Case of Dispute over a Contract of Assignment of Right and Interests in Bareboat Charterparty filed by ORIX Ship Resources Pte Ltd. against Shenzhen Huaxin Holdings Co. Ltd. and Shenzhen Xingpeng Shipping Enterprises Co. Ltd.
Guangzhou Maritime Court of the People's Republic of China
Civil Judgment
(2001)GHFZ No. 36
Plaintiff: ORIX Ship Resources Pte. Ltd.
Domicile: 250 North Bridge Road, No. 19-01 Raffles City Tower,
Singapore 179101, Singapore
Legal representative: Nagaaki Esaki, General Manager
Agents ad litem: Bai Tao, Zhang Guohua, lawyers of China Law Firm
Defendant: Shenzhen Huaxin Holdings Co., Ltd.
Domicile: Rm. 1001, 1002, 1005 &1020, 10/F, Hua Lian Building, Central Shennan Rd., Futian District, Shenzhen, Guangdong Province
Legal representative: Li Zhenhua, Chairman of the Board of Directors
Agent ad litem: Yang Yunfu, lawyer of Guangdong Heng Yun Law Firm
Agent ad litem: Wu Yaohong, lawyer of Guangdong Heng Tong Cheng Law Firm
Defendant: Shenzhen Xingpeng Shipping Enterprises Co., Ltd.
Domicile: 24/F, Hua Lian Building, Central Shennan Rd., Futian District, Shenzhen, Guangdong Province
Legal representative: Ai Quanqin, Chairman of the Board of Directors
Agent ad litem: Liu Guanghai, Deputy Manager of Shenzhen Xing Peng Shipping Enterprises Co., Ltd.
With respect to the case about dispute over a contract of assignment of right and interests in a bareboat charterparty filed by the Plaintiff ORIX Ship Resources Pte. Ltd. (hereinafter referred to as ?°ORIX Singapore?±) and the Defendant Shenzhen Huaxin Holdings Co., Ltd. (hereinafter referred to as ?°Shenzhen Huaxin?±) and the second Defendant Shenzhen Xingpeng Shipping Enterprises Co., Ltd. (hereinafter referred to as ?°Shenzhen Xingpeng?±), this court accepted the case on 23 March 2001 and constituted a collegial bench for trying the said case in accordance with law. During the period for submitting the statement of defence, Shenzhen Huaxin and Shenzhen Xingpeng raised dissention from this court??s jurisdiction over the said case. On 3 September, the Higher People??s Court of Guangdong Province rendered a final civil ruling, whereby the jurisdiction of this court over the subject case was maintained. On 13 November, this court convened the interested parties for exchange of evidences before the court, and on 6 January 2002 held an open court hearing for this case. Bai Tao and Zhang Guohua, the agents ad litem of the Plaintiff ORIX Singapore, Yang Yunfu and Wu Yaohong, agents ad litem for the Defendant Shenzhen Huaxin, and Liu Guanghai, agent ad litem for the Defendant Shenzhen Xingpeng, attended the court hearing. The case has now been concluded.
The Plaintiff ORIX Singapore stated that: on 8 January 1997, Kapoc Line S.A. and Xingpeng Maritime Inc., Panama (hereinafter referred to as ?°Xingpeng Panama?±) entered into a Loan Agreement. On 28 January, the two parties signed the Supplementary Agreement I to the Loan Agreement. It was agreed in the said Loan Agreement and its supplement that Kapoc Line S.A. shall lend Xingpeng Panama a loan of US$4,380,000, which shall be used by the latter to purchase a general cargo vessel to be registered in Panama in the name of ?°Xingye?±. On 8 January of the same year, Xingpeng Panama and Shenzhen Huaxin entered into a Bareboat Charterparty and on 28 January the two parties signed the Supplementary Agreement I to the Bareboat Charterparty. As agreed in the charterparty and the supplementary agreement, Xingpeng Panama shall charter out the ?°Xingye?± on a bare-boat basis to Shenzhen Huaxin. On 29 January, Shenzhen Huaxin confirmed in writing the delivery of ?°Xingye?± from Xingpeng Panama and agreed that calculation of hire shall be commenced on that day. On the same day, Xingpeng Panama, Shenzhen Huaxin and Kapoc Line S.A. entered into a three-party Agreement on Assignment of Right and interests in a Bareboat Charterparty, agreeing that Xingpeng Panama assigned all of its right, qualification, interests and benefit in the vessel ?°Xingye?± to Kapoc Line S.A., the mortgagee of ?°Xingye?±. After chartering in ?°Xingye?±, Shenzhen Huaxin sub-chartered out the bare-boat to Shenzhen Xingpeng. Shenzhen Xingpeng then time chartered out the vessel to Farenco Shipping S.A., Panama (hereinafter referred to as ?°Farenco Panama?±). Farenco Shipping Co. Ltd., Hong Kong (hereinafter referred to as ?°Farenco HK?±) provided a security to Shenzhen Xingpeng for Farenco Panama??s chartering of the vessel. For each sub-charter, the lessors, the charterers and Kapoc Line S.A. had signed a corresponding agreement on assignment of right and interest, whereby all the lessors assigned their right, qualification, interests and benefit in ?°Xingye?± to Kapoc Line S.A.. On 7 October 1998, Kapoc Line S.A. concluded an Agreement on Assignment of Right and interests in ?°Xingye?± with ORIX Singapore. On the same day, Kapoc Line S.A. notified Shenzhen Huaxin and Shenzhen Xingpeng in writing that from then on all hire or right or interests belonging to ?°Xingye?± had been transferred to ORIX Singapore. On 27 October, the mortgagee of ?°Xingye?± changed from Kapoc Line S.A. to ORIX Singapore. Shenzhen Huaxin and Shenzhen Xingpeng had repeatedly expressed that they would perform their obligations under the charterparties and would effect the relevant payment to Kapoc Line S.A.. In fact, Shenzhen Huaxin and Shenzhen Xingpeng did have effected part of the payment. However, since 21 April 1999, the two defendants have never made any payment to the Plaintiff. In addition, while ?°Xingye?± was on hire, she had been detained for a long time by the Bangladeshi government. In order to set the vessel free, the Plaintiff made great efforts and incurred lawyer??s fees and traveling expenses. Based on the above, the Plaintiff requested the court to order the two defendants, Shenzhen Huaxin and Shenzhen Xingpeng, to jointly and severally compensate the Plaintiff ORIX Singapore for its loss in hire in the sum of US$1,928,202.86 and the default interests calculating from 27 Apirl 1999 to 29 January 2002 in amount of US$448,026.79, loss of lawyer??s fees and legal costs at US$215,497.88 and miscellaneous losses such as traveling expenses in amount of US$156,809.58.
