ZHANG Jiansheng

[Abstract]
In case collision involved a ship which is on her trial voyage, according to the principle of "Who controls shall assume the risk", since the ship is controlled by the shipbuilder, who shall thus bear the risk accordingly. For collision involved three ships, whether it shall be deemed as one incident or two shall depend on the examination whether there exists a close-quarters situation and whether there is sufficient time for taking avoiding measures.

[Case index]
First instance: Ningbo Maritime Court, (2011)YHFZSCZ No.24 dated 23 December 2011
Second instance: Zhejiang Higher People's Court, (2012)ZHZZ No.31 (16 May 2012)

[Detail of case]
Plaintiff (Appellee): Shao Jun'ou
Defendant (Appellant): Zhoushan Dingheng Shipbuilding Co., Ltd. (hereinafter referred to as "Zhoushan Dingheng")
Defendant: Shanghai Dingheng Shipping Co., Ltd. (hereinafter referred to as "Shanghai Dingheng")

At aournd 1000hrs on 19 April 2010, "Zhe Xiang 988" owned by the Plaintiff departed from Fuzhou after loading with around 5000MT sand, while "Ding Heng 9" was anchored in Fo Du fairway. At 1144hrs, "Zhou Hai You 9", sailed down from Dinghai, passed through the sea area in a distance of 0.5nm west to Yang Xiao Mao. At 1158hrs, the Second Officer of "Ding Heng 9" observed "Zhe Xiang 988" in a distance about 0.3nm who approached to her. Both of the ships had not taken any avoiding measures. At around 1200, the two ships collided. At 1201hrs, "Zhou Hai You 9" detected "Zhe Xiang 988" in a distance shorter than 0.3nm, and order to "hard to port". At around 1201.5hrs, "Zhe Xiang 988" first observed "Zhou Hai You" which was in a distance of tens of meters. At around 1202hrs, the two ships collided. At around 1204hrs, "Zhe Xiang 988" sunk. The Plaintiff paid the wreck removal cost for "Zhe Xiang 988" in an amount of RMB2 million and indemnification to family dependents of the 4 deceased crewmembers in an amount of RMB2.28 million. On 15 June 2011, the MSA issued the Investigation Report of Marine Incident, determining that "Zhe Xiang 988" and "Zhou Hai You 9" shall bear equal liability for the collision between them, while "Zhe Xiang 988" shall bear the major liability for the collision between her and "Ding Heng 9" and "Ding Heng 9" bears the secondary liability. The Plaintiff brought a lawsuit before the court requesting the two Defendants to bear the joint and several liability to indemnify the Plaintiff for RMB4 million and assume the legal costs.
The court found that the registered operator of "Ding Heng 9" is Zhoushan Dingheng during her trial voyage. On 28 April 2011, the Defendant Zhoushan Dingheng completed the building of "Ding Heng 9" and the Defendant Shanghai Dingheng obtained the ownership of the ship the next day, on 29 April 2011.

[Trial]
Upon hearing, Ningbo Maritime court ascertained: around 2 minutes after collided with "Ding Heng 9", "Zhe Xiang 988" collided with "Zhou Hai You 9", which caused "Zhe Xiang 988" sunk. Given the panic of the crewmember and short time between the two collisions, most of the crewmember would not be able, even maneuver the ship with normal seamanship, to avoid the occurrence of the subsequent collision, thus there is causal relationship of the collisions involved the three ships and shall be deemed as a chain collision. In connection with the Investigation Report of Marine Incident, the court ascertained that the proportion of collision liability among "Zhe Xiang 988", "Zhou Hai You 9" and "Ding Heng 9" in this collision incident shall be 45%: 45%: 10%. Taking into consideration of the depreciation of the ship, market condition and the market price of ship of same kind at the time when the incident occurred, the court ascertained that "Zhe Xiang 988" valued RMB12 million and the losses sustained by Plaintiff due to this collision totaled RMB16.28 million.

The Defendant Zhoushan Hengding was the shipbuilder of "Ding Heng 9" and actually controlled the ship during her trial voyage. It was during her trial voyage, "Ding Heng 9" collided with "Zhe Xiang 988", thus Zhoushan Hengding shall indemnify the losses sustained by the Plaintiff due to this collision. The Plaintiff failed to prove that the Defendant Shanghai Hengding has actually controlled "Ding Heng 9" at the time when the collision occurred. Shanghai Hengding obtained the ownership of the ship after the incident. In addition, the Plaintiff has not claimed for maritime lien before the court and thus was not entitled to request the Defendant Shanghai Hengding to indemnify its loss. Taking consideration of the Plaintiff's loss and the liability proportion assumed by "Ding Heng 9", the Defendant Zhoushan Hengding shall indemnity the Plaintiff for RMB1.628 million, which has not exceeded the limitation invoked by the two Defendants. In sum, according to Paragraph 1 of Article 169 of the Maritime Code of the PRC and Paragraph 1 of Article 64 of the Civil Procedure Law of the PRC, the court ruled that 1) the Defendant Zhoushan Hengding shall indemnify the Plaintiff Shao Jun'ou for RMB1.628 million within 10 days after the judgment becomes effective; 2) overrule other claims by the Plaintiff Shao Jun'ou. After the first instance judgment was pronounced, Zhoushan Hengding filed an appeal with dissatisfaction to the first instance judgment, and the appellant court upheld the first instance judgment.

