GUANGZHOU MARITIME COURT

PEOPLE??S REPUBLIC OF CHINA

CIVIL JUDGMENT


 No.GHFZ 45&50(2000)


Plaintiff (defendant in counterclaim):		Zhao Yangsheng, male, born on November 19, 1968, of Han nationality, living in Zhaozhai Village, Naozhou Town, Dong Hai Dao Economic Development Zone, Zhanjiang City, China.

Plaintiff (defendant in counterclaim):		Liang Hongfang, male, born on June 14, 1959, of Han nationality, living in Yingming Village, Naozhou Town, Dong Hai Dao Economic Development Zone, Zhanjiang City, China.

Agent ad litem of the above two plaintiffs:		Zhong Yonghua, lawyer of Hai Dong Law Firm, Zhanjiang 

Agent ad litem of the above two plaintiffs:		Qin Guanquan, lawyer of Guangdong Yue Hai Law Firm

		

Defendant (plaintiff in counterclaim):		Guangzhou Gao Hua Yachts Manufacturing Co., Ltd.

Address:		Shenjing Village, Changzhou Town, Huangpu District, Guangzhou

Legal representative:		Qiu Zhanwei, Chairman of the Board

Agent ad litem:		Zhang Zhaohui, lawyer of Guangzhou Zhong Lian Law Firm

Agent ad litem:		Chen Leiming, assistant lawyer of Guangzhou Zhong Lian Law Firm

	


With regard to the cases of dispute arising from the contract of boat construction filed by the plaintiffs Zhao Yangsheng and Liang Hongfang against Guangzhou Gao Hua Yachts Manufacturing Co., Ltd. (hereinafter referred to as ?°Gao Hua Co.?±), this court accepted it on October 18, 2000 and thereafter formed a collegial bench in accordance with law, and organized the parties concerned to exchange evidence on November 14. Gao Hua Co. raised a counterclaim on November 27. This court organized the parties to exchange evidence for the second time on December 14 and held open hearings on the same day. The plaintiffs Zhao Yangsheng and Liang Hongfang and their agents ad litem Zhong Yonghua and Qin Guanquan, as well as the agents ad litem of the Defendant Gao Hua Co. Zhang Zhaohui and Chen Leiming attended the court hearings. The trial of this case has now been finalized.


The Plaintiffs Zhao Yangsheng and Liang Hongfang complained that on February 21 and June 25, 1998 respectively they entered into a Contract for Construction of 56-Seat High Speed Reinforced Glass Passenger Boat and a Supplementary Agreement thereto with the Defendant, appointing the Defendant to construct two high speed passenger boats for the Plaintiffs and to deliver the boats to the latter within 100 working days as of the day of signing of the Contract. On January 22, 1999, the Defendant delivered the boats. The Plaintiffs named the two boats ?°Fei Shun?± and ?°Fei Li?± and put them into operation. The average daily revenue of each boat amounted to RMB 5,000. On September 19, 2000, in order to recover the outstanding building costs for the boats, the Defendant detained ?°Fei Shun?± and the diesel oil on board, without being authorized, valuing RMB 1,400, and the electric drills valuing more than RMB 500, as well as the three sets of HF walkie talkie valuing RMB 6,000 onboard the said boat. For the purpose of retrieving the aforesaid property, the Plaintiffs incurred traveling expenses in the amount of RMB 15,000. Furthermore, the Defendant??s unauthorized detainment of the boat had also inflicted the following losses upon the Plaintiffs: RMB 7,500 resulting from idleness in work, RMB 613/month of navigation management fee, RMB 2,100 for berthage, RMB 1,000 for expenses of tax and passengers?? harbor dues, RMB 5,000/day for loss of operating revenue, and RMB 7,500 for wages for the crewmembers. The Plaintiffs requested the court to order the Defendant to: (1) immediately return the passenger boat ?°Fei Shun?± or to make a compensation for the cost of the boat at RMB 880,000; (2) return 372 kilograms of diesel oil, 3 sets of HF walkie talkie, 2 sets of maintenance and repair tools; (3) indemnify direct operational losses in the amount of RMB 150,000, traveling expenses at RMB 15,000, losses due to idleness in work at RMB 7,500, navigation management fees at RMB 613, berthage at RMB 2,100, and expenses for tax and passengers?? harbor dues at RMB 1,000.


