service Charges.



Clause 9 of the Lease Agreement stipulates that Lessee shall, at its sole expense, keep the containers free from damage, and maintain the containers in good order and repair, and shall be liable for damage suffered by containers before they are returned. 



Clause 10 of the Lease Agreement stipulates that Lessee is liable for all loss and Damage to the Containers subsequent to delivery and prior to return to Lessor, regardless of when such loss or damage may be discovered. Lessee is obligated to pay all Rental Charges on lost or damaged Containers until the Off-hire Date of each Container: (a) If a Container is lost, stolen or, in Lessor??s sole judgment, damaged beyond economic repair while on lease to Lessee, Lessee shall pay to Lessor the Replacement Value for such Container in accordance with the provisions of the Lease. Loss of a Container includes the Container being held by a third party (including, but not limited to, a governmental entity) after expiration or termination of this Lease with respect to such Container and Lessee??s inability or unwillingness to return the Container to Lessor within 60 days after the termination or expiration of the Lease with respect to the Container. Should Lessee return a Container to Lessor after having paid the Replacement Value for such Container to Lessor, Lessor will such Replacement Value to Lessee, net of any Rental Charges and other charges due on such Container due to such Container from its Off-hire Date; (b) If a Container is returned to Lessor with Damage, Lessor shall, in its sole discretion, determine whether it is economically feasible to repair such Container.



Clause 14 of the Lease Agreement stipulates that: (a) if the Lessee shall fail to pay any Rental Charge, Repair Charge, location Charge or other charges, and such failure shall continue for 10 days or more from the date such payment first came due, the Lessee shall be regarded to be in default; (b) upon the occurrence of any event of default, and at any time thereafter so long as the same shall be continuing, Lessor may forthwith, by notice in writing to the Lessee, declare this Lease to be in default and may exercise any permitted remedy at law or equity, including: to accelerate all rental charges for the full term to and including the return dates set forth in the Lease Agreement, causing these Rental Charges to become due and payable immediately for all containers; terminate this Lease Agreement with respect to all or any of the containers, whereupon, this Lease shall, except as otherwise provided in Section 2, terminate and Lessee shall be bound to return any Container in its possession as soon as possible after termination, in a state of repair satisfactory to Lessor in Lessor??s absolute discretion, and to pay within the same time all rental and other charges due under the Lease; if the Lessee failed to return the containers within 60 days of the termination of this Lease, the loss of such containers shall be irrebuttably presumed and Lessee shall pay the Replacement Value therefore, plus USD400 per container for relocation/positioning charges.



Schedule 1 of the Lease Agreement stipulates that Textainer shall lease out minimum 350 containers to Shenzhen Lianfu, including minimum 200 standard containers of 20 feet and minimum 150 high-cube containers of 40 feet at a daily rental rate of USD1.22 and USD2.08 respectively; 200 standard containers of 20 feet and 100 high-cube containers of 40 feet shall be delivered in Shanghai and another 50 high-cube containers of 40 feet shall be delivered in Shenzhen; the term of Schedule 1 to the Agreement shall be effective for five years commencing from the date of pick-up, for each Container, except that all claims and liabilities respecting each such Container arising out of acts and omissions occurring during the Term shall survive any termination of the Lease Agreement; upon termination of Schedule 1 to the Lease Agreement, Lessee shall pay to Lessor the amount of USD1.00 for each Container, after which Container shall become the property of the Lessee; each container to be leased for a minimum period of five years commencing from the date of pick-up (?°Minimum Term??); the replacement value of each container shall be equal to any and all unpaid rental payments plus USD1.00; during the Minimum Term, Lessor shall invoice Lessee monthly in advance for the minimum quantity specified herein whether or not such Containers are actually on lease. 



Schedule 2 to the Lease Agreement stipulates that the Lessor shall not provide container damage protection plan coverage under the terms of the Agreement. 



Schedule 3 to the Lease Agreement stipulates that handling fee for depot movement shall be USD15 per 20 fee container and USD25 per 40 fee container. 