[Analysis]

1. How to determine whether it's one collision or two for collisions involving three ships?

Two factors shall be taken into consideration: 1) whether there is continuity in time; 2) whether there is causal relationship between the two collisions. If the first collision does not cause subsequent close-quarter situation or even it does cause close-quarter situation which could be avoided through good seamanship and cautions but still collided with other ships or terminal, then these collision shall be deemed as two separate collisions. The reason lies in that under such circumstance, there is no causal relationship between the two collisions, the other party has no intervention to or fault at the second collision, thus the chain of causation has been broken and shall not bear relevant indemnification liability. In this case, about 2 minutes after she collided with "Ding Heng 9", "Zhe Xiang 988" collided with "Zhou Hai You 9" which caused "Zhe Xiang 988" sunk, there is continuity in time between the two collision and the second collision could not be avoid even with good seamanship and caution, thus there is causal relationship between the collisions of the three ships which shall be deemed as chain collision.

2. Who shall be held liable if the ship which is on her trial voyage involves a collision?

There are various points of views on who shall be held liable when a collision occurred to the ship which is on her trial voyage. The author holds that according to the theory of cost for risk control, to let the party who is most close to the risk to bear the risk shall encourage the party to try its best to control the risk for its own interests and would also minimize the cost for risk control, otherwise it may cause moral risk, i.e. to leave alone what was under its control but let other parties to bear the risk of loss arising therefrom. In case the aggrieved party claim for maritime lien, which is statutory real security, since the maritime claims arising due to ship collision have recourse effect and could reach to the owner who obtains the ownership of the ship after the collision incident. In this connection, there is risk for the shipowner as the holder of the real security to be held liable for statutory risk.

(By Judge of Ningbo Maritime Court)

Ni Xuewei/Fu Junyang[ Judge of Guangzhou Maritime Court.]

On 9th May 2009, Jiangxi Rare Earth & Rare Metals Tungsten Group (“Rare Earth”) entered into a sales contract with Amaxus International. LLC. (“Amaxus”) under which Rare Earth agreed to buy 500 tons of no.2 scrape copper from Amaxus. Ocean Honour International Limited (“Ocean Honour”) was assigned as the export agent for Amaxus. At the port of loading, SGS, CCIC and other peer survey institutes issued pre-shipment survey reports and conformations of quantity/quality of the scrape copper to be shipped to China. From June 2nd to 6th, 19 containers, which were affixed with the seal of RCL Feeder Pte., Ltd (“RCL Feeder”) but without the seal of CCIC PHILIPPINES.INC (“CCIC Phils”), were carried to Manila. On 9th June, RCL Feeders Phils., INC (“RCL Phils”) issued the bill of lading and provided the attached documents on behalf of RCL Feeder, which indicated: SHIPPER Ocean Honour, C/O Goldsphere Metal Marketing, CONSIGNEE and NOTIFY PARTY Rare Earth, CARRIER “OTANA BHUM”, PORT OF LOADING Port of Mania, PORT OF DISCHARGE Pingzhou Wharf, Nanhai of Guangdong; the 19 40 TEU containers were packed, tallied and sealed by SHIPPER; shipper described the cargo as 503.46 tons of NO.2 SCRAPE RED COPPER; the column of Container no./Seal no. recorded the container numbers of the 19 containers and the seal number of the shipping company; the bill also indicated that a full set of container information, including container number, seal of shipping liner, seal of CCIC Phils and the weight of each container, could refer to the B/L annex.

 “OTANA BHUM” arrived at Hong Kong on 9th June 2009. During transshipment, container REGU4999571 got damaged and the inside cargo was transshipped into container REGU4213152 which was then affixed with a CCIC seal 075153. But in its survey report, Standard Maritime & Cargo Survey described the cargo being transshipped as something like “soil and stones”. On 12th July, the 19 containers were shipped from Hong Kong to Pingzhou, Nanhai of Guangdong Province. The Claimant, CCIC Phils and representative of RCL Feeder carried a joint survey of the cargo. Findings included: each container bore an RCL seal and container REGU4213152 even bore an extra CCIC seal 075153; all the containers were in good appearance and with proper sealing, and the structure and opening of the containers were in good condition; the cargo inside was a mixture of soil, stones, rusted iron chunks and waste iron, far away from the scrape copper as indicated on the bill of lading.

On 19th May 2009, CCB Nanchang Hongdu Branch, upon the instruction of the Claimant, made out an irrevocable Letter of Credit, against which the bank required the Claimant to provide a full set of clean on board B/L (marking freight payable at destination, vessel’s name, and the notify party and consignee as the Claimant), signed commercial invoice, signed packing list, quality/quantity certificates at loading port by SGS, CCIC or other peer survey institutes, and CCIC pre-shipment survey report. On 20th June, the Claimant paid the cargo payment to the bank against which it became the holder of original bill of lading.

On 14th August 2009, RCL Phils requested Philippine National Bureau of Investigation (NBI) to investigate into the containers involved. On 8th February 2010, NBI released its investigation report, concluding that Rare Earth was caught in a fraud jointly contrived by several sides: SHIPPER Goldensphere took the first step to entrust CCIC Phils to survey the 500 tons of scrap copper and the copper was packed into containers at the survey scene but the containers were affixed with unnamed seal rather than the RCL seal and then the CCIC seal; after that, the containers were carried to other place rather than be directly carried to Manila terminal, during which the seals of CCIC Phils and the counterfeited seal were destroyed so as to replace the scrape copper cargo with equal weight of other substances. The containers had been affixed with the RCL seal before they arrived at Manila terminal.

On 3rd August 2009, Rare Earth made a complaint to Guangzhou Maritime Court: the seal number recorded in the bill of lading issued by RCL Phils B/L was false, which resulted in wrongly remittance of the cargo payment upon the maturity of the letter of Credit. The carrier RCL Feeder and the actual carrier Regional Container Lines Pte., Ltd (“RCL”), whose failure in exercising due diligence to attend to the cargo had resulted in the loss of CCIC Phils seals, shall undertake relevant tortuous liabilities.

