Guangzhou Maritime Court of the People??s Republic of China


Civil Judgment

(2008)GHFCZ No.101


Plaintiff: AIG UNION DESARROLLO S.A. 

Domicile: Calle Loma Linda No.265, San Salvador, El Salvador, C.A. 

Legal representative: Francisco P.R. De Sola, Director-General

Agent ad litem: Sun Jingliang, attorney from Wang Jing & Co.


Defendant: Guangzhou Ocean Shipping Company 

Domicile: 412 Huanshi Dong Lu, Guangzhou, People??s Republic of China.

Legal representative: Xu Huixing, General Manager 

Agents ad Litem: Huang Hui, attorney from Huang & Huang Co. Law Firm.

              Zhang Jing, attorney from Huang & Huang Co. Law Firm.


On 22nd February 2008, the Plaintiff AIG UNION DESARROLLO S.A. filed an action before this Court for a dispute arising from the contract of carriage of goods by sea with the Defendant Guangzhou Ocean Shipping Company. The Court, having entertained the case, proceeded to try it by a collegial panel according to law and summoned the parties twice to exchange evidence before the hearing on 4th November 2008 and 21st May 2009 respectively. On 21st May 2009, the Collegial Panel tried the case in public, the agent ad litem Sun Jingliang entrusted by the Plaintiff and the agents ad litem Huang Hui and Zhang Jing entrusted by the Defendant appeared before the Court. This case now has been concluded. 


The Plaintiff alleged that: In July 2001, M/V ?°Hengshan?± owned by the Defendant were loaded on board three shipments insured by the Plaintiff, and issued B/L F-02, B/L S202 and B/L S203 respectively. In transit, the goods contained in B/L S202 and B/L S203 suffered a total loss, the Plaintiff therefore reimbursed the Insured in a sum of US$ 479,187 as well as a sum of US$ 1,365.41 for charges of cargo disposal. In the mean time, as per Adjustment Report issued by Richards Hogg Lindley, the Plaintiff paid a sum of US$ 14,638.57 to the Defendant for the goods under B/L F-02, as a contribution to the general average. The Defendant, by issuing bills of lading, have assumed the obligations as to diligently and properly stowage and care for the subject goods, and shall also delivered the goods as stated in the Bills of Lading completely and in good condition at the port of destination. The Defendant, due to its default of obligation, however has caused the holder of the Bills of Lading to suffer damages. As an underwriter for the subject goods, the Plaintiff, having reimbursed the holders of the Bills of Lading and paid the contribution to the general average, has already lawfully subrogated with the title to suit the Defendant acting as the carrier. The Plaintiff therefore requested the Collegial Panel to rule that: 1. the Defendant shall reimburse the Plaintiff in a sum of US$ 480,552.41 and the interests accrued thereon for the damaged goods [the damage shall be fixed in a sum of RMB3, 433,643.08 (as converted on 20th February 2008 as the fixing date and relevant interests shall be calculated as per short -term loan interest rates as published by the People??s Bank of China (6 months ¨C 1year) from 5th April 2002 to the actual payment date]??2. The Defendant shall reimburse the Plaintiff in a sum of US$ 14,638.57 and the interests accrued thereon for the contribution to general average [such loss shall be fixed in a sum of RMB 104,595.51(as converted on 20th February 2008 as the fixing date and relevant interests shall be calculated as per short-term loan interest rates as published by the People??s Bank of China (6 months- 1 year) from 13th July 2004 to the actual payment date]. 3.The Defendant shall burden the litigation costs as well as other relevant legal expenses. 


The Plaintiff provided following evidence within the time limit for adducing evidence: 1. Documents relevant to the insurance indemnity, to prove the settlement of the insurance claim; 2. The Fire Accident Report of M/V ?°Hengshan?± (No.0110-131) issued by GWF Franklin S.A, to prove the fire accident occurred in No.2 cargo hold of M/V ?°Hengshan?± and goods under B/L S202, B/L S203 suffered a total loss as well as the value of the goods; 3. Adjustment Report issued by Richards Hogg Lindley, to prove contribution of the goods under B/L F-02 to general average shall be 25.606% of the goods value; 4. the Charterparty dated 28th June 2001, to prove that there has been a charterparty concluded between the Defendant and the shipper, and the charterparty has been incorporated in the Bill of Lading; 5. The Harbor Entry Declaration Form??to prove the Defendant deliberately  made false declaration of the quantity of the dangerous goods; 6. A List of Dangerous Goods, to prove the Defendant misrepresented the quantity of the dangerous goods and thus had fault in causing the fire accident. Among the evidence abovementioned, No.042866 Open Policy, No.035031 Insurance Certificate and Extension Clause contained in Evidence 1 and Evidence 3are authentic by verification with the original copies, others are duplicate copies.