2.	Facts about the Guaranty Agreement 



On 16 November, 2005, Shenzhen Agricultural Products signed a Guaranty Agreement which was accepted by Textainer. Clause 1 of the Agreement stipulates Shenzhen Agricultural Products unconditionally guarantees to Textainer (hereinafter called ?°Obligee?±), the payment of any and all indebtedness of Shenzhen Lianfu (hereinafter called ?°Obligor?±) to Obligee that arise due to the Container Lease Agreement. Clause 2 stipulates that should Obligor fail to perform any of its obligations or pay any of its indebtedness to Obligee, Guarantor shall forthwith, and in not more than 10 days after receipt of demand by Obligee: (a) pay to Obligee all sums due and payable by Obligee; and (b) perform all outstanding obligations of Obligor under the Lease Agreement and continue to do so until Obligor??s default thereunder has been remedied. Clause 3 stipulates Guarantor further agrees that Guarantor or Obligor shall have become insolvent or bankrupt, or shall have made an assignment for the benefit of their creditors, or there shall have been appointed a trustee or receiver of Guarantor or Obligor for all or a substantial part of either Obligor??s or Guarantor??s property, or any case or proceeding shall have been commenced or other action taken by or against Guarantor or Obligor in bankruptcy or seeking reorganization, liquidation, dissolution, winding-up, arrangement, composition or readjustment or other similar act or law of any jurisdiction now or hereafter existing, or there shall have been issued a warrant of attachment, execution, distraint or similar process against any substantial part of the property of Guarantor or Obligor, and any such event shall have continued for 60 days without being dismissed, bonded or discharged, then any and all of Guarantor??s obligations hereunder shall, at Obligee??s option, forthwith become due and payable without notice. 



Clause 5 of the Guaranty Agreement stipulates that Guarantor waives its right to revoke or terminate this guaranty at any time with respect to future obligations of Obligee.



Clause 6 of the Guaranty Agreement stipulates that the obligations of Guarantor hereunder are independent of the obligations of Obligor, and a separate action or actions may be brought and prosecuted against Guarantor whether action is brought against Obligor or whether Obligor be joined in any such action or actions. Guarantor waives, to the fullest extent permitted or the enforcement of this agreement, the benefit of any statute of limitations affecting their liability under this agreement or the enforcement of this agreement.



Clause 8 of the Guaranty Agreement stipulates that it is not necessary for the Obligee to inquire into the capacity or powers of Obligor of the officers, directors, partners, or agents acting or purporting to act on their behalf, and any indebtedness made or created in reliance on the professed exercise of those powers shall be guaranteed under this agreement. 



Clause 10 of the Guaranty Agreement stipulates that Guarantor waives any right to require Obligee to (a) proceed against Obligor; (b) proceed against or exhaust any security held from Obligor; or (c) pursue any other remedy in Obligee??s power whatsoever. Guarantor waives any defense base on or arising out of any defense of Obligor other than payment in full of the indebtedness, including without limitation any defense based on or any part thereof from any cause, or the unenforceability of the indebtedness or any part thereof from any cause, or the cessation from any cause of the liability Obligor other than payment in full of the indebtedness.



The aforesaid Guaranty Agreement is affixed with the company seal of Shenzhen Agricultural Products, and there is the hand-written name ?°CHEN YAO?± at the place of signature, job title General Manager. The Container Lease Agreement concluded between Textainer and Shenzhen Lianfu on 16 November 2005 was made an annex to the Guaranty Agreement. 



On 27 June, 2007, Shenzhen Agricultural Products applied with this Court for verifying the handwriting of the signature ?°CHEN Yao?± on the Guaranty Agreement.



The aforesaid Guaranty Agreement has not been submitted to the State Administration of Foreign Exchange for approval or registration. 



As stated in the Situation Report submitted by Shenzhen Agricultural Products to its superior entity: on 16 November, 2005, ZHANG Kai, general manager of Shenzhen Lianfu, brought a document entirely in English, saying that the document is an English Annex to the Container Lease Agreement concluded with Hongxin and that he forgot to submit this Annex together with the original Lease Agreement to LIN Zhihua, general manager of Shenzhen Agricultural Products, for approval and signature, requesting CHEN Yao, keeper of the official seal of Shenzhen Agricultural Products, to affix the seal onto the English document. CHEN Yao couldn??t understand the English document brought by ZHANG Kai; however, because Shenzhen Agricultural Products who is Shenzhen Lianfu??s holding company, should support the business development of Shenzhen Lianfu, besides, CHEN Yao knew that the general manager LIN Zhihua had indeed examined and approved the Container Lease Agreement concluded with Hongxin, CHEN Yao thus believed what ZHANG Kai said and affixed the official seal onto the Guaranty Agreement yet without signing thereon. 



On 9 August 2006, Buji Agricultural Products Wholesale Center of Shenzhen Agricultural Products Holding Ltd. (hereinafter referred to as ?°Agricultural Products Holdings?±) (the Center has no legal personality but shares the same personnel with Shenzhen Agricultural Products under a different name) submitted to its superior entity Agricultural Products Holdings a Latest Situation Report on Guaranty Provided Shenzhen Agricultural Products for Shenzhen Lianfu, stating that the Center received on 7 August from Wang Jing & Co., agent ad litem of Textainer a Lawyer??s Letter requesting Shenzhen Agricultural Products to assume joint and several liabilities under the Guaranty Agreement. Through investigation, it??s found that the Guaranty Agreement was in English and beyond the understanding of CHEN Yao, the then general manager of the transportation department of Shenzhen Agricultural Products; ZHANG Kai, general manager of Shenzhen Lianfu, lied that the Agreement was an Annex to the Container Lease Agreement concluded with Hongxin and said the business urgently required the signature by CHEN Yao; that is why CHEN Yao afterwards affixed the seal thereon but didn??t sign his name thereon. The signature on the Guaranty Agreement was a forged one.