The Defendants RCL Feeder, RCL Phils, and RCL made defense: the cargo loss was caused by trade fraud. The cargo had been replaced before they arrived at the storage yard of the destination port, namely, the cargo loss did not occur during the period of the carrier’s responsibility. The ship’s seals at the destination port remained the same with that at the loading port, which means the Defendant had fulfilled the obligation of delivery. The Defendants were not obligated to deliver the cargo as per the terms and conditions set forth in the B/L annex.

On hearing the case, Guangzhou Maritime Court held that: this was a case on dispute over liability for property lost at sea. The Claimant might raise a default lawsuit or a tort lawsuit as the B/L holder, but the court would hear the case as a tort lawsuit according to the Claimant’s orientation of complaint.

Investigation revealed that the cargo concerned had been replaced before being consigned to the carrier at the port of departure. During the consignment, the containers were not affixed with the seal of CCIC Phils and the Defendants denied taking any infringement acts to destroy the seals. In the condition that the RCL seals were absent on the containers but RCL Phils still issued the B/L and recorded such information on the B/L, it could be concluded that RCL Phils wrongly issued the bill of lading. The L/C which was used to effect the payment only required the B/L to be a full set of clean on board B/L (marking freight payable at the destination port, vessel’s name, and notify party and consignee as the Claimant) rather than require the B/L to record the number of CCIC Phils seals. That means whether the B/L bore the seal number or not would not affect the effectiveness of the L/C payment. To put differently, RCL’s mistake in issuing the bill of lading had no causal relations with the L/C payment. Therefore, the court overruled Rare Earth’s request against the three Defendants for tortuous liabilities since such requests were not based on factual or legal grounds.

Rare Earth was not satisfied with the first-instance verdict and lodged an appeal to the Higher People’s Court of Guangdong Province. On hearing the case, the Higher People’s Court of Guangdong Province held that RCL Feeder only put the cargo descriptions and particulars of containers on the B/L as instructed by the shipper. RCL Feeder also marked on the B/L annex of the seal numbers but did not indicate that the seal belonged to CCIC Phils. And in the terms of FCL delivery, RCL Feeder was only responsible for the condition of the full container. Now that the containers had been delivered in good appearance and condition and with proper seals, it shall be admitted that RCL Feeder had completed the delivery obligation as set forth in the bill of lading. Therefore, the court upheld the original ruling and rejected Rare Earth’s appeal against RCL for tort upon the ownership of cargo since such appeal were not based on factual or legal grounds.

Ni Xuewei[ Judge of Guangzhou Maritime Court.]

On 15th April 2004, Guangdong Fuhong Edible Oil Co., Ltd (hereinafter “Fuhong”) purchased 55,000 tons of Brazil soybean from Louis Dreyfus Asia Pte., Ltd at a C&F price of 369.26 USD per ton. On 23rd August, Fuhong made the cargo payment via a letter of credit in the sum of 177,884,911.77 CNY plus interest (currency hereinafter refers to CNY if no special instructions are given). On 27th April, Fuhong insured the cargo concerned against All Risks for 22874197.50 USD with Ping An Insurance Shenzhen Branch (hereinafter “Ping An Shenzhen”).

From 4th May to 7th May 2004 at Santos, Brazil, the soybean involved was loaded onto the Korea-registered vessel “Hanjin Tacoma” which was owned by Hanjin Shipping Co., Ltd. On 7th May, the ship’s agent Transatlantic Carriers (Agenciamentos) Ltd issued the original order bill of lading in triplicate. With shipper’s endorsement, the Bs/L were held by Fuhong.

At 0400hrs of 16th June 2004, “Hanjin Tacoma” arrived at Zhanjiang, China and dropped her anchor awaiting berthing. On 18th June, Fuhong eventually obtained the “Approval on Review of Agricultural Genetically Modified Organism Marks” and the “Safety Certificate for Agricultural Genetically Modified Organism (Import)” which were required of soybean cargo by the Ministry of Agriculture of China. At 1024hrs of 19th June, the Master submitted the Notice of Readiness to advice that the ship was ready for discharge. But it was not until 27th July that Fuhong was granted the AQSIQ “Approval on Quarantine Inspection of Imported Animals and Plants” for the cargo concerned. On 1st August, “Hanjin Tacoma” began to discharge the cargo and finished discharge on the third day of September.

At 1600hrs of 1st August 2004, Fuhong and other surveyors, when carrying sample survey of the cargo concern, found the soybean in moldy and damaged condition. In the next day, Fuhong sent a Notice of Loss to Ping An Shenzhen.

During 2nd August to 10th September 2004, CCIC Guangdong Branch carried out a survey of the soybean concerned at the Port of Zhanjiang. The survey report came out at 11th October with the conclusions as follows: altogether 5868.428 tons of cargo got damaged, which was mainly caused by no ventilation or poor ventilation in the cargo holds. For this reason, the cargo was seriously sweaty during the 86-day voyage and the days waiting for berthing.

In Civil Ruling (2005) GHFCZ No.211 rendered by Guangzhou Maritime Court concerning the action between Fuhong and Ping An Shenzhen for dispute over marine insurance contract, it was concluded that: the presence of heat and sweat resulting from poor ventilation in the cargo holds of “Hanjin Tacoma” was the major cause of damage to the cargo being insured; the loss to the 5868.428 tons of cargo shall be compensated in the sum of 17422973.76 CNY(with 0.3% deductible) and the survey of cargo damage charged 345966.72 CNY. Therefore, the court adjudged Ping An Shenzhen to pay a total sum of 17768940.48 CNY plus interest to Fuhong.