The Defendant argued that: 1. The Plaintiff is not a proper claimant in this Case and thus not entitled to file the action. The Insurance Certificate provided by the Plaintiff was unilaterally issued by itself, and was not an Insurance Contract. The Plaintiff was unable to provide evidence to prove the insured under the Insurance Policy was the exact lawful holder of the subject Bills of Lading or the exact consignee of the subject goods and who also had insurable interest over the goods when the incident occurred. 2. By bringing a time-barred claim, the Plaintiff has lost its right of winning the claim, the claim or the litigation requests therefore shall be rejected according to law. 3. The Plaintiff was unable to prove the total loss of the goods under in B/L S202 and B/L S203, who was therefore not entitled to claim for the cargo damage against the Defendant. 4. Assuming but not conceding that there was a real total loss of the goods under B/L S202 and B/L S203, the Carrier was entitled to exempt from the liability for fire and without taking any liability for compensation. 5. The general average was attributable to the fire which fell into the ambit of the exemptions the Carrier could enjoy, the Plaintiff was not entitled to claim for the contribution to general average according to law. The Defendant therefore requested the Collegial Panel to reject this lawsuit or claims filed by the Plaintiff, and ordered whom to bear the litigation costs. 


The Defendant provided following evidence within the time limit for procuring evidence: 1.Certificates of M/V ?°Hengshan?± (Including: Cargo Ship Safety Construction Certificate, Cargo Ship Safety Equipment Certificate, International Oil Pollution Prevention Certificate, Classification Certificate for Hull, Classification Certificate of China Classification Society, Minimum Safe Manning Certificate) and Crew List for the case-involving voyages, Document of Compliance, Inspection Report issued by Classification Society, Inspection Report issued by authority etc, to prove the seaworthiness of the vessel; 2. Ship??s Log, to prove the Defendant has performed its obligations as to properly keep and care for the goods; 3. Cargo Inspection Report of M/V ?°Hengshan?±, to prove no damage was found after the discharge of the goods under B/L S202 and B/L S203; 4. Inspection Certificate noted as Annex 6 of Adjustment Report issued by Richards Hogg Lindley (selected part), to prove the goods under B/L S202 and B/L S203 suffered no damage; 5. Inspection Certificate noted as Annex 3 of Adjustment Report issued by Richards Hogg Lindley, to prove the subject goods suffered no damage; 6. The Fire Accident Report of M/V ?°Hengshan?± issued by Burgoyne Incorporate on 22nd August 2001, to prove there was no fault and negligence on the part of the Defendant. Evidence 2, 3, 6 are authentic by verification with the original copies, others are duplicate copies.


Both parties submitted a selected work of IMDG Code 2000 Edition.


In the process of examination of the evidence, the Defendant did not acknowledge the authenticity of the evidence which were provided as duplicate copies by the Plaintiff; as to the Adjustment Report issued by Richards Hogg Lindley, the Defendant did not acknowledge it by reason of want of notarization and certification but did acknowledge the expenses incurred by general average. Besides, the Defendant acknowledged the matters as to the transportation of the subject goods and the fire accident occurred during the transportation as asserted by the Plaintiff. The Plaintiff did not acknowledge the authenticity and relevance of certificates of M/V ?°Hengshan?± as contained in Evidence 1, it however acknowledge other evidence provided by the Defendant. The Collegial Panel confirmed the evidence and facts as acknowledged by the parties and discussed the disputed ones hereinafter. 


Through investigation, the Collegial Panel ascertained the facts as follows: 


I.	 Matters as to cargo transportation and damage


On 28th June 2001, MANUCHAR acting as a charterer concluded a GENCON FORM charterparty with the Defendant, the carrying vessel was M/V ?°Hengshan?±. In July, M/V ?°Hengshan?± loaded goods in Shanghai and Tianjin etc and thereafter proceeded to El Salvador etc. On 13th July, The Defendant issued the B/L S203, under which, the shipper is MANUCHAR Company, the consignee is ?°To Order?± and the notify party is INDUSTIAS UNISOLA SA Company, the goods are 800 tons of sodium tripoliphosphate contained in 800 bags. On 14th July, the Defendant issued B/L S202, under which, the shipper is MANUCHAR Company, the consignee is to the order of LEVER El Salvador and the notify party is LEVER DE HONDURAS S.A., the goods are 200 tons of sodium tripoliphosphate II contained in 4000 bags, and each bag weighs 50 kilo grams. The port of Loading as stated in B/L S203 and B/L S202 is Shanghai, China. On 19th July, the Defendant issued B/L F-02, under which, the shipper is MANUCHAR Company, notify party is INDUSTIAS UNISOLA SA Company, the port of loading is Tianjin, the goods are 500 bags(each bag weighs 1 ton) of sodium sulfate. The port of destination as stated in all three Bills of Lading abovementioned is Acajutla, El Salvador and the Charterparty as dated 28th June 2001 were incorporated into these Bills of Lading.


