Chinese Maritime Cases: Selection for Year of 2014 (Chinese Maritime Cases Series) 3662632381, 9783662632383

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Chinese Maritime Cases Series Series Editors in Chief: Martin Davies · Jiang Lin

Martin Davies Jiang Lin Editors

Chinese Maritime Cases Selection for Year of 2014

Chinese Maritime Cases Series Series Editors Martin Davies, Law School, Tulane University, New Orleans, LA, USA Jiang Lin, Law School, Shanghai Maritime University, Shanghai, China

The primary aim of this series is to, for the first time, provide the academics, practitioners and businessmen worldwide with a crucial source to perceive how the specially designed Chinese maritime courts apply, interpretate and develop the shipping law in practice to strike a balance of interest among the domestic and international market players. Each year, China trades with other states in trillions of USD, and more than 90% of the cargoes are carried by ocean-going ships. In view of the enormous trade volume and maritime activities, foreign trading houses, shipping companies and marine underwriters, as well as their legal advisors, are keen to track down the developments of Chinese maritime law and court practice so as to predicate and avoid the potential problems or resolve the emerging disputes properly. Cases and judgments are regarded as a crucial source of learning. However, so far, no serial Chinese casebooks, which contain full English translation of selected judgments, have been published. The authors try to make an audacious break-through in this field. This series has a secondary aim: to establish a core part of the database, which can be further developed to be an innovative tool for the foreign students, professors and lawyers to have a systematic study of Chinese maritime law.

More information about this series at http://www.springer.com/series/16710

Martin Davies Jiang Lin •

Editors

Chinese Maritime Cases Selection for Year of 2014

123

Editors Martin Davies Law School Tulane University New Orleans, LA, USA

Jiang Lin Law School Shanghai Maritime University Shanghai, China

ISSN 2730-9851 ISSN 2730-986X (electronic) Chinese Maritime Cases Series ISBN 978-3-662-63238-3 ISBN 978-3-662-63239-0 (eBook) https://doi.org/10.1007/978-3-662-63239-0 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer-Verlag GmbH, DE part of Springer Nature. The registered company address is: Heidelberger Platz 3, 14197 Berlin, Germany

Preface

This volume is the first in a series that will collect and publish selected Chinese maritime law decisions, translated into English. The cases in this volume date from 2014; volumes for subsequent years will be published soon. China has eleven specialist maritime courts in: Dalian, Tianjin, Qingdao, Nanjing, Shanghai, Ningbo, Wuhan, Xiamen, Guangzhou, Beihai, and Haikou (proceeding from North to South). These courts adjudicate tens of thousands of cases every year, but much of the wealth of maritime law learning in their decisions remains inaccessible to the rest of the world as the decisions are not widely published outside China. The goal of this project, which has been in development since 2014, is to make a selection of representative decisions more readily available to maritime law scholars and practitioners internationally by translating them into English, and then publishing them both on the Internet and in a series of volumes, of which this is the first. The project is a joint venture between Shanghai International Shipping Institute of Shanghai Maritime University (SISI) and the Tulane Maritime Law Center (TMLC), which is part of Tulane University Law School in New Orleans. The editorial team at SISI is led by Assoc. Prof. Jiang Lin. This team selects the cases to be published and translates them into English before sending them to TMLC for further editorial work. The editorial team at TMLC, supervised by Prof. Martin Davies, reviews the manuscripts received from SISI and collates, edits and prepares the reports for publication.

New Orleans, USA Shanghai, China February 2021

Editors-in-Chief Martin Davies Jiang Lin

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Acknowledgments

The editors would like to acknowledge the following for their assistance with the Chinese end of this project: from Shanghai Maritime University Law School, Prof. Dong Nian Yin, Prof. Shi Cheng Yu and Prof. Cun Qiang Cai; from Shanghai Maritime Court, Judge Tong Wang, Judge Zhen Kun Jia and Judge Hai Long Lin; Assistants to Editors in particular Hui Zeng, Yu Ming Wang, Yun Fei Han, Rui Ying Chen and Mu Fan Jia Yang. The editors would also like to acknowledge the following present and former students of Tulane University Law School, who have served as Assistant Editors for the American part of this project: Richard Beaumont (2014–2015); Scott Ferrier (2015–2016); Guyer Bogen (2017–2018); Lindsey Magee Gordley and Katherine Kaplan (2018–2019); Erica Endlein (2019–2020); Robert Bradley and Mary Katherine Koch (2020–2021). The editors also acknowledge the efforts of Jocelyn Mahan and Andrea Felice of IQnection for their work in building the companion Web site for this project, www.chinesemaritimecases.com.

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About the Editors

Prof. Martin Davies is Admiralty Law Institute Professor of Maritime Law at Tulane University Law School in New Orleans and Director of the Tulane Maritime Law Center. He holds the degrees of M.A. and B.C.L. from Oxford University, England, and an LL.M. from Harvard Law School. Before joining Tulane, he was Harrison Moore Professor of Law at The University of Melbourne in Australia and before that he taught at Monash University, The University of Western Australia and Nottingham University. He has also been a visiting professor at universities in China, Italy, Azerbaijan and Singapore. In 2019, he was elected to be Titulary Member of the Comité Maritime International (CMI). He is the author (or co-author) of books on maritime law, international trade law, conflict of laws and the law of torts. He has also published many journal articles on these topics. He has extensive practical experience as a consultant for over 30 years on maritime matters and general international litigation and arbitration, in Australia, Hong Kong, Singapore and the USA. Assoc. Prof. Jiang Lin (John Lin) is Associate Professor of Maritime Law at Shanghai Maritime University and Deputy Director of Shipping Policy and Law Research Center of Shanghai International Shipping Institute. He is also Adjunct Professor at Tulane University Law School. After graduation with a B.Sc. degree from Shanghai Maritime University in 1996 and an LL.M. degree from Southampton University in 1999, he commenced his legal career at Sinclair Roche & Temperley (SRT) and later jointed Ince & Co. He was dually qualified as English solicitor and Chinese lawyer. In 2008, he came back to his mother college to be a lecturer and researcher. Meanwhile, he keeps practicing English and Chinese laws at Sinopar Law Firm. He is also Arbitrator with China Maritime Arbitration Association, Shanghai Arbitration Commission and Shanghai International Arbitration Center and Supporting Member of London Maritime Arbitrators’ Association.

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About the Editors

He is the author and chief editor of two serial books: Shanghai Shipping Policy and Law Development White Book and Shipping Finance Law Review. He also writes books and articles on cruise commerce, off-shore trade and insurance. John Lin is Member of Jiusan Society, one of the eight democratic parties in China.

Table of Contents

Table of Cases by Name of Plaintiff in First Instance Judgment . Table of Cases by Jurisdiction (Which Chinese Court Makes the Effective Judgment) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table of Cases by Cause of Action for Maritime Cases in the People’s Republic of China . . . . . . . . . . . . . . . . . . . . . . . . List of Maritime Courts and Their Appeal and Petition Courts in the People’s Republic of China . . . . . . . . . . . . . . . . . . . . . . . . List of Causes of Action for Maritime Cases in the People’s Republic of China . . . . . . . . . . . . . . . . . . . . . . . . Table of References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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xiii

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xxi

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xxxi

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xli

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xliii xlix

xi

Table of Cases by Name of Plaintiff in First Instance Judgment

AIU Property & Casualty Insurance Co., Ltd. Guangzhou Branch v. American President Lines Ltd. (2012) Guang Hai Fa Chu Zi No. 387, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . .

1

AIU Property & Casualty Insurance Co., Ltd. Guangzhou Branch v. American President Lines Ltd. (2013) Yue Gao Fa Min Si Zhong No. 14, judgment of second instance of Guangdong High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10

Bank of China Ningbo Branch v. China Electrical Import & Export Ningbo Co., Ltd. et al. (2013) Yong Hai Fa Shang Chu Zi No. 363, judgment of first instance of Ningbo Maritime Court . . . . . . . . . . . . . . .

23

Bo Fu Company (Hong Kong) Co., Ltd. v. Top Logic International Limited (2011) Wu Hai Fa Shang Zi No. 00148, judgment of first instance of Wuhan Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . .

33

Bo Fu Company (Hong Kong) Co., Ltd. v. Top Logic International Limited (2014) E Min Si Zhong Zi No. 00163, judgment of second instance of Hubei High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . .

63

CAI Bingchang v. FENG Zhifu (2013) Hu Hai Fa Chu Zi No. 34, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . .

99

CAI Bingchang v. FENG Zhifu (2014) Hu Gao Min Si (Hai) Zhong Zi No. 24, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

107

CAI Bingchang v. FENG Zhifu (2014) Min Shen Zi No. 1406, ruling of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . . . . . . . .

115

Changyi Yuanxiang Printing and Dyeing Co., Ltd. v. Pacific International Lines (Pte) Ltd. et al. (2011) Qing Hai Fa Shang Chu Zi No. 272, judgment of first instance of Qingdao Maritime Court . . . . . . .

119

xiii

xiv

Table of Cases by Name of Plaintiff in First Instance Judgment

Changyi Yuanxiang Printing and Dyeing Co., Ltd. v. Pacific International Lines (Pte) Ltd. et al. (2014) Lu Min Si Zhong Zi No. 27, judgment of second instance of Shandong High People’s Court . . .

134

Changyi Yuanxiang Printing and Dyeing Co., Ltd. v. Pacific International Lines (Pte) Ltd. et al. (2015) Lu Min Zai Zi No. 2, judgment of retrial of Shandong High People’s Court . . . . . . . . . . . . . .

155

Chaozhou Asia-Pacific Energy Co., Ltd. v. Hua Yang International Marine Transportation Co., Ltd. et al. (2011) Hai Shang Chu Zi No. 76, judgment of first instance of Beihai Maritime Court . . . . . . . . . .

179

Chaozhou Asia-Pacific Energy Co., Ltd. v. Hua Yang International Marine Transportation Co., Ltd. et al. (2014) Gui Min Si Zhong Zi No. 44, judgment of second instance of Guangxi Zhuang Autonomous Region High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

199

CHEN Lei v. Hainan Yalong Bay Underwater World Tourism Co., Ltd. et al. (2014) Qiong Hai Fa Shi Chu Zi No. 9, judgment of first instance of Haikou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . .

221

CHEN Linglong et al. v. Ping An Property & Casualty Insurance Company of China Ltd. Tianjin Branch et al. (2014) Jin Hai Fa Shang Chu Zi No. 148, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

231

CHEN Linglong et al. v. Ping An Property & Casualty Insurance Company of China Ltd. Tianjin Branch et al. (2014) Jin Gao Min Si Zhong Zi No. 122, judgment of second instance Judgment of Tianjin High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

242

China International Trust Investment Corporation Bank Xiamen Branch v. Boluo Jinhui Dredging Engineering Co., Ltd. (2014) Xia Hai Fa Min Te Zi No. 1, ruling of first instance of Xiamen Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

255

China Pacific Insurance (Group) Co., Ltd. Qingdao Branch v. Vopak Bohai Petrochemicals (Tianjin) Terminal Co., Ltd. (2014) Jin Hai Fa Shang Chu Zi No. 418, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

261

China Pacific Insurance (Group) Co., Ltd. Qingdao Branch v. Vopak Bohai Petrochemicals (Tianjin) Terminal Co., Ltd. (2014) Jin Gao Min Si Zhong Zi No. 110, judgment of second instance of Tianjin High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

269

China Pacific Property Insurance Co., Ltd. Hubei Branch v. Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft KG (2013) Hu Hai Fa Shang Chu Zi No. 870, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

277

Table of Cases by Name of Plaintiff in First Instance Judgment

xv

China Pacific Property Insurance Co., Ltd. Hubei Branch v. Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft KG (2014) Hu Gao Min Si (Hai) Zhong Zi No. 74, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . .

285

China Shipping Container Lines Tianjin Co., Ltd. v. Tianjin Kaituo Logistics Co. Ltd. (2013) Jin Hai Fa Shang Chu Zi No. 705, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . . . . . . . . . . .

293

China Pacific Insurance Co., Ltd. Shipping Insurance Operation Center v. Teh May Maritime Corporate Limited (2013) Hu Hai Fa Shang Chu Zi No. 1608, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

299

China Pacific Insurance Co., Ltd. Shipping Insurance Operation Center v. Teh May Maritime Corporate Limited (2014) Hu Gao Min Si (Hai) Zhong Zi No. 137, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

312

China Taiping Insurance Co., Ltd. Tianjin Branch v. Ningbo Shuxing Shipping Co. Ltd. (2013) Hu Hai Fa Shang Chu No. 360, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . .

325

Chongqing Transportation Equipment Finance Leasing Co., Ltd. v. Chongqing Kunyuan Shipping Co., Ltd. et al. (2013) Wu Hai Fa Shang Zi No. 0059, judgment of first instance of Wuhan Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

333

Chongqing Transportation Equipment Finance Leasing Co., Ltd. v. Chongqing Kunyuan Shipping Co., Ltd. et al. (2014) E Min Si Zhong Zi No. 00091, judgment of second instance of Hubei High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

354

Chongqing Transportation Equipment Finance Leasing Co., Ltd. v. Chongqing Kunyuan Shipping Co., Ltd. et al. (2014) Min Shen Zi No. 1921, ruling of retrial Judgment of The Supreme People’s Court . . .

380

Conti Caressa Schiffahrtsgesellschaft mbH & Co. KG MS “Conti Esperance” v. Offshore Oil Engineering Co., Ltd. (2012) Guang Hai Fa Chu Zi No. 432, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

385

Daewoo Shipbuilding and Marine Engineering Co., Ltd. v. Alpha Elephant Inc. et al. (2014) Xia Hai Fa Ren Zi No. 14, ruling of first instance of Xiamen Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . .

399

Darby International Investment Limited v. Rong Tai International Shipping Co., Ltd. et al. (2012) Yong Hai Fa Zhou Shang Chu Zi No. 714, judgment of first instance of Ningbo Maritime Court . . . . . . . .

409

xvi

Table of Cases by Name of Plaintiff in First Instance Judgment

Foshan Feitu Import & Export Co., Ltd. v. DHL Global Forwarding (China) Co., Ltd. et al. (2013) Guang Hai Fa Chu Zi No. 492, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . .

423

Fujian Ningde Sinotrans Shipping Agency Co., Ltd. v. Mindong Congmao Marine Industrial Co., Ltd. (2013) Xia Hai Fa Shang Chu Zi No. 445, judgment of first instance of Xiamen Maritime Court . . . . . .

437

Guangzhou Jingtao Logistics Co., Ltd. et al. v. Xiamen Yichenda Shipping Co., Ltd. (2013) Xia Hai Fa Shang Chu Zi No. 257, judgment of first instance of Xiamen Maritime Court . . . . . . . . . . . . . . .

453

Guangzhou Jingtao Logistics Co., Ltd. et al. v. Xiamen Yichenda Shipping Co., Ltd. (2014) Min Min Zhong Zi No. 195, judgment of second instance of Fujian High People’s Court . . . . . . . . . . . . . . . . .

470

Guangzhou Leying International Freight Forwarding Co., Ltd. v. Shanghai Lingpu Aquatic Products Co., Ltd. et al. (2014) Guang Hai Shang Chu Zi No. 233, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

493

Hainan Yuansheng Fisheries Co., Ltd. v. China Ocean Shipping Agency Co., Ltd. et al. (2014) Qiong Hai Fa Shang Chu Zi No. 3, judgment of first instance of Haikou Maritime Court . . . . . . . . . . . . . . .

499

Hainan Yuansheng Fisheries Co., Ltd. v. China Ocean Shipping Agency Co., Ltd. et al. (2014) Qiong Min San Zhong Zi No. 23, judgment of second instance of Hainan High People’s Court . . . . . . . . .

506

Hong Kong Dong Sheng Shipping Limited v. China Ping An Property Insurance Co., Ltd. Zhejiang Branch (2013) Yong Hai Fa Shang Chu Zi No. 563, judgment of first instance of Ningbo Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

515

Hong Kong Dong Sheng Shipping Limited v. China Ping An Property Insurance Co., Ltd. Zhejiang Branch (2014) Zhe Hai Zhong Zi No. 82, judgment of second instance of Zhejiang High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

529

Jiangsu Jiaolong Fishing Harbor Engineering Co., Ltd. v. Jiangyan Huatai Transport Co., Ltd. et al. (2013) Jin Hai Fa Shang Chu Zi No. 597, judgment of first instance of Tianjin Maritime Court . . . . . . . .

541

Jiangsu Jiaolong Fishing Harbor Engineering Co., Ltd. v. Jiangyan Huatai Transport Co., Ltd. et al. (2014) Jin Gao Min Si Zhong Zi No. 39, judgment of second instance of Tianjin High People’s Court . . .

564

Table of Cases by Name of Plaintiff in First Instance Judgment

xvii

Jiangsu Jinyang Shipyard Co., Ltd. v. Shanghai Chongming Port Construction Investment Management Co., Ltd. (2013) Hu Hai Fa Shang Chu Zi No. 1080, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

577

Jiangsu Shenghui Import and Export Co., Ltd. v. Guangying International Freight Forwarding Co. Ltd. (2013) Hu Hai Fa Shang Chu Zi No. 1267, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

589

Jiangsu Shenghui Import and Export Co., Ltd. v. GuangyingInternational Freight Forwarding Co. Ltd. (2013) Hu Gao Min Si(Hai) Zhong Zi No. 144, judgment of second instance of ShanghaiHigh People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

595

Jingjiang Longwit Oils and Grains Industrial Co., Ltd. v. Guangdong Jindonghai Group Co., Ltd. (2013) Wu Hai Fa Shang Zi No. 00485, judgment of first instance of Wuhan Maritime Court . . . . . . . . . . . . . . .

601

Jingjiang Longwit Oils and Grains Industrial Co., Ltd. v. Guangdong Jindonghai Group Co., Ltd. (2014) E Min Si Zhong Zi No. 00098, judgment of second instance of Hubei High People’s Court . . . . . . . . . .

613

LI Yunpeng et al. v. Tianjin Great Wall Underwater Engineering Co., Ltd. (2014) Jin Hai Fa Shi Chu Zi No. 22, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

623

LU Huicheng v. Jiangsu Chengjin Logistics Co., Ltd. (2013) Hu Hai Fa Hai Chu Zi No. 7, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

631

LU Huicheng v. Jiangsu Chengjin Logistics Co., Ltd. (2013) Hu Gao Min Si (Hai) Zhong Zi No. 129, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

636

Mindong Congmao Ship Industry Co., Ltd. v. Wärtsilä Switzerland Ltd. (2014) Xia Hai Fa Shang Chu Zi No. 21-2, ruling of first instance of Xiamen Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

641

Nanjing Lianrun Transportation Trade Co., Ltd. v. China Continent Property & Casualty Insurance Co., Ltd. et al. (2013) Hu Hai Fa Shang Chu Zi No. 12, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

649

Nanjing Lianrun Transportation Trade Co., Ltd. v. China Continent Property & Casualty Insurance Co., Ltd. et al. (2013) Hu Gao Min Si (Hai) Zhong Zi No. 86, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

659

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Table of Cases by Name of Plaintiff in First Instance Judgment

Nanjing Shunjin Shipping Co., Ltd. et al. v. Cangzhou Bohai New Area Zhen Yang Shipping Co., Ltd. (2012) Guang Hai Fa Shang Chu Zi Nos. 161 & 922, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

669

Nanjing Xinruida Shipping Co., Ltd. v. Ningbo Xianghai Fuel Co., Ltd. (2014) Guang Hai Fa Chu Zi No. 16, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

691

Ningbo Zhenhai Manyang Shipping Co., Ltd. v. Ezhou Datong Shipping Co., Ltd. (2014) Yong Hai Fa Shang Chu Zi No. 420, judgment of first instance of Ningbo Maritime Court . . . . . . . . . . . . . . .

705

Oldendorff Carriers GmbH and Co. KG v. Fangchenggang Group Co., Ltd. (2011) Hai Shang Chu Zi No. 56, judgment of first instance Beihai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

717

Oldendorff Carriers GmbH and Co. KG v. Fangchenggang Group Co., Ltd. (2014) Gui Min Si Zhong Zi No. 53, judgment of second instance of Guangxi Zhuang Autonomous Region High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

739

The People’s Insurance Company of China Tianjin Branch v. Jinzhou Jinrun Shipping Co., Ltd. (2014) Jin Hai Fa Shang Chu Zi No. 432, judgment of first instance of Tianjin Maritime Court . . . . . . . .

769

The People’s Insurance Company of China Tianjin Branch v. Jinzhou Jinrun Shipping Co., Ltd. (2014) Jin Gao Min Si Zhong Zi No. 80, judgment of second instance of Tianjin High People’s Court . . .

775

Pingtan Wenbiao Bunker Tanker v. Fujian Xinhai Shipping Co., Ltd. et al. (2013) Xia Hai Fa Shang Chu Zi No. 286, judgment of first instance of Xiamen Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . .

783

Pingtan Wenbiao Bunker Tanker v. Fujian Xinhai Shipping Co., Ltd. et al. (2014) Min Min Zhong Zi No. 554, judgment of second instance of Fujian High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

794

Populart Supplies v. Jiangsu Hengtong International Transportation Co., Ltd. et al. (2014) Guang Hai Fa Chu Zi No. 352, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . .

805

Qingdao Zuode International Trade Co., Ltd. v. Tianjin Weierke Petrochemical Co., Ltd. (2014) Jin Hai Fa Shang Chu Zi No. 499, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . . .

817

Rizhao Jinxilai Economic & Trade Co. Ltd. v. Jinhaihu Shipping Co., Ltd. (2013) Wu Hai Fa Shang Zi No. 00815, judgment of first instance of Wuhan Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

825

Table of Cases by Name of Plaintiff in First Instance Judgment

xix

Rizhao Jinxilai Economic & Trade Co. Ltd. v. Jinhaihu Shipping Co., Ltd. (2014) E Min Si Zhong Zi No. 00128, judgment of second instance of Hubei High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

831

Sanya Yanghai Shipping Industry Co., Ltd. v. Sanya Yangfan Yacht Club Co., Ltd. (2014) Qiong Hai Fa Shi Chu Zi No. 8, judgment of first instance of Haikou Maritime Court . . . . . . . . . . . . . . .

841

Sanya Yanghai Shipping Industry Co., Ltd. v. Sanya Yangfan Yacht Club Co., Ltd. (2014) Qiong Min Zhong San Zi No. 42, judgment of second instance of Hainan High People’s Court . . . . . . . . .

855

Shanghai Beyond International Logistics Co., Ltd. v. Kunshan Beile Pets Merchandise Co., Ltd. (2013) Hu Hai Fa Shang Chu Zi No. 1399, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . .

867

Shanghai Foreign Economic & Trade International Freight Forwarding Co., Ltd. v. Zhongxing Telecommunication Equipment Corporation (2013) Hu Hai Fa Shang Chu Zi No. 1567, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . .

875

Shanghai Jinchang Dredging Engineering Co., Ltd. v. Zhejiang Tianhai Marine Economic & Technology Development Co., Ltd. (2012) Hu Hai Fa Shang Chu Zi No. 1205, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

883

Shanghai Jinchang Dredging Engineering Co., Ltd. v. Zhejiang Tianhai Marine Economic & Technology Development Co., Ltd. (2013) Hu Gao Min Si (Hai) Zhong Zi No. 50, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . .

891

Shanghai Jinchang Dredging Engineering Co., Ltd. v. Zhejiang Tianhai Marine Economic & Technology Development Co., Ltd. (2014) Min Shen Zi No. 142, ruling of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

897

Shanghai Tangyuan Import & Export Trade Co., Ltd. v. Shanghai Hengchen International Freight Forwarding Co., Ltd. (2013) Hu Hai Fa Shang Chu Zi No. 1313, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

901

Shanghai Tangyuan Import & Export Trade Co., Ltd. v. Shanghai Hengchen International Freight Forwarding Co., Ltd. (2014) Hu Gao Min Si (Hai) Zhong Zi No. 12, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

912

Sunshine Property Insurance Co., Ltd. Shanghai Branch v. Maersk Line (China) Co., Ltd. et al. (2013) Guang Hai Fa Chu Zi No. 316, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . .

921

xx

Table of Cases by Name of Plaintiff in First Instance Judgment

Tianjin Jianyuan Geotechnical Engineering Co., Ltd. v. China Construction Second Engineering Bureau Co., Ltd. (2012) Jin Hai Fa Shang Chu Zi No. 543, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

935

Tianjin Jianyuan Geotechnical Engineering Co., Ltd. v. China Construction Second Engineering Bureau Co., Ltd. (2013) Jin Gao Min Si Zhong Zi No. 86, judgment of second instance of Tianjin High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

944

Tianjin Jianyuan Geotechnical Engineering Co., Ltd. v. China Construction Second Engineering Bureau Co., Ltd. (2014) Min Shen Zi No. 1032, ruling of retrial of The Supreme People’s Court . . . . . . . .

958

Tianjin Port Container Terminal Co., Ltd. v. Dalian Winland International Shipping Agency Co., Ltd. Tianjin Branch et al. (2014) Jin Hai Fa Shang Chu Zi Nos. 710–724, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

963

Tongling Shouyun Logistics Co., Ltd. v. Qinhuangdao Huizheng Trade Co., Ltd. (2013) Hu Hai Fa Shang Chu Zi No. 1734, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . .

977

UBI Logistics (China) Limited Qingdao Branch v. Qingdao Sunwide Tyre Co., Ltd. et al. (2013) Qing Hai Fa Hai Shang Chu Zi No. 535, judgment of first instance of Qingdao Maritime Court . . . . . . . . . . . . . .

983

WANG Sanju v. People’s Property and Casualty Insurance Company of China Co., Ltd. Zhaoqing Branch (2013) Guang Hai Fa Shang Chu Zi No. 1000, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

995

WANG Zhuorui v. Shanghai Jingyi Freight Forwarding Co., Ltd. (2013) Hu Hai Fa Shang Chu Zi No. 1314, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1003 Wing Wah Bunkers Ship Co., Ltd. v. Jiangxi Xinghai Shipping Co., Ltd. et al. (2013) Xia Hai Fa Shang Chu Zi No. 166, judgment of first instance of Xiamen Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1009 Wing Wah Bunkers Ship Co., Ltd. v. Jiangxi Xinghai Shipping Co., Ltd. et al. (2014) Min Min Zhong Zi No. 146, judgment of second instance of Fujian High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . 1025 WU Jie v. Dalian Keni Dredging Engineering Co., Ltd. et al. (2013) Da Hai Shi Chu Zi No. 86, judgment of first instance of Dalian Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1041

Table of Cases by Name of Plaintiff in First Instance Judgment

xxi

Xiamen Hongliang Import and Export Co., Ltd. v. Xiamen Hongbase International Freight Forwarding Co., Ltd. et al. (2013) Xia Hai Fa Shang Chu Zi No. 178, judgment of first instance of Xiamen Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1047 Xiamen Huizuan Import and Export Co., Ltd. v. Operasia International Freight Forwarding (Shanghai) Co., Ltd. (2013) Guang Hai Fa Shang Chu Zi No. 1118, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1061 Yangpu Hongyang Shipping Co., Ltd. v. Jiangsu Dongfang Huayuan Shipping Co., Ltd. (2014) Wu Hai Fa Shi Zi No. 00051, judgment of first instance of Wuhan Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . 1069 Yangpu Success Logistics Co., Ltd. v. China Railway Modern Logistics Technology Co., Ltd. Dalian Branch (2014) Da Hai Shang Chu Zi No. 331, judgment of first instance of Dalian Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1089 Yantai Xiangyu Materials Co., Ltd. v. China Continent Property & Casualty Insurance Co., Ltd. Yantai Sub-Branch et al. (2012) Qing Hai Fa Hai Shang Chu Zi No. 899, judgment of first instance of Qingdao Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1095 Yicheng Yaxin Home Textile Co., Ltd. v. Guangzhou Max Dragon International Freight Forwarding Co., Ltd. Shenzhen Branch (2014) Guang Hai Fa Chu Zi No. 133, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1109 ZHAO Xiaofeng v. COSCO International Air Freight Forwarding Co., Ltd. Dalian Branch (2013) Da Hai Shang Chu Zi No. 333, judgment of first instance of Dalian Maritime Court . . . . . . . . . . . . . . . . 1117 ZHAO Xiaofeng v. COSCO International Air Freight Forwarding Co., Ltd. Dalian Branch (2014) Liao Min San Zhong Zi No. 99, judgment of second instance of Liaoning High People’s Court . . . . . . . . 1124 Zhoushan Haiji Waterway Dredging Engineering Co., Ltd. v. Shandong Tianbao Excavating Co., Ltd. et al. (2013) Qing Hai Fa Hai Shang Chu Zi No. 71, judgment of first instance of Qingdao Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1131 Zhoushan Haiji Waterway Dredging Engineering Co., Ltd. v. Shandong Tianbao Excavating Co. Ltd. et al. (2014) Lu Min Si Zhong No. 20, judgment of second instance of Shandong High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1142

Table of Cases by Jurisdiction (Which Chinese Court Makes the Effective Judgment)

Effective Judgments Made by Maritime Courts Shanghai Maritime Court China Pacific Property Insurance Co., Ltd. Tianjin Branch v. Ningbo Shuxing Shipping Co., Ltd. (2013) Hu Hai Fa Shang Chu No. 360, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . Jiangsu Jinyang Shipyard Co. Ltd. v. Shanghai Chongming Port Construction Investment Management Co., Ltd. (2013) Hu Hai Fa Shang Chu Zi No. 1080, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shanghai Beyond International Logistics Co., Ltd. v. Kunshan Beile Pets Merchandise Co., Ltd. (2013) Hu Hai Fa Shang Chu Zi No. 1399, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . Shanghai Foreign Economic & Trade International Freight Forwarding Co., Ltd. v. Zhongxing Telecommunication Equipment Corporation (2013) Hu Hai Fa Shang Chu Zi No. 1567, judgment of first instance of Shanghai Maritime Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tongling Shouyun Logistics Co., Ltd. v. Qinhuangdao Huizheng Trade Co., Ltd. (2013) Hu Hai Fa Shang Chu Zi No. 1734, judgment of first instance of Shanghai Maritime Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . WANG Zhuorui v. Shanghai Jingyi Freight Forwarding Co., Ltd. (2013) Hu Hai Fa Shang Chu Zi No. 1314, judgment of first instance of Shanghai Maritime Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

325

577

867

875

977

1003

Tianjin Maritime Court China Shipping Container Lines Tianjin Co., Ltd. v. Tianjin Kaituo Logistics Co. Ltd. (2013) Jin Hai Fa Shang Chu Zi No. 705, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . .

293

xxiii

xxiv

Table of Cases by Jurisdiction …

LI Yunpeng et al. v. Tianjin Great Wall Underwater Engineering Co., Ltd. (2014) Jin Hai Fa Shi Chu Zi No. 22, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Qingdao Zuode International Trade Co., Ltd. v. Tianjin Weierke Petrochemical Co., Ltd. (2014) Jin Hai Fa Shang Chu Zi No. 499, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . . . . . Tianjin Port Container Terminal Co., Ltd. v. Dalian Winland International Shipping Agency Co., Ltd. Tianjin Branch et al. (2014) Jin Hai Fa Shang Chu Zi Nos. 710-724, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

623

817

963

Qingdao Maritime Court UBI Logistics (China) Limited Qingdao Branch v Qingdao Sunwide Tyre Co., Ltd. et al. (2013) Qing Hai Fa Hai Shang Chu Zi No. 535, judgment of first instance of Qingdao Maritime Court . . . . . . . . . . . . . . . . Yantai Xiangyu Materials Co., Ltd. v. China Continent Property & Casualty Insurance Co., Ltd. Yantai Sub-Branch (2012) Qing Hai Fa Hai Shang Chu Zi No. 899, judgment of first instance of Qingdao Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

983

1095

Dalian Maritime Court WU Jie v. Dalian Keni Dredging Engineering Co., Ltd. et al. (2013) Da Hai Shi Chu Zi No. 86, judgment of first instance of Dalian Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yangpu Success Logistics Co., Ltd. v. China Railway Modern Logistics Technology Co., Ltd. Dalian Branch (2014) Da Hai Shang Chu Zi No. 331, judgment of first instance of Dalian Maritime Court . . . . . . . . . . . . .

1041

1089

Guangzhou Maritime Court Conti Caressa Schiffahrtsgesellschaft mbH & Co. KG MS “Conti Esperance” v. Offshore Oil Engineering Co., Ltd. (2012) Guang Hai Fa Chu Zi No. 432, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foshan Feitu Import & Export Co., Ltd. v. DHL Global Forwarding (China) Co., Ltd. et al. (2013) Guang Hai Fa Chu Zi No. 492, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . Guangzhou Leying International Freight Forwarding Co., Ltd. v. Shanghai Lingpu Aquatic Products Co., Ltd. et al. (2014) Guang Hai Shang Chu Zi No. 233, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

385

423

493

Table of Cases by Jurisdiction …

Nanjing Shunjin Shipping Co., Ltd. et al. v. Cangzhou Bohai New Area Zhen Yang Shipping Co., Ltd. et al. (2012) Guang Hai Fa Shang Chu Zi Nos. 161 & 922, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nanjing Xinruida Shipping Co., Ltd. v. Ningbo Xianghai Fuel Co., Ltd. (2014) Guang Hai Fa Chu Zi No. 16, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Populart Supplies v. Jiangsu Hengtong International Transportation Co., Ltd. et al. (2014) Guang Hai Fa Chu Zi No. 352, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . Sunshine Property Insurance Co., Ltd. Shanghai Branch v. Maersk Line (China) Co., Ltd. et al. (2013) Guang Hai Fa Chu Zi No. 316, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . WANG Sanju v. People’s Property and Casualty Insurance of China Co., Ltd. Zhaoqing Branch (2013) Guang Hai Fa Shang Chu Zi No. 1000, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . Xiamen Huizuan Import and Export Co., Ltd. v. Operasia International Freight Forwarding (Shanghai) Co., Ltd. (2013) Guang Hai Fa Shang Chu Zi No. 1118, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yicheng Yaxin Home Textile Co., Ltd. v. Guangzhou Max Dragon International Freight Forwarding Co., Ltd. Shenzhen Branch (2014) Guang Hai Fa Chu Zi No. 133, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

xxv

669

691

805

921

995

1061

1109

Wuhan Maritime Court Yangpu Hongyang Shipping Co., Ltd. v. Jiangsu Dongfang Huayuan Shipping Co., Ltd. (2014) Wu Hai Fa Shi Zi No. 00051, judgment of first instance of Wuhan Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1069

Haikou Maritime Court CHEN Lei v Hainan Yalong Bay Underwater World Tourism Co., Ltd. et al. (2014) Qiong Hai Fa Shi Chu Zi No. 9, judgment of first instance of Haikou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

221

Xiamen Maritime Court China International Trust Investment Corporation Bank Xiamen Branch v. Boluo Jinhui Dredging Engineering Co., Ltd. (2014) Xia Hai Fa Min Te Zi No. 1, ruling of first instance of Xiamen Maritime Court . . . . . . . . . Daewoo Shipbuilding and Marine Engineering Co., Ltd. v. Alpha Elephant Inc. et al. (2014) Xia Hai Fa Ren Zi No. 14, ruling of first instance of Xiamen Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

255

399

xxvi

Table of Cases by Jurisdiction …

Fujian Ningde Sinotrans Shipping Agency Co., Ltd. v Mindong Congmao Marine Industrial Co., Ltd. (2013) Xia Hai Fa Shang Chu Zi No. 445, judgment of first instance of Xiamen Maritime Court . . . . . . . . . Mindong Congmao Ship Industry Co., Ltd. v. Wärtsilä Switzerland Ltd. (2014) Xia Hai Fa Shang Chu Zi No. 21-2, ruling of first instance of Xiamen Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Xiamen Hongliang Import and Export Co., Ltd. v. Xiamen Hongbase International Freight Forwarding Co., Ltd. et al. (2013) Xia Hai Fa Shang Chu Zi No. 178, judgment of first instance of Xiamen Maritime Court . . .

437

641

1047

Ningbo Maritime Court Bank of China Ningbo Branch v. China Electrical Import & Export Ningbo Co., Ltd. et al. (2013) Yong Hai Fa Shang Chu Zi No. 363, judgment of first instance of Ningbo Maritime Court . . . . . . . . . . . . . . . . . Darby International Investment Limited v. Rong Tai International Shipping Co., Ltd. et al. (2012) Yong Hai Fa Zhou Shang Chu Zi No. 714, judgment of first instance of Ningbo Maritime Court . . . . . . . . . Ningbo Zhenhai Manyang Shipping Co., Ltd. v. Ezhou Datong Shipping Co., Ltd. (2014) Yong Hai Fa Shang Chu Zi No. 420, judgment of first instance of Ningbo Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

23

409

705

Effective Judgments Made by Appeal Courts Shanghai High People’s Court China Pacific Property Insurance Co., Ltd. Hubei Branch v. Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft KG (2013) Hu Hai Fa Shang Chu Zi No. 870, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . China Pacific Property Insurance Co., Ltd. Hubei Branch v. Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft KG (2014) Hu Gao Min Si (Hai) Zhong Zi No. 74, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . China Pacific Insurance Co., Ltd. Shipping Insurance Operation Center v. Teh May Maritime Corporate Limited (2013) Hu Hai Fa Shang Chu Zi No. 1608, judgment of first instance of Shanghai Maritime Court . . . . . . . China Pacific Insurance Co., Ltd. Shipping Insurance Operation Center v. Teh May Maritime Corporate Limited (2014) Hu Gao Min Si (Hai) Zhong Zi No. 137, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Jiangsu Shenghui Import and Export Co., Ltd. v. Guangying International Freight Forwarding Co. Ltd. (2013) Hu Hai Fa Shang Chu Zi No. 1267, judgment of first instance of Shanghai Maritime Court . . . . .

277

285

299

312

589

Table of Cases by Jurisdiction …

Jiangsu Shenghui Import and Export Co., Ltd. v. Guangying International Freight Forwarding Co. Ltd. (2013) Hu Gao Min Si (Hai) Zhong Zi No. 144, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . LU Huicheng v. Jiangsu Chengjin Logistics Co., Ltd. (2013) Hu Hai Fa Hai Chu Zi No. 7, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . LU Huicheng v. Jiangsu Chengjin Logistics Co., Ltd. (2013) Hu Gao Min Si (Hai) Zhong Zi No. 129, judgment of second instance of Shanghai High People’s Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nanjing Lianrun Transportation Trade Co., Ltd. v. China Continent Property & Casualty Insurance Co., Ltd. et al. (2013) Hu Hai Fa Shang Chu Zi No. 12, judgment of first instance of Shanghai Maritime Court . . . . Nanjing Lianrun Transportation Trade Co., Ltd. v. China Continent Property & Casualty Insurance Co., Ltd. et al. (2013) Hu Gao Min Si (Hai) Zhong Zi No. 86, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shanghai Tangyuan Import & Export Trade Co., Ltd. v. Shanghai Hengchen International Freight Forwarding Co., Ltd. (2013) Hu Hai Fa Shang Chu Zi No. 1313, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shanghai Tangyuan Import & Export Trade Co., Ltd. v. Shanghai Hengchen International Freight Forwarding Co., Ltd. (2014) Hu Gao Min Si (Hai) Zhong Zi No. 12, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

xxvii

595

631

636

649

659

901

912

Tianjin High People’s Court CHEN Linglong et al. v. Ping An Property & Casualty Insurance Company of China Ltd. Tianjin Branch et al. (2014) Jin Hai Fa Shang Chu Zi No. 148, judgment of first instance of Tianjin Maritime Court . . . CHEN Linglong et al. v. Ping An Property & Casualty Insurance Company of China Ltd. Tianjin Branch et al. (2014) Jin Gao Min Si Zhong Zi No. 122, judgment of second instance of Tianjin High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . China Pacific Insurance (Group) Co., Ltd. Qingdao Branch v Vopak Bohai Petrochemicals (Tianjin) Terminal Co., Ltd. (2014) Jin Hai Fa Shang Chu Zi No. 418, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . China Pacific Insurance (Group) Co., Ltd. Qingdao Branch v Vopak Bohai Petrochemicals (Tianjin) Terminal Co., Ltd. (2014) Jin Gao Min Si Zhong Zi No. 110, judgment of second instance of Tianjin High People’s Court . . . . . . . Jiangsu Jiaolong Fishing Harbor Engineering Co., Ltd. v Jiangyan Huatai Transport Co., Ltd. et al. (2013) Jin Hai Fa Shang Chu Zi No. 597, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . .

231

242

261

269

541

xxviii

Table of Cases by Jurisdiction …

Jiangsu Jiaolong Fishing Harbor Engineering Co., Ltd. v Jiangyan Huatai Transport Co., Ltd. et al. (2014) Jin Gao Min Si Zhong Zi No. 39, judgment of second instance of Tianjin High People’s Court. . . . . . . . . . . The People’s Insurance Company of China Tianjin Branch v. Jinzhou Jinrun Shipping Co., Ltd. (2014) Jin Hai Fa Shang Chu Zi No. 432, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . . . . . The People’s Insurance Company of China Tianjin Branch v. Jinzhou Jinrun Shipping Co., Ltd. (2014) Jin Gao Min Si Zhong Zi No. 80, judgment of second instance of Tianjin High People’s Court. . . . . . . . . . .

564

769

775

Shandong High People’s Court Changyi Yuanxiang Printing and Dyeing Co., Ltd. v. Pacific International Lines (Pte) Ltd. et al. (2011) Qing Hai Fa Shang Chu Zi No. 272, judgment of first instance of Qingdao Maritime Court . . . . . . Changyi Yuanxiang Printing and Dyeing Co., Ltd. v. Pacific International Lines (Pte) Ltd. et al. (2014) Lu Min Si Zhong Zi No. 27, judgment of second instance of Shandong High People’s Court . . . . . . Changyi Yuanxiang Printing and Dyeing Co., Ltd. v. Pacific International Lines (Pte) Ltd. et al. (2015) Lu Min Zai Zi No. 2, judgment of retrial of Shandong High People’s Court . . . . . . . . . . . . . . . . . . . . . Zhoushan Haiji Waterway Dredging Engineering Co., Ltd. v. Shandong Tianbao Excavating Co., Ltd. et al. (2013) Qing Hai Fa Hai Shang Chu Zi No. 71, judgment of first instance of Qingdao Maritime Court . . . . . Zhoushan Haiji Waterway Dredging Engineering Co. Ltd. v. Shandong Tianbao Excavating Co. Ltd. et al. (2014) Lu Min Si Zhong No. 20, judgment of second instance of Shandong High People’s Court . . . . . .

..

119

..

134

..

155

..

1131

..

1142

Liaoning High People’s Court ZHAO Xiaofeng v. COSCO International Air Freight Forwarding Co., Ltd. Dalian Branch (2013) Da Hai Shang Chu Zi No. 333, judgment of first instance of Dalian Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . ZHAO Xiaofeng v. COSCO International Air Freight Forwarding Co., Ltd. Dalian Branch (2014) Liao Min San Zhong Zi No. 99, judgment of second instance of Liaoning High People’s Court . . . . . . . . . . . . . . . . . . .

1117

1124

Guangdong High People’s Court AIU Property & Casualty Insurance Co., Ltd. Guangzhou Branch v American President Lines Ltd. (2012) Guang Hai Fa Chu Zi No. 387, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . AIU Property & Casualty Insurance Co., Ltd. Guangzhou Branch v American President Lines Ltd. (2013) Yue Gao Fa Min Si Zhong No. 14, judgment of second instance of Guangdong High People’s Court . . . . . . .

1

10

Table of Cases by Jurisdiction …

xxix

Hubei High People’s Court Bo Fu Company (Hong Kong) Co., Ltd. v Top Logic International Limited (2011) Wu Hai Fa Shang Zi No. 00148, judgment of first instance of Wuhan Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bo Fu Company (Hong Kong) Co., Ltd. v. Top Logic International Limited (2014) E Min Si Zhong Zi No. 00163, judgment of second instance of Hubei High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . Jingjiang Longwit Oils and Grains Industrial Co., Ltd. v Guangdong Jindonghai Group Co., Ltd. (2013) Wu Hai Fa Shang Zi No. 00485, judgment of first instance of Wuhan Maritime Court . . . . . . . . . . . . . . . . . Jingjiang Longwit Oils and Grains Industrial Co., Ltd. v Guangdong Jindonghai Group Co., Ltd. (2014) E Min Si Zhong Zi No. 00098, judgment of second instance of Hubei High People’s Court . . . . . . . . . . . Rizhao Jinxilai Economic & Trade Co. Ltd. v. Jinhaihu Shipping Co., Ltd. (2013) Wu Hai Fa Shang Zi No. 00815, judgment of first instance of Wuhan Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rizhao Jinxilai Economic & Trade Co. Ltd. v. Jinhaihu Shipping Co., Ltd. (2014) E Min Si Zhong Zi No. 00128, judgment of second instance of Hubei High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

33

63

601

613

825

831

Hainan High People’s Court Hainan Yuansheng Fisheries Co. Ltd. v. China Ocean Shipping Agency Co., Ltd. et al. (2014) Qiong Hai Fa Shang Chu Zi No. 3, judgment of first instance of Haikou Maritime Court. . . . . . . . . . . . . . . . . . . . . . . . . Hainan Yuansheng Fisheries Co. Ltd. v. China Ocean Shipping Agency Co., Ltd. et al. (2014) Qiong Min San Zhong Zi No. 23, judgment of second instance of Hainan High People’s Court . . . . . . . . Sanya Yanghai Shipping Industry Co., Ltd. v. Sanya Yangfan Yacht Club Co., Ltd. (2014) Qiong Hai Fa Shi Chu Zi No. 8, judgment of first instance of Haikou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sanya Yanghai Shipping Industry Co., Ltd. v. Sanya Yangfan Yacht Club Co., Ltd. (2014) Qiong Min Zhong San Zi No. 42, judgment of second instance of Hainan High People’s Court . . . . . . . . . . . . . . . . . .

..

499

..

506

..

841

..

855

Fujian High People’s Court Guangzhou Jingtao Logistics Co., Ltd. et al. v. Xiamen Yichenda Shipping Co., Ltd. et al. (2013) Xia Hai Fa Shang Chu Zi No. 257, judgment of first instance of Xiamen Maritime Court . . . . . . . . . . . . . . . . . Guangzhou Jingtao Logistics Co., Ltd. et al. v. Xiamen Yichenda Shipping Co., Ltd. et al. (2014) Min Min Zhong Zi No. 195, judgment of second instance of Fujian High People’s Court . . . . . . . . . . . . . . . . . . . . .

453

470

xxx

Table of Cases by Jurisdiction …

Pingtan Wenbiao Bunker Tanker v. Fujian Xinhai Shipping Co., Ltd. et al. (2013) Xia Hai Fa Shang Chu Zi No. 286, judgment of first instance of Xiamen Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pingtan Wenbiao Bunker Tanker v. Fujian Xinhai Shipping Co., Ltd. et al. (2014) Min Min Zhong Zi No. 554, judgment of second instance of Fujian High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wing Wah Bunkers Ship Co., Ltd. v. Jiangxi Xinghai Shipping Co., Ltd. et al. (2013) Xia Hai Fa Shang Chu Zi No. 166, judgment of first instance of Xiamen Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wing Wah Bunkers Ship Co., Ltd. v. Jiangxi Xinghai Shipping Co., Ltd. et al. (2014) Min Min Zhong Zi No. 146, judgment of second instance of Fujian High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

783

794

1009

1025

Zhejiang High People’s Court Hong Kong Dongsheng Shipping Limited v China Ping An Property Insurance Co., Ltd. Zhejiang Branch (2013) Yong Hai Fa Shang Chu Zi No. 563, judgment of first instance of Ningbo Maritime Court . . . . . . . . . Hong Kong Dongsheng Shipping Limited v China Ping An Property Insurance Co., Ltd. Zhejiang Branch (2014) Zhe Hai Zhong Zi No. 82, judgment of second instance of Zhejiang High People’s Court . . . . . . . . .

515

529

Guangxi Zhuang Autonomous Region High People’s Court Chaozhou Asia-Pacific Energy Co., Ltd. v Hua Yang International Marine Transportation Co., Ltd. et al. (2011) Hai Shang Chu Zi No. 76, judgment of first instance of Beihai Maritime Court. . . . . . . . . . . . . . . . Chaozhou Asia-pacific Energy Co., Ltd. v Hua Yang International Marine Transportation Co., Ltd. et al. (2014) Gui Min Si Zhong Zi No. 44, judgment of second instance of Guangxi Zhuang Autonomous Region High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Oldendorff Carriers GmbH and Co. KG. v Fangchenggang Group Co., Ltd. (2011) Hai Shang Chu Zi No. 56, judgment of first instance of Beihai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Oldendorff Carriers GmbH and Co. KG. v Fangchenggang Group Co., Ltd. (2014) Gui Min Si Zhong Zi No. 53, judgment of second instance of Guangxi Zhuang Autonomous Region High People’s Court . . . . . . .

..

179

..

199

..

717

..

739

Effective Judgments Made by Petition Court The Supreme People’s Court CAI Bingchang v. FENG Zhifu (2013) Hu Hai Fa Chu Zi No. 34, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . CAI Bingchang v. FENG Zhifu (2014) Hu Gao Min Si (Hai) Zhong Zi No. 24, judgment of second instance of Shanghai High People’s Court . . .

99 107

Table of Cases by Jurisdiction …

CAI Bingchang v. FENG Zhifu (2014) Min Shen Zi No. 1406, ruling of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . Chongqing Transportation Equipment Finance Leasing Co., Ltd. v Chongqing Kunyuan Shipping Co., Ltd. et al. (2013) Wu Hai Fa Shang Zi No. 0059, judgment of first instance of Wuhan Maritime Court . . . . . . Chongqing Transportation Equipment Finance Leasing Co., Ltd. v Chongqing Kunyuan Shipping Co., Ltd. et al. (2014) E Min Si Zhong Zi No. 00091, judgment of second instance of Hubei High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chongqing Transportation Equipment Finance Leasing Co., Ltd. v Chongqing Kunyuan Shipping Co., Ltd. et al. (2014) Min Shen Zi No. 1921, ruling of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . Shanghai Jinchang Dredging Engineering Co., Ltd. v. Zhejiang Tianhai Marine Economic & Technology Development Co., Ltd. (2012) Hu Hai Fa Shang Chu Zi No. 1205, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shanghai Jinchang Dredging Engineering Co., Ltd. v. Zhejiang Tianhai Marine Economic & Technology Development Co., Ltd. (2013) Hu Gao Min Si (Hai) Zhong Zi No. 50, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shanghai Jinchang Dredging Engineering Co., Ltd. v. Zhejiang Tianhai Marine Economic & Technology Development Co., Ltd. (2014) Min Shen Zi No. 142, ruling of retrial of The Supreme People’s Court . . . . . . Tianjin Jianyuan Geotechnical Engineering Co., Ltd. v. China Construction Second Engineering Bureau Co., Ltd. (2012) Jin Hai Fa Shang Chu Zi No. 543, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tianjin Jianyuan Geotechnical Engineering Co., Ltd. v. China Construction Second Engineering Bureau Co., Ltd. (2013) Jin Gao Min Si Zhong Zi No. 86, judgment of second instance of Tianjin High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tianjin Jianyuan Geotechnical Engineering Co., Ltd. v. China Construction Second Engineering Bureau Co., Ltd. (2014) Min Shen Zi No. 1032, ruling of retrial of The Supreme People’s Court . . . . . . . . . . . .

xxxi

115

333

354

380

883

891

897

935

944

958

Table of Cases by Cause of Action for Maritime Cases in the People’s Republic of China

193. Dispute over liability for ship collision damage Conti Caressa Schiffahrtsgesellschaft mbH & Co. KG MS “Conti Esperance” v. Offshore Oil Engineering Co., Ltd. (2012) Guang Hai Fa Chu Zi No. 432, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nanjing Shunjin Shipping Co., Ltd. et al. v. Cangzhou Bohai New Area Zhen Yang Shipping Co., Ltd. (2012) Guang Hai Fa Shang Chu Zi Nos. 161 & 922, judgment of first instance of Guangdong Maritime Court . . . . Yangpu Hongyang Shipping Co., Ltd. v. Jiangsu Dongfang Huayuan Shipping Co., Ltd. (2014) Wu Hai Fa Shi Zi No.00051, judgment of first instance of Wuhan Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

385

669

1069

196. Dispute over liability for damage of ship pollution LU Huicheng v. Jiangsu Chengjin Logistics Co., Ltd. (2013) Hu Hai Fa Hai Chu Zi No. 7, judgment of first instance of Shanghai Maritime Court . . . . . . LU Huicheng v. Jiangsu Chengjin Logistics Co., Ltd. (2013) Hu Gao Min Si (Hai) Zhong Zi No. 129, judgment of second instance of Shanghai High People’s Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

631

636

199. Dispute over liability for damage to property on the sea or sea-connected waters China Taiping Insurance Co., Ltd. Tianjin Branch v. Ningbo Shuxing Shipping Co. Ltd. (2013) Hu Hai Fa Shang Chu No. 360, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . .

325

200. Dispute over liability for personal injury at sea CAI Bingchang v. FENG Zhifu (2013) Hu Hai Fa Chu Zi No. 34, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . .

99

xxxiii

xxxiv

Table of Cases by Cause of Action for Maritime …

CAI Bingchang v. FENG Zhifu (2014) Hu Gao Min Si (Hai) Zhong Zi No. 24, judgment of second instance of Shanghai High People’s Court . . . CAI Bingchang v. FENG Zhifu (2014) Min Shen Zi No. 1406, judgment of retrial of The Supreme People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . CHEN Lei v. Hainan Yalong Bay Underwater World Tourism Co., Ltd. et al. (2014) Qiong Hai Fa Shi Chu Zi No. 9, ruling of first instance of Haikou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . WU Jie v. Dalian Keni Dredging Engineering Co., Ltd. et al. (2013) Da Hai Shi Chu Zi No. 86, judgment of first instance Judgment of Dalian Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

107 115

221

1041

202. Dispute over contract of carriage of goods by sea or sea-connected waters AIU Property & Casualty Insurance Co., Ltd. Guangzhou Branch v. American President Lines Ltd. (2012) Guang Hai Fa Chu Zi No. 387, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . AIU Property & Casualty Insurance Co., Ltd. Guangzhou Branch v. American President Lines Ltd. (2013) Yue Gao Fa Min Si Zhong No. 14, judgment of second instance of Guangdong High People’s Court . . . . . . . Changyi Yuanxiang Printing and Dyeing Co., Ltd. v. Pacific International Lines (Pte) Ltd. et al. (2011) Qing Hai Fa Shang Chu Zi No. 272, judgment of first instance of Qingdao Maritime Court . . . . . . . . Changyi Yuanxiang Printing and Dyeing Co., Ltd. v. Pacific International Lines (Pte) Ltd. et al. (2014) Lu Min Si Zhong Zi No. 27, judgment of second instance of Shandong High People’s Court . . . . . . . . Changyi Yuanxiang Printing and Dyeing Co., Ltd. v. Pacific International Lines (Pte) Ltd. et al. (2015) Lu Min Zai Zi No. 2, judgment of retrial of Shandong High People’s Court . . . . . . . . . . . . . . . . . . . . . . . Chaozhou Asia-pacific Energy Co., Ltd. v. Hua Yang International Marine Transportation Co., Ltd. et al. (2011) Hai Shang Chu Zi No. 76, judgment of first instance of Beihai Maritime Court. . . . . . . . . . . . . . . . . . Chaozhou Asia-pacific Energy Co., Ltd. v. Hua Yang International Marine Transportation Co., Ltd. et al. (2014) Gui Min Si Zhong Zi No. 44, judgment of second instance of Guangxi Zhuang Autonomous Region High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . China Pacific Property Insurance Co., Ltd. Hubei Branch v. Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft KG (2013) Hu Hai Fa Shang Chu Zi No. 870, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . China Pacific Property Insurance Co., Ltd. Hubei Branch v. Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft KG (2014) Hu Gao Min Si (Hai) Zhong Zi No. 74, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

10

119

134

155

179

199

277

285

Table of Cases by Cause of Action for Maritime …

China Pacific Insurance Co., Ltd. Shipping Insurance Operation Center v. Teh May Maritime Corporate Limited (2013) Hu Hai Fa Shang Chu Zi No. 1608, judgment of first instance of Shanghai Maritime Court . . . . . . . China Pacific Insurance Co., Ltd. Shipping Insurance Operation Center v. Teh May Maritime Corporate Limited (2014) Hu Gao Min Si (Hai) Zhong Zi No. 137, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Guangzhou Leying International Freight Forwarding Co., Ltd. v. Shanghai Lingpu Aquatic Products Co., Ltd. et al. (2014) Guang Hai Shang Chu Zi No. 233, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Jiangsu Shenghui Import and Export Co., Ltd. v. Guangying International Freight Forwarding Co. Ltd. (2013) Hu Hai Fa Shang Chu Zi No. 1267, judgment of first instance of Shanghai Maritime Court . . . . . Jiangsu Shenghui Import and Export Co., Ltd. v. Guangying International Freight Forwarding Co. Ltd. (2013) Hu Gao Min Si (Hai) Zhong Zi No. 144, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The People’s Insurance Company of China Tianjin Branch v. Jinzhou Jinrun Shipping Co., Ltd. (2014) Jin Hai Fa Shang Chu Zi No. 432, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . . . . . The People’s Insurance Company of China Tianjin Branch v. Jinzhou Jinrun Shipping Co., Ltd. (2014) Jin Gao Min Si Zhong Zi No. 80, judgment of second instance of Tianjin High People’ s Court . . . . . . . . . . Rizhao Jinxilai Economic & Trade Co., Ltd. v. Jinhaihu Shipping Co., Ltd. (2013) Wu Hai Fa Shang Zi No. 00815, judgment of first instance of Wuhan Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rizhao Jinxilai Economic & Trade Co., Ltd. v. Jinhaihu Shipping Co., Ltd. (2014) E Min Si Zhong Zi No. 00128, judgment of second instance of Hubei High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sunshine Property Insurance Co., Ltd. Shanghai Branch v. Maersk Line (China) Co., Ltd. et al. (2013) Guang Hai Fa Chu Zi No. 316, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . Xiamen Hongliang Import and Export Co., Ltd. v. Xiamen Hongbase International Freight Forwarding Co., Ltd. et al. (2013) Xia Hai Fa Shang Chu Zi No. 178, judgment of first instance of Xiamen Maritime Court . . . . Xiamen Huizuan Import and Export Co., Ltd. v. Operasia International Freight Forwarding (Shanghai) Co., Ltd. (2013) Guang Hai Fa Shang Chu Zi No. 1118, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yangpu Success Logistics Co., Ltd. v. China Railway Modern Logistics Technology Co., Ltd. Dalian Branch (2014) Da Hai Shang Chu Zi No. 331, judgment of first instance of Dalian Maritime Court . . . . . . . . . . . . .

xxxv

299

312

493

589

595

769

775

825

831

921

1047

1061

1089

xxxvi

Table of Cases by Cause of Action for Maritime …

206. Dispute over ship sales and purchases contract Guangzhou Jingtao Logistics Co., Ltd. et al. v. Xiamen Yichenda Shipping Co., Ltd. (2013) Xia Hai Fa Shang Chu Zi No. 257, judgment of first instance of Xiamen Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . Guangzhou Jingtao Logistics Co., Ltd. et al. v. Xiamen Yichenda Shipping Co., Ltd. (2014) Min Richenda Zhong Zi No. 195, judgment of second instance of Fujian High People’s Court . . . . . . . . . . . . . . . . . . . . .

453

470

207. Dispute over shipbuilding contract Jiangsu Jinyang Shipyard Co., Ltd. v. Shanghai Chongming Port Construction Investment Management Co., Ltd. (2013) Hu Hai Fa Shang Chu Zi No. 1080, judgment of first instance of Shanghai Maritime . . . . .

577

208. Dispute over ship repairing contract Bo Fu Company (Hong Kong) Co., Ltd. v. Top Logic International Limited (2011) Wu Hai Fa Shang Zi No. 00148, judgment of first instance of Wuhan Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bo Fu Company (Hong Kong) Co., Ltd. v. Top Logic International Limited (2014) E Min Si Zhong Zi No. 00163, judgment of second instance of Hubei High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . .

33

63

211. Dispute over ship mortgage contract Bank of China Ningbo Branch v. China Electrical Import & Export Ningbo Co., Ltd. et al. (2013) Yong Hai Fa Shang Chu Zi No. 363, judgment of first instance of Ningbo Maritime Court . . . . . . . . . . . . . . . . . China International Trust Investment Corporation Bank Xiamen Branch v. Boluo Jinhui Dredging Engineering Co., Ltd. (2014) Xia Hai Fa Min Te Zi No. 1, ruling of first instance of Xiamen Maritime Court . . . . . . . . . Darby International Investment Limited v. Rong Tai International Shipping Co., Ltd. et al. (2012) Yong Hai Fa Zhou Shang Chu Zi No. 714, judgment of first instance of Ningbo Maritime Court . . . . . . . . .

23

255

409

212. Dispute over voyage charter party Hainan Yuansheng Fisheries Co., Ltd. v. China Ocean Shipping Agency Co., Ltd. et al. (2014) Qiong Hai Fa Shang Chu Zi No. 3, judgment of first instance of Haikou Maritime Court. . . . . . . . . . . . . . . . . . . . . . . . . . . Hainan Yuansheng Fisheries Co., Ltd. v. China Ocean Shipping Agency Co., Ltd. et al. (2014) Qiong Min San Zhong Zi No. 23, judgment of second instance of Hainan High People’s Court . . . . . . . . . . . . . . . . . . . . Tongling Shouyun Logistics Co., Ltd. v. Qinhuangdao Huizheng Trade Co., Ltd. (2013) Hu Hai Fa Shang Chu Zi No. 1734, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

499

506

977

Table of Cases by Cause of Action for Maritime …

xxxvii

213(2). Dispute over bareboat charter party Shanghai Jinchang Dredging Engineering Co., Ltd. v. Zhejiang Tianhai Marine Economic & Technology Development Co., Ltd. (2012) Hu Hai Fa Shang Chu Si No. 1205, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shanghai Jinchang Dredging Engineering Co., Ltd. v. Zhejiang Tianhai Marine Economic & Technology Development Co., Ltd. (2013) Hu Gao Min Si (Hai) Zhong Zi No. 50, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shanghai Jinchang Dredging Engineering Co., Ltd. v. Zhejiang Tianhai Marine Economic & Technology Development Co., Ltd. (2014) Min Shen Zi No. 142, ruling of retrial of The Supreme People’s Court . . . . . .

883

899

897

214. Dispute over ship financial leasing contract Chongqing Transportation Equipment Finance Leasing Co., Ltd. v. Chongqing Kunyuan Shipping Co., Ltd. et al. (2013) Wu Hai Fa Shang Zi No. 0059, judgment of first instance of Wuhan Maritime Court . . . . . . Chongqing Transportation Equipment Finance Leasing Co., Ltd. v. Chongqing Kunyuan Shipping Co., Ltd. et al. (2014) E Min Si Zhong Zi No. 00091, judgment of second instance of Hubei High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chongqing Transportation Equipment Finance Leasing Co., Ltd. v. Chongqing Kunyuan Shipping Co., Ltd. et al. (2014) Min Shen Zi No. 1921, ruling of retrial of The Supreme People’s Court . . . . . . . . . . . .

333

354

380

219. Dispute over contract on lease of shipping container China Shipping Container Lines Tianjin Co., Ltd. v. Tianjin Kaituo Logistics Co. Ltd. (2013) Jin Hai Fa Shang Cu Zi No. 705, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . .

293

221. Dispute over contract on custody of cargo in port China Pacific Insurance (Group) Co., Ltd. Qingdao Branch v. Vopak Bohai Petrochemicals (Tianjin) Terminal Co., Ltd. (2014) Jin Hai Fa Shang Chu Zi No. 418, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . China Pacific Insurance (Group) Co., Ltd. Qingdao Branch v. Vopak Bohai Petrochemicals (Tianjin) Terminal Co., Ltd. (2014) Jin Gao Min Si Zhong Zi No. 110, judgment of second instance of Tianjin High People’ s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Qingdao Zuode International Trade Co., Ltd. v. Tianjin Weierke Petrochemical Co., Ltd. (2014) Jin Hai Fa Shang Chu Zi No. 499, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . . . . .

261

269

817

xxxviii

Table of Cases by Cause of Action for Maritime …

222. Dispute over shipping agency contract Fujian Ningde Sinotrans Shipping Agency Co., Ltd. v. Mindong Congmao Marine Industrial Co., Ltd. (2013) Xia Hai Fa Shang Chu Zi No. 445, judgment of first instance of Xiamen Maritime Court . . . . . . . . .

437

223. Dispute over freight forwarding contract on the sea or sea-connected waters Foshan Feitu Import & Export Co., Ltd. v. DHL Global Forwarding (China) Co., Ltd. et al. (2013) Guang Hai Fa Chu Zi No. 492, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . Populart Supplies v. Jiangsu Hengtong International Transportation Co., Ltd. et al. (2014) Guang Hai Fa Chu Zi No. 352, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . Shanghai Beyond International Logistics Co., Ltd. v. Kunshan Beile Pets Merchandise Co., Ltd. (2013) Hu Hai Fa Shang Chu Zi No. 1399, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . Shanghai Foreign Economic & Trade International Freight Forwarding Co., Ltd. v. Zhongxing Telecommunication Equipment Corporation (2013) Hu Hai Fa Shang Chu Zi No. 1567, judgment of first instance of Shanghai Maritime Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shanghai Tangyuan Import & Export Trade Co., Ltd. v. Shanghai Hengchen International Freight Forwarding Co., Ltd. (2013) Hu Hai Fa Shang Chu Zi No. 1313, judgment of first instance of Shanghai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shanghai Tangyuan Import & Export Trade Co., Ltd. v. Shanghai Hengchen International Freight Forwarding Co., Ltd. (2014) Hu Gao Min Si (Hai) Zhong Zi No. 12, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . UBI Logistics (China) Limited Qingdao Branch v. Qingdao Sunwide Tyre Co., Ltd. et al. (2013) Qing Hai Fa Hai Shang Chu Zi No. 535, judgment of first instance of Qingdao Maritime Court . . . . . . . . . . . . . . . . Yicheng Yaxin Home Textile Co., Ltd. v. Guangzhou Max Dragon International Freight Forwarding Co., Ltd. Shenzhen Branch (2014) Guang Hai Fa Chu Zi No. 133, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ZHAO Xiaofeng v. COSCO International Air Freight Forwarding Co., Ltd. Dalian Branch (2013) Da Hai Shang Chu Zi No. 333, judgment of first instance of Dalian Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . ZHAO Xiaofeng v. COSCO International Air Freight Forwarding Co., Ltd. Dalian Branch (2014) Liao Min San Zhong Zi No. 99, judgment of second instance of Liaoning High People’s Court . . . . . . . . . . . . . . . . . . .

423

805

867

875

901

912

983

1109

1117

1124

Table of Cases by Cause of Action for Maritime …

xxxix

225. Dispute over contract for marine stores and spare parts supply Mindong Congmao Ship Industry Co., Ltd. v. Wärtsilä Switzerland Ltd. (2014) Xia Hai Fa Shang Chu Zi No. 21-2, ruling of first instance of Xiamen Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pingtan Wenbiao Bunker Tanker v. Fujian Xinhai Shipping Co., Ltd. et al. (2013) Xia Hai Fa Shang Chu Zi No. 286, judgment of first instance of Xiamen Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pingtan Wenbiao Bunker Tanker v. Fujian Xinhai Shipping Co., Ltd. et al. (2014) Min Min Zhong Zi No. 554, judgment of second instance of Fujian High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wing Wah Bunkers Ship Co., Ltd. v. Jiangxi Xinghai Shipping Co., Ltd. et al. (2013) Xia Hai Fa Shang Chu Zi No. 166, judgment of first instance of Xiamen Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wing Wah Bunkers Ship Co., Ltd. v. Jiangxi Xinghai Shipping Co., Ltd. et al. (2014) Min Min Zhong Zi No. 146, judgment of second instance of Fujian High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

..

641

..

783

..

794

..

1009

..

1025

226. Dispute over contract for employment of seaman LI Yunpeng et al. v. Tianjin Great Wall Underwater Engineering Co., Ltd. (2014) Jin Hai Fa Shi Chu Zi No. 22, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . WANG Zhuorui v. Shanghai Jingyi Freight Forwarding Co., Ltd. (2013) Hu Hai Fa Shang Chu Zi No. 1314, judgment of first instance of Shanghai Maritime Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

623

1003

227. Dispute over salvage contract Ningbo Zhenhai Manyang Shipping Co., Ltd. v. Ezhou Datong Shipping Co., Ltd. (2014) Yong Hai Fa Shang Chu Zi No. 420, judgment of first instance of Ningbo Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

705

228. Dispute over contract on refloatation on the sea or sea-connected waters Jiangsu Jiaolong Fishing Harbor Engineering Co., Ltd. v. Jiangyan Huatai Transport Co., Ltd. et al. (2013) Jin Hai Fa Shang Chu Zi No. 597, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . Jiangsu Jiaolong Fishing Harbor Engineering Co., Ltd. v. Jiangyan Huatai Transport Co., Ltd. et al. (2014) Jin Gao Min Si Zhong Zi No. 39, judgment of second instance of Tianjin High People’ s Court . . . . . . . . . .

541

564

xl

Table of Cases by Cause of Action for Maritime …

230. Dispute over marine insurance contract on the sea or sea-connected waters CHEN Linglong et al. v. Ping An Property & Casualty Insurance Company of China Ltd. Tianjin Branch et al. (2014) Jin Hai Fa Shang Chu Zi No. 148, judgment of first instance of Tianjin Maritime Court . . . . . . . . CHEN Linglong et al. v. Ping An Property & Casualty Insurance Company of China Ltd. Tianjin Branch et al. (2014) Jin Gao Min Si Zhong Zi No. 122, judgment of second instance of Tianjin High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hong Kong Dong Sheng Shipping Limited v. China Ping An Property Insurance Co., Ltd. Zhejiang Branch (2013) Yong Hai Fa Shang Chu Zi No. 563, judgment of first instance of Ningbo Maritime Court . . . . . . . . . Hong Kong Dong Sheng Shipping Limited v. China Ping An Property Insurance Co., Ltd. Zhejiang Branch (2014) Zhe Hai Zhong Zi No. 82, judgment of second instance of Zhejiang High People’s Court . . . . . . . . . Nanjing Lianrun Transportation Trade Co., Ltd. v. China Continent Property & Casualty Insurance Co., Ltd. et al. (2013) Hu Hai Fa Shang Chu Zi No. 12, judgment of first instance of Shanghai Maritime Court . . . . Nanjing Lianrun Transportation Trade Co., Ltd. v. China Continent Property & Casualty Insurance Co., Ltd. et al. (2013) Hu Gao Min Si (Hai) Zhong Zi No. 86, judgment of second instance of Shanghai High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . WANG Sanju v. People’s Property and Casualty Insurance Company of China Co., Ltd. Zhaoqing Branch (2013) Guang Hai Fa Shang Chu Zi No. 1000, judgment of first instance of Guangzhou Maritime Court . . . . . Yantai Xiangyu Materials Co., Ltd. v. China Continent Property & Casualty Insurance Co., Ltd. Yantai Sub-Branch et al. (2012) Qing Hai Fa Hai Shang Chu Zi No. 899, judgment of first instance of Qingdao Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

231

242

515

529

649

659

995

1095

235. Dispute over channel and port dredging contract Jingjiang Longwit Oils and Grains Industrial Co., Ltd. v. Guangdong Jindonghai Group Co., Ltd. (2013) Wu Hai Fa Shang Zi No. 00485, judgment of first instance of Wuhan Maritime Court . . . . . . . . . . . . . . . Jingjiang Longwit Oils and Grains Industrial Co., Ltd. v. Guangdong Jindonghai Group Co., Ltd. (2014) E Min Si Zhong Zi No. 00098, judgment of second instance of Hubei High People’s Court . . . . . . . . . Zhoushan Haiji Waterway Dredging Engineering Co., Ltd. v. Shandong Tianbao Excavating Co., Ltd. et al. (2013) Qing Hai Fa Hai Shang Chu Zi No. 71, judgment of first instance of Qingdao Maritime Court . . . . . Zhoushan Haiji Waterway Dredging Engineering Co., Ltd. v. Shandong Tianbao Excavating Co., Ltd. et al. (2014) Lu Min Si Zhong No. 20, judgment of second instance of Shandong High People’s Court . . . . . .

..

601

..

613

..

1131

..

1142

Table of Cases by Cause of Action for Maritime …

xli

236. Dispute over contract for construction of dock or harbor Tianjin Jianyuan Geotechnical Engineering Co., Ltd. v. China Construction Second Engineering Bureau Co., Ltd. (2012) Jin Hai Fa Shang Chu Zi No. 543, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tianjin Jianyuan Geotechnical Engineering Co., Ltd. v. China Construction Second Engineering Bureau Co., Ltd. (2013) Jin Gao Min Si Zhong Zi No. 86, judgment of second instance of Tianjin High People’s Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tianjin Jianyuan Geotechnical Engineering Co., Ltd. v. China Construction Second Engineering Bureau Co., Ltd. (2014) Min Shen Zi No. 1032, ruling of retrial of The Supreme People’s Court . . . . . . . . . . . .

935

944

958

241. Dispute over port operation Oldendorff Carriers GmbH and Co. KG. v. Fangchenggang Group Co., Ltd. (2011) Hai Shang Chu Zi No. 56, judgment of first instance Beihai Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Oldendorff Carriers GmbH and Co. KG. v. Fangchenggang Group Co., Ltd. (2014) Gui Min Si Zhong Zi No. 53, judgment of second instance of Guangxi Zhuang Autonomous Region High People’s Court . . . . . . . . . . . . Sanya Yanghai Shipping Industry Co., Ltd. v. Sanya Yangfan Yacht Club Co., Ltd. (2014) Qiong Hai Fa Shi Chu Zi No. 8, judgment of first instance of Haikou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sanya Yanghai Shipping Industry Co., Ltd. v. Sanya Yangfan Yacht Club Co., Ltd. (2014) Qiong Min Zhong San Zi No. 42, judgment of second instance of Hainan High People’s Court . . . . . . . . . . . . . . . . . . . . Tianjin Port Container Terminal Co., Ltd. v. Dalian Winland International Shipping Agency Co., Ltd. Tianjin Branch et al. (2014) Jin Hai Fa Shang Chu Zi Nos. 710-724, judgment of first instance of Tianjin Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

717

739

841

855

963

392. Dispute over damage caused by application for pre-litigation property preservation Nanjing Xinruida Shipping Co., Ltd. v. Ningbo Xianghai Fuel Co., Ltd. (2014) Guang Hai Fa Chu Zi No. 16, judgment of first instance of Guangzhou Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

691

463. Application for recognition and enforcement of foreign arbitral award Daewoo Shipbuilding and Marine Engineering Co., Ltd. v. Alpha Elephant Inc. et al. (2014) Xia Hai Fa Ren Zi No. 14, ruling of first instance of Xiamen Maritime Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

399

List of Maritime Courts and Their Appeal and Petition Courts in the People’s Republic of China

Maritime Courts

Appeal Courts

Petition Court

Shanghai Maritime Court http://shhsfy.gov.cn/hsfyytwx/hsfyytwx/

Shanghai High People’s Court http://www.hshfy.sh.cn/

The Supreme People’s Court of the People’s Republic of China http://www.court.gov.cn/

Tianjin Maritime Court http://tjhsfy.chinacourt.gov.cn/index.html

Tianjin High People’ s Court http://tjfy.chinacourt.gov.cn/ index.shtml

Qingdao Maritime Court http://qdhsfy.sdcourt.gov.cn/qdhsfy/sjb/ index.html

Shandong High People’s Court http://sdcourt.gov.cn/

Dalian Maritime Court http://www.dlhsfy.gov.cn/court/

Liaoning High People’s Court http://lnfy.chinacourt.gov. cn/index.shtml

Guangzhou Maritime Court http://www.gzhsfy.gov.cn/

Guangdong High People’s Court http://www.gdcourts.gov.cn/

Wuhan Maritime Court http://whhsfy.hbfy.gov.cn/

Hubei High People’s Court http://www.hbfy.gov.cn/

Haikou Maritime Court http://www.hkhsfy.gov.cn/

Hainan High People’s Court http://www.hicourt.gov.cn/

Xiamen Maritime Court http://www.xmhsfy.gov.cn/

Fujian High People’s Court http://www.fjcourt.gov.cn/

Ningbo Maritime Court https://www.nbhsfy.cn/court/index.html

Zhejiang High People’s Court http://www.zjsfgkw.cn/

Beihai Maritime Court http://www.bhhsfy.gov.cn/platformData/ infoplat/pub/bhhs_32/shouye_1003/ index.html

Guangxi Zhuang Autonomous Region High People’s Court http://www.gxcourt.gov.cn/

Nanjing Maritime Court www.njhsfy.gov.cn/

Jiangsu High People’s Court http://www.jsfy.gov.cn/

xliii

List of Causes of Action for Maritime Cases in the People’s Republic of China (Extracted from the Regulations on Causes of Action for Civil Disputes made by The Supreme People’s Court of the People’s Republic of China 2020)

Part 6 Ownership Dispute 49. Dispute over return of property buried underground Part 7 Usufruct Dispute 55. Dispute over exploration right Part 8 Mortgage Dispute 67. Dispute over mortgage (8) Dispute over mortgage of movables (9) Dispute over mortgage of vessels and aircrafts under manufacture (10) Dispute over floating charge of movables (11) Dispute over right of mortgage of ceiling amount 68. Dispute over right of pledge (1) Dispute over right of pledge of movables (2) Dispute over right of re-pledge (3) Dispute over right of pledge of ceiling amount (7) Dispute over right of pledge of warehouse receipts (8) Dispute over right of pledge of bills of lading (9) Dispute over right of pledge of equity interest (12) Dispute over right of pledge of receivables 69. Dispute over right of lien Part 10 Contract Dispute 74. Dispute over liability for fault in contracting 76. Dispute over confirming the validity of contract (1) Dispute over confirming the validity of contract (2) Dispute over confirming the invalidity of contract 77. Dispute over contract for assignment of creditor’s rights 103. Dispute over contract of loan (1) Dispute over contract of financial loan 104. Dispute over contract of suretyship 106. Dispute over pledge contract 114. Dispute over contract for contracting work (1) Dispute over contract for processing

(continued)

xlv

xlvi

List of Maritime Courts and their Appeal and Petition …

(continued) (2) Dispute over contract for manufacturing (5) Dispute over contract for testing (6) Dispute over contract for inspecting 116. Dispute over contract for carriage (3) Dispute over contract for carriage of passengers by waterway (4) Dispute over contract for carriage of goods by waterway (10) Dispute over contract for combined transport (11) Dispute over contract for combined transport by multiple way 118. Dispute over contract of warehouse 119. Dispute over agency contract (1) Dispute over contract for agency contract for import/ export 121. Dispute over commission contract 123. Dispute over intermediary contract 143. Dispute over right of recourse Part 19 Maritime Dispute 193. Dispute over liability for ship collision damage 194. Dispute over liability for contact of vessel 195. Dispute over liability for damage to facility in the air or under water 196. Dispute over liability for damage of ship pollution 197. Dispute over liability for marine pollution damage on the sea or sea-connected waters 198. Dispute over liability for damage to breeding on the sea or sea-connected waters 199. Dispute over liability for damage to property on the sea or sea-connected waters 200. Dispute over liability for personal injury at sea 201. Dispute over illegal lien on ship, cargoes carried by ship, bunkers and stores of ship 202. Dispute over contract of carriage of goods by sea or sea-connected waters 203. Dispute over contract of carriage of passenger by sea or sea-connected waters 204. Dispute over contract of carriage of luggage by sea or sea-connected waters 205. Dispute over ship operation contract 206. Dispute over ship sales and purchases contract 207. Dispute over shipbuilding contract 208. Dispute over ship repairing contract 209. Dispute over ship rebuilding contract 210. Dispute over ship dismantling contract 211. Dispute over ship mortgage contract 212. Dispute over voyage charter party 213. Dispute over charter party (1) Dispute over time charter party (2) Dispute over bareboat charter party 214. Dispute over ship financial leasing contract 215. Dispute over undertaking contract of transporting ship on the sea or sea-connected waters 216. Dispute over undertaking contract of fishing ships 217. Dispute over contract for lease of utensils affixed to ship 218. Dispute over contract for custody of utensils affixed to ship 219. Dispute over contract on lease of shipping container 220. Dispute over contract on custody of shipping container 221. Dispute over contract on custody of cargo in port

(continued)

List of Maritime Courts and their Appeal and Petition …

xlvii

(continued) 222. Dispute over shipping agency contract 223. Dispute over freight forwarding contract on the sea or sea-connected waters 224. Dispute over tally contract 225. Dispute over contract for marine stores and spare parts supply 226. Dispute over contract for employment of seaman 227. Dispute over salvage contract 228. Dispute over contract on refloatation on the sea or sea-connected waters 229. Dispute over towage contract on the sea or sea-connected waters 230. Dispute over marine insurance contract on the sea or sea-connected waters 231. Dispute over contract for protection and indemnity insurance on the sea or sea-connected waters 232. Dispute over contract for joint transport on the sea or sea-connected waters 233. Dispute over ship operation loan contract 234. Dispute over maritime security contract 235. Dispute over channel and port dredging contract 236. Dispute over contract for construction of dock or harbor 237. Dispute over contract for inspection of ship 238. Dispute over maritime security 239. Dispute over liability for major transport accident on the sea or sea-connected waters 240. Dispute over liability for major accident of port operation 241. Dispute over port operation 242. Dispute over general average 243. Dispute over marine development and utilization of sea 244. Dispute over joint ownership of ship 245. Dispute over ownership of ship 246. Dispute over maritime fraud 247. Dispute over confirmation of maritime claim Part 20 Business-related Dispute 256. Dispute over contract for affiliated operation 258. Dispute over contract for joint operation Part 27 Insurance Dispute 333. Dispute over contract for property insurance (4) Dispute over contract for guarantee insurance (5) Dispute over insurer’s right of subrogation 335. Dispute over contract for reinsurance 336. Dispute over contract for insurance brokerage 337. Dispute over contract for insurance agency Part 31 Tort Liability Dispute 390. Dispute over liability for damage caused by water transport (1) Dispute over liability for personal injury caused by water transport (2) Dispute over liability for property damage caused by water transport 392. Dispute over damage caused by application for pre-litigation property preservation 393. Dispute over damage caused by application for pre-litigation evidence preservation 395. Dispute over damage caused by application for advance execution Part 32 Cases of Declaration of Missing and Declaration of Death 400. Application for adjudication of death of citizen

(continued)

xlviii

List of Maritime Courts and their Appeal and Petition …

(continued) 401. Application for revocation of adjudication of death of citizen Part 36 Cases of Holding Properties Unclaimed 407. Application for determining certain property as ownerless 408. Application for revocation of determination of certain property as ownerless Part 40 Cases of Procedure for Hastening 418. Application for payment orders Part 41 Cases of Procedure of Public Summons for Exhortation 419. Application for public summons for exhortation Part 45 Cases of Application for Preservation 431. Application for pre-litigation property preservation 432. Application for pre-litigation behaviors preservation 433. Application for pre-litigation evidence preservation 434. Application for pre-arbitration property preservation 435. Application for pre-arbitration behaviors preservation 436. Application for pre-arbitration evidence preservation 437. Property preservation in arbitration proceedings 438. Evidence preservation in arbitration proceedings 439. Application for suspending payment of the amount under a letter of credit 441. Application for suspending payment of the amount under a letter of guarantee Part 48 Arbitration Cases 444. Application for confirmation of effectiveness of arbitration agreements 445. Application for revocation in arbitral award Part 49 Special Maritime Procedure Cases 446. Application for reservation of maritime claims (1) Application for detention of vessels (2) Application for auction of detained vessels (3) Application for seizure of vessel cargoes (4) Application for auction of seizure vessel cargoes (5) Application for seizure of bunker oil and ship’s stores (6) Application for auction of seizure bunker oil and ship’s stores 447. Application for maritime payment orders 448. Application for maritime injunctions 449. Application for maritime evidence preservation 450. Application for establishment of a fund for limitation liability for maritime claims 451. Application for publicizing notices for assertion of maritime priority rights 452. Application for registration and repayment of maritime claims Part 50 Application for Recognition and Enforcement of Judgments and Awards Cases 453. Application for enforcement of maritime arbitral award 454. Application for enforcement of intellectual property arbitral award 455. Application for enforcement of foreign affairs arbitral award 456. Application for recognition and enforcement of civil judgment rendered by court of the Hong Kong Special Administrative Region 457. Application for recognition and enforcement of arbitration award rendered by court of the Hong Kong Special Administrative Region

(continued)

List of Maritime Courts and their Appeal and Petition … (continued) 458. Application for recognition and enforcement of civil judgment rendered by court of the Macao Special Administrative Region 459. Application for recognition and enforcement of arbitration award rendered by court of the Macao Special Administrative Region 460. Application for recognition and enforcement of civil judgment rendered by court of Taiwan Special Administrative Region 461. Application for recognition and enforcement of arbitration award rendered by court of Taiwan Special Administrative Region 462. Application for recognition and enforcement of civil judgment rendered by foreign court 463. Application for recognition and enforcement of foreign arbitration award Part 54 Action of Opposition to Enforcement Cases 471. Offense against enforcement (1) Offense against enforcement by an outsider (2) Application for enforcement of objection 472. Objection over the implementation of the distribution plan

xlix

Table of References

Chinese Legislation Announcement of the People’s Bank of China on Further Reforming the Foreign Exchange Management System General……Conti Caressa (p. 397) Answers of the Supreme People’s Court to the Issues of Foreign-Related Commercial and Maritime Trial Practice I Art. 174……Nanjing Lianrun (p. 664, p. 668) Arbitration Law of the People’s Republic of China Article 5……Mindong Congmao (p. 644, p. 646) Civil Procedure Law of the People’s Republic of China Art. 21 Para. 2……Shanghai Tangyuan (p. 911, p. 918) Art. 23……Guangzhou Leying (p. 496) Populart Supplies (p. 812) Art. 24……Foshan Feitu (p. 431) Yicheng Yaxin (p. 1112) Art. 27……AIU Property (p. 7, p. 15) Changyi Yuanxiang (p. 129, p. 140, p. 161) Sunshine Property (p. 929) Xiamen Huizuan (p. 1066) Art. 30……Conti Caressa (p. 396) Art. 61 Para. 1……WANG Zhuorui (p. 1008) Art. 64 ……Jingjiang Longwit (p. 612, p. 618) Xiamen Huizuan (p. 1067)

Art. 64 Para.1……Bank of (p. 30) CAI Bingchang (p. 105, p. 111) Chaozhou Asia (p. 197, p. 212) China Pacific (p. 268, p. 272) China Pacific (p. 283, p. 289) China Shipping (p. 297) China Pacific (p. 311, p. 320) China Taiping (p.331) Darby International (p. 420) Foshan Feitu (p. 434) Jiangsu Jiaolong (p. 562, p. 572) Jiangsu Jinyang (p. 587) Jiangsu Shenghui (p. 594) LI Yunpeng (p. 628) LU Huicheng (p. 635) Nanjing Shunjin (p. 689) Oldendorff Carriers (p. 768) The People’s (p. 774, p. 777) Qingdao Zuode (p. 824) Sanya Yanghai (p. 854, p. 860) Shanghai Tangyuan (p. 911, p. 918) Shanghai Foreign (p. 881) Tianjin Port (p. 974) Tongling Shouyun (p. 982) UBI Logistics (p. 990, p. 992) WANG Sanju (p. 1001) Wing Wah (p. 1021, p. 1032) Xiamen Hongliang (p. 1060) Art. 65 Para. 1……Nanjing Xinruida (p. 703) Art. 107……WANG Zhuorui (p. 1008) Art. 139……The People’s (p. 779) Art. 140……CAI Bingchang (p. 112, p. 118) Art. 142……Bo Fu (p. 61, p. 89) Jingjiang Longwit (p. 612, p. 618) Yangpu Hongyang (p. 1086) (continued)

li

lii

Table of References

(continued) Art. 144……China Shipping (p. 297) Pingtan Wenbiao (p. 785, p. 792, p. 798) Rizhao Jinxilai (p. 829, p. 835) Tongling Shouyun (p. 982) Wing Wah (p. 1021, p. 1032) Xiamen Hongliang (p. 1060) Art. 145……Chongqing Transportation (p. 352, p. 367) Art. 154 Para. 3……Mindong Congmao (p. 646) Art. 170 Para. 1……AIU Property (p. 22) CAI Bingchang (p. 113) Art. 170 Sub Para. 1……Bo Fu (p. 97) Changyi Yuanxiang (p. 154, p. 175, p. 177) Chaozhou Asia (p. 219) CHEN Linglong (p. 253) China Pacific (p. 275, p. 291) China Pacific (p. 323) Chongqing Transportation (p. 379) Guangzhou Jingtao (p. 492) Hainan Yuansheng (p. 513) Hong Kong (p. 540) Jiangsu Jiaolong (p. 576) Jiangsu Shenghui (p. 600) Jingjiang Longwit (p. 622) LU Huicheng (p. 640) Nanjing Lianrun (p. 668) Oldendorff Carriers (p. 768) The People’s (p. 781) Pingtan Wenbiao (p. 802) Rizhao Jinxila (p. 839) Sanya Yangfan (p. 865) Shanghai Jinchang (p. 896) Shanghai Tangyuan (p. 920) Tianjin Jianyuan (p. 957) Wing Wah (p. 1039) ZHAO Xiaofeng (p. 1130) Art. 170 Sub Para. 1……Bo Fu (p. 97) Changyi Yuanxiang (p. 154, p. 175, p. 177) Chaozhou Asia (p. 219) CHEN Linglong (p. 253) China Pacific (p. 275, p. 291) China Pacific (p. 322) Chongqing Transportation (p. 379) Guangzhou Jingtao (p. 492) Hainan Yuansheng (p. 513) Hong Kong (p. 540) Jiangsu Jiaolong (p. 576) Jiangsu Shenghui (p. 600) Jingjiang Longwit (p. 622) LU Huicheng (p. 640) Nanjing Lianrun (p. 668) Oldendorff Carriers (p. 768) The People’s (p. 781) Pingtan Wenbiao (p. 802) Rizhao Jinxila (p. 839) Sanya Yangfan (p. 865) Shanghai Jinchang (p. 896) Shanghai Tangyuan (p. 920) Tianjin Jianyuan (p. 957) Wing Wah (p. 1039) ZHAO Xiaofeng (p. 1130) Art. 170 Sub Para. 2……Pingtan Wenbiao (p. 802) Art. 175……CAI Bingchang (p. 113) China Pacific (p. 291) China Pacific (p. 323) Jiangsu Shenghui (p. 600)

LU Huicheng (p. 640) Nanjing Lianrun (p. 668) Shanghai Jinchang (p. 896) Shanghai Tangyuan (p. 920) Art. 196……China International (p. 257, p. 259) Art. 197……China International (p. 259) Art. 200……CAI Bingchang (p. 118) Chongqing Transportation (p. 384) Shanghai Jinchang (p. 900) Art. 200 Sub Para. 2……Tianjin Jianyuan (p. 962) Art. 200 Sub Para. 5……Tianjin Jianyuan (p. 962) Art. 200 Sub Para. 6……Tianjin Jianyuan (p. 962) Art. 204 Para. 1……CAI Bingchang (p. 118) Shanghai Jinchang (p. 900) Tianjin Jianyuan (p. 962) Art. 207 Para. 1……Pacific International (p. 177) Art. 229……WU Jie (p. 1046) Zhoushan Haiji (p. 1140, p. 1148) Art. 253……Bank of (p. 31) Bo Fu (p. 62, p. 90) CAI Bingchang (p. 105) Changyi Yuanxiang (p. 132, p. 143, p. 164) CHEN Lei(p. 230) CHEN Linglong (p. 241, p. 247) China Pacific (p. 283) China Shipping (p. 298) Chongqing Transportation (p. 353, p. 368) Conti Caressa (p. 397) Darby International (p. 420) Foshan Feitu (p. 434) Fujian Ningde (p. 450) Guangzhou Jingtao (p. 469, p. 481) Guangzhou Leying (p. 498) Hainan Yuansheng (p. 504) Hong Kong (p. 527) Jiangsu Jiaolong (p. 562) Jiangsu Jinyang (p. 588) Jiangsu Shenghui (p. 594) LI Yunpeng (p. 629) LU Huicheng (p. 635) Nanjing Shunjin (p. 690) Nanjing Xinruida (p. 703) Ningbo Zhenhai (p. 715) Populart Supplies (p. 814) Rizhao Jinxilai (p. 830, p. 835) Sanya Yanghai (p. 854) Shanghai Beyond (p. 872) Shanghai Tangyuan (p. 911) Sunshine Property (p. 933) Tianjin Jianyuan (p. 942, p. 949) Tianjin Port (p. 975) UBI Logistics (p. 992) WANG Zhuorui (p. 1008) Wing Wah (p. 1022) Yangpu Hongyang (p. 1087) Yangpu Success (p. 1093) Yantai Xiangyu (p. 1108) Yicheng Yaxin (p. 1114) ZHAO Xiaofeng (p. 1123) Art. 283……Daewoo Shipbuilding (p. 406) (continued)

Table of References

liii

(continued) Company Law of the People’s Republic of China Art. 14 Para. 1……Populart Supplies (p. 814) Yicheng Yaxin (p. 1114) Contract Law of the People’s Republic of China Art. 1……Qingdao Zuode (p. 822) Art. 8……China Pacific (p. 268, p. 272) Jingjiang Longwit (p. 612, p. 618) Art. 10 Para. 1……Fujian Ningde (p. 450) Art. 26 Para. 1……Tianjin Port (p. 974) Art. 41……Hong Kong (p. 526, p. 532) Art. 44 Para. 1……Chaozhou (p. 216) Art. 45 Para. 1……Yangpu Success (p.1092) Art. 49……Hainan Yuansheng (p. 511) Shanghai Foreign (p. 881) Zhoushan Haiji (p. 1138, p. 1146) Art. 52 Para. 5……Wing Wah (p. 1019, p. 1029, p. 1030, p. 1038) Zhoushan Haiji (p. 1138, p. 1146) Art. 60……Chongqing Transportation (p. 352, p. 367) Tongling Shouyun (p. 982) COSCO International (p. 1129) Art. 60 Para. 1……China Pacific (p. 311, p. 320) Guangzhou Jingtao (p. 469, p. 481) Shanghai Beyond (p. 872) Shanghai Jinchang (p. 889, p. 894) Wing Wah (p. 1021, p .1032) Yangpu Success (p. 1092) Art. 60 Para. 2……ZHAO Xiaofeng (p.1122, p. 1123, p. 1126, p. 1128) Art. 61 Para. 1……Chongqing Transportation (p. 352, p. 367) WANG Zhuorui (p. 1008) Art. 62 Sub Para. 4……Fujian Ningde (p. 449) Yangpu Success (p. 1092) Art. 65……Jiangsu Jiaolong (p. 562, p. 572) Art. 67……Chongqing Transportation (p. 352, p. 367) Jiangsu Jiaolong (p. 562, p. 572) Art. 93 Para. 1……Tongling Shouyun (p. 982) Art. 97 Para. 2……Tongling Shouyun (p. 982) Art. 107……Bo Fu (p. 61, p. 89) China Shipping (p. 297) Guangzhou Jingtao (p. 469, p. 481) Hong Kong (p. 526, p. 532) Jiangsu Jiaolong (p. 562, p. 572) Jiangsu Jinyang (p. 587) Jiangsu Shenghui (p. 594) Pingtan Wenbiao (p. 792, p. 798) Shanghai Beyond (p. 872) Shanghai Jinchang (p. 889, p. 894) Shanghai Tangyuan (p. 911, p. 918) Tianjin Jianyuan (p. 942, p. 949) Wing Wah (p. 1021, p. 1032)

Art. 109……Jiangsu Jiaolong (p. 562, p. 572) Jiangsu Jinyang (p. 587) Pingtan Wenbiao (p. 792, p. 798) Tianjin Jianyuan (p. 942, p. 949) Tianjin Port (p. 974) Yangpu Success (p. 1092) Art. 113 Para. 1……Jiangsu Jiaolong (p. 562, p. 572) Populart Supplies (p. 814) Shanghai Beyond (p. 872) Art. 114……Guangzhou Jingtao (p. 469, p. 481) Art. 114 Para. 1……Tongling Shouyun (p. 982) Art. 116……Tongling Shouyun (p. 981) Art. 119 Para. 1……Tongling Shouyun (p. 982) Art. 120……Shanghai Tangyuan (p. 911, p. 918) Art. 124……Foshan Feitu (p. 433) Art. 125……CHEN Linglong (p. 241) Ping An (p. 247) Art. 125 Para. 1……Tongling Shouyun (p. 982) Art. 126 Para. 1……Yicheng Yaxin (p. 1113) Art. 133……Xiamen Hongliang (p. 1060) Art. 141……Xiamen Hongliang (p.1060) Art. 174……Fujian Ningde (p. 447, p. 450) Art. 205……Bank of (p. 30) Art. 206……Bank of (p. 30) Art. 206 Para. 1……Populart Supplies (p. 813) Art. 207……Bank of (p. 30) Art. 237……Chongqing Transportation (p. 352, p. 367) Art. 248……Chongqing Transportation (p. 348, p. 352, p. 363, p. 367, p. 372) Art. 250……Chongqing Transportation (p. 379) Art. 263……Bo Fu (p. 61, p. 89) Art. 272 Para. 3……Zhoushan Haiji (p.1138, p. 1140, p. 1146, p. 1148) Art. 396……Fujian Ningde (p. 450) ZHAO Xiaofeng (p. 1123, p. 1128) Art. 397……Fujian Ningde (p. 450) Art. 403……Tianjin Port (p. 973, p. 974) Art. 403 Para. 2……Tianjin Port (p. 973) Art. 405……Fujian Ningde (p. 450) UBI Logistics (p. 992) Art. 406……Foshan Feitu (p. 434) Populart Supplies (p. 814) Art. 406 Para1……ZHAO Xiaofeng (p. 1123, p. 1128) (continued)

liv

Table of References

(continued) Customs Law of the People’s Republic of China Art. 24……Qingdao Zuode (p. 823) ZHAO Xiaofeng (p. 1121, p. 1126) Art. 28……Qingdao Zuode (p. 823) Art. 29……Qingdao Zuode (p. 823) Art. 30……ZHAO Xiaofeng (p. 1122, p. 1127) Decisions on Forensic Issues issued by the National People’s Congress and Registry Management for Judicial Authentication Institutions Art. 2……Bo Fu (p. 77) Art. 4……Bo Fu (p. 78) General Principles of the Civil Law of the People’s Republic of China Art. 87……Guangzhou Leying (p. 498) Wing Wah (p. 1021, p. 1031, p. 1032) Art. 106 Para. 2……CAI Bingchang (p. 105, p. 111) LU Huicheng (p. 653) Art. 117……Oldendorff Carriers (p. 737, p. 768) Art. 117 Para. 2……LU Huicheng (p. 653) Art. 117 Para. 3……LU Huicheng (p. 653) Art. 123……Oldendorff Carriers (p. 737, p. 751, p. 764, p. 768) Art. 145……Bo Fu (p. 93) Art. 145 Para. 1……China Pacific (p. 311, p. 320) Guangdong Maritime Accidents Disposal Regulations General……Nanjing Shunjin (p. 680)

Guaranty Law of the People’s Republic of China Art. 5……Chongqing Transportation (p. 352) Art. 5 Para. 2……Chongqing Transportation (p. 351) Art. 9……Chongqing Transportation (p. 351, p. 352) Art. 13……Tianjin Port (p. 974) Art. 18 Para. 2……Chaozhou Asia (p. 192, p. 197, p. 207, p. 212, p. 214, p. 216) Art. 19……Chaozhou Asia (p. 192, p. 197, p. 206, p. 212)

Insurance Law of the People’s Republic of China Art. 18……Nanjing Lianrun (p. 666) Art. 30……Yantai Xiangyu (p. 1106) Art. 65 Para. 1……CHEN Lei (p. 228) Art. 74 Para. 2……CHEN Linglong (p. 241, p. 247, p. 252) Interim Measures for the Administration of Assessment of State-owned Assets of Enterprises General……Sanya Yangfan (p. 853, p. 859) Interim Measures on Settlement of Construction Project Price issued by the Ministry of Finance and the Ministry of Housing and Urban-rural Development Art. 3……Jingjiang Longwit (p. 621) Art. 14……Jingjiang Longwit (p. 621)

Interpretation II of the Supreme People’s Court on Several Issues concerning the Application of the Insurance Law of the People’s Republic of China Art. 9……Yantai Xiangyu (p. 1107) Art. 14……Yantai Xiangyu (p. 1107) Art. 20……Yantai Xiangyu (p. 1107) Interpretation of the Supreme People’s Court on Issues concerning the Application of Law for the Trial of Cases of Disputes over Sales Contracts General…………Jiangsu Jinyang (p. 587) Art. 1 Para. 1……Fujian Ningde (p. 447, p. 450) Art. 24……Guangzhou Jingtao (p. 468, p. 480, p. 492) Art. 24 Para. 4……Guangzhou Jingtao (p. 469, p. 481, p. 483) (continued)

Table of References

lv

(continued) Interpretation of the Supreme People’s Court on the Application of the Special Maritime Procedure Law of the People’s Republic of China Art. 1……Xiamen Huizuan (p. 1066) Art. 8……WANG Zhuorui (p. 1008) Art. 13……Daewoo Shipbuilding (p. 406) Art. 26……Nanjing Xinruida (p. 702) Interpretations of the Supreme People’s Court on Certain Issues concerning the Application of the Arbitration Law of the People’s Republic of China Art. 16……Mindong Congmao (p. 644)

Interpretations of the Supreme People’s Court on Issues concerning the Application of Law for the Trial of Cases of Dispute over Contracts on Undertaking Construction Projects Art. 17……Tianjin Jianyuan (p. 942, p. 949)

Interpretations of the Supreme People’s Court on Issues regarding the Ascertainment of Compensation Liability for Psychological Damages in Civil Torts Art. 8 Para. 2……CHEN Lei (p. 228, p. 230)

Interpretations of Supreme People’s Court on Law Application Issues in the Trial of Cases concerning Dispute over Contracts for Construction Projects Art. 2……Zhoushan Haiji (p.1139, p. 1147, p. 1152) Art. 26 Para. 2……Zhoushan Haiji (p. 1140, p. 1148)

Interpretations of the Supreme People’s Court on Several Issues concerning the Application of Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China I Art. 2……Bo Fu (p. 93) Art. 18……Mindong Congmao (p. 645) Art. 19……Wing Wah (p. 1018, p. 1028) Interpretation of the Supreme People’s Court on Several Issues concerning the Application of the Contract Law of the People’s Republic of China (II) Art. 29……Chongqing Transportation (p. 377) Guangzhou Jingtao (p. 469, p. 481) Interpretations of the Supreme People’s Court on Some Issues concerning the Application of Law for the Trial of Cases on Compensation for Personal Injury Art. 11 Para. 1……CAI Bingchang (p. 105, p. 111) Art. 17 Para. 1……CHEN Lei (p. 228, p. 229) Art. 19 Para. 1 ……CHEN Lei (p. 229) Art. 20……CHEN Lei (p. 229) Art. 22……CHEN Lei (p. 229) Art. 24……CHEN Lei (p. 229) Interpretations of the Supreme People’s Court on the Application of the Guaranty Law of the People’s Republic of China Art. 3……Chongqing Transportation (p. 378, p. 383, p. 384) Art. 7……Chongqing Transportation (p. 351, p. 367) Art. 22 Para. 1……Chaozhou Asia (p. 191, p. 206) Labor Contract Law of the People’s Republic of China Art. 29……LI Yunpeng (p. 628)

(continued)

lvi

Table of References

(continued) Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China General……Bo Fu (p. 93) Art. 3……Chaozhou Asia (p. 215) Art. 8……Chaozhou Asia (p. 189, p. 203) Art. 10 Para. 1……Mindong Congmao (p. 644) Wing Wah (p. 1037) Art. 16……Guangzhou Leying (p. 496) Art. 41……Rizhao Jinxilai (p. 837) Wing Wah (p. 1012, p. 1018, p. 1028, p. 1037) Art. 44……Oldendorff (p. 730, p. 745, p. 761, p. 768) Lianyungang Interim Indemnity Measures on the Land Requisition General……LU Huicheng (p. 634, p. 638) Maritime Code of the People’s Republic of China Art. 7……Chaozhou Asia (p. 216) Art. 11……Bank of (p. 30) CHEN Linglong (p. 259) Art. 22 Para. 1 Sub Para. 4……Ningbo Zhenhai (p. 714) Art. 42 Para. 2……Chaozhou Asia (p. 191, p. 206) Art. 42 Para. 4……Chaozhou Asia (p. 190, p. 204) Art. 46……AIU Property (p. 7, p. 16) Changyi Yuanxiang (p. 129, p. 132, p. 140, p. 142, p. 161, p. 164) Sunshine Property (p. 933) Art. 46 Para. 1……AIU Property (p. 17, p. 21) Chaozhou Asia (p. 190, p. 197, p. 205, p. 212) Rizhao Jinxilai (p. 829, p. 835) Sunshine Property (p. 930) Art. 46 Para. 1……Chaozhou Asia (p. 212) Art. 47……Changyi Yuanxiang (p. 130, p. 132, p. 141, p. 142, p. 162, p. 164) Chaozhou Asia (p. 191, p. 205) China Pacific (p. 283, p. 289) Art. 48……China Pacific (p. 283, p. 289) Art. 51……Changyi Yuanxiang (p. 131, p. 132, p. 141, p. 142 p. 143, p. 164, p. 176) China Pacific (p. 283, p. 289) Yicheng Yaxin (p. 1113) Art. 55……Changyi Yuanxiang (p. 132, p. 142, p. 153, p. 164, p. 175) Yicheng Yaxin (p. 1114) Art. 55 Para. 1……Chaozhou Asia (p. 193, p. 195, p. 197, p. 208, p. 210, p. 217 p. 218) Art. 55 Para. 2……Chaozhou Asia (p. 193, p. 195, p. 197, p. 208, p. 210, p. 217, p. 218) Art. 56……Sunshine Property (p. 931) Art. 56 Para. 1……China Pacific (p. 283, p. 289) Sunshine Property (p. 932, p. 933) Art. 59 Para. 1……Sunshine Property (p. 932)

Art. 64 Para. 1……AIU Property (p. 8, p. 17) Art. 71……Chaozhou Asia (p. 190, p. 205) China Pacific (p. 321) Hainan Yuansheng (p. 509) Jiangsu Shenghui (p. 594) Sunshine Property (p. 930) Xiamen Hongliang (p. 1060) Xiamen Huizuan (p. 1066, p. 1067) Art. 72……Xiamen Hongliang (p. 1059, p. 1060) Art. 72 Para. 2……Chaozhou Asia (p. 190, p. 205, p. 216) Art. 78 Para. 1……Chaozhou Asia (p. 190, p. 204) Art. 106……China Pacific (p. 283, p. 289, p. 291) Art. 146……Shanghai Jinchang (p. 889, p. 894) Art. 147……Shanghai Jinchang (p. 889, p. 894) Art. 152……Shanghai Jinchang (p. 889, p. 894) Art. 168……China Taiping (p. 331) Conti Caressa (p. 397) Art. 169 Para. 1……Nanjing Shunjin (p. 689) Art. 169 Para. 2……Nanjing Shunjin (p. 689) Art. 179……Ningbo Zhenhai (p. 714) Art. 180……Ningbo Zhenhai (p. 713, p. 714) Art. 192……Ningbo Zhenhai (p. 713, p. 714) Art. 217……Hong Kong (p. 526, p. 532) Art. 219……Hong Kong (p. 526, p. 532, p. 539) Art. 219 Para. 2 Sub Para. 1……CHEN Linglong (p. 239, p. 241, p. 246, p. 247) Art. 221……Yantai Xiangyu (p. 1107) Art. 237……Hong Kong (p. 526, p. 532) Nanjing Lianrun (p. 658) Yantai Xiangyu (p. 1107) Art. 238……Hong Kong (p. 526, p. 532) Art. 240……Nanjing Lianrun (p. 658) Art. 252……AIU Property (p. 7, p. 16) Sunshine Property (p. 929) Art. 252 Para. 1……China Pacific (p. 283, p. 289) China Pacific (p. 311, p. 320) Art. 257……Hainan Yuansheng (p. 503, p. 508) Art. 267 Para. 1……Hainan Yuansheng (p. 503, p. 504, p. 508, p. 509, p. 513) Nanjing Lianrun (p. 658) Art. 269……Changyi Yuanxiang (p. 129, p. 140, p. 161) Chaozhou Asia (p. 189, p. 204) Jiangsu Shenghui (p. 594) Sunshine Property (p. 929) Xiamen Huizuan (p. 1066) Art. 273 Para. 1……Conti Caressa (p. 396) Art. 277……China Pacific (p. 283, p. 289) Sunshine Property (p. 932) Art. 296……AIU Property (p. 7, p. 15) (continued)

Table of References

lvii

(continued) Maritime Ship Survey (2003) No.224 Reply of Approval of the Engagement of China Marine Services (CMS) in Maritime and Ship Notary Survey General……Bo Fu (p. 93) Maritime Traffic Safety Law of the People’s Republic of China Art. 31……Ningbo Zhenhai (p. 713)

Measures for Administration of Import of Specified Used Mechanical and Electronic Products Art. 7……ZHAO Xiaofeng (p. 1122, p. 1127)

Measures for Administration of Inspection and Authentication of Import and Export of Damaged Goods General……Rizhao Jinxilai (p. 838)

Measures on the Payment of Litigation Costs Art. 13 Para. 1……Chongqing Transportation (p. 353) Merchant Vessel (Registration) Ordinance (Chapter 415) of Hong Kong Special Administrative Region of the People’s Republic of China Art. 44……Darby International (p. 419)

Money Lenders Ordinance of Hong Kong Special Administrative Region of the People’s Republic of China Art. 2……Darby International (p. 419) Art. 24……Darby International (p. 419)

Notice of the People’s Bank of China on Reform of the Management System of Foreign Currency Deposit and Loan Interest Rates General……Yicheng Yaxin (p. 1114) Opinions of the Ministry of Human Resources and Social Security on Several Issues concerning the Implementation of the Regulations on Work-related Injury Insurances Para. 4……LI Yunpeng (p. 627) Opinions of the Supreme People’s Court on Several Issues concerning the Application of the Civil Procedure Law of the People’s Republic of China Art. 43……Pingtan Wenbiao (p. 801, p. 802) Art. 139 Para. 1……Mindong Congmao (p. 646) Art. 272……CHEN Linglong (p. 253) Property Law of the People’s Republic of China Art. 39……Chongqing Transportation (p. 351, p. 365) Art. 173……Bank of (p. 30) Art. 176……Bank of (p. 30) Art. 195……China International (p. 259) Art. 241……Oldendorff Carriers (p. 762, p. 768) Provisions of the People’s Republic of China on the Customs Administration of Declaration for the Import and Export of Goods General……ZHAO Xiaofeng (p. 1129) Provisions of the Supreme People’s Court on Certain Issues concerning the Application of Law to the Trial of Cases Involving Delivery of Goods without Original Bills of Lading Art. 6……Jiangsu Shenghui (p. 600) Art. 9……Guangzhou Leying (p. 498) Provisions of the Supreme People’s Court on Several Issues about the Trial of Cases concerning Marine Insurance Disputes Art. 14……AIU Property (p. 20) (continued)

lviii

Table of References

(continued) Provisions of the Supreme People’s Court on Several Issues concerning the Limitation of Action in the Trial of Civil Cases Art. 22……Nanjing Lianrun (p. 658) Provisions of the Supreme People’s Court on Several Issues concerning the Trial of Cases of Disputes over Marine Freight Forwarding Art. 1……Yicheng Yaxin (p. 1113) Art. 2……Hainan Yuansheng (p. 504, p. 509) Art. 3……Shanghai Foreign (p. 881) Art. 5 Para. 2……Shanghai Tangyuan (p. 911, p. 918) Art. 9……Guangzhou Leying (p. 497) Shanghai Beyond (p. 872) Art. 10……Foshan Feitu (p. 434) Populart Supplies (p. 814) Shanghai Tangyuan (p. 911, p. 918) Art. 11……Yicheng Yaxin (p. 1114) Art. 12 Para. 1……Yicheng Yaxin (p. 1113, p. 1114) Art. 13 Para. 1……Hainan Yuansheng (p. 504, p. 509) Provisions of the Supreme People’s Court on Some Issues about the Trial of the Cases of Ship Collision Disputes Art. 4……Conti Caressa (p. 397) Nanjing Shunjin (p. 688) Regulations for the Safety Management of Easy Fluidized Solid Bulk Cargo by Water Transportation of Ministry of Transport Art. 5……Yantai Xiangyu (p. 1105) Regulations of the People’s Republic of China Governing the Registration of Ships General…… Guangzhou Jingtao (p. 462, p. 475) Art. 5 Para. 1……Wing Wah (p. 1031) Art. 6……Pingtan Wenbiao (p. 799, p. 800, p. 801) Art. 10……Wing Wah (p. 1020, p. 1030) Art. 14 Para. 1 Sub Para. 10…… (p. 1031) Art. 31……Wing Wah (p. 1020, p. 1030)

Regulations of the People’s Republic of China on International Ocean Shipping Art. 16……Tianjin Port (p. 972) Regulations on Collection of Port Charges of the People’s Republic of China Art. 6……Tianjin Port (p. 974)

Regulations on Domestic Waterway Cargo Transportation General……The People’s (p. 772, p. 773, p. 776, p. 780) Art. 44……The People’s (p. 773, p. 777, p. 780) Regulations on Litigation Fees Art. 13……Bo Fu (p. 62)

Rules concerning Compensation of Property Damage of Collision and Allision Art. 8……Nanjing Shunjin (p. 678) Art. 9 Sub Para. 7……Nanjing Shunjin (p. 680) Art. 9 Sub Para. 8……Nanjing Shunjin (p. 680) Art. 10……Nanjing Shunjin (p. 679, p. 687) Art. 11……Nanjing Shunjin (p. 687) Art. 13……Nanjing Shunjin (p. 689)

(continued)

Table of References

lix

(continued) Safety Management Measures of Yangtze Deepwater Estuary Channel (12.5 m) During the Period of Trial Navigation Art. 8 Para. 1……Yangpu Hongyang (p. 1085) Several Provisions of the Supreme People’s Court on the Scope of Cases Art. 11……AIU Property (p. 7, p. 15) Xiamen Huizuan (p. 1066) Art. 23……Foshan Feitu (p. 431) Populart Supplies (p. 812) Some Provisions of the Supreme Court on the Scope of Cases to be Entertained by Maritime Courts Art. 1……Conti Caressa (p. 396) Art. 11……AIU Property (p. 7, p. 15) Xiamen Huizuan (p. 1066) Art. 23……Guangzhou Leying (p. 496) Yicheng Yaxin (p. 1112)

Some Provisions of the Supreme People’s Court on Evidence in Civil Procedures Art. 2……Chaozhou Asia (p. 196, p. 211) Guangzhou Jingtao (p. 469, p. 481) Qingdao Zuode (p. 824) Oldendorff Carriers (p. 735, p. 749) Art. 41……The People’s (p. 779) Art. 59……Bo Fu (p. 78) Art. 69 Para. 4……Shanghai Tangyuan (p. 911, p. 918) Art. 75……Zhoushan Haiji (p. 1138, p. 1146)

Special Maritime Procedure Law of the People’s Republic of China Art. 6……Changyi Yuanxiang (p. 129, p. 140, p. 161) Art. 19……Bo Fu (p. 93) Art. 20……Nanjing Xinruida (p. 701, p. 703) Technical Regulations for Statutory Survey of Seagoing Ships Navigating in Domestic Waters 2004 General……CHEN Linglong (p. 239)

Tort Liability Law of People’s Republic of China Art. 6 Para. 1……Yangpu Hongyang (p. 1086) Art. 8……CHEN Lei (p. 227, p. 229) Art. 13……CHEN Lei (p. 229) Art. 15 Para. 1 Sub Para. 6……Yangpu Hongyang (p. 1086) Art. 16……CAI Bingchang (p. 105, p. 111) CHEN Lei (p. 229) Art. 35……CAI Bingchang (p. 117) Yangtze River Ships Routing System in Shanghai Section Art. 10……Yangpu Hongyang (p. 1085)

International Conventions and Customs Appraisal Standard concerning Lost Wages of Victim Art. 5.4.6.1……CHEN Lei (p. 229)

International Convention for the Safety of Life at Sea, 1974 Art. 14(c)……Changyi Yuanxiang (p. 130) Art. 14(e)……Changyi Yuanxiang (p. 130)

Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 General……Daewoo Shipbuilding (p. 401, p. 406) Art. 5……Daewoo Shipbuilding (p. 406)

International Regulations for Preventing Collisions at Sea, 1972 Art. 6……Conti Caressa (p. 396) Art. 8……Conti Caressa (p. 396) Art. 10 Para. 2……Yangpu Hongyang (p. 1085) Art. 14……Nanjing Shunjin (p. 688)

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Table of References

Chinese Judgments (2005) Min Si Ta Zi No.1-1 Document of the Supreme People’s Court……Rizhao Jinxilai (p. 835, p. 838)

(2012) Yong Hai Shang Chu Zi No.294 Civil Mediation……Bank of (p. 29)

(2010) Hu Hai Fa Xian Zi No.4 Civil Ruling…… Nanjing Lianrun (p. 655, p. 661, p. 668)

(2013) Hu Hai Fa Hai Chu Zi No.24-1 Civil Judgment……China Taiping (p. 330)

(2011) Hu Hai Fa Chu Zi No.9 & No.10 Civil Mediations……Nanjing Lianrun (p. 655, p. 656, p. 661, p. 663)

(2013) Wu Hai Fa Shang Zi No.00377 Civil Judgment……Wing Wah (p. 1039)

(2012) Yong Hai Fa Zhou Bao Zi No.121 Civil Ruling……Darby International (p. 416)

(2014) Da Hai Shi Chu Zi No.43 Civil Judgment……Wing Wah (p. 1044)

Foreign Legislation and Judgments Arbitration Act 1996 General……Daewoo Shipbuilding (p. 402) Art. 17……Daewoo Shipbuilding (p. 404)

Swedish Arbitration Act Art. 1……Mindong Congmao (p. 646)

Guangzhou Maritime Court Civil Judgment AIU Property & Casualty Insurance Co., Ltd. Guangzhou Branch v. American President Lines Ltd. (2012) Guang Hai Fa Chu Zi No.387 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 10. Cause of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote Subrogated cargo insurer’s claim for short delivery dismissed because it had not provided adequate evidence that the goods were stolen while in the Defendant’s custody. Summary The Plaintiff-insurer brought a claim against the Defendant-carrier for reimbursement of the amount indemnified to its insured for losses resulting from a shortage of cargo presumed to occur during the transportation under a contract for carriage of goods by sea. The Plaintiff issued an open policy of carriage of goods to its insured regarding copper and copper products at the actual sale value on the invoice of such goods. The insured later claimed a shipment of bundles of copper alloy being carried in two sealed containers by the Defendant from Monterrey, Mexico to the Guangdong Province, China. The value of the goods in each container were insured to the amounts listed on the invoices. Upon arriving at the port of discharge, the goods in one of the containers were found to weigh 2,615 kg less than what was stated on the loading list. The insured notified the Plaintiff of the shortage of goods, and the Plaintiff subsequently notified the Defendant and hired surveyors to inspect the container. The surveyors’ investigation concluded that the goods were possibly stolen out of the container during the transportation of the cargo by comparing the screws on the container door to a photograph taken of them at the port of loading, and the value of goods lost was USD21,205.85. The Plaintiff indemnified its insured to that amount and obtained the right of subrogation from the insured. The Plaintiff then filed a claim against the Defendant-carrier to recover the amount it indemnified the insured for the goods it lost while being carried by the Defendant.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_1

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The court recognized that under Chinese Maritime Code the Defendant was responsible for the goods from the port of loading to the port of discharge, and that the Plaintiff enjoyed a subrogated right to make a claim for compensation from the Defendant. However, the court dismissed the Plaintiff’s claims for compensation on the grounds that the Plaintiff did not produce enough evidence to satisfy the factual and legal basis necessary for holding the Defendant liable by not delivering the containers in good order and condition. This was because the survey report submitted by the Plaintiff merely suggested that the loss of cargo probably resulted from someone taking the container doors off while under the care of the Defendant, but there was nothing showing that the loss could not have occurred in another manner or at a time when the Defendant was not in charge of the goods. Also, the Defendant showed that it received the two containers of goods (which were not weighted before loading) from the shipper in good order and condition with undamaged seals and delivered the containers in like order and condition, which means it could not have checked nor could it have known the condition or weight of copper bundles inside. The Plaintiff’s claim against the Defendant was rejected, and the Plaintiff was to be responsible for the payment of the court acceptance fee.

Judgment The Plaintiff: AIU Property & Casualty Insurance Co., Ltd. Guangzhou Branch Domicile: Yuexiu District, Guangzhou City, Guangdong, PRC. Legal representative: FANG Xiaoxiao, general manager. Agent ad litem: WU Yong, lawyer of Henry & Co. Law Firm. The Defendant: American President Lines Ltd. Domicile: Scottsdale, United States. Legal representative: Windle Timothy Jane, vice president and legal counsel of America. Agent ad litem: ZHANG Xinwei, lawyer of GL & Co. Law Firm Guangzhou Office. Agent ad litem: CAI Dongdong, lawyer of GL & Co. Law Firm Guangzhou Office. With respect to the case arising from dispute over contract of carriage of goods by sea filed by the Plaintiff, AIU Property & Casualty Insurance Co., Ltd. Guangzhou Branch against the Defendant, American President Lines Ltd. on May 22, 2012. After accepting this case, the court organized the collegiate panel consisting of the Acting Judges LI Lifei, PINGYANG Danke and DI Xin according to law. On August 24, the court summoned both parties to exchange evidence before the hearing and held a hearing in public. WU Yong, the agent ad litem of the Plaintiff and ZHANG Xinwei, the agent ad litem of the Defendant appeared in court to participate in the action. The trial of this case has been concluded.

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The Plaintiff alleged that in June 2011, Metales Y Pacas Trade S.A. Dec. V (hereinafter referred to as “Pacas Company”) entrusted the Defendant to carry scrap metal in two TEUs from the port of Lazaro Cardenas, Mexico to the port of Gaoming, Foshan City, Guangdong Province, PRC. On August 16, the consignee Chaowei Co., Ltd. (hereinafter “Chaowei Company”) found that the goods in one of the containers were 2,615 kg short while taking delivery of the goods. The Plaintiff, as the insurer of the above goods, compensated Chaowei Company for the loss of the goods in amount of USD21,205.85 in accordance with the insurance contract with Chaowei Company and the survey report issued by Pierre Leong Adjusters (Shanghai) Co., Ltd. Guangzhou Branch (hereinafter Pierre Leong Guangzhou). According to the related laws, the Plaintiff was entitled to demand recovery from the responsible party after it obtained the right of subrogation. The Defendant, as the carrier of the goods involved, had the obligation to carefully keep the goods, and should be held liable for the shortage of the goods. The Plaintiff requested the court to rule the Defendant to compensate it for the loss of the goods in amount of RMB134,233.03 (USD21,205.85 converted into RMB at exchange rate of USD to RMB on January 16, 2012), and the interest calculated at the loan interest rate over the same period of time for the People’s Bank of China from January 16, 2012, and bear the litigation fee for the subject case. The Plaintiff submitted the following evidentiary materials in a timely manner: 1. 2. 3. 4.

Open policy and declaration form; Sea waybill and the bill of lading; Survey report and photos; Export documents, invoices and weighing sheet of the shipment port of the goods involved; 5. EIR and weighing sheet of destination port and notice of accident; 6. Statement in written of the insured; and 7. Letter of subrogation and proof of payment. The Defendant submitted the following defenses: 1. According to the Maritime Code of the People’s Republic of China, a carrier’s liability period covers the entire period during which the carrier was in charge of the goods, starting from the time the carrier had taken over the goods at the port of loading, until the goods had been delivered at the port of discharge. The carriage involved was FCL cargo transportation, and the mode of delivery was the CY to CY. The Defendant, as the carrier of the containerized cargo involved, received sealed containers in no apparent abnormal condition and with no damaged seals from the shipper, therefore it did not know the actual situation of the goods in the containers and could not check the goods. The Defendant delivered the sealed containers to the consignee, and there was no evidence to prove the shortage of the goods claimed by the Plaintiff occurred during the period of carrier’s responsibility;

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2. Even if the Defendant should bear the compensation liability for shortage of the goods claimed by the Plaintiff, in the case that the Plaintiff failed to produce evidence to prove the claimed shortage of the goods involved resulted from an act or omission of the carrier done with the intent and with knowledge that such loss would probably result, the Defendant should be entitled to the benefit of limitation of liability provided for in Article 56 or 57 of the Maritime Code of the People’s Republic of China; and 3. The Plaintiff’s claim for loss of interest had no merit, and, even if such loss could be supported, the interest should be calculated at the deposit interest rate over the same period of time for People’s Bank of China from the date that the Plaintiff filed the action. In conclusion, the Defendant requested the court to dismiss all of the Plaintiff’s claims. The Defendant submitted the following evidential materials within the time limit for producing evidence: 1. Sea waybill; and 2. EIR of destination port. Upon cross-examination in the hearing, combined with the evidence and cross-examination opinions of the two parties, the court finds the following facts: On April 23, 2007, AIU Guangzhou Branch Foshan Sub-branch issued an open policy of carriage of goods numbered with EM45M00327, which stated that the insured was Chaowei Company; the subject matter insured were Copper and copper products whose fixed value should be based on the actual sale value on the invoice; the amount of limitation of liability should be USD1 million; the term of coverage was from April 20, 2007 until the policy was set aside in accordance with the terms of cancellation; the voyage was from Mexico to Guangdong Province; the means of transportation was a vessel approved by Institute Classification Clause 1/8/97; the old products insurance clause was Institute Cargo Clause (B)-1/1/82 and risk of theft, pilferage and non-delivery-1/12/82, oxidation, corrosion and fade of the subject matter insured were not covered, unless such loss was caused by the risks stated in Institute Cargo Clause (C)-1/1/82. On June 15, 2011, the Defendant, as a carrier, issued sea waybill No. APLU903076933 which stated the following information: the shipper was Pakas Company; the consignee and notify party was Chaowei Company; the place of delivery of the goods was Monterrey, Mexico; the port of loading was Lazaro Epinal; the port of discharge was Chiwan, China; the place of taking delivery of the goods was Sanshan City, Guangdong Province; the delivery mode was CY to CY, the carrying vessel was M.V. “SINGAPOREEXP;” the voyage was 123w; the goods were copper alloy with weight of 43,391.67 kg and volume of 60 cubic meters in two TEUs with number of TRLU3892530 and TCKU3297819, among which the numbers of the seals on No.TRLU3892530 container were APLMEX-00140121/R12511, with 10 bundles inside weighing 21,950.34 kg; and the number of seals on No.TCKU3297819 container were APLMEX-00140122/

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R12519, with 9 bundles of goods inside weighing 21,441.33 kg. The goods were loaded, weighed and counted by the shipper. Meanwhile the Defendant confirmed that the sealed containers, or other shipping units for loading the goods, were received in apparent good order and condition on the sea waybill. After the goods arrived in Hong Kong from Mexico, the Defendant entrusted Winsmart International Shipping Co., Ltd. to transfer the goods on the barge “Fuyue 108” to Zhujiang freight terminal, Gaoming District, Foshan City. On July 4, 2011, Chaowei Company submitted a declaration form of cargo transportation to declare the insured goods being carried during the period from May 11 to June 30, 2011 under No.EM45M00327 open policy, of which the insured amount of the goods loaded in No.TCKU3297819 container with the invoice number 1087 was 173,950.84 USD and the insured amount of the goods loaded in container No.TRLU3892530 with the invoice number 1088 was 178,080.35 USD. On August 13, 2011, the two containers reached port of Gaoming, Foshan City, and the goods were discharged from the vessel on August 16. The goods in container No.TRLU3892530 were found in shortage of 2.6 tons when being weighed during the customs clearance formalities. On August 18, Chaowei Company reported the shortage to the Plaintiff, and the Plaintiff entrusted Pierre Leong Guangzhou to survey the goods involved. After survey, Foshan Mingjie Import and Export Trade Co., Ltd. (hereinafter “Mingjie Company”) handled the delivery formalities and confirmed on the No.E1108-04310 EIR that the seals on the container holding the goods involved were undamaged, without weighing record, received 8 bundles and 19,345 kg. The Plaintiff issued a written notice to the Defendant about the shortage of the goods on the November 4. On January 10, 2012, Pierre Leong Guangzhou issued a final report on shortage of the goods, which documented that the surveyors of Pierre Leong Guangzhou (hereinafter referred to as “the surveyors”) arrived at Zhujiang freight terminal, Gaoming District, Foshan City on August 19 and found that No.TRLU3892530 container was laid in the yard for survey. Upon initial examination, it suggested the appearance of the container was in good condition and the seals numbered with R12511 and APL-MEX0140121 were undamaged. Accompanied by stevedores, the surveyors witnessed cut of the seals of No.TRLU3892530 container and the opening of the container. The goods were immediately discharged from the container for customs inspection, and upon check, the surveyors found eight bundles. After discharge of the goods, the surveyors carried a detailed check on the door handles as well as screws of the container, and found that the front screws on the left door handle of the right door of the container were in bright color with no rust and the nuts on the back were rusted seriously, whereas, the screws on the right door handle of the right door of the container were opposite to those on the left door handle: the front screws were rusted seriously 6 and the nuts on the back were in bright color with no rust. After the customs inspection, the goods were reloaded into No.TRLU3892530 container with a seal numbered “000154”. On August 20, the goods were shipped to the consignee’s warehouse in Songxia Industrial Park, Nanhai District, Foshan City for discharge. After discharge, the surveyors

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witnessed the weighing of the container and the goods therein. The actual net weight was 19,345 kg, which was 2,615 kg less than the weight stated on the loading list namely 21,960 kg. The surveyors compered the circumstances of the on-site survey to the photos of loading of the goods in Mexico supplied by Chaowei Company, determined that the goods loaded near the door in container No. TRLU3892530 in Zhujiang Gaoming freight terminal were obviously less than the goods loaded in the same place on the photos of loading; and two front screws on the door handle of the right door of No.TRLU3892530 container were not rusted seriously when loading the goods, nonetheless, the front screws of the door handle on the right door was seriously rusted, but the screws on the back were in bright color when being inspected in Gaoming freight terminal. In order to know the specific reason and place of the shortage, the surveyors repeatedly asked Chaowei Company to provide weighing record of the goods carried in container No. TRLU3892530 at the port of shipment. However, the shipper said they did not weigh the goods at the port of shipment, so they could not provide weighing record According to the findings of on-site survey and the date available, Pierre Leong Guangzhou held it was possible that the goods were stolen during the transportation in the way that someone took down the screws on the door of the container, opened the door, took the goods out of the container, then put on new screws of door handle without damaging the seals on the container. In accordance with the commercial invoice provided by Chaowei Company, this lot of goods valued 178,080.35 USD and weighed 21.96 tons, of which the unit price was $8,109.31 USD per ton, and the value of 2,615 kg goods in shortage was 21,205.85 USD. Pierre Leong Guangzhou held the claimed amount of 21,205.85 USD was fair and reasonable (according to the insurance declaration form that the insured amount of the goods was 178,080.35 USD), and the goods were fully insured, the final adjusting amount was 21,205.85 USD. On February 3, 2012, AIU Property & Casualty Insurance Company (hereinafter “AIU”) indemnified Chaowei Company 21,205.85 USD for the loss of the goods in container No.TRLU3892530, and Chaowei Company issued a Letter of Exemption from Liability and Subrogation to AIU agreeing that AIU obtained the right of subrogation to claim against the responsible party in respect of the insured event. AIU submitted a written statement after the trial which confirmed it indemnified Chaowei Company under the insurance agreement, and that it should enjoy corresponding right of subrogation. The Plaintiff provided a statement issued by Chaowei Company, which confirmed that it had no right to import and export, so it had to rely on a customs declaration broker to handle customs declaration matters. No formal contract or agreement was needed in customs declaration of scrap metal, so the broker could be entrusted to handle relevant customs declaration provided that the quoted price of customs declaration broker was paid. Thus, there was no commission contract or agreement between Chaowei Company and customs declaration broker. In the process of actual customs declaration, the customs declaration broker would choose a specially designated factory which had the right to import and export according to the port of discharge, so the second consignee of the goods in container No.

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TRLU3892530 was a specially designated factory (Mingjie Company) since it had the right to import and export, rather than Chaowei Company. It is also found that with the approval of the China Insurance Regulatory Commission, AIU Insurance Company Guangzhou Branch was restructured into AIU Property & Casualty Insurance Co., Ltd. Guangzhou Branch on January 2008, in the meantime, the name was altered into that of the Plaintiff. The original Foshan Sub-branch subordinated to AIU Guangzhou became sub-branch of the Plaintiff. Both the Plaintiff and the Defendant chose to resolve this case under the laws of the People’s Republic of China. The court holds the case arises from the dispute over contract of carriage of goods by sea fielded by the insurer to exercise the right of subrogation after compensating the insured for the loss of goods in accordance with the insurance contract. Pursuant to the provisions of Article 11 of the Several Provisions of the Supreme People’s Court on the Scope of Cases to be Entertained by Maritime Courts, the case is under the exclusive jurisdiction of the maritime courts. According to Article 27 of the Civil Procedure Law of the People’s Republic of China, an action instituted for a dispute arising from a railway, road, water, air, or multi-mode transportation contract shall be under the jurisdiction of the people’s court at the place of departure or destination of transportation or at the place of domicile of the defendant, since the place of destination involved is within the jurisdiction of the court, the court has jurisdiction over the case. The goods involved were transported from Mexico to China, so this case involved a foreign-related factors. Both the Plaintiff and the Defendant chose to apply the laws of the People’s Republic of China in the trial, in accordance with Article 296 of the Maritime Code of the People’s Republic of China. The governing laws of this case shall be the laws of the People’s Republic of China. According to the facts having been identified, Foshan sub-branch of the Plaintiff issued the cargo transportation open policy to Chaowei Company and underwrote the cargo transportation insurance, including the goods involved, of which the insured was Chaowei Company. The Plaintiff paid the insurance indemnity in amount of 21,205.85 USD to Chaowei Company on the basis of the provisions of the insurance contract after the Plaintiff confirmed the insured event happened. In accordance with Article 252 of the Maritime Code of the People’s Republic of China, where the loss of or damage to the subject matter insured within the insurance coverage is caused by a third person, the right of the insured to demand compensation from the third person shall be subrogated to the insurer from the time the indemnity is paid. The Plaintiff has obtained the right of subrogation, and is entitled to exercise the right to claim for compensation against the third person. The Defendant was responsible to transport the goods in container No. TRLU3892530 and had obligation to deliver the goods to the consignee set out in the sea waybill namely Chaowei Company. The delivery mode of the goods involved was CY to CY (namely from the container yard of the port of loading to the container yard of the port of discharge). According to Article 46 of the Maritime

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Code of the People’s Republic of China, the responsibilities of the carrier with regard to the goods carried in containers covers the entire period during which the carrier is in charge of the goods, starting from the time the carrier has taken over the goods at the port of loading, until the goods have been delivered at the port of discharge. During the period the carrier is in charge of the goods, the carrier shall be liable for the loss of or damage to the goods, except as otherwise provided for in this Section. The Defendant, as the carrier, the period of responsibility started from the time it took over the goods at the port of loading and ended in the time the goods were delivered at the port of discharge. The Defendant shall be liable for the loss of or damage to the goods, except for statutory exemptions. According to the record of the sea waybill, container No.TRLU3892530 was weighed, loaded and counted by the shipper, and the Defendant, as the carrier, received the containers in apparent good order and condition with undamaged seals, and neither the Defendant knew the actual state of the goods in the container, nor could it check; plus the shipper did not weigh the goods when delivering the goods to the Defendant at the port of loading. Hence, in the case that the Plaintiff did not have enough evidence to prove the specific weight and packages of the goods in the container when the shipper delivered the goods to the Defendant at the port of loading, it shall be regarded that the Defendant has fulfilled the carrier’s liability as agreed that it delivered the container in apparent good order and condition with undamaged seals to the consignee, Chaowei Company. Though the survey report submitted by the Plaintiff suggested that the reason of the shortage of the goods was probable that someone removed the door of the container and stole the goods involved, but it is a deduction drawn by the surveyors after comparing photos of loading the goods into the container and the condition of the container at the port of destination, other possibilities of the shortage of the goods cannot be excluded. Even if the surveyors’ conclusion that the goods involved were stolen in the transportation is correct, which may have occurred during the transportation from the time the goods were loaded into the container at the place of loading to the time the goods were delivered to the Defendant for shipment at the port of shipment or the transportation from the port of departure to the port of destination, conclusion that the shortage of goods arose during the period which the Defendant was in charge of the goods cannot be definitely drawn from the survey report. To sum up, the Plaintiff’s claims requesting the Defendant to compensate it for the loss of shortage and interest lack factual and legal basis, and shall not be supported in accordance with the law. According to Article 64 Paragraph 1 of the Maritime Code of the People’s Republic of China, the judgment is as follows: Reject the claims of the Plaintiff, AIU Property & Casualty Insurance Co., Ltd. Guangzhou Branch against American President Lines Ltd. Court acceptance fee in amount of RMB3,044 yuan, shall be born by the Plaintiff.

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In case of dissatisfaction with this judgment, the Plaintiff may within 15 days upon the service of this Judgment, and the Defendant may within 30 days upon the service of this judgment, submit a statement of appeal to the court, together with copies in accordance with the number of the opposite parties to lodge an appeal to Guangdong High People’s Court. Presiding Judge: LI Lifei Acting Judge: PINGYANG Danke Acting Judge: ZHAI Xin October 18, 2012 Clerk: ZHAO Hui

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Guangdong High People’s Court Civil Judgment AIU Property & Casualty Insurance Co., Ltd. Guangzhou Branch v. American President Lines Ltd. (2013) Yue Gao Fa Min Si Zhong No.14 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 1. Cause of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote Affirming lower court’s decision that subrogated cargo insurer’s claim for short delivery failed because it had not provided adequate evidence that the goods were stolen while in the Defendant’s custody. Summary The Appellant-Plaintiff appealed the judgment of the Guangzhou Maritime Court dismissing appellant’s compensation claim against RespondentDefendant for the amount indemnified to Appellant’s insured due to losses it incurred during the transportation of goods under a contract of carriage of goods by sea. The Appellant issued an open policy to the insured insuring copper and copper products at the actual sale value, and the insured later claimed a shipment of two containers a carrying copper alloy from Mexico to Guangzhou Province, China under the policy. Upon arrival at the port of discharge, the goods in one container were found to weigh 2,615 kg less than what was stated on the loading list. Appellant hired surveyors after being notified of the shortage, and the surveyors determined, by comparing photographs of the container, that the missing amount of goods were probably stolen during transportation. Appellant indemnified the insured to the amount of USD21,205.85 for the value of the goods lost, obtained the right of subrogation, and filed a compensation claim against the Respondent-carrier to recover the amount it indemnified its insured for the goods lost while being carried by the Respondent. The court of first instance, despite acknowledging that the Respondent was responsible for the insured’s goods from the port of loading to the port of discharge, dismissed the Appellant’s claim for compensation on the grounds that it lacked the factual and legal basis required to hold Respondent liable since the evidence produced merely suggested that the goods were stolen while being carried by Respondent. However, the Appellant’s evidence failed to rule out any other possible ways that could have caused the shortage to occur.

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The Appellant appealed this dismissal to the Guangdong High People’s Court asserting, among other things, that the shortage of goods occurred under the Respondent’s care making the Respondent liable for the shortage unless it can prove that the loss did not occur under its care. The court rejected the Appellant’s assertions and affirmed the court of first instance’s dismissal of Appellant’s claim on the grounds that the Respondent satisfied its burden of proof by delivering the container to the consignee in the same condition as it was received from the shipper, good appearance with undamaged seals, forcing the Appellant to produce evidence proving the shortage did occur under Respondent’s period of responsibility. The court held that the Appellant failed to do so since its evidence of the color deviation of the container door’s screws merely suggested that the shortage occurred during the Respondent’s period of responsibility while not ruling out the possibility that the shortage happened during land transportation.

Judgment The Appellant (The Plaintiff of First Instance): AIU Property Insurance Co., Ltd. Guangdong Branch Domicile: Yuexiu District, Guangzhou City, Guangdong Province, PRC. Legal representative: FANG Xiaoxiao, general manager. Agent ad litem: WU Yong, lawyer of Henry & Co. Law Firm. The Respondent (The Defendant of First Instance): American President Lines Ltd. Domicile: Scottsdale, United States. Legal representative: Windle Timothy Jane, vice president and legal counsel of America. Agent ad litem: ZHANG Xinwei, lawyer of GL & Co. Law Firm Guangzhou Office. Agent ad litem: CAI Dongdong, lawyer of GL & Co. Law Firm Guangzhou Office. The Appellant, AIU Insurance Co., Ltd. Guangdong Branch (hereinafter referred to as “AIU”) dissatisfied with (2012) Guang Hai Fa Chu Zi No.387 Civil Judgment rendered by Guangzhou Maritime Court with respect to the case arising from dispute over contract of carriage of goods by sea against the Respondent, American President Lines Ltd. (hereinafter referred to as “APL”), and appealed to the court. After accepting this case, the court organized a collegiate panel to try this case according to law. The trial of this case has been concluded. AIU alleged in the first instance that in June 2011, Metales Y Pacas Trade S.A. Dec. V (hereinafter referred to as “Pacas Company”) entrusted APL to carry scrap metals in two TEUs from port of Lazaro Cardenas, Mexico to port of Gaoming, Foshan City, Guangdong Province PRC. On August 16, the consignee Chaowei Co., Ltd. (hereinafter “Chaowei Company”) found, while taking delivery of the goods, that one of the containers was in shortage of 2,615 kg worth of goods. AIU,

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as the insurer of the above goods, compensated Chaowei Company for the loss of the goods in the amount of 21,205.85 USD based on the insurance contract signed with Chaowei Company and the survey report issued by Pierre Leong Adjusters (Shanghai) Co., Ltd. Guangzhou Branch (hereinafter Pierre Leong Guangzhou). According to relevant laws, AIU was entitled to demand recovery from the responsible party after obtaining the right of subrogation. APL, as the carrier of the goods involved, had the obligation of carefully keeping the goods and should be liable for the shortage of the goods. AIU requested the court to order APL to compensate it for the loss of the goods in amount of RMB134,233.03 (USD21,205.85 converted into RMB at exchange rate of USD to RMB on January 16, 2012) plus the interest therein (the interest should be calculated at the loan interest rate over the same period of People’s Bank of China from January 16, 2012), and bear the litigation fee for the subject case. APL defended in the first instance that according to the Maritime Code of the People’s Republic of China, carrier’s liability period covered the entire period during which the carrier was in charge of the goods, starting from the time the carrier had taken over the goods at the port of loading, until the goods had been delivered at the port of discharge. The carriage involved was FCL cargo transportation, and the mode of delivery was CY to CY. APL, as the carrier of the containerized goods involved, received sealed containers in no apparent abnormal order and condition with undamaged seals from the shipper. It did not know the actual situation of the goods in the containers, and also could not check the goods. APL had delivered the sealed containers to the consignee, and there was no evidence to prove the shortage of the goods claimed by AIU occurred during the period of carrier’s responsibility; even if APL were liable for the shortage of goods claimed by AIU, in the case that AIU failed to produce evidence proving that the claimed the shortage of goods involved resulted from an act or omission of the carrier done with the intent and knowledge that such loss would probably result, APL should be entitled to the benefit of limitation of liability provided for in Article 56 or Article 57 of the Maritime Code of the People’s Republic of China. AIU’s claim for loss of interest had no merit, even if such loss could be supported, the interest should be calculated at the deposit interest rate over the same period of People’s Bank of China from the date that AIU filed the action. In summary, APL requested the court of first instance to reject all the claims filed by AIU. The court of first instance found on April 23, 2007, AIU Guangzhou Branch Foshan Sub-branch issued an open policy of carriage of goods numbered with EM45M00327, which contained the following information: the insured was Chaowei Company; the subject matter insured were Copper and copper products whose fixed value should be based on the actual sale value on the invoice; the amount of limitation of liability should be 1 million USD; the term of coverage was from April 20, 2007 until the policy was set aside in accordance with the terms of cancellation; the voyage was from Mexico to Guangdong Province; the transport mean was a vessel approved by Institute Classification Clause 1/8/97; the old products insurance clauses were Institute Cargo Clause (B)-1/1/82 and risk of theft, pilferage and non-delivery-1/12/82; oxidation, corrosion and fade of the subject

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matter insured were not covered, unless such loss was caused by the risks stated in Institute Cargo Clause (C)-1/1/82. On June 15, 2011, APL, as a carrier, issued sea waybill No.APLU903076933 which stated that: the shipper was Pakas Company; the consignee and notify party was Chaowei Company; the place of delivery of the goods was Monterrey, Mexico; the port of loading was Lazaro Epinal; the port of discharge was Chiwan, China; the place of taking delivery of the goods was Sanshan City, Guangdong Province; the delivery mode was CY to CY; the carrying vessel was M.V. “SINGAPOREEXP”; the voyage was 123w; the goods were copper alloy with weight of 43,391.67 kg and volume of 60 cubic meters in two TEUs with number of TRLU3892530 and TCKU3297819, among which the numbers of the seals on No.TRLU3892530 container were APLMEX-00140121/R12511, with 10 bundles inside weighing 21,950.34 kg; and the number of seals on No.TCKU3297819 container were APLMEX-00140122/R12519, with 9 bundles of goods inside weighing 21,441.33 kg. The goods were loaded, weighed and counted by the shipper, and then APL confirmed that the sealed containers or other shipping units for loading the goods were received in apparent good order and condition on the sea waybill. After the goods arrived in Hong Kong from Mexico, APL entrusted Winsmart International Shipping Co., Ltd. to transfer the goods on the barge “Fuyue 108” to Zhujiang freight terminal, Gaoming District, Foshan City. On July 4, 2011, Chaowei Company submitted a declaration form of cargo transportation to declare the insured goods being carried during the period from May 11 to June 30, 2011 under open policy No.EM45M00327, of which the insured amount of the goods loaded in container No.TCKU3297819 was 173,950.84 USD and the insured amount of the goods loaded in container No. TRLU3892530 was 178,080.35 USD according to invoices No.1087 and No.1088 respective. On August 13, 2011, the two containers reached port of Gaoming, Foshan City and the goods were discharged from the vessel on August 16. The goods in container No.TRLU3892530 were found in shortage of 2.6 tons when being weighed during the customs clearance formalities. On August 18, Chaowei Company reported the shortage to AIU, and AIU entrusted the Pierre Leong Guangzhou to survey the goods involved. After survey, Foshan Mingjie Import and Export Trade Co., Ltd. (hereinafter “Mingjie Company”) handled the delivery formalities and confirmed that the seals on the container holding the goods involved were undamaged, without weighing record, received 8 bundles and 19,345 kg on the EIR No.E1108-04310. AIU issued a written notice to APL about the shortage of the goods on November 4. On January 10, 2012, Pierre Leong Guangzhou issued a final report on the shortage of the goods, which documented that the surveyors of Pierre Leong Guangzhou (hereinafter the surveyors) arrived at Zhujiang freight terminal, Gaoming District, Foshan City on August 19 and found that container No. TRLU3892530 was laid in the yard for survey. Upon initial check, it was found the appearance of the container was in good condition and the seals numbered with R12511 and APL-MEX0140121 were undamaged. Accompanied by stevedores,

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the surveyors witnessed the cutting of the seals on container No.TRLU3892530 and its opening. The goods were immediately discharged from the container for customs inspection, and the surveyors found eight bundles. After discharge, the surveyors carried a detailed inspection on the door handles as well as screws of the container, and found that the front screws on the left door handle of the right door of the container were in bright color with no rust and the nuts on the back were rusted seriously, whereas, the screws on the right door handle of the right door of the container were opposite to those on the left door handle, the front screws were rusted seriously and the nuts on the back were in bright color with no rust. After custom inspection, the goods were reloaded into container No.TRLU3892530 with a seal numbered with 000154. On August 20, the goods were unloaded at the consignee’s warehouse in Songxia Industrial Park, Nanhai District, Foshan City for discharge. After discharge, the surveyors witnessed the weighing of the container and the goods therein. The actual net weight was 19,345 kg, which was 2,615 kg less than the weight stated on the loading list (21,960 kg). The surveyors compered the situation of the on-site survey to the photos of loading of the goods in Mexico supplied by Chaowei Company and found that the goods loaded near the door in container No.TRLU3892530 in Zhujiang Gaoming freight terminal were obviously less than the goods loaded in the same place on the photos of loading and two front screws on the door handle of the right door of container No.TRLU3892530 were not rusted seriously when loading the goods. Nonetheless, the front screws of the door handle on the right door were seriously rusted, but the screws on the back were in bright color when being inspected in Gaoming freight terminal. In order to find the specific reason and place of the shortage, the surveyors repeatedly asked Chaowei Company to provide weighing record of the goods carried in container No. TRLU3892530 at the port of shipment. However, the shipper said they did not weigh the goods at the port of shipment, so they could not provide weighing record According to the situation of on-site survey and the date available, Pierre Leong Guangzhou determined it was possible that the goods were stolen during the transportation in the way that someone took down the screws on the door of the container, opened the door, took the goods away, and then put on new screws of door handle without damaging the seals on the container. In accordance with the commercial invoice provided by Chaowei Company, this lot of goods valued 178,080.35 USD and weighed 21.96 tons, of which the unit price was 8,109.31 USD per ton, and the value of 2,615 kg goods in shortage was 21,205.85 USD. Pierre Leong Guangzhou held the claimed amount (21,205.85 USD) was fair and reasonable, according to the insurance declaration form that the insured amount of the goods was 178,080.35 USD, and the goods were fully insured. The final adjusting amount was 21,205.85 USD. On February 3, 2012, AIU Property Insurance Company (hereinafter “AIU”) compensated 21,205.85 USD for the loss of the goods in No.TRLU3892530 container to Chaowei Company, and Chaowei Company issued a letter of exemption from liability and subrogation to AIU agreeing that AIU obtained the right of subrogation to claim against the responsible party in regards to the insured

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event. AIU submitted a written statement after the trial which confirmed it paid the insurance indemnity for AIU, and that it should enjoy corresponding right of subrogation. AIU provided a statement issued by Chaowei Company, which confirmed that it had no right to import and export, so it had to entrust a customs declaration broker to handle customs declaration matters. A formal contract or agreement was not needed for customs declaration of scrap metals, a customs declaration broker could be entrusted to handle the relevant customs declaration providing the quoted price of the customs declaration broker was paid, thus there was no commission contract or agreement between Chaowei Company and customs declaration broker. In the process of actual customs declaration, the customs declaration broker would choose a specially designated factory which had right to import and export according to the port of discharge, so the second consignee of the goods in container No. TRLU3892530 was a specially designated factory (Mingjie Company), which had the right to import and export, rather than Chaowei Company. It was also found that with the approval of the China Insurance Regulatory Commission, AIU Insurance Company Guangzhou Branch was restructured into AIU Property Insurance Co., Ltd. Guangzhou Branch on January 2008, while the name was altered into that of AIU. The original Foshan Sub-branch subordinated to AIU Guangzhou became sub-branch of AIU. Both AIU and APL chose the laws of the People’s Republic of China to resolve this case. The court of first instance held the case arose from the dispute over contract of carriage of goods by sea fielded by the insurer to exercise the right of subrogation after compensating the insured for the loss of goods in accordance with the insurance contract. Pursuant to the provisions of Article 11 of the Several Provisions of the Supreme People’s Court on the Scope of Cases to be Entertained by Maritime Courts, the case was under exclusive jurisdiction of maritime courts. According to Article 27 of the Civil Procedure Law of the People’s Republic of China, an action instituted for a dispute arising from a railway, road, water, air, or multi-mode transportation contract should be under the jurisdiction of the people’s court at the place of departure, destination of transportation, or at the place of domicile of APL, since the place of destination involved was under the jurisdiction of the court, the court had jurisdiction over the case. The goods involved were transported from Mexico to China, so this case involved a foreign-related factor. Both AIU and APL chose to apply the laws of the People’s Republic of China in the trial, in accordance with Article 296 of the Maritime Code of the People’s Republic of China. Therefore the governing laws of this case should be the laws of the People’s Republic of China. According to the facts having been identified, the Foshan Sub-branch of AIU issued the cargo transportation open policy to Chaowei Company and underwrote the cargo transportation insurance, including the goods involved, of which the insured was Chaowei Company. AIU paid the insurance indemnity in the amount of 21,205.85 USD to Chaowei Company on the basis of the provisions of the insurance contract after AIU confirmed that the insured event happened. In accordance

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with Article 252 of the Maritime Code of the People’s Republic of China, “where the loss of or damage to the subject matter insured within the insurance coverage is caused by a third person, the right of the insured to demand compensation from the third person shall be subrogated to the insurer from the time the indemnity is paid”, AIU had obtained the right of subrogation, and was entitled to exercise the right to claim for compensation against the third person. APL was responsible to transport the goods in container No.TRLU3892530 and had obligation to deliver the goods to the consignee set out in the sea waybill (Chaowei Company). The delivery mode of the goods involved was CY to CY, from the container yard of the port of loading to the container yard of the port of discharge. According to the provisions of Article 46 of the Maritime Code of the People’s Republic of China, “the responsibilities of the carrier with regard to the goods carried in containers covers the entire period during which the carrier is in charge of the goods, starting from the time the carrier has taken over the goods at the port of loading, until the goods have been delivered at the port of discharge. During the period the carrier is in charge of the goods, the carrier shall be liable for the loss of or damage to the goods, except as otherwise provided for in this Section,” the period of responsibility for APL as the carrier started from the time it took over the goods at the port of loading and ended in the time the goods were delivered at the port of discharge. APL should be liable for the loss of or damage to the goods, except for statutory exemptions. According to the record of the sea waybill, container No.TRLU3892530 was weighed, loaded and counted by the shipper, and APL received the containers in apparent good order and condition with undamaged seals. APL neither knew nor could it check the actual state of the goods in the container. The shipper did not weigh the goods when delivering the goods to APL at the port of loading. Hence, in the case that AIU did not have enough evidence to prove the specific weight and packages of the goods in the container when the shipper delivered the goods to APL at the port of loading, it should be regarded that APL had fulfilled the carrier’s liability as agreed by delivering the container in apparent good order and condition with undamaged seals to the consignee, Chaowei Company. Though the survey report submitted by AIU suggested that the reason of the shortage of the goods was that someone probably removed the door of the container and stole the goods involved, but it was a deduction drawn by the surveyors after comparing photos of loading the goods into the container and the condition of the container at the port of destination, other possibilities of the shortage of the goods could not be excluded. Even the deduction that, the goods involved were stolen in the transportation, which may occurred during the transportation from the time the goods were loaded into the container at the place of loading to the time the goods were delivered to APL for shipment at the port of shipment, or the transportation from the port of departure to the port of destination was correct, the conclusion could not be definitely drawn from this survey report that goods shortage happened during the period APL was in charge of the goods. To sum up, the claim that AIU requested APL to compensate for the loss of shortage and interest lacked factual and legal basis, and should not be supported in accordance with the law.

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According to Article 64 Paragraph 1 of the Maritime Code of the People’s Republic of China, the court of first instance rejected the claims filed by AIU against APL; court acceptance fee of this case in amount of RMB3,044 should be born by AIU. AIU, dissatisfied with the judgment of first instance, alleged as follows in the appeal: 1. According to the record on the sea waybill, it was a definitive fact that the shortage of the goods occurred, and APL should have the burden of proving that the shortage did not occur during the period of carrier’s responsibility, otherwise, it should be liable for the compensation. The shortage of the goods involved had already been found, recorded on the EIR, and compared to the record on the sea waybill at the time of being taken over at the port of destination. Pursuant to Article 77 of the Maritime Code of the People’s Republic of China, since the carrier did not note on the sea waybill, it should deliver the goods coinciding with the record on the sea waybill to a bona fide third party. Thus, once the consignee received did not coincide with the record on the sea waybill, the carrier shall bear corresponding liability for compensation, unless the carrier produced evidence proving that it should not bear such liability. That was to say, if the carrier in this case demanded an exemption, it should bear the burden of proof to prove the shortage involved was not caused by its reason, rather than the consignee bore the burden of proof to rule out the possibility that accident occurred during land carriage. 2. The unknown clause in the sea waybill did not constitute as comments to the goods. According to the Article 75 of the Maritime Code of the People’s Republic of China, if the bill of lading contains information on the description, mark, number of packages or pieces, weight or quantity of the goods with respect to which the carrier, or the other person issuing the bill of lading on his behalf, has the knowledge or reasonable grounds to suspect that such information does not accurately represent the goods actually received, or, where a shipped bill of lading is issued, loaded, or if he has had no reasonable means of checking, the carrier or such other person may make a note in the bill of lading specifying those inaccuracies, the grounds for suspicion or the lack of reasonable means of checking. But the unknown clause in the sea waybill did not comply with the condition of note provided in Article 75 of the Maritime Code of the People’s Republic of China, so it did not equate to a note in the sea waybill. If the carrier had reasonable means to check the information of the goods declared by the shipper, it should make a note in the sea waybill, however, in this case, the carrier did not make such a note in the sea waybill. Moreover, it is easy to check whether the weight of the goods declared shipper was accurate through weighing. The carrier had the ability and obligation to check weight of the goods involved. 3. If the carrier did not compensate the consignee, then the consignee could not claim for its losses. This case involved with international trade, it was impossible for the consignee to check the quantity of the goods at the port of dispatch,

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it could only require the shipper to provide relevant materials, such as weight record, documents for customs declaration and sea waybill at the time of shipment, and the consignee should pay the shipper according to the quantity recorded in the sea waybill. However, as the carrier did not check the weight of the goods involved, it did not know when the loss of the goods occurred. The consignee could not claim against the shipper or the carrier of the land transportation, they could only claim against the carrier according to the record in the sea waybill. Otherwise, if the carrier could exempt from the liability for damage with unknown clause, the third party acting in good faith would be unable to claim as a consequence, and the international trade could not normally proceed. 4. Even if the goods were not stolen during the carriage at sea, the carrier should bear the fault of issuing sea waybill. In the practice, many carriers of goods in containers would not check the condition of the goods declared by the shipper, there were many realistic conditions. In this regard, stealing goods in containers became rampant. Certain large ports, like Yantian port, on the present, upon the requirement of the carrier, would weigh goods when containers came in port to eliminate the phenomenon that the goods in containers were stolen without being found out. Therefore, even the goods were stolen before the reception of the carrier, it should undertake the liability for its fault of issuing the sea waybill, or it was unfair for the consignee since it was not entitled to claim for compensation as a result. To sum up, the carrier should deliver the goods to the consignee as prescribed in the sea waybill, otherwise it should bear corresponding liability for compensation. Meanwhile the carrier should check the goods delivered by the shipper, or it should undertake corresponding liability for issuing the bill at fault. Hence, the Appellant, AIU, requested the court to set aside the original judgment and order APL to compensate RMB134,233.03 yuan having been paid by AIU plus interest therein, and bear the litigation fees of the first instance and the second instance of this case. AIU alleged in the second instance as follows: 1. APL should provide evidence proving the shortage of goods occurred during the period of responsibility of APL, otherwise it would undertake the legal consequence due to failure of burden of proof. In the one hand, since it the contract of carriage of goods by sea involved was evidenced by a sea waybill issued by APL rather than a bill of lading, according to Article 80 of the Maritime Code of the People’s Republic of China, this sea waybill only could be the prima facie evidence that APL received the goods prescribed in the sea waybill, that was, the sea waybill only had an effect of prima facie evidence on the weight of goods, which differed from absolute evidence effectiveness of particulars in bill of lading between carrier and the bona fide transferee of the bill of lading including consignee provided in Article 77 of the Maritime Code of the People’s Republic of China. As a result, even if consignee received the goods whose weight did not conform to weight described in the sea waybill, APL could provide reverse to deny the effect of the prim facie evidence of the weight

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described therein. On the other hand, it was clearly recorded by APL that the containerized goods should be weighted, packed, and counted by the shipper; the weight of the goods in the sea waybill was provided by the shipper; and APL was entitled to take notes in the sea waybill and did that in fact when APL was unable to check whether the weight of the goods it received conformed to that specified in the sea waybill. According to Article 77 of the Maritime Code of the People’s Republic of China, this note had an effect to deny the record in the sea waybill to some extent, and APL could be exempt from corresponding legal responsibility within the items and scope of the note. In other words, this note did not suggest that APL admitted the real weight of the goods claimed by shipper, and APL would not assume obligation to deliver the goods in the weight recorded in the sea waybill. Hence, there was no merit to AIU’s claim that the shortage involved occurred during the responsibility period of APL for the discrepancy between the weight of the goods upon receipt in the port of destination and the weight recorded in the sea waybill. AIU should also provide other effective evidence proving the shortage involved occurred during the responsibility period of APL, otherwise it should undertake legal responsibility for failure of burden of proof. 2. The unknown clause was enough to constitute a note to APL in the sea waybill, and it was entitled to be exempt from the legal liability within the items and scope of the note. In this case, on account of the description, weight and any other detailed information were supplied by the shipper, and APL did not take part in the loading the goods onto the container. It did not know the actual condition of the goods in the container and only received a container in good condition with undamaged seals. In shipping practice, it was impossible for carrier to check the actual loading condition of the goods in every container, but in international trade practice, if transport documents lack basic records about goods, a negotiation bank would reject such transport documents and international trade would be affected. Therefore, the carrier had to record the condition of the goods involved in the sea waybill. However, this record would bring huge legal risks, as a result, the carrier added the note that the weighing, packing and counting of the goods were carried out by the shipper when recording the condition of the goods. This note actually indicated that the carrier could not check whether the actual condition of the goods supplied by shipper complied with the condition of the goods claimed by the shipper. Therefore, it was inconsistent with the requirements of note provided in Article 80 of the Maritime Code of the People’s Republic of China, and the carrier was entitled to exempt the legal liability within the items and scope of the note. 3. In this case, the legal relationship between the consignee and APL was a relationship of contract of carriage of goods by sea, and the legal relationship between the consignee and the shipper was international trade contract relationship. The consignee or AIU could not claim for compensation against the trade party according to relevant trade contract, and it was not the legal or agreed condition that APL should take liability.

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4. AIU’s claim that APL was at fault for issuing the bill of lading had no legal basis. There was no Article in Maritime Code of the People’s Republic of China provided “fault of issuing bill of lading”, so it was created by AIU itself. As a result, the facts were clearly decided and the laws were correctly applied in the judgment of first instance, so the claims and grounds of appeal of AIU had no factual or legal basis. Thus, APL requested the court to dismiss the appeal of AIU and affirm the judgment of first instance, so that the legal rights of APL could be protected. Neither party provided any new evidence in the second instance. After trial, the court holds that the facts found in the judgment of first instance are true and shall be affirmed. The court holds AIU, as the insurer, after indemnifying the insured (Chaowei Company) according to the insurance contract, exercised the right of subrogation to claim for compensation of the shortage of the goods involved against the carrier involved (APL) based on the main evidence such as the bill of lading, the EIR of destination port, weighing record and survey report. As prescribed in Article 14 of the Provisions of the Supreme People’s Court on Several Issues about the Trial of Cases concerning Marine Insurance Disputes, where an insurer institutes a case of dispute over exercise of right of subrogation for compensation, the entertaining court shall only try the legal relation between the third party who causes the accident and the insured. The case is arising from dispute over the contract of carriage of goods by sea. The carriage involved started from Mexico, so the case involved with foreign-related factors, both parties had no objection to the jurisdiction of the court of first instance and application of laws of the People’s Republic of China to resolve the dispute, and the court acknowledges that. AIU alleged that the carrier APL should bear the burden of proof for the shortage of goods claimed by it. Both the parties recognized the fact that the quantity of the goods arriving at the port was less than the quantity recorded in the sea waybill. The main dispute between the parties lies in which party shall bear the burden of proof proving whether the shortage of the goods occurred during the period of carrier’s responsibility. AIU alleged that sea waybill No.TRLU3892530 issued by APL recorded that the quantity of the goods in container was 10 bundles at a weight of 21,950.34 kg, and the goods arriving at the destination port were less than the goods recorded in the sea waybill. Therefore, it had already proved the shortage occurred during the period of carrier’s responsibility. The court holds that although APL, as the carrier, issued the sea waybill which the recorded quantity and weight of the goods declared by the shipper. It stated that the goods were weighed, packed and counted by the shipper and the carrier received packed goods in sealed container as affirmed by AIU. On demand of efficiency of container transportation, although the carrier records name, quantity and weight of goods according to the shipper’s declaration in the bill of lading or sea waybill, generally the carrier will not inspect the actual situation of the goods in the sealed container, which complies with objective condition and shipping practice. So, the record regarding the quantity and weight of the goods in the sea waybill issued by APL cannot prove the shortage

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the goods occurred during the period of its responsibility. APL delivered the container in good appearance with undamaged seals to the consignee at the container yard of the discharging port. It has satisfied the burden of proof by producing prima facie evidence proving it had performed the obligation for delivery of goods, and AIU now shall provide adverse evidence proving the shortage of the goods occurred during the responsibility period of APL. The ground of AIU’s appeal is that APL should bear the burden of proof to prove the shortage of the goods did not occur during the period of its responsibility lacks factual and legal basis, the court will not support. Pursuant to Article 46 Paragraph 1 of the Maritime Code of the People’s Republic of China, the responsibilities of the carrier regarding goods carried in containers covers the entire period during which the carrier is in charge of the goods, starting from the time the carrier has taken over the goods at the port of loading, until the goods have been delivered at the port of discharge. The responsibility of the carrier with respect to non-containerized goods covers the period during which the carrier is in charge of the goods, starting from the time of loading of the goods onto the ship until the time the goods are discharged therefrom. During the period the carrier is in charge of the goods, the carrier shall be liable for the loss of or damage to the goods, except as otherwise provided for in this Section. In this case the goods involved were carried in container, so the responsibilities of APL as the carrier covers the period starting from the time the carrier has taken over the goods at container yard of the lading port (Monterrey, Mexico) until the goods have been delivered at container yard of the discharge port (port of Gaoming, Foshan City, China). AIU submitted the survey report issued by Pierre Leong Company, and alleged it was likely that someone removed door handle of the container and stole the goods in the transportation, according to contrast of the detailed appearance of container in the photos before shipment and after unloading. However, with only comparing the color deviation of screws and nuts on the door of the container in the photos, it cannot be fully proved the fact that the door was removed and the goods were stolen occurred in the transportation. In fact, the survey report did not make a determinate judgment on whether it happened. Besides, the container involved in a land transportation from the place of packing to the port of loading, and the shortage possibly could have occurred during this period. Even if the door was actually removed and the goods were stolen, the survey report did not make a judgment on which section it occurred. It did not rule out the possibility that the shortage of the goods occurred during the land transportation from the place of packing to the port of loading. Therefore, AIU cannot provide sufficient evidence showing the shortage occurred during the period of carrier’s liability, and it shall bear the adverse consequence due to failure to satisfy the burden of proof. This issue is properly determined and dealt with in the judgment of first instance, so the court will affirm. As for the ground of appeal held by AIU that the consignee cannot claim against any person other than the carrier does not fall into the scope of the trial of this case. The appeal of AIU that APL shall be liable for the fault of issuing sea waybill lacks factual and legal basis, and the court will not support it.

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Pulling the threads together, the determination of the facts is clear, the application of relevant laws is correct and the procedures of the trial is legal in the judgment of first instance, so it shall be affirmed. The appeal of AIU lacks factual and legal basis, and shall been dismissed. Pursuant to Article 170 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance in amount of RMB3,044, shall be born by AIU Property Insurance Co., Ltd. Guangdong Branch. The judgment is final. Presiding Judge: WANG Jianping Acting Judge: WANG Jing Acting Judge: WU Siying July 31, 2014 Clerk: WANG Qian

Appendix: Relevant Laws Civil Procedure Law of the People’s Republic of China Article 170 After trying a case on appeal, the people’s court of second instance shall, in the light of the following situations, dispose of it accordingly: (1) if the facts were clearly ascertained and the law was correctly applied in the original judgment, the appeal shall be rejected in the form of judgment and the original judgment shall be affirmed; (2) if the facts were wrongly ascertained or the application of law was incorrect in the original judgment, the said judgment shall be amended according to the law; (3) if the basic facts were not clearly ascertained in the original judgment, the people’s court of second instance shall make a written order to set aside the original judgment and remand the case to the original people’s court for retrial, or the people’s court of second instance may amend the judgment after investigating and clarifying the facts; or (4) if there was serious violation of legal procedures such as omitting any party or making an illegal absentee judgment in the original judgment, the said judgment shall be set aside by a written order and the case remanded to the original people’s court for retrial. If the party files an appeal against the judgment made in the retrial by the court originally tried the case, the people’s court of second instance shall make a judgment according to the law.

Ningbo Maritime Court Civil Judgment Bank of China Ningbo Branch v. China National Electronic Import & Export Ningbo Company et al. (2013) Yong Hai Fa Shang Chu Zi No.363 Related Case(s) None. Cause of Action 211. Dispute over ship mortgage contract. Headnote The Plaintiff mortgagee bank held entitled to foreclose on ship mortgage and on other secured properties after default by one of several mortgagors. Summary Plaintiff-lender, Bank of China Ningbo Branch, sued Defendantborrower, China National Electronic Import & Export Ningbo Company (“CEIEC Ningbo”), and two others, Zhejiang Jiaolong Group Co., Ltd. and Chenye Shipbuilding Co., Ltd., for breach of contract. Plaintiff entered into two Floating Capital Loan Contracts with CEIEC Ningbo for RMB 77 million and RMB 40 million plus interest, respectively. CEIEC Ningbo eventually defaulted on the RMB 77 million loan contract, therefore, per the terms of both loan contracts, Plaintiff declared the loan for RMB 40 million due in advance requiring CEIEC Ningbo to pay the amounts due. Plaintiff also made three Maximum Mortgage Contracts with the other two defendants for RMB 103 million, 15.7 million, and 58.789 million, respectively, and each defendant placed the M.V. “Rong Ming,” usage rights to lands, three slipways, plus one dock as the mortgaged properties. Upon CEIEC Ningbo’s default, the other defendants failed to fulfill their mortgage obligations. Plaintiff filed suit against all three alleging that the failure of each defendant to fulfill their mortgage obligations granted it the right to immediately require CEIEC Ningbo to repay the floating capital loans plus fixed interest, penalty interest, and the right of preferred compensation from the sale of the mortgaged properties of the other two defendants. Only CEIEC Ningbo provided a written defense stating that it had special reasons for not repaying the amount due on the loans. The Court found that the Floating Capital Loan Contracts between Plaintiff and CEIEC Ningbo were lawful contracts, and Plaintiff was entitled to unilaterally make the loans due and require repayment under the contracts since CEIEC defaulted. It was also found that the mortgage contracts between Plaintiff and the other defendants were lawful, therefore, Plaintiff enjoyed the mortgage rights over the mortgaged properties registered by the Defendants. © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_2

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Judgment The Plaintiff: Bank of China Ningbo Branch Person in charge: QIAN Jianzhong. Agent ad litem: ZHANG Li. Agent ad litem: XU Huiwen. The Defendant: China National Electronic Import & Export Ningbo Company Legal representative: HONG Guanqi. Agent ad litem: LI Xiaobo. Agent ad litem: SHEN Yinlin. The Defendant: Zhejiang Jiaolong Group Co., Ltd. Legal representative: ZHENG Zhilong. Agent ad litem: ZHAO Yuesheng. Agent ad litem: GUO Shuqing. The Defendant: Chenye Shipbuilding Co., Ltd. Legal representative: ZHENG Rongyue. Agent ad litem: ZHAO Yuesheng. Agent ad litem: GUO Shuqing. With respect to this case arising from dispute over ship mortgage contract filed by the Plaintiff, Bank of China Ningbo Branch (hereinafter referred to as “BOC Ningbo”) against the Defendant, China Electrical Import & Export Ningbo Co., Ltd. (hereinafter referred to as “CEIEC Ningbo”), Zhengjiang Jiaolong Co., Ltd. (hereinafter referred to as “Jiaolong Company”), and Zhengjiang Chenye Shipbuilding Co., Ltd. (hereinafter referred to as “Chenye Company”) on June 4, 2013. The court, after accepting the case on the same day, organized a collegiate panel in accordance with the law. Due to the complexity of the facts, the court decided to extend the time limit of trial for 6 months in accordance with the law on July 18, 2013. The court respectively held two hearings in public on July 18, 2013 and March 26, 2014. ZHANG Li and XU Huiwen as agents ad litem entrusted by the Plaintiff, CEIEC Ningbo, LI Xiaobo and SHEN Yinlin as agents ad litem jointly entrusted by the Defendant, Jiaolong Company, and the Defendant, Chenye Company, appeared in court to participate in the hearings. After trial, this case has been concluded. The Plaintiff, BOC Ningbo claimed that on April 26, 2012, it signed (2012) Ningbo Ren Jie No.0106 Floating Capital Loan Contract, where CEIEC Ningbo applied to BOC Ningbo for a 12-month floating capital loan amounting to RMB 77,000,000, with a 6.56% fixed interest rate as the lending rate, which was settled quarterly. On July 10, 2012, the Plaintiff signed (2012) Ningbo Loan No.0181 Floating Capital Loan Contract with CEIEC Ningbo, where CEIEC Ningbo applied to BOC Ningbo for a 12-month floating capital loan in the amount of RMB 40,000,000 with a floating interest rate as the lending rate, which was settled quarterly. The security of the two above-mentioned loans were as follows:

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1. On September 21, 2010, the Plaintiff signed (2010) Ningbo Mortgage No.0065 Maximum Mortgage Contract with Jiaolong Company. It was agreed that Jiaolong Company provided a maximum security in an amount of RMB103,000,000 for loans, trade businesses, guarantees, fund businesses, and other credit businesses to the Plaintiff and CEIEC Ningbo during the period from September 21, 2010 to September 21, 2012. The mortgaged property was a chemical ship, the M.V. “Rong Ming” of which the registered number was 070308000601. The two parties registered the mortgage with Zhoushan Maritime Safety Administration on September 30, 2010. The registration number of the mortgage was DY0703100739 and the amount of the mortgage was RMB103,000,000. The ship had been detained by Zhoushan Maritime Court at port of Zhoushan because of the case arising from a dispute over ship mortgage contract filed by Darby International Investments Co., Ltd. (hereinafter referred to as “Darby Company”) and Rong Tai International Shipping Co., Ltd. (hereinafter referred to as “Rong Tai Company”) and was about to begin the judicial auction procedure. 2. On April 24, 2012, the Plaintiff signed (2012) Ningbo Mortgage No.0015 Maximum Mortgage Contract with Chenye Company, stating that Chenye Company provided a maximum security in an amount of RMB15,700,000 for loans, trade businesses, guarantees, fund businesses, and other credit businesses to the Plaintiff and CEIEC Ningbo during the period from April 24, 2012 to April 23, 2014. The mortgaged property was the usage right of the state-owned land located at Qiujiangmen Village, Daixi Town, Daishan County owned by Chenye Company. The two parties registered the mortgage with Daishan Land Resources Bureau on April 24, 2012 for the amount of RMB15,700,000. The number of the Encumbrance Certificate was (2012) Dai Taxiang No.00039. 3. On April 24, 2012, the Plaintiff signed (2012) Ningbo Mortgage No.0016 Maximum Mortgage Contract with Chenye Company, stating that Chenye Company provided a maximum security in an amount of RMB58,798,000 for loans, trade businesses, guarantees, fund businesses, and other credit businesses to the Plaintiff and CEIEC Ningbo during the period from April 24, 2012 to April 23, 2014. The mortgaged properties were the slipways and dock owned by Chenye Company. The two parties registered the mortgage with Daishan Industry and Commerce Administration on April 24, 2012 for the amount of RMB58,789,000. The registration number was Dai Gong Shang Di No.2012025. On April 24, 2014, the loan under (2012) Ningbo Loan No.0106 Floating Capital Loan Contract became due, and CEIEC Ningbo failed to repay the principal in the amount of RMB37,000,000 with interest. The Plaintiff had the right to declare the loan under (2012) Ningbo Loan No.0181 Floating Capital Loan Contract due in advance, according to the agreement of the loan contracts, and require CEIEC Ningbo to repay the loan in the amount of RMB40,000,000 plus the interest thereon. Up to the date of filing the lawsuit, CEIEC Ningbo still owed RMB77,000,000 and consequent interest, and Jiaolong Company and Chenye

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Company failed to perform the corresponding obligation for security. Hence, the Plaintiff requested the court to judge that: 1. The Defendant CEIEC Ningbo should immediately repay the floating capital loans in amount of RMB77,000,000, the interest equaling RMB454,666.66, and the penalty interest equating to RMB283,173.33 (counted up to May 22, 2013), amounting to a total sum of RMB77,737,839.99. The interest and the penalty interest accrued after such time should be counted to the day of repayment in accordance with the contract; 2. The Plaintiff should enjoy the right of preferred compensation from the proceeds of the auction or sale of mortgaged property provided by the Defendants Jiaolong Company and Chenye Company; and 3. The three Defendants should bear the litigation fees, preservation fees, and attorney fees of this case. The Defendant CEIEC Ningbo argued that: 1. The facts stated by the Plaintiff were true, but there were special reasons why it did not repay the outstanding sum of RMB77,000,000 and the interest thereon; and 2. It had no objection to the Plaintiff’s claim for the mortgage right over M. V.“Rong Ming” in accordance with law, and agreed this was only one effective way to resolve the dispute in this case. Neither the Defendant, Jiaolong Company, nor the Defendant, Chenye Company, submitted a written defense. They asserted in trial that they agreed the statement of the Defendant CEIEC Ningbo, and the security fees in the third claim of the Plaintiff, should be rejected according to the contract. The Plaintiff, BOC Ningbo submitted the following evidentiary material to the court within the time limit of producing evidence to support its claims: 1. (2012) Ningbo Loan No.0106 Floating Capital Loan Contract, to prove the fact that the Plaintiff lent RMB 77 million to CEIEC Ningbo with a fixed interest rate of 6.56%, and the life of the loan was 12 months. 2. (2012) Ningbo Loan No.0181 Floating Capital Loan Contract, to prove the fact that the Plaintiff lent CEIEC Ningbo RMB40 million, the life of the loan was 12 months, with a floating interest rate. 3. Two receipts of the loans, to prove the release of the two loans mentioned above. 4. (2010) Ningbo Mortgage No.0065 Maximum Mortgage Contract of BOC and the Ownership Registration Certificate, to prove the fact that Jiaolong Company charged a mortgage over M.V. “Rong Ming”. 5. (2012) Ningbo Mortgage No.0015 Maximum Mortgage Contract of BOC and the Land Encumbrance Certificate, to prove the fact that Chenye Company charged a mortgage over the land it owned.

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6. (2012) Ningbo Mortgage No.0016 Maximum Mortgage Contract of BOC and the Movable Property Mortgage Certificate about slipways and dock, to prove the fact that Chenye Company charged a mortgage over the slipways and dock it owned. 7. The reply of CEIEC Ningbo about the loan’s falling due, to prove the fact that CEIEC Ningbo acknowledged the debt and inability to repay. 8. Businesses license, Organization Code Certificate and Certificate of Identity of Legal Representatives, to prove the three Defendants were proper defendants. 9. List of the principals and interests (generated from the Plaintiff’s bank system), to prove the outstanding amount of the principals and interests up to May 22, 2013. 10. Attorney Entrustment Contract, invoice and voucher of attorney fees, to prove the attorney fees in the amount of RMB 150,000 incurred for the realization of the creditor’s right. The defendant CEIEC Ningbo submitted the following evidentiary material before the second hearing: 1. (2013) Yong Hai Fang Zhou Zhi Min Zi No.34 Civil Judgment rendered by Ningbo Maritime Court, to prove Jiaolong Company was registered as the shipowner of the M.V. “Rong Ming”. 2. Certificate, to prove that the registered owner of M.V. “Rong Ming” was Jiaolong Company since December 2008, and the registered mortgagor of the M.V. “Rong Ming” was the Plaintiff since September 2010, neither of which has ever changed. 3. The report regarding the processing and verification of designed materials of M. V. “Rong Ming”, to prove that M.V. “Rong Ming” was anchoring at Chenye Company’s dock after the construction was completed, it was neither delivered nor was the customs clearing formality for export handled, and it was subject to the supervision of Zhoushan Customs. After cross-examination in court, the three Defendants did not object to the authenticity, legality, or relevancy of Evidence 1 through Evidence 9 submitted by the Plaintiff. However, they argued the attorney fees claimed by the Plaintiff in Evidence 10 was not an inevitable expense and questioned its relevancy. The Plaintiff, Jiaolong Company, and Chenye Company did not object to the three pieces of evidence submitted by CEIEC Ningbo. After trial, the court holds that all of the evidence submitted by the Plaintiff were not different from the originals: Evidence 1 of CEIEC Ningbo is a legal instrument made by the court; Evidence 2 and Evidence 3 are sealed by the competent authorities, plus, the content of Evidence 2 can corroborate Evidence 4 of the Plaintiff. The parties admitted the authenticity and the legality of all the evidence mentioned above. Although the three Defendants objected to the attorney fees claimed by the Plaintiff, they did not deny the occurrence of the expense, therefore the court ascertains the probative force of all of the evidence submitted by the Plaintiff and the Defendants.

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According to the statements of the parties and the evidence having been ascertained, the court finds the following facts: On April 26, 2012, the Plaintiff signed (2012) Ningbo Loan No.0106 Floating Capital Loan Contract with CEIEC Ningbo stating the following terms: CEIEC Ningbo took a loan from the Plaintiff for the amount of RMB77,000,000 for payment of goods; the life of the loan was 12 months; the lending rate was a fixed interest rate (annual interest rate: 6.56%) which was settled quarterly; and 50% more of the floating interest rate was charged as an overdue penalty interest rate. On the same day, the Plaintiff issued the loan in the amount of RMB77,000,000 as agreed. On July 10, 2012, the Plaintiff signed (2012) Ningbo Loan No.0181 Floating Capital Loan Contract with the following terms: CEIEC Ningbo was to borrow RMB40,000,000 for payment of goods from the Plaintiff; the life of the loan was 12 months; the lending interest rate was a floating interest rate; every three months was a floating cycle since the interest was settled quarterly; and 50% more of the floating interest rate was charged as the overdue penalty interest rate. On the signing day, the Plaintiff issued the loan in the amount of RMB40,000,000 as agreed. It was provided in Paragraph 1 of Article 12 of the two loan contracts that any event outlined below would constitute or be regarded as a borrower’s default under the contract: “1. the lender fails to perform the obligation for payment and paying off; 6. default takes place under other contracts between the loaner and the lender or other financial institutions of BOC; events of default take place under other credit contracts between the loaner and the other financial institutions.” Also, Article 2 provided that “where the events of default provided in the preceding paragraph occur, the lender is entitled to declare that part or all of the outstanding principal and interest or other payables of the loans or trade finance sums under this contract and other contracts between the loaner and lender immediately fall due”. On September 21, 2010, the Plaintiff signed (2010) Ningbo Mortgage No.0065 Maximum Mortgage Contract with Jiaolong Company. The mortgage stated that Jiaolong Company was to provide a maximum security in the amount of RMB103,000,000 for loans, trade businesses, guarantees, fund businesses and other credit businesses to the Plaintiff and CEIEC Ningbo during the period from September 21, 2010 to September 21, 2012. The mortgaged property is a chemical ship, M.V. “Rong Ming” of which the registered number was 070308000601. The two parties registered the mortgage with Zhoushan Maritime Administration on September 30, 2010 for the amount of RMB103,000,000. The registration number of the mortgage was DY0703100739. On April 24, 2012, the Plaintiff signed (2012) Ningbo Mortgage No.0015 Maximum Mortgage Contract with Chenye Company, where it was agreed that Chenye Company provided maximum security in an amount of RMB15,700,000 for loans, trade businesses, guarantees, fund businesses, and other credit businesses to the Plaintiff and CEIEC Ningbo during the period from April 24, 2012 to April 23, 2014. The mortgaged property was the usage right of the state-owned lands located in Qiujiangmen Village, Daixi Town, Daishan County owned by Chenye Company. The two parties registered the mortgage in Daishan Land Resources

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Bureau on April 24, 2012. The number of the Encumbrance Certificate was (2012) Dai Taxiang No.00039. It was stated in the certificate that the lands were industrial lands, the right ranked the fourth place, and the numbers of the lands were 01300102230000, 01300102229000 and 01300102506000. On April 24, 2012, the Plaintiff signed (2012) Ningbo Mortgage No.0016 Maximum Mortgage Contract with Chenye Company, in which it was agreed upon that Chenye Company provided maximum security in an amount of RMB58,798,000 for loans, trade businesses, guarantees, fund businesses, and other credit businesses to the Plaintiff and CEIEC Ningbo during the period from April 24, 2012 to April 23, 2014. The mortgaged properties were the slipways and dock owned by Chenye Company. The two parties registered the mortgage with Daishan Industry and Commerce Administration on April 24, 2012. The registration number was Dai Gongshang Di No.2012025. In the Movable Property Mortgage Certificate, the mortgaged properties were a 20,000-ton dock, a 20,000-ton slipway, a 30,000-ton slipway and a 50,000-ton slipway owned by Chenye Company. On April 24, 2014, the loan under Floating Capital Loan Contract (2012) Ningbo Loan No.0106 fell due, CEIEC Ningbo failed to repay the principal in the amount of RMB37,000,000 and relevant interest. The Plaintiff declared that the loan under (2012) Ningbo Loan No.0181 Floating Capital Loan Contract fell due in advance according to the agreement of the loan contracts and required CEIEC Ningbo to repay the loan in the amount of RMB40,000,000 and the interest thereon. CEIEC Ningbo failed to repay the principal and interest above, after which Jiaolong Company and Chenye Company failed to fulfill their mortgage obligations as well. The Plaintiff filed a lawsuit before the court and paid the attorney fees in the amount of RMB150,000. It is also found that M.V “Rong Ming” was constructed by Chenye Company. CEIEC Ningbo made a ship export agent agreement with Chenye Company. It is agreed that CEIEC Ningbo acted for Chenye Company to export M.V. “Rong Ming” to Huiming International Shipping Co., Ltd., however because Chenye Company failed to deliver the ship on time, Huiming International Shipping Co., Ltd. terminated the ship construction contract upon arbitration in Hongkong. As a result of refunding the advance payments of the ship construction and interest to Huiming International Shipping Co., Ltd., CEIEC Ningbo brought suit against Chenye Company and Jiaolong Company in the court. In the trial of that case, CEIEC Ningbo, Chenye Company and Jiaolong Company reached a mediation agreement on November 2, 2012. After examination, the court made (2012) Yong Hai Shang Chu Zi No.294 Civil Mediation to establish the mediation agreement. During the construction of M.V. “Rong Ming” the ownership was registered with Zhoushan Maritime Administration on May 23, 2012. The shipowner was Jiaolong Company. The registration had no change. M.V. “Rong Ming” was anchoring at the dock of Chenye Company continuously and has not been delivered up to the present. The court holds that the loan contract between the Plaintiff and CEIEC Ningbo is lawful and valid and the Plaintiff has offered a loan as agreed. Thus, CEIEC Ningbo shall perform its obligation to repay the capital and interest. After the loan fell due

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under (2012) Ningbo Loan No.0106 Floating Capital Loan Contract, CEIEC Ningbo still defaulted the loan in the amount of RMB37,000,000 and relevant interest. The Plaintiff is entitled to unilaterally claim that the loan under (2012) Ningbo Loan No.0181 Floating Capital Loan Contract is now due, therefore, CEIEC Ningbo shall immediately repay the loan in total of RMB877,000,000 and fulfill its obligation to pay relevant interest and penalty interest as agreed. The Plaintiff claimed for the attorney fees against the Defendant, which has not been agreed upon in the contract. Such a claim has no merit and the objections made by the three Defendants in the cross-examination prevail. Hence, the court does not support this claim. The maximum mortgage contracts signed by the Plaintiff and Jiaolong Company and the Plaintiff, Chenye Company, respectively, are true intentions of the parties thereto and conform to the laws, therefore the effect of the contract shall be supported. The security scope of the mortgage shall include the principals, interests, and penalty interests under the two loan contracts involved. The properties over which Chenye Company charged mortgage have been registered according to the law. The Plaintiff has a mortgage right over the properties above. The security amount of the usage right of the industrial land acquired by Chenye Company is RMB15,700,00 and the security amount of slipways and the dock is RMB58,798,000. Jiaolong Company charged a mortgage over M.V. “Rong Ming” but it was not delivered to others. Instead it stayed with Chenye Company. The ownership was registered under Jiaolong Company with the Zhoushan Maritime Administration in accordance with the law on December 1, 2008. The registration has never been changed. The Plaintiff committed no fault in the course of concluding the maximum mortgage contract and handling the mortgage over the ship, therefore it shall enjoy the mortgage right over M.V. “Rong Ming” in respect to the claims above and such right shall be protected. To sum up, the court supports the rational parts of the claims of the Plaintiff. According to the provisions of Article 205, Article 206, and Article 207 of the Contract Law of the People’s Republic of China, Article 173 and Article 176 of the Property Law of the People’s Republic of China, Article 11 of the Maritime Code of the People’s Republic of China, and Paragraph 1 of Article 64 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: 1. The Defendant, China National Electronic Import & Export Ningbo Company, shall return the loan in the amount of RMB77 million, relevant interest in the amount of RMB454,666.66, and the penalty in the amount of RMB283,173.33 to the Plaintiff, Bank of China Ningbo Branch, within ten days after the judgment takes effect. It will also pay the overdue penalty interest on the principal and interests of the loans above counted by the interest rate penalty agreed upon in the contracts from May 23, 2013 to the date of payment designated by this judgment; 2. The Plaintiff, Bank of China Ningbo Branch, shall enjoy the mortgage right over the usage right of the lands (Plot Numbers: 01300102230000, 0130010222 9000, and 01300102506000) located at Qiujiangmen Village, Daixi Town,

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Daishan County owned by Zhejiang Chenye Shipbuilding Co., Ltd., and the three slipways and the dock of the Defendant, Zhengjiang Chenye Shipbuilding Co., Ltd. in respect to the claim confirmed by the first item herein. The security amount of the land usage right is RMB15,700,000 and the security amount of the slipways and dock is RMB58,798,000; 3. The Plaintiff, Bank of China Ningbo Branch, shall enjoy the mortgage right over M.V. “Rong Ming” anchoring at the dock of Zhengjiang Chenye Shipbuilding Co., Ltd. in terms of the claim confirmed by the first item herein. The mortgage right can challenge a third party since December 30, 2010; 4. The Plaintiff, Bank of China Ningbo Branch, shall enjoy the right of preferred compensation from the proceeds of the auction or sale of the mortgaged property in terms of the mortgaged property in accordance with the law. After the Defendants, Zhengjiang Jiaolong Group Co., Ltd. and Zhengjiang Chenye Shipbuilding Co., Ltd., undertake the liability for security, they are entitled to recourse against China Electronic Import & Export Ningbo Company; and 5. The other claims of the Plaintiff, Bank of China Ningbo Branch, shall be rejected. For failure to fulfill the obligation of payment within the period designated by this judgment, the person shall pay double interest on the debt for the delayed period pursuant to Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB431,240, the Plaintiff, Bank of China Ningbo Branch, shall bear RMB750 and the three Defendants shall jointly bear RMB430,490. In case of dissatisfaction with this judgment, any party may within fifteen days upon service of this judgment, submit a statement of appeal to the court, together with copies in accordance with the number of the opposite parties, to lodge an appeal to Zhejiang High People’s Court. [The case acceptance fee of appeal in the amount of RMB 431,240 (the specific amount will be decided by Zhejiang High People’s Court and the extra sum will be returned later) shall be prepaid at the time of submitting the statement of appeal. Where the fee is not paid within 7 days after the expiration of the time limit for appeal, the appeal will be deemed to be withdrawn automatically. Name of Account: Non-tax Revenue Settlement Account of Zhejiang Province Finance Department. Number of Account: 19000101040006 575401001. Bank of deposit: ABC Hangzhou City Xihu Branch. Judge: HU Jianxin Acting Judge: ZHANG Jiansheng Acting Judge: YUAN Nannan June 13, 2014 Clerk: ZHENG Jing

Wuhan Maritime Court Civil Judgment Bo Fu Company (Hong Kong) Co., Ltd. v. Top Logic International Limited (2011) Wu Hai Fa Shang Zi No.00148 Related Case(s) this is the judgment of first instance and the judgment of second instance is on page 63. Cause of Action 208. Dispute over ship repairing contract. Headnote the Plaintiff ship repairer held entitled to recover full cost of ship repairs despite Defendant’s argument that the amount charged was excessive. Summary the Plaintiff sued the Defendant for breach of a vessel repair contract for M.V. “KKG-2.” The total cost for the repairs was 1,076,078.75 USD. The Defendant initially paid 180,000 USD to the Plaintiff, and disputed its liability to pay the remaining 896,078.75 USD, arguing that the cost was excessive. The court rejected the Defendant’s evidence that the cost of repairs was excessive and found for the Plaintiff.

Judgment The Plaintiff: Bo Fu Company (Hong Kong) Co., Ltd. Domicile: Room 1101, 11th Floor, Zhongbao group bld., No.141 Des Voeux, Rd Cent., Hong Kong, China. Legal representative: XUE Bingqiang, chairman of the board. Agent ad litem: LI Zhaoliang, lawyer of Guangdong Huahan Law Firm. The Defendant: Top Logic International Limited Domicile: OMC Chamber, P.O. Box 3152, Road Town, Tortola, British Virgin Islands. Person in charge: LUO Fanghong, chairman of the board. Agent ad litem: GAO Jun, lawyer of Shanghai Duan & Duan Law Firm. Agent ad litem: WANG Jian, lawyer of Shanghai Duan & Duan Law Firm.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_3

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This case arose over a dispute about a ship repairing contract, filed by the Plaintiff Bo Fu Company (Hong Kong) Co., Ltd. (hereinafter referred to as “Bo Fu Company”) against the Defendant Top Logic International Limited (hereinafter referred to as “Top Logic”). On December 15, 2010, Bo Fu Company applied to the court for preservation of maritime claims to arrest M.V. “KKG-2,” owned by Top Logic. The next day, the court rendered Wu Hai Fa Bao Zi No.10 Civil Ruling to arrest M.V. “KKG-2” at Taizhou Port in Jiangsu Province. On January 11, 2011, Bo Fu Company filed an action before the court. The court adopted measures for the preservation of maritime claims and exercised jurisdiction in accordance with the law. The court accepted the case on January 18, 2011, and assigned Acting Judge AN Fu to try this case alone. Due to the complexity of the case, the court executed general procedure afterwards and organized a collegiate panel consisting of Judge ZHANG Jiangshun, Judge DAI Liangqiao, and Acting Judge WANG Wei. The court held hearings in public on April 15, 2011, and November 26, 2012, respectively. XUE Bingqiang appeared as the legal representative of the Plaintiff, and LI Zhaoliang appeared as agent ad litem of the Plaintiff WANG Jian and Gao Jun, appeared in court for Defendant Top Logic, participated in the lawsuit. After the failure of mediation, the trial of this case has been concluded. The Plaintiff alleged that on May 19, 2010, according to the requirement of the Defendant and its operator, Shanghai Chinese-Polish International Ship Management & Broker Company (hereinafter referred to as “Chinese-Polish Company”), the Plaintiff arranged for the ship repair of M.V. “KKG-2” which is owned by the Defendant at Shenzhen waters. The total cost for the repairs was 1,076,078.75 USD. Since then, the Defendant paid 180,000 USD to the Plaintiff. The Defendant owed 896,078.75 USD and interest thereon (interest should be calculated from September 30, 2010 to January 20, 2011, after that it should be calculated to the date of actual payment). Therefore, the Plaintiff requested the court to order the Defendant to pay the Plaintiff ship repair costs in amount of 896,078.75 USD and interest in amount of 14,735.22 USD. The interest should be temporarily calculated to January 20, 2011. After that, it should be calculated to the date of actual payment of the repair costs. The Plaintiff also asserts that the costs of litigation and property preservation shall be born by the Defendant. The Defendant, Top Logic, alleged M.V. “KKG-2” was repaired on waters of Chinese territory. Therefore, the appraisal price should be based on price and practice of Chinese domestic ship maintenance market instead of Hong Kong prices. According to the Assessment Report issued by the assessment office of China Marine Services Co., Ltd. (hereinafter referred to as “CMS”), which was entrusted by the Defendant, the price to repair M.V. “KKG-2” was far below the price claimed by the Plaintiff. The report was lawful and valid, the repair costs should be based on the report. The Plaintiff had presented the following evidence materials within the time limit for adducing evidence: Evidence 1 and 2) Copies of Nationality Certificate and specifications of M.V. “KKG-2”, to prove that M.V. “KKG-2” was owned by the Defendant;

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Evidence 3) Copies of a batch of emails concerning repair that had been notarized, to prove that the Defendant and its operator entrusted the Plaintiff to arrange the service of ship repairing at Shenzhen waters; Evidence 4) Original contract of ship repairs had been notarized, to prove that the Defendant and its operator entrusted the Plaintiff to arrange the service of ship repairing at Shenzhen waters; Evidence 5) Original list confirming ship repairs to M.V. “KKG-2” and its corresponding invoice, to prove that the Plaintiff finished repairs and outline the corresponding costs; Evidence 6) Payment voucher that the Defendant had paid repair costs of 180,000 USD, to prove that the Defendant had paid part of the costs; Evidence 7) Emails in which the Plaintiff requested payment and the Defendant confirmed arrears, to prove that the Plaintiff claimed its right and had been confirmed by the Defendant; Evidence 8) Original of a certificate, prove that the management company of M.V. “KKG-2” entrusted the Plaintiff to oversee repairs and admitted the costs to be reasonable. Therefore, signing the contract had no relation to the actual ship repair and was only to be used by the agent of the ship to handle exemption of tonnage tax; Evidence 9) Invoice of Intide International Limited (hereinafter to as “Intide Company”), to prove the accessories source and price of the Plaintiff’s repair. The Defendant admitted the authenticity of the above Evidence 1, 2, 3, 4, 6 and 7 issued by the Plaintiff while objecting to the probative force. The court finds that the Defendant admitted the authenticity of the evidence. Since the Plaintiff submitted the originals of Evidence 5, 8, 9 or the evidence has been notarized, the court admits the evidence’s authenticity. The Defendant presented the following evidential materials within the time limit for adducing evidence: Evidence 1) Original of enterprise information, to prove that Bo Fu Xin Tai Ship Repairing Co., Ltd.’s (Shenzhen) (hereinafter referred to as “Xin Tai Company”) license was revoked on November, 2007; and Evidence 2) Copy of contract of ship repairs, to prove that the Plaintiff signed a contract with Fa Sai Te Ship Service (Shenzhen) Co., Ltd. to transfer ship repair project that the Defendant entrusted Xin Tai Company to the third party. Yet, such a transfer was but without the Defendant’s agreement. The Plaintiff admitted the authenticity of the evidence given by the Defendant but objected to the relevancy. The court ascertains the authenticity of the above evidence. During the trial, the Defendant submitted Assessment Report. Assessment Report outlined the repair costs of M.V. “KKG-2” between May and August, 2010 at Shenzhen Port (hereinafter referred to as Assessment Report) issued by CMS and entrusted by the Defendant. The Plaintiff alleged that the report was a unilateral assessment entrusted by the Defendant. Therefore, the result of the assessment

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could only constrain the Defendant and not constrain the Plaintiff. Xu Zhang, who issued Assessment Report, has no corresponding assessment qualification of ship repairs and its content was wrong. The authenticity, relevancy, 4 and legality of the Assessment Report were not recognized. With respect to the evidence, the court will certify its effectiveness in the following pages. After evidence hearings and cross-examination, combining with record of the trial, the court finds the facts as follows: On May 19, 2010, LI Chen, employee of CIF International Shipping Co., Ltd. (hereinafter referred to as “CIF Company”) emailed XUE Bingqiang, a legal representative of Bo Fu Company for the terms of repair of M.V. “KKG-2”. On the next day, LUO Bing, employee of the Chinese-Polish Company, emailed XUE Bingqiang. The email outlines: “thank your company very much for repairing the main engine of M.V. “KKG-2.” Now, the ship has left for Shenzhen. Specific time of arrival should be passed on to your company when our company had been notified by the ship. The information of ship specific attachment is for your company reference. Please arrange for appropriate repairman to board and repair the main engine in accordance with the model of main engine in the information of ship. For the other repair projects, our company will send the repair list to your company as soon as possible.” On the same day, XUE Bingqiang responded to LUO Bing that preparation before repair had been arranged. On May 20, 2010, Bo Fu Company (Party A) signed the contract of ship repairing with Fa Sai Te ship service (Shenzhen) Co., Ltd. (Party B). Party B agreed that Party A hired the workman to repair the main engine of M.V. “KKG-2” and that it is expected to close in May. The ship left Hainan to Shenzhen for anchor repair and Party A entrusted Party B to be fully responsible for the repair. The quality of repair was checked and accepted by the ship. The moving part warranty was three months and the fixed part warranty was six months. Party A oversaw the signing engineering confirmation and settlement with the owner. From late May to August 26, 2010, M.V. “KKG-2” was repaired at Shenzhen Lantau anchorage. From August 17 to August 27, 2010, because Lantau was short of the anchorage and major repair projects had been completed, Shenzhen Maritime Safety Administration no longer agreed M.V. “KKG-2” should remain anchored at the anchorage. Therefore, the ship was shifted to anchorage of Zhizhou to be repaired. After August 28, M.V. “KKG-2” was shifted to anchorage of Sanmen Island to be repaired and supplied material due to a typhoon. During that time, CHAI Difu, LUO Bing, employee of Chinese-Polish Company, LI Chen, employee of CIF Company, the Master, chief engineer of M.V. “KKG-2” corresponded with XUE Bingqiang via email and fax to confirm issues like ship repairing project, additional projects, ordering spare parts, and ship material supplies. On May 27, 2010, XUE Bingqiang emailed CHAI Difu, LUO Bing, and LI Chen that M.V. “KKG-2” needed additional supplies. This included a full set of cross head lubricating oil booster pumps (attachment 75-33002), four full sets of cross head through bolts (attachment 5 75-36003) and other parts in attachment 75-32002. The ship’s repair contract was only to be used to handle exemption of tonnage tax by the agent. XUE Bingqiang questioned them to sign and seal soon

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and directly forward the paperwork to the agent. The repair contract attached described that Party A (Chinese-Polish Company) entrusted Party B (Xin Tai Company) to hire the repair work of M.V. “KKG-2”. The scope of the project was based on scope of the repair items in the quoted price. Project costs were 460,000 RMB, and the actual closing costs were to be calculated based on the sign of completion. The period of repair was weather working day of 15 consecutive days. If suffering from force majeure factors, the period of repair would be postponed. XUE Bingqiang, as the representative of Party B, signed the contract and covered the seal of Xin Tai Company on May 23, 2010. After Chinese-Polish Company received the above repair contract as mail attachment, LUO Bing, on behalf of Party A, sealed to confirm and stamped the seal of the ship management department of the Chinese-Polish Company on May 28, 2010. On May 29, 2010, XUE Bingqiang emailed CHAI Difu, and LUO Bing. He stated that: “my company experts and I boarded the ship for further examination on the fifth cylinder and found that 1. The bolt wire of the right side of the connecting rod bearing incurred serious damage.” According to the above phenomenon, a preliminary judgment resulted in the following consequences: 1. the rod bearing was out of shape. Alloys might fall off or strain, the bolt hole was damaged, and the locating pin was cut off. The rod bearing shall be taken to a factory for inspection and corresponding repairs. If it could not be repaired, we need to order spare parts. On the same day, CHAI Difu replied XUE Bingqiang that: “after receiving the email, please have your company arrange to disassemble the connecting rod bearing of the fifth cylinder as soon as possible and tell us the result. With respect to necessary spare parts, please have the technical service personnel of your company search the ship for spare parts first. If there are no spare parts, please inform the two spare parts suppliers that we will be forwarding you the order as soon as possible.” On June 8, 2010, CIF Company pre-paid 180,000 USD in ship repair costs though Bank of China (Hong Kong) Co., Ltd. On June 9, 2010, XUE Bingqiang emailed LUO Bing saying that: “the host free gear box was disassembled yesterday and it was found the situation was very serious because of the damage of more than a few bolts. In the attached drawing 2-sleeve spring assembly, each group consisted of 16 slices and each hole had 2 groups, a total of 28 groups were broken. The drawing 3-stroke limiting bolt*1pc (one piece was broken). 18 sets of cap bolts in the drawing, without numbers, were broken. The accessory had the picture and the drawing of the above spare parts.” During the process of repair, Bo Fu Company ordered the spare parts that included the above spare parts from Intide Company. On June 10, 2010, Intide Company issued invoice No.SP10031F to Bo Fu Company. The invoice indicated that the name of the vessel was M.V. “KKG-2”; the order number was SP0608KKG2-D1; equipment: main engine; model: K5SZ70/125B; manufacturer: MAN. The invoice itemized the encoding, name, quantity, unit price, and subtotal of each spare part. The total of the invoice was 220,723.53 USD. On June 28, 2010, Intide Company issued the invoice No.SP10036F to Bo Fu Company. The invoice indicated that the name of the vessel was M.V. “KKG-2”; the order number was SP0608KKG2-D4; equipment: auxiliary engine; model: VDS26/20AL-20;

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manufacturer: SKL. The invoice itemized the encoding, name, quantity, unit price, and subtotal of each spare part. The total of the invoice was 38,588.44 USD. After being checked by the court, the invoice itemized number, name, and quantity of the spare parts were consistent with the number, name, and quantity of the spare parts itemized in the clearing sheet issued by Bo Fu Company. There were 28 pieces of spare parts that encoded No.33751800131333500, which name was sleeve spring assembly, unit price was 1,824 USD and the total price was 51,072 USD. On June 16, 2010, the North Korean crew of M.V. “KKG-2” all got off the ship and was replaced by the Chinese crew. On June 28, 2010, chief engineer of M.V. “KKG-2” faxed Bo Fu Company maintenance report of No.1 auxiliary lifting cylinder of M.V. “KKG-2” The maintenance report outlined: the ship overhauled the No.1 auxiliary from June 25. The last time of overhauled No.1 auxiliary was February 26, 2009, and working time was 3906 hours. When checking the main bearing shell, it was found that exposed copper had abnormal wear. The crankshaft must be verified in the factory and check the bearing with new parts. Specific circumstances are outlined in photos. The above two main shaft bushes all had severe extrusion deformation. The last repair had a problem with the installation process. The auxiliary engine crankshaft was out of shape. Whereas the above conditions, the reason might be because the auxiliary machine could not work with a heavy load. At the same time, in order to ensure normal navigation, the other 3 auxiliary machines must be arranged by the lifting cylinder inspection. On July 7, 2010, Chief Engineer of M.V. “KKG-2” faxed Bo Fu Company and alleged, according to the result of the test report of the host system oil of M.V. “KKG-2”, the host system oil must be replaced. Since M.V. “KKG-2” changed shifts, No.2 generator voltage regulator had been burned once and now there was a problem with the No.4 generator that failed to set up voltage. According to this series of accidents, there were serious hidden troubles in the generator of M.V. “KKG-2”, which influenced the safety of the ship. Please have the company arrange an expert to diagnose the fault, check, and repair. Otherwise, the ship could not ensure safe navigation. On July 12, 2010, CHAI Difu of Chinese-Polish Company emailed LI Chen to request indication in terms of repair of the generator and renew all the lubricating oil. On July 5, 2010, XUE Bingqiang emailed LI Chen. The email outlined: Shipowner, Mr. LI Chen or Miss Ding, the following report on the repair of M.V. “KKG-2” has been sent to management company related personnel by email. Now, forwarded to you, is the report from our company. 7 Please check the following email and related accessories. Repair costs total 536,525.45 USD. Due to the additional items that continue to be issued to the succession crew, the accurate costs cannot be calculated temporarily. Because the North Korean crew made a lot of difficult problems, the repair costs are estimated to range from 200,000 USD to 300,000 USD. Your company has paid 180,000 USD. Due to our company advance huge funds and difficult turnover, we hope for you to arrange an advanced payment 350,000 USD as soon as possible. On July 6, 2010, Bo Fu Company issued an invoice, item number 2K1006115. The invoice contained ship materials and totaled to 18,421.35 USD. The next day,

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the Chief Engineer and Mate of M.V. “KKG-2” sealed to confirm the corresponding engineering confirmation. On August 3, 2010, Bo Fu Company issued an engineering settlement, item number 2K1006107. The settlement contained marine engineering and deck engineering repairs. Chief engineer of M.V. “KKG-2” signed to confirm the engineering confirmation. On the next day, Bo Fu Company issued a clearing sheet and invoice with the content of the repair costs to the engineering of marine and deck, totaling to 77,784.60 USD. On August 3, 2010, Bo Fu Company issued engineering confirmation, item number 2K1006112. The engineering confirmation contained the second stage after the crew shifted. Chief Engineer and Mate of M.V. “KKG-2” signed to confirm the engineering confirmation. On the same day, Bo Fu Company issued an invoice, item number 2K1006112. The invoice detailed repair costs to the engineering of marine and deck, totaling 345,493.80 USD. On August 5, 2010, Bo Fu Company issued engineering confirmation, item number 2K1005098. The engineering confirmation contained the repair of the host free gear box, the repair of 5 cylinder of host, supply spare parts, and general service. Chief engineer of M.V. “KKG-2” signed to confirm on the engineering confirmation. On the same day, Bo Fu Company issued clearing sheet and invoice, item number 2K1005098. The invoice corresponded to the costs of repair and supply for items in the engineering confirmation, totaling 496,374 USD. On August 28, 2010, Bo Fu Company issued engineering confirmation, item number 2K1006115ADD. The engineering confirmation contained the ship material/fuel and additional repairs. Mate of M.V. “KKG-2” signed to confirm the engineering confirmation and annotated that there was a leakage in host 1 cylinder. After three times of dismounting and welding, failing to weld, it was determined that the leakage was serious. On September 19, 2010, Bo Fu Company issued invoice, item number 2K1006115ADD. The invoice contained ship material/fuel and additional repairs totaling 118,655 USD. The second repair costs of the leakage of the 1 cylinder block was 4,000 USD, and the third repair costs was 13,000 USD. On September 25, 2010, LI Chen emailed XUE Bingqiang. The email outlined that: “I have received your mail and transfer to the leadership of the company. I will reply to you after an indication has been given by the company. The Master of M.V. “KKG-2” applied auxiliary lubrication oil and fresh water, as described below. Please help us again to do a good job of the above supply for us. Please confirm with the Master for the model of auxiliary lubrication oil. The offer is confirmed by me.” On September 29, 2010, LI Chen emailed XUE Bingqiang. The email outlined: “Confirming the offer, my colleague, Ding, will arrange payment as soon as possible, totaling 18,800 USD.” On September 30, 2010, Bo Fu Company issued two engineering confirmations, numbers 2K1009168 and 2K1009168. The content of the engineering confirmations included the phone recharge, copy of documents, and the mail for the ship. The West anchorage of the San Men island of Shenzhen supplied fresh water and oil. The Master of M.V. “KKG-2” signed to confirm the engineering confirmation and stamped the seal of M.V. “KKG-2”. On the same day, Bo Fu Company issued two invoices, numbers 2K1009168 and 2K1009168. The

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invoices stated that the above expenses were 550 USD and 18,800 USD, respectively. On October 28, 2010, JIANG Yongfang, employee of CIF Company, emailed XUE Bingqiang. The email stated that: “with respect to repair costs of M.V. “KKG-2”, according to the arrangement of our company, we plan to pay 200,000 USD to your company to allow the ship to keep sailing. With respect to the total costs, we sincerely hope that your company will seriously consider the future long-term cooperation of the two companies and consider giving a certain discount once again.” On December 1, 2010, LI Chen emailed Xue Bingqian. The email stated that: “we are very sorry for delay of the costs. Now, we need to submit the application for repayment to the headquarters. Please consider our funding difficulties, and whether the lowest limit of repayment can be given.” On the same day, JIANG Yongfang emailed XUE Bingqiang. The email stated that: “as you know, the plan to sell the M.V. “KKG-2” is true. With respect to the owed company repair costs of the ship, the leadership of headquarters have clear instructions to arrange payment. We hope your company can be assured and understands. Our company cannot accept the commitment of the payment proposed in the attachment by your company. The arrangement of payment must be conducted after the funds of the selling ship are in place. We still hope that your company will consider the future cooperation of two companies and give a maximum discount convenience to solve the problems as soon as possible.” On December 7, 2010, LI Chen emailed XUE Bingqiang. The email outlined that: “with respect to the accident of the 5 cylinders of M.V. “KKG-2” on May 13 of this year, we have submitted the information to the insurance company. Thank your company for your support at that time. At present, Shuang Xi Adjustment Company and insurer still lack the following documents: 1. 2. 3. 4. 5.

Clearing sheet of spare parts of the damaged machine; Receipt of spare parts of the ships; Clearing sheet of outsourcing project; Receipt of completion; and Proof of suspension of shipping.

Attachment in the mail was the claim of main engine fault of M.V. “KKG-2” on May 13, 2010. against the People’s Insurance Company of China. The claim stated that M.V. “KKG-2” loaded iron ore transported from BANDAR ABBAS of Iran to Nantong Port of China. Due to the fault of the main engine at 14:20 on May 12, M. V. “KKG-2” temporary anchored at Haikou port for inspection and repaired at the anchorage of Shenzhen. It was repaired on July 28. The costs of damage are as follows: port charge of Haikou was 46,700.80 RMB. Costs of inspection and boarding the ship of technical personnel was 19,500 RMB. Port charges of Shenzhen and travel expenses of management company personnel was 30,799 RMB. Repair costs of the accident were 943,656 USD. Attachment includes the bill of repair costs of Bo Fu Company.”

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During the process of the lawsuit, the ship management department of the Chinese-Polish Company issued a certificate on April 12, 2011. The certificate stated our company was the management company of M.V. “KKG-2,” and two parties signed the management contract of entrustment. Our company entrusted Bo Fu Company to arrange the repairs of the ship involved in the case and outlined repair costs shall be paid by shipowner, Top Logic. The shipowner had previously made the advance payment 180,000 USD to Bo Fu Company. Our company received the bill of repair costs involved in the case by email at 14:03 on October 21, 2010, and thought the costs were reasonable. Finally, after consultation between the shipowner and repair party, the total costs were determined and directly paid by the owner to the repair party. In order to save the costs of the shipowner, there was no tonnage tax during anchor repair. Our company was entrusted by the shipowner to sign a contract of repair with Xin Tai Company. Before the contract had been signed, it had been stated in the mail at 15:58 on May 27, 2010, that the contract was only used by an agent to handle the tax exemption. Additionally, M.V. “KKG-2” was sent to an agent directly, so the contract had no relation to actual ship repairs. On June 7, 2011, Chinese-Polish Company issued the statement of situation. The statement of situation stated that, with respect to M.V. “KKG-2” the case of dispute was over the ship repair of M.V. “KKG-2” and the supply contract. The ship management department of our company issued a certificate on April 12, 2011. Now, our company makes the following instructions in terms of the certificate: According to the ship management agreement signed by our company and Top Logic, our company has no agency authority to confirm and recognize repair costs. This instruction replaces the above certificate of ship management department of our company. Our company again states that the repair costs of M.V. “KKG-2” shall be decided by the shipowner and repair party after consultation. Our company will not offer an opinion or proof. During the trial, Top Logic entrusted CMS to assess the repair of the vessel involved and other expenses. CMS reviewed the price claimed by the Plaintiff in the clearing sheet on the basis of the engineering confirmation sealed to confirm by M. V. “KKG-2”, and the clearing sheet provided by the court. On November 10, 2011, CMS requested to Bo Fu Company and the agent ad litem to provide information of the corresponding specifications, model, and materials of related spare parts. There was no answer. On December 8, 2011, CMS issued Assessment Report. The second part of report described that the time of repair was from May 24, 2010 to August 5, 2010. M.V. “KKG-2” was repaired for a total of 73 days at Shenzhen Lantau anchorage. The main principle of appraisal price for the third part: 1) checking the price according to the part that was available to be referred in Yellow Book 92, and Blue Book 93. Estimators mainly adopted a rise to K = 1.2 of the price of Yellow Book 92 to check the price of repair costs of the ship based on the market of repair of foreign ships in domestic; 2) respecting the fact of fluctuation of ship repair market and connecting with the market of ship repairing in domestic; 3) connecting with practical experience of ship repairing and deducting the items that should not be

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charged and the items that are charged repeatedly; and 4) other principles of assessment. Secondly, the results of the Assessment of Repair Costs of the clearing sheet in the fourth part stated that clearing sheet 2K1005098 listed a large number of catalogues of spare parts, and the item that was supplied by Bo Fu Company was repeated in the list. Therefore, the total price of this group of spare parts was 223,835.20 USD and it had been charged. Estimators alleged that the costs of bolts, nuts, sealing rings, and shims should be deducted from the above costs of spare parts because the costs of these spare parts had been included in the original costs of repair. Without a detailed description of the parts in the clearing sheet, estimators, according to practical experience of ship repairing, deducted the costs of spare parts that had been included by 20%. Namely, they deducted the costs of spare parts according to K = 0.8. For example, the “casing spring” parts were repeated in P4-9 of item 2K1005098 and P32-7-2 of item 2K1005098. Therefore, the latter costs should be deducted (the costs was 51,072 USD). After deducting the repeated part of “casing spring” from the actual costs of spare parts, and considering the 20% deduction factors of spare parts, the result of price checking of the costs of spare parts, without dimensions, models, specifications, or invoices was (223,835.2-51,072) * 0.8 * 6.7715 = 935,892.80 RMB. (1:6.7715 was the rate exchange of USD and RMB on August 4, 2010). The casing spring listed by Bo Fu Company at P4-9 of referenced item 2K1005098 was 14 sets in total including 28 groups with 16 pieces in each group. All spare parts were replaced due to strong elasticity. The quantity of the new special tool installed was 448 pieces, and the total price was 4,480 USD. The Assessment Report adjusts the cost to 15,680 RMB. The name of 11 P32-7-2 (spare parts) of item 2K1005098 was casing spring No.33751800131333500. The unit price was 1,824,28 USD for sets and the total price was 51,072 USD. Thereby, it was calculated according to Yellow Book 92 and the reasonable repair costs of M.V. “KKG-2” was 2,080,337.3 RMB + 935,892.8 RMB = 3,016,230.1 RMB. The result of the fifth part of the Assessment Report, according to “2001 green” was 2,534,393.7 RMB + 935,892.8 RMB = 3,470,286.5 RMB. The sixth part “conclusion” held that: 1. The unit price of repair in clearing sheet was generally higher than the market price of ship repair. Due to the impact of the international financial crisis, the global shipping market collapsed. Considering the index of freight of Baltic for example, the BDI index rose to a record high of 11,793 points on May 20, 2008. It then plummeted to late July 2010, when the BDI index was 1,869. This was only 15.8 of the highest point. The upheaval in the market of shipping also brought a huge impact on the international and domestic market of ship repair. To cope with changes in the international and domestic market, the shipbuilding enterprises lowered the price of ship repair and maintenance operation. It did not show the huge changes of the market of ship repair in the clearing sheet of M.V. “KKG-2” issued by Bo Fu Company. The offer was clearly too high. Taking the first repair costs of the No.5 cylinder of the main engine of M.V. “KKG-2”, which was shown in the clearing sheet for example, the repair costs of cylinder

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3.

4.

5.

6.

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head, piston, and connecting rod of the item was 74,380 USD. Comparing with the repair quotation of Shanghai Metalock Co., Ltd. (hereinafter referred to as “Metalock Company”) engaged in the repair of main engine of ship, total costs of refurbishing the cylinder head, piston, and piston rod guide surface was about 80,000 RMB. It was 15.9% of the latter, which was far below the price claimed by Bo Fu Company; Lots of charging items in the clearing sheet were unreasonable and did not meet the practice of charges of ship repair. Many charges of process and repair services were found in the clearing sheet. While the costs of process and service of repair process had been included in the total costs of repair, it was no longer charged separately, whether in Yellow Book 92, Blue Book 93, or in practice of charges of ship repair. Additionally, item 2K1005098 of the clearing sheet covered professional factory assistance of repair of the No.5 cylinder of the main engine and the charge of hiring experts to determine the scope of repair. Costs of experts were as high as 6,000 USD. In the actual ship repair, in respect of professional engineering that cannot be repaired by the shipyard, the shipyard should put forward to the owner first. After asking for permission, the shipyard should find a professional factory to repair the ship together with the owner. When the repair project has been entrusted to a professional factory to repair, the repair project should be confirmed by the professional factory. The shipyard should not hire experts to participate in the repair activities so that costs should be deducted from the clearing sheet; The clearing sheet contains a large amount of costs of spare parts. Meanwhile, specifications, models, materials, and the size of most of spare parts are not clearly described in 12 the clearing sheet. As an issuing unit of the clearing sheet, Bo Fu Company is supposed to have the information, specifications, models, materials, and invoices of the spare parts and should provide these materials; Charging a fee of spare parts, like bolts, nuts, sealing rings, and shims in the clearing sheet, does not meet Yellow Book 92 and Blue Book 93 or practice for charges of ship repair. In the ship repair, spare parts like bolts, nuts, sealing rings and shims should be included in the total costs of repair of the equipment and should not be charged separately. Charging the costs of repair and costs of spare parts in the clearing sheet are repeatedly charges which should be deducted; Clearing sheets that show the process of ship repairing in the shipyard was unreasonable. In item 2K1006112 of clearing sheet, the high-pressure oil pump was disassembled to repair twice. In the normal ship repair, when there are no spare parts or spare parts have not arrived, the repairs should not be carried out. It should carry out repairs when all spare parts have arrived and should not be charged repeatedly. Therefore, the estimator should deduct these unreasonable charges; and Although two results have been given by Assessment Report based on the valuation of the market price and Green Book 2001, the estimator thinks it is more objective on the basis of valuation of market price. Due to the downturn

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and increased competition of the domestic ship repairing market in the past two years, it is difficult for foreign ships to make a quotation in accordance with Green Book 2001. Therefore, they often make a quotation in accordance with Yellow Book 92, Blue Book 93, and market price. The estimator thinks the mode of appraisal for the price is more objective based on Yellow Book 92, Blue Book 93 and market price than Green Book 2001. In conclusion, after reviewing the engineering confirmation that was signed by the crew on board provided by the client and clearing sheet provided by the court, the estimator thinks that the reasonable costs of repair of M.V. “KKG-2” at Lantau of Shenzhen port from May 24, 2010, to August 5 was 3,016,230.1 RMB. Attachments included that: Attachment 1) The result of appraisal of price on the basis of Yellow Book 92, Blue Book 93, and market price; Attachment 2) The result of appraisal of price on the basis of Green Book 2001; Attachment 3) The repair quotation of Metalock Company; and Attachment 4) The express sent by our company to Bo Fu Company. Attachment 1 and Attachment 2 list the names and encode the spare parts relating to the engineering settlement item 2K1005098 from page 13. It lists the name and encodes the spare parts supplied by Bo Fu Company from page 23. After comparison by the court, the name and encoding of the listed spare parts are the same. The appraiser believed they were charged repeatedly and did not conduct an appraisal of price of spare parts. The cost of these parts claimed by Bo Fu Company was 21,210 USD. Attachment 1 includes the cost of assembly, disassembly, and inspection of the cylinder head of No.5 main engine and was checked as 892 RMB. The costs of disassembly and inspection of the front and rear main bearing of No.5 cylinder was checked as 2,260 RMB. Attachment 2, the costs of assembly, disassembly, and inspection of the cylinder head of No.5 main engine was checked as 3,230 RMB. The costs of disassembly and inspection of the front and rear main bearing of No.5 cylinder was checked as 3,480 RMB. The subsidiary costs of coordinating the operation of transporting the ship that was claimed in Attachment 1 and Attachment 2 by Bo Fu Company was 1,000 USD per day. The total was 73,000 USD and was checked as 73,000 USD. The repair quotation by Metalock Company in Attachment 3 was a copy and was therefore not covered by the seal of this company. The content was a refurbished price of each type of piston, cylinder head, piston rod, and valve seat. Estimators of the above Assessment Report are Xu and Zhang. Xu was appointed as an expert from a maritime consultation expert database by Shanghai technology consulting service center on January 2007. Xu was granted Senior Engineer of ship repair management of engineering series by Shanghai shipping (Group) on December 1993. Zhang was granted senior engineer of hull specialty of engineering series on November 2007 and passed the insurance assessment practitioners qualification examination of Organization of China Insurance Regulatory Commission on December 2000. The CMS shortlist of the people’s court judicial appraiser list

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has been announced by People’s Court Daily on May 22, 2003, and the identification category is marine inspection, maritime assessment. Zhang did not appear in court after notice by the court. Xu (citizen identification number: ) appeared at court to accept inquiry by two parties. Xu alleged that he had participated in the checking and deciding of Blue Book 93 of the Ministry of Transport, and participated in written and checking. He participated in the deciding of Green Book 2001 and was familiar with price regulation and market quotation. When accepting inquiry, Xu answered that: “the signature in Assessment Report was signed by Zhang. Assessment Report, written by both, Zhang helped revise. I did price verification. It needs to provide dates like the specific model and quantity when ordering the spare parts from the seller of spare parts. It was unclear as to how long it will take the ship to go from the Lantau anchorage to Shekou port. Repairing in Lantau anchorage belonged to shop repair. Yellow Book 92 is applicable to the dock and shipyard repair, yet it is 14 without a single price of marine repair. According to the illustration of Yellow Book 92 and Green Book 2001, incidental engineering costs will not be calculated separately.” The casing spring in the report was used for “demodulator” (English original is Detuner, translation is demodulator translated by Shenzhen Sea Translation Co., Ltd. provided by the Plaintiff). Since Bo Fu Company failed to provide the parameter, it was impossible to describe the general shape of the casing spring. “Abnormal repair” refers to doing a rushed repair. This case belongs to normal repair. During the trial, the court questioned Bo Fu Company to explain the two instances of repairing the high pressure oil pump in the clearing sheet item No.2K1006112. XUE Bingqiang answered: the high pressure oil pump of the ship was bought from Germany. Since the generators on board could not use it, I had found a professional company to do a repair of disassembly and inspection to let the generator operate first, then I will change it when spare parts come. My job was to guarantee the safety of the ship, not to repeat the repair. If I repeated a ship repair, the owner would not sign and approve. The estimator proposed that there was no situation where the three auxiliary engines broke down at the same time. Yellow Book 92, provided by CMS, is a price list for domestic civil ships. The instructions stated that: 1) This price list is compiled by calculations and refers to the historical date of the general corporation system of the Chinese shipbuilding industry. This, combined with the actual situation of ship repair products and the current market price level, is used by all units of the company’s system; 2) This price list is only used for the repair of a civil conventional ship. The repair price of marine drilling platforms, engineering ships, and special facilities of other special ships shall be calculated additionally; 3) The material costs of the project’s materials that are included in the price list are calculated based on 91 current prices. In the case of material market prices having a big change, each plant may adjust the price differentials aspect appropriately according to the actual situation;

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4) Each item description of the price list has clearly defined the scope of repair and change. The costs of incidental engineering, possible renewed components, and special tools, molds, tires, or special equipment for construction process shall be calculated additionally; 5) Any single technical service, costs of fuel injector for diesel engines, high pressure oil pump, governor, ice machine, and air conditioning can rise appropriately; 6) Various specifications listed in the price list, between two specifications, shall be calculated by whichever is the higher; 7) When the coefficient of each part in the price list shows up at the same time, it should be calculated after adding up the coefficient; 8) The price listed in the price list is a factory price; 9) Factory entrusts external units to process, borrow equipment, purchase equipment and so on. It shall be calculated based on the actual costs of the factory, adding transport fees, management fees, statutory profit, and taxes; 10) This price list is only used for plant operations. The costs of operations out of the factory and travel construction shall be calculated additionally; and 11) This price is applied to daily work on normal working days. The owner should offer overtime pay if he is in a hurry to execute work. The Green Book 2001, provided by CMS, is a price list for repairs of domestic civil ships of the China Association of National Shipbuilding Industry. Its description part states: 1) Valuation currency of repair of state ship within the price list is RMB; 2) This price list is only used for normal working hours. Namely, 5 days a week and 8 hours a day. Repairs on statutory holidays and shipyard holidays are requested by the owner and requires overtime pay; 3) This price list is only used for shipyard plant construction. The costs of repair not in a shipyard and dock, harbor, anchorage, and sailing of the ship shall be increased according to specific projects; 4) The costs of service and repair of abnormal ship repairs in the shipyard shall be calculated additionally; 5) The shipyard will not be responsible for the damage caused by war, earthquakes, and other force majeure incidents; 6) Except for the important mechanical parts, propeller, and tail shaft, all removed waste material in repair of the ship shall belong to shipyard; 7) This price list is only used for repair of a gross tonnage in excess of 1,000 tons (including 1,000 tons) of transport vessels and fishing vessels. Repairs of under 1000 tons of transport vessels and fishing vessels shall be performed with reference to the above. Repair of other special ships are not in the range of the price list;

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8) This price list shall take effect on June 1, 2001. In the case of material prices and changes in exchange rates, the China Association of National Shipbuilding Industry reserves the right to adjust prices without notice; 9) Since the day in which the price list takes effect, the price list of ship repairs is formulated and used by domestic departments. Units would also stop being used at the same time. The court also finds that the cost of the 700 mm cylinder head assembly and disassembly regulated by Yellow Book 92 is 743 RMB. The cost of 500 mm piston assembly and disassembly is 1,005 RMB. The cost of the main bearing assembly and disassembly is 942 RMB. Cost of the 700 mm cylinder head assembly and disassembly regulated by the Green Book 2001 is 3,230 RMB. Cost of 500 mm piston assembly and disassembly is 4,800 RMB. The cost of main bearing assembly and disassembly is 1,740 RMB. Illustration (page 14) of Yellow Book 92 of marine engineering regulates that, if it needs to be repaired, the price for the change to a new one shall be calculated additionally. Pages 14-18 regulates that the cost of the cylinder head changing for replacement shall be calculated additionally. The cost of cylinder head auxiliary valve assembly and disassembly does not include the costs of changing the shim between the valve and cylinder head. The cost of changing the spare part of piston rings, and the bedding-in gap of the piston ring shall be calculated additionally. Disintegration of the piston to measure pressure does not include the cost of shim and replacement of a sealing ring. Cylinder sleeve assembly and disassembly does not include copper pad bed and the replacement of the rubber ring. Article 3 of general Blue Book 93 regulates that the artificial price and the material price should be listed separately. The Port of Registry for M.V. “KKG-2” is Panama. The call sign is H8HP, the owner is Top Logic, the overall length is 173.5M, the breadth is 23.05M, the depth is 13.7M, the gross tonnage is 15,893 tons, the net tonnage is 8,092 tons, the model number of the Main Engine: MANK5SZ70/12510330BHP. M.V. “KKG-2” was built in Germany and completed in 1985. The court also finds that the parity rate of USD to RMB was 6.6936 on September 29, 2010. When Bo Fu Company applied for the preservation of property to the court, it paid an application fee for preservation of property amounting to 5,000 RMB, and assisting costs in execution were 15,000 RMB. In the trial of this case, both the Plaintiff and the Defendant claimed to apply the law of the People’s Republic of China. The court holds that this case is the dispute of ship repairing contract. The Plaintiff is a Hong Kong legal person, the Defendant is a foreign legal person, and the ship repaired is a foreign vessel. Therefore, this case is a foreign-related civil dispute. Both parties alleged the application of Chinese law and that the case complies with the provisions of the relevant conflict rules of China. Chinese law shall be the governing law to settle the disputes in this case.

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The main outstanding issues in this case are that: 1. Whether the relationship of a ship repair contract between the parties is valid; 2. How to ascertain the repair costs. The legal relationship between the Plaintiff and the Defendant: the Defendant questions the subject qualification of the Plaintiff and argued that there was no repair contract between the Plaintiff and Defendant since the party who signed the repair contract with the Defendant was Xintai Company. The court confirms the establishment of a repair contract relationship between the Plaintiff and Defendant. The reasons are as follows: 1. Large quantities of e-mails and faxes between Chinese-Polish Company employee LUO Bing, CHAI Difu, and CIF Company employee LI Chen, JIANG Yongfang, as well as M.V. “KKG-2”’s the Master, crews and legal representative of Bo Fu Company XUE Bingqiang prove the establishment of a ship repair contract relationship between the two sides. These corresponding emails have complete attachments and form a complete chain of evidence. Related confirmation letters of the project have also been recognized by Top Logic. The court can identify the authenticity and relevancy of these e-mails. 2. The ship management department of the Chinese-Polish Company and the Chinese-Polish Company issue two certificates to declare that the management company of M.V. “KKG-2” is the Chinese-Polish Company who entrusts the Plaintiff to be responsible for the ship repair while repair costs should be paid by the Defendant. 3. The proof provided by the ship management department of Chinese-Polish Company and the emails sent by XUE Bingqiang to CHAI Difu, LUO Bin, and LI Chen on May 27, 2010, prove that the owners of the ship entrusted Chinese-Polish Company to sign a repair contract with Xin Tai Company. The contract is only used for the handling exemption of tonnage tax by the agent and is sent directly to the agent, which is not related with ship repair. 4. On June 8, 2010, CIF Company directly paid 180,000 USD to the Bo Fu Company for ship repair. Although the court cannot judge the relationship between the CIF Company and the Defendant Top Logic, from existing evidence, the Chinese-Polish Company questioned the CIF Company for instructions for the ship repair. CIF Company paid the ship repair costs and CIF Company’s LI Chen and JIANG Yongfang connected with Bo Fu Company. This proves that CIF Company is the actual controller of M.V. “KKG-2”. CIF Company paid the repairs on behalf of the Defendant and the payee is Bo Fu Company. This proves that CIF Company recognizes that Bo Fu Company is the repair party. Although the Plaintiff and the Defendant do not have a written contract, the parties establish the offer and acceptance process, and establish a repair contract relationship through messaging. The contract is not contrary to mandatory provisions of Chinese Law and it is valid. Therefore, the parties shall be in accordance with the contract and full performance of the contract obligations prescribed by law. After conclusion of the contract, the Plaintiff

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organized manpower and materials to complete the Defendant’s ship repairs and provided supplies. Such actions are confirmed by the Chief Engineer and the crews of M.V. “KKG-2”’ signed off on the actions. Driving away safely after the repair, the Defendant has not contested the repair quality, or supply issues. The Plaintiff also has no breach in the performance of the contract. The Defendant should be required by law to pay the appropriate fee for repairs, and supplies. Secondly, there is confirmation of the repair costs. The Plaintiff asserts that the Defendant accepted their offer of repair costs in an e-mail message, but the Defendant, In trial, denies acceptance and claims that the repair costs asserted by the Plaintiff are not in line with market prices. In the first hearing, the Defendant claimed that the repair costs should be assessed. During the second hearing, according to the Assessment Report, the Defendant argues that the repair costs asserted by the Plaintiff are too high. Therefore, the identification of the report is essential in this case. For the various aspects referred to in Assessment Report, the court finds as follows: 1) The nature of the assessment. The court permitted the Defendant’s application for an assessment of the repair costs involved after the first hearing. Afterwards, the Defendant entrusted CMS to do the assessment and CMS issued Assessment Report. The assessment in the proceeding is an application of science, technology, or expertise for solving the specialized issues and providing assessment. This assessment belongs to judicial expertise. 2) The delegate body. The Plaintiff claims that the assessment is entrusted by the Defendant and cannot restrain the Plaintiff. The court holds that the parties have rights to entrust qualified appraisers and institutions to identify specific matters unilaterally. Identification can be entrusted by one party or both parties. The Court has no direct impact on the effectiveness of judicial expertise conclusions. 3) The subject of identification. Subject of identification includes institutions and experts. The identification institution referred to in this case is CMS, and the appraisers are Xu and Zhang. The Plaintiff held that CMS was not a judicial institution because it did not have forensic intelligence. According to the Decisions on forensic issues issued (hereinafter referred to as the Decisions by the National People’s Congress and Registry Management for Judicial Authentication Institutions), the Registry Management for appraisers issued by the Ministry of Justice and judicial authentication institutions must hold judicial authentication licenses. Appraisers must also hold judicial appraiser licenses. Therefore, CMS, Xu, and Zhang cannot submit relevant documents, and their subject qualifications are illegal. The court holds that the decisions regulating the scope of the register management on judicial authentication institutions and appraisers of the judicial administration department under the State Council is restrained by the items listed in Article 2 of the Decisions: 1) Forensic identification class; 2) Material evidence identification class; 3) Identification of audiovisual materials; 4) Other matters that need to be registered and regulated by The Supreme People’s Court, Judicial Administration Department under the

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State, and The Supreme People’s Procuratorate. The identification in this case does not belong to the first three of the above involved identification. The fourth identification register should be ascertained by The Supreme People’s Court and Judicial Administration Department under the State, but Registry Management for Judicial Authentication Institutions and Registry Management for appraisers are not related with the fourth identification, so the identification in this case cannot be restrained by aforementioned regulations. CMS is listed in the roster of forensic appraisers of People’s Court announced on May 22, 2003 and its identification categories are maritime inspection and the maritime assessment. The Supreme People’s Court has not repealed the roster, therefore the court recognizes CMS’s qualification of judicial authentication institution. It does not violate the provisions of judicial interpretation that the Defendant entrust this company to identify the repair costs. According to Article 4 of the Decisions on forensic issues, forensic appraisers should have senior professional titles, licensing, or related experience. The identification in this case belongs to value identification, therefore appraisers should have senior professional titles, licensing, or experience related with value identification. The court finds that Shanghai Science and Technology Consulting Service Center hires Xu as a maritime consultant expert. Xu has the certificate of ship repair management engineer but it cannot prove that he has the qualification of value identification. Therefore the court cannot recognize Xu as a value identification appraiser. Since insurance assessment is related to the damage of the subject of appraisal, Zhang has the ship engineer qualification and passes the examination of insurance assessment. The court recognizes Zhang as a value identification appraiser but this qualification is limited to identify the price of the subject of insurance. 4) The obligations of appraiser to appear in court. According to the Article 59 of Regulations, relating to civil procedure evidence enacted by the Supreme People’s Court, the appraiser shall appear to accept the question. As an appraiser, Zhang does not appear in court to answer questions and fails to carry out the obligations of appraiser. Xu who appears in the court does not 20 have the qualifications of appraiser. Therefore, this evaluation report contains obstacles in trial cross-examination and identification. 5) The materials of identification. The materials that the appraisers use to evaluate the claims in this case are a letter of project confirmation signed by the person who was on the ship when the repair occurred and is supplied by the Defendant and the clearing sheet supplied by the court. The Defendant argues that since M. V. “KKG-2” has been auctioned and dismantled when the evaluation occurred and on November 10, 2011, CMS questioned Bo Fu Company and agent ad litem to supply the information of specifications, models, and materials of related parts. Yet, these two companies have not responded to the question. The appraisers of CMS cannot board M.V. “KKG-2” to find the condition of the ship technology and participate in the repair of this case. For the above reasons, it is fair that the appraisers evaluate the price of the ship repair with the letter of project confirmation, the clearing sheet, and the domestic ship repairing practice.

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The court believes that the appraiser cannot find the details of repair solely by these documents, but these details can influence the identification of the appraiser. The Defendant asserts that the evidence that proves facts should be supplied by the Plaintiff, but the court disagrees. Firstly, the e-mails between the parties have reflected the details of repair. Before the first hearing, the court sent the e-mails supplied by the Plaintiff to the Defendant and some of the e-mails were from Chinese-Polish Company and CIF Company. The Chinese-Polish Company is the Defendant’s ship manager. Therefore, the Defendant can verify and supplement details of the e-mails and learn about the repair procedure. For example, on May 27, 2010, there were a set of crossed lubricating oil pumps in Attachment 75-33002. Four sets of cross heads go through bolts in attachment 75-36003 (no spare parts number) and others in attachment 75-32002 are referred to in the e-mails from XUE Bingqiang to CHAI Difu. In the Attachments, there are printed drawings of machine parts described as DMR icon and encoded as 75-33002, 75-36003, and the corresponding number, name, code. If appraisers read these e-mails carefully, they can find the details of repair, the shape, and the code of parts. Secondly, when the ship is repaired, the manage letter of ship repair should be provided by the client, who also needs to provide the relevant drawings and other technical information, including information on spare parts. That means, as the client, the Defendant needed to preserve the relevant technical information by themselves. The XUE Bingqiang’s e-mails and attachments includes drawings that are all from the ship. The Defendant accepts that there are some disputes about the repair costs referred to in this case. It does not meet the rules of evidence that the Defendant dismantles the ship without preserving relevant materials and then question the repairer for these materials. Thirdly, the Engineering Confirmation has indicated codes of related spare parts. These codes are not made by the Plaintiff but supplied by the ship on the drawings corresponding to devices numbers. As a specialist of ship repair, the appraiser should know the name and the uses of the devices corresponding to the code. When the Plaintiff purchases spare parts, the Plaintiff does not have to inform the seller of models and specific data. The court inspected the invoices issued by 21 Intide Company. The spare part codes listed on the invoices are consistent with the Plaintiff’s cite. The Plaintiff’s statement is more credible that spare parts can be purchased only with codes. Based on this, the court holds that the Defendant’s claim, that the appraiser’s appraisal information is incomplete and that identification can only rely on both the Engineering Confirmation and the letter of settlement, cannot be established. The incorrect identification is due to the incomplete materials based on the Plaintiff’s errors. 6) The basis for identification. The identification conclusion made by the appraiser for evaluating the value of M.V. “KKG-2” is based on Yellow Book 1992. Green Book 2001 is used for reference. The court holds that using Yellow Book 1992 and Green Book 2001 as reference documents cannot reflect the market

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price at the time of repair and evaluating the repair costs should consider some other indexes and factors. The reasons are as follows: firstly, since the subjects of the ship repair contract are foreign legal persons and the ship is a foreign ship, the international market price of ship repair should be the reference of the evaluating price. Yet, the evaluation report does not refer to the international market price. Secondly, as we all know, the ship repair prices vary greatly in the past 20 years. The domestic repair price is used as the basement of evaluation. The ship-repair market of the second half of 2010 should also be considered. The ship-repair market of 2001 is different from the ship-repair market of 1992 and different from when Green Book 2001 was made. By the comparison, similar repairs in Green Book 2001 are increased to several times than those in Yellow Book 1992. For example, a 700 mm cylinder head disassembly in the former is 3,230 RMB, which is 3.35 times more than the latter 743 RMB. Additionally, a 500 mm piston disassembly in the former is 4,800 RMB, which is 3.77 times more than the latter 1,005 RMB. The Appraiser does not fully demonstrate that the market price of ship repair in 2010 is equal to the market price in 1992 or 2001. The appraiser uses the market price in 1992 and the market price in 2001 as the basement of evaluation instead of multiplying the corresponding coefficient of price variation, which is unconvincing. Third, the ship repair referred to in this case is in anchorage, but the price forms in Yellow Book 1992 and Green Book 2001 apply only to the factory repair. It is regulated clearly in the instructions of Yellow Book 1992 that this price form applies only to the factory repair and the prices of out-factory work and travel-construction are calculated separately. It is also regulated in Article 3 of the instructions of Green Book 2001 that this price form only applies to the factory work. The repair costs of non-shipyard, loading and unloading dock in port, buoy, anchorage, and voyage would be increased according to the construction. Attachment 1 and Attachment 2 of the Assessment Report do not take this factor into account. Using the factory repair costs to evaluate the anchorage repair costs is incorrect. The court holds that a reasonable evaluation should use Yellow Book 1992 or Green Book 2001 as reference. They should use them to multiple the respective coefficient of price variation, and markup coefficient of anchorage repair to determine the coefficient of foreign ship repair and take the international market price into account. 7) The content of Assessment Report. The Assessment includes two parts: the text and the Attachments. The assessment review of the court on the main text and some of the annexes are as follows: (1) In the second result of Part 4 of Assessment Report on repair costs, the 2K1005098 project in the clearing sheet contains a spare parts list with a large number of parts. The spare parts supplied by Bo Fu Company are also listed in this project. The total price of these spare parts is 22,3835.20 USD and these spare parts have been paid for. The appraiser claims that the total repair costs contain the costs of bolts, nuts, seals, gaskets, etc. Therefore, the costs of these spare parts should be deducted. Since the clearing sheet

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has no detailed description for these parts, the appraiser deducts 20% of the spare costs according to actual repair experience. After the court’s verification of the project, 2K1005098 starts from the page 13, and the name of spare parts and codes appear in the project repeatedly. They are listed in the install-control spare parts and the spare parts supplies separately. In this regard, the court holds that the appraiser does not review and distinguish the meaning of install-control spare parts and supplying spare parts. Clearly, the costs of install-control spare parts belong to the fixing costs (labor charges), but the costs of supplying spare parts belong to the material costs. The appraiser identifies that it is noticeably incorrect that the name of spare parts and codes appear in the project repeatedly and it is unfair that the costs of install-control spare parts is exempt from the charge. The spare parts listed in ‘spare parts supplies’ are all bought from the third party and the third party supply the corresponding invoices. Therefore, the costs should be paid by the Defendant. The appraiser holds that the total costs have contained the costs of spare parts, but it is regulated in Article Four of the instructions of Yellow Book 1992, “the costs of spare parts should be paid separately.” Therefore, the statement of the appraiser contradicts Yellow Book 1992. The court cannot trust the statement of the appraiser. Additionally, there is no base amount for the appraiser to deduct the 20% cost of spare parts, in accordance with common ship repair practice. Therefore, the court will not accept it. (2) In Assessment Report, regarding the parts, there are duplicate charges and the repetition should be deducted. For example, “casing spring” appears repeatedly in project 2K1005098 P4-9 and in project 2K1005098 p32-7-2. Therefore, the latter costs should be deducted (the fee is 51,072 USD). The Defendant argues that this charge is the recurring charge. The court cannot agree with the Defendant’s opinion. The reasons are as follows: 1) the premise of the appraiser’s evaluation is that the appraiser has basic knowledge about the subject’s material constitution, shape and use, etc. or the appraiser has reliable documents for reference. As a management engineer of ship 23 repair and maritime consulting expert, the appraiser in this case should have performed better. Yet, In trial, when the Plaintiff questioned the appraiser to describe the shape of the sleeve spring assembly, the answer of the appraiser was that the sleeve spring assembly is used for “Detuner.” Since Bo Fu Company does not supply parameters, the appraiser cannot describe the shape and the use of the sleeve spring assembly. After the trial, the Defendant argues that the translation of “Detuner” is a mistake and it should be translated into “Damper”. The Defendant also argues that there is no “Detuner” in the marine main engine in China. The court holds that, as a senior expert on ship repair, the appraiser must know whether there is “Detuner” in a marine main engine even if the Plaintiff supplied an incorrect translation. The appraiser should

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rectify the Plaintiff’s error instead of answering that the sleeve spring assembly is used for “Detuner” at the trial. The translation of the sleeve spring assembly is correct, so the appraiser should know the shape, constitution, and use of it. Meanwhile, the appraiser could not answer the Plaintiff’s question In trial. This means the appraiser has no knowledge about the nature of the repairs. Additionally, the identification in this case lasts for several years. Therefore, even if the appraiser has no knowledge about “the sleeve spring assembly” and “Detuner,” he had enough time to consult documents and question other experts. It is unacceptable when the appraiser has no knowledge about the subjects. Second, according to the e-mails between XUE Bingqiang, the Chinese-Polish Company, and CIF Company, buying the sleeve spring assembly is not the Bo Fu Company’s unilateral act. There are pictures of the sleeve spring assembly in the attachments of emails. At the same time, the supplier, Intide Company, supplies the corresponding invoices. The code of the sleeve spring assembly is consistent with the code in the clearing sheet. Third, as mentioned above, the appraiser’s identification that the sleeve spring assembly is calculated for repeated payment cannot distinguish the repair costs and the material costs. In project 2K1005098 P4-9, referred by the appraiser, it is listed by Bo Fu Company that the sleeve spring assembly has 14 sets. These sets contain 28 groups and each group contains 16 slices. All spare parts were to be replaced by new parts. Since the elasticity is good, 448 new special tools are installed one by one and the total price was 4,480 USD. Meanwhile, the name of project 2K1005098 P32-7-2 (spare parts) is “the sleeve spring assembly,” No.33751800131333500. The unit price was 1,824 USD. For 28 groups, the total price was 51,072 USD. The former cost is the fixing costs and the latter is the material costs. The costs have no base price in which the appraiser can deduct a material cost of the sleeve spring assembly. Thus, the court will not accept it. (3) In Assessment Report, the exchange rate is 6.7715 (the dollar against yuan). This rate is referred to by the appraiser as the middle rate on August 4, 2010 because August 5, 2010 is the date of the completion of the repair. The court believes that the appraiser cannot review the identification documents carefully and made August 5, 2010 the “finish date” by mistake. Therefore, the result of calculating repair costs is directly affected. The true date is September 29, 2010 and the middle rate on this date is 6.6936. The appraiser and the Defendant argue that the description on the repair process and facts in Assessment Report will not influence the result of the assessment. Yet there are flaws that Assessment Report based on the exchange rate of August 4, 2010. (4) The sixth part of Assessment Report holds that the unit price for fixing payment in the clearing sheet is generally higher than the price of the repair market. For example, the shipping market index fell and the repair costs of Metalock Company is just 15.9% of Bo Fu Company.

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The court holds that the appraiser’s conclusion does not have a sufficient factual basis. The reasons are as follows: 1) it cannot be denied that the shipping market in 2010 sharply dropped in comparison with the shipping market in 2008. Yet, the ship building market and ship repairing market have a lag phase to the shipping market. The appraiser does not cite the specific data of the ship repair market and does not demonstrate that the repair costs in 2010 equal the repair costs in 2001 or the repair costs in 1992. 2) As previously mentioned, this case should refer to the international ship repairing price. 3) The quotes for repairing (copies) of Metalock Company have not been sealed and confirmed by the company. Therefore, the quotes do not conform to procedural elements of evidence. 4) The quote for Metalock Company’s cylinder head, piston, and other renovation costs have been audited by the court. The costs in this case are fixing costs and the charges are for renewal. In trial, Bo Fu Company stated that its fixing projects do not have the process of renewal and just a few of projects are included in Metalock Company’s quote. The appraiser thinks that fixing and renewal are the same as refurbishment. The instruction of marine engineering is on page 14 of Yellow Book 1992. The regulation in the instruction clearly states that if the machines need be fixed or renewed, the costs should be calculated separately. The court holds that fixing and renewal are different from refurbishment. Therefore, it is incredible that the costs of fixing and renewal of Bo Fu Company are too high in comparison with the refurbishment quote for the Metalock Company. (5) In Assessment Report, there are many projects charged that are unreasonable and are not consistent with charge tradition in the clearing sheet. There are substantial costs of working procedures relating to the process of repair. Yet, whether in Yellow Book 1992 or in Blue Book 1993 or in the conventions of ship repair charges, the costs of working procedures about the process of repair and the charges of services have been contained in the total costs of the repair and they are not paid separately. The court finds that the appraiser did not identify the “working procedure and the costs of service” and does not use the corresponding documents of costs to outline the costs. Therefore, the court cannot judge whether “working procedure and the costs of service” claimed by the appraiser have been contained in the total costs of repair. The court also cannot judge whether the unreasonable charges claimed by the appraiser are true. As an expert who participates in writing and auditing the costs table of the ship repair, the appraiser should be familiar with the 25 contents of Yellow Book 1992 and Green Book 2001. In trial, the appraiser stated that: According to the instructions of Yellow Book 1992 and Green Book 2001, the costs of incidental engineering actions will not be calculated separately. Yet, incidental engineering actions are regulated in Article IV of the instruction of Yellow Book 1992. They have a price tariff that identifies the scope of repair, and renewal. The costs and probable renewal of spare parts, special tools, models, etc. are calculated separately. In the instruction

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of Green Book 2001, there is no regulation about that the costs of the incidental engineering and it is not calculated separately. In addition, it is clearly regulated in Green Book 2001 that the costs of abnormal services and repair in shipyard are calculated separately. Therefore, the appraiser is unfamiliar with the base identification. The court will not accept the appraiser’s claim that the costs of working procedures and services should not be calculated separately. (6) It is referred to in Assessment Report that the clearing sheet of the project 2K1005098 refers to the costs of the services of the professional factory for repairing main engine No.5, the costs of hiring experts to identify the scope of repair (the fee of experts is 6,000 USD) and so on. At the same time, in the process of the ship repair, if there are technical engineer problems that the shipyard cannot repair, the shipyard should apply the shipper for an agreement and search for a technical factory together with the shipper. When the repair project is given to a technical factory, the repair scheme should be made by the technical factory and the shipyard cannot hire specialists to attend the repair activity. Therefore, those costs should be deducted from the clearing sheet. The court holds that: 1) it is regulated in Green Book 2001 that the costs of abnormal services and repair in a shipyard are calculated separately. The costs of hiring experts can be considered as service charges and the costs are supported by evidence. 2) The appraiser claimed In trial that the repairs in this case are not normal repair. Yet, according to the content of the emails from LI Chen to XUE Bingqiang, on April 28, 2010, M.V. “KKG-2” carried iron ore from the port of Iran Bandar Abbas to Nantong Port at 1420 on May 12. Since there was something wrong with the main engine, the ship temporarily linked Haikou for inspection. Then, the ship was repaired on July 28. We have filed claims in respect of the accident to the insurance company. The Defendant filed claims for the repair cost to the insurance company. This means that the Defendant admits that this repair belongs to the abnormal repairs since normal repairs to a machine are not under the liability of the insurance. 3) The Plaintiff’s hiring of experts is not a unilateral act. According to the emails between XUE Bingqiang and CHAI Difu, on May 29, 2010, they connected with each other on hiring experts. The Chinese-Polish Company did not deny or stop them. On July 7, 2010, the Chief Engineer of M.V. “KKG-2” sent a fax to Bo Fu Company and questioned the company to arrange experts for diagnosis and inspection. Without combining the corresponding facts, the Assessment Report identifies that the Plaintiff’s hiring experts is a unilateral act and denies the costs of experts. Therefore, this will not be supported by the court. (7) In Assessment Report, the cost of bolts, nuts, seals, gaskets, and other spare parts have been listed in the clearing sheet. This is not consistent with Yellow Book 1992, Blue Book 1993, and the charge convention of ship

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repair. In ship repair, the costs of bolts, nuts, seals, gaskets, and other spare parts should be included in the total cost of machine repair and the costs should not be calculated separately. The act of both paying for repair and spare parts belongs to recurring charges and some parts of the costs should be deducted. After the court’s verification, 14-18 pages of marine engineering of Yellow Book 1992 provide that the costs of changing and replacing the cylinder head shall be calculated additionally. Costs of cylinder head auxiliary valve assembly and disassembly excluding does not include the costs of shim between valves or the cylinder head replacement. Costs of changing the spare parts of piston rings, and the bedding-in gap of the piston ring shall be calculated additionally. Disintegration of the piston to measure pressure does not exclude the cost of shim and sealing ring replacement. The cylinder sleeve assembly and disassembly excludes the copper pad bed and rubber ring replacement. At the same time, Article III of the general provisions of Blue Book 1993 provides that the cost of labor and the cost of material are to be listed separately. Obviously, the appraiser’s claim that the cost of little spare parts should be included in the total cost of machine repair contradicts the regulations of Yellow Book 1992, Blue Book 1993, and the conclusion of recurring charges on spare parts is the subjective assumption, which is incredible. (8) It is referred to in Assessment Report that: there are mistakes in the procedures of the ship repair, which is found in the clearing sheet. For example, in the clearing sheet of the project 2K1006112, the high-pressure oil pump has been fixed twice. In normal ship repair, when there are not enough spare parts, the repair should not be started. After spare parts are consolidated, the repair begins. The recurring charge is an error. Therefore, this unreasonable charge should be deducted by the appraiser. After the court’s verification, the project 2K1006112 includes “secondary repair on combined-type and high-pressure oil pump.” Whether the secondary repair is consistent with the appraiser’s statement of unreasonable working procedures and recurring charge should be ascertained with other evidence. In trial, the explanation of the Bo Fu Company for the secondary repair is that the high-pressure oil pump of the ship was bought from Germany. Since the generators on the ship cannot all work, the company requested for the specialized company to do the overhaul repair to let the generators work and would change the pump after the arrival of the spare parts. Bo Fu Company claims that their duty is to guard the ship’s safety instead of recurring repair. Therefore, if they repair repeatedly, the shipper will not sign for admitting. To this regard, the appraiser claims In trial that it is impossible for three incidental engines to work at the same time. Therefore, the explanation of Bo Fu Company is false. Based on the faxes between the Chief Engineer of the ship and Bo Fu Company, the court believes that the 27 explanation of Bo Fu Company is consistent with the

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facts. On June 28, 2010, the Chief Engineer of M.V. “KKG-2” sent a fax to Bo Fu Company. The content of the fax is that they found an abnormal abrasion on the main shaft bushing of the No. 1 main engine of M.V. “KKG-2.” The bent axles must be transported to the factory for inspecting and to match new spare parts. The pictures show the details. The two main shaft bushings referred to above have a serious contraction. The reasons are: 1) The inspection skills have the same previous problem; 2) Incidental bent axles have a deformation. According to the above situation, the deformation is the likely reason that the auxiliary generator cannot handle a large load. At the same time, for sailing safety, the other three auxiliaries must take the sling steel test. On July 7, 2010, the Chief Engineer of M.V. “KKG-2” sent another fax to Bo Fu Company. The content of the fax is that: After changing shift, the No.2 generator regulator has been burned once, the No.3 generator regulator has been burned once and now the No.4 generator regulator has voltage problems. According to the series accidents, the generators of M.V. “KKG-2” have serious safety problems and these problems have affected the safety of the ship. Bo Fu Company should hire experts to inspect and repair. Otherwise, the ship cannot finish the voyage safely. The content of the faxes from the Chief Engineer of M.V. “KKG-2” demonstrated that all auxiliary generators of M.V. “KKG-2” could not work and the generator system of the ship had serious safety problems that needed to be inspected and repaired. In trial, the statement of XUE Bingqiang was confirmed by the faxes of the Chief Engineer. The court holds that the secondary repair written in the clearing sheet is a requisite working procedure. In trial, the appraiser’s judgment that it was impossible that three incidental engines could not work at the same time was not consistent with the facts. The court cannot support the party’s claim that the unreasonable charge should be deducted. (9) It is referred to in Assessment Report that, although according to the market price and Green Book 2001, this report concludes two results. The appraiser thinks that making the market price, Yellow Book 1992, and “Green Book 1993” as references is more objective than Green Book 2001. The court holds that, although the appraiser claims that his way of evaluating price is objective and reasonable, after the court’s variation, the appraiser does not evaluate price by means of using the market price as the standard The appraiser simply takes Yellow Book 1992 and “Green Book 1993” for reference. For example, in the standard of Attachment 1, the appraiser identifies that the costs of dismantling the cylinder head of the No.5 main engine (the model of the main machine of M.V. “KKG-2” is MANK5SZ70/12510330BHP, the diameter of the cylinder is 700 mm, and the stroke is 1250 mm) is 892 RMB. In Yellow Book 1992, the costs of dismantling the cylinder (diameter 700 mm) is 743 RMB. The standard price of dismantling the front and the back bearings of the No. 5 cylinder is 2,260 RMB, while the unit corresponding costs in Yellow Book 1992 are

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942 RMB. These verification prices are 120% of the prices in Yellow Book 1992. The Assessment Report makes it clear that the price rises to the K = 1.2 is for repair. In Attachment 2, there are no coefficients of price rise. For example, the appraiser 28 identifies that the cost of dismantling the cylinder head is 3,230 RMB. In Green Book 2001, the cost of dismantling the cylinder (diameter 700 mm) is also 3,230 RMB. The verification price of dismantling the front and the back bearings of the No. 5 cylinder is 3,480 RMB, while the unit corresponding cost in Green Book 2001 is also 1,740 RMB. According to the above analysis, when the appraiser assesses the price in the standard of Yellow Book 1992, the appraiser does not consider the variation coefficients on price from 1992 to 2010 and the increase factors of anchorage repair. When the appraiser assesses the price in the standard of Green Book 2001, even the appraiser does not consider the felly factors. The main projects of ship repair costs are regulated in Yellow Book 1992 and Green Book 2001. Without regulation, these normative documents will lose practical value. The appraiser claims that the first article of the main valuation principle is referring to Yellow Book 1992 and Blue Book 1993. Meanwhile, most parts of the appraiser’s variation on the costs of ship repair are corresponding with the content of Yellow Book 1992 and Green Book 2001. Yet these parts of variation do not consider the variation coefficients of the market, the increase coefficients in anchorage repair, and do not consider the felly factors in the standard of Green Book 2001. The appraiser claims that the Assessment Report is in the standard of “market price,” which is a self-contradiction. (10) The Attachment 1 and Attachment 2 in Assessment Report assess some of the projects with no basis and are not corresponding to the actual condition. For example, the incidental transportation costs under the Project 2K1005098 are 1,000 USD each day and the total cost is 73,000 USD (the verification costs is 73,000 yuan). Namely, the transportation cost is 1,000 USD each day and the verification costs is 1,000 USD each day. The court holds that auditing the costs of the offshore transport operations should consider the transport distance, time, climate, hydrology, the shape of the ship, the tonnage of the ship, horse power, the age of the ship, and other factors. The basic factor is the transport distance, but in trial, the appraiser did not know the sailing time from Lantau anchorage to Shekou Port. As an appraiser, while some facts are not clear, they have direct impacts on conclusions. The appraiser should ascertain the facts to be fair. It is also not difficult to ascertain the facts. It is incredible that the appraiser identifies that the costs of offshore transport operations is 1,000 RMB each day in Attachment 1 and Attachment 2 when he does not know the transport distance or the sailing time. According to the emails between LI Chen and XUE Bingqiang, on September 25 and September 29, 2010, the costs of the auxiliary engine oil and fresh water applied by the chief engineer of M.V. “KKG-2” have been accepted by Top

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Logic. Therefore the 18,800 USD under the invoices of Project 2K1009168 need not be audited. 8) The “factory repair” and “anchorage repair.” The appraiser asserts that Lantau anchorage repair belongs to the factory repair and should apply to Yellow Book 1992 and Green Book 2001. Top Logic argues that the Assessment Report has considered the factor of anchorage repair. For example, the transport costs and barge costs have been considered and audited. This proves that Assessment Report makes a fair and reasonable evaluation on the content of the clearing sheet. The court cannot accept the above opinions for the following reasons: 1) it is clearly regulated in the Yellow Book 1992 and Green Book 2001 that the costs of non-factory works and business construction should be calculated separately and the costs of repair in non-factory, non-port, anchorage, and during the sailing can be increased according to the specific project. From the perspective of these provisions, the objects of separate calculation and price increases are the price of working, the price of construction, and the cost of construction instead of the transport costs. 2) Although Assessment Report has the cost evaluation on the transport costs, the barge costs, and the transport trunk costs, these costs are generated separately in the process of anchorage repair and are not related to the anchorage repair. 3) As previously mentioned, the appraiser’s evaluation on the transport costs and other costs is objective and without basis. It is inconsistent with market condition, which cannot be accepted by the court. 4) Construction prices are calculated separately in anchorage repair as objectively need. For example, no matter if it is a time-based repair or repair paid for by the piece, the anchorage repair needs more time than the factory repair because of a roundtrip to anchorage. This excess time can be calculated in overtime costs or calculated separately in the costs of repair. Construction workers must bear more risks in anchorage than in factory, like boarding, sailing, and bad weather. The working environment and living conditions in anchorage are worse than that in a factory. Anchorage repairs have more safety management responsibilities on vessel than factory repairs. As a result, all price lists provide that the cost of anchorage repair should be calculated separately instead of only calculating transport costs as the claim of Top Logic. It is not consistent with the regulations of Yellow Book 1992 and Green Book 2001 that the costs of anchorage repair are not calculated or increased in Assessment Report’s evaluation. 9) The signatures on Assessment Report. The evaluation in this case belongs to judicial expertise. Forensics is a serious business and the appraiser must sign on the identification conclusion, which is to the need of identification and reflects the integrity of the expertise. As an appraiser, Xu entrusts another appraiser Zhang to sign instead of signing by himself. In the condition that Zhang is absent, the court cannot judge whether the two appraisers’ signatures in the report are from Zhang. The court thinks that the appraiser is not serious about judicial expertise.

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Based on the above analysis, the court holds that the evaluation of CMS on the costs of ship repair has flaws based on the qualifications of the appraiser, the material of identification, and 30 the identification and the signatures of the appraisers. The identification argument and the identification conclusion are incomplete, not objective, and even false. Given the evaluation analysis, the basis, the argument, and the conclusion in the main text of the evaluation report all have holes. The court cannot accept it. In Attachment 1 and Attachment 2, the evaluation is divided into several sub-items. Therefore, the court can believe that the evaluation in Attachment 1 and Attachment 2 also has problems and the court cannot accept it. After the court’s verification, one of the letters of engineering confirmation submitted by Bo Fu Company (the number of the project is 2K1006115ADD) is commented by the Chief Engineer of M.V. “KKG-2.” The content of the comment is that: ‘the main cylinder No.1 leaks water and has been welded three times but the welding is not successful and the condition of leaking water is very serious. Without other evidence, the comment of the Chief Engineer can be considered as the objection on the leaking repair of Cylinder No.1. The second and third repair are both the repeat of the first repair. Therefore, the court holds that the costs of the latter two repairs (which is 17,000 USD) should be deducted. The repair and supply inventories of M.V. “KKG-2” should be signed and stamped by the Chief Engineer of M.V. “KKG-2”, the chief officer, or the Master. The cost of repair and supply total to 1,059,078.75 USD. Since there is no evidence to prove that these costs are unreasonable, repetitive, or exorbitant, these costs should be undertaken by Top Logic. Top Logic is still required to pay 879,078.75 USD since the company has paid 180,000 USD. In conclusion, the ship repair and supply contract relationship between the Plaintiff and the Defendant is validly established. Since the Plaintiff has carried out the obligation of repairing the ship, the Defendant’s act of defaulting paying the repair costs belongs to nonperformance and the Defendant should undertake the responsibility for breach of contract. In trial, the Defendant applies to evaluate the related costs because the costs claimed by the Plaintiff are exorbitant. After the trial, the court cannot believe the appraiser’s evaluation report. Therefore, the justification of the Defendant cannot be established and the Defendant should pay for the rest of the costs at 879,078.75 USD. The completion date of the ship repair referred to in this case is September 29, 2010. The Defendant should also pay for the interest of the unpaid costs since the next day of the completion date. According to Article 107 and Article 263 of the Contract Law of the People’s Republic of China and Article 142 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: 1. The Defendant, Top Logic International Limited, shall pay the Plaintiff 879,078.75 USD with interest (the interest shall be calculated at the dollar lending rate stipulated by the Bank of China from September 30, 2010 to the date of payment determined by this judgment) within ten days after this judgment take effect; and

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2. Reject other claims of the Plaintiff, Bo Fu Company (Hong Kong) Co., Ltd. If the Defendant does not pay the payment within the period decided by this judgment, according to the Article 253 of the Civil Procedure Law of the People’s Republic of China, the Defendant should pay double interest in the period of delay in performance. Court acceptance fee in amount of 53,940 RMB, the fee of application on property preservation in amount of 5,000 RMB, the fee of assistance in execution in amount of 15,000 RMB, in aggregate amount of 73,940 RMB. The Plaintiff should undertake 1,403 RMB and the Defendant should undertake 72,537 RMB. The court acceptance fee undertook by the Defendant should be paid to the Plaintiff within ten days from the date of this judgment. The court will not return the court acceptance fee paid by the Plaintiff in advance. If any party disagrees with the judgment of first instance, the parties may submit a letter of appeal, together with copies of the numbers of the opposing party to the court, and lodge an appeal to Hubei High People’s Court within 30 days upon service of the judgment. The Appellant shall pay the litigation fee of the appeal in advance according to the first paragraph of Article 13 of the Regulations on Litigation Fees. (Receiver: the non-tax income finance account of Fiscal Revenue Department of Hubei Province and the account number is 0569-1. Account of deposit: China Agricultural Bank Wuhan East Lake Branch.) If the appellant fails to pay the litigation fee of appeal within seven days after the expiration date for appeal, the appeal will be withdrawn automatically. Presiding Judge: ZHANG Jiangshun Acting Judge: DAI Liangqiao Acting Judge: WANG Wei March 26, 2014 Clerk: LI Yan

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Hubei High People’s Court Civil Judgment Bo Fu Company (Hong Kong) Co., Ltd. v. Top Logic International Limited (2014) E Min Si Zhong Zi No.00163 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 33. Cause of Action 208. Dispute over ship repairing contract. Headnote Affirming lower court decision holding that Plaintiff ship repairer was entitled to recover full cost of ship repairs despite the Defendant’s argument that the amount charged was excessive. Summary In the court of first instance, the Plaintiff sued the Defendant for breach of a vessel repair contract for M.V. “KKG-2.” The total cost for the repairs was 1,076,078.75 USD. The Defendant initially paid 180,000 USD to the Plaintiff, and disputed its liability to pay the remaining 896,078.75 USD, arguing that the cost was excessive. The court of first instance rejected the Defendant’s evidence that the cost of repairs was excessive and found for the Plaintiff. The Defendant appealed to the court of second instance. The court of second instance held the facts found in the judgment of first instance as true. The appeal was dismissed, and the judgment of first instance was affirmed.

Judgment The Appellant (the Defendant of first instance): Top Logic International Limited Legal Representative: LUO Fanghong, chairman of the board. Agent ad litem: GONG Xiaohang, lawyer of Shanghai Duanheduan Law Firm. Agent ad litem: WANG Jian, lawyer of Shanghai Duanheduan Law Firm. The Respondent (the Plaintiff of first instance): Bo Fu Company (Hong Kong) Co., Ltd. Legal Representative: XUE Bingqiang, chairman of the board. Agent ad litem: LI Zhaoliang, lawyer of Guangdong Huahan Law Firm.

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The Appellant, Top Logic International Limited (hereinafter referred to as “Top Logic”) disagreed with (2011) Wu Hai Fa Shang Zi No.00148 Civil Judgment. The initial case arose from a dispute over a ship repairing contract filed by the Respondent, Bo Fu (Hong Kong) Co., Ltd. (hereinafter referred to as “Bo Fu Company”) rendered by Dalian Maritime Court, and appealed to the court. After accepting the case, the court organized a collegiate panel in accordance with the law and heard the case in public on October 31, 2014. GONG Xiaohang and WANG Jian were the agents ad litem entrusted by the Appellant, and LI Zhaoliang was the agent ad litem entrusted by the Respondent. They all appeared in the court and participated in the action. The case has been concluded. The court of first instance found that, on May 19, 2010, that LI Chen, employee of CIF International Shipping Co., Ltd. (hereinafter referred to as “CIF Company”) emailed XUE Bingqiang, legal representative of Bo Fu Company, for the terms of repair of M.V. “KKG-2.” The next day, LUO Bing, an employee of Chinese-Polish Company, emailed XUE Bingqiang. The email outlined that: “thank your company very much for repairing the main engine of M.V. “KKG-2.” Now, the ship has left for Shenzhen. Specific time of arrival should be passed on to your company when our company receives notification by the ship. The information of ship, see attachment, is for your company’s reference. Please arrange appropriate repairmen to board and repair the main engine in accordance with the model of the main engine in the information of ship. For the other repair projects, our company will send the repair list to your company as soon as possible.” On the same day, XUE Bingqiang responded to LUO Bing that the preparations for the upcoming repairs were arranged. On May 20, 2010, Bo Fu Company (Party A) signed the ship’s repairing contract with Fa Sai Te ship service (Shenzhen) Co., Ltd. (Party B). The agreement outlined Party A employed the work of repairing the main engine of M.V. “KKG-2” to be completed in May. The ship left Hainan to Shenzhen for anchor repair. Party A entrusted Party B to be fully responsible for the repair. The quality of repair was to be checked and accepted by the ship. The moving part warranty was three months, and fixed part warranty was six months. Party A oversaw the signing of the engineering confirmation and the settlement with the owner. From late May to August 26, 2010, M.V. “KKG-2” was repaired at the Shenzhen Lantau anchorage. From August 17 to August 27, 2010, because Lantau was short of the anchorage and because major repair projects had been completed, Shenzhen Maritime Safety Administration no longer required M.V. “KKG-2” to remain at the Shenzhen anchorage. Therefore, the ship was shifted to Zhizhou anchorage to continue repairs. After August 28, M.V. “KKG-2” was shifted to the anchorage of Sanmen Island to continue repairs and was supplied with materials after the typhoon. During that time, CHAI Difu, LUO Bing, LI Chen, the Master, and the chief engineer of M.V. “KKG-2” all corresponded with XUE Bingqiang via email and fax to confirm repairment issues. Problems included the initial ship repairing projects, additional projects, ordering of spare parts, and ordering of ship materials.

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On May 27, 2010, XUE Bingqiang emailed CHAI Difu, LUO Bing, and LI Chen. The email outlined that: M.V. “KKG-2” needs to order supplies. Please view the attachment. The following parts need to be ordered that: 1. a full set of cross head lubricating oil booster pumps, see attachment 75-33002; 2. four full sets of cross head through bolts, see attachment 75-36003. There was no marking with the number of spare parts; and 3. other parts outlined in 75-32002. The ship repair contract that was attached was only to be used to handle an exemption of tonnage tax by the agent. XUE Bingqiang asked them to sign, seal, and to directly forward to the agent. There was a picture of printing machine parts marked DMR No.75-33002, 75-36003, and the corresponding numbers, names, and encodings within the attachment. The content of the ship repair contract attached outlined that Party A (Chinese-Polish Company) entrusted Party B (Xin Tai Company) to employ the work of M.V. “KKG-2.” The scope of the project was based on quoted scope of repair items. Project cost was 460,000 RMB and the actual closing cost was to be calculated based on signed completion. The period of repair was 15 consecutive days, weather working days. If the ship suffered from force majeure factors, the period of repair would be postponed. XUE Bingqiang, as the representative of Party B, signed the contract and covered the seal of Xin Tai Company on May 23, 2010. After the Chinese-Polish Company received the above ship repair contract as mail attachment, LUO Bing, on behalf of Party A, stamped and sealed the seal of ship management department of Chinese-Polish Company on May 28, 2010. On May 29, 2010, XUE Bingqiang emailed CHAI Difu and LUO Bing that: “the experts hired by my company and I boarded the ship to further examine the fifth cylinder and found that the bolt wire of right side of the connecting rod bearing incurred serious damage. According to the above phenomenon, in a preliminary judgment, such damage lead to additional consequences. Such consequences included that the rod bearing was out of shape, that alloys might fall off or strain, that the bolt hole got damaged, and that the locating pin was cut off. The rod bearing should be sent to the factory for inspection and corresponding repairs. If it cannot be repaired, we need to order spare parts.” On the same day, CHAI Difu replied to XUE Bingqiang that: “after receiving the email, please have your company arrange for the disassembly of the connecting rod bearing of the fifth cylinder as soon as possible and tell us the result. With respect to necessary spare parts, please have the technical service personnel of your company search the ship for spare parts. If there are no spare parts, please contact the two spare parts suppliers that we forwarded to you and order the parts as soon as possible.” On June 8, 2010, CIF Company prepaid ship repair costs 180,000 USD through the Bank of China (Hong Kong) Co., Ltd. On June 9, 2010, XUE Bingqiang emailed LUO Bing saying that: “the host free gear box was disassembled yesterday. It was determined that the situation was very serious because there was damage to more than a few bolts. The attached drawing of the 2-sleeve spring assembly outlines that each group consisted of 16 slices, each hole has 2 groups, and a total of 28 groups were broken. The drawing of the 3-stroke limiting bolt outlines one piece was broken. 18 sets of cap bolts in the

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drawing without numbers were broken. The accessory has the picture and the drawing outlines the above spare parts.” During the process of repair, Bo Fu Company ordered the spare parts, including the above spare parts, from Intide Company. On June 10, 2010, Intide Company issued invoice No. SP10031F to Bo Fu Company. The invoice indicated that the name of the vessel was M.V. “KKG-2”. The order number was SP0608KKG2-D1; equipment: main engine; model: K5SZ70/125B; manufacturer: MAN. The invoice itemized the encoding, name, quantity, unit price, and subtotal of each spare part. The total of the invoice was 220,723.53 USD. On June 28, 2010, Intide Company issued the invoice No. SP10036F to Bo Fu Company. The invoice indicated that the name of the vessel was M.V. “KKG-2”; the order number was SP0608KKG2-D4; equipment: auxiliary engine; model: VDS26/20AL-20; manufacturer: SKL. The invoice itemized the encoding, name, quantity, unit price, and subtotal of each spare part. The total of the invoice was $38,588.44 USD. The court of first instance checked the invoice itemized number, name, and 4 quantity of the spare parts. They court found it was consistent with the number, name, and quantity of the spare parts itemized in the clearing sheet issued by Bo Fu Company. There were 28 pieces of spare parts encoded in No.33751800131333500, which was named sleeve spring assembly, and the unit price was 1,824 USD. The total price was 51,072 USD. On June 16, 2010, the North Korean crew of M.V. “KKG-2” departed the ship and was replaced by a Chinese crew. On June 28, 2010, the Chief Engineer of M.V. “KKG-2” Bo Fu Company the maintenance report of the No.1 auxiliary lifting cylinder of M.V. “KKG-2”. The report outlined that: “the ship overhauled the No.1 auxiliary from June 25. The last time No.1 auxiliary was overhauled was February 26, 2009. The working time was 3906 hours. It was found that the exposed copper had abnormal wear when the main bearing shell was checked. Therefore, the crankshaft must be verified in the factory and the bearing checked with new parts. Specific circumstances were included as photos. The above two main shaft bushes all had severe extrusion deformation. The last repair had a problem with the installation process. The auxiliary engine crankshaft was out of shape. The above conditions might be the reason the auxiliary machine could not work with the heavy load. At the same time, in order to ensure the normal navigation, the other 3 auxiliary machines must be arranged by lifting the cylinder inspection. On July 7, 2010, the Chief Engineer of M.V. “KKG-2” faxed Bo Fu Company and alleged, according to the result of test report of host system oil of M.V. “KKG-2,” the host system oil must be replaced. Since M.V. “KKG-2” changed shifts, the voltage regulator on No.2 generator had been burned once, No.3 generator voltage regulator had been burned once, and now there was a problem in which No.4 generator failed to maintain voltage. According to this series of accidents, there was serious hidden troubles in generators of M.V. “KKG-2”, which influenced the safety of the ship. Please have the company arrange for experts to diagnose fault, check, and repair. Otherwise, the ship could not ensure the safe navigation.” On July 12, 2010, CHAI Difu of the Chinese-Polish Company

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emailed LI Chen to request the terms of repair for the generator and renewal of all the lubricating oil. On July 5, 2010, XUE Bingqiang emailed LI Chen that: “shipowner Mr. LI Chen or Miss Ding: The following report on the repair of M.V. “KKG-2” has been sent to management company personnel. We are now forwarding to you the report of our company. Please check the following email and related accessories. Repair costs total to 536,525.45 USD. Since the items issued by the succession crew keep expanding and adding, the accurate costs cannot be temporarily calculated. Because the North Korean crew made a lot of difficult problems, the repair costs was estimated to range from 200,000 USD to 300,000 USD. 180,000 USD have been paid by your company. We hope your company can arrange to make an additional advance payment 350,000 USD as soon as possible.” On July 6, 2010, Bo Fu Company issued an invoice numbered 2K1006115. The invoice contained ship material and totaled to 18,421.35 USD. The next day, the Chief Engineer and Mate of M.V. “KKG-2” sealed to confirm the corresponding engineering confirmation. On August 3, 2010, Bo Fu Company issued the engineering settlement, item number 2K1006107. The statement contained marine engineering and deck engineering costs. Chief engineer of M.V. “KKG-2” signed to confirm the engineering confirmation. The next day, Bo Fu Company issued a clearing sheet and invoice with the content of repair costs of engineering of marine and deck, totaling 77,784.60 USD. On August 3, 2010, Bo Fu Company issued engineering confirmation, item number 2K1006112. The confirmation contained the second stage after the crew shifted. The Chief Engineer and Mate of M.V. “KKG-2” signed to confirm the engineering confirmation. The same day, Bo Fu Company issued an invoice, item number 2K1006112. The invoice contained the repair costs of the marine engineering and deck totaling to 345,493.80 USD. On August 5, 2010, Bo Fu Company issued engineering confirmation, item number 2K1005098. The content of the confirmation was the repair of the host free gear box, repair of the host 5 cylinder, supply spare parts, and general service. Chief Engineer of M.V. “KKG-2” signed to confirm on the engineering confirmation. On the same day, Bo Fu Company issued a clearing sheet and invoice, item number 2K1005098. It corresponded to the costs of repair and supply for item in the engineering confirmation, totaling 496,374 USD. On August 28, 2010, Bo Fu Company issued engineering confirmation, item number 2K1006115ADD. The content was for ship materials, fuel and additional repairs. Mate of M.V. “KKG-2” signed to confirm on the engineering confirmation and annotated that there was a leakage in the host 1 cylinder. After three times of dismounting and welding, there was a failure to the weld and the leakage was serious. On September 19, 2010, Bo Fu Company issued an invoice, item number 2K1006115ADD. The content was for ship materials, fuel, and additional repairs totaling to 118,655 USD. The second repair cost to the leakage of the 1 cylinder block was 4,000 USD, and the third repair cost was 13,000 USD.

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On September 25, 2010, LI Chen emailed XUE Bingqiang: “I have received your mail and transferred it to the leadership of the company. I would reply to you after an indication has been given by the company. The Master of M.V. “KKG-2” applied auxiliary lubrication oil and fresh water, as described below. Please help us again provide good supplies for us. Please confirm with the Master for the model of auxiliary lubrication oil, and rely the offer confirmed by me.” On September 29, 2010, LI Chen emailed XUE Bingqiang that: “confirming the offer, my colleague Ding will arrange payment as soon as possible totaling to 18,800 USD.” On September 30, 2010, Bo Fu Company issued two engineering confirmations. The content was for recharging the phone, copies of documents, and mail for the ship. Costs also included fresh water and oil supplied by the West anchorage of San Men island of Shenzhen. The Master of M.V. “KKG-2” signed to confirm the engineering confirmation and stamped the seal of M.V. “KKG-2.” On the same day, Bo Fu Company issued two invoices, numbers 2K1009168, and 2K1009168. The invoices stated the above expenses were 550 USD and 18,800 USD, respectively. On October 28, 2010, JIANG Yongfang, an employee of CIF Company, emailed XUE Bingqiang: With respect to repair costs of M.V. “KKG-2,” according to the arrangement of our company, we plan to pay 200,000 USD to your company for recently allowing the ship to continue to sail. With respect to the total costs, we sincerely hope that your company would seriously consider the future long-term cooperation of our two companies, and consider giving a certain discount once again. On December 1, 2010, LI Chen emailed XUE Bingqiang that: “we are very sorry for the delay of the costs. Now, we need to submit the application for repayment to the headquarters. Please consider our funding difficulties, and whether the lowest limit of repayment could be given.” On the same day, JIANG Yongfang emailed XUE Bingqiang that: “as you know, the plan is to sell the M.V. “KKG-2”. With respect to the costs owed to your company, the leadership of headquarters have clear instructions to arrange payment. Our company could not accept the commitment of payment proposed in the attachment by your company. The arrangement of payment must be conducted after the funds of selling the ship were in place. We still hope that your company would consider the future cooperation of our two companies and we will give a maximum convenience discount to solve the problems as soon as possible.” On December 7, 2010, LI Chen emailed XUE Bingqiang that: “with respect to the accident of the 5 cylinders of M.V. “KKG-2”, on May 13 this year, we have submitted the accident to the insurance company. Thank your company for your support at that time. At present, Shuang Xi Adjustment Company and insurer still lack the following documents: 1. 2. 3. 4. 5.

Clearing sheet of spare parts of the damaged machine; Receipt of spare parts of the ship; Clearing sheet of outsourcing project; Receipt of completion; and Proof of suspension of shipping.

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An attachment includes the claim of the main engine fault of M.V. “KKG-2” on May 13, 2010, against PICC. The claim stated that M.V. “KKG-2” loaded iron ore transported from Bandar Abbas of Iran to Nantong Port of China. Due to the fault of the main engine at 14:20 on May 12 14:20, M.V. “KKG-2” temporary anchored at the Haikou port for inspection and repairs at 7 anchorage of Shenzhen. It had been repaired on July 28. Damages costs were as follows: port charge of Haikou was 46,700.80 RMB, costs of inspection and boarding the ship of technical personnel was 19,500 USD, port charges of Shenzhen, travel expenses of management company personnel was 30,799 USD, and repair costs of accident was 943,656 USD. The bill of repair costs of Bo Fu Company was attached.” During the trial, the ship management department of the Chinese-Polish Company issued a certificate on April 12, 2011 and stated that our company was the management company of M.V. “KKG-2”. The two parties signed the management contract of entrustment. Our company entrusted Bo Fu Company to arrange the repair of the ship involved in the case and repair costs should be paid by shipowner, Top Logic. The shipowner had paid advance in amount of 180,000 USD to Bo Fu Company. Our company received bill of repair costs involved in the case by email at 1403 on October 21, 2010 and thought the costs were reasonable. Finally, after consultation between shipowner and repair party, the total costs was determined and directly paid by the owner to the repair party. In order to save the costs of the shipowner, there was no tonnage tax during anchor repair. Our company was entrusted by the shipowner to sign a contract of repair with Xin Tai Company. Before the contract had been signed, it had been stated in the mail at 1558 on May 27, 2010 that the contract was only used by agent to handle the tax exemption. In addition, it was sent to the agent directly, so the contract had no relation to actual ship repairs. On June 7, 2011, the Chinese-Polish Company issued a statement of situation. It stated that, “with respect to the case of dispute over the ship repair of M.V. “KKG-2” and the contract of supply, the ship management department of our company issued a certificate on April 12, 2011. Now, our company makes the following instructions for certificate: According to the agreement of ship management signed by our company and Top Logic, our company has no agency authority to confirm and recognize repair costs. This instruction replaces the above certificate of the ship management department of our company. Our company states again that the repair costs of M.V. “KKG-2” should be decided by the shipowner and the repair party after consultation. Our company will not offer opinion or proof.” During the trial, Top Logic entrusted CMS to assess the repairs involved at the vessel and other expenses. CMS reviewed the price claimed by Yangpu Company in the clearing sheet on the basis of the engineering confirmation sealed to confirm by M.V. “KKG-2” and the clearing sheet provided by the court of first instance. On November 10, 2011, CMS requested Bo Fu Company and the agent ad litem to provide information of corresponding specifications, model, and materials of related spare parts while there was no answer.

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On December 8, 2011, CMS issued the Assessment Report. The second part of the report described the time of repair was from May 24, 2010 to August 5, 2010. Thus, M.V. “KKG-2” was repaired for a total of 73 days at Shenzhen Lantau anchorage. The main principles of appraisal for prices in the third part were: 1. checking the price according to the parts available for reference in Book 92 and Blue Book 93. Estimators mainly adopted a rise to K = 1.2 of the price of Yellow Book 92 to check the price of repair costs of the ship based on the market of repair of foreign ship in domestic; 2. respecting the fact of fluctuation of ship repair market and connecting with the market of ship repairing in domestic; 3. connecting the practical experience of ship repairing and deducting the items that should not be charged and the items that were charged repeatedly; and 4. other principles of assessment. The results of the assessment for repair costs of the clearing sheet in the fourth part stated that clearing sheet 2K1005098 listed many spare parts, and the items that were supplied by Bo Fu Company were repeated in the list. The total price of this part for spare parts was 223,835.20 USD and it had been charged. Estimators alleged that the costs of bolt, nut, sealing ring, and shim should be deducted from the above costs of spare parts. This is because the costs of the spare parts should have been included in the costs of repair. Without a detailed description of these parts in the clearing sheet, estimators, according to practical experience, deducted the costs of spare parts that had been included by 20%. Namely, they deducted the costs of spare parts according to K = 0.8. For example, the “casing spring” part was repeated in P4-9 of item 2K1005098 and P32-7-2 of item 2K1005098. So, the latter costs should be deducted (the costs was 51,072 USD). After deducting the repeated part of “casing spring” from the actual costs of spare parts and considering the 20% deduction factors of spare parts, the result of price checking of the costs of spare parts, without dimensions, models, specifications, or invoices was (223,835.2-51,072) * 0.8 * 6.7715 = 935,892.8 RMB. (1:6.7715 was the rate exchange of USD and RMB on August 4, 2010). The casing spring listed by Bo Fu Company at P4-9 of the referenced item 2K1005098 was 14 sets. This total included 28 groups, and 16 pieces of each group. All spare parts were replaced due to strong elasticity. The quantity of the new special tool installed was 448 pieces and the total price was 4,480 USD. The Assessment Report adjusted it to 15,680 USD. The name of P32-7-2 (spare parts) of item 2K1005098 was casing spring No.33751800131333500, the unit price 1,824,28 USD, and the total price 51,072 USD. Hereby, it was calculated according to Yellow Book 92 and the reasonable repair costs of M.V. “KKG-2” was RMB2,080,337.3 + RMB935,892.8 = RMB3,016,230.1. The result of the fifth part of the Assessment Report according to “2001 green” was 2,534,393.7 + 935,892.8 = 3,470,286.50 USD. The sixth part “conclusion” held that: 1. The unit price of repairs in the clearing sheet was generally higher than the market price of ship repairs. Due to the impact of the international financial crisis, the global shipping market collapsed. Taking index of freight of the Baltic for example, the BDI index rose to a record high of 11,793 points from May 20,

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2008, then plummeted. In late July 2010, the BDI index was 1,869, which was only 15.8 of the highest point. The upheaval in the shipping market also impacted the international and domestic ship repair markers. To cope with changes in the international and domestic market, the shipbuilding enterprises had lowered the price of ship repairs to maintain operations. Such costs did not show the huge changes in the market of ship repairs in the clearing sheets of M. V. “KKG-2” issued by Bo Fu Company. Therefore, the offer was obviously too high. For example, taking the first repair costs of No.5 cylinder of main engine of M.V. “KKG-2”, which was shown in the clearing sheet, the repair costs of the cylinder head, piston, and connecting rod of the item was 74,380 USD. Compared with the repair quotation of Shanghai Metalock Co., Ltd. (hereinafter referred to as “Metalock Company”) which engaged in the repair of the main engine of ship, total costs of refurbishing the cylinder head, piston, and piston rod guide surface was about 80,000 USD and it was 15.9% of the latter. This was far below the price claimed by Bo Fu Company. 2. Lots of charged items in the clearing sheet were unreasonable and did not meet the practice of charges of ship repair. Many charges involving the service of repair process were found in the clearing sheet. While the costs of the process had been included in the total costs of repair, it was no longer charged separately. This was whether it was in Yellow Book 92, Blue Book 93, or in practice of charges of ship repair. In addition, item 2K1005098 of the clearing sheet covered professional factory assistance of repair of No.5 cylinder of the main engine and charge of hiring experts to determine the scope of repair. The costs for experts was as high as 6,000 USD. In the actual ship repair, in respect to professional engineering that could not be repaired by the shipyard, the shipyard should put forward to the owner first. After asking for permission, the shipyard should find a professional factory to repair it together with the owner. When the repair project has been entrusted to professional factory to repair, the repair project should be confirmed by the professional factory, and the shipyard should not hire experts to participate in the repair activities. Therefore, those costs should be deducted from the clearing sheet. 3. The clearing sheet contains a large amount of costs of spare parts. Meanwhile, specifications, models, materials, and size of most of spare parts were not clearly described in the clearing sheet. As an issuing unit of the clearing sheet, Bo Fu Company was supposed to have the information and dates, including specifications, models, materials, and invoices of these spare parts and should provide these materials. 4. Charging a fee of spare parts, like for bolts, nuts, sealing rings, and shim in the clearing sheet, did not meet Yellow Book 92 and Blue Book 93 and the practice of charges of ship repair. In the ship repair, spare parts like bolts, nuts, sealing rings, and shim should be included in total 10 costs of repair of the equipment and should not be charged separately. Charging the costs of repair and costs of spare parts in the clearing sheet were repeated charges which should be deducted.

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5. The clearing sheet shows that the ship repair process in the shipyard was unreasonable. In item 2K1006112 of the clearing sheet, the high-pressure oil pump was disassembled to be repaired twice. In normal ship repair, when there were no spare parts or spare parts have not arrived, the repairs should not be carried out. The shipyard should carry out repairs only when all spare parts were there and should not be charged repeatedly. Therefore, the estimator should deduct these unreasonable charges. 6. Although two results have been given by Assessment Report on the basis of valuation of market price and Green Book 2001, the estimator thinks it was more objective on the basis of valuation of market price. Due to the downturn and increased competition of domestic ship repairing market of the past two years, it was difficult for foreign ships to quote in accordance with Green Book 2001. Therefore, they often made quotes in accordance with Yellow Book 92, Blue Book 93, and the market price. Therefore, the estimator thinks the mode of appraisal of the price was more objective on the basis of Yellow Book 92, Blue Book 93, and the market price than Green Book 2001. In conclusion, after reviewing in accordance with engineering confirmation signed to confirm by crew on board, among ship repairs provided by the client and the clearing sheet provided by the court of first instance, the estimator thinks that the reasonable cost of repair of M.V. “KKG-2” at Lantau of Shenzhen port from May 24, 2010 to August 5 was 3,016,230.10 RMB. Attachments: Attachment 1) The appraisal of prices on the basis of Yellow Book 92, Blue Book 93, and market price; Attachment 2) The appraisal of prices on the basis of Green Book 2001; Attachment 3) The repair quote of Metalock Company; and Attachment 4) The express sent by our company to Bo Fu Company. Attachment 1 and Attachment 2 list the name and encode of the spare parts about engineering settlement item 2K1005098 from 13 pages and list the name and encoding of the spare parts supplied by Bo Fu Company from 23 pages. After comparison by the court of first instance, the name and encoding of the listed spare parts were the same. The appraiser thought they were charged repeatedly and did not conduct an appraisal of the price of spare parts, and costs of this 11 parts claimed by Bo Fu Company was 21,210 USD. Attachment 1, the costs of assembly, disassembly, and inspection of the cylinder head of the No.5 main engine was checked as 892 RMB. The costs of disassembly and inspection of the front and rear main bearing of the No.5 cylinder was checked as 2,260 RMB. Attachment 2, the costs of assembly, disassembly, and inspection of cylinder head of No.5 main engine was checked as 3,230 RMB. The costs of disassembly and inspection of the front and rear main bearing of the No.5 cylinder was checked as 3,480 RMB. The subsidiary costs of coordinating the operation of the transportation ship that claimed in Attachment 1 and Attachment 2 by Bo Fu Company was 1,000 USD per day. The total was 73,000 USD and was checked as 73,000 RMB.

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The repair quote of Metalock Company, Attachment 3, was a copy without the covered seal of this company and the content was the refurbished price of each type of piston, cylinder head, piston rod, and valve seat. Estimators of Assessment Report were Xu and Zhang. Xu was an appointed expert from a maritime consultation expert database by the Shanghai technology consulting service center in January 2007. He was granted senior engineer of ship repair management of engineering series by Shanghai shipping (Group) on December 1993. Zhang was granted senior engineer of hull specialty of engineering series in November 2007 and passed the insurance assessment practitioners qualification examination of Organization of China Insurance Regulatory Commission in December 2000. CMS’s shortlist of the people’s court judicial appraiser list was announced by People’s Court Daily on May 22, 2003. The identification category was marine inspection and maritime assessment. Zhang did not appear in court after notice by the court of first instance. Xu (citizen identification number: ) appeared in the court of first instance to accept inquiry by two parties. Xu alleged that he had participated in the checking and deciding of Blue Book 93 of the Ministry of Transport, participated in written and checking, participated in deciding of Green Book 2001, and was familiar with price regulation and market quotation. When accepting inquiry, Xu answered that the signature in the Assessment Report was signed by Zhang. The Assessment Report was co-written, and Zhang helped revise it. Xu performed price verification. The Assessment Report needs to provide date such as the specific model and quantity when ordering the spare parts from the seller of spare parts. It was unclear as to the time it would take to transit from Lantau anchorage to Shekou port. Repairing in Lantau anchorage belonged to ship repair. Yellow Book 92 was applicable to the dock and shipyard repair without single price of marine repair. According to the illustration of Yellow Book 92 and Green Book 2001, incidental engineering costs would not be calculated separately. The casing spring in the report was used for “demodulator” (English original was Detuner, translation was demodulator translated by Shenzhen Sea Translation Co., Ltd. provided by Yangpu Company). Because Bo Fu Company 12 failed to provide the parameter, it was impossible to describe the general shape of the casing spring. Abnormal repairs refer to doing rushed repairs and this case involved normal repairs. In the trial, the court of first instance asked Bo Fu Company to explain the two repair instances of the high-pressure oil pump in the clearing sheet item No.2K1006112. XUE Bingqiang answered that: “the high pressure oil pump of the ship was bought from Germany. Since the generators on board could not use it, I found a professional company to disassemble and inspect the generator operation first, and then the part would be changed when spare parts arrived. My job was to guarantee the safety of the ship, not to repeat the repair. If I repeat ship repairs, the owner would not sign and approve. The estimator proposed that there was no situation that three auxiliary engines broke down at the same time.” Yellow Book 92, provided by CMS, was a price list for domestic civil ships. The instructions stated that: “1. this price list was compiled by calculations and refers to the historical date of the general corporation system of the Chinese shipbuilding

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industry combining with the actual situation of ship repair products and current market price level used by the unit of the company’s system; 2. this price list was only used for repair of the conventional civil ship. The repair prices of marine drilling platforms, engineering ships, and special facilities of other special ships should be calculated additionally; 3. the project costs of materials that are included in the price list are to be calculated based on 91 current prices. When material market prices change substantially, each plant may adjust the price differentials appropriately according to the actual situation; 4. each item description of the price list has clearly defined the scope of repair and change. The costs of its incidental engineering, possible components renewal, and special tools, molds, tires, and special equipment for construction process should be calculated additionally; 5. any single technical service, costs for the fuel injector for diesel engines, high-pressure oil pumps, governors, ice machines, and air conditioning could rise appropriately; 6. various specifications listed in the price list, between two specifications, should be calculated based on whichever was the higher; 7. when the coefficient of each part in the price list shows up at the same time, it should be calculated after adding up the coefficient; 8. the price listed in the price list is the factory price; 9. factory entrusted external units to process, borrow equipment, purchase equipment, and so on, should be calculated on the basis of the actual costs from the factory adding transport fees, management fees, statutory profits, and taxes; 10. this price list was only used for plant operation. The costs of operation out of factory and travel construction should be calculated additionally; and 11. this price was applied to daily work on normal working days. The owner should offer overtime pay the owner was in a hurry and needed overtime.” Green Book 2001, provided by CMS, was a price list for the repair of domestic civil ships of the China Association of National Shipbuilding Industry. Its part description states that: “1. the valuation currency of repair for a state ship in the price list is RMB; 2. this price list is only used 13 for normal working hours. Namely, 5 days a week and 8 hours a day. Repairs on statutory holidays, or shipyard holidays requested by the owner requires overtime pay; 3. this price list is only used for shipyard plant construction. The costs of repair not at a shipyard, including at dock, harbor, anchorage, and the sailing of the ship, should be increased according to the specific projects; 4. the costs of service and repairs of abnormal ship repairs in the shipyard should be calculated additionally; 5. the shipyard would not be responsible for damage caused by war, earthquakes, and other force majeure incidents; 6. except for the important mechanical parts, propeller and tail shaft, all removed waste material in the repair of the ship should belong to the shipyard; 7. this price list was only used for the repair of a gross tonnage in excess of 1000 tons (including 1000 tons) of transport vessels and fishing vessels. Repair of under 1000 tons of transport vessels and fishing vessels should be performed with reference to the above. Repair of other special ships are not in the range of the price list; 8. this price list should take effect on June 1, 2001. In the case where material prices and exchange rates change, the China Association of National Shipbuilding Industry reserves the right to adjust prices without notice; 9. since the day in which the price list takes effect, the price list of ship repairs

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formulated and used by domestic departments and units would stop using at the same time. The court of first instance ascertained that the costs of the 700 mm cylinder head assembly and disassembly regulated by Yellow Book 92 was 743 RMB. The costs of the 500 mm piston assembly and disassembly was 1,005 RMB. The costs of the main bearing assembly and disassembly was 942 RMB. Costs of 700 mm cylinder head assembly and disassembly regulated by Green Book 2001 was 3,230 RMB. Costs of 500 mm piston assembly and disassembly was 4,800 RMB. Costs of main bearing assembly and disassembly was 1,740 RMB. Illustration (page 14) of Yellow Book 92 of marine engineering provided that “if it needs to be repaired or replaced, the price should be calculated additionally.” Page 14-18 regulated that the costs of the cylinder head replacement should be calculated additionally. Costs of the cylinder head auxiliary valve assembly and disassembly did not include the costs of shim between the valve and cylinder head replacement. Costs of changing the spare parts of piston rings and bedding-in gap of piston ring should be calculated additionally. Disintegration of piston to measure the pressure did not include costs of shim and the sealing ring replacement. The cylinder sleeve assembly and disassembly did not include the copper pad bed and rubber ring changing for a new one. Article 3 of Blue Book 93 provided that artificial price and material price should be listed separately. The Port of Registry for M.V. “KKG-2” was Panama. The call sign was H8HP, owner was Top Logic, Overall Length was 173.5M, Breadth was 23.05M, Depth was 13.7M, Gross Tonnage was 15,893 tons, Net Tonnage was 8,092 tons, Model of Main Engine: MANK5SZ70/12510330BHP, Construction time and place: 1985 in Germany. The court of first instance also ascertained that parity rate of USD to RMB was 6.6936 on September 29, 2010. When Bo Fu Company applied the preservation of property to the court of first instance, it had paid an application fee for the preservation of property of 5,000 RMB and costs for assisting in the execution of 15,000 RMB. In the trial of this case, both Yangpu Company and Top Logic argued to apply the laws of the People’s Republic of China. The court of first instance held that this case was the dispute over ship repairing contract. Yangpu Company was a Hong Kong legal person, Top Logic was a foreign legal person, and the ship repaired was a foreign vessel. Therefore, this case was a foreign-related civil dispute. Both parties claimed the application of Chinese law and this claim complies with the provisions of the relevant conflict rules of China. Chinese law should be the proper law that settles this dispute. The issues in this case were: 1. whether the relationship of ship repair contract between the parties was valid; and 2. how were repair costs ascertained. Firstly, it was about the legal relationship between Yangpu Company and Top Logic. Top Logic questioned the subject qualification of Yangpu Company and argued that there was no repair contract between Yangpu Company and Top Logic since the one who signed the repair contract with Top Logic was Xintai Company.

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The court of first instance held there was a repair contract relationship between Yangpu Company and Top Logic. The reasons were as follows: 1. Large quantities of e-mails and faxes between the Chinese-Polish Company employee LUO Bing, CHAI Difu, CIF Company employee LI Chen, JIANG Yongfang, as well as the Master of M.V. “KKG-2,” crews, and the legal representative of Bo Fu Company, XUE Bingqiang, prove the establishment of a ship repair contract relationship between the two sides. These corresponding emails, which have complete attachments, form a complete chain of evidence. Related confirmation letters of the project are also recognized by Top Logic. Therefore, the court of first instance could identify the authenticity and relevancy of these e-mails. 2. The ship management department of the Chinese-Polish Company and Chinese-Polish Company issued two certificates to declare that the management company of M.V. “KKG-2” was the Chinese-Polish Company who entrusted Yangpu Company to be responsible for the ship repair while repair costs should be paid by Top Logic. 3. The proof provided by Ship management department of Chinese-Polish Company and the emails sent by XUE Bingqiang to CHAI Difu, LUO Bin and LI Chen on May 27, 2010, prove that 15 the owners of ship entrusted Chinese-Polish Company to sign a repair contract with Xin Tai company. The contract was only used for handling exemption of tonnage tax by the agent and sent directly to the agent, which was not related to ship repair. 4. On June 8, 2010, CIF Company directly paid 180,000 USD to the Bo Fu Company for ship repairs. Although the court of first instance could not judge the relationship between CIF Company and Top Logic, based on existing evidence, the Chinese-Polish Company asked the CIF Company for instructions for the ship repair. The CIF Company paid the ship repair and the CIF Company staff, LI Chen and JIANG Yongfang, connected with Boffo Company, which proves CIF Company was the actual controller of M.V. “KKG-2.” CIF Company paid the repairs on behalf of Top Logic and the payee was Bo Fu Company. This proves that the CIF Company recognizes that Bo Fu Company was the repair party. Although Yangpu Company and Top Logic did not execute a written contract, the parties prove an offer and acceptance process existed as well as the establishment of a repair contract relationship in the form of a data message. The contract was not contrary to mandatory provisions of Chinese Law and it was valid. Therefore, the parties should be in accordance with the contract and full performance of the contract obligations prescribed by law. After the conclusion of the contract, Yangpu Company organized manpower and material to complete Top Logic’s ship repairs. It was confirmed by the Chief Engineer and the crews of M.V. “KKG-2” signed. Driving away safely after the repair, Top Logic has not contested the repair quality, supply issues, and Yangpu Company has no breach in the performance of the contract. Top Logic should be required by law to pay the appropriate fee for repairs and supplies.

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The second issue is how the repair costs were ascertained. Yangpu Company asserts that Top Logic had accepted their offer of repair costs in an e-mail message. Yet in trial, Top Logic denies they accepted the repair costs and claims that the repair costs asserted by Yangpu Company were not in line with market prices. At the first hearing, Top Logic argued that the repair costs should be assessed. During the second trial, according to the Assessment Report, Top Logic argued that the repair costs asserted by Yangpu Company were too high. Therefore, the identification of the report was essential in this case. As regards the various aspects referred to in the Assessment Report, the court of first instance found as follows: 1. The nature of the assessment. Top Logic applied for an assessment of repair costs involved after the first hearing and the court of first instance permitted it. Afterwards, Top Logic entrusted CMS to perform the assessment and CMS issued the Assessment Report. The assessment in the proceeding was an application of science, technology, or expertise for solving specialized issues and providing assessment. The assessment belongs to judicial expertise. 2. The delegate body. Yangpu Company claims that the assessment was entrusted by Top Logic and could not restrain Yangpu Company. The court of first instance held that the parties have 16 rights to entrusted qualified appraisers and institutions to identify specific matters unilaterally. Identification was entrusted by one party, both parties, or the court of first instance and has no direct impact on the effectiveness of the judicial expertise conclusions. 3. The subject of identification. Subject of identification includes institutions and experts. The appraisal institution referred to in this case was CMS and the appraiser was Xu and Zhang. Yangpu Company held that CMS was not a judicial institution since it did not have a forensic intelligence. According to the Decisions on Forensic Issues issued by the National People’s Congress (hereinafter referred to as the “Decisions”), the Measures of Administration of Judicial Appraisal Institutions, and the Measures of Administration of Appraisers issued by the Ministry of Justice, judicial appraisal institutions must hold judicial appraisal licenses and appraisers must hold judicial appraiser licenses. Yet CMS, Xu, and Zhang failed to submit relevant documents. Therefore, their subject qualification was illegal. The court of first instance held that the Decisions provided that the scope of the register management on judicial appraisal institutions and appraisers of the judicial administration department under the State Council was restrained by the items listed in Article 2 of the Decisions. The items listed in Article 2 of the Decision were: (1) forensic identification class; (2) material evidence identification class; (3) identification of audiovisual materials; (4) other matters that need to be registered and regulated by The Supreme People’s Court, Judicial Administration Department under the State and the Supreme People’s Procuratorate. The identification, in this case, did not belong to the first three, outlined above, involved in identification. The fourth identification register should be ascertained by the Supreme People’s Court and Judicial Administration Department under the State. Yet, Measures of Administration of Judicial Appraisal Institutions and Measures of

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Administration of appraisers were not related with the fourth identification. Therefore, the identification in this case could not be restrained by regulations. CMS was listed in the roster of forensic appraisers of People’s Court announced on May 22, 2003 and its identification categories were maritime inspection and the maritime assessment. The Supreme People’s Court has not repealed the roster. Therefore, the court of first instance recognizes CMS’s qualification of judicial appraisal institution. It did not violate the provisions of the judicial interpretation that Top Logic entrusted this company to identify the repair costs. According to Article IV of the Decisions on forensic issues, forensic appraisers should have senior professional titles, licensing or related experience. The identification in this case belongs to value identification. Therefore, appraisers should have senior professional titles, licensing, or experience related with value identification. The court of first instance found that Shanghai Science and Technology Consulting Service Center hired Xu as a maritime consultant expert. Xu had the certificate of ship repair management engineer. Yet, the certificate could not prove that he had the qualification of value identification. Therefore, the court of first instance could not recognize Xu as a value identification appraiser. Since insurance assessments were related to the damage of the subject of appraisal, Zhang has the ship engineer qualification and passes the examination of 17 insurance assessment. The court of first instance recognizes Zhang as a value identification appraiser, but this qualification was restrained to identify the price of the subject of insurance. 4. The obligations of appraiser to appear in court. According to Article 59 of Some Provisions of the Supreme People’s Court on Evidence in Civil Procedures, the appraiser should appear to accept the question. As an appraiser, Zhang did not appear in court to answer questions and failed to perform the obligations of an appraiser. Xu, who appeared in the court of first instance, did not have the qualification of appraiser. Therefore, this evaluation report came across obstacles in trial during cross-examination and identification. 5. The materials of identification. For identification, the appraiser in this case used a letter of project confirmation signed by the person who was on the ship when the repair happened and supplied by Top Logic and the clearing sheet supplied by the court of first instance. Top Logic argued M.V. “KKG-2” had been auctioned and dismantled when the evaluation happened and on November 10, 2011. CMS had asked Bo Fu Company and the agent ad litem to supply the information of specifications, models, and materials of related parts. Yet, these two companies did not reply to the question. The appraisers of CMS could not board M.V. “KKG-2” to find the ship technology condition and participate in the repair of this case. For the above reasons, it was fair that appraisers evaluate the price of ship repair with the letter of project confirmation, the clearing sheet, and domestic ship repairing practices. The court of first instance held that the appraiser could not find the details of repair only by these documents. Yet, these details could influence the identification of the appraiser. Top Logic held that the evidence, which could prove these facts, should be supplied by Yangpu Company. Yet, the court of first instance disagreed with it. First, the e-mails

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between the parties had reflected the details of repair. Before the first hearing, the court of first instance sent the e-mails supplied by Yangpu Company to Top Logic and some of the e-mails were from Chinese-Polish Company and the CIF Company. Chinese-Polish Company was Top Logic’s ship manager. Therefore, Top Logic could verify and supplement details of the e-mails and learn about the repair procedure. For example, on May 27, 2010, there were a set of crossed lubricating oil pump in attachment 75-33002, four sets of cross head through bolts in attachment 75-36003 (no spare parts number), and others in attachment 75-32002 referred in the e-mails from XUE Bingqiang to CHAI Difu. In the attachments, there were printed drawings of machine parts ascertained as DMR icon and encoded as 75-33002, 75-36003 and the corresponding number, name, code. If appraisers read these e-mails carefully, they could find the details of repair, the shape, and the code of parts. Second, when the ship was repaired, the manage letter of ship repair should be provided by the client and the client also needed to provide the relevant drawings and other technical information, including information on spare parts. That meant, as the client, Top Logic needed to preserve the relevant technical information by themselves. The above XUE Bingqiang’s e-mails and attachments, including drawings, were all from the ship. Top Logic alleged that there were some disputes about the repair costs referred to in this case. It did not meet the rules of evidence that Top Logic dismantled the ship without preserving relevant materials and then asked the repairer for these materials. Third, the engineering confirmation had indicated codes of related spare parts. These codes were not made by Yangpu Company, but supplied by the ship on the drawings corresponding to devices numbers. As a specialist on ship repair, the appraiser should know the name and the use of the device corresponding to the code. When the Plaintiff purchased spare parts, Yangpu Company did not have to inform the seller of models and specific data. The court of first instance checked the invoices issued by Intide Company. The spare part codes listed on the invoices were consistent with Yangpu Company’s cite. Yangpu Company’s statement was more credible that spare parts could be purchased only with codes. Based on this, the court of first instance held that Top Logic’s claim that appraiser’s information was incomplete, and the identification could only rely on the engineering confirmation and the settlement letter could not be established. The incorrect identification was due to the incomplete materials instead of Yangpu Company’s errors. 6. The basis for identification. The identification conclusion made by the appraiser for evaluating the value of M.V. “KKG-2” was based on Yellow Book 2001 and Green Book 2001. The court of first instance held that using Yellow Book 1992 and Green Book 2001 as reference documents could not reflect the market price at the time of repairs. Evaluating the repair costs should consider some other indexes and factors. The reasons were as follows: firstly, since the subjects of the ship repair contract were foreign legal persons and the ship was a foreign ship, the international market price of ship repairs should be the reference of evaluating price. Yet, the evaluation report did not refer to the international market price. Secondly, as we all know, ship repair prices have varied greatly in

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the past 20 years. Even domestic repair prices were used as the basement of evaluation. The ship-repair market of the second half of 2010 should also be considered. Since the ship-repair market of 2001 was different from the ship-repair market of 1992, Green Book 2001 was created. By the comparison, similar repairs in Green Book 2001 were increased several times than in Yellow Book 2001. For example, the 700 mm cylinder head disassembly in the former was 3,230 RMB. This is 3.35 times more than the latter, which was 743 RMB. For the 500 mm piston disassembly, the former was 4,800 RMB, which was 3.77 times more than the latter 1,005 RMB. The appraiser did not fully demonstrate that the market price of ship repair in 2010 was equal to the market price in 1992 or 2001. The appraiser uses the market price in 1992 and the market price in 2001 as the basement of evaluation, instead of multiplying the corresponding coefficient of price variation, which was unconvincing. Thirdly, the ship repair referred to in this case was in anchorage but the price forms in Yellow Book 2001 and Green Book 2001 only apply the factory repair. It was regulated clearly in the instructions of Yellow Book 2001 that this price form applied only to the factory repair while the prices of out-factory work and travel-construction were calculated separately. It was regulated in Article 3 of the instructions of Green Book 2001 that this price form only applied to the factory work. The repair costs of non-shipyard, loading and unloading when in moored in port, at buoy, anchorage and voyage would be increased according to the construction. Attachment 1 and Attachment 2 of Assessment Report did not take these factor into account. Using the factory repair costs to evaluate the anchorage repair costs was incorrect. The court of first instance held that reasonable evaluation should use Yellow Book 2001 or Green Book 2001 as reference. They should use the references and multiple respective coefficients of price variation, markup coefficient of anchorage repair and come-up coefficient of foreign ship repair and take the international market price into account. 7. The content of Assessment Report. The assessment included two parts: the text and the attachments. The assessment review of the court of first instance on the main text and some of the annexes were as follows: 1) It was referred to in the second result of Part 4 of Assessment Report on repair costs that the 2K1005098 project in the clearing sheet contained a large spare parts list. The spare parts supplied by Bo Fu Company were also listed in this project. The total price of these spare parts was 22,3835.20 USD and these spare parts had been paid for. The appraiser held that since the total repair costs contained the costs of bolts, nuts, seals, gaskets, etc., the costs of these spare parts should be deducted. Since the clearing sheet had no detailed description about this part, the appraiser deducted 20% of the spare costs according to actual repair experience. After the court of first instance’s verification, the project 2K1005098 starts from the 13th page, the name of spare parts and codes appears in the project repeatedly and were listed in the install-control spare parts, and the supplying spare parts separately. In this regard, the court of first instance held

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that the appraiser did not review and distinguish the meaning of install-control spare parts and supplying spare parts. Obviously, the costs of install-control spare parts were the fixing costs (labor charges). Yet, the costs of supplying spare parts were the material costs. The appraiser held that it was obviously incorrect that the name of spare parts and codes appear in the project repeatedly and it was unfair to exempt the costs of install-control spare parts from the charge. The spare parts listed in “supplying spare parts” were all bought from the third party and the third party supplied the corresponding invoices. Therefore, the costs should be paid by Top Logic. The appraiser held that the total costs have contained the costs of spare parts, but it was regulated in Article Four of the instructions of Yellow Book 2001 that “the costs of spare costs should be paid separately.” Therefore, the statement of the appraiser is contrary to Yellow Book 2001. The court of first instance could not admit the statement of the appraiser. It also has no basement that the appraiser deducts 20% costs of spare parts, according to ship repair experience. Therefore, the court of first instance would not accept it. 2) In Assessment Report, there were repeated charges and the repetition should be deducted. For example “casing spring” appeared repeatedly in project 2K1005098 P4-9 and in project 2K1005098 p32-7-2. Therefore, the latter costs (51,072 USD) should be deducted. Top Logic argued that this charge was the recurring charge. The court of first instance could not agree with Top Logic’s opinion. The reasons were as follows: firstly, the premise of the appraiser’s evaluation was that the appraiser has basic knowledge about the subject’s material constitution, shape and use, etc. or the appraiser has reliable documents for reference. As a management engineer of ship repair and maritime consulting expert, the appraiser in this case should do better. In the trial, when Yangpu Company asks the appraiser to describe the shape of the sleeve spring assembly, the answer of the appraiser was that the sleeve spring assembly was used for “Detuner.” Since Bo Fu Company did not supply parameters, he could not describe the shape and the use of the sleeve spring assembly. After the trial, Top Logic held that the translation of “Detuner” was a mistake and it should be translated into “Damper.” Top Logic also argued that there was no “Detuner” in the marine main engine in China. As to this dispute, the court of first instance held that, as a senior expert on ship repair, the appraiser should have known whether there was “Detuner” in the marine main engine even if Yangpu Company supplied an incorrect translation. The appraiser should rectify Yangpu Company’s error instead of answering that the sleeve spring assembly was used for “Detuner” in the trial. The translation of the sleeve spring assembly was correct. Therefore, the appraiser should know the shape, constitution, and use of it. Meanwhile, the appraiser could not answer Yangpu Company’s question in the trial. This means that the appraiser has no knowledge about the nature of the repaired subject.

