Plaintiff			:	JP Morgan Chase Bank

Place of business in UK : 125  London Wall ECZY 5AJ, London, England

Legal Rep.		:	Elizabeth Jane Nelson, Managing Director

Agent ad litem	:	Lei Zhengqing and Huang Zhongmin with High Seas Law Firm


Defendant		:	Seastream Shipping Inc.

Domicile		:	80 Broad Street, Monrovia, Liberia

Legal Rep.		:	Nikolaos Valmas, Director

Agent ad litem	:	Pan Youwen and Fu Boyu of China Ocean Shipping Agency 						Mao Ming Shuidong Port Ltd.	


The Plaintiff JP Morgan Chase Bank brought an action before this Court on March 22, 2002 for the ship mortgage dispute between the Defendant Seastream Shipping Inc. and the Plaintiff. This Court accepted the case in accordance with the jurisdiction under Article 6, Para. 2, (6) of the Maritime Procedure Law of the People??s Republic of China. A collegial bench was formed after acceptance to hear the case in public session on July 25, 2002. Agents ad litem Lei Zhengqing and Huang Zhongmin for the Plaintiff attended the court hearing. The Defendant did not attend the court hearing without giving justified reason although it was summoned by writ. A trial by default was made by this Court for the case in accordance with Article 130 of the Civil Procedure Law of the People??s Republic of China. Now the trial of the case has been concluded.


It was alleged by the Plaintiff that on June 19, 1997 the Plaintiff and the Defendant and other four Borrowers entered into a Loan Agreement under which it was agreed that the Plaintiff should make available a loan of USD35,000,000 to the Borrowers and the five Borrowers should be jointly and severally liable for the repayment of the loan. It was also agreed under the Loan Agreement that a mortgage should be established on M.T. Mariner owned by the Defendant to secure the repayment of loan by the Borrowers. A Deed of Security was signed between the Defendant and the Plaintiff for the loan, under which the Defendant undertook to assume the guaranty liability in the event other Borrowers fail to repay the principals, interests and expenses under the Loan Agreement. On September 3, 2001, the Plaintiff and the five Borrowers entered into a Supplementary Agreement to amend partly the Loan Agreement and the last date of maturity was amended to be April 30, 2002. Up to March 5, 2002, the total amount of loan principals, interests and expenses payable by the Borrowers to the Plaintiff was USD2,519,304.89, for which the Defendant should assume joint and several liability for repayment. On July 17, 1999, the Plaintiff and the Maritime International Inc. (?°MII?±)-the parent company of the Defendant, entered into an Uncommitted Overdraft Facility Agreement, under which it was agreed that the Plaintiff should provide an overdraft facility to MII for USD2,000,000 and that MII should make immediate repayment of the overdraft facility on demand by the Plaintiff. On April 20, 2000, the two parties under the Uncommitted Overdraft Facility Agreement confirmed to raise the overdraft facility amount to USD3,000,000. On July 17, 2000, the Defendant and other Guarantors signed a Guarantee Contract with the Plaintiff, under which it was agreed that the Guarantors including the Defendant should assume joint and several liability for repayment of the overdraft. On July 18, 2000, the Defendant and the Plaintiff entered into a Second Priority Deed of Security under which it was agreed that the Defendant should provide a security for the repayment of the overdraft payable by MII to the Plaintiff by setting up a mortgage on M.T. Mariner owned by the Defendant. Up to March 5, 2002, the total amount of overdraft, interest and expenses payable by MII to the Plaintiff was USD4,804,072.37, for which the Defendant should assume guaranty liability. After the Plaintiff and the Borrowers (including the Defendant) signed the Loan Agreement and its amendments, Uncommitted Overdraft Facility Agreement and its amendments, the Plaintiff has fully fulfilled its contractual obligations by extending the loan to the Borrowers (including the Defendant) while the Borrowers (including the Defendant) failed to repay the loan as per the Loan Agreement or were unable to repay the balance of the loan. The Plaintiff accordingly issued notices to the Borrowers (including the Defendant) and the Guarantors, informing them that the unpaid balance of the loans was overdue. The Plaintiff asked this Court to adjudicate the Defendant to repay the loans due, overdraft, interests and expenses amounting to USD7,045,208.64, to order the Defendant to undertake the ship arrest application fee, creditors?? rights registration fee and the court fee for the subject case, and to affirm that the Plaintiff have the right of mortgage over the M.T. Mariner on basis of the above creditor??s right and that the Plaintiff have the right to share the ship auction proceeds on a priority basis. 