On 20th August 2001 at 14:25, M/V ?°Hengshan?± arrived at Manzanillo, Mexico and started to discharge the goods at 17:00 on the same day. On 22nd August at 07:30, No.2 cargo hold was on fire and the vessel sailed to the anchorage with a view to extinguishing fire. On 24th August at 14:20, the fire was extinguished and explosive/poisonous gas was clear out in the No.2 cargo hold thereafter. On 31st August, the Defendant claimed for general average. On 20th September, discharge of the goods resumed. On 11th October, discharge of the goods was completed and the vessel departed from Manzanillo, Mexico and proceeded to the next port. On 30th January 2004, Richards Hogg Lindley issued the Adjustment Report as an adjustor for general average. The Defendant, despite without acknowledging the Report, actually cited the annex of the said Report to prove its claims and confirmed the loss incurred in general average. Thus, the said Report shall be admissible. According to the Report, the contribution of the goods noted in B/L F-02 for general average shall be subject to 25.606% of their value. The Plaintiff has made a payment to the Adjustor in a sum of US $14,638.57 as a contribution to general average for the insured INDUSTRAS UNISOLA S.A. as noted in B/L F-02. The Defendant has acknowledged receipt of the payment via the Adjustor. 


Having been shipped to the port of Acajulta, El Salvador, the subject goods were inspected by GWF Franklin S.A. and who also issued the Fire Accident Report of M/V ?°Hengshan?± (No.0110-131) on 22nd February 2002. The Defendant did not acknowledge the said Report for the reason that the originals is not provided for checking. The Defendant provided the Cargo Inspection Report of M/V ?°Hengshan?± and annex of the Adjustment Report as evidence to the contrary. The Collegial Panel is of the opinion that from their contents, all of three Reports describe the goods are in apparent good condition except as are smoked and tainted. The Inspection Report and the annex of the Adjustment Report provided by the Defendant do not specify matters as to whether the smoked and tainted goods would have an effect on their use as well as how to deal with the problems etc, while the Inspection Report provided by the Plaintiff further specifies that the goods are deemed to be a constructive total loss by reason of the uselessness of the goods, parts of the facts of three Reports could be mutually proved and the contents noted therein are not contradicted with each other. Thus, the Inspection Report and the annex of the Adjustment Report provided by the Plaintiff shall be admissible and the contents noted therein shall be confirmed. 


It is alleged from the Inspection Report provided by the Defendant that the surveyor carried out a full inspection of discharge of the goods on the scene on 18th October 2001, it has been found that the goods were free from substantial damage except as were tainted, by which it drew a conclusion that the goods, having been discharged and inspected, appeared to be in apparent good condition and without any indication that they had been damaged except as were tainted. 


According to the Adjustment Report, there were unknown residues covering the surface of the packing bag on the top tier of No.2 Bottom Cargo Hold, and the goods contained in open packing bags may be contaminated by CO2 or other gas during the fire incident, but the condition of the content will be determined by an expert. Inspector did not determine in details the damages that each of the cargos stowed in No. 2 Cargo Hold suffered, and this shall be done by the individual Consignee when they received the cargo at their installation.