On 14 November, 2006, XIAO Tong and OU Xintao, respectively General Manager and Manager of the Security Department of Buji Agricultural Products Wholesale Center of Agricultural Products holdings Ltd. reported the suspected fraudulent act by Shenzhen Lianfu to Dongxiao Police Station under Shenzhen Public Security Bureau. According to Dongxiao Police Station, the reported case was not a criminal case and fell beyond the scope of functions and duties of a public security organ. The police also suggested that Buji Agricultural Products Wholesale Center of Agricultural Products Holdings Ltd. should strengthen internal management of its use official seal. 



On 19 August, 2005, a Container Lease Agreement was concluded by and between Hongxin and Shenzhen Lianfu, under which Hongxin is the Lessor, Shenzhen Lianfu is the Lessee and Shenzhen Agricultural Products is the Guarantor of Shenzhen Lianfu, jointly and severally liable for Shenzhen Lianfu??s debts. On 11 September 2005, Hongxin filed a lawsuit with Xiamen Maritime Court against Shenzhen Lianfu with respect to the dispute over Shenzhen Lianfu??s delay in paying the rental of containers, on-hire/off-hire fees and container repair fees owed to Hongxin. On 5 March, 2007, Xiamen Maritime Court adjudged that Shenzhen Lianfu shall pay Hongxin USD17,886.09 in total for the container rental, on-hire/off-hire fees and container repair fees and pay RMB43,033.93 as penalty for late payment and RMB5,923 as attorney??s fee. Shenzhen Agricultural Products shall be jointly and severally liable for the aforesaid fees under the Guaranty Agreement. 



According to the Senior Middle School Diploma of CHEN Yao, he gained 62 scores in graduation examination of English.



3.	Facts about Delivery of Leased Containers 



After the Container Lease Agreement was concluded between Textainer and Shenzhen Lianfu on 16 November 2005, Textainer delivered 200 standard containers of 20 feet and 100 high-cube containers of 40 feet during the period from 23 November 2005 to 8 May 2006. The specific dates and quantity of delivery of standard containers of 20 feet are as follows: 1 container shall be delivered on 8 December 2005; 3 containers shall be delivered on 15 December 2005; 1 container on 16 December 2005; 1 container on 29 December 2005; 40 containers on 28 February 2006; 154 containers on 8 May 2006. The specific dates and quantity of delivery of high-cube containers of 40 feet are as follows: 13 containers shall be delivered on 23 November 2005; 1 container shall be delivered on 25 November 2005; 4 containers on 30 November 2005; 1 container on 1 December 2005; 9 containers on 7 December 2005; 1 container on 8 December 2005; 10 containers on 14 December 2005; 3 containers on 21 December 2005; 3 containers on 28 December 2005; 3 containers on 29 December 2005; 2 containers on 8 February 2006; 1 container on 9 February 2006; 1 container on 16 February 2006; 1 container on 20 February 2006; 1 container on 22 February 2006; 1 container on 23 February 2006; 1 container on 24 February 2006; 2 containers on 26 February 2006, 42 containers on 28 February 2006. 



Textainer delivered 50 high-cube containers of 40 feet to Shenzhen Lianfu at Shekou Shenzhen on 13 May 2006; arrival of the same at Sekou Shenzhen on 13 May 2006 was confirmed by the container yard, Shenzhen Southern CIMC Containers Manufacture Co., Ltd., in its Letter sent on 15 May, 2006 to Textainer (the Letter was provided by Textainer). Prior to such arrival, Textainer sent an email on 14 March 2006 to Shenzhen Southern CIMC Containers Manufacture Co., Ltd., stating that the on-hire time of the aforesaid 50 high-cube containers of 40 feet was 15 March 2006 and requesting that Company to send the on-hirel time back to Textainer in the form of EDI for follow-up. Shenzhen Lianfu raised no objection to the on-hire time.