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Additionally, the identification in this case lasted for several years. Therefore, even if the appraiser had no knowledge about “the sleeve spring assembly” and “Detuner,” he had enough time to consult documents and ask other experts. It was incredible that the appraiser had no knowledge about the subjects. Second, according to the e-mails between XUE Bingqiang, the Chinese-Polish Company, and the CIF Company, buying the sleeve spring assembly was not Bo Fu Company’s unilateral act. There were also pictures of the sleeve spring assembly in the attachments of emails. At the same time, the supplier Intide Company supplies the corresponding voices, in which the code of the sleeve spring assembly was consistent with the code in the clearing sheet. Third, as mentioned above, the appraiser’s identification of the sleeve spring assembly that was calculated for payment repeatedly still could not distinguish the repair costs and the material costs. In the project 2K1005098, P4-9 was referred to by the appraiser. It was listed by Bo Fu Company that the sleeve spring assembly has 14 sets, which includes 28 groups and each group contains 16 slices. All spare parts would be replaced by new parts. Since the elasticity was good, 448 new special tools were installed one by one and the total price was $4,480 USD. Meanwhile, the name of project 2K1005098 P32-7-2 (spare parts) was “the sleeve spring assembly” No.33751800131333500. The unit price was $1,824 USD. For 28 groups, the total price was 51,072 USD. The former was the fixing costs and the latter was the material 21 costs. It has no basement that the appraiser deducts the material costs of the sleeve spring assembly and the court of first instance would not accept it. 3) In Assessment Report, the exchange rate of 6.7715 (the dollar against yuan) referred by the appraiser was the middle rate on August 4, 2010. August 5, 2010 was the date of repair completion. The court of first instance held that, since the appraiser could not review the identification documents carefully and make the August 5, 2010 as the date of finish by mistake, the result of calculating repair costs was directly affected. The true date was September 29, 2010 and the middle rate on this date was 6.6936. The appraiser and Top Logic argued that the description on the repair process and facts in the Assessment Report would not influence the result of the assessment, but this was not the case. It also has flaws that Assessment Report was based on the exchange rate of August 4, 2010. The sixth part of Assessment Report outlined that the unit price of the fixing payment in the clearing sheet was generally higher than the price of the repair market and takes into account shipping market index falls. For example, the repair costs of Metalock Company was just 15.9% of Bo Fu Company. 4) The court of first instance held that the conclusion of the appraiser did not have a enough factual basis. The reasons were as follows: firstly, it could not be denied that the shipping market in 2010 dropped sharply in comparison with the shipping market in 2008. Yet, the ship building market and

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the ship repairing market have a lag phase to the shipping market. The appraiser did not cite the specific data of the ship repair market and did not demonstrate that the repair costs in 2010 equal is to the repair costs in 2001 or the repair costs in 1992. Secondly, as previously mentioned, this case should refer to the international ship repairing price. Thirdly, the quotation for repairing (copies) of Metalock Company has not been sealed to confirm by the company. This did not conform to procedural elements of evidence. Fourthly, it has been audited by the court of first instance that the quotation of Metalock Company was for cylinder head, piston, and other renovation costs. Yet, the costs in this case were fixing costs and renewal charges. In trial, Bo Fu Company stated that its fixing projects did not have the process of renewal and only a few of the projects were consistent with the projects in Metalock Company’s quote. The appraiser thinks that the fixing and the renewal were same as the refurbishment. The instruction of the marine engineering was on page 14 of Yellow Book 2001. It was clearly regulated in the instruction that, if the machines need be fixed or renewed, the costs should be calculated separately. The court of first instance held that fixing and renewal were different from refurbishment. Therefore, it was incredible that the fixing costs and renewal costs of Bo Fu Company were so high in comparison with the refurbishment quotation of Metalock Company. 5) In Assessment Report, there were many charge projects that were unreasonable and were not consistent with charge tradition in the clearing sheet. There was a large cost for working procedures involving the repair process and the charges of services listed in the clearing sheet. Yet, whether in Yellow Book 1992, Blue Book 1993, or in the conventions of ship repair charges, the working procedures cost about the repair process and the charges of services have been contained in the total cost of the repair and they were not paid separately. The court of first instance found that the appraiser did not identify “working procedure and the costs of service” and did not use the corresponding documents of costs to demonstrate. Therefore, the court of first instance could not judge whether “working procedure and the costs of service” claimed by the appraiser have been contained in the total costs of repair and could not judge whether the unreasonable charges claimed by the appraiser was true. As an expert who participates in written and auditing the costs table of the ship repair, the appraiser should be familiar with the content of Yellow Book 1992 and Green Book 2001. In trial, the appraiser states that: According to the instructions of Yellow Book 1992 and Green Book 2001, the costs of incidental engineering costs would not be calculated separately. Yet, it was regulated in Article IV of the instruction of Yellow Book 1992 that this price tariff identified the scope of repairs and renewal. It also includes that incidental engineering and probable renewal of spare parts, special tools, models, etc. were calculated separately. In the instruction of Green Book 2001, there was no regulation that the costs of the incidental

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engineering was not calculated separately. Additionally, it was regulated clearly in Green Book 2001 that the costs of abnormal services and repair in shipyard were calculated separately. Therefore, the appraiser was unfamiliar with the basement of identification. The court of first instance would not accept the appraiser’s claim that the costs of working procedures and services should not be calculated separately. 6) It was referred to in Assessment Report that the clearing sheet of the project 2K1005098 refers to the costs of the services of the professional factory for repairing the No.5 main engine, the costs of hiring experts to identify the scope of repair (the fee of experts was 6,000 USD) and so on. At the same time, in the process of the ship repair, if there were technical engineering that the shipyard could not repair, the shipyard should apply to the shipper for agreement and search for technical factory together with the shipper. When the repair project was given to the technical factory, the repair scheme should be made by the technical factory. The shipyard could not hire specialists to attend the repair activity, so these costs should be deducted from the clearing sheet. The court of first instance held that: firstly, it was regulated in Green Book 2001 that the costs of abnormal services and abnormal repairs in the shipyard were calculated separately. The costs of hiring experts could be ascertained as service charges and the costs have evidence. Secondly, in trial, it was claimed by the appraiser that the repair in this case was a kind of normal repair. Yet, according to the content of the emails from LI Chen to XUE Bingqiang on December 7, 2010, on April 28 of 2010, M.V. “KKG-2” carried iron ore from Iran Bandar Abbas Port to Nantong Port at 1420 on May 12. Since there were something wrong with the main engine, the ship linked to Haikou temporarily for inspection. Then, the ship was repaired on July 28. We have filed claims for the accident to the insurance company. Top Logic filed claims for this repair costs to the insurance company. This means Top Logic admits that this repair belongs to the abnormal repairs since normal repairs to a machine were not under the liability of the insurance. Third, Yangpu Company’s hired experts were not a unilateral act. According to the emails between XUE Bingqiang and CHAI Difu on May 29, 2010, they connected with each other on hiring experts and the Chinese-Polish Company did not deny or stop them. On July 7, 2010, the Chief Engineer of M.V. “KKG-2” sent a fax to Bo Fu Company and asked the company to arrange experts for diagnosis and inspection. Without combining the corresponding facts, the Assessment Report identifies that Yangpu Company’s hiring experts was a unilateral act and denies the costs of experts. Therefore, this was not supported by the court of first instance. 7) It was referred to in Assessment Report that the costs of bolts, nuts, seals, gaskets, and other spare parts have been listed in the clearing sheet. This was not consistent with Yellow Book 1992, Blue Book 1993, and the charge convention of ship repair. In ship repair, the costs of bolts, nuts, seals,

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gaskets, and other spare parts should be included in the total cost of machine repair and these costs should not be calculated separately. The act of both paying for repair and spare parts belongs to recurring charges and some parts of the costs should be deducted. After the court of first instance’s verification, pages 14-18 of marine engineering of Yellow Book 1992 provides that the costs of replacing the cylinder head should be calculated additionally. Costs of the cylinder head auxiliary valve assembly and disassembly did not include the costs of the shim between the valve and cylinder head replacement. Costs of changing the spare parts of piston rings and bedding-in gap of piston rings should be calculated additionally. Disintegration of the piston to measure pressure did not include excluding costs of shim and sealing ring changes for new parts. Cylinder sleeve assembly and disassembly did not include excluding copper pad bed and rubber ring changes for new parts. At the same time, Article III of the general provisions of Blue Book 1993 provides that the costs of labor and the costs of material were listed separately. Obviously, the appraiser’s claim that the costs of little spare parts should be included in the total costs of machine repair contrary to the regulations of Yellow Book 1992, Blue Book 1993, and the conclusion of recurring charges on spare parts was the subjective assumption, which was improbable. 8) In Assessment Report, there were mistakes in the procedures of ship repair found in the clearing sheet. For example, in the clearing sheet of the project 2K1006112, the high-pressure oil pump had been fixed twice. In the normal ship repair, when spare parts were not enough, the repair should not be started. After spare parts were gotten together, the repair began. The 24 recurring charge also was an error. Therefore, this unreasonable charge should be deducted by the appraiser. After the court of first instance’s verification, it was determined that project 2K1006112 actually has the “secondary repair of the combined-type and high-pressure oil pump” project. It should be ascertained, with other evidence, that the secondary repair is consistent with the appraiser’s statement of unreasonable working procedures and recurring charges. In trial, Bo Fu Company’s explanation for the secondary repair was that the ship’s high-pressure oil pump was bought from Germany. Since the generators on the ship all could not work, the company asked the specialized company to overhaul the repairs to let the generators work and to change it after the arrival of the spare parts. Bo Fu Company claims that their duty was to ensure the safety of the ship instead of executing recurring repairs. If they repeated repair, the shipper would not approve of the work. Meanwhile, in trial, the appraiser claims that it was impossible for three incidental engines to not work at the same time. Therefore, Bo Fu Company’s explanation was inaccurate. Based on the faxes between the Chief Engineer of the ship and Bo Fu Company, the court of first instance held that the explanation of Bo Fu Company was consistent with the facts. On June 28, 2010, the Chief

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Engineer of M.V. “KKG-2” sent a fax to Bo Fu Company. The fax outlined that there was an abnormal abrasion on the main shaft bushing of the incidental No.1 engine of M.V. “KKG-2.” Therefore, the bent axles must be transported to the factory for inspecting and to match the new spare parts. The pictures showed the details. The two main shaft bushings, as outlined previously, have a serious contraction. This is likely because the inspection skills were previously problematic, and because the incidental bent axles had a deformation. According to the above situation, it was probable that the auxiliary generator could not handle a big load. At the same time, for the ship’s safety, the other three auxiliaries must take the sling steel test. On July 7, 2010, the Chief Engineer of M.V. “KKG-2” sent another fax to Bo Fu Company. The fax was outlined, after changing the shift, the No.2 generator regulator was burned once, the No.3 generator regulator was burned once, and now the No.4 generator regulator currently has voltage problems. According to the series of accidents, the generators of M.V. “KKG-2” have serious safety problems. These problems have affected the safety of the ship. Bo Fu Company should hire experts to inspect and repair. Otherwise, the ship could not finish the voyage safely. The content of the faxes from the Chief Engineer of M.V. “KKG-2” demonstrates that all auxiliary generators of M.V. “KKG-2” could not work. The generator system of the ship has serious safety problems, needs to be inspected, and needs repairs. In trial, the statement of XUE Bingqiang was confirmed by the faxes of the Chief Engineer. The court of first instance held that the secondary repair written in the clearing sheet was a requisite working procedure. In trial, the appraiser’s judgment that it was impossible for three incidental engines to not work at the same time was not consistent with the facts. Therefore, the appraiser’s conclusion outlining an unreasonable repair procedure and recurring charges was false. The court of first instance could not support the party’s claim that the unreasonable charge should be deducted. 9) In Assessment Report, according to the market price and Green Book 2001, the report concludes two results. The evaluator thinks that making the market price, using Yellow Book 1992, and “Green Book 1993” as reference, was more objective than Green Book 2001. The court of first instance held that, although the appraiser claims his way of evaluating prices was objective and reasonable, the appraiser did not evaluate price in a way of using the market price as the standard Instead, he only uses Yellow Book 1992 and “Green Book 1993” for reference. As seen in Attachment 1, the appraiser identifies that the costs of dismantling the cylinder head of the No.5 main engine (the model of the main machine of M.V. “KKG-2” was MANK5SZ70/12510330BHP, the diameter of cylinder was 700 mm and the stroke was 1250 mm) was 892 RMB. In Yellow Book 1992, the costs of dismantling the cylinder (diameter 700 mm) was 743 RMB. The standard price of dismantling the front and the back bearings of

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the No.5 cylinder was 2,260 RMB. The unit corresponding costs in Yellow Book 1992 was 942 RMB. These verification prices were 120% of the prices in Yellow Book 1992. The Assessment Report makes it clear that the price rises to the K = 1.2 was for felly repair. In Attachment 2, there were no coefficients of price rise. For example, the appraiser identifies that the costs of dismantling the cylinder head was 3,230 RMB. In Green Book 2001, the costs of dismantling the cylinder (diameter 700 mm) was also 3,230 RMB. The verification price of dismantling the front and the back bearings of the No.5 cylinder was 3,480 RMB, while the unit corresponding costs in Green Book 2001 was also 1,740 RMB. According to the above analysis, when the appraiser assesses the price in the standard of Yellow Book 1992, the appraiser did not consider the variation coefficients of prices from 1992 to 2010 and the increase factors of anchorage repair. When the appraiser assesses the price in the standard of Green Book 2001, the appraiser did not even consider felly factors. The main projects involving ship repair costs were regulated in Yellow Book 1992 and Green Book 2001. Otherwise, these normative documents would lose practical value. The appraiser claims that the first article of the main valuation principle referred to Yellow Book 1992 and Blue Book 1993. Most parts of the appraiser’s variation on the costs of ship repairs corresponded with the content of Yellow Book 1992 and Green Book 2001. Yet, the parts variation did not consider the market variation coefficients, the increase coefficients in anchorage repair, and did not consider the felly factors in the standard of Green Book 2001. The appraiser claims that Assessment Report was in the standard of “market price,” which is a self-contradiction. 10) Attachment 1 and Attachment 2 in Assessment Report assess some of the projects with no basis nor do they correspond to the actual condition. For example, taking the incidental transportation costs under the Project 2K1005098, the cost was 1,000 USD each day and the total cost was 73,000 USD (the verification cost was 73,000 USD). Namely, the transportation cost was 1,000 USD each day and the verification cost was 1,000 USD each day. The court of first instance held that auditing the costs of offshore transport operations should consider the transport distance, time, climate, hydrology, the shape of the ship, the tonnage of the ship, horsepower, the age of the ship, and other factors. The basic factor was the transport distance. Yet, in trial, the appraiser did not know the sailing time from Lantau anchorage to Shekou Port. As an appraiser, when some facts are not clear and have direct impacts on conclusions, the appraiser should ascertain the facts for fairness. It was also not difficult to ascertain the facts. It was incredible that the appraiser identified that the costs of offshore transport operations was 1,000 USD each day in Attachment 1 and Attachment 2 when he did not know the transport distance and the sailing time.

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According to the emails between LI Chen and XUE Bingqiang on September 25, 2010 and September 29, 2010, the costs of the auxiliary engine oil and fresh water applied by the Chief Engineer of M.V. “KKG-2” were accepted by Top Logic. Therefore, the 18,800 USD within the invoices of Project 2K1009168 did not need to be audited. 8. The “factory repair” and “anchorage repair.” The appraiser held that the Lantau anchorage repair belonged to the factory repair and should apply to Yellow Book 1992 and Green Book 2001. Top Logic argued that Assessment Report considered the factor of anchorage repair. For example, the transport costs and barge costs had been considered and audited. This proves the Assessment Report made a fair and reasonable evaluation on the content of the clearing sheet. The court of first instance could not accept the above opinions for the following reasons. Firstly, it was regulated clearly in Yellow Book 1992 and Green Book 2001 that costs of non-factory works and business construction should be calculated separately and the costs of repair in non-factory, non-port, anchorage, and during the sailing could be increased according to the specific project. From the perspective of these provisions, the objects of separate calculation and price increases were the price of working, the price of construction, and the costs of construction instead of the transport costs. Secondly, although the Assessment Report had the costs evaluation within the transport costs, the barge costs and the transport trunk costs were generated separately in the process of anchorage repair and were not related with the anchorage repair. Thirdly, as previously mentioned, the appraiser’s evaluation on the transport costs and other costs was objective without basis. It was inconsistent with market conditions, which could not be accepted by the court of first instance. Fourthly, construction prices were objectively calculated separately in anchorage repairs. For example, no matter if it was hourly repairs or repairs paid by the job, the anchorage repair needs more time than the factory repair because of the roundtrip to anchorage. This part of time could be calculated in overtime costs or calculated separately in the costs of repair. Construction workers must bear more risks in anchorage than in a factory. Risks include boarding, sailing, and bad weather. The working environment and living conditions in 27 anchorage were worse than in the factory. Anchorage repairs have more safety management responsibilities on the vessel than factory repairs. Therefore, all price lists provide that the costs of anchorage repairs should be calculated separately instead of only calculating transport costs, as the claim of Top Logic. It was not consistent with the regulations of Yellow Book 1992 and Green Book 2001. The costs of the anchorage repairs were not calculated or increased in the Assessment Report. 9. The signatures on Assessment Report. The assessment in this case belonged to judicial expertise. Forensic was a serious business and the appraiser needed to sign on the identification conclusion. The need for identification reflects the integrity of the expertise. As an appraiser, Xu entrusted another appraiser, Zhang, to sign instead of signing it himself. In the condition that Zhang was absent, the court of first instance could not judge whether the two appraisers’

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signatures in the report were from Zhang. The court of first instance held that the appraiser was not very serious about judicial expertise. Based on the above analysis, the court of first instance held that the evaluation of CMS on the cost of ship repairs has flaws on the qualification of the appraiser, the identification of materials, the basis of identification, and the signatures of the appraisers. The argument of identification and conclusion of identification were incomplete, not objective, and even false. The evaluation analysis, the basis, the argument, and the conclusion in the main text of the evaluation report all have holes. The court of first instance could not accept it. In Attachment 1 and Attachment 2, the evaluation was divided into several sub-items. Thus, the court of first instance could also believe that the evaluation in Attachment 1 and Attachment 2 also has problems. Therefore, the court of first instance could not accept it. After the court of first instance’s verification, one of the letters of engineering confirmation submitted by Bo Fu Company (the number of the project was 2K1006115ADD) was commented on by the Chief Engineer of M.V. “KKG-2” Its content outlined: “the No.1 main cylinder leaks water and has been welded three times. Yet the welding failed and the condition of leaking water was very serious.” Without other evidence, the comment of the Chief Engineer could be considered as the objection to the leaking repair of Cylinder No.1. The second repair and the third repair were both the repeat of the first repair. Therefore, the court of first instance held that the costs of the latter two repairs (which was 17,000 USD) should be deducted. The other inventories for repair and supply of M.V. “KKG-2” should be signed and stamped by the Chief Engineer, Chief Officer, or the Master of M.V. “KKG-2.” The costs of repair and supply totaled 1,059,078.75 USD. Since there was no evidence to prove that these costs were unreasonable, repetitive, or exorbitant, these costs should be paid by Top Logic. Top Logic was still required to pay 879,078.75 USD when the company previously paid 180,000 USD. In conclusion, the ship repair and supply contract relationship between Yangpu Company and Top Logic was validly established. Since Yangpu Company carried out the obligation repairing the ship, Top Logic’s act of defaulting payment on the repair costs fell into nonperformance. Top Logic should undertake the responsibility for breach of contract. In trial, Top Logic applied for evaluating related costs because the costs claimed by Yangpu Company were exorbitant. After trial, the court of first instance could not believe the appraiser’s evaluation report. Therefore, the justification of Top Logic could not be established and Top Logic should pay for the rest of the costs (879,078.75 USD). The completion date of the ship repair, referred to in this case, was September 29, 2010. Top Logic should also pay for the interest of the unpaid costs since the next day of the completion date. According to Article 107 and Article 263 of the Contract Law of the People’s Republic of China and Article 142 of the Civil Procedure Law of the People’s Republic of China, the court of first instance judged as follows:

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1. Top Logic International Limited should pay Yangpu Company 879,078.75 USD and interest (the interest should be calculated at the dollar lending rate stipulated by the Bank of China from September 30, 2010 to the date of payment determined by this judgment) within ten days after this judgment takes effect; and 2. Other claims of Yangpu Company, Bo Fu Company (Hong Kong) Co., Ltd. should be rejected. If Top Logic did pay within the period decided by this judgment, according to Article 253 of the Civil Procedure Law of the People’s Republic of China, Top Logic should pay double interest in the period of delay in performance. Court acceptance fee in amount of 53,940 RMB, the fee of application on property preservation in amount of 5,000 RMB, the fee of assistance in execution in amount of 15,000 RMB, in aggregate amount of 73,940 RMB, Yangpu Company should undertake 1,403 RMB and Top Logic should undertake 72,537 RMB. The litigation fees undertaken by Top Logic should be paid to Yangpu Company within ten days from the date of this judgment. The court of first instance would not return the litigation fee paid by Yangpu Company in advance. Top Logic disagreed with the judgment of first instance and appealed to the court. Top Logic requested the court to judge that: 1. According to the law, withdraw the first item of the judgment of first instance and remand the case for retrial or change the original judgment and reject the claims of Bo Fu Company; and 2. Bo Fu Company should bear the litigation costs of the first instance and the second instance. The main facts and reasons are as follows: 1. As to the subject, the repair of M.V. “KKG-2” involved several contracts, but there were none between Top Logic and Bo Fu Company. The only ship repair contract was signed by Zhong Bo Company and Xin Tai Company. The signature of the Master and the crew of M.V. “KKG-2” was confirmed by the completed tasks, and it could not be seen who completed the tasks. It was insufficient that the contacts between the parties concerned had the signature of the Master. The crew of M.V. “KKG-2” adopted as basis of the establishment of the contract in the judgment of first instance. It constituted an incorrect determination. 2. The appraisal report issued by Heng Da Company should be admitted. The judgment of first instance should not exclude the effect of this appraisal report. Heng Da Company was a maritime surveyor and maritime appraiser listed in the People’s Court Judicial Appraiser Roster announced by the Supreme People’s Court. ZHANG Jian and XU Ming, who signed the appraisal report, acquired certain certification or practicing qualification as needed. The disaffirmation on the professional qualification and the appraisal report in the judgment of first instance led to unclear determination of facts.

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3. As to the commissioning appraisal materials, Bo Fu Company was a Hong Kong enterprise, and it did not have enough resources to complete the ship repair business involved in mainland China. The repair of M.V. “KKG-2” should be subcontracted to a third party. Therefore, the technical documents related to the repair of the ship involved should be kept by the third party. Top Logic or Zhong Bo Company did not necessarily hold the materials. It constituted an unclear determination of facts in the judgment of first instance that the Defendant, as the commissioning party of the ship repair, should keep the technical documents. Accordingly, Top Logic should bear the adverse consequence of the failure for meeting its burden of proof. 4. There was a great difference in the price of shipyard repair (repair in dock) and that of voyage repair (repair in anchorage). The urgent repair of M.V. “KKG-2” could not solve the problem. The ship should be towed to the nearest dock for shipyard repair, so that the repair costs could be reduced substantially. Yet, the ship was repaired in anchorage for almost 4 months. As a result, the repair costs rose sharply. This issue was not addressed, and the price was counted by the standard of voyage repair in the judgment of first instance. Bo Fu Company had an obligation to repair the ship in a reasonable manner and ensure the repair costs as reasonable as possible. If such obligation was not fulfilled, then it was not entitled to claim for the extra repair costs. 5. As to the rationality of the repair price, since M.V. “KKG-2” was repaired in anchorage, the extra repair costs and supply costs should not be born by Top Logic. The signature of the Chief Engineer, the Chief Officer, or the Master was only an acceptance of the engineering confirmation, but not the price of the project. In fact the parties did not arrive at an agreement on the repair costs. The court of first instance, under the circumstance that Bo Fu Company did not provide evidence to prove the price was reasonable, directly ascertained that no evidence could 30 prove the price was unreasonable, and supported such price. The facts were unclearly found. It was grossly unfair to Top Logic. Bo Fu Company defended in written as follows: 1. The facts determined in the judgment of first instance were clear. 1:1. Large quantities of e-mails and faxes between the ship manage company of Top Logic, Zhong Bo Company and LUO Bin and CHAI Difu (its employee), LI Chen and JIANG Yongfang, employee of Zhong Ji Company, the Master and the crew of M.V. “KKG-2” and XUE Bingqiang, the legal representative of Bo Fu Company, are the perfect proof of factual ship repair contract between the two parties. These emails exchanges corresponded with the attachments thereof that were completed. Thus, they formed a complete evidence chain. The attachments, like the engineering confirmation, were admitted by Top Logic. Top Logic advanced the repair fees, in an amount of 180,000 USD, to Bo Fu Company through Zhong Ji Company. Although there was no written contract between Bo Fu Company and Top Logic, the electronic documents could prove the offer and the

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1:2.

1:3.

1:4.

1:5.

acceptance. The relationship of ship repair contract was established and the contract was valid. The qualification of Heng Da Company did not necessarily mean the qualification of XU Ming and ZHANG Jian. Heng Da Company had no appraisal qualification over ship repair price. XU Ming did not have expert qualification over price. Notwithstanding, ZHANG Jian had the qualification over the price of subject matter insured. This case did not arise from a dispute over subject matter insured. Therefore, he did not have qualifications to appraise the ship repair price involved. XU Ming, as the appraiser, did not sign the appraisal report himself, but entrusted ZHANG Jian to do that. Whether or not the signatures of the two appraisers were made by ZHANG Jian could not be confirmed. It was right that the effect of the appraisal report submitted by Top Logic was disaffirmed in the judgment of first instance. Top Logic, as the commissioning party of the repair, should keep relevant technical documents. It failed to do so. Thus, it should bear the relevant consequence. The e-mails reflected the content of the repairs, specifications, and models of the spare parts. When the ship was under repair, it was the commissioning party’s duty to provide the engineering conformation, the relevant drawings, and other technical documents. This includes information on spare parts. The codes of the spare parts were marked in the engineering confirmation. These codes were not made by Bo Fu Company. There were numbers that corresponded to serial numbers of the equipment in the drawings provided by the owner. It did not conform to the rules of evidence that Top Logic asked Bo Fu Company to provide technical documents for appraisal. It was the decision of Top Logic, not Bo Fu Company, to repair the ship in anchorage. Bo Fu Company was not the owner of the ship and it could not control the place to repair the ship fully loaded with imported goods. The ship repair costs of Bo Fu Company was decided to be born by Top Logic entirely in the judgment of first instance. The repair and supply list of M.V. “KKG-2” had been confirmed by the signature or seal of the Chief Engineer, Chief Officer or the Master. There was no valid evidence that could prove these costs were unreasonable charges, repeated charges, or excessive charges. These costs should be born by Top Logic.

2. The laws were correctly applied in the judgment of first instance. The appeal of Top Logic had no factual or legal basis and therefore it should be dismissed according to law. In the second-instance trial, the Appellant, Top Logic, submitted 11 copies printed through internet enquiry. The content was market prices of No.0 of diesel, steel, and fresh water in October 2010, to provide that the prices of steel, diesel, and fresh water in the settlement of account submitted by Bo Fu Company were much higher than the market prices.

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After Cross-examination, the Respondent, Bo Fu Company, argued that the authenticity of this set of evidence could not be confirmed. It disaffirmed the relevancy and legality thereof. Thus, it did not accept the set of evidence. The court holds that the contents of the group of evidence all come from the internet. Therefore, the authenticity thereof could not be verified. They are also not directly related to the repair of M.V. “KKG-2”. Therefore, the court holds the group of evidence are inadmissible. The Respondent, Bo Fu Company, did not submit any evidence to the court. After trial, the court holds the facts found in the judgment of first instance are true and shall be ascertained. As the court identified, the Maritime Safety Administration of the People’s Republic of China made Maritime Ship Survey (2003) No.224 Reply of Approval of the Engagement of China Marine Services (CMS) in Maritime and Ship Notary Survey, which recognized the qualification of Heng Da Company to be engaged in maritime and ship notary survey, and notary survey of ship products and related equipment, and maritime and ship survey and appraise business, the period of validity expired on June 30, 2006. The court holds that since the Appellant, Top Logic, is a company registered in the British Virgin Islands, the Respondent, Bo Fu Company, is a company registered in Hong Kong S.A.R., 32 and M.V. “KKG-2” is a ship registered in Panama, therefore this case involves both foreign-related and Hong Kong-related factors. It is the foreign-related civil and commercial dispute. In respect to the jurisdiction of this case, in accordance with Article 19 of the Special Maritime Procedure Law of the People’s Republic of China, the court of first instance took maritime preservation upon the request of the Respondent, Bo Fu Company. Therefore, Bo Fu Company is entitled to bring a lawsuit to the court of first instance. The court of first instance has jurisdiction over this case. The court, as the court of second instance, acquires the jurisdiction according to the law. In respect of the application of laws in this case, the repair of M.V. “KKG-2” was completed before the implementation of the Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China. According to Article 2 of the Interpretations of the Supreme People’s Court on Several Issues concerning the Application of Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China I, the governing laws shall be the prevailing laws when the foreign-related civil relations. As the parties to the ship repair contract alleged to apply the laws of the People’s Republic of China in the first instance, according to Article 145 of the General Principles of the Civil Law of the People’s Republic of China, the court ascertains that the parties have made a choice on the applicable law, therefore, the laws of China will apply to try the dispute over the ship repairing contract in this case.

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The court holds the main issues of this case are as follows: 1. Whether a ship repair contract relationship exits between the Appellant, Top Logic, and the Respondent, Bo Fu Company; 2. Whether the appraisal report issued by Heng Da Company shall be recognized; and 3. Whether the repair costs regarding M.V. “KKG-2” are reasonable. In respect to whether ship repair contract relationship exists between the Appellant, Top Logic, and the Respondent, Bo Fu Company, in the certificate in Evidence 8 of the first instance of Bo Fu Company, Zhong Bo Company said it was the management company of M.V. “KKG-2”. It commissioned Bo Fu Company to arrange the repair of the ship, and the repair costs were paid by Top Logic. The Appellant, Top Logic, did not deny that. The court of first instance found that on May 20, 2010, LUO Bing, employee of Zhong Bo Company, sent a mail to XUE Bingqiang asking for Bo Fu Company’s arrangement of repair of M.V. “KKG-2”. XUE Bingqiang replied on the very day that the preparation for repair had been handled. Subsequently, there were large quantities of emails and faxes regarding the repair of M.V. “KKG-2” exchanged between LUO Bin and CHAI Difu, the employees of Zhong Bo Company, LI Chen and JIANG Yongfang, the employees of Zhong Ji Company, the master and the crew of M.V. “KKG-2” and XUE Bingqiang. Based on above facts, the court holds during the repair of M.V. “KKG-2” work, Zhong Bo Company, as the agent of the Appellant, Top Logic, directly contacted the Respondent, Bo Fu Company, and the ship repair contract of M.V. “KKG-2” was concluded in the email between LUO bing, the employee of Zhong Bo Company, and XUE Bingqiang, the legal representative of Bo Fu Company, on May 20, 2010. The emails and faxes thereafter further reflect negotiation and agreement regarding the repair contract. As to the ship repair contract signed by Zhong Bo Company and Xin Tai Company, according to the facts found by the court of first instance, XUE Bingqiang, the legal representative of the Respondent, and Bo Fu Company, put forward in the email sent on May 27, 2010 that a ship repair contract was needed for the agent’s handling exemption from tonnage dues and a ship repair contract was attached in the email. XUE Bingqiang signed and affixed the stamp of Xin Tai Company on May 23, 2010. After Zhong Bo Company received the ship repairing contract, LUO Bing signed the contract and affixed the stamp of the Ship Management Department of Zhong Bo Company on May 28, 2010. In the certificate of Evidence 8 of the First Instance submitted by Bo Fu Company, Zhong Bo Company said that to save costs for the sake of the shipowner and tonnage dues were free during anchorage period. The shipowner entrusted it to sign a repair contract with Xin Tai Company only for the purpose of agent’s handling exemption from tonnage dues for M.V. “KKG-2”. It had nothing to do with actual ship repair. The statement of Zhong Bo Company corroborates the email of XUE Bingqiang. The above facts indicate the ship repair contract concluded by Zhong Bo Company and Xin Tai Company is irrelevant to the actual repair of M.V. “KKG-2”, it is signed to handle exemption from tonnage dues for M.

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V. “KKG-2”, and it cannot prove the ship repair contract relationship was established between the Appellant, Top Logic, and the Xin Tai Company. Therefore, the Appellant, Top Logic, and the Respondent, Bo Fu Company, did not sign any contract. The only ship repair contract was signed by Zhong Bo Company and Xin Tai Company. The basis is insufficient that the court of first instance ascertained the contractual relationship between the Appellant, Top Logic, and the Respondent, Bo Fu Company. The ground of appeal that the ascertainment is incorrect cannot stand. In respect to whether the appraisal report issued by Heng Da Company shall be recognized, the court holds that, firstly, as to the appraisal qualification of Heng Da Company, it is identified in the second instance the qualification of Heng Da Company approved by the Maritime Safety Administration of the People’s Republic of China to be engaged in marine and ship survey, and appraisal services in China was valid until June 30, 2006. At present, Heng Da Company lacks professional qualification. Therefore, the professionalism of their expert opinion can be reasonably questioned. In this case, the effect of the appraisal report issued will be affected. Secondly, as to the appraisal qualification of XU Ming, the Appellant, Top Logic, held it completely met the title or practicing qualification or experience of an appraiser. The court holds meeting the title or practicing qualification or experience of an appraiser does not equal acquiring appraiser qualification, Top Logic did not prove XU Ming had the qualification to appraise the price involved. It shall bear the adverse consequence of the failure to meet its burden of proof. Since XU Ming, as one of the appraisers signing the appraise report, lacks the appraiser qualification, the effect of the appraiser report will be further impacted. Thirdly, as to the material upon which the appraise report relied, due to the Appellant, Top Logic is the commissioning party for appraisal, it has the obligation to provide materials to Zhong Bo Company. The allegation of Top Logic, that the Respondent (Bo Fu Company) should provide the maintenance information has no merit. Appellant Top Logic is the owner of M.V. “KKG-2” only if it or the authorized party agreed the ship repair could be carried out. Therefore, it ought to hold relevant technical documents. The incomplete documents affected the accuracy of the appraisal report. It is proper for the court of first instance to find that Top Logic should bear the adverse consequence of failing to meet its burden of proof. In conclusion, the qualification of the appraisal institution and the appraiser of the appraisal report issued by Heng Da Company are defective, and the materials on which the appraisal report is based are not comprehensive. It is proper that the court of first instance disaffirmed the effect of the appraisal report after a comprehensive analysis. The ground of the Appellant, Top Logic, that the court of first instance should not exclude the appraisal report and the effect thereof should be admitted cannot stand. In respect to whether the repair costs regarding M.V. “KKG-2” are reasonable, there are mainly two reasons asserted by Top Logic. Firstly, the anchorage repair price was higher than that of shipyard repair. Bo Fu Company made M.V. “KKG-2” repaired in anchorage which led to high costs. Secondly, there was no agreement on the repair price of M.V. “KKG-2”. Therefore, it should be subject to the market price. The signature of the Master, the Chief Officer, or the Chief

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Engineer was only confirmation on the repair items, which did not involve a corresponding price. With respect to the first reason, according to the facts ascertained in the first instance, M.V. “KKG-2” was under repair for more than three months. During that time, CHAI Difu and LUO Bing, the employees of Zhong Bo Company, LI Chen, the employee of Zhong Ji Company, the master and the chief engineer of M.V. “KKG-2” contacted XUE Bingqiang to confirm the repair items, supplemental items, order of spare parts, and stores through email and fax. Based on this, the court holds that if the Appellant, Top Logic, had objection to the location of repairs it should have timely put forward that M.V. “KKG-2” should be towed to the nearest dock and repaired in the shipyard directly or through Zhong Bo Company. Top Logic did not raise any objection to the place of repair. It should be deemed as a tacit consent on the repair place of M.V. “KKG-2” and an agreement with the Respondent, Bo Fu Company, thereto. Therefore, the Appellant, Top Logic, raising objection to the repair place cannot change the agreement reached with the Respondent, Bo Fu Company, at that time. There is merit for its claim that the ship repair costs are too high based on place of repair. It cannot refuse to pay relevant costs. With regard to the second reason, the court holds that the evidence materials on the repair costs of M.V. “KKG-2” submitted by the Respondent, Bo Fu Company, in the first instance can be divided into two categories. One category is the invoice of spare parts required in the ship repair and the other category is the list of repair items and corresponding invoices. Regarding the costs of the spare parts, the Respondent, Bo Fu Company, submitted the original invoices, and the Appellant, Top Logic, did not question the costs. It can be ascertained that the Appellant, Top Logic, admitted the costs of the spare parts. Regarding the costs of the detailed repair items, the Master, the Chief Officer, or the Chief Engineer of M. V. “KKG-2” signed the conformation and accepted the repair items in the course of repair. The Appellant, Top Logic, did not raise objection thereto. They simply argued that conformation on the items did not mean conformation on the price. However, it failed to submit any sufficient and effective evidence to question the repair price, to prove the price was too high, to prove the price was unreasonable, or counted repeatedly. Therefore, it should bear the adverse consequence of the failure to meet its burden of proof. Furthermore, Zhong Ji Company, which acted on behalf of the Appellant, Top Logic, only expressed its hope for a discount from Bo Fu Company regarding the ship repair costs in an amount of 180,000 USD paid by the Appellant, Top Logic, in advance in two emails sent by the employee on October 28 and December 1, 2010. It raised no doubt or objection to the repair costs of M.V. “KKG-2”. Therefore, it lacks basis that the Appellant, Top Logic, questioned the rationality of ship repair costs. Therefore, the ground of appeal held by the Appellant, Top Logic, that the repair costs should be subject to the market price in the place where the contract was performed for no agreement having been reached on the price cannot stand. To sum up, there is a ship repairing contract regarding M.V. “KKG-2” between the Appellant, Top Logic, and the Respondent, Bo Fu Company. The Appellant Top Logic shall perform its obligation for payment as agreed, it shall pay the outstanding sum to Bo Fu Company and interest thereon. The facts are clearly

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determined, the laws are correctly applied and trial procedures are legally adopted in the judgment of first instance. According to the Article 170 Paragraph 1 Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance in amount of 53,940 RMB, shall be born by Top Logic International Limited. The judgment is final. Presiding Judge: GUO Zaiyu Acting Judge: YU Jun Acting Judge: LIN Xianghui December 19, 2014 Clerk: CHEN Yinhua

Shanghai Maritime Court Civil Judgment CAI Bingchang v. FENG Zhifu (2013) Hu Hai Fa Shang Chu Zi No.34 and Related Case(s) This is the judgment of first instance, and the judgment of second instance and the ruling of retrial are on page 107 and page 115 respectively. Cause of Action 200. Dispute over liability for personal injury at sea. Headnote The Plaintiff seafarer successful in claim for maintenance and cure. Summary The Plaintiff as the Defendant’s employee claimed that the Defendant should pay him maintenance and cure for the injuries he suffered while working on the Defendant’s ship. The Defendant argued that he should not be liable because the injuries were caused by the Plaintiff’s own gross negligence. The Defendant also argued that part of the fees should be offset because of his advance payment. The court found in favor of the Plaintiff and rejected the Defendant’s argument since he failed to present the corresponding evidence.

Judgment The Plaintiff: CAI Bingchang Agent ad litem: TANG Jianhua, lawyer of Jiangsu Zhengdong Law Firm. The Defendant: FENG Zhifu Agent ad litem: CHANG Changhua, lawyer of Jiangsu Guolei Law Firm. With respect to the case of dispute over liability of personal injury filed by the Plaintiff, CAI Bingchang, against the Defendant, FENG Zhifu, on July 26, 2013, the court, after accepting this case on 29 July, applied to summary procedure in accordance with the law. On July 26, the Plaintiff applied with the court to freeze the ownership of M.V. “Sutaiyu 02007” owned by the Defendant and prohibit the Defendant transferring title, charging mortgage, entering into bareboat charter and making other disposal regarding the vessel. The court ruled to permit the Plaintiff’s application and freeze M.V. “Sutaiyu 02007” in accordance with the law. The © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_4

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Defendant applied for reappraisal on September 5, and the court entrusted the Forensic Appraisal Center of Institute of Forensic Science (hereinafter referred to as “IFS”) to reappraise on September 6. On December 3, the court held a hearing in public. Agent ad litem of the Plaintiff, SHANG Jianhua, and agent ad litem of the Defendant, CHANG Changhua, appeared in court and participated in the trial. The case has been concluded. The Plaintiff claimed that he and the witnesses, Dong and Yang were hired by the Defendant on June 24, 2012 to perform fishing operations at sea on M.V. “Sutaiyu 02007” owned by the Defendant. The two parties agreed a yearly payment in amount of RMB55,000 for wages verbally At 0300 hrs on December 1, 2012, when the Plaintiff, Dong and Yang were working on the pontoon, the pontoon collided with the large vessel. The Plaintiff’s abdomen was hit by the fender of the large vessel and became unconscious on the spot. The Plaintiff was then sent to Rudong County People’s Hospital (hereinafter referred to as “Rudong Hospital”) for rescue. The Defendant paid medical treatment fees for the Plaintiff. In accordance with the appraisal opinions issued by IFS, the Plaintiff requested the court to rule the Defendant to compensate the Plaintiff for lost wages in amount of RMB27,123.29, nursing fees in amount of RMB3,957, food subsidies in amount of RMB468, nutrition fees in amount of RMB1800, disability indemnity in amount of RMB59,354, compensation for the infliction of mental distress in amount of RMB5,000, travel expenses in amount of RMB275, appraisal fee in amount of RMB1,560 of Forensic Appraisal Institute of the Third People’s Hospital of Nantong City (hereinafter referred to as “Nantong Forensic Appraisal Institute”). The Defendant argued that he was the shipowner of M.V. “Sutaiyu 02007”. The relationship between the Plaintiff and the Defendant was a labor relationship formed between individuals. On the very day, the Plaintiff told the Defendant that he had a stomachache, so the Defendant sent the Plaintiff to hospital and advanced relevant medical treatment fees. The Plaintiff had suffered dense adhesion of ileum, hernia tilt on left side, cyst in the left spermatic cord and other diseases before the accident. The Plaintiff was not injured when operating at sea, nor did he have any scar, so the injury was caused by his own gross negligence. The Defendant had an objection to the appraisal opinions issued by the Nantong Forensic Appraisal Institute, so it applied for reappraisal and advanced the appraisal fee in amount of RMB4,250. The Defendant raised an objection to the amount of part of the compensation items. The medical treatment fees in amount of RMB38,541.07 advanced by the Defendant should be decided along with all the other claims. The medical treatment fees advanced by the Defendant were for the resection operation of cyst in the left side spermatic cord which had no relevancy with the injury in this case and should be returned or deducted. The Defendant requested the court to reject the claims of the Plaintiff.

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The evidence provided by the Plaintiff to support the facts and claims he alleged, the Defendant’s opinions on cross-examination and the court’s opinions are as follows: Evidence 1, written statement and copy of ID card of the witness, Yang and Dong, to prove that the process of the Plaintiff’s injury caused by the Defendant during working on the ship; and the two parties made a verbal agreement on the salary, which was a yearly payment in amount of RMB55,000. The Defendant had objection to this set of evidence through cross-examination and held that the Plaintiff himself had gross negligence to his injury and the evidence could neither prove the Plaintiff had a fixed income, nor could it prove the Plaintiff’s wage reached RMB55,000 per year. The court holds that Dong’s statement in court proved the allegation of the Plaintiff, therefore the court ascertains that the Plaintiff worked on the vessel of the Defendant since June, 2012, his salary was RMB55,000 per year, and he was injured when carried out fishing operation on the vessel of the Defendant; Evidence 2, list of hospitalization expenses, CT diagnosis report, the operation record on December 1, 2012, discharge record of Rudong Hospital, to prove the fact that the Plaintiff was hospitalized after the injury. Upon cross-examination, the Defendant had no objection to the authenticity of the list of hospitalization expenses, CT diagnosis report and the operation record on December 17, 2012 of Rudong Hospital, but he had objection to the relevancy thereof, in respect of the medical treatment expenses of the operation of excision of cyst in the left side spermatic cord conducted on December 17, 2012, the Defendant argued it was irrelevant with the injury involved; the Defendant had no objection to the authenticity, legality or relevancy of the operation record on December 1, 2012 and the discharge record The court holds that the Defendant had no objection to the authenticity of this set of evidence, and the Plaintiff submitted the corresponding originals, therefore the court ascertains the authenticity of this set of evidence and the effect of the evidence proving the fact that the Plaintiff was hospitalized after the injury; Evidence 3, 22 invoices of travel expenses in amount of RMB275, of which RMB150 was spent on the way the Plaintiff went to Rudong Hospital for treatment and its family members’ leaving for the hospital to nurse him during the period when the Plaintiff was in hospital, RMB125 was the travel expenses of the Plaintiff generated on the way to IFS for reappraisal. Upon cross-examination, the Defendant had no objection to the travel expenses in amount of RMB125 generated from reappraisal, but in respect of RMB150 incurring during hospitalization, it required the Plaintiff to provide the routes and times to be verified by the court. The court holds that the invoices of travel expenses were originals and ascertains the authenticity of this set of evidence of which the relevancy and effect shall be synthetically decided by other evidence;

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Evidence 4, the appraisal opinions of the Nantong Forensic Appraisal Institute and an invoice of appraisal fee, to prove the Plaintiff spent RMB1,560 for appraisal in Nantong Forensic Appraisal Institute. Through the cross-examination, the Defendant had no objection to the authenticity of the evidence above, but held it was an appraisal before litigation from which the fee generated should be born by the Plaintiff itself. The court holds that this set of evidence are originals and ascertains the authenticity, and the relevancy and effect thereof shall be synthetically decided by other evidence; Evidence 5, appraisal opinions of IFS, to prove the Plaintiff suffered a ten-level disability and the rest period, nutrition period and nursing period. Through cross-examination, the Defendant had no objection to the authenticity or legality of the evidence but had an objection to its relevancy, and held the effect thereof should be decided by the court. The court holds that the forensic appraisal institute was confirmed by the two parties after negotiation, and the Defendant failed to produce evidence to deny the effect of the appraisal opinions of IFS, therefore the court ascertains the authenticity and effect thereof; Evidence 6, certificate issued by village committee of Xiegang Village, Yangkou Town, Rudong County, to prove the Plaintiff and his wife were full-time fishermen, registered as fishery resident. The Plaintiff was nursed by his wife, of which the nursing standard was RMB65.95 per day. Through cross-examination, the Defendant had no objection to the authenticity, legality or relevancy of this evidence. The court ascertains the effect of the evidence since the Defendant had no objection thereto; and Evidence 7, certificate issued by Jiangsu Province Yangcheng City Fishery Port Supervision Bureau, to prove M.V. “Sutaiyu 02007” was owned by the Defendant. Through cross-examination, the Defendant had no objection to the authenticity, legality or relevancy of this evidence. The court confirms the effect of the evidence since the Defendant had no objection thereto. The evidence that the Defendant submitted to the court to support the facts and the defence opinions he alleged, the cross-examination and the ascertainment opinions of the court are as follows: A copy of receipt for hospitalization of Rudong Hospital, 2 copies of receipt for outpatient medical treatment fees of Rudong Hospital, 3 copies of receipt for outpatient medical treatment fees of the Third People’s Hospital of Rudong County, to prove that the Defendant had advanced the medical treatment fees for the Plaintiff. Through cross-examination, the Plaintiff held that the evidence above had no corresponding originals to be verified. The court holds that the Defendant failed to submit corresponding originals and the evidence above does not conform to the formal requirements of evidence, therefore the court does not ascertain the effect thereof. Based on the evidence ascertained above and the investigation in the trial, the court ascertains the following facts: The Defendant, FENG Zhifu was the owner of M.V. “Sutaiyu 02007”. The Plaintiff had worked on this ship since June, 2012. The two parties made a verbal agreement that the salary of the Plaintiff was RMB55, 000 per year, which was a yearly payment. In the small hours of December 1, 2012, the Plaintiff was injured

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when performing fishing operation on Yellow Sea and was sent to Rudong Hospital on the same day. The Plaintiff was diagnosed of intestine rupture and acute diffuse peritonitis before operation. After conducting an exploratory laparotomy, the Plaintiff was diagnosed as intestine rupture and acute diffuse peritonitis. On December 17, the Plaintiff was diagnosed as left tilt hernia. After conducting the excision operation of left spermatic cord cyst, the Plaintiff was diagnosed as left spermatic cord cyst with infection. On December 26, the Plaintiff left the hospital. The Defendant advanced relevant medical treatment fees for the Plaintiff. On May 30, 2013, Jiangsu Zhengdong Law Firm entrusted the Nantong Forensic Appraisal Institute to appraise the degree of injury and disability, rest period, nursing period, number of nurse and nutrition period of CAI Bingchang. On June 1, the Nantong Forensic Appraisal Institute issued appraisal opinions, which were rendered as follows: 1. the appraiser, CAI Bingchang suffered intestine rupture and acute diffuse peritonitis caused by his injury and an operation of mending of intestine rupture was conducted, it equaled to a ten-level injury and disability; and 2. the rest period lasted till one day before the appraisal; two nurses were needed during the hospitalization and one was needed for one month after CAI Bingchang’s being discharged from hospital; and the nutrition period should be two months. The Plaintiff paid the appraisal fee in amount of RMB1,560. The Defendant disaffirmed the appraisal opinions and applied for a reappraisal on September 5, the Plaintiff agreed. The two parties, after negotiating, determined to appoint IFS to conduct the reappraisal. The court entrusted the Forensic Appraisal Center for reappraise on September 6. The Forensic Appraisal Center issued the appraisal opinions on November 8, the contents were as follows: 1. the appraised individual CAI Bingchang’s injury occurred on December 1, 2012 had a causal relationship with his “intestine rupture and acute diffuse peritonitis” (the attributable rate was 96%-100%). The operation of mending intestine rupture equaled to a ten-level injury and disability in a road traffic accident. CAI Bingchang rested for 180 days and was nursed for 60 days (one nurse per day) after the injury, in addition, the nourished period was 90 days; 2. It lacked basis that a causal relationship between the “ileum dense adhesion” and “intestine rupture and acute diffuse peritonitis” of the appraiser, CAI Bingchang; the basis of diagnosis about “hernia tilt on left side” in this case was not enough; there was no causal relationship between the “cyst in the left spermatic cord” and the “intestine rupture and acute diffuse peritonitis”. The Defendant paid the appraisal fee in amount of RMB4,250. The court holds that this case is arising from dispute over liability for personal injury at sea. The employee shall be liable for the injury suffered by the employer when carrying out employment activities. The Plaintiff worked on the ship owned by the Defendant and the Defendant paid wages to the Plaintiff, so an employment relationship is established between the two parties. The Defendant shall bear compensation liability for injury caused by safety production accident occurring in the period when the Plaintiff was working on the ship. The Defendant argued that the Plaintiff had fault at the accident and disagreed with the claims of the Plaintiff, but it failed to provide evidence to prove the fault of the Plaintiff, therefore the court does not admit the arguments of the Defendant.

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With respect to the compensation items and the amount thereof, the court ascertains as follows: 1. Lost wages. In accordance with the appraisal opinions, the Plaintiff’s rest period should be 180 days, namely from December 1, 2012 to May 29, 2013. In accordance with the statement of witnesses, the Plaintiff worked on the ship since June, 2012. If no accident happened, the actual working period could be last until May 2013. The two parties made a verbal agreement that the salary was RMB55,000 per year. The Plaintiff alleged to convert a daily wage on this basis and calculate by rest days in a period of 180 days determined in the appraisal opinions, so the total amount of the lost wages was RMB27,123.29. The court holds that the calculation basis and method are appropriate, so the court ascertains. 2. Nursing fees. The Plaintiff alleged that the nursing fees should be calculated by a standard of RMB65.95 per day for the nursing period in a term of 60 days determined in the appraisal opinions, so the total amount thereof was RMB3,957. The Defendant had no objection to the nursing standard, and requested the court to ascertain the nursing period. The court admits the nursing period and the number of nurse determined by the appraisal opinions, therefore ascertains the amount of this item alleged by the Plaintiff. 3. Nutrition fees. The Plaintiff alleged that the standard of nutrition fees should be RMB20 per day for the nutrition period in a term of 90 days determined in the appraisal opinions, so the total amount thereof was RMB1,800. The Defendant held that the standard was too high and affirmed RMB10 per day, and requested the court to ascertain the nutrition period. The court holds that the nutrition fees alleged by the Defendant are reasonable and admits the nutrition period in the appraisal opinions, therefore ascertains the amount of this item alleged by the Plaintiff. 4. Food subsidies in hospital. The Plaintiff alleged that the food subsidies should be calculated by RMB18 per day for 26 days in hospital, so the amount of the food subsidies was RMB486. The court ascertains. 5. Disability indemnity. The Plaintiff is a fisherman, and he failed to provide evidence to prove urban standard should apply. Therefore, the court ascertains the last year’s rural per capita net income of Jiangsu Province in amount of RMB12,202 per year as standard to calculate the indemnity by ten-level injury and disability (coefficient 0.1) determined in the appraisal opinions for 20 years. The amount of this item is RMB24,404. 6. Compensation for the infliction of mental distress. During the Plaintiff’s working on the vessel of the Defendant, he suffered a serious injury, so it is proper to claim for compensation for the infliction of mental distress. In accordance with degree of injury and disability suffered by the Plaintiff, the court ascertains the amount of this item is RMB5,000. 7. Travel expenses. The Plaintiff alleged the travel expenses in amount of RMB150 was spent in seeking medical treatment and the family members’ leaving for the hospital to nurse the Plaintiff when he was in hospital, and RMB125 was the travel expenses for reappraisal, and provided invoices for the travel expenses.

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The Defendant required the court to examine the travel expenses spent by family members of the Plaintiff from and to hospital to nurse the Plaintiff the when he was in hospital, and affirmed the travel expenses for the reappraisal. The court holds that travel expenses are needed for the family members to go and leave the hospital to nurse the Plaintiff when he was in hospital. In view of the duration of hospital stay and the distance from home of the Plaintiff to the hospital, the travel expenses alleged by the Plaintiff are reasonable, therefore the court ascertains the amount of this item alleged by the Plaintiff. 8. Appraisal fee. The appraisal fee in amount of RMB1,560 alleged by the Plaintiff generated from the appraisal appointed by the Plaintiff in the Nantong Forensic Appraisal Institute before the lawsuit. Since the two parties negotiated to conduct a reappraisal in IFS, the appraisal opinions submitted by the Plaintiff unilaterally are not adopted as an evidence to decide the facts in this case, therefore the court disaffirms the appraisal fee alleged by the Plaintiff. In addition, the appraisal fee in amount of RMB4,250 for the reappraisal conducted by IFS advanced by the Defendant is necessary expenses caused by the accident and shall be born by the Defendant. Moreover, the Defendant argued in the trial that part of the medical treatment fees advanced by the Defendant which were generated from his intrinsic disease (excision of cyst in the left spermatic cord) should be refunded by the Plaintiff or offset the claimed amount. The court holds that in accordance with the appraisal opinions issued by IFS, the Plaintiff truly underwent an operation of excision of cyst in the left spermatic cord during therapy, and the disease had no causal connection with the accident in this case. However, the Defendant failed to provide effective evidence to prove the medical treatment fees were paid by him, it is hard to evaluate the medical treatment expenses generated from this operation therapy. Therefore, the court does not admit the argument of the Defendant above. In summary, according to Article 106 Paragraph 2 of the General Principles of the Civil Law of the People’s Republic of China, Article 16 of the Tort Liability Law of People’s Republic of China, Article 11 Paragraph 1 of the Interpretations of the Supreme People’s Court of Some Issues concerning the Application of Law for the Trial of Cases on Compensation for Personal Injury. And Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: 1. The Defendant, FENG Zhifu, shall compensate the Plaintiff, CAI Bingchang, for lost wages, nursing fees, nutrition fees, food subsidies in hospital, disability compensations, compensation for the infliction of mental distress, travel expenses in amount of RMB63,027.29 within ten days after the judgment comes into effect; and 2. Other claims of the Plaintiff, CAI Bingchang, shall be rejected. If the Defendant fails to perform the obligation of payment within the period designated by this judgment, interest on the debt for the delayed period shall be doubled in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China.

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Court acceptance fee in amount of RMB2,288.43, the Plaintiff CAI Bingchang shall bear RMB913.43 and the Defendant FENG Zhifu shall bear RMB1,375; the Defendant shall bear RMB649 for the fee of applying for preservation before litigation. In event of dissatisfaction with this judgment, both parties may, within 15 days upon service of this Judgment, submit a bill of appeal together with ten duplicates to the court, to file an appeal to the Shanghai High People’s Court. Acting Judge: ZHU Xialing December 19, 2013 Clerk: MU Pengfei

Appendix: Relevant Laws 1. General Principles of the Civil Law of the People’s Republic of China Article 106…… Citizens and legal persons who breach a contract or fail to fulfil other obligations shall bear civil liability. 2. Tort Liability Law of People’s Republic of China Article 16 Where a tort causes any personal injury to another person, the tortfeasor shall compensate the victim for the reasonable costs and expenses for treatment and rehabilitation, such as medical treatment expenses, nursing fees and travel expenses, as well as the lost wages. If the victim suffers any disability, the tortfeasor shall also pay the costs of disability assistance equipment for the living of the victim and the disability indemnity. If it causes the death of the victim, the tortfeasor shall also pay the funeral service fees and the death compensation. 3. Interpretation of the Supreme People’s Court of Some Issues concerning the Application of Law for the Trial of Cases on Compensation for Personal Injury Article 11 Where the employee suffers a personal injury when carrying out employment activities, the employer shall be responsible for the indemnity, if such personal injury is caused by a third party, the claimer may claim for indemnity against the employer or the third party. The employer can recourse against the third party after he takes the liability for indemnity. 4. Civil Procedure Law of the People’s Republic of China Article 64 A party shall have the burden to provide evidence for its claims. Article 253 When a people’s court has decided to adopt property preservation, it may instruct the applicant to provide a surety; if the applicant fails to do so, his application may be rejected.

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Shanghai High People’s Court Civil Judgment CAI Bingchang v. FENG Zhifu (2014) Hu Gao Min Si (Hai) Zhong Zi No.24 Related Case(s) This is the judgment of second instance, and the judgment of first instance and the ruling of retrial are on page 99 and page 115 respectively. Cause of Action 200. Dispute over liability for personal injury at sea. Headnote The Defendant employer held liable for injury sustained by plaintiff seaman while working aboard defendant’s fishing vessel in the course of employment with defendant; no evidence of comparative fault justifying reduction of plaintiff’s damages. Summary This case arises from dispute over liability for the injury of an employee of the Defendant-Appellant’s vessel. The Defendant-Appellant appealed the court of first instance’s finding that the Plaintiff-Respondent was an employee of the Appellant’s vessel and the amount of lost wages awarded. Furthermore, the Defendant-Appellant asserted that the lower court erred in failing to reduce the Plaintiff-Respondent’s award on account of his comparative fault. Held—there was an established employment relationship between the two parties, and the amount of damages awarded was supported by the facts. Moreover, the lower court found that the Defendant-Appellant had not presented enough evidence to ascertain the comparative fault of its employee. Therefore, the Court upheld the court of first instance’s determination.

Judgment The Appellant (The Defendant of First Instance): FENG Zhifu Agent ad litem: CHANG Changhua, lawyer of Jiangsu Guolei Law Firm. The Respondent (The Plaintiff of First Instance): CAI Bingchang Agent ad litem: TANG Jianhua, lawyer of Jiangsu Zhengdong Law Firm. The Appellant, FENG Zhifu, disagreed with (2013) Hu Hai Fa Shang Chu Zi No.34 Civil Judgment made by Shanghai Maritime Court with regard to the case rising from dispute over personal injury on the sea against the Appellant, CAI Bingchang, and

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lodged an appeal to the court of first instance. After accepting the case on February 14, 2014, the court organized a collegiate panel and held a hearing in public on March 11, 2014. CHANG Changhua, agent ad litem of the Appellant, FENG Zhifum and TANG Jianhua, agent ad litem of the Respondent, CAI Bingchang, appeared in court and participated in the proceedings. The case has been concluded. The court of first instance found that FENG Zhifu was the owner of M.V. “Sutaiyu 02007”. CAI Bingchang had worked on this ship since June, 2012. The two parties made a verbal agreement that the salary of CAI Bingchang was RMB55,000 per year, which was a yearly payment. In the small hours of December 1, 2012, CAI Bingchang was injured when performing fishing operation on Yellow Sea and was sent to Rudong Hospital on the same day. CAI Bingchang was diagnosed of intestine rupture and acute diffuse peritonitis before operation. After conducting an exploratory laparotomy, CAI Bingchang was diagnosed as intestine rupture and acute diffuse peritonitis. On December 17, CAI Bingchang was diagnosed as left tilt hernia. After conducting the excision operation of left spermatic cord cyst, CAI Bingchang was diagnosed as left spermatic cord cyst with infection. On December 26, CAI Bingchang left the hospital. FENG Zhifu advanced relevant medical treatment fees for CAI Bingchang. On May 30, 2013, Jiangsu Zhengdong Law Firm entrusted the Forensic Appraisal Institute of the Third People’s Hospital of Nantong City (hereinafter referred to as “Nantong Forensic Appraisal Institute”) to appraise the degree of injury and disability, rest period, nursing period, number of nurse and nutrition period of CAI Bingchang. On June 1, the Nantong Forensic Appraisal Institute issued appraisal opinions, which were as follows: 1. the appraiser, CAI Bingchang suffered intestine rupture and acute diffuse peritonitis caused by his injury and an operation of mending of intestine rupture was conducted, it equaled to a ten-level injury and disability; and 2. the rest period lasted till one day before the appraisal; two nurses were needed during the hospitalization and one was needed for one month after CAI Bingchang’s being discharged from hospital; and the nutrition period should be two months. CAI Bingchang paid the appraisal fee in amount of RMB1,560. FENG Zhifu disaffirmed the appraisal opinions and applied for a reappraisal on September 5, CAI Bingchang agreed. The two parties, after negotiating, determined to appoint the IFS of Institute of Forensic Science (hereinafter referred to as “IFS”) to conduct the reappraisal. The court of first instance entrusted the IFS for reappraise on September 6. The IFS issued the appraisal opinions on November 8, the contents were as follows: 1. the appraised individual CAI Bingchang’s injury occurred on December 1, 2012 had a causal relationship with his “intestine rupture and acute diffuse peritonitis” (the attributable rate was 96%100%). The operation of mending intestine rupture equaled to a ten-level injury and disability in a road traffic accident. CAI Bingchang rested for 180 days and was nursed for 60 days (one nurse per day) after the injury, in addition, the nourished period was 90 days; 2. It lacks basis that a causal relationship between the “ileum dense adhesion” and “intestine rupture and acute diffuse peritonitis” of the appraiser, CAI Bingchang; the basis of diagnosis about “hernia tilt on left side” in this case was not enough; there was no causal relationship between the “cyst in the

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left spermatic cord” and the “intestine rupture and acute diffuse peritonitis”. FENG Zhifu paid the appraisal fee in amount of RMB4,250. The court of first instance held that this case was arising from dispute over liability for personal injury at sea. The employee should be liable for the injury suffered by the employer when carrying out employment activities. CAI Bingchang worked on the ship owned by FENG Zhifu and FENG Zhifu paid wages to CAI Bingchang, so a employment relationship was established between the two parties. FENG Zhifu should bear compensation liability for injury caused by safety production accident occurring in the period when CAI Bingchang was working on the ship. FENG Zhifu argued that CAI Bingchang had fault at the accident and disagreed with the claims of CAI Bingchang, but it failed to provide evidence to prove the fault of CAI Bingchang, therefore the court of first instance did not admit the arguments of FENG Zhifu. With respect to the compensation items and the amount thereof, the court of first instance ascertained as follows: 1. Lost wages. In accordance with the appraisal opinions, CAI Bingchang’s rest period should be 180 days, namely from December 1, 2012 to May 29, 2013. In accordance with the statement of witnesses, CAI Bingchang worked on the ship since June, 2012. If no accident happened, the actual working period could be last until May, 2013. The two parties made a verbal agreement that the salary was RMB55,000 per year. CAI Bingchang alleged to convert a daily wage on this basis and calculate by rest days in a period of 180 days determined in the appraisal opinions, so the total amount of the lost wages was RMB27,123.29. The court of first instance held that the calculation basis and method were appropriate and should be ascertained. 2. Nursing fees. CAI Bingchang alleged that the nursing fees should be calculated by a standard of RMB65.95 per day for the nursing period in a term of 60 days determined in the appraisal opinions, so the total amount thereof was RMB3,957. FENG Zhifu had no objection to the nursing standard, and requested the court of first instance to ascertain the nursing period. The court of first instance admitted the nursing period and the number of nurse determined by the appraisal opinions, therefore ascertained the amount of this item alleged by CAI Bingchang. 3. Nutrition fees. CAI Bingchang alleged that the standard of nutrition fees should be RMB20 per day for the nutrition period in a term of 90 days determined in the appraisal opinions, so the total amount thereof was RMB1,800. FENG Zhifu held that the standard was too high and affirmed RMB10 per day, and requested the court of first instance to ascertain the nutrition period. The court of first instance held that the nutrition fees alleged by FENG Zhifu were reasonable and admitted the nutrition period in the appraisal opinions, therefore it ascertained the amount of this item alleged by CAI Bingchang. 4. Food subsidies in hospital. CAI Bingchang alleged that the food subsidies should be calculated by RMB18 per day for 26 days in hospital, so the amount of the food subsidies was RMB486. The court of first instance ascertained the sum.

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5. Disability indemnity. CAI Bingchang was a fisherman, and he failed to provide evidence to prove urban standard should apply. Therefore, the court of first instance ascertained the last year’s rural per capita net income of Jiangsu Province in amount of RMB12,202 per year as standard to calculate the indemnity by ten-level injury and disability (coefficient 0.1) determined in the appraisal opinions for 20 years. The amount of this item was RMB24,404. 6. Compensation for the infliction of mental distress. During CAI Bingchang’s working on the vessel of FENG Zhifu, he suffered a serious injury, so it was proper to claim for compensation for the infliction of mental distress. In accordance with degree of injury and disability suffered by CAI Bingchang, the court of first instance ascertained the amount of this item was RMB5,000. 7. Travel expenses. CAI Bingchang alleged the travel expenses in amount of RMB150 was spent in seeking medical treatment and the family members’ leaving for the hospital to nurse CAI Bingchang when he was in hospital, and RMB125 was the travel expenses for reappraisal, and provided invoices for the travel expenses. FENG Zhifu required the court of first instance to examine the travel expenses spent by family members of CAI Bingchang from and to hospital to nurse CAI Bingchang the when he was in hospital, and affirmed the travel expenses for the reappraisal. The court of first instance held that travel expenses were needed for the family members to go and leave the hospital to nurse CAI Bingchang when he was in hospital. In view of the duration of hospital stay and the distance from home of CAI Bingchang to the hospital, the travel expenses alleged by CAI Bingchang were reasonable, therefore the court of first instance ascertained the amount of this item. 8. Appraisal fee. The appraisal fee in amount of RMB1,560 alleged by CAI Bingchang generated from the appraisal appointed by CAI Bingchang in the Nantong Forensic Appraisal Institute before the lawsuit. Since the two parties negotiated to conduct a reappraisal in the IFS, the appraisal opinions submitted by CAI Bingchang unilaterally were not adopted as an evidence to decide the facts in this case, therefore the court of first instance disaffirmed the appraisal fee alleged by CAI Bingchang. In addition, the appraisal fee in amount of RMB4,250 for the reappraisal conducted by the IFS advanced by FENG Zhifu was necessary expenses caused by the accident and should be born by FENG Zhifu. Moreover, FENG Zhifu argued in the first instance that part of the medical treatment fees advanced by FENG Zhifu which were generated from his intrinsic disease (excision of cyst in the left spermatic cord) should be refunded by CAI Bingchang or offset the claimed amount. The court of first instance held that in accordance with the appraisal opinions issued by the IFS, CAI Bingchang truly underwent an operation of excision of cyst in the left spermatic cord and the disease had no causal connection with the accident in this case. However, FENG Zhifu failed to provide effective evidence to prove the medical treatment fees were paid by him, it was hard to evaluate the medical treatment expenses generated from this operation therapy. Therefore, the court of first instance did not admit the argument of FENG Zhifu above.

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In summary, according to Article 106 Paragraph 2 of the General Principles of the Civil Law of the People’s Republic of China, Article 16 of the Tort Liability Law of People’s Republic of China, Article 11 Paragraph 1 of the Interpretations of the Supreme People’s Court of Some Issues concerning the Application of Law for the Trial of Cases on Compensation for Personal Injury and Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the court of first instance judged as follows: 1. FENG Zhifu, FENG Zhifu should compensate CAI Bingchang for lost wages, nursing fees, nutrition fees, food subsidies in hospital, disability compensations, compensation for the infliction of mental distress, travel expenses in amount of RMB63,027.29 within ten days after the judgment came into effect; and 2. Reject other claims of CAI Bingchang. FENG Zhifu requested the court to revoke the original judgment, and remand for retrial or amend the original judgment according to law, the main reasons were as follows: 1. The facts were wrongly determined in the judgment of first instance. 1:1. A labor relationship between individuals was established between CAI Bingchang and FENG Zhifu. Since the Tort Liability Law of the People’s Republic of China (hereinafter referred to as the “Tort Law”) took into effect, the so-called employment relationship did not exist anymore. The determination of court of first instance that the relationship between the two parties was employer and employee violated the provisions of the prevailing law; 1:2. The reason of CAI Bingchang’s injury lied in his inattention and imbalance in the cross-help operation, and the testimony of witness could also prove CAI Bingchang had fault at his injury. According to Article 34 of the Tort Law, where, in a labor relationship formed between individuals, the party providing labor services caused any harm to himself as the result of the labor services, both parties should assume corresponding liabilities according to their respective faults, therefore, the determination of court of first instance that FENG Zhifu should take full responsibility was wrong; and 1:3. Most workers had not fulfilled the service for one year. Therefore, the wages in amount of RMB55,000 per year alleged by the witness, Dong could not be established, the determination of lost wages in the judgment of first instance was wrong. 2. The laws were wrongly applied in the judgment of first instance. 2:1. The Tort Law, as a special law, compared with Interpretation of the Supreme People’s Court of Some Issues concerning the Application of Law for the Trial of Cases on Compensation for Personal Injury (hereinafter referred to as the “Interpretations on Personal Injury”), should be given

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priority to apply. In the meantime, the application of Article 16 of the Tort Law in the judgment of first instance was wrong. FENG Zhifu did not cause personal injury to CAI Bingchang; 2:2. The court of first instance judged FENG Zhifu to compensate CAI Bingchang for the infliction of metal distress in amount of RMB5,000. In this regard, the provisions of the Interpretations on Personal Injury were not applied, the original judgment lacked legal basis; and 2:3. The court of first instance did not interpret to CAI Bingchang that the medical treatment fees would be decided in this case and did not deal in accordance with the law upon receipt of statement of counterclaim of FENG Zhifu, but required FENG Zhifu to lodge another lawsuit. It went against the law and litigation right of FENG Zhifu was infringed. CAI Bingchang argued in the second instance that the two parties in the case were employer and employee; the injury arose from a production safety accident; FENG Zhifu should assume full responsibility; and the facts were clearly determined and the laws were properly applied in the judgment of first instance. Therefore, he requested the court to dismiss the appeal and affirm the judgment of first instance. In the second instance, FENG Zhifu submitted a stub of which was an express for statement of counterclaim to the court of first instance, proving it filed a counterclaim with the court of first instance on December 10, 2013, but no statement of counterclaim could be found in the files of the first instance. CAI Bingchang argued the stub did not reflect the delivery date, so he contested to the relevancy of this evidence. The court holds that this evidence does not fall into the scope and connotation of new evidence in the second instance, and the stub does not show the specific delivery date and situation of receipt, so the effect of evidence thereof shall not be ascertained, but the ground of appeal regarding to the counterclaim held by FENG Zhifu will be otherwise determined on basis of the facts of this case. The court holds that this case is arising from dispute over liability for personal injury at sea, the main issues of dispute in the second instance are as follows: 1. Whether the decision made by the court of first instance that the counterclaim filed by FENG Zhifu regarding the medical treatment fees would be tried in this case constitutes a breach of statutory procedure; 2. What the legal relationship between the FENG Zhifu and CAI Bingchang is established; and 3. Whether FENG Zhifu should compensate CAI Bingchang for his injury. In respect of the first issue, it is provided in Article 140 of the Civil Procedure Law of the People’s Republic of China that the additional claims of a plaintiff, the counterclaims of a defendant, and the claims of any third-party related to the same case may be combined and tried together. According to the trial records, FENG Zhifu raised a counterclaim in respect of the medical treatment fees, but the court of first instance requested him to provide the original vouchers of the medical treatment fees, FENG Zhifu alleged the vouchers had been surrendered to the insurer for

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settlement of claim, so he failed to provide the original copies as requested; at the same time, medical treatment fees unrelated to the accident involved in this case could not be distinguished, so the court of first instance made it clear that FENG Zhifu might institute another action with regarding to the medical treatment fees. Accordingly, the determination of the court of first instance on the medical treatment fees is appropriate. Therefore the court holds this claim of appeal raised by FENG Zhifu is not admissible. In respect of the second issue, the court holds that the relationship between FENG Zhifu and CAI Bingchang in the case have legal characteristics of employment relationship, the identification of court of first instance that a legal employment relationship was established between the two parties is proper; but with respect to the allegation of FENG Zhifu that CAI Bingchang was fault at the accident, the court holds that the record of medical treatment of CAI Bingchang, discharge record, forensic appraisal and witness testimony and other evidence form a complete evidence chain, and it is enough to prove that CAI Bingchang suffered an injury during the period of providing services, in the contrary, FENG Zhifu did not provide corresponding evidence to prove the fault of CAI Bingchang; therefore, the claim of FENG Zhifu that both parties should assume corresponding liabilities according to their respective faults pursuant to Article 35 of the Tort Law lacks factual and legal basis. In respect of the third issue, FENG Zhifu alleged that the lost wages should be calculated according to the standard of fishery industry of Jiangsu Province in 2011. But he expressed explicitly in the second instance that he concluded a verbal agreement in respect of wages with CAI Bingchang, of which the standard was 15% of gross revenue per ship. But FENG Zhifu did not provide the amount of the foregoing revenue, on the contrary, he applied for a witness who worked on the vessel over the same period to testify that the wage was RMB55,000 per year in the hearing. Accordingly, it is proper that the court of first instance adopted this standard to calculate lost wages of CAI Bingchang, the court of first instance hereby ascertains. In addition, the determination of the court of first instance on the items of compensation claimed by CAI Bingchang, which combined with the appraisal report is proper. Meanwhile, in view of CAI Bingchang suffered a tenth-level disability because of the accident, according to the relevant provisions of the Interpretation of the Supreme People’s Court on Issues concerning the Ascertainment of Compensation Liability for Emotional Damages in Civil Torts, the court of first instance ascertained a discretionary amount of RMB5,000 for the compensation for emotional damages, the court holds it is proper and shall be confirmed. In conclusion, the original judgment is proper. The appeal of FENG Zhifu lacks factual and legal basis, the court will not support. In accordance with of Article 170 Paragraph 1 and Article 175 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows:

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Dismiss the appeal and affirm the original judgment. Court acceptance fee of second instance in amount of RMB1,375.70, shall be born by the Appellant, FENG Zhifu. This judgment is final. Presiding Judge: DONG Min Acting Judge: ZHOU Yi Acting Judge: XU Yijin April 14, 2014 Clerk: LUO Gang

Appendix: Relevant Laws Civil Procedure Law of the People’s Republic of China Article 170 After hearing an appellate case, the people’s court of second instance shall handle the case respectively according to the following circumstances: (1) If the facts were clearly found and the law was correctly applied in the original judgment, the appeal shall be rejected by a judgment and the original judgment shall be sustained; (2) If the law was incorrectly applied in the original judgment, the judgment shall be amended according to law; (3) If in the original judgment the facts were incorrectly found or were not clearly found and the evidence was inconclusive, the judgment shall be rescinded and the case remanded by an order to the original people’s court for a retrial, or the people’s court of second instance may amend the judgment after investigating and clarifying the facts; or (4) If in the original judgment a violation of the prescribed procedure may have affected the correctness of the judgment, the judgment shall be rescinded and the case remanded by an order to the original people’s court for a retrial. The parties may appeal against the judgment or ruling rendered in a retrial of their case. Article 175 The judgments and rulings of a people’s court of second instance shall be final.

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The Supreme People’s Court of the People’s Republic of China Civil Ruling CAI Bingchang v. FENG Zhifu (2014) Min Shen Zi No.1406 Related Case(s) This is the ruling of retrial, and the judgment of first instance and the judgment of second instance are on page 99 and page 107 respectively. Cause of Action 200. Dispute over liability for personal injury at sea. Headnote Affirming decision that defendant employer was liable for injury sustained by plaintiff seaman while working aboard defendant’s fishing vessel in the course of employment with defendant, despite absence of evidence of fault on part of either employer or employee. Summary This case arose out of a dispute about an employer’s liability for injuries sustained by a worker on the employer’s vessel. The Defendant in the first instance of this dispute applied for retrial of the appeal court’s judgment that the two parties had an established employment relationship, and that the Defendant-Applicant was liable to the Plaintiff-Respondent for his injury at sea. The Defendant-Applicant asserted that both the court of first instance and the appeals court applied the wrong rules of law, and erred in requesting that the Defendant-Applicant’s counterclaim against the Plaintiff be litigated in a separate action. Held—that the two lower courts had applied the appropriate rules of law, and did not err in suggesting that the Defendant-Applicant must litigate its counterclaim against the Plaintiff in a separate trial. The Defendant’s application for a retrial was denied, and the court of appeals judgment was affirmed.

Ruling The Claimant of Retrial (The Defendant of First Instance, The Appellant of Second Instance): FENG Zhifu Agent ad litem: CHANG Changhua, lawyer of Jiangsu Guolei Law Firm.

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The Respondent of Retrial (The Plaintiff of First Instance, The Respondent of Second Instance): CAI Bingchang With regard to the case arising from dispute over liability for personal injury on the sea against CAI Bingchang, FENG Zhifu was not satisfied with (2014) Hu Gao Min Si (Hai) Zhong Zi No.24 and filed an application to the court for retrial. The court organized a collegiate panel to hear this case. Now the case has been concluded. The allegations of FENG Zhifu in the application for retrial are as follows: 1. The facts were incorrectly found in the judgment of first instance and the judgment of second instance. 1:1. CAI Bingchang’s injury occurred after the implementation of the Tort Liability Law of the People’s Republic of China (hereinafter referred to as the “Tort Law”), the legal relationship between the two parties should be determined in accordance with the Tort Law. Pursuant to Article 35 of this law, it was a labor relationship formed between individuals rather than an employment relationship in tradition before the Tort Law taking effect. Employment relationship should not be applied for conflict with the law, the affirmation of employment relationship of the judgment of second instance was wrong; 1:2. FENG Zhifu provided a statement of witness, to prove that CAI Bingchang failed to perform the operation specification in the cross-help operation, but the court of first instance did not mention, let alone analyze and determinate; 1:3. In the case where CAI Bingchang failed to produce evidence, to prove FENG Zhifu committed fault, FENG Zhifu was ruled to assume full responsibility in the judgment of first instance and the judgment of second instance, it was wrong. Dong, the witness in the first instance testified in the hearing of second instance, FENG Zhifu raised objection thereto, the collegiate panel held that the statement would be analyzed and determined according to relevant facts. The collegiate panel asked the witness whether FENG Zhifu had arranged safety trainings, he answered no. The court of second instance held FENG Zhifu was at fault for failure of arrangement of safety training for the crew. Since FENG Zhifu insisted that the second instance of the law of evidence, the quality certificate would lead to the failure of the second instance court of final appeal, the second instance court in thejudgment failed to confirm; and 1:4. On one hand, it was ascertained in the judgment of first instance that the employee should be liable for the employer’s injury whether at fault or not, on the other hand, in the employment relationship, the liability of employee could be waived or mitigated according to the fault of the employer, principle of liability with fault and principle of liability without fault were adopted in the meantime, so the judgment was contradictory and had no legal basis.

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2. The laws were wrongly applied in the judgment of second instance. Article 11 of the Interpretation of the Supreme People’s Court of Some Issues concerning the Application of Law for the Trial of Cases on Compensation for Personal Injury (hereinafter referred to as the “Interpretations on Personal Injury”). 2:1. Article 10 Paragraph 1 of the Interpretations on Personal Injury conflicted with that of Article 35 of the Tort Liability Law, according to the law, the former should not apply; and 2:2. The Tort Liability Law was not applied in the judgment of first instance and the judgment of second instance, but no explanations had been made by the courts, it violated the principle of application of law. 3. The court of second instance did not correct illegal procedure of the court of first instance. 3:1. As prescribed in Article 16 of the Tort Liability Law, medical treatment fee was one of the statutory compensation items, FENG Zhifu alleged he paid the medical treatment fees in advance for CAI Bingchang and submitted copies of vouchers of the medical treatment fees (the amount thereon complies with that of the sheet of medical treatment fees), CAI Bingchang argued he was unclear, FENG Zhifu requested the court of first instance to explain and try the claim regarding the medical treatment fees together, the court of first instance told FENG Zhifu to institute another action. The court of second instance did not correct the illegal decision of the court of first instance regarding the medical treatment fees; and 3:2. Because the court of first instance did not clarify, FENG Zhifu posted the statement of counterclaim and insisted a counterclaim in the hearing. But after receiving the statement of counterclaim, the court of first instance did not dispose according to law, the counterclaim was neither put into the files of this case, nor was it mentioned in the judgment. The court of second instance confused procedures of acceptance and trial of counterclaim deliberately, the title to sue could not be deprived because original vouchers could not be provided or medical treatment fees could not be distinguished. The court holds that the case arises from dispute over liability for personal injury on the sea. According to grounds of the application for retrial held by FENG Zhifu, the court mainly reviews the following issues: 1. Whether FENG Zhifu and CAI Bingchang committed fault at the accident involved in this case; 2. Whether application of law in the judgment of first instance and the judgment of second instance is wrong; and 3. Whether the decision of court of first instance that combined and tried the counterclaim in respect of medical treatment fees raised by FENG Zhifu together with this case violates statutory procedure.

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In respect of whether FENG Zhifu and CAI Bingchang committed fault at the accident involved, the court of first instance only found CAI Bingchang was injured in the early morning of December 1, 2012 when carrying out fishing operations in Yellow Sea. In the cross-examination of first instance, although Dong, the witness made a statement “before dawn, CAI Bingchang could not see clearly and he was unsteady on his foot” and “FENG Zhifu urged us to go up” in the hearing, but there is no other evidence to support his description on the process of the accident, whether CAI Bingchang or FENG Zhifu was fault at the accident fault cannot be identified. In respect of whether application of law in the judgment of first instance and the judgment of second instance is wrong in this case, the court holds CAI Bingchang worked on the vessel owned by FENG Zhifu and FENG Zhifu paid wages to him, the legal characteristics of the legal relationship between the two parties are in line with those of employment relationship, the determination in the judgment of first instance and judgment of second instance that an employment relationship is established between the two parties and the Interpretations on Personal Injury should apply is proper. According to the fact confirmed by the two judgments that the accident involved in this case was an unexpected event occurred on the sea. As prescribed in Article 11 of the Interpretations on Personal Injury, where an employee suffers an injury when carrying out an employment activity, the employer, whether at fault or not, shall bear the compensation liabilities, the decision of the court of second instance that CAI Bingchang should pay relevant compensation to FENG Zhifu is proper. FENG Zhifu’s allegation that the Tort Law rather than the Interpretations on Personal Injury should apply lacks factual and legal basis. In respect of whether the decision of court of first instance the on counterclaim of FENG Zhifu violates statutory procedures, as prescribed in Article 140 of the Civil Procedure Law of the People’s Republic of China, the additional claims of a plaintiff, the counterclaims of a defendant, and the claims of any third party related to the same case may be combined and tried together, it is not provided in the law that the counterclaim raised by the defendant shall be combined with the action in chief. The court of first instance made it clear that FENG Zhifu Lingan might otherwise institute a lawsuit in respect of the issues of medical treatment fees, the court holds that it is proper. In summary, FENG Zhifu’s application for retrial does not comply with the circumstances provided in Article 200 of the Civil Procedure Law of the People’s Republic of China. In accordance with Article 204 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the ruling is as follows: Dismiss the application for retrial raised by FENG Zhifu. Presiding Judge: WANG Shumei Acting Judge: FU Xiaoqiang Acting Judge: HUANG Xiwu November 5, 2014 Clerk: ZHAO Di

Qingdao Maritime Court Civil Judgment Changyi Yuanxiang Printing and Dyeing Co., Ltd. v. Pacific International Lines (Pte) Ltd. et al. (2011) Qing Hai Fa Shang Chu Zi No. 272 Related Case(s) This is the judgment of first instance, and the judgment of second instance and judgment of retrial are on page 134 and page 155 respectively. Cause of Action 202. Dispute over contract of carriage of goods by sea or on sea-connected waters. Headnote Ocean carrier held liable for damage to cargo caused during deviation because it had failed to exercise due diligence before the beginning of the voyage to ensure that the carrying ship’s holds were watertight. Summary Plaintiff-Shipper sued Defendant-Carriers for cargo loss during the voyage bargained for in a contract of carriage. Carrier loaded Plaintiff’s cargo in containers in Qingdao. During the voyage, Carriers’ crewmembers deviated from the intended voyage when it gave way to another ship. Crewmembers further deviated to avoid other structures. During that deviation, the ship made contact with a reef and ran aground. The cargo was salvaged but was a total loss. Shipper argued Carrier violated Articles 47–48 of the Maritime Law of China. Namely, Carrier did not exercise due diligence to make the ship seaworthy and cargoworthy before and at the beginning of the voyage. Shipper argued inspection stickers that expired during the voyage made the ship unseaworthy. Carrier answered that it had to liability because it exercised the requisite due diligence and the loss was caused by the negligence of its crew during navigation pursuant to Article 51 of the Maritime Law of China. The court held: (1) the ship was seaworthy because the inspection stickers had not expired when the ship began the voyage. (2) The Carrier was not liable for damage directly caused by its crewmembers’ negligence. (3) The Carrier was liable for damage indirectly caused by its crewmembers’ negligence. (4) Because the Carrier did not properly inspect its vessel and discover a hold was not watertight, the vessel was

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_5

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uncargoworthy. (5) According to Article 55 of the Maritime Code of China, actual loss is calculated based upon actual value. Actual value is determined at the time of shipment and insurance of freight.

Judgment The Plaintiff: Changyi Yuanxiang Printing and Dyeing Co., Ltd. Domicile: Kuiju Street, Changyi City, Shandong Province. Legal representative: GAO Sichuan, chairman of the board. Agent ad litem: GAO Liangchen, lawyer of Shandong Wincon Law Firm. Agent ad litem: LUAN Ke, lawyer of Shandong Wincon Law Firm. The Defendant: Pacific International Lines (Pte) Ltd. Domicile: No. 140 Cecil Street, #03-00, PIL Building, Singapore Post District 069540. Legal representative: ZHANG Ziwei, executive director. The Defendant: Pacific International Lines (China) Ltd. Domicile: Room 601, 6/F, Shanghai Bund International Tower, 99 HuangPu Road, Shanghai. Legal representative: ZHANG Songsheng, Chairman of the Board. Joint Agent ad litem: YUAN Hui, lawyer of WANG JING & Co. Qingdao Office. Joint Agent ad litem: WANG Yongli, lawyer of WANG JING & Co. Qingdao Office. With respect to the case arising from dispute over contract of carriage of goods by sea filed by the Plaintiff, Changyi Yuanxiang Printing and Dyeing Co., Ltd., against the Defendants, Pacific International Lines (Pte) Ltd. (hereinafter referred to as “PIL”) and Pacific International Lines (China) Ltd. (hereinafter referred to as “PIL China”) to the court on August 5, 2011. After accepting this case, the court organized a collegiate panel in accordance with the law and then held four hearings in public respectively on November 16, 2011, June 12, 2012, December 11, 2012 and April 10, 2013. GAO Liangchen, agent ad litem of the Plaintiff, and YUAN Hui and WANG Yongli, the joint agents ad litem of the two Defendants, appeared in court and participated in the hearings. This case has been concluded now. The Plaintiff alleged that in June 2010, the Defendants dealt with marine transportation of the export goods for the Plaintiff. After the goods in the eight containers involved were loaded on the vessel on June 25, 2010, the Defendant issued and delivered the full sets of clean original bill of lading to the Plaintiff (B/L numbers: BQDCOO01006481, BQDCOO01006482, BQDCOO01006483, BQD COO01006484, BQDCOO01006496, BQDCOO01006497, BQDCOO01006498 and BQDCOO01006499). It was stated in the B/L that the name of the vessel was M.V. “KOTA KADO”; the voyage number was “KAD073”; the port of loading was Qingdao; the port of unloading was Cotonou, Benin; the description of the

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goods was textile; the title of the B/L was PIL; the issuer of B/L was PIL Qingdao. The cargo concerned suffered a total loss in the course of carriage, the total value of goods amounted to USD947,520. The Plaintiff held that the cargo was damaged under the control of the Defendants, according to Article 46 of Maritime Code of the People’s Republic of China, the damage to the goods occurred during the Defendants’ period of responsibility; besides, Article 47 and 48 of Chinese Maritime Code, the Defendants, as the carriers, had the obligation to keep the ship seaworthy and cargoworthy, keep and care for the goods carried, the Defendants should bear the liability for the damage to the goods and all the economic losses caused to the Plaintiff. After the accident of damage to the goods occurred, the Plaintiff had requested the Defendants to compensate the losses of goods and other losses for many times, however, the Defendants evaded and eventually refused to reimburse. Therefore, the Plaintiff sued them to the court and requested the court to judge that: (1) the Defendants should compensate the Plaintiff for the losses of the goods, in an amount of USD947,520 (a total of RMB6,158,880 yuan according to the exchange rates RMB 6.5 for 1 dollar) together with the interest by corresponding interest rate on bank loans published by the People’s Bank of China from August 1, 2010 to the date that the compensation was actually paid; (2) the Defendants should return the freight and charges paid by the Plaintiff, in an amount of RMB153,980 yuan; (3) the Defendants should compensate the Plaintiff for the loss of the tax refund (a total of RMB985,420.8 yuan according to the exchange rate 1:6.5), in an amount of USD151,603.2, together with the interest from August 1, 2010 to the date of the actual compensation payment calculated at loan interest rate published by the People’s Bank of China over corresponding period; (4) The litigation fee for this case should be born by the Defendants. The Defendant argued that the basic facts of the existing case were that: on June 25, 2010, the voyage of KAD073 of M.V. “KOTA KADO”, which was owned by the Defendant, carried the 1632 bales textiles checked by the Plaintiff from Qingdao to Cotonou, Benin. The goods were loaded in eight containers. On June 29, 2010, M.V. “KOTA KADO” continued to load goods after arriving at Nansha Port. After the completion of loading, M.V. “KOTA KADO” departed from Nansha Port to Singapore at 23:42, local time, on June 29, 2010. Prior to the voyage, M.V. “KOTA KADO” sailed normally in seaworthiness and cargoworthiness. At about 0430, on June 30, 2010, M.V. “KOTA KADO” ran aground in the Da Danwei waterway of South China Sea, being damaged to vessel below the waterline, sea water entered into the holds No. 2 and 3 and the fore hold. The crew members of M.V. “KOTA KADO” immediately took emergency self-salvage measures and constantly allowed drainage but the water level of ship’s holds was still rising. After careful assessment of damage, the captain decided to drive the vessel onto the beach for avoiding the sinking of the vessel. After seeking advice from the Hong Kong Maritime Authorities, at 1424 on June 30, 2010, the vessel was driven onto the beach in Hong Kong waters. After stranding, PIL entered into the salvage agreement and carried out salvage work for the vessel and the goods on board According to the arrangement of the salvor, the eight containers concerned were unloaded from M.V. “KOTA KADO”. The eight containers, during the discharge, completely soaked by water, some of them were stained

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with grease. Afterwards, the eight containers were transferred to the yard of China Merchants Container Service Co., Ltd., waiting for further processing. On September 10, 2010, the surveyors of Petro Cargo & Marine Consultants Limited, and the surveyors of the general average, that was the Notary public office of Jia Migu, made the open-box inspection for the goods in the eight containers involved, and said the containers and the goods were damaged. PIL held that: (1) the Defendant exercised due diligence to make the vessel seaworthy. (2) The damage to the goods involved was caused by the negligence of the crew members of M.V. “KOTA KADO” in the navigation and should not be born by PIL. (3) After striking rocks, PIL immediately carried out the rescue and relief work, properly and carefully transferred and stored the container goods involved. (4) The goods involved, after being transferred to the yard, through the inspection, were found completely damaged and had no commercial value, but since the Hong Kong Environmental Protection Department (EPD) did not allow to handle the goods in Hong Kong, the Plaintiff itself also did not dispose of the goods, at present the goods was still piled up in the yard of Yongkang Container Service Co., Ltd. PIL China argued that: the B/L involved was issued by PIL. PIL China, neither the carrier of bill of lading nor the actual carrier, had no contractual or legal relationship with the Plaintiff. PIL China was not the proper Defendant of the existing case. Therefore, it requested the court to reject the claims of the Plaintiff against PIL China. The Plaintiff provided the court with following evidence to prove its claims: Evidence 1–5: eight copies of B/L; 8 copies of packing lists; 8 copies of invoice; 8 copies of customs declaration and 8 copies of ocean freight invoice, to prove that the Defendant was the carrier of the goods involved in the existing case, and the Plaintiff was the holder of the original bill of lading and also the consignor. The Plaintiff and the Defendant established the legal and valid contract of carriage of goods by sea between them; the value of goods involved was USD947,520; the Plaintiff had paid the freight and miscellaneous charges RMB153,980 yuan to Qingdao Tianxiang International Logistics Co., Ltd. Evidence 6, the inspection report issued by AMA Company, to prove the description of damage. Evidence 7– 11: the sales contract of goods concerned, Booking Note, 8 copies of the shipment notice; 8 copies of confirmation of B/L; 8 copies of the freight and miscellaneous charges invoice;8 copies of ocean freight invoice, to prove that the value of goods involved was USD947,520 and the Plaintiff had handled the formalities for booking and shipment of goods via Qingdao Tianxiang International Logistics Co., Ltd. Qingdao Tianxiang International Logistics Co., Ltd., as the freight forwarder of the Plaintiff, had paid to PIL Qingdaothe ocean freight concerned. Evidence 12, 13: the consultation report and the complementary technical consulting report issued by Qingdao Sanjie Maritime Technology Consulting Co., Ltd., to prove the shipowner did not make the renewal inspection by the regulation, resulting in the relevant certificates of the vessel involved had expired when left the port for departure, the Extended Statement provided by the shipowner, inconformity with the provisions

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of International Convention for the Safety of Life at Sea,1974 (hereinafter referred to as the convention),was invalid extension of certificate; the Defendant, before and at the beginning of the voyage, did not properly man the vessel, leading to fatigue driving by second officer, also violated the relevant provisions of the convention, shall bear the responsibility for unseaworthiness. The shipowner, before and at the beginning of the voyage, did not exercise its due diligence and fulfill its duties to make the vessel seaworthy and cargoworthy. After cross-examination, the two Defendants gave opinions as follows: they had no objection to evidence 1, 6, 7 and 10. And they had no objection to the formal authenticity of evidence 2, 3, 4, 9 and 11(evidence 11 contained the original copy of evidence 5.) As to evidence 8, a faxed copy, they had objection in the authenticity. They had no objection to the evidence 12 and 13, but held that the signed consultant in the technical consulting report did not had qualification of the registered surveyor and did not conduct the field investigation and test on board, the report issued by him lacked professional objectivity. The technical consulting report took the evidence provided by the Defendant out of context and presumed no specially. The following evidentiary documents were submitted by the Defendant to support its arguments: The first part: ship’s documents (notarized in Guangzhou for repairing). Evidence 1–12, Ship’s Certificate of Registry, Cargo Ship Safety Construction Certificate, Cargo Ship Safety Equipment Certificate, Cargo Ship Safety Radio Certificate, International Load Line Certificate, International Oil Pollution Prevention Certificate, Minimum Safe Manning Document, Certificate of Class, Safety Management Certificate, Document of Compliance, Crew List, Officer’s license (captain, chief officer, second officer, chief engineer). This group of evidence mutually proved that the Defendant, before and at the beginning of the voyage, had exercised due diligence to make the ship seaworthy and cargoworthy and to man the ship properly. The second part: the related documents of accident voyage. Evidence 13–21, bay plan, voyage plan, Checklist before the beginning of voyage, departure report, Checklist before sailing, charts, logbook (from June 29, 2010 to July 1),Engine Telegraph logbook recording of the bridge (on June 29, 2010 and June 30), maritime protest. This part of the evidence proved on the container stowage of the accident voyage, the planned route, the item of test of ISM, higher ship navigation performance before sailing and the accident conditions. The third part: the relevant documents of accident occurrence and emergency rescue. Evidence 22, 23, the brief facts records and salvage work summary after stranding, to prove the relevant facts of salvage operation after the accident. The fourth part: witness evidence. Evidence 24, Statements of Facts of second officer, to prove the description of the incident. The fifth part: the related documents of goods transfer, storage and process. Evidence 25–27, report of cargo damage after the accident, the summary report of discharge and storage of goods, survey report of goods, to prove the rescue condition of goods.

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After the first hearing, the two Defendants furnished the additional Evidence 28– 46, salvage agreement; the Appendix B of Special Compensation P&I Club Clause of Lloyd’s Standard Form of Salvage Agreement; mail for designating special assistance agent; Lloyd’s special compensation representative list; VDR Screen-shots (from 0350 to 0436 h, June 30, 2010, each interval of 2 min); map of track recovery; the letter sent by Hong Kong Marine Department to the shipowner and captain of M.V. “KOTA KADO”; the correspondence sent by the captain to Guangzhou Maritime Safety Administration; Civil Judgment of (2011) Yong Hai Fa Hai Shang Chu Zi No. 182; VDR CD; the pictures taken in the process of salvage by the special assistance agent; diving report; damage pictures of the vessel before repairing in the shipyard; ship’s general arrangement plan, project completion statement of COSCO (Guangdong) shipyard Co., Ltd.; the email correspondence among the shipowner, Nippon Kaiji Kyokai and Singapore Maritime and Port Authority; survey records of Nippon Kaiji Kyokai; exit permit of ships of international voyage; watchkeeping system of seafarers. The above evidence mentioned, Evidence 1–23 was the original notarized except the Evidence 13 for notarization certified evidence, as to evidence 24, the witness failed to appear in court to testify, As for evidence 25, formed in New Zealand, was only notarized but not certificated. Evidence 26 and 27 was notarization certified evidence, evidence 28, 36, 39, 41, 42, 44, 45 and 46 was copies, evidence 29, 30– 35, 38, 40 and 43 was printed pieces, and evidence 37 was optical disc. After cross-examination, the Plaintiff held that: it had objection to the formality of the first group of evidence, the 12 certificates, were formed in Singapore or in Tokyo, in accordance with the requirements of the rules of evidence, should be dealt with the formalities of notarization and certification of the place formed. It had no objection to the formality of the second group of evidence, but held, evidence 13, even notarized but not certificated, was still the copy; it had objection to the authenticity of evidence 21 and it was unilateral statement. It had no objection to the formality of the third group of evidence, but objected to the authenticity and objectivity of evidence 22; as to evidence 23, the Plaintiff held it uncertain about whether Global Consulting Company participated in the salvage, and objected to the authenticity and objectivity of the evidence. The Plaintiff had objection to the authenticity of the fourth group of evidence, because the witness of evidence 24 failed to appear in court for questioning, testimony did not had legal effect. The Plaintiff had objection to the formality of the fifth group of evidence and in the qualifications of the issuing company, for evidence 25 was only notarized but not certificated in New Zealand. The Plaintiff had no objection to the authenticity of evidence 26 but objected to the status of Petro Cargo & Marine Consultants Limited and to the objectivity of this evidence. The Plaintiff had objection to the formality of evidence 27 since it was not notarized and certificated in Hong Kong. The Plaintiff had no objection to certification 1 and 2 of the report but objected in certification 3. The Plaintiff had objection to the formality and authenticity of evidence 28–46. According to the request of the Plaintiff, the court obtained the following evidence from Guangdong Maritime Safety Administration in November 2012, the Grounding Accident Investigation Report of M.V. “KOTA KADO” in Guangzhou

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on June 30 (hereinafter referred to as Accident Investigation Report). The Plaintiff and Defendants had no objection to the evidence. The court made the following affirmation for the evidence: As to the evidence of the Plaintiff, the Defendants had no objection to the authenticity of evidence 1–13 (evidence 11 contained the script copy of evidence 5), the court confirms the authenticity of the 11 evidence. The court made comprehensive recognition to evidence 12 and 13; the court shall not accept the authenticity of evidence 8 because it was the faxed copy and did not conform to the requirements of the form of evidence. As to the evidence of the Defendants, the court confirms the authenticity of the first group of evidence which was ship’s certificate and was handled the notarization in China; the court confirms the authenticity of the second group of evidence, for which the Plaintiff had no objection to the form of this evidence except the authenticity of evidence 21, but the related conditions of accident shall be subject to the accident investigation report; the court made comprehensive recognition to the third, fourth and fifth group of evidence, but the related situations of accident shall be subject to the accident investigation report; as to evidence 28–46, evidence 29, as the terms of the contract, shall not be used as evidence, and the content of evidence 32 and 33 lied in evidence 37; evidence 36, as the judgment, shall not be used as evidence, for evidence 37 was initial data, the court confirms the authenticity of it; the court confirms the authenticity of evidence 41 which was the ship particulars. The court shall not accept the authenticity of other evidence. The court shall adopt the accident investigation report obtained. On the basis of the above analysis and recognition of the evidence, after the trial, the court made the following finding of fact: M.V. “KOTA KADO”, the vessel of PIL, was the steel container ship of Singapore, gross dead weight was 31,070 tons; net dead weight was 15,648 tons. Length O.A was 233.17 m; breadth was 32.2 m; depth was 17.1 m; completion time dated on June 30, 2005. In June 2010, the Plaintiff entrusted PIL to carry 1632 bales textiles loaded inside eight containers from QINGDAO to COTONOU BENIN. After the goods had been loaded on M.V. “KOTA KADO” on June 25, 2010, Pacific International Lines (China) Ltd. Qingdao Branch on behalf of PIL, issued and delivered eight full sets of clean original bills of lading to the Plaintiff (B/L No.: BQDCOO01006481, BQDCOO01006482, BQDCOO01006483, BQDCOO01006484, BQDCOO0100 6496, BQDCOO01006497, BQDCOO01006498 and BQDCOO01006499), and arranged the voyage to be “KAD073”. In above eight containers, in accordance with the bills of lading number sequence, the 6 containers under the first 6 copies of the bills of lading were loaded into No. 4 cargo holds of M.V. “KOTA KADO”, the 2 containers under the latter 2 copies of the bills of lading were loaded into No. 3 cargo hold of M.V. “KOTA KADO”. The Plaintiff paid the freight and miscellaneous charges, RMB 153,980 yuan to Qingdao Tianxiang International Logistics Co., Ltd. Qingdao Tianxiang international logistics Co., Ltd., as the

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freight forwarder of the Plaintiff, paid to PIL Qingdao the ocean freight RMB 150,680 yuan, for which each bill of lading was for RMB18,838 yuan, the Defendants recognized that the Plaintiff had paid the fees. The sales contract between the Plaintiff and Hong Kong Hongji International Development Co., Ltd., and the invoice and customs declaration issued by the Plaintiff, all of them showed the total value of goods was USD947,520, the price term was FOB. The value of goods respectively was, in accordance with the bill of lading number sequence, USD117,504, USD120,000, USD120,000 USD117,504; USD117,504, USD117,504, USD117,504 and USD120,000. The agreed method of payment was that the full payment would be effected by receiving the goods by Telegraphic Transfer. During the voyage concerned of “KAD073”, M.V. “KOTA KADO” was manned with 22 crew members, the condition of manning and certification conformed to the requirements of the Minimum Safe Manning Document; M.V. “KOTA KADO” held the following certificates: Ship’s Certificate of Registry; Cargo Ship Safety Construction Certificate, Cargo Ship Safety Equipment Certificate, Cargo Ship Safety Radio Certificate, International Load Line Certificate, International Oil Pollution Prevention Cert, Minimum Safe Manning Document, Certificate of Class, Safety Management Certificate, and Document Of Compliance (DOC).Among which the date of issue of 5 certificates, Cargo Ship Safety Construction Certificate; Cargo Ship Safety Equipment Certificate; Cargo Ship Safety Radio Certificate; International Load Line Certificate, International Oil Pollution Prevention Cert; respectively was on, October 20, 2005; September 10, 2005; October 20, 2005; October 20, 2005; January 15, 2009, and the due date of them was on June 29, 2010. The 5 copies of certificates all were attached to the Extended statements issued by Nippon Kaiji Kyokai on June 14, 2010, all of which specified the validity of the certificate, authorized by the government of the republic of Singapore, was extended until August 29, 2010; except that the Cargo Ship Safety Equipment Certificate had no survey records, other 4 copies of certificates all stated the recent annual test was on June 22, 2009, none of them were made the renewal inspection. The date of issue of Certificate of Class was on June 6, 2006, its due date was on June 29, 2010, the recent annual survey was on June 22, 2009 and the certificate did not have extended statements. All of the above six pieces of the vessel certificates stated that: the date of completion of the inspection this certificate accorded to was June 30, 2005. According to the accident investigation report, the recent inspection of the vessel was the annual inspection of 2009, the survey outcome was normal, the holding inspection certificates would expire on August 29, 2010 (the date was the date stated in the extended statements). The accident investigation report stated the accident as follows: at 2342 on June 29, 2010, M.V. “KOTA KADO”, loaded with 740, 20-feet containers and 844 40-foot containers, in a total number of 1584 containers, the weight of goods for 30,282 tons, sailed from Guangzhou Nansha Port area to Singapore. At the beginning of the voyage, the weather conditions were as follows: fine weather, breeze and good visibility, its drafts were about 10.6 m forward and 12.6 m. At 0400, the second officer Tong Chunguang and the sailor on duty Martaliga went on

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watchkeeping in Bridge, of whom the second officer commanded sailing and the sailor was responsible for hand steering and assisted keep a lookout. The course of the vessel was 118° and vessel speed was 14.0 knots, the second officer found an approaching vessel out in right front, shaping a crossing situation with the vessel, the second officer commanded the sailor to steer and turn to the right, and kept the course steady at 150° to avoid the approaching vessel, M.V. “KOTA KADO” deviated from its intended voyage. After giving way of the first crossing vessel, the sailor left the bridge for routine fire prevention and security patrol, the second officer operated the steering personally, once again turned to the right about 20° to avoid the other crossing approaching vessel, in the course, M.V. “KOTA KADO” deviated of its intended voyage to the right about 1 mile; after giving way of the second approaching vessel in the front-right, second officer observed there were some fishing nets with flashlight on the port side of this vessel and some fishing boats around the vessel. At 0417, M.V. “KOTA KADO” deviated of its intended voyage to the right about 1 mile; at 0424, the vessel was 2.3 nm away from Lixinpai reef; at 0428, M.V. “KOTA KADO” basically sailed from the group of fishing boats, second officer started to made small alterations of course to the left, planning to return to the intended route. At 0431′19, M.V. “KOTA KADO”, sailed at POSN 21°56′.757 N/ 114°04′0.514 E, with the course 149° and speed 19.0 knot, then contacted with Lixinpai reef. When the accident happened, the vessel tilted leftwards more than 20°. After the accident, water came into the fore peak, bow thruster room, forward deep tank, and holds No. 2 and No. 3, etc. At 0518, M.V. “KOTA KADO” anchored in 4 miles south of Lemma Islands to assess damage situation of the vessel. Because the vessel trimmed by bow and the damaged cabin continued to be taken by the water, the captain decided to come to an anchor in shallow water of 15–20 m water depth to guarantee the safety of vessel and personnel. At 0818, M. V. “KOTA KADO” pulled up its anchors and headed to the northeast. At 1424, in the absence of approval by Hong Kong Marine Department, M.V. “KOTA KADO” arrived in the place west of Hong Kong Lamma Island and anchored, at this time the main deck of the ship stem was submerged to the surface of the water. After that, the ship stem continued to sink until fast there. After anchoring of M.V. “KOTA KADO”, the shipowner employed Guangzhou Salvage Bureau to carry out the oil spill emergency disposal and deploy the oil boom around the vessel, and at the same time employed Svitzer Company to carry out the rescue and salvage operations. On the morning of August 18, all the containers were discharged and were carried to the shipyard near the Tying Yi Island to be repaired. On September 30, 2010, Japan NK classification society issued the assessment report for the accident damages as follows: (1) the cargo holds from bow to the frame of No. 126, the double bottom and its internal structure were damaged. (2) The No. 115–179 frames of port side, No. 160–240 frames of starboard side, and side shell plating and its internal structure were deformed. (3) holds No. 1–4, hatch coaming and hatch cover were damaged or deformed. The General Arrangement Plan of M.V. “KOTA KADO” showed, the frames No. 115–132 were in the forebody of No. 4 hold, the frames No. 132–168 were in hold No. 3, the frames No. 168–205 were in hold No. 1, the frames No. 205–240 were in hold No. 1.

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The accident investigation report stated the cause of the accident and the responsibility as follows: 1. The duty officer did not timely correct the yaw and did not keep alert to the risks as the result of yaw, which was the direct cause of the accident. 2. Fatigue watchkeeping of the duty officer was the important reason for the accident. 3. The captain’s failing to fulfill the duty of management and command of the vessel was one of the reasons for the accident. 4. Not choosing the recommended route was one of the reasons for the accident. 5. Keeping the speed on sea steady too early was one of the reasons for the accident. The VDR data of the vessel showed, at 0431, on June 30, 2010, the vessel ran aground, at 0433 (2 min after grounding), the bilge water alarm of holds No. 2 and No. 3 displayed high water level alarming, at 0544 (1 h and 13 min after grounding), the bilge water alarm of No. 4 hold displayed high water level alarming. In the hearings, the Defendant recognized that the alarming water level of bilge water alarm of the cargo hold was 30 cm. Summary of Salvage stated that: (1) the vessel collided with the underwater objection June 30, 2010, leading to that holds No. 2 and No. 3 were torn and a large number of sea water entered into the cabin. Then the vessel stranded on shoals of Hong Kong waters, the stem of 8 m embedded in mud, holds No. 1–5 in the front of bridge were submerged in water. (2) The shipowner had signed a salvage contract with Svitzer. 13. On July 3, holds No. 2, 3 and 4 had already been flooded and sea water also seeped into the hold No. 5. 20. When drawing water from hold No. 5, they found water level of No. 4 hold was also on the decline, this meant that a common connection point existed between two holds. 100. On July 18, even all the water pumps worked continuously, water level of No. 4 hold was not lowered, the reason for which was difficult to know. 128. On July 21, water pumps of holds No. 4 and No. 5 worked continuously, but the water level of No. 4 hold showed no sign of any decline, and since on the morning of July 18, the water level of No. 4 hold remained and unchanged. 139. On July 22, in the morning, the rescue team conducted pumping operations for No. 4 hold, and then found the water level of hold No. 5 fell a lot. 145. On July 23, repairing the holes in the cable pipe inside the intermediate bulkhead between holds No. 4 and No. 5. 158. On July 25, the water level of No. 4 hold could be maintained in 6–8 m due to pumping operations. 166. On July 26, the same. 172. On July 27, the same. 214. On August 3, the salvor successfully made the accident vessel reach stem draft for 9 m and stern draught for 11.7 m, and could sail into the shipyard, although sea water still seeped into the No. 2, 3, 4, holds (the water of hold No. 3 via the bulkhead infiltrated into No. 4 hold). According to the arrangement of the salvor, from July 30, 2010 to August 16, the eight containers involved were successively discharged from M.V. “KOTA KADO”. The eight containers during the discharge completely soaked by water,

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some of which were stained with grease, and then they were transferred to the yard of China Merchants Container Service Co., Ltd. On September 10, 2010, by the open-box inspection for the goods in the eight containers involved, the goods, soaked by saline water, had already no market value. After the accident, the buyer of the goods concerned in the existing case did not receive the goods, for the sales contract agreed in cash on delivery, the Plaintiff did not receive all the price of the goods agreed in the contract. Regarding the accident investigation report involved in the existing case (the create date was December 2010 after verification by the court), in the hearings, the court questioned the Defendants for many times, but the Defendant’s agents always said that the Maritime Safety Administration never made official confirmation. On April 18, 2012, Zhejiang High People’s Court, for trial of the other two cases caused by the accidents involved, had obtained this report from Guangdong Maritime Safety Administration, the Defendants of the two cases, namely the agents of shipowner of M.V. “KOTA KADO”, and the entrusted agents of the Defendant in the existing case, were in the different branch offices of the same law firm. The court also finds out that, the shipowner’s host country, namely the registered country of PIL, and the country of registration of M.V. “KOTA KADO” all were in Singapore, China and Singapore both were the signatories to International Convention for the Safety of Life at Sea, 1974 of United Nations maritime Organization (IMO). In the hearings, the Defendants recognized that under the provisions of the convention, M.V. “KOTA KADO” each cargo hold of which needed to meet the requirements of watertightness, to obtain the valid certificates. The above case facts, with evidence and hearing record in volume, were sufficient to be decided. The court holds that: this case is arising from dispute over contract of carriage of goods by sea with foreign-related factors. In the existing case, the place of dispatch was Qingdao, according to Article 27 of the Civil Procedure Law of the People’s Republic of China and Article 6 of the Special Maritime Procedure Law of the People’s Republic of China, the court shall have jurisdiction over the case. Both the Plaintiff and the two Defendants agreed to apply the laws of the People’s Republic of China to hear this case, Article 269 of the Maritime Code of the People’s Republic of China, the court, in accordance with the laws of the People’s Republic of China, solved the substantive dispute of the case. The case of contract of carriage of goods by sea shall apply to the Maritime Code of the People’s Republic of China and the relevant international conventions our country had participated. The Plaintiff, as the shipper, entrusted PIL, as the carrier, to carry the goods involved, the Plaintiff and PIL established between them a contractual relationship of carriage of goods by sea. According to Article 46 of Maritime Code of the People’s Republic of China, “the responsibilities of the carrier with regard to the goods carried in containers covered the entire period during which the carrier was in charge of the goods, starting from the time the carrier had taken over the goods at the port of loading, until the goods had been delivered at the port of discharge. During the period the carrier was in charge of the goods, the carrier shall be liable for the loss of or damage to the goods, except as otherwise provided for in this

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Section”, PIL, in the process of performance, during its period of responsibility, causing the cargo damage to the Plaintiff, except as otherwise provided for the contrary law, shall bear the corresponding compensation liabilities. PIL China, as the recording agent of the bill of lading involved in the existing case, did not constitute a contract of carriage of goods by sea with the Plaintiff, as a consequence it did not had the rights and obligations under this this contract. The court holds that the issues of this case are as follows: (1) whether the vessel in the voyage involved in the existing case was seaworthy and whether the existence of the ship’s certificates would affect the determination of seaworthiness of the ship. (2) Whether the excusable defense of negligence in the navigation of PIL could be established. (3) The cognizance of the Plaintiff’s loss and the compensation liability of PIL. Firstly, the determination of seaworthiness of the voyage involved in the existing case. In the existing case, the original period of validity of the 6 pieces of certificates of the ship involved were all on June 29, 2010, Nippon Kaiji Kyokai issued separately the extended statements for the 5 copies of certificates to extend the validity until August 29, 2010, the statements did not specify the pursuant law or the provisions of the convention. Regarding whether the extended statements were in line with the convention, PIL held the statements were based on the provision of the Article 14(c) of the convention, if a certificate other than a passenger vessel Safety Certificate was issued for a period of less than five years, the Administration might extend the validity of the certificate beyond the expiry date to the maximum period specified in paragraph (a), provided that the surveys referred to in regulations 8, 9 and 10 applicable when a certificate was issued for a period of 5 years were carried out as appropriate. The certificates of the ship, extended to 5 years in the condition of less than 5 years, therefore they were effective, and the ship was seaworthy. The Plaintiff gave the opinions as follows: because the date of inspection and the due date of each certificates were on June 30, 2005 and on June 29, 2010,these certificates were all the expiration of five-years, the extended statements shall not apply to the Article 14(c), and on the basis of the provision of Article 14(e) of the convention, if a vessel at the time when a certificate expired was not in a port in which it was to be surveyed, the administration might extend the period of validity of the certificate but this extension shall be granted only for the purpose of allowing the vessel to complete its voyage to the port in which it was to be surveyed, and then only in cases where it appears proper and reasonable to do so. No certificate shall be extended for a period longer than three months, and a vessel to which an extension was granted shall not, on its arrival in the port in which it was to be surveyed, be entitled by virtue of such extension to leave that port without having a new certificate. The extended statements were only limited to the voyage to the port in which the vessel was to be surveyed, but the vessel concerned on the voyage was still in the shipment of goods, whose purpose was transport instead of survey, as a result the whole voyage was unseaworthy. The court holds that, in accordance with Article 47 of the Maritime Code of the People’s Republic of China, the carrier shall, before and at the beginning of the

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voyage, exercise due diligence to make the vessel seaworthy, properly man, equip and supply the vessel and to make the holds, refrigerating and cool chambers and all other parts of the vessel in which goods were carried, fit and safe for their reception, carriage and preservation, the timing of the requirement for seaworthiness was before and at the beginning of the voyage, the vessel involved set sail at 2342, on June 29, 2010, this certificates were still within the original period of validity, the Plaintiff’s assertion of the vessel being unseaworthy by claiming that the extended statements did not conform to the stipulations of the convention shall not be established and supported by the court. Secondly, whether the excusable defense of negligence in the navigation argued by PIL could be established. The Defendant alleged that the accident investigation report identified the cause of the accident was the crew’s diligence in the navigation of the ship, in line with Article 51 of Maritime Code of the People’s Republic of China, the carrier shall not be liable for the loss of or damage to the goods occurred during the period of carrier’s responsibility arising or resulting from any of the following causes: (1) fault of the Master, crew members, pilot or servant of the carrier in the navigation or management of the vessel; PIL should be exempted from the liability. The court holds that the accident concerned was caused by the negligence of the crew members in navigation of the vessel, as to the loss directly by the accident, PIL shall be exempted from the liability. As to the loss indirectly by the accident, PIL shall not be excused from the liability by citing the fault of navigation. At first, the accident concerned directly caused damage to Holds No. 2 and No. 3 and seawater entered into the two cargo cabins in a very short time making the goods damaged, the Summary of salvage provided by the Defendant, stated the water of No. 4 hold was infiltrated via the bulkhead of hold No. 3, moreover the Defendant failed to provide evidence to prove that the accident involved caused damage to the intermediate bulkhead between holds No. 3 and No. 4 and led to water penetration. Then, the last inspection of the vessel involved, confirmed by the accident investigation report of Maritime Safety Administration, was the annual test on June 22, 2009 recorded in the certificate. With respect to whether Nippon Kaiji Kyokai had conducted the relevant inspection when making the extended statements on June 14, 2010,the Defendant in the trial had submitted the inspection report of Nippon Kaiji Kyokai, for the report being a copy, its authenticity shall not be confirmed; even if the evidence form conformed to the legal requirements, the survey was not recorded in the checkbox specified in the ship's certificate, besides the accident investigation report did not confirm the inspection, therefore the court shall not identify the authenticity of the survey. The problem of bulkhead being non-watertight could had been found and eliminated by the related inspection of the classification society in accordance with the convention, PIL, without the inspection which should be conducted to avoid the vessel’s bulkhead water penetration, making the No. 4 hold uncargoworthy, as for the resulting loss, shall not be exempted from the liability. Thirdly, the identification of the loss of the Plaintiff and the compensation liability of PIL.

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The Plaintiff’s eight containers cargo suffered total loss by inspection, of which 6 containers were loaded into the cargo hold No. 4 and No. 2 containers were carried into the hold No. 3, PIL shall not be excused from the loss of goods of No. 4 hold. Under Article 55 of the Maritime Code of the People’s Republic of China, the amount of indemnity for the loss of the goods shall be calculated on the basis of the actual value of the goods so lost, the actual value shall be the value of the goods at the time of shipment plus insurance and freight. According to the above regulations of the compensation value, in the existing case, PIL shall compensate the Plaintiff for the following loss: (1) the value of goods, the value of goods of the 6 containers in the hold No. 4 totaled USD707,520 on FOB term, not including insurance premium and freight. (2) Insurance premium, no evidence submitted by the Plaintiff to support it. (3) Freight, the Plaintiff had paid the freight RMB113,010 yuan for the 6 containers to PIL. The Plaintiff’s claim of interest loss shall be as the bank loans interest for the corresponding period from the date the Plaintiff brought its claims, namely on August 5, 2010, to the date given by this judgment. The Plaintiff’s other claims, without legal basis, shall not be supported. Pulling the threads together, in the existing case, PIL, as the carrier, carried the goods shipped by the Plaintiff, there was no evidence to prove the ship was unseaworthy before and at the beginning of the voyage. The accident involved was caused by the negligence of the crew members in the navigation of the ship, the direct loss as a result of the accident should not be born by the shipowner, PIL according to the law. But because the bulkhead was not watertight, causing the goods in the hold suffered water damage, PIL shall compensate the Plaintiff for such part of loss, in an amount of USD707,520 and RMB113,010 yuan. On these grounds, in accordance with Article 46, Article 47, Article 51 and Article 55 of the Maritime Code of the People’s Republic of China, the judgment is as follows: 1. The Defendant, Pacific International Lines (Pte) Ltd., shall compensate the Plaintiff, Changyi Yuanxiang Printing and Dyeing Co., Ltd., for the loss of goods in an amount of USD707,520 and RMB 113,010 yuan within ten days after this judgment comes into effect, and shall pay the interest from August 5, 2010 to the date designated by this judgment calculated at the loan interest rate over the corresponding period. 2. Other claims of the Plaintiff, Changyi Yuanxiang Printing and Dyeing Co., Ltd., against the Defendant, Pacific International Lines (Pte) Ltd., shall be rejected. 3. The claims of the Plaintiff, Changyi Yuanxiang Printing and Dyeing Co., Ltd., against the Defendant, Pacific International Lines (Pte) Ltd (China), shall be rejected. If the Defendant, Pacific International Lines (Pte) Ltd. fails to perform the obligation of payment within the period given by this judgment, shall double pay the interest for the delayed period in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China.

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Court acceptance fee in amount of RMB62,888 yuan, the Defendant, Pacific International Lines (Pte) Ltd., shall pay RMB44,022 yuan, and the Plaintiff, Changyi Yuanxiang Printing and Dyeing Co., Ltd., shall pay RMB18,866 yuan. Any party that disagrees this judgment as final may, within 15 days after service of this judgment to the Plaintiff and the Defendant, Pacific International Lines (Pte) Ltd. (China) or within 30 days upon service of this judgment to the Defendant, Pacific International Lines (Pte) Ltd., appealed to the Shandong High People’s Court by submitting six original letters of appeal to the court together with copies to the opposing party. Presenting Judge: GUO Junli Judge: CHI Huande Judge: LI Hua June 28, 2013 Clerk: XU Wenwen

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Shandong High People’s Court Civil Judgment Changyi Yuanxiang Printing and Dyeing Co., Ltd. v. Pacific International Lines (Pte) Ltd. et al. (2014) Lu Min Si Zhong Zi No. 27 Related Case(s) This is judgment of second instance, and the judgment of first instance and the judgment of retrial are on page 119 and page 155 respectively. Cause of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote Defendant carrier held not liable for cargo damaged as a result of ingress of water because of hull damage after the carrying ship hit a reef because of negligence in navigation, but was liable for cargo damaged as a result of water flowing from one hold to the next as a result of unseaworthiness of the bulkhead between the holds. Summary Cargo was damaged when the carrying ship KOTA KADO struck a reef. The direct cause of the damage in Hold No. 3 was ingress of water from hull damage as a result of the ship striking the reef. Water flowed from Hold No. 3 to Hold No. 4 because the bulkhead was not in a seaworthy condition. The court of first instance held and the appeal court affirmed that the carrier, PIL, was not liable for the damage to the cargo in Hold No. 3 but was liable for the damage to the cargo in Hold No. 4. The damage to the cargo in Hold No. 3 was caused by negligence in the navigation of the vessel, for which the carrier had a defence by law. The damage to the cargo in Hold No. 4 was caused by the unseaworthiness of the bulkhead, for which the carrier was liable because it had existed before and at the beginning of the voyage.

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Judgment The Appellant (the Plaintiff of first instance): Changyi Yuanxiang Printing and Dyeing Co., Ltd. Domicile: Kuiju Street, Changyi City, Shandong Province. Legal representative: GAO Sichuan, chairman of the board. Agent ad litem: TIAN Liuzhu, lawyer of Borui Law Firm. Agent ad litem: WANG Yu, lawyer of Borui Law Firm. The Appellant (the Defendant of first instance): Pacific International Lines (Pte) Ltd. Domicile: 140 Cecil Street, #03-00, PIL Building, Singapore Post District 069540. Legal representative: ZHANG Ziwei, Executive Director. Agent ad litem: YUAN Hui, lawyer of WANG JING & Co. Qingdao Office. Agent ad litem: WANG Yongli, lawyer of WANG JING & Co. Qingdao Office. The Defendant of first instance: Pacific International Lines (China) Ltd. Domicile: Room 601, Fl.6, Shanghai Bund International Tower, No. 99 HuangPu Road, Shanghai. Legal representative: ZHANG Songsheng, chairman of the board. Agent ad litem: YUAN Hui, lawyer of WANG JING & Co. Qingdao Office. Agent ad litem: WANG Yongli, lawyer of WANG JING & Co. Qingdao Office. The case of first instance case arose from dispute over contract of carriage of goods by sea involving the Defendant of first instance, Pacific International Lines (China) Ltd. (hereinafter referred to as “PIL China”), the Appellant, Changyi Yuanxiang Printing and Dyeing Co., Ltd. (hereinafter referred to as “Changyi Company”), and the Appellant, Pacific International Lines (Pte) Ltd. (hereinafter referred to as “PIL”) disagreed with the Qingdao Maritime Court (2011) Qing Hai Fa Shang Chu Zi No. 272 Civil Judgment and appealed to the court. After accepting the case, the court organized a collegiate panel by law and held a hearing in public. TIAN Liuzhu and WANG Yu, agents ad litem of the Appellant Changyi Company, and YUAN Hui and WANG Yongli, the joint agents ad litem of PIL and PIL China, appeared in court and participated in the action. Now the case has been concluded. On June 20, 2011, Changyi Company brought a lawsuit before the court of first instance. Changi Company claimed that in June 2010, it entrusted PIL and PIL China to handle marine transportation for its 8 containers. The bill of lading held by Changyi Company showed that the Issuer of the bill of lading was Pacific International Lines (China) Ltd. Qingdao Branch (hereinafter referred to as “PIL Qingdao”) to the order of Pacific International Lines (China) Ltd.. The goods suffered a total loss in the course of carriage. PIL and PIL China did not fulfill the duty prescribed by law. According to the provisions of Articles 46, 47, and 48 of the Maritime Code of the People’s Republic of China (hereinafter referred to as the Maritime Code), Changyi Company sued and requested the Court rule that: (1) PIL and PIL China

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should compensate Changyi Company for the loss of the goods in an amount of 947,520 USD. This is according to the exchange rate 1:6.5, for a total of 6,158,880 RMB, with the bank interest implemented in accordance with the loan interest rate stipulated by the People’s Bank of China for the corresponding period from August 1, 2010 to the date of the actual compensation payments. (2) PIL and PIL China should return the freight and miscellaneous charges paid by Changyi Company in an amount of 153,980 RMB. (3) PIL and PIL China should compensate Changyi Company 151,603.2 USD for the loss of the tax refund. This is according to the exchange rate 1:6.5 for a total of 985,420.8 RMB with the bank interest implemented in accordance with the loan interest rate stipulated by the People’s Bank of China for the corresponding period from August 1, 2010 to the date of the actual compensation payments. (4) The court fee for this case should be born by PIL and PIL China. The court of first instance found that: M.V. “KOTA KADO,” the vessel of PIL, was the steel container ship of Singapore. The gross dead weight was 31,070 tons, the Net Dead weight was 15,648 tons, length overall was 233.17 m, breadth moulded was 32.2 m, depth moulded was 17.1 m, and the completion time date was June 30, 2005. In June 2010, Changyi Company entrusted PIL to carry 1632 bales of textiles loaded inside eight containers from Qingdao to Cotonou Benin. After the goods had been loaded on the M.V. “KOTA KADO” on June 25, 2010, PIL Qingdao, on behalf on the Defendant PIL, issued and delivered eight full sets of clean original bills of lading to the Plaintiff and arranged the voyage to be M.V. “KAD073.” The bills of lading numbers were: BQDCOO01006481; BQDCOO01006482; BQDC OO01006483; BQDCOO01006484; BQDCOO01006496; BQDCOO01006497; BQDCOO01006498; BQDCOO01006499. In the above eight containers, in accordance with the bills of lading number sequence, the 6 containers under the first 6 copies of the bills of lading were loaded into the No. 4 cargo holds of M.V. “KOTA KADO.” The 2 containers under the latter 2 copies of the bills of lading were loaded into No. 3 cargo hold of M.V. “KOTA KADO.” Changyi Company paid the freight and miscellaneous charges, for a total of 153,980 RMB, to Qingdao Tianxiang International Logistics Co., Ltd. (hereinafter referred to as “Tianxiang Company”). Tianxiang Company, as the freight forwarder of Changyi Company, paid the ocean freight 150,680 RMB to PIL Qingdao for which each bill of lading was for 18,838 RMB. PIL confirmed that Changyi Company paid the fees. The sales contract between Changyi Company and Hong Kong Hongji International Development Co., Ltd., the invoice, and the customs declaration issued by Changyi Company, all showed the total value of goods was 947,520 USD and that the price term was FOB. The value of goods respectively was, in accordance with the bill of lading number sequence, 117,504 USD; 120,000 USD; 120,000 USD; 117,504 USD; 117,504 USD; 117,504 USD; 117,504 USD and 120,000 USD. It was agreed that the full payment would be implemented by receiving the goods by Telegraphic Transfer. During the voyage, M.V. “KOTA KADO” was manned with 22 crew members. The condition of manning and certification conformed to the requirements of the

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Minimum Safe Manning Document. M.V. “KOTA KADO” held the following certificates: Ship’s Certificate of Registry, Cargo Ship Safety Construction Certificate, Cargo Ship Safety Equipment Certificate, Cargo Ship Safety Radio Certificate, International Load Line Certificate, International Oil Pollution Prevention Cert Minimum Safe Manning Document, Certificate of Class, Safety Management Certificate, and the Document of Compliance (DOC). The date of issue of 5 certificates, Cargo Ship Safety Construction Certificate, Cargo Ship Safety Equipment Certificate, Cargo Ship Safety Radio Certificate, International Load Line Certificate, and International Oil Pollution Prevention Cert respectively was October 20, 2005, September 10, 2005, October 20, 2005, October 20, 2005, and January 15, 2009. The due date for them was June 29, 2010. The 5 copies of certificates all were attached to the Extended statements issued by Nippon Kaiji Kyokai on June 14, 2010. All the copies specified the validity of the certificate, authorized by the government of the Republic of Singapore, was extended until August 2010. The only exception was the Cargo Ship Safety Equipment Certificate, which had no survey record The other 4 copies of certificates all stated the recent annual test was June 22, 2009. None of them were made in the renewal inspection. The date of issue of Certificate of Class was on June 6, 2006. Its due date was on June 29, 2010. The recent Annual Survey was on June 22, 2009 and the certificate did not have extended statements. The six vessel certificates all stated the date of completion of the inspection this certificate was June 30, 2005. According to the accident investigation report, the recent inspection of the vessel was the annual inspection of 2009. The survey outcome was normal, and the holding inspection certificates would expire on August 29, 2010 (the date was the date stated in the extended statements). The accident investigation report stated that: on June 29, 2010 at 23:42, M.V. “KOTO KADO,” was loaded with 740 20-foot containers and 844 40-foot containers. This was for a total of 1584 4 containers for a total weight of goods of 30,282 tons. The M.V. “KOTO KADO” was to sail from Guangzhou Nansha port area to Singapore. At the beginning of the voyage, there was fine weather, a breeze, and good visibility. The draft was 10.6 m forward and 12.6 m aft. At 04:00, the Second Officer Tong Chunguang and the Sailor on Duty Maraliga went on watch on the Bridge. The Second Officer commanded sailing, was responsible for driving the ship, and assisted in keeping a lookout. The vessel was on a course of 188° for a speed of 14.0 knots. The Second Officer found an approaching vessel out in the front right, establishing a crossing situation with the vessel. The Second Officer commanded the sailor to turn right and steady on course 150° to avoid the approaching vessel. Thus, M.V. “KOTA KADO” deviated from its intended voyage. After giving way of the first crossing vessel, the sailor left the bridge for a routine fire-proofing and security patrol. The Second Officer personally operated the steering once again and turned to the right 20° to avoid the other crossing vessel. In doing so, M.V. “KOTA KADO” deviated about 1 mile right of its intended voyage. After giving way to the second approaching vessel, the Second Officer observed there were some fishing nets with lights on the port side of the vessel along with some fishing boats. At 04:17, the M.V. “KOTA KADO” deviated 1 mile from its intended voyage. At 4:24 the vessel was 2.3 NM away from Lixinpai reef. At

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04:28, M.V. “KOTA KADO” maneuvered away from the group of fishing boats and the Second Officer started to make small alterations of course to the left, planning to return to the intended route. At 04:31:19, the M.V. “KOTA KADO” was in POSN 21° 56.757 N, 114° 04.514 E, on a course of 149 and a speed of 19.0 knots. It then made contact with the Lixinpai reef. When the accident occurred, the vessel heeled over to the left more than 20°. After the accident, water came into the fore peak, bow thruster room, forward deep tank, and both the No. 2 and No. 3 holds. At 0518, M.V. “KOTA KADO” anchored 4 miles south of the Lamma Island to assess damages to the vessel. Since the vessel trimmed by the bow and because the damaged cabin continued taking on water, the Captain decided to anchor in shallow water that was 15–20 m deep to guarantee the safety of the vessel and personnel. At 0818, the vessel M.V. KOTA KADO pulled up its anchors and headed northeast. At 1425, in the absence of approval by the Hong Kong Marine Department, M.V. KOTA KADO arrived west of Hong Kong Lamma Island and anchored. At this time, the main deck of the ship bow was submerged to the surface of the water. At that time, the ship bow continued to sink until it held fast there. After the anchoring of M.V. KOTA KADO, the shipowner employed Guangzhou Salvage Bureau to carry out the oil spill emergency disposal and deployed the oil boom around the vessel. This occurred at the same time Svitzer Company carried out the rescue and salvage operations. On the morning of August 18, the vessel discharged all of its containers and headed to the shipyard near Tsing Yi Island to be repaired. On September 30, 2010, Japan NK classification society issued the assessment report for the accident damage that read: (1) The cargo holds from bow to the frame of No. 126, to include the 5 double bottom and its internal structure, was damaged. (2) No. 115–179 frames of the portside, No. 160–240 frames of the starboard side, and the side shell plating and its internal structure was deformed. (3) Holds No. 1– 4, the hatch coaming and the hatch cover were damaged or deformed. The General Arrangement Plan of M.V KOTA KADO showed that frames 115–132 were in the forebody of hold N. 4, frames No. 132–168 were in hold No. 3, frames No. 168– 205 were in hold No. 1 and frames No. 205–240 were in hold No. 1. The accident investigation report stated that the responsibility and cause of the accident were as follows: (1) the duty officer did not timely correct the yaw and did not keep alert to the risks as the result of the yaw. This was the direct cause of the accident. (2) Fatigue watchkeeping of the duty officer was the important reason causing the accident. (3) The captain’s failing to fulfill his command and management duties of the vessel was an additional reason for the accident. (4) Not following the recommended route was an additional reasons for the accident. (5) Maintaining steady speed too early was one of the reasons for the accident. The VDR data of the vessel showed that at 0431, on June 30, 2010, the vessel ran against a rock. At 0433, 2 min after striking a reef, the bilge water alarm for holds No. 2 and No. 3 displayed high water alarms. At 0544 h, 1 h and 13 min after striking a reef, the bilge water alarm for hold No. 4 displayed high water alarms. At the trial, PIL confirmed the alarming water level of the bilge water alarm in the cargo hold was 30 cm.

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Summary of Salvage stated that: (1) on June 30, 2010, the vessel collided with underwater objects. This caused holds No. 2 and No. 3 to be torn and a large amount of sea water to enter into the cabin. Then, the vessel was stranded on a shoal of Hong Kong waters. The stem of the vessel was 8 m embedded in mud. Holds No. 1–5 in the front of bridge were submerged in water. (2) The shipowner had signed a salvage contract with Svitzer. 13) On July 3, holds No. 2, 3 and 4 were flooded and sea water also seeped into hold No. 5. 20) When drawing water from hold No. 5, they found the water level of hold No. 4 was also on the decline. This meant there was a common connection point between the two holds. On July 18, even with all the water pumps working continuously, the water level of hold No. 4 was not lowered. The reason for this is difficult to establish. On July 21, water pumps of holds No. 4 and No. 5 worked continuously, but the water level of hold No. 4 showed no signs of any decline. Since the morning of July 18, the water level of hold No. 4 remained unchanged. 139) On the morning of July 22, the rescue team conducted pumping operations for hold No. 4 and found the water level of hold No. 5 had substantially fallen. 145) On July 23, the team began repairing the holes in the cable pipe inside the intermediate bulkhead between holds No. 4 and No. 5. 158) On July 25, the water level of hold No. 4 could be maintained to 6–8 m due to pumping operations. 166) On July 26, the same. 172) On July 27, the same. 214) On August 3, the salvor successfully made the accident vessel reach a stem draft of 9 6 m and stern draught for 11.7 m. Thus, the vessel could sail into the shipyard as sea water still seeped into the No. 2, 3, and 4 holds. The water in hold No. 3 infiltrated through the bulkhead into hold No. 4. According to the arrangement of the salvor, from July 30, 2010 to August 16, the eight containers involved were successively discharged from M.V. KOTA KADO. The eight containers during the discharge were completely soaked by water. Some of the containers were stained with grease. The containers were transferred to the yard of China Merchants Container Service Co., Ltd. On September 10, 2010, through an open-box inspection for the goods in the eight containers involved, it was established that the goods were soaked by saline water and had no market value. After the accident, the buyer of the goods concerned in the existing case did not receive the goods. Since the sales contract agreed to cash on delivery, Changyi Company did not receive the full price of the goods agreed to in the contract. Regarding the accident investigation report involved (the creation date was December 2010 after verification by the court of first instance). In trial, the original court questioned PIL and PIL China several times. Yet, the defendant’s agents continuously said the Maritime Bureau never made an official confirmation. On April 18, 2012, Zhejiang Province High People’s court, for trial of the other two cases caused by the accidents involved, obtained this report from Guangdong Maritime Safety Administration. The Defendants of these two cases, namely the entrusted agents of shipowner of M.V. KOTA KADO, and the agents ad litem of PIL and PIL China in the existing case, were in different branch offices of the same law firm. The court also found that, the shipowner’s host country, namely the registered country of PIL and the country of registration of the M.V. KOTA KADO, were in

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Singapore. China and Singapore were both signatories to International Convention for the Safety of Life at Sea (SOLAS) at the 1974 Convention of United Nations Maritime Organization (IMO). At the initial trial, PIL and PIL China confirmed that, under the provisions of the convention, each of the cargo holds for M.V. KOTA KADO needed to meet the water-tight integrity requirements to obtain valid certificates. The court of first instance held that this case was dispute over damage to the cargo of contract of carriage of goods by sea with foreign-related factors. In the existing case, the place of dispatch was Qingdao. According to Article 27 of Civil Procedure Law of the People’s Republic of China and Article 6 of Special Maritime Procedure Law of the People’s Republic of China, the court of first instance had jurisdiction over the case. The three parties agreed to apply the laws of the People’s Republic of China to hear the case, under Article 269 of the Maritime Code of the People’s Republic of China. The original court, in accordance with the laws of the People’s Republic of China, solved the substantive dispute of the case. This case, for the contract of carriage of goods by sea, applied to the Maritime Code of the People’s Republic of China and the relevant international conventions in which the country participated. Changyi Company, as the shipper, entrusted PIL, as the carrier, to carry the goods involved, on behalf of Changyi Company. PIL established a contractual relationship of the carriage of goods by sea. According to the provision of Article 46 of the Maritime Code of the People’s Republic of China, PIL, in the process of performance, during its period of responsibility, caused the cargo damage to the Changyi Company. Thus, except as otherwise provided for by contrary law, they shall bear the corresponding compensation liabilities. PIL China, as the recording agent of the bill of lading involved, did not constitute a contract of carriage of goods by sea with Changyi Company. As a consequence, it did not have the rights and also did not undertake obligations of the contract. The court of first instance held that the principal outstanding issues of this case were as follows: (1) whether the vessel in the voyage involved was seaworthy and whether the existence of the ship’s certificates would affect the determination of seaworthiness of the ship; (2) whether the excusable defense of negligence in the navigation of PIL could be established; and (3) the identification of Changyi Company’s loss and the compensation liability of PIL. Firstly, the court determined the seaworthiness of the ship on the voyage involved. In the existing case, the original valid period of the 6 certificates of the ship involved were all on June 29, 2010. Nippon Kaiji Kyokai issued separate extended statements for the 5 copies of certificates to extend the validity until August 29, 2010. The statements did not specify the pursuant law or the provisions of the convention. Regarding whether the extended statements were in line with the convention, PIL thought the statements were based on the provision of Article 14(c) of the convention. Article 14(c) stated that, “if a certificate other than a Passenger vessel Safety Certificate was issued for a period of less than five years, the Administration might extend the validity of the certificate beyond the expiration date to the maximum period specified in paragraph (a), provided that the surveys

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referred to in regulations 8, 9, and 10 are applicable when a certificate was issued for a period of 5 years and were carried out appropriately.” PIL believed the certificates of the ship, extended to 5 years in the condition of less than 5 years, were therefore effective, and the ship was seaworthy. Changyi Company outlined their opinion as follows: Because the date of inspection and the due date of each certificate was on June 30, 2005, on June 29, 2010, these certificates have expired. Thus, the extended statements shall not apply to Article 14(c). On the basis of the provision of Article 14(e) of the convention, if a vessel at the time when a certificate expired was not in a port to be surveyed, the Administration might extend the period of validity of the certificate. Yet, this extension shall be granted only for the purpose of allowing the vessel to complete its voyage to the port in which it was to be surveyed. This is only in cases where it appears proper and reasonable to do so. Thus, no certificate shall be extended for a period longer than three months, and a vessel to which an extension was granted shall not, on its arrival in the port in which it was to be surveyed, be entitled by virtue of such extension to leave that port without having a new certificate. The 8 extended statements were only limited to the voyage to the port in which the vessel was to be surveyed. The vessel on the concerned voyage was still in the shipment of goods. Since the purpose was to transport goods instead of being surveyed, the entirety of the voyage was unseaworthy. The original court was of the opinion that, in accordance with Article 47 of the Maritime Code of the People’s Republic of China, the timing of the requirement for seaworthiness was before and at the beginning of the voyage. The vessel involved set sail at 2342 h, on June 29, 2010. Thus, these certificates were still within the original period of validity. The assertion of Changyi Yuanxiang of the vessel being unseaworthy by claiming that the extended statements did not conform to the stipulations of the convention were not established and supported by the original court. Secondly, the court determined whether the excusable defense of negligence in the navigation made by PIL could be established. PIL alleged that the accident investigation report identified the cause of the accident was the crew’s lack of diligence in the navigation of the ship. In line with the provision of Article 51 of the Maritime Code of the People’s Republic of China, PIL should be exempted from the liability. The court of first instance found that the accident was caused by the negligence of the crew members in navigating the vessel. As to the direct loss by the accident, PIL shall be exempted from the liability. As to the loss indirect to the accident, PIL shall not be excused from the liability by citing the fault of navigation. At first, the accident directly caused damage to holds No. 2 and No. 3. Seawater entered the two cargo cabins in a very short time and caused damage to the goods. Summary of Salvage provided by PIL stated the water of hold No. 4 was infiltrated via the bulkhead of hold No. 3. Moreover, PIL failed to provide evidence to prove that the accident itself caused damage to the intermediate bulkhead between holds No. 3 and No. 4 and led to water penetration. Then, the last inspection of the vessel involved, confirmed by the accident investigation report of Maritime Bureau, was the annual test on June 22, 2009 recorded in the certificate.

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In determining whether Nippon Kaiji Kyokai had conducted the relevant inspection when making the extended statements on June 14, 2010, in trial, PIL submitted the inspection report of Nippon Kaiji Kyokai. Since the report was a copy, its authenticity could not be confirmed. Yet, even if the evidence form conformed to the legal requirements, the survey was not recorded in the checkbox specified in the ship’s certificate. The accident investigation report also did not confirm the inspection. Therefore, the court of first instance did not identify the authenticity of the survey. The bulkhead’s lack of water-tight integrity could had been found and eliminated by the related inspection of the classification society in accordance with the convention. Yet PIL, without the inspection, should be liable for the vessel’s bulkhead water penetration. The lack of water-tight integrity made the hold No. 4 not suitable for cargo stowage and therefore caused the resulting loss. Therefore, they should not be exempt from liability. Thirdly, the court of first instance identified the losses of Changyi Company and the compensation liability of PIL. The eight cargo containers of Changyi Company suffered a total loss according to inspection. Six containers were loaded into the cargo hold No. 4 and two containers were carried into hold No. 3. PIL should not be excused from the loss of goods of hold No. 4. Under the provisions of Article 55 of the Maritime Code of the People’s Republic of China, the amount of indemnity for the loss of the goods shall be calculated on the basis of the actual value of the goods lost. The actual value should be the value of the goods at the time of shipment plus insurance and freight. According to the above regulations of the compensation value, in the existing case, PIL should compensate Changyi Company for the following losses: (1) the value of goods. The value of goods of the six containers in hold No. 4 totaled 707,520 USD on FOB term, not including insurance and freight. (2) Insurance. There was no evidence submitted by Changyi Company to support an insurance amount. (3) Freight. Changyi Company paid the freight cost of 113,010 RMB for the six containers to PIL. PIL should compensate 113,010 RMB and 707,520 USD to Changyi Company for the loss of goods. The claim of Changyi Company for loss of interest should be the bank loans interest for the corresponding period from the date of claims, namely on August 5, 2010, to the date given by this ruling. The other claims of Changyi Company, without legal basis, were not supported by the original court. In summary, in the existing case, PIL, as the carrier, carried the goods shipped by Changyi Company. There was no evidence to prove the ship was unseaworthy before and at the beginning of the voyage. The accident at hand was caused by the negligence of the crew members in the navigation of the ship. Thus, according to the law, the direct loss as a result of the accident should not be born by PIL. Yet, the bulkhead was not watertight. This caused the goods in the hold to suffer water damage. Therefore, PIL was required to compensate the Changyi Company for part of the loss in the amount of 707,520 USD and 113,010 RMB. On these grounds, in accordance with Article 46, 47, 51 and 55 of the Maritime Code of the People’s Republic of China, the court of first instance judged that: (1) Pacific International Lines (Pte) Ltd. should compensate Changyi Company 707,520 USD and 113,010 RMB within ten days after the judgment took effect. The

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interest from August 5, 2010 to the date designated by this judgment calculated should be calculated at the loan interest rate over the corresponding period. (2) Other claims of Changyi Company against PIL should be overruled. (3) The claim of Changyi Company against PIL China should be rejected. In the event of failure to perform the obligation of payment within the period given by this judgment, interest on such payment of the delayed period should be doubled in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee for this case in amount of 62,888 RMB. PIL should bear 44,022 RMB and Changyi Company should pay 18,866 RMB. After the judgment was rendered, the Appellant, Changyi Yuanxiang, was dissatisfied with the judgment and lodged an appeal before the court for the following reasons: 1. PIL did not exercise due diligence to make the ship seaworthy. It could not cite the exemption clause of Article 51 stipulated in the Maritime Code. (1) On the date of sailing, the involved vessel’s certificates were expired. The Cargo Ship Safety Construction Certificate, Cargo Ship Safety Equipment Certificate, and Cargo Ship Safety Radio Certificate, governed by the Convention, were the certificates most relevant to the ship’s seaworthiness. On the basis of the provision of Article 14 of the convention, the three the certificates were valid from the survey date of completion. In accordance with the provisions of the International Convention on Load Lines 1966, and the Final Act of the International Conference on Marine Pollution 1973, the International Load Line Certificate and International Oil Pollution Prevention Cert were valid for 5 years. As indicated by the basis of issuance recorded in the above five certificates and social basic common sense, it could also be obtained that the certificates were issued due to the precondition that the vessel involved had gone through the actual inspection. After inspection, the certificates reflected the inspection results. Hence the above five copies of involved ship certificates should be valid for five years from the completion date of survey on June 30, 2005 up to June 29, 2010. (2) The extended statements attached to the above certificates had no authenticity or validity. Without the actual inspection of the ship there is no form of extended statement for the Certificate of Class. In first instance, PIL did not submit evidence to prove that the extended statements were made by Nippon Kaiji Kyokai and failed to provide the original evidence to prove that Nippon Kaiji Kyokai made a boarding visitation. If Nippon Kaiji Kyokai did make a boarding visitation on June 13 and 14 in 2010, there should be a signed extension on the back of the ship’s certificates instead of separately issued extended statements for each certificate. (3) Even if Nippon Kaiji Kyokai had made the boarding visitation and issued the extended statements, the statements shall not be supported by the court. Pursuant to the provision of Article 14(c) and (e) of the convention, this extension of the ship’s certificates shall be granted only for the purpose of allowing the ship to complete its voyage to the port in which it was to be

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surveyed. This should be only in cases where it appeared proper and reasonable to do so. The extended statements were not in line with the above situation of allowable extension. In form, the extended statements were not in conformity with the requirements for the appendix to the certificate, format, and contents of the certifying box prescribed in Article 15 of Chap. 1 of the convention. (4) PIL did not submit the original copy of the Exit Permit of the Ships of International Voyage. The evidence, even if it was accurate, was issued by Guangzhou Maritime Safety Administration based on the extended statements without authenticity and validity. Thus, the license could not be used as the basis for the ship’s seaworthiness. (5) The time for dead slow ahead was at 0001 on June 30, 2010. At that moment, the ship’s certificates had passed the period of validity. This was true even if the time for sailing was 2342 on June 29, 2010. PIL loaded the and shipped the cargo yet did not handle it carefully to ensure ship seaworthiness because they knew the certificates of the ship were about to expire. Thus, the navigational safety risk and amount of hidden dangers increased. 2. PIL improperly manned the ship with qualified crew members. The Second Officer did not receive pre-service training. There was a lack of work handover, crewmembers were driving the ship experiencing fatigue, and there was corporation mismanagement. These elements led to the unseaworthiness of the ship. 3. The Bulkhead of Hold No. 4 was not Watertight and not Suitable for Carrying Goods. (1) The bulkhead of holds No. 3 and No. 4 were not watertight. This led to the water of hold No. 3 overflowing into hold No. 4, as the bottom of hold No. 4 was not damaged at the time of the accident. The statement of the accident investigation report made by Guangdong Maritime Safety Administration outlines, “the cargo holds from bow to frame No. 126, to include the double bottom and its internal structure, were damaged.” Yet, this statement is from the assessment report issued by Japan NK Classification Society on September 30, 2010. Therefore, it was not submitted by PIL. Additionally, the diving report was a copy without notarial certification and therefore had no authenticity. Even if the above statement of damage “the bulkhead from fore peak to hold No. 3 and No. 4 partly severely damaged” was true, which referred to the scope of the area from the fore peak to the bulkhead of hold No. 4, this means the above area did not include the entire bulkhead or hold No. 4. Additionally, if there was a 10 by 20 cm hole in the shell of hold No. 4, a hole like the size of A4, was also not sufficient to allow water to enter into the hold. Specific reasons could be found in the technical consulting report. Moreover, if the bottom of hold No. 4 was damaged due to the stranding caused by sea water that seeped

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into it, its bilge water alarm would ring at the same time as the one in hold No. 3 rather than 1 h and 13 min after the accident. (2) The sea water could not enter into hold No. 4 from the hatch cover. According to the requirements of technical specification and equipment performance of the ship, a cargo hatch cover should be watertight. The statement that the “hatch cover was damaged” in the accident investigation report was based on the assessment report not submitted by PIL. PIL also failed to provide evidence on how rocks caused damage to the cargo hatch cover. In the light of Article 116 of Summary of Salvage filed by PIL, until July 20, 2010, PIL was still not clear as to why hold No. 4 was flooded with water. Additionally, if the sea water entered into hold No. 4 from the 12 hatch cover that was not damaged, this proves that the hatch cover was not watertight, therefore hold No. 4 was not suitable to stow cargo. According to the water injection time of holds No. 3 and No. 4 recorded in the VDR data, and the multiple records of summary salvage, the information ruled out the possibility that water entered into hold No. 4 from the bottom and hatch cover. The original judgment confirmed that the water in hold No. 4 was overflow from the bulkhead of hold No. 3. This was based on facts and techniques, conforms with common sense, and was clearly correct. On the basis of the expert analysis of Qingdao Sanjie Maritime Technology consulting Co., Ltd. (hereinafter referred to as Sanjie Company), in the absence of evidence to prove that the rocks caused damage to the intermediate bulkhead between holds No. 3 and No. 4, the only conclusion is that the intermediate bulkhead between the two holds were not watertight and had existed before and at the beginning of the voyage. Therefore, hold No. 4 was not suitable to stow cargo. 4. PIL should compensate Changyi Company for the complete amount of loss of the concerned goods’ tax refund. The loss of the export tax refund of the exporter for not collecting on the price of the goods shall belong to the loss resulting from the breach. This was stipulated in Article 113 of Contract Law of People’s Republic of China. In the existing case, due to the default of PIL, Changyi Company did not receive the entire the payment. PIL should compensate Changyi Company for the loss due to not receiving the export rebates. For these reasons, the Appellant, Changyi Company, requested the court of second instance to revoke the second item of judgment of first instance and to judge that PIL should compensate Changyi Company for the container cargo loss, in the amount of 240,000 USD. This was in respect to the other two bills of lading in which the freight amounted to 40,970 yuan. There was also the corresponding interest and loss of the tax refund of 151,603.2 USD and the corresponding interest. PIL appealed against Changyi Company and responded as follows: 1. PIL had exercised due diligence to make the ship seaworthy. The certificates related to ship’s seaworthiness before and at the beginning of the voyage were still within the original period of validity. Under the provision of Article 14 of the convention, the certificates should be valid from the date of issuance

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(October 20, 2005) rather than completion date of survey. The validity of the ship’s certificates were not more than five years from the date of issuance to the date of extension of the expiration on August 29, 2010. The extended statements were separately issued by Nippon Kaiji Kyokai in a condition that does not affect the schedule and at a time when they could not sign in the ship’s certificates. The extended statements, in conformity with the related stipulations of the convention, was authorized by the flag state government of Singapore 13 Maritime and Port Authority. China’s Maritime Authorities also accepted that the period of validity of the ship’s certificates should be until August 29, 2010. 2. PIL had properly manned the ship with qualified crew members. 3. There was no watertight defect of the intermediate bulkhead between holds No. 3 and No. 4. PIL submitted sufficient evidence to prove the reason hold No. 4 had flooded with water. In accordance with the accident investigation report, the assessment report of Japan NK Classification Society, and the diving report, the fact that the bottom of hold No. 4 was damaged could be confirmed. The accident caused damage to the hatch cover of hold No. 4, allowing sea water to enter hold No. 4 through the hatch cover. PIL had fulfilled its burden of proof concerning the ship’s seaworthiness and ability to stow cargo. The reasons for taking on water in holds No. 3 and No. 4, the damage to the goods, the technology consultation report, and the complementary technology consulting report presented by Changyi Company were not sufficient to refute the facts of the ship’s seaworthiness and unsuitability to stow cargo. PIL shall not bear the loss of tax refund that Changyi Company claimed. Under Article 55 of Maritime Code, the amount of indemnity for the loss of the goods by PIL should be limited to the actual value of the goods so lost. The claim for the loss of the tax refund of Changyi Company was neither based in law nor in fact. In conclusion, the appeal lodged by Changyi Company was inadmissible. The Appellant, PIL, refused to accept the judgment of first instance and appealed for the following reasons: 1. The original judgment confirmed that the intermediate bulkhead between holds No. 3 and No. 4 was not watertight, which contradicted the facts. (1) Under Article 47 of the Maritime Code, the ship’s seaworthiness extended to include the vessel’s equipment, the competency of the master and crew, and cargo-worthiness of the vessel. The original judgment decided the ship was seaworthy but found that hold No. 4 was not suitable to stow cargo and therefore contradicted itself. (2) There were no facts that show hold No. 4 bulkhead was not watertight before and at the beginning of the voyage. The original judgment affirmed that the Cargo Ship Safety Construction Certificate, before and at the beginning of the voyage, was still within the original period of validity. In the line with the provisions of the Convention, the certificate was the prima facie evidence to prove acceptable water-tightness of hold No. 4. The vessel involved held the Exit Permit of Ships of International Voyage issued by

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Guangzhou Maritime Safety Administration, and the certificate’s issuance was premised on the ship in a state of seaworthiness and suitable cargo stowage. (3) Striking the reef not only caused sea water to entered into holds No. 2 and No. 3 directly, but also damaged the intermediate bulkhead between holds No. 3 and No. 4, thus, hold No. 4 was flooded. The original judgment determined sea water came into hold No. 4 about 1 h and 13 min after accidentally striking a rock. According to the damage statement of the accident investigation report made by Guangdong Maritime Safety Administration as well as the General Arrangement Plan of the vessel provided by PIL, the location of the damaged frame No. 132 was the corresponding position of the intermediate bulkhead between holds No. 3 and No. 4. Yet the original judgment, in the case of confirming the above facts, judged that there was no evidence to prove the accident caused damage to the intermediate bulkhead between holds No. 3 and No. 4, which was self-contradictory. The diving report, and the project completion statement of COSCO (Guangdong) Shipyard Co., Ltd. that PIL submitted, corresponded with the accident investigation report. The accident investigation report showed that the intermediate bulkhead between holds No. 3 and No. 4 were severely damaged and that both the bulkhead and watertight board had been repaired. (4) The original judgment identified the intermediate bulkhead between holds No. 3 and No. 4 was not watertight only by following Article 214 of Summary of Salvage, which had no basis. The salvor made statements approximately one month after the accident. He outlined that, prior to August 3, 2010, there was water penetration between two holds due to the accident which caused damage to the bulkhead. Additionally, the discharge and salvage operation itself would cause certain influence to the bulkhead. The salvor simply stated the water of hold No. 3 by means of the bulkhead infiltrated into hold No. 4. The salvor did not elaborate on when the sea water entered the hold and why there was flooding from the bulkhead. The fact that the water in hold No. 4 flooded in via the bulkhead of hold No. 3 could not be deduced from the information at hand. Additionally, it could not be determined that the bulkhead of hold No. 4 of the vessel involved was not watertight before and at the beginning of the voyage. (5) The damage to the goods of hold No. 4 was directly caused by the stranding accident. After the stranding accident, holds No. 1 through 5 of the vessel were submerged in water. As indicated by the facts which were affirmed by the original judgment, sea water entered hold No. 4 in a short time. The accident investigation report specified the hatch coaming and hatch cover of holds No. 1–4 were damaged or deformed. Therefore, there must be sea water immerging into the interior hold No. 4 from the broken hatch cover. From the above facts, sea water entered the hold No. 4 in a short time after running aground. Sea water also came into the interior hold No. 4 from the

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broken hatch cover, which was the direct cause of the damage to the goods of hold No. 4. 2. The court of first instance was incorrect when it held that the issuance of the extended statements made by Nippon kaiji kyokai were without a related inspection. (1) The accident investigation report did not mention the inspection of the ship by Nippon Kaiji Kyokai. Yet, it confirmed the ship’s certificates would expire on August 29, 2010. As a result, the report acknowledged that the inspection was real and valid. Otherwise, the report would have concluded that the ship’s certificates should be valid until the date of the original record dated on June 29, 2010. (2) PIL had submitted the inspection records of Nippon Kaiji Kyokai to prove, when issuing the extended statements, that Nippon Kaiji Kyokai inspected the vessel on June 14, 2010. PIL had overcome various difficulties to submit the original record of notarized certification. The court of court of first instance refused to accept it, which ultimately lead to the false determination of the facts in this case. 3. The original court did not deal with the supplementary evidence of PIL in accordance with legal procedures. The copy inspection records of Nippon Kaiji Kyokai was submitted by PIL to the court of first instance within the time limit for adducing evidence. The contents of the evidence had a significant effect on the case ruling. The court of first instance, after receiving the original copy of evidence which had been notarized, still did not confirm its authenticity. PIL, failing to provide the original copy before the expiration of the period for adducing evidence, did not perform intentional misconduct or act grossly negligent. Therefore, because the evidence has a significant impact on the outcome of the ruling, the court should again designate the time limit for adducing evidence. The court of first instance should reorganize the cross-examination for this evidence, and should explain whether to adopt the evidence and outline the reasons. 4. The damage to the goods of holds No. 3 and 4 were caused by accidentally striking the reef. PIL exercised due diligence to make the ship seaworthy and suitable to stow cargo. Therefore, PIL shall be entitled to escape liability for negligence in navigation of the ship. 5. There were problems with the identification of the evidence by the court of first instance. The court of first instance made a differential solution between the evidence submitted separately by PIL and Changyi Company. They did not set a unified standard on the evidence submitted by PIL. Moreover, the burden of proof on ship seaworthiness which was declared by the court of first instance for the PIL was unfair. Yet, even on the basis of the current evidence identified by the court of first instance, it was sufficient to make the factual identification that the ship was

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seaworthy, suitable to stow cargo, and that the intermediate bulkhead between holds No. 3 and No. 4 was damaged in the accident. In conclusion, the Appellant PIL requested thin court of second instance should revoke the first item in the judgment of first instance and reject all the claims of Changyi Company. Changyi Company, responded to the appeal of PIL as follows: 1. The expiration of the ship’s certificates could prove the unseaworthiness of the vessel. Yet, the ship’s certificates were within the period of validity. This did not necessarily mean the vessel was seaworthy. In practice, there are many cases in which, although the ship’s certificates were valid, the court still held that the vessels were unseaworthy. 2. PIL had no evidence to prove the damage to the intermediate bulkhead between holds No. 3 and No. 4 were caused by the accident. It was possible that the seawater entering into hold No. 4 was due to the inherent defects and that the bulkhead was not watertight. Seawater came into hold No. 4 about 1 h and 13 min after striking a rock and triggered the alarm, which showed the damage to the bulkhead was not directly caused by the accident. The damage to the vessel described in the accident investigation report and quoted from the assessment report issued by Japan NK classification society on September 30, 2010, was not identified by Guangdong Maritime Safety Administration. 3. The extended statements had no authenticity and validity. The identification of the valid period ship’s certificates by the accident investigation report was based on the false materials the shipowner provided. 4. The determination of ship’s seaworthiness by the court of first instance was made by a reasonable comparison that combined the strength of evidence on both sides. 5. PIL’s statement and assumption that as long as the maritime authority found no unseaworthiness condition, this meant that the vessel was seaworthy, was incorrect. In summary, the appeal grounds of PIL could not be established. The Defendant in the first instance, PIL China, argued that the concerned bill of landing was not issued by PIL China. Therefore, PIL China, who was not the shipowner of the vessel concerned, had no connection to the damage to the goods involved and should not assume liability to pay compensation. During the trial of second instance, PIL provided three evidence (the original by notarization & authentication) to the court in favor of its claims: the inspection records and both the declaration and the assessment report of Nippon Kaiji Kyokai. The inspection records and declaration report were to prove Nippon Kaiji Kyokai made the inspection of the ship on June 13th and 14th 2010 before he issued the extended statements. The inspection results showed all the bilges in the holds near the hull remained watertight and not flooded with water. The extended statements issued by Nippon Kaiji Kyokai were with the authorization of the flag state government. The assessment report was to prove that the stranding accident caused

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damage to the vessel. The double bottom of hold No. 4 and the intermediate bulkhead between holds No. 3 and No. 4 were damaged by the accident. Hereto, by cross-examination, the Appellant, Changyi Yuanxiang, had no objection to the authenticity of the inspection records and the declaration report. Yet, Changyi Company reasoned the contents of two evidence could not achieve the aims of proof. The inspection records dated May 10, 2013, were inconsistent with the time of inspection that PIL stated. The inspection records and declaration could only show the bilge remained watertight but had nothing to do with the situation of the controversial bulkhead. It also showed that the survey violated the relevant provisions of the convention. Changyi Company accepted the authenticity of the declaration report of Nippon Kaiji Kyokai, but additionally argued that the declaration was also in violation of the provisions of the convention. PIL China had no objection in the probative force of the aforementioned evidence. The court held the three copies of the evidence were real. The closing date of the inspection records, May 10, 2013, which was printed onto it at the time of going through the formalities of notarization & authentication for the evidence, had nothing to do with the inspection date. The inspection records and declaration could prove Nippon Kaiji Kyokai had performed boarding inspection on June 13 and 14, 2010. The contents of the assessment report reflected the specific condition of damage to the ship involved. After the trial, the court found that Nippon Kaiji Kyokai, authorized by the flag state government of Singapore Maritime and Port Authority, conducted boarding inspections on June 13 and 14, 2010, to extend the certificate validity of ship involved. On September 25, 2012, Sanjie Company, according to the Captain’s protest of the vessel involved, the survey report provided by the shipowner, and the salvage operation summary (namely the aforementioned summary of salvage) etc., issued the technical consultation report. The report, within the statement of facts, outlined the cause of the seawater entering the holds No. 4 and No. 5. Hold No. 4 flooded with water because the watertight subdivision bulkhead between hold No. 3 and No. 4 existed and there were watertight defects in advance which led to seawater leakage from hold No. 3 to No. 4. The report also stated there were a series of defects. The bulkhead did not meet the requirements of watertight integrity on the bulkheads of the cabin hold. Thus after holds No. 2 and No. 3 were flooded by running aground, the seawater through the watertight defects on the bulkheads expanded into other holds. This caused the container cargo stowed in the other holds to be flooded and damaged. Finally, the report concluded that the stranding and accidental striking of rocks did not directly cause holds No. 4 and No. 5 to break and flood. Yet, the containers loaded in the holds No. 4 and No. 5 should not have been damaged due to the watertight defects on the bulkhead between hold No. 3 and No. 4. When the soaking of 18 hold No. 3 achieved the defect position, the water of hold No. 3 via the defect flooded into hold No. 4. This caused the containers of hold No. 4 to be flooded and the goods were damaged.

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On February 5, 2013, Sanjie Company, according to the accident investigation report obtained by the court of first instance, VDR, diving report, and pictures, etc., provided by the shipowner, made the technical consulting report (complementary report). The report also made the conclusion that the intermediate bulkhead between holds No. 3 and No. 4 of the vessel involved was not watertight before and at the beginning of the voyage. Other facts found by the court are in accordance with those affirmed by the original judgment. The court finds that this case is the dispute over contract of carriage of goods by sea. The court of first instance, based on the choice of two parties, applied to the laws of the People’s Republic of China to hear this case, complying with the law. The court confirms that the case should apply to the laws of the People’s Republic of China as the governing law to deal with disputes. The principal outstanding issues revolve around the following points: (1) whether PIL before and at the beginning of the voyage made the ship seaworthy; (2) whether PIL shall assume compensation liability for the cargo loss of Changyi Company; (3) whether PIL should bear responsibility, whether it shall compensate Changyi Company for the loss of the tax refund. With respect to whether PIL before and at the beginning of the voyage made the ship seaworthy. The accident investigation report specified the vessel set sail at 2342 h, on June 29, 2010. At that time, the vessel was still within the period of validity of certificates. The several valid ship’s certificates were the prima facie evidence to prove the soundness of the equipment of the vessel. Changyi Company failed to submit evidence to prove the equipment was not perfect. Accordingly, the court identified PIL, before and at the beginning of the voyage, had properly equipped the ship. At the same time, the accident investigation report also stated the condition of manning and certification complied with the requirements of the Minimum Safe Manning Document. Therefore, the number of the crew members equipped to man the vessel met the needs of navigation operation. The holding certificates of the crew members reflected that the crew members met the requirements of the minimum safe manning and acquired the special knowledge and skills for navigation. Therefore, PIL had properly manned the ship. With regard to the controversial problem between PIL and Changyi Company, as to whether there were the watertight defects on the bulkhead between hold No. 3 and No. 4, namely whether the hold No. 4 was fit to carry the contemplated cargo, based on their respective claims, PIL and Changyi Company had disagreements over the probative force of the summary of salvage, the technical consultation report, the complementary technical consulting report issued by Sanjie Company, the diving report, the project completion statement of COSCO Guangdong, the accident investigation report, the assessment report of Japan NK Classification Society, Cargo Ship Safety Construction Certificate, and Exit Permit of Ships of International Voyage. For the above evidence, the court finds that the summary of salvage filed by PIL specified the water of the hold No. 3 via the bulkhead had infiltrated into hold No. 4. As to why there was leakage on the bulkhead between hold No. 3 and No. 4 and when it was not watertight, the technical consultation report and the

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complementary technical consulting report of Sanjie Company submitted by Changyi Company gave some analyses. The technical consultation report, mainly through the analysis of the key facts listed in the summary of salvage, concluded that the intermediate bulkhead between holds No. 3 and No. 4 of the vessel involved was not watertight before and at the beginning of the voyage. Then, according to the accident investigation report obtained by the court of first instance, VDR, the diving report, and pictures, etc. provided by the shipowner, Sanjie Company made the technical consulting report (complementary report). The report, through the analysis of the time, speed, and position that the cargo cabins, and the damage position of the vessel, etc., further demonstrated the water-tightness of the intermediate bulkhead between holds No. 3 and No. 4, and also analyzed the contents of the diving report and the project completion statement of COSCO Guangdong. The report said that, even if the two pieces of evidence existed, PIL still could not eliminate the facts that there were the defects of water-tightness on the bulkhead between holds No. 3 and No. 4, then the supplementary report obtained the same conclusion with the technical consulting report. PIL did not provide the diving report and the project completion statement of COSCO Guangdong without the notarial certification and the original copy, which should not be adopted by the court. The statements of the accident investigation report, on “the No. 115–179 frames of port side … and side shell plating and its internal structure were deformed,” quoted from the contents of assessment report issued by Japan NK classification society. The point of the frame No. 132 lied in the corresponding position of the intermediate bulkhead between holds No. 3 and No. 4. Whether the deformation of frame No. 132 of port side meant that the intermediate bulkhead between holds No. 3 and No. 4 was damaged by the grounding accident was not recognized by the accident investigation report. When Sanjie Company issued the technical consulting report (complementary report), it also referred to the contents of the accident investigation report. Therefore, it did not conclude the intermediate bulkhead between holds No. 3 and No. 4 was damaged by the grounding accident. Accordingly, the claim of PIL, that the intermediate bulkhead between holds No. 3 and No. 4 was damaged on the grounds that the structure of frame No. 132 was deformed, shall not be supported by the court. As to the grounds of the appeal of PIL that seawater immerged into the interior hold No. 4 from the hatch cover and the intermediate bulkhead between holds No. 3 and 4 was damaged by discharge and salvage operation was not proven by evidence, therefore the court shall not sustain such a request. The two reports issued by Sanjie Company on the contents reflected that there were the watertight defects on the bulkhead between hold No. 3 and No. 4 before and at the beginning of the voyage, and the hold No. 4 was not fit to carry the contemplated cargo. Although the consultant SUN Mingliang, etc. did not have the qualification of a registered surveyor, these two reports were both technical service reports instead of the expert opinion made by the accredited body the court entrusted for the professional issues. The evidence did not need the precondition that the appraiser should have a certain qualification. Additionally, the consultant, SUN Mingliang, was a senior engineer for ship survey. The other two consultants

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were also senior engineers for maritime affairs administration management. SUN Mingliang, in first trial, appeared in court to accept the inquiries from the parties to the case. Therefore, the three consultants and other non-professional personnel were able to make a more accurate professional judgment for the facts of the vessel situations, therefore the two reports shall be believed by the court. Furthermore, the Cargo Ship Safety Construction Certificate and Exit Permit of Ships of International Voyage that PIL stated, were the prima facie evidence to prove the seaworthiness of the vessel. The court could not affirm the good water-tightness of hold No. 4 based only on these two certificates. Thus, Changyi Company met its burden of proof to prove the bulkhead between hold No. 3 and No. 4 was not-watertight before and at the beginning of the voyage, the evidence provided by PIL was not sufficient to refute, therefore the court shall not support PIL’s opinions. In conclusion, although PIL, before and at the beginning of the voyage, properly equipped and manned the ship, it did not exercise due diligence to make hold No. 4 fit to carry the contemplated cargo. As a result the vessel at hand was not in a state of seaworthiness. With respect to the second point, on the issue of whether PIL shall assume compensation liability for the cargo loss of Changyi Company. The damage to the goods of hold No. 3 were directly caused by the accidental striking of rocks. Therefore, liability belonged to the negligence in the navigation of the ship. PIL shall not bear compensation liability for the cargo loss of hold No. 3. The damage to the goods of hold No. 4 was because the intermediate bulkhead between holds No. 3 and No. 4 was not watertight and the bulkhead was taking in water. PIL, before and at the beginning of the voyage, did not exercise due diligence to make hold No. 4 fit to carry the contemplated cargo and make the ship seaworthy. There was a cause-and-effect relationship between the damage to the goods and unseaworthiness. Therefore, it should be entitled to compensation by PIL. Hence it was clearly correct for the original court to compel PIL to compensate the Plaintiff for the value of goods in hold No. 4 and the corresponding freight. With respect to the third point, on the issue of whether the claim of Changyi Company for the loss of the tax refund shall be supported: Since there was an established contract of carriage of goods by sea between Changyi Company and PIL, the compensation responsibility of PIL shall be subject to Article 55 of the Maritime Code of the People’s Republic of China. Therefore, the amount of indemnity for the loss of the goods shall be calculated on the basis of the actual value of the goods lost. The actual value 21 shall be the value of the goods at the time of shipment plus insurance and freight. The claim of Changyi Company for the loss of the tax refund was beyond the scope of the liability for compensation born by PIL. Accordingly, this ground of the appeal of Changyi Company shall not been sustained by the court. In conclusion, the appeals and grounds of the Appellants, Changyi Company and PIL, lack factual and legal basis and shall be dismissed. The findings of fact by the court of first instance are clear, the laws applied are correct, and the result of

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judgment is correct. According to Article 170 Paragraph 1 Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance in amount of 62,888 RMB. 18,866 RMB shall be born by the Appellant, Changyi Yuanxiang Printing and Dyeing Co., Ltd., 44,022 RMB shall be born by the Appellant, Pacific International Lines (Pte) Ltd. The judgment is final. Presiding Judge: DONG Bing Acting Judge: WANG Lei Acting Judge: FENG Yuhan June 6, 2014 Clerk: LIU Fugui

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Shandong High People’s Court Civil Judgment Changyi Yuanxiang Printing and Dyeing Co., Ltd. v. Pacific International Lines (Pte) Ltd. et al. (2015) Lu Min Zai Zi No. 2 Related Case(s) This is judgment of retrial, and the judgment of first instance and the judgment of second instance are on page 119 and page 134 respectively. Cause of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote On retrial ordered by Supreme People’s Court, affirming appeal court’s decision after first trial, holding defendant carrier not liable for cargo damaged as a result of ingress of water because of hull damage after the carrying ship hit a reef because of negligence in navigation, but liable for cargo damaged as a result of water flowing from one hold to the next as a result of unseaworthiness of the bulkhead between the holds. Summary Plaintiff cargo-owner sued Defendant carrier after its cargo was damaged when the carrying ship KOTA KADO struck a reef. The direct cause of the damage in Hold No. 3 was ingress of water from hull damage as a result of the ship striking the reef. Water flowed from Hold No. 3 to Hold No. 4 because the bulkhead was not in a seaworthy condition. The court of first instance held and the appeal court affirmed that the Defendant carrier, PIL, was not liable for the damage to the cargo in Hold No. 3 but was liable for the damage to the cargo in Hold No. 4. The damage to the cargo in Hold No. 3 was caused by negligence in the navigation of the vessel, for which the carrier had a defence by law. The damage to the cargo in Hold No. 4 was caused by the unseaworthiness of the bulkhead, for which the carrier was liable because it had existed before and at the beginning of the voyage. Defendant carrier filed a petition for retrial with the Supreme People’s Court, which was granted. During the retrial, the Court held that the central issue was whether the vessel was cargoworthy. The facts found during the retrial of this case were consistent with those found by the appeal court. The court concluded that there was insufficient evidence to support Defendant carrier’s claim that the vessel was cargoworthy, and therefore affirmed the appeal court judgment.

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Judgment The Claimant of Retrial (the Defendant of first instance, the Appellant of second instance): Pacific International Lines (Pte) Ltd. Domicile: 140 Cecil Street, #03-00, PIL Building, Singapore Post District 69540. Legal representative: ZHANG Ziwei, wxecutive director. Agent ad litem: YUAN Hui, WANG JING & Co. Qingdao Office. Agent ad litem: WANG Yongli, WANG JING & Co. Qingdao Office. The Respondent of Retrial (the Plaintiff of first instance, the Appellant of second instance): Changyi Yuanxiang Printing and Dyeing Co., Ltd. Domicile: Kuiju Street, Changyi City, Shandong. Legal representative: GAO Sichuan, Chairman. Agent ad litem: TIAN Liuzhu, Shandong Wenkang Law Firm. Agent ad litem: YOU Pengfei, Shandong Wenkang Law Firm. The Defendant of first instance: Pacific International Lines (China) Ltd. Domicile: Shanghai, the People’s Republic of China. Legal representative: ZHANG Songsheng, chairman. Agent ad litem: YUAN Hui, WANG JING & Co. Qingdao Office. Agent ad litem: WANG Yongli, WANG JING & Co. Qingdao Office. With respect to the case arising from dispute over contract of carriage of goods by sea between the Claimant of Retrial, Pacific International Lines (Pte) Ltd. (hereinafter referred to as PIL), and the Respondent of Retrial, Changyi Yuanxiang Printing and Dyeing Co., Ltd. (hereinafter referred to as Changyi Yuanxiang), the Defendant of first instance, Pacific International Lines (China) Ltd. (hereinafter referred to as PIL China), the Claimant of Retrial disagreed with the Shandong High People’s Court (2014) Lu Min Si Zhong Zi No. 27 Civil Judgment and applied for retrial to the Supreme People’s Court. The Supreme People’s Court made (2014) Min Shen Zi No. 1763 Civil Ruling on December 15, 2014 to order the court to retry the case. The court formed a new collegiate panel and held a hearing in public. Agent ad litem of PIL and PIL China, YUAN Hui, agent ad litem of Changyi Yuanxiang, TIAN Liuzhu, appeared in court to attend the hearing. Now the case has been concluded. Changyi claimed to the Qingdao Maritime Court on June 20, 2011 that, in June 2010, PIL and PIL China dealt with marine transportation of the export goods for Changyi Yuanxiang. It was stated in the B/L that the name of the vessel was M.V. “KOTA KADO”; the voyage number was “KAD073”; the port of loading was Qingdao; the port of unloading was Cotonou, Benin; the description of the goods was textile; the title of the B/L was PIL; the issuer of B/L was PIL Qingdao. The cargo concerned suffered a total loss in the course of carriage, the total value of goods amounted to USD947,520. Changyi Yuanxiang held that the cargo was damaged under the control of PIL and PIL China, according to Article 46 of Maritime Code of the People’s Republic of China, the damage to the goods

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occurred during PIL and PIL China’s period of responsibility; besides, Article 47 and 48 of Chinese Maritime Code, PIL and PIL China, as the carriers, had the obligation to keep the ship seaworthy and cargoworthy, keep and care for the goods carried, PIL and PIL China should bear the liability for the damage to the goods and all the economic losses caused to Changyi Yuanxiang. After the accident of damage to the goods occurred, Changyi Yuanxiang had requested PIL and PIL China to compensate the losses of goods and other losses for many times, however, PIL and PIL China evaded and eventually refused to reimburse. Therefore, Changyi Yuanxiang sued them to the court and requested the court to judge that: (1) PIL and PIL China should compensate Changyi Yuanxiang for the losses of the goods, in an amount of USD947,520 (a total of RMB6,158,880 yuan according to the exchange rates RMB 6.5 for 1 dollar) together with the interest by corresponding interest rate on bank loans published by the People’s Bank of China from August 1, 2010 to the date that the compensation was actually paid; (2) PIL and PIL China should return the freight and charges paid by Changyi Yuanxiang, in an amount of RMB153,980 yuan; (3) PIL and PIL China should compensate Changyi Yuanxiang for the loss of the tax refund (a total of RMB985,420.8 yuan according to the exchange rate 1:6.5), in an amount of USD151,603.2, together with the interest from August 1, 2010 to the date of the actual compensation payment calculated at loan interest rate published by the People’s Bank of China over corresponding period; (4) the litigation fee for this case should be born by PIL and PIL China. The court of first instance found out that, M.V. “KOTA KADO”, the vessel of PIL, was the steel container ship of Singapore, gross dead weight was 31,070 tons; net dead weight was 15,648 tons. Length O.A was 233.17 m; breadth was 32.2 m; depth was 17.1 m; completion time dated on June 30, 2005. In June 2010, Changyi Yuanxiang entrusted PIL to carry 1632 bales textiles loaded inside eight containers from QINGDAO to COTONOU BENIN. After the goods had been loaded on M.V. “KOTA KADO” on June 25,2010, Pacific International Lines (China) Ltd. Qingdao Branch on behalf of PIL, issued and delivered eight full sets of clean original bills of lading to Changyi Yuanxiang (B/L No.: BQDCOO01006481, BQDCOO01006482, BQDCOO01006483, BQDCOO 01006484, BQDCOO01006496, BQDCOO01006497, BQDCOO01006498 and BQDCOO01006499), and arranged the voyage to be “KAD073”. In above eight containers, in accordance with the bills of lading number sequence, the 6 containers under the first 6 copies of the bills of lading were loaded into No. 4 cargo holds of M.V. “KOTA KADO”, the 2 containers under the latter 2 copies of the bills of lading were loaded into No. 3 cargo hold of M.V. “KOTA KADO”. Changyi Yuanxiang paid the freight and miscellaneous charges, RMB153,980 yuan to Qingdao Tianxiang International Logistics Co., Ltd. Qingdao Tianxiang international logistics Co., Ltd., as the freight forwarder of Changyi Yuanxiang, paid to PIL Qingdao the ocean freight RMB150,680 yuan, for which each bill of lading was for RMB18,838 yuan, PIL and PIL China recognized that Changyi Yuanxiang had paid the fees. The sales contract between Changyi Yuanxiang and Hong Kong Hongji International Development Co., Ltd., and the invoice and customs declaration

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issued by Changyi Yuanxiang, all of them showed the total value of goods was USD947,520, the price term was FOB. The value of goods respectively was, in accordance with the bill of lading number sequence, USD117,504, USD120,000, USD120,000 USD117,504; USD117,504, USD117,504, USD117,504 and USD120,000. The agreed method of payment was that the full payment would be effected by receiving the goods by Telegraphic Transfer. During the voyage concerned of “KAD073”, M.V. “KOTA KADO” was manned with 22 crew members, the condition of manning and certification conformed to the requirements of the Minimum Safe Manning Document; M.V. “KOTA KADO” held the following certificates: Ship’s Certificate of Registry; Cargo Ship Safety Construction Certificate, Cargo Ship Safety Equipment Certificate, Cargo Ship Safety Radio Certificate, International Load Line Certificate, International Oil Pollution Prevention Cert, Minimum Safe Manning Document, Certificate of Class, Safety Management Certificate, and Document Of Compliance (DOC).Among which the date of issue of 5 certificates, Cargo Ship Safety Construction Certificate; Cargo Ship Safety Equipment Certificate; Cargo Ship Safety Radio Certificate; International Load Line Certificate, International Oil Pollution Prevention Cert; respectively was on, October 20, 2005; September 10, 2005; October 20, 2005; October 20, 2005; January 15, 2009, and the due date of them was on June 29, 2010. The 5 copies of certificates all were attached to the Extended statements issued by Nippon Kaiji Kyokai on June 14, 2010, all of which specified the validity of the certificate, authorized by the government of the republic of Singapore, was extended until August 29, 2010; except that the Cargo Ship Safety Equipment Certificate had no survey records, other 4 copies of certificates all stated the recent annual test was on June 22, 2009, none of them were made the renewal inspection. The date of issue of Certificate of Class was on June 6, 2006, its due date was on June 29, 2010, the recent annual survey was on June 22, 2009 and the certificate did not have extended statements. All of the above six pieces of the vessel certificates stated that: the date of completion of the inspection this certificate accorded to was June 30, 2005. According to the accident investigation report, the recent inspection of the vessel was the annual inspection of 2009, the survey outcome was normal, the holding inspection certificates would expire on August 29, 2010 (the date was the date stated in the extended statements). The accident investigation report stated the accident as follows: at 2342 on June 29, 2010, M.V. “KOTA KADO”, loaded with 740, 20-feet containers and 844 40-foot containers, in a total number of 1584 containers, the weight of goods for 30,282 tons, sailed from Guangzhou Nansha Port area to Singapore. At the beginning of the voyage, the weather conditions were as follows: fine weather, breeze and good visibility, its drafts were about 10.6 m forward and 12.6 m. At 0400, the second officer Tong Chunguang and the sailor on duty Martaliga went on watchkeeping in Bridge, of whom the second officer commanded sailing and the sailor was responsible for hand steering and assisted keep a lookout. The course of the vessel was 118° and vessel speed was 14.0 knots, the second officer found an approaching vessel out in right front, shaping a crossing situation with the vessel, the second officer commanded the sailor to steer and turn to the right, and kept the

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course steady at 150° to avoid the approaching vessel, M.V. “KOTA KADO” deviated from its intended voyage. After giving way of the first crossing vessel, the sailor left the bridge for routine fire prevention and security patrol, the second officer operated the steering personally, once again turned to the right about 20° to avoid the other crossing approaching vessel, in the course, M.V. “KOTA KADO” deviated of its intended voyage to the right about 1 mile; after giving way of the second approaching vessel in the front-right, second officer observed there were some fishing nets with flashlight on the port side of this vessel and some fishing boats around the vessel. At 0417, M.V. “KOTA KADO” deviated of its intended voyage to the right about 1 mile; at 0424, the vessel was 2.3 nm away from Lixinpai reef; at 0428, M.V. “KOTA KADO” basically sailed from the group of fishing boats, second officer started to made small alterations of course to the left, planning to return to the intended route. At 0431′19, M.V. “KOTA KADO”, sailed at POSN 21°56′.757 N/114°04′0.514 E, with the course 149° and speed 19.0 knot, then contacted with Lixinpai reef. When the accident happened, the vessel tilted leftwards more than 20°. After the accident, water came into the fore peak, bow thruster room, forward deep tank, and holds No. 2 and No. 3, etc. At 0518, M.V. “KOTA KADO” anchored in 4 miles south of Lemma Islands to assess damage situation of the vessel. Because the vessel trimmed by bow and the damaged cabin continued to be taken by the water, the captain decided to come to an anchor in shallow water of 15–20 m water depth to guarantee the safety of vessel and personnel. At 0818, M. V. “KOTA KADO” pulled up its anchors and headed to the northeast. At 1424, in the absence of approval by Hong Kong Marine Department, M.V. “KOTA KADO” arrived in the place west of Hong Kong Lamma Island and anchored, at this time the main deck of the ship stem was submerged to the surface of the water. After that, the ship stem continued to sink until fast there. After anchoring of M.V. “KOTA KADO”, the shipowner employed Guangzhou Salvage Bureau to carry out the oil spill emergency disposal and deploy the oil boom around the vessel, and at the same time employed Svitzer Company to carry out the rescue and salvage operations. On the morning of August 18, all the containers were discharged and were carried to the shipyard near the Tying Yi Island to be repaired. On September 30, 2010, Japan NK classification society issued the assessment report for the accident damages as follows: (1) the cargo holds from bow to the frame of No. 126, the double bottom and its internal structure were damaged. (2) The No. 115–179 frames of port side, No. 160–240 frames of starboard side, and side shell plating and its internal structure were deformed. (3) holds No. 1–4, hatch coaming and hatch cover were damaged or deformed. The General Arrangement Plan of M.V. “KOTA KADO” showed, the frames No. 115–132 were in the forebody of No. 4 hold, the frames No. 132–168 were in hold No. 3, the frames No. 168–205 were in hold No. 1, the frames No. 205–240 were in hold No. 1. The accident investigation report stated the cause of the accident and the responsibility as follows: (1) the duty officer did not timely correct the yaw and did not keep alert to the risks as the result of yaw, which was the direct cause of the accident. (2) Fatigue watchkeeping of the duty officer was the important reason for

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the accident. (3) The captain’s failing to fulfill the duty of management and command of the vessel was one of the reasons for the accident. (4) Not choosing the recommended route was one of the reasons for the accident. (5) Keeping the speed on sea steady too early was one of the reasons for the accident. The VDR data of the vessel showed, at 0431, on June 30, 2010, the vessel ran aground, at 0433 (2 min after grounding), the bilge water alarm of holds No. 2 and No. 3 displayed high water level alarming, at 0544 (1 h and 13 min after grounding), the bilge water alarm of No. 4 hold displayed high water level alarming. In the hearings, PIL and PIL China recognized that the alarming water level of bilge water alarm of the cargo hold was 30 cm. Summary of Salvage stated that: (1) the vessel collided with the underwater objection June 30, 2010, leading to that holds No. 2 and No. 3 were torn and a large number of sea water entered into the cabin. Then the vessel stranded on shoals of Hong Kong waters, the stem of 8 m embedded in mud, holds No. 1–5 in the front of bridge were submerged in water. (2) The shipowner had signed a salvage contract with Svitzer. 13. On July 3, holds No. 2, 3 and 4 had already been flooded and sea water also seeped into the hold No. 5. 20. When drawing water from hold No. 5, they found water level of No. 4 hold was also on the decline, this meant that a common connection point existed between two holds. 100. On July 18, even all the water pumps worked continuously, water level of No. 4 hold was not lowered, the reason for which was difficult to know. 128. On July 21, water pumps of holds No. 4 and No. 5 worked continuously, but the water level of No. 4 hold showed no sign of any decline, and since the morning of July 18, the water level of No. 4 hold remained and unchanged. 139. On July 22, in the morning, the rescue team conducted pumping operations for No. 4 hold, and then found the water level of hold No. 5 fell a lot. 145. On July 23, repairing the holes in the cable pipe inside the intermediate bulkhead between holds No. 4 and No. 5. 158. On July 25, the water level of No. 4 hold could be maintained in 6–8 m due to pumping operations. 166. On July 26, the same. 172. On July 27, the same. 214. On August 3, the salvor successfully made the accident vessel reach stem draft for 9 m and stern draught for 11.7 m, and could sail into the shipyard, although sea water still seeped into No. 2, 3, 4, holds (the water of hold No. 3 via the bulkhead infiltrated into No. 4 hold). According to the arrangement of the salvor, from July 30, 2010 to August 16, the eight containers involved were successively discharged from M.V. “KOTA KADO”. The eight containers during the discharge completely soaked by water, some of which were stained with grease, and then they were transferred to the yard of China Merchants Container Service Co., Ltd. On September 10, 2010, by the open-box inspection for the goods in the eight containers involved, the goods, soaked by saline water, had already no market value. After the accident, the buyer of the goods concerned in the existing case did not receive the goods, for the sales contract agreed in cash on delivery, Changyi Yuanxiang did not receive all the price of the goods agreed in the contract. Regarding the accident investigation report involved in the existing case (the create date was December 2010 after verification by the court), in the hearings, the court questioned PIL and PIL China for many times, but PIL and PIL China’s

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agents always said that the Maritime Safety Administration never made official confirmation. On April 18, 2012, Zhejiang High People’s Court, for trial of the other two cases caused by the accidents involved, had obtained this report from Guangdong Maritime Safety Administration, PIL and PIL China of the two cases, namely the agents of shipowner of M.V. “KOTA KADO”, and the entrusted agents of PIL and PIL China in the existing case, were in the different branch offices of the same law firm. The court of first instance also found out that, the shipowner’s host country, namely the registered country of PIL, and the country of registration of M.V. “KOTA KADO” all were in Singapore, China and Singapore both were the signatories to International Convention for the Safety of Life at Sea, 1974 of United Nations maritime Organization (IMO). In the hearings, PIL and PIL China recognized that under the provisions of the convention, M.V. “KOTA KADO” each cargo hold of which needed to meet the requirements of watertightness, to obtain the valid certificates. The court of first instance held that, this case was arising from dispute over contract of carriage of goods by sea with foreign-related factors. In the existing case, the place of dispatch was Qingdao, according to Article 27 of the Civil Procedure Law of the People’s Republic of China and Article 6 of the Special Maritime Procedure Law of the People’s Republic of China, the court should have jurisdiction over the case. Both Changyi Yuanxiang and PIL and PIL China agreed to apply the laws of the People’s Republic of China to hear this case, Article 269 of the Maritime Code of the People’s Republic of China, the court of first instance, in accordance with the laws of the People’s Republic of China, solved the substantive dispute of the case. The case of contract of carriage of goods by sea shall apply to the Maritime Code of the People’s Republic of China and the relevant international conventions our country had participated. Changyi Yuanxiang, as the shipper, entrusted PIL, as the carrier, to carry the goods involved, Changyi Yuanxiang and PIL established between them a contractual relationship of carriage of goods by sea. According to Article 46 of Maritime Code of the People’s Republic of China, “the responsibilities of the carrier with regard to the goods carried in containers covered the entire period during which the carrier was in charge of the goods, starting from the time the carrier had taken over the goods at the port of loading, until the goods had been delivered at the port of discharge. During the period the carrier was in charge of the goods, the carrier shall be liable for the loss of or damage to the goods, except as otherwise provided for in this Section”, PIL, in the process of performance, during its period of responsibility, causing the cargo damage to Changyi Yuanxiang, except as otherwise provided for the contrary law, should bear the corresponding compensation liabilities. PIL China, as the recording agent of the bill of lading involved in the existing case, did not constitute a contract of carriage of goods by sea with Changyi Yuanxiang, as a consequence it did not had the rights and obligations under this this contract. The court of first instance held that the issues of this case were as follows: (1) whether the vessel in the voyage involved in the existing case was seaworthy

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and whether the existence of the ship’s certificates would affect the determination of seaworthiness of the ship. (2) Whether the excusable defense of negligence in the navigation of PIL could be established. (3) The cognizance of Changyi Yuanxiang’s loss and the compensation liability of PIL. Firstly, the determination of seaworthiness of the voyage involved in the existing case. In the existing case, the original period of validity of the 6 pieces of certificates of the ship involved were all on June 29, 2010, Nippon Kaiji Kyokai issued separately the extended statements for the 5 copies of certificates to extend the validity until August 29, 2010, the statements did not specify the pursuant law or the provisions of the convention. Regarding whether the extended statements were in line with the convention, PIL held the statements were based on the provision of the Article 14(c) of the convention, if a certificate other than a passenger vessel Safety Certificate was issued for a period of less than five years, the Administration might extend the validity of the certificate beyond the expiry date to the maximum period specified in paragraph (a), provided that the surveys referred to in regulations 8, 9 and 10 applicable when a certificate was issued for a period of 5 years were carried out as appropriate. The certificates of the ship, extended to 5 years in the condition of less than 5 years, therefore they were effective, and the ship was seaworthy. Changyi Yuanxiang gave the opinions as follows: because the date of inspection and the due date of each certificates were on June 30, 2005 and on June 29, 2010,these certificates were all the expiration of five-years, the extended statements shall not apply to the Article 14(c), and on the basis of the provision of Article 14(e) of the convention, if a vessel at the time when a certificate expired was not in a port in which it was to be surveyed, the administration might extend the period of validity of the certificate but this extension shall be granted only for the purpose of allowing the vessel to complete its voyage to the port in which it was to be surveyed, and then only in cases where it appears proper and reasonable to do so. No certificate shall be extended for a period longer than three months, and a vessel to which an extension was granted shall not, on its arrival in the port in which it was to be surveyed, be entitled by virtue of such extension to leave that port without having a new certificate. The extended statements were only limited to the voyage to the port in which the vessel was to be surveyed, but the vessel concerned on the voyage was still in the shipment of goods, whose purpose was transport instead of survey, as a result the whole voyage was unseaworthy. The court of first instance held that, in accordance with Article 47 of the Maritime Code of the People’s Republic of China, the carrier should, before and at the beginning of the voyage, exercise due diligence to make the vessel seaworthy, properly man, equip and supply the vessel and to make the holds, refrigerating and cool chambers and all other parts of the vessel in which goods were carried, fit and safe for their reception, carriage and preservation, the timing of the requirement for seaworthiness was before and at the beginning of the voyage, the vessel involved set sail at 2342, on June 29, 2010, this certificates were still within the original period of validity, Changyi Yuanxiang’s assertion of the vessel being unseaworthy

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by claiming that the extended statements did not conform to the stipulations of the convention should not be established and supported by the court of first instance. Secondly, whether the excusable defense of negligence in the navigation argued by PIL could be established. PIL alleged that the accident investigation report identified the cause of the accident was the crew’s diligence in the navigation of the ship, in line with Article 51 of Maritime Code of the People’s Republic of China, the carrier should not be liable for the loss of or damage to the goods occurred during the period of carrier’s responsibility arising or resulting from any of the following causes: (1) fault of the Master, crew members, pilot or servant of the carrier in the navigation or management of the vessel; PIL should be exempted from the liability. The court of first instance held that the accident concerned was caused by the negligence of the crew members in navigation of the vessel, as to the loss directly by the accident, PIL should be exempted from the liability. As to the loss indirectly by the accident, PIL should not be excused from the liability by citing the fault of navigation. At first, the accident concerned directly caused damage to holds No. 2 and No. 3 and seawater entered into the two cargo cabins in a very short time making the goods damaged, the Summary of salvage provided by PIL, stated the water of No. 4 hold was infiltrated via the bulkhead of hold No. 3, moreover PIL failed to provide evidence to prove that the accident involved caused damage to the intermediate bulkhead between holds No. 3 and No. 4 and led to water penetration. Then, the last inspection of the vessel involved, confirmed by the accident investigation report of Maritime Safety Administration, was the annual test on June 22, 2009 recorded in the certificate. With respect to whether Nippon Kaiji Kyokai had conducted the relevant inspection when making the extended statements on June 14, 2010,the Defendant in the trial had submitted the inspection report of Nippon Kaiji Kyokai, for the report being a copy, its authenticity should not be confirmed; even if the evidence form conformed to the legal requirements, the survey was not recorded in the checkbox specified in the ship's certificate, besides the accident investigation report did not confirm the inspection, therefore the court of first instance should not identify the authenticity of the survey. The problem of bulkhead being non-watertight could had been found and eliminated by the related inspection of the classification society in accordance with the convention, PIL, without the inspection which should be conducted to avoid the vessel’s bulkhead water penetration, making the No. 4 hold uncargoworthy, as for the resulting loss, should not be exempted from the liability. Thirdly, the identification of the loss of Changyi Yuanxiang and the compensation liability of PIL. Changyi Yuanxiang’s eight containers cargo suffered total loss by inspection, of which 6 containers were loaded into the cargo hold No. 4 and No. 2 containers were carried into the hold No. 3, PIL shall not be excused from the loss of goods of No. 4 hold. Under Article 55 of the Maritime Code of the People’s Republic of China, the amount of indemnity for the loss of the goods should be calculated on the basis of the actual value of the goods so lost, the actual value should be the value of the goods at the time of shipment plus insurance and freight. According to

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the above regulations of the compensation value, in the existing case, PIL should compensate Changyi Yuanxiang for the following loss: (1) the value of goods, the value of goods of the 6 containers in the hold No. 4 totaled USD707,520 on FOB term, not including insurance premium and freight. (2) Insurance premium, no evidence submitted by Changyi Yuanxiang to support it. (3) Freight, Changyi Yuanxiang had paid the freight RMB 113,010 yuan for the 6 containers to PIL. Changyi Yuanxiang’s claim of interest loss should be as the bank loans interest for the corresponding period from the date Changyi Yuanxiang brought its claims, namely on August 5, 2010, to the date given by this judgment. Changyi Yuanxiang’s other claims, without legal basis, should not be supported. Pulling the threads together, in the existing case, PIL, as the carrier, carried the goods shipped by Changyi Yuanxiang, there was no evidence to prove the ship was unseaworthy before and at the beginning of the voyage. The accident involved was caused by the negligence of the crew members in the navigation of the ship, the direct loss as a result of the accident should not be born by the shipowner, PIL according to the law. But because the bulkhead was not watertight, causing the goods in the hold suffered water damage, PIL should compensate Changyi Yuanxiang for such part of loss, in an amount of USD707,520 and RMB113,010 yuan. On these grounds, in accordance with Article 46, Article 47, Article 51 and Article 55 of the Maritime Code of the People’s Republic of China, the judgment was as follows: PIL should compensate Changyi Yuanxiang for the loss of goods in an amount of USD707,520 and RMB113,010 yuan within ten days after this judgment came into effect, and should pay the interest from August 5, 2010 to the date designated by this judgment calculated at the loan interest rate over the corresponding period. (2) Other claims of Changyi Yuanxiang against PIL should be rejected. (3) The claims of Changyi Yuanxiang against PIL China should be rejected. If PIL failed to perform the obligation of payment within the period given by this judgment, should double pay the interest for the delayed period in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee of first instance was RMB 62,888 yuan, of which PIL should pay RMB44,022 yuan, and Changyi Yuanxiang should pay RMB18,866 yuan. Changyi Yuanxiang was dissatisfied with the judgment of first instance and appealed before the court for the following reasons: 1. PIL did not exercise due diligence to make the ship seaworthy. It could not cite the exemption clause of Article 51 stipulated in the Maritime Code. (1) On the date of sailing, the involved vessel’s certificates were expired. The Cargo Ship Safety Construction Certificate, Cargo Ship Safety Equipment Certificate, and Cargo Ship Safety Radio Certificate, governed by the Convention, were the certificates most relevant to the ship’s seaworthiness. On the basis of the provision of Article 14 of the convention, the three the certificates were valid from the survey date of completion. In accordance with the provisions of the International Convention on Load Lines 1966, and the Final Act of the International Conference on Marine Pollution 1973,

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the International Load Line Certificate and International Oil Pollution Prevention Cert were valid for 5 years. As indicated by the basis of issuance recorded in the above five certificates and social basic common sense, it could also be obtained that the certificates were issued due to the precondition that the vessel involved had gone through the actual inspection. After inspection, the certificates reflected the inspection results. Hence the above five copies of involved ship certificates should be valid for five years from the completion date of survey on June 30, 2005 up to June 29, 2010. The extended statements attached to the above certificates had no authenticity or validity. Without the actual inspection of the ship there was no form of extended statement for the Certificate of Class. In court of first instance, PIL did not submit evidence to prove that the extended statements were made by Nippon Kaiji Kyokai and failed to provide the original evidence to prove that Nippon Kaiji Kyokai made a boarding visitation. If Nippon Kaiji Kyokai did make a boarding visitation on June 13th and 14th in 2010, there should be a signed extension on the back of the ship’s certificates instead of separately issued extended statements for each certificate. Even if Nippon Kaiji Kyokai had made the boarding visitation and issued the extended statements, the statements should not be supported by the court. Pursuant to the provision of Article 14(c) and (e) of the convention, this extension of the ship’s certificates shall be granted only for the purpose of allowing the ship to complete its voyage to the port in which it was to be surveyed. This should be only in cases where it appeared proper and reasonable to do so. The extended statements were not in line with the above situation of allowable extension. In form, the extended statements were not in conformity with the requirements for the appendix to the certificate, format, and contents of the certifying box prescribed in Article 15 of Chap. 1 of the convention. PIL did not submit the original copy of the Exit Permit of the Ships of International Voyage. The evidence, even if it was accurate, was issued by Guangzhou Maritime Safety Administration based on the extended statements without authenticity and validity. Thus, the license could not be used as the basis for the ship’s seaworthiness. The time for dead slow ahead was at 0001 on June 30, 2010. At that moment, the ship’s certificates had passed the period of validity. This was true even if the time for sailing was 2342 on June 29, 2010. PIL loaded the and shipped the cargo yet did not handle it carefully to ensure ship seaworthiness because they knew the certificates of the ship were about to expire. Thus, the navigational safety risk and amount of hidden dangers increased.

2. PIL improperly manned the ship with qualified crew members. The Second Officer did not receive pre-service training. There was a lack of work handover, crewmembers were driving the ship experiencing fatigue, and there was

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corporation mismanagement. These elements led to the unseaworthiness of the ship. 3. The bulkhead of hold No. 4 was not watertight and not suitable for carrying goods. (1) The bulkhead of holds No. 3 and No. 4 were not watertight. This led to the water of hold No. 3 overflowing into hold No. 4, as the bottom of hold No. 4 was not damaged at the time of the accident. The statement of the accident investigation report made by Guangdong Maritime Safety Administration outlines, “the cargo holds from bow to frame No. 126, to include the double bottom and its internal structure, were damaged.” Yet, this statement was from the assessment report issued by Japan NK Classification Society on September 30, 2010. Therefore, it was not submitted by PIL. Additionally, the diving report was a copy without notarial certification and therefore had no authenticity. Even if the above statement of damage “the bulkhead from fore peak to hold No. 3 and No. 4 partly severely damaged” was true, which referred to the scope of the area from the fore peak to the bulkhead of hold No. 4, this meant the above area did not include the entire bulkhead or hold No. 4. Additionally, if there was a 10 by 20 cm hole in the shell of hold No. 4, a hole like the size of A4, was also not sufficient to allow water to enter into the hold. Specific reasons could be found in the technical consulting report. Moreover, if the bottom of hold No. 4 was damaged due to the stranding caused by sea water that seeped into it, its bilge water alarm would ring at the same time as the one in hold No. 3 rather than 1 h and 13 min after the accident. (2) The sea water could not enter into hold No. 4 from the hatch cover. According to the requirements of technical specification and equipment performance of the ship, a cargo hatch cover should be watertight. The statement that the “hatch cover was damaged” in the accident investigation report was based on the assessment report not submitted by PIL. PIL also failed to provide evidence on how rocks caused damage to the cargo hatch cover. In the light of Article 116 of Summary of Salvage filed by PIL, until July 20, 2010, PIL was still not clear as to why hold No. 4 was flooded with water. Additionally, if the sea water entered into hold No. 4 from the hatch cover that was not damaged, this proves that the hatch cover was not watertight, therefore hold No. 4 was not suitable to stow cargo. According to the water injection time of holds No. 3 and No. 4 recorded in the VDR data, and the multiple records of summary salvage, the information ruled out the possibility that water entered into hold No. 4 from the bottom and hatch cover. The original judgment confirmed that the water in hold No. 4 was overflow from the bulkhead of hold No. 3. This was based on facts and techniques, conforms with common sense, and was clearly correct. On the basis of the expert analysis of Qingdao Sanjie Maritime Technology consulting Co., Ltd. (hereinafter referred to as Sanjie Company), in the absence of evidence to prove

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that the rocks caused damage to the intermediate bulkhead between holds No. 3 and No. 4, the only conclusion is that the intermediate bulkhead between the two holds were not watertight and had existed before and at the beginning of the voyage. Therefore, hold No. 4 was not suitable to stow cargo. 4. PIL should compensate Changyi Yuanxiang for the complete amount of loss of the concerned goods’ tax refund. The loss of the export tax refund of the exporter for not collecting on the price of the goods should belong to the loss resulting from the breach. This was stipulated in Article 113 of Contract Law of People’s Republic of China. In the existing case, due to the default of PIL, Changyi Yuanxiang did not receive the entire the payment. PIL should compensate Changyi Yuanxiang for the loss due to not receiving the export rebates. For these reasons, the Appellant, Changyi Yuanxiang, requested the court of second instance to overrule the second item of judgment of first instance and to have PIL also compensate Changyi Yuanxiang for the container cargo loss, in the amount of 240,000 USD. This was in respect to the other two bills of lading in which the freight amounted to 40,970 yuan. There was also the corresponding interest and loss of the tax refund of 151,603.2 USD and the corresponding interest. PIL appealed against Changyi Yuanxiang and responded as follows: 1. PIL had exercised due diligence to make the ship seaworthy. The certificates related to ship’s seaworthiness before and at the beginning of the voyage were still within the original period of validity. Under the provision of Article 14 of the convention, the certificates should be valid from the date of issuance (October 20, 2005) rather than completion date of survey. The validity of the ship’s certificates were not more than five years from the date of issuance to the date of extension of the expiration on August 29, 2010. The extended statements were separately issued by Nippon Kaiji Kyokai in a condition that did not affect the schedule and at a time when they could not sign in the ship’s certificates. The extended statements, in conformity with the related stipulations of the convention, was authorized by the flag state government of Singapore Maritime and Port Authority. China’s Maritime Authorities also accepted that the period of validity of the ship’s certificates should be until August 29, 2010. 2. PIL had properly manned the ship with qualified crew members 3. There was no watertight defect of the intermediate bulkhead between holds No. 3 and No. 4. PIL submitted sufficient evidence to prove the reason hold No. 4 had flooded with water. In accordance with the accident investigation report, the assessment report of Japan NK Classification Society, and the diving report, the fact that the bottom of hold No. 4 was damaged could be confirmed. The accident caused damage to the hatch cover of hold No. 4, allowing sea water to enter hold No. 4 through the hatch cover. PIL had fulfilled its burden of proof concerning the ship’s seaworthiness and ability to stow cargo. The reasons for taking on water in holds No. 3 and No. 4, the damage to the goods, the technology consultation report, and the complementary technology consulting report presented by Changyi Yuanxiang were not sufficient to refute the facts of

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the ship’s seaworthiness and unsuitability to stow cargo. PIL shall not bear the loss of tax refund that Changyi Yuanxiang claimed. Under Article 55 of Maritime Code, the amount of indemnity for the loss of the goods by PIL should be limited to the actual value of the goods so lost. The claim for the loss of the tax refund of Changyi Yuanxiang was neither based in law nor in fact. In conclusion, the appeal lodged by Changyi Yuanxiang was inadmissible. The Appellant, PIL, refused to accept the judgment of first instance and appealed for the following reasons: 1. The original judgment confirmed that the intermediate bulkhead between holds No. 3 and No. 4 was not watertight, which contradicted the facts. (1) Under Article 47 of the Maritime Code, the ship’s seaworthiness extended to include the vessel’s equipment, the competency of the master and crew, and cargo-worthiness of the vessel. The original judgment decided the ship was seaworthy but found that hold No. 4 was not suitable to stow cargo and therefore contradicted itself. (2) There were no facts that show hold No. 4 bulkhead was not watertight before and at the beginning of the voyage. The original judgment affirmed that the Cargo Ship Safety Construction Certificate, before and at the beginning of the voyage, was still within the original period of validity. In the line with the provisions of the Convention, the certificate was the prima facie evidence to prove acceptable water-tightness of hold No. 4. The vessel involved held the Exit Permit of Ships of International Voyage issued by Guangzhou Maritime Bureau, and the certificate’s issuance was premised on the ship in a state of seaworthiness and suitable cargo stowage. (3) Striking the reef not only caused sea water to entered into holds No. 2 and No. 3 directly, but also damaged the intermediate bulkhead between holds No. 3 and No. 4, thus, hold No. 4 was flooded. The original judgment determined sea water came into hold No. 4 about 1 h and 13 min after accidentally striking a rock. According to the damage statement of the accident investigation report made by Guangdong Maritime Safety Administration as well as the General Arrangement Plan of the vessel provided by PIL, the location of the damaged frame No. 132 was the corresponding position of the intermediate bulkhead between holds No. 3 and No. 4. Yet the original judgment, in the case of confirming the above facts, ruled that there was no evidence to prove the accident caused damage to the intermediate bulkhead between holds No. 3 and No. 4, which was self-contradictory. The diving report, and the project completion statement of COSCO (Guangdong) Shipyard Co., Ltd. that PIL submitted, corresponded with the accident investigation report. The accident investigation report showed that the intermediate bulkhead between holds No. 3 and No. 4 were severely damaged and that both the bulkhead and watertight board had been repaired.

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(4) The original judgment identified the intermediate bulkhead between holds No. 3 and No. 4 was not watertight only by following Article 214 of Summary of Salvage, which had no basis. The salvor made statements approximately one month after the accident. He outlined that, prior to August 3, 2010, there was water penetration between two holds due to the accident which caused damage to the bulkhead. Additionally, the discharge and salvage operation itself would cause certain influence to the bulkhead. The salvor simply stated the water of hold No. 3 by means of the bulkhead infiltrated into hold No. 4. The salvor did not elaborate on when the sea water entered the hold and why there was flooding from the bulkhead. The fact that the water in hold No. 4 flooded in via the bulkhead of hold No. 3 could not be deduced from the information at hand. Additionally, it could not be determined that the bulkhead of hold No. 4 of the vessel involved was not watertight before and at the beginning of the voyage. (5) The damage to the goods of hold No. 4 was directly caused by the stranding accident. After the stranding accident, holds No. 1 through 5 of the vessel were submerged in water. As indicated by the facts which were affirmed by the original judgment, sea water entered hold No. 4 in a short time. The accident investigation report specified the hatch coaming and hatch cover of holds No. 1–4 were damaged or deformed. Therefore, there must be sea water immerging into the interior hold No. 4 from the broken hatch cover. From the above facts, sea water entered the hold No. 4 in a short time after running aground. Sea water also came into the interior hold No. 4 from the broken hatch cover, which was the direct cause of the damage to the goods of hold No. 4. 2. The court of first instance was incorrect when it held that the issuance of the extended statements made by Nippon kaiji kyokai were without a related inspection. (1) The accident investigation report did not mention the inspection of the ship by Nippon Kaiji Kyokai. Yet, it confirmed the ship’s certificates would expire on August 29, 2010. As a result, the report acknowledged that the inspection was real and valid. Otherwise, the report would have concluded that the ship’s certificates shall be valid until the date of the original record dated on June 29, 2010. (2) PIL had submitted the inspection records of Nippon Kaiji Kyokai to prove, when issuing the extended statements, that Nippon Kaiji Kyokai inspected the vessel on June 14, 2010. PIL had overcome various difficulties to submit the original record of notarized certification. The court of court of first instance refused to accept it, which ultimately lead to the false determination of the facts in this case. 3. The original court did not deal with the supplementary evidence of PIL in accordance with legal procedures. The copy inspection records of Nippon Kaiji Kyokai was submitted by PIL to the court of first instance within the time limit for

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adducing evidence. The contents of the evidence had a significant effect on the case ruling. The court of first instance, after receiving the original copy of evidence which had been notarized, still did not confirm its authenticity. PIL, failing to provide the original copy before the expiration of the period for adducing evidence, did not perform intentional misconduct or act grossly negligent. Therefore, because the evidence had a significant impact on the outcome of the ruling, the court should again designate the time limit for adducing evidence. The court of first instance should reorganize the cross-examination for this evidence, and should explain whether to adopt the evidence and outline the reasons. 4. The damage to the goods of holds No. 3 and 4 were caused by accidentally striking the reef. PIL exercised due diligence to make the ship seaworthy and suitable to stow cargo. Therefore, PIL should be entitled to escape liability for negligence in navigation of the ship. 5. There were problems with the identification of the evidence by the court of first instance. The court of first instance made a differential solution between the evidence submitted separately by PIL and Changyi Yuanxiang. They did not set a unified standard on the evidence submitted by PIL. Moreover, the burden of proof on ship seaworthiness which was declared by the court of first instance for the PIL was unfair. Yet, even on the basis of the current evidence identified by the court of first instance, it was sufficient to make the factual identification that the ship was seaworthy, suitable to stow cargo, and that the intermediate bulkhead between holds No. 3 and No. 4 was damaged in the accident. In conclusion, the Appellant PIL requested thin court of second instance should revoke the first item in the judgment of first instance and reject all the claims of Changyi Yuanxiang. Changyi Yuanxiang responded to the appeal of PIL as follows: 1. The expiration of the ship’s certificates could prove the unseaworthiness of the vessel. Yet, the ship’s certificates were within the period of validity. This did not necessarily mean the vessel was seaworthy. In practice, there were many cases in which, although the ship’s certificates were valid, the court still held that the vessels were unseaworthy. 2. PIL had no evidence to prove the damage to the intermediate bulkhead between holds No. 3 and No. 4 were caused by the accident. It was possible that the seawater entering into hold No. 4 was due to the inherent defects and that the bulkhead was not watertight. Seawater came into hold No. 4 about 1 h and 13 min after striking a rock and triggered the alarm, which showed the damage to the bulkhead was not directly caused by the accident. The damage to the vessel described in the accident investigation report and quoted from the assessment report issued by Japan NK classification society on September 30, 2010, was not identified by Guangdong Maritime Safety Administration.

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3. The extended statements had no authenticity and validity. The identification of the valid period ship’s certificates by the accident investigation report was based on the false materials the shipowner provided. 4. The determination of ship’s seaworthiness by the court of first instance was made by a reasonable comparison that combined the strength of evidence on both sides. 5. PIL’s statement and assumption that as long as the maritime authority found no unseaworthiness condition, this meant that the vessel was seaworthy, was incorrect. In summary, the appeal grounds of PIL could not be established. The Defendant in the first instance, PIL China, argued that the concerned bill of landing was not issued by PIL China. Therefore, PIL China, who was not the shipowner of the vessel concerned, had no connection to the damage to the goods involved and should not assume liability to pay compensation. During the trial of second instance, PIL provided three evidence (the original by notarization & authentication) to the court in favor of its claims that: the inspection records and both the declaration and the assessment report of Nippon Kaiji Kyokai. The inspection records and declaration report were to prove Nippon Kaiji Kyokai made the inspection of the ship on June 13 and 14 2010 before it issued the extended statements. The inspection results showed all the bilges in the holds near the hull remained watertight and not flooded with water. The extended statements issued by Nippon Kaiji Kyokai were with the authorization of the flag state government. The assessment report was to prove that the stranding accident caused damage to the vessel. The double bottom of hold No. 4 and the intermediate bulkhead between holds No. 3 and No. 4 were damaged by the accident. Hereto, by cross-examination, the Appellant, Changyi Yuanxiang, had no objection to the authenticity of the inspection records and the declaration report. Yet, Changyi Yuanxiang reasoned the contents of two evidence could not achieve the aims of proof. The inspection records dated May 10, 2013, were inconsistent with the time of inspection that PIL stated. The inspection records and declaration could only show the bilge remained watertight but had nothing to do with the situation of the controversial bulkhead. It also showed that the survey violated the relevant provisions of the convention. Changyi Yuanxiang accepted the authenticity of the declaration report of Nippon Kaiji Kyokai, but additionally argued that the declaration was also in violation of the provisions of the convention. PIL China had no objection in the probative force of the aforementioned evidence. The court of second instance held the three copies of the evidence were real. The closing date of the inspection records, May 10, 2013, which was printed onto it at the time of going through the formalities of notarization & authentication for the evidence, had nothing to do with the inspection date. The inspection records and declaration could prove Nippon Kaiji Kyokai had performed boarding inspection on June 13 and 14, 2010. The contents of the assessment report reflected the specific condition of damage to the ship involved.

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After the trial, the court of second instance found out that Nippon Kaiji Kyokai, authorized by the flag state government of Singapore Maritime and Port Authority, conducted boarding inspections on June 13 and 14, 2010, to extend the certificate validity of ship involved. On September 25, 2012, Sanjie Company, according to the Captain’s protest of the vessel involved, the survey report provided by the shipowner, and the salvage operation summary (namely the aforementioned summary of salvage) etc., issued the technical consultation report. The report, within the statement of facts, outlined the cause of the seawater entering the holds No. 4 and No. 5. Hold No. 4 flooded with water because the watertight subdivision bulkhead between hold No. 3 and No. 4 existed and there were watertight defects in advance which led to seawater leakage from hold No. 3 to No. 4. The report also stated there were a series of defects. The bulkhead did not meet the requirements of watertight integrity on the bulkheads of the cabin hold. Thus after holds No. 2 and No. 3 were flooded by running aground, the seawater through the watertight defects on the bulkheads expanded into other holds. This caused the container cargo stowed in the other holds to be flooded and damaged. Finally, the report concluded that the stranding and accidental striking of rocks did not directly cause holds No. 4 and No. 5 to break and flood. Yet, the containers loaded in the holds No. 4 and No. 5 should not have been damaged due to the watertight defects on the bulkhead between hold No. 3 and No. 4. When the soaking of hold No. 3 achieved the defect position, the water of hold No. 3 via the defect flooded into hold No. 4. This caused the containers of hold No. 4 to be flooded and the goods were damaged. On February 5, 2013, Sanjie Company, according to the accident investigation report obtained by the court of first instance, VDR, diving report, and pictures, etc., provided by the shipowner, made the technical consulting report (complementary report). The report also made the conclusion that the intermediate bulkhead between holds No. 3 and No. 4 of the vessel involved was not watertight before and at the beginning of the voyage. Other facts found by the court of first instance were in accordance with those affirmed by the judgment of first instance. The court of second instance held that this case was the dispute over contract of carriage of goods by sea. The court of first instance, based on the choice of two parties, applied to the laws of the People’s Republic of China to hear this case, complying with the law. The court of second instance confirmed the case should apply to the laws of the People’s Republic of China as the applicable law to deal with disputes. The principal outstanding issues revolve around the following points: 1. whether PIL before and at the beginning of the voyage made the ship seaworthy; 2. whether PIL should assume compensation liability for the cargo loss of Changyi Yuanxiang; 3. whether PIL should bear responsibility, whether it should compensate Changyi Yuanxiang for the loss of the tax refund. With respect to whether PIL before and at the beginning of the voyage made the ship seaworthy. The accident investigation report specified the vessel set sail at 2342 h, on June 29, 2010. At that time, the vessel was still within the period of validity of certificates. The several valid ship’s certificates were the prima facie

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evidence to prove the soundness of the equipment of the vessel. Changyi Yuanxiang failed to submit evidence to prove the equipment was not perfect. Accordingly, the court identified PIL, before and at the beginning of the voyage, had properly equipped the ship. At the same time, the accident investigation report also stated the condition of manning and certification complied with the requirements of the Minimum Safe Manning Document. Therefore, the number of the crew members equipped to man the vessel met the needs of navigation operation. The holding certificates of the crew members reflected that the crew members met the requirements of the minimum safe manning and acquired the special knowledge and skills for navigation. Therefore, PIL had properly manned the ship. With regard to the controversial problem between PIL and Changyi Yuanxiang, as to whether there were the watertight defects on the bulkhead between hold No. 3 and No. 4, namely whether the hold No. 4 was fit to carry the contemplated cargo, based on their respective claims, PIL and Changyi Yuanxiang had disagreements over the probative force of the summary of salvage, the technical consultation report, the complementary technical consulting report issued by Sanjie Company, the diving report, the project completion statement of COSCO Guangdong, the accident investigation report, the assessment report of Japan NK Classification Society, Cargo Ship Safety Construction Certificate, and Exit Permit of Ships of International Voyage. For the above evidence, the court found out that the summary of salvage filed by PIL specified the water of the hold No. 3 via the bulkhead had infiltrated into hold No. 4. As to why there was leakage on the bulkhead between hold No. 3 and No. 4 and when it was not watertight, the technical consultation report and the complementary technical consulting report of Sanjie Company submitted by Changyi Yuanxiang gave some analyses. The technical consultation report, mainly through the analysis of the key facts listed in the summary of salvage, concluded that the intermediate bulkhead between holds No. 3 and No. 4 of the vessel involved was not watertight before and at the beginning of the voyage. Then, according to the accident investigation report obtained by the court of first instance, VDR, the diving report, and pictures, etc. provided by the shipowner, Sanjie Company made the technical consulting report (complementary report). The report, through the analysis of the time, speed, and position that the cargo cabins, and the damage position of the vessel, etc., further demonstrated the water-tightness of the intermediate bulkhead between holds No. 3 and No. 4, and also analyzed the contents of the diving report and the project completion statement of COSCO Guangdong. The report said, even if the two pieces of evidence existed, PIL still could not eliminate the facts that there were the defects of water-tightness on the bulkhead between holds No. 3 and No. 4, then the supplementary report obtained the same conclusion with the technical consulting report. PIL did not provide the diving report and the project completion statement of COSCO Guangdong without the notarial certification and the original copy, which shall not be adopted by the court. The statements of the accident investigation report, on “the No. 115–179 frames of port side … and side shell plating and its internal structure were deformed,” quoted from the contents of assessment report

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issued by Japan NK classification society. The point of the frame No. 132 lied in the corresponding position of the intermediate bulkhead between holds No. 3 and No. 4. Whether the deformation of frame No. 132 of port side meant that the intermediate bulkhead between holds No. 3 and No. 4 was damaged by the grounding accident was not recognized by the accident investigation report. When Sanjie Company issued the technical consulting report (complementary report), it also referred to the contents of the accident investigation report. Therefore, it did not conclude the intermediate bulkhead between holds No. 3 and No. 4 was damaged by the grounding accident. Accordingly, the claim of PIL, that the intermediate bulkhead between holds No. 3 and No. 4 was damaged on the grounds that the structure of frame No. 132 was deformed, shall not be supported by the court. As to the grounds of the appeal of PIL that seawater immerged into the interior hold No. 4 from the hatch cover and the intermediate bulkhead between holds No. 3 and 4 was damaged by discharge and salvage operation was not proven by evidence, therefore the court of second instance should not sustain such a request. The two reports issued by Sanjie Company on the contents reflected there were the watertight defects on the bulkhead between hold No. 3 and No. 4 before and at the beginning of the voyage, and the hold No. 4 was not fit to carry the contemplated cargo. Although the consultant SUN Mingliang, etc. did not have the qualification of a registered surveyor, these two reports were both technical service reports instead of the expert opinion made by the accredited body the court entrusted for the professional issues. The evidence did not need the precondition that the appraiser should have a certain qualification. Additionally, the consultant, SUN Mingliang, was a senior engineer for ship survey. The other two consultants were also senior engineers for maritime affairs administration management. SUN Mingliang, in the first instance, appeared in court to accept the inquiries from the parties to the case. Therefore, the three consultants and other non-professional personnel were able to make a more accurate professional judgment for the facts of the vessel situations, therefore the two reports should be accepted by the court of second instance. Furthermore, the Cargo Ship Safety Construction Certificate and Exit Permit of Ships of International Voyage that PIL stated, were the prima facie evidence to prove the seaworthiness of the vessel. The court of second instance could not affirm the good water-tightness of hold No. 4 based only on these two certificates. Thus, Changyi Yuanxiang met its burden of proof to prove the bulkhead between hold No. 3 and No. 4 was not-watertight before and at the beginning of the voyage, the evidence provided by PIL was not sufficient to refute, therefore the court of second instance should not support PIL’s opinions. In conclusion, although PIL, before and at the beginning of the voyage, properly equipped and manned the ship, it did not exercise due diligence to make hold No. 4 fit to carry the contemplated cargo. As a result the vessel at hand was not in a state of seaworthiness. With respect to the second point, on the issue of whether PIL should assume compensation liability for the cargo loss of Changyi Yuanxiang. The damage to the

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goods of hold No. 3 were directly caused by the accidental striking of rocks. Therefore, liability belonged to the negligence in the navigation of the ship. PIL should not bear compensation liability for the cargo loss of hold No. 3. The damage to the goods of hold No. 4 was because the intermediate bulkhead between holds No. 3 and No. 4 was not watertight and the bulkhead was taking in water. PIL, before and at the beginning of the voyage, did not exercise due diligence to make hold No. 4 fit to carry the contemplated cargo and make the ship seaworthy. There was a cause-and-effect relationship between the damage to the goods and unseaworthiness. Therefore, it should be entitled to compensation by PIL. Hence it was clearly correct for the original court to compel PIL to compensate Changyi Yuanxiang for the value of goods in hold No. 4 and the corresponding freight. With respect to the third point, on the issue of whether the claim of Changyi Yuanxiang for the loss of the tax refund should be supported: since there was an established contract of carriage of goods by sea between Changyi Yuanxiang and PIL, the compensation responsibility of PIL should be subject to Article 55 of the Maritime Code of the People’s Republic of China. Therefore, the amount of indemnity for the loss of the goods should be calculated on the basis of the actual value of the goods lost. The actual value should be the value of the goods at the time of shipment plus insurance and freight. The claim of Changyi Yuanxiang for the loss of the tax refund was beyond the scope of the liability for compensation born by PIL. Accordingly, this ground of the appeal of Changyi Yuanxiang should not been sustained by the court of second instance. In conclusion, the appeals and grounds of the Appellants, Changyi Yuanxiang and PIL, lacked factual and legal basis and should be dismissed. The findings of fact by the court of first instance were clear, the laws applied were correct, and the result of judgment was correct. Pursuant to Article 170 Paragraph 1 Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment was as follows: dismiss the appeal and affirm the judgment of first instance. Court acceptance fee of second instance in amount of RMB62,888 yuan. 18,866 yuan should be born by Changyi Yuanxiang, 44,022 yuan should be born by PIL. PIL disagreed the judgment of second instance and applied for retrial to the Supreme People’s Court that, firstly, the court of second instance omitted important evidence during the hearing, namely the Japan Classification Society Inspection Record and statement from Japan NK Classification Society, the evidence was enough to prove that PIL checked the watertightness of the ship involved. Secondly, the court of second instance accepted the Technical Consultation Report (Supplementary Report) submitted by Changyi Yuanxiang, which was wrong application of law. Thirdly, the court of second instance improperly assigned the burden of proof of the parties, in the case where PIL initially provided evidence to prove the watertightness of the ship, Changyi Yuanxiang did not submit a counter-proof to prove its claim, so it should bear the corresponding legal responsibility. In conclusion, it required the court of retrial to find out the facts and change the judgment. The Respondent of Retrial Changyi Yuanxiang argued that, the parties in this case had no objection to the fact that the bulkhead between the holds No. 3 and

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No. 4 was not watertight, resulting in seawater entering the No. 4 hold from No. 3 hold. The issue of the case was whether the watertightness defect of the bulkhead between No. 3 and No. 4 holds was caused by the accident in this case. According to the law, if PIL claimed to be exempted from compensation, it should provide evidence to prove that there was a causal relationship between the accident and the watertightness defect of the bulkhead between No. 3 and 4 holds. Throughout the case, PIL did not complete the burden of proof, and the court of second instance ordered it to bear the liability for compensation, which was not inappropriate. During the hearing, Changyi Yuanxiang hired professionals to analyze and demonstrate the relevant materials of PIL to further confirm the legality of its rights, which further confirmed that PIL should bear the liability for compensation. In conclusion, the facts confirmed by the court of second instance were clear, and the application of law was correct, so it required the court of retrial to affirm the judgment of second instance. The Defendant of first instance PIL China argued that, it agreed with the claims of PIL. The facts found out by the court of retrial are the same as those confirmed by the court of second instance. The court of retrial holds that, the issue of the case is whether PIL’s voyage was cargowothy, namely whether the bulkhead between No. 3 and 4 holds of the cargo ship involved had watertight defects. The Maritime Code Article 51 stipulates that, the carrier shall not be liable for the loss of or damage to the goods occurred during the period of carrier’s responsibility arising or resulting from any of the following causes: (1) fault of the Master, crew members, pilot or servant of the carrier in the navigation or management of the ship; … the carrier who is entitled to exoneration from the liability for compensation as provided for in the preceding paragraph shall, with the exception of the causes given in sub-paragraph (2) bear the burden of proof. Combined with the facts of this case, if PIL claimed that it was not liable for the loss of Changyi Yuanxiang’s cargo, it should prove that the loss of No. 4 hold cargo was causally related to the accident, namely the water entering the bulkhead between No. 3 and 4 holds was caused by the accident in this case. From the existing evidence, PIL did not complete the burden of proof, for the following reasons: (1) PIL did not provide effective evidence to prove that the water inflow of No. 3 and 4 holds bulkhead was caused by the accident in this case. Whereas the fact that PIL was directly involved in the rescue and repair of the accident ship as a shipowner, it should fully grasp the status and causes of the damage to the ship. With such convenient conditions, PIL still had no direct evidence to prove that the water seepage in No. 3 and 4 holds bulkhead was caused by this accident. (2) There was no clear conclusion in the ship’s Accident Investigation Report that No. 4 hold was damaged due to the accident and seawater entered. (3) PIL did not provide evidence to prove that the bulkhead of No. 3 and 4 holds in the case involved were watertight before sailing. PIL’s main reason for the watertightness of No. 3 and 4 holds bulkhead was that the Japan Classification Society inspected the ships on June 13 and 14, 2010, in 2013, the Japan Classification Society Statement further confirmed that the inspections carried out on June 13 and 14, 2010, included

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general inspections of watertightness of bulkheads. The court holds that, the 2013 Japan Classification Society Statement was based on the Japan Classification Society Inspection Record on June 13 and 14, 2010, so the basis for analyzing the watertightness inspection of the bulkheads involved should be the Japan Classification Society Inspection Record The specific inspection items of this inspection record include the annual thorough inspection of Keling Crane and the inspection of the turbine project, but there was no watertightness inspection of the cargo hold bulkhead in the inspection details. The inspection was not filled in the inspection column specified in the certificate and the Incident Investigation Report did not confirm the situation of the inspection, the confirmation that PIL did not conduct bulkhead watertightness inspection on ship is correct. (4) Changyi Yuanxiang submitted the Technical Consultation Report and Technical Consultation Report (Supplementary Report) to support the cause of the damaged goods, in order to clarify the facts, the court of second instance combined the two reports to further analyze the responsibilities of PIL, which is not inappropriate. In conclusion, the court holds that, PIL did not complete the burden of proof provided by law, and its claim that Changyi Yuanxiang No. 4 hold should be exempted from liability for damages has insufficient evidence to prove, so the court does not support it. Pulling the threads together, the court holds that, the claims of PIL cannot be established, and the court does not support them. The facts confirmed by the court of second instance are clear, and the application of law is correct, which should be affirmed. According to the Civil Procedure Law of the People’s Republic of China Article 207 Paragraph 1, Article 170 Paragraph 1 Sub-paragraph 1, the judgment is as follows: Affirm the Shandong High People’s Court (2014) Lu Min Si Zhong Zi No. 27 Civil Judgment. The judgment is final. Presiding Judge: LI Xia Acting Judge: LIU Yang Acting Judge: CHAI Jiaxiang May 21, 2015 Clerk: TAO Xinzhi

Beihai Maritime Court Civil Judgment Chaozhou Asia–Pacific Energy Co., Ltd. v. Hua Yang International Marine Transportation Co., Ltd. et al. (2011) Hai Shang Chu Zi No. 76 Related Case(s) this is the judgment of first instance and the judgment of second instance is on page 199. Cause of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote shipowner held liable as actual carrier for seawater damage to a cargo of coal, although bill of lading was issued by a different party; court rejected the Defendants’ argument that seawater immersion had not caused any diminution in the market value of the coal, and awarded damages. Summary the First Defendant issued a Bill of Lading to the Plaintiff for carriage of a cargo of coal from South Africa to China on a ship owned by the Second Defendant, the actual carrier. The cargo was damaged by seawater during the carrying voyage, and the Plaintiff sued the contracting carrier, the actual carrier, and also the Third Defendant, an insurer that had issued a guarantee in relation to the incident. The Court held that the Second Defendant was the carrier even though it had time-chartered the ship to another person who was not party to this litigation, and that it was responsible for the damage, because it had failed to exercise due diligence in relation to the unseaworthiness of the carrying ship. Although the First Defendant had issued and signed the bill of lading, it was not the carrier because it had issued the bill of lading as agent for the master and not as an independent carrier. The Third Defendant was jointly and severally liable with the Second Defendant because of its guarantee undertaking. The court rejected the Defendants’ argument that immersion in seawater had not caused a devaluation in the market value of the coal and awarded damages.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_6

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Judgment The Plaintiff: Chaozhou Asia–Pacific Energy Co., Ltd. Domicile: East Side of Xinjing Road and Gangxi Road, Jingzhou, Raoping, Chaozhou City, Guangdong Province. Legal representative: LIN Jiwang, chairman of the board. Agents ad litem: HUANG Zhuo and XU Han, lawyers of Guangdong Zhengda United Law Office. The Defendant: Hua Yang International Marine Transportation Co., Ltd. Domicile: Room1401, World Commerce Centre Harbor City, 7-11 Guangdong Road, Tsim Sha Tsui, Kowloon, Hong Kong. Legal representative: LV Sujun, director. The Defendant: Grand Wide Shipping Co., Ltd. Domicile: Sea Centre Harbor City, 5 Guangdong Road, Tsim Sha Tsui, Kowloon, Hong Kong. Legal representative: LV Sujun, director. The Defendant: People’s Insurance Company of China Jiangsu Branch Domicile: Insurance Building, No. 69 changjiang Road, Nanjing City, Jiangsu Province. Person in charge: HUA Shan, general manager. Agents ad litem of the above three Defendants: SHEN Ke and GUAN Baiqiu, lawyers of Shanghai Simeng Law Office. With respect to the case arising from dispute over contract of carriage of goods by sea filed by the Plaintiff Chaozhou Asia–pacific Energy Co., Ltd. against the Defendants, Hua Yang International Marine Transportation Co., Ltd. (hereinafter referred to as “Huayang Company”), Grand Wide Shipping Co., Ltd. (hereinafter referred to as “Grand Wide”), People’s Insurance Company of China Jiangsu Branch (hereinafter referred to as “PICC Jiangsu”), the court organized the collegiate panel in accordance with the law after accepting this case on June 7, 2011. Huayang Company and Grand Wide challenged the jurisdiction in the defense period. Since this issue refers to confirmation of the effect of a foreign-related arbitration clause, in accordance to Article 1 of the Notice of the Supreme People’s Court on How People’s Court to Manage the Issues Related to Foreign-related Arbitration and Foreign Arbitration, the court reported to the Guangxi Zhuang Autonomous Region High People’s Court (hereinafter referred to as “Guangxi High Court”) to review and decide. Through the review of the Supreme People’s Court, Guangxi High Court replied to the court and held thin court had jurisdiction on July 24, 2012. The court hereby rejected the challenge to the jurisdiction on August 20, 2012 and heard this case in public on October 31. HUANG Zhuo and XU Han, agents ad litem of the Plaintiff, and SHEN Ke, agent ad litem of the three Defendants, appeared in court and participated in the action. The case has been concluded.

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The Plaintiff alleged that on May 18, 2010, the Plaintiff purchased bituminous coal from South Africa and transported from the port of Richards Bay in South Africa to the Fangchenggang in China by M.V. “GOLDEN HUAXI” owned by Huayang Company. Grand Wide issued the bill of lading, which showed that weight of cargo on board was 142,578 tons. Grand Wide was the carrier and Huayang Company was the actual carrier. On August 16, after the ship arrived at the Fangchenggang, the Plaintiff found the amount of goods were short and damaged. The logbook recorded that the damage of goods was due to the seawater entering cargo holds caused by the leakage of a drain pipe in the front top side hold. On August 20, the Defendant PICC Jiangsu issued a guarantee to the Plaintiff for this accident, of which the amount was RMB2.4 million. However, the three Defendants had so far refused to indemnify the Plaintiff. To protect its legal interest, the Plaintiff requested the court to adjudge the three Defendants to be jointly and severally liable to compensate for the loss of shortage of the goods, the loss of the damaged goods, the port operating costs, and the fee of surveying the residual, totaling RMB3,783,702.53, and the interest on overdue payment in an amount of RMB131,856.78 (interest should be calculated from August 17, 2010 to May 20, 2011 at the loan interest rate over the corresponding period, after that, the interest should be calculated to the date of actual payment), and bear the litigation fee for this case. Huayang Company and Grand Wide alleged that: (1) the coal would not have any substantial loss by virtue of sea water, therefore the Plaintiff’s claim that sea water led to the coal devaluation clearly violated scientific principle and lacked basis in reality. (2) According to the natural characteristic of coal, the shortage of the calorific value of coal had no link to sea water and the shortage was caused by the natural shortages of different coal batches or calorific value measuring deviation at best. Therefore, this case was essentially a dispute over the weight of coal and the shortage could not be the basis for the damage of the goods. (3) The coal sales contract between the Plaintiff and actual users reflected the normal deal specification and the price of coal at home and could not be direct evidence to confirm the loss. (4) In regard to the calorific value of the coal soaked by sea water, there were two shortage domestic test results. The survey of China Certification & Survey Group Guangxi Co., Ltd. (hereinafter referred to as “CCIC Guangxi”) was taken closer to the time of actual delivery, the use of coal and the result had higher accuracy and credibility, therefore the court should take priority over the test result to compare the sound goods with wetted goods in the measurement of calorific value. (5) According to the survey before and after the discharge of cargo by the People’s Republic of China Fang Cheng Gang Enter-Exit Survey and Quarantine Bureau (hereinafter referred to as “CIQ”), the amount of wetted goods was 14,032.42 tons. No matter if the Plaintiff claimed the loss of calorific value or the shortage of goods, the court should calculate on the basis of 14,032.42 tons. (6) The loss of calorific value that the Plaintiff claimed should be calculated in by means of the calorific value deviation ratio times CIF price of cargo, not including other taxes. (7) The shortage of goods that the Plaintiff claimed was a gross error and the actual shortage was very small. In addition, the shortage was within the range of

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reasonable loss as well as the measurement deviation. Therefore, the shortage of goods that the Plaintiff claimed should not be regarded as the loss of goods. (8) The port operating costs, the fee of checking residual, etc. that the Plaintiff claims are based on facts and the carrier agrees to compensate the Plaintiff. (9) The amount of compensation in the Maritime Code of China was restricted to the CIF price, not including any interest and the Plaintiff had no evidence to prove the increase of loan and loan interest caused by sea water, therefore the loss of interest that the Plaintiff claimed had no basis. Although Huayang Company was the owner of M.V. “GOLDEN HUAXI”, it signed the time charter party with the person not involved in the case and did not participate in the contract of carriage of goods by sea, therefore Huayang Company was only the vessel provider and was not be entrusted by others for the carriage of goods. Therefore, Huayang Company was neither the carrier, nor the actual carrier and should not undertake the compensation liability. Grand Wide had no relation with the contract of carriage of goods by sea and did not participate in the chartering, therefore it should not undertake the liability under the contract of carriage of goods by sea. Accordingly, Huayang Company and Grand Wide requested the court to reject the Plaintiff’s claims. The Defendant PICC Jiangsu agreed with the defense of Huayang Company and Grand Wide. In addition, the guarantee provided by PICC Jiangsu had not been established. Only through a valid legal instrument confirming the undertaking of civil liability by the shipowner did PICC Jiangsu have the obligation and responsibility for guarantee. At present, this case was still pending, therefore the liability of guarantee has not been confirmed. In addition, the question of the guarantee for potential liability had not been confirmed, therefore the Plaintiff was not entitled to compensation by PICC Jiangsu. Evidence materials provided by the Plaintiff to support its claims are as follows: 1. Sales contract and the amendment thereto, to prove that the Plaintiff imported 300,000 tons of bulk coal from South Africa; 2. Bill of lading, to prove that the Plaintiff, as the holder of the bill of lading, had the right to claim compensation and M.V. “GOLDEN HUAXI” loaded 142,578 tons of bulk coal from South Africa; 3. Invoice, to prove that the unit price of goods was 116.49 US$/ton (not including added value tax); 4. Certificate of Weight at the loading port, to prove that the amount of goods was 142,578 tons; 5. Certificate of Sampling and Analysis (loading port), to prove the weight of goods at the loading port and low order calorific value (NCV) was 6041 kcal/ kg; 6. Customs declaration, to prove that the goods were imported legitimately and the dollar was at 6.7802 against RMB; 7. Special payment book of import value-added tax, to prove that the Plaintiff paid 17% value-added tax for these goods and the actual unit price of goods was 924.10 RMB/ton (116.49  6.7802  1.17);

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8. Stowage plan, to prove the stowage situation of each M.V. “GOLDEN HUAXI”’s hold; 9. Temporary Survey Certificate of RINA, to prove that the holds of M.V. “GOLDEN HUAXI” were flooded during the voyage; 10. Logbook, to prove the same content of Evidence 9; 11. Certificate of Weight at the discharging port, to prove that the amount of discharging goods was 142,483.90 tons, which was 94.10 tons less than the amount recorded in the bill of lading at 142,578 tons; 12. Certificate of Weight at the discharging port, to prove the weight survey sampling result of the goods involved; 13. Survey certificate (checking residual), to prove that the moisture of the damaged goods was 10.9%, 3.67% higher than 7.23% at the loading port; the weight of the damaged goods declines and the basis low order calorific value of coal was 5699 kcal/kg, which was 342 kcal/kg less than 6041 kcal/kg at the loading port; it was the leakage of the water pipe in water ballast space that led to the damage of goods; 14. The chlorine ion test report made by Guangdong Institute of Analysis, to prove that the chlorine ion of wetted goods in hold No. 1 was nine times more than the normal coal; 15. Port operation contract, to prove that all-in port operating costs appointed by the Plaintiff and the Company of Fangchenggang was RMB 15/ton; 16. Port operation costs invoice, to prove that the Plaintiff paid additional port operation costs in amount of RMB21,546 (798.01 tons  27 RMB/ton) for the 798.01 ton loss goods; 17. Receipt of Entry Survey and Quarantine of CIQ, to prove that the Plaintiff paid a RMB 55,779 survey expense; 18. Letter of protest, to prove the situation of the damaged goods of each hold of the ship involved; 19. Guarantee, to prove that Jiangsu branch issued the Guarantee to the Plaintiff for this accident, the amount of the Guarantee was RMB2.4 million; 20. Purchase contract, to prove that the Plaintiff sold the damaged goods involved; 21. Water freight bill, to prove that the damaged goods were shipped from Fangchenggang by M.V. “ZHIHAI 5” and M.V. “JINLUN 9” three times; 22. Certificate of Weight, to prove low order calorific value (as received basis) of the damaged goods; 23. Survey report, to prove the reason of the accident involved, the amount of the damaged goods, and the rate and degree of depreciation; 24. Survey Certificate of Weight (discharging port), to prove that the amount of discharging goods was 142,483.90 tons, which was 94.10 tons less than the amount of bill of lading 142,578 tons; and 25. Certificate of Weight at the discharging port, to prove the weight of sampling goods involved. The three Defendants’ cross-examination opinions are as follows. Firstly, they raised no objection to the authenticity of Evidence 1–7 but held that the unit price

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115.70 US$/ton CFR appointed in the sales contract was aimed at the goods with a calorific value of 6000 kcal/kg. Secondly, this contract stipulated that the calorific value of the final accounts should be in accordance with the average of the calorific value measured at the loading port and the discharging port if the shortage between them was greater than 80 kcal/kg. Actually, the shortage between the 5835 kcal/kg measured at the discharging port and the 6041 kcal/kg measured at the loading port was greater than 80 kcal/kg, so the calorific value of the final accounts should be in accordance with the average value 5938 kcal/kg. Third, the unit price of goods in Evidence 3 was only the initial appointment and was not the final accounts. In addition, the Plaintiff did not provide any final accounting documents to confirm whether they were to conduct their task in accordance with the method stipulated to in the contract. Next, the three Defendants objected to the legality of Evidence 3–5, which should be notarized and authenticated, including the seal of bank. Fifth, the three Defendants had no objection to the authenticity of Evidence 8–13 and held that Evidence 12 was only the weight report of sound goods at the loading port, therefore, this case should use the date of the commodity survey bureau at the discharging port to compare the shortage of calorific value between sound goods and wetted goods. This was because the test standard of weight report for sound goods and wetted goods was different and Evidence 13 should be used to confirm the amount of wetted goods. Sixthly, the three Defendants objected to the authenticity of Evidence 14. Seventhly, the three Defendants had no objection to the authenticity of Evidence 15–17 and the rate of port operating costs in Evidence 15 but held that this case should calculate the amount of goods lost by sea water on the basis of Survey Certificate on Damaged Cargo. They accordingly objected to the relevancy of Evidence 17 because there was no evidence to prove the fees of Entry Survey and Quarantine of CIQ was caused by sea water. Eighthly, the three Defendants had no objection to the authenticity of Evidence 18, but only as it represented the Plaintiff’s unilateral declarations. Ninthly, the three Defendants had no objection to the authenticity of Evidence 19, but the establishment of assured responsibility was conditional. Tenthly, the three Defendants had no objection to the authenticity of Evidence 20–22, but held that the four domestic coal purchase contracts are the normal coal purchase contracts instead of a discount contract for the wetted goods; Eleventhly, the three Defendants had no objection to the authenticity of Evidence 23 but objected to the determination for loss. Lastly, the three Defendants had no objection to the authenticity, the legality, and the relevancy of Evidence 24 and 25. Evidence materials provided by Huayang Company, Grand Wide, and PICC Jiangsu to support 6 their arguments are as follows: 1. Survey report, to prove that the broken drain-pipe caused water to enter hold No. 1 and that the situation of water entry in hold No. 2 was not serious because it was an indirect water entry; the coal therein was insoluble in water, meaning the sea water did not damage the coal. The coal was not damaged or short in quantity. Also, to prove that the amount of wetted goods was 14,023.41 tons but a small amount of wetted goods might be mixed with sound goods. In other

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words, the wetted goods did not influence the sound goods because the amount of sound goods was very large; 2. Hydraulic-washing system description of the coal yard, to prove that the coal was stored and shipped in the open and did not fear the rain. In addition, the coal needs frequent artificial sprinkling, implying that water was necessary for the coal and would not cause any damage to the coal; 3. GB Technical specifications of coal water mixture, to prove that the coal had the character of being water-fast. In recent years, the new technology of coal water mixture had been developed and it was convenient to ship, store, and use the coal when the water content of coal was over 30%; 4. Time charter party, to prove that Huayang Company, as the owner of the ship, had signed the time charter with a person not involved in the case and knew little about the voyage charter, therefore Huayang Company was only the vessel provider and was not entrusted by others for the carriage of goods. Therefore, Huayang Company was neither the carrier, nor the actual carrier. The Plaintiff’s cross-examination opinions are as follows: the Plaintiff had no objection to the authenticity of Evidence 1 but asserted that the surveyor did not appear in court to accept the interpretation and that this report’s estimation of the amount of wetted goods in hold No. 2 was too low. In addition, the conclusion of investigation that sea water had a little influence on calorific value of goods was wrong. The Plaintiff had no objection to the authenticity of Evidence 2 but argued that it could not show that the coal did not fear the rain. The indoor storage cost was high, therefore the coal could be stored in the open without conditions. However this could not show that the coal did not fear the rain. The purpose of the sprinkling was to prevent dust rising from the coal instead of directly watering the coal. The Plaintiff had no objection to the authenticity of Evidence 3 but asserted that the Defendant ignored that the technology of coal water mixture needed to consider the proportion and additives. Evidence 4 was not the original copy, so its authenticity could not be confirmed. The court’s opinions are that: Huayang Company, Grand Wide, and PICC Jiangsu had no objection to the authenticity of Evidence 1–13 or 15–25. The court adopts them as the basis to confirm the case facts, as well as to examine and confirm the controversial content regarding the details of the case and all evidence. The three Defendants objected to the form legality of Evidence 3–5 because they were not notarized. The court holds that although the invoice, Certificate of Weight, and Certificate of Sampling and Analysis was formed in China, 7 according to the payment way of letter of credit, the Plaintiff should pay the issuing bank for the documents since it had finished the customs declaration and transfer of import goods. Evidence 3–5 are copies and had the seal for business of CCB Raoping branch, meaning they ultimately were formed in China. Therefore the invoice, Certificate of Weight, and Certificate of Sampling and Analysis do not need to be notarized because they had been examined and circulated by the banks involved under the letter of credit, the three Defendants had confirmed the authenticity of their content, and the copies provided by the Plaintiff as evidence had been sealed

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and confirmed by domestic bank. Accordingly, the court has no objection to the legality. The three Defendants objected to the authenticity of Evidence 14, but did not provide counter evidence to overturn the conclusion of this test report. In addition, Evidence 23 provided by the Plaintiff confirmed Evidence 14, therefore the court adopts it as the basis to confirm the case facts. The Plaintiff had no objection to the authenticity of Evidence 1–3 provided by the three Defendants and the court adopted them as the basis to confirm the case facts. Additionally the court examined and confirmed the controversial content with the details of the case and all evidence. The Plaintiff had no objection to the authenticity of Evidence 4, the court admitted the authenticity thereof and examined and confirmed the content and relevancy with the details of the case and all evidence. The court hereby ascertains the following facts through investigation: On May 18, 2010, the Plaintiff signed the coal sales contract with BULK TRADING S.A. (Swiss) and both sides modified part of the contract terms. The main content of this contract was that: the Plaintiff purchased South Africa steam coal from BULK TRADING S.A., the foundation unit price was 115.70 US $/tons CFR Fangchenggang, invoice unit price was 115.70 US$/tons  actual low order calorific value (as received basis)/6000 kcal/kg. The mode of payment was letter of credit. The goods standard was ISO standard, the standard index of total moisture (as received basis) was 7%-10%, rejection standard was over 13%, the standard index of low order calorific value (as received basis) was 6000–6080 kcal/ kg, rejection standard was below 5750 kcal/kg. The buyer could question the weight of the coal arriving at the discharging port on the basis of Certificate of Weight at the discharging port. Carrying ship M.V. “GOLDEN HUAXI” loaded the coal under the contract at the port of Richards Bay in South Africa. During the loading process, the loading port surveyor, South Africa Yinkelai Service Company, conducted the draft survey and sampling survey for the goods on board Certificate of Weight showed that the draft survey was 142,578 tons. Certificate of Sampling and Analysis showed that the total moisture (as received basis) was 7.23% (on the basis of ISO589- B2), low order calorific value (as received basis) was 6041 kcal/kg (on the basis of ISO1928). Grand Wide issued the bill of lading after loading, which showed that the carrier was XSTRATA COAL MARKETING AG instead of BULK TRADING S.A. The consignee was to order, the notify party was the Plaintiff, the goods were bituminous coal in bulk from South Africa, the amount of the coal was 142,578 tons, the discharging port was the Fangchenggang in China, clean on board, the apparent condition of the goods loaded was in order. The freight was paid according to the contract. The signatory was Grand Wide, who was the agent of captain YAORENFU of M.V. “GOLDEN HUAXI”. The stowage plan of this vessel showed that the amount of goods in hold No. 1 was 13,244 tons, 16,599 tons in hold No. 2, 16,003 tons in hold No. 7. The invoice issued by BULK TRADING S.A. showed that the invoice unit price was 116.40 US$/ton on the basis of the calculation method appointed by the contract, the total price of goods was 16,608,911.22/US$. On the way to Singapore, M.V. “GOLDEN HUAXI” encountered the bad weather of a force 8–9 gale from July 22–28, 2010. The ship pitched on the sea and

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the seawater flooded the stem, the deck, and the hatchway cover. The maximum sounding value is No. 1P at 12.12 m and No. 2P at 6.97 m, measured on August 2. On August 9, the ship arrived in Singapore and RINA classification society arrived on board to inspect. Temporary Survey Certificate on Hold issued by RINA classification society recorded that: “The captain reported that the maximum immersed depth of hold No. 1 was 12 m and hold No. 1 was 6.6 m on the way from the port of Richards Bay to Singapore. According to the diving report submitted by the divers, the leakage of the drain pipe in the front of No. 1 top side hold caused the sea water to enter hold No. 1. It was suspected that the reason the sea water entered the hold No. 2 was through the sewage pipe, the sea water in hold No. 1 entered the hold No. 2.” On August 16, the ship arrived at the Fangchenggang in China and called at #20 berth to discharge the goods. Fangchenggang CIQ conducted the draft survey (fore draft). On this day, the consignee found the goods in hold No. 1 to be clearly soaked and requested the goods in hold No. 1 to be discharged and stored separately. The discharge of the goods in hold No. 1 stopped and the discharge from hold No. 2–9 began. On August 17, the ship moved to #19 berth to discharge starting with hold No. 1 with its contents to be stored separately. Fangchenggang CIQ conducted the separate sampling survey for the goods in hold No. 1. The goods in hold No. 2–9 were stored together. On August 18, the consignee found that the middle-level of hold No. 2 had a lot of sea water which leaked from the shore tackle grab when the grab seized the goods in hold No. 2. There was still no way to store these goods separately because of the lack of a terminal storage yard On August 19, as the representative of the cargo insurer, the surveyor, the representative of Shipowner Guangdong Hengzhun Insurance Survey Co., Ltd. (hereinafter referred to as “Hengzhun Company”), and the surveyor, the representative of charterer Guangdong Haizheng Insurance Survey Co., Ltd. (hereinafter referred to as “Haizheng Company”), conducted the joint survey for the goods in hold No. 1 and 2 and sealed the samples on the spot. On the same day, the ballast water in hold No. 7 flooded and wet the surplus goods because the exploring tube had a hole formed from rust. On August 20, the ship completed the discharge. Finally, Fangchenggang CIQ finished the draft survey and issued Survey Certificate of Weight which showed that the amount of discharging goods was 142,483.90 tons. It completed the sampling survey for the whole goods on board, including wetted goods, and issued Certificate of Weight which shows that the total moisture (as received basis) was 8.33%, the low order calorific value (as received basis) was 5835 kcal/kg according to GB/T212-2008, GB/T213-2008 and so on. It completed the survey for the goods in hold No. 1 and issued Survey Certificate on Damaged Cargo which shows that the actual weight was 14,023.42 tons, the total moisture was 10.9%, the low order calorific value (as received basis) was 5699 kcal/kg, and the fee 9 of checking residual was RMB55,779. Afterwards, Hengzhun Company and Haizheng Company both made Survey Report agreeing that: (1) the weight of the damaged goods in hold No. 1 was 13,244 tons, the weight of the damaged goods in hold No. 7 was about 200 tons. The reason that the partial goods were damaged was that through the sewage pipe or the crack in the clapboard, the sea water in hold No. 1 entered hold No. 2. However, there were some disputes about

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the weight of the damaged goods in hold No. 2. Hengzhun Company asserted that 50% of the goods were damaged while Haizheng Company asserted that 20% of the goods were damaged. The Plaintiff’s declaration unit price was the invoice unit price issued by BULK TRADING S.A., 116.5 US$/ton. The gross price was 16,608,911.22 US$ and was equivalent to RMB112,647,300 according to the exchange rate of RMB against U.S. dollar at 6.78:1. Therefore, the Plaintiff paid the import value-added tax RMB19,150,041 according to the 17% tax rate to Fangchenggang. All in-port operating costs for involved goods at RMB3,847,065.30 (unit price was RMB 27/ton) to the Company of Fangchenggang (including the operating costs corresponding to the goods lost). The fee of checking residual was RMB55,779 to Fangchenggang CIQ. On September 20, Hengzhun Company sent the sampling of wetted goods in hold No. 1 and normal sampling in hold No. 3–9 sealed by the relevant surveyor to Guangdong Institute of Analysis to inspect the chlorine ion. The analysis result showed that the chlorine ion of sea water coal was more than nine times that of normal coal. On August 19, 2010, the Plaintiff made a letter of protest to the captain to explain the situation of damage which the captain signed and sealed. In addition, the captain specified that: “the pollution or damage of the goods will be confirmed in accordance with the survey report of Protection and Indemnity Club and the seal only confirms the receipt”. On August 20, the Defendant PICC Jiangsu issued the guarantee to the Plaintiff and was willing to undertake no more than RMB2.4 million worth of responsibility for warranty. Such an agreement was confirmed by the written agreement of the cargo owner and the shipowner or the effective judgment. PICC Jiangsu would pay if the Plaintiff submitted the written application and the guarantee would be effective until the case concludes. In addition, PICC Jiangsu confirmed that Huayang Company, as the shipowner, clearly told him that this ship was not active in its bareboat charter period. The shipowner or administrator agreed to apply Chinese law for this claim and Beihai Maritime Court had the exclusive jurisdiction for this case. On October 12, the Plaintiff signed four identical purchase contracts with Sinopec International Guangdong Co., Ltd. (hereinafter referred to as Sinopec), which stipulated that: Sinopec purchased 5000 tons of South African bituminous coal (four contracts was 20,000 tons), the cost standard was the low order calorific value 5900 kcal/kg, the benchmark price was RMB826/ ton, the settlement price would be adjusted in accordance with the proportion of actual low order calorific value and 5900 kcal/kg. On October 20, M.V. “ZHIHAI 5” shipped 8607.82 tons coal consigned by the Plaintiff from Fangchenggang to Sinopec and CCIC Guangxi issued Certificate of Weight which showed that: the total moisture was 10.25%, the low order calorific value (as received basis) was 5725 kcal/kg. On October 21, M.V. “JINLUN 9” shipped 4930.16 tons coal consigned by the Plaintiff from Fangchenggang to Sinopec and CCIC Guangxi issued Certificate of Weight which showed that: the total moisture was 9.60%, the low order calorific value (as received 10 basis) was 5766 kcal/kg. On October 29, M.V. “JINLUN 5” shipped 8520.70 tons of coal consigned by the Plaintiff from Fangchenggang to Sinopec and CCIC Guangxi issued Certificate of Weight which

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showed that: the total moisture was 8.29% and the low order calorific value (as received basis) was 5795 kcal/kg. There were two types of survey standard for the coal: ISO standard and GB standard. The survey standard of total moisture was ISO589, which corresponded to GB/T211-2007. The survey standard of calorific value was ISO1928, which corresponded to GB/T213-2008. Huayang Company was the shipowner of M.V. “GOLDEN HUAX” and signed the time charter party with BUNGE SA, GENEVA on June 9, which stipulated that the charter period was 60 days from the delivery of this ship. According to the shipping practice in the international trade, the allowable measurement error for the shipment of bulk cargo was usually 5%. According to Article 8 of Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China, “Lex fori shall apply to the determination on the nature of foreign-related civil relations.” The Plaintiff sued for the damage of its goods in terms of the bill of lading, therefore this case is a dispute over the contract of carriage of goods by sea. The Plaintiff and the Defendants agreed to apply Chinese law to try this case. In addition, according to Article 269 of the Maritime Code of the People’s Republic of China (hereinafter referred to as the Maritime Code) “the parties to a contract may choose the law applicable to such contract,” making the applicable law of this case Chinese law. Synthesizing the opinions of the Plaintiff and the Defendants, the issues are that: (1) whether the three Defendants should bear the compensation liability for the Plaintiff’s loss; (2) how to confirm the loss of the Plaintiff. 1. Whether the three Defendants should bear the compensation liability for the Plaintiff’s loss: The Plaintiff argued that Grand Wide was the carrier, Huayang Company was the actual carrier, PICC Jiangsu was the guarantee for the compensation and they should all undertake joint liability for the loss of the Plaintiff. Huayang Company argued that although Huayang Company was the owner of M. V. “GOLDEN HUAXI”, it only signed the time charter with the person not involved in the case and did not participate in the contract of carriage of goods by sea, making Huayang Company only the vessel provider not to be sub-entrusted by others for the carriage of goods. Therefore, Huayang Company was neither the carrier nor the actual carrier and did not undertake the compensation liability. Grand Wide asserted that it had no relation to the contract of carriage of goods by sea and did not participate in the chartering of the ship, therefore it should not undertake the liability under the contract of carriage of goods by sea. The Defendant PICC Jiangsu argued that the guarantee provided by PICC Jiangsu was not established. Only through the valid legal instrument to confirm that the shipowner must undertake civil liability did PICC Jiangsu had obligations for guarantee and responsibilities. At present, this case was still in the course of legal proceedings, meaning the liability of guarantee had not been confirmed. In addition, whether or not the guarantee rejected to perform potential liability had not been confirmed, therefore the Plaintiff had no right to request for PICC Jiangsu to bear the compensation liability.

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The court holds that according to Article 42 Paragraph 4 of the Maritime Code of the People’s Republic of China: “Consignee” means the person who is entitled to take delivery of the goods. The Plaintiff finalized this deal with CFR terms as the purchaser. He is the notifier shown in the bill of lading involved and has the right to take the delivery of goods from the carrier by the original bill of lading received through the payment for letter of credit. Accordingly, the Plaintiff is the consignee. According to Article 78 Paragraph 1 of the Maritime Code of the People’s Republic of China, the relationship between the carrier and the holder of the bill of lading with respect to their rights and obligations shall be defined by the clauses of the bill of lading. The consignee can claim rights as carrier on the basis of the bill of lading, including the right to claim for compensation to the carrier when the goods suffer loss or damage during the period of the carrier’s responsibility. The bill of lading was issued by Grand Wide who is the agent of the captain. The Plaintiff, as the consignee, only can use the bill of lading to recognize the carrier when the bill of lading is transferred to him because he is not the shipper entering into the carriage contract under CFR terms. According to Article 71 of the Maritime Code of the People’s Republic of China: A bill of lading is a document which serves as evidence of the contract of carriage of goods by sea and the taking over or loading of the goods by the carrier, based on which the carrier undertakes to deliver the goods against surrendering the same. A provision in the document stating that the goods are to be delivered to the order of a named person, or to order, or to bearer, constitutes such an undertaking. If the issuer cannot prove the name of the proxied carrier to the bill of lading issued by the agent of captain, the shipowner will be confirmed as the primary carrier unless the shipowner can prove that there exists the true carrier in defense. For this case, Huayang Company as the shipowner and Grand Wide as the issuer did not claim or prove that there exists a true carrier in defense and did not deny the authorization authenticity of the involved bill of lading. Additionally, a bill of lading signed by the agent of the captain is deemed to have been signed by the captain. According to Article 72 Paragraph 2 of the Maritime Code of the People’s Republic of China, the bill of lading may be signed by a person authorized by the carrier. A bill of lading signed by the Master of the ship carrying the goods is deemed to have been signed on behalf of the carrier. Huayang Company should be deemed as the carrier. As for the arguments of Huayang Company: it signed the time charter with a person not involved in the case. He did not participate in the contract of carriage of goods by sea nor was he to be sub-entrusted by others. The court holds that the Plaintiff as the consignee did not and should not know the situation of ship chartering or the carriage contract. Only through the bill of lading could he confirm the carrier, meaning Huayang Company could not confront the Plaintiff’s claims with the reason that it is not a party to the carriage contract. According to Article 46 Paragraph 1 of the Maritime Code of the People’s Republic of China: the responsibilities of the carrier with regard to the goods carried in containers covers the entire period during which the carrier is in charge of the goods, starting from the time the carrier has taken over the goods at the port of loading, until the goods have been delivered at the port of discharge. The

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responsibility of the carrier with respect to non-containerized goods covers the period during which the carrier is in charge of the goods, starting from the time of loading of the goods onto the ship until the time the goods are discharged therefrom. During the period the carrier is in charge of the goods, the carrier shall be liable for the loss of or damage to the goods, except as otherwise provided for in this Section. The involved goods were noncontainerized goods and the sea water loss in holds No. 1, 2, and 7 occurred in transit and before the discharging, therefore the loss occurred during the period the carrier had responsibility. According to Article 47 of the Maritime Code of the People’s Republic of China: the carrier shall, before and at the beginning of the voyage, exercise due diligence to make the ship seaworthy, properly man, equip and supply the ship, and to make the holds, refrigerating and cool chambers, and all other parts of the ship in which goods are carried, fit and safe for their reception, carriage and preservation. Huayang Company, as the carrier, has the duty to exercise due diligence to make the ship seaworthy. However, these goods were damaged because of the construction defect of the drain piping, blow-off pipe, hold clapboard, and the exploring tube of ballast hold. Huayang Company did not prove that it had exercised due diligence to make the ship seaworthy and properly make the ship cargo worthy. Also, it did not prove that the loss of goods was caused by any of the reasons for which the carrier shall not be liable. Therefore, Huayang Company should be responsible for the loss of and damage to the goods. According to Article 42 Paragraph 2 of the Maritime Code of the People’s Republic of China: “Actual carrier” means the person to whom the performance of the carriage of goods, or of part of the carriage, has been entrusted by the carrier, and includes any other person to whom such performance has been entrusted under a sub-contract. The Plaintiff alleged that Grand Wide was the carrier and Huayang Company was the actual carrier, meaning he needed to prove that Grand Wide signed the carriage contract with the shipper and entrusted the carriage to Huayang Company. However, the Plaintiff neither proved that Grand Wide was a party to the carriage contract, nor proved that Grand Wide entrusted the carriage to Huayang Company. Besides, Huayang Company and Grand Wide did not recognize these facts. Meanwhile, from the identified facts, Grand Wide issued the bill of lading just as the agent of captain instead of the independent carrier. Therefore, the court holds that: the Plaintiff’s claim should not be adopted for having no factual basis. Grand Wide was not the carrier of the involved goods and did not need to undertake the responsibility of carrier. The Defendant PICC Jiangsu unilaterally issued a guarantee, of which the limit was RMB2.4 million, to the Plaintiff and to which the Plaintiff did not raise any objection. According to Article 22 Paragraph 1 of Interpretations of the Supreme People’s Court on the Application of the Guaranty Law of the People’s Republic of China: a third party unilaterally issues the guarantee in written to the creditor and the contract of guaranty will be established if the creditor accepts it and does not raise any objection. The contract of guaranty was established and created a guarantee effectiveness when PICC Jiangsu issued the guarantee to the Plaintiff. From the content of this guarantee, PICC Jiangsu, did not indicate that the suretyship

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mode was the general suretyship, or in other words, that the surety shall undertake suretyship liability in case the debtor defaults. Rather, it indicated that only after the confirmation of debt could the Plaintiff apply for the payment of guarantee. According to Article 19 of the Guaranty Law of the People’s Republic of China (hereinafter referred to as the “Guaranty Law”): in the absence of an agreed or explicitly agreed mode of suretyship, the parties shall bear the suretyship liability following the mode of a suretyship of joint and several liability. PICC Jiangsu should accordingly undertake the joint and several suretyship liability. Therefore, the court holds that PICC Jiangsu had indicated that it was willing to undertake the suretyship liability regarding the compensation for damage of involved goods and confirmed a maximum amount of the guarantee. Whether the compensation amount was confirmed did not influence the effect of the joint and several suretyship liability. According to Article 18 Paragraph 2 of the Guaranty Law of the People’s Republic of China: Where the debtor of a suretyship of joint and several liability defaults at the time when the time limit for his performance of the obligation provided in the principal contract expires, the creditor may demand that the debtor perform his obligation, or demand that the surety undertake the suretyship liability within the scope of the suretyship agreement. Additionally, Article 26: where the surety of a suretyship of joint and several liability and the creditor have no agreement on the term of suretyship, the creditor shall, within six months from the date of maturity of the principal debts, have the right to demand that the surety undertake suretyship liability. The Plaintiff claimed the compensation liability against the carrier along with the suretyship liability to PICC Jiangsu. Therefore, the claim that PICC Jiangsu should undertake the suretyship of joint and several liability within the scope of the suretyship agreement was with lawfully recognized evidence and should be supported by the court. 2. How to identify the loss of the Plaintiff: The Plaintiff argued that the loss of this sea water accident was the loss from goods shortage, the loss from the damage of the goods, the port operating costs, and the fee of checking residual for a total of RMB3,783,702.53 and the interest on overdue payments (interest should be calculated at the loan interest rate over the correspondent period of bank from August 17, 2010). The Defendants, Huayang Company, Grand Wide, and PICC Jiangsu, argued that the claims of the Plaintiff, loss of goods shortage and the loss of coal devaluation, lacked basis in reality, but for the port operating costs, the fee of checking residual, the Defendants agreed to compensate the Plaintiff. The loss of interest also lacked basis in reality. The court holds that the Plaintiff had a legitimate right to claim the loss of this accident. The loss included the loss of goods shortage, the loss of calorific value decline, the loss of chloride ion increase, the port operating costs, the fee of checking residual and the loss of interest for delayed compensation. The court confirms that the amount of wetted goods in hold No. 1 and No. 7 was 13,244 tons and 200 tons because both parties had no objection. Although Survey Certificate (checking residual) made by Fangchenggang CIQ showed that the amount of wetted goods in hold No. 1 was 14,023.42 tons (which was not the same

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as the stowage situation at the loading port) the measurement mode of Survey Certificate (checking residual) was to weigh with a platform scale, which was not the same as the stowage mode weighing by estimating. Accordingly there exists a measuring error. In addition, all the goods in hold No. 1 suffered seawater immersion, so it is reasonable that the weight of discharged goods was more than the goods that did not suffer seawater immersion at the loading port. Therefore, the Defendants’ opinion that the weight of sea water was 14,023.42 tons as stated in Survey Certificate (checking residual) lacked basis in reality and was not supported by the court. The wetted goods in hold No. 2 were not stored separately, so there was no effective way to measure the weight. Besides, the Survey Report of Hengzhun Company and Haizheng Company was in the way of estimation, leading to both sides having a great dispute. Therefore, the court confirmed it comprehensively by considering the following factors: the maximum depth of the bilge well, the maximum submerged depth of the hold, exposure of the place to water and whether the sound goods and wetted goods were discharged separately. According to the logbook, survey report, and two Survey Reports, the maximum depth of bilge well and the maximum submerged depth of the hold were both more than half of the depth of hold No. 1 and the location where water was found was in the middlelevel of the hold. In addition, the goods in hold No. 2 could not be discharged and stored separately for objective reasons and the sound goods were inevitable to be mixed with the wetted goods. Therefore, the court holds that it was reasonable to confirm that the weight of sea water in hold No. 2 was 8300 tons (16,599 tons/2), half of the stowage weight. In conclusion, the weight of wetted goods is 21,744 tons (13,244 tons + 8300 tons + 200 tons). As to the calculation method of the loss of goods, compensation for damages, and the real value of goods, according to Article 55 Paragraph 1 of the Maritime Code of the People’s Republic of China: the amount of indemnity for the loss of the goods shall be calculated on the basis of the actual value of the goods so lost, while the amount for the damage to the goods shall be calculated on the basis of the shortage between the values of the goods before and after the damage, or on the basis of the expenses for the repair and Paragraph 2: The actual value shall be the value of the goods at the time of shipment plus insurance and freight, the real value of sound goods should be confirmed on the basis of the CIF price at the loading port and hereby calculated the compensation for loss of goods (shortage of goods); the real value of the damaged goods should be confirmed on the basis of the CIF price, which was confirmed as the sound goods at the loading port and hereby calculated the real value’s gap before and after the damage. In other words, calculated the compensation for loss of goods. Therefore, according to the law, the carrier’s compensation for the loss of and damage to the goods was limited to the CIF price of the damaged goods, not including the value-added tax on imports undertaken by the consignee and the market price, the actual sales status in consignee host country. The Plaintiff did not prove that he paid the insurance expense, therefore it adopts the CFR price at the loading port. However according to the sales contract, the Plaintiff had the right to question the weight of the coal on the basis of the Certificate of Weight at the discharging port and then adjust the unit price. The

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contract between the Defendants, Grand Wide, Huayang Company, and the Plaintiff was the contract of carriage of goods by sea, meaning that the Plaintiff violating the agreement of the sales contract or giving up some contract rights could not be the two Defendants’ defenses unless they could prove that the Plaintiff adjusted the unit price when he actually paid the price of goods. Besides, as a result of the CFR terms, the risk of transit shall be born by the buyer (the plaintiff). As to the wet damage of the goods caused by the reason of the carrier, the plaintiff could only request the carrier to take responsibility and could not thereby question the weight of goods to the seller. Therefore, the Plaintiff paid the issuing bank for the documents, declared to customs on the basis of the invoice unit price, and paid value-added tax on imports. Therefore, the court holds that the real value of the sound goods should be calculated by the invoice unit price U.S. dollars 116.49/ton, which is equal to RMB789.8/ton (U. S. dollars116.49/ton  6.78). As to the compensation amount for the loss of goods, firstly, it was the shortage reflected by the draft survey. According to the survey certificate of the draft survey issued by Fangchenggang CIQ, the amount of discharging goods of M.V. “GOLDEN HUAXI” is 142,483.90 tons, which is 94.10 tons less than the amount of bill of lading’s 142,578 tons. According to the shipping practice in the international trade, the allowable measurement error for the shipment of bulk cargo is usually 5%. The allowable measurement error of draft survey for the whole of the goods is 712.89 tons (142,578 tons  5%), meaning the shortage of 94.10 tons is allowable and the carrier need not indemnify. Secondly, it was the shortage caused by the increase of total moisture. The survey standard of total moisture of Fangchenggang CIQ is GB/T211-2007, which corresponds to the survey standard of total moisture of loading port ISO589. Therefore, they had no shortage. Besides, the Plaintiff had the right to question the weight of the coal on the basis of CIQ’s result. Thus, the Defendants’ opinion that Fangchenggang CIQ’s survey results could not compare with the survey results of the loading port will not be adopted by the court. Meanwhile, Certificate of Weight of 142,578 tons of goods made by Fangchenggang CIQ was for all of the samples in all 9 holds, including sound goods and the damaged goods, meaning the result was comprehensive. Therefore, the Defendants’ opinion that the weight survey result of 142,578 tons of goods made by Fangchenggang CIQ for the sound goods will not be adopted by the court. According to the survey certificate (checking residual), the total moisture (as received basis) of wetted goods in hold No. 1 was 10.9%. The court finds that this could be regarded as the total moisture (as received basis) of all the wetted goods, which was 3.67% more than the total moisture (as received basis) of loading port 7.23% (10.9–7.23%). The Survey report of Hengzhun Company and the Defendants’ defense both asserted that extra water of goods was equal to the shortage of goods, so the shortage amount of 21,744 tons sea water coal caused by 3.67% excess moisture was 798 tons (21,744 tons  3.67%). Therefore, according to the above-mentioned unit price of sound goods of RMB789.80/ton, the compensation amount for the loss of goods was RMB630,260.40 (798 tons  RMB789.80/ton).

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Next, the compensation amount for the devaluation of the market price caused by the decline of the low order calorific value (as received basis) will be discussed. From the type of pricing of the involved goods in international trade and domestic trade, the low order calorific value (as received basis) of coal is the key factor to decide the market price and the actual price is adjusted on the basis of the proportion of the actual low order calorific value (as received basis) of the coal and the low order calorific value (as received basis) appointed by the contract. Although the water cannot produce a chemical reaction with the coal is immersed in seawater, this cannot lead to the change of the coal’s molecular structure. The increase of extra income will absorb part heat when measuring the calorific value and lead to the decline of the low order calorific value (as received basis), thus influencing the market price of the coal and leading to the devaluation objectively. Therefore, although the seawater immersion cannot lead to the change of coal’s molecular structure, it has direct contact with the devaluation of market price. Accordingly, the Defendants’ defense that the increase of moisture could not lead to the damage of the goods’ value is not accepted by the court and we confirm that the involved goods had the loss of devaluation caused by the decline of the low order calorific value (as received basis). According to Article 55 Paragraph 1 and Paragraph 2 of the Maritime Code of the People’s Republic of China, the amount of the damaged goods was 21,744 tons and the real value in sound condition was RMB17,173,411.20 (21,744 tons  RMB789.80/ton). The real value of the damaged goods could be calculated by: USD115.70 (CFR price of sound goods at the loading port)/ton  actual low order calorific value (as received basis) 5699 kcal/ kg stated by the survey certificate (checking residual)/6000 kcal/kg. However, the Plaintiff sold these goods in succession two months later and the total moisture and low order calorific value had changed because the sea water coals were stored under the sunlight for a certain time which lead to the decline of extra income. Therefore the court adopted the result of Certificate of Weight when the Plaintiff resold and shipped the goods to calculate the real value of the damaged goods. However, this result could only objectively prove the weight of purely the damaged goods which were stored separately in hold No. 1 when they were shipped, but not the weight of other purely damaged goods because they were stored mixed with sound goods. The certificates of weight of two voyages of M.V. “ZHIHAI 5” and the one voyage of M.V. “JINLUN 5” stated that the total moisture was higher than or near the data of the comprehensive Certificate of Weight for the whole of the goods when they were discharged made by Fangchenggang CIQ and were below the data of checking residual for the goods in hold No. 1 made by Fangchenggang CIQ. Besides, the low order calorific value was both higher than the data of the checking residual and was below the data of the comprehensive Certificate of Weight for the all of the goods. Therefore, according to the known facts and daily rules of thumb, the court could presume that it was impossible that the goods carried on the two vessels were all the damaged goods, all sound goods, or a majority of sound goods. Thus, looking to common sense one must confirm that these goods were a mixture of the damaged goods and sound goods. The Plaintiff regarded the survey data of this mixture as the Certificate of Weight’s result of purely the damaged goods when they were

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transferred, and this claim was unfavorable to the Plaintiff because of some objective condition. However, the Plaintiff had the right to reasonably dispose his rights which did not contravene the law, therefore the court adopted the data. Accordingly, the court holds that this case should use the survey data of certificates of weight of the two voyages of M.V. “ZHIHAI 5” and the one voyage of M.V. “JINLUN 9” to confirm the ultimate damaging situation and real value. According to the formula mode of the CFR price at the loading port, on October 20, 2010, M. V. “ZHIHAI 5” shipped 8607.82 tons of coals consigned by the Plaintiff. The low order calorific value (as received basis) was 5725 kcal/kg, the CFR price of the same products was USD110.40/ton (USD115.70/ton  5725 kcal/kg/6000 kcal/ kg), which was equal to RMB748.51/ton (USD110.40/ton  6.78). The gap of real value between before and after this accident was RMB355,416.89 [(RMB789.80 / ton—RMB748.51/ton)  8607.82 tons]; On October 29, 2010, M.V. “ZHIHAI 5” shipped 8520.70 tons coals consigned by the Plaintiff. The low order calorific value (as received basis) was 5795 kcal/kg, the CFR price of the same products was USD111.75/ton (USD115.70/ton  5795 kcal/kg/6000 kcal/kg), which was equal to RMB757.67/ton (USD111.75/ton  6.78). The gap of real value between before and after this accident was RMB 273,770.09 [(RMB789.80 /ton–RMB757.67/ ton)  8520.70 tons]. On October 21, 2010, M.V. “JINLUN 9” shipped 4930.16 tons of coal consigned by the Plaintiff. The low order calorific value (as received basis) was 5766 kcal/kg, the CFR price of the same product was USD111.19/ton (USD115.70/ton  5766 kcal/kg/6000 kcal/kg), which was equal to RMB753.87/ ton(USD111.19 /ton  6.78). The Plaintiff claimed that 4615.48 tons of goods among them were damaged and that the gap of real value between before and after this accident was RMB165,834.20 [(RMB789.80/ton–RMB753.87 /ton) 8520.70 tons]. In conclusion, the gap of real value between before and after this accident for all the damaged goods was RMB795,021.18 (RMB355,416.89 + RMB273,770.09 + RMB165,834.20), thereby the court confirmed the compensation amount for the devaluation of the market price caused by the decline of the low order calorific value (as received basis). As to the loss of the increase of chloride ion, the court holds that: although the Plaintiff had proved that the chloride ion content of the wetted goods was apparently higher than the normal coal, this result of sampling survey was between the pure wetted goods and the sound goods. Nearly half of the wetted goods had been stored mixing with the sound goods. In addition, the Plaintiff failed to prove that all the wetted goods including the goods in hold No. 1, which were stored separately, were transported separate from other sound goods, meaning the result of the sampling survey could not reflect the goods’ situation when they were actually delivered to the buyer. Besides, the chloride ion content did not influence the price of coal and the Plaintiff did not prove that the higher chloride ion content caused the extra expense or loss to the Plaintiff or his buyer. Therefore, according to Article 2 of Some Provisions of the Supreme People’s Court on Evidence in Civil Procedures: the parties concerned shall be responsible for producing evidence to prove the facts on which their own allegations are based or the facts on which the allegations of the other party are refuted. Where any party produces evidence or

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evidence produced cannot support the facts on which the allegations are based, the party concerned that bears the burden of proof shall undertake unfavorable consequences. This claim lacks evidence and should be rejected by the court. As to the loss of the port operating costs, the fee for checking residual, and the interests for 18 overdue compensation, the court holds that: with respect to the loss of the port operating costs of RMB21,546 and the fee of checking residual RMB55,779 for the damaged goods, the Defendants agreed to indemnify the Plaintiff, therefore the court supports the Plaintiff’s claims. The Plaintiff claimed that the interests should be calculated at the loan interest rate over the correspondent period from the bank from August 17, 2010 (the following day the Defendants knew of the accident) to the date when the Defendants pay all the actual reparation. However, the Plaintiff did not prove the facts that the goods involved were transferred through bank loans and produced the loss of repayment, therefore the interests should be calculated at the deposit interest rate over the correspondent period from the bank from October 29, 2010, the date that all losses had been confirmed, and the start day of the last transferring voyage. To summarize, the court holds that the loss was during the period for which the carrier was responsible. Huayang Company as the carrier did not exercise due diligence to make the ship seaworthy. Also, the loss of goods was not caused by the reasons for which the carrier shall be exempt from liability, therefore he should be responsible for the loss of and damage to the goods. Grand Wide was not the party of the involved transport relationship and did not need to undertake the compensation liability of the carrier. PICC Jiangsu, as the guarantee of efficient suretyship of joint and several liability, should undertake the suretyship of joint and several liability because the loss of the Plaintiff did not go beyond the scope of the suretyship agreement. Besides, the three Defendants did not claim the package limitation of liability, so the loss of the Plaintiff was the loss of goods shortage of RMB630,260.40, the loss from devaluation of RMB795,021.18, the port operating costs of RMB21,546, the fee of checking residual of RMB55,779, for a total of RMB1,502,606.58 and the loss of corresponding interests. According to the Maritime Code of the People’s Republic of China Article 46 Paragraph 1, Article 55 Paragraph 1 and Paragraph 2, the Guaranty Law of the People’s Republic of China Article 18 Paragraph 2, Article 19, the Civil Procedure Law of the People’s Republic of China Article 64 Paragraph 1 that “a party shall have the responsibility to provide evidence in support of its own propositions”, the judgment is as follows: 1. The Defendant, Hua Yang International Marine Transportation Co., Ltd., shall indemnity the loss of the Plaintiff, Chaozhou Asia–pacific Energy Co., Ltd., RMB1,502,606.5 with interest (the interest shall be calculated at the deposit interest rate over the correspondent period from the bank from October 29, 2010 to the time of payment confirmed by this judgment);

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2. The Defendant, People’s Insurance Company of China Jiangsu Branch, shall undertake the supplementary liability for the loss and interest thereon to the Plaintiff, Chaozhou Asiapacific Energy Co., Ltd.; 3. Other claims of the Plaintiff, Chaozhou Asia–pacific Energy Co., Ltd., shall be rejected. Court acceptance fee in amount of RMB38,124, RMB22,874 shall be born by the Plaintiff, Chaozhou Asia–pacific Energy Co., Ltd., and RMB15, 250 by the Defendants, Hua Yang International Marine Transportation Co., Ltd. and People’s Insurance Company of China Jiangsu Branch. The Defendants shall pay the debt within 10 days after this Judgment takes effect and the interest on the debt for the delayed period shall be doubled. The creditor can apply for enforcement to the court within 2 years upon expiration of the time limit for payment designated by the effective judgment. In event of dissatisfaction with this judgment, the Plaintiff may, within 15 days upon service of this judgment, the Defendants, Hua Yang International Marine Transportation Co., Ltd. and Grand Wide Shipping Co., Ltd., may, within 30 days upon service of this judgment, the Defendant People’s Insurance Company of China Jiangsu Branch, may, within 15 days upon service of this judgment, submit an appeal to the court, with duplicates in terms of the number of the opposing parties, to lodge an appeal to the Guangxi Zhuang Autonomous Region High People’s Court and prepay the appeal fee within 7 days upon the expiration of time limit of filing an appeal (Payee: Guangxi Zhuang Autonomous Region High People’s Court; Number of Account: 20-017,301,040,003,777; Bank of Deposit: Agricultural Bank of China Nanning City Wanxiang Branch); otherwise, the appeal will be automatically withdrawn. Presiding Judge: HUANG Juxiu Acting Judge: HUANG Siqi Acting Judge: SU Bin December 20, 2013 Clerk: LI Yuhui

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Guangxi Zhuang Autonomous Region High People’s Court Chaozhou Asia–Pacific Energy Co., Ltd. v. Hua Yang International Marine Transportation Co., Ltd. et al. (2014) Gui Min Si Zhong Zi No. 44 Related Case(s) this is the judgment of second instance, and the judgment of first instance is on page 179. Cause of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote affirming lower court opinion that insurer was jointly and severally liable with actual carrier for seawater damage to a cargo of coal, and affirming lower court decision that immersion in seawater had caused diminution in value to the coal, so damages were awarded. Summary the court of first instance held that the owner of the ship GOLDEN HUAXI was liable to pay damages to the Plaintiff for seawater damage to a cargo of coal, and that the Appellant, an insurer that had issued a guarantee for the carrier’s liability, was jointly and severally liable. The court of first instance rejected the Defendants’ argument that immersion in seawater had not caused any diminution in market value of the coal. On appeal, the court held that the Appellant was liable on the guarantee, which had been adequately proven, and that the court of first instance had correctly calculated the diminution in the market price of the coal. The appeal was dismissed.

Judgment The Appellant (the Defendant of first instance): Hua Yang International Marine Transportation Co., Ltd. Domicile: Room 1401, Harbor City, World Trade Center, No. 7-11 Guangdong Road, Tsim Sha Tsui, Kowloon, Hongkong. Legal representative: LV Sujun, director.

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The Appellant (the Defendant of first instance): People’s Insurance Company of China Jiangsu Branch Domicile: Insurance Mansion, No. 69 Changjiang Road, Nanjing City, Jiangsu Province. Person in charge: HUA Shan, general manager. Joint Agent ad litem: SHEN Ke, lawyer of Simeng Law Firm. Joint Agent ad litem: GUAN Boqiu, lawyer of Simeng Law Firm. The Respondent (the Plaintiff of first instance): Chaozhou Asia-Pacific Energy Co., Ltd. Domicile: East Side of Xinjing Road and Gangxi Road, Jingzhou Raoping, Chaozhou City, Guangdong Province. Raoping County, Chaozhou City, Guangdong Province. Legal representative: LIN Jiwang, chairman of the board. Agent ad litem: HUANG Zhuo, lawyer of Guangdong Zhengda United Law Firm. Agent ad litem: XU Han, lawyer of Guangdong Zhengda United Law Firm. The Defendant of first instance: Grand Wide Shipping Co., Ltd. Domicile: Sea Centre Harbor City, 5 Guangdong Road, Tsim Sha Tsui, Kowloon, Hongkong. Legal representative: LV Sujun, director. Agent ad litem: SHEN Ke, lawyer of Simeng Law Firm. Agent ad litem: GUANG Boqiu, lawyer of Simeng Law Firm. The Appellants, Hua Yang International Marine Transportation Co., Ltd. (hereinafter referred to as “Huayang Company”) and Peoples PICC Jiangsu of China Jiangsu Branch (hereinafter referred to as “PICC Jiangsu”), disagreed with (2011) Hai Shang Chu Zi No. 76 Civil Judgment, which was rendered by Beihai Maritime Court, with respect to the case arising from a dispute over contract of the carriage of goods by sea, in which Chaozhou Asia Pacific Energy Co., Ltd. (hereinafter referred to as “Energy Company”) and Grand Wide Shipping Co., Ltd. (hereinafter referred to as “Grand Wide”) were involved, and appealed to the court. After accepting the case on June 3, 2014, the court formed a collegiate panel consisting of Judge TAN Qinghua, who acted as the presiding judge, Acting Judge BAI Shuyi, and Acting Judge WANG Yijun in accordance with the law and heard the case in public on July 7, 2014. HUANG Qiuyan was appointed as the clerk. SHEN Ke as the joint agent ad litem entrusted by the Appellants, Huayang Company and PICC Jiangsu and the Defendant in the first instance Grand Wide, and XU Han as agent ad litem entrusted by the Respondent, Energy Company, appeared in court and participated in the action. Now the case has been concluded. The court of first instance ascertained the following facts through investigation: On May 18, 2010, Energy Company signed the coal sales contract with BULK TRADING S.A. (Swiss) and both sides modified part of the contract terms. The main content of this contract was: Energy Company purchased South Africa steam coal from BULK TRADING S.A., the foundation unit price was 115.70 US $/tons CFR Fangchenggang, the invoice unit price was 115.70 US$/tons  actual

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low order calorific value (as received basis)/6000 kcal/kg. The method of payment was a letter of credit. The goods standard was ISO standard, the standard index of total moisture (as received basis) was 7–10%, the rejection standard was over 13%, the standard index of low order calorific value (as received basis) was 6000– 6080 kcal/kg, and the rejection standard was below 5750 kcal/kg. The buyer could question the weight of the coal arriving at the discharging port on the basis of the Certificate of Weight at the discharging port. Carrying ship M.V. “GOLDEN HUAXI” loaded the coal under the contract at the port of Richards Bay in South Africa. During the loading process, the loading port surveyor, South Africa Yinkelai Service Company, conducted the draft survey and sampling survey for the goods on board Certificate of Weight showed that draft survey was 142,578 tons, Certificate of Sampling and Analysis showed that the total moisture (as received basis) was 7.23% (on the basis of ISO589-B2), low order calorific value (as received basis) was 6041 kcal/kg (on the basis of ISO1928). Grand Wide issued the bill of lading after loading, which showed that the carrier was XSTRATA COAL MARKETING AG instead of BULK TRADING S.A. The consignee was to order, the notifying party was Energy Company, the goods were bituminous coal in bulk from South Africa, the amount of the coal was 142,578 tons, and the discharging port was Fangchenggang in China. The contract was for clean on board, the apparent condition of the goods loaded was in order, and the freight was paid according to the contract. The signatory was the Grand Wide who was the agent of captain YAORENFU of M.V. “GOLDEN HUAXI”. The stowage plan of this vessel showed that the amount of goods in hold No. 1 was 13,244 tons, in hold No. 2 was 16,599 tons, and in hold No. 7 was 16,003 tons. The invoice issued by BULK TRADING S.A. demonstrates that the invoice unit price was 116.40 US$/ ton on the basis of calculation method appointed by the contract. The total price of goods was 16,608,911.22 US$. On the way to Singapore, M.V. “GOLDEN HUAXI” encountered bad weather with gales of force 8–9 on July 22–28, 2010. The ship pitched on the sea and the seawater flooded the stem, the deck, and the hatchway cover. According to the logbook, the four bilge wells No. 1P&S and 2P&S endured exceptional conditions on July 25 to August 7 with the maximum sounding value of No. 1P = 12.12 m and No. 2P = 6.97 m measured on August 2. On August 9, this ship arrived in Singapore and RINA classification society attended on board to inspect. The Temporary Survey Certificate on Hold issued by RINA classification society recorded that: “The captain reported that the maximum immersed depth of hold No. 1 was 12 m while its measurement on the way from the port of Richards Bay to Singapore was 6.6 m. According to the diving report submitted by the divers, the leakage of a drainpipe in the front of the No. 1P top side hold caused that the sea water to enter hold No. 1. The reason that the sea water entered hold No. 2 was suspected to be through the sewage pipe, the sea water in hold No. 1 entered hold No. 2. On August 16, the ship arrived at the Fangchenggang in China and called at berth #20 to discharge the goods. Fangchenggang CIQ conducted the draft survey (fore draft). On this day, the consignee found the goods in hold No. 1 were soaked and requested the goods in hold No. 1 to be discharged and stored separately. The

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discharge of the goods in hold No. 1 stopped and the hold No. 2–9 started. On August 17, the ship moved to berth #19 to discharge beginning with hold No. 1 to be stored separately. Fangchenggang CIQ conducted the separate sampling survey for the goods in hold No. 1 and the goods in hold No. 2–9 were stored together. On August 18, the consignee found that the middle-level of the hold No. 2 contained a lot of sea water which had leaked from the shore tackle grab when the grab seized the goods in hold No. 2. There was still no way to store these goods separately because of the lack of a terminal storage yard On August 19, as the representative of the cargo insurer, the surveyor, the representative of Shipowner Guangdong Hengzhun Insurance Survey Co., Ltd. (hereinafter referred to as “Hengzhun Company”), the surveyor, and the representative of charterer Guangdong Haizheng Insurance Survey Co., Ltd. (hereinafter referred to as “Haizheng Company”), conducted the joint survey for the goods in hold No. 1 and 2 and sealed the samples on the spot. On the same date, the ballast water in hold No. 7 flooded and wet the surplus goods because the exploring tube had a rust hole. On August 20, the ship completed the discharge. Finally, Fangchenggang CIQ finished the draft survey and issued a Survey Certificate of Weight which demonstrated that the amount of discharging goods was 142,483.90 tons. It finished the sampling survey for the whole of the goods on board, including wetted goods, and issued the Certificate of Weight which demonstrated that the total moisture (as received basis) was 8.33%, the low order calorific value (as received basis) was 5835 kcal/kg according to GB/ T212-2008, GB/T213-2008, and so on. It finished the survey for the goods in hold No. 1 and issued the Survey Certificate on Damaged Cargo which demonstrated that the actual weight was 14,023.42 tons, the total moisture was 10.9%, the low order calorific value (as received basis) was 5699 kcal/kg, and the fee of checking residual was RMB 55,779. Afterwards, Hengzhun Company and Haizheng Company both made the Survey report agreeing that: (1) The weight of the damaged goods in hold No. 1 was 13,244 tons and the weight of the damaged goods in hold No. 7 was about 200 tons. The reason that the partial goods were damaged was that through the sewage pipe or the crack of clapboard, the sea water in hold No. 1 entered the hold No. 2. However, there were some disputes regarding the weight of the damaged goods in hold No. 2. Hengzhun Company asserted that 50% of the goods were damaged while Haizheng Company argued that 20% of the goods were damaged. Energy Company’s declaration unit price was the invoice unit price issued by BULK TRADING S.A., 116.5 US$/tons. The gross price was 16,608,911.22 US$ and was equivalent to RMB112,647,300 according to the then exchange rate of RMB against U.S. dollar 6.78:1. Therefore, Energy Company paid the import value-added tax of RMB19,150,041 according to the 17% tax rate to Fangchenggang. All-in port operating costs for the involved goods was RMB 3,847,065.30 (unit price was RMB 27/ton) to the Company of Fangchenggang (including the operating costs corresponding the goods lost). The fee for checking residual RMB 55,779 to Fangchenggang CIQ. On September 20, Hengzhun Company sent the sampling of wetted goods in hold No. 1 and a normal sampling from hold No. 3–9, sealed by the relevant surveyor to Guangdong Institute of

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Analysis to inspect the chlorine ion. The analysis result demonstrated that the chlorine ion of the sea water coal was more than nine times the normal coal. On August 19, 2010, Energy Company submitted a letter of protest to the captain to explain the situation of damage and the caption signed and sealed. In addition, the caption specified that: “the pollution or damage of the goods will be confirmed in accordance with the survey report of Protection and Indemnity Club. The seal only confirms the receipt”. On August 20, PICC Jiangsu issued the guarantee to Energy Company and was willing to undertake no more than RMB 2.4 million worth of responsibility for warranty, which confirmed by the written agreement of the cargo owner and the shipowner or the effective judgment. PICC Jiangsu would pay if Energy Company submits the written application and the guarantee would be effective until the case concludes. In addition, PICC Jiangsu confirmed that Huayang Company, as the shipowner, clearly told him that this ship was not currently in its bareboat charter period, the shipowner or administrator agreed to apply Chinese law for this claim, and that Beihai maritime court had the exclusive jurisdiction for this case. On October 12, Energy Company signed four identical purchase contracts with Sinopec International Guangdong Co., Ltd. (hereinafter referred to as Sinopec), which stipulated that: Sinopec purchased 5000 tons of South Africould bituminous coal (four contracts totaled 20,000 tons), the costing standard was the low order calorific value of 5900 kcal/kg, the benchmark price was RMB826/ton, and the settlement price would be adjusted in accordance to the proportion of the actual low order calorific value of 5900 kcal/kg. On October 20, M.V. “ZHIHAI 5” shipped 8607.82 tons of coal consigned by Energy Company from Fangchenggang to Sinopec and CCIC Guangxi issued the Certificate of Weight, showing that: the total moisture was 10.25% and the low order calorific value (as received basis) was 5725 kcal/kg. On October 21, M.V. “JINLUN 9” shipped 4930.16 tons of coal consigned by Energy Company from Fangchenggang to Sinopec and CCIC Guangxi issued the Certificate of Weight, showing that: the total moisture was 9.60% and the low order calorific value (as received basis) was 5766 kcal/kg. On October 29, M.V. “JINLUN 5” shipped 8520.70 tons of coal consigned by Energy Company from Fangchenggang to Sinopec and CCIC Guangxi issued the Certificate of Weight, showing that: the total moisture was 8.29% and the low order calorific value (as received basis) was 5795 kcal/kg. There were two types of survey standards for the coal: ISO standard and GB standard. The survey standard of total moisture was ISO589, which corresponds to GB/T211-2007. The survey standard of calorific value was ISO1928, which corresponds to GB/T213-2008. Huayang Company was the shipowner of M.V. “GOLDEN HUAX” and signed the time charter party with BUNGE SA, GENEVA on June 9, which stipulated that the charter period was 60 days from the delivery of this ship. According to the shipping practice in the international trade, the allowable measurement error for the shipment of bulk cargo was typically 5%. According to Article 8 of Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China “Lex fori should apply to the determination on the nature of foreign-related civil relations”. Energy Company sued for damage of goods in terms of the bill of lading, meaning this case was a

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dispute over the contract of carriage of goods by sea. Energy Company agreed to apply Chinese law to try this case. In addition, according to Article 269 of the Maritime Code of the People’s Republic of China (hereinafter referred to as the Maritime Code) “the parties to a contract may choose the law applicable to such contract”, so the applicable law of this case was Chinese law. Synthesizing the opinions of Energy Company and the Defendants of first instance, the issues of dispute were that: (1) whether the three Defendants of first instance should bear the compensation liability for Energy Company’s loss; (2) how to confirm the loss of Energy Company. 1. Whether the three Defendants of first instance should bear the compensation liability for Energy Company’s loss: Energy Company argued that Grand Wide was the carrier, Huayang Company was the actual carrier, PICC Jiangsu was the guarantee for the compensation, and that they should undertake joint liability for the loss of Energy Company. Huayang Company countered that although it was the owner of M.V. “GOLDEN HUAXI” it only signed the time charter with the person not involved in the case and did not participate in the contract of carriage of goods by sea, therefore Huayang Company was only the vessel provider and was not to be sub-contracted by others for the carriage of goods. Accordingly, Huayang Company was neither the carrier, nor the actual carrier and do not assume the compensation liability. Grand Wide countered that he has no relation with the contract of carriage of goods by sea and does not participate in the ship chartering, therefore he should not assume the liability under the contract of carriage of goods by sea. PICC Jiangsu countered that the guarantee provided by PICC Jiangsu did not establish liability. Only through the valid legal instrument to confirm does the shipowner need to undertake civil liability. PICC Jiangsu had obligations for guarantee and responsibilities. At present, this case is still in the course of legal proceeding, so the liability of guarantee has not been confirmed. In addition, whether or not the guarantee rejects to perform potential liability has not been confirmed, therefore Energy Company had no right to request PICC Jiangsu to bear the compensation liability. The court of first instance held that according to Article 42 Paragraph 4 of the Maritime Code of the People’s Republic of China: “Consignee” means the person who was entitled to take delivery of the goods. Energy Company finalized this deal with CFR terms as the purchaser. He was the notifier showed in the bill of lading involved and has the right to take delivery of goods from the carrier by the original bill of lading, received through the payment for letter of credit, making Energy Company the consignee. According to Article 78 Paragraph 1 of the Maritime Code of the People’s Republic of China: the relationship between the carrier and the holder of the bill of lading with respect to their rights and obligations should be defined by the clauses of the bill of lading. The consignee could claim rights to the carrier on the basis of the bill of lading, including the right to claim for compensation to the carrier when the goods incurred loss or damage during the period of the carrier’s responsibility. The bill of lading was issued by Grand Wide, who was

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the agent of the captain. Energy Company, as the consignee, could only use the bill of lading to recognize the carrier when the bill of lading was transferred to him because he was not the shipper entering into the carriage contract under CFR terms. According to Article 71 of the Maritime Code of the People’s Republic of China: A bill of lading is a document which serves as evidence of the contract of carriage of goods by sea and the taking over or loading of the goods by the carrier, based on which the carrier undertakes to deliver the goods against surrendering the same. A provision in the document stating that the goods were to be delivered to the order of a named person, or to order, or to bearer, constitutes such an undertaking. If the issuer could not prove the name of proxied carrier to the bill of lading issued by the agent of captain, the shipowner would be confirmed as the primary carrier unless the shipowner could prove that there exists the true carrier in defense. For this case, Huayang Company as the shipowner and the issuer Grand Wide did not claim or prove that there exists the true carrier in defense and did not deny the authorization authenticity of the involved bill of lading as well as a bill of lading signed by the agent of captain which was deemed to have been signed by the captain. According to Article 72 Paragraph 2 of the Maritime Code of the People’s Republic of China, the bill of lading may be signed by a person authorized by the carrier. A bill of lading signed by the Master of the ship carrying the goods was deemed to have been signed on behalf of the carrier, Huayang Company should therefore be deemed as the carrier. For the arguments of Huayang Company: it had signed the time charter with the person not involved in the case and it did not participate in the contract of carriage of goods by sea, nor was it to be sub-contracted by others. The court of first instance held that Energy Company as the consignee did not and should not know the situation of ship chartering or carriage contract and it only could, through the bill of lading, confirm the carrier. Therefore Huayang Company could not confront Energy Company’s claims with the reason that it was not a party to the carriage contract. According to Article 46 Paragraph 1 of the Maritime Code of the People’s Republic of China: the responsibilities of the carrier with regard to the goods carried in containers covers the entire period during which the carrier was in charge of the goods, starting from the time the carrier has taken over the goods at the port of loading, until the goods have been delivered at the port of discharge. The responsibility of the carrier with respect to non-containerized goods covers the period during which the carrier was in charge of the goods, starting from the time of loading of the goods onto the ship until the time the goods were discharged therefrom. During the period the carrier was in charge of the goods, the carrier should be liable for the loss of or damage to the goods, except as otherwise provided for in this Section, the involved goods were non-containerized goods and the loss caused by sea water in holds No. 1, 2, and 7 occurred in transit and before discharge, making the loss during the responsibilities period of the carrier. According to Article 47 of the Maritime Code of the People’s Republic of China: the carrier should, before and at the beginning of the voyage, exercise due diligence to make the ship seaworthy, properly man, equip and supply the ship, and to make the hold, refrigerating and cool chambers, and all other parts of the ship in which

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goods were carried, fit and safe for their reception, carriage, and preservation. Huayang Company, as the carrier, had the duty to exercise due diligence to make the ship seaworthy. However, these goods were damaged because of the construction defects of the drain piping, blow-off pipe, hold clapboard, and the exploring tube of the ballast hold, by the Huayang Company. Huayang Company did not prove that it had exercised due diligence to make the ship seaworthy and properly make the ship cargo worthy. Also, Huayang Company did not prove that the loss of goods was caused by the exceptions for which the carrier should not be held liable. Therefore, Huayang Company should be responsible for the loss of and damage to the goods. According to Article 42 Paragraph 2 of the Maritime Code of the People’s Republic of China: “Actual carrier” means the person to whom the performance of the carriage of goods, or of part of the carriage, has been entrusted by the carrier, and includes any other person to whom such performance has been entrusted under a sub-contract. Energy Company argued that Grand Wide was the carrier and Huayang Company was the actual carrier, therefore it needed to prove that Grand Wide signed the carriage contract with the shipper and entrusted the carriage to Huayang Company. However, Energy Company neither proved that Grand Wide was a party to the carriage contract, nor did it prove that Grand Wide entrusted the carriage to Huayang Company. Moreover, Huayang Company and Grand Wide did not recognize these facts. Meanwhile, from the identified facts, Grand Wide issued the bill of lading as the agent of captain instead of the independent carrier. Therefore, the court of first instance held that: Energy Company’s claim should not be adopted for having no factual basis. Grand Wide was not the carrier of the involved goods and did not need to undertake the responsibility of carrier. PICC Jiangsu unilaterally issued a guarantee, which the limit was RMB2.4 million, to Energy Company and Energy Company did not raise any objection. According to Article 22 Paragraph 1 of Interpretations of the Supreme People’s Court on the Application of the Guaranty Law of the People’s Republic of China: a third party unilaterally issues the guarantee in written to the creditor and the contract of guarantee would be established if the creditor accepts it and does not raise any objection. The contract of guarantee was established and created guarantee effectiveness when PICC Jiangsu issued the guarantee to Energy Company. From the content of this guarantee, PICC Jiangsu did not indicate the suretyship mode was the general suretyship, which was that the surety should undertake suretyship liability in case the debtor defaults, but indicated that only after the confirmation of debt could Energy Company apply for the payment of guarantee. According to Article 19 of the Guaranty Law of the People’s Republic of China (hereinafter referred to as “Guaranty Law”): In the absence of an agreed or explicitly agreed mode of suretyship, the parties should bear the suretyship liability following the mode of a suretyship of joint and several liability. PICC Jiangsu should undertake the joint and several suretyship liability. Therefore, the court of first instance held that PICC Jiangsu had indicated that it was willing to undertake the suretyship liability regarding the compensation for damage of the involved goods and confirmed the maximum amount of the guarantee. In other words, whether or not the

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compensation amount was confirmed did not influence the effect of the joint and several suretyship liability. According to Article 18 Paragraph 2 of the Guaranty Law: Where the debtor of a suretyship of joint and several liability defaults when the time limit for his performance of the obligation provided in the principal contract expires, the creditor may demand that the debtor perform his obligation, or demand that the surety undertake the suretyship liability within the scope of the suretyship agreement. Additionally, Article 26: Where the surety of a suretyship of joint and several liability and the creditor have no agreement on the term of suretyship, the creditor should, within six months from the date of maturity of the principal debts, have the right to demand that the surety undertake suretyship liability. Energy Company claimed the compensation liability to the carrier along with the suretyship liability to PICC Jiangsu, so the claim that PICC Jiangsu should undertake the suretyship of joint and several liability within the scope of the suretyship agreement was with lawfully recognized evidence and was supported by the court of first instance. 2. How to identify the loss of Energy Company: Energy Company held that the loss of this sea water accident was the loss of goods shortage, the loss of goods damage, the port operating costs, the fee of checking residual, for a total of RMB3,783,702.53 and the interest on overdue payments (interest should be calculated at the loan interest rate over correspondent period of bank from August 17, 2010). Huayang Company, Grand Wide, and PICC Jiangsu asserted that the claims of Energy Company including shortage of goods and the loss of coal devaluation lacked foundation, however they agreed to compensate Energy Company for the port operating costs and the fee for checking residual. The loss of interests also lacked foundation. The court of first instance held that Energy Company had a legitimate right to claim for the loss of this accident. The loss included the shortage of goods, the loss of calorific value decline, the loss of chloride ion increase, the port operating costs, the fee for checking residual, and the loss of interest for delayed compensation. The court of first instance confirmed that the amount of wetted goods in hold No. 1 and No. 7 was 13,244 tons and 200 tons because both parties had no objection. Although the Survey certificate (checking residual) made by Fangchenggang CIQ showed that the amount of wetted goods in hold No. 1 was 14,023.42 tons (which was not the same as the stowage situation at the loading port) the measurement mode of the Survey certificate (checking residual) was to weigh with a platform scale (which was not the same as the stowage mode weighing by estimating). In other words, a measuring error exists. In addition, all the goods in hold No. 1 suffered seawater immersion, so it was reasonable that the weight of discharged goods was more than the goods that did not suffer seawater immersion at the loading port. Therefore, the opinion of the Defendants in the first instance that the weight of sea water was 14,023.42 tons stated in the Survey certificate (checking residual) lacked foundation and was not supported by the court of first instance. The wetted goods in hold No. 2 were not stored separately, so there was

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no effective way to measure the weight. Besides, the survey report of Hengzhun Company and Haizheng Company was an estimation, leading both sides to have a great dispute. Therefore, the court of first instance comprehensively confirmed it considering the following factors: the maximum depth of the bilge well, the maximum submerged depth of the hold, the location where water was found, and whether the sound goods and wetted goods were discharged separately. According to the logbook, survey report, and two survey reports, the maximum depth of bilge well and the maximum submerged depth of the hold were both more than half of the depth of hold No. 1 and the location where water was found was in the middle-level of the hold. In addition, the goods in hold No. 2 could not be discharged and stored separately for objective reasons and the sound goods were inevitably to be mixed with the wetted goods. Therefore, the court of first instance held that it was reasonable to confirm that the weight of sea water in hold No. 2 was 8300 tons (16,599 tons/2), or half of the stowage weight. In conclusion, the weight of wetted goods was 21,744 tons (13,244 tons + 8300 tons + 200 tons). As to the calculation method of loss of goods, compensation for damages, and the real value of goods, according to Article 55 Paragraph 1 of the Maritime Code of the People’s Republic of China: the amount of indemnity for the loss of the goods should be calculated on the basis of the actual value of the goods so lost, while that for the damage to the goods should be calculated on the basis of the shortage between the values of the goods before and after the damage, or on the basis of the expenses for the repair and Paragraph 2: the actual value should be the value of the goods at the time of shipment plus insurance and freight, the real value of sound goods should be confirmed on the basis of the CIF price at the loading port and thereby calculate the compensation for loss of goods (shortage of goods). The real value of the damaged goods should be confirmed on the basis of the CIF price, which was confirmed as the sound goods at the loading port and thereby calculated the real value’s gap before and after the damage. In other words, calculate the compensation for loss of goods. Therefore, according to the law, the carrier’s compensation for the loss of and damage to the goods was limited to the CIF price of the damaged goods, not including the value-added tax on imports undertaken by the consignee and the market price, the actual sales status in consignee host country. Energy Company did not prove that it paid the insurance expense, so we are adopting the CFR price at the loading port. Although according to the sales contract, Energy Company had the right to question the weight of the coal on the basis of the Certificate of Weight at the discharging port and then adjust the unit price. The contract between Grand Wide, Huayang Company, and Energy Company was the contract of carriage of goods by sea, so whether Energy Company violated the sales contract, or gave up some contract rights, could not be used as the two Defendants’ defenses unless they could prove that Energy Company adjusted the unit price when it actually paid the price of goods. Besides, as a result of the CFR terms, the risk of transit should be born by the buyer (Energy Company). As to the wet damage of the goods caused by the carrier, Energy Company could only request the carrier to take responsibility and could not thereby question the weight of goods to the seller. As a result, Energy Company paid the issuing bank for the

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documents, declared to customs on the basis of the invoice unit price, and paid value-added tax on imports. Therefore, the court of first instance held that the real value of the sound goods should be calculated by the invoice unit price US $116.49/ton, which was equal to RMB 789.8/ton (US $116.49/ton  6.78). As to the compensation amount for the loss of goods, firstly, it was the shortage reflected by the draft survey. According to the survey certificate of the draft survey issued by Fangchenggang CIQ, the amount of discharging goods of M.V. “GOLDEN HUAXI” was 142,483.90 tons, which was 94.10 tons less than the amount of the bill of lading’s 142,578 tons. According to the shipping practice in the international trade, the allowable measurement error for the shipment of bulk cargo was usually 5%. The allowable measurement error of draft survey for the whole of the goods was 712.89 tons (142,578 tons  5%), so the shortage of 94.10 tons was allowable and the carrier did not need indemnify. Secondly, it was the shortage caused by the increase of total moisture. The survey standard of total moisture of Fangchenggang CIQ was GB/T211-2007, which corresponds to the survey standard of total moisture of loading port ISO589. Put simply, they had no shortage. Besides, Energy Company had the right to question the weight of the coal on the basis of CIQ’ result. Thus, the opinion of the Defendants in the first instance that Fangchenggang CIQ’s survey result could not compare with the survey result of loading port was not to be adopted by the court of first instance. Meanwhile, Certificate of Weight of 142,578 tons of goods made by Fangchenggang CIQ was for all of the samples in hold No. 9, including sound goods and the damaged goods, meaning the result was comprehensive. Therefore, the opinion of the Defendants of first instance that the weight survey result of 142,578 tons of goods made by Fangchenggang CIQ was for the sound goods was not to be adopted by the court of first instance. According to the survey certificate (checking residual), the total moisture (as received basis) of wetted goods in hold No. 1 was 10.9%. The court of first instance held that this could be regarded as the total moisture (as received basis) of all the wetted goods, which was 3.67% more than the total moisture (as received basis) of loading port 7.23% (10.9–7.23%). The survey report of Hengzhun Company and the Defendants of first instance both held that extra water of goods was equal to the shortage of goods, so the shortage amount of 21,744 tons of sea water coal caused by 3.67% excess moisture was 798 tons (21,744 tons 3.67%). Therefore, according to the above-mentioned unit price of sound goods RMB789.80/ton, the compensation amount for the loss of goods was RMB630,260.40 (798 ton  RMB 789.80/ton). As to the compensation amount for the devaluation of market price caused by the decline of the low order calorific value (as received basis), from the type of pricing of the involved goods in international trade and domestic trade, the low order calorific value (as received basis) of coal was the key factor to decide the market price. The actual price was adjusted on the basis of the proportion of the actual low order calorific value (as received basis) of the coal and the low order calorific value (as received basis) appointed by the contract. Although the water could not produce a chemical reaction with the coal, and seawater immersion could not lead to the change of the coal’s molecular structure, the increase of extra income would absorb

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part of the heat when measuring the calorific value and lead to the decline of the low order calorific value (as received basis), thus influencing the market price of the coal and objectively leading to the devaluation. Therefore, although the seawater immersion could not lead to the change of coal’s molecular structure, it had direct contact with the devaluation of the market price. Therefore the Defendants’ defense in the first instance that the increase of moisture could not lead to the damage of goods’ value was not to be adopted by the court of first instance which confirmed that the involved goods had the loss of devaluation caused by the decline of the low order calorific value (as received basis). According to Article 55 Paragraphs 1 and 2 of the Maritime Code of the People’s Republic of China, the amount of the damaged goods was 21,744 tons and the real value in sound condition was RMB17,173,411.20 (21,744 tons  RMB789.80/ ton). The real value of the damaged goods could be calculated in the following method: USD115.70 (CFR price of sound goods at the loading port)/ton  actual low order calorific value (as received basis) 5699 kcal/kg stated by the survey certificate (checking residual)/6000 kcal/kg. However, Energy Company sold these goods in succession two months later and the total moisture as well as the low order calorific value had changed because the sea water coals were stored under the sunlight for a certain time which led to the decline of extra income. Accordingly the court of first instance adopted the result of the Certificate of Weight when Energy Company resold and shipped the goods to calculate the real value of the damaged goods. However, this result could only objectively prove the weight of purely damaged goods which were stored separately in hold No. 1 when they were shipped, but not the weight of other purely damaged goods because they were stored mixed with sound goods. The certificates of weight of two voyages of M.V. “ZHIHAI 5” and the one voyage of M.V. “JINLUN 5” stated that the total moisture was all higher than or near the data of the comprehensive Certificate of Weight for the whole of the goods when they were discharged, made by the Fangchenggang CIQ, and were below the data of checking residual for the goods in hold No. 1, made by the Fangchenggang CIQ. Additionally, the low order calorific value was both higher than the data of checking residual and was below the data of the comprehensive Certificate of Weight for the whole goods. Therefore, according to the known facts and daily rules of thumb, the court of first instance could presume that it was impossible the goods carried on the two vessels were all the damaged goods, all sound goods, or a majority of sound goods. Therefore, it was in line with common sense to confirm that these goods were a mixture of the damaged goods and sound goods. Energy Company regarded the survey data of this mixture as Certificate of Weight’s result of purely the damaged goods when they were transferred and this claim was unfavorable to Energy Company because of some objective condition. However, Energy Company had the right to reasonably exercise its rights. Since this did not contravene the law, the court of first instance adopted this data. Therefore, the court of first instance held that this case should use the survey data of certificates of weight of two voyages of M.V. “ZHIHAI 5” and the one voyage of M.V. “JINLUN 9” to confirm the ultimate damaging situation and real value. According to the formula mode of the CFR price at the loading port,

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on October 20, 2010, M.V. “ZHIHAI 5” shipped 8607.82 tons of coal, consigned by Energy Company. The low order calorific value (as received basis) was 5725 kcal/kg, the CFR price of the same products was USD110.40/ton (USD115.70/ton  5725 kcal/kg/6000 kcal/kg), which was equal to RMB 748.51/ton (USD110.40 /ton  6.78), the gap of real value between before and after this accident was RMB355,416.89 [(RMB789.80/ton—RMB748.51/ ton)  8607.82 tons]. On October 29, 2010, M.V. “ZHIHAI 5” shipped 8520.70 tons of coal, consigned by Energy Company. The low order calorific value (as received basis) was 5795 kcal/kg, the CFR price of the same products was USD111.75/ton (USD115.70/ton  5795 kcal/kg/6000 kcal/kg), which was equal to RMB757.67/ton (USD111.75/ton  6.78), the gap of real value between before and after this accident was RMB273,770.09 [(RMB789.80/ton–RMB757.67/ ton)  8520.70 tons]. On October 21, 2010, M.V. “JINLUN 9” shipped 4930.16 tons of coal, consigned by Energy Company. The low order calorific value (as received basis) was 5766 kcal/kg, the CFR price of the same products was USD111.19/ton (USD115.70/ton  5766 kcal/kg/6000 kcal/kg), which was equal to RMB753.87/ton (USD111.19 /ton  6.78). Energy Company claimed that 4615.48 tons of goods among them was damaged, the gap of real value between before and after this accident was RMB165,834.20 [(RMB789.80/ton–RMB753.87 /ton)  8520.70 tons]. To summarize, the gap of real value between before and after this accident for all the damaged goods was RMB795,021.18 (RMB355,416.89 + RMB273,770.09 + RMB165,834.20). Accordingly, the court of first instance confirmed the compensation amount for the devaluation of market price caused by the decline of the low order calorific value (as received basis). As to the loss of the increase of chloride ion, the court of first instance held that: although Energy Company had proven that the chloride ion content of the wetted goods was apparently higher than the normal coal, this result of the sampling survey was between the pure wetted goods and the sound goods while nearly half of the wetted goods had been stored mixing with the sound goods. In addition, Energy Company did not prove that all the wetted goods, including the goods in hold No. 1, which was stored separately, were transported separately with other sound goods, meaning this result of the sampling survey could not reflect the goods’ situation when they were actually delivered to the buyer. Besides, the chloride ion content did not influence the price of coal and Energy Company did not prove that the higher chloride ion content caused the extra expense or loss to Energy Company or his buyer. Therefore, according to Article 2 of Some Provisions of the Supreme People’s Court on Evidence in Civil Procedures: the parties concerned should be responsible for producing evidence to prove the facts on which their own allegations were based or the facts on which the allegations of the other party were refuted. Where any party produces evidence or evidence produced could not support the facts on which the allegations were based, the party concerned bears the burden of proof and should undertake unfavorable consequences. This claim lacked evidence and was withheld by the court of first instance. Next, the loss of the port operating costs, the fee of checking residual and the interests for overdue compensation. The court of first instance held that: With

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respect to the loss of the port operating costs of RMB21,546 and the fee of checking residual of RMB55,779 for the damaged goods, the Defendants of first instance agreed to indemnity, allowing the court of first instance to support Energy Company’s claims. Energy Company claimed that the interests should be calculated at the loan interest rate over correspondent period of bank from August 17, 2010 (the day after the Defendants in the first instance knew about the accident) to the date when the Defendants in the first instance pay all the reparation. However, Energy Company did not prove the facts that the involved goods were transferred through bank loans and produced the loss of repayment, therefore the interest should be calculated at the deposit interest rate over the correspondent period from the bank from October 29, 2010, the date that all losses had been confirmed and the start day of the last transferring voyage. In conclusion, the court of first instance found that the loss was during the responsibilities period of the carrier. Huayang Company, as the carrier, did not exercise due diligence to make the ship seaworthy. Also, the loss of goods was not caused by any exceptions that the carrier would not be liable for, so it should be responsible for the loss of and damage to the goods. Grand Wide was not the party of the involved transport relationship and did not need to undertake the compensation liability as carrier. PICC Jiangsu, as the guarantee of efficient suretyship of joint and several liability, should undertake the suretyship of joint and several liability because the loss of Energy Company did not go beyond the scope of the suretyship agreement. Besides, the three Defendants in the first instance did not claim the package limitation of liability, making the loss of Energy Company composed of the shortage of goods at RMB630,260.40, the loss from devaluation at RMB795,021.18, the port operating costs at RMB21,546, and the fee of checking residual at RMB55,779, for a total of RMB1,502,606.58 plus the loss of corresponding interests. According to Article 46 Paragraphs 1 and 2 of the Maritime Code of the People’s Republic of China, the Guaranty Law of the People’s Republic of China Article 18 Paragraph 2, Article 19, the Civil Procedure Law of the People’s Republic of China Article 64 Paragraph 1: a party should have the responsibility to provide evidence in support of its own propositions, the judgment was as follows: (1) Huayang Company should indemnify the loss of Energy Company in an amount of RMB1,502,606.5 plus interest (the interest should be calculated at the deposit interest rate over the correspondent period from the bank from October 29, 2010 to the time of payment confirmed by this judgment); (2) PICC Jiangsu should undertake the supplementary liability for the loss and interests thereon to Energy Company; and (3) other claims filed by Energy Company were hereby rejected. Huayang Company disagreed with the (2011) Hai Shang Chu Zi No. 76 Civil Judgment rendered by Beihai Maritime Court and filed an appeal, alleging as follows: firstly, the allegation that the bill of lading involved was issued by the Master’s agent and that the Master was the representative of the owner of ship was incorrect. According to Article 136 of the Maritime Code of the People’s Republic of China, “the charterer shall be entitled to give the Master instructions with respect to the operation of the ship. However, such instructions should not be inconsistent

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with the stipulations of the time charter.” Obviously, under a time charter party, the Master’s act was not all representative of the owner, especially for the matters of carriage of goods. The Master should act in accordance with the instructions of the charter, therefore the Master was the representative of the charter party, not the owner, namely the Appellant. Secondly, although there was the permitted shortage of bulk cargo in the process of quantifying the delivery in transport, the shortage being 5/1000, according to the usual practice in international trade in the first-instance decision, the court of first instance did not treat water superscalar goods as the part of the lost goods. The court of first instance did not adopt 5/1000 as the permitted shortage standard in these circumstances, making the compensation of the shortage of the goods, RMB630,260.40, undoubtedly wrong. The correct result and the method to calculating the amount of compensation of the shortage of the goods should be that: (1) the decrease of 94.10 tons found by the draft survey, plus the excessive moisture of 798 tons, implies that the actual amount of shortage of the total ship was 892.10 tons; 2.5% of the permitted shortage of the ship cargo was 712.89 tons; the amount of shortage of the total cargo minus the amount of the permitted shortage equals 179.21 tons; (2) the carrier should indemnify RMB141,540.06 (179.21 tons  RMB789.80/ton) on the basis of the unit price of goods, being RMB789.80 per ton; (3) in respect of the amount of compensation for the loss of the goods due to the low calorific value, (1) factor of the wetting had no effect on the weight of coal. At best, it would affect the determination of the calorific value because of the high moisture in coal. Therefore, the court of first instance should not support the claims for damage. Even if the court of first instance supported the claims based on the effect of water, it was necessary to fully prove that the wet coal was indeed sold at a discount alone. According to the existing evidence, the Appellant could prove that it sold the wet goods separately, not to mention the specific sale volume and price cuts. (2) Although wet goods in total could reach 217,744 tons, wet goods separately only reached 14,023.42 tons. Accordingly, if the Respondent had indeed sold the wet goods, the number of the sale was no more than 14,023.42 tons. As previously mentioned, the court of first instance clearly requested the Appellant to submit all of the resale documents for the entire cargo of transport, however there was no legal weight of the burden of proof for the Appellant in the judgment. The court of first instance considered the number of purported 21,744 tons, which was clearly incorrect. Even to calculate the suggested sale of the price of the loss, it should be calculated in accordance with 1a maximum of 4023.42 tons. (3) The Appellant did not follow the requirements of the court of first instance, which required it to submit the actual settlement of goods involved with foreign sellers to the court, therefore it should be presumed that the calorific value of the payment was 5940kcl/kg rather than the 6000kcl/kg signed in the sale contract. On the basis of the sales contract signed by the Appellant and the foreign seller, if the decrease of the calorific value of the goods comparing to that at the port of discharge was more than 80kcl/kg, the seller and buyer should calculate the price of the goods in accordance with the average calorific value of the two ports. The average calorific value of the two ports was 5940kcl/kg. The price of 6000kcl/kg bought by the Appellant from abroad was USD115.70, converted to

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5940kcl/kg was 115.70  (5940/6000) = USD114.54, reflecting the exchange rate of 6.78 to RMB776.60. According to the report of three Guangxi commodity inspections, the calorific value of wetted goods was 5725 kcl/kg 8600 tons, 5797 kcl/kg 8600 tons, and 5766 kcl/kg 5000 tons, which could be used to calculate the weighted average of the low calorific value at 5762 kcl/kg. The decrease from 5940 to 5762 kcl/kg was RMB776.60  (5940–5762)/5940 = RMB 23.27. The total loss price of 14,032.42 tons should be RMB 23.27  14,032.42 tons = RMB326,534.41. Accordingly it requested to revoke the original judgment and all claims of the Respondent should rejected according to law. PICC Jiangsu disagreed with the (2011) Hai Shang Chu Zi No. 76 Civil Judgment made by Beihai Maritime Court and alleged that the letter of guarantee was an accessory contract, which was based on rights and liabilities from the main contract. The letter of guarantee should take effect after the damage compensation liability had been established through the legal process, namely when the principal debt contract had become effective. According to Article 18 Paragraph 2 of the Guaranty Law of the People’s Republic of China, “where the debtor of a suretyship of joint and several liability defaults when the time limit for his performance of the obligation provided in the principal contract expires, the creditor may demand that the debtor perform his obligation or demand that the surety undertake the suretyship liability within the scope of the suretyship agreement.” Prior to the decision of the present case, the debt had not been established, even up to the time of the expiration. The court of first instance ignored the subordination of the letter of guarantee. In the case, the main debt relationship is not determined and the appeal making the Appellant take liability was clearly incorrect. The reason for the shortage and loss of the goods was the same to Huayang Company, therefore it requested to revoke the original judgment and all claims of the Respondent should be rejected according to law. The Respondent argued that firstly, Huayang Company was the owner of ship involved as well as the carrier, and it should be liable for compensation in accordance with the law. Secondly, the plea for shortage in the first-instance based on the serious water leakage was correct in accordance with the law and should be upheld. Thirdly, for damage of goods during the voyage, Energy Company had already provided the resale contract, waybill, and the corresponding certificate of quality, which can confirm its number and calorific value in need. Fourthly, according to the letter of guarantee provided by PICC Jiangsu, PICC Jiangsu and Huayang Company should be responsible for the loss of Energy Company, which was correct and should be sustained. Therefore, the appeal filed by the two Appellants should be dismissed and the original judgment should be afirmed. In the proceedings of the second instance, the parties submitted no new evidence to the court. In the second instance, the two Appellants raised the following objection to the facts found in the first instance: Certificate of Weight of 142,578 tons by the commodity inspection of Fangchenggang, which should refer to the sound goods rather than all of the goods. The court of first instance found that Certificate of Weight contained all of the goods, making it incorrect. The Respondent, Energy Company, raised no objection to the facts found in the first

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instance. The court finds that Certificate of Weight records 142,578 tons of goods. Because the goods are checked at random in the unloading process there is no evidence to prove that the sampling inspection is only for the sound goods. Therefore, the court does not adopt the appeal above asserted by the two Appellants. The facts found in the first instance are clear and the evidence is sufficient, the court hereby admits such facts and evidence. The court holds this is a case arising from a dispute over contract of carriage of goods by sea. Huayang Company and Macro State Shipping Co., Ltd. (hereinafter referred to as “Macro State”), the Defendant of first instance, are Hong Kong companies. This is a case of foreign-related civil dispute. It is necessary for the court to consider the application of law in this case, according to Article 3 of the Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China: “the parties may explicitly choose the laws applicable to foreign-related civil relations in accordance with the provisions of law.” The parties had chosen Chinese law in the first instance, therefore the Chinese law shall apply. Based on the allegations of both parties, the court holds that the principal outstanding issues in the case involve that: (1) whether Huayang Company is the carrier in the case; whether it shall be liable for compensation; and whether PICC Jiangsu should bear joint and several liability; (2) the number of short-amount goods involved and the amount of the loss; (3) the loss of the goods. Firstly, in respect of whether Huayang Company is the carrier in the case; whether it shall be liable for compensation; and whether PICC Jiangsu should bear joint and several liability. The Appellant, Huayang Company, asserted it was the owner under the time charter party and that the Master did not entirely act on behalf of the owner, especially in terms of the transportation of the goods. The Master should act in accordance with the instructions of the charterers, thus the Master issued bills of lading which were in fact on behalf of the charterer, rather than on behalf of the owner, Huayang Company. The Appellant, PICC Jiangsu asserted that the guarantee contract was established in the form of a letter of guarantee, however the establishment of the guarantee contract did not bear to the beginning of the guarantee liability. The letter of guarantee should be enforced after the damage compensation liability had been established in way of legal approach, namely the principal debt contract had been effective. The Appellant treated PICC Jiangsu as a defendant, which was in violation of the provisions of the Guaranty Law of the People’s Republic of China, and it was incorrect that the court of first instance supported such an action. The Respondent, Energy Company, asserted that Huayang Company was the carrier of the ship involved. In accordance with the provisions of the law, Huayang Company should be liable for the damages. According to the letter of guarantee issued by PICC Jiangsu, the court of first instance decided that PICC Jiangsu and Huayang Company should bear joint and several liability for the loss of Energy Company, which is correct. The court holds that the trade of coal involved is conducted in the terms of CFR. According to the bill of lading, M.V. “Jin Huaxi” is the transport ship and the

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signature on the bill of lading is issued by Yao Renfu, the agent of the Master of M.V. “Jin Huaxi” and the mate of Macro State. According to Article 72 Paragraph 2 of the Maritime Code, “the bill of lading may be signed by a person authorized by the carrier. A bill of lading signed by the Master of the ship carrying the goods is deemed to have been signed on behalf of the carrier.” In this case, Macro State, as the agent of the Master of M.V. “Jin Huaxi” and the mate, issued the bill of lading, which should therefore be regarded as having been issued by the Master of M.V. “Jin Huaxi,” namely the carrier. The bill of lading involved does not indicate the carrier of the bill of lading. According to Article 7 of the Maritime Code, “the ownership of a ship means the ship owner’s rights to lawfully possess, utilize, profit from, and dispose of the ship in his ownership.” Huayang Company is the owner of M.V. “Jin Huaxi,” so the court of first instance identified it as the carrier. Under CFR terms, Energy Company is not the shipper of the contract of the carriage of goods. As a consignee, it can only identify the carrier according to the bill of lading. Therefore the court of first instance ascertained that Huayang Company was the carrier and should be liable for compensation, a position that is also supported by the court. PICC Jiangsu issued a letter of guarantee amounting to 2.4 million to the Respondent unilaterally on August 20, 2010 and the Plaintiff did not have any objection. According to Article 22 Paragraph 1 of Interpretations of the Supreme People’s Court on Several Issues concerning Application of the Guaranty Law of the People’s Republic of China, “the third party issues a letter of guarantee to the creditor in written, the creditor accepts it and has no objection. The guarantee contract is established.” The guarantee contract shall have been established on the day when Energy Company and PICC Jiangsu issued the letter of guarantee. According to Article 44 Paragraph 1 of the Contract Law of the People’s Republic of China, “the contract established according to law becomes effective upon its establishment” and there is no legal situation which hinders its effect coming into force, meaning the guarantee contract has become effective. According to Article 18 Paragraph 2 of the Guaranty Law of the People’s Republic of China, “where the debtor of a suretyship of joint and several liability defaults when the time limit for his performance of the obligation provided in the principal contract expires, the creditor may demand that the debtor perform his obligation, or demand that the surety undertake the suretyship liability within the scope of the suretyship agreement.” In this case, Huayang Company should be liable for the loss of the damage and shortage of the goods. The expiration of the time limit of the loss issued by Energy Company to Huayang Company is put forth. Moreover, Huayang Company has no objection to the debtor. The appeal that PICC Jiangsu should bear joint and several liability with Energy Company when it claimed against the carrier shall be supported. PICC Jiangsu argued it should not be jointly and severally liable as a defendant in the case, which is not supported.

