Dispute over damages arising from ship collision filed by Shanghai Oriental Shipping & Resource Co., Ltd. against Shanghai Hailian Transportation Co. Ltd，Beihai Honghai Shipping Co., Ltd.etc

Updated：2015-12-24 Views：6682 
                       Guangzhou Maritime Court of the People??s Republic of China



                                          Civil Judgment 

                                                                                 ?¨2009??GHFCZ No.97



Plaintiff??	Shanghai Oriental Shipping & Resource Co., Ltd.

Address??	F/3, 4160, Pu Dong Shangnan Road, Shanghai

Legal Representative??	XU Hongyi, Chairman

Agent ad litem??	WU Jinjun, Employee

Agent ad litem??	LUAN Jianping, attorney from Shanghai Gong Mao Law Firm 

		  Defendant??	

Beihai Honghai Shipping Co., Ltd.

Address??	Building C, F/9, Quanjing Tower, Beihai Avenue, Haicheng District, Beihai City,  Guangxi Zhuang Autonomous Region

Legal Representative??	CHEN Feijing, General Manager

Agent ad litem??	CHEN Yusheng, attorney from Lin Yi Hua & Co. Law Office

Agent ad litem??	WANG Silu, attorney from Lin Yi Hua & Co. Law Office



Defendant??	

Orient Overseas Container Line (UK) Limited

Address??	F/33, Harbour Center, No. 25 Harbour Road, Wanchai, Hong Kong 

Legal Representative??	DAI Shengjian, Director 

Agent ad litem??	CHEN Xiangyong, attorney from Wang Jing & Co.

Agent ad litem??	Cao Yanghui, attorney from Wang Jing & Co.

	 

	 

With respect to the case of dispute over damages arising from ship collision filed by the Plaintiff, Shanghai Oriental Shipping & Resource Co., Ltd., against Shanghai Hailian Transportation Co. Ltd. (hereinafter referred to as ?°Hailian Company?±), Beihai Honghai Shipping Co., Ltd. (hereinafter referred to as ?°Honghai Company?±), Swan National Leasing (Commercials) Limited, Orient Overseas Container Line (UK) Limited (hereinafter referred to as ?°OOCL (UK)?±) and Orient Overseas Container Line Limited, this Court, after accepting this case, formed a collegial bench in accordance with law to conduct a trial on the case. Since acceptance of this case shall be based on a decision of another case of dispute over damage compensation arising from ship collision accepted by this Court, Civil Ruling (2009) GHFCZ No.97-3 was made by this Court on 26 May, 2009 to suspend this trial. On 12 March, 2012, the cause for suspending this trial was eliminated and trial of this case was resumed. On 23 May, 2012, the Plaintiff withdrawn its claim against the Defendants, Hailian Company, Swan National Leasing (Commercials) Limited and Orient Overseas Container Line Limited, which was approved by this Court. This Court called upon the Plaintiff and the Defendants involved to carry out pre-trial evidence exchange respectively on 16 April and 11 June, 2012 and conducted an open trial on the present case. The following persons have participated in the trial of first instance and the trial of second instance respectively: WU Jinjun and LUAN Jianping, agents ad litem of the Plaintiff; CHEN Yusheng, agent ad litem of the Defendant Honghai Company; CHEN Xiangyong and CAO Yanghui, agents ad litem of the Defendant OOCL (UK). The trial of this case has been closed. 



The Plaintiff alleged that: on 6 August, 2008, the Plaintiff and Hailian Company entered into an agreement of carriage, under which Hailian Company is expected to, by way of partial shipment, carry steel sheets of 6,421.981MT from Zhang Jia Gang to the terminal of CSSC Guangzhou Longxue Shipbuilding Co., Ltd. (hereinafter referred to as ?°Longxue Company?±). On 16 October, 2008, the Defendant Honghai Company issued a Waterway Bill, confirming that the total weight of 209 pieces of steel sheets carried by M/V ?°Xinghai 668?± was 1,780.704MT. Honghai Company was the owner of M/V ?°Xinghai 668?±. On 21 October, 2008, M/V ?°Xinghai 668?±, on its way to Guangzhou Port, collided with M/V ?°OOCL EUROPE?± bareboat chartered by the Defendant OOCL (UK), leading to sinking of M/V ?°Xinghai 668?± and the cargoes consigned for shipment by the Plaintiff who therefore suffered from economic losses arising therefrom. According to the final judgment of Higher People??s Court of Guangdong Province, the Defendant Honghai Company shall bear 40% of and the Defendant OOCL (UK) shall bear 60% of the liabilities for the subject collision accident. The Plaintiff requested this Court to order these two Defendants to, based on the proportion of their respective liabilities, compensate for economic losses suffered by the Plaintiff in an amount of RMB 16,458,186.83 plus interest (the interest shall be calculated at the enterprise working-capital loan interest rate of the same period announced by the People??s Bank of China from 21 October, 2008 till the date of compensation payment as determined under this judgment). Litigation fees, cost of application for property preservation, cost of application for registration of creditor??s rights and other expenses involved in this case shall be borne by both these Defendants. 



In the course of trial proceedings, the Plaintiff modified the amount of economic losses incurred into RMB 16,260,865.40, which includes RMB 15,958,497.24 of purchased price of cargoes in this case, RMB 293,816.16 of freight and RMB 8,552 of insurance premium. Other litigation requests remained the same. 