Within the time limit for adducing evidence, the Plaintiffs submitted the following evidence: (1) Contract for Construction of 56-Seat High Speed Reinforced Glass Passenger Boat and the Supplementary Agreement thereto; (2) Certificates of Delivery and Taking Delivery; (3) Certificate of Survey; (4) Certificate of Nationality; (5) Certificate for Transportation Operations; (6) receipts for building costs of the boats; (7) written notes of answers to inquiries by the local police station of Shalan Town, Taishan City dated September 19, 2000; (8) receipts for passengers?? harbor dues and berthage of ?°Fei Shun?± and ?°Fei Li?± from May to July, 2000; (9) Invoice of Delivery Order for the Diesel Oil issued by Jinda Development Co. under Guangdong Provincial Petroleum Enterprises Group, (Zhenjiang) to Hong Da Co.; (10) payroll of ?°Fei Shun?± from January to September, 2000; (11) Statement of Income and Expenditure of ?°Fei Shun?± from January 1 to September 15, 2000; (12) receipts for navigation management fees of ?°Fei Shun?± and ?°Fei Li?± for December 1999; (13) invoices for wharfage dues of ?°Fei Shun?± and ?°Fei Li?± from October, 1999 to February, 2000; (14) Invoice for purchase of air-conditioners dated July 30, 1999; (15) 6 receipts for maintenance and repair fees incurred by ?°Fei Shun?± and ?°Fei Li?± from March to October, 1999; (16) receipts for harbor dues of ?°Fei Shun?± in August and December, 1999; (17) evidence of sale of oil issued by Xia Hai Petroleum Station to Naozhou fleet; (18) 24 pieces of invoice for traveling expenses; (19) 30 pieces of invoice for costs of accommodation and meals.


The Defendant Gao Hua Co. defended and counter-claimed that it was reasonable and legitimate for him to take back one of the two boats in accordance with the provisions of Paragraph 2 of Article 7 of the Supplementary Agreement, because the two Plaintiffs had delayed payments for the construction of the two boats for a long time. Therefore, the Plaintiffs were not entitled to demand return of the boat. Besides, the names of the owner of ?°Fei Shun?± stated in different certificates were different from one another, varying from ZhaoYangsheng, Liang Hongfang to Hong Rongliang and so on. Hence, the Plaintiffs?? right to action was not certain. As for losses in operations, which could only incur upon the operator of boats, which was the passenger transport company under the present case, while the Plaintiffs, alleged to be the shipowners, were not entitled to claim for compensation. Moreover, the evidence and materials produced by the Plaintiffs were not directly related to this case. Therefore, the Defendant requested to dismiss the claims of the Plaintiffs.


The Defendant, acting in conformity with the above-mentioned construction Contract and the Supplementary Agreement thereto, constructed and delivered two passenger boats to the Plaintiffs. The Plaintiffs, however, failed to pay, as have been agreed upon, the boat construction costs progressively as scheduled. On January 23, 1999, the two parties set to settle the accounts for building the boats, ascertaining that the Plaintiffs still owed the Defendant RMB 510,000, and mutually agreeing that the Plaintiffs shall pay RMB 150,000 to the Defendant by the end of March 1999, while the remaining sum shall be paid up as provided for in the Contract. However, by May 10, 2000, the Plaintiffs paid only RMB 190,000 to the Defendant, the remaining RMB 320,000 being not paid up until this time. The Defendant requested the court to order the Plaintiffs to: (1) pay the cost of construction of the boats overdue in the amount of RMB 320,000; (2) pay the penalties for overdue payment in the amount of RMB 80,000 (calculating on the basis of 0.03% per day from March 30,1999 up to the date of actual payment); (3) compensate the Defendant for the losses resulting from this litigation in the amount of RMB 20,000.


The Defendant Gao Hua Co. submitted the following evidence and materials within the time limit for adducing evidence: (1) Contract for Construction of 56-Seat High Speed Reinforced Glass Passenger Boat and the Supplementary Agreement thereto; (2) Certificates of Delivery and Taking Delivery; (3) the IOU issued by the Plaintiffs on January 23, 1999.


Responding to the counterclaim of the Defendant, the Plaintiffs Zhao Yangsheng and Liang Hongfang argued that as the Defendant failed to deliver the boats as scheduled by delaying for 100 working days, nor did he issue the invoices for the payment of the boat building costs as contracted, and??within a period of less than one year after delivery of the two boats, the air-conditioning system and the stern shafts of the two boats broke down and the Defendant failed to bring them back to normal operation. As a consequence, the Plaintiffs had to pay RMB 29,199 for repair. Considering that the Defendant had seriously breached the contract and agreement, the Plaintiffs were therefore entitled to suspend payment for the remainder of the construction costs and to offset the repair costs. The provisions of Paragraph 2 of Article 7 of the Supplementary Agreement were in violation of the relevant provisions of law and the principle of fairness, and should therefore be regarded as invalid. In view of this, it was illegal for the Defendant to detain the boat basing on those provisions. Besides, the request for compensation for penalties and losses resulting from the litigation as claimed by the Defendant were groundless in law and in facts.