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Secondly, in respect to the short-amount goods involved and the amount of the loss: 1. As to the amount of the shortage of the goods: Huayang Company and PICC Jiangsu asserted that the certificate of the water weight issued by Fangchenggang CIQ and the bill of lading involved showed the amount of shortage was 94.10 tons. Wetted coal increased 3.67% than that at the port of loading; the short amount due to moisture increase was 798 tons, making the short amount for those 892.10 tons in all. According to the practice in international trade, the permitted shortage of bulk cargo of delivery in transport was 5/1000. The number on the bill of lading was 142,578 tons, so the permitted shortage was 712.89 tons (5/1000  142,578 tons). The short amount for which the carrier should be liable was the actual decrease in amount minus the allowable decrease, meaning 179.12 tons (892.10 tons minus 712.89 tons). According to the unit price, RMB789.80/ton, the carrier should pay RMB141,540.06 (179.21 tons  789.80 tons/ton). The allegation put forth by Energy Company, having been supported by the court of first instance on the basis of the fact of serious leakage, is correct and shall be upheld. The court holds that according to the usual practice in international trade, the permitted shortage of bulk cargo in the process of quantity of delivery in transport is 5/1000; the number in the bill of lading is 142,578 tons, making the permitted shortage 712.89 tons (5/1000  142,578 tons). The certificate of the water weight issued by Fangchenggang CIQ and bill of lading shows the shortage amount is 94.10 tons, which is within the permitted shortage range, making such a loss negligible. According to the Fangchenggang CIQ’s inspection certificate, the wetted coal in hold No. 1 was 10.9%. The court holds that it can be regarded as the total water content of all wetted goods. Compared to that received at the loading port, it had an increase of 3.67%. Hengzhun Company’s assessment report and the defendant’s plea asserted that the wet goods equal the shortage of goods, making the amount of shortage of the 21,744 tons wetted coal because of 3.67% excess moisture is 798 tons (21,744 tons  3.67%). In the opinion of the court, the essential part should not be regarded as permitted shortage. Permitted shortage is proper because of the deviation of the weight measurement and in the transportation. The shortage due to the wet coal should not be regarded as permitted shortage. Therefore the appeal that the short amount is within the permitted shortage range issued by Huayang Company and PICC Jiangsu is not supported by the court. Accordingly, the amount of goods in shortage should be 798 tons. 2. As to the problem of loss due to the shortage: According to Article 55 Paragraph 1 of the Maritime Code, “the amount of indemnity for the loss of the goods shall be calculated on the basis of the actual value of the goods so lost, while that for the damage to the goods shall be calculated on the basis of the difference between the values of the goods before and after the damage, or on the basis of the expenses for the repair.” Additionally, Article 55

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Paragraph 2 of the Maritime Code, “the actual value shall be the value of the goods at the time of shipment plus insurance and freight.” The carrier shall only be responsible for the value of the goods when loading, insurance and freight, not including the import value-added tax born by the receiving party, and market value and actual sales in the receiver’s country should not be taken into account. Because the Appellant does not proffer the proof of the insurance, the CFR price shall be applied. According to contract of the sale of coal, the Appellant has the right to inquire the weight of coal based on the inspection certificate by CIQ in the discharge port and adjust the unit price of goods. However because Huayang Company and the Plaintiff have the relationship of the contract of carriage of goods by sea, it cannot use the fact that the Respondent has been in violation of the contract or agrees or gives up some rights of the contract as the defenses of the contract, unless it can prove that the Appellant adjusted the unit price of the goods in the actual payment. Moreover, because of the CFR trade terms, the risk of transportation is assumed by the buyer, meaning the Appellant can only claim for the responsibility of the loss of the wetted goods due to the carrier against the carrier, but not the seller. Accordingly, Energy Company has obtained the documents against payment and declared at customs according to the unit price and paid the import tax. Therefore, the court holds that the actual value of the sound goods is USD116.49/ton, equivalent to RMB789.80/ton (116.49 US$/ton  6.78) in accordance with the invoice, making the loss from the shortage of the goods to be RMB 630,260.40 (798 tons  RMB789.80/ton). 3. As to the loss of the goods: Huayang Company and PICC Jiangsu argued that the factor of water had no effect to the weight of the goods and that the court of first instance should not support the so-called claim for loss of and damage to goods. Even in order to calculate the so-called loss, it should be based on 14,023.42 tons and the calorific value should be settled at 5940 kcl/kg between the Respondent and the foreign seller. The settlement price should be RMB 776.60/ton and the weighted average of the wet goods was 5762 kcl/kg. The price ranges from 5940 to 5762 kcl/kg at RMB23.37 [RMB776.60  (5940–5762)/5940)] and the total loss of the 14,032.42 tons goods was RMB326,534.41 (RMB23.27  14,032.42 tons). The appeal of the loss of the goods filed by Energy Company was correctly supported by the first-instance and it shall be affirmed. The court holds that although only 14,023.42 tons of goods are stacked, the parties have no objection to the total amount of damaged goods being 21,744 tons, therefore when calculating the loss of the damaged goods, it should be based on 21,744 tons. The appeal of 14,023.42 tons by the two Appellant will not be supported by the court. According to the provisions of Article 55 Paragraph 1 of the Maritime Code, “the amount of indemnity for the loss of the goods shall be calculated on the basis of the actual value of the goods so lost, while that for the damage to the goods shall be calculated on the basis of the difference between the values of the goods before and after the damage, or on the basis of the expenses for the repair.” Article 55 Paragraph 2 of the Maritime Code, “the actual value shall

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include the value of the goods at the time of shipment, insurance and freight.” The appeal that it should calculate the price of goods in accordance with the average value in two ports has no factual or legal basis, and will not be supported by the court. According to Article 3.2 of the coal sale contract, the South African Power Coal CFR is USD115.70 per ton and based on the received low calorific value 6000kcl/kg, it can calculate the difference of the actual value of the goods before and after the damage. The difference of the actual value of the goods before and after the damage of the three batches resold by the Asian Energy Company is calculated as follows: (1) 8607.82 tons x (RMB789.80 per ton-5725kcl/kg/6000kcl/ kg  USD 115.70/ton  6.78) = RMB355,416.89; (2) 8520.70 tons  (RMB789.80 per ton-5795 kcl/kg/6000 kcl/kg  USD115.70/ton  6.78) = RMB273,770.09; (3) 4615.48 tons  (RMB789.80 per ton-5766 kcl/kg/6000 kcl/ kg  USD115.70/ton  6.78) = RMB165,834.20. The difference of the actual value of the goods before and after the damage of the three batches is RMB795,021.18 (RMB355,416.89 + RMB273,770.09 + RMB165,834.20), which is compensation of the goods caused by the low calorific value identified by the court. In summary, the court finds that the dispute in the case is the contract of carriage of goods by sea. Under CFR items, Respondent Energy Company, as the consignee, can only identify the carrier according to the bill of lading. Therefore the court of first instance found that Huayang Company is the carrier and it can accordingly ask PICC Jiangsu to bear the guarantee responsibility when it claims the damage from the carrier. When calculating the amount of the shortage of the coal, it should not be within the range of the permitted shortage. Huayang Company argues that the calorific value should be 5940 kcl/kg according to the settlement between Energy Company and the foreign seller, therefore the court should use this value to calculate the loss of the wet goods. This has no factual or legal basis and the court will not support the method. In the first instance proceedings, the facts were clearly found, the laws were correctly applied, and the substantive issues were properly handled. There is no factual or legal basis for the appeal of the Appellants, and the court will not support it. In accordance with Article 170 Paragraph 1 Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance in amount of RMB38,124, Huayang International Marine Transportation Co., Ltd. and People’s Insurance Company of China Jiangsu Branch, specifically each shall bear RMB19,062 (Huayang International Marine Transportation Co., Ltd. and Peoples PICC Jiangsu of China Jiangsu Branch have prepaid RMB38,124.). RMB19,062 having been paid more by the Appellants, Huayang International Marine Transportation Co., Ltd. and People’s Insurance Company of China Jiangsu Branch, will be returned by the court.

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The obligor shall pay the debt within 10 days after this Judgment takes effect and the interest on the debt for the delayed period shall be doubled. The creditor may apply for enforcement to the court within 2 years upon expiration of the time limit for payment designated by the effective judgment. The judgment is final. Presiding Judge: TAN Qinghua Acting Judge: BAI Shuyi Acting Judge: WANG Yijun September 13, 2014 Clerk: HUANG Qiuyan

Haikou Maritime Court Civil Judgment CHEN Lei v. Hainan Yalong Bay Underwater World Tourism Co., Ltd. et al. (2014) Qiong Hai Fa Shi Chu Zi No.9 Related Case(s) None. Cause of Action 200. Dispute over liability for personal injury at sea. Headnote The Plaintiff recovered damages for injuries sustained at a resort while operating a motorboat under supervision of an untrained employee; apportionment of liability between individual defendants and their insurer. Summary: The Plaintiff paid to operate a motorboat at a resort, where she was accompanied by an uncertified and unqualified staff member. As a result, the Plaintiff was instructed to operate the boat without any formal training. The Plaintiff bumped her chin and suffered injuries, which resulted in three lost teeth, cuts to her chin and missed work for 30 days. The court found for the Plaintiff and ordered following reimbursement structure: the two Defendants’ insurer should pay for medical, travel expenses, lost wages, nutrition expenses, and compensation of psychological damage in a total amount of RMB35,424.6, and the two Defendants should jointly and severally undertake liability for compensation in an amount of RMB17,600.80.

Judgment The Plaintiff: CHEN Lei, female, born on May 21, 1986, Han Domicile: 48 Technology Road, Yanta District, Xi’an City, Shanxi Province. Agent ad litem: TIAN Guojian, lawyer of Hainan Waijing Law Firm. The Defendant: Hainan Yalong Bay Underwater World Tourism Co., Ltd. Domicile: National Tourism Resort, Yalong Bay, Sanya City, Hainan. Legal representative: ZHA Riping.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_7

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The Defendant: Sanya Bai Fu Lai Tourism Development Co., Ltd. Domicile: Underwater World Beach Business Hall, Yalong Bay, Sanya City, Hainan. Legal representative: XU Zhiqiang, general manager. Agent ad litem of two Defendants: LIU Ming, male, Han, clerk of Hainan Yalong Bay Underwater World Tourism Co., Ltd. The Third Party: People’s Property and Casualty Insurance Company (Group) of China Hainan Branch Domicile: 2 Heng Road, Shimao Avenue, Haikou City, Hainan. Person in charge: SHAN Rongguang, general manager. Agents ad litem: LI Fang and HAN Yao, lawyers of Hainan realizer Law Firm. With respect to the case arising from dispute over liability for personal injury at sea filed by the Plaintiff, CHEN Lei against the Defendant, Hainan Yalong Bay Underwater World Tourism Co., Ltd. (hereafter referred to as “Yalong Bay Company”) on March 18, 2014, the court, after accepting this case on the same day, appointed Acting Judge WANG Weimin to try the case independently in accordance with the law. During the trial, according to the application filed by two Defendants, Yalong Bay Company and Sanya Bai Fu Lai Tourism Development Co., Ltd. (hereafter referred to as “Bai Fu Lai Company”), the court added Bai Fu Lai Company as joint Defendant of this case and People’s Property and Casualty Insurance Company (Group) of China Hainan Branch (hereafter referred to as “PICC Hainan”) as the Third Party of this case. At the same time, the court decided this case be tried under ordinary procedure in accordance with law and organized the collegiate panel consisting of acting judge WANG Weimin who acted as Presiding Judge, Acting Judge WU Yonglin and People’s Assessor TIAN Shihong to continue the panel of this case. The court held two hearings in public to try this case on April 17 and June 25, 2014. TIAN Guojian, agent ad litem of the Plaintiff, LIU Ming, agent ad litem jointly entrusted by the Defendants Yalong Bay Company and Bai Fu Lai Company, and HAN Yao, agent ad litem of the Third Party PICC Hainan, appeared in court and participated in the action. The court mediated for several times, but the parties could not arrive at a mediation agreement. Now the case has been concluded. The Plaintiff alleged that on March 15, 2013, when the Plaintiff took part in the motorboat activity at sea of Yalong Bay Underwater World Resort, for the fault of the coach, the Plaintiff’s face bumped on the handlebar of the motorboat, as a result, the Plaintiff’s chin cracked and three upper teeth were lost. After this accident happened, the Plaintiff commuted to hospital for medical treatment for many times. The Plaintiff had the three teeth repaired and implanted in Xi’an Jiaotong University Stomatology Hospital (hereafter referred to as “Stomatology Hospital”), and spent certain medical expenses, travel expenses, accommodation expenses etc. and lost wages for three months; in the meantime, the Plaintiff suffered serious psychological damage due to the loss of front teeth. The parties could not arrive at an

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agreement regarding compensation for this case after negotiation for several times. In summary, the Plaintiff requested the court to adjudge the Defendants, Yalong Bay Company and Bai Fu Lai Company and the third party, PICC Hainan jointly and severally compensated the Plaintiff for the medical expenses in amount of RMB37,500.8, the lost wages in amount of RMB9,000, travel expenses and accommodation expenses in amount of RMB2,919, nutrition expenses in amount of RMB10,000 and compensation of psychological damages in amount of RMB30,000. The Plaintiff submitted the following evidence to support her claims: 1. Two inquiry records and one mediation record made by Hainan Province Sanya City Tourism Quality Supervisory Administration (hereafter referred to as “Tourism Supervisory Administration”) on March 16, 2013 and March 19, 2013 respectively. HU Wanwen, the person in charge of the motorboat activity at sea of Yalong Bay Underwater World Resort stated in the records made by Tourism Supervisory Administration that the coach mentioned above had no qualification certificate. The Plaintiff stated in the records that the motorboat coach only told her the method to start and stop the motorboat, and there was no other training; 2. Special invoice for the outpatient fee, settlement receipt of medical expenses and payment voucher of China Construction Bank. The medical expenses paid by the Plaintiff were RMB37,753.5 in total; 3. Certificate of Diagnosis for Illness, Outpatient Medical Record, Implant Operation Record, Certificate of Diagnosis, test sheet, inspection record and certification of doctor’s advice made by Chinese People’s Liberation Army No.187 Central Hospital (hereafter referred to as “187 Hospital”) and Stomatology Hospital; 4. Vouchers of travel expenses (6 car tickets, 8 train tickets, 2 airport shuttle bus tickets and 1 airplane ticket), dining expenses, hotel expenses paid by the Plaintiff and pictures of the injury; 5. Certifications of occupation and annual income of the Plaintiff issued by Shanxi Communication Service Co., Ltd. The two Defendants did not submit defence to the court, but alleged in the hearing that there was a contracting operation agreement between Yalong Bay Company and Bai Fu Lai Company, in which it was agreed that Bai Fu Lai Company operated the motorboat activity at the sea and undertook related civil liability independently, so Yalong Bay Company was not a direct party of this case; Bai Fu Lai Company bought public liability insurance and the insurer, PICC Hainan should participate in the action as third party; as to the compensation claimed by the Plaintiff, the medical expenses, accommodation expenses and travel expenses which could be proved by vouchers should be compensated, while the amount of nutrition expenses and psychological damages were too high, in addition, the Plaintiff could work as usual, so the lost wages should not be compensated, even if the Defendants should compensate that sum, the Plaintiff should provide certificate of loss of working time.

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The two Defendants submitted the following evidence to the court to support of their pleas: 1. Contracting Operation Agreement signed by the two Defendants on July 15, 2012; 2. Public Liability Insurance (1999 version) Policy (No.PACG201246010000000023) issued by PICC Hainan, insurance industry special invoice of PICC Hainan (No.00215623), Public Liability Insurance Clauses (1999 version). The Third Party did not submit plea to the court, but it argued in the hearing that as to the medical expenses, the liability of the third party should be determined within the limitation of RMB2,000 agreed by the insurer and the insured based on the actual voucher; as to the lost wages and the nutrition expenses, the Plaintiff did not apply for appraise and the medical organization did not issue related opinions. According to the Appraisal of Rest Period, Nutrition Period and Nursing Period of Personal Injury Victims (trial version), the longest period for lost wages was 30 days and the longest period for nutrition expenses was also 30 days (RMB50 per day). Accept RMB200 of travel expenses and accommodation expenses. The injury to the Plaintiff did not reach the injury and disability degree, so the psychological damage compensation should not be supported. The Third Party PICC Hainan did not submit related evidence to the court. Upon cross-examination in the hearing, the two Defendants raised no objection to the authenticity, legality and relevancy of the 5 evidence submitted by the Plaintiff, but they held that Manager XU in evidence 1 (the mediation record) was a typo, it should be Manager XU (other word) namely XU Zhiqiang, the general manager of Bai Fu Lai Company. The Third Party had no objection to the authenticity, legality and relevancy of evidence 1, 2 and 3; it also had no objection to the authenticity and legality of evidence 4, but it argued that the travel expenses, dining expenses and accommodation expenses in this evidence had no relationship with the treatment of the Plaintiff. It had no objection to the authenticity of evidence 1, but it argued that the Plaintiff’s wage should be comprehensively proved by payroll, bank slip and so on. Regard to the evidence submitted by the two Defendants, the Plaintiff had no objection to the authenticity, legality and relevancy of evidence1. It had no objection to the authenticity and legality of evidence 2 but challenged the relevancy of evidence 2. It held that evidence 2 was signed by Bai Fu Lai Company and the third party, the liability was an internal issue which had no relationship with the Plaintiff. The third party had no objection to the authenticity, legality and relevancy of the evidence 1 and 2. The ascertainment of the court confirms on the evidence submitted by the Plaintiff are as follows: 1. As to evidence 1, 2, 3 and the injured pictures including in the evidence 4, the two Defendants and the Third Party had no objection to the authenticity, legality and relevancy of above evidence so the court confirms the evidence.

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2. As to invoices of travel expenses, accommodation expenses and drink and food expenses related to the evidence 4, the two Defendants and the Third Party had no objection to the authenticity, legality and relevancy of above evidence. The court ascertains the authenticity and legality of above-mentioned evidence. In respect to whether these expenses had necessarily relationship with the Plaintiff’s treatment, the court holds that the Plaintiff commuted to Haikou City, Sanya City, Nada town (Danzhou City), Hainan Province, Xi’an City, Shanxi Province and Yinchuan City, Ningxia Hui Nationality Autonomous Region, and negotiated with the Defendants for the compensation, there shall be expenses resulting therefrom. The court ascertains the reasonable part of the expenses. 2:1. As to the car tickets, there are 6 car tickets provided by the Plaintiff, among which two tickets are continuous numbers in a same train from Haikou City to Danzhou City on March 20, 2013, the amount thereof is RMB47; two tickets are continuous numbers in a same train from Danzhou City to Sanya City on March 28, 2013, the amount thereof is RMB69; one car ticket from Haikou City to Danzhou City on March 30, 2013, the amount thereof is RMB32; one car ticket from Danzhou City to Haikou City on April 3, 2013, the amount thereof is RMB30. The car tickets in continuous numbers on 20 March and 28 March do not conform with the logical thinking that one person has one ticket and the Plaintiff did not explain the situation, so the court only ascertains one of each. The court ascertains 4 car tickets provided by the Plaintiff, the amount thereof is RMB47, RMB69, RMB32 and RMB30 respectively, and the total amount is RMB178. 2:2. As to the train tickets, there are 8 train tickets provided by the Plaintiff, among which two tickets are continuous numbers in a same train from Sany City to Haikou City on March 19, 2013, of which the amount is RMB83.5 and the passengers are the Plaintiff and ZHAO Yaxiu; two tickets are continuous numbers in a same train from Sanya City to Haikou City on March 28, 2013, of which the amount is RMB83.5 and the passengers are the Plaintiff and ZHAO Yaxiu; three tickets are continuous numbers in a same train from Yinchuan City to Xian City on June 2, 2013, of which the passengers are the Plaintiff, ZHAO Yaxiu and CHEN Dongfeng, and the amount of the Plaintiff’s ticket is RMB196; one train ticket of the Plaintiff from Yinchuan City to Xian City on August 19, 2013, of which the amount is RMB196. The Plaintiff did not explain the relationship between her and ZHAO Yaxiu and CHEN Dongfeng and the reason why they took train together. So the court does not ascertain 4 tickets related to above-mentioned two person. In view of the above, the court ascertains 4 tickets of the Plaintiff, of which the amount is RMB83.5, RMB83.5, RMB196 and RMB196 respectively, and the total amount is RMB559. 2:3. As to the airplane ticket and the airport shuttle bus ticket. According to the time on the car tickets, train tickets and airplane ticket provided by the Plaintiff, after the accident happened, the Plaintiff commuted between Haikou City, Sanya City and Danzhou City for treatment and negotiation of

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the compensation. In addition, the Plaintiff took airplane to continue treatment in inland. In view that the Plaintiff was an inland tourist who spent holiday in Hainan Province, even if the accident involved did not happen, the Plaintiff would also spend on travel expenses on returning to inland after holiday ended. So the airplane ticket and airport shuttle bus ticket provided by the Plaintiff were irrelevant with this case. The court does not ascertain the tickets above. 2:4. As to the accommodation invoices, there are 4 invoices provided by the Plaintiff, the amount is clear but the issuer could not be recognized in one invoice; the issuer is clear but the amount cannot be recognized in two invoices; both the amount and the issuer cannot be recognized in one ticket. The court does not ascertain the 4 invoices. 3. The two Defendants had no objection to the authenticity, legality and relevancy of evidence 5 and the Third Party also had no objection to the authenticity thereof. The court ascertains this evidence. With regard to the evidence 1, 2 submitted by the two Defendants, the court holds that both parties had no objection to authenticity and legality of the two evidence (the agreement and the insurance policy). The two evidence not only could demonstrate with each other but also had relevancy with this case. So the court ascertains the evidence. According to the cross-examination and ascertainment above, and combined with the facts having been ascertained in the hearing and the claims and pleas, the court finds the following facts after trial: At 1400 hrs on March 15, 2013, the Plaintiff paid RMB150 in the Yalong Bay Underwater World Resort hall which was located in the Hainan Province Yalong Bay National Holiday Resort to take part in the motorboat activity at sea. The project party appointed a coach without qualification certificate to operate the motorboat together with the Plaintiff. That coach directly let the Plaintiff who had not been systematically trained operate the motorboat, as a result, the Plaintiff’s face was bumped on the handlebar of the motorboat when operating the motorboat. The accident caused the Plaintiff’s chin chapped and three upper teeth lost. After the accident happened, the Plaintiff went to Sanya City People Hospital, 187 Hospital, Stomatology Hospital and Shanxi Province Geology Exploration Bureau Workers Hospital for treatment and paid medical expenses in amount of RMB37,753.5, travel expenses in amount of RMB737 and related accommodation expenses. During the treatment, the Plaintiff negotiated with the two Defendants regarding compensation for several times, but achieved no result. Thus the Plaintiff instituted this action. It is also found that Yalong Bay Underwater World Resort is belonged to Yanglong Bay Company and this company planned, operated and managed the above-mentioned landscape. On June 15, 2012, Yalong Bay Company and Bai laifu Company entered into a contract operation written agreement and agreed to contract

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the motorboat at sea in the landscape to Bai Lai Fu Company, of which the operation term was one year (from July 20, 2012 to July 19, 2013). On March 31, 2012, Bai Fu Lai Company (the insured) bought public liability insurance from PICC Hainan (the insurer). On the same day, Bai Fu Lai Company paid the insurance premium in amount of RMB20,000 for PICC Hainan. PICC Hainan issued a policy of public liability insurance (version of 1999), of which the number was PZCG201246010000000023. Under the policy, the parties agreed that the insurance coverage was the entertainment event of motorboat at sea operated by the insured; the insurance term was from April 1, 2012 to March 31, 2013; the limitation for each person for one accident was RMB220,000, the limitation of accidental personal injury was RMB200,000, the limitation of medical compensation of accidental personal injury was RMB20,000 and within medical liability coverage 80% of medical expenses would be compensated, in addition, the deductible of each accident was RMB100. The insurer was only responsible for the personal injury and damage to the property of the third person which was caused by accidents happened under entertainment events operated by the insured and the insurer should undertake the civil compensation liability in accordance with the law. Before the accident involved happened, the Plaintiff served in Shanxi correspondence service Co., Ltd whose annual yield was RMB40,000. The evidence submitted by the Plaintiff and the Defendants and trial record are put in the files to prove above-mentioned facts. The court holds that this case is arising from dispute over liability for personal injury at sea. The main issues in this case are who shall be responsible for the compensation of the personal injury to the Plaintiff and how much shall be compensated. 1. In respect of the liability for Bai Fu Lai Company and Yalong Bay Company. The personal injury to the Plaintiff was caused by the direct mistake of the coach when the Plaintiff took part in the motorboat activity at sea in Yalong Bay Underwater World Resort. As the actual operator, Bai Fu Lai Company should know very well high risks in this activity. It should standard and strengthen personnel management, but it appointed a staff without qualification certificate as coach, consequently the accident happened and directly caused the Plaintiff injured. Yalong Bay Company is in charge of general planning, operation and management of Yalong Bay Underwater World Resort. It contracted the motorboat activity at sea in the resort to Bai Fu Lai Company to operate. It was agreed that Bai Fu Lai Company would undertake all losses in the operation, including personal injury to tourists. The agreement can only bind the contracting parties, but cannot bind a third party. The agreement cannot exempt Yalong Bay Company from the obligation of inspecting and supervising the operation of Bai Fu Lai Company. In this case, the irregular operation of Bai Fu Lai Company and Yalong Bay Company’s unfulfillment of inspection and supervision jointly led to this accident and caused the Plaintiff injured. According to the provision of Article 8 of the Tort Liability Law of People’s

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Republic of China, if two or more persons jointly commit a tort and cause damages to other people, they shall bear joint and several liability, Bai Fu Lai Company and Yalong Bay Company shall bear joint and several liability for compensation for personal injury to the Plaintiff. 2. In respect of whether PICC Hainan shall undertake the liability in this case. PICC Hainan is not joint or direct tortfeasor in this case, but the accident involved happened in insurance term, and the entertainment activities including motorboat at sea operated by the insured, which Bai Fu Lai Company should undertake the civil liability for compensation, fell into the scope of the coverage. During the action, the two Defendants filed an application to add PICC Hainan as third party to take part in the action, it suggests the two Defendants required PICC Hainan to bear the insurance indemnity liability as agreed. According to Article 65 Paragraph 1 of the Insurance Law of the People’s Republic of China, the insurer may directly indemnify a third party for loss or damage caused by the insured of a liability insurance contract in accordance with the provisions of laws or the terms of an insurance contract and the agreement between PICC Hainan and Bai Fu Lai Company that the insurer is responsible for personal injury or property damage to third person caused by accidents in the entertainment activities operated by the insured and the insured shall undertake corresponding civil liability for compensation in accordance with the law, PICC Hainan shall bear the indemnification liability for personal injury to the Plaintiff caused by the accident involved, and the indemnification shall base on the agreement that the limitation for each person for one accident is RMB220,000, the limitation of accidental personal injury is RMB200,000, the limitation of medical compensation of accidental personal injury is RMB20,000 and within medical liability coverage 80% of medical expenses will be compensated, in addition, the deductible of each accident is RMB100. 3. In respect of compensation items and the total amount of compensation. According to Article 17 Paragraph 1 of the Interpretations of the Supreme People’s Court on Several Law Application Issues on the Trial of Cases concerning Compensation for Personal Injury, “where a victim suffers personal injury, the obligor to compensation shall compensate all expenses related to treatment and decreased income because of loss of working time, including medical expenses, lost wages, nursing expenses, travel expenses, accommodation expenses, dining subsidy in hospital and necessary nutrition expenses” and Article 8 Paragraph 2 of the Interpretations of the Supreme People’s Court on Issues regarding the Ascertainment of Compensation Liability for Psychological Damages in Civil Torts, “where a person suffers psychological damage from a tort, serious result is caused, the people’s court shall rule the tortfeasor bear liabilities for cessation of infringement, removal of obstruction, elimination of danger, return of property, restoration to the original status, compensation for losses, apology, and elimination of consequences and restoration of reputation” the reasonable medical expenses, lost wages, travel expenses, accommodation expenses and nutrition expenses spent by the Plaintiff and proper psychological

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damage compensation for the injury caused by this accident shall be protected by the law. Combining the injury, treatment, income and claims of the Plaintiff, the court ascertains the reasonable amount of compensation which should be protected as follows: 1. As to the medical expenses, the amount claimed by the Plaintiff is RMB37,500.8, it is lower than the actual paid amount namely RMB37,753.5, so the court ascertains the former amount; 2. As to the lost wages, according to the standard of loss or fracture of tooth stipulated in Article 5.4.6.1 of the Appraisal Standard concerning Lost Wages of Victim and the injury to the Plaintiff, the court ascertains the loss of working time is 30 days. Combined with the Plaintiff’s income, the court ascertains the amount of lost wages is RMB3,287.5 (RMB40,000 per year/ 365 days * 30 days); 3. As to the travel expenses and accommodation expenses in amount of RMB2,919 claimed by the Plaintiff, the Plaintiff could not provide valid invoices except the travel expenses in amount of RMB737. So the court ascertains RMB737; 4. As to the nutrition expenses, considering the injury to the Plaintiff and treatment, the court ascertains this part is RMB1,500; and 5. As to the compensation of psychological damage, objectively, this accident caused the Plaintiff suffering serious injury and critically affected her work and life. Based on the actual situation in this case, the court ascertains the amount of compensation of psychological damage is RMB10,000. The amount of above-mentioned expenses is RMB53,025.4 in total. According to the above statement that the liability for personal injury should be undertaken by two Defendants and PICC Hainan separately, PICC Hainan shall indemnify the Plaintiff RMB35,424.6 (medical expenses in amount of RMB20,000 + travel expenses in amount of RMB737 + lost wages in amount of RMB3,287.6 + nutrition expenses in amount of RMB1,500 + compensation of psychological damage in amount of RMB10,000 − deductible in amount of RMB100). The two Defendants shall jointly and severally bear compensation liability for the remaining part namely RMB17,600.8. In summary, the court supports the claim of the Plaintiff against PICC Hainan for medical, travel expenses, lost wages, nutrition expenses and compensation of psychological damage in a total amount of RMB35,424.6, and holds the two Defendants jointly and severally undertake liability for compensation in amount of RMB17,600.8. The court does not support other claims filed by the Plaintiff. According to Article 8, Article 13 and Article 16 of the Tort Liability Law of People’s Republic of China, Article 17 Paragraph 1, Article 19 Paragraph 1, Article 20, Article 22 and Article 24 of the Interpretations of the Supreme People’s Court on Several Law Application Issues on the Trial of Cases concerning Compensation for Personal Injury, and Article 8 Paragraph 2 of the Interpretations of the Supreme

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People’s Court on Issues regarding the Ascertainment of Compensation Liability for Psychological Damages in Civil Torts, the judgment is as follows: 1. The Defendants, Hainan Yalong Bay Underwater World Tourism Co., Ltd. and Sanya Bai Fu Lai Tourism Development Co., Ltd., shall jointly and severally compensate the Plaintiff, CHEN Lei, RMB17, 600.8 within 10 days upon the effectiveness of this judgment; 2. The Third Party, People’s Property and Casualty Insurance Company (Group) of China Hainan Branch, shall compensate the Plaintiff, CHEN Lei, RMB35, 424.6 within 10 days upon the effectiveness of this judgment; and 3. Other claims filed by the Plaintiff CHEN Lei shall be rejected. Where the party who bears the obligation for payment fails to fulfill the above-mentioned payments within the period designated in this judgment, such party shall, in accordance with Article 253 of Civil Procedure Law of the People’s Republic of China, double pay the interest for the period of delayed performance. Court acceptance fee in amount of RMB2,036, RMB829 shall be born by the Plaintiff CHEN Lei, RMB809 shall be born by the Third Party People’s Property and Casualty Insurance Company (Group) of China Hainan Branch and RMB398 shall be jointly born by the Defendants, Hainan Yalong Bay Underwater World Tourism Co., Ltd and Sanya Bai Fu Lai Tourism Development Co., Ltd. In event of dissatisfaction with this Judgment, any party may within 15 days upon service of this judgment, submit a statement of appeal to the court, with duplicates in the number of the opposite parties, to appeal to the Hainan High People’s Court. Presiding Judge: WANG Weimin Acting Judge: WU Yonglin People’s Assessor: TIAN Shihong August 26, 2014 Clerk: HUANG Haijun

Tianjin Maritime Court Civil Judgment CHEN Linglong et al. v. Ping An Property & Casualty Insurance Company of China Ltd. Tianjin Branch et al. (2014) Jin Hai Fa Shang Chu Zi No.148 Related Case (s) This is the judgment of first instance and the judgment of second instance is on page 242. Cause of Action 230. Dispute over marine insurance contract on the sea or sea-connected waters. Headnote Hull insurance policy allowed any of the co-assureds to claim for total loss of the insured ship, and the value of the loss was to be calculated by reference to the market value of the vessel when the contract was made. Summary The Plaintiff shipowner contracted to acquire vessel insurance from two Defendant insurers. When Plaintiff’s vessel, M/V “Jin Ye 88” encountered a storm that occasioned total loss of the ship, the Plaintiffs filed an insurance claim to recover the value for which they had contracted. The court held that the policy covered all three co-owners of the ship, so all plaintiffs were entitled to bring the claim for breach of contract; that the cause of the wreck fell within the coverage parameters, so the insurers were obligated to indemnify the plaintiffs. The court further held that the insured value of the ship was to be determined in reference to the market value of the ship at the time the insurance contract was made and according to the provisions of the contract.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_8

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Judgment The Plaintiff: Tianjin Jin Ye Shipping Co., Ltd. Domicile: A4179C23 Standard Factory, No.2 Technology, No.129 Haibin Ten Road, Bonded District, Tianjin. Legal representative: CHEN Dajin, chairman of the board. Agent ad litem: ZHOU Leiding, lawyer of Grandall Law Firm Tianjin Office. Agent ad litem: ZHANG Rui, lawyer of Grandall Law Firm Tianjin Office. The Plaintiff: CHEN Linglong, male, Han, born on March 15, 1976 Domicile: No.18, First Haiyang Village District, Shitang Town, Wenling City, Zhejiang. Agent ad litem: JIA Yiou, lawyer of Grandall Law Firm Tianjin Office. The Plaintiff: CHEN Xinhua, male, Han Domicile: No.46 District 2, Haiyang Village, Shitang Town, Wenling City, Zhejiang. Agent ad litem: JIA Yiou, lawyer of Grandall Law Firm Tianjin Office. The Defendant: Ping An Property & Casualty Insurance Company of China Ltd. Tianjin Branch Domicile: 1 Baidi Road, Nankai District, Tianjin. Person in charge: WANG Ran, vice general manager. Agent ad litem: WANG Peng, lawyer of Tianjin Gaopeng Law Firm. Agent ad litem: LI Dongyan, male, Han, born on February 27, 1982, living in Hongqiao District, Tianjin, employee. The Defendant: Ping An Property & Casualty Insurance Company of China Ltd. Domicile: Floor 6 &7, Xinghe Development Center Grogshop, Fuhua Three Road, Futian District, Shenzhen City, Guangdong. Legal representative: SUN Jianping, chairman of the board. Agent ad litem: WANG Peng, lawyer of Tianiin Gaopeng Law Firm. Agent ad litem: LI Dongyan, male, Han, born on February 27, 1982, living Hongqiao District, Tianjin, employee. With respect to the case arising from dispute over marine insurance contract filed by the Plaintiffs, Tianjin Jin Ye Shipping Co., Ltd. (hereinafter “Jin Ye Company”), CHEN Linglong and CHEN Xinhua against the Defendants, Ping An Property & Casualty Insurance Company of China Ltd. Tianjin Branch (hereinafter “Ping An Tianjin”) and Ping An Property & Casualty Insurance Company of China Ltd. (hereinafter “Ping An”), the court, after accepting this case on February 25, 2014, proceeded to try it under general procedure according to the law. The court held two hearings in public on May 12 and August 4, 2014 respectively. In the first hearing,

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CHEN Dajin, the legal representative of the Plaintiff Jin Ye Company, ZHOU Leiding and ZHANG Rui, agents ad litem of the Plaintiffs CHEN Linglong and CHEN Xinhua, and JIA Yiou, agent ad litem of them, WANG Peng and LI Dongyan, agents ad litem of the Defendants, Ping An Tianjin and Ping An, appeared in court and participated in the action; in the second hearing, CHEN Dajin, the legal representative of the Plaintiff Jin Ye Company, ZHOU Leiding, agent ad litem of it, JIA Yiou, agent ad litem of the Plaintiffs, CHEN Linglong and CHEN Xinhua, WANG Peng and LI Dongyan, agents ad litem of the Defendants, Ping An Tianjin and Ping An, and TIAN Zhiyun, an employee of the appraiser Tianjin Global Maritime Inspection & Consultants Company (hereinafter “Global Company”), appeared in court and participated in the action. Now the case has been concluded. The three Plaintiffs alleged that they purchased coastal and inland river hull insurance for M.V. “Jin Ye 88”, which was owned by them, from the two Defendants. The two Defendants issued the policy numbered with PCB040002090300000190 of coastal and inland river hull insurance. On October 3, 2013, M.V. “Jin Ye 88” loaded at the Port of Tianjin and was about to head for the port of Wenzhou, the ship encountered typhoon on the coast of Qidong, then sank in 32.01.6°N 122.33.0°E at 1025 on October 8, 2013. Since M.V. “Jin Ye 88” occurred total loss, the three Plaintiffs requested the two Defendants to compensate according to the insurance policy, but the two Defendants only prepaid RMB1,800,000, the rest of the indemnity in sum of RMB8,400,000 was in arrears hitherto. Therefore the three Plaintiffs requested the court to rule that the two Defendants jointly and severally pay the insurance indemnity in sum of RMB8,400,000 and interest thereon, which should be calculated from October 8, 2013 to the day of payment at the loan interest rate of the People’s Bank of China over the same period, and bear the litigation fees. The two Defendants argued as follows: 1. The accident involved resulted from the unseaworthiness of the ship, the two Defendants could not compensate according to the contract; 2. Even if the two Defendants should compensate, the amount of the insurance indemnity claimed by the Plaintiff was too high. There was only insured amount but no insured value agreed in the insurance policy, the insured value should be counted according to the provisions of the law and the agreement in the contract. The age of the ship involved was more than 3 years, so the insured value should be calculated on the basis of that of an old ship, 15% of the loss as well RMB1,800,000, the sum having been paid should be deducted from the indemnity; 3. The Defendant, Ping An Tianjin was the insurer under the insurance contract involved, so it should bear the external insurance liabilities by itself, Ping An should not bear such liabilities; 4. The insured in this case was the Plaintiff, Jin Ye Company, rather than the Plaintiffs CHEN Linglong and CHEN Xinhua, so they were not entitled to file a lawsuit in terms involved.

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The main issues in this case are as follows: 1. Whether CHEN Linglong and CHEN Xinhua are the insureds under the insurance contract involved; 2. Whether the reason of the sinking of M.V. “Jin Ye 88” falls into the risks covered by the insurance contract involved; 3. What the insured value of the insurance contract involved should be; 4. Whether the Defendant Ping An should bear the insurance liability. The three Plaintiffs submitted evidence as follows: 1. Certificate of Ownership; 2. Certificate of Nationality, to jointly prove that the owners of M.V. “Jin Ye 88” were the three Plaintiffs and they were entitled to claim for the loss of the ship; 2. Inspection Certificate of Marine Ship, to prove that M.V. “Jin Ye 88” acquired complete certificates after construction, therefore it was a seaworthy ship; 3. Survey Report of Marine Ship, to prove that M.V. “Jin Ye 88” was a seaworthy when in danger; 4. Coastal and inland river insurance policy and Insurance Clauses, to prove that the insurance contractual relationship established between the three Plaintiffs and the two Defendants, the three Plaintiffs purchased total loss insurance for the ship involved; 5. Insurance invoice, to prove the three Plaintiffs fully paid the insurance premium in time; 6. Marine Accident Report, to prove that M.V. “Jin Ye 88” sank because it met with strong winds and waves; 7. Certificate of weather, to prove that the wave force at sea was about 10 when M.V. “Jin Ye 88” was in danger, which met the circumstance provided in the Insurance Clauses that the indemnity would be paid if the ship occurred total loss due to wind over grade 8; 8. Water Traffic Accident Liability Determination Letter, to prove that the direct cause why M.V. “Jin Ye 88” overturned and sank was water leakage to cargo hold due to extreme weather; 9. Ship Minimum Safe Manning Certificate; 10. Certificates of Competency of Crew onboard M.V. “Jin Ye 88”, to jointly prove that the manning of M.V. “Jin Ye 88” met the requirement of the minimum safe manning; 11. Minutes of the update meeting of Shanghai Maritime Safety Administration (hereinafter referred to as “Shanghai MSA”) about the disposal of M.V. “Jin Ye 88”, to prove that the Shanghai Maritime Safety Administration urged the three Plaintiffs to refloat the ship and remove the shipwreck in time after M.V. “Jin Ye 88” sank; 12. Rescue work report of M.V. “Jin Ye 88”, to prove that the sue and labour charges of M.V. “Jin Ye 88” was RMB692,716.05;

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13. Refloating License issued by Shanghai MSA; 15. Agreement of Clearing, Refloating and Pollution Prevention Oil Extracting Operation in terms of M.V. “Jin Ye 88”, to jointly prove that there was no residual value of M.V. “Jin Ye 88” and Shanghai MSA agreed to refloat M.V. “Jin Ye 88”; 14. 16. Letters about the claim in respect of M.V. “Jin Ye 88”, to prove the fact that the Defendant refused to indemnify; 15. 17. Statement issued by the Tianjin Ship Inspection Department, to prove that the gap between the hatch covers and hatch coamings and the gap between the hatch covers met the design specifications as well the technical regulation for statutory survey; 16. 18. Coastal and inland river hull insurance policy of M.V. “Jin Ye 88” for four successive years from November 14, 2009 to November 13, 2013 from the two Defendants, to prove that the two Defendants decreased the insured amount of the ship year by year on the basis of the actual value of the ship; 17. 19. Coastal and inland river hull insurance policy issued by People’s Insurance Company of China Ltd.; and 18. 20. Coastal and inland river hull insurance policy issued by Ping An, to prove that the policies of the same kind issued by other insurance companies stated the insured value which was consistent with the insured amount. Upon the application of the Plaintiff, Jin Ye Company, the court entrusted Global Company to appraise the actual value of M.V. “Jin Ye 88”, it issued the survey report, in which it held the market value of M.V. “Jin Ye 88” on November 14, 2012 was RMB14,879,000. The three Plaintiffs raised no contest to the survey report. The cross-examination opinions of the two Defendants on the evidence submitted by the three Plaintiffs are as follows: The two Defendants affirmed the authenticity of evidence 1, 3, 5, 8 and 17, but questioned the purpose of proof thereof. The two Defendants disaffirmed the authenticity of evidence 2 since there was no original. The two Defendants raised no contest to the evidence 6, 7, 9-16, 18, but questioned the relevancy of evidence 19-20. The two Defendants questioned the survey report, they argued that Global Company did not have the corresponding assessment qualification, the conclusion of which was the replacement value other than the market value of the ship, also it did not take the market factors into consideration, so it could not be regarded as the basis to identify the actual value of the ship. The two Defendants provided the following evidence: 1. Water Traffic Accident Liability Determination Letter, to prove that the sinking of M.V. “Jin Ye 88” resulted from unseaworthiness of the ship; 2. Coastal and inland river hull insurance slip, to prove that the Plaintiff Jin Ye Company purchased all risks under coastal and inland river hull insurance for the ship involved from the Defendant Ping An Tianjin. The Plaintiff, Jin Ye Company confirmed that it had received the Insurance Clauses for coastal and

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inland river hull insurance as well as the additional clause, and the insurer had clearly reminded and explained the Insurance Clauses; 3. Coastal and inland river hull insurance policy, Insurance Clauses and Certificate of Nationality, to prove that the ship involved was an old ship, the Defendant Ping An Tianjin issued the insurance policy upon the requirement of the Plaintiff Jin Ye Company, and both parties did not agree a specific insured value. The insured value should be ascertained according to the agreement of the Insurance Clauses; 4. Ship Appraisal Report and the attachment, to prove that the Defendant Ping An Tianjin had ascertained the actual value of the ship involved by means of entrusting to appraise, which should be regard as the basis of the insurance indemnity. The cross-examination opinions of the three Plaintiffs on the evidence submitted by the two Defendants are as follows: The three Plaintiffs affirmed the authenticity of evidence 1-3, but questioned the purpose of proof thereof, and disaffirmed the authenticity of evidence 4. The ascertainment opinions of the court on the evidence submitted by the three Plaintiffs are as follows: the court ascertains the authenticity of the evidence 1, 3-18, and the effect of the evidence aforesaid. Though there is no original of evidence 2, the content thereof can mutually corroborate evidence 1 and 3, so the court ascertains its effect; evidence 1 and 2 can prove that the owners of M.V. “Jin Ye 88” are the three Plaintiffs; evidence 3 can prove that M.V. “Jin Ye 88” has got complete certificates after completion of construction, it was a seaworthy ship; evidence 4 can prove that M.V. “Jin Ye 88” was a seaworthy ship when in danger; evidence 5 can prove that the insureds stated in the policy involved are Jin Ye Company etc., the coverage is all risks under coastal and inland river hull insurance; evidence 6 can prove that the Plaintiff, Jin Ye Company had fully paid the insurance premium in time; evidence 7-9 can prove that the direct cause of the overturn and sinking lies in that M.V. “Jin Ye 88” encountered wave force of 10 and free surface emerged due to water leakage to cargo hold; evidence 10 and 11 can prove that the manning of M.V. “Jin Ye 88” satisfied the requirement of the minimum safe manning; evidence 12 can prove that Shanghai MSA urged the Plaintiff, Jin Ye Company to refloat and remove the shipwreck in time after M.V. “Jin Ye 88” sank; evidence 13 can prove that the sue and labor charges of M.V. “Jin Ye 88” is RMB692,716.05; evidence 14 and 15 can prove that Lianyungang Dali Underwater Engineering Co., Ltd. (hereinafter “Dali Company”) disassembled, refloated and removed M.V. “Jin Ye 88” and charged the refloating charges and the sue and labour charges against the wreckage of the ship; evidence 16 can prove that the Plaintiff, Jin Ye Company required the Defendant, Ping An Tianjin to compensate after the accident, but Ping An Tianjin did not fully compensate, evidence 17 can prove that the gap between the hatch covers and hatch coamings and between the hatch covers of M.V. “Jin Ye 88” meet the requirements of design specifications; evidence 18 can prove M.V. “Jin Ye 88” has been insured by the Defendant Ping An Tianjin for four successive years from November 14, 2009 to November 13,

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2013, the insured amount of the ship reduced year by year; evidence 19-20 have no relevancy to this case, the court does not ascertain the effect of evidence thereof. With respect to the survey report issued by Global Company, the court holds that Global Company, as the appraiser involved, was jointly appointed by both parties which has the qualification for ship survey and assessment granted by China Classification Society, the procedure and result of the replacement cost method it applied to estimate the value of M.V. “Jin Ye 88” is proper, so the court ascertains the survey report. The ascertainment opinions of the court on the evidence submitted by the two Defendants are as follows: evidence 1 and 3 are consistent with evidence 9, 5 and 2 of the Plaintiff, the ascertainment opinions are the same as above; the court ascertains the authenticity of evidence 2, which can prove that the Plaintiff Jin Ye Company sealed on the words “the proposer has received the coastal and inland river hull insurance policy clauses and additional clause, and ascertained that the insurer has clearly stated the clause about exemptions of the insurer” printed in the insurance slip; evidence 4 is an assessment report, but the appraiser who signed the report did not appear in court to be questioned, what’s more, there are some contradictions in the report, such as the base date of assessment confirmed in the report is November 14, 2012, while in page 8 it is stated that the trade date of M.V. “Jin Ye 88” is October 2013, and the remaining time of M.V. “No.2012308B1” is 24 years in page 8, but the remaining time of the ship showed in the page 10 is 30 years. So the court does not ascertain the evidence effect of the assessment report. After trial, it is found that the construction of M.V. “Jin Ye 88” was finished on October 19, 2009, which had been engaged in transportation of coastal bulk cargo. This ship is owned jointly by the three Plaintiffs, the ratio of ownership is 40% for Jin Ye Company, 39% for CHEN Linglong and 21% for CHEN Xinhua. On October 17, 2012, the Plaintiff Jin Ye Company as the proposer purchased coastal and inland river hull insurance from the Defendant Ping An Tianjin and submitted Certificate of Ownership, Certificate of Nationality and etc. of M.V. “Jin Ye 88”. Ping An Tianjin issued No. PCB0400020903000000190 policy on the same day, which stated that the insurer was Jin Ye Company etc., the insured ship was M.V. “Jin Ye 88”, the coverage was all risks under coastal and inland river hull insurance, the insured amount was RMB12,000,000, the term of coverage was from November 14, 2012 to November 13, 2013, but there was no record of the insured value, it was stated on the face of the policy that the deductible of total loss accident was 15% of the loss. According to Clause 1 of the Insurance Clauses attached to the policy, if the total loss of the insured ship was caused by wind above grade 8 (including), the claim should be payable under this insurance; it was provided in Clause 5, a ship whose age was more than 3 years should be regarded as an old ship, the insured value of an old ship was subject to the actual value, actual value referred to the market value of the ship or the market value of the ship at the time of accident; it was provided in Clause 7, when the ship occurred total loss, if the insured value was higher than or equaled to the insured amount, the indemnity should be subject to the insured amount, if the insured amount was higher than or

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equaled to the insured value, the indemnity should not exceed the insured value of the ship at the time of accident. On October 3, 2013, after loading at Port of Tianjin, M.V. “Jin Ye 88” was bound for the port of Wenzhou. During the voyage, the ship encountered typhoon and sunk in 32.01.6°N 122.33.0°E at 1025 on October 8, 2013. The ship acquired complete certificates and the crew meet requirement of the minimum safe manning when it sank. After Shanghai Maritime Safety Administration investigated, it found out that M.V. “Jin Ye 88” met with wind about grade 10 when the accident occurred, the direct cause of the overturn and sinking of the ship was the free surface caused by water leakage to the cargo hold, and it held there was a gap between the hatch cover and the hatch coaming and the hatch canvas was torn by storm during the voyage, so it was possible that water leaked into the cargo hold. Because M.V. “Jin Ye 88” influenced the navigation safety of the surrounding waters, Shanghai MSA instructed Dali Company to salvage the ship. Dali Company towed M.V. “Jin Ye 88” to the shoal and guarded the ship, sue and labor charges in amount of RMB692,715.05 arose therefrom. After that, Shanghai MSA requested the Plaintiff, Jin Ye Company to refloat and remove the sunken ship, the Plaintiff, Jin Ye Company after the Defendant, Ping An Tianjin agreed, signed a refloating contract with Dali Company on November 19, 2013, in which it is provided Dali Company disassembled, removed and refloated M.V. “Jin Ye 88” and the wreckage of the ship charged against the refloating charges, and the sue and labor charges should be offset by the shipwreck, the contract has been fulfilled. After the accident, the Plaintiff Jin Ye Company held that M.V. “Jin Ye 88” constituted total loss, so it requested the Defendant Ping An Tianjin to compensate on the basis of the insured amount, although the Defendant Ping An Tianjin agreed that the ship constituted constructive total loss and prepaid the insurance indemnity in amount of RMB1,800,000 to the Plaintiff Jin Ye Company on November 21, 2013, it held that the indemnity should be paid on the basis of the market value of M.V. “Jin Ye 88”, for which dispute arose between the two parties. According to the assessment of Global Company entrusted by the court, the actual value of M.V. “Jin Ye 88” on November 14, 2012 namely at the time when the insurance liability commenced was RMB14,879,500. It is also found out that M.V. “Jin Ye 88” was insured by the Defendant Ping An Tianjin since it had been constructed, the insured amount of last three years was respectively RMB1,700,000, RMB1,700,000 and RMB1,500,000. The court holds this case is arising from dispute over hull insurance contract. 1. In respect of the issue whether the Plaintiffs CHEN Linglong and CHEN Xinhua are the insureds under the insurance contract involved, the court holds that the insureds stated in the policy involved are Jin Ye Company etc. It is consistent with the record of shipowner stated in the first page of Certificate of Ownership of M.V. “Jin Ye 88” and the co-owners of the ship stated in the second page are Jin Ye Company, CHEN Linglong and CHEN Xinhua which is the explanation and demonstration of “Jin Ye Company etc.”. Since this certificate has been

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submitted to the insurer when arranging the insurance, the insurer should know the co-ownership of M.V. “Jin Ye 88”, the insureds stated in the policy is “Jin Ye Company, etc.” which shall be interpreted as the insureds include Jin Ye Company, CHEN Linglong and CHEN Xinhua, so the Plaintiffs CHEN Linlong and CHEN Xinhua are insureds under the insurance contract involved. 2. In respect of the issue whether the cause of the sinking of M.V. “Jin Ye 88” falls into the coverage under the insurance contract involved, the court holds that according to the investigation of Shanghai MSA, the direct cause of the sinking of M.V. “Jin Ye 88” lies in that the ship encountered wind about grade 10, as a result, water leaked into the cargo hold and produced free surface. Shanghai MSA held that there was a gap between the hatch cover and hatch coaming, accordingly the two Defendant alleged that M.V. “Jin Ye 88” was unseaworthy, but according to the opinions of Tianjin Ship Inspection Department, the situation aforesaid met with the requirement of the design specifications, M.V. “Jin Ye 88” shall use hatch tarpaulin to ensure weathertight cover according to the Technical Regulations for Statutory Survey of Seagoing Ships Navigating in Domestic Waters 2004 (hereinafter referred to as the “Technical Regulations”), Shanghai MSA identified that the hatch canvas of this ship was tore by storm, it suggested the ship had been covered with canvas according to the Technical Regulations, combined with the facts that M.V. “Jin Ye 88” has complete certificates and the manning satisfied the requirement of the minimum safe manning ship, the court ascertains the ship was seaworthy at the time of accident, so the allegation of the two Defendants cannot be supported. Above all, the direct cause of the sinking is that M.V. “Jin Ye 88” met with wind about grade 10. According to the provision of Clause 1 of the Insurance Clauses that if the total loss of the ship is caused by wind over grade 8 (include wind 8), the claim arising therefrom shall be payable under the insurance, the cause of the sinking of M.V. “Jin Ye 88” falls into the coverage of the insurer, so the insurer shall indemnify. 3. In respect of the insured value in the contract involved, the court holds that the parties did not agree a specific insured value in the insurance contract involved. Considering that the age of M.V. “Jin Ye 88” exceeded 3 years when it sank, according to the Clause 5 of the Insurance Clauses, the insured value of the ship should be determined by the actual value. It is also provided in this clause that the actual value refers to the market value of the ship or the market value at the time of accident. “The market value at the time of accident” can be easily understood, while there is no time attribute of the paralleled words “market value of the ship”, it is not clear. The court holds that according to Article 219 Paragraph 2 Sub-paragraph 1 of the Maritime Code of the People’s Republic of China, the insured value of the ship shall be the value of the ship at the time when the insurance liability commences, the “market value of the ship” aforesaid shall be interpreted as the market value at the time when the insurance liability commenced namely November 14, 2012. According to the survey

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report issued by Global Company, the market value of M.V. “Jin Ye 88” on November 14, 2012 is RMB14,879,500 which shall be the insured value of M. V. “Jin Ye 88”. As to the insured amount, the court holds that the Plaintiff raised no contest to that M.V. “Jin Ye 88” constituted total loss, so the insurer shall indemnify on the basis of total loss. It is stated on the face of the policy that the deductible of a total loss accident is 15% of the loss, it is contradictory in grammar, the deductible ratio refers to a certain ratio, while “15% of the loss” indicate a specific sum. So it shall be interpreted in combination with the purpose of the insurance contract, other clauses and principle of good faith. According to Clause 7 of the Insurance Clauses involved, after the ship occurs total loss, if the insured value is higher than or equals to the insured amount, the insurer shall indemnify on the basis of the insured amount, if the insured value is lower than the insured amount, the insurer shall indemnify on the basis of the insured amount. From the purposes of contract, the agreement of the deductible ratio in the policy is to further limit the responsibility of the insurer to 85% of the total loss. So combined with Clause 7, it shall be interpreted as when the insured value is higher than or equals to the insured amount, the insurer shall indemnify 85% of the insured amount, when the insured value is lower than the insured amount, the insurer shall indemnify 85% of the insured value. Since the insured value of M.V. “Jin Ye 88” is higher than the insured amount, the insurer shall indemnify 85% of the insured amount namely RMB10,200,000, after deducting RMB1,800,000 having been paid, the insurer still needs to pay RMB8,400,000. 4. In respect of the issue that whether the Defendant Ping An shall bear the liability, the court holds that the official seal affixed on the policy involved is No.247 special insurance seal of Ping An Property & Casualty Insurance Company of China Ltd., the two Defendants argued that No.247 represented Ping An Tianjin, combined with the fact that the Plaintiff, Jin Ye Company contacted with the Defendant Ping An Tianjin in terms of the indemnity, the Defendant Ping An Tianjin had paid the insurance indemnity in amount of RMB1,800,000, the court holds that Ping An Tianjin is the insurer involved. Since Ping An Tianjin has no legal personality, according to Article 74 Paragraph 2 of the Insurance Law, its civil liability shall be undertaken by Ping An, so Ping An shall pay the insurance indemnity in amount of RMB8,400,000. As to the interest on the insurance indemnity alleged by the three Plaintiffs, the court holds that there shall be a reasonable period for Ping An to examine and prepare after it received the claim, the court determines November 21, 2013 namely the time Ping An Tianjin prepaid the insurance indemnity as the expiry date of the above-mentioned period for examination and preparation. Because Ping An has not paid the rest insurance indemnity in amount of RMB8,400,000, therefore it shall bear the interest on the sum from the November 22, 2013 counted on the basis of the loan interest rate published by Bank of China over the same period. .

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To sum up, according to the Contract Law of the People’s Republic of China Article 125, the Insurance Law of the People’s Republic of China Article 74 Paragraph 2, the Maritime Code of the People’s Republic of China Article 219 Paragraph 2 Sub-paragraph 1, the Provisions of the Supreme People’s Court on Several Issues about Trial of Cases concerning Marine Insurance Disputes Article 1, the judgment is as follows: 1. The Defendant, Ping An Property & Casualty Insurance Company of China Ltd., shall pay the insurance indemnity in amount of RMB8,400,000 to the Plaintiffs, Tianjin Jin Ye Shipping Co., Ltd., CHEN Linglong and CHEN Xinhua, within 10 days after this judgment comes into effect; 2. The Defendant, Ping An Property & Casualty Insurance Company of China Ltd., shall compensate the Plaintiff, Tianjin Jin Ye Shipping Co., Ltd. CHEN Linglong, CHEN Xinhua, for the interest on the payment aforesaid (calculated from November 22, 2013 to the date of payment designated by this judgment on the basis of the loan interest rate published by Bank of China over the same period); 3. Other claims of the Plaintiffs, Tianjin Jin Ye Shipping Co., Ltd., CHEN Linglong and CHEN Xinhua, shall be rejected. For failure to fulfill the obligation of payment within the period designated by this judgment, interest on the debt for the delayed period shall be doubled according to Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB70,600 and the appraisal cost in amount of RMB35,000 shall be undertaken by the Defendant, Ping An Property & Casualty Insurance Company of China Ltd. Considering that the Plaintiff prepaid the sum, for the convenience of settlement, the court will not repay to the Plaintiff. The Defendant, Ping An Property & Casualty Insurance Company of China Ltd., shall pay to the Plaintiff along with other payments. In the event of dissatisfaction with this judgment, the parties may within 15 days upon the service of this judgment, submit a statement of appeal to the court, together with copies in six copies, to lodge an appeal to the Tianjin High People’s Court, and pay the appeal fee in terms of the dissatisfied amount decided in the first instance within 7 days upon submitting the statement of appeal (Bank of deposit: Agricultural Bank of China Tiancheng Branch 02200501040006269, Account Name: Finance Department of Tianjin High People’s Court). If overdue, the appeal will be regard as withdrawn automatically. Presiding Judge: CHEN Jianpeng Acting Judge: PEI Daming Acting Judge: HU Yingjie October 8, 2014 Clerk: ZHANG Guojun

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Tianjin High People’s Court Civil Judgment CHEN Linglong et al. v. Ping An Property & Casualty Insurance Company of China Ltd. Tianjin Branch et al. (2014) Jin Gao Min Si Zhong Zi No.122 Related Case (s) This is judgment of second instance, and the judgment of first instance is on page 231. Cause of Action 230. Dispute over marine insurance contract on the sea or sea-connected waters. Headnote Affirming lower court decision holding defendant hull insurer liable to indemnify for total loss of ship in storm, and affirming lower court’s method of valuation of loss. Summary The court affirmed the judgment of the court of first instance holding that the Defendant insurer was liable to indemnify the Plaintiff shipowner for loss of the Plaintiff’s ship, and held that the lower court’s method of calculating the ship’s worth and the basis of fault were correctly established. The ship’s sinking was due to winds over grade 10 and the insurance company, Ping An Property & Casualty Insurance Company of China Ltd. could not prove otherwise.

Judgment The Appellant (the Defendant of first instance): Ping An Property & Casualty Insurance Company of China Ltd. Domicile: Floor 6 & 7, Xinghe Development Center Grogshop, Fuhua Three Road, Futian District, Shenzhen, Guangdong. Legal representative: SUN Jianping, chairman of the company. Agent ad litem: WANG Peng, lawyer of Tianiin Gaopeng Law Firm. Agent ad litem: LI Dongyan, male, Han, born on February 27, 1982, Living in Hongqiao District, Tianjin, employee

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The Respondent (the Plaintiff of first instance): Tianjin Jin Ye Shipping Co., Ltd. Domicile: A4179C23 Standard Factory, No.2 Technology, No.129 Haibin Ten Road, Bonded District, Tianjin. Legal representative: CHEN Dajin, general manager of the company. Agent ad litem: ZHOU Leiding, lawyer of Grandall Law Firm Tianjin Office. Agent ad litem: ZHANG Rui, lawyer of Grandall Law Firm Tianjin Office. The Respondent (the Plaintiff of first instance): CHEN Linglong, male, Han, born on March 15, 1976 Domicile: No. 18, First Haiyang Village District, Shitang Town, Wenling City, Zhejiang. Agent ad litem: JIA Yiou, lawyer of Grandall Law Firm Tianjin Office. The Respondent (the Plaintiff of first instance): CHEN Xinhua Agent ad litem: JIA Yiou, lawyer of Grandall Law Firm Tianjin Office. The Defendant of first instance: Ping An Property & Casualty Insurance Company of China Ltd. Tianjin Branch Domicile: No.1 Baidi Road, Nankai District, Tianjin. Person in charge: WANG Ran, deputy general manager. Agent ad litem: LI Dongyan, male, Han, born on February 27, 1982, Living in Hongqiao District, Tianjin, employee. Agent ad litem: WANG Peng, lawyer of Tianjin Gaopeng Law Firm. With respect to the case arising from dispute over ship insurance contract between the Appellant, Ping An Property & Casualty Insurance Company of China Ltd. (hereinafter referred to as Ping An), and the Respondents, Tianjin Jin Ye Shipping Co., Ltd. (hereinafter referred to as Jin Ye), CHEN Linglong, CHEN Xinhua, the Defendant of first instance, Ping An Property & Casualty Insurance Company of China Ltd. Tianjin Branch (hereinafter referred to as Ping An Tianjin), the Appellant disagreed with the Tianjin Maritime Court (2014) Jin Hai Fa Shang Chu Zi No.148 Civil Judgment and appealed to the court. After accepting it, the court formed a collegiate panel that GENG Xiaoning was Presiding Judge, YU Yinan was Acting Judge and LI Shanchuan was Acting Judge, Clerk SUN Chao worked as recording. The court held a hearing in public on November 28, 2014. Agents ad litem of the Appellant Ping An, WANG Peng and LI Dongyan, legal representative of the Respondent Jin Ye, CHEN Dajin, agents ad litem ZHOU Leiding and ZHANG Rui, joint agent ad litem of the Respondents Chen Longlong and CHEN Xinhua, JIA Yiou, agents ad litem of the Defendant of first instance Ping An Tianjin, LI Dongyan and WANG Peng, appeared in court to attend the hearing. Now the case has been concluded. The court of first instance found out that, the construction of M.V. “Jin Ye 88” was finished on October 19, 2009, and had been engaged in transportation of coastal bulk cargo. This ship was owned jointly by Jin Ye, CHEN Linglong and CHEN

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Xinhua (hereinafter referred to as Jin Ye and other two parties), the ratio of ownership was 40% for Jin Ye, 39% for CHEN Linglong and 21% for CHEN Xinhua. On October 17, 2012, Jin Ye as the proposer purchased coastal and inland river hull insurance from Ping An Tianjin and submitted the certificate of ownership, certificate of nationality of M.V. “Jin Ye 88”. Ping An Tianjin issued No. PCB0400020903000000190 policy on the same day, which stated that the insurer was Jin Ye, the insured ship was M.V. “Jin Ye 88,” the coverage was all risks under coastal and inland river hull insurance, the insured amount was 12,000,000 yuan, the term of coverage was from November 14, 2012 to November 13, 2013. However, there was no record of the insured value, though it was stated on the face of the policy that the deductible of total loss accident was 15% of the loss. According to Clause 1 of the insurance clauses attached to the policy, if the total loss of the insured ship was caused by wind above grade 8 (including), the claim should be payable under this insurance. Clause 5 provided that a ship more than 3 years old should be regarded as an old ship, that the insured value of an old ship should be subject to the actual value, which referred to the market value of the ship or the market value of the ship at the time of accident. Clause 7 provided that when the ship occurred total loss, if the insured value was higher than or equal to the insured amount, the indemnity should be subject to the insured amount; if the insured amount was higher than or equaled to the insured value, the indemnity should not exceed the insured value of the ship at the time of accident. On October 3, 2013, after loading at Port of Tianjin, M.V. “Jin Ye 88” was bound for the Port of Wenzhou. During the voyage, the ship encountered a typhoon and sunk in 32.01.6°N 122.33.0°E at 1025 on October 8, 2013. The ship acquired complete certificates and the crew met the requirement of the minimum safe manning when it sank. After Shanghai Maritime Safety Administration investigated, it found out that M.V. “Jin Ye 88” met with wind about grade 10 when the accident occurred. It said that the direct cause of the ship’s overturn and sinking water leakage to the cargo hold; there was also a gap between the hatch cover and the hatch coaming and the hatch canvas was torn by storm during the voyage, so it was possible that water leaked into the cargo hold. Because M.V. “Jin Ye 88” influenced the navigation safety of the surrounding waters, Shanghai MSA instructed Lianyungang Dali Underwater Project Co., Ltd. (hereinafter referred to as Dali) to salvage the ship. Dali towed M.V. “Jin Ye 88” to the shoal and guarded the ship, sue and labor charges in amount of 692,715.05 yuan arose therefrom. After that, Shanghai MSA requested Jin Ye to refloat and remove the sunken ship, Jin Ye, after Ping An Tianjin agreed, concluded a refloatation contract with Dali on November 19, 2013, in which it was provided that Dali disassembled, removed and refloated M.V. “Jin Ye 88”and the wreckage of the ship charged against the refloatation charges, and the sue and labor charges should be offset by the shipwreck, the contract was fulfilled. After the accident, Jin Ye held that M.V. “Jin Ye 88” constituted total loss, so it requested Ping An Tianjin to compensate on the basis of the insured amount, although Ping An Tianjin agreed that the ship constituted constructive total loss and

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prepaid the insurance indemnity in amount of 1,800,000 yuan to Jin Ye on November 21, 2013, it held that the indemnity should be paid on the basis of the market value of M.V. “Jin Ye 88”, for which dispute arose between the two parties. According to the assessment of Tianjin Global Maritime Inspection & Consultation Company (hereinafter referred to as Global Company) entrusted by the court of first instance, the actual value of M.V. “Jin Ye 88” on November 14, 2012 at the time when the insurance liability commenced was 14,879,000 yuan. The court of first instance also found out that, M.V. “Jin Ye 88” had been insured by Ping An Tianjin since it was constructed, the insured amount of last three years was respectively 17,000,000 yuan, 17,000,000 yuan and 15,000,000 yuan. Jin Ye and other two parties, by the reason that Ping An and Ping An Tianjin did not pay the insurance indemnity as agreed in the insurance policy, requested the court of first instance that Ping An and Ping An Tianjin should jointly and severally pay the insurance indemnity in sum of 8,400,000 yuan and interest thereon, which should be calculated from October 8, 2013 to the day of payment at the loan interest rate of the People’s Bank of China over the same period, and bear the litigation fees. The court of first instance held that, the case was the dispute over ship insurance contract. Firstly, in respect to the issue whether CHEN Linglong and CHEN Xinhua were the insureds under the insurance contract involved, the court of first instance held that the insureds stated in the policy involved were “Jin Ye and others”. It was consistent with the record of shipowner stated in the first page of the certificate of ownership of M.V. “Jin Ye 88” and the co-owners of the ship stated in the second page were Jin Ye, CHEN Linglong and CHEN Xinhua, which was the explanation and demonstration of “Jin Ye and others”. Since this certificate had been submitted to the insurer when arranging the insurance, the insurer should know the co-ownership of M.V. “Jin Ye 88”, the insureds stated in the policy was “Jin Ye and others”, which should be interpreted as the insureds included Jin Ye, CHEN Linglong and CHEN Xinhua, so CHEN Linlong and CHEN Xinhua should be the insureds under the insurance contract involved. Secondly, in respect to the issue whether the cause of the sinking of M.V. “Jin Ye 88” fell into the coverage under the insurance contract involved, the court of first instance held that according to the investigation of Shanghai MSA, the direct cause of the sinking of M.V. “Jin Ye 88” lied in that the ship encountered wind about grade 10, as a result, water leaked into the cargo hold and produced free surface. Shanghai MSA held that there was a gap between the hatch cover and hatch coaming, accordingly, Ping An and Ping An Tianjin alleged that M.V. “Jin Ye 88” was unseaworthy, but according to the opinions of Tianjin Ship Inspection Department, the situation aforesaid met with the requirement of the design specifications, M.V. “Jin Ye 88” should use hatch tarpaulin to ensure weathertight cover according to the Technical Regulations for 13 Statutory Survey of Seagoing Ships Navigating in Domestic Waters 2004, Shanghai MSA identified that the hatch canvas of this ship was tore by storm, it suggested the ship had been covered with canvas according to the Technical Regulations, combined with the facts that M.V.

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“Jin Ye 88” had complete certificates and the manning satisfied the requirement of the minimum safe manning ship, the court of first instance ascertained that the ship was seaworthy at the time of accident, so the allegation of Ping An and Ping An Tianjin could not be supported. Above all, the direct cause of the sinking was that M.V. “Jin Ye 88” met with wind about grade 10. According to the provision of Clause 1 of the insurance clauses that if the total loss of the ship was caused by wind over grade 8 (including wind 8), the claim arising therefrom should be payable under the insurance, the cause of the sinking of M.V. “Jin Ye 88” fell into the coverage of the insurer, so the insurer should indemnify. Thirdly, in respect to the insured value in the contract involved, the court of first instance held that the parties did not agree a specific insured value in the insurance contract involved. Considering that the age of M.V. “Jin Ye 88” exceeded 3 years when it sank, according to the Clause 5 of the insurance clauses, the insured value of the ship should be determined by the actual value. It was also provided in this clause that the actual value referred to the market value of the ship or the market value at the time of accident. “The market value at the time of accident” could be easily understood, while there was no time attribute of the paralleled words “market value of the ship”, it was not clear. The court of first instance held that according to Article 219 Paragraph 2 Sub-paragraph 1 of the Maritime Code of the People’s Republic of China, the insured value of the ship should be the value of the ship at the time when the insurance liability commences, the “market value of the ship” aforesaid should be interpreted as the market value at the time when the insurance liability commenced, namely November 14, 2012. According to the survey report issued by Global Company, the market value of M.V. “Jin Ye 88” on November 14, 2012 was 14,879,000 yuan which should be the insured value of M.V. “Jin Ye 88”. As to the insured amount, the court of first instance held that the parties raised no contest that M.V. “Jin Ye 88” constituted total loss, so the insurer should indemnify on the basis of total loss. It was stated on the face of the policy that the deductible of a total loss accident was 15% of the loss, it was contradictory in grammar, the deductible ratio referred to a certain ratio, while “15% of the loss” indicated a specific sum. Because the clause was unclear, it should be interpreted in accordance with the purpose of the insurance contract, other clauses and principle of good faith. According to Clause 7 of the insurance clauses involved, after the ship occurred total loss, if the insured value was higher than or equaled to the insured amount, the insurer should indemnify on the basis of the insured amount; if the insured value was lower than the insured amount, the insurer should indemnify on the basis of the insured amount. From the purposes of contract, the agreement of the deductible ratio in the policy was to further limit the responsibility of the insurer to 85% of the total loss. So combined with Clause 7, it should be interpreted as when the insured value was higher than or equaled to the insured amount, the insurer should indemnify 85% of the insured amount, when the insured value was lower than the insured amount, the insurer should indemnify 85% of the insured value. Since the insured value of M.V. “Jin Ye 88” was higher than the insured amount, the insurer should indemnify 85% of the insured amount, namely 10,200,000 yuan,

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after deducting 1,800,000 yuan that was paid, the insurer still needed to pay 8,400,000 yuan. Fourthly, in respect to the issue that whether Ping An should bear the liability, the court of first instance held that the official seal affixed on the policy involved was “No.247 special insurance seal of Ping An Property & Casualty Insurance Company of China Ltd.”, Ping An and Ping An Tianjin argued that No.247 represented Ping An Tianjin, combined with the fact that Jin Ye contacted with Ping An Tianjin in terms of the indemnity, Ping An Tianjin had paid the insurance indemnity in amount of 1,800,000 yuan, the court of first instance held that Ping An Tianjin was the insurer involved. Since Ping An Tianjin had no legal personality, according to Article 74 Paragraph 2 of the Insurance Law of the People’s Republic of China, its civil liability should be undertaken by Ping An, so Ping An should pay the insurance indemnity in amount of 8,400,000 yuan. As to the interest on the insurance indemnity alleged by Jin Ye and other two parties, the court of first instance held that there should be a reasonable period for Ping An to examine and prepare after it received the claim, the court of first instance determined November 21, 2013 namely the time Ping An Tianjin prepaid the insurance indemnity as the expiry date of the above-mentioned period for examination and preparation. Because Ping An had not paid the rest of the insurance indemnity in amount of 8,400,000 yuan, it should bear the interest on the sum from the November 22, 2013 counted on the basis of the loan interest rate published by the People’s Bank of China over the same period. Pulling the threads together, according to the Contract Law of the People’s Republic of China Article 125, the Insurance Law of the People’s Republic of China Article 74 Paragraph 2, the Maritime Code of the People’s Republic of China Article 219 Paragraph 2 Sub-paragraph 1, the Provisions of the Supreme People’s Court on Several Issues about Trial of Cases concerning Marine Insurance Disputes Article 1, the judgment was as follows: 1. Ping An should pay Jin Ye, CHEN Linglong and CHEN Xinhua insurance indemnity 8,400,000 yuan within ten days after the judgment came into effect. 2. Ping An should pay Jin Ye, CHEN Linglong and CHEN Xinhua the interest of the above payment (calculated from November 22, 2013 to the date of payment designated by this judgment on the basis of the loan interest rate published by the People’s Bank of China over the same period). For failure to fulfill the obligation of payment within the period designated by this judgment, interest on the debt for the delayed period should be doubled according to Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of 70,600 yuan, appraisal cost in amount of 35,000 yuan, should be born by Ping An. Ping An disagreed with the judgment of first instance and appealed to the court that it required the court to revoke the judgment of first instance, and change to reject all the claims of Jin Ye and other two parties, and court acceptance fees of first and second instances should be born by Jin Ye and other two parties. Facts and reasons: firstly, the accident involved was not covered by the insurer’s underwriting liability, and the insurer had the right not to pay compensation. The scope of the insurer’s liability for compensation should be limited to losses caused by the underwriting risk

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as a recent cause. The Confirmation of Liability for Water Traffic Accident issued by the Shanghai MSA (hereinafter referred to as the Confirmation of Accident) only recognized that the free surface of the ship’s cargo compartment influent was the direct cause of the ship’s overturning and sinking. It did not clearly determine whether the cabin influx was caused by strong wind and the role of the strong wind in the incident. The judgment of first instance determined that the direct cause of the ship’s sinking based on the Certificate of Accident was that it encountered a strong wind of level 10, and judged that the insurer should bear all the liability for compensation by the reason that it was within the coverage of the insurer, which lacked relevant evidence to support, and was not consistent with the confirmation of the Confirmation of Accident, it was wrong confirmation of facts. Secondly, the Inspection Report issued by Global Company had many defaults, it could not be used as the basis to determine the insurance value of ship. 1. the Inspection Report issued by Global Company was the assessment about ship replacement value but not ship market value, so this conclusion could not be used to prove the insurance value of the ship; 2. the inspector of the Inspection Report had no price assessment qualification issued by the National Development and Reform Commission; 3. the content of the Inspection Report was vague, sloppy, and there were a lot of errors, the inspection conclusion lacked a clear basis, which had no accuracy and rigor. Thirdly, the court of first instance judged Ping An to take responsibility in the case where the insurer was identified as Ping An Tianjin, which was obviously inappropriate. According to relevant laws and regulations, the court could enforce the property of Ping An only when Ping An Tianjin could not fulfill its obligations. Jin Ye argued that: firstly, M.V. “Jin Ye 88” had no seaworthiness. The extreme weather with a strong wind of level 10 was the direct and decisive cause of the water influx and final overturn of the ship involved, the accident involved was within the scope of the underwriter’s underwriting liability, and it should be liable for compensation. Secondly, Global Company was authorized by the court to carry out the appraisal, and its ship inspection and evaluation qualifications were issued by the China Classification Society, so it should be determined that it had the qualifications for inspection and evaluation. Ship inspection and evaluation were socially versatile matters, and their inspection agencies and inspection personnel did not need to be included in the registration and management scope of the judicial administrative department, nor did they need to have qualifications for price evaluation. Thirdly, Ping An confused the concept of replacement price method and replacement price. Global Company used the replacement price method to estimate the price of the new ship, and then used the replacement rate method to depreciate the replacement price based on the service life of the ship. Accordingly, Jin Ye require the court to dismiss the appeal of Ping An and affirm the original judgment. CHEN Linglong and CHEN Xinhua jointly argued that: firstly, the recent cause of the sinking of M.V. “Jin Ye 88” was that it encountered a strong wind of about 10, which belonged to the insurance coverage of the insurer. Secondly, the insurance value of the ship involved was 12 million yuan, and the insurer should pay compensation according to this standard 1. The insurance amount was determined based on the insurance value. The insurance amount of M.V. “Jin Ye 88” had been

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reduced from 17 million yuan to 15 million yuan over four years, and finally to 12 million yuan. Therefore, 12 million of M.V. “Jin Ye 88” of insurers was the value of the ship that was jointly recognized by the insurer and Jin Ye and other two parties, and Ping An should pay accordingly. 2. It was reasonable for Global Company to use the replacement price method to evaluate the actual value of the ship involved, which was able to confirm the actual value of the ship involved. There were obvious problems with the ship valuation certificate provided by Ping An, and the appraiser refused to appear in court for questioning, so the certificate could not be used as the basis for determining the facts of the case. Accordingly, CHEN Linglong and CHEN Xinhua required the court to dismiss the appeal of Ping An and affirm the original judgment. Ping An Tianjin stated that: it agreed with the appeal of Ping An, and it required to the court to judge according to law. Jin Ye submitted the following evidence in second instance: evidence 1, report of revision of the Decision of the Standing Committee of the National People’s Congress on the Administration of Forensic Expertise (Draft) by NPC Law Committee; evidence 2, decision of the standing committee of the national people’s congress on the administration of forensic expertise, to prove that for matters that were more versatile in society, they did not need to be included in the registration management of the judicial administrative department, so Global Company and its inspectors did not need to be qualified for price evaluation. Ping An cross-examined that, it did not recognize the relevancy of evidence 1 and 2, the above-mentioned evidence could only prove that the appraisal unit could not enter the directory of the corresponding judicial appraisal unit or the judicial appraisal database after the administrative license or corresponding qualification was obtained. In this case, Global Company did not have the qualification for price evaluation, nor did it have the conditions to evaluate the market value of ships. CHEN Linglong and CHEN Xinhua jointly argued that, they agreed with the purpose of proof of evidence 1 and 2 submitted by Jin Ye. Ping An Tianjin cross-examined that, it agreed with the cross-examination opinions of Ping An. Combined with the providing of evidence and cross-examination opinions of the parties, the court holds that, because the parties had no objection to the authenticity of evidence 1 and 2, so the court confirms the authenticity. Ping An, CHEN Linglong, CHEN Xinhua and Ping An Tianjin did not submit evidence. Except for the facts found out by the court of first instance, the court also finds out that, Clause 5 of the insurance clauses stipulated that “the insurance amount should be determined according to the insurance value, or it can be determined by the insurance parties through consultation, but the insurance amount must not exceed the insurance value”. It is also found out that, Global Company held Evaluation Certificate of Ship and Offshore Facilities Repair Service Unit issued by CCS, the service items stated in the certificate included “fair inspection, inspection, investigation and evaluation of ships, offshore facilities, containers and maritime cargoes” and “ship and

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offshore facilities construction, reconstruction supervision, engineering calculation and evaluation”. The appraiser SUN Hao was qualified as a registered asset appraiser and an insurance appraisal practitioner. TIAN Zhiyun could serve as chief engineer officer for ships with a propulsion power of 3000 kW and above. According to Inspection Report issued by Global Company, the company first used the general method of domestic ship evaluation and the detailed information of M.V. “Jin Ye 88”, combined with the results of the ship construction price estimation, according to the construction level of most domestic shipyards, the estimated replacement price of the ship was 16.077 million yuan. Then, it chose the replacement price method, comprehensively considering the replacement price of the ship, the residual value of the ship, the service life of the ship and the remaining life time, and calculated the current value of the ship to 14.879 million yuan. Interpretation Letter issued by Global Company during the trial of first instance further explained that Global Company’s M.V. “Jin Ye 88” value inspection report was based on a specific value definition (namely the exchange value most likely to be achieved in the best use state on the open market), within a specific time (namely the evaluation base date), and conducted a ship market value assessment for M.V. “Jin Ye 88” instead of a ship price assessment. The above facts can be proved by insurance contract, Inspection Report, Interpretation Letter issued by Global Company and other evidence. The court holds that, this case is the dispute over ship insurance contract, the insureds were Jin Ye, CHEN Linglong and CHEN Xinhua, the insurer was Ping An Tianjin. Ping An was the general company of the insurer. The issues are that: firstly, whether the accident involved is within the scope of insurance liability; secondly, if it is an insurance liability, how to determine the amount of insurance compensation. Whether the accident involved is within the scope of insurance liability. Jin Ye and other two parties claimed that the ship sunk accident was within the scope of insurance liability. It is necessary to prove that the underwriting risk occurred. The ship sank after encountering the risk, and initially proved that there is a causal relationship between the risk and ship sinking. Now all parties had no objection to the fact that there was a strong wind of about 10 insured risk and the fact that the ship sank, so Jin Ye and other two parties also need to prove causality. Shanghai Maritime Safety Administration is the maritime safety supervision and administration authority involved. Confirmation of Accident issued by it is a notarized document. In the absence of sufficient evidence and reason to overthrow, it should be used as the basis for determining the facts of the case. Shanghai Maritime Safety Administration determined in Confirmation of Accident that M.V. “Jin Ye 88” encountered a strong wind of level 10, and the wind and waves tore the ship’s sealing canvas, which caused the possibility of water ingress in the cargo compartment. Shanghai Maritime Safety Administration determined that the free liquid surface caused by the influence of the cargo compartment was the direct cause of the ship’s sinking. Because there is a second-level causal relationship between the above phenomena, and the strong wind around level 10 is the dominant and decisive reason for the subsequent series of results, so Shanghai Maritime Safety Administration’s above-mentioned determination can prove that there is a

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causal relationship between the strong wind around 10 and the ship’s sinking. After Jin Ye and other two parties completed the burden of proof, the insurer claimed not to pay, and must prove that the ship’s sinking was caused by an uncovered risk or an exclusion from the insurance clause. Although Ping An Tianjin and Ping An put forward Confirmation of Accident, they only recognized that there was the possibility of strong wind leading to water in the cargo compartment, but did not determine that the strong wind was the only cause of the accident. Because the two companies failed to submit evidence to prove that there were other uncovered risks sufficient to cause the influent of the cargo tank to form a free liquid surface, so the above claim lacks basis and cannot be established. Accordingly, M.V. “Jin Ye 88” sank due to near-level winds of level 8 or above, which is an accident caused by underwriting risk, and the insurer Ping An Tianjin should bear liability for compensation. Amount of insurance indemnity. Firstly, insurance value of the ship involved. Since the parties involved did not determine the insurance value in the insurance policy, they should be determined in conjunction with the insurance contract and the relevant provisions of the Maritime Code of the People’s Republic of China. The court of first instance explained in written that the insurance value of M.V. “Jin Ye 88” was determined to be the market value of the ship on November 14, 2012 when the insurance liability involved was started, which is not inappropriate, so the court confirms it. Entrusted by the court of first instance, Global Company issued Inspection Report, which estimated the current value of M.V. “Jin Ye 88” on November 14, 2012 to 14.879 million yuan. In trial of first instance, the company provided Interpretation Letter to further explain that Inspection Report was an assessment of the market value of M. V. “Jin Ye 88”. Ping An advocated that Global Company and its appraisers did not have the corresponding qualifications. The conclusion of Inspection Report could not be used to prove the market value of the ship. The court holds that, the above concept of Ping An cannot be established. 1. In practice, the appraisal agencies that have the right to carry out ship value assessment are not limited to those appraisal agencies that have the qualification of price assessment issued by the National Development and Reform Commission. The corresponding certificate held by Global Company stated that the company has the ability to carry out ship inspection and assessment. The two appraisers have the qualifications of a registered asset appraiser, the qualification of insurance assessment and the experience of engaging in marine engineering. So it should be confirmed that the company and its appraisers have corresponding appraisal qualifications. 2. Global Company evaluated the market value of M.V. “Jin Ye 88”, and the replacement price method, the current market price method, and the current value of income method are all scientific evaluation methods. Using the above methods to evaluate the same subject in the same state, the evaluation conclusions should be objective, and there will be no obvious differences due to different evaluation methods. Accordingly, Global Company chose the

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replacement price method to evaluate the market value of the ship when it was no longer possible to conduct on-site surveys on M.V. “Jin Ye 88” and it was difficult to find the same or similar ships, which is not inappropriate. Moreover, Global Company calculated the market value of the ship at the beginning of insurance liability by using the replacement price method but not the replacement price of the new ship, the ship’s insurance liability is calculated after comprehensively considering the ship’s replacement price, the ship’s residual value, the ship’s service life and the remaining life. 3. The insurance amount determined by the insurance policy involved was 12 million yuan, combined with the fact that the ship involved was insured by Ping An Tianjin during the four years from the completion of the construction to the sinking, and the insurance amount decreased year by year, it can be confirmed that the above insurance amount was negotiated and determined by Ping An Tianjin and Jin Ye after fully considering the actual value of the ship at the beginning of the insurance liability, the construction period, and depreciation. The agreement in the insurance contract concerning “the insurance amount is determined by the insurance value, or it can be negotiated and determined by both parties, but the insurance amount must not exceed the insurance value” can also prove that the insurance amount determined by both parties is not higher than the insurance value recognized by both parties. Therefore, the insurance amount agreed by both parties of the insurance contract can prove that the value of the ship insurance determined in the Inspection Report is reasonable. In conclusion, the above reason of Ping An cannot be established, the insurance value of M.V. “Jin Ye 88” on November 14, 2012 was 14.879 million yuan. Secondly, compensation amount of Ping An Tianjin. In this case, Ping An Tianjin should compensate Jin Ye and the two parties in accordance with the total loss. The court of first instance used the purpose interpretation, system interpretation and other methods, combined with Article 7 of the insurance contract, to interpret the positive clause of the insurance policy “the deductible rate of the total loss accident is 15% of the loss amount” as “when the insurance value is higher when equal to the insurance amount, the insurer shall compensate 85% of the insurance amount”, which is not inappropriate, so the court confirms it. Accordingly, Ping An Tianjin should compensate 85% of the insurance amount of Jin Ye and the two parties, namely 10,200,000 yuan. Because it paid 1.8 million yuan, it should also pay 8.4 million yuan and the above payment from November 22, 2013 to the actual payment date, according to the interest rate calculated by the People’s Bank of China during the same period. Finally, burden of liability of Ping An and Ping An Tianjin. According to the Insurance Law of the People’s Republic of China Article 74 Paragraph 2, the branch of an insurance company does not have the status of a legal person, and its civil liability shall be born by the insurance company. Ping An Tianjin is a branch company established by Ping An in accordance with legal procedures and does not have legal personality, so its civil liability should be born by Ping An. Ping An claimed that the burden of liability should be confirmed by the Opinions of the

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Supreme People’s Court on Several Issues concerning the Application of the Civil Procedure Law of the People’s Republic of China Article 272 that if other organizations were unable to perform their obligations determined by legal documents during the enforcement, the people’s court could rule the enforcement of the property of legal persons or individual citizens who were legally responsible to the other organizations. However, since the above-mentioned legal provisions are procedural provisions on enforcement issues, it cannot be used to exclude the application of the Insurance Law of the People’s Republic of China, so the claim of Ping An lacks basis, and the court does not support it. Pulling the threads together, the facts confirmed by the court of first instance are clear, and the application of law is correct, the reasons of appeal of Ping An lack basis, which cannot be established. According to the Civil Procedure Law of the People’s Republic of China Article 170 Paragraph 1 Sub-paragraph 1, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance in amount of 70,600 yuan, shall be born by the Appellant, Ping An Property & Casualty Insurance Company of China Ltd. The judgment is final. Presiding Judge: GENG Xiaoning Acting Judge: YU Yinan Acting Judge: LI Shanchuan December 18, 2014 Clerk: SUN Chao

Xiamen Maritime Court Civil Ruling China International Trust Investment Corporation Bank Xiamen Branch v. Boluo Jinhui Dredging Engineering Co., Ltd. (2014) Xia Hai Fa Min Te Zi No.1

Related Case (s) None. Cause of Action 211. Dispute over ship mortgage contract. Headnote Mortgagee’s secured claim to be satisfied from the proceeds of sale of the mortgaged ship was given priority over the claims of other maritime lien holders. Summary The Defendant mortgaged its vessel as security when applying for a loan with the Plaintiff bank. After the Defendant failed to repay the loan, the Plaintiff filed suit for the realization (foreclosure) of the ship’s mortgage, and asked the court to compel auction or sale of the vessel in order to repay the Defendant’s outstanding debts, and to give the Plaintiff priority over other claims in repayment from the proceeds of sale. The Defendant argued thin court lacked jurisdiction over the claim, and that previously-existing maritime liens over the vessel should be settled before repaying the Plaintiff. Held - The court held that it had jurisdiction over the case since the vessel involved was located in the port of Xiamen, and compelled the auction or sale of the vessel, the proceeds thereof going towards the repayment of the Plaintiff with priority over other maritime liens.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_9

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Ruling The Applicant: China International Trust Investment Corporation Bank Xiamen Branch Domicile: No.81West Lake Road, Xiamen City, Fujian. Person in charge: ZHOU Hua, president. Agent ad litem: XU Rong, lawyer of Fujian Jinpan & Co Law Firm. Agent ad litem: ZHENG Yuebin, lawyer of Fujian Jinpan & Co Law Firm. The Respondent: Boluo Jinhui Dredging Engineering Co., Ltd. Domicile: No.41 Second Zhongyuan Road, Louyang village, Boluo County, Guangdong. Legal representative: CHEN Yahui, general manager. Agent ad litem: WANG Jianming, lawyer of Fujian Jianming & Co Law Firm. Agent ad litem: FENG Huan, apprentice lawyer of Fujian Jianming & Co Law Firm. The Applicant, China International Trust Investment Corporation Bank Xiamen Branch (hereinafter referred to as “CITIC Xiamen”), filed an application for realizing ship mortgage to the court on May 12, 2014. After accepting it, GUO Kunliang, Acting Judge, tried the case in accordance with law. The case has been concluded. The Applicant CITIC Xiamen alleged, Xiamen Jinhui Dredging Engineering Co., Ltd. (hereinafter referred to as “Xiamen Jinhui”) applied for issuance of bank acceptance bill in total sum of RMB19 Million, after the bank acceptance bill fell due, Xiamen Jinhui did not pay the amount, the Applicant paid RMB9,343,250 for it in advance, and had not gotten the money back yet. The interest thereon was RMB3,200,063 by June 3, 2014. Since the Respondent Boluo Jinhui Dredging Engineering Co., Ltd. (hereinafter referred to as “Boluo Jinhui”) provided a maximum mortgage in amount of RMB9.5million on M.V. Jin Hui 06 owned by him for Xiamen Jinhui, the Applicant applied for a ruling to auction or sell off M.V. Jin Hui 06 and requested a priority in satisfying its claim within the amount of RMB9.5million. The Applicant provided the following evidence: (2011) Xia Yin Shou Zi No.537 Comprehensive Credit Contract, (2011) Xia Yin Di Zi No.537-22 Maximum Mortgage Contract, Certificate of Ownership, Certificate of Mortgage, (2012) Xia Yin Cheng Zi No.008453 Acceptance Agreement on Bank Acceptance Bill, Purchase and Sale Contract, Application for Bank Acceptance Bill, the Notice of Freezing Deposits into Account, Bank Acceptance Bills, Income Receipt, the Notice of Unfreezing Deposits out of Account, Voucher of Collection on Bill and Unit Loan Voucher.

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The Respondent raised the following objections: 1. According to Article 196 of the Civil Procedure Law of the People’s Republic of China (hereinafter referred to as the “Civil Procedure Law”), in this case, territorial jurisdiction and exclusive jurisdiction was wrong, the case should be transferred to grass-roots people's court of Huizhou; 2. The Applicant claimed against Xiamen Jinhui as the Second Respondent in error, the Respondent should be in the face of impossibility of recourse; 3. There were maritime liens such as crew wages on M.V. Jin Hui 06, if M.V. Jin Hui 06 was auctioned and the Applicant claimed a priority, it would be a serious violation of the legitimate rights and interests of the lienors; 4. The amount of RMB9.5 Million applied for the realization of the mortgage was wrong, because even if followed the statement of the Applicant, the actual debt was RMB9,343,250, not the maximum amount of RMB9.5 Million. Therefore, the application of the Applicant should be rejected. Upon trying the case, the court finds out that: on December 29, 2011, CITIC Xiamen and Xiamen Jinhui signed (2011) Xia Yin Shou Zi No. 537 Comprehensive Credit Contract, it was agreed that Xiamen Jinhui applied with CITIC Xiamen for a comprehensive credit in amount of RMB9.5 Million during the period from January 10, 2012 to January 10, 2013; one of security was (2011) Xia Yin Di Zi No.537-22 Maximum Mortgage Contract, which was signed between CITIC Xiamen and Boluo Jinhui on the same day, it was agreed that Boluo Jinhui provided its vessel Jinhui 06 (Certificate of Ownership No.090410000111) as a pledge for the maximum mortgage in amount of RMB9.5 Million; the secured debt was credit granted by CITIC Xiamen to Xiamen Jinhui from January 10, 2012 to January 10, 2013; the range of mortgage includes principal, interest, penalty interest, compound interest, liquidated damages, fees to keep the pledge and fees for realization of the creditor’s rights and mortgage, and etc. On January 13, 2012, CITIC Xiamen and Boluo Jinhui went through registration of mortgage of the vessel the Jin Hui 06 with Huizhou Maritime Safety Bureau. On January 17, 2012, CITIC Xiamen and Xiamen Jinhui signed (2012) Xia Yin Cheng Zi No.008453 Acceptance Agreement on Bank Acceptance Bill, it was agreed that CITIC Xiamen accepted the five bank acceptance bills with a total amount RMB19,000,000; Xiamen Jinhui paid deposit for amount of RMB9.5 Million; Xiamen Jinhui should pay all the money to CITIC Xiamen before the due date; CITIC Xiamen would make payment against the bills after the bills fell due; where the amount was not paid after the expiration date, penalty would be charged based on the overdue days and the amount of overdue payment with a daily rate of 5/10000; if People’s Bank of China made an adjustment on penalty interest rate, it should be calculated at the rate of the date of adjustment; this agreement was specific business contract of (2011) Xia Yin Shou Zi No.537 Comprehensive Credit Contract, there was other securities agreed in the credit contract. On January 18, 2012, Xiamen Jinhui paid a deposit in sum of RMB9.5 Million, CITIC Xiamen accepted the five bank acceptance bills with a total amount RMB19 Million. After the bills fell due, CITIC Xiamen made the

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payment. After deducting the deposit and interest, the amount CITIC Xiamen paid for Xiamen Jinhui was RMB9,343,250. After dunning, Xiamen Jinhui had not paid the principal and the interest thereon. It is also found out that M.V. Jin Hui 06 was now anchored in port of Xiamen. With regard to the objection of the Applicant, determinations of the court are as follows: 1. As specialized courts, maritime courts, according to the Provisions of the Supreme People’s Court on the Scope of Cases to be Entertained by Maritime Courts, try first-instance maritime cases under general procedure and summary procedure and special procedure cases. Article 196 of the Civil Procedure Law does not rule out special jurisdiction of maritime courts, so the court’s acceptance of the application for realization of the ship mortgage complies with the provisions of law. According to Article 196 of the Civil Procedure Law, the security holder has the right to put forward application for realizing the rights of security with the court of the place where the property for security lies, since M. V. Jin Hui 06 is now berthing in port of Xiamen, the court has jurisdiction over the case; 2. It is improper that the Applicant claimed against Xiamen Jinhui as the second Respondent, but the Applicant has withdrawn the request against Xiamen Jinhui, so Boluo Jinhui is now the only Respondent, the trial of this case will not be affected; 3. The execution of the ruling regarding to the realization of the right of ship mortgage, shall be applied to the auction of the ship, the creditor’s rights registration and repayment procedure provided in the Special Maritime Procedure Law of the People’s Republic of China to guarantee the realization of maritime liens. Therefore, although maritime lien is prior to ship mortgage, the Applicant's application for realization of the ship mortgage will not prevent realization of any maritime lien on M.V. Jin Hui 06; 4. The contract of maximum mortgage includes interest, penalty interest and compound interest and other charges, besides the principal in amount of RMB9.5 Million. CITIC Xiamen advanced RMB9,343,250 and adding the penalty interest calculated at ten thousandths five according to the acceptance contract, the total amount is more than RMB9.5 Million. Therefore, the request of the Applicant to have a priority of repayment within the amount of RMB9.5 Million is appropriate. In summary, the request of the Respondent to reject the request of the Applicant and transfer this case to the court of Huizhou People’s Court shall be rejected. With regard to the application of the Applicant, the court holds that CITIC Xiamen signed the comprehensive credit contract and the bank acceptance bill acceptance agreement with Xiamen Jinhui, and signed the maximum mortgage contract with Boluo Jinhui, the contracts above are real intents of the parties and do not violate laws and regulations, so they shall be legal and effective. The mortgage on M.V. Jin Hui 06 has been established since the date of the contract came into

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effect, and according to the mortgage registration, CITIC Xiamen is the first mortgagee. CITIC Xiamen accepted the bills and advanced the payment pursuant to the agreement, but Xiamen Jinhui failed to repay the money and interest thereon, so the mortgagor, Boluo Jinhui shall take the liability for the maximum mortgage in amount as agreed. Therefore, the application of the CITIC Xiamen to realize the mortgage of M.V. Jin Hui 06 shall be admitted in accordance with law. In summary, in accordance with the Property Law of the People’s Republic of China Article 195, the Maritime Code of the People’s Republic of China Article 11, the Civil Procedure Law of the People's Republic of China Article 196 and Article 197, the ruling is as follows: 1. The application of China International Trust Investment Corporation Bank Xiamen Branch shall be admitted; 2. Auction or sell off M.V. Jin Hui 06 owned by Boluo Jinhui Dredging Engineering Co., Ltd., China International Trust Investment Corporation Bank Xiamen Branch proceeds within the amount of RMB9.5Million in the priority. The ruling is final. Acting Judge: GUO Kunliang June 16, 2014 Clerk: SONG Zhigang

Appendix: Relevant Laws 1. Property Law of the People’s Republic of China Article 195 When the obligor fails to pay its/his due debts or any circumstance for realizing the right to mortgage as stipulated by the parties concerned occurs, the mortgagee may, by concluding an agreement with the mortgagor, convert the property under mortgage into money or seek preferred payments from the money incurred from the auction or sale of the property under mortgage. In case the said agreement has damaged the interests of any other obligee, the obligee may request the people's court to cancel this agreement within one year after he/ it has known or should know the cause for cancellation. In case the mortgagee and the mortgagor fail to conclude an agreement on the means of realizing the right to mortgage, the mortgagee may request the people's court to auction or sell off the property under mortgage. The property under mortgage shall be converted into cash or be sold off by referring to its marker price. 2. Maritime Code of the People’s Republic of China Article 11 The right of mortgage with respect to a ship is the right of preferred compensation enjoyed by the mortgagee of that ship from the proceeds of the

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auction sale made in accordance with law where and when the mortgagor fails to pay his debt to the mortgagee secured by the mortgage of that ship. 3. Civil Procedure Law of the People’s Republic of China Article 196 If the obligee of a security interest applies to realize his security interest, he shall according to such laws as the Property Law, etc. apply to the basic people’s court in the place where the property for security is located. Article 197 After the application is entertained and examined by the people’s court, if it conforms to the provisions of the law, the property for security shall be auctioned or sold off and the obligee may apply to the people’s court for execution when the other party refuses to fulfill or partly fulfills the ruling; if the application fails to meet the provisions of the law, it shall be denied and the obligee may file a lawsuit to the people’s court. Prompt for enforcement: Article 214 If a party fails to comply with a certificate of obligation enforcement by a notary office according to law, the other party may apply to the people’s court that has the jurisdiction over the case for the enforcement of the obligation and the applied people’s court shall enforce such an obligation. If a people’s court discovers a definite error in a notarized certificate of obligation, the people’s court shall make a ruling not to enforce the obligation and serve the letter of the ruling to the both parties and the notary office.

Tianjin Maritime Court Civil Judgment China Pacific Insurance (Group) Co., Ltd. Qingdao Branch v. Vopak Bohai Petrochemicals (Tianjin) Terminal Co., Ltd. (2014) Jin Hai Fa Shang Chu Zi No.418 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 269. Cause of Action 221. Dispute over contract on custody of cargo in port. Headnote Operator of shore tanks held not liable for shortage of cargo as its period of responsibility did not extend to the whole period of time from discharge from the carrying ship, but only once the cargo was pumped into the shore tanks. Summary The outsider, Qingdao Yi Jia Economic & Trade Industry Import & Export Co., Ltd., signed a Storage and Loading/Discharge Service Contract with the Defendant, Vopak Bohai Petrochemicals (Tianjin) Terminal Co Ltd. They agreed that the Defendant would provide Yi Jia Company with the service of discharging and storing BTX aromatics. In late December, 2002, BTX aromatics belonging to Yi Jia Company and Rengqiu Dong Sheng Company Petrochemical Co., Ltd. were transported to the Port of Tianjin by M.V. TORM THYRA. The Defendant discharged the goods into the shore tank and then stored the goods. Upon examination by a surveyor, there was found to be a shortage of 106,836 mt in total. The Plaintiff insurer underwrote risk of the goods shortage. After the insured event occurred, the Plaintiff paid RMB280,767.59 to the insured as agreed and acquired the right of subrogation. Then, the Plaintiff sued the defendant for breach of Storage and Loading/Discharge Service Contract and alleged the defendant should be liable for goods shortage. The Defendant argued it entered into a storage contract with Yi Jia Company. As a safekeeping party, the Defendant had no direct relation with the ship. The Defendant only agreed the weight of tank inspection. Yi Jia Company accepted the weight of the goods in the shore tank and had paid relevant charges. The contract had been executed. Thus, it should not be held responsible for the shortage.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_10

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The main issue of this case was whether the shortage claimed by the Plaintiff occurred in the period the Defendant’s responsibility. The court found the Defendant was not involved in the contractual relationship based on the Defendant’s evidence. The Defendant only took over the goods as the safekeeping party under Storage and Loading/Discharge Service Contract; it was not in charge of the discharging of the goods. Therefore the court denied the Plaintiff’s allegation that the Defendant’s period of responsibility should cover the entire period starting from the time the goods were discharged from the ship, to the time the goods were loaded into the shore tank. The Plaintiff claimed for the goods shortage, but it failed to provide evidence to effectively prove the shortage happened during the period of taking over and storage. The Defendant had not breached the discharging and storage contract, thereby the court denied the Plaintiff’s claim for the shortage compensation.

Judgment The Plaintiff: China Pacific Insurance (Group) Co., Ltd. Qingdao Branch Domicile: No. 47 Hong Kong Road, Shinan District, Qingdao City, Shandong Province. Person in charge: YU Xuan, general manager of the branch. Agent ad litem: LIU Jingtao, lawyer of Shandong Youhua Law Office. Agent ad litem: HAO Zhigang, lawyer of Shandong Youhua Law Office. The Defendant: Vopak Bohai Petrochemicals (Tianjin) Terminal Co., Ltd. Domicile: No.1 Lingang Industry Park, Tianjin City. Legal Representative: MENG Qingdong, Director. Agent ad litem: ZHOU Leiding, lawyer of Grandall (Tianjin) Law Firm. Agent ad litem: ZHANG Rui, lawyer of Grandall (Tianjin) Law Firm. With respect to the case arising from dispute over contract on custody of cargo in port filed by Plaintiff, China Pacific Insurance (Group) Co., Ltd. Qingdao Branch, against the Defendant, Vopak Bohai Petrochemicals (Tianjin) Terminal Co., Ltd., after accepting the case on April 3, 2014, the court appointed Acting Judge ZHANG Jie to try this case by summary procedure on May 13, 2014. HAO Zhigang, agent ad litem of the Plaintiff, ZHOU Leiding and ZHANG Rui, agents ad litem of the Defendant, appeared in the court and participated in the action. The case has been concluded. The Plaintiff claimed that on November 28, 2012, Qingdao Yi Jia Economic & Trade Industry Imp.& Exp. Co., Ltd. (hereinafter referred to as “Yi Jia Company”) signed No.VBPTT-Spot-20121128 Storage and Loading/Discharge Service Contract with the Defendant. The parties agreed the Defendant would provide Yi Jia Company with service of discharging and storing BTX aromatics. In late December 2002, Yi Jia Company and Rengqiu Dong Sheng Company

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Petrochemical Co., Ltd. (hereinafter referred to as “Dong Sheng Company”). BTX aromatics were transported to Port of Tianjin by M.V. TORM THYRA. The Defendant discharged the goods into the shore tank and then stored the goods. Upon examination by SGS, after the BTX aromatics arrived at Port of Tianjin, the weight before discharge was 25,809.561 mt and the weight after discharge into the shore tank of the Defendants was 25,702,725 mt. There was a shortage of 106,836 mt in total. The Plaintiff underwrote risk of the goods shortage. After the insured event occurred, the Plaintiff paid RMB280,767.59 to the insured as agreed and acquired the right of subrogation. The Plaintiff requested the court to judge that: 1. the Defendant should compensate RMB280,767,59 and interest thereon (the interest should be counted from March 28, 2013 to the day of effectiveness of this judgment by the loan interest rate of the Bank of China over the same period); 2. the Defendant should bear the litigation fees. The Defendant defended as follows: 1. the Defendant and Yi Jia Company, the insured entered into a storage contract. The weight of the goods in the shore tank should be subject to the weight of tank inspection. As a safekeeping party, the Defendant had no direct relation with the ship. The Defendant only agreed the weight of tank inspection; 2. the Defendant’s exchanged equipment had no direct relation with the equipment of the ship. So there was no exchanged equipment problem. The Defendant had no fault in the discharge and storage. Yi Jia Company had no objection to the weight of the goods in the shore tank and had paid relevant charges. The contract had been executed. In summary, the Defendant should not be responsible for the shortage and requested the court to deny Plaintiff’s claims. According to the Plaintiff’s claims and Defendant’s pleas, the parties were unanimous in the following facts: the weight of the goods involved recorded in the bill of lading was 25,872,739 mt; the weight of the goods before being discharged from the ship was 25,809,561 mt; the weight of the goods after being discharged into the shore tank of the Defendant was 25,702,725 mt; the shortage was 106,836 mt. The court ascertains the facts above. The main issues of this case are whether the shortage claimed by the Plaintiff occurred in the period of responsibility of the Defendant; and if it does, what the compensation amount the Defendant shall bear and the calculation basis thereof is. The Plaintiff submitted the following evidence to prove its claims: 4:1. Storage and Loading/Discharge Service Contract, to prove the contractual relationship of storage and loading/discharge was established between the insured and the Defendant. The contract was made by the Defendant unilaterally, if a dispute over the understanding of the contract, an interpretation unfavorable to the party making the contract should prevail; 2. insurance policy, to prove that the Plaintiff underwrote cargo insurance; 3. insurance survey report issued by Zhongdaxin Insurance Surveyors and Loss Adjusters Co., Ltd. (hereinafter referred to as Surveyors Company), to prove the loss of the goods and the insurance indemnity; 4. letter of subrogation and the bank transfer voucher, to prove that the Plaintiff paid the insurance indemnity and acquired a subrogation right; 5. statement of situation; 6. import agency

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agreement, to prove that the Plaintiff acquired subrogation right from the other insured, Dong Sheng Company and paid the insurance indemnity; 7. weight report of SGS, to prove that the weight of the goods after being discharged into the shore tank was less than that in the bill of lading; 8. import customs declaration form, to prove that the value of goods was USD1097.36/mt. The Defendant’s opinion in cross-examination are as follows: it accepted evidence 1-3, 5-8’s authenticity and legality, but challenged the relevancy thereof. It disagreed that the Defendant was in charge of the harbor loading/discharge operation in evidence 1, the parties’ agreement. The Defendant did not deliver the goods directly to the ship. The loading/discharge means discharging the goods by a form of transport after the storage. Evidence 2, the insured in one of the insurance policies was Dong Sheng Company, did not sign any agreement with the Defendant. The Plaintiff did not submit No.611712 contract and No.613772 contract mentioned in the bill of lading, it could not prove that the goods under the policy were the goods involved. Evidence 3 could prove that the Defendant was not responsible for the shortage, and the shipper should assume that responsibility. Evidence 4, the Defendant accepted the authenticity and legality of the letter of subrogation, but challenged the relevancy thereof. Yi Jia Company’s benefit assignment itself could not prove Dong Sheng Company also assigned insurance benefit. The Defendant did not object legality of the bank voucher, but it challenged the authenticity and the relevancy thereof. There was no original bank voucher of payment from the Plaintiff to Dong Sheng Company. Evidence 5 was only put on a Yi Jia Company’s stamp, it could not prove that the Dong Sheng Company’s delegation. Evidence 6 could not prove Dong Sheng Company authorized Yi Jia Company to receive indemnity. The weight in the shore tank recorded in evidence 7 was only the goods’ storage weight basis under Storage and Loading/Discharge Contract. The ship tank’s weight was irrelevant with the storage contract. The price recorded in evidence 8 was C&F price, including the freight. The claimed amount on the basis of this price should deduct the freight from Amsterdam to Qingdao. The court’s ascertainment opinions are as follows: because the Defendant accepted the Plaintiff’s evidence 1-3 and 5-8’s authenticity, the court accepts the authenticity of the evidence. Evidence 1 can prove the relationship of storage and loading/discharge contract between Yi Jia Company and the Defendant. Evidence 2 can prove that the Plaintiff issued two insurance policies to Yi Jia Company and an insurance policy to Dong Sheng Company to insure cargo transport. Evidence 3 can prove that the surveyors company issued survey report in terms of the settlement of claims of the goods involved. Evidence 4, the court accepts the authenticity of the letter of subrogation of Yi Jia Company and the bank transfer voucher from the Plaintiff to Yi Jia Company. It can prove that the Plaintiff paid insurance indemnity in terms of the goods involved to Yi Jia Company. The Plaintiff failed to submit the original transfer voucher of the payment from Yi Jia Company to Dong Sheng Company. Moreover, transfer date in the copy is December 5, 2013, which is distant from the day the Yi Jia Company got the insurance indemnity namely March 28, 2013. So, the court does not accept the authenticity and relevancy of the copy.

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Evidence 5-6 cannot prove that Dong Sheng Company authorized Yi Jia Company to settle claim. Evidence 7 can prove that after the goods involved arrived at Tianjin port, the ship inspection weight thereof is 25,809,561 mt and the shore tank inspection weight thereof is 25,702,725 mt; and evidence 8 can prove the goods custom value involved. The Defendant submitted the following evidence to support its allegations: 1. Storage and Loading/Discharge Service Contract, to prove the relationship between Yi Jia Company and the Defendant should be subject to the contract. The weight of the goods after being discharged into shore tank was the only weight the Defendant agreed and should be responsible for, the weight of the goods before being discharge from the ship had no binding force on the contract; 2. weight report, to prove that SGS was a third party authorized by Yi Jia Company, the surveyed data should be the basis of the parties’ performance of the contract; 3. email, to prove that the weight of loading was subject to the weight to tanks. The weight on board was irrelevant with the Defendant; after finding the weight of the goods in the shore tank was different with that on board, the staff of Yi Jia Company and surveyors of SGS examined the spot of discharge and pipes. SGS found no emitting, drop or leakage occurred; and all the goods had been discharged into the shore tank; 4. email, to prove that Yi Jia Company confirmed the weight of BTX aromatics calculated by SGS; 5. business card, to prove the Yi Jia Company’s employees, WANG Haibo, ZHOU You and GUAN Honghong’s identifications; 6. harbor operation contract, to prove that Tianjin Sinoport Shipping Agency Co., Ltd. (hereafter referred to as “Sinoport Company”) authorized Tianjin Vopak Lingang Port Co., Ltd. (hereafter referred to as “Terminal Company”) to carry out loading/discharge operation on behalf of Yi Jia Company. The loading/discharge operation was irrelevant with the Defendant; 7. invoices of terminal charge, security fee, berthing fee, mooring and unmooring fee, to prove that Sinoport Company paid the fees under the cargo owner’s authorization and the invoices were issued to Sinoport Company; 8. Copy of the Business License of Terminal Company, to prove that Terminal Company was an independent legal person; 9. Terminal Company and the Defendant’s certificate of customs supervision place, to prove that Terminal Company and the Defendant were container yard under Customs’ supervision, each company was respectively responsible for supervision over declare dutiable goods. Evidence 6-9 was supplemental evidence and was the original. The Plaintiff’s cross-examining opinions on the evidence submitted by the Defendant are as follows: it had no objection to evidence 1 and evidence 5, it affirmed that they could prove that the Defendant should be liable for breach of the storage and loading/discharge contract; it affirmed the content of proof of evidence 2, but held that the authenticity thereof could not be verified; it affirmed the authenticity of evidence 3, but disaffirmed the purpose of proof thereof. It argued that evidence 3 was made by the Defendant unilaterally, it lacked legal basis that no reply to the email meant a confirmation thereto; it had no objection to the authenticity of evidence 4, but challenged the purpose of proof thereof, and argued

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it could prove the goods shortage involved, but it could not reflect the confirmation of the shortage and the exemptions. The Plaintiff made the cross-examination comments of evidence 6-9 in written; in respect of evidence 6, the parties which sealed and signed the contract were Sinoport Company and Terminal Company; in respect of evidence 7, the relationship of payment and invoice was established between Sinoport Company, Tianjin Jinbin Glory International Shipping Agency Co., Ltd. and Terminal Company. Yi Jia Company did not confirm and sign evidence 6 and 7, it was a contract that the Defendant arranged the matters entrusted to the third party in order to perform the obligation under Storage and Loading/ Discharge Service Contract; evidence 8 and 9 was irrelevant with this case. The court’s ascertainment opinions on the evidence submitted by the Defendant are as follows: the Plaintiff accepted the authenticity of the Defendant’s evidence 1, 3, 4 and 5. Evidence 6-9 is the original, the court accepted the authenticity thereof. Evidence 1 can prove that the harbor Yi Jia Company had a cargo storage contract relationship with the Defendant. The Defendant failed to provide the original copy of evidence 2, but the weight of goods in the shore tank thereon is 25,702,725 mt in total, which is the same with record of the Plaintiff evidence 7. So, the evidence 2 can prove the weight of goods in the shore tank. Evidence 3 can prove that the Defendant explained the situation of the goods involved after being discharged into the shore tank. Evidence 4 and 5 can prove that Yi Jia Company confirmed the storage fee was calculated on the basis of goods’ weight in the shore tank. Evidence 6 can prove that Yi Jia Company is the receiver of the goods involved under the terminal operation contract. The principal is Sinoport Company and the harbor operator is Terminal Company, the operation task is discharging goods from the ship, the goods are BTX aromatics. The number of 10 bills of lading are 31119/ DS1-10. The responsible duration is the entire period that Terminal Company is in charge of the goods, starting from the time when it took over the goods to the time when Yi Jia Company received the goods. Evidence 7 can prove that Terminal Company issued invoices in terms of the port charges such as discharging fee, security charges and etc. to Sinoport Company. Evidence 8 and 9 can prove that Terminal Company and the Defendant are two independent legal persons. After trial, the court found that the outsider, Yi Jia Company and the Defendant signed No.VBPTT-Spot-20121128 Storage and Loading/Discharge Service Contract. The parties agreed in the contract period lasts for 30 days from December 20, 2012 to January 18, 2013. The Defendant provides Yi Jia Company would storage and loading/discharge services including the storage and operation fee, demurrage, truck loading and discharge fee, tank transferring fee, nitrogen seal fee, tank cleaning fee, extra service/facility fee. Yi Jia Company bore the handling charge of the waste, raffinate and tank washings. The dock fee and port charges were charged separately by Terminal Company and the port administrative department. The Defendant provided Yi Jia Company with a carbon-steel tank which could contain 25,000 ± 5% mt BTX aromatics. The accurate weight was subject to actual tank’s weight inspection.

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Yi Jia Company signed two insurance policies with the Plaintiff. It was stated in No.AQI55024112Q000656L that the contract number was 611712, the insured goods were BTX aromatics, the weight of the goods was 6,872.739 mt, the insured amount was USD7,560,013, the means of transport was M.V. “TORM THYRA”, the coverage was all risks, and the deductible was 0.5% of the insured amount; it was stated in No.AQID55024112Q000657Q that the contract number was 613772; the insured goods were BTX aromatics, the weight of the goods was 9,000 mt, the insured amount was USD9,900,000, the means of transport was M.V. “TORM THYRA”; the coverage was all risks, the deductible was 0.5% of the insured amount. On the same day, Dong Sheng Company signed an insurance policy with the Plaintiff, of which the number was AQID55024112Q000658V. It was stated in the policy that the contract number was 611712, the insured goods were BTX aromatics, the weight of the goods was 10,000 mt, the insured amount was USD11,000,000, the transport was M.V. “TORM THYRA”, the coverage was all risk, and the deductible was 0.5% of the insured amount. The surveying company issued No.ZDXTJ2012F0200333 Insurance Survey Report on January 23, 2013, stating that the principal was the Plaintiff, the numbers of the insurance policies were AQID55024112Q00656L, AQID55024112Q00 0657Q and AQID55024112Q0000658V; the insured goods were BTX aromatics, the transport was M.V. “TORM THYRA”, the insured event occurred on December 25, 2012 and the surveying time was December 26, 2012. It was also stated in the report that the weight recorded in the shipped bill of lading was 25,872.739 mt, the tank inspection weight of SGS after the goods arrived at Port of Tianjin was 25,809.561 mt, there was a shortage of 63.178 mt. Since no oil pipeline’s defect had been found in the survey, the surveyor held that it did not exclude M.V. “TORM THYRA”’s liability for the shortage. According to the appendix of the SGS report, the ship inspection weight should be 25,809.561 mt and the tank inspection weight should be 25,702.725 mt, so it was a misrepresentation. In fact, there was a difference of 170.014 mt between the weight recorded in bill of lading and that of the tank inspection at Port of Tianjin. The report suggested the Plaintiff pay an insurance indemnity in amount of RMB280,767.56 for the goods shortage. The Plaintiff paid RMB280,767.56 to Yi Jia Company on March 28, 2013. On the same day, Yi Jia Company issued a letter of subrogation to the Plaintiff. The court holds this case is arising from the dispute over subrogation of harbor cargo storage contract. The two insureds involved are Yi Jia Company and Dong Sheng Company. The Plaintiff only provided the evidence to prove that it had paid the insurance indemnity to Yi Jia Company, but it failed to prove that it had paid the insurance indemnity to Dong Sheng Company. The court only deals with the issue that the Plaintiff acquired the right of subrogation from Yi Jia Company in this case. Yi Jia Company and the Defendant established a harbor cargo storage contract relationship. Yi Jia Company is the goods owner and the Defendant is the safekeeping party. Whether or not the Plaintiff’s claim that goods shortage occurred in the period of responsibility of the Defendant, the Plaintiff alleged that a discharging and storage

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contract relationship was established between Yi Jia Company and the Defendant. The Defendant not only needed to provide storage service, but also service of discharging the goods into the shore tank for Yi Jia Company. According to the Defendant’s evidence, Sinoport Company, the agent of Yi Jia Company signed a terminal operation contract with the Terminal Company to arrange the discharging of the goods involved. The Defendant is not involved in the contractual relationship. So the Defendant only took over the goods as the safekeeping party under Storage and Loading/Discharge Service Contract, it is not in charge of the discharging of the goods. The court denied the Plaintiff’s allegation that the Defendant’s responsible period should cover the entire period starting from the time the goods were discharged from the ship, to the time the goods were loaded into the shore tank. The Plaintiff claimed for the goods shortage, but it failed to provide evidence to effectively prove the shortage happened during the period of taking over and storage. The Defendant breached the discharging and storage contract, therefor the court denied the Plaintiff’s claim for the shortage compensation. To sum up, according to the Contract Law of People’s Republic of China Article 8, and the Civil Procedure Law of the People’s Republic of China Article 64 Paragraph 1, the judgment is as follows: The claims of the Plaintiff, China Pacific Insurance (Group) Co., Ltd. Qingdao Branch, shall be rejected; Court acceptance fee in amount of RMB2,756 shall be born by the Plaintiff. In event of dissatisfaction with this judgment, both parties may, within 15 days upon service of this judgment, submit a statement of appeal together with ten duplicates to the court to lodge an appeal to Tianjin High People’s Court. The appeal fee shall be paid within 7 days after submitting the statement of appeal. The amount depends on the part of the disagreement of the first instance, otherwise, it will be deemed as withdrawn automatically. (Bank of deposit: Agriculture Bank of China Tianjin City Tiancheng Branch. Account number: 02200501040006269. Account name: Finance Department of Tianjin High People’s Court). Acting Judge: ZHANG Jie August 5, 2014 Clerk: WANG Pu

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Tianjin High People’s Court Civil Judgment China Pacific Insurance (Group) Co., Ltd. Qingdao Branch v. Vopak Bohai Petrochemicals (Tianjin) Terminal Co., Ltd. (2014) Jin Gao Min Si Zhong Zi No.110 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 261. Cause of Action 221. Dispute over contract on custody of cargo in port. Headnote Affirming lower court decision holding operator of shore tanks not liable for shortage of cargo as its period of responsibility did not extend to the whole period of time from discharge from the carrying ship, but only once the cargo was pumped into the shore tanks. Summary The Plaintiff cargo owner sued the Defendant operator of short tanks for shortage of cargo. The court of first instance held that the Defendant was not liable, as its period of responsibility did not extend to the whole period of time from discharge from the carrying ship, but only once the cargo was pumped into the shore tanks. The Plaintiff appealed and the appeal court affirmed the judgment of first instance.

Judgment The Appellant (the Plaintiff of first instance): China Pacific Insurance (Group) Co., Ltd. Qingdao Branch Domicile: No.47 Hong Kong Road, Shinan District, Qingdao City, Shandong Province. Person in charge: YU Xuan, general manager of the branch. Agent ad litem: LIU Jingtao, lawyer of Shandong Youhua Law Office. Agent ad litem: HAO Zhigang, lawyer of Shandong Youhua Law Office.

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The Respondent (the Defendant of first instance): Vopak Bohai Petrochemicals (Tianjin) Terminal Co., Ltd. Domicile: No.1 Lingang Industry Park, Tianjin. Legal representative: MENG Qingdong, director of the company. Agent ad litem: ZHOU Leiding, lawyer of Grandall (Tianjin) Law Firm. Agent ad litem: ZHANG Rui, lawyer of Grandall (Tianjin) Law Firm. With respect to the case arising from dispute over contract of warehousing of goods at port between the Appellant, China Pacific Insurance (Group) Co., Ltd. Qingdao Branch (hereinafter referred to as CPIC Qingdao), and the Respondent, Vopak Bohai Petrochemicals (Tianjin) Terminal Co., Ltd. (hereinafter referred to as Vopak), the Appellant disagreed with the Tianjin Maritime Court (hereinafter referred to as the court of first instance) (2014) Jin Hai Fa Shang Chu Zi No.418 Civil Judgment (hereinafter referred to as the judgment of first instance), and appealed to the court. After accepting it on September 17, 2014, the court formed a collegiate panel that LI Tong was Presiding Judge, YANG Zeyu was Acting Judge and ZHANG Xin was Acting Judge, Clerk YU Yinan worked as recording. The court held a hearing in public on October 22, 2014. Agent ad litem of the Appellant CPIC Qingdao, HAO Zhigang, and agents ad litem of the Respondent Vopak, ZHOU Leiding and ZHANG Rui, appeared in court to attend the hearing. Now the case has been concluded. The court of first instance found out that, on November 28, 2012, the outsider, Qingdao Yi Jia Economic and Trade Industrial Import and Export Co., Ltd. (hereinafter referred to as Yi Jia) and Vopak concluded No.xxx-Spot-20121128 Warehousing and Loading/Discharge Service Contract. The parties agreed in the contract that the Vopak provided Yi Jia with warehousing and loading/discharge services including the storage, and “fees” included operation fee, demurrage, truck loading and discharge fee, tank transferring fee, nitrogen seal fee, tank cleaning fee, extra service/facility fee. Yi Jia should bear the handling charge of the waste, raffinate and tank washing. The dock fee and port charges were charged separately by Tianjin Lin’gang Vopak Terminal Co., Ltd. (hereinafter referred to as Terminal Company) and the port administrative department. Vopak provided Yi Jia with a carbon-steel tank which could contain 25,000 ± 5% tons BTX aromatics. The accurate weight was subject to actual tank’s weight inspection. The effect was from December 20, 2012 to January 18, 2013, 30 days. On December 11, 2012, Yi Jia concluded two insurance policies with CPIC Qingdao. It was stated in No.xxx that the contract number was 611712, the insured goods were BTX aromatics, the weight of the goods was 6,872.739 tons, the insured amount was USD7,560,013, the means of transport was M.V. “TORM THYRA”, the coverage was all risks, and the deductible was 0.5% of the insured amount; it was stated in No.xxx that the contract number was 613772; the insured goods were BTX aromatics, the weight of the goods was 9,000 tons, the insured amount was USD9,900,000, the means of transport was M.V. “TORM THYRA”, the coverage was all risks, the deductible was 0.5% of the insured amount. On the same day, the outsider Renqiu City Dong Sheng Petrochemical Co., Ltd.

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(hereinafter referred to as Dong Sheng) concluded an insurance policy with CPIC Qingdao, of which the number was xxx. It is stated in the policy that the contract number was 611712, the insured goods were BTX aromatics, the weight of the goods was 10,000 tons, the insured amount was USD11,000,000, the means of transport was M.V. “TORM THYRA”, the coverage was all risk, and the deductible was 0.5% of the insured amount. Beijing Zhongxinda Insurance Surveyors & Adjusters Co., Ltd. issued No.xxx Insurance Survey Report on January 23, 2013, stating that the principal was CPIC Qingdao, the numbers of the insurance policies were AQID55024112Q00656L, AQID55024112Q000657Q and AQID55024112Q0000658V, the insured goods were BTX aromatics, the means of transport was M.V. “TORM THYRA”, the insurance accident happened on December 25, 2012 and the surveying time was December 26, 2012. It was also stated in the report that the weight recorded in the shipped bill of lading was 25,872.739 tons, the tank inspection weight of SGS after the goods arrived at Port of Tianjin was 25,809.561 tons, there was a shortage of 63.178 tons (according to the appendix of the SGS report, the ship inspection weight should be 25,809.561 tons and the tank inspection weight should be 25,702.725 tons, so it was a misrepresentation. In fact, there was a difference of 170.014 tons between the weight recoded in bill of lading and that of the tank inspection at Port of Tianjin.). Since no oil pipeline’s defect was not found in the survey, the surveyor held that he did not exclude M.V. “TORM THYRA”’s liability for the shortage. In addition, the report suggested that CPIC Qingdao should pay the insurance indemnity in amount of RMB280,767.56 yuan for the goods shortage. CPIC Qingdao paid RMB280,767.56 yuan to Yi Jia on March 28, 2013. On the same day, Yi Jia issued a letter of subrogation to CPIC Qingdao. CPIC Qingdao claimed to the court of first instance by the reason that Vopak should bear liability for storage of goods and required the court to judge that: 1. Vopak should compensate RMB280,767,59 yuan and interest thereon (the interest should be counted from March 28, 2013 to the day of that this judgment came into effect by the loan interest rate of the People’s Bank of China over the same period); 2. litigation fees should be born by Vopak. Then, CPIC Qingdao changed the first item into that Vopak should compensate for RMB176,434.35 yuan. The court of first instance held that, this case was the dispute over subrogation of contract of warehousing of goods at port. The two insureds involved were Yi Jia and Dong Sheng. CPIC Qingdao only provided the evidence to prove that it paid the insurance indemnity to Yi Jia, but it failed to prove that it had paid the insurance indemnity to Dong Sheng. The court only dealt with the issue that CPIC Qingdao acquired the right of subrogation from Yi Jia in this case. Yi Jia and Vopak established a contract of warehousing of goods at port relationship. Yi Jia was the goods owner and Vopak was the safekeeping party. Whether or not CPIC Qingdao’s claim that goods shortage happened in the period of responsibility of Vopak, CPIC Qingdao alleged that a discharging and warehousing contract relationship was established between Yi Jia and Vopak. Vopak not only needed to provide warehousing service, but also service of discharging the goods into the shore tank for Yi Jia. According to Vopak’s evidence,

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Tianjin Sinoport Co., Ltd. (hereinafter referred to as Sinoport Company), the agent of Yi Jia, concluded the Terminal Operation Contract with the Terminal Company to arrange the discharging of the goods involved. Vopak was not involved in the contractual relationship. So Vopak only took over the goods as the safekeeping party under Warehousing and Loading/Discharge Service Contract, it was not in charge of the discharging of the goods. The court of first instance did not support CPIC Qingdao’s allegation that Vopak’s responsible period should cover the entire period starting from the time the goods were discharged from the ship, to the time the goods were loaded into the shore tank. CPIC Qingdao claimed for the goods shortage, but it failed to provide evidence to effectively prove that the shortage happened during the period of taking over and storage. And it did not prove that Vopak breached Warehousing and Loading/Discharge Service Contract, therefore the court of first instance did not support CPIC Qingdao’s claim for the shortage compensation against Vopak. Pulling the threads together, according to the Contract Law of the People’s Republic of China Article 8, the Civil Procedure Law of the People’s Republic of China Article 64 Paragraph 1, the court of first instance judged that reject the claims of CPIC Qingdao. Court acceptance fee in amount of 2,756 yuan, should be born by CPIC Qingdao. CPIC Qingdao disagreed with the judgment of first instance and appealed to the court that the facts confirmed by the court of first instance were wrong, and the procedure was illegal, so it required to revoke the judgment of first instance, send back to retry or change to support the claims of CPIC Qingdao, and court acceptance fees of the two cases should be born by Vopak. Facts and reasons: firstly, the contract between Yi Jia and Vopak in the case was clearly recorded as the Warehousing and Loading/Discharge Service Contract, Vopak promised to provide two services of warehousing and loading/unloading in the contract, and its contractual obligations included warehousing and loading/unloading, so the confirmation of the court of first instance that Vopak only provided warehousing service was not consistent with the contract. Secondly, according to the contract between the two parties, “since the product crosses the flange surface of the connection between the vessel and the tank facility” was deemed to be delivered to Vopak, and the responsibility range of Vopak was clear, namely from the time when the product crossed the flange surface of the connection between the vessel and the tank facility, and until the goods were in the pipelines, auxiliary facilities, and shore tanks of the entire tank area, Vopak should bear the responsibility for the warehousing and handling of the goods involved. CPIC Qingdao had submitted the unloaded ship dry cabin certificate, clearance report, etc., to prove that the goods were unloaded from the ship, and the final number of shore tanks was less than the unloaded amount, the short quantity should be determined to occur within the scope of responsibility of Vopak. Thirdly, the evidence submitted by CPIC Qingdao, such as Agency Import and Export Agreement between Yi Jia and Dong Sheng, Statement issued by Yi Jia, voucher for CPIC Qingdao to pay insurance compensation to Yi Jia and the certificate of Yi Jia transferring insurance compensation against Dong Sheng, could mutually prove the fact that insurance compensation was paid to Dong

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Sheng. The court of first instance did not confirm the agency relationship between Yi Jia and Dong Sheng, then denied the fact that CPIC Qingdao paid Dong Sheng the insurance compensation through Yi Jia, which was wrong confirmation of fact. Fourthly, Vopak and Terminal Company formed a mixed personality and carried out the same business, according to Warehousing and Loading/Discharge Service Contract involved, Vopak formed a general contracting and subcontracting relationship with Terminal Company, and Vopak was obligated to bear responsibility for the subcontractors’ actions or negligence under this agreement. Vopak argued that, the facts confirmed by the court of first instance were clear, Vopak should not bear the responsibility for the short quantity of goods involved, so it required to dismiss the appeal and affirm the original judgment. Facts and reasons: firstly, Vopak and Yi Jia established a warehousing contract relationship, and Vopak only assumed the rights and obligations of warehousing and storage. In this case, the equipment of Vopak did not directly contact with the ship’s equipment, and the responsibility range was from receiving the goods from the terminal company to the time of delivery. Secondly, the two parties agreed to use the quantity of cans as the basis for receiving the goods, and Vopak should only be liable to Yi Jia for the quantity of cans. Thirdly, during the cargo loading and unloading process, the operation of Vopak complied with the specifications, and the situation of running, running, dripping, and leakage was ruled out through on-site investigation, Vopak had no fault for the short quantity of goods and should not be held responsible. Fourthly, Vopak and Terminal Company were two independent legal persons. There was no subcontracting relationship, nor were they affiliated units, and there was no mixing of company personality. During the period of second instance, CPIC Qingdao submitted the business registration information of Vopak and Terminal Company, to prove that Vopak and Terminal Company had a mixed personality, which was essentially the same entity performing the obligations under the Warehousing and Loading/Discharge Service Agreement involved. Vopak cross-examined that, it had no objection to the authenticity, but did not recognize the purpose of proof, the shareholders, legal representatives, business scope, and financial management of the two companies were different, and there was no mixing of company personalities. The court confirms that, because Vopak had no objection to the authenticity of the evidence provided by CPIC Qingdao, so the court confirms the authenticity of the evidence, but it cannot prove that there was no mixing of company personalities between Vopak and Terminal Company. Except for the facts found out by the court of first instance, the court also finds out that, CPIC Qingdao recognized that Sinoport Company was the freight forwarder of Yi Jia. Sinoport Company and Terminal Company concluded the Port Goods Operation Contract, the goods were unloaded through the flange surface of the connection between the ship and the dock company pipeline. It is also found out that, the appendix V 1.6.1 of Warehousing and Loading/ Discharge Service Contract involved stipulated that, “in the following cases, the product shall be deemed to have been delivered to Vopak in the tank farm, or

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re-delivered from the tank farm to the customer: (a) … (b) … (C) if the product passes (a) or (b) If the pipeline is delivered or re-delivered outside the circumstances mentioned in item 1, the product shall be deemed delivered when it passes through the pipeline and the valves on the pipeline located in the tank area”. It is also found out that, the business license of Vopak stated that the legal representative was MENG Qingdong, the business scope was “the construction, management and auxiliary services of storage facilities in the tank farm; warehousing, loading and unloading, packaging, pipeline transportation and simple processing of petrochemicals and various chemical products; providing technical consulting and information consulting services related to the above businesses”; the shareholders (promoters) were Vopak Terminal Lingang B.V and Tianjin Changlu Hangu Saltworks Co., Ltd. business scope was “construction, management and operation of terminal facilities; loading, unloading, acceptance, pipeline transportation and transportation of various chemical products and other liquid and gaseous products; auxiliary services for terminal facility operations; technical consultation, information consultation and other services related to the above businesses”; the shareholders (promoters) were Vopak Terminal Lingang B.V and Tianjin Changlu Hangu Saltworks Co., Ltd. The senior management personnel of Vopak and Terminal Company included MENG Qingdong, LIU Jianjun, LI Xiushan, WU Hui. The above facts can be proved by the record of hearing of second instance, Port Cargo Operation Contract, Warehousing and Loading/Discharge Service Contract, business licenses of Vopak and Terminal Company, business registration information. The court holds that, the case is the dispute over contract of warehousing of goods at port. The issues are that: firstly, whether CPIC Qingdao obtained the subrogation right of Dong Sheng; secondly, how to determine the period of responsibility of Vopak and whether there was a short quantity of goods during the period of liability of Vopak; thirdly, whether Vopak and Terminal Company were affiliated companies, there were cases of subcontracting and mixed company personality. As to whether CPIC Qingdao obtained the subrogation right of Dong Sheng. CPIC Qingdao entered into insurance contract with Yi Jia and Dong Sheng, respectively, and Yi Jia and Dong Sheng had insurance interests in the goods under their respective insurance policies. CPIC Qingdao should make insurance claims on the different insurance benefits of Yi Jia and Dong Sheng. There is no evidence that CPIC Qingdao directly paid Dong Sheng, and what CPIC Qingdao claimed that Yi Jia had the right to collect insurance compensation payment for Dong Sheng and the payment made by Yi Jia to Dong Sheng in the form of goods after one year of obtaining insurance compensation was the insurance compensation payment involved cannot be proved by sufficient evidence. Therefore, it cannot be confirmed that CPIC Qingdao actually paid Dong Sheng and obtained the right of subrogation. As to whether the short quantity of the goods involved happened during the period of responsibility of Vopak. The two parties had disputes on the understanding of the scope of the contractual obligations of Vopak and the period of

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responsibility. CPIC Qingdao advocated the entire period from the unloading of the cargo to the onshore tank and the storage of the cargo in the onshore tank, but Vopak claimed that its liability period was only from the storage period after the cargo reached the shore tank. The court holds that, according to the actual operation of the cargo storage and loading and unloading processes involved, Yi Jia’s freight Forwarder Sinoport Company concluded a port operation contract with Terminal Company, Terminal Company charged the loading and unloading charges. After the cargo involved in the port arrived, it was unloaded from the flange surface of the connection between the ship and Terminal Company’s pipeline. Therefore, the cargo involved was under the control of Vopak from the beginning of the connection between Terminal Company’s pipeline and Vopak’s tank facility, the period of responsibility of Vopak should be from this time to the storage of the goods after they reached the shore tank, and the full period when the goods were delivered to Yi Jia. Therefore, the claim of CPIC Qingdao that the short amount of goods happened during the period of responsibility of Vopak lacks factual basis, so the court does not support it. As to the relationship between Vopak and Terminal Company. According to the facts found by the court, the two companies have independent legal person qualifications, and the registered capital, personnel, functions and business scope are different, and the two are not the same subject. Moreover, CPIC Qingdao did not provide sufficient and effective evidence to prove that there is a mixture of personality and property between the two companies, nor can it conclude that there is an association relationship and subcontract relationship between the two companies. Therefore, the claim of CPIC Qingdao that Vopak should bear the rights and obligations under the Port Cargo Operation Contract between Terminal Company and Sinoport Company has no basis, so the court does not support it. Pulling the threads together, the facts confirmed by the court of first instance are clear, and the application of law is correct. According to the Civil Procedure Law of the People’s Republic of China Article 170 Paragraph 1 Sub-paragraph 1, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance in amount of 5,512 yuan, shall be born by the Appellant, China Pacific Insurance (Group) Co., Ltd. Qingdao Branch. The judgment is final. Presiding Judge: LI Tong Acting Judge: YANG Zeyu Acting Judge: ZHANG Xin November 24, 2014 Clerk: YU Yinan

Shanghai Maritime Court Civil Judgment China Pacific Property Insurance Co., Ltd. Hubei Branch v. Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft KG (2013) Hu Hai Fa Shang Chu Zi No.870 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 285. Cause of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote Multimodal carrier held liable for water damage to cargo but held entitled to limit its liability because the Plaintiff failed to establish on which leg of the multimodal transport the damage occurred. Summary The Plaintiff, a cargo insurer, brought this action against the Defendant, a multimodal carrier, seeking payment for water damage to third party insured’s industrial automatic control equipment. The Plaintiff argued that the Defendant’s failure to provide an adequate shipping container for the equipment coupled with evidence of sea and freshwater intrusion proved that Defendant was liable for the damage. The Defendant argued that the insured’s failure to inspect and properly package the cargo led to the damage. The Defendant also argued that the Plaintiff had failed to introduce adequate evidence of the Defendant’s liability. Additionally, in the alternative, the Defendant sought limitation of liability under Chinese Maritime Code, arguing that, as required to overcome a carrier’s limitation of liability, the Plaintiff had not adequately shown on which leg of the transport the damage had occurred or alternatively that the Defendant’s intentional or reckless act or omission had led to the cargo damage. The Shanghai Maritime Court held that the Defendant was liable for the damage to third-party insured’s equipment, but allowed the Defendant to limit its liability because of the Plaintiff’s inability to prove an exception to limitation of liability.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_11

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Judgment The Plaintiff: China Pacific Property Insurance Co., Ltd. Hubei Branch Domicile: Wuhan City, Hubei Province, the People’s Republic of China. Person in charge: YU Baoyu, General Manager. Agent ad litem: CHEN Youmu, lawyer of Wintell & Co. Shanghai Office. Agent ad litem: WU Jianhong, lawyer of Wintell & Co. Ningbo Office. The Defendant: Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft KG Domicile: Federal Republic of Germany. Legal representative: Heino Schmidt and Peter Frederiksen, members of the executive committee. Agent ad litem: WANG Canming, lawyer of WANG JING & Co. Shanghai Office. Agent ad litem: WANG Hongyu, lawyer of WANG JING & Co. Shanghai Office. With respect to the case of dispute over contract of carriage of goods by sea filed by the Plaintiff, China Pacific Property Insurance Co., Ltd. Hubei Branch, against the Defendant, Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft KG, to the court on July 2, 2013. The court accepted the case on the same day and organized a collegiate panel in accordance with law. The Defendant raised a challenge to jurisdiction during period for submitting defense, the court made a civil ruling which rejected the challenge lodged by the Defendant on September 9, 2013, but the Defendant was not satisfied with the ruling and lodged an appeal. Shanghai High People’s Court made (2013) Hu Gao Min Si (Hai) Zhong Zi No.126 Civil Ruling to dismiss the Defendant’s appeal on November 25, 2013. The court held a hearing in public on March 11, 2014, WU Jianhong as agent ad litem of the Plaintiff, WANG Canming as agent ad litem of the Defendant, appeared in court and participated in the hearing. The case has been concluded. The Plaintiff alleged the outsider, Wuhan Sanhe Zhongcheng Import and Export Trade Co. Ltd. (hereinafter referred to as the “Sanhe Company”), entrusted the Defendant to carry a container loaded with industrial automatic control equipment from Wuhan, China to Veracruz, Mexico. After accepting the entrustment, the Defendant issued the multimodal transport bill of lading numbered as SUDUN21546144075, which recorded as follows: the shipper was Sanhe Company, the goods were transshipped in port of Shanghai and the container number was SUDU5726130. On June 8, 2012, after the goods arrived at the destination, it was found through the survey of a survey company that the goods involved suffered wet damages. The Plaintiff, as the goods insurer under the bill of lading, compensated USD275,410.68 in respect of the insured event to the consignee, and then acquired the right of subrogation according to law. The Plaintiff held that the goods involved were damaged during the transportation and the Defendant as carrier should be liable for that. Therefore, the Plaintiff requested the court to rule that the Defendant compensate the Plaintiff for economic losses in

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amount of USD275,410.68 and the corresponding interest (according to the USD demand deposit interest rate of the Bank of China over the same period from March 30, 2012 to the date of the effectiveness of this judgment), and bear the total litigation costs. The Defendant defended as follows: 1. from the available evidence, it could not be proved that the wet damages to the goods occurred during the period of the Defendant's liability. The goods involved were full container load, the shipper lead-sealed the container itself and the goods were delivered as full container load at the port of destination. On June 8, 2012, the container involved was delivered to the consignee from the container yard of the port of destination. There was no evidence suggesting the goods suffered wet damages. The Defendant received the notice of the wet damages to the goods on July 26, 2012 for the first time; 1. Even if the wet damages to the goods involved occurred in the period of transport in this case, the goods were covered with plastic films on the surface and then put into wooden boxes which were loaded into the container later. If the water immerged into the container, then into wooden boxes, and finally permeated the plastic films, it showed the packing was inadequate; 2. According to the provisions of the Maritime Code, since the number of the packages and weight were enumerated in the B/L, the carrier may enjoy limitation of liability that should not exceed USD25,072. The evidence materials submitted by the Plaintiff to support its claims, the cross-examination opinions of the Defendant and the determination of the court are as follows: 1. Bill of lading, to prove that a contractual relation of carriage of goods by sea was established between the Plaintiff and the Defendant. The Defendant had no objection to it. The court affirms the effectiveness and probative force thereof; 2. Tally list, packing list, invoice and customs declaration, to prove that the goods were actually shipped in the container. The Defendant had no objection to the evidence above. The court affirms the effectiveness and probative force thereof; 3. Assessment report and the attachment, to prove that the goods involved suffered wet damages. The Defendant had no objection to the authenticity and legality of the assessment report and held the notarization certification procedures are complete, but it raised a contest to surveyor’s analysis of the damages reason. It was confirmed the damages was caused by fresh water in the assessment report, but seawater was mentioned in the analysis, it was contradictory. So the argument that water immerged into the container in the transport lacked basis. In addition, the losses identified in the assessment report were lower than the amount compensated by the insurer. The Defendant raised no contest to the authenticity of the pictures in the attachment, but argued it could not identify whether the container in the picture was the one involved. The court holds that notarization certification procedures of the assessment report are complete, and the Defendant had no objections to the authenticity and legality of the assessment report as well as the authenticity of attachment picture, it can be

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determined the pictures were the container and the goods involved, therefore, the court affirms the effectiveness and probative force of the above evidence; and 4. Insurance policy, letter of authorization, compensation agreement, voucher of compensation payment, receipt and the letter of subrogation, to prove that the Plaintiff had compensated for the damages to the good involved and obtained the right of subrogation. The Defendant had no objection to the evidence above. The court affirms the effectiveness and probative force thereof. Evidence materials provided by the Defendant to support its allegations, cross-examination opinions of the Plaintiff and determination of the court are as follows: 1. Container tally list, to prove that the container was in good conditions without abnormity at the time of shipment. The Plaintiff did not confirm the authenticity of the tally list and held that the tally list had no relevancy to the case. The court holds that the Defendant does not provide the original tally list and the Plaintiff did not confirm its authenticity, therefore, the court does not affirm the effectiveness thereof; and 2. Equipment interchange receipt (EIR), to prove that the goods had been delivered on June 8, 2012 and there was no abnormality of the goods and container. The Plaintiff put forward an objection to the authenticity of the EIR, because it was not notarized, in addition, it was showed in the EIR that the container plate was damaged when returned empty. The court holds that the Plaintiff had objection to the authenticity of the EIR for lack of notarization, and the Defendant failed to explain when the laden container departed from container yard and when the empty container returned reasonably, therefore, the court does not affirm the effectiveness thereof. After cross-examination and combined with investigation in the trial, the court finds the facts as follows: On March 15, 2012, Sanhe Company sold a set of industrial automation control system to a Mexico company, AB CALSA S.A. DE C.V. (hereinafter referred to as “AB Company”), it was prescribed in the invoice numbered with WHAEIN12031515 and the packing list that the goods were 5,615 kg and loaded in 25 wooden boxes, the value thereof was EUR308,942.32, the place of delivery was a warehouse which located in no.49 Cordoba Federal Avenue, Veracruz, Mexico. On March 27, 2012, the Plaintiff issued the cargo transport insurance policy numbered with AWUHA2624212Q000592Z and it was stated the insured was Sanhe Company, the insured goods were industrial automation control system, the invoice number was WHAEIN12031515, the insurance amount was EUR 339,837, the means of transport was JI HAI ZHI CHENG V. A158, the transport route was from Wuhan, China to Veracruz, Mexico, and insurance coverage was all risks. On March 30, 2012, AB Company issued a letter of authorization, authorizing Sanhe Company as its agent to handle all matters under the policy numbered with

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AWUHA2624212Q000592Z, including negotiation of insurance compensation, acceptance of insurance compensation amount and all financial matters related to insurance. On March 30, 2012, Shanggang Group Changjiang Logistics (Hubei) Co., Ltd., as the agent of the Defendant, issued a multimodal transport bill of lading numbered with SUDUN21546144075 in Wuhan, it was noted in the bill of lading that the shipper was Sanhe Company, the consignee was AB Company, the place of receipt and the port of loading were Wuhan, China, the port of discharge was Lazaro Cardenas, Mexico, the destination was Veracruz, Mexico, the container number was SUDU5726130, the goods were industrial automation control system, that quantities were 25 packages, and the shipper was in charge of packing, counting and sealing. The container goods were shipped from Wuhan to Shanghai, China by M/V JI HAI ZHI CHENG V.A158 and were transshipped in port of Shanghai by M/V MONTE VERDE to Lazaro Cardenas, Mexico. Then on June 8, 2012 the goods arrived at the consignee’s warehouse that located in no. 49 Cordoba Federal Avenue, Veracruz, Mexico by rail and truck transport. On June 15, 2012, VRS RTS MEXICO accepted the entrustment of the Plaintiff to inspect the goods in the consignee's warehouse. On March 19, 2013, VRS RTS MEXICO issued a survey report which showed that the damages to the goods involved occurred because the container was not closed tightly or had holes. No inspection was carried out on the prevention of moisture and the container survey when loading the goods. In transport, sea water or fresh water seeped into the container, the goods got damp and oxidative, as a result, all equipment and electronic parts were damaged. The estimated costs of repair and replacement were about USD338,623.70 and VRS RTS MEXICO suggested that the compensation amounts be USD266,595.08. On August 23, 2012, Sanhe Company issued a receipt and letter of subrogation to the Plaintiff. On September 10, 2012, the Plaintiff signed a compensation agreement with and Sanhe Company, it was agreed the Plaintiff compensated USD275,410.68 to Sanhe Company as a final and one-time solve for the insured accident; the compensation payment was accepted by the consignee, AB Company finally. After the consignee received the compensation, the Plaintiff's liability under the policy was terminated; before signing this agreement, Sanhe Company should issue a receipt for the compensation and letter of subrogation to the Plaintiff. On September 21, 2012, the Plaintiff paid the insurance compensation in amount of USD275,410.68 to the consignee AB company. The court holds that this case is the dispute over contract of carriage of goods by sea and the Defendant is a foreign company, therefore, this case involved a foreign-related factors. According to the provisions of Chinese laws, the parties can choose expressly applicable law of foreign-related civil legal relationship. Whereas the fact that the parties in the trial choose unanimously Chinese law, the court allows and confirms the law of the People’s Republic of China as the applicable law to solve the dispute.

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According to the arguments of the Plaintiff and the Defendant, the court confirms the issues as follows: 1. Whether the Defendant shall be liable for compensation; 2. Whether the Defendant is entitled to enjoy the limitation of liability. In respect of whether the Defendant shall be liable for compensation, the Defendant argued that based on the available evidence, the Plaintiff could not prove that the wet damages to the goods occurred in the period of the Defendant’s responsibility; the Defendant did not participate in the survey and the survey was conducted alone by the surveyor entrusted by the Plaintiff; the consignee did not give a notice on the damages to the goods involved within 15 days after receiving the goods, it should be deemed that the carrier delivered the goods in good condition; it was the careless inspection of the shipper on the condition of the container and the inadequacy of packing of the goods that caused the damages, therefore, the carrier should not be liable for compensation. The court holds that the Defendant is multimodal transport carrier, the carrier shall be liable for the loss of or damages to the goods occurred in the period of the carrier’s responsibility. The assessment report and the pictures in the attachment provided by the Plaintiff can show that when opened the container in the consignee’s warehouse, the bottom of container was damp, the packing of goods was damp and musty and the goods got rusty, it could prove that sea water or fresh water seeped into the container and caused damages to the goods in transport. The court does not support the Defendant’s argument that the damages did not occur in the period of the carrier’s responsibility. The container is a means of transport provided by the Defendant. The goods involved were packed with plastic bags and placed into the crates together with some small articles. The packages of the goods were put up with the moisture-proof marks. The court does not support the Defendant’s argument that the improper package of the goods caused the damages and the carrier shall not be liable for compensation, because the Defendant failed to prove the inadequacy package of the goods. In respect of whether the Defendant is entitled to the benefit of limitation of liability, the Plaintiff argued that the damages most likely occurred in the domestic waterway transport section from Wuhan to Shanghai, the Defendant failed to provide proper container, and it had reckless omission during the period of performance of the contract of carriage, therefore, the Defendant shall not be entitled to the benefit of limitation of liability. According to the law, if the transport section in which the loss of or damages to the goods occurs cannot be ascertained, the multimodal transport operator shall be liable for compensation in accordance with the stipulations regarding to the carrier's liability and the limitation. In this case, the Plaintiff failed to prove that the damages occurred in the domestic waterway transport section from Wuhan to Shanghai, hence the Defendant shall compensate in accordance with the stipulations regarding the carrier’s liability and the limitation. According to the law, if it is proved that the loss of or damages to the goods resulted from an act or omission of the carrier done with the intent to cause such

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loss or damages or recklessly and with knowledge that loss or damages would probably result, the carrier shall not be entitled to the limitation of liability. In this case, the Plaintiff failed to prove that the loss of or damages to the goods resulted from an act or omission of the carrier done with the intent to cause such loss or damages or recklessly and with knowledge that loss or damages would probably result or any other circumstances that shall not be entitled to the limitation of liability, therefore, the Defendant can benefit the limitation of liability in accordance with law. It is prescribed in the bill of lading that the container numbered with SUDU5726130 loaded 25 packages goods, of which gross weight was 5,615 kg. The amount of limitation was 16,666.75 Units of Account as per packages; and amount of the limitation was 11,230 Units of Account as per gross weight of the goods. According to law, it shall be calculated by the higher amount, namely 16,666.75 Units of Account. The Units of Account is the Special Drawing Right as defined by the International Monetary Fund. On the basis of the conformation of the Plaintiff and the Defendant in the trial, according to the exchange rate (1:1.5402) of SDR and USD on the date of judgment published by State Administration of Foreign Exchange, the compensation amount was USD25,670.13. In respect of the loss of interest, the Plaintiff requested to calculate the interest from March 30, 2012 to the date of effectiveness of this judgment at USD demand deposit interest rate of Bank of China over the same period. The court holds the carrier issued the B/L involved on March 30, 2012, in that time the insured event had not occurred yet, neither had the Plaintiff settled the claim of the insured nor it lodged a claim against the Defendant. Therefore, the court does not admit the loss of interest above claimed by the Plaintiff. The interest shall be calculated from the date of filing the suit to the date of the effectiveness of this judgment at the USD demand deposit interest rate of the Bank of China over the same period. In conclusion, in accordance with the Maritime Code of the People’s Republic of China Article 47, Article 48, Article 51, Article 56 Paragraph 1, Article 106, Article 252 Paragraph 1 and Article 277, and the Civil Procedure Law of the People’s Republic of China Article 64 Paragraph 1, the judgment is as follows: 1. The Defendant, Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft KG, shall compensate the Plaintiff, China Pacific Property Insurance Co., Ltd. Hubei Branch, for the losses of goods in amount of USD25,670.13 within ten days from the date of the effectiveness of this judgment, as well as the interest thereon calculated from July 2, 2013 to the date of the effectiveness of the judgment according to the USD demand deposit interest rate of Bank of China over the same period; 2. Other claims of the Plaintiff, China Pacific Property Insurance Co., Ltd. Hubei Branch, shall be rejected. If the Defendant Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft KG fails to perform the obligations for payment within the time specified by this judgment, in accordance with Article 253 of the Civil Procedure Law of the

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People’s Republic of China, it shall double pay the interest for the period of delayed performance. Court acceptance fee in amount of RMB22,151, the Plaintiff, China Pacific Property Insurance Co., Ltd. Hubei Branch, shall bear RMB18,608, and the Defendant, Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft KG, shall bear RMB3,543. In event of dissatisfaction with this judgment, the Plaintiff, China Pacific Property Insurance Co., Ltd. Hubei Branch may, within fifteen days upon service of this judgment, and the Defendant Hamburg Südamerikanische Dampfschifffahrts Gesellschaft KG may, within thirty days upon service of this judgment, submit a statement of appeal with duplicates being submitted in terms of the number of other parties, to lodge an appeal to the Shanghai High People’s Court. Presiding Judge: QIAN Xu Acting Judge: CHEN Lei Acting Judge: FANG Yi March 20, 2014 Clerk: JI Xiaoqing

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Shanghai High People’s Court Civil Judgment China Pacific Property Insurance Co., Ltd. Hubei Branch v. Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft KG (2014) Hu Gao Min Si (Hai) Zhong Zi No.74 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 277. Cause of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote Affirming lower court decision holding multimodal carrier liable for water damage to cargo but also holding that the carrier was entitled to limit its liability because the Plaintiff failed to establish on which leg of the multimodal transport the damage occurred. Summary This case arose out of a dispute over contract of carriage of goods by sea. Both Plaintiff and Defendant appealed the lower court’s judgment that the Defendant was liable for the damage of goods in transport and was entitled to limit its liability. The Defendant argued that the lower court incorrectly found that it was liable for the damage, while the Plaintiff claimed thin court erred in allowing the limitation of such liability. Held-The court held that the lower court’s determination was clear and its application of law was appropriate. Therefore, the judgment was affirmed and both Plaintiff and Defendant’s appeals were dismissed.

Judgment The Appellant (the Plaintiff of first instance): China Pacific Property Insurance Co., Ltd. Hubei Branch Domicile: Wuhan City, Hubei Province, the People’s Republic of China. Person in charge: YU Baoyu, General Manager. Agent ad litem: CHEN Youmu, lawyer of Wintell & Co. Shanghai Office. Agent ad litem: WU Jianhong, lawyer of Wintell & Co. Ningbo Office.

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The Appellant (the Defendant of first instance): Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft KG Domicile: Federal Republic of Germany. Legal representative: Heino Schmidt and Peter Frederiksen, members of the executive committee. Agent ad litem: WANG Canming, lawyer of WANG JING & Co. Shanghai Office. Agent ad litem: WANG Hongyu, lawyer of WANG JING & Co. Shanghai Office. The Appellant, China Pacific Property Insurance Co., Ltd. Hubei Branch (hereinafter referred to as “CPIC Hubei Branch”) was not satisfied with the Civil Judgment (2013) Hu Hai Fa Shang Chu Zi No.870 made by the Shanghai Maritime Court with regard to a dispute over contract of carriage of goods by sea against the Appellant, Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft KG (Hamburg - South America Steamship Company or Hamburg South America Line) (hereinafter referred to as “South America Line”), and lodged an appeal to the court. After accepting the case on June 6, 2014, the court organized a collegiate panel and held a hearing in public on August 14, 2014. WU Jianhong as agent ad litem of CPIC Hubei Branch and WANG Canming as agent ad litem of South America Line appeared and participated in the hearing. The case has been concluded. The court of first instance identified the following facts in trial on March 15, 2012: Sanhe Company sold a set of industrial automation control systems to a Mexican company, AB CALSA S.A. DE C.V. (hereinafter referred to as “AB Company”). It was prescribed in an invoice and in the packing list that the goods weighed 5,615 kg, had a value of EUR308,942.32, and were loaded in 25 wooden boxes. The place of delivery was a warehouse located in Veracruz, Mexico. On March 27, 2012, the Plaintiff issued a cargo transport insurance policy stating: the insured was Sanhe Company, the insured goods were industrial automation control systems, the invoice number, the insurance amount was EUR339,837, the means of transport was via the JI HAI ZHI CHENG V. A158, the transport route was from Wuhan, China to Veracruz, Mexico, and insurance coverage was all risks. On March 30, 2012, AB Company issued a letter of authorization identifying Sanhe Company as its agent to handle all matters under the cargo transport policy, including the negotiation of insurance compensation, acceptance of insurance compensation amounts, and all financial matters related to insurance. On March 30, 2012, Shanggang Group Changjiang Logistics (Hubei) Co., Ltd., as the agent of the Defendant, issued a multimodal transport bill of lading in Wuhan. It was noted in the bill of lading that the shipper was Sanhe Company, the consignee was AB Company. It further stated: that the place of receipt and the port of loading was Wuhan, China; the port of discharge was Lazaro Cardenas, Mexico; the destination was Veracruz, Mexico; the goods were industrial automation control systems; the container number with the contents of 25 packages; and the shipper was in charge of packing, counting and sealing. The container goods were shipped from Wuhan to Shanghai, China by M/V JI HAI ZHI CHENG V.A158 and were transshipped in port of Shanghai by M/V MONTE VERDE to Lazaro Cardenas,

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Mexico. Then, on June 8, 2012, the goods arrived at the consignee’s warehouse located in Veracruz, Mexico through rail and truck transport. On June 15, 2012, VRS RTS MEXICO was hired by the Plaintiff to inspect the goods in the consignee's warehouse. On March 19, 2013, VRS RTS MEXICO issued a survey report which showed that the damage to the goods involved occurred because the container was not closed tightly or there were holes therein. No inspection was carried out on the prevention of moisture on the container survey when loading the goods. In transport, sea water or fresh water seeped into the container, the goods became damp and oxidized, and, as a result, all equipment and electronic parts were damaged. The estimated cost of repair and replacement was about USD338,623.70, and VRS RTS MEXICO suggested that the compensation amount be USD266,595.08. On August 23, 2012, Sanhe Company issued a receipt and letter of subrogation to the Plaintiff. On September 10, 2012, the Plaintiff signed a compensation agreement with Sanhe Company, where it agreed to compensate Sanhe Company in the amount of USD 275,410.68 as a final, one-time solution for the insured accident. The compensation payment would be accepted by the consignee, AB Company, after which the Plaintiff's liability under the policy would be terminated. On September 21, 2012, the Plaintiff paid the insurance compensation in amount of USD275,410.68 to the consignee AB Company. The court of first instance found that this case arose out of a dispute over contract of carriage of goods by sea. The Defendant was a foreign company, therefore, this case involved foreign-related factors. According to the provisions of Chinese laws, the parties could expressly choose the applicable law pertaining to a foreign-related civil legal relationship. Whereas the fact that the parties in the trial chose Chinese law unanimously, the court of first instance allowed and confirmed the law of the People’s Republic of China as the applicable law to solve the dispute. According to the arguments of the Plaintiff and the Defendant, the court of first instance found the issues to be as follows: 1. Whether the Defendant should be liable for compensation; and 2. Whether the Defendant was entitled to the limitation of liability. In respect of whether the Defendant should be liable for compensation, the Defendant argued that based on the available evidence, the Plaintiff could not prove that the damage to the goods occurred during the period of the Defendant's responsibility; the Defendant did not participate in the survey and the survey was conducted alone by the surveyor hired by the Plaintiff. Furthermore, since the consignee did not give notice of the damage to the goods involved within 15 days after receiving the goods, it should be deemed that the carrier delivered the goods in good condition. Defendant also argued that it was the careless inspection of the shipper as to the condition of the container, and the inadequacy of the packing of the goods that caused the damage; therefore, the carrier should not be liable for compensation. The court of first instance held that the Defendant was a multimodal

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transport carrier, and the carrier should be liable for the loss of, or damages to, the goods which occurred within the period of the carrier’s responsibility. The assessment report and the pictures in the attachment provided by the Plaintiff could show that when it opened the container in the consignee’s warehouse, the bottom of container was damp, the packing of goods was damp, and musty, and the goods were rusted. It could prove that sea water or fresh water seeped into the container and caused damage to the goods in transport. The court of first instance did not find the Defendant’s argument that the damage did not occur during the period of the carrier’s responsibility persuasive. The container was a means of transport provided by the Defendant. The goods involved were packed with plastic bags and placed into the crates together with some small articles. The packaging of the goods was furnished with the moisture-proof marks. Thus, the court of first instance did not accept the Defendant’s argument that improper packaging of the goods caused the damage because it failed to prove the inadequacy of the packaging. In respect of whether the Defendant was entitled to the benefit of limitation of liability, the Plaintiff argued that the damage most likely occurred in the domestic waterway transport section from Wuhan to Shanghai. Furthermore, the Defendant failed to provide a proper container, and it was reckless in its omission during the period of performance of the contract of carriage. Therefore, the Defendant should not be entitled to the limit its liability. According to the law, if the transport section in which the loss of, or damage to, the goods occurred could not be ascertained, the multimodal transport operator should be liable for compensation in accordance with the stipulations regarding the carrier’s liability and the limitation. In this case, the Plaintiff failed to prove that the damage occurred in the domestic waterway transport section from Wuhan to Shanghai; hence, the Defendant should compensate in accordance with the stipulations regarding the carrier’s liability and the limitation. According to the law, if it was proved that the loss of, or damage to, the goods resulted from an act or omission of the carrier, either done with the intent to cause such loss or damage, or recklessly and with knowledge that loss or damage would probably result, the carrier should not be entitled to the limitation of liability. In this case, the Plaintiff failed to prove that the damage to the goods resulted from an act or omission of the carrier, done with the intent to cause such loss or damage, or recklessly and with knowledge that loss or damage would probably result, or any other circumstances that shall not be entitled to the limitation of liability. Therefore, the Defendant was entitled to limitation of liability in accordance with law. It was prescribed in the bill of lading that the amount of limitation was 16,666.75 Units of Account as per package, or 11,230 Units of Account per gross weight of the goods. According to law, it should be calculated by the higher amount, namely 16,666.75 Units of Account. The Units of Account was the Special Drawing Right as defined by the International Monetary Fund. On the basis of the conformation of the Plaintiff and the Defendant in the trial, according to the exchange rate (1:1.5402) of SDR and USD on the date of judgment published by State Administration of Foreign Exchange, the compensation amount was calculated to be USD25,670.13.

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In respect of the lost interest, the Plaintiff requested to calculate the interest from March 30, 2012 to the date of the effectiveness of this judgment at the USD demand deposit interest rate of the Bank of China. The court of first instance held that the carrier issued the bill of lading involved on March 30, 2012, but at that time the insured event had not occurred yet. The Plaintiff neither had settled the claim of the insured, nor had it lodged a claim against the Defendant. Therefore, the court of first instance did not affirm Plaintiff’s formula for the calculation of the lost interest. The interest should be calculated from the date of filing the suit to the date of this judgment at the USD demand deposit interest rate of the Bank of China. In conclusion, in accordance with the Maritime Code of the People’s Republic of China Article 47, Article 48, Article 51, Article 56 Paragraph 1, Article 106, Article 252 Paragraph 1 and Article 277, and the Civil Procedure Law of the People’s Republic of China Article 64 Paragraph 1, the judgment was as follows: 1. The Defendant, Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft KG, should compensate the Plaintiff, China Pacific Property Insurance Co., Ltd. Hubei Branch, for the loss of goods in the amount of USD25,670.13 within ten days from the date of the effectiveness of this judgment, as well as the interest thereon calculated from July 2, 2013 to the date of this judgment according to the USD demand deposit interest rate of Bank of China over the same period; 2. Other claims of the Plaintiff, China Pacific Property Insurance Co., Ltd. Hubei Branch should be rejected. CPIC Hubei Branch refused to accept the judgment of first instance and lodged an appeal to the court on the grounds that the original judgment was not clear in its determination of facts, and to request the court to revoke the judgment of first instance and support its claims. The main reasons are as follows: 1. Neither did South America Line provide qualified container, nor did it find out about the leak in the container during transport. At the same time, comparing the container seal number on the bill of lading with that of the inland waybill of the port of destination, it could be found that the container seal was changed, suggesting that the carrier opened the container during transport. Therefore, South America Line knew the damage done to the goods involved, and according to the Article 59 of the Maritime Code, South America Line should not be entitled to the limitation of liability; and 2. Based on the evidence, the damage to the goods involved occurred in the section of waterway or landway of the Defendant’s responsibility. Thus, according to Article 105 of the Maritime Code, South America Line should not be entitled to the limitation of liability. South America Line defended as follows: 1. According to the evidence submitted to court of first instance, the container appeared to be in good condition with no damages. Hence, the allegation of CPIC Hubei Branch that South America Line should not be entitled to the limit its liability, due to breakage of the container, lacked factual and legal basis.

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2. The allegation of CPIC Hubei Branch that the water penetration occurred in the section of domestic waterway transport lacked basis. Chapter 4 of the Maritime Code was only applicable to waterway transport between the ports of the People’s Republic of China. Since the transport in this case was the international carriage of goods by sea, from Wuhan to Mexico, taking Shanghai as a port of port of transshipment, there was no domestic waterway transport in this case. 3. The change of the container seal number was due to the inspection of Mexico Customs, after the customs opened the container it needed to be resealed. The carrier did not know of the damage to the goods involved and did not cause such damage intentionally or recklessly. Accordingly, South America Line requested the court to dismiss the appeal of CPIC Hubei Branch. South America Line refused to accept the judgment of first instance and lodged an appeal to the court, requesting to revoke the judgment of first instance and reject the claims of CPIC Hubei Branch. The main reason is that according to the situation and the evidence, South America Line, as the carrier, should not be responsible for the damage where the appearance of the container was in good condition. CPIC Hubei Branch alleged that the assessment report and the site photos submitted to court of first instance could prove that the accident actually took place. The container seal number was changed, which South America Line alleged was because of the inspection at Customs, but it did not provide any evidence to prove that, so it could be speculated that the carrier had opened the container. Thus, the carrier should have known about the accident. Accordingly, CPIC Hubei Branch requested the court to dismiss the appeal of South America Line. Both parties did not submit new evidentiary material during the appeal. The court holds that the facts are clear in the determination of the judgment of first instance and shall be confirmed. The court holds that this case is the dispute over contract of carriage of goods by sea. Since this case involves with foreign-related factors, and the parties agreed to apply Chinese law to solve the dispute in the first instance, the court of first instance use of the law of the People’s Republic of China is appropriate and shall be affirmed. The main issues in second instance are as follows: whether South America Line is liable for compensation; if it should undertake such liability, whether it is entitled to the limitation of liability. In respect of whether South America Line is liable for compensation, South America Line argued that the appearance of the container was in good condition, and there was no evidence to prove that the damage occurred in the period of the carrier’s liability. The court holds that from the contents of the tally list and packing list, there is no notes of the condition of the goods when the shipper, Sanhe Company entrusted an outsider to load the goods involved, and according to the assessment report, and the pictures provided, it can be found that after the goods arrived at the destination, the bottom of the container was damp and the goods were rusty. The assessment report of the goods involved found that the damage occurred because the container was not closed tightly or there were holes therein. Sea water

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or fresh water seeped into the container during the transport, and the goods became damp and oxidized; therefore, all equipment and electronic parts were damaged. The carrier argued that the goods suffered the damage before loading, or after the taking delivery, but provided no evidence to prove that. The carrier also alleged that the damage to the goods did not occur during the period of its liability; however, it did not provide sufficient evidence to prove that. According to the provisions of the Maritime Code, during the period that the carrier is in charge of the goods, the carrier shall be liable for the loss of, or damage to, the goods, except those arising or resulting from causes for which the carrier is not liable as provided in the relevant Articles of Section 2 of Chapter 4 of the Maritime Code. The ascertain of the court of first instance that South America Line shall be liable for the damages to the goods involved is proper, and the court hereby confirms. The grounds of appeal asserted by South America Line that it should not be responsible for the damage lack any factual or legal basis; therefore, the court will affirm the lower court’s findings. In respect of whether South America Line is entitled to the limitation of liability, CPIC Hubei Branch argued that the container seal number changed, proving that South America Line clearly knew of the damage done to the goods, and such damage was done either intentionally or recklessly; therefore, South America Line should not be entitled to the limitation of liability according to law. From the evidence in this case, the parties did not raise any objection to the container seal number when the consignee received and inspected the goods, and CPIC Hubei Branch did not provide any evidence to prove that South America Line knew of the damage to the goods or caused such damages intentionally or recklessly. The inspection report provided by CPIC Hubei Branch indicates the reason for damage lies in sea water or fresh water seeping into the container, causing the goods to get wet and oxidize, but this conclusion cannot prove that damage occurred in a certain section of the transport. According to Article 106 of the Maritime Code, if the section of transport in which the loss of or damage to the goods occurred could not be ascertained, the multimodal transport operator shall be liable for compensation in accordance with the stipulations regarding the carrier’s liability and the limitation thereof as set out in Chapter 4. In conclusion, the ground of appeal held by CPIC Hubei Branch that South America Line should not be entitled to the benefit of limitation of liability lacks legal basis, and the court denies the appeal on these grounds. In conclusion, the original judgment is clear in the determination of the facts and correct in the application of the relevant laws. The appeals of CPIC Hubei Branch and South America Line lack factual and legal basis, and the court does not accept these arguments. According to the Civil Procedure Law of the People’s Republic of China Article 170 Paragraph 1 Sub-paragraph 1 and Article 175, the judgment is as follows:

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Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance in amount of RMB22,151 yuan, the Appellant, China Pacific Property Insurance Co., Ltd. Hubei Branch, shall bear RMB18,608, and the Appellant, Hamburg Südamerikanische Dampfschifffahrts Gesellschaft KG, shall bear RMB3,543. The judgment is final. Presiding Judge: DONG Min Acting Judge: XU Yijin Acting Judge: HU Hailong September 16, 2014 Clerk: CHEN Xi

Tianjin Maritime Court Civil Judgment China Shipping Container Lines Tianjin Co., Ltd. v. Tianjin Kaituo Logistics Co., Ltd. (2013) Jin Hai Fa Shang Chu Zi No.705 Related Case(s) None. Cause(s) of Action 219. Dispute over contract on lease of shipping container. Headnote Container lessee held liable to pay container demurrage, including payment for deemed loss of containers not returned within 90 days. Summary The Plaintiff sought damages from defendant for a failure to return shipping containers leased by the Plaintiff to the Defendant. The court determined that the parties had a marine container leasing contract. Held - The Defendant was liable to the Plaintiff, according to the provisions laid out in the marine container leasing contract, for the failure to return certain shipping containers and damage caused to other containers. A contract provision deeming containers not returned within 90 days to be lost was upheld and enforced.

Judgment The Plaintiff: China Shipping Container Lines Tianjin Co., Ltd. Domicile: 28 Zengjin Street, Hexi District, Tianjin City. Legal representative: ZHAO Hongzhou, general manager. Agent ad litem: ZHU Yajun, male, born on April 1, 1972, living in Tanggu District, Tianjin City, staff of the Plaintiff. Agent ad litem: WEN Liyun, female, born on September 1, 1983, living in Hedong District, Tianjin city, staff of the Plaintiff. The Defendant: Tianjin Kaituo Logistics Co. Ltd. Domicile: Tongda Square, Tianjin Bonded District, Tianjin.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_12

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With respect to the case arising from dispute over contract on lease of shipping container filed by the Plaintiff, China Shipping Container Lines Tianjin Co., Ltd., against the Defendant, Tianjin Kaituo Logistics Co., Ltd., to the court, after accepting the case on November 26, 2013, the court appointed Acting Judge ZHANG Jie to try by summary procedure according to law. After the case was accepted, the Plaintiff provided an accurate address of the Defendant for service, but the notice of respondent to action could not be directly served at the domicile of the Defendant. Then this case was tried under general procedure by the collegiate panel consisting of Presiding Judge, ZHANG Lina, Acting Judges, ZHANG Jie and CHEN Xingwang. The court held a hearing in public on March 12, 2014. ZHU Yajun and WEN Liyun instructed by the Plaintiff appeared in court and participated in the action, while the Defendant, upon being served with a legal subpoena, did not appear in the court, so this case was tried by default according to law and has now been concluded. The Plaintiff alleged that on March 1, 2013, the Plaintiff and the Defendant signed Container Management Center of China Shipping Container Lines Tianjin Co., Ltd. Container Delivery Agreement (hereinafter referred to as the Container Delivery Agreement), provided related issues on the Defendant’s taking delivery of and use of the containers managed by the Plaintiff. The Defendant confirmed with its seal the tariff of container detention charges, which was an appendix of the agreement. After signing the Container Delivery Agreement, the Defendant paid a deposit in the sum of RMB200,000 to the Plaintiff. From March 8 to May 23, 2013, the Defendant took delivery of containers for a total of 125 times, among which container detention occurred 121 times; the container detention charges were RMB959,160 and the repair costs for damaged containers were RMB14,530; in addition, there were 4 containers that had not been returned yet. According to Article 11 of the Container Delivery Agreement, “if a container is not returned within 90 days after having taken delivery, such container shall be deemed as lost.” The Plaintiff was entitled to container detention charges for 90 days and compensation for total loss of such container. Container detention charges of the four containers were RMB109,440 and the value thereof was USD17,050. Therefore, the Plaintiff requested the court to judge that: 1. The Defendant should pay the container detention charges in sum of RMB959,160, the repair costs for the damaged containers in sum of RMB14,530, and compensation for total loss of the four containers in amount of USD17,050 (equivalent to RMB104,669.95) to the Plaintiff, the total amount was RMB1,187,799.95 and it turned to RMB987,799.95 after deducting the deposit; 2. The Defendant should bear the litigation costs. The Defendant did not appear in court, nor did he make any defense. The Plaintiff submitted the following evidence to support its claims:

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1. Container Delivery Agreement, to prove the container leasing contract was established between the Plaintiff and the Defendant, in which the two parties agreed on the detention charges and conditions of container’s total loss; 2. Equipment interchange receipt, to prove the return situation of the containers involved; 3. Excel, to prove calculation method and amount of container detention charges; 4. Business license of the Defendant, to prove the subject identity of the Defendant; 5. List issued by Tianjin Ocean Shipping Co., Ltd., to prove unloading time of the two containers involved; 6. List issued by China Tally Tianjin Co., Ltd., to prove unloading time of the two containers under B/L numbered with NGOTSN002429; 7. Screenshot of system of the Plaintiff, to prove the residual value of the containers involved; 8. Tariff of container detention charges, to prove the standard of detention charges of import and export trade container; 9. Internal Manual of Tianjin Company Container Management Center, to prove the process of container management; 10. Proof that the Container Management Center was a department of the Plaintiff and the container management manual provided in the agreement referred to the container management manual of the Plaintiff; 11. Yard agreement, to prove that the Plaintiff agreed to store the containers involved. The Defendant did not appear in court, nor did it make any cross-examination opinions. The opinions of the court on the evidence submitted by the Plaintiff are as follows: except evidence 4, the evidence above is the original, while evidence 4 is stamped with official seal of the Defendant, thus 4 the authenticity thereof can be identified. Therefore, the court ascertains the authenticity of all the evidence submitted by the Plaintiff will be confirmed. Evidence 1, 4 and 10 can prove the marine container leasing contract relationship between the Plaintiff and the Defendant; evidence 2, 5 and 6 can prove the return date of the containers involved; evidence 7, 9 and 11 can prove the loss of the four containers involved, of which the residual value is USD16,500; evidence 1 and 8 can prove the standard of detention charges of import and export trade containers; evidence 3 is only the calculation process of the amount to be awarded and shall not be provided as evidence. After trial it is found that China Shipping Container Transport Tianjin Co., Ltd. Container Management Center (hereinafter referred to as “Container Management Center”) signed Container Delivery Agreement with number of TJXGB2013-092 with the Defendant on February 8, 2013. The Plaintiff ratified the Container Management Center and signed the agreement on behalf of the Plaintiff. It is expressly provided in Container Delivery Agreement that:

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1. The Defendant and the Container Management Center should carry out import-trade containers delivery services; 2. The Defendant knew and will obey the regulations formulated by the Container Management Center and its superior company; 3. The Defendant would take delivery of and use containers in accordance with the provisions; 4. A free-charge period wais granted, but detention charges were also provided, both should be subject to the version published by Container Management Center; 5. If any container was not returned within 90 days upon being taken delivery, according to relevant regulations of the Plaintiff, such container would be deemed as lost and the Container Management Center would claim for compensation and detention charges; 6. Container Delivery Agreement comes effect upon the day Container Management Center receive the deposit and the parties sign Container Delivery Agreement, of which the cut-off day of period of validity was up to December 31, 2013; 7. Any dispute arising out of or concerning Container Delivery Agreement should be submitted to Tianjin Maritime Court for resolution. When signing the agreement, the Defendant confirmed a tariff of detention charges of export-trade containers with a seal, the standard being as follows: free of charge for the first 7 days; RMB120 each day from the period from 8th day to 14th day; RMB240 each day from 15th day to 21st day, RMB360 each day afterwards; and holidays being free of charge. The container detention charges of import-trade containers provided by the Plaintiff and export-trade containers published on its public professional website are basically the same, among which the charges for import 40-foot dry cargo container are as follows: free of charge for the first 7 days; RMB120 each day from the period from 8th day to 14th day; RMB240 each day from 15th day to 21st day, RMB360 each day afterwards; calculated from the day of discharge to the day of return to container yard; and holidays being free of charge. Four of the containers taken delivery from February 28, 2013 to March 7, 2013, numbered with CCLU6600703, CCLU7325988, CCLU6097667 and TCNU607 7520 have not been returned. In accordance with calculation standard of importtrade containers published on the Plaintiff’s website, the container detention charges of the four containers are RMB109,440. The court holds that a marine container leasing contract is established between the Plaintiff and the Defendant, the Plaintiff is the lessor and the Defendant is the lessee. The two parties shall enjoy the rights and fulfill obligations according to the Container Delivery Agreement, the Plaintiff shall provide the Defendant with the containers entrusted or managed by it, and the Defendant shall promptly return the containers and shall take liability for breach of contract if it fails to return. In the case of exceeding free-charge period, the Defendant shall pay container detention charges to the Plaintiff. In respect of the standard of container detention charges, the Defendant signed Container Delivery Agreement on import-trade containers

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delivery services, in the meantime, confirmed the container detention charges of export-trade containers, of which the standard is basically same with that of import-trade containers, the Defendant raised no objection thereto, so it shall be deemed as the Defendant has knew and confirmed standard of detention charges of import-trade containers published on the Plaintiff’s website. Therefore, the court will support the claim of the Plaintiff that the Defendant should pay container detention charges in sum of RMB1,068,600 (RMB109,440 plus RMB959,160) to it. Given it is expressly agreed by the parties in Container Delivery Agreement, the Plaintiff shall deduct the deposit from 6 unpaid fees and the Defendant has paid a deposit of RMB200,000, so the Defendant still needs to pay the container detention charges in amount of RMB868,600 to the Plaintiff. The Plaintiff claimed for the losses arising from loss of the four containers numbered with CCLU6600703, CCLU7325988, CCLU6097667 and TCNU607 7520, given it is provided in Container Delivery Agreement that if a container is not returned within 90 days after being taken delivery, such container shall be deemed as lost, although the Plaintiff and the Defendant only agreed on issues of taking delivery of containers, such clause complies with industry practice and is reasonable. In addition, the Defendant did not raise any contest to this clause when signing the agreement. Therefore, the court supports the claim of the Plaintiff to confirm the containers involved have been lost and request the Defendant to compensate for the loss therefrom. The compensation standard can be determined according to internal period of use and depreciation rate of the Plaintiff, namely the loss of the totally lost containers shall be calculated by the residual value thereof, so the court will support the claim of the Plaintiff that the Defendant should compensate for the four containers involved in sum of USD16,500. In addition, the Plaintiff shall not claim for the ownership of the containers with number of CCLU6600703, CCLU7325988, CCLU6097667 and TCNU6077520 after being recovered from the compensation for total loss of the containers aforesaid. The Plaintiff did not provide evidence to prove the fact that the container does not exist, nor does it provide evidence to prove the cost of repair. Therefore, it is not supported by the Plaintiff’s claim that the container is damaged. In summary, according to the Contract Law of the People’s Republic of China Article 107, the Civil Procedure Law of the People’s Republic of China Article 64 Paragraph 1 and Article 144, the judgment is as follows: 1. The Defendant, Tianjin Kaituo Logistics Co., Ltd., shall pay RMB868,600 to the Plaintiff, China Shipping Container Transport Tianjin Co., Ltd.; 2. The Defendant, Tianjin Kaituo Logistics Co., Ltd., shall compensate the Plaintiff, China Shipping Container Transport Tianjin Co., Ltd., for the losses of containers numbered with CCLU6600703, CCLU7325988, CCLU6097667 and TCNU6077520 in amount of USD16,500 within ten days after this judgment takes effect; 3. Other claims of the Plaintiff, China Shipping Container Transport Tianjin Co., Ltd., shall be rejected.

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In case of any failure of payment within the period specified in this Judgment, the Defendant, Tianjin Kaituo Logistics Co., Ltd., shall double pay the interest for the period of delayed performance in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB13,678, the Plaintiff shall bear RMB248, and the Defendant shall bear RMB13,430. Whereas the Plaintiff has prepaid the case acceptance fee, for convenience of settlement, the Defendant shall pay its proportion to the Plaintiff together with payment awarded above, the court will not otherwise return the sum. In event of dissatisfaction with this judgment, any party may within 15 days upon service of this judgment, submit a statement of appeal to the court, with four duplicates, to lodge an appeal to the Tianjin High People’s Court. Appeal fee shall be paid within 7 days upon submission of the statement of appeal (Bank of deposit: the Agricultural Bank of China Tiancheng Branch 02-200501012001686, Account name: Financial Department of Tianjin High People’s Court), otherwise, the appeal shall be deemed to be withdrawn automatically. Presiding Judge: ZHANG Lina Acting Judge: ZHANG Jie Acting Judge: CHEN Xingwang June 16, 2014 Clerk: CAO Xiaohui

Shanghai Maritime Court Civil Judgment China Pacific Insurance Co., Ltd. Shipping Insurance Operation Center v. Teh May Maritime Corporate Limited (2013) Hu Hai Fa Shang Chu Zi No.1608 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 312. Cause of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote The Plaintiff cargo insurer’s claim for short delivery of a cargo of iron ore held to be unsuccessful because loss of weight during carrying voyage was due to water draining off during the voyage; the Plaintiff had not adequately proved the weight in dry metric tons. Summary The Plaintiff insurance company sought to recover monetary damages for loss of goods, when iron ore purchased by the Plaintiff’s client and loaded unto the Defendant carrier’s ship in Brazil was alleged to be lacking in weight upon delivery in Shanghai. The Defendant argued that the difference in weight, as measured in wet metric tons, was due to the quality of the iron ore, which naturally drained off water weight during the voyage to Shanghai. This drained water had to be removed from the hold at sea to maintain the safety of the ship. The court found that the Plaintiff did not provide sufficient evidence to refute this argument, either through documentation or by using an alternative method of weighing the delivered ore in dry metric tons. The Plaintiff’s claim that goods were lost was not supported and judgment was rendered for the Defendant

Judgment The Plaintiff: China Pacific Insurance Co., Ltd. Shipping Insurance Operation Center Domicile: Hongkou District, Shanghai. Person in charge: TANG Ruiping, general manager. Agent ad litem: LI Huan, lawyer of Shanghai Huaxia Huihong Law Firm. © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_13

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The Defendant: Teh May Maritime Corporate Limited Domicile: Hong Kong. Legal representative: Angela CHAO, director. Agent ad litem: WANG Canming, lawyer of WANG JING & Co. Shanghai Office. Agent ad litem: XIE Jianfeng, lawyer of WANG JING & Co. Shanghai Office. With respect to the case arising from dispute over contract of carriage of goods by sea filed by the Plaintiff, China Pacific Insurance Co., Ltd. Shipping Insurance Operation Center, against the Defendant, Teh May Maritime Corporate Limited, to the court on November 4, 2013, the court, after accepting this case on November 5, 2013, organized the collegiate panel to hear this case. On June 12, 2014, the court held a hearing to try this case in public. LI Huan, agent ad litem of the Plaintiff, WANG Canming and XIE Jianfeng, agents ad litem of the Defendant, appeared in court to attend the hearing. Now this case has been concluded. The Plaintiff alleged that 166,379 WMT (wet metric ton) iron ores bought by the outsider Bao Kuang Trade International Co., Ltd. (hereinafter referred to as “Bao Kuang Company”) were loaded onto M.V. TEH MAY and then carried from Itaguai in Brazil to port of Shanghai in September 2012. The ship agent issued a full set of clean original shipped bill of loading on behalf of the Master. The goods involved were found in shortage on outturn in port of Shanghai on October 24, 2012. The Plaintiff paid RMB225,685.64 to Bao Kuang Company according to the cargo transport insurance contract between them and acquired the right of subrogation. The Plaintiff argued that the Defendant, as the carrier of the goods, should be liable for compensation for the loss of the goods. The Plaintiff requested the court to judge that the Defendant should compensate the Plaintiff for the economic loss in amount of RMB225,685.64 and interest thereon (the interest should counted from June 17, 2013 to the day of effectiveness of this judgment by the loan interest rate of the People’s Bank of China over the same period), and bear court acceptance fee. The Defendant argued as follows: 1. Bao Kuang Company, the receiver alleged by the Plaintiff was not lawful holder of the bill of lading involved, therefore Bao Kuang Company had no title to sue in this case and accordingly the Plaintiff had no title to sue based on the subrogation lawsuit of Bao Kuang Company. 2. Moisture content of the iron ores imported from Brazil was high, so it was natural that plenty of water exuding in the transportation. The weight of the goods at the port of discharge plus the weight of water drained in the transportation equaled to the weight of the goods recorded in the bill of lading and there was no shortage. 3. Carrier transported and delivered the goods involved on basis of WMT. The carrier was only responsible for the goods counted on basis of WMT. So it was irrelevant with the carrier that the Plaintiff weighed the goods on basis of DMT (dry metric ton).

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4. Weight in the insurance contract was counted on basis of DMT. The Plaintiff settled the claim on basis of WMT, it was an issue under the insurance contract and it was irrelevant with the carrier. 5. Moisture Certificate at Port of Loading and Quality Certificate at Port of Discharging issued by China Shanghai Entry-Exit Inspection and Quarantine Bureau (hereinafter referred to as “CIQ”) were issued by the interested party of the goods or agency entrusted by the interested party of the goods. The moisture content recorded in the Moisture Certificate or the Quality Certificate was an issue of quality agreed in a goods purchase and sales contract rather than a requirement under a transportation contract. 6. Since there were ordinary wear and tear and draft survey errors in the transportation of bulk cargo such as iron ores, the carrier could exempt liabilities for shortage within five thousandths of the total weight of the goods. 7. Even if the moisture content recorded in the Moisture Certificate or the Quality Certificate was correct, according to the weight standard alleged by the Plaintiff, the Plaintiff made a mistake in the calculation, there was no shortage of goods. The evidence submitted by the Plaintiff, the cross-examination of the Defendant, and the ascertainment opinions of the court are as follows: 1. Bill of lading, a guarantee issued by United Kingdom Mutual Steamship Assurance Association and the delivery note of import goods (Port of Shanghai), to prove the contract of carriage of goods by sea relationship between Bao Kuang Company and the Defendant. The Defendant accepted the effect of this group of evidence but not the purpose of proof thereof. It held the bill of loading had not been indorsed, so it could not prove that Bao Kuang Company was lawful holder of the bill of lading; the guarantee was a security for the claim of the Plaintiff but not a conformation of the contract of carriage of goods by sea relationship; the delivery note was only a proof of delivery, which was irrelevant with the contract of carriage of goods by sea. The court holds that the effect of this group of evidence shall be ascertained since the Defendant affirmed and the purpose of proof will be clarified in the reasoning part of the judgment combined with other evidence and facts having been found by the court. 2. Customs declaration form of import goods and the bill provided by the Defendant, to prove the total value of the goods involved. The Defendant affirmed the effect of this group of evidence but argued that the total value of the goods should be subject to the price recorded in the customs declaration form. The court holds that the effect of this group of evidence shall be ascertained for the affirmation of the Defendant. The unit DMT price of the goods involved will be revised according to the iron content recorded in the CIQ Qualification Certificate. While the value of the goods was only an estimated amount, the value of the goods shall be identified by the unit DMT price affirmed in the add bills, which is counted by the iron content recorded in the customs declaration form and the CIQ Qualification Certificate.

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3. Weight Certificate and Certificate of Analysis of Goods at port of loading, Weight Certificate and Quality Certificate issued by CIQ of the port of discharging, to prove the WMT weight and moisture content of the goods at the port of loading and the port of discharging, and the shortage on outturn. The Defendant accepted the effect of this group of evidence but not the purpose of proof thereof. the Defendant held the evidence provided by the Plaintiff suggested that 164,633 WMT, the weight at port of discharging plus 1,753.20 MT, the weight of water drained in the voyage approximately equaled to 166,379 WMT, the weight of the goods at port of loading, so there was no shortage of goods. The court holds that the effect of this group of evidence shall be ascertained for the affirmation of the Defendant and the purpose of proof will be clarified in the reasoning part of the judgment combined with other evidence and facts having been found by the court. 4. Cargo transport insurance policy, receipt, letter of subrogation and payment voucher of insurance premium, to prove that Plaintiff was the insurer under the bill of lading and the Plaintiff acquired the right of subrogation after paying the insurance indemnity to Bao Kuang Company. The Defendant affirmed the effect and the purpose of proof of this group of evidence. The court holds the effect and the purpose of proof of this group of evidence shall be ascertained for the affirmation of the Defendant. 5. Acceptance notice, to prove that the counter party of the trade paid the price of goods in amount of USD16.353,779.71. The court holds that the effect and the purpose of this group of evidence shall be ascertained for the affirmation of the Defendant. The evidence submitted by the Defendant for its defence, the cross-examination of the Plaintiff, and the ascertainment opinions of the court are as follows: 1. Report of the expert witness, Dr. Nicolas Crouch, to prove that there was no shortage of the goods involved; business license of AMS Brookesbell, which issued that report, to prove that the business scope of this company included providing technical consultation in the marine technology field; and the expert’s professional resume, to prove the professional competence of the expert. The Plaintiff affirmed the effect of the business license but did not admit the effect of the report and the resume. It argued the identification of the expert and the signature in the report could not be identified, and this company had not passed a professional attestation and acquired a qualification to issue expert reports. The court holds that the business license shall be ascertained for the affirmation of the Plaintiff, but it is only referred that the company can only provide technical consultation in the marine technology field, it has no qualification for issuing expert reports. In addition, the expert is a foreigner, the identification and the resume of the expert cannot be verified, so does the signature in the report. In conclusion, the court holds neither the effect nor the purpose of proof of this group of evidence shall be ascertained.

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2. Emails sent by the Master, attachment of drainage log and printed copies of the drainage log affixed with the ship seal, all of these have been notarized, to prove that the total weight of the water drained from the goods involved in the voyage was 1,753.20 MT. The Plaintiff affirmed the notarization form of the emails but not the authenticity thereof; and argued the drainage log was issued by the Defendant unilaterally, so it did not affirm the effect and the purpose of proof of the evidence. The court holds that this group of evidence have been notarized and the emails were sent at regular intervals by the Mater before this suit, if the Plaintiff cannot provide opposite evidence, the effect of this group of evidence shall be ascertained; and the fact that the total water drained from the goods involved is 1,753.20 MT shall be ascertained. The purpose of proof will be clarified in the reasoning part of the judgment combined with other evidence and facts having been found by the court. 3. Loading survey report and annual hull survey III and mechanical survey III issued by American Bureau of Shipping (hereinafter “ABS”) in July 2012, to prove that the ship involved was fit for carrying the goods involved, and the ship was in good condition, including the holds, the hatch and the bilge pump system. The Plaintiff argued that there was no proof for the qualification of the surveying company and the surveyor of the loading survey report, and there was no signature in the annual hull survey and mechanical survey, so the Plaintiff disaffirmed the effect of this group of evidence; in addition, this group of evidence could not prove that the ship was in good condition during the voyage nor exclude the purpose of proof of this group of evidence. The court holds that the loading survey report is issued by a third party authorized by P&I Club of the Defendant, and the Defendant has gone through the notarization procedure, so the effect of this group of evidence shall be ascertained. The reason of absence of signature in the hull survey and the mechanical survey lies in that they were downloaded from the website of ABS by the Defendant through its own account. The Defendant has gone through the notarization procedure to corroborate the effect of this evidence. The effect of the survey reports shall be ascertained and the purpose of proof of this group of evidence due to the high probability of civil evidence shall be ascertained either. 4. Certificate of Analysis of Goods at Port of Loading, to prove physical and chemical analysis of goods involved; Certificate of Weight of Goods at Port of Loading, to prove that the weight of goods at the time of loading was 166,379 WMT; Information Sheet of Solid Bulk Goods issued by the shipper, Vale S.A. on August 29, 2012, to prove the nature of the goods; Certificate of Moisture Content and Transportable Moisture Limit, to prove the nature in moisture content of the goods involved issued by the shipper on August 27, 2012. The Plaintiff affirmed the effect and the purpose of proof of the evidence except Certificate of Moisture Content and Transportable Moisture Limit for absence of conformation of the issuer and disaffirmed the content that the moisture content of the goods at port of loading is 7.82%. The court holds that the group of evidence were formed in foreign territory and had been gone through corresponding notarization procedures, moreover they were issued by the shipper

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and affixed the seals of the ship and the shipper, therefore the effect of this group of evidence shall be ascertained. The effect of other evidence of this group shall be ascertained for the affirmation of the Defendant. The purpose of proof will be clarified in the reasoning part of the judgment combined with other evidence and facts having been found by the court. 5. Purchase and Sales Contract, to prove that the specific agreement in the contract on the difference between the DMT weight at the port of loading and that of the port of discharge, which was a trade issue; bill, to prove that the difference between the DMT weight at the port of loading and that of the port of discharge had been resolved between the seller and the buyer. The Plaintiff had no objection to the effect of this group of evidence but disagrees with the purpose of proof thereof. The Plaintiff argued that it was agreed in the Purchase and Sales Contract a 0.5% shortage was allowable, but the receiver suffered additional economic loss besides 0.5% shortage. The court holds that the effect of this group of evidence shall be ascertained for the affirmation of the Plaintiff; since the bill is a supplementary settlement bill, the fact that except USD16,353,779.71 in the letter of credit, Bao Kuang Company paid USD1,603,909.20 to the counter party as agreed shall be ascertained. 6. Three analysis reports about the reason of shortage of iron ores imported from Brazil on the official websites of CIQ and other government departments of China, to prove that it was normal that plenty of water drained from the iron ores imported from Brazil in the voyage due to the nature, so the ship should drain off the water for the sake of safety. The Plaintiff argued the case could not be generalized due to circumstances and disaffirmed the effect and the purpose of this group of evidence. The court holds upon verification, the evidence are from the websites of CIQ and other related government departments of China. Seen from the content, iron ores imported from Brazil always separate out a large amount of water during the voyage. It is consistent with the safety instruction in the Information Sheet of Solid Bulk Goods, therefore the effect and the purpose of this group of evidence shall be ascertained. According to the analysis of above-mentioned evidential materials and the investigation in the hearing, the court finds out the following facts: In September 2012, M.V. TEH MAY, which was owned by the Defendant, carried the iron ores bought by the third party, Bao Kuang Company from Itaguai in Brazil to Shanghai. On September 2, 2012, the agent of the ship issued clean No.1 charter party B/L on behalf of the Master. It was stated clearly in the bill of lading that: the shipper was VALE S.A.; the consignee was to order; the name of the ship was M.V. TEH MAY; the voyage was from Brazil to Shanghai; the goods were standard sinter feed guaiba and the total weight was 166,379 WMT. On August 27, 2012, the shipper, VALE S.A issued Certificate of Moisture Content and Transportable Moisture Limit to the Defendant, which stated the transportable moisture limit of the goods involved was 8.74% and the moisture content of the goods was 7.82%. It was recorded in the remarks of the certificate that the average actual moisture content of the goods and the maximal actual

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moisture content comes from the weekly measurement by the shipper’s laboratory; when this statement was given to the Master or his agent, according to the acknowledge of the shipper, the average actual moisture content was the moisture content of the goods to be loaded; the shipper stated the goods agreed with the record above. As far as the shipper was concerned, all data and standards were true and correct, which described the goods to be loaded. The certificate was signed by the Master and affixed with the seal of M.V. TEH MAY and the seal of VALE S.A. Information Sheet of Solid Bulk Goods was issued by VALE S.A. on August 29, 2012, it was stated that: the transport ship was M.V. TEH MAY; the shipper was VALE S.A.; the goods were standard sinter feed guaiba, the standard moisture content of which was 8.0%; according to the nature of the goods and 7.7.3 of the International Maritime Solid Bulk Cargo Code 2009, where the average actual moisture content of this kind of goods was lower than the transportable moisture limit, the goods were hard to liquefy, a filter or filter medium was recommended, and relevant requirements should refer to Certificate of Moisture Content and Transportable Moisture Limit. For the safety of loading and voyage, the shipper suggested that “1. in consideration of plenty of water will drain from the goods in the voyage, a filter is suggested to be installed at the bottom of the holds to prevent the bilge well from being blocked up by solid particles in the drained water. 2. The Master shall exercise good seamanship and be careful to draw water from the bilge well.” The certificate was signed by the Master and affixed with the seal of M.V. TEH MAY and the seal of VALE S.A. According to the certificate of weight of goods at port of loading issued by VALE S.A. on September 2, 2012, the weight of the goods involved was 166,379 WMT. According to the certificate of quality analysis of goods issued on September 4, 2012, the moisture content of the goods involved was 7.30%. The P&I Club of the Defendant authorized a third party to survey the goods receipt issued by the shipper VALE S.A. The total weight of the goods at the port of loading was 166,379 WMT; the loading of the goods started from August 31, 2012 and ended on September 2, 2012. During this period, the Defendant carried out a cylinder test and the result of the test showed the goods were in good condition. The agent of the shipper inspected the holds before loading, and found the result satisfied. The agent of the shipper installed drainage bilge consisting of a layer of gravels and a layer of sands. The annual hull survey and mechanical survey issued by ABS showed that the hull of the ship involved (including the hatch) and the machinery (including the bilge pump system) were in a good condition. The Master of M.V. TEH MAY sent reports, the theme was the bottom of the ship, to the shipper and related person at regular intervals during the period from September 8 to October 18, 2012. The attachments were emails about the drainage records. The weight of drained water in the emails added up to 1,753.20 MT. The Plaintiff issued No.AHYXH0158012Q006064S marine cargo insurance policy in terms of the goods involved. It was specified in the insurance policy: the insurer was Bao Kuang Company; the route was from Itaguai in Brazil to Shanghai in China; the goods were standard sinter feed guaiba and the total weight was 166,379 WMT; and the insurance amount was USD17,989,158. There was a

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deducible of 0.3% agreed in the contract. After the accident involved occurred, the Plaintiff paid Bao Kuang Company RMB225,685.64 through Alipay on June 17, 2013, then Bao Kuang Company issued the letter of subrogation to the Plaintiff and confirmed the receipt of the insurance indemnity. Bao Kuang Company went through delivery formality of import goods with the delivery order in October 2012. The delivery order named Bao Kuang Company as the receiver or the agent. The name of ship, the name of goods and the weight of goods were all same with the descriptions in the bill of loading. The delivery order was affixed with the seal of delivery of import goods of Shanghai Universal Shipping Agency Co., Ltd. the release seal and the phytosanitary seal of the Customs. Bao Kuang Company authorized the outsider, Shanghai Sinotrans Customs Declaration Co., Ltd., to declare import goods to the Customs on October 18, 2012. It was recorded in the customs declaration form that: the operation unit was Bao Kuang Company; the consignee was Ma Steel International Trade & Economic Co., Ltd.; the name of the ship was M.V. TEH MAY; the mode of trade was general trade; the mode to conclude the transaction was C&F; the name of the goods was fine iron ores; the weight was 166,379,000.000 kg; the unit price was USD0.0983/ kg and the value of the goods was USD16,353,779.71. Bao Kuang Company accepted the letter of credit and paid USD16,353,779.71 to Bao Kuang Trade Asian Co., Ltd. through Bank of China to redeem the bill of loading, then Bao Kuang Company adjusted the unit DMT price of the goods according to the iron content of 63.54% recorded in the CIQ Certificate of Quality and added a bill of USD1,603,909.20. The final transaction price of the goods involved was USD117.04/dry ton. M.V. TEH MAY arrived at Lv Hua Shan anchorage ground in port of Shanghai and part of goods were discharged on October 18, 2012. Then the ship arrived at Luo Jing dock in port of Shanghai, the rest goods were discharged on October 24, 2012. Shanghai CIQ inspected the goods board at Lv Hua Shan anchorage ground and port of Shanghai on October 18, 2012 and October 24, 2012, then CIQ issued the Certificate of Weight and the Certificate of Quality of the goods involved at port of discharge. It was recorded in the certificates that the weight of the goods involved at the port of discharge was 164,633 WMT; the moisture content was 7.37%; and the iron content was 63.54%. On July 9, 2013, the English Steamship Owners Mutual Protection and Indemnity Association issued a guarantee to the Plaintiff to secure the responsibility for compensation of M.V. TEH MAY arising out of the transportation involved, the guarantee amount was no more than USD112,611.21. It mentioned that the owner of M.V. TEH MAY was the Defendant and the ship was not in bareboat charter. The court also finds out that it was agreed in the measurement of weight, sampling, analysis and payment of the purchase and sales contract that the weight of the goods at port of loading and the port of discharge should be measured by draft survey according to the international practice, the bill of loading and the certificate of weight should be counted on basis of the weight at the port of loading and the weight survey certificate issued by CIQ should be the basis at the port of

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discharge. The weight in bill of lading, the iron content and the moisture content stated in the certificate of analysis of goods at port of loading issued by the seller or VALE INTERNATIONAL S.A. form the basis of invoice. The moisture content in the Certificate of Analysis issued by VALE INTERNATIONAL S.A. was 7.30%, it was the basis of the invoice of payment settlement under the trade contract. The court also finds out that it was a normal phenomenon that iron ores imported from Brazil usually separate out water during voyage due to the nature. The carrier should drain off water according to the actual condition for the safety of the voyage. The court holds that this case is arising from dispute over contract of carriage of goods by sea. Since the Defendant is a legal person and the port of loading involved is Itaguai in Brazil, this case contains foreign-related factor. As prescribed in the law, the parties can choose governing law to resolve the disputes over a foreign-related contract upon consensus. In this case, the parties choose the laws of the People’s Republic of China as applicable law. The court holds that the main issues in this case are as follows: 1. Whether the Plaintiff enjoys the title to sue; 2. Whether there is shortage of goods in this case. In respect of whether the Plaintiff enjoys the title to sue, the court holds that the evidence available show that Bao Kuang Company paid USD16,353,779.71 in the letter of credit to Bao Kuang Trade Asian Co., Ltd. through Bank of China to redeem the bill of loading and it is recorded in the delivery order affixed with the seal of the ship that the receiver is Bao Kuang Company. According to the normal process of exchange of bill of lading, only if the lawful holder applies for taking delivery of goods with full set of original bill of lading, will the carrier give the holder the delivery order of import goods sealed by the ship agent, the court ascertains that Bao Kuang Company is a lawful holder of bill of lading. The Plaintiff as the insurer of the insured goods paid the insurance indemnity to Bao Kuang Company, then Bao Kuang Company issued the right of subrogation to the Plaintiff, and the Plaintiff acquired the right of subrogation. The Defendant affirmed it issued the bill of loading involved in the hearing, so the Defendant shall be ascertained as the carrier of the transportation involved. In conclusion, the Plaintiff enjoys the title to sue based on the contract of carriage of goods by sea concluded with the insured, which is lawful holder of the bill of lading, and the Defendant. In respect of whether there is goods shortage in this case, the Plaintiff argued that the carrier should be responsible for WMT goods. The goods involved are iron ores including worthless water and dry goods, where the carrier knew explicitly but did not notify the receiver, it alleged large amount of water were drained out. Therefore the carrier is not entitled to allege that he is only responsible for the WMT weight. The shortage counted on basis of DMT with the factor of water excluded is more scientific, which means the weight at the port of loading namely 154,233.33 DMT (based on the moisture content 7.30% recorded in the Moisture Content Certificate issued by VALE INTERNATIONAL S.A.) minus the weight at the port of discharging namely 152,499.54 DMT (based on the 7.37% of moisture content

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recorded in the Moisture Content Certificate issued by CIQ), the goods are in shortage of 1,733.79 DMT. The court holds the allegation of the Plaintiff that the weight should be counted on basis of WMT shall be adjudged from the following aspects: Firstly, if weighted on basis of DMT claimed by the Plaintiff, then the moisture content of the goods at the port of loading and the port of discharge shall be cleared. Since the certificate of weight and quality of goods at port of discharge was issued by CIQ, which has no interest with the carrier, the shipper or the receiver and has administrative law enforcement power, since the Defendant cannot provide opposite evidence, the court ascertains the effect of the evidence. But there are three moisture content certificates. The first one is Certificate of Moisture Content of and Transportable Moisture Limit of the goods involved issued by the shipper, VALE S.A on August 27, 2012 to the Defendant, in which the transportable moisture limit is 8.74% and the moisture content is 7.82%, this certificate is affixed with the seal of the ship and signed by the shipper; the second one is the Information Sheet of Solid Bulk Cargo issued by the shipper, VALE S.A on August 29, 2012 to the Defendant, in which the typical moisture content of the goods involved is 8.0%, it is also affixed with the seal of the ship and signed by the shipper; the third one is the certificate of analysis of cargo issued by VALE INTERNATIONAL S.A on September 4, 2012 after the voyage started (4 September), on which the moisture content is 7.30%. This certificate is not sealed by the Defendant and the Defendant claimed that he had never received the certificate. It is used for settlement of purchase and sales contract and compensation to the Plaintiff. The court holds that the certificate of analysis of goods, the moisture content is 7.30%: This certificate is issued after the ship set sail. It is not sealed by the Defendant and the Defendant alleged that it had never received the certificate until the interested party of the goods claimed for compensation. The Plaintiff shall bear adverse consequence for failure on burden of proof to prove that it had sent the certificate to the Defendant. The issuer of the certificate is VALE INTERNATIONAL S.A., which has interested relation with the shipper, VALE S.A. It can be seen from the agreement in the purchase and sales contract the issuer is not the carrier, the purpose of issuance of the certificate is to settlement of the price of the goods involved, therefore it can only bond on the interested party of the goods under the trade contract. It cannot be regarded as the basis to measure the shortage of goods. The other two certificates are issued by the shipper to the Defendant, which are affixed with the seal of the Defendant and the shipper. Whether the seals of the two parties mean consistent confirmation of the parties on the moisture content recorded in the certificates, furthermore mean the confirmation of the Defendant the moisture content at the port of loading is 7.82% or 8.0%, and then mean the Defendant has confirmed the quality of the goods and delivered the goods in such quality to the receiver? The court holds that it needs to consider the real intention when the Defendant received the certificates. First, the Defendant received the certificate in which the moisture content is 7.82% on August 27, 2012 and received the

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certificate in which the moisture content is 8.0% on August 29, 2012. After that, the Defendant sampled the goods involved and conducted cylinder physical test in the period from August 31, to September 2, 2012. After observing the physical changes to judge whether the moisture content was over high. The result of cylinder physical test was satisfying, so the Defendant accepted the carriage. If the seal and signature mean the Defendant has accepted the moisture content of the goods, then there is no need to conduct the physical test. The court holds that the records in the certificates are just preliminary trust on the moisture content of the goods to decide whether it would carry the goods. The physical test is to verify the data in the certificates. Second, it can be seen from the Loading Inspection Report that the period from the receipt of the certificates to the shipment is short, so that the Defendant has no time to check the data of the goods carefully. Third, the court holds that what the carrier needs to focus on is the quality of goods (reflected by moisture content) when it endangers navigation safety, it is necessary for the carrier to care about the quality of cargo. That’s to say, the obligation of the carrier for inspection of the quality of the goods shall be limited to ensuring navigation safety. Therefore where whether the goods can be transport safely can be determined by a physical test, it is unnecessary for the carrier to inspect the data of moisture content carefully. In conclusion, the court holds that the seal and signature of the Defendant just mean the receipt of the certificates rather than conformation of the moisture content recorded therein. Even if the seal and signature of the Defendant is a confirmation on the moisture content 7.82% or 8.0%, it does not mean the Defendant has confirmed the quality of the goods and it would deliver the cargo to the receiver in such quality. Since the attention of the carrier to the moisture content attributes to the influence thereof on the navigation safety, it shall know something about the moisture content for navigation safety. Whether the moisture content is 8.0%, 7.82%, 7.78% or 7.68%, as long as the moisture content of the goods is under the limit namely 8.74%, does not make a difference. So the seal and signature of the Defendant does not exclusively mean its confirmation on the authenticity and accuracy of the data, so as far to the agreement on the carriage. In consideration of that, those certificates are issued by the shipper without confirmation of the Defendant and joint inspection of both parties, they cannot bond on the carrier under the transport contract and be the basis to count the shortage of goods. In conclusion, the Plaintiff failed to provide effective evidence to prove the accurate data of moisture content at the port of loading namely DMT weight of the goods, then prove the shortage counted by dry weight. So the Plaintiff shall bear the consequence for failure of burden of proof. The court does not accept the Plaintiff’s claim that there is shortage in weight standard of DMT. In this case, the parties had no objection to the facts that the weight of the goods at the port of loading is 166,379 WMT, the weight at the port of discharge is 164,633 WMT and the shortage is 1,746 WMT. The computational formula to count the shortage on basis of weight standard of DMT identified by the Plaintiff in the hearing is: WMT weight at the port of loading * (100- moisture content at the port of loading) % - WMT weight at the port of discharge * (100 - moisture content at the port of discharge) % = shortage on basis of DMT weight between the two

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ports. The shortage is 1,733.79 DMT counted on basis of calculation standard identified by the Plaintiff. No matter the moisture content of 7.30% at the port of loading or the moisture content of 7.37% at the port of discharge or the weighted average, the WMT weight deduced from 1,733.79 DMT is much more than 1,746 WMT. Since the Plaintiff cannot prove the rationality of its claim for shortage counted on basis of WMT, it shall bear adverse consequence for failure of burden of proof. The court will not support the claim of the Plaintiff for the shortage of 1,733.79 DMT. From the above, since the Plaintiff failed to provide effective evidence to prove the actual moisture content of the goods at the port of loading and the rationality of the shortage in DMT, the court will not support its claim for DMT as the weight standard and the result thereof. The bill of loading, the customs declaration form, the certificate of weight of goods at port of loading and the loading survey report suggest that the shipper delivered the goods to the Defendant in the weight of WMT and the Defendant accepted and carried the goods in the weight of WMT. According to international practice, draft survey namely WMT is the weight standard in the international trade. The weight standard recorded in the insurance policy issued by the Plaintiff is WMT. The weight standard in the sales contract, the insurance contract and the transportation contract of this case is WMT. In conclusion, the court holds the actual weight method agreed by the parties under their contract in practice shall be deferred to, so WMT shall be adopted as the weight standard to count the shortage of goods involved. Firstly, the Defendant proved that the ship was fit for loading the goods involved and all aspected including the hatch cover and the bilge water drainage system of the ship were in good condition with the notarized loading survey report, hull survey report and machinery survey report, which are highly probable and advantageous evidence; secondly, the Defendant provided the notarized emails about drainage log sent by the Master to the shipper etc. and notarized printed copies of the drainage logs sealed with the seal of the ship. This group of evidence reflect the Master had informed the shipper and other related parties the condition of drainage during transportation at regular intervals even if the Master did not know who is the receiver, and all documents in the emails show the specific situation of drained water. The total weight in the emails adds up to 1,753.20 MT. On one hand, the Defendant performed the requirement put forward by the shipper in the information sheet of solid bulk cargo that the Master should exercise good seamanship and pay special attention to draw and drain water at the bottom of the hold to take care of the goods properly, on the other hand, the goods involved are in shortage of 1,746 MT, which is in a reasonable range, it can be proved there is no shortage of goods if counted on basis of WMT. In summary, since the Plaintiff failed to produce effective evidence to prove the calculation standard on basis of DMT, and the calculability and the rationality of the result counted on basis of DMT. Where the Defendant can prove that no shortage occurred when counted on basis of WMT, the Plaintiff shall bear the consequence for failure of burden of proof. The court will not support the shortage of the goods

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and corresponding loss claimed by the Plaintiff. According to Article 145 Paragraph 1 of the General Principles of the Civil Law of the People’s Republic, Article 252 Paragraph 1 of the Maritime Code of the People’s Republic of China, Article 60 Paragraph 1 of the Contract Law of People’s Republic of China and Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Not support the claims of the Plaintiff, China Pacific Insurance Co., Ltd. Shipping Insurance Operation Center. Court acceptance fee in amount of RMB4,685, shall be born the Plaintiff, China Pacific Insurance Co., Ltd. Shipping Insurance Operation Center. In event of dissatisfaction with this judgment, the Plaintiff, China Pacific Insurance Co., Ltd. Shipping Insurance Operation Center, within 15 days upon service of this judgment, and the Defendant, Teh May Maritime Corporate Limited, within 30 days upon service of this judgment, submit a statement of appeal to the court, with duplicates in the number of the opposite party, to lodge an appeal to the Shanghai High People’s Court. Presiding Judge: JI Gang Acting Judge: WANG Huanjin Acting Judge: TANG Qin August 5, 2014 Clerk: GU Chanyan

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Shanghai High People’s Court Civil Judgment China Pacific Insurance Co., Ltd. Shipping Insurance Operation Center v.

Teh May Maritime Corporate Limited (2014) Hu Gao Min Si (Hai) Zhong Zi No.137 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 299. Cause of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote Affirming lower court’s decision that the Plaintiff cargo insurer’s claim for short delivery of a cargo of iron ore was unsuccessful because loss of weight during carrying voyage was due to water draining off during the voyage; the Plaintiff had not adequately proved the weight in dry metric tons. Summary This is an appeal of the Shanghai Maritime Court first instance judgment (2013) Hu Hai Fa Shang Chu Zi No.1608. The case concerns a shipment of iron ore, which the Defendant transported from Brazil to Shanghai. The Plaintiff alleged that there was a shortage of the ore upon delivery for which the Defendant should be responsible and pay monetary damages. The lower court judged for the Defendant, holding that there was no shortage of ore and that any difference between the weight of the ore upon loading and the weight upon delivery was due to a natural loss of water-weight. The Plaintiff appealed, claiming that there was insufficient evidence to support the lower court’s judgment and, moreover, that there had been a misapplication of law. The court of second instance, here, affirmed the lower court’s judgment, finding that there was no basis for a claim of shortage of goods and that the Respondent was not liable for monetary damages.

Judgment The Appellant (the Plaintiff of first instance): China Pacific Insurance Co., Ltd. Shipping Insurance Operation Center Domicile: Hongkou District, Shanghai. Person in charge: TANG Ruiping, general manager. Agent ad litem: LI Huan, lawyer of Shanghai Huaxia Huihong Law Firm.

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The Respondent (the Defendant of first instance): Teh May Maritime Corporation Limited Domicile: Hong Kong. Legal representative: Angela CHAO, director. Agent ad litem: WANG Canming, lawyer of WANG JING & Co. Shanghai Office. Agent ad litem: XIE Jianfeng, lawyer of WANG JING & Co. Shanghai Office. With respect to the case arising from dispute over contract of carriage of goods by sea filed by the Appellant, China Pacific Insurance Co., Ltd. Shipping Insurance Operation Center (hereinafter referred to as CPIC Operation Center), against the Respondent, Teh May Maritime Corporation Limited, the court, after accepting this case on September 26, 2013, organized the collegiate panel to try this case. On November 13, 2014, the court heard this case in public. LI Huan, agent ad litem of the Appellant, WANG Canming and XIE Jianfeng, agents ad litem of the Respondent, appeared in court to attend the hearing. Now the case has been concluded. It was found by the court of first instance that on September 2012, M.V. TEH MAY, which was owned by Teh May Maritime Corporation Limited, carried the iron ores bought by the outsider Bao Kuang Company from Itaguai in Brazil to Shanghai. On September 2, 2012, the agent of the ship issued clean No.1 charter party B/L on behalf of the Master. It was stated clearly in the bill of lading that: the shipper was VALE S.A.; the receiver was to order; the name of the ship was M.V. TEH MAY; the voyage was from Brazil to Shanghai; the goods are standard sinter feed guaiba and the total weight was 166,379 WMT. On August 27, 2012, the shipper VALE S.A issued Certificate of Moisture Content and Transportable Moisture Limit to Teh May Maritime Corporation Limited, which stated the transportable moisture limit of the goods involved was 8.74% and the moisture content of the goods was 7.82%. It was recorded in the remarks of the certificate that the average actual moisture content of the goods and the maximal actual moisture content came from the weekly measurement by the shipper’s laboratory; when this statement was given to the Master or his agent, according to the acknowledge of the shipper, the average actual moisture content was the moisture content of the goods to be loaded; the shipper stated the goods agreed with the record above. As far as the shipper was concerned, all data and standards were true and correct, which described the goods to be loaded. The certificate was signed by the Master and affixed with the seal of M.V. TEH MAY and the seal of VALE S.A. Information Sheet of Solid Bulk Goods was issued by VALE S.A. on August 29, 2012, it was stated that: the transport ship was M.V. TEH MAY; the shipper was VALE S.A.; the goods were standard sinter feed guaiba, the standard moisture content of which was 8.0%; according to the nature of the goods and 7.7.3 of the International Maritime Solid Bulk Cargo Code 2009, where the average actual moisture content of this kind of goods was lower than the transportable moisture limit, the goods were hard to liquefy, a filter or filter medium was recommended, and relevant requirements should refer to Certificate of Moisture Content and Transportable Moisture Limit. For the safety of loading and voyage, the shipper suggested that: “1. in consideration of plenty of water will drain from the goods in

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the voyage, a filter is suggested to be installed at the bottom of the held to prevent the bilge well from being blocked up by solid particles in the drained water. 2. The Master should exercise good seamanship and be careful to draw water from the bilge well.” The certificate was signed by the Master and affixed with the seal of M. V. TEH MAY and the seal of VALE S.A. According to the certificate of weight of goods at port of loading issued by VALE S.A. on September 2, 2012, the weight of the goods involved was 166,379 WMT. According to the certificate of quality analysis of goods issued on September 4, 2012, the moisture content of the goods involved was 7.30%. The P&I Club of Teh May Maritime Corporation Limited authorized a third party to survey the goods receipt issued by the shipper VALE S.A. The total weight of the goods at the port of loading was 166,379 WMT; the loading of the goods started from August 31, 2012 and ended on September 2, 2012. During this period, Teh May Maritime Corporation Limited carried out a cylinder test and the result of the test showed the goods were in good condition. The agent of the shipper inspected the held before loading, and found the result satisfied. The agent of the shipper installed drainage bilge consisting of a layer of gravels and a layer of sands. The annual hull survey and mechanical survey issued by ABS showed that the hull of the ship involved (including the hatch) and the machinery (including the bilge pump system) were in a good condition. The Master of M.V. TEH MAY sent reports, the theme was the bottom of the ship, to the shipper and related person at regular intervals during the period from September 8 to October 18, 2012. The attachments were emails about the drainage records. The weight of drained water in the emails added up to 1,753.20 MT. CPIC Operation Center issued No.AHYXH0158012Q0XXXXXX Marine Cargo Insurance Policy in terms of the goods involved. It was specified in the insurance policy that: the insurer was Bao Kuang Company; the route was from Itaguai in Brazil to Shanghai in China; the goods were standard sinter feed guaiba and the total weight was 166,379 WMT; and the insurance amount was USD17,989,158. There was a deducible of 0.3% agreed in the contract. After the accident involved occurred, CPIC Operation Center paid Bao Kuang Company RMB225,685.64 through Alipay on June 17, 2013, then Bao Kuang Company issued the letter of subrogation to CPIC Operation Center and confirmed the receipt of the insurance indemnity. Bao Kuang Company went through delivery formality of import goods with the delivery order in October 2012. The delivery order named Bao Kuang Company as the receiver or the agent. The name of ship, the name of goods and the weight of goods are all same with the descriptions in the bill of loading. The delivery order is affixed with the seal of delivery of import goods of Shanghai Universal Shipping Agency Co., Ltd. the release seal and the phytosanitary seal of the Customs. Bao Kuang Company authorized the third party, Shanghai Sinotrans Customs Declaration Co., Ltd., to declare import goods to the Customs on October 18, 2012. It was recorded in the customs declaration form that: the operation unit was Bao Kuang Company; the consignee was Ma Steel International Trade & Economic Co., Ltd.; the name of the ship was M.V. TEH MAY; the mode of trade was general

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trade; the mode to conclude the transaction was C&F; the name of the goods was fine iron ores; the weight was 166,379,000.000 kg; the unit price was USD0.0983/ kg and the value of the goods was USD16,353,779.71. Bao Kuang Company accepted the letter of credit and paid USD16,353,779.71 to Bao Kuang Trade Asian Co,. Ltd. through Bank of China to redeem the bill of loading, then Bao Kuang Company adjusted the unit DMT price of the goods according to the iron content of 63.54% recorded in the CIQ Certificate of Quality and added a bill of USD1,603,909.20. The final transaction price of the goods involved was USD117.04/dry ton. M.V. TEH MAY arrived at Lv Hua Shan anchorage ground in port of Shanghai and part of goods were discharged on October 18, 2012. Then the ship arrived at Luo Jing dock in port of Shanghai, the rest goods were discharged on October 24, 2012. Shanghai CIQ inspected the goods board at Lv Hua Shan anchorage ground and port of Shanghai on October 18, 2012 and October 24, 2012, then CIQ issued the certificate of weight and the certificate of quality of the goods involved at port of discharge. It was recorded in the certificates that the weight of the goods involved at the port of discharge was 164,633 WMT; the moisture content was 7.37%; and the iron content was 63.54%. On July 9, 2013, the English Steamship Owners Mutual Protection and Indemnity Association issued a guarantee to CPIC Operation Center to secure the responsibility for compensation of M.V. TEH MAY arising out of the transportation involved, the guarantee amount was no more than USD112,611.21. It mentioned that the owner of M.V. TEH MAY was Teh May Maritime Corporation Limited and the ship was not in bareboat charter. The court of first instance found that it was agreed in the measurement of weight, sampling, analysis and payment of the purchase and sales contract that the weight of the goods at port of loading and the port of discharge should be measured by draft survey according to the international practice, the bill of loading and the certificate of weight should be counted on basis of the weight at the port of loading and the weight survey certificate issued by CIQ should be the basis at the port of discharge. The weight in bill of lading, the iron content and the moisture content stated in the certificate of analysis of goods at port of loading issued by the seller or VALE INTERNATIONAL S.A. formed the basis of invoice. The moisture content in the Certificate of Analysis issued by VALE INTERNATIONAL S.A. was 7.30%, it was the basis of the invoice of payment settlement under the trade contract. The court of first instance also found that it was a normal phenomenon that iron ores imported from Brazil usually separate out water during voyage due to the nature. The carrier should drain off water according to the actual condition for the safety of the voyage. The court of first instance held that this case was arising from dispute over contract of carriage of goods by sea. Since Teh May Maritime Corporation Limited was a legal person and the port of loading involved was Itaguai in Brazil, this case had foreign-related factors. As prescribed in the law, the parties could choose governing law to resolve the disputes over a foreign-related contract upon

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consensus. In this case, the parties chose the laws of People’s Republic of China as governing law. The court of first instance held that the main issues in this case were as follows: 1. Whether CPIC Operation Center enjoyed the title to sue; 2. Whether there was shortage of goods in this case. In respect of whether CPIC Operation Center enjoyed the title to sue, the court of first instance held that the evidence available show that Bao Kuang Company paid USD16,353,779.71 in the letter of credit to Bao Kuang Trade Asian Co., Ltd. through Bank of China to redeem the bill of loading and it was recorded in the delivery order affixed with the seal of the ship that the receiver was Bao Kuang Company. According to the normal process of exchange of bill of lading, only if the lawful holder applied for taking delivery of goods with full set of original bill of lading, would the carrier give the holder the delivery order of import goods sealed by the ship agent, the court of first instance ascertained that Bao Kuang Company was a lawful holder of bill of lading. CPIC Operation Center as the insurer of the insured goods paid the insurance indemnity to Bao Kuang Company, then Bao Kuang Company issued the right of subrogation to CPIC Operation Center, and CPIC Operation Center acquired the right of subrogation. Teh May Maritime Corporation Limited affirmed it issued the bill of loading involved in the hearing, so Teh May Maritime Corporation Limited should be ascertained as the carrier of the transportation involved. In conclusion, CPIC Operation Center enjoyed the title to sue based on the contract of carriage of goods by sea concluded with the insured, which was lawful holder of the bill of lading, and Teh May Maritime Corporation Limited. In respect of whether there was goods shortage in this case, CPIC Operation Center argued that the carrier should be responsible for WMT goods. The goods involved were iron ores including worthless water and dry goods, where the carrier knew explicitly but did not notify the receiver, it alleged large amount of water were drained out. Therefore the carrier was not entitled to allege that he was only responsible for the WMT weight. The shortage counted on basis of DMT with the factor of water excluded was more scientific, which meant the weight at the port of loading namely 154,233.33 DMT (based on the moisture content 7.30% recorded in the moisture content certificate issued by VALE INTERNATIONAL S.A.) minus the weight at the port of discharging namely 152,499.54 DMT (based on the 7.37% of moisture content recorded in the Moisture Content Certificate issued by CIQ), the goods were in shortage of 1,733.79 DMT. The court of first instance held the allegation of CPIC Operation Center that the weight should be counted on basis of WMT should be adjudged from the following aspects: Firstly, if weighted on basis of DMT claimed by CPIC Operation Center, then the moisture content of the goods at the port of loading and the port of discharge should be cleared. Since the certificate of weight and quality of goods at port of discharge was issued by CIQ, which had no interest with the carrier, the shipper or the receiver and had administrative law enforcement power, since Teh May

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Maritime Corporation Limited could not provide opposite evidence, the court of first instance ascertained the effect of the evidence. But there were three moisture content certificates. The first one was Certificate of Moisture Content of and Transportable Moisture Limit of the goods involved issued by the shipper, VALE S.A on August 27, 2012 to Teh May Maritime Corporation Limited, in which the transportable moisture limit was 8.74% and the moisture content was 7.82%, this certificate was affixed with the seal of the ship and signed by the shipper; the second one was Information Sheet of Solid Bulk Cargo issued by the shipper, VALE S.A on August 29, 2012 to Teh May Maritime Corporation Limited, in which the typical moisture content of the goods involved was 8.0%, it was also affixed with the seal of the ship and signed by the shipper; the third one was Certificate of Analysis of Cargo issued by VALE INTERNATIONAL S.A on September 4, 2012 after the voyage started (September 4), on which the moisture content was 7.30%. This certificate was not sealed by Teh May Maritime Corporation Limited and Teh May Maritime Corporation Limited claimed that he had never received the certificate. It was used for settlement of purchase and sales contract and compensation to CPIC Operation Center. The court of first instance held that the certificate of analysis of goods, the moisture content was 7.30%: this certificate was issued after the ship set sail. It was not sealed by Teh May Maritime Corporation Limited and Teh May Maritime Corporation Limited alleged that it had never received the certificate until the interested party of the goods claimed for compensation. CPIC Operation Center should bear adverse consequence for failure on burden of proof to prove that it had sent the certificate to Teh May Maritime Corporation Limited. The issuer of the certificate was VALE INTERNATIONAL S.A., which had interested relation with the shipper, VALE S.A. It could be seen from the agreement in the purchase and sales contract the issuer was not the carrier, the purpose of issuance of the certificate was to settlement of the price of the goods involved, therefore it could only bond on the interested party of the goods under the trade contract. It could not be regarded as the basis to measure the shortage of goods. The other two certificates were issued by the shipper to Teh May Maritime Corporation Limited, which were affixed with the seal of Teh May Maritime Corporation Limited and the shipper. Whether the seals of the two parties meant consistent confirmation of the parties on the moisture content recorded in the certificates, furthermore meant the confirmation of Teh May Maritime Corporation Limited the moisture content at the port of loading was 7.82% or 8.0%, and then meant Teh May Maritime Corporation Limited had confirmed the quality of the goods and delivered the goods in such quality to the receiver? The court of first instance held that it needed to consider the real intention when Teh May Maritime Corporation Limited received the certificates. Firstly, Teh May Maritime Corporation Limited received the certificate in which the moisture content was 7.82% on August 27, 2012 and received the certificate in which the moisture content is 8.0% on August 29, 2012. After that, Teh May Maritime Corporation Limited sampled the goods involved and conducted cylinder physical test in the period from August 31 to September 2, 2012. After observing the physical changes

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to judge whether the moisture content was over high. The result of cylinder physical test was satisfying, so Teh May Maritime Corporation Limited accepted the carriage. If the seal and signature meant that Teh May Maritime Corporation Limited had accepted the moisture content of the goods, then there was no need to conduct the physical test. The court of first instance held that the records in the certificates were just preliminary trust on the moisture content of the goods to decide whether it would carry the goods. The physical test was to verify the data in the certificates. Secondly, it could be seen from the loading inspection report that the period from the receipt of the certificates to the shipment was short, so that Teh May Maritime Corporation Limited had no time to check the data of the goods carefully. Thirdly, the court of first instance held that what the carrier needed to focus on was the quality of goods (reflected by moisture content) when it endangered navigation safety, it was necessary for the carrier to care about the quality of cargo. That was to say, the obligation of the carrier for inspection of the quality of the goods should be limited to ensuring navigation safety. Therefore where whether the goods could be transport safely could be determined by a physical test, it was unnecessary for the carrier to inspect the data of moisture content carefully. In conclusion, the court of first instance held that the seal and signature of Teh May Maritime Corporation Limited just meant the receipt of the certificates rather than conformation of the moisture content recorded therein. Even if the seal and signature of Teh May Maritime Corporation Limited was a confirmation on the moisture content 7.82% or 8.0%, it did not mean Teh May Maritime Corporation Limited had confirmed the quality of the goods and it would deliver the cargo to the receiver in such quality. Since the attention of the carrier to the moisture content attributes to the influence thereof on the navigation safety, it should know something about the moisture content for navigation safety. Whether the moisture content was 8.0%, 7.82%, 7.78% or 7.68%, as long as the moisture content of the goods was under the limit namely 8.74%, did not make a difference. So the seal and signature of Teh May Maritime Corporation Limited did not exclusively mean its confirmation on the authenticity and accuracy of the data, so as far to the agreement on the carriage. In consideration of that, those certificates were issued by the shipper without confirmation of Teh May Maritime Corporation Limited and joint inspection of both parties, they could not bond on the carrier under the transport contract and be the basis to count the shortage of goods. In conclusion, CPIC Operation Center failed to provide effective evidence to prove the accurate data of moisture content at the port of loading namely DMT weight of the goods, then prove the shortage counted by dry weight. So CPIC Operation Center should bear the consequence for failure of burden of proof. The court of first instance did not accept CPIC Operation Center’s claim that there was shortage in weight standard of DMT. In this case, the parties had no objection to the facts that the weight of the goods at the port of loading was 166,379 WMT, the weight at the port of discharge was 164,633 WMT and the shortage was 1,746 WMT. The computational formula to count the shortage on basis of weight standard of DMT identified by CPIC Operation Center in the hearing was: WMT weight at the port of loading * (100- moisture

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content at the port of loading) % - WMT weight at the port of discharge * (100 moisture content at the port of discharge) % = shortage on basis of DMT weight between the two ports. The shortage was 1,733.79 DMT counted on basis of calculation standard identified by CPIC Operation Center. No matter the moisture content of 7.30% at the port of loading or the moisture content of 7.37% at the port of discharge or the weighted average, the WMT weight deduced from 1,733.79 DMT was much more than 1,746 WMT. Since CPIC Operation Center could not prove the rationality of its claim for shortage counted on basis of WMT, it should bear adverse consequence for failure of burden of proof. The court of first instance did not support the claim of CPIC Operation Center for the shortage of 1,733.79 DMT. From the above, since CPIC Operation Center failed to provide effective evidence to prove the actual moisture content of the goods at the port of loading and the rationality of the shortage in DMT, the court of first instance did not support its claim for DMT as the weight standard and the result thereof. The bill of loading, the customs declaration form, the certificate of weight of goods at port of loading and the loading survey report suggest that the shipper delivered the goods to Teh May Maritime Corporation Limited in the weight of WMT and Teh May Maritime Corporation Limited accepted and carried the goods in the weight of WMT. According to international practice, draft survey namely WMT was the weight standard in the international trade. The weight standard recorded in the insurance policy issued by CPIC Operation Center was WMT. The weight standard in the sales contract, the insurance contract and the transportation contract of this case was WMT. In conclusion, the court of first instance held that the actual weight method agreed by the parties under their contract in practice should be deferred to, so WMT should be adopted as the weight standard to count the shortage of goods involved. Firstly, Teh May Maritime Corporation Limited had proved that the ship was fit for loading the goods involved and all aspected including the hatch cover and the bilge water drainage system of the ship were in good condition with the notarized loading survey report, hull survey report and machinery survey report, which were highly probable and advantageous evidence; secondly, Teh May Maritime Corporation Limited provided the notarized emails about drainage log sent by the Master to the shipper etc. and notarized printed copies of the drainage logs sealed with the seal of the ship. This group of evidence reflected the Master had informed the shipper and other related parties the condition of drainage during transportation at regular intervals even if the Master did not know who was the receiver, and all documents in the emails show the specific situation of drained water. The total weight in the emails added up to 1,753.20 MT. On one hand, Teh May Maritime Corporation Limited performed the requirement put forward by the shipper in Information Sheet of Solid Bulk Cargo that the Master should exercise good seamanship and pay special attention to draw and drain water at the bottom of the hold to take care of the goods properly, on the other hand, the goods involved were in shortage of 1,746 MT, which was in a reasonable range, it could be proved there was no shortage of goods if counted on basis of WMT.

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In summary, since CPIC Operation Center failed to produce effective evidence to prove the calculation standard on basis of DMT and the calculability and the rationality of the result counted on basis of DMT, Teh May Maritime Corporation Limited could prove that no shortage occurred when counted on basis of WMT, CPIC Operation Center should bear the consequence for failure of burden of proof. The court of first instance did not support the shortage of the goods and corresponding loss claimed by CPIC Operation Center. According to Article 145 Paragraph 1 of the General Principles of the Civil Law of the People’s Republic, Article 252 Paragraph 1 of the Maritime Code of the People’s Republic of China, Article 60 Paragraph 1 of the Contract Law of People’s Republic of China and Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the court of first instance judged that the claims of CPIC Operation Center should not be supported and court acceptance fee in amount of RMB4,685 should be born CPIC Operation Center. CPIC Operation Center held in the appeal that the facts were not clearly determined, the evidence were not enough and the application of law was incorrect in the judgment of first instance. The certificate of weight of goods at port of loading submitted by CPIC Operation Center was issued by VALE INTERNATIONAL S.A on September 2, 2012. VALE INTERNATIONAL S.A was the biggest corporation in the field of producing and exporting iron ores, so it had formed an international practice that the certificates issued by this corporation would be confirmed. In the certificates of weight of goods at port of loading, that moisture content of the goods involved was 7.30% and the weight was 166,37 WMT, the shortage was counted on this basis, so the carrier Teh May Maritime Corporation Limited should bear the liability for compensation. But court of first instance held that the certificates could only bond on the shipper and the receiver but the carrier. At the same time, the court of first instance ascertained the effect of the drainage records and emails between the parties submitted by Teh May Maritime Corporation Limited unilaterally, it violated rule of evidence, then an incorrect identification that no shortage of the goods existed was made. For above reasons, CPIC Operation Center requested the court to revoke the judgment of first instance and ruled Teh May Maritime Corporation Limited compensate for the economic loss in amount of RMB225,685.64 and interest thereon (the interest should be counted on the loan interest rate of Bank of China over the same period from June 17, 2013 to the date of payment designated by this judgment) or remand this case for retrial. Teh May Maritime Corporation Limited defended that the facts were found clearly, the laws were applied correctly and the result was right in the judgment of first instance. The moisture certificates of goods at the port of loading are issued by the shipper unilaterally (no matter whether there is the seal and signature of the Master). These certificates cannot bond on the carrier, so it was correct that the court of first instance refused to accept the certificates of weight of goods at port of loading issued by VALE INTERNATIONAL S.A. The international practice of bulk goods transportation adopts WMT, so the allegation of CPIC Operation Center that the settlement method in the certificate of moisture content namely comparing

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DMT weight in the international trade contract concerning to identify whether there was shortage of DMT should be adopted violates the international practice. The conclusion of shortage of the goods involved was a business arrangement or calculation errors made by the buyer (the receiver) of the purchase and sales contract and the insurer of the insurance contract, which was irrelevant with Teh May Maritime Corporation Limited. It was correct that according to the measurement of the draft survey at the port of loading and the port of discharging, court of first instance determined that no shortage of goods occurred in the transportation by the weight standard of WMT. For above reasons, Teh May Maritime Corporation Limited requested the court to dismiss the appeal of CPIC Operation Center and affirm the judgment of first instance. The two parties did not submit new evidence during the second instance. After trial, the court holds that the facts found by the court of first instance are clear and shall be ascertained. The court holds that this case is arising from dispute over contract of carriage of goods by sea. M.V. TEH MAY owned and operated by Teh May Maritime Corporation Limited carried the goods involved. The shipping agent issued order bill of loading on behalf of the Master. Teh May Maritime Corporation Limited is the carrier of the transportation involved. The bill of loading is delivered to the third party, Bao Kuang Company, which is the holder of the bill of loading and the receiver, and relationship of carriage of goods by sea is established between it and Teh May Maritime Corporation Limited. CPIC Operation Center settled the claim according to the goods transport insurance contract concluded with the insured Bao Kuang Company and acquired the right of subrogation. CPIC Operation Center and Teh May Maritime Corporation Limited agreed to apply the laws of China in the trial, so it is proper court of first instance determined the governing law is law of China. The main issue in the second instance is whether there is shortage of goods occurring during the responsibility period of Teh May Maritime Corporation Limited. CPIC Operation Center alleged the carrier should be responsible for goods and the shortage of goods was 1,733.79 DMT on the basis of the moisture content 7.3% recorded in the certificate of weight of goods at port of loading issued by VALE INTERNATIONAL S.A. and 7.37% moisture content recorded in the qualification certificate of goods at the port of discharge issued by CIQ. Teh May Maritime Corporation Limited alleged that as the carrier, it should only be responsible for the WMT weight of the goods and according to the data of draft survey at the port of loading and the port of discharging, there is no shortage of goods in WMT occurring during the responsible period of the carrier. The court holds that according to Article 71 of the Maritime Code of the People’s Republic of China, the bill of loading involved is an evidence of goods transportation contract by sea and the taking over of the goods by the carrier from the shipper; and according to Article 78, the rights and the obligations between the carrier, Teh May Maritime Corporation Limited and the consignee and the holder of bill of loading, Bao Kuang Company shall be regulated by the bill of loading involved. The goods recorded in the bill of loading are standard sinter feed guaiba

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(fine iron ores containing water) and the total weight of the goods is 166,379 WMT, which shows that the goods involved were weighed by WMT, accordingly it can be confirmed that WMT is the weight unit when the carrier took over and delivered the goods, unless it can be proved that the carrier and the shipper have made special agreement that DMT is the weight unit of the delivery of the goods. In this case, there is no evidence which can prove that there is agreement between the carrier and the shipper. Even though there are records of moisture content in Certificate of Moisture Content and the Transportable Moisture Limit and Information Sheet of Solid Bulk Goods surrendered by the shipper, VALE S.A. before the voyage, it is the requirement of the International Maritime Solid Bulk Cargoes Code that the shipper shall provide the information of moisture content of the goods to the carrier, of which the aim is to make it convenient that the carrier identifies whether the goods conform to standard for safe transportation, so the seal and signature of the carrier on these materials do not influence the agreement that WMT is the weight unit of the goods in the bill of lading. According to the purchase and sales contract, the moisture content recorded in the certificate of weight issued by the outsider VALE INTERNATIONAL S.A. after the voyage began is the basis of invoice for settlement of the price of the goods. The agreement that the parties adopt DMT as price unit under the purchase and sales contract cannot bind on the carrier under the transportation contract, so it is correct that court of first instance identified that the certificate of weight of goods at port of loading issued by VALE INTERNATIONAL could not be the basis of the shortage of goods. For all above reasons, the appeal of CPIC Operation Center that Teh May Maritime Corporation Limited, as the carrier, should be liable for the DMT weight of the goods and the DMT weight of the goods had a shortage during the voyage lacks factual and legal basis, therefore the court will not support. The goods involved are fine iron ore containing water and it is a normal phenomenon that the iron ores separate out water during the voyage, therefore the carrier shall drain out water for safety of the voyage. In the first instance, the carrier submitted the emails of the Master, attachments of drainage logs and printed copies of drainage logs stamped with the seal of the ship (these materials are all notarized) to prove that the total weight of drained water is 1,753.20 MT. It is correct that the court of first instance admitted these emails and documentary evidence that formed in the transportation. According to the data of draft survey at the port of loading and the port of discharging, the total weight of drained water and reasonable errors of draft survey, it is proper that that the court of first instance ascertained no goods shortage occurred in the transportation with adequate evidence. To sum up, the evidence available proves that Teh May Maritime Corporation Limited shall only be responsible for WMT and there is no shortage of goods in WMT during the carriage, so Teh May Maritime Corporation Limited need not take the responsibility of compensation to the receiver. The ground of appeal held by CPIC Operation Center that there is shortage during the carriage and Teh May Maritime Corporation Limited should compensate the receiver. The original judgment is correct and shall be sustained. According to Article 170 Paragraph 1

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Sub-paragraph 1 and Article 175 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance in amount of RMB4,685, shall be born by China Pacific Insurance Co., Ltd. Shipping Insurance Operation Center. The judgment is final. Presiding Judge: DONG Min Acting Judge: XU Yijin Acting Judge: HU Hailong December 12, 2014 Clerk: CHEN Xi

Shanghai Maritime Court Civil Judgment China Taiping Insurance Co., Ltd. Tianjin Branch v. Ningbo Shuxing Shipping Co., Ltd. (2013) Hu Hai Fa Shang Chu No.360 Related Case(s) None. Cause of Action 199. Dispute over liability for damage to property on the sea or sea-connected waters. Headnote The Defendant shipowner held not liable to the Plaintiff subrogated cargo insurer for total loss of cargo as a result of collision; the Plaintiff had failed to prove its allegation that the Defendant’s ship was overloaded and, in any event, that would not have been the cause of the loss, as the other ship involved in the collision was 100% responsible, having run into the Defendant’s ship at anchor. Summary The Plaintiff, a subrogated cargo insurer, sued the Defendant shipowner in relation to total loss of insured cargo of steel as a result of sinking of the Defendant’s ship after it had been struck while at anchor by another ship. The Plaintiff sought to recover 5% of the cargo losses from the Defendant, on the basis that this was the Defendant’s share of responsibility for the sinking. The Plaintiff argued that the Defendant had overloaded the ship on the voyage involved, which was a direct cause of the sinking of the ship and cargo. The Defendant countered that the ship was not in fact overloaded, and even if it was, this did not cause the collision. The court held that the Defendant was not liable for two reasons. Firstly, the Defendant was not responsible at all for the collision In a separate trial, the court adopted the findings of the maritime safety administration’s investigation of the collision and held that the other vessel was 100% responsible for the accident. Secondly, the Plaintiff had failed to prove that the ship was overloaded, and even if the ship had been overloaded, there was nothing to suggest that that directly caused the accident or increased the losses resulting from it. Therefore, the court rejected the Plaintiff’s claims.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_14

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Judgment The Plaintiff: China Taiping Insurance Co., Ltd. Tianjin Branch Legal representative: LI Li. Agent ad litem: XU Jianfeng, WANG JING & Co. Shanghai Office. Agent ad litem: QIAO Jing, WANG JING & Co. Shanghai Office. The Defendant: Ningbo Shuxing Shipping Co., Ltd. Legal representative: LUO Chengyong. Agent ad litem: TAN Jie, Shanghai Polaw & Co. Agent ad litem: ZHU Xialing, Shanghai Polaw & Co. This case arose from a dispute over liability for damage to property on the sea filed by the Plaintiff, China Taiping Insurance Co., Ltd. Tianjin Branch, against the Defendant, Ningbo Shuxing Shipping Co., Ltd., on March 15, 2013. The court accepted the case on the same day and formed a collegiate panel in accordance with the law. On March 15, 2013, the Plaintiff filed an application for property preservation to seal up and freeze RMB5,713,016.40 in assets owned by the Defendant. The court issued an order granting property preservation for the corresponding assets on March 25, 2013. On July 4, 2013, the court ruled to suspend the trial of this case on the grounds that this action was dependent upon the results of the trial of another case that had not yet concluded. On February 10, 2014, the trial of this case resumed. On March 5, 2013, the court held a hearing in public. QIAO Jing, the Plaintiff’s agent ad litem, and TAN Jie, the Defendant’s agent ad litem, appeared in court and participated in hearing. Now the case has been concluded. The Plaintiff’s claims are as follows. In January 2013, M.V. “Shuxing 1” which was owned by the Defendant, carried 14,955.84 metric tons of steel cargo belonging to 12 companies, including Shanghai Ri Shengchang Materials Co., Ltd. (hereinafter referred to as “Ri Shengchang Company”), from Caofeidian to Ningbo via Shanghai. The Defendant issued waterway cargo bill No.TCGK100010989. On January 12, 2013, M.V. “Shuxing 1” collided with M.V. “Yongxing 7” in the estuary of the Yangtze River. M.V. “Shuxing 1” sank as a result of the collision, along with the cargo involved. M.V. “Shuxing 1” was overloaded on the voyage that the accident occurred. As the owner of M.V. “Shuxing 1,” the Defendant should be liable for 5% of the cargo losses in accordance with the company’s percentage of fault. As the insurer of the cargo involved, the Plaintiff indemnified the cargo owners and acquired the right of subrogation in accordance with the law. Therefore, the Plaintiff requested the court to judge that: 1. The Defendant should compensate the Plaintiff for cargo losses in the amount of RMB1,718,395.47 with interest (calculated from January 12, 2013 to the date that this judgment came into effect, according to the RMB currency deposit interest rate published by the Bank of China for the corresponding period); and

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2. The Defendant should pay the litigation fees. The Defendant argued that M.V. “Shuxing 1” was not at fault in the collision that occurred on January 12, 2013 between M.V. “Shuxing 1” and M.V. “Yongxing 7”. M.V. “Shuxing 1” was not overloaded on the voyage; but, even if the ship was overloaded, it did not cause the accident involved. The Defendant should not be liable for the cargo losses involved. The Defendant requested the court to reject the claims of the Plaintiff. The Plaintiff submitted the following pieces of evidence: 1. Waterway cargo waybill No.TCGK100010989, to prove that the cargo involved was loaded on M.V. “Shuxing 1”, and that the Defendant, as the owner of M.V. “Shuxing 1”, issued the waterway cargo waybill for the cargo involved; 2. Memorandum and letter of authorization, to prove that Tianjin Hengrun Logistics Co., Ltd. (hereinafter referred to as “Hengrun Company”) signed the memorandum with the Ministry of Transport Shanghai Salvage Company (hereinafter referred to as “Shanghai Salvage Company”), on behalf of the twelve cargo owners, to sell the underwater cargo involved for RMB19,408,193.58; 3. Purchase order, sales contract, value-added tax (VAT) invoice, and payment voucher for the cargo involved, as well as the transportation contract signed by Hubei Xinsheng Delong Trade Co., Ltd. and Zunhua City Chunshan Transport Fleet and the inland transportation invoice, to prove that the total weight of the cargo involved was 14,955.84 metric tons, the total value of the cargo was RMB56,217,092.80 (including the value-added tax), and Hubei Xinsheng Delong Trade Co., Ltd. paid inland freight totaling RMB74,493 for 1,489.86 metric tons of steel at a price of RMB50 per ton; 4. Cargo transport insurance policy for the cargo involved, the voucher and confirmation letter pertaining to the insurance indemnities, and the letter of subrogation, to prove that the Plaintiff, as the insurer of the cargo involved, paid RMB34,367,909.46 in insurance indemnities to the twelve cargo owners, including Ri Shengchang Company, and acquired the right of subrogation in accordance with the law; 5. Certificates for the ship and the maritime accident investigation report, to prove that the Defendant is the shipowner of M.V. “Shuxing 1”, the reference loading capacity of M.V. “Shuxing 1” was 15,794 metric tons, and that at the time of the accident, M.V. “Shuxing 1” was carrying 15,958 metric tons and was therefore overloaded. Overloading was the direct cause of the sinking of the ship and loss of cargo. The shipowner of M.V. “Shuxing 1” should be liable to compensate for the cargo losses. The Defendant raised no objection to the authenticity of evidence 1 and 2 of the Plaintiff, but held that evidence 2 could not prove that the sale price of the underwater cargo constituted a reasonable disposal of the cargo by the Plaintiff. The Defendant raised no objection to evidence 3 or 4 of the Plaintiff. The Defendant raised no objection to the authenticity of evidence 5 of the Plaintiff, but held that the

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maritime accident investigation report issued by the maritime safety administration did not mention that the ship was overloaded nor did it mention that overload was the reason for the sinking of the ship and loss of cargo. At the time of the accident, the ship was not over the reference loading capacity recorded in the ship’s certificate and was therefore not overloaded. The Defendant submitted the following pieces of evidence: 1. Voyage charter party, to prove that the Defendant concluded a voyage charter party with Hengrun Company; 2. (2013) Hu Hai Fa Shang Chu Zi No.24–1 Civil Judgment, to prove that M.V. “Yongxing 7” should take full responsibility for the collision accident and that M.V. “Shuxing 1” was not at fault for the accident; 3. Hu Hai Song Ze Zi (2013) No.05–02 water traffic accident responsibility confirmation, to prove that the maritime safety administration investigated the collision accident involved and confirmed that M.V. “Yongxing 7” should bear full responsibility for the accident. The Plaintiff refuted the authenticity and the relevancy of evidence 1 of the Defendant, and held the document was a fax and not the original, and that the charter party between the Defendant and the outsider was not relevant to this case. The Defendant was the owner of the ship carrying the cargo involved, and it issued a waybill for said cargo, so it should be liable for the cargo losses involved. The Plaintiff affirmed the authenticity of evidence 2 and 3, but held that the responsibility confirmation and the judgment referred primarily to the liability for the collision, not the cause of the cargo losses. The overloading of the ship was not the direct cause of the sinking of the ship and cargo. The court holds that evidence 1 of the Plaintiff corroborates evidence 1 of the Defendant, and it can prove that the cargo involved was carried by M.V. “Shuxing 1”. Evidence 2 and 3 of the Plaintiff can prove the amount of the cargo losses involved. Evidence 4 of the Plaintiff can prove that the Plaintiff paid the insurance indemnities and acquired the right of subrogation in accordance with the law. Evidence 5 of the Plaintiff can prove the basic facts concerning M.V. “Shuxing 1” and the collision. Evidence 2 and 3 of the Defendant can prove that M.V. “Yongxing 7” should take full responsibility for the collision accident involved. Therefore, the court confirms the effectiveness and probative force of the evidence submitted by the Plaintiff and the Defendant. According to the evidence above and the investigation during the trial, the court finds the following facts: On December 25, 2012, the Defendant and Hengrun Company concluded a voyage charter party, in which it was agreed that M.V “Shuxing 1” would carry a shipment of steel cargo from the port of departure, Caofeidian, to the port of destination, Ningbo/Shanghai. The shipowner of M.V. “Shuxing 1” was the Defendant, the ship identification number was CN20081262561, and the reference loading capacity specified in the ship inspection certificate was 15,794 metric tons. On January 9, 2013, M.V. “Shuxing 1” set sail from the port of Caofeidian carrying

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15,958 metric tons of steel. M.V. “Shuxing 1” was loaded with 14,955.84 metric tons of cargo, owned by the following twelve companies: Maanshan City Dangtu Feixiang Tube Co., Ltd., Shanghai Rishengchang Materials Co., Ltd., Hubei Xinsheng Delong Trade Co., Ltd., Wuhu Shuangyuan Tube Co., Ltd., Wuhu Shuangyuan Strip Steel Co., Ltd., Hangzhou Chungang Steel Co., Ltd., Zhejiang Fusheng Industrial Co., Ltd., Zhejiang Province Metallurgical Materials Co., Ltd., Nanjing Yifengyuan Steel Co., Ltd., Wuxi Chuanye Trade Co., Ltd., Zhejiang Jinzhou Pipeline and Technology Co., Ltd., and Shanghai Quanwei Trade Co., Ltd. The Defendant issued waterway cargo waybill No.TCGK100010989 to Hengrun Company for the cargo involved. At 1808 on January 12, 2013, when M.V. “Yongxing 7” set sail from north of the shipping route and north of the reporting line for the Yangtze River Estuary, it collided with M.V. “Shuxing 1”, which was at anchor. As a result, M.V. “Shuxing 1” and the cargo loaded on it sank, including the cargo involved. The value of the cargo involved was RMB56,217,092.80. Hubei Xinsheng Delong Trade Co., Ltd. paid inland freight in the amount of RMB74,493 for the 1,489.86 metric tons of steel strips it owned. The Plaintiff confirmed that according to the VAT invoice, Maanshan City Dangtu Feixiang Tube Co., Ltd. and Zhejiang Province Metallurgical Materials Co., Ltd. offset taxes in the amount of RMB1,808,942.47 for the steel they bought. After the accident occurred, Hengrun Company signed a memorandum with Shanghai Salvage Company on behalf of the twelve cargo owners involved, whereby the underwater cargo was sold for RMB19,408,193.58. The Plaintiff was the provider of the cargo transport insurance in this case. After the accident resulting in the cargo losses involved occurred, the Plaintiff settled the claims of the cargo owners involved, paying a total of RMB34,367,909.46 in insurance indemnities, In exchange, the cargo owners agreed to assign all rights to the cargo involved to the Plaintiff. The court also finds that the Wusong Branch of the Shanghai Maritime Safety Administration investigated the collision accident involved and made the following findings: 1. the Master’s improper operation of M.V. “Yongxing 7” was the primary cause of the accident. After setting sail, M.V. “Yongxing 7” navigated at a low speed of about 4 knots. The current at that time was flowing southeast at a speed of 3 knots. The Master failed to notice the deviation of the ship caused by the strong current and the slow speed of the vessel. As a result, M.V. “Yongxing 7” collided with the moored M.V. “Shuxing 1”. 2. The emergency measures taken by M.V. “Yongxing 7” were improper. Before the collision, M.V. “Yongxing 7” did not take steering measures or emergency braking measures to avoid the accident. 3. The emergency response and mitigation efforts of M.V. “Yongxing 7” after the collision were improper. During the collision, the bulbous bow of M.V. “Yongxing 7” became lodged inside of M.V. “Shuxing 1”. After the collision, M.V. “Yongxing 7” backed up blindly and separated from M.V. “Shuxing 1”. As a result, a large amount of water immediately flooded into M.V. “Shuxing 1” and the ship eventually sank, exacerbating the losses caused by the accident. Therefore, the Wusong Branch concluded that M.V. “Yongxing 7” was fully responsible for the accident.

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The Defendant brought another action before the court with respect to this case arising from the dispute over compensation for damages resulting from the ship collision against Ningbo Yongzheng Marine Co., Ltd. (hereinafter referred to as “Yongzheng Company”), the owner of 6 M.V. “Yongxing 7,” on July 2, 2013. After the trial, the court ascertained the facts of the collision, and rendered (2013) Hu Hai Fa Hai Chu Zi No.24–1 Civil Judgment, in which the court held that Yongzheng Company, the owner of M.V. “Yongxing 7”, was fully responsible for the collision accident involved. This judgment had since come into effect. The court holds that this case arose from the dispute over the liability for property damage caused by a ship collision. The cargo involved was carried by M. V. “Shuxing 1” which is owned by the Defendant. The accident resulted in cargo losses. The Plaintiff was the insurer of the cargo and paid the insurance indemnities, acquiring the right of subrogation according to law. The Plaintiff is entitled to request that the Defendant should bear legal responsibility proportional to its tort liability. The Plaintiff claimed that the weight of the cargo carried by M.V. “Shuxing 1” on the voyage of the accident was 15,958 metric tons, exceeding the reference loading capacity of 15,749 metric tons, and therefore the ship was overloaded. Overloading the ship directly caused the cargo losses and the Defendant should bear the corresponding liability for said losses. The Defendant argued that overloading a ship refers to the situation where, after loading, a ship cannot maintain the minimum freeboard and did not reserve enough buoyancy. Whether the ship was overloaded should be determined by whether the actual drainage volume was more than the approved full-load drainage volume. Whether the weight of the cargo exceeded the reference loading capacity cannot be the basis for determining if the ship was overloaded. In this regard, the court holds that the responsibility confirmation issued by the maritime administrative department does not state that M.V. “Shuxing 1” was overloaded, and the Defendant’s argument is more consistent with shipping practices. The Plaintiff failed to provide evidence to prove that M.V. “Shuxing 1” was overloaded on the voyage of the accident and shall therefore bear the adverse consequences. In this case, M.V. “Shuxing 1” had already sailed from Caofeidian to the Yangtze River estuary in Shanghai safely and was moored when the collision accident occurred. Even if M.V. “Shuxing 1” was overloaded on the voyage of the accident, there is no direct causality between the collision accident and the overloading. M.V. “Shuxing 1” and the cargo it carried sank after the collision accident. The Responsibility Confirmation made by the maritime administrative department after its investigation does not state whether the loading capacity of M.V. “Shuxing 1” had any influence on the occurrence or severity of the cargo losses. Furthermore, the Plaintiff failed to provide evidence to prove that the loading capacity of M.V. “Shuxing 1” affected the cargo losses involved. Therefore, the court does not support the claim of the Plaintiff that the Defendant should bear 5% of the liability for compensation of the losses of the cargo involved on the grounds that it lacks both a legal and factual basis.

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The collision accident involved was caused by M.V. “Yongxing 7”. M.V. “Shuxing 1” was not at fault. The court adopts the argument of the Defendant since it conforms with the law. In summary, in accordance with the Maritime Code of the People’s Republic of China Article 168, and the Civil Procedure Law of the People’s Republic of China Article 64 Paragraph 1, the judgment is as follows: Reject the claims of the Plaintiff, China Taiping Insurance Co., Ltd. Tianjin Branch. Court acceptance fee in the amount of RMB20,265.56, shall be born by the Plaintiff, China Taiping Insurance Co., Ltd. Tianjin Branch. In case of any dissatisfaction with this judgment, any party may, within 15 days upon the service of this judgment, submit a statement of appeal with duplicates in the number of opposing parties, to lodge an appeal to the Shanghai High People’s Court. Presiding Judge: KE Yonghong Acting Judge: LI Jian People’s Assessor: LI Youwen March 18, 2014 Clerk: LU Peiyan

Wuhan Maritime Court Civil Judgment Chongqing Transportation Equipment Finance Leasing Co., Ltd. v. Chongqing Kunyuan Shipping Co., Ltd. et al. (2013) Wu Hai Fa Shang Zi. No.0059 Related Case(s) This is the judgment of first instance, and the judgment of second instance and the judgment of retrial are on page 354 and page 380 respectively. Cause of Action 214. Dispute over ship financial leasing contract. Headnote Lessor held to be entitled to recover outstanding hire from lessee under finance leasing agreement; port administration held to be liable to pay half of outstanding amount despite being not permitted by law to engage in business activities. Summary The Plaintiff, a finance leasing company, sued the First Defendant, the lessee, to recover outstanding charter hire under a finance leasing contract. The Plaintiff also claimed that the Second Defendant, a port administration, was liable to pay part of the outstanding amount under a guarantee contract. The First Defendant counterclaimed against the Plaintiff, arguing that the two ships that were the subject of the finance leasing contract were defective because they were built at the wrong shipyard The court held that the First Defendant was liable to pay the outstanding hire. Although the Second Defendant, as a public institution performing administrative functions was not legally permitted to engage in business activities such as providing a guarantee, it was nevertheless ordered to pay half of the outstanding amount if the First Defendant did not do so.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_15

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Judgment The Plaintiff (the counterclaim Defendant): Chongqing Transportation Equipment Finance Leasing Co., Ltd. Domicile: Left 6F, B2 Zone, Science and Tech. Inoovation Park, No. 13 Caifu Avenue, Yubei District, Chongqing City. Organization Code: 6,710,442–6. Legal representative: YU Yong, chairman of the board. Agents ad litem: HUANG Li, PAN Zhi, lawyers of Chongqing Hanmo Law Firm. The Defendant (the counterclaim Plaintiff): Chongqing Kunyuan Shipping Co., Ltd. Domicile: No.46, Wan Li Cheng Qiang, Wanzhou District, Chongqing City. Organization Code: 76,269,217–0. Legal representative: ZHANG Maoan, executive director. Agent ad litem: YI Kai, lawyer of Chongqing Lanjian Law Firm. Agent ad litem: WANG Wen, employee, female, Han, born on October 19, 1971, living in Jiangbei District, Chongqing City. The Defendant: The Port Administration of Chongqing Domicile: Hongshi Road, Hong Qi He Gou, Jiangbei District, Chongqing City. Organization Code: 45,039,335–8. Legal representative: WANG Botao, chairman of the board. Agent ad litem: YI Kai, lawyer of Chongqing Lanjian Law Firm. The Third Party: Chongqing Fuling Dawei Shipbuilding Co., Ltd. Domicile: Community 10, Shuanglong Village, Qingxi Town, Fuling District, Chongqing City. Organization Code: 79,354,481–6. Legal representative: GUO Zhifu, general manager. Agent ad litem: JU Xiaohong, lawyer of Chongqing Xiayang Law Firm. Agent ad litem: GUO Xingming, male, Han, born on January 29, 1971, living in Fuling District, Chongqing City, Manager of this Company. This case arised from dispute over ship finance leasing contract filed by the Plaintiff (the counterclaim Defendant), Chongqing Transportation Equipment Finance Leasing Co., Ltd. (hereinafter referred to as “Finance Leasing Company”) against the Defendant (the Pcounterclaim Plaintiff), Chongqing Kunyuan Shipping Co., Ltd. (hereinafter referred to as “Kunyuan Company”), the Defendant, the Port Administration of Chongqing (hereinafter referred to as “Port Administration”) and the Third Party, Chongqing Fuling Dawei Shipbuilding Co., Ltd. (hereinafter referred to as “Dawei Company”). The court, after accepting this case, organized the collegiate panel consisting of Presiding Judge GONG Wenjing, Judge WANG Yucheng, and Judge KONG Linggang to try the case pursuant to the law, and held a public hearing. Finance Leasing Company applied to Chongqing No.1 Intermediate

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People’s Court for a property preservation before action on April 25, 2012. They requested the court to render a freezing order against Kunyuan Company’s bank account in an amount of 500,000 RMB and the ownership of M.V. “Jinyuan No.1011”. Since then, Finance Leasing Company initiated a claim and applied to the Chongqing No.1 Intermediate People’s Court for referring to this special jurisdiction and sought a property freezing order on December 31, 2012. After accepting this case, the court rendered a freezing order over the ownership of M.V. “Jinyuan No.1011” in accordance with the law.Kunyuan Company filed a counterclaim before the period of proof expired. The court combined the claim and the counterclaim. This case was heard in public on March 22 and June 29, 2013. HUANG Li and PAN Zhi served as agents ad litem of the Plaintiff (the counterclaim Defendant) Finance Leasing Company. YI Kai and WANG Wen were the agents ad litem of the Defendant (the counterclaim Plaintiff) Kunyuan Company. YI Kai was the agent ad litem of the Defendant, the Port Administration. GUO Xingming and JU Xiaohong were the agents ad litem of Dawei Company. They participated in the court hearing. Now the case has been concluded. Finance Leasing Company claimed that it signed Finance Leasing Contract concerning two bulk container vessels with Kunyuan Company, on April 2, 2011. On May 3, 2011, the Port Administration as mortgagor (the Plaintiff of the claim as mortgagee, against Kunyuan Company as debtor) and the three parties signed Margin Collateral Contract together. The contract required the Port Administration to pledge 6,000,000 RMB for the performance of Finance Leasing Contract. The Defendant, Kunyuan Company, had not paid the charter hire since March 13, 2012. Therefore, the Plaintiff brought a lawsuit before the court and requested: (1) Kunyuan Company should pay all outstanding charter hire in sum of 33,541,004.20 RMB. This was according to the appointment of Finance Leasing Contract. (2) Kunyuan Company should pay the unpaid due hire of 1,219,672.88 RMB by May 14, 2012. This was caused by default in payment of the charter hire and a default interest in the amount of 28,967.23 RMB for the outstanding charter hire accrued from May 15, 2012 to the day paid off on the base of daily 5/10000 of the unpaid hire to the Plaintiff of claim immediately. (3) Kunyuan Company should pay the attorney’s fees to recover the creditor’s rights of this case in sum of 300,000 RMB, preservation costs of 5,000 RMB, and guarantee fees in the sum of 30,000 RMB to the Plaintiff. (4) If Kunyuan Company failed to fully pay No.1, No.2, No.3 claims above, the Plaintiff, then, could put these two vessels involved in this finance leasing contract (M.V. “Huasheng 3013” and M.V. “Huasheng 1003”) into auction to reimburse the costs above with the auction money. (5) Port Administration should bear joint guarantee liability within 6,000,000 RMB. (6) The litigation costs of this case should be born by the two Defendants. Kunyuan Company argued that: (1) in the course of fulfilling the contract, Finance Leasing Company was in fundamental breach of contract for the shipbuilding fees in amount of 1,000,000 RMB that had not been paid. The delay and shortfall in the shipbuilding contract payments were attributed to quality problems of vessels. (2) The reason why Kunyuan Company did not pay the charter hire was that these two vessels were not built by Dawei Shipyard, which was appointed in

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Finance Leasing Contract. The actual construction company, Chongqing Wanzhou Hongyun Ship Building and Repairing Co., Ltd. (hereinafter referred to as “Hongyun Company”), did not have the necessary qualifications to construct vessels over 6,000 tons. (3) After receiving the vessels, Kunyuan Company found there were quality defects in the vessels. When Finance Leasing Company was consulted to deal with the matters, Finance Leasing Company initiated a request for an action from the court. This was abuse of right to claim. (4) Regarding the lawyer’s fees claimed by Finance Leasing Company, since the citizens and organizations could participate in civil litigation on their own, lawyers were not necessary. Hence, the lawyer’s fees should not be born by Kunyuan Company. (5) Concerning the costs of freezing order, Finance Leasing Company had the strength of guarantee. The costs which were arise from guarantee by a third party should not be born by Kunyuan Company. (6) Kunyuan Company paid the margin in amount of 3,000,000 RMB and the commission charges in amount of 3,300,000 RMB to Finance Leasing Company. According to the contract, even if Kunyuan Company was in arrears, Finance Leasing Company should have deducted the balance first, rather than directly take preservation measures and bring a lawsuit. To sum up, Kunyuan Company was not breach of contract. Kunyuan Company requested for the court to reject the claims of Finance Leasing Company. The Defendant Port Administration argued that: (1) the disputes between Finance Leasing Company and Kunyuan Company occurred due to the fundamental breach of Finance Leasing Company. (2) The Port Administration, as administrative authority, did not guarantee qualification. The margin collateral contract signed between the Port Administration, Finance Leasing Company, and Kunyuan Company was invalid based on the following. (3) Finance Leasing Company won, Kunyuan Company would have sufficient assets (two newly-built vessels, margin in sum of 3,000,000 RMB) to bear responsibility for lease payment. The Port Administration would not be liable. The Third Party Dawei Company argued that: Dawei Company was not clear about the disputes between Finance Leasing Company and Kunyuan Company and was not involved in any way. Dawei Company had dropped out of the manufacturing of the vessels involved for a long time. The corresponding responsibilities and obligations should be born by Kunyuan Company. Kunyuan Company was in arrears. Finance Leasing Company should have deducted from the margin first, rather than directly bringing a lawsuit. Suing Finance Leasing Company led to the enlargement of losses and was an abuse of the right to claim. The counterclaim Plaintiff, Kunyuan Company, rebutted that the dispute of this case was caused by the fundamental breach of contract by the counterclaim Defendant, Finance Leasing Company. As a result, Kunyuan Company filed a counterclaim to request: (1) terminate Finance Leasing Contract between the counterclaim Plaintiff, Kunyuan Company, and the counterclaim Defendant Finance Leasing Company. (2) The counterclaim Defendant Finance Leasing Company should return auxiliary expenses in the amount of 3,300,000 RMB, margin amount of 3,000,000 RMB, and paid rent in the amount of 3,031,259.32 RMB to the counterclaim Plaintiff, Kunyuan Company. (3) The counterclaim

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Defendant, Finance Leasing Company, should indemnify the counterclaim Plaintiff, Kunyuan Company, for losses of guarantee fees in the amount of 600,000 RMB. (4) The counterclaim Defendant, Finance Leasing Company, should pay the liquidated damages in the amount of 2,700,000 RMB to the counterclaim Plaintiff, Kunyuan Company. (5) The litigation costs of counterclaim should be born by the counterclaim Defendant Finance Leasing Company. Port Administration argued that: (1) the disputes between Finance Leasing Company and Kunyuan Company occurred due to the fundamental breach of Finance Leasing Company. (2) The Port Administration as administrative authority did not have guarantee qualification, the margin collateral contract signed between the Port Administration, Finance Leasing Company and Kunyuan Company was invalid based hereon. (3) Finance Leasing Company won it, Kunyuan Company would have sufficient assets (two new-build vessels, margin in sum of RMB3,000,000) to bear responsibility for lease payment, the Port Administration would not be liable for. The Third Party Dawei Company argued that: Dawei Company was not clear about disputes between Finance Leasing Company and Kunyuan Company and had nothing to do with it, Dawei Company had dropped out the manufacturing of the vessels involved for a long time, the corresponding responsibilities and obligations should be born by Kunyuan Company. Kunyuan Company was in arrears, Finance Leasing Company should have deducted in margin first, rather than directly bringing a lawsuit, the sue of Finance Leasing Company led to enlargement of losses and was abuse of right to claim. Finance Leasing Company presented the following evidence within the time limit for adducing evidence to support its claim and used as counterclaim evidence: Evidence 1: Finance Leasing Contract, to prove that Finance Leasing Company and Kunyuan Company formed a finance leasing contractual relationship and the contract terms, the contract appointed that hire in arrears bore 5/10000 of liquidated damages, Kunyuan Company had already been fundamental breach of contract, Finance Leasing Company could dispose of lease item, disposal shall be deducted all costs what Finance Leasing Company deserved, the remaining part should return to Kunyuan Company; Evidence 2: the interest table of the People’s Bank of China, charter hire adjustment notice and lease repayment schedule, to prove the charter hire rate corresponded the standards; Evidence 3: Certificate of Ship Ownership, to prove that Finance Leasing Company had ownership over the vessels of this case; Evidence 4: Margin Collateral Contract, to prove the fact that the Port Administration provided collateral security and pledge security deposit in sum of RMB6,000,000; Evidence 5: transfer vouchers and recording vouchers of China Minsheng Bank, to prove the first hire Finance Leasing Company paid to shipbuilding party and lease commencement date;

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Evidence 6: payment system special vouchers and three copies of contact letter of China Minsheng Bank of December 15, 2011, to prove the fact that the second phase of deferred payment of charter hire had produced by Kunyuan Company; Evidence 7: principal guarantee contract and its invoice, invoice of guarantee fees, to prove the guarantee fees paid by Kunyuan Company; Evidence 8: legal services contract and its invoice, to prove the specific amount of lawyer’s fees; Evidence 9: financial vouchers, to prove that Finance Leasing Company had fully performed her contractual obligations to pay finance money in amount of RMB30,000,000 to Kunyuan Company; Evidence 10: civil ruling and payment vouchers (receipts), to prove that the specific amount of costs of preservation; Evidence 11: Letter on Strict Compliance with Finance Leasing Contract, express mail receipt signed by Kunyuan Company and its search records, to prove that after Kunyuan Company was in arrears, Finance Leasing Company fulfilled obligation to urge and Kunyuan Company had received the letters and notices sent by Finance Leasing Company. Upon cross-examination, Kunyuan Company and the Port Administration had no objection to the authenticity of evidence 1 to 10 submitted by Finance Leasing Company, but had objection to the proof of purpose. They believed that Finance Leasing Company paid the first installments of shipbuilding fees in sum of RMB12,000,000 to Dawei Company on May 13, 2011, paid the second installments of RMB9,000,000 to Dawei Company on August 25 in the same year, paid the third installments of RMB3,000,000 to Dawei Company and accepted a bill of exchange in sum of RMB3,000,000 on October 17 in the same year. After receiving notices from Dawei Company on February 9, 2012, Finance Leasing Company deducted hire in amount of RMB700,000 owed by Kunyuan Company, default interest in amount of RMB7,623, discount charges in amount of RMB81,000, withheld RMB700,000 for not issuing shipbuilding invoices and retention money in amount of RMB300,000, and returned the rest shipbuilding fees in amount of RMB1,301,540.56 advanced by Kunyuan Company back to Kunyuan Company. Although Finance Leasing Company paid shipbuilding fees in sum of RMB29,000,000, there was still one million RMB unpaid, and failed to pay on time, which was breach of contract. Margin collateral contract should be invalid by the law. Kunyuan Company and the Port Administration had objection to evidence 11, Kunyuan Company received court summons in April 2012, and not received letter of summons from Finance Leasing Company, four fees deducted by Finance Leasing Company were not actually paid and should not be deducted based hereon. Dawei Company held in cross-examination that it had no objection to the authenticity of evidence 1, Finance Leasing Contract and other evidence had nothing to do with it. The court took the view that it confirmed evidence 1 to 10 for Kunyuan Company and the Port Administration had no objection to the authenticity of the evidence submitted by Finance Leasing Company. Concerning evidence 4, Margin

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Collateral Contract, Kunyuan Company and the Port Administration had no objection to the authenticity of it, but due to the reason that the Port Administration was public institution to carry out administrative function, the court would ascertain whether this margin collateral contract was valid according to the identified facts of this case. The court deemed evidence 11, post express, inadmissible because the words were too illegible to determine the contents of sending materials and it could not prove whether Kunyuan Company received it, what’s more, whether this evidence was associated with this case could not be determined. Kunyuan Company presented the following evidence to the court within the time limit for adducing evidence to support its claim and refute the claim of Finance Leasing Company: Evidence 1: lease repayment schedule, to prove that Kunyuan Company had paid rent accounting to RMB3,031,259.32 from June, 2011, to February, 2012; Evidence 2: T/T bank bills, lease deposit receipts, to prove that Kunyuan Company had paid hire accounting to RMB9,931,259.32 to Finance Leasing Company, wherein paid guarantee fees accounting to RMB600,000 on April 6, 2011, paid security deposit accounting to RMB3,000,000 and commission charges accounting to RMB3,300,000 on May 12 of the same year, the above money was merely the costs Kunyuan Company paid to Finance Leasing Company, not including the costs Kunyuan Company paid to the shipyard; Evidence 3: certificates of seaworthiness of M.V. “Huasheng 1003” and M.V. “Huasheng 3103”, to prove that construction plant of vessels was Hongyun Company, in the agreement between Kunyuan Company and Finance Leasing Company that was Dawei Company, the actual construction plant was different from the one appointed in the contract, Finance Leasing Company constituted a serious breach; Evidence 4: notice on related matters of three gorges northern line locks duspending for repair; Evidence 5: notice on making shipping companies stability during the time of Three Gorges Gezhouba locks’ repair launched by the Port Administration of Wanzhou District, to prove that locks of Three Gorges were overhauled from March 7 to April 30, 2012, which inflected normal operation of vessels. Upon cross-examination, Finance Leasing Company had no objection to evidence 1 and 2, but held that the hire paid by Kunyuan Company was overdue, guarantee fees in amount of RMB600,000 were not paid to Finance Leasing Company, but paid to Chongqing Yuchao High-Tech Guarantee Co., Ltd., Finance Leasing Company was not clear about it. Finance Leasing Company had objection to evidence 3, held that ship information in Certificate of Registry shall prevail, construction plant recorded in certificate of registry was Dawei Shipyard, even what the Defendant Kunyuan Company said was true, it had nothing to do with Finance Leasing Company. Besides, Finance Leasing Company held evidence 4 and 5 had no relationship with this case.

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Dawei Company held that, because the domicile of Dawei Company Chongqi Fuling was power cuts, ships could not be completed on schedule, after consultation with Finance Leasing Company and Kunyuan Company, appointed that Hongyun Company built the vessels involved. After withdrew from shipbuilding, Dawei Company did not understand the situation since then. The court holds that, the court adopts evidence 1 and 2, to which Finance Leasing Company raised no objection, but in respect of the guarantee in sum of RMB600,000 and whether Kunyuan Company had overdue hire, the court would comprehensive accreditation in conjunction with other evidence and ascertained facts of this case. For evidence 3, because it was issued by Chongqing Ship Inspection Bureau and Wanzhou Ship Inspection Bureau, corroborating other evidence, it could prove these two vessels were built by Hongyun Company, but for whether this evidence could prove that the Plaintiff of claim constituted a serious breach, the court would comprehensive accreditation in conjunction with other evidence and ascertained facts of this case. For evidence 4 and 5, owing to that they were well-known facts in transportation companies, the court confirms it. Port Administration did not submit any evidence. Dawei Company presented the following evidence to the court within the time limit for adducing evidence to support its pleas: Commitment that Kunyuan Company issued to Dawei Company, to prove that Kunyuan Company promised to change the shipbuilder into Hongyun Company instead of Dawei Company, Kunyuan Company bore all responsibilities and obligations related to Dawei Company, Hongyun Company bore joint liability. Upon cross-examination, Finance Leasing Company had no objection to the authenticity and proof of purpose of Commitment, but held that Finance Leasing Company did not agree with Commitment, and third party shall provide tripartite agreement between Kunyuan Company, Dawei Company and Hongyun Company. Both Kunyuan Company and the Port Administration had no objection to the authenticity and validity of Commitment, but had objection to its proof of purpose, they requested the court to comprehensive accreditation in conjunction with other evidence. The court holds that: Commitment was not inscribed in time, but there was stamp of Kunyuan Company, Dawei Company and Hongyun Company, and all the parties had no objection to the authenticity of this evidence, based hereon, the court adopted it. Based on the said effective evidence submitted by the Plaintiff, the Defendant and the Third Party, the court ascertains the following facts: On April 2, 2011, Finance Leasing Company (Party A) as lessor, Kunyuan Company (Party B) as lessee, Dawei Company (Party C) as builder, signed a tripartite Finance Leasing Contract. Clause 1 of contract agreed that: the lease item of this contract was two bulk container vessels which container capacity was 35TEU, cargo capacity was 6,000 tons, this lease item was Party A leased to Party B to use according to independent choice of Party B for Party C and lease item, Party C was responsible for the construction, and this lease item was specified and confirmed by Party B, Party B self-determined the entire contents such as lease

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name, model, etc. according to her need without dependent on the skills of Party A and subject to Party A’s intervention, Party B shall be responsible for any problems of lease item occurred in lease process including economic losses, and Party B still shall pay hire and what she shall pay to Party A. Clause 3 agreed: the price of lease item accounting to RMB31,042,744, wherein Party A paid 30 million RMB to Party C (25.5 million RMB of bank transfer, 4.5 million RMB of acceptance bill), this price was lump sum price, Party A no longer paid any other expenses to Party C, Party B paid RMB1,042,744 to Party C, part exceeded total price of lease item shall be born by Party C; after transacting ship certificate of inspection when the project was completed, Party A, B, C shall finish auditing the project and amount within 10 working days, formed confirmed tripartite settlement statement; after finish transacting ship certificates (including ship certificate of ownership registry acquired by Party A), Party A shall pay all the remaining money in addition to quality warranty deposit to Party C in accordance with the contract within 5 working days. It was prescribed in Clause 4 the terms and methods for both Party A and B paying lease item price to Party C. Clause 5 pointed out that, ownership of the leased objects vested in Party A before Party B paid off all debts under this contract, Party B only enjoyed the right to use in the lease period, any other person in addition to Party A had no right to dispose of the leased objects. Clause 6 pointed out that, the lease payment amount were specified in lease repayment schedule (Appendix Four), in the lease term, the annual lease rate took floating system which floating 15% with reference to loan interest rate for over five years of the People’s Bank of China as 6.6% to implement, the annual lease rate that was 7.95%, in case of benchmark deposit interest rate of the People’s Bank of China adjusted, Party A would make adjustment of annual lease rate with same direction and margin ……, when the interest adjusted, the lessor did not need to get the prior consent of the lessee, but shall issue Notice of Hire Adjustment to the lessee, if the lessee confirmed and agreed with Notice of Hire Adjustment, she shall pay hire to the lessor according to it; if Party B delayed in lease payment, then Party B shall pay to Party A in the following order: insurance premium, liquidated damages, compensation, hire arrears penalty, hire arrears interest, hire arrears of principal, the current interest, the current principal, security deposit; if Party B failed to paid off the above money in the above order in the current lease payment date, it would be deemed as failure to make full payment of the current hire; lease term was 66 months, calculated from the lease commencement date; the lease commencement date shall be the date on which Party A paid the first paragraph of the lease item price to Party C and Party C received it; in this lease, Party B paid commission charges in sum of RMB3 million to Party A at one time. Clause 7 pointed out that, two vessels tentatively started building on April 2, 2011, delivery on December 2, 2011 (Party A acquired certificate of ship ownership registry), as initial shipbuilding funding of Party A and Party B was not in place which caused delays, the start date and the date of delivery postponed; Party B shall respectively issue acceptance sheet of lease item to Party A and Party C within five working days since the receipt of the lease item. Clause 10 pointed out that, Party B shall purchase the insurance and type designated and approved by Party A in lease term - builders’ risks insurance, trials

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insurance, all risks of coastal and inland vessels, and indicate Party A as the first beneficiary. In order to ensure Kunyuan Company completing building these two vessels successfully and make the ownership of two vessels be registered under Party A’s name, meanwhile the finance leasing contract was signed, Finance Leasing Company (Party A), Kunyuan Company (Party B), Chongqing Transportation Financing Guarantee Co., Ltd. (Party C) (hereinafter referred to as Financing Guarantee Company) signed guarantee contract together. Guarantee contract appointed that, way to ensure was that joint liability, Party B guaranteed Party A to acquire certificate of ship ownership registry of two vessels on time according to the appointment of main contract, or on behalf of Party B, Party C would assume its liability for breach, repay the lease item price what Party A had paid to Dawei company and interest losses, and all the actual costs for the realization of claims; guarantee contract also made agreement of warranty period and exemption clauses and so on. Additionally, to ensure Finance Leasing Company acquire certificate of ship ownership registry according to the contract and realize the right to charging hire and so on, Clause 11 and Appendix of finance leasing contract also appointed three ways of guarantee, the first was that Party B paid security deposit accounting to RMB3 million to Party A to ensure the fulfilment of all obligations under finance leasing contract and acceptance of civil liability due to the contract; if Party B failed to pay hire in accordance with contract or other breach of contract, Party B was entitled to keep the deposit to offset the liquidated damages, due hire and other payable accounts at any time; if that happened, Party B shall repay her shortfall of deposit according to Party A’s written notice within 10 working days, if not repaid timely, Party B constituted anticipatory breach of contract; meanwhile Appendix One, the proposed budget table, appointed, deposit calculated without interest and was return back after the lessee changed to the lease item’s registration owner. The second was margin collateral contract which was signed by Kunyuan Company, Finance Leasing Company and the Port Administration on May 3 in the same year; the contract appointed that the Port Administration provided collateral security in account of 6 million RMB for Kunyuan Company to ensure that Finance Leasing Company obtained certificate of ship ownership registry of two vessels, Kunyuan Company paid hire and other payable accounts according to main contract and the costs to claim of Finance Leasing Company due to the overdue payment. The third was mortgage contract, Party B used its own ship M.V. “Jinyuan 2011” to provide collateral for the fulfilment of contract. The entire guarantee above indicated that when Kunyuan Company was breach of contract, Finance Leasing Company may have disposed the secured property at any time. Concerning liability for breach, Clause 14 of finance leasing contract appointed that: the following circumstances constituted a fundamental breach of contract: that Party A did not fully pay lease item price on schedule resulted in the inability to perform the contract, or Party B could not normally exercise the rights to possess and use the leased property because of unlawful interference of Party A, or Party A subleased the lease item or did other investment behaviors without the written

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consent of Party B in the lease term; if Party B failed to pay the due hire, commission charges and other payable accounts according to the contract, or failed to pay any fees Party A paid on behalf of Party B on time, Party B shall pay default interest for daily 5/10000 of overdue balances to Party A, until the date of full payment; the circumstances that Party B failed to register the ship ownership in the name of Party A and deliver the certificate of ownership to Party A, and Party B had a hire in arrears for two months or more, or appeared deferred rent for second time and so on, were deemed as fundamental breach of Party B. Article 15 appointed that, if Party A was fundamental breach, Party B may unilaterally terminate the contract and claim compensation for damages to Party A, if Party B was anticipatory breach or fundamental breach, Party B would immediately lose the rights to possess, use and benefit of lease item, Party A was not only entitled to request Party B to be liable for breach and damages in accordance with the contract, but also entitled to take the following one or more remedies: (1) early termination of this contract, recourse to Party B all accrued unpaid hire, liquidated damages, damages, all outstanding hire and other payable accounts what Party B shall pay under the contract; (2) early termination of this contract, be entitled to recover or prohibit the use of the leased property, and demand Party B to compensate for all the losses Party A suffered thereby; (3) force Party B to fulfill this contract through judicial means, and demand Party B to compensate Party A for all losses and expenses caused by breach of contract (including litigation fees, arbitration costs, lawyer’s fees and all other costs incurred due to recovery, etc.). As a complement to finance leasing contract, Appendix 1, the proposed budget table, Appendix 2, lease item list, Appendix 3, payment of lease item price list, and Appendix 4, charter hire repayment schedule, made a specific agreement on the name of lease item, lease term, the total hire, time and manner of hire payment, nominal price, etc. The hire repayment schedule provided, Kunyuan Company paid hire in sum of RMB37,283,838.60 to Finance Leasing Company, the 13th of each month was hire payment day from May 13, 2011, the hire needed to be paid in 66 seasons, the rent for the first six seasons was RMB189,750 each season, the rent from season seven to season 66 was RMB602,422.31 each season. Since the People’s Bank of China adjusted loan interest rate for over five years, Finance Leasing Company issued rent adjustment notice to Kunyuan Company on July 7, 2011, adjusting the amount of hire payment for each season, the payment amount for season one and season two was RMB195,500, the payment amount for season three to season six was RMB202,687.50, the payment amount for season 34 was RMB605,710.76, the payment amount for the rest seasons was RMB609,836.44, total principal and interest of hire accounting to RMB37,791,936.40. On June 8, 2012, Finance Leasing Company adjusted the rent after June 13, 2012, accordingly with respect to the adjustment of the People’s Bank of China on loan interest rate for over five years, the adjusted gross hire was RMB37596710.37, the hire for each season was RMB606,152.93. April 2, 2011, the day signed margin collateral contract, the Port Administration transferred deposit accounting to 6 million RMB into Finance Leasing Company’s bank account in Shanghai Pudong Development Bank Chongqing Branch through Internet bank, Kunyuan Company mortgaged M.