The Plaintiff provided this Court with the following evidential materials within the period for adducing evidence: 1. Agreement of Carriage; 2. Waterway Bill; 3. Receipts; 4. Cargo Delivery Note; 5. Storage List; 6. Notice of Loss; 7. Sales Contract; 8. Purchase Contract; 9. Purchase Invoice; 10. Letter of Warranty; 11.Statement of Cargo Ownership Transfer; 12.Public Letter from Hong Kong Marine Department; 13.Correspondence between the Plaintiff and the Defendant Honghai Company; 14.Correspondence between the Plaintiff and Hong Kong Marine Department; 15. Description of Situation issued by Longxue Company; 16.Ship Registry Materials issued by Beihai Maritime Bureau; 17.Agreement on Prepayment of Insurance Indemnity; 18.Agreement on Second Prepayment of Insurance Indemnity; 19.Certificate of Insurance. 



The Defendant Honghai Company alleged that: 1. the Plaintiff did not provide evidences sufficient to prove that it??s entitled to claim for the subject cargo losses; 2. None of the evidences provided by the Plaintiff suffices to prove that it has suffered from the subject cargo losses; therefore the Plaintiff??s requests shall be rejected by this Court; 3.the Plaintiff has presented the VAT Invoice for purchase of the subject cargoes; if any cargo losses has actually been suffered by the Plaintiff, the amount of such losses shall be the VAT Invoice amount excluding 17% thereof; 4.withou prejudice to the preceding points of view, Honghai Company is entitled to restriction of maritime liabilities and the compensation for maritime liabilities in this case shall be limited to RMB 2,642,925.24. Reasonable expenses paid by the Defendant Honghai Company for detecting and salvaging the subject sunken ship and the cargoes carried thereon shall be proportionally deducted from such liability limitation.  



The Defendant Honghai Company provided this Court with the following evidential materials within the period for adducing evidence: 1. Sunken Ship Searching Agreement concluded by and between the Defendant Honghai Company and Shenzhen Xinlong Diving Engineering Co., Ltd. (hereinafter referred to as ?°Xin Long Company?±), Report on Sunken Ship Searching and payment vouchers for conducting sunken ship searching; 2.Agreement on Salvage of Sunken Ship and Cargoes, payment vouchers for salvage works; 3.correspondence between the Defendant Honghai Company and Hong Kong Maine Department; 4. Sunken Ship Searching Agreement concluded by and between the Defendant Honghai Company and Guangzhou Salvage, Report on Sunken Ship Searching, price quotation for and payment vouchers for conducting sunken ship searching; 5.correspondence between the Defendant Honghai Company and the Plaintiff.



The Defendant OOCL (UK) alleged that: 1. the Plaintiff did not provide evidences sufficient such as the voucher of payment of cargo price, to prove that it??s entitled to claim for the subject cargo losses; 2.the collision accident in this case was fundamentally and directly caused by gross fault in manning of M/V ?°Xinhai 668?±. Even though liabilities between both ships had been apportioned under the final judgment by the Higher People??s Court of Guangdong Province, the real cause of the subject accident had not been found yet because Honghai Company did not provide true evidence; therefore, the liability ascertainment in respect of M/V ?°Xinhai 668?± made by the Higher People??s Court of Guangdong Province was wrong, and the Defendant Honghai Company shall be fully liable for cargo losses arising from the collision; 3.the Plaintiff??s claim quanta shall not be sustained for the following two reasons: firstly, the Plaintiff didn??t provide vouchers of cargo payment made to the Seller; secondly, the Plaintiff claimed for a compensation of RMB 16,300,000; however, as indicated by evidences provided by the defendant Honghai Company, the cost of cargo refloatation was only RMB 5 million. In this case, the Plaintiff obviously failed to perform its duty to mitigate loss and thus is not entitled to claim for total loss of the sunken cargo but could claim for an amount of only RMB 5 million at most. 



The Defendant OOCL (UK) provided this Court with the following evidential materials within the period for adducing evidence: 1. Certificate of Registry of M/V ?°OOCL EUROPE?±, Deck Logbook, Engine Logbook, Maritime Investigation Report issued by Hong Kong Marine Department etc.; 2. Letter from Hong Kong Marine Department; 3.Letter of the Plaintiff requesting the Defendant Honghai Company to salvage the subject cargoes; 4. Price Quotation by Guangzhou Salvage; 5.Agreement on Refloatation of Sunken Ship and Cargoes concluded by and between the Defendant Honghai Company and Xin Long Company. 



Based on evidences adduced by both the Plaintiff and the Defendants and through investigation and cross-examination, the collegial bench ascertains the following facts: 



1.	Sales of the subject cargoes 

The Plaintiff claimed that the subject cargoes in this case were 209 pieces of steel sheets which were purchased by the Plaintiff and China National Shipbuilding Equipment & Materials (East China) Co., Ltd. commissioned by the Plaintiff from Jiangsu Shagang Group Co., Ltd. (hereinafter referred to as ?°Shagang Group?±). The Plaintiff had paid RMB 15,958,497.24 for purchasing such 209 pieces of steel sheets weighed 1,780.704MT in total. Afterwards, the Plaintiff sold the subject cargoes to Longxue Company at a price of RMB 16,458,186.83. Evidences such as Purchase Contract, Purchase Invoice, Sales Contract and Letter of Warranty etc. have been provided by the Plaintiff to prove such claim. 