While being cross-examined in the court hearings, neither party contested the evidential documents such as the Contract for Construction of 56-Seat High Speed Reinforced Glass Passenger Boats and the Supplementary Agreement thereto, the Certificate for Delivery and Taking Delivery, the receipts for payments of the costs of boat construction, the IOU, the various certificates of ?°Fei Shun?± and the written notes of answers to inquiries by the local police station of Shalan Town, Taishan City. Therefore, the collegial bench confirmed the foregoing documents.


The following facts were ascertained with the help of the above confirmed evidence:


On February 21, 1998, the two Plaintiffs, as Party A, and the Defendant, as Party B, entered into the Contract for the Construction of 56-Seat High Speed Reinforced Glass Passenger Boats. On June 25, the two parties to the Contract further concluded a Supplementary Agreement. According to the Contract and the Agreement, Party B shall construct two high speed passenger boats at the cost of RMB 880,000 each for Party A and shall deliver them to Party A within 100 working days as of the date of signing the Contract. Should Party A fail to effect the payments of construction costs progressively as scheduled in the Contract, he shall have to pay a penalty for delaying payment at 0.05% per day of the sum payable in the corresponding period. The place of delivery of the boats was the wharf of Party B. Party B guaranteed a one-year free maintenance for the boat structure as of the date of going out of the dockyard of the boat and a two-year free maintenance for serious problems with respect to the boat structure. Subparagraphs 2 & 3 of Article 4 (II) of the Supplementary Agreement provided that upon delivery of the boats, Party A shall pay to Party B RMB 1,000,000 and the remaining sum shall be paid off within 6 months as of the date of going into operation of the boats by Party A. Paragraph 2 of Article 7 of the Supplementary Agreement further stipulated that should Party A fail to pay off the remaining sum as agreed on in the Contract 6 months after the commencement of operation, and should such failure remain for another 6 months, Party A shall unconditionally return one of the boats to Party B.


On January 22, 1999, the representatives of the Plaintiffs and the Defendant delivered and took delivery of the boats at the wharf of the Defendant, and concluded a Certificate for Delivery and Taking Delivery, which stated that the Plaintiffs had examined and accepted the high speed passenger boats constructed by the Defendant. On 23January, the two parties set to settle the accounts in relation to the costs of construction of the boats. Based on the result of such settlement, the Plaintiffs issued an IOU, stating that they still owed RMB 510,000 as cost of construction to the Defendant and promising to effect the payment in the amount of RMB 150,000 by the end of March, 1999 and to pay the rest as provided for in the Contract. Thereafter, the Plaintiffs named the two boats ?°Fei Shun?± and ?°Fei Li?± and went through formalities for obtaining various papers for operation. The Certificate of Registry of Ownership of ?°Fei Shun?± stated that the owners were Zhao Yangsheng, Liang Hongfang and Hong Rongliang. The Certificate for Transportation Operations stated that the operator of the boats was Zhanjiang Naozhou Passenger Transportation Co. and the date of issuance was February 8, 1999. But in fact, Zhanjiang Naozhou Passenger Transportation Co. was merely the nominal operator of ?°Fei Shun?±. The actual operators of the boat were the Plaintiffs, who paid management fees to the said company. 


The Plaintiffs paid RMB 10,000 on April 5, 1999, RMB 20,000 on April 14, 1999, RMB 20,000 on May 13, 1999, RMB 100,000 on June 10, 1999, RMB 30,000 on June 18, 1999, and RMB 10,000 on May 10, 2000, totaling RMB 190,000 to the Defendant. In order to recover the remaining sum, the Defendant detained ?°Fei Shun?± at Shanzui Wharf, Shalan Town, Taishan City on September 19. Reacting to such detainment, Qiu Zhanwei, Board Chairman of the Defendant, and the Plaintiff Zhao Yangsheng respectively went to the police station of Shalan Town to report the case, requesting the local police station to handle it. The police station considered the Defendant??s detaining the boat in reliance upon the provisions of their Agreement, namely, ?°Party B is entitled to take back one boat should Party A fail to effect payment of the construction costs in due course?±, to be a civil dispute. Also taking into account that Zhao Yangsheng hoped to settle the dispute between himself and the Defendant, the police station dismissed the case. Thereafter, the Defendant steered ?°Fei Shun?± back to his wharf and kept it afloat there under his custody.


