BEIHAI MARITIME COURT

PEOPLE?? S REPUBLIC OF CHINA

CIVIL JUDGMENT


No.Hai-Shang-Chu 022 (2001)


Plaintiff:            Cai Guimu, male, Han nationnality, shareholder of 

Nanyue Sugar Company, Lufeng City, Guangdong 

Province

Domicile:            Donghai Town, Lufeng City, Guangdong Province

Agent ad Litem:       Cai Shaofeng, attorney-at-law of Renheng Law

Firm, Guangdong Province

Agent ad Litem:       Lin Setai, male, 50 years old, legal adviser to 

Sugar & Biscuits Factory of Lufeng City, 

Guangdong Province

Domicile:            Donghai Town, Lufeng City, Guangdong Province


Defendant:          Guigang Office of PICC

Domicile:            Kou??an Block, Zhongshan Road, Guigang City

Legal Representative:   Mai Guocheng, vice president 

Agent ad Litem:      Qin Dongming , attorney-at-law of Zhixin Law 

Firm, Guangzhou City

Agent ad Litem:       Yu Wenqiu, male, 72 years old, vice president of 

Xingbao Consultation Service Company of 

Guangxi 

Domicile:            No. 16, Xinghu Road, Xincheng District, Nanning 

City


This court accepted the cases of dispute over insurance contract of carriage of goods by water on March 27, 2000, and organized a collegial bench to hold open court hearing. The litigants of the case were as follows: the plaintiff Cai Guimu; the defendant Guigang Office of PICC and third parties Jiangbei Auto Team of Gangbei District, Guigang City; United Transport Company of Guigang City, Guangxi Zhuang Autonomous Region; Jiangkou No.1 Water Transport Company of Guiping City.  This case was transferred to this court by Guigang Intermediate People??s Court. The bench held a public hearing on September 11. On account of the fact that the aforementioned third parties were not the parties to the insurance contract in this case, the collegial bench made an oral ruling that the third parties should quit this suit. The hearing was held with the presence of the defendant Cai Guimu, agents ad litem Cai Shaofang and Lin Cetai, the principal leader of the defendant Mai Guocheng, agents ad litem Qin Dongming and Yu Wenqiu. The hearing has now been concluded.


The plaintiff alleged: on December 7, 1998 the plaintiff authorized the Jiangbei Auto Team of Gangbei District of Guigang City ( hereinafter called Jiangbei Team) to deliver 180 tons of red sugar worth RMB ?¤455,400 from No.2 Sugar Factory of Tiandong County in Guangxi to Qunxing Dock in Xintang of Zengcheng City, Guangdong province. Jiangbei Team was also entrusted to apply for insurance of inland carriage of goods by water and land.  On October 9, Jiangbei Team contacted the United Transport Company of Guigang City of Guangxi Zhuang Autonomous Region (hereinafter called ?° United Co.?±) who then hired the ship No. 014 of Jiangkou No.1 Water Transport Company of Guiping City (hereinafter called ?°Water Transport?±) as the carrying vessel. On October10, having confirmed the goods and the ship, the defendant issued insurance certificates of inland carriage of goods by water and land with 180 tons of red sugar as subject-matter insured. The contract of insurance was thereby concluded and took effect. The red sugar, however, was lost when it was carried by the Ship 014 run by Water Transport.  Such non-delivery of the goods should be the risk covered by the transportation insurance. The plaintiff claimed to the defendant but was refused. The plaintiff thus made the litigant request to this court that the defendant should pay the indemnity in an amount of RMB ?¤455,400.