Within the period for adducing evidence, the Plaintiff ORIX Singapore provided this court with 40 pieces of documentary evidence and one Opinions on English Law, all of which had been notarized and legalized in Hong Kong. Moreover, the Plaintiff sent one witness to the court hearing to give testimony.
The Defendant Shenzhen Huaxin argued that although both the bareboat charterparty and the contract of assignment of right and interests involved in the present case provided that English law should be the governing law thereof, yet the Plaintiff ORIX Singapore didn??t produce the specific provisions of English law or the relevant judicial precedent in the period for adducing of evidence. Therefore, the subject case should be governed by Chinese law. In the light of the relevant stipulations of Chinese law, the said contract should be ineffective. Shenzhen Huaxin did not authorize Ai Quanqin to sign the Bareboat Charterparty or the Agreement on Assignment of Right and interests in Bareboat Charterparty, nor did Shenzhen Huaxin take part in the operation, management or the refunding of the loan in respect of the vessel ?°Xingye?±, therefore it was not bound by any contractual relationship with ORIX Singapore, and it was groundless for ORIX Singapore to sue Shenzhen Huaxin. Furthermore, based on the same facts and requests, ORIX Singapore initiated a lawsuit against Farenco Panama in Hong Kong in 1999 and filed another one against Shenzhen Huaxin and Shenzhen Xingpeng in Hong Kong in September 2000. ORIX Singapore??s lodging a legal action against Shenzhen Huaxin and Shenzhen Xingpeng again was a repeated claim, which should not be supported. As the charterparty involved in this case was null, ORIX Singapore should not calculate its loss in hire on the basis of the agreement in the invalid charterparty. Instead, the loss of hire should be based on the market renting rate of vessels of the same type. Since the market renting rates of vessels of the same type are much lower than those stipulated in the said charterparty, and ORIX Singapore failed to prove the market renting rates of vessels of the same type, the court is requested to dismiss the claims of the Plaintiff ORIX Singapore against the Defendant Shenzhen Huaxin.
The Defendant Shenzhen Huaxin produced 15 evidences within the period of adducing evidences.
The Defendant Shenzhen Xingpeng admitted that it was responsible for the actual operation and management of ?°Xingye?± as well as her loan-refunding matters since she was purchased in. Except that, Shenzhen Xingpeng raised the same argument as that of Shenzhen Huaxin.
The evidences furnished by Shenzhen Xingpeng were identical with those produced by Shenzhen Huaxin.
The Plaintiff ORIX Singapore, the Defendants Shenzhen Huaxin and Shenzhen Xingpeng had no objection to the documentary evidences in foreign languages produced by their respective opponent(s), but were not satisfied with some of the Chinese translations of the said documents. With regard to the part of translations disputed by the parties, Shenzhen Huaxin paid in advance translation fees in amount of RMB1,000 and this court appointed professional translators of Guangdong University of Foreign Studies to translate the said part. The parties concerned did not raise any objection to the translations by the professional translators within the time limit. Upon cross-examination of the said documentary evidences, the following facts have been ascertained:
On 22 November 1996, Xingpeng Panama and Alfamarin Denizcilik A.S., Turkey (hereinafter referred to as ?°the Turkish company?±) concluded a Memorandum of Ship Purchase Agreement, agreeing that Xingpeng Panama purchased the vessel ?°Alfamar?± from the Turkish company at USD7,430,000, a deposit of 10% of which was to be paid within 3 banking days after the Memorandum was signed.
On 8 January 1997, Xingpeng Panama entered into a Loan Agreement with Kapoc Line S.A., which stipulates that: the lender Kapoc Line S.A. lent a loan of not more than USD4,380,000 to the borrower Xingpeng Panama, who should use the loan to purchase the Turkish ?°Alfamar?±, which was to be re-named ?°Xingye?± and to be registered in Panama with Xingpeng Panama as the owner and the mortgage of ?°Xingye?± to Kapoc Line S.A. should be registered in Panama; Xingpeng Panama should pay back the loan and the interests accrued thereon to Kapoc Line S.A. by 16 installments, with the principal of each installment being USD273,750 and the interests to be calculated by an annual interests rate of 1.625% plus the annual USD interests rate of the same amount of London Inter-bank Offered Rate in the corresponding period; if Xingpeng Panama failed to pay the matured debts, the loan and the interests thereon or other payments due under the Letter of Guarantee, it should pay a default interests calculating from the day of non-performance of debts till the day of actual payment; the interests for overdue payments should be refunded as per the demand of Kapoc Line S.A., failing which the interests should be added to the principal and compound interests would be demanded. It is also agreed in the Agreement that Shenzhen Huaxin was the head bareboat charterer, Shenzhen Xingpeng the sub-charterer of the bareboat ?°Xingye?±, Far East Enterprises (Hong Kong) Co. Ltd. the time charterer; Xingpeng Panama and Shenzhen Huaxin were to sign a Bareboat Charter Party; Xingpeng Panama, Shenzhen Huaxin and Kapoc Line S.A. were to sign an Agreement on Assignment of Right and interests in Bareboat Charterparty; Shenzhen Huaxin and Shenzhen Xingpeng to sign an Agreement on Sub-Chartering of Bareboat; Shenzhen Huaxin, Shenzhen Xingpeng and Kapoc Line S.A. to sign an Agreement on Assignment of Right and Interests in Sub-chartering of Bare-boat; Shenzhen Xingpeng and East Enterprises (Hong Kong) Co. Ltd. to sign a Time Charter Party; Shenzhen Xingpeng and Kapoc Line S.A. to sign an Agreement on Assignment of Right and interests in Time Charterparty. The forms of the above agreements were all subject to the demand and approval of the loan-lender, Kapoc Line S.A.. All the foregoing agreements were guaranty documents with Shenzhen Huaxin, Shenzhen Xingpeng and East Enterprises (Hong Kong) Co. Ltd. being the guarantors. Xingpeng Panama warranted that itself and the said guarantors were limited companies legally established and lawfully existing, and that all the above agreements are lawful and valid, and ensured that all the above agreements and all other charterparties or contracts related to the vessel stipulate that all proceeds from the bareboat charters, sub-bareboat charters and time charters should be remitted to the bank account designated by Kapoc Line S.A. timely. Xingpeng Panama also guaranteed to register the said vessel in Panama in its name and Shenzhen Huaxin accepted the vessel in accordance with the Bareboat Charterparty, Shenzhen Xingpeng accepted the vessel as per the sub-bareboat charterparty and East Enterprises (Hong Kong) Co. Ltd. accepted it on the basis of the time charterparty. Failure to perform the obligation under the agreements by Xingpeng Panama and the other guarantors shall constitutes a breach of contract. If breach of contract occurs, Xingpeng Panama shall, without prejudice to the right of Kapoc Line S.A., provide Kapoc Line S.A. with compensation for all costs, expenses and debts and, at the request of Kapoc Line S.A., pay to the latter a sum sufficient to compensate for the said costs, expenses and debts. The agreement shall be governed by English law. Besides, the conditions for a loan, refunding or refunding ahead of schedule, handling charges, etc. were also specified in the Agreement.