During the period for adducing evidence, the Plaintiff presented to this Court the following evidential documents: 1) Loan Agreement; 2)Supplementary Agreement to the Loan Agreement; 3) Deed of Security; 4)Registration Certificate of Ship Mortgage; 5) Uncommitted Overdraft Facility Agreement; 6) Supplementary Agreement to Amend the Uncommitted Overdraft Facility Agreement; 7) Guarantee Contract; 8) Second Priority Deed of Security; 9) Certificate of Second Priority Mortgage; 10) Loan Repayment Notice; 11) Certificate of Registry of M.T. Mariner; 12) Letter of Confirmation of debt by the Defendant and 13) Notice of repayment of overdraft.


The Defendant accepted the service of court documents via its appointed agents ad litem but did not present any evidential document. Nor did it make any defence.


Through the trial, the collegial bench ascertained as follows with regard to evidential documents of this case:


On the face of the Plaintiff??s Evidence 1-Loan Agreement presented by the Plaintiff, there is no the signature of the Plaintiff, the Defendant or other Borrowers. Although the Plaintiff later did provide to this Court the Loan Agreement between the Plaintiff and the Borrowers as notarized by the notary public in UK, the notarized contract text did not meet the legal requirement as no legalization formalities were gone through therefore. The Plaintiff??s Evidence 2- Supplementary Agreement to the Loan Agreement and Evidence 3- Deed of Security could, by cross-verification, confirm the existence of Loan Agreement and the amount loaned by the Plaintiff to the Defendant under the Loan Agreement being USD35,000,000, the facts of which the collegial bench accepted. But the collegial bench did not accept other contents under the Loan Agreement. The Plaintiff??s Evidence 10-Loan Repayment Notice was unilaterally made by the Plaintiff. Since the Plaintiff??s Evidence 12- Letter of Confirmation of debt by the Defendant could only verify that the Plaintiff had sent a Loan Repayment Notice to the Defendant but could not verify the specific content of the Loan Repayment Notice. Therefore, the collegial bench only recognized the fact that the Plaintiff had sent a Loan Repayment Notice to the Defendant but did not recognize the content of the Loan Repayment Notice. The Plaintiff presented its Evidence 13-Overdraft Facility Repayment Notice in an attempt to prove that on July 13, 2002 it urged the agent of the Defendant to repay the overdraft. But as this document was made unilaterally by the Plaintiff and there was no other evidence to corroborate that the Plaintiff had sent this notice, the collegial bench did not recognize this evidential document. All other evidential documents were notarized by the notary public in the country of origin and legalized by Chinese??s Embassy in such country and the Defendant did not raise objection. The collegial bench through examination did not find any defect that would prejudice the evidential effect of the evidences. Therefore, all other evidential documents were recognized.


On basis of the above evidential documents recognized, the collegial bench ascertained the following findings of facts:


On June 19, 1997, the Plaintiff and the Defendant, Mariner Shipping Inc., Montemar Shipping Inc., Seaward Shipping Inc. and Taramar Shipping Corporation entered into a Loan Agreement, under which it was agreed that the Plaintiff would make available a loan of USD35,000,000 to the above five Borrowers. On September 3, 2001, the Plaintiff and the above five Borrowers including the Defendant signed a Supplementary Agreement to the Loan Agreement, under which it was confirmed that up to even date with the signing of the Supplementary Agreement to the Loan Agreement, the amount of loan extended was USD10,130,987. The Supplementary Agreement made part amendments to the Loan Agreement and the way of loan repayment was agreed as follows: the first installment through the sixth installment should be made consecutively. The first two repayment installments should be USD843,250 respectively and the following four repayment installments (including the sixth installment) should be USD593,250 respectively. The last sum to be repaid would be USD6,071,487. The last date of maturity was amended to be April 30, 2002. The first repayment installment should be made on September 15, 2001 and the following each repayment installments should be made at intervals of 45 days. In the Supplementary Agreement to the Loan Agreement, the Borrowers also agreed to pay all expenses, costs and disbursements (including lawyer??s fee) incurred by the Plaintiff for preparing, negotiating, securing and implementing or attempting to enforce the Supplementary Agreement to the Loan Agreement.