After the said ruling came into effect, Ping An Shenzhen paid a total amount of 19245818 CNY of insurance compensation plus interest to Fuhong on 1st June 2006. After that, Ping An Shenzhen filed the subject case, requesting Hanjin Shipping to compensate 19245818 CNY plus interest calculated till 1st June 2006.

On hearing the case, Guangzhou Maritime Court held that: the subject case concerned the dispute over contract of carriage of goods by sea filed by Ping An Shenzhen who had became subrogated to the right of the insured. Fuhong was the lawful holder of the bill of lading and the lawful party to take delivery of the soybean cargo. The Defendant Hanjing Shipping and Fuhong were bounded by a contract of carriage of goods by sea, which was testified by the bill of lading.

Hanjin Shipping, as the carrier, shall be responsible for the soybean on board from the period of 4th May 2004 to 3rd September 2004. Although the Master submitted the Notice of Readiness early on 19th June, owing to which the time of discharge should have been counted from 0800hrs of the next working day following the submission of the notice, the cargo was not discharged within the time prescribed. Therefore, the submission of the notice did not constitute the end of Hanjin Shipping’s liability for the storage and custody of the cargo on board. Rather, Hanjin Shipping shall be liable for the cargo until the date when the cargo was actually discharged rather than when the vessel became ready for discharge.

“Hanjin Tacoma” sailed from Santos, Brazil, crossed the equator, and arrived at Zhanjiang, China. This was a journey from winter to summer that crossed a wide range of temperatures. When sailing on a scheduled route within a specific period of time, the vessel should have properly controlled the temperature and ventilation of the cargo holds. Failure in temperature control would increase the moisture content of the soybean cargo and damage the cargo because humidity in warm air would condense into liquid when the vessel was sailing from cold waters to tropical seas. But Hanjin Shipping did not take any steps to control the temperature or humidity of the holds and all the air vents were kept closed during the journey from 8th May to 16th June. It was hard to say Hanjin Shipping had exercised due diligence to attend to the cargo.

The Master delivered the Notice of Readiness at 1024hrs of 19th June 2004, notifying that the vessel was well prepared for discharge. So the discharge should have started at 0800hrs of 20th June according to agreements in the sales contract. However, the soybean cargo was a genetically modified product, which was required of special approval by Chinese authorities and Fuhong failed to obtain the AQSIQ “Approval on Quarantine Inspection of imported Animals and Plants” before 20th June. It was not until 27th July that Fuhong got the approval to met the requirements of laws and was able to discharge the cargo. A 38-day delay in the import approval formalities for transgenic soybean directly caused the delay of cargo on board up to 38 days. The increased portion of loss shall be undertaken by Fuhong.

Although Hanjing Shipping was to blame for not exercising due obligation for cargo custody, it had submitted the Notice of Readiness and had made good preparation for discharge. If the cargo could have been discharged in time, the losses to cargo would be less. But since the cargo had been damaged, it was even more crucial to take effective measures to stop the loss. In the event that extra measures were not necessary, the party that had the obligation to take due measures to stop the loss should be more proactive in taking such measures rather than let the loss go unchecked and become heavier. Therefore, according to Article 119 of the Contract Law of the People’s Republic of China, the consignee Fuhong should have made discharge arrangements in time. But Fuhong only obtained the import approval after 38 days of the sending of the Notice of Readiness. As such, Fuhong could not avoid the liability for the increased losses occurred. Both of the parties were to blame for the cargo loss in the subject case. Considering Hanjin Shipping’s failure in cargo custody and Fuhong’s failure to take effective measures to stop loss from increasing, Hanjing Shipping shall be 70% liable for the loss and Fuhong shall be 30% liable for the loss.

Guangzhou Maritime Court adjusted: the Defendant Hanjin Shipping paid 13472072.60 CNY for the cargo loss plus interest to the Claimant Ping An Insurance Shenzhen Branch; the court overrule other claims made by the Claimant.

Neither of the parties was satisfied with the verdict, so they made appeal to the Higher People’s Court of Guangdong Province. In the second-instance hearing, the parties concerned reached an accord under which Hanjin Shipping agreed to compensate 3105000 USD to Ping An Shenzhen before 15th January 2012 as the full and final settlement of the subject case.

Foshan Industrial Co., Ltd (hereinafter “Foshan Industrial”) entrusted Global Logistics (Xiamen) Co., Ltd (hereinafter “Global”) for the shipment of the cargo concerned. On 18th August 2012, Global, in the name of the company itself, issued three copies of the original bill of lading titled “Global” to Foshan Industrial, on which indicated: SHIPPER Foshan Industrial; CONSIGNEE/NORTIFY PARTY Model One International S.A; PLACE OF RECEIPT Foshan, China; PORT OF LOADING Hong Kong; CARRIER ocean carrier “CAROLINE MAERS*” shipped and sailed on 18th August 2012; PORT OF DISCHARGE Balboa, Panama; PLACE OF DELIVERY Colón Free Trade Zone; cargo loaded, tallied and sealed by the shipper; cargo packed and loaded in two containers UETU5042783 and PONU7333056; FIRST VESSEL “Fo Hang ” received cargo at Foshan, China; FREIGHT PAYABLE AT DESTINATION.