On the same day, Xingpeng Panama and Shenzhen Huaxin entered into a Bareboat Charterparty, which provides that Xingpeng Panama as the ship owner chartered out the ?°Xingye?± to Shenzhen Huaxin for a period of 4 years commencing from the day of delivery of the vessel; Shenzhen Huaxin to pay the hire to Xingpeng Panama by 17 installments, the initial sum being USD3,050,000 and each of the subsequent sum being USD273,750; besides the hire, the charterer Shenzhen Huaxin also had to pay the relevant taxes and duties, to pay interests for all hire overdue and other sums payable at the rate of default interest, the default interests rate to be 3% higher than the London Inter-bank Offered Rate; the obligation of Shenzhen Huaxin to pay the hire and the sums under this Agreement was absolute and unconditional, without being subject to any offset, counter-claim, defence, withdrawal, delay or reduction of rights, and also without the right of terminating this Agreement or being released from or exempted from or waiving any obligation or liability hereunder; should Shenzhen Huaxin fail to pay the hire or other payable sums within the time limit of payment and no remedial measures had been taken, Xingpeng Panama may notice Shenzhen Huaxin in writing of its terminating the agreement; thereafter, Shenzhen Huaxin should immediately pay the sum of depreciation equal to the amount specified by valid provisions and all other sum due but remaining outstanding, the prescriptive devaluation being 101% of the principal; starting from the day of delivery of the ship, Shenzhen Huaxin should be responsible for all costs and expenses related to the operation and management of the ship; should receive any writ of summons from the court, be sued against or calumniated, or be arrested, detained, seized, put under control of or confiscated by or via any court, legal proceedings, governmental organ or other administrative organization, Shenzhen Huaxin should notice Xingpeng Panama of the same timely and should, at its own expenses, endeavor to get the ship be exempted or released from detention within 30 days and immediately notify Xingpeng Panama of such lift; should Shenzhen Huaxin not be exempted or released from detention within 30 days, Xingpeng Panama may seek exemption and release of the ship by itself without being liable for its such act and all costs and expenses incurred by Xingpeng Panama for the said purposes should be borne by Shenzhen Huaxin; Shenzhen Huaxin assumed all risks of the ship??s losses, consumptions, being stolen or damaged as well as all risks of requisition of ownership and the ship??s being seized or confiscated; should substantial damages be done to the ship or actual, or constructive total loss or unanimously agreed total loss of the ship occur, or the ownership of the ship be requisitioned or the ship being seized or confiscated by any governmental organ or agents of governmental organ, Shenzhen Huaxin shall inform Xingpeng Panama of the same in time, and shall, on the next date of payment after the occurrence of the said incidents, pay to Xingpeng Panama an amount equaling the prescribed depreciation with the interests for breach of contract calculating from such date at the rate of default interest; in order to further ensure that the charterers pay the hire and perform their other obligations, the charterers should, as soon as possible, forward, in a way acceptable to the ship owners, to the ship owners the guaranty documents such as the contract and certificate of transfer of right and interests of hire with the beneficiary being Kapoc Line S.A. confirmed by the shipowner Xingpeng Panama and the charterer Shenzhen Xinhua, the certificate of transfer of right and interests and the hire payable with Kapoc Line S.A. as the beneficiary signed by and between Shenzhen Huaxin, the charterer to the bareboat charterparty and Shenzhen Xingpeng, the sub-lessor under demise charter, and the certificate of assignment of right and interests and the hire payable with the beneficiary being Kapoc Line S.A. confirmed by the sub-lessor under demise charter, Shenzhen Xingpeng; English law shall apply to the Agreement. The Agreement also contains clauses in respect of relevant definitions, delivery of ship, supervision and use of the ship, maintenance of the ship, conversion and alteration of the ship, ship survey, tear and wear of the ship, requisition of the ship, insurance, miscellaneous and contract-breaching matters, compensations, business reports, maritime salvage, bill of lading, compensation, non-compulsory termination of the contract, assignment of the right of the charterers, rider clauses, warrants by the charterers and preconditions and so forth. At the court hearing, the parties concerned confirmed that the hire and interests were to be paid once every three months, the last day of every three months being the day of payment and the first day of payment being the day of delivery of the ship.
On the same day when the above two agreements were signed, Shenzhen Huaxin and Shenzhen Xingpeng entered into a Sub-bareboat Charterparty, whereby it was agreed that Shenzhen Huaxin sub-chartered out ?°Xingye?± by demise to Shenzhen Xingpeng and the latter paid hire to the former. The provisions in the Sub-bareboat Charterparty with regard to the lessor and the charterer??s rights and interests and the applicable law are identical with the corresponding contents of the Bareboat Charterparty by and between Xingpeng Panama and Shenzhen Huaxin.