On June 27, 1997, the Plaintiff and the Defendant signed a Deed of Security, under which it was agreed to establish a mortgage of first priority over M.T. Mariner owned by the Defendant in favor of the Plaintiff to secure the repayment of the loan of USD35,000,000. On June 27, 1997, the Plaintiff and the Defendant went through the ship mortgage registration formalities for M.T. Mariner with Bahamas Ship Registrar in London by virtue of the above mentioned Loan Agreement and Deed of Security. In the Registration Certificate of Ship Mortgage, it was stated that the Defendant established a mortgage over the 64 shares owned by the Defendant in M.T. Mariner and her crafts in favor of the Plaintiff to secure the repayment of sums currently due or owing to the Mortgagee under the Loan Agreement, Deed of Security and other guarantee documents including the principals, interests and other sums which can be specified. 


On July 7, 1999, the Plaintiff and MII signed an Uncommitted Overdraft Facility Agreement, under which it was agreed that the Plaintiff should provide an overdraft facility to MII for USD2,000,000 and that MII should make immediate repayment of the overdraft on demand by the Plaintiff. On July 17, 2000, the Defendant and other Guarantors Mariner Shipping Inc., Montemar Shipping Inc., Seaward Shipping Inc. and Taramar Shipping Corporation entered into a Guarantee Contract with the Plaintiff, under which it was agreed that the five Guarantors including the Defendant should assume joint and several liability for repayment of the overdraft in amount of USD2,000,000. On July 18, 2000, the Defendant and the Plaintiff entered into a Second Priority Deed of Security under which it was agreed that the Defendant should provide a security for the repayment of the above mentioned overdraft by setting up a mortgage on M.T. Mariner owned by the Defendant. On July 18, 2000, the Defendant went through the ship mortgage registration formalities for M.T. Mariner with Bahamas Ship Registrar in London by virtue of the above mentioned Uncommitted Overdraft Facility Agreement and Second Priority Deed of Security. In the Registration Certificate of Ship Mortgage, it was stated that the Defendant established a mortgage over the 64 shares owned by the Defendant in M.T. Mariner and her crafts in favor of the Plaintiff to secure the repayment of sums currently due or owing to the Mortgagee under the Uncommitted Overdraft Facility Agreement, Second Priority Deed of Security and other guarantee documents including the principals, interests and other sums which can be specified. On September 3, 2001, the Plaintiff and MII, the Defendant, Mariner Shipping Inc., Montemar Shipping Inc., Seaward Shipping Inc. and Taramar Shipping Corporation signed a Supplementary Agreement to     the Uncommitted Overdraft, under which it was confirmed that up to even date with the signing of the Supplementary Agreement to the Uncommitted Overdraft Facility Agreement, the total amount of overdraft extended to MII was USD1,993,615.64 and the Uncommitted Overdraft Facility Agreement was partly amended.


On March 7, 2002, the Plaintiff sent repayment notices to the Defendant for the above two loans. On April 5, 2002, the Defendant sent a reply (Letter of Reply) to the Plaintiff indicating that, the Defendant confirmed receipt of the repayment notice sent by the Plaintiff on March 7, 2002 in accordance with the Loan Agreement dated June 19, 1997 and the Guarantee Contract dated July 17, 2000 and confirmed that up to March 15, 2002 the overdraft amount due under the Uncommitted Overdraft Facility Agreement was USD4,804,072.37 and the amount due under the Loan Agreement was USD2,241,136.27. The Defendant confirmed that the above loans remained un-repaid up to the present and also confirmed its joint and several liability with other Borrowers for the above loans. The Defendant believed that it was impossible for other Borrowers to repay the loan after this ship was sold. The Defendant authorized the Plaintiff to present this Letter of Confirmation to the court in Guangzhou, China. The Defendant did not intend to defend against the claims pursued by the Plaintiff before the court in Guangzhou against M.T. Mariner. The Defendant had no sufficient fund to repay the above loans and did confirm not to raise any objection to the Plaintiff??s application for judicial sale of M.T. Mariner by the court in Guangzhou. The Defendant authorized its local agent-China Ocean Shipping Agency Mao Ming Shuidong Port Ltd. to accept the service of court documents for arresting and auctioning M.T. Mariner, judgment and writs etc. During the court hearing, the Plaintiff confirmed that the amounts of the two loans (including the loan, overdraft and relevant expenses) were free from any mistake.