As indicated in the aforesaid evidences: Products Purchase/Sales Contracts numbered D080608 and K0808I2 were concluded on 6 June and 7 July, 2008 respectively by and between the Plaintiff as the Buyer and Shagang Group as the Supplier, under which the Buyer purchased from the Supplier steel sheets in a quantity of 1,296.291MT and 1,656.225MT respectively at a price of RMB 11,295,653.15 and RMB 14,653,695.90; the Buyer should by itself take delivery of the cargoes from Shagang Company. A List of Purchased/Sold Products was enclosed respectively in each of these two Products Purchase/Sales Contracts, specifying in detail the specifications, models, quantities, weights, unit prices and total prices of the steel sheets. On 19 October, 2008, Shagang Company issued to the Plaintiff a VAT Invoice of an amount of RMB 7,146,815.38, covering 7 pieces of the subject steel sheets weighted 37.694MT at a price of RMB 342,891.25. On 28, August and 8 October, 2008, the Plaintiff as the Buyer and China National Shipbuilding Equipment & Materials (East China) Co., Ltd. as the Supplier entered into two Industrial and Mineral Products Purchase/Sales Contracts, under which the Buyer purchased from the Supplier steel sheets of 2,021.013MT and 1,448.452MT respectively at a price of RMB 18,097,982.30 and RMB 13,385,130.40; the Buyer should by itself take delivery of the cargoes from Shagang Company. A List of Purchased/Sold Products was enclosed respectively in each of these two Products Purchase/Sales Contracts, specifying in detail the specifications, models, quantities, weights, unit prices and total prices of 195 pieces and 7 pieces respectively of the subject steel sheets in this case. On 18 November, 2008 and 17 March, 2009 respectively, China National Shipbuilding Equipment & Materials (East China) Co., Ltd. issued to the Plaintiff 13 VAT invoices numbered 01615967-01615979 covering 195 pieces of steel sheets weighted 1673.779MT totally at a total price of RMB 14,973,626.93. The Invoice numbered 00199267 covers 7 pieces of the subject steel sheets weighted 69.231MT totally at a total price of RMB 641,979.06. The aforesaid 209 pieces of steel sheets were of a total weight of 1780.704MT and a total price of RMB 15,958,497.24. 



Four Products Purchase/Sales Contracts numbered 07GLS230-01C155, 07GLS230-01C158, 07GLS230-01C163 and 07GLS230-01C172 respectively by and between the Plaintiff as the Supplier and Longxue Company as the Buyer were concluded on 6 June, 3 July, 7 August and 18 September, 2008 respectively, under which steel sheets purchased/soled were weighted 1,296.291MT, 1,656.225MT, 2,106.578MT and 1,443.452MT respectively and priced at RMB 11,691,021.91, RMB 14,993,222.05, RMB 19,446,850.57 and RMB  13,803,142.22 respectively. A List of Purchased/Sold Products was enclosed respectively in each of these four Products Purchase/Sales Contracts, specifying in detail the specifications, models, quantities, weights, unit prices and total prices of the subject steel sheets in this case, of which 209 pieces were sold to Longxue Company at a price of RMB 16,458,186.83. 



On 20 April, 2012, Longxue Company issued a Description of Situation to confirm that ?°with respect to the provision ?°Place and Method of Delivery shall be a terminal designated by the Buyer?± as prescribed in Article 3 of the four Products Purchase/Sales Contracts numbered 07GLS230-01C155, 07GLS230-01C158, 07GLS230-01C163 and 07GLS230-01C172 respectively concluded in 2008 by and between our company and the Plaintiff, the terminal refers to the terminal of Longxue Company; the aforesaid four Products Purchase/Sales Contracts have been fully performed by both parties thereto and the sinking of 209 pieces of steel sheets of a total weight of 1,780.704MT carried onboard M/V ?°Xinghai 668?± has nothing to do with our company?±. Agent ad litem of the Plaintiff alleged in the court trial that after occurrence of the subject collision, the Plaintiff resupplied cargoes to Longxue Company. 

  

Both Defendants raised no objection to the truthfulness of the aforesaid evidences and contents thereof corroborate with each other; besides, the collegial bench admitted the aforesaid evidences and facts. 



2.	Carriage of the subject cargoes 



On 6 August, 2008, the Plaintiff and Hailian Company entered into an agreement of carriage, under which Hailian Company is expected to, by way of partial shipment, carry steel sheets of 6,421.981MT including the subject cargoes in this case from Zhang Jia Gang to the terminal of CSSC Guangzhou Longxue Shipbuilding Co., Ltd.; the through waterway freight should be calculated at a rate of RMB 165/MT (including pilotage, insurance premium and cost of carriage); the Plaintiff should paid the freight to Hailian Company within one month of arrival of the cargoes at Longxue Company??s terminal. 



On 15 October, 2008, the subject cargoes in this case started to be loaded onboard M/V ?°Xinghai 668?± at Shagang Company??s terminal. According to specifications and weights indicated in the Cargo Delivery Note issud by Shagang Company, 4 pieces of steel sheets of a total weight of 19.349MT were covered under No.6880 Delivery Note; 3 pieces of steel sheets of a total weight of 18.3MT were covered under No.6882 Delivery Note; 195 pieces of steel sheets of a total weight of 1,637.779MT were covered under No.6860 Delivery Note; 7 pieces of steel sheets of a total weight of 69.231MT were covered under No.6887 Delivery Note; these four Delivery Notes indicated a total of 209 pieces of steel sheets weighted 1,780.704MT in total. One of these Delivery Notes has a handwriting description ?°A total of 209 pieces of steel sheets without being scraped or bent have been actually received by GAO Huaqiang?±. The Defendant Honghai Company confirmed that GAO Huaqiang was one of its employees. Shagang Company issued 30 pieces of storage lists, under which the name, specification, quantity and weight of the cargoes are consistent with those indicated in the Delivery Notes. 