On 28 January 1997, Xingpeng Panama and Kapoc Line S.A. signed a Supplementary Agreement I to the Loan Agreement, agreeing that, at the request of Xingpeng Panama, Kapoc Line S.A. agreed to change the time charterer under the Time Charterparty from Far East Enterprises (Hong Kong) Co. Ltd. into Farenco Panama. The time charterparty shall remain effective for 4 years, the daily hire being not less than USD6,500. On the same day, Xingpeng Panama and Shenzhen Huaxin signed the Supplementary Agreement I to Bareboat Charterparty; Shenzhen Huaxin and Shenzhen Xingpeng entered into the Supplementary Agreement I to Sub-Bareboat Charterparty. The time charterer under the above two supplementary agreements was also be accordingly altered as Farenco Panama.
Besides, before the signing of the above-mentioned loan agreement, bareboat charterparty, sub-bareboat charterparty and their respective supplements, Shenzhen Xingpeng and Farenco Panama concluded a Time Charterparty on 3 January of the same year, agreeing that Shenzhen Xingpeng chartered out ?°Xingye?± to Farenco Panama for a period of 4 years and that Farenco Panama paid to Shenzhen Xingpeng the daily hire of USD6,500. After the said time charterparty was signed, Farenco HK issued a Guaranty for Charterparty to Shenzhen Xingpeng on 25 January of the same year, stating that as it was totally because Farenco HK so requested that Shenzhen Xingpeng signed the charterparty dated 3 January, Farenco HK hereby guaranteed that Farenco Panama would perform all its obligations under the charterparty and the relevant documents and would effect, in full, all payments due at the present time and in the future as scheduled as per the provisions of the charterparty and the relevant documents.
On 29 January 1997, Xingpeng Panama, Shenzhen Huaxin and Kapoc Line S.A. signed an Agreement on Assignment of Right and interests in Bareboat Charterparty, which stipulated that Xingpeng Panama should assign all and any of its rights, qualifications and interests under the bareboat charterparty and its relevant supplementary agreement and appendix to Kapoc Line S.A., the mortgagee of ?°Xingye?±, and should continue to perform its obligations under the charterparty; Shenzhen Huaxin paid to Kapoc Line S.A. the freight, hire, proceeds or other sums payable or to be payable on the basis of the Bareboat Charterparty and, without the approval of Kapoc Line S.A. in writing, Shenzhen Huaxin must not transfer or waive its rights and obligations under the charterparty; Xingpeng Panama undertook to take all necessary steps to ensure that Shenzhen Huaxin perform all obligations as per the provisions of the charterparty and that the said payment be effected to Kapoc Line S.A. at the time Kapoc Line S.A. may possibly instruct temporarily; once the outstanding debts were paid off to Kapoc Line S.A., Kapoc Line S.A. should, as per the demand of Xingpeng Panama and at the expense of the latter, transfer the pertaining assets and interests formally assigned to the former back to Xingpeng Panama; the relevant rights and compensation afforded to Kapoc Line S.A. under this agreement were a supplement to the rights and compensation conferred to Kapoc Line S.A. by the loan agreement, the guaranty documents and the applicable law, rather than a restriction; this agreement shall be governed by English law. On the same day, Shenzhen Huaxin, Shenzhen Xingpeng and Kapoc Line S.A. concluded the Agreement on Assignment of Right and interests in Sub-Bareboat Charterparty, providing that Shenzhen Huaxin transferred all its rights, qualifications and interests under the Sub-Bareboat Charterparty and the related supplementary agreements and appendix to Kapoc Line S.A., the mortgagee of ?°Xingye?±; the clauses in respect of the rights and obligations of the transferor and the transferee, as well as the application of law were the same as the corresponding clauses under the said Agreement on Assignment of Right and interests in Bareboat Charterparty. On the same day, Shenzhen Xingpeng and Kapoc Line S.A. signed the Agreement on Assignment of Right and interests in Time Charterparty and Guarantee for Charterparty, stating that Shenzhen Xingpeng transferred all its rights, qualifications and interests under the Time Charterparty and the related supplementary agreements and appendix to Kapoc Line S.A., the mortgagee of ?°Xingye?±; the clauses in respect of the rights and obligations of the transferor and the transferee as well as the application of law were the same as the corresponding clauses under the said Agreement on Assignment of Right and interests in Bareboat Charterparty. On the day when the Agreement on Assignment of Right and interests in Time Charterparty and Guarantee for Charterparty was signed, Shenzhen Xingpeng noticed Farenco Panama in writing to the effect that Shenzhen Xingpeng had assigned to Kapoc Line S.A. all its rights, qualifications, interests and benefits under the charterparty, all payments due to Shenzhen Xingpeng, as well as any other rights and interests likely to rise under the charterparty, at the same time authorizing and instructing Farenco Panama to pay to Kapoc Line S.A. all hire, proceeds or other sums already payable or would become payable to under the charterparty to Shenzhen Xingpeng. Farenco Panama replied in writing to confirm receipt of such notice.
On 7 October 1998, Kapoc Line S.A. and ORIX Singapore concluded the Agreement on Assignment of Right and interests of ?°Xingye?±, agreeing that from 7 October on Kapoc Line S.A. assigned the loan and other rights and interests enjoyed by it under the loan agreement and the related guaranty documents to ORIX Singapore; the assigned sums up to 7 October included the outstanding principal of the loan in amount of USD2,737,500 plus the interests accrued from the last day of payment of interests to 7 October in amount of USD41,746.88; the relevant guaranty documents included the Agreement on Assignment of Rights and Interests in Bare-boat Charterparty, the Agreement on Assignment of Rights and Interests in Sub-Bare-boat Charterparty, the Agreement on Assignment of Rights and Interests in the Time Charterparty and the Letter of Guarantee for Charterparty, and so forth; English law shall be applied to the Agreement. On the same day, the two parties also signed a Joint Declaration on First Priority Assignment of Mortgage of ?°Xingye?±, stating that on 4 April 1997, formalities of registration of the mortgage of ?°Xingye?± were passed in Panama; the shipowner Xingpeng Panama mortgaged the ship ?°Xingye?± to Kapoc Line S.A. for the amount of USD4,380,000 plus interest; now Kapoc Line S.A. transferred, assigned, handed over and delivered all of its right and interests under such mortgage, together with all the rights, qualifications and benefits of Kapoc Line S.A. and all the creditor??s rights and debts due or to become due under such mortgage to ORIX Singapore. On the same day, Kapoc Line S.A. notified Shenzhen Huaxin and Shenzhen Xingpeng respectively that in accordance with the relevant guaranty documents, Kapoc Line S.A. had completely assigned all and any of its rights, qualifications, interests and benefits to ORIX Singapore. The assignment came into effect on 7 October, and that from this effective date on all sums payable to Kapoc Line S.A. should be paid to ORIX Singapore instead.