According to the Adjustment Report of GWF Franklin S.A. submitted by the Plaintiff, in response to the application of the Plaintiff, GWF Franklin S.A. has carried out inspection on the goods in warehouse No.1 in the Port of Acajutla in Salvador on 24 October 2001. The vessel arrived on 16 October 2001 and the unloading of the goods was finished at 1135 on 22 October 2001. In accordance with the stowage plan, S202 and S202 Shipments were loaded in the bottom of No.2 Cargo Hold; F-02 Shipment was on the upper-deck of Hold 1. Paraffin and other goods in Hold 2 were loaded on the upper-deck; the first shipment, S203 shipment was loaded in the bottom of Hold 2, and the third shipment, i.e. S202 shipment, was loaded on the top of S203 shipment. According to relevant information, fire broke out in Hold 2, which is the same as the inspection results of surveyors, but it seemed that the fire broke out on the upper-deck of Hold 2. Shipments of S203 and S202 were undamaged in their outer appearance but have suffered from fumigation and some of them were broken. Because there was inconsistence in the fluctuation of the source of samples, observed status of the goods and unexplainable test results in the tests carried out in the independent lab, the test results provided by the consignee shall be most accurate. According to the test results provided by the consignee, the particle size and density of the goods do not complied with the specifications. On 11 February 2002, representatives of the consignee LEVER Salvador Company, INDUSTIAS UNISOLA S.A. and the Plaintiff held a meeting in a processing factory in Salvador, and the Consignee alleged that the smoky smell of the goods would be the major problem for the use of the goods because the subject goods would be used as the basic products for manufacturing detergent. Upon estimation, the fees for reprocessing??not including additional charges or any other charges during the transportation of the goods, is about USD 447,100. In consideration of all aspects of this claim, the Inspection Office determined shipments S203 and S202 have constituted total loss. The total value of CIF price on the invoices of the goods under B/L S203 and B/L S202 are USD 386,400 and USD 97,600 respectively, and the total amount is USD 484,000. Because shipment F-02 was loaded in Hold 1, goods were not influenced by the fire and this shipment was delivered at port.


In addition, although the Plaintiff did not recognize the evidence, such as ship??s certificates submitted by the Defendant on the ground that these materials are just photocopies, however, these certificates and other evidence are in consistent and mutual proving, therefore they should be adopted in the absence of evidence to the contrary. Upon investigation, M/V ?°Hengshan?± owned by the Defendant is a steel multifunctional general cargo vessel built in 1983 with the vessel official number of 84D1113, IMO number of 8225357, total tonnage of 12,448 and net tonnage of 6548. Both the Ship Minimum Safety Manning Certificate and Cargo Ship Safety Equipment Certificate of the vessel were still valid at the time when the accidence occurred and the subject voyage conforms to the requirement of minimum safe manning. China Classification Society has also issued an Inspection Report indicating that, upon the inspection by the Company certified by the member society of the International Association of Classification Societies, the status of the carbon dioxide system on the vessel was found to be satisfactory. Article 12 of the Charter Party dated 28 June 2001 stipulates that, the Defendant guarantees the vessel can load goods including chemicals, steels and paraffins in an total amount of at least 12,5000 metric tons when it is full loaded, and the deck of the vessel can load up to 230 tons of dangerous goods and cargo holds can load up to 1000 metric tons of dangerous goods; Article 28 stipulates that, the Captain shall be responsible for the stowage plan and supervision of the process of the transshipping, stowing and unloading of the goods.


II.Cause for the Occurrence of Cargo Damage


The Defendant insisted it has fulfilled its obligations as a carrier according to the Inspection Report of the Fire Incident and Log Book of M/V ?°Hengshan?± issued by Burgoyne Incorporate. The contents of the Log Book and the Report are consistent.