On 16 October, 2008, the Defendant Honghai Company as the carrier issued a Waterway Bill indicating that ?°the Plaintiff was the Shipper; Longyue Company was the Consignee; the cargoes were 209 pieces of steel sheets weighing 1,780.704MT in total; the destination should be the terminal of Longxue Company. The Waterway Bill indicates some handwriting words that ?°See the Storage List for specifications of the wide thick plate?±. The Defendant Honghai Company affixed the seal of V Xinghai 668?± at the place of signature by the Carrier.   



On 21 November, 2008, the Defendant Honghai Company issued a Notice of Loss to China Pacific Property Insurance Co., Ltd. Shanghai Branch (hereinafter referred to as ?°Pacific Insurance Shanghai Branch?±), stating that MV ?°Xinghai 668?± carried steel sheets of 1780MT from Zhang Jia Gang to the Guangzhou Longxue Shipyard on 17 October, 2008 and sank after being collided with a foreign vessel at the water area adjacent to Hong Kong at 0600 hours of 21 October,2008, and requested the Pacific Insurance Shanghai Branch to send personnel to make inspections and entertain the loss claim. 



The Plaintiff intended to prove by the aforesaid evidences that: the subject cargoes were actually carried by M/V ?°Xinghai 668?± and sank together with the same vessel on 21 October, 2008 in the collision accident. According to both Defendants, the aforesaid evidences were insufficient to prove that M/V ?°Xinghai 668?± actually carried the subject cargoes. The collegial bench holds that: evidences such as Product Sales/Purchase Contracts, Lists of Sold/Purchased Products, Delivery Notes, Storage Lists, Waterway Bill provided by the Plaintiff constitute a complete evidence chain which proves that the 209 pieces of steel sheets of 1,780.704MT purchased by the Plaintiff were loaded onboard M/V ?°Xinghai 668?±; the Defendant Honghai Company also confirmed in the Notice of Loss that the cargoes in question were loaded onboard ?°Xinghai 668?±; therefore, the defense by both Defendants that the Plaintiff failed to sufficiently prove that the subject cargoes were loaded onboard M/V ?°Xinghai 668?± could not be sustained.



3.	Insurance for the subject cargoes



As indicated in the Certificate of Domestic Waterway and/or Overland Cargo Transportation Insurance: on 17 October, 2008, the Plaintiff as the Insured and Hailian Company as the Applicant covered the subject cargoes against all risks under terms of domestic waterway and/or overland cargo transportation insurance (which became effective on 2 February, 1995) with Pacific Insurance Shanghai Branch by paying an insurance premium of RMB 8,552 for an insured amount of RMB 10,690.000. Pacific Insurance Shanghai Branch prepaid RMB 2,000,000 and RMB 2,500,000 on 4 May, 2009 and 26 October, 2009 respectively to the Plaintiff, and the Agreement on Prepayment of Insurance Indemnity and the Agreement on Prepayment of Insurance Indemnity for the Second Time were concluded respectively by and between them. Based on the fact that the specific amount of cargo losses in this case cannot be determined and additional costs incurred to the Plaintiff due to its purchase of substitute cargoes, the Plaintiff requested Pacific Insurance Shanghai Branch to prepay insurance indemnity. With respect to the forgoing matters, both parties reached the following agreements ?°1. Pacific Insurance Shanghai Branch shall respectively prepay RMB 2,000,000 and RMB 2,500,000 to the Plaintiff within 10 days after each prepayment agreements becomes effective; 2.both parties mutually confirm that the Plaintiff shall initially claim compensation for the subject cargo losses against any party who is held liable for the accident; prepayment of insurance indemnities by Pacific Insurance Shanghai Branch shall not prejudice the Plaintiff??s exercising of its rights to claim for the subject cargo losses against any liable party. The amount of losses to the Plaintiff arising from the accident shall be determined as per the terms and conditions of Insurance Policy No.ASHH101043080001015N and based on such an amount as ascertained under effective judgment made by the court or as approved by both parties through consultation; when the subject cargoes has been under insured, if the subject cargo losses incurred to the Plaintiff finally could not be fully compensated by any liable party, with respect to the part of losses failed to be compensated, Pacific Insurance Shanghai Branch shall assume insurance liabilities as agreed under the Insurance Policy and according to the proportion of the insured amount in the cargo value; for any extended part of losses or any losses which could not be recovered from any liable party through the Plaintiff??s fault, Pacific Insurance Shanghai Branch is entitled to correspondingly deduct the insurance indemnity; 3.both parties shall, within 30 days after the Plaintiff receives all compensations payable by any party liable for the accident, settle the insurance indemnity fund based on the principle of ?°returning the overcharge and demanding payment for the shortage?±; 4.the Plaintiff confirms its promise to further negotiate with Hong Kong Marine Department to obtain a permit to salvage the sunken cargoes by itself, and, after obtaining the permit, to proactively assess and conduct cargo salvage operations with an aim to mitigate cargo losses. The Plaintiff acknowledged receipt of RMB 4,500,000 of insurance indemnity prepaid by Pacific Insurance Shanghai Branch after both Agreements on Prepayment of Insurance Indemnity were concluded by and between them.