Global entrusted the cargo concerned to the actual carrier A.P. Moller – Maers* Group, a party not involved in the subject case. On 12th September 2012 in Guangzhou, Maers* Line, on behalf of Maers* Group, issued a sea waybill or a combined transport bill of lading titled “Maers* Line”, on which indicated: SHIPPER World Asia Shipping Ltd; CONSIGNEE/NORTIFY PARTY General Cargo S.A.; CARRIER “CAROLINE MAERS*” loaded on 18th August; PORT OF LOADING Hong Kong; PORT OF DISCHARGE Balboa; PLACE OF DELIVERY Colón Free Trade Zone; CONTAINER No.UETU5042783/No.PONU7333056; FREIGHT PAYABLE AT DESTINATION; FIRST VESSEL “Fo Hang 1003” sailed off Foshan on 13th August.

After the Cargo concerned arrived at Colón Free Trade Zone, the First Civil Court of Colón Circuit of the Republic of Panama sent an Official Note No.1022 to the manager of Maers* Group on 17th September 2012. The Note notified that according to Order No.852 dated 14th September concerning the application of Mauricio Vargas to detain the property of Model One International S.A, the court would formally detain the 647 cases of goods in container UETU5042783 and the 199 cases of goods in container PONU7333056. The goods, covering a variety of goods such as floor board, ceramic tile, corner, corner plate, bathtub and toilet, were in the ownership of Model One International S.A. The goods were carried by Maers* Group and at the moment were detained at Manzanillo international terminal of the Port of Manzanillo.

The Claimant lodged claims with Guangzhou Maritime Court against Global and Global Shantou Branch, alleging that: the Claimant entrusted the Defendant to carry the cargo to Panama, against which the Defendant issued the original B/L on 18th August. On 10th October, the Defendant sent email to the Claimant, notifying that the cargo under the B/L was controlled by Panama authorities. But the Defendant did not provide any effective evidence for such fact. The Claimant considered that the Defendant was releasing cargo without the presentation of the original bill of lading and shall pay compensation to the Claimant for default. The Claimant therefore requested the court to rule: the two Defendants to jointly pay 109,011.15 USD plus interest to the Claimant and to bear the litigation fees of the subject case.

The two Defendants rose to their own defense: the cargoes were detained by the Panama court at Manzanillo international terminal of Colón Free Trade Zone immediately when they had arrived at the destination port, rather than to be released by the Defendant without the presentation of original bill of lading. Maers* Group, the actual carrier of the cargo concerned, had no fault in the case since the cargo was detained by the local court owing to the consignee’s involvement in a local lawsuit. For the moment, the Carrier could do nothing about the cargo being detained and the carrier shall not be liable for such circumstance. Therefore, the Defendants requested the court to overrule the Claimant’s claims.

On hearing the case, Guangzhou Maritime Court judged: the contract of carriage of goods by sea entered and concluded by the Claimant and Global was valid and effective. The two parties shall observe the clauses of the contract by exercising their rights and fulfilling their obligations. Global Shantou Branch, as a branch of Global, had directly contacted the Claimant to address relevant issues when handling the carriage involved. That means, Global Shantou Branch had actually participated in the performance of the carriage contract and therefore shall undertake joint liability of carrier with Global. Since the two Defendants consigned the cargo concerned to the actual carrier Maers* Group, a party not involved in the subject case, the Defendants shall be liable for the actual effect of the carriage performed by Maers* Group. Given that Claimant, who was the shipper indicated on the B/L, still held the full set of the original Bs/L in accordance with the B/L and other evidences, and that the Defendants did not deny the loss of control over the cargo concerned for the moment which was testified by the notified official note of the First Civil Court of Colón Circuit, this court therefore admitted the fact that the cargo concerned had been detained at the destination port.

The dispute of the subject case centered on whether or not the two Defendants had released the cargo without the presentation of the original B/L and whether or not the Defendants shall be, if any, held responsible for such act. The Claimant as the shipper alleged that the cargo concerned had been released by the Defendants without the presentation of original B/L and hence requested the Defendants to jointly undertake compensation liability for default. The Defendants as the carrier defended that they did not release the cargo without the presentation of original B/L and therefore shall not be liable for the cargo detained at the destination port. The Defendant also argued that the cargoes were detained by the local court immediately when they had arrived at Colón Free Trade Zone owing to the designated consignee’s involvement in a local lawsuit, which could be testified by the official note of the First Civil Court of Colón Circuit. Therefore, the Defendants had no fault and shall not be held liable for the cargo detention. According to Article 51 Paragraph 5 of the PRC Maritime Law, the carrier shall not be liable for the loss of or damage to the goods occurred during the period of carrier's responsibility arising or resulting from detention under legal process. Although the detention occurred during the period of the Defendants’ responsibility, the Defendants shall not be held liable for the loss arising from such act. Therefore, based on the facts and legal grounds, the court supported the Defendants’ defense and judged that the Defendants shall not be liable for the cargo loss arising from cargo detention at the destination port. In summary, without being furnished with factual or legal evidence, the court lawfully rejected the Claimant’s allegation that the Defendants released the cargo without the presentation of original B/L and the Claimant’s claim for compensation from the Defendants. The court overruled the claims made by Foshan Industrial.

On 27th September 2009, Zhoushan Shipyard (hereinafter “Shipyard”) and Heng  Shipping Company (hereinafter “Shipping Company”) entered into the Contract on Transformation/Repair of M/V “Heng Yu” under which Shipping Company agreed to entrust Shipyard to repair the vessel as of 26th June 2010 to 10th May 2011 at an engineering cost provisionally set at 57,650,000 CNY. The contract also agreed on the term of payment. After that, the vessel put in the shipyard and Shipyard began the transformation and repair project on the vessel.