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V. “Jinyuan 2011” owned by herself to Finance Leasing Company, mortgage period was to October 2, 2016, the two parties handled mortgage registration; Kunyuan Company remitted 6.RMB3 million to Finance Leasing Company’s account on May 12, wherein margin in sum of RMB3 million, commission charges in sum of 3.3 million RNB, and paid security deposit in amount of RMB600,000 to Chongqing Yuchao High-Tech Guarantee Co., Ltd. After the guarantee fund and property appointed by main contract and accessory contract was in place, Finance Leasing Company paid the first season lease item price of 12 million RMB to Dawei Company on May 13, 2011. Because the domicile of Dawei Company Chongqi Fuling was power cuts, in order to avoid delay in construction period, Kunyuan Company consulted with Dawei Company to let Hongyun Company to build the ships. For changing the shipbuilding company into Hongyun Company, Kunyuan Company issued an Commitment, promising that Kunyuan Company bore and performed all the liability, obligation and costs, etc., which shall be born by Dawei Company appointed in finance leasing contract, and built the vessels in accordance with the quality and requirements appointed by finance leasing contract, Kunyuan Company arranged the staff needed on hers own and was responsible for the costs and delivered the ships on schedule according to the contract; Kunyuan Company was solely responsible for all casualty (security) incident occurred during ship construction; the money appropriated by Finance Leasing Company entered into Dawei Company’s account, then was sub-paid to Kunyuan Company to make reasonable arrangements according to her need for building ships; Kunyuan Company shall bear the costs generated by Dawei Company for the reason that Finance Leasing Company did not pay the money according to the contract, Finance Leasing Company’s claim was decided Dawei Company as obligator for compensation, Kunyuan Company and Hongyun Company bore joint liability. Hongyun Company stamped on the Commitment as guarantor for joint liability. Subsequently, Hongyun Company started building ships. On August 12, 2011, Kunyuan Company sent a letter of asking to pay the second season price to Finance Leasing Company. After receiving the letter, Finance Leasing Company Asset Risk Management Department sent staff to the ship construction site to view the ship construction schedule. On August 15, 2011, Finance Leasing Company sent an letter on the ship construction schedule of Kunyuan Shipping Company, pointing that the ship construction schedule did not meet the requirement of the second season payment according to field visits situation of the construction site and the letter to confirm the progress issued by Chongqing Ship Inspection Bureau, and refused to pay the second paragraph of shipbuilding fees based thereon. Finance Leasing Company paid the season 2 and season 3 ship construction fees separately after the ship construction reached the requirement to pay. In order to ensure the progress of ship building and the required material for ship building in place, Kunyuan Company loaned to sign the steel and machinery purchase and sale contracts with Hubei Shenzhou Xinye Industry Commerce Co., Ltd. and Chongqing Luwei Diesel Sales Co., Ltd. respectively on August 15 and 16. Hongyun Company completed building the two vessels on January 10, 2012. On January 13, 2012, Kunyuan Company handled the ownership

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registration of the two ships, the shipowner was Finance Leasing Company, Class No. separately was 120,112,000,013 and 120,112,000,014, ship name was M.V. “Huasheng 3103” and M.V. “Huasheng 1003”, the construction plant was Dawei Company, the completion date was January 10, 2012, lease column stated lessor was Finance Leasing Company, lessee was Kunyuan Company, the rent in amount of RMB18,641,919.30, lease term was 66 months, lease registration date was January 31, 2012. People’s Republic of China Ship Trial Certificate recorded that the ship construction plant of M.V. “Huasheng 1003” and M.V. “Huahsheng 3103” was Hongyun Company. Dawei Company delivered M.V. “Huasheng 3103” and M.V. “Huasheng 1003” to Finance Leasing Company in the same day, then Finance Leasing Company delivered M.V. “Huasheng 3103” and M.V. “Huasheng 1003” to Kunyuan Company, ship transfer files confirmed the ships met Kunyuan Company’s requirements. On February 2, 2012, Dawei Company issued application letter to Finance Leasing Company, the letter appointed according to finance leasing contract that the new-built vessels M.V. “Huasheng 1003” and M.V. “Huasheng 3103” obtained certificate of ship ownership registry on January 13, 2012, Kunyuan Company had paid shipbuilding project funds of season 4 and season 5 accounting to RMB3 million on behalf of your company, that is all the shipbuilding fees had been paid up, now entrusted your company to pay shipbuilding fees of season 4 in sum of RMB2.7 million and shipbuilding fees of season 5 in sum of RMB300,000 (quality warranty deposit) directly to Kunyuan Company according to the appointment of finance leasing contract. After receiving the letter of Dawei Company, Finance Leasing Company sent a working contact letter to Kunyuan Company on February 7, the contents indicated: since Kunyuan Company existed deferred hire payment of RMB602,422.31 in the course of performing contract, Finance Leasing Company requested to deduct default interest resulting from deferred hire payment and the hire in shipbuilding project funds in amount of RMB2.7 million; and detained RMB700,000 from shipbuilding project funds in amount of RMB2.7 million until Kunyuan Company purchased all risks of inland vessels and delivered the insurance policy according to the contract and delivered invoice of full shipbuilding fees which issued by Dawei Company and paid to Finance Leasing Company to Finance Leasing Company before January 29. Kunyuan Company issued reply letter in the same day after receiving working contact letter, agreeing Finance Leasing Company, after deducting the hire in sum of RMB609,836.44 owed by Kunyuan Company on January 13, 2012, default interest in sum of RMB7,623 and discount charges in sum of RMB81,000 in the shipbuilding project funds accounting to RMB2.7 million, to pay the rest to Kunyuan Company. On February 9, Finance Leasing Company paid the rest money in amount of RMB1,301,540.56 to Kunyuan Company through bank transfer after deducting the involved fees in the reply letter of Kunyuan Company. For the construction of the ships, Kunyuan Company paid shipbuilding fees in amount of RMB1,042,744 to Dawei Company according to the appointment of contract; Finance Leasing Company totally paid shipbuilding fees in sum of RMB29 million to Dawei Company, there were: 12 million RMB on May 13, 2011,

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9 million RMB on August 25 in the same year, RMB3 million and acceptance bill of RMB3 million on October 17, on February 9, 2012, after the ship construction was completed and closed an account, Finance Leasing Company deducted the temporary detained fees in sum of RMB700,00 and quality warranty deposit in sum of RMB300,000 for Kunyuan Company not issuing invoices, and the hire in arrears, default interest, discount charges in sum of RMB698,459.44 of Kunyuan Company, then returned the rest money of shipbuilding fees of RMB3 million advanced by Kunyuan Company accounting to RMB1,301,540.56 to Kunyuan Company. Kunyuan Company paid hire accounting to RMB3,031,259.32 and delayed fees accounting to RMB7,623 to Finance Leasing Company from June 13, 2011 to February 2, 2012, including: remitting RMB195,500 to Finance Leasing Company’s bank account in China Development Bank Chongqing Branch on June 13, 2011; remitting RMB195,500 to Finance Leasing Company’s bank account in Shanghai Pudong Development Bank Chongqing Branch respectively on July 12 and August 11 in the same year; remitting RMB7,187.50 to this account on August 12; remitting RMB202,687.50 to this account respectively on September 13 and October 12; paying RMB202,687.50 on November 13; Kunyuan Company gave Finance Leasing Company an acceptance bill of one million RMB to pay the hire of December on December 6, Kunyuan Company issued an written power of attorney on December 13, authorizing Chongqing Guqiao Trading Co., Ltd. (hereinafter referred to as Guqiao Company) to deal with hire calculation matters on behalf of Finance Leasing Company, on December 14, after discounting the acceptance bill and charging the discount interest in amount of RMB36,000, Finance Leasing Company transferred one million RMB to Guqiao Company’s account, Guqiao Company re-remitted the rent of December in sum of RMB609,836.44 to Finance Leasing Company’s account in Bank of Chongqing Liangjiang Branch; Kunyuan Company did not pay the rent of January 13, 2012, accounting to RMB609,836.44 for the reason that Finance Leasing Company did not pay the shipbuilding fees of season 4 and season 5 and shipbuilding fees in sum of RMB3 million advanced by Kunyuan Company was not recovered. On February 9, after Finance Leasing Company settled accounts with Kunyuan Company, Kunyuan Company repaid the hire of January, 2012, accounting to RMB609,836.44 and bore late fees in amount of RMB 7,623; Kunyuan Company paid hire in sum of RMB609,836.44 on February 13. On February 21, Chongqing Wanzhou the Port Administration issued Wan Zhou Gang Fa [2012] No.8 Notice on Making Shipping Companies Stability During the Time of Three Gorges Gezhouba Lock to Repair, the notice proposing that, according to the regulations of concerning branches of Gezhouba and Three Gorges locks, Gezhouba Lock No.1 planned to make overhaul from March 7 to April 30, 2012, south line of Three Gorges locks synchronized with the annual maintenance, in the meantime No.1 lock stopped running, north line of Three Gorges locks run 20 days for single line, Three Gorges navigation would face great difficulties at that time … After receiving the notice of the maritime sector, Kunyuan Company believed that the weak market and the repair of Three Gorges Gezhouba locks and Three Gorges locks made a great influence on her operating, so

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applied to Finance Leasing Company for an extension to hire payment orally. Kunyuan Company applied to Finance Leasing Company in written again on April 8, applying to pay the hire of March with the shipbuilding fees in amount of RMB700,000 withheld by Finance Leasing Company, or postpone the hire payment to June, or retrieve the mortgaged vessel to loan from bank. Finance Leasing Company did not agree after receiving Kunyuan Company’s application. Finance Leasing Company applied to Chongqing First Intermediate People’s Court for property freezing order before an action on April 25 in the same year, which froze Kunyuan Company’s bank accounts and ownership of M.V. “Jinyuan No.1011”. Finance Leasing Company brought a lawsuit on May 14. Until the time to sue, Finance Leasing Company still detained shipbuilding fees in amount of RMB70,000 and unpaid quality warranty deposit in amount of RMB300,000 because Kunyuan Company did not provide the invoices of shipbuilding, Kunyuan Company unpaid the hire of March and April, 2012 accounting to RMB1,219,672.88. The court also finds out that, Finance Leasing Company set up registration through the approval of industrial and commercial administration of Chongqing on March 6, 2008, the business scope was Finance Leasing business. Kunyuan Company set up registration through the approval of Industrial and Commercial Administration of Chongqing Wanzhou on July 27, 2004, the business scope was the inter-provincial general cargo transportation in Yangtze River and its tributaries, valid until April 30, 2013. The Port Administration of Chongqing was established in August, 2000, deputy departmental level public institution directly under Chongqing Transport Commission, undertaking administrative functions of the whole city’s maritime transport, as well as listing “Chongqing Local Maritime Administration”, “Chongqing Ship Inspection Administration”, the implementation of three brands, a team, a unified allocation, under one roof. Its main responsibilities were to be responsible for the administrative management and safe management of the city’s maritime transportation in accordance with the relevant policies, laws, regulations, and standards. Dawei Company set up registration through the approval of industrial and commercial administration of Chongqing Fuling on October 24, 2006, the business scope was general business items, ship building and repair, steel structure processing, ship design, technical consultation, business term expired on December 31, 2016. The court holds that: this case is dispute over ship finance leasing contract. Finance Leasing Company is shipowner and lessor, Kunyuan Company is lessee, Dawei Company is shipbuilder, the Port Administration is guarantor. Finance leasing contract signed by Finance Leasing Company, Kunyuan Company and Dawei Company is real intention of three parties, not contrary to law, this contract was lawful and valid. Guarantee contract, mortgage contract, margin collateral contract and the proposed budget table, lease item list, payment of lease item price list, charter hire payment schedule are accessory contracts of finance leasing contract. Since the parties did not raise objections to guarantee contract, mortgage contract, the proposed budget table, lease item list, payment of lease item price list, hire payment schedule and these contracts are not contrary to law, are lawful and

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valid, the court affirms them. The issues in this case include that: 1. whether Kunyuan Company did not pay two seasons rent that constituted a fundamental breach of contract; 2. whether Finance Leasing Company decided to change the ship construction plant from Dawei Company into Hongyun Company, whether the ships involved existed quality problems, whether Kunyuan Company’s counterclaim shall be supported; 3. whether Margin Collateral Contract was valid, whether the Port Administration shall bear joint responsibility. Regarding the first issue and the second issue, the court holds that, a finance leasing contract is a contract whereby the lessor, upon purchase of the lessee-selected lease item from a lessee-selected seller, provides the lease item to the lessee for its use, and the lessee pays the rent. Paying rent to the lessor in accordance with the contract during the lease term is a fundamental obligation of the lessee. It is provided in Article 248 of the Contract Law of the People’s Republic of China, the lessee shall pay the rent in accordance with the contract. Where the lessee fails to pay the hire within a reasonable time limit after receiving the demand for payment from the lessor, the lessor may require payment of the full hire; or it may terminate the contract and take back the lease item. This provision is the remedies the lessor taken in the case that the purpose of the contract is impossible to achieve, that is a fundamental breach of contract alleged by Finance Leasing Company. The so-called fundamental breach refers to that the consequences of breach of contract has been hindered the aim of contract to achieve, includes the other party delayed performance of its main obligation after such performance has been demand and the other party delays performance of its obligations rendering it impossible to achieve the purpose of the contract. The other party delaying performance of its obligations rendering it impossible to achieve the purpose of the contract or delaying performance of its main obligation after such performance has been demand, and failing to perform within a reasonable period constitutes a fundamental breach of contract. Because the fundamental breach of one party would seriously damage the interests of the other party, it is provided in the law that the other party enjoys the right to terminate the contract; this right to terminate may be exercised without being demand. But delay in performance is not necessarily a fundamental breach of contract, only under the situation that the purpose of the contract cannot be achieved or the other party delays performance of its main obligation after such performance has been demand, and failing to perform within a reasonable period can constitute a fundamental breach of contract. In this case, Finance Leasing Company claimed that there was a total of four seasons rent Kunyuan Company failing to pay that constituted a fundamental breach of contract, where in December 2011 the hire paid two days delay, in January 2012 the hire paid 25 days delay. According to the contract, each hire payment date was the 13th of each month, in order to pay the hire for December 2011, Kunyuan Company gave the acceptance bill of one million RMB to Finance Leasing Company on December 6, Finance Leasing Company, in order to charge discount interests, after discounting the acceptance bill on December 15, remitted to Guqiao Company, then Guqiao Company paid instead of Kunyuan Company, although the actual arrival date of this hire was December 15, such delay was not caused by Kunyuan

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Company, Kunyuan Company was not in breach for the payment of this hire, the court disaffirms the claim of Finance Leasing Company that Kunyuan Company was breach for the payment of this charter hire; Kunyuan Company shall pay the hire for January 2012 in sum of RMB609,836.44 on January 13, but Kunyuan Company advanced RMB3 million in the case that Finance Leasing Company did not pay the shipbuilding fees, Finance Leasing Company shall pay this money to Kunyuan Company according to the notice of ship construction party, therefore under the situation that Finance Leasing Company did not pay the advanced ship construction fees to Kunyuan Company, Kunyuan Company did not pay the hire for January 2012 temporarily, later in the settlement, Kunyuan Company not only asked Finance Leasing Company to deduct the hire for January from shipbuilding project fees of RMB2.7 million on her initiative, but also assumed the default interest accounting to RMB7,623. Therefore, under a mutual payment obligation, Kunyuan Company’s arrears of hire did not constitute a fundamental breach of contract. About the problems of two seasons hire for March and April 2012, Kunyuan Company applied for an extension to pay or taking other alternative measures in the reason that the weak market and the repair of Gezhouba locks and Three Gorges locks affecting the passage and other grounds, but the application behavior did not represent Kunyuan Company refused to pay hire, nor Kunyuan Company did not have the sincerity and ability to continue fulfilling the contract, two seasons hire in sum of RMB1,219,672.88 was 3.2% of the total hire compared with 66 seasons hire in sum of RMB37,791,936.40, was not delay in main debt, would not lead to the purpose of contract of Finance Leasing Company not being achieved. Moreover, the deposit in amount of RMB3 million from Kunyuan Company, the pledge deposit in amount of six million RMB from the Port Administration, ship mortgage of M.V. “Jinyuan 2011” were in the control of Finance Leasing Company, such guarantee was enough to pay the two seasons hire and the corresponding costs owed by Kunyuan Company. Besides, Finance Leasing Company still had the ship construction funds in sum of RMB700,000 and retention money in sum of RMB300,000 unpaid to Kunyuan Company. Thus, after the balance of shipbuilding fees and two seasons hire, Kunyuan Company only owed to Finance Leasing Company for more than two hundred thousand RMB. The act of Kunyuan Company did not constitute a fundamental breach of contract, the court disaffirms the claim of Finance Leasing Company that Kunyuan Company was fundamental breach. Concerning the counterclaim of Kunyuan Company that Finance Leasing Company played a decisive role in changing shipyard which led to quality defects of ships, the court holds that, according to finance leasing contract, the shipyard was selected by Kunyuan Company independently, and Kunyuan Company shall be responsible for quality. Though the ship construction plant changed into Hongyun Company from Dawei Company later, Kunyuan Company did not provide evidence to prove such change was determined by Finance Leasing Company, and in accordance with the written commitment of Kunyuan Company, it was confirmed that changing the shipyard of two vessels into Hongyun Company was decided by

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tripartite consultations of Kunyuan Company, Dawei Company and Hongyun Company, having nothing to do with Finance Leasing Company, and the vessels were qualified by testing. When handling the relevant formalities to deliver, Finance Leasing Company, Kunyuan Company and Dawei Company confirmed that the quality of vessels met the requirements of contract in the EIR. The available evidence provided by Kunyuan Company could not prove that Finance Leasing Company played a decisive role in changing shipyard and there were problems in the quality of ships. In addition, Finance Leasing Company refusing to pay the second season of construction fees under the situation that ship construction party did not meet the construction schedule did not violate terms of the contract; it did not necessarily lead to the occurrence of a ship quality problem. Furthermore, according to the contract, even if there were quality problems of ships, Finance Leasing Company did not bear the liability. About the claim of Kunyuan Company that Finance Leasing Company detaining shipbuilding fees accounting to one million yuan unpaid constituted a fundamental breach of contract, the court holds that, Paragraph 4 of Article 4.2 in the finance leasing contract, issuing of invoice, appointed, Party C issued a full formal invoice to Party A in accordance with the actual paid amount of lease item according to the appointment of the foregoing provisions, and all invoices shall be fully issued to Party A on the date that Party A obtained certificate of ownership of the ships (with quality warranty deposit section). According to the agreement of this article, the invoice of shipbuilding fees was issued by Party C that was shipbuilding party, Kunyuan Company as lessor was not the obligator to issue shipbuilding invoice, Finance Leasing Company used her advantages of controlling the unpaid shipbuilding fees, forcing Kunyuan Company to accept the unreasonable requirements of Finance Leasing Company that issuing shipbuilding invoice and detaining shipbuilding funds in amount of RMB700,000 before issuing the invoice in case of violation of true will, the acts of Finance Leasing Company to detain shipbuilding funds in amount of RMB700,000 did not have factual and legal basis and constituted a breach, Finance Leasing Company shall pay this money to Kunyuan Company. The breach acts of Finance Leasing Company was in line with the appointment of Article 14.1.1 of contract, but the breach occurred after completion of the construction of ships, it did not affect the ships’ construction, and RMB700,000 was equivalent to 2.33% of the shipbuilding fees Finance Leasing Company shall pay, according to the intention of the parties to enter into a contract, the breach did not constitute a fundamental breach of contract, the court disaffirms the counterclaim of Kunyuan Company. About the third issue, the court takes the view that, in accordance with the provisions of Interim Regulation on the Registration of Public Institutions, the term “public institutions” refers to the public service organizations that are established by the state organs or other organizations by using the state-owned assets for the purpose of engaging in activities of education, science and technology, culture and hygiene. The purpose of its establishment is for public welfare and not for profit; it can be divided into public welfare institutions and profitable public institutions. The Port Administration belongs to public welfare institutions, not having the

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qualification to engage in business activities, her main responsibility is responsible for Chongqing water transport industry’s administration, supervise and manage the waterway transport market, safeguard market order; responsible for Chongqing (except the Yangtze River) water traffic safety management and other functions. It is provided in Article 9 of the Guaranty Law of the People’s Republic of China (hereinafter referred to as the “Guaranty Law”): “schools, kindergartens, hospitals and other institutions or social groups cannot act as guarantors”; it is provided in Article 3 of Interpretation of the Supreme People’s Court on Some Issues Regarding the Application of Guaranty Law of the People’s Republic of China: “a security contract shall be invalid if state organs and institutions, social organizations for the public good violate the law by acting as security provider. The creditor’s consequent loss shall be compensated pursuant to Article 5 Paragraph 2 of Guaranty Law.” In this case, the funding of the Port Administration is allocated from the state, the Port Administration does not have the qualification in security, her pledge act for Kunyuan Company is business approach inconsistent with its functions, her pledge act directly harm the national interest and violates mandatory provisions of law, based hereon, the margin and collateral contract is invalid. The Port Administration as public institution performing administrative functions, knowing that she did not have the qualification to guarantee, still provided pledge security for Kunyuan Company, had a certain responsibility for the invalidity of margin collateral contract. When Finance Leasing Company entered into finance leasing contract and margin collateral contract, she made a detailed understanding of the relevant legal provisions of finance leasing and guarantee, knowing that the Port Administration as public institution for the purpose of public welfare did not have the qualification to guarantee, still asked the Port Administration to provide pledge security, having a certain responsibility for the invalidity of margin collateral contract. According to Article 7 of Interpretation of the Supreme People’s Court on Some Issues Regarding the Application of Guaranty Law of the People’s Republic of China, “the security provider and debtor shall assume joint compensation liability for the creditor’s loss on the condition that the principal contract is valid while the security contract is invalid, and the creditor is not at fault. If the creditor and security provider are both at fault, the security provider’s portion of civil liability shall not exceed half of the debtor’s unpayable portion.” Until bringing a lawsuit, Kunyuan Company was two seasons rent arrears to Finance Leasing Company in sum of RMB1,219,672.88, therefore the Port Administration shall bear the half liability of this two seasons hire when Kunyuan Company was unable to pay the hire. To sum up, although Finance Leasing Company and Kunyuan Company had disputes in the course of performing the contract, the two parties fulfilled the main obligations according to the contract; the acts of two parties did not constitute a fundamental breach of contract. The claim of Finance Leasing Company to request Kunyuan Company to pay all outstanding hire, default inteest and other losses in the reason that Kunyuan Company was fundamental breach, lack a proper basis, and shall be disaffirmed; due to that Finance Leasing Company was the ownership of M.V. “Huasheng 1003” and M.V. “Huasheng 3103”, according to Article 39 of

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Property Law of the People’s Republic of China, Finance Leasing Company had the right to dispose of two vessels on her own without the consent of the court, the court disaffirms the claim of Finance Leasing Company that when Kunyuan Company could not fully repay the debt, Finance Leasing Company could auction the two vessels (M.V. “Huasheng 1003” and M.V. “Huasheng 3103”) involved in financial lease contract of this case, using the auction money to cover the above costs. Similarly, the claim of Kunyuan Company to terminate the contract, return the money paid and compensate for damages in the reason that Finance Leasing Company changing the shipyard caused the quality defects of ships and not paying the shipbuilding fees according to the contract constituted a fundamental breach, lack a proper basis, and shall be disaffirmed in accordance with law. The Port Administration as public institution performing administrative functions, did not have the qualification to guarantee, the margin collateral contract signed with Finance Leasing Company and Kunyuan Company was invalid, the Port Administration shall bear the half liability in the range of Kunyuan Company unable to pay for the two seasons rent Kunyuan Company unpaid when disputes occurred. Because the disputes of Kunyuan Company and Finance Leasing Company arising from the performance of contract were not resolved, that Kunyuan Company failed to pay the due charter hire pursuant to the contract could not be deemed as a breach. Although Kunyuan Company defended as weak market and the repair of Gezhouba and Three Gorges inflecting navigation, the defense could not justify why Kunyuan Company did not pay rent, Kunyuan Company had owed to Finance Leasing Company the due rent accounting to RMB12,806,565.24 from March 13, 2012 to November 13, 2013, before the judgment of the court, Kunyuan Company shall pay the due rent to Finance Leasing Company, and for the outstanding rent, Kunyuan Company shall fulfil the obligations according to the contract. According to Contract Law of the People’s Republic of China Article 60, Article 61 Paragraph 1, Article 67, Article 237, Article 248, the Guaranty Law of the People’s Republic of China Article 5, Article 9, the Civil Procedure Law of the People’s Republic of China Article 145, the judgment is as follows: 1. The Defendant, Chongqing Kunyuan Shipping Co., Ltd., shall owe the hire from March 13, 2012 to November 13, 2013 in sum of RMB 12,806,565.24 to the Plaintiff, Chongqing Transportation Equipment Finance Leasing Co., Ltd.; 2. In case that the Defendant, Chongqing Kunyuan Shipping Co., Ltd., cannot pay the rent of March and April 2012 in sum of RMB1,219,672.88, the Defendant, the Port Administration of Chongqing, shall bear half of the liability for the two months’ hire; 3. The counterclaim Defendant, Chongqing Transportation Equipment Finance Leasing Co., Ltd., shall pay the detained shipbuilding fees amounting to RMB700,00 to the counterclaim Plaintiff, Chongqing Kunyuan Shipping Co., Ltd.; 4. Reject other claims of the Plaintiff, Chongqing Transportation Equipment Finance Leasing Co., Ltd.;

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5. Reject other counterclaims of the counterclaim Plaintiff, Chongqing Kunyuan Shipping Co., Ltd.; 6. After the contents of the above payment balance, limit the Defendant, Chongqing Kunyuan Shipping Co., Ltd., to pay the Plaintiff, Chongqing Transportation Equipment Finance Leasing Co., Ltd., RMB12,106,565.24 within ten days as of the effectiveness of this judgment. Where any party fails to perform the obligation of paying above-mentioned amounts within the period prescribed herein, such party shall, in accordance with Article 253 of Civil Procedure Law of the People’s Republic of China, double pay the interest for the period of delayed performance. Court acceptance fee of the claim in amount of RMB217,424,RMB126,104 shall be born by the Plaintiff of claim Chongqing Transportation Equipment Finance Leasing Co., Ltd., RMB97,588 by the Defendant of claim (the counterclaim Plaintiff) Chongqing Kunyuan Shipping Co., Ltd. The court will not refund the prepaid part of Chongqing Transportation Equipment Finance Leasing Co., Ltd., Chongqing Kunyuan Shipping Co., Ltd. pays that to Chongqing Transportation Equipment Finance Leasing Co., Ltd. together in the fulfillment of the above payment obligations. If any parties who disagree with this judgment, they may within 15 days upon service of this judgment, submit a letter of appeal to the court, with duplicates being submitted in terms of the number of the opposing party, to lodge an appeal to the Hubei High People’s Court of the People’s Republic of China. The appeal fees shall, according to the appealed amount dissatisfied with the judgment and Article 13 Paragraph 1 of Measures on the Payment of Litigation Costs, be paid in advance by remittance to the Hubei High People’s Court (the depositary bank is Agricultural Bank of China Wuhan Donghu Branch, the name of account is Hubei Provincial Finance Department Non-tax Revenue Settlement Account, and the account number is 052101040020201. The column of banking credentials purposes shall mark “Hubei Higher People’s Court” or the code of the Hubei High People’s Court “103,001”). If the Appellant has not yet prepaid such sum within seven days after the expiry of the appeal period, the case will be referred to as automatic withdrawal of the appeal. Presiding Judge: GONG Wenjing Judge: WANG Yucheng Judge: KONG Linggang September 27, 2013 Clerk: CHEN Rong

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Hubei High People’s Court Civil Judgment Chongqing Transportation Equipment Finance Leasing Co., Ltd. v. Chongqing Kunyuan Shipping Co., Ltd. et al. (2014) E Min Si Zhong Zi No.00091 Related Case(s) This is the judgment of second instance, and the judgment of first instance and the judgment of retrial are on page 333 and page 380 respectively. Cause(s) of Action 214. Dispute over ship financial leasing contract. Headnote Affirming lower court decision holding lessor to be entitled to recover outstanding hire from lessee under finance leasing agreement. Summary The Plaintiff, a finance leasing company, sued the First Defendant, the lessee, to recover outstanding charter hire under a finance leasing contract. The Plaintiff also claimed that the Second Defendant, a port administration, was liable to pay part of the outstanding amount under a guarantee contract. The First Defendant counterclaimed against the Plaintiff, arguing that the two ships that were the subject of the finance leasing contract were defective because they were built at the wrong shipyard. The court held that the First Defendant was liable to pay the outstanding hire. Although the Second Defendant, as a public institution performing administrative functions was not legally permitted to engage in business activities such as providing a guarantee, it was nevertheless ordered to pay half of the outstanding amount if the First Defendant did not do so. The Plaintiff and the First Defendant both appealed. The court of second instance dismissed the appeal and affirmed the original judgment.

Judgment The Appellant (the Plaintiff of first instance, the counterclaim Defendant): Chongqing Transportation Equipment Finance Leasing Co., Ltd. Domicile: Left 6F, B2 Zone, Science and Tech. Innovation Park, No.13 Caifu Avenue, Yubei District, Chongqing City. Organization Code: 6,710,442–6.

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Legal representative: YU Yong, chairman of the board. Agent ad litem: XIONG Jie, lawyer of Chongqing Exceedon & Partners Law Firm. Agent ad litem: ZHANG Siqiang, lawyer of Chongqing Exceedon & Partners Law Firm. The Appellant (the Defendant of first instance, the counterclaim Plaintiff): Chongqing Kunyuan Shipping Co., Ltd. Domicile: No.46, Wan LI Cheng Qiang, Wanzhou District, Chongqing City. Organization Code: 76,269,217–0. Legal representative: ZHANG Maoan, executive director. Agent ad litem: YI Kai, lawyer of Chongqing Lanjian Law Firm. Agent ad litem: WANG Wen, employee, female, Han, born on October 19, 1971, living in Jiangbei District, Chongqing City. The Respondent (the Defendant of first instance): The Port Administration of Chongqing Domicile: Hongshi Road, Hong Qi He Gou, Jiangbei District, Chongqing City. Organization Code: 45,039,335–8. Legal representative: WANG Botao, director. Agent ad litem: CHEN Li, lawyer of Chongqing Solton & Partners Law Firm. Agent ad litem: HUANG Changdun, staff. The Third Party of first instance: Chongqing Fuling Dawei Shipbuilding Co., Ltd. Domicile: Community 10, Shuanglong Village, Qingxi Town, Fuling District, Chongqing City. Organization Code: 79,354,481–6. Legal representative: GUO Zhifu, general manager. Agent ad litem: JU Xiaohong, lawyer at Chongqing Xiayang Law Firm. This case arose over a ship finance leasing contract, Wuhan Maritime Court made (2013) Wu Hai Fa Shang Zi No.0059 Civil Judgment, the Appellant, Chongqing Transportation Equipment Financing Leasing Co., Ltd. (hereinafter referred to as Finance Leasing Company) and the Appellant Chongqing Kunyuan Shipping Co., Ltd. (hereinafter referred to as Kunyuan Company) disagreed with the judgment and appealed to the court. The court, after accepting this case, organized the collegiate Panel consisting of Presiding Judge WAN Haili, Acting Judge HU Zhengwei and Acting Judge OU Haiyan, to investigate the case pursuant to the law. They heard the case in public on May 8, 2014. XIONG Jie and ZHANG Siqiang, as agents ad litem of the Appellant Finance Leasing Company. YI Kai and WANG Wen were agents ad litem of the Appellant Kunyuan Company. CHEN Li and HUANG Changdun were agents ad litem of the Respondent, the Port Administration. JU Xiaohong was agent ad litem of the Third Party of first instance Dawei Company. They appeared in court to attend the trial. Now the case has been concluded. Finance Leasing Company requested for the court of first instance to judge that: (1) Kunyuan Company should pay all outstanding hire (for a total of 33,541,004.20

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RMB) in accordance with the agreement of Finance Leasing Contract, immediately; (2) Kunyuan Company should pay the outstanding hire in amount of 1,219,672.88 RMB. It should also pay the interest on the delayed payment by the end of May 14, 2012, which was caused by default payment, in the amount of 28,967.23 RMB. The interest on the delayed payment counted from May 15, 2012 to the payment day and is the based on the daily 5/10000 of the unpaid hire to the Plaintiffs; (3) Kunyuan Company paid lawyer’s fees to recover creditor’s rights of this case in sum of 300,000 RMB. It requested the costs of preservation measure in sum of 5,000 RMB and guarantee in sum of 30,000; (4) if Kunyuan Company failed to fully pay off the above claims, Finance Leasing Company could apply to the court for action of the two vessels involved in Finance Leasing Contract (M.V. “Huasheng 3013” and M.V. “Huasheng 1003”), to recover the costs above by auction proceeds; (5) the Port Administration should bear joint and several liability for security within 6,000,000 RMB; (6) the litigation costs of this case should be born by Kunyuan Company and the Port Administration. Kunyuan Company filed a counterclaim to request the court of first instance to judge that: (1) terminate Finance Leasing Contract between Kunyuan Company and Finance Leasing Company; (2) Finance Leasing Company should return auxiliary expenses amounting to 3,300,000 RMB, the margin amounting to 3,000,000 RMB, and the hire amounting to 3,031,259.32 RMB to Kunyuan Company; (3.) Finance Leasing Company should compensate Kunyuan Company for loss of guarantee fees amounting to 600,000 RMB; (4) Finance Leasing Company should pay the liquidated damages amounting to 2,700,000 RMB to Kunyuan Company; (5) the litigation costs of the counterclaim should be born by Finance Leasing Company. The court of first instance found that: on April 2, 2011, Finance Leasing Company (Party A) as lessor, Kunyuan Company (Party B) as lessee, Dawei Company (Party C) as builder, signed a tripartite parties the Finance Leasing Contract. Clause 1 of contract agreed and indicated that the leased properties were two bulk/container vessels with the capacities of 35TEU (cargo capacities were 6,000 tons each). Party A leased them to Party B to use them in accordance with the discretion of Party B for Party C and leased properties. The leased properties were specified and confirmed by Party B. The entirety of the contents, such as name, model, etc. were at the discretion of Party B without depending on the skills of Party A and subject to Party A’s intervention. Party B should be responsible for any problems that occurred to the leased properties during the lease term including economic losses. Party B should pay hire to Party A. Clause 3 outlined that the total price of leased properties (lump sum price) amounted to 31,042,744 RMB. Wherein, Party A paid 30 million RMB to Party C (25.5 million RMB of bank transfer and 4.5 million RMB of acceptance bill), and Party B paid 1,042,744 RMB to Party C. The part exceeding total price of leased properties should be born by Party C. After obtaining Ship Inspection Certificate when the project was completed, Party A, Party B, and Party C should finish auditing the project within 10 working days. The formed settlement statement was confirmed by the three parties. After obtaining the ship certificates, Party A should pay all the remaining money in

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addition to the quality warranty deposit to Party C in accordance with the contract within 5 working days. It was prescribed in Article 4 the terms and methods for both Party A and B to pay the leased properties price to Party C. Clause 5 agreed that the ownership of the leased properties was vested in Party A before Party B paid off all debts under this contract. Party B only enjoyed the right to use in the lease period. Any other person, in addition to Party A, had no right to dispose of the leased properties. Clause 6 indicated that the lease payment amount was specified in the lease repayment schedule (Appendix 4). In the lease term, the annual lease rate was a floating 15% with reference to loan interest rate for over five years of the People’s Bank of China as 6.6% to implement. The annual lease rate that was 7.95%, in case of benchmark deposit interest rate of the People’s Bank of China was adjusted. Party A would adjust the annual lease rate with the same direction and margin. The lessee should pay rent to the lessor according to Notice of Rent Adjustment. If Party B delayed in lease payment, then Party B should pay to Party A in the following order: insurance premium, liquidated damages, compensation, hire arrears penalty, hire default interest, hire arrears of principal, the current interest, the current principal, and security deposit. If Party B failed to pay off the above costs in the above order by the current lease payment date, it would be deemed as a failure to make full payment of the current rent. The lease term was 66 months. This was calculated from the lease commencement date. The commencement date should be the date on which Party A paid the first paragraph of the leased properties price to Party C and Party C received it. Party B paid commission charges in sum of 3.3 million RMB to Party A at one time. Article 7 appointed that two vessels tentatively started construction on April 2, 2011. The delivery was on December 2, 2011 (Party A acquired Ownership Registry Certificate). The initial shipbuilding fund of Party A and Party B was not in place, which caused delays. The start date and the date of delivery were postponed. Party B should respectively issue an acceptance sheet of leased properties to Party A and Party C within five working days from the receipt of the leased properties. Clause 10 indicated that Party B should purchase the insurance and type designated and approved by Party A in lease term - builders’ risks insurance, trials insurance, all risks of coastal and inland vessels, and agreed Party A as the first beneficiary. Clause 11 and Appendix also appointed three ways of guarantee. The first was that Party B paid a security deposit accounting to 3 million RMB to Party A to ensure the fulfilment of all obligations under the Finance Leasing Contract and acceptance of civil liability due to the contract. If Party B failed to pay rent in accordance with contract or other breach of contract, Party B was entitled to keep the deposit to offset the liquidated damages, due rent, and other due accounts at any time. If that happened, Party B shall repay her shortfall of deposit according to Party A’s written notice within 10 working days. If not repaid timely, Party B’s actions constituted an anticipatory breach of contract. Meanwhile, Appendix 1, the proposed budget table, appointed, deposited, and calculated without interest and was returned after the lessee changed to the leased properties’ registration owner. The second was a Pledge Fund Contract. Margin Collateral Contract was signed by Kunyuan Company, Finance Leasing Company and the Port Administration on May 3 in the same year. The

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contract outlined that the Port Administration should provide a collateral security in an account of 6 million RMB for Kunyuan Company to ensure that Finance Leasing Company obtained Ownership Registry Certificates of the two vessels. Kunyuan Company paid the hire and other due accounts, according to the main contract and the costs to claim of Finance Leasing Company, due to the overdue payment. The third was a mortgage contract. Party B used its own ship M.V. “Jinyuan 2011” to provide collateral for the fulfilment of the contract. Clause 14 agreed to the following circumstances and constituted a fundamental breach of contract. Party A did not fully pay the price of the leased properties on schedule, which resulted in the inability to perform the contract, or Party B could not normally exercise the rights to possess and use the leased properties because of unlawful interference of Party A, or Party A subleased the leased properties or did other investment acts without the written consent of Party B in the lease term. If Party B failed to pay the due hire, commission charges, and other due accounts according to the contract, or any fees Party A paid on behalf of Party B on time, Party B should pay default interest on daily 5/10000 of the outstanding balance to Party A, until the date of full payment. In the event that Party B failed to register the ship ownership in the name of Party A and deliver the Certificate of Ownership to Party A, and Party B had a hire in arrears for two months or more, or appeared deferred for second time and so on, were deemed as fundamental breach of Party B. Clause 15 agreed that if Party A fundamentally breached the contract, Party B may unilaterally terminate the contract and claim compensation for damages from Party A. If Party B was in violation of an anticipatory breach or fundamental breach, Party B would immediately lose the rights to possess, use, and benefit from the leased properties. Party A was not only entitled to request Party B to be liable for breach of contract and the damages in accordance with the contract, but was also entitled to take the following one or more remedies: (1) if the contract is terminated in advance, Party A was entitled to recourse from Party B for all accrued unpaid hire, 5 liquidated damages, damages, all outstanding hire, and other fees due accounts that Party B should pay under the contract; (2) if the contract is terminated in advance, Party A should stop using the leased properties and demand Party B to compensate for all the losses Party A suffered thereby; (3) Party B should fulfill this contract through judicial means and demand Party B to compensate Party A for all losses and expenses caused by breach of contract (including litigation fees, arbitration costs, lawyer’s fees, and all other costs incurred due to recovery, etc.). As a complement to Finance Leasing Contract, Appendix 1, the proposed budget table, Appendix T2, leased properties list, Appendix 3, payment of leased properties price list, and Appendix 4, rent repayment schedule, made a specific agreement on the name of leased properties, lease term, the total hire, time and manner of hire payment, nominal price, etc. The hire repayment schedule provided, Kunyuan Company paid hire in a sum of 37,283,838.60 RMB to Finance Leasing Company. On the 13th of each month from hire payment day from May 13, 2011, the hire needed to be paid in 66 months. The hire for the first six months was 189,750 RMB each month. The hire from month seven to month 66 was 602,422.31 RMB each month. Since the adjustment of loan interest rate, Finance

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Leasing Company adjusted the hire on July 7, 2011. The payment amount for month one and month two was 195,500 RMB. The payment amount for month three to month six was 202,687.50 RMB. The payment amount for the third month and fourth months was 605,710.76 RMB, the payment amount for the remaining months was 609,836.44 RMB. The total principal and interest of hire amounted to 37,791,936.40 RMB. On June 8, 2012, Finance Leasing Company adjusted the rent after June 13, 2012 to 37,596,710.37 RMB. The hire for each month was 606,152.93 RMB. On April 2, 2011, according to Finance Leasing Contract, Finance Leasing Company (Party A), Kunyuan Company (Party B), Chongqing Transportation Financing Guarantee Co., Ltd. (Party C) (hereinafter referred to as Financing Guarantee Company, later changed to Chongqing Yuchao High-Tech Guarantee Co., Ltd. (hereinafter referred to as “Yuchao Company”) signed a guarantee contract together. The guarantee contract outlined that in order to ensure that it was joint and several liability, Party B guaranteed Party A to acquire Ownership Registry Certificate of two vessels on time according to the agreement of the main contract. The other option was that on behalf of Party B, Party C would assume its liability for breach, repay the leased properties price that Party A had paid to Dawei Company and the loss of interest, and all the actual costs for the realization of claims. The guarantee contract also made an agreement of warranty period and exemption clauses and so on. That day, the Port Administration transferred a deposit amounting to 6 million RMB to Finance Leasing Company’s bank account. Kunyuan Company charged a mortgage over M.V. “Jinyuan 2011” to Finance Leasing Company. The mortgage period was to October 2, 2016. The two parties handled mortgage registration. Kunyuan Company remitted 6.3 million RMB to Finance Leasing Company’s account on May 12. The margin in sum of 3 million RMB, commission charges in sum of 3.3 million RMB, and security deposit in an amount of 600,000 RMB were paid to the Yuchao Company. Finance Leasing Company paid the first month leased properties price of 12 million RMB to Dawei Company on May 13. Because the domicile of Dawei Company, Chongqi Fuling experienced power cuts there were issues with construction. In order to avoid delay in the construction period, Kunyuan Company consulted with Dawei Company to let Chongqing Wanzhou Hongyun Ship Building and Repair Co., Ltd. (hereinafter referred to as “Hongyun Company”) to build the ships. For changing the shipbuilding company into Hongyun Company, Kunyuan Company issued a Commitment, promising that Kunyuan Company bore and performed all the liability, obligation, and costs, etc., which shall be born by Dawei Company as outlined in the Finance Leasing Contract. It built the vessels in accordance with the quality and requirements appointed by the Finance Leasing Contract. Kunyuan Company arranged the staff needs on its own, was responsible for the costs, and delivered the ships on schedule according to the contract. Kunyuan Company was solely responsible for all security incidents that occurred during ship construction. The money appropriated by Finance Leasing Company entered Dawei Company’s account and then was sub-paid to Kunyuan Company to make reasonable arrangements according to its need for building ships. Kunyuan

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Company should bear the costs generated by Dawei Company because Finance Leasing Company did not pay the money according to the contract. Finance Leasing Company claimed that Dawei Company was the obligator for compensation. Therefore, Kunyuan Company and Hongyun Company should bear joint and several liability. Hongyun Company stamped on the Commitment as guarantor for joint and several liability. On August 12, 2011, Kunyuan Company sent a letter to demand the second month to Finance Leasing Company. On August 15, 2011, Finance Leasing Company sent a letter on the ship construction schedule of Kunyuan Shipping Company. The letter pointed out that the ship construction schedule did not meet the requirement of the second month payment in accordance with the field visits situation of the construction site and the letter confirming the progress issued by Chongqing Ship Inspection Bureau. It refused to pay the second paragraph of construction price based thereon. Finance Leasing Company paid the second month and the third month of the ship price separately after the ship construction reached the requirement of payment. In order to ensure the progress of shipbuilding and the required materials for shipbuilding in place, Kunyuan Company signed Steel and Machinery Purchase and Sale Contracts with Hubei Shenzhou Xinye Industry Commerce Co., Ltd. and Chongqing Luwei Diesel Sales Co., Ltd., on August 15 and 16, respectively. Hongyun Company completed building the two vessels on January 10, 2012. On January 13, 2012, Kunyuan Company completed the ownership registration of the two ships. The Classification Nos. separately were 120,112,000,013 and 120,112,000,014. According to the record of Ownership Registry Certificate, the shipowner was Finance Leasing Company. The ships’ names were M.V. “Huasheng 3103” and M.V. “Huasheng 1003”. The builder was Dawei Company, and the completion date was January 10, 2012. The lease column stated that the lessor was Finance Leasing Company, the lessee was Kunyuan Company, and the rent amount was 7 18,641,919.30 RMB. The lease term was 66 months, and lease registration date was January 31, 2012. Ship Trial Certificate recorded that the builder of M.V. “Huasheng 1003” and M.V. “Huahsheng 3103” was Hongyun Company. Dawei Company delivered M.V. “Huasheng 3103” and M.V. “Huasheng 1003” to Finance Leasing Company on the same day. Then, Finance Leasing Company delivered M.V. “Huasheng 3103” and M.V. “Huasheng 1003” to Kunyuan Company. The ship transferred documents to confirm that the ships satisfied Kunyuan Company’s requirements. On February 2 of the same year, Dawei Company issued an application letter to Finance Leasing Company. The letter outlined that according to the Finance Leasing Contract, the newly built vessels M.V. “Huasheng 1003” and M.V. “Huasheng 3103” obtained the Ownership Registry Certificate on January 13, 2012. Kunyuan Company paid the fourth month and the fifth month of the shipbuilding project price amounting to 3 million RMB on behalf of your company. The construction price was paid and we now entrust your company to pay a construction price of month four in sum of 2.7 million RMB and construction price of month five in sum of 300,000 RMB (the quality warranty deposit) directly to Kunyuan Company according to the agreement of The Finance Leasing Contract. After

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receiving the letter of Dawei Company, Finance Leasing Company sent a working contact letter to Kunyuan Company. On February 7, the letter read that: since Kunyuan Company deferred hire payment of 602,422.31 RMB in the course of performing the contract, Finance Leasing Company requested to deduct default interest resulting from deferred hire payment and the hire in the shipbuilding project price in amount of 2.7 million RMB. It detained 700,000 RMB from the shipbuilding project price in amount of 2.7 million RMB until Kunyuan Company purchased all risks of inland vessels and delivered the insurance policy according to the contract and delivered the invoice of full construction price, which was issued by Dawei Company and paid to Finance Leasing Company before January 29. Kunyuan Company issued a reply letter the same day after receiving a working contact letter. The letter agreed Finance Leasing Company, after deducting the hire in sum of 609,836.44 RMB owed by Kunyuan Company on January 13, 2012, default interest in sum of 7,623 RMB, and discount charges in sum of 81,000 RMB in the shipbuilding project price amounting to 2.7 million RMB, to pay the rest to Kunyuan Company. On February 9, Finance Leasing Company paid the remaining costs in amount of 1,301,540.56 RMB to Kunyuan Company, after deducting hire and default interest, leaving the 1 million unpaid RMB, which included the quality warranty deposit in sum of RMB300,000. For the construction of the ships, Kunyuan Company paid the construction price in the amount of 1,042,744 RMB to Dawei Company; Finance Leasing Company fully paid the construction price in the sum of 29 million RMB to Dawei Company, there were: 12 million RMB on May 13, 2011, 9 million RMB on August 25 in the same year, 3 million RMB and acceptance bill of 3 million RMB on October 17, on February 9, 2012, Finance Leasing Company offset the due 8 construction price in sum of two million RMB with the construction price of 3 million RMB advanced by Kunyuan Company. Kunyuan Company paid the hire amount of 3,031,259.32 RMB and default interest amounting to 7,623 RMB to Finance Leasing Company from June 13, 2011 to February 2, 2012. This included 195,500 RMB paid to Finance Leasing Company respectively on June 13, July 12, and August 11, 2011; 7,187.50 RMB paid on August 12 and 202,687.50 RMB respectively paid on September 13, October 12, and November 13. Kunyuan Company gave Finance Leasing Company an acceptance bill of 1 million RMB to pay the hire for December. On December 6, Finance Leasing Company did not offset the hire of December after receiving the acceptance bill, but discounted it and charged the discount interest in amount of 36,000 RMB to Kunyuan Company on December 14. Finance Leasing Company transferred 1 million RMB to the account of Chongqing Guqiao Trading Co., Ltd. (hereinafter referred to as Guqiao Company) which was authorized by Kunyuan Company to deal with rent calculation matters. Guqiao Company re-remitted the rent of December in sum of 609,836.44 RMB to Finance Leasing Company’s account in Bank of Chongqing Liangjiang Branch. Kunyuan Company did not pay the hire of January 13, 2012 of 609,836.44 RMB because the construction price in sum of 3 million RMB advanced by Kunyuan Company was not recovered. On February 9, after Finance Leasing Company settled accounts with Kunyuan

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Company. Kunyuan Company repaid the hire of January 2012, amounting to 609,836.44 RMB, and bore default interest in amount of 7,623 RMB. Kunyuan Company paid the hire in sum of 609,836.44 RMB on February 13. Since then, Kunyuan Company did not pay the hire again to Finance Leasing Company. On February 21, in the same year, Chongqing Wanzhou Administration Port and Shipping issued Wan Zhou Gang Fa [2012] No.8 Notice on Making Shipping Companies Stability. During the time of Three Gorges Gezhouba Lock to repair, the notice proposed that, according to the regulations of concerning branches of Gezhouba and Three Gorges locks, Gezhouba Lock No.1 planned to make an overhaul from March 7 to April 30, 2012. The south line of Three Gorges locks synchronized with the annual maintenance. In the meantime, the No.1 lock stopped running. The north line of Three Gorges locks run 20 days for a single line. The Three Gorges navigation would face great difficulties at that time. After receiving the notice of the maritime sector, Kunyuan Company held that the weak market, the repair of Three Gorges Gezhouba locks, and Three Gorges locks made a great influence on her operating. Therefore, they applied to Finance Leasing Company for an extension to hire payment orally. Kunyuan Company applied to Finance Leasing Company in written again on April 8, applying to pay the hire of March with the construction price in an amount of 700,000 RMB withheld by Finance Leasing Company, to postpone the hire payment to June, or to retrieve the mortgaged vessel to loan from the bank. Finance Leasing Company did not agree with Kunyuan Company’s application. Finance Leasing Company applied to Chongqing First Intermediate People’s Court for a property freezing order before an action on April 26 in the same year. This froze Kunyuan Company’s bank accounts and ownership of M.V. “Jinyuan 1011”. Finance Leasing Company brought a lawsuit on May 14. Finance Leasing Company set up registration through the approval of industrial and commercial administration of Chongqing on March 6, 2008. The company’s scope was financing leasing business. Kunyuan Company set up registration through the approval of Industrial and Commercial Administration of Chongqing Wanzhou on July 27, 2004. The company’s scope was the inter-provincial general cargo transportation in Yangtze River and its tributaries, which was valid until April 30, 2013. The Port Administration was established in August 2000. It was a deputy departmental level public institution directly under Chongqing Transport Commission. It undertook the administrative functions of the entire city’s maritime transport, as well as listing “Chongqing Local Maritime Administration”, “Chongqing Ship Inspection Administration”, the implementation of three brands, a team, and a unified allocation, all under one roof. Its main responsibilities are for the administrative management and safe management of the city’s maritime transportation in accordance with the relevant policies, laws, regulations, and standards. Dawei Company set up registration through the approval of the industrial and commercial administration of Chongqing Fuling on October 24, 2006. The company’s scope was the general business items, ship building and repair, steel structure processing, ship design, technical consultation, business term expired on December 31, 2016.

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The court of first instance held that: this case was the dispute over a ship finance leasing contract. Finance Leasing Company was the shipowner and lessor. Kunyuan Company was the lessee, Dawei Company was the shipbuilder, and the Port Administration was the guarantor. The Finance Leasing Contract, signed by Finance Leasing Company, Kunyuan Company, and Dawei Company, was the real intention of three parties. The contract was lawful and valid. The Guarantee contract, mortgage contract, proposed budget table, leased properties list, payment of leased properties price list, and hire payment schedule were accessory contracts of the Finance Leasing Contract. Since the parties did not raise objections to these contracts and they were not contrary to law, they were all also lawful and valid. The court of first instance affirmed them. According to the facts and the statements of parties, the court of first instance held, the issues of controversy in this case included: (1) whether Kunyuan Company constituted a fundamental breach of contract and had obligation to pay rent promptly to Finance Leasing Company under the contract; (2) whether Finance Leasing Company constituted a fundamental breach of contract during the performance of contract; (3) whether Margin Collateral Contract was valid. The first issue was whether Kunyuan Company constituted a fundamental breach of contract and had an obligation to pay rent promptly to Finance Leasing Company under the contract. The court of first instance took the view that the Finance Leasing Contract was a contract whereby the lessor, upon purchase of the lessee-selected leased properties from a lessee-selected seller, provided the leased properties to the lessee for its use, and the lessee paid the hire. Paying hire to the lessor, in accordance with the contract during the lease term, is a fundamental obligation of the lessee. It was provided in Article 248 of Contract Law of the People’s Republic of China, the lessee should pay the hire in accordance with the contract. Where the lessee failed to pay the hire within a reasonable time limit, after receiving the demand for payment from the lessor, the lessor may require payment of the full hire or it may terminate the contract and take back the leased properties. The so-called “fundamental breach” referred to that the consequences of breach of contract had been hindered the aim of contract to achieve. This included the other party’s delayed performance of its main obligation after such performance had been demanded and the other party delayed performance of its obligations rendering it impossible to achieve the purpose of the contract. If the other party delays performance of its obligations rendering it impossible to achieve the purpose of the contract or delaying performance of its main obligation after such performance had been demanded, failing to perform within a reasonable period constitutes a fundamental breach of contract. Therefore, the fundamental breach of one party would seriously damage the interests of the other party. It was provided in the law that the other party enjoyed the right to terminate the contract. This right to terminate may be exercised without being demanded. Delay in performance was not necessarily a fundamental breach of contract. Only under the situation that the purpose of the contract could not be achieved or the other party delayed performance of its main obligation after such performance had been demanded, and failing to perform

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within a reasonable period could constitute a fundamental breach of contract. In this case, Finance Leasing Company claimed that there was a total of four months hire where Kunyuan Company failed to pay, which constituted a fundamental breach of contract. In December 2011, the hire pay was two days delayed, and in January 2012 the hire pay was 25 days delayed. According to the contract, each hire payment date was the 13th of each month. In order to pay the hire for December 2011, Kunyuan Company gave the acceptance bill of 1 million RMB to Finance Leasing Company on December 6. Finance Leasing Company, in order to charge discount interests, after discounting the acceptance bill on December 15, remitted to Guqiao Company. Then, Guqiao Company paid instead of Kunyuan Company. Although the actual arrival date of this rent was December 15, such delay was not caused by Kunyuan Company. Kunyuan Company was not in breach for the payment of this hire. The court of first instance disaffirms the claim of Finance Leasing Company that Kunyuan Company was in breach for the payment of this hire. Kunyuan Company shall pay the hire for January 2012 in the sum of 609,836.44 RMB on January 13. Yet, Kunyuan Company advanced 3 million RMB in the case that Finance Leasing Company did not pay the construction price. Finance Leasing Company shall pay this money to Kunyuan Company according to the notice of the ship construction party. Therefore, under the situation, Finance Leasing Company did not pay the advanced ship construction fees to Kunyuan Company. Kunyuan Company did not pay the hire for January 2012 temporarily. Later in the settlement, Kunyuan Company not only asked Finance Leasing Company to deduct the hire for January from shipbuilding project fees of 2.7 million RMB on her initiative, but also assumed the default interest accounting to 7,623 RMB. Therefore, under a mutual payment obligation, Kunyuan Company’s arrears of hire did not constitute a fundamental breach of contract. For the two months’ rent for March and April 2012, Kunyuan Company applied for an extension to pay or taking other alternative measures with the reason that the weak market and the repair of Gezhouba locks and Three Gorges locks affected the passage and other grounds. Yet, the application act did not represent that Kunyuan Company refused to pay hire. Kunyuan Company did not have the sincerity or ability to continue fulfilling the contract. Two months hire in sum of 1,219,672.88 RMB was 3.2% of the total hire compared with 66 months hire in the sum of 37,791,936.40 RMB. A delay in main debt would not lead to the purpose of the contract of Finance Leasing Company not being achieved. Moreover, Finance Leasing Company still had the ship construction funds in sum of 700,000 RMB and retention money in the sum of 300,000 RMB unpaid to Kunyuan Company. After the balance of construction price and two months hire, Kunyuan Company owed Finance Leasing Company more than two hundred thousand RMB. Besides, the three million RMB deposit from Kunyaun Company, the pledge deposit in an amount of six million RMB from Administration for Port and Shipping, and the ship mortgage of M.V. “Jinyuan 2011” were in the control of Finance Leasing Company. Such a guarantee was enough to pay the two months’ hire and the

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corresponding costs owed by Kunyuan Company. Thus, the above actions of Kunyuan Company did not constitute a fundamental breach of contract. For the bearing attorney’s fees, when bringing a civil lawsuit in our country, there was no mandate to hire a lawyer to participate in the proceedings. There was also no provision that attorney’s fees shall be born by the losing party. Although Finance Leasing Company and Kunyuan Company made an agreement on the issue of bearing attorney’s fees in the contract, Kunyuan Company did not constitute a fundamental breach, and Finance Leasing Company had specialized court of first instance disaffirmed the claim of Finance Leasing Company that Kunyuan Company shall bear attorney’s fees. Regarding the problem of bearing bond and fees for preservation, when Finance Leasing Company applied to take protective measures against Kunyuan Company, Kunyuan Company only had two months hire of March and April 2012 unpaid. The guarantee property was much greater than their outstanding hire and default interest. According to the contract, for the hire and default interest owed by Kunyuan Company, Finance Leasing Company shall deduct from the security deposit first. The court of first instance disaffirmed the claim of Finance Leasing Company that requested Kunyuan Company to bear the bond and fees for freezing order. Kunyuan Company should timely fulfill payment obligations and assume the corresponding fines and losses according to the contract in the event they do not obtain the consent of Kunyuan Company. Yet, Kunyuan Company no longer paid hire since March 2012 until the court of first instance delivered a sentence. Since there was no legal basis of suspending performance or terminating the contract in the Finance Leasing Contract signed by the two parties and Kunyuan Company actually operated the chartered ships, Kunyuan Company still had obligations to pay the hire timely according to the contract and pay default interest to Finance Leasing Company for its delay in hire payment. According to the facts found by the court of first instance, Kunyuan Company had owed to Finance Leasing Company 22 months due hire amounting to 12,806,565.24 RMB from March 13, 2012 to November 13, 2013. Before the judgment of the court of first instance, Kunyuan Company shall pay the due hire to Finance Leasing Company, and for the outstanding hire, Kunyuan Company should fulfill the obligations according to the contract. Moreover, due to the fact that Finance Leasing Company was the ownership of M.V. “Huasheng 1003” and M.V. “Huasheng 3103”, according to Article 39 of Property Law of the People’s Republic of China, Finance Leasing Company had the right to dispose of two vessels on its own without the consent of the court of first instance. The court of first instance disaffirmed the claim of Finance Leasing Company to auction M.V. “Huasheng 1003” and M.V. “Huasheng 3103” to cover the rent owed by Kunyuan Company. The second issue was whether Finance Leasing Company constituted a fundamental breach of contract during the performance of contract. The court of first instance held that, according to the provisions of Paragraph 4 of Clause 4.2 in Finance Leasing Contract and the invoice of construction price issued by shipbuilding party, that Kunyuan Company, as lessor, was not the obligator to

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issue a shipbuilding invoice. The acts of Finance Leasing Company to detain shipbuilding funds in the amount of 700,000 RMB with the reason that Kunyuan Company did not issue an invoice of construction price constituted a breach. Finance Leasing Company shall pay this money to Kunyuan Company timely. The acts of Finance Leasing Company to refuse to pay the construction price in sum of 700,000 RMB constituted a breach. Yet, the breach occurred after completion of the construction of the ships. It did not affect the ships’ construction and 700,000 RMB, equivalent to 2.33% of the construction price, Finance Leasing Company should pay. According to the intention of the parties to enter into a contract, the breach did not constitute a fundamental breach of contract. The counterclaim of Kunyuan Company, requesting to terminate the Finance Leasing Contract and refund the commission charges, security deposit, hire paid and damages because Finance Leasing Company was in breach, lacked a factual basis and legal basis. Therefore, the court of first instance disaffirmed it. According to Finance Leasing Contract, the shipyard was selected by Kunyuan Company independently and Kunyuan Company shall be responsible for quality. Though the builder later changed to the Hongyun Company from Dawei Company, Kunyuan Company did not provide evidence to prove such change was determined by Finance Leasing Company. In accordance with the written commitment of Kunyuan Company, it was confirmed that changing the ship yard of two vessels into Hongyun Company was decided by the three parties’ consultations of Kunyuan Company, Dawei Company, and Hongyun Company. This had nothing to do with Finance Leasing Company, and the vessels were qualified by testing. When handling the relevant formalities to deliver, Finance Leasing Company, Kunyuan Company, and Dawei Company confirmed that the quality of vessels met the requirements of contract in the EIR. The available evidence, provided by Kunyuan Company, could not prove that Finance Leasing Company played a decisive role in changing the shipyard and there were problems in the quality of the ships. Finance Leasing Company applied for the property preservation and brought a lawsuit to the Court for the disputes that occurred in the process of contract performance. The right to exercise the right to sue given by law did not affect Kunyuan Company’s fulfillment of the contract obligations in accordance with the contract. Therefore, the defense of Kunyuan Company that Finance Leasing Company abused the right to appeal, was a delay in the payment of construction price, had ship quality problems, and then refused to pay the hire could not stand. The court of first instance disaffirmed the defense. The third issue was whether Margin Collateral Contract was valid. The court of first instance held, according to the provisions of Interim Regulation on the Registration of Public Institutions, the term “public institutions” referred to the public service organizations that were established by the state organs or other organizations by using the state-owned assets for the purpose of engaging in activities of education, science and technology, culture, and hygiene. The purpose of its establishment was for public welfare and was not for profit. It could be divided into public welfare institutions and profitable public institutions. It was provided in the Article 3 of Judicial Interpretation of the Supreme People’s Court

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on Some Issues Regarding the Application of Guaranty Law of the People’s Republic of China: “a security contract shall be invalid if state organs and institutions, social organizations for the public good violate the law by acting as security provider. The creditor’s consequent loss shall be compensated pursuant to Article 5 Paragraph 2 of Guaranty Law”. In this case, the funding of the Port Administration was allocated from the state. The Port Administration did not have the qualification in security. Her pledge act for Kunyuan Company was a business approach that was inconsistent with its functions. Her pledge act directly harmed the national interest and violates mandatory provisions of law. Margin Collateral Contract was invalid. The Port Administration, as a public institution performing administrative functions, knowing that she did not have the qualification to guarantee, still provided pledge security for Kunyuan Company. It had a certain responsibility for the invalidity of Margin Collateral Contract. When Finance Leasing Company entered into Finance Leasing Contract and Margin Collateral Contract, it made a detailed understanding of the relevant legal provisions of finance leasing and guarantee, knowing that the Port Administration as public institution for the purpose of public welfare did not have the qualification to guarantee. It still asked the Port Administration to provide pledge security, having a certain responsibility for the invalidity of Margin Collateral Contract. According to Article 7 of Judicial Interpretation of the Supreme People’s Court on Some Issues Regarding the Application of Guaranty Law of the People’s Republic of China, “The security provider and debtor shall assume joint compensation liability for the creditor’s loss on the condition that the principal contract is valid while the security contract is invalid, and the creditor is not at fault. If the creditor and security provider are both at fault, the security provider’s portion of civil liability shall not exceed half of the debtor’s undue portion.” Therefore, the Port Administration should bear the half liability of rent and late fees when Kunyuan Company was unable to pay the rent. However, the maximum amount of compensation was no more than 6 million RMB. The court of first instance judged as follows according to Contract Law of the People’s Republic of China Article 60, Article 61 Paragraph 1, Article 67, Article 237, Article 248, the Guaranty Law of the People’s Republic of China Article 5, Article 9, the Civil Procedure Law of the People’s Republic of China Article 145: 1. The Finance Leasing Contract signed by Finance Leasing Company and Kunyuan Company was legal and valid, the two parties should fulfill corresponding obligations and enjoy the corresponding rights under the contract. 2. Kunyuan Company paid the hire from March 13, 2012 to December 13, 2013 in the sum of 13,350,698.52 RMB and the default interest to Finance Leasing Company (default interest based on the time of hire to be paid, calculated according to the daily five/ ten thousands until the date of the payment determined by the Judgment). 3. The Port Administration should bear half the liability for the hire and the interest when Kunyuan Company was unable to pay the rent from March 13, 2012 to December 13, 2013 in the sum of 13,350,698.52 RMB. The default interest however, the maximum amount of compensation, was no more than 6 million RMB. 4. Dismissed other claims of Finance Leasing Company. 5. Reject other counterclaims of Kunyuan Company. The above compensation should be paid in a lump sum

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within ten days as of the effectiveness of this Judgment. Where any party failed to perform the obligation of paying the above-mentioned amounts within the period prescribed herein, such party should, in accordance with Article 253 of Civil Procedure Law of the People’s Republic of China, double pay the interest on the period of delayed performance. Court acceptance fee of the claim in amount of 217,424 RMB, 120,000 RMB should be born by Finance Leasing Company, and 97,424 RMB by Kunyuan Company. Court acceptance fee of the counterclaim was 97,588 RMB, which should be born by Kunyuan Company (the court of first instance would not refund the prepaid part of Finance Leasing Company. Kunyuan Company paid that to Finance Leasing Company together in the fulfillment of the above payment obligations). Finance Leasing Company, dissatisfied with the judgment, and filed an appeal to the court, requesting that: (1) revoke the third and fourth sentence contents of (2013) Wu Hai Fa Shang Zi NO.0059 Civil Judgment of Wuhan Maritime Court, and commute according to law; (2) the litigation fees of the first instance and the second instance should be born by Kunyuan Company. It claimed the judgment of first instance was in fact made in error. The first instance held that lawyer’s fees incurred when Finance Leasing Company hired lawyers to engage in the lawsuit did not have necessity, disaffirming the claim of Finance Leasing Company to request Kunyuan Company to pay attorney’s fees was wrong. Finance Leasing Company and Kunyuan Company expressly agreed in the contract of the matters of bearing attorney’s fees. The agreement was legal and valid, having been legally binding. This case was strongly professional and technical. Finance Leasing Company hiring lawyers to engage in the lawsuit was inevitable, reasonable, and consistent with the agreement of the parties and not contrary to the provisions of law and regulations. The first instance held that Finance Leasing Company refusing to pay the construction price in amount of 700,000 RMB constituted a breach, was wrong. It was expressly appointed in the Finance Leasing Contract that one of the conditions of Finance Leasing Company to pay was receiving the invoice of shipbuilding. Refusing to pay in the case that not receiving the invoice of shipbuilding and payment conditions were not in place did not constitute a breach. The understanding of the first instance that the Port Administration was a public institution for the purpose of welfare and the nature of Margin Collateral Contract was a guarantee contract was wrong. The nature of Margin Collateral Contract should be a pledge contract. Even if the Port Administration was a public institution for the purpose of welfare, as long as it does not provide a guarantee security or provide collateral or collateral security with public facilities, they were not in violation of the mandatory provisions of laws and administrative regulations. The Port Administration, providing collateral security with currency other than public facilities, was not in violation of the mandatory provisions of laws and regulations, legal and valid, shall be protected by law. Kunyuan Company argued that the grounds of Finance Leasing Company’s appeal was not set up. Finance Leasing Company was in fundamental breach of the performance of the contract. Therefore, the contract should be terminated.

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The Port Administration argued that: (1) the judgment of first instance on the facts was right. The Port Administration was the public institution of the nature of welfare, funding was allocated by the state’s financial, and could not be secured from the outside. (2) The judgment of first instance, on the deposit and Pledge Fund Contract, were invalid and the applicable law was correct. (3) The improper settlement between Kunyuan Company and Finance Leasing Company and Finance Leasing Company’s abuse of rights led to the lawsuit of this case. Finance Leasing Company exercised the right to appeal maliciously under the situation that Kunyuan Company only did not pay two months hire timely and had solvency. The Port Administration requested to affirm the original judgment. Dawei Company asserted that Dawei Company was not clear with the disputes of this case. Dawei Company did not have much interest in law. Kunyuan Company was also dissatisfied with the above Judgment and filed an appeal to the court, requesting that: (1) revoke (2013) Wu Hai Fa Shang Zi No.0059 Civil Judgment of Wuhan Maritime Court, and remand for retrial or commute according to law. (2) The litigation fees of the first instance and the second instance should be born by Finance Leasing Company. it held the judgment of first instance on the facts was in error, the procedure was illegal, and the law was applied improperly. (1) Finance Leasing Company had constituted a fundamental breach of contract. The purpose of the contract of Kunyuan Company could not be achieved, and the Court shall support Kunyuan Company’s counterclaim and decide to terminate the contract. The court of first instance ascertained that Finance Leasing Company owed construction price in sum of 1 million RMB. The leased ships had not been in operation and the purpose of contract of Kunyuan Company could not be achieved for the following reasons: (i) since Finance Leasing Company owed the ship construction balance due amounting to 700,000 RMB without cause, the shipyard did not complete finishing works on ships. (ii) It was coincided with the overhaul of Three Gorges ship locks in February 2012. All vessels were suspended. (iii) The objective of Kunyuan Company to lease ships was for container transport because Kunyuan Company only had the right to operate, did not have the ownership, and the two parties handled the bareboat charter registration. Container liner shipping units required the owner to issue a certificate to prove that it had not recovered ships within two years, but Finance Leasing Company did not cooperate, leading to Kunyuan Company not being able to use the ships for container transport. (iv) The court of first instance had ascertained that Finance Leasing Company still owed to Kunyuan Company 1 million RMB. Kunyuan Company had also noticed, in written, to offset the hire for March and April 2012. According to the provisions of Article 99 of Contract Law of the People’s Republic of China, the debt had been eliminated. It should be recognized that Kunyuan Company paid the hire for March 2012, and part of the hire for April 2012. Moreover, it was appointed in Finance Leasing Contract, if there was insufficient hire, it should deduct from the deposit first, refusing to compensate the margin after summon was an anticipatory breach of contract. In summary, Kunyuan Company had spent nearly 10 million RMB and the ships were unable to properly enter into operation. The purpose of contract of Kunyuan Company could not be achieved. The original judgment

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beyond the scope of Finance Leasing Company’s claims was in violation of principle of justice of “no trial without complaint,” and was without factual and legal basis. For the outstanding rent in amount of 33,541,004.20 RMB claimed by Finance Leasing Company, the court of first instance had no right to change its claims from undue hire into due hire. Finance Leasing Company only paid for the default interest of hire for March and April 2012. Yet, the court of first instance decided Kunyuan Company had to pay default interest of hire from March 13, 2012 to December 13, 2013. When Kunyuan Company requested Finance Leasing Company to offset the hire for March and April 2012 in 1 million RMB, Finance Leasing Company applied to the court for a freezing order on the property before litigation immediately on April 26, 2012, froze Kunyuan Company’s bank account, and detained Kunyuan Company’s vessel. Finance Leasing Company prosecuted again to request to pay all the undue hire on May 14 of the same year. It was not clear whether Kunyuan Company should pay the hire above before the Court made a ruling. Kunyuan Company could not bear default interest because Finance Leasing Company abused the right to sue and the people’s court could not make a ruling in the statutory time limit. It was obviously unfair for Kunyuan Company and without legal basis. The rent itself already contained the principal and interest. The interest rates also increased by 15% on the basis of the national benchmark interest rate. Therefore, calculating late fees was obvious double counting. Besides, according to the provisions of Contract Law, if liquidated damages were too high, it could be reduced. In this case, Kunyuan Company not only paid commission charges in sum of 3.3 million RMB, but also paid interest of more than 15% of the benchmark interest rate and paid default interest. It was extremely unfair for Kunyuan Company. The people’s court should legally exempt or cut back in the trial. It was not a legal basis for the original judgment to verdict Finance Leasing Company, having the right to dispose of leased properties independently. The trial ascertained that, this case was a dispute of the Finance Leasing Contract. Kunyuan Company had invested 1,042,744 RMB in the construction of vessels. Later, Kunyuan Company also paid hire from June 2011 to February 2012 during the construction of the ships amounting to 3,031,259.32 RMB. The most was principal and interest. Therefore, although M.V. “Huaheng 3013” and M.V. “Huasheng 1003” were registered in the name of Finance Leasing Company, Kunyuan Company still owned part of the property. If Finance Leasing Company disposed of the ship at any price without the consent of Kunyuan Company, it would inevitably prejudice the legitimate interests of Kunyuan Company. If the verdict was only given on the ships owned by Finance Leasing Company, according to Property Law of the People’s Republic of China, then Finance Leasing Company should return the costs that Kunyuan Company paid. The original judgment should support Kunyuan Company’s counterclaim. The court of first instance had verified, through cross-examination, that M.V. “Huasheng 3013” and M.V. “Huasheng 1003” had already completed construction on January 10, 2012, and finished delivery on January 13, 2012. The two parties confirmed that the subject of ships met the requirements of Kunyuan Company in the transfer file. Therefore, the facts “defaulting on payment of ship construction

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balance due in amount of 700,000 RMB caused the shipyard not to finish works on ships” that simply did not exist. If there were finishing work, it was certainly because the construction was not completed. Therefore, the Marine Bureau and ship registration agency would not make registry. The Register of Shipping would not survey the ships and Kunyuan Company certainly would not receive the ships. The certificate of ship registry and certificate of inspection themselves inflected the facts that the completion of the construction of the ships and the ships were qualified by testing. The transfer file proved that the subject matter was in compliance with the contract requirements and was to be signed for delivery. (2) Regarding the problems of the Three Gorges Dam ship locks overhaul, Finance Leasing Company held, firstly, since the Three Gorges Dam was built, it would arrange a time in turn each year for normal maintenance of each gate, it was a normal event. The second was whether or not the gate overhaul had anything to do with the dispute over Finance Leasing Contract involved, it had no legal relevancy. Thirdly, the overhaul of gates would only affect the passage of the vessels and other gates would remain open, shipping time would be extended, and would not lead to the ship suspending. Fourth, it belonged to the normal operation risk of ships, and was insufficient to become grounds for Kunyuan Company to not pay hire and be exempt from liability. It was impossible to excuse them for the breach of lessor and why the purpose of contract could not be achieved. (3.) There was not any provision about “it was necessary for the shipowner to issue proof that not recovering ships within two years to engage in container transport” according to any existing effective laws, regulations, rules or articles of association. Kunyuan Company’s argument had no factual and legal basis. For the purposes of the ships, as long as the ships delivered by Finance Leasing Company complied with the agreement of the Finance Leasing Contract and bareboat charter party, it would be deemed as Finance Leasing Company fulfilling its contractual obligations completely and properly. In this case, the kind of ships agreed upon by two parties was combination bulk-container ship. The ships delivered by Finance Leasing Company were also combination bulk-container ships in full compliance with the agreement. As for Kunyuan Company wanting to conduct container transport or bulk shipping, it was Kunyuan Company’s business decisions, regardless of Finance Leasing Company, and it could not become the reason for the purpose of the contract not being achieved. In addition, for bareboat charter, in the lease term appointed by contract, the lessor had no reason to require recovery of leased ships if the lessee paid hire and fulfilled completely in accordance with the lease contract. The appointed lease term in this case was 66 months. In this period, Finance Leasing Company had no reason to require recovery of leased ships as long as Kunyuan Company paid rent and fulfilled completely in accordance with the lease contract. Moreover, Kunyuan Company never asked Finance Leasing Company to prove not to recover ships within two years. At the same time, the requirement itself was not equivalent and fair for it to request Finance Leasing Company not to recover the ships in case of not receiving the hire. Kunyuan Company failed to provide evidence to prove the fact that she required to offset rent for March and April 2012 in written in the first instance. The original judgment also did not find the fact that Kunyuan Company

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was required to offset rent for March and April 2012. Finance Leasing Company urged to pay rent. The summon letter, express mail receipt, and inquiry records were enough to prove it. It was biased for the court of first instance to disaffirm, as the words were illegible. According to Article 248 of Contract Law of the People’s Republic of China, bringing a lawsuit according to law because Kunyuan Company owed hire was Finance Leasing Company’s right to sue. Its exercise was not only in line with the contract, but also in line with the law. The original judgment deciding to pay rent from March 2012 to December 13, 2013 was not in violation of the principle of “no trial without complaint” and was not beyond the scope of the respondent’s claims. Firstly, Finance Leasing Company made two requests in the first instance. One was to pay due hire from March 13 to May 13, 2012 in sum of 1,219,672.88 RMB and default interest. The second was to pay all outstanding rent since May 14, 2012 in sum of 33,541,004.20 RMB and default interest. All the outstanding hire from March 13, 2012, to the date of expiration of the lease term was included in two requests. It certainly included the hire in the original judgment from March 13, 2012 to December 13, 2013. Therefore, for the hire payment of ships, if there was no consensus release, unilateral termination, or decision to cancel the lease contract, it should pay hire in accordance with the time, methods and amounts appointed by contract. As such, Kunyuan Company held that during the Court proceedings, the view that there was no need to pay hire and bear default interest did not have any factual and legal basis. Finally, for the decision to pay default interest of hire, on the one hand, Kunyuan Company shall pay default interest of hire strictly according to the contract based on the spirit of fulfilling the contract comprehensively and appropriately. Yet, Kunyuan Company had no evidence to prove that the appointed default interest shall be adjusted and reduced if it exceeded the statutory standard. Therefore, the first instance deciding to bear default interest together with paying hire complied with fact and law. According to certificate of ship ownership, certificate of ship nationality, lease contract, proof of payment, and other materials, and the relevant provisions of Property Law of the People’s Republic of China, Finance Leasing Company enjoyed complete and undisputed ship ownership of the subject ships M.V. “Huasheng 3103” and M.V. “Huasheng 1003”. The first instance holding that Finance Leasing Company had the right to dispose of the leased properties independently not only had sufficient factual basis, but also had complete legal basis. The Port Administration argued that the substantive rights of the Port Administration were not involved in the complaint of Kunyuan Company. The first instance, related to the facts and the applicable law of the Port Administration, were correct. Dawei Company argued that Dawei Company was not clear about the disputes between the parties to this case. It had nothing to do with Dawei Company. Finance Leasing Company submitted two groups of new evidence to the court to support its claim. The first group of evidence included: a copy of minutes of the meeting of Chongqing Municipal People’s Government; a document of Chongqing Transport Commission and Finance Bureau (2007) No.288; and the strategic cooperation

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framework agreement between the Port Administration and Finance Leasing Company. This group of evidence was to prove that the margin collateral security contract signed by the Port Administration and Finance Leasing Company was a valid contract. A 6 million RMB deposit of cash provided from the Port Administration was from Chongqing Municipal People’s Government. The government specifically allocated for building Chongqing into the upper Yangtze River waterway center. There was not a violation of prohibitive provisions of law for the Port Administration to use the special funds. The collateral security money in this case was legal and valid. The second group of evidence included: visa records of the vessel arrival and departure of subject ships as well as M.V. “Huasheng 3013” and M.V. “Huasheng 1003” from March 2012 to May 31, 2014. This was to prove that the subject ships run in good condition and did not suspend since construction. Kunyuan Company asserted in cross-examination that it had no objection to the authenticity of the evidence submitted by Finance Leasing Company, but disaffirmed its purpose of proof. The guarantee contract was void for as long as the violation of the prohibitive provisions of law. This was regardless of where money came from, or whether it was the true meaning of the Port Administration. The second group of evidence proved Kunyuan Company was difficult in the process of subject ships’ operation. The Finance Leasing Contract appointed that the subject ships were for container transport, while a lot of visa records were produced by trial. This evidence could not prove the transport of goods, nor the good running condition of subject ships. The Port Administration argued in cross-examination that, in the first group of evidence, since the minutes of the meeting was a copy without the original to check, it disaffirmed its authenticity. It confirmed the authenticity of other evidence, but disaffirmed its purpose was to notify the Finance Bureau expressly qualified the secured party. The Port Administration did not have the guarantee subject qualification. The second group of evidence had nothing to do with the Port Administration and they did not conduct a cross-examination. Dawei Company asserted that the two groups of evidence had nothing to do with Dawei Company. Therefore, it did not publish cross-examination opinion. The court held, in the two groups of evidence submitted by Finance Leasing Company as well as the minutes of the meeting in the first group was a copy, the Port Administration disaffirmed its authenticity. It was without an original to check. Therefore, the court disaffirmed this evidence. The rest of the evidence was true, legitimate, and effective. It could be used as the basis for facts of the case. Kunyuan Company also submitted a charter party signed by Kunyuan Company and Shang PAN-ASIA Shipping Co., Ltd. (hereinafter referred to as PAN-ASIA Company) to the court, to prove that Kunyuan Company signed a bareboat charter party with PAN-ASIA Company to engage in container liner shipping. Yet, due to the noncooperation of Finance Leasing Company, Kunyuan Company could not engage in container liner shipping. Finance Leasing Company countered in cross-examination that this evidence had already existed before the court of first instance. It did not belong to the

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category of new evidence, and the authenticity of the contract could not be confirmed. Kunyuan Company never asked to present the relevant certificate. This contract, even if true, was the only relationship between Kunyuan Company and the third party. It had no relevancy with Finance Leasing Company. Additionally, Finance Leasing Company would not recover the ships as long as Kunyuan Company paid hire on schedule. Both the Port Administration and Dawei Company asserted that they had nothing to do with this evidence. The court takes the view that this evidence is unilaterally submitted by Kunyuan Company. From the content, the contract is a contract between Kunyuan Company and an outsider. The authenticity cannot be determined and it has no association with this case. Therefore, this evidence is inadmissible. The Port Administration presented transfer records and receipts to the court to prove that the Port Administration transferred 6 million RMB in cash to Finance Leasing Company in its name. The guarantee did not comply with the relevant provisions of Property Law and Guaranty Law. The Port Administration did not have the qualification to guarantee. Finance Leasing Company had no objection to its authenticity, but disaffirmed its purpose of proof. This evidence proved that the 6 million RMB belonged to special funds allocated by the government. Kunyuan Company confirmed the authenticity of evidence. It asserted it proved the involved contract was unfair. Dawei Company countered that it had no relationship with this evidence and did not cross-examine. The court takes the view that this evidence is real, legal, and effective, and can be adopted as evidence for the verdict. The court examined the facts found by the court of first instance to be true and the court affirms them. In combination with the claims and defences of the parties, the principal outstanding issues of this case can be summarized as: (1) whether Finance Leasing Company’s act constitutes a fundamental breach of contract and leads to the termination of contract; (2) whether the original judgment ruled the scope of the claims of Finance Leasing Company; (3) whether the Port Administration should assume security responsibility; and (4) whether Finance Leasing Company enjoys independent the right of disposal of the leased ships. In respect of whether Finance Leasing Company’s act constitutes a fundamental breach of contract and leads to the termination of contract. Kunyuan Company argued Finance Leasing Company was unjustified in delay in the final payment of construction price. This led to the ship construction party not making finishing construction of the ships. It was not cooperative to issue proof which led to Kunyuan Company not engaging in container transport. It had constituted a fundamental breach, and it was time for the overhaul of the Three Gorges Dam ship lock. The Three Gorges Dam was suspending, resulting in the leased ships not being put into operation. Kunyuan Company could not achieve the

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purpose of signing the contract and Finance Leasing Company shall be terminated according to law. Finance Leasing Company argued that the subject ships had completed construction and finished registry of ship ownership and bareboat charter. They were delivered to Kunyuan Company to use. Whether to carry out container transportation or bulk cargo transport in use was Kunyuan Company’s business approach, having no relationship to Finance Leasing Company. Besides, Kunyuan Company never asked Finance Leasing Company to issue proof of “not recovering ships within two years”. The overhaul of the Three Gorges Dam was normal maintenance and did not have legal relevancy with Finance Leasing Company. Therefore, Finance Leasing Company did not constitute a fundamental breach. The court takes the view that, in the finance leasing legal relationship, the fundamental purpose of the lessee was to sign Finance Leasing Contract is to resolve the problem of insufficient funds required for short-term payments for the lessee to buy subject matter on his own. This was through financing that the lessor purchases the subject matter chosen by the lessor, which then leases it to the lessee. In this case, the act of Finance Leasing Company did not affect Kunyuan Company to realize its purpose of contract. Operating selected subject ships through financing did not constitute a fundamental breach. Firstly, Article 14 of Finance Leasing Contract signed by Finance Leasing Company, Kunyuan Company, and Dawei Company, appointed, “14.1.1 that Party A fails to pay leased properties price timely and fully according to contract which leads to inability to perform the contract, constitutes a fundamental breach of Party A”, “14.1.2 Party A constitutes a fundamental breach in case that Party A’s illegal intervention causes Party B to not properly exercise the right of possession and right to use of leased properties”, “14.1.3 the act that Party A re-subleases leased properties without the written consent of Party B in lease term and other investment acts constitute a fundamental breach”. Such content, outlined above, is the agreement of the contracting parties on the lessor conducting what action being fundamental breach. Currently, the lessor Finance Leasing Company paid the construction price in sum of 29 million RMB to the ship construction party. The remaining 1 million RMB has been advanced by Kunyuan Company. The three parties made delivery of the subject ships on January 31, 2012. Kunyuan Company received the subject ships and confirmed the ships met the requirements of Kunyuan Company. Additionally, the subject ships handled ownership registration, bareboat charter registration, and obtained trial certification. These facts illustrate the lessor Finance Leasing Company fulfilled its contractual obligation to deliver the leased vessels. The lessee Kunyuan Company actually possessed and operated the leased ships. Therefore, even if Finance Leasing Company ignores to pay part of construction price, it does not lead to a result where Finance Leasing Contract cannot be performed. Moreover, a working contact letter that Finance Leasing Company issued to Kunyuan Company on February 7, 2012, shows the reason why Finance Leasing Company did not apply to Kunyuan Company to offset the advanced construction price amounting to 1 million RMB with hire is that Kunyuan Company did not purchase insurance for the leased ships according to the contract and the

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construction party did not issue an invoice of construction price. Therefore, Finance Leasing Company’s act does not violate the agreement of the Finance Leasing Contract and does not constitute a fundamental breach appointed by Article 14.1.1 of the Finance Leasing Contract. There is no evidence to prove that Finance Leasing Company has other acts constituting a fundamental breach appointed in the contract. The claim of Kunyuan Company that Finance Leasing Company’s act of owing the construction price constitutes a fundamental breach of contract is not established. Secondly, in the finance leasing law relationship, the primary obligation of the lessor is to provide leased properties according to the option of the lessee. In this case, the lessor Finance Leasing Company delivered leased ships to the lessee Kunyuan Company in accordance with Kunyuan Company’s choice. The container transportation or bulk cargo transport, after receiving the leased ships was Kunyuan Company’s business act, had nothing to do with Finance Leasing Company. Kunyuan Company asked Finance Leasing Company to issue the commitment of “not recovering ships within two years.” It has neither the contract agreement nor the legal basis. Whether or not Finance Leasing Company issues a commitment does not affect Kunyuan Company’s operation of the leased ships. Third, the relevant documents of the Port and Shipping Administration on the maintenance work of ship locks of the Three Gorges and Gezhouba show that the overhaul period of Gezhouba lock No.1 is from March 7 to April 30, 2012. During the overhaul, it arranges the commutated operation of lock No.2, lock No.3, the south line, north line, and other emergency programs to alleviate pressure of lock navigation. The lease term, appointed by Kunyuan Company and Finance Leasing Company, is 66 months. 54 days of the Gezhouba ship locks overhaul would not have a so-called impact of “leading to the frustration of Finance Leasing Contract” on Kunyuan Company during the whole lease term. Even generating economic losses, it has nothing to do with the lessor Finance Leasing Company. The business risk during the lease term shall be born by Kunyuan Company. Therefore, the claim of Kunyuan Company concerning “Finance Leasing Company’s fundamental breach leads to frustration of the contract, the contract shall be terminated and Finance Leasing Company shall return Kunyuan Company’s commission charges, security deposit and paid hire”, lack factual and legal basis, and shall be disaffirmed. In respect to whether the original judgment ruled the scope of the claims of Finance Leasing Company. Kunyuan Company asserted Finance Leasing Company only claimed for outstanding hire and due hire for February and March 2012 as well as default interest counting to May 14, 2012. Yet, the first instance decided Kunyuan Company should pay hire from March 2012 to December 13, 2013. Over the range of claims, the breach of the principle of no trial without complaint. The court found Finance Leasing Company filed an action to the court of first instance on December 31, 2012, claiming that (1) Kunyuan Company should pay all outstanding hire accounting of 33,541,004.20 RMB to Finance Leasing Company; (2) Kunyuan Company should pay due hire in sum of 1,219,672.88 RMB and default interest in sum of 28,967.23 RMB on the rent in arrears until May 14, 2012 to Finance Leasing Company immediately. From the above claims,

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Finance Leasing Company requested for Kunyuan Company to pay all rent from March 2012 to the expiry date of 66 months appointed in the contract and default interest arising due to hire in arrears. The court of first instance made the original judgment on December 18, 2013, when hire from March 2012 to December 2013 was due hire. Kunyuan Company shall fulfill the obligation of paying hire to Finance Leasing Company under the situation where the contract was not terminated and Kunyuan Company still possessed and operated the ships. Therefore, the decision of the court of first instance that Kunyuan Company should pay rent from March 13, 2012 to December 13, 2013 and late fees was not inappropriate. The court disaffirms the claim of Kunyuan Company that the original judgment ruled beyond the scope of the claims and holds Kunyuan Company shall pay due hire and default interest owed to Finance Leasing Company. In respect to whether default interest are appointed excessive, Kunyuan Company argued that the hire includes not only the principal construction price invested by Finance Leasing Company, but also a floating interest rate of 15%. Finance Leasing Company charges deposit, cash collateral, and commission charges in advance. The actual investment is only 16.7 million RMB. Charging late fees again is exorbitant and should be adjusted. The court holds that the hire calculation method agreed by Kunyuan Company and Finance Leasing Company is based on the construction price paid by Finance Leasing Company, floating 15% with reference to loan interest rate for over five years of the People’s Bank of China. This is according to the provisions of Article 243 of the Contract Law of the People’s Republic of China, “unless otherwise agreed by the parties, the hire under the Finance Leasing Contract shall be determined based on the major portion of or full costs of purchasing the leased properties and the lessor’s reasonable profit.” The rental agreement, as outlined above, does not violate the mandatory provisions of law. In light of the current market situation of financial and credit sectors, the rent standard is also reasonable. When Kunyuan Company fails to pay hire timely, it would inevitably lead to Finance Leasing Company’s economic losses again during the delay in payment. Kunyuan Company should bear the liability for breach to Finance Leasing Company according to contract, paying a daily 5/10000 default interest. The deposit paid in advanced by Kunyuan Company and pledged cash paid by the Port Administration is the security in order to make Kunyuan Company perform the contract on time. The commission charges is according to the contract. The above agreement is not in violation of the mandatory provisions of law. The advanced charge of Finance Leasing Company is reasonable and legitimate. Moreover, the Finance Leasing Company also pays the construction price in amount of 29 million RMB to the ship construction party in accordance with the contract and delivers the qualified ships to Kunyuan Company. Therefore, offsetting the above money and ship construction principal invested by Finance Leasing Company, is obviously without factual and legal basis. Kunyuan Company only pays 10 months hire in 66 months, and requests to terminate the contract in counterclaim. Therefore, according to the provisions of Article 29 of Interpretation II of the Supreme People’s Court of Several Issues concerning the Application of the Contract Law of the People’s Republic of China, “the party

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claims the agreed liquidated damages are exorbitant and requests to appropriately reduce, the Court shall order the actual loss basis, taking into account a combination of factors as the fulfillment of contract. The degree of fault of the parties, as well as the expected benefits and others, should be measured against the principle of fairness and good faith, and make a ruling. The liquidated damages agreed by the parties exceed 30% of losses and generally can be identified as ‘excessively higher than the losses’ prescribed in Paragraph 2”. Presently, there is no evidence to prove the standards of late fees calculation in the Finance Leasing Contract exceeds 30% of the losses. Therefore, the agreement of the standards of default interest calculation in the Finance Leasing Contract is not excessively higher than the losses, grounds of appeal of Kunyuan Company on default interest cannot stand, the court disaffirms it. In respect of whether the Port Administration shall assume the responsibility for security. Finance Leasing Company argued the Port Administration uses special funds to provide collateral security. It is neither providing the security guarantee, nor providing mortgage or pledge guarantee with public facilities. It does not violate the mandatory provisions of law, and its guarantee act is legal and effective. Therefore, the Port Administration shall bear guarantee responsibility. The court takes the view that Finance Leasing Company submitted to the Chongqing Transport Commission, Chongqing Finance Bureau, on the Issuance of Chongqing Waterway Development Funds Management Approach and strategic cooperation framework agreement signed by the Port Administration and Chongqing Transportation Equipment Leasing Co., Ltd. in March 2010, to prove that cash collateral provided by the Port Administration was waterway development funds of Chongqing City. However, currently, there is neither evidence to prove that the construction and operation of the ships involved is a special project of waterway development to implement standardization and anti-pollution, nor evidence to prove the cash collateral provided by the Port Administration is from waterway development funds. According to the provisions of Funds Management Approach, Chongqing Three Gorges Reservoir Area Industry Credit Guarantee Co., Ltd. should provide the security for special projects of waterway development. Additionally, a party of strategic cooperation framework agreements is the Chongqing Transportation Equipment Leasing Co., Ltd. There is no evidence to prove the relation this company has with Finance Leasing Company. The framework agreement does not produce a binding contract between Finance Leasing Company and the Port Administration. Therefore, the Port Administration, as public institution for the purpose of welfare, provides collateral security to Finance Leasing Company. According to the provisions of Article 3 of Interpretations of the Supreme People’s Court on the Application of the Guaranty Law of the People’s Republic of China, this Pledge Fund Contract is invalid. This ground of appeal of Finance Leasing Company lacks factual and legal basis and shall be disaffirmed. In respect to whether Finance Leasing Company enjoys independent right of disposal of the leased ships.

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Kunyuan Company asserted Kunyuan Company has paid the construction price in amount of 1,042,744 RMB and hire in amount of 3,031,259.32 RMB for the construction of the leased ships involved. The majority of the hire, in addition to interest, is the principal of shipbuilding. Therefore, Kunyuan Company has partial ownership of the leased vessels. Finance Leasing Company has no right to dispose of leased ships. The court holds that Clause 5.1 and 5.2 of Finance Leasing Contract provide the ownership of leased properties always belongs to Finance Leasing Company in the lease term. Kunyuan Company only enjoys the right to use in the lease term. Ownership of the leased properties vests in Finance Leasing Company before Kunyuan Company pays off all debts under this contract. Any other person, in addition to Finance Leasing Company, has no right to dispose of the leased properties. According to the provisions of Article 250 of the Contract Law of the People’s Republic of China, “the lessor and the lessee may agree on the ownership of the leased properties at the expiry of the lease term. Where ownership of the leased properties is not agreed or the agreement is not clear, nor can it be determined in accordance with Article 61 of this Law, the ownership of the leased properties shall belong to the lessor.” The above agreement is valid. The ownership of the leased ships vests in Finance Leasing Company before Kunyuan Company pays off all debts under this contract at present. The leased ships are still registered in the name of Finance Leasing Company. Finance Leasing Company enjoys property rights to the leased ships. Therefore, it enjoys the right to dispose of the leased vessels according to law. Although Kunyuan Company pays part of construction price in the ship construction, it does not necessarily acquire part ownership of the ships without the agreement of contract. This ground of appeal of Kunyuan Company is not satisfied and is not supported by the court. To summarize, the facts were clearly found and the laws were correctly applied in the judgment of first instance, of which the proceedings were right and the result was proper. All grounds of appeal of the Appellant Finance Leasing Company and the Appellant Kunyuan Company cannot be established. According to the Civil Procedure Law of the People’s Republic of China Article 170 Paragraph 1 Sub-paragraph 1, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee of the second instance in amount of 315,012 RMB, 217,424 RMB shall Be born by Chongqing Transportation Equipment Financing Leasing Co., Ltd., 97,588 RMB by Chongqing Kunyuan Shipping Co., Ltd. The judgment is final. Presiding Judge: WAN Haili Acting Judge: HU Zhengwei Acting Judge: OU Haiyan July 21, 2014 Clerk: CHENG Jianxiao

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The Supreme People’s Court of the People’s Republic of China Civil Ruling Chongqing Transportation Equipment Finance Leasing Co., Ltd. v. Chongqing Kunyuan Shipping Co., Ltd. et al. (2014) Min Shen Zi No.1921 Related Case(s) This is the ruling of retrial, and the judgment of first instance and the judgment of second instance are on page 333 and page 354 respectively. Cause of Action 214. Dispute over ship financial leasing contract. Headnote Affirming judgment of lower courts that the Port Administration could not, as a public institution, act as a guarantor for a private company’s debts. Summary The Plaintiff, a finance leasing company, sued the First Defendant, the lessee, to recover outstanding charter hire under a finance leasing contract. The Plaintiff also claimed that the Second Defendant, a port administration, was liable to pay part of the outstanding amount under a guarantee contract. The First Defendant counterclaimed against the Plaintiff, arguing that the two ships that were the subject of the finance leasing contract were defective because they were built at the wrong shipyard. The court held that the First Defendant was liable to pay the outstanding hire. Although the Second Defendant, as a public institution performing administrative functions was not legally permitted to engage in business activities such as providing a guarantee, it was nevertheless ordered to pay half of the outstanding amount if the First Defendant did not do so. The Plaintiff and the First Defendant both appealed. The appeal court dismissed the appeal and affirmed the original judgment. The Plaintiff-Appellant applied to the Supreme Court for a retrial. The Supreme Court affirmed the ruling of the court of first instance. The court held that Chongqing Port Administration was not a proper guarantor, as it was a public institution.

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Ruling The Claimant of Retrial (the Plaintiff of first instance, the counterclaim Defendant, the Appellant of second instance): Chongqing Transportation Equipment Finance Leasing Co., Ltd. Domicile: Left 6F, B2 Zone, Science and Technology Innovation Park, No.13 Caifu Avenue, Yubei District, Chongqing City. Legal representative: YU Yong, chairman of the board. Agent ad litem: XIONG Jie, lawyer of Chongqing Exceedon & Partners Law Firm. The Respondent of Retrial (the Defendant of first instance, the counterclaim Plaintiff, the Appellant of second instance): Chongqing Kunyuan Shipping Co., Ltd. Domicile: No.46 Wan LI Cheng Qiang, Wanzhou District, Chongqing City. Legal representative: ZHANG Maoan, executive director. The Respondent of Retrial (the Defendant of first instance, the Respondent of second instance): The Port Administration of Chongqing Domicile: Hongshi Road, Hong Qi He Gou, Jiangbei District, Chongqing City. Legal representative: WANG Botao, director general. The Third party of first instance: Chongqing Fuling Dawei Shipbuilding Co., Ltd. Domicile: Community 10, Shuanglong Village, Qingxi Town, Fuling District, Chongqing City. Legal representative: GUO Zhifu, general manager. The Applicant of Retrial, Chongqing Transportation Equipment Finance Leasing Co., Ltd. (hereinafter referred to as “Finance Company”) disagreed with (2014) E Min Si Zhong Zi No.00091 Civil Judgment rendered by Hubei High People’s Court with respect to the case arising from dispute over ship finance leasing contract against the Respondent of Retrial, Chongqing Kunyuan Shipping Co., Ltd. (hereinafter referred to as “Kunyuan Company”), the Respondent of Retrial, Chongqing City Port and Waterway Administration (hereinafter referred to as “Chongqing Port Administration”) and the Third Party of first instance, Chongqing Fuling Dawei Shipbuilding Co., Ltd., and filed an application for retrial to the court. The court organized the collegiate panel to try the case in accordance with the law. After trial, this case has been concluded. Finance Company alleged in the application for retrial: this case conformed to the circumstances prescribed in Article 200 Paragraph 1 and Paragraph 6 of the Civil Procedure Law of the People’s Republic of China, and should be retried. Specific reasons were as follows: 1. It was ascertained in the judgment of second instance that Chongqing Transportation Equipment Leasing Co., Ltd., which was a party to Strategic Cooperation Framework Agreement concluded between it and Chongqing Port

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Administration, had no relevancy with Finance Company, Strategic Cooperation Framework Agreement had no binding force between Finance Company and Chongqing Port Administration. The industrial and commercial archives inquired and achieved by Finance Company could prove that Chongqing Transportation Equipment Leasing Co., Ltd. was the former name of Finance Company, they were the same civil subject, therefore Strategic Cooperation Framework Agreement should bind Finance Company and Chongqing Port Administration; 2. Article 3 of the Interpretations of the Supreme People’s Court on Several Issues Regarding the Application of Guaranty Law of the People’s Republic of China (hereinafter referred to as the “Interpretations of the Guaranty Law”) was incorrectly applied in the judgment of first instance and the judgment of second instance, Deposit Pledge Contract signed by Finance Company, Kunyuan Company and Chongqing Port Administration on May 3, 2011 was determined to be null and void and the claim of Finance Company requesting Chongqing Port Administration to assume pledge liability was dismissed. It was provided in the Property Law of the People’s Republic of China (hereinafter referred to as the “Property Law”), the Guaranty Law of the People’s Republic of China (hereinafter referred to as the “Guaranty Law”) and related administrative regulations, institutions with the aim of benefiting the public could not act as guarantors or charge mortgage or pledge over public welfare facilities, institutions with the aim of benefiting the public were not prohibited pledge over cash. In this case, it did not violate any mandatory provision of laws or administrative regulations that Chongqing Port Administration pledged over cash, the provisions of Article 3 of the Interpretations of Guaranty Law should not apply. Chongqing Port Administration submitted a statement alleging as follows: 1. The evidence submitted by Finance Company during the period of application for retrial did not constitute a new evidence of retrial; 2. Chongqing Port Administration was a public institution directly subordinated to Chongqing City Transport Commission, all the funds came from the state financial allocation, it was a public welfare institution. This fact was correctly determined by the court of first instance and the court of second instance; 3. The Deposit Pledge Contract was determined to be null and void in the judgment of first instance and the judgment of second instance, of which the application of law was correct. First, according to Article 3 of the Interpretations of the Guaranty Law, Chongqing Port Administration, as a public welfare institution, could not pledge for Finance Company according to the law; secondly, it was not provided in the Property Law that cash could be deposit of a pledge. Chongqing Port Administration remitted RMB6 million into Finance Company’s account directly, it neither complied with the provisions on deposit pledge provided in the Property Law and the Guaranty Law, nor did it comply with the provision of the Notice of Chongqing Transport Commission and Chongqing Finance Bureau on Issuance of the Measures of Special Funds for

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Water Transport of Chongqing City that the guarantor should be Chongqing Sanxia Guarantee Group; 4. Even if Chongqing Transportation Equipment Leasing Co., Ltd. and Finance Company were the same civil subject, Strategic Cooperation Framework Agreement, as well as Deposit Pledge Contract, was null and void for violation of mandatory provisions of the Guaranty Law and the Property Law and provisions on guarantee subject of the Notice of Chongqing Transport Commission and Chongqing Finance Bureau on Issuance of the Measures of Special Funds for Water Transport of Chongqing City, and should not bind Finance Company; and 5. In the case that Kunyuan Company had sufficient capability to pay off debts, Finance Company should return the deposit in sum of RMB6 million to Chongqing Port Administration to avoid loss of state assets. During the period of application for retrial, Finance Company provided Notice of Permission of Registration Alteration as new evidence in the retrial to prove that Chongqing Transportation Equipment Leasing Co., Ltd. was the former name of Finance Company, and they were the same civil subject. Chongqing Port Administration argued in the cross-examination, this evidence did not constitute new evidence in retrial, what it received was a fax copy, its authenticity should be determined by the court according to the original copy submitted by Finance Company; in addition, it disaffirmed the legality and relevancy thereof; at the same time, Chongqing Port Administration disaffirmed the purpose of proof thereof, because the seal affixed on Strategic Cooperation Framework Agreement was not Chongqing Transportation Equipment Leasing Co., Ltd. and the agreement had no relevancy with this case. Chongqing Port Administration was not a proper guarantor, the legal consequence would not change because of any contract or agreement inconsistent with the Guaranty Law and judicial interpretation signed by it. The court holds this evidence was obtained from the archives department of Chongqing City Industry and Commerce Administration, it was stamped with the special seal of inquiry, so its authenticity shall be confirmed, the fact that Chongqing Transportation Equipment Leasing Co., Ltd. changed its name to Finance Company can be ascertained. The court holds this case is arising from dispute over ship finance leasing contract. According to the retrial application of Finance Company and the statements of Chongqing Port Administration, the main issue in this case is whether Chongqing Port Administration, as public welfare institution, can pledge over cash. It is clearly provided in Article 3 of the Interpretations of the Supreme People’s Court on the Application of the Guaranty Law of the People’s Republic of China, a security contract shall be invalid if public welfare institutions violate the law by acting as security provider. Accordingly, where public welfare institutions charge mortgage or pledge over their own properties, such mortgage or pledge shall be invalid, except as otherwise provided by law. In this case, Chongqing Port Administration as a public welfare institution, the funds and public facilities used by it are properties allocated by the state for normal operation, it is not allowed to

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charge mortgage or pledge over the state properties according to law. The pledge over RMB6 million in cash is in violation of the provision of Article 3 of the Interpretations of the Supreme People’s Court on the Application of the Guaranty Law of the People’s Republic of China, it is proper for the court of first instance and the court of second instance to ascertain the Deposit Pledge Contract involved is null and void. The evidence submitted by Finance Company in the period of application for retrial proves the fact that Chongqing Transportation Equipment Leasing Co., Ltd. changed its name to Finance Company, but it does not affect the identification of effectiveness of Deposit Pledge Contract involved. Based hereon, the claim held by Finance Company that the prevailing laws only prescribed public welfare institutions could not charge guarantee or pledge over public welfare facilities, but did not prohibit pledge over cash, and Deposit Pledge Contract involved was valid lacks factual and legal basis. Its ground of application for retrial cannot stand. To sum up, the application for retrial filed by Finance Company does not meet the circumstances provided in Article 200 of the Civil Procedure Law of the People’s Republic of China, the ruling is as follows: Dismiss the application for retrial of Chongqing Transportation Equipment Finance Leasing Co., Ltd. Presiding Judge: WANG Shumei Acting Judge: FU Xiaoqiang Acting Judge: HUANG Xiwu December 16, 2014 Clerk: ZHAO Di

Guangzhou Maritime Court Civil Judgment Conti Caressa Schiffahrtsgesellschaft mbH & Co. KG MS “Conti Esperance” v. Offshore Oil Engineering Co., Ltd. (2012) Guang Hai Fa Chu Zi No.432 Related Case(s) None. Cause of Action 193. Dispute over liability for ship collision damage. Headnote calculating damages for collision between moving vessel and stationary vessel, comparing repair costs in China with repair costs in other countries. Summary The Plaintiff, Conti Caressa Schiffahrtsgesellschaft mbH & Co. KG, owner of the MS “Conti Esperance” brought this action to recover damages, including repair costs and lost wages, from a collision that occurred on May 18, 2010 against the Defendant, Offshore Oil Engineering Co., Ltd. In response, Offshore Oil argued that some of the repairs made by the Plaintiff in South Africa were unreasonable, and could have been done for a much lower rate in China, and the court should only find it liable in the “reasonable” amount that the ship could have been repaired in China. Additionally, Offshore Oil argued that the damage to M.V. MS “Conti Esperance” suffered in this case was caused by the collision between M.V. “Offshore Oil 225” and M.V. “Hua Dian 8” and that the Defendant should only bear liability in accordance with its proportional fault of the collision between M.V. “Offshore Oil 225” and M.V. “Hua Dian 8”. The Court held that Offshore Oil failed to prove that “Hua Dian 8” bore any liability towards the collision with MS “Conti Esperance” and that the Defendant owed the Plaintiff RMB461,785.99, which included certain deductions for unreasonable repairs that did not stem from the accident, plus interest.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_16

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Judgment The Plaintiff: Conti Caressa Schiffahrtsgesellschaft mbH & Co. KG MS “Conti Esperance” Domicile: Paul-Wassermann-Str.5, 81,829 Munchen, Germany. Legal representative: Josef Sedlmeyr and Michael Huber, Director. Agent ad litem: CHEN Xiangyong, lawyer of WANG JING & Co. Agent ad litem: WANG Jun, lawyer of WANG JING & Co. The Defendant: Offshore Oil Engineering Co., Ltd. Domicile: 202-F105 Ligang Building, No.82 West Second Avenue, Airport Economic Zone, Tianjin City, China. Legal representative: ZHOU Xuezhong, president. Agent ad litem: FAN Shuan, lawyer of Henry & Co. Agent ad litem: HOU Fuzhi, lawyer of Henry & Co. With respect to the case arising from dispute over compensation for damage caused by ship collision filed by the Plaintiff, Conti Caressa Schiffahrtsgesellschaft mbH & Co. KG MS “Conti Esperance”, against the Defendant, Offshore Oil Engineering Co., Ltd., the Plaintiff filed an action to the court on May 16, 2008. After accepting this case, the court organized the collegiate panel consisting of Presiding Judge XIONG Shaohui, Judge PINGYANG Danke and Judge LI Lifei to try the case in accordance with the law, and appointed ZENG Huifen as Clerk. The court summoned the parties to exchange evidence pre-trial on April 12, 2013, and held a hearing in public on May 7. WANG Jun as agent ad litem of the Plaintiff, FAN Shuan and HOU Fuzhi as agents ad litem of the Defendant appeared in court and participated in the action. Now the case has been concluded. The Plaintiff alleged that at 1618 h on May 18, 2010, M.V. “MSC Kirari” owned by the Plaintiff was anchored port side in the No.8 berth of Shenzhen Chigang Bay, and then started cargo operation. At 1820, M.V. “Offshore Oil 225” owned by the Defendant hit M.V. “MSC Kirari” which was safely mooring and operating due to improper operation when passing M.V. “MSC Kirari”. The hull of M.V. “MSC Kirari” was damaged. The Plaintiff paid the loss of ship, average assessment fee, ship survey, the rent loss and etc. in the sum of USD744,081.14. This collision accident was completely caused by the fault of M.V. “Offshore Oil 225”, and the Defendant should cover the civil liability for damages according to law. The Plaintiff requested the court to rule the Defendant to compensate the Plaintiff’s loss in amount of USD744,081.14, equivalent to RMB 4,687,711.20, together with interest thereon (interest should be calculated from May 18, 2010 to the day the Defendant actually paid off at the deposit interest rate on the People’s Bank of China over corresponding period), and pay the litigation cost. The Plaintiff presented the following materials within the time limit for adducing evidence: (1) certificate of register, to prove that the Plaintiff and the Defendant were respectively the legal owner of the ship involved in the case; (2) logbook, sea

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protest, statement of fact, letter of confirmation and letter of guarantee, to prove the collision and collision liability between two vessels; (3) damage report, report of classification survey of ships, invoice and payment voucher of occasional repair cost, invoice and payment voucher of permanent repair cost, invoice and payment voucher of dock charges and maintenance certificate, to prove that the Plaintiff paid the occasional repair cost in sum of USD23,314, the permanent repair cost in sum of USD445,592.20 and the dock charges in sum of ZAR2,744,845.31; (4) time charter party, off-hire invoice and off-hire report, to prove that the Plaintiff paid the rent loss caused by the collision in amount of USD44,333.53; (5) invoice and payment voucher of survey fee, to prove that the Plaintiff paid the survey fee caused by the collision in amount of USD11,954.28; (6) invoice and payment voucher of port charges and agency fee, invoice and payment voucher of cost of paints, invoice and payment voucher of communication fee, record for crew overtime pay and marine stores, and invoice of service charge, to prove that the Plaintiff paid other charges caused by the collision in sum of USD21,638.21 and ZAR290,424.87. The Defendant argued that the damage M.V. “MSC Kirari” suffered in this case was caused by the collision between M.V. “Offshore Oil 225” and M.V. “Hua Dian 8”. The Defendant should only bear the liability for compensation in accordance with the liability proportion of the collision between M.V. “Offshore Oil 225” and M.V. “Hua Dian 8”. And the ship should be repaired nearby after the collision. According to the damage inspection opinions of the insurance loss adjustment company authorized by the Plaintiff, if M.V. “MSC Kirari” was repaired in China, the repair cost was only about USD70,000. Even if M.V. “MSC Kirari” had reasonable grounds for repairing in South Africa, the charges incurred were also unreasonably high; the reasonable repair cost in South Africa should be about USD170,000. To sum up, the Defendant requested the court to decide that the Defendant shall compensate the Plaintiff for the reasonable loss according to the proportion of the collision liability between M.V. “Offshore Oil 225” and M.V. “Hua Dian 8”. The Defendant presented the following evidence within the time limit for adducing evidence: 1. Marine Accident Report, to prove proportion of liability of M.V. “Offshore Oil 225” in the collision with M.V. “Hua Dian 8”; 2. Survey Report issued by Hong Kong Wu Ye Shuan Insurance Surveyor Co., Ltd. (hereinafter referred to as “Wuyeshuan Company”), to prove the reasonable amount of the loss M.V. “MSC Kirari” suffered in this collision; 3. Report of Ship Classification Survey, to prove the loss range of M.V. “MSC Kirari” in this collision; 4. Assessment report issued by South Africa entity, to prove the maintenance status of M.V. “MSC Kirari” in South Africa; 5. Quotation and valuation of repair cost of Youlian Shipyard, to prove the repair cost if M.V. “MSC Kirari” was repaired in China.

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Upon trial and cross-examination, and in combination of the evidence and opinions on cross-examination submitted by parties to the case and statement of accounts, the collegiate panel ascertains the following facts through investigation: I. Particulars of the ships involved in the accident M.V. “Conti Esperance”: gross tonnage 31,730 tons, net tonnage 19,976 tons, length overall 192.40 M, breadth 32.25 M, depth 17.38 M. vessel type: container ship; material of shell: steel; port of registry: Hamburg, Germany; IMO No.: 9124500; engine output power: 24,300KW; construction place and name of shipyard: Bremer Vulkan Werft; year built: 2007. The Plaintiff was the registered ship owner. On February 26, 2010, the Plaintiff and Mediterranean Shipping Company S.A. (MSC) signed a time charter party, agreeing that MSC chartered M.V. “Conti Esperance” from the Plaintiff, the shortest tenancy was 16 months and the longest was 18 months, the specific time be determined by the charterer. The Plaintiff shall provide and pay for all provisions, wages and consular shipping and discharging fees of the crew, should pay for the insurance of the vessel, also for all the cabin, deck, engine-room and other necessary stores, including boiler water and maintain its class and keep the vessel in a thoroughly efficient state in hull, machinery and equipment for and during the service. That the charterer should provide and pay for all the fuel except as otherwise agreed, port charges, pilotages, agencies, commissions, consular charges (except the pertaining to the crew), and all other usual costs except those before stated, but when the vessel be put into a port for causes which vessel was responsible, then all such charges incurred should be paid by the owner; the charterer should pay for the rent at the rate of USD3,500 per day or by a ratio to the owner commencing on and from the day of delivery, and at and after the same rate for any part of a day. On the basis of the above time charter party, M.V. “Conti Esperance” was renamed M.V. “MSC Kirari”. After the expiration of the lease, M.V. “MSC Kirari” changed name back to M.V. “Conti Esperance” on September 29, 2011. M.V. “Offshore Oil 225”: gross tonnage 12,752 tons, net tonnage 3,825 tons, length overall 153.20 M, breadth 38 M, depth 9 M. Vessel type: heavy and lengthy cargo carrier; material of shell: steel; port of registry: Tianjin, China; IMO No.: 9576026; host type: internal-combustion engine; gross power: 6,178KW; construction place and name of shipyard: Lianyungang, Lianyungang Hengcheng Shipbuilding Co., Ltd.; construction time: November. The Defendant was the registered ship owner and operator of the ship. II. Details of the Accident At 1618 h on May 18, 2010, M.V. “Conti Esperance” was at the No.8 berth of Chigang Bay, and started the cargo handling operation. At 1820 h, M.V. “Offshore Oil 225” hit M.V. “Hua Dian 8” owned by Zhuhai Huadian Shipping Co., Ltd. when it was departing from Chigang Bay Shengbaowang Dock and turning around in the harbor. Then M.V. “Offshore Oil 225”

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collided with M.V. “Conti Esperance” which was moored in Chigang Bay No.8 berth, causing its starboard hull damage in the cabin 5 row box 14 and scratches in the living area near the front end of the navigation lights of M.V. “Conti Esperance”. After occurrence of the accident, Shenzhen MSA carried out investigations thereto in accordance with the law, and issued Investigation Report on the Collision Accident No.2010003–1, which presented the following opinions: for the collision between M.V. “Offshore Oil 225” and M.V. “Hua Dian 8”, M.V. “Offshore Oil 225” should bear the major liability while M.V. “Hua Dian 8” the minor liability; for the collision between M.V. “Offshore Oil 225” and M.V. “Conti Esperance”, M.V. “Offshore Oil 225” should bear full liability. III. Losses Claimed by the Plaintiff After the accident, the Plaintiff hired Shenzhen Xinghaian Ship Engineering Co., Ld. (hereinafter referred to as “Xinghaian Company”) to make occasional repair of M.V. “Conti Esperance” in Chigang Bay from May 19 to 20, and June 1 to 2, 2010. On August 3, 2011, M.V. “Conti Esperance” arrived at the port of Durban, South Africa, the Plaintiff hired Elgin Brown & Hamer (Pty) Ltd (hereinafter referred to as Elgin Shipyard) to make special inspection and repair service of M.V. “Conti Esperance”. On August 5, M.V. “Conti Esperance” went to the shipyard dry dock and finished repair on August 20. With respect to the losses claimed by the Plaintiff arising from the subject accident, the collegiate panel ascertains losses separately as follows: (I) Occasional repair cost of M.V. “Conti Esperance” The Plaintiff submitted inspection report of the collision between M. V. “Conti Esperance” and M.V. “Offshore Oil 225” issued by Shenzhen Kent Marine Technical Services Co., Ltd. (hereinafter referred to as Kent Company), invoices and pay bills of repair cost issued by Xinghaian Company and bank payment vouchers and other evidence, claiming that the occasional repair cost of M.V. “Conti Esperance” was totally USD23,314. The Defendant only approved occasional repair cost in sum of USD10,940, and provided inspection report issued by Wuyeshan Company. Both parties had no objection to the authenticity of the evidence above. Inspectors of the above two inspection reports all appeared in court to answer questions. Inspection report of Kent Company recorded that: on May 19, inspector XIANG Changyong of Kent Company made the damage inspection of the ship together with master and first mate of M.V. “Conti Esperance” and surveyor of Germanischer Lloyd (GL). Some damage took space reference because there was no enough drawing to locate corresponding shell plating exactly accurate. During the inspection, inspectors first inspected hull in the rented boat, then inspected on the deck and in the starboard cofferdam, finding that hull, starboard No.8 hatch and cofferdam all suffered damages. In the

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same morning, diver detected the underwater part of the hull and recorded it. According to the inspection report issued by the diver, the underwater part of the hull had no obvious damage and deformation. The inspection report also referred that the damaged and deformed shell plate, inner frame, longitudinal, bulkhead bottom plate and so on, needed to be cut off and replaced by new ones, the repair time was estimated to be about 15 days. On May 19, the Plaintiff made occasional repair of damaged hatch cover, lashing platform, cofferdam and others of M.V. “Conti Esperance” according to classification society’s requirements. Invoice of repair cost recorded that Xinghaian Company provided hatch repair and other service from May 19 to 20, 2010 costing USD6,164; provided hatch fault repair and other service from June 1 to 2, costing USD6,680; provided diving operations and other services on September 8, costing USD10,470. Bank payment document showed that the Plaintiff paid USD6,680, USD4,260 and USD10,470 on August 5, June 16 and October 27 to Xinghaian Company. The report about the description of the damaged part of the ship issued by Wuyeshuan Company was basically the same as Kent Company’s recording, ascertaining that the repair cost on May 19 to 20 in sum of USD6,164 and the repair cost on June 1 to 2 in sum of USD6,680 was reasonable cost, however evidence showed that the Plaintiff only actually paid USD4,260 for repair projects on May 19 to 20, the actual repair cost shall be USD4,260 and USD6,680; whereas the Plaintiff already arranged Shenzhen Hyde Diving Engineering Co., Ltd. to conduct a dive inspection on May 19, finding no abnormality and injury, diving detect on September 8 was not necessary, the cost should be taken by the Plaintiff himself. The court holds that, the Plaintiff already arranged diver to detect the underwater part of the hull on May 19, 2010, and found no obvious damage and deformation, the Plaintiff arranged another diving operation on September 8 without proper grounds, the resulting fees of USD10,470 shall be disaffirmed. Xinghaian Company provided hatch fault repair and other service from May 19 to 20 and June 1 to 2, 2010, corresponding invoice price was USD6,164 and USD6,680 respectively, although the Defendant ascertained it as reasonable cost, the payment document submitted by the Plaintiff showed the actual repair cost was lower than the invoice price and without reasonable explanation, to sum up, the court decided the occasional repair cost of M.V. “Conti Esperance” in amount of USD10,940 according to the amount actually paid by the Plaintiff. (II) Permanent repair costs of M.V. “Conti Esperance” The Plaintiff provided the damage report issued by Saf-x Marine Services Company (hereinafter referred to as Saf-x Company), the

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inspection report issued by GL, proof, repair invoices and payment vouchers issued by the shipyard and so on to prove the permanent repair cost of M.V. “Conti Esperance” in sum of USD445,592.20 and ZAR2,744,845.31. The Defendant had no objection to the authenticity of the evidence above and the fact that the Plaintiff paid relevant repair cost. However, according to the survey report issued by Wuyeshuan Company and the quotation of Youlian Shipyard, the Defendant believed that the permanent repair cost claimed by the Plaintiff was too high, the repair period was too long, and there was no need to be repaired in dry dock. The Defendant claimed that if M. V. “Conti Esperance” was repaired in China, the repair time was within 7 working days, the repair cost was about USD70,000; even if M.V. “Conti Esperance” was repaired in South Africa, she shall be repaired no more than 10 days, the reasonable repair cost shall be only USD170,000. The inspection report issued by GL recorded that after the involved collision accident on May 19, 2010, GL sent surveyors to board the ship to make damage inspection at Chigang Bay entrusted by the Plaintiff. The inspection found that starboard hull plate O between frame No.64 to No.67 and hull plate N between frame No.55 to No.67 were deformed inward about 20–25 mm; hull plate L between frame No.138 to No.147 and hull plate O/N between frame No.147 to No.150 were deformed inward about 10–15 mm; no other visible cracks and damaged on the surface, and no equipment for close-up survey on the hull plate was provided. The damage report issued by Saf-x Company recorded that on August 2, 2011, M.V. “Conti Esperance” moored in Durban Port No.104 new dock and was ready to enter into dry dock to conduct renewal survey (special survey). The damaged shell part of the ship found by the survey included as follows: 1. starboard hull plate was depressed and wrinkled, frame No.44 strake L 5 m  2 m (damage located in diesel and fuel oil storage cabinet), frame No.65 strake O 7 m  2 m, frame No.65 strake N 9 m  2.4 m, frame No.65 strake M 9 m  3 m, frame No.68 strake L 4 m  2.5 m, frame No.140 strake O 5 m  2 m, frame No.140 strake N 3 m  2.4 m, frame No.140 strake L 10 m  2 m; 2. internal stiffeners of damaged hull plate were wavy and distorted, horizontal frame No.56, No.60, No.64, No.66, No.136, No.138, No.142, No.146 were wavy, floating longitudinal between bulkhead plates of starboard wing bulkhead No.3 was wavy and distorted, longitudinal rib rack of hull was wavy and distorted. Among the damaged parts above, the damage of frame No.44 and No.68 were not recorded in damage report of the classification society and report of Kent Company, but Saf-x Company believed that these two damages were indeed also caused by the accident

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involved, because these two were in the same row of the damaged location with other damages discovered preciously. Implemented permanent repair was as follows: 1. renewal of hull plate, including frame No.36 - No.45, frame No.55 - No.58, frame No.58 - No.68, frame No.65 - No.71, frame No.132 - No.147, frame No.142 No.148; 2. cut and change of longitudinal of starboard frame No.142 - No.146 at the empty space and ballast tank No.3; 3. cut and change of horizontal frame in the hull plate renewal, including frame No.56, No.60, No.64, No.66, No.136, No.138, No.142, No.146; 4. cut and part renewal of horizontal / longitudinal frame of hull plate, including frame No.57- No.68, No.143- No.149, No.132- No.146; 5. Installing brackets for each newly installed frame. Repair methods: do not need to enter into the dry dock; provide spreader and transportation; provide scaffolding; implement fire watch during repair; clean oil tanks, clean storage cabinet of diesel and fuel at repairs between frame No.36 and No.45, in order to ensure the safety of heat operation; after the completion of weld of shell plate, make magnetic particle inspection; after completion of repair, make tank tightness test in the presence of the surveyors from classification society and meet their requirements. Also paint the renewal steel parts according to the ship’s painting schedule. Tax invoice issued by Elgin Shipyard showed: cost of ship repair and ship construction in sum of USD445,592.20, dry-docking cost in amount of ZAR2,744,845.31. Inspection report of Wuyeshuan Company believed that there was no need to enter into dry dock to repair; damage of frame No.44 and No.68 shall not be deemed as the result of the accident involved, there was no need to paint the inner side of repaired shell plate, cost due to paint shall be halved; excluding the unreasonable fees above, the permanent repair cost shall be USD124,847.88. Concerning the dispute of the damage of frame No.44 and No.68, expert XIANG Changyong who issued Kent Company’s inspection report admitted that these two damages was not found at board inspection when he appeared in court to answer questions. But he believed these were caused by collisions in this case, in particular the corresponding tank of frame No.44, interior could not be measured. XIANG Changyong also proved that both the inner and outer sides of the shell plate of M. V. “Conti Esperance” had paint before collision, there was need to paint both sides when repairing the shell plate. The court holds that the quotation of Youlian Shipyard submitted by the Defendant is only a general preliminary quotation, not the calculated repair price after boarding the damaged ship to inspect and make a detailed repair plan, and the ship was in the process of fulfilling the contract of carriage of goods by sea when the collision happened, she could not spend a long time in China to conduct a

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thorough repair of ship, that the Plaintiff arranged M.V. “Conti Esperance” to repair during the special survey period in South Africa after the completion of carriage contract is reasonable. The Plaintiff claims permanent repair time is 10 days, and present proof issued by Elgin Shipyard, the inspection report of Wuyeshuan Company submitted by the Defendant also holds the repair time in South Africa is no more than 10 days, therefore the court approves the reasonable time for repair in South Africa is 10 days. Concerning the dry-dock cost claimed by the Plaintiff, inspection report submitted by the Plaintiff and the Defendant says there is no need to enter into dry dock for repair work, the court disaffirms the dry-dock cost in sum of ZAR2,744,845.31 for it is not the losses caused by the collision. Among costs of ship repair and ship construction, cost associated with degassing inspection certificate in amount of USD3,189.90, cost to open/close hatch in accordance with the ship owner’s instruction in amount of USD4,879.50, thickness measurement cost in accordance with instruction of classification society and ship owner in amount of USD1,926, and dock crane cost in amount of USD44,274, are costs generated by routine tests, having nothing to do with this collision accident, the court disaffirms; the fire watch costs from August 3, 2011 to August 24 (22 days) in sum of USD18,470.50, the average daily cost of fire watch is USD839.57, the court affirms the fire watch cost in sum of USD8,395.70 for the reasonable repair time of 10 days; the hot work permission fees from August 3, 2011 to August 27 in sum of USD318.33, the average daily cost of fire watch is USD12.73, the court affirms the fire watch cost in sum of USD127.30 for the reasonable repair time of 10 days; although the damage of frame No.44 and No.68 of M.V. “Conti Esperance” was not detected in the several test conducting in the collision location, given frame No.44 faces to oil tank, there is no effective device capable of close examination of shell plate, frame No.68 and damaged frame No.55–67 are in the same row which is very close position, it shall be deemed the damage of frame No.44 and 68 is caused by collision accident, if the Defendant has no evidence to the contrary, repair cost of all collision site in amount of USD372,533.97 should be supported. To sum up, the court ascertains the permanent repair cost of M.V. “Conti Esperance” in amount of USD381,056.97. (III) Loss for the hire of M.V. “Conti Esperance” The Plaintiff presented off-hire invoice and off-hire report to claim that the loss of hire of M.V. “Conti Esperance” in sum of USD44,333.53, where rent was USD3,500 per day; the shipment date was delayed one day 16 h because of the involved collision accident, the cost of fuel consumption was added up to USD3,500.20; the off-hire time for repair in South Africa was totally 21 days 20 h

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12 min, deducting special survey time, the delay of lease for repair in South Africa due to the accident involved was 10 days. The Defendant had no objection to the fact of off-hire, but believed off-hire time in South Africa for repair shall be no more than 10 days. The court holds that according to the reasonable occasional repair time and permanent repair time the court ascertained, the off-hire time of ship due to the accident involved is totally 11 days and 16 h, the rent is USD3,500 per day, less than one day the rent calculates based on a pro rata, the loss of rent adds up to USD40,833.33; and the ship was in port operation when collision occurred, she needed the corresponding fuel, loss of fuel consumption should be added in sum of USD3,500.20. To sum up, the loss of hire of M.V. “Conti Esperance” due to the collision accident is ascertained as USD44,333.53. (IV) Inspection fee The Plaintiff submitted the invoice issued by Rennie Murray & Company (PTY) Ltd. (hereinafter referred to as “Rennie Company”) to claim the inspection fee Saf-x Company charged due to the accident involved in amount of USD11,954.28. The Defendant had no objection to the authenticity of the invoice, but held the opinion that the subjects to make test and issue invoice were not the same ones thus cannot prove the rationality of the cost the Plaintiff claimed. The Plaintiff responded that Saf-x Company and Rennie Company were affiliates. The court holds that the inspection fee is caused for the Plaintiff to submit inspection report of Saf-x Company, the content of the inspection report is relatively objective and reasonable, the court ascertains the most opinion of the report, therefore, the inspection fee the Plaintiff claimed is reasonable. Under the case that the Defendant ascertained the authenticity of the above invoice, that the third party besides surveyors issuing the invoice of inspection fee does not violate law and affect the legal rights of the Defendant. The court ascertains the inspection fee the Plaintiff claimed in amount of USD11,954.28. (V) Port charges and agency fee The Plaintiff submitted the port charges bill issued by King & Son Ship’s Agent to claim port charges and agency fee due to the accident involved in amount of ZAR262,239.17. The Defendant had no objection to the authenticity of the evidence above, but believed that such cost was special survey cost in South Africa and had nothing to do with this case. The court holds that the Plaintiff arranged the ship to make special survey in South Africa would generate port charges and agency fee, under the situation that the Plaintiff did not have evidence to prove

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the port charges above was inevitable cost caused by the collision, the court disaffirms port charges and agency fee above in amount of ZAR262,239.17. Paint costs The Plaintiff submitted the invoice and payment voucher of paint costs to claim paint costs due to the accident involved in amount of USD9,791.21. The Defendant had no objection to the authenticity of the evidence, but believed that there was no need to paint the inner side of shell plate, based thereon, the reasonable paint costs was only half of the amount the Plaintiff claimed. The court holds that there were no reasonable excuses for the Defendant’s claim of no need to paint inner side of shell plate. The court supports the claim of the Plaintiff of the paint costs in sum of USD9,791.21 in accordance with law. Communication cost The Plaintiff submitted several invoices of communication cost to claim communication cost due to the accident involved in amount of ZAR28,185.87. The Defendant had no objection to the authenticity of the evidence, but believed that such cost was normal communication cost during special survey South Africa and had nothing to do with this case. The court holds that the Plaintiff has no evidence to prove the communication cost above was inevitable cost caused by the collision, based thereon, the court disaffirms the claim accordance with law. Crew overtime payment and material consumption costs The Plaintiff submitted maintenance notice to claim crew overtime pay and material consumption costs due to the repair on May 20, 1010, in amount of USD737. The Defendant had no objection to the authenticity of the evidence, but believed it had nothing to do with this case. The court holds that the Plaintiff did not have evidence to prove the crew overtime payment and material consumption costs were inevitable cost caused by the collision, based thereon, the court disaffirms the claim accordance with law. Case-handling service fee The Plaintiff submitted the bill issued by Huatai Insurance Agency & Consultant Service Ltd. (hereinafter referred to as “Huatai Company”) and the invoice issued by Kent Company to claim the inspection cost, service cost, auxiliary costs paid to Huatai Company in amount of USD11,000. The bill recorded the cost Huatai Company asked for the Plaintiff due to the accident involved included inspection cost in amount of USD3,710, service cost in amount of USD7,200 and auxiliary costs in amount of USD200. The invoice

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showed Kent Company issued an inspection invoice of USD3,710 to Huatai Company due to the collision. The Defendant had no objection to the authenticity of the evidence above, but believed only the inspection cost in amount of USD3,710 was reasonable cost due to the collision. The court holds that the Plaintiff submitted the invoice issued by Kent Company due to the collision, the Defendant ascertained the inspection cost in amount of USD3,710 was reasonable cost due to the collision, based thereon, the court supports it accordance with law. There was no evidence to prove the service cost in amount of USD7,200 and auxiliary costs in amount of USD200 claimed by the Plaintiff was inevitable cost caused by the collision, based thereon, the court disaffirms the claim accordance with law. During the trial, the parties agreed that laws of the People’s Republic of China shall apply to deal with the dispute. The court holds this case is the dispute over damage compensation arising from ship collision, the Plaintiff is a foreign corporation, and the case is a foreign dispute over damage compensation arising from ship collision. According to Article 1 of the Some Provisions of the Supreme Court on the Scope of Cases to be entertained by Maritime Courts, this case is under the specialized jurisdiction of maritime courts. In this case, the collision happened in waters of Shenzhen, China, which is the area of the court, according to Article 30 of the Civil Procedure Law of the People’s Republic of China, “an action instituted for damages for a vessel collision or any other maritime accident shall be under the jurisdiction of the people's court at the place where the collision occurs, where the colliding vessel first arrives or where the vessel at fault is detained or at the place of domicile of the defendant”, the court has jurisdiction on the case. Due to that the collision happened in China and parties to the case also agreed that laws of the People’s Republic of China shall be applied to deal with the dispute during the trial, according to Article 273 Paragraph 1 of the Maritime Code of the People’s Republic of China and Article 44 of the Law of the People’s Republic of China on Law for Foreign-related Civil Relationships, laws of the People’s Republic of China shall apply to deal with the substantive dispute. M.V. “Conti Esperance” was carrying out cargo operation at Chigang Bay No.8 berth when the accident happened, she was in a relatively quiescent state. M.V. “Offshore Oil 225”, as an underway ship, according to the provisions of Article 6 and Article 8 of International Regulations for Preventing Collisions at Sea, 1972, shall at a safe speed so that she can take proper and effective action to avoid collision and be stopped within a distance appropriate to the prevailing circumstances and conditions; should take any action to avoid collision positively and betimes with due regard to the observance of good seamanship. M.V. “Offshore Oil 225” violated the regulations above, collided with M.V. “Conti Esperance” moored in Chigang Bay No.8 berth, caused damage to the hull of M.V. “Conti Esperance”, and shall bear whole liability. The Defendant argued that the loss of M.V. “Conti Esperance” in this accident was caused by the collision between M.V. “Offshore Oil 225” and M.V. “Hua Dian 8”, but she failed to provide evidence to prove that it was

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the collision between M.V. “Offshore Oil 225” and M.V. “Hua Dian 8” caused the following close-quarters situation, leading to crew of M.V. “Offshore Oil 225” not able to avoid the accident with good seamanship and due diligence. Under the situation that the Defendant did not have strong evidence to prove this collision was the sole and inevitable result of the collision between M.V. “Offshore Oil 225” and M.V. “Hua Dian 8”, the defense of the Defendant that M.V. “Offshore Oil 225” collided with M.V. “Conti Esperance” and M.V. “Hua Dian 8” was one collision and that the Defendant shall bear the liability according to the proportion of the collision between M.V. “Offshore Oil 225” and M.V. “Hua Dian 8” could not stand. According to Article 4 of the Provisions of the Supreme People’s Court on Some Issues about the Trial of the Cases of Ship Collision Disputes, the liability for damage arising from ship collision shall be born by the shipowner. Since the Defendant is the registered shipowner of M.V. “Offshore Oil 225”, the Defendant shall be liable for damages arising from the subject collision and shall compensate the Plaintiff for losses caused thereby. The losses of the Plaintiff add up to USD461,785.99, the Defendant should compensate for it. The Plaintiff also requested the interest thereon. The claim is compliance with the law. The interest will be calculated from May 19, 2010, the next day of the accident, to the payment day prescribed herein at the loan interest rate of working capital of enterprises for the same period as published by the People’s Bank of China. Given that the foreign currency loans in mainland China has liberalized in accordance with the provisions of Announcement of the People’s Bank of China on Further Reforming the Foreign Exchange Management System since September 21, 2000, determined by the financial institutions themselves, foreign currency loans in mainland China has no uniform standard from September 21, 2000. In order to determine the case interest fairly and reasonably, the principal amount shall be converted from USD to RMB at the exchange rate on March 15, 2007 (1:6.8278), and the interest shall be calculated at the loan interest rate over the corresponding period published by the People’s Bank of China. To sum up, according to Article 168 of the Maritime Code of the People’s Republic of China, the judgment is as follows: The Defendant, Offshore Oil Engineering Co., Ltd., shall compensate the Plaintiff, Conti Caressa Schiffahrtsgesellschaft mbH & Co. KG MS “Conti Esperance”, for its losses of USD461,785.99 and the interest calculated from May 19, 2010, to the payment day prescribed herein at the loan interest rate of working capital for the same period as published by the People’s Bank of China (the principal amount shall be converted from USD to RMB at the exchange rate of 1:6.8278 of the date of May 19,2010). The obligation to pay the above-mentioned amounts shall be fulfilled within 10 days as of the effectiveness of this judgment. Where any party fails to perform the obligation of paying above-mentioned amounts within the period prescribed herein, such party shall, in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China, double pay the interest for the period of delayed performance.

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Court acceptance fee in amount of RMB44,301.68, RMB16,807.51 shall be born by the Plaintiff, Conti Caressa Schiffahrtsgesellschaft mbH & Co. KG MS “Conti Esperance”, and RMB27,494.17 shall be born by the Defendant, Offshore Oil Engineering Co., Ltd. In event of dissatisfaction with this judgment, the Plaintiff, may within 30 days upon service of this judgment, and the Defendant, may within 15 days upon service of this judgment, submit a letter of appeal to the court, with duplicates in terms of the number of the opposing party, to lodge an appeal to the Guangdong High People’s Court of the People’s Republic of China. Presiding Judge: XIONG Shaohui Acting Judge: PINGYANG Danke Acting Judge: LI Lifei July 7, 2014 Clerk: ZENG Huifen

Xiamen Maritime Court Civil Ruling Daewoo Shipbuilding and Marine Engineering Co., Ltd. v. Alpha Elephant Inc. et al. (2014) Xia Hai Fa Ren Zi No. 14 Related Case(s) None. Cause of Action 463. Application for recognition and enforcement of foreign arbitral award. Headnote London arbitration award for failure to pay shipbuilder recognized as enforceable. Summary The Claimant, Daewoo Shipbuilding and Marine Engineering Co., Ltd., brought this action against the Respondents Alpha Elephant Inc. and Noel Venture Limited to enforce a foreign arbitration award, stemming from the breach by the Respondents to make payments due on a shipbuilding contract. Shipbuilding Contract specified that any disputes over the contract price were to be settled by arbitration in London, England. The respondents failed to appear at the scheduled arbitration, and the arbitrator awarded the Claimant USD28,250,000.00 and interest against Alpha Elephant, and USD20,885,000.00 and interest against Noel. The Claimant initiated this suit to have the Xiamen Maritime Court recognize the foreign arbitral award. The court held that since the dispute before the London arbitration arose from a “contractual and commercial legal relationship,” Chinese law recognized that dispute as a matter that could be legally handled by arbitration, and found for the Claimant in the amount determined by the arbitration.

Ruling The Claimant: Daewoo Shipbuilding and Marine Engineering Co., Ltd. Domicile: 125 Namdaemun Road, Seoul Central District, Republic of Korea. Legal representative: GAO Zaihao, acting director. Agent ad litem: LI Rongcun, lawyer of Wang Jing and Co. (Xiamen). Agent ad litem: YANG Dongyang, lawyer of Wang Jing and Co. (Xiamen). © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_17

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The Respondent: Alpha Elephant Inc. Domicile: Ajeltake Road, Ajeltake Island, Majuro, Republic of the Marshall Islands, MH96960. The Respondent: Noel Venture Limited Domicile: 80 Broad Street, Monrovia, Liberia. With respect to the case of application for recognition of foreign arbitral award filed by the Claimant, Daewoo Shipbuilding and Marine Engineering Co., Ltd. (hereinafter referred to as “Daewoo Company”), against the Respondents, Alpha Elephant Inc. (hereinafter referred to as “Alpha Elephant”) and Noel Venture Limited (hereinafter referred to as “Noel Company”), the court, after accepting this case on October 13, 2012, organized a collegiate panel. Now the case has been concluded. Daewoo Company claimed that: K Elephant Corporation, as the buyer, signed the Shipbuilding Contract for Construction and Sales of the 317,000 DWT Oil Tanker M.V. “A Elephant” (Hull No.: 5330) with it on May 9, 2007, of which it was provided in Article 13 that dispute over the contract price should be referred to arbitration in London in accordance with the Arbitration Act 1996 of the United Kingdom and the London Maritime Arbitrators Association Rules for the time being in force. On the same day and November 28, 2008, the two parties signed the Addendum No. 1, Addendum No. 2 and Addendum No. 3 to the Shipbuilding Contract. On January 18, 2010, the buyer under Shipbuilding Contract, was novated from K Elephant Corporation to A Elephant Inc., and on February 3, 2010, from A Elephant Inc. to Alpha Elephant. It was agreed in the two Novation Agreements that any dispute arising therefrom should be resolved according to Article 13 (Arbitration) of the Shipbuilding Contract, and this clause should be incorporated into the agreement. On July 5 of the same year, Alpha Elephant as the buyer, Daewoo Company as the builder and Noel Company signed the Addendum No. 4 to Shipbuilding Contract, agreeing that Alpha Elephant should be obliged to pay the first deferred payment in amount of USD25,000,000 and Noel Company should be obliged to pay the second deferred payment in amount of USD30,000,000 in 11 installments since the next month after the contractual delivery date namely June 30, 2010. As prescribed in Article 16 of the said Addendum, any dispute should be submitted to arbitration in accordance with Article 13 (Arbitration) of the Shipbuilding Contract. On July 39, 2011, Alpha Elephant as the buyer, Daewoo Company as the builder signed the Addendum No. 5 with Noel Company, in which it was agreed that Alpha Elephant and Noel Company would fulfil the debts and provide valid guarantee. Noel Company confirmed and accepted Glory Mortgage Contract (the first preferred mortgage granted by Glory Advance Corporation over M.V. “Glory Advance” to Daewoo Company) as the guarantee for the second deferred payment (as defined in the Addendum No. 4), and Article 16 of the Addendum No. 4 (namely Article 13 Arbitration of the Shipbuilding Contract) to be incorporated into the Addendum No. 5. On account of the failure of Alpha Elephant and Noel Company to perform

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the obligation under Shipbuilding Contract, Daewoo Company had to commence arbitration proceedings in London against Alpha Elephant and Noel Company. Since the two Respondents failed to appoint an arbitrator within the specified time limit, Mr. John Colin Sheppard, an arbitrator of London Maritime Arbitrators Association, was appointed as the sole arbitrator in the arbitration proceedings. On May 14, 2014, Mr. John Colin Sheppard rendered the Arbitral Awards Relating to the Dispute over the Shipbuilding Contract of M.V. “A Elephant” (Hull No.: 5330) Dated May 8, 2007 (hereafter referred to as “Arbitral Awards 5330”). As Arbitral Awards 5330 was rendered and published by the arbitration tribunal which was lawfully organized as per an effective arbitration clause agreed by the parties in London, and the subject matter awarded by the tribunal was the principal debt under the guarantee involved in the case arising from dispute over conformation for maritime claims filed by Daewoo Company against Advance Glory Company and entertained by Xiamen Maritime Court of the People’s Republic of China, in accordance with the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (hereafter referred to as “New York Convention 1958”) and the Notice of the Supreme People’s Court on Implementing the Convention on the Recognition and Enforcement of Foreign Arbitral Awards Acceded to by China, Daewoo Company requested the court to recognize the legal effect of Arbitral Awards 5330 within the territory of the People’s Republic of China. In order to prove its claims, Daewoo Company submitted Shipbuilding Contract of M.V. “A Elephant” (Hull No.: 5330) together with the Addendum No. 1, Addendum No. 2, Addendum No. 3, Addendum No. 4 and Addendum No. 5 thereto, two Novation Agreements, Mortgage Contract in terms of the first preferred mortgage over M.V. “Glory Advance” and corresponding Certificate of Preliminary Registration, Certificate of the First Preferred Mortgage Registration, Certificate of Ownership and Encumbrance of Ship, Arbitral Awards 5330 and the witness statement of Vivinne Edeltraud Pitroff, a lawyer of Holman Fenwick Willan LLP dated February 19, 2014. The said evidence formed in the Republic of Korea and UK mentioned above have all been notarized by the domestic notary organ and certified by the Embassy of the People’s Republic of China. On October 15, 2014, according to the address offered by Daewoo Company, the court served the copy of the Application for Recognition of Foreign Arbitral Awards, the Notice of Response to Action, the Notice of Members of collegiate panel, the relevant evidence submitted by Daewoo Company and other legal instruments relating to this subject case to Total Marine Transport Co., Ltd. (hereinafter referred to as “TMT Company”) [Address: 16F., No. 200, Sec 1., Keelung Road, Taipei in Taiwan; Postcode: 11071; Tel: (02) 27239559)], the process agent designated by the two Respondents by EMS (No. EE860936033CN and No. EE869536016CN). On 17 October, TMT Company signed and stamped the Acknowledgement of Service on behalf of the two Respondents (the address and telephone on the stamp are same with the information offered by Daewoo Company. However, neither the two Respondents raised any objection to the Application for Recognition of Foreign Arbitral Awards nor did they submit any evidence within 30 days specified by the court.

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After examination, the court ascertains the authenticity of the evidence, which has been notarized and certified, provided by Daewoo Company and accordingly ascertains the facts stated by Daewoo Company. The court further finds that it is provided in Article 13 (Disputes and Arbitration) of the Shipbuilding Contract of M.V. “A Elephant” (Hull No.: 5330) that “… (a) Any dispute over the vessel’s compliance or non-compliance with the rules and regulations of the Classification Society or other administrative authorities between the parties hereto, as the case may be, shall be referred to the Classification Society or other administrative authorities, the decision of which shall be final, conclusive and binding upon the parties hereto. (b) All other disputes shall be resolved by arbitration in London, England in accordance with and subject to the Arbitration Act 1996 or any statutory modifications or reenactment thereof for the time being in force and in accordance with the Rules currently in force of the London Maritime Arbitrators Association. The builder and the buyer shall each appoint an arbitrator and the two arbitrators thus appointed shall thereupon appoint a third arbitrator”. As prescribed in Article 18 (Representative), “the representative designated by the buyer to receive the notices under this contract shall be TMT Company C/O K Elephant Corporation. The receiver is Su Xinji, the president, whose fax is +886 2 2719-2699 and mailbox is [email protected], unless another representative is informed by the seller through a written notice to the builder”. Article 19 (Notice and Language) provides that “… any and all notices, requests, demands, instructions, advice or correspondences in connection with financial and legal matters under this contract shall be sent by registered airmail, express, hand-delivery or written confirmation by telefax, and the notice shall take effect, promptly the mail was delivered or served, but it shall be deemed to be delivered within 10 days after the date of dispatch of the registered airmail or 5 days after the date of dispatch of the express…any and all notices and correspondences shall be written in English”. Su Xinji signed the two Novation Agreements of the Shipbuilding Contract of M.V. “A Elephant” as the representative and director of K Elephant Corporation, A Elephant Inc. and Alpha Elephant Company. What’s more, Article 10 of the two Novation Agreements set forth that “any dispute arising out of Novation Agreement shall be resolved according to Article 13 of Shipbuilding Contract and this article shall be deemed to be incorporated into this agreement”. As specified in Article 1 (Definition and Interpretation) of the Addendum No. 4 to the Shipbuilding Contract of M.V. “A Elephant” that “… TMT refers to Total Marine Transport Co., Ltd., a company established according to the laws of Taiwan, of which the registered address is 12F., No. 167 Fuxing North Road, Songshan District, Taipei, Taiwan…” It is provided in Article 15 (Notice) that Article 18 of the contract shall be deemed to be incorporated into this Addendum, as if set out in this Addendum and any reference of the contract or its articles shall be construed as a reference of the Addendum or any article hereof. It shall inform Noel Company according to the address: 10 F., No. 245, Sec. 1, Dunhua South Road, Taipei, Taiwan; Receiver: Su Xinji; Fax: +88 622 509 3960. Article 16 (Jurisdiction and Arbitration) sets forth that “… any dispute arising out of this Addendum shall be submitted to arbitration in accordance to Article 13 (Arbitration) of the Shipbuilding Contract. Article 4

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(Contractual Modifications) of Addendum No. 5 to Shipbuilding Contract of M.V. “A Elephant” that “…Glory General Assignment Agreement means the assignment agreement, under which Glory Owner, as the assignor, assigned the first priority in earnings, insurance and requisition compensation to the assignee, the builder on or about the date of the Addendum No. 5. Glory Mortgage Contract means the mortgage contract under which the Glory Owner, as the mortgager, obtained the first preferred mortgage over the Panamanian ship on or about the date of the Addendum No. 5. Glory Guarantees mean the Glory Mortgage Contract and the Glory General Assignment Agreement. The Glory Owner means Glory Advance Corporation, a company established pursuant to the laws of the Republic of Panama, of which the registered address is the top floor, Saar Durbar Building, 59 East Great Street, Bali Zha New, Panama, Mail No. 7284… Mortgage contracts mean the Glory Mortgage Contract, the Second Preferred Mortgage Contract and the Third Preferred Mortgage Contract. Article 9 provides Incorporation—Article 1.3-1.5 (Interpretation), Article 13 (Miscellaneous), Article 15 (Notice) and Article 16 (Jurisdiction and Arbitration) of the Addendum No. 4 are incorporated into this Addendum. On July 29, 2011, Glory Advance Corporate (the owner of M.V. “Glory Advance”) signed a mortgage contract with Daewoo Company, agreeing the first preferred mortgage over M.V. “Glory Advance” shall be the guarantee for the second deferred payment in amount of USD41,770,000 under the Shipbuilding Contracts of M.V. “B Elephant” and M.V. “A Elephant” and the mortgage shall be registered at the mortgage registration authority of Panama. On August 24 of the same year, the Public Registration Department of Sales and Encumbrances of Ships of the Republic of Panama formally and permanently registered Daewoo Company’s first preferred mortgage over M.V. “Glory Advance”. On November 26, 2013, upon the request of Daewoo Company to the mortgage registration authority, Consulate General of Panama in London issued the Certification of Ownership and Encumbrances of Ship with the authorization of the Merchant Marine Department of the Republic of Panama, confirming that the shipowner of M.V. “Glory Advance” was Glory Advance Corporate and the first preferred mortgage enjoyed by Daewoo Company over the ship for amount of USD41,770,000 was still registered. On November 27, 2013, Vivinne Edeltraud Pitroff, a lawyer of Holman Fenwick Willan LLP appointed Mr. John Colin Sheppard, an arbitrator of London Maritime Arbitrators Associate, as the arbitrator in respect of the dispute over the contract price of M.V. “A Elephant” on behalf of Daewoo Company. The next day, Mr. John Colin Sheppard confirmed to accept the appointment. On December 10, 2013, Mr. Vivinne Edeltraud Pitroff faxed to Ms. Monica Chen, who worked in TMT Company (fax number: 00 886 2723 5086), saying that “the notification of my client’s appointment of arbitrator with regard to the matters mentioned above is enclosed”. The notification and the like were sent to the latest address of TMT Company as we knew, but we are informed by Dewoo Company that TMT Company changed the address earlier this year and the fax number mentioned above is the correct one”. The next day, Lawence Lee of Daewoo Company sent the notification of appointment of arbitrator to Monica Chen in person. Given that no

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reply had been gotten, lawyer Vivinne Edeltraud Pitroff sent a notice again to the two Respondents on December 30. In accordance with Article 17 of the Arbitration Act 1996, the two Respondents had 7 days to appoint their arbitrator and were informed that if exceeding the time limit, Mr. John Colin Sheppard would be the sole arbitrator. But after seven days elapsed, there was nothing later. On January 8, 2014, Holman Fenwick Willan LLP sent notifications to the two Respondents to tell that Mr. John Colin Sheppard was the sole arbitrator. Thereafter, in order to make it absolutely clear to Noel that the Applicant’s claim was not only being brought against Alpha Elephant, but also against Noel Company as principal obligors, a further notification was sent by Holman Fenwick Willan LLP to Noel on January 14, 2014, calling upon Noel Company to appoint its arbitrator within 14 days. No response was given from Noel Company, so a further notice was sent from Holman Fenwick Willan LLP on January 29, 2014 to Noel Company, giving it 7 clear days to appoint its arbitrator, informing that if it failed to do that Mr. John Colin Sheppard would be confirmed as sole arbitrator. However, still no response was received from Noel Company. On February 6, 2014, Holman Fenwick Willan LLP wrote to Mr. John Colin Sheppard to advise him of the failure of the two Respondents to appoint their arbitrator, again confirm him as sole arbitrator, and inform “so far as a channel to contact with the Respondents, we have sent our messages to Alpha Elephant Inc. C/O TMT Co., Ltd. both by fax and email, the relevant contact details of which are as follows: TMT Co., Ltd., Receiver: Mr. Su Xinji, Fax No.: 00 886 2 2723 5082; Receiver: Ms. Monica Chen, Email: [email protected]. As to Noel Venture Limited, we cannot get in contact with it through the address stated in the contract, instead we contact via its registered office address in Liberia…: LISCR Trust Company C/O 80 Broad Street, Monica, Liberia. Accordingly, as far as Noel Venture Limited is concerned, we believe that it will be necessary for you to send at least your first communication and any subsequent Orders you will make to Noel Company by courier and fax (00 886 2 2723 5082) also for the attention of Mr. Su Xinji. Finally we have served a copy of our Claim Submissions on the Respondents…” On February 11, John Colin Sheppard confirmed him was appointed as the sole arbitrator. On February 19, lawyer Vivienne Edeltraud Pitroff made a witness statement under the notarization of notary Nigel P. Ready, to which relevant emails, faxes and letters marked “VEP 1” were enclosed to confirm the authenticity of the facts mentioned above. On May 13, 2014, John Colin Sheppard, as sole arbitrator, rendered the Arbitral Awards 5330, saying that “… on March 19, 2014 I faxed the First Respondent and emailed the Second Respondent (copies also being couriered to them by the Claimant’s London solicitors), as follows:…In the arbitration reference…in which I am sole arbitrator…in which reference Alpha Elephant and Noel Company were, on February 17, 2014, served with Claim Submissions on behalf of Daewoo Company, and upon Respondents’ failure to serve Defence Submissions, I now Order that Respondents shall serve their Defence Submissions by 1730 BST on April 9, 2014 … On April 10, 2014, I faxed the First Respondent and emailed the Second Respondent (copies also being couriered to them by the Claimant’s London solicitors) as follows: … Further to my Order of dated March 19, 2014 in this

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arbitration reference, I note from HFW’s email of April 10, 2014 that no Defence submissions have been served by the Respondents by the time limit in that Order of 1730 BST on April 9, 2014. I now make a Final and Peremptory Order that the Respondents shall serve their Defence Submissions by 1730 BST on Friday April 25, 2014. Should the Respondents fail to serve their Defence Submissions by this time and date then pursuant to s.41(7)(c) of the Arbitration Act 1996 I shall without further notice, ‘proceed to an Award on the basis of such materials as have been properly provided to me’…No Defence Submissions were served by either of the Respondents by 1730 BST on April 25, 2014, or at all. Now I the said John Colin Sheppard, having considered the written submissions and supporting documents put before me, do hereby make, issue and publish this my final Arbitral Awards as follows, reserving my jurisdiction in respect of all other matters not dealt with in my Award and the reasons relating thereto: (A) … the Claimant’s claim against the First Respondent (Alpha Elephant) succeeds in the sum of USD28,250,000.00 together with compound interest at 10% per annum and pro rata interest on unpaid installments 5 to 12 of USD406,250.00 each from the last day of every three months after the contractual delivery date as regards installments 5–11, and from the third anniversary of the Contractual Delivery Date as regards instalment 12, until the time of actual payment of such interest. (B) … the First Respondent (Alpha Elephant) shall forthwith pay the Claimant the sums awarded in (A) above. (C) … the Claimant’s claim against the Second Respondent (Noel Company) succeeds in the sum of USD20,885,000.00 together with compound interest at 10% per annum and pro rata on the four unpaid interest sums of USD617,500.00; USD520,000.00; USD422,500.00 and USD325,000.00 accrued on the four unpaid Second Deferred installments 8 to 11 from the dates set out as the Second Deferred instalment dates in the table appearing in paragraph 15 above, until the time of actual payment of such interest; (D) … the Second Respondent (Noel Company) shall forthwith pay to the Claimant the sums awarded in (C) above. (E) … the Claimant’s claim against the First and Second Respondents in respect of costs and expenses incurred pursuant to Clause 9.4 of Addendum No. 4 succeeds and I therefore further award and declare that the First and Second Respondents are liable to pay such sums as I may hereafter find have been incurred by the Claimant together with interest at 5% per annum or pro rata compounded with three monthly rests from the date such sums were paid by the Claimant until paid by the First and Second Respondents. (F) … the First and Second Respondents shall bear their own costs in the reference and jointly and severally pay those of the Claimant on the standard basis … together with compound interest thereon with three monthly rests at an annual rate of 5% and pro rata from the date of my Award until the date of payment. The First and Second Respondents shall also jointly and severally pay for the costs of my Award in the sum of EUR3,500.00 provided always, that if this sum, or any part thereof, shall have been paid by the Claimant in the first instance, it shall be entitled to an immediate reimbursement from the First and/or the Second Respondent of the monies so paid, together with compound interest thereon with three monthly rests at an annual rate of 5% per annum or pro rata from the date of payment until the date of reimbursement.”

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It is further ascertained that on December 6, 2013, the court auctioned M.V. “Glory Advance” legally arrested at a price of RMB58,700,000. As the first preferred mortgagor having been registered of the vessel, Daewoo Company applied to register the creditors’ rights and the court approved. Then, Daewoo Company brought an action for affirming maritime claims against Glory Advanced Company [(2014) Xia Hai Fa Shang Que Zi No. 1]. Since the specific amount of the mortgage over the vessel involved shall be subject to the principal debt under the Shipbuilding Contract to be determined by the arbitration in London, the court ruled to suspend the trial of this case on March 27, 2014. After trial, the court holds that Daewoo Company, after instituting arbitration proceedings in London according to the arbitration clause of Shipbuilding Contract, requested the court to recognize the legal effect of Arbitral Awards 5330 in the territory of the People’s Republic of China, this case is an application for recognition of foreign arbitral awards. Since the issue Daewoo Company applied to be awarded is the principal debt guaranteed by M.V. “Glory Advance” which has been auctioned by the court, and Daewoo Company has applied for claim registration and initiated the claim confirmation proceedings in the procedure of ship auction according to law. According to Article 13 of the Interpretation of the Supreme People’s Court on the Application of the Special Maritime Procedure Law of the People’s Republic of China, the court, as court at the place where the ship was auctioned, has the jurisdiction over this case. Both China and UK are contracting parties to the New York Convention 1958, according to Article 283 of the Civil Procedure Law of the People’s Republic of China, the New York Convention 1958 shall be applicable to this case. The dispute over the Shipbuilding Contract involved arose from contractual and commercial legal relationship, pursuant to the People’s Republic of China, this case may be resolved by arbitration. According to the address provided by Daewoo Company, the court served the copy of the Application for Recognition of Foreign Arbitral Awards, the Notice of Response to Action and other legal instruments to TMT Company, the process agent appointed by the two Respondents, and the acknowledgment of TMT Company shall be deemed as the two Respondents’ receipt of the same. However, the two Respondents did not raise any objection to the Application for Recognition of Foreign Arbitral Awards within the time limit designated by the court. In this case, the court ascertains that the two Respondents have no objection to Arbitral Awards 5330. At the same time, Arbitral Awards 5330 is not conflicted with the public policy of the People’s Republic of China. To sum up, in accordance with Article 283 of the Civil Procedure Law of the People’s Republic of China and Article 5 of the New York Convention 1958, the ruling is as follows: Recognize that Arbitral Awards Relating to the Dispute over the Shipbuilding Contract in Respect of M.V. “A Elephant” (Hull No.: 5330) Dated May 8, 2007 issued by John Colin Sheppard as sole arbitrator of London Maritime Arbitrators Association on May 13, 2014 shall be legal effect in the territory of the People’s Republic of China.

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Application fee in amount of RMB500, shall be born by the Respondents, Alpha Elephant Inc. and Noel Venture Limited. The ruling is final. Presiding Judge: CAI Fujun Judge: CHEN Ya Judge: YU Jianlin December 10, 2014 Acting Clerk: LI Yue

Appendix: Relevant Laws Interpretation of the Supreme People’s Court on the Application of the Special Maritime Procedure Law of the People’s Republic of China. Article 13 Where a party applies for enforcement of a maritime Arbitral Awards or recognition or enforcement of a foreign maritime Arbitral Awards in accordance with Article 11 of the Special Maritime Procedure Law, the case shall be subject to the jurisdiction of the maritime court of the place where the property against which the Arbitral Awards is enforced is located or of the domicile of the person against whom the Arbitral Awards is enforced; where the property is a ship, the case shall be subject to the jurisdiction of a maritime court regardless of whether that ship is within the jurisdiction area of that maritime court. If there is no maritime court at the place where the ship is located, the jurisdiction shall be assumed by the nearest maritime court. The phrases “the place where the property is located” and “the domicile of the person against whom the Arbitral Award is enforce” as mentioned in the preceding paragraph refer to the areas over which a maritime court exercises its jurisdiction. Civil Procedure Law of the People’s Republic of China Article 283 If an Arbitral Award made by a foreign arbitral organ requires the recognition and enforcement by the people’s court of the People’s Republic of China, the party concerned shall directly apply to the intermediate people’s court in the place where the party subjected to enforcement has his domicile or where his property is located. The people’s court shall deal with the matter in accordance with the international treaties concluded or acceded to by the People’s Republic of China or with the principle of reciprocity.

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Convention on the Recognition and Enforcement of Foreign Arbitral Awards Article 5. (1) Recognition and enforcement of the Arbitral Award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that: (a) The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the Arbitral Awards was made; or (b) The party against whom the Arbitral Award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or (c) The Arbitral Award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the Arbitral Award which contains decisions on matters submitted to arbitration may be recognized and enforced; or (d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or (e) The Arbitral Award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that Arbitral Awards was made. (2) Recognition and enforcement of an Arbitral Award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that: (a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or (b) The recognition or enforcement of the Arbitral Award would be contrary to the public policy of that country.

Ningbo Maritime Court Civil Judgment Darby International Investment Limited v. Rong Tai International Shipping Co., Ltd. et al. (2012) Yong Hai Fa Zhou Shang Chu Zi No. 714 Related Case(s) None. Cause of Action 211. Dispute over ship mortgage contract. Headnote Vessel arrested was the same as that mortgaged to the Plaintiff, and lack of formalities by law of the place of execution of the mortgage did not prevent its enforceability. Summary The Plaintiff brings a claim against the Defendant for a dispute over repayment of a loan of HKD50 million with a 36% interest rate. The Defendant claims that it never received the money, and claims that the contract between the parties did not conform the law of Hong Kong, thus it is void. Furthermore, the Defendant mortgaged its vessel with the Plaintiff to secure the loan. When the Plaintiff arrested the vessel, the Defendant claimed that it was not the same vessel in the mortgage agreement. –Held by the Ningbo Maritime Court that there was clear intent between the Plaintiff and Defendant to engage in the contract, thus any issues with formality will not free the Defendant from its duties to the Plaintiff. Furthermore, the court held that the vessel arrested was in fact the same vessel contained in the mortgage agreement between the two parties. The court demanded that the Defendant should pay the Plaintiff the principal and interest of the loan in the sum of RMB55,025,600.

Judgment The Plaintiff: Darby International Investment Limited Domicile: Center mailbox 957, Thor tora rode town offshore Company, British Virgin Islands. Legal representative: YANG Suli, director. © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_18

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Agent ad litem: SHEN Chaoying, lawyer of Shanghai Jia Chuang Run Hua Law Firm. Agent ad litem: JIANG Xiaohao, lawyer of Shanghai Jia Chuang Run Hua Law Firm. The Defendant: Rong Tai International Shipping Co., Ltd. Domicile: 10/F Room D Billion Centre A, 1 Wang Kwong Road, Kowloon Bay, Hong Kong Special Administrative Region, the People’s Republic of China. Legal representative: ZHENG Zhilong, director. Agent ad litem: ZHAO Yuesheng, lawyer of Zhao and Co. The Third Party: China Electronic Import and Export Co., Ltd. Ningbo Branch Domicile: 26/F International Exhibition Center, No.168 Baizhang Road, Ningbo, Zhejiang, the People’s Republic of China. Legal representative: HONG Guanqi, Director. Agent ad litem: LUO Congrui, lawyer of Rolmax Law Firm Shanghai Office. Agent ad litem: WANG Xuejun, male, born on November 3, 1965, Han, company employee, living in Haishu District, Ningbo, Zhejiang, the People’s Republic of China. The Plaintiff Darby International Investment Limited filed a case concerning dispute over ship mortgage contract against the Defendant Rongtai International Vesselping Co., Ltd. on December 20, 2012. After accepting the case, the court tried the case under general procedure in accordance with law. On January 14, 2013, the Defendant raised a challenge of jurisdiction and demanded to bring the dispute involved to the courts of Hong Kong. On January 25, 2013, the court made (2012) Yong Hai Fa Zhou Shang Chu Zi No. 714 Civil Ruling according to law, rejecting the Defendant’s challenge of jurisdiction. The Defendant appealed on February 20, 2013, Zhejiang High People’s Court dismissed the appeal and affirmed the original ruling. On May 24, 2013, the Third Party China Electronics Import and Export Co., Ltd. Ningbo Branch (hereinafter referred to as CEIEC Ningbo Branch) applied to the court to participate in the litigation as a Third Party, the court allowed in accordance with the law. This case was heard in public on April 2, 2014 and May 23, 2014. SHEN Chaoying and JIANG Xiaohao, agents ad litem of the Plaintiff, ZHENG Zhilong, legal representative of the Defendant, and ZHAO Yuesheng, agent ad litem of the Defendant, LUO Congrui and WANG Xuejun, agents ad litem of the Third Party, attended the hearings. Now the case has been concluded. The Plaintiff argued that on January 31, 2012, it signed a ship mortgage contract with the Defendant in Hong Kong, it was agreed that: 1. the Plaintiff provided a loan of HKD50 million to the Defendant on January 31, 2012, M.V. RONG MING owned by the Defendant (IMO: 9557630) and all the rights and interests thereon would be mortgaged to the Plaintiff as guarantee for the aforementioned loan; 2. the annual loan interest rate was 36%, the loan period was 3 months calculating from January 31, 2012, and the effective date to calculate the rate should be calculated

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from the day of payment of the loan, namely January 31, 2012 to April 30, 2012; 3. the Plaintiff was entitled to recover from the Defendant for all losses, costs, expenses, and corresponding expenses resulted from the Defendant’s late payment; 4. the Plaintiff was entitled to seize, had a lien on and auction of M.V. RONG MING for the Defendant’s late payment, the Defendant had to give up all the defence, and compensate all losses of the Plaintiff unconditionally; 5. provisions of the contract should be governed by the laws of Hong Kong. After signing the contract, the Plaintiff gave a loan in amount of HKD50 million to the Defendant according to the contract in Macau on January 31, 2012. YING Yinghuan, who was authorized by the Defendant in written, received the money. The Defendant mortgaged the involved vessel to the Plaintiff in Hong Kong where the vessel was registered on February 6, 2012, and went through corresponding mortgage registration formalities in Hong Kong Maritime Department, the Plaintiff became the only mortgagee of the vessel ever since. But the Defendant failed to repay the loan together with corresponding interest on April 30, 2012, therefore the Plaintiff applied for arresting the vessel on November 14, 2012. The vessel involved had been arrested by the court. Up to now, the Plaintiff had suffered losses including interest on the loan, overdue interest and fees because of the defendant’s default. In conclusion, the Plaintiff sued to the court and requested the court to judge that: 1. the Defendant should immediately repay the loan in sum of HKD50 million and compensate the loss of interest in sum of HKD18 million temporarily (calculated at the interest rate of 36% as agreed upon by both parties to January 31, 2013 temporarily), according to the exchange rate that HKD1 equaled RMB0.8092 on April 30, 2012, it was equivalent to RMB55,025,600; 2. the Defendant should bear all the fees arising from the recourse of the Plaintiff for the aforementioned loans, temporarily calculated as RMB1,110,800.3; 3. the Plaintiff should enjoy a mortgage right on M.V. RONG MING in respect of the aforementioned amount. The Defendant, Rong Tai International Shipping Co., Ltd., argued that it had no objection to the loan agreement between the two parties, but the Plaintiff had no evidence to prove whether the money had been paid or how it was paid, nor could it prove whether there were other disputes between the Plaintiff and the Defendant. The mortgage formalities of the involved vessel had not been completed, the mortgage could not establish, besides, the Plaintiff’s opinion on the applicable law was not clear. The claims of the Plaintiff should be rejected for lack of factual and legal basis. The Third Party, CEIEC Ningbo Branch stated that: 1. it had a direct interest relation with the case. The involved vessel and M.V. Rong Ming which it applied for enforcement registered with Zhoushan Maritime Safety Administration were the same one; 2. the Plaintiff filed the action based on the Contract Law and the Maritime Code, so this case should be governed by Chinese laws; 3. the evidence provided by the Plaintiff could not prove the loan agreement between the Plaintiff and the Defendant had been actually performed; 4. the ownership and mortgage registration of M.V. RONG MING with Zhoushan Maritime Safety Administration complied to the laws of China, it should be valid and there was no alteration or cancellation formality, the registration undergone by the Plaintiff and the Defendant

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in Hong Kong Maritime Department was false and invalid; 5. the registration with Zhoushan Maritime Safety Administration was valid, it could challenge any third parties including the Plaintiff and the Defendant, so the registration in Hong Kong could not challenge the domestic registration; 6. the application conditions of the judgment made by the court of Hong Kong were hush, what it confirmed was only the validity of registration made on February 17, 2012, but not the present effectiveness of the ownership and mortgage. In conclusion, the Third Party requested the court to reject the Plaintiff’s claims. To support its claims, the Plaintiff, Darby International Investment Co., Ltd., submitted the following evidence materials to the court within the time limit: 1. Mortgage loan agreement and translation thereof, to prove that the Plaintiff and the Defendant concluded the mortgage loan agreement, agreeing that the Plaintiff provided a loan in sum of HKD50 million to the Defendant and the Defendant mortgaged M.V. RONG MING to the Plaintiff; 2. Loan payment receipt, authorization and instructions letter, and translation thereof, to prove that the Plaintiff had paid the loan of HKD50 million agreed in the loan agreement to the Defendant; 3. Ship mortgage agreement concluded in Hong Kong and the relevant vessel registration record issued by Hong Kong Maritime Department, to prove that M.V. RONG MING which owned by the Defendant had been mortgaged to the Plaintiff and the related mortgage registration formalities had been handled, and the Plaintiff as the only mortgagee had been registered; 4. Company’s registration information from Hong Kong Companies Registry, to prove that ZHENG Zhilong was the board director and shareholder of the Defendant, it should have the right to sign the agreement and undergo the mortgage formalities on behalf of the Defendant; 5. Legal opinion issued by Hong Kong ONS Law Firm, to prove the related mortgage agreement concluded between the Plaintiff and the Defendant was legal and valid, and the term on annual interest rates as well as the related losses (including attorney fees) in the loan agreement were all comply with the law; 6. Invoices and the translation thereof, to prove the relevant expenses had paid to the Plaintiff on March 29, 2013; 7. Documents of Hong Kong court, to prove the ownership and mortgage registration of M.V. RONG MING confirmed with laws of Hong Kong, and its effectiveness had been confirmed by the court; 8. Legal opinions issued by Hong Kong Guo Kuangyi Law Firm, to prove that in Hong Kong lawyer’s opinion, the involved loan contract complied with the laws of Hong Kong, provide the relevant laws and cases of Hong Kong applied to the loan contract involved in the case and reinforce evidence 5; 9. Statement of Mrs. YANG Suli and the Statement of Mr. CHEN Jinzhang (illustration of the loans), to prove the Plaintiff agent’s illustration of the situation of the loan, the Plaintiff borrowed HKD50 million from a third party, Sun City Group Co., Ltd. (hereinafter referred to as “Sun City Company”).

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To support its defence, the Defendant, Rong Tai International Shipping Co., Ltd., submitted the following evidence materials to the court within the time limit: 1. Documents of Hong Kong court, to prove that the Hong Kong court’s decision did not affect the mainland court’s confirming the registration effectiveness of the vessel involved in mainland China; 2. Registration documents of the vessel in Hong Kong, to prove that the registration in Hong Kong was illegal and invalid. To support its opinions, the Third Party provided the following evidence materials to the court within the time limit: 1. (2012) Yong Hai Fa Zhou Shang Chu Zi No.294 Civil Mediation; 2. Application for compulsory enforcement and proof table, to prove that M.V. RONG MING was the subject matter of the application for compulsory enforcement; 3. Ownership Registration Certificate of the vessel; 4. Mortgage Registration Certificate of the vessel, to prove that M.V. RONG MING was owned by Zhejiang Dragon Group Co., Ltd. (hereinafter referred to as “Dragon Group”), the vessel was registered in Zhoushan on November 8, 2008 and was mortgaged to China Construction Bank Zhoushan Branch on December 23, 2008. The mortgage was deregistered on 10 September 2010. The vessel was mortgaged to Bank of China Ningbo Branch since September 30, 2010 up to now; 5. Macau police matters, to prove that the case between the Plaintiff and the Defendant concerning dispute over the vessel mortgage contract was suspected of fraud, relevant parties has reported the case to the Macau police; 6. Report on design, materials and process of M.V. RONG MING, to prove that M.V. RONG MING was berthing at the wharf of Zhejiang Chenye shipbuilding Co., Ltd. (hereinafter referred to as “Chenye Company”). The vessel had not been delivered, and the formalities for export customs declaration had not undergone, the import materials already registered under a manual were under the supervision of Zhoushan Customs; 7. Evidence issued by Chenye Company, to prove the claim of the Plaintiff that M.V. RONG MING was the same vessel applied for compulsory enforcement by the Third Party; 8. (2013) Yong Hai Fa Zhou Zhi Min Zi No.35 Civil Ruling, to prove that M.V. RONG MING was owned by Dragon Group; 9. Inner registration materials of M.V. RONG MING in Hong Kong, to prove that M.V. RONG MING’s registration in Hong Kong was based on false statements; 10. Translation of the documents of Hong Kong court, to prove that the Chinese translation submitted by the Plaintiff was mistaken; 11. Mrs. YANG Suli’ s receipt, to prove the inconsistencies between the receipts the Plaintiff submitted before and after and suggested the false statement of the Plaintiff on the source of money.

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Upon cross-examination, as regard to the Plaintiff’s evidence, the Defendant argued that evidence 1 was a copy, its effectiveness should be ascertained according to law; evidence 2 was a copy, it disaffirmed the authenticity and relevancy of it; it had no objection to evidence 3, but the effect should be ascertained according to the laws of Hong Kong; it had no objection to evidence 4, but the proving content should be ascertained according to the laws of Hong Kong; evidence 5 would not be affirmed, because the law stipulated it could not be confirmed according to the legal opinions provided by lawyer of one party; it had no objection to the authenticity of evidence 6, but did not confirm the amount and time thereof; it had no objection to the authenticity of evidence 7, but argued that translation provided by the Plaintiff had mistakes; it did not confirm authenticity, legality and relevancy of evidence 8, 9. After cross-examination, the Third Party considered that the notarized certification procedure of the Plaintiff’s evidence was illegal, and the content was not notarized. Specifically, it disaffirmed the authenticity, legality and relevancy of evidence 1, and held whether ZHENG Zhilong had the authorization to sign on behalf of the Defendant was not clear; it disaffirmed the authenticity, legality and relevancy of evidence 2 either, whether ZHENG Zhilong had the right to authorize others was not clear; it disaffirmed evidence 3, and argued the vessel registration and mortgage registration in Hong Kong was invalid for establishing on the basis of false statement; it disaffirmed evidence 4, because it could only prove that ZHENG Zhilong was a director of the Defendant, but could not prove that it had the right to act on behalf of the Defendant; it disaffirmed evidence 5, according to the laws of Hong Kong, it should be illuminated by an independent Third Party, but it was the Plaintiff’s unilateral statement made by its attorney in Hong Kong; it disaffirmed evidence 6, the Plaintiff failed to prove that it had paid the attorney fees, and the legal fees should not be sustained; it affirmed the authenticity of evidence 7, but the Plaintiff’s translation was wrong; and it disaffirmed the authenticity, legality and relevancy of evidence 8 and evidence 9. As regard to the Defendant’s evidence, upon cross-examination, the Plaintiff had no objection to the authenticity but the purpose thereof. The Plaintiff held the ownership registration and mortgage registration with the Hong Kong Maritime Department was valid, but not as proved by the Defendant that the relevant registration was invalid. The Third Party affirmed all of the Defendant’s evidence after cross-examination. As regard to the evidence of the Third Party, after cross-examining, the Plaintiff had no objection to the authenticity of evidence 1 and 2, but held that it was irrelevant with the case, while it could prove that the Third Party was disinterested with the case. It had no objection to the authenticity of evidence 3 and 4, but it questioned the effectiveness of the vessel registration with Zhoushan Maritime Safety Administration. Evidence 5 was not affirmed, but it could prove the borrowing actually happened. The Plaintiff did not confirm the authenticity of evidence 6, and it held whether the vessel had departed from the port was not necessary condition for registration in Hong Kong. It also disaffirmed evidence 7 and held that the statement of Chenye Company was false. The Plaintiff had no objection to the

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authenticity of evidence 8, but it could prove that the Third Party should claim for its rights in the enforcement procedures. The Plaintiff had no objection to the authenticity of evidence 9 either, but this evidence could not prove that the registration in Hong Kong was invalid. In respect of evidence 10, the Plaintiff held that the translation provided by the Plaintiff should prevail. There was no objection on the authenticity of evidence 11, but the receipt had not been delivered to Sun City Company, it was possessed by the Plaintiff. The real receipt was the one of which the title was the Plaintiff. It had been delivered to Sun City Company. The Third Party had no objection to evidence provided by the Defendant. After reviewing the case, the court holds that: since the Defendant’s legal representative ZHENG Zhilong and the agent ad litem, ZHAO Yuesheng have affirmed that the signature on evidence 1 and 2 of the Plaintiff were signed by themselves, and the two evidence are consistent, so the court affirms the two evidence. In respect of evidence 3 provided by the Plaintiff, there is an original mortgage contract of the vessel, it can corroborate other evidence as well as evidence 1 and 2, so the court ascertains it. The Plaintiff’s evidence 4 is information of the Defendant, the Defendant has no objection, the court ascertains. The Plaintiff’s evidence 5 and 8 can corroborate each other, the court affirms both evidence. The Plaintiff’s evidence 6 is unilateral document and there is no corroborative payment voucher, it shall be disaffirmed. All the parties have no objection to the Plaintiff’s evidence 7, so the court hereby ascertains. The Plaintiff’s evidence 9 corroborates evidence 1 and 2, it shall be affirmed. All the parties have no objection to the Defendant’s evidence 1 and 2, the court hereby affirms. Evidence 1, 2, 3, 4 of the Third Party corroborates each other and all the parties have no objection to the authenticity thereof, the court hereby affirms. Evidence 5 of the Third Party is a copy and has no other effective evidence to support, so it shall not be affirmed. Evidence 6 and 7 of the Third Party are original documents, the court ascertains. All the parties have no objection to the authenticity of the Third Party’s evidence 8 and 9, so the court hereby affirms. Evidence 10 of the Third Party is the translation of order made by the court of Hong Kong, given that all parties have provided a translation, the content of the order will be determined synthetically. Evidence 11 of the Third Party is inconsistent with the Plaintiff’s evidence 9, but the court has affirmed that the Plaintiff’s evidence 8 and 9 can prove the fact that the Plaintiff borrowed money from Sun City Company, so the authenticity of this evidence shall be confirmed, but the content thereof will not be. According to all the parties’ statements and the effective evidence the court having confirmed, the court ascertains the following facts: the Plaintiff and the Defendant signed the loan agreement on January 31, 2012, agreeing that the Plaintiff granted the Defendant a loan in sum of HKD50 million. The Defendant mortgaged its exclusively owned vessel RONG MING to the Plaintiff (IMO: 9557630). The Defendant paid an interest at annual interest rate of 36%, the loan period was three months calculating from January 31, 2012, and the effective date to calculate the interest was the date of payment of the loan. If the Defendant failed to repay the loan, the Plaintiff was entitled to sue the Defendant and requested the Defendant to assume all the costs, expenses, and miscellaneous fees the Plaintiff

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paid. In addition, this loan agreement was governed by the laws of Hong Kong. On the same day, the Plaintiff delivered HKD50 million to the Defendant’s authorized representatives, Ying Ying Huan and ZHENG Zhilong signed the loan payment receipt on behalf of the Defendant in Macau, confirming the loan in sum of HKD50 million from the Plaintiff had been received and the Plaintiff had fulfilled its obligations, and then the Defendant set a mortgage on M.V. RONG MING. On February 6, 2012, the Defendant signed the vessel mortgage contract. On February 17, 2012, the two parties completed the mortgage registration with Hong Kong Maritime Department, stating the mortgagor was the Defendant, the mortgagee was the Plaintiff, and the mortgaged property was M.V. RONG MING. On November 14, 2012, the Plaintiff applied with the court for arresting M.V. RONG MING before filing this action because the Defendant did not return the money, the court made (2012) Yong Hai Fa Zhou Bao Zi No.121 Civil Ruling, ruling to arrest M.V. RONG MING in Chenye Company. The Plaintiff lodged a lawsuit to the court on December 20, 2012. In addition, the court ascertains that M.V. RONG MING was built by Chenye Company. On November 2, 2007, CEIEC Ningbo Company signed a vessel export agency agreement with Chenye Company, agreeing that CEIEC Ningbo Branch exported M.V. RONG MING to Himons Jewel Shipping Co., Ltd. as the agent of Chenye Company. Because of Chenye Company’s failing to deliver the vessel on time, upon arbitration in Hong Kong, Himons Jewel Shipping Co., Ltd. cancelled the vessel construction contract. After returning the shipbuilding advance payment and interest to Himons Jewel Shipping Co., Ltd., CEIEC Ningbo Branch filed a lawsuit against Morning Industry Company and Dragon Group with the court on May 23, 2012. In the trial of the case, CEIEC Ningbo Branch, Chenye Company and Dragon Group reached a mediation agreement voluntarily on November 2, 2012, after examination, the court made (2012) Yong Hai Fa Zhou Shang Chu Zi No.294 Civil Mediation to confirm it on the same day. In the process of construction, the ownership of M.V. RONG MING was registered on December 1, 2008 with Zhoushan Maritime Safety Administration and Dragon Group was registered as the ship owner. The vessel mortgage registration was completed on September 30, 2010 with Zhoushan Maritime Safety Administration, the mortgagors was Bank of China Co., Ltd. Ningbo Branch, and the registration had not been changed ever since. M.V. RONG MING was berthing at the wharf of Chenye Company, and had not been delivered yet. On June 4, 2010, the Defendant submitted an application for vessel registration to the Hong Kong Maritime Department and requested to register its ownership of M.V. RONG MING (Rong Ming). On June 30, 2010, M.V. RONG MING was registered with the Hong Kong Maritime Department, the owner was the Defendant. On February 17, 2012, the vessel mortgage registration was completed in the Hong Kong Maritime Department, the mortgagee was the Defendant and the mortgagor was the Plaintiff, the registration had not been changed yet. Besides, the court finds that on June 13, 2013, the Plaintiff filed a lawsuit regarding to the registration and mortgage registration of M.V. RONG MING with the High Court of Hong Kong. On November 26, 2013, the Hong Kong court made

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an order, ascertaining the effectiveness of the registration and mortgage registration of M.V. RONG MING in Hong Kong in accordance with the Hong Kong Merchant Vessel (Registration) Ordinance (Chapter 415). According to the allegations of the parties and their recognition of the facts, the court concludes and analyzes the issues of the case as follows: 1. As for the applicable law of the case. The Plaintiff argued that the case should be governed by the laws of Hong Kong, the Defendant and the Third Party argued that part of the loan agreement should be governed by the laws of Hong Kong, and the part involved mortgage in mainland should apply Chinese laws. The court holds that it is provided in Article 4 of the loan agreement concluded by the Plaintiff and the Defendant clearly that the loan agreement shall be governed by the laws of Hong Kong and the Plaintiff has provided relevant laws of Hong Kong, therefore, the loan agreement between the parties in this case shall be governed by the laws of Hong Kong. 2. As for the establishment and effectiveness of the loan agreement between the Plaintiff and the Defendant and whether it shall be performed. The Plaintiff argued that the loan agreement between the Plaintiff and the Defendant was legal and valid and it had lent HKD50 million according to the contract, the contract had been actually performed. While the Defendant argued that although there was a corresponding agreement between the Plaintiff and the Defendant, the Defendant did not actually receive the money, there was no evidence to prove that the Plaintiff had actually performed the contract, what’s more, there was a dispute over the effectiveness of the contract under the laws of Hong Kong. The Third Party maintained there were no sufficient evidence to prove whether there was a loan agreement between the Plaintiff and the Defendant, let along the fact that the Plaintiff had lent the Defendant HKD50 million. The court holds that the Plaintiff and the Defendant have no objection to the signing of the loan agreement and mortgage agreement and the vessel mortgage, the two parties only contested the effectiveness of the agreement and whether the agreement shall be actually performed. According to the provisions of Article 2 of the Money lenders Ordinance of Hong Kong, the Plaintiff in the case of is not a money lender defined in the Ordinance, so the loan agreement between the two parties does not need to meet the requirements of a specific form to take effect, the loan agreement between the two parties has legal effect because of the free declarations of intention and legal considerations, and the agreement on an annual interest rate of 36% does not violate the provisions of Article 24 of the Money lenders Ordinance of Hong Kong, so it is also valid. Regarding to the performance of the contract, the Plaintiff provided the receipt, the authorization and the instructions signed by ZHENG Zhilong, the legal representative, ZHAO Yuesheng, the agent and YING Yinghuan, the authorized representative of the Defendant, and the agent also elaborated the process of the performance of the contract in details, combined with the fact that the Defendant assisted the Plaintiff in undergoing vessel mortgage registration, the court

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confirms that the Plaintiff actually performed the loan agreement, namely it had paid HKD50 million to the Defendant. There is no evidence to support the allegations of the Defendant and the Third Party that the Plaintiff has not actually performed the contract, so the court will not ascertain. In conclusion, the court holds that the loan agreement between the Plaintiff and the Defendant is legally established and takes effect, and the Plaintiff has actually performed the contract. 3. As for whether the Rong Ming is M.V. RONG MING. After examination, the court holds that both the RONG MING registered with Zhoushan Maritime Safety Administration of the People’s Republic of China and M.V. RONG MING registered with Hong Kong Maritime Department were built by Chenye Company. Chenye Company proved that it only built a ten-thousand-ton chemical/product vessel since the company was founded. Combined with the fact that the two vessels are the same one stated by ZHENG Zhilong, the common legal representative of Dragon Group and the Defendant, the court affirms that M.V. RONG MING registered in Zhoushan Maritime Safety Administration and M.V. RONG MING registered in Hong Kong Maritime Department are the same one. 4. As for the effectiveness of the Plaintiff’s mortgage right on M.V. RONG MING. The Plaintiff argued that the Plaintiff had provided the loan to the Defendant as agreed, and undergone the mortgage registration with the Hong Kong Maritime Department in accordance with law, the Hong Kong court also confirmed the effectiveness of the registration and mortgage registration with the Hong Kong Maritime Department, therefore the Plaintiff enjoyed the right of mortgage of M.V. RONG MING in accordance with law. The Defendant argued that M.V. RONG MING was registered in Hong Kong based on false documents, so it was invalid, its legal and valid owner should be Dragon Group, so the Defendant had no right to set the mortgage on the vessel and the Plaintiff's mortgage was invalid. The Third Party held that M.V. RONG MING and M.V. RONG MING were the same vessel. The vessel was berthing in Zhoushan and registered to be owned by Dragon Group and mortgaged to Bank of China Co., Ltd. Ningbo Branch with Zhoushan Maritime Safety Administration. Therefore, the mortgage registration should be invalid for the Defendant’s false registration with the Hong Kong Maritime Department. The court holds that the Defendant applied to the Hong Kong Maritime Department for ownership registration of M.V. RONG MING and provided corresponding registration information of the vessel, and succeeded in undergoing the registration of the vessel. The Plaintiff accepted the Defendant’s vessel mortgage loan relying on the registration and the Defendant signed the vessel mortgage contract, the two parties’ intention of the vessel mortgage is clear and real, besides they have undergone the mortgage registration of the vessel with the competent department in accordance with law. To determine the validity of the mortgage registration of the vessel, it shall be reviewed according to the laws of place where the mortgage is registered. According to the provisions of the Hong Kong

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Merchant Vessel (Registration) Ordinance (Chapter 415), the registration is effective, and it has neither been revoked nor changed, so the mortgage registration between the two parties should be valid. In conclusion, the Plaintiff enjoys the mortgage of M.V. RONG MING. Because the RONG MING and M.V. RONG MING are the same vessel, time of the mortgage registration of M.V. RONG MING with Zhoushan Maritime Safety Administration is September 30, 2010, that of M.V. RONG MING with the Hong Kong Maritime Department is February 17, 2012, so the Plaintiff’s mortgage right of M.V. RONG MING may challenge a Third Party since February 17, 2012. In conclusion, the court holds that the Plaintiff is foreign company and the Defendant is a Hong Kong company, thus, there are foreign and Hong Kong-related factors. The court ruled to arrest M.V. RONG MING upon the Plaintiff’s application, according to Article 19 of the Special Maritime Procedure Law of the People’s Republic of China, the court has jurisdiction in accordance with the law because of taking maritime preservation measures. In respect of the applicable law, the Plaintiff and the Defendant have expressly agreed to apply the laws of Hong Kong in the loan agreement, and the Plaintiff provided relevant laws of Hong Kong on the disputes involved, so the governing laws applied to the case shall be the laws of Hong Kong. The loan agreement between the Plaintiff and the Defendant is lawfully established and valid, the Plaintiff provided the loan to the Defendant, so the Defendant shall pay the interest as agreed and return the principal on time. Now the Defendant’s failure to pay the interest and return the principal as agreed obviously constitute default, it shall bear the corresponding liability for breach of contract. The Plaintiff’s claim to request the Defendant to repay the principal in sum of HKD50 million and the interest in sum of HKD18 million is legitimate and reasonable, therefore the court affirms. The claim of the Plaintiff that the amount of the principal and interest thereof should be calculated at the exchange rate (HKD1 = RMB 0.8092) of the due date, namely April 30, 2012 amounting to RMB55,025,600 is appropriate, the court affirms. The Plaintiff required the Defendant to undertake the fees in sum of RMB1,110,800.3 resulted from the Plaintiff’s recourse of the aforesaid loans, but it failed to produce sufficient and effective evidence, the claim shall not be ascertained. The Plaintiff and the Defendant underwent the mortgage registration with Hong Kong Maritime Department in accordance with the law on the basis of the Merchant Vessel (Registration) Ordinance (Chapter 415), the registration shall be valid, the Plaintiff’s claim for enjoying mortgage right on M.V. RONG MING is legal and reasonable, the court hereby affirms. The Defendant and the Third Party have not provided sufficient evidence to support their opinions that the loan agreement is null and void and the agreement has not been performed, therefore the court will not adopt. In conclusion, the reasonable part of the Plaintiff’s claims will be sustained. According to Article 2 and Article 24 of the Money Lenders Ordinance of Hong Kong Special Administrative Region of the People’s Republic of China, Article 44 of the Merchant Vessel (Registration) Ordinance (Chapter 415) of Hong Kong Special Administrative Region of the People’s Republic of China, Article 3 and

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Article 41 of the Law of the People’s Republic of China Governing the Application of Laws on Foreign-related Civil Relations, Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, after discussion of the judicial committee, the judgment is as follows: 1. The Defendant, Rong Tai International Shipping Co., Ltd., shall pay the principle and interest thereof in sum of RMB55,025,600 to the Plaintiff within ten days after this judgment comes into effect; 2. The Plaintiff Darby International Investment Co., Ltd. shall enjoy the mortgage right of M.V. RONG MING which owned by the Defendant Rong Tai International Shipping Co., Ltd., the mortgage may challenge a third party from the date of the mortgage registration, namely February 17, 2012; 3. Reject other claims of the Plaintiff Darby International Investment Co., Ltd. If the obligation of payment is not fulfilled within the period designated by this judgment, interest on the debt for the delayed period shall be doubled in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB319,730, the Plaintiff, Darby International Investment Co., Ltd., shall bear RMB3,221, and the Defendant, Rong Tai International Shipping Co., Ltd., shall bear RMB316,509. In case of dissatisfaction with this judgment, the Plaintiff and the Defendant may within 30 day upon the service of this judgment submit a statement of appeal to the court, together with copies in accordance with the number of the opposite parties, the court of second instance shall be Zhejiang High People’s Court [the appeal court acceptance fee in sum of RMB 319,730 (the specific amount shall be determined by Zhejiang High People’s Court, the extra part will be returned later) shall be paid in advance when the statement of appeal is submitted. If the fee not be paid within seven days after the expiration of the time limit, it shall be deemed as automatic withdrawal of the appeal. The fee shall be paid to the non-tax revenue settlement account of Zhejiang Province Department of Finance, the account number is 19000101040006575401001 and the opening bank is Agricultural Bank of China Hangzhou Branch. Presiding Judge: CHEN Xiaoming Acting Judge: XIA Guangen Acting Judge: SHAN Yajuan June 13, 2014 Clerk: XU Meina

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Appendix: Relevant Laws 1. Money Lender Ordinance of Hong Kong Special Administrative Region of the People’s Republic of China Article 2 “Money Lender” refers to a person who operates money lending business or put a statement or declaration on advertisements or illustrate in any other way that it is engaged in the business (despite whether it is engaged into other business as well). Article 24. (1) any person (despite whether he is money lender or not) who borrows a loan or provide loan, it shall be deemed illegal if the real annual interest rate is more than sixty percent; (2) where the actual rate exceeds the interest rate stipulated in paragraph (1), any loan agreement on repayment of the loan or payment of interest thereof, and any mortgage set on such load agreement shall not be executed. 2. Merchant Vessel (Registration) Ordinance (Chapter 415) of Hong Kong Special Administrative Region of the People’s Republic of China Article 44. (1) A registered vessel may be made security for any obligation by way of a mortgage under this Ordinance. (2) The instrument creating such a mortgage shall be in the specified form: … (3) Upon lodgement of a mortgage instrument and any consents required pursuant to Section 45(2), the register shall enter in the registration of the mortgage and shall endorse on the mortgage instrument date and time of registration. (4) Mortgage instruments shall be registered in the order of their lodgement. 3. Law of the People’s Republic of China Governing the Application of Laws on Foreign-related Civil Relations Article 3 The parties concerned may choose the applicable law of foreign-related civil relation in accordance with the law applicable law express. Article 41 The parties concerned may choose the laws applicable to contracts by agreement. If the parties do not choose, the law of habitual residence of who performs its obligations can best embody the characteristics of the contract or other laws which are most closely connected to the contract shall be applied. 4. Civil Procedure Law of the People’s Republic of China Article 64 The parties shall bear the liability to produce evidence in support of their claim. …

Guangzhou Maritime Court Civil Judgment Foshan Feitu Import and Export Co., Ltd. v. DHL Global Forwarding (China) Co., Ltd. Foshan Branch et al. (2013) Guang Hai Fa Chu Zi No. 492 Related Case(s) None. Cause of Action 223. Dispute over freight forwarding contract on the sea or sea-connected waters. Headnote Freight forwarder held liable for delivery of goods without presentation of original bill of lading, having been held to have acted as contractual carrier rather than merely as forwarding agent. Summary The Plaintiff, Foshan Feitu Import and Export Co., Ltd., entered into an international sale of goods agreement with a foreign company, Russo Company to sell bath facilities to Venezuela. The Plaintiff then authorized the Defendant, DHL Foshan Branch to carry the goods to Venezuela, the two parties established a contract of carriage of goods by sea, the Plaintiff was the shipper and the Defendant was the carrier. DHL Foshan issued an original bill of lading, charging a freight forwarding fee and notifying the plaintiff that they acted as carrier of goods. However, The Plaintiff did not deliver the original bill of lading to the customer and the customer refused to pay for the goods. Afterwards, the Defendant DHL issued to the Plaintiff another bill of lading in triplicate as the agent of the carrier Danmar Company. Even though, the Venezuelan Customs require original documents issued by a carrier or the NVOCC in order for delivery to occur, DHL Foshan notified the plaintiff that the goods had been delivered to the receiver, Russo, in Venezuela. The plaintiff sued the defendant for damage, because the defendant delivered goods without presentation of the original bill of lading. The main issues were: (1) the nature of the contract, namely whether the legal relationship between the parties was a contract of carriage of goods by sea or contract of freight forwarding; (2) whether the goods involved were delivered without original bill of lading and the reason; (3) whether or not the Plaintiff suffered a loss; (4) whether or not the two Defendants breached the contract and were liable for compensation.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_19

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The court held the parties had a marine freight forwarding contract sustained by mutual and genuine intents based on equality and free would expression. The Defendant was at fault in making the bill of lading in dispute, mistakenly issuing a LCL (less than a container load) bill of lading as a FCL (full container load) bill of lading and caused the delivery of goods without original bill of lading. Under Article 124, Article 406 of the Contract Law of the People’s Republic of China; Article 10 of the Provisions of the Supreme People’s Court on Several Issues in the Trial of Cases concerning Dispute over Marine Freight Forwarding, the Plaintiff as principal sustained any loss due to the fault of the agent, DHL, the principal could claim damages.

Judgment The Plaintiff: Foshan Feitu Import and Export Co., Ltd. Domicile: No. 5 Temporary Shop, South Jihua Si Road, Chancheng District, Foshan City, Guangdong. Legal representative: LUO Zhicheng, chairman. Agent ad litem: CUI Jianjun, lawyer of Guangdong Headhunt Law Firm. The Defendant: DHL Global Forwarding (China) Co., Ltd. Foshan Branch Domicile: Room 708–710 Yongfeng Building, 12 Tongji West Road, Chancheng District, Foshan City, Guangdong. Person in charge: WU Ziling, general manager. The Defendant: DHL Global Forwarding (China) Co., Ltd. Domicile: Room 2001, Oriental International Financial Plaza, 318 South Zhongshan Road, Huangpu District, Shanghai. Legal representative: HUANG Guozhe, general manager. Joint agent ad litem: WU Yong, lawyer of Henry and Co. With respect to the case arising from dispute over freight forwarding contract filed by the Plaintiff, Foshan Feitu Import and Export Co., Ltd., against the Defendant, DHL Global Forwarding (China) Co., Ltd. Foshan Branch (hereinafter referred to as “DHL Foshan”), and DHL Global Forwarding (China) Co., Ltd. (hereinafter referred to as “DHL”) on April 9, 2013, after the Plaintiff supplemented documents on April 22, the court accepted this case on April 27, and organized the collegiate panel consisting of Judge NI Xuewei who acted as Presiding Judge, Judge WU Guining and Acting Judge YANG Yaxiao according to the law and appointed LU Shiying as Clerk, and summoned the parties to exchange evidence before trial on July 15, September 9, and heard the case in public on July 15 and September 9, CUI Jianjun as agent ad litem of the Plaintiff, WU Yong as joint agent ad litem of the two Defendants, appeared in court and participated the hearings. Now the case has been concluded.

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The Plaintiff alleged that on June 5, 2012, it signed an international sale of goods agreement with a foreign company in respect of bath facilities sold to Venezuela. The Plaintiff entrusted DHL Foshan to carry the goods to Venezuela, the two parties established a relationship of contract of carriage of goods by sea, the Plaintiff was the shipper and the Defendant was the carrier. DHL Foshan issued original B/L numbered with F0Q036959 and charged freight forwarding fee from the Plaintiff, a relationship of carriage and a relationship of agency were established. On November 23, DHL Foshan notified the Plaintiff that the goods had been taken over via e-mail. The Plaintiff did not deliver the original B/L to the customer and the customer refused to pay for the goods after taking delivery of the goods. DHL Foshan was a branch established by DHL in Foshan City, thus DHL should bear the civil liability for compensation. The delivery of goods without original B/L of the two Defendants caused direct economic loss to the Plaintiff, the two Defendants should bear the liability for compensation. Therefore the Plaintiff requested the court to judge: 1. The two Defendants should compensate USD10,980 [the currency should be converted to the currency of RMB at the exchange rate in August 2012 (1:6.25) namely RMB68,625] and the interest from October 7, 2012 to the date of payment of the compensation (the interest should be calculated at the loan interest rate of working capital over the same period of People’s Bank of China); 2. The two Defendants should bear the litigation fees. The Plaintiff submitted the following evidence materials within the time limit for producing evidence: 1. Full set of original No. F0Q036959 B/L, to prove that the Plaintiff entrusted the Defendant to transport the goods in the four containers to Venezuela; 2. Invoice, to prove that the Plaintiff had paid freight forwarding fee to DHL Foshan, a freight forwarding relationship established between the two parties; 3. E-mail sent by DHL Foshan to the Plaintiff, to prove that DHL Foshan notified the Plaintiff that the goods had been taken delivery of and it shirked the responsibility of delivery of goods without original B/L to the local customs; 4. E-mail and goods list sent by the Plaintiff to the customer on May 29, 2012, to prove that the full price of the goods was USD10,980; 5. Customs Declaration Form of Export Goods of the People’s Republic of China (hereinafter referred to as “customs declaration form”), to prove that the customs declaration price of the goods involved was USD8,640; 6. Copy of No.F0Q036959 B/L, to prove that there were other goods that the Plaintiff entrusted the Defendant to ship. The two Defendants jointly argued that they were not the carriers of the goods involved, they were just the agents of the carrier who collected goods at port of loading and singed the B/L on behalf of the carrier. In this case, it involved FOB goods, the consignee was responsible for booking space, there was no relationship of contract of carriage of goods by sea between the Plaintiff and the two Defendants, even though the carrier should bare the liability for delivery of goods

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without original B/L, the two Defendants, as agents, should not bare the liability. The goods involved were shipped by LCL, there was another B/L for other goods, the carrier delivered the goods against that B/L, the B/L held by the Plaintiff was an additional B/L, thus this case was not concerning delivery of goods without original B/L. Pursuant to the laws of Venezuela, the carrier could deliver goods without original B/L. The consignee had paid the price of the goods, so the Plaintiff did not have any loss. The customs declaration price of the goods involved was USD8,640, the compensation, if any, should be based on the customs declaration price. To sum up, the Defendants requested the court to reject the Plaintiff’s claims. The two Defendants submitted the following evidence within the time limit for producing evidence: 1. Statement issued by the consignee, Inversiones Russo 3000. CA (hereinafter referred to as to “Russo Company”), to prove that the consignee had paid the price of the goods according to the instruction of the Plaintiff; 2. Invoice issued by the Plaintiff, to prove that the Plaintiff requested to pay the price of the goods to the account of a third party; 3. Email between the consignee and the Plaintiff, to prove that the Plaintiff confirmed it had received the price of the goods; 4. Foreign currency account withdrawal slip of Hong Kong and Shanghai Banking Corporation Limited, to prove that the consignee had paid the payment for goods; 5. Customs declaration form, to prove the customs price of the goods and the number of the B/L was 93308400; 6. Copies of No. HLCUCA4120846678 B/L, No. F0Q036657 B/L and No. F0Q036959 B/L, to prove that the goods involved were carried by LCL with other goods; 7. Agency Agreement, to prove that DHL was the agent of Danmar Company, and it had the authorization to issue the B/L; 8. Sample of registered B/L of Danmar Company, to prove that Danmar Company was a NVOCC having been registered; 9. Sample of registered B/L of DHL, to prove that the B/L issued by DHL was B/ L of DHL. During the hearing, the nature of the legal relationship alleged by the Plaintiff was not consistent with ascertainment of the court based on the facts, after the court explained, the two Defendants submitted evidence within the renewed limitation of time for producing evidence; 10. E-mail between employees of DHL Foshan and agent at the port of destination, to prove that the two Defendants had notified the agent at port of destination that they issued two sets of B/L that only when the two sets of B/L were received it could the goods be delivered, so the Defendants committed no fault in the delivery of the goods involved. Through cross-examination in the hearing, the two Defendants had no objection to the effect of the full set of original B/L, the invoice, the e-mail sent by DHL Foshan to the Plaintiff, the customs declaration form or the copy of No. F0Q036192

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B/L, but argued that the carrier was specified in the B/L involved, DHL issued the B/L on behalf of the carrier, the freight was to be collected, and DHL Foshan only charged the fees at the port of loading. The two Defendants did not affirm the authenticity and relevancy of the e-mails between the Plaintiff and its customer, and argued there was no relevancy between the receiver of the e-mail and the consignee of the goods involved. The Plaintiff did not affirm the authenticity of the statement of the consignee submitted by the two Defendants, but admitted it did not send the original B/L of another consignment until receiving a payment in amount of USD10,980, and pointed out that the sum was paid for all the goods entrusted by the Plaintiff sent to Venezuela rather than specially paid for the goods involved, the price of the goods involved should be calculated as per specific portion; the Plaintiff did not affirm the authenticity, legality or relevancy of the e-mail between employee of DHL Foshan and the agent at the destination port, and alleged that the content of the e-mail suggested the two Defendants were entitled to decide whether the goods could be delivered without consent of Danmar Company, the agency relationship alleged by the two Defendants was not true; the Plaintiff believed it held the only original B/L, and it knew there were two sets of original B/L for the goods involved until it received the e-mail, apparently, the two Defendants were fault at that; the Plaintiff had no objection to the authenticity of other evidence except the relevancy of the agency agreement for no effective date declared in the agreement. The court ascertains the probative force of the evidence, the authenticity of which the Plaintiff and the Defendants had no objection to. Regarding to the e-mails between the Plaintiff and its customer submitted by the Plaintiff, the customer who sent the e-mail was Sherilka Henry of Model One International S.A (hereinafter referred to as to “Model One Company”), he referred in the e-mail sent to the Plaintiff on May 26, 2012 that he sent the email on behalf of Mr. Nasser, who was designated as the consignee of the goods involved in the purchase and sales contract attached in the email, the contracting mailbox was [email protected], the allegation of the two Defendants that the email had no relevancy with the consignee involved is inconsistent with the facts, the court will determine comprehensively with other evidence; the agency agreement submitted by the two Defendants conforms with form of evidence, the date of effectiveness was specified in the English version, the Plaintiff only raised objection but failed to submit contrary evidence to prove its invalidation, the court ascertains the probative force thereof. The statement of Russo Company, which stated it had paid the price of goods in amount of USD10,980 on October 9, 2012 to Xingyue Construction Materials Co., Ltd. (hereinafter referred to as to “Xingyue Company”), the representative designated by the Plaintiff, the statement of Russo Company was an evidence formed after the action, and it was inconsistent with the record in the invoice issued by Russo Company, the court does not ascertain it. The court will determine the email between the employee of DHL Foshan and agent of destination port comprehensively with other evidence. According to the evidence adopted by the court and the situation of hearing, the court finds out the following facts:

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1. Performance of the purchase and sales contract On April 26, 2012, the Plaintiff signed an international purchase and sales contract with its customer, Model One Company. Model One Company bought ceramic tiles, massage parlors and shower cubicles in amount of USD112,733.34 by FOB from the Plaintiff and shipped the goods from Foshan to Venezuela, the mode of payment was telegraphic transfer in advance, a deposit representing 30% of the price paid in advance, the rest sum paid before shipment, and the delivery date was within 8 or 9 weeks after receiving the deposit. After the investigation of the court, the sale manager, Shirley Huang of the Plaintiff stated received a deposit in amount of USD30,000 for the consignment of the goods transported to Venezuela. The statement was consistent with the agreement on mode of payment between the Plaintiff and Model One Company in the international purchase and sales contract, and the amount coincided. The court confirmed the fact that the Plaintiff received the deposit in amount of USD30,000 for the goods involved. In the hearing, the Plaintiff alleged that due to Model One Company was cheated when paying the price of the goods to the Plaintiff, it wrongfully remitted the payment to the account of a hack. The goods were not completely loaded into the prepared 2 40’GP containers (No. F0Q036192 B/L), the rest goods, namely the goods involved were loaded by LCL into other 4 20’GP containers (No. F0Q036959 B/L). The goods under No. F0Q036192 B/L arrived at the port of destination first, because of the trouble in payment mentioned above, the Plaintiff did not deliver the original B/L to Russo Company, the Plaintiff sent e-mail to Sanitivi Company indicating it mail the original B/L received last week to Mr. Nasser until after Sanitivi Company paid USD10,980 through HSBC to the account of Xingyue Company which was nominated by the Plaintiff on October 9, 2012. On October 11, Sanitivi Company sent an e-mail to the Plaintiff alleging it had mailed the B/L to Mr. Nasser through FedEx. On October 4, the Plaintiff issued an invoice on which the amount of USD10,980 to Russo Company, which stated “release 2  40HQ containers under the ocean bill of lading”, such information of the containers was same as that of No.F0Q036192 B/L. Mr. Nasser was the representative of Russo Company. Russo Company did not pay the remaining sum after receiving the original B/L. The cargo list submitted by the Plaintiff which was affirmed by Model One Company recorded the total price of 36 sets of FC-507 shower cubicles and 36 sets of FC-503 shower cubicles is USD10,980. The customs declaration price of the goods involved was in amount of USD8,640. Since the Plaintiff had actually performed the contract with Model One Company and partial price of the goods had been paid, and the buyer affirmed the price of the goods involved was USD10,980, the probative force of the contract is stronger than that of the customs declaration form, thus the court ascertains that the value of the goods involved was USD10,980.

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2. Facts regarding the transport involved On August 2012, the Plaintiff entrusted DHL Foshan to transport 72 sets of shower cubicles from Foshan, China to Maracaibo, Venezuela, the consignee was Russo Company, in the meantime, another shipper, Foshan Xunya Construction Materials Co., Ltd. (hereinafter referred to “Xunya Company”) entrusted DHL Foshan to ship a consignment of goods to the same consignee at the same port of destination, there were still positions in the 8 containers loading tiles, DHL Foshan arranged the two consignments of goods to be transported by LCL with the consent of the Plaintiff. The Plaintiff shipped the goods involved to Xunya Company and finished LCL loading at Xunya Company. The Plaintiff paid the freight forwarding fee in amount of RMB4,360 to DHL Foshan, then DHL Foshan issued special invoice for international freight forwarding on August 1, the number of the B/L stated therein was F0Q036192 and the fee included agency fees at the loading port of the goods under No.F0Q036192 B/L and the goods involved. After DHL Foshan took over the goods, it entrusted a third party to carry out the transport and nominated DHL Global Forwarding Venezuela (hereinafter referred to as to “DHL Venezuela”) as the consignee. As No.HLCUCA4120846678 B/L issued by the agent, Herbero (China) Guangzhou Branch (hereinafter referred to as to “Herbero Company”) on August 21, 2012 showed, Hebero was the carrier, DHL Foshan as the shipper delivered the 8 containers carrying ceramic titles and shower cubicles carried in the containers numbered with CPSU1764238, CSQU3147038, FSCU3591863, GATU0030679, CPSU1616734, FSCU7398446, CAXU6664680 and GATU0277231 in the carrier’s container yard in Foshan and loaded the goods on M.V. “SHI YUN 901”, the consignee was DHL Venezuela, the port of loading was Foshan, China and the port of discharging was Maracaibo Venezuela, the place of was the container yard of carrier at Maracaibo, the method of delivery was FCL/ FCL, and the basic freight was prepaid. On August 21, DHL issued No.F0Q036657 B/L of which the title was Danmar Company in triplicate as the agent of the carrier Danmar Company, to the Plaintiff and Xunya Company. It was stated in No.F0Q036959 B/L that the shipper was the Plaintiff, the consignee was Resso Company, the notify party was the consignee, the carrying vessel was M.V. “SHI YUN 901”, the port of loading was Foshan China, the port of discharge was Maracaibo, the freight forwarder was DHL Foshan, it was stated in the delivery description blank that the deliverer was DHL Venezuela, the goods were transferred to Mr. Nasser in Venezuela. The containers (20’GP) which were numbered with CPSU1764238, CSQU3147038, FSCU3591863 and GATU0030679 loaded 36 shower cubicles, the freight was to be collected, the shipper was in charge loading the goods into containers, counting and sealing, the mode of transport was CY/CY, non-negotiable. The numbers of the containers and the seal numbers were same as the information recorded in No.F0Q036959 B/L.

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The difference between No.F0Q036959 B/L and No.F0Q036657 B/L lied in that the shipper was Xunya Company, ceramic tiles and glazed tiles 8 20’GP containers were transported to Venezuela, the other 4 containers were numbered with CPSU1616734, FSCU7398446, CAXU6664680 and GATU0277231. On September 6, the employee of DHL Foshan sent an e-mail to DHL Venezuela, the agent of destination port, informing that it issued two sets of B/L numbered with F0Q036657 and F0Q036959 for 8 containers to Russo Company had been to the two shippers. On September 10, it sent an e-mail again to remind DHL Venezuela that it could not deliver the goods to the consignee unless it took back two sets of original B/L. On September 26, DHL Venezuela replied by e-mail to DHL Foshan alleging that: “delivery of goods in Venezuela shall only be permitted by the Customs, if the compulsory documents do not meet the requirement of the Customs, neither the carrier nor the NVOCC has the right to release the goods. Therefore, if the consignee does not possess the original B/L, customs clearance cannot proceed and the Customs will not permit delivery of the goods.” On October 6, the goods involved arrived at the port of destination. On November 23, the employee of DHL Foshan notified the Plaintiff by email that the goods had been picked up by Russo Company. On June 21, Mr. Nasser sent letter to DHL alleging that only the goods under the original B/L provided by the shipper had gone through customs clearance, he did not know there was other original B/L relating to the bathroom doors loaded by Xunya Company in the container, the payment in amount of USD10,980 under the B/L involved had been paid to Xingyue Company, the representative nominated by the Plaintiff by Saintivi Company. The two Defendants affirmed in the hearing that the goods involved had been taken delivery by Russo Company and were no longer under the control of Danmar Company, and they argued that the B/L held by the Plaintiff was an additional B/L. 3. Other facts On May 13, 2011, Danmar Company, as the principal in the name of a Swiss NVOCC, signed an agency agreement with DHL, which provided that Danmar Company entrusted DHL to deal with its business in China, including signing B/L of Danmar Company. This agreement took effect as of the date stipulated herein and continued to be effective unless any party notified the other party to terminate this agreement in written for two months in advance; it was sealed and signed by the authorized representatives of Danmar Company and DHL; it was notarized by notarial authority of Swiss Basel, notarized the two representatives were authorized to sign and the signatures were real, and it was verified by both Swiss Federal General Office and the Consular Section of the Embassy of the People’s Republic of China in Swizerland. Danmar Company has registered the sample of the B/L involved with the Ministry of Transport of the People’s Republic of China, DHL has also registered. Such content could be searched on Chinese Shipping Website, an ancillary website of the Ministry of Transport.

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Saintivi Company was a Hong Kong company, both the Plaintiff and the Defendants affirmed that the consignee Russo Company appointed Saintivi Company as its trade agent. The court holds that this case is arising from dispute over marine freight forwarding contract. According to Article 23 of the Several Provisions of the Supreme People’s Court on the Scope of Cases Entertained by Maritime Courts, this case is under exclusive jurisdiction of maritime courts. According to Article 24 of the Civil Procedure Law of People’s Republic of China, a lawsuit brought on a contract dispute shall be under the jurisdiction of the people’s court in the place where the Defendant has his domicile or where the contract is performed. The domicile of the Defendant DHL Foshan is in Foshan and the contract was performed in Foshan, therefore the court has jurisdiction over this case. The port of destination is Venezuela, the Plaintiff field an action on the ground of delivery of goods without original B/L at the port of destination and claimed for liability for compensation as result of breach of contract against the two Defendants, there are foreign-related factors in this case, the Plaintiff and the two Defendants agreed to apply the laws of the People’s Republic of China, therefore, laws of the People’s Republic of China shall be governing laws to deal with the substantial disputes of this case. The main issues of the Plaintiff and the Defendant as follows: 1. Nature of the contract, namely whether the legal relationship between the parties is contract of carriage of goods by sea or contract of freight forwarding; 2. Whether the goods involved were delivered without original B/L and the reason; 3. Whether the Plaintiff suffered a loss; 4. Whether the two Defendants had fault in performing the contract and shall be liability for compensation. In respect of the nature of the contract, the Plaintiff ascertained that the two Defendants breached the contractual obligations under the contract of carriage of goods by sea that the carrier should deliver goods with original B/L, and claimed against the two Defendants to bare liability for compensation. Seen from the evidence available, the title of the B/L issued by the Defendant DHL is Danmar Company B/L titled with “Danmar Lines”, and DHL stated that it issued the B/L as the agent of the carrier rather than the carrier. The sample of the B/L has been registered with the Ministry of Transport of the People’s Republic of China, and can be searched on the website “Chinese Shipping”. The Plaintiff, as a diligent shipper, if it is sure about whether the B/L issuer is carrier or agent of carrier, it can verify the actual situation through the website or require the B/L issuer to provide agency agreement for check. DHL issued the B/L on behalf of Danmar Company with explicit authority in the agency agreement which was effective since it was signed. Therefore DHL was duly authorized to issue B/L on behalf of Danmar Lines Limited, it was legal acts of agency. In the contractual relationship evidenced by the B/L involved, the shipper is the Plaintiff, the carrier is Danmar Company and DHL is the authorized issuer of B/L. The allegation of the Plaintiff that DHL was

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the carrier of the transport involved and the relationship of contract of carriage of goods by sea is inconsistent with the facts of this case and shall not be supported. The Plaintiff paid the freight forwarding fee in amount of RMB4,360 to DHL Foshan for the goods including the goods under No.F0Q036192 B/L and No. F0Q036959 B/L. According to the amount, it shall not be the freight from Foshan, China to Venezuela, and it is stated the freight is to be collected, the price terms is FOB, the Plaintiff does not bare the freight in the B/L. Therefore, the freight forwarding fee paid by the Plaintiff is the remuneration and consideration from the Defendant DHL Foshan after it fulfilled its obligation for freight forwarding services, namely the freight forwarding fee during the period of accepting the Plaintiff’s entrustment to book space, delivering goods and issued B/L to the shipper. Thus it can be seen though there is not written freight forwarding contract concluded between the Plaintiff and DHL Foshan, the actions have proved the factual freight forwarding contract relationship, the Plaintiff is the principal and DHL Foshan is the agent. The marine freight forwarding contract is true expression of intent on the basis of equality and voluntary, which does not violate the statutory provisions of laws and administrative regulations, it is legal and valid, so both parties shall perform the obligations strictly and enjoy rights accordingly. In respect of the issue that whether the goods involved were delivered without original B/L at the port of destination and the reason, DHL issued two sets of original B/L to the Plaintiff and Xunya Company respectively for the four containers involved on behalf of Danmar Company, namely No.F0Q036657 B/L, of which the shipper is Xunya Company and No.F0Q036959 B/L, of which the shipper is the Plaintiff, whereas the mode of transport stated in the two sets of B/L is CY/CY, neither LCL nor the portion of the goods of each shipper in the full containers has been noted on the B/L. Judging from the mode of transport stated in the two sets of B/L, the Customs of destination port, carrier or agency of destination port delivered the goods by FCL, which did not need to be restowed, once any one set of the B/L mentioned above is transferred to the consignee, the consignee can take delivery of the full containers stated in the B/L and another one will definitely incur delivery of goods without original B/L. In fact, when the goods involved arrived at the port of destination, the consignee only went through the formalities of customs declaration for the goods under No. F0Q036657 but not for the goods under No. F0Q036959, which means the consignee took delivery of the 8 containers under No. F0Q036657 B/L by FCL including the goods involved. When DHL issued the B/L on behalf of Danmar Company, it issued FCL B/L as LCL B/L and failed to indicate LCL transport rightly and it had fault in making and issuing B/L, which had causal relationship with the delivery of goods without original B/L. The allegation of the two Defendants that the B/L held by the Plaintiff was additional B/L and the carrier’s delivery of the goods did not constitute delivery of goods without original B/L is inconsistent with the facts of this case, thus it cannot stand. In respect of the issue that whether the Plaintiff suffered a loss, the consignee Russo Company had paid USD10,980 to the Plaintiff, but the sum is not for the goods involved. Russo Company bought a batch of goods including the goods

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involved from the Plaintiff, of which the total price is USD112,733.34. The Plaintiff entrusted DHL Foshan to arrange shipment for the goods in two consignments, DHL issued No. F0Q036657 and No. F0Q036959 B/L to the Plaintiff, combining the e-mails between the Plaintiff and Russo Company regarding negotiating retirement of documents and the delivery of information recorded in the invoice issued by the Plaintiff to Russo Company, it can be confirmed that the payment in amount of USD10,980 from Russo Company is for exchange of No. F0Q036192 B/ L, but the price under the B/L is not fully paid. The Plaintiff had received the deposit in amount of USD33,820 (30% of the price of the goods). In the hearing, the agent ad item of the Plaintiff alleged that USD10,980 was part of the payment under the whole international trade contract, the payment regarding the goods involved should be calculated as per specific portion. The Plaintiff’s allegation is disposition of its own civil rights and interests without interfering other’s interests, the court hereby supports it. The agreed payment under the whole international trade contract is USD112,733.34, the Plaintiff received the deposit in amount of USD33,820 and a sum in amount of USD10,980, the outstanding sum was USD67,933.34; the value of the goods involved is USD10,980 accounting 9.74% of the price of all the goods; it can be calculated that the outstanding sum of the goods involved is USD6616.71, that is the amount of the loss of Plaintiff for delivery of goods without original B/L is USD6616.71. The allegation of the two Defendants that Plaintiff suffered no actual loss is inconsistent with the facts, thus it cannot stand. In respect of the issue that whether the two Defendants shall bear liability for compensation, this case is dispute over Marine Freight forwarding contract, which is an innominate contract having not been stipulated in the Contract Law of the People’s Republic of China, as prescribed in Article 124 of the Contract Law of the People’s Republic of China, the general provisions of this law shall applied, and reference may be made to the provisions in the Provisions of agency appointment contracts of this Law that most closely relate to Marine Freight forwarding contract. There is definite causal relationship between the delivery of goods without original B/L and the fault in making the B/L involved and issuing a LCL B/L as a FCL B/L; the B/L involved was delivered to the Plaintiff by DHL Foshan in performance of commission matters. The positions of the two Defendants are special, DHL Foshan acted as freight forwarder of the Plaintiff, while DHL was the agency of Danmar Company and represented Danmar Company to issue B/L. DHL Foshan as professional freight forwarder, who has professional knowledge about all aspects of container transportation as well as issuance of B/L. As a diligent freight forwarder, DHL Foshan arranged LCL transportation for the goods involved with Plaintiff’s consent, it should deliver original LCL B/L to the Plaintiff, but what it delivered to the Plaintiff is a FCL B/L. It failed to exercise due diligence to review B/L and delivered original B/L with incorrect record to the Plaintiff, as a result, the Plaintiff could not effectively control the goods with the B/L. DHL Foshan failed to exercise due diligence to review the wrongfulness of issuing B/L which directly result in the consequence that the consignee finished clearance with one original B/L and picked up the goods, consequently led to Plaintiff’s failure to collect payment for goods.

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As prescribed in Article 10 of the Provisions of the Supreme People’s Court on Several Issues in the Trial of Cases concerning Dispute over Marine Freight Forwarding, if the principal claims the freight agency enterprise shall bear the relevant liability for indemnification on the grounds that such freight agency enterprise causes any loss to it due to handling marine freight agency matters, the people’s courts shall support the principal’s claim, except the freight agency enterprise may prove it has no fault; and according to Article 406 of the Contract Law of the People’s Republic of China, under a commission contract for value, if the principal sustains any loss due to the fault of the agent, the principal may claim damages, DHL Foshan committed apparent fault in the commission matters, the Plaintiff’s claim that DHL Foshan shall compensate its loss caused by delivery of the goods without original B/L has factual and legal basis, thus DHL Foshan shall compensate the Plaintiff’s loss according to the law. The loss occurred on the day that the goods were actually taken delivery by the consignee, the Plaintiff did not prove the date, the evidence can only prove that the Defendant was notified the goods were picked up on November 23, 2012, thus the court ascertains the date to calculate the interest. DHL Foshan is a branch founded by DHL, which is not legal person and does not have capacity for civil liability, DHL as the legal enterprise that founded DHL Foshan shall bear supplemental liability for compensation in case the properties of DHL Foshan are not enough to repay the entire debt. To sum up, according to Article 406 of the Contract Law of the People’s Republic of China, Article 10 of the Provisions of the Supreme People’s Court on Several Issues in the Trial of Cases concerning Disputes over Marine Freight Forwarding and Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: 1. The Defendant, DHL Global Forwarding (China) Co., Ltd., shall compensate the Plaintiff, Foshan Feitu Import & Export Co., Ltd., USD6,616.71 and interest thereon (the sum after being exchanged to RMB at USD to RMB exchange rate of the People’s Bank of China on November 23 2012 namely 1:6.2267 is RMB41,200.27, then the interest shall be calculated at the loan interest rate of working capital over the same period published by the People’s Bank of China from November 23, 2012 to the payment day prescribed herein); 2. The Defendant, DHL Global Forwarding (China) Co., Ltd., shall bear supplemental compensation responsibility in case the properties of DHL Global Forwarding (China) Co., Ltd. Foshan Branch are not enough to repay its debt; 3. Reject other claims of the Plaintiff, Foshan Feitu Import and Export Co., Ltd. The obligations of paying the above-mentioned amount shall be fulfilled within ten days as of the effectiveness of this judgment. Where any party fails to perform the obligation of paying above-mentioned amounts within the period prescribed herein, such party shall, in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China, double pay the interest for the period of delayed performance.

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Court acceptance fee in amount of RMB1,560, the Plaintiff, Foshan Feitu Import and Export Co., Ltd., shall bear RMB620, RMB940 which shall be born by the Defendants shall be returned to the Plaintiff directly, the court will not return the prepaid fee otherwise. In event of dissatisfaction with this judgment, any party may, within 15 days upon service of this judgment, submit a statement of appeal to the court, with duplicates in the number of the opposite parties, to lodge an appeal to the Guangdong High People’s Court. Presenting Judge: NI Xuewei Judge: WU Guining Acting Judge: YANG Yaxiao May 4, 2014 Clerk: LU Shiying

Xiamen Maritime Court Civil Judgment Fujian Ningde Sinotrans Shipping Agency Co., Ltd. v. Mindong Congmao Marine Industrial Co., Ltd. (2013) Xia Hai Fa Shang Chu Zi No. 445 Related Case(s) None. Cause of Action 222. Dispute over shipping agency contract. Headnote The Plaintiff ship’s agent sought payment of commission for ten voyages; defendant shipowner argued that it was liable for only two voyages; the court held that the Defendant was liable to pay for nine voyages on the basis of the evidence. Summary The Plaintiff shipping agency Sinotrans sued the Defendant Congmao Company for breach of a ship agency contract, claiming it had not been paid in full for conducting ship agency affairs for the voyages of ten Congmao Company ships. Sinotrans sought full payment plus interest on the amount outstanding and repayment of costs associated with the litigation. The Defendant Congmao Company argued that it contracted Sinotrans for ship agency services for only two, rather than ten, ships, and was therefore not in breach. Furthermore, Congmao Company counterclaimed that it overpaid Sinotrans for its services and demanded reimbursement and litigation costs. The court found in favor of Sinotrans but only considered the evidence sufficient to prove that Sinotrans had been contracted to perform shipping agency services for nine of the ten voyages involved. For these nine voyages, the court ordered Congmao Company to pay the outstanding amount owed to Sinotrans and interest. Finally, the court apportioned the costs associated with the litigation between the two parties and rejected all remaining claims of the Plaintiff and the Defendant.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_20

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Judgment The Plaintiff (The Counterclaim Defendant): Fujian Ningde Sinotrans Shipping Agency Co., Ltd. Domicile: Room 404-405, Floor 4, 105 South Jiaocheng Road, Jiaocheng District, Ningde City, Fujian. Legal representative: CHEN Ning, general manager. Agent ad litem: JIANG Yan, lawyer of Fujian Sanshan Law Firm. The Defendant (The Counterclaim Plaintiff): Mindong Congmao Marine Industrial Co., Ltd. Domicile: Li Fan Village, Xia Bai Shi Town, Fu’an City, Fujian. Legal representative: LIU Congsheng, chairman. Agent ad litem: MIAO Luansheng, lawyer of Fujian Renwen Law Firm. Agent ad litem: ZHENG Bin, lawyer of Fujian Renwen Law Firm. With respect to the case arising from dispute over ship agency contract filed by the Plaintiff (the counterclaim Defendant), Fujian Ningde Sinotrans Shipping Agency Co., Ltd. (hereinafter referred to as “Sinotrans”), against the Defendant (the counterclaim Plaintiff), Mindong Congmao Marine Industrial Co., Ltd. (hereinafter referred to as “Congmao Company”), on September 17, 2013, the court, after accepting the case, organized the collegiate panel consisting of Judge LIN Ruiyun, who acted as Presiding Judge, Acting Judge ZENG Dajin, and People’s Assessor LIAN Yi to hear the case. Congmao Company filed a counterclaim on January 16, 2014, and Sinotrans applied to add claims on May 14, 2014 and May 26, 2014, respectively. The court granted all the claims and decided to try the original claim and the counterclaim in combination. The court held public hearings on November 13, 2013 and June 3, 2014. JIANG Yan, agent ad litem of Sinotrans, and ZHENG Bin and MIAO Luansheng, agents ad litem of Congmao Company, appeared in court and participated the hearings. Now the case has been concluded. Sinotrans claimed that, from January 2011 to September 2012, Congmao Company entrusted Sinotrans with ship agency affairs for its ships under repair or reconstruction. Sinotrans completed the ship agency affairs for ten voyages entrusted by Congmao Company as agreed (the ten voyages being: M.V. “Green Spring” Voyage, M.V. “Qian Li Shan 13” V.1101, M.V. “Mei Da 106” Voyage, M.V. “Bin Dong Shan 36” V.1005, M.V. “Qian Li Shan 18” V.1102, M.V. “Qian Li Shan 15” V.1105, M.V. “Qian Li Shan 18” V.1104, M.V. “Yu Quan Shan 1” V.1203, M.V. “Qian Li Shan 18” V.1201, M.V. “Long Sheng 8” Voyage), incurring port charges, pilotage fees, joint inspection fees, customs fees, agency fees, shipping tonnage dues, and other kinds of agency fees adding up to RMB375,734.55, of which Congmao Company had not as yet paid RMB284,608.30. Therefore, Sinotrans requested the court to judge:

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1. Pay agency fees in the amount of RMB 284,608.30 and the interest thereon from September 25, 2012 to the date of payment calculated on the basis of the loan interest rate published by the People’s Bank of China in the corresponding period; and 2. Bear the case acceptance fee. Later, Sinotrans applied to add claims on May 14, 2014 and May 26, 2014 for prepayment of the appraisal fees and the court participation fees of appraiser. Sinotrans requested the court to require Congmao Company to pay the appraisal fee in the amount of RMB2,500 and appraiser’s appearance fee in the amount of RMB800. Congmao Company argued that out of the ten voyages alleged by Sinotrans, it only entrusted the ship agent affairs for two voyages, namely M.V. “Green Spring” Voyage, of which the agency fees were RMB51,538.85, and M.V. “Mei Da 106” Voyage, of which the agency fees were RMB16,849. Congmao Company paid the agency fees of the above two voyages, totaling RMB68,387.85, to Sinotrans on January 20, 2012. As to the ship agency affairs of the remaining eight voyages, Congmao Company claimed it was not the principal, that no commission contract was established between it and Sinotrans, that Congmao Company was only involved as a company undertaking the repair of relevant ships with respect to the voyages, and that Sinotrans’ claim for payment of the agency fees of the eight voyages against Congmao Company, therefore, had no merit and should be rejected. Congmao Company also alleged in the counterclaim that it entrusted Sinotrans to handle the shipping agency affairs of M.V. “Green Spring” Voyage and M.V. “Mei Da 106” Voyage in January 2011 and May 2011, respectively. On January 20, 2012, Congmao Company paid agency fees in the amount of RMB80,658.25 to Sinotrans via bank transfer. After settlement, the agency fees of the above two voyages turned out to be only RMB 68,387.85, but Sinotrans refused to return the extra RMB12,270.40 paid by Congmao Company. Therefore, Congmao filed a counterclaim to requesting the court to require Sinotrans that: 1. return the overpaid RMB12,270.40 to Congmao Company and to pay the interest from January 20, 2012 to the date of actual return calculated on the basis of the loan interest rate of the same kind in the corresponding period published by the People’s Bank of China; 2. assume the litigation costs. Sinotrans argued that ship agency affairs of the ten voyages involved were entrusted to it by Congmao Company. On January 20, 2012, Congmao Company paid agency fees of RMB80,658.25 to Sinotrans via bank transfer, and by this date Sinotrans had completed the shipping agency affairs for the first seven voyages, including M.V. “Green Spring” Voyage, M.V. “Qian Li Shan 13” V.1101, M.V. “Mei Da 106” Voyage, M.V. “Bin Dong Shan 36” V.1005, M.V. “Qian Li Shan 18” V.1102, M.V. “Qian Li Shan 15” V.1105, and M.V. “Qian Li Shan 18” V.1104. Since Congmao Company owed the agency fees of all seven voyages in the amount of RMB280,658.25, after Congmao Company paid RMB80,658.25, there was still RMB200,000 in arrears. Together with agency fees of

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RMB84,608.30 arising from the shipping agency affairs for the remaining three voyages (M.V. “Yu Quan Shan 1” V.1203, M.V. “Qian Li Shan 18” V.1201, M.V. “Long Sheng 8” Voyage), Congmao Company owed Sinotrans ship agency fees in the amount of RMB284,608.30. Thus, the counterclaims of Congmao Company should be rejected. Sinotrans submitted the following evidence to support its claims and defend against Congmao Company’s counterclaims: 1. Voyage bill and entrustment documents, to prove that Congmao Company entrusted Sinotrans to perform shipping agency affairs, which incurred agency fees in the amount of RMB375,734.55; 2. Transfer voucher, to prove that Congmao Company paid RMB80,658.25 to Sinotrans on January 20, 2012; 3. Statement of current accounts, to prove that Congmao Company owed Sinotrans the agency fees in amount of RMB284,608.30; 4. Entrustment and declaration documents of M.V. “Green Spring”, to prove that M.V. “Green Spring” was owned by Congmao Company; 5. Entrustment and declaration documents of M.V. “Mei Da 106”, to prove that M.V. “Mei Da 106” was purchased and was owned by Congmao Company; 6. Entrustment and declaration documents of M.V. “Bin Dong Shan 36”, to prove that M.V. “Bin Dong Shan 36” was purchased and was owned by Congmao Company; 7. Commission contract (for purchasing a scrap steel ship), to prove that M.V. “Qian Li Shan 13” was purchased by Beijing Zhonghuan Lvzhou Technology and Trade Development Co., Ltd. under the entrustment of Congmao Company; 8. Crew transfer report, to prove that M.V. “Bin Dong Shan 36” and M.V. “Qian Li Shan 15” were owned by Congmao Company; 9. Tariff Payment Bill (M.V. “Yu Quan Shan 1”), to prove that M.V. “Yu Quan Shan 1” was a ship imported by Congmao Company; 10. Email correspondence between the two parties, to prove that CHEN Xiaofang was the business contact person of Congmao Company; 11. Transfer voucher (visa fee and repatriation fee of Burma crew members), to prove the authenticity of the item in amount of RMB10,468, namely visa fee and send fee of Burma crew members, recorded on the statement of current accounts, which was paid by Hai Ling Company to Sinotrans; 12. Letter of commitment, payment vouchers, voyage bill (M.V. “Qian Li Shan 18” V.0808-0901, M.V. “Qian Li Shan 13” voyage in 2008), to prove the commission and settlement records of the previous voyage by both sides with respect to M.V. “Qian Li Shan 18” and M.V. “Qian Li Shan 13”; 13. Domestic enterprise registration table, to prove the change of the name of Sinotrans; 14. Invoice of pilotage dues of M.V. “Qian Li Shan 18”, to prove that the pilotage dues for M.V. “Qian Li Shan 18” voyage under Evidence 12 was prepaid by Sinotrans;

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15. Invoice of customs fees of M.V. “Qian Li Shan 18”, to prove that the customs fees for M.V. “Qian Li Shan 18” voyage under evidence 12 was prepaid by Sinotrans; 16. Invoices of the quarantine fees of M.V. “Qian Li Shan 18”, to prove that Sinotrans paid the fees for immunization and rat extermination certificate in advance for M.V. “Qian Li Shan 18” voyage under Evidence 12; 17. Scrappage Report and Tariff Payment Bill of M.V. “Qian Li Shan 13”; 18. Ballast Declaration Form and Tariff Payment Bill of M.V. “Bin Dong Shan 36”; 19. Tariff Payment Bill of M.V. “Mei Da 106”; 20. Maintenance and health management plan of M.V. “Qian Li Shan 15”; all of the above evidence 17, 18, 19, 20, jointly to prove that M.V. “Qian Li Shan 13”, M.V. “Bin Dong Shan 36”, M.V. “Mei Da 106”, M.V. “Qian Li Shan 15” were owned by Congmao Company; 21. Voyage statement of accounts, letter of Authorization, and credit note for voyages in 2009 of M.V. “Qian Li Shan 13” V0810 –0901; 22. Voyage statement of accounts of, letter of authorization, and credit note for voyages in 2008 of M.V. “Qian Li Shan 18”; 23. Voyage statement of accounts, letter of authorization, letter of guarantee, maintenance report, log of over-side, and credit note of M.V. “Qian Li Shan 13” V1001 and V1001-2; 24. Voyage statement of accounts, letter of authorization, letter of guarantee, notice of license into the port, situation statement, and credit note of M.V. “Qian Li Shan 13” V0806, together with evidence 21, 22, 23, and 24, to prove that the previous voyages, before the ten voyages involved in the case, for which Congmao Company entrusted Sinotrans to deal with shipping agency affairs. According to the voyage statement of accounts issued by Sinotrans, Congmao Company paid the exact amount, and there were letters of authorization stamped by the registered owner for joint inspections in port; 25. Voyage statement of accounts of M.V. “Long Sheng 8”, to prove that ZHU Naiyun, an employee of Congmao Company, signed the voyage statement of accounts of M.V. “Long Sheng 8”; 26. Express waybill, to prove that Sinotrans sent the voyage statement of accounts of M.V. “Long Sheng 8” by express mail to ZHU Naiyun of Congmao Company; 27. Certificate issued by the post office, to prove that ZHU Naiyun signed for the express mail in which the voyage statement of accounts of M.V. “Long Sheng 8” was contained; 28. Transfer voucher for payment of authenticity fee, to prove that Sinotrans paid the authenticity fee of RMB2,500; 29. Transfer voucher of the payment of surveyors’ participation in court, to prove that Sinotrans paid the appraiser’s court appearance in the amount of RMB800; 30. Hearing record and accessories of (2013) Xia Hai Fa Shang Chu Zi No.553, to prove that the voyage of M.V. “Qian Li Shan 15” involved was entrusted by Congmao Company to Sinotrans.

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The court’s analysis and ascertainment of the evidence submitted by Sinotrans is as follows: evidence 1, the report on scrappage of M.V. “Bin Dong Shan 36,” is a copy and cannot be verified for lack of the original. Congmao Company challenged the authenticity thereof, so it alone cannot be the basis to determine the facts. Congmao Company challenged the authenticity of the voyage statement of accounts of M.V. “Yu Quan Shan 1” V.1203 and M.V. “Qian Li Shan 18” V.1201, but since ZHU Naiyun, previously of Congmao Company, signed the two voyage statements of accounts, the court holds that the two statements have been verified as identical with the original. ZHU Naiyun also confirmed their authenticity in the investigative records, therefore, the court supports the effect of evidence of the two voyage statements of accounts. As to the authenticity of the other materials of Evidence 1, Congmao Company confirmed the authenticity of other parts of Evidence 1, so the court supports their effect of evidence. As Congmao Company confirmed the authenticity of evidence 2, 4, 5, 7, 11, 12, 13, the ballast declaration form of M.V. “Bin Dong Shan 36” in evidence 18, evidence 20, 21, 22, 23, 24, 26, 27, 28, 29, and 30 submitted by Sinotrans, the court admits the authenticity thereof. Evidence 9, 14, 15, and 16, the customs duties payment statements of M.V. “Bin Dong Shan 36” in evidence 18, and evidence 19 cannot be verified for lack of the original, and Congmao Company challenged their authenticity, therefore they cannot be the basis to determine the facts alone. As to the “Settlement of Accounts” signed and confirmed by CHEN Xiaofang on June 5, 2012 in evidence 3 submitted by Sinotrans, Congmao Company argued that the authenticity of CHEN Xiaofang’s signature could not be confirmed. When verification was requested by the court, Congmao Company clearly replied to the court that CHEN Xiaofang’s signature on the statement of current accounts was not signed by CHEN Xiaofang. Following the expert report issued by Ding Li judicial appraisal center in Fujian Province, however, the court holds that CHEN Xiaofang’s signature on the statement of current accounts on June 5, 2012 is authentic. Therefore, the court ascertains the effect of evidence of the statement of current accounts. Because Sinotrans’ statement regarding the other statements of current accounts involving “Yu Quan Shan 1” V1203, “Qian Li Shan 18” V1201, “Long Sheng 8” was unilateral, the court does not ascertain the effect of evidence thereof. Congmao Company raised no objection to the authenticity of the general situation of shipping agency of M.V. “Bin Dong Shan 36,” the application for international navigation of ships into port, or the notice of completion of shipment into port formalities in Evidence 6, therefore the court confirms the effect of evidence. The report on the scrappage of an imported scrap ship in evidence 6 and the report on the request to reduce import scrap ship sanitation disposal are copies and cannot be checked for lack of originals. Furthermore, Congmao Company challenged the authenticity, therefore they cannot individually be used as a basis to determine the case facts. As for the two crew transfer reports in evidence 8, although Congmao Company disputed their authenticity, the reports match evidence 3 submitted by Congmao Company, therefore the court confirms their authenticity. With respect to Evidence 10, the business emails exchanged between the parties, because ZHANG Jianhua, previously an employee of Sinotrans, confirmed its authenticity in the investigative

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records, the authenticity of evidence 10 shall be confirmed by the court. Congmao Company had no objection to evidence 17, the report on steel hulk scrappage of “Qian Li Shan 13,” but disputed the authenticity of the receipt of tariff for M.V. “Qian Li Shan 13.” Because each of these pieces of information confirms that the other matches with evidence 7 submitted by Sinotrans, the court confirms their effect of evidence. Both the above two pieces of evidence 7 proved that Congmao Company was involved in the related operations not just as a repairing firm but also as purchaser of “Qian Li Shan 13” as a steel hulk for dismantling. Evidence 25, the voyage statement of accounts of “Long sheng 8,” is a copy without the original for verification and is inconsistent with the other voyage statement of accounts of “Long Sheng 8” in evidence 1 provided by Sinotrans. ZHU Naiyun signed the statement of accounts on October 22, 2012, but evidence 27 shows that the statement was delivered to Congmao Company on October 23, 2012, which is a contradiction. Therefore, the effect of evidence of Evidence 25 shall not be confirmed. Congmao Company submitted the following evidence to support its counterclaim defense: Letter of Authorization of M.V. “Qian Li Shan 13”; The repair contract of M.V. “Qian Li Shan 13”; Letter of Authorization of crew’s disembarkation of M.V. “Bin Dong Shan 36”; Repair contract of M.V. “Qian li Shan 18” (April 2011); Letter of Authorization of M.V. “Qian Li Shan 18”; (September 2011); Letter of Authorization of M.V. “Qian Li Shan 18” (January 2012); Letter of Authorization of M.V. “Qian Li Shan 15”; Delivery report of M.V. “Yu Quan Shan 1”; The report on steel hulk scrappage of M.V. “Yu Quan Shan 1”; (the above evidence 1 to 9 were jointly used to prove that there was no principal-agent relationship between the parties. All the evidence had been submitted by Sinotrans to Xiamen Maritime Court in (2013) Xia Hai Fa Shang Chu Zi No.310-301 Case.) 10. Voyage statement of accounts of M.V. “Green Spring”; 11. The voyage statement of accounts of M.V. “Mei Da 106”; (the above evidence 10 and 11 were jointly used to prove the agency expenses of M.V. “Green Spring” and M.V. “Mei Da 106.”); 12. Transfer voucher (same as evidence 2 submitted by Sinotrans) to prove the agency fees in the amount of RMB 80,658.25 were paid by Congmao Company. 1. 2. 3. 4. 5. 6. 7. 8. 9.

Evidence 1 to 12 submitted by Congmao Company are hereby confirmed because no objection to the authenticity was raised by Sinotrans. The court obtained the following evidence: 1. A series of trial records obtained from (2013) Xia Hai Fa Shang Chu Zi No.310-301. On July 9, 2013, Sinotrans filed a lawsuit against Congmao Company for the ship agency contract of the ten voyages. After the trial, Sinotrans withdrew its lawsuit on September 15, 2013. The evidence submitted

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by the parties, the cross-examination opinions, and the statements in the trial record in the series of cases are relevant to the case. The ship voyage certificates, seafarer certificates, and receipts of tonnage dues certificates of V1101 voyage of M.V. “Qian Li Shan 13” and V1105 voyage of M.V. “Qian Li Shan 15”, respectively, signed by CHEN Xiaofang, the agent of Congmao Company, on March 16, 2011 and October 6, 2011, were confirmed as authentic by Congmao Company in the cross-examination opinion, but in the second evidence-exchange procedure it did not admit its authenticity. Because the court finds that the two receipts were identical to the original, the effect of evidence shall be confirmed; 2. The court obtained investigation records of ZHANG Jianhua and ZHU Naiyun. ZHANG Jianhua, previously an employee of Sinotrans, who left Sinotrans in October 2012, was responsible for shipping agency business during his service. ZHU Naiyun, previously an employee of Congmao Company, was responsible for shipping coordination and assisting CHEN Xiaofang with the business of the ship agency company; 3. An investigation record of CHEN Xiaofang of Congmao Company obtained from (2013) Xia Hai Fa Shang Chu Zi No.553; 4. A judicial authentication issued by Fujian Dingli Judicial Authentication Center. During the trial, to authenticate CHEN Xiaofang’s signature on the statement of current accounts on June 5, 2012, the court ex officio entrusted Fujian Ding Li judicial authentication center to identify the handwriting. Sinotrans paid the authentication fees and court costs of the identifiers. After our notice, the judicial authentication opinion holds that the signature of CHEN Xiaofang on the statement of current accounts and the signature sample provided for comparison are written by the same person. After trial, the court also finds that there is a long-term cooperative relationship between Congmao Company and Sinotrans. The trading practice formed by the two parties in their long-term ship agency business is as follows: Congmao Company did not make written ship agency contracts, and most business matters were orally contracted and agreed to by CHEN Xiaofang, the agent of Congmao Company, by telephone with Sinotrans. After Sinotrans accepted the commission, Congmao Company’s agent CHEN Xiaofang provided the application materials required by Sinotrans, and Sinotrans delivered the invoices to Congmao Company after completion of the agency affairs. Sinotrans paid all agency fees in advance without charging Congmao Company for deposit and dealt with Congmao Company after the completion of ship agency affairs. From January 2011 to September 2012, Sinotrans completed the shipping agency business of the ten voyages involved. Congmao Company confirmed the commission of the voyages of M.V. “Green Spring” and M.V. “Mei Da 106” out of the ten voyages involved. In addition, Congmao Company claimed that the registered shipowners of the corresponding ship (two Hong Kong companies) both issued a Letter of Authorization (namely evidence 1, 3, 5, 6, 7 of Congmao Company) suggesting that the agent of the above ship agency affairs were Hong

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Kong shipowners, rather than Congmao Company. Sinotrans argued that the Hong Kong shipowners of the above ships were Congmao Company’s affiliated enterprises registered overseas and that the Letter of Authorization was supplementary material submitted according to the requirements of the joint inspection departments in the process of actual execution of the shipping agency affairs after the entrustment agreement reached between Sinotrans and Congmao Company. The Letter of Authorization, which was a form letter, was issued in the name of the ship’s registered shipowner, to prove Sinotrans’ identity as the shipping agent of the corresponding voyage to joint inspection departments, such as customs. To support its defense, Sinotrans relied on evidence 12, 21, 22, 23, and 24 it submitted to jointly prove the Letter of Authorization sealed by the registered shipowner existed in the previous voyages of M.V. “Qian Li Shan 13,” M.V. “Qian Li Shan 15,” and M.V. “Qian Li Shan 18” (namely voyages prior to the ten voyages involved). Such Letters of Authorization were used as joint inspection declaration material in port, but the principal of the ship agency affairs of the previous voyages was also Congmao Company. After Sinotrans completed its duties, Congmao Company paid the agency fees as indicated on the voyage statement of accounts issued by Sinotrans. The previous employee of Congmao Company, ZHU Naiyun, and Sinotrans’s previous employee, ZHANG Jianhua, also confirmed that the above-mentioned Letter of Authorization was issued by Congmao Company to Sinotrans for port joint inspection declaration material in the investigative records. In conclusion, the court holds that the Letter of Authorization in evidence 1, 3, 5, 6, and 7 submitted by Congmao Company was insufficient to support its claim that the ship agency affairs of the five corresponding voyages were entrusted by the registered shipowner to Sinotrans. During the trial of (2013) Xia Hai Fa Shang Chu Zi No.553 Case, Congmao Company submitted the voyage statement of accounts and declaration materials of M.V. “Qian Li Shan 15” V1105 as evidence to support its claims and alleged in the hearing that it entrusted Sinotrans to perform the ship agency affairs. In addition, CHEN Xiaofang, the agent of Congmao Company, had issued receipts to Sinotrans for M.V. “Qian Li Shan 15” V.1105 and signed the relevant forms, including the ship certificate, certificate of the crew, and tonnage dues license managed by Sinotrans, which all acknowledged the work of Sinotrans in the shipping agency affairs. Based on the facts above mentioned, the court finds that the principal of the ship agency affairs of M.V. “Qian Li Shan 15” V.1105, one of the first seven voyages, was Congmao Company, while the Letter of Authorization in evidence 7, provided by Congmao Company as the registered shipowner of M.V. “Qian Li Shan 15,” shall be deemed to be the declaration material Congmao Company provided to Sinotrans for port joint inspection. On January 20, 2012, Congmao Company paid RMB80,658.25 to Sinotrans via bank transfer for ship agency fees. Before the transfer payment of RMB80,658.25, the agent, CHEN Xiaofang, settled the ship agency fees incurred with Sinotrans by telephone. Congmao Company claimed that CHEN Xiaofang only settled the agency fees of the voyages of M.V. “Green Spring” and M.V. “Mei Da 106” and not those involving the rest of the first seven voyages which had already been

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completed by Sinotrans. Congmao Company’s claims are inconsistent with the related facts and evidence of the case and cannot be confirmed. First, if CHEN Xiaofang only incurred agency fees in an amount of RM 68,287.85 for the voyages of M.V. “Green Spring” and M.V. “Mei Da 106”, then Congmao Company’s payment of RMB80,658.25 following CHEN Xiaofang’s telephone call with Sinotrans, was an overpayment, which was not in conformity with the trading practice between the two parties. Congmao Company stated that the agency fees preliminarily calculated by CHEN Xiaofang via telephone was in a range from RMB60,000 to RMB70,000 and that Congmao Company paid slightly more via bank transfer, after the final settlement, to return the overcharge and demand payment of the shortage. However if it intended to pay more for returning the overcharge and demanding payment of the shortage in the future, why would it not pay a whole number amount rather than RMB80,658.25, which is not a whole number? Congmao Company explained this was to facilitate Sinotrans’ confirmation for the purpose of the transfer amount. However, in practice, it can be directly indicated the purpose of the money in the transfer between public accounts, and these explanations of Congmao Company clearly could not be confirmed. Second, as to the RMB80,658.25 Congmao Company transferred to Sinotrans after CHEN Xiaofang’s telephone settlement, CHEN Xiaofang confirmed in written on the intercourse funds settlement that the amount was payment of the agency fees of the first 7 voyages involved, rather than payment for the agency fees of the voyages of M.V. “Green Spring” and M.V. “Mei Da 106” alone. Therefore, the ship agency fees in the telephone settlement between CHEN Xiaofang and Sinotrans should be the agency fees of the first 7 voyages involved, not just the agency fees of the voyages of M.V. “Green Spring” and M.V. “Mei Da 106.” On June 5, 2012, Sinotrans issued a statement of current accounts to Congmao Company, and CHEN Xiaofang, as the agent of Congmao Company, signed and confirmed it. The statement of current accounts recorded that the ship agency affairs of the first seven voyages involved completed by Sinotrans incurred agency fees of RMB291,126.25, of which RMB10,468 for the visa fee and sending fee of Burmese crews of M.V. “Qian Li Shan 13” V.1101 was paid by Congmao Company to Sinotrans via Hai Ling Company. After deducting that amount, the agency fees of the first 7 voyages was RMB280,658.25. Congmao Company paid the agency fees of the first seven voyages involved in an amount of RMB80,658.25 to Sinotrans via bank transfer, and therefore still owes Sinotrans RMB200,000 for the first 7 voyages. Regarding CHEN Xiaofang’s signature on the statement of current accounts, Congmao Company claimed that CHEN Xiaofang had not obtained the company’s authorization in advance, therefore the statement of current accounts could not be used to prove that the ship agency affairs of the first seven voyages involved were entrusted by Congmao Company. However, in the long-term course of business between the two parties, the business agent of Congmao Company was CHEN Xiaofang. Congmao Company claimed that most of its business with Sinotrans was conducted by CHEN Xiaofang over the phone, even if the contracting behavior, such as concluding a shipping agency contract, did not need to issue a written certificate of authorization for CHEN Xiaofang to Sinotrans separately. Congmao

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Company had no evidence to prove that it had made a special statement to Sinotrans suggesting that CHEN Xiaofang had no right regarding the settlement of each voyage after completing the shipping agency affairs without getting the company’s authorization in advance. Therefore, the court holds that Sinotrans had reason to believe that CHEN Xiaofang was authorized if her behavior, as the agent of Congmao Company, was not obviously beyond the scope of her normal business duties. In addition, as to the payment of the voyages of M.V. “Green Spring” and M.V. “Mei Da 106,” which Congmao Company acknowledged was settled by telephone between CHEN Xiaofang and Sinotrans and which Congmao Company paid according to the result of CHEN Xiaofang’s telephone settlement, there is no evidence that Congmao Company issued a written certificate of authorization of settlement for CHEN Xiaofang to Sinotrans separately. This proves that Congmao Company’s claim that CHEN Xiaofang failed to obtain the authorization for the settlement of shipping agency fees is inconsistent with the facts in the case and the trading practice between the two parties. The last 3 of the ten voyages involved were M.V. “Yu Quan Shan 1” V1203, M. V. “Qian Li Shan 18” V1201, and the M.V. “Long Sheng 8” voyage. After completing the shipping agency affairs, Sinotrans delivered the voyage statement of accounts of M.V. “Yu Quan Shan 1” V1203 and M.V. “Qian Li Shan 18” V.1201 on June 5, 2012, together with all the corresponding invoices, to ZHU Naiyun, the salesman of Congmao Company, and ZHU Naiyun signed them. But after receiving the above voyage statement of accounts and invoices, Congmao company neither paid the amount according to the disbursement listings nor returned the disbursement listings and invoices to Sinotrans. The court finds that this case is arising from a dispute over a ship agency contract. The dispute between the parties issues on the ship agency affairs of the ten voyages involved completed by Sinotrans, apart from the voyage of M.V. “Green Spring” and M.V. “Mei Da 106,” which Congmao Company clearly confirmed. The issues are whether the principal of the shipping agency affairs for the remaining 8 voyages was Congmao Company and whether there was a contractual relationship between the two parties about the shipping agency affairs of the 8 voyages involved. According to the long-term cooperative relationship between both parties, their trading practice was that no written contracts of ship agency were made, most business matters were contracted and negotiated via telephone, the entrusted party would directly perform the agent affairs, and that the two sides would settle and make payments afterwards. In accordance with Article 174 of the Contract Law of the People’s Republic of China: if there are provisions in the law for other non-gratuitous contracts, such provisions shall apply; in the absence of such provisions, reference shall be made to the relevant provision of sales contract. With reference to Article 1 Paragraph 1 of the Interpretation of the Supreme People’s Court on Issues concerning the Application of Law for the Trial of Cases of Disputes over Sales Contracts, “if there is no written contract between the parties, but a party claims there is a sales contract relationship established by delivery note, receipt, statements, invoices, etc., then the people’s court shall, in combination with

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manner of trade, trade practices, and other relevant evidence, confirm whether the sales contract is established.” The court finds that it should decide whether there is a contractual relationship between the two parties on the basis of a comprehensive consideration of the evidence and the facts having been ascertained, combining the trade practice and manner of trade between the parties. Given that (1) Congmao Company paid RMB80,658.25 out of the total ship agency fees of the first voyages involved of RMB280,658.25 via bank transfer on January 20, 2012, after its agent CHEN Xiaofang’s telephone settlement of the first involved voyages with Sinotrans, Congmao Company’s payment actually confirmed that CHEN Xiaofang’s telephone settlement was performed as part of her employment duties on behalf of Congmao Company; (2) the agent of Congmao Company, CHEN Xiaofang, signed the voyage statement of accounts issued by Sinotrans recording the account of the shipping agency fees of the first 7 voyages on June 5, 2012, which confirmed that Congmao Company has paid RMB80,658.25 of the agency fees of the first 7 voyages to Sinotrans and still owed RMB200,000. This is a written confirmation of the results of the telephone settlement between both sides and suggests that the agent of Congmao Company confirmed in the settlement that the principal of the first seven voyages involved was Congmao Company; (3) referring to M.V. “Qian Li Shan 15” V.1105 and M.V. “Qian Li Shan 13” V.1101, from the first seven voyages involved, Congmao Company confirmed it entrusted performance to Sinotrans for “Qian Li Shan 15” V.1105 in (2013) Xia Hai Fa Shang Chu Zi No.553, and the agent of Congmao Company, CHEN Xiaofang, issued a receipt to Sinotrans for the two voyages and signed the ship certificate, certificate of crews, and tonnage dues license of the relevant declaration forms. In other words, it accepted the work of Sinotrans’ in shipping agency affairs. In addition, evidence 7 and 17 also proves that Congmao Company was involved in the related operations not only as a repairing firm but also as purchaser of “Qian Li Shan 13,” a steel hulk for dismantling; (4) as to the last three voyages of the ten voyages involved: there was insufficient evidence concerning the voyage of M.V. “Long Sheng 8” to prove that it had been entrusted by Congmao Company, but as to M.V. “Yu Quan Shan 1” V.1203 and M.V. “Qian Li Shan 18” V.1201, Congmao Company signed for the voyage statement of accounts and the attached full set of invoices. Afterwards, Congmao Company neither paid nor returned the invoices. Following the trading practice between the two parties, it shall be deemed that Congmao Company is the principal of the shipping agency affairs of M.V. “Yu Quan Shan 1” V.1203 and M.V. “Qian Li Shan 18” V.1201; (5) the previous employee of Sinotrans, ZHANG Jianhua, who was responsible for dealing with the shipping agency affairs of Congmao Company, stated in the investigation record that CHEN Xiaofang clearly demonstrated that the principal of the shipping agency affairs of the ten voyages involved was Congmao Company when CHEN Xiaofang contracted with him. Furthermore, the voyage statement of accounts and invoice of the voyages involved were delivered to Congmao Company. In light of all the facts and evidence, combined with the trading habits between both parties, the court holds that the ship agency affairs of all the voyages involved, except for the voyage

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of M.V. “Long Sheng 8,” were entrusted to Sinotrans by Congmao Company and that there was a ship agency contract relationship between both parties for the nine voyages. The voyage of M.V. “Long Sheng 8” is the last voyage of the ten voyages involved. The evidence Sinotrans submitted includes two voyage statements of accounts of M.V. “Long Sheng 8” (evidence 1 and evidence 25 each has one), the approval form of application for release after maintenance of a foreign ship, the repair report table of the foreign ship into the dock, and the courier details receipt of voyage statement of accounts of listing mailed from Sinotrans to ZHU Naiyun of Congmao Company, which was tracked to its destination and stamped by the post office. The remaining evidence provided cannot be checked against an original. The “name of the materials inside” space, having been filled in with “the materials of M. V. “Long Sheng 8,” cannot prove, on its own, that the materials in the express mail actually contained the voyage statement of accounts and invoice of M.V. “Long Sheng 8”. Although the mail contained the above materials, the certified mail showed that the date of mailing was October 23, 2012, while the signing date on the voyage statement of accounts in evidence 25 was October 22, 2012. This is a time inconsistency. In addition, the contents of the voyage statement of accounts of listing in evidence 1 and evidence 25 are not consistent. Therefore, the court holds that the evidence submitted by Sinotrans is insufficient to prove that the ship agency affairs it completed for M.V. “Long Sheng 8” were entrusted to it by Congmao Company. Thus, the claim demanding Congmao Company to pay the shipping agency fees of M.V. “Long Sheng 8” in the amount of RMB22,860.50 shall not be supported. In this case, Sinotrans completed the shipping agency affairs of the 9 voyages as agreed. For the first seven voyages, the two parties confirmed in written that Congmao Company owed Sinotrans the agency fees of RMB200,000 in the statement of current accounts on June 5, 2012. For the two voyages afterwards (namely M.V. “Yu Quan Shan 1” V.1203 and M.V. “Qian Li Shan 18” V.1201), Congmao Company received voyage statement of accounts and invoices on June 5, 2012. The voyage statement of accounts of M.V. “Yu Quan Shan 1” V.1203 records that Congmao Company owed Sinotrans agency fees of RMB20,499.60. The voyage statement of accounts of M.V. “Qian Li Shan 18” V.1201 records that Congmao Company owed Sinotrans agency fees of RMB41,248.20. Therefore, Congmao Company owed Sinotrans agency fees for the above nine voyages in the amount of RMB261,747.80. Because the payment date of the agency fees was not expressly agreed upon by the two parties, in accordance with the provisions of Article 62 Sub-paragraph 4 of the Contract Law of the People’s Republic of China, the obligor may require performance at any time, provided that the other party shall be given the time required for preparation. Sinotrans’ acts of issuing the statement of current accounts, requesting written confirmation of the debt of the first seven voyages involved, and issuing the voyage statement of accounts of M.V. “Yu Quan Shan 1” V.1203 and M.V. “Qian Li Shan 18” V.1201, were actions claiming the rights of the obligor. Congmao Company should pay the agency fees within a reasonable

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period, which is the time necessary to prepare the payment amount, from the date Sinotrans claimed its right on June 5, 2012. Congmao Company’s non-payment before Sinotrans filed a lawsuit on September 17, 2013, clearly constitutes a breach of contract. Both parties confirmed in court that if one party fails to pay an overdue debt, it shall additionally pay the other party interest on the debt, which should be calculated at the bank loan interest rate over the same period from the date payment was due to the date of repayment. As Sinotrans voluntarily renounced its claim against Congmao Company for the interest for late payment before September 25, 2012 in the trial, and the period from June 5, 2012 to September 24, 2012 is far beyond the required reasonable amount of time for Congmao Company to prepare the payment amount, Sinotrans’s claim for determining September 25, 2012 as the start date for the calculation of interest on the overdue payment, based on the law, should be supported. In addition, during the trial, Sinotrans paid fees to the authorized court for authentication in an amount of RMB2,500 and the costs for experts to appear in court in an amount of RMB800, for a total amount of RMB3,300. Because the court partly supports and partly rejects the claims of Sinotrans, the court, making a discretionary decision, assigns Sinotrans to bear the cost for experts appearing in court in the amount of RMB265.06 and Congmao Company to bear the authentication fee and the costs of experts participation in court in the amount of RMB3,034.94. Congmao Company, the counterclaim Plaintiff, had no facts to support or legal basis for its claim. Therefore, the counterclaim shall be rejected. In conclusion, according to Article 10 Paragraph 1, Article 174, Article 396, Article 397, and Article 405 of the Contract Law of the People’s Republic of China, and Article 1 Paragraph 1 of the Interpretation of the Supreme People’s Court on Issues concerning the Application of Law for the Trial of Cases of Disputes over Sales Contracts, the judgment is as follows: 1. The Defendant of the original claim, Mindong Congmao Marine Industrial Co., Ltd., shall, within 10 days after the date that this judgment becomes effective, pay the Plaintiff of the original claim, Fujian Ningde Sinotrans Shipping Agency Co., Ltd., the agency fees in the amount of RMB261,747.80 and the interest thereon from September 25, 2012 to the date of payment specified by this judgment calculated at the loan interest rate for the corresponding period published by the People’s Bank of China; 2. Other claims of the Plaintiff of the original claim, Fujian Ningde Sinotrans Shipping Agency Co., Ltd. shall be rejected; 3. All counterclaims of Mindong Congmao Marine Industrial Co., Ltd. shall be rejected. For failure to fulfill the obligation of payment within the period specified herein, interest on debt for the delayed period shall be doubled, in accordance with Article 253 in the Civil Procedure Law of the People’s Republic of China. Court acceptance fee of the original claim in amount of RMB5,918.62, the Plaintiff, Fujian Ningde Sinotrans Shipping Agency Co., Ltd., shall bear

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RMB475.40, and the Defendant, Mindong Congmao Marine Industrial Co., Ltd., shall bear RMB5,443.22. Court acceptance fee of the counterclaim in the amount of RMB53.38, shall be born by the counterclaim Plaintiff, Mindong Congmao Marine Industrial Co., Ltd. Authentication fee and the appraiser’s court appearance fee in amount of RMB3,300, Fujian Ningde Sinotrans Shipping Agency Co., Ltd. shall bear RMB265.06 and Mindong Congmao Marine Industrial Co., Ltd. shall bear RMB3,034.94. In the event of dissatisfaction with this judgment, the parties may within 15 days upon the service of this judgment, submit a Statement of Appeal to the court, together with copies according to the number of the opposing party, to file an appeal to the Fujian High People’s Court. Presiding Judge: LIN Ruiyun Acting Judge: ZENG Dajin People’s Assessor: LIAN Yi June 20, 2014 Clerk: LU Xinmiao

Appendix: Relevant Laws 1. Contract Law of the People’s Republic of China Article 10 The parties may use written, oral or other forms in entering into a contract. … Article 174 If there are provisions in the law for other non-gratuitous contracts, such provisions shall apply; in the absence of such provisions, reference shall be made to the relevant provision on sales contract. Article 396 A commission contract refers to a contract whereby the principal and the agent agree that the agent shall handle the matters of the principal. Article 397 A principal may specially entrust an agent to handle one or several matters or may generally entrust the agent to handle all matters. Article 398 The principal shall prepay the expenses for handling the commissioned business. Any expense necessary for handling the commission advanced by the agent shall be repaid with interest by the principal. Article 405 Upon completion of the commission by the agent, the principal shall pay the remuneration thereto. Where the commission contract is terminated or the commission is not capable of being completed due to any reason not attributable to the agent, the principal shall pay to the agent an appropriate amount of remuneration. If the parties agree otherwise, such agreement shall prevail.

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2. Interpretation of the Supreme People’s Court on Issues Concerning the Application of Law for the Trial of Cases of Disputes Over Sales Contracts Article 1 Where there is no written contract between the parties and one party claims that a sales contract exists on the basis of delivery notes, goods received notes, settlement statements or invoices, the people’s court shall determine whether a sales contract has been formed by considering the transaction methods and customary business practices between the parties as well as other relevant evidence. …

Xiamen Maritime Court Civil Judgment Guangzhou Jingtao Logistics Co., Ltd. et al. v. Xiamen Yichengda Shipping Co., Ltd. (2013) Xia Hai Fa Shang Chu Zi No. 257 Related Cases(s) This is the judgment of first instance and the judgment of the second instance is on page 470. Cause of Action 206. Dispute over ship purchases and sales contract. Headnote A ship was sold by the Plaintiffs to the Defendant but there were two different contracts with very different purchase prices; the court enforced the contract with the higher purchase price because it accepted the Plaintiff’s version of the reason for the difference, rather than the Defendant’s version. Summary The Plaintiffs sold a vessel to the Defendant. Two contracts arose from the transaction, one with a purchase price of RMB18 million and another with a purchase price of RMB8.28 million. The Defendant had paid RMB7 million at the time this claim was filed, alleging that there were several serious defects found on the ship during inspection and that the vessel was unseaworthy. The Defendant demanded a return of its payments, including the deposit, from the Plaintiffs in exchange for the return of the vessel. The Plaintiffs refused. The Defendant claimed that instead, the parties agreed to enter into a new contract with identical terms but with a lower purchase price of RMB8.28 million to better reflect the market value of the vessel. Conversely, the Plaintiffs claimed that the second contract with the purchase price of RMB8.28 million was created upon the Defendant’s request in an effort to avoid taxes on the purchase and demanded that the original purchase price of RMB18 million be enforced. The court found that based on the timing of the two contracts’ formation coupled with the time of inspection and discovery of defects that the Plaintiff’s theory was more reasonable. It rejected the Defendant’s assertion that the price was lowered because of the unseaworthy condition of the vessel because these defects were discovered after the new contract was entered into by the parties. Therefore, the defects could not have had an impact on the new contract price. The court also reasoned that a reduction of about RMB10 million in the purchase price could not have occurred within the span of several days without suspicion. Finally, the court © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_21

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used recorded conversations between the two parties in order to ascertain the true intention of the parties regarding the contracts. Accordingly, the original price of RMB18 million was found to be the intended price and was enforced. However, the court used its discretion in calculating the interest rate of the late payments because of the nature of the installment timetable.

Judgment The Plaintiff: Guangzhou Jingtao Logistics Co., Ltd. Domicile: Room D, Floor 16, Building 8, Poly Lily Garden, No. 381 Gongye Avenue, Haizhuqu District, Guangzhou. Legal representative: XU Guoqian, chairman. Agent ad litem: SHI Guomin, lawyer of Fujian Quanzhong Law Firm. Agent ad litem: WU Xiaowen, lawyer of Fujian Tianyi Law Firm. The Plaintiff: WU Dequan, Male, Born on July 21, 1952, Han, Living in Shijing Town, Nanan, Fujian Agent ad litem: ZHANG Dongshan, lawyer of Fujian Xiayang Law Firm. Agent ad litem: WU Xiaowen, lawyer of Fujian Tianyi Law Firm. The Plaintiff: WU Jiapei, Male, Born on October 29, 1946, Han, Living in Shijing Town, Nanan, Fujian Agent ad litem: WU Xiaowen, lawyer of Fujian Tianyi Law Firm. The Plaintiff: HONG Jinde, Male, Born on February 24, 1960, Han, Living in Xiangzhou District, Zhuhai, Guangzhou Agent ad litem: WU Xiaowen, lawyer of Fujian Tianyi Law Firm. The Defendant: Xiamen Yichengda Shipping Co., Ltd. Domicile: No.19, Xiabanshe 3, Xiaban Village, Maxiang Town, Xiangan District, Xiamen, Fujian. Legal representative: WU Gangyi, general manager. Agent ad litem: ZENG Zhenqiu, lawyer of Beijing Dentons (Xiamen) Law Firm. Agent ad litem: DONG Jinhui, lawyer of Beijing Dentons (Xiamen) Law Firm. This was a case arising from dispute over ship purchases and sales contract filed by the Plaintiffs, Guangzhou Jingtao Logistics Co., Ltd. (hereinafter referred to as “Jingtao Company”), WU Dequan, WU Jiapei and HONG Jinde, against the Defendant Xiamen Yichengda Shipping Co., Ltd. (hereinafter referred to as “YCD Company”) on June 6, 2013. After accepting this case in accordance with the law, the court organized the collegiate panel consisting of Judge LIN Jing, Acting Judge CHEN Ya, and People’s Assessor WU Yanting. Later, People’s Assessor WU Yanting exited the collegiate panel for some reasons. Acting Judge CHEN Yanzhong participated in decision. During the proceedings, the

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Plaintiffs applied for maritime claims preservation to the court. The court rendered a ruling granting the application on June 13, 2013 and froze registration formalities of transfer, mortgage, bareboat charter, alteration of name, and alteration of the port of registry of M.V. “Yi Cheng 12”. The court held hearings in public on August 5, 2013 and October 12, 2013. The Plaintiff HONG Jinde and relevant agents ad litem, SHI Guomin, ZHANG Dongshan, WU Xiaowen, the Defendant WU Gangyi and agents ad litem, ZENG Zhenqiu and DONG Jinhui, appeared in court to attend the hearings. Now the case has been concluded. The four Plaintiffs alleged together that: the Plaintiffs and the Defendant entered into Ship Assignment Contract on November 17, 2011, agreeing that the Defendant purchased the ship M.V. “Xu Da” at a price of RMB18 million. To fulfill this contract, the Defendant would pay RMB11 million on December 16, 2011 and in case of failure, it would pay overdue interest to the Plaintiffs at the monthly interest rate of 1.08%. After the contract was concluded, the Plaintiffs transferred the ship to the Defendant as agreed. Ownership was transferred to the Defendant and the name of the ship was changed to M.V. “Yi Cheng 12.” However the Defendant only paid RMB7 million, including a ship maintenance balance payment in the amount of RMB430,000, paid to Fujian Zishun Ship Co., Ltd. (hereinafter referred to as “Zishun Company”) on behalf of the Plaintiffs. RMB11 million remained in arrears. The Plaintiff made demands for the arrears many times but was rejected by the Defendant. The Plaintiffs claimed that due to the Defendant’s breach of contract, it should be liable to the Plaintiffs. Thus, the Plaintiffs requested the court to judge that the Defendant should immediately make the remaining payment in the amount of RMB11 million, together with the interest accrued from November 17, 2011 to the date of the actual calculated payment, with a monthly interest rate of 1.08%. The Defendant argued that: firstly, Ship Assignment Contract was concluded between the Defendant and Jingtao Company. According to the relativity of contract principle, the contract should only be binding upon Jingtao Company and itself, meaning that the parties who were not party to the contract should not be entitled to initiate any proceedings. Secondly, there were two Ship Assignment Contracts. The former contract was replaced by the latter, making the Plaintiffs’ claims on the payment in arrears and the accrued interest lacking in legal and factual basis. Ship Assignment Contract signed on November 17, 2011 outlined that the ship would transfer under the condition of seaworthiness. The ship was reported to the China Classification Society (hereinafter referred to as “CCS”) and the Xiamen Bureau and Fuzhou Bureau, that there were 12 kinds of serious quality defects and was therefore unseaworthy. Because of the serious quality defects, unseaworthiness, and being reported, there was a great deal of uncertainty about the existing contract. Therefore the parties made a new contract which was recorded at the Xiamen MSA. The payment in arrears should be calculated on the basis of the latter contract. Thirdly, the Plaintiffs had not yet completely delivered relevant documents of the ship until now, including the product certificate and the instructions of the main engine and auxiliary engines. Therefore the Plaintiffs had no right to claim the arrears and interest. Additionally the interest provided in the contract was too high, and should thus be adjusted.

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To support its claims, the four Plaintiffs submitted the following evidence materials: 1. Enterprise Business License, Organization Code Certificate, Legal Representative Certificate and ID Card, to prove the four Plaintiffs’ status of the proceedings; 2. Ship Assignment Contract and Power of Attorney, to prove that the ship was assigned at the price of RMB18 million; 3. Ship assignment formalities and the basic status of ship registration, to prove that the ship was assigned on November 25, 2011 and the ownership of the ship had been transferred to the Defendant; 4. Certification, to prove that the ship assignment formalities met the contract requirements; 5. Ship repairing payment promise, to prove that the Defendant paid the debts for the contract; 6. (2012) Xia Hai Fa Shang Chu Zi No.202 Civil Judgment, to prove that the court decided the market value of ship involved at 18,000,000 yuan; 7. audio and text (CD), to prove that the Defendant’s legal representative WU Gangyi admitted that the contract price was RMB 18 million in a conversation with the Plaintiff HONG Jinde; 8 and 9. Report that the Fujian MSA assigned its ship inspection business to the China Classification Society, and the Rules for Initial Inspection of Domestic Ships of the China Classification Society, to prove that the original vessel inspection certificate of M.V. “Xu Da 1” was issued by the Guangdong Ship Inspection Bureau (Guangzhou Municipality Sub-bureau). After the ship was sold to the Defendant, it was registered in Xiamen Port and the ship inspection was in the charge of the classification society of China. Because there were differences in the inspection standards of the two authorities, some necessary rectification had to be made. While this was a statuary requirement, it did not imply that the ship was unseaworthy before the rectification. Therefore the costs arising from the rectification of the unseaworthy conditions as well as the influence on the voyage schedule had nothing to do with the Plaintiff; 10. Bank account details, to prove that the Defendant gradually paid the deposit of RMB4.9 million to the Plaintiff from November 18 to November 21, 2011. The cross-examination opinions of the Defendant regarding the evidence of the Plaintiffs are as follows: the Defendant had no objection to the authenticity of evidence 1 and evidence 2; it had no objection to evidence 3, but had objection to the content of proof that the name signed in Ship Assignment Formalities of M.V. “Xu Da 1” was WU Guoqian as recorded in the Xiamen MSA, while the Plaintiffs asserted it to be the same contract but was signed by WU Dequan. Ship assignment formalities of the ship recorded in the Xiamen MSA recorded the place of delivery as Zini Shipyard located in the town of Longhai Zhangzhou, Fujian, which was not

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recorded in the ship assignment formality submitted by the Plaintiffs. Two formalities referred to the dated time and transfer time as both November 25, 2011, however the ship could not be assigned twice on the same day, so the ship was not assigned on November 25, 2011. No objection was raised to the authenticity of evidence 4, but the certificate date was August 11, 2011, and could only prove seaworthiness of the ship at that time but not at the time of transfer. On the contrary, after the previous contract came into force there was an immediate report of grave unseaworthiness of the ship. Such a problem actually did exist according to the survey of the inspection agency. No objection was raised to evidence 5. No objection was raised to evidence 6, but the object of proof was contested. The civil judgment identified the four Plaintiffs and the outsider, WU Arong, confirmed that the price of RMB18 million was the market value of the ship at the transfer time, but not that the ship was worth RMB18 million at the transfer time. In addition, the price of RMB18 million was based on the seaworthiness of the ship, and, if it was not seaworthy, it clearly was not worth RMB18 million. The Defendant admitted the authenticity of evidence 7, but it was recorded secretly under the circumstances of WU Gangyi being uninformed and HONG Jinde lacking any relationship with the case and not being the owner of the ship, left the recording unable to serve as legal evidence of the case. Evidence 8 and 9 was online printing material, of which the authenticity should be confirmed by the court, and the object of proof thereof was contested. The authenticity of evidence 10 was conceded to, after the event of a report explaining that the Defendant had asked the Plaintiff to return RMB5 million and pay liquidated damages of RMB1 million, however the Plaintiffs failed to repay the loan. As a result both sides signed a new contract for RMB8.28 million. Combined with the proof provided by the Plaintiffs and the cross-examination of the Defendant, the court holds that the Defendant acknowledged authenticity of evidence 1 to 7 as well as evidence 10. This section of the evidence will be confirmed in form and the content of this evidence will be identified together with other evidence. The authenticity of evidence 8 and 9, which was downloaded materials, cannot be confirmed, therefore these materials will not be admitted. To support its allegation, the Defendant submitted the following evidence: 1. Maritime Cargo Ship, Certificate of Seaworthiness, Seagoing Ship Oil Pollution Prevention Certificate and Seagoing Ship Load Line Certificate, to prove that the ship certificates were valid for one year; 2. Ship Assignment Contract of which the price was RMB18 million, to prove that the contract expressly stated that the ship would be assigned under the condition of seaworthiness; 3 and 4. Two copies of Ship Assignment Contract of which the price was RMB8.28 million, one reserved for the parties, another recorded in the Xiamen MSA, both to prove that both sides came into a new agreement after learning about the certain problem of M.V. “Xu Da 1”, and it did not record the date. The date in the contract recorded in the Xiamen MSA was for the purpose of convenient registration, not the actual signing date;

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5. (2012) Xia Hai Fa Shang Chu Zi No.202 Civil Judgment, to prove that the Defendant had paid RMB7 million to purchase the ship; 6 and 7. Two copies of documents of transfer formalities of M.V. “Xu Da 1”, one for the record in the MSA, both to prove that the formalities used to prepare the cancellation of registration for the Plaintiff, which it had signed at the same time as signing the transfer contract. However the signing date was not recorded, which meant it could not prove that the ship was assigned at the recordation time of these formalities; 8. Cancellation of registration certificate, to prove that the formalities of the cancellation of registration certificate of M.V. “Xu Da 1” completed on December 15, 2011. Later, the formalities of transfer were undergone by the Plaintiff, which was a breach of the contract; 9. Seagoing Ship Inspection Certificate, Certificate of Seaworthiness of the Maritime Cargo Ship, Seagoing Ship Oil Pollution Prevention Certificate, and Seagoing Ship Load Line Certificate, to prove that the ship was not seaworthy. After it was repaired and an inspection conducted by inspection authorities in Fuzhou, Xiamen, Quanzhou, it was considered seaworthy. The related certificate issued on April 16, 2012 after inspection, of which the period of validity reduced from about 1 year to 5 months, resulting in a shorter interval of inspection and increased frequency of inspection; 10. Charter Party, to prove that the shipping date was reduced by about five months, and that the loss in rent was about RMB2.25 million. Due to reform and repairs, the actual loss would be more; 11 to 14. Survey Report of the flag state (Shanghai MSA), notice of departure prohibited (Shanghai MSA), Survey Report of the flag state (Tianjin MSA), notice of departure prohibited (Tianjin MSA), to prove high expenses arising from the retention and survey resulting from the vessel being reported; and 15. Auction notice and the deal, to prove that the similar ship auction price was lower than the actual price of the ship. The four Plaintiffs’ cross-examination opinions on the evidence of the Defendant are as follows: evidence 1 was admitted and the ship was seaworthy. No objection was raised as to evidence 2; describing the transfer price in the contract as RMB18 million (the invoice was not included), that the Defendant took charge of all expenses arising in the process of ship trading, and that the Defendant made the deal with the understanding that it was aware of the actual situation of the ship. No objection was raised to evidence 3 and 4, but the relevancy thereof was contested, the contract of RMB8.28 million was made to avoid a possible tax at the request of the Defendant. No objection was raised as to the authenticity of evidence 5; the Defendant was in breach of the contract when he paid the deposit. No objection was raised as to the authenticity of evidence 6 and 7, both sides signed many agreements in order to complete the transfer formalities, but the transfer formalities had not been completed as of November 25, 2011. No objection was raised as to the authenticity of evidence 8, but Plaintiffs asserted that the actual cancellation date

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was earlier than November 25, 2011, and there was no breach of contract because the Plaintiffs had the right to file a counterclaim. Therefore the date should be postponed in the case where the Defendant delayed to pay the deposit. No objection was raised as to the authenticity of evidence 9, but these certificates could not prove that the ship did not meet the requirements and seaworthy conditions agreed upon in the contract. Evidence 10 was the contract made between the Defendant and others parties. Its authenticity could not be affirmed, and was irrelevant to the case. The authenticity of evidence 11 to 14 was contested. The evidence pertained to events that occurred after the ship assignment and ship classification were altered. The authenticity of evidence 15 was contested and it was irrelevant to the case. Considering the evidence submitted by the Plaintiffs and the cross-examination of the Defendant, the court holds that the basis of the verdict will be evidence 1 to 9 as no objection has been raised as to their authenticity. Evidence 10 cannot be verified for lack of the original. The authenticity of evidence 11 to 14 cannot be verified for lack of the original. The opposite stands true for evidence 15 which was downloaded material, of which the authenticity cannot be confirmed. Therefore the evidence cannot be admitted. Upon the Defendant’s application, the court collected and copied the documents referring to M.V. “Yi Cheng 12” from the Xiamen MSA, issued the letter of investigation to the Xiamen MSA, and collected the latter’s replies. In addition, the court considers the domestic shipping inspection report of M.V. “Yi Cheng 12” from Xiamen Bureau of the China Classification Society (hereinafter referred to as “CCS Xiamen”), and two records of investigation from the general manager WU Youcai. Both sides conceded the authenticity and legality of the above materials, therefore the evidence can be used as the basis of judgment. Combined with the above evidence, cross-examination, the established opinions of the court, and the investigation in the trial, the court finds the following facts: In 2007, WU Dequan, HONG Jinde, WU Jiapei and the outsider WU Arong made an oral agreement entrusting Jingtao Company to purchase M.V. “Xu Da 1.” The ship was subordinate to Jingtao Company for convenience of operation after the ship was purchased. It was registered in the Guangzhou Safety Maritime Administration, with Jingtao Company as the shipowner. WU Dequan, HONG Jinde, WU Jiapei and the outsider WU Arong were relatives. WU Dequan was a shareholder of Jingtao Company. On November 17, 2011, WU Dequan, HONG Jinde and WU Gangyi negotiated the issues on transfer of M.V. “Xu Da 1” in the office of the Xiamen Huaxuda Shipping Co., Ltd. (hereinafter referred to as “Huaxuda Company”) and agreed to a ship assignment contract. The contract provided that Jingtao Company would assign M.V. “Xu Da 1” to YCD Company. The price was RMB18 million (not including the invoice.) At the time of the signing of the contract, YCD Company paid the deposit of RMB5 million. The two sides both agreed to have the ship delivered under the status quo of seaworthiness. YCD Company would pay RMB11 million to Jingtao Company by way of cash or remittance before December 16, 2011. If there was any delay, YCD Company would pay the monthly interest rate of 1.08%, and pay in full by January 17, 2012. Jingtao Company would take

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responsibility of the ship cancellation formalities and completely transfer authority to YCD Company, with Jingtao Company finishing its job in 15 working days after signing the contract. After the certification of the ship registration cancellation and the formalities of the ship inspection were transferred from Jingtao Company to YCD Company, YCD Company would pay the balance of RMB2 million to Jingtao Company, and YCD Company would be the ship’s owner after the full amount was paid. The parties shall not default. If YCD Company defaulted, Jingtao Company would automatically receive the deposit as YCD Company’s penalty, conversely if Jingtao Company defaulted, it shall return YCD Company’s deposit and compensate RMB1 million. After YCD Company placed its seal on the contract, it was signed by WU Gangyi. Additionally, WU Dequan signed the contract as the representative of Jingtao Company, then took the contract to Guangzhou where the seal of Jingtao Company was affixed. The date on which Jingtao Company signed the contract was November 17, 2011, while YCD Company had not signed at that time. When the contract was concluded, Certificate of Cargo Ship Seaworthiness, Oil Pollution Prevention Certificate, and Seagoing Ship Load Line Certificate were issued by the Guangzhou Ship Inspection Bureau and were valid until July 18, 2012. Sea Shipping Dangerous Goods Certificate was valid until January 18, 2012. From November 18, 2011 to November 21, 2011, YCD Company paid the deposit of RMB5 million to WU Dequan, and then paid HONG Jinde ship purchase price of RMB1.57 million, which was confirmed by Jingtao Company. According to the instruction of Jingtao Company and WU Dequan, YCD Company paid RMB430,000 to Zishun Company as a part of the ship price on November 28, 2011. At that point, the total amount paid by YCD Company was RMB 7 million. Jingtao Company assigned M.V. “Xu Da 1” to YCD Company after the contract was concluded in Zini Shipyard located in the town of Longhai Zhangzhou Fujian. YCD Company was ready to change the registration from Guangzhou Bureau to CCS Xiamen after accepting the ship, which was renamed as M.V. “Yi Cheng 12”. On December 2, 2011, Jingtao Company trusted WU Hongqin, the son of WU Dequan, to submit an application for the cancellation of ownership of the ship and nationality certificate to Guangzhou MSA, to provide Ship Assignment Contract, and handle ship assignment formalities of M.V. “Xu Da 1”. The authority accepted the application on the same day. After analyzing the documents, it was determined that Ship Assignment Contract regarding the cancellation of ownership and nationality certificate was not the one signed on November 17, 2011. The transfer price was RMB8.28 million instead of RMB18 million and the deposit amount differed. Additionally, the second installment and the third installment were altered in the contract in the documents. Other terms of the contract had no difference with the other contract. In addition, it was XU Guoqian rather than WU Dequan who represented Jingtao Company to sign the contract, and the dates of signature on both contracts was November 17, 2011. M.V. “Xu Da 1” transfer formalities in the documents were recorded as follows: on November 25, 2011, Jingtao Company assigned the ownership of M.V. “Xu Da 1” to YCD Company. From that point on, Jingtao Company would not take the business of any ship management affairs or disposal of the ship. Authority was transferred to YCD Company to take

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responsibility of all aspects of ship management, to enjoy corresponding legal rights, and bear corresponding legal responsibility. The transferrer, Jingtao Company, affixed its seal to the contract and XU Guoqian signed the contract. The transferee, YCD Company, also sealed the contract and WU Gangyi signed, the date of signing being November 17, 2011. On December 15, 2011, the Guangzhou MSA nullified the Certificate of Ownership and the Certificate of Nationality of the ship after examination and approval. On December 19, 2011, the Guangzhou MSA sent the documents of M.V. “Xu Da 1” to the Xiamen MSA. On December 22, 2011, the Xiamen MSA found six problems upon preliminary examination after receiving documentation and sent a letter to the Guangzhou MSA. Two of the problems relate to this case: firstly, December 12, 2011 marked the cancellation of registration of the ship. The date signed in Ship Assignment Agreement was prior to the actual assignment date. It was therefore illogical and different from the one Xiamen provided. Secondly, the Xiamen MSA received the materials concerning the dispute over who was the shareholder of M.V. “Xu Da 1”, stating that the Guangzhou MSA should verify this matter. On December 23, 2011, the Guangzhou MSA replied with instructions and added related information (attached) provided by the owner Jingtao Company. It also stated that the Guangzhou MSA did not receive the materials concerning a dispute over the shareholding of M.V. “Xu Da 1”. Jingtao Company issued a statement concerning the discrepancy of the delivery date of M.V. “Xu Da 1”, explaining that Ship Assignment Agreement of M.V. “Xu Da 1” did not record the location of assignment, which the company submitted to the Guangzhou MSA on November 17, 2011. After consultation with YCD Company, Jingtao Company provided an agreement recording the location of assignment on November 25, 2011. Due to the negligence of the staff, there were two transfer agreement dates, and the whole of the assignment agreement should be subject to the documents made on November 25, 2011. On December 26, 2011, YCD Company submitted an application of ownership/ nationality registration of M.V. “Xu Da 1” to Xiamen MSA, and submitted Ship Assignment Contract and M.V. “Xu Da 1” Transfer Formalities. Ship Assignment Contract submitted by YCD Company was the same as the contract submitted by Jingtao Company to Guangzhou MSA. The transfer price was RMB8.28 million. Subsequently, the ship documents were delivered. The above documents and transfer formalities Jingtao Company submitted to Guangzhou MSA record the transfer location as Zini Shipyard located in Longhai Town, Zhangzhou, Fujian dated November 25, 2011. Other content in the documents had no differences. On December 27, 2011, Xiamen MSA issued a certificate of ownership for M.V. “Xu Da 1” dated November 25, 2011, in which the owner was listed as YCD Company. In early December 2011, YCD Company hired CCS Xiamen to perform ship inspections. CCS Xiamen surveyed the ship for several days beginning on December 7, 2011. On December 21, 2011, after CCS Xiamen received 12 complaints regarding defects of the ship from CCS Xiamen, the surveyors appointed by CCS Fuzhou and CCS Xiamen verified and inspected the issues mentioned in the

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complaints beginning on January 11, 2012. The first inspection of the ship was conducted by CCS Xiamen beginning on March 21, 2012. The opinions of the Department of Drawing Review of CCS Fuzhou was implemented by CCS Xiamen. On April 16, 2012, a domestic shipping inspection report was issued by the CCS (code: 2012 xm0187). On the same day, the Seagoing Ship Seaworthiness Certificate, Seagoing Ship Oil Pollution Prevention Certificate and Seagoing Ship Load Line Certificate of M.V. “Yi Cheng 12” were issued by the Domestic Vessel Inspection Center of CCS Xiamen, of which the expiration date was September 15, 2012. On May 2, 2012 and May 16, 2012, HONG Jinde called WU Gangyi twice to ask him to pay the balance of the purchase price in the amount of RMB11 million. WU Gangyi admitted he signed the ship purchase and sales contract, in which the price was RMB18 million, but he insisted that the other party delayed delivery of the ship and should pay a penalty in an approximate amount of RMB1 million due to breach of contract. The transfer of the ship was not under the condition of seaworthiness and he suffered a loss of more than RMB2 million arising from the renovation and repair following the report of WU Arong. Twice in the conversation, the two parties failed to mention the ship purchase and sales contract of RMB8.28 million. On June 29, 2012, WU Arong filed a claim in court against Jingtao Company, WU Dequan, WU Jiapei and HONG Jinde. The court added YCD Company as the Third Party in the trial, of which the number was (2012) Xia Hai Fa Shang Chu Zi No.202. As WU Arong argued, as one of the actual owners of M.V. “Xuda 1” that Jingtao Company, WU Dequan, WU Jiapei and HONG Jinde assigned the ship to YCD Company without his permission, and that they should therefore compensate for losses. In this case, Jingtao Company, WU Dequan, WU Jiapei, HONG Jinde confirmed the ship price to be RMB18 million, and that the contract of the ship price of RMB8.28 million was used to meet the need of tax avoidance during registration. WU Arong also recognized the market value of the ship to be RMB18 million at the time of the transfer, but YCD Company considered the contract in which the price was RMB8.28 million as overall the real intention between the two parties. On July 13, 2013, the court sent the investigation letter to the Xiamen MSA to investigate two issues: firstly, whether there was a request of registration party to submit a tax certificate in the process of ownership registration by YCD Company concerning M.V. “Yi Cheng 12”; secondly, whether the contract parties had submitted the ship transfer contract of RMB18 million in the process of ownership registration by YCD Company concerning M.V. “Yi Cheng 12”. On July 18, 2013, the Xiamen MSA replied the following in written: firstly, there was no need to submit a tax certificate in the process of ownership registration according to the Regulations of the People’s Republic of China Governing the Registration of ships; secondly, Ship Assignment Contract in the ship registration documents was used as the criterion. In addition, Ship Assignment Contract did not mention the price of

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RMB18 million and the materials altered in the process of checking the registration files of M.V. “Yi Cheng 12”. On October 9, 2013, the court investigated several inquiries regarding WU Youcai who was the general manager of the CCS Xiamen, as follows: firstly, whether M.V. “Yi Cheng 12” must be inspected again at the time of changing the registration from Guangzhou Port to Xiamen Port. Secondly, whether there was unseaworthy conditions of the ship at the time of inspection by the CCS Xiamen. Thirdly, whether or not the report was therefore true. Fourthly, why the certificate, which was issued by CCS Xiamen Domestic Vessel Inspection Center, was valid for five months. In respect to the above mentioned issues, WU Youcai replied as follows: firstly, the ship must be re-inspected and re-issued a certificate for altered registration from Guangzhou Port to Xiamen Port. Secondly, in view of working with the same type of ship, inspection standards were consistent. Thirdly, strictly speaking, the ship should be seaworthy for as long as the period of validity of the certificate. While this did not excuse the ship from some minor problems in the process of running, it would not exclude any minor problem arising during the operation process that could not influence the ship’s seaworthiness. As to the problem of reporting, some aspects were true while others were not. The certificate with a period of four or five months validity was a temporary certificate. Typically, a long-term certificate would be issued before the temporary validity expires, but here, it did not affect the next time of inspection. In the trial, the court investigated the process of signing the Ship Assignment Contract of RMB 8.28 million from both parties’ perspectives. The four Plaintiffs stated the following: the Ship Sales Contract of RMB 18 million was perfected by Jingtao Company and YCD Company on November 17, 2011. In the few days following, due to the taxes paid by YCD Company, Jingtao Company agreed to a lower priced contract for YCD Company to go through formalities in order to fulfil the tax avoidance request of the Defendant. Several contracts made by YCD Company in which the price was RMB8.28 million, covers marked with a seal, were sent to WU Hongqin in Guangzhou. WU Hongqin brought them to XU Guoqian to sign and stamp with the Jingtao Company seal, then used the contracts to go through the formalities of cancellation at Guangzhou MSA. In the meantime, the sealed contracts were sent to WU Gangyi. The contract of which the price was RMB8.28 million concluded without signing in time and, at the time of submission to the MSA, in order to remain consistent with the previous contract, it was also dated November 17, 2011. YCD Company stated as follows: on November 17, 2011, after the contract of which the price was RMB 18 million was finalized, it was brought by Jingtao Company to the Guangzhou MSA to go through the cancellation formalities. The Guangzhou MSA sent the ship documents to Xiamen MSA after cancellation of the ship, and WU Gangyi registered the ship in Xiamen MSA. On December 15, 2011 and December 16, 2011, the officers of the Xiamen MSA informed WU Gangyi that the registration could not proceed because WU Arong had reported to the MSA Xiamen that WU Dequan had sold 45% of the ship’s shares, which had belonged to WU Arong, without WU Arong’s permission. WU Gangyi called WU Dequan for settlement upon negotiation. The Xiamen MSA

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then returned the ship documents to the Guangzhou MSA. At the same time, because of the report of the ship in the CCS, YCD Company was informed by CCS Xiamen that the ship may not be inspected for serious defects. As a result, YCD Company sought to return the ship, refund the ship price, and compensate for the liquidated damages. However, WU Dequan refused to refund the money and compensate for damages, but agreed that the ship price could be reduced. In the evening of December 18, 2011, WU Hongqin messaged WU Gangyi to sign a new contract, and both parties ultimately agreed on the price at RMB8.28 million. On the next day, YCD Company drafted and signed the contract reflecting the price at RMB8.28 million and sent it to WU Hongqin in Guangzhou for the signature of XU Guoqian and seal of Jingtao Company. WU Hongqin then took the contract to the Guangzhou MSA to fulfil the formalities of alteration of the contract and returned the contract to YCD Company. The Guangzhou MSA then sent the documents of the ship to Xiamen once more where the officer of Xiamen MSA informed WU Gangyi to deal with the registration formalities on December 26. As for the reduction of the ship price from RMB18 million to RMB8.28 million, YCD Company held that there were three main factors: firstly, Jingtao Company defaulted by failing to deliver the ship within 15 days in accordance with the contract. Consequently, YCD Company did not want to accept the ship and requested a refund of the deposit and payment of liquidated damages in the amount of RMB1 million. However, the opposing party refused to refund and only agreed to reduce the ship price. Secondly, the ship inspection was biased due to the report of 12 serious defects by WU Arong. Thirdly, the market price of the ship was continuously decreasing, and it was unpredictable whether the reported problems could be rectified, how much repairs would cost, the length of time needed to complete the repairs, and the level of impact on the ship schedule. In addition, YCD Company also confirmed in the trial that if the ship at the time of the transfer was completely seaworthy and had no other risks, the ship would have been worth RMB18 million. However, because the ship was reported and many defects were found, as well as considering the shareholder’s internal disputes, the actual value of the ship was much lower than RMB18 million. YCD Company also stated that it had paid in the amount of RMB2.16 million for the repairs and fees in five months. The court describes this case as a dispute over a ship sales contract. Jingtao Company, as shipowner when considering the registration of M.V. “Xu Da 1,” has the right to dispose of the ship. There are two copies of the ship assignment contract with two different prices. Notwithstanding the price terms, both sides are in agreement as to all other terms of the contract. Furthermore, the content of the contracts does not violate the compulsory provisions of laws, making the contract between Jingtao Company and YCD Company lawful and effective. Jingtao Company therefore has the right to require YCD Company to fulfill its obligation to pay the price of the ship. Although WU Dequan, WU Jiapei, and HONG Jinde are actual owners of the ship, they solely represent Jingtao Company in ship sales negotiations. They are not parties to the ship sales contract and they confirmed that Jingtao Company was the party to the contract in the claim to advocate for rights

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against YCD Company. Therefore, the claims of WU Dequan, WU Jiapei and HONG Jinde cannot stand and shall be rejected. The main issues on which contract shall be used to identify the price of the ship between Jingtao Company and YCD Company. In other words, regarding the contract in which the price was originally RMB18 million, Jingtao Company takes the position that the RMB8.28 million contract was made to meet the request of a tax avoidance, which was recorded in the MSA. Conversely, YCD Company insists that due to the effect of objective factors, the transaction price of the ship sales contract was lowered from RMB 18 million to RMB8.28 million after negotiation. The court’s analysis is as follows: Firstly, in the finalization process of the contract with the price of RMB8.28 million according to the sides’ statements, the statement of YCD Company is clearly not in conformity with any existing evidence. YCD Company insisted that after the Xiamen MSA returned the ship documents to the Guangzhou MSA, the buyer and sellers made a new deal of adjusting the price to RMB8.28 million on December 18, 2011. On the next day, YCD Company drafted the contract with the price of RMB8.28 million and sent it to Guangzhou, where it was signed by XU Guoqian and sealed by Jingtao Company. Next, WU Hongqin delivered the contract to the Guangzhou MSA for alterations to the contract with the RMB 18 million price. However, according to the ship documents of the Xiamen MSA, the Guangzhou MSA sent the contract to the Xiamen MSA on December 19, 2011, and the Xiamen MSA received the documents on December 22, 2011. The court has not found validity in the process of the Xiamen MSA returning the documents to the Guangzhou MSA whereas the course of both sides replaced the contract in the Guangzhou MSA. Additionally, in the letter of receipt of the documents sent by the Xiamen MSA to the Guangzhou MSA on the same day, it did not indicate that Jingtao Company needed to alter the Ship Assignment Contract that had been submitted at the time of cancellation of the ship. In addition, the contract submitted by YCD Company to apply for registration of M.V. “Yi Cheng 12” to the Xiamen MSA found in the documentation was the same as the contract submitted at the time of cancellation and no option to replace the contract of which the price was RMB18 million. Therefore the court declines YCD Company’s stated reasoning of replacing the RMB18 million contract with the RMB8.28 million contract due to its inconsistency with existing evidence and a lack of other evidence to support it. On the contrary, Jingtao Company asserted that the contract with the price of RMB8.28 million was finalized within days after the contract with the price of RMB18 million was finalized and did not go against the existing evidence and established logic. Because the Guangzhou MSA accepted the application for cancellation filed by Jingtao Company concerning M.V. “Xu Da 1” on December 2, 2011, explaining that Ship Assignment Contract had been submitted by Jingtao Company to the Guangzhou MSA at this time, the court affirms at a minimum that the contract with the RMB8.28 million purchase price entered into force before December 2, 2011. Secondly, looking to the contract of which the price is RMB8.28 million, YCD Company is of the opinion that the ship transaction price being altered from RMB18 million to RMB8.28 million cannot stand. YCD Company confirmed that

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the market value of the ship would reach RMB 18 million pursuant to the condition of seaworthiness and absent other risks. Therefore, if there were no objective factors affecting the ship’s value in this case, it would be impossible for the transaction price of the ship to fall to RMB8.28 million in a short span of several days. On the contrary, it clearly defied common sense that the price of RMB18 million for a ship would, within a few days, fall to RMB8.28 million. In fact, three factors, which YCD Company listed in the trial as resulting in the alteration of contract price, were not enough by themselves to cause the alteration of the transaction price. CCS Xiamen received the report concerning 12 defects of M.V. “Xu Da 1” on December 21, 2011 but, as mentioned above, the contract with the purchase price of RMB8.28 million would be finalized before December 2, 2011 at the earliest. Even according to the statement of YCD Company, the price of RMB8.28 million was paid on December 18, 2011. This all suggests that the finalization of the contract with a purchase price of RMB8.28 million had not been influenced by the 12 reported defects. Similarly, the factors of the possibility of alterations, the time and expense of repairs, and the prediction of influence on the shipping schedule taken together could not influence the conclusion of the contract with the purchase price of RMB8.28 million. Additionally, even if Jingtao Company had not finished the cancellation procedures within 15 workdays in accordance with the contract after it had been signed, liquidated damages would only be RMB1 million. It could not go so far as to affect the contract price by a reduction of nearly RMB10 million. In contrast, the position of Jingtao Company that the contract price of RMB8.28 million was made to meet the need of YCD Company in order to avoid tax is more possible and reasonable. Comparing the contract with the price of RMB8.28 million with the contract with the price of RMB18 million, except for the difference of the transfer price, and consequentially different balance of the deposit and payment amount, the other terms and the signing day are completely consistent. If for the purpose of modifying the contract, the two sides may make a supplementary agreement for terms such as of the issue of price. There is no need to enter into another contract containing all of the terms of the previous contract or sign the same day as the previous contract thereon. On the contrary, if a new contract was entered into for alteration of the price as YCD Company stated, under normal circumstances, the parties to the contract would add a term like “the previous contract is null and void” in the contract. Because YCD Company could not give a reasonable explanation as to the objective reasons and process of the price reduction, it leads to a conclusion that the contract with a purchase price of RMB8.28 million was to meet the demand of form, but not to replace the former contract of RMB18 million. In addition, according to the letter of the Xiamen MSA, it is not required to submit a tax certificate in the process of ownership registration. In other words, contracts of different prices have no influence on the amount of tax to be charged, similar to real estate sales concerning registration of ownership in the Xiamen MSA. However, it cannot be excluded at the request of YCD Company. Thirdly, evidence demonstrates the course of recovering the ship price. Two telephone recordings prove that HONG Jinde requested WU Gangyi to pay the remainder of the purchase price in the amount of RMB11 million in accordance

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with the total price of RMB18 million. WU Gangyi admitted the total price of the contract to be RMB18 million at that time. The contract with the RMB8.28 million purchase price was not mentioned. Instead, the conversation only emphasized the loss and compensation for the asking price. Although the recordings were made without the knowledge of WU Gangyi, no evidence proves that WU Gangyi suffered coercion or significant misconception, therefore the evidence demonstrates the real expression of intent of the parties. The court accordingly admits the evidence into the record Although HONG Jinde is not a party to Ship Assignment Contract, as the actual owner of the ship and intermediary in the course of finalizing the contract, he has the right to ask the buyer to pay based in his capacity as a representative of Jingtao Company. From the content of the phone call, both sides were discussing the payment of arrears on the basis of the contract with a RMB18 million purchase price. If the price had been altered to RMB8.28 million, the loss must be contained in the difference, and there is no need to negotiate the contract of which the price is RMB18 million and the compensation of the loss as a result. Since both sides still negotiated the payment in arrears on the basis of a total price ofRMB 18 million, it follows that the real transfer price had not been altered to RMB8.28 million. In conclusion, Ship Assignment Contract, with a purchase price of RMB18 million, is the final and real expression of intent of the buyer and seller. RMB8.28 million is not the real transaction price. It is sufficient to prove that YCD Company had accepted the ship. The certificates of the ship, including Certificate of Seaworthiness, were valid in the period of transfer, the formalities of ship assignment had been agreed to in written by both sides, and YCD Company registered the ship under its own name and completed ship inspections by the CCS. This clearly shows that YCD Company had accepted the ship and would pay the contract price. According to the contract, the payment is divided into three installments. RMB5 million would be paid as the first installment at the time of finalizing the contract. YCD Company would pay RMB11 million as the second installment before December 16, 2011 and, if delayed, YCD Company would pay monthly interest at the rate of 1.08%, and be required to at least pay off the price and the interest before January 17, 2012. The third instalment in the amount of RMB2 million would be paid to Jingtao Company after completing the ship cancellation formalities (such as the ship registration cancellation certificate) for YCD Company. To date, YCD Company has only paid RMB7 million including the deposit, and the payment date in the contract has expired. Jingtao Company is therefore entitled to the payment of the remaining sum, namely RMB11 million and demand liability for default by YCD Company. Jingtao Company now claims for the interest on the remaining sum of RMB11 million calculated since December 17, 2011 at the rate of 1.08% agreed to in the contract, but the court holds it shall be distinguished based on the responsibility for the delay in payment of the remaining two installments. First of all, the principle of the second installment is RMB9 million, and the monthly interest rate in the contract is 1.08%, which reflect the calculation standard of liquidated damages for overdue payment. The loss of interest shall be decided as its main loss under the condition that Jingtao Company is unable to bear the burden of

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proof, making the monthly interest rate of 1.08% too high. Whereas the double opportunities of the penalty to make up for the loss for the observant party and to punish the default party, the court discretionarily alters the standard of liquidated damages for overdue payment to refer to 1.3 times of the bank’s one-year benchmark interest rate over the corresponding period promulgated by the People’s Bank of China, from December 17, 2011 to the date of payment decided by the court. Secondly, YCD Company still must pay the final payment in the amount of RMB2 million, and it is only agreed to in the contract that the final payment shall be paid after the formalities of cancellation and the formalities of the ship inspection department have been finished by Jingtao Company. However, the time and standard of the final payment are not specifically provided within the contract. Whereas this case, mandating that the final payment shall be paid after completing the formalities of cancellation and ship inspection department by Jingtao Company is mainly to guarantee that YCD Company progresses smoothly through ownership registration and the ship inspection once again. Once YCD Company acquired the ownership registration certificate issued by the Xiamen MSA (on December 27, 2011) as well as the relevant certificates issued by the CCS (after April 16, 2012), and the actual owner of the original ship, HONG Jinde, requested WU Gangyi to pay the remaining sum as the representative of Jingtao Company on May 2, 2012, YCD Company had no reason to refuse payment on the remaining balance. It is a breach of the contract that YCD Company failed to pay the remaining sum to date, and Jingtao Company has the right to require the opposing party to assume liability for breach of contract. Although there are no liquidated damages for overdue payment or calculation method of penalty referring to the unpaid RMB2 million, according to Article 24 of the Interpretation of the Supreme People’s Court on Issues concerning the Application of Law for the Trial of Cases of Disputes over Sales Contracts, where the liquidated damages for late payment or the method of calculating such liquidated damages are not stipulated in a sales and purchase agreement and the seller claims the compensation for the loss arising from late payment on the ground that the buyer breaches the contract, the people’s court may calculate the compensation based on the benchmark interest rate of the People’s Bank of China for RMB loans of the same type and same term and with reference to the standard of the penalty interest rate for late payment. In addition, the Notice of the People’s Bank of China on Some Issues concerning Renminbi Loan Interest Rates (Yin Fa [2003] No.251) is a regulation aiming at the rate of the penalty interest. The penalty interest on the overdue loan (the borrower fails to repay the loan as agreed) can be added 30–50% of the loan interest stipulated in a loan contract. According to relevant provisions of judicial interpretations and the notice of the People’s Bank of China, YCD Company failed to pay RMB2 million to purchase the ship. The court utilizes the standard of 1.3 times the one-year benchmark interest rate over the same period promulgated by the People’s Bank of China to calculate interest on the remaining sum of RMB2 million. As for the defense of YCD Company that it suffered the loss of ship repairs and shipping schedule, has not received the product certificate, and considering the problems of other relevant certificates concerning the main engine and auxiliary engine, YCD

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Company may file another lawsuit against Jingtao Company, however it is not a proper reason to refuse to pay the price of the ship and corresponding interest in this case. In accordance with Article 60 Paragraph 1, Article 107, and Article 114 of the Contract Law of the People’s Republic of China, Article 29 of the Interpretation of the Supreme People’s Court of Several Issues concerning the Application of the Contract Law of the People’s Republic of China (II), Article 24 Paragraph 4 of the Interpretation of the Supreme People’s Court on Issues concerning the Application of Law for the Trial of Cases of Disputes over Sales Contracts, and Article 2 of the Supreme People’s Court on Evidence in Civil Procedures, the judgment is as follows: 1. The Defendant, Xiamen Yichengda Shipping Co., Ltd., shall pay RMB11 million to Plaintiff, Guangzhou Jingtao Logistics Co., Ltd., within ten days after the date of the judgment enters into force, and the interest thereon calculated to the date of payment decided by the court by 1.3 times of the one-year benchmark interest rate of the People’s Bank of China over the corresponding period (the interest on RMB9 million shall be calculated from December 17, 2011 and the interest on RMB2 million from May 3, 2012); 2. Reject the other claims of the Plaintiff Guangzhou Jingtao Logistics Co., Ltd.; 3. Reject all claims of the Plaintiffs WU Dequan, WU Jiapei and HONG Jinde. If the Defendant, Xiamen Yichengda Shipping Co., Ltd., fails to perform the obligation for payment within the period designated by this judgment, it shall pay double interest on the period of delayed performance, in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in the amount of RMB10,0630, the maritime claims preservation application fee in the amount of RMB5,000, in total of RMB105,630, the Plaintiffs Guangzhou Jingtao Logistics Co., Ltd., WU Dequan, WU Jiapei and HONG Jinde, shall bear RMB6,897, and the Defendant, Xiamen Yichengda Shipping Co., Ltd., shall bear RMB98,733. Any parties who disagree with the judgment may, within 15 days upon the service of the judgment, submit a letter of appeal to the court, with duplicates in the number of the opposing parties, and appeal to the Fujian High People’s Court. Presiding Judge: LIN Jing Acting Judge: CHEN Yanzhong Acting Judge: CHEN Ya October 24, 2013 Clerk: ZHANG Zhuwei

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Fujian High People’s Court Civil Judgment Guangzhou Jingtao Logistics Co., Ltd. et al. v. Xiamen Yichengda Shipping Co., Ltd. (2014) Min Min Zhong Zi No. 195 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 453. Cause of Action 206. Dispute over ship purchases and sales contract. Headnote Affirming lower court judgment holding that the Plaintiff, the seller of a ship, was entitled to recover the full agreed purchase price rather than a lower purchase price stated in a subsequent contractual document because the subsequent document had been drawn up to avoid taxes, rather than because the vessel had defects, as alleged by the Defendant buyer. Summary This is an appeal from a judgment that involved two disputed contracts for the sale of a ship. Two contracts arose from the sale of a ship, one with a purchase price of RMB18 million and another with a purchase price of RMB8.28 million. The Defendant had paid RMB7 million at the time the claim was filed, alleging that there were several serious defects found on the ship during inspection and that the vessel was unseaworthy. The Defendant demanded a return of its payments, including the deposit, from the Plaintiffs in exchange for the return of the vessel. The Plaintiffs refused. The Defendant claimed that instead, the parties agreed to enter into a new contract with identical terms but with a lower purchase price of RMB8.28 million to better reflect the market value of the vessel. Conversely, the Plaintiffs claimed that the second contract with the purchase price of RMB8.28 million was created upon the Defendant’s request in an effort to avoid taxes on the purchase and demanded that the original purchase price of RMB18 million be enforced. The court found that based on the timing of the two contracts’ formation, coupled with the time of inspection and discovery of defects, that the Plaintiff’s theory was more reasonable. It rejected the Defendant’s assertion that the price was lowered because of the unseaworthy condition of the vessel because these defects were discovered after the new contract was entered into by the parties. Therefore, the defects could not have had an impact on the new contract price. The original price of RMB18 million was found to be the intended price and should be enforced.

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However, the court used its discretion in calculating the interest rate of the late payments because of the nature of the installment timetable. On appeal, the court affirmed the lower court’s judgment.

Judgment The Appellant (The Plaintiff of First Instance): Guangzhou Jingtao Logistics Co., Ltd. Domicile: Room D, Floor 16, Building 8, Poly Lily Garden, No. 381 Gongye Avenue, Haizhuqu District, Guangzhou. Legal representative: XU Guoqian, chairman. Agent ad litem: ZHANG Dongshan, lawyer of Fujian Xiayang Law Firm. The Appellant (The Defendent of first Instance): Xiamen Yichengda Shipping Co., Ltd. Domicile: No. 19, Xiabanshe 3, Xiaban Village, Maxiang Town, Xiangan District, Xiamen, Fujian. Legal representative: WU Gangyi, general manager. Agent ad litem: CHEN Zhensheng, lawyer of Shanghai Fanyang Law Firm. Agent ad litem: WANG Jing, lawyer of Shanghai Fanyang Law Firm. The Plaintiff of First Instance: WU Dequan, Male, Born on July 21, 1952, Han, Living in Shijing Town, Nanan, Fujian Agent ad litem: ZHANG Dongshan, lawyer of Fujian Xiayang Law Firm. The Plaintiff of First Instance: HONG Jinde, Male, Born on February 24, 1960, Han, Living in Xiangzhou District, Zhuhai, Guangzhou Agent ad litem: ZHANG Dongshan, lawyer of Fujian Xiayang Law Firm. The Plaintiff of First Instance: WU Jiapei, Male, Born on October 29, 1946, Han, Living in Shijing Town, Nanan, Fujian The Appellant, Guangzhou Jingtao Logistics Co., Ltd. (hereinafter referred to as “Jingtao Company”), and the Appellant, Xiamen Yichengda Shipping Co., Ltd. (hereinafter referred to as “YCD Company”) refused to accept (2013) Xia Hai Fa Shang Chu Zi No.257 Civil Judgment with respect to the case arising from a dispute over the ship purchases and sales contract, and filed an appeal to the court. After accepting the case, the court formed a collegiate panel and held a hearing in public on March 5, 2014. CHEN Zhensheng and WANG Jing, agents ad litem of YCD Company; ZHANG Dongshan, joint agent ad litem of HONG Jinde, WU Dequan and Jingtao Company, the Plaintiffs of first instance, appeared in court to attend the hearing. WU Jiapei, the Plaintiff of first instance, refused to appear in court without justified reason upon summon, therefore the court tried this case by default in light of the law. Now the case has been concluded.

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In the first instance, Jingtao Company, HONG Jinde, WU Dequan and WU Jiapei requested the court to judge that YCD Company should pay the ship purchase price in the amount of RMB11 million immediately along with the loss of interest calculated from December 17, 2011 to the date of actual payment at the monthly rate of 1.08%. In 2007, WU Dequan, HONG Jinde, WU Jiapei, and the outsider WU Arong made an oral agreement, entrusting Jingtao Company to purchase M.V. “Xu Da 1”. The ship was assigned to Jingtao Company for convenience of operation after the ship was purchased and the Guangzhou Safety Maritime Administration registered Jingtao Company as the shipowner. WU Dequan, HONG Jinde, WU Jiapei, and the outsider WU Arong were relatives. WU Dequan was a shareholder of Jingtao Company. On November 17, 2011, WU Dequan, HONG Jinde and WU Gangyi negotiated the issues of transfer of M.V. “Xu Da 1” in the office of the Xiamen Huaxuda Shipping Co., Ltd. (hereinafter referred to as “Huaxuda Company”) and agreed to a ship assignment contract. The contract provided that Jingtao Company would assign M.V. “Xu Da 1” to YCD Company with a price of RMB18 million (not including the invoice.) At the time the contract was signed, YCD Company paid the deposit of RMB5 million and both sides agreed to the ship being delivered under the status quo of seaworthy. YCD Company would pay RMB11 million to Jingtao Company by way of cash or remittance before December 16, 2011, and, if delayed, YCD Company would pay interest calculated by a monthly rate of 1.08%, and paid in full on January 17, 2012. Jingtao Company would take charge of the ship cancellation formalities and completely transfer authority to YCD Company, while Jingtao Company would complete its duties in 15 working days after the signing of the contract. After the certification of ship registration cancellation and the formalities of ship inspection were transferred from Jingtao Company to YCD Company, YCD Company would pay the balance of RMB2 million to Jingtao Company, and YCD Company would be the ship’s owners after the full amount was paid. The parties shall not default. If YCD Company defaulted, the deposit would automatically become the penalty paid to Jingtao Company. If Jingtao Company defaulted, it would return YCD Company’s deposit and compensate with an additional RMB1 million. After the contract was signed by WU Gangyi and sealed by YCD Company, WU Dequan signed the contract as representative of Jingtao Company, who then took the contract to Guangzhou where Jingtao Company affixed its seal. Jingtao Company signed the contract on November 17, 2011, while YCD Company had not yet signed at that time. When the contract was concluded, the Certificate of Seaworthiness of Cargo Ship, the Oil Pollution Prevention Certificate, and the Seagoing Ship Load Line Certificate issued by the Guangzhou Province Guangzhou City Ship Inspection Bureau was valid until July 18, 2012; the Sea Shipping Dangerous Goods Certificate was valid until January 18, 2012. From November 18, 2011 to November 21, 2011, YCD Company paid the deposit of RMB5 million to WU Dequan and paid HONG Jinde ship purchase price of RMB1.57 million, which was confirmed by Jingtao Company. In accordance to the instruction of Jingtao Company and WU Dequan, YCD Company paid RMB430,000 to Zishun Company as a part of the ship price on November 28, 2011.