With respect to the disputes between the two parties over the facts of this case, the collegial bench ascertained as follows:


I.	Whether there were diesel oil, electric drills and walkie talkies onboard


The Plaintiffs furnished the Delivery Order for the Diesel Oil issued by Jinda Development Co. under Guangdong Provincial Petroleum Enterprises Group, (Zhanjiang) to Hong Da Co. and the evidence for sale of oil issued by Xia Hai Petroleum Station to Naozhou fleet on August 1, 2000 to prove the existence of diesel oil, electric drills and walkie talkies onboard. The Defendant contended that there was no sign whatsoever on the Delivery Order for the Diesel Oil or the evidence for the sale indicating that it was relevant to this case. The collegial bench accepted the Defendant??s argument and held that such evidence had no connection with and no effect in support of this case, thus refused such evidence.


II.	With regard to losses in operation and in charges and dues


For the purpose of proving that the detainment of ?°Fei Shun?± had incurred losses in operation and in charges and dues totaling RMB 161,213, the Plaintiffs produced the following evidence and documents: receipts of passengers?? harbor dues and berthage of ?°Fei Shun?± and ?°Fei Li?± from May to July, 2000; payroll of ?°Fei Shun?± from January to September, 2000; Statement of Income and Expenditure of ?°Fei Shun?± from January 1 to September 15, 2000; receipts of navigation management fees of ?°Fei Shun?± and ?°Fei Li?± in December, 1999; invoices for wharfage of ?°Fei Shun?± and ?°Fei Li?± from October, 1999 to February, 2000; and receipts for harbor dues of ?°Fei Shun?± in August and December 1999. The Defendant held that as the payroll and the Statement of Income and Expenditure were made by the Plaintiffs themselves, without being authenticated by relevant legal authorities, they could not reflect the real situation and were thus without any evidential force. Moreover, none of the items of charges such as passengers?? harbor dues, berthage of the boat, navigation management fees, wharf dues and harbor charges as shown on the receipts and evidence occurred during the period when ?°Fei Shun?± was taken back and, therefore, they all had no connection with this case. The collegial bench accepted the view of the Defendant and held that the evidence produced by the Plaintiffs was not directly connected with this case. Hence, the collegial bench shall not accept such evidence from the Plaintiffs.


III.	Regarding the cost of the air-conditioners and the charges for repairs


The Plaintiffs submitted the Invoice for purchase of air-conditioners dated July 30, 1999 and 6 receipts of repair charges of ?°Fei Shun?± and ?°Fei Li?± on slipway incurred during March-October, 1999 to support their claim that the relevant expenses in the amount of RMB 29,199 should be deducted from the construction costs. The Defendant refuted that the cost for air-conditioners and the charges of repairs of the boats did not fall within the agreed scope of guaranteed free maintenance for the boat structure, and therefore should be borne by the Plaintiffs themselves. The collegial bench held that although the Defendant??s name and address were written on the invoice for purchase of air-conditioners, which seemingly indicated that this sum was paid for and on behalf of the Defendant, yet, the Plaintiffs failed to adduce evidence to prove that the Defendant approved of or authorised the plaintiffs for such purchase on the Defendant??s behalf. Even though the air-conditioners in question were actually used by ?°Fei Shun?± or ?°Fei Li?±, they were beyond the scope of free maintenance as they were beyond the scope of free maintenance of the boat structure as mutually agreed upon. The Items of Charges on the receipts of up-to-slipway repairs respectively noted ?°Individual repair charges?± or ?°up-to-slipway repair charges?± for ?°Fei Shun?± or ?°Fei Li?±, which were not sufficient to prove that the repairs fell within the scope of guaranteed free maintenance for boat structure as previously agreed upon. Therefore, the Defendant??s confutation was tenable and the collegial bench shall not accept the relevant evidential documents produced by the Plaintiffs, as they were irrelevant to this case.


IV.	About the transportation expenses and the accommodation costs


The Plaintiffs submitted 24 invoices of transportation expenses and 30 invoices of costs of accommodation and meals to prove that they had incurred expenses for transportation, accommodation and meals amounting to RMB 15,000 in their attempts to get back their boat under detainment. The Defendant held that there were no records on the above receipts showing the time and purposes for which the charges actually incurred, so the said receipts were irrelevant to this case. The collegial bench held that the Defendant??s point of view was tenable, and did not accept such untenable evidence submitted by the Plaintiffs.


Hong Rongliang declared to waive his substantive rights and declined to attend the court hearings of this case. Therefore, the collegial bench shall not summon him to the hearing.