4.	Trial of the case of ship collision liabilities  



With respect to the dispute over damages arising from collision between M/V ?°Xinghai 668?± and M/V ?°OOCL EUROPE?± , the Defendant Honghai Company filed a lawsuit with this Court, requesting OOCL (UK), the bareboat charterer of M/V ?°OOCL EUROPE?± , and other parties to assume compensation liabilities; OOCL (UK) thereafter initiated a counterclaim against the Defendant Honghai Company. The case numbers of such two claims were (2009)GHFCZ No.4 and (2009)GHFCZ No.292 respectively. This Court ruled in the Judgment of first instance that the Defendant Honghai Company shall bear 40% of and the Defendant OOCL (UK) shall bear 60% of the liabilities for the subject collision accident. The Defendant OOCL (UK) was dissatisfied with the judgment of first instance and filed an appeal. During the trial of second instance, the Defendant OOCL (UK) applied with the Higher People??s Court of Guangdong Province for obtaining evidential materials form Guangdong MSA in order to prove that some of the evidences provided by the Defendant Honghai Company were untrue and led to wrong ascertainment of accident liabilities by the court. The Higher People??s Court of Guangdong Province disapproved the application for obtaining evidence filed by the Defendant OOCL (UK) by reason that the Defendant OOCL (UK) had submitted a Confirmation of Completion of Adducing Evidences to the court of first instance. On 20 December, 2011, the Higher People??s Court of Guangdong Province made Civil Judgments (2010)YGFMSZZ No.86, 87 to overrule the appeal and sustain the original judgment. 



5.	The Defendant Honghai Company??s application for constituting liability limitation fund for maritime claims and the Plaintiff??s application for property preservation 



On 11 February, 2009, the Defendant Honghai Company applied with this Court for setting up a liability limitation fund for maritime claims. After accepting the application, this Court made a Civil Ruling (2009)GHFCZ No.116 on 19 May of the same year, permitting the Defendant Honghai Company to set up a liability limitation fund for maritime claims by exercising its 249,832 special drawing rights. Calculated at the exchange rate of special drawing rights to US dollars announced on the date of accident (i.e. 21 October, 2008), the fund can be converted into RMB 2,642,925.24. The Defendant OOCL (UK) was dissatisfied with the Civil Ruling and filed an appeal. The Higher People??s Court of Guangdong Province made the Civil Ruling (2009)YGFMSZZ No.267 to overrule the appeal and sustain the original ruling. However, the Defendant Honghai Company didn??t constitute any liability limitation fund for maritime claims with this Court according to the effective ruling. 



During the period when this Court was announcing the application by the Defendant Honghai Company for setting up a liability limitation fund for maritime claims, the Plaintiff completed formalities of registration of creditor??s rights with this Court and paid a registration application fee of RMB 1,000. Besides, when the Defendant Honghai Company didn??t set up any liability limitation fund for maritime claims, the Plaintiff applied for property preservation four times one after another with this Court. This Court approved the Plaintiff??s application for property preservation, prohibiting the Defendant Honghai Company to go through formalities of disposing ownership of any part of its properties, and the property preservation fee in amount of RMB20,000 was thus incurred to the Plaintiff. 



6.	Information about M/V ?°Xinghai 668?± and cargo refloatation operations in this case



After M/V ?°Xinghai 668?± sank, a Sunken Ship Diving Inspection Agreement was concluded by and between the Defendant Honghai Company and Xin Long Company on 1 December, 2008, under which Xin Long Company was entrusted to conduct a diving inspection to M/V ?°Xinghai 668?± sunken at the water area adjacent to East Lamma Channel Fairway, determine the status of the sunken ship and cargoes and issue a report on the searching. The cost of diving and searching was about RMB 85,000. 



On 11 December, 2008, Hong Kong Friendly Benefit Engineering Co., Ltd. issued a Diving Report for M/V ?°Xinghai 668?±.



On 8 February, 2009, an Agreement on Refloation of the Sunken Ship and Cargoes was entered into by and between the Defendant Honghai Company and Xin Long Company, under which Xin Long Company was entrusted to refloat M/V ?°Xinghai 668?± and the subject cargoes in this case. The lump-sum fee for refloating the sunken ship was RMB 2,900,000; while the lump-sum fee for refloating the subject cargoes, cleaning them with fresh water and transporting them to the terminal of Longxue Company was RMB 5,000,000.   



As indicated in a number of fax correspondences between the Defendant Honghai Company and Hong Kong Marine Department which were provided by the Defendant Honghai Company, in the course of entrusting Xin Long Company to refloat the sunken ship and cargoes in this case, the Defendant Honghai Company applied with Hong Kong Marine Department for many times for postponing the refloatation. 



The agent ad litem of the Defendant Honghai Company alleged in the court trial that: Xin Long Company was unfamiliar with the procedures of applying for relevant permits required to conduct salvage operations in Hong Kong water areas and couldn??t fully estimate potential difficulties to be encountered. That is why salvage operations were not conducted in the end. Afterwards, the Defendant Honghai Company inquired Guangzhou Salvage about the cost of refloating the sunken ship and cargoes in this case. Guangzhou Salvage quoted that: refloatation operations conducted on site before 25 January, 2009 would cost RMB 9,180,000; it would cost RMB 8,380,000 after March, 2009. The Defendant Honghai Company didn??t conclude a salvage contract with Guangzhou Salvage because it was unable to pay for the costs of refloatation. 