4.	Facts about Chasing Rentals and Terminating the Container Lease Agreement by Textainer 



On 7 August 2006, Textainer appointed Wang Jing & Co. to send a lawyer??s letter to Shenzhen Lianfu and Shenzhen Agricultural Products requesting Shenzhen Lianfu to pay USD84,541.68 of container rentals to Textainer and requesting Shenzhen Agricultural Products to bear joint and several liabilities for Shenzhen Lianfu??s debts under the Guaranty Agreement. On 15 September 2006, Textainer appointed Wang Jing & Co. to send a lawyer??s letter to Shenzhen Lianfu and Shenzhen Agricultural Products informing Shenzhen Lianfu of termination of the Container Lease Agreement concluded between Textainer and Shenzhen Lianfu and requesting Shenzhen Lianfu to return the leased containers and pay all outstanding amounts. 



5.	Facts about Return of Leased Containers 



During the period from August 2006 to November 2006, Shenzhen Lianfu returned 150 standard containers of 20 feet and 150 high-cube containers of 40 feet to Textainer at four ports respectively in Shanghai, Hong Kong, Singapore and Port Kelang of Malaysia, with 50 containers of 20 feet left not-returned. The specific dates and quantity of return of standard containers of 20 feet are as follows: 13 containers shall be returned on 30 August, 2006; 16 containers shall be returned on 31 August, 2006; 3 containers on 1 September, 2006; 1 container on 6 September, 2006; 1 container on 7 September, 2006; 14 containers on 8 September, 2006; 20 containers on 9 September, 2006; 18 containers on 10 September 2006; 8 containers on 11 September, 2006; 8 containers on 12 September, 2006; 10 containers on 13 September, 2006; 2 containers on 14 September, 2006; 4 containers on 16 September, 2006; 8 containers on 17 September, 2006; 2 containers on 18 September, 2006; 10 containers on 19 September, 2006; 4 containers on 20 September, 2006; 2 containers on 27 September, 2006; 1 container on 19 October, 2006; 1 container on 23 October, 2006; 2 containers on 9 November, 2006; 1 container on 18 November, 2006. The specific dates and quantity of return of high-cube containers of 40 feet are as follows: 4 containers shall be returned on 30 August, 2006; 1 container shall be returned on 31 August, 2006; 3 containers on 1 September, 2006; 7 containers on 7 September, 2006; 1 container on 8 September, 2006; 1 container on 20 September, 2006; 5 containers on 21 September, 2006; 4 containers on 27 September, 2006; 3 containers on 4 October, 2006; 1 container on 5 October, 2006; 1 container on 6 October, 2006; 1 container on 4 November, 2006; 25 containers on 6 November, 2006; 53 containers on 7 November, 2006; 27 containers on 8 November, 2006; 7 containers on 9 November, 2006; 8 containers on 11 November, 2006; 2 containers on 13 November, 2006; 1 container on 19 November, 2006. 



6.	Facts about Various Expenses and Losses Incurred under the Container Lease Agreement 



Based on the delivery date and redelivery date of 350 leased containers ascertained as above (of which 50 standard containers of 20 feet have not yet been returned, the rental thereof shall be calculated until 60th day following termination of the Container Lease Agreement), calculated at a daily rental of USD1.22 for each standard container of 20 feet and USD2.08 for each high-cube container of 40 feet under the Container Lease Agreement, the outstanding rentals of containers owed by Shenzhen Lianfu to Textainer amounted to USD150,704.06 in total, of which USD11,205.72 incurred in March 2006, USD11,044 incurred in April 2006, USD15,921 incurred in May 2006; USD16,680 incurred in June 2006; USD17,236 incurred in July 2006; USD19,796.82 incurred in August 2006; USD13,082.44 incurred in September 2006; USD10,334.48 incurred in October 2006; USD35,384.08incurred in November 2006; USD19.52 incurred in December 2006. 



As agreed in Schedule 3 to the Container Lease Agreement, handling fee for depot movement shall be USD15 per 20 fee container. The handling fees incurred from delivery by Textainer of 154 standard containers of 20 feet at Shanghai Port on 8 May 2006 amounted to USD2,310.   



Redelivery of 20?? Standard Container numbered TGHU3784618 by Shenzhen Lianfu on 16 December 2006 at Port Kelang of Malaysia resulted in USD70 of terminal handling charges and USD25 of entry fee; that is USD95 in total. 



According to the finding of facts above, 50 of the 154 standard containers of 20 feet delivered by Textainer on 8 May 2006 at Shanghai Port to Shenzhen Lianfu have not been redelivered. As stipulated in Clause 14 of the Container Lease Agreement, if Lessee fails to return a container within sixty days after termination of the Lease Agreement, with respect to such container, the loss of such container shall be irrebuttably presumed and Lessee shall pay the Replacement Value therefore, plus USD400 per container for relocation/positioning charges. The aforesaid 50 standard containers of 20 feet shall be presumed to be lost and Shenzhen Lianfu shall compensate for the loss thereof to Textainer as agreed. As agreed in Schedule 1 to the Container Lease Agreement, the minimum lease term for each container shall be 5 years commencing from the date of delivery; the replacement cost for each container shall be equivalent to any or all outstanding rentals plus USD 1. The loss of the aforesaid 50 standard containers of 20 feet amounts to USD119,785. 