In summary, the collegial bench unanimously held that:


This was about a dispute over the contracts for construction of boats. Although the Plaintiffs initiated this litigation on the grounds of dispute over damages resulting from the detainment of a boat, yet the essential nature of this dispute over the detainment of the boat was about the effectiveness of the clause regarding the terms of payment of construction costs in the contract of construction, which belonged to a dispute over contract rather than a controversy over act of tort. Hong Rongliang, though registered as one of the owners of the boats in question, was not a party to the contract of construction or the Supplementary Agreement. In addition, he had declined to attend the hearings of this case, and had also declared to waive his substantive rights with respect to this case. Hence, his absence from the court hearings did not affect the rights and obligations of the parties to this case and the normal handling of this case.


The substantive clauses of the construction contract and its Supplementary Agreement were eligible and their contents were legitimate. They should be deemed to have reflected the true intents of the parties to them, and were thus ascertained as effective. The provisions of paragraph 2 of Article 7 of the Supplementary Agreement to the effect that should the Plaintiffs fail to pay off the boat-construction costs within the time limit, they should unconditionally return one of the boats to the Defendant, was a clause in respect of liabilities for breach of contract. The wording of such clause was definite and specific and was binding upon both parties to the Contract. The Plaintiffs?? allegation that such clause was in violation of the provisions of law was neither valid nor tenable. 


In the course of the performance of the contract, the Plaintiffs took delivery of the boats, obtained various certificates for the boats, and legally obtained the ownership thereof. However, this did not affect the Defendant??s contractual rights to take back one of the boats to compensate for the remaining and outstanding sum of the construction costs and the Penalty for the payment overdue under the circumstances the Plaintiffs failed to effect payment for the rest of the construction costs in time in accordance with the provisions of paragraph 2 of Article 7 of the Supplementary Agreement. Thereafter, the Plaintiffs refused to pay the remaining sum of the construction costs on the grounds that the Defendant failed to issue invoice for their payments. Such allegation of the Plaintiffs was not well founded, and the Plaintiffs?? act had constituted a violation of the Contract. In view of the Plaintiffs?? failure to pay off the construction costs, the Defendant detained ?°Fei Shun?± and kept it in his dockyard without permission. Such action of the Defendant was not appropriate. However, this did not affect the Defendant??s substantive rights on the detained boat. Therefore, the Defendant was entitled to keep ?°Fei Shun?± in custody as a means of compensation for the yet-to-be-paid construction costs and the penalty for overdue payment thereof. The Plaintiffs had no right to demand the Defendant to release the detained boat or to compensate for their losses resulting from the detainment. Meanwhile, the Plaintiffs?? obligation to pay the remainder of the construction costs and the penalty for overdue payment to the Defendant should be deemed to have been fulfilled. All of the relevant claims requests of the Plaintiffs and the relevant counterclaims of the Defendant were not tenable and shall all be dismissed.


The Defendant should have undertaken certain liabilities for compensation for his inappropriate and unauthorized detainment of the boat. However, as the Plaintiffs failed to convincingly prove their losses in operations and the expenditure they incurred resulting from the Defendant??s detaining the boat, the Plaintiffs?? claim in this respect should be dismissed.


With regard to the Plaintiffs?? requests that the Defendant return the diesel oil, walkie talkies and the maintenance and repair tools onboard, as well as to offset the costs of purchasing air-conditioners and the charges for repair from the remaining sum of the construction costs payable by the Plaintiffs, they should be dismissed as not well-supported by evidence.


The Defendant??s request to order the Plaintiffs to compensate for his losses resulting from this litigation in the amount of RMB 20,000 had no factual and legal basis, and is thus dismissed.


Summing up the above and in accordance with the provisions of Article 111 of the General Principles of Civil Law of the PRC, the judgment is hereby rendered as follows:


I.	The litigation requests of the Plaintiffs Zhao Yangsheng and Liang Hongfang are dismissed;


II.	The counterclaims of the Defendant Guagnzhou Gao Hua Yachts Manufacturing Co., Ltd. are dismissed.


The fee for acceptance of the case amounting to RMB 19,268 shall be borne by the Plaintiffs, while that for acceptance of the counterclaim totaling RMB 11,030 shall be paid by the Defendant.


Should there be any objection to this Judgment, a statement of appeal with copies in the number of the opponent party can be submitted to this court within 15 days upon service of this Judgment. The court of appeal shall be the Higher People??s Court of Guangdong.



Presiding Judge: Xiong Shaohui

Judge: Xiang Minghua

                                Acting Judge: Li Yichuan


 (chop of Guangzhou Maritime Court)

January 10, 2001


Certified True Copy


Clerk: Mo Fei