The defendant argued: Due to the fact that the plaintiff had no insurable interest in the 180 tons of red sugar worth RMB ?¤455,400, the contract of insurance should be void. The subject-matter insured by Guigang Office of PICC was white sugar instead of red sugar as the plaintiff claimed. The 180 tons of red sugar that the plaintiff named as subject-matter insured in his pleading was shipped not on the carrying vessel agreed in the insurance policy, i.e. the Ship 014 managed by Water Transport, but on a ?°black?± ship. As a consequence, the insurance liability had not commenced. The unregistered ?°black?± ship used by the defrauders could not act against a third party i.e. the defendant. The loss of goods arising from fraud was beyond the scope of coverage. The issuance of insurance policy should be invalid because (1) the insurance agent Xian Xueyan was trapped to issue the insurance policy and (2) Xian Xueyan,as the insurance agent of the defendant, was entrusted by the plaintiff to get a carrying vessel, which resulted in her act as the agent for both sides. The loss of the plaintiff should come under the jurisdiction of the department of public security and be recovered after the defrauders were caught. Therefore, the defendant requested that the plaintiff??s litigant requests be rejected and the plaintiff bear the court fees.


The following facts were affirmed. On December 7, 1998, the plaintiff authorized Jiangbei Team by telephone to deliver 180 tons of Donghailing Brand red sugar from No.2 Sugar Factory of Tiandong County in Guangxi, through Guigang where the sugar was shipped, to Qunxing Dock of Xintang Town, Zengcheng City of Guangdong province. Jiangbei Team was also entrusted to apply for the insurance of inland carriage of goods by water and land. On December 8 Jiangbei Team authorized United Co. to hire a carrying vessel. The assistant director of water transport department of United Co., Xian Xueyan contacted a woman who claimed to be the owner of the Ship 014 managed by Water Transport. They orally agreed that on the morning of December 10, the Ship 014 should be loaded with 180 tons of red sugar in Guitang Dock and be delivered to Zengcheng City of Guangdong against the freight of RMB ?¤39 per metric ton. At about 11 a.m. on December 9, Xian Xueyan checked the transport license of the Ship 014 and was convinced of the legality of the transport license of the Ship 014 presented by the ?°woman shipowner?±. At about 3:30 p.m. Xian Xueyan phoned Water Transport to confirm the Ship 014. Xu Haiyan, working in the office of Water Transport, confirmed that there was a ship 014 in Water Transport and the owner was Huang Zhineng, which was consistent with the name left to Xian Xueyan by the ?°woman shipowner?±. Xian Xueyan then paid the ?°Woman shipowner?± the freight RMB ?¤5,000. On December 10, Xian Xueyan, as the insurance agent of the defendant, issued two premium certificates of inland carriage of goods by water and land with serial numbers of Gui-Ding-Chou No.0012251 and Gui-Ding-Chou No.0012252 under Insurance Clause of Inland Carriage of Goods by Water and Land. The following items were recorded in the certificates: the insured and applicant for insurance Cai Guimu; name of goods: white sugar; transshipment place: Guigang; destination: Neihe; carrying vessel: ?°Jiang-Yi-Si 014?±; shipping date: December 10,1998; insurance premium rate 3?? against all risks. One of the two certificates recorded: weight of goods: 40 tons; amount insured: RMB ?¤60,000; insurance premium ?¤180; while those in the other certificate were: weight of goods 140 tons, amount insured ?¤60,000, insurance premium: RMB ?¤630. Both of the two certificates bore the signature of Xian Xueyan??the seal  bearing ?°Guiping-Jiangkou-Yi-Gongsi-014?± and the business seal of the defendant. On the same day, 180 tons of red sugar from Tiandong County of Guangxi was discharged at Guitang Dock of Guigang and loaded on the Ship 014 provided by the ?°woman shipowner?±. On December 11, the Ship 014 set sail. But until December 15, the plaintiff had not received the goods at the port of destination, so the plaintiff inquired Jiangbei Team by phone. The plaintiff reported to the department of public security on December 24 when the plaintiff still had no idea where the goods were. On December 30, the plaintiff sent a notice of claim for loss of the insured shipment to the defendant. On April 29, 1999 the plaintiff submitted the notice of claim on the loss of the shipment covered by the insurance for domestic water and road transport for the indemnity of a total amount of RMB?¤455,400, including the loss of cargo (the red sugar) of RMB ?¤428,400 and the charge for road transport together with forwarding charge of RMB?¤27,000. On June 4??the defendant gave the plaintiff  a notice of refusal of indemnity on the grounds that the loss arising from fraud was not recoverable. The plaintiff then brought a suit against the defendant.