According to the Report, the handling of the fire incident and the investigation on the cause of the incident were carried out under the instruction of the Protection and Indemnity Association of the vessel. This vessel is of the length of 157.64 meters, breath of 27.60 meters, and the breath to the upper deck of 12.995 meters. There are altogether 4 cargo holds on the vessel with each hold having a tween deck hold and a bottom hold. The tween deck hold of Hold 2 was separated into left and right sections with the capacities of 1608.3 cubic meters and 1669.8 cubic meters respectively, and the capacity of the bottom hold is 4729 cubic meters. The cargo spaces of the vessel were protected by the total flooding CO2 fire extinguishing system with the installation of slot-in smoke detectors at the same time. The fire incident of M/V ?°Hengshan?± occurred in MANZANILLO of Mexico at the voyage of NO.26, which was right within the time of the unloading of the goods loaded from China. Details of loading and unloading of the cargos and the observations during the fire incident from crew were obtained from the inquiries from different crew members. The subject voyage loaded goods in Shanghai on 13 July and the goods loaded into Hold 2 at the beginning were sodium tripoliphosphate for the shipment to Guayaquil and Acajutla, goods loaded later on the voyage were cascorbic acid, Silicon-manganese and other sodium tripoliphosphate. Later, paraffins were loaded into Hold 2. tween deck hold of Hold 2 started to load goods on 18 July. Several bags of paraffins were loaded in at first, then several drums of Sodium Hydrosulphit were loaded, at last many bags of paraffins and lead ingots were loaded. On 21 July, paraffins were loaded into tween deck hold of Hold 2 in Dalian for the shipment to MANZANILLO. During the voyage, the sea was mild, and ventilation doors of all Holds were open, at the same time, the plenum system was also used for the ventilation of the cargo holds. During the voyage, no one has ever entered into the deck or bottom hold of Hold 2. The smoke detecting system installed in the bridge was kept on working status with a checking for every 4 hours. During the unloading of goods, expect for the standard supervision, no crew has ever entered into the cargo space or participated in the unloading operation. The unloading of the goods of Hold 2 started from unloading paraffins in bags and this unloading continued to 0730 on 22 August when the fire incident was detected for the first time. It was said that no other cargo has been unloaded from Hold 2 before the occurrence of the fire incident. Before the occurrence of the fire incident, there was no abnormal smell during the unloading of the goods. The unloading of paraffins continued to 0700 on 22 August. At 0730 of 22 August, crew member on watch started to patrol and took out the headlight from the tween deck hold of Hold 2 when he found that there was a ball of red light in the bottom hold from the joint of the hatch cover of the second floor tween deck hold with a little smoke. Chief engineer immediately grasp a dry powder fire extinguisher of 6 kilogrammes from the storage room of the boatswain and found that there was a small flame coming out from the joint of the hatch cover of the second floor tween deck hold. It was confirmed that the position of the flame was on the right front of the tween deck hold, a little ahead from the place where drums of Sodium Hydrosulphit were placed. Fire extinguisher did not work at that time and later the hatch cover and the ventilation system were closed. Four fire hoses were connected to cool down the edge of the hatch cover on the right. Later, Co2 was injected into Hold 2. Shortly after the occurrence of the fire incident, several towages approached the vessel and used fire monitors to further cool down the hatch cover. The vessel was shift to berth at anchorage at around 1333. The conclusion is the fire incident was originated at Hold 2 and the goods involved included Sodium Hydrosulphit in drums and paraffins in bags. Crew members on the vessel injected Co2 through the closed hatch cover and took measures such as cooling the edge of hatch cover by using fire hoses, successfully taking control of the fire. Later, inert gas generator was used to purify the toxic and flammable gas with the holds. After that, cargo holds were opened and the unloading of goods started. Investigation shows that the fire incident originated on top of the goods at the right front of the bottom hold and at the very beginning, the flame was found in the gap at the joint of the hatch cover on the deck of second floor in the right front of the tween deck hold. According to the Inspection, no equipment on the vessel within the area where the fire incident originated shall be responsible for the fire incident. No direct tangible evidence proving the specific reasons for the occurrence of the fire incident has been found. The Investigation indicated that the fire incident was not caused by any defect or any fault of any system or equipment onboard the vessel, and there was neither any evidence showing the fire incident was caused by any conduct of any crew member. However, through the method of exclusion, only the following possibilities might be the cause of the fire incident. The occurrence of the fire incident seemed to have connection with the damage or spillage of the Sodium Hydrosulphit in drums during the unloading in MANZANILLO, or flammable matters such as cigarette carelessly disposed by unloading workmen, or hot particles produced during the exhaust of diesel-driven forklift used by unloading workmen for the unloading of goods. From the current stage, the most possible cause of the fire would be the spillage and fire of Sodium Hydrosulphit, because it was very difficult for the lit cigarette or hor particles to cause the bags packing paraffin to catch fire.


The Plaintiff did not recognize the reasons for the fire incident. The Plaintiff alleged that, the Defendant deliberately made false declaration with the port authority of Manzanillo with regard to the quantity of dangerous cargo carried onboard, which led to the fact that the port authority and discharging Company failed to supervise or handle properly the discharging as they should do and the stowage of the dangerous cargo was inappropriate, which do not comply with the requirement of International Maritime Dangerous Goods Code (2000), the lack of fire extinguishing equipment on the vessel led to the loss of goods. The Plaintiff therefore submitted the photocopies of the Application Form for Visiting Ships filed with the SECRETARIA DE COMUNICACIONE Y TRANSPORTES of Manzanillo port in Mexico. The Defendant did not recognize this evidence. The Collegiate Bench hold that, on the photocopy of Application for Visiting Ships, the ship??s name has been obviously revised (from HEGSHAN to HENG SHAN), the administration number of the ship is not consistent with the one on the certificate provided by the Defendant, and the signature and seal of the captain is illegible and has no corresponding supporting evidence, thus shall not be adopted as evidence.