The ship??s registration document of M.T. Mariner as excerpted by Bahamas Ship Registrar in London on February 8, 2002 showed that M.T. Mariner was a steel tanker built in South Korea in 1976 with gross tonnage being 130,421MTs and net tonnage being 100,598MTs. She was registered in Nassau, Bahamas. The total 64 shares on the vessel were fully owned by the Defendant. Three mortgages were separately established on the ship: mortgage over the 64 shares of the ship on June 27, 1997 to secure the repayment of the loan and interests to the Plaintiff; mortgage over the 64 shares of the ship on July 18, 2000 to secure the repayment of the loan and interests to the Plaintiff and the mortgage over the 64 shares of the ship on September 20, 2001 to secure the repayment of debt and interests to Puertollano Compania Naviera S.A. The mortgage registration document did not state clearly the amount of debt secured, the interest rate and the repayment period. The Plaintiff presented the legalized notarial certificate issued by Richard John Saville-the notary public in London which verified the authenticity of the above ship mortgage document, certified the compliance of the ship mortgage document with the currently effective legislation of Bahamas and proved that it was made in accordance with the requirement of Bahamas Ship Registrar in London and that it was correct and valid.


On March 14, 2002, the Plaintiff filed an application with this Court for arresting M.T. Mariner on the ground that the Defendant delayed in repaying USD7,323,377.26 as secured loans and interests to the Plaintiff and demanded a security of USD7,800,000. On March 15, this Court handed down a ruling, approving the Plaintiff??s application for arrest of ship and ordering the Defendant to provide a security of USD7,800,000 within 30 days. M.T. Mariner was arrested at the same day. On March 22, after the Plaintiff brought the subject case before this Court, the Plaintiff applied for auctioning M.T. Mariner on the ground that the Defendant refused to provide security as ordered and that it was unsuitable for M.T. Mariner to remain under arrest. After examination, this Court made a ruling on March 29 to sell the ship by auction and keep the auction proceeds. On May 9, M.T. Mariner was sold by this Court by auction and it was bought by the Plaintiff at the price of USD5,940,000. On May 14, M.T. Mariner was handed over by this Court to the Plaintiff in the waters off Mao Min Shuidong port and the arrest of the ship was lifted. The Plaintiff paid in advance RMB5,000 to this Court as application fee for arresting and auctioning M.T. Mariner. During the period for the auction public notice was posted. The Plaintiff paid RMB500 to this Court as claim registration fee to register its claim in order to share the ship auction proceeds. This Court incurred ship keeping and watching fee, auction fee and Customs tonnage in a total amount of USD678,628.17 for arresting and auctioning M.T. Mariner. The balance of the auction proceeds of M.T. Mariner was USD5,261,371.83 after the above mentioned arrest and auction fees and tonnages were deducted.


The collegial bench holds unanimously that this was a case of dispute over ship mortgage involving foreign elements. In accordance with Article 271 of the Maritime Code of the People??s Republic of China, ?°the law of the flag state of the ship shall apply to the mortgage of the ship?±. In this case, the flag state of the mortgaged M.T. Mariner was Bahamas. Therefore Bahamas Merchant Shipping Act shall apply to the resolution of the dispute over ship mortgage.


The Plaintiff presented to this Court the English text of Bahamas Merchant Shipping Act which had been notarized by notary public in Bahamas and legalized by Chinese Embassy in Bahamas. The Act was certified to be promulgated on November 29, 1976 with effect from December 31, 1976 and remained effective at the material time. The Chinese translation of ?°Mortgage?± (from Article 33 through Article 41) was certified to be true to the original language by notarization. 