The following facts were also ascertained: the Ship 014 of the Water Transport was 21.40 meters in LOA, 19.00 meters in LBP, 3.70 meters in moulded width, 1.40 meters in depth moulded, with a gross tonnage of 29 tons, net tonnage of 16 tons and reference dead weight tonnage of 40 tons. Huang Zhineng was the registered owner of the ship, which had been operated by Huang Yongxing??s son of Huang Zhineng, in the name of Water Transport. Around October, 1998, Huang Yongxing returned all certificates of the ship to Water Transport, except the certificate of seaworthiness. He claimed that the ship 014 was sold to Guangdong and the certificate of seaworthiness had been returned to Guiping Harbor Superintendency. However, Water Transport, instead of having the registration of the ship 014 cancelled, sent the certificate of the ship 014 by mail on November 20, 1998 to Li Gui??an, the manager of Shizui Water Transport Company of Guiping City. Afterwards, Li Gui??an took the certificate to the Office of Navigation Administration and Harbor Navigation Superintendency of Guiping City, making up all charges and taxes since the ship ceased running. On November 25 he applied for temporary seaworthiness survey to Guangxi Ship Inspection Bureau who issued temporary certificate for inland water ships expiring on Janurary 15, 1999. On December 8,1999, Li Gui??an delivered the certificate of the ship 014 to a woman who claimed to be ?° Li Xiaoqiong?±. This woman intended to run a ?°three-none?± ship (i.e. with no ship certificate, no transport license and no certificate of seaworthiness) in the name of Shizui Water Transport Company.

It was affirmed that Nanyue Sugar Company in Lufeng City was a private company, which was founded by three shareholders: the plaintiff, Ma Yansheng and Chen Jupu. The registered capital was RMB ?¤450,000. The scope of business included edible sugar and non-staple foodstuff, etc. This company had proved that the plaintiff had been entrusted to apply for the insurance of carriage of goods as the applicant for insurance and beneficiary.

The aforementioned facts, after cross-examination and being ascertained and verified by the collegial bench, had been entered in the court records and proved by the following evidence:(1) items of evidence presented by the plaintiff: notice at the time of loss; notice of claim; notice of refusing indemnification; certificates from the plaintiff??s Company and Bureau of Administration of Industry & Commerce of Lufeng City; Xian Xueyan??s testimony, and correspondence between the plaintiff and the defendant; (2) evidence presented by the defendant: statement of Jiangbei Team; freight receipt bearing the seal of Ship 014; form of acceptance of the case by the department of public security; certificate from Guiping Harbor Superintendency; temporary certificate for inland water ships; application form of ship nationality; certificate of ownership; tonnage certificate, calculation chart of ship??s reference dead weight tonnage; certificate of load line; photos of the ship 014; certification from Navigation Administration Office of Guiping City, Xu Guorong??s testimony; (3) evidence presented by both of the two parties: certificates of insurance premium; invoice of sale of goods; certificate of products allocation; receipt of 180-ton red sugar with the seal of the ship 014; certification from Guitang Dock of Guigang; shipment invoice of red sugar, and statement of detection of the case by Gangbei Branch, Bureau of Public Security, Guigang City and the testimony of witnesses.