III.Situation concerning the Sales and Insurance of the Cargo


The 042866 open policy, 035031 insurance certificate and extension clauses issued as the documents of insurance settlement for claims rendered by the Plaintiff are original copies, and other evidence such invoices issued by MANUCHAR Company are photocopies. But matters of transportation stated on the invoices are consistent with the relevant notes on the bills of lading, and the open policy and insurance certificate are mutual proving, thus these evidence shall be adopted in the absence of evidence to the contrary. Basic on the above facts, it was found that:


Goods under bill of lading of S202 were purchased by LEVER Honduras Company from

Belgium MANUCHAR Company with CFR Allah Hu Tel price, in an total amount of USD 97,600. LEVER El Salvador bought ?°Transport of Merchandise Insurance, Export-Import and Internal Transport?± from the Plaintiff., and the then Plaintiff issued a Insurance Certificate numbered as 035351 to the insured LEVER El Salvador ON 20 November 2001, which was one of the insurances under the open policy numbered as 044479. According to the notes on the Certificate of Insurance, shipping units of the goods included many suppliers, and the goods were delivered to LEVER El Salvador to be carried by MV ?°Hengshan?± from Salvador to Central America and Panama. As per the Declaration dated on 31 October 2001, the responsibility period is Warehouse/Warehouse. As indicated on the Declaration, the subject cargo was raw materials bought by LEVER Salvador from affiliated companies in October 2001. The Plaintiff claimed that this shipment was purchased by LEVER El Salvador from LEVER Honduras. Because the Insured did not know about the damage to the cargo until the cargo was delivered to Salvador in October 2001, thus classified the cargo into the Declaration of October. In April 2002, the Plaintiff, as per the insurance contract, pay USD 976,624.00 to the insured, El Salvador LEVER Company as the insurance indemnity. The insured issued a receipt confirming that it had received the above amount.


Goods S203 with a value of USD386, 400.00 were bought by INDUSTRIAS UNISOLA SA from Belgium seller MANUCHAR at C&F Acajutla Salvador. GRUPO UNISOLA bought ?°Transport of Merchandise Insurance, Export-Import and Internal Transport?± from the Plaintiff. The insured was GRUPO UNISOLA and its affiliated companies in Central America. The Plaintiff thereby issued open policy No. DM-42866. The risks covered include the damage to goods owned, kept, supervised or controlled by the insured during the transportation. The responsibility period is Warehouse/Warehouse. The insurance is valid from 1 May 2001 to 30 April 2002. The insured is required to make monthly declaration of the value and movement of the goods. Moreover, the deductible amount for loss of marine unfrozen goods is 1% of goods value. The Plaintiff issued an Insurance Certificate numbered as 035031 to the insured on 25 September 2001. According to the Insurance Certificate, the Insured was INDUSTIAS UNISOLA S.A., and shipping units of cargo included many suppliers , cargo to be delivered to INDUSTIAS UNISOLA S.A. to be carried by MV ?°Hengshan?± for shipment from America, Mexico etc. to Salvador and other places as per the Declaration dated on 31 August 2001. In the Declaration Form dated August 2001, the ?°place of shipment?± was ?°Belgium?±. The Plaintiff alleged that it is because the seller was a Belgium Company and it makes no difference with respect to coverage under open insurance. In April 2002, the Plaintiff, as per the insurance contract, paid USD382, 563.00 to the insured, INDUSTIAS UNISOLA SA, as insurance indemnity. The insured issued a Receipt confirming that it had received the above amount. 


In addition, both the Plaintiff and the Defendant confirmed that the delivery day of the damaged goods shall be dated 29 November 2001 but could not confirm the termination date of the general average adjustment. 


The Plaintiff alleged that it has filed a lawsuit with Panama No.2 Maritime Court against the Defendant dated 15 October 2002. And on October 17th the Defendant provided a guarantee to the said court via its P&I club. On 22 May 2003, Panama No.2 Maritime Court held that this Court shall have jurisdiction over the dispute, and decided to suspend the litigant action. Since the Plaintiff could not submit evidences to prove the facts, the Defendant did not approve the said statement. 


In the process of litigation, the Plaintiff filed an application that this Court should make the adjudication on the limitations of action alone, but the defendant objected that. 


Both parties agreed that the laws of Chinese Mainland shall apply to the handling of the subject disputes.