 

The Plaintiff held that: it was unreasonable for the Defendant Honghai Company who was the owner of several ships to allege that it was unable to pay for the salvage costs. The Defendant Honghai Company shall be fully liable for failure in promptly conducting refloation operations which resulted in total loss of the subject cargoes and have no right to limitation of liability for maritime claims. 



The Defendant Honghai Company confirmed that M/V ?°Xinghai 668?± and the subject cargoes have not been refloated yet. 



Members of the collegial bench unanimously hold that: this is a case of dispute over damages arising from ship collision involving Hong Kong. According to stipulations of Article 1 of Several Rules of the Supreme People??s Court on the Jurisdiction of the Maritime Courts, this case is within the jurisdiction of the maritime courts. Considering that the subject collision occurred in the border area between Guangzhou and Hong Kong water areas, pursuant to provisions of Article 241 of the Civil Procedure Law of the People??s Republic of China, this Court had competent jurisdiction. According to provisions of Paragraph 1 of Article 273 of the Maritime Code of the People??s Republic of China, laws of the People??s Republic of China shall apply. 



The dispute in this case mainly focuses on the following issues: the Plaintiff??s title to sue, whether the Defendant Honghai Company is entitled to limitation of liability for maritime claims, whether the insurance indemnity prepaid by the insurance company to the Plaintiff shall be deducted from the amount claimed by the Plaintiff. 



As to the issue on the Plaintiff??s title to sue, according to findings of fact through investigation, the Plaintiff was both the Seller and the Shipper of the subject cargoes. When the cargoes was damaged in the course of carriage, the Plaintiff is entitled to claim for damages for the cargo by law. Longxue Company as the Consignee acknowledged that Longxue Company was not the party with title to the subject cargoes. Therefore, both Defendants?? allegations that the Plaintiff was not the party with title to the subject cargoes is factually and legally groundless and shall not be sustained. 



As indicated in evidences available for this case, the cargo losses were caused by sinking of M/V ?°Xinghai 668?± arising from its collision with M/V ?°OOCL EUROPE?±. In Civil Judgments (2010)YGFMSZZ No.86, 87 made by the Higher People??s Court of Guangdong Province, it was ascertained that the subject collision were caused through faults of both M/V ?°Xinghai 668?± and M/V ?°OOCL EUROPE?± , which should respectively bear 40% and 60% of the liability. In accordance with provisions of Paragraph 1 of Article 169 of the Maritime Code of the People??s Republic of China, ?°If the colliding ships are all in fault, each ship shall be liable in proportion to the extent of its fault.?± and provisions of Paragraph 2 thereof, ?°The ships in fault shall be liable for the damage to the ship, the goods and other property on board pursuant to the proportions prescribed in the preceding paragraph. Where damage is caused to the property of a third party, the liability for compensation of any of the colliding ships shall not exceed the proportion it shall bear?±, the Defendant Honghai Company as the owner of M/V ?°Xinghai 668?± and the Defendant OOCL (UK) as the bareboat charterer of M/V ?°OOCL EUROPE?± shall respectively bear 40% and 60% of the liabilities for cargo losses suffered by the Plaintiff arising from the subject collision. 



As to the issue on whether the Defendant Honghai Company is entitled to limitation of liability for maritime claims, pursuant to provisions of Chapter 11 of the Maritime Code of the People??s Republic of China, the subject should comply with the provisions of Article 204, and the maritime claims should be among the limitable claims provided for in Article 207, and there should be no circumstances as set out in Article 209. When the subject collision accident occurred to M/V ?°Xinghai 668?±, the subject cargoes carried onboard were on the way from Zhang Jia Gang to Guangzhou. The carriage was between inland ports of China and the Defendant Honghai Company was the owner of M/V ?°Xinghai 668?± which is the subject in compliance with provisions of Article 204 of the Maritime Code of the People??s Republic of China. Maritime claims subject to limitation listed in Article 207 of the Maritime Code of the People??s Republic of China include: claims in respect of loss of life or personal injury or loss of or damage to property including damage to harbour works, basins and waterways and aids to navigation occurring on board or in direct connection with the operation of the ship or with salvage operations, as well as consequential damages resulting therefrom. The loss of the subject cargoes was caused by ship collision which led to sinking of the carrying ship in the course of its shipping operations, falling within the category of claims which are subject to limitation as provided above. As long as losses in this case were not resulted from any reckless act or omission of the Defendant Honghai Company with intent to cause such loss or with knowledge that such loss would probably incur, the Defendant Honghai Company shall be entitled to limitation of liability for maritime claims. Evidences available in this case indicate that the cargo losses arising from ship collision were caused through faults of both ships; no evidence could prove that the losses were resulted from any reckless act or omission of the Defendant Honghai Company with intent to cause such loss or with knowledge that such loss would probably incur. Therefore, the Defendant Honghai Company is entitled to limitation of liability for maritime claims pursuant to provisions in Article 207 of the Maritime Code of the People??s Republic of China. The Plaintiff alleged that the Defendant Honghai Company was not entitled to limitation of liability for maritime claims by reason that the Defendant Honghai Company had not performed the duty to refloate the sunken cargoes. The issue on determining whether the Defendant Honghai Company has fulfilled its duty to mitigate losses based on whether it has salvaged the subject cargoes or not is a matter of loss ascertainment in nature and has no relevance to the matter of whether the Defendant Honghai Company is entitled to limitation of liability for maritime claims and shall not prejudice the Defendant Honghai Company??s entitlement to limitation of liability for maritime claims for the cargo losses arising from ship collision. In case any sufficient evidence is available to prove that the cargo losses were extended due to fault of the Defendant Honghai Company, the extended part of such losses shall not be deemed as losses resulted from the subject ship collision, but this has no relevance to the limitation issue. Although the Agreement on Refloatation by and between the Defendant Honghai Company and the salvaging company indicates that the agreed refloatation fee is lower than the purchase price of the subject cargoes, the same cargoes failed to be refloated and the actual final cost of successfully refloating and cleaning up the cargoes could not be determined. Without sufficient evidences available, the Plaintiff??s allegation that the Defendant Honghai Company caused extension of the cargo losses was factually groundless and the losses shall be ascertained as the result from the subject ship collision. Therefore, because of lack of evidence, the Plaintiff??s defense that ?°the Defendant Honghai Company shall not be entitled to limitation of liability for maritime claims for not having conducted refloatation operations?± shall not be sustained by this Court. 