After conclusion of the above agreements, the parties concerned have performed their respective obligations under the agreements. In January 1997, Kapoc Line S.A., as per the Loan Agreement, remitted USD4,380,000 to the bank account designated by Xingpeng Panama in refunding the loan. After paying off the said price for the ship to the Turkish Company, Xingpeng Panama took delivery of the ship ?°ALFAMAR?± and renamed her ?°Xingye?±.
On 29 January 1997, Shenzhen Huaxin confirmed having taken delivery of ?°Xingye?± from Xingpeng Panama and the commencement of calculation of hire on that day. On the same day, Shenzhen Xingpeng confirmed its having taken delivery of ?°Xingye?± from Shenzhen Huaxin as well as the commencement of calculation of hire from that day on.
During the time when ?°Xingye?± was bareboat and time chartered out, her registry was still with Panama. After bareboat chartered in the vessel, neither Shenzhen Huaxin nor Shenzhen Xingpeng went through formalities for registration of the bareboat charter in Mainland China. During the court hearing, Shenzhen Xingpeng alleged that during the period when the vessel was time chartered to Farenco Panama, it had been trading to ports of Mainland China, without producing any evidence in this regard. Shenzhen Xingpeng also alleged that the purchase and trading operation of ?°Xingye?± were managed by Xingpeng Panama and Shenzhen Xingpeng; Shenzhen Huaxin did not take part in the same.
It was recorded on the 13 pieces of bank remittance receipts provided by ORIX Singapore that Xingpeng Panama, Shenzhen Xingpeng and Farenco HK, during the period commencing from 23 April 1998 to 21 April 1999, had paid to ORIX (Asia) Co. Ltd. (hereinafter referred to as ?°ORIX HK?±) a sum of USD1,388,757.27. At the court hearing, ORIX Singapore confirmed having received the hire of the 2nd to the 10th installments in the sum of USD2,463,750, but not that for the 11th to the 17th installments. According to the commercial invoices provided by ORIX Singapore, ORIX HK and ORIX Singapore, during 28 January 1997 to 27 April 1999, had respectively sent 9 notices to Shenzhen Xingpeng, requesting the latter to pay the interests agreed under the Loan Agreement for the first 9 installments, which amounted to USD554,246.33. At the court hearing, ORIX Singapore confirmed having received the said interests and alleged that it had refunded the part of each installment of hire or interests that exceeded the agreed sum to Shenzhen Xingpeng ¨C altogether more than USD200,000 had been returned to Shenzhen Xingpeng; up to the day when this lawsuit was filed, there were still USD7,209.64 remaining on the bank account of ORIX Singapore; this sum should be payable to Shenzhen Xingpeng.
The Time Charterparty and the Agreement on Assignment of Rights and Interests in Bareboat Charterparty involved in the present case were concluded by Ai Quanqin in the name of Shenzhen Huaxin. When signing the above two agreements, Ai Quanqin was the Director & General Manager of Shenzhen Huaxin. According to a Written Approval of All Directors and Share-holders of Shenzhen Huaxin signed by 3 directors as produced by ORIX Singapore, the company authorized Ai Quanqin to negotiate for and sign on the Bareboat Charterparty, the Sub-Bareboat Charterparty, the Agreement on Assignment of Rights and Interests in Bareboat Charterparty and so on. It was revealed from the annual report of 1997 of Shenzhen Huaxin that a vessel was additionally purchased in 1997; ORIX HK paid for it in amount of RMB28,805,249.60 through financing. At the court hearing, Shenzhen Huaxin confirmed that it was the controlling share-holder of Shenzhen Xingpeng and that Shenzhen Huaxin had no license to manage/operate ships and to engage in shipping business; Shenzhen Xingpeng confirmed that Xingpeng Panama was a company registered in Panama by them as per the demand of Kapoc Line S.A.; ORIX Singapore confrmed that Kapoc Line S.A. was a company registered in Panama by them; ORIX Singapore and ORIX Hk are the sole-owned subsidiaries to (Japan) ORIX Co., Ltd. respectively registered in Singapore and Hong Kong.
On 28 October 1998, the Public Registrar of Panama certified that the owner of ?°Xingye?± was Xingpeng Panama; the registry of the ship??s mortgage was entered on 4 April 1997, the mortgagee being ORIX Singapore and the mortgage amount being USD4,380,000.
From January 1999 to December 2001, ?°Xingye?± was arrested in Bangladesh and ORIX HK and ORIX Singapore appointed lawyers to try to get the ship released. In addition, Shenzhen Huaxin and Shenzhen Xingpeng did not pay the hire, ORIX HK and ORIX Singapore had to appoint lawyers in Hong Kong to sue them, for which they had paid lawyers?? fees to the law firms of Hong Kong, China, Daka, Bangladesh, Tokyo, Japan and Panama or paid to other relevant units the notarization fees, translation fees, insurance premium, survey fees, etc. As per the receipts and the debit notes furnished by ORIX Singapore to this court, the legal costs paid amounted to USD215,497.88, other miscellaneous costs amounting to USD134,299.58, of which USD43,641 was paid for this case, and USD6,031.21 was paid for translation, notarization and others. With respect to the above, Shenzhen Huaxin and Shenzhen Xingpeng are of the opinion that Shenzhen Huaxin and Shenzhen Xingpeng are not the parties paying or collecting the fees, and it could not be verified whether the above fees had actually been paid and the criteria for such charges, and they have nothing to do with this case, so they refused to confirm the same.
On 9 August 2000, Shenzhen Xingpeng sent a letter to ORIX HK, stating that since it was impossible for ?°Xingye?± to be released, Shenzhen Xingpeng, as the ship owner, suggested that a lump sum of USD250,000 be paid to the loan lender for settlement of the outstanding loan as well as the final and full settlement of the debts owing to ORIX Singapore by the shipowner, Shenzhen Huaxin and Shenzhen Xingpeng.