The members of the collegial panel agreed that it is a case concerning disputes over the contract of carriage of goods by sea which is filed by the insured in performing its subrogation right as per the B/L after the insurer paid the indemnity for the loss of goods and the general average adjustment charges according to the insurance contract. The Plaintiff is an El Salvador Company and the goods involved were transported from China mainland to El Salvador and other place which makes this case contains the factor concerning foreign affairs. The Plaintiff instituted an action in this Court. Since the maritime court has specific jurisdiction over the dispute concerning the contract of carriage of good by sea, the place of departure in the contract involved and the place where the Defendant has its domicile are under this Court??s jurisdiction, this Court shall have the jurisdiction over this case in accordance with Paragraph 2 of Clause 2 in Article 6 of The Special Maritime Procedure Law of the People??s Republic of China and Article 28 of the Civil Procedure Law of the People??s Republic of China. During the court hearing, parties concerned agreed that the disputes shall be handled pursuant to the laws of Chinese Mainland. And according to Article 269 of the Maritime Code of the People??s Republic of China, the contract involved shall be handled apply to the laws of Chinese Mainland. 


I.On the Plaintiff??s Subrogation Right and the Limitations of Action 


1.On the Plaintiff??s Subrogation Right 


The Plaintiff, as the insurer of the carriage of goods involved, obtained the subrogation right after paying insurance indemnity for the loss of goods involved to the insured, El Salvador LEVER Company and INDUSTIAS UNISOLA SA, thus is entitled to perform the subrogation right for the said two companies according to law. The collegial panel heard the case and focused on the carriage contract relationship between the insured and the carrier alone. The matter whether the consignee of the goods involved has insurable interest in the goods or not during the insured incident, goes beyond the cognizance of this Court in hearing the case, thus shall not be heard. In accordance with the B/L and Charter Party, the Defendant is the carrier of the carriage involved; the consignee under B/L S202 is to the order of El Salvador LEVER Company; the consignee under B/L S203 and F-02 is ?°To Order?± and the notify parties under the three B/Ls are El Salvador LEVER Company, INDUSTRAS UNISOLA S.A.. Though, the B/L involved submitted by the Plaintiff has no terms and conditions on the reverse, there are three copies of Insurance Certificate referred to the contents of the B/L which proves that the aforesaid two companies are the consignees of the two shipments of goods involved carried by the Defendant. The Cargo Damage Survey Report issued by GWF Franklin S.A. also shows that the said two companies participated in the settlement of cargo damage as consignees. These facts preliminarily prove that El Salvador Company and INDUSTRAS UNISOLA S.A. are the lawful holders of the three B/Ls involved. The Defendant, as the carrier of the carriage of goods involved, shall bear the responsibility of making delivery and hold the relevant evidences for the delivery. In case the Defendant fails to provide evidence to the contrary, the collegial panel may determine that the consignee under the B/L S202 involved in the subject case is El Salvador LEVER Company, and the consignee under the B/L S203, F-02 is INDUSTRAS UNISOLA S.A.. The Plaintiff, performing the subrogation right for the three consignees of the said three shipments of goods, is entitled to claim against the Defendant in accordance with the B/L. And the Defendant??s defense for the said claim shall be dismissed. 


2.On the time bar issue


According to the clause of Article 257 of the Maritime Code of the People??s Republic of China, the limitation of action for the Plaintiff to institute an action with respect to contract concerning carriage goods by sea in performing the subrogation right for the consignee according to the B/L shall be 1 year, calculated from the date when carrier make or shall make the delivery. In the subject case, the parties concerned confirmed that the delivery day of the goods under the B/L S202 and S203 shall be on 29 November 2001, and the limitation of action shall be calculated from that day on. Therefore, the limitation of action for the Plaintiff to bring a claim against the carrier with regard to the alleged loss of goods under the B/L S202 and S203 shall be expired on 29 November 2002. The Plaintiff has already paid the general average adjustment charges, and according to Article 263 of the Maritime Code of the People??s Republic of China, the limitation of action for the Plaintiff to pursue recovery from the Defendant in performing its subrogation right for the insured shall be 1 year calculated from the termination date of the adjustment. Since the Plaintiff and the Defendant could not confirm the accurate termination date of the adjustment and the adjustment report shall be issued after completing the adjustment, it is reasonable to calculate the time limit from the day of issuing the adjustment report, which is 30 January 2004. And the limitation of action shall be expired on 30 January 2005. On 22 February 2008, the Plaintiff brought a lawsuit to this Court to make claims against the Defendant for the loss of goods and the general average adjustment charges, and such action were filed after the expiration of the limitation of action. The Plaintiff could not provide evidence to prove that this case has the grounds for suspension and discontinuance as prescribed in Article 267 of the Maritime Code of the People??s Republic of China. The claims brought by the Plaintiff with respect to the loss of goods involved in the case and the apportionment expense after the general average adjustment were filed after the expiration of the limitation period of action, and they should be dismissed according to law. 