On 27th July 2011, ICBC Gulou Branch (hereinafter “Gulou Branch”) lodged a lawsuit with Ningbo Maritime Court, requesting the court to arrest “Heng Yu” so as to be secured by the ship mortgage. Gulou Branch also requested the court to support its application to enjoy the right of mortgage in the sum of 150,000,000 CNY against “Heng Yu” owned by Shipping Company and the right of preferred compensation. On 29th July 2011, Ningbo Maritime Court arrested “Heng Yu” at the dock of Shipping Company. On 21st February 2012, the court rendered a civil ruling, adjudging Gulou Branch to enjoy the right of mortgage against “Heng Yu” owned by Shipping Company within the sum of 150,000,000 CNY.

Considering that Ningbo Maritime Court had issued a notice for the arrest of “Heng Yu”, Shipyard and Shipping Company agreed to suspend the transformation and repair of “Heng Yu” as of 20th August 2011, as was set forth in the Contract on Settlement of Transformation/Repair of “Heng Yu” entered and concluded on 29th October 2011. It was also agreed that the ongoing project shall be deemed terminated on an “as is” basis in the event that Shipping Company failed to set a date to resume the project within six (6) months after signing the settlement contract. Under such circumstance, Shipping Company shall, before 29th April 2012, pay a lump sum of 70.36 million CNY, after being confirmed by both parties, for the project and the costs occurred due to the suspension. After signing the contract, however, Shipping Company did not set a date to resume the project, nor did it pay the due amount for the project and the costs during the suspension in accordance with the contract in spite of calls and urges from Shipyard.

In its claims filed with Ningbo Maritime Court against Shipping Company, Shipyard alleged: the said contracts entered by and between the Claimant and the Defendant were valid and effective under which the Claimant had undertaken the liability to transform and repair “Heng Yu” in accordance with the clauses of the contract but the Defendant defaulted on the contract by not paying the due amount. Therefore, the Claimant requested the court to rule: (1) the Defendant to pay 70.36 million CNY plus interest for the transformation and repair of “Heng Yu”; (2) the Defendant to pay for the port charge and electricity cost of the vessel during the suspension; AND (3) the Claimant to enjoy the possessory liens against “Heng Yu” owned by Shipping Company and the right of preferred compensation from the proceeds of the auction sale.

The Defendant did not make any defense, nor did it provide any supporting evidence against such claims.

The third party Gulou Branch held that: the arrest of ship did not constitute possession of the ship by the Claimant; namely, the arrest was not the constitutative requirement of possessory liens. Therefore, Gulou Branch requested the court not to support the Claimant’s right to possessory liens against “Heng Yu” owned by the Defendant.

On hearing the case, Ningbo Maritime Court judged: the contract concerning the transformation/repair of vessel entered by and between the Claimant and the Defendant was valid and effective, and both of the parties shall lawfully perform their obligations as agreed in the contract. The transformation and repair of the vessel concerned was real and most of the job had been effectively carried out. According to the Contract on Settlement of Transformation/Repair of “Heng Yu” entered and conclude between Shipyard and Shipping Company on 29th October 2011, and considering that the Defendant had failed to set a resumption date or to make due payment according to the contract, the contract for the transformation/repair of the vessel shall be deemed terminated and the Defendant shall be in debt for the transformation/repair of the vessel as of 29th April 2012. Therefore, the court supported the Claimant’s request for the payment of expenses plus interest for the transformation and repair of “Heng Yu” since such claim was valid and grounded.

The third party Gulou Branch was adjudged to enjoy the right of mortgage of “Heng Yu” within the sum of 150,000,000 CNY. According to the principles of the PRC Property Law and relevant provisions of the PRC Maritime Law, this court held that the contract on transformation/repair of ship, which had been established and performed before the third party excised the right of ship mortgage, shall not be affected and excluded by the ship mortgage. Especially, according to Article 11 of PRC Maritime Law, the major function of the right of mortgage of ship (the right of preferred compensation from the proceeds of the auction sale) only enjoys priority in compensation over other creditor’s rights during the allocation of the proceeds of the auction sale. Ship mortgage could not nullify other creditor’s rights. According to Article 25 of PRC Maritime Law, the possessory lien is the natural outcome of default on debts (the building or repairing cost of a ship) rather than a “consensual lien” prescribed in a contract. Ship mortgage and possessory lien only vie for priority with one another in the auction sale of a ship and the allocation of the proceeds of the auction sale, and the possessory lien has priority over ship mortgage. Neither of the rights can nullify the legal effect of the other. According to the legislative intent of the possessory lien (to conditionally and rationally recognize private remedy in a bid to maintain the normal legal order), the third party’s application for ship detention by exercising the right of ship mortgage in order to cause the lien holder’s loss of possession could not be admitted by this court, because such application was not supported by facts or legal grounds. In accordance with the relevant laws and provisions, arrest-auction procedure is a special procedure of the court to tackle all the creditor’s rights concerning a ship in a forced, collective and thorough manner. This special procedure is made to lawfully allocate the ship’s price in a settled, collective, and definite manner, which cannot and will not change the legal status of the creditor’s rights before such settlement. To conclude, the third party’s application for admitting the Claimant’s possessory lien against “Heng Yu” by causing the lien holder’s losing of possession through ship arrest shall not be supported by the court since such application had no factual or legal grounds.

In summary, the court supported the reasonable claims raised by the Claimant and overruled the application and request made by the third party for absence of factual or legal grounds. The court therefore ruled: (1) the Defendant to pay the Claimant 912,525 CNY for port charge, 37,500 CNY for electricity, and 70,360,000 CNY plus interest for the transformation and repair of the ship; AND (2) the Claimant to hold the possessory lien against “Heng Yu” so as to secure the sum of 65,848,633 CNY plus interest for the port charge, electricity fee, transformation and repairing costs (plus the prepaid material costs and others).