According to the Price Assessment Document issued by container service factory, Invoice of Repair Fees issued by Textainer and Shenzhen Lianfu??s email for confirmation, it??s ascertained that, with respect to a total of 83 containers (consisting of 30 standard containers of 20 feet and 53 high-cube containers of 40 feet) of the 350 containers involved in this case, a total of USD2457.26 of container repair fee was incurred. 



According to the Invoices of Trailer Fees issued by Fai Shanghai International Container Repair Co., Ltd., Tech-tainer Services Pte Ltd. and Eng Kong Container Agencies (Ptd) Ltd, the trailer fees incurred by Textainer from colleting leased containers redelivered by Shenzhen Lianfu amount to USD3,264.79 in total. 



7.	Facts about Counterclaims Filed by Shenzhen Agricultural Products



The following expenses were incurred by Shenzhen Agricultural Products from preparing evidential materials in this case: 1. RMB620 incurred from notarizing the Web page of Textainer, RMB160 of translation fee and RMB11 of other expenses; that is, RMB791 in total; 2. RMB2,400 of translation fee incurred from translating the Container Lease Agreement and the Guaranty Agreement provided by Textainer; 3. RMB240 incurred from searching industrial and commercial information. The aforesaid fees total RMB3,431. 



8.	Facts about Property Preservation 



On 28 September 2006, Textainer filed with this Court an application for pre-litigation property preservation, requesting this Court to freeze USD150,000 (or RMB1,200,000 or other properties of equivalent value) of bank deposits of Shenzhen Lianfu and Shenzhen Agricultural Products. This Court approved Textainer??s application for pre-litigation property preservation and sealed vehicles under the names of Shenzhen Lianfu and Shenzhen Agricultural Products. On 10 August 2010, Shenzhen Intermediate People??s Court sent to this Court the Letter Calling for Assistance in Lifting Preservation Measures against Shenzhen Lianfu??s Bankruptcy Assets, by reference number: (2009)SZFMQQSZ No.17, which states ?°on 15 October, 2009, the said Shenzhen Intermediate Court announced pursuant to law that the procedures for bankruptcy liquidation of Shenzhen Lianfu have been initiated and Shenzhen Zhuoxiao Liquidation Co., Ltd. was appointed as the administrator for taking over Shenzhen Lianfu??s assets.?± Because this Court had sealed up vehicles and bank accounts of Shenzhen Lianfu, for the disposal of Shenzhen Lianfu??s bankruptcy assets, this Court was requested to lift the preservation of vehicles and bank accounts of Shenzhen Lianfu in accordance with the provisions of Article 19 of the Enterprise Bankruptcy Law of People??s Republic of China. On 27 September 2010, this Court provided assistance pursuant to the law and adjudicated to lift the attachment of vehicles and bank accounts under the name of Shenzhen Lianfu. 



9.	Facts about Governing Laws 



As stipulated in Paragraph (K), Clause 17 of the Container Lease Agreement in this case, the Lease Agreement shall be governed by and construed in accordance with the internal law of the State of California, USA applicable to contracts between residents of California to be performed wholly within California. 



Clause 15 of the Guaranty Agreement stipulates that this guaranty shall be deemed to be made under, and shall be governed by, the laws of the State of California in all respects, including matters of construction, validity, and performance, and its terms and provisions may not be waived, altered, modified, or amended except in writing duly signed by an authorized officer of Obligee and by Guarantor. Clause 16 of the Guaranty Agreement further stipulates that Guarantor further agrees that all actions and proceedings shall be litigated only in courts having situs within the State of California and Guarantor hereby consents to the jurisdiction of any local, state or federal court located within the State of California.



Members of the collegial bench unanimously hold that:



1.	Nature of the Case



Under the Container Lease Agreement in this case, the Lessor is Textainer; the Lessee is Shenzhen Lianfu; Textainer shall deliver 350 containers to Shenzhen Lianfu for use; while Shenzhen Lianfu shall pay rentals of the leased containers to Textainer. The Container Lease Agreement contains no stipulations on any seller of the leased object or purchase by the Lessor of any leased object from the seller and thus the Least Agreement is not in conformity with the feature of a financial lease contract. Therefore, the legal relationship between Textainer and Shenzhen Lianfu is of no essential element of a financial leas contract; Shenzhen Agricultural Products?? claim that the Container Lease Agreement in this case should be regarded as a finance lease contract is untenable for lack of evidence. Considering that, in this case, Shenzhen Agricultural Products provided Textainer with the Guaranty Agreement which was also accepted by Textainer, Shenzhen Agricultural Products is the Guarantor of Shenzhen Lianfu and the Creditor is Textainer which is a foreign enterprise. To sum up, this case involves dispute over foreign maritime container lease contract and guaranty contract in relation thereto. 