After the subject dispute arose, Shenzhen Xingpeng and ORIX Singapore had held negotiations for many times. As Shenzhen Huaxin is the holding company of Shenzhen Xingpeng, some of the staff from Shenzhen Xingpeng who took part in the negotiations simultaneously held positions in Shenzhen Huaxin. ORIX Singapore was of the opinion that Shenzhen Huaxin had also participated in the negotiations, but failed to produce adequate evidence to prove it.
On 18 May 2000, Hong Kong High Court rendered a judgment for the case filed by ORIX Singapore and Kapoc Line S.A. against Farenco HK, ordering Farenco HK to pay USD3,544,818 to ORIX Singapore and Kapoc Line S.A. and the interests calculated from 10 November 1999 up to the day of actual payment, as well as to bear the court costs of the said case.
On 29 September 2000, Hong Kong High Court issued a court order for the case filed by ORIX Singapore and Kapoc Line S.A. against Farenco HK. ORIX Singapore confirmed that Hong Kong Court had, at its request, laid the case aside.
On 14 January 2002, Sanwa Bank Japan Hong Kong Branch issued a certificate to the effect that based on the electronic record of the daily transaction interests rate, the annual interests rate of London Inter-bank Offered Rate for fixed deposit from 27 October 1998 to 29 October 2001 (per three-month being a unit of calculation) was 5.26768%.
The Collegial Bench unanimously hold that: the main basis of the Plaintiff ORIX Singapore??s lodging the complaint was the agreement on assignment of rights and interests between it and Kapoc Line S.A., the agreement on assignment of rights and interests among Kapoc Line S.A., Xingpeng Panama and Shenzhen Huaxin, as well as the agreement on assignment of rights and interests among Kapoc Line S.A., Shenzhen Huaxin and Shenzhen Xingpeng. The rights and interests to be assigned under three agreements on assignment of rights and interests were the hire and other costs in respect of ?°Xingye?± due to the mortgagee or the lessors of the ship. Therefore, the subject case is about a dispute over agreements on assignment of rights and interests in bareboat charterparty involving foreign elements. Although the Loan Agreement between Xingpeng Panama and Kapoc Line S.A. have some connection with the facts of this case, yet the Loan Agreement itself is neither the focus of the subject dispute nor the direct basis of the Plaintiff??s complaint. Hence, the assertion of Shenzhen Huaxin and Shenzhen Xingpeng that this case is about the contractual relationship of financing and chartering is not tenable.
The Plaintiff ORIX Singapore advocated that disputes under this case should be regulated by the law agreed upon in the contracts among the parties. The parties to the agreements on assignment of rights and interests in bareboat charterparty under this case had agreed under the agreements that English law should be the applicable law. This should be deemed the true intention of the parties to the agreements. Paragraph 1 of Article 145 of the General Principles of the Civil Law of the PRC provides that the parties to a foreign-related contract may choose a law which is suitable for settlement of contractual disputes. The choice of the parties to the agreements involved in this case in respect of the applicable law is not in violation of the public interests of China and should be deemed lawful and effective.
The parties concerned should adduce evidence to prove that this case should apply English law. The Defendants Shenzhen Huaxin and Shenzhen Xingpeng waived their burden of proof because they advocated that Chinese law should be applicable. The Plaintiff ORIX Singapore submitted to this court a Legal Opinions on English Law issued by an English solicitor. A lawyer from Hong Kong as appointed by the Ministry of Justice of the PRC notarized the signature of the English solicitor who issued the said Opinions. According to the Opinions, the English solicitor entrusted by ORIX Singapore, upon perusal of the Loan Agreement, Supplementary Agreement I to the Loan Agreement, Bareboat Charterparty, Supplementary Agreement I to the Bareboat Charterparty, Sub-Bareboat Charterparty, Supplementary Agreement I to the Sub-Bareboat Charterparty, Agreement on Assignment of Rights and Interests in Bareboat Charterparty, Agreement on Assignment of Rights and Interests in Sub-Bareboat Charterparty, Time Charterparty, Letter of Guarantee for Charterparty, Agreement on Assignment of Rights and Interests in Time Charterparty & Letter of Guarantee for Charterparty, and Agreement on Assignment of Rights and Interests in ?°Xingye?±, takes the view that, under the presupposition that the signing, presenting, performance or enforcement of all of the contracts by and among the companies established in the territory under the judicial jurisdiction of foreign countries were all in compliance with the laws of the relevant countries, the above contracts and agreements are effective under the English law, that ORIX Singapore is entitled to claim the outstanding hire plus the interests accrued thereon, the legal costs and other relevant costs incurred by ORIX Singapore in the process of exercising its rights under the above contracts or agreements, and that the claims listed in the Statement of Complaint of ORIX Singapore may be supported by English law. English judicial precedents are also introduced in the said Opinions. However, these Opinions are but analyses and comments to the effect that the contracts involved herein are effective and the Plaintiff ORIX Singapore??s claims may be supported by English law without giving the specific provisions of the related English law, and have not been notarized and legalized in Britain. Hence the collegial bench could not ascertain the Opinions as the evidential document of English law, nor could the correctness of the precedents introduced be ascertained. Therefore, in accordance with article 193 of the Opinions of the Supreme People??s Court on Some Issues Concerning the Enforcement of the General Principles of the Civil Law of the People??s Republic of China, the law of China shall be applied to this case.
This case is about a dispute over the contract of assignment of rights and interests in a bareboat charterparty. Whether the effectiveness of the Loan Agreement is ascertained or not shall not affect the handling of the subject dispute. Moreover, the effectiveness of the Loan Agreement does not fall within the scope of trials of this case. Therefore, the collegial bench shall not ascertain the issue of effectiveness of the Loan Agreement.
Ai Quanqin signed the Bareboat Charterparty, Sub-Bareboat Charterparty and the corresponding agreements on assignment of rights and interests on behalf of Shenzhen Huaxin. Before the said agreements were signed, Ai Quanqin had obtained the authorization from some of the directors of Shenzhen Huaxin, and at the time of signing the agreements, Ai Quanqin was the Director & General Manager of Shenzhen Huaxin. After the agreements were signed, Shenzhen Huaxin revealed in its annual report that it had purchased a cargo vessel from ORIX HK through financing. All these facts are sufficient to prove that Ai Quanqin had obtained authorization from Shenzhen Huaxin when he signed the agreements and that Shenzhen Huaxin had acknowledged the signing of the above agreements by Ai Quanqin on its behalf. Hence, the assertion of Shenzhen Huaxin that the company did not authorize Ai Quanqin to sign the agreements is not in conformity with the facts and should not be supported.