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So far, the total amount paid by YCD Company was RMB7 million. Jingtao Company assigned M.V. “Xu Da 1” to YCD Company after the contract was concluded in Zini Shipyard located in Longhai Zhangzhou, Fujian. At this point, after accepting the ship, YCD Company was ready to alter the registration from Guangzhou Bureau to CCS Xiamen,. The ship was renamed as M.V. “Yi Cheng 12”. On December 2, 2011, Jingtao Company trusted WU Hongqin, the son of WU Dequan, to submit the application for cancellation of ownership of the ship and nationality certificate to the MSA Guangzhou, to provide Ship Assignment Contract, and to handle ship assignment formalities of M.V. “Xu Da 1”. The authority accepted the application on the same day. After checking the documents, it became clear that Ship Assignment Contract regarding cancellation of the ownership and nationality certificate was not the same contract signed on November 17, 2011. The transfer price was listed as RMB8.28 million instead of RMB18 million and the amount of the deposit differed. Also, the second and third payment installments were altered in the contract in the documents. Other terms of the contract have no difference with the other contract. In addition, it was XU Guoqian rather than WU Dequan who represented Jingtao Company to sign the contract, and the signing dates for both contract was November 17, 2011. M.V. “Xu Da 1” transfer formalities in the documents are recorded as follows: on November 25, 2011, Jingtao Company assigned the ownership of M.V. “Xu Da 1” to YCD Company. From that point on, Jingtao Company would not accept the business of any ship management or disposal affairs. YCD Company would take charge of all business dealing with ship management and enjoy corresponding legal rights and bear corresponding legal responsibility. The transferor, Jingtao Company, sealed the contract and XU Guoqian signed the contract. The transferee, YCD Company, sealed the contract and WU Gangyi signed the contract. The date of signing was November 17, 2011. On December 15, 2011, after examination and approval, MSA Guangzhou nullified the Certificate of Ownership and the Certificate of Nationality of the ship. On December 19, 2011, MSA Guangzhou sent the documents related to M.V. “Xu Da 1” to Xiamen MSA. On December 22, 2011, Xiamen MSA found six problems upon preliminary examination after receiving the documents and sent a letter to MSA Guangzhou. Two of these problems are related to this case: 1) the cancellation of the registration of the ship and the date signed in Ship Assignment Agreement was December 12, 2011, prior to the assignment date. This is illogical and different from the contract that Xiamen is providing; 2) Xiamen MSA received the materials concerning the dispute regarding the shareholder status of M.V. “Xu Da 1”, and MSA Guangzhou should verify this matter. On December 23, 2011, MSA Guangzhou replied: 1) instructions and additional related information (attached) provided by owner Jingtao Company; 2) MSA Guangzhou did not receive the materials concerning dispute over the shareholding of M.V. “Xu Da 1”. Jingtao Company issued a statement concerning the discrepancy of the delivery date of M. V. “Xu Da 1”, explaining: Ship Assignment Agreement of M.V. “Xu Da 1” did not record the location of assignment, which the company submitted to MSA Guangzhou on November 17, 2011. After consultation with YCD Company, Jingtao Company provided an agreement recording the location of assignment on

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November 25, 2011. Due to the negligence of the staff, there were two transfer agreement dates, and the entirety of the assignment agreement should be subject to the documents made on November 25, 2011. On December 26, 2011, YCD Company submitted an application of ownership/ nationality registration of M.V. “Xu Da 1” to Xiamen MSA and submitted Ship Assignment Contract and M.V. “Xu Da 1” Transfer Formalities. The Ship Assignment Contract submitted by YCD Company matches with the contract that Jingtao Company submitted to the MSA Guangzhou. The transfer price was RMB8.28 million after the ship documents were delivered. The above mentioned documents and the transfer formalities Jingtao Company submitted to The MSA Guangzhou record the transfer location as Zini Shipyard, located in Longhai Town, Zhangzhou, Fujian dated November 25, 2011. Other content had no differences. On December 27, 2011, Xiamen MSA issued a certificate of ownership for M.V. “Xu Da 1” dated November 25, 2011, in which the owner was YCD Company. In early December 2011, YCD Company assigned ship inspection duties to CCS Xiamen, who surveyed the ship for several days beginning on December 7, 2011. On December 21, 2011, after CCS Xiamen received 12 complaints regarding the defects of the ship from CCS Xiamen, the surveyors appointed by CCS Fuzhou and CCS Xiamen verified and inspected the issues of the complaints beginning January 11, 2012. The first inspection of the ship was conducted by CCS Xiamen from March 21, 2012. The opinions of the Department of Drawing Review of CCS Fuzhou were implemented by CCS Xiamen. On April 16, 2012, CCS issued a domestic shipping inspection report (code: 2012 xm0187). On the same day, the Seagoing Ship Seaworthiness Certificate, Seagoing Ship Oil Pollution Prevention Certificate, and Seagoing Ship Load Line Certificate for the M.V. “Yi Cheng 12” were issued by Domestic Vessel Inspection Center of CCS Xiamen, of which the expiration date was September 15, 2012. On May 2, 2012 and May 16, 2012, HONG Jinde called WU Gangyi twice to ask him to pay the balance of the purchase price in the amount of RMB11 million. WU Gangyi admitted that he signed the ship purchase and sales contract, of which the price was RMB18 million, but he insisted that the other party delayed delivery of the ship and should pay the penalty of about RMB1 million due to the breach of contract. Furthermore, the transfer of the ship was not under the requisite condition of seaworthiness. This resulted in a loss of more than RMB2 million arising from rectification and repairs due to the report of WU Arong. Twice in the conversation, the two sides failed to mention the ship purchase price and sales contract of RMB8.28 million. On June 29, 2012, WU Arong filed a case to the court of first instance against Jingtao Company, WU Dequan, WU Jiapei, and HONG Jinde. The court of first instance added YCD Company as the third party in the trial, of which the number was (2012) Xia Hai Fa Shang Chu Zi No.202. As WU Arong argued, as one of the actual owners of M.V. “Xu Da 1”, Jingtao Company, WU Dequan, WU Jiapei, and HONG Jinde assigned the ship to YCD Company without his permission, and should therefore compensate for losses. In this case, Jingtao Company, WU Dequan, WU Jiapei and HONG Jinde confirmed the ship price of RMB18 million,

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whereas the contract of with the ship price of RMB8.28 million was used to meet the need of tax avoidance during registration. WU Arong also recognized that the market value of the ship was RMB18 million at the time of the transfer, but YCD Company considered the contract of which the price was RMB8.28 million (hereinafter referred to as the RMB 8.28 Million Contract”) as reflecting the real intention between the two sides. On July 13, 2013, the court of first instance sent an investigation letter to Xiamen MSA to investigate two issues: 1. whether there was a request of registration party submitting tax certificate in the process of ownership registration by YCD Company concerning M.V. “Yi Cheng 12”; 2. whether the contract parties had submitted the transfer ship contract of RMB 18 million in the process of ownership registration by YCD Company concerning M.V. “Yi Cheng 12”. On July 18, 2013, Xiamen MSA replied in written as follows: 1. there was no need to submit a tax certificate in the ownership registration process according to Regulations of the People’s Republic of China Governing the Registration of Ships; 2. Ship Assignment Contract in the ship registration documents was used as the criterion. In addition, Ship Assignment Contract did not mention the price of RMB18 million and the materials altered in the process of checking the registration files of the M.V. “Yi Cheng 12”. On October 9, 2013, the court of first instance investigated some questions on WU Youcai, the general manager of the CCS Xiamen, as follows: 1) whether M.V. “Yi Cheng 12” must be inspected again at the time of changing the registration from Guangzhou Port to Xiamen Port; 2) whether the ship was unseaworthy at the time of inspection by the CCS Xiamen; 3) whether or not this was true concerning the report; 4) why the certificate was valid for five months, which was issued by CCS Xiamen Domestic Vessel Inspection Center. According to the above problems, WU Youcai replied as follows: 1) the ship must be re-inspected and re-issued a certificate altered accordingly and registered from Xiamen from Guangzhou; 2) whereas the same type ship, inspection standards were consistent; 3) strictly speaking, the ship should be seaworthy for as long as the certificate was valid, but this did not rule out some minor problems in the process of the running of the ship. However it would not exclude any minor problem arising from the operation process which may not influence seaworthiness. As to the problem of reporting, some part was true while some part was not true. The certificate with a validity period of four or five months was a temporary certificate and typically would be replaced by a long-term certificate before the temporary certificate becomes invalid. However this did not affect the next time of inspection. In trial, the court of first instance investigated the process of signing Ship Assignment Contract of RMB8.28 million from both sides. The four Plaintiffs of first instance stated that: in the few days after Ship Sales Contract of RMB18 million was concluded by Jingtao Company and YCD Company on November 17, 2011, Jingtao Company agreed to make a lower-priced contract for YCD Company as a formality. This resulted from a request by the Defendant to avoid taxes due to the taxes paid by YCD Company. Several contracts made by YCD Company with the price of RMB8.28 million, seal affixed, were sent to WU Hongqin in

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Guangzhou. WU Hongqin brought the contracts to XU Guoqian to sign and affix the seal Jingtao Company, then used the contracts to go through the formalities of cancellation at The MSA Guangzhou. In the meantime, WU Hongqin sent the sealed contract to WU Gangyi. The RMB8.28 Million Contract concluded without signing time, and at the time of submitting to the MSA, in order to remain consistent with the previous contract, the latter contract was also dated November 17, 2011. YCD Company stated as follows: on November 17, 2011, after the contract of which the price was RMB18 million (hereinafter referred to as “the RMB18 Million Contract”) concluded, Jingtao Company brought the contract to MSA Guangzhou to go through the cancellation formalities. MSA Guangzhou sent the ship documents to Xiamen MSA after cancellation of the ship, and WU Gangyi registered the ship in Xiamen MSA. On December 15, 2011 and December 16, 2011, the officers of Xiamen MSA informed WU Gangyi that the registration could not proceed because WU Arong had reported to the MSA Xiamen that WU Dequan had sold 45% of shares of the ship, which had belonged to WU Arong, without his permission. WU Gangyi called WU Dequan for settlement upon negotiation. Xiamen MSA then returned the ship documents to MSA Guangzhou. At the same time, because of the report of the ship in the CCS, YCD Company was informed by CCS Xiamen that the ship might be inspected for serious defects. As a result, YCD Company sought to return the ship, receive a refund of the ship price, and receive compensation for the liquidated damages. WU Dequan refused to refund the money and compensate for damages but agreed to reduce the ship price. In the evening of December 18, 2011, WU Hongqin messaged WU Gangyi to sign a new contract. Both parties ultimately agreed to a price of RMB8.28 million. On the next day, YCD Company drew up and signed the RMB8.28 Million Contract and sent it to WU Hongqin in Guangzhou City for the signature of XU Guoqian and the seal of Jingtao Company. WU Hongqin then took the contract to MSA Guangzhou to fulfil the formalities of the alteration of the contract and sent the contract back to YCD Company. MSA Guangzhou then sent the documents of the ship to Xiamen once more. The officer of Xiamen MSA informed WU Gangyi to address the registration formalities on December 26. In regards to the ship price being reduced from RMB18 million to RMB8.28 million, YCD Company held that there were three main factors: first, Jingtao Company defaulted by failing to deliver the ship within 15 days in accordance with the contract. YCD Company did not want to accept the ship and requested a refund of the deposit and payment of liquidated damages in the amount of RMB1 million. However, the opposing party refused to refund the deposit and only agreed to reduce the ship price. Secondly, the ship inspection was influenced by the report of 12 serious defects by WU Arong. Thirdly, the market price of the ship was continuously decreasing and it was uncertain whether the reported problems could be rectified, how much and how long the repairs would take, and how much impact this would have on the ship schedule. In addition, YCD Company confirmed in the trial that if the ship at the time of the transfer was completely seaworthy with no other risks, it would be worth RMB18 million. Because it was reported that the ship had many defects and considering the shareholders’ internal disputes, the actual value of the ship was

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much lower that RMB18 million. YCD Company also stated that it had paid RMB2.16 million for the repairs and fees in a five month period. The court of first instance held that the case was a dispute over a contract for the sale of a ship. Jingtao Company, as shipowner by way of the registration of M.V. “Xu Da 1”, had the right to dispose of the ship. There were two copies of a ship assignment contract with two different prices. Besides the price, both versions were consistent as to all other terms of the contract. The content of the contracts did not violate the compulsory provisions of laws, therefore the contract between Jingtao Company and YCD Company was lawful and effective, giving Jingtao Company the right to require YCD Company to fulfill its obligation to pay the ship price. Although WU Dequan, WU Jiapei and HONG Jinde were the actual owners of the ship, they only represented Jingtao Company in ship business negotiations and were not parties to the ship sales contract. They confirmed that Jingtao Company was the party to the contract in the trial to advocate claims against YCD Company. Therefore, the claims of WU Dequan, WU Jiapei and HONG Jinde could not stand and should be rejected. The main issues concerned which contract should be utilized to identify the price of the ship at issue between Jingtao Company and YCD Company. In other words, after the contract reflecting the price of RMB18 million concluded, whether, as Jingtao Company insisted, the contract of which the price was RMB8.28 million was made to meet the request of tax avoidance recorded in the MSA, or, as YCD Company insisted, it was due to the effect of objective factors that the transaction price of the ship sales contract went down from RMB18 million to RMB8.28 million after negotiation. The analysis of the court of first instance was as follows: Firstly, in the conclusion process of the RMB8.28 Million Contract according to the two sides’ statements, the statement of YCD Company was clearly not in conformity with existing evidence. YCD Company insisted that after Xiamen MSA returned the ship documents to MSA Guangzhou, the buyer and sellers made a new deal of a purchase price at RMB8.28 million on December 18, 2011. On the next day, YCD Company drew up the contract of which the price was RMB8.28 million and sent it to Guangzhou, where it was signed by XU Guoqian and sealed by Jingtao Company. WU Hongqin then brought it to MSA Guangzhou for the alteration of the contract of which the price was RMB18 million. However, according to the ship documents of Xiamen MSA, MSA Guangzhou sent the contract to Xiamen MSA on December 19, 2011 and Xiamen MSA received the documents on December 22, 2011. The court of first instance did not find the facts of Xiamen MSA returning the documents to MSA Guangzhou or that both sides replaced the contract in MSA Guangzhou to be credible. Also, in the letter of receipt of the documents sent by Xiamen MSA to MSA Guangzhou on the same day, it did not point out that Jingtao Company needed to alter Ship Assignment Contract submitted at the time of cancellation of the ship. In addition, the contract submitted by YCD Company to apply to Xiamen MSA for registration of M.V. “Yi Cheng 12” in the documents was the same as the one submitted at the time of cancellation and there was no course of replacing the contract of which the price was RMB 18 million. Therefore the court of first instance did not acknowledge the

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statement by YCD Company that the process of making the RMB8.28 million contract and the replacement of the RMB18 million contract due to the inconsistency of the existing evidence and a lack of other evidence to support it. On the contrary, Jingtao Company held that the contract of which the price was RMB8.28 million was concluded within a few days after the contract of which the price was RMB18 million was finalized; it did not go against the existing evidence and logic. Because MSA Guangzhou accepted the application for cancellation filed by Jingtao Company concerning M.V. “Xu Da 1” on December 2, 2011 and explained that Ship Assignment Contract had been submitted by Jingtao Company to MSA Guangzhou at this time, the court of first instance affirmed that at a minimum the contract of which the price was RMB8.28 million concluded before December 2, 2011. Secondly, regarding the contract of which the price was RMB8.28 million, YCD Company asserted that the ship transaction price alteration from RMB18 million to RMB8.28 million could not stand. YCD Company confirmed the market value of the ship would reach RMB18 million under the condition of seaworthiness and absence of other risks, therefore, if there was no objective factors affecting the ship’s value in the case, it was impossible that the transaction price of the ship fell to RMB8.28 million in a short span of a few days. On the contrary, it clearly defied common sense that the price of RMB18 million for a ship fell to RMB8.28 million within a few days. In fact, three factors, which YCD Company claimed in the trial led to the alteration of the contract price, were not enough to cause the alteration. CCS Xiamen received the report concerning 12 defects of M.V. “Xu Da 1” on December 21, 2011, but as mentioned above, the contract of which the price was RMB8.28 million would be concluded before December 2, 2011 at least. According to the statement of YCD Company, the price of RMB8.28 million was dealt on December 18, 2011, which clearly suggests that the conclusion of the contract of which the price was RMB8.28 million had not been influenced by the 12 reported defects. Similarly, the factors of the possibility of restoration, the time and expense of repair, and the prediction of their influence on the shipping schedule, could not lead to influence the conclusion of the contract of which the price was RMB8.28 million. Additionally, even if Jingtao Company had not finished the cancellation procedures within 15 workdays in accordance with the contract after the contract was signed, liquidated damages were only RMB1 million. It could not go so far as to affect the contract price by reducing it by nearly RMB10 million. In contrast, the assertion of Jingtao Company that the contract price of RMB8.28 million was made to meet the need of YCD Company to avoid tax was more possible and reasonable. Comparing the contract of which the price was RMB8.28 million with the contract of which the price was RMB8.28 million, except for the difference of the transfer price (and consequentially different balance of the deposit and payment amount) the other terms and the signing day were completely consistent. If for purpose of modifying the contract, the two sides might make a supplementary agreement in terms of the issue of price, there was no need to conclude another contract with all of the terms of the previous contract repeated, or to sign on the same day as the original contract. On the contrary, if a new contract

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was entered into for alteration of the price as YCD Company stated, under normal circumstances, the parties to the contract would add a term of “the previous contract is null and void” in the contract. Because YCD Company could not give a reasonable explanation of the objective reasons and process of the price reduction, it simply led to a conclusion that the contract of which the price was RMB 8.28 million was to meet the demand of form, but not to replace the former contact of RMB 18 million. In addition, according to the letter of Xiamen MSA, a tax certificate was not required to submit in the process of ownership registration, that is to say contracts of different prices had no influence on the amount of tax just as real estate sales concerning registration of ownership in Xiamen MSA. It could not deny it was the request of YCD Company. Thirdly, in the course of recovering the ship price, two phone recordings proved that HONG Jinde requested WU Gangyi to pay the rest of the ship purchase price in the amount of RMB11 million according the total price of RMB18 million. In the recordings, WU Gangyi admitted that the total price of the contract was RMB 18 million at that time while the contract of which the price was RMB8.28 million was not mentioned, and simply emphasized the loss and compensation. Although the sound records were made without the knowledge of WU Gangyi, no evidence proved that WU Gangyi suffered coercion or significant misconception. Therefore the evidence shows the real expression of intent of the parties, and the court of first instance admitted it. Although HONG Jinde was not the party to Ship Assignment Contract, as the actual owner of the ship and intermediary in the course of the conclusion of the contract, he had right to ask the buyer to pay as a representative of Jingtao Company. Based on the content of the phone call, both sides were discussing the payment of arrears on the basis of the contract of which the price was RMB18 million. If the price had been altered to RMB8.28 million, the loss must be contained in the difference, and there was no need to negotiate the contract of which the price was RMB18 million and the compensation of the resulting loss. Since the both sides still negotiated the payment in arrears on the basis of a total price of RMB18 million, it follows that the real transfer price was not altered to RMB8.28 million. In conclusion, Ship Assignment Contract, of which the price was RMB18 million, was the final real expression of the intent of the buyers and seller, and RMB8.28 million was not the real transaction price. It was sufficient to prove that YCD Company had accepted the ship, that the certificates of the ship, including the Certificate of Seaworthiness, were valid in the period of transfer, that the formalities of the ship assignment had been agreed to in written by both sides, and that YCD Company registered the ship under the name of itself and finished ship inspection by the CCS. This clearly demonstrated that YCD Company had accepted the ship and it should pay the contract price. According to the contract, the payment was divided into three installments: RMB5 million was to be paid as the first installment at the time of the conclusion of the contract. YCD Company would pay RMB11 million as the second installment before December 16, 2011, and if delayed, YCD Company would pay monthly interest at the rate of 1.08%, and at a minimum pay off the price and the interest before January 17, 2012. The third installment in the amount of RMB2 million would be paid to Jingtao Company after completing the

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ship cancellation formalities (such as the ship registration cancellation certificate) for YCD Company. At this point in time YCD Company had only paid RMB7 million, including the deposit, and the payment date in the contract has expired. As a result, Jingtao Company was entitled to the payment of the remaining sum, namely RMB11 million and to demand liability for default by YCD Company. Jingtao Company now demanded the interest on the remaining sum of RMB11 million calculated at the rate of 1.08% accruing from December 17, 2011 as agreed to in the contract, but the court of first instance held that it should be distinguished from determining the responsibility for delay in payment of the remaining two installments. First of all, the principle of the second installment was RMB9 million, and the monthly interest rate in the contract was 1.08%, which reflect the calculation standard of liquidated damages for overdue payment. The loss of interest should be determined to be its main loss under the condition that Jingtao Company was unable to bear the burden of proof, so the monthly interest rate at 1.08% was too high. In view of the double characters of the penalty to make up loss for the observant party and punish the default party, the court of first instance discretionarily altered the standard of liquidated damages for overdue payment to refer to 1.3 times of the one-year benchmark interest rate over the corresponding period promulgated by the People’s Bank of China, from December 17, 2011 to the date of payment decided by the court of first instance. Secondly, YCD Company still needed to pay the final payment of RMB2 million, and it was agreed to in the contract that the final payment should be paid after the formalities of cancellation and the formalities of ship inspection department had been finished by Jingtao Company. However the time and standard of final payment were not specifically provided therein. In view of this case, the reason that final payment should be paid after completing the formalities of cancellation and ship inspection department by Jingtao Company, was mainly to guarantee YCD Company to smoothly go through ownership registration and the ship inspection once again. Once YCD Company acquired the ownership registration certificate issued by Xiamen MSA (on December 27, 2011) and the relevant certificates issued by the CCS (after April 16, 2012), and the actual owner of the original ship, HONG Jinde, asked WU Gangyi to pay the remaining sum as a representative of Jingtao Company on May 2, 2012, YCD Company had no reason to refuse to pay the remaining part of the price. It was a breach of the contract that YCD Company failed to pay the remaining sum, and Jingtao Company had the right to require the opposing party to assume liability for breach of contract. Although there were no liquidated damages for overdue payment or a calculation method of penalty referring to the unpaid RMB2 million, according to Article 24 of the Interpretation of the Supreme People’s Court on Issues concerning the Application of Law for the Trial of Cases of Disputes over Sales Contracts, where the liquidated damages for late payment or the method of calculating such liquidated damages are not stipulated in a sales and purchase agreement and the seller claims compensation for the loss arising from late payment on the ground that the buyer breached the contract, the people’s court may calculate the compensation based on the benchmark interest rate of the People’s Bank of China for RMB loans of the same type and same term and with reference to the

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standard of the penalty interest rate for late payment. In addition, the Notice of the People’s Bank of China on Some Issues concerning Renminbi Loan Interest Rates (Yin Fa [2003] No.251) was a regulation aiming at the rate of the penalty interest, therefore the penalty interest on the overdue loan (the borrower fails to repay the loan as agreed) could be added 30–50% of loan interest stipulated in a loan contract. According to relevant provisions of judicial interpretations and the notice of the People’s Bank of China, YCD Company failed to pay RMB2 million to buy the stern. The court of first instance identified the standard of 1.3 times of the one-year benchmark interest rate over the same period promulgated by the People’s Bank of China to calculate interest on the outstanding sum of RMB2 million. As for the defense of YCD Company that it suffered the loss of ship repairing and shipping schedule, and that YCD Company had not handed over the product certificate and the problems of other relevant certificates concerning the main engine and the auxiliary engine, YCD Company may file another lawsuit against Jingtao Company. However these defenses were not proper reasons to refuse to pay the price of the ship and corresponding interest in this case. In accordance with Article 60 Paragraph 1, Article 107 and Article 114 of the Contract Law of the People’s Republic of China, Article 29 of the Interpretation of the Supreme People’s Court of Several Issues concerning the Application of the Contract Law of the People’s Republic of China (II), of Article 24 Paragraph 4 of the Interpretations of the Supreme People’s Court on Issues concerning the Application of Law for the Trial of Cases of Disputes over Sales Contracts, and Article 2 of the Provisions of the Supreme People’s Court on Evidence in Civil Procedures, the court of first instance judged that: 1. YCD Company should pay RMB11 million to Jingtao Company within ten days after the date of the judgment came into force, as well as the interest calculated to the date of payment decided by the court of first instance by 1.3 times of the one-year benchmark interest rate of the People’s Bank of China over the corresponding period (the interest on RMB9 million should be calculated from December 17, 2011 and the interest on RMB2 million from May 3, 2012); 2. reject other claims of Jingtao Company; 3. rejected all claims of WU Dequan, WU Jiapei and HONG Jinde. If YCD Company failed to perform the obligation for payment within the period designated by this judgment, it should pay double interest on the period of delayed performance, in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB10,0630, the maritime claims preservation application fee in amount of RMB5,000, for a total of RMB105,630, the Plaintiffs of first instance, Jingtao Company, WU Dequan, WU Jiapei and HONG Jinde should bear RMB6,897, and YCD Company should bear RMB98,733. After the first instance, the Plaintiffs in the first instance, Jingtao Company, HONG Jinde, WU Dequan and WU Jiapei refused to accept the original judgment and lodged an appeal to the court as follows: Article 3 of Ship Assignment Contract had stated that YCD Company should pay the deposit of RMB5 million on November 17, 2011, RMB11 million before December 16, 2011 and the balance before January 17, 2012. Article 7 of the contract defined the calculation standard of the monthly interest of 1.08%. Article 8 of the contract provided that the ship’s owner was YCD Company,

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after all the sum was paid, and YCD Company would obtain the ownership of the ship on November 25, 2011. The date of payment should therefore be advanced on that day. The claim filed by Jingtao Company, HONG Jinde, WU Dequan, and WU Jiapei in first instance had already diminished that for calculation convenience; the interest was all calculated from December 17, 2011. The overdue interest claimed by Jingtao Company was only equivalent to half of four times of the loan interest rate over the same period promulgated by the People’s Bank of China, which should be protected by law. However, the original court diminished the liability of YCD Company for breach of contract, which violated the principle autonomy of will and contradicted the facts. Therefore, the Appellant required the court of second instance to cancel the interest thereon calculated by 1.3 times the one-year benchmark interest rate over the same period promulgated by the People’s Bank of China to the date of payment decided by the court (the interest on RMB9 million should be calculated from December 17, 2011 and that on RMB2 million from May 3, 2012) in paragraph 1 in the original judgment and paragraph 2 therein, and amend to that YCD Company immediately pay RMB11 million, together with the interest thereon which should be calculated from November 17, 2011 to the date of actual payment at a monthly interest rate of 1.08%. Finally, that YCD Company bear the litigation costs of the first instance and the second instance. YCD Company argued as follows: 1. There was a dispute on the actual price of Ship Assignment Contract determined by the judgment of first instance between the two parties, and YCD Company alleged it should be identified as RMB8.28 million. Also, that Article 7 and Article 8 in the contract be the basis of the payment of contract price and interest; 2. Even if RMB18 Million was identified as the transaction price, Jingtao Company alleged YCD Company had obtained the ownership of the ship on November 25, 2011, making the time of payment become due in advance on November 25, 2011. The fact was that YCD Company had not obtained the ownership of the ship until December 27, 2011, and Jingtao Company only finished the cancellation of certificate on November 30. YCD Company obtained the Certificate of Ownership on December 27. According to the letter of appeal submitted by YCD Company, Ship Transfer Formalities submitted in the first instance by Jingtao Company was fake, which could not be admitted as evidence, and it did not provide November 25 as the day of acquiring the ownership. It only agreed that YCD Company should apply all certificates and bear corresponding responsibility. On December 27, when the certificates of the ship were acquired, the ship had serious defects and other certificates had not yet been made. On April 16, 2012, YCD Company obtained other relevant certificates. Jingtao Company fundamentally breached the contract. As ships were a means of transport, the ship could not be put into operation when it had not obtained corresponding certificates. It failed to deliver the ship in accordance with the contract, so it had no right to demand payment of contract price and interest; 3. The claim of Jingtao Company referring to the method of calculation for the loss of interest was contrary to the practice, which should not be adopted in

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accordance with the law. Even according to Article 7 of the contract, if interest was paid exceeding the day as agreed, this would be merely the calculation standard of liquidated damages for overdue payment decided in the judgment of first instance. Under the condition that Jingtao Company could not bear its burden of proof, it should be mainly defined as loss of interest, making the standard at the rate of 1.8% too high. According to Article 20 of the Interpretation of the Supreme People’s Court of Several Issues concerning the Application of the Contract Law of the People’s Republic of China (II), if the agreed liquidated damages are too high, the court should weigh in consideration the performance of the contract under the principle of fairness. In the first instance, YCD Company alleged that the liquidated damages were too high, which should be adjusted to the loan interest rate over the same period, and the calculation method to adjust the liquidated damages adopted by the court of first instance was in favor of Jingtao Company. As to the loss of interest calculation standard, according to the specific circumstances of different cases, the judicial practices at present mainly adopted the loan interest rate or deposit interest rate over the same period. The court of first instance took account of the principal “compensating the observant party and punishing the breaching party,” and decided to calculate the interest with reference to 1.3 times the financial institutions’ one-year benchmark loan interest rate over the same period. The became extra compensation for the losses. With reference to Article 6 of the Interpretation of the Supreme People’s Court on Issues concerning the Application of Law for the Trial of Cases of Dispute over Contracts on Undertaking Construction Projects, the agreed calculation standard of interest rate exceeded the interest rate of the loans of the same kind and over the same period. According to stipulation referring to balance payment in Article 8 of Ship Assignment Contract, Jingtao Company could only claim to calculate at the rate of loans of same kind over the same period. It was wrong that the interest should be calculated from May 3, 2012 referring to Article 24 Paragraph 4 of the Interpretation of the Supreme People’s Court on Issues concerning the Application of Law for the Trial of Cases of Disputes over Sales Contracts. Jingtao Company’s grounds of appeal lacked factual and legal basis. YCD Company, the Defendant in the first instance, lodged an appeal to the court as follows: 1. It was incorrect that the court of first instance ascertained that the RMB8.28 Million Contract should be concluded at least before December 2, 2011. First of all, the RMB18 Million Contract had not provided that taxes should be born by YCD Company, which was different with what Jingtao Company put forth. YCD Company had never requested Jingtao Company to make a contract with a lower price for YCD Company to go through formalities for tax avoidance. Regarding the RMB8.28 Million Contract, Jingtao Company went through the formalities for cancellation of registration of the ship over the time limit, so the ownership of the ship had not yet been transferred to YCD Company. A dispute arising from

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compensation for ownership damage between ship shareholders, WU Arong, a shareholder, reported that the ship had many defects, rendering the ship unable to be inspected at once, thus YCD Company requested WU Dequan to return the ship and refund payment for the ship in the amount of RMB5 million and liquidated damages in the amount of RMB1 million, according to contract. Also, WU Dequan did not want to refund the money and compensate for breach of contract, but still wanted to sell the ship. Therefore, he simultaneously asked WU Gangyi for assistance. Both sides agreed to enter into a new contract in the case of sharply reducing price after consultation. It was approximately one month since the date of signing the RMB18 Million Contract, not a matter of days. Secondly, based on the interpretation by the original court of the documents pertaining to the MSA Xiamen, there was no content referring to any authority returning to the Guangdong MSA or the process of changing the recorded contract in MSA Guangzhou by either side. This did not mean Jingtao Company had never submitted the RMB18 Million Contract to MSA Guangzhou, or that the RMB8.28 Million Contract was concluded before December 2, 2011. Judging from the actual situation, Jingtao Company might have submitted the RMB18 Million Contract to the MSA on November 17, 2011, concluded the RMB8.28 Million Contract immediately after, and changed the application materials (including RMB18 Million Contract) before the MSA examined and approved and documents. Thirdly, the original court found that on December 2, 2011, Jingtao Company entrusted WU Hongqin, the son of WU Dequan, to submit the application for cancellation of the ownership of the ship and nationality certificate to MSA Guangzhou and to provide Ship Assignment Contract and M.V. “Xu Da 1” Ship Transfer Formalities. The authority accepted on the same day, contradictory to Jingtao Company’s statement. According to the stipulations of the contract, Jingtao Company would go through the formalities for cancellation of the ship within 15 working days after signing the contract. Under normal circumstances, it could not be extended to December 2, 2011 in order to deal with concerned formalities, unless extended on purpose or in accordance with a hidden agenda. According to the records and texts of the dialogue between WU Gangyi and HONG Jinde, Jintao Company went through the cancellation formalities immediately after signing the contract on November 17, 2011, but the attempt failed due to the actions of MSA. It was 15 days from November 17 to December 2, and it clearly was not immediate. YCD Company indicated that the original judgment was founded on a lack of basis or that Jintao Company’s statement was false. Finally, YCD Company asserted that the decision of the original court, being that on December 19, 2011, the MSA Guangzhou sent the documents of M.V. “Xu Da 1” to the MSA Xiamen, was lacking in basis. According to relevant stipulations, there was a deadline of seven days to proceed with ship cancellation formalities. Supposing that Jintao Company sent the cancellation application to MSA Guangzhou on December 2, 2011, it should have been completed before December 9, not delayed to February 19. Otherwise, it was on December 22, 2012 that MSA Xiamen accepted all documents from MSA Guangzhou. However, courier service only took one day from

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Guangzhou to Xiamen. Supposing the reply of MSA Xiamen to the investigation letter sent by the original court was true, then the determination of the original judgment was wrong. 2. The reasoning behind the original judgment that “it is more possible and reasonable of the allegation of Jingtao Company that the RMB8.28 Million Contract was made to meet the need of YCD Company for tax avoidances” was a complete conjecture, lacked factual basis, and was unreasonable. The statement of Jingtao Company had no evidentiary support and was contradictory to the reply of MSA Xiamen. YCD Company would even be burdened with the transaction tax of the ship, the amount of which was RMB8,280. Due to the breach of Jingtao Company, the loss of YCD Company reached between RMB7 and 8 million. It would be inconceivable that YCD Company would burden millions in loss to avoid ten thousand RMB tax. 3. The reasoning behind the original judgment that “the conclusion of the RMB8.28 Million Contract had not actually been influenced by the report” lacked factual basis. Due to the report of WU Arong, the dispute had been arising between the shareholders of Jingtao Company and did not concern the ownership cancellation formalities. As a result, YCD Company suffered a loss. Because WU Dequan beseeched, YCD Company decided not to terminate the contract and instead entered into the RMB8.28 Million Contract to maximize its benefit, a reasonable action to take. 4. The determination of the original judgment concerning when the ship was transferred by Jingtao Company to YCD Company was not clear. The original judgment confirmed that the date of acquiring the ownership of the ship was November 25, 2011. Why then, would the ownership cancellation registration be completed on December 15? The mortgage over the ship was canceled on November 30, 2011, and the certificates of ownership and nationality were canceled on December 15. YCD Company had not obtained the Certificate of Ownership until December 27, 2012. Under this situation, why did both sides deliver and accept the ship on November 25, 2011? 5. The form and content of two pieces of records and texts submitted by Jingtao Company in the first instance should not be adopted. This evidence was recorded secretly under circumstances in which WU Gangyi was uninformed, which violated the principle of good faith and was unlawful. The content of the records therefore could not reflect the truth. There was something HONG Jinde intended to avoid and hide facts that were not in his favor. He intentionally stimulated, induced, and misled; therefore, the records should not be adopted because they were untrue, biased, and violated the party’s will. Also, the records clearly elaborately filtered and diverted information and there existed obvious defects. Viewing the content, most of the sound records had not been transcribed, but were represented by sound recording, and what HONG Jinde said was clearly contradictory with the original judgment. In the records, there were more than 20 dialogues reflecting YCD Company’s claim that the RMB8.28 Million Contract should be the basis to solve the dispute.

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6. The contract of 8.28 million was concluded after negotiation by both sides and signed and sealed by both sides’ legal representatives. The contract did not go against the mandatory provisions of any laws or administrative regulations, which was lawfully formed and therefore became effective. It is unacceptable that the original judgment denied its effectiveness on the grounds that the contract was not both of the parties’ true expression of intention. 7. In the original judgment, although there were different opinions from both sides concerning the conclusion date of two copies of the contract, both sides admitted that the RMB8.28 Million Contract formed and took effect later in time than did the RMB18 Million Contract. Thus because both sides changed portions of the original contract, the effectiveness of the latter contract should prevail over the former contract, and the former contract was therefore replaced by the latter one. 8. The RMB8.28 Million Contract, which was the contract formally submitted to MSA Xiamen for record, should prevail over the RMB18 Million Contract, which was not recorded, its priority should be confirmed. 9. The date of signing for the RMB8.28 Million Contract was written by Jingtao Company, it was not the true execution date. Jingtao Company argued YCD Company’s objection to the facts ascertained in the first instance, asserting that it lacked factual basis: 1. According to the ship registration documents, MSA Guangzhou entertained the application of ship cancellation on December 2. 2011. The court of first instance found that the contract had been concluded before that day, and the other party had not furnished any evidence to prove that the contact had been changed in MSA at that time. Therefore, what the original judgment found was correct. 2. The ship price in the amount of RMB18 million (without an invoice) provided in the contract was the actual price. If taxes were included, additional money needed to be paid. Therefore, the opposing party, in order to reduce loss, asked to sign a contract with a lower price. 3. Reports received by the CCS and WU Arong denied that he had acted. The date of the report was December 21, 2011, after the contract had been formed. The contract was formed on December 2, 2011, while YCD Company asserted that the contract had been signed after the report, which was not consistent with the facts. 4. YCD Company contested the timing of acquiring ownership of the ship, believing that it was wrong to deem such time to be the acquirement of the Certificate of Ownership. Instead, Transfer of ownership of the ship should be subject to the time of delivery. The transfer of ownership on the certificate had only countering effectiveness. 5. YCD Company alleged it did not admit the telephone call records in the first instance and insisted that the records were inconsistent with the facts. As to the telephone call records, YCD Company denied at the beginning of first instance, but later ascertained the authenticity of the form thereof. The records reflected its true intent and objective facts, and should be admitted.

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6. YCD Company alleged it was inconsistent with the law that the effectiveness of the contract recorded in MSA should prevail and that the key could be found in both sides’ genuine expression of intention. Conversely, the RMB8.28 Million Contract, which was made at the request of the opposing party for the purpose of tax avoidance, should not have superior effectiveness. HONG Jinde and WU Dequan accepted the appeal and defense of Jingtao Company. Jingtao Company submitted a copy of complaint in the second instance, to prove that YCD Company had previously asserted a claim on the basis of the RMB18 Million Contract in a separate trial against Jingtao Company. YCD Company had no objection as to the authenticity of the evidence but asserted that they filed this lawsuit to better protect their rights and interests, not to affirm the contract. YCD Company submitted the following 12 sets of evidence to the court in the appeal: 1. Inspection business invoices of CCS, CCS Domestic Vessel Inspection Report, and inquiry record made by the agent of YCD Company on WU Gangyi, to prove that on December 2, 2011, Jingtao Company did not go through the cancellation formalities of the ship at the agreed time, which constituted a default. When WU Dequan ordered WU Gangyi to go through ship inspection quickly, the initial inspection was interrupted because of the report of WU Arong, This was the reason why the contract price fell to RMB8.28 million; 2. Entertaining notice of MSA Guangzhou, WU Hongqin’s ID Card, Announcement of Loss of Jingtao Company, Ship’s Nationality Loss Registration Approval Paper and Announcement of MSA Guangzhou, and the Ship Registration Approval Paper, to prove that the reasoning behind the original judgment that “on December 2, 2011, Jingtao Company submitted an application for cancellation of the ownership and nationality certificate to MSA Guangzhou, provided Ship Assignment Contract and the M.V. “Xu Da 1” Ship Transfer Formalities, and the authority accepted on the same day” did not conform to the facts and the law; 3. The report letters that WU Arong sent to CCS Fuzhou, to prove that due to the report by WU Arong declaring that the ship had serious problems as to its quality, the contract price was reduced to RMB8.28 million; 4. (2009) No. 027 Domestic Vessel Inspection Letter of No.001 Letter of the Domestic Business Operation Department of CCS, to prove that the time of the first inspection conducted on the ship involved, which YCD Company entrusted to CCS, was suspended due to the report, and the contract price was reduced to RMB8.28 million; 5. The Letter concerning Issues on the Ship Registration Files of M.V. “Xuda 1” which MSA Xiamen sent to MSA Guangzhou, the Reply concerning Issues on the Ship Registration Files of M.V. “Xu Da 1” sent by MSA Guangzhou to MSA Xiamen, the Statement of the Unconformity of the Date of Delivery of M. V. “Xu Da 1”, the RMB8.28 Million Contract registered and recorded in MSA,

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8. 9.

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and Ship Assignment Contract held by YCD Company, to prove the reason why the contract price was changed to RMB8.28 million; The original judgment, (2012) Xia Hai Fa Chu Zi No.202 Civil Judgment, to prove the reason why the contract price was changed to RMB8.28 million; Investigation record made by the original court on WU Gangyi, and ship mortgage cancellation registration introduction book, the letter and reply the original court sent to MSA Xiamen, the lack of Mortgage Registration Certificate, the Cancellation Certificate of Ownership and Nationality Registration, and the Ownership Registration Certificate, to prove that WU Gangyi insisted that the transaction price was RMB8.28 million rather than RMB18 million from beginning to end, as well as to prove the reason why the contract price was changed to RMB8.28 million; Investigation letter sent by the court of first instance to WU Zhiyuan, YCD Company’s costs list, and courier stub of SF-express, to prove the above object; General machine receipts of Xiamen City Local Taxation Bureau, payment voucher of the electronic tax collection of the Agricultural Bank of China, to prove that Jingtao Company’s statement that the RMB8.28 Million Contract was made to avoid tax had no factual basis; Two copies of the Transfer Formalities of M.V. “Xu Da 1,” Letter of Commitment on Payment for Ship’s Repair Charges, to prove that the reasoning for the original judgment that “Jingtao Company transferred M.V. “Xu Da 1” to YCD Company after the contract was concluded in the Zini Shipyard located in Longhai Town Zhangzhou Fujian” was not consistent with the facts and the law; The Seaworthiness Certificate, the Marine Vessel Load Line Certificate, the Marine Oil Pollution Prevention Certificate, to prove that Jingtao Company had not delivered the ship until November 25, 2011; Bills/Receipts of CCS, invoice of inspection cost, statement of account in terms of ship repairing project, the schedule of cash receipt and payment of M.V. “Yi Cheng 12”, proof of materials costs, insurance invoice, charter party, and two copies of the supervision and inspection report of the flag state, to prove the RMB 8.28 Million Contract signed by YCD Company and Jingtao Company could not make up for the loss.

Jingtao Company cross-examined the evidence above in the trial and asserted that in the first set of evidence, the initial inspection invoice was not new evidence, the second survey report was the material investigated by the court of first instance but not new evidence, the third was a statement of WU Gangyi speaking with his attorney, conversations which could not be used as evidence. It further asserted that six copies of evidence in the second set of evidence were not original, that its authenticity should not be ascertained, and it did not submit them in the first instance. The third set of evidence was the evidence collected by the court of first instance, so it was not new evidence. The fourth set of evidence was the letter of the CCS submitted by Jingtao Company in the first instance and there was no objection thereto. The fifth set of evidence was the evidence collected by the court of first

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instance, so it was not new evidence. The sixth set of evidence was submitted in the first instance, so it was not new evidence. The seventh set of evidence was submitted in the first instance, so it was not new evidence. The eighth set of evidence, the first part of which was a record upon investigation conducted by the opposing attorney on the employees of YCD Company, was in essence the testimony of witnesses. However, because the witnesses did not appear in court, it should not be admitted. The second was an internal list of YCD Company, which had no probative force. The third was a courier stub, which not new evidence. The ninth set of evidence was the circumstances surrounding the ship transaction service charge and the taxes paid by YCD Company. It was not submitted in the first instance, and therefore not new evidence. Apparent authenticity could be ascertained but the object of proof could not stand, and in fact YCD Company had avoided a part of taxes. The tenth set of evidence had been submitted and cross-examined in the first instance. The eleventh set of evidence had been submitted and cross-examined in the first instance. In respect of the twelfth set of evidence, YCD Company was able to submit but failed in the first instance, and it could not constitute as new evidence. The schedule of cash receipt and payment were internal statistical materials and should not have probative force. In essence they are the testimony of witnesses, and such witnesses did not appear in court, giving it no probative force. The insurance invoice was not new evidence, and the charter party and MSA inspection report had been submitted in the first instance. The court holds that the first and second pieces of evidence in the first set of evidence submitted by YCD Company are not new evidence. The third is the statement of WU Gangyi, the legal representative of YCD Company making to its agent. The second set of evidence cannot be verified for lack of the original, nor can it prove the direct relation to the facts of this case. The third to seventh sets of evidence do not fall into new evidence. Concerning the eighth set of the evidence, the first piece and second piece are the testimony of witnesses and, since WU Zhiyuan did not appear in court to testify, they cannot be admitted. The third piece is not new evidence. Regarding the ninth set of evidence, Jingtao Company ascertained its authenticity but contested the object of proof and it was submitted by YCD Company over the time limit for adducing evidence. The court will combine the other facts to make a judgment. The tenth and eleventh sets of evidence have been submitted in the first instance and do not fall into new evidence. As for the twelfth set of evidence, Bills/Receipts of CCS, invoice of inspection cost, statement of account in terms of ship repairing project, the schedule of cash receipt and payment of M.V. “Yi Cheng 12,” and proof of materials costs are not submitted within the time limit for adducing evidence and cannot prove the direct relation to this case. Insurance invoice, charter party, 2 copies of supervision and inspection report of the flag state have been submitted, and they are not new evidence. In the second instance, YCD Company contested the formation time of the RMB8.28 Million Contract decided in the first instance, the time at which MSA Guangzhou sent all of the documents of M.V. “Xu Da 1” to MSA Xiamen, and the time at which YCD Company obtained the ownership of the ship. The parties had

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no objection to the basic facts of the case ascertained by the court of first instance. The court hereby confirms in accordance with the law. As for the objection of YCD Company to the facts, the court will decided in a culmination of the main issues in this case. Regarding the controversial issues between YCD Company and Jingtao Company, the court analyzes as follows: I. In respect to the real transaction price of the ship The court holds that firstly, according to the ship registration approval taking from the relevant department by the original court, WU Hongqin applied to MSA Guangzhou for cancellation of ownership and nationality of the ship on December 2, 2011, it follows that Ship Assignment Contract must be submitted at the same time. Considering that only the RMB8.28 Million Contract is recorded in the relevant departments, meaning there is no evidence that this contract has been replaced, the original judgment having decided that the contract concluded before December 2, 2011 is correct. Secondly, according to the notice of ship documents transfer taken from the relevant department by the original court, MSA Guangzhou sent the notice to MSA Xiamen on December 19, 2011. As a result, based on the provisions of the Regulations of the People’s Republic of China Governing the Registration of Ships and other provisions on the time limitation of the ship cancellation procedures is 7 days, YCD Company contested the time at which MSA Guangzhou sent all of the documents of M.V. “Xu Da 1” to MSA Xiamen. Because it lacks evidence to support it, the court will not accept this assertion. Third, according to the investigation in the original court, the MSA Xiamen received the letter reporting 12 defects of M.V. “Xu Da 1” on December 21, 2011 and the RMB8.28 Million Contract was formed before December 2, 2011. Therefore it is incorrect that the original judgment ascertained that the formation of the RMB8.28 Million Contract had not been influenced by the letter. In addition, it is incorrect that the court of first instance, according to the Certificate of Ownership of M.V. “Yi Cheng 12” issued by the MSA Xiamen, determined YCD Company as the owner of the ship and the date of acquiring ownership being on November 25, 2011. According to the above analysis, YCD Company’s claim that the MSA Xiamen had returned the ship documents to the MSA Guangzhou. Then, on December 18, 2011, both parties ultimately made the deal at a price of RMB8.28 million. On the next day, YCD Company drew up the RMB8.28 Million Contract and sent it to Guangzhou. WU Hongqin took the contract to XU Guoqian for the signature and seal of Jingtao Company. WU Hongqin then took the contract to the MSA Guangzhou to fulfil the formalities of contract change. There was lack of evidence to support this assertion and the court will not accept it. On the other hand, according to the written record of the second hearing in the first instance, YCD Company ascertained the authenticity of the text of phone call record submitted by Jingtao Company. While the record was recorded when WU Gangyi was uninformed, no evidence could prove that WU Gangyi was under duress or that gross negligence was

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committed. Furthermore, YCD Company alleged HONG Jinde intended to avoid and conceal the facts that were disadvantageous to him, intentionally stimulated, induced and misled, that the records were obviously elaborately filtered and diverted, and most records were not put into words, but were represented by audio. However it lacks evidence to support these assertions, which cannot stand. Therefore the phone call record can be admitted as the basis for this case. According to the two phone call records, HONG Jinde had asked WU Gangyi to pay the rest of ship purchase price of RMB 11 million according to the total price of RMB18 million. WU Gangyi admitted that the total price in the contract was RMB18 million at that time, the RMB8.28 Million Contract was not mentioned, and the parties only referred to the losses and demand for compensation. Consequently, although the RMB8.25 Million Contract was concluded after the RMB18 Million Contract and recorded in the MSA, the RMB8.28 Million Contract is not the declaration of will of the parties, and it was correct that the original court found the actual market price of the ship to be RMB18 million. II. In respect of whether the first instance decided that YCD Company should pay interest is correct The court holds that YCD Company defaulted on the contract and it shall bear the liability for breach of contract for failure to pay the ship price according to the contract. The Ship Assignment Contract provides that YCD Company shall pay RMB11 million as the second installment before December 16, 2011, if delayed, YCD Company shall pay monthly interest at the rate of 1.08%, and finally that this agreement is a liquidated damages clause. YCD Company continues to owes the second installment in the amount of RMB9 million. Jingtao Company failed to bear the burden of proof to prove the loss, therefore the loss of interest shall be identified as the main loss. A standard rate at 1.08% is high concerning a monthly interest. In view of the double characteristics of the penalty, namely to make up loss for the observant party and punish the default party, it is proper that the court of first instance discretionally altered the standard of liquidated damages for overdue payment to refer to 1.3 times of the one-year benchmark interest rate over the same period promulgated by the People’s Bank of China. Secondly, YCD Company continues to owe RMB2 million. The contract simply provides that the money must be paid after completing the formalities of cancellation and ship inspection departments by Jingtao Company, but not specifically when to pay or the penalty standard of overdue payment. After YCD Company acquired the Ownership Registration Certificate issued by the MSA Xiamen (on December 27, 2011) and the relevant certificates issued by the CCS (after April 16, 2012), HONG Jinde, the actual owner of the ship, requested WU Gangyi to pay the remainder of the money as a representative of Jingtao Company on May 2, 2012. However, YCD Company had not paid the

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outstanding sum of RMB2 million until now. This already constitutes a default, giving Jingtao Company the right to request YCD Company to take the liability for damages for breach of the RMB2 million. Given that there are no liquidated damages for overdue payment or a calculation method of penalty, according to Article 24 of the Interpretation of the Supreme People’s Court on Issues concerning the Application of Law for the Trial of Cases of Disputes over Sales Contracts, and the relevant regulations of the People’s Bank of China, it was within the discretion of the court of first instance to hold that the interest should be calculated on the basis of the standard of 1.3 times the one-year benchmark interest rate over the same period promulgated by the People’s Bank of China. So the grounds of appeal of Jingtao Company cannot stand, therefore, the court will not support. In conclusion, in according with Article 170 Paragraph 1 Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance in amount of RMB100,630, RMB6,570 shall be born by Guangzhou Jingtao Logistics Co., Ltd. and RMB94,060 shall be born by Xiamen Yichengda Shipping Co., Ltd. Court acceptance fee of first instance and other costs shall be executed according to the original judgment. The judgment is final. Presiding Judge: LIN Zexin Acting Judge: HUANG Zhijiang Acting Judge: BAI Yu May 12, 2014 Clerk: WU Shichun

Guangzhou Maritime Court Civil Judgment Guangzhou Leying International Freight Forwarding Co., Ltd. v. Shanghai Lingpu Aquatic Products Co., Ltd. et al. (2014) Guang Hai Shang Chu Zi No. 233 Related Case(s) None. Cause of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote intermediaries who acted for an exporter in contracting with a freight forwarder were held to be jointly and severally liable with the exporter for fees invoiced by the forwarder, as the intermediaries and there exporter were held to have contracted with the forwarder as common principals. Summary Two Defendants contracted with the Plaintiff, a freight forwarder, on behalf of an exporter. The role of the Defendants was to declare exports for purposes of customs declarations and transport documentation, but all fees were to be paid by the exporter. The Plaintiff forwarder sued the Defendants when the exporter did not pay the fees invoiced by the Plaintiff. The Defendants asked the court to reject the Plaintiff’s claim on the ground that the fees should be paid by the exporter, for whom they had acted as agents only. Held—the Defendants and the exporter should be held jointly and severally liable for the Plaintiff’s claim because they had jointly authorized the Plaintiff, as common principals, to conduct freight forwarding services, with the result that each was responsible for the entire debt. The Plaintiff’s claim was sustained.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_22

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Judgment The Plaintiff: Guangzhou Leying International Freight Forwarding Co., Ltd. Domicile: Room 1804, No. 1–11 Huilan Road, South of Guangzhou Avenue, Haizhu District, Guangzhou, Guangdong. Legal representative: LIU Sha, director. Agent ad litem: AN Shouzhi, lawyer of WANG JING & Co. Agent ad litem: TAN Zhuoran, lawyer of WANG JING & Co. The Defendant: Shanghai Lingpu Aquatic Products Co., Ltd. Domicile: Floor 3, Oriental International Fisheries Market, Jungong Road, Yangpu District, Shanghai. Legal representative: SHAO Feng, general manager. Agent ad litem: SHAO Zongdao. The Defendant: Shanghai Linghai Aquatic Products Commerce and Trade Co., Ltd. Domicile: Floor 3, Oriental International Fisheries Market, Jungong Road, Yangpu District, Shanghai. Legal representative: SHAO Feng, general manager. Agent ad litem: SHAO Zongdao. With respect to the case of dispute over freight forwarding contract filed by the Plaintiff, Guangzhou Leying International Freight Forwarding Co., Ltd., against the Defendant, Shanghai Lingpu Aquatic Products Co., Ltd. (hereinafter referred to as Lingpu Company), and the Defendant, Shanghai Linghai Aquatic Products Commerce and Trade Co., Ltd. (hereinafter referred to as Linghai Company), on March 4, 2014. After accepting the case, Judge LI Lifei heard the case in public under summary procedure in accordance with law on May 22, 2013. AN Shouzhi and TAN Zhuoran as agents ad litem of the Plaintiff and SHAO Zongdao as agent ad litem of the two Defendants appeared in court and participated in the litigation. The case has been concluded now. The Plaintiff claimed that the two Defendants issued an authorization letter to entrust it as a freight forwarder to arrange shipment for their refrigerated container goods from Shenzhen, including finding price advantage, agency of export services, settlement of relevant costs, etc. on June 1, 2012. It had fulfilled the obligations of a freight forwarder pursuant to the contract, but the two Defendants defaulted the freight under the B/L numbered OOLU2018044700. So the Plaintiff requested the court to order the two Defendants to pay the freight in sum of RMB11,782.50 together with interest. On April 9, 2013, the Plaintiff altered its claims as a request to rule the two Defendants to pay the freight during the period from January to May in 2012 in amount of USD22,822 and RMB76,995 together with interest thereon calculated at RMB floating capital loan interest rate of the People’s Bank of China over same period from June 1, 2013 to the date of payment designated by this judgment and jointly bear the litigation costs.

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The Plaintiff provided the following evidence within the time limit for producing evidence: 1. Letter of Authorization, to prove that the establishment of the agency relationship between the Plaintiff and the Defendant; 2. Statement of account between the Plaintiff and Guangzhou Lingshan Aquatic Products Co., Ltd. (hereinafter referred to as Lingshan Company) and Value Added Tax (VAT) Invoices issued by the Plaintiff, to prove that the two Defendants owed the freights from January to May in 2012 in amount of USD22,822 and RMB76,995 to the Plaintiff; 3. Bills of lading, statement of account of Shenzhen Donggang Transportation Co., Ltd., VAT invoices and payment vouchers issued by Orient Overseas Container Line (China) Co., Ltd. Guangzhou Branch, to prove that the Plaintiff paid relevant fees for the two Defendants in advance; 4. QQ chatting records, statement made by the Plaintiff, express sheet of S.F. EXPRESS Co., Ltd. and the receipt note thereof, to prove that the Plaintiff posted the 30 bill of ladings involved to the Defendant Lingpu Company through S.F. EXPRESS; 5. Industry and commerce information of the two Defendants published in the national enterprises credit and information publicity system, to prove that the two Defendants confused personality. The two Defendants jointly argued that in June 2011, Guangzhou Lingshan Company signed a foreign trade agency agreement with the two Defendants, it was prescribed that the goods of Guangzhou Lingshan Company which were sold abroad should be declared in the name of the two Defendants, and Guangzhou Lingshan Company would bear relevant fees for customs declaration and transport. The Plaintiff issued VAT invoices to Guangzhou Lingshan Company in 2013, and Guangzhou Lingshan Company promised to pay. The freights claimed by the Plaintiff should be paid by Guangzhou Lingshan Company rather than the two Defendants. Thus the two Defendants requested the court to reject the claims of the Plaintiff. The two Defendants provided the agency agreement within the time limit for producing evidence, to prove that the freights involved should be paid by Guangzhou Lingshan Company to the Plaintiff. After cross-examination in the trial, the two Defendants did not raise contest to the authenticity, legality and relevancy of the evidence produced by the Plaintiff, therefore the court admits the evidence according to law. Based on the evidence submitted by the Plaintiff and combined with the hearing, the court hereby ascertains the facts as follows: On June 1, 2012, Guangzhou Lingshan Company and the two Defendants jointly issued a letter of authorization to the Plaintiff, which authorized the Plaintiff as the designated agency of Guangzhou Lingshan Company and the two Defendants to arrange export transport for their refrigerated containers from Port of Shenzhen, including finding advantageous price, agency of export services, settlement of relevant costs, etc., such commission lasted to December 31, 2013.

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From January to May, 2013, the Plaintiff carried out export transport of the refrigerated containers involved which departed from the port of Shenzhen in accordance with the letter of authorization. The detailed operation procedures were as follows: Guangzhou Lingshan Company provided the information of the export goods involved to the Plaintiff, and the Plaintiff booked space according to such information, as well, paid relevant fees in advance. The fees paid by the Plaintiff for the 30 refrigerated containers goods include maritime freight, towing fees, export documentation fees, seal fees, port charges of port of loading, emergency fuel additional fees, which amount to RMB191,799.37. All the original bills of lading issued by the maritime carrier in respect of the goods involved were delivered to Shanghai Lingpu Company which was noted as the shipper thereon by the Plaintiff. On October 24, the Plaintiff sent a statement of account to Guangzhou Lingshan Company to inform it the freights generated from January to May 2013 amounted to USD22,822 and RMB82,547, minus RMB5,552 which had been paid on June 27, in the end it should pay the Plaintiff a total of USD22,822 and RMB76,995. The statement of account listed the freight of every month in detail and relevant VAT invoices were attached. On the same day, Guangzhou Lingshan Company confirmed the accuracy of the amount thereon with its seal. Two Defendants, in order to prove the freights claimed by the Plaintiff should be paid by Guangzhou Lingshan Company, submitted a copy of the agency agreement involved. It was stated in the agency agreement that the goods which were sold abroad by Guangzhou Lingshan Company were declared for export customs in the name of the two Defendants, invoices should be issued to Guangzhou Lingshan Company and it was responsible for payment for all the fees arising from customs declaration and transport, and the agency period thereof started from June 2011 and ended in June 2014. The Plaintiff argued there was no original copy to verify this evidence, and the contents thereof only involved Guangzhou Lingshan Company and the two Defendants, the Plaintiff could not be bound, therefore, it did not confirm the authenticity and relevancy of the evidence. The court holds that in this case, the Plaintiff delegated to arrange the transport for the goods involved from Shenzhen, China to a foreign country, so the case is the dispute over foreign-related freight forwarding contract. According to Article 23 of the Some Provisions of the Supreme People’s Court on the Scope of Cases to be Entertained by Maritime Courts, this case is under exclusive jurisdiction of maritime court. The place of performance of the freight forwarding contract involved is Shenzhen, Guangdong, it is in the jurisdiction of the court. In accordance with Article 23 of the Civil Procedure Law of the People’s Republic of China, an action instituted for a contract dispute shall be under the jurisdiction of the people’s court at the place of domicile of the defendant or at the place where the contract is performed, the court has jurisdiction over the case. According to the facts having been identified in this case, the agency acts and agency relationship took place in China, as prescribed in Article 16 of the Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China, the laws at the locality of agency act shall apply to agency, but the laws at

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the locality of agency relation shall apply to the civil relations between the principal and the agent, the laws of the People's Republic of China shall apply in this case. The main issue in this case lies in who shall bear freights of the 30 refrigerated containers’ goods involved. On June 1, 2012, the two Defendants and Guangzhou Lingshan jointly issued the letter of authorization to the Plaintiff to entrust it to conduct freight forwarding services freight forwarding contractual relation between the two Defendants and Guangzhou Lingshan Company and the Plaintiff shall be affirmed. The two Defendants and Guangzhou Lingshan Company are co-principals and the Plaintiff is agent under the freight forwarding contract. As the freight forwarding contract does not violate mandatory provisions of law and administrative regulations, it shall be valid and effective, the parties thereof shall exercise rights and perform obligations in accordance with the contract. While the rights and obligations of the principal are not stipulated clearly, the two Defendants and Guangzhou Lingshan, as common principals, enjoy the rights and bear the obligations jointly and severally. The agent's acts of agency shall be considered as acts of principal under the freight forwarding contract and have legal effects on the two principals. The Plaintiff has conducted export transport for the 30 refrigerated containers’ goods from port of Shenzhen to foreign country in accordance with the instructions of the principal and paid related fees in advance, with the confirmation of Guangzhou Lingshan Company, the Plaintiff shall charge USD22,822 and RMB76,995 in respect of the freights from January to May 2013. According to Article 9 of the Provisions of the Supreme People’s Court on Several Issues in the Trial of Cases concerning Marine Freight Forwarding Disputes, if the freight forwarding enterprise completes the marine freight forwarding matters according to general powers of entrustment and requests the principal to pay relevant reasonable expenses, the people’s court shall support such request, the two Defendants and Guangzhou Lingshan Company bear joint and several obligation for the payment above. According to Article 87 of the General Principal of Civil Law of the People’s Republic of China, when there were two or more creditors or debtors to a deal, each of the joint creditors shall be entitled to demand that the debtor fulfil his obligations, in accordance with legal provisions or the agreement between the parties; each of the joint debtors shall be obliged to perform the entire debt, the two Defendants and Guangzhou Lingshan Company have the obligation to pay off the freights involved. The claim of the Plaintiff requesting the two Defendants to pay the freight in amount of USD22,822 and RMB76,995 with interest thereon complies with the contract as well as the law, it shall be supported. The interest shall be calculated from the next day on which Guangzhou Lingshan Company confirmed the freights mentioned above, namely October 25, 2013. The two Defendants defended that Guangzhou Lingshan Company declared for customs in the name of the two Defendants and it should bear the freights involved, since the agency agreement is only a copy and it cannot be supported by other evidence, in addition, the agency agreement is agreement between the two Defendants and Guangzhou Lingshan Company, and there is no evidence to prove the Plaintiff has known the

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agency contract before the performance, so such an agency contract cannot bind the Plaintiff, the defense of the Defendants that they should not bear the freights lacks reason and basis, and shall be rejected. In summary, in accordance with Article 87 of the General Principles of the Civil Law of the People’s Republic of China and Article 9 of the Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law to the Trial of Cases Involving Delivery of Goods without Original Bills of Lading, the judgment is as follows: The Defendants, Shanghai Lingpu Aquatic Products Co., Ltd. and Shanghai Linghai Aquatic Products Commerce and Trade Co., Ltd. shall pay the freight during the period from January to May 2012 in amount of USD22,822 and RMB76,995 together with interest thereon calculated at RMB floating capital loan interest rate of the People’s Bank of China over same period from June 1, 2013 to the date of payment designated by this judgment (the rate of USD amount above shall be calculated after being converted at the exchange rate published by the People’s Bank of China on October 25, 2013). The above obligation of payment shall be fulfilled within 10 days after this judgment comes into effect, for failure to fulfill that, interest on the debt for the delayed period shall be doubled, according to Article 253 of the Civil Procedure Law of People’s Republic of China. Court acceptance fee in amount of RMB2,374.57 yuan, shall be born by the two Defendants jointly and severally. In the event of dissatisfaction with this judgment, any party may, within 15 days upon service of this judgment, submit a statement of appeal to the court, with duplicates being submitted in terms of the number of other parties, to lodge an appeal to the Guangdong High People’s Court. Judge: LI Lifei May 26, 2014 Clerk: ZHOU Qian

Haikou Maritime Court Civil Judgment Hainan Yuansheng Fisheries Co., Ltd. v. China Ocean Shipping Agency Co., Ltd. et al. (2014) Qiong Hai Fa Shang Chu Zi No. 3 Related Case(s) This is the judgment of first instance and the judgment of the second instance is on page 506. Cause of Action 212. Dispute over voyage charter party. Headnote Carrier held liable for delivery of cargo without presentation of original bills of lading; shipper’s suit not time-barred because carrier’s agent had admitted liability within the one-year limitation period. Summary The Plaintiff shipped a cargo of frozen tilapia from Haikou to the United States under a bill of lading issued by the Defendant. The Plaintiff alleged that it had suffered loss as result of the fact that the Defendant’s US agent had delivered the goods to the consignee in the United States without presentation of the original bill of lading. The Defendant argued that the Plaintiff’s claim was time barred because it had been brought more than one year after delivery should have been made. Held: the Defendant was liable to compensate the Plaintiff for the loss that it had suffered as a result of the consignee’s refusal to pay the Plaintiff for the fish that were delivered in the US without presentation of the original bill of lading. The claim was not time barred because the Defendant’s agent had admitted liability to make compensation within the one-year time period.

Judgment The Plaintiff: Hainan Yuansheng Fisheries Co., Ltd. Domicile: No. 6 Yutang Road, Development Zones, Chengmai County, Hainan. Legal representative: LIU Rongjie, chairman. Agent ad litem: SONG Wen, lawyer of Hainan Gangfeng Law Firm. Agent ad litem: TANG Yuan, lawyer of Hainan Gangfeng Law Firm. © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_23

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The Defendant: China Ocean Shipping Agency Co., Ltd. Domicile: 10/F, New Henderson International Building, No. 3 West Maizidian Road, Chao Yang District, Beijing. Legal representative: ZHANG Jiqing, chairman. The Defendant: China Ocean Shipping Agency Co., Ltd. Shenzhen Branch. Domicile: Room 20B02, Anlian Building, No. 4018 Jintian Road, Futian District, Shenzhen, Guangdong. Legal representative: HUANG Shusong, chairman. Agent ad litem of the two Defendants: WANG Xiaochun, lawyer of Guangdong Langzheng Law Firm. Agent ad litem of the two Defendants: CHEN Aiji, employee of China Ocean Shipping Agency Co., Ltd. Shenzhen Branch. With regard to the case arising from dispute over voyage charter party filed by the Plaintiff, Hainan Yuansheng Fisheries Co., Ltd. (hereinafter referred to as “Yuansheng Company”). against the Defendant, China Ocean Shipping Agency Co., Ltd. (hereinafter referred to as “PENAVICO”) and the Defendant, China Ocean Shipping Agency Co., Ltd. Shenzhen Branch (hereinafter referred to as “PENAVICO Shenzhen”) on November 6, 2013. After accepting the case on the same day, the court formed a collegiate panel consisting of Presiding Judge, CHEN Yinhong, Judge HU Jun and Acting Judge, ZHANG Yifang to try the case in accordance with law. The court held an hearing in public on January 10, 2014. TANG Yuan, agent ad litem of the Plaintiff, WANG Xiaochun and CHEN Aiji, agents ad litem jointly of the two Defendants PENAVICO and PENAVICO Shenzhen, attended the hearing. Now the case has been concluded. The Plaintiff claimed that on June 10, 2012, the Plaintiff issued the multimodal bill of lading to the Defendant PENAVICO (B/L No. WD2012060380, Container No. EISU5659304, Seal No. EMCABA5151), of which the place of loading was Haikou China and the place of discharge was Newark, America. According to the agreement of the Plaintiff and the Defendant, the goods would be delivered against surrendering original bill of lading. That meant the consignee should surrender the original bill of lading issued by the Plaintiff PENAVICO Shenzhen, which was the agent of PENAVICO, to DGS LOGISTICS, LLC (NY) (hereinafter referred to as “DGS Company”), the specified overseas agent, and then DGS Company could deliver the goods to the consignee. In fact, the goods was delivered to the Long River International Inc. (hereinafter referred to as “Long River Company”) without original bill of lading, as a result, the Plaintiff could not get the payment for the goods in sum of USD74,360. The Plaintiff claimed that the two Defendants should indemnify the Plaintiff USD74,360 (namely RMB473,598.84, converted at the exchange rate prevailing on June 10, 2012) and bear the litigation costs.

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The Defendant PENAVICO did not file a reply in written to the court within the period for submitting defence, only defended orally that: 1. Time bar of the case had expired; 2. Exchange rate of the loss of payment for goods suffered by the Plaintiff should be counted on the agreed date of payment. So it requested the court to reject the claims of the Plaintiff. The Defendant PENAVICO Shenzhen did not file a reply in written to the court within the period for submitting defence, only defended orally that: (1) it did not inform DGS Company, its overseas agent to release the goods without original B/L, it only knew the goods were delivered after receiving a notification from the Plaintiff, it committed no fault; (2) PENAVICO Shenzhen was the agent of PENAVICO, so PENAVICO should take the responsibility for compensation. It requested the court to judge in accordance with law. The Plaintiff submitted the following nine evidential materials within the time limit for adducing evidence to support its claims: 1. Original bill of lading in triplicate, to prove that the shipper was the Plaintiff, the Defendant PENAVICO Shenzhen was the agent of the carrier, the Defendant PENAVICO, which was the actual carrier; 2. Commercial invoice, to prove that the value of the goods was USD74,360; 3. Proforma invoice, of which the receiver was Long River Company and the payment clause was document against payment at sight, to prove that the quantity and name of the goods involved recorded in the proforma invoice was consistent with that in the bill of lading; 4. Customs Declaration, B/L No. HKWL060802; 5. Health Certificate; 6. Quarantine Certificate; Evidence 4–6 was to prove that the price of the goods involved was USD74,360 and the customs formalities were completed. 7. Chatting record of MSN between Plaintiff and the Defendant PENAVICO Shenzhen on April 9, 2013, to prove that the Defendant PENAVICO Shenzhen admitted its fault at the release of goods involved without B/L and was willing to take the obligation; 8. E-mails between the Plaintiff and the Defendant PENAVICO Shenzhen from February 15, 2013 to December 25, 2013; 9. E-mail send by the Defendant PENAVICO Shenzhen to the Plaintiff related to the judgment made by United States District Court for the Southern District of New York relating to the dispute between DGS Company and Long River Company. The main content was that DGS Company sued the Long River Company on November 9, 2012 to claim for the payment for goods in amount of USD74,360 together with the 9% interest incurring from July 6, 2012 and the litigation costs, the court decided that Long River Company should compensate DGS Company USD88,344.33.

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Evidences 8 and 9 was to prove that the Defendant PENAVICO Shenzhen had got the compensation for payment of goods under the B/L involved from the consignee. Upon cross-examination, the Defendant PENAVICO and the Defendant PENAVICO Shenzhen argued that evidence 3, namely the proforma invoice was produced unilaterally by the Plaintiff, they did not confirm the authenticity and relevancy thereof. The number of bill of lading in evidence 4, namely the customs declaration was not consistent with that of bill of lading issued by the Plaintiff. The two Defendants raised no contest to the authenticity of other evidence and confirmed the price of the goods involved and the fact that the goods was delivered without bill of lading. The court confirms the authenticity of the nine evidence. the evidence can prove that the Plaintiff as shipper, the Defendant PENAVICO was carrier and the Defendant PENAVICO Shenzhen was the agent of the Defendant PENAVICO. After the goods involved were released without bill of lading, the Plaintiff claimed for compensation against the Defendant PENAVICO Shenzhen for many times from September 26, 2012 to April 9, 2013. The Defendant PENAVICO Shenzhen agreed to resolve the dispute in the way of lawsuit. The Defendant PENAVICO did not submit any evidential materials within the time limit for adducing evidence. The Defendant PENAVICO Shenzhen submitted four evidential materials: 1. Chatting records of MSN between the Plaintiff and it from September 26, 2012 to the October 11, 2012, to prove that the Plaintiff had already known the release of goods at the port of discharge, so the Plaintiff should take obligation for its fault at the delivery of goods without bill of lading; 2. E-mails from September 26, 2013 to September 27, 2012, to prove that it investigated the details of delivery after knowing the goods involved had been picked up; 3. E-mails on October 23, 2012, to prove that it communicated with Plaintiff and investigated the delivery and payment in time, it did not hide any facts against the Plaintiff; 4. Chatting record of MSN between the Plaintiff and the Defendant during the October 16 to the December 12, 2012, to prove that the Defendant fulfilled the duty of diligence and he was faultless as the Defendant had contacted matters with the Plaintiff for many times which including delivery of goods, payment and recovering from consignee. The Defendant PENAVICO raised no contest to the four evidence above. The Plaintiff raised no contest to the authenticity of evidence 1 after cross-examination. The court confirmed the authenticity of evidence 1, but the purpose thereof is inadmissible. The Plaintiff did not confirm the authenticity of the evidence 2, 3 and 4 but it held the contents of the three evidence were in compliance with those of the evidence submitted by the Plaintiff. The three evidence are electronic data, although there is no notary or other certification formality, the contents thereof are in line

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with the statement of the Plaintiff, therefore, the court affirms the three evidence. Together with evidence 1, the evidence prove the estimated time of arrival of goods involved, delivery of goods without bill of lading conducted by the Defendant, and the fact that the Plaintiff claimed against the Defendant. According to the evidence above and combined with investigation in the trial, the court ascertains the following facts: On June 10, 2012, the Plaintiff delegated the Defendant PENAVICO to carry a batch of frozen tilapia, the price term was CFR. The Defendant PENAVICO Shenzhen, as the agency of the Defendant PENAVICO, issued the original multimodal bill of lading in triplicate with number of WD2012060380. It was prescribed in the bill of lading that the carrier was the Plaintiff, the notify party was Long River Company, the place of loading was Haikou, China, the place of delivery was Newark, America, the date of shipment was June 10, 2012, the vessel was M. V. FANG ZHOU 5, the voyage number was 120,608, the number of the container involved was EISU5659304, the number of packages was 4400, the freight had been paid, and the mode of shipment was CY-CY. The number of container, name of goods, number of packages etc. in the export declaration were in line with the statement of the bill of lading, and the total price (USD74,360) was added. According to the e-mails submitted by the Defendant PENAVICO Shenzhen between it and the Plaintiff on September 26, 2012, the goods involved were estimated to arrive at the port of delivery on July 18, 2012. DGS Company delivered the goods to the consignee, Long River Company without original bill of lading. The original bill of lading was sent back to the Plaintiff due to Long River Company’s late payment. Presently, the Plaintiff still holds the original bill of lading in triplicate. On September 26, 2012, the Plaintiff notified the Defendant PENAVICO Shenzhen that it had not received the payment for goods and requested it to inquire about the bill of lading involved. On November 9, 2012, DGS Company brought an action against Long River Company to United States District Court for the Southern District of New York. On April 9, 2012, the Defendant PENAVICO Shenzhen agreed to fulfill obligations of compensation in the way of lawsuit when talking the dispute of this case with the Plaintiff. The court holds that, the Defendant argued that the lawsuit lodged by the Plaintiff exceeded the time limitation, according to Article 14 Paragraph 1 of the Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law during the Trial of Cases about Delivery of Goods without an Original Bill of Lading, an action lodged by a holder of original bill of lading against the carrier for delivery of goods without original bill of lading shall apply to Article 257 of the Maritime Code of the People’s Republic of China, of which the limitation period is one year, counting from the day on which the goods should have been delivered by the carrier. It is provided in Article 267 Paragraph 1 of the Maritime Code of the People’s Republic of China, the limitation of time shall be discontinued as a result of bringing an action or submitting the case for arbitration by the claimant or the admission to fulfill obligations by the person against whom the claim was brought up. So the limitation period of this action shall be calculated from the estimated time to arrival of the goods, namely July 18, 2012. The

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Defendant PENAVICO Shenzhen to fulfill obligations for compensation on April 9, 2013, the limitation of time was discontinued. Therefore, the court does not adopt the defence of the Defendant, the limitation period of this case has not expired. A bill of lading is a document which serves as an evidence of the contract of carriage of goods by sea and the taking over or loading of the goods by the carrier, and based on which the carrier undertakes to deliver the goods against surrendering the same. According to the fact that have been found, the Plaintiff is the shipper recorded in the bill of lading involved, the Defendant PENAVICO is carrier, the Defendant PENAVICO Shenzhen only issued the bill of lading on behalf of the carrier. So the Defendant PENAVICO is the carrier of the goods under the bill of lading involved. Although the Plaintiff argued the Defendant PENAVICO Shenzhen was the actual carrier of the goods involved, it did not provide relevant evidence to prove that, so the court will not ascertain the Plaintiff’s allegation. And the Plaintiff failed to produce evidence to prove the Defendant PENAVICO Shenzhen committed fault at the release of goods without bill of lading by DSG Company, so it shall not bear the burden of compensation. The contractual relationship of voyage charter party between the Plaintiff and the Defendant PENAVICO is lawfully established, both parties shall fulfill the obligations in accordance with the contract. The Plaintiff still holds the full set of the original B/L, but the Defendants released the goods, and there is no agreed or statutory exemption, it obviously constitutes release of goods without bill of lading. The Defendant PENAVICO’s breach of the contract resulted in that the Plaintiff lost control of the goods and had not received the payment so far, so it shall bear the liabilities for breach of contract and compensate the Plaintiff for losses of goods. The value of goods involved is USD74,360, to which the Defendant PENAVICO has no contest. So the court ascertains the loss of goods in amount of USD74,360 claimed by the Plaintiff. As for the argument of the Plaintiff that the claimed amount to be awarded shall be converted to currency of RMB at the exchange rate prevailing on the date of loading of the goods involved (namely June 10, 2012), the court holds that it shall be counted on the estimated day of arrival of the goods (namely July 18, 2012). In summary, according to the Article 71, Article 267 Paragraph 1 of the Maritime Code of the People’s Republic of China, Article 2, Article 13 Paragraph 1 of the Provisions of the Supreme People’s Court on Several Issues concerning the Trial of Cases of Disputes over Marine Freight Forwarding, the judgment is as follows: 1. The Defendant, China Ocean Shipping Agency Co., Ltd., shall compensate the Plaintiff, Hainan Yuansheng Fisheries Co., Ltd., for the loss of goods in amount of USD74,360 (converted at the exchange rate prevailing on July 18, 2012); 2. Reject other claims of the Plaintiff. For failure to fulfill the obligation of payment within the period ascertained by this judgment, according to Article 253 of the Civil Procedure Law of the People’s Republic of China, the Defendant shall pay double interest for the delayed period.

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Court acceptance fee in amount of RMB8,404, shall be born by the Defendant China Ocean Shipping Agency Co., Ltd. In case of dissatisfaction with this judgment, the Plaintiff and the Defendants may within 15 days upon the service of this judgment, submit a statement of appeal to the court, together with copies in accordance with the number of the opposite parties to lodge an appeal to the Hainan High People’s Court. Presiding Judge: CHEN Yinghong Judge: HU Jun Acting judge: ZHANG Yifang February 14, 2014 Clerk: XIE Huijing

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Hainan High People’s Court Civil Judgment Hainan Yuansheng Fisheries Co., Ltd. v. China Ocean Shipping Agency Co., Ltd. et al. (2014) Qiong Min San Zhong Zi No. 23 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 499. Cause(s) of Action 212. Dispute over voyage charter party. Headnote The Defendant carrier held to be bound by its agent’s admission of liability, which led to the tolling of the time-bar for suit for misdelivery of goods without presentation of original bill of lading. Summary The Plaintiff shipped a cargo of frozen tilapia from Haikou to the United States under a bill of lading issued by the Defendant. The Plaintiff alleged that it had suffered loss as result of the fact that the Defendant’s US agent had delivered the goods to the consignee in the United States without presentation of the original bill of lading. The Defendant argued that the Plaintiff’s claim was time barred because it had been brought more than one year after delivery should have been made. The Haikou Maritime Court found the Defendant liable to the Plaintiff. The Defendant appealed. Held—The appeal court affirmed the lower court’s judgment and held that the Defendant entrusted its agent, either expressly or apparently, to act on its behalf when corresponding with the Plaintiff over the issue of compensation for the delivery of goods without presentation of a bill of lading.

Judgment The Appellant (the Defendant of first instance): China Ocean Shipping Agency Co., Ltd. Domicile: 10/F, New Henderson International Building, No. 3 West Maizidian Road, Chao Yang District, Beijing. Legal representative: ZHANG Jiqing, chairman. Agent ad litem: WANG Xiaochun, lawyer of Guangdong Langzheng Law Firm.

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The Respondent (the Plaintiff of first instance): Hainan Yuansheng Fisheries Co., Ltd. Domicile: No. 6 Yutang Road, Development Zone, Chengmai Country, Hainan. Legal representative: LIU Rongjie, chairman. Agent ad litem: SONG Wen, lawyer of Hainan Gangfeng Law Firm. Agent ad litem: TANG Yuan, lawyer of Hainan Gangfeng Law Firm. The Defendant of first instance: China Ocean Shipping Agency Co., Ltd. Shenzhen Branch. Domicile: Room 20B02, Anlian Building, No. 4018 Jintian Road, Futian District, Shenzhen, Guangdong. Legal representative: HUANG Shusong, chairman. Agent ad litem: CHEN Aiji, employee. Agent ad litem: WANG Xiaochun, lawyer of Guangdong Langzheng Law Firm. With regard to the case of dispute over the voyage charter party between the Appellant, China Ocean Shipping Agency Co., Ltd. (hereinafter referred to as “PENAVICO”), and the Respondent, Hainan Yuansheng Fisheries Co., Ltd. (hereinafter referred to as “Yuansheng Company”), and the Defendant of first instance, China Ocean Shipping Agency Co., Ltd. Shenzhen Branch (hereinafter referred to as “PENAVICO Shenzhen”), the Appellant disagreed with the judgment of first instance made by Haikou Maritime Court and appealed to the court. The court accepted the appeal on April 1, 2014 and organized the collegiate panel consisting of Presiding Judge, ZHAO Yinghua and Acting Judges, WANG Hao and GAO Junhua according to law. On May 12, 2014, the court heard the case in public at the fourth tribunal. WANG Xiaochun, agent ad litem of the Appellant, PENAVICO, TANG Yuan, agent ad litem of the Respondent Yuansheng Company, CHEN Aiji and WANG Xiaochun, agents ad litem of the Defendant of first instance, PENAVICO Shenzhen, appeared in court to attend the hearing. After unsuccessful mediation, now the case has been concluded. The court of first instance ascertained that, on June 10, 2012, Yuansheng Company entrusted PENAVICO to carry a batch of frozen tilapia, the price term was CFR. PENAVICO Shenzhen, as the agency of PENAVICO, issued the original multimodal bill of lading in triplicate numbered with WD2012060380. It was prescribed in the bill of lading that the carrier was the Plaintiff, the notify party was Long River Company, the place of loading was Haikou, China, the place of delivery was Newark, America, the date of shipment was June 10, 2012, the vessel was M.V. FANG ZHOU 5, the voyage number was 120,608, the number of the container involved was EISU5659304, the number of packages was 4400, the freight had been paid, and the mode of shipment was CY-CY. The number of container, name of goods, number of packages etc. in the export customs declaration were in line with the statement of the bill of lading, and the total price (USD74,360) was added. According to the e-mails submitted by PENAVICO Shenzhen between it and Yuansheng Company on September 26, 2012, the goods involved were estimated to

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arrive at the port of delivery on July 18, 2012. DGS Logistics Co., Ltd. (hereinafter referred to as “DGS Company”) delivered the goods to the consignee, Long River Company without original bill of lading. The original bill of lading was sent back to Yuansheng Company due to Long River Company’s late payment. Yuansheng Company still held the original bill of lading in triplicate. On September 26, 2012, Yuansheng Company notified PENAVICO Shenzhen that he had not received the payment for goods and requested it to inquire about the bill of lading involved. On November 9, 2012, DGS Company brought an action against Long River Company before United States District Court for the Southern District of New York. On April 9, 2012, PENAVICO Shenzhen agreed to fulfill obligation of compensation in the way of legislation when talking about the dispute of this case with the Plaintiff. Yuansheng Company filed an action to the court of first instance and requested the court to decide the two Defendants to indemnify USD74,360 and bear the litigation fees jointly and severally. PENAVICO argued that the action lodged by Yuansheng Company exceeded the limitation of action, and the exchange rate of the payment of goods should be calculated by that of the day of payment as agreed. PENAVICO Shenzhen argued it committed no fault and it was the agent of PENAVICO, so any responsibility should be born by PENAVICO. The court of first instance held that, according to Article 14 Paragraph 1 of the Provisions of the Supreme People’s Court on Several Issues on the Application of Law in the Trial of Cases concerning Delivery of Goods without Original Bill of Lading, “an action lodged by a holder of original bill of lading against the carrier for delivery of goods without original bill of lading shall apply to Article 257 of the Maritime Code of the People’s Republic of China”, of which the limitation period was one year, counting from the day on which the goods should have been delivered by the carrier; as provided in Article 267 Paragraph 1 of the Maritime Code of the People’s Republic of China, “the limitation of time shall be discontinued as a result of bringing an action or submitting the case for arbitration by the claimant or the admission to fulfill obligations by the person against whom the claim is brought up”, so the limitation period of this action should be calculated from the estimated time to arrival of the goods, namely July 18, 2012. PENAVICO Shenzhen agreed to fulfill the obligation for compensation on April 9, 2013, so the limitation of time was discontinued. Therefore, the limitation period of this case had not expired. According to the facts having been found, Yuansheng Company was the shipper recorded in the bill of lading involved, PENAVICO was carrier, PENAVICO Shenzhen only issued the bill of lading on behalf of the carrier. So PENAVICO was the carrier of the goods under the bill of lading involved. Although Yuansheng Company argued PENAVICO Shenzhen was the actual carrier of the goods involved, it did not provide relevant evidence to prove that, so the court of first instance did not ascertain the Plaintiff’s allegation. And Yuansheng Company failed to produce evidence to prove PENAVICO Shenzhen committed fault at the release of goods without bill of lading by DSG Company, so it should not bear the burden of compensation. The contractual relationship of voyage charter party between Yuansheng Company and PENAVICO was lawfully established, both parties

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should fulfill the obligations in accordance with the contract. Yuansheng Company still held the full set of the original B/L, but the Defendants had delivered the goods, and there was no agreed or statutory exemption, it obviously constituted delivery of goods without bill of lading. PENAVICO’ s breach of the contract resulted in that Yuansheng Company lost control of the goods and had not received the payment so far, so it should bear the liabilities for breach of contract and compensate Yuansheng Company for the losses of goods. The value of goods involved was USD74,360, to which PENAVICO had no contest. So the court of first instance ascertained the loss of goods in amount of USD74,360 claimed by Yuansheng Company. As for the argument of Yuansheng Company that the claimed amount to be awarded should be converted to currency of RMB at the exchange rate prevailing on the date of loading of the goods involved (namely June 10, 2012), the court of first instance held that it should be counted on the estimated day of arrival of the goods (namely July 18, 2012). In summary, according to Article 71, Article 267 Paragraph 1 of the Maritime Code of the People’s Republic of China, and Article 2, Article 13 Paragraph 1 of the Provisions of the Supreme People’s Court on Several Issues concerning the Trial of Cases of Disputes over Marine Freight Forwarding, the court of first instance judged that, PENAVICO should compensate Yuansheng Company for the losses of goods in amount of USD74,360 (converted at the exchange rate prevailing on July 18, 2012), and rejected other claims of Yuansheng Company. PENAVICO requested to revoke the first part of the judgment of first instance and reject the claims of Yuansheng Company. The reasons were as follows: 1. The judgment of first instance wrongly expanded the power of agency of PENAVICO Shenzhen granted by PENAVICO. PENAVICO Shenzhen was only the agent to issue bill of lading on behalf of PENAVICO, and such authorization was limited to issue the bill of landing. PENAVICO did not authorize PENAVICO Shenzhen to deal with the dispute arising from delivery of goods without B/L and compensation therefrom. So all the acts of PENAVICO Shenzhen after the delivery of goods could not represent PENAVICO. The conformation of the judgment of first instance that PENAVICO Shenzhen had the right to deal with the dispute on behalf of PENAVICO base on that PENAVICO Shenzhen was the agent of PENAVICO to issue B/L, so discontinuance of time limitation resulted from PENAVICO Shenzhen’s admission to fulfill the obligations lacked basis. According to the logic above, there was no need for PENAVICO to entrust agent in suit, PENAVICO Shenzhen had the right to deal with the case on behalf of it, so the identification in the judgment of first instance which expanded the authorization unlimitedly was at fault. 2. The judgment of first instance wrongly ascertained that PENAVICO Shenzhen agreed to fulfill the obligation for compensation. Firstly, the chatting records on April 9, 2013 were excerpted, so they could not be used as evidence for incompleteness. Secondly, the record could not prove PENAVICO Shenzhen agreed to compensate. On the contrary, it proved that PENAVICO Shenzhen did

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not agree to compensate, so it asked Yuansheng Company to solve the dispute through litigation. The court of first instance misinterpreted the records. 3. The records could not discontinue the time bar. In summary, PENAVICO appealed to request the court to reject the claims of Yuansheng Company. Yuansheng Company defensed that the original judgment was clear in the determination of facts, correct in the application of relevant laws and legal in the proceedings, so it should be affirmed. 1. PENAVICO authorized PENAVICO Shenzhen to exercise the power of agency in the international carriage of goods, but it was not informed of the scope of the power of agency clearly. After suffering heavy economic losses resulted from delivery of goods without bill of lading, PENAVICO took the advantage of a state-owned key enterprise and dealt with the compensation unconcernedly and execrably, it had reasons to trust the agent of PENAVICO had right to deal with issues on the compensation, so it was reasonable to contact with the agent regard to the compensation. According to Article 65 of the General Principles of the Civil Law of the People’s Republic of China, where the entrustment of agency was in written, the power of attorney shall clearly state the agent’s name, the entrusted tasks and the scope and duration of the power of agency. If the power of attorney is not clear as to the authority conferred, the principal shall bear civil liability towards the third party, and the agent shall be held jointly liable. According to Article 66 of this law, the principal shall bear civil liability for an act performed by an actor with no power of agency, beyond the scope of his power of agency or after his power of agency has expired, only if he recognizes the act retroactively. If the act is not so recognized, the performer shall bear civil liability for it. If a principal is aware that a civil act is being executed in his name but fails to repudiate it, his consent shall be deemed to have been given. PENAVICO failed to prove that PENAVICO Shenzhen did not have power of agency or deny the act thereof in the period of producing evidence in the first instance. So the determination of court of first instance that what PENAVICO Shenzhen talked about the dispute over the compensation involved on April 9, 2013 was real expression of intent. 2. The action brought by Yuansheng Company did not exceed the time bar. According to Article 14 Paragraph 1 of the Provisions of the Supreme People’s Court on Several Issues on Application of Law in the Trial of Cases concerning Delivery of Goods without Original Bill of Lading, an action lodged by a holder of original bill of lading against the carrier for delivery of goods without original bill of lading shall apply to Article 257 of the Maritime Code of the People’s Republic of China, of which the limitation period was one year, counting from the day on which the goods should have been delivered by the carrier. It is provided in Article 267 Paragraph 1 of the Maritime Code of the People’s Republic of China, the limitation of time shall be discontinued as a result of bringing an action or submitting the case for arbitration by the claimant or the

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admission to fulfill obligations by the person against whom the claim was brought up. So PENAVICO Shenzhen expressed its agreement to fulfil the obligation for compensation on April 4, 2013. The action lodged by Yuansheng Company to the Haikou Maritime Court had an effect to discontinue the limitation period. To sum up, facts were clearly determined and laws were properly applied in the original judgment, Yuansheng Company requested the court to dismiss the appeal of PENAVICO. PENAVICO Shenzhen argued that it only suggested Yuansheng Company to institute legal procedures and did not agree to compensate. It is found out in the second instance that the contractual counterpart of Yuansheng Company is PENAVICO and DGS Company was the agent of PENAVICO in the port of destination. The records of MSN between Yuansheng Company and PENAVICO Shenzhen from September 2012 to April 2012 show that Yuansheng Company had been communicating with PENAVICO Shenzhen about the delivery of goods without bill of lading and corresponding compensation since September 2012, and claimed directly against PENAVICO Shenzhen on November 29, 2012, PENAVICO Shenzhen replied that its overseas agent had brought an action before the court of American and the hearing was scheduled on January 2013, it advised Yuansheng Company to complete the overseas procedure of recovery, as a big company, PENAVICO Shenzhen would help Yuansheng Company deal with the problems till the end. On April 9, 2013, PENAVICO Shenzhen replied Yuansheng Company that its overseas agent DGS Company won the action in New York, America, and if it could not recover the payment, it would sue DGS Company. PENAVICO Shenzhen would like to indemnify Yuansheng Company, but it advised Yuansheng Company to institute legal proceeding on account of shorter time according to the reply of the leader thereof, once losing the action, the compensation would be made. Then Yuansheng Company filed the case against PENAVICO and PENAVICO Shenzhen with the Haikou Maritime Court, it withdrew the case after the court explained that PENAVICO Shenzhen was not its contractual counterpart. In the hearing of the second instance, all parties confirmed the actual contact person and the operator of the business in the case was PENAVICO Shenzhen. The court holds that the main issue in the case is whether PENAVICO shall indemnify Yuansheng Company the losses of the goods in amount of USD74,360 (converted at the exchange rate prevailing on July 18, 2012). PENAVICO alleged that the power of agency of the PENAVICO Shenzhen was limited to issue bill of lading, the act that the PENAVICO Shenzhen agreed to take the obligation for compensation could not represent PENAVICO after the delivery of goods without bill of lading. The words, “as the agency of the carrier China Ocean Shipping Agency” are clearly noted on the bill of lading, but the power of agency of PENAVICO Shenzhen which is limited to issue the bill of lading cannot be reflected, in addition, PENAVICO failed to submit evidence to prove that it had informed Yuansheng Company the specific scope of the authority of PENAVICO Shenzhen.

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According to Article 49 of the Contract Law of the People’s Republic of China, if an actor oversteps the power of agency and the counterpart has reasons to trust that the actor has the power of agency, the act of agency shall be effective. In the hearing of second instance, all the parties confirmed the actual contact person and operator of the business was PENAVICO Shenzhen, and Yuansheng Company had been contacting with PENAVICO Shenzhen about the compensation after delivery of goods without bill of lading. Although PENAVICO alleged that the chatting records between Yuansheng Company and PENAVICO Shenzhen was excerpt and could not reflect genuine intention of both parties, it could not submit the whole chatting records to prove its allegation. So its allegation is inadmissible, and the chatting records shall be ascertained. It can be found that PENAVICO Shenzhen dealt with the payment of goods of Yuanshen Company positively and never refused to take the obligations in the chatting records between Yuansheng Company and PENAVICO Shenzhen from September 2012 to April 2013, so Yuansheng Company has reasons to believe PENAVICO Shenzhen has the right to deal with the compensation. On the basis of this reason, Yuansheng Company sued PENAVICO Shenzhen other than PENAVICO on May 2013. The court does not ascertain the allegation that PENAVICO Shenzhen was only its agent to issue bill of lading and the act that it agreed to take the obligation for compensation could not represent PENAVICO. PENAVICO alleged that the chatting records of PENAVICO Shenzhen on April 9, 2013 did not suggest the willing of to take the obligation for compensation, therefore the limitation of action were not discontinued. The court holds that according to Article 257 of the Maritime Code, the limitation period counts from the day on which the goods of goods shall have been delivered by the carrier, the goods involved were estimated to arrive at port on July 18, 2012, therefore the limitation period should be counted on that day and ended on July 18, 2013. After knowing the delivery without bill of lading, Yuansheng Company had been contacting with PENAVICO Shenzhen about the compensation, and raised a claim against the PENAVICO Shenzhen on November 29, 2012. PENAVICO Shenzhen behaved positively during the whole process, it not only admitted the fact of delivery of goods without bill of lading, but also alleged that its overseas agent had got effective judgment regarding to creditor’ s rights for the goods in America, and as a big company, PENAVICO Shenzhen would help Yuansheng Company to deal with the problems. It was clearly stated in the chatting records on April 9, 2013 that if PENAVICO Shenzhen could not get the payment, it would sue its overseas agent; PENAVICO Shenzhen was to compensate in advance, but it could not make compensation without undergoing legal proceedings, upon the reply of the leader, it advised Yuansheng Company to sue under legal proceedings, compensate would be made once losing the action. Yuansheng Company then filed an action against PENAVICO Shenzhen with Haikou Maritime Court, and withdrew the case after the court explained that the PENAVICO Shenzhen was not its contractual counterpart. Combined with the facts above, it can be found that Yuansheng Company was never slack in exercising its rights, it continued to claim for rights in the way of business communication other than action on the basis of positive attitude

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of PENAVICO Shenzhen. PENAVICO Shenzhen never refuses to take the obligation for compensation, on the contrary, its recognition of the delivery of goods without bill of lading and the positive attitude suggests its ability and willingness to compensate. Where PENAVICO acknowledged its faults at delivery of the goods involved, it shall know that once Yuansheng Company sued, it will get a judgment of compensation for payment. So the act that PENAVICO Shenzhen advised Yuansheng Company to lodge an action on the April 9, 2013 can be regarded as the agreement of PENAVICO Shenzhen to take the obligation for compensation. According to Article 267 Paragraph 1 of the Maritime Code of the People’s Republic of China, it constitutes a discontinuance of limitation period, and the new limitation period shall count from April 9, 2013, so the action brought by Yuansheng Company on the November 6, 2013 does not exceed the limitation period. The allegation of PENAVICO cannot be established, so the court will not ascertain. To sum up, the facts are clearly ascertained and the law is correctly applied in the original judgment, therefore it shall be affirmed. According to Article 170 Paragraph 1 Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance in amount of 8,404 yuan, shall be born by the Appellant, China Ocean Shipping Agency Co., Ltd. The judgment is final. Presiding Judge: ZHAO Yinghua Acting Judge: GAO Junhua Acting Judge: WANG Hao June 4, 2014 Clerk: YANG Qian

Appendix: Relevant Laws Contract Law of the People’s Republic of China. Article 49 If an actor has no power of agency, oversteps the power of agency, or the power of agency has expired and yet concludes a contract in the principal’s name, and the counterpart has reasons to trust that the actor has the power of agency, the act of agency shall be effective. Civil Procedure Law of the People’s Republic of China. Article 170 After trying a case on appeal, the people’s court of second instance shall, in the light of the following situations, dispose of it accordingly: If the facts were clearly ascertained and the law was correctly applied in the original judgment, the appeal shall be rejected in the form of judgment and the original judgment shall be affirmed.

Ningbo Maritime Court Civil Judgment Hong Kong Dong Sheng Shipping Limited v. China Ping An Property Insurance Co., Ltd. Zhejiang Branch (2013) Yong Hai Fa Shang Chu Zi No. 563 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 529. Cause of Action 230. Dispute over marine insurance contract on the sea or sea-connected waters. Headnote the Plaintiff insured held entitled to an indemnity under its hull policy for loss of its ship caused by negligence of master and crew, rather than by unseaworthiness; measure of indemnity held to be the value of the ship at the time of the loss, and plaintiff held to be not entitled to recover charterparty revenue lost as a result of Defendant’s refusal to pay claim. Summary the Plaintiff shipowner sued the Defendant insurer for an indemnity after the sinking of its ship. The Plaintiff that the ship sank because strong winds and high swells, constituting perils of the sea, and alternatively the negligence of the master and crew, both of which were within the scope of insurance coverage. The Defendant argued that the sea conditions were good at the time of the incident and that the improper stowage of the cargo was such that the master and crew should have known that the ship was unseaworthy, so that the sinking was not covered by the policy. The Plaintiff claimed RMB10,000,000, the value of the ship at the time of the insurance policy commencement, while the Defendant argued that, if found liable, it should only be so for RMB5,600,000, using the day of the incident as the basis for valuation. The Plaintiff also argued for indemnification for loss of profit from a time charter party it had entered into but could not honor because of the Defendant’s refusal to pay. The court held that sea conditions were good the day of the incident but that the master and crew were negligent, making the Defendant liable to pay the insurance indemnity. The valuation at the time the insurance policy commenced was used to determine the indemnity amount and while the Defendant was not liable for the failed time charter party, it was liable for interest on the period of nonpayment.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_24

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Judgment The Plaintiff: Hong Kong Dong Sheng Shipping Limited Domicile: Floor 12, SanTai Building, 137–139 Connaught Road, Hong Kong SAR. Legal representative: FANG Weiyuan, director. Agent ad litem: WAN Renshan, lawyer of Shanghai Trend Law Firm. The Defendant: China Ping An Property Insurance Co., Ltd. Zhejiang Branch Domicile: Building1-3, No. 9 Huang Gushan Road, Xihu District, Hangzhou. Person in charge: CAO Yang, general manager. Agent ad litem: SHI Quanpei, lawyer of Grandall (Ningboi) Law Firm. Agent ad litem: WEI Jingjing, lawyer of Grandall (Ningboi) Law Firm. With respect to the case arising from dispute over marine insurance contract filed by the Plaintiff, Hong Kong Dongsheng Shipping Limited, against the Defendant, China Ping An Property Insurance Co., Ltd. Zhejiang Branch, to the court on August 5, 2013, after accepting the case on 8 August, the court organized the collegiate panel according to the law, and held three hearings in public on September 23, October 24, 2013 and February 26, 2014 respectively. FANG Weiyuan, the legal representative of the Plaintiff and WAN Renshan, agent ad litem of the Plaintiff, SHI Quanpei and WEI Jingjing, agents ad litem of the Defendant, appeared in court to attend the hearings. HU Shande, the witness, appeared in court and made a statement. Now the case has been concluded. The Plaintiff argued that on December 21, 2011, the service agent of the Defendant filled the insurance slip on behalf of the Plaintiff, to underwrite M.V. “Dong Sheng”, which was owned by the Plaintiff. On December 28, the Defendant issued the ship insurance policy, which was numbered with 11,209,601,900,021,903,924. It was stated in the policy that the term of coverage was from 0000 on January 1, 2012 to 2400 on December 31, 2012, the coverage was all risks, the insured amount was RMB10,000,000, and the premium was RMB85,000. The Plaintiff paid the premium as agreed. On December 11, 2012, M. V. “Dong Sheng” sailed from port of Dangjin in South Korea to Yantai, carrying 2,400 mt of steel. At that time, northern cold air had just passed, the storm was above grade 6 and there were waves on the sea. Around 1540, when M.V. “Dong Sheng” sailed to 37° 16.88′N, 124° 20′E, it was hit by a surge, the ship suddenly listed 35° portside, then listed 35° starboard At 1640, the right air tube of M.V. “Dong Sheng” had been submerged, it threatened the safety of the crew, the Master was forced to abandon the ship and the crew were rescued by a passing vessel named M.V. “Hai Zhidai”. On the same day, The Plaintiff gave a urgent report on the distress at sea to the Defendant, but the Defendant intentionally delayed to settle the claim. Until June 14, 2013, six months after the accident, the Plaintiff was notified by the Defendant that it rejected the claim because the accident did not fall into the insurance liability. The Plaintiff time chartered M.V. “Dong Sheng” to Peng Wei International Ship Management Co., Ltd. (hereinafter referred to as “Peng Wei

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Company”), however, since the Defendant delayed and finally rejected the claim, the Plaintiff was unable to fulfill the time charter party and suffered an economic loss of USD315,000 (equivalent to RMB1,953,000). The Plaintiff held that the reasons why M.V. “Dong Sheng” sank was that the ship encountered winter storms and surges, and sea water immerged, which were obviously perils of the sea and referred to other marine disasters set out in the policy, and the Defendant should bear the total loss of the ship as well as the operation loss resulting from delayed settlement. The Plaintiff requested the court to rule the Defendant to pay the insurance indemnity for the total loss of the ship in amount of RMB10,000,000 and the operation loss resulting from the delayed settlement of the subject matter insured in amount of RMB1,953,000, and the bank business loan interest of the principal amount of RMB11,953,000,000 over the same period from January 13, 2013 to date of the judgment. The Defendant defended that according to Article 22 of the Insurance Law, when lodging a claim with the insurer for payment of indemnities or insurance benefits in accordance with the insurance contract after the occurrence of an event, the insured should provide to the insurer all proofs and information he could provide pertinent to determining the nature or cause of, the extent of the losses due to, and other circumstances of the insured event. Only if the insured had proved the nature and cause of the accident was the insurer’s liability, could the insurer claim for indemnity. The allegation of the Plaintiff that the accident belonged to other perils of the sea set out in the policy was a subjective guess and illogical perspective. Firstly, perils of the sea referred to disasters at sea, like strong winds or waves, but based on the evidence submitted by the Plaintiff, both the logbook and the process report of saving the crew of M.V. “Dong Sheng” submitted by the Maritime Safety Administration indicated that the wind was grade 6 and the height of wave was 2 m at the time of the accident, the sea conditions was peaceful and calm, therefore no damage could be caused. Second, even if there was damage, the Plaintiff should prove the reason of the damage, and only the reason specified in the insurance clauses fell into the coverage. It was apparently illogical that the Plaintiff inferred backward the cause of the ship’s sinking was the perils of the sea from the result, since it was well possible that the ship sank due to its problems, such as lack of hull strength, break of steel plate, holes of the ship, man-made sabotage and etc. In case where the cause of the accident could not be proved to be the covered risks and the possibility of other causes of accident could not be excluded, there was no reason to demand the insurer to indemnify. The Plaintiff failed to provide evidence to prove the cause of the ship’s sinking fell into the scope of insurance liability, therefore the Defendant had no obligation to pay. Besides, the insured value in the insurance policy was blank, the Plaintiff’s claiming for the total loss of the ship in amount of RMB10,000,000 lacked evidence and the operation loss were irrelevant with the insurance contract. In summary, the Defendant requested the court to dismiss all the claims of the Plaintiff. According to the claims of the Plaintiff and pleas of the Defendant, the main issues in this case are the establishment of the insurance contract relationship, the cause and liability of the ship’s sinking, and the identification of economic losses.

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Firstly, in respect of the insurance contract relationship between the Plaintiff and the Defendant. The Plaintiff submitted the following evidence during the period of producing evidence to support its claims: 1. Insurance policy 2012 of M.V. “Dong Sheng”, to prove that there was an insurance contract relationship between the Plaintiff and the Defendant and the content of the insurance clauses; 2. Invoice of the premium, to prove that the Plaintiff had paid the insurance premium as agreed; 3. Emails of FANG Weiyuan which had been notarized by Shanghai Oriental Notary Public Office, to prove that the salesman of the Defendant only inquired information like the insured, the insurer, the ship, term of coverage etc., and the insured value in the policy was blank and crossed out, then he signed the policy on behalf of FANG Weiyuan, and the Defendant did not fully prompt and explain the exemption clauses towards the insured; 4. The Plaintiff’s explanation on the process of the insurance arrangement of M.V. “Dong Sheng”, to prove that the Plaintiff negotiated with the clerk of Ping An Bank Hangzhou Branch by email, FANG Weiyuan did not fill out the insurance slip, it was filled and signed by the clerk of Defendant, the blank of insured value was improperly concealed and missed. The Defendant held in the cross-examination that it had no objection to evidence 1 and 2; it affirmed the authenticity of evidence 3, but challenged the content and purpose of proof thereof. It held the insurance, which was bought by the clerk of Ping An Bank Hangzhou Branch under the entrustment of Plaintiff, was a business between them, it was not clear of that; from the terms on the reverse of the policy, the exclusions and exemption terms had been highlighted by different fonts; evidence 4 was about the process of purchasing the insurance, it was the Plaintiff’s unilateral statement and should not be regarded as evidence. As for the evidence above, the Defendant affirmed the authenticity of evidence 1 to 3, the court ascertains the process of purchasing insurance and the insurance contract relationship established between the Plaintiff and the Defendant; evidence 4 is an unilateral statement of the Plaintiff, it lacks corroborative evidence, so the court does not ascertain the effect of evidence thereof. Secondly, in respect of the causes and responsibilities of the sinking of the ship involved. The Plaintiff submitted the following evidence to the court: 5. Video of the scene, to display the process that water flew into ship, and finally the ship sank; 6. Maritime Traffic Accident Report, to prove the fact that M.V. “Dong Sheng” had reported the traffic accident to Yantai City Longkou Maritime Safety Administration at 1540 on December 11, 2012;

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7. Testimony of the seamen of M.V. “Dong Sheng” about the process of the accident, to prove that the ship was sailing through transverse waves, suddenly was hit by swells and sank after the ship listed sharply; 8. Process report by the seamen of M.V. “Hai Zhida” about rescue of M.V. “Dong Sheng”, to prove that the starboard deck of M.V. “Dong Sheng” was submerged and huge swells at that time; 9. Central Weather Bureau’s broadcast of strong winds at sea at 0600 on December 9, 2012, to prove the possibility of swells in the area where the accident occurred because winter winds and cold-air outbreak just passed through the area; 10. Testimony provided by HU Shande, the Master of M.V. “Dong Sheng” (with a Certificate of Master) concerning the process of the sinking and the rescue, to prove that the ship involved was hit by huge swells suddenly, then after a sharp list, water flew into the ship, and finally the ship was abandoned and sank, the Master appeared in the court as a witness and stated: at that time the storm was about 5–6 grade, at 1540 I was having a rest in the room, a particularly large swell hit the ship, at first the ship listed 30° port side, then listed starboard I went to the bridge and steered the ship. But six hours later, the ship continued to list starboard In consideration of safety, I made a decision to abandon the ship. I suppose the cause of the accident was the huge swells, the ship shaking too fast, lashing wire of the goods broke, steel plates removed and punctured the hull; 11. Manifest, bill of lading, laytime statement of facts, stowage plan, to prove that the goods were safely stowed and the departure formality was declared according to law; 12. PSC retention record of Asia–Pacific Port State Control Memorandum on M.V. “Dong Sheng”, to prove that the ship had not been detained over three years, the ship status was normal, and the safety management system was certificated; and 13. Inquiry records of the Master, HU Shande, chief officer LIANG Miaojie, and the chef YUAN Shineng made by Yantai City Longkou MSA, to prove that the ship listed seriously at the beginning of the accident, it was the result of external force. The Defendant held in the cross-examination: it had no objection to evidence 5; it had no objection to the authenticity of evidence 6–8, but the three evidence were issued unilaterally by the Plaintiff, the contents thereof were involved; evidence 9 was a marine weather forecast, the authenticity thereof was recognized, but the Defendant argued it could not achieve the purpose of proof of the Plaintiff, on the contrary, it proved that the weather and the sea conditions in the area where the accident occurred (namely other waters in the report) was good, the cold air did not affect that area; evidence 10 was the testimony of the Master of M.V. “Dong Sheng”, which was contradictory with the record of Longkou MSA, such as in the testimony, the ship firstly listed port side and then listed to starboard, but in the record of Longkou MSA, he said the ship

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sudden listed terribly, and he never talked about the ship listed port side and then listed to starboard; evidence 11–12, the Defendant questioned its authenticity, and from the perspective of relevancy, it has nothing to do with the case; evidence 13, the Defendant had no objection to its authenticity of the inquiry records of Longkou MSA, but the statements in the records should be regarded as the testimony, and the witnesses should testify in court as requested by the law, otherwise it could not be used as valid evidence. Besides, the Master, the chief officer and the chef all had an interests relationship with the Plaintiff, their records could not be the basis to determine facts. The Defendant, in order to prove its defence on the cause of the accident, submitted the following evidence during the period of producing evidence the court: 1. Logbook of M.V. “Hai Zhida”, to prove that M.V. “Dong Sheng” started sailing to China at the same time, and the navigation area was same, so the records about the weather and sea conditions in the logbook could reflect the weather conditions on the day of the accident, at 1600 on December 11, 2012, the wind was grade 4–5 and the wave height was 2 m; 2. Inquiry record by the surveyor of Ping An Insurance Company of the Master and the chief officer, the master said the measures they took were reducing the speed and head to sea, which stated by the Master’s record; and it was also stated in the record of the chief officer that the ship took measures of head to sea, to prove the Master’s operation was normal, and the fact alleged by the Plaintiff that it was improper operation that the Master did not take the measure of head to sea and sailing did not exist; 3. Investigation report and materials of Korea Marine Police, marine weather bulletin, maritime traffic accident report, to prove that on the day of the accident, the weather and sea conditions were normal, and the Plaintiff admitted that the weather and sea conditions were good, so the Plaintiff’s claim that the cause of ship-sinking was perils of the sea could not stand. The Plaintiff held that evidence 1 was a copy, its authenticity was doubtful, and the time recorded thereon was December 13, 2012, two days after the accident, winds and waves at sea varied, the record two days later was definitely different with the time of accident. Evidence 2, namely the records of the crew were true, as stated in the investigation record of the chief officer, around 1400 (two hours before the accident) the ship shook. According to the two records, the measure of head to sea were taken only after the occurrence of the listing starboard of ship, only at this moment did the Master and chief officer realize that the heading of 285° was obviously improper, so they redirected immediately. It just proved that proper navigation methods before the accident were incorrect. In respect of evidence 3, it was stated in the report of Korea Marine Police that the wind was grade 3–4, the wave height was 1.5 m and the weather was good, which was not corresponded with the record that the wind was grade 5–6 and the wave height was 2 m in other evidence, the probative force of this evidence

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was weak. The Marine Weather Bulletin did not specifically record that it was good weather on the east Yellow Sea, but the maritime transport accident could prove the winds were northern winds of grade 5–6, the swells were normal, the situations were very normal for a, ten-thousand-ton ship, but for M.V. “Dong Sheng”, a 3700-ton ship, it could be considered as poor weather. Therefore, the Defendant could not achieve the purpose of proof to prove the weather was good. In respect of evidence 5–13, the ascertainment opinions of the court are as follows: the Defendant did not raise any objection to the authenticity of the evidence provided by the Plaintiff except evidence 11 and 12, so the court ascertains the effect of evidence thereof; evidence 11 is a copy, but the original has been lost along with the ship, it corroborates with other evidence, so the court ascertains it; evidence 12 is irrelevant with this case, it is a printed web page without confirmation and lacks authenticity, the court does not ascertain. Evidence 1 provided by the Defendant is not the original, the court does not ascertain; the Plaintiff had no objection to the authenticity of evidence 2, so the court does not ascertain; in evidence 3, the report of the Korea Maritime Police formed out of the territory of China, it has not been notarized, so it shall not be ascertained; the marine weather bulletin and the maritime traffic accident report, of which the contents are same with that submitted by the Plaintiff, so it shall be ascertained. According to the evidence having been ascertained, the court concludes the following facts: 1. The sea conditions at the time of accident. Evidence 13 of the Plaintiff, namely the inquiry records of the Master LIANG Miaojie, the chief officer HU Shande and the chef YUAN Shineng made by Longkou MSA, and the inquiry records of the Master and the chief officer made by the investigator of the Defendant are records immediately made after the accident occurred, which have shown high reliability and the statements are almost consistent, so they shall be ascertained. In the records, the Master and the chief officer stated that it was northern wind of 5–6 grade and the waves were 2 m, it belonged to normal sea conditions, it cannot be regarded as strong winds, waves or high swells; 2. The process of the accident involved. The Plaintiff claimed that a flow of swell hit the ship, then the ship firstly listed 35° port side, then immediately listed 35° starboard, but no evidence can prove these statements; according the statement of the Master in the record made by Longkou MSA, at around 1540, I suddenly felt that the ship was listing badly … I asked the helmsman what the list angle was, he told me 35° starboard, so it is can be identified that the ship listed starboard directly, and it did not list port side then starboard; and 3. In respect of the cause of the ship-sinking accident the Plaintiff alleged in the bill of complaint is attack of swell, it fell into other perils of sea explicitly specified in the policy, the Plaintiff added a new reason when

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stating the reasons in the hearing, it held the ship sailed from east to west, it was blowing north wind, the Master failed to head sea and winds to reduce wind surface, thus the ship encountered crosswind. It was navigable fault of the Master. The court finds out that in records of the inquiry made by Longkou MSA, the Master said in the record of Longkou MSA: I think (the cause of the accident) is mainly the remove of the goods. The chief officer stated in the records: at 1540 the goods on board removed, the ship listed 35° starboard, the air pipe of the starboard deck was submerged… (I think the cause of the accident) the ship was affected by crosswind and waves, and the remove of the goods. I guess the wires might loose, after hit by 2 swells, the ship list, all of a sudden, the remove happened. The chef stated: at around 1525, I was cooking in the kitchen, two consecutive waves suddenly hit the ship, everything in the kitchen slipped down to the ground, and I was hurt. From the statements above, the inferences of the crew on the cause of the accident are basically the same, namely the ship was shaking because of crosswinds and the goods removed, the ship suddenly listed starboard After the ship listed starboard, the Master took the remedial measures of head sea and winds while sailing, but it was too late, the ship sunk because it lose stability. The court holds the cause of the accident is in accordance with the circumstances at that time, so it shall be ascertained.

14.

15.

16.

17.

18.

Third, the economic loss caused by the ship-sinking accident involved. The Plaintiff submitted the following evidence to the court: notarized emails in evidence 3, to prove that insured amount was RMB10,000,000, and the Defendant wrote off the insured value while filling in the insurance slip. Insurance policies of M.V. “Dong Sheng” issued by China Continent Property & Casualty Insurance Company 2010 and 2011, to prove that the insured value of the ship was RMB10,000,000; Assets Evaluation Report issued Zhoushan Putuo Maritime Assets Evaluation Co., Ltd., to prove that after careful assessment of a qualified assets evaluation agency, the bare hull value of M.V. “Zhou Shan 18” (former domestic registered name of M.V. “Dong Sheng”) (not including spare parts, fuel, rigging etc.), on the valuation benchmark day namely July 1, 2012 was RMB9,432,000; Annual Assets Evaluation Report, to prove that the bare hull value of M.V. “Zhou Shan 18” on the valuation benchmark date namely June 15, 2011 was RMB10,080,000; Loss list of M.V. “Dong Sheng”, to prove that apart from the hull and the main and auxiliary machines in amount of RMB9,432,000,000, plus spare parts, fuel, rigging etc., the amount of the total economic losses was about RMB10,697,200. Ship purchase and sales contract and voucher of payment of M.V. “Guo Shun 3”, to prove the transaction prices of a ship similar to M.V. “Dong Sheng” over the same insured period when the insurance liability commenced in the same area was about RMB10,000,000, it was reasonable to adopt RMB10,000,000 as the insured value of the M.V. “Dong Sheng”;

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19. Time charter party concluded by the Plaintiff and Shanghai Xin Xin Shipping Co., Ltd. (hereinafter “Xin Xin Company”), the statement of Xin Xin Company about performance of M.V. “Dong Sheng” on the voyage involved, to prove the Plaintiff chartered M.V. “Dong Sheng” to Xin Xin Company, the hire started from June 2012 to December 2012, the rent was USD900 a day, the ship was in seaworthy during the entire hire term; 20. Verification of insurance liability on January 18, 2013 and the notice of claim on June 13, 2013, to prove that the Defendant should verify the loss within the statutory time limit of 30 days namely before January 19, 2013, but it was delayed and not until June 13, 2013 was the verification of loss made and a decision to refuse to indemnify was issued; and 21. Time charter party concluded by the Plaintiff and Peng Wei Company, the application of the Plaintiff on substituting M.V. “Dong Yuan” to M.V. “Dong Sheng” to perform the charter party, time charter party signed by Jing Hang Shipping (Hong Kong) Co., Ltd. and Peng Wei Company, to prove that the Plaintiff chartered M.V. “Dong Sheng” to Peng Wei Company at a rent of USD2,100 a day on January 13, 2013, because M.V. “Dong Sheng” sank and the Defendant did not settle the claim in time, the Plaintiff had to send M.V. “Dong Yuan” (later renamed as M.V. “Nan Xiang”) to perform the time charter party concluded with Peng Wei Company, thus it suffered loss of rent income, the amount of which was: 150 days (from January 12 to June 14 in 2013)  USD2,100 (daily rent)  6.2 (exchange rate) = RMB1,953,000,000. The Defendant held in the cross-examination: it had no objection to the authenticity of evidence 14, but argued the evidence had no relevancy to this case. The name of the vessel in the two assessment reports of evidence 15 and 16 was not “Dong Sheng”, and it was not assessed for the dispute in this case, and the two assessment reports had specific purpose namely for bank mortgage loan, obviously they could not prove the actual value of the ship; evidence 17 was made by the Plaintiff unilaterally, and it had no legality; it disaffirmed the authenticity, legality and relevancy of evidence 18. The contract was original, but the voucher of the payment was not submitted, whether the contract had been actually performed could not be proved, the authenticity and the relevancy could not be identified; it disaffirmed evidence 19 either, Xin Xin Company and the Plaintiff had a charter relation, they were two interested parties, and there was no evidence to prove the contents of their statements, so it disaffirmed the statement of performance of the subject voyage; the Defendant had no objection to evidence 20; and evidence 21 had nothing to do with the disputes in this case, it had no relevancy, and judging from the content of the evidence, it could not prove the facts. The Defendant, in order to prove the value of the ship, submitted the Ship Valuation Advisory Report issued by the valuation center of Zhejiang Province Ship Trading Market to the court, to prove that the actual value (namely insured value) of M.V. “Dong Sheng” on the valuation benchmark date, December 11, 2012 should be RMB5,600,000. The Plaintiff argued the evidence was submitted after the period of producing evidence, the valuation benchmark date was

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December 11, 2012, it was apparently inconsistent with the provision of the Maritime Law that where no insured value had been agreed, the insured value should be calculated the value of the ship at the time when the insurance liability commenced, so the valuation should not be adopted in this case. With regard to evidence provided by the Plaintiff, the court, after trial, holds that: since the Defendant had no objection to evidence 14 and 20, the court ascertains the probative force thereof; evidence 15 and 16 is valuation of M.V. “Dong Sheng” (domestic registration name is M.V. “Zhou Shan 18”) in recent years; evidence 17 is an unilateral statement of the Plaintiff, there is no other corroborative evidence, so the court does not ascertain the probative force thereof; evidence 18 reflect the transaction price of the same type ships in the same period, they can be the reference to determine the value of the ship; evidence 19 and 21 is the contracts concluded by the Plaintiff and the third party, the authenticity is difficult to identify, and are of insufficient relevancy with the case, so the court does not ascertain the probative force thereof. The valuation benchmark date in the valuation report offered by the Defendant is the date of the occurrence of insured accident, it is inconsistent with relevant provision that the insured value refers to the value of the ship at the time when the insurance liability commences, so the court does not ascertain the probative force thereof. According to the evidence having been ascertained and the statements in the hearing, the court ascertains the following facts: M.V. “Dong Sheng”, which was named as M.V. “Zhou Shan 18”, was a Cambodian steel bulk cargo ship owned by the Plaintiff, of which the total length was 86.2 m, the breadth was 13.2 m, the depth was 6.7 m, and the tonnage was 2,157 gross tons. In December 2011, the Plaintiff purchased insurance covering all risks from the Defendant for M.V. “Dong Sheng”, the blank of insured value in the insurance slip was blank. On December 28, the Defendant issued an insurance policy with the number of 11,209,601,900,021,903,924, which stated the term of coverage was from 0000 h on January 1, 2012 to 2400 h on December 31, 2012, the coverage was all risks, the insurance amount was RMB10,000,000, the premium was RMB85,000, insured value column was blank; the absolute deductible of each accident was RMB50,000 and 10% of the loss, whichever was higher, and the deductible of total loss was 10% of the insurance amount. The Plaintiff had paid the premiums as agreed. On December 9, 2012, M.V. “Dong Sheng” arrived at Port of Dang Jin in South Korea, the loading 2,398.911 mt of marine steel plates started at 1255 and finished at 2140 on December 10. The pilot went on board at 0050 and off board at 0250 h on December 11, the ship sailed to Yantai according to the planned route. The weather and sea conditions were good at that time, with northerly winds grade 3–4, 2 m’ wave height, heading 285° and speed of 7 knots, the ship sailed transversely. Around 1540, M.V. “Dong Sheng” sailed to 37° 16.88′N, 124° 20′E, due to ship’s long time transverse sailing, the ship was rolling right and left, as a result, the goods removed and the ship listed 35° starboard suddenly, the air pipe of the starboard deck was submerged, then the ship was immediately redirected to 0° head sea at slow speed, and reported to the company and requested for rescuing from nearby

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ships. With gradual immersion of seawater into the air pipe on the starboard deck of M.V. “Dong Sheng”, the lives of the crew were threatened, the Master was forced to abandon the ship. At 1810 h, the crew were rescued by the passing ship M.V. “Hai Zhida”, but M.V. “Dong Sheng” sank. The Plaintiff reported the distress at sea to the Defendant and demanded insurance claims. On January 18, 2013, the Defendant indicated it needed further investigation on the cause of the accident. On June 13, 2013, the Defendant formally notified the Plaintiff that it the claim refused the claim because the accident involved did not fall into the scope of insurance liability. The court holds that the marine insurance contract relationship between the Plaintiff and the Defendant is established and effective according to law. Although the Plaintiff denied that the insurance slip was signed by itself, no objection was raised on the insurance terms of the policy, it paid the premiums as agreed and filed this case based on the policy, it shall be deemed as the effectiveness of a ratification of signature. The term of coverage of the policy is from 0000 h on January 1, 2012 to 2400 h on December 31, 2012. The ship-sinking accident involved occurred on December 11, 2012, it is an insurance accident occurred during the insurance liability period. There are two grounds on which the Plaintiff requested the Defendant to bear the insurance liability, one is the bad weather and unpredictable swells M.V. “Dong Sheng” encountered and the other one is the negligence of the crew, respectively falls into the circumstances provided in paragraph 1 of clause 1 on the reverse of the insurance policy: “2. stranding, collision, touching of any fixed or floating objects or other objects, or other perils of the sea” and “7- (4) the Master, crew and pilots, ship repairing personnel and charterer’s negligence”. In respect of the first reason, according to the facts identified by the court, the weather and sea conditions on December 11, 2012 were good, with northern winds at grade 5–6 and wave height of 2 m, there is no evidence suggesting that there were large swells, so the evidence are insufficient that the Plaintiff claimed the weather conditions at that time constituted other perils of sea, the court will not support. In respect of the second reason, the court holds that the accident involved is due to sailing head sea for a long time, as a result, the goods suddenly removed and caused the ship listed starboard; the reason that the goods removes may be improper lashing and strapping of steel plates at the time of loading, or the Master and the crew’s sailing head sea for a long time and the ship suffering too much shake, no matter which one is the reason, or both two of them are the reasons, it can always be attributed to provision in the policy: “7- (4) the Master, crew, pilots, ship repairing personnel and charterer’s negligence” and that such negligence is not due to the failure of due diligence of the insured, the owner or the manager, and does not fall into the exemptions enjoyed by the insurer such as “the insured knew or should have known that such unseaworthiness of improper loading at the beginning of the voyage” and “negligence or willful misconduct of the insured and their representatives”, therefore the court determined the accident involved falls into the insurance coverage, and the insurer shall pay the insurance indemnity.

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As for the amount of payment of indemnity, it was stated in the policy of M.V. “Dong Sheng” the insured amount was RMB10,000,000, but there was no agreement on the insured value. The Plaintiff held that the insured value was RMB10,000,000, while the Defendant, according to its assessment reports, alleged that the insured value was RMB5,600,000. The court holds that: firstly, the insured value of the ship shall be the value of the ship at the time when the insurance liability commences, including the total value of the ship’s hull, machinery, equipment, fuel, stores, gear, supplies and fresh water on board as well as the insurance premium. The valuation benchmark date in Ship Valuation Report submitted by the Defendant is the day of the occurrence of the accident involved namely December 11, 2011, which is not the day of the commencement of insurance liability, cannot be identified as basis to determine the insured value of the ship; secondly, in accordance with the Maritime Code, a contract of marine insurance mainly includes: name of the insurer, name of the insured, subject matter insured, insured value, insured amount, perils insured against and perils excepted, duration of insurance coverage, insurance premium etc. As a professional insurer, the Defendant shall examine and determine the essential elements of contract comprehensively. The policy involved is a standard form offered by the Defendant, and the blank of insured value is empty, so unfavorable interpretation against the Defendant shall be adopted; thirdly, according to insurance policy of M.V. “Dong Sheng” of 2010 and 2011 provided by the Plaintiff, ship valuation reports and the market price of similar ships, the court finds that the value of the ship at the commencement of the insurance liability namely The insured value is RMB10,000,000. Since it is provided in the policy the deductible of total loss is 10% of the loss, the deductible in amount of RMB1,000,000 shall be deducted in the insurance indemnity. Another claim of the Plaintiff namely the operation loss of RMB1,953,000 caused by the Defendant delayed verification of the loss of subject matter insured caused by the ship-sinking accident involved is not direct loss arising out of the accident involved, and does fall into the scope of indemnity agreed in the policy, in addition, as prescribed in the law the insurer’s indemnity for the loss from the accident insured shall be limited to the insured amount, so the court does not protect the loss. But according to the law, the insurer shall timely indemnify the Plaintiff’s loss, so the interest from the day that the claim should be settled shall be protected. The court decides the day to start calculating the interest shall be two months after the accident occurred namely February 11, 2012. To sum up, the rational part of the Plaintiff’s claims shall be supported. According to Article 41 and Article 107 of the Contract Law of the People’s Republic of China, Article 217, Article 219, Article 237 and Article 238 of the Maritime Code of the People’s Republic of China, the judgment is as follows: 1. The Defendant, China Ping An Insurance (Group) Co., Ltd. Zhejiang Branch, shall pay RMB9,000,000 to the Plaintiff, Hong Kong Dong Sheng Shipping Limited, within ten days after this judgment comes into effect, and the interest from February 11, 2012 to the day of enforcement determined by the judgment

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counted at the loan benchmark interest rate over the same period of Bank of China; 2. Reject other claims of the Plaintiff, Hong Kong Dong Sheng Shipping Limited. In case of failure of payment within the period specified in this judgment, the interest on the debt for the delayed period shall be doubled in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB95,520, of which the Plaintiff, Hong Kong Dong Sheng Shipping Limited, shall bear RMB25,550 and the Defendant, China Ping An Insurance (Group) Co., Ltd. Zhejiang Branch, shall bear RMB69,970. In the event of dissatisfaction with this judgment, the Plaintiff Hong Kong Dong Sheng Shipping Limited may within 30 days upon the service of this judgment, while the Defendant China Ping An Insurance (Group) Co., Ltd. Zhejiang Branch may within 15 days, submit an appeal to the court, together with copies in the number of the opposite party, to lodge an appeal to the Zhejiang High People’s Court. The appeal fee shall be RMB95,520 (the exact amount is determined by the Zhejiang Prime People’s Court, the excess part will be refunded in the future) within 7 days upon submission of the statement of appeal, (Bank of Deposit: Non-tax Revenue Settlement Account of Zhejiang Province Finance Department. Account Name: Agricultural Bank of China Hangzhou City Xihu Branch. Number of account: 19,000,101,040,006,575,401,001) otherwise, the appeal will be deemed to be withdrawn automatically. Presiding Judge: CHEN Xiaoming Acting Judge: LI Xianda Acting Judge: SHAN Yajuan May 20, 2014 Acting Clerk: ZHU Danying

Appendix: Relevant Laws Contract Law of the People’s Republic of China Article 41 If a dispute over the understanding of the standard terms occurs, it shall be interpreted in accordance with common understanding. Where there are two or more kinds of interpretation, an interpretation unfavorable to the party supplying the standard terms shall prevail. Where the standard terms are inconsistent with non-standard terms, the latter shall prevail. Article 107 If a party fails to perform its obligations under a contract, or its performance fails to satisfy the terms of the contract, it shall bear the liabilities for breach of contract such as to continue to perform its obligations, to take remedial measures, or to compensate for losses.

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Maritime Code of the People’s Republic of China Article 217 A contract of marine insurance mainly includes: (1) (2) (3) (4) (5) (6) (7) (8)

Name of the insurer; Name of the insured; Subject matter insured; Insured value; Insured amount; Perils insured against and perils excepted; Duration of insurance coverage; and Insurance premium.

Article 219 The insurable value of the subject matter insured shall be agreed upon between the insurer and the insured. Where no insurable value has been agreed upon between the insurer and the insured, the insurable value shall be calculated as follows: (1) The insurable value of the ship shall be the value of the ship at the time when the insurance liability commences, being the total value of the ship’s hull, machinery, equipment, fuel, stores, gear, provisions and fresh water on board as well as the insurance premium; (2) The insurable value of the cargo shall be the aggregate of the invoice value of the cargo or the actual value of the non-trade commodity at the place of shipment, plus freight and insurance premium when the insurance liability commences; and (3) The insurable value of the freight shall be the aggregate of the total amount of freight payable to the carrier and the insurance premium when the insurance liability commences; (4) The insurable value of other subject matter insured shall be the aggregate of the actual value of the subject matter insured and the insurance premium when the insurance liability commences. Article 237 The insurer shall indemnify the insured promptly after the loss from a peril insured against has occurred. Article 238 The insurer's indemnification for the loss from the peril insured against shall be limited to the insured amount. Where the insured amount is lower than the insured value, the insurer shall indemnify in the proportion that the insured amount bears to the insured value. Civil Procedure Law of the People’s Republic of China Article 253 If the person subjected to execution fails to fulfill his obligations with respect to pecuniary payment within the period specified by a judgment or written order or any other legal document, he shall pay double interest on the debt for the belated payment. If the person subjected to execution fails to fulfill his other obligations within the period specified in the judgment or written order or any other legal document, he shall pay a charge for the dilatory fulfillment.

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Zhejiang High People’s Court Civil Judgment Hong Kong Dong Sheng Shipping Limited v. China Ping An Property Insurance Co., Ltd. Zhejiang Branch (2014) Zhe Hai Zhong Zi No. 82 Related Case(s): this is the judgment of second instance, and the judgment of first instance is on page 515. Cause of Action: 230. Dispute over marine insurance contract on the sea or sea-connected waters. Headnote: affirming lower court judgment holding that the Plaintiff insured was entitled to an indemnity under its hull policy for loss of its ship caused by negligence of master and crew, rather than by unseaworthiness; measure of indemnity held to be the value of the ship at the time of the loss, and the Plaintiff held to be not entitled to recover charterparty revenue lost as a result of the Defendant’s refusal to pay claim. Summary: the Plaintiff shipowner sued the Defendant insurer for an indemnity after the sinking of its ship. The Plaintiff that the ship sank because strong winds and high swells, constituting perils of the sea, and alternatively the negligence of the master and crew, both of which were within the scope of insurance coverage. The Defendant argued that the sea conditions were good at the time of the incident and that the improper stowage of the cargo was such that the master and crew should have known that the ship was unseaworthy, so that the sinking was not covered by the policy. The Plaintiff claimed RMB10,000,000, the value of the ship at the time of the insurance policy commencement, while the Defendant argued that, if found liable, it should only be so for RMB5,600,000, using the day of the incident as the basis for valuation. Plaintiff also argued for indemnification for loss of profit from a time charter party it had entered into but could not honor because of the Defendant’s refusal to pay. The court held that sea conditions were good the day of the incident but that the master and crew were negligent, making the Defendant liable to pay the insurance indemnity. The valuation at the time the insurance policy commenced was used to determine the indemnity amount and while the Defendant was not liable for the failed time charter party, it was liable for interest on the period of nonpayment. On appeal, the court affirmed the original judgment.

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Judgment The Appellant (the Defendant of first instance): China Ping An Property Insurance Co., Ltd. Zhejiang Branch. Domicile: Building 1-3, No. 9 Huang Gushan Road, Xihu District, Hangzhou. Person in charge: CAO Yang, general manager. Agent ad litem: LI Daofeng, lawyer of Grandall (Ningbo) Law Firm. Agent ad litem: WEI Jingjing, lawyer of Grandall (Ningbo) Law Firm. The Respondent (the Plaintiff of first instance): Hong Kong Dong Sheng Shipping Limited. Domicile: Floor 12, SanTai Building, 137-139 Connaught Road, Hong Kong SAR. Legal representative: FANG Weiyuan, director. Agent ad litem: WAN Renshan, lawyer of Shanghai Trend Law Firm. The Appellant Ping An Property Insurance Co., Ltd. Zhejiang Branch (hereinafter referred to as “PAIC Zhejiang”) was dissatisfied with (2013) Yong Hai Fa Shang Chu Zi No. 563 Civil Judgment with regard to the case arising from dispute over marine insurance contract against the Respondent Hong Kong Dong Sheng Shipping Co., Ltd. (hereinafter referred to “Dong Sheng Company”) made by Ningbo Maritime Court, and lodged an appeal to the court. After accepting the case, the court organized the collegiate panel according to law on July 2, 2014 and heard this case in public on August 26, 2014. LI Daofeng and WEI Jingjing, agents ad litem of the Appellant PAIC Zhejiang, and FANG Weiyuan, the legal representative of the Respondent Dong Sheng Company and WAN Renshan, agent ad litem of the Respondent appeared in court to attend the hearing. Now the case has now been concluded. The facts found by the court of first instance are that, M.V. “Dong Sheng”, which was named as M.V. “Zhou Shan 18”, was a Cambodian steel bulk cargo ship owned by the Plaintiff, of which the total length was 86.2 m, the breadth was 13.2 m, the depth was 6.7 m, and the tonnage was 2,157 gross tons. In December 2011, the Plaintiff purchased insurance covering all risks from the Defendant for M.V. “Dong Sheng”, the blank of insured value in the insurance slip was blank. On December 28, the Defendant issued an insurance policy with the number of 11,209,601,900,021,903,924, which stated that the term of coverage was from 0000 h on January 1, 2012 to 2400 h on December 31, 2012, the coverage was all risks, the insurance amount was RMB10,000,000, the premium was RMB85,000, insured value column was blank; the absolute deductible of each accident was RMB50,000 and 10% of the loss, whichever was higher, and the deductible of total loss was 10% of the insurance amount. The Plaintiff had paid the premiums as agreed. On December 9, 2012, M.V. “Dong Sheng” arrived at port of Dangjin in South Korea, the loading of 2398.911 mt of marine steel plates started at 1255 and finished at 2140 on December 10. The pilot went on board at 0050 and off board at 0250 on December 11, the ship sailed to Yantai according to the planned route. The weather and sea conditions were good at that time, with northerly winds grade 3–4, 2 m’ wave height, heading 285° and speed of 7 knots, the ship sailed transversely.

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Around 1540, M.V. “Dong Sheng” sailed to 37° 16.88′N, 124° 20′E, due to ship’s long time transverse sailing, the ship was rolling right and left, as a result, the goods removed and the ship listed 35° starboard suddenly, the air pipe of the starboard deck was submerged, then the ship was immediately redirected to 0° head sea at slow speed, and reported to the company and requested for rescuing from nearby ships. With gradual immersion of seawater into the air pipe on the starboard deck of M.V. “Dong Sheng”, the lives of the crew were threatened, the Master was forced to abandon the ship. At 1810, the crew were rescued by the passing ship M.V. “Hai Zhida”, but M.V. “Dong Sheng” sank. The Plaintiff reported the distress at sea to the Defendant and demanded insurance claims. On January 18, 2013, the Defendant indicated it needed further investigation on the cause of the accident. On June 13, 2013, the Defendant formally notified the Plaintiff that it the insurer refused the claim because the accident involved did not fall into the scope of insurance liability. The court of first instance held that the marine insurance contract relationship between the Plaintiff and the Defendant was established and effective according to law. Although the Plaintiff denied that the insurance slip was signed by itself, no objection was raised on the insurance terms of the policy, it paid the premiums as agreed and filed this case based on the policy, it should be deemed as the effectiveness of a ratification of signature. The term of coverage of the policy was from 0000 on January 1, 2012 to 2400 on December 31, 2012. The ship-sinking accident involved occurred on December 11, 2012, it was an insurance accident occurred during the insurance liability period. There were two grounds on which the Plaintiff requested the Defendant to bear the insurance liability, one was the bad weather and unpredictable swells M.V. “Dong Sheng” encountered and the other one was the negligence of the crew, respectively fell into the circumstances provided in paragraph 1 of clause 1 on the reverse of the insurance policy: “2. stranding, collision, touching of any fixed or floating objects or other objects, or other perils of the sea” and “7- (4) the Master, crew and pilots, ship repairing personnel and charterer’s negligence”. In respect of the first reason, according to the facts identified by the court of first instance, the weather and sea conditions on December 11, 2012 were good, with northern winds at grade 5–6 and wave height of 2 m, there was no evidence suggesting that there were large swells, so the evidence were insufficient that the Plaintiff claimed the weather conditions at that time constituted other perils of sea, the court of first instance did not support. In respect of the second reason, the court of first instance held that the accident involved was due to sailing head sea for a long time, as a result, the goods suddenly removed and caused the ship listed starboard; the reason that the goods removes might be improper lashing and strapping of steel plates at the time of loading, or the Master and the crew’s sailing head sea for a long time and the ship suffering too much shake, no matter which one was the reason, or both two of them are the reasons, it could always be attributed to provision in the policy: “7- (4) the Master, crew, pilots, ship repairing personnel and charterer’s negligence” and that such negligence was not due to the failure of due diligence of the insured, the owner or the manager, and did not fall into the exemptions enjoyed by the insurer such as “the insured knew or should have known that such

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unseaworthiness of improper loading at the beginning of the voyage” and “negligence or willful misconduct of the insured and their representatives”, therefore the court of first instance determined the accident involved fell into the insurance coverage, and the insurer should pay the insurance indemnity. As for the amount of payment of indemnity, it was stated in the policy of M.V. “Dong Sheng” that the insured amount was RMB10,000,000, but there was no agreement on the insured value. The Plaintiff held that the insured value was RMB10,000,000, while the Defendant, according to its assessment reports, alleged that the insured value was RMB5,600,000. The court of first instance held that: firstly, the insured value of the ship should be the value of the ship at the time when the insurance liability commences, including the total value of the ship’s hull, machinery, equipment, fuel, stores, gear, supplies and fresh water on board as well as the insurance premium. The valuation benchmark date in Ship Valuation Report submitted by the Defendant was the day of the occurrence of the accident involved namely December 11, 2011, which was not the day of the commencement of insurance liability, could not be identified as basis to determine the insured value of the ship; secondly, in accordance with the Maritime Code, a contract of marine insurance mainly includes: name of the insurer, name of the insured, subject matter insured, insured value, insured amount, perils insured against and perils excepted, duration of insurance coverage, insurance premium etc. As a professional insurer, the Defendant should examine and determine the essential elements of contract comprehensively. The policy involved was a standard form offered by the Defendant, and the blank of insured value was empty, so unfavorable interpretation against the Defendant should be adopted; thirdly, according to insurance policy of M.V. “Dong Sheng” of 2010 and 2011 provided by the Plaintiff, ship valuation reports and the market price of similar ships, the court of first instance found that the value of the ship at the commencement of the insurance liability namely The insured value was RMB10,000,000. Since it was provided in the policy the deductible of total loss was 10% of the loss, the deductible in amount of RMB1,000,000 should be deducted in the insurance indemnity. Another claim of the Plaintiff namely the operation loss of RMB1,953,000 caused by the Defendant delayed verification of the loss of subject matter insured caused by the ship-sinking accident involved was not direct loss arising out of the accident involved, and did fall into the scope of indemnity agreed in the policy, in addition, as prescribed in the law the insurer’s indemnity for the loss from the accident insured should be limited to the insured amount, so the court of first instance did not protect the loss. But according to the law, the insurer should timely indemnify the Plaintiff’s loss, so the interest from the day that the claim should be settled shall be protected. The court of first instance decided the day to start calculating the interest should be two months after the accident occurred namely February 11, 2012. To sum up, the rational part of the Plaintiff’s claims should be supported. According to Article 41 and Article 107 of the Contract Law of the People’s Republic of China, Article 217, Article 219, Article 237 and Article 238 of the Maritime Code of the People’s Republic of China, the court of first instance judged that the Defendant should pay RMB9,000,000 to the Plaintiff within ten

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days after this judgment came into effect, and the interest from February 11, 2012 to the day of enforcement determined by the judgment counted at the loan benchmark interest rate over the same period of Bank of China; and reject other claims of the Plaintiff. Court acceptance fee in amount of RMB95,520, the Plaintiff should bear RMB25,550 and the Defendant should bear RMB69,970. PAIC Zhejiang dissatisfied with the judgment of first instance and lodge an appeal to the court: 1. No evidence could support the fact that the goods on board removed ascertained in the judgment of first instance. 1:1 The records of seamen could not confirm the fact. According to the records, the statements were guess of the seamen, and they were not sure about that, the Master confirmed in the trial that no one checked the goods, no one saw the goods removing, and no evidence could prove either. If thousands of tons of steels in the storm removed to the right side and collided with the copper bulkhead, a loud sound would come out. But no one heard such sound, so there was no remove. 1:2 Based on the record of the Master, the chief officer and the chef made by the Longkou MSA, the court of first instance speculated the goods removed, but in these records, the Master said “I went to check the goods after loading, no obvious spaces between the two sides”, “I did not hear abnormal sound, in the room and the bridge.” Spare space was the precondition of remove, but there was no space, the goods could not remove. 2. The judgment of first instance ascertained the ship had been sailing on beam seas and rolled, resulting in the shifting of goods”, it was a speculation without evidence to support. 2:1 In the judgment of first instance it was speculated that the goods removed because of the impact of crosswinds and beam seas, the ship rolled inevitable, but according to the records made by Longkou MSA, the Master said the ship did not roll. The chef was cooking, and the chief officer claimed that the ship was stricken by the waves suddenly, it meant no obvious storm come before that, it was unlikely to prove the ship was affected by crosswinds and beam seas. 2:2 The Master alleged in the first instance and the records made by Longkou MSA that there was no negligence in navigation, then it was speculation that the ship sailed in crosswinds and on beam seas before the list. No seamen had ever said that the ship did not sail in crosswinds and on beam seas before or after the list. From the prevailing wind direction at that time and the actual heading course of 285, there was no adverse consequence of crosswinds and beam seas. Combined with the planned route and destination, it could be found that M.V. “Dong Sheng” was always sailing in crosswinds and on beam seas.

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2:3 M.V. “Hai Zhida”, which was on the same direction of course, was in heading 285, no adverse consequence of beam seas existed, it indicated that there was no beam sea. 2:4 According to the records of Longkou MSA, Dong Sheng Company had carried same goods on the same or similar routes, and the Master had been navigating for 10 years, he had rich experience in steering. In this case, there was no basis to speculate the ship sailed in crosswinds. 3. No beam sea was so strong to cause remove of the goods. Common ships could resist grade 8 storms. Under the normal circumstance of waves, a ship was able to reset timely from rolling. It never happened that the ship could not reset after list to one side. The court of first instance found that the weather and sea conditions on December 11, 2012 were good, northern winds of grade 5–6 and wave height of two meters, held no evidence suggested large swells exited and did not support the allegation of Dong Sheng Company that the meteorological conditions constituted other perils of the sea, but at the same time the court also held that the ship sailed on beam seas for a long time and rolled from side to side, the goods removed suddenly and the ship listed starboard as a result. It was contradictory. 4. It lacked evidence for the judgment of first instance to identify the reason of the accident fell into “the negligence of Master, the seamen, pilots, ship repair personnel and charterers”. 4:1 The Master testified in court that the route of the ship was on planned in advance, he said “the ship is steered on the planed course of west by north, which is mapped out according to the geographic situation, we must navigate in this way”, there was no negligence. 4:2 Before the accident, there was no obvious warning, so no one could have foreseen the accident, there was no negligence sailing heading wind according to the planned route. 4:3 The process report of M.V. “Hai Zhida” rescuing the seamen of M.V. “Dong Sheng” showed the course of M.V. “Hai Zhida” was 285° either, it suggested that this course was reasonable. 4:4 M.V. “Dong Sheng” previously carried steels, the Master and seamen had rich experience to navigate with the same loading methods in the same routes, argument of negligence was inconsistent with the fact. 5. The cause of the accident could not exclude moral hazard. There was no strong wave or storm, in view of many doubts before and after the accident, the only possibility was moral hazard. 6. The insured value of the ship was wrongfully identified. The insurance indemnity should be determined on the basis of the value of the ship insured at that time. The court of first instance incorrectly adopted the price a year ago as the basis, and the valuation price was made for bank loan, which was significantly higher than it should be. The appraisals report submitted by PAIC

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Zhejiang in the first instance was made almost at the same time of the marine insurance, therefore the appraisals report should be adopted. 7. It was provided in Article 8 of the special agreement terms on the reverse of the insurance policy involved the contents concerning total loss did not apply to this policy. Where the ship was total lost, then the indemnity should be paid according to the insured amount, the Clauses was enacted in 1986, at that time the Insurance Law had not been published and there was no concept of insured value or insured amount until the Maritime Code was published. In addition, the burden of proof to refutatory allegations above should be born by Dong Sheng Company. In summary, the PAIC Zhejiang requested the court to set aside the original judgment and dismiss all the claims of Dong Sheng Company. Dong Sheng Company defended as follows: 1. Combined with investigation materials of maritime authorities and the common sense of nautical activities, it was consistent with the objective law that the court of first instance ascertained the ship rolled for beam seas, and the goods removed as a result. 1:1 TANG Miaojie, the chief officer on duty confirmed in the investigation of PAIC Zhejiang at around 1400, the ship was rolling right and left. Combining the gale warning on sea released by the Central Meteorological Observatory a day ago, it was predictable that the impact of the residual winds, waves and swells on the ship, at 1400 M.V. “Dong Sheng”, after attacked by the waves, rolled from side to side. It was the consequence of sailing on beam seas. 1:2 The logbook of M.V. “Hai Zhida” which rescued M.V. “Dong Sheng” submitted by PAIC Zhejiang objectively documented the facts that the winds and waves were reinforced before and after the accident at the area where the accident occurred. At 1200 the sea conditions “cloudy, soft wind and light waves” corresponded to the record “ wind of grade 4 and waves of grade 3” on the back. At 1600 the sea conditions “cloudy, strong wind and moderate waves” corresponded to the record “wind of grade 6, northern winds and waves of grade 4–5” on the back. 1:3 According to the navigation rules, M.V. “Dong Sheng” was a small ship of which the free board was 1 m and the dead weight was 3300 tons, the ship sailed in beam seas for a long time, failed to take turns and reduce the speed and other measures, it would inevitably lead to the goods listing and removing to the other side, eventually cause the ship turn over. It was in line with the basic common sense. 1:4 The investigation records of maritime investigation authority objectively reflected the sinking resulted from the remove of goods. The Master of M.V. “Dong Sheng”, HU Shande stated in the survey: “I think (the accident) is mainly caused by the remove of the goods.” The chief officer on duty, TANG Miaojie stated that: “the ship was influenced by the crosswinds and

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beam seas, and the goods removed, it is possible that the wire ropes got loose, two waves (hit), the ship listed soon, the goods removed in a sudden.” The chef stated: “At around 1535, I was cooking in the kitchen, and suddenly two consecutive waves hit the boat, all stuff in the kitchen slipped to the ground, I was injured, my chest hit the door, and finally I climbed out of the kitchen.” From these materials, every seaman all mentioned the impact of sudden waves, it was logical and consistent with experience that the goods thereon removed and M.V. “Dong Sheng” listed under long-term influence of crosswinds and beam seas. 2. PAIC Zhejiang lacked proper understanding of the right navigation methods to tackle with winter storm, therefore it wrongfully claimed that the accident was resulted from the negligence of seamen. 2:1 Voyage at sea was complex and difficult, serious mistakes of the seamen in handling the ship combined with special nature of cargo or ship in sea voyage might lead to overturn or damages, so the marine insurance underwrote risks of seamen’s negligence. 2:2 It was requested in the Company Operating Manual of Dong Sheng Company and Guide to the Master for Avoiding Dangerous Situations in Adverse Weather and Sea Conditions of the Maritime Safety Committee of the International Maritime Organization, in terms of the navigation methods that the ship should avoid sailing in crosswinds and on beam seas, when confronted with crosswinds and beam seas, the sailor on duty or the Master should take measures to reduce the risk. But when the accident occurred, the Master and seamen were too careless to be aware of the danger and continued sailing with the navigation method endangering the safety of ship, until 1540 M.V. “Dong Sheng” listed seriously, the Master reduced the speed sharply (from 7 to 2 knots), redirected the course (from 280 to 000°) against the wind and sailed on beam seas, but it was too late, ultimately the accident happened. 2:3 The winds and waves actually encountered in the waters the M.V. “Dong Sheng” sailing through constituted “other perils of the sea”. More direct cause of the sinking was the negligence of the Master and the seamen sailing on beam seas. The two reasons fell into the coverage of all risks. 3. The value and the insurance indemnity identified in the court of first instance were correct. 3:1 The insured amount and the insured value of M.V. “Dong Sheng” in annual insurance policy of ocean vessel in 2010 and 2011 were both RMB10,000,000. The policy of 2012 was filled by PAIC Zhejiang, the insured value was written off, but the insured amount was still RMB10,000,000 and the premium was on the basis of RMB10,000,000.

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3:2 Two evaluation report of M.V. “Dong Sheng” before and after the underwriting showed that the assessment value of the ship was RMB10,000,000 or more, evidence offered by the Dong Sheng Company in first instance, which was the actual transaction price of similar kind of ship in the same area over the same period. It was expressly agreed in Article 12 (2) -1 of the Hull Insurance Clauses, where an actual total loss occurs, the indemnity is paid according to the insured amount. In summary, Dong Sheng Company requested the court to dismiss the appeal and affirm the judgment of first instance. During second instance, PAIC Zhejiang did not submit new evidence. Dong Sheng Company submitted the following new evidence: the investigation and inquiry records of maritime traffic accident of CHEN Li, the engineer on duty and WU Guangming, the chief engineer on duty made by Longkou MSA, to reinforce the evidence of the first instance that giant sound and list of the ship at the time of accident. PAIC Zhejiang held in the cross-examination that it had no objection to the authenticity of the evidence, but it could be proved giant sound and list of the ship were caused by the removing of the goods. As for evidence submitted by Dong Sheng Company, the court holds that the two copies of the inquiry and investigation records were from Longkou MSA, PAIC Zhejiang has no objection to the authenticity of the evidence. Though the two evidence cannot prove the facts of the case along, as corroborative evidence, they shall be ascertained. After the trial of second instance, the court ascertains the facts found in the judgment of first instance. It is also found that it is provided in Article 10 of Hull Insurance Clauses of China Ping An Insurance Company: “(B) Total loss 1. Where the insured vessel is completely destroyed or seriously damaged beyond restoration of original condition, or the insured inevitably loses the ship, as actual total loss, it should be indemnified according to the insured amount.” The court holds that according to the claims and the grounds of appeal as well as the argument of the parties, the main issues of this case in the second instance are as follows: 1. Whether PAIC Zhejiang shall assume the insurance liability for the loss arising out of the sinking of M.V. “Dong Sheng”; 2. How to ascertain the amount of indemnity. In respect of the first issue, according to the clauses of the insurance policy involved, the term of coverage is from 0000 on January 1, 2012 to 2400 on December 31, 2012, and the ship-sinking accident involved occurred on December 11, 2012, within the period of insurance liability. Dong Sheng Company alleged M. V. “Dong Sheng” sank because the ship encountered bad weather and unpredictable swells as well as the negligence of seamen, which falls into the circumstances provided in clause 1 (1) “2. Other perils of the sea” and “7- (4) negligence of the Master, seamen, pilots, ship repair personnel and charterers”, it is a insured event.

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The court finds that because the ship involved sank, the ship certificate, stowage plans and other important materials have been lost, it is difficult to make an appraisal report of the accident, the testimonies of the Master and seamen who were on board at the time of the accident occurred are of great importance. The inquiry records of HU Shande, the Master, TANG Miaojie, the chief officer and YUAN Shineng, the chef of M.V. “Dong Sheng” made by Longkou MSA are statements of the three person made when they first arrived in China after the accident occurred, and the statements on facts of them are basically the same, they have high credibility and shall be accepted. According to the inquiry records made by the Longkou MSA, as to the weather, both TANG Miaojie and HU Shande said that weather conditions before and after the accident were northern wind of grade 5–6, wave height of 2 m and visibility of 5–6 nautical miles. The statements correspond with content “it was north-west wind of grade 6 and the wave height was 2 m” in the process report of M.V. “Hai Zhida” rescuing the seamen of M.V. “Dong Sheng”. The allegation of Dong Sheng Company that the weather conditions at the time of the accident constituted “other perils of the sea” lacks evidence and shall not be supported. As to the cause of the accident, HU Shande, TANG Miaojie and YUAN Shineng all mentioned in the record that the ship suddenly listed, HU Shande believed that the it was caused by the remove of the goods, TANG Miaojie thought the sailing on beam seas for a long time caused the wire ropes got loose, and resulting in the remove of the goods. Considering that the ship was sailing from east to west, heading for north west 285°, the fact of northern wind and the statement of HU Shande “after the accident, the course was changed and the speed was slowed down to steaming head to the sea”, it can be inferred that the ship was sailing on beam seas. According to the fact that M.V. “Touelmarul” rescued M.V. “Dong Sheng” without effect and the content “the wind and wave were too strong at that time, our ship and life saving rafts were rolling” in the report of M.V. “Hai Zhida” rescuing the seamen of M.V. “Dong Sheng”, it can be found although northern winds of grade 5–6 and wave height of 2 m do not constitute perils of the sea, but it still has a large impact on the ship’s navigation safety at sea. It is reasonable that the judgment of first instance determined the accident involved is caused by the ship’s long-term sailing on beam seas and the consequent rolling of the ship, then the sudden remove of the goods finally led to list starboard of the ship. M.V. “Dong Sheng” carried steels of different types and lengths weighing more than 2300 mt sailing on beam seas, the lashing of the steels is crucial to the safety of navigation, but no evidence suggest that the seamen checked the goods during the voyage. The remove of goods may result from improper lashing of steels at time of loading, or the Master and the seamen navigated on beam seas for a long time and the ship was rolling right and left, no matter which one or both of them led to the accident, it can be attributed to the insurance liability set out in the policy “7(4) negligence of the Master, seamen and pilots, ship repair personnel and charterers”. PAIC Zhejiang shall provide evidence to prove that the loss is caused by exclusions, but apart from the objection that the accident is caused by moral hazard, it did not submit any other valid evidence, so it shall assume the insurance liability for the loss of M.V. “Dong Sheng”.

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In respect of the second issue, the blank of insured value of M.V. “Dong Sheng” in the insurance policy involved is empty, according to Article 219 of the Maritime Code, the insured value of the ship shall be the value of the ship at the time when the insurance liability commences, being the total value of the ship’s hull, machinery, equipment, fuel, stores, gear, provisions and fresh water on board as well as the insurance premium. In this Case, the insurance liability commenced at 0000 on January 1, 2012, but the evaluation benchmark date of the assessment report provided by both parties is not that date. From the evidence available, the court finds that in the insurance policies of M.V. “Dong Sheng” in 2010 and 2011 underwritten by China Continent Property & Casualty Insurance Company, and the two evaluation reports made after and before the insurance is arranged provided by Dong Sheng Company, the value of the ship was assessed as RMB10,000,000, of which the evaluation benchmark date of the evaluation report issued by Zhoushan City Putuo Yuanhang Assets Appraisal Co., Ltd. is July 1, 2012, the closest one to the commencement of the insurance liability in this case. PAIC Zhejiang as a professional insurance agency, shall know the significance to agree the insured value of the subject matter insured, and conduct preliminary examination on the insured value, where the insured value is significantly higher than the insured amount, it can make a professional judgment about that and has the right to refuse to underwrite or reduce the insured amount, but in this case, PAIC Zhejiang confirmed that the insured amount was RMB10,000,000, and charged the premium in accordance with the insured amount. It is clearly provided in paragraph 2 (1) in Article 10 of the “Hull Insurance Clauses” attached to the insurance policy that the indemnity shall be paid by the insured amount when total loss or constructive total loss occurs, no evidence can prove that Dong Sheng Company was in bad faith or intent of fraud, the two parties have reached an agreement on how to determine the amount of indemnity when the insured events occur. The Ship Assessment and Consultation Report submitted by PAIC Zhejiang, in which the evaluation benchmark date is December 11, 2012, nearly a year later than the commencement of insurance liability, shall not be ascertained. Accordingly, the court holds that it is proper that the court of first instance ascertained the insured value of M.V. “Dong Sheng” as RMB10,000,000 based on the examination of insurance policies of M.V. “Dong Sheng” underwritten by other insurance company in 2010 and 2011, asset assessment reports before and after the arrangement of the insurance involved. PAIC Zhejiang applied for appraisal of the insured value of the ship involved during the second instance, the court did not support. Since the deductible for total loss is 10% of the loss is agreed in the policy, so the deductible in amount of RMB1,000,000 shall be deducted from the insurance indemnity. As for the allegation held by PAIC Zhejiang that paragraph 8 of special agreement clause in the policy provided the part concerning total loss in the clauses should not apply, it is a misreading of the agreement, the original terms reads as follows: the agreement in the insurance clauses concerning the deductible of total loss, salvage and rescue fee does not apply to this policy, it is an amendment on the deductible on the reverse, does not mean that the contents concerning total loss are not applicable.

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In summary, maritime insurance contract between the parties concerned has been established and taken effect. The ship involved was total lost due to the insurance responsibility set out in the policy, PAIC Zhejiang failed to produce evidence to prove that the total loss was caused by excluded liability, PAIC Zhejiang shall bear insurance responsibility for the loss. After deducting the deductible in amount of RMB1 million, it still need to pay RMB1 million and the overdue interest. The facts are clearly ascertained and the law are correctly applied in the original judgment. The grounds of appeal held by PAIC Zhejiang cannot stand, and the court does not support. In accordance with Article 170 Paragraph 1 Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance in amount of RMB95,520, shall be born by China Ping An Property Insurance Co., Ltd. Zhejiang Branch. The judgment is final. Presiding Judge: WANG Jianfang Acting Judge: ZHENG Enliang Acting Judge: CHU Ningyu October 17, 2014 Clerk: ZHANG Yu

Tianjin Maritime Court Civil Judgment Jiangsu Jiaolong Fishing Harbor Engineering Co., Ltd. v. Jiangyan Huatai Transport Co., Ltd. et al. (2013) Jin Hai Fa Shang Chu Zi No. 597 Related Case (s): This is the judgment of first instance and the judgment of second instance is on page 564. Cause of Action: 228. Dispute over contract on refloatation on the sea or sea-connected waters. Headnote: The Plaintiff salvor held to be entitled to recover in full under a fixed price wreck removal contract; the Defendant’s counterclaims about late and defective performance rejected. Summary: The Plaintiff salvor Jiaolong Company sued the Defendant Huatai Company for breach of contract. The Plaintiff alleged that the Defendant breached a wreck removal contract made between them for payment of RMB 5.8 million for salvage of a Huatai Company vessel that sank in a busy port. The Plaintiff Jiaolong argued that it fully completed its duties under the terms and requirements of the contract and that the Defendant Huatai did not perform its obligations of payment and therefore breached their contract. The Defendant Huatai counter-argued that the Plaintiff Jiaolong breached the contract by its failure to engage four ships in the wreck removal process and its illegal use of distress to over-charge Huatai beyond fair market value. The Defendant Huatai Company’s arguments failed and the court found fully in favour of the Plaintiff Jiaolong Company. The court ordered that Huatai Company should complete its payment as required under the contract with interest and dismissed any remaining claims against Jiaolong Company.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_25

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Judgment The Plaintiff (the counterclaim Defendant): Jiangsu Jiaolong Fishing Harbor Engineering Co., Ltd. Domicile: No. 2 Jingkou Jiaolong Road, Tainan Town, Yandu District, Yancheng City, Jiangsu. Legal representative: HAN Caigao, chairman. Agent ad litem: LI Min, lawyer of Jiangsu Changhe Law Firm. The Defendant (the counterclaim Plaintiff): Jiangyan Huatai Transport Co., Ltd. Domicile: Jiangmao Village, Duoyu Town, Jiangyan District, Taizhou City, Jiangsu. Legal representative: CAO Zhaocheng, chairman. Agent ad litem: WANG Youlin, lawyer of Jiangsu Jiang & Hao Law Firm. The Defendant: China Communications Construction Company Tianjin Dredging Co., Ltd. Domicile: No. 41 Taierzhuang Road, Hexi District, Tianjin. Legal representative: KANG Xuezeng, Chairman of the Board. Agent ad litem: LI Hongwei, employee. Agent ad litem: WANG Zhiguo, employee. The Third party: Shanghai Success Water Engineering Co., Ltd. Domicile: Room 601, No. 12, 810 Lane, Songbin Road, Baoshan District, Shanghai. Legal representative: ZHOU Xuecheng, general manager. Agent ad litem: LI Hua, legal consultant. With respect to the case arising from dispute over contract on refloatation on the sea between the Plaintiff, Jiangsu Jiaolong Fishing Harbor Engineering Co., Ltd. (hereinafter referred to as “Jiaolong Company”), against the Defendants, Jiangyan Huatai Transport Co., Ltd. (hereinafter referred to as “Huatai Company”), China Communications Construction Company Tianjin Dredging Co., Ltd. (hereinafter referred to as “CCCC”), the court, after accepting the case on September 9, 2013, formed a collegiate panel consisting of Acting Judge CHEN Jianpeng as Presiding Judge, Acting Judge FU Xiaoke and Acting Judge ZHANG Junbo to try the case under general procedure in accordance with the law. In consideration that Shanghai Success Water Engineering Co., Ltd. (hereinafter referred to as “Success Company”) has interested relations in law with the case, during the trial, the court notified it as a Third Party to participate in the action in light of law. Huatai Company, the Defendant of the subject case, filed a counterclaim to the court, the court consolidated the original claim and the counterclaim according to law. The court held two hearings in public on October 15, 2013 and November 29, 2013. LI Min, agent ad litem of Jiaolong Company; CAO Zhaocheng and WANG Youlin, respectively, the legal representative and agent ad litem of Huatai Company; LI

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Hongwei and WANG Zhiguo, agents ad litem of CCCC; LI Hua, agent ad litem of Success Company, appeared in court to attend the hearings. Now the case has been concluded. Jiaolong Company alleged that: on March 30, 2013, M. V. “Su Hua Tai 001”, owned by Huatai Company, collided with M. V. “Tong Yuan”, owned by CCCC, in the waterway of Huanghua Port. The accident resulting in M. V. “Su Hua Tai 001” sinking in the port and seriously blocking traffic. Jiaolong Company, in accordance with the instructions of Cangzhou Municipality Maritime Safety Administration (hereinafter referred to as Cangzhou MSA), conducted a sweeping and underwater survey over M. V. “Su Hua Tai 001”, and made a Measurement Report. On April 3, Cangzhou MSA organized Jiaolong Company, CCCC, Success Company, and other relevant units and personnel to coordinate refloate and remove the shipwreck of M. V. “Su Hua Tai 001” and made minutes of the meeting. On the same day, Jiaolong Company and Huatai Company signed a shipwrecks refloatation and salvage agreement. Huatai Company and CCCC signed the Agreement on Disbursement and Advancement charge for the refloatation. Jiaolong Company, jointly with the third party, carried out the refloating operation of M. V. “Su Hua Tai 001.” On April 19, CCCC paid Jiaolong Company the prepayment sum of the refloating charge in the amount of RMB 2.9 million. On April 26, Jiaolong Company and the Third Party completed the refloatation of the whole sunken ship M. V. “Su Hua Tai 001”. Due to gale warning at sea on the next day, Jiaolong Company and the Third Party in accordance with the instruction of Cangzhou MSA moved the sunken M. V. “Su Hua Tai 001” by crane to a sea area outside of the waterway and laid it on the sea floor. On May 28, Jiaolong Company, the two Defendants, the Third Party, Wudi Harbour Shipping Services Co., Ltd. (hereinafter referred to as “Wudi Company”) signed the Supplementary Agreement of refloatation of M. V. “Su Hua Tai 001” (hereinafter referred to as Supplementary Agreement). Jiaolong Company fully completed all obligations under Shipwreck Refloatation Contract and Supplementary Agreement afterwards. The Huatai Company breached the contract, failed to handle the formalities for delivery and acceptance of the ship, and to notify CCCC to pay the remaining sum of the salvage charges in time. CCCC refused to fulfill its obligation for payment while it was aware that Jiaolong Company and the Third Party had fully fulfilled the contractual obligations and the actual conditions to pay the remaining sum of the refloatation charge had been satisfied. Therefore, Jiaolong Company requested the court to judge that: 1. Huatai Company should pay the award for refloating M. V. “Su Hua Tai 001” in the amount of RMB2.9 million and the interest on deferred payment immediately; 2. CCCC should be jointly and severely liable for the above payment; 3. Huatai Company and CCCC should bear the legal fees in this case. Huatai Company argued that it neither agreed to pay RMB2.9 million to Jiaolong Company and that it did not assume the joint and several liability for payment. Refloatation Contract was signed under a circumstance where the sunken ship should be refloated within a prescribed period. Taking advantage of its perilous state in terms of the current distress, the refloatation charge was obviously unfair. Huatai Company held that the contract price should been altered to RMB3.5

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million. Jiaolong Company did not fulfill its contractual obligations to refloat the whole ship, but took reckless adventures, cut the ship under water, and the hull was badly damaged. Thereafter, Huatai Company filed a counterclaim requesting that Jiaolong Company compensate the loss of the hull in the amount of RMB3.3 million. While Huatai Company made an agreement on the advance payment with CCCC, it was simply an internal agreement between the parties that there was no basis that CCCC should undertake joint and several liability. CCCC argued that: (1) according to the provision of the Maritime Traffic Safety Law of the People’s Republic of China and the Measures on Administration of Refloatation of Sunken Ships of the People’s Republic of China, Huatai Company was the legal obligor to refloat the sunken ship, therefore CCCC should not assume the statutory responsibility for the refloatation; (2) CCCC had no contractual relationship with Jiaolong Company therefore it should not bear the obligation to pay the refloatation charge; (3) while CCCC paid the refloatation charge in advance for Huatai Company this did not mean CCCC became the obligor under Shipwrecks Refloatation Agreement; (4) according to Agreement on Disbursement and Advancement of Refloatation Charge, CCCC paid the refloatation charge directly to Jiaolong Company therefore CCCC did not assume joint and several liability; (5) CCCC paid the refloatation charge in advance and witnessed Supplementary Agreement, therefore CCCC did not assume joint and several liability to pay the refloatation charge. Success Company argued that it participated in the whole refloatation process, that Shipwreck Refloatation Contract was signed upon equal consultation of both sides, and the breakage of the ship could not be attributed to it. Huatai Company alleged that: on April 3, 2013, in terms of the refloatation of M. V. “Su Hua Tai 001”, Jiaolong Company signed Shipwreck Refloatation Contract with Huatai Company, agreeing that Jiaolong Company would execute the overall Refloatation Scheme for M. V. “Su Hua Tai 001” at a price of RMB5.8 million; the refloatation period from April 4, 2013 to April 14, 2013. On April 4, 2013 Jiaolong Company worked out the overall scheme of refloatation operation in terms of M. V. “Su Hua Tai 001” (hereinafter referred to as Refloatation Scheme) and reported to Cangzhou MSA for approval. Refloatation Scheme provided that according to the situations of underwater scanning, the scheme was designed to refloat the whole sunken ship under a more practical means of refloatation, namely cleaning ship holds and lifting the whole shipwreck according to its structure and the estimated weight. In order to ensure one-off refloatation, four crane ships were contracted to carry out the lifting, named respectively: M. V. “Qin Hang Gong 68” (lifting capacity: 1000t), M. V. “Qin Hang Gong 82” (lifting capacity: 600t), M. V. “Hu Success 10” (lifting capacity: 900t), M. V. “Hu Success 1” (lifting capacity: 500t). The total lifting capacity was 3000t, which was higher than the maximum weight of the sunken ship. The lifting ropes used by each ship were annular wire ropes with a diameter of 120 mm and length of 90 m, two ropes per ship, totaling eight ropes.

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To prevent damaging the shipwreck’s hull with the ropes, four lifting ships would lift simultaneously under unified command with coordination and cooperation. The details of the operation period are: one day for preparation, four days for cleaning holds, one day for sucking sludge, two days for laying wire rope, one day for lifting, one day for removing to the shallows, totaling 10 days. However, after signing the contract, Jiaolong Company did not refloat the whole shipwreck until April 26, 2013. Additionally, Jiaolong Company violated the operation scheme because it only dispatched three lifting ships. After lifting the entire shipwreck, due to the lack of lifting capacity, M. V. “Su Hua Tai 001” had to once again be put into the sea. This directly led to serious damage to the hull (v-shape) and a break in the middle of the shipwreck. After the refloatation failed, Jiaolong Company, in order to evade the responsibility, transferred all of the salvage ships. On May 21, 2013, Jiaolong Company issued a Commitment to ensure the subsequent refloatation work of M. V. “Su Hua Tai 001.” On May 28, 2013, in order to avoid expanding losses, Jiaolong Company signed Supplementary Agreement with Huatai Company and was forced to agree to cut M. V. “Su Hua Tai 001” under water. The breach of Jiaolong Company caused losses to Huatai Company, therefore, Huatai Company requested the court to judge that: 1. Jiaolong Company should compensate for losses concerning M. V. “Su Hua Tai 001” to Huatai Company immediately, totaling RMB3.3 million; 2. Jiaolong Company should bear all legal costs in this case. Jiaolong Company argued that: Shipwreck Refloatation Contract and Supplementary Agreement signed by Huatai Company and Jiaolong Company represented the true intention of both parties and conformed to the law. The two parties agreed that total price of Refloatation Contract was RMB5.8 million; Huatai Company had the contractual obligation to pay RMB2.9 million in advance to Jiaolong Company, otherwise Jiaolong Company could not carry out substantive refloatation work; the scheme to refloat the shipwreck was agreed by both parties, and both parties had anticipated and expressly agreed in the contract that if the shipwreck in the lifting process had accidents such as the hull breaking down, the responsibility and costs should be undertaken by Huatai Company. The refloatation period was 10 days and the period would be extended in case of strong winds. Huatai Company had the obligation to acquire a parking place after refloatation the shipwreck from the water. In summary, Jiaolong Company argued that Huatai Company’s counterclaim had no factual or legal basis, thus it should be rejected. According to the allegations and arguments of the parties in the original claim and the counterclaim, the principal outstanding issues of this case can be summarized as follows: (1) whether the price of Refloatation Contract between Jiaolong Company and Huatai Company is unfair and what the reasonable amount shall be; (2) whether CCCC should undertake joint and several liability; (3) whether Jiaolong Company breached the contract involved in the refloatation; (4) whether it is true and reasonable for Huatai Company to claim for loss of refloatation. During the trial, Jiaolong Company, in order to prove its claims, provided the following evidence:

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Evidence 1, Business License: organization code certificate and refloatation unit qualification certificate, to prove Jiaolong Company as the subject of litigation and the execution and performance of the Shipwreck Refloatation Contract is proper; Evidence 2, Inspection: Report of M. V. “Su Hua Tai 001” (hereinafter referred to as Jiaolong Inspection Report) and M. V. “Su Hua Tai 001” Shipwreck Inspection Report issued by Tianjin Hailong Underwater Engineering Co., Ltd. provided by Huatai Company (hereinafter referred to as Hailong Inspection Report), to prove that on April 1, 2013, Jiaolong Company, under the instruction of Cangzhou MSA and the commission of the Defendants, headed for the sinking place of M. V. “Su Hua Tai 001” to inspect shipwreck M. V. “Su Hua Tai 001” and appoint the divers to detect under water, then determine the specific location and damaged condition of the shipwreck. After inspecting, it found that the position about 15 m in front of the bridge in the starboard side of the shipwreck had wrinkled and broken off. It also found a hole of 10 m in length and 2.5 m in height. The corresponding part in the port side was found wrinkled and broken. In the process of refloatation and lifting the shipwreck out of the water it was inevitable that the shipwreck would break (Paragraph 4 of Article 6 of Jiaolong Inspection Report). 2. The upper deck of the shipwreck M. V. “Su Hua Tai 001” was obviously fractured and deformed; it presented a V-shape and the steel plate of the deck presented a longitudinally wavy shape, the side board was seriously deformed; and the deck fractured (Hailong Report 3, 4, 5, 6), to prove that M. V. “Su Hua Tai 001” was seriously damaged, and the shipwreck was unable or impossible to self-float after being refloated from underwater; Evidence 3, copies of the notice of the meeting of safety management of the refloatation operation M. V. “Su Hua Tai 001” existed. The minutes of the meeting with regard to safety management of refloatation operation of M. V. “Su Hua Tai 001” and attendance sheets were to be admitted to prove that (1) on the condition of the administration of Cangzhou MSA, the parties concerned were present, it was affirmed that the shipwreck involved blocked the waterway of Huangye Port and seriously affected the normal operation of the integrated port area. The obstruction must be cleared and the shipwreck refloated within the prescribed period; (2) Huatai Company was the subject responsible for shipwreck refloatation of M. V. “Su Hua Tai 001”, and CCCC, as the obligor of the accident, had the obligation to advance the refloatation charge; (3) because Huatai Company did not issue a receipt according to Agreement on Disbursement and Advancement of Refloatation Charge, CCCC failed to advance the refloatation charge to Jiaolong Company, thus the shipwreck refloatation of M. V. “Su Hua Tai 001” was affected; (4) the fact that the competent authority Cangzhou MSA required Jiaolong Company to maintain and preserve evidence when the shipwreck was refloated out of the water; Evidence 4, copies of Shipwreck Refloatation Contract and Supplementary Agreement, to prove that: (1) the rights and obligations of Shipwreck Refloatation Contract signed Jiaolong Company, Success Company and the two Defendants; (2) Jiaolong Company and Huatai Company confirmed that M. V. “Su Hua Tai 001” was broken and the refloatation operation of the shipwreck involved was carried out in accordance with the salvage scheme. The refloatation charge

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amounting to RMB5.8 million included disposal costs, diesel costs and management fees; (3) according to the payment method and time of the shipwreck refloatation charge of M. V. “Su Hua Tai 001”: after Shipwreck Refloatation Contract was signed, the Defendants would pay RMB2.9 million in advance, and would pay the balance within three days after the shipwreck was delivered. The two Defendants had agreed to pay Jiaolong Company and the Third Party the refloatation charge. Furthermore, the Defendants had a contractual obligation to pay RMB2.9 million as a prepayment refloatation charge to Jiaolong Company. Otherwise, Jiaolong Company could not enter into the substantive refloatation work; (4) Huatai Company had a contractual obligation to determine the safe water area to lay the shipwreck and to handle the delivery procedure in the shipwreck refloatation site; (5) both sides had predicted the problems which would appear in the shipwreck refloatation process and the undertaking of other costs; (6) the conditions of delivery and acceptance of the shipwreck; (7) what the agreed condition of paying the balance of the refloatation project was: after Jiaolong Company and Success Company successfully completed the refloatation operation, they sent the two parts of the shipwreck to Wudi Company which had been designated by Huatai Company, and assisted the shipwreck to the slipway of the shipyard (8) CCCC, as the subject responsible for the accident and the obligor of the advanced refloatation charge, confirmed the liability for payment of Jiaolong Company as a witness; Evidence 5, copy of Agreement on Disbursement and Advancement of Refloatation Charge, to prove that: (1) the two Defendants had confirmed the fact that CCCC should undertake or pay in advance the refloatation charge; (2) the fact that CCCC committed to bear the refloatation charge in advance; (3) the fact that the two Defendants clearly knew the refloatation charge amounted to RMB5.8 million; (4) the fact that CCCC pledged that the refloatation charge undertaken by it would not exceed RMB5.8 million and it would pay to Jiaolong Company directly; Evidence 6, Jiangsu Province VAT invoices numbered with 14,347,845– 14,347,850, to prove the fact that Jiaolong Company issued invoices for the refloatation charge to CCCC as requested; Evidence 7, notice of receipt of the Agricultural Bank of China, to prove that on April 19, 2013, CCCC had already paid the refloatation charge of RMB2.9 million to Jiaolong Company in advance by the competent authority the Meeting Minutes, Agreement on Disbursement and Advancement of Refloatation Charge and Shipwreck Refloatation Contract; Evidence 8, certificate issued by Wudi Company, to prove that: 1. on June 20, 2013, M. V. “Su Hua Tai 001” shipwreck had already been delivered (the shipwreck has been moved to the slipway of the shipyard designated by Huatai Company as agreed); 2. the contractual condition to pay the balance of the refloatation charge had been accomplished; Evidence 9, overall scheme of the refloatation operation of the shipwreck M. V. “Su Hua Tai 001”, to prove that the scheme was submitted to Cangzhou MSA for the record and Jiaolong Company put forward in Refloatation Scheme, the general situation of the shipwreck describes the state of the shipwreck, operating

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environment, the damage to shipwreck and the situation of goods. See Article 3 Paragraph 1 of the Scheme which expresses the overall Refloatation Scheme: Jiaolong Company will dispatch four refloatation ships to the site to carry out the refloatation; Article 2.4: the shipwreck’ maximum weight when it is lifted out of thewater is 1981 tons; Item 3.5, (actually 2.5): the estimated lifting capacity 2377 tons; Paragraph 5: Jiaolong Company will send four refloatation ships to the site to lift, and the shipwreck will be secured with eight wire ropes (two each ship), and lifted at the same time under coordination; Paragraph 7: it is predicted that the shipwreck may break off in the lifting process, it will take Refloatation Scheme cutting underwater and salvaging on segmentation. See Article 5: the operation period is expressed as: 10 day, and in case of winds at or above six level, the period will be extended; Evidence 10, a set of photos, and a report of weather and sea conditions, to prove that: (1) on April 26, 2013, Jiaolong Company and the Third Party dispatched four lifting ships to the site in accordance with Shipwreck Refloatation Contract and the overall Refloatation Scheme having been put on record, jointly completed the refloatation of the whole shipwreck (Jiaolong Company fulfilled the refloatation obligations of Shipwreck Refloatation Contract within 7 days after receiving the prepayment of the refloatation, 3 days in advance), according to the overall scheme of the refloatation operation of M. V. “Su Hua Tai 001” (four ships with 8 wire ropes); (2) after the shipwreck was refloated from the water, the situation of damage was basically identical with that of the underwater inspection, and the shipwreck was absolutely unable to float by itself and the scheme of cut and seal underwater had to be carried out; (3) the weather and storm conditions nearby Bohai around April 27, 2013; Evidence 11, Completion Report, to prove that: (1) Jiaolong Company and the Third Party fulfilled its obligations to lift the shipwreck in accordance with the provisions before, during and after the refloatation operation; (2) the fact that Jiaolong Company and the Third Party fully fulfilled all contractual obligations in accordance with Shipwreck Refloatation Contract and the overall Refloatation Scheme. Huatai Company’s cross-examination opinions on the evidence submitted by Jiaolong Company are as follows: it raised no objection to evidence 1; no objection to the authenticity of evidence 2, but the purpose of proof was inadmissible. Hailong Inspection Report did not truly reflect the damage to the ship, the situation of damage was grossly exaggerated, it was not true that there was a 15 m hole before the bridge of the starboard side. Hailong Inspection Report provided by Huatai Company showed that the hole’s diameter was 40 cm, and Jiaolong Company recognized Hailong Measurement Report. Evidence 3, it disaffirmed the Meeting Minutes on April 3 for lack of seal, but recognized the Meeting Minutes on April 17, the attendance sheet could not prove the fact that the shipwreck effected the operations of the port. Evidence 4, there was no objection to the authenticity of Shipwreck Refloatation Contract but Huatai Company held that it could not prove M. V. “Su Hua Tai 001” had already broken, both sides made an agreement that the shipwreck had broken. However, because Huatai Company was not a professional

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organization, it was unclear what the extent of the ship’s actual damage was underwater, nonetheless it was recognized by Hailong Inspection Report. During the refloatation operation Jiaolong Company should fulfill the obligation for maintenance with due diligence, and according to Article 8 of the contract, Jiaolong Company should inspect and find the situation of damage to the shipwreck before the operation. The first Jiaolong Inspection Report was made before the conclusion of the agreement, thus Jiaolong Company should inspect and measure the shipwreck to find the situation of damage thereto before the actual refloatation. However, Jiaolong Company did not carry out this work. Article 8 of the contract provided that Jiaolong Company should not be liable for the situations such as deformation during the process of lifting. Huatai Company argued that such terms should be invalid since it unilaterally exempted Jiaolong Company’s liability. The shipwreck refloatation was carried out in accordance with the overall scheme, which refered to the hull structure being preserved in intact. Even Jiaolong Company had acknowledged that the ship had already broken, it should still carry out the refloatation in accordance with the overall Refloatation Scheme. This was the reason why Huatai Company agreed to the refloatation charge in the amount of RMB5.8 million. There was no objection to the authenticity of Supplementary Agreement, but the background of Supplementary Agreement was failure of preliminary refloatation. Huatai Company requested Jiaolong Company to join the refloatation, and Jiaolong Company required Huatai Company to agree to divide the refloatation. This was not the genuine intention of Huatai Company, and it also proved that before signing Supplementary Agreement, Jiaolong Company did not complete the refloatation operation. There was no objection to the authenticity of evidence 5, but it could not prove that CCCC had the obligation to continue to pay. No objection to evidence 6–8. There was no objection to the authenticity of evidence 9. The shipwreck Refloatation Scheme was designed to refloat and lift the whole shipwreck. On the sixth page of Refloatation Scheme, four lifting ships with a total lift floating capacity of 3,000 tons were planned to carry out the refloatation. On the seventh page, it was planned that four ships with eight wire ropes each would engage their lifting capacity and should be timely adjusted while the operation occurred. The ninth page describes the names of the lifting ships and the plan sketch of Refloatation Scheme, but the fact was that Jiaolong Company did not operate in accordance with Refloatation Scheme. Evidence 10, the authenticity of PPT was not recognized, it could not reflect the ship’s name, and the other party displayed in the way of PPT, the authenticity thereof could not be confirmed. Evidence 11, Completion Report, the names of lifting ships described in the report are inconsistent with one of the ships’ names recorded in the scheme, which could also prove that the other party did not refloat the shipwreck pursuant to the refloatation contract. The report was produced by Jiaolong Company unilaterally, the authenticity thereof was inadmissible. The cross-examination opinions of CCCC on the evidence provided by Jiaolong Company are as follows: there was no objection to evidence 1; evidence 2 was denied to be cross-examined; there was no objection to the authenticity of evidence 3, it proved the defense of CCCC that CCCC was not the obligor; there was no

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objection to the authenticity of evidence 4, but its purpose of proof was inadmissible. There was no legal relationship created by the refloatation contract between CCCC and Jiaolong Company, so CCCC did not have the obligation to jointly and severely pay the refloatation charge, and CCCC witnessed that the signing of Supplementary Agreement, it did not prove that it was jointly and severally obligated to pay the refloatation charge; there was no objection to the authenticity of evidence 5, but it also proved that CCCC merely paid the refloatation charge in advance, it had no obligation to pay directly; there was no objection to evidence 6; evidence 7 also proved the defense of CCCC that it was the on arrangement of the advanced payment agreement to advance RMB2.9 million, it was irrelevant to Shipwreck Refloatation Contract; evidence 2 was denied to be cross-examined; evidence 9 to 11 was irrelevant to the claims of Jiaolong Company, there was no cross-examination opinion thereon. The cross-examination opinions of Success Company on the evidence of Jiaolong Company: recognize the authenticity, relevancy, legality and the purpose of proof of all evidence. The opinions of the court on the evidence provided by Jiaolong Company are as follows: the effect of evidence of evidence 1 shall be confirmed; evidence 2 and the apparent authenticity of the two reports shall be confirmed. The true situation of the damage to the shipwreck has great distinction with the two inspection underwater reports, and the court holds that this issue shall be determined in combination with the photos after the shipwreck was refloated from water. The authenticity of the meeting minutes, attendance sheet, and the notice of evidence 3 shall be confirmed, which can prove that CCCC assumed the obligation to advance the refloatation charge. Evidence 4, the effect of evidence of Shipwreck Refloatation Contract and Supplementary Agreement shall be confirmed, to which the right and obligation between Jiaolong Company and Huatai Company shall be subject. The effect of evidence of evidence 5 shall be confirmed, but the evidence is an agreement on the advanced refloatation charge between CCCC and Huatai Company, which can only bind the contractual counter party. It has no contractual effect for Jiaolong Company. The effect of evidence of evidence 6–8 shall be confirmed. The authenticity, legality and relevancy of evidence 9 (Refloatation Scheme) shall be confirmed. Although Huatai Company denied the authenticity of the photos in evidence 10, the court finds that the evidence to support this claim is insufficient. Therefore, the court confirms the authenticity of the set of photos. The court finds that the set of photos may reflect the refloatation operation process and four ships participated in the refloatation process. The effect of evidence of weather forecasts shall be confirmed, which can prove the weather and storm conditions on April 27, 2013 near Bohai. The authenticity of Evidence 11 is confirmed because the record therein is detailed and corroborated with other evidence and describes the refloatation process, notwithstanding that the Completion Report was issued by Jiaolong Company unilaterally. For the original claim and the counterclaim, Huatai Company submitted the following evidence together to prove its allegations:

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Evidence 1, Business License, Organization Code Certificate and the certificate of the legal representative of License, to prove its capacity to file the counterclaim; Evidence 2, Hailong Inspection Report, to prove the situation of the shipwreck and that it could be refloated overall; Evidence 3, Shipwreck Refloatation Contract, to prove that both parties agreed to the operation period of the shipwreck refloatation and the refloatation charge was RMB5.8 million under the overall refloatation, at the same time, to prove Jiaolong Company’s refloatation exceeded the designated period and created the event of default; Evidence 4, Refloatation Scheme, to prove that Jiaolong Company carried out the refloatation according to the overall Refloatation Scheme, it should send four lifting ships with total lifting capacity of 3,000 tons; Evidence 5, the notice to refloat within a designated period, to prove that the situation was urgent when Refloatation Contract was signed; Jiaolong Company took advantage of the current distress and that the refloatation charge in amount of RMB5.8 million was much higher than the market price; Evidence 6, letter of commitment, to prove that the refloatation operation of Jiaolong Company was seriously overdue and it constituted a breach of contract; Evidence 7, photos of the shipwreck before it was refloated, to prove that the shipwreck hull was intact; Evidence 8, the photos when the shipwreck was being refloated, to prove that Jiaolong Company operated recklessly and it only dispatched three lifting ships and the lifting capacity was in shortage, as a result, the refloatation failed and the shipwreck’s hull was seriously damaged; Evidence 9, Supplementary Agreement, to prove that because the refloatation operation of Jiaolong Company was delayed, Huatai Company was forced to agree to cut the shipwreck underwater in order to avoid expanding its losses; Evidence 10, the photos after the shipwreck was refloated, to prove the reckless operation of Jiaolong Company caused the shipwreck’s hull to be severely damaged; Evidence 11, estimated repair price list, to prove the amount of the losses incurred by the severe damage to the shipwreck’s hull. The cross-examination opinions of Jiaolong Company on the evidence of Huatai Company are as follows: the authenticity, legality and relevancy of evidence 1 should be confirmed. There was no objection to the authenticity of evidence 2, but the description therein on the whole was inadmissible. The authenticity, legality and relevancy of evidence 3 should be confirmed, but not the purpose of proof. The period of the shipwreck was only 10 days after the shipwreck was refloated from the water as a whole. Evidence 4 was admitted and the scheme had been put on record in the Maritime Safety Administration, but the scheme could be adjusted at any time. Evidence 5 was admitted, as it could be seen that the shipwreck affected the normal operation in the port area. There was no objection to the authenticity of evidence 6, but the situation was that the opposing two companies limited the freedom of Jiaolong Company. Jiaolong Company still fulfilled the obligations in accordance with the commitment. There was no objection to the authenticity of

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evidence 7 and evidence 8, but not the purpose of proof. The first photo did not reflect the damage to the ship underwater, it only reflected the situations on board. The second photo (on April 27) of evidence 8 reflected the situation that the ship was steadily refloated from the water as a whole, and it did not reflect the entire objective situation. Evidence 9 was admitted. It proved the fact that the shipwreck must be cut. Evidence 10 was admitted because the damage to the shipwreck could be seen from it. Evidence 11 was not accepted. The cross-examination opinions of CCCC on the evidence of Huatai Company: the evidence is irrelevant to CCCC and it did not address ant cross-examination opinions. The cross-examination opinions of the third-party Success Company on the evidence of Huatai Company, agree to the cross-examination opinions of Jiaolong Company. It was held that CCCC commissioned divers to carry out the underwater inspection, but the investigations were not comprehensive as they only explored the damaged position in starboard side and found a hole when in fact, there was a greater breakage. The refloatation ship was M. V. “Hu Success 12” at the beginning, then funds were not available. Success Company sent M. V. “Hu Success 11,” which was in compliance with operating standards and had been reported to MSA. The length of the ships standing in a line was found insufficient during the operation and Refloatation Scheme was adjusted timely. It was not until the end of the refloatation operation did a ship leave. The opinions of the court on the evidence provided by Huatai Company are as follows: admit the effect of evidence of evidence 1. Admit the apparent authenticity of evidence 2, but the situation of the damage to the ship described in Inspection Report was not in accordance with the actual condition reflected by the photos taken after the shipwreck was refloated from water, and according to the report, the court cannot draw the conclusion that the shipwreck can be refloated as a whole. Admit the effect of evidence of evidence 3 and 4. Admit the effect of evidence of evidence 5. The court holds that the Maritime Safety Administration’s issuing a notice of refloatation within the designated period for the safety of waterway is not to put Huatai Company in distress. The authenticity of evidence 6 shall be admitted. Whether Jiaolong Company constituted delay in refloatation shall be confirmed comprehensively in combination with other evidence, whether Jiaolong Company delayed in refloatation cannot be ascertained by this evidence alone. Evidence 7 that the photograph cannot reveal the underwater damage to the ship and cannot prove that the shipwreck’s hull was intact [admission unclear]. Evidence 8 is inadmissible. Huatai Company failed to explain which stage of the refloatation process this set of photograph reflects, so the evidence is inadmissible. The authenticity, the legality and the relevancy of evidence 9 is admitted. Evidence 10, the authenticity of this set of photos shall be confirmed, the court finds that the collision is the cause of the serious damage to the ship’s hull rather than the refloatation operation through analyzing the pictures and the previous underwater inspection report. Evidence 11, the list was issued by Huatai Company unilaterally, and whether the maintenance costs above occurred due to the collision accident or due to the refloatation operation cannot be affirmed, therefore the evidence was inadmissible.

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In the trial of the case, CCCC did not submit any evidence to the court. The Third Party provided the following evidence: Evidence 1, Business License, Organization Code Certificate, Refloatation Qualification Certificate of the Third Party, to prove that the Third Party cooperated with Jiaolong Company to refloat M. V. “Su Hua Tai 001” shipwreck, and had the qualification to undertake rights and obligations of Shipwreck Refloatation Contract and Supplementary Agreement, also its operation qualification was in line with the provisions of law; Evidence 2, a copy of Shipwreck Refloatation Contract, to prove that both sides of the contract, especially Huatai Company, clearly knew the damage extent and the state of M. V. “Su Hua Tai 001” before the refloatation and that M. V. “Su Hua Tai 001” shipwreck had already broken at the time of signing the agreement. While the two sides also shared a common recognition to the fact that M. V. “Su Hua Tai 001” shipwreck Refloatation Scheme was carried out in accordance with segment Refloatation Scheme; Evidence 3, a copy of Supplementary Agreement, to prove that: (1) the parties had arrived at a consensus in terms of the refloatation project of M. V. “Su Hua Tai 001” on the objection or dispute appeared in the process of the preliminary refloatation, at the same time they formed a new agreement about the later refloatation project content and related issues. (2) CCCC further clarified the fact that it advanced the refloatation charge for Huatai Company. (3) The Third Party had performed the operation obligation in accordance with the contract; Evidence 4, The 8 pages of photos of M. V. “Su Hua Tai 001” shipwreck, to prove that, (1) (photo 1 & 2) the fact that the Third Party and Jiaolong Company together completed the refloatation of the shipwreck by segments in accordance with Supplementary Agreement. (2) (photo 3 & 4) That fact that the Third Party lifted the shipwreck segments on the slipway of Wudi Company in accordance with Supplementary Agreement and the claim of Huatai Company. (3) (photo 5–8) In Measurement Report provided by Jiaolong Company, the situation of the damaged area and its status was basically true (the position about 15 m front of the bridge in the starboard side of the shipwreck having wrinkled and broken off, a hole of 10 m in length and 2.5 m in height, and the corresponding part in the port side was found wrinkled and broken); Evidence 5, certificate provided by Wudi Company, to prove that the Third Party lifted the segments of M. V. “Su Hua Tai 001” on the slipway of Wudi Company on June 20, 2013, and the Third Party completely fulfilled contractual obligations until then; Evidence 6, copy of Completion Report, to prove that: the Third Party and Jiaolong Company carried out the refloatation operation according to the operation scheme, Refloatation Contract, and Supplementary Agreement; Evidence 7, Shanghai VAT Invoices numbered with 00998528–00998542, to prove that: the Third Party and Jiaolong Company jointly completed the refloatation of the shipwreck involved, the Third Party issued the receipt to Jiaolong Company in accordance with the agreement, then Jiaolong Company paid part of the refloatation charge according to the agreement.

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The cross-examination opinions of Jiaolong Company on the evidence of the Third Party are as follows: all the evidence was recognized. The cross-examination opinions of Huatai Company on the evidence of the Third Party are as follows: admit evidence 1. There was objection to whether Success Company participated in cooperative refloatation in compliance with the provisions, and Jiaolong Company should use its own ship to carry out the refloatation, it should not subcontract the work. There was no objection to evidence 2, but Huatai Company did not clearly know of the fracture. There was no objection to evidence 3. The photos in evidence 4 explained that the ship was refloated respectively, not as a whole, and the photos taken after the ship was re-floated on the water prove that it was the improper operation of Jiaolong Company and the Third Party that caused the damage to the ship. The third party’s opinions are not in accordance with the record in Hailong Report. No objection was raised to evidence 5. Evidence 6 was unilaterally offered and was recognized. No objection was raised to evidence 7. The cross-examination opinions of CCCC on the evidence of the third party are as follows: 1. it did not admit the purpose of proof of evidence 3, Supplementary Agreement, and except for CCCC, the parties admitted its purpose of proof. 2. It did not address cross-examination opinions on other evidence. The opinions of the court on the evidence provided by the third party are as follows: the effect of evidence of evidence 1 shall be admitted. Evidence 2 and evidence 3 comply with the evidence provided by Jiaolong Company, and Huatai Company confirmed the effect of evidence of the above-mentioned evidence. The authenticity of the photos of evidence 4 shall be admitted, and the fifth, sixth, seventh and eighth photo can reflect the damage to the ship in the starboard side. The court admits the effect of evidence of evidence 5. Evidence 6 is in accordance with the evidence provided by Jiaolong Company and the court admits its effect of evidence. The court does not admit evidence 7 for lack of relevancy with the fact to be proved. After the hearing, Jiaolong Company and Success Company together provided two sets of evidence to the court: the first set of evidence was Nationality Certificates, Cargo-worthiness Certificates, and Lifting Ship Certificate of M. V. “Hu Success 10,” M. V. “Hu Success 11”, M. V. “Hu Success 12”, M. V. “Qin Hang Gong 68”, and M. V. “Qin Hang Gong 82”, to prove whether it was M. V. “Hu Success 11” or M. V. “Hu Success 12” that participated in the refloatation operation and that the lifting capacity together with M. V. “Hu Success 10”, M. V. “Qin Hang Gong 86”, and M. V. “Qin Hang Gong 82” exceeded the estimated lifting capacity of 2377 tons set out in the refloatation operation scheme. The second set of evidence was two sea charts, to prove the coordinates of the location where the ship sank, the location where the shipwreck was laid after the first refloatation, the location where the shipwreck was blocked, as well as the location where the shipwreck was finally delivered. The cross-examination opinions of Huatai Company on the two sets of evidence: the first set of evidence was a certificate of the five ships. Because they were all copies, the authenticity thereof could not be confirmed. Even if Jiaolong Company

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actually sent four lifting ships to the operation, Jiaolong Company could not deny the fact that the three lifting ships in the refloatation site were lifting simultaneously. The photographs submitted by Huatai Company could reflect the refloatation site and Jiaolong Company also recognized the authenticity of these photos in court. The second set of evidence was two sea charts, they were copies, the authenticity thereof cannot be confirmed. Even if the charts were true, they were irrelevant to the damage of the ship in refloatation. If Jiaolong Company smoothly refloated M. V. “Su Hua Tai 001” from water in the first refloatation, Jiaolong Company should carefully ground the vessel in the nearest beach as agreed, not put the ship into the sea. CCCC held that the above-mentioned sets of evidence are unrelated to itself, so it did not address any cross-examination opinions. The court certified views on the above-mentioned two sets of evidence: the court confirms the authenticity of the first set of evidence related to each ship certificate, the court considers that based on the records of the certificate, whether the total lifting capacity of M. V. “Hu Success 11” (587 t), M. V. “Hu Success 10” (446 t), M. V. “Qin Hang Gong 68” (1000 tons), and M. V. “Qin Hang Gong 68” (600 tons) (the total lifting capacity was 2633 tons), or a total lifting capacity of M. V. “Hu Success 12” (612 tons), M. V. “Hu Success 10”, M. V. “Qin Hang Gong 86” and M. V. “Qin Hang Gong 82” (total lifting capacity of 2658 tons), exceeds the estimated lifting capacity of 2377 tons set out in the Refloatation Scheme. As for the second set of the evidence, the authenticity shall be admitted, it can prove the coordinates of the location where the ship sank, the location where the shipwreck was laid after the first refloatation, the location where the shipwreck was blocked, as well as the location where the shipwreck was finally delivered. After trial, it is found that: on March 30, 2013, M. V. “Su Hua Tai 001”, owned by Huatai Company, collided with M. V. “Tong Yuan”, owned by CCCC, in the channel of the Huanghua Port. This led to M. V. “Su Hua Tai 001” sinking in port. On April 2, 2013, Jiaolong Company carried out measurements and inspection underwater of the shipwreck and issued the Jiaolong Inspection Report on April 3, 2013. This report described that the position approximately 15 m in front of the bridge on the starboard side of the shipwreck had wrinkled and broken off. Also, there was a hole of 10 m in length and 2.5 m in height, and the corresponding part in the port side was found wrinkled and broken. On April 3, 2013, Tianjin Hailong Underwater Engineering Company, an outsider, also made a measurement on the shipwreck and issued Hailong Measurement Report. The report documents that the roof of the bridge was exposed to the water, there was an irregular hole about 40 cm diameter at about 20 m in front of the bridge and about 1 m of the board in starboard side, as well as the upper deck having suffered a clear deformation. On April 3, 2013, Cangzhou MSA organized the relevant parties and the units involved and held a coordination meeting with regard to safety operation management of the shipwreck refloatation of M. V. “Su Hua Tai 001”. Meeting minutes were kept, which record that Huatai Company should carry out the shipwreck refloatation in accordance with the relevant legal claims, if Huatai Company failed to finish the refloatation within the time prescribed by Cangzhou MSA,

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Cangzhou MSA would take compulsory measures to refloat the shipwreck. On the same day, Cangzhou MSA issued a notice to refloat the shipwreck within a prescribed period, requesting Huatai Company to arrange qualified domestic refloatation companies to submit an application for approval of the shipwreck refloatation operation of M. V. “Su Hua Tai 001” and Refloatation Scheme to Cangzhou MSA before April 7, 2013, and completed the removal before April 13, 2013. On April 3, 2013, Huatai Company (Party A) and Jiaolong Company (Party B) signed Shipwreck Refloatation Contract. Article 2 Paragraph 3 of the contract provided that: “the shipwreck has broken, now Refloatation Scheme of the shipwreck referred to in the contract shall be implemented in accordance with the overall Refloatation Scheme”, and Paragraph 4 provided that, “firstly, pump the sand in the shipwreck, then prepare a wire rope to lift, (Party A is responsible for designating a place to lay the shipwreck in a safe area nearby) ground the shipwreck on the beach at the refloatation site and handle the delivery procedures, then the refloatation operation ends.” Article 3 Paragraph 1 provided that, “the refloatation charge is RMB5.8 million; including disposal costs, diesel costs, management fees and so on.” Paragraph 2 provided that, “after the contract was signed, Party A shall pay RMB2.9 million to Party B in advance”. Paragraph 3 provided that: “the balance of the refloatation charge shall be paid within three days after the shipwreck is put on the beach and is delivered, and Party A shall pay to the account specified by Party B in one payment”. Article 4 provided that: “the shipwreck Refloatation Scheme starts from April 4, 2013 and ends on April 14, 2013; effective working days (arrival time shall be decided by weather factors) shall be determined in an estimated time of Party B run-off according to the operation schedule: “Party B shall notify Party A in advance, and Party A shall decide the grounding place which satisfies the length of a 4.5-m lifting ship within three days of the refloatation.” Article 8 Paragraph 2 provided that, “the shipwreck refloatation shall be operated in accordance with the segment scheme. After the shipwreck is grounded on the beach, the follow-up sealing, reinforcement, pumping, towing, and so on are irrelevant to Party B.” Paragraph 3 provided that, “the shipwreck sank due to a collision, and deformation of the shipwreck may occur during the lifting process, Party B shall not bear any responsibility or expenses for the shipwreck, specific circumstances are as follows: 3.1 the shipwreck hull may break in the lifting process; 3.2 the costs of the shipwreck in the field since it does not have the ability of self-floating and resulting from difficulty of repair”. On April 3, 2013, CCCC (Party A) and Huatai Company (Party B) signed Agreement on Disbursement and Advancement of Refloatation Charge. Article 1 provided that: “on the premise that Party B enjoys and bears the rights and obligations of Shipwreck Refloatation Contract, Party A agrees to bear part of the refloatation charge within the limitation of RMB1.3 million. Party A recognizes RMB4.5 million, in order to meet the price requested by the refloatation company”. Article 2 provided that: “Party A will advance the refloatation charge in the amount of RMB4.5 million, which shall be paid by Party B, and it shall pay directly to the refloatation company, in accordance with the agreement in Shipwreck Refloatation

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Contract provided by Party B and the instructions of Party B.” Article 3 provided that: “before Party A advances the refloatation charge, Party B shall provide a receipt and copies of invoices issued by the refloatation company to Party B (with the official seal of Party B) for future reference.” On April 4, 2013, Jiaolong Company issued Refloatation Scheme of M. V. “Su Hua Tai 001”, which records in part the overall Refloatation Scheme in which Refloatation Scheme was designed to refloat the whole shipwreck, adopt more practical means of refloatation, and implement the method of cleaning the holds and lifting the entire hull. The scheme estimates that the maximum weight to lift the shipwreck was 1981 tons, and that in order to ensure the success of the first refloatation, it was determined that the reserved lift capacity be 0.2 times that of the theoretical weight, thus the total lift capacity of the shipwreck refloatation was calculated to be 2377 tons. The following four lifting ships were to be a part of the scheme: M. V. “Qin Hang Gong 86” with a lifting capacity of 1000 tons. M. V. “Qin Hang Gong 82” with a lifting capacity of 600 tons. M. V. “Hu Success 10” with a lifting capacity 900 tons. M. V. “Hu Success 12” with a lifting capacity of 500 tons. The total lifting capacity of the four ships was 3000 tons. After identification, the safety load recorded in Ship Certificate of M. V. “Hu Success 10” was 4370 KN, equivalent to about 446 tons, and the safe load of M. V. “Hu Success 12” was 6000 KN, equivalent to about 612 tons. The actual safe load recorded in the Ship Lifting Certificate of the two ships above-mentioned is inconsistent with the records of the operation scheme. The safe load of M. V. “Qin Hang Gong 68” and M. V. “Qin Hang Gong 82” recorded in the Ship Lifting Certificate was consistent with the scheme described, respectively, 1000 tons and 600 tons. On April 8, 2013, Jiaolong Company issued six value-added tax invoices to Huatai Company, of which the amount was RMB5.8 million. On April 16, 2013, Cangzhou MSA organized Cangzhou Port set Co., Ltd. Cangzhou Bohai Sea Port, and CCCC to hold a meeting regarding the safety management of the shipwreck refloatation operation. Minutes of the meeting describe as follows: (1) in the case that Huatai Company fails to issue a receipt of the advance to Tianhang Office (CCCC), Tianhang Office shall advance the refloatation charge and pollution charge as quickly as possible to the refloatation operations units. Non-payment of the refloatation charge shall not prejudice the refloatation work; (2) although Tianhang Office pays the refloatation charge and pollution costs, it does not mean that Tianhang Office is the legal obligor for the shipwreck refloatation and Tianhang Office shall not bear the responsibilities or obligations under the Shipwreck Refloatation Contract, the Ship Pollution Response Agreement, or the Guardian and Clearing Agreement; (4) Cangzhou MSA coordinated Huatai Company and the refloatation operation unit to select a grounding place for M. V. “Su Hua Tai 001” after it was refloated from the water. On April 19, 2013, CCCC paid RMB2.9 million to Jiaolong Company via bank transfer. Next, Jiaolong Company together with Success Company jointly refloated the shipwreck and completed the refloatation of the entire shipwreck out of the water at 1700 on April 26, 2013, and gradually removed the shipwreck from the main channel of Huanghua Comprehensive Port to a location 400 m to the south. On

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April 27, 2013, because of strong winds at sea, Jiaolong Company removed the shipwreck to the sea area of Huanghua Port (38° 24.412 N, 118° 01.046E) and temporarily laid it on a shallow seabed. On May 21, 2013, Cangzhou MSA reorganized Huatai Company (Party A), Jiaolong Company (Party B), Success Company (Party C), and Wudi Company (Party D) to sign Supplementary Agreement of Refloatation of M. V. “Su Hua Tai 001”. The agreement provided in the overall operation scheme that, “the shipwreck M. V. “Su Hua Tai 001” shall be cut from the break into two segments underwater, then the cargo holds of the two parts of ship will be prepared for closure of the compartment with steel plates, in order to make the shipwreck achieve self-floating ability, and then tow the shipwreck to the repair yard” Article 8 provided that, “after Party B and Party C finish the refloatation operation and Party C sends the two segments of the shipwreck to Party D, which is appointed by Party A, and assisted the shipyard to remove the shipwreck to the slipway, Party A shall notify CCCC and issue a receipt of RMB2.9 million, and CCCC will pay the balance of the refloatation charge in the amount of RMB2.9 million on behalf of Party A to Party B. The payment having already been paid to Party B in advance includes all the fees and expenses relevant to the operation of M. V. “Su Hua Tai 001” having been paid by Party B and Party C. Without such notification and approval, CCCC cannot pay to Party B.” CCCC signed Supplementary Agreement as a witness unit. Then, Jiaolong Company and Success Company, in accordance with the agreed Supplementary Agreement, completed cutting the shipwreck underwater, lifted it by segments, pumped water and sand, welded and sealed, and removed the shipwreck to Wudi Company. On June 20, 2013, they assisted the shipyard to remove the on the slipway and acquired a certificate issued by Harbor Company. On June 21, 2013, Jiaolong Company submitted to the Completion Report to Cangzhou MSA, and the plan sketch attached thereto shows that the four ships involved in the refloatation operation are M. V. “Qin Hang Gong 86”, M. V. “Qin Hang Gong 82”, M. V. “Hu Success 10”, and M. V. “Hu Success 11”. It is additionally found that the safe load limit of M. V. “Hu Success 11” described in lifting certificate was 5750KN, equivalent to about 587 tons, and the total lifting and floating capacity of the four ships above-mentioned was 2633 tons. Then photos taken after the refloatation of the shipwreck show that there were large depressions and cracks in the starboard side of the ship. The court finds that the case is arising from the dispute over contract on refloatation on the sea. Shipwreck Refloatation Contract and Supplementary Agreement signed by Jiaolong Company and Huatai Company are legal and effective, which can serve as the basis to confirm the rights and obligations of parties to the contract. Although Huatai Company claimed that the amount of Refloatation Contract was obviously unfair and Jiaolong Company had defaults during the refloatation process, the court does not admit it since Huatai Company did not provide sufficient evidence to prove its claims. In respect of the outstanding issues of the case, the court expounds as follows:

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Whether the amount of Shipwreck Refloatation Contract is obviously unfair: Huatai Company alleged that the contract involved was signed when Huatai Company was under the emergency of refloatation within a prescribed period. Jiaolong Company took advantage of the perilous state of Huatai Company, thus the refloatation charge was clearly unfair and requested to adjust the contract price from RMB5.8 million to RMB3.5 million. The court finds that Huatai Company’s claim cannot stand. Firstly, M. V. “Su Hua Tai 001”, which is owned by Huatai Company, sank in the channel of Huanghua Comprehensive Port as a result of a collision. The shipwreck hampered the safety of navigation and affected the normal operations of the port. Cangzhou MSA issued a Notice of Refloatation the Shipwreck within the Designated Period to Huatai Company for the sake of the public interests and the safety of navigation, meaning it did not intend to put Huatai Company in the crisis situation. Although it resulted in an urgent state to some extent for Huatai Company, no evidence can prove that Jiaolong Company took advantage of the state and forced Huatai Company to accept the refloatation charge in an amount of RMB5.8 million. Secondly, Huatai Company did not provide evidence to the court to prove the amount of RMB3.5 million it claimed to be reasonable. In summary, the court holds that the claim of Huatai Company in terms of the amount of the refloatation charge cannot stand, and the refloatation charge in the amount of RMB5.8 million identified in Shipwreck Refloatation Contract is the expression of genuine intentions of the two parties. Whether there is a breach of Jiaolong Company during the refloatation process. In respect of this issue, the main disputes of both sides are manifested mainly in the following four aspects: (1) Whether the refloatation was overdue. Huatai Company alleged that Jiaolong Company failed to carry out the operation according to the contract. The agreed refloatation period in the contract started from April 4, 2013 and ended April 14, 2013, while Jiaolong Company arrived at the site on April 26, 2013. Jiaolong Company argued that it failed to operate as agreed because Huatai Company failed to advance the prepayment at the agreed time. The actual time of the payment was April 19, 2013, later than the agreed date of April 3, 2013. The court finds that, in the case that Huatai Company did not pay the advance as agreed, Jiaolong Company can exercise the counterargument right of plea against the advance performance according to law and refuse the demand of performance filed by the Huatai Company. Thus the claim by Huatai Company that refloatation was overdue cannot stand. (2) The reason of the failure of the first refloatation. Huatai Company held that the reason why the first refloatation was unsuccessful was lack of lifting capacity. Huatai Company alleged that Jiaolong Company only sent three lifting ships to participate in the refloatation operations, thereby violating the agreement of four ships provided in the Refloatation Scheme. As a result the lifting capacity was insufficient. As proof, Huatai Company submitted three sets of photos to the court to demonstrate that only three lifting ships were at work in the actual operation. In this regard, Jiaolong Company argued that in view of the length of

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the shipwreck, it could not arrange four ships in a line during the operation. Instead there were three lifting ships operating on one side of the shipwreck and one operating on the other side. Jiaolong Company also provided photographs to the court to prove that there were four ships at work in the operation. Moreover, Jiaolong Company held that the stage of the refloatation reflected by photographs submitted by Huatai Company was not the process where the shipwreck was refloated out of the water, but rather was the process where three ships lifted the shipwreck and sailed after the refloatation. The court finds that the refloatation process reflected in the photos provided by Huatai Company is not clear, and they cannot reflect the specific refloatation stage, therefore, the court does not find the purpose of proof of this set of photos. The photos provided by Jiaolong Company, which can completely reflect the whole refloatation process, shall be admitted. Moreover four lifting ships described in the operation scheme are M. V. “Qin Hang Gong 86”, M. V. “Qin Hang Gong 82”, M. V. “Hu Success 10”, M. V. “Hu Success 12”, with a total lifting capacity of 3000 tons. However, in the Completion Report the actual operation ship M. V. “Hu Success 12” was replaced by M. V. “Hu Success 11”. Based on the facts having been found, M. V. “Qin Hang Gong 86”, M. V. “Qin Hang Gong 82”, M. V. “Hu Success 10” and M. V. “Hu Success 11” have a total lifting and floating capacity of 2633 tons. The court finds that despite the lifting and floating capacity of 2633 tons being lower than the total lifting and floating capacity of the four ships of 3000 tons, it can satisfy the requirement of the scheme. 2633 still exceeds the estimated total lifting and floating capacity of 2377 tons in the scheme, therefore, the court holds that Jiaolong Company provided sufficient lifting capacity in the process of the shipwreck lifting. In addition, Jiaolong Company and Success Company asserted that the reason for the failure of the first refloatation centered around Huatai Company having failed to designate the grounding place in time, in addition to strong winds at sea. The court holds that the claim of Jiaolong Company and Success Company shall be supported. It is documented in the Supplementary Agreement signed by the three parties and Harbour Company that “the ship has broken off in the middle, and the cargo holds have no compartment, therefore it has no self-floating capacity. In the meantime there was strong winds on the sea. Under the approval of Cangzhou MSA VTS Center and CCCC, the shipwreck was moved out of the main channel and was temporarily laid on the seabed.” The facts described in the agreement can corroborate with other evidence and it shall be admissible. Also, Huatai Company did not provide evidence to prove it timely appointed the grounding place as agreed in the Refloatation Contract. In conclusion, the court finds that Jiaolong Company did not breach the contract in the first refloatation process. (3) The reason of the serious damage to the hull. Huatai Company claimed that due to the barbaric operation of Jiaolong Company, it caused serious damage to the shipwreck. To prove this fact, Huatai Company provided Jiaolong Inspection Report to the court and submitted a set of photos, which demonstrated that the

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major damage to the starboard side of the ship was dents and tears. The court finds that the ship involved sunk due to a collision accident and that, before sinking, the ship had already suffered damage due to the collision. Huatai Company’s existing evidence cannot prove that the damage to the ship was caused by the refloatation operation, thus the claim of the Huatai Company is inadmissible. In summary, the court holds that Jiaolong Company has no fault in terms of the damage to the ship and shall not assume the liability to compensate. (4) The reason that the ship broke apart in the refloatation. The court finds, firstly, in Refloatation Contract and Supplementary Agreement, both sides agreed that the shipwreck should be refloated in accordance with the segment scheme. Secondly, from the photos taken after the shipwreck had been refloated out of the water, the ship hull had been badly damaged, and in order to realize a long-distance transport to the shipyard for repair, the shipwreck would have to obtain self-floating capability. It is therefore rational to have cut and sealed the shipwreck. In summary, the court holds there is no error that Jiaolong Company refloated the shipwreck by segments. Whether CCCC is jointly and severally liable for the refloatation charge. The court holds that CCCC shall not bear joint and several liability for the refloatation charge. Firstly, in the meeting minutes on April 17, 2013, it is clearly documented that CCCC would only pay the refloatation charge in advance. Secondly, the Agreement on Disbursement and Advancement of Refloatation Charge signed by CCCC and Huatai Company was an internal agreement between the two sides. In accordance with the principle of privity of contract, the contract has no legal effect on a third party. Finally, in Supplementary Agreement signed by Huatai Company, Jiaolong Company, Success Company, and Harbour Company, although it is agreed “…Party A (Huatai Company) shall timely notify CCCC and issue a receipt of RMB 2.9 million to CCCC, and CCCC will pay the balance of the refloatation charge (RMB 2.9 million) to Party B (Jiaolong Company) on behalf of Huatai Company,” the court holds that CCCC is not the party to Supplementary Agreement. It is only a witness and its agent signed the Agreement, which does not constitute an acceptance of the obligation for payment. And the court finds that the Agreement is an agreement that the third party shall fulfill debts to the creditor. In the case that the third party fails to fulfill obligations, the debtor, Huatai Company shall be liable for breach of contract to the creditor, Jiaolong Company. In summary, the court holds that there is no contractual obligation and legal basis for Jiaolong Company to claim that CCCC shall bear the joint and several liability for the payment and such a claim shall not be supported. In summary, the court finds that Shipwreck Refloatation Contract and Supplementary Agreements between Jiaolong Company and Huatai Company shall be legal and effective and both parties shall strictly perform the obligations in accordance with the contract. After Jiaolong Company fulfilled the contractual

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obligations according to the agreement, Huatai Company shall pay the remaining RMB2.9 million refloatation charge as agreed. Moreover, Jiaolong Company claims the interest loss of the costs aforementioned shall be calculated from June 20, 2013 by the loan interest rate over the same period promulgated by the People’s Bank of China, its reasoning being that June 20, 2013 was the date of the actual completion of the refloatation operation. The court holds that the claim of Jiaolong Company has legal basis and factual proof, and shall be supported. In respect to the losses of the ship claimed by Huatai Company in the counterclaim against Jiaolong Company, the court holds that Jiaolong Company did not breach the contract when performing Shipwreck Refloatation Contract. The claim that Huatai Company requested Jiaolong Company to undertake the liability for breach of contract has no legal and factual basis, thus the counterclaim of Huatai Company shall be rejectsed. In summary, according to Article 65, Article 67, Article 107, Article 109, Article 113 Paragraph 1 of the Contract Law of the People’s Republic of China, and Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: 1. The Defendant (the counterclaim Plaintiff), Jiangyan Huatai Transport Co., Ltd., shall pay the refloatation charge in the amount of RMB2.9 million and the interest thereon which shall be calculated from June 20, 2013 to the date of actual payment at the loan interest rate of the People’s Bank of China over the corresponding period, to Jiangsu Jiaolong Fishing Harbor Engineering Co., Ltd. (the counterclaim Defendant) within 10 days from the day that this judgment comes into effect; 2. Reject other claims of the Plaintiff, Jiangsu Jiaolong Fishing Harbor Engineering Co., Ltd.; 3. Reject the counterclaims of the Defendant (the counterclaim Plaintiff) Jiangyan Huatai Transport Co., Ltd. If the Defendant (the counterclaim Plaintiff) Jiangyan Huatai Transport Co., Ltd. fails to perform obligations of payment within the period specified in this judgment, in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China, the interest shall be doubled during the period of delayed payment. Court acceptance fee of the original action in the amount of RMB3,044, and court acceptance fee of the counterclaim in the amount of RMB16,600, totaling RMB46,600, shall be born by the Defendant Jiangyan Huatai Transport Co., Ltd. In view that Jiaolong Company Jiangsu Jiaolong Fishing Harbor Engineering Co., Ltd. has prepaid part of the case acceptance fee of the original action (RMB30,000), the court will not undergo refund procedure, and it will be paid by Jiangyan Huatai Transport Co., Ltd. together with the above-mentioned payment to Jiangsu Jiaolong Fishing Harbor Engineering Co., Ltd.

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In case of dissatisfaction with this judgment, any party may submit a letter of appeal to the court, together with copies in duplicate within 15 days upon the service of this Judgment, to lodge an appeal to Tianjin High People’s Court and pay appeal costs to Tianjin High People’s Court according to part of the amount in the judgment of first instance (Bank of Deposit: Agricultural Bank of China Tiancheng Branch; Number of account: 02-200501012001686; Name of account: Tianjin High People’s Court Finance Department), otherwise the appeal will be regarded to be automatically withdrawn. Presiding Judge: CHEN Jianpeng Acting Judge: ZHANG Junbo Acting Judge: FU Xiaoke February 25, 2014 Clerk: SONG Wenjie

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Tianjin High People’s Court Civil Judgment Jiangsu Jiaolong Fishing Harbor Engineering Co., Ltd. v. Jiangyan Huatai Transport Co., Ltd. et al. (2014) Jin Gao Min Si Zhong Zi No. 39 Related Case (s): This is the judgment of second instance, and the judgment of first instance is on page 541. Cause of Action: 228. Dispute over contract on refloatation on the sea or sea-connected waters. Headnote: Affirming lower court judgment holding that the Plaintiff salvor was entitled to recover in full under a fixed price wreck removal contract and rejecting the Defendant’s counterclaims about late and defective performance. Summary: Tianjin High People’s Court dismissed the appeal of Jiangyan Huatai Transport Co., Ltd. and affirmed the original judgment in favor of Jiangsu Jiaolong Fishing Harbor Engineering Co., Ltd. The case turned on the removal and refloating by Jiaolong Company of a shipwrecked vessel belonging to Huatai Company in the channel of the Huanghua Port. Huatai Company refused to pay Jiaolong Company because Huatai Company claimed it breached the contractual obligations of the Shipwreck Refloating Contract. Moreover, Huatai Company wanted Jiaolong Company to be held jointly and severally liable for the losses of the ship. The court of first instance held that Jiaolong Company did not breach the contract when performing the Shipwreck Refloating Contract and the claim that Huatai Company requested Jiaolong Company to undertake the liability for breach of contract had no legal and factual basis. Huatai Company and Jiaolong Company both presented evidence that reasonable accommodations were made to the original agreement between the two companies. However, Huatai Company did not meet its evidentiary burden to prove Jiaolong Company breached the contractual obligation. In contrast, Jiaolong Company presented sufficient evidence to defend its actions and any variations from the original expectations of Huatai Company. Consequently, the appeals court upheld the findings of the court of first instance and ordered Huatai Company to pay the outstanding amounts due under the contract to Jiaolong Company.

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Judgment The Appellant (the Defendant of first instance and the counterclaim Plaintiff): Jiangyan Huatai Transport Co., Ltd. Domicile: Jiangmao Village, Duoyu Town, Jiangyan District, Taizhou City, Jiangsu. Legal representative: ZHANG Suping, chairman. Agent ad litem: CAO Zhaocheng, manager. Agent ad litem: HUO Hongjun, legal consultant. The Respondent (the Plaintiff of first instance, the counterclaim Defendant): Jiangsu Jiaolong Fishing Harbor Engineering Co., Ltd. Domicile: No.2 Jingkou Jiaolong Road, Tainan Town, Yandu District, Yancheng City, Jiangsu. Legal representative: HAN Caigao, chairman. Agent ad litem: LI Min, lawyer of Jiangsu Changhe Law Firm. The Defendant of first instance: China Communications Construction Company Tianjin Dredging Co., Ltd. Domicile: No.41 Taierzhuang Road, Hexi District, Tianjin. Legal representative: KANG Xuezeng, chairman. Agent ad litem: LI Hongwei, employee. Agent ad litem: WANG Zhiguo, employee. The Third party of first instance: Shanghai Success Water Engineering Co., Ltd. Domicile: Room 601, No. 12, 810 Lane, Songbin Road, Baoshan District, Shanghai. Legal representative: ZHOU Xuecheng, general manager. Agent ad litem: LI Hua, employee. With respect to the case arising from the refloatation contract at sea between the Respondent, Jiangsu Jiaolong Fishing Harbor Engineering Co., Ltd. (hereinafter referred to as “Jiaolong Company”), the Defendant of first instance, China Communications Construction Company Tianjin Dredging Co., Ltd. (hereinafter referred to as “CCCC”), the Third Party of first instance, Shanghai Success Water Engineering Co., Ltd. (hereinafter referred to as “Success Company”), the Appellant, Jiangyan Huatai Transport Co., Ltd. (hereinafter referred to as “Huatai Company”), disagreed with (2013) Jin Hai Fa Shang Chu Zi No. 597 Civil Judgment rendered by Tianjin Maritime Court, and appealed to the court. After accepting the case, the court organized the collegiate panel consisting of Judge GENG Xiaoning as Presiding Judge, Acting Judge LI Shanchuan, and Acting Judge TANG Na. The court appointed ZHANG Hongchuan as Clerk and held a hearing in public on May 20, 2015. CAO Zhaocheng and HUO Hongjun, agents ad litem of Huatai Company; LI Min, agent ad litem of Jiaolong Company; LI Hongwei and WANG Zhiguo, agents ad litem of CCCC; and LI Hua, agent ad litem

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of Success Company, appeared in court to attend the hearing. Now the case has been concluded. The court of first instance found that on March 30, 2013, M. V. “Su Hua Tai 001”, owned by Huatai Company, collided with M. V. “Tong Yuan”, owned by CCCC, in the channel of the Huanghua Port. The collision led to M. V. “Su Hua Tai 001” sinking in port. On April 2, 2013, Jiaolong Company carried out underwater measurement and inspection and issued the Jiaolong Inspection Report on April 3, 2013. Jiaolong Inspection Report detailed that the position, about 15 m in front of the bridge on the starboard side of the shipwreck, wrinkled and broke off and there was a hole of 10 m in length and 2.5 m in height. A corresponding part in the port side was found wrinkled and broken. On April 3, 2013, Tianjin Hailong Underwater Engineering Company, an outsider, also made a measurement on the shipwreck and issued Hailong Measurement Report. Hailong Measurement Report documents that the roof of the bridge was exposed to the water, there was an irregular hole about 40 cm in diameter approximately 20 m from the front of the bridge and about 1 m in board on the starboard side, and the upper deck suffered a clear deformation. On April 3, 2013, Cangzhou MSA organized the relevant parties and the units involved and held a coordination meeting with regard to safety operation management of the shipwreck refloatation of M. V. “Su Hua Tai 001”. The meeting minutes state that Huatai Company should carry out the shipwreck refloatation in accordance with the relevant legal claims. If Huatai Company fails to finish the refloatation within the time prescribed by Cangzhou MSA, Cangzhou MSA would take compulsory measures to refloat the shipwreck. On the same day, Cangzhou MSA issued a notice to refloat the shipwreck within the prescribed period, requesting Huatai Company to arrange qualified domestic refloatation companies to submit an application for approval of shipwreck refloatation operation of M. V. “Su Hua Tai 001” and a refloatation scheme to Cangzhou MSA before April 7, 2013. Huatai Company completed the removal before April 13, 2013. On April 3, 2013, Huatai Company (Party A) and Jiaolong Company (Party B) signed Shipwreck Refloatation Contract. Paragraph 3 of Article 2 of the contract provided that, “the shipwreck has broken, now the refloatation scheme of the shipwreck referred to in the contract shall be implemented in accordance with the overall refloatation scheme, and paragraph 4 provided that, “firstly, pump the sand in the shipwreck, then ware a wire rope to lift, (Party A is responsible for designating a place to lay the shipwreck in a safe area nearby) ground the shipwreck on the beach at the refloatation site, and handle the delivery procedures, then the refloatation operation ends.” Paragraph 1 of Article 3 provided that, “the refloatation charge is RMB 5.8 million; including disposal costs, diesel costs, management fees and so on.” Paragraph 2 provided that, “after the contract is signed, Party A shall pay RMB2.9 million to Party B in advance.” Paragraph 3 provided that, “the balance of the refloatation charge shall be paid within three days after the shipwreck is put on the beach and is delivered, and Party A shall pay to the account specified by Party B in one payment.” Article 4 provided that, “the shipwreck refloatation scheme starts on April 4, 2013 and ends on April 14, 2013; effective working days

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(arrival time shall be decided by weather factors) shall be determined by the estimated time of Party B according to the operation schedule. Party B shall notify Party A in advance, and Party A shall decide the grounding place, which satisfies the length of a 4.5-m lifting ship within three days of the refloatation.” Paragraph 2 of Article 8 provided that, “the shipwreck refloatation shall be operated in accordance with the segment scheme. After the shipwreck grounds on the beach, the follow-up sealing, reinforcement, pumping, towing, and so on are irrelevant with regard to Party B.” Paragraph 3 provided that, “the shipwreck sank due to a collision, and the deformation of the shipwreck may occur during the lifting process. Party B shall not bear any responsibility or expenses for the shipwreck, specific circumstances are as follows: 3.1 the shipwreck hull may break in the lifting process; and 3.2 the costs of the shipwreck in the field since it has no ability of self-floating and the resulting difficulty of repair.” On April 3, 2013, CCCC (Party A) and Huatai Company (Party B) signed Agreement on Disbursement and Advancement of Refloatation Charge. Article 1 provided that, “on the premise that Party B enjoys and bears the rights and obligations of the Shipwreck Refloatation Contract, Party A agrees to bear part of the refloatation charge within the limitation of RMB1.3 million.” Party A recognized RMB4.5 million, in order to meet the price requested by the refloatation company. Article 2 provided that, “Party A will advance the refloatation charge in the amount of RMB4.5 million, which shall be paid by Party B, and it shall pay directly to the refloatation company, according to the agreement in Shipwreck Refloatation Contract provided by Party B and the instructions of Party B.” Article 3 provided that, “before Party A advances the refloatation charge, Party B shall provide a receipt and copies of invoices issued by the refloatation company to Party B (with the official seal of Party B) for future reference.” On April 4, 2013, Jiaolong Company issued the refloatation scheme of M. V. “Su Hua Tai 001”, which records in part of the overall refloatation scheme that the refloatation scheme was designed to refloat the entire shipwreck, adopt more practical means of refloatation, and implement the method of cleaning the hold and lifting the whole hull. The scheme estimated that the maximum weight to lift the shipwreck was 1981 tons and in order to ensure the success of the first refloatation, it was determined that the reserved lift capacity was 0.2 times of the theoretical weight. Thus, the total lift capacity of the shipwreck refloatation was calculated to 2377 tons. The following four lifting ships were to put into the scheme: M. V. “Qin Hang Gong 86”, with lifting capacity of 1000 tons; M. V. “Qin Hang Gong 82”, with lifting capacity of 600 tons; M. V. “Hu Success 10”, with lifting capacity 900 tons; M. V. “Hu Success 12”, with lifting capacity of 500 tons. The total lifting capacity of the four ships was 3000 tons. After identification, the safety load recorded in Ship Certificate of M. V. “Hu Success 10” was 4370 KN, equivalent to about 446 tons and the safe load of M. V. “Hu Success 12” was 6000 KN, equivalent to about 612 tons. The actual safe load recorded in the Ship Lifting Certificate of the two ships above-mentioned was inconsistent with the records of

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the operation scheme: the safe load of M. V. “Qin Hang Gong 68” and M. V. “Qin Hang Gong 82” recorded in Ship Lifting Certificate was consistent with the scheme described, respectively, 1000 tons and 600 tons. On April 8, 2013, Jiaolong Company issued six value-added tax invoices to Huatai Company, of which the amount was RMB5.8 million. On April 16, 2013, Cangzhou MSA organized Cangzhou Port Set Co., Ltd., Cangzhou Bohai Sea Port, and CCCC to hold a meeting regarding the safety management of the shipwreck refloatation operation. Minutes were made after the meeting as follows: 1. in the case that Huatai Company fails to issue a receipt of the advance to Tianhang Office (CCCC), Tianhang Office shall advance the refloatation charge and pollution charge as quickly as possible to the refloatation operations units—non-payment of refloatation charge shall not prejudice the refloatation work; 2. although Tianhang Office pays the refloatation charge and pollution costs, it did not mean that Tianhang Office is the legal obligor for the shipwreck refloatation, and Tianhang Office shall not bear the responsibilities or obligations under the Shipwreck Refloatation Contract, the Ship Pollution Response Agreement, and the Guardian and Clearing Agreement; … 4. Cangzhou MSA coordinated Huatai Company and the refloatation operation unit to select a grounding place for M. V. “Su Hua Tai 001” after it was refloated from the water. On April 19, 2013, CCCC paid RMB2.9 million to Jiaolong Company via bank transfer. Then Jiaolong Company together with Success Company jointly refloated the shipwreck and completed the refloatation of the whole shipwreck out of water at 1700 h on April 26, 2013. The Companies gradually removed the shipwreck from the main channel of Huanghua Comprehensive Port to a place 400 m away therefrom in the south. On April 27, 2013, because of strong winds at sea, Jiaolong Company removed the shipwreck to the sea area of Huanghua Port (38° 24.412N, 118° 01.046E) and temporarily laid it on a shallow seabed. On May 21, 2013, Cangzhou MSA reorganized Huatai Company (Party A), Jiaolong Company (Party B), Success Company (Party C), and Wudi Company (Party D) to sign Supplementary Agreement of Refloatation of M. V. “Su Hua Tai 001”. The agreement provided in the overall operation scheme that, “the shipwreck M. V. ‘Su Hua Tai 001’ shall be cut from the break into two segments underwater, then the cargo holds of the two parts of the ship will be disposed to close the compartment with steel plates to make the shipwreck achieve self-floating ability, and then tow the shipwreck to the repair yard” Article 8 provided that, “after Party B and Party C finish the refloatation operation and Party C sends the two segments of the shipwreck to Party D, which is appointed by Party A and assists the shipyard to remove the shipwreck to the slipway, Party A shall notify CCCC and issue a receipt of RMB2.9 million. CCCC will pay the balance of the refloatation charge in the amount of RMB2.9 million on behalf of Party A to Party B. The payment, having already been paid to Party B in advance, includes all of the fees and expenses relevant to the operation of M. V. ‘Su Hua Tai 001’ having been paid by Party B and Party C. Without the notification and approval, CCCC could not pay Party B.” CCCC signed Supplementary Agreement as a witness unit.

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Then Jiaolong Company and Success Company, in accordance with the agreed Supplementary Agreement, completed cutting the shipwreck underwater, lifted the shipwreck by segments, pumped water and sand, welded and sealed, and removed the shipwreck to Wudi Company. On June 20, 2013, Wudi Company assisted the shipyard to remove the slipway and acquired a certificate issued by Harbor Company. On June 21, 2013, Jiaolong Company submitted the Completion Report to Cangzhou MSA, and the plan sketch attached thereto shows four ships involved in the refloatation operation were M. V. “Qin Hang Gong 86”, M. V. “Qin Hang Gong 82”, M. V. “Hu Success 10” and M. V. “Hu Success 11”. It was additionally found that the safe load of M. V. “Hu Success 11”, described in the lifting certificate was 5750KN, equivalent to about 587 tons, and the total lifting and floating capacity of the four ships above-mentioned is 2633 tons. Photos taken after the refloatation of the shipwreck show that there were large depressions and cracks in the starboard side of the ship. The court of first instance found that the case arose from a dispute over a contract of refloatation at sea. Shipwreck Refloatation Contract and Supplementary Agreement thereto signed by Jiaolong Company and Huatai Company were legal and effective, which could serve as the basis to confirm the rights and obligations of parties to the contract. Although Huatai Company claimed that the amount of Refloatation Contract was obviously unfair, and Jiaolong Company had defaults during the refloatation process, the court of first instance did not admit it since Huatai Company did not provide sufficient evidence to prove its claims. In respect to the outstanding issues of the case, the court of first instance expounded as follows: Whether the amount of Shipwreck Refloatation Contract was obviously unfair: Huatai Company alleged that the contract involved was signed when Huatai Company was under the emergency of a refloatation within a prescribed period, and Jiaolong Company took advantage of the perilous state of Huatai Company. Thus, the refloatation charge was obviously unfair and it requested to adjust the contract price from RMB5.8 million to RMB3.5 million. The court of first instance held that Huatai Company’s claim could not stand. Firstly, M. V. “Su Hua Tai 001”, which was owned by Huatai Company, sank in the channel of Huanghua Comprehensive Port as a result of a collision, the shipwreck hampered the safety of navigation, and affected the normal operations of the port. Cangzhou MSA issued a Notice of Refloatation the Shipwreck within the Designated Period to Huatai Company for the sake of the public interests and the safety of navigation. Cangzhou MSA did not intend to put Huatai Company in the crisis situation. Although it resulted in an urgent state to some extent for Huatai Company, no evidence can prove that Jiaolong Company took advantage of the state and forced Huatai Company to accept the refloatation charge in the amount of RMB5.8 million. Secondly, Huatai Company did not provide evidence to the court of first instance to prove that the amount of RMB3.5 million it claimed was unreasonable. In summary, the court of first instance held that the claim of Huatai Company, in terms of the amount of the refloatation charge, could not stand. The refloatation charge in the amount of RMB5.8 million, identified in Shipwreck Refloatation Contract, was the express of genuine intentions of the two parties.

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In respect to whether there was a breach of Jiaolong Company during the refloatation process, the main disputes of both sides were mainly manifested in the following four aspects: 1. Whether the refloatation exceeded the designated period. Huatai Company alleged that Jiaolong Company failed to carry out the operation according to the contract. The agreed refloatation period in the contract started from April 4, 2013 and ended April 14, 2013, while Jiaolong Company arrived at the site on April 26, 2013. Jiaolong Company argued that it failed to operate as agreed because Huatai Company failed to advance the prepayment at the agreed time. The actual time of the payment was April 19, 2013, later than the agreed date namely April 3, 2013. The court of first instance held that since Huatai Company did not pay the advance as agreed, Jiaolong Company could exercise the counterargument right of plea against the advance performance according to law and refuse the demand of performance filed by the Huatai Company. Thus, the claim by Huatai Company that refloatation exceeded the designated period could not stand. 2. The reason of the failure of the first refloatation. Huatai Company argued that the reason why the first refloatation was unsuccessful was a lack of lifting capacity. Huatai Company alleged that Jiaolong Company only sent three lifting ships to participate in the refloatation operations, it violated the agreement of four ships provided in the refloatation scheme, and the lifting capacity was insufficient. To support this, Huatai Company submitted three sets of photos to the court of first instance to prove that only three lifting ships were at work in the actual operation. In this regard, Jiaolong Company argued that in view of the length of the shipwreck, it could not arrange four ships in a line during the operation, there were three lifting ships operating on one side of the shipwreck and one operating on the other side. Jiaolong Company also provided photographs to the court of first instance to prove that there were four ships at work in the operation. Moreover, Jiaolong Company asserted that the stage of the refloatation reflected by photographs submitted by Huatai Company was not the process that the shipwreck was refloated out of water, but was the process that three ships lifted the shipwreck and sailed after the refloatation. The court of first instance held that the refloatation process reflected in the photos provided by Huatai Company was not clear, and they could not reflect the specific refloatation stage. Therefore, the court of first instance did not admit the effect of evidence of this set of photos. The photos provided by Jiaolong Company, which could completely reflect the whole refloatation process, shall be admitted. Moreover, the four lifting ships described in the operation scheme were M. V. “Qin Hang Gong 86”, M. V. “Qin Hang Gong 82”, M. V. “Hu Success 10” and M. V. “Hu Success 12”, with a total lifting capacity of 3000 tons, but in the Completion Report the actual operation ship M. V. “Hu Success 12” was replaced by M. V. “Hu Success 11.” Based on the facts having been found, M. V. “Qin Hang Gong 86”, M. V. “Qin Hang Gong 82”, M. V. “Hu Success 10” and M. V. “Hu Success 11” had a total lifting and floating capacity of 2633 tons. The court of first instance held that despite the fact

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that the lifting and floating capacity of 2633 tons was lower than the total lifting and floating capacity of the four ships of 3000 tons, it could satisfy the requirement of the scheme—the number exceeded the estimated total lifting and floating capacity of 2377 tons in the scheme. Therefore, the court of first instance held that Jiaolong Company had provided sufficient lifting capacity in the process of the shipwreck lifting. In addition, Jiaolong Company and Success Company argued that the reason for the failure of the first refloatation rested in the failure of Huatai Company to designate the grounding place in time and strong winds at sea. The court of first instance held that the claim of Jiaolong Company and Success Company should be supported. It was documented in Supplementary Agreement signed by the three parties and Harbour Company that “the ship has broken off in the middle, and the cargo holds had no compartment, so the shipwreck had no self-floating capacity. In the meantime, there was strong wind on the sea. Under the approval of Cangzhou MSA VTS Center and CCCC, the shipwreck was moved out of the main channel and was temporarily laid on the seabed.” The fact described in the agreement can corroborate with other evidence, and it should be admissible. Huatai Company did not provide evidence to prove it timely appointed the grounding place as agreed in Refloatation Contract. In conclusion, the court of first instance found that Jiaolong Company did not breach the contract in the process of the first refloatation. 3. The reason for the serious damage to the hull. Huatai Company claimed that due to the barbaric operation of Jiaolong Company, it caused serious damage to the shipwreck. To prove this fact, Huatai Company provided Hailong Inspection Report to the court of first instance and submitted a set of photos, which reflected that the major damage to the starboard side of the ship was dented and torn. The court of first instance found that the ship involved sunk due to a collision accident. Before sinking, the ship had already suffered damage due to the collision. Huatai Company’s existing evidence could not prove that the damage to the ship was caused by the refloatation operation, thus, the claim of Huatai Company was inadmissible. In summary, the court of first instance held that Jiaolong Company had no fault in terms of the damage to the ship and should not assume the liability to compensate. 4. The rationality of the ship broke off in the refloatation. The court of first instance found that: firstly, in Refloatation Contract and Supplementary Agreement, both sides agreed that the shipwreck should be refloated in accordance with the segment scheme; secondly, from the photos taken after the shipwreck had been refloated out of water, the ship hull was badly damaged, and in order to realize a long-distance transport to the shipyard for repair, the shipwreck should obtain self-floating capability making it rational to cut and seal the shipwreck. In summary, the court of first instance held there was no issue with Jiaolong Company refloatation the shipwreck by segments. In respect of whether CCCC was jointly and severally liable for the refloatation charge, the court of first instance held that CCCC should not bear joint and several

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liability for the refloatation charge. Firstly, in the meeting minutes on April 17, 2013, it was clearly documented that CCCC only pay the refloatation charge in advance. Secondly, the Agreement on Disbursement and Advancement of Refloatation Charge signed by CCCC and Huatai Company was an internal agreement between the two sides. In accordance with the principle of privity of contract, the contract had no legal effect on a Third Party. Finally, in Supplementary Agreement signed by Huatai Company, Jiaolong Company, Success Company, and Harbour Company, although it was agreed taht “... Party A (Huatai Company) shall timely notify CCCC and issue a receipt of RMB2.9 million to CCCC, and CCCC will pay the balance of the refloatation charge (RMB2.9 million) to Party B (Jiaolong Company) on behalf of Huatai Company,” the court of first instance held that CCCC was not the party to Supplementary Agreement, it was only a witness, and its agent signed the agreement, which did not constitute an acceptance of the obligation for payment. The court of first instance found that the agreement was an agreement that the Third Party fulfilled debts to the creditor, in the case that the Third Party failed to fulfill obligations. The debtor, Huatai Company, should be liable for breach of the contract to the creditor, Jiaolong Company. In summary, the court of first instance held that there was no contractual obligation and legal basis for Jiaolong Company to claim that CCCC should bear the joint and several liability for the payment and such claim should not be supported. In summary, the court of first instance found that Shipwreck Refloatation Contract and Supplementary Agreements between Jiaolong Company and Huatai Company should be legal and effective, so both parties should strictly perform the obligations in accordance with contract. After Jiaolong Company fulfilled the contractual obligations according to the agreement, Huatai Company should pay the remaining RMB2.9 million refloatation charge as agreed. Moreover, Jiaolong Company claimed the interest loss of the costs aforementioned, should be calculated from June 20, 2013, on the basis of the loan interest rate over the same period promulgated by the People’s Bank of China, since June 20, 2013 was the date of the actual completion of the refloatation operation. The court of first instance held that the claim of Jiaolong Company had legal basis and factual proof and should be supported. In respect to the losses of the ship claimed by Huatai Company in the counterclaim against Jiaolong Company, the court of first instance held that Jiaolong Company did not breach the contract when performing Shipwreck Refloatation Contract. The claim that Huatai Company requested Jiaolong Company to undertake the liability for breach of contract had no legal or factual basis. Thus, the counterclaim of Huatai Company should be dismissed. In summary, according to Article 65, Article 67, Article 107, Article 109, Article 113 Paragraph 1 of the Contract Law of the People’s Republic of China, and Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the court of first instance judged as follows: 1. Huatai Company should pay the refloatation charge in the amount of RMB2.9 million and the interest thereon, which should be calculated from June 20, 2013 to the date of actual payment at the loan interest rate of the People’s Bank of China

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over the corresponding period to Jiaolong Company within 10 days from the day that this judgment came into effect; 2. reject other claims of Jiaolong Company; 3. reject the counterclaims of Huatai Company. Court acceptance fee of the original action in the amount of RMB3,044 and court acceptance fee of the counterclaim in the amount of RMB16,600, totalling RM 46,600, should be born by Huatai Company. Huatai Company disagreed with the original judgment and instituted an appeal before the court. Huatai Company requested the court to revoke the original judgment and support the counterclaims it filed in the first instance or remand the case for retrial, and Jiaolong Company bear the legal costs. Facts and reasons: firstly, the ships dispatched by Jiaolong Company to refloat the ship involved were unseaworthy and the lifting power was insufficient. As a result, the refloatation on April 26 and April 27, 2013 failed, and the ship involved was not refloated and removed from the main waterway until April 28. Secondly, due to the ship involved not being able to be removed to the grounding place designated by Huatai Company, Jiaolong Company decided to lay the ship to the sea then Jiaolong Company signed Supplementary Agreement with other units. Thirdly, the fault of Jiaolong Company committed in the refloatation caused serious expanding damage, which should not have occurred to the hull of the ship involved, therefore Jiaolong Company should compensate for the losses suffered by Huatai Company. Jiaolong Company defended that it had fulfilled the obligations in Shipwreck Refloatation Contract and Supplementary Contract, it did not go against the contracts and relevant specifications of refloatation operation. The facts were clearly found and the laws were correctly found in the original judgment, accordingly Jiaolong Company requested the court to dismiss the appeal of Huatai Company. CCCC did not address any statement. Success Company argued the facts were clearly stated and the laws were correctly found in the original judgment. Consequently, the court should dismiss the appeal of Huatai Company. During the second trial, Huatai Company submitted the following evidence as a supplement: Evidence 1, photos, to prove that the bridge of M. V. “Su Hua Tai 001” was not badly damaged. M. V. “Qin Hang Gong 86”, M. V. “Qin Hang Gong 82” and M. V. “Hu Success 12” participated in the refloatation operation. Because of the unseaworthiness of the ships and the incapability of the cranes, the steel ropes were forced unevenly and the refloatations on April 24 and April 27 failed. The shipwreck was not refloated until April 28. Because of the distance between the main hooks was too short, the stern would definitely crash in the process of lifting. Because the ships participating in the refloatation lacked the capability of lifting, the steel ropes were forced unevenly, the shipwreck was badly deformed, and the steel ropes were damaged; Evidence 2, a certificate issued by Wudi Company, to prove that Jiaolong Company and Huatai Company had chosen the place of grounding of the ship involved;

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Evidence 3, License of Activities on Water and Under Water of the People’s Republic of China and the navigation warning released by Hebei Maritime Safety Administration, to prove that Jiaolong Company applied for the license with seaworthy ships, but dispatched unseaworthy ships to carry out the operation. Thus, it violated the safe operation provided in Shipwreck Refloatation Contract and enlarged the cost of loss; Evidence 4, weather prediction on April 28 and April 29, to prove there was no strong wind on the sea on the two days and it did not influence the shipwreck being removed to the designated place. Because the steel ropes of the ships taking part in the refloatation were overloaded, Jiaolong Company only re-laid the shipwreck into the water; and. Evidence 5, a statement on calculation of the lifting capacity of the operating ships, to prove that the lifting capacity of the ships taking part in the refloatation was insufficient. Jiaolong Company addressed the cross-examination opinions as follows: CCCC did not address cross-examination opinions. The cross-examination opinions of Success Company are the same as those of Jiaolong Company. The ascertainment opinions of the court on the supplementary evidence are as follows: evidence 1 cannot reflect the process of the refloatation, therefore the effect of evidence shall not be admitted. Evidence 2 is a statement of a witness, however the witness did not appear in court, so the effect of evidence thereof shall not be admitted. Jiaolong Company and Success Company affirmed the authenticity of evidence 3, so the court admits the same. Evidence 4 is evidence from a website without notarization and Jiaolong Company and Success Company objected to it, therefore the court does not admit the effect of evidence thereof. Evidence 5 is a unilateral statement, thus the effect of evidence thereof shall not be admitted. CCCC, Jiaolong Company, and Success Company had no supplementary evidence. Besides the facts having been found by the court of first instance, the court finds the original name of Huatai Company was Jiangyan City Huatai Transport Co., Ltd., on March 8, 2013, upon examination and approval by Jiangsu Province Industry and Commerce Administration, the name was altered to the present one. The court holds that this case is arising from the dispute over contract on refloatation on the sea. The principal outstanding issues are whether Jiaolong Company breached in the performance of the refloatation contract and whether Jiaolong Company should be liable for the claims of Huatai Company. 1. In respect to whether Jiaolong Company breached the performance of the refloatation contract: Shipwreck Refloatation Contract signed by Huatai Company and Jiaolong Company and Supplemental Agreement signed by Huatai Company, Jiaolong Company, Success Company, and Wudi Company are expressions of genuine intents and shall be lawful and effective. The rights and obligations of the parties concerned shall be subject to the above agreements.

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Huatai Company and Jiaolong Company agreed in Shipwreck Refloatation Contract that the shipwreck had broken off, the sand in the shipwreck would be pumped, then the shipwreck would be lifted with steel ropes and water pumped inside. It would be removed to a safe place designated by Huatai Company, and ground the shipwreck. Jialong Company would handle the delivery formality on the site, then the refloatation operation would be finished. After grounding the shipwreck, the subsequent plug, fastening, pumping water, towing, and removing operation have nothing to do with Jiaolong Company. The Supplemental Agreement stated that on April 26, 2013, Jiaolong Company and Success Company once refloated M. V. “Su Hua Tai 001” owned by Huatai Company from the water, but the shipwreck broke off in the middle of the hull. The cargo holds had no partitions, meaning the shipwreck could not refloat itself. In the meantime, the wind was too strong. Jiaolong Company removed the shipwreck from the main channel and laid it on seabed temporarily. That is to say, Jiaolong Company has already completed the obligation above. After concluding Supplementary Agreement, Jiaolong Company and Success Company fulfilled the operation of underwater cutting, lifting, pumping water, welding, sealing, etc. Success Company sent the shipwreck to Wudi Company and assisted. At this point, Jiaolong Company and Success Company fulfilled the obligations under the Supplementary Agreement. Haitai Company shall pay the outstanding sum of RMB2.9 million. As for the allegation of Huatai Company that the original court erroneously found that the refloatation of the shipwreck on April 26 and April 27 failed and that it was not until April 28, 2013 that the shipwreck was refloated, the court holds the Supplementary Agreement had cleared Jiaolong Company and Success Company once they refloated M. V. “Su Hua Tai 001” from the water on April 26, 2013, which was signed by Huatai Company. Thus, the allegation shall not be supported for a lack of basis. Huatai Company argued that Jiaolong Company only dispatched three vessels to engage in the refloatation, which were unseaworthy and lacked the capacity of lifting. The court holds that the photos submitted by Huatai Company can only prove the number of the vessels taking part in the refloatation was three, which is inconsistent with four provided in Refloatation Plan. However the photos cannot reflect the specific stage of the refloatation. It is proper that the original court, after analyzing the shooting angle and specific stage of the photos submitted by Jiaolong Company and Success Company, combined the statements of the two parties, admitted the photos, and determined that four vessels took part in the refloatation. As for the capacity of lifting of the vessels, although Jiaolong Company replaced M. V. “Hu Success 11” with M. V. “Hu Success 12”, the total lifting capacity of the four vessels M. V. “Qin Hang Gong 86”, M. V. “Qin Hang Gong 82”, M. V. “Hu Success 10” and M. V. “Hu Success 12” is 2633 tons, which has exceeded the lifting capacity the refloatation needed namely 2377 tons ascertained in Refloatation Plan. It is correct that the original court held Jiaolong Company had supplied sufficient lifting capacity.

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2. In respect to whether Jiaolong Company shall bear the liability for the loss of the refloatation claimed by Huatai Company: Huatai Company claimed since Jiaolong Company committed fault in the performance of Shipwreck Refloatation Contract and Supplementary Agreement, the shipwreck was badly damaged and Huatai Company suffered a great loss. The court holds in Shipwreck Refloatation Contract that Huatai Company and Jiaolong Company jointly confirmed in the event “the shipwreck broke off”, “the refloatation of the shipwreck shall be carried out pursuant to the plan of breaking off.” Moreover, if “the shipwreck sank due to collision, the shipwreck may be deformed in the process of refloatation, Jiaolong Company will not bear any expenses or liability, specifically, the hull may break off in the lifting of the shipwreck, the shipwreck is unable to refloat by itself, and it is hard to repair on the site; accordingly, before the refloatation of the shipwreck involved, it is predictable that the shipwreck may break off in the process of lifting, and it has been confirmed that Jiaolong Company shall not bear the expenses and liability arising therefrom. In addition, Huatai Company failed to prove the damage to the shipwreck was caused by the defaults in the refloatation work, thus, the argument lacks factual and legal basis that Huatai Company requested Jiaolong Company to bear all the losses of the ship. To summarize, Jiaolong Company completed the refloatation operation of the shipwreck involved, it did not breach the Shipwreck Refloatation Contract and the Supplementary Agreement, Huatai Company’s request for Jiaolong Company to bear the losses of the ship lacks basis, and Huatai Company shall pay the outstanding sum of RMB290 to Jiaolong Company. The facts were clearly found and the laws were correctly applied by the original court. The grounds of appeal filed by Huatai Company cannot stand. According to Article 170 Paragraph 1 Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance in amount of RMB32,400, shall be born by Jiangsu Huatai Transport Co., Ltd. The judgment is final. Presiding Judge: GENG Xiaoning Acting Judge: LI Shanchuan Acting Judge: TANG Na July 24, 2014 Clerk: ZHANG Hongchuan

Shanghai Maritime Court Civil Judgment Jiangsu Jinyang Shipyard Co., Ltd. v. Shanghai Chongming Port Construction Investment Management Co., Ltd. (2013) Hu Hai Fa Shang Chu Zi No. 1080 Related Case(s) None. Cause of Action 207. Dispute over shipbuilding contract. Headnote The purchaser of pontoons held liable for late payment of the final installment of the purchase price because the pontoons had passed the relevant safety inspection, although the government audit bureau did not verify the funds to pay the final installment until two years later. Summary The Plaintiff filed claims against the Defendant for delay of payment and deferral of payment pursuant to the contract between the parties for the construction of pontoons and installations of appurtenances. The Plaintiff additionally sought attorneys, travel and other additional costs and that the Defendant bear the case acceptance fee. The Defendant hired the Plaintiff to build two steel pontoons and install appurtenances, including an approach bridge. The parties entered into a contract where the Defendant was to pay the Plaintiff in five installments, with each installment’s provisions and amounts listed in the contract. While the Defendant paid the agreed upon amount for the first three installments, they paid a reduced amount than what was listed in the contract for the fourth installment and did not pay the fifth installment until several years later. Although the pontoons and other equipment passed a government quality inspection and were certified as accepted, the funds to pay the final installment were not verified by the relevant government audit bureau until two years later—Held: by Shanghai Maritime Court that the Defendant was liable for the breach of contract for deferral and delay of the payments, but was not liable for the other claims. The Defendant was ordered to pay Plaintiff in the amount of RMB1418.18 for the deferred payment and RMB43,361.52 for the delayed payment.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_26

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Judgment The Plaintiff: Jiangsu Jinyang Shipyard Co., Ltd. Domicile: Jintan City, Jiangsu. Legal representative: LIAN Wenlin, chairman. Agent ad litem: CHEN Yuezhong, lawyer of Jiangsu Siyanghong Law Firm. The Defendant: Shanghai Chongming Port Construction Investment Management Co., Ltd. Domicile: Shanghai. Legal representative: WU Miaosheng, executive director. Agent ad litem: ZHANG Hui, lawyer of Shanghai Honglun Yujun Law Firm. Agent ad litem: XUE Xiaodong, lawyer of Shanghai Honglun Yujun Law Firm. With respect to the case arising from dispute over shipbuilding contract filed by the Plaintiff, Jiangsu Jinyang Shipyard Co., Ltd. (hereinafter referred to as “Jinyang Company”), against the Defendant, Shanghai Chongming Port Construction Investment Management Co., Ltd. (hereinafter referred to as “Chongming Company”), on July 26, 2013, the court, after accepting the case on July 29, 2013, organized the collegiate panel and held a hearing in public on December 18, 2013. Agent ad litem of the Plaintiff, CHEN Yuezhong, and agent ad litem of the Defendant, XUE Xiaodong, appeared in court to attend the hearing. Now the case has been concluded. The Plaintiff alleged that in June 2009, the Plaintiff, the Defendant and an outsider, Shanghai Laiqi Steel Structure Co., Ltd. (hereinafter “Laiqi Company”) entered into the Steel Pontoons and Appurtenances Construction and Installation Contract (hereinafter referred to as the “Shipbuilding Contract”), in which it was agreed that the Plaintiff and Laiqi Company would build two steel pontoons and install appurtenances such as the approach bridge and cradle for the Defendant, and the Defendant should pay the contract price to the Plaintiff. Then the Plaintiff and Laiqi Company performed their contractual obligations, the Defendant, however, delayed the payment and deferred the last installment. Therefore, the Plaintiff requested the court to judge: (1) the Defendant should pay the outstanding sums in amount of RMB1418.18; (2) the Defendant should compensate the Plaintiff for the loss of interests on the delayed payment in amount of RMB222,934.10; (3) the Defendant should compensate the Plaintiff for lawyer’s costs, travel costs and other costs incurred by claiming for outstanding sums in amount of RM266,563.58; (4) the Defendant should bear court acceptance fee. The Defendant defended as follows: (1) the sum in the first claim of the Plaintiff was actually the charges for water and electricity occurring during the construction, which should be deducted. Therefore, there was no delay in payment by the Defendant; (2) the project funds were granted by government, which should be audited before use. The Defendant arranged the payment without any deliberate delay after audit, therefore the Plaintiff’s claiming for punitive interests was

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unreasonable. Accordingly, the Defendant requested the court to reject the claims filed by the Plaintiff. The evidence produced by the Plaintiff, the cross-examination of the Defendant and the ascertainment of the court are as follows: 1. Hipbuilding Contract, to prove that the Defendant entrusted the Plaintiff to build the pontoons involved and the rights and obligations of both parties; The Defendant affirmed the authenticity, legality and relevancy of this evidence, and the court ascertains the probative force thereof. 2. Proofs and the Certificates of Inspection of Inland-water Ship (hereinafter referred to as the “Ship Certificates of Inspection”) issued by Jiangsu Province Changzhou City Ship Inspection Bureau (hereinafter “Changzhou Ship Inspection Bureau”), to prove that the time when the pontoons involved passed the inspection; The Defendant affirmed the authenticity of the evidence, however disaffirmed the effect thereof, and held that the Certificates were marked as draft ones, so they could not stand as proof. The court holds that the proofs issued by Changzhou Ship Inspection Bureau coincide with the Certificates of Inspection of the pontoons involved, the fact that Changzhou Ship Inspection Bureau had carried out the inspection of the construction of the pontoons involved and thus the court ascertains the probative force thereof. 3. Audit report, to prove the construction period of the pontoons involved and the final audited price of the project; The Defendant affirmed the authenticity of the evidence. Further, both parties ascertained the price verified in the audit report as final settlement price of the Shipbuilding Contract, therefore the court ascertains the probative force thereof. 4. Statement of settlement, to prove the paid sums and the outstanding sums; The Defendant affirmed the issuance date and amount of the invoices, as well as the date and amount of the paid sums stated in the Statement, but argued the outstanding sums were deducted by utilities, so no breach of contract occurred. The court ascertains the effect of this evidence, and the content to be proved will be ascertained based on the Statement of Settlement together with the vouchers of actual payments and other evidence. 5. Detailed list of travel costs and appendix, to prove the costs such as transportation costs and accommodation costs arising from the Plaintiff’s claiming for the outstanding sums; The Defendant disaffirmed the authenticity of this set of evidence, and argued that part of the costs occurred during (the journey) from Zhuhai to Shanghai, which had no relevancy to the fact the Plaintiff tried to prove. The court finds that this set of evidence are copies, the attached vouchers were made by the Plaintiff unilaterally, and the attached invoices show no relevancy to this case, therefore the probative force thereof cannot be ascertained. 6. Retaining contract and an IOU, to prove the lawyer’s costs of the Plaintiff in this case;

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The Defendant had no objection to its authenticity thereof, however, alleged that the cost were incurred by the Plaintiff itself and exceeded the ordinary standard, therefore should not be born by the Defendant. As the contract and the IOU are sealed with official stamps of the parties concerned, the court ascertains the authenticity and the probative force of the evidence. 7. Calculating sheet of liquidated damages, to prove the amount of interests on the delayed payment the Defendant should pay; The Defendant disaffirmed the effect of this evidence for the inaccurate timeline and the standard determined by the Plaintiff. As both parties altered and reconfirmed a new calculation standard of interest, the existence and amount of the interests on the delayed payment shall be determined according to the stipulations in the contract and the actual performance of the Defendant by the new standard instead of the initial one. The evidence submitted by the Defendant, the cross-examination of the Plaintiff, and ascertainment of the court are as follows: 1. Tender notice published by the Government Procurement Centre of Chongming County, to prove that the project involved was an public tendering project funded by government; The Plaintiff affirmed the authenticity thereof, however, argued that the nature of the project had no relevancy to the shipbuilding Contract between the Plaintiff and the Defendant. As the Tender Notice was published by the Government Procurement Centre of Chongming County and affirmed by the Plaintiff, the court ascertains the probative force thereof. 2. Certificates of Inspection of Inland-water Ship issued by Shanghai Ship Inspection Department, to prove that the pontoons passed acceptance inspection on December 15, 2009; The Plaintiff affirmed the authenticity of the evidence, however, argued that the time when the pontoons passed the inspection of Changzhou Ship Inspection Bureau should prevail. The certificates were issued by ship inspection authority, therefore the court ascertains the authenticity thereof, but whether the date of passing the inspection of Shanghai Ship Inspection Department shall be deemed as the passing time of acceptance inspection of the pontoons involved will be decided based on the stipulations in the contract and the actual performance of both parties. 3. Bank slip, to prove that the Defendant remitted RMB2,096,250 to the Plaintiff; The Plaintiff affirmed the authenticity thereof, however, argued that the Defendant deducted some amounts from the payment by itself and therefore failed to fulfill the obligation for payment set out in the contract. As this evidence corroborates evidence 4 produced by the Plaintiff and the Plaintiff affirmed the authenticity of this evidence, the court ascertains the probative force thereof, relevant content to be proved shall be subject to it.

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4. Detailed statement of charges for water and electricity and the detailed statement of deduction, proving that the outstanding sums in amount of RMB1418.18 were the charges for water and electricity; The Plaintiff disaffirmed the authenticity, legality and relevancy of the evidence on the ground that there was no relevant stipulation in the contract and it had never confirmed the deduction. The court finds that the evidence are copies made by the Defendant unilaterally which was disaffirmed by the Plaintiff, therefore the effectiveness of this group of evidence was disaffirmed. 5. Audit report, to prove the costs caused by the increased quantities, and as no stipulation on additional costs was provided in the contract, the Defendant did not delay any payment; The Plaintiff affirmed the authenticity of the audit report and argued that the additional costs should be paid within a reasonable period after the issuance of the audit report according to the agreement on the last installment under the Shipbuilding Contract. As this evidence is same as the Plaintiff’s evidence 3 and both parties affirmed its effect, the court ascertains the probative force thereof. This audit report shows that the final price of the shipbuilding and installation is RMB10,953,996, which is RMB458,996 more than the initial price stipulated in the contract. 6. Finance confirmation note issued by Chongming Audit Bureau, to prove that the last installment could be paid only after verification of the government authority; The Plaintiff raised no objection to the authenticity, legality and relevancy thereof, however argued it could not prove the last installment should be verified by government. As the Plaintiff affirmed the authenticity, legality and relevancy of this evidence, the court ascertains the effect thereof. But there is no statement or similar expression stating that the authority’s approval should be obtained before the payment of the outstanding sums, the court therefore does not ascertain the purpose of proof thereof. 7. Payment receipt, to prove that the Defendant paid the last installment on February 6, 2013; The Plaintiff affirmed the authenticity of this evidence and pointed out that the payment date reflected by it could prove the Defendant’s delay in payment. As this evidence coincides with evidence 4 provided by the Plaintiff and the authenticity thereof has been affirmed by the Plaintiff, the court ascertains the effect thereof, relevant content of proof shall be subject to the statement therein. 8. Hu Fa Gai Tou (2008) No. 167 Document issued by Shanghai Development and Reform Committee, to prove that the project involved was funded by government; The Plaintiff affirmed the authenticity of this evidence, but argued that, according to the doctrine of privity of the contract, there should be no relevancy between the performance of the contract and whether the project was funded by the government or not. This evidence is a government document, therefore the court ascertains its authenticity. It proved the funding source of the Changxing

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Ferry Terminal of Hengsha-Changxing Cross-River Transportation Project (hereinafter referred to as “Hengsha-Changxing Cross-River Terminal Project”). 9. Certificate of acceptance inspection, to prove the delivery time of the Hengsha-Changxing Cross-River Terminal Project; The Plaintiff affirmed the authenticity of this evidence, but argued that the acceptance time of the whole project was not the delivery time of the pontoons involved. Further, this certificate was issued for the whole project, while the Plaintiff just contracted a part of the project, therefore it has no relevancy to the shipbuilding project involved. The court ascertains the effect thereof, the fact it proved will be ascertained by the statement therein and other evidence. 10. Appropriation vouches, to prove that Chongming Finance Bureau appropriated the last installment to the Defendant on December 20, 2012; The Plaintiff affirmed the authenticity of this evidence, but argued that, according to the doctrine of privity of the contract, there should be no relevancy between the performance of the contract and whether the project was funded by government. As the Plaintiff affirmed the authenticity of this evidence, the court confirms the same. However, it only proves the appropriation from the government, but not the relevancy to the Shipbuilding Contract involved. 11. Certificates of registry of the pontoons, proving the ownership of M. V. “Gang Tou Dun 2” and M. V. “Gang Tou Dun 3”. The Plaintiff affirmed the authenticity, legality and relevancy of the evidence, and the court confirms the same. The fact it proves shall be found as per the information therein. Taking cross-examination opinions of both parties and the investigation in the trial into consideration, the court finds the facts as follows: On September 17, 2008, Shanghai Development and Reform Committee made a reply on relevant application of Chongming Development and Reform Committee, in which Hengshang-Changxing Cross-River Terminal Project consisting of the construction in water and on land and the auxiliary equipment was approved. The total amount of investment was RMB41,480,000, of which RMB33,180,000 was funded by construction subsidies of Shanghai Municipality Government and the remaining part was funded by Chongming County Government. On April 22, 2009, the Government Procurement Purchase Centre of the Chongming County published a tender notice, then the Defendant became the tenderee, and the second program of the subject tender in the project included construction of a 50-metersteel pontoon and a 40-m steel pontoon and installment of appurtenances. On July 23, 2009, the Plaintiff and the third party, Laiqi Company entered into, with the Defendant, the Construction and Installation Contract of Steel Pontoons and Steel Approach Bridge, Cradle and Appurtenances the like. It is agreed in the contract that the Plaintiff and the Laiqi Company will build and install a 50-m pontoon and a 40-m steel pontoon together with appurtenances such as steel approach bridge and the cradle. The pontoons were built by the Plaintiff. The total price of the contract is RMB10,495,000, which will be paid to the Plaintiff by the Defendant, then divided

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between the Plaintiff and Laiqi Company. The payment will be arranged in installments: the first instalment, representing 15% of the contract price (RMB1,574,250), shall be paid upon the contract coming into effect; the second instalment, representing 40% of the contract price (RMB4,198,000), shall be paid upon the keel-laying, pay; the third instalment, representing 20% of the contract price (RMB2,099,000), shall be paid; the fourth instalment, representing 20% of the contract price (RMB2,099,000), shall be paid upon passing the acceptance inspection,; and the last installation, representing 5% of the contract price (RMB524,750), should be paid within 15 days after the expiration of one year’s quality warranty; any increase or decrease due to modifications and/or adjustments approved by the Defendant and the design company with schedule being adjusted when the quantities of the construction increase or decrease arising from alteration of design. After the completion of the construction, the Plaintiff and Laiqi Company should apply with the Changzhou Ship Inspection Bureau for acceptance inspection. After passing the inspection and completing the installation and test run, three parties will carry out the delivery-acceptance formalities. The quality warranty period was one year after the delivery of the pontoons. The two pontoons involved were built in Jintan, Jiangsu. On October 12, 2009, Changzhou City Ship Inspection Bureau carried out an inspection on M. V. “Gang Tou Dun 2” and M. V. “Gang Tou Dun 3”, it was found that the safety equipment, structure, machinery, electric devices and the radio communication system of the pontoons complied with the relevant standard and specifications and the pontoons were seaworthy and permitted to be used as pontoon in port of level-A navigation area. On October 13, 2009, the pontoons’ Inspection Certificates were prepared and transferred to Shanghai Ship Inspection Department through the ship inspection system. On December 15, 2009, Shanghai Ship Inspection Department formally issued the Inspection Certificates for the two pontoons involved. During the period when the certificates were transferred among the ship inspection authorities, the two pontoons were removed from the building place to Hengsha-Changxing Cross-River Terminal and berthed there. On January 18, 2010, Shanghai Maritime Safety Administration (hereinafter referred to as “Shanghai MSA”) issued the certificates of registry for the pontoons involved, in which it was recorded that the shipowner was the Defendant, the builder was the Plaintiff, and the day on which the Defendant obtained the ownership was October 15, 2009. On May 15, 2010, Shanghai Zhenghong Construction Consulting Co., Ltd. (hereinafter referred to as “Zhenghong Company”) issued an audit report for the pontoons involved, in which the final settlement price of the construction and installation of the pontoons and appurtenances was RMB10,953,996, RMB458,996 more than the initial contract price. On January 21, 2011, Shanghai Transport and Port Administration and other authorities consisted a group to inspect and accept the Hengsha-Changxing Cross-River Terminal Project and issued a certification of acceptance, which stated that the whole cross-river project was mainly consisted of the construction in water and on land and the construction of the pontoons involved, the direct costs were

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RMB38,490,000, the completion date was October 15, 2009, the project passed the quality inspection and met the operation requirement upon test run, and the project was approved to pass the acceptance inspection and be delivered for operation. On December 20, 2012, Chongming Finance Bureau appropriated the last installment of Hengsha-Changxing Cross-River Terminal Project in amount of RMB18,180,000 to the Defendant. On January 7, 2013, Chongming Audit Bureau verified the construction price of the ancillary pontoons of Hengsha-Changxing Cross-River Terminal Project funded by Chongming County Government was RMB4,345,500. From July 9, 2009 to September 9, 2009, the Defendant paid the first three installments in amount of RMB7,871,250 (75% of the total contract price) to the Plaintiff in four times. On January 15, 2010, the Defendant paid RMB2,096,250 to the Plaintiff and on February 6, 2013, the Defendant paid RMB985,077.82 to the Plaintiff. In addition, the Plaintiff and the Defendant mutually agreed that, in case of calculation of interest, the deposit interest rate should be calculated by 0.01% per day and the loan interest rate should be calculated by 0.017% per day. The court finds that the Plaintiff and the Defendant entered into Shipbuilding Contract, then the Plaintiff constructed the pontoons and installed the appurtenances for the Defendant, which had been delivered and put into operation, the shipbuilding contract relationship was established between the two parties. In accordance with both parties’ arguments, the issues involved can be concluded as follows: (1) whether the Defendant has paid the whole contract price, namely whether the charges for water and electricity in amount of RMB1418.12 shall be deducted; (2) the deadline of the last installment agreed in Shipbuilding Contract; (3) whether the sums in amount of RMB458,996 for increased quantities are delayed; (4) the calculation standard of interests on the delayed payment given the Defendant did delay the payment. 1. In respect of whether the Defendant had paid the full amount of the contract price According to the stipulations of Shipbuilding Contract, the initial contract price was RMB10,495,000, while after verification of Zhenghong Companym, the final contract price came RMB10,953,996. From July 9, 2009 to September 9, 2009, the Defendant fulfilled the payment for the first three installments (75% of the total contract price). On January 15, 2010, the Defendant paid the Plaintiff RMB2,096,250, RMB2750 less than the agreed fourth installment (RMB2,099,000). On February 6, 2013, the Defendant paid RMB985,077.82 to the Plaintiff. Finally, the total amount paid by the Defendant is RMB1418.18 less than the total amount ascertained by the audit report. The Defendant defended that it had estimated and deducted charges for water and electricity in amount of RMB2750 in advance. After the completion of the project, the actual charges of water and electricity were RMB1418.18 which were deducted accordingly. The court holds that deduction of the charges for water and electricity lacks contractual or any other grounds, neither the Plaintiff confirmed, nor

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did the Defendant provide calculation standard, therefore, the Defendant’s defense that the charges for water and electricity should be deducted from the unpaid RMB1418.18 cannot stand and shall be rejected by the court. The Defendant shall pay the outstanding sums and compensate the loss of interests thereon. In respect of the interests of the outstanding sums, the Plaintiff alleged that the Defendant paid RMB2,096,250 on January 15, 2010, leaving RMB2750 unpaid, of which RMB1331.82 was paid on February 6, 2013, the interests thereon should be calculated for a period of 1130 days; and the remaining RMB1418.18 had not been paid, the interest thereon should be calculated for a period of 1280 days. It is agreed by the two parties that the date of payment is the day after passing acceptance inspection (both parties affirmed in the first instance that “after” referred to one month after passing acceptance inspection) and the standard of passing the inspection refers to pass the inspection of Changzhou Ship Inspection Bureau, therefore the date of payment shall be one month after November 13, 2009, on which the pontoons passed the inspection of Changzhou Ship Inspection Bureau, namely October 13, 2009. Therefore, the overdue period claimed by the Plaintiff is reasonable and shall be supported by the court. 2. In respect of the deadline of the last installment Shipbuilding Contract sets out that the last 5% of the contract price (RMB524,750) shall be paid within 15 days after the expiration of the one-year quality warranty period, and such period is one year after the delivery of the pontoons. To ascertain the deadline of the payment of the outstanding sums and the quality warranty period, the delivery date shall be ascertained first. With regard to the delivery of the ship, neither did the Plaintiff nor the Defendant produce relevant documents or supporting evidence to prove the delivery formality of the ship. The Plaintiff argued that pursuant to the Shipbuilding Contract the Plaintiff and the Laiqi Company should apply with Changzhou Ship Inspection Bureau for acceptance inspection after the completion of the shipbuilding, and the three parties should carry out the delivery formality after the inspection passed. In the actual performance of the contract, Changzhou Ship Inspection Bureau inspected M. V. “Gang Tou Dun 2” and M. V. “Gang Tou Dun 3” on October 12, 2009, and issued the certificates of inspection for the pontoons involved the next day. Then the Plaintiff delivered the pontoons to the Defendant. In addition, both the date of completion of the project and the date the Defendant obtained the ownership of the pontoons were October 15, 2009 according to the certificate of acceptance inspection and the certificate of registry of the pontoons. The Plaintiff therefore requested to regard October 15, 2009 as the start point of the warrant period. While the Defendant alleged the date of delivery should be determined by the date Shanghai Ship Inspection Department issued the certificates of inspection, namely December 15, 2009. The court holds that the Plaintiff, the Defendant and the outsider Laiqi Company have agreed in Shipbuilding Contract that the pass of inspection of Changzhou Ship Inspection Bureau shall be regarded as the pass of acceptance inspection,

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thus the Defendant’s allegation that the time when Shanghai Ship Inspection Department issued the Certificates of Inspection for the pontoons involved should be regarded as the pass of acceptance inspection and the time of delivery of the pontoons cannot stand. Pursuant to the public tender notice of the Hengsha-Changxing Cross-River Terminal Project, relevant documents of the Shanghai Development and Reform Committee, and the Certificate of Acceptance Inspection, the construction of the two pontoons and installation of the appurtenances involved are parts of Hengsha-Changxing Cross-River Terminal Project. Pursuant to Certificate of Acceptance Inspection of the Hengsha-Changxing Cross-River Terminal Project, the whole project was completed on October 15, 2009, and the test run was carried out then. As parts of the whole project, the construction of the two pontoons and installation of the appurtenances involved should be completed before October 15, 2009 and have controlled and run by the Defendant. Further, considering the fact that the pontoons involved berthed at Hengsha-Changxing Cross-River Terminal upon the pass of the inspection of Changzhou Ship Inspection Bureau and the record in the Certificates of Registry of the pontoons involved that the Defendant obtained the ownership of the pontoons on October 15, 2009, the Plaintiff’s allegation that October 15, 2009 should be regarded as the date of delivery and the starting point of the quality warranty period shall be supported. The quality warranty period under the Shipbuilding Contract is one year, specifically, from October 15, 2009 to October 14, 2010. The deadline of the last installment shall be the 15th day after the expiration of the one-year warranty period, namely October 15, 2010. The Defendant did not pay the last installment until February 6, 2013, the payment exceeded the deadline set out in the Shipbuilding Contract, therefore they shall be responsible for the delayed payment. The Plaintiff’s claim that the overdue period is 820 days shall be ascertained. 3. In respect of the time of payment of the increased sums The Plaintiff alleged that the increased sums in amount of RMB458,996 arising from the increased quantities should be paid together with the last installment or in a reasonable period after the verification of the final contract price. The Defendant failed to pay the sums on time, thus it shall be responsible for the delayed payment. The court holds that the delay in performance refers to the contractual obligation is not performed or not fully performed within the performance period set out in the contract. In current case, according the Shipbuilding Contract, the agreement between the Plaintiff and the Defendant that the last installment, namely 5% (RMB 524,750) of the contract price, should be paid within 15 days after the expiration of the quality warranty period, did not include the sums arising out of the increased quantities. In addition, there is no other clause in the contract stipulating the date of payment for sums of increased quantities and the liability for breach of the contract by delay in payment of the sums. Where no performance period is set out, the obligee shall inform the obligor the performance period and hasten the obligor when the latter fails to perform his obligation after the expiration of the performance period.

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The Plaintiff failed to produce any evidence like payment notice to prove it had notified or hastened the Defendant to pay the sums of the increased quantities. Therefore, the Plaintiff’s claim that the Defendant should bear the liability for breach of the contract as to the delay in payment of the increased quantities cannot be supported by the court. 4. In respect of the standard of interest on the delayed payment The Plaintiff alleged the loss of interests arising from the Defendant’s delay in payment should be calculated by one and half times of the loan interest rate according to the Notice of the People’s Bank of China on Issues Concerning the RMB Loan Interest Rates and the Interpretation of the Supreme People’s Court on Issues concerning the Application of Law for the Trial of Cases of Disputes over Sales Contracts. The court holds that the Defendant did delay the payment under Shipbuilding Contract and the Plaintiff’s claim for the loss of interests on the delayed payment shall be supported. However, the disputes involved neither arise out of taking loan from a financial institution nor relate to a sales contract, therefore the Notice of the People’s Bank of China on Issues concerning the RMB Loan Interest Rates or the Interpretation of the Supreme People’s Court on Issues concerning the Application of Law for the Trial of Cases of Disputes over Sales Contracts shall not apply. Additionally, the Plaintiff failed to produce evidence to prove it took a loan from bank, therefore the interest rate shall be calculated by the deposit interest rate designated by both parties, namely (RMB1331.82 * 1130 days + RMB1418.18 * 1280 days + RMB524,750 * 820 days) * 0.01%/day, to sum up, the total amount of the interests is RMB43,361.52. At last, as to the travel costs and the lawyer’s costs, the court holds that as the Plaintiff failed to produce effective evidence to prove the actual occurrence and the relevancy to this case of the travel costs, this claim shall be dismissed; the Plaintiff requested the Defendant to bear its lawyer’s costs, however, the lawyer’s costs are not necessary costs for this action and the Plaintiff failed to prove the sum have been actually paid, therefore, the lawyer’s costs claimed by the Plaintiff shall also be dismissed. In summary, according to Article 107 and Article 109 of the Contract Law of the People’s Republic of China, and Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: 1. The Defendant, Shanghai Chongming Port Construction Investment Management Co., Ltd., shall pay the deferred payment in amount of RMB1418.18 to the Plaintiff within ten days after this judgment comes into force; 2. The Defendant, Shanghai Chongming Port Construction Investment Management Co., Ltd., shall pay the loss of interests for the delayed payment in amount of to RMB43,361.52 the Plaintiff within ten days after this judgment comes into force; 3. Reject other claims of the Plaintiff.

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In case of any failure of payment within the period designated in this judgment, the Defendant shall pay double interest for the period of delayed performance according to Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB9078, RMB8308 shall be born by the Plaintiff and RMB770 shall be born by the Defendant. In case of any dissatisfaction, the Plaintiff and/or the Defendant may within 15 days upon service of this judgment, submit a statement of appeal to the court, with the copies according to the number of the opposite party, to file an appeal to the Shanghai High People’s Court. Presiding Judge: JI Gang Acting Judge: JIANG Yun Acting Judge: TANG Qin January 6, 2014 Clerk: JIN Jie

Shanghai Maritime Court Civil Judgment Jiangsu Shenghui Import and Export Co., Ltd. v. Guangying (Shanghai) International Freight Forwarding Co., Ltd. (2013) Hu Hai Fa Shang Chu Zi No. 1267 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 595. Cause of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote The Defendant freight forwarder held liable for delivery of its cargo without presentation of original bill of lading at port of destination, despite the fact that the Plaintiff cargo owner was not actually the holder of the bill of lading at the time of misdelivery, having not then paid the forwarder's fees; the Plaintiff held to have the rights of a “holder” of the bill of lading because it was identified as shipper on the bill of lading. Summary The Plaintiff brought a claim against the Defendant for indemnification for the losses it incurred as a result of its cargo disappearing upon delivery by the agent of the port of discharge. The Plaintiff shipper contracted with the Defendant freight forwarder to ship lightbulbs worth 67,681.81 USD from Shanghai to Durban, South Africa with the final place of delivery being Johannesburg. The Defendant issued three copies of the original bill of lading stating the goods would be carried in two separate containers aboard a vessel. However, the Plaintiff did not have the original bill of lading since it failed to pay the relevant freight forwarding fees. Upon arrival of the goods, the agent of the port released the goods without the bill of lading despite the Defendant informing the Plaintiff that the goods could not be delivered without the original bill of lading. The Plaintiff paid the relevant freight forwarding fees, then filed suit in the Shanghai Maritime Court against the Defendant seeking indemnification for the value of the lost cargo. The court ascertained three major issues relevant to resolving the matter: (1) the Plaintiff and Defendant’s legal relationship; (2) whether a delivery of goods constitutes as such without the original bill of lading and whether the Defendant is liable for such delivery; and (3) the proper calculation of the amount of loss incurred by the Plaintiff. The court first ascertained that the Plaintiff and Defendant © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_27

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engaged in a contract for the carriage of goods on the sea as, according to the bill of lading, the shipper and carrier respectively. This means that the Plaintiff, as the shipper identified in the bill of lading, contracted for the space to ship the goods, and enjoyed the right as the holder of the bill of lading despite the Defendant possessing it all along. Secondly, the Defendant was held to be liable for the agent of the port of destination delivering the goods without the bill of lading since it was the carrier under the contract for carriage of goods and the agent of the port of discharge was found to be an agent of the Defendant causing it to liable for the agent’s actions. Finally, the court determined amount of compensation the Defendant had to pay the Plaintiff was determined by the value of the goods plus freight and insurance costs from when the goods shipped, which equaled 47,377.29 USD and interest. The amount of interest owed was to be calculated from the date the case was accepted and when judgment was rendered. Held—The Shanghai Maritime Court ordered the Defendant to indemnify the Plaintiff 47,377.29 USD and interest for the losses it incurred.

Judgment The Plaintiff: Jiangsu Shenghui Import and Export Co., Ltd. Legal representative: CHEN Wei. Agent ad litem: YANG Jie, lawyer of Shanghai Huiye Law Firm. The Defendant: Guangying (Shanghai) International Freight Forwarding Co., Ltd. Legal representative: LIU Shiqiang. Agent ad litem: ZHANG Wen, lawyer of Shanghai Zhongshen Law Firm. With respect to the case of dispute over contract of carriage of goods by sea filed by the Plaintiff, Jiangsu Shenghui Import and Export Co., Ltd., against the Defendant, Guangying (Shanghai) International Freight Forwarding Co., Ltd. on August 26, 2013. After accepting the case on the same day, the court tried under summary procedure. On September 24, 2013, the case was transferred to be tried under general procedure and the court organized a collegiate panel. On October 22, 2013, the court held a hearing in public. YANG Jie as agent ad litem of the Plaintiff and ZHANG Wen as agent ad litem of the Defendant appeared in court to attend the hearing. Now the case has been concluded. The Plaintiff alleged that in May, 2013, it booked space for a batch of lamps through the Defendant, the port of loading was Shanghai and the place of delivery was Johannesburg. The Defendant confirmed the booking information and the form of the B/L, and sent a scan of the B/L to the Plaintiff. The B/L was numbered with SHASEXXXXXXXX, which was registered by the Defendant. The Plaintiff held the Defendant delivered the goods involved without the original B/L, as a result, it lost control of the goods. Therefore, the Plaintiff requested the court to judge the

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Defendant to indemnify the losses of payment for goods and the interest (calculated at USD demand deposit interest rate over the same time of Bank of China from July 1, 2013 to the date of effectiveness of the judgment). The Defendant argued that it was the agent in the port of destination who delivered the goods involved without B/L. It was neither the action nor instruction of the Defendant. It had no fault at this. Moreover, the Plaintiff did not produce enough evidence to prove the amount for the losses of the goods it claimed. Therefore the Defendant requested the court to dismiss the claims of the Plaintiff. To prove the claims, the Plaintiff submitted the following evidence and the cross-examination opinions of the Defendant are as follows: 1. The booking list and invoice of the goods involved, to prove that the Plaintiff entrusted the Defendant to transport the goods involved. The Defendant raised no contest to the authenticity, legality and relevancy of that; 2. Scan of the original B/L, to prove that the B/L given by the Defendant to the Plaintiff. The form had been registered on record. In addition, the issuer and the title were the Defendant; 3. Packing list, commercial invoice and customs declaration, to prove the value of the goods involved. The Defendant did not confirm the packing list and the commercial invoice and had no contest to the authenticity but not the content of the customs declaration; 4. Container circulation record, to prove that the container had been circulated. The Defendant had no objection on the authenticity of it, but did not affirm the fact of delivery of the goods involved without B/L; 5. Emails of the parties, to prove that the Defendant confirmed the goods had been delivered without B/L, and it was done by the agent in the port of the destination. The Defendant raised no contest to the authenticity, so the court ascertains the effect thereof. Since the Defendant raised no contest to evidence 1 and 2, the court affirms the effect of the two evidence. The packing list and the commercial invoice of evidence 3 are made by the Plaintiff, and the Defendant disaffirmed, therefore the court will not ascertain its effect. The Defendant had no objection to the customs declaration in evidence 3, evidence 4 and evidence 5, the court confirms the effect thereof. To prove the defense, the Defendant submitted the following evidence and the cross-examination opinions of the Plaintiff are as follows: 1. Emails with the agent in the port of destination, to prove that the Defendant had no fault, because the losses involved were caused by the agent in the port of destination. The Plaintiff raised no contest to the authenticity thereof; 2. Emails between the Plaintiff and the Defendant, to prove that the non-delivery of the original B/L involved resulted from the failure of the Plaintiff to pay relevant fees occurring in the port of departure and the Defendant committed no fault at the delivery of goods involved without B/L. The Plaintiff confirmed the authenticity but not the content thereof;

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3. The original B/L, to prove that the original B/L was still possessed by the Defendant. The court holds that evidence 1, namely the emails are printed copy, the Plaintiff did not affirm those, therefore, the court does not confirm. The effect of evidence 2 and 3 for the conformation of the Plaintiff, but the evidence above cannot prove the Defendant shall not bear responsibility for the losses involved. Upon analysis and determination of the evidence above, the court ascertains the following facts based on investigation in the trial: In May, 2013, the Plaintiff entrusted the Defendant to handle the import and transport of a batch of bulbs. After accepting the entrustment, the Defendant finished the related operations at the port of departure and issued original B/L in triplicate. The title and the issuer of the B/L was the Defendant and the form of the B/L had been registered on record with the Ministry of Transport. The B/L was numbered SHASE130XXXXX, the shipper was the Plaintiff, the port of loading was Shanghai, the port of discharge was Durban, South Africa, the place of delivery was Johannesburg, the name of the vessel was LUOBAHE, the voyage was V.141W, the goods shipped were 1308 crates of bulbs which were loaded in two 40’GP containers, the container numbers were MAGU51XXXXX and BMOU48XXXXX, the delivery terms was FCL (CY/CY). The goods were actually carried by Changrong Shipping Company and the B/L number of the actual carrier was EGLV1423504XXXXX. According to the container circulation record of Changrong Shipping Company, the goods involved were loaded to ship on May 4, 2013 and the empty containers that loaded the goods involved had been returned on June 13, 2013. Besides, the employee of the Defendant informed the agent at the port of destination of the Plaintiff by e-mail that the goods involved could only be delivered with original B/L, however, the goods were still released by the agent without authority. The value of cargo noted in the export custom declaration was USD67,681.81 and the trade terms was FOB. The Plaintiff acknowledged that they had received 30% of the price of goods aforesaid. After investigation, it was found that the Defendant did not deliver the original B/L to the Plaintiff because the Plaintiff failed to pay relevant freight forwarding fees in the port of departure. During the trial, the Plaintiff paid the fees mentioned above. In the meanwhile, the Defendant said they would not deliver the B/L to The Plaintiff in the case of recovery in the court, whereas it recognized the Plaintiff was the lawful holder of the original B/L. Based on the allegations of both parties, the court holds the main issues in the case lie in: 1. The legal relation between the two parties; 2. Whether it constitutes delivery of goods without B/L and whether the Defendant shall take the responsibility for that; and 3. How to identify the amount of loss. The court holds that this case is the dispute over contract of carriage of goods by sea. Since the port of discharge and the place of delivery were in South Africa, this

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case involved foreign-related factors. The parties may explicitly choose the laws applicable to foreign-related civil relations in accordance with the provisions of law. The Plaintiff and the Defendant agreed to apply Chinese law to deal with the dispute in the hearing of the first instance. Hence the court determines Chinese laws as the applicable law in this case. With regard to the legal relation between the two parties, firstly, the Defendant accepted booking of the Plaintiff and issued the B/L involved. The form of B/L had been registered on record by the Defendant. Thus, The court identified the Defendant as the carrier of the contract of carriage of goods by sea involved; secondly, though the Plaintiff did not get and possess the original B/L actually, as the shipper stated in the B/L and the person who actually booked space for the goods involved, it should enjoy the rights of holder of original B/L considering that the B/L involved was not transferred normally because the carrier possessed it all along. Therefore, the court identified the Plaintiff as the shipper of the contract of carriage of goods and the holder of the original B/L. With regard to the delivery of goods without B/L and the liabilities of the Defendant, firstly, the delivery term stated in B/L was FCL (CY/CY). According to the container circulation record, the empty containers involved had been returned on June 13, 2013, which could be recognized as the prima facie evidence that the goods had already been delivered; secondly, the Defendant admitted that the goods involved were released by the agent in port of destination in the e-mail. The court held that, the Defendant, as the carrier of the contract of carriage of goods, delivered the goods without original B/L against the law. As a result, the Plaintiff lost control of the goods involved of no payment had been received. Therefore, the Plaintiff was entitled to require the Defendant to bear the liability for compensation. The Defendant defended that the delivery of goods without original B/L was the arbitrary act of the agent in the port of destination and it did not commit any subjective fault. However, the agent in the port of destination who delivered the goods involved without B/L was the agent of the Defendant, its fault should be regarded as the fault of the Defendant and it should bear liability for its acts of agency, hence the court does not adopt the defense of the Defendant. With regard to the amount of the loss suffered by the Plaintiff, according to the law, the amount of compensation for the loss caused by a carrier to the holder of an original B/L due to delivery of goods without the original B/L shall be calculated based on the value of the goods plus freight and insurance expenses when the goods are shipped. The Defendant disagreed with the claimed amount, but it had no evidence to prove its assertion. The Plaintiff admitted that it had received 30% of the payment and claimed for the other 70% of the FOB price in the customs declaration, namely USD47,377.29, it was ascertained by The court. With regard to the loss for interest, the Plaintiff required to calculate interest at one-year USD deposit rate of Bank of China from July 1, 2013 to the date of the effectiveness of the judgment. The court holds that this dispute occurred less than half a year ago, in addition, the Plaintiff could not prove the specific time it should have received the remaining payment, thus it was reasonable to calculate the interest at the USD demand deposit interest rate over the same time of Bank of China, starting from the

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date that the case was accepted, namely August 26, 2013 to the date of effectiveness of the judgment. The court rules the Defendant to indemnify the Plaintiff the losses of payment for goods and the interest (calculated at USD demand deposit interest rate over the same time of Bank of China from August 26, 2013 to the date of effectiveness of the judgment). After trial, the court holds the facts identified in the first instance are true and shall be affirmed. In summary, according to Article 107 of the Contract Law of the People’s Republic of China, Article 71 and Article 269 of Maritime Code of the People’s Republic of China, Article 2 and Article 6 of the Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law in Trial of Cases of Dispute over Delivery of Goods without an Original Bill of Lading, and of Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follow: The Defendant, Guangying (Shanghai) International Freight Forwarding Co., Ltd., shall compensate the losses for the goods in amount of USD47,377.29 together with the interest (calculated at USD demand deposit interest rate over the same time of Bank of China from August 26, 2013 to the date of effectiveness of the judgment) to the Plaintiff, Jiangsu Shenghui Import and Export Co., Ltd., within 10 days after this judgment comes into effect. In case of any failure of payment within the period specified in this judgment, the Defendant, Guangying (Shanghai) International Freight Forwarding Co., Ltd. shall double pay the interest for the period of delayed performance in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB5706, shall be born by the Defendant. In the event of dissatisfaction with this judgment, the Plaintiff and the Defendant may within 15 days upon the service of this judgment, submit a statement of appeal to the court, together with copies according to the number of the relevant party to the case, to lodge an appeal to the Shanghai High People’s Court. Presiding Judge: QIAN Xu Acting Judge: FANG Yi Acting Judge: WANG Lei October 23, 2013 Clerk: LIAO Luqi

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Shanghai High People’s Court Civil Judgment Jiangsu Shenghui Import and Export Co., Ltd. v. Guangying (Shanghai) International Freight Forwarding Co., Ltd. (2013) Hu Gao Min Si (Hai) Zhong Zi No. 144 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 589. Cause of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote Affirming lower court judgment holding freight forwarder liable for misdelivery of cargo without presentation of original bill of lading. Summary The Plaintiff shipper brought a claim against the Defendant for losses caused by missing cargo. The Plaintiff shipper engaged the Defendant freight forwarder to ship two cargo containers full of light bulbs from Shanghai to Johannesburg. The Defendant issues a bill of lading but never handed the bill over to the Plaintiff because the Plaintiff failed to pay the requisite fees at the port of origin. The Defendant had the cargo delivered to its agent at the port of destination who then released the cargo to an unknown third party who did not have the bill of lading. Subsequently, the Plaintiff paid the requisite fees and filed suit against the defendant. The first-instance Shanghai Maritime Court held that the Defendant was liable to the Plaintiff for breaching the contract for carriage of goods by sea when it turned over the goods to someone who did not possess the bill of lading. The Defendant was ordered to pay the Plaintiff 47,377.29 USD plus interest for its losses. The Defendant appealed. –Held by the Shanghai High People’s Court that the original judgment shall be affirmed, and that the Defendant will continue to be liable to the Plaintiff for 47,377.29 USD and interest for its losses.

Judgment The Appellant (the Defendant of first instance): Guangying (Shanghai) International Freight Forwarding Co., Ltd. Legal representative: LIU Shiqiang. Agent ad litem: ZHANG Wen, lawyer of Shanghai Zhongshen Law Firm.

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The Respondent (the Plaintiff of first instance): Jiangsu Shenghui Import and Export Co., Ltd. Legal representative: CHEN Wei. Agent ad litem: YANG Jie, lawyer of Shanghai Huiye Law Firm. The Appellant Guangying (Shanghai) International Freight Forwarding Co., Ltd. (hereafter referred to as Guangying Company) disagreed with (2013) Hu Hai Fa Shang Chu Zi No. 1267 Civil Judgment made by Shanghai Maritime Court regarding to the dispute over contract of carriage of goods by sea with the Respondent, Jiangsu Shenghui Import and Export Co., Ltd. (hereafter referred to as Shenghui Company), and lodged an appeal to the court. After accepting the case on December 5, 2013, the court formed a collegiate panel and held a hearing in public on September 14, 2014. ZHANG Wen as agent ad litem of Guangying Company and YANG Jie as agent ad litem of Shenghui Company appeared in court to attend the hearing. This case has been concluded now. The court of first instance ascertained the following facts by trial: Shenghui Company entrusted Guangying Company to handle the import and transport of a batch of bulbs. After accepting the entrustment, Guangying Company finished the related operations at the port of departure and issued original B/L in triplicate. The title and the issuer of the B/L was Guangying Company and the form of the B/L had been registered on record with the Ministry of Transport. The B/L was numbered SHASE130XXXXX, the shipper was Shenghui Company, the port of loading was Shanghai, the port of discharge was Durban, South Africa, the place of delivery was Johannesburg, the name of the vessel was LUOBAHE, the voyage was V.141W, the goods shipped were 1308 crates of bulbs which were loaded in two 40’GP containers, the container numbers were MAGU51XXXXX and BMOU48XXXXX, the delivery terms was FCL (CY/CY). The goods were actually carried by Changrong Shipping Company and the B/L number of the actual carrier was EGLV1423504XXXXX. According to the container circulation record of Changrong Shipping Company, the goods involved were loaded to ship on May 4, 2013 and the empty containers that loaded the goods involved had been returned on June 13, 2013. Besides, the employee of Guangying Company informed the agent at the port of destination of Shenghui Company by e-mail that the goods involved could only be delivered with original B/L, however, the goods were still released by the agent without authority. The value of cargo noted in the export custom declaration was USD67,681.81 and the trade term was FOB. Shenghui Company acknowledged that they had received 30% of the price of goods aforesaid. After investigation, it was found that Guangying Company did not deliver the original B/ L to Shenghui Company because Shenghui Company failed to pay relevant freight forwarding fees in the port of departure. During the trial, Shenghui Company paid the fees mentioned above. In the meanwhile, Guangying Company said they would not deliver the B/L to Shenghui Company in the case of recovery in the court, whereas it recognized Shenghui Company was the lawful holder of the original B/L.

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The court of first instance held that this case was dispute over contract of carriage of goods by sea. Since the port of discharge and the place of delivery were in South Africa, this case involved foreign-related factors. The parties could explicitly choose the laws applicable to foreign-related civil relations in accordance with the provisions of law. Shenghui Company and Guangying Company agreed to apply Chinese law to deal with the dispute in the court session of the first instance. Hence the court of first instance determined Chinese laws as the applicable law in this case. With regard to the legal relation between the two parties, firstly, Guangying Company accepted the booking of Shenghui Company and issued the B/L involved. The form of B/L had been registered on record by Guangying Company. Thus, the court of first instance identified Guangying Company as the carrier of the contract of carriage of goods by sea involved; secondly, though Shenghui Company did not get and possess the original B/L actually, as the shipper stated in the B/L and the person who actually booked space for the goods involved, it should enjoy the rights of holder of original B/L considering that the B/L involved was not transferred normally because the carrier possessed it all along. Therefore, the court of first instance identified Shenghui Company as the shipper of the contract of carriage of goods and the holder of the original B/L. With regard to the delivery of goods without B/L and the liabilities of Guangying Company, firstly, the delivery term stated in B/L was FCL (CY/CY). According to the container circulation record, the empty containers involved had been returned on June 13, 2013, which could be recognized as the prima facie evidence that the goods had already been delivered; secondly, Guangying Company admitted that the goods involved were released by the agent in port of destination in the e-mail. The court of first instance held that, Guangying Company, as the carrier of the contract of carriage of goods, delivered the goods without original B/L against the law. As a result, Shenghui Company lost control of the goods involved of no payment had been received. Therefore, Shenghui Company was entitled to require Guangying Company to bear the liability for compensation. Guangying Company defended that the delivery of goods without original B/L was the arbitrary act of the agent in the port of destination and it did not commit any subjective fault. However, the agent in the port of destination who delivered the goods involved without B/L was the agent of Guangying Company, its fault should be regarded as the fault of Guangying Company and Guangying Company should bear liability for its acts of agency, hence the court of first instance did not adopt the defense of Guangying Company. With regard to the amount of the loss suffered by Shenghui Company, according to the law, the amount of compensation for the loss caused by a carrier to the holder of an original B/L due to delivery of goods without the original B/L shall be calculated based on the value of the goods plus freight and insurance expenses when the goods are shipped. Guangying Company disagreed with the claimed amount, but it had no evidence to prove its assertion. Shenghui Company admitted that it had received 30% of the payment and claimed for the other 70% of the FOB price in the customs declaration, namely USD47,377.29, it was ascertained by the court of first instance. With regard to the loss for interest, Shenghui Company

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required to calculate interest at one-year USD deposit rate of Bank of China from July 1, 2013 to the date of the effectiveness of the judgment. The court of first instance held that this dispute occurred less than half a year ago, in addition, Shenghui Company could not prove the specific time it should have received the remaining payment, thus it was reasonable to calculate the interest at the USD demand deposit interest rate over the same time of Bank of China, starting from the date that the case was accepted, namely August 26, 2013 to the date of effectiveness of the judgment. The court of first instance ruled Guangying Company to indemnify Shenghui Company the losses of payment for goods and the interest (calculated at USD demand deposit interest rate over the same time of Bank of China from August 26, 2013 to the date of effectiveness of the judgment). Guangying Company appealed to request to revoke the original judgment and reject the claims of Shenghui Company in the first instance. The reasons are as follows: 1. Shenghui Company had obvious fault and it should be liable for its misbehavior: (1) the overseas freight forwarder was appointed by Shenghui Company and the foreign buyers jointly, the overseas freight forwarder informed Guangying Company to contact with Shenghui Company in respect of the transport of the goods involved, and such entrustment had no relation with Guangying Company; (2) the trade terms between Shenghui Company and the foreign buyer was FOB, so when the goods involved were loaded onto the ship in Shanghai port, it could be deem as completion of delivery. While Shenghui Company appointed Johannesburg as the place of delivery and consequently lost the control of goods involved, it means Shenghui Company voluntarily undertook the risk of shipment to the port of destination, hence it should bear the responsibility of its own accord; 2. The goods involved were delivered without presentation of original B/L by the overseas freight forwarder. It was contrary to the principle of fairness that the court of first instance ruled Guangying Company to bear the losses in amount of USD47,377.29, whereas Guangying Company only charged about RMB3000; 3. Shenghui Company should bear all the burden of proof of the value of goods, since it claimed for losses. The court of first instance decided that Guangying Company should indemnity for the corresponding losses of the goods involved without any relevant evidence but the oral presentation that Shenghui Company had received 30% of payment. The decision lacked factual and legal basis. Shenghui Company argued that: 1. The trade contract and transport contract were based on different legal relation, and the responsibility of Guangying Company under the transport contract cannot be exempted by the trade terms in the trade contract. The goods involved were delivered without the original B/L. Guangying Company, as the contractual carrier, should bear the liability for compensation;

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2. In this case, Guangying Company issued the B/L in its own name and it had the certification of NVOCC, hence it was more than a booking agent. Guangying Company should undertake corresponding liability of the carrier according to relevant laws; 3. Shenghui Company provided the commercial invoice and customs declaration examined and confirmed by customs, hence the value of goods stated in the custom declaration could be the basis to identify the amount of the loss. Shenghui Company admitted the reception of 30% of payment by the spirit of seeking truth from facts, and only claimed for 70% of the amount of loss. It was the self-admission to the part of facts. If Guangying Company claimed that Shenghui Company received any other payment besides the 30% of payment from the foreign buyers, it should produce evidence to prove. In conclusion, it alleged that the facts identified in the first instance were clear and the law was correctly applied in the original judgment, thus it requested the court dismiss the appeal and affirm the original judgment. Both parties did not provide new evidence in the second instance. After trial, the court holds that the facts identified in the first instance are true and shall be affirmed. The court holds that this case is the dispute over contract of carriage of goods by sea, and the main issues in the case are as follows: 1. Whether Guangying Company shall take the responsibility for delivery of the goods involved without the original B/L; 2. How to identify the amount of loss. Based on the facts identified in two instances, Guangying Company accepted the booking of Shenghui Company and issued a B/L with a title of Guangying Company, hence Guangying Company is the contractual carrier in this case. Guangying Company alleged that it was the agent in the port of destination that delivered the goods involved without original B/L, and it was irrelevant to Guangying Company. Nevertheless, Shenghui Company concluded a relationship of contract of carriage of goods by sea with Guangying Company, Shenghui Company, as the shipper of the goods involved and the lawful holder of B/L, is entitled to request Guangying Company, the carrier, to bear the liability of delivery goods without original B/L. According to relevant provisions of maritime laws, the carrier who delivers the goods to the person without the original B/L, damages the right of lawful holder of the original B/L, therefore, he shall bear the civil liability for the losses resulting therefrom. The trade terms of the goods involved is FOB, it merely indicates the risk of goods during transport shall be undertaken by the buyer under the trade contract, while the dispute in this case is Guangying Company, the carrier’s delivery of goods without the original B/L, they are different legal relations and concepts. Therefore, this ground of appeal of Guangying Company shall not be supported. With regard to the amount of loss, the export custom declaration submitted by Shenghui Company can prove the value of goods involved. It shall be recognized as

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self-admission that Shenghui admitted it received 30% of payment in the first instance. Under the circumstance that Guangying Company has no evidence to prove Shenghui Company received other payments, according to Article 6 of the Several Provisions of the Supreme People’s Court on Application of Law in Trial of Disputes over Delivery of Goods without Original Bills of Lading, the original judgment that Guangying Company indemnify Shenghui Company USD47,377.29 is appropriate and the court hereby affirms. In summary, the facts are clearly found and the law is correctly applied in the original judgment. The appeal lodged by Guangying Company is lack of factual and legal basis, hence the court will not support. According to Article 170 Paragraph 1 Sub-paragraph 1 and Article 175 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance in amount of RMB5706, shall be born by the Appellant, Guangying (Shanghai) International Freight Forwarding Co., Ltd. The judgment is the final. Presiding Judge: DONG Min Acting Judge: ZHOU Yi Acting Judge: XU Yijin February 24, 2014 Clerk: LUO Gang

Wuhan Maritime Court Civil Judgment Jingjiang Longwit Oils and Grains Industrial Co., Ltd. v. Guangdong Jindonghai Group Co., Ltd. (2013) Wu Hai Fa Shang Zi No. 00485 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 613. Cause of Action 235. Dispute over channel and port dredging contract. Headnote Developer of a wharf held to be not entitled to recover from construction company the financial costs incurred as a result of having made advance payment, because the parties had entered into a supplementary agreement settling final costs, which made no mention of financing costs. Summary A developer contracted with a construction company to build a wharf. The parties later made a supplementary agreement changing the schedule of advance payments. The supplementary agreement explicitly stated that the construction company should bear any financial costs incurred as a result of the developer making payment in advance. The parties later made a second supplementary agreement specifying the final construction costs of the overall project, which made no mention of the amount of financing costs or responsibility for them. The developer sued the construction company claiming the financing costs that it had incurred as a result of making payment in advance, arguing that those were additional costs that should not be counted in the project settlement made in the second supplementary agreement. The construction company argued that the second supplementary agreement was the final agreement of the parties and that the developer’s financing costs were not included in that agreement. The court held that the developer was not entitled to recover its financing costs. The parties were bound by the second supplementary agreement as a final settlement of the amount owing for the project.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_28

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Judgment The Plaintiff: Jingjiang Longwit Oils and Grains Industrial Co., Ltd. Domicile: Newport Park of Economic Development Zone, Jingjiang City, Jiangsu. Organization Code: 67,203,129-9. Legal representative: LI Shubiao, chairman. Agent ad litem: ZHU Lianhai, lawyer of Jiangsu Suhao Law Firm. Agent ad litem: YANG Qiaolin, lawyer of Jiangsu Suhao Law Firm. The Defendant: Guangdong Jindonghai Group Co., Ltd. Domicile: Huaqian Building, 22 South Jinhuan Road, Shantou City, Guangdong. Organization Code: 19,274,638-3. Legal representative: ZHOU Renxu, chairman. Agent ad litem: ZHENG Chengjie, lawyer of Guangdong Jiage Law Firm. With respect to the case arising from dispute over port construction contract filed by the Plaintiff, Jingjiang Longwit Oils and Grains Industrial Co., Ltd. (hereinafter referred to as “Longwit”), against the Defendant, Guangdong Jindonghai Group Co., Ltd. (hereinafter referred to as “Jindonghai”), which was transferred to the court by Taizhou Intermediate People’s Court on April 27, 2013. After accepting the case on the same day, the court formed a collegiate panel consisting of Judge ZHANG Yu as Presiding Judge, Judge XIONG Wenbo and Judge Yin in accordance with the law. During the trial in Taizhou Intermediate People’s Court, the Plaintiff submitted an application for preservation measures to freeze the deposit in amount of RMB4,470,000 or the seize or detain equivalent assets of the Defendant. Taizhou Intermediate People’s Court approved the application in accordance with the law and froze the deposit in amount of RMB4,470,000 of the Defendant and seized its ownership of the house located at No. 401 Room, 93 Changping Road, Jinping District, Shantou City. After the case was transferred to the court, the court continued the preservation measures according to the application by the Plaintiff. On May 7, 2013, The Plaintiff submitted an application for discharging the seizure of ownership of the house at No. 401 Room, 93 Changping Road, Jinping District, Shantou City, the court rendered (2013) Wu Hai Fa Shang Zi No. 00485-1 Ruling to discharge the seizure of ownership of the house No. 401 Room, 93 Changping Road, Jinping District, Shantou City. On August 28, 2013, the court held a hearing in public. ZHU Lianhai and YANG Qiaolin as agents ad litem of the Plaintiff, and ZHENG Chengjie as agent ad litem authorized by the Defendant appeared in court to attend the hearing. After the hearing, the court conducted a mediation, which ended in failure due to great dissension. Now the case has been concluded. The Plaintiff alleged that on May 26, 2009, the Plaintiff made Contract on Wharf Construction of Grains and Logistic Centre at Xingang Operation Area of Jingjiang Port Area of Taizhou Port (hereinafter referred to as Wharf Construction Contract), agreeing that the Defendant contracted the construction of the wharf for the Grains and Logistic Centre with project duration from March 15, 2009 to

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January 31, 2010, amounting to 323 calendar days; and the contract price including provisional sum and safety production expenses was tentatively fixed at RMB219,449,700, which should be paid by installments according to the schedule of the project. After the conclusion of the contract, the Defendant requested the Plaintiff to pay the project price in advance because of inadequacy of funds, to this end, the two parties ran into a supplementary agreement numbered with No. JJLONGWITGW20090516-1BC1 on May 31, 2009 (hereinafter referred to as Supplementary Agreement C1), which rescheduled the time and proportion of the project price; made it explicit that the Defendant should bear the financial costs incurred by advance payment; and agreed when the prepayment and progress payment having been paid by the Plaintiff as agreed exceeded 20% of the project price (namely RMB197,702,432, provisional sum and safety production expenses were not included), the Defendant should pay the financial costs for the payment by the Plaintiff thereafter, and the method of calculation of financial costs were as follows: the project price days from the cash day to the day of the acceptance of the overall project the loan interest rate over corresponding period 130%. The overall project passed the acceptance inspection on October 28, 2010. The two parties ran into a supplementary agreement numbered with No. JJLONGWITGW200905161BC4 (hereinafter referred to as Supplementary Agreement C4) to specify the final construction costs of the overall project and the sum having been paid by the Plaintiff, but neither the amount nor the undertaking of financial costs incurred by Advance Payment by the Plaintiff had been mentioned therein. The Plaintiff had contacted with the Defendant for several times in terms of the undertaking of the financial costs, by which the Defendant declined without exception. Therefore, the Plaintiff requested the court to judge that the Defendant should pay the financial costs in amount of RMB4,415,676.45 and bear the litigation fee of the subject case (including the preservation fees). The Defendant argued as follows: (1) Supplementary Agreement C4 entered into by and between the two parties was a consensus on the project price after full consultation. This agreement was the final confirmation on all the credits and debts of the project involved between the two parties, so no other fees should be counted; (2) Project Settlement Verification Form made on December 22, 2011 was a final confirmation on the project price in the form of formal completion settlement document after the two parties arrived at an agreement for final accounts according to the supplementary agreements above, which had been approved by the project construction cost department. According to Paragraph 1 of Article 14 of the Interim Measures on Settlement of Construction Project Price and the definition and practice of project settlement, project completion settlement was a confirmation on the overall credits and debts of the two parties incurred by the construction project, and unless otherwise specified, neither party could claim for any right against the other party except from the project completion settlement document above. Meanwhile, according to Paragraph 5 of Article 17 and Paragraph 6 of Article 17 of Wharf Construction Contract involved, there was no doubt that the final accounts paid to the contractor only included the credits and debts of the two parties before settlement. During the construction involved, the costs for measures

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meeting the schedule of the main project of the oil berth wharf and the incremental costs for prefabricated frames due to the delay of drawings added up to RMB9,050,372.64, which as shown in the remarks of Project Settlement Verification Form was decided by the two parties to be calculated at RMB1,000,000 in the final accounts. It indicated that the two parties had reached a consensus after deliberation on the financial costs and two sums above by making a compromise. The credits and debts of the two parties should not surpass the contents clearly stated in Project Settlement Verification Form, the Plaintiff was not entitled to claim for any rights against the Defendant beyond the project completion settlement document above; (3) the claim of the Plaintiff that the financial costs had already been solved in the settlement of contract price had no factual basis; (4) the two parties had agreed upon the alteration of payment method of the project price, so the claim of the Plaintiff for the interest on the payment had no factual basis and violated the provisions of Article 12 and Article 13 of the Interim Measures on Accounting of the Construction Engineering Price. So, the claims of the Plaintiff that the Defendant should pay RMB4,415,676.45 had no merits and should be rejected. To prove its claims, the Plaintiff submitted the following evidence: 1. Wharf Construction Contract, to prove that the Defendant contracted the wharf construction project from the Plaintiff, and the two parties entered into a construction contract; The Defendant raised no contest to the authenticity, legality or relevancy thereof, but held that Sub-paragraph 3 of Paragraph 3 of Article 17 of Wharf Construction Contract which was against Paragraph 1 of Article 12 and Paragraph 3 of Article 13 of the Interim Measures on Settlement of Construction Project Price. It also held that Sub-paragraph 2 of Paragraph 5 of Article 17 and Sub-paragraph 1 of Paragraph 6 of Article 17 of Wharf Construction Contract were about the final confirmation on the project price by the two parties. The court holds the opposing party raised no objection to this evidence upon cross-examination, the court admits this evidence. 2. Supplementary Agreement C1 signed on May 31, 2009, to prove that the parties agreed on the alteration of payment method of the project price and the Plaintiff paid the project price in advance on condition that the Defendant bore the financial costs calculated in the method: project price paid (the part exceeding 20% of the contract price) days from the cash day to the day of the acceptance of the overall project the loan interest rate over corresponding period 130%; The Defendant had no contest to the authenticity thereof, but it contested the relevancy and legality thereof, and held that it could not support the claims of the Plaintiff. The relevant provision in the Agreement that financial costs followed advance payment was against the law, besides, such arrangement had been ruled out by Supplementary Agreement C4 dated December 20, 2011 and Project Settlement Verification Form dated December 22, 2011.

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The court holds that this evidence is related to this case and the opposing party raised no objection to the authenticity thereof and the content is not against mandatory provisions of the law, the court affirms the effect of evidence. 3. Certification of Completion inspection and acceptance, to prove that the overall project was accepted on October 28, 2010, and the Defendant had no contest to this evidence, so the court admits this evidence; 4. Letter of Request to Verify the Interest for Advance Payment and the Minutes of the Meeting on Settlement of the Longwit Wharf Project (hereinafter referred to as the “Minutes”), to prove that the Defendant accepted to bear the financial costs incurred by Advance Payment, and the parties agreed to appoint their accountants to verify the specific amount thereof when settling the project; The Defendant argued that whether Letter of Request to Verify the Interest for Advance Payment could not be confirmed, and denied the letter had been sent to it; the Defendant raised no contest to the authenticity or legality thereof, but for relevancy and the content thereof, of which the content relating to the financial costs had been excluded by Supplementary Agreement C4 dated December 20, 2011 and Project Settlement Verification Form dated December 22, 2011; it could prove that such content was formed after a series of consultation on the financial costs during the project settlement. The court holds that although the Defendant did not confirm whether Letter of Request to Verify the Interest for Advance Payment had been sent to it, the title of the letter above is mentioned in Quantity Settlement of Items out of Project Business Contact List enclosed to Audit Report adduced by the Plaintiff, so the court ascertains that the Defendant had actually sent the letter out. Other evidence is relevant to this case. The opposing party raised no objection to the authenticity, legality or relevancy of this evidence upon cross-examination, so the court admits this evidence. 5. Audit Report of the Wharf Construction Project of Grains and Logistic Centre at Xingang Operation Area of Jingjiang Port Area of Taizhou Port (hereinafter referred to as Audit Report), Project Settlement Verification Summary Sheet attached thereto, Quantity Settlement of Items out of Project Business Contact List and Project Settlement Verification Form, to prove that the audit agency did not verify the financial costs which should be born by the Defendant or cut the sum from the project price. The Defendant raised no contest to the authenticity, the legality or relevancy of the evidence except the content thereof. The court holds the opposing party, upon cross-examination, raised no objection to the authenticity, legality or relevancy of this evidence, the court admits this evidence; 6. Supplementary Agreement C4 signed on December 20, 2011, to prove that the parties signed the Agreement only for the purpose of reconfirmation on the final project price and the sum having been paid by the Plaintiff, and the financial costs have not taken into account therein. The Defendant raised no contest to the

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authenticity, legality or relevancy of the evidence except the content thereof. The court holds the opposing party, upon cross-examination, raised no objection to the authenticity, legality or relevancy of this evidence, the court admits this evidence; 7. A list of financial payment procedure and calculation of financial costs paid by the Plaintiff, to prove that the Defendant should pay the financial costs in amount of RMB4,415,676.45 to the Plaintiff. The Defendant had no contest to the authenticity of the financial payment procedure, but it contested the relevancy thereof. As for the list of calculation of financial costs, the Defendant contested the authenticity, legality, relevancy and the content of proof thereof, and held that it was only data unilaterally made by the Plaintiff which could not be used as the evidence. But the Defendant admitted that the Plaintiff had in fact paid RMB171,922,444.14 for the project price, and it still had to pay RMB2,321,388.86. The court holds that the financial payment procedure is relevant to the subject case, upon cross-examination, the Defendant raised no contest to the authenticity or legality thereof, the court admits the evidence; the list of calculation of financial costs are unilaterally made by the Plaintiff, it only presents the explanations for its claims and cannot be taken as evidence. The court admits the amount of project price having been paid by the Plaintiff and the outstanding sum which had been confirmed by the two parties. To prove its defence, the Defendant submitted the following evidence within the time limit for adducing evidence: 1. Business license and lookup table of business registration information of the two parties, to prove the subject qualification of the parties. The Plaintiff raised no contest thereto, so the court admits it; 2. Wharf Construction Contract, to prove that the Defendant contracted the construction project from the Plaintiff, and the two parties have established a relationship of wharf construction contract. The project shall be settled by actual quantity and the rights and obligations shall be subject to the contract. The Plaintiff raised no contest thereto, so the court admits it; 3. Supplementary Agreement C1, to prove that the project was delayed as a result of tight funding by the Plaintiff, which should bear the loss of stoppage and the two parties agreed on the alteration of payment method and time of the project price. The Plaintiff raised no contest to the authenticity thereof, but argued that it could not prove the Plaintiff caused the delay of the project involved, meanwhile it could prove that the Plaintiff had indeed paid the project price in advance. Upon cross-examination, the Plaintiff raised no contest to the authenticity thereof, the court admits the evidence; 4. Certification of Completion inspection and acceptance, to prove that the overall project passed the acceptance inspection on October 28, 2010. The Plaintiff raised no contest to the authenticity thereof, so the court admits the evidence;

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5. Supplementary Agreement C4, to prove that the two parties settled the items contained in the contract, and the Plaintiff only confirmed part of the costs arising from the measures meeting the schedule of the overall project and the delay of drawings; and the Plaintiff still owed part of the project price. The Plaintiff raised no contest to the authenticity thereof, but argued that the two sums had been confirmed therein, but the Defendant held only part of the costs was confirmed, it was not in compliance with the fact. Upon cross-examination, the Plaintiff raised no contest to the evidence, so the court admits it; 6. Meeting Minutes dated July 29, 2009, the summary table of costs of prefabricated frames and measures meeting the schedule and the table of costs of measures meeting the schedule of the main construction of oil berth wharf, to prove that the delay of drawings by the Plaintiff caused the costs of prefabricated frames increased; in order to make sure that the project could be finished on time, the Defendant took measures meeting the schedule for adding quantities upon the request of the Plaintiff. The Plaintiff raised no contest to the authenticity thereof, but it did not confirm the summary table and the table of costs on the ground that they were unilaterally made by the Defendant. Upon cross-examination, the Plaintiff raised no contest to Meeting Minutes, so the court admits it; the court holds the summary table and the table of costs are unilaterally made by Defendant, without the confirmation of the Plaintiff and the audit of an independent third party, they cannot be the basis to decide the fact; 7. Project Settlement Verification Form, to prove that the two parties have completed the final settlement of the project involved, all the credits and debts shall be subject to Project Settlement Verification Form. The Plaintiff raised no contest to the authenticity thereof, but it did not admit the purpose of proof thereof. Upon cross-examination, the opposing party raised no contest to this evidence, so the court admits it; 8. Supplementary Agreement numbered with GDJDHJJMT-2002-02-001, to prove the Defendant additionally paid RMB1,000,000 because of the delay of the construction drawings of the oil berth to Wuhu Xiangsheng Co., Ltd. The Plaintiff held that it was a copy and it did not confirm the authenticity thereof. The court holds that there is no original to verify, besides the Plaintiff, thus this evidence shall be inadmissible; and 9. Project Business Contact List, to prove that the Defendant additionally paid RMB1,480,000 incurred by the delay of the construction drawings of the oil berth to Jiangsu Gangtou Co., Ltd. The Plaintiff held that it was a copy and it did not confirm the authenticity thereof. The court holds that it cannot be verified for lack of original, besides the Plaintiff, so this evidence shall be inadmissible. After trial, the court finds out the following facts: On May 26, 2009, the Plaintiff and the Defendant concluded Wharf Construction Contract, agreeing that the Defendant constructed the project of Grains and Logistic Centre at Xingang Operation Area of Jingjiang Port Area of Taizhou Port with a temporary contract price of RMB219,449,700 including provisional sum and safety production expenses. After Jindonghai signed the contract and provided the

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performance bond, 10% of the contract price (provisional sum and safety production expenses excluded) should be paid to Jindonghai in advance as prepayment; during the construction, progress payment should be paid on the basis of 20% of the actual quantity signed and confirmed by the supervisor monthly; when the payment reached 20% of the contract price, Longwit would suspend to pay and 90% of the contract price should be paid within 28 days after the project settlement, 5% of the contract price should be paid after completion acceptance and the remaining 5% was quality warranty deposit. Within 14 days after the quality warranty period expired and the certificate of termination was issued, the supervisor would issue the quality warranty deposit payment certificate, the quality warranty deposit would be paid to the contractor. Where the balance between the submitted sum of final accounts of the project and the verification price exceeded 5% of the former, 8% of the exceeding part would be taken as verified reduction amount, which should be deducted from the settlement payment by the developer. On May 31, 2009, the Plaintiff and the Defendant signed Supplementary Agreement C1, which rescheduled the project duration and payment schedule. Article 2 of the Agreement provided that 10% of the contract price (provisional sum and safety production expenses excluded) shall be paid as prepayment by Longwit to Jindonghai in advance within 15 days after the signing of the agreement; 10% of the berth costs should be paid by Longwit after the cross beam under the oil berth had been completed as scheduled; 50% of the completed quantity should be paid after the overall oil berth was completed as scheduled, afterwards, 50% of the actual quantity having been completed should be paid each month; 75% of the completed quantity should be paid within 28 days after the project was completed and accepted. Jindonnghai should submit the final accounts, and Longwit should commission an independent third party with qualification to audit shipping construction costs located at the place of the subject construction to do the settlement within 30 day; 90% of the sum of the final accounts should be paid within 15 working days after the settlement was finished, the other 10% was the quality warranty deposit. When the prepayment and progress payment having been paid by Longwit as agreed exceeded 20% of the project price (namely RMB197,702,432, provisional sum and safety production expenses were not included), Jindonghai should bear the financial costs paid by Longwit, and the method of calculation of financial costs were as follows: the project price days from the cash day to the day of the acceptance of the overall project the loan interest rate over corresponding period 130%. At the same time, Article 4 provided that this supplementary agreement was appendix to the Contract on construction of the Grains and Logistic Centre at Xingang Operation Area of Jingjiang Port Area of Taizhou Port, it should take priority over other appendixes. Article 5 provided that in event of any inconsistencies with the Contract on the Construction of the Grains and Logistic Centre at Xingang Operation Area of Jingjiang Port Area of Taizhou Port, this agreement should prevail. Article 6 provided that any issued not mentioned in this Agreement should subject to the Contract on the Construction of the Grains and Logistic Centre at Xingang Operation Area of Jingjiang Port Area of Taizhou Port.