2.	About Jurisdiction 



The Higher People??s Court of Guangdong Province, pursuant to the law, adjudicated on 15 May 2007 that this Court has competent jurisdiction over this case. 



3.	About Governing Law 



In accordance with provisions of Paragraph 1, Article 126 of the Contract Law of the People??s Republic of China, ?°Parties to a foreign-related contract may select the applicable law for resolution of a contractual dispute, except as otherwise provided by law. Where parties to the foreign-related contract fail to select the applicable law, the contract shall be governed by the law of the country with the closest connection thereto?±, both the Container Lease Agreement and the Guaranty Agreement stipulate that the governing laws shall be the laws of the State of California USA. In accordance with the provisions of Paragraph 1, Article 9 of the Rules of the Supreme People's Court on the Relevant Issues concerning the Application of Law in Hearing Foreign-Related Contractual Dispute Cases in Civil and Commercial Matters, ?°The parties choosing a foreign law to govern a contractual dispute or modifying a choice of law governing a contractual dispute to a foreign law shall provide or prove the relevant content of the foreign law?±, the parties to this case shall be burdened for providing or proving relevant content of the laws of the State of California USA; however, the parties hereto failed in providing documents to this Court to prove the relevant content of the laws of the State of California USA. In accordance with provisions of Paragraph 3, Article 9 of the Rules of the Supreme People's Court on the Relevant Issues concerning the Application of Law in Hearing Foreign-Related Contractual Dispute Cases in Civil and Commercial Matters, ?°Where neither the parties nor the people's court can ascertain the content of the foreign law through proper channels, the people's court may apply the law of the People's Republic of China?±, the substantive disputes in this case shall be governed by the laws of the People??s Republic of China.  



4.	About Validity of the Container Lease Agreement and Assumption of Liabilities thereunder 

 	

The Container Lease Agreement concluded between Textainer and Shenzhen Lianfu is a true expression of the intent of the parties thereto, violates no mandatory provisions of laws and regulations and thus shall be deemed as a legitimate and valid contract which is binding upon both parties thereto. Shenzhen Agricultural Products?? claim that the above Lease Agreement shall be void is factually and legally groundless and shall not be sustained. 



After the above Lease Agreement was concluded, Textainer performed its obligations of delivering the leased containers in accordance therewith. Pursuant to the provisions of Paragraph 1, Article 60 and Paragraph 226 of the Contract Law of the People??s Republic of China, Shenzhen Lianfu shall, in accordance with terms and conditions of the Agreement, pay rentals and other relevant expenses regularly. In this case, Shenzhen Lianfu, after being duly summoned, failed to attend the trial without justified reasons and failed in proving that it had performed its obligations thereunder; thus Shenzhen Lianfu shall be deemed as having waived its litigation rights. Shenzhen Lianfu??s failure in performing its obligations of paying rentals and other relevant expenses has constituted a breach under Article 14 of the Lease Agreement; Textainer is entitled to terminate the above Lease Agreement by giving a written notice to Shenzhen Lianfu and request Shenzhen Lianfu to promptly redeliver the leased containers to Textainer and to pay all rentals and other expenses payable under the above Lease Agreement; since Shenzhen Lianfu failed in redelivering some of the leased containers within 60 days of termination thereof, Textainer is also entitled to request Shenzhen Lianfu to compensate for the loss of the containers. 



5.	About Validity of the Guaranty Agreement and Assumption of Liabilities hereunder 



According to the facts ascertained by this Court, the Guaranty Agreement, after being affixed with the official seal of Shenzhen Agricultural Products, was issued to and accepted by Textainer. CHEN Yao, who affixed the seal thereon and acted then as general manager of Shenzhen Agricultural Products, held a senior middle school diploma and must have an appropriate level of professional skills and a reasonable judgment. The Guaranty Agreement, once affixed with the seal of Shenzhen Agricultural Products, shall become effective to the external third parties. Deficiency in Shenzhen Agricultural Products?? internal management shall not be act against Textainer. Shenzhen Agricultural Products?? request of rescinding the act of affixing the seal thereon is factually and legally groundless and shall not be sustained. Whether the third party CHEN Yao has signed the Guaranty Agreement makes no difference in respect of the effect of the seal affixed onto the Guaranty Agreement of Shenzhen Agricultural Products; therefore, Shenzhen Agricultural Products?? application for verifying the handwriting of the signature ?°CHEN Yao?± on the Guaranty Agreement to determine whether it was signed by CHEN Yao himself shall not be approved. 