The Bareboat Charterparty in respect of ?°Xingye?± between Shenzhen Huaxin and Xingpeng Panama was not registered in Mainland China, the legal consequence of which, according to Article 6 of the Regulations of the PRC on Registration of Ships, is that the unregistered Bareboat Charterparty can not be directed against a third party, rather than that the Bareboat Charterparty is not made void. The assertions of Shenzhen Huaxin that the Bareboat Charterparty between it and Xingpeng Panama should be null and void because Shenzhen Huaxin has no license to engage in shipping business and the said charterparty did not go through registration formalities for bareboat chartering are baseless and should not be supported. The Bareboat Charterparty by and between Shenzhen Huaxin and Xingpeng Panama is not in breach of the prohibitive provisions of the laws and administrative regulations of China. Therefore, it is lawful and effective and is legally binding upon both parties. Likewise, the Sub-Bareboat Charterparty between Shenzhen Huaxin and Shenzhen Xingpeng is also lawful and effective and binding upon the two parties to it. As per the said Bareboat Charterparty and Sub-Bareboat Charterparty, Xingpeng Panama had the obligation to deliver the ship to Shenzhen Huaxin and enjoyed the right to collect from the latter the hire and other related costs, and Shenzhen Huaxin was obliged to deliver the ship to Shenzhen Xingpeng and entitled to collect from the latter the hire and other sums due. Now that the vessel named in the agreements has been actually delivered and accepted, Shenzhen Huaxin has the obligation to pay the hire and other costs to Xingpeng Panama, while Shenzhen Xingpeng has the obligation to pay the hire and other costs to Shenzhen Huaxin.
The Agreement on Assignment of Rights and Interests in Bareboat Charterparty among Xingpeng Panama, Shenzhen Huaxin and Kapoc Line S.A. reflects the true intentions of the three parties to it and is not in violation of law or administrative regulations. The rights of Xingpeng Panama under the Bareboat Charterparty are transferable and valid creditor??s rights. Therefore, the Agreement on Assignment of Rights and Interests in Bareboat Charterparty is effective. According to the Agreement, Xingpeng Panama assigned all its rights to Kapoc Line S.A., and Kapoc Line S.A. is entitled to ask Shenzhen Huaxin to pay the hire and other costs, while Shenzhen Huaxin is obliged to pay the hire and other costs to Kapoc Line S.A.. Likewise, the Agreement on Assignment of Rights and Interests in Sub-Bareboat Charterparty among Shenzhen Huaxin, Shenzhen Xingpeng and Kapoc Line S.A. is also legitimate and effective. As per the said Agreement and the Sub-Bareboat Charterparty, Kapoc Line S.A. is entitled to ask Shenzhen Xingpeng to pay the hire and other costs, and the latter is obliged to pay the hire and other costs to the former.
The Agreement on Assignment of Rights and Interests in Sub-Bareboat Charterparty stipulates that Shenzhen Huaxin undertakes to take all necessary steps to ensure that Shenzhen Xingpeng perform all obligations as per the provisions of the charterparty, and that the said payment be effected, timely, to Kapoc Line S.A. at the time Kapoc Line S.A. may possibly instruct temporarily; the relevant rights and compensation afforded to Kapoc Line S.A. under this agreement were a supplement to the rights and compensation conferred to Kapoc Line S.A. by the loan agreement, the guaranty documents and the applicable law, rather than a restriction. In the light of the above, what Shenzhen Huaxin assigned was merely its rights under the sub-bareboat charterparty, not rights and obligations altogether, and what Kapoc Line S.A. assumed was the rights of Shenzhen Huaxin; the obligations of Shenzhen Huaxin under the charterparty have not be exempted. That is to say, if Shenzhen Xingpeng fails to pay the hire and other costs to Kapoc Line S.A., the right of Kapoc Line S.A. to collect the hire and other costs would not be restricted due to the Agreement on Assignment of Rights and Interests in Sub-Bareboat Charterparty; Kapoc Line S.A. is entitled to ask Shenzhen Huaxin to pay the hire in reliance on the Bareboat Charterparty, the Agreement on Assignment of Rights and Interests in Bareboat Charterparty and so forth; meanwhile, Shenzhen Huaxin has undertaken that the hire be paid to Kapoc Line S.A. on time, which shows that Shenzhen Huaxin is willing to be the co-debtor for the outstanding sums payable by Shenzhen Xingpeng. Similarly, the Time Charterparty and the Agreement on Assignment of Rights and Interests in Letter of Guarantee for Charterparty between Shenzhen Xingpeng and Kapoc Line S.A. did not exempt Shenzhen Xingpeng from its obligation of payment of hire, and Shenzhen Xingpeng was still willing to assume liabilities, as a co-debtor for the obligation of payment of hire of Farenco Panama under the time charterparty.
ORIX Singapore and Kapoc Line S.A. signed the Agreement on Assignment of Rights and Interests in ?°Xingye?±, whereby Kapoc Line S.A. assigned its rights and obligations under the contracts involved in the present case to ORIX Singapore and notified Shenzhen Huaxin and Shenzhen Xingpeng of the same. This Agreement reflects the true intentions of the two parties and is legitimate and valid. In the light of the Agreement on Assignment of Rights and Interests in Bareboat Charterparty and the Agreement on Assignment of Rights and Interests in Sub-Bareboat Charterparty, Kapoc Line S.A. transferred its right of collecting the hire and other costs from Shenzhen Huaxin and Shenzhen Xingpeng to ORIX Singapore. Therefore, ORIX Singapore is entitled to demand payment of the hire and other costs by Shenzhen Huaxin and Shenzhen Xingpeng, and Shenzhen Huaxin and Shenzhen Xingpeng should pay the hire and other costs directly to ORIX Singapore and bear the liabilities for overdue payment.