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On November 11, 2009, the wharf construction of the oil berth project passed the completion inspection and acceptance. Bulk Grains Berth 1# and 2# Project passed the completion inspection and acceptance. On October 11, 2011, the Plaintiff and the Defendant listed the disputable items in the project settlement, so meeting minutes were made thereby, Paragraphs 6 of Article 2 Contact List mentioned that the interest on Advance Payment should be verified by the accountants of the builder and constructor. The completion settlement of the wharf construction project involved was sent to Wuxi Jianhui Construction Project Consultation Co., Ltd. (hereinafter referred to as “Jianhui Company”) for verification by the Plaintiff. Jianhui Company issued Xi Jian Suo (2013) No. H1008 Audit Report of the Wharf Construction of Grains and Logistic Centre at Xingang Operation Area of Jingjiang Port Area of Taizhou Port, which stated that the verification scope was the grains logistics center at Xingang Operation Area of Jingjiang Port Area of Taizhou Port, the verification basis was the document of completion provided by the constructor, including the Construction Contract, Work Contact List, Project Verification Record, the Project Statement, the As-constructed Drawing and etc. The report showed that the quoted price was RMB186,921,344; the verified price was RMB173,590,271; with RMB13,331,073 being reduced upon verification, the reduction ratio was 7.13%; the accounting fee was RMB318,800; the amount of the costs for measures meeting the schedule agreed by the parties and the delay of drawings was RMB1,000,000; and the final settlement sum was RMB174,271,471. In the Quantity Settlement of Items out of the Project Business Contact List, the 25th column of the Items states the Letter of Request of Verifying Interest Incurred by Advance Payment, but the corresponding columns of construction declaration, verification of owner and supervisor and remark are blank. The Plaintiff, the Defendant and Jianhui Company signed Project Settlement Verification Form, which confirmed that the verified price of the construction project was RMB174,271,471 once again. And as the remark column showed, neither the quoted price or the verified price included the costs of measures meeting the schedule in amount of RMB7,507,827 and the additional costs for prefabricated frames incurred by delay of drawing in amount of RMB1,542,546. Upon negotiation, the Plaintiff and the Defendant agreed the two sum would be calculated by RMB1,000,000 in the final accounts. On December 20, 2011, the Plaintiff and the Defendant signed Supplementary Agreement C4, reaching an agreement on the final settlement as follows: “confirm the final accounts of the wharf construction quoted by Jindonghai is RMB196,062,223, of which the amount of the costs of measures meeting the schedule and delay of drawings is RMB9,140,876; the final settlement sum negotiated by the parties and audited by the third party independently is RMB174,271,471 including the costs of measures meeting the schedule and delay of drawings in amount of RMB1,000,000; according to the Wharf Construction Contact and the negotiation of the parties, after deducting relevant expenses, the final settlement sum is RMB174,243,833.” Longwit paid RMB161,276,824.76 to Jindonghai, leaving RMB12,967,008.24 to be paid. RMB7,467,008.24 should be

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paid in cash and RMB5,500,000 by acceptance bill. At the same time, Article 5 provided, this agreement, as an appendix to the Wharf Construction Contact, should take precedence over other appendixes and supplementary agreements. Article 6 provided that in event of any inconsistencies with the Contract on the Construction of the Grains and Logistic Centre at Xingang Operation Area of Jingjiang Port Area of Taizhou Port, this agreement should prevail. Article 7 provided that any issued not mentioned in this Agreement should subject to the Contract on the Construction of the Grains and Logistic Centre at Xingang Operation Area of Jingjiang Port Area of Taizhou Port. After Supplementary Agreement C4 was concluded, the Plaintiff paid RMB10,645,619.38 to the Defendant at separate times. So far, the Plaintiff paid RMB171,922,444.14 to the Defendant in total, and still owed RMB2,321,388.86. The court holds that the case is arising from dispute over port construction contract. Rights and obligations of the two parties shall be governed by the contract law. So the Contract Law of the People’s Republic of China is the applicable law to be applied to the case. The contract signed by parties is expression of genuine intents. It is legally binding upon the two parties. The principal outstanding issues in this case are whether the financial costs have been incorporated in the final settlement and whether the Plaintiff is entitled to the financial costs after the project settlement is completed. The Plaintiff claimed that project settlement was final calculation and confirmation of the construction costs, the financial costs incurred by advance payment undertaken by the developer were extra expenses which did not fall into the construction costs, and should not be counted in the project settlement. Moreover, no matter in the final accounts, the negotiation on the settlement sum or audit of project settlement by an independent third party, the financial costs had not been covered. Article 7 of Supplementary Agreement C4 also expressly provides that any issued not mentioned in this Agreement should subject to Wharf Construction Contract and other supplementary agreements or appendixes. Therefore, the Defendant should pay the financial costs incurred by Advance Payment according to Supplementary Agreement C1. The Defendant argued that project settlement referred to final confirmation on all the costs related to the subject construction. The financial costs were not reflected in the settlement documents or supplementary agreements, because the financial costs had been offset by the extra expenses in the construction in amount of about RMB900 million namely the costs of measures meeting the schedule and delay of drawings in the negotiation, eventually the two sums were counted by RMB100 million in the final accounts. And Supplementary Agreement C4 was a summary of views about the project price after full consultation, so is the final confirmation of all credits and debts of the project, apart from this, other costs should no longer be calculated. Although Article 7 of the supplementary agreement provided uncovered matters, uncovered matters referred to the project maintenance, quality warranty and other contents which had not been mentioned in this agreement. Therefore, the

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Plaintiff was not entitled to the financial costs after the project price had been settled. The court holds that project completion final accounts is the final confirmation on all creditors’ rights and obligations between the developer and the contractor incurred by the construction project. Article 17.5.2 of Special Provisions of the Wharf Construction Contract involved provides that after receiving and verifying the completion payment form, the construction supervisor shall declare the payment that the developer shall pay to the contractor to the developer for verification and cc the contractor, as well as the balance between the developer and the contractor if any. After the developer verifies, the developer shall pay the sum of final settlement as stated above to the contractor within 28 days after the construction supervisor issues a completion certificate. Consequently, all costs arising from the project have been accounted into project completion settlement. Once the developer and the contractor reach an agreement on the project completion settlement, no other costs except the rights and debts confirmed in the settlement shall be accounted. Any party cannot claim for other credits or debts other than those specified in the project settlement documents. In this case, the financial costs arising out of Advance Payment by Longwit are relevant costs of the wharf construction, so it shall be counted into the project settlement. The Audit Report issued by Jianhui Company is under the entrustment of the Plaintiff, and the foundational materials, on which the report based, are provided by the constructors, including the wharf construction contract, work contact list, project settlement form etc. Although Audit Report and Project Settlement Verification From do not reflect the financial costs, but in the Quantity Settlement of Items out of the Project Business Contact List attached to the Audit Report, the Letter of Request to Verify the Interest for Advance Payment is filled in the column of items, it suggests the financial costs have been taken into account when the Defendant provided the settlement basis and the Plaintiff entrusted Jianhui Company with the project settlement, and there is no omission. Although construction application, verification of owner and supervisor, and remark are blanks in the column of items, it cannot prove that the financial costs have not been accounted into the project settlement. What’s more, Supplementary Agreement C4 is the last supplementary agreement for the Wharf Construction Contract. It shall take priority over other supplementary agreements and appendixes. Any inconsistencies with other agreements, provisions in this agreement shall prevail. In this Agreement, it is clearly stated this Agreement is a consensus arrived upon by the parties on completion final accounts. Based on the audited sum of the final accounts of the project, after deducting relevant sum, the Plaintiff and the Defendant confirm that the final settlement sum is RMB174,243,833. This Agreement also identifies the payment method of the paid sum, the outstanding sum and the remaining sum. The Project Settlement Verification Form has been signed and confirmed by the Plaintiff, the Defendant and Jianhui Company, the three Parties raised no contest thereto. In view of that, the court holds that the amount mentioned above is the final project price, all credits and debts including the financial costs have been settled in the final accounts. In

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addition, the financial costs claimed by the Plaintiff is about RMB4 billion, if the developer count the sum into the final accounts, it can offset the project payment. It is repugnant to common sense that this sum is omitted in final settlement. In respect of the term of “Uncovered Matters” in Article 7 of Supplementary Agreement C4, the court has noted that there is same expression in Supplement Agreement C1, so the court has reason to believe that such expression is a standard terms. So it does not necessarily mean the finical costs shall fall into uncovered matters. In conclusion, the Plaintiff and the Defendant have settled project completion final accounts, containing the financial costs incurred by Advance Payment have been counted therein. The two parties have confirmed all costs and payments arising out of the project in Supplementary Agreement C4, both of them shall obey the agreement. The Plaintiff shall not be entitled to the financial costs separately beyond the final settlement price of the project. The claim of the Plaintiff has no factual and legal basis, therefore the court will not support. According to Article 8 of the Contract Law of the People’s Republic of China, Article 64 and 142 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Reject the claims of the Plaintiff, Jingjiang Longwit Oils and Grains Industrial Co., Ltd. The Plaintiff, Jingjiang Longwit Oils and Grains Industrial Co., Ltd., shall bear court acceptance fee in amount of RMB42,130. Any party who disagrees with this judgment may submit a letter of appeal within 15 days upon service of this judgment to file an appeal to the Hubei High People’s Court. When submitting the letter of appeal, the Appellant shall pay appeal fees in accordance with the dissatisfied sum and Article 13 Paragraph 1 of the Measures of Court Costs to Hubei High People’s Court within 7 days after submitting the letter of appeal, otherwise, the appeal will be deemed to be withdrawn (Deposit Bank: Agricultural Bank of China Wuhan City Donghu Branch; Number of Account: 052101040020201). Presiding Judge: ZHANG Yu Judge: XIONG Wenbo Judge: YI Lu December 6, 2013 Clerk: ZHANG Yu

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Hubei High People’s Court Civil Judgment Jingjiang Longwit Oils and Grains Industrial Co., Ltd. v. Guangdong Jindonghai Group Co., Ltd. (2014) E Min Si Zhong Zi No. 00098 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 601. Cause of Action 235. Dispute over channel and port dredging contract. Headnote Affirming lower court judgment that the developer of a wharf was not entitled to recover from the construction company the financial costs it had incurred as a result of having made advance payment, because the parties had entered into a supplementary agreement settling final costs, which made no mention of financing costs. Summary A developer contracted with a construction company to build a wharf. The parties later made a supplementary agreement changing the schedule of advance payments. The supplementary agreement explicitly stated that the construction company should bear any financial costs incurred as a result of the developer making payment in advance. The parties later made a second supplementary agreement specifying the final construction costs of the overall project, which made no mention of the amount of financing costs or responsibility for them. The developer sued the construction company claiming the financing costs that it had incurred as a result of making payment in advance, arguing that those were additional costs that should not be counted in the project settlement made in the second supplementary agreement. The construction company argued that the second supplementary agreement was the final agreement of the parties and that the developer’s financing costs were not included in that agreement. The court offirst instance held that the developer was not entitled to recover its financing costs. The parties were bound by the second supplementary agreement as a final settlement of the amount owing for the project. The developer appealed, arguing that the second supplementary agreement was a settlement of project costs, and financial costs were not project costs. The appeal court affirmed the lower court’s judgment, holding that the second supplementary agreement reflected the genuine intention of the two parties, that the agreement was not against mandatory provisions of laws or administrative regulations, and that it should bind both parties. After the project was completed, the two parties conducted the completion settlement and neither party raised any objection to the total audited amount.

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Judgment The Appellant (the Plaintiff of first instance): Jingjiang Longwit Oils and Grains Industrial Co., Ltd. Domicile: Newport Park of Economic Development Zone, Jingjiang City, Jiangsu. Economic Development Zone, Jingjiang City, Jiangsu. Organization Code: 67203129-9. Legal representative: LI Shubiao, chairman. Agent ad litem: ZHU Lianhai, lawyer of Jiangsu Jianghao Law Firm. Agent ad litem: YANG Qiaolin, lawyer of Jiangsu Jianghao Law Firm. The Respondent (the Defendant of first instance): Guangdong Jindonghai Group Co., Ltd. Domicile: Huaqian Building, 22 South Jinhuan Road, Shantou City, Guangdong. Organization Code: 19274638-3. Legal representative: ZHOU Renxu, chairman of the Board. Agent ad litem: ZHENG Chengjie, lawyer of Guangdong Jiage Law Firm. The Appellant, Jingjiang Longwit Oils and Grains Industrial Co., Ltd. (hereinafter referred to as “Longwit”), disagreed with (2013) Wu Hai Fa Shang Zi No. 00485 Civil Judgment rendered by the Wuhan Maritime Court with regard to the case arising from dispute over port construction contract filed by the Appellant against the Respondent, Guangdong Jindonghai Group Co., Ltd. (hereinafter referred to as “Jindonghai”), and appealed to the court. After accepting the case on May 14, 2014, the court organized a collegiate panel consisting of Judge WAN Haili, Acting Judge OU Haiyan and Acting Judge HU Zhengwei, and held a hearing to try this case in public. ZHU Lianhai and YANG Qiaolin, agents ad litem of Longwit, and ZHENG Chengjie, agent ad litem of Jindonghai appeared in court and participated in the action. Now the case has been concluded. After trial, the court of first instance found the following facts: on May 26, 2009, Longwit and Jindonghai concluded the Wharf Construction Contract, agreeing that “Jindonghai constructed the project of Grains and Logistic Centre at Xingang Operation Area of Jingjiang Port Area of Taizhou Port with a temporary contract price of RMB219,449,700 including provisional sum and safety production expenses. After Jindonghai signed the contract and provides the performance bond, 10% of the contract price (provisional sum and safety production expenses excluded) should be paid to Jindonghai in advance as prepayment; during the construction, progress payment should be paid on the basis of 20% of the actual quantity signed and confirmed by the supervisor monthly; when the payment reached 20% of the contract price, Longwit would suspend to pay and 90% of the contract price should be paid within 28 days after the project settlement, 5% of the contract price should be paid after completion acceptance and the remaining 5% is quality warranty deposit. Within 14 days after the quality warranty period expired and the certificate of termination was issued, the supervisor would issue the quality

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warranty deposit payment certificate, the quality warranty deposit would be paid to the contractor. Where the balance between the submitted sum of final accounts of the project and the verification price exceeded 5% of the former, 8% of the exceeding part would be taken as verified reduction amount, which should be deducted from the settlement payment by the developer”. On May 31, 2009, Longwit and Jindonghai signed Supplementary Agreement C1, which rescheduled the project duration and payment schedule. Article 2 of the Agreement provided that “10% of the contract price (provisional sum and safety production expenses excluded) shall be paid as prepayment by Longwit to Jindonghai in advance within 15 days after the signing of the agreement; 10% of the berth costs shall be paid by Longwit after the cross beam under the oil berth has been completed as scheduled; 50% of the completed quantity shall be paid after the overall oil berth is completed as scheduled, afterwards, 50% of the actual quantity having been completed shall be paid each month; 75% of the completed quantity shall be paid within 28 days after the project is completed and accepted. Jin Ding Hai shall submit the final accounts, and Longwit shall commission an independent third party with qualification to audit shipping construction costs located at the place of the subject construction to do the settlement within 30 day; 90% of the sum of the final accounts shall be paid within 15 working days after the settlement is finished, the other 10% is the quality warranty deposit. When the prepayment and progress payment having been paid by Longwit as agreed exceeded 20% of the project price (namely RMB197,702,432, provisional sum and safety production expenses are not included), Jindonghai shall bear the financial costs paid by Longwit, and the method of calculation of financial costs are as follows: the project price * days from the cash day to the day of the acceptance of the overall project * the loan interest rate over corresponding period * 130%”. At the same time, Article 4 provides “this supplementary agreement is appendix to the Contract on construction of the Grains and Logistic Centre at Xingang Operation Area of Jingjiang Port Area of Taizhou Port, it shall take priority over other appendixes”. Article 5 provided that “in event of any inconsistencies with the Contract on the Construction of the Grains and Logistic Centre at Xingang Operation Area of Jingjiang Port Area of Taizhou Port, this agreement shall prevail”. Article 6 provides that “any issued not mentioned in this Agreement shall subject to the Contract on the Construction of the Grains and Logistic Centre at Xingang Operation Area of Jingjiang Port Area of Taizhou Port”. On November 11, 2009, the wharf construction of the oil berth project passed the completion inspection and acceptance. Bulk Grains Berth 1# and 2# Project passed the completion inspection and acceptance. On October 11, 2011, Longwit and Jindonghai listed the disputable items in the project settlement, so meeting minutes were made thereby, Article 2 Paragraph 6 Contact List mentioned that the interest on the Advance Payment should be verified by the accountants of the builder and constructor. The completion settlement of the wharf construction project involved was sent to Wuxi Jianhui Construction Project Consultation Co., Ltd. (hereinafter referred to as “Jianhui Company”) for verification by Longwit. Jianhui Company issued Xi Jian

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Suo (2013) No. H1008 Audit Report of the Wharf Construction of Grains and Logistic Centre at Xingang Operation Area of Jingjiang Port Area of Taizhou Port, which stated that the verification scope was the grains logistics center at Xingang Operation Area of Jingjiang Port Area of Taizhou Port, the verification basis was the document of completion provided by the constructor, including the Construction Contract, Work Contact List, Project Verification Record, the Project Statement, the As-constructed Drawing and etc. The report showed that the quoted price was RMB186,921,344; the verified price was RMB173,590,271; with RMB13,331,073 being reduced upon verification, the reduction ratio was 7.13%; the accounting fee was RMB318,800; the amount of the costs for measures meeting the schedule agreed by the parties and the delay of drawings was RMB1,000,000; and the final settlement sum was RMB174,271,471. In the Quantity Settlement of Items out of the Project Business Contact List, the 25th column of the Items stated the Letter of Request of Verifying Interest Incurred by Advance Payment, but the corresponding columns of construction declaration, verification of owner and supervisor and remark were blank. Longwit, Jindonghai and Jianhui Company signed Project Settlement Verification Form, confirming that the verified price of the construction project was RMB174,271,471 once again. And as the remark column shows, neither the quoted price or the verified price includes the costs of measures meeting the schedule in amount of RMB7,507,827 and the additional costs for prefabricated frames incurred by delay of drawing in amount of RMB1,542,546. Upon negotiation, Longwit and Jindonghai agreed the two sum would be calculated by RMB1,000,000 in the final accounts. On December 20, 2011, Longwit and Jindonghai signed Supplementary Agreement C4, reaching an agreement on the final settlement as follows: “confirm the final accounts of the wharf construction quoted by Jindonghai is RMB196,062,223, of which the amount of the costs of measures meeting the schedule and delay of drawings is RMB9,140,876; the final settlement sum negotiated by the parties and audited by the third party independently is RMB174,271,471 including the costs of measures meeting the schedule and delay of drawings in amount of RMB1,000,000; according to the Wharf Construction Contact and the negotiation of the parties, after deducting relevant expenses, the final settlement sum is RMB174,243,833. Longwit paid RMB161,276,824.76 to Jindonghai, leaving RMB12,967,008.24 to be paid. RMB7,467,008.24 shall be paid in cash and RMB5,500,000 by acceptance bill. At the same time, Article 5 provides, this agreement, as an appendix to the Wharf Construction Contact, shall take precedence over other appendixes and supplementary agreements. Article 6 provides that in event of any inconsistencies with the Contract on the Construction of the Grains and Logistic Centre at Xingang Operation Area of Jingjiang Port Area of Taizhou Port, this agreement shall prevail. Article 7 provides that any issued not mentioned in this Agreement shall subject to the Contract on the Construction of the Grains and Logistic Centre at Xingang Operation Area of Jingjiang Port Area of Taizhou Port.

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After Supplementary Agreement C4 was concluded, Longwit paid RMB10,645,619.38 to Jindonghai at separate times. So far, Longwit paid RMB171,922,444.14 to Jindonghai in total, and still owed RMB2,321,388.86. The court of first instance held that the case was arising from dispute over wharf construction contract. Rights and obligations of the two parties should be governed by the contract law. So the Contract Law of the People’s Republic of China was substantive law to be applied to the case. The contract signed by parties was expression of genuine intents. It was legally binding upon the two parties. The principal outstanding issues in this case were whether the financial costs had been incorporated in the final settlement and whether Longwit was entitled to the financial costs after the project settlement was completed. The court of first instance held that: project completion final accounts was final confirmation on all creditors’ rights and obligations between the developer and the contractor incurred by the construction project. Article 17.5.2 of Special Provisions of the Wharf Construction Contract involved provided that after receiving and verifying the completion payment form, the construction supervisor should declare the payment that the developer should pay to the contractor to the developer for verification and the contractor, as well as the balance between the developer and the contractor if any. After the developer verified, the developer should pay the sum of final settlement as stated above to the contractor within 28 days after the construction supervisor issued a completion certificate. Consequently, all costs arising from the project have been accounted into project completion settlement. Once the developer and the contractor reached an agreement on the project completion settlement, no other costs except the rights and debts confirmed in the settlement should be accounted. Any party could not claim for other credits or debts other than those specified in the project settlement documents. In this case, the financial costs arising out of Advance Payment by Longwit were relevant costs of the wharf construction, so it should be counted into the project settlement. Audit Report issued by Jianhui Company was under the entrustment of Longwit, and the foundational materials, on which the report based, were provided by the constructors, including the wharf construction contract, work contact list, project settlement form etc. Although Audit Report and Project Settlement Verification From did not reflect the financial costs, but in the Quantity Settlement of Items out of the Project Business Contact List attached to Audit Report, the Letter of Request to Verify the Interest for Advance Payment was filled in the column of items, it suggested the financial costs had been taken into account when Jindonghai provided the settlement basis and Longwit entrusted Jianhui Company with the project settlement, and there was no omission. Although construction application, verification of owner and supervisor, and remark were blanks in the column of items, it could not prove that the financial costs had not been accounted into the project settlement. What’s more, Supplementary Agreement C4 was the last supplementary agreement for the Wharf Construction Contract. It should take priority over other supplementary agreements and appendixes. Any inconsistencies with other agreements, provisions in this agreement should prevail. In this Agreement, it was clearly stated

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this Agreement was a consensus arrived upon by the parties on completion final accounts. Based on the audited sum of the final accounts of the project, after deducting relevant sum, Longwit and Jindonghai confirmed that the final settlement sum was RMB174,243,833. This Agreement also identified the payment method of the paid sum, the outstanding sum and the remaining sum. Project Settlement Verification Form had been signed and confirmed by Longwit, Jindonghai and Jianhui Company, the three parties raised no contest thereto. In view of that, the court of first instance held that the amount mentioned above was the final project price, all credits and debts including the financial costs had been settled in the final accounts. In addition, the financial costs claimed by Longwit was about RMB4 billion, if the developer count the sum into the final accounts, it could offset the project payment. It was repugnant to common sense that this sum was omitted in final settlement. In respect of the term of “Uncovered Matters” in Article 7 of Supplementary Agreement C4, the court of first instance had noted that there was same expression in Supplement Agreement C1, so the court of first instance held it had reason to believe that such expression was a standard terms. So it did not necessarily mean the finical costs should fall into uncovered matters. In conclusion, Longwit and Jindonghai had settled project completion final accounts, containing the financial costs incurred by advance payment have been counted therein. The two parties had confirmed all costs and payments arising out of the project in the Supplementary Agreement C4, both of them should obey the agreement. Longwit should not be entitled to the financial costs separately beyond the final settlement price of the project. The claim of Longwit had no factual and legal basis, therefore the court of first instance did not support. According to Article 8 of the Contract Law of the People’s Republic of China, Article 64 and Article 142 of the Civil Procedure Law of the People’s Republic of China, the court of first instance rejected the claims of Longwit and Longwit should bear court acceptance fee in amount of RMB42,130 and the preservation fee in amount of RMB5000. Longwit disagreed with the judgment and appealed that: the court should revoke and change the judgment according to law; and Jindonghai should bear the court acceptance fee. The main facts and reasons were as follows: the project completion settlement was settlement of project costs, the financial costs did not fall into the range of the project costs. The facts were unclearly found and the laws were incorrectly applied in the original judgment, as a result, the judgment was wrong. Project completion settlement meant after the contractor completed the contracted project in accordance with the contract, and the project passed the completion inspection and acceptance, the developer should settle the final project price. That is to say, project completion settlement only referred to settlement of project price, the financial costs should not be included. Article 17.5 of Completion Settlement of the Wharf Construction Contract provided that “the contractor should submit a completed payment application and relevant documents to the supervisor within 28 days after the project passed the completion inspection and acceptance. After verifying the documents, the supervisor determines the due and payable sum the

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developer shall pay and send that to the contractor for verification and cc the developer.” This clause clearly provided the range and procedure of project completion settlement. Supervisor was an indispensable part in the project completion settlement. The range of settlement was raised by the contractor and verified and approved by the construction supervisor and the developer. In this case, Jindonghai, as the contractor, did not put forward the finical costs in the completion settlement. The supervisor and the developer did not verify the finical costs either. The evidence related to the finical costs was be confined to Supplement Agreement C1, the Letter Request for Verifying the Interest for Advance Payment, the Minutes of the Meeting on Settlement of Longwit Wharf Project, the Quantity Settlement of Items out of the Project Business Contact List attached to Audit Report. Supplement Agreement C1 was signed by Longwit and Jindonghai, in which it was first time that Jindonghai should undertake the finical costs arising out of advance payment requested by Longwit; the Letter Request for Verifying the Interest for Advance Payment was sent to Longwit from Jindonghai, requesting Longwit to verify the finical costs it calculated; the Minutes of the Meeting on Settlement of Longwit Wharf Project only involved Longwit and Jindonghai; the Quantity Settlement of Items out of the Project Business Contact List attached to the Audit Report was made by auditing office. The construction supervisor was not involved in the evidence above, Jindonghai did not submit the finical costs to the supervisor to verify. It meant that construction supervisor did not know the agreement between Longwit and Jindonghai about the finical costs from beginning to end, it was impossible that the supervisor requested the contractor to undertake the finical costs, so the finical costs was definitely not counted in the completion settlement. No matter based on common understanding or the agreement of the two parties, the finical costs should not be covered in completion settlement. The finical costs should be deducted after the completion settlement. The parties did not settle the finical costs when settling the final accounts. It was exactly why it was prescribed Uncovered Matters should subject to the Wharf Construction Contract and other supplementary agreements in Supplement Agreement C4 after Audit Report was issued. The court of first instance ascertained it was standard terms on the ground of similar provision in Supplement Agreement C1, but according to Article 39 Paragraph 2 of the Contract Law of the People’s Republic of China, the terms of Uncovered Matters in this case was result of negotiation of the two parties, it did not meet the characteristics of standard terms, it could be identified as standard terms. Since the Uncovered Matters terms was joint intents of the two parties, so the uncovered matters should be dealt according to the Wharf Construction Contract and other supplementary agreements, the finical costs was not mentioned in Supplement Agreement C4, so the finical costs ought to be uncovered matters. Jindonghai argued the facts were clearly ascertained and the laws and regulations were correctly applied in the original judgment, the appeal should be dismissed and the original judgment should be affirmed. Firstly, project completion settlement was final confirmation on all the credits and debts arising out of the subject project between the developer and the contractor. Based on the definition of project completion settlement and practice, the project completion settlement was final

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confirmation on all the credits and debts incurred by the project, if no special agreement or interpretations was provided, any party was not entitled to claim against the other party. Article 14 Paragraph 1 of the Interim Measures for Construction Project Price provided that “after the project is completed, the parties shall make settlement in accordance with the agreed contract price and adjustments thereto and claims”, accordingly, project completion settlement was final settlement of the contract price and adjustments and claims. In the course of the performance of the contract, the parties altered the original method of payment to advance payment and arranged the interest as financial costs, it was adjustment agreed in the above terms. So the financial costs certainly should be incorporated into project completion settlement. In fact, the contract reflected those contents. Article 17.5 Special Provisions of the Wharf Construction Contract provided “(a) the construction supervisor shall determine the final payable sum as agreed; and (b) the balance of arrears between the developer and the contractor, if any, after confirming the sum having been paid by the developer and the due sum of the contractor according to the contract”. Article 17.6 provided that “the total amount of the Settlement Payment Application should represent final settlement of the sum paid to the contractor as agreed”. These terms above had cleared that the final sum that the developer should pay included all the credits and debts that should be born by two parties before settlement, the total sum in the Settlement Payment Application was final settlement of the payment that should be paid to contractor. So no other credits and debts except the payment having been confirmed in the final settlement should exist. Secondly, the finical costs incurred by advance payment which were directly related to the construction, such sum should be incorporated into the project settlement. In the process of project completion settlement, the parties discussed the finical costs for several times and finally concluded Supplementary Agreement C4 and Project Settlement Verification Form. The Letter of Request for Verifying the Interest on Advance payment appeared in the Quantity Settlement of Items out of the Project Business Contact List attached to the Audit Report, it suggested that the finical costs had been counted in the settlement, and no item was omitted. In Longwit’s opinion, uncovered matters referred to the finical costs, but it was unilateral understanding of unilateral without basis. Any party had no right to make arbitrary interpretation or expanding interpretation, let along interpretation in favor of its own side. In fact, the uncovered matters mainly referred to quality of the project and warranty period. It could be corroborated by Article 4 therein. Similar terms could also be found in Supplementary Agreement C1. It was proper that the original court ascertained such representation was standard terms. In the proceedings of the second instance, the two parties did not submit new evidence. After trial, the court finds that the facts found by the court of first instance were true, and the court hereby ascertains. Combined with the claims and defence of the parties, the court holds the outstanding issue of this case is whether Jindonghai shall pay Longwit the finical costs after the project settlement. The analyses of the court are as follows:

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Longwit alleged that the project completion settlement only referred to settlement of the costs of the project completed by the contractor, the finical costs were not contained in the project costs. When the parties audited the settlement of the project, they did not count the finical costs either. So Jindonghai should pay the finical costs to Longwit according to Supplement Agreement C1. Jindonghai alleged that project completion settlement was final confirmation on all credits and debts incurred by the construction project, the finical costs should be incorporated into the settlement. In addition, as the Quantity Settlement of Items out of the Project Business Contract List attached to Audit Report showed, the two parties had taken the finical costs into the range of the settlement. So Jindonghai should not pay Longwit the finical costs. The court holds that the finical costs have been counted in the settlement of the construction project involved, Jindonghai need not pay Lingwit. Firstly, Article 3 of the Interim Measures on Settlement of Construction Project Price issued by the Ministry of Finance and the Ministry of Housing and Urban–rural Development provides “settlement of costs of construction project in this Measures refers to activity to agree on the contract price of the contracting construction project and settle the project prepayment, project progress payment and project completion settlement price according to the contract. Article 14 provides “after completion of the project, the parties shall conduct project completion settlement on the basis of the contract price, adjustments of the contract price and claims. In this case, Longwit and Jindonghai have agreed on the finical costs in Supplement Agreement C1. From the content and the calculation method, it can be seen that the purpose of agreement on the finical costs lies in that alterations made in the supplementary agreement on prepayment and progress payment provided in the original contract lead to the result that the payable sum exceeds the original agreement or the payment time is advanced, then the interest loss suffered by Longwit shall be covered. This can be deemed as an agreement on finical costs. So the finical costs shall be counted in the settlement. The allegation of Longwit that the project completion settlement only referred to settlement of the costs of the project completed by the contractor and the finical costs were not contained in the project costs cannot stand; secondly, Jianhui Company issued Audit Report of the wharf construction project involved, which is based on completion documents provided by the constructor including the construction contract, the working lists, the signing record, the statement of settlement and etc. The Letter of Request for Verifying the Interest on Advance Payment and the Quantity Settlement of Items out of the Project Business Contact List suggest that the finical costs have been counted in the audit; thirdly, after Jianhui Company issued Audit Report, Longwit and Jindonghai confirmed the audited price of the project and signed the project completion settlement. But the project completion settlement does not mention the finical costs, the parties signed Supplement Agreement C4, in which the sum of final accounts as well as the time of payment is confirmed. The allegation of Longwit the finical costs fell into Uncovered Matters is unreasonable. In addition, the parties have agreed in the supplementary agreement that the finical costs shall be deducted from the agreed payment. Seen from the above agreement, the finical costs shall be directly

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deducted in the prepayment or progress payment rather than pay separately. No evidence shows the finical costs have been deducted. It has no factual or legal basis that Longwit requested Jindonghai to pay the finical costs. To sum up, the contract and those supplements are the genuine intention of the two parties, not against mandatory provisions of laws or administrative regulations, and shall bind both parties. After the project was completed, the two parties conducted the completion settlement and both of them raised no objection to the audited sum. After the project payment has been settled, it has no factual and legal basis that Longwit requested Jindonghai to pay the finical costs. The ground of appeal cannot stand, the court will not support. The facts were clearly found and the laws were correctly applied in the original judgment, and the trial procedure was lawful and the substantive decision was proper. According to Article 170 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance in amount of RMB42,130, shall be born by the Appellant, Jingjiang Longwit Oils and Grains Industrial Co., Ltd. The judgment is final. Presiding Judge: WAN Haili Acting Judge: OU Haiyan Acting Judge: HU Zhengwei August 7, 2014 Clerk: CHENG Jianxiao

Tianjin Maritime Court Civil Judgment LI Yunpeng et al. v. Tianjin Great Wall Underwater Engineering Co., Ltd. (2014) Jin Hai Fa Shi Chu Zi No. 22 Related Case(s) None. Cause of Action 226. Dispute over contract for employment of seaman. Headnote Parents of a deceased seaman were held to be entitled to compensation for the seaman’s death by drowning after drinking alcohol during dinner on shore with workmates, as the deceased died during working hours at his workplace. Summary The Plaintiffs LI Yunpeng and YU Huiqin, parents of the deceased, brought an action against their son’s employer, Tianjin Great Wall Underwater Engineering Co., Ltd. for damages arising from a work related injury to their son. The Plaintiffs’ son was employed by the Defendant as a ship’s cook. During the course of his employment the deceased went ashore for dinner and drank some alcohol during dinner. The deceased then later returned to the ship, and was later found to have drowned. The Defendant argued that the deceased did not die during the course of his employment because the deceased was intoxicated after going out and drinking at dinner. Held—there was a factual labor contract relationship between the Defendant and the deceased, and the deceased’s death, was the result of a work-related injury. Therefore, the Plaintiffs, as parents of LI Zhang, are entitled to compensation for his death.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_29

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Judgment The Plaintiff: LI Yunpeng, male, Han, born on September 18, 1936, jobless, living in Dongli District, Tianjin Agent ad litem: ZHANG Yonggang, male, Han, born on April 1, 1961, staff of Tianjin Gangtong Business Consulting Services Co., Ltd., living in No. 203, Door 5, Building 3, Chongan Road, Yingkou Street, Tanggu District, Tianjin. The Plaintiff: YU Huiqin, female, Han, born on July 3, 1938, jobless, living in Room 111, Door 2, Building 2, East Chenglin Street, Dongli District, Tianjin, wife of the Plaintiff LI Yunpeng Agent ad litem: ZHANG Yonggang, male, Han, born on April 1, 1961, staff of Tianjin Gangtong Business Consulting Services Co., Ltd., living in Tanggu District, Tianjin. The Defendant: Tianjin Great Wall Underwater Engineering Co., Ltd. Domicile: Door 76, Building 10, the Second Street, Economic and Technological Development Zone, Tianjin. Legal representative: ZHAO Hengli, chairman of the company. Agent ad litem: SONG Bingdong, lawyer of Tianjin Xingbing Law Firm. With respect to the case arising from dispute over contract for seaman’s employment filed by the Plaintiffs, LI Yunpeng and YU Huiqin, against the Defendant, Tianjin Great Wall Underwater Engineering Co., Ltd. (hereafter referred to as “Great Wall”), on December 26, 2013, the court, after accepting the case on the same day, applied general procedure in accordance with law and organized the collegiate panel consisting of the presiding judge, Yang Ling and the acting judges, HU Yingjie and PEI Daming. The court held two court sessions in public on February 26 and May 29, 2014 respectively. ZHANG Yonggang, the agent ad litem of the Plaintiffs and ZHAO Hengli, the agent ad litem of the Defendant appeared in court and participated in action. The trial of this case has been closed. The Plaintiffs alleged that they were parents of LI Zhang, who was a seaman hired by the Defendant on August 10, 2013 as a chef working on M. V. “Great Wall No. 6” owned by the Defendant for 14 h. On the morning of November 27, 2013, LI Zhang died of drowning during work. The Plaintiffs argued there was an labor contract relationship established between the Defendant and LI Zhang, so the Defendant should compensate the Plaintiffs funeral service fees in sum of RMB23,232, bereavement payments for dependent family members in sum of RMB45,600, a lump sum work-related death allowance in sum of RMB491,300, lost wages in sum of RMB4000 and travel expenses in sum of RMB2000, of which the total amount was RMB566,132. The Defendant argued that it was an accidental death to LI Zhang who should not be determined as having work-related injury; and the amount of compensation should be specified by the compensation standards of work-related injury.

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Based on the argument of the two parties, the main issues in this case are as follows: 1. What the relationship between LI Zhang and the Defendant is; 2. Whether the Defendant shall be liable for compensation; 3. What the amount of loss and the basis thereof is. The Plaintiffs submitted the following evidence to the court to support their allegations: 1. The statement provided by Donggu Public Security Frontier Station, to prove that LI Zhang was hired by the Defendant as a chef on M. V. “Great Wall No. 6”, which was owned by the Defendant, and he was died of drowning on the evening of November 26, 2013; 2. Copy of Identification Card of LI Zhang, to prove his basic information; 3. Residence Booklet, to prove the information of family members of LI Zhang; 4. Information on the website of the Defendant, to prove its basic information; 5. Certificate of Income, to prove the incomes of the Plaintiffs’ eldest son, LI Tie and eldest daughter, LI Hua; 6. The alarm registration form obtained by the court according to the Plaintiffs’ application; and 7. The survey video obtained by the court according to the Plaintiffs’ application. The Plaintiffs held that evidence 6 and 7 had demonstrated the fact that LI Zhang was died of drowning and he was not intoxicated. Evidence 1, 2, 3, 5, 6 and 7 was the original, and evidence 4 was photoprint of screenshots download from the internet. Cross-examination opinions of the Defendant are as follows: it had no objection to the authenticity of evidence; evidence 1 proved that there was an labor contract relationship between LI Zhang and the Defendant; it had no objection to evidence 2–4; evidence 5 could not prove the actual income of LI Tie and LI Hua; evidence 6 and 7 proved that it was in the time when the ship put in harbor for shelter from the wind but not when he was at work that LI Zhang drank too much and was drowned accidentally. The Defendant submitted the following evidence to the court to support its allegations: 1. A statement made by CHEN Yingquan and his identification card and photo, to prove the fact that LI Zhang intoxicated on the night involved; 2. Payroll, to prove that there was a labor contract relationship between LI Zhang and the Defendant; 3. Electronic voucher, price list of funeral company, mortuary fee receipt and charge bills of funeral company, to prove the Defendant advanced funeral service fees in amount of RMB18,170. 4. Certificate of Registry, to prove M. V. “Great Wall No. 6” was owned by the Defendant;

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5. Crew Qualification Certificate, to prove that LI Zhang was a chef on ship; 6. Bank transfer voucher, to prove the wages of LI Zhang from the Defendant; 7. An insurance policy, to prove that the Defendant purchased employer’s liability insurance for LI Zhang. Evidence 1 to 3, 5, 6 and 7 was the original and evidence 4 was a duplicated one. Cross-examination opinions of the Plaintiffs are as follows: the witness in evidence 1 should appear in court to be cross-examined and it had no objection to the fact that LI Zhang drank, but held the statement could not prove he was intoxicated; it had no objection to the authenticity of evidence 2, but held the payroll could not prove there was a labor contract relationship established between LI Zhang and the Defendant; and it had no objection to evidence 3. Ascertainment opinions of the court on the evidence produced by the Plaintiffs are as follows: the Defendant has no objection to the authenticity of evidence submitted by the Plaintiffs, the court ascertains the evidence; evidence 1 can prove that LI Zhang, the son of the two Plaintiffs, was hired by the Defendant as chef and died of drowning; evidence 2 and 3 can prove the basic information of LI Zhang and his family; evidence 4 can prove the basic information of the Defendant; evidence 5 was provided by the company where LI Tie and LI Hua work in, but it cannot prove that their lost wages; evidence 6 and 7 can prove the fact that LI Zhang was died of drowning. Ascertainment opinions of the court on the evidence produced by the Defendant are as follows: the Plaintiffs had no objection to the authenticity of evidence 2–7 submitted by the Defendant, and the court ascertains the evidence. With respect to evidence 1, the witness should have appeared in court for cross-examination, while combined with the investigation video provided by the Public Security Frontier Station, the authenticity of the statement can be confirmed, and it can prove that LI Zhang drank on the night involved; evidence 2 can prove the labor contract relationship between LI Zhang and the Defendant; evidence 3 can prove that the Defendant paid funeral service fees in amount of RMB18,170; evidence 4 can prove the basic information of the Defendant; evidence 5 can prove LI Zhang’s crew qualification; evidence 6 can prove the wages of LI Zhang paid by the Defendant; evidence 7 can prove the fact that the Defendant purchased employer’s liability insurance for LI Zhang. After trial, the court finds that LI Zhang was hired by the Defendant as a chef working on M. V. “Great Wall No. 6” owned by the Defendant on August 10, 2013. The monthly base wage was RMB3800 and the offshore subsidy was RMB50 per day. At 1800 h on November 26, 2013, LI Zhang and his colleagues left the ship to a restaurant near the wharf for dining, and LI Zhang drank during dinner and returned to the wharf at 2000 h on that night. At 0800 h in the next morning, LI Zhang was found died of drowning at the berth of M. V. “Great Wall No. 1”, which was also owned by the Defendant, next to M. V. “Great Wall No. 6”. Dong Gu Public Security Frontier Station, after answering the alarm, conducted an on-site

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investigation, holding that no obvious trauma was on LI Zhang’s body and he was died of drowning. LI Zhang’s sister, LI Hua had no objection to the cause of death and did not require a forensic appraisal. The court also finds that the average monthly wage of the staff of Tianjin in 2012 was RMB3872 and the amount of the urban residents’ per capita disposable income in 2012 was RMB24,565. The Defendant purchased employer’s liability insurance for LI Zhang from People’s Insurance Company of China Tianjin Branch (hereinafter “PICC Tianjin Branch”). It is also found that the Plaintiff, LI Yunpeng was LI Zhang’s father, his monthly pension was RMB2245. LI Zhang had no spouse or child. LI Tie was his brother and LI Hua was his sister, both of them had fixed wage every month. The court holds that the Plaintiffs filed a lawsuit for dispute over compensation for personal injury at sea, but in the trial, the Plaintiffs changed their claims and claimed for their rights according to the compensation standard of work-related injury insurance premiums based on the labor contract relationship between the Defendant and LI Zhang, so the case arises from dispute over a seaman labor contract. LI Zhang worked on M. V. “Great Wall No. 6” which was owned by the Defendant and the Defendant paid fixed wage every month, both LI Zhang and the Defendant have fully performed their respective obligations according to the stipulations of the labor contract. The Defendant purchased employer’s liability insurance for LI Zhang from PICC Tianjin Branch. In conclusion, although a written labor contract has not been concluded by the two parties, a factual labor contract relationship has already been established. As a seaman, LI Zhang shall work on board all the time. According to the supervisory video in the investigation video of Dong Gu Public Security Frontier Station and the statement of witness, on the day that the accident happened, LI Zhang went back to the ship together with colleagues after going out to dinner, he had access to the wharf where the ship anchored and was near M. V. “Great Wall No. 6”. Combined with the salvage site, it can be determined that LI Zhang had returned to the workplace. LI Zhang was died of drowning during working hours in the workplace, so the death of LI Zhang shall be determined as work-related injury. The Defendant alleged that the death of LI Zhang should not be determined as work-related injury because he was died as a result of intoxication. Referring to Paragraph 4 of the Opinions of the Ministry of Human Resources and Social Security on Several Issues concerning the Implementation of the Regulations on Work-related Injury Insurances, “the ascertainment of intoxication or drug, shall be subject to the legal document issued by relevant authorities or effective judgment made by the people’s courts; without the evidence above, it can be ascertained combined with other relevant evidence”, the court holds that intoxication refers to a person who drinks too much and his body becomes parafunctional. In fact, LI Zhang did drink, but the evidence available cannot prove that he was intoxicated. At the same time, it can be proved that LI Zhang remained conscious before going back to the ship in the light of the statement in the investigation video provided by Public Security Frontier Station.

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According to Article 62 Paragraph 2 of the Regulations on Work-Related Injury Insurances, if an employee of the work unit suffers from work-related injury during the period in which the work unit has not purchased work-related injury insurance, the employer shall make payments according to the item of work-related injury insurance benefits and at the standard stipulated herein. Because the Defendant did not purchase work-related injury insurance for LI Zhang, it shall bear relevant costs for of LI Zhang’s death. According to the Article 39 of the Regulations, in the case of a work-related death of an employee, the directly-related family members of the employee shall receive a funeral allowance, bereavement payments for dependent family members and a lump sum work-related death allowance from work-related injury insurance funds in accordance with the following provisions: (1) the funeral allowance shall be six months’ average monthly wage of the Employees in the pooling region in the preceding year; (2) bereavement payments for dependent family members shall be made at a certain percentage of the Employee’s wage to each of the family members of the Employee that, before the Employee’s death, was dependent on the Employee for primary source of income and that has no work capability; (3) the standard for the lump sum work-related death allowance shall be 20 times of urban residents’ per capita disposable income in the preceding year. In conclusion, the Defendant should bear the funeral service fee in amount of RMB23,232 (RMB3872 * 6 month), the lump sum work-related death allowance in amount of RMB491,300 (RMB24,565 * 20 year). The Plaintiffs have old-age pensions, and LI Zhang is not the only child of them, their eldest son, LI Tie and the eldest daughter LI Hua have fixed wage incomes. Their primary source of income was not from LI Zhang, so the court will not support the claim for bereavement payments for dependent family members. The Plaintiffs alleged that the Defendant should compensate for the lost wages in account of RMB4000 and the travel expenses in amount of RMB2000, but this claim does not fall into the scope of compensation provided in the Regulations on Work-Related Injury Insurances, and the evidence submitted by the Plaintiffs are insufficient to prove such loss, therefore the court will not ascertain that. Since the Defendant has paid the funeral service fee in amount of RMB18,170, it shall pay the funeral allowance in amount of RMB5062 (RMB23,232-RMB18,170), the lump sum work-related death allowance in sum of RMB491,300 (RMB24,565 * 20 year), of which the total amount is RMB496,362. To sum up, there is a factual labor contract relationship between the Defendant and LI Zhang and relevant provisions of the Regulations on Work-Related Injury Insurances shall apply in this case. LI Zhang’s death is a result of work-related injury, so the Plaintiffs as parents of LI Zhang are entitled to claim for compensation. The Defendant failed to pay work-related injury insurance premium according to the Regulations on Work-Related Injury Insurance, it shall pay compensation and relevant costs for LI Zhang’s death. In conclusion, according to Article 29 of the Labor Contract Law of the People’s Republic of China, Article 2, Article 39 and Article 62 of the Regulations on Work-Related Injury Insurances, Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows:

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1. The Defendant, Tianjin Great Wall Underwater Engineering Co., Ltd., shall compensate the Plaintiffs LI Yunpeng and YU Huiqin for the funeral allowance in amount of RMB5062 and work-related death allowance in amount of RMB491,300, of which the total amount is RMB496,362 within 10 days upon the effectiveness of this judgment; 2. Reject other claims of the Plaintiffs, LI Yunpeng and YU Huiqin. In case of any failure of payment within the period specified in this judgment, the Defendant, Tianjin Great Wall Underwater Engineering Co., Ltd., shall pay double interest on the debt for the delayed period in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB9461, RMB1166 shall be born by the Plaintiffs, LI Yunpeng and YU Huiqin, and RMB8295 shall be born by the Defendant, Tianjin Great Wall Underwater Engineering Co., Ltd. Since the Plaintiffs, LI Yunpeng and YU Huiqin, paid court acceptance fee cost in advance, as a matter of convenience, the Defendant shall pay its respective proportion of the acceptance fee together with the amount awarded above to the Plaintiffs, and the court will not otherwise return the sum. In the event of dissatisfaction with this judgment, any party may within 15 days upon the service of this judgment, submit a statement of appeal to the court, together with 8 copies, to lodge appeal with Tianjin High People’s Court. The appeal fee shall be paid on basis of dissatisfied amount awarded in the judgment of first instance within 7 days upon submission of the statement of appeal, (Bank of Deposit: Agricultural Bank of China Tian Cheng Branch 02200501040006269; Account Name: Financial Affairs Department of Tianjin High People’s Court) otherwise, the appeal will be withdrawn automatically. Presiding Judge: YANG Ling Acting Judge: PEI Daming Acting Judge: HU Yingjie July 23, 2014 Clerk: HAN Xiaohui

Shanghai Maritime Court Civil Judgment LU Huicheng v. Jiangsu Chengjin Logistics Co., Ltd. (2013) Hu Hai Fa Hai Chu Zi No. 7 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 636. Cause of Action 196. Dispute over liability for damage of ship pollution. Headnote Damage to seaweed farm held to be compensable by the Defendant because the Plaintiff proved actual right to use the affected area, although damages reduced because of the Plaintiff’s failure to signpost area adequately. Summary The Plaintiff was a lessee of an aquatic agricultural area that specialized in growing laver which is a type of seaweed. The Defendant was a vessel owner whose vessel traversed the agricultural area and destroyed parts of the seaweed farm. The Defendant claimed that the Plaintiff did not have the actual right to use the area and second that the Plaintiff could not prove that it was the Defendant’s vessel that trespassed into the area. Shanghai Maritime Court held—that the Plaintiff did have the legal right to lease the area and that it was the Defendant’s vessel that trespassed into the aquatic area. The court apportioned 75% fault for the Defendant and 25% fault for the Plaintiff. Stipulating that the Plaintiff did not post the requisite notifications of a maritime aquatic area.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_30

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Judgment The Plaintiff: LU Huicheng Agent ad litem: WANG Weimeng, lawyer. The Defendant: Jiangsu Chengjin Logistics Co., Ltd. Domicile: Building 6-2, Meihua Road, Development Zone, Lianyungang City, Jiangsu. Legal representative: LIU Xuanlin. Agent ad litem: CHANG Hongbo, lawyer of Jiangsu Mingzhida Law Firm. Agent ad litem: ZHANG Naiwen, lawyer of Jiangsu Mingzhida Law Firm. This case arised from a dispute over compensation for damage caused by sea farming. It was filed by the Plaintiff, LU Huicheng, against the Defendant, Jiangsu Chengjin Logistics Co., Ltd. On April 18, 2013, the court, after accepting the case, applied the general procedure according to the law and organized a collegiate panel on the same day. Upon the application of the Plaintiff, the court made (2013) Hu Hai Fa Hai Bao Zi No. 46 Civil Ruling, to freeze the ownership of M. V. SIYUAN 1 which was owned by the Defendant. On August 15, 2013, the court heard the case in public. WANG Weimeng, agent ad litem of the Plaintiff, LIU Xuanlin, legal representative of the Defendant, and CHANG Hongbo, agent ad litem of the Defendant appeared in court to attend the hearing. Now the case has been concluded. The Plaintiff alleged that on the evening of November 16, 2012, M. V. SIYUAN 1 which was owned by the Defendant, went astray and ended in the laver sea farming area. This area was contracted by the Plaintiff and sailed on this particular area for more than five hours. It damaged the lavers and sea farming facilities in an area of 8 hectares and escaped after the accident. Due to the damage to the sea farming facilities, no revenue could be gained from the lavers within the year. After the investigation and mediation of Lianyungang Maritime Safety Administration and the Huangwo Village Committee, the Defendant refused to bear liability for the damages. The Plaintiff therefore brought a lawsuit and requested the court to judge that the Defendant should compensate for the losses of the lavers and sea farming facilities in sum of RMB 900,000, and bear the case fee and a pre-action preservation fee. The Defendant alleged that: 1. The Plaintiff did not obtain lawful right to use the sea area involved; 2. The Plaintiff could not prove that M. V. SIYUAN 1 was sailing on the sea area involved; 3. The basis to calculate the losses adopted by the Plaintiff has no legal force, and that the Plaintiff did not take any measure to minimize losses. In summary, the Defendant requested the court to reject the claims of the Plaintiff.

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Based on the allegations of the two parties, the court concludes that the main issues are as follows: 1. Whether the Plaintiff has obtained lawful right to use the sea area involved and the right to claim for losses resulted from the accident; 2. Whether the accident was caused by M. V. SIYUAN 1 which is owned by the Defendant; 3. Whether the losses of sea farming claimed by the Plaintiff is reasonable. According to the determination and analysis of the evidence in this case, and the investigation in the trial, the court ascertains the following facts: On March 20, 2012, Huangwo Company obtained the Certificate of Right to Use Sea Area issued by Lianyun District Oceanic Bureau. The sea area marked in the Certificate was a 14 ha area with boundary coordinates as follows: ① 034°43′ 27.87″, 199°31′19.37″; ② 034°42′56.24″, 119°32′04.36″; ③ 034°42′08.65″, 119° 31′25.82″; ④ 034°42′46.79″, 119°30′14.77″; ⑤ 034°42′57.73″, 119°30′14.72″. The expiration date on this right to use was May 31, 2012, before expiration, Huangwo Company applied with Lianyun District Oceanic Bureau for an extension of and regained the Certificate for Right to Use Sea Area, of which the expiration date now was May 31, 2013. On June 1, 2012, the Plaintiff signed a leasing contract on the right to use sea area with Huangwo Company, under which the Plaintiff leased a sea area of 14 hectares for laver sea farming with a rent of RMB 450 per hectare per year expiring on May 31, 2013. On November 17, 2012, the Plaintiff reported to the Huangwo Village Committee of Gaogong Island that its aquaculture area was damaged by a break-in of a ship and reported the case to Lianyungang MSA. On January 21, 2013, after an investigation, the Lianyungang MSA made (2013) Yun Hai Shi Ze Zi. No. 001 Confirmation of Liability for Maritime Accident. Which confirmed that M. V. SIYUAN 1, a sand carrier for Lianyungang, accidentally broke into the aquaculture area contracted by the Plaintiff at the sea area in 34°43′26.64″ N, 119°31′ 01.48″ E around 17:06 on November 16, 2012. The accident caused damages to part of the lavers and ropes used for sea farming. Major causes of the accident as analyzed in the report were as follows: the captain of M. V. SIYUAN 1 was unfamiliar with the route of the sea area where the accident occurred; there were insufficient seamen on board and they failed to keep a lookout; no navigational notice of the aquaculture area was posted, and no obvious alerting sign had been set by the user of the sea area. Therefore, M. V. SIYUAN 1 should bear the majority liability, while the owner of the aquaculture area should bear minor liability for the damage. On January 18, 2013, Lianyun District Oceanic Bureau issued the assessment opinions on the damage to the production facilities and lavers. According to the investigation and video of the scene, it was identified that three aquaculture rafts were damaged, two of which were partially damaged, and the other one was completely damaged. No laver would be yielded that year. Meanwhile, according to the standard set by Lian Jia Ren Zheng Zi No. 46—Pricing Appraisal Conclusions

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of the Rod-inserted Laver Sea farming Facilities in the North Section of the South Dam, which was issued by Lianyungang Price Certificating Center, it was estimated in the assessment opinions that the losses of the Plaintiff for sea farming facilities were at least RMB273,600; in addition, according to the standard set by the Interim Measures of Lianyungang Government on Indemnity of Land Requisition, the amount of the compensation for the lavers was suggested to be RMB540,000. Altogether, the total amount of compensation was set at RMB813,600. The court also ascertains that M. V. SIYUAN 1 was a common sand carrier, = the port of registration was Lianyungang, China and the owner was the Defendant, Jiangsu Chengjin Logistics Co., Ltd. The court holds it can be proved that the process as well as the succession of the Plaintiff’s obtaining the right to use the sea area involved. This is according to facts and evidence such as the Certificate for the Right to Use Sea Area for the sea area involved and the lease contract on the right to use sea area for aquaculture. The Plaintiff is the actual user and the beneficiary of lavers in the sea area, so it had the right to claim for compensation of the losses resulting from the accident. The Defendant argued that the Plaintiff did not obtain the legal right to use the involved sea area, but it did not provide evidence to prove that. The Confirmation of Liability for Maritime Accident issued by Lianyungang MSA confirmed that M. V. SIYUAN 1, owned by the Defendant, accidentally broke into the aquaculture area contracted by the Plaintiff, and caused damage to the lavers and ropes used for sea farming. The Defendant denied the facts mentioned above, but it did not provide any effective evidence. Therefore, the defense of the Defendant that the accident was not caused by M. V. SIYUAN 1 was deemed inadmissible. Besides, according to the analysis on major causes of the accident, it can be found that the master of M. V. SIYUAN 1 were unfamiliar with the sea route of the area where the accident occurred; the crew neglected to observe; there were no navigation notices and no obvious signs alerting of the aquaculture area. Both the Plaintiff and the Defendant were to blame for the losses occurring in the accident. Based on this analysis of the causes of the accident and combined with the Conformation of Liability for Maritime Accident issued by Lianyungang MSA, the court affirms that the Defendant shall bear 75% of the responsibility and the Plaintiff shall bear 25% of the responsibility. In this case, the assessment opinions provided by Lianyun District Oceanic Bureau were based on the compensation standard set by the Lianyungang Interim Indemnity Measures on the Land Requisition at the time when the accident occurred. Generally speaking, the compensation standard set by the Interim Indemnity Measures on the Land Requisition is lower than the market price at the time when and the place where the accident occurred, therefore, it can be used to estimate the losses of the Plaintiff. The Defendant challenged the compensation standard, but it failed to provide any evidence and did not apply for authentication and assessment within the time limit for producing evidence. In summary, the Defendant, as the owner of M. V. SIYUAN 1 which accidentally broke in the aquaculture area leased by the Plaintiff and consequently caused the damages involved, shall bear 75% of the liability for compensation,

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namely RMB610,200. According to Article 106 Paragraph 2, Article 117 Paragraph 2 and Paragraph 3 of the General Principles of the Civil Law of the People’s Republic of China, and Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: 1. The Defendant shall compensate the Plaintiff for the losses of sea farming in sum of RMB610,200 within 10 days after the judgment takes effect; 2. Reject other claims of the Plaintiff. If the Defendant Jiangsu Chengjin Logistics Co., Ltd. fails to perform its obligations for payment within the time specified by this judgment, in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China, it shall double pay the interest for the period of delayed performance. Court acceptance fee in amount of RMB 12,800 and the pre-action preservation fee in amount of RMB5000, the total amount in amount of RMB 17,800, the Plaintiff, LU Huicheng shall bear RMB5551 and the Defendant, Jiangsu Chengjin Logistics Co., Ltd. shall bear RMB12,249. In event of dissatisfaction with this judgment, the Plaintiff and the Defendant may, within fifteen days upon service of this judgment, submit a statement of appeal with duplicates being submitted in terms of the number of other parties, to lodge an appeal to the Shanghai High People’s Court. Presiding Judge: ZHANG Liang Acting Judge: ZHU Jie People’s Assessor: TAO Yang September 26, 2013 Clerk: CEN Qi

Appendix: Relevant Laws 1. General Principles of the Civil Law of the People’s Republic of China Article 106 Any citizen or legal person who is at fault for infringing upon the property of the state or a collective shall be subject to civil liability. Article 117 Anyone who damages the property of the state, a collective, or another person shall restore the property to its original condition or reimburse the estimated price. If the victim suffers other great losses therefrom, the infringer shall compensate for those losses as well. 2. Civil Procedure Law of the People’s Republic of China Article 64 A party shall have the burden to provide evidence for its claims. …

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Shanghai High People’s Court Civil Judgment LU Huicheng v. Jiangsu Chengjin Logistics Co., Ltd. (2013) Hu Gao Min Si (Hai) Zhong Zi No. 129 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 631. Cause of Action 196. Dispute over liability for damage of ship pollution. Headnote Decision holding the Defendant liable for damage to the Plaintiff’s seaweed farm affirmed on appeal. Summary The Appellant-Defendant appealed a decision in which it was apportioned 75% fault for a trespass into an aquatic agricultural area that specialized in growing laver. The court held that the Appellant-Defendant did not provide enough evidence in trial and at appeal to overturn the trial court’s decision.

Judgment The Appellant (the Defendant of first instance): Jiangsu Chengjin Logistics Co., Ltd. Domicile: Building 6-2, Meihua Road, Development Area, Lianyungang City, Jiangsu. Legal representative: LIU Xuanlin, general manager. Agent ad litem: CHANG Hongbo, lawyer of Jiangsu Mingzhida Law Firm. Agent ad litem: ZHANG Naiwen, lawyer of Jiangsu Mingzhida Law Firm. The Respondent (the Plaintiff of first instance): LU Huicheng Agent ad litem: ZHU Guishan, lawyer of Jiangsu Mingliang Law Firm. The Appellant, Jiangsu Chengjin Logistics Co., Ltd. (hereafter referred to as “Chengjin Company”), refused to accept (2013) Hu Hai Fa Hai Chu Zi No. 7 Civil Judgment in regards to a dispute over damage to a sea farming area made by Shanghai Maritime Court and lodged an appeal with the court. After accepting the case on December 12, 2013, the court organized a collegiate panel and heard the cases in public on December 16, 2013. LIU Xuanlin, legal representative of Chengjin Company, and CHANG Hongbo, agent ad litem of the Appellant, and

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ZHU Guishan, agent ad litem of the Respondent, appeared in court to attend the hearing. Now the case has been concluded. The court of first instance ascertained the following facts: on March 20, 2012, Lianyungang Gaogong Island Huangwo Fishing and Aquaculture Company (hereafter referred to as “Huangwo Company”) obtained Certificate of Right to Use Sea Area issued by Lianyun District of Lianyungang Municipality Oceanic and Fisheries Affairs Bureau (hereafter Lianyun Oceanic Bureau). The sea area marked in the Certificate was 14 hectares with boundary coordinates as follows: ① 034°43′ 27.87″, 199°31′19.37″; ② 034°42′56.24″, 119°32′04.36″; ③ 034°42′08.65″, 119° 31′25.82″; ④ 034°42′46.79″, 119°30′14.77″;⑤ 034°42′57.73″, 119°30′14.72″. The expiration date was May 31, 2012, before which, Huangwo Company applied with Lianyun Oceanic Bureau for an extension of the right to use sea area mentioned above and it regained Certificate for Right to Use Sea Area. The certificate was now set to expire on May 31, 2013. On June 1, 2012, LU Huicheng signed a leasing contract on the right to use sea area with Huangwo Company, under which LU Huicheng leased a sea area of 14 hectares for a laver sea farm with a rent of 450 (RMB) per hectare per year and the expiration date was May 31, 2013. On November 17, 2012, LU Huicheng reported to the Huangwo Village Committee of Gaogong Island that his aquaculture area was damaged by a break-in of a ship and reported the case to Lianyungang Maritime Safety Administration. After an investigation, Lianyungang MSA made (2013) Yun Hai Shi Ze Zi No. 001 Maritime Accident Responsibility Confirmation on January 21, 2013. The report confirmed that the vessel M. V. SIYUAN 1, a Lianyungang sand carrier, accidentally broke into the aquaculture area contracted by LU Huicheng at the coordinates 34°43′26.64″ N, 119°31′01.48″ E around 17:06 on November 16, 2012. The accident, which constituted a minor-accident, caused damages to part of the lavers and ropes used for sea farming and no injuries occurred. Major causes of the accident analyzed in the report were as follows: the captain of M. V. SIYUAN 1 was not familiar with the route where the accident occurred; seamen were insufficient on board and they failed to keep a look-out; no navigational notices of the aquaculture area were published and no obvious alerting sign had been set by the owner. Therefore, M. V. SIYUAN 1 should bear the main responsibility, while the owner of the aquaculture area contributorily liable. On January 18, 2013, Lianyun Oceanic Bureau issued an assessment opinion on the damage to the production facilities and lavers in the aquaculture area. According to the investigation and video of the scene, it was identified that three aquaculture rafts were damaged, two of which remained less than 30%, and the other one was completely damaged. No laver would be yielded that year. Meanwhile, according to the standard set by Lian Jia Ren Zheng Zi No. 46—Pricing Appraisal Conclusion of the Rod-Inserted Laver Sea Farming Facilities in the North Section of the South Dam, which was issued by Lianyungang Price Certificating Center, it was estimated in the assessment opinions that the loss of LU Huicheng’s sea farming facilities were at least in amount of 273,600 yuan. Additionally, according to the standard set by the Interim Measures of Lianyungang Government on Indemnity of Land

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Requisition, the amount of the compensation for the lavers was suggested to be 540,000 yuan. Altogether, the total amount of compensation was 813,600 yuan. The court of first instance ascertained that M. V. SIYUAN 1 was a common sand carrier, of which the port of registration was Lianyungang, China and the owner was Chengjin Company. The court of first instance held that it could be proved that LU Huicheng’s obtained the right to use the sea area involved. Certificate for the Right to Use Sea Area and the lease contract on the right to use sea area for aquaculture proved that LU Huicheng obtained the right to use the area involved. LU Huicheng was the actual user and the beneficiary of lavers in the sea area, so he had the right to claim for compensation of the losses resulted from the accident. Chengjin Company argued that LU Huicheng did not obtain the legal right to use the involved sea area, but it did not provide evidence to prove that. Therefore, the court of first instance held that the defense of Chengjin Company was inadmissible. Accident Liability Conformation issued by Lianyungang MSA confirmed that M. V. SIYUAN 1 owned by Chengjin Company accidentally broke into the aquaculture area contracted by LU Huicheng, and caused damage to the lavers and the ropes used for sea farming. Together with other evidence, show that M. V. SIYUAN 1 accidentally broke into the aquaculture area. Chengjin Company denied the facts mentioned above, but did not provide any effective evidence. Therefore, the defense of Chengjin Company, which was that the accident was not caused by M. V. SIYUAN 1 was also deemed inadmissible. According to the analysis on major causes of the accident, it could be found that the captain of M. V. SIYUAN 1 was not familiar with the sea route where the accident occurred; the crew neglected to post a look-out; no navigational notices had been published, and no obvious alerting signs had been posted by the owner of the aquaculture area. Both LU Huicheng, as the contractor and the manager of the related aquaculture area and the Chengjin Company, as the owner of the causing-accident ship, were to blame for the losses suffered. Based on the analysis of the causes of the accident and combined with the Liability Conformation of the maritime accident issued by Lianyungang MSA, the trial court held that the Chengjin Company should bear 75% of the responsibility and that LU Huicheng should bear 25%. In the case, the assessment opinions provided by Lianyun Oceanic Bureau were based on the compensation standard set by the Lianyungang Interim Indemnity Measures on the Land Requisition at that time when the accident occurred. Generally speaking, the compensation standard set by the Interim Indemnity Measures on the Land Requisition was lower than the market price at the time when and the place where the accident occurred. It could be used to estimate the loss of LU Huicheng. Chengjin Company objected to the compensation standard, but failed to provide any evidence, and did not apply for authentication and assessment within the time limit for adducing evidence. Therefore, the trial court held the defense of Chengjin Company, that the basis to calculate the losses of LU Huicheng, had no legal effect.

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In summary, Chengjin Company, as the owner of M. V. SIYUAN 1 which accidentally broke in the aquaculture area leased by LU Huicheng and consequently caused the damages involved, should bear 75% of the liability for compensation, namely 610,200 yuan. Therefore, the court of first instance judged that Chengjin Company should compensate LU Huicheng for the losses of sea farming in sum of 610,200 yuan within ten days after the judgment took into effect. The court of first instance rejected other claims of LU Huicheng. In the appeal, Chengjin Company appealed that: 1. M. V. SIYUAN 1 had never appeared at the accident scene. Therefore, the conclusion drawn by the trial court was wrong; 2. LU Huicheng did not obtain the legal right to use the sea area involved. Therefore, he was not entitled to claim for the losses resulted from the accident; and 3. LU Huicheng committed obvious fault, in his claim for losses of the aquaculture area, his claim was groundless, and he did not perform his obligation to mitigate damages. The trial courts finding of facts having were wrong and the laws it applied were improper. Chengjin Company requested the court to revoke the original judgment and retry the case. LU Huicheng alleged that: 1. The appeal submitted by Chengjin Company contradicted the findings of fact; 2. The original judgment was clear in the determination of the facts and correct in the application of relevant laws. LU Huicheng requested the court to dismiss the appeal. During the appeal, both parties did not submit any new evidence. After trial, the court holds the facts ascertained by the court of first instance are clear and hence shall be confirmed. The court holds that the case is concerning a dispute over compensation for damage to a sea farm. The main issues in this case are as follows: 1. Whether the accident involved was caused by M. V. SIYUAN 1; 2. Whether LU Huicheng has the right to claim for compensation of the losses; 3. Whether LU Huicheng suffered economic losses. According to the Civil Procedure Law, a party shall have the burden to produce evidence for its claims. The party having the burden to produce evidence shall bear the adverse consequences for failure of providing evidence or insufficient evidence to prove its allegations. In this case, LU Huicheng provided the notice of investigation issued by Lianyungang MSA, navigation trajectory, and time graph of M. V. SIYUAN 1. Additionally, it submitted the inquiry records of the maritime accident and the liability conformation of the maritime accident. The evidence above form a complete evidence chain. Therefore, the above evidence prove that M. V. SIYUAN 1 owned by Chengjin Company accidentally broke into the sea area because of unfamiliarity with the sea route and the crew’s lack of observation. The

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vessel caused the corresponding economic losses. Chengjin Company did not request a re-identification on the liability conformation of the maritime accident issued by Lianyungang MSA, nor did it provide a Book of Signatory Navigation or other documents of the vessel to prove that the vessel was sailing or berthed on other sea area when the accident occurred. Therefore, Chengjin Company shall bear the legal consequence for its failure to produce evidence. It is proper that the court of first instance ascertained that Chengjin Company was the infringing party and should bear corresponding responsibility. Moreover, LU Huicheng provided the Certificate for the Right to Use Sea Area and the leasing contract on the right to use sea area for aquaculture, which can prove that LU Huicheng is the actual user and beneficiary of the aquaculture area. Therefore, LU Huicheng has the right to a claim for indemnification for the losses occurring in the accident. For the reasons above, the court does not support appeal held by Chengjin Company. According to the laws of China, anyone who damages the property of the state, a collective, or another person shall restore the property to its original condition or reimburse its estimated price. After the accident, LU Huicheng immediately reported to the local village committee and to the Lianyungang MSA which conducted an assessment of the accident scene. Local aquaculture authority—Lianyun Oceanic Bureau issued the assessment of the damages that occurred to production facilities and lavers in the aquaculture area. According to the investigation on scene and related local standards, and confirmed LU Huicheng suffered an economic loss in amount of 810,000 yuan. Chengjin Company neither applied for authentication or assessment, nor did it entrust a third party to assess otherwise. Therefore, Chengjin Company shall bear the responsibility for its failure to produce evidence. It is correct the court of first instance affirmed the assessment in accordance with the principle of evidence verification based on specific situations in this case. The court overrules the claim held by Chengjin Company that the economic loss of LU Huicheng for the reason of lack of basis. The original judgment is clear in the determination of the facts and correct in the application of relevant laws. According to Article 170 Paragraph 1 Sub-paragraph 1 and Article 175 of the Civil Law of the People's Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fees of second instance in amount of 9902 yuan, shall be born by the Appellant, Jiangsu Chengjin Logistics Co., Ltd. The judgment is final. Presiding Judge: CHEN Zilong Acting Judge: FENG Guanghe Acting Judge: HOU Jun February 11, 2014 Clerk: LUO Gang

Xiamen Maritime Court Civil Ruling Mindong Congmao Ship Industry Co., Ltd. v. Wärtsilä Switzerland Ltd. (2014) Xia Hai Fa Shang Chu Zi No.21–2 Related Case(s) None. Cause of Action 225. Dispute over contract for marine stores and spare parts supply. Headnote Arbitration clause in an engine supply contract enforced, despite the fact that the clause did not identify any governing law and specified arbitration by a non-existent institution in Switzerland; case rejected. Summary The Plaintiff brought a claim for reimbursement of installment payments it had to paid to the Defendant under several marine engine supply contracts. The Defendant disputed the Xiamen Maritime Court’s jurisdiction to hear the case, citing an arbitration clause contained in the contracts between the parties. The Plaintiff argued that the arbitration clause, which required the parties to arbitrate in Sweden, was invalid because it failed to state what law was applicable to the arbitration, named a non-existent entity as the arbitrator, and failed to state other applicable arbitration procedures. The Plaintiff also alleged that the Defendant’s Swedish law experts were unqualified and biased. The Xiamen Maritime Court, applying Swedish law, held that the arbitration clause was valid and enforceable even though no arbitrator had been identified, because the parties had agreed that the country of arbitration was Sweden.

Ruling The Plaintiff: Mindong Congmao Ship Industry Co., Ltd. Domicile: Lifang Village, Xiabaishi Town, Fu’an, Ningde, Fujian, the People’s Republic of China. Legal representative: LI Tanwu, director. Agent ad litem: ZHAO Jinsong, lawyer of All-Bright Law Office (Shenzhen). Agent ad litem: DUAN Qingxi, lawyer of All-Bright Law Office (Beijing). © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_31

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The Defendant: Wärtsilä Switzerland Ltd. Domicile: Zürcherstrasse 12,CH-8401 Winterthur, Switzerland. Legal representative: Martin Wernli, general manager. Agent ad litem: NIU Lei, lawyer of Beijing Zhonglun Law Firm Shanghai Office. Agent ad litem: XU Tao, lawyer of Beijing Zhonglun Law Firm Shanghai Office. With respect to the case arising from dispute over contract of ship stores and spare parts supply filed by the Plaintiff, Mindong Congmao Ship Industry Co., Ltd. (hereinafter referred to as “Mindong”), against the Defendant, Wärtsilä Switzerland Ltd. (hereinafter referred to as “Wärtsilä”). The Defendant raised a challenge of jurisdiction of the case during the period of submission of defence, alleging the court had no jurisdiction over the case. The reasons are as follows: 1. Article 7 Paragraph 5 of the three marine engine supply contracts signed by the Plaintiff and the Defendant was arbitration clause which clearly stated as follows: all disputes in connection with this Contract or the execution thereof should be settled friendly through negotiations. In case no settlement could be reached, the case could then be submitted for arbitration to the Swedish International Economic & Trade Arbitration Committee in accordance with the Provisional Rules of Procedures Promulgated by the said Arbitration Committee. The Arbitration should take place in Stockholm and the decision of the Arbitration Committee should be final and binding upon both parties, neither party should seek recourse to a law court or other authorities to appeal for revision of the decision. Arbitration fee should be born by the losing party; 2. Judging from the contents of the arbitration clause in this case, the parties did not reach an agreement on the governing law to confirm the validity of arbitration clause, but clearly agreed the seat of arbitration was Stockholm, Sweden. Therefore, Swedish law should be the governing law to confirm the validity of arbitration clause; 3. Pursuant to the Swedish Arbitration Act, the arbitration clause was lawful and valid. (1) Pursuant to relevant provisions of the Swedish Arbitration Act, while there was determined legal relationship and intention for arbitration between the parties, the arbitration agreement should be established, no matter whether the parties had agreed on specific arbitration rules and arbitration authority or whether the name thereof was complete or correct. In addition, an arbitration agreement could be reached in written or orally, since concrete form thereof was not requested in laws of Switzerland, Therefore, the arbitration clause in this case was lawful and valid; (2) the arbitration clause in this case was valid and it could be accepted by Arbitration Institute of the Stockholm Chamber Of Commerce (hereinafter referred to as SCC). The name of the arbitration authority stipulated in the arbitration clause, namely Swedish International Economic & Trade Arbitration Committee, was not accurate, but it was expressly agreed that the seat of arbitration was Stockholm, Sweden SCC was the only institution that could deal with international arbitration, it did not strictly require its full and accurate name to be written in arbitration agreement.

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It could accept the wording of arbitration clause in this case and the case for arbitration. To sum up, pursuant to Swedish Arbitration Act the arbitration clause was lawful and valid. Therefore, the Defendant held that Xiamen Maritime Court had no jurisdiction over the case and requested the court to reject the action filed by the Plaintiff. To support its objection, the Defendant submitted the following evidence: 1. (2006) Min Si Ta Zi No.1 Reply of the Supreme People’s Court. The arbitration clause involved in that case did not contain an agreement on arbitration authority, what was agreed was arbitration should be conducted in Zurich, Switzerland, which was similar to the arbitration clause in this case. The Supreme People’s Court held Swiss laws should be the applicable law and pursuant to Swiss Arbitration Law, the arbitration clause was valid; 2. (2006) Min Si Ta Zi No.9 Reply of the Supreme People’s Court. The law of the place where the arbitration was conducted namely Switzerland was confirmed as the governing law in that case. One of the reasons held by Guangdong High People’s Court was that it was difficult to apply foreign law. It was not clearly stipulated in the Federal Statute of Private International Law (1987) of Switzerland that whether an arbitration clause leaving out arbitration authority was effective or not could not be identified directly. In the Reply, the Supreme People’s Court held that where foreign laws had not been ascertained, it was inappropriate to refuse to apply foreign laws due to the difficulty hereto, and finally confirmed the arbitration clause leaving out arbitration authority involved arbitration was valid and executable in accordance with the laws of Switzerland; 3. Legal opinions on Swedish law issued by Johan Gernandt, senior consultant and Katarina Nilsson, Partner of Sweden (VINGE) Law Firm Shanghai Representative Office. In the legal opinions, it was held that the Swedish law should be the applicable law to confirm the validity of arbitration clause. Pursuant to the Swedish law, the arbitration clause in that case should be valid and executable, and be the reason for terminating the court proceedings; 4. The Swedish Arbitration Act in both Chinese and English text, to prove that the arbitration clause was lawful and valid in accordance with the Swedish Arbitration Act. The Plaintiff alleged that the Swedish International Economic & Trade Arbitration Committee and arbitration rules promulgated by it stipulated in the arbitration clause involved did not exist; there were SCC, branch of ICC (International Chamber of Commerce) and other arbitration authorities in Stockholm; therefore, the arbitration clause in this case should be null and void; Xiamen Maritime Court had jurisdiction over this case in accordance with law. Upon investigation, it was ascertained that the Plaintiff signed two marine engine supply contracts with the Defendant on July 3, 2007 (contract number: 07MDCM-001–001-CH, 07MDCM-002–001-CH). It was clearly stated in Article 7 Paragraph 5 of the two contracts “Arbitration All disputes in connection with this Contract or the execution thereof shall be settled friendly through negotiations. In

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case no settlement can be reached, the case may then be submitted for arbitration to the Swedish International Economic & Trade Arbitration Committee in accordance with the Provisional Rules of Procedures Promulgated by the said Arbitration Committee. The Arbitration shall take place in Stockholm and the decision of the Arbitration Committee shall be final and binding upon both parties, neither party shall seek recourse to a law court or other authorities to appeal for revision of the decision. Arbitration fee shall be born by the losing party.” Afterwards, the Plaintiff filed a lawsuit regarding to dispute over payment with the court, requesting to order the Defendant to return the installment payment in amount of USD6,205,000, having been paid by the Defendant in accordance with the engine supply contract, and the interest thereon; and Defendant should bear the case acceptance fee. It is also found that there was no arbitration authority called Swedish International Economic & Trade Arbitration Committee, and the so–called Provisional Rules of Procedures did not exist. Johan Gernandt was a lawyer of Sweden (VINGE) Law Firm and former partner in Sweden Gernandt & Danielsson Law Firm. Katarina Nilsson was partner and chief representative of Sweden (VINGE) Law Firm Shanghai Representative Office. Both of them had the lawyer’s practice qualification of Sweden. The court holds that cause of action is dispute over contract of ship stores and spare parts supply. The Plaintiff is Chinese legal person and the Defendant is Swiss legal person. Therefore, the subjects of the ship stores and spare parts supply contract involved foreign-related stores elements. There is an arbitration clause in the contract of ship stores and spare parts supply, based on which the Defendant alleged thin court had no jurisdiction over the case. According to Article 5 of the Arbitration Law of the People’s Republic of China, whereas the parties concerned have reach an agreement for arbitration, the people’s court shall not accept the suit brought to the court by any party involved, except in case where the agreement for arbitration is invalid. Therefore, the focus of this case is whether the arbitration clause in the contract involved is valid. According to Article 16 of the Interpretations of the Supreme People’s Court on Certain Issues concerning the Application of the Arbitration Law of the People’s Republic of China, with respect to examination of the validity of a foreign-related arbitration agreement, the law agreed upon by the parties shall apply; if the parties have not agreed upon an applicable law, but have agreed upon the seat of arbitration, the laws at the locality of the arbitration shall apply; if the parties have agreed upon neither applicable law nor the place of arbitration, or they fail to clearly agree upon the place of arbitration, the laws at the locality of the court shall apply. Both of the Plaintiff and the Defendant approved to apply the Swedish law to confirm the validity of arbitration clause in the public hearing in respect of challenge of jurisdiction. It can be considered as the two parties have reached an agreement on the applicable law. Therefore, the validity of arbitration clause in this case shall be confirmed in accordance with the Swedish law. In respect of the ascertainment of the Swedish law, in accordance with Article 10 Paragraph 1 of the Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China, foreign laws applicable to foreign-related civil relations shall be ascertained by the people’s court, arbitration

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authority or administrative organ. If any party chooses the applicable foreign laws, he shall provide the laws of this country. To prove the contents of Swedish law, the Defendant submitted the Swedish Arbitration Act in both Chinese and English text and legal opinions on Swedish laws issued by Sweden (VINGE) Law Firm. The Plaintiff had no objection to the Swedish Arbitration Act but alleged that: 1. The Defendant mentioned that the arbitration clause should be valid if only the seat of arbitration or the word of arbitration was included therein, and there was no need to agree on specific arbitration authority and rules. The arbitration should be carried out under procedure rules, or it could not proceed. The interpretations of the Swedish Arbitration Act made by the Defendant were inaccurate and misleading; 2. The Defendant held that it lacked basis that the case should be submitted to SCC for arbitration. The Swedish Arbitration Act did not stipulate that cases could only or should be submitted to SCC when the arbitration authority was not clearly agreed. The Defendant, as a worldwide well-known company with a long history, should clearly know the name of commercial dispute settlement authority. On that premise, the Defendant still appointed an arbitration authority, whose name was totally different from SCC. It was reasonable to speculate that there was no agreement between the two parties to submit the dispute to SCC for arbitration. Therefore, the dispute cannot be submitted to SCC for arbitration despite of wording agreed by the parties because SCC was the only institution that could deal with international commercial arbitration, or it would violate the principle of autonomy in the field of business contract; 3. The parties could submit an application for arbitration to SCC, it was the right of the parties. But whether the application would be accepted by SCC or whether the respondent would raise an objection was unknown. SCC did not certainly have jurisdiction over the case and it was entirely possible to be rejected. Once SCC refused to accept this case, the Plaintiff could not seek any other appropriate legal remedies; 4. The identity and qualification of Johan Gernandt and Katarina Nilsson who issued the legal opinions on Swedish laws were involved. According to Johan Gernandt’s resume, he had held the post of the president of Trade and Industry Development Committee of Stockholm Chamber of Commerce since 2000. Therefore, the Plaintiff argued that Johan Gernandt had an interest with SCC. It was very difficult to ensure objective and fair, therefore the opinions should not be recognized. The court holds that according to the Article 18 of the Interpretations of the Supreme People’s Court on Several Issues concerning Application of Law of the People’s Republic of China on Choice of Law for Foreign-Related Civil Relationships (I) that a people’s court shall listen to the opinions on the contents of the foreign law that shall be applied and the comprehension and application thereof. The contents of the Swedish Arbitration Act shall be confirmed, since the Plaintiff and the Defendant have no objection hereto. The identity of Johan Gernandt and Katarina Nilsson can be verified. Both of them are partner of Sweden Law Firm and

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have the lawyer’s practice qualification of Sweden. The legal opinions issued by them shall be prima facie evidence of the contents of Swedish law and can be used as the reference for the court to ascertain the contents of Swedish law. It is provided in Article 1 of the Swedish Arbitration Act, disputes concerning matters in respect of which the parties may reach a settlement may, by agreement, be referred to one or several arbitrators for resolution. Such an agreement may relate to future disputes pertaining to a legal relationship specified in the agreement. The dispute may concern the existence of a particular fact. In addition to interpreting agreements, the filling of gaps in contracts can also be referred to arbitrators. Arbitrators may rule on the civil law effects of competition law as between the parties. The arbitration clause in this case clearly states that all disputes in connection with the contract involved or the execution thereof shall be submitted for arbitration in case of no settlement can be reached. The legal relationship and arbitration intention between the parties are clear and comply with the Swedish law above, and therefore the arbitration clause in this case is lawful and valid. While the arbitration authority and the rules thereof stipulated in the arbitration clause do not exist, in accordance with the Swedish law, where an arbitration clause lacks specific name of the arbitration authority or rules, the validity thereof will not be affected and such arbitration clause will not become invalid or unable to perform. Both parties may still reach an agreement to submit the case to SCC or other arbitration authority or organize an arbitration tribunal for arbitration in accordance with the relevant provisions in Swedish Arbitration Act. To sum up, the arbitration clause in this case is lawful and valid. According to Article 154 Paragraph 3 of the Civil Procedure Law of the People’s Republic of China, Article 139 Paragraph 1 of the Opinions of the Supreme People’s Court on Several Issues concerning the Application of the Civil Procedure Law of the People’s Republic of China and Article 5 of the Arbitration Law of the People’s Republic of China, the ruling is as follows: Reject the lawsuit of the Plaintiff, Mindong Congmao Ship Industry Co., Ltd. In case of dissatisfaction with this ruling, the Plaintiff Mindong Congmao Ship Industry Co., Ltd. may, within 10 days upon the service of this ruling, and the Defendant, Wärtsilä Switzerland Ltd. may within 30 days upon service of this ruling, submit a statement of appeal to the court, together with copies in accordance with the number of the opposite parties, and appeal to the Fujian High People’s Court. Presiding Judge: TIAN Xingyu Acting Judge: CHEN Yanzhong Acting Judge: CHEN Ya May 27, 2014 Clerk: ZHANG Zhuwei

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Appendix: Relevant Laws Civil Procedure Law of the People’s Republic of China Article 154 Ruling applies to the following range: …… (3) rejection of a complaint; …… Interpretations of the Supreme People’s Court on Several Issues concerning Application of Law of the People’s Republic of China on Choice of Law for Foreign-Related Civil Relationships (I) Article 139 Paragraph 1 If the complaint does not meet the requirements for acceptance the court shall make an order to reject it. If the people’s court finds that the complaint does not meet the requirements for acceptance after place the case on the docket shall make an order to reject the complaint. Arbitration Law of the People’s Republic of China Article 5 A people’s court shall not accept an action initiated by one of the parties if the parties have concluded an arbitration agreement, unless the arbitration agreement is invalid.

Shanghai Maritime Court Civil Judgment Nanjing Lianrun Transportation Trade Co., Ltd. v. China Continent Property & Casualty Insurance Co., Ltd. et al. (2013) Hu Hai Fa Shang Chu Zi No.12 Related Case(s) this is the judgment of first instance and the judgment of second instance is on page 659. Cause of Action 230. Dispute over marine insurance contract on the sea or sea-connected waters. Headnote P&I insurer required to indemnify assured for full cost of constituting limitation fund after a collision involving the assured’s ship, even though claims against the fund included claims for indirect losses and the insurance policy between insurer and assured provided that there would be no indemnity for indirect losses. Summary the Plaintiff insured its M.V. LIAN RUN 6 with the Defendant insurer for both hull and machinery risks and Protection and Indemnity (P&I) cover against liability. M.V. LIAN RUN 6 was involved in a collision, as a result of which the other vessel sank. The Plaintiff instituted limitation proceedings and constituted a fund using money advanced by the Defendant. The Plaintiff also had M.V. LIAN RUN 6 repaired, and claimed the cost of repairs from the Defendant under its hull insurance cover. There was a dispute about the total repair cost, and the Defendant also argued that any liability of the Plaintiff for indirect losses sustained by the owner of the other ship in the collision should be deducted from the amount of the indemnity it was required to pay, because liability for indirect losses was excluded under the policy. Held – the Defendant’s evidence about the reasonable cost of the repairs to M.V. LIAN RUN 6 should be preferred to the Plaintiff’s, because the Defendant’s evidence was supported by an independent appraisal. The Defendant was liable for the full amount of constituting the limitation fund, regardless of whether that fund included liability for indirect losses. It was irrelevant that the Plaintiff filed its claim after the limitation period had expired, because the Defendant admitted its intent and willingness to indemnify the Plaintiff after the limitation period had expired. © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_32

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Judgment The Plaintiff: Nanjing Lianrun Transportation Trade Co., Ltd. Legal representative: BU Shudong, general manager. Agent ad litem: ZHENG Hongkui, Jiangsu Shenglv Law Firm. The Defendant: China Continent Property & Casualty Insurance Co., Ltd. Legal representative: OU Wei, chairman. Agent ad litem: LI Hongwei, Shanghai Wintell & Co. (Zhoushan). Agent ad litem: FAN Haitao, Shanghai Wintell & Co. The Defendant: China Continent Property & Casualty Insurance Co., Ltd. Business Department Person in charge: HUANG Le, general manager. Agent ad litem: LI Hongwei, Shanghai Wintell & Co Law Firm (Zhoushan). Agent ad litem: FAN Haitao, Shanghai Wintell & Co Law Firm. With respect to the case arising from dispute over marine insurance contract filed by the Plaintiff Nanjing Lianrun Transportation Trade Co., Ltd. against the Defendant China Continent Property & Casualty Insurance Co., Ltd. and China Continent Property & Casualty Insurance Co., Ltd. Business Department on December 26, 2012. After accepting this case on December 27, the court organized the collegiate panel in accordance with the law and heard the case in public on March 14, 2013. ZHENG Hongkui, agent ad litem of the Plaintiff, and LI Hongwei and FAN Haitao, agents ad litem of the Defendants, appeared in court to attend the hearing. Now the case has been concluded. The Plaintiff alleged that on April 2, 2010, the Plaintiff signed an insurance contract with the Defendant in terms of M.V. LIAN RUN 6. On September 8, 2010, M.V. LIAN RUN 6 collided with M.V. JIE HANG 9 at 30°59′467 N/122°12′348E, M.V. JIE HANG 9 sank and the stem of M.V. LIAN RUN 6 broken as a result. On that very day, the Plaintiff reported the accident to the Defendant. After inquisition, Shanghai Yangshan Port Maritime Safety Administration made Determination of the Responsibility of Maritime Accident, which confirmed that M.V. LIAN RUN 6 should take the main responsibility and M.V. JIE HANG 9 should take the secondary responsibility. In November 2010, as requested by the Defendant, the Plaintiff applied with Shanghai Maritime Court to set up a limitation fund for maritime claims liability (hereinafter referred to as the “Fund”). The amount of the Fund was RMB1,889,044.25, which had been paid by Defendant. The losses of all the creditors caused by the accident involved had been recovered from the Fund in proportion. The stem of M.V. LIAN RUN 6 insured by the Defendant had been damaged in this accident and the ship was repaired in Nanjing Zijinshan Shipyard, the amount of the repair price was RMB1,134,346. The Plaintiff claimed against the Defendant according to the insurance contract and submitted Hull Insurance Claim Form to the Defendant on December 28, 2013. However, the Defendant refused to compensate with a variety of reasons, so the dispute involved occurred. The

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Plaintiff requested the court to judge: 1. the Defendants should compensate the repair cost in amount of RMB1,134,346 within the coverage of the insurance, the application fee of the Fund in amount of RMB2,000, the court announcement fee of the Fund in amount of RMB5,400, the ligation fees to deal with this maritime accident in amount of RMB7,504.50; 2. the Defendants should bear court acceptance fee. The Defendants argued as follows: 1. the Defendant, China Continent Property Insurance Co., Ltd. (hereinafter “CCIC”), was not a party to the insurance contract involved and should not undertake the insurance liability; 2. the lawsuit filed by the Plaintiff exceeded the limitation of action and there was no incident that could suspend the limitation of action, the Plaintiff had lost the right to win a lawsuit; 3. with regard to the claims of the Plaintiff, the reasonable amount of losses the Defendant affirmed was the repair fee in amount of RMB758,536 and legal costs in amount of RMB14,904.50; 4. the Defendant was entitled to deduct the deductible from the insurance indemnity according to the insurance policy; 5. the Defendant was entitled to offset the sum paid by it in advance for the Plaintiff. The evidence materials provided by the Plaintiff to support its claims, the cross-examination opinions of the the two Defendants and the ascertainment opinions of the court are as follows: 1. Business License and Organization Code Certificate, to prove the subject qualification of the Plaintiff. The two Defendants had no objection to the authenticity of the evidence, and the court ascertains the effect of evidence thereof; 2. Certificate of Ownership and Certificate of Nationality, to prove the legal materials of the ship involved. The two Defendants had no objection to the authenticity and legality of the evidence, but they challenged the relevancy thereof and held that it was not the Certificate of Nationality when the accident occurred. The two Defendants had no objection to the authenticity of the evidence, and the court ascertains the effect of evidence thereof; 3. Ship Inspection Certificate and Ship Seaworthiness Certificate, to prove that the ship meet the navigation requirements. The two Defendants had no objection to the authenticity and legality of the evidence, but they challenged the relevancy thereof and held that they were both issued in 2011. The two Defendants had no objection to the authenticity of the evidence, and the court ascertains the effect of evidence thereof; 4. Insurance policy, to prove that the contract relationship between the Plaintiff and the Defendant. The two Defendants had no objection to the authenticity, legality and relevancy of the evidence, but held that the insurance policy was not completed for lack of insurance clauses; The two Defendants had no objection to the authenticity, legality and relevancy of the evidence, and the court ascertains the effect of evidence thereof. 5. Determination of Responsibility of Maritime Accident, to prove the fact of the insured accident. The two Defendants had no objection to the authenticity, the

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legality and the relevancy of the evidence, and the court ascertains the effect of evidence thereof; Notice of Accident, to prove that the Plaintiff had performed the obligation of report. The two Defendants held that they had never received that. The court holds that the Plaintiff has no evidence to prove it sent the Notice of Accident to the two Defendants, so the effect of evidence thereof cannot be ascertained; Civil Ruling, to prove the fact of the establishment of the Fund and the compensation. The two Defendants had no objection to the authenticity, legality and relevancy of the evidence, the court ascertains the effect of evidence thereof; Ship Repair Contract and Statement of Account, to prove the fact that the ship was repaired. The two Defendants had no objection to the authenticity, legality and relevancy of the evidence, but held that the repair price was too high and part of repair items were covered by the insurance involved. The two Defendants had no objection to the evidence and the court ascertains the effect of evidence thereof. However, with respect to the rationality of repair price, the court will decide comprehensively with other evidence; Invoices and Bank Transfer Slip, to prove the payment of repair cost and the losses of the Plaintiff. The two Defendants had no objection to the authenticity, legality and relevancy of the evidence, but held that the loan more than RMB480,000 was payment for goods rather than repair cost. The court ascertains that the two Defendants had no objection to the authenticity, the legality and the relevancy of the evidence and confirm the effect of evidence. However, with respect to the rationality of repairing price, the court will judge comprehensively with other evidence; Hull Insurance Claim Form and Letter of Claim, to prove the fact that the Plaintiff claimed for indemnity. The two Defendants had no objection to the authenticity, legality and relevancy of the evidence and the court ascertains the effect of evidence thereof; Receipts of the application fee for the Fund, the court announcement fee for the Fund and the ligation fees, to prove that the Plaintiff had paid these fees. The two Defendants had no objection to the authenticity, legality and relevancy of the evidence and the court ascertains the effect of evidence thereof; E-mails, to prove the lawsuit filed by the Plaintiff did not passed the limitation of action. The two Defendants held that these emails were submitted after the expiration of the time limit for producing evidence, so they could not be used as evidence. The two Defendants did not raise any objection to the authenticity of the evidence and the court ascertains the effect of evidence thereof; and Certificate issued by Bank of China Nanjing City Liuhe Sub-branch, to prove that the insurance beneficiary had agreed the Plaintiff to institute this lawsuit. The two Defendants held that the certificate was submitted after the expiration of the time limit for producing evidence, it could not be used as evidence. In addition, it only showed that the bank gave the Plaintiff the right to institute this lawsuit, but not the right to get the insurance indemnity from the Defendant.

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The Plaintiff offered the original copy of the certificate and the two Defendants had no objection to the authenticity thereof, so the court ascertains the effect of evidence thereof. The evidence materials provided by the two Defendants to support their defences, the cross-examination opinions of the Plaintiff and the ascertainment opinions of the court are as follows: 1. Survey Report of the collision accident between M.V. LIAN RUN 6 and M.V. JIE HANG 9 (issued by Ejoy Insurance Surveyors & Adjusters Co., Ltd.), to prove that the repair cost of M.V. LIAN RUN 6 was RMB526,168. The Plaintiff held that the report did not have fairness, because the survey was entrusted by the Defendant unilaterally and the amount was inconsistent with the actual payment of the repair cost and the appraisal conclusion made by the appraiser entrusted by the court, so the court does not ascertain the effect of evidence thereof; 2. Payment voucher, to prove that the Defendant had paid RMB1,987,077.78 to set up the Fund in advance for the Plaintiff. The Plaintiff held that insurer was one of the parties to apply for the Fund, it paid the sum for the sake of its own insurance interest, so no advanced payment existed. The Plaintiff had no objection to the payment and the court ascertains the effect of evidence thereof; 3. Coastal and Inland-river Hull Insurance Clauses, to prove that indirect losses should not be indemnified by the Defendant. The Plaintiff had no objection to the authenticity of the evidence, but held that it was unreasonable that indirect losses would not be covered. The two Defendants had no objection to the authenticity of the evidence and the court ascertains the effect of evidence thereof; 4. (2011) Hu Hai Fa Hai Chu Zi No.9 & 10 Civil Mediations, to prove that the two parties confirmed M.V. LIAN RUN 6 should take 80% of the responsibility and the loss of earning in amount of RMB930,000 of M.V. JIE HANG 9 would be recovered by the Fund; 5. (2011) Hu Hai Fa Hai Chu Zi No.7 & 9 &10 Civil Rulings, to prove that all the stakeholders concerned confirmed the total amount of the Fund was RMB1,987,077.78, and the compensation rate was 31.17894%; 6. Coastal and Inland-river Hull Insurance Policy (2010), to prove that after the Defendant interpreted the contents of the insurance clauses attached with the insurance contract in detail, the Plaintiff signed and sealed the policy to confirm it knew and accepted the contents clearly; 7. Letter of Authorization for Insurance Agent Service (2009), to prove that the Plaintiff entrusted Jiangsu Oriental Navigator Insurance Brokers Co., Ltd. as the insurance broker to manage the insurance issues; 8. Coastal and Inland-river Hull Insurance Policy (2008), to prove that after the Defendant interpreted the contents of the insurance clauses attached with the insurance contract in detail, the insured knew and accepted the contents;

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The Plaintiff had no objection to evidence 4-8. The two Defendants had no objection to the authenticity, legality or relevancy of the evidence and the court ascertains the effect of evidence thereof. 9. Retaining Agreement, to prove that the Defendant paid RMB150,000 for attorney fee to deal with the accident of M.V. LIAN RUN 6. The Plaintiff held that the attorney fee was irrelevant to the Plaintiff, the cost was spent in the purpose of protection of the insurance company’s own interests. In addition, it was unreasonable to request the Plaintiff to bear such fee and the standard thereof was unreasonable too. The Plaintiff challenged the relevancy of the evidence and the Plaintiff was not a party to the contract, so the court does not ascertain the effect of evidence thereof; and 10. Assessment and Appraisal Report of the repair cost of M.V. LIAN RUN 6 (issued by Shuangxi Maritime Co., Ltd.), to prove that the reasonable repair cost was RMB758,536. Although the Plaintiff held the cost was too low, the civil Mediations had taken into effective, this report should be confirmed. The Plaintiff had no objection to this report and the court ascertains the effect of evidence thereof. According to the analysis and ascertainment of the evidence, and combined with investigation in the hearing, the court ascertains the following facts: on April 1, 2010, Lianrun Company purchased a coastal and inland-river hull insurance. On April 6, CCIC Business Department, as the insurer, issued No.PCBA201031090 004000027 coastal and inland-river hull all-risk insurance policy. The policy read that the insured was Lianrun Company, the name of the insured vessel was M.V. LIAN RUN 6, the insurance covered all-risks and the additional risks were 1/4 additional risk plus separate risks of propeller and etc. The insured amount was RMB28 million and the term of coverage was from April 2, 2010 to April 1, 2011. Besides, it was provided in the special agreement list of the policy that with regard to the main risks, the deductible of each accident was RMB50,000 or 10% of the loss, whichever was higher. The deductible also applied to the collision or allision liability and separate risks of propeller and etc. The first beneficiary was Bank of China Nanjing City Liuhe Branch) (hereinafter “BOC Liuhe”). It was provided in the Coastal and Inland-river Hull Insurance Clauses of China Continental Property and Casualty Insurance Co., Ltd. attached to the policy that “Article 2 All risks This insurance covers total loss or partial loss of or damage to the insured vessel arising from the six causes enumerated in Article 1 as well as the following liabilities and expenses: 1. collision or allision liability: direct losses and expenses arising from collision or allision between the insured vessel and other vessels, docks, port facilities or buoys, which includes direct loss of the cargo carried on the collided vessel and the liability for compensation the insured should undertake; Article 3 This insurance does not cover the losses, liabilities or expenses caused by the following reasons: 6. The liabilities and expenses of indirect losses and expenses, loss of life and personal injuries or consequent liability and expense of the insured vessel and a third party due to insured event; Article 11 The insurer will deduct the deductible from the indemnities as per the agreement in the policy (except total loss, collision or allision liability).

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At around 0145 h on September 8, 2010, M.V. LIAN RUN 6 which was owned by Lianrun Company collided with M.V. JIE HANG 9 which was owned by Qingzhou City Hengsheng Shipping Co., Ltd. (hereinafter “Hengsheng Company”), an outsider, the stem of M.V. LIAN RUN 6 fell apart, and M.V. JIE HANG 9 was damaged and water flowed into the bottom of M.V. JIE HANG 9. On March 14, 2011, Shanghai Yangshan Port Maritime Safety Administration made Hu Hai Yang Ze Zi (2011) No.001 Conformation of Responsibility of Maritime Accident, which identified that M.V. LIAN RUN 6 should take the main responsibility and M.V. JIE HANG 9 should take the secondary responsibility. On September 23, 2010, Lianrun Company entered into a ship repair contract with Nanjing Tanker Corporation Zijinshan Shipyard (hereinafter “Zijinshan Shipyard”). Lianrun Company authorized Zijinshan Shipyard to repair M.V. LIAN RUN 6. The contract quotation was RMB1.15 million. On October 18, 2010, Zijinshan Shipyard and Lianrun Company made an agreement and issued a repair statement. The final repair price was RMB1,134,346. On December 18 and 28, 2010, Lianrun Company made the payments to Zijinshan Shipyard in two installments. On December 29, Zijinshan Shipyard issued an invoice for the repair cost in amount of RMB1,134,346 to Lianrun Company. In November, 2010, Lianrun Company applied with the court to set up a limitation fund for maritime claims liability (hereinafter the “Fund”). On November 30, the court made the (2010) Hu Hai Fa Xian Zi No.4 Civil Ruling, which approved the application to set up the Fund filed by Lianrun Company. On December 10, 2010, the court set up the Fund for Lianrun Company with a guarantee provided by CCIC Business Department. The amount of the Fund was RMB1,987,077.78. On November 14, 2011, Shanghai Shuangxi Maritime Development Co. Ltd. (hereinafter “Shuangxi Company”) issued an assessment and appraisal report under the authorization of the court for the repair cost of M.V. LIAN RUN 6, the conclusion of which was that the reasonable repair cost should be RMB758,536. On November 17, 2011, the court made the (2011) Hu Hai Fa Chu Zi No.9 & No.10 Civil Mediations, which confirmed that in terms of the losses arising out of the maritime accident caused by M.V. LIAN RUN 6, Hengsheng Company should take 20% of the responsibility and Lianrun Company should take 80% of the responsibility. The losses of Hengsheng Company was RMB6,257,985, including the loss of earning in amount of RMB930,000. Lianrun Company should compensate 80% of the losses suffered by Hengsheng Company, namely RMB5,006,388. Hengsheng Company should compensate RMB151,707.20 to Hengsheng Company. After a offset, Lianrun Company should pay RMB4,854,680.80 to Hengsheng Company. The sum would be paid by the Fund set for the accident of M.V. LIAN RUN 6. On the same day, the court made (2011) Hu Hai Fa Chu Zi No.7 & No.9 & No.10 Civil Rulings, in which it was confirmed that in the maritime accident caused by M.V. LIAN RUN 6, the total sum of the claims of all the creditors was RMB6,373,140.80 and the creditors concluded a repayment agreement that they would seek payment from the total sum of the Fund. On December 13, 2011, CCIC Business Department paid RMB1,987,077.78 to the court for the Fund.

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On December 28, 2011, Lianrun Company sent a hull insurance claim form and a letter of claim to CCIC to claim for RMB3,136,328.28, which included RMB1,987,077.78 paid in advance for the Fund by CCIC Business Department. On October 15, 2012, ZHANG Jie, an employee of CCIC Business Department, sent an email to Lianrun Company, alleging that in terms of the collision accident between M.V. LIAN RUN 6 and M.V. JIE HANG 9, CCIC Business Department would pay RMB238,091.12 to Lianrun Company and Lianrun Company should provide relevant documents and account number. On March 21, 2013, BOC Liuhe issued a certificate, agreeing Lianrun Company to institute this action. The court holds that the case is arising from dispute over marine insurance contract. The insurer stated in the policy and the special agreement list is CCIC Business Department, the insured is Lianrun Company and the first beneficiary is BOC Liuhe. The owner of the insured vessel M.V. LIAN RUN 6 is Lianrun Company. And BOC Liuhe issued a certificate to approve Lianrun Company to institute this lawsuit. Lianrun Company has insurable interest and is proper plaintiff. CCIC Business Department is a subsidiary of CCIC, it does not have qualification of an independent legal person. But it is a financial subsidiary which was established according to the law and has obtained a business license. So it is a qualified independent subject to participate in litigation and can pay off external debts, it shall undertake the civil liabilities to Lianrun Company as the insurer of the insurance contract involved. The insurance contract between Lianrun Company and CCIC Business Department is legal and effective. After the insured accident occurred, CCIC Business Department shall indemnify Lianrun Company pursuant to the insurance contract. CCIC is the parent company of CCIC Business Department, so it shall undertake the supplementary liability in case that CCIC Business Department’s assets are not sufficient to pay off the debt. In respect of the limitation of action in this case, the limitation of action of dispute over marine insurance contracts is two years, counting from the day that the insured accident occurred. The insured collision accident between M.V. LIAN RUN 6 and M.V. JIE HANG 9 occurred on September 8, 2010, but on October 15, 2012, CCIC Business Department sent an email to Lianrun Company in which it agreed to indemnify Lianrun Company and asked it to provide relevant documents and account number. The court holds that CCIC Business Department expressed an intent of its willingness to fulfill its obligations to Lianrun Company. Hence, the court does not support the defence of CCIC Business Department and CCIC that the limitation of action has expired. In respect of the losses suffered by Lianrun Company, there occurred a collision between M.V. LIAN RUN 6 and M.V. JIE HANG 9, which caused the stem of M. V. LIAN RUN 6 broken. Lianrun Company had the vessel repaired and paid the repair cost in amount of RMB1,134,346. However, Shuangxi Company conducted an appraisal upon the repair cost of M.V. LIAN RUN 6, and the conclusion thereof is that the reasonable cost is RMB758,536. According to the (2011) Hu Hai Fa Chu Zi No.9 & No.10 Civil Mediations made by the court, both Lianrun Company and Hengsheng Company, a third party, confirmed the amount of the loss incurred to

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Lianrun Company was RMB758,536. Therefore, the amount of the loss of Lianrun Company is the reasonable repair cost, namely RMB758,536. In respect of the deductible, it is provided in Article 11 of the Insurance Clauses attached to the policy involved that each indemnity would deduct the deductible provided in the policy (except total loss, collision or allision liability), but it is provided in the special agreement list of the policy that the deductible of each accident is RMB50,000 or 10% of the loss, whichever is the higher; the deductible is also applied to collision or allision liability, and separate insurance like the propeller etc. The two terms mentioned above are contradictory. According to relevant laws, where a standard clause is inconsistent with non-standard clause, the non-standard clause shall be adopted. However, according the Insurance Clauses, the collision or allision liability refers to liability for indemnity of direct losses and expenses suffered by a vessel collided by the insured vessel. In this case, what Lianrun Company claimed for is the losses of the insured vessel after it collided with another vessel, it does not fall into the scope covered by collision or allision liability. Besides, the insured accident involved does not cause a total loss to the insured vessel. So the amount of the indemnity shall deduct 10% of the losses. In respect of the sum to set up the Fund paid by CCIC Business Department and CCIC in advance for Lianrun Company (including the loss of earning of M.V. JIE HANG 9, amounting to RMB231,971.31, which is indirect loss; 10% of the other losses except the loss of earning is deductible, amounting to RMB175,510.65; and the total amount is RMB407,481.96), and the interest thereon shall be undertaken by Lianrun Company and deducted from the insurance indemnity. The court holds that the Fund is set up to limit the shipowner’s liability for compensation. The amount of the Fund is calculated on the basis of the tonnage of the vessel involved, and it is unrelated to the amount and kind of the shipowner’s liability for compensation. The indemnity of Lianrun Company caused by the insured accident involved amounted to RMB6,373,140.80, including the loss of earning of M.V. JIE HANG 9 in amount of RMB930,000. Even if the loss of earning is indirect loss, it falls into the exemption provided in the Insurance Clauses and shall not be undertaken by the insurer, the insurer still needs to undertake an indemnity for about five million yuan after deducting indirect losses and deductible, which is far more than the total amount of the Fund, namely RMB1,987,077.78. Hence, the court will not support the claim of CCIC Business Department and CCIC that the indirect losses and deductible shall be deducted from the insurance indemnity for lack of factual and legal basis. The court holds that the application fee and the court announcement fee of the Fund together with the litigation fees to deal with the maritime accident paid by Lianrun Company are necessary and reasonable expenses paid by the insured to avoid or minimize the loss of compensation that can be recovered pursuant to the contract. So the court supports the claim of Lianrun Company for the expenses mentioned above against CCIC Business Department. The court holds that the attorney fee CCIC Business Department paid in the case of the Fund is for the sake of its own rights and interests; it is an expense to minimize the indemnity; besides, the amount thereof is not confirmed by Lianrun

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Company. As a result, the court will not support the allegation held by CCIC Business Department that the attorney fee should be contributed by Lianrun Company and deducted from the insurance indemnity. To sum up, according to Article 237, Article 240 and Article 267 of the Maritime Code of the People’s Republic of China, Article 22 of the Provisions of the Supreme People’s Court on Several Issues concerning the Limitation of Action in the Trial of Civil Cases, the judgment is as follows: 1. China Continent Property & Casualty Insurance Co., Ltd. Business Department shall pay the indemnity in amount of RMB682,682.40 to Nanjing Lianrun Transportation Trade Co., Ltd. within 10 days after this judgment takes into effect; 2. China Continent Property & Casualty Insurance Co., Ltd. Business Department shall pay the application fee of the limitation fund for maritime claims liability in amount of RMB2,000, court announcement fee of the limitation fund for maritime claims liability in amount of RMB5,400 and the litigation fees to deal with the maritime accident in amount of RMB7,504.50 within 10 days after this judgment takes into effect; 3. China Continent Property & Casualty Insurance Co., Ltd. shall undertake the supplementary liability for China Continent Property & Casualty Insurance Co., Ltd. Business Department’s debt mentioned above; 4. Not support other claims of Nanjing Lianrun Transportation Trade Co., Ltd. If the Defendant China Continent Property & Casualty Insurance Co., Ltd. Business Department does not fulfill the obligation of payment according to the judgment, the interest of debt shall be doubled according to the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB15,143 yuan, the Plaintiff Nanjing Lianrun Transportation Trade Co., Ltd. shall bear RMB5,905.77 yuan, and the Defendants China Continent Property & Casualty Insurance Co., Ltd. and China Continent Property & Casualty Insurance Co., Ltd. Business Department shall bear RMB9,237.23 yuan. In event of dissatisfaction with this Judgment, the parties may within 15 days upon service of this Judgment, substitute a statement of appeal to the court, with duplicates in the number of the opposite parties, to lodge an appeal to the Shanghai High People’s Court. Presiding Judge: QIAN Xu Acting Judge: CHEN Lei Acting Judge: DONG Xiaonan June 20, 2013 Clerk: JI Xiaoqing

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Shanghai High People’s Court Civil Judgment Nanjing Lianrun Transportation Trade Co., Ltd. v. China Continent Property & Casualty Insurance Co., Ltd. et al. (2013) Hu Gao Min Si (Hai) Zhong Zi No.86 Related Case(s) this is the judgment of second instance, and the judgment of first instance is on page 649. Cause of Action 230. Dispute over marine insurance contract on the sea or sea-connected waters. Headnote affirming lower court judgment that the Plaintiff had an insurable interest in vessel damaged in collision. Summary the court of first instance is affirmed because Lianrun Company has an insurable interest, the insurance indemnity for ship repair is the repair costs confirmed by the parties concerned with a 10% deductible, and is affirmed based on the attitude of the insurer towards the settlement of claim in terms of the insured accident. The Appellant-Defendant appealed the decision as to whether the Lianrun Company is the subject of the insurance indemnity involved, whether the loss of earning and the deductible (10% of the losses) under collision liability shall be deducted from the Fund, having been paid by CCIC Business Department in advance; and whether the action instituted by Lianrun Company has exceeded the limitation of action. The court held that the Appellant-Plaintiff did not provide the factual and legal basis on appeal to overturn the court of first instance’s decision. Thus, the court of first instance is affirmed.

Judgment The Appellant (the Defendant of first instance): China Continent Property & Casualty Insurance Co., Ltd. Business Department Person in charge: HUANG Le, general manager. Agent ad litem: LI Hongwei, lawyer of Shanghai Wintell & Co. (Zhoushan). Agent ad litem: FAN Haitao, lawyer of Shanghai Wintell & Co.

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The Respondent (the Plaintiff of first instance): Nanjing Lianrun Transportation Trade Co., Ltd. Legal representative: BU Shudong, general manager. Agent ad litem: ZHENG Hongkui, lawyer of Jiangsu Shenglv Law Firm. The Defendant of first instance: China Continent Property & Casualty Insurance Co., Ltd. Legal representative: OU Wei, chairman. Agent ad litem: LI Hongwei, lawyer of Shanghai Wintell & Co. (Zhoushan). Agent ad litem: FAN Haitao, lawyer of Shanghai Wintell & Co. The Appellant, China Continent Property & Casualty Insurance Co., Ltd. Business Department (hereinafter referred to as “CCIC Business Department”) refused to accept (2013) Hu Hai Fa Shang Chu Zi No.12 Civil Judgment in regards to the dispute over marine insurance contract with the Respondent Nanjing Lianrun Transportation Trade Co., Ltd. (hereinafter referred to as “Lianrun Company”) and the Defendant of first instance China Continent Property & Casualty Insurance Co., Ltd. (hereinafter referred to as “CCIC”) made by Shanghai Maritime Court and filed an appeal to the court. After accepting the case on July 26, 2013, the court organized the collegiate panel and heard the case in public on September 12, 2013. LI Hongwei and FAN Haitao, agents ad litem of the Appellant CCIC Business Department and the Defendant of first instance CCIC, and ZHENG Hongkui, agent ad litem of the Respondent Lianrun Company, appeared in court to attend the hearing. Now the case has been concluded. The court of first instance ascertained the following facts: on April 1, 2010, Lianrun Company purchased coastal and inland-river hull insurance. On April 6, CCIC Business Department, as the insurer, issued the coastal and inland-river hull all-risk insurance policy, No.PCBA201031090004000027. The policy red that the insured was Lianrun Company, the name of the insured vessel was M.V. LIAN RUN 6, the insurance covered all-risks and the additional risks were ¼ additional risk plus separate risks of propeller etc. The insured amount was RMB28 million and the term of the coverage was from April 2, 2010 to April 1, 2011. It was provided in the special agreement list of the policy that with regard to the main risks, the deductible of each accident was RMB50,000 or 10% of the loss, whichever was higher. The deductible also applied to the collision or allision liability and separate risks of propeller etc. The first beneficiary was the Bank of China Nanjing City Liuhe Branch (hereinafter referred to as “BOC Liuhe”). It was provided in the Coastal and Inland-river Hull Insurance Clauses of China Continental Property and Casualty Insurance Co., Ltd. (hereinafter referred to as the “Insurance Clauses”) attached to the policy that “Article 2 – All risks. This insurance covers total loss or partial loss of or damage to the insured vessel arising from the six causes enumerated in Article 1, as well as the following liabilities and expenses: 1. Collision or allision liability: direct losses and expenses arising from collision or allision between the insured vessel and other vessels, docks, port facilities or buoys, which includes direct loss of the cargo carried on the collided

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vessel and the liability for compensation the insured should undertake; Article 3 stated this insurance does not cover the losses, liabilities or expenses caused by the following reasons: the liabilities and expenses of indirect losses and expenses, loss of life and personal injuries or consequent liability and expense of the insured vessel and a third party due to insured event; Article 11 stated the insurer will deduct the deductible from the indemnities as per the agreement in the policy (except total loss, collision or allision liability). At around 0145 h on September 8, 2010, M.V. LIAN RUN 6 which was owned by Lianrun Company collided with M.V. JIE HANG 9 which was owned by Qingzhou City Hengsheng Shipping Co., Ltd. (hereinafter referred to as “Hengsheng Company”), an outsider. The stem of M.V. LIAN RUN 6 fell apart, and M.V. JIE HANG 9 was damaged, which caused water to flow into the bottom of M.V. JIE HANG 9. On March 14, 2011, Shanghai Yangshan Port Maritime Safety Administration made Hu Hai Yang Ze Zi (2011) No.001 Conformation of Responsibility of Maritime Accident, which identified that M.V. LIAN RUN 6 should take the main responsibility and M.V. JIE HANG 9 should take the secondary responsibility. On September 23, 2010, Lianrun Company entered into a ship repair contract with Nanjing Tanker Corporation Zijinshan Shipyard (hereinafter “Zijinshan Shipyard”). Lianrun Company authorized Zijinshan Shipyard to repair M.V. LIAN RUN 6. The contract quote was RMB1.15 million. On October 18, 2010, Zijinshan Shipyard and Lianrun Company made an agreement and issued a repair statement. The final repair price was RMB1,134,346. On December 18 and 28, 2010, Lianrun Company made payments to Zijinshan Shipyard in two installments. On December 29, Zijinshan Shipyard issued an invoice for the repair cost in amount of RMB1,134,346 to Lianrun Company. In November, 2010, Lianrun Company applied with the court of court of first instance to set up a limitation fund for maritime claims liability (hereinafter the “Fund”). On November 30, the court of first instance made (2010) Hu Hai Fa Xian Zi No.4 Civil Ruling, which approved the application to set up the Fund filed by Lianrun Company. On December 10, 2010, the court of first instance set up the Fund for Lianrun Company with a guarantee provided by CCIC Business Department. The amount of the Fund was RMB1,987,077.78. On November 14, 2011, Shanghai Shuangxi Maritime Development Co. Ltd. (hereinafter referred to as “Shuangxi Company”) issued an assessment and appraisal report under the authorization of the court of first instance for the repair cost of M.V. LIAN RUN 6, the conclusion of which was that the reasonable repair cost should be RMB758,536. On November 17, 2011, the court of first instance made (2011) Hu Hai Fa Chu Zi No.9 & No.10 Civil Mediations, which confirmed that in terms of the losses arising out of the maritime accident caused by M.V. LIAN RUN 6, Hengsheng Company should take 20% of the responsibility and Lianrun Company should take 80% of the responsibility. The losses of Hengsheng Company was RMB6,257,985, including the loss of earning in amount of RMB930,000. Lianrun Company should compensate 80% of the losses suffered by Hengsheng Company, namely

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RMB5,006,388. Hengsheng Company should compensate RMB151,707.20 to Lianrun Company. After the offset, Lianrun Company should pay RMB4,854,680.80 to Hengsheng Company. The sum would be paid by the Fund set for the accident of M.V. LIAN RUN 6. On the same day, the court of first instance made (2011) Hu Hai Fa Chu Zi No.7 & No.9 & No.10 Civil Rulings, in which it was confirmed that in the maritime accident caused by M.V. LIAN RUN 6, the total sum of the claims of all the creditors was RMB6,373,140.80 and the creditors concluded a repayment agreement that they would seek payment from the total sum of the Fund. On December 13, 2011, CCIC Business Department paid RMB1,987,077.78 to the court of first instance for the Fund. On December 28, 2011, Lianrun Company sent a hull insurance claim form and a letter of claim to CCIC to claim for RMB3,136,328.28, which included RMB1,987,077.78 paid in advance for the Fund by CCIC Business Department. On October 15, 2012, ZHANG Mou, an employee of CCIC Business Department, sent an email to Lianrun Company, alleging that in terms of the collision accident between M.V. LIAN RUN 6 and M.V. JIE HANG 9, CCIC Business Department would pay RMB238,091.12 to Lianrun Company and Lianrun Company should provide relevant documents and account number. On March 21, 2013, BOC Liuhe issued a certificate, agreeing Lianrun Company to institute this action. The court of first instance held that the case was arising from dispute over marine insurance contract. The insurer stated in the policy, and the special agreement list, was the CCIC Business Department. The insured was Lianrun Company and the first beneficiary was BOC Liuhe. The owner of the insured vessel M.V. LIAN RUN 6 was Lianrun Company. BOC Liuhe issued a certificate to approve Lianrun Company to institute this lawsuit. Lianrun Company had insurable interest and was proper plaintiff. CCIC Business Department was a subsidiary of CCIC, it did not have qualification of an independent legal person. Yet, it was a financial subsidiary which was established according to the law and had obtained a business license. Therefore, CCIC Business Department was a qualified independent subject to participate in litigation and could pay off external debts, so it should undertake the civil liabilities to Lianrun Company as the insurer of the insurance contract involved. The insurance contract between Lianrun Company and CCIC Business Department was legal and effective. After the insured accident occurred, CCIC Business Department should indemnify Lianrun Company pursuant to the insurance contract. CCIC was the parent company of CCIC Business Department, so it should undertake the supplementary liability in case that CCIC Business Department’s assets were not sufficient to pay off the debt. With respect of the limitation of action in this case, the limitation of action of dispute over marine insurance contracts was two years, counting from the day that the insured accident occurred. The insured collision accident between M.V. LIAN RUN 6 and M.V. JIE HANG 9 occurred on September 8, 2010, but on October 15, 2012, CCIC Business Department sent an email to Lianrun Company in which it agreed to indemnify Lianrun Company and asked it to provide relevant

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documents and account number. The court of first instance held that CCIC Business Department expressed an intent of its willingness to fulfill its obligations to Lianrun Company. Hence, the court of first instance did not support the defence of CCIC Business Department and CCIC that the limitation of action had expired. With respect to the losses suffered by Lianrun Company, there was a collision between M.V. LIAN RUN 6 and M.V. JIE HANG 9, which caused the stem of M. V. LIAN RUN 6 to break. Lianrun Company had the vessel repaired and paid the repair cost in amount of RMB1,134,346. However, Shuangxi Company conducted an appraisal upon the repair cost of M.V. LIAN RUN 6, and the conclusion thereof was that the reasonable cost was RMB758,536. According to (2011) Hu Hai Fa Chu Zi No.9 & No.10 Civil Mediations made by the court of first instance, both Lianrun Company and Hengsheng Company, an outsider, confirmed the amount of the loss incurred to Lianrun Company was RMB758,536. Therefore, the amount of the loss of Lianrun Company was the reasonable repair cost, namely RMB758,536. With respect to the deductible, it was provided in Article 11 of the Insurance Clause attached to the policy involved that each indemnity would deduct the deductible provided in the policy (except total loss, collision or allision liability). However, it was provided in the special agreement list of the policy that the deductible of each accident was RMB50,000 or 10% of the loss, whichever was the higher; the deductible was also applied to collision or allision liability, and separate insurance like the propeller etc. The two terms mentioned above were contradictory. According to relevant laws, where a standard clause was inconsistent with non-standard clause, the non-standard clause should be adopted. However, according the Insurance Clause, the collision or allision liability referred to liability for indemnity of direct losses and expenses suffered by a vessel collision by the insured vessel. In this case, what Lianrun Company claimed for was the losses of the insured vessel after it collided with another vessel, it did not fall into the scope covered by collision or allision liability. Besides, the insured accident involved did not cause a total loss to the insured vessel. Therefore, the amount of the indemnity should deduct 10% of the losses. With respect to the sum to set up the Fund paid by CCIC Business Department and CCIC in advance for Lianrun Company, the loss of earnings of M.V. JIE HANG 9, amounting to RMB231,971.31, which was indirect loss, 10% of the other losses except the loss of earnings, amounting to RMB175,510.65, and the interest thereon must be undertaken by Lianrun Company and deducted from the insurance indemnity. The court of first instance held that the Fund was set up to limit the shipowner’s liability for compensation. The amount of the Fund was calculated on the basis of the tonnage of the vessel involved, and was unrelated to the amount and kind of the shipowner’s liability for compensation. The indemnity of Lianrun Company caused by the insured accident involved amounted to RMB6,373,140.80, including the loss of earning of M.V. JIE HANG 9 in amount of RMB930,000. Even if the loss of earning was indirect loss, it fell into the exemption provided in the Insurance Clause and should not be undertaken by the insurer, the insurer still needed to undertake an indemnity for about five million yuan after deducting indirect losses and deductible, which was far more than the

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total amount of the Fund, namely RMB1,987,077.78. Hence, the court of first instance did not support the claim of CCIC Business Department and CCIC that the indirect losses and deductible should be deducted from the insurance indemnity for lack of factual and legal basis. The court of first instance held that the application fee and the court announcement fee of the Fund together with the litigation fees to deal with the maritime accident paid by Lianrun Company were necessary and reasonable expenses paid by the insured to avoid or minimize the loss of compensation that could be recovered pursuant to the contract. So, the court of first instance supported the claim of Lianrun Company for the expenses mentioned above against CCIC Business Department. The court of first instance held that the lawyer’s fee CCIC Business Department paid in the case of the Fund was for the sake of its own rights and interests; it was an expense to minimize the indemnity; besides, the amount thereof was not confirmed by Lianrun Company. As a result, the court of first instance did not support the allegation held by CCIC Business Department that the attorney fees should be contributed by Lianrun Company and deducted from the insurance indemnity. In summary, the court of first instance judged as follows: 1. China Continent Property & Casualty Insurance Co., Ltd. Business Department should pay the indemnity in the amount of RMB682,682.40 to Nanjing Lianrun Transportation Trade Co., Ltd. within 10 days after this judgment takes into effect; 2. China Continent Property & Casualty Insurance Co., Ltd. Business Department should pay the application fee of the limitation fund for maritime claims liability in the amount of RMB2,000, court announcement fee of the limitation fund for maritime claims liability in the amount of RMB5,400 and the litigation fees to deal with the maritime accident in the amount of RMB7,504.50 within 10 days after this judgment takes into effect; 3. China Continent Property & Casualty Insurance Co., Ltd should undertake the supplementary liability for China Continent Property & Casualty Insurance Co., Ltd. Business Department’s debt mentioned above; 4. Not support other claims made by Nanjing Lianrun Transportation Trade Co., Ltd. CCIC Business Department appealed to revoke the original judgment and change the judgment to reverse the holding by the court of first instance of all claims against Lianrun Company or pay the indemnity in amount of RMB247,623 to Lianrun Company on the premise of the agreement of BOC Liuhe, an outsider. CCIC Business Department’s main arguments were as follows: 1. The limitation of action had expired when Lianrun Company instituted the action. According to Article 174 of the Answers of the Supreme People’s Court to the Issues of Foreign-Related Commercial and Maritime Trial Practice I (hereinafter the “Answers”), “where the obligor agrees to negotiate with the obligee about the indemnity, but an agreement on specific amount of the

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indemnity cannot be arrived, it cannot be deemed as the obligor agrees to fulfill his obligations and the limitation of action suspends.” In this case, the employee of CCIC Business Department only sent an email to propose an amount that it would like to pay, which was not consistent with the amount claimed by Lianrun Company. This could not be deemed as an agreement to fulfill obligations and thus it did not constitute a suspension of limitation of action. 2. Where the ground of suspension of limitation of action could not stand, CCIC Business Department held that the first beneficiary in the policy was BOC Liuhe. in court of first instance, the evidence provided by Lianrun Company only suggested that BOC Liuhe agreed that the action could be brought by Lianrun Company, but they could not prove that the bank agreed the indemnity should be paid to Lianrun Company. The court of first instance decided directly that CCIC Business Department should pay the indemnity to Lianrun Company without agreement of the first beneficiary of the policy, which was a judicial interference to civil and commercial activity, and could probably harm the legal rights and interests of the beneficiary of the policy. 3. The determination of the court of first instance on the nature of the Fund was false. There was no legal and factual basis the court of first instance held that the Fund did not include indirect losses and the deductible. If Lianrun Company did no set up the Fund, the insurer would indemnify more than five million. Additionally, the application fee, the court announcement fee of the Fund, and the litigation fees to deal with the maritime accident were necessary and reasonable expenses paid by the insured to avoid or minimize the loss of compensation that could be recovered pursuant to the contract. These expenses were out of statutory duty to mitigate loss, and they should be contributed on the basis of the benefit each gained. Lianrun Company’s pleas were as follows: 1. During the time limitation of appeal, CCIC Business Department altered its claim to an insurance indemnity in the amount of RMB247,623 from Lianrun Company, with the agreement of BOC Liuhe, the outsider involved. It did not comply with the Civil Procedure Law. CCIC Business Department changed its claim to dismiss all the claims of Lianrun Company in the hearing of the court of second instance. 2. CCIC Business Department kept showing its willingness to pay the indemnity within a reasonable scope, which constituted a commitment to suspend limitation of action provided by law. 3. As to the subject, a loan contract relationship established between Lianrun Company, BOC Liuhe, and the vessel involved did not suffer total loss or constructive total loss. In court of first instance, CCIC Business Department did not apply to add BOC Liuhe as a party of this case. Therefore, the court of first instance could not decide that CCIC Business Department should pay the indemnity directly to BOC Liuhe. It was an issue performing to the payment obligation and an issue in the period of execution. Therefore, it did not fall into the scope of the trial in this case.

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4. Lianrun Company purchased all-risk insurance from CCIC Business Department. Therefore, CCIC Business Department should indemnify all losses incurred to a third party, and the Fund would not distinguish direct losses or indirect losses. In summary, Lianrun Company requested the court dismiss the appeal and affirm the original judgment. CCIC raised no defense in appeal. During the appeal, Lianrun Company submitted a certificate issued by BOC Liuhe to prove that the bank had approved Lianrun Company to draw the indemnity. CCIC Business Department and CCIC jointly alleged that this evidence was not new evidence of second instance. They confirmed the authenticity of the certificate but alleged that the payable amount, RMB706,824.13, was not consistent with the facts, and it was only unilateral allegation of Lianrun Company. Additionally, there was no court of first instance case number, court of second instance case number, policy number, or insured vessel involved within the certificate. Therefore, they did not affirm the legality and relevancy of this evidence. The court attests that the evidence above is original copy. The court ascertains the authenticity thereof. Yet, as to its effect of evidence, the court will take a comprehensive consideration with the facts having been found. In appeal, the court ascertains that, in respect of the deductible, the special agreement of the insurance slip printed by the insurance company and sealed by Lianrun Company provides, “the deductible of each accident is RMB50,000 or 10% of the losses, whichever is higher.” Yet, in the original policy issued by the insurance company, the terms was changed as “the deductible of each accident is RMB50,000 or 10% of the loss, whichever is the higher. This deductible is also applied to collision or allision liability, separate risk like propeller etc.” There is no difference between the original policy and the insurance slip in terms of the coverage, additional risks and total premium. The court ascertains the facts found by the court of first instance. The court holds that the case is arising from dispute over marine insurance contract. The main issues of the appeal are as follows: 1. Whether Lianrun Company is the subject of the insurance indemnity involved; 2. Whether the loss of earning and the deductible (10% of the losses) under collision liability shall be deducted from the Fund, having been paid by CCIC Business Department in advance; 3. Whether the action instituted by Lianrun Company has exceeded the limitation of action. In respect of the first issue in appeal, it is provided in the special agreement of the insurance policy that the first beneficiary is BOC Liuhe. In accordance with Article 18 of the Insurance Law of the People’s Republic of China (hereinafter referred to as the “Insurance Law”), a beneficiary refers to a person who has been designated by the insured or the insurant to enjoy the right to insurance claims. Meanwhile, it is provided in Article 95 of the Insurance Law that personal insurance

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includes life insurance, health insurance and accidental injury insurance. Accordingly, it is provided in the personal insurance section of the Insurance Law that the concept of beneficiary is clearly defined. However, this case is concerned with marine insurance contract, which falls under property insurance. According to the facts ascertained in the court of first instance and in appeal, Lianrun Company is the policy holder and the insured involved, who purchased coastal and inland-river hull all-risk insurance for M.V. LIAN RUN 6 owned by Lianrun Company. Thus, Lianrun Company has an insurable interest in the subject matter insured. As a result of the insured accident that occurred involving the vessel involved, Lianrun Company is absolutely entitled to claim for indemnity from the insurer on the basis of the insurance contract. CCIC Business Department alleged in the statement of appeal and statement in the hearing that it did not mean to evade the obligations it should take. It agreed to pay the indemnity directly to Lianrun Company on the premise of the agreement of BOC Liuhe. With this background, Lianrun Company provided a relevant evidence issued by BOC Liuhe on appeal. In other words, it was requested by CCIC Business Department that Lianrun Company asked BOC Liuhe to issue a certificate. This satisfied with the premise that CCIC Business Department performed the insurance obligation to the insured involved without prejudice to a third party’s rights and interests. It is proper the court of first instance decided CCIC Business Department should pay the insurance indemnity to Lianrun Company in accordance with the insurance contract. In appeal, the defense of CCIC Business Department and CCIC that the certificate issued by BOC Liuhe was not new evidence is contradicted with the claims of appeal and the statement in the hearing. Therefore, the court will not support. In respect of the second issue in appeal, CCIC Business Department alleged that the loss of earning of the opponent vessel should not be undertaken by it and the deductible (10% of the losses) under collision liability which should not be undertaken by it could be deducted from the Fund. The court holds that, after the accident occurred, the losses suffered by the opponent vessel namely M.V. JIE HANG 9 owned by Hengsheng Company, is RMB6,257,985, including the loss of earning in amount of RMB930,000. After offset with the compensation made by Lianrun Company, Lianrun Company still shall pay RMB4,854,680.80 to Hengsheng Company. Yet, the amount of the Fund that Lianrun Company set up is RMB1,987,077.78 and Hengsheng Company is just one of the three creditors. In this situation, it is proper the court of first instance decided the insurer should not allege to deduct the loss of earning of the opponent vessel. Meanwhile, in the original insurance policy, the insurance company extended the deductible which is only applied to the indemnity for the insured vessel to the indemnity arising from collision liability. Yet, the agreement for the standard of the deductible under collision liability is not very clear. The ground of appeal held by CCIC Business Department has no merit. Thus, the court will not adopt. Accordingly, the court ascertains the insurance indemnity for ship repair is RMB682,682.40 based on the repair costs confirmed by the parties concerned with a 10% deductible.

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Additionally, the court also ascertains the reasons and conclusion concerning the application fee and the court announcement fee of the fund. In respect of the third issue on appeal, it is provided in Article 174 of the Answers of the Supreme People’s Court to the Issues of Foreign-Related Commercial and Maritime Trial Practice I that when the limitation of action of maritime litigation expires, the promise made by the obligor that he agrees to undertake the liability and obligations to the obligee according to the law shall be protected. In this case, the collision involved occurred on September 8, 2010. The court of first instance made (2010) Hu Hai Fa Xian Zi No.4 Civil Ruling on November 30, 2010 to approve the application to set up the Fund filed by Lianrun Company. On December 13, 2011, CCIC Business Department paid the Fund to the maritime court. After Lianrun Company sent an application for claim and a letter of claim on December 28, 2011, an employee of CCIC Business Department sent an email to Lianrun Company which indicated that CCIC Business Department should pay Lianrun Company RMB238,091.12 and asked Lianrun Company to provide relevant documents and account number on October 15, 2012. Taking a general view on the attitude of the insurer towards the settlement of claim in terms of the insured accident, the insurer kept showing his willingness to undertake the obligations, but only held different opinion on the specific amount of indemnity with the insured. Accordingly, the limitation of action in this case shall apply to Article 174 of the Answers. Therefore, the court confirms the decision on the limitation of action in the court of first instance judgment. In summary, the judgment of first instance is proper. The appeal of CCIC Business Department lacks factual and legal basis and therefore the court will not support it. In accordance with Article 170 Paragraph 1 Sub-paragraph 1 and Article 175 of the Civil Procedure Law of People’s Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the court of first instance. Court acceptance fee of second instance in amount of RMB8,049.46. It shall be assumed by China Continent Property & Casualty Insurance Co., Ltd. Business Department. The judgment is final. Presiding Judge: DONG Min Acting Judge: ZHOU Yi Acting Judge: XU Yijin January 26, 2014 Clerk: LUO Gang

Guangzhou Maritime Court Civil Judgment Nanjing Shunjin Shipping Co., Ltd. et al. v. Cangzhou Bohai New Area Zhenyang Shipping Co., Ltd. (2012) Guang Hai Fa Shang Chu Zi Nos. 161 & 922 Related Case(s) None. Cause of Action 193. Dispute over liability for ship collision damage. Headnote apportionment of liability between two ships at fault in a collision (70%/30%) and calculation of losses as a result of damage to the two ships involved. Summary Two cargo vessels collided in Guangzhou Port, and each sued the other for damages. The court found both vessels liable, but held that the primary liability lay with the Plaintiffs’ vessel, which had been navigating in the wrong side of the channel, and turned to port as the risk of collision became apparent. The Defendant’s vessel was also at fault, to a lesser degree, for failing to reduce speed when the risk of collision became apparent, and for turning to port into the Plaintiffs’ vessel. The Plaintiffs’ vessel was held to be 70% responsible for the itemized losses suffered by the Defendant, and the Defendant’s vessel 30% responsible for the losses suffered by the Plaintiffs.

Judgment The Plaintiff (the counterclaim Defendant): Nanjing Shunjin Shipping Co., Ltd. Domicile: No.3 Temple, Cangxiji Town, Yangjiang Town, Gaochun County, Nanjing, Jiangsu. Legal representative: XU Mingxing, chairman. The Plaintiff (the counterclaim Defendant): Zhuhai Diwei Shipping Co., Ltd. Domicile: Unit C of 7 F., No. 291, Rirong Bldg., West Renmin Road, Xiangzhou District, Zhuhai, Guangdong. Legal representative: HE Chuan, general manager. © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_33

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Agent ad litem of the two Plaintiffs: CHANG Wen, lawyer of Jiangsu Tianmao Law Firm, Agent ad litem of the two Plaintiffs: ZHANG Lu, lawyer of Jiangsu Tianmao Law Firm, The Defendant (the counterclaim Plaintiff): Cangzhou Bohai New Area Zhenyang Shipping Co., Ltd. Domicile: 1201 of Unit 1, No.2 of Haiyi Manor, Bohai New Area, Cangzhou, Hebei. Legal representative: CHEN Yusong, general manager. Agent ad litem: ZHU Weikang, lawyer of Guangdong Horizon Law Firm. Agent ad litem: CAI Hang, lawyer of Guangdong Horizon Law Firm. This case arose over a dispute regarding ship collision damage liability between the Plaintiffs, Nanjing Shunjin Shipping Co., Ltd. (hereafter referred to as “Shunjin Company”) and Zhuhai Diwei Shipping Co., Ltd. (hereafter referred to as “Diwei Company”), and the Defendant, Cangzhou Bohai New Area Zhenyang Shipping Co. Ltd. (hereafter referred to as “Zhenyang Company”). Additionally, the Defendant Zhenyang Company filed a counterclaim against the two Plaintiffs. The court accepted the two claims and formed a panel, consisting of Presiding Judge ZHANG Kexiong, Judge WU Guining and Acting Judge YIN Zhonglie. YANG Qian and LU Shiying were appointed as Clerks. The court held hearings on November 22, 2012 and March 8, 2013. The court ordered the parties to exchange evidence before trial. CHANG Wen and ZHANG Lu, agents ad litem of the two Plaintiffs, and ZHU Weikang and CAI Hang, agents ad litem of the Defendant Zhenyang Company, appeared in court to attend the hearings. Now the case has been concluded. The Plaintiffs, Shunjin Company and Diwei Company, claimed as follows: On December 29, 2011, M.V. JIANG XIA JIN, which belonged to the Plaintiff Shunjin Company, loaded 5,060 tons cement clinker for transport from Shatianin Rongxuan wharf, in Dongguan, to Shantou Port. M.V. JIANG XIA JIN collided with M.V. ZHEN YANG HAI 1, which was owned by the Defendant Zhenyang Company, when it sailed to Guangzhou, 14–16 light beacons waters, nearby of Lingding Channel in Guangzhou Port. The collision led to the sinking of M.V. JIANG XIA JIN, and the total loss of ship and cargo. The collision gave rise to damages as follows: M.V. JIANG XIA JIN ship loss, RMB13,800,000; bunkers loss, RMB1,158,020; crew personal effects, RMB285,339; machinery accessories loss, RMB577,363; deck material loss, RMB317,885.5; turbine tools and material loss, RMB253,927; cargo loss, RMB1,966,228.8; detention loss, RMB482,651.92; salvage charges, RMB8,600,000; marine oil spill contingency fee, RMB547,250; marine maintenance costs, RMB1,400,800; and buoy fee, RMB410,449.5; for a total loss of RMB29,799,884.72. M.V. JIANG XIA JIN was bareboat chartered to the Plaintiff Diwei Company on August 16, 2010, and the charter was registered with the maritime authorities. The two Plaintiffs had the legal right to claim for the losses mentioned above. The two Plaintiffs held that M.V. ZHEN YANG HAI 1 did not observe the 1972 International Regulations for Preventing Collision at Sea, and

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did not take any effective measures to avoid the collision, the failures directly caused the collision and led to the total ship and cargo loss of M.V. JIANG XIA JIN. The Defendant should bear 60% of the liability and the Plaintiffs claimed as follows: 1. the Defendant should, to the extent of 60%, compensate for the loss of ship, bunkers, crew personal effects, machinery accessories, deck material, turbine tools and material, cargo, detention, salvage, marine oil spill contingency fee, marine maintenance costs, and buoy fee, for a total of RMB17,879,930.83, and interest (calculated from the date of collision to the date of effective sentence, applying the loan interest rate of the People’s Bank of China for the same period); 2. the Defendant should be liable for the litigation fee, evidence preservation costs, and ship valuation fee. The Plaintiffs Shunjin Company and Diwei Company provided the following evidence: 1. Ownership registration and certificate of ship’s nationality, to prove that the Plaintiff Shunjin Company was the shipowner of M.V. JIANG XIA JIN and Diwei Company was the bareboat charterer, and that both of them are qualified to act as plaintiffs. 2. Ship certificates of inspection and manning certificate, to prove that M.V. JIANG XIA JIN was seaworthy and was inspected and adequately manned before the collision. 3. The case report related to the collision between M.V. JIANG XIA JIN and M. V. ZHEN YANG HAI 1, made by Guangzhou Maritime Safety Administration, to prove that M.V. ZHEN YANG HAI 1 did not exercise good seamanship and take effective measure to avoid collision, causing the collision to occur. 4. Bulk carriers assets’ evaluation report of M.V. JIANG XIA JIN, made by Jiangsu Zhongxing Certified Public Accountants on August 23, 2007, and Ship Valuation Report for M.V. JIANG XIA JIN, made by China Marine Services Company, Shanghai Branch on May 11, 2012, to prove that the assessed value of M.V. JIANG XIA JIN was RMB17,971,333.3 when the collision happened. 5. Ship loss list, list of crew personal effects, turbine spare parts list, deck material list, turbine tool and material list of M.V. JIANG XIA JIN, which show the value of the loss of the ship to be about RMB16,000,000; the loss of crew personal effects, RMB285,339; machinery accessories loss, RMB577,363; deck material loss, RMB317,885.5; and turbine tools and material loss RMB253,927. 6. Ship bunker list, notice of payment of Shunjin Company, receipts, bunkering document issued by Zhuhai East Long Guang Petrochemical Co., Ltd., application for bunkering, bank electronic receipt, and copies of receipts issued by Guangzhou Guangzining Ship Engine Accessories Ltd., to prove that the bunker loss was RMB1,158,020. 7. Fuel purchase contract, certification of value issued by Huarun Cement Co., Ltd. (hereinafter referred to as “Huarun Company”), certification issued by the Logistics Department of Huarun Company, the reply of compensation for damage of M.V. JIANG XIA JIN, letter of subrogation, vessel freight schedule,

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list of the transition of noncontainerized cargo, and sea cargo waybill, to prove that the cargo loss was RMB1,966,228.8. Two statements, Domestic Contract of Carriage, Shipping Contract of Huarun Cement, and the Special Auditor’s Report issued by Nanjing Huasheng Xinwei Certified Public Accountants, to prove that the ship detention loss was RMB482,651.92. The letter requiring salvage of M.V. JIANG XIA JIN as soon as possible, issued by Guangzhou Maritime Safety Administration, the salvage contract, the license of surface and underwater activities, water depth measurement technical report and collection letter issued by Jianhua Company, to prove that M.V. JIANG XIA JIN was a total loss, that the Plaintiff entrusted Jianhua Company to salvage the ship, and that the salvage charge was RMB8,600,000. Removal of oil spill and antifouling monitoring scheme of M.V. JIANG XIA JIN, sewage disposal fee agreement, marine oil spill emergency disposal and resource usage rate table, and site clean-up fee settlement of M.V. JIANG XIA JIN, to prove that the removal cost was RMB547,250. Relevant charges of Kok Marine for maintenance and emergency wreck beacons, setting cost budget for M.V. JIANG XIA JIN, to prove that the marine maintenance cost was RMB1,400,800 and the buoy fee was RMB410,449.50. Assessment report issued by Ejoy Insurance Surveyors & Adjusters Co., Ltd., to prove permanent repair cost caused by the collision with M.V. ZHEN YANG HAI 1 was about RMB340,000 (excluding the cost of the former ship and the three escort tugs). Policy bill of M.V. JIANG XIA JIN, to prove that both the insurance value and the insurance amount were RMB13,800,000.

The Defendant Zhenyang Company replied and counterclaimed that on December 29, 2011, M.V. JIANG XIA JIN, which belonged to the Plaintiff Shunjin Company, loaded 5,060 tons cement clinker from Shatianin Rongxuan wharf in Dongguan, bound for Shantou Port. M.V. JIANG XIA JIN collided with M.V. ZHEN YANG HAI 1, belonging to the Defendant Zhenyang Company, when it sailed to the waters of Guangzhou, between light beacons 14 and 16, near Lingding Channel in Guangzhou Port, which led to seriously damage of M.V. JIANG XIA JIN. The reason of the collision mentioned above was M.V. JIANG XIA JIN’s serious rules violation and improper maneuver, and M.V. JIANG XIA JIN should bear 90% of liability. Zhenyang Company was the registered shipowner of M.V. ZHEN YANG HAI 1, Shunjin Company was the registered shipowner of M.V. JIANG XIA JIN, and Diwei Company was the registered bareboat charterer of M. V. JIANG XIA JIN. In accordance with relevant law of China, Shunjin Company and Diwei Company should bear the compensation liability for the loss the Defendant Zhenyang Company suffered. Initial estimated total loss of the Defendant Zhenyang Company was about RMB3,000,000 (including but not limited to ship repair cost, RMB1,096,702; ship detention loss, RMB1,106,000; paint fee, RMB423,570; salvage charge, RMB95,000; maritime accident treatment, trash removal, standard setting fee and maintenance fee RMB368,728, and so on). The

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Defendant counterclaimed as follows: (1) the two Plaintiffs should, to the extent of 90%, compensate for the loss caused by the collision: RMB2,700,000 in total, plus interest (which should be calculated from December 29, 2011, to the date of full payment of liability, at the loan interest rate of the People’s Bank of China for the same period); (2) the two Plaintiffs should jointly bear litigation fee. The Defendant Zhenyang Company provided the following evidence: 1. Ownership registration certificate of the ship, to prove that the Defendant Zhenyang Company was the shipowner of M.V. ZHEN YANG HAI 1. 2. The notarized International Load-line Certificate, International Tonnage Certificate, International Oil Pollution Prevention Certificate and Accessories, Ship Inspection Certificate Book, Endorsement of Compliance and Annual Check, Sea Cargo Ship Seaworthiness Certificate, Civil Liability for Bunker Oil Pollution Damage Insurance or Other Financial Security, Safety Management Certificate and so on, to prove that M.V. ZHEN YANG HAI 1 was seaworthy at the time of the collision. 3. M.V. ZHEN YANG HAI 1’s Seamen’s Record Book, Seafarer’s Certificate of Competency and Crew List, to prove that the vessel’s manning met the minimum standards. 4. M.V. ZHEN YANG HAI 1’s logbook, engine logbook, deck telegraph book, marine telegraph book, water traffic accident report and the captain investigative records, to prove that M.V. JIANG XIA JIN should bear 90% of the liability. 5. Completed statement and receipt issued by Dongguan Zhonglian Shipping Co., Ltd., to prove that the repair charge generated by the collision was RMB1,096,702.90. 6. Contract of sale of industrial products and receipts, to prove that the paint costs generated by the collision were RMB423,570. 7. Two receipts for the salvage charge, to prove that the salvage charge the Defendant paid was RMB95,000. 8. The logbook from December 29, 2011 to January 5, 2012 and from March 2, 2012 to March 20, 2012, the charter party, delivery agreement, notice of off-hire, notice of rescission of hire, settlement agreement and certificates (6 copies), to prove that the loss of off-hire and the rescission of hire caused by the collision was RMB1,016,000. 9. The VAT ordinary invoices, to prove that the Defendant entrusted PICC Cangzhou Branch to pay RMB30,000 for ship appraisal fee. 10. Ship value appraisal report, issued by Guangdong Maritime Engineering Consulting Inspection Co., Ltd. and the assessment report of the collision between M.V. ZHEN YANG HAI 1 and M.V. JIANG XIA JIN, issued by Fairicc Survey & Loss Adjusting Co., Ltd., to prove that the value of M.V. JIANG XIA JIN was RMB8,800,000. The two Plaintiffs replied against the counterclaim that, although the collision would be recognized by the maritime department, the Defendant’s claim for the Plaintiffs to bear 90% of the liability was unreasonable, which should be mainly

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undertaken by the Defendant. The claimed repair fee was inaccurate, because some of the repairs had no relationship with this collision. The ship detention loss was calculated by the loss of hire, which method was incorrect and the basis for this calculation insufficient. The Plaintiffs requested the court to reject the counterclaims of the Defendant. According to the submissions and the cross-examination of the two parties, and the court’s trial, the court finds the following facts: I. General situation of the involved ships M.V. JIANG XIA JIN, gross tonnage 2,989, deadweight tonnage 1,674, overall length 96.80 m, molded beam 16.60 m, molded depth 6.65 m. Navigational zone, coastal waters and A & B of the Yangtze River; operating area: A1 + A2. Port of registry, Nanjing Port. The ship was a steel bulk carrier, completed on January 12, 2004 by Huangyan Yongshun Shipyard. The Plaintiff Shunjin Company was the shipowner of M.V. JIANG XIA JIN. The vessel was hired by the Plaintiff Diwei Company, by bareboat charter, on August 16, 2010 and registered with the maritime authorities. The Plaintiff held the ship’s survey record book, Certificate of Load Line, sea cargo ship airworthiness certificate, Ship Oil Pollution Prevention Certificate, Ships Air Pollution Prevention Certificate, and the certificate of minimum personnel equipped for safety. All the certificates were effective when the collision happened. The actual manning of the involved ship was 14, which fit the certificate of minimum personnel equipped for safety. M.V. ZHEN YANG HAI 1, gross tonnage 14,045, deadweight tonnage 7,865, overall length 158.85 m, molded beam is 23.80 m and molded depth was 13.00 m. Navigational zone, coastal waters; operating area, A1 + A2. Port of registry, Huanghua Port. The ship was a steel bulk carrier, completed on January 19, 2009. The date of transfer of title was February 7, 2009. The shipyard was Zhejiang Donghong Industries Co., Ltd. The Defendant Zhenyang Company was the shipowner and the operator of the vessel. Zhenyang Company held the ship’s certificates surveying record book, Certificate of Load Line, sea cargo ship airworthiness certificate, Certificate of Registered Tonnage of ship, Civil Liability for Bunker Oil Pollution Damage Insurance and other finance certificate and the certificate of minimum personnel equipped for safety. All the certificates were effective when the collision happened. The actual manning of the involved ship was 16, which fit the certificate of minimum personnel equipped for safety. II. Description of the incident After the collision happened, Guangzhou Maritime Safety Administration, as maritime authorities, established an accident investigation team to research the collision. Together with the crew interrogation record, ship certificates, seafarer certificates, and the videos of the VTS of Guangzhou, the Guangzhou “12.29” collision investigation report related to M.V. JIANG XIA JIN and M.V. ZHEN YANG HAI 1 (hereafter referred to as collision investigation report). The collision investigation report and other

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evidence were cross-examined by both parties. Although two parties asserted objection to part of the report, they did not provide rebuttal evidence. So the court admits the process, cause and liability in the collision investigation report, made by Guangzhou Maritime Safety Administration. According to the collision investigation report, M.V. JIANG XIA JIN departed Gongguan Shatian Rongxuan Wharf at 1745 h on December 20, 2011. The destination was Shantou, and the vessel was loaded 5,060 tons cement clinker, at a draft of 4.90 m/5.10 m. At 1945 h, M.V. JIANG XIA JIN’s sailors shifted off duty. Bridge watch was held by the captain DAI Hongshu and the sailor WANG Lichuan. The captain took charge of command, lookout and engine telegraph, and the sailor took charge of steering and assisting the captain with lookout. Two radars were in use, at 1.5 nm and 3.0 nm range off-centered display, and two VHF radios were monitoring channel 09. The electronic chart, AIS, and GPS, were all in normal operation. At 23:02, M.V. JIANG XIA JIN sailed near light beacon #18 and found that M.V. ZHEN YANG HAI 1 was in front of it, at about 3.5 nm ahead, according to the radar and AIS. The captain thought the two ships were in state of normal navigation and there was no ship in the middle, so he did not contact M.V. ZHEN YANG HAI 1. When M.V. JIANG XIA JIN sailed near light beacons #15 and #16, in front of a turning point in the channel, the captain ordered the helmsman to steer a little to the left. At 23:08, M.V. JIANG XIA JIN contacted M.V. ZHEN YANG HAI 1 by VHF radio. M.V. ZHEN YANG HAI 1 required M.V. JIANG XIA JIN to come right more, and was answered. At 23:14, M.V. JIANG XIA JIN’s course was 165.30° and speed was 5.4 knots. The captain suddenly found that M.V. ZHEN YANG HAI 1 turned sharply left. Prior to that turn, M.V. JIANG XIA JIN could see red and green sidelights, but now could only see the green one. To avoid collision, the captain ordered the helm right hard-over, and decelerated to half-speed ahead. The captain also asked M.V. ZHEN YANG HAI 1 why it turned left and M.V. ZHEN YANG HAI 1 answered, and required M.V. JIANG XIA JIN to turn right. At 23:15, M.V. JIANG XIA JIN’s course was 156.10° and speed was 5.5 knots. M.V. ZHEN YANG HAI 1 started from Hebei Jingtang Port on December 16, 2011. The destination was Guangzhou Huangpu and it loaded 22,000 tons of steel. M.V. ZHEN YANG HAI 1 anchored and waited for berth in the 13ZH anchorage ground of Pearl River Mouth. At 21:12 on December 29, 2011, M.V. ZHEN YANG HAI 1 weighed anchor and headed into the port, with a draft of 9.10 m/9.40 m. The captain CHEN Zheguo, third mate KANG Jiajia and sailor LIN Zhicheng were on duty on the bridge. The navigation lights were illuminated, two radars were set at 1.5 nm and 3.0 nm range off-center display, two VHFs were listening at channels 09 and 16, and the vessel had two electronic chartplotters and one AIS, all in normal use. At 23:02, M.V. ZHEN YANG HAI 1 sailed near light beacon #9 and observed that a vessel was in front of it, at about 3.5 nm ahead, according to the radar.

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The captain ordered to slow down from ahead 6 (full speed) to ahead 5. At 23:10, M.V. ZHEN YANG HAI 1 sailed past beacon #11 with course 330.80° and speed 12.5 knots. At 12:13, M.V. ZHEN YANG HAI 1’s course was 335.20° and speed was 12.5 knots. Seeing M.V. JIANG XIA JIN was in the approach channel, M.V. ZHEN YANG HAI 1 contacted M.V. JIANG XIA JIN by VHF and reminded it that it had better not sail on the approach channel, which was agreed by M.V. JIANG XIA JIN. At 23:14, M.V. ZHEN YANG HAI 1’s course was 336.70° and speed was 12.5 knots, and it began to turn left. At 23:15, M.V. ZHEN YANG HAI 1’s course was 318.80° and speed was 12.1 knots. The captain felt there was danger of collision and he ordered right rudder 20°, then full right rudder and engines dead slow ahead. At eleven fifteen p.m. and thirty seconds, M.V. ZHEN YANG HAI 1’s course was 318.30° and speed was 11.8 knots. The left bow of M.V. ZHEN YANG HAI 1 crashed into the No. 2 hold of M.V. JIANG XIA JIN. The location of the accident was between beacons #13 and #14 of Lingding Channel, Port of Guangzhou. The coordinates were 22°24.21’ N, 113°45.74’ E. After the collision, M.V. JIANG XIA JIN was damaged and water flooded in. The captain ordered to stop and let the Mate check the situation of the water. The Mate found that the vessel was listing seriously to the left, accelerating the sinking speed. Under the request of Guangzhou Vessel Traffic Service (VTS), the captain accelerated to ahead 3 and tried to bear off the channel. At 23:25, the hull listed to 90 degrees. The captain ordered the crew to abandon ship, close the oil tank valve, stop the pumps, and put down the port life raft. Fourteen seamen boarded the life raft and were rescued by the Shuang Ning 508. M.V. JIANG XIA JIN eventually sank in the outer limit of the channel, by southern beacon #16. M.V. ZHEN YANG HAI 1 stopped and reported to the Guangzhou VTS. M.V. ZHEN YANG HAI 1 offered Guangzhou VTS that it could launch its life raft to save the crew of M.V. JIANG XIA JIN. When M.V. ZHEN YANG HAI 1 learned that the seamen were saved by another ship, so it waited outside the eastern #13 for the investigation. When the collision happened, the local weather was sunny, temperature was 18 degrees, northeasterly winds four to five knots, slight sea, flood tide, northerly flow 1 knot and visibility 3 nm to 4 nm. There was no other ship in navigation or berthed near the site. Guangzhou Maritime Safety Administration confirmed that this collision was due to the fault of the crews. M.V. JIANG XIA JIN sailed near the port side in the channel and M.V. ZHEN YANG HAI 1 did not slow down and turn left in time, which was the direct cause of the collision. Both sides had obvious fault. It was M.V. JIANG XIA JIN’s act of sailing too near the port channel that led to this collision danger. It was obvious that M.V. JIANG XIA JIN’s fault was greater than that of M.V. ZHEN YANG HAI 1. So M.V. JIANG XIA JIN bore the main liability and M.V. ZHEN YANG HAI 1 took the secondary liability.

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III. The identification of the loss claimed by the two Plaintiffs The loss claimed by the two Plaintiffs included: ship loss, RMB13,800,000; bunker loss, RMB1,158,020; crew personal effects, RMB285,339; machinery accessories loss, RMB577,363; deck material loss, RMB317,885.5; turbine tools and material loss, RMB253,927; cargo loss, RMB1,966,228.8; detention loss, RMB482,651.92; salvage charges, RMB8,600,000; marine oil spill contingency fee, RMB547,250; marine maintenance costs, RMB1,400,800; and buoy fee, RMB410,449.5; a total of RMB29,799,884.72. Now, the loss was confirmed as follows: i. The loss of value of the ship involved In order to prove that the value of M.V. JIANG XIA JIN was RMB17,071,333.30, the two Plaintiffs provided two assessment reports. One of them was issued by China Marine Services Company. This report regarded the day of collision as base day for valuation. The company decided that the value of the ship, when the collision occurred, was RMB17,071,333.30, by replacement method, according to the certificates and documents of the ship. In order to prove the reasonability of this report, the two Plaintiffs also submitted the report issued by Jiangsu Zhongxing Certified Public Accountants on August 23, 2007. This report regarded the day August 20, 2007 as the base day for valuation and was made to provide the reference asset value of the vessel. That company decided the value of the ship was RMB20,200,000, by market approach. The two Plaintiffs thought the value of the ship was RMB20,200,000. Although the depreciation expense of the ship should be calculated in accordance with the relevant judicial interpretation, the value of RMB17,071,333.30 was still reasonable. The two Plaintiffs submitted an insurance policy issued by PICC Gaochun Branch, after trial, which showed the vessel to be insured against all risks of coastal and river hull. The period of insurance was from 00:00 on April 2, 2011 to 24:00 on April 1, 2012. Both the insurance value and the insurance amount were RMB13,800,000. The loss the two Plaintiffs claimed was RMB13,800,000. The Defendant argued that M.V. JIANG XIA JIN report made by Jiangsu Zhongxing Certified Public Accountants lacks objectivity, because, as for asset value in 2007, was higher than the true market value, and the value of the ship went down continuously after 2007. The Defendant argues the report issued by China Marine Services Company was not reasonable. The Defendant maintained that in accordance with the relevant judicial interpretation, assessing the value of the ship shall take market comparison approach preferentially rather than the unreasonable replacement method. Besides, the evaluation corporation does not have the qualification of judicial assessment and there was no evidence to support it. The Defendant did not recognize the report.

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In order to prove the loss value of M.V. JIANG XIA JIN, the Defendant provided two assessment reports. The first was the assessment reports issued by Qingdao International Shipping Exchange, Inc., who was entrusted by Fairicc Survey & Loss Adjusting. Qingdao International Shipping Exchange decided that the value of M.V. JIANG XIA JIN at the time of collision was RMB8,800,000, by the market comparison approach. The second report was issued by Guangdong Maritime Engineering Consulting Inspection Co., Ltd. This report was made by the analogy of market price method, and decided the ship value of M.V. JIANG XIA JIN was RMB8,960,000. The two Plaintiffs did not recognize the authenticity of the report issued by Qingdao International Shipping Exchange Inc., because no lawyer appeared in court. The Plaintiffs argued that the report issued by Guangdong Maritime Engineering Consulting Inspection was obtained from the internet and they did not recognize its authenticity. In addition, the two comparator ships were auctioned by the court, and their auction prices were lower than the market value, so the Plaintiffs did not recognize the authenticity, legality, nor reasonableness of the valuation. The court holds that in accordance with the provision of Article 8 of Rules concerning Compensation of Property Damage of Collision and Allision, the calculation of the value of ship depends on the ship price at the scene; if no similar ship price is available, it will depend on the price of a similar ship in the vessel’s home port, or other similar ship price in some other area; if there is no market price, it depends on the cost or purchase price, less depreciation. The collision occurred in December 2011. The Plaintiff Shunjin Company insured M.V. JIANG XIA JIN; both the insurance value and insurance amount are RMB13,800,000. As a professional insurance institution, the insurer evaluated and accepted the insurance of Shunjin Company, so the policy value of the ship could indicate the real value of the ship. Under the circumstance where the Defendant did not provide contrary evidence, the court confirms that the value of M.V. JIANG XIA JIN was RMB13,800,000, when the collision occurred. ii. The ship detention loss In order to prove the ship detention loss of M.V. JIANG XIA JIN, the two Plaintiffs offered the balance sheet from June 2011 to November 2011, and the Special Auditor’s Report, issued by Nanjing Huasheng Xinwei Certified Public Accountants. The balance sheet indicated the income and the expenses which were deducted—operating cost and tax, etc.—during the operation period. The average profit of each month was RMB241,325.96. Nanjing Huasheng Xinwei Certified Public Accountants were entrusted by the Plaintiff to audit the profit from June 2011 to November 2011 and made the special audit report. The Nanjing Huasheng Xinwei Certified Public Accountants held the

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view that the balance sheet the Plaintiff provided complied with the rules of enterprise accounting. It also confirmed that the profit of M.V. JIANG XIA JIN from June 2011 to November 2011 was RMB1,447,955.77, and the average profit of each month was RMB241,325.96. The two Plaintiffs claimed that the ship detention loss for two months was RMB482,651.92, according to the report. The Defendant argued that the balance sheet was made unilaterally, and it did not consider the average profit of the two voyages before and after. The Defendant did not recognize the report, because it was unfounded. The court holds that M.V. JIANG XIA JIN was destroyed, and salvaged after it sank. So, it is reasonable for the two Plaintiffs to calculate the ship detention loss according to the profit from June 2011 to November 2011. If the Defendant could not provide new evidence to overturn that calculation, the court admits the special audit report, in accordance with the provision of Article 10 of the Rules concerning Compensation of Property Damage of Collision and Allision, if the ship is a total loss, the limitation is calculated by finding a substitute ship in a reasonable period, where that period is no more than two months. Therefore, the court admits that the ship detention loss was RMB482,651.92. iii. The bunker loss The Plaintiff provided: (1) bunker deposit of M.V. JIANG XIA JIN, which listed type, quantity, unit price and total amount; (2) ship refueling requisition, letterhead of M.V. JIANG XIA JIN, Oil Credential of Zhuhai East Long Guang Petrochemical Co., Ltd. with two receipts and two bank electronic bank receipts: the assertion was that M.V. JIANG XIA JIN stemmed 19.95 tons of bunkers on November 29, 2011 and 55 tons on December 24, 2011, at Zhuhai East Long Guang Petrochemical Co., and the Plaintiff paid RMB957,572.50 for bunkers; (3) copies of receipts issued by Guangzhou Guang Zi Ning Marine Diesel Parts Co., Ltd. Doumen District Jingan Tianbao Lubricants Business Department, Zhuhai Jinhang Ship Purchase Department, Ningbo Zhongce Power & Machinery Group Co., Ltd., Hangzhou Huatong Instrument Co., Ltd. Zhanjiang Huixing Shipping Supplies Co., Ltd. Zhanjiang Xiashan District Feida Agricultural Fishery Machinery Trade Department, and so on: these could prove that the Plaintiffs paid RMB230,447.50 for lubrication oil to the companies mentioned above. The Plaintiffs claimed that the total bunker loss was RMB1,158,020. The Defendant argued that the Plaintiffs did not offer the engine room logs and oil book or other evidence, so the fuel consumption could not be verified. The Defendant did not admit to including the added bunker amount before the collision to the loss calculation.

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The court holds that the Plaintiffs should offer the relevant evidence of the quantity of oil before the collision and the oil consumption in the operation. Since the Plaintiffs did not offer enough evidence, the oil deposit and the oil credential alone could not confirm the quantity of oil onboard M.V. JIANG XIA JIN. So, the court does not support this claim. iv. The loss of crew personal belongings The Plaintiffs provided the list of crew personal belongings of M.V. JIANG XIA JIN, which listed the crew’s lost items, including laptops, watches, mobile phones, clothes and so on. The Plaintiffs claimed that the loss of crew personal belongings was RMB285,339. The Plaintiff stated in the trial that RMB10,000 has been paid in cash to each sailor, but there was no evidence to prove it. The Defendant asserted objection to the authenticity of the crew personal belongings. The court holds that in accordance with Article 9 Sub-paragraph 7 and 8 of the Rules concerning Compensation of Property Damage of Collision and Allision, the loss of crews’ necessities should be compensated according to the actual loss; though any money, gold and silver, jewels, negotiable securities, or other precious items carried by crew will not be compensated. The lost things and loss amount listed in the list provided by the Plaintiffs did not have any other evidence to corroborate. If it could not confirm the actual loss of crew personal belongings, the loss can be calculated by RMB800 each person in accordance with Guangdong Maritime Accidents Disposal Regulations. So, the crew personal belongings loss of the fourteen sailors on M.V. JIANG XIA JIN was RMB11,200. v. Cabin spares, deck material, marine attachments and material loss The Plaintiff provided the marine spares list of M.V. JIANG XIA JIN, the deck material list of M.V. JIANG XIA JIN, marine attachments and so on. The Plaintiff claimed that the collision caused the loss of marine spares valued at RM 577,363, the loss of deck material was RMB 317,855.50, and marine attachments and material loss was RMB253,927. The Defendant argued that it could not be proved that the cabin spares and deck materials on the list were equipped onboard M.V. JIANG XIA JIN. Although the spares and materials were part of the vessel, they have already been calculated in the ship value and could not be compensated for a second time. The court holds that the list mentioned above was made only by the Plaintiff and there was no evidence to prove that these materials and spares were actually purchased and used on M.V. JIANG XIA JIN or not. So, The court rules against this claim. vi. The loss of goods In order to prove the cargo loss caused by the sink of M.V. JIANG XIA JIN, the Plaintiffs provided the following evidence: (1) clinker purchases and sales contract between Huarun Fengkai and Huarun

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Shantou, which proved Huarun Shantou purchased cement clinker from Huarun Fengkai, and the price was RMB399 per ton. The quantity was at the determination of Huarun Fengkai, and the reasonable wastage depended on the standard of plus or minus 3%; (2) the cargo value certification issued by Huarun Shantou proved that M.V. JIANG XIA JIN carried 5,067.6 tons cement clinker, which unit price was RMB 388 per ton and total amount was RMB1,966,228.80, from Rongxuan wharf in Dongguan on December 29, 2011; (3) non-containerized cargo transfer bill, which proved the weight of this cargo was 5,067 tons—the port operators under this bill had the business seal of Rongxuan wharf in Dongguan; (4) the certificate of Huarun Company Logistics Department (the management department of Huarun Company) which took charge of the physical distribution of Huarun Pingnan, Huarun Fengkai and Huarun Shantou, which were affiliated companies of Huarun Company; (5) the reply of compensation for damage of M.V. JIANG XIA JIN, issued by the Logistics Department, indicated that Shunjin Company’s M.V. JIANG XIA JIN, sank in the voyage of carriage on December 29, 2011, with RMB5,067.60 tons cement clinker, which unit price was RMB388 per ton and cargo value was RMB1,966,228.80. According to the agreement and the requirement of Shunjin Company, this company agreed that the compensation amount Shunjin should bear could be separately deducted from the freight and the deduction began in January 2012; (6) sea-ship shipping freight schedule with the business seal of Huarun Company from January, 2012 to April 2012, listing the date of issuance, type, barge wharf, ship name, receiving company, actual quantity, unit price and freight of each month and remarked that the loss caused by the sinking of M.V. JIANG XIA JIN was RMB1,966,228.80, which would be deducted from the freight. The schedule of each month also included non-containerized cargo list, sea cargo waybill and seaship cargo waybill which were all stamped with the ship seal of Shunjin Company; (7) the letter of subrogation issued by Huarun Company Logistics Department on February 21, 2012 showed that the compensation shall be paid by Shunjin Company has been deducted from the freight and the amount was RMB1,966,228.80. The company transferred the claim right to Shunjin Company and the recourse should be performed by Shunjin Company. The Defendant argued that Huarun Company Logistics Department was not consignor or consignee and it did not have the right to issue the letter of subrogation. The Defendant did not admit the two Plaintiffs’ allegation of using freight to compensate the cargo loss. The court will admit the purchase and sales contract, non-containerized cargo list, and the cargo value certificate issued for the cement value loaded on M.V. JIANG XIA JIN. Concerning the

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Plaintiffs’ claims to compensate the freight loss, the actual weight of the cargo in every voyage in the sea-ship shipping freight schedule issued by Huarun Company was the same as the non-containerized cargo list, sea cargo waybill and seaship cargo waybill and the calculation was correct. So the court confirms it. Concerning the nature the relationship among Huarun Company Logistics Department, Huarun Company Fengkai Branch, and Huarun Company Shantou Branch, the court holds that the Huarun Company Logistics Department’s taking charges of all affairs of Huarun Company and its affiliated companies was reasonable. The Defendant argued that Huarun Company Logistics Department was not consignor or consignee and it did not have the right to issue the letter of subrogation, but the argument is not recognized by the court. The Plaintiff has compensated Huarun Shantou for cargo damage, so the Plaintiff obtained the right to claim indemnity. The court decides that the Plaintiffs’ cargo loss was RMB1,966,228.80. vii. Salvage charges After the collision between M.V. JIANG XIA JIN and M.V. ZHEN YANG HAI 1, the letter requiring salvage of M.V. JIANG XIA JIN as soon as possible was issued by Guangzhou Maritime Safety Administration. It requested the Plaintiff to arrange a qualified wrecking company for salvage. On January 31, 2012, the Plaintiff signed a salvage contract with Jianhua Company and agreed that the company should maintain the wreck site. It could pump out the oil stored in the ship, under the permission of environment, together with removing the cargoes, the cost was RMB8,600,000. Adding the wreck of ship and the rest value of cargo to the salvage party which was witnessed by the Defendant and signed and sealed on the contract. On February 17, after the permission of Guangzhou Bureau, Jianhua Company began the salvage operation. On June 12, the salvage location of M.V. JIANG XIA JIN and the surrounding area bathymetry technical report near beacon #16 of Shenzhen Linding Channel was issued by Guangzhou Siwei Chengke Information Engineering Co., Ltd. confirmed that M.V. JIANG XIA JIN met the demands of the maritime sector after salvage and check. The Plaintiff paid RMB7,000,000 for salvage charge. On November 9, 2012, Jianhua Company issued a letter requesting payment to the Plaintiff, which stated that after the collision, the Plaintiff signed salvage contract with it and agreed the cost was RMB8,600,000. After signing the contract, it salvaged in accordance with the regulations of the contract and the maritime department and the salvage operation was finished in June 2012. It issued the bill, but the Plaintiff only paid RMB 7,000,000 for salvage charge, and there was RMB1,600,000 unpaid. It required the Plaintiff to pay it as soon as possible. The Plaintiffs asserted no

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objection to the salvage and the requesting payment letter, but they thought the salvage charge was too high. The court holds that, the salvage was witnessed by the Defendant and signed between the Plaintiff and Dongguan Jianhua Shujun Salvage Marine Engineering Co., Ltd. (hereinafter referred to as “Jianhua Company”). Jianhua Company finished the salvage and issued the bill, and it could get its salvage charge according to the agreement. The Defendant’s argument that the salvage charge was too high does not have a basis in fact or legislation. The court recognizes that the Plaintiff shall pay RMB8,600,000 for salvage charge. viii. Marine oil spill contingency fee After the collision happened, the Plaintiff signed a clean-up fee agreement with Guangzhou Zhujiang Port Antifouling Co., Ltd. They agreed that the oil spill on the surface of the water caused by M.V. JIANG XIA JIN should be cleaned up and antifouling conducted by Guangzhou Port Zhujiang Port Antifouling Co., Ltd. They also agreed on the charging standard and the settlement method. Guangzhou Zhujiang Port Antifouling Co., Ltd. issued an oil spill clearing and pollution monitoring program on January 1, 2012. In order to establish the clean-up fee, a marine oil spill emergency resource use rate table was also submitted. Guangzhou Port Zhujiang Antifouling Co., Ltd. issued M.V. JIANG XIA JIN a wreck site clean-up fee settlement on February 13, which listed the environmental clean-up vessel operation, the material usage, and other fees. The clean-up fee was RMB 537,250, in total. During the trial, both parties stated that they received the clean-up fee payment notice issued by Guangzhou Maritime Safety Administration, but they were still consulting and had not actually settled. The court holds that since both parties and the marine authority have not yet settled the clean-up fee, the court does not support this claim, which should be resolved by consultation of both parties and the marine authority. ix. Marine maintenance costs and buoy fee The Plaintiffs offered the Shajia marine maintenance cost, issued by Guangdong Maritime Safety Administration Buoy Department, and the emergency wreck buoy emergency deployment costs of M.V. JIANG XIA JIN, which establish that the fee was generated by the tools and staff of the marine authority, included a marine maintenance cost of RMB410,449.50. During the trial, both parties stated that consultations over details of the bill were ongoing with Guangdong Maritime Safety Administration, and the Plaintiff confirmed that this cost had not been paid. The court holds that since both parties and the marine authority have not settled the marine maintenance costs and setting buoy fee, the

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court does not this claim which should be resolved by consultation of both parties and the marine authority. To sum up, the Plaintiff’s actual loss caused by the collision, including ship loss RMB13,800,000, ship detention loss RMB482,651.92, crew personal belongings loss RMB11,200, cargo loss RMB1,966,228.80, and salvage charge RMB8,600,000, add up to RMB24,860,080.72. IV. The loss claimed by Defendant Zhenyang Company The loss the Defendant Zhenyang Company claimed included: (1) ship repair allowance, RMB1,096,702; (2) salvage charge, RMB 95,000; (3) paint repair cost, RMB423,570; (4) ship detention loss, RMB1,016,000; (5) maritime accident, cleanup, buoy and maintenance cost, RMB368,728. The court decides the issues of loss and expense as follows: i. Ship repair allowance After the collision happened, ZHEN YANG HAI 1 arrived at Dongguan Zhonglian Shipping Co., Ltd.’s repair factory to be repaired. In order to establish the repair costs, the Defendant provided the completed statements of ship repair expense issued by Dongguan Zhonglian Shipping Co., Ltd. The completed statement listed that a special service charge of RMB340,497, deck project costs of RMB665,008, marine engineering costs RMB43,400, adding engineering costs RMB11,980 and paint engineering costs RMB35,817.90, adding up to RMB1,096,702.90. Dongguan Zhonglian Shipping Co., Ltd. issued receipt to the Defendant Zhenyang Company on March 19, 2012 and demonstrated that it had received the ship repair fees of RMB1,096,702.90 for ZHEN YANG HAI 1. In order to prove M.V. ZHEN YANG HAI 1’s repair expense was reasonable, the insurer of the Defendant, PICC Cangzhou Branch, entrusted Fairicc Survey & Loss Adjusting Co., Ltd. to assess the repair budget of M.V. ZHEN YANG HAI 1. Fairicc Survey & Loss Adjusting Co., Ltd. checked it, according to the site situation and the completed statement, and it eliminated the items that did not pertain to the collision, and adjusted individual items’ quotation. It confirmed the reasonable repair allowance of ZHEN YANG HAI 1, related to the collision, was RMB523,962.60. According to the request of Maritime Safety Administration, when M.V. ZHEN YANG HAI 1 sailed to the factory, it used a tug escort and the tug charge was RMB45,000. So the total repair allowance of M.V. ZHEN YANG HAI 1 was RMB568,926.60. The insurer of the Plaintiff, PICC Gaochun Branch, entrusted Ejoy Insurance Surveyors & Adjusters Co., Ltd. to assess the repair allowance of M.V. ZHEN YANG HAI 1. Ejoy Insurance estimated that the repair allowance was about RMB340,000, according to the situation of the site. In addition, in order to meet the demand of the Maritime Safety

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Administration, Dongguan Zhonglian Shipping Co., Ltd. employed a ship belonging to the Maritime Safety Administration, and three towboats, which generated tug charge RMB200,000. So the total repair allowance was about RMB540,000. The court holds that after the collision occurred, the Defendant entrusted Dongguan Zhonglian Shipping Co., Ltd. to repair the ship and paid RMB1,096,702.90 as repair allowance. As estimated by Fairicc Survey & Loss Adjusting Co., Ltd. which was entrusted by the insurer of the Defendant, eliminating those items which did not belong to the completed statement, the reasonable repair allowance for M.V. ZHEN YANG HAI 1, related to this collision, was RMB568,926.60. While the Plaintff’s insurer entrusted Ejoy Insurance to estimate the repair allowance, the result was an allowance of about 540,000 yuan. The two reports’ results did not differ greatly. The Plaintiffs could not offer rebuttal evidence, so the court admits the report made by Fairicc Survey & Loss Adjusting Co., Ltd. and confirms that the repair allowance generated by the collision of ZHEN YANG HAI 1 was RMB568,962.60. ii. Salvage charge The Defendant provided two receipts; one was for RMB50,000 and the other was for RMB45,000, which proved the Defendant paid RMB95,000 for salvage of ZHEN YANG HAI 1, on January 11, 2012. The Plaintiff asserted no objection to authenticity of receipts. The court confirms that the Defendant paid the salvage charge in amount of RMB95,000. iii. Paint repair cost The Defendant offered the contract for sales of industrial and mineral products, signed with Qingdao Haijian Chemical Co. The parties agreed that the chemical company provided ten kinds of paints to M.V. ZHEN YANG HAI 1, which price added up to RMB 423,570. A receipt of paint cost was also issued. The Plaintiff argued that the paint cost had been paid when M.V. ZHEN YANG HAI 1 was repaired in the shipyard, and that the Defendant could not could not prove the relationship of the paint the Defendant purchased to the damages claimed. The court holds that the paint cost has been listed in the completed statement issued by Dongguan Zhonglian Shipping Co. The Defendant could not offer evidence to prove the existence of this relationship, so the court does not support this claim. iv. Ship detention loss The Defendant signed a charter party with Yangpu Jinglong Shipping Co., Ltd. (hereinafter referred to as Yangpu Jinlong). They agreed that the Defendant would charter M.V. ZHEN YANG HAI 1 to Yangpu Jinglong, for the charter period of 6 months, calculated from delivery. The Defendant would procure and pay the insurance on hull, fresh water

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supply, and crew wages. During the charter period, Yangpu Jinglong would pay all fuel fees and material supply costs. The hire was RMB1,200,000 each month and ZHEN Deping was assigned by the Defendant as the receiver. After the contract was signed, both sides signed the delivery agreement. They confirmed that M.V. ZHEN YANG HAI 1 went on charter in Jingtang Port at 11:00 am, December 18, 2011. There were 100 tons fuel oil and 40 tons diesel oil on the ship when the ship was delivered. On January 7, 2012, notice of off-hire was sent by Yangpu Jinglong to the Defendant. It said that because M.V. ZHEN YANG HAI 1 encountered a marine accident and was seized by the court, the company would not pay the hire for the period when M.V. ZHEN YANG HAI 1 was seized and undergoing maritime processing. On March 19, Yangpu Jinglong sent notice of cancellation of the charter party. It said that because M.V. ZHEN YANG HAI 1 met marine accident, which caused the ship to be seized for a long time, and it had a serious impact on the company’s arrangement and adjustment. The company decided to cancel the charter party, effective immediately. According to the charter party, the hire should only be paid until 23:30 on January 11, 2012 (when Guangzhou Huangpu finished) and the hire during investigation and maritime processing (from 22:15 on December 29, 2011 to 16:33 on January 5, 2012) shall also remain unpaid. On April 6, the Defendant Zhenyang Company signed a settlement agreement with Yangpu Jinglong. As both sides canceled the charter party, the hire and fuel oil was settled as follows: the charterer had paid RMB1,050,000 for hire and the charterer still should pay RMB61,712 for hire until 22:30 on January 11, 2012. The ship was delivered with 100 tons fuel oil and 40 tons diesel oil. The ship was redelivered with 107.6 tons fuel oil and 30 tons diesel oil, so the Defendant Zhenyang Company shall pay RMB31,262 for fuel oil. To sum up, Yangpu Jinglong Shipping Co., Ltd. shall pay RMB30,450 to the Defendant. The Defendant Zhenyang Company also provided 6 certificates issued by Agricultural Bank of China. These showed that ZHEN Deping’s account received RMB100,000, RMB100,000, RMB500,000, RMB200,000, RMB150,000 and RMB30,450 on November 6, 2011, December 5, 2011, December 19, 2011, January 6, 2012, January 10, 2012 and April 9, 2012. In order to prove the elapsed time of the investigation, marine processing, and repair of M.V. ZHEN YANG HAI 1, the Defendant Zhenyang Company also provided the logbook from December 29, 2011 to January 5, 2012 and from March 2, 2012 to March 20, 2012. This proves that the marine processing of M.V. ZHEN YANG HAI 1 took seven days, and its repair lasted for nineteen days. The court holds that the evidence mentioned above is all represented by the original documents. Although the Plaintiffs objected to the authenticity of the documents, they did not provide rebuttal evidence.

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The court does not support the Plaintiffs’ objection. M.V. ZHEN YANG HAI 1 suffered a collision during the charter period and the charterer refused to pay the hire and cancelled the contract, causing the loss from ship detention. In accordance with the provision of Article 10 of the Rules concerning Compensation of Property Damage of Collision and Allision, the damages for the period of ship repair should be limited to the reasonable period of actual repair. It includes the time of docking, time in dock, inspection, and so on. Article 11 provides that, if the collision causes off-hire or the charterer refuses to pay hire, the calculation should depend on the saving cost caused by off-hire or the amount payment denied. It was agreed in the charter party that the hire was RMB1,200,000 each month and RMB40,000 each day on average. From the time the collision happened to the conclusion of marine processing, seven days elapsed (from December 30, 2011 to January 5, 2012). According to the logbook, the repair period was from March 3 to March 20, 2012. The Defendant and the charterer, Yangpu Jinglong Shipping Co., Ltd., canceled the charter party on March 19, 2012, so there were 25 days’ ship detention loss and the hire loss was RMB1,000,000. v. Marine accident handling, clean-up, buoy and maintenance cost The Defendant claimed that the marine accident handling, clean-up, buoy, and maintenance costs, which added up to RMB368,728, are due to the maritime authority, and still outstanding. The court holds that since the cost mentioned above has not been paid, the court rules against this claim and it should be resolved by consultation between the two Plaintiffs and the maritime authority. To sum up, the actual loss of the Defendant caused by the collision includes ship repair allowance, RMB 568,962.60; salvage charges, RMB 95,000; and the ship detention loss, RMB 1,000,000; which add up to RMB 1,663,962.60. In the lawsuit, the Plaintiff Shunjin Company, as the shipowner of M.V. JIANG XIA JIN, and the Plaintiff Diwei Company, as the charterer of M.V. JIANG XIA JIN, demanded that the Defendant bear the liability for the loss of the ship in the collision. The Defendant asserted no objection to the two companies’ acting as joint plaintiffs. The two Plaintiffs also confirmed that they agreed to share Defendant’s compensation for the loss on a pro rata basis. The court holds that this case is the dispute over collision damage compensation. The collision occurred in the Linding Channel, between beacons #13 and #14, in Huangzhou Port. These are waters which permit sea-going vessels’ navigation. The 1972 International Regulations for Preventing Collision at Sea (COLREGs) and the Regulations for Sailing Ship Safety at Pearl River Estuary shall be applied to determine the liabilities.

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Before the collision, M.V. ZHEN YANG HAI 1 was sailing in the approach channel in Guangzhou Linding channel, while M.V. JIANG XIA JIN was sailing in the outbound channel. M.V. JIANG XIA JIN was obliged to observe Article 6 of Regulations for Sailing Ship Safety at Pearl River Estuary, and steer as close as it could to the outer edge of the channel, on starboard M.V. JIANG XIA JIN sailed in the main channel between #14 and #16 and gradually tracked from the starboard side of the channel to the port side. It occupied the approach channel and it did not return to the starboard side after it received the warning of M.V. ZHEN YANG HAI 1, which action and inaction violated Article 6 of Regulations for Sailing Ship Safety at Pearl River Estuary. In accordance with COLREGs Article 14, when two power-driven vessels are meeting on reciprocal or nearly reciprocal courses, so as to involve risk of collision, each shall alter her course to starboard so that each shall pass on the port side of the other. From 23:14 to 23:15, when M.V. JIANG XIA JIN observed M.V. ZHEN YANG HAI 1 make a left turn, M.V. JIANG XIA JIN again turned left, from course 166.30° to 156.10°, in violation of COLREGs Article 14. At 12:13, when M.V. ZHEN YANG HAI 1 observed that M.V. JIANG XIA JIN was navigating in the approach channel, the captain did not order to slow engines to provide time to assess the situation. M.V. JIANG XIA JIN still sailed at 12.5 knots. Because it did not slow down, the relative velocity was very high when the collision happened. M.V. ZHEN YANG HAI 1 did not slow down before the collision, in violation of COLREGs Article 6, safe speed of navigation. The direct reason for the collision was that M.V. JIANG XIA JIN navigated into the port side channel, M.V. ZHEN YANG HAI 1 did not slow down in time, and both ships turned left before the collision. M.V. JIANG XIA JIN’s navigation in the port side channel led to the danger of collision, and the extent of its fault was larger than that of M.V. ZHEN YANG HAI 1. So, M.V. JIANG XIA JIN shall take the primary liability and M.V. ZHEN YANG HAI 1 shall beat the secondary liability. To sum up, following the extent of fault of the two ships, the court holds that M.V. JIANG XIA JIN takes 70% and M.V. ZHEN YANG HAI 1 takes 30% liability. In accordance with Article 4 of the Provisions of the Supreme People’s Court on Some Issues about the Trial of the Cases of Ship Collision Disputes, the liability caused by ship collision shall be assumed by the two shipowners. If the collision happened during registered bareboat charter, it shall be assumed by the bareboat charterer. The Plaintiff Diwei Company, as the bareboat charterer, and the Defendant, as the shipowner of M.V. ZHEN YANG HAI 1, shall compensate for the loss of each other on a proportional basis. The Plaintiff Shunjin Company, as the shipowner of M.V. JIANG XIA JIN, and the Plaintiff Diwei Company, as the bareboat charterer of M.V. JIANG XIA JIN, jointly demanded compensation for the collision loss from the Defendant. The Defendant asserted no objection to the two companies’ acting as joint plaintiffs. The two Plaintiffs also confirmed that they agreed to jointly compensate the loss of the Defendant, on a pro rata basis. This stipulation of the two parties does not violate the mandatory provisions of the law in China, and it is effective on both sides. In accordance with Article 169 of the Maritime Code of the People’s Republic of China, if colliding ships are both at fault, each ship shall be liable in proportion to

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the extent of its fault. The ships at fault shall be liable for damage to the vessel, the goods, and other property on board, pursuant to the proportions prescribed. Where damage is caused to the property of a third party, any of the colliding ships’ liability for compensation shall not exceed the proportion of liability it shall bear. The two Plaintiffs, as the shipowner and the bareboat charterer of M.V. JIANG XIA JIN, and the Defendant Diwei Company, as the shipowner of M.V. ZHEN YANG HAI 1 shall compensate each other’s losses on a proportional basis. The two Plaintiffs’ actual loss caused by the collision included ship loss, RMB13,800,000; ship detention loss, RMB482,651.92; crew personal belongings, RMB11,200; cargo loss, RMB1,966,228.80; and salvage charge, RMB8,600,000; adding up to 24,860,080.72 yuan. The Defendant, who takes 30% of the liability, shall compensate RMB7,458,024.22 in all: for ship loss, RMB 4,140,000; ship detention loss, RMB144,795.58; crew personal belongings, RMB3,360; cargo loss, RMB589,868.64; and salvage charge, RMB2,580,000, to the Plaintiffs. The Defendant’s actual loss caused by the collision included ship repair allowance, RMB568,962.60; salvage charge, RMB95,000; and ship detention loss, RMB1,000,000; adding up to RMB1,663,962.60. The two Plaintiffs, who take 70% of the liability, shall compensate RMB1,164,773.82 in all: for ship repair allowance, RMB398,273.82; salvage charge, RMB66,500; and ship detention loss, RMB700,000, to the Defendant. Other claims made by the two parties are not supported by the court, because they lack factual basis and legal foundation. In accordance with the interest on loss provision of Article 13 of the Rules concerning Compensation of Property Damage of Collision and Allision, the interest for the loss of ship value is calculated from the date of ship detention loss to the date the settlement or verdict. Interest on other loss is calculated from the actual occurrence of loss, or incurrence of fee, to the date the settlement or verdict. Thus, both the Plaintiffs and Defendant shall get recovery from the opposing party. The interest derived from the loss of ship value is calculated from the ship detention loss. Any other loss is calculated from its actual occurrence to the date of payment set by this Judgment on the basis of the interest rate for liquid capital loan over the corresponding period as promulgated by the People’s Bank of China. To sum up, according to Article 169 Paragraph 1 and Paragraph 2 of the Maritime Code of the People’s Republic of China and Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: 1. The Defendant, Cangzhou Bohai New Area Zhenyang Shipping Co., Ltd., shall compensate the Plaintiffs, Nanjing Shunjin Shipping Co., Ltd. and Zhuhai Diwei Shipping Co., Ltd., for loss in the amount of RMB7,458,024.22 and the interest thereof (ship loss RMB4,140,000, calculated from February 29, 2012; ship detention loss RMB144,795.58, calculated from February 29, 2012; crew personal belongings RMB3,360, calculated from December 29, 2011; cargo loss RMB589,868.64, calculated from February 21, 2012; salvage charge RMB2,580,000, calculated from November 9, 2012, to the date of payment set by this Judgment on the basis of the interest rate for liquid capital load in RMB over the corresponding period as promulgated by the People’s Bank of China);

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2. The Plaintiffs, Nanjing Shunjin Shipping Co., Ltd. and Zhuhai Diwei Shipping Co., Ltd., shall jointly compensate the Defendant, Cangzhou Bohai New Area Zhenyang Shipping Co., Ltd., for loss, in the amount of RMB1,164,773.82 and the interest thereof (ship repair allowance RMB398,272.82, calculated from March 19, 2012; salvage charge RMB66,500, calculated from January 11, 2012; ship detention loss RMB700,000, calculated from March 20, 2012, to the date of payment set by this Judgment on the basis of the interest rate for liquid capital load in RMB over the corresponding period as promulgated by the People’s Bank of China); 3. Reject other claims of the Plaintiffs Nanjing Shunjin Shipping Co., Ltd. and Zhuhai Diwei Shipping Co., Ltd.; 4. Reject other claims of the Defendant Cangzhou Bohai New Area Zhenyang Shipping Co., Ltd. Court acceptance fee in amount of RMB151,506, has been prepaid by the Plaintiffs. Because the Plaintiff reduced the amount of claims before the end of the defense, the Plaintiffs Nanjing Shunjin Shipping Co., Ltd. and Zhuhai Diwei Shipping Co., Ltd. shall jointly and severely bear RMB94,956 and the Defendant Cangzhou Bohai New Area Zhenyang Shipping Co., Ltd. shall bear RMB48,917. The remainder, RMB7,633, will be returned by the court. The Defendant Cangzhou Bohai New Area Zhenyang Shipping Co., Ltd. shall bear RMB8,652 and the two Plaintiffs Nanjing Shunjin Shipping Co., Ltd. and Zhuhai Diwei Shipping Co., shall jointly and severely bear RMB6,013. The above obligation of payment shall be fulfilled within 10 days after this judgment comes into effect. For failure to fulfill the obligation of payment within the period designated by this Judgment, interest on the debt for the delayed period shall be doubled, according to Article 253 of the Civil Procedure Law of the People’s Republic of China. In case of dissatisfaction with this judgment, a statement of appeal can be submitted to the court within 15 days upon the service of this judgment, together with copies in accordance with the number of the opposite parties. The court of second instance shall be the Guangdong High People’s Court. Presiding Judge: ZHANG Kexiong Judge: WU Guining Acting Judge: YIN Zhonglie November 11, 2013 Clerk: YANG Qian LU Shiying

Guangzhou Maritime Court Civil Judgment Nanjing Xinruida Shipping Co., Ltd. v. Ningbo Xianghai Fuel Co., Ltd. (2014) Guang Hai Fa Chu Zi No.16 Related Case(s) None. Cause of Action 392. Dispute over damage caused by application for pre-litigation property preservation. Headnote Bunker supplier held liable for wrongful arrest of ship in relation to a claim for bunkers supplied to the ship when it was demise chartered to a charterer different from the one in possession when the ship was arrested. Summary This case arose from the wrongful arrest of M.V. HAI CHANG 26, which was bareboat chartered to the Plaintiff, Nanjing Xinruida Shipping Co., Ltd. at the time of arrest. The Defendant arrested the vessel because it was owed for several oil supply contracts that it fulfilled, when Hainan Shangdao Shipping Co. Ltd., the previous bareboat charterer of M.V. HAI CHANG 26, was in control of the ship. Control had since transferred to the Plaintiff, and thus the arrest that occurred during the Plaintiff’s charter was wrongful. The court held that the Defendant must reimburse the Plaintiff for costs, which included crew wages and other fees associated with the arrest, minus the fees for expected profits, which the Plaintiff failed to prove, totaling RMB98,877.90.

Judgment The Plaintiff: Nanjing Xinruida Shipping Co., Ltd. Domicile: RM405, No.300 Emei Road, Xiongzhou Street, Liuhe District, Nanjing, Jiangsu. Legal representative: XU Xinyun, chairman. Agent ad litem: YAN Tao, lawyer of Shandong Costal Zhengda Law Firm. Agent ad litem: KONG Wendan, lawyer of Shandong Costal Zhengda Law Firm.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_34

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The Defendant: Ningbo Xianghai Fuel Co., Ltd. Domicile: No.88 Xiufeng Road of Gaoqiao Industrial Park, Yinzhou District, Ningbo, Zhejiang. Legal representative: CAI Haidong, general manager. Agent ad litem: LI Huibin, lawyer of Zhejiang Haoshang Law Firm. Agent ad litem: WANG Xukai, lawyer of Zhejiang Haoshang Law Firm. With respect to the case arising from dispute over damage caused application for pre-litigation property preservation filed by the Plaintiff, Nanjing Xinruida Shipping Co., Ltd., against the Defendant, Ningbo Xianghai Fuel Co., Ltd., to the court on November 11, 2013, after receiving the submissions, the court accepting this case on December 25 and organized the collegiate panel consisting of Presiding Judge WEN Jing, Acting Judges YANG Yousheng and CHEN Zhenqing to try the case and appointed HUANG Mingdian as clerk in accordance with the law. On March 19, 2014, the court held an open hearing. YAN Tao, agent ad litem of the Plaintiff, and WANG Xukai, agent ad litem of the Defendant, appeared in court to attend the hearing. Now the case has been concluded. The Plaintiff alleged that M.V. HAI CHANG 26 belonged to Dalian Haichang Shipping Co., Ltd. (hereinafter referred to as “Haichang Company”). On December 29, 2011, Haichang Company signed a bareboat charter party with Hainan Shangdao Shipping Co., Ltd. (hereinafter referred to as “Shangdao Company”) and completed the formalities of registration for the bareboat charter at Dalian Maritime Safety Administration, which stated the onhire and logoff period was from January 29, 2012 to September 6, 2012. On September 3, 2012, Haichang Company signed the bareboat charter party of M.V. HAI CHANG 26 with the Plaintiff. Dalian Maritime Safety Administration issued a bareboat charter registration certificate on September 6, 2012, which stated the charter period was from September 3 2012 to September 3, 2017, and issued a citizenship certificate of the ship, which stated the ship operator of M.V. HAI CHANG 26 was the Plaintiff. The Defendant applied to the court to arrest the ship over the dispute of the ship supplies contract against the ship owner and/or the operator of M.V. HAI CHANG 26 on September 13, 2012. The Plaintiff, as the operator of the ship, in accordance with the court’s request, provided RMB700,000 as guarantees for the court on September 17, 2012, but the Defendant did not sue the Plaintiff within the statutory period. It was affirmed by the Zhejiang High People’s Court (2013) Zhe Hai Zhong Zi No.90 Civil Judgment that the owner of M.V. HAI CHANG 26, Haichang Company, was not liable for the dispute of the case. Shangdao Company was not a lessee or an operator, not even an owner of M.V. HAI CHANG 26 when the Defendant arrested the ship. The Defendant’s filing arresting M.V. HAI CHANG 26 was by mistake in the case of the owner’s not liable according to the effective judgment. The Defendant shall bear the liability caused by this to compensate the Plaintiff for the cost of maintaining during the arrest period of M.V. HAI CHANG 26, schedule losses during its charter period and the cost incurred by providing the guarantees. The Plaintiff request the court to judge that: (1) the costs and expenses in sum of RMB110,179.14 of maintaining during the arrested period and the schedule losses of M.V.

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HAI CHANG 26 incurred by the Defendant’s claiming for preservation by mistake., the guarantees in sum of RMB54,600 to releasing the arrest of M.V. HAI CHANG 26, all the sum above is RMB164,779.14. (2) The litigation expenses, the preservation expenses and all the legal fees should be born by the Defendant. The Plaintiff submitted the following evidence materials within the time limit for adducing evidence: (1) the certificate of the bareboat charter registration and the certificate of nationality of the ship, to prove that the Plaintiff, as the actual operator, chartered M.V. HAI CHANG 26 from September 3, 2012 to September 3, 2017; (2) bareboat charter party and invoices, to be proved the charter term, the charter hire and rights and obligations of every party; (3) order of arresting and releasing ship arrested, to prove the facts and the time that M.V. HAI CHANG 26 was arrested; (4) payroll sheets of September, 2012 of M.V. HAI CHANG 26, to prove the wages of crews when the ship was put under arrest; (5) pretty cash, the voyage account of the pretty cash and the payroll requisitions of M.V. HAI CHANG 26, to prove the expenses of board wages during the period of ship arrest; (6) consignment vouchers, oil supply vouchers and invoices, to prove the fuel prices during the period of ship arrest; (7) profit sheets in October, 2012 of M.V. HAI CHANG 26, wage sheets, oil supply vouchers and invoices, the liquid chemicals in bulk water transport voyage charter party and the invoices of bulk liquid chemicals transported by waterway, the freight confirmation sheets of October, to prove the operations and profitability of M.V. HAI CHANG 26; (8) wire transfer certificate and the dedicated certificate of payment systems, to prove the time between the Plaintiff submit and the court refunded the guarantee in sum of RMB700,000; (9) Zhejiang High People’s Court (2013) Zhe Hai Zhong Zi No.90 Civil Judgment, to prove that the Defendant had not sued the Plaintiff and the owners of M.V. HAI CHANG 26 should not bear the compensation liability; (10) engine room log book and the logbook, to prove the fuel consumption and the sailing date delayed during the ship arrested period. The Plaintiff submitted the following supplementary evidence materials after the court: (11) The certificate issued by Dalian Maritime Safety Administration, intended to prove the authenticity of the evidence material (1) submitted by the Plaintiff; (12) The waterway transport license, intended to prove the Plaintiff’s qualification of operating waterway transport; (13) The bank transfer vouchers of Rural Credit Cooperative in Shandong Province, intended to prove that due to the arrest of M.V. HAI CHANG 26, by consensus, Haichang company agreed the Plaintiff to calculate the rent according to the entire two months of September and October after negotiation, and the Plaintiff paid the rents for two months in the end of the October; (14) The Ship lowest Safety Manning Certificate, intended to prove the lowest manning requirements of M.V. HAI CHANG 26 and the actual manning number of the ship was reasonable; (15) The vouchers of Online banking payment, intended to prove that the Plaintiff actually had paid the wages to the crew; (16) The wire transfer vouchers of Rural Credit Cooperative in Shandong Province, to prove that oil fees under evidence material (6) had been paid; (17) The electronic receipts of the online bank of China Industrial and Commercial Bank combined with

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evidence material (7), intended to prove the actual oil supply sum on September 28, 2012; (18) The income receipts of Rural Credit Cooperative in Shandong Province, combined with evidence material (7), intended to prove the freight of October, 2012 had been paid to the Plaintiff by China Oilfield Services Limited, Tianjin Branch; (19) The transportation contract signed by the Plaintiff and China Oilfield Services Limited and the dedicated invoices, intended to prove the situation of the first laden voyage after M.V. HAI CHANG 26 was released from arrest. The Defendant argued that: The Defendant refueled M.V. HAI CHANG 26 on April 2 and May 12, 2012, after which the ship affirmed the fact and stamped the seal of M.V. HAI CHANG 26 of Haichang Company. Based on the reasonable trust, the Defendant had reasons to regard that Haichang Company should bear the obligation of paying for the oil; Haichang Company was the owner of M.V. HAI CHANG 26, and the Defendant’s application for arresting the ship complied with the regulation of Article 23 of the Special Maritime Procedure Law of People’s Republic of China. The Defendant filed application of pre-litigation preservation on the basis of oil supply vouchers or other evidence. After the related disputes were sued to the court, the first instance judgment supported the Defendant’s appeal, and sentenced that Haichang Company should bear the obligation of paying for the oil, and Shangdao Company should bear the liabilities jointly and severally, so the Defendant had fulfilled its reasonable duty of care. which could not be concluded in fault due to the different understanding of the counterpart of the ship supply contract by the court of first and second instance. The pre-litigation preservation of property is a coercive measure that is taken before the dispute being put to the litigation. It is neither possible nor reasonable if the Defendant’s appeal is required to be exactly the same as the court’s effective judgments in the support level according to the facts and Evidence. The evidence materials submitted by the Plaintiff failed to verify the so-called loss claimed by it, the Plaintiff shall bear the legal consequence of evidence lack. The cost of maintaining of the ship should have been included in the calculation of the schedule losses, but the Plaintiff regarded it as an independent appeal, which constituted a repeated claim. In addition, the evidence materials submitted by the Plaintiff failed to prove its so-called schedule losses; the expenses paid by the Plaintiff for providing the guarantees to the court should be limited to the differential section between current bank interest rates and bank lending rates at the same period within the guarantees. Other claims lacked legal basis, and the Defendant requested the court to reject the claims of the Plaintiff. The Defendant did not submit evidence materials. After cross-examination, the Defendant thought the authenticity of the evidence material (1) submitted by the Plaintiff was unable to be verified, which cannot prove that the Plaintiff was the actual operator. The Defendant deemed the evidence material (2) inadmissible and held that the statements of the contract on page 8 specified that the ship was chartered to Zhejiang Yonghua shipping Co., Ltd., which caused the confusion of the subject of the bareboat charter. The Defendant raised no contest to the evidence material (3).The Defendant deemed the evidence material (4) to (6) inadmissible in their authenticity, validity and relevancy and held that they

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were issued unilaterally by the Plaintiff, whether or not actually performed was not clear, which also could not achieve the purpose of proof by the Plaintiff. The Defendant raised no contest to the authenticity of evidence material (7) but held that the invoices failed to prove that the voyage charter party had performed and raised objection to the authenticity, validity and relevancy of the other materials. The Defendant had no objection to the evidence material (8) and (9). The Defendant held that the evidence material (10) was submitted after the expiry of time limit for proof and the contents were filled unilaterally by the Plaintiff, and the oil consumption that incurred during the period of the ship’s arrested were fixed costs during the discharge period other than the costs of maintaining. The Defendant deemed the evidence material (11) inadmissible in its authenticity, validity and relevancy and held that the inscribed time of this certificate was earlier than the occurrence time of the fact that it intended to prove, so it was not able to prove the fact occurring later. The Defendant deemed the evidence material (12) and (13) admissible in their authenticity. The Defendant deemed the evidence material (14) admissible in its authenticity but held that manning of the ship should subject to the crew recorded on the visa book of the voyage involved. The Defendant deemed the evidence material (15) inadmissible in authenticity because the name of the remitter and the remittee did not tally with the Plaintiff and the crew in this case, which proved the falsity of the wage sheets. The Defendant deemed the evidence material (16) admissible, but it has no relevancy with the payment of oil involved. The Defendant deemed the evidence material (17) inadmissible in their authenticity, validity and relevancy. The Defendant had no objection to the evidence material (18) in its authenticity but held that it was not relevant with this case, and the amount did not tally with the invoices of the freight; the transportation contract in the evidence material (19) had not been verified with the original, so the Defendant deemed it inadmissible in its authenticity but the authenticity of the invoices was admissible, however, the Defendant held that they had no relevancy with this case and failed to prove whether or not the charterer had paid the amount on the invoices. After examination, the court admitted all the evidence materials which authenticity that the parties have no objection to, but the court should comprehensively admit the facts that they intended to prove through the combination of the court investigations, cross-examinations and mutual corroborations of the Evidence. With regard to the evidence material (1), (11) that the Defendant raised objections to, although there was a fault about the inscribed time of the certificate issued by Dalian Maritime Safety Administration, the contents of the proof were basically coincide with the situation the court got during the process of executing the command of arresting M.V. HAI CHANG 26 and could be mutual corroborated with the facts that the evidence material (9) proved, so the court deemed the certificate admissible in its authenticity thought there were flaws with it. The evidence material (2) had no difference with the original after verifying, although there was a statement in the contract that the ship was chartered to the person not involved in the case, the name of the ship owner and the charterer on the contract were coincide with the inscribed signatures and could also be mutual corroborated with the evidence (1), (11), so the

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court affirmed. The evidence material (4) to (6) had no difference with the originals after verifying, the court deemed them admissible in their authenticity, but the contents that they intended to prove should be affirmed through the combination of other Evidence. The profit sheets in the evidence material (7) were made unilaterally by the Plaintiff, so the authenticity of the contents should be affirmed through the related receipts, the wage sheets, the oil supply vouchers and invoices, and the freight invoices had no difference with the originals after verifying, so the court affirmed them, the Plaintiff was not able to submit the originals of the voyage charter party and the freight checklists to be vertified, the freight invoices issued by it could neither prove the fund was actually paid nor prove it was the incomes of the freight in October. The evidence material (10) was complementally submitted by the Plaintiff at term of the court and was coincide with the original after verifying, the court affirmed its authenticity. The Plaintiff did not submit the originals of the evidence material (15), (17) for verifying, so its authenticity could not be affirmed, the court disaffirmed. The transportation contract in the evidence material (19) could not be verified with original, the issued time of the freight invoices were the same as it in the freight invoices in the evidence material (7) which could not prove the time when the freight was generated. Based on the above Evidence affirmed and the court investigations, the court finds out the following facts: 1. Facts about the arrest of M.V. HAI CHANG 26 The Defendant applied to the court to arrest the ship against the ship owner and/ or the operator of M.V. HAI CHANG 26 as the respondents on September 12, 2012 which was berthing on Zhanjiang Port until the respondent provided effective guarantees equivalent to RMB700, 000. The Defendant provided guarantees in sum of RMB200, 000 in cash for the appeal above. On September 13, the court made (2012) Guang Hai Fa Bao Zi No.159–2 Civil Ruling, admitted the application of the Defendant, served on and executed the same day. On September 19, the Plaintiff provided RMB700,000 in cash to the court as guarantees, remitted to the guarantee account of the court according to the requestment of the award above, then, the court released the arrest of M.V. HAI CHANG 26. According to the logbook of M.V. HAI CHANG 26, the ship had arrived at the anchorage of Zhanjiang Port on September 13 to wait for discharge. The order of arrest was conveyed at 1500 that afternoon by the Coast Guard Boat. At 1555, September 15, it reported that Zhanjiang VTS applied for weighing anchor, berthing No.204. At 1558, the anchor was weighed. At 1705, the ship berthed No.204 and reported to Zhanjiang VTS. At 1510, September 16, the discharge was completed. At 1629, it reported to Zhanjiang VTS to leaving to the berth No.7 to anchor and anchored at 1759. At 1759, September 17, it reported to Zhanjiang VTS to apply for weighing anchor and setting sail. After the ship was arrested, the Defendant filed an application on September 29, 2012 to Ningbo Maritime Court against Haichang Company and Shangdao Company requiring Haichang Company to repay the oil supply sum and

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compensate the cost of applying for ship arrest, and Shangdao Company shall bear joint and several liabilities. Ningbo Maritime Court made (2012) Yong Hai Fa Chu Zi No.440 Civil Judgment and found the following facts: M.V. HAI CHANG 26, which was owned by Haichang Company, was a steel bulk chemical tanker. On December 29, 2011, Haichang Company signed a bareboat charter party with Shangdao Company, chartering the ship by bareboat to Shangdao Company for operation with December 29 to 30, 2011 as the time of delivery, 2 years fixed plus 2 years (with the ship owner’s option) as the charter period and RMB4,000,000 per year as charter money. On April 24, 2012, M.V. HAI CHANG 26 completed the formalities of registration for the bareboat charter at Dalian Maritime Safety Administration, which stated the onhire date was January 29, 2012. On September 6, 2012, the ship completed the formalities of registration for logout of bareboat charter and the bareboat charter was end up. During the charter period above, the Defendant dispatched tankers to supply oil for M.V. HAI CHANG 26 for many times. Among them, the Defendant dispatched the tanker “DONG KAI YOU 11” to supply oil for the ship on April 2 and May 12, 2012 with 49 tons of fuel No.120, RMB5700 per ton, 18 tons of DMC diesel, RMB8, 950 per ton, 4 barrels of Great Wall Lubricant, RMB2650 per barrel refueled on April 2, totally in amount of RMB451, 000. 44.2 tons of fuel No.120, RMB5650 per ton, 15 tons of DMC diesel, RMB8, 450 per ton, 4 barrels of No. 4030 Great Wall Lubricant, RMB2730 per barrel, 2 barrels of No.CD40 Great Wall Lubricant, RMB2680 per barrel refueled on May 12, totally in amount of RMB392, 760. The representative of M.V. HAI CHANG 26, LIN Zhongfang, signed and stamped the ship seal for each of the twice oil supply. The ship seal demonstrated the words of “M.V. HAI CHANG 26 of Dalian Haichang shipping Co., Ltd.” Shangdao Company paid RMB200,000 but still owed the balance in amount of RMB643,760 to pay. The first instance of Ningbo Maritime Court ruled that Haichang Company should pay its owed oil fees in amount of RMB643,769 and the interests calculated according to the lending rates of People’s Bank of China from May 13, 2012 to the day that the effective judgment starting to be executed and the expenses for applying for arresting the ship in amount of RMB4,020 within ten days from the date of the effectiveness of the judgment; Shangdao Company should bear joint and several liabilities to the debt. Haichang Company dissatisfied with the ruling above and appealed to Zhejiang High People’s Court. The court of second instance made (2013) Zhe Hai Zhong Zi No.90 Civil Judgment and affirmed the facts found by the original judgment but held that the representative of M.V. HAI CHANG 26, LIN Zhongfang, signed and stamped the ship seal as affirmation for each of the twice oil supply to the ship involved, and the ship seal demonstrated the words of “M.V. HAI CHANG 26 of Dalian Haichang shipping Co., Ltd.” on the oil supply vouchers. The two parties of the case did not sign an oil supply contract in written, thus the oil supply vouchers could be regarded as a proof of ruling a contractual relationship of oil supply between two parties. Although the ship seal of Haichang Company was stamped on the oil supply contract involved, which was not the official one, could only be a preliminary proof of recognizing the subject of the contract. From January 29 to

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September 6, 2012, Shangdao Company bareboat chartered the ship involved, and Haichang Company, Shangdao Company completed the formalities of registration for the bareboat charter at Dalian Maritime Safety Administration as the ship owner and the charterer respectively. The ship involved was occupied, used and operated by Shangdao Company in this period. Both of the twice oil supply involved occurred during the period of bareboat charter, and the Defendant had also supplied oil to Shangdao Company prior to this time and had charged full amount of oil fees paid by Shangdao Company. After refueling of the ship involved, Shangdao Company paid for a part of the oil fees to the Defendant, so the oiled party of the oil supply contract should be Shangdao Company instead of Haichang Company, and Shangdao Company should bear the liabilities of paying for the oil fees to the Defendant. Moreover, although Shangdao Company issued a letter of guarantee as bondsman, promising that it would bear the liabilities of the unpaid oil fees involved, it was a unilateral meaning expression of Shangdao Company and could not change its subject status as counterpart of the oil supply contract. The court was required to judge that: revoke (2012) Yong Hai Fa Chu Zi No.440 Civil Judgment of the Ningbo Maritime Court, and Shangdao Company should pay its owed oil fees in amount of RMB643, 769 and the interests calculated according to the lending rates of People’s Bank of China from May 13, 2012 to the day that the effective judgment starting to be executed and the expenses for applying for arresting the ship in amount of RMB4,020 within ten days from the date of the effectiveness of the judgment, and reject other claims of Defendant. It is also found out that M.V. HAI CHANG 26 was built on June 30, 2006 with 1,574GT, 881NT, 81.65 m in total length, 12 m in molded breadth, 5.60 m in molded depth and a main engine with power of 735 kW. It was stated on the Ship lowest Safety Manning Certificate that the manning standard could not below the following number and grade when the ship was sailing, which meant it should comply with the safety manning requirements: a captain, a first mate, a second mate, a third mate, a chief engineer, a third engineer, a fourth engineer, three duty sailors, two equipment operators, one full-time or two part-time general operators, a third engineer added in the documents of this certificate after continuous sailing over 36 h. On September 3, 2012, the Plaintiff signed a bareboat charter party with Haichang Company, and Haichang Company rented out the bareboat M.V. HAI CHANG 26 to the Plaintiff and delivered the ship on the same day with 3 years fixed plus 2 years (with the ship owner’s option) as the charter period. When the 3 years fixed charter period over, the ship owner had the option to require the charterer to renew the charter for 2 years, but the price and requirements should be complied with the charter party, the charter money was RMB4,000,000 per year, RMB10,958 per day, the charterer would be given full power for occupying the ship, arranging it for a variety of usages, and the ship would be under control by the charterer in all respects during the charter period; the charter should man, supply for boards, sailing, operations and fuels for the ship and bear the cost of repairs at any time during the charter and the cost that should be paid by the charterer of using and operating the ship including taxes for general municipals and states in foreign countries, the Plaintiff should prepay down payment of the bareboat charter in sum

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of RMB1,000,000 on 5 working days before the delivery date negotiated by the two parties, including the first month’s charter money, and the rest of the money should be regarded as the guarantees, etc. On September 6 of the same year, Dalian Maritime Safety Administration issued a bareboat charter registration certificate, stated the onhire date was from September 3, 2012 and the logoff date was September 3, 2017. The certificate of nationality of the ship issued by this bureau also stated that the owner of M.V. HAI CHANG 26 was Haichang Company and the operator was the Plaintiff, and the period of validity of the certificate was from September 6, 2012 to September 3, 2017. Dalian Maritime Safety Administration issued the written confirmation as well to prove the contents above. The Plaintiff held the waterway transport permit approved by Ministry of Transport, mainly operating transportation by product oil tankers and chemical tankers sailing on the domestic coastal waters and the middle and lower reaches of the Yangzi River. The Plaintiff claimed for the loss of arresting the ship as follows: (1) the charter money of the ship per day in amount of RMB10,958  4 days was RMB43,832; (2) the wages of the crew in amount of RMB163,700  30 days  4 days was RMB21,826.67; (3) the board wages in amount of RMB18 per day  14 people  4 days was RMB1,008; (4) oil fees totally in amount of RMB18,740.47, calculated as follows: 0.825 tons of fuel oil  RMB5,350 per ton was RMB4,413.75; 1.595 tons of diesel  RMB7,384.62 per ton was RMB13,780.80; 32 kg of the main engine oil  RMB17.06 per kilogram was RMB545.92; (5) the schedule losses in amount of RMB191,983  31 days  4 days was RMB24,772; (6) costs incurred by providing guarantees, the loan interest in amount of RMB54, 600, calculated in accordance with the one-year lending rates of People's Bank of China, 7.8% and the principal in amount of RMB700,000. Evidence and facts about the losses occurred during the arrest of M.V. HAI CHANG 26 were as follow: 1. The Plaintiff provided guarantees in sum of RMB700,000 in cash to the court on September 17, 2012 which was remitted to the guarantee account of the court. The court refunded the Plaintiff guarantees in amount of RMB700,000 on September 18, 2013 and then refunded the Plaintiff the current interests in amount of RMB2,450 generated from the guarantees saved in the court’s account. The one-year lending rates of financing institutions announced by People’s Bank of China on July 5, 2012 was 6%. 2. The charter money: the Plaintiff submitted the bank transfer vouchers of Rural Credit Cooperative in Shandong Province and the invoices issued by Haichang Company on December 28, 2012, proving that the Plaintiff paid the charter money of the two months, from September to October, in amount of RMB666,000 to M.V. HAI CHANG 26. 3. The Plaintiff submitted the wage sheets in September, 2012 of M.V. HAI CHANG 26, and it totally paid off 15 seamen including a captain, a first mate, a second mate, a third mate, a chief engineer + electrician, a second engineer, a boatswain, two third engineers, four sailors and four equipment operators in amount of RMB163,700. Although the wage sheets were issued

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unilaterally by the Plaintiff, the captain CHEN Beiyi, the first mate ZHANG Dingquan, the second mate LUO Qihua, the chief engineer + electrician TONG Xinlong, the sailor HUANG Cheng, FU Aguo, ZHANG Zhenggao and the equipment operator HE Zhaohui, etc. who signed on the wage sheets all signed and kept a record of events on the engine logbook and the logbook, which could prove that these employees worked on M.V. HAI CHANG 26. Moreover, it was required by Ship lowest Safety Manning Certificate that 12 or more seamen should be manned under normal circumstances. The manning proposed by the Plaintiff increased a second engineer and a chef compared with the lowest safety manning standard The increased third engineer, HU Feihu, embarked on September 29, and the third engineer of origin left office in October. The Plaintiff calculated the payload in accordance with 14 seamen was reasonable since there was a substitution to the third engineer of origin. The standard of wages that the Plaintiff paid off to the crew could not be queried according to market quotations of crew’s wages of similar ships at that time. The wages that the Plaintiff paid off was higher or lower compared with the references of market quotations of the crew wages of propylene bulk cargo ships in September 2012, and it was also higher or lower compared with the references of market quotations of the crew wages of propylene oil ships in May, 2013. However, calculated in accordance with the references of the market quotations, there was little discrepancy between the amount added by the standard wages of the relevant positions and the amount of the wages that the Plaintiff paid off to the crew. Although the Defendant raised an objection to the amount of the wages, it did not submitted relevant Evidence, thus the court disaffirmed. The court affirmed the total sum of the wages paid off by the Plaintiff in September, 2012. 4. The ship pretty cash, the voyage statements and the payroll requisitions, to prove that the Plaintiff paid as board wages of the September of 14 person  RMB18 per day  30 days was RMB7,560. The Defendant affirmed the board wages of the crew with the standard of RMB18 per day per person. 5. The oil fees paid during the arrest of M.V. HAI CHANG 26. The Plaintiff submitted the consignment vouchers, the oil supply vouchers and the invoices which proved M.V. HAI CHANG 26 refueled 6 barrels of 170 kg standard engine oil in amount of RMB17,400,10 tons of light diesel oil in amount of RMB86,400 and 40 tons of fuel oil in amount of RMB214,000 which meant the engine oil was RMB17.06 per kilogram, the diesel oil was RMB8,640 per ton and the fuel oil was RMB5,350 per ton. The engine logbook of M.V. HAI CHANG 26 stated that the auxiliary engine consumed diesel 0.35 ton and engine oil 5 kg per day on September 13 and 14; the main engine consumed diesel 0.15 ton and the auxiliary engine consumed engine oil 6 kg on September 15; the main engine consumed diesel 0.15 ton and the auxiliary engine consumed engine oil 0.20 ton/0.32 ton, engine oil 6 kg on September 16; the main engine consumed fuel oil 0.825 ton, diesel 0.075 ton, engine oil 11 kg and the auxiliary engine consumed diesel 0.32 ton, engine oil 5 kg on September 17. The engine logbook stated that from September 15 to 16, the ship weighed anchor, berthed, discharged and unberthed after the discharge, then it weighed

Nanjing Xinruida Shipping Co., Ltd. v. Ningbo Xianghai Fuel Co., Ltd.

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anchor and set sail on September 17. The fuel charges generated from discharging and setting sail were inevitable fees occurred in the operation of ship, even if the ship were not being arrested, the charge would still be generated, so the fuel charge should not be calculated through the generated oil consumption recorded on the logbook of the ship from September 15 to September 17. Instead, the amount of the fuel charge should refer to the oil consumption generating from the waiting period on anchorage ground on September 13 and 14 which meant the expenses of the oil consumption during the berth period of the arrested ship should be calculated according to diesel 0.35 ton per day, engine oil 5 kg per day. 6. Schedule losses. The Plaintiff submitted the charter party of bulk liquid chemicals transported by waterway, the freight confirmation sheets, the transportation contracts and the invoices, proving the freight of M.V. HAI CHANG 26 in October was in total amount of RMB1, 001, 083.04. However, besides the invoices, there were no originals for verifying all of the other materials. The invoices were issued by the Plaintiff, but the Plaintiff did not submit evidence to prove the amount of the invoices that it had already received, which failed to prove the incomes was actually occurred. The profits in amount of RMB191,983.71 on the profit sheets of October made by the Plaintiff was worked out by the incomes of the freight in amount of RMB1,001,083.04 minus the payload in amount of RMB162,954, the refuel charge in amount of RMB305,000, the charter money in amount of RMB333,333.33 and the board wages of the crew in amount of RMB7,812. However, it was demonstrated in the pretty cash voyage report of Haichang Ship that the charges the Plaintiff paid included harbor dues, wharf service charges, cast loosen charge, antifouling charges, etc. The profit sheets made by the Plaintiff could not objectively reflect the loss of its acquirable net profits of the ship. The court holds that this case is the dispute over liability of damages led from filing a pre-litigation preservation of property instituted by the Plaintiff against the Defendant due to the losses of the Plaintiff caused by the fault of the Defendant to file a pre-litigation preservation of arrested ship. As prescribed for Article 20 of the Special Maritime Procedure Law of the People’s Republic of China, “a maritime claimant who has wrongfully applied for preservation of a maritime claim shall indemnify the person against whom the claim is made or any interested person for loss sustained thereby.” The focus issue of the dispute in this case is that whether or not there is a fault which would inevitably lead to the consequence of damage and the loss of the Plaintiff when the Defendant applying for preservation. The purpose of conduct a preservation of property is to insure the execution of the effective judgment by restricting the right of disposition of the party. If the applicant made a fault in the claim corresponding to the preservation of property, the measure of preservation of property would lack warrants and legal reasons. The Defendant applied for preservation of property against the ship owner and / or the operator of M.V. HAI CHANG 26, the operator of the ship had already altered at the time of preservation that was not Shangdao

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Company which was the oiled party on the oil supply contract. The Plaintiff, as the operator of the ship when in arrest, had completed the formality of the change of registration in Maritime Sector and had acquired the new certificate of nationality of the ship, but the Defendant still listed it as the respondent, which was a fault for the application object, and the Defendant did not file a suit against the Plaintiff after the arrest of the ship, so the Plaintiff had no need to bear liabilities to the maritime claims of the Defendant. The owner of the ship also had no need to bear liabilities to the refueling charges claimed by the Defendant through the final judgment of the court. Therefore, the Defendant shall compensate the losses caused by the fault for applying for preservation. The Plaintiff signed a bareboat charter party with the owner of M.V. HAI CHANG 26 and registered as the operator of the ship. During the period of the bareboat charter, the ship was entirely in the charge of the Plaintiff whose normal use of the ship was interfered due to the arrest of the ship, and the Plaintiff, as the operator of M.V. HAI CHANG 26, submitted the cash guarantees to the court in order to release the ship, by which the Plaintiff had the right to claim indemnity for the resulting losses. As prescribed for Article 26 of the Interpretation of the Supreme People’s Court on the Application of the Special Maritime Procedure Law of the People’s Republic of China, “losses caused by a maritime claimant’s wrongfully submitting applies for arrest of a ship including the fees and expenses of maintaining generated during the berth term in the arrest of the ship, the schedule losses generated due to the arrest of the ship and the expenses from the guarantees submitted from the respondent in order to release the ship.” The Plaintiff claimed to calculate the payment of providing the guarantees in accordance with the one-year lending rates of People’s Bank of China, but the Defendant argued that the expenses should be limited to the difference part between current bank interest rates and bank lending rates at the same period. The argument of the Defendant was reasonable, so the court affirmed. The Plaintiff provided cash guarantees in sum of to the court on September 17, 2012, and the court refunded the guarantees to the Plaintiff on September 18, 2013, The period of which is one year, and the interest that was given to the Plaintiff shall be calculated according to the one-year lending rates of 6% announced by People’s Bank of China, the loan interests of the principal in amount of RMB700,000 was RMB42,000. The Plaintiff claimed that the interest rate rise to actually 7.8% without submitting evidence, so the court disaffirmed. During the period that the guarantees of the Plaintiff were saving in the account of the court, the bank paid the interest according to the current interest rate. The court refunded the interests generated in amount of RMB2,450 to the Plaintiff, so the losses of submitting the cash guarantees of the Plaintiff shall be the difference between this fund and the deposit and loan interests, in amount of RMB39,550. M.V. HAI CHANG 26 was arrested on September 13 and released on September 17, and it was totally be detained for 4 days. During this period, it took one day for the ship to discharge, and the time of discharge was the time that must be spent in normal shipping operation which could not be calculated as the berth time during the period of arresting a ship and should be deducted, so the actual berth time of the

Nanjing Xinruida Shipping Co., Ltd. v. Ningbo Xianghai Fuel Co., Ltd.

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ship caused by the attachment was 3 days. The charter money, the crew wages, the board wages and the fuel charges that claimed by the Plaintiff were the fees and expenses of maintaining generated during the berth term in the arrest of the ship which were the inevitable fees generated in the operation of the ship, however, because the ship was arrested and could not be operated, there was no corresponding income of operation to offset, so the Defendant should make compensation. The Plaintiff paid off crew wages in amount of RMB163,700 of September, 2012, so the wages of the crew during the arrest of the ship in amount of RMB163,700  30 days  3 days was in amount of RMB16,370, the board wages in amount of RMB18 per day  14 people  3 days was RMB756, the Plaintiff paid the charter money in amount of RMB10,958 per day  3 days was RMB32,874, the fuel charge: diesel consumption 0.35 ton per day  3 days was 1.05 ton, calculated according to RMB8,640 per ton was in amount of RMB9, the engine oil 5 kg per day  3 days was 15 kg, calculated according to 17.06 per kilogram was in amount of RMB255.90. The total loss above was RMB98,877.90. The Plaintiff requested the Defendant to compensate the schedule losses which were net profits of normal operation of the ship. However, since the Plaintiff could neither prove its specific amount of the ship operation, nor could it calculate its losses of acquirable net profits of the ship in detail, the Plaintiff shall bear the adverse consequences of failure on burden of proof. The court disaffirmed this claim of the Plaintiff. To sum up, in accordance with Article 65 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, Article 20 of the Special Maritime Procedure Law of the People’s Republic of China, and Article 24 of the Explanation about Several Problems of the Maritime Special Procedure Law of the People’s Republic of China by Supreme People’s Court, the judgment is as follows: 1. The Defendant Ningbo Xianghai Fuel Co., Ltd. shall compensate the Plaintiff Nanjing Xinruida Shipping Co., Ltd. for its losses in amount of RMB98,877.90. 2. Reject other claims of the Plaintiff Nanjing Xinruida Shipping Co., Ltd. The payment obligations above shall be performed within 10 days after this judgment comes into effect. If the Defendant fails to perform the obligation of payment within the period designated by this judgment, interest on the debt for the delayed period shall be doubled paid in accordance with the provisions of Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB3,596, the Plaintiff shall bear RMB1,438 and the Defendant shall bear RMB2,158. Court acceptance fee prepaid by the Plaintiff will not be refund by the court separately which the Defendant shall pay it to the Plaintiff directly.

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In event of dissatisfaction with this judgment, both parties may, within 15 days upon service of this judgment, submit a bill of appeal together with ten duplicates to the court, file an appeal to the Guangdong High People’ s Court. Presiding Judge: WEN Jing Acting Judge: YANG Yousheng Acting Judge: CHEN Zhenqing June 5, 2014 Clerk: HUANG Mingdian

Ningbo Maritime Court Civil Judgment Ningbo Zhenhai Manyang Shipping Co., Ltd. v. Ezhou Datong Shipping Co., Ltd. (2014) Yong Hai Fa Shang Chu Zi No. 420 Related Case(s) None. Cause of Action 227. Dispute over salvage contract. Headnote The Plaintiff salvor held to be entitled to salvage reward for participating in successful salvage operation under the direction of maritime administrative authority, despite the fact that it had no contract with the defendant shipowner. Summary The Plaintiff participated in salvage operations under the direction of the maritime administrative department, after a sunken vessel had been raised by other salvors. The Defendant shipowner refused to pay salvage reward to the Plaintiff who sued. The court held that no salvage contract existed between the Plaintiff and the Defendant, but the Plaintiff was nevertheless entitled to salvage reward for its participation in a successful salvage, and had a maritime lien over the ship for the amount of its claim.

Judgment The Plaintiff: Ningbo Zhenhai Manyang Shipping Co., Ltd. Domicile: 91 Shengli Road, Zhenhai District, Ningbo City. Organization Law: 72041453-5. Legal representative: WANG Xinman, chairman. Agent ad litem: YE Yuanhua, lawyer of Beijign Dentons Law Offices (Ningbo). Agent ad litem: PAN Anqi, lawyer of Beijign Dentons Law Offices (Ningbo). The Defendant: Ezhou Datong Shipping Co., Ltd. Domicile: 309 Wuchang Road, Ezhou City, Hubei. Organization Law: 78446117-0. Legal representative: WAN Xingtian, chairman. Agent ad litem: CHEN Zhixiong, male, born on April 17, 1961, Han, manager. Agent ad litem: HE Benyu, lawyer of Hubei Benzheng Law Firm. © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_35

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With respect to the case arising from the dispute over contract salvage at sea filed by the Plaintiff, Ningbo Zhenhai Manyang Shipping Co., Ltd. (hereinafter referred to as “Manyang”) against the Defendant, Ezhou Datong Shipping Co., Ltd. (hereinafter referred to as “Datong”) on May 20, 2014, after accepting the case on May 27, 2014, the court organized the collegiate panel to try the case in accordance with law. On July 14, 2014, the court organized the parties to exchange evidence, and heard the case in public on August 21. YE Yuanhua as agent ad litem of the Plaintiff Manyang, CHEN Zhixiong and HE Benyu asagents ad litem of the Defendant Datong, appeared in court to attend the hearing. Now the case has been concluded. Manyang claimed that, on February 28, 2014, M.V. “Da Tong Hai 001” (hereinafter referred to as M.V. “001”) owned by Datong overturned and sank near the west of Jintang Island, Port of Ningbo-Zhoushan, badly endangered the safety of the navigation of the ships and facilities of the port in the water of accident, and posed a risk of severe pollution damage to marine environment. On March 1, 2014, Manyang started emergency refloatation operation, finally succeeded in removing the ship from navigable water. It fixated the ship and subsequently implemented safety supervision until March 10, 2014 when Datong requested it to terminate the salvage operations and transfer M.V. “001” to Datong. As Datong did not pay for any sum, thus Manyang brought a lawsuit against Datong to claim for: 1. The salvage charges in amount of RMB4,922,901 and the interest from March 11, 2014 to the date of payment designated by the judgment counted on the basis on the bank loan interest rate over the same period; 2. Maritime lien in terms of the said maritime claim over M.V. “001”; 3. Compensation for the pre-action preservation fee in amount of RMB5,000. Manyang changed its claims on July 10, 2014 as follows: 1. The Defendant should pay the salvage charges in amount of RMB4,928,664 and the interest from March 11, 2014 to the date of payment designated by the judgment counted on the basis on the bank loan interest rate over the same period; 2. The Plaintiff was entitled to a maritime lien in terms of the said maritime claim over M.V. “001”; 3. The Defendant should compensate for the pre-action preservation fee in amount of RMB5,000 and the security fee in amount of RMB25,300. The Defendant raised no objection to the fact that M.V. “001” overturned and sank in the west waters of Jintang Island, Port of Ningbo-Zhoushan, but argued that the Plaintiff did not participate in the salvage operation of towing M.V. “001” to safe water area at early stage, the operation of oil resistance or towing the ship to the berth after successful salvage. Therefore the claims of the Plaintiff had no merit, thus it requested the court to reject the claims. The Plaintiff, in order to support claims, submitted the following evidence materials to the court:

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1. Business registration information of the Defendant and the Nationality Certificate of M.V. “001”, to prove that the subject qualification of the Defendant and the shipowner of M.V. “001” was the Defendant; 2. Letter of authorization issued by Hubei Datong Interconnect Logistics Co., Ltd. (hereinafter referred to as “Datong Logistics”) with regard to the full power to CHEN Zhixiong and other two persons to handle the sinking of M.V. “001” at Zhenhai in Ningbo; 3. Meeting minutes about relevant issues on emergency settlement and salvage of M.V. “001”, signed by the Plaintiff, the Defendant and Zhejiang Junxi Marine Engineering Co., Ltd. (hereinafter referred to as “Junxi Company”); Evidence 2 and 3 are to prove that after M.V. “001” overturned and sank, The Plaintiff refloated the ship in emergence. 4. Report of the salvage of M.V. “001” from March 1, 2014 to March 9, 2014 of the Plaintiff and the AIS Trajectory Diagrams of the salvage ships owned by the Plaintiff, M.V. “Manyang 208” (from February 28, 2014 to March 11, 2014) and M.V. “Manyang 2004” (from March 1, 2014 to March 11, 2014); 5. Emergency expenses list and the summary sheet of salvage charges of M.V. “001” provided by the Plaintiff; Evidence 4 and 5 was to prove that the Plaintiff used professional facilities and personnel to carry out emergency refloating and guard of M.V. “001” from March 1, 2014 to March 10, 2014, and the total refloatation costs are RMB4,928,664.18. 6. (2014) Yong Hai Fa Zhou Bao Zi No. 23 Civil Ruling and the Injunction of Arrest, and the letter of counter guarantee provided by Zhoushan Haidian Financial Security Co., Ltd. at the behest of the Plaintiff, the invoice of the service charge and the voucher of telegraphic transfer for the security, to prove that as a result of the Defendant failure of payment, the Plaintiff applied to the court to arrest M.V. “001” before litigation, that incurred preservation fee in amount of RMB5,000 and the service charge for the security in amount of RMB25,300; 7. Copies of Certificate of Refloatation Qualification and Certificate of Diving Operation Qualification, upon verification, no difference with the original document has been found, to prove that the Plaintiff is qualified for refloatation and diving operation; 8. Copies of the Nationality Certificates, the Ownership Registration Certificates and the Ship Inspection Certificates of M.V. “Manyang 208” and M.V. “Manyang 2004”. Upon verification, no difference with the original document had been found; 9. Copies of the Nationality Certificate, the Ownership Registration Certificate and the Coastal Ship Inspection Certificate of M.V. “Manyang Jiao 03”, upon verification, no difference with the original document had been found; Evidence 8 and 9 was to prove the situations of the three refloatation ships owned by Manyang.

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10. Contract of lighting coals, the construction contract of laying submarine cable, the leasing contract of crane vessel, the ship charter party, the contract of loading arm lifting, the construction contract of refloatation and laying submarine cable signed by the Plaintiff with third parties, and the corresponding invoices of value-added tax and the vouchers of payment, to prove that the market rates of M.V. “Manyang 208” and M.V. “Manyang 2004” are higher than the emergency refloatation rates involved; 11. Suggested price tariff of air diving operation, to prove the reference of the costs of partial materials and workers of the Plaintiff in the emergency refloatation involved; 12. Attendance record of the salvage workers and the relevant qualification certificate of the workers, to prove the situations of the workers of the Plaintiff participating in the emergency refloatation operation; 13. Photographs of the spot of the emergency refloatation operation of M.V. “001”; 14. Copies of the logbooks of M.V. “Manyang 208” and M.V. “Manyang 2004” from March 1, 2014 to March 10, 2014, upon verification, no difference with the original document had been found; 15. Proof of M.V. “001” emergency salvage provided by Ningbo Port Co., Ltd. Barge Port Branch (hereinafter referred to as “Barge Port Company”); Evidence 13, 14 and 15 was to prove the fact and process that the Plaintiff participated in the emergency refloatation operation of M.V. “001”. Upon the application of the Plaintiff, the court obtained the following evidence from Ningbo Maritime Search and Salvage Center: 1. Statement of situations about the emergency salvage of M.V. “001” the Plaintiff participated in; 2. Meeting minutes signed by the Plaintiff, the Defendant and Junxi Company with regard to relevant issues on the salvage operation and salvage of the sinking M. V. “001” (evidence 3 provided by the Plaintiff); 3. Dynamic figures of M.V. “Manyang 208” and M.V. “Manyang 2004” on March 2, 2014, to prove that the Plaintiff carried out the emergency refloatation involved under the supervision of maritime authority. The Defendant submitted the following evidence to the court in order to support its defence: 1. Statement of situations about the salvage of M.V. “001” provided by Junxi Company, and the contract of preliminary salvage and refloatation of sunken ship signed by Junxi Company and the Defendant, the confirmation order of the delivery of M.V. “001” and the voucher of payment, to prove that after M.V. “001” sank, Junxi Company was the first who party arrived at the accident scene, Junxi Company carried out salvage and successfully towed M.V. “001” to safe water to moor with Barge Port Company, and refloated the ship successfully and safely. The Defendant paid RMB2,240,000 to Junxi Company for preliminary emergency salvage and refloatation, the Plaintiff did not participate in emergency salvage.

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2. Statement of situations about the salvage of M.V. “001”, emergency refloatation process provided by Barge Port Company, and the tug operation agreement signed by Barge Port Company with Datong Logistics, and the invoice of the towage fee, to prove that Barge Port Company together with Junxi Company carried out emergency salvage of M.V. “001” and towed M.V. “001” to safe water, after refloating the sunken ship, Barge Port Company towed the ship to the appointed berth, the Defendant paid RMB590,000 to Barge Port Company for preliminary salvage and towage fee, the Plaintiff did not participate in the salvage. 3. Oil spills cleaning up agreement with regard to M.V. “001” signed by Ningbo Yongjie Oil Spring Emergency Service Limited (hereinafter referred to as “Yongjie Company”) with the Defendant and the invoice of oil pollution emergency disposal fees, to prove that all the oil pollution resistance operations in the process of towing and rescuing, guarding and refloating M.V. “001” were completed by Yongjie Company, and the Defendant paid the oil pollution disposal fee in amount of RMB600,000. 4. Confirmation letter of statement of account between the Defendant and Datong Logistic, to prove that the Defendant was a branch of Datong Logistic, the said payments were advanced by Datong Logistic for the Defendant. After cross-examination in court, as regard to the evidence provided by the Plaintiff, the Defendant raised no objection to the industry and commerce registration information of the Defendant and the Nationality Certificate of M.V. “001” in evidence 1, the Civil Ruling and Injunction of Arrest in evidence 6, the Ownership Certificate of M.V. “Manyang 2004” in evidence 8; it raised no objection to the authenticity of the letter of authorization in evidence 2, but held that it was not issued by the Defendant to the Plaintiff, there was not an entrustment relationship between the both parties. The contents of the meeting minutes were untrue, the signature was not true intention of the Defendant, it was under the circumstance at that time, it did not affirm evidence 3. The salvage report and the ship trajectory diagrams in evidence 4 and the expenses list and the summary sheet in evidence 5 were all unilateral statement of the Plaintiff, the Defendant did not affirm these aforesaid evidence. The letter of counter guarantee, the invoice and the voucher of payment in evidence 6 and the Refloatation Operation Qualification Certificate and the Diving Operation Qualification Certificate in evidence 7 and the original Nationality Certificate, Ownership Registration Certificate and Ship Inspection Certificate of M.V. “Manyang 208” and Nationality Certificate and Ship Inspection Certificate of M.V. “Manyang 2004” in evidence 8 were not provided during the period of the burden of proof designated by the court, the Defendant did not cross-examine. No original could verify evidence 9, the certificate of M.V. “Manyang Jiao 03”, the Defendant did not cross-examine. The Defendant did not cross-examine the contract, invoice and voucher of payment in evidence 10 because the Plaintiff failed to provide originals thereof within the time limit of the burden of proof, the documents which had originals were irrelevant to this case, the Defendant did not confirm the aforesaid evidence. Evidence 11, the authenticity of the

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suggested price tariff of air diving operation should be ascertained by the court. Evidence 12, the attendance record of salvage personnel was unilateral statement of the Plaintiff, the Defendant did not affirm; the Plaintiff only provided three original documents of qualification certificates of relevant personnel, but they were production and operation management safety training certificates, and they could not suggest that the relation between the personnel engaging in the salvaging operation with Plaintiff, they were irrelevant with this case; the Defendant did not cross-examine the qualification certificate without originals. Evidence 13, the photographs of the salvaging operation spot and evidence 14, the logbooks of M.V. “Manyang 208” and M.V. “Manyang 2004” and evidence 15 the evidence provided by Barge Port Company were all provided by the Plaintiff after the time limit of the burden of proof expired, they were not new evidence provided in the Civil Procedure Law, the Defendant did not cross-examine. The Defendant raised no objection to the procedure of the evidence obtained by the court, but held the content of the statement that the Plaintiff participated in the emergency salvage and was in charge of warning at the accident water were not true. As for the evidence submitted by the Defendant, the Plaintiff argued the seal on evidence 1, statement of situations was a seal for business but not formal corporate seal, it had objection to the authenticity of the statement of situations; the Plaintiff raised no objection to the authenticity of evidence 2, the preliminary salvage and refloatation contract, the confirmation letter of delivery of the ship and the vouchers provided by Barge Port Company, but it held that the evidence could not exclude the refloating operation conducted by the Plaintiff, therefore they were irrelevant with this case; it raised no objection to authenticity or the legality of evidence 3, the spilled oil cleaning up agreement of Yongjie Company and the invoice, but it questioned the relevancy thereof and held that the evidence could not prove M.V. “001” did not participate in the salvage operation. It raised no objection to the authenticity of evidence 4, the letter of confirmation of statement of account, and the relationship between Datong Logistic and the Defendant will be verified by the court. After trial, the court ascertains the business registration information of the Defendant and the nationality certificate of M.V. “001” in evidence 1, the Civil Ruling and the Injunction of Arrest in evidence 6 and the ownership certificate of M.V. “Manyang 2004” in evidence 8 since the Defendant has no objection thereto. As for evidence 2, the letter of authorization, the Defendant has no objection to the authenticity thereof, so the court ascertains its authenticity. Evidence 3, the meeting minutes, which has no difference with the evidence obtained from Ningbo Maritime Research and Salvage Center by the court, although the Defendant argued the signature was not expression of its real intention, he did not provide evidence to prove that, shall be ascertained. Evidence 4, the salvage report, although it is unilateral statement of the Plaintiff, it is coherent and logic, the part, to which the Defendant raised no objection, consistent with the statement of situations obtained by the court shall be confirmed. Evidence 5, the costs list and the summary sheet, which were made by Mangyang Company, do not meet with the format and validity of evidence, the court does not ascertain. The counter guarantee, invoice, voucher

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of payment in evidence 6, the refloating and diving operation qualification certificate in evidence 7, and about the nationality certificate, the ownership registration certificate and the ship inspection certificate of M.V. “Manyang 208” in evidence 8, and the nationality certificate and the ship inspection certificate of M.V. “Manyang 2004” are all provided by the Plaintiff during the time limit of producing evidence, and the originals have been submitted to the court before the hearing. After the explanation of the court, the Defendant rejected to publish cross-examination opinions, the court directly ascertains the evidence mentioned above. There is no original of the nationality certificate of M.V. “Manyang Jiao 03” in evidence 9, so it cannot be ascertained. The contracts, invoices and vouchers of payment in evidence 10 are irrelevant with this case, and the cross-examination of the Defendant was reasonable, so the evidence cannot be ascertained. The suggested price tariff of air diving operation in evidence 11, since the Plaintiff did not state how it calculated the relevant quatation according to the price tariff, the court does not ascertain the relevancy of evidence. The attendance record of relevant personnel in evidence 12 was made by the Plaintiff unilaterally, it shall not be ascertained; the relevant personnel qualification certificates, because the Plaintiff failed to provide evidence to prove the attendance of the personnel, shall not be ascertained. The photographs of the spot in evidence 13 and the logbook of M.V. “Manyang 2004” in evidence 14 were provided by the Plaintiff within the period designated by the court, so they shall be ascertained; the logbook of M.V. “Manyang 208” and evidence 15, the proof issued by Barge Port Company were all provided by the Plaintiff after the time limit of producing evidence expired, the Defendant refused to cross-examine, the court does not ascertain the evidence. Evidence 1, the statement of situations, salvage and refloatation contract, letter of confirmation of the delivery of the ship and voucher of payment provided by Junxi Company; and evidence 2, the statement of process, the operation agreement, the invoice of towage fee issued by Barge Port Company provided by the Defendant corroborate the evidence of statement of situations obtained by the court from Ningbo Maritime Search and Center, the evidence can form a complete chain of evidence with the letter of authorization in evidence 2 and the meeting minutes in evidence 3 provided by the Plaintiff, and jointly prove that the Plaintiff had participated in the emergency salvage operation together with Barge Port Company under the conduct of maritime administrative department, therefore the defence of the Defendant that the Plaintiff did not participate in the emergency salvage operation shall not be accepted by the court for lack of evidence and ground. The court ascertains the spilled oil cleaning up agreement concluded with Yongjie Company and the invoice in evidence 2, and the confirmation of statement of account in evidence 4 checking since the Plaintiff raised no objection. According with the statements of the parties and the valid evidence ascertained by the court, the court finds the following facts: M.V. “001” owned by the Defendant was a steel dry cargo ship, the port of registration was Wuhan, the overall length was 97.56 m, the molded breadth was 16.50 m, the molded depth was 6.68 m, the gross ton was 2,976 T and the deadweight was 1666 T. On February 28, 2014, M.V. “001” capsized on the Qili water

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in Ningbo, Ningbo City Maritime Search and Salvage Centre quickly initiated an emergency plan to salvage the ship after receiving report, coordinated the ships including M.V. “Yong Gang Tuo 20” owned by Barge Port Company and M.V. “Su Hang Gong 008” owned by Junxi Company to participate in the emergency salvage operation. Datong Logistic (parent company of the Defendant) full authorized three persons including CHEN Zhixiong to deal with the accident of ship sinking. At about 2200 on 1 March, after Ningbo Maritime Research and Salvage Center got the information that M.V. “001” removed and floated to Jintang Bridge, they immediately coordinated M.V. “Manyang 208” and M.V. “Manyang 2004” of the Plaintiff to participate in emergency salvage. The power of main engine of M.V. “Manyang 208” was 706 KW, it set out from dock of Baifeng at 2305 in the next day, the power of main engine of M.V. “Manyang 2004” was 900 KW, it set out from dock of Baifeng at 0040 on the next day from the dock of the Plaintiff, the ships arrived at the site of accident at 0340 on March 2. At about 0800, M.V. “001” was towed to shallow waters of Dapukou in Jintang. M.V. “Manyang 208” and M.V. “Manyang 2004” connected wire ropes and moored to fix the ship’s position and prevent the shipwreck from going down and floating, and took charge of warning on nearby waters. At 1400 on 10 March, Zhenhai Maritime Safety Administration called up the Plaintiff, the Defendant and Junxi Company to discuss relevant issues of the emergency salvage and salvage of the sunken ship, the three companies jointly signed the meeting minutes on the same day, in which it is stated that “1. the monitoring ship for emergency disposal of the Plaintiff should depart from the wreck site at 1500 on the very day, Junxi Company should carry out the obligations for salvage under the salvage contract as soon as possible; 2. the Plaintiff and M.V. “001” should negotiate friendly in terms of the preliminary emergency disposal fees on the basis of objective situations and facts.” At 1855, M.V. “Manyang 208” and M.V. “Manyang 2004” departed from the area where M.V. “001” lied. As result of a frustration of agreement on the emergency disposal fees the Plaintiff brought the lawsuit. It is also found out that on April 24, 2014, as the Defendant failed to pay the salvage payments, Mayang Company brought a pre-action preservative measure over maritime claim to arrest M.V. “001”. The court approved and the Plaintiff paid the application fee in amount of RMB5,000 and the counter guarantee fee in amount of RMB25,300. According to the allegations of the two parties, the court the main issues and analysis are as follows: 1. The legal relationship between the Plaintiff and the Defendant. The Plaintiff argued that it carried out the salvage of the sunken ship under the command of maritime authority. The main purpose was the common interest of the safety of navigation channel and port facilities, but not salvaging the sunken ship. Therefore it was a refloatation contract relationship established between the two parties. However, the Defendant argued it did not entrust the Plaintiff to salvage the sunken ship, there was no contractual relationship.

Ningbo Zhenhai Manyang Shipping Co., Ltd. v. Ezhou Datong …

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The court holds that since the accident involved took place in the sea area of Chinese, according to Article 31 of the Maritime Traffic Safety Law of the People’s Republic of China, where vessels and installations are involved in accidents that jeopardize or may jeopardize traffic safety, the competent authority shall have the right to take necessary, compulsory measures to deal with the matter. The ship sinking involved took place in the main anchorage ground of port of Ningbo, Jintang Bridge is close, the Plaintiff salvaged the ship in distress under the command of the competent authority in charge of management of navigation and safety at sea, there is contract of salvage at sea relationship between the parties in fact. The ship involved was still in danger when it was successfully arrived at foreshore, the Plaintiff conducted the subsequent guard of the ship according to the command the competent authority belongs to salvage. Although the Plaintiff argued that it refloated the sunken ship, therefore the two parties established a refloatation contract relation, according to the provisions of law, the objects of salvage include ships and other property in distress, sunken ship can be also incorporated into the objects of salvage; the Plaintiff had never reached an agreement on refloating the sunken ship with the Defendant, it does not accord with the nature of a refloatation contract; and the Plaintiff carried out the salvage operation under the command of the competent authority, its purpose is not only to maintain navigation safety, but also to salve the value of the sunken ship, which accords with the constitutive requirements of salvage at sea. Therefore the argument of the Plaintiff on refloatation contract lacks evidence and ground, the court will not be support. 2. The salvage payment of the Plaintiff can acquire. According to Article 192 of the Maritime Code of the People’s Republic of China provided that “with respect to the salvage operations performed or controlled by the relevant competent authorities of the State, the salvors shall be entitled to avail themselves of the rights and remedies provided for in this chapter in respect of salvage operations.” In the case, the Plaintiff, as the salvor, under the situations that the salvage operations have had useful result, shall be entitled to a reward Manyang claimed against the Defendant for payments in amount of RMB4,928,664, specifically including: 1. ship machine fees of M.V. “Manyang 208”, M.V. “Manyang 2004” and M.V. “Manyang Jiao 03” in amount of RMB3,327,500; 2. costs of materials like air compressor and steel wires etc. in amount of RMB105,200; 3. personnel costs in amount of RMB603,880. The aforementioned three sums are in total amount of RMB403,658; 4. management fee 10%, calculated by RMB403,658; 5. taxes 11%, calculated by RMB488,426.18. As the aforementioned costs are claimed by the Plaintiff unilaterally, the quotations have not been confirmed by the Defendant, and the Plaintiff failed to explain the basis of calculation, the costs and acquirable interest of the salvage operation, the court does not adopt. According to the ten criteria being taken into full account to fix the reward of salvage operations provided in Article 180 of the Maritime Code of the People’s Public of China, and combined with specific situations of the salvage of the

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Plaintiff, and taking the market price of salvage operation of ship in Ningbo and Zhoushan for reference, the court made a discretion that the acquirable salvage reward of the Plaintiff shall be calculated as follows: the salvage operation shall be counted on the basis of RMB2.0 per HPH (horsepower-hour), the guard shall be counted on the basis of RMB1.2 per HPH, and the disposal fee of each ship is RMB150,000. The main engine power of M.V. “Manyang 208” is 706 KW namely 961HP, the time spent in the salvage operation is 9 h and the time spent in guard is 203 h, the salvage payment is about RMB401,397.6. The main engine power of M.V. “Manyang 2004” is 900 KW namely 1224HP, the time spent in salvage operation a total of 7.33 h, in guardship a total of 203 h, the salvage payment is about RMB466,118.4. Meanwhile in light of the nature and extent of the danger in the salvage operation and according to the spirit of encourage salvage operation, the salvage payment shall be increased by 10% of the expenses. The salvage payments of the two ships can get are RMB954,267.6. According to Article 22 Paragraph 1 Sub-paragraph 4 of the Maritime Code of the People’s Republic of China, payment claims for salvage payment take priority in compensation with respect to the ship which gave rise to the said claim. The said payments claimed by the Plaintiff are salvage payment and the Plaintiff’s exercising maritime lien does not exceed the statutory period, so the court supports that. The Plaintiff also claimed against the Defendant for pre-action preservation fee in amount of RMB5,000, it is in conformity with law, the court also supports that. As for the service fee of the counter guarantee in amount of RMB25,300 claimed by the Plaintiff, since there is no relevant contract and legal basis, the court does support. To sum up, the court supports the reasonable part of claims of the Plaintiff. According to Article 22 Paragraph 1 Sub-paragraph 4, Article 179, Article 180 and Article 192 of the Maritime Code of the People’s Republic of China, the judgment is as follows: 1. The Defendant, Ezhou Datong Shipping Co., Ltd., shall pay the salvage payments in amount of RMB954,267.6 to the Plaintiff, Ningbo Zhenhai Manyang Shipping Co., Ltd., and this interest of the payment from March 3, 2014 to the date of performance designated by this judgment calculated by the loan interest rate published by Bank of China over the same period; 2. The Plaintiff, Ningbo Zhenghai Manyang Shipping Co., Ltd., is entitled to maritime lien over M.V. “Da Tong Hai 001” owned by the Defendant, Ezhou Datong Shipping Co., Ltd.; 3. The Defendant, Ezhou Datong Shipping Co., Ltd., shall pay the pre-action preservation fee in amount of RMB5,000 to the Plaintiff, Ningbo Zhenghai Manyang Shipping Co., Ltd. within 10 days after the judgment takes effect; 4. Reject other claims of the Plaintiff, Ningbo Zhenhai Manyang Shipping Co., Ltd.

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If the Defendant, Ezhou Datong Shipping Co., Ltd., fails to perform the obligation for payment within the period designated by this judgment, it shall pay double interest on the debt for the belated period according to the provision of Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fees in amount of RMB46,220, after the Plaintiff, Ningbo Zhenhai Manyang Shipping Co., Ltd., changed the claims, it is RMB46,470, the Plaintiff Ningbo Zhenhai Manyang Shipping Co., Ltd. shall bear RMB37,530 and the Defendant Ezhou Datong Shipping Co., Ltd. shall bear RMB8,940. In case of any dissatisfaction with this judgment, any party may within 15 days upon the service of this judgment, submit a statement of appeal with duplicates in the number of the opposite parties, to lodge an appeal to the Zhejiang High People’s Court. [The fee of appellant case in amount of RMB46,470 (the exact amount will be decided by Zhejiang High People’s Court and if any, the extra money will be returned) shall be prepaid when submitting the statement of appeal. If the fee is not paid within 7 days after the expiration of the time lime of appeal, the appeal shall be deemed to be withdrawn automatically. Name of account: Non-tax Revenue Settlement Account of Zhejiang Province Finance Department, Account number: 19000101040006575401001. Bank of deposit: Agriculture Bank of China Hangzhou Branch.] Presiding Judge: QIAN Bingbing Acting Judge: XU Jiajing Acting Judge: WANG Liansheng September 30, 2014 Clerk: ZHENG Jing

Appendix: Relevant Laws 1. Maritime Code of the People’s Republic of China Article 22 The following maritime claims shall be entitled to maritime liens: (4) Payment claims for salvage payment; …… Article 179 Where the salvage operations rendered to the distressed ship and other property have had a useful result, the salvor shall be entitled to a reward. Except as otherwise provided for by Article 182 of this Law or by other laws or the salvage contract, the salvor shall not be entitled to the payment if the salvage operations have had no useful result. Article 180 The reward shall be fixed with a view to encouraging salvage operations, taking into full account the following criteria:

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(1) Value of the ship and other property salved; (2) Skill and efforts of the salvors in preventing or minimizing the pollution damage to the environment; (3) Measure of success obtained by the salvors; (4) Nature and extent of the danger; (5) Skill and efforts of the salvors in salving the ship, other property and life; (6) Time used and expenses and losses incurred by the salvors; (7) Risk of liability and other risks run by the salvors or their equipment; (8) Promptness of the salvage services rendered by the salvors; (9) Availability and use of ships or other equipment intended for salvage operations; (10) State of readiness and efficiency of the salvors’ equipment and the value thereof. The reward shall not exceed the value of the ship and other property salved. Article 192 With respect to the salvage operations performed or controlled by the relevant competent authorities of the State, the salvors shall be entitled to avail themselves of the rights and remedies provided for in this chapter in respect of salvage operations.

Beihai Maritime Court Civil Judgment Oldendorff Carriers GmbH and Co. KG v. Fangchenggang Group Co., Ltd. (2011) Hai Shang Chu Zi No. 56 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 739. Cause of Action 241. Dispute over port operation. Headnote The Plaintiff time charterer recovered damages for damage to ship caused by Defendant’s crane, despite the fact that it was neither the owner nor demise charterer, because the time charter party made the charterer responsible to the shipowner for any damage sustained during cargo operations. Summary The Plaintiff-Time Charterer sued the Defendant-Port Operator in tort arising out damage to a vessel caused by the grab of the Defendant’s crane during discharge operations. The Plaintiff claimed that the Defendant was fully responsible for the vessel’s damage and should bear the full amount of liability for the losses the Plaintiff incurred from maintenance, repair, and other related expenses, plus loss of profits and ship detention expenses. The Defendant denied that it was at fault and also asserted that the Plaintiff did not standing to sue since it was not the ship owner or demise charterer. In awarding USD250,358.40 and EUR39,096.27 to the Plaintiff, the court determined that the Plaintiff had the capacity to file suit against that the Defendant since the damage occurred while the vessel was under the Plaintiff’s control, and the Time Charter Party gave the Plaintiff a legal interest in the vessel by making it responsible for any damage and repairs sustained during discharge operations. The court also granted recovery for the maintenance/repair costs, surveyor inspection fees, and fuel losses because each of those costs was reasonable and necessary for the Plaintiff to incur as a result of the accident. However, some costs, including sewage treatment expenses and the travel expenses for the ship owner’s representative were not reasonable and necessary, and the Plaintiff could not recover for loss of hire or profits since it had failed to prove what its income was prior to the accident and that the nature of the damages caused hire payments to cease.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_36

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Judgment The Plaintiff: Oldendorff Carriers GmbH and Co. KG Domicile: Willy-Brand-Allee 6, 23554 Lubeck, Germany. Legal representative: Per Franch-Petersen, Claims Manager. Agent ad litem: SHEN Xiangman, lawyer of WANG JING & Co. Agent ad litem: BAI Xiaoliu, attorney of WANG JING & Co. The Defendant: Fangchenggang Group Co., Ltd. Domicile: No. 22 Friendship Avenue, Port District, Fangchenggang City, Guangxi Zhuang Autonomous Region. Legal representative: YE Shixiang, chairman. Agent ad litem: TANG Cheng, lawyer of Guangxi Tangcheng Law Firm. Agent ad litem: LI Kunlin, assistant lawyer of Guangxi Tangcheng Law Firm. With respect to the case arising from a dispute over port operation filed by the Plaintiff, Oldendorff Carriers GmbH and Co. KG, against the Defendant, Fangchenggang Group Co., Ltd., the court, after accepting the case on March 4, 2011, formed a collegiate panel according to law, and held two hearings in public on July 28, 2011 and November 13, 2013. SHEN Xiangman and BAI Xiaoliu, agents ad litem of the Plaintiff, and TANG Cheng, agent ad litem of the Defendant, appeared in court to attend the hearings. Now the case has been concluded. The Plaintiff claimed that on June 29, 2009, M.V. “Castillo de Gormaz”, a time charter vessel carrying iron ore, arrived at the Fangchenggang Port. At 0515 on July 2, the vessel berthed Fangchenggang lightering wharf and began to unload, the Defendant was responsible for the discharge operation. Later that day at 21:15, the mobile crane used for unloading lost control during the process of moving to the terminal. This caused the cable to break and the grab of discharge to fall on the 3rd port side cargo hatch cover. The main deck and hatch cover were also seriously damaged. This accident affected the vessel’s classification and M.V. “Castillo de Gormaz” was unable to operate. On July 12, after a temporary repair in Fangchenggang, the ship headed to Yiulian Shipyard (Shekou) Co., Ltd. (hereinafter referred to as “Yiulian Shipyard”) for permanent repair. The Plaintiff paid the repair costs of USD205,840, along with other related costs amounting to EUR103,420.91. The discharging operation was supposed to be completed at 1200 on July 4, however, it was not completed until 02:24, July 6. On July 22, M.V. “Castillo de Gormaz” left Shekou and headed for Singapore via Fangchenggang at 2118 on July 23, 2009. Accordingly, the accident resulted in detention for 18.67917 days, causing loss of hire at USD334,403.78 and extra fuel consumption of 208.20 tons which caused USD83,904.60 worth of losses on fuel oil. M.V. “Castillo de Gormaz” had been sublet to a third party by the Plaintiff. As a result of the accident, the ship was delayed in delivery for 21.41667 days and the Plaintiff suffered a loss of profits amounting to USD872,570.39 (including the loss of hire in the amount of USD523,583.96, hire reduced loss of USD289,543.92, and fuel loss of USD59,442.50.

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The Plaintiff held that the Defendant should take full responsibility for damage to the ship, bear all the liability for the loss, and requests the court to order the Defendant to (1) pay the expense of ship repair at USD205,840 and other related costs amounting to EUR103,420.91; (2) pay USD418,308.38 caused by the ship detention; (3) pay USD872,570.39 for loss of profits; (4) pay the interest of the above payments (the interest should be calculated from the commencement date of this action to the actual payment day at the one-year loan interest rate as published by the People’s Bank of China); (5) bear all the litigation costs. The Defendant argued that the Plaintiff had no title to sue and that the claims lacked factual and legal basis, thus the court should reject the request of the Plaintiff for several reasons. Firstly, in accordance with the law and judicial practice, only the owner or demise charterer of the vessel was entitled to claim tort damages from the Defendant. The Plaintiff was neither the owner nor the demise charterer and could not enjoy the property rights prescribed by law, therefore the Plaintiff did not have title to sue and the court should reject the lawsuit. Secondly, the Defendant had no fault in this accident and did not need to bear civil liability. The Defendant used the crane normally and took care to follow the routing maintenance. The steel rope use-frequency was well within the limits. The Assessor Company commissioned by the Plaintiff also confirmed that the safety of crane operations did not exceed the load-carrying capacity. The case-related accident was an occasional accident, the Plaintiff failed to prove the Defendant’s fault, and should bear the adverse consequences of litigation. Thirdly, the maintenance costs amounting to USD205,840 have no basis in fact and should not be supported because (1) the Owner and the Plaintiff had confirmed the ship repair fee of USD70,000 in written form; (2) the Plaintiff repaired the ship unilaterally, chose to repair the ship in Shenzhen instead of in the vicinity place, deliberately concealed the entire process and refused the public estimated company to make a survey test, refused to show an inspection certificate issued by Lloyd’s Classification Society, and did not let the public know clearly the repair project and scope; (3) repair invoice provided by the Plaintiff was not real and unreasonable. The invoice amount was the result of negotiation, not the actual maintenance costs, which means the description of the Plaintiff’s maintenance fee was very casual and lacked objectivity and reality; (4) maintenance projects beyond the actual scope of the accident. The clear detection of combustible gases, sewage treatment, oil cleaning, and other projects had nothing to do with the hatch cover repair; (5) maintenance costs were unreasonable. Fourthly, the costs equaling to EUR103,420.91 that the Plaintiff claimed had no direct relation to ship repair and was beyond a reasonable range, which cannot be identified as the compensation project. Also, the Plaintiff’s claim for the loss arising from the ship becoming stranded amounting to USD418,308.38 had no sufficient facts and legal basis. Finally, the claim for loss of profits was an overlapping claim, and lacked legal basis. The Plaintiff submitted the following evidence to the court to prove that it was the time-charterer of M.V. “Castillo de Gormaz” and actually controlled and operated the vessel, thus it should have capacity to sue:

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1: 2: 3: 4: 5: 6: 7: 8: 9: 10: 11:

Bill of lading, to prove the cargo loading condition; Ship specifications, to prove the ship’s specification parameter; The vessel’s Registration Certificate; The International Tonnage Certificate; The Classification Certificate; The Cargo Ship Safety Construction Certificate; The Cargo Ship Safety Equipment Certificate; The Minimum Safe Manning Certificate; The International Load Line Certificate; The Safety Management Certificate; The Certificate of Conformity. The above 3–11 in order to prove that the ship was seaworthy and without any damage before the accident; The Ship’s General Arrangement, to prove the third cabin hatch of the ship’s port side, hatch, coaming, deck structure, parameters and so on; Payment records; Payment details. The above 30 and 31, to prove that the Plaintiff had actually paid the inspection fee and other costs related to ship maintenance; Charter Party entered into by the Owner and the Plaintiff, to prove that the Plaintiff was the actual controller and also the operator of the ship and the hire was USD 18,600 per day.

12: 30: 31:

40:

During the cross-examination, the Defendant alleged that evidence 1–12 had flaws, was irregular, and therefore could not show the notarization process. They would recognize the authenticity if the notarization was indeed performed, but there were disputes regarding the notarization. Additionally, the evidence could not prove the Plaintiff’s control, possession or management of the ship, nor the Plaintiff’s ownership. There was no objection regarding the authenticity of evidence 30 and 31, however neither piece could neither prove the Plaintiff’s capacity to sue or the payment records or payment details. They also failed to prove the Plaintiff’s identity and capacity and had little relevancy to this case. There was no objection to evidence 40, however this contract was a contract of lease in which the Plaintiff was a time-charterer. It lacked title to sue as only the demise charterer and the shipowner have the right to claim compensation for infringement. The court finds that evidence 1–12 provided by the Plaintiff went through a notarization process and while the Defendant objected to the form, it failed to present sufficient evidence. Therefore the court refuses to adopt the Defendant’s position and confirms the authenticity of evidence 1–12. The Defendant had no objection to the authenticity of evidence 30–31, accordingly the court recognizes its authenticity. The above evidence could be used as the basis to confirm the facts regarding the controversial matter, therefore the court will combine the case and other evidence to make a judgment. The following evidence was submitted by the Plaintiff to the court to prove the ship repair and maintenance costs as well as other costs concerned with the repair:

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Evidence 14: the statement of facts in Fangchenggang; Evidence 15: survey report issued by Guangzhou Haizheng Insurance Survey Co., Ltd. (hereinafter referred to as “Haizheng Company”); Evidence 16: deck logs (June 29–July 16); Evidence 17: deck logs (July 17–July 26); Evidence 18: Damage Report issued by the Master; Evidence 19: Sea Protest issued by the Master; Evidence 20: control records issued by the Classification Society; Evidence 21: interim certificate issued by the Classification Society; Above 14–21, evidence of damage and the causes; Evidence 21: invoice No. 9000336, issued by the Lloyd’s Classification Society, to prove that the costs of the Classification Society inspectors to check ship on board in Fangchenggang as well as in Shenzhen and Shekou; Evidence 23: invoice No. 9000336 issued by the Lloyd’s Classification Society, to prove the same contents as evidence 22; Evidence 24: invoices signed by China Ocean Shipping Agency Fangcheng, to prove costs arising from the head of the ship owner’s boarding supervision on ship maintenance; Evidence 25: invoices signed Pokka Ship Service Co., Ltd., to prove costs of changing ship cables; Evidence 26: invoices issued by MacGREGOR Company, to prove costs of replacing the hatch cover and costs of the manufacturer’s technical support; Evidence 27: VIAJES invoices, to prove the airfare generated by the head of the ship owner’s supervision on ship maintenance and underwater operations; Evidence 28: underwater operation invoices, to prove the cost generated by underwater operations during the time the repair work finished to the time the ship left the shipyard; Evidence 29: other inspection fee invoices, to prove fees for the daily measurement of the ship; Evidence 30: payment records, to prove that the Plaintiff had actually paid the fees set forth in Evidence 23–29; Evidence 31: payment details, to prove the same contents as evidence 30; Evidence 32: invoice issued by the LOFFLER Company and the NOAH ARK Company, to prove the costs of hiring the maintenance engineer and supervising engineer to Fangchenggang and Shekou to do on-site repair guidance; Evidence 33: bank records No. AZNA920803641100 and No. AZNA920903 814500, to prove that the Plaintiff had actually paid the fees set forth in the Evidence 32; Evidence 34: invoices issued by Yiulian Shipyard, to prove the repair costs; Evidence 35: bank records, No. AZNA919802060600 and No. AZNA920803 643500, to prove the Plaintiff had actually paid the fees to the shipyard; Evidence 36: statements of facts, to prove vessel’s in/outbound harbor conditions at Shekou;

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Evidence 42: expense details related to evections, to prove the actual related costs incurred by the shipowner’s representative’s evections; Evidence 43: expense bills related to the evection, to prove the same content of evidence 42; During the cross-examination, the Defendant alleged that it had no problems regarding the authenticity of evidence 14 and 15, which proved that Haizheng Company conducted the field survey after the damage of the ship and held a loss survey conference on July 6. Evidence 15, part 10 of the Survey report showed that Haizheng Company’s requirement to Yiulian Shipyard for a view about the repair situation and such requirement was refused by the Plaintiff’s representative, thus there is no way to understand the actual repair situation and the related costs. The report also showed that the ship had stranded at the berth while left the Yiulian Shipyard There is no objection to evidence 16 and 17, the navigation log of the latitude and longitude displayed on the ship did not go through Qiongzhou Strait, meaning it was impossible for the ship to sail through Fangchenggang. Instead, it traveled straight from Shekou to Singapore. Accordingly the Plaintiff’s allegation about fuel loss from Fangchenggang to Singapore had no basis. There was no objection to the authenticity of evidence 18, which indicated it was the ship manager who negotiated with the Defendant and not the Plaintiff. There was no objection to the authenticity of evidence 19, 20, 21, 34, 35, however the invoice amount was consulted by the Plaintiff and the shipyard with uncertainty and could not prove the actual maintenance costs of the ship’s damage. There was no objection to the authenticity of evidence 23 or 24, but only the first items (namely EUR 226.50) produced by the security structure integrated test was related to the case. The others were generated from the general test of the hull which operated by the Classification Society and had nothing to do with this case. There was no objection to the authenticity of evidence 24, but the costs had nothing to do with the ship damage. There was no objection to the authenticity of evidence 25, but the cable was essential for the ship and also had nothing to do with ship damage. There was no objection to the authenticity of evidence 26, but the invoice date was August 31, 2009 which was not included in the repairing period and thus failed to prove that the hatch had been delivered to Yiulian Shipyard Additionally the heading of the invoice was not that of the Plaintiff. There was no objection to the authenticity of evidence 27, but they were travel tickets and the exact use was not clear. There was no objection to the authenticity of evidence 28, but such cost was produced by the use of underwater video. While there was damage on the cover, the invoice date was July 30, 2009 which was not included in the repair period and thus had nothing to do with this case. Evidence 29 (the daily measurement fee) was the cost of the ship’s routine maintenance occurring on June 8, 2010 and is irrelevant to the case. There was no objection to the authenticity of evidence 30 and 31, but they were irrelevant to the case. There was no objection to the authenticity of evidence 32 and 33 because they showed the costs arising from ZHUWEI’s service in Yiulian Shipyard However, the public survey report did not mention this person, so it was unreasonable and has no association with the case. There was no objection to the

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authenticity of evidence 36 which recorded situations such as encountering the Typhoon, berthing depth limitations, etc., from which it could be inferred that the ship had stranded during the maintenance in Yiulian Shipyard. There was no objection to the authenticity of evidence 42 or 43, but such evidence failed to explain how these costs occurred and to whom they were paid and are irrelevant to the case. The court confirms the authenticity of evidence 14–36, 42, and 43 which were submitted by the Plaintiff to the Defendant because it could serve as the fact basis of this case. As to the disputed matters, the court will review the case and other evidence to make a judgment. The Defendant submitted the following evidence to the court to support its defense that there was no factual basis for the ship maintenance costs and other associated costs: Evidence 1–7: photos, to prove the hull condition of M.V. “Castillo de Gormaz” after the accident; Evidence 2: sketches, to prove the condition of the hatch cover and other parts after the accident; Evidence 3: report and its annex about M.V. “Castillo de Gormaz”, to prove that after the accident, the shipowner claimed for more than USD70,000 in maintenance costs through his agents China Fangcheng Ocean Shipping Co., Ltd. on July 7, 2009, together with the maintenance list of Yiulian Shipyard; Evidence 4: maintenance list of Yiulian Shipyard and other materials, to prove that the repair items were repaired at the Plaintiff’s own discretion, which were beyond the damage scope and standard It was the hatch cover that was damaged, therefore the detection and clearing of combustible gas, sewage treatment, oil clearing, and other items shall not be included in the maintenance projects. The maintenance platform built for repairing the ship costs about USD30,000 and can be reused, so the material costs should not be included into the maintenance loss. Only the labor costs should be considered. The cost of shifting berths caused by the typhoon during maintenance should be born by the Plaintiff itself. In accordance with established practice, the old hatch residual values and depreciation shall be deducted after the replacement of the new hatch cover; Evidence 6: 6 preliminary reports issued by Haizheng Company, to prove that 8 parties conducted inspections to the maintenance procedure before making a conclusion about a USD 70,000 maintenance fee. Upon cross-examination, the Plaintiff could not recognize the authenticity of evidence 1 since it was not the original and its source was unknown. The authenticity of the first sketch could not be recognized in evidence 2 because the source of the first sketch was unclear and could have been painted by the Defendant. However, there was no objection to the authenticity of the second sketch. There was no objection to the authenticity of evidence 3, but the Plaintiff could not recognize its relevancy and content. The authenticity of maintenance list attachment could not be recognized, even if it was true. It was merely a quote and

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not the actual maintenance costs. There was no objection to the authenticity, legality, or relevancy of evidence 4. The amount of the maintenance list provided by Yiulian Shipyard and hatch cover maintenance costs provided by the production company was in accordance with the evidence provided by the Plaintiff and confirms the Plaintiff’s allegation. The authenticity and relevancy of evidence 6 could not be recognized because the report was only draft messages sent by the company staff without final confirmation of HaiZheng Company. Instead, evidence 15 (the official report) should prevail. The court finds that the first sketch in evidence 2 submitted by the Defendant is not clear, so it will not recognize the evidence. The form and authenticity of evidence 6 (the periodic reports of Haizheng Company serving as the basis of the final report) is confirmed and the details will be confirmed through comprehensive identification. The court recognizes the authenticity of the second sketch in evidence 2 as well as evidence 3 and 4, to which the Plaintiff had no objection as the fact basis of the case. As to other disputed matters, the court will combine the case and other evidence to make a judgment. The following evidence was submitted by the Plaintiff to the court to prove the claims of demurrage and that the loss of profits had a factual and legal basis: Evidence 13: NOR issued by the Master, to prove the time that the vessel arrived in Fangchenggang; Evidence 14: laytime statement of facts in Fangchenggang, to prove the shipping damage and the causes; Evidence 16: deck logs (June 29–July 16), to prove that on July 2, after the damage occurred, the ship stopped unloading and shifted berth. On July 6, the discharge was finished and the ship headed for Shekou for maintenance and so on; Evidence17: deck log (July 17–26), to prove the same as evidence 16; Evidence 36: statements of facts, to prove vessel’s in/outbound harbor conditions at Shekou and the time loss suffered; Evidence 37: lists about damage for detention of the ship and the economic loss caused by fuel consumption, to prove loss for detention and loss of fuel consumption; Evidence 38: lists about loss of profits and the economic loss caused by fuel consumption, to prove loss for profits and loss of fuel consumption; Evidence 39: invoice signed by Aegean, to prove the fuel was priced at US 403 per ton; Evidence 40: charter party entered into between the owner and the Plaintiff, to prove that the Plaintiff was the actual controller and operator of the ship, and the hire was USD18,600 per day; and Evidence 41: charter party entered into between the Plaintiff and a third party, Pacific Bulk, to prove the hire was USD44,000 per day; Evidence 44: The Plaintiff’s supplementary submission after the hearing, including 3 hire statements and a written confirmation issued by EMPRESA NAVIERA ELCANO SA to prove it received the hire.

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Upon cross-examination, the Defendant had no objection as to the authenticity of evidence 13 and 14, but argued that the accident did not affect the normal unloading operation. It recognized the authenticity of evidence 16 and 17, 36 and 40 as each item went through notarization procedures. Evidence 37 and 38 were calculation lists unilaterally made by the Plaintiff, so the effect of evidence could not be recognized. Evidence 39 had not been notarized, so its authenticity could not be recognized. In addition, the fuel price displayed by the invoice issued on June 26 was apparently higher than that issued on April 29. The price difference was up to more than USD100, which was irrational according to the Defendant. There was no objection to evidence 41. Evidence 44 was extraterritorial evidence, failing to perform the related notarization procedures according to law, and not the original, therefore its authenticity could not be confirmed. The court finds that the Defendant recognized the authenticity of evidence 13, 14, and 41. Evidence 16, 17, 36, and 40 have been notarized, and the Defendant recognized its authenticity. Thus, the authenticity of such evidence is confirmed. Evidence 36 and 37 were calculation lists unilaterally made by the Plaintiff with no other evidence to support this point, therefore the effect of evidence could not be confirmed. The court confirms Evidence 39 because there is no need for notarial certification procedure since it is extraterritorial evidence belonging to commercial papers used for international circulation. Meanwhile, evidence 44 is extraterritorial evidence in copy form and performed no notarization certification procedure. The Defendant denies its authenticity as does the court. The Defendant submitted the following evidence to the court in support of its defense that the Plaintiff had no factual or legal basis to claim the loss of demurrage and profits: Evidence 5: charter parties, letters, agreements, and annexes from Yunnan Kunming Iron & Steel International Trade Co., Ltd., to prove that more than USD200,000 demurrage and other losses arising from the accident of M.V. “Castillo de Gormaz” have already been paid. After cross-examination the Plaintiff claimed that evidence 5 was not original and could not confirm its authenticity. Even if the evidence was true, it had has no relation to the case. The court holds that evidence shall be submitted in the original form. Evidence 5 is a copy, the Defendant failed to submit the original in order to verify the copy, and there is no evidence to prove its authenticity, therefore the court will not admit its authenticity. During the process of the lawsuit, the court accepts the following evidence ex officio: Evidence 1: temporary certificate No. 8719126 issued by LR; and Evidence 2: the record of an investigation carried out in January 15, 2014, to the manager of the Operating Division of Yiulian Shipyard, XU Dalin, mainly involving the Yiulian Shipyard having the ability to perform the maintenance procedures independently. All the projects were aimed at the damaged hatch cover

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except cleaning the 75 tons of oil out of the engine room. All the costs were charged for the actual costs incurred. Neither the Plaintiff nor the Defendant contested the authenticity of the above evidence. The court will find whether such evidence can be determined as the fact basis of this case after combining the case and other evidence. Accordingly, the court ascertains the following facts: On April 21, 2009, the Plaintiff entered into a charter party with EMPRESA NAVIERA ELCANO SA (the owner’s operator of M.V. “Castillo de Gormaz”), which contained the following terms and conditions: the Plaintiff agreed to hire the Vessel for a period of six to eight months with the hire payments being USD18,600 per day. The ship was to be redelivered to the owner in like good order and condition (ordinary wear and tear excepted). The Charterer shall have the liberty to sublet the Vessel for all or any part of the time covered by this charter party, but it remained responsible for the fulfillment of this charter party. Article 2 states that “the charterer, while the vessel is on hire, shall provide and pay all the bunkers…”. Article 15 mentions that “[i]n the event of loss of time from deficiency and/or default of officers or crew, or deficiency of stores, fire, breakdown of, or damages to hull, machinery or equipment, grounding, or detention by average accidents to the Vessel or cargo unless resulting from, dry docking for the purpose of examination or painting the bottom, or by any other similar cause preventing the full working of the Vessel, the payment of hire shall cease for the time thereby lost.” Article 26 states that “[n]othing herein stated is to be construed as a demise of the Vessel to the Time Charterer. The Owners shall remain responsible for the navigation of the Vessel, acts of pilots and tug boats, insurance, crew, and all other matters, same as when trading for their account.” The additive clause of Article 29 states the following: Speed about 15 knots (empty), 13.73 knots (fully laden), on a consumption of about 52 metric tons of fuel, no diesel oil is consumed at sea but it is consumed in port; [the vessel] in idle condition consumes about 3 metric tons of fuel and 0.5 tons of diesel oil, while working is about 4 tons of fuel and 0.5 tons of diesel oil. Article 44 mentions that the charterer shall be responsible for damage (beyond ordinary wear and tear) to any part of the vessel caused by stevedores. Such damage shall be notified as soon as reasonably possible by the Master to the charterer or their agent and to their stevedores, failing which the charterer shall not be held responsible. The Master shall endeavor to cooperate with the charterer or his or her agent to claim losses and issue a written letter of claim to the responsible party in a timely manner. The charterer is obliged to repair any stevedore damage prior to completion of the voyage, but must repair stevedore damage affecting the vessel’s seaworthiness or class before the vessel sails from the port where such damage was caused or found. All additional expenses incurred shall be for the account of the charterer and any time lost shall be for the account of and shall be paid to the owner by the charterer at the demurrage rate.

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M.V. “Castillo de Gormaz” carried 151,278 net tons of iron ore at Itaguai, Brazil and arrived in Fangchenggang pilot station at 20:12 on June 29, 2009, then submitted its NOR. On July 2, at 05:15, the vessel berthed at Fangchenggang lightering wharf, and the discharge operations began under the direction of the Defendant. At 21:15 that day, during the discharge operation, the shore gantry mobile crane used for unloading operations lost control, the cable broke, and the full laden grab fell on the 3rd cargo hatch cover at the port side of the vessel. The discharge operation stopped immediately. On the same day, the Master of M.V. “Castillo de Gormaz” submitted a damage report to the Defendant, stating the 3rd cargo hatch cover at the port side was removed from the original location. Plus the track, track column, hatch coaming, side boards, gear train and its accessories, packaging channel, and handrails all were deformed and damaged. On July 4, the Master issued another damage report, adding the following damage items: two cracked fiber cables spring, beams and a side stringer below the roof, as well as the coaming crutches were deformed and damaged. The Master then issued a sea protest on July 4 suggesting the damage and required the Defendant bear responsibility for all the losses and delay. The Defendant’s staff signed it. On July 4, 2009, a surveyor from Lloyd’s Register Guangzhou Agency, commissioned by EMPRESA NAVIERA ELCANO S.A. (the ship manager), boarded the vessel to assess the damage. The surveyor specified the following in an operation control record issued on July 4: Damage No. 1 lies under the 3rd cargo hatch cover: 1. the sheer strake, including the rubber channel, is deformed and damaged; 2. the roof is deformed; 3. structural parts of the hatch cover, including the beam arch, side stringer, and the crutches are deformed and damaged; 4. ramps and support parts are deformed and damaged; 5. wheels and the connected parts are bent. Damage No. 2 lies below the coaming of the 3rd cargo hatch cover: 1. the strengthen crutch is deformed; 2. the roof is deformed. Damage No. 3: 1. the handrails are deformed; 2. two spring cables are broken. On July 6, the surveyor issued another operation control record which stated that, under Damage No. 4, (1) the gunwale of No. 1 and No. 2 port side topside tanks were damaged; (2) frames No. 232 and No. 233 between the No. 37 and No. 36 sheer strakes were slightly sunken in. On July 4, 2009, LR Guangzhou Agency issued an interim certificate which required a necessary repair to the damaged hatch cover as well as the hatch coaming and the handrails before leaving Fangchenggang, otherwise the ship’s classification certificate would be cancelled. M.V. “Castillo de Gormaz” shifted to berth No. 17 on the same day to continue discharging the cargo and finished at 02:24 on July 6. Upon the owner’s arrangement, the Master, the owner’s representative, the engineer from MacGREGOR (Shanghai) Maintenance & Repair Co., Ltd., the surveyors from Lloyd’s Register Guangzhou Agency, ship’s agent of the Plaintiff’s, surveyors from

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Haizheng Company, surveyors from Haijiang Surveyors & Adjusters Co., Ltd., a surveyor from Balance Cargo Insurance Survey Co., Ltd., and other parties held a conference to discuss the repair matters and the repair plan. On that same day, the Master of M.V. “Castillo de Gormaz” issued another sea protest recording: (1) The damaged 3rd hatch cover and other damage related to the discharge operation shall be repaired before the Vessel leaves Fangchenggang (before July 2, 2009); (2) The ship shall be properly fixed if such repair could not be finished; (3) The port should pay all the costs related to berth shifting; (4) The port shall be responsible for all the costs and expenses if the ship traveled to the shipyard and completed a permanent repair as required by the owner and the Classification Society; and (5) All the necessary materials shall be in accordance with the construction requirement and purchased under the approval of the Classification Society, all equipment and spare parts must be provided by MacGREGOR and so on. The Defendant signed the above protest. According to the repair plan made previously, on July 7, M.V. “Castillo de Gormaz” shifted to berth No. 2 for a temporary repair to fix the hatch cover and finished at 17:18 on July 11. After that, surveyors from Lloyd’s Register Guangzhou Agency boarded and inspected the vessel. They accepted the temporary repair and issued “Cargo Ship Safety Construction Certificate,” proving that after the temporary repair the ship was able to sail to Shekou safely for a permanent repair. At 17:48 on July 11, M.V. “Castillo de Gormaz” left Fangchenggang heading for Yiulian Shipyard to accept a permanent repair. At 16:54 on July 13, M.V. “Castillo de Gormaz” reached Yiulian Shipyard, first mooring at Berth No. 8 then at Berth No. 1 for repairs. These repairs amounted to USD205,840, and the Plaintiff paid that amount in full. The repair projects and their costs are as follows: 1. General service cost at USD67,200, including the charge of towage of the vessel, piloting the ship berth and unberth and mooring and unmooring twice, berth for seven days, use of the gangway two times; 2. Steel construction projects, including repair of the handrails, the hatch cover, and the extend rail, repair the 3rd left hatch cover, removal/repair the outfitting; 3. Other items cost USD17,320 including the use of a crane to lift the hatch cover up to the wharf and lift it back, repair the cover runner, change bearing, treatment for 75 tons of sewage, clean up 30 square meters oil; and 4. USD47,200 arising from general service during the typhoon periods, tugs, pilotage, mooring and unmooring, ramps, and other services. From 05:42 on July 18 to 05:48 July 21, M.V. “Castillo de Gormaz” anchored in Hong Kong Lantau Island anchorage in order to shelter from the typhoon “Molave.” At 17:06 on July 21, M.V. “Castillo de Gormaz” left Berth No. 8 due to

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a berthing depth restriction, and berthed again at 19:06 that day until leaving Yiulian Shipyard for Singapore at 06:20 on July 22. On July 15, the Master of M.V. “Castillo de Gormaz” bought two mooring lines costing USD6,300. On July 23, Lv Fu Rong International Trade Co., Ltd. issued a payment notification to the Plaintiff asking it to pay the boarding service fee of EUR7,469 to an engineer named ZHUWEI. The Plaintiff remitted the money through the Deutsche Bank. Noah Marine Service Co., Ltd. issued invoice on July 25 for EUR20,498, which included supervision and management services provided by FEI amounting to EUR9,900, travel allowance equaling EUR360, travel expenses amounting to EUR1,033, phone bill for EUR350, cover components valued at EUR2,165, and EUR6,690 for accelerating the departure in Fangchenggang as well as the repair in the shipyard and withdrawing the vessel from the anchorage to avoid a typhoon on May 24, 2011. The Plaintiff remitted the above-mentioned amount of money through the Deutsche Bank. On July 12, Fangchenggang China Shipping Agency Co., Ltd. issued 6 invoices for various kinds of fees amounting to USD2,660, including transportation expenses, boarding fees, accommodation fees, and other expenses amounting to USD2,535 which the owner’s representative, PLAZA JAYO EDUARDO, FEI, surveyors from P&I Club, Lloyd’s surveyor Hu Dawei spent during July 4 or 5 until July 11 in Fangchenggang. These invoices also covered USD125 for the purchase of British Admiralty Chart No. 4123, and airfare costs of the Owner’s representative PLAZA JAYO EDUARDO amounting to EUR11,899.79. Singapore LFA GLOBAL PTE LTD issued an invoice on July 30 showing that they had received the underwater inspection fee for 4250 Singapore dollars (SGD) from EMPRESA NAVIERA ELCANO S.A. On August 12, Lloyd’s Register Guangzhou Agency issued two invoices to EMPRESA NAVIERA ELCANO S.A. for the service they offered to M.V. “Castillo de Gormaz” in Fangchenggang and Shekou, the total amount being EUR12,182.93. Cargotec CHS Asia Pacific Pte Ltd. issued an invoice to MacGREGOR (ESP) S.A. MARINE SERVICES on August 18 for local transportation expenses, engineer service expenses, overtime pay, allowance, airfares, steamer tickets, train tickets, accommodation expenses, and others totaling to SGD16,371.55. MacGREGOR (ESP) S.A. MARINE SERVICES issued two invoices to Empresa Nacional Elcano de la Marina Mercante S.A. on August 31 amounting to EUR13,513.34. On June 8, 2010, EMPRESA NAVIERA ELCANO S.A. charged the Plaintiff for daily inspection fees of about RMB18,200. On May 23, 2011, the Plaintiff remitted USD100,696.50 to EMPRESA NAVIERA ELCANO S.A. through the Hamburg branch of Deutsche Bank. EMPRESA NAVIERA ELCANO S.A. issued a certificate on July 17, 2010 confirming payments, including USD93,466.50 (equivalent to EUR65,696.56) used as payments for the hatch cover damage of M. V. “Castillo de Gormaz”, the details including fees charged by Fangchenggang China Shipping Agency Co., Ltd., airfares of the owner’s representative, underwater inspection expenses, inspection fees charged by Lloyd’s Register, fees

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charged by MacGREGOR (ESP) SA MARINE SERVICES, costs of two cables, and daily survey expenses etc. On June 25, 2009, the Plaintiff refueled 2,999.789 tons for this voyage in Singapore at the price of USD403. On June 29, the Chief Officer recorded in the log book that fuel quantity was 3,421 tons, and then 3,320 tons on July 13, later at 0842 on July 18, it was 3,297.50 tons. On July 3, 2009, the Plaintiff entered into a time charter party with Pacific Bulk Shipping (Cayman) Ltd., in which Pacific Bulk Shipping (Cayman) Ltd. agreed to hire M.V. “Castillo de Gormaz” for a period from the time of delivery to November 23, 2009 or December 23, 2009 within below mentioned limits: (1) the vessel shall be used for loading iron ore, the Charterer shall pay for the hire at the rate of USD44,000 per day from the time of delivery; (2) the vessel shall be placed at the disposal of the Charterer while the pilot dropped at the designated place in the open seas of Singapore. Required by the charterer, time shall not commence before July 8, 2009, local time. The Owner shall notify the Charterer in advance about the expected condition of the vessel if the Charterer failed to give notice of readiness before or at 0800 on July 15, 2009, local time. On July 10, both parties entered into a supplementary agreement: (1) the lay day is July 15, 2009; (2) the cancelling date is July 26, 2009; and (3) the rate is USD44,000 per day and all other articles, conditions, and exclusive clauses remain the same. Also found at the trial, the Defendant requested for identification but later for a stay since both parties applied for an out-of-court settlement. The court approved the identification on April 20, 2012 that Guangzhou Marine Engineering Consulting & Testing Company was to carry out the identification, but later aborted it due to both sides failing to provide necessary materials. The court finds that the Plaintiff sued the Defendant for losses caused by the discharging operation, in which the Defendant’s crane grab damaged the vessel. This makes the present matter a port operation dispute. As to the Applicable Law on this case, for a tortious act committed in Guangxi, China and both parties all cited the laws of the People’s Republic of China to raise claim and make defense. Pursuant to the provisions of Article 44 of the Law of the People’s Republic of China on Application of Laws to Foreign-Related Civil Relations, “the laws at the place of the tort shall apply to liabilities for tort, but if the parties have a mutual habitual residence, the laws at the mutual habitual residence shall apply. If the parties choose the applicable laws by agreement after any tort takes place, such agreement shall prevail.” Therefore, the substantive dispute of this case shall be settled according to the laws of China. Combining the views of both parties, the principal outstanding issues of this case are: whether the Plaintiff has the right to claim the damage involved in the law suit; and how to determine the damage scope and the total amount of losses.

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I. With regard to whether the Plaintiff has the capacity to sue. The Plaintiff argued that it was the Defendant that caused the ship damage during the discharge operation, and, based on the charter party between the two parties, it should be entitled to recourse against the tortfeasor (the Defendant). Hence, it asserts that it has the capacity to sue after undertaking compensation responsibility. The Defendant argued that the Plaintiff was only a time charterer, and neither the owner nor the demise charterer of the ship. Meaning the Plaintiff did not actually control and operate the ship. Thus, the Plaintiff does not enjoy title prescribed by law and does not have the capacity to sue, therefore the lawsuit should be rejected. The court holds that, the Plaintiff was the time charterer of M.V. “Castillo de Gormaz” based on the charter party entered into between itself and the ship owner. This means that it was entitled to use the vessel in the agreed period. After the expiration of the charter, the ship should be redelivered to the owner in like good order and condition. In this case, during the discharge operation in Fangchenggang, China, the crane grab belonging to the Defendant fell on the 3rd cargo hatch cover at the port side of the vessel causing damage to the main deck and hatch cover and affecting the ship’s classification society. The Master notified the Plaintiff in written after the damage occurred and the Plaintiff commenced to deal with the matter. According to Article 44 of the charter party, “the Charterer shall be responsible for damage to any part of the vessel caused by loading/discharge. Such damage shall be notified as soon as reasonably possible by the Master to the charterer, failing which the charterer shall not be held responsible.” The Plaintiff should bear the liability in such a case. According to Article 44 Paragraph 2, “the charterer is obliged to repair any damage affecting the vessel’s seaworthiness or class before the Vessel sails from the port where such damage was caused or found. All additional time and expenses incurred shall be for the account of the Charterer.” The Plaintiff entrusted the shipyard to conduct the repair and paid the repair expenses as well as other costs directly related. It also paid the transportation expenses, testing fees, investigation costs, and others that the owner paid for previously. Such payments were based on the charter party, giving them a legitimate reason. Therefore, although the Plaintiff was neither the owner nor the demise charterer of the ship, it finally took the responsibility based on the obligations under the charter party. The owner’s approval on the disposal and costs indicated the losses have been recovered. In summary, as the party who ultimately bore the consequence of the damage, the Plaintiff has the capacity to sue the tortfeasor, the Defendant. Secondly, in accordance with the charter party, the Plaintiff provided the fuel and afforded the payments, giving it an independent right to the fuel and was entitled to claim for losses that occurred during the maintenance period. Moreover, the Plaintiff was entitled to sublet the vessel and had a right independent of the

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rights of the owners or the demise charterers. In other words, the Plaintiff has a legal interest in the ship and it should have the corresponding rights to claim for losses. Accordingly, the court confirms its capacity to sue. There is no factual or legal basis to support the Defendant’s defense, therefore the court will not accept it. II. With regard to the scope of loss and the determination of it. The Plaintiff asserted that the accident caused the following losses: (1) Ship maintenance costs amounting to USD205,840; (2) Inspection fees, travel expenses, and other costs related to the maintenance amounting to EUR103,420.91; (3) Loss of hire amounting to USD334,403.78 and extra fuel consumption amounting to USD83,904.60 due to detention; (4) Loss of profits amounting to USD872,570.39 for the ship was delayed in delivery to the subletting party. The Defendant countered that (1) the maintenance cost was too high and only costs within the limit of USD70,000 were reasonable. Also, the maintenance projects were beyond the actual scope of the accident. The clear detection of combustible gases, sewage treatment, oil cleaning, and other projects had nothing to do with the hatch cover repair; (2) other costs that the Plaintiff claimed had no direct relation to the ship repair; (3) losses caused by detention have insufficient facts and legal basis; (4) the claim for loss of profits was an overlapping claim and lacked legal basis. The court holds that: (a) In respect of the maintenance costs. After M.V. “Castillo de Gormaz” was damaged, the Plaintiff chose to repair the ship at Yiulian Shipyard in Shekou, Shenzhen City. It was necessary and reasonable because the location where the accident occurred did not have the ability to repair. The Defendant argued that the ship should have been repaired in Zhanjiang, but failed to prove that the shipyard in Zhanjiang was available to provide a berth, and had the same repair conditions and charge as Yiulian Shipyard. Therefore, the court will disregard this defense. The Plaintiff provided repair lists and invoices issued by Yiulian Shipyard to prove losses arising from the repair of the ship and the court confirms such evidence. The court has also conducted investigations and collected evidence ex officio from Yiulian Shipyard regarding the repair projects and costs. The above-mentioned evidence is sufficient to support the Plaintiff’s claim for ship repair expenses and reaching the standard of proof. There is no need for judicial expertise.

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In regard to items questioned by the Defendant, the court holds that: (1) The clearing and detection of combustible gas are fixed items, the expense is reasonable; (2) The process of 75 tons of sewage which cost USD9,000 has nothing to do with the hatch cover repair, the Defendant shall not bear the expenses; (3) The repair platform is necessary for a hatch cover repair operation, Yiulian Shipyard did not build a platform specially. Instead, they only added steel to the original platform to fix the hatch in connection with its characteristics. Thus, the cost incurred was reasonable and necessary; (4) During the repair process, shifting berth costs such as towage and pilotage occurred in order to avoid a typhoon. The court finds that the costs are directly caused by the typhoon, however if there was no damage caused by the fault of the Defendant, there is no need to repair the ship during the Typhoon period and such costs would not occur. Yet the costs were still caused by the tort and the Defendant should bear the burden; and (5) On the issue of deduction after new for old, the court finds that the Plaintiff should not have repaired the ship in the absence of such damage caused by the Defendant’s negligence. Besides, the repaired hatch cover was only a small part of the ship and its restoration had little impact on the value of the entire ship, therefore there was no need to make such deduction. In conclusion, apart from USD9,000 incurred through the processing of 75 tons of sewage, the court confirms the remaining USD196,840 repair costs. There is no evidence to prove the Defendant’s defense on maintenance costs and such defense is not consistent with the facts found by the court, therefore it will not be accepted. (b) In respect to the inspection fees, travel expenses and other costs related to the maintenance of the ship. The inspection fees equaling EUR12,182.93 that Lloyd’s Register charged for providing services determining the extent of the damage to the ship were reasonable and necessary, therefore they are accepted by the court. The expenses charged by Fangchenggang China Shipping Agency Co., Ltd. including transportation expenses, accommodation fees, and other expenses caused by the Owner’s representative, surveyors from P&I Club, and Lloyd’s surveyors are recognized by the court because they were necessary and reasonable expenses. As to the costs of purchasing the chart, the destination port of the present voyage was Fangchenggang. Due to the damage the ship had to deviate from the pre-planned course and travel to Shekou for maintenance. Therefore, the purchase of the chart was also necessary and the Defendant should bear the expense. In summary, the court confirms USD2,660 (equivalent to EUR1,900) charged by Fangchenggang China Shipping Agency Co., Ltd. According to the facts found by the court, the accident involved caused the breaking of two spring cables, the costs for which amount to USD 6,300 (equivalent to EUR 4,500). This amount should be paid by the Defendant.

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Regarding the expenses charged by MacGREGOR, it was the manufacturer that must provide all the equipment and spare parts according to the previous Sea Protest. During the maintenance process of the hatch cover, these spare parts, and later the professional services, amounting to EUR13,513.34 are reasonable and confirmed by the court. The court will not support the Plaintiff’s claims for an underwater inspection fee for it could not prove the connection between such expense and the damage. Nor will the court support the daily inspector expense because the Plaintiff failed to explain the specific usage and to prove the connections. In regards to the supervision fee and other service expenses charged by LvFuRong International Trade Co., Ltd. and Noah Marine Service Co., Ltd., the court finds that the hatch cover was repaired by the largest and best shipyard in South China (Yiulian Shipyard) and the manufacturer also provided service and accessories. This is because it is common practice to hire professionals to do supervision and instruction in order to ensure the repair schedule and the maintenance quality. Hence, these costs and expenses shall be born by the Defendant. Given the difficulty in ship repair procedure, time, the repair ability of Yiulian Shipyard, and other factors, the court finds the Defendant liable for EUR7,000. As for the airfare, accommodation fees, and other travel expenses, the court finds that after the accident, the Plaintiff proceeded according to the Charter Party and authorized Lloyd’s Register and P&I Club and other professional institutions to conduct examinations. This was all while it directed the ship to Yiulian Shipyard and paid all the costs. The ship was totally under the control of the Plaintiff and was adequately disposed. Under such circumstances, the ship owner may send representatives to the scene out of concern for its own self-interest since such activities are aimed at running a business. Thus, the costs incurred should be born voluntarily by the ship owner. The Plaintiff also failed to demonstrate the function that the Owner’s representatives played, therefore the court will not support the Plaintiff’s claim. In summary, for the repair expenses the Plaintiff claimed, the court will support a reasonable amount of EUR39,096.27. (c) In respect of the loss of hire caused by detention. The court will not support such a claim. Firstly, the accident caused damage to the hatch cover and part of the main deck and such damage affected the ship’s classification society making a permanent repair is necessary. In other words, the ship was unable to conduct normal operations during the time it took to the finish of repair. According to the Charter Party, Article 15: in the event of loss of time from deficiency and/or default of crew, or deficiency of stores, fire, breakdown of, or damages to the hull, machinery or equipment, grounding, or detention by average accidents to the Vessel or cargo unless resulting, dry docking for the purpose of examination or painting bottom, or by any other similar cause preventing the full working of the vessel, the payment of hire shall cease for the time thereby lost.

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Secondly, the Plaintiff claimed that it had already paid the hire, but evidence to prove such claim as provided by the Plaintiff were copies without notarization and thus cannot be recognized. According to Article 2 of Some Provisions of the Supreme People’s Court on Evidence in Civil Procedures, “the parties have the responsibility to provide evidence to prove the facts on which either the claims are based on or the defenses are based on, the party who bears the burden of proof shall bear any unfavorable consequences if there is no evidence or evidence is insufficient to prove such facts.” The Plaintiff failed to provide sufficient evidence, and thus should take the legal consequences for the failure to meet the burden of proof. The court will not recognize the claim of hire. In summary, the Plaintiff shall not claim compensation for loss of hire due to detention, because neither is such loss necessary nor had it actually occurred. (d) In respect to the fuel loss occurred during the period repair the ship. As previously mentioned, the Plaintiff was time-charterer and the fuel provider. It should have an independent right to fuel loss, but the key point lies in the identification of the fuel quantity and the unit price. The court finds that regarding the amount of fuel lost during the repair operations, the fuel consumption calculation is generally based on the measurement of the oil amount from the beginning of the voyage till the end of the voyage, plus the amount added during the voyage. Presently, the Plaintiff claims that fuel consumption during the repair operation should be the difference between the time the repair began or should be repaired and the time to finish such repair. The oil consumption which the Plaintiff claimed was based on its unilateral records, while the Defendant questioned the objective reality of such records. It considered that according to the unit fuel consumption and the sailing time to Zhanjiang port and time in port agreed in the Charter Party, the amount of fuel consumption should be 81.04 tons. Indeed, the ship headed for Shenzhen Shekou ultimately for repairs, Zhanjiang Port is located in the middle of Shekou and Fangchenggang, as measured by the Defendant’s calculation method, oil consumption during the maintenance period shall be 130 tons. In summary, the amount the Plaintiff calculated mostly agrees with the Defendant’s calculation, therefore the court upholds the Plaintiff’s claim that the fuel consumption of M.V. “Castillo de Gormaz” is 132.80 tons from when the accident occurred to the departure from Yiulian Shipyard after the repair was completed at 0620 on July 22. The invoices provided by the Plaintiff showed that the unit price was USD403 at the last time the ship added fuel for this voyage, so the total amount of fuel lost is USD53,518.40 (132.80 tons  USD403/ton). After being repaired, M.V. “Castillo de Gormaz” was delivered off the coast of Singapore and sailed from Shenzhen Shekou where Yiulian Shipyard was located to Singapore. The distance between Shekou and Singapore is almost the same distance as it is from Fangchenggang to Singapore, therefore the fuel consumption will not increase and the court will not support the Plaintiff’s claim involving fuel loss from Shenzhen Shekou to the open waters of Fangchenggang.

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(e) In respect of the loss of profits. The court will not support the Plaintiff’s claims for loss of profits, which include sublease hire loss and fuel loss, for such claims lack evidence and sufficient reasons. Firstly, it was after the damage occurred that the Plaintiff sublet the vessel to the third party. The sublease had not yet occurred when the accident happened, meaning the Plaintiff’s real income did not exist at that time and such loss was not caused by the Defendant’s negligence. Secondly, the Charter Party can only prove the legal relationship between the Plaintiff and the third party. It failed to provide evidence, such as bank transfer vouchers, to prove the fulfillment of the contract. Therefore, the hire profits lack objective connections. Next, the additional terms of the Charter Party showed only that the daily hire reduced to USD42,000 but failed to explain the reason, which cannot prove the causal relationship between the fall in hire and delay in delivery of the ship. Finally, the Charter Party agreed that the ship should be delivered at the open seas of Singapore at the time the pilot disembarked, meaning the Plaintiff should be responsible for the fuel consumption from Fangchenggang back to Singapore whether or not the damage had occurred. The above losses include reasonable repair costs at USD196,840, other costs related to ship repair in the amount of EUR39,096.27, and loss of fuel at USD53,518.40 during the repair operation. All the losses occurred in 2009, yet the Defendant appeared lax to pay compensation. Therefore, it should bear the loss of interests caused by such delay. The Plaintiff claimed that the interest should be calculated from the start of the action (March 4, 2011) to the date of payment set by this Judgment. The court holds that the interest shall be calculated at the loan interest rate of liquid capital over the corresponding period as promulgated by the People’s Bank of China. To summarize, the court holds that the Plaintiff has proper competency of litigation, so it has the right to claim losses related to the damage of M.V. “Castillo de Gormaz.” The Defendant is the port operator and owner of the mobile crane used during the operation during which the cable broke and the grab of cargo fell on the 3rd cargo hatch cover at the port side of the vessel, caused serious damage to the main deck and hatch cover. According to the National Standard GB3608-93 “above grade homework,” “where the operation is conducted at 2 m above the falling height datum which is likely to fall, the operation is called Height Operation.” Article 123 of the General Principals of Civil Law of the People’s Republic of China (hereinafter referred to as the “Civil Law”) states that “people who work in the condition of high-altitude, high pressure, flammable, explosive, toxic, radioactive, high-speed means of transport which is highly dangerous to the surrounding environment and causing harm to other persons, shall bear civil liability; if it can be proven that such damage caused deliberately by the victim then it should not bear civil liability.” This means the Defendant shall bear no-fault liability unless it can prove the defense. In this case, the Defendant shall bear civil

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liability to compensate for it could not prove the accident was caused deliberately by the Plaintiff. Additionally, according to Article 117 of the General Principals of Civil Law of the People’s Republic of China, “[o]ne who seizes State or Collective property or other’s property is prohibited, it should return the property back or reimburse it if the property cannot be returned. One who destroys State, collective property or others property should take the responsibility of restoring or compensating. Also, the tortfeasor shall take the responsibility of compensation if the victim suffers other great losses.” The Defendant shall compensate the Plaintiff for the ship repair costs amounting to USD196,840, other costs relating to ship repair amount to EUR39,096.27, and fuel losses and its interests during the maintenance period amount to USD53,518.40. According to Article 117, Article 123 of the General Principals of Civil Law of the People’s Republic of China Article 64 Paragraph 1 of the Civil Procedure Law, “a party shall have the responsibility to provide evidence in support of its own propositions,” the judgment is as follows: 1. The Defendant, Fangchenggang Group Co., Ltd., shall compensate the Plaintiff, Oldendorff Carriers GmbH and Co. KG, for the costs of ship repairs amounting to USD196,840 and the interest thereon (the interest shall be calculated from March 4, 2011 to the date of payment set by this judgment at the loan interest rate of liquid capital in RMB over the corresponding period as promulgated by the People’s Bank of China); 2. The Defendant, Fangchenggang Group Co., Ltd., shall compensate the Plaintiff, Oldendorff Carriers GmbH and Co. KG, ship maintenance costs in an amount of EUR39,096.27 and the interest thereon (the interest shall be calculated from March 4, 2011 to the date of payment set by this Judgment at the loan interest rate of liquid capital load in RMB over the corresponding period as promulgated by the People’s Bank of China); 3. The Defendant, Fangchenggang Group Co., Ltd., shall compensate the Plaintiff, Oldendorff Carriers GmbH and Co. KG, fuel loss amounting to USD53,518.40 and interest thereon (the interest shall be calculated from March 4, 2011 to the date of payment set by this Judgment at the loan interest rate of liquid capital in RMB over the corresponding period as promulgated by the People’s Bank of China); 4. Reject other claims of the Plaintiff, Oldendorff Carriers GmbH and Co. KG. Court acceptance fee in amount of RMB84,930, of which the Defendant, Fangchenggang Group Co., Ltd., shall bear RMB69,149, and the Plaintiff, Oldendorff Carriers GmbH and Co. KG, shall bear RMB15,781. The obligation of the above-mentioned payment shall be fulfilled within 10 days as of the effectiveness of this Judgment. Where any party fails to pay the above-mentioned amount within the period prescribed herein, such party shall, pay double the interest for the period of delayed payment. The obligee can apply to the

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court for execution within two years on the last day of the performance period designated by this judgment. In the event of dissatisfaction with this Judgment, the Plaintiff may, within 30 days upon service of this judgment, and the Defendant may, within 15 days upon service of this judgment, file an application together with 3 copies to the court, to lodge an appeal to the Guangxi Zhuang Autonomous Region High People’s Court. The appeal cost shall be paid in advance within 7 days after the limitation of appeal expires. (Beneficiary: Guangxi Zhuang Autonomous Region High People’s Court, Account number: 20-017301040003777, Bank of deposit: Agricultural Bank of China Nanning City Wanxiang Branch), otherwise, the appeal will be deemed to be automatically withdrawn. Presiding Judge: HUANG Juxiu Acting Judge: HUANG Siqi Acting Judge: SU Bin February 18, 2014 Clerk: OU Lulu

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Guangxi Zhuang Autonomous Region High People’s Court Civil Judgment Oldendorff Carriers GmbH and Co. KG v. Fangchenggang Group Co., Ltd. (2014) Gui Min Si Zhong Zi No. 53 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 717. Cause of Action 241. Dispute over port operation. Headnote Affirming lower court decision holding that the Plaintiff time charterer was entitled to recover damages for damage to ship caused by the Defendant’s crane, despite the fact that it was neither the owner nor demise charterer, because the time charter party made the charterer responsible to the shipowner for any damage sustained during cargo operations, but denying time charterer's claim for lost prepaid hire. Summary The Plaintiff-Time Charterer sued the Defendant-Port Operator in tort arising out damage to a vessel caused by the grab of the Defendant’s crane during discharge operations. The court of first instance held that the Plaintiff had the capacity to sue the tortfeasor Defendant since the damage to the vessel occurred while it was in control of and had a legal interest in the vessel, while also ordering the Defendant to reimburse Plaintiff USD250,358.40 and EUR39,096.27 for the costs associated with the maintenance, inspection, and fuel expended while repairing the vessel. Both parties appealed the court of first instance’s findings. The Plaintiff argued the court of first instance erred in denying its claim for reimbursement of hire payments since the Off-Hire Clause should not have applied whenever the Plaintiff was responsible for vessel repairs, while also arguing that its evidence failed to meet the court’s requirements due to the inadequate amount of time given by the court. The Defendant asserted the court of first instance wrongfully held that the Plaintiff had the requisite capacity to file suit because only vessel owners and demise charterers are permitted to make a claim for such damages. Further, the court of first instance failed to admit evidence showing that the scope and amount of the awarded damages was unreasonable. In rejecting each party’s arguments on appeal, the court affirmed the court of the first instance’s

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ruling that the Time Charterer had the capacity to make a claim for recourse damages since the provisions of the relevant charter party explicitly stated that the Time Charterer would be responsible for any damage caused by the stevedores to the vessel and for any fuel expended during the voyage. The court also held the court of first instance correctly determined the scope and amount of damages by permitting the Time Charterer to recover damages for the maintenance, repair, and inspection costs arising out of the accident while denying an award for loss of hire that was prepaid by the Time Charterer and the costs associated with the repairs to the vessel but were merely tangential to the accident.