As to the issue of whether the insurance indemnity prepaid by Pacific Insurance Shanghai Branch to the Plaintiff shall be deducted from the amount claimed by the Plaintiff: during the period of litigation, Pacific Insurance Shanghai Branch prepaid RMB 4,500,000 of insurance indemnity to the Plaintiff. Both Defendants held that, pursuant to provisions of Article 252 of the Maritime Code of the People??s Republic of China, the right of the insured to demand compensation from any third person shall be subrogated to the Insurer from the time the indemnity is paid; since Pacific Insurance Shanghai Branch had prepaid RMB 4,500,000 of insurance indemnity to the Plaintiff, the right of recourse within the scope of coverage was acquired by Pacific Insurance Shanghai Branch; the Plaintiff has no right to further claim for the part of losses covered by the prepaid indemnity against the Defendants. The Plaintiff however holds that, according to the Agreement on Prepayment of Insurance Indemnity concluded by and between the Plaintiff and Pacific Insurance Shanghai Branch, prepayment of insurance indemnity made by Pacific Insurance Shanghai Branch shall not preclude the Plaintiff from exercising its right to claim for the subject cargo losses against any liable party. The Plaintiff and Pacific Insurance Shanghai Branch shall, within 30 days after the Plaintiff receives all compensations payable by any liable party, settle the insurance indemnity fund based on the principle of ?°returning the overcharge and demanding payment for the shortage?±. The amount of RMB 4,500,000 was only a prepayment rather than an actual indemnity under the insurance contract between the Plaintiff and Pacific Insurance Shanghai Branch; thus the Plaintiff is entitled to claim compensation for all losses of the subject cargoes against both Defendants. The collegial bench holds that the Plaintiff initiated this lawsuit by alleging that both Defendants were parties liable for the subject collision accident and should compensate for losses of the subject cargos arising from the collision. This lawsuit is a case of tort dispute. The Plaintiff as a party with title to the cargoes carried onboard the sunken ship is entitled to claim for the subject cargo losses against both Defendants as liable parties. In accordance with the Agreement by and between the Plaintiff and Pacific Insurance Shanghai Branch, prepayment of insurance indemnity made by Pacific Insurance Shanghai Branch shall not preclude the Plaintiff from exercising its right to claim for the subject cargo losses against any liable party; after the Plaintiff receives all compensations payable by any liable party, the Plaintiff and Pacific Insurance Shanghai Branch shall settle the insurance indemnity fund based on the principle of ?°returning the overcharge and demanding payment for the shortage?±. Therefore, the amount of RMB 4,500,000 was only a prepayment of insurance indemnity rather than the final insurance indemnity; and liabilities to be assumed by both Defendants as parties liable for the tort will not be aggravated by the Agreement by and between the Plaintiff and the Insurer. The Plaintiff??s claiming for total loss of the subject cargoes in its own name against liable parties after having received prepayment of insurance indemnity made by Pacific Insurance Shanghai Branch is in conformity with law and shall be sustained. Therefore, pursuant to law, both Defendants?? defense that ?°the insurance indemnity of RMB 4,500,000 prepaid by the insurance company to the Plaintiff shall be deducted from the amount claimed by the Plaintiff?± shall be dismissed. 