Under the above Guaranty Agreement, Shenzhen Agricultural Products is the Guarantor, Textainer is the Creditor and Shenzhen Lianfu is the Debtor. Considering that Textainer is a foreign enterprise while Shenzhen Agricultural Products and Shenzhen Lianfu are domestic enterprises, the above Guaranty Agreement is a foreign related guaranty contract. In accordance with the provisions of Article 12 of the Administrative Measures for the Provision of Foreign-related Guaranty by Domestic Institutions promulgated by the People??s Bank of China, ?°the guarantor may provide a foreign entity with security after obtaining approval from the State Administration of Foreign Exchange?±. Shenzhen Agricultural Products shall obtain an approval from the State Administration of Foreign Exchange before providing the foreign enterprise with the guaranty. According to Paragraph (1), Article 6 of Interpretations of the Supreme People??s Court on Several Issues Concerning Application of the ?°PRC Guaranty Law?±, any contract for provision of foreign guaranty without being approved or registered by relevant competent authorities of the State shall be null and void. The above Guaranty Agreement has not been approved by the State Administration of Foreign Exchange and therefore shall be deemed as null and void. 



Shenzhen Agricultural Products is at fault because it provided a foreign related guaranty without first obtaining the approval of the State Administration of Foreign Exchange. Upon accepting the above guaranty, Textainer as the creditor was obligated to find out whether Shenzhen Agricultural Products?? provision of such guaranty had been approved by relevant authorities and whether the guarantor had completed the approval formalities; if the guaranty approval formalities had not been completed, the creditor was obligated to urge the guarantor to complete them so that a valid guaranty may be gained. Textainer failed in performing the aforesaid obligation upon accepting the guaranty provided by Shenzhen Agricultural Products and shall be deemed as being at fault. According to Article 7 of Interpretations of the Supreme People??s Court on Several Issues Concerning Application of the ?°PRC Guaranty Law?±, ?°The guaranty provider and debtor shall assume joint compensation liability for the creditor's loss on the condition that the principal contract is valid while the guaranty contract is invalid, and the creditor is not at fault. If the creditor and guarantor are both at fault, the guarantor 's portion of civil liability shall not exceed half of the amount which the debtor is unable to pay?±; Shenzhen Agricultural Products shall be liable for compensating 50% of the amount which Shenzhen Lianfu is unable to compensate. 



6.	About Assumption of Various Losses and Expenses



According to the finding of facts about losses and expenses incurred to Textainer due to Shenzhen Lianfu??s breach, Shenzhen Lianfu shall pay Textainer USD150,704.06 of container hires, USD2,310 of repair fees, USD70 of terminal handling fees, USD25 of entry fees, USD119,785 for cost of losses, USD2,457.26 of repair fees and USD3,264.49 of trailer fees; that is, USD278,616.11 in total. 



In accordance with the provisions of Paragraph 1, Article 114 of the Contract Law of the People??s Republic of China, ?°The parties may agree that if one party breaches the contract, it shall pay a certain sum of liquidated damages to the other party in light of the circumstances of the breach, and may also agree on a method for the calculation of the amount of compensation for the damages incurred as a result of the breach?±, the service fee calculated at a monthly rate of 15% (annual rate of 18%) of the amount due and unpaid by the lessee as agreed in Clause 6 of the Container Lease Agreement is of the nature of liquidated damages. The Defendant Shenzhen Agricultural Products defended in the court trial that the service fee as stipulated in the Agreement exceeds a reasonable scope. Although the contractual stipulations on the aforesaid liquidated damages is a true expression of the parties to the contract, the annual rate of 18% for calculation of liquidated damages obviously is excessively high and shall be reduced appropriately in accordance with the provisions of Article 29 of Interpretation II of the Supreme People's Court of Several Issues concerning Application of the Contract Law of the People's Republic of China, ?°Where a party alleges that the agreed amount of liquidated damages is too much and requests a proper reduction, the people's court shall weigh the request and make a ruling on the basis of the actual losses, in consideration of the performance of contract, seriousness of the fault of the party, expected benefits and other comprehensive factors and under the principles of fairness and good faith.?± ?°If the amount of liquidated damages agreed on by the parties exceeds the losses incurred by 30%, generally, it shall be deemed as ?°significantly higher than the losses incurred?± as mentioned in paragraph 2 of Article 114 of the Contract Law.?± Therefore, this Court, by taking into consideration of the actual circumstances, determines that the amount of liquidated damages in this case shall be 30% of the losses actually incurred. The total amount of various losses incurred to Textainer from Shenzhen Lianfu??s breach of the Agreement is USD278,616.11, thus 30% of which shall be USD83,584.83. Any amount of liquidated damages claimed exceeding USD83,584.83 shall not be supported by this Court. Considering that the service fee agreed under the Container Lease Agreement includes interests, Textainer??s claim for interests is duplicate and is thus denied. 