Judgment The Appellant (The Plaintiff of First Instance): Oldendorff Carriers GmbH and Co. KG Domicile: Willy-Brand-Allee 6, 23554 Lubeck, Germany. Legal representative: Per Franch-Petersen, Claims Manager. Agent ad litem: SHEN Xiangman, lawyer of WANG JING & Co. Agent ad litem: BAI Xiaoliu, lawyer of WANG JING & Co. The Appellant (The Defendant of First Instance): Fangchenggang Group Co., Ltd. Domicile: No. 22 Friendship Avenue, Port District, Fangchenggang, Guangxi, the People’s Republic of China. Legal representative: YE Shixiang, chairman. Agent ad litem: TANG Cheng, lawyer of Guangxi Tangcheng Law Firm. Agent ad litem: HE Nengrong, lawyer of Guangxi Tangcheng Law Firm. With respect to the case arising from dispute over port operation, the Appellant, Oldendorff Carriers GmbH and Co. KG. (hereinafter referred to as “Oldendorff”), and the Appellant, Fangchenggang Group Co., Ltd. (hereinafter referred to as “Fangchenggang”), disagreed with (2011) Hai Shang Chu Zi No. 56 Civil Judgment rendered by Beihai Maritime Court and instituted an appeal to the court. After accepting this case, the court organized the collegiate panel consisting of Presiding Judge TAN Qinghua, Acting Judge BAI Shuyi and Acting Judge YANG Ding, to try the case in accordance with the law, and heard the case in public on November 14, 2014. BAI Xiaoliu, agent ad litem of the Appellant Oldendorff, TANG Cheng, agent ad litem of the Appellant Fangchenggang, appeared in court to attend the hearings. Now the case has been concluded. The court of first instance found the following facts: On April 21, 2009, Oldendorff entered into a charter party with EMPRESA NAVIERA ELCANO SA, namely the owner’s operator of M.V. “Castillo de Gormaz”. The terms and conditions were as follows: Oldendorff agreed to hire the vessel and the hire period was six months up to eight months; the hire

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was USD18,600 per day; after the expiration of the lease, the ship should be redelivered to the owner in good order and condition (ordinary wear and tear excepted); the charterer should have the liberty to sublet the vessel for all or any part of the time covered by this charter party, but the charterer remained responsible for the fulfillment of this charter party; Article 2 stated that: the charterer, while the vessel was on hire, should provide and pay all the bunkers…; Article 15 stated that: in the event of loss of time from deficiency and/or default of officers or crew, or deficiency of stores, fire, breakdown of, or damages to hull, machinery or equipment, grounding, or detention by average accidents to the vessel or cargo unless resulting, dry docking for the purpose of examination or painting bottom, or by any other similar cause preventing the full working of the vessel, the payment of hire shall cease for the time thereby lost. Article 26 stated that: nothing herein stated was to be construed as a demise of the vessel to the time charterer. The owners should remain responsible for the navigation of the vessel, acts of pilots and tug boats, insurance, crew, and all other matters, same as when trading for their account; additive clause Article 29 stated that: speed about 15 knots (empty), 13.73 knots (fully laden), on a consumption of about 52 metric tons of fuel, no diesel oil ess consumed at sea but it was consumed in port: in idle condition consumes about 3 metric tons of fuel and 0.5 tons of diesel oil, while working was about 4 tons of fuel and 0.5 tons of diesel oil; Article 44 stated that: the charterer should be responsible for damage (beyond ordinary wear and tear) to any part of the vessel caused by stevedores. Such damage should be notified as soon as reasonably possible by the Master to the charterer or their agent and to their stevedores, failing which the charterer should not be held responsible. The Master should endeavor to cooperate with the charterer or his or her agent to claim losses and issue a written letter of claim to the responsible party in a timely manner. The charterer was obliged to repair any stevedore damage prior to completion of the voyage, but must repair stevedore damage affecting the vessel’s seaworthiness or class before the vessel sailed from the port where such damage was caused or found. All additional expenses incurred should be for the account of the charterer and any time lost should be for the account of and should be paid to the owner by the charterer at the demurrage rate. M.V. “Castillo de Gormaz” carried 151,278 net tons of iron ore at Itaguai, Brazil and arrived in Fangchenggang pilot station on June 29, 2009 at 20:12 then submitted the NOR. At 05:15 on July 2, Fangchenggang began to unload the vessel while it was berthed at Fangchenggang lightering wharf per its duties as the responsible party of the discharge operation. Later that day at 21:15, during the discharge operation, the shore gantry mobile crane used for the unloading operation went out of control, the cable broke, and the full laden grab fell on the third cargo hatch cover at the port side of the vessel. The discharge operation stopped immediately. On the same day, the Master of M.V. “Castillo de Gormaz” submitted a damage report to Fangchenggang, stating the third cargo hatch cover at the port side was removed from the original location, and that all of the following had been deformed and damaged: the track, track column, hatch coaming, side boards, gear train and its accessories, packaging channel, and handrails. On July 4, the Master

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issued another damage report, adding the following damaged items: two fiber cables spring cracked; beams and side stringer below the roof, as well as the coaming crutches deformed and damaged. On July 4, the Master issued a sea protest outlining the damage and required Fangchenggang to bear responsibility for all the losses and delay. Fangchenggang’s staff signed the document. On July 4, 2009, a surveyor from Lloyd’s Register Guangzhou Agency commissioned by the ship manager EMPRESA NAVIERA ELCANO S.A. came on board to examine the damage. The surveyor specified in an Operation Control Record issued on July 4: Damage No. 1 lies under the 3rd cargo hatch cover: 1. the sheer strake, including the rubber channel deformed and damaged; 2. the roof deformed; 3. structure parts of the hatch cover, including the beam arch, side stringer and the crutches deformed and damaged; 4. ramps and support parts deformed and damaged; 5. wheels and the connected parts bent. Damage No. 2 lies below the coaming of the 3rd cargo hatch cover: 1. the strengthen crutch deformed; 2. the roof deformed. Damage No. 3: 1. the handrails deformed; 2. two spring cables broke. On July 6, the surveyor issued another operation control record which specified the Damage No. 4: the gunwale of No. 1 and No. 2 port side topside tanks are damaged; 2. frames No. 232 and No. 233 between the No. 37 and No. 36 sheer strakes sunken a little. On July 4, 2009, LR Guangzhou Agency issued an interim certificate which required a necessary repair to the damaged hatch cover as well as the hatch coaming and the handrails before leaving Fangchenggang, otherwise the ship’s classification certificate would be cancelled. On July 4, 2009, M.V. “Castillo de Gormaz” shifted to berth No. 17 to continue unloading and finished at 02:24 on July 6. Upon the Owner’s arrangement, the Master, the owner’s representative, an engineer of MacGREGOR (Shanghai) Maintenance & Repair Co., Ltd., surveyors from Lloyd’s Register Guangzhou Agency, a ship’s agent of the Oldendorff’ s, surveyors from Haizheng Company, surveyors from Haijiang Surveyors & Adjusters Co., Ltd., a surveyor from Balance Cargo Insurance Survey Co., Ltd., and other parties held a conference to discuss the repair matters and the repair plan. On the same day, the Master of M.V. “Castillo de Gormaz” issued another sea protest, recording that 1. the damaged 3rd hatch cover and other damages related to the discharge operation shall be repaired before the vessel leaves Fangchenggang namely before July 2, 2009; 2. the ship shall be properly fixed if such repair could not be finished; 3, the port should pay all the costs related to berth shifting; 4. the port shall be responsible for all the costs and expenses if the ship is headed for the shipyard and completed a permanent repair as required by the Owner and the Classification Society; 5. all the necessary materials shall be in accordance with the construction requirement and purchased under the approval of the Classification Society, all equipment and spare parts must be provided by MacGREGOR and so on. Fangchenggang signed the above protest. According to the repair plan made previously, on July 7, M.V. “Castillo de Gormaz” shifted to berth No. 2 for a temporary repair to fix the hatch cover and finished at 17:18 on July 11. After that, surveyors from Lloyd’s Register Guangzhou Agency appeared on board to inspect the vessel, they accepted the temporary repair, and issued “Cargo Ship Safety Construction Certificate” to prove

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that after the temporary repair the ship was able to sail to Shekou safely for a permanent repair. At 17: 48 on July 11, M.V. “Castillo de Gormaz” left Fangchenggang heading for Yiulian Shipyard to accept a permanent repair. At 16:54 on July 13, M.V. “Castillo de Gormaz” arrived at Yiulian Shipyard, where it moored firmly at Berth 8. At 11:00 on July 14, the vessel was moved to Berth 1 for repairs, which cost USD205,840. Oldendorff paid in full for the following repair projects: 1. general service cost of USD67,200, including the charge of towage of the vessel, piloting the ship to berth and unberth and mooring and unmooring twice, berth for seven days, and use of the gangway twice; 2. steel construction projects, including the repair of the handrails, the hatch cover and the extend rail, the repair of the 3rd left hatch cover, and the removal/repair of the outfitting; 3. other items cost USD17,320, including the use of a crane to lift the hatch cover up to the wharf and lift it back, the repair of the cover runner, change bearing, the treatment of 75 tons of sewage, and clean-up of 30 square meters of oil; 4. USD47,200 arising from general service during the typhoon periods, tugs, pilotage, mooring and unmooring, ramps, and other services. From 05:42 on July 18 to 05:48 July 21, M.V. “Castillo de Gormaz” anchored in Hong Kong Lantau Island anchorage in order to shelter from the Typhoon “Molave.” At 17:06 on July 21, M.V. “Castillo de Gormaz” left Berth 8 due to a berthing depth restriction and berthed again at 19:06 that day until leaving Yiulian Shipyard for Singapore at 06:20 on July 22. On July 15, the Master of M.V. “Castillo de Gormaz” bought two mooring lines which cost USD 6,300. On July 23, Lv Fu Rong International Trade Co., Ltd. issued a payment notification to Oldendorff asking it to pay a boarding service fee in the amount of EUR7,469 to an engineer named ZHU Wei. on May 25, 2011, Oldendorff remitted the money through the Deutsche Bank. On July 25, Noah Marine Service Co., Ltd. issued an invoice amount of EUR20,498, including supervision and management service provided by FEI, which charged EUR9,900, travel allowance amounting to EUR360, travel expenses amounting to EUR1,033, a phone bill amounting to EUR350, cover components amounting to EUR2,165, and costs incurred by accelerating the departure in Fangchenggang as well as the repair in the shipyard and withdrawing the vessel from the anchorage to avoid a Typhoon hit amounting to EUR6,690. On May 24, 2011, Oldendorff remitted the above-mentioned amount of money through the Deutsche Bank. On July 12, Fangchenggang China Shipping Agency Co., Ltd. issued 6 invoices for various ees amounting to USD2,660, including transportation expenses, boarding fees, accommodation fees, and other expenses amounting to USD2,535 which the owner’s representative, PLAZA JAYO EDUARDO, FEI, surveyors from P&I Club, Lloyd’s surveyor, Hu Dawei, spent during July 4 and 5 until July 11 in Fangchenggang, and USD125 for the purchase of British Admiralty Chart No. 4123. Airfare costs of the owner’s representative, PLAZA JAYO EDUARDO, amounted to EUR11,899.79 including departure from Madrid, Spain on July 4 via London, through Hong Kong, and arrival in Nanning on July 5; on July 11 departure from Nanning to Hong Kong, on July 23 from Hong Kong to Singapore, on July 27 from Singapore through London to Madrid. On July 30, Singapore LFA GLOBAL PTE LTD issued an invoice showing that they had received the underwater

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inspection fee amount of 4250 Singapore dollars from EMPRESA NAVIERA ELCANO S.A.. On August 12, Lloyd’s Register Guangzhou Agency issued two invoices to EMPRESA NAVIERA ELCANO S.A for service they offered to M.V. “Castillo de Gormaz” in Fangchenggang and Shekou, totaling EUR12,182.93. On August 18, Cargotec CHS Asia Pacific Pte Ltd. issued an invoice to MacGREGOR (ESP) S.A. MARINE SERVICES, for local transportation expenses, engineer service expenses, overtime pay, allowance, airfares, steamer tickets, train tickets, accommodation expenses, and others amounting to SGD16,371.55 (Singapore dollars). On August 31, MacGREGOR (ESP) S.A MARINE SERVICES issued two invoices to Empresa Nacional Elcano de la Marina Mercante S.A. amounting to EUR13,513.34. On June 8, 2010, EMPRESA NAVIERA ELCANO S.A charged Oldendorff for daily inspection fees about RMB18,200. On May 23, 2011, Oldendorff remitted USD100,696.50 to EMPRESA NAVIERA ELCANO S.A. through the Hamburg branch of Deutsche Bank. On June 17, 2011, EMPRESA NAVIERA ELCANO S.A. issued a certificate to confirm such payments, among which USD93,466.50 (equivalent to EUR65,696.56) was used as payment for the hatch cover damage of M.V. “Castillo de Gormaz,” the details including fees charged by Fangchenggang China Shipping Agency Co., Ltd., airfares of the owner’s representative, underwater inspection expenses, inspection fees charged by Lloyd’s Register, fees charged by MacGREGOR (ESP) S.A. MARINE SERVICES, costs of two cables, and daily survey expenses. etc. On June 25, 2009, Oldendorff refueled 2,999.789 tons for this voyage in Singapore at the price of USD403. On June 29, the chief mate recorded in the log book that the fuel quantity was 3,421 tons, 3,320 tons on July 13,and at 0842 on July 18, it was 3,297.50 tons. On July 3, 2009, Oldendorff entered into a time charter party with Pacific Bulk Shipping (Cayman) Ltd., in which Pacific Bulk Shipping (Cayman) Ltd. agreed to hire M.V. “Castillo de Gormaz” for a period from the time of delivery to November 23, 2009 or December 23, 2009 within below mentioned limits: the vessel should be used for loading iron ore, the charterer should pay for the hire at the rate of USD44,000 per day from the time of delivery; the vessel should be placed at the disposal of the charterer while the pilot dropped at the designated place in the open seas of Singapore. Required by the charterer, time should not commence before July 8, 2009, local time, the owner should notify the charterer in advance about the expected condition of the vessel if the charterer failed to give notice of readiness before or at 08:00 on July 15, 2009, local time. On July 10, both parties entered into a supplementary agreement: the lay day was July 15, 2009 and the cancelling date was July 26, 2009, the rate was USD44,000 per day and all other articles, conditions, and exclusive clauses remained the same. The court of first instance also found in the trial that Fangchenggang applied to the court of first instance for identification but later for a stay, for both parties applied for an out-of-court settlement. On this matter, the court of first instance rendered a ruling on April 20, 2012 to permit Guangzhou Marine Engineering Consulting & Testing Company to carry out the identification, which was later aborted due to both sides’ failure to provide necessary materials.

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The court of first instance held that Oldendorff sued Fangchenggang for losses caused by the discharging operation in which Fangchenggang’s crane grab damaged the vessel, therefore this was a port operation dispute. As to the Applicable Law in this case, tortious act committed in Guangxi, China and both parties cited the laws of the People’s Republic of China to raise claims and make defenses. According to Article 44 of the Law of the People’s Republic of China on Application of Laws to Foreign-Related Civil Relations, “the laws at the place of tort should apply to liabilities for tort, but if the parties have a mutual habitual residence, the laws at the mutual habitual residence should apply. If the parties choose the applicable laws by agreement after any tort takes place, the agreement should prevail.” The substantive dispute of this case should be settled according to the laws of China. Combining the views of both parties, the principal outstanding issues of this case were that: whether Oldendorff had the title to claim for the damages involved; how to determine the scope of the damages and the total amount of losses. I. With regard to whether Oldendorff had the capacity to sue. It was Fangchenggang that caused the damage to the ship during the discharge operation, Oldendorff claimed that based on the Charter Party between the two parties, it should be entitled to recourse against the tortfeasor (Fangchenggang) after undertaking compensation responsibility, therefore Oldendorff had the capacity to sue. Fangchenggang asserted that Oldendorff was only a time charterer, not the owner or demise charterer of the ship. Because it did not actually control and operate the ship, it did not enjoy property prescribed by law, therefore Oldendorff did not have the capacity to sue and the lawsuit should be rejected. The court of first instance held that Oldendorff was entitled to use the vessel in the agreed period as the time charterer of M.V. “Castillo de Gormaz” according the charter party entered into between it and the owner. Also, the ship should be redelivered to the owner in like good order and condition after the expiration of the lease. In this case, during the discharge operation in Fangchenggang, China, Fangchenggang’s crane grab fell on the 3rd cargo hatch cover at the port side of the vessel, causing damage to the main deck and hatch cover and affecting the ship’s classification society. After the damage occurred, the Master notified Oldendorff in written and Oldendorff commenced to deal with the matter. According to Article 44 of the Charter Party, which states that “[t]he charterer should be responsible for damage to any part of the vessel caused by loading/discharge. Such damage should be notified as soon as reasonably possible by the Master to the charterer, failing which the charterer should not be held responsible,” Oldendorff should bear the liability. Additionally, in Article 44 Paragraph 2, it stated that “[t]he charterer is obliged to repair any damage affecting the vessel’s seaworthiness or class before the

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vessel sails from the port where such damage was caused or found. All additional time and expenses incurred should be for the account of the charterer.” As the damage affected the vessel’s class, Oldendorff entrusted the shipyard to conduct the repair and paid the repair expenses as well as other costs directly related. It also paid the transportation expenses, testing fees, investigation costs, and others that the owner spent previously. Such payments were based on the charter party, giving them a legitimate reason. Therefore, although Oldendorff was neither the owner nor the Demise charterer of the ship, it finally took the responsibility based on the obligations under the charter party. The owner’s approval on the disposal and costs indicated the losses had been recovered. To sum up, as the party who ultimately bore the consequence of the damage, Oldendorff had the capacity to sue against the tortfeasor namely Fangchenggang. Secondly, according to the charter party, Oldendorff fulfilled its duty as Time charterer of the vessel and provided the fuel and afforded the payments, therefore it had an independent right to the fuel and was entitled to claim losses incurred during the maintenance period. Moreover, Oldendorff was entitled to sublet the vessel and had a right independent of the rights of the owners or the demise charterers. In summary, Oldendorff had a legal interest in the ship and should have the corresponding rights to claim the losses. The court of first instance confirmed its capacity to sue and held there was no factual or legal basis to support Fangchenggang’s defense. II. With regard to the scope of damages and the determination of loss. Oldendorff alleged that the accident caused the following losses: (1) Ship maintenance cost amounting to USD205,840; (2) Inspection fees, travel expenses, and other costs related to the maintenance amounting to EUR103,420.91; (3) Loss of hire amounting to USD334,403.78 and extra oil consumption amounting to USD83,904.60 due to detention; (4) Loss of profits amounting to USD872,570.39 for the ship was delayed in delivery to the sublet party. Fangchenggang alleged that: (1) The maintenance cost was too high and only costs within the limit of USD70,000 were reasonable. Additionally, the maintenance projects were beyond the actual scope of the accident. The clear detection of combustible gases, sewage treatment, oil cleaning, and other projects had nothing to do with the hatch cover repair; (2) Other costs that Oldendorff claimed has no direct relation to ship repair; (3) Losses caused by detention have no sufficient facts and legal basis for support; (4) The claim for the loss of profits was an overlapping claim and lacked legal basis.

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The court of first instance held that: (a) In respect to the maintenance costs, after M.V. “Castillo de Gormaz” was damaged, Oldendorff chose to repair the ship at Yiulian Shipyard in Shekou, Shenzhen in southern China. It was necessary and reasonable, because where the accident occurred did not have the ability to repair the ship. Fangchenggang argued that the ship should be repaired in Zhanjiang, but failed to prove that the shipyard in Zhanjiang was available to provide berth and had the same repair conditions and charge as Yiulian Shipyard. Therefore, the court of first instance rejected such defense. Oldendorff provided repair lists and invoices issued by Yiulian Shipyard to prove the loss arising from the repair of the ship and the court of first instance confirmed such evidence. The court of first instance also conducted an investigation and collected evidence ex officio from Yiulian Shipyard regarding the repair projects and costs. The above-mentioned evidence was sufficient to support Oldendorff’s claim for ship repair expenses and reaching the standard of proof, there was no need for a judicial expertise. Regarding the items questioned by Fangchenggang, the court of first instance held that (1) the clarity and detection of combustible gas are fixed items, the expense was reasonable; (2) the processing of 75 tons of sewage, which cost USD9,000, had nothing to do with the hatch cover repair, therefore Fangchenggang should not bear the expenses; (3) the repair platform was necessary for the hatch cover repair operation, however Yiulian Shipyard did not build a platform particularly for this instance. Instead, they only added some steel to the original platform to fix the hatch in connection with its characteristics, thus the cost incurred was reasonable and necessary; (4) during the repair process, shifting berth costs, such as towage and pilotage, occurred in order to avoid a typhoon. The court of first instance held that the cost was directly caused by the typhoon, however if there was no damage caused by the fault of Fangchenggang, then there would be no need to repair the ship during the typhoon period. Such costs would not therefore occur and Fangchenggang should bear the burden; (5) on the issue of deduction after new for old, the court of first instance held that Oldendorff should not have repaired the ship in the absence of such damage caused by Fangchenggang’s negligence. Besides, the repaired hatch cover was only a small part of the ship and its restoration had little impact on the value of the entire ship. Therefore there was no need to make such a deduction. In conclusion, apart from USD9,000 incurred through the processing of 75 tons of sewage, the court of first instance confirmed the remaining repair costs in the amount of USD196,840. There was no evidence to prove Fangchenggang’s defense on the maintenance costs and such defense was not consistent with the facts found by the court of first instance, so it was not accepted. (b) In respect of the inspection fees, travel expenses and other costs related to the maintenance of the ship: (1) the court of first instance recognized that the inspection fees in the amount of EUR12,182.93 that Lloyd’s Register charged for providing service twice in order to determine the damaged condition of the

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ship was reasonable and necessary; (2) the court of first instance also recognized that the expenses charged by Fangchenggang China Shipping Agency Co., Ltd. including transportation expenses, accommodation fees, and other expenses caused by the owner’s representative, surveyors from P&I Club and Lloyd’s surveyors were necessary and reasonable expenses. As to the costs of purchasing the Chart, the destination port of its present voyage was Fangchenggang. Due to the damage, the ship had to deviate from the pre-planned course and head for Shekou for maintenance, therefore the purchase of the chart was also necessary and Fangchenggang should bear the expense. In summary, the court of first instance confirmed the USD2,660 (equivalent to EUR1,900) charged by Fangchenggang China Shipping Agency Co., Ltd.; (3) according to the facts found by the court of first instance, the accident involved caused two spring cables to break, therefore such costs amounting to USD6,300 (equivalent to EUR4,500) should be paid by Fangchenggang; (4) as to expenses charged by MacGREGOR. MacGREGOR is the manufacturer, according to the previous Sea Protest all equipment and spare parts must be provided by MacGREGOR. During the maintenance process of the hatch cover, such spare parts and later the professional service cost amounted to EUR13,513.34, was reasonable and the court of first instance confirms it; (5) the court of first instance did not support Oldendorff’s claims for underwater inspection fees because it could not prove the connection between such expense and the damage; (6) the court of first instance did not support the daily inspector expense because Oldendorff failed to explain the specific usage and to prove the connections; (7) as to the supervision fee and other service expense charged by Lv Fu Rong International Trade Co., Ltd. as well as Noah Marine Service Co., Ltd., the court of first instance found the hatch cover was repaired by the biggest and best shipyard in South China (Yiulian Shipyard) and the manufacturer also provided service and accessories. However it was the common practice to hire professionals to perform supervision and instruction in order to ensure the repair schedule and the maintenance quality. Such costs and expenses should accordingly be born by Fangchenggang. Given the difficulty in ship repair procedure, time, the repair ability of Yiulian Shipyard, and other factors, the court of first instance discretionarily ascertained Fangchenggang should bear EUR7,000; (8) on the airfare, accommodation fees, and other travel expenses, the court of first instance held that Oldendorff dealt with the relevant affairs according to the Charter Party, authorized Lloyd’s Register and P&I Club and other professional institutions to conduct surveys, and delivered the ship to Yiulian Shipyard which had the title for repair and paid all the costs. During this time the ship was completely in the charge of Oldendorff and was adequately disposed. Under the damage circumstances, with the concerns about self-interest, the owner could send representatives to the scene to supervise, but the costs incurred related to such activities aimed at running the business should be born voluntarily by the owner. Also, Oldendorff failed to demonstrate the function of the owner’s representatives, therefore the court of first instance did

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not support Oldendorff’s claim. In summary, for the repair expenses Oldendorff claimed the court of first instance supported a reasonable amount of EUR39,096.27. (c) In respect to the loss of hire caused by detention, the court of first instance did not support such claims. Firstly, the accident caused damage to the hatch cover and part of the main deck. Such damage affected the ship’s classification society making a permanent repair necessary, meaning the ship was unable to conduct normal operations during the repairs. Article 15 of the charter party stated that “in the event of lost time from deficiency and/or default of crew, or deficiency of stores, fire, breakdown of, or damages to hull, machinery or equipment, grounding, or detention by average accidents to the vessel or cargo unless resulting, dry docking for the purpose of examination or painting bottom, or by any other similar cause preventing the full working of the vessel, the payment of hire should cease for the time thereby lost. Secondly, Oldendorff claimed that it had already paid the hire, but evidence to prove such claim as provided by Oldendorff were copies without notarization and thus cannot be recognized. According to Article 2 of Some Provisions of the Supreme People’s Court on Evidence in Civil Procedures, “[t]he parties have the responsibility to provide evidence to prove the facts either the claims are based on or the defenses are based on, the party bears burden of proof should bear any unfavorable consequences if there’s no evidence or evidence is insufficient to prove such facts.” Since Oldendorff failed to provide sufficient evidence, it should take the legal consequences of failure to meet the burden of proof. The court of first instance held that Oldendorff could not claim compensation for loss of hire due to detention because such loss was neither necessary nor did it actually occur. (d) In respect to the loss of oil consumption occurred during the period to repair the ship. As previously mentioned, Oldendorff was the fuel provider, therefore it should have an independent right on loss of oil consumption since it was the time charterer of the ship. The key point lied in the identification of the fuel quantity and the unit price. As to the amount of loss of fuel during the repair operation, the court of first instance found that oil consumption calculation was generally based on measurement (namely the oil amount from the beginning of the voyage till the end of the voyage while also including the amount added during the voyage). In this case, Oldendorff claimed that oil consumption during the repair operation should be the difference between the time the repairs began or should have begun and the time the repairs were completed. The oil consumption which Oldendorff claimed was based on its unilateral records, while Fangchenggang questioned the objective reality of such records. It alleged that according to the unit oil consumption and the sailing time to Zhanjiang port and time in port agreed to in the Charter Party, the amount of oil consumption should be 81.04 tons. Indeed, the ship headed for Shenzhen Shekou ultimately to be repaired. Zhanjiang Port was located in the middle of Shekou and Fangchenggang, as measured by Fangchenggang’s calculation method, and oil

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consumption during the maintenance period should be 130 tons. In summary, the amount Oldendorff calculated mostly corresponded with Fangchenggang’s calculation, therefore the court of first instance confirmed Oldendorff’s claim that the oil consumption of M.V. “Castillo de Gormaz” was 132.80 tons from the time the accident happened to the departure from Yiulian Shipyard after the repair was complete at 06:20 on July 22. The invoices provided by Oldendorff showed that the unit price was USD403 at the last time the ship added fuel for this voyage, therefore the total amount of loss of oil consumption was USD53,518.40 (132.80 tons  403 USD/ton). After being repaired, M.V. “Castillo de Gormaz” was delivered off the coast of Singapore and sailed from Shenzhen Shekou, where Yiulian Shipyard was located, to Singapore. The distance between Shekou and Singapore was almost the same distance as Fangchenggang to Singapore, therefore the oil consumption did not increase. The court of first instance did not support Oldendorff’s claim for the loss of oil consumption from Shenzhen Shekou to the open waters of Fangchenggang. (e) In respect to the loss of profits, the court of first instance did not support Oldendorff’s claims for loss of profits, which included sublease hire loss and loss of oil consumption, because such claims lacked evidence and sufficient reasons. Firstly, it was after the damage occurred when Oldendorff sublet the vessel to the third party. The sublease had not occurred yet when the accident transpired, meaning Oldendorff’s real income did not exist at that time. Therefore such loss was not caused by Fangchenggang’s negligence. Secondly, the charter party could only prove the legal relationship between Oldendorff and the third party. It failed to provide evidence such as bank transfer vouchers to prove the fulfillment of the contract, therefore the hire profits lack the requisite objective connections. Thirdly, the additional terms of the charter party showed only the daily hire reduced to USD42,000 and failed to explain the reason which cannot prove the causal relationship between the fall in hire and delay in delivery of the ship. Finally, the charter party agreed that the ship should be delivered at the open seas of Singapore. At the time the pilot disembarks, Oldendorff should be responsible for the oil consumption from Fangchenggang back to Singapore whether the damage has occurred or not. The above losses include reasonable repair costs at USD196,840, other costs related to ship repair in the amount of EUR39,096.27, loss of fuel of USD53,518.40 during the repair operation. All the losses occurred in 2009, yet Fangchenggang appeared slow to make compensation, therefore it should bear the loss of interests caused by such delay. Oldendorff claimed that the interest should be calculated from the start of the action (March 4, 2011) to the date of payment set by this Judgment. The court of first instance confirmed the interest should be calculated at the loan interest rate of liquid capital over the corresponding period as promulgated by the People’s Bank of China. To summarize, the court of first instance held that Oldendorff had proper capacity to pursue litigation and had the title to claim for the losses consequential to the damages to M.V. “Castillo de Gormaz.” Fangchenggang, as a port operator

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whose mobile crane was out of control during the operation, which broke the cable, causing the grab of discharge to fall on the 3rd cargo hatch cover at the port side of the vessel, resulting in serious damage to the main deck and hatch cover. According to the National Standard GB3608-93 “above grade homework,” “where the operation is conducted at 2 m above the falling height datum which is likely to fall, the operation is called Height Operation.” According to Article 123 of the General Principals of Civil Law of the People’s Republic of China (hereinafter referred to as the “Civil Law”), “people who works in the condition of high-altitude, high pressure, flammable, explosive, toxic, radioactive, or high-speed means of transport which is highly dangerous to the surrounding environment and causing harm to other person, shall bear civil liability. If it can be proven that such damage was caused deliberately by the victim then it should not bear civil liability.” Fangchenggang should bear no-fault liability unless it can prove the excusation. In this case, Fangchenggang should bear civil liability to compensate since it could not prove the accident was caused deliberately by Oldendorff. According to Article 117 of the General Principals of Civil Law of the People’s Republic of China, “[o]ne who seizes State or Collective property or others’ property is prohibited, it should return the property back or reimburse if the property cannot be returned. One who destroys State collective property or others’ property should take the responsibility of restoring or compensating. Also, the tortfeasor shall take the responsibility of compensating if the victim suffers other great losses.” Fangchenggang should compensate Oldendorff for the ship repairs costs amounting to USD196,840, other costs associated with ship repair in amounting to EUR39,096.27, loss of oil consumption, and its interests during the maintenance period amounting to USD53,518.40. According to the provisions of Article 117, Article 123 of the Civil Law, and Article 64 Paragraph 1 of the Civil Procedure Law, “a party should have the responsibility to provide evidence in support of its own propositions,” the court of first instance judged as follows: (1) Fangchenggang should compensate Oldendorff for the costs of ship repairing in the amount of USD 196,840 and the interest thereon (the interest should be calculated from March 4, 2011 to the date of payment set by the Judgment at the loan interest rate of liquid capital in RMB over the corresponding period as promulgated by the People’s Bank of China); (2) Fangchenggang should compensate Oldendorff for ship maintenance costs in the amount of EUR39,096.27 and the interest thereon (the interest should be calculated from March 4, 2011 to the date of payment set by the Judgment at the loan interest rate of liquid capital load in RMB as promulgated by the People’s Bank of China over the corresponding period); (3) Fangchenggang should compensate Oldendorff for the loss of oil consumption in the amount of USD53,518.40 and the interest thereon (the interest should be calculated from March 4, 2011 to the date of payment set by the judgment at the loan interest rate of liquid capital load in RMB as promulgated by the People’s Bank of China over the corresponding period); (4) reject other claims filed by Oldendorff.

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The Appellant Oldendorff appealed that: 1. According to Article 15 of the charter party, the court of first instance held that Oldendorff could cease the payment of hire in the event of loss of time from damages to the hull and thus overruled Oldendorff’s claim against loss for detention. Oldendorff claimed that such a finding was clearly wrong. Article 15 of the charter party entered into by Oldendorff and Fangchenggang agreed that, “in the event of loss of time from deficiency and/or default of officers or crew, or deficiency of stores, fire, breakdown of, or damages to hull, machinery or equipment, grounding, or detention by average accidents to the vessel or cargo unless resulting, dry docking for the purpose of examination or painting bottom, or by any other similar cause preventing the full working of the vessel, the payment of hire shall cease for the time thereby lost.” The court held that Oldendorff could cease the payment of hire. According to Oldendorff, such a judgment was a misconception of the spirit of the charter. Article 44 of the supplementary provisions, which had specified the division of responsibilities between the two parties in case of damage caused by port operations, also made clear the charterer should pay the hire under the circumstance where it was liable for damage of the vessel. As Article 44 agreed that, “the charterer shall be responsible for damage to any part of the vessel caused by stevedores. Such damage shall be notified as soon as reasonably possible by the Master to the Charterer or their agent and to their stevedores, failing which the Charterer shall not be held responsible.” In this case, the Master notified Oldendorff’s agent and other related parties as soon as the damage occurred. In accordance with the agreement, Oldendorff should be responsible for damage to the vessel caused by stevedores. According to Oldendorff, the Off-hire Clause should not be applied in the case of when the Charterer was responsible for the damage. This was supported by British lawyers’ opinions submitted in the second instance evidence under Britain’s law. Meanwhile, according to Article 44 of the charter party, “the charterer is obliged to repair any stevedore damage prior to completion of the voyage, but must repair stevedore damage affecting the vessel’s seaworthiness or class before the vessel sails from the port where such damage was caused or found. All additional expenses incurred shall be for the account of the charterer and any time lost shall be for the account of and shall be paid to the owner by the charterer.” Because of the accident, the ship’s hatch cover and part of the main deck were damaged, which affected the class of the ship and seaworthiness. Oldendorff was liable for damage caused by the loading/ unloading operation, it should therefore repair the ship and be responsible for the time lost and other expenses. This meant that Oldendorff still needed to pay rent to the owner during the repair operation. The court of first instance took Article 15 out of context, made an arbitrary decision that Oldendorff could cease the payment during the repair operation. Such an arbitrary decision was clearly wrong, for the court failed to take the following factors into consideration: firstly, according to British law, an off-hire clause should not be applied to the case where the charterer was responsible for the time loss; secondly, related

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terms of the charter party; thirdly, special terms superior to form clauses. The wrong judgment was the result of the court of first instance’s failing to fully and correctly understand the charter party under British law. 2. The court of first instance directly denied the fact that Oldendorff had actually paid the rent during the repair operation, for there was formal a defect of the evidence, and thus rejected Oldendorff’s claim for loss for detention. Such verdict was clearly wrong. According to the charter party, Oldendorff still needed to pay rent to the owner and had already paid in full. According to the requirement of the court of first instance, to prove such facts, Oldendorff submitted a statement of hire and receipts issued by the owner soon after the first instance. To meet tight deadlines, only scanned images of the above-mentioned documents were submitted to the court of first instance. After receiving such documents, the court of first instance did not raise any questions or further requirements to the form of the evidence, including the original evidence and the notarization matter. However, the court of first instance held that Oldendorff failed to provide sufficient evidence since the evidence submitted were copies without notarization. Thus it could not confirm Oldendorff’s claim for payment of rent; such judgment was improper application of the law. Oldendorff claims that the hire statement and the owner’s receipts could accurately show that Oldendorff had already paid the rent in full to the owner. Secondly, unlike the copied evidence, the content of evidence with form defects was authentic and credible. Only the capacity of evidence and weight of proof needed to be further proven due to defects in form. Such evidence could be adopted by the court in the case of other evidence to support or to supplement. Taking into account the procedure of collecting original evidence abroad and that the notarization procedure took a long time, it was normal that Oldendorff was temporarily unable to do such within a relatively short period of time required by the court. The court of first instance should have given adequate time to it, Oldendorff would have obtained such evidence and finish the notarization procedure accordingly. The court of first instance overemphasized the form of evidence and therefore denied Oldendorff’s claim directly. By doing so it acted against “take the facts as the criterion,” which was the requirement of trial. 3. Oldendorff’s claim for loss of rent had sufficient factual and legal basis. According to “the No. 4 Civil Division of the Supreme People’s Court’s Guidance on Practices in Foreign-Related Commercial and Maritime Trials (No. 1)” on question: “those extraterritorial evidence must be notarized, except for commercial papers used for international circulation.” Therefore, in the British lawyer’s opinion, the original statements of hire and the original bank statement invoices provided in the second instance were sufficient to prove that Oldendorff had already paid to the Owner the rent during the ship maintenance, and there was no need for a notarization procedure on the original Bank invoices. To this end, Oldendorff requested to revoke Beihai Maritime Court (2011) Hai Shang Chu Zi No. 56 Civil Judgment the fourth item, dismiss the appeal of Fangchenggang, and rule that Fangchenggang should compensate Oldendorff for loss of hire caused by repair detention amounting to

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USD334,403.78 and the interest thereon (the interest should be calculated from March 4, 2011 to the date of payment set by this Judgment, at the loan interest rate of liquid capital load in RMB over the corresponding period as promulgated by the People’s Bank of China). The Appellant Fangchenggang appealed that: 1. There was no factual or legal basis for the court of first instance to hold that the Appellant, Oldendorff, had the title to sue. Firstly, based on Article 44 of the charter party entered into by Oldendorff and the owner of CASTILL, the court of first instance held that Oldendorff took the responsibility based on the obligations under the charter party and it was the party who ultimately bore the consequence of the damage. Therefore, Oldendorff had the capacity to sue the tortfeasor. Fangchenggang argued that this decision was incorrect. According to Article 2 Paragraph 3 of the Property Law, the owner or demise charterer enjoyed the property right (that was the ownership, the usufructuary right, and the security right of the ship) prescribed by law. Oldendorff was the time charterer of the vessel, not the owner or the demise charterer, and did not actually possess, manage or control the ship. It was only entitled to use the vessel in regards to the creditor’s rights under the contract and not the right of property tenancy in a general sense. Therefore, the right enjoyed by Oldendorff was neither the property right nor the operation right and the creditor’s right under the contract should not prevail against the property right. Therefore, the court of first instance should have made clear that only the owner or demise charterer had the title to claim for compensation. Secondly, the judgment of first instance held that Oldendorff was entitled to claim loss of fuel to Fangchenggang for it had actually paid the cost. In this case, the alleged infringement act was not directly against the ship fuel. Loss of oil consumption during ship maintenance should be placed in the maintenance expense, and such expense should be claimed to Fangchenggang by the owner or the demise charterer who enjoy the title to sue. Thirdly, the first judgment held that Oldendorff was entitled to sublet the vessel and thus had a right independent of the rights of the owner or the demise charterer. Although Oldendorff could sublet the ship, it would still perform the obligations to the owner or the demise charterer. However it should not be entitled to enjoy the property right against the sub-charterer. In this case, there is no evidence to prove the owner or the demise charterer had given up the right of claim compensation. If the court ultimately found that the time charterer should enjoy such a right, chances were Fangchenggang would confront with claims from the owner or the demise charterer after making compensation to the time charterer. Fourthly, the leasehold was not the usufructuary right prescribed by the Property Law, let alone the time charter right in this case, and Oldendorff did not actually possess the ship. Indeed, the ship was entirely possessed and controlled by the owner through dispatching crews. Accordingly, the leasehold was not the usufructuary right prescribed by law. Civil law academia also tended to consider that a

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leasehold was not a usufructuary right and did not have the characteristics of a usufructuary right. Opposing regarding a leasehold as a usufructuary right, Oldendorff should not be entitled to claim for compensation from any perspective. Fifthly, from the perspective of the charter party, Oldendorff had no right to claim for compensation. According to Article 44 Paragraph 2 of supplementary provisions, “the charterer is obliged to repair any damage at the port where such damage was caused, all additional expenses and time lost incurred shall be for the account of the charterer”, no agreement had been reached on the expenses and time lost occurred outside of the place of damage. Meanwhile, Article 15 provided that the repair expenses and the payment of hire should not be paid by the charter in the event of repairing the ship in Yiulian Shipyard, and such expenses should be for the account of the owner. Apparently, Oldendorff should neither bear the repair expenses and the loss of hire nor could it claim for compensation to Fangchenggang. 2. In the first instance, the court did not thoroughly verify and adopt evidence favorable to Fangchenggang, and held the ship maintenance cost in amount of USD196,840 to lack sufficient factual basis. Firstly, the owner and Oldendorff had confirmed the cost was about USD70,000. After the accident, Haizheng Company was hired by Oldendorff to examine the ship and later issue several survey reports, including the report No. 4 (issued on July 9, 2009), and make assessments about the maintenance expense, which about USD70,000. Previously on July 7, 2009, Fangcheng Ocean Shipping Co., Ltd., as the agent of the owner, also wrote to Fangchenggang (together with the maintenance list of the Yiulian Shipyard) to inform of such expense. The former was entrusted by Oldendorff and the latter was entrusted by the owner, both represented the interests of the owner. In the normal sense, the appraisal should take the top dollar instead of the low price. Fangchenggang had reason to believe that this was the real intention of Oldendorff, and also to believe that the maintenance costs did not exceed USD70,000. Also, Fangchenggang would like to emphasize that the Haizheng Company’s report No. 3 showed that the owner called a meeting on July 6 with eight parties to discuss the repair matters and the repair plan. Therefore, the repair expense in the amount of USD70,000 was a conclusion made by Haizheng Company to Oldendorff, as well as a consensus reached by the owner, Oldendorff and the P&I Club. Secondly, Oldendorff repaired the ship unilaterally and was unable to prove the expense up to USD200,000 arising from the repair process since (1) Oldendorff deliberately concealed the whole process. In actuality, the ship was slightly damaged but it chose to repair the ship in Shenzhen instead of Zhanjiang, a place in the vicinity. Meanwhile, since all the parties had reached an agreement that the repair cost should be within USD70,000, Oldendorff should give reasonable notice to Fangchenggang and ask for permission before repairing since Yiulian’s quotation was three times more than the previous assessment. Oldendorff should have provided convenience or other assistance to Haizheng Company in order to conduct a survey and assessment of the ship. Although Haizheng Company’s

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surveyor made repeated requests after the ship was delivered to Yiulian Shipyard, Oldendorff declined the site survey. Haizheng Company was unable to understand the actual repair situation, let alone the maintenance items and the standard of charge; (2) the repair invoice provided was not real and unreasonable and states: “through negotiation, the representatives of the shipyard and the delegates presented unanimously agreed the invoice amount shall be USD205,840.” This amount was the result of negotiation, not the actual maintenance cost, which means the description of maintenance fee was very casual and lacked objectivity and reality; (3) as to the assessment of the hatch cover reparation, the ship repair price of Yiulian Shipyard was not the government price, Oldendorff deliberately did not allow a third-party to step in, and Fangchenggang had no way to get involved. It was necessary for a reassessment and the only way to identify the reasonable cost. Upon the application of Fangchenggang, Guangzhou Marine Engineering Consulting & Testing Company was randomly selected by the court of first instance to carry out the assessment of the hatch cover repair cost. As the charterer, Oldendorff was available to obtain and submit the drawing, but it refused to provide it, meaning the assessment could not be conducted and Oldendorff should be responsible for it. 3. The court of first instance held that the maintenance cost was beyond reasonable levels. Most of the expenses that Oldendorff claimed were not necessary for the Master himself, being the representative of the owner, could perform related functions, creating no need for a third-party to participate. Transportation expenses, accommodation fees, and other expenses caused by the owner’s representative, surveyors from the P&I Club, and Lloyd’s surveyors, should be born respectively because according to the charter party, there was no need for the owner to send someone to deal with this matter in case of the charterer bearing the repair cost. Fangchenggang only argued the Lloyd’s inspection fee and the cost of purchasing Charts were reasonable. 4. Loss of oil consumption confirmed by the court of first instance went far beyond the reasonable level. Fangchenggang argued that Oldendorff overstated the oil consumption during the detention, the ship should be repaired at Zhanjiang port, and the reasonable amount of oil consumption should be the consumption from Fangchenggang to Zhanjiang, as well as during the maintenance period, amounting to about 81.04 tons. To this end, Fangchenggang requested to revoke Beihai Maritime Court (2011) Hai Shang Chu Zi No. 56 Civil Judgment, reject the lawsuit or the claims of Oldendorff, or retry the case. Against Fangchenggang’s appeal, Oldendorff argued that: 1. The court of first instance held that Oldendorff had the capacity to sue, which had factual and legal basis and was correct. Although Oldendorff was neither the owner nor the demise charterer of the ship, it fully took the responsibility based on the obligations under the charter party. The owner’s approval on the disposal and costs indicated that the losses had been recovered. To summarize, as the

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party who ultimately bore the consequence of the damage, Oldendorff had the capacity to sue the tortfeasor (Fangchenggang). Secondly, according to the charter party, as time charterer of the vessel, Oldendorff provided the fuel and afforded the payments, therefore it had an independent right to the fuel and was entitled to claim losses incurred during the maintenance period. Moreover, according to the charter party, as a time charterer, Oldendorff was entitled to sublet the vessel and had a right independent from the rights of the owner or the demise charterer. In summary, Oldendorff had a legal interest in the ship and it shall have the corresponding rights to claim the loss. The court accordingly confirmed the capacity to sue. The above judgment was correct. The reasons were as follows: firstly, Fangchenggang asserted that the right enjoyed by Oldendorff was neither the property right nor the operation right. The creditor’s right under the contract should not prevail against the property right. However, according to Article 2 Paragraph 3 of the Property Law cited by Fangchenggang, as the time charterer of the vessel, Oldendorff did enjoy the right to directly control the ship and the exclusivity of usage while it benefited through use of the vessel. Additionally, it was entitled to sublet the vessel. Such rights clearly meet the characteristics of a usufructuary right. Secondly, according to the charter party, Oldendorff provided the fuel and afforded the payments, demonstrating an independent right to the fuel and was entitled to claim loss. The accident involved caused additional oil consumption and such expenditure was Oldendorff’s direct loss incurred from the behavior of Fangchenggang. Furthermore, during the entire repair operation, the owner had no objection with the way Oldendorff handled the ship and also confirmed Oldendorff had already paid in full the repair cost. In other words, the owner’s loss had been recovered, therefore it was correct that Oldendorff was the party who should ultimately bear the consequence of the damage. According to the fundamental legal theory of Civil Law, “[o]ne who infringes other’s interests shall bear the responsibility accordingly.” It was correct the court of first instance held that Oldendorff should be entitled to recourse against the infringer after bearing compensation to the owner. Besides, the owner confirmed that Oldendorff had already paid the repair cost in full, so it was untenable that Fangchenggang would challenge with claims from the owner or the demise charterer after it paid compensation to the time charterer. Regardless if the owner would not separately file a claim against Fangchenggang in case of bearing no loss, even though it did so, Fangchenggang could also make an adequate defense. Finally, according to the charter party, as a time charterer, Oldendorff was entitled to sublet the vessel and had a right independent of the rights of the owners or the demise charterers. According to the possession system theory of the Property Law, Oldendorff possessed the ship and it had the capacity to sue. According to Article 245 of the Property Law, the occupant was entitled to claim for compensation to the third party who caused the damage even if it did not enjoy such property right. Despite there being no specific definition of “possession”, according to the theory of the civil law tradition in the Property Law, the traditional civil law theory referred to “possession” as the

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facts to manage and control the property. The essence of possession lied in the subject’s control of the property with free will. It could be seen that dominance was the very core of possession, whether possession set up or not could be judged by the actual control, use, and benefit of the property. (1) Evidence 40 submitted in the first instance namely Article 8 of the charter party agreed that, “the Master (although appointed by the owner), shall follow the instructions and orders of the charter on the operation and representation of the ship”. Accordingly, although the crews were employed by the owner, they should follow the instructions and orders of the charter on the operation of the ship. During the actual performance of the charter party, Oldendorff issued instructions to the Master and the Master did follow such instructions. Under both the contractual arrangement and the contract performance, Oldendorff did actually control, use, and benefit from the ship; (2) under the charter party, “the charterer shall have the liberty to sublet the vessel for all or any part of the time covered by this charter party”. the right should not be affected by whether the sublet actually happened or not, and such agreement also indicated that Oldendorff should enjoy the right to use or in other words, enjoy his rights of usufruct. 2. Judgment of the first instance held that ship maintenance cost in the amount of USD196,840 was correct, which had a sufficient factual basis. In the first instance, Oldendorff provided repair lists and invoices issued by Yiulian Shipyard. The court also conducted an investigation and evidence collection ex officio in Yiulian Shipyard. The above-mentioned evidence was sufficient to support Oldendorff’s claim and reached the standard of proof. It was correct that the court held no need for a judicial expert. In regard to the repair items questioned by Fangchenggang, the court also made a comprehensive confirmation that it should bear the reasonable costs. All the reasons to support Fangchenggang’s query were presented before and were robustly refuted by Oldendorff, and thus should not be supported. (1) The quote amounting to USD70,000 was an initial offer of the shipyard, which contained basic items only, no cost of steel structure was included, therefore the actual repair cost should prevail. The shipyard also confirmed this in the first instance. All the parties quoted such quotation to confirm that they understood the offer, which did not conform to Oldendorff’s proof; (2) in order to deny the authenticity of the above-mentioned cost, Fangchenggang cast doubt on Oldendorff choice to repair the ship in Shenzhen instead of in Zhanjiang, a location in the vicinity of the accident. Such doubt ignored the specific circumstances of the accident. The representatives in charge of coordination and arrangement confirmed that due to the large tonnage involved, Zhanjiang shipyard had no suitable berth for the ship. Additionally, no proper crane was available to carry the damaged hatch cover. Oldendorff spared every effort to understand that the available shipyard with berth and equipment was Yiulian Shipyard in Shekou, Shenzhen and a

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shipyard in Hong Kong. Considering that the cost in Hong Kong must be expensive, all the parties agreed to repair the ship in Yiulian Shipyard. Such a decision was reasonable and a responsible performance to prevent a further upsurge in losses; (3) Oldendorff had informed Fangchenggang about the repair procedure and had never rejected Haizheng’s on-board investigation. It was due to the Typhoon that the investigation was detained; (4) all the items and charges were specified in the repair invoices and if Fangchenggang considered there to be something wrong in it, it should point out the specific items and provide the relevant evidence; (5) after Fangchenggang applied to the court for judicial assessment, Oldendorff cooperated actively and provided necessary materials. However due to the ship being sold after the accident, it was difficult to collect relevant charts, thus the chart of the ship could not be provided. Neither the court nor the assessment company could solve this problem. Finally the judicial assessment was aborted, for which Oldendorff should not be responsible. Instead, Fangchenggang should bear the responsibility. 3. Costs associated with ship repair confirmed by the court of first instance were reasonable and correct. Fangchenggang alleged such an amount confirmed costs to be beyond reasonable levels, one of the reasons being “[t]he Master himself could exercise related functions as it was the representative of the owner, there was no need for a third-party to participate”. Such claim actually lacked the requisite basis because the ship repair procedure was complex and professional, and the involvement of a specialized corporation was essential. It was reasonable that the owner and Oldendorff were concerned about the condition of ship while sending representatives to the scene to provide supervision and coordination. The resulting expense should therefore be born by the tortfeasor. It was also unreasonable that Fangchenggang asserted that “transportation expenses, accommodation fees and other expenses caused by the owner’s representative, surveyors from the P&I Club, and Lloyd’s surveyors should be born respectively”. These expenses arose from these people’s participation in the maintenance procedure and should be ultimately born by the tortfeasor. 4. The judgment of first instance on the amount of loss of oil consumption was reasonable and had sufficient fact basis. As mentioned earlier, due to the large tonnage involved, Zhanjiang shipyard had no suitable berth for the ship and no proper crane to carry the damaged hatch cover. Oldendorff ultimately decided to repair the ship in Yiulian Shipyard and such decision was reasonable. Accordingly, the reasonable amount of oil consumption should be the consumption from Fangchenggang to Zhanjiang as well as during the maintenance period. Against Oldendorff’s appeal, Fangchenggang argued that, it was correct that the court of first instance rejected Oldendorff’s claim on loss of hire. Firstly, according to the charter party between Oldendorff and the owner, in the event of any cause preventing the full working of the vessel, the payment of hire should cease for the time thereby lost. According to the contract, there was not enough reason to prove that Oldendorff took the loss of hire. Secondly, Oldendorff claimed that it had

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actually paid in full the rent to the owner, but no evidence in accordance with the law was provided by Oldendorff. At the present, there was no payment document or notarized evidence to support. Thus it was correct that the court of first instance did not confirm such claim. During the second instance, the Appellant Oldendorff submitted the following new evidence to the court in order to support of its appeal: 1. Legal opinion of the British Attorney, to prove that according to Article 15 of the charter party, in accordance with British law, the Off-hire Clause should not be applied; 2. Hire statement; 3. Three pieces of vouchers issued by Commerzbank AG. Evidence 2–3 was to prove that Oldendorff paid in full to the owner the rent incurred during the repair procedure. Upon cross-examination the Appellant Fangchenggang argued that: evidence 1 was the opinion of a legal expert, which could only be adopted as reference were the opinion to be used as evidence and the expert should appear in court to be questioned. Fangchenggang would not confirm the authenticity of evidence 2 since such statement was issued by Oldendorff unilaterally, yet the owner did not confirmed the payment of rent. It objected to the authenticity and relevancy of evidence 3, and asserted the evidence was an extraterritorial evidence without notarization. In addition, it had existed since 2009, so it was not a new evidence and exceeded the time limit for presenting evidence. In addition, such evidence was only a unilateral statement of Oldendorff, specified that it was not a bank statement, and the signature in the bottom could not be verified. The evidence therefore could not demonstrate Oldendorff’s payment. The Appellant Fangchenggang submitted no evidence during the second instance. For above evidence, the court holds that, evidence 1 is an expert opinion, belonging to the testimony of a witness, and since the expert did not appear in court to be questioned by both parties, the authenticity could not be confirmed; evidence 2 was issued by Oldendorff unilaterally, yet the owner did not confirm the payment of rent and cannot form a chain of evidence. The court will not admit it. Evidence 3 did not go through a notarization procedure, and there are words like “the banks did not sign this statement” in all three pieces of vouchers. The authenticity of this evidence could not be confirmed and there is no other evidence to support it. Hence, the court will not admit it. In the second instance, both the Appellant Oldendorff and the Appellant Fangchenggang had no objection to the facts confirmed by the court of first instance. Facts found by the court of first instance are clear and the evidence is sufficient, therefore the court also admits the evidence.

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Additionally, there are reports relating to the situation of Gomez issued by China Fangcheng Ocean Shipping Co., Ltd. to Fangchenggang on July 7, in which the first point stated that: “1. the vessel was repaired at Yiulian Shipyard in Shekou. After a Fangchenggang preliminary repair, in which the damaged hatch cover was lifted back then fixed on the hatch, an initial seal was made in order to obtain single voyage permission from the Classification Society. Later the ship headed for Shekou Yiulian Shipyard for a permanent repair. The shipping company has already contacted the shipyard.” The third point stated that: “costs relating to repair operation in the amount of USD92,000 (expense arising from preliminary repair in Fangchenggang was not included), specifically: 1. repair cost in the amount of USD70,000. The steel consumption cannot be determined exactly, all the expenditures see appendix 2. 2. Expense arising from the vessel in/outbound harbor at Shekou (including pilot, tug boat, and others in the amount of USD22,000), see appendix 3.” The court also finds out that on July 6, 2009, the Master of M.V. “Castillo de Gormaz” issued a sea protest, the ninth point stated that: “I reserve the right to extend (supplement) this sea protest for there may be additional damage potentially existing in the repair process.” Both of the two damage reports issued by the Master on July 2, 2009 and July 4 stated that: “in case of failing to repair damage referred to in copies of this notice and to provide the burden of proof, a test shall be carried out immediately, and your company shall be liable for the Charter.” The report was sealed by the Ship Manager EMPRESA NAVIERA ELCANOS. The court holds that this case is arising from a dispute over port operation. One of the parties namely the Appellant Oldendorff is incorporated in Germany and the ship involved flew the Bahamas flag, therefore this case involves foreign elements. According to the provisions of Article 44 of the Law of the People’s Republic of China on Application of Laws to Foreign-Related Civil Relations, “the laws at the place of tort shall apply to liabilities for tort, but if the parties have a mutual habitual residence, the laws at the mutual habitual residence shall apply. If the parties choose the applicable laws by agreement after any tort takes place, the agreement shall prevail.” Both parties agreed to choose laws of the People’s Republic of China as applicable laws, so this case shall be settled with the application of the laws of the People’s Republic of China. Combined with the allegations of Oldendorff and Fangchenggang, the principal outstanding issues of this case are that, (1) whether the Appellant Oldendorff has the capacity to sue; (2) whether the Appellant Fangchenggang shall indemnify the Appellant Oldendorff and how to determine the scope of the damages and the total amount of losses.

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I. With regard to whether the Appellant Oldendorff has the capacity to sue. The Appellant Oldendorff held that the court of first instance correctly held that Oldendorff had the capacity to sue. Although Oldendorff was neither the owner nor the demise charterer of the ship, it finally took the responsibility according to the obligations under the charter party, thus it should have the capacity to sue. The Appellant Fangchenggang argued that, there was no factual or legal basis that the court of first instance held that the Appellant Oldendorff had the title to sue. The owner or demise charterer should only enjoy the property right prescribed by law. Oldendorff was the time charterer of the vessel, it could only enjoy the right to use (the creditor’s rights under the contract). Besides, in this case, the alleged infringement act claimed by Oldendorff was not directly against the ship fuel. Loss of oil consumption during ship maintenance should be placed in the maintenance expense, and such expense should be claimed to Fangchenggang by the owner or the demise charterer who enjoyed the title to sue. Although Oldendorff could sublet the ship, it still performed the obligations to the owner or the demise charterer. However it should not be entitled to enjoy the property right against the sub-charterer. In this case, no evidence could prove that the owner or the demise charterer had given up the right of claim compensation. The court holds that the Appellant Oldendorff has the capacity to sue. The reasons are as follows: 1. On April 21, 2009, Oldendorff entered into a charter party with EMPRESA NAVIERA ELCANO S.A., namely the owner’s operator of M. V. “Castillo de Gormaz”, in this charter, Oldendorff agreed to hire the vessel. Such agreement formed the basis upon which Oldendorff could lawfully possess the ship. According to Article 241 of the Property Law of People’s Republic of China, “possession based on contractual relationship as well as the use, profit, and liability for breach of the real property or movable property, shall be performed as agreed in the contract; if there is no such stipulation in the contract or the stipulation is not clear, the relevant provisions of the law shall prevail.” Oldendorff’s title to sue shall be based on the charter party entered into with EMPRESA NAVIERA ELCANO S.A. According to Article 44 of the charter party, “[t]he charterer shall be responsible for damage (beyond ordinary wear and tear) to any part of the vessel caused by Stevedores. Such damage shall be notified as soon as reasonably possible by the Master to the charterer, or their agent, and to their Stevedores, and failing to do so shall not make the charterer responsible. The Master shall endeavor to cooperate with the charterer, or his or her agent, to claim losses and issue a written letter of claim to the responsible party in a timely manner. The charterer is obliged to repair any stevedore damage prior to completion of the voyage, but must repair stevedore damage affecting the vessel’s seaworthiness or class before the vessel sails from the port where such damage was caused or found. All additional expenses incurred shall be for the account of the charterer and

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any time lost shall be for the account of and shall be paid to the owner by the charterer at the demurrage rate.” The 3rd cargo hatch cover of M.V. “Castillo de Gormaz” was damaged which caused serious damage to the main deck as well as the hatch cover and affected the ship’s classification society. Soon after the damage occurred, the Master notified Oldendorff in written, thus Oldendorff shall be responsible for the time lost and other expenses during the repair operation. It actually paid all the maintenance cost and other related costs. At this point, Oldendorff shall have the capacity to sue the tortfeasor, Fangchenggang. According to Article 2 of the charter party, “the charterer, while the vessel is on hire, shall provide and pay all the bunkers…”; Oldendorff provided the fuel and afforded the payments. It certainly has an independent right to the fuel and is entitled to claim loss to Fangchenggang. Moreover, according to the charter party, “the charterer shall have the liberty to sublet the vessel for all or any part of the time covered by this charter party, but the charterer remain responsible for the fulfillment of this charter party.” In other words, Oldendorff also has the capacity to claim loss. Furthermore, Fangchenggang argued that all additional expenses and time lost incurred should be undertaken by the charterer. No agreement had been reached on the expenses and time lost occurred out of the place of damage. The court holds such claim is a misinterpretation of the charter party. The ship finished the permanent repair in Yiulian Shipyard, but all the loss was caused by the accident. The argument that Oldendorff should bear responsibility only to time loss and expenses incurred at the port is partial. Besides, both of the two damage reports issued by the Master on July 2, 2009 and July 4, 2009 to Fangchenggang states: “[i]n case of failing to repair damage referred to in copies of this notice and to provide the burden of proof, a test shall be carried out immediately and your company shall be liable for the Charter.” As can be seen, Oldendorff has title to sue. The court will accordingly reject the Appellant Fangchenggang’s claims. 2. Both of the two damage reports issued by the Master on July 2, 2009 and July 4, 2009 to Fangchenggang states: “[i]n case of failing to repair damage referred to in copies of this notice and to provide the burden of proof, a test shall be carried out immediately and your company shall be liable for the Charter.” This indicates the operator has already transfered the title to sue to Oldendorff. This builds a complete chain of evidence along with the charter party, all of which prove that Oldendorff has the title to sue. In conclusion, the Appellant Oldendorff had the capacity to sue, the Appellant Fangchenggang argued Oldendorff was neither the owner nor the demise charterer of the ship but was merely a time charterer and did not actually control and operate the ship, thus did not enjoy property prescribed by law. However, the court rejects such claim.

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II. With regard to whether Fangchenggang shall compensate Oldendorff and how to determine the scope of the damages and the total amount of the losses. The Appellant Oldendorff argued that (1) it was right that the court of first instance found the ship maintenance cost totaled USD196,840, which had sufficient fact basis; (2) it was logical and correct that the court of first instance found the costs related to ship maintenance totaled EUR39,096.27; (3) the loss of oil consumption totaling USD53,518.40 was determined in the judgment of the court of first instance and was reasonable and had factual basis; (4) Fangchenggang shall compensate Oldendorff for the loss of hire caused by ship maintenance in an amount of USD334,403.78. The Appellant Fangchenggang countered that (1) in the first instance, the court did not thoroughly verify and adopt evidence favorable to Fangchenggang, and held the ship maintenance cost totaling USD196,840 lacked sufficient factual basis; (2) the amount of the maintenance cost the court of first instance held was outside the reasonable cap. Fangchenggang only asserted the Lloyd’s inspection fee and the cost of purchasing Charts were reasonable; (3) the amount of the loss of oil consumption the court of first instance held was unreasonable because the ship should be repaired at Zhanjiang Port and the reasonable amount of oil consumption should be the consumption from Fangchenggang to Zhanjiang as well as that during the maintenance period. Such amount should be about 81.04 tons; (4) it was correct that the court of first instance did not support Oldendorff’s claim on loss of hire. The court holds that, according to the National Standard GB3608-93 “above grade homework”, “where the operation is conducted at 2 m above the falling height datum, which is likely to fall, the operation is called Height Operation.” In this case, during the discharge operation the shore gantry mobile crane belonging to Fangchenggang went out of control, the cable broke and caused damage to the ship. This was an accident caused by Height Operation. According to Article 123 of the General Principals of Civil Law of People’s Republic of China (hereinafter referred to as the “Civil Law”), “[p]eople who work in the condition of high-altitude, high pressure, flammable, explosive, toxic, radioactive, high-speed means of transport which is highly dangerous to the surrounding environment and causing harm to other persons, shall bear civil liability; if it can be proven that such damage caused deliberately by the victim then it shall not bear civil liability”, obligation arising from Height Operation shall bear no-fault liability. In this case, Fangchenggang shall bear civil liability to compensate since it could not prove the accident was deliberately caused by Oldendorff. The court holds that: (a) As to the maintenance costs: After M.V. “Castillo de Gormaz” was damaged, Oldendorff chose to repair the ship in Yiulian Shipyard at Shekou, Shenzhen in southern China, which was necessary and reasonable because the accident location did not have the ability

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to repair. Besides, China Fangcheng Ocean Shipping Co., Ltd. issued reports relating to the situation of Gomez to Fangchenggang on July 7 to state that the vessel needed a permanent repair at Yiulian Shipyard in Shekou. Fangchenggang did not raise any objection after receiving the reports. Furthermore, Fangchenggang failed to prove that the shipyard in Zhanjiang was available to provide a berth place with the same repair conditions and charge with Yiulian Shipyard, therefore the Court will reject this claim that the ship should be repaired in Zhanjiang. Next, although the reports outline that “repair cost totaling USD70,000”, it also states that “[t]he steel consumption cannot be determined exactly.” This indicates that maintenance costs in this report were simply an assessment rather than a final price. Additionally, on July 6, 2009, the Master of “MV. Castillo de Gormaz” issued a sea protest in which its 9th point states: “I reserve the right to extend (supplement) this Sea Protest for there may be additional damage that potentially exists in the repair process.” This sea protest also indicates that the maintenance cost shall be based on the actual expense and it could not be defined until the permanent repair was finished and qualified. Oldendorff provided repair lists and invoices issued by Yiulian Shipyard to prove losses arising from the repair of the ship. The court of first instance confirmed that apart from USD9,000 incurred through the process of 75 tons of sewage, the repair cost shall be USD196,840. Such conclusion was correct and reasonable. The court will reject Fangchenggang’s claim that the repair cost shall be USD70,000. Thirdly, Fangchenggang held that Oldendorff repaired the ship unilaterally and the cost was too high, but failed to provide evidence to support such claim. Also, no evidence was presented to prove that maintenance items did not exist or were not reasonable, therefore Fangchenggang’s unilateral statement could not overthrow Oldendorff’s tangible evidence, thus the Court will not support such a claim. (b) As to the inspection fees, travel expenses, and other costs related to the maintenance of the ship: 1. Neither party objected to inspection fees amounting to EUR1,588.00 at Shekou and inspection fees amounting to EUR10,594.93 at Fangchenggang, as well as USD125 for the purchase of British Admiralty Chart No. 4123, the court confirms such cost. As to Fangchenggang’s query about part of the cost confirmed by the court of first instance, the court holds that: (1) expenses charged by Fangchenggang China Shipping Agency Co., Ltd., including transportation expenses, accommodation fees, and other expenses incurred by the owner’s representative, surveyors from the P&I Club and Lloyd’s surveyors, were necessary and reasonable expenses which Oldendorff has already paid in full. Fangchenggang argued that such expense should be born respectively, yet provided no evidence to prove that the cost had been born respectively by all parties. The court confirms the judgment of the court of first instance that USD2,660 (equivalent to EUR1,900) was reasonable; (2) as to the cost of USD 6,300 (equivalent to EUR 4,500) arising from changing two broken spring cables, the court of first instance found that the damage report issued by the Master on July 4,

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2009 indicated that cost was a direct loss, and the court confirms it; (3) MacGREGOR (the manufacturer) issued 3 pieces of invoices including the labor cost amount to EUR7,943.12, travel expenses amounting to 16,371.55 Singapore dollars, and the cost of spare parts in the amount of EUR5,570.22. Among those, labor costs in the amount of EUR7,943.12 and the cost of spare parts in the amount of EUR5,570.22 arising from changing the damaged spare parts, which had a direct connection with the accident. Hence, the court confirms the total amount of EUR13,513.34; (4) regarding the supervision fee in the amount of EUR7,469 charged by Lv Fu Rong International Trade Co., Ltd. as well as the supervision fee and other service expenses in the amount of EUR20,498 charged by Noah Marine Service Co., Ltd., the court of first instance held that it was the common practice to hire professionals to do supervision and instruction in order to ensure the repair schedule and the maintenance quality. In addition, given the difficulty in ship repair procedure, time, the repair ability of Yiulian Shipyard and other factors, the court of first instance assumed that Fangchenggang should bear EUR7,000. The court confirms such judgment. In summary, the court confirms the inspection fee as well as travel expenses in an amount of EUR39,096.27. (c) As to the loss of hire caused by detention: Article 15 of the charter party entered into by Oldendorff and EMPRESA NAVIERA ELCANO S.A. agreed that, “in the event of lost time from deficiency and/or default of officers or crew, or deficiency of stores, fire, breakdown of, or damages to hull, machinery or equipment, grounding, or detention by average accidents to the vessel or cargo unless resulting, dry docking for the purpose of examination or painting bottom, or by any other similar cause preventing the full working of the vessel, the payment of hire shall cease for the time thereby lost.” Oldendorff can cease the payment of hire. Although Oldendorff provided the British lawyer’s opinion and the hire statement, such statement was issued by Oldendorff unilaterally and could not prove the payment of rent. Also, the owner did not confirm the hire statement. In addition, three pieces of vouchers issued by Commerzbank AG did not go through a notarization procedure, and there are words like “the banks did not sign this statement” in all of them. Fangchenggang did not confirm the authenticity of them, and the court could not confirm the authenticity of such evidence. According to the principle “he who is affirming must prove”, Oldendorff failed to provide sufficient evidence and should assume the legal consequences arising from a failure to meet the burden of proof. Thus, the court will not recognize Oldendorff’s claim for loss of rent. Additionally Oldendorff asserted pursuant to “the No. 4 Civil Court of the Supreme People’s Court’s Guidance on Practices in Foreign-Related Commercial and Maritime Trials (No. 1)” on question 16: “those extraterritorial evidence must be notarized, except for commercial papers used for international circulation.” Therefore, the British lawyer’s opinions, the original statements of hire, and the original bank statement invoices provided in the second instance

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were sufficient to prove that Oldendorff had already paid to the owner the rent during the ship maintenance. Accordingly there was no need for a notarization procedure on the original Bank invoices. To this matter, the court holds that the three pieces of vouchers issued by Commerzbank AG do not belong to commercial papers, commercial paper is terminable, and negotiable debt instruments issued by the issuing entity to meet the needs of the movements of funds, including drafts, promissory notes, checks, bills of lading, certificates of deposit, shares, and so on. In this case, bank vouchers do not belong in this scope and still need a notarization procedure. Therefore, the court will not support the Appellant Oldendorff’s claim. (d) As to the loss of oil consumption incurred during the repair period for the ship: As mentioned before, the ship was ultimately repaired at Yiulian Shipyard in Shekou, Shenzhen. Fangchenggang argued that the reasonable amount of oil consumption should be the consumption from Fangchenggang to Zhanjiang as well as during the maintenance period. The court of first instance held that the amount of oil consumption was generally based on measurement. It is correct and reasonable that the oil consumption should be the amount from the beginning of the voyage until the end of the voyage while also including the amount added during the voyage. Actually, Zhanjiang Port is located in the middle of Shekou and Fangchenggang, meaning even as measured by Fangchenggang’s calculation method, the amount of oil consumption should be 81.04 tons. It is correct that the court of first instance held the total amount of oil consumption during the maintenance period should be 130 tons. Accordingly, the court affirms that the oil consumption of M.V. “Castillo de Gormaz” is 132.80 tons. Invoices provided by the Oldendorff show that the unit price was USD403 at the occasion the ship was bunkered for this voyage, therefore the total amount of loss of oil consumption is USD53,518.40 (132.80 tons  403 USD/ton). As mentioned above, all the losses occurred in 2009, the Appellant Fangchenggang shall compensate the interests claimed by the Appellant Oldendorff. The interest shall be calculated from March 4, 2011 to the date of payment set by the judgment of first instance at the loan interest rate of liquid capital load over the corresponding period as promulgated by the People’s Bank of China. To summarize, the court holds that Oldendorff has the capacity to sue and is entitled to claim losses consequential to the damages to M.V. “Castillo de Gormaz”; Fangchenggang shall compensate Oldendorff for the costs of ship repairing amounting to USD196,840 and the interest thereon (the interest shall be calculated from March 4, 2011 to the date of payment set by this judgment at the loan interest rate of liquid capital load in RMB over the corresponding period as promulgated by the People’s Bank of China); the costs related to ship maintenance in an amount of EUR39,096.27 and the interest thereon (the interest shall be calculated from March 4, 2011 to the date of payment set by this Judgment at the loan interest rate of liquid capital load in RMB over the corresponding period as promulgated by the People’s Bank of China); loss of oil consumption in an amount of USD53,518.40 and the

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interest thereon (the interest shall be calculated from March 4, 2011 to the date of payment set by this judgment at the loan interest rate of liquid capital load in RMB over the corresponding period as promulgated by the People’s Bank of China). The court of first instance ascertained the facts clearly, applied the laws correctly, and properly dealt with the case. The Appellant’s appeal has no factual or legal basis and the court will not support it. According to Article 117, Article 123 of the General Principals of the Civil Law of People’s Republic of China, Article 241 of the Property Law of People’s Republic of China, Article 44 of the Law of the People’s Republic of China on Application of Laws to Foreign-Related Civil Relations, Article 64 Paragraph 1 and Article 170 Paragraph 1 Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee in amount of RMB108,197.64, the Appellant, Oldendorff Carriers GmbH and Co. KG., shall bear RMB23,267.64 (it has already prepaid RMB23,267.64) and the Appellant, Fangchenggang Group Co., Ltd., shall bear RMB84,930 (it has already prepaid RMB 84,930). The obligation of the above-mentioned payment shall be fulfilled within 10 days as of the effectiveness of this judgment. If the obligor fails to perform the obligation of payment within the period prescribed herein, it shall double pay the interest for the period of delayed performance. The obligee may apply to the court for enforcement on the last day of the performance period designated by this effective judgment within two years. The judgment is final. Presiding Judge: TAN Qinghua Acting Judge: BAI Shuyi Acting Judge: YANG Ding December 18, 2014 Clerk: HUANG Qiuyan

Tianjin Maritime Court Civil Judgment The People’s Insurance Company of China Tianjin Branch v. Jinzhou Jinrun Shipping Co., Ltd. (2014) Jin Hai Fa Shang Chu Zi No. 432 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 775. Cause of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote The Plaintiff subrogated cargo insurer failed to establish that rust damage to steel occurred during the Defendant carrier’s period of responsibility. Summary The Plaintiff, a subrogated insurer, sued the Defendant carrier for rust damage caused by saltwater to steel goods. Held—that the Plaintiff had failed to provide sufficient evidence to meet its evidentiary burden in showing that the rust damage caused to the steel goods occurred during the Defendant’s period responsibility. The claims were rejected.

Judgment The Plaintiff: The People’s Insurance Company of China Tianjin Branch Domicile: 61Shiyijing Road, Hedong District, Tianjin. Person in charge: GAO Jian, general manager. Agent ad litem: LUO Chengju, lawyer of Tianjin Jing Dong Law Firm. Agent ad litem: ZHOU Jun, lawyer of Tianjin Jing Dong Law Firm. The Defendant: Jinzhou Jinrun Shipping Co., Ltd. Domicile: No. 21-19 Shui Mo Lin Xi, Taihe District, Jinzhou, Liaoning. Legal representative: GAO Xiuying, general manager. Agent ad litem: WU Guoqiang, staff of Jinzhou Jinrun Shipping Co., Ltd.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_37

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With respect to the case arising from dispute over the insurance subrogation under contract of carriage of goods by water filed by the Plaintiff, People’s Insurance Company of China Tianjin Branch (hereinafter referred to as “PICC Tianjin”) against the Defendant, Jinzhou Jinrun Shipping Co., Ltd. (hereinafter referred to as “Jinrun Company”), the court accepted this case on April 8, 2014 and appointed Acting Judge ZHANG Lina to try this case under summary procedure, then the court turned to general procedure because of the complexity of this case and organized the collegiate panel consisting of Presiding Judge ZHANG Lina, Acting Judges WANG Huiran and CHEN Xingwang and appointed MA Jihai as clerk according to the law. The court held hearings in public on May 22, 2014 and June 19, 2014. LUO Chengju and ZHOU Jun (did not appear in court in the second instance), agents ad litem of the Plaintiff, WU Guoqiang, agent ad litem of the Defendant, appeared in court and participated in the action. Now the case has been concluded. The Plaintiff alleged that on July 2013, M.V. “Xin Jin Xin”, which owned by the Defendant, carried the goods involved insured by the Plaintiff from Port of Tianjin to Jiujiang. Since the Defendant failed to keep the goods involved properly, the goods involved were corroded with rust by seawater, as a result, the Plaintiff suffered a loss of RMB74,574.9 and paid assessment fee in sum of RMB1,000. Therefore, the Plaintiff requested the court to judge that: 1. The Defendant should compensate for the loss in sum of RMB75,574.9 and interest thereon (the interest should be calculated at loan interest rate over the same period of the Chinese People’s Bank from January 9, 2014 to the day of payment); 2. The Defendant should bear all the litigation costs. The Defendant argued that Bulk Cargo Shortage and Damage List (hereinafter referred to as Damage List) was not true and disaffirmed the damage to the goods involved occurred. Therefore, the Defendant requested the court to reject all the claims of the Plaintiff. According to the claims of the Plaintiff and the defence of the Defendant, the court sums up the main issues in this case are as follows: 1. Whether the rust damage to the goods occurred in the period of responsibility of the Defendant the seawater corrosion damage and the Defendant should bear liability for the damage; 2. If the goods involved were damaged, what the amount of loss caused by such damage is. The Plaintiff submitted the following evidence to support its allegations: 1. Four policies, to prove that an insurance contract was established between the Plaintiff and the insured and the goods insured by the Plaintiff had been delivered to M.V. “Xin Jin Xin” for shipment; 2. Two waterway bills of lading numbered with 000,269 and 0,002,698, to prove that the goods insured by the Plaintiff were carried by M.V. “Xin Jin Xin”;

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3. Damage list, to prove the details of damage to the goods involved issued by the tally company and the ship owner; 4. Survey report, to prove survey company investigated on the scene and issued the details of the damaged goods; 5. Invoices of assessment service fee, to prove the assessment fee; 6. Receipt of insurance indemnity, subrogation receipt and voucher of payment, to prove that the insured had received the insurance indemnity of the damaged goods involved from the Plaintiff and transferred the right of subrogation to the Plaintiff; 7. Letter of authorization, to prove that the insured, Foshan City Lecong Town Juyuan Goods and Materials Co., Ltd. (hereinafter referred to as “Juyuan Company”) entrusted Foshan City Fuyuan Trade Co., Ltd. to purchase insurance and handle issues of receipt and delivery of the goods under the bill of lading numbered with 0,002,698; 8. Certification issued by Foshan City Zhuyin Nankun Investment Co., Ltd. (hereinafter referred to as “Nankun Company”), to prove the situation of the damaged goods involved. Evidence 1–7 was the original. The cross-examination opinions of the Defendant with regard to evidence of the Plaintiff are as follows: the Defendant affirmed the authenticity but not the relevancy of evidence 1; it affirmed evidence 2; in respect of evidence 3, it argued the final items of Damage List were added later, and the shipowner did not know; in respect of evidence 4, it held survey report should be issued by a survey agency designated by the two parties, it could not be confirmed that the subject goods in the survey report were the goods carried by the vessel of the Defendant and could not prove the damage occurred on the vessel involved; it affirmed evidence 5 and 6; and disaffirmed evidence 7 and 8. The Defendant provided the following evidence to support its allegations: 1. Initial delivery receipt of the goods involved; 2. Ship’s log, to prove that there was no violent storms and waves during the period from the time the vessel entered into the port to the time the vessel moved to berth and from the time of shipment to the time the vessel left the port of destination; 3. Certification of port, to prove that the final items in Damage List were added in the case where the Defendant knew nothing about that, the rust damage caused by seawater did not occur in the period of carriage. The cross-examination opinions of the evidence submitted by the Plaintiff are as follows: the Plaintiff affirmed evidence 1, but disaffirmed the authenticity of evidence 2 and 3. The ascertainment opinions of the court on the evidence submitted by the Plaintiff and Defendant are as follows: the Plaintiff provided the originals of its evidence 1, 2, 5, 6 and 7, and the Defendant provided the originals of its evidence 1 and 3, so the court ascertains the authenticity of the seven evidence. Evidence 1 and

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2 of the Plaintiff can prove the Plaintiff issued policies with numbers of 19386, 19387 and 19376 for the goods under the waterway bill of lading numbered with 0002692, the insured paid the insurance indemnity to Juyuan Company and Juyuan Company transferred the right of recourse in respect of the goods under the insurance vouchers. Evidence 1, 2 and 6 can jointly prove the insurance contract of domestic carriage of goods by water, the Plaintiff paid the insurance indemnity to Juyuan Company and obtained the right of subrogation from Juyuan Company according to law. The Plaintiff alleged it had obtained the right of subrogation under the bill of lading numbered with 0,002,698, on which the consignee was Fuyuan Company, but it failed to produce evidence to prove, therefore the court does not ascertain. Evidence 1 of the Plaintiff and evidence 2 of the Defendant can prove the carrier of the goods involved is the Defendant and the consignee is Juyuan Company, the rights and obligations between the two parties shall be subject to the Regulations on Domestic Waterway Cargo Transportation. Evidence 3 of the Plaintiff, namely the Damage List is a document made by Nankun Company, the Defendant alleged the seal on the Damage List was not true, but it failed to produce evidence to prove, so the court does not ascertain. In respect of the making of the Damage List, the Defendant provided a certification (evidence 3 of the Defendant): after the vessel carrying the goods involved departed the port, the freight forwarder informed Juyuan Company to add “12 are H-steels deformed and 45 H-steels are rusted; 172 angle steels are rusted, 464 angle steels are deformed and 8 angle steels are seriously deformed” on the Damage List which has already recorded “1 is damaged and 8 are deformed”, Nankun Company recorded this circumstance in the Damage List, since it did not know the details of the damaged goods, it disaffirmed that. The court holds damage list is a record of damaged goods inspected by a tally company or other third party which is confirmed by the ship owner and cargo owner. The premise of binding force of damage list on the Plaintiff and the Defendant is confirmation of a tally company, other third party or the ship owner. The content added in the damage list involved was filled in after the goods involved were discharged from the port, it is not the result of the survey conducted by Nankun Company and it was not affirmed by Nankun Company. The content was added before the seal was affixed, so the seal cannot suggest the Defendant have affirmed the added damaged goods. In summary, the court does not ascertain effect of the record “12 pieces of H-steel are deformed and 45 pieces of H-steels are rusted; 172 pieces of angle steels are rusted, 464 pieces of angle steels are deformed and 8 pieces of angle steels are seriously deformed” in evidence 3 of the Plaintiff; the effect of evidence 3 of the Defendant evidence shall be ascertained; evidence 8 of the Plaintiff is a copy and contradicts evidence 3 of the Defendant, the court does not ascertain the effect thereof; in respect of evidence 4 of the Plaintiff, namely the survey report, the court holds what the assessment personnel based on when identified the damage of the goods involved is the Damage List, of which the added content was alleged by Juyuan Company unilaterally and has no legally binding force to the Defendant. The assessment personnel did not verified whether the damaged goods were the goods involved when surveying the goods reported by Juyuan Company in the warehouse thereof. Therefore, the report lacks objectivity

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and preciseness, the court does not ascertain the effect thereof and holds it cannot prove rust damage caused by seawater to the goods occurred in the period of responsibility of the Defendant. The Defendant cannot prove the seal on evidence 2 is seal of the vessel involved, the court does not ascertain the effect thereof. After trial, the court finds out that, on July 11, 2013, M.V. “Xin Jin Xin” owned by the Defendant carried the goods involved from Tianjin Port to Jiujiang Port. The Defendant issued a bill of lading with a number of 0002692, which recorded as follows: the consignee is Juyuan Company; the name of goods is 2426 pieces of H-steel and 128 pieces of angle-steel; rights and obligations of the carrier, the actual carrier, the shipper and the consignee shall apply to the Regulations on Domestic Waterway Cargo Transportation. The Plaintiff issued the policies numbered with 19386, 19387 and 19376, in which the insured is Juyuan Company, on July 12, 2013 for the goods involved. On July 24, 2013, the vessel arrived in Foshan Nankun dock. After the goods were discharged from the dock and Juyuan Company took delivery of the goods, the freight forwarding of Juyuan Company informed Nankun Company to add a record that “12 pieces of H-steels are deformed and 45 pieces of H-steels are rusted; 172 pieces of angle steels are rusted, 464 pieces of angle steels are deformed and 8 pieces of angle steels are seriously deformed”, Nankun Company added the content in the record, but it did not confirm the content above. Subsequently, the Plaintiff reported to the insurer, the Plaintiff entrusted Foshan City Derong Insurance Assessment Co., Ltd. to conduct a survey on the reported goods in the warehouse of Juyuan Company. The Plaintiff paid the assessment fee in amount of RMB1,000. On January 10, 2014, the Plaintiff paid the insurance indemnity in amount of RMB74,574.9 to Juyuan Company and obtained the right of subrogation. The Plaintiff held the Defendant as the carrier of the goods involved should bear the liability for compensation, but the Defendant did not make such compensation, therefore it filed an action. It is also found out that, the Defendant was the registered shipowner of M.V. “Xin Jin Xin”, and held a waterway transport license. The court holds this case is arising from dispute over insurance subrogation under contract of the carriage of goods by water. The Defendant is the carrier of the goods involved, Juyuan Company is the consignee and the insured and the Plaintiff is the insurer. According to Article 44 of the Regulations on Domestic Waterway Cargo Transportation, the consignee is entitled to claim for compensation of loss of or damage to goods and delay in delivery of goods against the carrier. In this case, where the goods were damaged, the consignee has the right to claim for compensation of the goods under the waterway bill of lading. The Plaintiff obtained the right of subrogation in accordance with the law after paying insurance indemnity to Juyuan Company, and accordingly has the right to claim for compensation against the Defendant. In respect of whether the rust damage to the goods involved occurred during the period of responsibility of the Defendant, the Plaintiff had paid insurance indemnity for the loss of rust damage to the goods involved to the insured, Juyuan Company; the Plaintiff affirmed it only claimed for the loss of rust damage to the goods, and it provided Damage List and survey report to prove its allegations, but as the

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ascertainment opinion aforesaid, the record in Damage List that 45 pieces of H-steels and 172 pieces of angle steels are rusted was reported by Juyuan Company unilaterally, the third party, Nankun Company and the Defendant did not confirm, and the survey report cannot prove the rust damage to the goods involved occurred during the period of responsible of the Defendant. Therefore, according to Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, a party shall have the burden to provide evidence for its claims. The Plaintiff failed to provide sufficient evidence to prove the rust damage to the goods involved occurred during period of responsible of the Defendant. The court does not support the claims of the Plaintiff. In summary, according to Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Reject the claims of the Plaintiff, the People’s Insurance Company of China Tianjin Branch. Court acceptance fee in amount of RMB1,690, shall be born by the Plaintiff. In the event of dissatisfaction with this judgment, any party may within 15 days upon the service of this judgment, submit a statement of appeal to the court together five copies, lodge an appeal to the Tianjin High People’s Court. The appeal fee shall be paid according to the unsatisfied amount awarded by the court of first instance within 7 days upon submission of the statement of appeal, (Bank of deposit: Agricultural Bank of China Tianjin City Tiancheng Branch 02200501040006269; Account name: Financial Department of Tianjin High People’s Court) otherwise, the appeal shall be deemed to be withdrawn automatically. Presiding Judge: ZHANG Lina Acting Judge: WANG Huiran Acting Judge: CHEN Xingwang July 1, 2014 Clerk: MA Jihai

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Tianjin High People’s Court Civil Judgment The People’s Insurance Company of China Tianjin Branch v. Jinzhou Jinrun Shipping Co., Ltd. (2014) Jin Gao Min Si Zhong Zi No. 80 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 769. Cause of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote Subrogated cargo insurer failed to establish that the cargo for which it had paid a claim for damage was damaged by the defendant carrier, as the carrier had not had a representative at the survey that produced the report supposedly establishing the damage. Summary The People’s Insurance Company of China Co., Ltd. Tianjin Branch, as subrogee, of Juyuan Company, appeals a judgment relating to a contract for the carriage of goods by sea. This case arose from a shipment of various steel pieces that the Respondent, Jinrun Company, delivered to Juyuan, the consignee. Juyuan Company found the steel to be damaged and corroded and thus commenced this action against Jinrun Company. The court held that the People’s Insurance Company of China Co. Ltd. Tianjin Branch, failed to establish that the damage done to its cargo was the same cargo that Jinrun Company transported because Jinrun Company was not present during the survey conducted by the appellant, nor did Jinrun Company confirm the results of the survey. Judgment of first instance was affirmed.

Judgment The Appellant (The Plaintiff of First Instance): The People’s Insurance Company of China Tianjin Branch Domicile: 61Shiyijing Road, Hedong District, Tianjin. Person in charge: GAO Jian, general manager. Agent ad litem: LUO Chengju, lawyer of Tianjin Jing Dong Law Firm. Agent ad litem: HU Youbin, lawyer of Tianjin Jing Dong Law Firm.

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The Respondent (The Defendant of First Instance): Jinzhou Jinrun Shipping Co., Ltd. Domicile: No. 21-19 Shui Mo Lin Xi, Taihe District, Jinzhou, Liaoning. Legal representative: GAO Xiuying, general manager. Agent ad litem: WU Guoqiang, staff of Jinzhou Jinrun Shipping Co., Ltd. The Appellant, the People’s Insurance Company of China Co., Ltd. Tianjin Branch (hereinafter referred to as “PICC Tianjin”), disagreed with (2014) Jin Hai Fa Shang Chu Zi No. 432 Civil Judgment rendered by Tianjin Maritime Court with respect to the case arising from dispute over contract of carriage of cargo by sea it filed against the Respondent, Jinzhou Jinrun Shipping Co., Ltd. (hereinafter referred to as “Jinrun Company”), and instituted an appeal to the court. After accepting the case, the court organized the collegiate panel according to the law consisting of Judge GENG Xiaoning as Presiding Judge, Acting Judge LI Shanchuan and Acting Judge YANG Zeyu, and appointed ZHANG Hongchuan as the Clerk. The court held a hearing in public on August 13, 2014. LUO Chengju and HU Youbin, agents ad litem of PICC Tianjin, and WU Guoqiang, agent ad litem of Jinrun Company, appeared in court and participated in the action. Now the case has been concluded. After trial, the court of first instance found that on July 11, 2013, M.V. “Xin Jin Xin” which was owned by Jinrun Company carried the cargo involved from Tianjin Port to Jiujiang Port. Jinrun Company issued a bill of lading numbered with 0002692, recording as follows: the consignee was Juyuan Company; the cargo were 2426 pieces of H-steel and 128 pieces of angle-steel; rights and obligations of the carrier, the actual carrier, the shipper and the consignee should subject to the Regulations on Domestic Waterway Cargo Transportation. PICC Tianjin issued the insurance policies numbered with 19386, 19387 and 19376 on July 12, 2013 in terms of the cargo involved, in which Juyuan Company was stated as the assured. On July 24, 2013, the vessel arrived at Foshan Nankun dock. After the cargo were discharged from the dock and Juyuan Company took delivery of the cargo, the freight forwarder of Juyuan Company informed Nankun Company to add a record that “12 pieces of H-steels are deformed and 45 pieces of H-steels rusted; and 172 pieces of angle steels rusteded, 464 pieces of angle steels are deformed and 8 pieces of angle steels are seriously deformed”, Nankun Company added the content in the record, but it did not confirm the content above. Subsequently, PICC Tianjin reported to the insurer, PICC Tianjin. On July 29, 2013, PICC Tianjin entrusted Foshan City Derong Insurance Assessment Co., Ltd. to conduct a survey on the damaged cargo in the warehouse of Juyuan Company. PICC Tianjin paid the survey fee in amount of RMB1,000. On January 10, 2014, PICC Tianjin paid the insurance compensation in amount of RMB74,574.9 to Juyuan Company and obtained the right of subrogation. PICC Tianjin held that Jinrun Company as the carrier of the cargo involved should bear the liability for compensation, but Jinrun Company did not make such compensation, therefore it filed an action. It was also found Jinrun Company was the registered shipowner of M.V. “Xin Jin Xin” and held a waterway transportation license.

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The court of first instance held that this case was arising from dispute over contract of carriage of goods by water. Jinrun Company was the carrier of the cargo involved, Juyuan Company was the consignee and the assured and PICC Tianjin was the insurer. According to Article 44 of the Regulations on Domestic Waterway Cargo Transportation, the consignee was entitled to claim for compensation of loss of or damage to cargo and delay in delivery of cargo against the carrier. In this case, where the cargo were damaged, the consignee was entitled to the compensation of the cargo under the waterway bill of lading. PICC Tianjin obtained the right of subrogation in accordance with the law after paying insurance compensation to Juyuan Company, and accordingly was entitled to the compensation by Jinrun Company. In respect of whether the rust damage to the cargo involved occurred during the period of responsibility of Jinrun Company, PICC Tianjin had paid insurance compensation for the loss of rust damage to the cargo involved to the assured, Juyuan Company; PICC Tianjin affirmed it only claimed for the loss of rust damage to the cargo, and it provided Broken and Damaged Cargo List and Survey Report to prove its allegations, but as the ascertainment opinion aforesaid, the record in Broken and Damaged Cargo List that 45 pieces of H-steels and 172 pieces of angle steels were rusted was reported by Juyuan Company unilaterally, the third party, Nankun Company and Jinrun Company did not confirm, and Survey Report could not prove the rust damage to the cargo involved occurred during the period of responsibility of Jinrun Company. Therefore, according to Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, a party had the burden to provide evidence for its claims. PICC Tianjin failed to provide sufficient evidence to prove the rust damage to the cargo involved occurred during period of responsibility of Jinrun Company. The court of first instance did not support the claims of PICC Tianjin. In summary, the court of first instance, according to Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, rejected the claims of PICC Tianjin and judged that PICC Tianjin should bear court acceptance fee in amount of RMB1,690. PICC Tianjin dissatisfied with the judgment of first instance and filed an appeal to the court. It requested the court to revoke the original judgment, support its claims, and order Jinrun Company to undertake the court fees for the first and second instance. Facts and reasons are as follows: 1. The original court unclearly found that the facts. Firstly, on July 1, 2013, after M. V. “Xin Jin Xin” owned by Jinrun Company, which carried the cargo involved underwritten by PICC Tianjin, arrived at the port of discharge, the port issued a Broken and Damaged Cargo List. The situation of the cargo damage stated in the Broken and Damaged Cargo List had been confirmed by Jinrun Company with the ship’s seal. In the case where Jinrun Company had admitted the fact of cargo damage in this case, it was incorrect that the court of first instance negated the effect of Broken and Damaged Cargo List. In addition, after the accident, PICC Tianjin commissioned a survey company to survey the accident. The survey

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company surveyed the steels carried by the ship involved according to the specifications and types of the steels stated in the cargo planning, determined the situation of damage caused by seawater corrosion, and excluded other reasons of the corrosion of the steels. The Survey Report stated the fact of cargo damage objectively and truly, it should be the basis to determine the cargo damage involved. It had no basis that the court of first instance ascertained Broken and Damaged Cargo List had no legal effect without examination and negated the effect of the Survey Report. Secondly, PICC Tianjin had obtained the right of subrogation under the waybill numbered with 0,002,698, namely domestic waterway cargo transportation insurance policy with tail number of 19383. The Power of Attorney submitted by PICC Tianjin in the first instance could prove the insurer stated in the insurance policy, Foshan City Fuyuan Trade Co., Ltd. (hereinafter referred to as “Fuyuan Company”) was the agent of the cargo owner, Juyuan Company arranged the transportation and took delivery and deliver 269 packages of angle-steel under the insurance policy above. The damaged cargo recorded in the Survey Report and the Broken and Damaged Cargo List contained 269 packages of angle-steel under this insurance policy. PICC Tianjin had compensated RMB74,574.9 to Juyuan Company, it had already obtained the right of subrogation of the cargo under the insurance policy with tail number of 19383. Thirdly, Nankun Company submitted two Statements to the court of first instance, the contents of the first statement coincided with Broken and Damaged Cargo List; but in the second statement, the whole Broken and Damaged Cargo List was confirmed first, then only part of the content thereof was confirmed by means of list. This Statement was inconsistent, it was incorrect that the court of first instance ascertained the authenticity thereof. 2. The original court incorrectly applied laws. Broken and Damaged Cargo List and Survey Report submitted by PICC Tianjin formed a chain of evidence in terms of the cargo damage involved, although Jinrun Company negated the evidence above, it failed to adduce effective evidence to refute. Therefore, it should bear adverse consequence for failure of burden of proof. 3. The original court violated legal procedure. In the trial, after explaining the legal consequence of evidence submitted by Jinrun Company, the original court allowed Jinrun Company to withdraw part of the evidence which would produce adverse consequence, it violated legal trial procedure. Jinrun Company did not submit written defence, it argued in the hearing that it was not informed that the record about the damaged situation in the Broken and Damaged Cargo List was added, besides, Nankun Company did not confirm that the added content, therefore it had no effect of evidence. In addition, the survey was carried out of the warehouse without notifying Jinrun Company to appear in the scene, so it could not be confirmed the cargo in survey were the cargo involved, and the Survey Report failed to make a detailed explanation about the reason of the damage to the steels, so it could not be the basis to determine the facts of this case. In summary, Jinrun Company requested the court to dismiss the appeal of PICC Tianjin and affirm the original judgment.

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PICC Tianjin submitted the following supplementary evidence in the second instance: Evidence 1, industrial and commercial registration information of Juyuan Company and Fuyuan Company, to prove that the legal representatives of the two companies were one and the same, namely XIN Huichen. In terms of the cargo involved, Fuyuan Company was mainly in charge of arranging transportation and Juyuan Company was mainly in charge of handling cargo insurance claims; Evidence 2, Domestic Cargo Transportation Claim Application, to prove that Fuyuan Company commissioned Juyuan Company to handle the claim in terms of the cargo under the policy with tail number of 19383 and receive compensation and other matters; Evidence 3, two copies of Domestic Cargo Transportation Subrogation Letter, to prove Fuyuan Company and Juyuan Company respectively assigned the right of recovery under the policy with tail number of 19383, and 19387, 19386 and 19376 to PICC Tianjin. Upon cross-examination, Jinrun Company did not admit the authenticity, legality or relevancy of the evidence 1, 2 and 3. The court, after comprehensively analyzes evidence and the cross-examination opinion, ascertains that the authenticity of evidence 1. It can prove the legal representatives of Juyuan Company and Fuyuan Company are one and the same natural person; the authenticity of the form of evidence 1 and evidence 2 shall be ascertained, but the two pieces of evidence were made by PICC Tianjin before the action, they are not new evidence provided in Article 139 of the Civil Procedure Law of the People’s Republic of China and Article 41 of the Some Provisions of the Supreme People’s Court on Evidence in Civil Procedures, the content recorded therein is inconsistent with the Domestic Cargo Transportation Subrogation Letter submitted by PICC Tianjin in the original trial, so the effect of evidence shall not be ascertained. Jinrun Company did not submit evidence in the second instance. The court ascertains the facts found in the original judgment, also finds that one of the two statements submitted by Nankun Company in the first instance is a copy affixed with the special seal for business of Nankun Company, and the other one is the original affixed with the official seal of Nankun Company. In the two statements, Nankun Company indicated that there were three Broken and Damaged Cargo Lists in terms of M.V. “Xin Jin Xin” V.130712, it only affirms No. 0002411 Broken and Damaged Cargo List. The copied statement stated the record that 1 piece of H-steel was broken, 20 pieces deformed and 45 pieces rusted; 172 pieces of angle-steel rusted, 464 pieces deformed and 8 pieces seriously deformed in No. 0002411 Broken and Damaged Cargo List was true. The original statement stated after investigation and verification, the record that 1 piece of H-steel was broken and 8 pieces deformed in No. 0002411 Broken and Damaged Cargo List was true, but other record was added upon the requirement of the freight forwarder.

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The court holds that this case is arising from domestic cargo transportation contract. The outstanding issues are that: whether PICC Tianjin obtained the right of subrogation under the insurance policy with tail number of 19383; whether the goods were damaged by seawater corrosion. In respect of whether PICC Tianjin obtained the right of subrogation under the insurance policy with tail number of 19383, the Domestic Cargo Transportation Insurance Compensation Receipt and the Domestic Cargo Transportation Subrogation Letter submitted by PICC Tianjin in the original trial can prove that PICC Tianjin has obtained the right of subrogation of the cargo under the insurance policies with tail number of 19386, 19387 and 19376 after PICC Tianjin compensated RMB74,574.9 to the assured, Juyuan Company. PICC Tianjin claimed it had compensated Juyuan Company and Fuyuan Company and obtained the right of subrogation of the cargo under the insurance policy with tail number 19386, 19387 and 19376 in amount of RMB5,910.3 and that under the insurance policy with the tail number of 19383 in amount of RMB68,664.6, and the total amount was RMB74,574.9. But the Domestic Cargo Transportation Claim Application and the Domestic Cargo Transportation Subrogation Letter it submitted in the original trial contradicted with the Domestic Cargo Transportation Insurance Compensation Receipt and the Domestic Cargo Transportation Subrogation Letter it submitted to the court, and it failed to make a reasonable explanation, therefore the claim that PICC Tianjin has obtained the right of subrogation of the cargo under the insurance policy with tail number of 19383 shall not be supported, PICC Tianjin has only obtained the right of subrogation of the cargo under the insurance policy with 19386, 19387 and 19376 from Juyuan Company. In this case, PICC Tianjin, as the insurer, is entitled to exercise the right of claim for the cargo damage against Juyuan Company after it obtained the right of subrogation. No. 0002692 waybill issued by Jinrun Company, the carrier of the cargo involved, records the consignee is Juyuan Company, and states the rights and obligations between the two parties shall be subject to the Regulations on Domestic Waterway Cargo Transportation. Therefore, the rights and obligations between Jinrun Company with Juyuan Company shall subject to the relevant provisions of the Regulations on Domestic Waterway Cargo Transportation. Article 44 of the Regulations on Domestic Waterway Cargo Transportation provides that the consignee is entitled to claim for compensation of loss of or damage to goods and delay in delivery of goods against the carrier. Accordingly, after PICC Tianjin paid the compensation to Juyuan Company, it is entitled to claim against Jinrun Company based on the above provisions. In respect of whether the cargo were damaged by seawater corrosion, in this case, PICC Tianjin only claimed the loss of the cargo damaged by seawater corrosion, whether seawater corrosion occurred during the transportation of the cargo by Jinun Company should be examined. In this regard, PICC Tianjin requested Jinrun Company to bear the liability for compensation according to Broken and Damaged Cargo List and Survey Report. Firstly, as to the effect of evidence of Broken and Damaged Cargo List, it is an objective record of situation of the damaged cargo, after tally company or other

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third party surveyed and the consignee and the carrier of the cargo confirmed, it can be the basis to identify the damage to the cargo. In this case, Nankun Company issued the two Statements in terms of Broken and Damaged Cargo List, the one stamped with the official seal of Nankun Company is the original, the effect of evidence thereof shall prevail over the copied one stamped with the business seal of Nankun Company, so the court admit the Statement affixed with the official seal of Nankun Company. Nankun Company, as the recorder of the situation of the damaged cargo confirmed in the Statement stamped with the official seal that in terms of the loss caused by seawater corrosion, although No. 0002411 Broken and Damaged Cargo List stated that 45 pieces of H-steel were rust, 172 pieces of angle-steel were rust, Nankun Company did not confirm the content and illustrated such content was added to the Broken and Damaged Cargo List after the receiver found the cargo damaged according to the requirement of the freight forwarder of the receiver. Such circumstance corroborates the allegation of Jinrun Company that part of the content about the damaged cargo were added to the Broken and Damaged Cargo List afterwards and it knew nothing about that. Thus, the record made by Nankun Company that 45 pieces of H-steel rusted and 172 pieces of angle-steel rusted in Broken and Damaged Cargo List is not objective record of damaged cargo based on survey and verification. In the case where the record about the situation of damaged cargo has not been confirmed by Jinrun Company and no other evidence can prove the content above in Broken and Damaged Cargo List, this part in No. 0002411 Broken and Damaged Cargo List is inadequate to be the basis for the loss caused by seawater corrosion. Secondly, as to the effect of evidence of Survey Report, the survey company accepted the commission of Jinrun Company to survey the damaged cargo involved, the survey object shall be the cargo involved carried by Jinrun Company. But according to the Survey Report, the survey site is D22 Warehouse, Jiujiang Metals Market Foshan City, Guangdong Disheng Co., Ltd. located at Sanshui District in Foshan City, and the warehouse of Juyuan Company located at Lecong Steel Market at Shunde District in Foshan City, the survey object is the damaged cargo reported by Juyuan Company. Only the representative of Juyuan Company participated in the survey, inspection and inventory conducted by the survey company, Jinrun Company did not participate in the survey nor did it confirm the result, the Survey Report cannot prove the surveyed cargo are the cargo carried by Jinrun Company, further, the identification about the situation of damaged cargo in Survey Report cannot be admitted as the basis to ascertain the damage to the cargo involved. Accordingly, evidence submitted by PICC Tianjin cannot prove that the cargo involved were damaged due to corrosion by seawater, the court does not support the claim that Jinrun Company should undertake the liability for the cargo damage. In conclusion, the facts are clearly found and the laws are correctly applied in the original judgment, the grounds of appeal held by PICC Tianjin lack basis and cannot stand. In accordance with Article 170 Paragraph 1 Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows:

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Dismiss the appeal, and affirm the original judgment. The Appellant, Peoples Insurance Company of China Co., Ltd. Tianjin Branch shall bear Court acceptance fee of the second instance in amount of RMB1,690. The judgment is final. Presiding Judge: GENG Xiaoning Acting Judge: LI Shanchuan Acting Judge: YANG Zeyu October 27, 2014 Clerk: ZHANG Hongchuan

Xiamen Maritime Court Civil Judgment Pingtan Wenbiao Bunker Tanker v. Fujian Xinhai Shipping Co., Ltd. et al. (2013) Xia Hai Fa Shang Chu Zi No. 286 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 794. Cause of Action 225. Dispute over contract for marine stores and spare parts supply. Headnote The registered owner and individual operators held liable to pay for bunkers supplied to ship, despite absence of written contract, because of industry custom and existing relationship between the parties. Summary The Plaintiff, a bunker supplier, alleged that it had supplied fuel to M. V. XIN HAI SHENG 168 on four different occasions but had not received payment for the last refueling. The Plaintiff therefore brought suit against the registered owner of the ship, the bareboat charterer of the ship, and the five individuals who managed and operated the ship. The court ultimately held for the Plaintiff, finding that the registered owner and the five individuals that managed and operated the ship were liable to pay for the bunkers. The court held that the evidence indicated that the fourth refueling had in fact occurred, and although there was no written contract, industry customs and the ongoing relationship between the parties established that a supply contract did in fact exist. The court also determined that the bareboat charterer was not liable for the payment because the charter was never fulfilled in accordance with the agreement, and the company never possessed, used, or operated the ship during the relevant period.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_38

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Judgment The Plaintiff: Pingtan Wenbiao Bunker Tanker Domicile: Pingtan, Fujian. Legal representative: XUE Jinbiao, general manager. Agent ad litem: LIN Yong, lawyer of Fujian Yuanyi Law Firm. Agent ad litem: MA Wei, lawyer of Fujian Yuanyi Law Firm. The Defendant: Fujian Xinhai Shipping Co., Ltd. Domicile: Fuzhou, Fujian. Legal representative: ZHENG Xiuyun, general manager. Agent ad litem: LIN Danjing, lawyer of Fujian Chuangyuan Law Firm. Agent ad litem: LIN Qing, lawyer of Fujian Chuangyuan Law Firm. The Defendant: Yingkou Jinduoshou Shipping Co., Ltd. Domicile: Yingkou, Liaoning. Legal representative: LI Hua, general manager. Agent ad litem: GU Jianfeng, lawyer of Liaoning Haida Law Firm. The Defendant: CHEN Ruilu, male, born on October 6, 1968, living in Pingtan, Fujian. The Defendant: CHEN Xiuzhong, male, born on August 11, 1968, living in Pingtan, Fujian. The Defendant: WU Suqiang, male, born on October 3, 1971, living in Pingtan, Fujian. The Defendant: ZHENG Shengwen, male, born on November 19, 1975, living in Fuzhou, Fujian. The Defendant: CHEN Yixiao, male, resident of the Hong Kong Special Administrative Region. Agent ad litem: WU Suqiang. This case arose from a dispute over a fuel supply contract, filed by the Plaintiff, Pingtan Wenbiao Bunker Tanker (MIN PING YU YOU 6778), against the Defendant, Fujian Xinhai Shipping Co., Ltd. (hereinafter referred to as “Xinhai”), on June 27, 2013. The case was accepted and tried by Judge WANG Gang. On August 19, the Plaintiff filed a motion to add Yingkou Jinduoshou Shipping Co., Ltd. as a Defendant. On August 22, the Defendant Xinhai filed a motion to add Yingkou Jinduoshou Shipping Co., Ltd., CHEN Ruilu, and CHEN Xiuzhong as Defendants. On August 27, the court added Yingkou Jinduoshou Shipping Co., Ltd. (hereinafter referred to as “Jinduoshou”), CHEN Ruilu and CHEN Xiuzhong as Defendants, and notified them of the upcoming trial. On September 11, the court granted the motion of the Defendants Xinhai, CHEN Ruilu, and CHEN Xiuzhong, and added WU Suqiang and ZHENG Shengwen as Defendants, and notified them

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of the upcoming trial. The court held a hearing in public on October 16, 2013. Agent ad litem of the Plaintiff, LIN Yong, agent ad litem of the Defendant Xinhai, LIN Danjing, agent ad litem of the Defendant Jinduoshou, GU Jianfeng, agent ad litem of the Defendant ZHENG Shengwen, ZHENG Huihua, and the Defendants CHEN Ruilu, CHEN Xiuzhong and WU Suqiang, appeared in court to attend the hearing. Upon investigation, the court found that another party should have participated in the trial but did not. Therefore, the court added CHEN Yixiao as a Defendant on November 8, 2013, and notified him of the upcoming trial. Because the party was from Hong-Kong, the case was tried under general procedure. The court held a second hearing in public on November 20, 2013. Agent ad litem of the Plaintiff, LIN Yong, and agent ad litem of the Defendant Xinhai, LIN Danjing, appeared in court to attend the hearing. Despite being summoned by the court, the Defendants Jinduoshou, CHEN Ruilu, CHEN Xiuzhong, WU Suqiang, ZHENG Shengwen and CHEN Yixiao failed to appear in court without proper justification. As a result, the court entered a default judgment in accordance with Article 144 of the Civil Procedure Law of the People’s Republic of China. Now the case has been concluded. The Plaintiff’s claimed that, M.V. XIN HAI SHENG 168, owned by the Defendant Xinhai, was supplied with fuel on several occasions. On October 4, 2011, the ship received 30 tons of heavy oil at a unit price of 5000 yuan, for a total cost of 150,000 yuan. On December 1, 2011, the ship received 40 tons of heavy oil at a unit price of 5020 yuan and 10 tons of light oil at a unit price of 8300 yuan, for a total cost of 283,800 yuan. On January 25, 2012, the ship received 40 tons of heavy oil at a unit price of 5250 yuan, for a total cost of 210,000 yuan. On February 15, 2012, the ship received 43 tons of heavy oil at a unit price of 5450 yuan and 10 tons of light oil at a unit price of 8600 yuan, for a total cost of 320,350 yuan. The total cost of the bunkering was 964,150 yuan and the Defendant made a payment of 630,000 yuan. The remaining balance owed by the Defendant was 334,150 yuan. Therefore, the Plaintiff claimed that the Defendant should pay the Plaintiff the remaining 334,150 yuan and interest, calculated from February 16, 2012, which was the date the payment became overdue, to the date of repayment, at the commercial loan interest rate of 6% per year (thus, if repayment was made on June 16, 2013, the interest would be 32,078.40 yuan). The Plaintiff submitted the following evidence to support its claims: (1) the certificate of approval for the retail business of refined oil products, to prove that the oil was legally supplied to the Defendant by the Plaintiff; (2) the bunker certificate, to prove that the Defendant’s ship received oil from the Plaintiff’s business. The Defendant Xinhai argued that M.V. XIN HAI SHENG 168 was chartered by the Defendant Jinduoshou from April 16, 2007 to April 15, 2012. The parties signed Bareboat Charter Party and followed the procedure for registration. The events that preceded the Plaintiff’s claims occurred during the period of the bareboat charter. Therefore, the charterer of the ship should be responsible for making the payment, and the Defendant Xinhai was not an eligible defendant. The Defendant Xinhai submitted the following evidence to support its defense: (1) bareboat charter party, (2) bareboat charter registration certificate, to prove that

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M.V. XIN HAI SHENG 168 was chartered by the Defendant Jinduoshou from April 16, 2007 to April 15, 2012, and the Defendant Xinhai did not participate in the operation of the ship; and (3) the ship affiliation agreement, to prove that the actual shipowners of M.V. XIN HAI SHENG 168 were CHEN Ruilu and CHEN Xiuzhong. After the first HEARING, the Defendant Xinhai supplied another piece of evidence: (4) cabin capacity table for M.V. XIN HAI SHENG 168, to prove that the ship could not accommodate for fueling on February 15, 2012. The Defendant also filed a motion with the court to launch an investigation into the ownership of M.V. XIN HAI SHENG 168 and the circumstances of the bareboat charter from April 16, 2007 to June 13, 2013. However, the Dalian Maritime Court had already confirmed these facts in the third piece of evidence submitted by the Defendant Jinduoshou. Therefore, the investigation was not necessary. The Defendant Jinduoshou argued that it was not an eligible defendant and should not be liable for the payment for the following reasons. Firstly, the bunker tanker is an object and is therefore not a qualified Plaintiff. Secondly, the Defendant was not a necessary party and should not have been joined in the lawsuit; thus, it could not be listed as the defendant in this case. Thirdly, the effective judgment (2013) Da Hai Ba Shang Chu Zi No. 1 made by the Dalian Maritime Court confirmed that Bareboat Charter Party was not fulfilled in accordance with the agreement. Rather, it was used to register ownership of M.V. XIN HAI SHENG 168 in the Defendant Xinhai’s name and to obtain the relevant ship certificates in Yingkou. Xinhai did not actually deliver the ship to Jinduoshou. The Defendant Jinduoshou did not possess, use, or operate the ship during the bunkering period. CHEN Ruilu and CHEN Xiuzhong had actual control of the ship. If the oil was in fact supplied, the Plaintiff’s claim should be against the counterparty of the contract. Furthermore, the Plaintiff’s interest calculation method was wrong. The Defendant Jinduoshou submitted the following evidence to support its defense: (1) ship affiliation agreement between Xinhai, CHEN Ruilu, and CHEN Xiuzhong, to prove that CHEN Ruilu and CHEN Xiuzhong had actual control of M.V. XIN HAI SHENG 168; (2) Civil Judgment (2013) Da Hai Ba Shang Chu Zi Di No. 1, to prove that Bareboat Charter Party was not fulfilled in accordance with the agreement and M.V. XIN HAI SHENG 168 was operated by Xinhai and owned and managed by CHEN Ruilu and CHEN Xiuzhong. The Defendant WU Suqiang argued that the captain kept a record of every time M.V. XIN HAI SHENG 168 was fueled. The last record was January 25, 2012. The Plaintiff’s claims regarding the first three occasions whereby the ship was fueled are true. However, there is no record of the fourth occasion. The ship was fueled with a total of 92.83 tons of oil on January 8 and January 25 of 2012. It subsequently ran three voyages and consumed 45 tons of fuel, leaving about 47 tons remaining. Given that the capacity of the fuel tank was 80 tons, the ship could not have accommodated an additional 43 tons of fuel. In addition, it took M.V. XIN HAI SHENG 168 five days to travel from Pingtan to Rizhao. The ship arrived in Rizhao at 2:50 A.M. on February 20. Thus, the ship must have departed from Pingtan in the early morning of February 15 at the latest, making it impossible that the ship was

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fueled on the afternoon of February 15. Therefore, M.V. XIN HAI SHENG 168 did not actually receive fuel on February 15, 2012. The Defendant WU Suqiang submitted the following evidence in support of his defense: (1) WeChat message sent by the Defendant ZHENG Shengwen, the captain of M.V. XIN HAI SHENG 168, on March 9, 2013, to prove that there was no record of fueling on February 15, 2012, as claimed by the Plaintiff; (2) fueling confirmation form from Rizhao Wanghai Petrochemical Company, to prove that M. V. XIN HAI SHENG 168 was supplied with oil in Rizhao on January 8, 2012; (3) fueling record of M.V. XIN HAI SHENG 168, (4) voyage record of M.V. XIN HAI SHENG 168, to prove that the ship made only two voyages between Shandong and Guangdong from January 8 to February 20, 2012, using 30–40 tons of fuel each time, and that ZHENG Shengwen intentionally concealed evidence of the fueling on January 8, 2012 and forged evidence of the fueling on February 15, 2012, with the Plaintiff; (5) WeChat message sent by the Defendant ZHENG Shengwen on January 25, 2012, to prove that M.V. XIN HAI SHENG 168 departed from Pingtan the day before the ship was supposedly fueled; (6) voyage income and expenditure schedule of M.V. XIN HAI SHENG 168, to prove that M.V. XIN HAI SHENG 168 departed from Pingtan before the afternoon of February 15, 2012, so it could not possibly have been fueled in Pingtan. The Defendants CHEN Ruilu and CHEN Xiuzhong argued that they did not participate in the operation of the ship and had no knowledge of the fueling. The Defendant ZHENG Shengwen argued that the four instances of fueling had indeed occurred and that the quantities claimed by the Plaintiff were correct and could be proven by the voyage record. The Defendants CHEN Ruilu, CHEN Xiuzhong, and ZHENG Shengwen did not submit evidence. The Defendant CHEN Yixiao did not present an argument nor did he submit evidence. After cross-examination, the court confirmed the evidence submitted by the parties as follows: 1. Evidence of the Plaintiff: The Defendant Xinhai’s cross-examination opinions on the Plaintiff’s evidence are as follows. Firstly, it had no objection to the authenticity of evidence 1, but it held that the Plaintiff was operating illegally without an oil product transportation license. Second, it raised an objection as to the authenticity of evidence 2, arguing that the company had not inscribed the seal of M.V. XIN HAI SHENG 168 on the document; the signatory was not employed by the company, and the ship was under a bareboat charter during this period. The Defendant Jinduoshou’s cross-examination opinions on the Plaintiff’s evidence are as follows: it had no objection to the authenticity of evidence 1, but held that the bunker tanker was an object and therefore not qualified to bring a civil lawsuit. It had no objection to the authenticity of evidence 2, but asserted that there was a difference in the amount of time between the first two instances of fueling and the amount of time between the second two instances of fueling. It

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also argued that the company did not operate the ship and did not know anything about the fueling. The Defendants CHEN Ruilu and CHEN Xiuzhong did not have any cross-examination opinions on the Plaintiff’s evidence and did not know anything about the fueling. The Defendant WU Suqiang had no objection to evidence 1, but objected to the authenticity of evidence 2, arguing that Pingtan Comprehensive Experimental Zone, where fuel costs were on the rise, had not yet been established. These fueling bills were supplemented. The Defendant ZHENG Shengwen had no objection to the two pieces of evidence. Regarding evidence 1 of the Plaintiff, the court holds that it can be verified by the original. The parties had no objection to evidence 1 except having no knowledge of it. Whether or not the Plaintiff conducted business in the location where it was licensed does not affect the probative force of the evidence. The court therefore confirms the probative force of the evidence. As for evidence 2 of the Plaintiff, the court holds that it can be verified by the original. However, the Defendants Xinhai, Jinduoshou, and WU Suqiang objected to the authenticity of the evidence. Upon investigation, the court found that Pingtan Comprehensive Experimental Zone was established in July of 2009. Furthermore, there is no issue with the fueling bills. The signatory was the chief engineer of M.V. XIN HAI SHENG 168, and the seal is that of M.V. XIN HAI SHENG 168. Therefore, the court confirms the probative force of the first three fueling and bunker certificates. The probative force of the fueling and bunker certificate for the fueling on February 15, 2012, will be analyzed later on. 2. Evidence of the Defendant Xinhai The Plaintiff’s cross examination opinions on the Defendant Xinhai’s evidence are as follows. It could not cross-examine evidence numbers 1 through 3 because it was not a party to the contract. It held that the capacity stated in evidence 4 was incorrect and the amount of fuel did not exceed the capacity of the tank, which was confirmed by ZHENG Shengwen. The Defendant Jinduoshou had no objection to the authenticity of the evidence, but held that the bareboat charter registration could not prove that M.V. XIN HAI SHENG 168 was actually operated by the company. The Defendants CHEN Ruilu, CHEN Xiuzhong, WU Suqiang, and ZHENG Shengwen had no objection to the evidence and recognized the bareboat charter, but they asserted that the ship was operated and managed by them. The court holds that aside from the Plaintiff, the parties had no objection to evidence numbers 1 through 3. Therefore, the court confirms the authenticity of the evidence, and its probative force will be analyzed later on. As for evidence 4, the words “XIN HAI SHENG 168” are written by hand, and the time of completion and tonnage are not consistent with that of M.V. XIN HAI SHENG 168. Therefore, the court does not confirm the probative force of evidence 4.

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3. Evidence of the Defendant Jinduoshou The Plaintiff held that it could not cross-examine evidence numbers 1 and 2 because it was not a party to the contract, and it had no objection to the authenticity of evidence 3. The Defendant Xinhai had no objection to the authenticity of the three pieces of evidence, but argued that Jinduoshou was the nominal operator of M.V. XIN HAI SHENG 168, not the actual shipowner, and the bareboat charter party had a hire clause but was it was not fulfilled. The Defendants CHEN Ruilu, CHEN Xiuzhong, WU Suqiang, and ZHENG Shengwen had no objections. Therefore, the court confirms the probative force of the evidence. 4. Evidence of the Defendant WU Suqiang The Plaintiff’s cross-examination opinions on the Defendant WU Suqiang’s evidence are as follows. it could not recognize the authenticity of evidence 1, and argued that the evidence could not prove that the fueling on February 15, 2012 did not occur. Evidence 2 was a copy that could not be verified and had no relevancy to the case. Evidence 3 and 4 could prove that there were 4 instances of fueling, and the times and quantities were the same as those claimed by the Plaintiff. Evidence 5 was not relevant to the case. The authenticity of evidence 6 could not be recognized, and the evidence was not relevant to the case. There was no record of the income and expenditure statement. The Defendant Xinhai’s cross-examination opinions on the Defendant WU Suqiang’s evidence are as follows. It held that it was not a party to the contract and did not participate in the operation of the ship, so it could not recognize the authenticity and relevancy of evidence 1–4. However, it asserted that the Defendants WU Suqiang and ZHENG Shengwen were engaged in another case and therefore had a conflict of interest. It had no objection to evidence 5 and 6. The Defendant Jinduoshou held that the period for submitting evidence was over, so it did not cross-examine Defendant WU Suqiang’s evidence. It asserted that it did not actually operate the ship and had no knowledge relevant to the case. The Defendants CHEN Ruilu and CHEN Xiuzhong had no knowledge of the fueling and could not cross-examine the evidence. The Defendant ZHENG Shengwen stated that evidence 3 was provided by him, but that he did not know anything about the other pieces of evidence and could therefore not cross-examine them. The court holds that the evidence of the Defendant WU Suqiang was one-sided and contradictory. Evidence 1 and 6 cannot prove that the fueling on February 15, 2012 did not occur. Evidence 2 has no original and cannot be verified, and it cannot disprove the occurrence of the fueling on February 15, 2012. Furthermore, the parties did not recognize the authenticity of the evidence or had no knowledge of it. Therefore, the court does not confirm the probative force of the evidence. Evidence 3 and 4 recorded the fueling on February 15, 2012, but not the fueling on January 8. The ship added oil on December 21, 2011 in Lanshan, which disproves the statement of WU Suqiang and proves the claims of the Plaintiff.

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According to the analyses and confirmation of the evidence above, along with the record of the hearing, the court finds that: The actual shipowner of M.V. XIN HAI SHENG 168 was the outsider GAO Xiong. On March 13, 2007, the ownership of the ship was registered to the Defendant Xinhai to apply for a mortgage loan. On April 5 of the same year, Xinhai and Jinduoshou signed Bareboat Charter Party to facilitate Xinhai’s application for the relevant ship certificates in Yingkou. They agreed to a charter period of five years, ending on April 15, 2012. On April 26, 2007, the bareboat registration was completed at the Fuzhou Maritime Safety Administration, but the charter party was not actually performed. On July 30, 2009, the ship was resold to four of the Defendants: WU Suqiang, CHEN Yixiao, CHEN Ruilu, and CHEN Xiuzhong. Later, WU Suqiang transferred 10% of his shares to ZHENG Shengwen. On August 28 of the same year, the Defendants CHEN Ruilu and CHEN Xiuzhong, as shareholder representatives, signed the Ship Affiliation Agreement with Xinhai, agreeing to affiliate the ship with Xinhai’s name. On the same day, the Defendant Xinhai also signed the Affiliation Agreement with Jinduoshou, agreeing give Jinduoshou the right to operate the ship in the form of a bareboat charter. However, the ship was still actually operated by Xinhai. During the trial, the Defendants Xinhai and WU Suqiang and the other actual owners acknowledged that the ship was actually operated and managed by a five-person partnership including WU Suqiang. WU Suqiang and ZHENG Shengwen also recognized that M.V. XIN HAI SHENG 168 had been fueled three times by the Plaintiff. On October 4, 2011, the ship received 30 tons of heavy oil at a unit price of 5000 yuan, for a total cost of 150,000 yuan. On December 1, 2011, the ship received 40 tons of heavy oil at a unit price of 5020 yuan and 10 tons of light oil at a unit price of 8300 yuan, for a total cost of 283,800 yuan. On January 25, 2012, the ship received 40 tons of heavy oil at a unit price of 5250 yuan, for a total cost of 210,000 yuan. The total cost of the oil was 643,800 yuan. WU Suqiang and other 4 shareholders paid 630,000 yuan, still owing 13,800 yuan. It is also found out that the registered owner of M.V. XIN HAI SHENG 168 was Xinhai, but the ship was actually owned by 5 people including WU Suqiang. WU Suqiang had 40% ownership of the ship, CHEN Yixiao had 30%, CHEN Ruilu had 15%, ZHENG Shengwen had 10%, and CHEN Xiuzhong had 5%. The actual operators of the ship were also the above 5 people. The ship was later delivered to the Defendant Xinhai because of another debt. In June of 2013, the ship was resold by Xinhai. It is also found out that the Plaintiff was a sole proprietorship enterprise registered with the ministry of commerce and industry. The court holds that this case is the dispute over a fuel supply contract. Although the Plaintiff and the operator of M.V. XIN HAI SHENG 168 did not have a written agreement, a contract was nevertheless established given the habits of the industry as well as the long-term relationship between the parties. The Plaintiff supplied fuel to M.V. XIN HAI SHENG 168 and issued the fuel supply certificate according to the contract. The chief engineer signed and stamped the ship’s seal in the recipient column, establishing the fuel supply relationship between the two parties. The

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parties did not disagree as to the dates and quantities of the first three fueling occasions, and the operator made a payment of 630,000 yuan for the oil. The issues are that: (1) whether M.V. XIN HAI SHENG 168 was supplied with oil at the Plaintiff’s place of business on February 15, 2012, (2) if so, who should be responsible for the oil payment. 1. Whether M.V. XIN HAI SHENG was supplied with oil at the Plaintiff’s place of business on February 15, 2012 Both the Plaintiff and the Defendant ZHENG Shengwen confirmed that a fueling occurred on February 15, 2012, but the Defendant WU Suqiang denied it. The court holds that the Plaintiff’s claim can be proven by the fuel supply voucher and the fueling certificate issued on February 15, 2012. The recipient and consignee columns of the certificate had the seal of M.V. XIN HAI SHENG 168 and the signature of the ship’s chief engineer, ZENG Erjin. This is consistent with the fuel supply certificates for the first three fueling occasions. The Defendant WU Suqiang recognized the first three fueling occasions and denied the last but provided no evidence to support this refutation. The logbook of the ship has been lost, and the fueling records in evidence 3 and 4 are consistent with the cost and tonnage claimed by the Plaintiff. The court confirms the probative force of the fuel supply certificate for February 15, 2012. It can be proven that on February 15, 2012, at the Plaintiff’s place of business, M.V. XIN HAI SHENG 168 was supplied with 43 tons of heavy oil at a unit price of 5450 yuan as well as 10 tons of light oil at a unit price of 8600 yuan, for a total cost of 320,350 yuan. The Defendant WU Suqiang stated that the captain did not report the fueling, but failure to report the fueling does not mean that it did not occur. The Defendant WU Suqiang also stated that if the ship was supplied with fuel in Pingtan on February 15, 2012, it could not have reached Rizhao in the early morning of the 20th. However, no evidence was provided to support this assertion. Various factors including weather, sea conditions, speed, and load size affect the length of a ship’s journey, making it different every time. The Defendant WU Suqiang also stated that the heavy oil tank could not have accommodated a refueling in Pingtan on February 15, 2012. The Defendant Xinhai also held this view. However, as confirmed by the Defendant WU Suqiang, M.V. XIN HAI SHENG 168 was also fueled with a similar amount of fuel on January 25, which the fuel tank was able to accommodate. The parties have different opinions regarding the capacity of M.V. XIN HAI SHENG 168 heavy oil tank. The Defendant Xinhai held that it could hold 70 tons; the Defendant WU Suqiang held that it could hold 80 tons; and the Defendant ZHENG Shengwen held that it could hold 100 tons. However, none of these parties provided any evidence to prove their assertions. Based on the information regarding the voyages and fuel consumption of the ship from January 8 to February 15 provided by the Defendant ZHENG Shengwen, it is unlikely that the fuel tank would be unable to accommodate the refueling. According to the Defendant WU Suqiang’s algorithm, the fueling on January 8, 2012 would’ve had to occur on December 21, 2011. Yet, during this period,

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three voyages were made and there were no issues with fuel tank accommodation. Therefore, the defense of the Defendants Xinhai and WU Suqiang cannot be established. 2. Who should be responsible for the oil payment Based on the statements of the Defendants Xinhai, WU Suqiang, CHEN Ruilu, CHEN Xiuzhong, and ZHENG Shengwen, the court can confirm that WU Suqiang, CHEN Yixiao, and others are the actual shipowners and operators of M.V. XIN HAI SHENG 168. The Defendant Xinhai was the registered shipowner of M.V. XIN HAI SHENG 168. Although the Defendant Xinhai stated that the ship’s seal was not inscribed or authorized by it, the affiliating party had authority to act in the name of the ship, including the use of M.V. XIN HAI SHENG 168’s seal. The court holds that the Defendants WU Suqiang, CHEN Yixiao, CHEN Ruilu, CHEN Xiuzhong, and ZHENG Shengwen, as the actual shipowners and operators of M.V. XIN HAI SHENG 168, should be held liable for the oil payment for M.V. XIN HAI SHENG 168. The Defendant Xinhai, as the registered owner of M.V. XIN HAI SHENG 168, should be jointly and severally liable for the settlement of the fueling arrears of the ship. Although the Defendant Jinduoshou signed Bareboat Charter Party with Xinhai and registered the bareboat charter with Fuzhou Maritime Safety Administration, the bareboat charter was not actually fulfilled. This was confirmed by the Dalian Maritime Court’s effective judgment and was also recognized by WU Suqiang as well as other parties. M.V. XIN HAI SHENG 168 was not delivered to Jinduoshou but was actually operated and managed by the Defendant WU Suqiang and other parties. The Defendants Xinhai, WU Suqiang, CHEN Yixiao, CHEN Ruilu, and CHEN Xiuzhong all held that Jinduoshou had collected a management fee and affiliation fee and should therefore also be held liable. The court holds that the so-called affiliation agreement signed by Xinhai and Jinduoshou clearly stipulated that “the operating right will be placed in the name of Party B (Jinduoshou) in the form of a bareboat charter, but Party A (Xinhai) will actually carry out the business operations.” There are no terms of affiliation in the agreement, such as an affiliation fee, etc. The existence of an affiliation relationship is a separate legal issue that should be litigated in another case. Therefore, the Defendant Jinduoshou should not be liable for the oil payment for M.V. XIN HAI SHENG 168. In conclusion, according to Article 107 and Article 109 of the Contract Law of the People’s Republic of China, and Article 144 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: 1. The Defendants WU Suqiang, CHEN Yixiao, CHEN Ruilu, CHEN Xiuzhong and ZHENG Shengwen shall pay the Plaintiff Pingtan Wenbiao Bunker Tanker the oil payment of 334,150 yuan and the interest thereof at an annual rate of 6% (13,800 yuan from January 26, 2012 and 320,350 yuan from February 16, 2012 to the date that the payment is made, confirmed by the judgment); 2. The Defendant Fujian Xinhai Shipping Co., Ltd. shall bear joint and several liability.

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Court acceptance fee in the amount of 6794 yuan shall be born by the Defendants WU Suqiang, CHEN Yixiao, CHEN Ruilu, CHEN Xiuzhong, ZHENG Shengwen and Fujian Xinhai Shipping Co., Ltd. If unsatisfied with this judgment, any party may, within 15 days of the date of service of this judgment, submit an appeal with copies in the number of opposing parties, to lodge an appeal to the Fujian High People’s Court. Presiding Judge: WANG Gang Acting Judge: WANG Duanduan Acting Judge: YOU Caimo November 28, 2013 Clerk: LI Yue

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Fujian High People’s Court Civil Judgment Pingtan Wenbiao Bunker Tanker v. Fujian Xinhai Shipping Co., Ltd. et al. (2014) Min Min Zhong Zi No. 554 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 783. Cause of Action 225. Dispute over contract for marine stores and spare parts supply. Headnote Affirming lower court decision holding registered owner and individual operators liable to pay for bunkers supplied to ship, despite absence of written contract, because of industry custom and existing relationship between the parties. Summary The Plaintiff, a bunker supplier, alleged that it had supplied fuel to M. V. XIN HAI SHENG 168 on four different occasions but had not received payment for the last refueling. The Plaintiff therefore brought suit against the registered owner of the ship, the bareboat charterer of the ship, and the five individuals who managed and operated the ship. The court of first instance ultimately held for the Plaintiff, finding that the registered owner and the five individuals that managed and operated the ship were liable to pay for the bunkers. The Court held that the evidence indicated that the fourth refueling had in fact occurred, and although there was no written contract, industry customs and the ongoing relationship between the parties established that a supply contract did in fact exist. The court also determined that the bareboat charterer was not liable for the payment because the charter was never fulfilled in accordance with the agreement, and the company never possessed, used, or operated the ship during the relevant period. The registered owner appealed the judgment, arguing that the facts confirmed by the court of first instance were incorrect and that there was no legal basis to support the conclusion that it should bear joint and several liability. The appeal court affirmed the judgment of the court of first instance. The court held that the supposed bareboat charterer of the ship, Yingkou Jinduoshou, never actually possessed or operated the ship. However, the appeal court amended the date from which the interest for the bunker payment was to be calculated.

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Judgment The Appellant (the Defendant of first instance): Fujian Xinhai Shipping Co., Ltd. Domicile: Fuzhou, Fujian. Legal representative: ZHENG Xiuyun, general manager. Agent ad litem: LIN Qing, lawyer of Fujian Chuangyuan Law Firm. The Respondent (the Plaintiff of first instance): Pingtan Wenbiao Bunker Tanker Domicile: Pingtan, Fujian. Person in charge: XUE Jinbiao, general manager. The Respondent (the Defendant of first instance): Yingkou Jinduoshou Shipping Co., Ltd. Domicile: Yingkou, Liaoning. Legal representative: LI Hua, general manager. Agent ad litem: LIU Xu, lawyer of Liaoning Haida Law Firm. Agent ad litem: GU Jianfeng, lawyer of Liaoning Haida Law Firm. The Respondent (the Defendant of first instance): CHEN Ruilu, male, born on October 6, 1968, living in Pingtan, Fujian. The Respondent (the Defendant of first instance): CHEN Xiuzhong, male, born on August 11, 1968, living in Pingtan, Fujian. The Respondent (the Defendant of first instance): WU Suqiang, male, born on October 3, 1971, living in Pingtan, Fujian. The Respondent (the Defendant of first instance): ZHENG Shengwen, male, born on November 19, 1975, living in Fuzhou, Fujian. The Respondent (the Defendant of first instance): CHEN Yixiao, male, resident of the Hong Kong Special Administrative Region. Agent ad litem: WU Suqiang. This case arose from a dispute over a fuel supply contract between the Appellant, Fujian Xinhai Shipping Co., Ltd. (hereinafter referred to as “Xinhai”), and the Respondents Pingtan Wenbiao Bunker Tanker (MIN PING YU YOU 6778) (hereinafter referred to as “Wenbiao Bunker Tanker”), Yingkou Jinduoshou Shipping Co., Ltd. (hereinafter referred to as “Jinduoshou”), CHEN Ruilu, CHEN Xiuzhong, WU Suqiang, ZHENG Shengwen, and CHEN Yixiao. The Appellant disagreed with Civil Judgment (2013) Xia Hai Fa Shang Chu Zi No. 286 of the Xiamen Maritime Court and appealed to the court. After accepting the case, the court formed a collegiate panel according to law and held a public hearing on May 21, 2014. Agent ad litem of Xinhai, LIN Qing, appeared in court to attend the

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hearing. Despite being summoned by the court, the Respondents Wenbiao Bunker Tanker, Jinduoshou, CHEN Ruilu, CHEN Xiuzhong, WU Suqiang, ZHENG Shengwen and CHEN Yixiao failed to appear in court without proper justification. As a result, the court entered a default judgment. Now the case has been concluded. In the first instance, Wenbiao Bunker Tanker claimed that Xinhai should be responsible for the oil payment of 334,150 yuan plus interest, calculated from February 16, 2012, which was the date the payment became overdue, to the date of repayment, at the commercial loan interest rate of 6% per year (thus, if repayment is made on June 16, 2013, the interest would be 32,078.40 yuan). The other parties involved were subsequently notified of the upcoming trial. The court of first instance found that the actual shipowner of M.V. XIN HAI SHENG 168 was the outsider GAO Xiong. On March 13, 2007, ownership of the ship was registered in the name of the Xinhai in order to apply for a mortgage loan. On April 5 of the same year, Xinhai and Jinduoshou signed Bareboat Charter Party in order to facilitate Xinhai’s application for the relevant ship certificates in Yingkou. They agreed to a charter period of five years, ending on April 15, 2012. On April 26, 2007, the bareboat registration was completed at the Fuzhou Maritime Safety Administration, but the charter party was not actually performed. On July 30, 2009, the ship was resold to WU Suqiang, CHEN Yixiao, CHEN Ruilu and CHEN Xiuzhong. Later, WU Suqiang transferred 10% of his shares to ZHENG Shengwen. On August 28 of the same year, CHEN Ruilu and CHEN Xiuzhong, as shareholder representatives, signed Ship Affiliation Agreement with Xinhai, agreeing to affiliate the ship with Xinhai’s name. On the same day, Xinhai also signed the Affiliation Agreement with Jinduoshou, agreeing to give Jinduoshou the right to operate the ship in the form of a bareboat charter. However, the ship was still actually operated by Xinhai. During the trial, Xinhai, WU Suqiang, and the other actual shipowners acknowledged that the ship was actually operated and managed by a five-person partnership including WU Suqiang. WU Suqiang and ZHENG Shengwen also recognized that M.V. XIN HAI SHENG 168 had been fueled three times by Wenbiao Bunker Tanker. On October 4, 2011, the ship received 30 tons of heavy oil at a unit price of 5000 yuan, for a total cost of 150,000 yuan. On December 1, 2011, the ship received 40 tons of heavy oil at a unit price of 5020 yuan and 10 tons of light oil at a unit price of 8300 yuan, for a total cost of 283,800 yuan. On January 25, 2012, the ship received 40 tons of heavy oil at a unit price of 5250 yuan, for a total cost of 210,000 yuan. The total cost of the oil was 643,800 yuan. WU Suqiang and the four other shareholders paid 630,000 yuan and still owed 13,800 yuan. It was also found out that the registered owner of M.V. XIN HAI SHENG 168 was Xinhai, but the ship was actually owned by five people including WU Suqiang. WU Suqiang had 40% ownership of the ship, CHEN Yixiao had 30%, CHEN Ruilu had 15%, ZHENG Shengwen had 10%, and CHEN Xiuzhong had 5%. The actual operators of the ship were also the above five people. The ship was later delivered to Xinhai because of another debt. In June of 2013, the ship was resold by Xinhai.

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It was also found out that Wenbiao Bunker Tanker was a sole proprietorship enterprise registered with the ministry of commerce and industry. The court of first instance held that the case was a dispute over a fuel supply contract. Although Wenbiao Bunker Tanker and the operator of M.V. XIN HAI SHENG 168 did not have a written agreement, a contract was nevertheless established given the habits of the industry as well as the long-term relationship between the parties. Wenbiao Bunker Tanker supplied fuel to M.V. XIN HAI SHENG 168 and issued the fuel supply certificate according to the contract. The chief engineer signed and stamped the ship’s seal in the recipient column, establishing the fuel supply relationship between the two parties. The parties did not disagree as to the dates and quantities of the first three fueling occasions, and the operator made a payment of 630,000 yuan for the oil. The issues were: (1) whether M.V. XIN HAI SHENG 168 was supplied with oil at the Plaintiff’s place of business on February 15, 2012, (2) if so, who should be responsible for the oil payment. 1. Whether M.V. XIN HAI SHENG was supplied with oil at Wenbiao Bunker Tanker’s place of business on February 15, 2012 Both Wenbiao Bunker Tanker and ZHENG Shengwen confirmed that a fueling occurred on February 15, 2012, but WU Suqiang denied it. The court of first instance held that Wenbiao Bunker Tanker’s claim could be proven by the fuel supply voucher and the fueling certificate issued on February 15, 2012. The recipient and consignee columns of the certificate had the seal of M.V. XIN HAI SHENG 168 and the signature of the ship’s chief engineer, ZENG Erjin. This was consistent with the fuel supply certificates for the first three fueling occasions. WU Suqiang recognized the first three fueling occasions and denied the last but provided no evidence to support this refutation. The logbook of the ship had been lost, and the fueling records in evidence 3 and 4 were consistent with the cost and tonnage claimed by Wenbiao Bunker Tanker. The court of first instance confirmed the probative force of the fuel supply certificate for February 15, 2012. It could be proven that on February 15, 2012, at Wenbiao Bunker Tanker’s place of business, M.V. XIN HAI SHENG 168 was supplied with 43 tons of heavy oil at a unit price of 5450 yuan as well as 10 tons of light oil at a unit price of 8600 yuan, for a total cost of 320,350 yuan. WU Suqiang stated that the captain did not report the fueling, but failure to report the fueling did not mean that it did not occur. WU Suqiang also stated that if the ship was supplied with fuel in Pingtan on February 15, 2012, it could not have reached Rizhao in the early morning of the 20th. However, no evidence was provided to support this assertion. Various factors including weather, sea conditions, speed, and load size affect the length of a ship’s journey, making it different every time. WU Suqiang also stated that the heavy oil tank could not have accommodated a refueling in Pingtan on February 15, 2012. Xinhai also held this view. However, as confirmed by WU Suqiang, M.V. XIN HAI SHENG 168 was also fueled with a similar amount of fuel on January 25, which the fuel tank was able to accommodate. The parties had different opinions regarding the capacity of M.V. XIN HAI SHENG 168’s heavy oil tank. Xinhai held that it could hold 70 tons,

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WU Suqiang held that it could hold 80 tons, and ZHENG Shengwen held that it could hold 100 tons. However, none of these parties provided any evidence to prove their assertions. Based on the information regarding the voyages and fuel consumption of the ship from January 8 to February 15 provided by ZHENG Shengwen, it was unlikely that the fuel tank would have been unable to accommodate the refueling. According to WU Suqiang’s algorithm, the fueling on January 8, 2012 would’ve had to occur on December 21, 2011. Yet, during this period, three voyages were made, and there were no issues with fuel tank accommodation. Therefore, Xinhai and WU Suqiang’s defense could not be established. 2. Who should be responsible for the oil payment Based on the statements of Xinhai, WU Suqiang, CHEN Ruilu, CHEN Xiuzhong and ZHENG Shengwen, it could be confirmed that WU Suqiang, CHEN Yixiao, and the others were the actual shipowners and operators of M.V. XIN HAI SHENG 168. Xinhai was the registered shipowner of M.V. XIN HAI SHENG 168. Although Xinhai stated that the ship’s seal was not inscribed or authorized by it, the affiliating party had authority to act in the name of the ship, including the use of M.V. XIN HAI SHENG 168’s seal. The court of first instance held that WU Suqiang, CHEN Yixiao, CHEN Ruilu, CHEN Xiuzhong, and ZHENG Shengwen, as the actual shipowners and operators of M.V. XIN HAI SHENG 168, should be held liable for the oil payment for M.V. XIN HAI SHENG 168. Xinhai, as the registered owner of M.V. XIN HAI SHENG 168, should be jointly and severally liable for the settlement of the fueling arrears of the ship. Although Jinduoshou signed the Bareboat Charter Party with Xinhai and registered the bareboat charter with Fuzhou Maritime Safety Administration, the bareboat charter was not actually fulfilled. This was confirmed by the Dalian Maritime Court’s effective judgment and was also recognized by WU Suqiang and other parties. M.V. XIN HAI SHENG 168 was not delivered to Jinduoshou but was actually operated and managed by WU Suqiang and other parties. Xinhai, WU Suqiang, CHEN Yixiao, CHEN Ruilu, and CHEN Xiuzhong all held that Jinduoshou had collected a management fee and affiliation fee and should therefore also be held liable. The court of first instance held that the so-called affiliation agreement signed by Xinhai and Jinduoshou clearly stipulated that “the operating right will be placed in the name of Party B (Jinduoshou) in the form of bareboat charter, but Party A (Xinhai) will actually carry out the business operations.” There were no terms of affiliation in the agreement, such as an affiliation fee, etc. The existence of an affiliation relationship is a separate legal issue that should be litigated in another case. Therefore, Jinduoshou should not be liable for the oil payment for M.V. XIN HAI SHENG 168. In conclusion, according to Article 107 and Article 109 of the Contract Law of the People’s Republic of China, and Article 144 of the Civil Procedure Law of the People’s Republic of China, the judgment was as follows: 1. WU Suqiang, CHEN

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Yixiao, CHEN Ruilu, CHEN Xiuzhong, and ZHENG Shengwen should pay Wenbiao Bunker Tanker the oil payment of 334,150 yuan and the interest thereof at an annual rate of 6% (13,800 yuan from January 26, 2012 and 320,350 yuan from February 16, 2012 to the date that the payment is made, confirmed by the judgment); 2. Xinhai should bear joint and several liability. Court acceptance fee in the amount of 6794 yuan should be born by WU Suqiang, CHEN Yixiao, CHEN Ruilu, CHEN Xiuzhong, ZHENG Shengwen and Xinhai. After the judgment was rendered, Xinhai filed an appeal with the court, arguing that the facts confirmed by the court of first instance were incorrect and that there was no legal basis to support the conclusion that Xinhai should bear joint and several liability. Firstly, when the debt in this case was incurred, M.V. XIN HAI SHENG 168 was registered under a bareboat charter. In accordance with Article 6 of the Regulations of the People’s Republic of China Governing the Registration of Ships, a bareboat charter registration was effective against third parties. The bareboat charterer, Jinduoshou, should be liable for the ship’s operating debts. Xinhai should not be responsible for the payment involved. Secondly, whether or not Bareboat Charter Party was fulfilled does not change the fact that the registration provided effective notice of the bareboat charter to the public. Whether Bareboat Charter Party was fulfilled and how it was performed were internal issues of the bareboat charter relationship that only affect the signatory parties of the contract and have nothing to do with the third party. The court of first instance concluded that the registration of Bareboat Charter Party did not actually provide public notice of the bareboat charter. In coming to this conclusion, the court confused the internal relationship of the parties with the external effectiveness of the bareboat charter against third parties. Thirdly, Xinhai was not a party to the fueling contract and did not benefit from it. The court of first instance held that Xinhai was liable for the fuel payment, which was not consistent with the principle of relativity of contact. Fourthly, the court of first instance did not correctly confirm the affiliation relationship regarding M.V. XIN HAI SHENG 168. Affiliation Agreement signed by Xinhai and Jinduoshou was actually signed by Xinhai and Jinduoshou on behalf of WU Suqiang and other individuals. The registered owner was Xinhai, the operator was Jinduoshou, and the actual operators of the ship were WU Suqiang and other individuals. Fifthly, Bareboat Charter Party was not unfulfilled, but rather partially fulfilled. The operation and management of the ship by WU Suqiang and other individuals should be regarded as Jinduoshou’s fulfillment of its ship management obligations. As with the hire clause, the other contents of Bareboat Charter Party represented the true intentions of the parties and were binding on Jinduoshou. Sixthly, the court of first instance concluded that Xinhai had given permission for the use of the ship’s seal, engraved with “Fujian Xinhai Shipping Co., Ltd.,” by default, which was inconsistent with the facts. Xinhai only had an ownership relationship with WU Suqiang and the other individuals; the affiliating party could only use Xinhai’s name in connection with the ownership of the ship. Seventhly, the court of first instance did not correctly determine the starting date for the purpose of calculating the interest on the fuel payment. The date that the fueling payment was due was not agreed upon in the fueling voucher. According to Article

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62 of the Contract Law of the People’s Republic of China, the date by which CHEN Ruilu and the other individuals should have fulfilled their obligation to pay for the fueling should be the date that Wenbiao Bunker Tanker filed the lawsuit. Therefore, the original judgment should be revoked and the new judgment should hold that Xinhai was not liable for the payment. The Respondent Jinduoshou did not appear in court to attend the hearing, but submitted a written reply in which it argued the following. Firstly, Jinduoshou was not a party to the fueling contract that Wenbiao Bunker Tanker claims was not fulfilled, and Jinduoshou should not be liable for the debts related to this contact. WU Suqiang and other individuals acknowledged that they were the actual owners and operators of the ship involved, and Jinduoshou was neither the registered owner nor the operator of the ship. It did not actually use the ship and was not the counterparty of the fueling contract. Secondly, Xinhai misunderstood Article 6 of the Regulations of the People’s Republic of China Governing the Registration of Ships, according to which registration provided public notice of the establishment, transfer, and extinction of bareboat charter rights. Wenbiao Bunker Tanker requested payment for refueling plus interest, which had nothing to do with the establishment, transfer, or extinction of bareboat charter rights. Thirdly, Xinhai mischaracterized the affiliation relationship regarding the ship in this case. Ship Affiliation Agreement signed by the actual owner of the ship and Xinhai clearly stipulated that the ship involved was affiliated with Xinhai for the purpose of engaging in the transportation business. Furthermore, the fueling voucher was stamped with the seal engraved with “Fujian Xinhai Shipping Co., Ltd. XIN HAI SHENG 168,” indicating that the affiliating party was engaged in business in the name of the affiliated party. Bareboat Charter Party was signed only for the convenience of applying for a certificate in Yingkou, and there was no actual performance. Jinduoshou was not the operator of the ship involved. Fourthly, Civil Judgment (2013) Da Hai Ba Shang Chu Zi No. 1, which was already in force, stated that Bareboat Charter Party was not actually performed and that Xinhai did not deliver the ship involved to Jinduoshou. Xinhai’s claim that there was partial performance of Bareboat Charter Party was incorrect. Therefore, Jinduoshou requested thin court dismiss the appeal and affirm the original judgment. The Respondents Wenbiao Bunker Tanker, CHEN Ruilu, CHEN Xiuzhong, WU Suqiang, ZHENG Shengwen and CHEN Yixiao did not appear in court and did not submit written replies. During the second instance, the parties did not submit new evidence. The Appellant Xinhai objected to the fact that it did not actually perform Bareboat Charter Party. Aside from this, Xinhai had no other objection to the facts confirmed by the court of the first instance. The question of fact raised by Xinhai will be analyzed in combination with other issues. The rest of the facts were not objected to, so the court of second instance confirms them. The issues in the second instance are that: (1) whether Xinhai should bear joint and several liability for the oil payment; (2) confirmation of the interest on the oil payment.

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1. Whether Xinhai should bear joint and several liability for the oil payment The court holds that the facts found in this case indicate that the actual owners of M.V. XIN HAI SHENG 168 during the fueling period were WU Suqiang, CHEN Ruilu, CHEN Xiuzhong, ZHENG Shengwen and CHEN Yixiao. On April 5, 2007, before WU Suqiang and the others became the actual owners of M.V. XIN HAI SHENG 168, Xinhai signed Bareboat Charter Party with Jinduoshou for M.V. XIN HAI SHENG 168, agreeing to charter the ship to Jinduoshou, and completed the bareboat charter registration. Civil Judgment (2013) Hai Da Ba Shang Chu Zi No. 1 of Dalian Maritime Court that has taken effect found that the agreement was not actually performed, and that the agreement was only for the purpose of registering the ownership of M.V. XIN HAI SHENG 168 in Yingkou. On August 28, 2009, CHEN Ruilu and CHEN Xiuzhong, as shareholder representatives, signed Ship Affiliation Agreement with Xinhai, agreeing to register M.V. XIN HAI SHENG 168 in the name of Xinhai. M.V. XIN HAI SHENG 168 was actually used and operated by the actual shipowner. On the same day, Xinhai and Jinduoshou signed the Affiliation Agreement, which gave Jinduoshou the right of operation in the form of a bareboat charter but stipulated that the ship was still actually operated by Xinhai. The fueling voucher in this case named M.V. XIN HAI SHENG 168 as the vessel that had received the oil and was stamped with the “Fujian Xinhai Shipping Co., Ltd. XIN HAI SHENG 168” ship seal. The facts above are sufficient to support the determination that the actual shipowners and operators of M.V. XIN HAI SHENG 168 during the fueling period were WU Suqiang and the other individuals. The court of the first instance ruled that WU Suqiang and the others should be responsible for the refueling payment concerned. With regard to Xinhai’s liability, the ship’s seal bearing Xinhai’s name was used when the ship was refueled. Based on the ship’s seal, Wenbiao Bunker Tanker initially only brought suit against Xinhai, arguing that Xinhai should bear liability for the fuel payment in accordance with the fuel voucher. However, the court found that WU Suqiang and other individuals were the actual owners and operators of the ship, and determined that the actual owners should bear liability, which complied with existing laws as well as the principle of contract relativity. The current laws do not explicitly stipulate that the affiliating and affiliated parties shall bear joint and several liability in regard to the vessel fueling agreement. However, according to Article 43 of the Opinion of the Supreme People’s Court on Several Issues concerning the Application of the Civil Procedure Law of the People’s Republic of China and the legal principles of good faith and fairness, the court of first instance held that Xinhai should bear joint and several liability for the oil payment involved, which is not inappropriate. As for the liability of Jinduoshou, although the ship involved was registered in Jinduoshou’s name at the time of the fueling, Jinduoshou was not the actual operator of the ship. Article 6 of the Regulations of the People’s Republic of China Governing the Registration of Ships stipulates that “the establishment, transfer, and extinction of the ship’s mortgage and bareboat chartering rights shall be registered with the ship registration authority; without registration, no

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third party shall be opposed.” The provisions regarding the establishment of bareboat chartering rights are not directly relevant to the debts incurred during the actual operation of the ship. Xinhai’s claim that Jinduoshou should be liable cannot be established. 2. Confirmation of the interest on the oil payment Xinhai had an objection to the starting date used for calculating the interest on the fuel payment as determined by the court of the first instance. This issue rests on the determination of the date that WU Suqiang and the other individuals should have paid for the oil. In this case, the fueling voucher did not indicate that there was an agreement regarding the date that the fuel payment was due and there is no evidence to prove that the parties reached a supplementary agreement on this issue. Although the court of first instance’s holding did not specify the date that the oil payment was due in this case, the main text of the judgment clearly stated that the due date of the payment for the purpose of calculating interest was February 16, 2012, which was the day after the date of refueling. Thus, the court of first instance determined that the payment for the fuel was due at the time of fueling. This holding is consistent with Articles 61 and 161 of the Contract Law of the People’s Republic of China. In its petition, Wenbiao Bunker Tanker claimed that the starting date for the purpose of calculating interest for the entire sum was February 16, 2012. This is the date that should be adopted by the court. However, the court of the first instance held that the interest for 13,800 yuan of the total payment should be calculated from January 26, 2012. This is beyond the scope of the lawsuit and should be corrected by the court. The interest for the oil payment of 334,150 yuan is to be calculated at an annual interest rate of 6% from February 16, 2012 to the date when the judgment is determined. In conclusion, the Appellant Xinhai’s arguments on appeal cannot be established, but the calculation of interest by the court of the first-instance is inappropriate. According to Articles 61 and 161 of the Contract Law of the People’s Republic of China, Article 170 Paragraph 1 Sub-paragraphs 1 and 2 of the Civil Procedure Law of the People’s Republic of China, and Article 43 of the Opinion of the Supreme People’s Court on Several Issues concerning the Application of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: 1. Affirm the second item of Civil Judgment (2013) Xia Hai Fa Shang Chu Zi No. 286 of Xiamen Maritime Court; 2. Change the first item of Civil Judgment (2013) Xia Hai Fa Shang Chu Zi No. 286 of Xiamen Maritime Court to that “WU Suqiang, CHEN Yixiao, CHEN Ruilu, CHEN Xiuzhong, and ZHENG Shengwen shall pay Pingtan Wenbiao Bunker Tanker the oil payment of 334,150 yuan with interest, calculated at an annual interest rate of 6% from February 16, 2012, to the date on which the payment is made, confirmed by the judgment, within 10 days after the judgment goes into effect.”

Pingtan Wenbiao Bunker Tanker v. Fujian Xinhai Shipping Co., Ltd. et al.

803

Court acceptance fee of second instance in the amount of 6794 yuan, shall be born by the Appellant, Fujian Xinhai Shipping Co., Ltd., and court acceptance fee of first instance shall be paid according to the judgment of first instance. The judgment is final. Presiding Judge: LIN Zexin Acting Judge: HUANG Zhijiang Acting Judge: BAI Yu May 26, 2014 Clerk: WU Shichun

Guangzhou Maritime Court Civil Judgment Populart Supplies v. Jiangsu Hengtong International Transportation Co., Ltd. et al. (2014) Guang Hai Fa Chu Zi No. 352 Related Case(s): None. Cause of Action: 223. Dispute over freight forwarding contract on the sea or sea-connected waters. Headnote: Shipper and freight forwarder held to be equally responsible for extra costs incurred as a result of cargo of paintings being returned from Canada to China after Canadian quarantine authorities refused admission because of bark lining to the shipping container; both plaintiff and defendant should have known that the packing was unacceptable. Summary: A consignment of paintings was shipped from China to Canada. The paintings were packaged in wooden crates lined with bark and were denied entry to Canada at Toronto because the bark violated Canada’s regulations regarding plant and animal quarantine. The shipment was returned to China, the bark was removed, and the shipment was then returned to Canada. The Plaintiff, Populart Supplies, had hired the Defendant, Jiangsu Hengtong International Transportation Co., Shenzhen Branch and its parent company to manage and coordinate the shipment of its goods to Canada. Populart was charged by its customer, Empire Industries, Inc., for the extra shipping costs. Populart sought reimbursement from the Defendants. The Defendants argued that Populart was aware of the bark in the packaging as well as Canada’s relevant regulations based on past business and should be found at fault. The Defendants also argued that they were not liable for the fumigation performance of a hired third party, claiming that their liability extended only to the arrangement of such third party services. The court found that Plaintiff and the Defendants were equally at fault because both had knowledge of the requisite shipping conditions needed to fulfill Canada’s inspection laws and should have each performed their duty of care regarding the bark on the packaging. An agent is liable for its principal’s loss to the extent of its fault in the matter. The cost of the reshipment and repackaging would therefore be split in half between the Plaintiff and the Defendants. © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_39

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Judgment The Plaintiff: Populart Supplies. Domicile: Flat/Room 602, 6/F, the Hart, No. 4 Hart Avenue, Tsim Sha Tsui, Kowloon, Hong Kong. Representative: ZHUANG Changming, independent director. Agent ad litem: ZENG Qingli, lawyer of Guangdong Juhang Law Firm. Agent ad litem: HUANG Lingyan, lawyer of Guangdong Juhang Law Firm. The Defendant: Jiangsu Hengtong International Transportation Co., Ltd. Shenzhen Branch. Domicile: Room 2801, Building A, Zhong Shen Garden Community, South Caitian Road, Futian District, Shenzhen City, Guangdong. Person in charge: HU Bo, general manager. Agent ad litem: ZHANG Yukun, lawyer of Shanghai Gewu Law Firm. The Defendant: Jiangsu Hengtong International Transportation Co., Ltd. Domicile: Room 1704, Huachen Building, Shen Juren Lane, Gulou District, Nanjing City, Jiangsu. Legal representative: LI Xingying, director. Agent ad litem: ZHANG Yukun, lawyer of Shanghai Gewu Law Firm. With respect to the case arising from dispute over freight forwarding contract filed by the Plaintiff Populart Supplies against the Defendant, Jiangsu Hengtong International Transportation Co., Ltd. Shenzhen Branch (hereinafter referred to as “Hengtong Shenzhen”) and the Defendant, Jiangsu Hengtong International Transportation Co., Ltd. (hereinafter referred to as “Hengtong Company”), which was transferred by Shenzhen Futian People’s Court to the court, after accepting this case on May 5, 2014, the court organized the collegiate panel consisting of Presiding Judge SONG Weili, Judge ZHAI Xin and Acting Judge XU Chunlong to try the case in according to law, and appointed ZHOU Qian as Clerk. On June 26, the court summoned all parties concerned to exchange evidence before hearing and held a public hearing on this day and on October 29. ZHUANG Changming, legal representative of the Plaintiff, ZENG Qingli, agent ad litem of the Plaintiff, and ZHANG Yukun, agent ad litem of the two Defendants, appeared in the court and participated in the action. Now the case has been concluded. The Plaintiff alleged that on July 10, 2012, the Plaintiff entrusted Hengtong Shenzhen to transport 57 boxes of goods of jade stones, oil painting etc. from port of Yantian in China to port of Toronto in Canada by sea. After receiving the goods, Hengtong Shenzhen handled affairs such as booking shipping space and fumigation, and charged the Plaintiff for agency cost. On 17 August, Hengtong Shenzhen informed the Plaintiff that the bark on the external packaging of the goods did not reached the requirement of Canada’s animal and plant quarantine, and it was were ordered to ship back the goods. Then the goods were sent back to Hong Kong from Canada, after being repackaging, the goods were re-sent to Toronto. The customer

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of the Plaintiff, Empire Industries Inc. (hereinafter referred to as “Empire Company”) advanced related expense in amount of CAD13,192 for the Plaintiff. The Plaintiff suffered a loss and requested the court to rule the two Defendants to compensate the Plaintiff CAD13,192 (equivalent to RMB80475.16) jointly and severally and bear the litigation fees of this case. In the trial, the Plaintiff altered the claimed amount to USD12,765.62. The Plaintiff submitted the following evidence within the time limit for producing evidence: 1. 2. 3. 4. 5.

6. 7. 8. 9.

11.

12.

13.

14.

Consignment Bill; Cost Confirmation; Cash Payment Slip; Warehouse Receipt; Fumigation/Disinfection Certification. The evidence above was to prove the following facts: a freight forwarding contract relationship had been established between the Plaintiff and Hengtong Shenzhen, the Plaintiff paid the freight forwarding fee to Hengtong Shenzhen and Hengtong Shenzhen finished the fumigation on behalf of the Plaintiff. Claim Notification sent by Hengtong Shenzhen to the Plaintiff; Bill of Lading of COSCO International Freight Co., Ltd. (hereinafter referred to as “COSCO”); Bill send by South China COSCO International Freight Co., Ltd. to Hengtong Shenzhen (hereinafter referred to as “South China COSCO”); Invoice of Fret Phoenix Bathurst Freight Inc. (hereinafter referred to as “Phoenix Company”); The above evidence was to prove following facts: the goods involved were shipped back because Canada’s competent authority found bark on the external packaging of the goods, the goods involved were shipped back to Hong Kong for repackaging, and reshipped to Toronto in Canada. The Plaintiff suffered a loss of CAD13,192 for ship back and reshipment. Description of fumigation cost of a consignment loaded in No.ZIMU2861497 container dated January 1, 2011, to prove that Hengtong Shenzhen has the obligation to remove the bark for sake of the Plaintiff; Confirmation of IPPC mark on the goods involved, to prove the fumigation personnel has the obligation to check whether there is bark on the goods during fumigation; After the first hearing, the Plaintiff submitted the following evidence: Consignment Bill dated January 4, 2011 of Hengtong Shenzhen, to prove the freight forwarding business relationship between the Plaintiff and the Defendant; The emails and attachments dated July 1, 2014 and 16 October send by Empire Company to the Plaintiff, to prove actual loss of the Plaintiff was USD12,765.62.

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The two Defendants argued that: 1. Packaging of the goods involved were not supplied by the two Defendants, Hengtong Shenzhen entrusted a professional agency to accomplish the fumigation. The two Defendants had no obligation to examine and prompt the packaging and fumigation of the goods involved. The Defendants had no fault in the agent of fumigation and should not assume legal liability; 2. Freight for return shipment of the goods involved were not paid by the Plaintiff. The email, in which Empire Company claimed against the Plaintiff and indicated it paid the fees involved for the Plaintiff as agent, formed after the Plaintiff brought the proceeding and could not prove that the Plaintiff had or should pay the fees mentioned above. The Plaintiff did not suffer any actual loss; 3. Goods involved were designated FOB goods, the way of payment of freight was “freight collect”, COSCO should claim for right against the receiver, Phoenix Company rather than the Defendants. In summary, the Defendants requested the court to reject the claims of the Plaintiff. The two Defendants submitted the following evidence within the period for producing evidence: 1. Bill of lading of Hengtong; 2. Bill of lading of COSCO; 3. Confirmation of IPPC Mark, to prove the freight forwarding contract relationship between the Plaintiff and the two Defendants and the two Defendants fulfilled the freight forwarding services as agreed; 4. Email sent by South China COSCO to Hengtong Shenzhen on July 17, 2012, to prove that goods were denied entry to Canada because of the bark on the external packaging of the goods involved and the goods were ordered to be shipped back; 5. Email and the attachment thereof, the Inspection Report of Hong Kong Gardner Surveying Co., Ltd. (hereinafter referred to as “Gardner Surveying”) sent by South China COSCO on September 24, 2012; 6. Inspection Report dated November 28, 2012 of Intertek Testing Services H.K. Ltd. (hereinafter referred to as “Intertek Company”). The evidence above was to prove the reason that the goods were denied to entry to Canada was the bark on the external packaging wooden box of the goods in the initial transportation. After the first hearing, the Defendants submitted more evidence additionally. 8. Presentation of condition, to prove that freight collect business between the Plaintiff and Defendants and obligation of inspecting bark not clearly stated. After cross-examination, the Plaintiff and the two Defendants conformed the authenticity of the evidence provided by the opposite party. After verification, the court holds the evidence above is relevant to this case, the sources thereof are legal, and the collecting subject, method and procedure conform to the law. Therefore the probative force thereof shall be ascertained. The court hereby finds the following facts:

Populart Supplies v. Jiangsu Hengtong International Transportation …

809

On July 10, 2012, the Plaintiff sent a booking note to Hengtong Shenzhen for shipment of 57 boxes of jade stone, ancient bronze, chandelier and framed paintings from Shenzhen in China to Toronto in Canada. The external packaging of the goods above was consisted of solid wood crate, plywood and carton. After Hengtong Shenzhen accepting entrustment, it handled the freight forwarding services such as tallying, customs declaration, fumigation, stuffing and so on for the Plaintiff. On the same day, Hengtong Shenzhen entrusted COSCO to transport the goods. On July 23, Hengtong Shenzhen sent a cost confirmation to demand the Plaintiff to pay the customs declaration fee, tallying fee, goods fumigation fee, stuffing fee, document fee, operation fee and customs declaration fee in Canada in a total amount of RMB4,445.45 (the goods fumigation fee was RMB900). On July 24, the Plaintiff paid the fees above to Hengtong Shenzhen. On July 11, Hengtong Shenzhen entrusted China Certification & Inspection (Group) Co., Ltd. Shenzhen Branch (hereinafter referred to as “CCIC Shenzhen”) to accomplish the fumigation of the goods involved. CCIC Shenzhen used methyl bromide to fumigate the goods involved in Long Ling Heights, Longgang District in Shenzhen. It was stated in the conformation of IPPC mark numbered with 118,290 that the confirmation date was July 11, 2012 and it was stated the wooden packaging was new, there was no bark or soil, and nothing was nigrescence and mildew. This slip was signed by the staff of CCIC Shenzhen and Mengxin, the staff of the Plaintiff. During the hearing, the Plaintiff and the two Defendants had dispute over who signed the items. The Plaintiff alleged that the Defendant signed and confirmed the items after CCIC Shenzhen filled, while the two Defendants alleged it was the Plaintiff that filled in and signed the items. The court holds the Defendant Hengtong Shenzhen entrusted CCIC Shenzhen to accomplish fumigation, where it could not prove that the items were filled by the Plaintiff, the court ascertains the items such as “whether there is bark or soil” on the conformation of IPPC mark was filled by CCIC Shenzhen and signed by the Plaintiff. On July 13, 2012, Luohu Exit-Entry Inspection & Quarantine Bureau issued a Fumigation/Disinfection Certification for the goods involved, in which it was stated that the method of fumigation was methyl bromide. On July 19, the goods involved were stuffed in No. GESU5082330 container were shipped on voyage 0074E of M.V. “COSCO Shenzhen” from Yantian in Shenzhen to Port of Prince Rupert in Canada. On July 21, Hengtong Company sent No. OSZX12070090 bill of lading tilted Hengtong Company to the Plaintiff, which stated that the shipper was Shenzhen Office of the Plaintiff, the consignee was Empire Company, the freight forwarder was Phoenix Company, the carrying vessel was M.V. “COSCO Shenzhen” on voyage 0074E, the port of loading was Yantian China, the port of discharge was Port of Prince Rupert in Canada, the place of delivery was Toronto in Canada, the number of the container was GESU5082330, the goods were jade stones, ancient bronze, chandelier and framed paintings, the packages were 57 boxes, the gross weight was 1511.3 kg, the volume was 8.701 m2, the goods had been fumigated and the way of payment of freight was “freight collect”. On the same day, COSCO issued No. COSU6063912291 multimodal transport bill of lading with its own title)

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to Hengtong Company, which stated that the shipper was Hengtong Company, the consignee and the notify party was Phoenix Company, the delivery agent was Pantos Logistics Canada Inc., the carrying vessel, the port of loading, the port of discharge, the place of delivery, the number of container, the description of the goods, the packages, gross weight, volume, fumigation and way of payment of freight were all the same with those in No. OSZX12070090 bill of lading. On August 4, the goods involved arrived at the port of Prince Rupert in Canada. On August 15, the Canada Border Inspection Bureau informed COSCO that the goods involved fell into a case that the wood packaging and bark could not reach the requirement, which constituted a violation of Article 8 Paragraph 1 of the Plants Protection Law of Canada; and the goods would be confiscated if they did not leave Canada before August 29. On August 17, South China COSCO sent an email to Hengtong Shenzhen to inform that the goods involved were sent back to China under the order of relevant department of Canada because the external wood packaging did not meet the requirement of Canada’s plant inspection. The costs resulting therefrom including the inspection fee at port of Prince Rupert, storage fee at the port in Canada, the freight of the return transportation from Canada to Hong Kong, port charges, striping charge, handling charges at the warehouse in Hong Kong, the freight from Hong Kong to port of Prince Rupert and the freight from port of Prince Rupert to Toronto in Canada, should be paid by Hengtong Shenzhen. On August 21, Hengtong Shenzhen sent a notice of claim to inform the Plaintiff the issues told by South China COSCO and demanded the Plaintiff to affirm the costs resulted from the transportation from Canada to Hong Kong and the transportation from Hong Kong to Canada. On September 20, the goods involved were sent back on voyage 0075 of M.V. “COSCO Vancouver” from the port of Prince Rupert to Hong Kong. On September 21, the container involved was discharged into the warehouse of Hengchang Warehouse Co., Ltd. located No. 18 Port Road, Kwai Chuang, N.T., Hong Kong and in the Hutchison Center. On the same day, Gardner Surveying, entrusted by COSCO, surveyed the goods involved on the spot. It was said in the survey report issued by the company that there are six wooden boxes attached with bark. On September 26, 28 and 29, Intertek Company witnessed current situation of attachment of bark to the 11 wooden boxes (including 6 wooden boxes above) and the situation after the goods were repacked. Survey Report issued by Intertek Company claimed that the 11 wooden boxes were repacked with plywood case. On October 3, 2012, the re-packed goods involved were loaded into No. TCNU9623603 container by COSCO and transported from Canada to Hong Kong. Except the carrying vessel, the voyage, the of container number, the time and place to issue bill of lading stated in No. OOLU121017H bill of lading issued by COSCO, other items are the same as those stated in No. COSU6063912291 bill of lading. The goods involved were taken delivered by Phoenix Company upon arrival in Canada. On October 9, South China COSCO issued 4 bills to Hengtong Company, in which it was stated that the freight from Yantian to port of Prince Rupert was

Populart Supplies v. Jiangsu Hengtong International Transportation …

811

USD426.38 and the freights of the return transportation from Canada to Hong Kong and re-transportation and from Hong Kong to Canada were USD12,766.32. After receiving the bills, Hengtong Company immediately informed Phoenix Company. Phoenix Company paid the sum above to COSCO. On October 25, Phoenix Company informed Empire Company by email that the total freight of the return transport was CAD13,192. On October 26, Empire Company paid CAD13,192 to Phoenix Company. On the same day, Phoenix Company issued an invoice to Empire Company. On July 1, 2014, Empire Company informed the Plaintiff by email that it had paid the freight of the return transportation of the goods involved in amount of CAD13,192, after deducting the freight from Yantian to port of Prince Rupert in amount of USD426.38, the Plaintiff should bear USD12,766.62. Empire Company claimed for compensation against the Plaintiff. On 16 October, Empire Company informed the Plaintiff by email that it had paid the fees above as the Plaintiff’s agent. It is also found that except the freight forwarding service regarding the consignment involved, Hengtong Shenzhen once entrusted two consignments for the Plaintiff from October in 2010 to January in 2011. The goods handled in January, 2011 revolved with fumigation and Hengtong Shenzhen charged RMB8,937 for the freight forwarding fee, including the fumigation fee in amount of RMB1,100. In this business, Hengtong Shenzhen entrusted others to remove the bark and mildew on the packaging of the goods and charged the Defendant for RMB400. According to the information published on the website of the General Administration of Quality and Supervision, Inspection and Quarantine (http://www. aqsiq.gov.cn/xxgk_13386/jgfl/dzwjyjgs/ywxx/201210/t20121017_284231.htm, browsed on December 8, 2014),the International Standard for Phytosanitary Measures has been implemented in Canada(hereinafter referred to as “ISPM15.”) since on July 5, 2006. According to ISPM15 (2009) (http://wenku.baidu.com/ link?url=GXT2Ow2dtdideZJhf62oPS56g32ZFt-N9tIBitAt_0TXarfY_0N9LNUJqe0Itz5B7x-JKndWWnhIpKLiWb3XLDZL5qIsORRZXwwTXT667y, browsed on December 8, 2014), wood packaging was fumigated by the way of Methyl bromide, the bark thereon should be removed. During the court, both the Plaintiff and the two Defendants affirmed that the main reason of the goods involved were denied to enter Canada and sent back to Hong Kong for repackaging and re-transported to Canada was the failure to find and remove the bark attached to the packaging when the goods involved were fumigated in Shenzhen; COSCO arranged the return transportation and the costs resulting therefrom were essential and necessary; COSCO had charged the freight of the return transportation; Phoenix Company was the agent of Empire Company in the port destination namely Canada; and the loss involved was USD12,765.62. In respect whether the Plaintiff suffered an actual loss, COSCO claimed for the costs arising out of the return transportation and re-transpotation due to improper fumigation against the shipper, Hengtong Company stated in No. COSU 6063912291 bill of lading issued by COSCO, Hengtong Shenzhen informed the Plaintiff to bear the costs according to the freight forwarding contract it concluded

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with the Plaintiff. Although COSCO claimed against Hengtong Company, the two Defendants informed Phoenix Company to pay the costs rather than claimed for compensation against the Plaintiff. But Phoenix Company is the agent of Empire Company, Empire Company shall bear the consequence of the act of agency. After paying the costs advanced by Phoenix Company according to the agency relation between it and Phoenix Company and deduced the freight from Yantian in Shenzhen to the port of Robert Prince, Empire Company claimed for USD12,765.62 against the Plaintiff and declared the sum above were paid by it for the Plaintiff. The email sent by Empire Company to the Plaintiff, in which Empire Company claimed for the compensation and indicated Empire Company as the agent of the Plaintiff paid the costs above corroborates the claim of the Plaintiff that Empire Company paid the freight of return transportation for it. Accordingly, the court holds that Empire Company paid the freight of return transportation in amount of USD12,765.62 for the Plaintiff and the costs above shall be ascertained as inevitable loss of the Plaintiff. During the trial, the Plaintiff and the two Defendants all chose the law of the People’s Republic of China as governing law to resolve the disputes in this case. The court holds that this case is arising from dispute over a freight forwarding contract. The Plaintiff is an enterprise of Hong Kong. The two Defendants dealt with relevant affairs of the transport from Yantian Shenzhen to Canada and the re-shipping to Canada. The Plaintiff of this case is Hong Kong, the facts involved have foreign element and it is a Hong Kong, foreign case. According to Article 23 of the Several Provisions of the Supreme People’s Court on the Scope of Cases Entertained by Maritime Courts, this case is under exclusive jurisdiction of maritime courts. The Defendant Hengtong Shenzhen’s domicile is Shenzhen in China, which is in the range of the court accepted. According to Article 23 of the Civil Procedure Law of the People’s Republic of China, an action instituted for a contract dispute shall be under the jurisdiction of the people’s court at the place of domicile of the defendant or at the place where the contract is performed, the court has jurisdiction over the case it. According to the provision of Article 126 of the Contract Law, parties to a foreign-related contract may select the applicable law for resolution of a contractual dispute. The parties in this case chose the laws of China to resolve the disputes in this case, so the laws of China shall apply in this case. Both the Plaintiff and Hengtong Shenzhen affirmed the freight forwarding contract relationship between them. The Plaintiff is the principle and Hengtong Shenzhen is the agent. The express of the intention under the contract is real, it does not violate any statutory provisions of laws and regulations, so the contract is legal and valid, and both parties shall perform the contract. The freight forwarding contract included fumigation agent. Hengtong Shenzhen shall bear the obligation to accomplish the fumigation of the goods involved with due diligence after receiving the fumigation charge; deal with special requirement in the agent matters; and inform the principal in time when it cannot handle. If the Plaintiff suffered loss and Hengtong Shenzhen could not prove it had no fault, then it shall assume the liability for compensation for breach of contract.

Populart Supplies v. Jiangsu Hengtong International Transportation …

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The goods involved were packed in wooden crates and needed to be fumigated before being transported to Canada. Hengtong Shenzhen determined to use the method of methyl bromide to accomplish the fumigation. It should know clearly that the wooden packages transported to Canada cannot have bark attached on when fumigation was conducted in this way, otherwise, the goods will be refused to entry a country, ordered to be returned or confiscated. Even Hengtong Shenzhen has no qualification for fumigation and entrusted a third party to do that, it still have the obligation to inform the third party to accomplish the fumigation according to the requirements of Canada, and shall be responsible for the act of the third party. Definitely, if Hengtong Shenzhen found the goods did not meet the requirement when carrying out the fumigation, for the interest of the Plaintiff, it could take the same measure as it did in the goods it agented in January, 2011 to remove the bark, namely removing the bark and mildew and charging a reasonable fee from the Plaintiff. The fumigation of the goods involved had been entrusted to CCIC Shenzhen by Hengtong Shenzhen. According to the Confirmation of IPPC Mark of CCIC Shenzhen, six matters of the goods involved to be fumigated to be checked clearly include the existence of bark or soil, which illustrates it have a major impact on the implementation of fumigation that whether there is bark, so the implementing entity of fumigation shall check carefully. However, CCIC Shenzhen confirmed the packages of the goods involved had no bark where bark attached to part of the crates in fact. It failed to perform the obligation of due diligence, it was at fault. This fault act resulted in the goods involved were transported to Canada and sent back to Hong Kong and the re-transported to Canada. The fault act has a direct causation to the return transportation of the goods involved. CCIC Shenzhen was entrusted by Hengtong Shenzhen, so Hengtong Shenzhen shall bear the consequence of fault act. The defence of the two Defendants that the agency matters of Hengtong Shenzhen were limited to contact and arrange a qualified fumigation agency to implement the fumigation and acquire relevant certificate of fumigation as the Plaintiff’s agent has no factual and legal basis, the court will not support. The Plaintiff has long been engaged in Canadian trades and shall know clearly relevant laws and regulations on banning goods with bark into territory of Canada. During process of imposing IPCC mark, the packages of the goods involved were attached with bark, even the staff of CCIC Shenzhen failed to find the bark, the Plaintiff, which has the duty of care, shall carefully examine whether the packages of the goods were attached with bark. Additionally, the goods agented by Heng Tong Company in January, 2011 were fumigated after bark was removed. The Plaintiff was fully aware that part of the packages of the goods involved were wooden, it shall check whether the packages were attached with bark carefully. The Plaintiff failed to perform the duty for care, it was at fault for occurrence that the goods with bark were carried to Canada and the follow-up return transportation. Taking these factors into consideration, the court holds that the proportion of fault-responsibility for the loss in amount of USD12,765.62 arising out of improper fumigation of the goods involved of the Plaintiff and Hengtong Company is 50%. According to Article 206 Paragraph 1 of the Contract Law of the People’s Republic of China, under a commission contract for value, if the principal sustains any loss

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due to the fault of the agent, the principal may claim damages. Under a gratuitous agency appointment contract, if the principal sustains any loss due to the agent’s intentional misconduct or gross negligence, the principal may claim damages; Article 113 Paragraph 1 of the Contract Law, where a party fails to perform its obligations under the contract or its performance fails to conform to the agreement and cause losses to the other party, the amount of compensation for losses shall be equal to the losses caused by the breach of contract, including the interests receivable after the performance of the contract, provided not exceeding the probable losses caused by the breach of contract which has been foreseen or ought to be foreseen when the party in breach concludes the contract; and Article 10 of the Provisions of the Supreme People’s Court on Several Issues concerning the Trial of Cases of Disputes over Marine Freight Forwarding, where a client requests a freight forwarder to indemnify relevant compensations on the grounds that the freight forwarder causes losses to the client when handling marine freight forwarding transaction, the people’s court shall support such claim, except that the freight forwarder can prove that he has no fault, Hengtong Shenzhen shall compensate the Plaintiff for the loss of USD6.382.81 within its extent of liability. According to Article 14 Paragraph 1 of the Company Law of the People’s Republic of China, a company may set up branches. To set up a branch, the company shall file a registration application with the company registration authority and shall obtain a business license. A branch shall not enjoy the status of an enterprise legal person and its civil liabilities shall be born by its parent company, Hengtong Company shall assume the legal liability of Hengtong Shenzhen. To sum up, according to Article 113 Paragraph 1 and Article 406 of the Contract Law of the People’s Republic of China, Article 14 Paragraph 1 of the Company Law of the People’s Republic of China and Article 10 of the Provisions of the Supreme People’s Court on Several Issues concerning the Trial of Cases of Disputes over Marine Freight Forwarding, the judgment is as follows: 1. The Defendant, Jiangsu Hengtong International Transportation Co., Ltd., shall compensate the Plaintiff, Populart Supplies, for the loss of return cost USD6,382.81; 2. Reject other claims of the Plaintiff Populart Supplies. The obligation for the above-mentioned payment shall be fulfilled of within ten days after takes effect. Where the party who bears the obligation for payment fails to fulfill the above-mentioned payments within the period designated in this judgment, such party shall, in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China, double pay the interest for the period of delayed performance. Court acceptance fee in amount of RMB1,812, the Plaintiff Populart Supplies shall bear RMB906, Jiangsu Hengtong International Transportation Co., Ltd. shall bear the rest.

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In event of dissatisfaction with this judgment, the Plaintiff Populart Supplies may, within 30 days upon the delivery of this judgment, and the Defendants Jiangsu Hengtong International Transportation Co., Ltd. Shenzhen Branch and Jiangsu Hengtong International Transportation Co., Ltd. may, within 15 days upon the delivery of this judgment, submit a statement of appeal to the court, with duplicates being submitted in terms of the number of the opposite parties, to lodge an appeal to the Guangdong High People’s Court. Presiding Judge: SONG Weili Judge: ZHAI Xin Acting Judge: XU Chunlong December 9, 2014 Clerk: ZHOU Qian

Tianjin Maritime Court Civil Judgment Qingdao Zuode International Trade Co., Ltd. v. Tianjin Weierke Petrochemical Co., Ltd. (2014) Jin Hai Fa Shang Cu Zi No. 499 Related Case(s) None. Cause of Action 221. Dispute over contract on custody of cargo in port. Headnote: The Plaintiff cargo-owner’s claim against defendant warehouse company for failure to deliver goods on demand failed because of lack of proof that plaintiff had the right to demand delivery because the Defendant warehouse had delivered goods to entity that had contracted with it. Summary the Plaintiff, Qingdao Zuode International Trade Co., Ltd., purchased a shipment of BTX aromatics, which cleared customs and were stored at the Defendant, Tianjin Weierke Petrochemical Co., Ltd.’s, warehouse as agreed by the Defendant’s contract with Renqiu City Dong Sheng Petrochemical Co., Ltd. (“Dong Sheng Company”). Dong Sheng Company submitted the proper Delivery Order (D/O) and original Bills of Lading to the Defendant. The Plaintiff contended that the goods were not delivered to the Plaintiff by the Defendant on demand. The Plaintiff sought tort damages, reimbursement for the goods, or delivery of the goods immediately. The court held that the Plaintiff failed to submit enough evidence to prove that it had the right to take delivery of the goods involved from the Defendant. The Defendant’s delivery of the goods involved to Dong Sheng Company complied with the contract and the law, and thus, the Defendant was not liable to the Plaintiff.

Judgment The Plaintiff: Qingdao Zuode International Trade Co., Ltd. Domicile: Room 1904, Jianguo Building, No. 519 Central Changjiang Road, Development Zone, Qingdao, Shandong. Legal representative: NIU Ye, manager. Agent ad litem: ZHANG Honglei, lawyer of Shandong Changsheng Law Firm. © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_40

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The Defendant: Tianjin Weierke Petrochemical Co., Ltd. Domicile: No. 1 Lingang Industry Zone, Tanggu Area, Binhai New District, Tianjin. Legal representative: DOU Lianxia, general manager. Agent ad litem: LI Ruihong, lawyer of Tianjin Junheng Law Firm. With respect to the case arising from dispute over liability for damage to port warehousing goods filed by the Plaintiff, Qingdao Zuode International Trade Co., Ltd., against the Defendant, Tianjin Weierke Petrochemical Co., Ltd., the court, after accepting the case on May 14, 2014, applied general procedure and held hearings in public on July 3 and September 2 respectively. ZHANG Honglei, agent ad litem of the Plaintiff, and LI Ruihong, agent ad litem of the Defendant, appeared in court and participated in the action. Now the case has been concluded. The Plaintiff alleged that it entered into a contract with Qingdao China Union Oil Co., Ltd. (hereinafter referred to as “Union Oil”) to buy 15,181.623 tons of BTX aromatics. It paid RMB101,691,513.58 to Union Oil and the customs import VAT in amount of RMB15,32.38. The goods involved were released by the Customs with customs formality cleared and unloaded into the Defendant’s warehouse. While the Plaintiff took delivery of the goods from the Defendant, the Defendant refused to deliver the goods. The Plaintiff requested the court to judge that the Defendant should bear the liability for compensation, and deliver the goods in weight of 15,181.623 tons immediately or compensate the Plaintiff for the loss of the goods in amount of RMB118,907,245.96 and the interest thereon, and bear the litigation costs. The Defendant defended that the goods involved were stored in the warehouse of the Defendant as per the storage contract signed by Renqiu City Dong Sheng Petrochemical Co., Ltd. (hereinafter referred to as “Dong Sheng Company”) and the Defendant, Dong Sheng Company surrendered an original bill of lading stamped by the Customs (hereinafter the D/O namely delivery order). The Defendant still held the original D/O, based on which the Defendant delivered the goods as per the instruction of Dong Sheng Company. It was normal performance of contractual obligation and did not constitute tort to the Plaintiff, so the Defendant should not assume tort liability. The main issues of this case are as follows: 1. Whether the Plaintiff has the subject qualification to claim for the rights on the goods against the safekeeping party namely the Defendant; 2. Whether the Defendant’s delivery of goods to Dong Sheng Company constitutes tort against the Plaintiff; and 3. The amount and basis of the loss suffered by the Plaintiff. The Plaintiff submitted the following evidence: 1. Goods import contract, to prove that the Plaintiff concluded an import contract regarding the goods involved with Union Oil;

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2. Commercial invoice, to prove that Union Oil issued beneficiary commercial invoice to the Plaintiff for the goods involved; 3. Bank payment voucher, to prove that the Plaintiff paid Union Oil USD16,523,920.83 for the goods involved; 4. Original B/L, to prove that the Plaintiff was the owner of the goods involved by means of endorsing the B/L involved; 5. Customs declaration form, to prove that the Plaintiff declared the goods involved to the Customs; 6. Special bill of payment of import VAT, to prove that the Plaintiff paid VAT in accordance to law; 7. Customs release form (evidence 4 of the Defendant namely D/O), to prove that the goods involved were released by the Customs and the Plaintiff could take delivery; 8. Inspection report, to prove the goods involved had been inspected; 9. Statement of Tianjin Development District Tong Bao International Forwarder Co., Ltd. (hereinafter referred to as “Tong Bao Company”), to prove that the goods were discharged into the warehouse of the Defendant, Tong Bao Company paid import VAT for the Plaintiff; 10. Port operation contract, to prove that the Plaintiff was the receiver of the goods; 11. Statement of Tianjin Chuang Jin International Shipping Agency Co., Ltd. (hereinafter referred to as “Chuang Jin Company”), to prove that Chuang Jin Company released the title of the goods to the Plaintiff and discharged the goods into the Defendant’s warehouse; 12. Statement of Tianjin Gang Yuan Company Shipping Co., Ltd. (hereinafter referred to as “Gang Yuan Company”), to prove that the goods involved were delivered to the Defendant with customs cleared, the Plaintiff, as the owner of the goods involved, was entitled to take delivery of the goods from the Defendant; 13. Sales and purchase contract concluded by the Plaintiff and Ju Li Global Holding Co., Ltd. (hereinafter referred to as “Ju Li Company”) and statement of Ju Li Company, to prove that as per Sales and Purchase Contract, the ownership of the goods involved had not been transferred as the Plaintiff did not receive the payment for the goods involved from Ju Li Company; 14. Guarantee of import exchange for B/L, to prove that the B/L was telex released in port of departure, the Plaintiff authorized Gang Yuan Company to handle the goods delivery procedures. The cross-examination opinions of the Defendant on the evidence of the Plaintiff are as follows: it challenged the authenticity and relevancy of evidence 1 and held it was inconsistent with relevant invoice and bank payment voucher; it challenged the authenticity and relevancy of evidence 2 and 3; it held evidence 1–3 could not prove Defendant commit tort to the Plaintiff; it challenged the authenticity of evidence 4; it admitted the authenticity, legality and relevancy of evidence 5, 6 and 8, of which the formalities were handled by Dong Sheng Company at its own costs; it admitted the authenticity of evidence 7, it argued the original was kept by the

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Defendant and was delivered by Dong Sheng Company, which could not prove the Plaintiff had the right to take delivery of the goods; the company seal on evidence 9 and 12 could not be verified, it challenged the authenticity and legality thereof, but the two companies above were entrusted by Dong Sheng Company and the expenses were paid by Dong Sheng Company, the invoice was also issued to Dong Sheng Company; it admitted the authenticity, legality and relevancy of evidence 10, the service concerned was handled by Dong Sheng Company at its own costs; it held the authenticity and legality of evidence 11 could not be verified; it challenged the authenticity, legality and relevancy of evidence 13, it argued if the contract did exist, the contract could prove Dong Sheng Company had obtained the ownership of the goods involved; it challenged the authenticity of evidence 14. The ascertainment opinions of the court on the evidence provided by the Plaintiff are as follows: the court holds evidence 1–3 can demonstrate each other and admit the authenticity thereof, they can prove the Plaintiff bought the goods involved from Union Oil and paid the price of the goods. The court admits the authenticity of evidence 4, but the Plaintiff only held one original B/L rather than full set in hand, it cannot prove the Plaintiff is entitled to claim for the goods involved. As the Defendant did not challenge the authenticity of evidence 5–8, the court ascertains the evidence can prove the Plaintiff bought the goods involved. Evidence 7 can prove the goods involved were released by the Customs, but the original documents have been delivered by Plaintiff when it performed the contract as the seller to the buyer, thus it cannot prove the Plaintiff has the right to request deliver the goods involved. Evidence 9–12 can demonstrate the transport documents of the goods involved, the court ascertains the authenticity thereof, the evidence can prove the Plaintiff is the receiver of the goods under the contract of carriage of goods by sea involved and the goods involved underwent customs clearance and were discharged into the warehouse of the Defendant. However, as the goods involved were resold as per the domestic trade contract, it is not the Plaintiff who signed the warehousing contract with the Defendant. Hence, it cannot prove that the Plaintiff has the right to take delivery of the goods. The court ascertains the authenticity of evidence 13, but the conclusion and performance of the purchase and sale contract is irrelevant to this case. Evidence 14 can demonstrate other documents, the court ascertains the authenticity thereof, but it’s not a letter of authorization, so it cannot prove the Plaintiff entrusted Gang Yuan Company to handle the delivery of the goods involved. The Defendant submitted the following evidence: 1. Notification of filing case and receipt of case acceptance, to prove that the goods involved were on suspicion of fraud of payment, the criminal case should be handled first. 2. Warehousing contract and invoice of warehousing fees, to prove that Dong Sheng Company entered into a warehousing contract with the Defendant, the goods involved were stored in the Defendant’s warehouse, and the Defendant issued the invoice to Dong Sheng Company.

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3. Notification of title of goods, proving that the Plaintiff knew perfectly well the goods involved were sold to Dong Sheng Company, which was entitled to take delivery of the goods involved. 4. D/O (the Plaintiff’s evident 7 namely customs release form), to prove that Dong Sheng Company obtained the original D/O according to purchase and sales contract, the warehousing contract concluded by Dong Sheng Company and the Defendant based on the D/O was lawful and valid, Dong Sheng Company was entitled to take delivery of the goods involved. 5. Delivery instruction, to prove that Dong Sheng Company had already taken delivery of all the goods in the warehouse. The cross-examination opinions of the Plaintiff on the evidence of the Defendant are as follows: it admitted the authenticity of evidence 1, but the criminal case report was irrelevant to the Plaintiff and it should not influence the trial of this case; the Defendant held the authenticity of evidence 2 could not be identified, it could not prove that the Defendant’s delivery of the goods to Dong Sheng Company complied with the law; it admitted the authenticity of evidence 3 and 4, but held the D/O could merely prove the goods involved had been released by the Customs, it was an act of approval of the authority, holding D/O did not mean the right of taking delivery of the goods, the taking delivery of the goods should be subject to the customs release form; the authenticity of evidence 5 could not be identified and it was irrelevant to the Plaintiff. The ascertainment opinions of the court on the evidence provided by the Defendant are as follows: the court ascertains the authenticity of evidence 1, the legal fact of criminal case it involved was not the same legal fact in this case, the trial of the criminal case had no influence to this case. Evidence 2 and 5 were sent out or signed via fax, among which the invoice is original, these two evidence can demonstrate each other, although the Plaintiff disagreed with the effect of them, it did not provide opposite evidence to rebut, the court ascertains the authenticity thereof, they can prove that Dong Sheng Company entered into a warehousing contract with the Defendant in respect of the goods involved, Dong Sheng Company took delivery of the goods involved as agreed. The court ascertains evidence 3 and 4 since the Plaintiff had no objection to the authenticity thereof, evidence 3 can prove that the Plaintiff was fully aware of the fact that the goods involved were sold to Dong Sheng Company, while evidence 4 can prove Dong Sheng Company held the D/O and based on which it signed the warehousing contract with the Plaintiff, so Dong Sheng Company is entitled to take delivery of the goods involved. After trial, the court ascertains the following facts: on February 12, 2014, the Plaintiff entered into contract with Union Oil, the third party, to buy 15,181.623 tons of BTX aromatics, the Plaintiff paid the price of the goods in amount of USD16,523,920.83 as agreed. The goods involved were carried on M.V. “EDZARD SCHULTE” from Bangkok, Thailand to Tianjin, China, the carrier issued 5 sets of original B/L in triplicate numbered with GC14020101– GC14020105, on which the consignee was to order of VITOL ASIA PET LTD., the

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notify party was the Plaintiff, who held a original B/L of each set. According to the telex release instruction of the carrier and the guarantee of import exchange for B/L provided by the Plaintiff, the goods involved were telex released by the shipping agent, Chuang Jin Company, and were discharged into tanker of the Defendant. On February 24, the Plaintiff as seller entered into a purchase and sales contract with Ju Li Company, then Ju Li Company resold the captioned goods to Dong Sheng Company. To perform the purchase and sales contract, the Plaintiff delivered the documents in relation to the delivery and customs clearance of the goods to Ju Li Company. The delivery, customs clearance and port procedures were actually carried out by Tong Bao Company and Gang Yuan Company. Gang Yuan Company completed the delivery formality and obtained the D/O sealed by Chuang Jin Company. Tong Bao Company was in charge of handling the customs declaration of the goods involved, Xingang Customs of PRC sealed the D/O, the Plaintiff did not pay port charges, customs declaration charges or customs import VAT etc., as well as the agent fees and advanced payment for the charges above to Tong Bao Company and Gang Yuan Company. On March 19, Dong Sheng Company, holding original D/O with the customs’ seal, concluded a warehousing contract for the goods involved with the Defendant, in which it was agreed that Dong Sheng Company should issue storage D/O of the goods involved to the Defendant each time Dong Sheng Company took delivery of oil from the Defendant’s tanker. During March to April 2014, Dong Sheng Company took all goods involved with presenting notice of delivery, in which stated the consignor, receiver, name of goods and truck number etc. The court holds that this case is arising from dispute over liability for damage to port warehouse goods, according to Article 1 of the Contract Law of the People’s Republic of China, warehousing contract is a contract whereby the safekeeping party stores the goods delivered by the depositor, and the depositor pays the warehousing fee. The issue of this case lies in that whether the Plaintiff is one party of the warehousing contract and whether the Defendant as safekeeping party has performed its obligation of delivering the goods with due diligence. Firstly, in respect of whether the Plaintiff has the statute of a subject to claim for the title of the goods involved against the safekeeping party namely the Defendant. The Plaintiff bought the goods involved from the domestic seller. As stated in the B/L, the consignee was to order, the Plaintiff is the notify party. The full set of B/L is in triplicate, as per shipping practice, only the party holding full set of original B/L can be deemed as holder of original B/L, but the Plaintiff only held one original copy, based on which the Plaintiff cannot be confirmed as the definite holder of the B/L involved. Even if the Plaintiff is the holder of the B/L, it shall claim for the title of the goods involved against the carrier of the contract of carriage of goods by sea rather than the safekeeping party. Hence, the Plaintiff did not obtain the statute of subject to claim for the title of the goods involved from the B/L. In the port operations of import goods, goods are discharged from vessel to warehouse, D/O connects the transport with storage, the D/O involved was a copy of the B/L involved affixed with the seal of the shipping agent and the seal of the Customs. As per the import exchange for B/L guarantee and the carrier’s instruction

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of telex release, the shipping agent Chuang Jin Company issued D/O to release the goods involved. The delivery formality was not entrusted to agent to handle or handled by itself. The Plaintiff sold the goods involved to Ju Li Company, who then resold to Dong Sheng Company. Dong Sheng Company obtained relevant delivery documents as per the purchase and sales contract above and actually handled the delivery formality, it lawfully held the D/O of the goods involved. The fact that the Plaintiff was the consignee of telex B/L could not be known to other person for no record hereto was stated in the D/O. Instead, the Plaintiff lost control over the goods in the process of switching documents for performing the contract, it was not one party to warehousing contract. Dong Sheng Company as buyer claimed for the title of the goods against the safekeeping party with the original D/O, and signed the warehousing contract with the Defendant. With only a copy, the Plaintiff did not contact with the Defendant for the title of the goods to sign the warehouse contract for the goods involved. On the contrary, Dong Sheng Company signed the warehouse contract with the Plaintiff and obtained the right to dispose the goods, and took delivery of the goods involved eventually. Therefore the Plaintiff delivered the documents in relation to delivery and customs clearance to other buyer to undergo the delivery formality, hence it lost control over the D/O of the goods involved. The Plaintiff is not one party to the warehousing contract, so it does not have the statute of subject to claim for the title of the goods against the Defendant namely the safekeeping party. Secondly, whether the Defendant’s delivery to Dong Sheng Company constitutes tort to the Plaintiff. This case is dispute over general tort liability. In accordance to relevant provisions of the Tort Law, general tort liability shall satisfy the following constitutive conditions: commitment of a tort, harm caused by such tort, the causation between the tort and the harm and the fault of tortfeasor thereto. As to whether the Defendant committed a tort and whether the Defendant was at fault, on one hand, as mentioned above, there is no warehousing contractual relationship between the Plaintiff and the Defendant. On the contrary, the Defendant submitted the warehousing contract to prove the contractual relationship between the Defendant and Dong Sheng Company, in which it is agreed that Dong Sheng Company should issue a stamped warehouse D/O to the Defendant in every delivery. From March to April 2014, Dong Sheng Company presented the Defendant notification of delivery, which were sealed by Dong Sheng Company and stated the consignor, consignee, tanker number, goods description, truck number etc., it shall be deemed as warehouse D/O as agreed. It is proper that the Defendant delivered the goods against the warehouse D/O. On the other hand, in accordance to Article 24, 28, and 29 of the Customs Law of the People’s Republic of China, the receiver of import goods and the sender of export goods shall make an accurate declaration, the import goods shall be subject to customs examination and released upon customs endorsement only after the payment of duties or the provision of a guarantee. When signing the warehousing contract, Dong Sheng Company presented the D/O stamped with the Customs’ release seal to the Defendant which is kept by the Defendant. Accordingly, the goods involved have been released by the Customs and the

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Defendant’s delivery does not violate relevant provisions. Based on above, the Defendant commit no fault or tort act in the storage and delivery of the goods involved. The damage the Plaintiff claimed does not occur under the warehousing contract and it has no causation with the Defendant’s release of the goods, the Defendant shall not assume tort liability. Thirdly, in respect of the amount and basis of the loss of the Plaintiff. The loss of the payment for goods it had paid as agreed and the loss of import VAT claimed by the Plaintiff are not caused by the release of the Defendant as per the warehousing contract, it shall be settled in another action. In summary, the Plaintiff failed to submit enough evidence to prove it had the right to take delivery of the goods involved from the Defendant. The Defendant’s delivery the goods involved to Dong Sheng Company complies with the contract and the law, it shall not assume tort liability towards the Plaintiff. According to Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, Article 2 of the Several Provisions of the Supreme People’s Court on evidence in Civil Procedures, the judgment is as follows: Reject the claims of the Plaintiff, Qingdao Zuode International Trade Co., Ltd., against the Defendant, Tianjin Weierke Petroleum Chemical Co., Ltd. Court acceptance fee in amount of RMB636,336, shall be born by the Plaintiff. In case of any dissatisfaction with this judgment, any party may within 15 days upon the service of this judgment, submit a statement of appeal with duplicates in the number of the opposite parties, to lodge an appeal to the Tianjin High People’s Court, and the appeal fee shall be paid within 7 days after the statement of appeal is submitted (Bank of Deposit: Agriculture Bank of China Tianjin City Tiancheng Sub-branch 02,200,501,040,006,269; Name of Account: Financial Department of Tianjin High People’s Court), otherwise the appeal will be deemed to be withdrawn automatically. Presiding Judge: SHI Fuxin Judge: YANG Ling Acting Judge: ZHANG Lina October 8, 2014 Clerk: CAO Xiaohui

Wuhan Maritime Court Civil Judgment Rizhao Jinxilai Economic & Trade Co., Ltd. v. Jinhaihu Shipping Co., Ltd. (2013) Wu Hai Fa Shang Zi No. 00815 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 831. Cause of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote The Defendant carrier held liable for contamination by water of a cargo of palm stearin after the Plaintiff cargo owner established that the cargo had been loaded in good condition and had been delivered in damaged condition. Summary The Defendant carrier carried a cargo of palm stearin from Du Mai, Indonesia, to Taixing, China, under a clean bill of lading issued by the Defendant and indorsed to the Plaintiff. The Plaintiff alleged that the stearin was shipped in good condition in Indonesia, as established by a pre-shipment survey, but arrived in Taixing damaged by water, as established by a post-arrival survey. The Defendant failed to appear in court and failed to offer any rebuttal evidence or arguments. Held —the Defendant was liable for the Plaintiff’s loss caused by the contamination of the palm stearin.

Judgment The Plaintiff: Rizhao Jinxilai Economic & Trade Co., Ltd. Domicile: North Tianjin Road and East Taiyuan Road, Rizhao, Shandong. Organization Code: 76577684-7. Legal representative: SONG Chunnian, general manager. Agent ad litem: MIAO Leijun, lawyer of SG & Co. Agent ad litem: YANG Liu, lawyer of SG & Co.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_41

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The Defendant: Jinhaihu Shipping Co., Ltd. Domicile: Fl. 33, Building 2, Trade Center, 51 Kuichang Road, Kowloon, Hong Kong. Legal representative: WU Changzheng, director. Agent ad litem: LI Chenbiao, lawyer of Beijing Zhonglun Law Firm Shanghai Branch. Agent ad litem: CHEN Liang, lawyer of Beijing Zhonglun Law Firm Shanghai Branch. With regard to the case arising from dispute over contract of carriage of goods by sea filed by the Plaintiff Rizhao Jinxilai Economic & Trade Co. Ltd. (hereinafter referred to as “Jinxilai Company”) against the Defendant Jinhaihu Shipping Co., Ltd. (hereinafter referred to as “Jinhaihu Company”) on May 28, 2013, since the place of destination was port of Jingjiang, Jiangsu, which was under the jurisdiction of the court, the court, after accepting the case in accordance with law, organized the collegiate panel consisting of Judge DAI Liangqiao Acting Judge REN Nina and Acting Judge LI Yan, and held a hearing in public on November 19, 2013. MIAO Leijun and YANG Liu, agents ad litem of the Plaintiff, appeared in court and participated in the action, the Defendant, after being served with a legal subpoena, refused to appear in court without proper reasons. The court tried the case by default. Now the case has been concluded. The Plaintiff alleged on May 24, 2012, the Defendant, as the carrier, issued a clean bill of lading numbered with DUM/TAI-02/03/04 for the palm stearin involved, and the Plaintiff was the notify party under the bills of lading. According to the bill of lading, the goods involved, namely 2000 tons palm stearin, were carried on M.V. JIN HAI HU from port of Du Mai, Indonesia to port of Taixing, China. On June 5, 2012, it was found the goods were mixed with water when discharged at the port of destination. Upon survey, it was found shortage and the deteriorated quality of the goods involved caused losses in amount of RMB558,245.88. The Defendant, as the carrier, should bear the liability for compensation. The Plaintiff instituted this action to request the court to rule the Defendant compensate RMB558,245.88 for the losses and related interest thereon, and bear the costs of litigation. The Defendant did not submit a written defence during the period of defence. The Plaintiff submitted the following evidence to the court within the period of producing evidence: 1. Bills of Lading with number of DUM/TAI-02/03/04 and the Chinese translations, to prove the legal relationship between the two parties; 2. Commercial invoices and Chinese translations, to prove the weight and value of the goods involved; 3. Certificate of Weight Inspection, Certificate of Quality Inspection, Certificate of Holds, Pumps and Piping Inspection, Certificate of Plant Quarantine in the loading port and Chinese translations thereof, to prove the quality, weight and sanitary conditions of the goods involved and the cargo worthiness of the holds at the time of shipment;

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4. Certificate of Authentication of Loss of or Damage to Goods, to prove that the goods involved was found mixed with water when discharged, the quality of the goods was inconsistent with the descriptions of bills of lading; the wet damage occurred before discharging; the amount of losses of the Plaintiff; 5. No. 2228 Letter of Guarantee and basic business information of Huatai Insurance Brokerage Co., Ltd. Shanghai Branch, to prove that the China Reinsurance (Group) Corporation provided a security for the Defendant in this case; 6. Agreement of disposal of the damaged goods carried on M.V. JIN HAI HU and the details, proving the Plaintiff entrusted East China Oil Industry (Taixing) Co., Ltd. (hereinafter referred to as “Taixing Company”) to process the goods involved, and drainage charges and sewage treatment charges in amount of RMB875,443.38 occurred therefrom; 7. Value-added tax invoices, proving the Plaintiff had paid corresponding processing charges; 8. Entry Inspection and Quarantine of Goods, to prove the shortage and deteriorated quality of the goods involved. The Defendant did not appear in the court, it shall be deemed as a waiver of the right to cross examine to evidence. The court ascertains the authenticity of the evidence above. The Defendant submitted no evidence to the court within the time limit for producing evidence. After trial, the court finds out the following facts: On May 23, 2012, the Defendant as the carrier issued three sets of tanker bill of lading with number of DUM/TAI-02/03/04. It was stated in the bills of lading that the shipper was Pt. NAGAMAS PALMOIL LESTARI, the consignee was to order, the notify party was Jinxilai Company, the name of vessel was M.V. JIN HAI HU, the port of loading was Du Mai, the port of discharge was Taixing, the name of goods was palm stearin, the quantity were 1000 tons, 546.692 tons and 452.345 tons respectively, clean on board and freight prepaid. The carriage shall comply with terms of charter party concluded by Jinhaihu Shipping Co., Ltd. and Bingfeng Macau Offshore Commercial Service Co., Ltd. (the charterer) (hereinafter referred to as “Bingfeng Company”) on April 20, 2012. On May 23, 2012, Bingfeng Company issued the commercial invoices numbered with ID/0139/0512/FOB, ID/0140/0512/FOB, ID/0141/0512/FOB to Jinxilai Company, which states the product name was palm stearin, characteristics: highest FFA (free fact acid) was 0.2%, highest moisture and impurities was 0.15%, the highest iodine content was 48, the melting point was 50–56 degrees Celsius, the highest color was three-class red, the weight were 1000 tons, 546.692 tons and 452.345 tons respectively, and the unit price was USD1,085 per ton.

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On May 25, 2012, in Du Mai, Indonesian, the port of loading, an independent surveyor, Pt. International Cargo Surveyor carried out a survey on the goods carried on M.V. JIN HAI HU and issued the Certificates of Quality numbered with 0199/ ICS-OPS/V/12-D. It was stated in the certificate that FFA was 0.19%, moisture and impurities were 0.08%, iodine content was 34.2, melting point was 54 degrees Celsius, color was 2.5-class red, etc. On the same day, the surveyor issued Certificate of Holds, Pumps and Piping Authentication, proving of the holds, pipeline and pump were suitable for receiving and carrying oils. After the goods involved arrived at the port of destination, Taizhou City Entry-exit Inspection and Quarantine Bureau of the People’s Republic of China (hereinafter referred to as CIQ) inspected the goods involved and made the Notices of Entry Inspection and Quarantine of Goods numbered with 321900112002691/2/ 3. The notice stated that: the consignee was Jinxilai Company and the numbers of the bills of lading were DUM/TAI-02/03/04; the results of the inspection and quarantine suggest the goods except the FFA index, other quality indexes of the goods involved met the requirements of the contract; upon inspection, the goods had been discharged from the vessel, and the actual weight was 994.63 tons, 543.764 tons and 449.922 tons respectively, which were 3.357 tons, 2.929 tons and 2.243 tons less than the weight in the bills of lading respectively. The results of tests in laboratory the goods involved were as follows: moisture was 0.1%, iodine content was 34.5, FFA is 0.5%, melting point was 53.2 °C, color was 2.3-class red. After finding the goods involved were damaged, CIQ conducted a survey of loss of or damage to the goods carried on M.V. JIN HAI HU and made the Certificate of Authentication of Loss of or Damage to Goods numbered with 321,900,112,002,691. It was specified in the certificate as follows: the consignee was Jinxilai Company, the goods were solid palm stearin, the numbers of bills of lading were DUM/TAI-02/03/04, the destination was Taizhou, Jiangsu, the arrival date was June 5, 2012, the discharge date was June 6, 2012 and the survey time was from June 5 to August 15, 2012. The results of the survey were as follows: the goods of Jinxilai Company and Rizhao Changhua Marine Products Co., Ltd. (hereinafter referred to as “Changhua company”) were loaded in holds named 1P/S, 2P/S, 4P/S, 5P/S, and SPOPS of M.V. JIN HAI HU, and arrived at the port of Taixing on June 5, 2012. When taking samples of the goods, the surveyors found water in the holds mentioned above. Upon consultation of the consignee, the insurer and P&I Club, the damaged goods were unloaded to T6002 tank of Taixing Company and left to stand. From June 18, 2012 water in the tank was discharged repeatedly, and 5.88 tons of water and a mixture of oil and water was discharged by June 21, 2012. On June 12, 2012, the four parties (CIQ, the consignee, the insurer and P&I Club) measured and took sample of the goods in T6002 tank. Through tests in laboratory, it turned out the FFA disconfirmed with the requirement designated by the contract, the acid value and peroxide value did not meet the standard requirements of the GB15680-2009. The surveyors of CIQ investigated processing technology of the waterlogged solid palm stearin and the losses might occur, and

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estimated actual situation of the goods as follows: 1. weight loss: 5.88 tons of water and a mixture of oil and water was discharged from the tank (void waste), calculated by the average contract price and exchange rate on the day of customs declaration, the costs were RMB40,506.74; 2. The costs of refined oil in order to make goods meet the standard of qualified products were RMB1,432,056.48; 3. related additional costs: drainage costs and sewage treatment costs were RMB11,850; and storage costs were RMB190,862.27. The total amount of the losses amounted to RMB1,675,275.49. According to ratio of the bills of lading held by the two companies, the amount of the losses suffered by Jinxilai Company was RMB558,245.88. In addition, water existed before the goods were discharged. On June 25, 2012, Jinxilai Company (Party A) and Taixing Company (Party B) signed the disposal agreement of the damaged goods carried by M.V. JIN HAI HU. Party A entrusted Party B to process the damaged goods involved, after the processing, the solid palm stearin should comply with national quality standards. The costs for processing and disposing the damaged goods involved were RMB875,443.38. In June 2012, Jinxilai Company paid the processing costs as agreed. The court holds that the case is arising from dispute over carriage of goods by sea. There is no agreement on applicable law in the bills of lading, since the place of destination of the voyage involved and the domicile of the consignee are both in territory of China, it can be determined this case has the most close link with China, according to the Law of the People’s Republic of China Governing the of Applicable Law on Foreign-related Civil Relations, the case shall be governed by the laws of China. According to Chinese laws, the contract of carriage of goods by sea evidenced by the bills of lading is valid and effective, and the parties shall fully perform their obligations according to the contract and the law. According to the facts having been determined, the quality indexes of the goods involved met the requirements designated by the invoices of the goods involved upon delivery for shipment, however, at the time of discharge, it was found that the goods were mixed with water, the FFA index thereof was 0.50%, which did not meet the requirements of the contract and water had existed before discharge. That is to say, shortage of and damage to the goods involved occurred in the period of responsibility of the carrier, the carrier failed to prove exemptions, thus Jinxilai Company shall take the responsibility for the losses therefrom. On the basis of Certificate of Authentication of Loss of or Damage to Goods made by CIQ, Jinxilai Company suffered losses in amount of RMB558,245.88. After Jinxilai Company entrusted Taixing Company to process and dispose the damaged goods, the actual costs are RMB875,443.38. The court holds that the identification of the losses of the goods made by CIQ is reasonable, and the Defendant shall compensate. According to Article 46 Paragraph 1 of the Maritime Code of the People’s Republic of China and Article 144 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: The Defendant, Jinhaihu Shipping Co., Ltd., shall compensate the Plaintiff, Rizhao Jinxilai Economic & Trade Co. Ltd., for the losses in amount of

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RMB558,245.88 and interest thereon (the interest shall be calculated at financial institutions lending rate over the same period promulgated by the People’s Bank of China from May 28, 2013 to the day of payment set by this judgment) within ten days upon this judgment takes effect. For failure to fulfil the obligation of payment within the period designated by this judgment, interest for the period of delayed performance shall be doubled according to Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB9,383, shall be born by the Defendant. The Defendant shall pay the ligation fee prepaid by the Plaintiff in advance within ten days upon the effectiveness day this judgment, the court will not otherwise return. In event of dissatisfaction with this judgment, the Plaintiff may within 15 days upon service of this judgment and the Defendant may within 30 days upon service of this judgment submit an statement of appeal according to the number of the opposite party, to lodge an appeal to Hubei High People’s Court. The Appellant shall pay appeal fee in advance according to the claimed amount according to Article 13 Paragraph 1 of Measures on Litigation Fees. (Remittee: Hubei Province Department of Finance Non-tax Income Remitting Settlement Account; Account Number: 052101040020201; Bank of Deposit: Agricultural Bank of China Wuhan City East Lake Branch) If the Appellant fails to pay the appeal fee within 7 days after period of appeal expires, the appeal will be deemed to be withdrawn automatically. Presiding Judge: DAI Liangqiao Acting Judge: REN Nina Acting Judge: LI Yan December 20, 2013 Clerk: YUE Juan

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Hubei High People’s Court Civil Judgment Rizhao Jinxilai Economic & Trade Co., Ltd. v. Jinhaihu Shipping Co., Ltd. (2014) E Min Si Zhong Zi No. 00128 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 825. Cause of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote Affirming lower court’s decision that the Defendant carrier should held liable for contamination by water of a cargo of palm stearin after the Plaintiff cargo owner provided evidence that the cargo had been loaded in good condition and had been delivered in damaged condition. Summary The Defendant carrier carried a cargo of palm stearin from Du Mai, Indonesia, to Taixing, China, under a clean bill of lading issued by the Defendant and indorsed to the Plaintiff. The stearin was shipped in good condition in Indonesia, as established by a pre-shipment survey, but arrived in Taixing damaged by water, as established by a post-arrival survey. The lower court held the Defendant liable for the contamination. On appeal, the Defendant argued that the lower court’s judgment against it should be overturned because the Plaintiff had failed to introduce sufficient evidence to show that damage had actually occurred and that the purported damage had occurred during the carrier’s period of responsibility. The carrier also introduced its own experts, which it had failed to do in lower court, to refute the plaintiff’s claims. Held—that the Appellant’s expert was unqualified and had relied on samples taken too long after the Plaintiff’s claims arose. The court affirmed the lower court’s decision and instructed the carrier to pay litigation fees.

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Judgment The Appellant (the Defendant of first instance): Jinhaihu Shipping Co., Ltd. Domicile: Fl. 33, Building 2, Trade Center, 51 Kuichang Road, Kowloon, Hong Kong. Legal representative: WU Changzheng, director. Agent ad litem: LI Chenbiao, lawyer of Beijing Zhonglun Law Firm Shanghai Branch. Agent ad litem: CHEN Liang, lawyer of Beijing Zhonglun Law Firm Shanghai Branch. The Respondent (the Plaintiff of first instance): Rizhao Jinxilai Economic & Trade Co., Ltd. Domicile: North Tianjin Road and East Taiyuan Road, Rizhao, Shandong. Organization Code: 76577684-7. Legal representative: SONG Chunnian, general manager. Agent ad litem: MIAO Leijun, lawyer of SG & Co. Agent ad litem: YANG Liu, lawyer of SG & Co. The Appellant, Jinhaihu Company Shipping Co., Ltd. (hereinafter referred to as “Jinhaihu Company”), refused to accept (2013) Wu Hai Fa Shang Zi No. 00815 Civil Judgment with regard to the case arising from dispute over carriage of goods by sea made by Wuhan Maritime Court against the Respondent, Rizhao Jinxilai Economic & Trade Co. Ltd. (hereinafter referred to as “Jinxilai Company”), and lodged an appeal to the court. After the acceptance of the court, the court organized the collegiate panel consisting of Presiding Judge SU Jiang, Acting Judges OU Haiyan and DAI Qifen according to law and tried this case in public on July 28, 2014. CHEN Liang, agent ad litem of Jinhaihu Company, and YANG Liu, agent ad litem of Jinxilai Company, appeared in court and participated in the action. Now the case has been concluded. Jinxilai Company requested the court of first instance to judge that Jinhaihu Company should compensate it for the losses in amount of RMB558,245.88 and corresponding interest, and bear the costs of litigation. The court of first instance found out the following facts: On May 23, 2012, Jinhaihu Company as the carrier issued three sets of tanker bill of lading with number of DUM/TAI-02/03/04. It was stated in the bills of lading that the shipper was Pt. NAGAMAS PALMOIL LESTARI, the consignee was to order, the notify party was Jinxilai Company, the name of vessel was M.V. JIN HAI HU, the port of loading was Du Mai, the port of discharge was Taixing, the name of goods was palm stearin, the quantity were 1000 tons, 546.692 tons and 452.345 tons respectively, clean on board and freight prepaid. The carriage should comply with terms of charter party concluded by Jinhaihu Shipping Co., Ltd. and Bingfeng Macau Offshore Commercial Service Co., Ltd. (the charterer) (hereinafter referred to as “Bingfeng Company”) on April 20, 2012.

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On May 23, 2012, Bingfeng Company issued the commercial invoices numbered with ID/0139/0512/FOB, ID/0140/0512/FOB, ID/0141/0512/FOB to Jinxilai Company, which stated that the product name was palm stearin, characteristics: highest FFA (free fatty acid) was 0.2%, highest moisture and impurities was 0.15%, the highest iodine content was 48, the melting point was 50–56 degrees Celsius, the highest color was three-class red, the weight were 1000 tons, 546.692 tons and 452.345 tons respectively, and the unit price was USD1,085 per ton. On May 25, 2012, in Du Mai, Indonesian, the port of loading, an independent surveyor, Pt. International Cargo surveyor carried out an inspection on the goods carried on M.V. JIN HAI HU and issued the Certificates of Quality numbered with 0199/ICS-OPS/V/12-D. It was stated in the certificate that FFA was 0.19%, moisture and impurities was 0.08%, iodine content was 34.2, melting point was 54 °C, color was 2.5-class red, etc. On the same day, the surveyor issued Certificate of Holds, Pumps and Piping Authentication, proving of the holds, pipeline and pump were suitable for receiving and carrying oils. After the goods involved arrived at the port of destination, Taizhou City Entry-exit Inspection and Quarantine Bureau of the People’s Republic of China (hereinafter referred to as CIQ) inspected the goods involved and made the Notices of Entry Inspection and Quarantine of Goods numbered with 321900112002691/2/ 3. The notice stated that: the consignee was Jinxilai Company and the numbers of the bills of lading were DUM/TAI-02/03/04; the results of the inspection and quarantine suggest the goods except the FFA index, other quality indexes of the goods involved met the requirements of the contract; upon inspection, the goods had been discharged from the vessel, and the actual weight were 994.63 tons, 543.764 tons and 449.922 tons respectively, which were 3.357 tons, 2.929 tons and 2.243 tons less than the weight in the bills of lading respectively. The results of tests in laboratory the goods involved were as follows: moisture was 0.1%, the iodine content was 34.5, the FFA was 0.5%, the melting point was 53.2 °C, and the color was 2.3-class red. After finding the goods involved were damaged, CIQ conducted a survey of loss of or damage to the goods carried on M.V. JIN HAI HU and made the Certificate of Authentication of Loss of or Damage to Goods numbered with 321,900,112,002,691. It was specified in the certificate as follows: the consignee was Jinxilai Company, the goods were solid palm stearin, the numbers of bills of lading were DUM/TAI-02/03/04, the destination was Taizhou, Jiangsu, the arrival date was June 5, 2012, the discharge date was June 6, 2012 and the survey time was from June 5 to August 15, 2012. The results of the survey were as follows: the goods of Jinxilai Company and Rizhao Changhua Marine Products Co., Ltd. (hereinafter referred to as “Changhua company”) were loaded in holds named 1P/S, 2P/S, 4P/S, 5P/S, and SPOPS of M.V. JIN HAI HU, and arrived at the port of Taixing on June 5, 2012. When taking samples of the goods, the surveyors found water in the holds mentioned above. Upon consultation of the consignee, the insurer and P&I Club, the damaged goods were unloaded to T6002 tank of Taixing Company and left to stand. From June 18, 2012 water in the tank was discharged repeatedly, and 5.88 tons of water and a mixture of oil and water was discharged by

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June 21, 2012. On June 12, 2012, the four parties (CIQ, the consignee, the insurer and P&I Club) measured and took sample of the goods in T6002 tank. Through tests in laboratory, it turned out the FFA disconfirmed with the requirement designated by the contract, the acid value and peroxide value did not meet the standard requirements of the GB15680-2009. The surveyors of CIQ investigated processing technology of the waterlogged solid palm stearin and the losses might occur, and estimated actual situation of the goods as follows: 1. weight loss: 5.88 tons of water and a mixture of oil and water was discharged from the tank (void waste), calculated by the average contract price and exchange rate on the day of customs declaration, the costs were RMB40,506.74; 2. the costs of refined oil in order to make goods meet the standard of qualified products were RMB1,432,056.48; 3. related additional costs: drainage costs and sewage treatment costs were RMB11,850; and storage fees were RMB190,862.27. The total amount of the losses amounted to RMB1,675,275.49. According to ratio of the bills of lading held by the two companies, the amount of the losses suffered by Jinxilai Company was RMB558,245.88. In addition, water existed before the goods were discharged. On June 25, 2012, Jinxilai Company (Party A) and Taixing Company (Party B) signed the disposal agreement of the damaged goods carried by M.V. JIN HAI HU. Party A entrusted Party B to process the damaged goods involved, after the processing, the solid palm stearin should comply with national quality standards. The costs for processing and disposing the damaged goods involved were RMB875,443.38. In June 2012, Jinxilai Company paid the processing costs as agreed. The court of first instance held that the case was arising from dispute over carriage of goods by sea. There was no agreement on applicable law in the bills of lading, since the place of destination of the voyage involved and the domicile of the consignee were both in territory of China, it could be determined this case has the most close link with China, according to the Law of the People’s Republic of China Governing the of Applicable Law on Foreign-related Civil Relations, the case should be governed by the laws of China. According to Chinese laws, the contract of carriage of goods by sea evidenced by the bills of lading was valid and effective, and the parties should fully perform their obligations according to the contract and the law. According to the facts having been determined, the quality indexes of the goods involved met the requirements designated by the invoices of the goods involved upon delivery for shipment, however, at the time of discharge, it was found that the goods were mixed with water, the FFA index thereof was 0.50%, which did not meet the requirements of the contract and water had existed before discharge. That was to say, shortage of and damage to the goods involved occurred in the period of responsibility of the carrier, the carrier failed to prove exemptions, thus Jinxilai Company should take the responsibility for the losses therefrom. On the basis of Certificate of Authentication of Loss of or Damage to Goods made by CIQ, Jinxilai Company suffered losses in amount of RMB558,245.88. After Jinxilai Company entrusted Taixing Company to process and dispose the damaged goods, the actual costs were RMB875,443.38. The court of first instance held that the identification of

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the losses of the goods made by CIQ was reasonable, and Jinhaihu Company should compensate. According to Article 46 Paragraph 1 of the Maritime Code of the People’s Republic of China and Article 144 of the Civil Procedure Law of the People’s Republic of China, the court of first instance judged that Jinhaihu Company should compensate Jinxilai Company for the losses in amount of RMB558245.88 and interest thereon (the interest should be calculated at financial institutions lending rate over the same period promulgated by the People’s Bank of China from May 28, 2013 to the day of payment set by this judgment) within ten days upon the judgment of first instance took effect. For failure to fulfil the obligation of payment within the period designated by the judgment of first instance, interest for the period of delayed performance shall be doubled according to Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB9,383, should be born by Jinhaihu Company. Jinhaihu Company should pay the ligation fee prepaid by Jinxilai Company in advance within ten days upon the effectiveness day the judgment of first instance, the court of first instance would not otherwise return. Jinhaihu Company dissatisfied with the judgment of first instance and appealed, and requested the court that: 1. Revoke the judgment of first instance and change the judgment according to the law to reject all claims of the Respondent; 2. The Respondent should bear the litigation costs for the first instance and second instance. The facts and reasons are as follows: 1. The inspection reports of loading port and discharge port could not be binding on the carrier, the Respondent failed to produce evidence to prove the alleged damage occurred during the period of carrier’s liability, the facts were incorrectly ascertained in the judgment offirst instance. According to Article 46 of the Maritime Code of the People’s Republic of China and (2005) Min Si Ta Zi No. 1-1 Document of the Supreme People’s Court, “the responsibility of the carrier with respect to liquid bulk cargoes covers the period during which the carries is in charge of the goods, starting from the end offlange plate connected oil pipeline of the loading vessel and the shore tank to the end of flange plate connected oil pipeline of the discharge vessel and the shore tank”, in this case, the Respondent argued that the quality of the goods involved was deteriorated, but it only submitted a loading port inspection report before the goods were loaded, but no inspection report of sample of the goods in the ship tank after the goods were loaded was provided. Similarly, the discharge port inspection report submitted by the Respondent could not prove the quality of the goods involved at the end of the flange plate; 2. The claimed shortage did not actually occur, it was incorrectly ascertained in the judgment of first instance; 3. The growth of FFA of the palm stearin involved was natural attribute; 4. The Respondent failed to produce evidence to prove the actual losses, the corresponding refining costs is extremely unreasonable;

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5. The storage fees claimed by the Respondent was unreasonable, should be excluded; 6. The interest was ruled to be calculated at loan interest rate lacked legal basis. The Appellant Jinxilai Company requested the court to dismiss the appeal and affirm the judgment of first instance. Facts and reasons are as follows: 1. The quality inspection report showed that the goods involved were in good condition. The carrier issued clean bills of lading, which indicated the quality of the goods. The Certificate of Loss of or Damage to Goods could prove when the surveyors boarded on the ship, they found water in the cargo holds and the goods were damaged. According to CIQ Survey Report, water had existed before discharge, and it was enough to prove that the damage occurred in the responsibility period of carrier. After the occurrence of the damage, the Appellant issued a guarantee to the consignee and the insurer to make the ship set sail as soon as possible, and after consultation with the representatives of the parties, the goods were discharged to a shore tank. It could be seen that the Appellant confirmed the shore tank was clean and dry before discharge the goods thereinto. Then, CIQ and the parties concerned jointly measured and took sample of the goods in the shore tank, the sample could not reflect the condition of the goods at the time of discharge, the test conclusion should bind the Appellant; 2. The water contained in the goods would not automatically release, the determination on the weight of the goods involved of the court of first instance was right; 3. Jinhaihu Company claimed that the FFA growth of the goods involved was nature attribute had no factual basis; 4. The determination of the judgment of first instance on refining fee was well-founded; 5. Storage fees arose out of the damage, so it should be compensated; and 6. The losses caused by the damage should be born by Jinhaihu Company, but actually Jinxilai Company advanced the sums, for the latter, as the enterprise, advancing the ums would lead to take loans, so it was reasonable for it to claim a loss of interest. Jinhaihu Company, to prove its appeal claims, submitted three evidence to the court in the second instance: 1. Expert Opinions, to prove: 1:1 The reasonable growth rate of FFA during 13 days’ carriage was 0.05%; 1:2 There were various factors effecting FFA; 1:3 The estimated cost for defining FFA of the palm oil from 0.05% to 0.2% was RMB100-RMB150 per ton; and 1:4 The goods involved did not meet the national standard at the time of shipment.

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2. Survey Report, to prove that the FFA index of the sample in the shore tank was 0.55%; and the FFA index of the sample of the refined goods was 0.14%. 3. National Standards, to prove that the imported goods did not meet Chinese national standards and they were illegal goods. The cross-examination opinions of Jinxilai Company are as follows: 1. The evidence above were not in conformity with the requirements of new evidence, and should not be adopted; 2. The qualification of the expert in evidence 1 was in doubt, the expert had no the qualification to evaluate refining costs of the goods involved, the opinions had no objectivity and should not be adopted, at the same time, national standard on which the opinions based was wrong; 3. Evidence 2 showed FFA content of the goods in the shore tank before refining was 0.55%, proving FFA content after the goods were discharged did not conform to the contract, and the index would not increase with time passing; and 4. Evidence 3 could not reflect the quality of the goods did not conform to the national standard of import goods, and it should not be affirmed. The ascertainment opinions of the court are as follows: evidence 1 is an expert statement, but the expert who made the statement did not appear in the court and participated in the proceedings. Jinhaihu Company entrusted the expert on August 12, 2013, more than a year had passed since the goods arrived at port. The expert opinions is based on relevant documents like the Laboratory Test Reports, etc., are not attached thereto, the court cannot verify the authenticity thereof. The attached expert’s qualification has no relevant original, and the specific area of the expert is not clear. Based on the reasons above, the court holds that the expert opinions lack objectivity and scientificity, and are not enough to repudiate the CIQ Survey Report and the Certification of Authentication of Loss of or Damage to Goods; evidence 2 is Survey Report made by SGS with unilateral entrustment of Jinhaihu Company. The time SGS taking sample is November 1, 2012, more than half a year after the goods arrived at port, and Jinhaihu Company failed to illustrate the legitimate source of the sample submitted to SGS, so SGS Survey Report is also not enough to repudiate the CIQ Survey Report and the Certification of Authentication of Loss of or Damage to Goods; evidence 3 is the Chinese National Standard on palm (released in 2009), Jinhaihu Company’s calculating FFA index by the acid value in the standard lack clear basis, and it failed to submit relevant basis to illustrate the identity of the two indexes, so the evidence cannot realize the objective of proof. After trial, the court finds the facts found by the court of first instance are true and shall be ascertained. The court holds that since Jinhaihu Company is set up in Hong Kong, this case is a Hong Kong-related case. The cause of action of this case is dispute over the contract of carriage of goods by sea, but the parties did not reach an agreement on applicable laws to resolve disputes arising out of the contract, according to Article 41 of the Law of the People’s Republic of China Governing Application of Laws on Foreign-related Civil Relations, the laws at the habitual residence of the party

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whose fulfillment of obligations can best reflect the characteristics of this contract or other laws which have the closest relation with this contract shall apply. In this case, the destination and the consignee’s domicile are in mainland China, so the laws of China shall apply to resolve the disputes concerned. According to prosecution and defense, the court holds the main issues in this case are whether the damage to the goods involved occurred in the period of responsibility of carrier; and how to calculate the damaged value. With regard to the issues, the court decides as follows: In respect of whether the damage occurred in the period of responsibility of the carrier, the court holds that according to (2005) Min Si Ta Zi No. 1-1 Document of the Supreme People’s Court, the responsibility of the carrier with respect to liquid bulk cargoes covers the period during which the carrier is in charge of the goods, starting from the end of flange plate connected oil pipeline of the loading vessel and the shore tank to the end of flange plate connected oil pipeline of the discharge vessel and the shore tank. In this case, an independent surveyor issued a Certification of Quality Inspection and a Certificate of the Holds, Pipeline and Pump Inspection, which can prove that the holds, pipeline and pump are suitable for receiving and carrying oil. Jinhaihu Company as the carrier issued clean bills of lading and did not raise any objection to the apparent condition and the weight of the goods involved, as well as the inspection certificates. After the goods arrived at the port, the surveyors found water in the goods when taking sample in the holds. Upon consultation of the consignee, the insurer and P&I Club (on behalf of Jinhaihu Company), the goods were discharged to the shore tank to let off water. The sample in the subsequent quality inspection was jointly taken by CIQ, the consignee, the insurer and the P&I Club. It can be found, the disposal and inspection of the goods after arriving at port were agreed by Jinhaihu Company, the Test Report issued by CIQ shall bind Jinhaihu Company. According to the two reports, the goods involved were in good condition at the time of shipment, and damages were found at the time of discharge, so the damages involved occurred during the period of responsibility of Jinhaihu Company, it shall bear the liability of compensation for the damage to the goods involved. The allegation of Jinhaihu Company that the two reports were not binding Jinhaihu Company, and no damage to the goods involved occurred during the transportation lacks factual and legal basis, so it shall not be supported. In respect of determination of the value of the damaged goods, the main basis to determine the value of the damaged goods in the judgment of first instance is Test Report issued by CIQ. Surveyors of CIQ investigated process technology of the solid palm stearin and possible losses that might incur, and made a certification of loss of or damage to goods based on the actual situation of the goods involved, estimating total amount of the weight loss of the goods, the costs of refining oil, drainage and sewage treatment, and the storage fees is RMB558,245.88. The test was conducted by CIQ, a neutral state institution, according to the Measures for Administration of Inspection and Authentication of Import and Export of Damaged Goods. Test Report is a notarial deed, which meets the requirements of authenticity, legality and relevancy of an evidence, so it shall serve as a basis for determining the

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value of damaged goods involved. The expert opinions and Test Report of SGS submitted by Jinhaihu Company are not enough to repudiate the Authentication Report on Damaged Goods of CIQ, so the allegation that no shortage of the goods occurred and the refining costs and storage fees were unreasonable raised by Jinhaihu Company lacks evidence and cannot stand. In respect of the allegation of Jinhaihu Company that growth of FFA was natural attribute and it should not be responsible for the change of the quality of the goods involved, the court holds that Jinhaihu Company as the carrier, has the obligation to ensure the change of the quality of the goods within reasonable scope during the carriage. When the goods involved were loaded on board, the FFA thereof was 0.19%, but the inspection in the port of destination showed the FFA thereof was 0.50%, nearly three times of that at the time of shipment, it went well beyond the scope of normal growth. Therefore, the ground of appeal raised by Jinhaihu Company has no basis in fact, the court will not support. In respect of whether the interest shall be calculated by loan interest rate, the court holds it does not violate laws that interest is calculated by loan interest rate in the judgment of first instance. The court will not support the ground of appeal raised by Jinhaihu Company that loan interest rate has no legal basis. In summary, the judgment of first instance’s facts are clearly determined the laws are correctly applied and procedure of the first instance is legal, Jinhaihu Company’s grounds of appeal cannot be established. According to Article 170 Paragraph 1 Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee in amount of RMB9,383, shall be born by the Appellant, Jinhaihu Shipping Co. Ltd. The Judgment is final. Presiding Judge: SU Jiang Acting Judge: OU Haiyan Acting Judge: DAI Qifen September 12, 2014 Clerk: CHENG Jianxiao

Haikou Maritime Court Civil Judgment Sanya Yanghai Shipping Industry Co., Ltd. v. Sanya Yangfan Yacht Club Co., Ltd. (2014) Qiong Hai Fa Shi Chu Zi No.8 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 855. Cause of Action 241. Dispute over port operation. Headnote Lessee of a port terminal held entitled to recover berthing fee from shipowner that had been given government permission to berth its ships at the terminal for free, as port authority’s sub-lease had expired but shipowner had refused to remove its ships. Summary The Plaintiff, sub-lessee of a salt terminal, sub-sub-leased the terminal to a port authority. The Defendant was given permission by the municipal government to berth its ships at the terminal for a limited period. After the limited period expired, the Plaintiff gave notice to the Defendant, requiring it to remove its ships from the terminal. The Defendant’s ships continued to use the terminal, so the Plaintiff sued for repossession or for Defendant to pay a berthing fee for use of the terminal. The Defendant argued that the Plaintiff did not have standing to sue, as it had sub-sub-leased the terminal to the port authority. The Court held: (1) that the port authority’s sub-sub-lease had expired; (2) that the Plaintiff had the legal operation and management rights over the terminal; (3) that Defendant did not have authority to berth its vessels in the terminal; (4) that the Defendant should pay a terminal occupation fee to the Plaintiff.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_42

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Judgment The Plaintiff: Sanya Yanghai Shipping Industry Co., Ltd. Domicile: 2F, the office of the Port Administration, Xinjian Road, Sanya City, Hainan. Legal representative: LI Jiayong, general manager. Agent ad litem: CHEN Zhengwei, lawyer of Hainan Yanbixin Law Firm. The Defendant: Sanya Yangfan Yacht Club Co., Ltd. Domicile: No.27 Xiayangtian, Hedong District, Sanya City, Hainan. Legal representative: QIU Xiaowu, general manager. Agent ad litem: XIAO Xueshan, lawyer of Hainan Jiatian Law Firm. Agent ad litem: PAN Derui, lawyer of Hainan Jiatian Law Firm. With respect to the case arising from dispute over right to use wharf filed by the Plaintiff, Sanya Yanghai Shipping Industry Co., Ltd. (hereinafter referred to as “Yanghai Company”), against the Defendant, Sanya Yangfan Yacht Club Co., Ltd. (hereinafter referred to as “Yangfan Company”), before the court on March 11, 2014, after this case was accepted on the same day, Acting Judge WU Yonglin was appointed as sole judge to try this case in accordance with the law. The court held hearings in public on April 16, May 5 and May 23. CHEN Zhengwei, agent ad litem of the Plaintiff, QIU Xiaowu, legal representative of the Defendant and PAN Derui, agent ad litem of the Defendant, appeared in court and participated in the action. Now the case has been concluded. The Plaintiff alleged that on September 15, 2010, Hainan Province Yuya Saltworks (hereinafter referred to as “Yuya Saltworks”) and Sanya Shengshi Gangwan Business Travel Service Co., Ltd. (hereinafter referred to as “Shengshi Company”) entered into Wharf Leasing Agreement, agreeing that Shengshi Company would lease the Saltworks Wharf from Yuya Saltworks. On October 27, 2010, Shengshi Company concluded Wharf Management Contract with the Plaintiff, in which it was agreed that the Saltworks Wharf would be turned over to the Plaintiff to operate and manage by Shengshi Company, and on November 10, the two parties entered into Managed Assets Transfer Protocol, suggesting the Plaintiff formally took over the Saltworks Wharf. Afterwards, the Plaintiff sub-leased the wharf to Sanya Weida Development Construction Co., Ltd. (hereinafter referred to as “Weida Company”) and Weida Company again sub-leased the wharf to the Port Administration of Sanya Municipality (hereinafter referred to as the “Port Administration”). On October 8, 2011, the three parties made Saltworks Wharf Management Agreement, according to which the Plaintiff had the right to operate and manage the Saltworks Wharf. In September 2011, Sanya Municipality Government demolished the simply constructed wharf and temporary buildings along the Phoenix Square Park. In order to solve the issue of the berthing of ships owned by some enterprises with operation qualification, upon coordination, these companies including the Defendant could

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freely use the Saltworks Wharf for half year (from September 1, 2011 to February 29, 2012). After the period expired, Sanya Municipality Government prolonged the period for free use to October 1, 2013. As the government terminated the subsidy, the Plaintiff gave notice to the Defendant on May 1 and November 18, 2013, requesting it to have their vessels left the Saltworks Wharf. But the vessels owned by the Defendant were still berthing at the Saltworks Wharf. Now, the typhoon season was coming, if the vessels of the Defendant still occupied the Saltworks Wharf, the large vessels owned by the Plaintiff such as M.V. “Ocean Great Wall” would have no place to berth. It would place the vessels including M.V. “Ocean Great Wall” in great potential risks. To sum up, the act that the Defendant forcibly occupied the Saltworks Wharf seriously infringed the Plaintiff’s legitimate rights, therefore the Plaintiff instituted the action to request the court to judge: 1. The vessels owned by the Defendant should not berth at the Saltworks Wharf; 2. The Defendant should pay the fees of using wharf to the Plaintiff at RMB150,000 per month from October 2, 2013 to the day that the vessels of the Defendant left the Saltworks Wharf; 3. The Defendant should bear the litigation fee for the subject case. In support of its claims, the Plaintiff submitted the following evidential documents: 1. Wharf Leasing Agreement made by Yuya Saltworks and Shengshi Company dated September 15, 2010, agreeing that Shengshi Company leased 130 meters water front of wharf located in South Sea Road of Sanya City and a vacant land located between 40 meters off the east water front and South Sea Road to Yuya Saltworks with a term from October 1, 2010 to September 30, 2025. 2. Wharf Management Contract made by the Plaintiff and Shengshi Company dated October 27, 2010, agreeing that Shengshi Company would entrust the Plaintiff with the management and use of a land of 3,342 square metres which was a part of No.12-6 land and 130-meter water front of wharf with a term of 15 years. 3. Managed Asset Transfer Protocol made by the Plaintiff and Shengshi Company on November 10, 2010. The Plaintiff confirmed that it had taken over the Saltworks Wharf (including 130-meter water front, a land covering 1,672 square meters, and the water and electricity facilities in the land) from Shengshi Company. 4. The Minutes of the Meeting of the General Secretary Office of Sanya Municipality Government (Vol.67) printed and distributed on September 1, 2011 namely Discussion on the Issues of Demolishing the Simply Constructed Wharf and Temporary Buildings along the Phoenix Square Park. In the meeting, it was decided that the Defendant could freely use the Saltworks Wharf for half a year by reason of the demolition of the simply constructed wharf and temporary buildings along the Phoenix Square Park and the Bureau of Finance of Sanya Municipality (hereinafter referred to as the “Finance

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Bureau”) would subsidize the management fees of the wharf to the Port Administration. San Cai [2012] No.870 Document issued by the Finance Bureau namely the Opinion on the Arrangement of the Management Fees for Using the Saltworks Wharf paid by the Port Administration, the Finance Bureau suggested that the standard of subsidy for the management fees of the Saltworks Wharf should be RMB150,000 per month from March 1, 2012 to August 30, 2012. The Minutes of the Thematic Meeting of Sanya Municipality Government namely Discussion on the Evaluation System and Monitor Scheme of Integrated Development of Urban and Rural Areas of Sanya Municipality (2013.Vol.81), stating the issue of vessels owned by the Defendant leaving from the Saltworks Wharf. San Cai [2013] No.1319 Document issued by the Finance Bureau namely the Opinion on Arrangement of the Management Fee for Using the Saltworks Wharf. The main contents of the document were as follows: “the Finance Bureau has granted an appropriation of RMB2,700,000 to the Port Administration as the fee for using wharf from the end of 2011 to April 2013; the Finance Bureau will still make an appropriation of RMB900,000 as the fee for using wharf from April 2013 to October 2013 to the Port Administration according to the original standard (RMB150,000 per month); if the vessels owned by Yangfan Company still berth at the Saltworks Wharf after October 2013, the Finance Bureau will not undertake the fees for using wharf, instead, Yangfan Company shall be born by itself”. Notice on Leaving Yuya Saltworks Wharf and Letter to Sanya Yangfan Yacht Club Co., Ltd., the Defendant sent the two letters to the Plaintiff on May 1, 2013 and November 18, 2013 respectively, requesting the vessels owned by the Defendant to leave the Saltworks Wharf. San Tu Fang (2012) Zi No.006098 Certificate of Land-use Right and House Ownership, which showed that Yuya Saltworks was the holder of land-use right of the land for port and wharf covering 2,515.02 square meters at the South Sea Road in Sanya City. Wharf Management Agreement made by the Plaintiff and Weida Company on May 20, 2011, in which it was stated that Weida Company would take over the Saltworks Wharf from the Plaintiff, and manage and operate the wharf with a term from June 1, 2011 to May 31, 2012; and Weida Company should pay RMB150,000 each month to the Plaintiff. Wharf Management Agreement made by Weida Company and the Port Administration on June 25, 2011, in which it was agreed that the Port Administration would take over the Saltworks Wharf from Weida Company and it would manage and operate the wharf from July 1, 2011 to June 30, 2012 and the annual revenue should be no less than RMB1,800,000. Saltworks Wharf Management Agreement made by the Plaintiff, Weida Company and the Port Administration on October 8, 2011, stating that the Port Administration would directly pay the management fee; in the course of requisition of the Saltworks Wharf by Sanya Municipality Government, the Port

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Administration applied to the municipality government for subsidy and the subsidy would be granted to the Plaintiff; after the requisition, this Agreement would be terminated and the Plaintiff operated and managed the wharf. The Defendant argued as follows: firstly, the Plaintiff was not a proper plaintiff. According to the evidence submitted by the Port Administration in the case of (2013) Qiong Hai Fa Shang Chu Zi No.43 namely San Gang Zi [2012] No.97 Document, Weida Company entrusted the Port Administration with the management of the Saltworks Wharf; the Port Administration participated in all previous coordination meetings organized by the government whereas the Plaintiff never attended such meetings. By the end of 2012, the Port Administration filed an action before Haikou Maritime Court with the cause of the Defendant’s invading and occupying the Saltworks Wharf. All the facts above proved that the Port Administration was the real subject which operated and managed the Saltworks Wharf. It was contradicted with the statement alleged by the Plaintiff in this action that the Plaintiff was the owner of the Saltworks Wharf. In addition, the Plaintiff could not provide enough evidence to prove Yuya Saltworks was the owner of the Saltworks Wharf, so Yuya Saltworks had no right to dispose the Saltworks Wharf. To sum up, the Plaintiff had no right to manage and use the Saltworks Wharf or interest in this case, according to Article 108 of the Civil Procedure Law of the People’s Republic of China, Yanghai Company was not a proper Plaintiff; secondly, the Plaintiff had no legitimate right to manage and use the Saltworks Wharf. Upon investigation, Yuya Saltworks was a state-owned enterprise, but Shengshi Company was not. Even if Yuya Saltworks was the owner of the Saltworks Wharf, according to Article 6, Article 20, Article27 of the Interim Measures for the Administration of Assessment of Assets of State-owned Enterprises, it was necessary to assess Yuya Saltworks’ leasing its wharf and report that to the State-owned Assets Supervision and Administration Commission for approval or record Otherwise, such economic activity was null and void. In this case, Yuya Saltworks leased the Saltworks Wharf, a state-owned asset to Shengshi Company which was non-state-owned enterprise without assessment or report to the relevant authority for approval or record, so the act that Yuya Saltworks leased the Saltworks Wharf was null and void and the act of Shengshi Company subletting the Saltworks Wharf to the Plaintiff was also null and void. Therefore, it was illegal for the Plaintiff to manage and operate the Saltworks Wharf; thirdly, there was no contractual relationship or subordinate relationship between the Plaintiff and the Defendant. It was under the requirement of Sanya Municipality Government that the Defendant berthed its vessels at the Saltworks Wharf. Besides, there was no other passenger terminal that could satisfy the requirement of anchorage of M.V. “Yangfan Star No.1” and M.V. “Yangfan Star No.2”, the Defendant could only berth the vessels at the Saltworks Wharf. What’s more, RMB150,000 per month was the standard of subsidy for berthing the vessels of three yacht companies including the Defendant at the Saltworks Wharf. The Plaintiff’s requesting the Defendant to pay the fee for using wharf had no factual or legal basis.

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The Defendant submitted the following evidential documents to support its allegations: 1. A complaint submitted to Haikou Maritime Court by the Port Administration on December 26, 2012, of which the main contents were as follows: the Port Administration filed an action before the Haikou Maritime Court by virtue of the cause of action that the Defendant occupied the Saltworks Wharf, requesting the Defendant not to berth the vessels at the Saltworks Wharf and pay management fees in amount of RMB600,000 calculated from September 1, 2012 to December 31, 2012. 2. Request for Instruction on Coordination of the Leaving of the Vessels Owned by Yangfan Yacht Club and Other Companies from the Saltworks Wharf as Soon as Possible and Subsidy for the Fees for Using Wharf (Ya Gang Zi [2012] No.97) submitted to Sanya Municipality Government by the Port Administration on July 10, 2012 and a reply made by Sanya Municipality Government thereto. The Port Administration requested Sanya Municipality Government to subsidize the fees for management of the Saltworks Wharf from March 3, 2012 to June 3, 2012, and alleged that it was under the entrustment of Weida Company that it managed and operated the Saltworks Wharf. 3. Request for Instruction on Coordination of the Leaving of the Vessels Owned by Yangfan Yacht Club from the Saltworks Wharf as Soon as Possible submitted to Sanya Municipality Government by the Port Administration and a reply made by Sanya Municipality Government thereto. The Port Administration requested Sanya Municipality Government to coordinate the work to make the vessels of the Defendant leave the Saltworks Wharf, and alleged that it was under the entrustment of Weida Company that it managed the Saltworks Wharf. Evidence 1, 2 and 3 was to prove that the person which had the right to manage and operate the Saltworks Wharf was the Port Administration. 4. Opinion on the Vessels owned by Yangfan Company Continuing to Use the Saltworks Wharf (San Jiao Yun [2012] No.413) submitted by the Ministry of Transport to Sanya Municipality Government and the Approval Form made by Sanya Municipality Government thereto, in which Sanya Municipality Government consented that the Defendant could still freely use Saltworks for 6 months after the term of freely using expired (namely March 1, 2012). The documents above were to prove that Sanya Municipality Government consented that the Defendant could continue to use the wharf. 5. Disclosure materials of the enterprise credit information of Yuya Saltworks, Hainan Salt Industry Corporation, Shengshi Company and Sanya New Bay Investment Co., Ltd. (hereinafter referred to as “New Bay Company”) show that Yuya Saltworks is wholly-owned subsidiary of Hainan Salt Industry Corporation, which is fully funded by the State-owned Assets Supervision and Administration Commission of Hainan Province. Shengshi Company is jointly funded by a natural person, Zhou Guicui and New Bay Company. New Bay Company is jointly funded by natural persons Wei Dixu and LI Jiayong. This

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evidence was to prove that Yuya Saltworks was a state-owned enterprise while Shengshi Company was non-state-owned enterprise. 6. Shipbuilding Contract, of which the main contents were as follows: the Defendant and Sunbird Yacht Co., Ltd. entered into a contract concerned construction of two sightseeing passenger vessels. Shipbuilding Contract was to prove that the purpose to construct M.V. “Yangfan Star No.1” and M.V. “Yangfan Star No.2” was not to occupy the Saltworks Wharf. The court collected the complaints and evidence submitted by the Plaintiff in (2013) Qiong Hai Fa Shang Chu Zi No.43 Case and (2013) Qiong Hai Fa Shang Chu Zi No.123 Case tried in the court upon the application of the Defendant. (2013) Qiong Hai Fa Shang Chu Zi No.43 Case was filed by the Port Administration against the Defendant on the ground of the Defendant’s occupying the Saltworks Wharf on December 26, 2012. The evidence submitted by the Port Administration was as follows: 1. The Minutes of the Thematic Meeting of Sanya Municipality Government namely the Discussion on Relevant Issues about Regulation of Sanya Port (Sanya Estuary) (Vol.133), which shows that Sanya Municipality Government discussed comprehensive regulation of Sanya Port on June 8, 2011. 2. A document of the Finance Bureau, the Opinion on the Arrangement for the Fees for Using and Managing the Saltworks Wharf paid by the Port Administration (San Cai [2012] No.432), which is the opinion given by the Finance Bureau to Sanya Municipality Government in respect of the issue that the Port Administration requested the Defendant to make its vessels leave the Saltworks Wharf. Besides the two pieces of evidence above, another four pieces of evidence submitted by the Port Administration which are same with evidence 4 and 5 submitted by the Plaintiff, and evidence 2 and 4 submitted by the Defendant in this case respectively. (2013) Qiong Hai Fa Shang Chu Zi No.123 Case was filed by the Plaintiff against the Defendant on the ground that the Defendant occupied the Saltworks Wharf on June 5, 2013. The evidence submitted by the Plaintiff in that case is same with evidence 1, 2, 3, 4, 5 and 8 submitted by the Plaintiff in this case, but Letter to Sanya Yangfan Yacht Club Co., Ltd. is not included. The Defendant used the evidence above to prove that evidence 1 to 4 submitted by it came from the complaints and evidence submitted by the Plaintiff in (2013) Qiong Hai Fa Shang Chu Zi No.43 Case and (2013) Qiong Hai Fa Shang Chu Zi No.123 Case, so the Defendant has no original copies of the evidence above. The court ex officio collected the land register cards and parcel maps in the Certificates of Land-use Right and House Ownership numbered with Nan Hai Guo Yong (1994) Zi No.0568 and San Tu Fang (2012) Zi No.006098 from the Bureau of Land and Environment Resources. The land register card and parcel map involved in the Certificates of Land-use Right and House Ownership numbered with Nan Hai Guo Yong (1994) Zi No.0568

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show Yuya Saltworks is the holder of the right to use the state-owned land of covering14,160.20 square meters located at the South Sea Road in Sanya City, which is used for port or wharf and the number of which is (12)-6. The land register card and parcel map involved in the Certificates of Land-use Right and House Ownership numbered with San Tu Fang (2012) Zi No.006098 show that Yuya Saltworks is the holder of the right to use the state-owned land covering 2,515.02 square meters located at the South Sea Road in Sanya City, which is used for port or wharf and the number of which is 13-10-3-2. This certification is transferred from the Certificates of Land-use Right and House Ownership numbered with Nan Hai Guo Yong (1994) Zi No.0568. Upon cross-examination, as regard to the evidence submitted by the Plaintiff, the Defendant argued as follows: it had no objection to the authenticity of evidence 1, 2 and 3, but it questioned the relevancy, the legality and the content to be proved. The three pieces of evidence above could not prove Yuya Saltworks was the holder of the right to use the Saltworks Wharf. The agreement violated relevant regulations on management of state-owned assets, it should be null and void; it had no objection to the authenticity, legality or relevancy of evidence 4, 5, 6 and 7, but it argued that the evidence 4 proved that the Port Administration was the operator of the Saltworks Wharf, after the time of using the Saltworks Wharf for free expired granted by the government, it should charge for the management on the basis of the operating situation of the enterprise rather than the market price; evidence 6 and 7 could only prove that Sanya Municipality Government arranged it to freely use the Saltworks Wharf and the standard of subsidy was RMB150,000 per month, but it could not prove that the subsidy was granted to the Plaintiff; it had no objection to the authenticity of evidence 8, but it questioned the relevancy and the legality thereof. The two notices were made by the Plaintiff unilaterally and the contents thereof had no factual basis, and they could not prove that the Plaintiff was the holder of the right to use the wharf. The time when the first notice was made was May 21, 2013, it contradicted with the time of freely using the wharf stated by the Plaintiff which was from September 1, 2011 to October 1, 2013, it meant that the Plaintiff notified it to make its vessels leave the wharf before the time of freely using the wharf expired. There was no original of evidence 9 to be verified, so it questioned the authenticity of evidence 9; it questioned the authenticity, legality and relevancy of evidence 10, 11 and 12. The Plaintiff, the Port Administration and Weida Company shared some same shareholders, they had close relationship, so the three contracts were probably falsified afterwards. Upon cross-examination, as regard to the evidence submitted by the Defendant, the Plaintiff argued as follows: it had no objection to the authenticity of evidence 1, but it questioned the content to be proved. After instituting an action, the Port Administration withdrew that action, the court did not decide the operator of the Saltworks Wharf. There was no original of evidence 2, 3 or 4 to be verified, so it questioned the authenticity thereof; it questioned the authenticity of evidence 5 for lack of relevancy to this case; evidence 6 lacked relevancy to this case; it had no objection to the complaints and evidence submitted by the Plaintiff in (2013) Qiong Hai Fa Shang Chu Zi No.123 Case, but it questioned the complaint and evidence

Sanya Yanghai Shipping Industry Co., Ltd. v. Sanya Yangfan …

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submitted by the Port Administration in (2013) Qiong Hai Fa Shang Chu Zi No.43 Case. Although the Port Administration was the shareholder of the Plaintiff, the Port Administration and the Plaintiff were two separated legal entities, the complaint and evidence submitted by the Port Administration could not represent the Plaintiff. Both of the Plaintiff and the Defendant had no objection to the authenticity of the land register cards and parcel maps involved in the Certificate of Land-use Right and House Ownership with the number of Nan Hai Guo Yong (1994) Zi No.0568 and San Tu Fang (2012) Zi No.006098. The court admits these two pieces of evidence. The confirmation of the court on the evidence submitted by the Plaintiff was as follows: 1. All of evidence 1, 2, 3, 10, 11, 12 has been verified as identical with the original, so the court ascertains these 6 pieces of evidence. Although the area of the land involved in the San Tu Fang (2012) Zi No.006098 Certificate of Land-use Right and House Ownership is different from that of the leased land agreed in the Wharf Management Contract signed by the Plaintiff and Shengshi Company, according to the successive relationship of the wharf lease contracts involved in evidence 1, 2, 10, 11 and 12, and the statements about the leased property in these contracts, and combined with evidence 3, evidence 9 and the evidence collected by the court from the Land and Environment Resources Bureau of Sanya Municipality, the court ascertains that the leased property involved in above contracts contains the 130 meters east-west water front located at the South Sea Road in Sanya City and part of the land located between 40 meters east of the water front and the South Sea Road (collectively referred to as the Saltworks Wharf). These 6 pieces of evidence jointly prove the course that the Plaintiff got the right to manage and operate the Saltworks Wharf. 2. The Defendant had no objection to the authenticity, relevancy or legality of evidence 4, 5, 6 and 7, so the court ascertains these 4 pieces of evidence. Evidence 4 and 5 prove that the time that the Finance Bureau granted subsidy for using the wharf from September 1, 2011 and the standard is RMB150,000 per month. In combination with evidence 4 and 5, the Finance Bureau alleged in evidence 7 that “it had granted RMB2,700,000 to the Port Administration for the fees for using and managing the Saltworks Wharf from the end of 2011 to April, 2013”, it shall be understood as the Finance Bureau has granted a subsidy of RMB2,700,000 in terms of the Saltworks Wharf from September 1, 2011 to February 28, 2013; “the fees for managing wharf is RMB900,000 from April 2013 to October 2013…” shall refer to the subsidy for the fees for management in terms of the Saltworks Wharf in amount of RMB900, 000 from April 1, 2013 to September 30, 2013; “after October 2013, the vessels owned by the Sanya Yangfan Yacht Club…” shall be understood as after October 1, 2013, thus the period to use for free arranged by the government shall be ended by September 30, 2013.

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3. There are signatures of the employee in the two letters involved in evidence 8 and the Defendant raised no objection to the authenticity thereof, so the court admits this evidence. 4. Although no original can verify evidence 9, it is same with the land register cards and parcel maps involved in the Certificate of Land-use Right and House Ownership numbered with Nan Hai Guo Yong (1994) Zi No.0568 collected by the court. The court admits this evidence. The court ascertains the evidence submitted by the Defendant as follows: 1. Upon verification, evidence 1 is same as the complaint submitted by the Port Administration (2013) Qiong Hai Fa Shang Chu Zi No.43 Case. So the court admits this evidence. 2. The request and the approval opinion involved in evidence 2, 3 and part of the complaint corroborate evidence 5 and 7 submitted by the Plaintiff in this case; the court ascertains these two pieces of evidence. 3. Evidence 4 is a government document, which is the same as San Jiao Yun [2012] No.413 Document submitted by the Port Administration in (2013) Qiong Hai Fa Shang Chu Zi No.43 Case, and it can be corroborated by relevant evidence, thus the court admits this evidence. 4. The National Enterprise Credit Information Publicity System is held by the State Administration for Industry and Commerce of the State Council. The information disclosed on the system is of truthfulness. Upon verification, the information involved in evidence 5 is same as the content disclosed on this system. The court hereby admits this evidence. 5. Evidence 6 lacks relevancy to this case, the court deems the evidence inadmissible. The copied complaints taken from (2013) Qiong Hai Fa Shang Chu Zi No.43 Case and No.123 Case are same with the originals, the court admits the authenticity thereof. The evidence submitted by the Port Administration and the Plaintiff in the cases above and the evidence submitted by the Plaintiff and the Defendant in this case can be mutually proved, thus the court admits the evidence from the two cases above. According to the cross-examination and ascertainments above, combined with the facts having been found in the hearing and the opinions of both parties, the facts ascertained by the court are as follows: Wharf Leasing Agreement made by Yuya Saltworks and Shengshi Company on September 15, 2010 states that Shengshi Company leased Saltworks Wharf from Yuya Saltworks with a term from October 1, 2010 to September 30, 2025. Wharf Management Contract made by the Plaintiff and Shengshi Company dated October 27, 2010 states that Shengshi Company will entrust the Plaintiff with the operation of the Saltworks and facilities involved. On November 10, the Plaintiff and Shengshi Company entered into a real estate management agreement, confirming that the Saltworks Wharf and the water electricity facilities involved to be handed over to the Plaintiff.

Sanya Yanghai Shipping Industry Co., Ltd. v. Sanya Yangfan …

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Wharf Management Agreement made by the Plaintiff and Weida Company on May 20, 2011 states that Weida Company would take over the Saltworks Wharf from the Plaintiff and operate the wharf with management fees of RMB150,000 per year and a term of one year. Wharf Management Agreement made by Weida Company and the Port Administration on June 25 states that the Port Administration would take over the Saltworks Wharf from Weida Company and manage the wharf also with a term of one year and an agreement that annual revenue should be no less than RMB1, 800,000 was arrived therein. The Saltworks Wharf Management Agreement made by the Plaintiff, Weida Company and the Port Administration on October 8 states that the obligations and rights under the Saltworks Management Agreement signed by the Plaintiff and Weida Company and the Wharf Management Agreement signed by Weida Company and the Port Administration will be directly fulfilled by the Plaintiff and the Port Administration, meaning that the Port Administration should directly pay the management fees to the Plaintiff; during the time of the wharf’s being requisitioned, the Port Administration shall apply for the subsidy from the municipality government and such subsidy will be granted to the Plaintiff; and after the government’s requisitioning, this tripartite agreement will be terminated and the Plaintiff shall operate and manage the wharf. On September 1, 2011, it was decided to demolish the simple-constructed wharf and temporary buildings along the Phoenix Square Park in the Working Conference of the General Secretary of Sanya Municipality Government. After negotiating with the Port Administration, the Defendant could still freely use the Saltworks Wharf for half a year (from September 1, 2011 to February 29, 2012) and the Port Administration would get a subsidy for the fees of RMB150,000 each month for using the Saltworks Wharf from the Finance Bureau. After the term of free using expired, Sanya Municipality Government arranged the Defendant to freely use the Saltworks Wharf again with the term from March 1 to August 30, 2012 and the Finance Bureau would keep on granting the subsidy for using Saltworks Wharf as per the original standard After that, Sanya Municipality arranged the Defendant to continue freely using the Saltworks Wharf and the term was prolonged to September 30, 2013. The Finance Bureau granted a subsidy in amount of RMB3,600,000 to the Port Administration for the fee for using Saltworks Wharf from September 1, 2011 to September 30, 2013, but it did not grant the fees of using the Saltworks Wharf since March 2013. San Cai [2013] No.1319 Document issued by the Finance Bureau shows that if the vessels owned by Yangfan Company still berth at the Saltworks Wharf after the October 2013, the Finance Bureau would not undertake the fees for using the wharf. The enterprise should undertake the fees by itself. The Plaintiff sent Letter to Yangfan Yacht Club Co., Ltd. to the Defendant on November 18, 2013 and requested the Defendant to have its vessels leave from the Saltworks Wharf, but the Defendant refused. Thus the Plaintiff instituted this action.

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The court, in addition to the facts found above, also finds out that: 1. Yuya Saltworks was a state-owned enterprise which had the right to use the land located at the South Sea Road in Sanya City, of which the original land number is (12)-6, covering 14,160.20 square meters; and the land certificate number was Nan Hai Guo Yong (1994) Zi No.0568. Sanya Municipality Government took part of the land in the middle-west near South Sea Road as reservation land for the government. The government issued a renewed certificate with a number of San Tu Fang (2012) Zi No.006098 for the rest land on July 30, 2012, of which the land number was 13-10-3-2; covering 2,515.02 square meters; and the use was for port or wharf. The east side of the land was 130.86 meters to the water front; the west side of the land was connected to the South Sea Road; and the length of the water front from east of the water front to the South Sea Road was 38.93 meters. 2. Since August 30, 2012, when the term of free berthing at the wharf expired, the vessels owned by the Defendant were still berthing at the Saltworks Wharf and the Defendant failed to pay the fees. On December 26, 2012, the Port Administration filed an action arising from dispute over right to use wharf against the Defendant before the court, and the court accepted that case which was numbered with (2013) Qiong Hai Fa Shang Chu Zi No.43. Afterwards, that case was concluded in way of withdrawal by the Port Administration. 3. In the situation where the government only subsidized the fees for using the Saltworks Wharf before February 2013, the Defendant berthed its vessels at the Saltworks Wharf and refused to leave the wharf. The Plaintiff notified the Defendant to make its vessels leave Yuya Saltworks Wharf on May 1, 2013 and sued the Defendant to the court on June 5 by reason of the Defendant’s occupying the Saltworks Wharf. The court accepted that case, of which the number is (2013) Qiong Hai Fa Shang Chu Zi No.123, Afterwards, that case was concluded in way of withdrawal by the Port Administration. 4. Only the Defendant had berthed its vessels at the Saltworks Wharf since September, 2011 and the vessels occupy most of the berthing space, as a result, other vessels could not berth at the wharf. 5. Shengshi Company was non-state-owned enterprise. 6. Both the Plaintiff and the Defendant confirmed in the trial that the first-stage construction of Phoenix Square Park Yacht Wharf had been completed by the end of 2013 and opened for business. The court holds that this case is arising from dispute over the right to use wharf. According to the facts having been found, Yuya Saltworks is the holder of the right to use the Saltworks Wharf, which has the right to legally possess and freely lease the Saltworks Wharf. So the allegation of the Defendant that it is powerless dispose that Yuya Saltworks leased the Saltworks Wharf on the ground that it is not the owner thereof cannot stand. Although Yuya Saltworks is a state-owned enterprise, Shengshi Company is a non-state-owned enterprise, without assessment, approval or record, Yuya Saltworks leased the Saltworks Wharf to Shengshi Company in

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violation of related provisions of the Interim Measures for the Administration of Assessment of State-owned Assets of Enterprises, which was published by the State-owned Assets Supervision and Administration Commission of the State Council, it is not a law or administrative regulation, so the Wharf Leasing Agreement concluded by the parties shall not be void and null for regulation above. The allegation held by the Defendant that the acts that Yuya Saltworks leased the Saltworks Wharf and Shengshi Company leased the Saltworks Wharf are null and void cannot stand. In conclusion, Wharf Leasing Agreement made by Saya Saltworks and Shengshi Company, Wharf Management Contract made by Shengshi Company and the Plaintiff, Wharf Management Agreement made by the Plaintiff and Weida Company and that between Weida Company and the Port Administration, Saltworks Wharf Management Agreement made by the Plaintiff, Weida Company and the Port Administration were genuine intention of the parties concerned, which did not violate the compulsory provisions of laws and administrative regulations, so all of them are valid contracts. After the Plaintiff acquired the right to manage the Saltworks Wharf according to Wharf Management Contract signed by and between the Plaintiff and Shengshi Company, although the Plaintiff leased the Saltworks Wharf to Weida Company and Weida Company subleased the Saltworks Wharf to the Port Administration, the terms were both one year. The Plaintiff, Weida Company and the Port Administration agreed in Saltworks Wharf Management Agreement that after the requisition, the tripartite agreement had been terminated and the Plaintiff had the right to operate and manage the Saltworks Wharf. Therefore, both the term of the Plaintiff’s leasing and the term of freely using arranged by the government ended on October 1, 2013. After that, the Plaintiff had the right to legally operate and manage the Saltworks Wharf. So, the defence held by the Defendant that the Plaintiff had no right to manage and use the Saltworks Wharf because the Plaintiff is not the proper claimant cannot stand. Furthermore, the situation where the hulls of M.V. “Yangfan Star No.1” and M.V. “Yangfan Star No.2” are too large to berth at any other wharfs in Sanya City cannot be the legal excuse or statutory exemption. The court does not admit it. The first-phase construction of the Phoenix Square Park Yacht Wharf had been completed by the end of 2013 and opened for business. The Finance Bureau also clearly expressed it would not grant subsidy to the Defendant for its vessels berthing at the Saltworks Wharf after October 2013. So the defence of the Defendant that it was the arrangement of the government that the vessels berthed at the Saltworks Wharf after October 2013 has no merit and the court does not adopt. In conclusion, the act that the Defendant berthed its vessels at the Saltworks Wharf, which is managed and operated by the Plaintiff, constitutes an infringement. The claim alleged by the Plaintiff that the Defendant should stop infringement and indemnify its damages shall be supported. But the infringement after the time ascertained by the effective judgment is an unascertained fact having not occurred, which is not proper to deal in this case. The court does not support this claim. According to the fact found in this case, during the term of free using arranged by the government namely from September 1, 2011 to September 30, 2013, the Finance Bureau granted the subsidy by RMB150, 000 per month for the fees for

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using the Saltworks Wharf. In addition, according to Wharf Management Agreement made by the Plaintiff, Weiada Company and the Port Administration, the average fee for each month for using the Saltworks Wharf is also RMB150, 000 per month. The vessels still berthing at the Saltworks Wharf are owned by the Defendant, so the claim filed by the Plaintiff for the fee to occupy the wharf in amount of RMB150,000 per month shall be supported. To sum up, according to Article 15 Paragraph 1 Sub-paragraph 1 and Sub-paragraph 6 of the Tort Liability Law of the People’s Republic of China, Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: 1. The Defendant, Sanya Yangfan Yacht Club Co., Ltd., shall stop infringement since the day of effectiveness of this judgment, namely the vessels cannot berth at Yuya Saltworks Wharf located at the South Sea Road in Sanya City. 2. The Defendant, Sanya Yangfan Yacht Club Co., Ltd., shall pay the fees in amount of RMB150,000 each month for occupying the wharf to the Plaintiff, Sanya Yanghai Shipping Service Industry Co., Ltd., within ten days after this judgment comes into effect (where the vessels owned by the Defendant leaves the Saltworks Wharf before this judgment comes into effect, the calculation shall start from October 2, 2013 and end by the actual leaving day; otherwise, the Defendant shall pay the fees from October 2, 2013 to the day of the effectiveness of this judgment.). 3. Reject other claims filed by the Plaintiff, Sanya Yanghai Shipping Service Industry Co., Ltd. Where the Defendant, Sanya Yangfan Yacht Club Co., Ltd., fails to perform the obligation to pay the above-mentioned amount within the period ascertained in this judgment, the interest on the debt shall be doubled for the period of delayed performance according to Article 253 of the Civil Procedure Law of the People’s Republic of China. The Defendant, Sanya Yangfan Yacht Club Co., Ltd., shall bear court acceptance fee of this case in amount of RMB7,125. In the event of dissatisfaction with this judgment, the Plaintiff and the Defendant may within 15 days upon the service of this judgment, submit a letter of appeal to the court, together with copies according to the numbers of the opposing party to the case, to lodge an appeal to Hainan High People’s Court. Acting Judge: WU Yonglin June 4, 2014 Clerk: HUANG Haijun

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Hainan High People’s Court Civil Judgment Sanya Yanghai Shipping Industry Co., Ltd. v. Sanya Yangfan Yacht Club Co., Ltd. (2014) Qiong Min Zhong San Zi No.42 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 841. Cause of Action 241. Dispute over port operation. Headnote Affirming lower court decision holding that lessee of a port terminal was entitled to recover berthing fee from shipowner that had been given government permission to berth its ships at the terminal for free, because port authority’s sub-lease had expired but shipowner had refused to remove its ships. Summary The Plaintiff, sub-lessee of a salt terminal, sub-sub-leased the terminal to a port authority. The Defendant was given permission by the municipal government to berth its ships at the terminal for a limited period. After the limited period expired, the Plaintiff gave notice to the Defendant, requiring it to remove its ships from the terminal. The Defendant’s ships continued to use the terminal, so the Plaintiff sued for repossession or for the Defendant to pay a berthing fee for use of the terminal. The Defendant argued that the Plaintiff did not have standing to sue, as it had sub-sub-leased the terminal to the port authority. The court held: (1) that the port authority’s sub-sub-lease had expired; (2) the Plaintiff had the legal operation and management rights over the terminal; (3) the Defendant did not have authority to berth its vessels in the terminal; (4) the Defendant should pay a terminal occupation fee to the Plaintiff. The Defendant appealed and the appeal court affirmed the judgment of first instance.

Judgment The Appellant (the Defendant of first instance): Sanya Yangfan Yacht Club Co., Ltd. Domicile: No. 27 Xiayangtian, Hedong District, Sanya City, Hainan. Legal representative: QIU Xiaowu, general manager.

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Agent ad litem: PAN Derui, lawyer of Hainan Jiatian Law Firm. Agent ad litem: WANG Longkui, lawyer of Hainan Jiatian Law Firm. The Respondent (the Plaintiff of first instance): Sanya Yanghai Shipping Industry Co., Ltd. Domicile: 2F, the office of the Port Administration, Xinjian Road, Sanya City, Hainan. Legal representative: LI Jiayong, general manager. Agent ad litem: CHEN Zhengwei, lawyer of Hainan Yanbixin Law Firm. Dissatisfied with (2014) Qiong Hai Fa Shi Chu Zi No.8 Civil Judgment rendered by the Haikou Maritime Court on June 4, 2014 with respect to the case arising from dispute over the right to use wharf, in which the Respondent Sanya Yanghai Shipping Industry Co., Ltd. (hereinafter referred to as “Yanghai Company”) was involved, the Appellant Sanya Yangfan Yacht Club Co., Ltd. (hereinafter referred to as “Yangfan Company”) lodged an appeal before the court on June 19, 2014. After accepting this case, the court organized the collegiate panel consisting of Presiding Judge LI Ge, Judge ZHAO Yinghua and Acting Judge WANG Hao to try the case in accordance with the law, and HUANG Jiachen was appointed as Clerk. On August 20, 2014, the court held a hearing in public. PAN Derui and WANG Longkui, agents ad litem of Yangfan Company; CHEN Zhengwei, agent ad litem of Yanghai Company, appeared in court and participated in the action. There was no result after mediation in accordance with the law. Now the case has been concluded. Yanghai Company alleged that on September 15, 2010, Hainan Province Yuya Saltworks (hereinafter referred to as “Yuya Saltworks”) and Sanya Shengshi Gangwan Business Travel Service Co., Ltd. (hereinafter referred to as “Shengshi Company”) entered into Wharf Leasing Agreement, agreeing that Shengshi Company would lease the Saltworks Wharf from Yuya Saltworks. On October 27, 2010, Shengshi Company concluded Wharf Management Contract with Yanghai Company, in which it was agreed that the Saltworks Wharf would be turned over to Yanghai Company to operate and manage by Shengshi Company, and on November 10, the two parties entered into the Managed Assets Transfer Protocol, suggesting Yanghai Company formally took over the Saltworks Wharf. Afterwards, Yanghai Company sub-leased the wharf to Sanya Weida Development Construction Co., Ltd. (hereinafter referred to as “Weida Company”) and Weida Company again sub-leased the wharf to the Port Administration of Sanya Municipality (hereinafter referred to as the “Port Administration”). On October 8, 2011, the three parties made Saltworks Wharf Management Agreement, according to which Yanghai Company had the right to operate and manage the Saltworks Wharf. Since September 2011, upon corporation, Sanya Municipality Government in order to solve the issue of the berthing of ships owned by some enterprises with operation qualification, arranged these companies including Yangfan Company could freely use the Saltworks Wharf for half year. After the period expired, Sanya Municipality Government prolonged the period for free use to October 1, 2013. As the government terminated the subsidy, Yanghai Company sent Letter to Sanya Yangfan Yacht Club Co., Ltd. to Yangfan Company on May 1 and November 18,

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2013, requesting it to have their vessels left the Saltworks Wharf. But Yangfan Company refused. Therefore, Yanghai Company instituted the action to request the court to judge: the vessels owned by Yangfan Company should not berth at the Saltworks Wharf; Yangfan Company should pay the fees of using wharf to Yanghai Company at RMB150,000 per month from October 2, 2013 to the day that the vessels of Yangfan Company left the Saltworks Wharf; Yangfan Company should bear the litigation fee for the subject case. After trial, the court of first instance found out that Yuya Saltworks and Shengshi Company concluded Wharf Leasing Agreement on September 15, 2010, stating that Shengshi Company leased Saltworks Wharf from Yuya Saltworks with a term from October 1, 2010 to September 30, 2025. On October 27, 2010, Yanghai Company and Shengshi Company Wharf Management Contract, agreeing that Shengshi Company would entrust Yanghai Company with the operation of the saltworks and facilities involved. On November 10, Yanghai Company and Shengshi Company entered into a real estate management agreement, confirming that the Saltworks Wharf and the water electricity facilities involved to be handed over to Yanghai Company. On May 20, 2011, Yanghai Company and Weida Company made Wharf Management Agreement, agreeing that Weida Company would take over the Saltworks Wharf from Yanghai Company and operate the wharf with management fees of RMB150,000 per year and a term of one year. Wharf Management Agreement made by Weida Company and the Port Administration on June 25 stated that the Port Administration would take over the Saltworks Wharf from Weida Company and manage the wharf also with a term of one year and an agreement that annual revenue should be no less than RMB1,800,000 was arrived therein. On October 8, Yanghai Company, Weida Company and the Port Administration signed Saltworks Wharf Management Agreement, stating that the obligations and rights under Saltworks Management Agreement signed by Yanghai Company and Weida Company and Wharf Management Agreement signed by Weida Company, and the Port Administration would be directly fulfilled by Yanghai Company and the Port Administration, which meant that the Port Administration should directly pay the management fees to Yanghai Company; during the time of the wharf’s being requisitioned, the Port Administration should apply for the subsidy from the municipality government and such subsidy would be granted to Yanghai Company; and after the government’s requisitioning, this tripartite agreement would be terminated and Yanghai Company should operate and manage the wharf. On September 1, 2011, it was decided to demolish the simple-constructed wharf and temporary buildings along the Phoenix Square Park in the Working Conference of the General Secretary of Sanya Municipality Government. After negotiating with the Port Administration, Yangfan Company could still freely use the Saltworks Wharf for half a year (from September 1, 2011 to February 29, 2012) and the Port Administration would get a subsidy for the fees of RMB150,000 each month for using the Saltworks Wharf from the Finance Bureau. After the term of free using expired, Sanya Municipality Government arranged Yangfan Company to freely use the Saltworks Wharf again with the term from March 1 to August 30, 2012 and the

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Finance Bureau would keep on granting the subsidy for using Saltworks Wharf as per the original standard After that, Sanya Municipality arranged Yangfan Company to continue freely using the Saltworks Wharf and the term was prolonged to September 30, 2013. The Finance Bureau granted a subsidy in amount of RMB3,600,000 to the Port Administration for the fee for using Saltworks Wharf from September 1, 2011 to September 30, 2013, but it did not grant the fees of using the Saltworks Wharf since March 2013. San Cai [2013] No.1319 Document issued by the Finance Bureau shows that if the vessels owned by Yangfan Company still berth at the Saltworks Wharf after the October 2013, the Finance Bureau would not undertake the fees for using the wharf. The enterprise should undertake the fees by itself. Yanghai Company sent the Letter to Yangfan Yacht Club Co., Ltd. to Yangfan Company on November 18, 2013 and requested Yangfan Company to have its vessels leave from the Saltworks Wharf, but Yangfan Company refused. Thus Yanghai Company instituted this action. In addition to the facts found above, the court of first instance also found out that: 1. Yuya Saltworks was a state-owned enterprise which had the right to use the land located at the South Sea Road in Sanya City, of which the original land number was (12)-6, covering 14,160.20 square meters; and the land certificate number was Nan Hai Guo Yong (1994) Zi No.0568. Sanya Municipality Government took part of the land in the middle-west near South Sea Road as reservation land for the government. The government issued a renewed certificate with a number of San Tu Fang (2012) Zi No.006098 for the rest land on July 30, 2012, the land number was 13-10-3-2; covering 2,515.02 square meters; and the use was for port or wharf. The east side of the land was 130.86 meters to the water front; the west side of the land was connected to the South Sea Road; and the length of the water front from east of the water front to the South Sea Road was 38.93 meters. 2. Since August 30, 2012, when the term of free berthing at the wharf expired, the vessels owned by Yangfan Company were still berthing at the Saltworks Wharf and Yangfan Company failed to pay the fees. On December 26, 2012, the Port Administration filed an action arising from dispute over right to use wharf against Yangfan Company before the court of first instance, and the court of first instance accepted that case which is numbered with (2013) Qiong Hai Fa Shang Chu Zi No.43. Afterwards, that case was concluded in way of withdrawal by the Port Administration. 3. In the situation where the government only subsidized the fees for using the Saltworks Wharf before February 2013, Yangfan Company berthed its vessels at the Saltworks Wharf and refused to leave the wharf. Yanghai Company notified Yangfan Company to make its vessels leave Yuya Saltworks Wharf on May 1, 2013 and sued Yangfan Company to the court of first instance on June 5 by reason of Yangfan Company’s occupying the Saltworks Wharf. The court of first instance accepted that case, of which the number was (2013) Qiong Hai Fa Shang Chu Zi No.123, Afterwards, that case was concluded in way of withdrawal by the Port Administration.

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4. Only Yangfan Company had berthed its vessels at the Saltworks Wharf since September, 2011 and the vessels occupy most of the berthing space, as a result, other vessels could not berth at the wharf. 5. Shengshi Company was non-state-owned enterprise. 6. Both Yanghai Company and Yangfan Company confirmed in the trial that the first-stage construction of Phoenix Square Park Yacht Wharf had been completed by the end of 2013 and opened for business. The court of first instance held that this case was arising from dispute over the right to use wharf. According to the facts having been found, Yuya Saltworks was the holder of the right to use the Saltworks Wharf, which had the right to legally possess and freely lease the Saltworks Wharf. So the allegation of Yangfan Company that it was powerless dispose that Yuya Saltworks leased the Saltworks Wharf on the ground that it was not the owner thereof cannot stand. Although Yuya Saltworks was a state-owned enterprise, Shengshi Company was a non-state-owned enterprise, without assessment, approval or record, Yuya Saltworks leased the Saltworks Wharf to Shengshi Company in violation of related provisions of the Interim Measures for the Administration of Assessment of State-owned Assets of Enterprises, which was published by the State-owned Assets Supervision and Administration Commission of the State Council, it was not a law or administrative regulation, so the Wharf Leasing Agreement concluded by the parties should not be void and null for regulation above. The allegation held by Yangfan Company that the acts that Yuya Saltworks leased the Saltworks Wharf and Shengshi Company leased the saltworks wharf were null and void cannot stand. In conclusion, Wharf Leasing Agreement made by Saya Saltworks and Shengshi Company, Wharf Management Contract made by Shengshi Company and Yanghai Company, Wharf Management Agreement made by Yanghai Company and Weida Company and that between Weida Company and the Port Administration, Saltworks Wharf Management Agreement made by Yanghai Company, Weida Company and the Port Administration were genuine intention of the parties concerned, which did not violate the compulsory provisions of laws and administrative regulations, so all of them were valid contracts. After Yanghai Company acquired the right to manage the Saltworks Wharf according to Wharf Management Contract signed by and between Yanghai Company and Shengshi Company, although Yanghai Company leased the Saltworks Wharf to Weida Company and Weida Company subleased the Saltworks Wharf to the Port Administration, the terms were both one year. Yanghai Company, Weida Company and the Port Administration agreed in Saltworks Wharf Management Agreement that after the requisition, the tripartite agreement had been terminated and Yanghai Company had the right to operate and manage the Saltworks Wharf. Therefore, both the term of Yanghai Company’s leasing and the term of freely using arranged by the government ended on October 1, 2013. After that, Yanghai Company had the right to legally operate and manage the Saltworks Wharf. So, the defence held by Yangfan Company that Yanghai Company had no right to manage and use the Saltworks Wharf because Yanghai Company is not the proper claimant cannot stand. Furthermore, the situation where the hulls of M.V.

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“Yangfan Star No.1” and M.V. “Yangfan Star No.2” were too large to berth at any other wharfs in Sanya City could not be the legal excuse or statutory exemption. The court of first instance did not admit it. The first-phase construction of the Phoenix Square Park Yacht Wharf had been completed by the end of 2013 and opened for business. The Finance Bureau also clearly expressed it would not grant subsidy to Yangfan Company for its vessels berthing at the Saltworks Wharf after October 2013. So the defence of Yangfan Company that it was the arrangement of the government that the vessels berthed at the Saltworks Wharf after October 2013 had no merit and the court of first instance did not adopt. In conclusion, the act that Yangfan Company berthed its vessels at the Saltworks Wharf, which was managed and operated by Yanghai Company, constituted an infringement. The claim alleged by Yanghai Company that Yangfan Company should stop infringement and indemnify its damages should be supported. But the infringement after the time ascertained by the effective judgment was an unascertained fact having not occurred, which was not proper to deal in this case. The court of first instance did not support this claim. According to the fact found in this case, during the term of free using arranged by the government namely from September 1, 2011 to September 30, 2013, the Finance Bureau granted the subsidy by RMB150, 000 per month for the fees for using the Saltworks Wharf. In addition, according to Wharf Management Agreement made by Yanghai Company, Weiada Company and the Port Administration, the average fee for each month for using the Saltworks Wharf was also RMB150,000 per month. The vessels still berthing at the Saltworks Wharf were owned by Yangfan Company, so the claim filed by Yanghai Company for the fee to occupy the wharf in amount of RMB150,000 per month should be supported. To sum up, according to Article 15 Paragraph 1 Sub-paragraph 1 and Sub-paragraph 6 of the Tort Liability Law of the People’s Republic of China, Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the court of first instance judged that Yangfan Company should stop infringement since the day of effectiveness of this judgment, namely the vessels could not berth at Yuya Saltworks Wharf located at the South Sea Road in Sanya City; Yangfan Company should pay the fees in amount of RMB150, 000 each month for occupying the wharf to Yanghai Company within ten days after the judgment came into effect (where the vessels owned by Yangfan Company left the Saltworks Wharf before this judgment came into effect, the calculation should start from October 2, 2013 and end by the actual leaving day; otherwise, Yangfan Company should pay the fees from October 2, 2013 to the day of the effectiveness of this judgment.); reject other claims filed by Yanghai Company. In addition, Yangfan Company should bear court acceptance fee of the case in amount of RMB7,125. Yangfan Company alleged in the appeal as follows: 1. The wharf involved had been approved to be the construction area for the marine fire station project of the Fire Service Department of Sanya Municipality Public Security Bureau by Sanya Municipality Government and Sanya

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Municipality Planning Bureau, so Yanghai Company had no right to request Yangfan Company to leave the wharf and pay the fees for occupying the wharf. There was no contractual or subordinate relationship between the Plaintiff and the Defendant, so there was no factual or legal basis that the court of first instance rendered Yangfan Company to pay the fees for occupying wharf, of which the standard was RMB150,000 per month, to Yanghai Company. The subsidy in amount of RMB150,000 granted by the Finance Bureau was a decision made by Sanya Municipality Government in consideration of the need of three enterprises including Yangfan Company at that time. There was no factual or legal basis that the court of first instance rendered Yangfan Company to pay RMB150,000 per month as the fees for occupying wharf to Yanghai Company on this basis. It was a serious violation of legal procedure and the judgment was seriously injustice that the court of first instance failed to add Yuya Saltworks as the third party of this case. It was serious violation of law and improper admission of evidence that the court of first instance admitted evidence 1, 2, 3, 10, 11 and 12 submitted by Yanghai Company to ascertain that Yanghai Company had acquired the right to operate and manage the Saltworks Wharf involved. The facts ascertained by the court of first instance were seriously incorrect and the judgment rendered by the court of first instance was seriously injustice. The court of first instance intentionally ran counter to the facts, twisted the law and favored Yanghai Company on purpose when rendering the judgment which were contrary to the fact and law. First, it was seriously wrong and injustice that the court of first instance ascertained that the deadline that Yangfan Company could freely use the Saltworks Wharf arranged by the Finance Bureau was September 30, 2013 (in the eighth line of the twelfth page of the original judgment); secondly it was seriously wrong and injustice that the court of first instance decided that the Finance Bureau granted the subsidy in amount RMB3,600,000 for the charges for using the Saltworks Wharf from September 1, 2011 to September 30, 2013 to the Port Administration; thirdly, it was seriously wrong and injustice that the court of first instance ascertained that Yanghai Company did not have the right to legally operate and manage the wharf involved until October 1, 2013, and it was an infringement that Yangfan Company berthed its vessels at the wharf involved after October 1, 2013. The original court incorrectly applied the laws and the judgment was seriously injustice. First, the court of first instance ascertained that the act of Yuya Saltworks leasing the wharf involved to Shengshi Company was legal and valid, and accordingly ascertained the act of Shengshi Company subleasing the wharf involved to Yanghai Company was also legal and valid. The application of laws was seriously wrong and the judgment was seriously injustice; secondly, the court of first instance ascertained that Yangfan Company’s act was an infringement, so Yangfan Company should indemnify Yanghai Company’s damages, and Yangfan Company was adjudged to pay the fees for occupying wharf on the basis of RMB150,000 per month. The application of laws was

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seriously wrong and the judgment was seriously injustice. In conclusion, Yangfan Company requested the court to reverse the judgment of first instance and overruled the action instituted by Yanghai Company. Yanghai Company defended in the second instance as follows: firstly, the claim filed by Yangfan Company that the wharf involved was used for the marine fire station project had no legal basis; secondly, it was legal and reasonable that the court of first instance adjudged that Yangfan Company pay RMB150,000 per month as the charge for occupying the wharf; thirdly, the result of this case had no interest with Yuya Saltworks, so it was right for the court of first instance did not add Yuya Saltworks as the third party in this case; fourthly, the admission of evidence by the court of first instance was not improper; finally, the facts were clearly ascertained and the laws were correctly applied by the court of first instance. Yanghai Company requested the court to dismiss Yangfan Company’s appeal and affirm the original judgment. Yangfan Company submitted the following three pieces of evidence in the second instance: evidence 1, a copy of Di Zi No.460200201200228 Construction Land Planning Permit issued by Sanya Municipality Planning Bureau on June 6, 2012; evidence 2, a copy of document issued by Sanya Municipality Planning Bureau on June 5, 2012, namely Opinion on Examination of the Land Used for the South Sea Road Marine Fire Station Project (San Gui Di Shen (2012) No.29); evidence 3, a copy of the general layout of the South Sea Road Marine Fire Station. These three pieces of evidence were all inquired by Yangfan Company from the Fire Department of Sanya Municipality Public Security Bureau, which could prove that the wharf involved had been used for construction by the Fire Department of Sanya Municipality Public Security Bureau and planned for construction of the South Sea Road Marine Fire Station. Upon cross-examination, as regard to three pieces of evidence submitted by Yangfan Company, Yanghai Company argued that these three pieces of evidence were all copies, so it questioned the authenticity thereof. Upon verification, the court holds that the three pieces of evidence above are copies and the location of the land showed in copy of San Gui Di Shen (2012) No.29 Document is controlled and planned land in the South Sea area numbered with NBH01-01-13, but the land in the San Tu Fang (2012) Zi No.006098 Certification of Land-use Right and House Ownership is numbered with 13-10-3-2. Yangfan Company cannot prove that No. NBH01-01-13 land and land No.13-10-3-2 land are one and the same. Therefore, these three pieces of evidence shall be inadmissible. In the hearing of second instance, Yangfan Company questioned the authenticity of Wharf Management Agreement made by Yanghai Company and Weida Company on May 20, 2011, Wharf Management Agreement made by the Weida Corporation and the Port Administration on June 25, 2011 and the Agreement on Management of the Saltworks Wharf made by Yanghai Company, Weida Company and the Port Administration on October 8, 2011. The court holds that although Yangfan Company questioned the authenticity of these three agreements, it cannot provide the evidence to prove the agreements are false, its claim cannot stand.

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As to the issue that Yangfan Company held the fact that the Finance Bureau granted subsidies for using the Saltworks Wharf in amount of RMB3,600,000 to the Port Administration from September 1, 2011 to September 30, 2013 was incorrectly found, to find this fact, the court collected 8 pieces of documentary evidence including 4 copies of Bank Receipts, 2 copies of Bank Slips (Collection) of Industrial and Commercial Bank of China, 2 copies of Special Voucher for the Payment System of the People’s Bank of China. Upon cross-examination, both parties had no objection to the authenticity, the legality or the relevancy thereof. According to the copies of the Bank Receipts, the Finance Bureau granted 4 sums of subsidies for 25 months to the Saltworks Wharf on the basis of RMB150,000 per month. The first, the second and the fourth installment each is RMB900,000, the third installment is RMB1,050,000, and the total amount is RMB3,750,000. In respect of the amount and time of the subsidies, after the court verified with the Finance Bureau, it can be ascertained that the Finance Bureau had granted RMB3,750,000 to the Port Administration from September 1, 2011 to September 30, 2013 and the Finance Bureau stopped after September 30, 2013. So, the fact found by the court of first instance that subsidy in amount of RMB3, 600, 000 granted by the Finance Bureau to the Port Administration from September 1, 2011 to September 30, 2013 is the charge for using the Saltworks Wharf is wrong and shall be corrected. Both parties had no objection to other facts found by the court of first instance, so the court hereby ascertains. The main issues in dispute of this case are as follows: 1. whether Yanghai Company has the right to request Yangfan Company to leave the wharf and pay the charge for occupying the wharf; 2. whether Yangfan Company shall pay the charge for occupying the wharf to Yanghai Company, of which standard is RMB150,000 per month; 3. whether there is a violation of legal procedure in the first instance. 1. Whether Yanghai Company has the right to request Yangfan Company to leave the wharf and pay for the charge for occupying the wharf. Yuya Saltworks has the right to use the land covering 14,160.20 square meters located at South Sea Road in Sanya City, of which the original land number is (12)-6. Afterwards, Sanya Municipality Government changed the middle-west part of the land near South Sea Road into reservation land for the municipality government, and issued a certificate numbered with San Tu Fang (2012) Zi No.006098 for the rest of the land covering 2,515.02 square meters on July 30, 2012, of which the land number is 13-10-3-2. The land is used for port or wharf, the east side is 130.86 meters from the coastline, the west side is connected to the South Sea Road and the east water front is 38.93 meters from the South Sea Road. The region of this land in the parcel maps conforms to the leased region under the Wharf Leasing Agreement made by Yuya Saltworks and Shengshi Company on September 15, 2010, since Yangfan Company had no objection to the authenticity thereof, it can be ascertained that the wharf which Shengshi Company leased from Yuya Saltworks is the wharf involved. Shengshi Company has the right to operate the wharf involved according to the Wharf Leasing Agreement. On October 27 and November 10, 2010, Shengshi

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Company and Yanghai Company entered into Wharf Management Contract and Managed Asset Transfer Agreement respectively. Yanghai Company, according to the two agreements above, acquired the right to operate the land (12)-6 of Yuya Saltworks (including front water of 130 meters) namely the wharf involved for fifteen years. Yangfan Company had no objection to the authenticity of the two agreements above. Wharf Management Agreement made by the Plaintiff and Weida Company on May 20, 2011 provides that Weida Company will take over the Saltworks Wharf from the Plaintiff and it would manage the wharf with a term of one year. The Wharf Management Agreement made by Weida Company and the Port Administration on June 25, 2011 provides the Port Administration will take over the Saltworks Wharf from Weida Corporation with a term of one year. Saltworks Wharf Management Agreement made by Yanghai Company, Weida Company and the Port Administration on October 8, 2011 provides the Port Administration paid the management fees directly; in the course of Sanya Municipality Government using the Saltworks Wharf, the Port Administration shall apply to the Municipality Government for subsidy and the subsidy will be granted to Yanghai Company; after the requisition, this agreement will be terminated and the Plaintiff could corporate and manage the wharf. Therefore, Yanghai Company is entitled to operate the wharf involved. Yangfan Company still occupies the wharf involved after the requisition on September 30, 2013 which had interfered with Yanghai Company managing and operating the wharf. Yanghai Company is entitled to request Yangfan Company to leave the wharf and pay the fees for occupying the wharf. 2. Whether Yangfan Company shall pay the fees for occupying the wharf to Yanghai Company of which standard is RMB150,000 per month. From September 1, 2011 to September 30, 2013, the Finance Bureau granted the subsidy for using the Saltworks Wharf with the standard of RMB150,000 per month. According to Wharf Management Agreement between Yanghai Company and Weida Company and Wharf Management Agreement between Weida Company and the Port Administration, the monthly average charge for using the Saltworks Wharf is also RMB150,000 per month. Only the vessels owned by Yangfan Company berthing at the Saltworks Wharf during the period when government granted subsidy, no evidence can prove the government granted subsidy for using wharf to three companies. It was lawful for Yanghai Company to request Yangfan Company to pay the charge for using wharf by the standard of the government’s subsidy. The judgment of first instance is not improper and shall be sustained. 3. Whether there is a violation of legal procedure in the first instance. Yuya Saltworks, as the holder of right to use the wharf involved, made Wharf Leasing Agreement with Shengshi Company to lease the Saltworks Wharf to Shengshi Company. Shengshi Company subleased the wharf to Yanghai Company. The sublease above is legal and valid. Yanghai Company has legitimate right to operate the wharf involved. Whether Yuya Saltworks participated in the action or not would not affect the trial of this case, it is not a

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party that must take part in the proceedings. That the court of first instance did not add Yuya Saltworks as third party to participate in action is proper in procedure of the trial. The claim made by Yangfan Company lacks factual and legal basis, and shall not be supported in accordance with the law. In conclusion, the determination of the facts is clear, the application of relevant laws is correct. According to Article 170 Paragraph 1 Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Sanya Yangfan Yacht Club Co., Ltd. shall bear court acceptance fee of second instance in amount of RMB7,125. The judgment is final. Presiding Judge: LI Ge Judge: ZHAO Yinghua Acting Judge: WANG Hao September 15, 2014 Clerk: HUANG Jiachen

Appendix: Relevant Laws Civil Procedure Law of the People’ s Republic of China Article 170 After trying a case on appeal, the people’s court of second instance shall, in the light of the following situations, dispose of it accordingly: (1) If in the original judgment the facts were clearly found and the law was correctly applied, the appeal shall be rejected by a judgment and the original judgment shall be sustained; (2) If in the original judgment the facts were incorrectly found or the laws were incorrect applied, the judgment shall be amended, set aside or altered according to the law; (3) If in the original judgment the basic facts were not clearly found, the judgment shall be reversed and the case remanded by an order to the original people’s court for a retrial, or the people’s court of second instance may amend the judgment after investigating and clarifying the facts; or (4) If in the original judgment there was serious violation of legal procedures such as omitting party or illegally rendering the judgment by default, the original judgment shall be set aside by a written order and the case remanded to the original people’s court for retrial. If the party files an appeal against the judgment rendered by the court originally tried the case in the retrial, the people’s court of second instance shall not remand the case again.

Shanghai Maritime Court Civil Judgment Shanghai Beyond International Logistics Co., Ltd. v. Kunshan Beile Pets Merchandise Co., Ltd. (2013) Hu Hai Fa Shang Chu Zi No. 1399 Related Case(s) None. Cause of Action 223. Dispute over freight forwarding contract on the sea or sea-connected waters. Headnote freight forwarder held not liable to pay additional port fees incurred by cargo-owner at the port of destination, as those fees were not incurred due to the forwarder’s actions. Summary the Plaintiff claimed that a freight forwarder was liable for extra port fees at the port of destination. The Plaintiff also requested the court to award lawyer’s fees. The Defendant claimed that the fees were incurred because of the actions of the Plaintiff and therefore it should not be liable for them. The court held that there was no evidence that the fees were incurred due to the actions of the Plaintiff and that the Defendant should have paid them under the freight forwarding agreement. The court did not award lawyer’s fees.

Judgment The Plaintiff: Shanghai Beyond International Logistics Co., Ltd. Legal representative: REN Weidong, general manager. Agent ad litem: REN Yuwei, lawyer of Shanghai Rolmax Law Firm. The Defendant: Kunshan Beile Pets Merchandise Co., Ltd. Legal representative: WANG Weichao, general manager. The Plaintiff, Shanghai Beyond International Logistics Co., filed this case regarding a dispute over marine freight forwarding contract against the Defendant, Kunshan Beile Pets Merchandise Co., Ltd., on September 26, 2013. The court, after © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_43

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accepting the case on the same day, applied summary procedure and held a hearing in public on November 6, 2013. REN Yuwei, agent ad litem of the Plaintiff, and WANG Weichao, legal representative of the Defendant, appeared in court to attend the hearing. Now the case has been concluded. The Plaintiff claimed that on April 2013, the Defendant entrusted the Plaintiff a consignment of LCL to the United States. The Plaintiff fulfilled its obligation of freight forwarding after accepting the entrustment, the goods were shipped on April 13 (bill of lading No. KHLSA03539, name of vessel M.V. CSCL ZEEBRUGGE, voyage No. 0077E). Before the goods arrived at the destination, the Defendant confirmed the freight and issued a payment guarantee on April 22. Promising to pay all the fees to the Plaintiff before May 13. But when the consignee took delivery of the goods, the Defendant refused to pay the Plaintiff the freight forwarding fees. Therefore, the Plaintiff requested the court to judge that: 1. The Defendant should pay the defaulted freight forwarding fees in sum of 8400 yuan together with interest (the interest should be calculated from May 14, 2013 to the date that this judgment came into effect at the one-year loan interest rate as set by the People’s Bank of China); 2. The Defendant should compensate the lawyer’s fee of the Plaintiff in sum of 5000 yuan. The Defendant had no objection to the freight forwarding relationship between the Plaintiff and the Defendant as well as it agreed that the freight forwarding fees were 8400 yuan. However, the Defendant argues that there was an extra expense that occurred in the port of destination, in the sum of USD626.93 (3830 yuan). The Defendant had to pay the expense in order to evade increasing the loss, so it contended that this amount should be deducted from the total payment. The Plaintiff claimed that the Defendant should pay 4570 yuan. The request of the Plaintiff’s lawyer fee had no factual or legal basis, because there was no agreement on lawyer fee in the freight forwarding contract. The Plaintiff’s claim that the clause regarding payment guarantee stipulated that all legal responsibilities and consequences should be born by the Defendant was not clear, and thus it could not be construed liberally to hold them liable for lawyer’s fees. In addition, the lawyer’s fees was not a necessary expense for the Plaintiff to claim. The Plaintiff’s claim that according to the Standard of Governmental Guided-Price of Lawyer Service Charges of Shanghai, the lawyer’s fees in amount of 5000 yuan was too high. To sum up, the Defendant argued that the amount it should pay to the Plaintiff was 4570 yuan. According to the allegations of the two parties, it can be found that there is no dispute over the facts regarding to the freight forwarding relationship. The Defendant had no objection to the evidence submitted by the Plaintiff regarding the letter of guarantee and the bill of lading which proves that the Plaintiff fulfilled its obligation under the freight forwarding contract. Therefore, the court ascertains the probative force of this evidence and confirms the fact that the Defendant entrusted the Plaintiff to conduct freight forwarding of twenty-three boxes of dog life vests from Shanghai, China to Los Angeles, United States. The Plaintiff fulfilled the

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obligation of the aforesaid contract and the goods arrived at the destination and were delivered to the consignee. The issues in this case are that: 1. Whether the extra expense, in amount of USD626.93, at port of destination alleged by the Defendant actually occurred and whether it should be deducted from the freight forwarding fees in amount of 8400 yuan alleged by the Plaintiff; 2. Whether the Plaintiff’s lawyer’s fee should be covered by the Defendant. In respect to the first dispute: The Plaintiff submitted the fee confirmation and the payment guarantee in order to prove that the Defendant confirmed and promised to pay the freight forwarding fees that are claimed by the Plaintiff. The Defendant had no objection to the authenticity of the evidence but argues that the Plaintiff told the Defendant the amount in the fee confirmation covered all expenses, but it charged the consignee at the port of destination. The Defendant submitted the receipt of freight forwarding at the port of destination, the customs declaration papers, the letter sent by the Plaintiff’s lawyer to the Defendant, payment statements from the Defendant to the consignee via electronic transaction system PayPal. Additionally, the Defendant submitted e-mails from Olga Curtis, the consignee, to the Defendant in order to prove that the Plaintiff was charged the fee recorded and to prove that it was charged an additional USD509.95 at the port of destination. The Defendant had actually paid the consignee USD350.00, and the failure of ISF information declaration was caused by the Plaintiff’s agent at the port of destination. The Plaintiff had no objection to the authenticity of lawyer’s letter but held that the letter was based on the correspondence between the two parties before the Plaintiff filed this action. The letter contained information about the events that occurred at the port of destination rather than affirmation of the additional expenses. The Plaintiff argued that other evidence submitted by the Defendant did not meet the formal requirements for evidence to be admitted and had not been notarized. The sender of the e-mails could not be verified and these e-mails did not show any information that was relevant to the case. There was no payment receipt affirmed by any platform or financial institution attached to the electronic payment statement. The facts alleged by the Defendant did not match with what the Plaintiff knew. The court holds that the evidence shall be admitted because the Defendant did not object to the authenticity of the fee confirmation and the payment guarantee. These documents were signed by the Defendant on April 22, 2013 and the amount confirmed by the Defendant was 8400 yuan, thus the court confirms its probative force. The receipt of freight forwarding fees at the port of destination and the customs declaration paper, the payment statement from the Defendant to the consignee via electronic transaction system, the e-mails from the consignee to the Defendant submitted by the Defendant were all digital documents or printouts, the Plaintiff did not confirm their authenticity. Also, the Defendant did not present digital documents and data that went through proper procedure therefore, the court

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does not affirm the probative force. It can be found from the content of this evidence, the fees include import tariff, security, storage charges occurring at the port of destination, which are not the same fees recorded in the fee confirmation signed by the Defendant. The charger is not the Plaintiff or its agent at destination port, thus this evidence cannot prove that the Plaintiff recharged freight forwarding fees from the Defendant. While the e-mails from the consignee to the Defendant merely refer that the consignee faxed documents to “them” twice but got no reply, and after inquiring via e-mail again, “they” replied “who is this sent to?”. The e-mails do not show any information or content relating to “them”. Under the circumstances that without any ancillary evidence to prove who “they” are and the content of the fax sent by the consignee, the e-mails from the consignee to the Defendant cannot prove that the Defendant has declared ISF information to the Plaintiff or his agent at the port of destination or that the Plaintiff has fault. The Plaintiff confirmed the authenticity of the lawyer’s letter from the Plaintiff to the Defendant submitted by the Defendant, therefore the court affirms its effect. Based on verification of the evidence above and combined with the court’s investigation, the court ascertains the relating facts with respect to the dispute as follows: after the goods involved were shipped, the Defendant sealed on the fee confirmation on April 22 and the legal representative of the Defendant signed it, confirming the goods. The Defendant incurred an agency lump sum fee amounting to RMB7,400, an agency inspection fee in the amount of RMB785, a commission fee in sum of RMB200, and an agency AMS (America Manifest System) alteration fee in the sum of RMB252, and the total amount thereof was RMB8,637. In the trial, the Plaintiff voluntarily deducted part amount, both the Plaintiff and the Defendant affirmed the total payment in the fee confirmation was RMB8,400. On the same day, the Defendant signed on the payment guarantee, confirmed the fee incurred from the goods involved in the case was RMB8,400, and guaranteed to pay it off before May 13. The Defendant confirmed the goods arrived at the port of destination on April 27, 2013, extra fees alleged by the Defendant in sum of USD626.93 at destination port occurred after the goods arrived at the port of destination and before the consignee received the goods. On July 25, 2013, the authorized agent of the Plaintiff sent an e-mail to notify the Defendant the items and causation of the destination port fees and held that the trade term was DDU and the declaration of import ISF information should be conducted by the consignee, thus the import tariff and the destination port fees should not be born by the Defendant. The Plaintiff did not have fault at freight forwarding and hoped the Defendant to pay off before August 1, 2013. Regarding this dispute, the court holds that both parties have different understanding as to the scope of the fees that the Plaintiff claimed against the Defendant. The Plaintiff argued that the extra destination port fees in the bill of defense of the Defendant did not include the fees claimed by the Plaintiff and it was caused by consignee’s own fault, which shall not be born by the Defendant; moreover, this fee was not charged by the Plaintiff, the Defendant also failed to produce evidence to prove that it had paid the money. While it is the fees confirmed by the Defendant in the fee confirmation that the Plaintiff claimed for, the extra destination port fees

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mentioned by the Defendant are irrelevant to this case. The Defendant argued that the fees claimed by the Plaintiff included all the expenses incurring until the goods were delivered to the consignee by DDU such as fees of destination port clearance, import information declaration etc., thus any expense at the port of destination should be covered and the amount paid by Defendant, if any, should be deducted from the amount claimed by the Plaintiff. The court holds that the contract is the source of the rights and obligations of both parties, where there is no agreement or such agreement is ambiguous, such rights and obligations shall be determined in accordance with the evidence involved in the case. In this case, in order to determine whether the fees claimed by the Plaintiff had included extra destination port fees, it shall base on the agreement between the Plaintiff and the Defendant with respect to the freight forwarding matters and the fees. Although, both the Plaintiff and the Defendant do not submit any evidence to prove the specific items of freight forwarding contract. Specifically, whether the destination port clearance fee or the import information declaration fee is included, as well as whether the money collected by the Plaintiff from Defendant includes extra destination port fees. But the effective evidence in this case proves that the Defendant has paid the Plaintiff the agency lump sum fee, in the sum of ¥7400, the agency inspection fee in the sum of RMB785, the commission fee in the sum of RMB200 and the agency AMS (America Manifest System) alteration fee in the sum of RMB252, and the total amount paid is RMB8,400. It suggests that the RMB8,400 is consisted of four items, namely the agency lump sum fee, the agency inspection fee, the commission and the AMS alteration fee, but the destination port clearance fee and the import information declaration fee are excluded. Moreover, the Defendant failed to provide effective evidence to prove that the total amount paid and the specific items of the destination port fees, it also failed to prove that it had paid the destination port fees to the Plaintiff and the amount. The Defendant even failed to prove that the destination port fees was charged by the Plaintiff. Therefore the Plaintiff was entitled to require the Defendant to pay the freight forwarding fees it confirmed in the sum of RMB8,400. The Plaintiff also claimed for the interest from the second day from the date that Defendant confirmed to pay, namely May 14, 2013. This allegation had legal basis, but bearing the interest at the rate of loan interest lacks factual basis. The rate shall be calculated as per the deposit interest of People’s Bank of China over the same period. The Plaintiff submitted the retaining agreement, the invoice of lawyer service fee, and the payment receipt in order to prove that it hired a lawyer and paid the lawyer service fee. The Defendant had no objection to the authenticity of the evidence, but alleged that neither had the Plaintiff confirmed the lawyer fee through the fee confirmation, nor had both parties come to an agreement in the contract, thus such expense was irrelevant with the case. Moreover, according to the related standard of Shanghai, the Plaintiff’s allegation was too high. The court holds that since the Defendant had no objection to the authenticity of the evidence, then the court also ascertains this evidence. As well as the fact that the Plaintiff hired a lawyer to act on behalf of it in this case and paid lawyer service fee in amount of RMB5,000.

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The court holds that the lawyer service fee is not necessary for the Plaintiff to protect its rights through lawsuit. Also, the lawyer service fee is not reasonable and there is foreseeable loss in case of the Defendant’s default when the freight forwarding contract was concluded. Although the Defendant referred that if the Defendant failed to make full payment, it would bear all legal responsibilities and consequences therefrom (including but not limited to any expenses to deal with such matter paid by the Plaintiff) in the payment guarantee with his seal. But “any expenses” referred in the payment guarantee shall be necessary and reasonable, and shall comply with the above reasonable and foreseeable rule on default loss. Therefore the Plaintiff’s allegation of the lawyer service fee lacks legal basis, the court will not grant the lawyer’s fee. To sum up, the Defendant failed to prove that the Plaintiff charged the destination port fees besides the fees it claimed, in the opposite, the Defendant confirmed its obligation to pay the freight forwarding fees in sum of RMB8,400 in the fee confirmation sealed by itself and the payment guarantee. Therefore the Defendant shall continue to perform and compensate the interest. The Plaintiff’s allegation of the lawyer service fee lacks legal basis, it shall not be ascertained. According to Article 60 Paragraph 1, Article107, Article 113 Paragraph 1 of the Contract Law of the People’s Republic of China, Article 9 of the Provisions of Supreme People’s Court on Several Issues in the Trial of Cases concerning Disputes over Marine Freight Forwarding, and Article 64 Paragraph 1 of the Civil Procedure Law of People’s Republic of China, the judgment is as follows: 1. The Defendant, Kunshan Beile Pets Merchandise Co., Ltd., shall pay the frieght forwarding fee in the sum of RMB8,400 and the interest thereon to the Plaintiff, Shanghai Beyond International Logistics Co., Ltd., within ten days after the judgment comes into effect (the interest shall be calculated from May 14, 2013 to the date of this judgment taking effect at the deposit rate over the same period of the People’s Bank of China). 2. Reject other claims of the Plaintiff Shanghai Beyond International Logistics Co., Ltd. Where the Defendant, Kunshan Beile Pets Merchandise Co., Ltd., fails to perform the obligation of paying above-mentioned amounts within the period prescribed herein, such party shall, in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China, double pay the interest for the period of delayed performance. Court acceptance fee in amount of RMB135, shall be collected half namely RMB67.50 for applying summary procedure, RMB25.19 shall be born by the Plaintiff Shanghai Beyond International Logistics Co., Ltd., and RMB42.31 shall be born by the Defendant Kunshan Beile Pets Merchandise Co., Ltd.

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In event of dissatisfaction with this judgment, both parties may, within 15 days upon service of this Judgment, submit a bill of appeal to the court, with duplicates being submitted in terms of the number of the other parties, to lodge an appeal to the Shanghai High People’s Court. Acting Judge: LIN Yan November 13, 2013 Clerk: ZHANG Yan

Shanghai Maritime Court Civil Judgment Shanghai Foreign Economic & Trade International Freight Forwarding Co., Ltd. v. Zhongxing Telecommunication Equipment Corporation (2013) Hu Hai Fa Shang Chu Zi No.1567 Related Case(s) None. Cause of Action 223. Dispute over freight forwarding contract on the sea or sea-connected waters. Headnote Freight forwarder who booked and paid for ocean freight for carriage of goods held to be not entitled to recover fees and costs from supposed shipper, because supposed employees who had requested the forwarding services were in fact acting for a different company that was formerly a subsidiary of the supposed shipper. Summary The Plaintiff alleged that the Defendant entrusted it to perform freight forwarding services for the shipment of storage batteries from the port of Shanghai to Matadi, Democratic Republic of the Congo. The Plaintiff paid freight to the ocean carrier in advance, but the Defendant did not reimburse the Plaintiff, despite several requests for payment. The Defendant argued that there was no freight forwarding contract relationship established between it and the Plaintiff. Held - that the Plaintiff’s allegation that there was a contractual relationship was not valid. The Plaintiff failed to provide adequate evidence that the people who had requested it to perform the forwarding services were acting on behalf of the Defendant with agency authority to bind the Defendant to contracts.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_44

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Judgment The Plaintiff: Shanghai Foreign Economic & Trade International Freight Forwarding Co., Ltd. Legal representative: LU Wan. Agent ad litem: LIU Peiguo, lawyer of Shanghai Tongting Law Firm. Agent ad litem: JIN Biao, employee. The Defendant: Zhongxing Telecommunication Equipment Corporation Legal representative: HOU Weigui Agent ad litem: TANG Dandan, employee. Agent ad litem: XIN Yilong, employee. With respect to the case arising from dispute over maritime freight forwarding contract between the Plaintiff, Shanghai Foreign Economic & Trade International Freight Forwarding Co., Ltd., against the Defendant, Zhongxing Telecommunication Equipment Corporation, on November 11, 2013, after accepting the case on November 4, 2013, the court decided the summary procedure should apply. The court held the first hearing of this case in public on January 15, 2014. LIU Peiguo and JIN Biao, agents ad litem of the Plaintiff, and XIN Yilong, agent ad litem of the Defendant, appeared in court to attend the hearing. Because of complexity of the case, the court ruled this case be tried under general procedure on January 22, 2014. The court held the second hearing of this case in public on April 8, 2014, LIU Peiguo, agent ad litem of the Plaintiff, and TANG Dandan, agent ad litem of the Defendant, appeared in court to attend the hearing. Now the case has been concluded. The Plaintiff alleged that the Defendant entrusted it to perform freight forwarding services for a shipment of storage batteries from port of Shanghai to Matadi, Congo through LIU Yuhan and QIN Chuanchuan. The goods were shipped in two consignments respectively on October 28 and November 10 from Port of Shanghai and arrived at the port of destination safely. The Plaintiff paid the freights in amount of USD28,300 in advance, but after several collection calls, the Defendant still did not pay the sum to the Plaintiff. Therefore, the Plaintiff requested the court to judge that the Defendant should pay the freight forwarding fees in amount of USD28,300 and interest thereon (the interest should be calculated at the bank loan interest rate over the same period from November 11, 2011 to the day of effectiveness of the judgment) and bear court acceptance fee. The Defendant argued that there was no freight forwarding contract relationship established between it and the Plaintiff, the claims of the Plaintiff for freight forwarding fees had no factual and legal basis, and it requested the court to reject the claims of the Plaintiff.