It??s reasonable for the Plaintiff to claim for a compensation for the subject cargo loss at their purchase price. Based on evidences such as Products Purchase/Sales Contract and VAT Invoices provided by the Plaintiff, the collegial bench ascertains that the value of the subject cargoes amounts to RMB 15,958,497.24; the Defendant Honghai Company??s defense that the amount of 17% value-added tax shall be deducted from the value of the subject cargo losses is legally groundless and shall not be sustained. In accordance with the Agreement of Carriage by and between the Plaintiff and Hailian Company, the freight claimed by the Plaintiff should be paid within one month of arrival of the subject cargoes at the port of destination. The subject cargo losses occurred in the course of carriage and the Plaintiff didn??t pay the freight; thus there is no evidence to support the Plaintiff??s claim for freight. In accordance with the Agreement of Carriage by and between the Plaintiff and Hailian Company, the insurance premium is included in the freight; as indicated in evidences available in this case, Hailian Company was the insurance applicant and the Plaintiff failed to adduce any evidence to prove it had paid for the insurance premium, thus there is neither any evidence to support the Plaintiff??s claim for insurance premium. According to the Civil Judgments (2010)YGFMSZZ No.86, 87 made by the Higher People??s Court of Guangdong Province, the Defendant Honghai Company and the Defendant OOCL (UK) shall respectively bear 40% and 60% of the liabilities for the cargo losses by paying RMB 6,383,398.90 and RMB 9,575,098.34 respectively to the Plaintiff. Since the Defendant Honghai Company is entitled to limitation of liability for maritime claims and, as adjudicated by this Court and the Higher People??s Court of Guangdong Province in the trials of first instance and second instance, the limitable liability of the Defendant Honghai Company for losses arising from the subject ship collision shall be limited to the amount of RMB 2,642,925.24; therefore, the Defendant Honghai Company may compensate the Plaintiff for an amount of RMB 2,642,925.24 only; any amount claimed exceeding the limit shall not be compensated by Honghai Company. The Defendant Honghai Company??s allegation that reasonable expenses incurred for searching for and refloating the sunken ship and cargoes in this case shall be deducted proportionally from the limited amount of compensation for liabilities in this case is legally groundless and shall not be sustained. The Plaintiff??s request that ?°the interest shall be borne by the two defendants and calculated at the enterprise working-capital loan interest rate of the same period announced by the People??s Bank of China from the date of occurrence of the subject ship collision (i.e. 21 October, 2008) till the date of compensation payment as determined under this judgment?± is reasonable and shall be sustained. The Plaintiff??s application for property preservation was against properties of the Defendant Honghai Company and this Court has ascertained that the Defendant Honghai Company shall be liable for the subject cargo losses; therefore, the cost of application for property preservation shall be borne by the Defendant Honghai Company because it??s caused by the Defendant Honghai Company. In accordance with provisions of Article 7 of Several Provisions of the Supreme People's Court on the Trial of Cases of Disputes over the Limitation of Liability for Maritime Claims, the cost of application for registration of creditor??s rights paid by the Plaintiff shall be borne by the Defendant Honghai Company. 



In accordance with provisions of Paragraph 1 and Paragraph 2 of Article 169, Article 204 and item (1) Paragraph 1 of Article 207 of the Maritime Code of the People??s Republic of China, the judgment is rendered as follows: 

 

(1)	 The Defendant Beihai Honghai Shipping Co., Ltd. shall compensate the Plaintiff Shanghai Oriental Shipping & Resource Co., Ltd. the amount of RMB 2,642,925.24 plus interest (the interest shall be calculated at the enterprise working-capital loan interest rate of the same period announced by the People??s Bank of China from 21 October, 2008 till the date of compensation payment as determined under this judgment); 



(2)	 The Defendant OOCL (UK) shall compensate the Plaintiff Shanghai Oriental Shipping & Resource Co., Ltd. the amount of RMB 9,575,098.40 plus interest (the interest shall be calculated at the enterprise working-capital loan interest rate of the same period announced by the People??s Bank of China from 21 October, 2008 till the date of compensation payment as determined under this judgment);



(3)	 The Defendant Beihai Honghai Shipping Co., Ltd. shall compensate the Plaintiff Shanghai Oriental Shipping & Resource Co., Ltd. the cost of application for property preservation in an amount of RMB 20,000. 



(4)	 The Defendant Beihai Honghai Shipping Co., Ltd. shall compensate the Plaintiff Shanghai Oriental Shipping & Resource Co., Ltd. the cost of application for registration of creditor??s rights in an amount of RMB 1,000. 



(5)	 Other litigation claims put forward by the Plaintiff Shanghai Oriental Shipping & Resource Co., Ltd. are overruled. 



The Plaintiff has prepaid an amount of RMB 120,549 for the court fee and requested to reduce the claim amount before completion of court investigations. As such, the court fee should be recalculated and RMB 1,183.81 should be refunded to the Plaintiff. The actually charged court fee for this case is RMB 119,365.19, of which the amount RMB 29,841.30 shall be borne by the Plaintiff, the amount of RMB 19,098.43 shall be borne by the Defendant Honghai Company and the amount of RMB 70,425.46 shall be borne by the Defendant OOCL (UK). 



The above obligations of payment shall be performed within 10 days of the effective date of this Judgment. 



If above obligations of payment fail to be performed within the specified period of time under this Judgment, the interest will be pay in double for the overdue period of late performance in accordance with provisions of Article 229 of the Civil Procedure Law of the People??s Republic of China. 



In event of dissatisfaction with this Judgment, the Plaintiff and the Defendant Honghai Company may, within 15 days, while the Defendant OOCL (UK), may, within 30 days of service of this Judgment, submit a Statement of Appeal to this Court with copies according to the number of relevant parties to this case, appealing to the Higher People??s Court of Guangdong Province.  







Presiding Judge		XU Yuanping 

Judge		ZHANG Kexiong 

Acting Judge		WU Guining



(Official Chop of Guangzhou Maritime Court Affixed)

						    20 August, 2012



Certified to be true to the original 



Clerk					YANG Qian







The translation is provided by Wang Jing & CO.