7.	About Counterclaim 



Considering Shenzhen Agricultural Products has fault in the conclusion of contract, it??s appropriate for Textainer to join Shenzhen Agricultural Products as a co-defendant in this case. Shenzhen Agricultural Products?? claim that Textainer shall compensate for defense costs incurred from Shenzhen Agricultural Products?? responding to the lawsuit is factually and legally groundless and shall not be supported. Shenzhen Agricultural Products?? claim that the third party shall compensate for such defense costs is a kind of internal management affairs and shall be handled according to the legal relationship between Shenzhen Agricultural Products and CHEN Yao under the Labor Contract Law and internal policies of Agricultural Products. Shenzhen Agricultural Products?? request that the third party CHEN Yao shall be ordered to bear the defense losses incurred in this case shall not be supported. 



In summary, in accordance with Paragraph 1 Article 60, Article 107, Paragraph 1 and Paragraph 2 of Article 114, Article 226 of the Contract Law of the People??s Republic of China, Paragraph 2 Article 5 of the Security Law of the People??s Republic of China, Paragraph (1) Article 6 and Article 7 of Interpretations of the Supreme People??s Court on Several Issues Concerning Application of the ?°PRC Security Law?±, Article 29 of Interpretation II of the Supreme People's Court of Several Issues concerning Application of the Contract Law of the People's Republic of China, Article 130 of the Civil Procedure Law of the People's Republic of China, the judgment is rendered as follows: 



1. The Defendant Shenzhen Lianfu Transportation Industrial Co. Ltd. shall compensate the Plaintiff in this case ?°Textainer Equipment Management Limited?± the amount of USD278,616.11 for various losses and expenses and the amount of USD83,584.83 as damages for breach of contract, that is USD362,200.94 in total;



2. In the event that the Defendant Shenzhen Lianfu Transportation Industrial Co. Ltd. fails to pay clear its debts as indicated in paragraph 1 above, the Defendant in this case ?°Shenzhen Agricultural Products Transportation Co., Ltd.?± shall be liable for payment of 50% thereof to the Plaintiff ?°Textainer Equipment Management Limited?±;



3. The Defendant Shenzhen Agricultural Products Transportation Co., Ltd, after assuming the compensation liabilities as indicated in paragraph 2 above, is entitled to recourse against the Defendant Shenzhen Lianfu Transportation Industrial Co. Ltd.;



4. Other litigation requests put forward by the Plaintiff Textainer Equipment Management Limited are dismissed; 



5. Litigation requests by the Plaintiff in the counterclaim-Shenzhen Agricultural Products Transportation Co., Ltd. are dismissed. 



The litigation fee in this case is RMB36,060, of which the amount of RMB15,670 shall be borne by the Plaintiff Textainer, the amount of RMB10,195 shall be borne by the Defendant Shenzhen Lianfu, and the amount of RMB10,195 shall be borne by the Defendant Agricultural Products. The litigation fee in the counterclaim case is RMB50 which shall be borne by the Plaintiff in the counterclaim-Agricultural Products. The court fee has been prepaid by the Plaintiff Textainer, and this court will not refund thereof. The Defendant Shenzhen Lianfu and Shenzhen Agricultural Products shall each pay their respective portion of court fee directly to the Plaintiff Textainer. The pre-trial property preservation fee in the amount of RMB6,550, and enforcement fee in the amount of RMB5,000, shall be borne by the Defendant Shenzhen Lianfu and Shenzhen Agricultural Products in half each.



The forgoing pecuniary obligations shall be performed within 10 days when this Judgment becomes legally effective.



In the even of failure of payment of any sums as adjudged herein within the designated time period, the defaulting party shall pay double interest for the period of delay as penalty in accordance with the provisions of Article 229 of the Civil Procedure Law of China.



In event of dissatisfaction with this Judgment, Textainer may, within 30 days of service of this Judgment, and Shenzhen Lianfu and Shenzhen Agricultural Products may, within 15 days of service of this Judgment, submit a Statement of Appeal to this Court with copies according to the number of the other parties to this case, for appealing to the Higher People??s Court of Guangdong Province.  





Presiding Judge:		Wu Zili

Judge:				Song Weili 

Acting Judge		Yang Yaxiao



(Official Chop of Guangzhou Maritime Court Affixed)

August 1, 2012



Certified to be true to the original 



Clerk				Zeng Huifen





The translation is provided by Wang Jing & CO.