II.Other Issues disputed over by the Parties concerned 


1.Whether the goods under the B/L S202 and S203 should be determined as actual total loss or not? 


The Inspection Report issued by GWF Franklin S.A. and the Adjustment Report submitted by the Plaintiff for proving total loss of the goods, the Cargo Inspection Report of M/V ?°Hengshan?± and the Fire Accident Report submitted by the Defendant conform to each other in recording the cargo transportation, fire accident and the fumigation to goods. The Inspection Report issued by GWF Franklin further shows that the consignee alleged that the fumigation is the major issue because the goods involved will be used as raw materials for detergent. In consideration of the reprocessing expense (not including the surcharge during the transportation of the goods and other expenses) and the various aspects of this claim, the S203 Shipment and the S202 Shipment shall be determined as constructive total loss. In case the evidence submitted by the Defendant could not refute the Inspection Report issued by GWF Franklin S.A., the collegial panel may determined the goods involved as constructive total loss due to fumigation after the fire accident in accordance with the said report. 


2.On Causes of the Loss of Goods under B/L S202 and S203


Among the reports submitted by the Plaintiff and the Defendant, only the Fire Accident Report of M/V ?°Hengshan?± issued by Burgoyne Incorporate submitted by the Defendant has analyzed the causes of cargo loss. In case the Plaintiff could not present evidence to the contrary, the collegial panel may determine the cause of cargo loss according to the analysis in the said report, i.e. the most probable reason for causing the damage of goods is the overflow of Sodium Hydrosulphit, which then caused the fire accident.   


3.Whether the Defendant, as carrier, failed to provide a vessel both sea-worthy and cargo-worthy, to stow and discharge goods properly and prudently or not? Whether the Defendant could be entitled for fire exemption with regard to the loss caused by the fire accident or not?


The vessel certifications submitted by the Defendant show that the vessel involved was sea-worthy and cargo-worthy before and at the beginning of the voyage, and manned with enough crew members. The vessel was also equipped with carbon dioxide extinguisher system which is qualified by classification society. According to International Maritime Dangerous Goods Code (2000), Sodium Hydrosulphit belongs to class 4.2 dangerous goods, and Silicon-manganese belongs to class 4.3 dangerous goods. The two kinds of dangerous goods shall be kept in cool condition during transportation, and be stowed ?°far away?± from heat sources, i.e. they can be stowed in one hold, but the vertical distance between the two shall be no less than 3 meters. During the voyage involved, the two shipments of Sodium Hydrosulphit and Silicon-manganese were stowed separately in the tween deck and the lower hold in Hold 2 which did not violated the stowage provisions of International Maritime Dangerous Goods Code (2000). According to the logbook and the Fire Accident Report of M/V ?°Hengshan?± issued by Burgoyne Incorporate, during the fire accident and afterward, the Defendant has taken rational measures to put out the fire, and adopted proper measures like: ventilation, air change, cleaning, and elimination of smell and so on, to take cake of the goods properly and prudently. The Plaintiff alleged that the damage of goods was caused due to the Defendant??s failure to declare faithfully the actual condition of the dangerous goods on board to the port authority of Manzanillo, Mexico, which makes the port authority and the discharge Company failed to supervise and handle the discharging of goods properly as it should be. However, the factual ground of such alleged causal relationship is insufficient and thus could not be adopted by this court. And the fumigation is an inevitable result of the fire accident. The carrier shall not be liable for the loss of the goods caused by fumigation after a fire accident due to the fault not attributable to the Defendant itself in accordance with Paragraph 2 of Clause 1 in Article 51 of the Maritime Code of the People??s Republic of China. 


To sum up, this court rendered the following judgment in accordance with Paragraph 2 of Clause 1 in Article 51, Clause 1 of Article 257 and Article 263 of the Maritime Code of the People??s Republic of China: 


The litigation requests of the Plaintiff, AIG UNIION DESARROLLO S.A, shall be dismissed.


The court fee in amount of RMB44, 712 shall be borne by the Plaintiff. 


In case any party is not satisfied with this judgment, the Plaintiff should, within 30 days after this judgment is served, while the Defendant should, within 15 days after this judgment is served, submit a statement of appeal to this court so as to make appeal with the Higher People??s Court of Guangdong Province. 








Presiding Judge: Song Weili 


Acting Judge: Song Ruiqiu


Acting Judge: Chang Weiping 



November 2, 2010

(Sealed by Guangzhou Maritime Court)



Court Clerk: Zhu Mingfang 



This copy has been verified as identical with the original.



The translation is provided by Wang Jing & CO.