On 20th March 2010, China Marine Shipping Agency Co., Ltd Tianjin Branch, who acted as agent for Malaysia International Shipping Corporation Berhad (hereinafter “MISC Berhad”), issued an original bill of lading MISCKHI000020873 titled “MISC Berhad”, on which indicated: SHIPPER Aspen Global Trading Inc.; CONSIGNEE/NOTIFY PARTY Shandong Laigang Group Yongfeng Steel Ltd (hereinafter “Yongfeng Steel”); VESSEL NAME/VOYAGE “BUNGA RAYA SEMBILAN”/104E; PLACE OF RECEIPT/PORT OF LOADING Karachi, Pakistan, PLACE OF DELIVERY/PORT OF DESTINATION Qingdao, China; CARGO DESCREPTION 132 20′GP containers of bulk oxidized iron scale; GROSS WEIGHT 3675.875 tons; DATE OF SHIPMENT 20th March 2010; ADVANCE FREIGHT; also included in the B/L were the case number, weight, gross weight, and seal number of the containers. Terms continued on back thereof were standard terms in printing, Article 2 of which prescribed “the terms of Carrier’s applicable Tariff are incorporated herein. Particular attention is drawn to the terms therein relating to Container and vehicle demurrage. Copies of the relevant provisions of the applicable Tariff are obtainable from the Carrier or his agents upon request in the case of inconsistency between this Bill of Lading and the applicable Tariff, this Bill of Lading shall prevail.” Also prescribed in Article 13 Paragraph 4 thereof was: “If containers supplied by or on behalf of the Carrier are unpacked at the Merchant’s premises, the Merchant is responsible for returning the empty Containers, with interiors brushed and clean, to the point or place designated by the Carrier, his servant or agents, within the time prescribed. Should a Container not be returned within the prescribed time, the Merchants should be liable for any demurrage, loss or expenses, which may arise from such non-return. ”

On 4th April 2010, “BUNGA RAYA SEMBILAN” arrived at the Port of Qingdao and discharged the cargo concerned at Qingdao Qianwan Container Terminal. On 6th April 2010, the designated consignee Yongfeng Steel, through the agent Qingdao Ocean Shipping Agency, obtained the Delivery Order against the presentation of the original bill of lading.

On 30th April 2010, AQSIQ Huangdao Bureau inspected the cargo concerned and issued a Quarantine Treatment Advice for the date, by which it notified Qingdao Customs to return the cargo because the cargo concerned failed to meet the requirements provided in the Notice of the Five Ministries on Adjustments to Management Category of Imported Waste (2009/No.36). Yongfeng Steel was later informed of the AQSIQ notice, but the specific time was not known. As a result, the containers were unpacked and restowed at the terminal, and were finally returned.

According to the Statement of Expenses concerning Import Containers prepared by Qiangdao Ocean Shipping Agency, the 132 containers involved arrived on 4th April 2010. Of these containers, 91 were empty and returned on 6th November 2010 with 207 days overdue, and the rest 41 returned on 7th November 2010 with 208 days overdue.

According to the tariff of import container at Qingdao Port which was published on MISC Berhad’s website: 20 TEU dry container is free for use for 10 days; demurrage begins to count at 5 USD/day for the 11th-20th day, at 10 USD/day for the 21th-40th day, and at 20 USD/day beyond the 40th day.

Qiangdao Xin Dong Fang Container Storage & Transportation Co., Ltd issued the Estimate of Repair Cost for Dry Containers for the 124 containers on 6th and 7th November 2010, on which the container number, vessel’s name and the B/L number were in line with that of the subject containers. The repair cost was estimated at 7059.15 USD.

In its claims raised with Qingdao Maritime Court, MISC Berhad alleged that the Defendant Yongfeng Steel, who was the consignee designated in the B/L, obtained the Delivery Order by presenting the original bill of lading to the Claimant on 6th April 2010. But the Defendant did not take delivery of the cargo as planned. It was not until 6th and 7th November 2010 that the Defendant returned the 132 empty containers, resulting in a loss of 501,100 USD to the Claimant. Moreover, the containers used for carriage of the cargo concern suffered some damages during the voyage, for which the Claimant had to spend 7059.15 USD on the repair. Therefore, the Claimant requested the court to rule: (1) the Defendant to pay 501,100 USD plus interest for the demurrage; (2) the Defendant to pay 7059.15 USD plus interest for container damage; (3) the Defendant to bear the litigation fee and other legal expenses arising from the subject case.

The Defendant defended for itself before the court on the following grounds: (1) the Defendant was not liable for the loss alleged by the Claimant since the non-pickup of the cargo concern totally resulted from the Claimant’s failure to inspect the cargo before the shipment of solid waste; (2) As regards the claim for demurrage based on the overleaf terms of the B/L, such claim was apparently unfair since the Claimant did never remind or inform the Defendant of such terms in an explicit way, and the loss occurred might not exceed the amount of rent for containers of the same voyage and type; (3) the claim for repair expense of the containers was groundless because the Claimant could not provide evidence to prove the degree or causes of damage occurred to the containers, or provide vouchers or invoices for the repair, thereby forming no ground for such complaint; AND (4) the Claimant shall be liable for the increased loss arising from the Claimant’s failure in taking appropriate measures to stop the loss. Therefore, the Defendant requested the court to overrule the claims raised by the Claimant.