The Plaintiff and the Defendants  etc. Borrowers signed the Loan Agreement on June 19, 1997, under which the Borrowers including the Defendant borrowed a loan of USD35,000,000 from the Plaintiff. The Plaintiff and MII entered into the Uncommitted Overdraft Facility Agreement on July 7, 1999, under which the Plaintiff agreed to provide an overdraft of USD2,000,000 to MII. The Plaintiff and the Defendant signed Guarantee Contracts for the two loans respectively, under which the Defendant agreed to assume guaranty liability for the two loans and joint and several liability for repayment of the loans. According to the Supplementary Agreement to the Loan Agreement, the period for repayment of the last installment would be expired on April 30, 2002. According to the Uncommitted Overdraft Facility Agreement, the overdraft loan would become due on demand by the Plaintiff. The Plaintiff sent repayment notice to the Defendant on March 7, 2002. Therefore, the Defendant should have repaid in full the overdraft facility on March 7, 2002. All contracts/agreements involved in this case are the declaration of true will of the parties. They did not harm the public interest of the People??s Republic of China or violate the compulsory provisions of law. Therefore, those contracts/agreements are lawful and valid and should be binding upon the parties. The parties should perform their obligations under such contracts/agreements. Although the Plaintiff did not provide the evidence to prove the exact amount of loans, the Plaintiff and the Defendant did confirm that up to March 15, 2002 the amounts of the two loan principals, interests and relevant expenses owed by the Defendant to the Plaintiff were USD4,804,072.37 and USD2,241,136.27 respectively, totaling USD7,045,208.64. The Defendant should repay in full the above mentioned debts.


The Defendant established mortgage over its M.T. Mariner to secure the repayment of the two loans and went through mortgage registration formalities with the Ship Registrar of flag state-Bahamas Ship in London. Bahamas Merchant Shipping Act does not provide for other indispensable requirements except the time for registration. The Act provides in Article 33, Para. 1 and Para. 2, that ?°the registered ship or her shares can be the security for loan or other valuable consideration. When the required mortgage document is presented, the initial registrar should allow the registration as a record. The registration of mortgage should be made in the sequence following the filing of application for registration before the initial registrar. The registrar should make a memorandum to announce the mortgage that has been registered and indicate the actual time of registration in the record.?± Articles 35 provides that ?°If more than one mortgages have been registered over the same ship or same share, no matter whether there is express, implied or constructed notice, the sequence of priority should be determined according to the date of registration, not the date of mortgage.?± Article 37 provides that ?°each registered mortgagee shall have the right to dispose of the ship or shares within the limit of his registered scope and issue valid receipt for purchase price. If more than one mortgages have been registered over the same ship or same share, without the unanimous consent of the previous mortgagees, the subsequent mortgagees may not sell the ship or the shares, except as per the ruling of a competent court.?± According to the ship mortgage registration in Bahamas Ship Registrar, the ship mortgages established to secure the repayment of the two loans in the present case were of first mortgage and second mortgage in sequence. The registration of the two ship mortgages did not violate the provisions of Bahamas Merchant Shipping Act in respect of ship mortgage. The relevant legalized notarial certificate also proved that registration of the two mortgages complied with the law of Bahamas and was valid. In accordance with the above provisions of Bahamas Merchant Shipping Act, the Plaintiff had the first priority and second priority mortgages over M.T. Mariner for the two loans of USD2,241,136.27 and USD4,804,072.37 invovled in the case before she was auctioned by this court. Because the Defendant failed to pay up part of the loans secured by the above ship mortgages after the loans become mature, the Plaintiff had the right to apply to the court for auctioning M.T. Mariner and to have its loans paid in priority from the auction proceeds of M.T. Mariner.


To sum up, in accordance with Section 35 and Section 37 of Bahamas Merchant Shipping Act, the judgment is handed down as follows:


The Defendant Seastream Shipping Inc. is ordered to pay USD7,045,208.64 to the Plaintiff JP Morgan Chase Bank to discharge the loan, overdraft facility, interests and relevant expense. The Plaintiff JP Morgan Chase Bank on account of its claims had the right of mortgage with respect to M.T. Mariner before this Court sold her by auction and should share the auction proceeds of M.T. Mariner on a priority basis.


The court fee in amount of RMB302,386, ship arrest application fee in amount of RMB5,000 and creditor??s right registration fee in amount of RMB500 should be undertaken by the Defendant. As the above fees had been advanced by the Plaintiff, this Court will not refund them and the Defendant should directly pay these fees to the Plaintiff.


The above monetary obligations should be fulfilled within 10 days from the date this judgment takes effect.  


If not satisfied with this judgment, either party can make appeal to the Higher People??s Court of Guangdong Province within 30 days upon service of this judgment by filing with this Court the Statement of Appeal in the number of the counter parties.


Presiding Judge	:	Zhan Simin

Judge			:	Xian Jiankang

Acting Judge	:	Yu Xiaohan


July 25, 2002


Clerk			:	Mo Fei