It is agreed upon under the Bareboat Charterparty and the Sub-Bareboat Charterparty that Shenzhen Huaxin and Shenzhen Xingpeng should pay the hire by 17 installments. If the hire is not effected within the time limit, they should pay the agreed depreciation and all other sums overdue. Now Shenzhen Xingpeng and Shenzhen Huaxin have only effected the hire and interests of the first 10 installments, with the remaining 7 installments still unpaid. The sums overdue amount to USD1,916,250 (USD273,750/installment x 7), and the agreed depreciation is USD19,162.50. As per the above agreements, Shenzhen Huaxin and Shenzhen Xingpeng have the obligation of payment. The Plaintiff ORIX Singapore, after deducting the USD7,209.64 of Shenzhen Xingpeng remaining in the bank account of the former, requests Shenzhen Huaxin and Shenzhen Xingpeng to pay USD1,928,202.86. Such request is well-grounded and should be supported. It is also specified in the Bareboat Charterparty and the Sub-Bareboat Charterparty that besides paying the hire, Shenzhen Huaxin and Shenzhen Xingpeng agree to immediately pay the interests for the overdue hire on the basis of the default interests upon receipt of a debit note for the sums payable under the said charterparties. Hence, the request of the Plaintiff ORIX Singapore for payment of default interests by Shenzhen Huaxin and Shenzhen Xingpeng is in conformity with the stipulation of the contracts and thus should be backed. The above agreements prescribe that the default interests be 3% higher than London Bank??s USD deposit rate (P) of the same amount. The Plaintiff ORIX Singapore??s claim that the default interests be calculated on the basis of P + 3% is baseless and thus should be dismissed. The default interests should be calculated on the basis of P + 3% x P. During the court hearing, the Plaintiff ORIX Singapore admitted that only 7 installments of hire, namely from 11th to the 17th, were not received. The dates of payment for the said 7 installments are 29 April 1999, 29 July 1999, 29 October 1999, 29 January 2000, 29 April 2000, 29 July 2000 and 29 October 2000, and the amount of each installment is USD273,750. Another request of the Plaintiff ORIX Singapore that the default interests be calculated from 27 April 1999 to 29 January 2002 is groundless and should not be supported. The default interests should be calculated on the basis of the hire of each installment from 30 April 1999, 30 July 1999, 30 October 1999, 30 January 2000, 30 April 2000, 30 July 2000 and 30 October 2000 up to 29 January 2002.
The respective rights and interests of ORIX Singapore, Shenzhen Huaxin and Shenzhen Xingpeng are defined as per the Agreement on Assignment of Rights and Interests in Bareboat Charterparty, the Agreement on Assignment of Rights and Interests in Sub-Bareboat Charterparty and the Agreement on Assignment of Rights and Interests in ?°Xingye?±. The rights that ORIX Singapore enjoys against Shenzhen Huaxin and Shenzhen Xingpeng are those that Xingpeng Panama and Shenzhen Huaxin enjoy as the bareboat lessor under the Bareboat Charterparty and the Sub-Bareboat Charterparty. Shenzhen Huaxin and Shenzhen Xingpeng are only responsible for payment of legal costs or miscellaneous expenses paid or incurred by Xingpeng Panama or Shenzhen Huaxin as per the Bareboat Charterparty and the Sub-Bareboat Charterparty. Shenzhen Huaxin and Shenzhen Xingpeng should compensate for the part of the legal costs and other miscellaneous costs directly incurred for this case. Other costs are internal expenses of ORIX Singapore or Kapoc Line S.A. and should not be borne by Shenzhen Huaxin and Shenzhen Xingpeng. The request of ORIX Singapore for Shenzhen Huaxin and Shenzhen Xingpeng to bear the said legal costs and miscellaneous expenses is baseless and should be dismissed.
Mainland China and Hong Kong have relatively separate judicial systems. ORIX Singapore lodged the subject complaint with Hong Kong court, which was accepted by Hong Kong High Court. This does not affect ORIX Singapore??s right to file a complaint again with this court. Therefore, this court does not support the groundless allegation of Shenzhen Huaxin and Shenzhen Xingpeng that these claims of ORIX Singapore are repeated claims.
In summary of the above, the judgment is made as follows in pursuance of Article 91, Article 111 and Article 112 of the General Principles of the Civil Law of the PRC:
The Defendants Shenzhen Huaxin and Shenzhen Xingpeng to indemnify the Plaintiff ORIX Singapore for the hire and the depreciation in amount of USD1,928,202.86;
The Defendants Shenzhen Huaxin and Shenzhen Xingpeng to pay the default interests to the Plaintiff ORIX Singapore accrued on each installment of hire of USD273,750 respectively calculating from 30 April 1999, 30 July 1999, 30 October 1999, 30 January 2000, 30 April 2000, 30 July 2000 and 30 October 2000 up to 29 January 2002 at 3% higher than the London Bank??s USD deposit rate of the same amount;
The Defendants Shenzhen Huaxin and Shenzhen Xingpeng to indemnify the Plaintiff ORIX Singapore for the legal costs and incidental expenses in amount of USD49,672.21; and
Other litigant requests of the Plaintiff ORIX Singapore to be dismissed.
USD6,312 out of the acceptance fees of this case in the sum of USD22,510 is to be born by the Plaintiff ORIX Singapore and the remaining USD16,198 to be borne by the Defendants Shenzhen Huaxin and Shenzhen Xingpeng. Shenzhen Huaxin is to bear the translation fees for this case at RMB1,000. The acceptance fees paid in advance by ORIX Singapore shall not be returned by the court, and Shenzhen Huaxin and Shenzhen Xingpeng shall pay their share of the acceptance fees to ORIX Singapore direct.
The above payments should be effected within 10 days as of the day when this Judgment takes effect.
Should there be any objections to this Judgment, a statement of appeal with copy/copies in the number of the opposing party/parties may be submitted to this Court within 30 days by the Plaintiff ORIX Singapore and within 15 days by the Defendants Shenzhen Huaxi and Shenzhen Xingpeng upon the service of this Judgment, for appealing before the appeal court Guangdong Higher People??s Court.
Chief Judge: Zhan Simin
Judge: Xu Yuanping
Judge: Cheng Shengxiang
Date: 2 July 2002
Assistant to Judges: Pan Guanchong
?? ??Clerk: Zhu Mingfang
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