This court held: the fact that the plaintiff put forth a proposal for insurance of carriage of goods by water and the defendant accepted the proposal and issued certificates of insurance meant that the insurance contract had been concluded between the two parties. The contract was a bona fide expression of intention on the basis of equality and free will, and the terms of the contract did not violate laws and regulations. Hence the contract shall be legally valid and binding on both parties. As to the subject-matter insured, which the defendant??s agent mistakenly wrote as white sugar, the defendant should have corrected the errors on the insurance certificates, where the defendant had been fully aware that the subject-matter insured should be red sugar when the goods were carried to the Guitang Dock. Therefore, the errors being not corrected had no bearing on the validity of the insurance contract. The Insurance Law of the PRC stipulated that an insurable interest is a legal interest that the assured has in the subject-matter insured. The invoice presented by the plaintiff recorded Nanyue Sugar Company of Lufeng City, Guangdong Province as the buyer. As the company was a private enterprise and the plaintiff was one of the shareholders of the company, the plaintiff was legally interested in the subject-matter insured. What??s more, the company entrusted the plaintiff to apply in his own name for insurance of carriage of goods as an applicant for and the beneficiary of the insurance. It was without a doubt that the plaintiff had the insurable interest in the subject-matter insured. The defendant??s arguments that the plaintiff had no insurable interest in the subject-matter insured and the insurance contract should be void were untenable. Xian Xueyan issued insurance certificates to the plaintiff as the insurance agent of the defendant, thereby establishing the legal relationship pertaining to the insurance at issue. Meanwhile, she was entrusted to hire a carrying vessel for the plaintiff, which was the legal relationship of carriage of goods by water. The act as agent for both parties should occur in the same legal relationship. Thus untenable was the defendant??s argument that the insurance contract was void because of Xian Xueyan??s act as agent for both sides.


As to the insurance for carriage of goods by water, the carrying vessel, i.e. the specific ship was an essential factor for the insurance contract and a condition for the insurer to accept the proposal for insurance. The key issue of this case was that the subject-matter insured, viz the 180-ton red sugar, had not been loaded onto the Ship 014 as stated in the certificate of insurance, but onto a three-none ship, the personator of the Ship 014, which resulted in the total loss of the cargo shipped. Therefore, on one hand, the plaintiff did not load the cargo on the ship stated in the insurance certificate, which led to material breach of the insurance contract. On the other hand, the subject-matter insured was not loaded on the Ship 014 as the record on the insurance stated, which means there was no possibility for the subject-matter insured loaded on the ship under the insurance certificates to have perils insured against. The plaintiff had violated the terms of the insurance and perils or casualties covered did not occur. The loss of cargo in this case, not arising from the perils insured against, was excluded from the scope of coverage. Hence, tenable was the defendant??s argument that the defendant should not bear insurance liability because the plaintiff??s cargo was not loaded on the Ship 014. The plaintiff??s claim for insurance compensation, in the absence of evidence and legal basis, shall not be supported. 


Pursuant to Article 12 of the Insurance Law of the People's Republic of China: ?° An insurance contract shall hold after the insured applies for insurance and the insurer agrees to underwrite the insurance and the two sides have reached agreement on the clauses of the contract.?±, Article 8 of Contract Law of the People's Republic of China: ?°As soon as a contract is established in accordance with the law, it shall be legally binding on the parties. The parties shall perform their respective obligations in accordance with the terms of the contract.  Neither party may unilaterally modify or rescind the contract?±, and Article 106 of General Principle of Civil Law of the People's Republic of China which provides: ?°Citizens and legal persons who breach a contract or fail to fulfil other obligations shall bear civil liability?±, this Court hereby decides as follows:


1. The litigant requests of the plaintiff Cai Guimu shall be dismissed;

2.	The plaintiff shall bear the acceptance fee for the case RMB ?¤9??340 .


If any litigant contests this judgment, it may submit an appeal in writting to this court within 15 days upon the service of this judgment with copies corresponding to the number of the opposing litigants and appeal to the Higher People??s Court of Guangxi Zhuang Autonomous Region. The appeal fee of ?¤9??340  shall be paid in advance within 7 days upon the date of the expiration of the appeal period(the account: the special account of litigant fee, the Higher People??s Court of Guangxi Zhuang Autonomous Region; the number of the account: 886100010; the deposit bank: Gucheng Road Branch of Nanning City, China Agriculture Bank). If the payment is delayed without application for postponement, the appeal shall be deemed as being withdrawn automatically.



Presiding Judge        Wu Zaiyang

Judge                Ni Xuewei

Judge                Xie hua


(Official Chop of Beihai Maritime Court)

                           Date             25 September, 2000


Certified true copy

Clerk                Huang Juxiu