On hearing the case, Qingdao Maritime Court held that Article 78 Paragraph 1 of the Maritime Law of the People’s Republic of China, which reads “The relationship between the carrier and the holder of the bill of lading with respect to their rights and obligations shall be defined by the clauses of the bill of lading”, did not require such clauses to appear on the front page or on the overleaf, nor did it require such clauses to be consented or agreed between the carrier and the consignee/holder of the bill of lading. Therefore, these clauses shall be effective and valid as long as they were not made so as to cut the carrier’s responsibilities and not running against the provisions of Section Four of the PRC Maritime Law and other mandatory regulations of Chinese laws. As regards the explanation that the Defendant shall not be bounded by the clauses on back of the bill of lading because the Claimant and the Defendant had not reached agreement on such clauses, this court did not accept such defense. For the subject case, certain conditions should be met if the consignee is to undertake the demurrage liability. That is, the carrier or its agent should be the one to provide the containers, the containers should be unpacked at the premise of the merchant, and the carrier should prescribe the time and place for the return of empty containers. Actually, the containers involved were unpacked at the terminal rather than being unpacked in the storage yard or the premise of the merchant, and the Claimant also confirmed not prescribing a specific time and place for the return of empty containers. This court therefore held that Article 13.4 concerning the charge of demurrage was not applicable to the Defendant and the court did not support the Claimant’s request in this respect.

After obtaining the Delivery Order, the Defendant should have gone through the delivery formalities in time. Yet the Defendant did not take delivery of the cargo. Rather, it held the Claimant’s containers for a long time, hence obstructing the normal circulation of the containers and causing heavy loss to the Claimant. Therefore, the Defendant shall compensate the Claimant for the losses occurred. However, the Claimant could not provide evidence to prove the specific damage resulting from the Defendant’s failure in timely returning the containers. Moreover, in the condition that the containers could not be recalled and put into circulation, the Claimant might as well rend containers of the same type to put into operation so as to prevent the loss becoming serious. But the Claimant did not take such steps to stop the loss. Therefore, the Claimant had no right to claim compensation for the increased portion of losses. As regards the Defendant’s proposal that calculation of the loss arising from the Defendant’s failure in taking timely delivery and returning the containers to the Claimant shall refer to the rent for containers of the same voyage, type and amount, this court held that it was in line with the laws, regulations, and practice to calculate the loss on such criterion and the court supported the Defendant’s proposal in this respect.

Given that the Claimant could not prove the relevance, validity and rationality of the container repair expense it had paid and the carriage of the cargo concerned, the court did not support the Claimant’s request for the repair costs.

In summary, the court adjudged the Defendant to pay the Claimant 48315.7 USD for the demurrage and overruled other claims made by the Claimant.

In January 2012, Ningbo Company placed a forwarding order with International Company for the consignment of garments, under which International Company was responsible for space booking and Ningbo Company handled inland transport and customs declaration. On 6th February 2012, ITSA issued an NVOCC bill of lading NGBSE021846 on which indicated: VESSEL/VOYAGE “XINXIAMEN”/ 1205W; DATE OF LOADING 6th February 2012; PORT OF DEPARTURE Ningbo Port and PORT OF DESTINATION La Spezia of Italy; SHIPPER Ningbo Company; CONSIGNEE GITEXSRL. Ala Company, who was the actual carrier, issued a sea waybill CNNB0564046. Ningbo Company paid 3175 CNY for the export local charge to International Company against which International Company invoiced Ningbo Company for the payment. However, the cargo concerned which arrived at the destination port on 2nd March 2012 has not yet been picked up till the date since the consignee refused to take delivery. International Company has sent emails requesting the Claimant to handle the cargo, but Ningbo Company does not take any disposal measures or obtain the NVOCC bill of lading from International Company.

On 18th October 2012, Ningbo Company filed an action with Ningbo Maritime Court against International Company, requesting the court to rule: (1) the Defendant to instantly return the cargo worth 142,524 USD to the Claimant (in case of a failing return, a monetary compensation of 896,418.95 CNY shall be made based on the CNY/USD central parity rate published on 10th October 2012); AND (2) the Defendant to return 3,175 CNY of the local charge. International Company defended: (1) the Defendant was not a proper subject to face the claims since it was ITSA that issued the NVOCC B/L in the subject case; (2) the Defendant had actually performed the obligations required of a forwarder and had no faults of its own; (3) the Claimant had no right to claim for compensation for cargo losses since the cargo held up at the destination port for non-pickup remained in the ownership of the Claimant. The Defendant requested the court to overrule the Claimant’s claims.

On 28th November 2012, International Company handed over three original copies of the NVOCC bill of lading NGBSE021846 to Ningbo Company before the court, but the latter rejected the Bs/L. International Company then submitted the three original copies of the bill of lading to the court.

On hearing the case, Ningbo Maritime Court held that: the Defendant as the forwarder had received the local charge after performing the obligation of space booking and other forwarding services and had invoiced the Claimant for such charge. That means, the Claimant and the Defendant were bonded by a forwarding agreement. Since the cargo held up at the destination port for non-pickup did not become lost and the Defendant had handed over the B/Ls before the court, the Claimant had the full right to disposal of the cargo concerned. The obligations expected of the Defendant as set forth in the forwarding agreement had been completely fulfilled after the Defendant made shipping arrangements for the carriage of the cargo concerned from Ningbo port to La Spezia. The Claim’s request for handing back of the cargo involved return procedures, which was not the Defendant’s obligations under the forwarding agreement. In the absence of sufficient evidence and solid grounds, the court overruled the Claimant’s claims for return of the cargo or monetary compensation for cargo loss. The court also overruled the Claimant’s claim for the return of local charge since the cargo concerned had been carried to the destination port and the Defendant had the right to collect such charge. Although the NVOCC B/Ls were not handed over to the Claimant in a timely manner, the Claimant did not make complaints for whatever loss or monetary loss that it had suffered for such delay, the court therefore did not examine the case in this respect. In summary, according to Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the court overruled the claims raised by the Claimant Ningbo Company.