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The Plaintiff submitted the following evidence: 1. Emails related to freight forwarding services between the Plaintiff and the Defendant, to prove that the Defendant inquired the quotation and confirmed the fees through QIN Chuanchuan, and entrusted the Plaintiff to conduct freight forwarding services through LIU Yuhan. Both the postfixes of the domain name of mailboxes of QIN Chuanchuan and LIU Yuhan were @zte.com.cn; the addresses of them in the emails were the same namely Congo Chine Telecom Investment Management Department, Floor 21, Zhongxing Telecommunication Building, 55 South of Keji Road, Shenzhen; and the telephone numbers of them were respectively 0755-26775932 and 0755-2677389. 2. Two bills of lading and three custom declaration forms, to prove the Plaintiff completed the freight forwarding services involved. 3. Four freight invoices and two payment vouchers, to prove that the Plaintiff paid the freight related to the freight forwarding services involved in advance. 4. Two evidence exchange records and a hearing record of (2013) Hu Hai Fa Shang Chu Zi No.581 case, to prove authenticity of the emails in evidence 1. 5. Inquiry form of commercial subjects registration and record information of Shenzhen Market Supervision Administration, to prove that Congo Chine Telecom S.A.R.L (Congo) was neither a Chinese legal person, nor an office set up in China, and it was not a legal employer. 6. A list of social insurance issued by Shenzhen Social Insurance Fund Administration, to prove that the Defendant paid social insurance for QIN Chuanchuan from August to December 2011 and QIN Chuanchuan was an employee of the Defendant during the period when the freight forwarding services involved were being conducted. 7. A certificate issued by China Telecom Co., Ltd. Shenzhen Branch, to prove the office telephone number of LIU Yuhan (0755-26775932) and that of QIN Chuanchuan (0755-26775932) were registered with the name of the Defendant. 8. Emails sent by QIN Chuanchuan to the employee of the Plaintiff to inquiry the situation of goods’ arrival at warehouse, to prove that QIN Chuanchuan was fully engaged in the freight forwarding services involved. 9. Emails between the Plaintiff and LIU Yuhan regarding confirmation of the bill of lading and issuance of invoices in the freight forwarding services involved, to prove that LIU Yuhan confirmed the bill of lading of the goods involved and asked the Plaintiff to issue invoices. 10. Three invoices of the freight forwarding fees involved, of which the total amount was USD31,648, to prove that the Plaintiff issued invoices as requested by LIU Yuhan and the invoices were not for foreign companies. 11. Emails regarding the quotation of freight forwarder services involved sent by LIU Yuhan to the Plaintiff, in which LIU Yuhan alleged his company had a batch of batteries to be shipped to Matadi, to prove that the Defendant entrusted the Plaintiff to conduct the freight forwarding services involved through LIU Yuhan.

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The Defendant disaffirmed evidence 1-3 and 5-11 submitted by the Plaintiff and held that evidence 1 was used to prove the commission relationship between the Plaintiff and Shanghai Zhongxing Pylontech Company Energy Technology Co., Ltd. (hereinafter referred to as “Pylontech Company”). It was insufficient that the Plaintiff presumed that LIU Yuhan and QIN Chuanchuan were entitled to represent the Defendant only based on the place of office and postfix of the domain name of mailbox, and they were not employees of the Defendant; evidence 2 showed the parties of the goods purchase and sale contract were Pylontech Company and Congo Chine Telecom S.A.R.L (hereinafter referred to as “Congo Chine Telecom”), and in the bills of lading involved, the shipper was Pylontech Company and the consignee was Congo Chine Telecom; evidence 6 could not serve as an evidence to prove the labor relationship between QIN Chuanchuan and the Defendant, in addition, QIN Chuanchuan was not involved in the consultation of the freight forwarding services involved; the time of issuance of evidence 7 was not clear and it could not prove the two telephone numbers were used by the Defendant all along; the invoices in evidence 10 showed the payee thereof was Congo Chine Telecom, which was irrelevant to the Defendant. The Defendant confirmed the authenticity of evidence 4, but it held it proved the trade and the transportation of the goods involved was irrelevant to it. The court ascertains that evidence 1, 8, 9 and 11 are emails regarding the freight forwarding services involved between all parties concerned and the emails in evidence 1 were sent or copied to MAO Xiaoxia, an employee of Pylontech Company. During the period when the court was trying (2013) Hu Hai Fa Shang Chu Zi No.581 case of dispute over freight forwarding contract filed by the Plaintiff against Pylontech Company, Pylontech Company confirmed the authenticity of these emails; the emails of November 8 and November 10, 2011 in evidence 9 sent by LIU Yuhan to the Plaintiff were consistent with evidence 1, therefore the court ascertains the effect of evidence of the above-mentioned part of evidence 1 and evidence 9, but the effect of evidence of other part of evidence 8 and 9, and evidence 11 cannot be ascertained; evidence 2, 3 and 10 were documents and the invoices related to the freight forwarding services, the contents to be proved by evidence 2 and 10 had been confirmed by Pylontech Company in the hearing of (2013) Hu Hai Fa Shang Chu Zi No.581 case, evidence 3 has an original copy which can prove that Plaintiff paid the freights for goods involved in advance, on the basis of above, the court ascertains the effect of evidence and the effect of evidence of evidence 2, 3 and 10; evidence 4 came from the documents of (2013) Hu Hai Fa Shang Chu Zi No.581 case, it can prove the fact that the Plaintiff instituted an lawsuit against Pylontech Company in terms of the facts of this case, and Pylontech Company confirmed relevant evidence and facts related to the freight forwarding services involved, therefore the court ascertains the effect of evidence and the effect of evidence thereof; the authenticity of evidence 5 cannot be ascertained and it is Congo Chine Telecom S.A.R.L (Congo) the Plaintiff inquired, which is different with Congo Chine Telecom S.A.R.L, so the court does not ascertain the effect of evidence and the effect of evidence thereof; evidence 6 and 7 were obtained by the Plaintiff with an investigation order issued by the court,

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evidence 6 can prove that the Defendant paid social insurance for QIN Chuanchuan from August to December, 2011 and evidence 7 can prove that relevant telephone numbers were registered with the name of the Defendant, the court ascertains the effect of evidence and the effect of evidence of evidence 6 and 7. The Defendant submitted the following evidence to support its arguments: labor contracts and contract termination agreements signed between Congo Chine Telecom and LIU Yuhan and QIN Chuanchuan respectively, to prove that both of them were employees of Congo Chine Telecom rather than employees of the Defendant when the freight forwarding services involved were being carried out. The Plaintiff did not confirm the evidence submitted by the Defendant and held that Congo Chine Telecom was foreign legal person, it went against relevant provisions of the State Council and the government regulations of Shenzhen City that Congo Chine Telecom employed Chinese employees directly, so the contracts were illegal and void. The Defendant paid social insurance for QIN Chuanchuan, so a labor contract relationship was established between QIN Chuanchuan and the Defendant, and it also applied to LIU Yuhan. The court holds that the authenticity of the evidence submitted by the Defendant cannot be ascertained, so the court does not ascertain the effect of evidence and the probative force thereof. Based on the ascertainment opinions above mentioned and the investigation in the hearing, the court finds out the following facts: in October 2011, the Plaintiff carried out freight forwarding services for a shipment of storage batteries from Shanghai, China to Matadi, Congo under the instruction of LIU Yuhan via email (from [email protected]). The goods were respectively loaded on board in two consignments on October 28 and November 10, the carrier issued bills of lading numbered with SGHZA7829 and MH0090825, the shipper of the two bills of lading was Pylontech Company and the consignee thereof was Congo Chine Telecom, and the trade terms in the customs declaration forms was FOB. The Plaintiff paid two payments of freights in amount of USD28,300 in advance. The Plaintiff issued three invoices in terms of the freight forwarding services involved, the payer was Congo Chine Telecom and the total amount was USD31,648. The emails related to the freight forwarding services involved were all copied to QIN Chuanchuan (to [email protected]). During the trial of this case, the Plaintiff applied with the court for an investigation order on December 24, 2014 to investigate the owner of telephone numbers 0755-26775389 and 0755-26775932 and the record of social insurance of QIN Chuanchuan and LIU Yuhan from August to December 2011. After investigation, it was found both the telephone numbers in the emails of QIN Chuanchuan and LIU Yuhan were registered with the name of the Defendant, and the Defendant paid social insurance for QIN Chuanchuan, but the record of social insurance of LIU Yuhan could not be reached. The Defendant confirmed the postfixes (@zte.com.cn) of the domain name of the mailboxes of QIN Chuanchuan and LIU Yuhan were same to that of the enterprise mailbox of the Defendant and Zhongxing Telecommunication Building,

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55 South of Keji Road, Shenzhen, which appeared in the address of QIN Chuanchuan and LIU Yuhan, was possessed by the Defendant. The court also finds that the Plaintiff brought a lawsuit in terms of the freight forwarding services involved against Pylontech Company to the court on May 6, 2013. The Plaintiff alleged that it was entrusted by Pylontech Company to conduct the freight forwarding services involved and it requested the court to rule the Defendant pay the freight forwarding fees in amount of USD31,648 and the interest thereon. In the litigation, the Plaintiff altered its claim to a payment in amount RMB23,000 from Pylontech Company. On July 9, 2013, the Plaintiff concluded a settlement agreement with Pylontech Company, in which Pylontech Company agreed to pay RMB21,724 to the Plaintiff. The Plaintiff confirmed that the initial claimed amount namely USD31,648 included freights, freight forwarding fees and other expenses, the sum Pylontech Company agreed to pay were expenses except the freights. It is found out that the goods were sold to Congo Chine Telecom by Pylontech Company, and Congo Chine Telecom was a company constructed according to the laws of Congo. On December 29, 2012, the Defendant made an announcement said that it sold 51% of the shares of Congo Chine Telecom and the transfer of equity was completed on October 21, 2011. This case arose from dispute over freight forwarding contract. The Plaintiff alleged that there was a freight forwarding contract relationship between the Plaintiff and the Defendant, so it should bear the burden of proof to prove that the freight forwarding services involved it carried out were entrusted by the Defendant. The Plaintiff alleged that LIU Yuhan and QIN Chuanchuan were employees of the Defendant, and their performances were acts on behalf of the Defendant. Even if they were not employees of the Defendant, their acts constituted apparent agency. In addition, when the freight forwarding services involved were being carried out, Congo Chine Telecom were controlled by the Defendant and all the business activities related to the goods involved conducted by Congo Chine Telecom were managed by the Investment Management Department of the Defendant, thus the Defendant should pay the freight forwarding fees involved. In respect of whether the instructions of the freight forwarding services involved were acts that LIU Yuhan and QIN Chuanchuan performed on behalf of the Defendant, the court holds that: firstly, the evidence available suggest that LIU Yuhan gave instructions in terms of the freight forwarding services involved to the Plaintiff via emails, although the emails were all copied to QIN Chuanchuan, he did not entrust the Plaintiff or give any instruction thereto, he only participated in the contact for the freight forwarding services involved, therefore the court holds that Plaintiff carried out the freight forwarding services according to the instructions of LIU Yuhan; secondly, the Plaintiff did not submit any evidence to prove LIU Yuhan is employee of the Defendant and the presumption is only based on the postfix of mailbox, telephone numbers and place of office to affirm LIU Yuhan is employee of the Defendant is insufficient. The Defendant argued its concerned company could use its mailbox with the same domain name, telephone numbers

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and place of office. Therefore, the Plaintiff alleged that LIU Yuhan was employee of the Defendant cannot be supported. In respect of whether the acts of LIU Yuhan and QIN Chuanchuan constitute apparent agency, the court holds that: firstly, there was no business relationship between the Plaintiff and the Defendant before the business involved occurred, the Plaintiff alleged in the hearing that it began to do business with LIU Yuhan and QIN Chuanchuan upon the introduction of Pylontech Company. The Plaintiff had no contact with LIU Yuhan and QIN Chuanchuan before the business involved occurred and did not verify the identification of them, nor did it collect information to prove the rechtsschein of power to delegate the Defendant. The telephone numbers and the fact that the Defendant paid social insurance for QIN Chuanchuan cannot deemed as evidence to prove the subjective state of the Plaintiff at the time it accepted the commission. Therefore, it was out of subjective credulity that the Plaintiff believed that LIU Yuhan and QIN Chuanchuan had agency power of the Defendant; secondly, there was no letter of commission in the freight forwarding services involved, LIU Yuhan and QIN Chuanchuan did not show letter of commission to the Plaintiff, and the name of the Defendant had never showed in all the emails or relevant documents related to the business involved. The Plaintiff did not provide any evidence that could prove LIU Yuhan and QIN Chuanchuan were employees of the Defendant. The payer on the invoices issued by the Plaintiff under instruction is Congo Chine Telecom instead of the Defendant, and the trade and the transportation of the goods involved are irrelevant to the Defendant. On the basis of above, the acts of LIU Yuhan and QIN Chuanchuan are insufficient to form rechtsschein of agency power. Therefore, the allegation of the Plaintiff that LIU Yuhan and QIN Chuanchuan were employees of the Defendant and they had the agency power, and at least the acts thereof constituted apparent agency lack sufficient evidence, so the court cannot support. In respect to whether the business activities conducted by Congo Chine Telecom were managed by the Investment Management Department of the Defendant and whether the Defendant should bear the freight forwarding fees involved, the court holds that the evidence submitted by the Plaintiff cannot prove that the business activities were in the charge of the Investment Management Department of the Defendant; even if they were in the charge of the Investment Management Department, the business activities were conducted with the name of Congo Chine Telecom and the Plaintiff did not provide any evidence to prove the Defendant should be liable for the business activities conducted by the company controlled by it which was set up according to the laws of Congo, the court does not support the claim of the Plaintiff. In summary, the allegation of the Plaintiff that a freight forwarding contract was established between it and the Defendant, and the Defendant should pay the freight forwarding fees cannot stand. According to Article 49 of the Contract Law of the People’s Republic of China, Article 3 of the Provisions of the Supreme People’s Court on Several Issues concerning the Trial of Cases of Disputes over Marine Freight Forwarding, Article 64 Paragraph 1 of the Civil Procedure Law of the

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People’s Republic of China, Article 5 of Several Provisions of the Supreme People’s Court on Civil Evidence, the judgment is as follows: Reject the claims of the Plaintiff, Shanghai Foreign Economic & Trade International Freight Forwarding Co., Ltd. Court acceptance fee in amount of RMB4,262, shall be born by the Plaintiff, Shanghai Foreign Economic & Trade International Freight Forwarding Co., Ltd. In case of dissatisfaction with this judgment, any party may within 15 days upon service of this judgment submit a statement of appeal to the court, together with copies in accordance with the number of the opposite parties, to lodge an appeal to the Shanghai High People’s Court. Presiding Judge: KE Yonghong Judge: LI Jian People’s Assessor: LI Youwen April 24, 2014 Clerk: LU Peiyan

Shanghai Maritime Court Civil Judgment Shanghai Jinchang Dredging Engineering Co., Ltd. v. Zhejiang Tianhai Marine Economic & Technology Development Co., Ltd. (2012) Hu Hai Fa Shang Chu Zi No.1205 Related Case(s) This is the judgment of first instance, and the judgment of second instance and the ruling of retrial are on page 891 and page 897 respectively. Cause of Action 213(2). Dispute over bareboat charter party. Headnote Bareboat charterer held liable to pay outstanding hire as required by termination agreement, notwithstanding vessel’s unseaworthiness and owner’s breach of confidentiality agreement in charter party. Summary The Defendant and the Plaintiff entered into a bareboat charter party for 3-year term, and 1-year management agreement. However, six months into the contract, the Plaintiff’s vessel stopped working, which led to the Plaintiff and the Defendant entering into an agreement to terminate the charter party and management agreement. Within the termination agreement, the Defendant agreed to pay outstanding hire and management fees, albeit at a reduced rate because of the situation with the Plaintiff’s vessel. After execution of the termination agreement, the Defendant still refused to pay the sum agreed upon. The Plaintiff sued the Defendant, which asserted that it should not have to pay the sum agreed upon because the Plaintiff had deliberately concealed the fact that its vessel was unseaworthy, and had breached the confidentiality portion of the bareboat charter, with the result that the termination agreement was conducted in bad faith. Held - that both the breakdown of the vessel and the alleged breach of the confidentiality agreement occurred before the parties negotiated the termination agreement. Therefore, the Defendant knew or should have known of the situation and should have bargained to reduce the fees accordingly. Furthermore, the court found that since the vessel worked for the first six months of the contract, the Plaintiff had provided a seaworthy vessel at the point of delivery. The termination agreement was affirmed, and the Defendant was to pay the Plaintiff the amount stipulated in such agreement (RMB15,401,466), as well as liquidated damages for failure of payment.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_45

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Judgment The Plaintiff: Shanghai Jinchang Dredging Engineering Co., Ltd. Legal representative: ZHANG Huajin, chairman. Agent ad litem: WANG Yan, lawyer of Shanghai Ousen Law Firm. The Defendant: Zhejiang Tianhai Marine Economic & Technology Development Co., Ltd. Legal representative: SONG Guoqing, chairman. Agent ad litem: ZHANG Baolou, lawyer of Hebei Canggang Law Firm. Agent ad litem: LIU Jingjun. With respect to the case arising from dispute over bareboat charter party filed by the Plaintiff, Shanghai Jinchang Dredging Engineering Co., Ltd., against the Defendants, Zhejiang Tianhai Marine Economic & Technology Development Co., Ltd. and Bohai Cangzhou Jianghai Dredging Engineering Co., Ltd. (hereinafter referred to as “Jianghai Company”) on August 27, 2012, the court, after accepting this case on August 29, organized the collegiate panel to try the case in accordance with law. On December 27, the Plaintiff applied to withdraw the action against Jianghai Company, and the court granted permission with a ruling. On January 23, 2013, the court heard this case in public. ZHANG Huajin, legal representative of the Plaintiff, WANG Yan, agent ad litem of the Plaintiff, SONG Guoqing, legal representative of the Defendant, and ZHANG Baolou, agent ad litem of the Defendant, appeared in court to attend the hearing. Now the case has been concluded. The Plaintiff claimed that it signed Bareboat Charter Party of M.V. “Tai Feng” and Management Agreement for M.V. “Tai Feng” with the Defendant. The charter period agreed in the bareboat charter party was 3 years, from May 17, 2011 to May 16, 2014; the monthly hire was RMB2,350,000 and the yearly hire was RMB25,850,000 (hire of the last month of each year was free). The Defendant paid one-way arrangement fees in sum of RMB1,171,555. Corporation period agreed in Management Agreement was one year the basic fees were RMB100,000 per month, and the incentive payment depended on production. The Plaintiff provided M.V. “Tai Feng” to carry out dredging construction of maintenance of 10-ton waterway of Huanghua Port, but the Defendant failed to pay hires and management fees as agreed and after repeated exhortations, the Plaintiff still got no payment. Upon several consultations, the two parties signed Agreement on Termination of Bareboat Charter Party and the Management Agreement of M.V. “Tai Feng”, Bareboat Charter Party was terminated in advance and an agreement about settlement was reached as follows: the Defendant should pay the deferred hires and management fees in sum of RMB13,901,466, in case of failure to pay the payment aforesaid, the Defendant should otherwise pay arrangement fees of M.V. “Tai Feng” in sum of RMB1.5 million. After being hastened for several times, the Defendant still refused to pay the outstanding sums. So the Plaintiff requested the

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court to judge that the Defendant should pay the hires, management fees and arrangement fees in amount of RMB15,401,466 together with liquidated damages (calculated by three times of the six-month to one-year loan interesting rate over the same period of People’s Bank of China from March 1, 2012 to the date of payment) and bear court acceptance fee of this case. The Defendant argued that the Plaintiff breached secrecy agreement when performing Bareboat Charter Party, the Plaintiff, in order to sign construction contract directly with Cangzhou Huanghua Port Dredging Engineering Co., Ltd. (hereinafter referred to as “Huanghua Port Company”), contacted and informed it the Defendant deferred the due hires to the Plaintiff. The Plaintiff concealed the significant quality problems of M.V. “Tai Feng”, the ship stopped work for 43 days, as a result, the Defendant suffered huge economic losses and credit losses, and consequently, the cooperation relationship between the Defendant and Huanghua Port Company was broken up. Agreement on Termination of Bareboat Charter Party and the Management Agreement of M.V. “Tai Feng”, Bareboat Charter Party was signed under the situation where the Defendant did not know the vital facts, so it constituted a significant misunderstanding and Agreement on Termination of Bareboat Charter Party and the Management Agreement of M.V. “Tai Feng”, Bareboat Charter Party should be withdrawn. For those reasons, the Defendant requested the court to reject the Plaintiff’s claims. The Plaintiff submitted the following evidence to support its claims: 1. Bareboat Charter Party of M.V. “Tai Feng”, to prove that the Plaintiff chartered the vessel involved to the Defendant and the Defendant should pay the hires; 2. Management Agreement of M.V. “Tai Feng”, to prove that the Plaintiff actually managed the ship during the charter period and the Defendant should pay the management fees; 3. Notice of call, to prove that the Defendant deferred relevant payments; 4. Agreement on Termination of Bareboat Charter Party and the Management Agreement of M.V. “Tai Feng”, Bareboat Charter Party and appendix, to prove that the Plaintiff and the Defendant had settled the payments deferred by the Defendant; 5. License of Safety Production, Certificate of Enterprise Qualification of Construction Industry, and License of Activities on Water and Under Water, to prove that construction of the Plaintiff complied with regulations; 6. Memorandum on hires, to prove that the Defendant had committed to pay the amount in arrears after settlement. The Defendant had no objection to the authenticity, legality and relevancy of the evidence above, and confirmed the probative force of evidence 1, 2 and 5; as for evidence 3, the Defendant did not comply the amount in the Notice; as for evidence 4, the Defendant held that the Plaintiff concealed the breakdown of the main engine of the vessel involved, in addition, the days of construction to be settled was inconsistent with the actual days and WEI Changfu who signed the list in the appendix was a supervisor of construction and could not delegate it; as for evidence

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6, the Defendant did not get the project price from Huanghua Port Company because of the latter alleged M.V. “Tai Feng” stopped work for 43 days during the construction period, so it could not pay the Plaintiff. In summary, the Defendant did not confirm the probative force of evidence 3, 4 and 6. The court ascertains the probative force the evidence submitted by the Plaintiff that since the Defendant confirmed the authenticity, legality and relevancy thereof; regarding evidence 3, the Plaintiff only needs to prove the fact that the Defendant defers the payment, while the amount thereof would be proved by evidence 4; regarding evidence 4, all payments have been settled after the two parties terminated Bareboat Charter Party, while WEI Changfu delegated the Plaintiff to conclude and perform Bareboat Charter Party, so he shall be affirmed as the agent of the Defendant; regarding evidence 6, it can prove the fact that the Defendant defers the payments to the Plaintiff, and the Defendant promised to pay the outstanding sums after receiving the payments of the project. In summary, the court ascertains the probative force of the evidence above. The Defendant submitted the following evidence to support its allegations: 1. Corporation agreement, to prove that Cangzhou Port Co., Ltd. cooperated with the Defendant in terms of the Huanghua Port Project; 2. Bareboat Charter Party of M.V. “Tai Feng”, to prove the rights and obligations of the Plaintiff and the Defendant under the contract; 3. Management Agreement of M.V. “Tai Feng”, to prove the rights and obligations in respect of management of the vessel a in the charter period; 4. Request of termination of the construction conducted by M.V. “Tai Feng”, to prove that the Plaintiff breached secrecy agreement to let out the information of Huanghua Port Project to Huanghua Port Company; 5. Agreement on Termination of Bareboat Charter Party and Management Agreement of M.V. “Tai Feng”, to prove that Bareboat Charter Party and Management Agreement of M.V. “Tai Feng” between the two parties had been cancelled; 6. Agreement, to prove that M.V. “Tai Feng” was repaired too frequently and could not meet the requirements of construction, Cangzhou Port Group Co., Ltd. (the previous Cangzhou Port Co., Ltd.) requested the Defendant to quit the corporation; 7. Statement of situations and appendix, to prove that the main engine of M.V. “Tai Feng” had serious defects, losses arising from the suspension of work for 43 days should be deducted from the hires and management fees, and after that deduction, the Defendant should not pay any money to the Plaintiff. The Plaintiff had no objection to the authenticity, legality, relevancy or probative force of evidence 2, 3 and 5 and affirmed the content of evidence 1; but it disconfirmed the probative force of evidence 4 and held Huanghua Port Company was clear of the situation of its involvement in the project of Huanghua Port; and disconfirmed the authenticity, legality, relevancy and probative force of evidence 6 and 7 as well.

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The court ascertains that since the Plaintiff confirmed the authenticity, legality, relevancy and probative force of evidence 2, 3 and 5 as well as the content of evidence 1, the court confirms evidence effect and probative force of above-mentioned evidence; as for evidence 4, the situation of M.V. “Tai Feng” was open and Huanghua Port Company should have known the circumstance that the Plaintiff was involved in the project of Huanghua Port, so the Defendant cannot allege the Plaintiff breached the secrecy agreement; as for evidence 6, this agreement cannot reflect M.V. “Tai Feng” was frequently repaired and could not meet the requirement of construction; as for evidence 7, the Plaintiff and the Defendant have settled the accounts after Bareboat Charter Party of M.V. “Tai Feng” was terminated, so the Defendant cannot deduct the hires and management fees which should be paid by the Plaintiff according to settlement between the Plaintiff and Huanghua Port Company. In summary, the court does not ascertain the probative force of the evidence 4, 6and 7. According to the determined evidence and investigation in the hearing, the court finds out the following facts: On May 17, 2011, the Plaintiff signed Bareboat Charter Party of M.V. “Tai Feng” (a sand dredger vessel with capacity of 10,000m3) with the Defendant to subcharter M.V. “Tai Feng” chartered by it, the owner was Shanghai Gold Harbor Dredging Engineering Co., Ltd. to the Defendant. It was agreed in the contract as follows: the charter period was 3 years from May 17, 2011 to May 16 2014; the monthly hire was RMB2,350,000 (including tax) and the last month of every year was free of hire; the yearly hire was RMB25,850,000; the hire should be paid by month and the payment day was the first day of the next month of one month after commencement date; the Defendant should pay the hire to the account designated by the Plaintiff; in case of hires being deferred for more than 7 days, the Defendant should pay 1‰ overdue fine each day to the Plaintiff; while in case of hires being deferred for more than 15 days, the Plaintiff was entitle to withdraw the vessel and make a claim; according to the Defendant’s order, the Plaintiff arranged M.V. “Tai Feng” to leave from Qinzhou to anchorage of Huanghua Port and the Defendant agreed to pay the costs of bunkers, fresh water, crew wages and etc. in sum of RMB1,171,555. On May 20, 2011, the Defendant signed a cooperation agreement with Cangzhou Port Co., Ltd. to use M.V. “Tai Feng” for channel maintenance, dredging and other projects in Huanghua Integrated Port, which was owned by Cangzhou Port Co., Ltd. On May 23, 2011, the Plaintiff signed Management Agreement of M.V. “Tai Feng” with the Defendant to entrust the Plaintiff to manage M.V. “Tai Feng”. It was agreed in the agreement that the Defendant entrusted the Plaintiff to manage construction, employ crew, maintain ship equipment and other matters in the form of service outsourcing; the Defendant should bear all costs of M.V. “Tai Feng” arising from the construction, such as bunkers, water, crew wages and food, insurance, repairs, spare parts, inspection, measurement, transportation and port charges, management system certification fees and all other costs; the cooperation period was one year; the Defendant should pay management fees including basic fees and incentive fees to the Plaintiff by month, specifically, the Defendant should

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pay the basic fees in amount RMB100,000 each month to the Plaintiff if M.V. “Tai Feng” completed project quantities for more than 400,000m3 (include the figure) in a month and furthermore, incentive fees should be paid if project quantities for more than 450,000m3 (include the figure) were completed in one month; if the Defendant failed to pay basic fees and incentive fees, it should pay overdue fine in amount of 1‰ of the sum each day to the Plaintiff, and if the Defendant did not pay for two consecutive months, the Plaintiff was entitle to take measures, such as stop work or production and the Defendant should bear all the losses and liabilities therefrom. Since May 23, 2011, the Plaintiff put M.V. “Tai Feng” into Huanghua Integrated Port to the dredging project of channel maintenance, but the Defendant failed to pay hires and management fees as agreed. On October 19, M.V. “Tai Feng” stopped work due to the vessel’s breakdown and repairs therefrom, and was back to operation until December 1. On January 5, 2012, the Plaintiff and the Defendant signed Agreement on Terminating Bareboat Charter Party and Management Agreement of M.V. “Tai Feng”, Bareboat Charter Party and Management agreement of M.V. “Tai Feng” were terminated ever since, in which the parties agreed to reduce part of the hires and management fees when accounting overdue fines and partial losses arising from ship repairs upon friendly consultation. It was clearly provided in Agreement on Terminating Bareboat Charter Party and Management Agreement of M.V. “Tai Feng” that the unpaid hires and management fees were RMB16,504,606; the final amount should deduct the repair costs occurring from December 1, 2011 to January 2, 2012 which should be born by the Plaintiff, but were actually paid by the Defendant and Huanghua Port Company; if the Defendant failed to pay the aforementioned payments by the end of February 2012, it should otherwise pay arrangement costs of M.V. “Tai Feng” in amount of RMB1.5 million; if the Defendant failed to pay the full amount within the agreed time, liquidated damages calculated by three times of bank loan interest over the same period shall be paid to the Plaintiff; the two parties handed over and settled the remaining bunkers and fittings of M.V. “Tai Feng”, if the Defendant returned the bunkers owned by the Plaintiff in port of Huanghua, the costs would be deduced from the unpaid amounts according to the actual costs of bunkers. On January 9, 2012, WEI Changfu, on the behalf of the Defendant, annotated the hires and management fees in amount of owed RMB13,901,466 in the appendix of Agreement on Terminating Bareboat Charter Party and Management Agreement of M.V. “Tai Feng” as follows: 1. deduct costs of its own bunkers in amount of RMB3,184,000; 2. add costs of bunkers paid by Haifeng Company in amount of RMB680,000; 3. deduct repair costs in December in amount of RMB99,140. On June 16, 2012, the Plaintiff and the Defendant signed Memorandum on Payment of Hires on M.V. “Tai Feng” which clearly provided issues of hires on M. V. “Tai Feng”. The Defendant promised to pay the Plaintiff according to progress payment as soon as it received project settlement payment from Huanghua Port Company. But the Defendant had not paid the hires, management fees and arrangement fee to the Plaintiff yet.

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The court holds that this case is arising from dispute over bareboat charter party. A bareboat charter party relationship and a vessel management contract relationship are established according to law between the Plaintiff and the Defendant. The Plaintiff, as shipowner and manager of the ship involved, has an obligation to deliver a seaworthy vessel and manage the vessel; and the Defendant, as charterer and principal of the vessel involved, has an obligation to pay hires and management fees as agreed. After the Plaintiff arranged M.V. “Tai Feng” to operate in Huanghua Port, the vessel operated normally for nearly five months, it proves that the vessel was seaworthy and suitable for contractual use upon delivery. After malfunction of the vessel occurred, the Plaintiff and the Defendant signed an agreement to terminate the bareboat charter contract and management contract of M.V. “Tai Feng”, and settle all the payments including the hires and management fees. This agreement is real intent of each party. WEI Changfu’s settling accounts on behalf of the Defendant was act of work, so the Defendant shall fulfil the obligation for punctual payment according to the agreement. The Plaintiff’s breach of secrecy agreement and the malfunction of the vessel defended by the Defendant occurred before concluding the agreement on termination of the bareboat charter party involved and settlement of payment, the Defendant knew or should have known the situations above, and the two parties have taken the issues into account and deducted relevant fees when settling payment, so there is no significant misunderstanding. After the termination of the bareboat charter party and settlement of payment, the Defendant failed to pay the hires and other fees, but raised the defence above after the Plaintiff brought a lawsuit, therefore the court will not ascertain its defence. The Defendant shall continue to perform its obligation for payment as agreed, namely it shall pay the hires and management fees in amount of RMB13,901,466, the arrangement fee in sum of RMB1.5 million, totally amounting to RMB15,401,466, as well as liquidated damages for failure of payment. So the court supports the claims of the Plaintiff. In summary, according to Article 60 Paragraph 1 and Article 107 of the Contract Law of the People’s Republic of China, Article 146, Article 147 and Article 152 of the Maritime Code of the People’s Republic of China, the judgment is as follows: The Defendant, Zhejiang Tianhai Marine Economic & Technology Development Co., Ltd., shall pay the hires, management fees and arrangement fees in sum of RMB15,401,466 and liquidated damages (calculated by three times of the six-month-to-one-year loan interesting rate over the same period of People’s Bank of China from March 1, 2012 to the date of payment) within ten days after this judgment comes into effect. Court acceptance fee of second instance in sum of RMB122,131, shall be born by the Defendant, Zhejiang Tianhai Marine Economic & Technology Development Co., Ltd.

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In case of dissatisfaction with this judgment, any party may within 15 days upon the service of this judgment, submit a statement of appeal to the court, together with copies in accordance with the number of the opposite parties, and lodge an appeal to the Shanghai High People’s Court. Presiding Judge: JI Gang Acting Judge: SHAN Dan Acting Judge: DONG Xiaonan February 25, 2013 Clerk: LU Yu

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Shanghai High People’s Court Civil Judgment Shanghai Jinchang Dredging Engineering Co., Ltd. v. Zhejiang Tianhai Marine Economic & Technology Development Co., Ltd. (2013) Hu Gao Min Si (Hai) Zhong Zi No.50 Related Case(s) This is the judgment of second instance, and the judgment of first instance and the ruling of retrial are on page 883 and page 897 respectively. Cause of Action 213(2). Dispute over bareboat charter party. Headnote Affirming lower court decision holding that a bareboat charterer was liable to pay outstanding hire as required by termination agreement, notwithstanding vessel’s unseaworthiness and owner’s breach of confidentiality agreement in charter party. Summary The court of first instance in this case held that the Defendant-Appellant was required to pay the Plaintiff-Respondent hire and management fees according to a bareboat charter and management termination contract. Defendant-Appellant appealed, arguing that the lower court erred in its factual findings and application of the law. It further argued that it was unaware of the Plaintiff-Respondent’s breach of the confidentiality agreement in the charter and of the unseaworthy condition of the vessel when it signed the termination agreement; and, therefore, it should not be bound by its terms. Held - the Defendant-Appellant knew or should have known about the circumstances surrounding the bareboat charter relationship at the time it signed the termination agreement. Furthermore, the Defendant-Appellant did not put sufficient evidence forward to prove the existence of a secrecy agreement or that the Plaintiff-Respondent’s vessel was unseaworthy. The Defendant-Appellant’s appeal was dismissed and the court of first instance’s judgment was affirmed.

Judgment The Appellant (the Defendant of first instance): Zhejiang Tianhai Marine Economic & Technology Development Co., Ltd. Domicile: No.33 Xiangyuan Road, Gongshu District, Hangzhou, Zhejiang.

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Legal representative: SONG Guoqing, chairman. Agent ad litem: ZHANG Baolou, lawyer of Hebei Canggang Law Firm. The Respondent (the Plaintiff of first instance): Shanghai Jinchang Dredging Engineering Co., Ltd. Domicile: Room.207, Building 5, No. 30 Baogang Road, Baozhen Town, Chongming County, Shanghai. Legal representative: ZHANG Huajin, chairman. Agent ad litem: WANG Yan, lawyer of Shanghai Ousen Law Firm. With respect to the case arising from dispute over bareboat charter party filed by the Respondent, Shanghai Jinchang Dredging Engineering Co., Ltd. (hereinafter referred to as Shanghai Jinchang), against the Appellant, Zhejiang Tianhai Marine Economic & Technology Development Co., Ltd. (hereinafter referred to as “Zhejiang Tianhai”), the Appellant was dissatisfied with (2012) Hu Hai Fa Shang Chu Zi No.1205 Civil Judgment made by the Shanghai Maritime Court and lodged an appeal to the Shanghai High People’s Court. The court of first instance, after accepting this case on April 11, 2013, organized the collegiate panel to try the case in accordance with the law. On May 21, 2013, the court of first instance summoned all parties and held a hearing in public. SONG Guoqing, legal representative, and ZHANG Baolou, agent ad litem of Zhejiang Tianhai, ZHANG Huajin, legal representative, and WANG Yan, agent ad litem of Shanghai Jinchang, appeared in court to attend the hearing. Now the case has been concluded. The court of first instance found out that on May 17, 2011, Shanghai Jinchang signed Bareboat Charter Party of M.V. “Tai Feng” (a sand dredger vessel with capacity of 10,000m3) with Zhejiang Tianhai to subcharter M.V. “Tai Feng” chartered by it, of which the owner was Shanghai Gold Harbor Dredging Engineering Co., Ltd. to Zhejiang Tianhai. It was agreed in the contract as follows: the charter period was 3 years from May 17, 2011 to May 16, 2014; the monthly hire was RMB2,350,000 (including tax) and the last month of every year was free of hire; the yearly hire was RMB25,850,000; the hire should be paid by month and the payment day was the first day of the next month of one month after commencement date; Zhejiang Tianhai should pay the hire to the account designated by Shanghai Jinchang; in case of hires being deferred for more than 7 days, Zhejiang Tianhai should pay 1‰ overdue fine each day to Shanghai Jinchang; while in case of hires being deferred for more than 15 days, Shanghai Jinchang was entitle to withdraw the vessel and make a claim; according to Zhejiang Tianhai’s order, Shanghai Jinchang arranged M.V. “Tai Feng” to leave from Qinzhou to anchorage of Huanghua Port and Zhejiang Tianhai agreed to pay the costs of bunkers, fresh water, crew wages and etc. in sum of RMB1,171,555. On May 20, 2011, Zhejiang Tianhai signed a cooperation agreement with Cangzhou Port Co., Ltd. to use M.V. “Tai Feng” for channel maintenance, dredging and other projects in Huanghua Integrated Port, which was owned by Cangzhou Port Co., Ltd. On May 23, 2011, Shanghai Jinchang signed Management Agreement of M.V. “Tai Feng” with Zhejiang Tianhai to entrust Shanghai Jinchang to manage M.V.

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“Tai Feng”. It was agreed in the agreement that Zhejiang Tianhai entrusted Shanghai Jinchang to manage construction, employ crew, maintain ship equipment and other matters in the form of service outsourcing; Zhejiang Tianhai should bear all costs of M.V. “Tai Feng” arising from the construction, such as bunkers, water, crew wages and food, insurance, repairs, spare parts, inspection, measurement, transportation and port charges, management system certification fees and all other costs; the cooperation period was one year; Zhejiang Tianhai should pay management fees including basic fees and incentive fees to Shanghai Jinchang by month, specifically, Zhejiang Tianhai should pay the basic fees in amount RMB100,000 a month to Shanghai Jinchang if M.V. “Tai Feng” completed project quantities for more than 400,000m3 (include the figure) in a month and furthermore, incentive fees should be paid if project quantities for more than 450,000m3 (include the figure) were completed in a month; if Zhejiang Tianhai failed to pay basic fees and incentive fees, it should pay overdue fine in amount of 1‰ of the sum each day to Shanghai Jinchang, and if Zhejiang Tianhai did not pay for two consecutive months, Shanghai Jinchang was entitle to take measures, such as stop work or production and Zhejiang Tianhai should bear all the losses and liabilities therefrom. Since May 23, 2011, Shanghai Jinchang put M.V. “Tai Feng” into Huanghua Integrated Port to the dredging project of channel maintenance, but Zhejiang Tianhai failed to pay hires and management fees as agreed. On October 19, M.V. “Tai Feng” stopped work due to the vessel’s breakdown and repairs therefrom, and was back to operation until December 1. On January 5, 2012, Shanghai Jinchang and Zhejiang Tianhai signed Agreement on Terminating Bareboat Charter Party and Management Agreement of M.V. “Tai Feng”, the bareboat charter party and the management agreement of M.V. “Tai Feng” were terminated ever since, in which the parties agreed to reduce part of the hires and management fees when accounting overdue fines and partial losses arising from ship repairs upon friendly consultation. It was clearly provided in Agreement on Terminating Bareboat Charter Party and Management Agreement of M.V. “Tai Feng” that the unpaid hires and management fees were RMB16,504,606; the final amount should deduct the repair costs occurring from December 1, 2011 to January 2, 2012 which should be born by Shanghai Jinchang, but were actually paid by Zhejiang Tianhai and Huanghua Port Company; if Zhejiang Tianhai failed to pay the aforementioned payments by the end of February 2012, it should otherwise pay arrangement costs of M.V. “Tai Feng” in amount of RMB1.5 million; if Zhejiang Tianhai failed to pay the full amount within the agreed time, liquidated damages calculated by three times of bank loan interest over the same period should be paid to Shanghai Jinchang; the two parties handed over and settled the remaining bunkers and fittings of M.V. “Tai Feng”, if Zhejiang Tianhai returned the bunkers owned by Shanghai Jinchang in port of Huanghua, the costs would be deduced from the unpaid amounts according to the actual costs of bunkers. On January 9, 2012, WEI Changfu, on the behalf of Zhejiang Tianhai, annotated the hires and management fees in amount of owed RMB13,901,466 in the appendix of Agreement on Terminating Bareboat Charter Party and Management Agreement of M.V. “Tai Feng” as follows: 1. deduct costs of its own bunkers in amount of

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RMB3,184,000; 2. add costs of bunkers paid by Haifeng Company in amount of RMB680,000; 3. deduct repair costs in December in amount of RMB99,140. On June 16, 2012, Shanghai Jinchang and Zhejiang Tianhai signed Memorandum on Payment of Hires on M.V. “Tai Feng” which clearly provided issues of hires on M.V. “Tai Feng”. Zhejiang Tianhai promised to pay Shanghai Jinchang according to progress payment as soon as it received project settlement payment from Huanghua Port Company. But Zhejiang Tianhai had not paid the hires, management fees and arrangement fee to Shanghai Jinchang yet. The court of first instance held that this case was arising from dispute over a bareboat charter party. A bareboat charter party relationship and a vessel management contract relationship were established according to law between Shanghai Jinchang and Zhejiang Tianhai. Shanghai Jinchang, as shipowner and manager of the ship involved, had an obligation to deliver a seaworthy vessel and manage the vessel; and Zhejiang Tianhai, as charterer and principal of the vessel involved, had an obligation to pay hires and management fees as agreed. After Shanghai Jinchang arranged M.V. “Tai Feng” to operate in Huanghua Port, the vessel operated normally for nearly five months, it proved that the vessel was seaworthy and suitable for contractual use upon delivery. After malfunction of the vessel occurred, Shanghai Jinchang and Zhejiang Tianhai signed an agreement to terminate the bareboat charter contract and Management contract of M.V. “Tai Feng” and settle all the payments including the hires and management fees. This agreement was real intent of each party. WEI Changfu’s settling accounts on behalf of Zhejiang Tianhai was act of work, so Zhejiang Tianhai should fulfil the obligation for punctual payment according to the agreement. Shanghai Jinchang’s breach of secrecy agreement and the malfunction of the vessel defended by Zhejiang Tianhai occurred before concluding the agreement on termination of the bareboat charter party involved and settlement of payment, Zhejiang Tianhai knew or should have known the situations above, and the two parties had taken the issues into account and deducted relevant fees when settling payment, so there was no significant misunderstanding. After the termination of the bareboat charter party and settlement of payment, Zhejiang Tianhai failed to pay the hires and other fees, but raised the defence above after Shanghai Jinchang brought a lawsuit, therefore the court of first instance did not ascertain its defences. Zhejiang Tianhai should continue to perform its obligation for payment as agreed, namely it should pay the hires and management fees in amount of RMB13,901,466, the arrangement fee in sum of RMB1.5 million, totally amounting to RMB15,401,466, as well as liquidated damages for failure of payment. So the court of first instance supported the claims of Shanghai Jinchang. The court of first instance, according to Article 60 Paragraph 1 and Article 107 of the Contract Law of the People’s Republic of China, Article 146, Article 147 and Article 152 of the Maritime Code of the People’s Republic of China, judged that Zhejiang Tianhai should pay the hires, management fees and arrangement fees in sum of RMB15,401,466 and liquidated damages (calculated by three times of the six-month-to-one-year loan interesting rate over the same period of People’s Bank of China from March 1, 2012 to the date of payment) within ten days after the judgment came into effect.

Shanghai Jinchang Dredging Engineering Co., Ltd. …

895

Zhejiang Tianhai appealed that the facts were wrongly identified and the laws were improperly applied in the judgment of first instance and held that: 1. When Shanghai Jinchang signed the bareboat charter party involved with Tianhai Company, it concealed M.V. “Tai Feng” had serious quality problems, which afterwards caused the vessel’s suspension of work and repair after putting into operation for nearly five months. So the identification that M.V. “Tai Feng” was seaworthy when being delivered went against the facts and justice. 2. Zhejiang Tianhai did not know Shanghai Jinchang breached the secrecy clause until the first instance proceeded. Zhejiang Tianhai signed the settlement agreement involved without knowing its own interests were seriously damaged, so this settlement agreement was signed with serious misunderstanding, it was a civil act which could be rescinded. Even according to the obviously unfair settlement agreement aforementioned, Shanghai Jinchang should be responsible for breach of secrecy agreement and providing a vessel with serious quality problems. In summary, Zhejiang Tianhai requested the court to revoke the original judgment and remand this case for retrial or amend the judgment. Shanghai Jinchang defended that the judgment of first instance was correct: 1. The evidence available suggested that M.V. “Tai Feng” was seaworthy when being delivered and it created profits for more than RMB40 million in Huanghua Port in five months; it was normal the vessel occurred malfunction in the construction and the vessel met the requirement of construction after repairs; in addition, in Agreement on Terminating Bareboat Charter Party and Management Agreement of M.V. “Tai Feng”, the two parties also reached an agreement on issues including repair costs of the vessel; 2. The so-called secrecy clause did not exist in fact, besides the actual situations of M.V. “Tai Feng” could be found from published information; in addition, Agreement on Terminating Bareboat Charter Party and Management Agreement of M.V. “Tai Feng” was signed after mutual communication of the two parties’ legal representative, after that, they also signed the Memorandum to reaffirm the payment. Therefore the circumstance of serious misunderstanding alleged by Zhejiang Tianhai did not exist. Shanghai Jinchang did not breach the contract involved, Zhejiang Tianhai should pay corresponding amounts as agreed. Accordingly, Shanghai Jinchang requested the court to dismiss the appeal and affirm the original judgment. Two parties did not submit new evidence in the second instance. After trial, the court holds that the facts were clearly found and shall be reaffirmed. The court holds that this case is arising from dispute over bareboat charter party. The bareboat charter party relationship and the vessel management contract relationship between Shanghai Jinchang and Zhejiang Tianhai have been established according to law. Shanghai Jinchang alleged, as bareboat shipowner and ship

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manager, it had performed the obligation to deliver a seaworthy vessel and manage the vessel; and Zhejiang Tianhai should pay the hires, management fees, and the liquidated damages as agreed. But Zhejiang Tianhai held that M.V. “Tai Feng” was seaworthy when delivered, and Zhejiang Tianhai signed the settlement agreement on related fees with serious misunderstanding. The court holds that the evidence suggest that M.V. “Tai Feng” carried out construction in the dredging project of channel maintenance in Huanghua Integrated Port for nearly 5 months and after being repaired for more than one month because of the vessel’s malfunction, the vessel was back to normal production. In Agreement on Terminating Bareboat Charter Party and Management Agreement of M.V. “Tai Feng”, the two parties negotiated the losses occurring during the period of repair, but it does not mention that the malfunction of the vessel was caused by unseaworthiness of the vessel upon delivery. Therefore, the evidence available are insufficient to prove that M.V. “Taifeng” was unseaworthy when Zhejiang Tianhai delivered the vessel, so the court does not admit this ground of appeal. The two parties signed Agreement on Terminating Bareboat Charter Party and Management Agreement of M.V. “Tai Feng” on January 5, 2012 and settled the sums which should paid by Zhejiang Tianhai. After that, the two parties signed the memorandum on June 6 in the same year to clear the amount that Zhejiang Tianhai should pay to Shanghai Jinchang once again. Now no valid evidence has been submitted by Zhejiang Tianhai to prove the situation of serious misunderstanding, nor can evidence prove the two parties have concluded a secrecy agreement or other Shanghai Jinchang’s breaches of contract, so Zhejiang Tianhai shall pay the suns confirmed by the two parties to Shanghai Jinchang. The court does not ascertain this ground of appeal. In summary, the appeal of Tianhai Company lacks factual and legal basis, the court will not support. The facts are clearly determined and the result is correct in the judgment of first instance. According to Article 170 Paragraph 1 Sub-paragraph 1 and Article 175 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance in amount of RMB114,209, shall be born by the Appellant, Zhejiang Tianhai Marine Economic & Technology Development Co., Ltd. The judgment is final. Presiding Judge: WANG Haiming Judge: DONG Min Acting Judge: FENG Guanghe June 3, 2013 Clerk: CHEN Xi

Shanghai Jinchang Dredging Engineering Co., Ltd. …

897

The Supreme People’s Court of the People’s Republic of China Civil Ruling Shanghai Jinchang Dredging Engineering Co., Ltd. v. Zhejiang Tianhai Marine Economic & Technology Development Co., Ltd. (2014) Min Shen Zi No.142 Related Case(s) This is the ruling of retrial, and the judgment of first instance and the judgment of second instance are on page 883 and page 891 respectively. Cause of Action 213(2). Dispute over bareboat charter party. Headnote Refusing to order retrial of lower court decisions holding that a bareboat charterer was liable to pay outstanding hire as required by termination agreement, notwithstanding vessel’s unseaworthiness and owner’s breach of confidentiality agreement in charter party. Summary The court of first instance in this case held that the Defendant-Appellant was required to pay the Plaintiff-Respondent hire and management fees according to a bareboat charter and management termination contract. On appeal, the court of appeal affirmed the decision of the court of first instance, holding that the Defendant-Appellant knew or should have known when it signed the termination agreement that the Plaintiff-Respondent’s vessel was unseaworthy, and that the Plaintiff-Respondent was in breach of a confidentiality agreement in the bareboat charter. Now as Applicant, the Defendant-Respondent applied for a retrial. The Claimant of Retrial claimed that the vessel involved in the bareboat charter party was not seaworthy upon delivery. The Claimant of Retrial also claimed that its intentions were not adequately expressed in the charter party because it was unaware of damage to the vessel’s engine. Further the Applicant claimed that the Respondent violated a confidentiality agreement by releasing information to a third party regarding the bareboat charter party. Lastly the Applicant claimed that the agreement was actually a time charter, so it was entitled to stop paying hiring and management fees for the Vessel’s operation when the Vessel broke down. Held - the court of the first instance’s decision was correct, so the Applicant was denied a retrial. There was not a violation of confidentiality as the Applicant itself violated the original agreement, so the Respondent was within its rights to notify a third party. The allegations that the agreement was for a time charter party lacked merit and were not addressed.

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Ruling The Claimant of Retrial (the Defendant of first instance, the Applicant of second instance): Zhejiang Tianhai Marine Economic & Technology Development Co., Ltd. Domicile: No.30 Xiangyuan Road, Gongshu District, Hangzhou, Zhejiang. Legal Representative: ZHANG Huajin, chairman. The Respondent of Retrial (the Plaintiff of first instance, the Respondent of second instance): Shanghai Jinchang Dredging Engineering Co., Ltd. Domicile: Room 207, Building 5, No.30 Baogang Road, Baozhen Town, Chongming County, Shanghai. Legal representative: ZHANG Huajin, chairman. With respect to the case arising from dispute over bareboat charter party filed by the Claimant of Retrial, Zhejiang Tianhai Marine Economic & Technology Development Co., Ltd. (hereinafter referred to as Zhejiang Tianhai), against the Respondent of Retrial, Shanghai Jinchang Dredging Engineering Co., Ltd. (hereinafter referred to as Shanghai Jinchng), the Claimant of Retrial was unsatisfied with (2013) Hu Gao Min Si (Hai) Zhong Zi No.50 Civil Judgment made by the Shanghai High People’s Court and applied for retrial to the court. The court organized the collegiate panel in accordance with law to try this case and the case has now been concluded. Zhejiang Tianhai applied for retrial for the following reasons: 1. M.V. “Tai Feng” had serious quality problems before delivery. The main engine of the vessel could not meet the conditions to use for 3 years as agreed in Bareboat Charter Party of M.V. “Tai Feng” (a sand dredger vessel with capacity of 10,000m3). The original court wrongly presumed the vessel was in a seaworthy state since M.V. “Tai Feng” operated normally for 5 months; 2. Agreement on Terminating of Bareboat Charter Party and Management Agreement of M.V. “Tai Feng” was signed under the situation where Zhejiang Tianhai was not aware of damage to its interests, so this agreement was not expression of its real intent and it was a civil act which could be rescinded; 3. Shanghai Jinchang breached the secrecy agreement of Management Agreement of M.V. “Tai Feng”. It let out confidential information to a third party, so it should bear the liability for breach of contract and compensate Zhejiang Tianhai for actual losses therefrom. 4. The case was actually concerning a time charter party, during the period when M.V. “Tai Feng” was repaired, Zhejiang Tianhai should stop paying hires and management fees. So Zhejiang Tianhai requested the court to retry this case.

Shanghai Jinchang Dredging Engineering Co., Ltd. …

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The court holds that the main issues shall be ascertained in the trial are as follows: 1. 2. 3. 4.

Whether M.V. “Tai Feng” was seaworthy; Whether Shanghai Jinchang violated the secrecy agreement; Whether Settlement Agreement was the real intent of Zhejiang Tianhai; Determination of responsibility of Zhejiang Tianhai.

In respect of whether M.V. “Tai Feng” was seaworthy, the rights and obligations upon delivery of the two parties are clearly provided in Article 3 of Bareboat Charter Party. According to the facts found by the original courts, since Zhejiang Tianhai had no objection to the fact that M.V. “Tai Feng” was put into the construction of dredging project of Huanghua Port and its construction complied with relevant provisions, the statement of situations issued by Cangzhou Huanghua Port Harbor Engineering Co., Ltd. Dredging Company (hereinafter referred to as “Huanghua Port Company”) cannot prove that M.V. “Tai Feng” was unseaworthy at the time of delivery. Therefore the allegation of Zhejiang Tianhai that the vessel involved had serious quality problems and was unseaworthy lacks factual basis. The ascertainment of the original courts that the evidence in this case could not prove the vessel involved was not seaworthy upon delivery is proper. In respect of whether Shanghai Jinchang violated the secrecy agreement, it is provided in Management Agreement that Shanghai Jinchang shall keep secret of the agreement and shall be regarded as staffs of Zhejiang Tianhai in any situation; if Zhejiang Tianhai did not pay management fees on time, Shanghai Jinchang is entitled to terminate the Agreement. In this case, according to the facts found by the original courts, M.V. “Tai Feng” is not owned by Zhejiang Tianhai, in fact it is registered in the name of a third party and chartered to Zhejiang Tianhai for dredging construction after Shanghai Jinchang chartered the vessel. The condition of M.V. “Tai Feng” is public and Huanghua Port Company should have known the situation of its participation in the dredging project. The application for suspending operations and request of withdrawal of the vessel raised by Shanghai Jinchang because Zhejiang Tianhai did not pay the hires and management fees against Huanghua Port are reasonable and do not violate the duty of secrecy. So the allegation of Zhejiang Tianhai that Shanghai Jinchang breached the duty of secrecy lacks factual basis. In respect of whether Settlement Agreement was the real intent of Zhejiang Tianhai, according to the facts found by the original courts, Zhejiang Tianhai admitted that the Agreement on Terminating of Bareboat Charter Party and Management Agreement of M.V. “Tai Feng” and List of the Management Fees of M. V. “Tai Feng” Entrusted by Zhejiang Tianhai (Second Contract) were both signed by WEI Changfu, who is a manager of the construction appointed by Zhejiang Tianhai; since Zhejiang Tianhai failed to prove that WEI Changfu overstepped the power of agency, the determination in the original judgment that WEI Changfu’s settling payments was act of work is proper. The allegation of Zhejiang Tianhai that Settlement Agreement was not express of it real intent lacks factual basis.

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In respect of determination of responsibility of Zhejiang Tianhai, according to the facts that the original courts have identified, the parties in this case confirmed Bareboat Charter Party, Management Agreement and Agreement on Terminating of Bareboat Charter Party and Management Agreement of M.V. “Tai Feng”. It is proper that the original courts ascertained the bareboat charter party relationship and ship management relationship established between Zhejiang Tianhai and Shanghai Jinchang according to the evidence. Since the two parties have expressly agreed on termination of the charter party and settlement of payments, Zhejiang Tianhai shall fulfill its obligations as agreed, so its allegation for non-payment of hires and management fees based on time charter party lacks factual and legal basis. In summary, Zhejiang Tianhai’s application for retrial does not meet the circumstances provided in Article 200 of the Civil Procedure Law of the People’s Republic of China. In accordance with Article 204 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the ruling is as follows: Dismiss the application for retrial of Zhejiang Tianhai Marine Economic & Technology Development Co., Ltd. Presiding Judge: HU Fang Judge: GUO Zhonghong Judge: YU Xiaohan March 25, 2014 Clerk: LI Na

Shanghai Maritime Court Civil Judgment Shanghai Tangyuan Import & Export Trade Co., Ltd. v. Shanghai Hengchen International Freight Forwarding Co., Ltd. (2013) Hu Hai Fa Shang Chu Zi No.1313 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 912. Cause of Action 223. Dispute over freight forwarding contract on the sea or sea-connected waters. Headnote Freight forwarder held liable for the fault of its subcontractors in sending cargo to the wrong destination but cargo-owner held 80% responsible for its own losses because it failed to exercise adequate supervision of documents during the packing and loading processes. Summary The Plaintiff sought damages against the Defendant for the shipment of its goods to an improper destination. The Defendant was a freight forwarding company that was entrusted with goods. The Defendant hired a third party to complete customs declaration, towing and other freight forwarding services. The third party shipped the goods to the wrong destination. The Plaintiff brought an action to recover damages. The court held: 1) that if the third party was found to be at fault, the defendant would be held liable to the plaintiff; 2) that both the Defendant and Plaintiff would be held at fault for the goods being shipped to the wrong destination; 3) the Plaintiff suffered actual losses.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_46

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Judgment The Plaintiff: Shanghai Tangyuan Import & Export Trade Co., Ltd. Legal representative: HUANG Leimin. Agent ad litem: CHEN Jianxin, lawyer of Shanghai Guoxiong Law Firm. Agent ad litem: LIU Honglei, lawyer of Shanghai Guoxiong Law Firm. The Defendant: Shanghai Hengchen International Freight Forwarding Co., Ltd. Legal representative: ZHANG Gang. Agent ad litem: WANG Fuxin, employee With respect to the case arising from dispute over marine freight forwarding contract between the Plaintiff, Shanghai Tangyuan Import & Export Trade Co., Ltd. (hereinafter referred to as “Tangyuan Company”), and the Defendant, Shanghai Hengchen Company International Freight Forwarding Co., Ltd. (hereinafter referred to as “Hengchen Company”), the Plaintiff filed an action to the court on September 4, 2013. The court accepted the case on the same day and applied summary procedure in accordance with law. The Defendant raised a contest to the jurisdiction of the case during the period for submitting statement of defense. It alleged that the dispute involved was not concerning dispute over marine freight forwarding contract and requested the court to transfer the case to Shanghai Hongkou People’s Court located in the place of the Defendant’s domicile. Through examination, the court made (2013) Hu Hai Fa Shang Chu Zi No.1313 Civil Ruling on September 25, 2013, rejecting the contest to the jurisdiction raised by the Defendant. The Defendant did not appeal against the ruling. On October 23, 2013, the court heard the case in public. HUANG Leimin, legal representative of the Plaintiff, CHEN Jianxin and LIU Honglei, agents ad litem of the Plaintiff, and WANG Fuxin, agent ad litem of the Defendant, appeared in court to attend the hearing. This case has now been concluded. The Plaintiff asserted that the Plaintiff entrusted the Defendant to complete customs declaration, towing and other freight forwarding services for a batch of tires transported from Qingdao to Novorossiysk, Russia and paid relevant charges. On account of mistaken loading by the Defendant, the goods were shipped to Bremerhaven, Germany. On June 18, 2013, the Plaintiff was informed the mistake by the Defendant, and actively cooperated with the Defendant to remedy. However, the goods were still detained aboard The Plaintiff had to rearrange order and shipment to Novorossiysk. Therefore, the Plaintiff requested the court to adjudge the Defendant to compensate for cargo loss in sum of RMB101,280 and the freight in sum of RMB3,586. The Defendant argued that after accepting the freight forwarding, the Defendant delegated the freight forwarder to a qualified third party to complete customs declaration and towing. The Defendant was faultless at such delegation and should not bear any liability or risk caused by the fault of the third party. The Plaintiff did not provide any evidence to prove that the involved goods carried to Novorossiysk

Shanghai Tangyuan Import & Export Trade Co., Ltd. …

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were mistakenly loaded. Even if the goods were mistakenly loaded, the Plaintiff did not provide any evidence to prove that its losses were caused by such mistaken loading. The Plaintiff committed fault in the course of supervision of loading and confirmation of B/L, thus it should be liable for the losses resulted from that. As the Plaintiff had received the payment of the involved goods, there was no causality between the replenishment and shipment of goods afterwards and the mistaken loading of the involved goods. The fact that the consignee had taken delivery of the goods showed that the consignee waived their objection and the goods had been actually dealt, so that the losses claimed by the Plaintiff were false. As a result, the Defendant requested to reject the claims filed by the Plaintiff. The Plaintiff submitted the following evidence to the court to support its arguments: 1-3. Freight forwarding invoices issued by the Defendant, export customs declaration, and result about the container circulation inquired from the official website of Maersk, to prove the marine freight forwarding contractual relationship between the Plaintiff and the Defendant, the destination of the involved goods was Novorossiysk and the time of departure. The Defendant had no objection to the effect of the above evidence, thus the court ascertains the above evidence. 4-5, 11. Original equipment manufacturing contract, export customs declaration, invoices of replenished goods, freight forwarding invoices, payment voucher and B/L with a title of GNSFREIGHTFORWARDINGLTD (hereinafter referred to as “GNS”), to prove that the Plaintiff purchased goods again and shipped the goods to Russia because of the mistaken loading. The Defendant had no objection to the authenticity of the above evidence, but alleged that there was no relevancy between the proved facts and the involved dispute. The court holds that the evidence show that the involved goods were mistakenly loaded, so that it was reasonable for the Plaintiff to replenish new goods. In the absence of any evidence to the contrary, the cross-examination opinions of the Defendant will not be adopted. Thus the effect of is ascertained due to the above evidence can be corroborated with each other and other evidence on record 6-7. Export Equipment Interchange Receipt/Packing and Tally List and chatting records by QQ in June 2013, to prove that the Defendant shipped the goods to a wrong destination and the Defendant informed the Plaintiff this problem of the goods. The Defendant had no objection to the authenticity of the above evidence, but alleged that there was no relevancy between the proved facts and the involved dispute, and it could not prove the Defendant shipped the goods to a wrong destination. Furthermore, in the chatting records, when AN Fang, a clerk of the Defendant (user name “LAN Xi”) asked HUANG Leimin, the legal representative of the Plaintiff (user name “Leo_hearted”) whether he had noticed the loading container number was different from the container number described in B/L, HUANG Leimin said he had already found that and called his booking agent, Globe Success

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International Transportation Ltd. Qingdao Branch (hereinafter referred to as “Globe Success Company”). It proved that the Plaintiff had known the mistake about the container number and the Defendant was not the first one to find the problem. In this regard, the Plaintiff explained that they asked Globe Success Company on May 13, 2013 that why the container number and seal number were wrong, and got a reply from Globe Success Company that the container number was changed because of change of container. The court holds that the cross-examination argument of the Defendant shall not be adopted in the absence of any evidence to the contrary. Thus the effect of the above evidence is ascertained. As for the responsibility for the mistaken loading, the court will determine comprehensively hereinafter. 8. Guarantee, to prove that the Plaintiff tried to remedy under the situation of mistaken loading. The Defendant acknowledged the effect of evidence of the guarantee and alleged that the description therein proved it was the factory that mistakenly loaded the goods. The court ascertains the effect of the above evidence because of the Defendant affirmation. As for the responsibility for the mistaken loading, the court will determine comprehensively hereinafter. 9-10. Confirmation of B/L and Maersk B/L, to prove that there was no information about container number when the Plaintiff confirmed the B/L on May 3, 2013, and until the loaded vessel set sail the Plaintiff have got the B/L and learned the container number. The Defendant affirmed the date that the Plaintiff confirmed the B/L, but had objection to the fact that there was no information of container number when the Plaintiff confirmed the B/L. The Defendant acknowledged the effect of evidence of Maersk B/L, and alleged that in combination with the results about the circulation of container inquired from the official website of Maersk, the consignee had taken delivery of the goods in that container. The court holds that Confirmation of B/L was sent to the Plaintiff by Globe Success via E-mail attachment, the Plaintiff connected to the internet to show the content of the E-mail attachment at court, and the Defendant checked it, thus the effect shall be ascertained; the effect of evidence of Maersk B/L shall be ascertained due to the Defendant’s affirmation. 12. Booking confirmation, to prove that the Plaintiff did not have any fault. The Defendant affirmed the effect of evidence of the booking confirmation, but alleged that the Plaintiff had already known the situation of mistaken loading. The court holds that the effect of evidence shall be ascertained due to the Defendant’s affirmation. As for the responsibility for the mistaken loading, the court will determine comprehensively hereinafter. During the trial, the Plaintiff provided invoices of the involved goods, freight forwarding invoices issued by Globe Success Company and two statements provided by Weifang Lutong Rubber Co., Ltd. (hereinafter referred to as “Lutong Company”) as supplement, proving the value of the involved goods and the

Shanghai Tangyuan Import & Export Trade Co., Ltd. …

905

forwarding fees charged by Globe Success Company; Weifang Zhaoyang Rubber Co., Ltd. (hereinafter referred to as “Zhaoyang Company”) which affixed its seal on the export equipment interchange receipt/packing and tally list was an associated company of Lutong Company, and the loading situation of loading the involved goods to container. The Defendant acknowledged the relevancy of the Invoices of the goods and the freight forwarding invoices, but alleged that the above invoices were from business contact between the Plaintiff and the third party, thus it could not affirm the authenticity. As for the two statements, except affirming the facts that the trailer carried two twenty feet empty containers to the factory to load goods and the driver gave an Export Equipment Interchange Receipt/Packing and Tally List to the factory, the Defendant did not affirm the authenticity and relevancy of other contents in the two statements. The court holds that the above evidence answer to the original copy, thus in the absence of any evidence to the contrary, the effect of the above evidence is ascertained. The Defendant submitted the following evidence to the court to support their arguments: 1. A Statement provided by Qingdao Shunfa trailer Fleet (hereinafter referred to as “Shunfa Fleet”), to prove that Shunfa Fleet arrived at the designated factory as requested to complete the overland towing. The Plaintiff had no objection to the authenticity of this evidence, but alleged that it was irrelated to the involved dispute. As for this issue, the Defendant explained that Qingdao Sunmoon International Logistics Co., Ltd. (hereinafter referred to as “Sunmoon Company”), as mentioned in the Statement, was the Defendant’s agent in Qingdao. After accepting the agency, the Defendant delegated the agency to Sunmoon Company to complete land towing and customs declaration, and then Sunmoon Company sub-delegated the agency to Shunfa Fleet to complete the land towing issues of the involved goods. The court holds that the statement can be corroborated with other evidence provided by the Defendant and is consistent with the shipping information of the involved goods stated in the evidence provided by the Plaintiff, thus in the absence of any evidence to the contrary, the cross-examination argument of the Plaintiff will not be adopted and the effect of the above evidence is ascertained due to the Plaintiff’s affirmation. 2-8. Emails between the Plaintiff and the Defendant, emails between the Plaintiff and their booking agent, Globe Success Company, booking confirmation, Maersk B/L and the cost confirmation issued by Globe Success Company to the Plaintiff, to prove that the Defendant did not actually arrange the overland towing; the Plaintiff had known the vessel, voyage, loading port, discharge port, container number and other shipping information about the involved goods, but its negligence at supervising the loading caused the mistake; and afterwards the Defendant actively gave suggestions to the Plaintiff. The Plaintiff had no objection to the authenticity of the above evidence, but did not affirm the objective to prove. The court holds that the above evidence can be corroborated with other evidence on record, and the Booking Confirmation

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and Maersk B/L are same with the evidence provided by the Plaintiff. The effect of the above evidence shall be ascertained due to the Plaintiff’s affirmation. As for the responsibility for the mistaken loading, the court will determine comprehensively hereinafter. 9. Records of calls between WANG Fuxin, agent ad litem of the Defendant, and the driver of Shunfa Fleet who was in charge of the overland towing of the involved goods, to prove that the driver had reminded the factory to check the information of goods before loading. The Plaintiff alleged that the identity of the two callers could not be verified, thus the effect of evidence of the evidence should not be affirmed. The court holds that the Defendant failed to verify that the caller was the driver of Shunfa Fleet who was in charge of the overland towing of the involved goods, thus the effect of evidence shall not be ascertained. In fact, even if their identity can be verified, the one-sided statement of the driver is not enough to prove the fact that the driver reminded the factory to check the information of goods before loading. During the trial, the Defendant provided the Power of Attorney in respect of the delegation to Sunmoon Company to complete overland towing, freight forwarding invoices, commercial invoices and packing list of the gas stove not involved in this case which were carried to Russia because of mistaken loading, to prove the sub-delegation relationship between the Defendant and Sunmoon Company, and the Russian consignee had controlled such goods at present. The Plaintiff alleged that the above evidence could not answer to the original copies, thus it did not affirm the effect of evidence, but it confirmed the fact that the mistakenly loaded goods not involved this case had been delivered to the consignee. The court holds that the Power of Attorney and the freight forwarding invoices are photocopies that can not answer to the original copy, but they can be corroborated with other evidence on record, thus the effect of evidence shall be ascertained. In fact, as a freight forwarder domiciled in Shanghai, it is customary for the Defendant to delegate the agency to Sunmoon Company located in Qingdao to handle the involved goods loaded in Qingdao. As for the Commercial Invoices and the Packing List, the effect of evidence will not be ascertained because they can not answer to the originals and have no corroboration with other evidence on record The court ascertains the fact that the goods not involved this case which were loaded mistakenly have been delivered to the consignee. Taking the above cross-examination opinions and statements made by the Plaintiff and the Defendant into consideration, the court ascertains the following facts: To perform the trading contract with KUMPANLLC, the Plaintiff purchased the involved goods from Lutong Company, entrusted the Defendant to complete the customs declaration, towing and other forwarding services regarding to the exportation affairs from Qingdao to Novorossiysk, and paid the freight forwarding fees including towing fee, customs declaration fee and operating fees amounted to RMB1,700 in accordance with the Invoice issued by the Defendant. The involved Export Customs Declarations specified that the business unit and the shipper was the Plaintiff, the standard trade term was FOB, the goods were 600 forklift

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pneumatic tires were worth of USD18,107; the vessel/voyage was CMACGMERVING/ME950W, the container number was MRKU9329881, and the B/L number was 588220832. The Plaintiff contacted Globe Success Company, the booking agent designated by KUMPANLL to manage the booking and shipping affairs. On May 3, 2013, Globe Success Company sent Confirmation of B/L to the Plaintiff via E-mail attachment. The B/L with a title of GNS specified that the shipper was the Plaintiff, the consignee and the notify party is LIMITEDLIABILITYCOMPANY “KUMPAN”, the vessel/ voyage was CMACGMERVING/950W, the loading port was Qingdao, the discharging port and destination was Novorossiysk, Russia, the goods were 600 forklift pneumatic tires loaded in a twenty feet container, the period of responsibility was CY to CY, and freight was to be collected. But there was no record about container number in the Confirmation of B/L. After accepting the agency, the Defendant delegated the agency to Sunmoon Company to complete relevant forwarding affairs and paid the freight forwarding fees amounting to RMB1,470. Then Sunmoon Company delegated the agency to Shunfa Fleet to complete trailering of the involved goods overland. On May 4, 2013, the container trailer of Shunfa Fleet loaded two twenty feet empty containers including the involved container numbered MRKU9329881, heading for the place designated by Lutong Company and the cargo owner not involved in the case to load the goods. After the trailer arrived at Lutong Company, the driver provided an export equipment interchange receipt/packing and tally list to the handler of Lutong Company. The handler filled cargo information in the export equipment interchange receipt/packing and tally list and stamped the seal of Zhaoyang Company, associated company of Lutong Company, and then loaded the involved goods into the empty container designated by the driver. The Export Equipment Interchange Receipt/Packing and Tally List specified that the vessel/voyage was CMACGMTITAN/FM556W, the container number was UACU3347639, the B/L number was CNQIN081819, the destination was Bremerhaven. The cargo information written by the cargo owner showed the cargo name was tires, number of packages was 600, gross weight was 7,245 and volume was 28; Zhaoyang Company sealed on the signature bar of loading company. As for the loading, the statement provided by Shunfa Fleet illustrated that they accepted the agency of Sunmoon Company to load at the designated location. On May 4, 2013, Shunfa Fleet appointed a driver, Liu Shuzhou to drive a trailer (license plate number: LB73860) to carry two empty twenty feet containers to load goods. The involved container numbered MRKU9329881 and the other container numbered UACU3347639 was shipped to Bremerhaven, the vessel/voyage was CMACGMTITAN/FM556W and the B/L number was CNQIN081819. After arriving at the designated place, the driver passed the export equipment interchange receipt/packing and tally list to the handler of factory. The factory took charge of the inspection of container, loading of goods, lead sealing, filling orders and stamping seal. During the trial, HUANG Leimin, the legal representative of the Plaintiff also admitted that he went to the spot where the loading was supervised. With the confirmation of the Plaintiff on the above information, Globe Success Company then booked space with Maersk Line. On May 9, 2013, Maersk (China)

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Shipping Co. Ltd. acted for Maersk Line to issue a full set of original B/L numbered 588220832, stating the information was same with the Confirmation of the B/L and the container number was MRKU9329881. On the same day, Globe Success Company sent the cost confirmation to the Plaintiff, on which also marked the above container number. The Plaintiff paid the freight forwarding fees in sum of RMB2,126 to Globe Success Company and got the full set of original B/L, and then sent the B/L to the consignee at destination to take delivery of goods. The court finds out that, according to the results about the circulation of container inquired from the official website of Maersk, the involved container numbered MRKU9329881 entered into container yard on May 4, 2013, and was shipped on M/V CMACGMERVING on 9 May and discharged at Busan on May 11. Then it was shipped on M/V CMACGMRACINE to proceed the voyage and discharged at Novorossiysk on June 26, and gated out empty on July 11. During the trial, the Plaintiff affirmed that the goods in the involved container numbered MRKU9329881 had been delivered to the consignee. The court finds out that, on March 13, 2013, the Plaintiff got the B/L and found that the container number was different from the number when it supervised the loading, and then asked Globe Success Company via email. Globe Success Company replied that the Plaintiff should ask the freight forwarder in Qingdao if they had problems with the container number. Due to the mistake of the goods not involved in this case shipped to Bremerhaven, the consignee who was not involved in the case informed the Defendant through their booking agent. On June 18, 2013, the Defendant asked the Plaintiff via QQ that if they noticed the number of the loaded container was different from the that described in B/L, the Plaintiff said they had already found that and called their booking agent, Globe Success Company, and was told that it was caused by change of container. The Defendant claimed the goods might be loaded mistakenly and suggested the Plaintiff ask Globe Success Company to require Maersk to keep the goods stay at the port of transshipment and transship the goods to Bremerhaven. On June 19, 2013, the Plaintiff issued a guarantee in the assistance of the Defendant to Globe Success Company, stating that due to the mistaken loading of No.MRKU9329881 container by the factory, the Plaintiff required to detain the goods in Istanbul and confirm the liability and costs that should be assumed by the Plaintiff. As the scheme of detention of goods at the port of transshipment failed, on the same day, the Plaintiff issued another guarantee to cancel the detention. In the days followed, the Defendant informed the Plaintiff through QQ and E-mail that the mistakenly loaded goods were gas stoves and the cargo owner not involved the case required to retrieve the goods. The Defendant expressed their willingness to deal with the follow-up problems with the Plaintiff and proposed to transship the goods from Novorossiysk to Bremerhaven or return the goods to Qingdao, but ultimately, the two plans were not carried out. The court also finds out that the Plaintiff had received full payment of the involved goods from KUMPANLLC and the goods in No.MRKU9329881 container arrived at Novorossiysk were not forklift pneumatic tires, the Plaintiff signed the contract of original equipment manufacturing with Lutong Company on July 3, 2013 to purchase 600 forklift pneumatic tires for replenishment, which were worth

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of RMB101,280. On July 4 and 27 of the same year, the Plaintiff paid the above money to Lutong Company in twice. Then the Plaintiff entrusted Globe Success Company to ship the above goods and paid the freight forwarding fees in sum of RMB3,586 to it on July 30. The court holds that the Plaintiff and the Defendant has established a valid marine freight forwarding contractual relationship with respect to the customs declaration, towing and other freight forwarding services of the involved goods, and both parties shall exercise rights and fulfill obligations according to the contract. Based on the arguments of the two parties, the involved issues can be summarized as follows: 1. Who shall undertake the legal consequence after the Defendant delegated the agency to a qualified third party; 2. Who shall be responsible for the mistaken loading of the involved goods; 3. Whether the Plaintiff suffered actual losses. 1. In respect of who shall undertake the legal consequence after the Defendant delegated the agency to a qualified third party The court holds that the evidence on record show that the Plaintiff entrusted the Defendant to complete customs declaration, towing and other freight forwarding services with respect to the shipment of the involved goods, then the Defendant delegated the agency to Sunmoon Company to complete towing and Sunmoon Company delegated the agency to Shunfa Fleet. As the two parties did not have any agreement on sub-delegation of the Defendant, neither did the Plaintiff subsequently ratify such sub-delegation, nor the Defendant proved that the Plaintiff accepted such sub-delegation through distinct action, it can be affirmed that such sub-delegation was absence of consent of the Plaintiff. Therefore, as the freight forwarder, the Defendant shall be responsible for the action of Sunmoon Company and Shunfa Fleet to the client, namely the Plaintiff. In other words, if Sunmonn Company or Shunfa Fleet have fault at fulfilling forwarding duties, for the Plaintiff, it shall be viewed as the fault of the Defendant. The argument of the Defendant that they should not bear any liability or risk caused by fault of the third party is lack of factual and legal basis, the court will not adopt. 2. In respect of who shall be responsible for the mistaken loading of the involved goods The court holds that, firstly, according to the evidence on record, the mistaken loading of the involved goods happened in the course of encasement before shipping, thus it is necessary to firstly clear the respective obligations of the two parties in the encasement period. During the trial, the Plaintiff affirmed that Lutong Company was in charge of the encasement. The legal consequence of the action of Lutong Company shall be undertaken by the Plaintiff with respect to the marine freight forwarding contractual relationship between the Plaintiff and the Defendant. Therefore, the Plaintiff shall be responsible for inspecting, loading, sealing, filling the documents and confirming goods information in the encasement period. As a matter of fact, HUANG Leimin, the legal representative

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of the Plaintiff went to the spot to supervise the loading. In the encasement period, the Defendant, as freight forwarder were not in charge of specific loading affairs, but as they assigned the same container trailer to carry two empty containers to load goods of different cargo owners, it shall keep necessary caution, that’s to say, give the correct export equipment interchange receipt/ packing and tally list to the owners and instruct the owners to load the cargo in corresponding container. Secondly, the identified details of the case indicate that the two parties obviously failed to perform their respective obligations discreetly. As for the Defendant, it gave a mistaken export equipment interchange receipt/packing and tally list of the goods not involved in the case to the Plaintiff, and there was no valid evidence to prove that the driver had noticed or reminded that. As for the Plaintiff, even if the Plaintiff did not know the number of the involved container when confirming the information on the B/L on May 3, 2013, namely one day before the encasement, they should have known the vessel/voyage, destination and other shipping information of the involved goods. The information on the export equipment interchange receipt/packing and tally list provided by the driver was distinctly different from the shipment information of the involved goods, obviously the staff of the cargo owners accepted rashly without check, and noted the information of the involved goods on the wrong document and sealed that. Even the legal representative of the Plaintiff who arrived at the loading spot did not pay attention to that and check. Therefore, it shall be determined that both the Plaintiff and the Defendant have fault at the mistaken loading of the goods. Finally, in consideration of the details of obligations, the causality of mistaken loading, and the situation of staffs on the spot of the two parties during the encasement period, compared with appearance of the driver of the Defendant on the loading spot, the legal representative of the Plaintiff who arrived at the loading spot shall know more about the shipping information of the involved goods and have more opportunity to find the mistake of the documents and avoid the subsequent losses therefrom in time. Therefore, the court ascertains comprehensively that the Plaintiff shall take the majority of the liability for the mistaken loading in a proportion of 80% and the Defendant shall bear 20% of the liability. 3. In respect of whether the Plaintiff suffered actual losses The court holds that though the Plaintiff has got the payment for the involved goods, the consignee did not receive the correct goods, it is reasonable for the Plaintiff to repurchase and reship the goods. As the Defendant did not prove that the Plaintiff has received the payment for the reshipped goods, the expenses for the second purchase and shipment amounting to RMB101,280 and the forwarding fees amounting to RMB3,586 shall be ascertained as actual losses suffered by the Plaintiff. Though the Plaintiff affirmed that the consignee had taken delivery of the goods not involved in the case carried in No. MRKU9329881 container, such fact does not mean that the consignee has disposed the involved goods and got profits therefrom, and cannot duly prove that the Plaintiff obtained a benefit or reduced loss therefrom. The Defendant

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argued that the fact that the consignee had taken delivery of the goods showed the consignee waived his objection and the goods had been actually dealt, so that the losses the claimed by the Plaintiff was false, such defence is lack of factual and legal basis, the court will not ascertain. The Plaintiff suffered actual losses from the mistaken loading in total sum of RMB104,866. Such losses are resulted from the fault of both the Plaintiff and the Defendant when performing the contract, and shall be undertaken in proportion to the extent of their respective fault. Therefore, the Plaintiff shall bear RMB83,892.80 and the Defendant shall bear RMB20,973.20. In conclusion, according to Article 107 and 120 of the Contract Law of the People’s Republic of China, Article 5 Paragraph 2 and Article 10 of the Provisions of the Supreme People’s Court on Several Issues in the Trial concerning Cases of Disputes over Marine Freight Forwarding, Article 21 Paragraph 2 and 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, and Article 69 Paragraph 4 of the Some Provisions of the Supreme People’s Court on Evidence in Civil Procedures, the judgment is as follows: 1. The Defendant Shanghai Hengchen International Freight Forwarding Co., Ltd. shall compensate the Plaintiff Shanghai Tangyuan Import & Export Trade Co., Ltd. for RMB20,973.20 within 10 days upon the effect of this judgment. 2. Reject other claims of the Plaintiff, Shanghai Tangyuan Import & Export Trade Co., Ltd. In case of any failure of payment within the period specified in this Judgment, the Defendant, Shanghai Hengchen International Freight Forwarding Co., Ltd., shall double pay the interest for the period of delayed performance in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB2,397. Since summary procedure is adopted, the fee shall be reduced by half, namely RMB1,198.50, RMB958.80 shall be born by the Plaintiff Shanghai Tangyuan Import & Export Trade Co., Ltd, and RMB239.70 shall be born by the Defendant Shanghai Hengchen International Freight Forwarding Co., Ltd. In the event of dissatisfaction with this judgment, the Plaintiff, Shanghai Tangyuan Import & Export Trade Co., Ltd., and the Defendant, Shanghai Hengchen International Freight Forwarding Co., Ltd., may within 15 days upon the service of this judgment, submit a statement of appeal to the court, together with copies according to the numbers of the relevant parties to the case, to lodge an appeal to the Shanghai High People’s Court. Acting Judge: WANG Yang December 3, 2013 Clerk: CHEN Yi

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Shanghai High People’s Court Civil Judgment Shanghai Tangyuan Import & Export Trade Co., Ltd. v. Shanghai Hengchen International Freight Forwarding Co., Ltd. (2014) Hu Gao Min Si (Hai) Zhong Zi No.12 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 901. Cause of Action 223. Dispute over freight forwarding contract on the sea or sea-connected waters. Headnote Affirming decision that held freight forwarder liable for the fault of its subcontractors in sending cargo to the wrong destination but holding cargo-owner 80% responsible for its own losses because it failed to exercise adequate supervision of documents during the packing and loading processes. Summary The Plaintiff sought damages from the Defendant for the shipment of its goods to an improper destination. The Defendant was a freight forwarding company that was entrusted with goods. The Defendant hired a third party to complete customs declaration, towing and other freight forwarding services. The third party shipped the goods to the wrong destination. The Plaintiff brought an action to recover damages. The lower court held the Defendant to be liable, but also held the Plaintiff to be 80% responsible for its own loss, because it had failed to exercise adequate supervision of documents during the packing and loading processes. Both sides appealed. Held - the lower court correctly found that both parties were responsible for the goods and the errors by both parties led to the goods being shipped to the wrong location.

Judgment The Appellant (the Plaintiff of first instance): Shanghai Tangyuan Import & Export Trade Co., Ltd. Legal representative: HUANG Leimin. Agent ad litem: CHEN Jianxin, lawyer of Shanghai Guoxiong Law Firm. Agent ad litem: LIU Honglei, lawyer of Shanghai Guoxiong Law Firm.

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The Appellant (the Defendant of first instance): Shanghai Hengchen International Freight Forwarding Co., Ltd. Legal representative: ZHANG Gang. Agent ad litem: WANG Fuxin, employee. The Appellants, Shanghai Tangyuan Import & Export Trade Co., Ltd. (hereinafter referred to as “Tangyuan Company”) and Shanghai Hengchen International Freight Forwarding Co., Ltd. (hereinafter referred to as “Hengchen Company”), disagreed with (2013) Hu Hai Fa Shang Chu Zi No.1313 Civil Judgment made by the Shanghai Maritime Court regarding to dispute over marine freight forwarding contract, and appealed to the court. After accepting the case on January 10, 2014, the court formed a collegiate panel according to the law and heard the case in public on February 26, 2014. CHEN Jianxin and LIU Honglei, agents ad litem of the Appellant Tangyuan Company, WANG Moumou, agent ad litem of the Appellant Hengchen Company, appeared in court to attend the hearing. Now the case has been concluded. It was ascertained by the original court that to perform the trading contract with KUMPANLLC, Tangyuan Company purchased the involved goods from Lutong Company, entrusted Hengchen Company to complete the customs declaration, towing and other forwarding services regarding to the exportation matters from Qingdao to Novorossiysk, and paid the freight forwarding fees including towing fee, customs declaration fee and operating fees amounted to RMB1,700 in accordance with the Invoice issued by Hengchen Company. The involved Export Customs Declarations specified that the business unit and the shipper was Tangyuan Company, the standard trade term was FOB, the goods were 600 forklift pneumatic tires were worth of USD18,107; the vessel/voyage was CMACGMERVING/ME950W, the container number was MRKU9329881, and the B/L number was 588220832. Tangyuan Company contacted Globe Success Company, the booking agent designated by KUMPANLL to manage the booking and shipping matters. On May 3, 2013, Globe Success Company sent Confirmation of B/L to Tangyuan Company via E-mail attachment. The B/L with a title of GNS specified that the shipper was Tangyuan Company, the consignee and the notify party was LIMITEDLIABILITYCOMPANY “KUMPAN”, the vessel/voyage was CMACGMERVING/950W, the loading port was Qingdao, the discharging port and destination was Novorossiysk, Russia, the goods were 600 forklift pneumatic tires loaded in a twenty feet container, the period of responsibility was CY to CY, and freight was to be collected. But there was no record about container number in the Confirmation of B/L. After accepting the agency, Hengchen Company delegated the agency to Sunmoon Company to complete relevant forwarding matters and paid the freight forwarding fees amounting to RMB1,470. Then Sunmoon Company delegated the agency to Shunfa Fleet to complete trailer of the involved goods overland. On May 4, 2013, the container trailer of Shunfa Fleet loaded two twenty feet empty containers including the involved container numbered MRKU9329881, heading for the place designated by Lutong Company and the cargo owner not involved in the case to load the goods. After the trailer arrived at Lutong Company, the driver provided a Export Equipment Interchange Receipt/Packing and Tally List to the handler of

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Lutong Company. The handler filled cargo information in the Export Equipment Interchange Receipt/Packing and Tally List and stamped the seal of Zhaoyang Company, associated company of Lutong Company, and then loaded the involved goods into the empty container designated by the driver. The Export Equipment Interchange Receipt/Packing and Tally List specified that the vessel/voyage was CMACGMTITAN/FM556W, the container number was UACU3347639, the B/L number was CNQIN081819, the destination was Bremerhaven. The cargo information written by the cargo owner showed the cargo name was tires, number of packages was 600, gross weight was 7,245 and volume was 28; Zhaoyang Company sealed on the signature bar of loading company. As for the loading, the statement provided by Shunfa Fleet illustrated that they accepted the agency of Sunmoon Company to load at the designated location. On May 4, 2013, Shunfa Fleet appointed a driver, Liu Shuzhou to drive a trailer (license plate number: LB73860) to carry two empty twenty feet containers to load goods. The involved container numbered MRKU9329881 and the other container numbered UACU3347639 was shipped to Bremerhaven, the vessel/voyage was CMACGMTITAN/FM556W and the B/L number was CNQIN081819. After arriving at the designated place, the driver passed the Export Equipment Interchange Receipt/Packing and Tally List to the handler of factory. The factory took charge of the container inspection, loading, sealing, filling orders and stamping seals. During the trial, HUANG Leimin, the legal representative of Tangyuan Company, also admitted that he went to the spot where the loading was supervised. With the confirmation of Tangyuan Company on the above information, Globe Success Company then booked space with Maersk Line. On May 9, 2013, Maersk (China) Shipping Co. Ltd. acted for Maersk Line to issue a full set of original B/L numbered 588220832, stating the information was same with the Confirmation of the B/L and the container number was MRKU9329881. On the same day, Globe Success Company sent the cost confirmation to Tangyuan Company, on which also marked the above container number. Tangyuan Company paid the freight forwarding fees in sum of RMB2,126 to Globe Success Company and got the full set of original B/L, and then sent the B/L to the consignee at destination to take delivery of goods. The original court found out that, according to the results about the circulation of container inquired from the official website of Maersk, the involved container numbered MRKU9329881 entered into container yard on May 4, 2013, and was shipped on M/V CMACGMERVING on May 9 and discharged at Busan on May 11. Then it was shipped on M/V CMACGMRACINE to proceed the voyage and discharged at Novorossiysk on June 26, and gated out empty on July 11. During the trial, Tangyuan Company affirmed that the goods in the involved container numbered MRKU9329881 had been delivered to the consignee. The original court finds that, on March 13, 2013, Tangyuan Company got the B/ L and found that the container number was different from the number when it supervised the loading, and then asked Globe Success Company via email. Globe Success Company replied that Tangyuan Company should ask the freight forwarder in Qingdao if they had problems with the container number. Due to the mistake of

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the goods not involved in this case shipped to Bremerhaven, the consignee who was not involved in the case informed Hengchen Company through their booking agent. On June 18, 2013, Hengchen Company asked Tangyuan Company via QQ that if they noticed the number of the loaded container was different from the that described in B/L, Tangyuan Company said they had already found that and called their booking agent, Globe Success Company, and was told that it was caused by change of container. Hengchen Company claimed the goods might be loaded mistakenly and suggested Tangyuan Company ask Globe Success Company to require Maersk to keep the goods stay at the port of transshipment and transship the goods to Bremerhaven. On June 19, 2013, Tangyuan Company issued a guarantee in the assistance of Hengchen Company to Globe Success Company, stating that due to the mistaken loading of No. MRKU9329881 container by the factory, Tangyuan Company required to detain the goods in Istanbul and confirm the liability and costs that should be assumed by Tangyuan Company. As the scheme of detention of goods at the port of transshipment failed, on the same day, Tangyuan Company issued another guarantee to cancel the detention. In the days followed, Hengchen Company informed Tangyuan Company through QQ and E-mail that the mistakenly loaded goods were gas stoves and the cargo owner not involved the case required to retrieve the goods. Hengchen Company expressed their willingness to deal with the follow-up problems with Tangyuan Company and proposed to transship the goods from Novorossiysk to Bremerhaven or return the goods to Qingdao, but ultimately, the two plans were not carried out. The original court also found out that Tangyuan Company had received full payment of the involved goods from KUMPANLLC and the goods in No. MRKU9329881 container arrived at Novorossiysk were not forklift pneumatic tires, Tangyuan Company signed the contract of original equipment manufacturing with Lutong Company on July 3, 2013 to purchase 600 forklift pneumatic tires for replenishment, which were worth of RMB101,280. On 4 and 27 July of the same year, Tangyuan Company paid the above money to Lutong Company in twice. Then Tangyuan Company entrusted Globe Success Company to ship the above goods and paid the freight forwarding fees in sum of RMB3,586 to it on July 30. The original court held that Tangyuan Company and Hengchen Company had established a valid marine freight forwarding contractual relationship with respect to the customs declaration, towing and other freight forwarding services of the involved goods, and both parties should exercise rights and fulfill obligations according to the contract. Based on the arguments of the two parties, the involved disputes could be summarized as follows: 1. Who should undertake the legal consequence after Hengchen Company delegated the agency to a qualified third party; 2. Who should be responsible for the mistaken loading of the involved goods; and 3. Whether Tangyuan Company suffered actual losses. 1. In respect of who should undertake the legal consequence after Hengchen Company delegated the agency to a qualified third party.

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The court of first instance held that the evidence on record showed that Tangyuan Company entrusted Hengchen Company to complete customs declaration, towing and other freight forwarding services with respect to the shipment of the involved goods, then Hengchen Company delegated the agency to Sunmoon Company to complete towing and Sunmoon Company delegated the agency to Shunfa Fleet. As the two parties did not have any agreement on sub-delegation of Hengchen Company, neither did Tangyuan Company subsequently ratify such sub-delegation, nor Hengchen Company proved that Tangyuan Company accepted such sub-delegation through distinct action, it can be affirmed that such sub-delegation was absence of consent of Tangyuan Company. Therefore, as the freight forwarder, Hengchen Company should be responsible for the action of Sunmoon Company and Shunfa Fleet to the client, namely Tangyuan Company. In other words, if Sunmonn Company or Shunfa Fleet had fault at fulfilling forwarding duties, for Tangyuan Company, it should be viewed as the fault of Hengchen Company. The argument of Hengchen Company that they should not bear any liability or risk caused by fault of the third party was lack of factual and legal basis, the court of first instance would not adopt. 2. In respect of who should be responsible for the mistaken loading of the involved goods The court of first instance held that, firstly, according to the evidence on record, the mistaken loading of the involved goods happened in the course of encasement before shipping, thus it was necessary to first clear the respective obligations of the two parties in the encasement period. During the trial, Tangyuan Company affirmed that Lutong Company was in charge of the encasement. The legal consequence of the action of Lutong Company should be undertaken by Tangyuan Company with respect to the marine freight forwarding contractual relationship between Tangyuan Company and Hengchen Company. Therefore, Tangyuan Company should be responsible for inspecting, loading, sealing, filling the documents and confirming goods information in the encasement period. As a matter of fact, HUANG Leimin, the legal representative of Tangyuan Company, went to the spot to supervise the loading. In the encasement period, Hengchen Company, as freight forwarder were not in charge of specific loading matters, but as they assigned the same container trailer to carry two empty containers to load goods of different cargo owners, it shall keep necessary caution, that’s to say, give the correct Export Equipment Interchange Receipt/Packing and Tally List to the owners and instruct the owners to load the cargo in corresponding container. Secondly, the identified details of the case indicate that the two parties obviously failed to perform their respective obligations discreetly. As for Hengchen Company, it gave a mistaken Export Equipment Interchange Receipt/Packing and Tally List of the goods not involved in the case to Tangyuan Company, and there was no valid evidence to prove that the driver had noticed or reminded that. As for Tangyuan Company, even if Tangyuan Company did not know the number of the involved container when confirming the information on the B/L on May 3,

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2013, namely one day before the encasement, they should have known the vessel/voyage, destination and other shipping information of the involved goods. The information on the Export Equipment Interchange Receipt/Packing and Tally List provided by the driver was distinctly different from the shipment information of the involved goods, obviously the staff of the cargo owners accepted rashly without check, and noted the information of the involved goods on the wrong document and sealed that. Even the legal representative of Tangyuan Company who arrived at the loading spot did not pay attention to that and check. Therefore, it should be determined that both Tangyuan Company and Hengchen Company had fault at the mistaken loading of the goods. Finally, in consideration of the details of obligations, the causality of mistaken loading, and the situation of staffs on the spot of the two parties during the encasement period, compared with appearance of the driver of Hengchen Company on the loading spot, the legal representative of Tangyuan Company who arrived at the loading spot should know more about the shipping information of the involved goods and have more opportunity to find the mistake of the documents and avoid the subsequent losses therefrom in time. Therefore, the court of first instance ascertained comprehensively that Tangyuan Company should take the majority of the liability for the mistaken loading in a proportion of 80% and Hengchen Company should bear 20% of the liability. 3. In respect of whether Tangyuan Company suffered actual losses The court of first instance held that though Tangyuan Company had got the payment for the involved goods, the consignee did not receive the correct goods, it was reasonable for Tangyuan Company to repurchase and reship the goods. As Hengchen Company did not prove that Tangyuan Company had received the payment for the reshipped goods, the expenses for the second purchase and shipment amounting to RMB101,280 and the forwarding fees amounting to RMB3,586 should be ascertained as actual losses suffered by Tangyuan Company. Though Tangyuan Company affirmed that the consignee had taken delivery of the goods not involved in the case carried in No.MRKU9329881 container, such fact did not mean that the consignee had disposed the involved goods and got profits therefrom, and could not duly prove that Tangyuan Company obtained a benefit or reduced loss therefrom. Hengchen Company argued that the fact that the consignee had taken delivery of the goods showed the consignee waived his objection and the goods had been actually dealt, so that the losses the claimed by Tangyuan Company was false, such defence was lack of factual and legal basis, the court of first instance would not ascertain. Tangyuan Company suffered actual losses from the mistaken loading in total sum of RMB104,866. Such losses were resulted from the fault of both Tangyuan Company and Hengchen Company when performing the contract, and should be undertaken in proportion to the extent of their respective fault. Therefore, Tangyuan Company should bear RMB83,892.80 and Hengchen Company should bear RMB20,973.20.

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In conclusion, according to Article 107 and Article 120 of the Contract Law of the People’s Republic of China, Article 5 Paragraph 2 and Article 10 of the Provisions of the Supreme People’s Court on Several Issues in the Trial concerning Cases of Disputes over Marine Freight Forwarding, Article 21 Paragraph 2 and 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, and Article 69 Paragraph 4 of the Some Provisions of the Supreme People’s Court on Evidence in Civil Procedures, court of first instance judged that Hengchen Company should compensate Tangyuan Company for RMB20,973.20 within 10 days upon the effect of the judgment; reject other claims of Tangyuan Company. Tangyuan Company argued in the appeal that: 1. The freight forwarding contract concluded by Tangyuan Company and Hengchen Company was effective. Hengchen Company should perform the obligation for towing and loading properly and prudently in accordance with the contract. Such obligation would be exempted or transferred to Tangyuan Company because the legal representative of Tangyuan Company appeared in the spot. The determination of original court that Tangyuan Company should be in charge of inspection of container, loading goods, lead sealing, filling orders and confirming the goods was incorrect. 2. Hengchen Company committed faults obviously in the process of handling the commissioned affair, it should bear the liability for compensation. Firstly, Hengchen Company handed the export equipment interchange receipt/packing tally list of the goods which were not involved in this case to the factory of Tangyuan Company. Secondly, Hengchen Company’s driver designated an incorrect container to the factory of Tangyuan Company to load goods. Thirdly, Hengchen Company arranged one container trailer carrying two empty containers for different owners to load their goods, as a result, risk of error raised. And finally, Hengchen Company, as an agent, failed to fulfill the obligations for inspection of container and check relevant information in the course of loading. In summary, Tangyuan Company requested the court to set aside the judgment of first instance and amend the judgment or remand the case to the original court for retrial. Hengchen Company pleaded that it concluded contract with customs broker and trailer fleet on behalf of Tangyuan Company, rather than actually performed trialing work. Hengchen Company found a qualified trailer fleet and customs broker in Qingdao, so it had completed the commissioned affairs, and there was no fault at the performance. In addition, the trailer fleet was only responsible for trialing empty containers to the factory designated by Tangyuan Company and carrying the loaded containers to port. Loading, inspection, tally, sealing and filling in the EIR were done by Tangyuan Company or its factory. The direct cause of the losses suffered by Tangyuan Company was mistake in loading, and the main reason lies in that Tangyuan Company did not check the information in the equipment exchange receipt, so it should bear main responsibility for it. The division of responsibility determined by the original court is objective and factual.

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Hengchen Company argued in the appeal that: 1. 1.The liability of the trailer fleet should not exceed the probable losses caused by the breach of the obligation for towing which was foreseen or ought to be foreseen when it accepted the consignment, that means the loss should not exceed the extra trailer costs because of the mistaken loading. 2. The value of the gas stoves which were loaded mistakenly should be deducted from The actual losses of Tangyuan Company. Therefore, it requested the court to re-identify the scope of liability for damages and the actual losses of Tangyuan Company. Hengchen Company defended that the corresponding losses of Tangyuan Company arising from the mistaken loading actually existed, therefore it disagreed with the claims of Hengchen Company in the appeal. In the second instance, both parties did not submit any new evidence. After trial, the court ascertains that the facts determined by the court of first instance are clear and shall be affirmed. The court holds that the case is concerning dispute over marine freight forwarding contract. The main issues in the second instance lie in whether Hengchen Company shall be responsible for the mistaken loading of the goods concerned and the scope of the responsibility, and the actual losses suffered by Tangyuan Company. With respect to whether Hengchen Company shall be responsible for the mistaken loading of the goods concerned and the scope of the responsibility, the court holds that if a party fails to perform its obligations under a contract, or its performance fails to satisfy the terms of the contract, according to law, it shall bear the liabilities for breach of contract. In the case, wrong shipment is caused by wrong loading, while the reason of wrong loading, on one side, is the trailer driver’s failure at exercising due diligence in the case of two empty containers on one trailer and delivery of the wrong export container EIR / packing tally list, on another side is the reckless performance of Tangyuan Company in the course of inspecting the container and loading the goods into the container. Therefore, the performance of Hengchen Company fails to satisfy the terms of the contract, it shall bear the liability for the breach of the contract. As for the scope of the responsibility, it shall be determined comprehensively by the circumstances of the case. The court holds that, though Hengchen Company has a defective performance to the contract, the particulars in the export container EIR / packing tally list are not consistent with related information of the goods concerned, especially the port of destination which is expressly described in Chinese is Bremerhaven. It is apparently inconsistent with the port of destination stated in the trade contract and the confirmation of B/L, namely the Novorossiysk, Russia. HUANG Moumou, the representative of Tangyuan Company at the loading spot, and the staff appointed to inspect and load the goods into container by Lutong Company, should have found the difference when checking and filling the documents and the mistakes thereafter could be avoided. Therefore, after considering the rights and obligations of both parties and the causality of the losses, it is proper that the court of first instance decided Hengchen Company to bear

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secondary liability for goods, the court affirms the decision and dismiss the grounds of appeal raised by Tangyuan Company. Hengchen Company also argued that its liability should not exceed the probable losses caused by the breach of the obligation for towing which was foreseen or ought to be foreseen when it accepted the commission, namely the trailer fees. The court holds that, although Hengchen Company differs from Tangyuan Company in terms of extent of breach of contract, according to the facts determined in this case, there is a clear causal link between the negligence of Hengchen Company and mistaken loading of the goods, and the fault of Tangyuan Company cannot block the causal link. In addition, as a professional freight forwarder, mistaken loading and shipment caused by improper performance of trailer obligation do not exceed the scope which was foreseen or ought to be foreseen when it concluded the contract. Therefore, the grounds raised by Hengchen Company in the appeal are inadmissible. In respect of the actual losses of Tangyuan Company, due to the fault of the parties in the course of performing contract, the goods were shipped to Bremerhaven, Germany mistakenly and Tangyuan Company lost control of the goods, so the losses of Tangyuan Company do exist. Since then, in order to fulfill its obligations under the sale contract, the action that Tangyuan Company re-purchased and arranged shipment of the goods is reasonable. In the case where the price of the newly purchased goods is almost equivalent to the goods concerned, the decision that the original court calculated the actual losses by the re-purchased price of the goods and freight forwarding fees thereof is appropriate, so the court ascertains. The goods were loaded mistakenly, Tangyuan Company is not entitled to dispose the gas stove not involved in the case, so the court will not adopt the ground of appeal raised by Hengchen Company that the gas stove not involved in the case should be deducted from the actual losses. In summary, the grounds of appeal in this case raised by the parties lack factual and legal basis, so the appeals are not supported. The original judgment is clear in the determination of the facts and correct in the application of relevant laws. According to Article 170 Paragraph 1 Sub-paragraph 1 and Article 175 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee in amount of RMB2,397, the Appellant, Shanghai Tangyuan Import & Export Trade Co., Ltd., shall bear RMB1,917.6, and the Appellant, Shanghai Hengchen International Freight Forwarding Co., Ltd., shall bear RMB479.40. The judgment is final. Presiding Judge: DONG MIN Acting Judge: HU Hailong Acting Judge: XU Yijin March 17, 2014 Clerk: CHEN Xi

Guangzhou Maritime Court Civil Judgment Sunshine Property Insurance Co., Ltd. Shanghai Branch v. Maersk Line (China) Co., Ltd. et al. (2013) Guang Hai Fa Chu Zi No.316 Related Case(s) None. Cause of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote The Defendant carrier held liable for water damage to cargo sustained during its period of responsibility, but entitled to limit its liability by reference to the number of packages damaged, there being no evidence about their weight. Summary The Plaintiff insurance company sought to recover monetary damages for the loss of goods, electronic communication devices purchased by the Plaintiff’s insured, which were loaded on to the Defendant’s carrier ship in Yantian, Shenzhen for carriage to the port of Douala, Cameroon, and which were damaged by water during transit. When the container arrived in the port of Douala, the Customs agents inspected the container and noticed a puncture in the top of the container. After further inspection by the customs agents in Douala, 14 packages were found to have suffered water damage during transit from the hole in the top of the container. The court found that the Defendant did not provide sufficient evidence to refute that the goods were damaged within its period of responsibility. The Plaintiff’s claim for the full amount of its loss was not sustained as the Defendant was held to be entitled to limit its liability by reference to the number of packages damaged, there being no evidence of their weight.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_47

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Judgment The Plaintiff: Sunshine Property Insurance Co., Ltd. Shanghai Branch Domicile: Floor 9, 777 Lane, No.55 West Guangzhong Road, Shanghai. Person in charge: WANG Sen, General Manager. Agent ad litem: HE Aiping, lawyer of Guangdong Bright & Wing Law Firm. Agent ad litem: TAN Chuanjun, lawyer of Guangdong Bright & Wing Law Firm. The Defendant: Maersk Line (China) Co., Ltd. Domicile: Room 1705-1708, Block B, Lecheng Centre, No.24 East Third Ring Road, Chaoyang District, Beijing. Legal representative: DING Zejuan, chairman. Agent ad litem: ZHANG Xinwei, lawyer of Shanghai GL&CO. (Guangzhou). Agent ad litem: YUAN Yuan, lawyer of Shanghai GL&CO. (Guangzhou). The Defendant: Maersk Line (China) Co., Ltd. Shenzhen Branch Domicile: B-H Unit Fl.14 & Fl.15, Maoye Times Square, Haide Second Road, Cultural Center, Nanshan District, Shenzhen, Guangdong. Person in charge: FENG Ni, financial manager. Agent ad litem: ZHANG Xinwei, lawyer of Shanghai GL&CO. (Guangzhou). Agent ad litem: YUAN Yuan, lawyer of Shanghai GL&CO. (Guangzhou). With respect to the case of dispute over contract of carriage of goods by sea filed by the Plaintiff, Sunshine Property Insurance Co., Ltd. Shanghai Branch, against the Defendant, Maersk Line (China) Co., Ltd. (hereinafter referred to as “Maersk China”), and the Defendant, Maersk Line (China) Co., Ltd. Shenzhen Branch (hereinafter referred to as “Maersk Shenzhen”) on February 20, 2013, the court, after accepting the case on February 21, organized the collegiate panel consisting of Presiding Judge PINGYANG Danke, Judge ZHAI Xin and People’s Assessor TANG Jie to try the case in accordance with the law, and appointed ZENG Huifen as Clerk. On April 10, 2013, the court summoned all parties concerned to exchange evidence before trial and held a hearing in public. TAN Chuanjun, agent ad litem of the Plaintiff, ZHANG Xinwei and YUAN Yuan, agents ad litem of the two Defendants, appeared in court to attend the hearing. Now the case has been concluded. The Plaintiff alleged that on December 9, 2011, the insured, Huawei Technology Co., Ltd. (hereinafter referred to as “Huawei Technology”) sent a batch of communication devices from port of Yantian, Shenzhen to Port of Douala, the Republic of Cameroon. The contractual carrier was Maersk Shenzhen, the actual carrier was Maersk China, the carrying vessel was M.V. “Sine Maersk” owned by A. P. Moller-Maersk A/S (hereinafter referred to as “Maersk”), the number of the B/L was 863115586 and there were 9 containers loading the goods under the B/L. On January 21, 2012, the goods arrived at the destination. It was found there was a hole at the top of No.MSKU1162830 container and the goods in the container suffered wet damages in the course of unloading. On February 24, all parties concerned

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jointly surveyed the goods in the container and found the goods suffered wet damage on a large scale. On May 4, Maersk China informed the accident via a written report of damage to goods. Since the damage to the goods involved attributed to water wet and the damaged goods were communication devices, the loss of the goods could only be identified after certain inspection. Upon inspection of Huawei Technology, the loss of the goods caused by the accident amounted to USD254,195.03, the Plaintiff indemnified USD203,906.17 after deducting the residual value in amount of USD50,288.86 in accordance with insurance agreement. The Plaintiff requested the court to judge that the two Defendants should jointly and severally compensate the Plaintiff for the economic loss in amount of RMB1,289,686.13 (USD currency should be converted into RMB currency according to instant USD to RMB exchange rate of China Administration of Foreign Exchange (1:6.3249) on the day of actual payment of the Plaintiff namely July 6, 2012) and interests thereon (interest should be counted at RMB loan interest rate of Bank of China over the same period from July 7, 2012 to the day of actual payment). The litigation costs should be born by the two Defendants. The Plaintiff submitted the following evidence materials within the limit time for producing evidence: 1. Insurance agreement and supplementary agreement, cargo transportation insurance policy, bank payment record of insurance indemnity, letter of subrogation, letter of insurance indemnity calculation; 2. Email about report of the accident, and claim letter to the Plaintiff and the two Defendants sent by Huawei Technology; 3. Copy of No.863115586 B/L, accident report issued by Maersk China to Huawei Technology; 4. Invoice of the goods involved, quality inspection report of damaged goods and calculation list of the loss of goods issued by Huawei Technology; 5. Survey report of damage to the goods involved; The two Defendants defended that: 1. The Defendants had no objection to the relationship of contract of carriage of goods by sea between the Plaintiff and the two Defendants, but alleged that the contractual carrier was the Defendant Maersk China and the actual carrier was the Defendant Maersk Shenzhen; 2. The damage to the goods involved did not occur during the responsibility period of the two Defendants. The goods in the container involved had been transported to the port of destination on January 21, 2012 and had been delivered to Bollore Africa Logistics Co., Ltd. (hereinafter referred to as “Bollore Company”) which acted for the shipper or the consignee. At the time of delivery of the goods, the top of the container was in good condition and the equipment interchange receipt (EIR) had been made, which actually was the container inspection report mentioned in the Plaintiff’s evidence. Afterwards, the goods in the container involved had been under the control of Bollore Company.

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The hole at the top of the container and wet damage to the goods caused by the hole was found on February 24 when the consignee took delivery of the goods and transported the goods to the warehouse, the consignee took photos and notified the carrier on February 25. Therefore, the damage to the goods in the container involved occurred in the period when Bollore Company was in charge of the goods rather than in the responsibility period of the two Defendants. With respect to the damage to the goods occurring after delivery of goods in the container involved, the carrier should not be liable to compensate; 3. The claimed amount of the Plaintiff, which was counted on the basis of 110% of the actual value of the damaged goods in good condition minus the residual value had no factual and legal basis. The amount of the loss of the goods should be counted on the basis on the actual value of the damaged goods in good condition. Even if the two Defendants should bear corresponding liability, they were entitled to enjoy limitation of liability in accordance with Article 56 of the Maritime Code of the People’s Republic of China. With no weight of the damaged goods for reference, an amount equivalent to 666.67 units of account per package should be adopted. Where the actual loss of a package of goods was lower than the above-mentioned statutory highest limitation of liability, the Plaintiff should claim for the amount of the actual loss; where the actual loss of a package of goods exceeded the above-mentioned statutory highest limitation of liability, the two Defendants should take liability for compensation within the statutory highest limitation. The residual value of the wet damaged goods was USD50,288.86, it should be contributed on the basis of the proportion accounted by the value of each wet damaged goods in the value of the goods of full container, and the residual value should be subtracted from the amount of each wet damaged goods. Accordingly, it turned out that the highest limitation of liability the two Defendants should bear was USD14,750.52, thus the Defendants requested the court to reject the claims filed by the Plaintiff. The two Defendants jointly submitted the following evidence materials within the limit time for producing evidence: 1. Copy of No. 863115586 B/L; 2. Copy of EIR of port of Douala; 3. Email about notification of the damage of goods to the two Defendants on February 25, 2012. The two Defendants jointly submitted the following evidence materials after the court hearing: 4. Certificate of Nationality of M.V. “Sine Maersk”, Summary Document of International Safety of Life at Sea Continuous Record, Certificate of International Oil Pollution Prevention and the attachment, Certificate of Ship Class, Certificate of Compliance (the Kingdom of Denmark), Certificate of International Load Lines, Certificate of Ship Tonnage, Certificate of Insurance or Financial Security for Civil Liability for Bunker Oil Pollution Damage, Certificate of Minimum Safe Manning, List of Crew;

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Upon cross-examination, the two Defendants had no objection to the insurance agreement and supplementary agreement, cargo transportation insurance policy, bank payment record of insurance indemnity, claim letter to the Plaintiff and the two Defendants issued by Huawei Technology, copy of No.863115586 B/L, accident report issued by Maersk China to Huawei Technology, invoice of the goods involved, quality inspection report on the damaged goods and calculation list of loss of goods issued by Huawei Technology submitted by the Plaintiff. The Plaintiff had no objection to B/L No.863115586 submitted by the two Defendants. The court ascertains the probative force of the above evidence. The two Defendants had no objection to the authenticity, legality or relevancy of the letter of subrogation, letter of insurance indemnity calculate, email of Huawei Technology about report of the accident, claim letter of Huawei Technology to the Plaintiff and the two Defendants, survey report on damage to the goods involved submitted by the Plaintiff, but alleged that part of the contents of the evidence did not comply with the facts. The court holds that since the two Defendants had no objection to the authenticity, legality and relevancy of the above evidence, its probative force thereof shall be ascertained. In respect of whether the evidence above can prove the relevant facts of this case, it needs to be identified comprehensively in combination with other evidence and facts. The Plaintiff challenged the authenticity, legality and relevancy of all the certificates and the crew list of M.V. “Sine Maersk” submitted by the two Defendants. The court holds that the copies submitted by the two Defendants are consistent with the originals, of which the contents are related to this case and the statutory notary certification procedures have been handled, hence the court ascertains the probative force thereof. The Plaintiff had objection to the authenticity of the copy of the EIR of port of Douala and the email about notification of the damage to the goods sent to the two Defendants on February 25, 2012 submitted by the two Defendants, and alleged that the two evidence materials were formed out of the territory of the People’s Republic of China, no statutory notary certification procedure was handled, so they should not be admissible. The court holds that there is no original to verify the copy of the EIR of port of Douala, the authenticity thereof cannot be ascertained, and since it was formed out of the territory of the People’s Republic of China and the two Defendants failed to submit document of notary certification in conformity with relevant provisions of laws and judicial interpretations. The court has designated the deadline for the two Defendants to submit the document of notary certification as supplementary during the hearing, but the two Defendants failed to submit within that period. In respect of the email on February 25 submitted by the two Defendants, neither the two Defendants proved the identity of the addressee and the addresser, nor could the Defendants have other facts or evidence to prove, hence the authenticity thereof cannot be ascertained. Therefore, the two evidence materials above submitted by the two Defendants shall not be admissible. According to the facts confirmed by the parties and probative force of the above evidence having been ascertained, the court finds the following facts:

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On February 11, 2011, Huawei Technology signed Huawei Global Logistics Insurance Purchase Agreement 2011-2012 with Sunshine Property Insurance Co., Ltd. (hereinafter referred to as “Sunshine Insurance”), it was agreed the insurer was Sunshine Insurance, the insureds were Shenzhen Huawei Investment Holding Co., Ltd., Huawei Technology Investment Co., Ltd., Huawei International Co., Ltd., and their subsidiaries, affiliated companies or enterprise entities which complied with the provisions of the Company Law, or holding company entities, other companies or enterprise entity which had obligation to arrange insurance for their benefit. The insurance purchase by the insured was global logistics insurance. The insurance policy was global transport and warehouse open policy. It was agreed in Article 14 “Insured Amount” of the agreement that the insured amount of the international transport insurance should be counted on the basis of amount of customs clearance of destination country multiply (1+ markon percentage), usually the markon percentage was 10%. It was agreed in Article 19 “Claim Handling” of the agreement, where the materials involved with Huawei information security were covered by international freight insurance when such materials were scrapped, the wreckage value thereof was 20% of insured amount of the scrapped materials, where the materials not involved with Huawei information security were scrapped, the wreckage value thereof should be RMB7.7 per kg, and the wreckage value mentioned above should be deducted from the insurance indemnity directly. On June 20, Sunshine Property Insurance Co., Ltd. Shenzhen Branch (hereinafter referred to as to “Sunshine Insurance Shenzhen”) issued No.1091010022011004900 insurance policy on behalf of Sunshine Insurance, on which the total insured amount was USD35,000,000. In December 2011, Huawei Technology exported a batch of communication devices to Cameroon Postal Services. According to the invoice issued by Huawei Technology, the CIP price of the goods was USD7,498,591.28. Huawei Technology entrusted the Defendant Maersk China to transport the goods. On December 9, the Defendant Maersk Shenzhen issued No.863115586 original shipped B/L in the name of the Defendant Maersk China. The title of the B/L was Maersk, the seal of the Defendant Maersk China was affixed on the seal blank. It was stated the shipper was Huawei Technology, the consignee and the notify party was Cameroon Postal Services; the name of the vessel was M.V. “Sine Maersk” and the voyage was 1202; the port of loading was port of Yantia, Shenzhen PRC and the port of discharge was port of Douala, Cameroon; the service terms was CY/CY, the freight was prepaid; the goods were communication devices in 9 containers, the goods were packed, stacked, weighed and counted by the shipper, of which 176 packages in weight of 6,560.96 kg were loaded in a 40 feet container numbered with MSKU1162830. The goods above arrived at port of Douala, Cameroon on January 21, 2012. On February, 29 Huawei Technology sent email to the Plaintiff, saying that a hole was found on the top of one container carried to Cameroon when the Customs unpacked the container to inspect the goods therein in the warehouse, rain soaked the goods in the container; the preliminarily estimated loss was USD300,000; due to unavailable contact with local staff, it remained to be cleared whether the goods

Sunshine Property Insurance Co., Ltd. Shanghai Branch …

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were in the Customs or in the warehouse. It asked whether the Plaintiff needed survey on the spot and informed that YAN Zhihua was the contact person for the survey. Huawei Technology would send a formal notice of accident claim. On March 8, Huawei Technology submitted Notice of Accident/Claim to Sunshine Insurance and alleged on November 5, 2011, the goods involved were shipped from Shenzhen and arrived at Cameroon on January 21, 2012, and then a hole at the top of the container was found. On February 24, Huawei Technology conducted a joint inspection with the customer, several packages were damaged by water, the time of the occurrence of the accident was February 24, the estimated amount of loss and the claimed amount were both USD300,000. From March 8 to 9, the parties concerned conducted a joint inspection on the goods in No.MSKU1162830 container in the Transimex warehouse of Port of Douala under No.863115586 B/L. Omega Maritime Co., Ltd. (hereinafter referred to as “Omega Company”) participated in the joint inspection on behalf of Huawei Technology and its insurer, and issued the survey report on June 29. According to the survey report, there were 176 packages of goods loaded in the container transported from port of Yantian, Shenzhen to port of Douala, Cameroon by M.V. “Sine Maersk”. After the goods in the container were discharged by DIT Company from the vessel, Bollore Company handled the import customs clearance formality for the goods and delivered the goods to the consignee at Transimex yard of port of Douala. With respect to the delivery of the goods, Omega Company participated in the joint inspection on behalf of Huawei Technology under the instruction of Zass International GMBH. It was said the container had been opened to be inspected at the request of the Customs. Upon the joint inspection, it was found that there was a cleft in size of about 10cm * 8cm in the place of 50cm from the door of container at the top of No.MSKU1162830 container, part of the goods in the container were dampened and damaged. With respect to the joint inspection, the staff of Omega Company met YAN Zhihua, the representative of Huawei Technology to sign the statement of joint discovery, while YAN Zhihua refused to sign it and offer any document such as container table, commercial invoice, letter of protest to Omega Company. On March 27, Omega Company sent the statement of discovery by email to Huawei Technology, but it got no reply. With respect to the cause of the damage to the goods, due to lack of the documents like report of discharge, container table etc., it was concluded in the survey report that the wet damage to the goods in the container might reasonably attribute to water leakage at the top of the container during the carriage at sea or the unloading of the goods at Port of Douala. With respect to the extent of the loss of the goods, due to lack of documents of the goods like commercial invoice, the extent of loss of goods was not identified in the survey report. On March 21, Huawei Technology issued a quality inspection report, which recorded that due to the hole at the top of No.MSKU1162830 container, water ran into the container and caused the damage to the goods, 14 kinds and 69 packages of goods scrapped in total. Huawei Technology issued a calculation list of loss of the insured property. According to the above-mentioned the quality inspection report

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and calculation list of loss, there were 69 packages of goods in 14 kinds scrapped in the container, of which the total amount of the loss was USD231,086.39, including: 1. Four 800W AC power module, the unit price was USD323.69; 2. Four Quidway S9306/S9312 master control A, the unit price was USD1,032.77; 3. One S9303 whole frame, the unit price was USD412.73; 4. Two 800W AC power module, the unit price was USD323.69; 5. One 48 Port interface plug-in, the unit price was USD2,058.20; 6. One 24-Port interface plug-in, of which the unit price was USD1,752.30; 7. One S9303 whole frame, the unit price was USD412.73; 8. Two 800W AC power module, the unit price was USD323.69; 9. One 48 Port interface plug-in, the unit price was USD2,058.20; 10. One 24-Port interface plug-in, the unit price was USD1,752.30; 11. One 48 Optical transceiver, the unit price was USD48.96; 12. One Eudemon firewall, the unit price was USD71,194.07; 13. One Eudemon firewall, the unit price was USD71,194.07; 14. One Eudemon firewall, the unit price was USD71,194.07; The Plaintiff and the two Defendants had no objection to the sort, quantity, amount of loss of single goods, total amount of loss of the scrapped goods recorded in the above quality inspection report or calculation list of loss. It was also recorded in the calculation list of loss of insured property that according to the calculation method agreed in the insurance agreement between Huawei Technology and Sunshine Insurance, the claimed amount should be 110% of the total amount of the loss of the scrapped goods namely USD254,95.03. On May 4, the Defendant Maersk China issued an accident report to Huawei Technology, alleging that with respect to the goods transported from Port of Shenzhen, China to Port of Douala, Cameroon under No.863115586 B/L, Maersk Cameroon S.A. was noticed that part of the goods in No.MSKU1162830 container under the B/L suffered wet damage at port of Douala, Cameroon on February 25, there were photos showing a hole at the top of the container; and Huawei Technology submitted an inspection report of container which recorded the condition of breakage of container issued by port of Douala, Cameroon on February 18 to the Defendant Maersk China on May 3. On May 8, Huawei Technology submitted the notice of claim to the Defendant Maersk China, alleging that the goods under the No.863115586 B/L were loaded at port of Shenzhen, China on December 5, 2011 and transported to Port of Douala, Cameroon on January 21, 2012. A hole at the top of container was found while being inspected by the Customs, 44 packages of goods in the container were damaged by water, the Defendant Maersk China should take full responsibility for the loss above. From June 24 to July 2, the Plaintiff made an adjustment in respect of the insurance claim for the loss of the goods involved made by Huawei Technology and made the calculation statement of cargo transportation insurance indemnity.

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929

According to the statement of calculation, the loss of subject matter insured was USD254,195.03, the residual value thereof was USD50,288.86, the indemnity ratio was 100%. There was no deductible, so the final insurance indemnity was USD203,906.17. On July 6, the Plaintiff paid the insurance indemnity in amount of USD203,906.17 to Huawei Technology through Sunshine Insurance Shenzhen. Huawei Technology issued the letter of subrogation on the same day and confirmed it received the indemnity in amount of USD203,906.17 for the loss of the subject matter insured caused by wet damage under No.1091010022011004900 insurance policy from the Plaintiff on February 21, 2012, and assigned the rights and interests regarding the indemnity it had acquired to the Plaintiff and authorized the Plaintiff to recover or file a lawsuit against the parties within the scope permitted by the law. It is also found that M.V. “Sine Maersk” was a container vessel owned by Maersk; the flag nation of the vessel was the Kingdom of Denmark, which was officially registered in International Maritime Organization; the minimum safe manning of the vessel was 13 persons and there were 21 shipmen working on board for the voyage of the goods involved; and the amount and class of crews satisfied Certificate of Minimum Safe Manning. The parties all chose to apply the laws of the People’s Republic of China to resolve the substantive disputes of this case in the hearing. The court holds that this case is arising from dispute over contract of carriage of goods by sea. The goods involved were transported from port of Yantian, Shenzhen to Port of Douala, Cameroon by sea. This case involved foreign-related factors. According to Article 11 of the Supreme People’s Court on Several Provisions concerning the Scope of Cases Entertained by Maritime Courts, dispute over contract of carriage of goods by sea is under exclusive jurisdiction of maritime courts. The place of shipment of the goods involved and the domicile of the Defendant Maersk Shenzhen is Shenzhen, Guangdong, which is under the jurisdiction of the court; and according to Article 27 of the Civil Procedure Law of the People’s Republic of China, a lawsuit arising from a dispute over a railway, road, water, or air transport contract or over a combined transport contract shall be under the jurisdiction of the people’s court of the place of dispatch or the place of destination or where the defendant has his domicile, the court has the jurisdiction over this case. The parties all chose to apply the laws of the People’s Republic of China to resolve the substantive disputes of this case, according to Article 269 of the Maritime Code of the People’s Republic of China, the laws of the People’s Republic of China shall apply to resolve the substantive disputes of this case. The Plaintiff, as the insurer, paid the insurance indemnity in amount of USD203,906.17 to Huawei Technology, the insured. According to Article 252 of the Maritime Code of the People’s Republic of China, where the loss of or damage to the subject matter insured within the insurance coverage is caused by a third person, the right of the insured to demand compensation from the third person shall be subrogated to the insurer from the time the indemnity is paid, the Plaintiff obtained the right of subrogation and was entitled to subrogate the right of the insured to demand compensation from the third person. The two Defendants had no objection to the fact that Plaintiff acquired the right of subrogation.

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Huawei Technology entrusted Maersk China to transport the goods involved loaded in No.MSKU1162830 container, the Defendant Maersk China accepted the entrustment and carriage of the goods involved as the contractual carrier. The Defendant Maersk Shenzhen issued No.863115586 B/L on behalf of it. According to Article 71 of the Maritime Code of the People’s Republic of China, a bill of lading is a document which serves as an evidence of the contract of carriage of goods by sea, so No.863115586 B/L could be deemed as the basis of the relationship of contract of carriage of goods by sea between Huawei Technology and the Defendant Maersk China, Huawei Technology as the shipper and the Defendant Maersk China as the carrier should exercise right and fulfil obligation in accordance with the contract and relevant laws. According to the record of No.863115586 B/L, the service terms of the goods involved was CY/CY, the consignee and the notify party was Cameroon Postal Services, and no release agent or delivery agent at the port of destination was stated therein. Pursuant to Article 46 Paragraph 1of the Maritime Code of the People’s Republic of China that the responsibilities of the carrier with regard to the goods carried in containers covers the entire period during which the carrier is in charge of the goods, starting from the time the carrier has taken over the goods at the port of loading, until the goods have been delivered at the port of discharge. The responsibility of the carrier with respect to non-containerized goods covers the period during which the carrier is in charge of the goods, starting from the time of loading of the goods onto the ship until the time the goods are discharged therefrom. During the period the carrier is in charge of the goods, the carrier shall be liable for the loss of or damage to the goods, except as otherwise provided for in this Section, the responsibility period of the Defendant Maersk China as the carrier starts from the time the carrier took over the goods in the container yard of the port of loading namely port of Yantian, Shenzhen PRC to the time the goods were delivered in the container yard of the port of destination namely port of Douala, Cameroon and the consignee was in charge of the goods involved. Except for the statutory exemptions, the Defendant Maersk China shall be liable for the loss of the goods involved occurring in the period of its responsibility. The present evidence of this case show that the goods in No.MSKU1162830 container under No.863115586 B/L was found damaged by water leakage at the port of discharge namely port of Douala. The two Defendants alleged that No. MSKU1162830 container had been delivered to Bollore Company which was on behalf of the consignee at the port of discharge. The damage on the top of the container had not been found when the container was delivered to Bollore Company. Therefore, the damage of the container and the wet damage to the goods in the container occurred after the goods involved were delivered, but not in the period of the carrier’s responsibility. They submitted a copy of the EIR of Port of Douala and the email about notification of the damage to the goods to the two Defendants on February 25, 2012 as evidence. However, the authenticity of these two evidence cannot be ascertained, so they are not admissible. The specific delivery time of the goods involved, the time when the damage to No. MSKU1162830 container and the wet damage to the goods were found is not

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clearly recorded according to the present evidence. But the discovery time shall at latest be the time when the goods involved were delivered to the consignee. According to survey report on damage to the goods involved issued by Omega Company, water leakage at the top of No.MSKU1162830 container occurred during the carriage of the container by sea or unloading of the goods at port of Douala. In the case that the two Defendants could not submit evidence to prove that the damage to No.MSKU1162830 container and wet damage to the goods occurred after the goods were delivered to the consignee, Cameroon Postal Services, it can be confirmed that wet damage to the goods in the container occurred before the goods were delivered to the consignee within the period of carrier’s responsibility. So the claim of the two Defendants cannot stand for lack of factual basis. The Defendant Maersk China was the carrier of the entire carriage of the goods involved. The loss of the goods involved occurred in the period of its responsibility. No evidence can prove exemptions provided in Article 51 of the Maritime Code. So the Defendant Maersk China shall be liable for the damage to the goods involved to the Plaintiff in accordance with the law. The Plaintiff claimed for the economic loss in amount of USD203,906.17. The two Defendants held that the loss of the goods should not be counted on basis of the method that the insured amount minus residual value of the goods, and alleged that the actual loss of each damaged goods should be counted on basis of the value minus residual value of the goods, then multiply the average numbers of packages in the container involved. The loss of the goods involved claimed by the Plaintiff was counted on basis of calculation method of the insured amount agreed in the insurance agreement that between Huawei Technology and Sunshine Insurance. The residual value of the damaged goods used in the calculation method alleged by the two Defendants was also based on the insurance agreement. It was not the result agreed in the contract of carriage of goods by sea or actual survey of scrapped goods, so it has no merit. The calculation method of the loss of the goods claimed by the Plaintiff and the two Defendants cannot be adopted. It has been identified that 69 packages of scrapped goods in a total of 14 kinds were damaged by water, according to the statistics of the amount of loss of each scrapped goods, the total loss s USD231,086.39. The parties have no objection to the extent, kind, quantity, amount of loss of single package and the total loss of the scrapped goods, the court ascertains the scrapped goods involved damaged by water have been already lost, the total amount of loss is USD231,086.39. The Defendant Maersk China alleged that the compensation for the loss of the goods involved should be subject to the limitation of liability provided in Article 56 of the Maritime Code, but the Plaintiff held that the limitation of liability above should not be applied to this case. Since no fact or evidence can suggest special request had been put forward in the carriage of the goods involved, the carrying vessel shall be deemed as an ordinary container vessel which is capable to safely receive, load and transport the goods involved. The two Defendants produced evidence to prove M.V. “Sine Maersk”, which actually carried out the carriage of the goods involved, is a container vessel having been officially registered and is still sailing with crew satisfying relevant requirements manned in the voyage involved.

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Therefore, it shall be considered that the Defendant Maersk China, as the carrier of the entire carriage of the goods involved, arranged a proper vessel and fulfilled the obligations of carrier. The Plaintiff failed to produce evidence to prove the conditions provided in Article 59 Paragraph 1 of the Maritime Code, it shall be liable for the legal consequences of failure of burden of proof. The claim of the Plaintiff cannot stand for lack of factual basis. According to Article 56 Paragraph 1 of the Maritime Code, the carrier’s liability for the loss of or damage to the goods shall be limited to an amount equivalent to 666.67 Units of Account per package or other shipping unit, or 2 Units of Account per kg of the gross weight of the goods lost or damaged, whichever is the higher. It has been identified that there were 176 packages of goods in total weight of 6,560.96 kg loaded in No.MSKU1162830 container, among which 69 packages of goods were scrapped because of water damage, and the goods were deemed to be lost. No evidence or fact can prove the total weight of the 69 packages of goods, so the limitation of liability of the goods involved shall be counted on basis of the packages of the goods involved. Since the specific time when the loss of the goods involved occurred cannot be ascertained, the time of issuing the quality inspection report on the damaged goods confirmed by Huawei Technology namely March 21 as the actual time of occurrence of the loss of the goods. According to Article 277 of the Maritime Code, the Unit of Account referred to in this law is the Special Drawing Right as defined by the International Monetary Fund Organization, according to the SDR to USD exchange rate (1:1.539760) that published by the International Monetary Fund Organization on March 21, 2012, the limitation of liability of single package involved was USD1,026.51. According to the amount of loss of single package of scrapped goods having been identified, where the amount of the loss of single package does not exceed USD1,026.51, the indemnity shall be counted on the basis of amount of the actual loss of the goods, where the amount of the loss of single package exceeds USD1,026.51, the indemnity shall be limited to USD1,026.51. Based on this calculation, in the 14 kinds and 69 packages of scrapped goods having been identified, the amount of the loss of single package of No.1, 3, 4, 7, 8, and 11 goods (58 packages in total) does not exceed USD1,026.51, the indemnity shall be counted on the basis of the amount of actual loss of the goods, namely USD5,765.06 in total; the amount of the loss of single package of the other 8 kinds (11 packages in total) exceeds the limitation of liability namely USD1,026.51, the indemnity shall be limited to USD11,291.61, so the total limitation of liability of the goods is USD17,056.67, the amount exceeding the limitation of liability claimed by the Plaintiff shall not be supported. The Plaintiff claimed that the amount of indemnity should be limited to an amount equivalent to 666.67 Units of Account per package multiply 176 packages of goods, and exchanged USD currency to RMB currency, the court holds it lacks factual and legal basis and shall not be supported. The interest of the loss of the goods involved shall be born by the Defendant Maersk China. The Plaintiff claimed that USD currency should be converted into RMB at the rate of the day that the insurance indemnity was actually paid and the interest

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should be counted from the day after that, the court holds it is reasonable and shall be supported. Therefore USD17,056.67 shall be converted into RMB currency according to the USD to RMB central parity rate published by Bank of China on July 6, 2012 (1:6.3249), then the interest shall be counted at RMB loan interest rate of Bank of China over the same period from July 7, 2012 to the date of payment designated by this judgment. The Plaintiff claimed that the two Defendants should be jointly liable for compensation. It has been identified that a relationship of contract of carriage of goods by sea is established between the shipper of the goods involved, Huawei Technology and the Defendant, Maersk China. The Defendant Maersk Shenzhen was arranged by the Defendant Maersk China to issue the B/L to Huawei Technology on behalf of the Defendant Maersk China, there is no relationship of contract of carriage of goods by sea between Maersk Shenzhen and Huawei Technology. Therefore, Maersk China shall be liable for compensation. In respect of the allegation of the two Defendants that the Defendant Maersk Shenzhen was the actual carrier, it has been identified that the Defendant Maersk Shenzhen is not the owner or bareboat charterer of M.V. “Sine Maersk”, or the one which actually transported the goods involved, so it is not actual carrier of the goods involved. The claim of the two Defendants lacks factual basis, so it cannot stand. There is no other fact or evidence to prove any agreement between Huawei Technology or the Plaintiff and the two Defendants that the two Defendants shall take liability for compensation jointly and severally, so the claim of the Plaintiff lacks factual basis, the court will not support. In summary, in accordance with Article 46, Article 56 Paragraph 1 of the Maritime Code of the People’s Republic of China, the judgment is as follows: 1. The Defendant, Maersk Line (China) Co., Ltd., shall compensate the Plaintiff, Sunshine Property Insurance Co., Ltd. Shanghai Branch, for the loss of goods in amount of USD17,056.67 and interest thereon (the USD currency shall be converted into RMB currency according to the USD to RMB middle exchange rate published by Bank of China on July 6, 2012 (1:6.3249), and the interest shall be counted at RMB loan interest rate of Bank of China over the same period from July 7, 2012 to the date of payment confirmed by this judgment); 2. Reject other claims of the Plaintiff, Sunshine Property Insurance Co., Ltd. The above obligation of payment shall be fulfilled within 10 days after this judgment comes into effect. For failure to fulfill the obligation of payment within the period designated by this Judgment, the person shall pay double interest on the debt for the delayed period according to Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB16,817.87, the Plaintiff, Sunshine Property Insurance Co., Ltd. Shanghai Branch, shall bear RMB15,459.14, and the Defendant, Maersk Line (China) Co., Ltd., shall bear RMB1,358.73.

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In case of dissatisfaction with this judgment, any party may within fifteen days upon service of this judgment, submit a statement of appeal to the court, together with copies in accordance with the number of the opposite parties, to lodge an appeal to the Guangdong High People’s Court. Presiding Judge: PINGYANG Danke Judge: ZHAI Xin People’s Assessor: TANG Jie October 31, 2014 Clerk: ZENG Huifen

Tianjin Maritime Court Civil Judgment Tianjin Jianyuan Geotechnical Engineering Co., Ltd. v. China Construction Second Engineering Bureau Co., Ltd. (2012) Jin Hai Fa Shang Chu Zi No.543 Related Case(s) This is the judgment of first instance, and the judgment of second instance and the ruling of retrial are on page 944 and page 958 respectively. Cause of Action 236. Dispute over contract for construction of dock or harbor. Headnote Contractor constructing passenger terminal held liable to pay subcontractor outstanding sums due under subcontract for backfilling of soil. Summary The Plaintiff, subcontractor, agreed with the Defendant, head contractor, to complete an outdoor backfilling hill skill soils project as part of Defendant’s construction of a cruise terminal at Tianjin Port. The contract explicitly described the type of payment the Plaintiff was to receive. The Plaintiff completed the project at the end of March 2010, but the Defendant did not fully pay Plaintiff the agreed upon price. The parties disagreed about the amount of soil that had been shifted by the Plaintiff. Held—that Defendant was legally bound to the contract and must pay the Plaintiff the outstanding sum of RMB1,342,034 and interest.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_48

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Judgment The Plaintiff: Tianjin Jianyuan Geotechnical Engineering Co., Ltd. Legal representative: CUI Jishun, chairman. Agent ad litem: LIU Hailong, lawyer of Hebei Hengtai (Tianjin) Law Firm. Agent ad litem: XU ke, trainee lawyer of Hebei Hengtai (Tianjin) Law Firm. The Defendant: China Construction Second Engineering Bureau Co., Ltd. Legal representative: CHEN Jianguang, chairman. Agent ad litem: WANG Jian, project manager. Agent ad litem: LI Bingqi, lawyer of Tianjin Yunhan Law Firm. With respect to the case arising from dispute over port construction contract filed by the Plaintiff, Tianjin Jianyuan Geotechnical Engineering Co., Ltd., against the Defendant, China Construction Second Engineering Bureau Co., Ltd., the court accepted the case on June 20, 2012 and thereafter organized the collegiate panel consisting of Judge YANG Lin, and Acting Judges LI Yin and ZHANG Junbo to try the case under general procedure in accordance with law. During the trial, the Plaintiff and the Defendant applied for reconciliation out of court, but failed to reach an agreement. The court held hearings in public on November 7, 2012, November 23, 2012 and August 8, 2013. Agents ad litem of the Plaintiff, LIU Hailong and XU Ke, and agents ad litem of the Defendant, WANG Jian and LI Bingqi, appeared in court to attend the hearings. Now the case has been concluded. The Plaintiff claimed that on February 25, 2010, the Plaintiff and Defendant signed a subcontracting contract concerning the outdoor backfilling hill-skill soils project contained in the Tianjin Port International Cruise Dock Project (passenger building project), which specifically provided the unit price, scope of the project, performance period, liability for breach of contract and so on. The Plaintiff completed the project involved within the period as agreed. The project quantities the Plaintiff completed were as follows: the quantities of backfilling hill-skill soils were 49,309.659 m3 and the price was RMB1,035,343.6; the quantities of backfilling plain soils were 14,285.754 m3 and the price was RMB800,002.22; the increased quantities of backfilling hill-skill soils due to removing silt during the construction were 10,051.88 m3 and the price was RMB1,035,343.6; the quantities of loss of earthworks caused by improper construction by a third party, Haijiali Company were 830 m3 and the price was RMB85,490; the sum of backfilling hill-skill soils, quartering hammers, excavators, dump trucks confirmed by the Defendant unilaterally (beyond the contract) was RMB42,944. The total sum of the project price was RMB7,042,674.62. The Defendant had paid RMB2.3 million for the project involved so far and the rest RMB4,742,674.62 had not been paid yet. Therefore the Plaintiff requested the court to rule the Defendant to pay the rest project price in amount of RMB4,742,674 and the interests thereon calculated at the bank loan interest rate over the same period from June 25, 2010, and bear the litigation fees. During the hearing, the Plaintiff changed the outstanding sum into RMB5,210,080,

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and claimed that the Defendant should pay 95% of the project price as agreed in the contract involved, namely RMB4,834,576. The Defendant argued that the basis of calculation of the project quantities was explicitly agreed in the contract signed by the two parties and the basis adopted by the Plaintiff was wrong. It recognized the fact that the loss was caused by Haijiali Company, but it should not bear the liability for that. The Defendant recognized the sum in amount of RMB42,787 it unilaterally confirmed. According to the contract, the progress payment at this stage should be 80% of the project price, and requested the court to adjudicate in accordance with law. The court holds that the main dispute of this case lies in ascertainment of the quantities. To support its claims, the Plaintiff submitted the following evidence materials to the court: 1. construction project subcontracting contract, to prove that a relationship of construction contract established between the Plaintiff and the Defendant; 2. application form for costs of modification of project and the drawings, to prove that the ground elevation and the loss of earthworks after removing silt in a quantities of 830 m3; 3. statement of completion of Tianjin Port International Cruise Dock Project, to prove that the initial elevation was 4.7 meters and the degree of density was 93% in the construction site; 4. design specifications of construction drawings, to prove that the total construction quantities fulfilled by the Plaintiff and the initial ground elevation; 5. project quantities settlement sheet, to prove the basis of settlement adopted by the Plaintiff unilaterally. The cross-examination opinions of the Defendant on the evidence submitted by the Plaintiff are as follows: it had no objection to the authenticity and purpose of proof of evidence 1; it disaffirmed the authenticity and relevancy of evidence 2 and evidence 3 since the Defendant did not submit these two documents to the Plaintiff, and it argued the application form for costs of modification of project was an internal data, though the seal and signature thereon were real, the document was void, the source of evidence 2 was illegal, and these two evidence could not challenge the agreement in the contract involved; it disaffirmed the purpose of proof of evidence 4 and held the ground elevation before the construction should be calculated in accordance with the contact; it had no objection to the authenticity of the Defendant’s signature in evidence 5. During the hearing, the Plaintiff applied for verification on Tianjin International Cruise Home Port Co., Ltd. in respect of relevant facts, and applied to the court for obtaining the original of evidence 3 submitted by itself. The court made an investigative record in accordance with law and obtained the originals of the relevant documents of the Statement of Completion of Tianjin Port International Cruise Dock Project. The Plaintiff disaffirmed the authenticity of the evidence obtained by the court, but the Defendant had no objection thereto. The ascertainment opinions of the court on the evidence provided by the Plaintiff are as follow: the court ascertains the authenticity of evidence 1 and holds it can prove the two parties established a contractual relationship as well as the agreement on the quantities, price of the project and etc. in the contract; the court ascertains the authenticity of the application form for costs of modification of project in evidence

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2, but holds the application form could not prove the project quantities because it is internal data of the Defendant, and neither it has been examined by a supervision institution or the owners, nor is it issued externally. In addition, the court does not ascertain the authenticity of the drawings in evidence 2 because there is no original drawings and no issuing unit is noted thereon; the court does not ascertain evidence 3 for discrepancy with the evidence obtained by the court; the court ascertains the authenticity of evidence 4 and 5, and the authenticity of the obtained evidence upon application of the Plaintiff, but holds they cannot prove the project quantities independently. To support its allegations, the Defendant submitted the following evidence materials to the court: 1. contract for construction project, to prove the contractual relationship between the Plaintiff and the Defendant and the calculation basis of the project quantities agreed in the contract; 2. topographic maps of the cruise dock of Dongjiang Port area, to prove the project quantities; 3. design specifications of construction drawings, to prove that these drawings were only regarded as the calculation basis of the upper elevation in the backfilling project; 4. photos, to prove that the construction carried out by the Plaintiff did not meet the requirement of the designed elevation in the drawings; 5. technology service contract, to prove the effect of the topographic maps in evidence 2; 6. construction drawings, to prove the scope of the project involved; 7. appraisal conclusion. The cross-examination opinions of the Plaintiff upon the evidence submitted by the Defendant are as follows: the Plaintiff affirmed the authenticity of evidence 1, and held the calculation of the project quantities should be pursuant to the design specifications of construction drawings; it disaffirmed the authenticity and relevancy of evidence 2 because it argued the maps should be issued before the construction design drawings; it had no objection to the authenticity of evidence 3; it disaffirmed the relevancy of evidence 4; it affirmed the authenticity of evidence 5, but argued that the contract was signed on April, 2012, while the topographic maps were drawn on February, 2010, the time was contradictory; it had no objection to evidence 6; it held evidence 7 was illegal, the surveyor had no qualification and the appraisal institution had interest in the business involved in the case; it disaffirmed the relevancy of evidence 7, but argued the appraisal conclusion, which differed from the actual project quantities greatly, had no probative force for the facts. The ascertainment opinions of the court on the evidence provided by the Defendant are as follow: the court ascertains the authenticity of the evidence 1, 2, 3, 5, 6 and 7, and they can prove the Plaintiff and the Defendant agreed on calculation rule of the project quantities in the contract and the project quantities calculated on the basis of relevant drawings; and the court does not ascertain the authenticity of evidence 4. After trial, the court finds out that, on February 25, 2010, the Plaintiff and the Defendant signed the Tianjin construction project professional subcontracting contract, and the Defendant was the contractor and the Plaintiff was the subcontractor. The two parties agreed on the construction of the outdoor backfilling hill-skill soils project contained in the Tianjin Port International Cruise Dock Project (passenger building project) located at Dongjiang Port Area, Tianjin Port.

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The project included construction of the original ground, trimming of the ground, and backfilling hill-skill soils. It was provided in the contract that the comprehensive unit price includes but not limited to labor costs, management fees, materials costs, machinery costs, settlement costs, taxes, profits, insurance fees, board and lodging costs and other costs for all work concerning the subcontracting contract involved; the comprehensive unit price of the project was RMB103 per cubic meter, including handling the original ground, trimming the ground, and backfilling hill-skill soils (including purchasing the soils, transport, grinding the soils on the scene, and the compaction coefficient was 0.93), the settlement considered freely, and the comprehensive unit price would not adjust when settling the project; the settlement of project quantities would not be calculated by receipts, the grid figures identified by the owners should prevail, and the upper elevation should be subject to the designed elevation and calculated on the basis of construction drawings. The method of payment agreed in the contract was as follows: the subcontractor should backfill the hill-skill soils in accordance with the requirements in the contract, and the progress payment of the project should be paid by 60% of the sum resulting from the finished quantities affirmed by the contractor multiplying the unit price; the payment should be stopped when 80% of the project price has been paid; 95% of the total project price should be paid within three month after the completion and acceptance of the general project; 5% of the total project price was regarded as maintenance fund, which should be settled within three months after the warranty period expires. The warranty period of the subcontracting contract was 2 years, calculating from the day of acceptance of the general project. The payment from the contractor to subcontractor should be based on relevant sums from the developer, and the subcontractor should provide qualified subcontract project invoices. On December 1, 2009, China Construction (Beijing) Design Consultant Co., Ltd. issued Design Specifications of Tianjin Port International Cruise Dock (Passenger Building Project) Environmental Landscape Construction Drawings (Fascicule I) (hereinafter referred to as the design drawings). In the earthworks diagram, the initial ground elevation of the project involved was 4.7 meters and it stated the data of construction site, completed ground elevation, earthworks of backfilling hill-skill soils and backfilling planting soils and etc. It also stated that the calculation of earthworks was an estimated data and for reference only, and the calculation should be subject to the actual quantities on site. On January 12, 2010, this company issued the construction drawings, which drew the specific scope of the backfilling project. During the hearings, the Plaintiff and the Defendant affirmed the scope of backfilling planting soils was that of backfilling plain soils, and the comprehensive unit price of backfilling plain soils was RMB46 per cubic meter. In February 2010, Tianjin Port International Cruise Home Port Co., Ltd. (hereinafter referred to as Cruise Port Company) entrusted Tianjin Survey and Design Institute for Shipping Engineering (hereinafter referred to as Design Institute) to draw topographic map 1 and 2 of the cruise dock of Dongjiang Port

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Area before construction (measuring time: February 2010; measurer: KE Min; draftsman: LI Quanrong; surveyor: WU Qingbao) (hereinafter referred to as topographic maps), and the topographic maps marked the topography of the construction area before construction. The Plaintiff started the construction of the project involved by the end of February 2010 and completed on March 25, 2010. The Defendant, as the contractor, finished the general project on September 2010 and the general project has been put into use. The developer was Cruise Port Company, and the general project had not been settled so far between it and the Defendant. Upon investigation of the court on Cruise Port Company, it affirmed the topographic maps were the basis of the project quantities. On January 17, 2013, in order to account the project quantities, the Defendant applied to the court for entrusting Shipping Design Institute to draw grid figures for the project quantities. In July 2013, Shipping Design Institute issued the Verification Specifications of Project Quantities of Outdoor Backfilling Hill-skill Soils Project of Tianjin Port International Cruise Dock Project, which calculated the project quantities based on the grid figures by grid method, and the conclusion was as follows: the theoretical earthworks of backfilling hill-skill soils were 33,411 m3 and the calculating earthworks thereof were 36,084 m3 (the compaction coefficient was 1.08), the theoretical earthworks of backfilling plain soils were 7,600 m3 and the calculating earthworks thereof were 9,880 m3 (the compaction coefficient was 1.30). During the construction, the Defendant signed the confirmation letter that it had to pay the other project fees in amount of RMB42,787. The two parties confirmed that the Defendant had paid the project price in sum of RMB 2.3 million to the Plaintiff. The court holds that the case is arising from dispute over dock construction contract, and the construction project subcontracting contract signed by the Plaintiff and the Defendant is a declaration of true intents, in the meantime, the contract does not violate mandatory provisions of laws and administrative regulations, so the contract is legal and effect. The Plaintiff as the subcontractor and the Defendant as the contractor shall fully perform their obligations respectively in accordance with the contract. The Plaintiff completed the backfilling hill-skill soils project according to the contract by the end of March 2010, and the project involved has been put into use for a long time, so the Defendant shall fulfill its obligation to pay the project price to the Plaintiff as agreed. As for project quantities, the dispute between the Plaintiff and the Defendant lies in the ascertainment of the bottom elevation before construction for calculation of the project quantities. The Plaintiff held that the bottom elevation before the construction should be the initial elevation of the ground recorded in the design drawings, namely 4.7 meters, while the Defendant argued that it should be on the basis of data stated in the topographic maps. The court holds that the calculation rule of project quantities has been specifically agreed in the contract involved, namely the grid figures confirmed by the owner, and the upper elevation shall be

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calculated in accordance with the construction drawings. The evidence submitted by the Plaintiff and the Defendant does not contain grid figures. In comparison of the design drawings and the topographic maps, the topographic maps were completed by Shipping Design Institute under the entrustment of Cruise Port Company before the construction of the project involved, and both parties had no objection thereto during the construction and Cruise Port Company also affirmed that the topographic maps were the basis to calculate the project quantities. The court holds that the maps can reflect the ground elevation before the construction objectively, and the maps shall be the basis to calculate the project quantities. Upon the application of the Defendant, Shipping Design Institute drew grid figures for the backfilling hill-skill soils project by grid method on the basis of the topographic maps and other maps, and calculated the backfilling earthworks of hill-skill soils and plain soils in this way, and it is of objective. The comprehensive unit price agreed in the contract involved contains the factors like compaction coefficient and so on, therefore the theoretical project quantities calculated by Shipping Design Institute shall be basis to ascertain the project quantities. After calculation, the project price of backfilling hill-skill soils was RMB3,441,333, the project price of backfilling plain soils is RMB349,600, the other project price having been confirmed by the Defendant with the signature in the confirmation letter is RMB42,787, and the three sums amount to RMB3,833,720. The Plaintiff argued that the quantities of backfilling hill-skill soils were increased because of removing silt during the construction, but the court will not support the claim since the Plaintiff failed to provide effective evidence to prove that. As for the loss caused by Haijiali Company, an outsider, claimed by the Plaintiff, the court cannot ascertain the fact of loss suffered by Haijiali Company, and the Defendant disagreed to take responsibility for that loss, therefore the court will not support this claim. As for the proportion of payment, the Defendant argued that since the general contract had not been completed and settled, so it should pay the Plaintiff 80% of the project price in accordance with the contract. The court holds that the payment schedule agreed in the contract is an agreement on the performance period, which is true intents of the two parties and has a binding force thereto. The Plaintiff shall obey the agreement that 95% of the settled price shall be paid within three months after the general project has been completed and accepted, and the settlement of the project involved has been completed, but the Plaintiff cannot be involved in and control the acceptance inspection and settlement of the general project, so the period is unclearly and unreasonably predictable for the Plaintiff. In this case, the general project, which was completed by the Defendant in September 2010, has already put into use for a long time, but until now the settlement of the project hasn’t been completed and the Defendant did not provide proper reason for failure of settlement of the project involved and cannot clearly point out when the project involved was completed and settled. Therefore the court holds that the agreement on period of payment in the contract that the acceptance inspection and settlement of the general project is unclear and unpredictable for the Plaintiff. Therefore, the

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Plaintiff is entitled to claim for 95% of project price in a relatively reasonable time against the Defendant. The court will not support the Plaintiff’s claim that the date the Defendant should pay 95 % of project price was June 25, 2010, because it does not comply with the agreement in the contract. The Plaintiff brought the lawsuit before the court on June 18, 2012, the court holds that date shall be deemed to be the reasonable time of payment; as for the payment time of the sum less than 80% of the project price, the court holds that the date of completion of the project involved shall be March 25, 2010 according to the contract. Therefore, the court will support the Plaintiff’s claim that the Defendant should pay 95% of the project price. The project price involved totally amounts to RMB3,833,720. The Defendant has paid RMB2.3 million and according to the payment schedule at this stage, namely 95% of the project price, it still owes RMB1,342,034 to the Plaintiff. As for the standard of interest of the outstanding sum, no agreement between the two parties has been reached, so it shall be calculated at loan interest rate over the same period of the People’s Bank of China according to law. In conclusion, according to Article 107 and Article 109 of the Contract Law of the People’s Republic of China and Article 17 of the Interpretations of the Supreme People’s Court on Issues concerning the Application of Law for the Trial of Cases of Dispute over Contracts on Undertaking Construction Projects, the judgment is as follows: 1. The Defendant, China Construction Second Engineering Bureau Co., Ltd., shall pay in sum of RMB1,342,034 to the Plaintiff, Tianjin Jianyuan Geotechnical Engineering Co., Ltd., within ten days after this judgment comes into effect; 2. The Defendant, China Construction Second Engineering Bureau Co., Ltd., shall pay the interest of the sum mentioned above (interest on RMB766,976 shall be calculated from March 25, 2010, and interest on RMB575,058 shall be calculated from June 18, 2012, to the day of actual payment designated by this judgment according to the corresponding interest rate published by the People’s Bank of China) to the Plaintiff within ten days after the judgment comes into effect; 3. Reject other claims of the Plaintiff. For failure to fulfill the obligation of payment within the period designated by this judgment, interest on the debt for the delayed period shall be doubled in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB45,477, the Plaintiff shall bear RMB32,853 and the Defendant shall bear RMB12,624. Since the Plaintiff prepaid the acceptance fee, for the convenience of settlement, the court will not return the proportion of the Plaintiff, and the proportion of the Defendant shall be paid together with the sum mentioned above to the Plaintiff.

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In case of dissatisfaction with this judgment, any party may within 15 days upon the service of this judgment submit a statement of appeal to the court, together with 5 copies, with Tianjin High People’s Court. The appeal acceptance fee shall be paid to the Tianjin High People’s Court based on dissatisfied sum decided in the judgment of first instance within seven days after submitting the statement of appeal (Bank of Deposit: Agricultural Bank of China Hangzhou Branch 02-20050102001686, Account Number: Finance Department of Tianjin High People’s Court), otherwise, the appeal shall be deemed to be withdrawn automatically. Presiding Judge: YANG Ling Acting Judge: LI Ying Acting Judge: ZHANG Junbo August 16, 2013 Clerk: LIU Shuli

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Tianjin High People’s Court Civil Judgment Tianjin Jianyuan Geotechnical Engineering Co., Ltd. v. China Construction Second Engineering Bureau Co., Ltd. (2013) Jin Gao Min Si Zhong Zi No.86 Related Case(s) This is the judgment of second instance, and the judgment of first instance and the ruling of retrial are on page 935 and page 958 respectively. Cause of Action 236. Dispute over contract for construction of dock or harbor. Headnote Affirming lower court decision awarding damages to subcontractor for outstanding sums due under subcontract for backfilling of soil, dismissing subcontractor’s appeal that damages were insufficient. Summary The Plaintiff, subcontractor, agreed with the Defendant, head contractor, to complete an outdoor backfilling hill skill soils project as part of Defendant’s construction of a cruise terminal at Tianjin Port. The contract explicitly described the type of payment the Plaintiff was to receive. The Plaintiff completed the project at the end of March 2010, but the Defendant did not fully pay the Plaintiff the agreed upon price. The parties disagreed about the amount of soil that had been shifted by the Plaintiff. The lower court found for the Plaintiff and awarded damages, but the Plaintiff, dissatisfied with the amount awarded, appealed. The appeal court dismissed the appeal since the lower court’s judgment was consistent with the calculation method provided in the contract between the parties.

Judgment The Appellant (the Plaintiff of first instance): Tianjin Jianyuan Geotechnical Engineering Co., Ltd. Domicile: No.47 Hebei Road, Binghai New District, Tanggu District, Tianjin. Legal representative: CUI Jishun, chairman. Agent ad litem: LIU Hailong, lawyer of Hengtai (Tianjin) Law Firm. Agent ad litem: TIAN Zengqing, lawyer of Hengtai (Tianjin) Law Firm.

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The Respondent (the Defendant of first instance): China Construction Second Engineering Bureau Co., Ltd. Domicile: No.251 Beiyang Road, Liyuan Town, Tongzhou District, Beijing. Legal representative: CHEN Jianguang, chairman. Agent ad litem: WANG Jian, project manager. Agent ad litem: RONG Hui, lawyer of Tianjin Zehui Law Firm. With respect to the case arising from dispute over port construction contract against the Respondent, China Construction Second Engineering Bureau Co., Ltd. (hereinafter referred to as Second Bureau), the Appellant, Tianjin Jianyuan Geotechnical Engineering Co., Ltd. (hereinafter referred to as Jianyuan Company) dissatisfied with (2012) Jin Hai Fa Shang Chu Zi No.543 Civil Judgment rendered by Tianjin Maritime Court (hereinafter referred to as the court of first instance), and instituted an appeal to the court. After accepting the case, the court organized the collegiate panel consisting of Judge AN Wenjie as Presiding Judge, Judge ZHAO Qingquan and Acting Judge TANG Na, and appointed WANG Xinrui as Clerk in accordance with the law. The court held a hearing in public on November 31, 2013. LIU Hailong, agent ad litem of the Appellant, and WANG Jian and RONG Hui, agents ad litem of the Respondent, appeared in court to attend the hearing. Now the case has been concluded. The court of first instance ascertained that Tianjin International Cruise Home Port Co., Ltd. (hereinafter referred to as Cruise Port Company) as a developer, contracted the Tianjin Port International Cruise Dock Project (passenger building project) out to Second Bureau. Second Bureau, as the main contractor, subcontracted the backfilling hill-skill soils project contained in the whole project to Jianyuan Company, the two parties signed the Tianjin construction project professional subcontracting contract. It was agreed the project of Jianyuan Company included that: 1. handling of the original ground and trimming of the ground; 2. backfilling hill-skill soils. It was provided in the supplementary clauses of the subcontract that the comprehensive unit price included but not limited to labor costs, management fees, materials costs, machinery costs, settlement costs, taxes, profits, insurance fees, board and lodging costs and other costs for all work concerning the subcontracting contract involved; the comprehensive unit price of the project was RMB103 per cubic meter, including handling the original ground, trimming the ground, and backfilling hill-skill soils (including purchasing the soils from an outsider, transport, grinding the soils on the scene, and the compaction coefficient was 0.93), the sedimentation considered freely, and the comprehensive unit price would not adjust when settling the project; the settlement of project quantities would not be calculated by receipts, the grid figures identified by the owners should prevail, and the elevation of upper epidermis should be subject to the designed elevation and calculated on the basis of construction drawings. The method of payment agreed in the contract was as follows: the subcontractor should backfill the hill-skill soils in accordance with the requirements in the contract, and the progress payment of the project should be paid by 60% of the sum resulting from the finished quantities affirmed by the contractor multiplying the unit price; the

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payment should be stopped when 80% of the project price has been paid; 95% of the total project price should be paid within three month after the completion and acceptance of the general project; 5% of the total project price was regarded as maintenance fund, which should be settled within three months after the warranty period expires. The warranty period of the subcontracting contract was 2 years, calculating from the day of acceptance of the general project. The payment from the contractor to subcontractor should be based on relevant sums from the developer, and the subcontractor should provide qualified subcontract project invoices. On December 1, 2009, China Construction (Beijing) Design Consultant Co., Ltd. (hereinafter referred to as CSCEC Beijing Company) issued Design Specifications of Tianjin Port International Cruise Dock (Passenger Building Project) Environmental Landscape Construction Drawings (Fascicule I) (hereinafter referred to as design drawings). In the earthworks diagram, the initial ground elevation of the project involved was 4.7 meters and the data of construction site, completed ground elevation, earthworks of backfilling hill-skill soils and backfilling planting soils and etc were stated therein. It also stated that the calculation of earthworks was an estimated data and for reference only, and the calculation should be subject to the actual quantities on site. On January 12, 2010, CSCEC Beijing Company issued the construction drawings, which drew the specific scope of the backfilling project. During the hearing, Jianyuan Company and Second Bureau affirmed the scope of backfilling planting soils was that of backfilling plain soils, and the comprehensive unit price of backfilling plain soils was RMB46 per cubic meter. In February 2010, Cruise Port Company entrusted Tianjin Survey and Shipping Design Shipping Design Institute for Water Transport Engeering (hereinafter referred to as Shipping Design Institute) to draw topographic maps, and the topographic maps marked the topography of the construction area before construction. Jianyuan Company started the construction of the project involved by the end of February 2010 and completed on March 25, 2010. Second Bureau, as the contractor, finished the general project namely the passenger building project in September 2010, which had been put into use. Cruise Port Company and Second Bureau had not settled the general project so far. During the construction, Second Bureau signed the confirmation letter that it had to pay the other project fees in amount of RMB42,787. The two parties confirmed that Second Bureau had paid the project price in sum of RMB2.3 million to Jianyuan Company. On December 1, 2012, the court of first instance conducted an investigation on Cruise Port Company, it affirmed the topographic maps were the basis of the project quantities. In January 2013, in order to account the project quantities, upon the application of Second Bureau, the court of first instance entrusted Shipping Design Institute to draw grid figures for the project quantities. In July 2013, Shipping Design Institute issued Verification Specifications of Project Quantities of Outdoor Backfilling Hill-skill Soils Project of Tianjin Port International Cruise Dock Project, which calculated the project quantities based on the grid figures by grid method, and the conclusion was as follows: the theoretical earthworks of backfilling

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hill-skill soils were 33,411 m3 and the calculating earthworks thereof were 36,084 m3 (the compaction coefficient was 1.08), the theoretical earthworks of backfilling plain soils were 7,600 m3 and the calculating earthworks thereof were 9,880 m3 (the compaction coefficient was 1.30). Jianyuan Company argued in respect of the project quantities it had completed as follows: 1. the quantities of backfilling hill-skill soils were 49,309.659 m3 and the price was RMB1,035,343.6; 2. the quantities of backfilling plain soils were 14,285.754 m3 and the price was RMB800,002.22; 3. the increased quantities of backfilling hill-skill soil due to removing silts during the construction was 10,051.88 m3 and the price was RMB1,035,343.6; 4. the quantities of loss of earthworks caused by improper construction by a third party, Haijiali Company were 830 m3 and the price was RMB85,490; 5. the sum of backfilling hill-skill soil, quartering hammers, excavators, dump trucks confirmed by Second Bureau unilaterally (beyond the contract) was RMB42,944. The total sum of the project price was RMB7,042,674.62. Second Bureau had paid RMB2.3 million for the project involved so far and the outstanding RMB4,742,674.62 had not been paid yet. Therefore Jianyuan Company instituted this action and requested the court to rule Second Bureau to pay the rest project price in amount of RMB4,742,674 and interests thereon calculated at the bank loan interest rate over the same period from June 25, 2010, and bear the litigation fees. Jianyuan Company changed the outstanding sum into RMB5,210,080, and claimed that Second Bureau should pay 95% of the project price as agreed in the contract involved, namely RMB4,834,576. The court of first instance held that the case was arising from dispute over port construction contract, and the construction project subcontracting contract signed by Jianyuan Company and Second Bureau was a declaration of true intents, in the meantime, the contract did not violate statutory provisions of laws and administrative regulations, so the contract was legal and effect. Jianyuan Company as the subcontractor and Second Bureau as the contractor should fully perform their obligations respectively in accordance with the contract. Jianyuan Company completed the backfilling hill-skill soils project according to the contract by the end of March 2010, and the project involved had been put into use for a long time, so Second Bureau should fulfill its obligation to pay the project price to Jianyuan Company as agreed. As for project quantities, the dispute between Jianyuan Company and Second Bureau lied in the ascertainment of the bottom elevation before construction for calculation of the project quantities. Jianyuan Company argued that the bottom elevation before the construction should be the initial elevation of the ground recorded in the design drawings, namely 4.7 meters, while Second Bureau argued that it should be on the basis of the data stated in the topographic maps. The court of first instance held that the calculation rule of project quantities had been specifically agreed in the contract involved, namely the grid figures confirmed by the owner, and the elevation of upside epidermis should be calculated in accordance with the construction drawings. The evidence submitted by Jianyuan Company and Second Bureau did not contain grid figures. In comparison of the design drawings and the topographic maps, the topographic maps were completed by Shipping Design

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Institute under the entrustment of Cruise Port Company before the construction of the project involved, and both parties had no objection thereto during the construction and Cruise Port Company also affirmed that the topographic maps were the basis to calculate the project quantities. The court of first instance held that the maps could reflect the ground elevation before the construction objectively, and the maps should be the basis to calculate the project quantities. Upon the application of Second Bureau, Shipping Design Institute drew grid figures for the backfilling hill-skill soils project by grid method on the basis of the topographic maps and other maps, and calculated the backfilling earthworks of hill-skill soils and plain soils in this way, and it was of objective. The comprehensive unit price agreed in the contract involved contained the factors like compaction coefficient and so on, therefore the theoretical project quantities calculated by Shipping Design Institute should be the basis to ascertain the project quantities. After calculation, the project price of backfilling hill-skill soils was RMB3,441,333, the project price of backfilling plain soils was RMB349,600, the other project price having been confirmed by Second Bureau with the signature in the confirmation letter was RMB42,787, and the three sums amounted to RMB3,833,720. Jianyuan Company argued that the quantities of backfilling hill-skill soils were increased because of removing silt during the construction, but the court of first instance did not support the claim since Jianyuan Company failed to provide effective evidence to prove that. As for the loss caused to Haijiali Company, an outsider claimed by Jianyuan Company, the court of first instance could not ascertain the fact of loss suffered by Haijiali Company, and Second Bureau disagreed to take responsibility for that loss, therefore the court of first instance did not support this claim. As for the proportion of payment, Second Bureau argued that since the general contract had not been completed and settled, so it should pay Jianyuan Company 80% of the project price in accordance with the contract. The court of first instance held that the payment schedule agreed in the contract was an agreement on the performance period, which was true intents of the two parties and had a binding force thereto. Jianyuan Company should obey the agreement that 95% of the settled price should be paid within three months after the general project was completed and accepted, and the settlement of the project involved had been completed, but Jianyuan Company could not be involved in and control the acceptance inspection and settlement of the general project, so the period was unclearly and unreasonably predictable for Jianyuan Company. In this case, the general project, which was completed by Second Bureau in September 2010, had already put into use for a long time, but until now the settlement of the project had not been completed and Second Bureau did not provide proper reason for failure of settlement of the project involved and could not clearly point out when the project involved was completed and settled. Therefore the court of first instance held that the agreement on period of payment in the contract that the acceptance inspection and settlement of the general project was unclear and unpredictable for Jianyuan Company. Jianyuan Company was entitled to claim for 95% of the project price in a relatively reasonable time against Second Bureau. The court of first instance did not support Jianyuan Company’s claim that the date Second Bureau should pay 95 % of the project price

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was June 25, 2010, because it did not comply with the agreement in the contract. Jianyuan Company brought the lawsuit before the court of first instance on June 18, 2012, the court of first instance held that date should be deemed to be the reasonable time of payment; as for the payment time of the sum less than 80% of the project price, the court of first instance held that the date of completion of the project involved should be March 25, 2010 according to the contract. Therefore, the court of first instance supported Jianyuan Company’s claim that Second Bureau should pay 95% of the project price. The project price involved totally amounted to RMB3,833,720. Second Bureau had paid RMB2.3 million and according to the payment schedule at this stage, namely 95% of the project price, it still owed RMB1,342,034 to Jianyuan Company. As for the standard of interest of the outstanding sum, no agreement between the two parties had been reached, so it should be calculated at loan interest rate over the same period of the People’s Bank of China according to law. In conclusion, according to Article 107 and Article 109 of the Contract Law of the People’s Republic of China and Article 17 of the Interpretations of the Supreme People’s Court on Issues concerning the Application of Law for the Trial of Cases of Dispute over Contracts on Undertaking Construction Projects, the court of first instance judge that: 1. Second Bureau should pay in sum of RMB1,342,034 to Jianyuan Company within ten days after this judgment came into effect; 2. Second Bureau should pay the interest of the sum mentioned above (the interest on RMB766,976 should be calculated from March 25, 2010, and the interest on RMB575,058 should be calculated at loan interest rate over the same period published by the People’s Bank of China from June 18, 2012, to the day of actual payment designated by the judgment) to Jianyuan Company within ten days after the judgment came into effect; reject other claims of Jianyuan Company. For failure to fulfill the obligation of payment within the period designated by the judgment, interest on the debt for the delayed period should be doubled in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee of first instance in amount of RMB45,477, Jianyuan Company should bear RMB32,853 and Second Bureau should bear RMB12,624. Being dissatisfied with the judgment of first instance, Jianyuan Company appealed to the court and requested to revoke the judgment of first instance and judge that Second Bureau pay the project price in sum of RMB5,210,080 as well as overdue interest thereon, and bear the litigation fees of this case. Facts and reasons were as follows: 1. The facts were unclearly ascertained in the judgment of first instance. Firstly, it constituted unclear ascertainment of fact that the court of first instance calculated the project quantities on the basis of the verification specifications issued by Shipping Design Institute. It was provided in the subcontracting contract signed by the two parties that the calculation rule to settle the project quantities should be subject to the grid figures confirmed by the owner, but Second Bureau could not provide the grid figures affirmed by the owner, so the project quantities should be settled according to the actual quantities completed by Jianyuan

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Company. Combined with the construction drawings and the completion settlement report submitted by Jianyuan Company, it could prove the bottom elevation before construction was 4.7 meters, and the project quantities should be calculated on the basis of the bottom elevation. The verification specifications issued by Shipping Design Institute should not be the basis to ascertain the facts because Shipping Design Institute was not qualified for forensic appraisal and had interest with the business involved. Secondly, during the first instance, Jianyuan Company submitted Application Form for Costs of Alteration of Project, the Examination and Approval Form for Alteration of Project, the Report on Removing Silts and Losses to the court of first instance. (hereinafter referred to as Report on Removing Silts and Losses), which could prove the increased quantities of backfilling hill-skill soils due to removing silts during the construction, but the court of first instance held Jianyuan Company did not provide effective evidence to prove the facts, it constituted unclear ascertainment of facts; thirdly, the project had been wholly completed and put into operation for a long time. According to the payment time agreed in the subcontracting contract, Second Bureau should pay the whole project price before the judgment of first instance was rendered, but the court of first instance ruled Second Bureau pay 95% of the project price, it constituted unclear ascertainment of facts; 2. Second Bureau definitely affirmed the increased payment due to the alteration of plain soils into hill-skill soils was RMB81,622 in the defence it submitted to the court of first instance, but the court of first instance did not judge that Second Bureau should pay that sum to Jianyuan Company; 3. Second Bureau affirmed that the loss arising from the increased earthworks caused by the improper construction of Haijiali Company, and Report on Removing Silts and Losses could prove that. Second Bureau, as the prime contractor and the beneficiary of increasing backfilling earthworks, should take responsibility for Jianyuan Company; 4. The court of first instance entrusted Shipping Design Institute to issue verification specifications, and regarded it as the basis to ascertain facts, it violated the statutory procedure. The defence of Second Bureau were as follows: 1. It was specifically agreed in the subcontracting contract that the calculation rule of the project quantities was grid method, but Jianyuan Company calculated the project quantities by bottom elevation method, it breached the contract involved and lacked basis; 2. Application Form for Costs of Alteration of Project, Examination and Approval Form for Alteration of Project, Report on Removing Silts and Losses submitted by Jianyuan Company were internal and ineffective documents, and Jianyuan Company got these documents in an illegal way because these documents were given by a leaving staff of Jianyuan Company personally, so the fact of removing silts could not be proved;

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3. Regarding the progress payment of the project, it was provided in the subcontracting contract that 95% of the settled total prices should be paid within three months after the general project had been completed and accepted and the settlement of the project had been completed. Despite the project had been completed, the settlement had not been finished. So the obligatory right claimed by Jianyuan Company was ineffective and it lacked basis that Second Bureau should pay the payment in full amount; 4. Jianyuan Company argued that Shipping Design Institute was not a qualified forensic appraisal subject, and the verification specifications issued by it should not be adopted. However, what provided in the laws was to entrust an appraiser not a qualified forensic appraisal institution. So the allegations of Jianyuan Company lacked basis. In summary, Second Bureau requested the court to dismiss Jianyuan Company’s appeal. During the second instance, Jianyuan Company applied for a witness, KONG Qingwen to testify the existence of removing silts during the construction. KONG Qingwen testified that he took part in the collecting soils for the foundation of the main body of the passenger building project and the backfilling soils construction. Second Bureau did not affirm the authenticity of the statement of witness, and argued that the way of handling silts in the statement of witness about conflicted with the statement of Jianyuan Company, the statement that the puddle formed because of collecting soils for building project department in the west construction area was untrue, and the soils used for building project department were purchased from a third party but were not collected from the construction area. The court’s verification opinions on the statement of KONG Qingwen are as follows: Jianyuan Company stated that there was a puddle in the construction area of the paving square, and some silts were put into the puddle. But KONG Qingwen stated that he put all the silts out of the construction area but not into the puddles, and he did not mention that there was puddle in the paving square. The statement of witness conflicted with the statement of Jianyuan Company concerning the important contents such as the position of the puddle in the construction area and the handling way of silts, so the court does not ascertain the effect of the statement of witness. Second Bureau did not submit evidence as supplement. During the second instance, the court obtained the following evidence: 1. inquiry record of chief engineer of Shipping Design Institute, and he stated that Shipping Design Institute drew the topographic map on December 11, and the area involved was disposed by vacuum preloading technique; no silts on large scale in the area involved existed when Shipping Design Institute surveyed and drew the topographic map in February 2010, and the area had been handled by vacuum preloading technique, so there should not exist a lot of silts theoretically; 2. the topographic map drawn by Shipping Design Institute in November 2008 and comparison diagram of this topographic map with the topographic map of February 2010; 3. six-page supervision log, there were partial record about the construction

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situation of the outdoor project, but no relevant record about removing silts in the log. The cross-examination opinions of Jianyuan Company on the three evidence above are as follows: 1. Shipping Design Institute had interest with Cruise Port Company and Second Bureau, and the completion time stated by Shipping Design Institute was wrong, so Jianyuan Company had proper reason to doubt that Shipping Design Institute did not survey and draw the topographic maps on the scene; 2. the two drawings were not valid and objective for lack of signature of the principal and the agent; 3. no record on removing silts in the supervision log did not mean that Jianyuan Company had not removed the silts. In summary, Jianyuan Company did not affirm the effect of the three evidence above. The cross-examination views of Second Bureau on the above three evidence are as follows: Second Bureau affirmed the authenticity, legality and relevancy of three evidence above except the inaccurate statement of the completion time of the main body of the passenger building project in the inquiry record The ascertainment opinions of the court on the above evidence are as follows: evidence 1 can prove there were no silts on large scale in the area involved when Shipping Design Institute surveyed and drew the topographic maps on February 2010, and the area involved had been handled by vacuum preloading technique, so silts on a large scale should not exist in the area theoretically; evidence 2 can reflect the change of elevation data measured by Shipping Design Institute in 2008 and 2010. Combined with evidence 1, it can be proved that the fact that the overall elevation data of 2010 did change greatly in the area involved compared to those of 2008. There might an slight sedimentation of the ground in the area involved had been handled by vacuum preloading technique, but the elevation of the east of the paving square had been increased partially compared to the elevation of 2008; evidence 3 can prove that there is partial record on the outdoor project, but no record on removing silts in the supervision log. Besides the facts ascertained in the court of first instance, the court finds out that Jianyuan Company and Second Bureau agreed in the subcontracting contract that the scope of the subcontracting project was within the scope of the construction drawings, the main contents were as follows: 1. handle the original ground and trimming the ground, including clear weeds, bushes and arbors in the roadbed, remove grass roots in the grass road and stub or roots of bushes and arbors; clear the silts in the puddles and basins in the roadbed and after clearing the silts, backfill lime soils to the potholes to the original ground by layer and compact the soils by layer; 2. Backfill hill-skill soils, including purchase, transport and dump hill-skill soils, compact soils by layer, handle relevant formalities, coordinate relevant relationships and so on. The court also ascertains that Jianyuan Company submitted Application Form for Costs of Alteration of Project, Examination and Approval Form for Alteration of Project, Report on Removing Silts and Losses to the court of first instance. Report on Removing Silts and Losses was issued with the seal of the project department on November 28, 2010, and the main contents were as follows: to Tianjin Port Group Co., Ltd., Tianjin Port Construction Co., Ltd., Tianjin Port Engineering Supervision

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& Consultant Co., Ltd. (hereinafter referred to as Tianjin Port Supervision Company): “Second Bureau contracted the outdoor project of the passenger building, and the backfilling form of the bottom groove is backfilling hill-skill soils. Before backfilling earthworks, large quantities of silts are needed to be handled on the construction site. After repeated discussions with the construction company, the agent construction company and the supervision company, it is finally decided to carry all of the silts out of the site. Second Bureau has measured the ground elevation on the site after removing silts, and the quantities of bulldozing silts are about 10,051.88 m3. The construction area in the east is bounded on the construction area of Haijiali Company. During the construction, Haijiali Company backfilled the earthworks of the construction area of Second Bureau into its construction area with carelessness, which caused losses of 830 m3 earthworks to Second Bureau. The actual earthworks had a great difference with calculating earthworks for the facts above. Hope each company will affirm the facts said above.” Application Form for Costs of Alteration of Project was issued by Second Bureau on November 29, 2010, and it was affixed with the seal of the project department and signed by the person in charge of the project, SHEN Min. The application form stated that the altered project was backfilling hill-skill soils in the removing silts area, the fees were RMB2,217,102.84, including the removing silts in a quantity of 10,051.88 m3 which amounted to RMB643,521.36, backfilling hill-skill soils in a quantity of 10881.88 m3 which amounted to RMB1,499,849.52, and the taxes were RMB73,731.96. On the same day, Second Bureau issued Examination and Approval Form for Alteration of Project signed by the person in charge of the project, SHEN Min, in which altered project price was the same as that in Application Form for Costs of Alteration of Project. Second Bureau denied that it had submitted three documents above to Cruise Port Company and Tianjin Port Supervision Company in the first instance and the trial of the court, and these documents are not affirmed by Cruise Port Company and Tianjin Port Supervision Company. In addition, it is turned out that the court of first instance once sent a letter of assisting investigation to the Tianjin Port Supervision Company during the first instance, it is stated in the reply the letter which the company replied the court of first instance that: in respect of the issue on the position of this company in the project involved, this company, as the supervision unit, was entrusted by the owner to supervise the construction of the Tianjin Port International Cruise Dock Project (passenger building project) according to the construction and supervision contract. During the construction, this company only supervised and managed Second Bureau to ensure that the project went well. But in the meantime, Second Bureau had never reported the detailed information of the subcontract unit or subcontractor to this company, this company knew nothing about it; in respect of the issue on surveying and mapping, the topographic maps were surveyed and drawn by Shipping Design Institute, this company had never got involved in and knew nothing about that whether there were phenomenon of puddle, silts and so on. After the construction started, Second Bureau had no doubt in the topographic maps and

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this company supervised the construction according to the topographic maps, and executed the standards of the contract strictly until the project was completed. The court holds this case is the dispute over port construction contract. The subcontracting contract signed between Jianyuan Company and Second Bureau is the true intents of the two parties and does not violate mandatory provisions of laws or administrative regulations. The contract is legal and valid and the two parties shall perform the contract as agreed. Jianyuan Company has finished the construction of the project according to the contract and the project has already put into use, so Second Bureau shall pay the project price to Jianyuan Company as agreed. The main issues of this case are as follows: 1. How to ascertain the quantities of backfilling hill-skill soils and plain soils with the scope of the contract; 2. Whether backfilling hill-skill soils increased due to removing silts exist; 3. Whether the fact of the alteration of backfilling hill-skill soils and plain soils exist; 4. Whether Second Bureau shall be liable for the loss caused by the improper construction of Haijiali Company. Regarding the problem how to ascertain the quantity of backfilling hill-skill soils and plain soils agreed in the contract, the court holds that it is definitely agreed in the subcontract that the calculation of quantity should be subject to the grid figures affirmed by the owner. Although the two parties did not provide the grid figures affirmed by the owner, the court of first instance entrusted Shipping Design Institute with drawing grid figures, and accordingly affirmed the project quantities. The grid figures which are based on the measured data in the topographic maps involved drawn by Shipping Design Institute under the entrustment of Cruise Port Company before the construction of the project can reflect the actual situation of the construction area before the construction. So the grid figures drawn by Shipping Design Institute on the basis of topographic maps are objective, by which the quantities of hill-skill soils and plain soils are calculated should be shall be the basis of ascertainment of the project quantities involved completed by Jianyuan Company. Jianyuan Company alleged that the initial ground elevation which was 4.7 meters in the design drawings issued by CSCEC Beijing Company should be the basis of calculation of the project quantities, but it does not conform to the calculation method of project quantities agreed in the contract, so the court will not ascertain. As for the allegation of Jianyuan Company that Shipping Design Institute was interested in the business involved, so the verification specifications issued by Shipping Design Institute should not be used as basis to ascertain facts, the court holds that Shipping Design Institute was entrusted by Cruise Port Company to provide surveying and mapping service, and has no interest in law with the dispute between Second Bureau and Jianyuan Company, therefore the court will not support the allegation. Regarding whether backfilling hill-skill soils increased due to removing silts, the main basis of the allegation that hill-skill soils increased due to removing silts

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Jianyuan Company relied on are Application Form for Costs of Alteration of Project, Examination and Approval Form for Alteration of Project, Report on Removing Silts and Losses issued by Second Bureau and the statement of witness, but combined with the investigation in the trial and other evidence available, the court holds that the allegation held by Jianyuan Company lacks evidence. Firstly, the topographic maps involved had been drawn before Jianyuan Company started the construction, so it can reflect the actual conditions of the area before construction and it is the major basis of calculation of the project quantities completed by Jianyuan Company. If Jianyuan Company found large quantities of silts needed to be cleaned out when entering into the construction area, the elevation of that area after removing silts and elevation marked on the topographic maps might alter, and the quantities of backfilling hill-skill soils might alter greatly, Jianyuan Company, as the actual construction company, should negotiate with Second Bureau and Tianjin Port Supervision Company and affirmed that issue together. However, Jianyuan Company could not provide the negotiation record between it, Second Bureau and Tianjin Supervision Company, or the application it filed to Second Bureau and the alteration order signed by Second Bureau. The replies issued by Tianjin Supervision Company to the court of first instance can prove that each party had no doubt in the topographic maps involved, supervision of the construction was conducted according to the topographic maps until the end of the project. Although there are records about the outdoor backfilling hill-skill soils project in the supervision log of passenger building project, there is no record about removing silts. In addition, the two parties signed a confirmation letter to prove the increased project fees in sum of RMB42,787 beyond the contract, but it is illogical that there is no alteration order signed by the two parties in respect of such great alteration of project quantities as alleged by Jianyuan Company that it had to backfill tens of thousands of cubic meters’ hill-skill soils. Secondly, Jianyuan Company argued that large quantities of silts were resulted from a big puddle formed by collecting soils from the area involved when constructing the foundation of the main body of passenger building project and the project department. However, the main body of passenger building project had been completed in 2009. If the puddle mentioned above existed, the topographic maps drawn of 2010 should reflect it. But compared the topographic maps drawn of 2008 with the topographic maps drawn of 2010, it could not be proves. In addition, Jianyuan Company submitted a statement of witness to prove that there were silts in the area involved, but some important contents such as the positions of puddle in the area involved and the way to handle the silts in the statement of Jianyuan Company conflicted with the statement of witness. The court does not ascertain the effect of the statement of witness. So the cause of formation of silts alleged by Jianyuan Company cannot stand. Thirdly, it is provided in the subcontracting contract involved that Jianyuan Company shall be liable for clearing the puddle and removing silts in the construction area involved, and the lower areas shall be backfilled by lime soils to the initial ground after the silts were removed. But it does not comply with the contract

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that Jianyuan Company backfilled the areas with hill-skill soils instead of lime soils after removing silts. In conclusion, although Jianyuan Company submitted Application Form for Costs of Alteration of Project, Examination and Approval Form for Alteration of Project, Report on Removing Silts and Losses issued by Second Bureau which were all signed and sealed by Second Bureau, to prove the existence of backfilling hill-skill soils after removing silts, these documents were not issued by Second Bureau to Jianyuan Company and were not affirmed by Tianjin Port Supervision Company and Cruise Port Company, and Jianyuan Company could not provide other evidence to prove the actual construction. Instead, the evidence issued by Tianjin Port Supervision Company, Cruise Port Company and Shipping Design Institute could prove that such great quantities of silts did not exist in the area involved, and the cause of formation of silts held by Jianyuan Company cannot stand, so the court will not support the allegation of Jianyuan Company that Second Bureau should pay the project price of the increased backfilling hill-skill soils due to moving silts to Jianyuan Company. Regarding whether the alteration of backfilling hill-skill soils and plain soils exists, the court holds that Jianyuan Company did not allege the fact that hill-skill soils wer changed into plain soils when it filed an action, but Jianyuan Company added the claim after Second Bureau stated in the written defence that the alteration of partial green project into pavement project led to an increase of the quantities of backfilling hill-skill soils and a decrease of the quantities of backfilling plain soils, as well as an increase of project price. But Second Bureau denied the above contents during the hearing of the first instance. During the trial, Jianyuan Company examined the construction site unilaterally to prove that the drawings were not altered and the green project was not altered into pavement project, and then Jianyuan Company argued that it backfilled hill-skill soils pursuant to the requirements of Cruise Port Company, and the project price increased as a result. However, Jianyuan Company could not submit relevant evidence to prove that and Second Bureau denied it either. So the court will not support the allegation of Jianyuan Company. Regarding whether Second Bureau shall be liable for the loss caused by the improper construction of Haijiali Company, the court holds that the two parties had no objection to the loss caused by the improper construction of Haijiali Company, but Haijiali Company is an outsider, the amount of loss cannot be ascertained in this case. Jianyuan Company can settle the loss in other ways. Regarding the proportion of payment of Second Bureau, Jianyuan Company alleged in the first instance that Second Bureau should pay 95% of the total project price, and the court of first instance supported Jianyuan Company’s claim on the proportion of payment. Now Jianyuan Company alleged that Second Bureau should pay the full project price exceeds its original claim, so this will not support. In conclusion, the judgment of first instance is clear in ascertaining facts, correct in application of law. The appeal of Jianyuan Company is not established and the court does not support it. In accordance with Article 170 Paragraph 1

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Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance in amount of RMB37,745, shall be born by Tianjin Jianyuan Geotechnical Engineering Co., Ltd. The judgment is final. Presiding Judge: AN Wenjie Judge: ZHAO Qingquan Acting Judge: TANG Na January 10, 2014 Clerk: WANG Xinrui

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The Supreme People’s Court of the People’s Republic of China Civil Ruling Tianjin Jianyuan Geotechnical Engineering Co., Ltd. v. China Construction Second Engineering Bureau Co., Ltd. (2014) Min Shen Zi No.1032 Related Case(s) This is the ruling of retrial, and the judgment of first instance and the judgment of second instance are on page 935 and page 944 respectively. Cause of Action 236. Dispute over contract for construction of dock or harbor. Headnote The Supreme People’s Court refused application for a retrial and affirmed lower court decisions awarding damages to subcontractor for outstanding sums due under subcontract for backfilling of soil, dismissing subcontractor’s appeal that damages were insufficient. Summary The Plaintiff, subcontractor, agreed with the Defendant, head contractor, to complete an outdoor backfilling hill skill soils project as part of Defendant’s construction of a cruise terminal at Tianjin Port. The contract explicitly described the type of payment the Plaintiff was to receive. The Plaintiff completed the project at the end of March 2010, but the Defendant did not fully pay the Plaintiff the agreed upon price. The parties disagreed about the amount of soil that had been shifted by the Plaintiff. The lower court found for the Plaintiff and awarded damages, but the Plaintiff, dissatisfied with the amount awarded, appealed. The appeal court dismissed the appeal since the lower court’s judgment was consistent with the calculation method provided in the contract between the parties. The Plaintiff applied for retrial to the Supreme People’s Court. The Supreme People’s Court dismissed the application because the Plaintiff failed to provide sufficient evidence.

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Ruling The Claimant of Retrial: (the Plaintiff of first instance and the Appellant of second instance): Tianjin Jianyuan Geotechnical Engineering Co., Ltd. Domicile: No.47 Hebei Road, Binghai New District, Tanggu District, Tianjin. Legal representative: CUI Jishun, chairman. Agent ad litem: LIU Hailong, lawyer of Hebei Hengtai (Tianjin) Law Firm. The Respondent of Retrial: (the Defendant of first instance and the Respondent of second instance): China Construction Second Engineering Bureau Co., Ltd. Domicile: No.251 Beiyang Road, Liyuan Town, Tongzhou District, Beijing. Legal representative: CHEN Jianguang, chairman. With respect to the case arising from dispute over port construction contract against China Construction Second Engineering Bureau Co., Ltd. (hereinafter referred to as Second Bureau), Tianjin Jianyuan Geotechnical Engineering Co., Ltd. (hereinafter referred to as Jianyuan Company) dissatisfied with (2013) Jin Gao Min Si Zhong Zi No.86 Civil Judgment rendered by Tianjin High People’s Court, and made an application for retrial to the court. The court organized the collegiate panel to try this case in accordance with the law. Now the case has been concluded. Jianyuan Company alleged in the application for retrial: 1. The basic facts ascertained in the judgment of first instance and the judgment of second instance lacked evidence to prove. 1:1. Regarding the calculation of the project quantities involved, it was provided in the contract that the calculation rule of settlement of project quantities was subject to the grid figures confirmed by the owner, but Second Bureau failed to provide grid figures confirmed by the owner and it led to inaccurate calculation of the project quantities involved. Based on the above facts, according to the Provisions on the Administration of External Entrustment of Forensic Appraisal of the People’s Court, where both parties in a lawsuit failed to reach an agreement after negotiation, the forensic appraisal institution of the people’s court would chose an appraiser which meets the requirements of forensic appraisal and was listed in the register. However, the court of first instance, without undergoing negotiation, directly entrusted Tianjin Survey and Design Institute for Shipping Engineering (hereinafter referred to as Shipping Design Institute), which was not qualified for forensic appraisal and had close relationship with Second Bureau, according to the will of Second Bureau to issue an appraisal conclusion, and it violated legal procedure to regard the appraisal conclusion as direct and the only basis to ascertain the project quantities involved and it was unjust to Jianyuan Company. In addition, the elevation initially agreed in the contract was 4.7 meters and the elevation that the owner affirmed in the contract was also 4.7 meters. If the project quantities were not calculated by this data, then a forensic appraisal institution which was confirmed by the two parties

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or had qualification should be entrusted to appraise the calculation rule of the project quantities. So the facts ascertained in the effective judgment lacked evidence to prove. 1:2. Regarding whether there were alterations of hill-skill soils and plain soils, Second Bureau admitted the fact the quantities of backfilling hill-skill soils increased arising from alteration of partial green project into pavement project and accordingly the project price increased in the written defence, then Second Bureau denied the fact without evidence to withdraw that admission, so the court should ascertain the fact admitted by Second Bureau. The court of second instance ignored estoppel. The judgment constituted unclear ascertainment of facts and obviously insufficient evidence. 1:3. Regarding whether there were increased backfilling hill-skill soils arising from removing silts during the construction, Jianyuan Company submitted Application Form for Costs of Alteration of Project, Examination and Approval Form for Alteration of Project, Report on Removing Silts and Losses and the statement of witness, the evidence formed a complete evidence chain to prove the fact of increased backfilling hill-skill soils and the project quantities involved. The beneficiary was Second Bureau. The reasoning of the court that the project quantities involved had not increased went against the principle of good faith and actual performance of the Contract Law of the People’s Republic of China, the judgment constituted unclear ascertainment of facts and obviously insufficient evidence. 2. The party could not obtain the main evidence needed for the trial of this case due to objective causes and applied to the people’s court for obtaining in written, but the court did not obtain them. As for the project quantities involved, the court did not approve the application for entrusting a qualified forensic appraisal institution to appraise the project quantities filed by Jianyuan Company. In addition, the court did not investigate the several applications for settlement of the project quantities of Jianyuan Company filed by Second Bureau to the owner. 3. The laws were incorrectly applied in the original judgments. Regarding the loss of earthworks cause by the outsider Haijiali Company and the increased quantities of backfilling earthworks, the two parties had no objection to the facts of loss caused by improper construction of Haijiali Company. Report on Loss of Earthworks of Outdoor Backfilling Hill-skill Soils for Removing Silts and Partial Earthworks in the East Area provided by the Applicant could prove the fact of the increased backfilling earthworks and the quantities thereof (in a total of 10,051.88m3), and the beneficiary was Second Bureau. The court holds that the case is arising from dispute over port construction contract. According to grounds of retrial held by the Applicant, the main dispute of this case lies in calculation of the project quantities involved.

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1. Regarding the calculation basis of project quantities, the calculation rule of settlement of the project quantities is specifically agreed the subcontracting contract signed by Jianyuan Company and Second Bureau, it means it shall subject to the grid figures confirmed by the owner, and the upper elevation shall be calculated in accordance with the design drawings and construction drawings. But the evidence submitted by the two parties did not contain grid figures affirmed by the owner. According to the application of Second Bureau, Shipping Design Institute drew grid figures for the hill-skill soils backfilling project by grid method based on the topographic maps and other drawings. The topographic maps were completed by Shipping Design Institute under the entrustment of Cruise Port Company before the construction of the project involved, and both parties had no objection thereto during the construction and Cruise Port Company also affirmed that the topographic maps were the basis to calculate the project quantities. So the ascertainment of court of first instance that the grid figures could reflect ground elevation before construction objectively and should be the basis to calculate project quantities is proper. Jianyuan Company held it was unjust to settle according to the grid figures, but it failed to provide evidence to prove. So the court will not support the claim. 2. Regarding whether there is alteration of hill-skill soils and plain soils, although Second Bureau alleged in the defence that the alteration of partial green project into pavement project led to the increase of the quantities of backfilling hill-skill soils and decrease of the quantities of backfilling plain soils, and the increase of project price, it denied the contents above during the hearing of the first instance. According to the facts ascertained in the judgment of first instance, during second instance, Jianyuan Company examined the site unilaterally to prove that the drawings were not altered and the green project was not altered into pavement project. In addition, Jianyuan Company did not allege the fact that plain soils were not altered into hill-skill soils when it filed an action to the court. Where Jianyuan Company could not provide other relevant evidence, it is proper that its claim was not supported in the judgment of first instance. 3. Regarding the increased backfilling hill-skill soils due to removing silts, Jianyuan Company submitted the Application Form for Costs of Alteration of Project, the Examination and Approval Form for Alteration of Project, the Report on Removing Silts and Losses which were signed and sealed by Second Bureau. These three documents were not issued by Second Bureau to Jianyuan Company, and Second Bureau did not admit the contents of the above evidence during the hearing, so it does not constitute admission in an action, and Jianyuan Company still needed to provide other evidence to prove the authenticity thereof. However, Jianyuan Company did not submit any other negotiation record about the issue; Jianyuan Company failed to prove that it had applied with Second Bureau for altering project quantities application and Second Bureau signed the examination and approval form; and there is no evidence proving that Jianyuan Company questioned none of silts in the puddles had been marked in the topographic maps.

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4. Regarding whether Second Bureau should be responsible for the loss caused by improper construction of Haijiali Company, the two parties had no objection to the fact, but Haijiali Company is an outsider, the amount of loss cannot be ascertained in this case. Jianyuan Company can settle the loss in other ways. The ascertainment of the original judgments is proper. 5. Jianyuan Company argued that its application filed with the court of first instance for entrusting institution which had forensic appraisal qualification to appraise the project quantities involved was not approved. The court holds it does not violate legal procedure that the court of first instance had ascertained the project quantities based on the identified facts and did not support the claim of Jianyuan Company. In summary, the application for retrial filed by Jianyuan Company does not comply with the circumstance provided in Article 200 Sub-paragraph 2, Sub-paragraph 5 and Sub-paragraph 6 of the Civil Procedure Law of People’s Republic of China. According to Article 204 Paragraph 1 of the Civil Procedure Law of People’s Republic of China, the ruling is as follows: Dismiss the application for retrial of Tianjin Jianyuan Geotechnical Engineering Co., Ltd. Presiding Judge: WANG Shumei Acting Judge: FU Xiaoqiang Acting Judge: HUANG Xiwu October 9, 2014 Clerk: ZHAO Di

Tianjin Maritime Court Civil Judgment Tianjin Port Container Terminal Co., Ltd. v. Dalian Winland International Shipping Agency Co., Ltd. Tianjin Branch et al. (2014) Jin Hai Fa Shang Chu Zi Nos. 710-724 Related Case(s) None. Cause of Action 241. Dispute over port operation. Headnote Parent company of shipping company held liable to pay port usage charges incurred by subsidiary. Summary The Plaintiff Tianjin Port Container Terminal Co. brought this action against shipping companies Winland, Winland Tianjin, and Zhenhua over nonpayment of port handling charges for four vessels for over fifteen voyages. The court held that there was a port operation contract between the port and Winland Tianjin and held Winland liable as the controlling company because Winland Tianjin did not have the separate legal personality required to engage in international trading by Article 16 of the Regulations of the People’s Republic of China on International Ocean Shipping. The court further found that Winland Tianjin had breached the shipping contract and held Winland liable for damages incident to breach of contract. Although Winland claimed that Zhenhua had guaranteed the debt, Winland failed to prove that argument and so the court rejected the claim against Zhenhua.

Judgment The Plaintiff: Tianjin Port Container Terminal Co., Ltd. Domicile: No. 3990 Xingang Road, Tanggu District, Tianjin. Legal representative: LI Quanyong, chairman. Agent ad litem: ZHANG Ya, lawyer of Winners Law Firm. Agent ad litem: ZHAO Jinxia, lawyer of Winners Law Firm. © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_49

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The Defendant: Dalian Winland International Shipping Agency Co., Ltd. Tianjin Branch Domicile: No. 2-1-2-1 Xinyuan New Town of Tanggu, Binhai New District, Tianjin. Person in charge: WANG Qiang, manager. Agent ad litem: FANG Liang, lawyer of WANG Pengnan & Co. Agent ad litem: REN Tiejun, lawyer of WANG Pengnan & Co. The Defendant: Dalian Winland International Shipping Agency Co., Ltd. Domicile: No. 305 Zhongshan Road, Shahekou District, Dalian, Liaoning. Legal representative: LI Hongmin, director. Agent ad litem: fang Liang, lawyer of WANG Pengnan & Co. Agent ad litem: REN Tiejun, lawyer of WANG Pengnan & Co. The Defendant: Tianjin Zhenhua International Shipping Agency Co., Ltd. Domicile: Floor 7, Block B, MSD Building, No. 62 Second Street, Development District, Tianjin. Legal representative: LIU Mingtian, chairman. Agent ad litem: LIN Rongrong, female, employee. Agent ad litem: WANG Jianwei, male, employee. With respect to the fifteen cases arising from dispute over port operation filed by the Plaintiff, Tianjin Port Container Terminal Co., Ltd., against the Defendants, Dalian Winland International Shipping Agency Co., Ltd. Tianjin Branch (hereinafter referred to as “Winland Tianjin”) and Dalian Winland International Shipping Agency Co., Ltd. (hereinafter referred to as “Winland”) and Tianjin Zhenhua International Shipping Agency Co., Ltd. (hereinafter referred to as “Zhenhua Company”), the court, after accepting these 15 cases, formed a collegiate panel consisted of Presiding Judge LIU Fengwu, Acting Judge ZHANG Jie and People’s Assessor WANG Jun. the court held a hearing in public under general procedure on November 6, 2014. ZHANG Ya and ZHAO Jinxia, agents ad litem of the Plaintiff; FANG Liang, agent ad litem of Winland Tianjin and Winland, LIN Rongrong, agent ad litem of Zhenhua Company, appeared in court to attend the hearing. Now the case has been concluded. The Plaintiff claimed as follows: M.V. “ULTIMA”, M.V. “JOSCO LILY”, M.V. “FPMC CONTAINER 10”, M.V. “TALLAHASSEE” berthed at its port to load and unload over a long period of time. Each of the four vessels was used for co-loading by different companies. It charged the shipping agent of every co-loading company handling charges, port guarantee charges, port dues, storage charges, frozen charges and other port charges in accordance with the owners, the numbers, the types and other details of the containers stated in Statistical List of the Number of Containers for Voyages of Liner Vessels (hereinafter referred to as the Containers List) sent by Winland Tianjin or Zhenhua Company to it. The vessels mentioned above began to operate at its port since December 2013, Winland Tianjin acted as the general shipping agent of M.V. “ULTIMA”; Zhenhua Company acted as the general shipping agent of the other three vessels and the Winland was responsible for

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co-loading. But since the V.1401E of M.V. “ULTIMA” on January 6, 2014, Winland Tianjin owed it the port charges in total amount of RMB761,394 under 15 voyages of the four vessels mentioned above. Winland Tianjin had received the invoices provided by it, Winland Tianjin should pay for it within a month thereafter, in another word, before April 19, 2014, or overdue interest and late fee would be incurred. But Winland Tianjin failed to pay for the charges. In addition, Zhenhua Company provided a deposit in amount of RMB300,000 as the guarantee for the port charges which Winland Tianjin owed to the Plaintiff. The Plaintiff requested The court to judge as follows: 1. Winland Tianjin and Winland should pay the port charges in amount of RMB761,349; 2. Winland Tianjin and Winland should pay the interest on the amount mentioned above (the interest should be calculated from April 20, 2014 to the day of actual payment at the deposit rate over the same period promulgated by the People’s Bank of China); 3. Winland Tianjin and Winland should pay a late fee in amount of RMB414,959.73 for port handling charges, calculated from April 20, 2014 to August 6, 2014 by 0.5% per day in accordance with the Regulations on Port Charges issued by the Ministry of Transport; 4. The Plaintiff should enjoy priority in the deposit (RMB300,000) provided by Zhenhua Company; 5. Court acceptance fee should be born by the three Defendants. Winland Tianjin and Winland defended that, Winland Tianjin had no independent legal personality and should not bear civil liability; there was no contractual relationship between the Plaintiff and Winland Tianjin and Winland, so the Plaintiff was not entitled to claim for the port handling charges. The containers generating port charges were belonged to the third party, Winland Container Lines Hong Kong Co., Ltd. (hereinafter referred to as “Winland HK”), in that case, Winland HK was the obligator for payment. It was obvious that the Plaintiff claimed against incorrect subjects. Winland Tianjin performed the obligations as the shipping agent of Winland HK, so Winland Tianjin was not obliged to pay for the port handling charges in light of law. There was no legal basis for the Plaintiff to request the two Defendants aforementioned to take the liability for port handling charges which should be born by Winland HK according to the relevant provisions of the General Principles of Civil Law of the People’s Republic of China. Zhenhua Company defended that it did not sign a guarantee contract with the Plaintiff, so the claim of the Plaintiff to take priority in RMB300,000 provided by Zhenhua Company lacked factual and legal basis; besides, the amount of RMB300,000 involved was paid by Zhenhua Company as the guarantee for smooth berthing of the principal’s ships; after the vessels departed the port, it had lawfully proposed to offset the debt between it and the Plaintiff by such sum. According to the claims of the Plaintiff and the pleas of the three Defendants, the parties raised no objection to the following facts: the port charges generated from

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the shipping space of the fifteen voyages involved agented by Winland Tianjin and Winland is RMB761,389. The fifteen voyages include M.V. “ULTIMA” V.1348W, M.V. “ULTIMA” V.1401E, M.V. “JOSCO LILY” V.401W, M.V. “JOSCO LILY” V.402E, M.V. “ULTIMA” V.1402W, M.V. “ULTIMA” V.1403E, M.V. “JOSCO LILY” V.403W, M.V. “JOSCO LILY” V.404E, M.V. “ULTIMA” V.1404W, M.V. “ULTIMA” V.1405E, M.V. “FPMC CONTAINER 10” V.1408E, M.V. “ULTIMA” V.1408W, M.V. “ULTIMA” V.1409E, M.V. “TALLAHASSEE” V.1409W and M.V. “TALLAHASSEE” V.1410E. In addition, Zhenhua Company has paid RMB300,000 as deposit to the Plaintiff. The court ascertains the above-mentioned facts. The main issues in dispute can be summarized as follows: 1. Whether there is a port operation contractual relationship established between the Plaintiff and Winland Tianjin and Winland, and whether the two Defendants shall pay the Plaintiff the port charges of the fifteen voyages involved; 2. Whether the late fee claimed by the Plaintiff has legal basis and whether the late fee can be claimed together with the interest if a relationship of port operation contract has established between the Plaintiff and Winland Tianjin and Winland; and 3. Whether the deposit paid by Zhenhua Company is the guarantee for the port charges involved. The Plaintiff submitted the following evidential materials to support its claims: 1. Route record, the information of the M.V. “ULTIMA”, port operation bill, vessel operation bill, Containers List, invoice, special receipt for port construction dues; 2. The detail list of the fees having been paid by Winland Tianjin, cheque and the balance sheet; and 3. Port Operation Charges Settlement Agreement. Evidence 1–3 was about the detailed process of port operation and the payment of the previous voyages between the Plaintiff and Winland Tianjin, to prove that there was a direct contractual relationship between them and Winland Tianjin had the obligation for payment. Meanwhile, there was a practice in port operations that port companies clear fees and pay to shipping agents; 4. Agreement on entrustment of collection of port construction dues, proofs of entrusted collection of port construction dues (2012 and 2013), the Notice to Print and Distribute the Administrative Rules on Collection of Port Construction Dues, and application for settlement business of Bank of China; Evidence 4 was to prove the qualification of the Plaintiff to collect the port construction charges and the basis of the port construction charges, and the Plaintiff had paid the port construction charges for all the ships in operation to the Maritime Safety Administration in advanced during the period of arrears. 5. Rules of Collection of Port Dues and the details of specific charges; Evidence 5 was to prove that the standard of the port dues, the mooring and unmooring charges, the port surcharges and the late fee generated from

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7.

8. 9. 10.

11.

12. 13.

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imported and exported goods, and the legal basis of the port operator’s charging port charges from the shipping agents. Notice on charging port facility guarantee fees, Notice on Relevant Issues concerning Charging Port Facility Guarantee Fees, and Notice of Administrative Rules on Charging Port Facility Guarantee Fees of Tianjin Port; Evidence 6 was to prove the basis to charge port guarantee fees. Rules of Containers Charges of Tianjin Port and the announcement on adjustment of container storage fees; Evidence 7 was to prove the basis to charge storage fees, frozen fees and guarantee fees at Tianjin Port. Notice and the lump sum rate of container handling charges of Tianjin Port; Evidence 8 was to prove the basis to charge the handling fees. Evidence 9 was accountants’ reports, to prove the amount of port charges of the voyage involved. Materials including the documents on which the port operation is based, to prove the situations of the operations of the voyages involved, proof of Zhenhua Company on the situation of the obligor to pay for the voyages involved; the proof of the third-party tally company on the arrears; the conformation of Winland Tianjin on the act of defaulting the payment and the payable sum. Record of calls (disks and the written records) and detailed call log, to prove that the Plaintiff had claimed the right to get the arrears back from Winland Tianjin. Unified receipt; The copy of cheque of Zhenhua Company; Evidence 12 and 13 was to prove that Zhenhua Company paid RMB300,000 as deposit for the arrears to the Defendants Winland Tianjin and Winland.

The cross-examination opinions of Winland Tianjin and Winland and the evidence provided by the Plaintiff are as follows: As to evidence 1, the two Defendants raised no objection to the authenticity thereof, but the sum claimed by the Plaintiff should not be paid by the two Defendants. The Plaintiff clearly knew about Winland Tianjin was engaged in activities as the shipping agent. It was the ship-party that entrusted the Plaintiff to do the port operations. The bills could not prove the two Defendants were the principals; as to evidence 2, the two Defendants raised no objection to the authenticity thereof. The two Defendants only performed the obligations of agents rather than entrusted the Plaintiff with the port operations; as to evidence 3, the Defendants raised no objection to the authenticity thereof. It showed that Zhenhua Company signed the basis of port operations charges with the Plaintiff and the Plaintiff should charge Zhenhua Company the port operation charges; as to evidence 4, the two Defendants raised no objection to the authenticity thereof, but they were not the payer for the port construction fees, and they were not obliged to pay the port construction fees; as to evidence 5, the two Defendants raised no objection

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to the authenticity thereof, however, the late fee claimed by the Plaintiff was much too high; the two Defendants raised no objection to the authenticity of evidence 6, 8 and 9; as to evidence 7, the two Defendants raised no objection to the authenticity thereof, the Plaintiff did not have the authority to decide the payer, and what involved in this case was exchanging shipping space rather than co-loading, so this rules could not be applied to this case; as to evidence 10, it could be proved that the principal involved was the ship-party rather than the two Defendants, and the words “expenses on the account of the cargo owner” on the delivery order suggested the port operation charges should not be paid by the two Defendants, no port operation contract between the Plaintiff and the two Defendants could be proved; as to evidence 11, the two Defendants raised no objection to the authenticity thereof, but it could not prove that there was a port operation contract made by the Plaintiff and Winland Tianjin. In fact, Winland HK was the obligor to pay the port operation charges involved; the two Defendants did not express cross-examination opinion on evidence 12 and 13 for irrelevancy. The cross-examination opinions of Zhenhua Company on the evidence provided by the Plaintiff are as follows: it raised no objection to the authenticity, the legality or the relevancy of evidence 1 to 4 and 12 to 13, but questioned the purpose of proof; it raised no objection to evidence 5 to 10; it questioned the legality of evidence 11 because the records submitted by the Plaintiff did not get the admission from the party, so it did not cross-examine the authenticity thereof. The ascertainment opinions of the court on the evidence provided by the Plaintiff are as follows: since the three Defendants all raised no objection to the authenticity of the evidence provided by the Plaintiff, the court ascertains the authenticity thereof. Evidence 1 to 3 can prove the operating process of the previous voyages between the Plaintiff and Winland Tianjin; evidence 4 to 8 can prove the industrial regulations on the guarantee charges, port charges, storage fees, port construction fees, mooring and unmooring charges, miscellaneous operation expenses etc. in the 15 voyages involved charged by the Plaintiff; evidence 9 to 10 can prove the relevant documents concerning guarantee charges, port charges, storage fees, port construction fees, mooring and unmooring charges, miscellaneous operation expenses etc. and the specific amount thereof; evidence 11 can prove the employee of Winland Tianjin and Winland confessed to the Plaintiff the arrears; evidence 12 and evidence 13 can prove Zhenhua Company paid RMB300,000 as the deposit to the Plaintiff, but cannot prove the deposit is the guarantee for the involved port charges in the 15 voyages. Winland Tianjin and Winland provided the following evidence in order to prove their allegation: 1. Shipping agency agreement and the protocol thereof, to prove Winland and the outsider Winland HK signed the shipping agency agreement. It was also to prove that Winland was the shipping agent of Winland HK in mainland China, and the payer for port operation charges was Winland HK.

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2. Business license, to prove that the business scope of the two Defendants was international shipping agency business and the two Defendants were only ship agencies. 3. Business license of Winland HK, to prove that Winland HK had the shipping business qualification and could run container liner business, and this company truly existed. 4. Cooperation agreement, to prove that the co-loading party was Winnland HK, and the containers incurring port charges were owned by Winland HK, the Plaintiff should request Winland HK to pay for the port operation charges. 5. Charter party, to prove that the dispatching-party of M.V. “ULTIMA” was Winland HK, and it was expressly agreed in the charter party that port operation charges incurred by M.V. “ULTIMA” should be paid by Winland HK. 6. Arrears statement letter and mail sent by Winland HK to the Plaintiff, to prove Winland HK admitted it was the obligor to pay for the port operation charges. The Plaintiff had cooperated with Winland HK for many years and it clearly knew that Winland HK was the debtor. 7. Delivery order of Winland Tianjin, to prove that Winland Tianjin clearly expressed that it did not undertake any fees related to container transport, port operation and storage; and in light of such statement, it was impossible that Winland Tianjin signed port operation contract with the Plaintiff in its own name. 8. Voyage bills sent by Winland Tianjin to Winland HK, to prove that Winland Tianjin would make detailed bills of port operation charges, tally fees, agent fees, etc. generated from each voyage of each ship after each voyage finishes on behalf of Winland HK and sent them to Winland HK to settle accounts. Winland Tianjin only paid the port charges as the agent of Winland HK and the real principal of port operation and the obligor for payment was Winland HK. 9. Financial accounting vouchers, to prove that Winland HK had the obligation to pay the charges and the real principal of port operation and the obligor for payment was Winland HK. The cross-examination opinions of the Plaintiff on evidence submitted by Winland Tianjin and Winland are as follows: it raised no objection to the authenticity of the stamp on evidence 1, but it did not admit the authenticity and legality of the process of signing the contract; it raised no objection to authenticity of evidence 2, but it questioned the purpose of proof thereof; it held that the authenticity of evidence 3 could not be confirmed for lack of original to verify, it came from abroad without undergoing notarial attestation. The Plaintiff did not admit the purpose of proof and held that it could not prove the voyages involved were operated by Winland HK; it raised no objection to the authenticity but questioned the legality of evidence 4; it did not admit the authenticity, the legality or the relevancy of evidence 5; it raised no objection to authenticity but questioned the purpose of proof of evidence 6, but it did not admit the mails to prove the contract relationship between the Plaintiff and Winland HK; it raised no objection to the authenticity of evidence 7 but questioned the purpose of proof thereof. Actually, the fees were paid by Winland Tianjin; it did not admit the authenticity, the legality

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as well as the content of proof of evidence 8, and it held it had no relevancy to this case; it questioned the authenticity and relevancy of evidence 9 and did not admit the purpose of proof. The cross-examination opinions of Zhenhua Company on the evidence submitted by Winland Tianjin and Winland are same as that of the Plaintiff. The ascertainment opinions of the court on evidence submitted by the Defendant are as follows: since the Plaintiff and Zhenhua Company raised no objection to the authenticity of evidence 1, 2, 4, 6 and 7, the court ascertains the authenticity thereof. The court holds evidence 1 is a contract between Winland and the third-party Winland HK, so it cannot bind a party not involved in the contract, nor can it prove Winland has the obligation to pay the port charges involved; evidence 2 can prove the business scope of Winland Tianjin and Winland; evidence 3 came from overseas without notarial attestation, the court does not admit the form of the evidence and this evidence cannot prove Winland HK has the qualification to engage in international liner shipping business in mainland China; evidence 4 can prove that Winland HK and Goto Shipping International Limited (hereinafter referred to as “Goto Company”) signed a cooperation agreement, agreeing they jointly dispatch vessels, exchange shipping space and other relevant issues; evidence 5 is not the original, but the contents thereof comply with this statement of the three Defendants, the court confirmed the authenticity thereof, but this evidence cannot prove the port charges involved shall be paid by Winland HK; evidence 6 is issued by Winland HK unilaterally, so it cannot prove the Plaintiff took Winland HK as the counterparty of the port operation contract; evidence 7 cannot prove Winland Tianjin has the obligation to pay the port charges; the court does not ascertain the authenticity of evidence 8 and evidence 9 for lack of originals. Zhenhua Company provided the following evidence in order to prove its allegation. 1. Agency agreement between Zhenhua Company and Goto Company, to prove that Zhenhua Company was the shipping agent of Goto Company at Tianjin Port. 2. Charter party between Goto Company and Legenda Martime, S.A. involved M. V. “ULTIMA”, to prove that Goto Company had been the charterer of M.V. “ULTIMA” since March 14, 2014. 3. Ship’s movement, to prove that the Plaintiff changed the voyage plan of M.V. “ULTIMA” V.1410W authorized by Zhenhua Company because of the “cause of company”. 4. Voucher of agent fees and the receipt thereof provided by Zhenhua Company to Goto Company, to prove that both Zhenhua Company and Goto Company regarded RMB300,000 was paid for the voyage of M.V. “ULTIMA” V.1410W. 5. The messages sent by the financial staff of Zhenhua Company, to prove that Zhenhua Company required re-issuance after receiving the receipt from the Plaintiff. 6. Emails, to prove that Zhenhua Company had exercised the right of set-off to balance other debts.

Tianjin Port Container Terminal Co., Ltd. v. Dalian Winland …

971

The cross-examination opinions of the Plaintiff on the evidence provided by Zhenhua Company are as follows: The Plaintiff admitted the authenticity and the purpose of proof of evidence 1; it admitted the authenticity but not the purpose of proof of evidence 2 to 6. The cross-examination opinions of Winland Tianjin and Winland on the evidence submitted by Zhenhua Company are as follows: the two Defendants did not express any opinion on evidence 1 to 6 because of irrelevance. But the Plaintiff shall request Zhenhua Company rather than the two Defendants to pay for the port charges. The ascertainment opinions of the court on evidence submitted by Zhenhua Company are as follows: as the Plaintiff raised no objection to evidence 1 to 6, the court ascertains the authenticity of all the evidence. The court holds evidence 1 can prove Zhenhua Company is the shipping agent of Goto Company; evidence 2 can prove Goto Company and Legenda Martime S.A. signed a time charter party on March 14, 2014; evidence 3 to 6 can prove that Zhenhua Company had paid RMB300,000 as deposit to the Plaintiff. After examination, the court holds that Winland and Winland HK signed Shipping Agency Agreement on December 26, 2012, agreeing that “Winland HK entrusted Winland as its shipping agent for all of the vessels it controlled including its own vessels, the vessels under time charter party and the vessels and shipping space it can be controlled in terms of appointing agent when the vessels berthing at every port in China; Winland took charge of paying all fees under the entrustment of Winland HK at home, including hire, fuel oil, port charges, repair costs, etc.; the Defendant shall finish the voyage settlement within 25 days after the ship departs port and send the original voyage bill to Winland HK; Winland HK shall pay for port charges listed in the bills in 3 bank workdays after receiving and examining the original voyage bills; the expiry date of the effectiveness of this agreement shall be December 31, 2013.” Winland and Winland HK signed Protocol of Shipping Agency Agreement on December 1, 2013, agreeing that “the period of effectiveness of the agreement signed on December 26, 2013 would extend to December 31, 2014. Winland is the international shipping agent of Winland HK, and as a branch of Winland, Winland Tianjin carried out the international shipping agent affairs.” Winland HK and Goto Company signed Cooperation Agreement in 2013, agreeing that both parties dispatched vessels together and exchanged shipping spaces on North China - Kansai Line since December 7, 2013. Before March 14, 2014, the ship of Winland HK operating on this line was M.V. “ULTIMA”, the three ships of Goto Company operating on the line were M.V. “JOSO LILY”, M.V. “TALLAHASSEE” and M.V. “FPMC CONTANINER 10”; after March 14, 2014, M.V. “ULTIMA” as well as the other three vessels was operated by Goto Company. During the period from January 2014 to March 14, 2014, the port charges involved involved the shipping spaces exchanged by Winland HK and Goto Company in 15 voyages on the international liner shipping. Winland Tianjin is the general shipping agent of M.V. “JOSO LILY”, M.V. “TALLAHASSEE” and M.V. “FPMC CONTAINER 10” in this line. According to the confirmation of Winland

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Tianjin and Winland and the claim of the Plaintiff, which have been verified by the court, the amount of the port charges generated from the shipping space occupied by Winland HK and the mooring and unmooring charges M.V. “ULTIMA” in the 15 voyages was RMB761,389 in total. On March 14, 2014, M.V. “ULTIMA” was operated by Goto Company, and its general shipping agent was Zhenhua Company. At 1105 on March 21, 2014, the Plaintiff canceled the ship movement of M.V. “ULTIMA” upon the request of company. Zhenhua Company paid RMB300,000 as deposit to the Plaintiff on March 24, 2014. On the same day, the Plaintiff issued a receipt to Zhenhua Company, and the use of the deposit stated on the receipt is security for Winland’s debt. The employee of Zhenhua Company asked to change the receipt and did not admit it as the deposit for Winland’s debt. It is also found out that, Winland HK did not acquire Certification of Registration of International Liner Shipping Qualification. Neither Winland Tianji had legal personality nor was it a branch accounting independently. The court holds that this case falls into dispute over port operation contract concerning maritime transport. The business model involved is the exchange of shipping space of international liner shipping, so the responsibility for port charges under this circumstance shall be cleared. In practices, exchange of shipping space means each company of a shipping group consisted of more than two ship owners, upon mutual negotiation and joint adjustment of schedule, offers one or more container ships with similar performance and equipment and each ship owner has the right to use certain ratio of the shipping space of each container ship to carry container cargo or empty containers; ship owners canvas container cargoes independently and use shipping spaces of each other without paying freight, they pay for the port charges of their containers, but the ship charges are still paid by the ship owner of the subject vessel. In current laws of China, there is no clear definition on exchange of shipping space. In accordance with Article 16 of the Regulations of the People’s Republic of China on International Ocean Shipping, “where an international shipping operator operates the international liner shipping business into and out of Chinese ports, he shall obtain the operation qualification for international liner shipping according to the provisions of these Regulations. Without the operation qualification for international liner shipping, a party may not engage in the business operations of international liner shipping, and may not release the schedule to the public or accept booking for shipping space. In case of operating the international liner shipping by the means of joint dispatch of ships, exchange of shipping space, or associated operation, etc., the provisions of the first paragraph of this Article shall be applicable.” It can be seen that the ship owner which operates international liner shipping by means of exchange of shipping space, shall obtain the operation qualification for international liner shipping and takes relevant responsibilities independently. Each ship owner is an independent carrier under the business model of exchanging shipping space, shipping charges shall be paid by shipowner of the whole vessel or its agent, but the port charges incurred by containers in the space occupied by each company shall be independently paid by each owner or its agent.

Tianjin Port Container Terminal Co., Ltd. v. Dalian Winland …

973

In terms of the main issues of this case, the court ascertains as follows: (I) Whether there is relationship of port operation contract established between the Plaintiff and Winland Tianjin and Winland, and whether the two Defendants shall pay for the port charges Firstly, there is a relationship of port operation contract between Winland Tianjin and Winland and the Plaintiff. Before the dispute involved occurred, as the port operator, the Plaintiff directly provided Winland Tianjin with the port operation service, and when finished the entrusted matters, the Plaintiff required Winlan Tianjin to provide receipts, and Winland Tianjin paid for relevant fees to the Plaintiff according to the amount on the receipts. The Defendant’s paying in its name constitutes a confirmation of the port operation completed by the Plaintiff. In addition, given the characteristic of international liner shipping, the port operation contract is consecutive, so there is relationship of port operation contract between the Plaintiff and Winland Tianjin under the 15 voyages. Since Winland Tianjin has no legal personality, Winland shall take the liability as the controlling company. Secondly, the Plaintiff chose Winland Tianjin and Winland as the counterparty to the port operation contract. Winland HK and Winland formed relationship of commission contract through signing a shipping agency agreement and the protocol thereof. Winland HK is the principal, while Winland is the agent. No evidence in this case shows that Winland Tianjin once informed the Plaintiff the principal was Winland HK during the port operation of the voyages involved until the case fell into action, Winland Tianjin disclosed the fact to the Plaintiff. In that case, the court holds that this case satisfies the circumstances of indirect agent provided in Article 403 of the Contract Law of the People’s Republic of China. As prescribed in Paragraph 2 of this Article, “if the agent does not perform the obligations in respect of the third party due to causes of the principal, the agent shall disclose the principal to the third party. The third party hence may choose the agent or the principal as the counterpart to claim its rights.” During the proceedings, after Winland Tianjin and Winland disclosed the principal was Winland HK, the Plaintiff did not apply to change the subject of litigation, it shall be regarded as an effective exercise of right to choose the counterparty, so Winland Tianjin has the obligation to pay for the port charges to the Plaintiff. As to the issue of payment between Winland Tianjin, Winland and Winalnd HK, the two parties can otherwise resolve. Finally, because dispute over the port operation contract between the Plaintiff and Winland Tianjin and Winlan exists, the two Defendants have the obligation to pay for the port charges. In addition, since Winland HK does not obtain a Certification of Registration of International Liner Shipping Qualification, and Winland Tianjin and Winland indeed had fault in the international liner shipping business they delegated, so the two Defendants shall bear the corresponding liability for their fault. According to the

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Plaintiff’s claim and the confirmation of the three Defendants having been verified by the court, the port charges generated from the shipping space occupied by Winland HK and the mooring and unmooring charges of M.V. “ULTIMA” in the 15 voyages are RMB761,389 in total, and the sum shall be undertaken by Winland Tianjin and Winland. (II) Whether the late fee claimed by the Plaintiff has legal basis and whether it can be claimed together with the interest. In accordance with Article 6 of the Regulations on Collection of Port Charges of the People’s Republic of China (Foreign Trade Part), “payer is obliged to pay in advance or cash unless it has made an agreement with the port authority otherwise on the account day (postponed when an official holiday comes). A late fee of 5‰ of the payment will be charged if such payment falls due from the next day of the account day.” The court holds that the Plaintiff can claim for late fee according to this divisional regulation. The account day claimed by the Plaintiff is April 19, 2014 and the three Defendants raised no objection thereto, so the late fee shall be RMB414,957 in total calculated from April 20, 2014 to August 6, 2014. The court support the Plaintiff’s claim for late fee. Because the two Defendants breached the contract, the Plaintiff is entitled to request them to bear the liability for breach of contract such as compensation for losses, accordingly, the Plaintiff claimed for the loss of deposit interest on the port charges. The court holds that the late fee claimed by the Plaintiff is enough to cover the loss of deposit interest. So the Plaintiff shall not claim for the loss of deposit interest on the port charges. The court does not support the claim of the Plaintiff. (III) Whether the deposit paid by Zhenhua Company is the guarantee for the port charges involved. The Plaintiff claimed that RMB300,000 paid by Zhenhua Company was the guarantee of the debt. In accordance with the provision of Article 13 of the Guaranty Law of the People’s Republic of China, a guarantor and the creditor shall enter into a written guarantee contract. The Plaintiff failed to provide the written guarantee contract and the evidence that can prove Zhenhua Company agreed to provide guarantee, so the court does not support the claim of the Plaintiff. In accordance with Article 26 Paragraph 1, Article 109, Article 403 of the Contract Law of the People’s Republic of China and Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: 1. The Defendants, Dalian Winland International Shipping Agency Co., Ltd. Tianjin Branch and Dalian Winland International Shipping Agency Co., Ltd., shall pay the port charges in amount of RMB761,389 to the Plaintiff, Tianjin Port Container Terminal Co., Ltd., within ten days from the date of effectiveness of the judgment;

Tianjin Port Container Terminal Co., Ltd. v. Dalian Winland …

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2. The Defendants, Dalian Winland International Shipping Agency Co., Ltd. Tianjin Branch and Dalian Winland International Shipping Agency Co., Ltd., shall pay RMB414, 579 as late fee of above amount to the Plaintiff, Tianjin Port Container Terminal Co., Ltd., within ten days from the date of effectiveness of the judgment; 3. Reject other claims of the Plaintiff. If the Defendants, Dalian Winland International Shipping Agency Co., Ltd. Tianjin Branch and Dalian Winland International Shipping Agency Co., Ltd., fail to perform the obligation of payment within the period designated by this judgment, the interest on the debt for the delayed period shall be doubled in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB15,441, which has been prepaid by the Plaintiff, shall be paid by the Defendants, Dalian Winland International Shipping Agency Co., Ltd. Tianjin Branch and Dalian Winland International Shipping Agency Co., Ltd., for the convenient settlement, the two Defendants shall pay it together with the above amount and The court will not proceed with the repayment formality. In event of dissatisfaction with this judgment, both parties may, within 15 days upon services of this judgment, submit a bill of appeal in in sextuplicate to the Tianjin High People’s Court. The fee of appeal shall be paid according to the dissatisfied amount decided in the first-instant judgment within 7 days upon submitting the bill of appeal, otherwise the appeal will be deemed to be withdrawn. (Bank of Deposit: Agricultural Bank of China Tianjin City Tiancheng Branch, 02200501040006269; Name of Account: Finance Department of Tianjin High People’s Court) Presiding Judge: LIU Fengwu Acting Judge: ZHANG Jie People’s Assessor: WANG Jun November 30, 2014 Clerk: WANG Pu

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Enclosed List: the name and voyages, and the time of mooring and unmooring of the international liner vessels. No.

Vessel’ name

Voyage (inbound)

1 2 3 4 5 6 7 8 9 10 11

M.V. “ULTIMA”

1348W

12 13 14 15

Voyage (outbound)

The time of mooring 2014-1-6

1401E JOSCO LILY

401W

M.V. “ULTIMA”

1402W

JOSCO LILY

403W

M.V. “ULTIMA”

1404W

2014-1-6 2014-1-14

402W

2014-1-15 2014-1-19

1403W

2014-1-20 2014-1-29

404E

M.V. “FPMC CONTAINER 10” M.V. “ULTIMA”

2014-1-30 2014-2-5

1405E 1408E 1408W

2014-2-5 2014-2-22 2014-3-1

1409E M. V. “TALLAHASSEE”

The time of unmooring

1409W

2013-3-2 2014-3-9

1410E

2014-3-10

Shanghai Maritime Court Civil Judgment Tongling Shouyun Logistics Co., Ltd. v. Qinhuangdao Huizheng Trade Co., Ltd. (2013) Hu Hai Fa Shang Chu Zi No.1734 Related Case(s) None. Cause of Action 212. Dispute over voyage charter party. Headnote Dispute concerning demurrage and damages for failure to load cargo on a voyage-Chartered ship; the charterer was held liable to pay demurrage and also to forfeit the deposit it had paid, but was not liable to pay demurrage for delay after the charter had been cancelled by the owner. Summary The Plaintiff chartered its ship M.V. YIN BAO to the Defendant to carry a cargo of coal from Qinhuangdao to Jiangdu. The Defendant paid a deposit of RMB100,000, as it was required to do by the charter. The chartered ship M.V. YIN BAO arrived at the agreed upon date and location, but the Defendant did not make the required declarations to the port authority in order to enable it to begin loading, and did not load any coal. The Plaintiff terminated the contract and M.V. YIN BAO left the port after being on demurrage for twenty-one days. The Defendant voluntarily paid the Plaintiff RMB200,000 for demurrage, but refused to pay any additional demurrage as claimed by the Plaintiff, or to pay damages for failure to load any cargo. The Plaintiff subsequently filed suit against the Defendant for additional demurrage and damages for failure to load any cargo. —Held by Shanghai Maritime Court that the Defendant breached the contract and was liable for the deposit and voluntarily paid demurrage, as well as for damages for failure to load cargo. However, the court held that the Plaintiff was not entitled to the sum of RMB551,250 that it had claimed for additional demurrage.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_50

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Judgment The Plaintiff: Tongling Shouyun Logistics Co., Ltd. Domicile: Tongling, Anhui. Legal representative: WANG Yonggen, chairmen. Agent ad litem: YANG Kunwei, lawyer of Jiangsu Jinjing Law Firm. The Defendant: Qinhuangdao Huizheng Trade Co., Ltd. Domicile: Qinhuangdao, Hebei. Legal representative: BAI Wenhe. With respect to the case arising from dispute over voyage charter party filed by the Plaintiff, Tongling Shouyun Logistics Co., Ltd., against the Defendant, Qinhuangdao Huizheng Trade Co., Ltd., on December 6, 2013. The court, after accepting the case on the same day, applied under general procedure and held a hearing in public on February 17, 2014. YANG Kunwei as agent ad litem of the Plaintiff attended the hearing. The Defendant, after being served a legal subpoena, did not appear in court without proper reason. Now the case has been concluded. The Plaintiff alleged that it concluded a voyage charter party with the Defendant, in which it was agreed that the Defendant would charter M.V. M.V. YIN BAO owned by the Plaintiff to carry coals from Qinhuangdao to Jiangdu; besides, minimum chargeable tonnage, freight, demurrage, liquidated damages and other items were also agreed. After conclusion of the voyage charter party, the Defendant paid a deposit in sum of RMB100,000. The vessel involved arrived at Qinghuangdao on September 19, 2013 as agreed and departed on October 9, 2013, during this period the Defendant did not declare to the port authority and start loading. The Defendant paid demurrage in sum of RMB200,000 to the Plaintiff. The vessel was on demurrage for 21 days, while the Plaintiff voluntarily charged demurrage for 17 days in amount RMB850,000. Meanwhile, the Defendant should compensate RMB551,250 for non-delivery of goods as agreed and the deposit paid by it should be impounded. The Plaintiff requested the court to judge that the Defendant should compensate the Plaintiff for the demurrage and the liquidated damages in the amount of RMB1,101,250 and bear the litigation costs. The Defendant did not appear in court but defended in written: the demurrage in sum of RMB50,000 per day and the liquidated damages amounting to 30% of the freight being were repeat agreement, the two payments could not be applied at the same time; the agreed demurrage was too high and it should be adjusted to a sum of RMB15,000 per day; the liquidated damages were also too high and it should be reduced to 10% of the freight; the liquidated damages and the deposit in sum of RMB100,000 should not be applied repeatedly, the deposit having being paid by the Defendant should be deducted from the liquidated damages claimed by the Plaintiff.

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The Plaintiff submitted the following evidence to support its arguments: 1. Voyage charter party, to prove that the contract relationship of voyage charter established between the Plaintiff and the Defendant and they had agreed on demurrage, liquidated damage and other terms; 2. E-bank receipt, to prove that the Defendant had paid the deposit in sum of RMB100,000 and the demurrage in sum of RMB200,000 to the Plaintiff; 3. Logbook, to prove that the plaintiff’s vessel arrived at Qinghuangdao for loading as agreed, but no goods was delivered to the Plaintiff. The Defendant did not submit any evidence within the time limit for producing evidence. The court holds that, evidence 1, namely the voyage charter party involved was signed via fax, and evidence 2 and 3 was the original. The three evidence can corroborate each other from formation time and content, therefore they shall be ascertained. The court finds the following facts according to the evidence submitted to the court and the statements of the two parties: The Plaintiff signed the voyage charter party involved with the Defendant on December 14, 2013 under which M.V. M.V. YIN BAO carried coals from Qinhuangdao, Hebei to Jiangdu, Jiangsu. It was agreed the Plaintiff was the shipowner and the Defendant was the charterer; the layday was December 14, 2013 (plus or minus one day); the freight was RMB49 per day and the minimum chargeable tonnage was 37,500 tons; the demurrage was RMB100,000 per day, the loading time and unloading time was 66 h respectively. It was provided in Article 1 of special agreement and responsibility for breach of contract, “this contract will take effect after being signed, otherwise the lessee shall pay a deposit in sum of RMB100,000 to the shipowner once the contract takes effect, the shipowner is entitled to refuse delivering the vessel”; Article 3 provided “freight and demurrage shall be paid after the vessel arrives at the anchorage of discharge port in lump sum; Article 5 provided “total laytime for loading and discharging, calculated from time of vessel’s arrival at port of loading/discharge, once on demurrage, always on demurrage, PDPR per day or prorate”; Article 7 provided “where the charterer cannot handle port declaration formality within 48 hour after the vessel arrives at the anchorage of loading port, the charterer shall pay demurrage in sum of RMB50,000 per day, otherwise the lessor is entitled to cancel the contract and impound the deposit for charterer’s failure to deliver goods”; and Article 9 provided “if the vessel/goods are not delivered, the party who breaches the contract shall compensate 30% of the freight”. At 0815 hour on December 19, 2013, M.V. YIN BAO arrived at the anchorage of port of Qinghuangdao. M.V. YIN BAO departed at 1145 hour on October 9, 2013 due to the Defendant’s failure of port declaration and loading goods. The Plaintiff confessed an unladen voyage needed three to four days in the hearing. It is also found out that BAI Guoqing, an outsider, remitted RMB100,000 as deposit under the voyage charter party involved to the Plaintiff on September 14,

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2013 and September 16, 2013. BAI Guoqing remitted RMB100,000 on September 23, 2013 and the Defendant remitted RMB100,000 to the Plaintiff as demurrage under the voyage charter party involved. The court holds that this case is arising from dispute over voyage charter party, the Defendant refused to appear in court without proper reason, it shall be deemed the Defendant gave up the right of cross-examination and defence. The main issues in this case are as follows: 1. Interpretation of Article 7 of the special agreement of the voyage charter party involved; 2. The liability shall be taken by the Defendant pursuant to the voyage charter party involved; and 3. Whether the amount of compensation can be adjusted according to the defence of the Defendant. In respect of the interpretation of Article 7 of the special agreement of the voyage charter party involved, it is agreed where the charterer cannot handle port declaration formality within 48 hour after the vessel arrives at the anchorage of port of loading, the charterer shall pay demurrage in sum of RMB50,000 per day, otherwise the shipowner is entitled to cancel the contract and impound the deposit for charterer’s failure to deliver goods. Firstly, although the word “cancel” is used in the clause, the shipowner’s right to terminate the contract is subject to certain conditions; secondly, the condition to terminate the contract, if being interpreted according to the words, “RM50,00 per day” is only an agreement on the standard of payment but not on period of payment, objectively such condition cannot be accomplished, as a result, this clause has no practical meaning. It can be found from the actual performance of the parties, after the vessel arrived at the port of loading on 19 September, the Defendant did not declare to the port until the vessel departed from the port of discharge on 21 September, and the Defendant and BAI Guoqing, an outsider, paid RMB100,000 respectively. To sum up, the court holds that it is reasonable to interpret the condition to terminate the contract and make it clear that the charterer shall pay RMB50,000 per day as demurrage if he fails to declare to the port within 48 hour after the vessel arrives at the anchorage; thirdly, the result of the charterer’s failing to declare to the port and pay the demurrage in time is the right of the shipowner to cancel the contract involved, and the way to take liability for the cancellation is clearly agreed in the contract, namely “impound the deposit for charterer’s non-delivery of goods, the deposit herein shall be deemed as RMB100,000 paid by the Defendant to the Plaintiff. In respect of the liability the Defendant shall take, pursuant to the voyage charter party involved, the calculating standard, time to count, and period of payment of demurrage are provided in Article 7 of the special agreement on related issues of demurrage in case of non-delivery of goods are provided in the contract involved. The court holds the Defendant did not declare to the port within 48 hour after the vessel arrived at the anchorage and refused to pay the demurrage except 4 days’ sums, the condition to terminate the contract has accomplished, so the Plaintiff may

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choose to wait for the goods for the sake of freight or cancel the contract and request the Defendant to take liability as agreed. The Plaintiff’s withdrawal of the vessel constitutes an actual cancellation of the contract involved, so it is entitle to payment from the Defendant. Except RMB200,000 having been paid by the Defendant, other demurrage claimed by the Plaintiff will not be ascertained for the following reasons: first, the result in case of the Defendant’s breach of the contract is clearly provided in Article 7 the special agreement, namely the deposit will be impounded. The Plaintiff is entitled to a general right of relief, the Defendant will not take any other liability; second, the Plaintiff confessed a unladen voyage would take three to four days and it cannot prove it is the Defendant’s request to withdraw the ship on the 20th day after the vessel’s arriving at the anchorage, therefor the court will not ascertain it is reasonable commercial act and the Plaintiff is not entitle to compensation of additional losses occurring during the period aforesaid. In respect of whether the amount of compensation can be adjusted according to the defence made by the Defendant, the Defendant contended that demurrage and liquidated damages were repeat agreement and the amount of liquidated damages was too high, in addition, the deposit and liquidated damages should not be claimed at the same time. The court holds firstly, there is a special agreement on demurrage in Article 7 of special clause in the contract, the demurrage voluntarily paid by the Defendant according to the contract is compensation for the time the vessel had waited in order to hold the vessel when non-delivery of goods occurred. The demurrage under this clause dose not overlap the liability for breach of contract the Defendant shall bear; second, regarding the standard of the demurrage and liquidated damages, the two parties are subjects engaged in shipping and trade who have ability of professional judgment and equal negotiation, the agreement on demurrage and liquidated damages is express of real intends of the two parties, the Defendant unilaterally requested to adjust the standard agreed by them without specific reason and evidence, the court does not ascertain; finally, with regard to whether the allegation that the deposit overlaps the liquidated damages, according to Article 116 of the Contract Law of the People’s Republic of China, if the parties agree on both liquidated damages and a deposit, and one party is in breach, the other party may choose to apply either the provisions for liquidated damages or that for the deposit, it is provision on a circumstance where liquidated damages and a deposit are agreed in the meantime, but it is clearly provided in Article 7 of the contract involved the way the Defendant to take liability is to lose the deposit and bear the result of non-delivery of goods, Article 9 in the contract provided liquidated damages for non-delivery of goods is 30% of the freight, pursuant to the two articles, the liability agreed in Article 7 shall be interpreted as the two parties have arrived at an agreement on a deposit and liquidated damages at the same time, the court holds it does not go against the law, the Plaintiff is entitled to claim for deposit as well as liquidated damages. In summary, the voyage charter party is established between the Plaintiff and the Defendant. The Defendant constituted a breach of Article 7 of the special agreement of the contract involved, the Plaintiff cancelled this contract in accordance with terms permitting such cancellation. Besides the deposit in sum of RMB100,000 and

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the demurrage in sum of RMB200,000 having been paid by the Defendant, the Plaintiff is entitled to payment of compensation for non-delivery of goods, namely 30% of the freight in sum of RMB551,250 from the Defendant. According to Article 93 Paragraph 1, Article 97 Paragraph 2, Article 114 Paragraph 1, Article 119 Paragraph 1, Article 125 Paragraph 1 and Article 60 of the Contract Law of the People’s Republic of China, Article 64 Paragraph 1 and Article 144 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: 1. The Defendant, Qinhuangdao Huizheng Trade Co., Ltd., shall pay RMB5511,250 to the Plaintiff, Tongling Shouyun Logistics Co., Ltd., within ten days after this judgment come into effect. 2. Reject other claims of the Plaintiff, Tongling Shouyun Logistics Co., Ltd. Court acceptance fee in amount of RMB14,711, the Plaintiff, Tongling Shouyun Logistics Co., Ltd., shall bear RMB7,346.67 and the Defendant, Qinhuangdao Huizheng Trade Co., Ltd., shall bear RMB7,364.33. In event of dissatisfaction with this judgment, any party may within 15 days upon service of this judgment, submit a statement of appeal to the court, with duplicates being submitted in terms of the number of the opposite party, to lodge an appeal to the Shanghai High People’s Court. Presiding Judge: QIAN Xu Acting Judge: FANG Yi Acting Judge: LIAO Luqi March 6, 2014 Clerk: LI Yuanjun

Qingdao Maritime Court Civil Judgment UBI Logistics (China) Limited Qingdao Branch v. Qingdao Sunwide Tyre Co., Ltd. et al. (2013) Qing Hai Fa Hai Shang Chu Zi No. 535 Related Case(s) None. Cause of Action 223. Dispute over freight forwarding contract on the sea or sea-connected waters. Headnote The Plaintiff freight forwarder held entitled to recover some but not all of claimed amounts advanced to carriers on behalf of defendants, there being inadequate proof that all payments had been authorized by defendants. Summary The Plaintiff freight forwarder brought suit against the Defendant and a shipper alleging that it was still owed freight and transport charges it had paid to actual carriers under a maritime freight forwarding contract and that the Defendants should be held jointly and severally liable for these charges on the theory that there was confusion regarding the corporate personality of the two Defendants. The Plaintiff and the Defendant entered into a one-year maritime freight forwarding contract where the Plaintiff was to charter space on vessels for the Defendant’s goods and pay the freight and transport charges for each carriage in RMB and USD currency. The legal representative of Defendant signed a cost confirmation form acknowledging that the Plaintiff had paid the necessary freight and transport charges associated with the carriage of goods and also listed the other Defendant as the shipper. However, the Plaintiff alleged that the Defendant had accepted another seven consignments and advanced portions freight and transport charges in both RMB and USD currencies on behalf of various other entities. It attempted to prove this by submitting copies of the bills of lading and other documents, but failed to produce the source of these documents which was alleged to be an attachment in an email that was deleted after the resignation of the Plaintiff’s clerk. Under Article 405 of the Contract Law of the People’s Republic of China, a principal shall reimburse the agent once the agreed to transaction has been completed. Therefore, the Court held that the Defendant was liable for the freight and transport charges associated with the October consignment since its legal representative signed and confirmed those amounts. However, the Court did not hold the © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_51

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Defendant liable for the freight and transport charges associated with the other seven consignments on the grounds that the copies produced by the Plaintiff only named other entities, not the Defendant, meaning the Plaintiff failed to link the Defendant to each of the transactions. The Plaintiff also never produced the source of these documents in order to support its claim that the Defendant should be liable for the charges paid. The court also held that there was no confusion as to the corporate identities of the Defendant and the shipper because the Plaintiff failed to produce any evidence showing any confusion associated with the financial matters and business addresses of the Defendants. Hence, the Defendant and shipper were not held jointly and severally liable, and all of the Plaintiff’s claims for remuneration were dismissed except for the one associated with the October consignment of which the Defendant was liable for and ordered to pay those freight and transport charges.

Judgment The Plaintiff: UBI Logistics (China) Limited Qingdao Branch. Domicile: Rm.1207–1209, Zhongtianheng Building, 8 South Fuzhou Road, Qing Dao City, Shandong. Legal representative: ZHANG Haibei, general manager. Agent ad litem: WANG Zhonghua, lawyer of Shandong Youhua Law Firm. Agent ad litem: HAO Zhigang, lawyer of Shandong Youhua Law Firm. The Defendant: Qingdao Sunwide Tyre Co., Ltd. Domicile: Room 1417, Building A Digital Tech, 63 Haier Road, Laoshan District, Qingdao City, Shandong. Legal representative: CHEN Zhen, manager. Agent ad litem: GUAN Lei, employee. The Defendant: Sunwide Rubber Corp., Limited. Domicile: Room 2105 J0D2412 Trend Centre 29–31 Cheuneg Lee St Chai Wan Hong Kong. Service Address: Rm.1417 Building B, Digital Technology Center, 63 Haier Road, Laoshan District, Qingdao City, Shandong. With respect to the case arising from dispute over maritime freight forwarding contract filed by the Plaintiff, UBI Logistics (China) Limited Qingdao Branch (hereinafter referred to as “UBI Qingdao”), against the Defendants, Qingdao Sunwide Tyre Co., Ltd. (hereinafter referred to as “Qingdao Sunwide”) and Sunwide Rubber Corp., Limited. (hereinafter referred to as “Sunwide Rubber”), the court, after accepting the case, organized the collegiate panel and heard the case in public. WANG Zhonghua and HAO Zhigang, agents ad litem of the Plaintiff, and GUAN Lei, agent ad litem of the Defendant Qingdao Sunwide, appeared in court to attend the hearing. Upon summon by the court, the Defendant Sunwide Rubber refused to appear in court without proper reason. Now the case has been concluded.

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The Plaintiff claimed that: during June to October 2012, Qingdao Sunwide entrusted the Plaintiff with the services of carriage of goods by sea for several times. It accepted the entrustment and provided corresponding services, but Qingdao Sunwide still owed RMB4698.3 and USD10,190. Sunwide Rubber confirmed the outstanding sum by signature. The Plaintiff held that there was corporate personality confusion between Sunwide Rubber and Qingdao Sunwide, so Sunwide Rubber should be severally and jointly liable for the debts. But so far both of them did not pay. To safeguard its legitimate rights and interests, the Plaintiff brought a lawsuit before the court and requested the court to judge: 1. The two Defendants should severally and jointly pay the outstanding sum in amount of RMB4698.3 and USD10,190 to the Plaintiff; 2. The two Defendants should bear all the preservation fees and litigation fees. The Defendant Qingdao Sunwide argued that it did not affirm the allegation in its bill of complaint that Qingdao Sunwide entrusted UBI Qingdao with services of carriage of the goods by sea, and it was not the fact that it had confirmed the outstanding sum by signature. The Defendant Sunwide Rubber did not submit written defence. The Plaintiff submitted the following evidence to support its claims: 1. Maritime freight forwarding contract, to prove that UBI Qingdao and Qingdao Sunwide signed a maritime freight forwarding contract; 2. Booking note, the costs confirmation form of the customer, the stub of cheque for transfer, the internal application for payment of the Plaintiff, the invoice, the international remittance credit advice of Bank of China Shandong Branch, the electronic payment receipt of China Merchants Bank, the record sheet of invoice issued to Shandong Shouguang Shunfuchang Imp. & Exp. Co., Ltd. and the record sheet of the invoice issued to Qingdao Sunwide of the first consignment, to prove that the Defendant still owed RMB330 to the Plaintiff; 3. Booking note, the costs confirmation form of the customer, an email, the stub of cheque for transfer, the internal application for payment of the Plaintiff, the invoice, the international remittance credit advice of Bank of China Shandong Branch, the electronic payment receipt of China Merchants Bank, the record sheet of the invoice issued to Sheng Tai Group Co., Ltd., the record sheet of invoice issued to Qingdao Sunwide and the bill of lading issued by the shipping company of the second consignment, to prove the Defendant still owed RMB132 and USD2650 to the Plaintiff; 4. Booking note, the costs confirmation form of the customer and the bill of lading issued by the shipping company of the third consignment, to prove that the Defendant still owed RMB2885 to the Plaintiff; 5. Booking note, the costs confirmation form of the customer, an email, the stub of cheque for transfer, the internal application for payment of the Plaintiff, the remittance and transfer voucher of Bank of China, the invoice, the electronic payment receipt of China Merchants Bank, the record sheet of invoice issued to Sheng Tai Group Co., Ltd., the record sheet of invoice issued to Qingdao

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Sunwide and the bill of lading issued by the shipping company of the forth consignment, to prove that the Defendant still owed RMB126 and USD2650 to the Plaintiff; Booking note, the costs confirmation form of the customer, the stub of cheque for transfer, the internal application for payment of the Plaintiff, the remittance and transfer voucher of Bank of China, the invoice, the electronic payment receipt of Bank of China, the record sheet of invoice issued to Dongying Wanxing Rubber Co., Ltd., the record sheet of invoice issued to Qingdao Sunwide, the export shipping order and the bill of lading issued by the shipping company of the fifth consignment, to prove that the Defendant still owed RMB775.3 and USD2000 to the Plaintiff; Booking note, the costs confirmation form of the customer, two emails, the stub of cheque for transfer, the internal application for payment of the Plaintiff, the remittance and transfer voucher of Bank of China, the invoice, the electronic payment receipt of China Merchants Bank, the record sheet of invoice issued to Sheng Tai Group Co., Ltd. and the record sheet of invoice issued to Qingdao Sunwide of the sixth consignment, to prove that the Defendant still owed RMB135 and USD2650 to the Plaintiff; Booking note, the costs confirmation form of the customer, the costs confirmation form of the customer signed by CHEN Zhen, the bill of lading issued by the shipping company, the export shipping order, the confirmation of contents of the bill of lading, the electronic payment receipt of China Merchants Bank, the domestic and foreign currency payment debit notice of Bank of China, the internal application for payment of the Plaintiff and invoice of the seventh consignment, to prove that the Defendant still owed RMB15 and USD240 to the Plaintiff; Booking note, the costs confirmation form of the customer, the stub of cheque for transfer, the internal application for payment of the Plaintiff, the remittance and transfer voucher of Bank of China, invoice, the electronic payment receipt of China Merchants Bank, the record sheet of invoice issued to Qingdao Nexen Trade Co., Ltd., the record sheet of invoice issued to Qingdao Sunwide, the export shipping order, the bill of lading issued by the shipping company and the guarantee for telex release of the eighth consignment of the eighth consignment, to prove that the Defendant still owed RMB300 to the Plaintiff.

The cross-examination opinions of the Defendant Qingdao Sunwide on the evidence materials submitted by the Plaintiff UBI Qingdao are as follows: The Defendant had no objection to the authenticity of evidence 1 but it questioned the content thereof; the Defendant raised objection to the booking notes, costs confirmation forms of the customer, the bills of lading issued by the shipping company, the export shipping orders, the invoices of freight and the guarantees for telex release in evidence 2–7 and evidence 9 since they are all copies; the Defendant questioned the record sheet of invoice issued to Qingdao Sunwide because it have never received it; the Defendant questioned the authenticity of the email because LIU Xuefeng was no longer the employee of the Plaintiff since August 2012; the

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Defendant questioned the stub of cheque for transfer, the application for payment, invoice, the international remittance credit advice issued by Bank of China Shandong Branch, the electronic payment receipt of China Merchants Bank, and the record sheet of invoice issued to Shandong Shouguang Shunfuchang Imp. & Exp. Co., Ltd. in evidence 2; the Defendant raised no objection to the stub of cheque for transfer, the internal application for payment of the Plaintiff, the invoice, the international remittance credit advice issued by Bank of China Shandong Branch, the electronic payment receipt of China Merchants Bank, and the record sheet of invoice issued to Sheng Tai Group Co., Ltd. in evidence 3; the Defendant raised no objection to the stub of cheque for transfer, the internal application for payment of the Plaintiff, the remittance and transfer voucher of Bank of China, the invoice, the electronic payment receipt of China Merchants Bank and the record sheet of invoice issued to Sheng Tai Group Co., Ltd. in evidence 5; the Defendant raised no objection to the stub of cheque for transfer, the internal application for payment of the Plaintiff, the remittance and transfer voucher of Bank of China, the invoice, the electronic payment receipt of China Merchants Bank and the record sheet of invoice issued to Dongying Wanxing Rubber Co., Ltd. in evidence 6; the Defendant raised no objection to the stub of cheque for transfer, the internal application for payment of the Plaintiff, the remittance and the transfer voucher of Bank of China, the invoice, the electronic payment receipt of China Merchants Bank and the record sheet of the invoice issued to Sheng Tai Group Co., Ltd. in evidence 7; the Defendant raised no objection to the costs confirmation form of the customer signed by CHEN Zhen, the bill of lading issued by the shipping company, the export shipping order, the confirmation of contents of the bill of lading, the electronic payment receipt of China Merchants Bank, the domestic and foreign currency payment debit notice of Bank of China, the internal application for payment of the Plaintiff and the invoice in evidence 8; the Defendant raised no objection to the stub of cheque for transfer, the internal application for payment of the Plaintiff, the remittance and transfer voucher of Bank of China, the invoice, the electronic payment receipt of China Merchants Bank and the record sheet of the invoice issued to Qingdao Nexen Trade Co., Ltd. in evidence 9. The Defendant Sunwide Rubber did not express cross-examination opinions for absence in court. The court ascertains the evidence to which the Defendant Qingdao Sunwide has no objection in evidence 1, evidence 2–9 submitted by the Plaintiff; the booking note, the costs confirmation form of the customer, the bill of lading issued by the shipping company, the shipping order, guarantee for telex release in evidence 2–7 and evidence 9 are all copies, the Defendant disaffirmed, and the Plaintiff failed to provide evidence to prove the source, therefore the court does not ascertain the evidence mentioned above; the court does not ascertain the record sheet of invoice since no evidence can prove it has been given to Qingdao Sunwide; the court does not ascertain the email because no evidence can prove the identity of the sender, the recipient and its sources.

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The Defendant Qingdao Sunwide and Sunwide Rubber did not submit any evidence. After trial, the court finds out the following facts: On April 23, 2012, UBI Qingdao and Qingdao Sunwide signed a maritime freight forwarding contract, in which it was agreed that Qingdao Sunwide entrusted UBI Qingdao to freight forward the international carriage of goods by sea. As to the conditions of effectiveness of the contract, it was provided that the effective term of this contract was one year starting from the date of signature by UBI Qingdao. On October 15, 2012, CHEN Zhen, the legal representative of Qingdao Sunwide signed the costs confirmation form of the customer issued by UBI Qingdao to confirm the freight in amount of USD240 and the customs clearance fee in amount of RMB15 of the goods Qingdao Sunwide entrusted UBI Qingdao to freight forward the carriage. This consignment was the seventh consignment alleged by the Plaintiff, of which the number of the bill of lading was LC500WH202, the shipper was named as Sunwide Rubber. UBI Qingdao chartered ship for booking space from the Wei Hang (Tianjin) International Logistics Co., Ltd. Dalian Branch for this consignment, and paid the freight in amount of USD210 and RMB15. UBI Qingdao alleged that in addition to the consignment mentioned above, UBI Qingdao accepted another seven consignments, and advanced the transport charges in RMB currency and the freight in USD currency. UBI Qingdao submitted internal application for payment, the stub of the check for transfer, and the invoice issued by the freight forwarder of next level, to prove UBI Qingdao advanced the payment. The number of the bill of lading of the first consignment was FXQD131247. UBI Qingdao paid the freight in amount of RMB29,795.5 to Zhong Cheng International Transportation Co., Ltd. Shandong Branch. UBI Qingdao confirmed that it had received the freight and the transport charges in amount of RMB1930 from Shandong Shouguang Shunfuchang Imp. & Exp. Co., Ltd. through bank transfer, and UBI Qingdao issued the invoice. UBI Qingdao alleged that the Defendant paid the freight and transport charges in the name of Shandong Shouguang Shun Fuchang Imp. & Exp. Co., Ltd., but the Defendant Qingdao Sunwide disaffirmed that. As to the freight, UBI Qingdao confirmed it had received the freight in amount of USD4435 paid by Sunwide Rubber through bank transfer. The number of the bill of lading of the second consignment was 7QDREUP1207401. UBI Qingdao paid the transport charges in amount of RMB2027 and the freight in amount of USD2600 to Jiangsu Xinhang International Freight Forwarding Co., Ltd. Qingdao Branch. UBI Qingdao confirmed that it had received the transport charges of this consignment in amount of RMB2100 from Sheng Tai Group Co., Ltd. through bank transfer and it issued the invoice. UBI Qingdao alleged Qingdao Sunwide paid the transport charges in the name of Sheng Tai Group Co., Ltd., but the Defendant Qingdao Sunwide disaffirmed that. The number of the bill of lading of the third consignment was HAQDTK230201. UBI Qingdao did not submit any evidence to prove it advanced payment to the freight forwarder of next level.

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The number of the bill of lading of the forth consignment was 7QDREUP1207503. UBI Qingdao paid the transport charges in amount of RMB2027 and the freight in amount of USD2600 to Jiangsu Xinhang International Freight Forwarding Co., Ltd. Qingdao Branch. UBI Qingdao confirmed that it had received the transport charges of this consignment in amount of RMB2100 from Sheng Tai Group Co., Ltd. through bank transfer and it issued the invoice. UBI Qingdao alleged Qingdao Sunwide paid the transport charges in the name of Sheng Tai Group Co., Ltd., but the Defendant Qingdao Sunwide disaffirmed that. The number of the bill of lading of the fifth consignment was 177DHJHJQ1511. UBI Qingdao paid the transport charges in amount of RMB1927 and the freight in amount of USD1800 to Qingdao World Ex Logistics Co., Ltd. UBI Qingdao confirmed that it had received the transport charges of this consignment in amount of RMB1351.70 from Dongying Wanxing Rubber Co., Ltd. through bank transfer and it issued the invoice. UBI Qingdao alleged Qingdao Sunwide paid the transport charges in the name of Dongying Wanxing Rubber Co., Ltd., but the Defendant Qingdao Sunwide disaffirmed that. The number of the bill of lading under the sixth consignment was IQDREUS1208278. UBI Qingdao paid the transport charges in amount of RMB2027 and the freight in amount of USD2545 to Broadway Pacific International Logistics (Qingdao) Co., Ltd. UBI Qingdao confirmed that it had received the transport charges of this consignment in amount of RMB2100 from Sheng Tai Group Co., Ltd. through bank transfer and it issued the invoice. UBI Qingdao alleged Qingdao Sunwide paid the transport charges in the name of Sheng Tai Group Co., Ltd., but the Defendant Qingdao Sunwide disaffirmed that. The number of the bill of lading of the eighth consignment was APLU065563066. UBI Qingdao paid the transport charges in amount of RMB2402 and the freight in amount of USD65 to Shanghai Kaishi International Freight Forwarding Co., Ltd. Qingdao Branch. UBI Qingdao confirmed that it had received RMB2640.60 paid by WANG Qingrui through bank transfer and issued the invoice in amount of RMB2640.60 to Qingdao Nexen Trade Co., Ltd. UBI Qingdao alleged Qingdao Sunwide paid the transport charges in the name of WANG Qingrui, but the Defendant Qingdao Sunwide disaffirmed that. UBI Qingdao submitted the booking notes and the confirmation forms of freight of seven consignments except the one under No.LC500WH202 bill of lading to prove the principal was UBI Qingdao, but the booking note and the confirmation form of freight were all copies and UBI Qingdao claimed that the source was attachment to email. Because the clerk had resigned and the emails had been deleted, so UBI Qingdao could not prove the source of the copies. The email about chartering ship for booking space could not prove the source, the identities of the sender and recipient. As to the seven consignments for which UBI Qingdao advanced the payment for the two Defendants, UBI Qingdao did not submit evidence to prove it had advanced the transport charges and the freight of the consignment under the bill of lading HAQDTK230201, and although the fees of the other six consignments could be proved that they had paid, the relevancy between the payment with Qingdao Sunwide cannot be proved. Specifically, as to the four

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consignments under the bills of lading numbered with 7QDREUP1207401, 7QDREUP1207503, 177DHJHJQ1511 and APLU065563066, UBI Qingdao only provided the copies of the bills of lading, which named the Defendant Sunwide Rubber as the shipper, but it could not illustrate the sources of these copies; as to the two consignments under No.FXQD131247 bill of lading and No. IQDREUS1208278 bill of lading, UBI Qingdao failed to provide the copies thereof, neither it could prove the relevancy between the two consignments and the two Defendants, nor could it prove the payments were advanced for Qingdao Sunwide. UBI Qingdao alleged that Qingdao Sunwide issued invoices for the transport charges of RMB currency, but no evidence could prove that the invoices had been delivered to Qingdao Sunwide, and Qingdao Sunwide disaffirmed that. The court holds that the main issues of this case are that: whether the Defendant Qingdao Sunwide is the principal of the eight consignments involved; whether there is a confusion of corporate personality between Qingdao Sunwide and Sunwide Rubber. In respect of whether the Defendant Qingdao Sunwide is the principal of the eight consignments involved. UBI Qingdao claimed it signed a maritime freight forwarding contract with Qingdao Sunwide, so the eight consignments involved were all entrusted by Qingdao Sunwide. Qingdao Sunwide rebutted that although they signed the maritime freight forwarding contract, but it only entrusted Qingdao Sunwide with shipment of only one consignment, other seven consignments had nothing to do with Qingdao Sunwide. In this regard, the court holds that, in accordance with Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, a party shall have the burden to produce evidence for its claims. UBI Qingdao shall prove that the seven consignments disaffirmed by Qingdao Sunwide are in fact entrusted by Qingdao Sunwide for shippment. UBI Qingdao submitted the maritime freight forwarding contract concluded by it and Qingdao Sunwide. The effective period of this contract is one year, and no specific number of bill of lading of each consignment has been agreed therein. Therefore whether the eight consignments involved were entrusted by Qingdao Sunwide for shipment shall be decided by each shipping document of each consignment. As to the consignment under No.LC500WH202 bill of lading, the legal representative of Qingdao Sunwide signed the confirmation form of freight and the bill of lading. Therefore, Qingdao Sunwide shall be deemed to be the principal of this consignment. This consignment have been successfully shipped. In accordance with Article 405 of the Contract Law of the People’s Republic of China, Upon completion of the commissioned affair by the agent, the principal shall pay the remuneration thereto, Qingdao Sunwide has confirmed the receipt of the freight of this consignment, so Qingdao Sunwide shall pay the freight in amount of USD240 and the clearance fee in amount of RMB15. As to the other seven consignments, UBI Qingdao submitted the vouchers and invoices of the freights and the transport charges to the freight forwarder of six consignments. But the evidence can only prove that UBI Qingdao have paid to the freight forwarder the fees under the bill of lading numbered with FXQD131247,

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7QDREUP1207401, 7QDREUP1207503, 177DHJHJQ1511, IQDREUS1208278 and APLU065563066, it cannot prove that Qingdao Sunwide is relevant with these six consignments. UBI Qingdao alleged the numbers of the bills of lading on the invoices and the copies of B/L it submitted can form a chain of evidence. But as to the consignments under the bill of lading numbered with FXQD131247 and IQDREUS1208278, UBI Qingdao failed to submit any bill of lading related to Qingdao Sunwide. As to the consignments under the bill of lading numbered with 7QDREUP1207401, 7QDREUP1207503, 177DHJHJQ1511 and APLU065563066, UBI Qingdao only submitted the copies thereof, and cannot prove the source. The shipper on these copies of the bills of lading is Sunwide Rubber rather than Qingdao Sunwide, it cannot be proved that these bills of lading are related to Qingdao Sunwide. On the contrary, the electronic payment receipts of China Merchants Bank and the invoices of freight submitted by UBI Qingdao can prove that UBI Qingdao have received the freights of the six consignments from Shandong Shouguang Shunfuchang Imp. & Exp. Co., Ltd., Sheng Tai Group Co., Ltd., Dongying Wanxing Rubber Co., Ltd. and WANG Qingrui, and UBI Qingdao issued invoices of the freight on which named the payee as the units mentioned above. The number of the bills of lading in the invoices and that of the goods for which it advanced payment are same. As to the consignment under No. HAQDTK230201 bill of lading, UBI Qingdao failed to submit the voucher and invoice of the freight and the transport charge it advanced to form a chain of evidence to prove its allegation. UBI Qingdao also submitted the record sheet of the invoices of the other seven consignments issued to Qingdao Sunwide, but Qingdao Sunwide disaffirmed it had received the invoices above. Therefore, UBI Qingdao cannot prove that Qingdao Sunwide owes the freights by these invoices. The court holds that the key evidence to identify whether Qingdao Sunwide was the principal was the booking note and the confirmation form of freight. UBI Qingdao only submitted the copies and claimed that they were attachments in emails. But because of the resignation of the clerk, the emails have been deleted and cannot be submitted as evidence, the copies cannot prove that Qingdao Sunwide is the principal. As to the emails having not been deleted, the identities of the addressor and addressee cannot be proved, therefore, Qingdao Sunwide cannot be identified as the customer. In short, the evidence submitted by UBI Qingdao cannot prove that Qingdao Sunwide is the customer of the seven consignments under the bills of lading numbered with FXQD131247, 7QDREUP1207401, 7QDREUP1207503, 177DHJHJQ1511, IQDREUS1208278, APLU065563066 and HAQDTK230201. And the evidence also cannot prove Qingdao Sunwide shall pay the freights of the seven consignments. But as to No.LC500WH202 bill of lading, the freight in amount of USD240 and the clearance fee in amount of RMB15 shall be supported. In respect of whether there is a confusion of corporate personality between Qingdao Sunwide and Sunwide Rubber. UBI Qingdao alleged that there is a confusion of personality between two Defendants in terms of the actual business address, the identity of the principal, the identity of the shipper, financial affairs, the corporate seal and the representative of

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signature, so the two Defendants shall bear the liability for payment severally and jointly. Qingdao Sunwide disaffirmed. The court holds that UBI Qingdao claims that the key evidence of corporate personality confusion alleged by the Plaintiff is the mixed use of the seal in the costs conformation form of customer, but the evidence is a copy, its legal source cannot be proved, so the court does not ascertain. The court holds that Qingdao Sunwide and Sunwide Rubber are two separate companies registered with the Administration of Industry and Commerce, and Sunwide Rubber is a Hong Kong company. The key nature to decide there is a confusion of corporate personality between the two Defendants is the confusion of business address and the financial affairs in particular. But UBI Qingdao failed to submit other evidence to prove the confusion mentioned above. Therefore, the court cannot ascertain whether there is a confusion of corporate personality between Qingdao Sunwide and Sunwide Rubber. The court does not support the claims of Qingdao Sunwide. To sum up, Qingdao Sunwide entrusted UBI Qingdao with the services of carriage of the goods under the No.LC500WH202 bill of lading, Qingdao Sunwide shall pay the freight in amount of USD240 and the customs clearance fee in amount RMB15. The court will not support other claims of UBI Qingdao for lack of evidence. UBI Qingdao cannot prove there is a confusion of corporate personality between Sunwide Rubber and Qingdao Sunwide, so the court does not ascertain the claim that Sunwide Rubber shall be liable jointly and severally. In accordance with Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China and Article 405 in the Contract Law of the People’s Republic of China, the judgment is as follows: 1. The Defendant, Qingdao Sunwide Tyre Co., Ltd., shall pay the freight in amount of USD240 and the clearance fee in amount of RMB15 to the Plaintiff, UBI Logistics (China) Limited Qingdao Branch; 2. Reject other claims of the Plaintiff, UBI Logistics (China) Limited Qingdao Branch, against the Defendant, Qingdao Sunwide Tyre Co., Ltd.; 3. Reject other claims of the Plaintiff, UBI Logistics (China) Limited Qingdao Branch, against the Defendant, Sunwide Rubber Corp., Limited; The obligation for the aforesaid payment shall be fulfilled by the Defendant, Qingdao Sunwide Tyre Co., Ltd., within 10 days after the effectiveness of this judgment. In case of any failure of payment within the period specified in this judgment, the interest on the debt for delayed period shall be doubled in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB1536, the Plaintiff, UBI Logistics (China) Limited Qingdao Branch, shall bear RMB1502, and the Defendant, Qingdao Sunwide Tyre Co., Ltd., shall bear RMB34. In the event of dissatisfaction with this judgment, the Plaintiff, UBI Logistics (China) Limited Qingdao Branch, and the Defendant, Qingdao Sunwide Tyre Co., Ltd., may within 15 days, while the Defendant, Sunwide Rubber Corp., Limited, may within 30 days upon the service of this judgment, submit a statement of appeal

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to the court, together with copies according to the numbers of the opposite parties, to lodge an appeal to the Shandong High People’s Court. Presiding Judge: WANG Ailing Judge: SUN Peng Judge: ZHANG Bo March 20, 2014 Clerk: REN Wei

Guangzhou Maritime Court Civil Judgment WANG Sanju v. People’s Property and Casualty Insurance Company of China Co., Ltd. Zhaoqing Branch (2013) Guang Hai Fa Shang Chu Zi No.1000 Related Case(s) None. Cause of Action 230. Dispute over marine insurance contract on the sea or sea-connected waters. Headnote Liability for damage to hydrology station not covered by insurance policy providing cover for compensation for damage to ports, harbor facilities and navigation marks. Summary The Plaintiff filed suit against the Defendant over an insurance contract dispute in the Guangdong Zhaoqing Duanzhou People’s Court. The Defendant contested to the jurisdiction and the Zhaoqing Court transferred the case to the court. The Plaintiff purchased costal and inland water insurance for the vessel M.V. YUE ZHAO QING HUO 3388 from the Defendant. The policy included coverage for allisions and collisions. The vessel collided with the hydraulic constructions located at Haiwei Hydrology Station shore at the fault of the vessel. The Defendant refused to compensate the Plaintiff for the accident. The Plaintiff filed suit in order to recover the compensation from the Defendant. The court held that the Defendant did not have indemnify the Plaintiff because the collision did not involve an object that was included in the policy, thus the hydraulic constructions were not within the coverage of the insurance. The claims were rejected.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_52

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Judgment The Plaintiff: WANG Sanju, male, Han, born on May 9, 1955, living in Duanzhou District, Zhaoqing, Guangdong Agent ad litem: LIANG Guangwen, lawyer of Guangdong Junding Law Firm. Agent ad litem: LIU Yingzhi, lawyer of Guangdong Junding Law Firm. The Defendant: People’s Property and Casualty Insurance Company of China Co., Ltd. Zhaoqing Branch Domicile: No.9 North Guta Road, Zhaoqing, Guangdong. Person in charge: NO ZhiJia, person in charge of the branch. Agent ad litem: HUANG Zhuo, lawyer of Guangdong Zhengda Lianhe Law Firm. Agent ad litem: ZHENG Xi, lawyer of Guangdong Zhengda Lianhe Law Firm. With respect to the case arising from dispute over marine insurance contract on sea-connected waters filed by the Plaintiff WANG Sanju against the Defendant People’s Property and Casualty Insurance Company of China Co., Ltd. Zhaoqing Branch (hereinafter referred to as PICC P&C Zhaoqing Branch) with Guangdong Zhaoqing Duanzhou People’s Court on April 1, 2013. During the period for submitting defence, the Defendant raised a contest to the jurisdiction and the Duanzhou People’s Court made (2013) Zhao Duan Fa Min Si Chu Zi No.192 Civil Ruling, ruling to transfer the case to the court. After accepting this case on November 15, 2013, the court organized the collegiate panel consisting of Judge XU Yuanping as Presiding Jude, Judge WU Guining and Acting Judge Yin Zhonglie to try the case in accordance with the law and appointed LI Chunyu as the clerk. On December 30, 2013, the court called up all parties concerned to exchange evidence and held hearings in public on the same day and another on February 21, 2014. LIANG Guangwen, agent ad litem of the Plaintiff, and HUANG Zhou, agent ad litem of the Defendant, attended the hearing on December 30, 2013. ZHENG Xi, agent ad litem of the Defendant, attended the hearing on February 21, 2014. Now the case has been concluded. The Plaintiff WANG Sanju claimed that on September 12, 2012, he purchased an insurance of coastal and inland water vessel covering all risks and additional risks for M.V. YUE ZHAO QING HUO 3388 from the Defendant. The Defendant underwrote the insurance and issued an insurance policy which stated that the insured amount of the collision and allision liability insurance was RMB5,500,000 and the insured amount of shipowner’s liability for crew insurance was RMB1,000,000, the term of coverage dated from 0000 hrs on September 15, 2012 to 2400 hrs on September 14, 2013. The Plaintiff paid the insurance premium in amount of RMB55,500. At 0800 hrs on December 26, 2012, M.V. YUE ZHAO QING HUO 3388 accidentally collided with the hydraulic constructions locating at the shore of Haiwei Hydrology Station which was set by of Pearl River Hydrology and Water Resource Monitor Center (hereinafter referred to as “Monitor Center”) when sailing in Haiwei water of Guizhou water, Shunde, Guangdong, as a result,

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the hydraulic constructions collapsed and hydrology monitoring equipment was damaged. After the accident occurred, the Plaintiff reported to Shunde Maritime Safety Administration (hereinafter referred to as “Shunde MSA”) and the Defendant, and assisted the Defendant in investigating the scene. On January 11, 2013, the Shunde MSA issued Investigation Conclusion of Inland Water Traffic Accident (hereinafter referred to as the “Investigation Conclusion”), which ascertained that M.V. YUE ZHAO QING HUO 3388 should take full responsibility for this accident. The Plaintiff immediately gave the Investigation Conclusion and a list of estimated losses to the Defendant, and negotiated issues in respect of the compensation with the Defendant for several times. However, the Defendant rejected to compensate all along. On March 2, the Plaintiff and the Monitor Center reached an agreement on compensation of the hydraulic constructions of Haiwei Hydrology Station and the hydrology monitoring equipment thereof. On March 20, the Plaintiff paid RMB600,000 to the Pearl River Hydrology and Water Resource Monitor Center according to the compensation agreement. The Plaintiff claimed that the insurance contract between the Plaintiff and the Defendant was valid and legal, the accident involved constituted an insured event prescribed in the insurance contract, the Defendant should assume the liability for compensation as agreed. To sum up, the Plaintiff requested the court to judge that the Defendant should pay the insurance compensation in amount of RMB600,000 and interest thereon (the interest should be calculated at the loan interest rate over the same period of the People’s Bank of China from March 21, 2013 to the day that the Defendant paid off the insurance compensation mentioned above), and assume the ligation costs. The Plaintiff submitted the following evidence to the court: 1. Identity card of the Plaintiff, Certificate of Ship Ownership and a certification issued by Zhaoqing Jiahang Shipping Co., Ltd., to prove that the Plaintiff had insurable interest in M.V. YUE ZHAO QING HUO 3388 and was proper Plaintiff of this case; 2. Organization code certificate of the Defendant, to prove that the Defendant was proper Defendant of this case; 3. Policy of coastal and inland water vessel insurance covering all risks, the Hull Insurance Clauses of Coastal and Inland Water Transportation Vessels (2009 version), Additional 1/4th Collision and Allision Liability Insurance Clause (2009 version), Additional Shipowner’s Liability for the Crew Insurance Clause (2009 version) and invoice, to prove that the Plaintiff had paid the premium to the Defendant and the insurance contract relationship between the Plaintiff and the Defendant was established; 4. Inland water vessel seaworthiness certificate, to prove that M.V. YUE ZHAO QING HUO 3388 was an inland water vessel and belonged to the scope of the subject-matter of insurance; 5. Investigation Conclusions Inland Water Traffic Accident and certificate of correction issued by Shunde MSA, proving that M.V. YUE ZHAO QING HUO 3388 collided with Haiwei Hydrology Station, caused damages to the hydraulic

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constructions such as monitor room, approach bridge on the riverside of the hydraulic station and monitor equipment, M.V. YUE ZHAO QING HUO 3388 should take full responsibility; 6. Equipment investment estimate table, the construction estimate table, the summary estimate table of Haiwei Hydrology Station, and its scaffolds construction of the collapsed water-level monitor room, approach bridge and other hydraulic constructions, the compensation agreement of the damaged Haiwei Hydrology Station (initial), to prove that the Plaintiff should assume the responsibility for this accident and compensate for the losses of Haiwei Hydrology Station; 7. Notice of refusal of claim issued by the Defendant, to prove that the Defendant refused to compensate in respect of this accident; 8. Compensation agreement on reconstruction of Haiwei Hydrology Station and the voucher of the individual business of ICBC, receipt and invoice, to prove that the Plaintiff suffered losses in amount of RMB600,000 caused by the accident. The Defendant argued that the hydrology station collided by M.V. YUE ZHAO QING HUO 3388 was not specified in the insurance clauses which only contained ports, harbor facilities and navigation marks, thus the accident involved did not constitute to an insured event, and the Defendant should not assume the insurance responsibility. The Defendant requested the court to reject the claims of the Plaintiff. The Defendant did not submit any evidence to the court. The Defendant had no objection to the authenticity of evidence submitted by the Plaintiff and the court holds the evidence are admissible. The court ascertains the following facts according to the investigation in the hearing and the admissible evidence above: The registered shipowners of M.V. YUE ZHAO QING HUO 3388 were Zhaoqing Jiahang Shipping Co., Ltd. (hereinafter referred to as “Jiahang Company) and the Plaintiff, Jiahang Company held 51% of the share and the Plaintiff held another 49%. The vessel was a bulk carrier and thruster thereof was screw propeller. Jiahang Company issued a certificate to prove the actual owner of M.V. YUE ZHAO QING HUO 3388 was the Plaintiff and the Plaintiff had full ownership of the vessel. It was stated in Inland Water Vessel Seaworthiness Certificate of the vessel involved that the vessel was inland water vessel, which was permitted to sail in A-level navigation areas, and used for self-discharge sand carrier. On September 12, 2012, the Defendant underwrote the insurance purchased by the Plaintiff for M.V. YUE ZHAO QING HUO 3388 and issued the all-risks policy of coastal and inland water vessel insurance, which stated as follows: the insured was the Plaintiff; the insurer was the Defendant; the insured vessel was M.V. YUE ZHAO QING HUO 3388; the risks covered by the insurer were all risks of coastal and inland water vessel insurance and the insurance amount was RMB5,500,000; additional risks were shipowner’s liability for crew and 1/4th collision and allision liability, and the insured amount was RMB1,000,000 and

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RMB5,500,000 respectively; the term of coverage started from 0000 hrs on September 15, 2012 to 2400 hrs on September 14, 2013; the insurance premium was RMB55,500; the deductible rate of a partial loss was 10% and the deductible amount should not be less than RMB20,000, whichever was higher, and the deductible rate of a ship’s total loss was 20%; and the navigation area was A-level inland water, no claim arising from a peril insured against would be payable if the insured vessel sail out of the navigation verified by ship inspection department. On the same day, the Plaintiff paid the insurance premium in amount of RMB55,500 to the Defendant. According to the Coastal and Inland Water Vessel Insurance Clauses attached to the policy submitted by the Defendant, all risks insured total loss and partial loss of a vessel resulted from the collision, allision and other four causes, and collision and allision liability, general average, salvage costs and rescue cost therefrom. It was provided in the collision and allision liability the that the direct losses and costs, including the loss of the goods loaded on the vessel resulted from the collision or allision between the insured vessel and ports, harbor facilities and navigation marks in navigable waters shall be born by the insured in accordance with the law. This insurer only indemnifies 3/4ths of the amount of indemnification for each collision or allision, the maximum amount of indemnification in a lump sum or in accumulation should be limited to the insured amount of the vessel during the period of insurance. It is provided in the 1/4th Collision and Allision Liability Insurance Clauses (2009 version) that this insurance covers the responsibility which was not covered by 3/4ths collision and allision liability insurance, but the maximum amount of indemnification in a lump sum or in accumulation should be limited to the insured amount of the vessel during the period of insurance; this insurance was added only when 3/4ths collision and allision liability insurance was underwritten; in addition to the content specified in this insurance, other provisions of the main risks clauses, should apply to this insurance. Around 0800 hrs on December 26, 2012, M.V. YUE ZHAO QING HUO 3388 was discharging sand at the port of and Hongji Pile and Sand Factory in Haiwei water area of Guizhou water. Around 0910 hrs, during the process of shifting berth to the port of sand vessel in downstream, starboard bow of the vessel collided with Haiwei Hydrology Station on the other side of the river, as a result, the station collapsed It was a sunny day with gentle breeze when the accident occurred. Shunde MSA issued the Investigation Conclusion, ascertaining as follows: there were minor scratches on starboard bow; the monitor room, approach bridge and monitor equipment were damaged; the accident was caused by M.V. YUE ZHAO QING HUO 3388 unilaterally; and the main reason of the accident was failure of proper watch during the process of shifting berth in astern way. During the process of shifting berth, no seaman was added to keep watch on M.V. YUE ZHAO QING HUO 3388 reversed aimless and finally caused the accident; these acts violated Article 6 of Regulations on Preventing Collisions in Inland Waters of the People’s Republic of China (2003 version) and according to Article 3 Paragraph 1 thereof, M.V. YUE ZHAO QING HUO 3388 should born full responsibility. In the trial, Shunde MSA amended the description, “the accident caused the collapse of the

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hydraulic station” as “the accident caused the collapse of monitor room and the approach bridge on the riverside of the hydraulic station and damage to monitor equipment” by hand. After the accident occurred, the Plaintiff reported to the Defendant. The Monitor Center provided the Plaintiff with the equipment investment estimate table, the construction estimate table and the summary estimate table of the Haiwei Hydrology Station. The two parties reached an initial compensation agreement on the damages to Haiwei Hydrology Station, which provided the responsible party of this accident was the Plaintiff and the Plaintiff agreed to assume the responsibility of the accident and compensate all losses of Haiwei Hydrology Station, including the costs of removing the damaged constructions, survey, design, application, construction for new-building hydrology station and purchase and installation of equipment. The Plaintiff argued that the hydraulic constructions such as hydrometric station and approach bridge were constituent part of the hydrology port, which fell into the coverage listed in the insurance clauses and requested the Defendant to verify the insurance compensation of the collision accident according to the Compensation Agreement (initial) on the damage to Haiwei hydrology station reached by the Plaintiff and the Monitor Center and the estimate table of losses. On February 28, 2013, the Defendant delivered the notice of refusal to the Plaintiff, which stated that the insurance claim in respect of the collision occurring on December 26, 2012 raised by the Plaintiff did not fall into the scope of compensation in the insurance contract. On March 2, 2013, the Plaintiff and the Monitor Center reached an compensation agreement on reconstruction of Haiwei Hydrology Station, the Plaintiff promised to pay the expenses for reconstruction and equipment in amount of RMB60,000 in a lump sum. On March 20, the Plaintiff paid RMB600,000 to the Monitor Center and the latter issued a receipt and an invoice to confirm the payment. The court holds that this case is the dispute over marine insurance contract on sea-connected waters. The Plaintiff purchased an insurance covering all risk and additional risks for M.V. YUE ZHAO QING HUO 3388 from the Defendant. The Defendant underwrote the insurance and issued a policy to the Plaintiff, an insurance contact relationship was established between the two parties. The insurance contact is express of real intents of the two parties, and it does violate mandatory provisions of laws and administrative regulations of China, so it shall be legal and valid. The Plaintiff is the insured and the Defendant is the insurer under the insurance contract. Both parties enjoy the rights and assume the obligations in accordance with the contract and law. The registered shipowners of M.V. YUE ZHAO QING HUO 3388 are Jiahang Company and the Plaintiff, Jiahang Company provided an evidence to prove that the Plaintiff was the actual shipowner and had full ownership thereof. Therefore, the Plaintiff has insurable interest in the M.V. YUE ZHAO QING HUO 3388. In this case, the Hull Insurance Clauses of Coastal and Inland Water Transportation Vessels enumerates the objects which may trigger collision and allision liability, the insurer only assumes the compensation liability for

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compensation of direct losses and fees resulted from the collision between the insured vessel and ports, harbor facilities and navigation marks, therefore, the collision and allision liability risks are named risks, and the objects and risks which are not listed in insurance clause did not fall into the coverage under the policy involved. The main issue in this case is whether the hydrology station pertains to ports, harbor facilities or navigation marks listed in the policy, namely whether the accident in this case constitutes an insured event prescribed in the policy. Whether the hydrology station involved is port prescribed in the insurance clauses shall be determined by its function and usage. Port is a place for passengers going on and off board and cargo loading and unloading, while the hydrology station is a building and place for monitoring and collecting hydrology data. They have obvious differences on the function and usage. Where the Plaintiff failed to prove the hydrology station had function of port or was used as a port, the allegation held by him that the collided hydrology station constituted a port shall be disaffirmed for lack of basis. Meanwhile, the Plaintiff did not provide evidence to prove the damaged the hydrology station constituted a port, harbor facility or navigation mark. Therefore, the hydrology station is not the object covered by the collision and allision liability insurance, and the accident in this case is not an insured event provided in policy. The allegation filed by the Plaintiff that the Defendant should pay insurance indemnification for the collision accident in the case has no factual and legal basis and shall be rejected. To sum up, according to Article 64 Paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Reject the claims of the Plaintiff WANG Sanju. Court acceptance fee in amount of RMB9,800, shall be born by the Plaintiff WANG Sanju. In event of dissatisfaction with this judgment, any party may within 15 days upon service of this judgment, submit a statement of appeal to the court, with duplicates being submitted in terms of the number of the opposite party, to lodge an appeal to the Guangdong High People’s Court. Presiding Judge: XU Yuanping Judge: WU Guining Acting Judge: Yin Zhonglie March 28, 2014 Clerk: LI Chunyu

Shanghai Maritime Court Civil Judgment WANG Zhuorui v. Shanghai Jingyi Freight Forwarding Co., Ltd. (2013) Hu Hai Fa Shang Chu Zi No. 1314

cRelated Case(s) None. Cause of Action 226. Dispute over contract for employment of seaman. Headnote Relationship between worker and employer held to be seaman service relationship rather than contractual labor relationship. Summary The Plaintiff, a seaman, brought a claim against the Defendant, vessel owner and Plaintiff’s employer, over what type of contract existed between the two parties and the amount the Defendant owed the Plaintiff for his services. The Plaintiff worked aboard the Defendant’s vessels for two continuous periods. The Plaintiff alleged that the relationship between the two parties was that of a contractual labor relationship, while the Defendant alleged that it was that of a seaman service relationship. The Plaintiff claimed that because it was a contractual labor relationship, the Defendant owed the Plaintiff wages for his off-time between his two periods of employment, wages for annual leave and weekend overtime, a year’s wages for double the amount because no written labor contract was signed, economic compensation, and social security premiums. Alternatively, if the court agreed with the Defendant and the relationship was that of a seaman service contract, the Plaintiff claimed that he was still entitled one month’s remuneration during working on board in sum of RMB29,000; and remunerations for statutory holiday in sum of RMB52,000. Held by Shanghai Maritime Court that the type of relationship, and thus contract, between the Plaintiff and Defendant was that of a seaman service. The court held that the Plaintiff’s claim that the relationship was that of a contractual labor relationship fell outside of the court’s jurisdiction. Furthermore, the court held that the Plaintiff was not entitled to remunerations for statutory holiday because he did not have factual evidence to support the claim. The court, however, did hold the Defendant liable for one month’s remuneration.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_53

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Judgment The Plaintiff: WANG Zhuorui Agent ad litem: XIAO Jing, lawyer of Jiangsu Shengqian Law Firm. The Defendant: Shanghai Jingyi Freight Forwarding Co., Ltd. Legal representative: QI Tezhi. Agent ad litem: RUAN Zhou, lawyer of Shanghai Zhiyuan Law Firm. With respect to the case of dispute over seamen’s employment filed by the Plaintiff WANG Zhuorui against the Defendant Shanghai Jingyi Freight Forwarding Co., Ltd. on September 4, 2013, the court, after accepting the case on September 9, 2013, organized the collegiate panel and held a hearing in public on December 24, 2013. XIAO Jing as agent ad litem of the Plaintiff, and QI Tezhi as agent ad litem of the Defendant, appeared in court to attend the hearing. Now the case has been concluded. The Plaintiff alleged that he had worked as chief officer on M.V. “Shuang Yan 1” which was owned by the Defendant since June 29, 2010, a labor contract relationship was established between the Plaintiff and the Defendant; the Defendant did not sign a labor contract in written form with the Plaintiff, nor did the Defendant pay social security premiums for the Plaintiff; the Defendant deferred one-month’s wage and overtime wages to the Plaintiff without proper reason and did not pay the wages during work-waiting period when the Plaintiff was off board; the Plaintiff dissolved the labor relationship with the Defendant on August 28, 2013 for the Defendant’s violation of the relevant provisions of the Labor Contract Law of the people’s Republic of China. In addition, according to Article 30 Paragraph 2 of the Regulations of the People’s Republic of China on Seamen (hereinafter referred to as the “Seamen Regulations”), the Plaintiff should enjoy annual leave of at least 5 days for each 2 months of work on board, but he had no vocation when working on M.V. “Shuang Yan 1” and the Defendant did not pay wages of annual leave in accordance with the Seamen Regulations. Therefore, the Plaintiff requested the court to judge the Defendant to pay: 1. Deferred wages during working on board in sum of RMB29,000 and wages during work-waiting period off board in sum of RMB13,900; 2. Wages of annual leave in sum of RMB120,000 and weekend overtime wages in sum of RMB66,666.67; 3. Twelve-month’s wages at double amount in sum of RMB100,900 because no written labor contract had been signed between the Defendant and the Plaintiff; 4. Economic compensation in sum of RMB29,429.17; 5. Social security premiums from June 9, 2010 to August 29, 2013; and 6. Court acceptance fee.

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The Plaintiff held that the wages paid by the Defendant should offset the wages of annual leave in sum of RMB120,000, so the actual deferred wages should be RMB149,000. Upon interpretation, the Plaintiff insisted to claim for the sums above against the Defendant based on labor contract relationship, and the Plaintiff alleged if the court would not ascertain a labor contract relationship established between the Plaintiff and the Defendant, then the Defendant should pay service remuneration and remuneration for statutory holiday based on a service contract relationship. Therefore, the Plaintiff requested the court to judge the Defendant to pay: 1. One month’s remuneration during working on board in sum of RMB29,000; and 2. Remunerations for statutory holiday in sum of RMB52,000. The Defendant argued as follows: 1. It was seamen service contract relationship rather than labor contract relationship was established between it and the Plaintiff, and the service contracts in two periods were independent, it had no obligation to pay the wages during work-waiting period off board, wages of annual leave, weekend overtime wages, double wages for non-conclusion of labor contract and economic compensation after termination of the service contract as well as social security premiums. 2. The performance of the Plaintiff was defective when he served as chief officer on M.V. “Shuang Yan 1”, so the Defendant withheld RMB15,000 from his remunerations. The provision on vocation of seamen in Article 30 Paragraph 2 of the Seamen Regulations should not apply to seaman service contract relationship, in addition, the Plaintiff’s claim for wages of annual leave in first phase work on board (from June 29, 2010 to September 3, 2011) exceeded the limitation of action. 3. If the court ascertained a labor contract relationship was established between the two parties, then the labor contract should have been dissolved on the day the Plaintiff got off the ship (namely November 19, 2012), the Defendant needed not pay the wages during work-waiting period off board to the Plaintiff; the Plaintiff left the vessel at his own discretion, the Defendant needed not pay economic compensation to the Plaintiff; seamen’s work adopted variable-interval system, manning of M.V. “Shuang Yan 1” complied with regulations, so in fact, no weekend overtime wages occurred; the Plaintiff should institute claims for his rights within one year from the date of termination of the labor relationship, the claim for double wages due to non-conclusion of labor contract exceeded the limitation of action; even it should be calculated by the way claimed by the Plaintiff, the wages of annual leave claimed in accordance with Article 30 of the Seamen Regulations, which did not exceed the limitation of action, was only RMB6,327 (calculated by 6.66 days); and the social insurance premiums should not be decided by the court.

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The Plaintiff submitted the following evidence: 1. Seafarer service book of the Plaintiff, to prove that the Plaintiff served as chief officer on M.V. “Shuang Yan 1” during the two periods from June 29, 2010 to September 3, 2011 and from September 29, 2011 to November 19, 2012; the Plaintiff’s performance of the work on the vessel was qualified; the Plaintiff was waiting for work since November 19, 2012, labor relationship continued. The Defendant raised no objection to the authenticity of the evidence, but held the appraisal of the Plaintiff’s performance in the seafarer service book was signed by the master on the day when the Plaintiff left the vessel, it could only be prima facie rather that a final evidence to prove that the Plaintiff was not at fault in his work on board; two separate service contract relationship were established in the two periods, the Defendant had never paid any remuneration when the Plaintiff was not on the vessel; and the Plaintiff, after leaving M.V. “Shuang Yan 1” on November 19, 2012, worked on another ship, it showed that the Plaintiff was not subject to the domination of the Defendant. 2. Statement of account of the Plaintiff’s bank card from May 26, 2011 to January 10, 2013, to prove that the Defendant paid monthly wages to the Plaintiff, but the wage of the last month and wages when the Plaintiff was not on board wages had not been paid; RMB41,000 having been paid by the Defendant on November 16, 2011 included remunerations of October 2011 in sum of RMB27,000 and the retroactive remunerations in sum of RMB14,000 for work of the first period. The Defendant had no objection to the authenticity of the evidence, but argued that “wages” in the summary of statement of account only showed the payment was a note of the bank, but it was unrelated to the nature of the payment; and the remunerations for the work in the first period had been settled. The Defendant paid RMB41,000 to the Plaintiff on November 16, 2011, which included the remunerations of October 2011 in sum of RMB27,000 and RMB14,000 required by the Plaintiff to be paid in advance, the prepayment should be deducted. 3. The labor contract signed by the Plaintiff and Tianjin Jinbin Kuaihang Shipping Co., Ltd., the owner of M.V. “Jin Bin Kuai Hang 168”, to prove the labor contract relationship between the Plaintiff and the present work unit. The Defendant did not affirm the authenticity of this evidence. The court holds that evidence 1 of the Plaintiff can prove the work of the Plaintiff on M.V. “Shuang Yan 1” and the work on another vessel after leaving M.V. “Shuang Yan 1”, and evidence 2 of the Plaintiff can prove the payment from the Defendant to the Plaintiff, so the court ascertains the effect of evidence 1 and 2 of the Plaintiff. The authenticity of evidence 3 of the Plaintiff cannot be verified, so the court will not ascertain the effect thereof. The Defendant did not submit any evidence. Based on the evidence above and the investigation in the hearing, the court finds the facts as follows: the Defendant was owner of M.V. “Shuang Yan 1”. The Plaintiff worked as chef officer on M.V. “Shuang Yan 1” in two periods, one was

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from June 2010 to September 29, 2011 to November 3, 2011 and another was from September 29, 2012. The Defendant and Plaintiff did not sign a written contract, the Defendant paid remunerations by month to the Plaintiff during the time the Plaintiff worked on M.V. “Shuang Yan 1”, the remuneration was RMB27,000 per month during the period from May 2011 to February 2012 and the remuneration was RMB29,000 per month during the period from March 2012 to November 2012. The appraisal of the master of M.V. “Shuang Yan 1” on the performance of the Plaintiff in the two periods was qualified. The Plaintiff and the Defendant confirmed they had settled the remunerations from September 3, 2011 to June 29, 2010, but the Defendant did not pay remunerations from September 4, 2011 to September 28, 2011 and on November 16, 2011, the Defendant paid RMB41,000 to the Plaintiff. The remunerations of the month before the Plaintiff’s leaving M.V. “Shuang Yan 1” on October 19, 2013 had not yet been settled. The court holds that the case is the dispute over labor contract between seaman and the ship owner in respect of work on board. Dispute over the payment of the Plaintiff’s remunerations for the work on the vessel owned by the Defendant is under the jurisdiction of maritime courts. The Plaintiff alleged there was a labor contract relationship between the Plaintiff and the Defendant, and then put forward requests including break and vacation, social insurance, economic compensation and etc. After the court interpreted to the Plaintiff, he still adhered to these claims. The court holds that the claims raised by the Plaintiff on basis of labor contract relationship against the Defendant does not fall into the scope of cases entertained by maritime courts, the court will not decide, the Plaintiff can apply with related authority for resolution. The Plaintiff provided service on M.V. “Shuang Yan 1” and the Defendant confirmed, the seaman service contract relationship between the two parties was established in accordance with law. In the seaman service contract relationship, the Defendant, as employer, shall pay for the service in full amount. The Plaintiff argued that the Defendant deferred the remunerations of the month before he left the vessel in sum of RMB29,000. The Defendant argued that the payment in sum of RMB41,000 paid by him to the Plaintiff on November 16, 2011 included the prepayment in sum of RMB14,000, the sum should be deducted from the remunerations of the last month, in fact the Defendant actually owed remunerations in sum of RMB15,000 to the Plaintiff. The court holds that both parties have confirmed the remunerations of the Plaintiff and the Plaintiff also confirmed that except the remunerations of the last month before he left the vessel, the Defendant timely paid the remunerations to the Plaintiff in full amount by month. The Plaintiff’s explanation about the payment in sum of RMB14,000 is contradictory with the fact he had confirmed, while explanation of the Defendant that the payment in sum of RMB14,000 is advance payment complies with the identified facts. When settling the remunerations, the amount having been paid by the Defendant shall be deducted from the remunerations. Therefore, the court ascertains the amount of the remunerations the Defendant deferred to the Plaintiff is RMB15,000. The Defendant failed to provide evidence to prove its allegation that the performance of the

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Plaintiff was defective, the court will not ascertain. The Defendant has no legitimate reason to withhold the remunerations of the Plaintiff, therefore it shall pay the deferred remunerations in amount of RMB15,000 to the Plaintiff. The right of request for remuneration of break and vocation is a statutory right provided in the Labor Law, but the claim of Plaintiff for remuneration of break and vocation based on service contract lacks legal basis, the court will not support. In summary, according to Article 61 Paragraph 1 and Article 107 of the Civil Procedure Law of the People’s Republic of China, Article 8 of the Interpretations of the Supreme People’s Court on the Application of the Special Maritime Procedure Law of the People’s Republic of China, the judgment is as follows: 1. The Defendant, Shanghai Jingyi Freight Forwarding Co., Ltd., shall pay USD47,377.29 to the Plaintiff, WANG Zhuorui, within 10 days after this judgment comes into effect; 2. Reject other claims of the Plaintiff, WANG Zhuorui. In case of any failure of payment within the period specified in this Judgment, the Defendant, Shanghai Jingyi Freight Forwarding Co., Ltd., shall double pay the interest for the period of delayed performance in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB1,825, the Plaintiff, WANG Zhuorui, shall bear RMB1,487, and the Defendant, Shanghai Jingyi Freight Forwarding Co., Ltd., shall bear RMB338. In the event of dissatisfaction with this judgment, any party may within 15 days upon the service of this judgment, submit a statement of appeal to the court, together with copies according to the numbers of the opposite party to the case, to lodge an appeal to the Shanghai High People’s Court. Presiding Judge: KE Yonghong Acting Judge: LI Jian People’s Assessor: LI Youwen February 20, 2014 Clerk: LU Peiyan

Xiamen Maritime Court Civil Judgment Wing Wah Bunkers Ship Co., Ltd. v. Jiangxi Xinghai Shipping Co., Ltd. et al. (2013) Xia Hai Fa Shang Chu Zi No. 166 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 1025. Cause of Action 225. Dispute over contract for marine stores and spare parts supply. Headnote Registered owner and beneficial owner held jointly and severally liable for supply of bunkers to ship by the Plaintiff. Summary The Plaintiff sued the individual and corporate owners of the general dry cargo vessel M.V. FUYANG 88, for payment of an invoice for bunkers provided in Hong Kong, with interest and fees. Corporate defendant argued it was the registered owner only, and not the beneficial or contractually responsible owner, and that the bunker contract in suit was illegal, as M.V. FUYANG 88 was engaged in domestic coastwise trade, and therefore barred by statute from fueling in Hong Kong, a foreign port, and that the disputed bunker contract therefore amounted to fuel smuggling. The individual defendant conceded that he was the beneficial and contractually responsible owner, and admitted the fuel debt was his, but contested the Plaintiff’s claim for interest and other consequential damages. The court found for the Plaintiff on all counts, holding the corporate and individual owners jointly and severally liable.

Judgment The Plaintiff: Wing Wah Bunkers Ship Co., Ltd. Domicile: No.63 P.O. Box, Yuen Long, New Territories, Hong Kong SAR. Legal Representative: LV Yongle. Agent ad litem: GUI Gang, lawyer of Beijing Zhonglun (Shenzhen) Law Firm. Agent ad litem: WANG Hao, lawyer of Beijing Zhonglun (Shenzhen) Law Firm. © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_54

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The Defendant: Jiangxi Xinghai Shipping Co., Ltd. Domicile: East New District, Yihuang County, Jiangxi. Legal representative: CHEN Renxin, manager. Agent ad litem: CHEN Qibin, lawyer of Beijing Dongyuan (Xiamen) Law Firm. Agent ad litem: CHEN Renqiang, Secretary General of Yangpu Privately Operated Shipping Association. The Defendant: WANG Yongqiang, Male, Born on September 15, 1967, Han Nationality, Pingtan Country, Fujian With respect to the case arising from dispute over ship stores and spare parts supply contract filed by the Plaintiff, Wing Wah Bunkers Ship Co., Ltd., against the Defendants, Jiangxi Xinghai Shipping Co., Ltd. (hereinafter referred to as “Xinghai Company”) and WANG Yongqiang, to the court on April 2, 2013, after accepting the case, the court organized a collegiate panel and held a hearing in public on August 27, 2013. LV Yongle, the legal representative of the Plaintiff, and GUI Gang and WANG Hao, agents ad litem of the Plaintiff, CHEN Renxin, the legal representative of Xinghai Company, and CHEN Renqiang and CHEN Qibin, agents ad litem of Xinghai Company, appeared in court to attend the hearing. WANG Yongqiang, upon summons by the court, refused to appear in court without proper reason. The court tried this case by default pursuant to the law. Now the case has been concluded. The Plaintiff alleged that: on February 20, 2012, Xinghai Company purchased 8 tons of 0 # diesel, of which the unit price was RMB6,700 per ton and the price was RMB53,600, and 55 tons of IF180 millennium bunkers, of which the unit price RMB4,960 was per ton and the price was RMB272,800 for M.V. FUYANG 88 owned by it. The total price of the aforesaid bunkers was RMB326,400. On the same day, the Plaintiff issued a bill of sales (NO.YT11578) to the Defendant, which was affixed with the ship’s seal and signed by WANG Yongqiang. The Plaintiff had notified the Defendants to pay the bunkers for many times, however, the Defendants only paid RMB50,000 and had not cleared the balance so far. The Plaintiff held that the bill of sales issued by the Plaintiff and signed and sealed by Xinghai Company was a lawful and valid purchase and sale contract, it should be protected by the law; and that WANG Yongqiang, as the receiver of the goods, which was the actual user and the beneficiary, should be jointly and severally liable to pay off the price of the goods. Therefore, the Plaintiff requested the court to judge that the two Defendants should jointly and severally pay the bunkers in amount of RMB276,400 and the interest thereon (the interest should be calculated by 1.5% per month to the day of payment, the interest temporarily calculated from the payable date to March 9, 2013 was RMB49,752), as well as the case acceptance fee, the property preservation fee and the lawyer’s fee in total of RMB30,210 and other fees resulted from this case.

Wing Wah Bunkers Ship Co., Ltd. v. Jiangxi Xinghai …

1011

To prove its claims, the Plaintiff submitted the following evidence: 1. Bill of Sales (No.YT11578), to prove that the Plaintiff and the Defendant entered into a bunkers purchase and sale contract, the Plaintiff had delivered the bunkers to the Defendant and WANG Yongqiang has taken delivery of the bunkers; 2. Arrears Conformation Letter, to prove the time, the amount, the currency, the calculation method of interest and the assumption of litigation fees of the price of bunkers owed by the Defendant; 3. Business registration certificate, to prove that the Plaintiff was a company that was established and registered according to the laws of Hong Kong, and had acquired a certificate issued by the registration authority; 4. Operation License of Tanker issued by the Hong Kong Marine Department, to prove that the tanker owned by the Plaintiff had acquired the Operation License issued by the Hong Kong Marine Department and had the qualification to operate; 5. Sinopec Petroleum Products Purchase and Sale Agreement and Exxon Mobil Petroleum Purchase and Sale Contract, to prove that the petroleum sold by the Plaintiff was lawfully acquired; 6. The diagram of Use Area for Supplying Bunkers in the West of Lamma Island made by the Hong Kong Marine Department, to prove that the Plaintiff ran bunkers business within the sea area designated by the Customs and Exercise Department of Hong Kong (hereinafter referred to as the “HK Customs”), which was a lawful act; 7. Trading record of high sulfur red bunkers submitted by the Plaintiff to the Task Force of the HK Customs, to prove that the Plaintiff had reported the bunkering record of the Defendant according to the supervision requirements of the HK Customs; 8. Invoice of lawyer’s fee, to prove that the expenses the Plaintiff paid for this case. Xinghai Company argued as follows: 1. The bunkering claimed by the Plaintiff did not exist, the evidence provided by the Plaintiff was fake, and there was a suspicion of malicious prosecution. Bill of Sales and Arrears Conformation Letter provided by the Plaintiff were not signed by the actual shipowner, WANG Yongqiang and there was no bunkering record in Logbook of M.V. FUYANG 88, it was sufficient to overturn the legal resource of the ship’s seal and the fact that the Plaintiff bunkered M.V. FUYANG 88; 2. In respect of whether there was a bunkers trade between the Plaintiff and WANG Yongqiang, and whether WANG Yongqiang failed to pay the bunkers, it was the fault of the Plaintiff due to imprudence and Xinghai Company was irrelevant to that. The Plaintiff claimed that the dispute over supply of bunkers occurred in the period when M.V. FUYANG 88 was operated in the name of Xinghai Company, even if the bunkers supply was true, it was the Plaintiff’s fault that it clearly knew that M.V. FUYANG 88 was affiliated to Xinghai Company, but it still traded with the actual shipowner, WANG Yongqiang and

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M. Davies and J. Lin

gave credit to him. The ship’s seal, which was neither the seal having been recorded nor the seal used by Xinghai Company, could only be used for port entry and exit visas, it could not represent Xinghai Company or be used to sign economic contracts, the contract affixed with the ship’s seal had no statutory force; The governing law of this case should be the laws of the People’s Republic of China. Although the Plaintiff in the subject case was a company of Hong Kong, it could be seen from the arrears confirmation letter provided by the Plaintiff, WANG Yongqiang had issued an IOU to the Plaintiff, the action filed by the Plaintiff was dispute over creditor’s right. The Plaintiff requested WANG Yongqiang to remit the related sum to the personal bank account in the territory of China, the place of payment was in mainland China and the place of performance was in mainland China either. According to Article 41 of the Law of the People’s Republic of China on Application of Laws to Foreign-related Civil Relations (hereinafter referred to as the “the Law on Application of Laws”), the laws which had the most significant relationship with this contract were the laws of the People’s Republic of China. Besides the act of the Plaintiff in this case was smuggling, according to Article 6 and Article 7 of the Provisions of the Supreme People’s Court on Relevant Issues concerning the Application of Law in the Trial of Cases concerning Dispute over Foreign-Related Civil and Commercial Contract, so the laws of People’s Republic of China should be applied; Even the bunkers trade between the Plaintiff and WANG Yongqiang did exist, it was illegal transaction and should not be protected by the law. In accordance with paragraph 5 of Article 52 of the Contract Law of the People’s Republic of China (hereinafter referred to as the “Contract Law”), the bunkers supply contract between WANG Yongqiang and the Plaintiff was invalid and Xinghai Company should not be liable; Trading Record of High-sulfur Red Oil of Maritime Use under Voluntary Supervision provided by the Plaintiff, to prove that the Plaintiff concealed the fact that it sold petroleum products illegally. There was no corresponding record in the evidence that the Plaintiff sold bunkers to WANG Yongqiang or M.V. FUYANG 88, and the types of ships purchasing bunkers in the trade records were only limited to fishing ships, ships navigating in inland rivers, etc. It was inconsistent with the type of M.V. FUYANG 88, a sea-going ship. It suggested that not only the domestic laws and regulations prohibited ships navigating in domestic waters bunkering overseas, but also supply of bunkers to ships navigating in waters of the mainland China was not permitted in the laws and regulations of Hong Kong; Xinghai Company should not undertake the liability to pay the bunkers and other liabilities. Xinghai Company did not know the supply of bunkers involved and the bunkering constituted an act of smuggling, the illegal income of the Plaintiff should be confiscated. To sum up, Xinghai Company requested the court to reject the claims filed by the Plaintiff.

Wing Wah Bunkers Ship Co., Ltd. v. Jiangxi Xinghai …

1013

Xinghai Company submitted the following evidence to prove its allegations: 1. Ship Entrustment Management and Loan Agreement, to prove that the actual shipowner of M.V. FUYANG 88 was WANG Yongqiang, who made his own management decisions, took full responsibility for his own profits and losses and assumes liability for all debts and events. It was out of the need of registration that the ship was registered in the name of Xinghai Company. Xinghai Company did not enjoy related right of ownership, so it should bear relevant legal responsibilities or obligations. Concurrently, this evidence also demonstrated that the signature of WANG Yongqiang was different from those in the bill of sales and the arrears conformation letter; 2. Water transportation license 3. Ship transportation business license, jointly to prove that the scope of business of M.V. FUYANG 88 was transportation of general cargo between domestic coastal ports and ports at middle and lower reaches of Yangtze River, namely the ship was a sea-going ship. If the supply of bunkers was true, the Plaintiff failed to fulfill the duty to review, with the purpose of high profits, it illegally supplied bunkers to the ships only navigating in waters of mainland China. The Plaintiff helped smuggling, so it should be taken as an accomplice of the crime of smuggling and its illegal interests should not be protected; 4. Ship purchase and sale contract; 5. Letter of entrustment, to prove that M.V. FUYANG 88 had been sold and the affiliated relations between the two Defendants had been terminated. Prior to sale of the ship, all the debts should be born by WANG Yongqiang; 6. Logbook of M.V. FUYANG 88, to prove that there ess no record in the logbook that M.V. FUYANG 88 had been to sea area of Hong Kong on February 20, 2012, the allegation of the Plaintiff that it supplied bunkers to M. V. FUYANG 88 on February 20, 2012 within the sea area of Hong Kong was not true; 7. Report on Request to Terminate the Trial of the Case and Assignment to the Customs Police Department, to prove that the acts of WANG Yongqiang and the Plaintiff fell into smuggling, Xinghai Company had requested the court to transfer the case to the public security organ, and it was not the party or actor of this case; 8. Xinghai Company submitted evidence 8, Emergency Notice on Conscientiously Making a Good Job of Transportation Ships Bunkering Overseas (hereinafter referred to as the “Emergency Notice”) as supplement in court, to prove that M. V. FUYANG 88 was a ship which could not bunker overseas. Even if the bunkering did happen, it was an act of smuggling and the actual actor should assume corresponding criminal and civil liability; 9. Certificates of crew, to prove that WANG Yongqiang was not staff of the ship, he was not on M.V. FUYANG 88, therefore it was impossible for him to sign or seal for the bunkering involved;

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M. Davies and J. Lin

10. Civil Judgment, to prove that the ship’s seal was only used for transportation and operation management, and the allegation that the arrears affixed with the ship’s seal was conducted by the shipping company had no legal effect. WANG Yongqiang argued that: 1. He was the actual shipowner of M.V. FUYANG 88, which was affiliated to Xinghai Company, the related debts on the ship should be born by himself and were irrelevant to Xinghai Company; 2. M.V. FUYANG 88 did purchase fuel from the Plaintiff during the process of operation and transportation, it has no objection to the name, the quantity, the amount or the unit price of the fuel claimed by the Plaintiff, however it argued the interest, litigation costs and lawyer’s fee claimed by the Plaintiff should not be born by him; and 3. He himself knew nothing about whether there was tax evasion of the diesel bunkers sold by the Plaintiff to M.V. FUYANG 88. Whether the claims of the Plaintiff was legitimate should be reviewed by the court. WANG Yongqiang did not submit any evidence. According to the request of the Plaintiff, the court obtained the following evidence from Jiujiang Maritime Safety Administration: Certificate of Ship’s Registration, Ship’s Property Rights Assignment Agreement, Protocol of Delivery and Acceptance of Ship, Ownership Shares of Ship Assignment Contract, Protocol of Delivery and Acceptance of Ownership Shares of Ship and Mortgage Contract. After adducing evidence and cross-examination in the hearing, the court analyses and ascertains the evidence of the parties as follows: In respect of evidence materials provided by the Plaintiff: As to evidence 1 and evidence 2, Xinghai Company did not admit the authenticity, legality or relevancy thereof and contested the ship’s seal and the signature of WANG Yongqiang on them, it held that according to the records in the logbook of M.V. FUYANG 88, the bunkering did not exist. The court holds that the above evidence have gone through the formalities of notarization and certification, although the Plaintiff admitted that the signature of WANG Yongqiang was not signed by him in the trial, combined with the confirmation of WANG Yongqiang on the bunkering and the fact that WANG Zhenzhu, the person who actually signed the bunkering record, alleged by the Plaintiff appeared in the certificates of crew of evidence 9 submitted by Xinghai Company, the court ascertains the authenticity of the above two evidence. Even though the logbook did not record the bunkering of the ship involved, it was recorded by the ship, as a unilateral record, it is insufficient to refute the above two pieces of evidence and it cannot deny the fact of the actual bunkering, accordingly the court ascertains the effect of evidence of evidence 1 and evidence 2. As to evidence 3 and evidence 4, except the relevancy, Xinghai Company raised no objection to the authenticity or the legality thereof. The court ascertains the authenticity of the evidence and holds it can prove the Plaintiff was established and

Wing Wah Bunkers Ship Co., Ltd. v. Jiangxi Xinghai …

1015

registered according to the laws of Hong Kong and M.V. “Yu Tai”, the tanker involved, has acquired Operation License issued by Hongkong Marine Department and is qualified to operate. As to evidence 5, Xinghai Company raised no objection to the authenticity thereof but argued it could not prove the bunkers involved were acquired legally. The court ascertains the authenticity thereof. It is a petroleum products purchase and sale agreement between the Plaintiff and a third party which demonstrates that the Plaintiff is entitled to sell the bunkers involved. As to evidence 6, Xinghai Company raised no objection to the authenticity thereof, but held the evidence was irrelevant to this case. The court holds that combined with the Plaintiff’s evidence 1, the fact that the Plaintiff supplied bunkers to M.V. FUYANG 88 within the use area for supplying fuel in the sea area of Lamma Island designated by Hongkong Marine Department can be proved. As to evidence 7, Xinghai Company did not confirm the authenticity, the legality or the relevancy thereof, the court holds that it is the bunkering record submitted by the Plaintiff to the HK Customs, which can prove that the Plaintiff has reported the bunkering. As to evidence 8, Xinghai Company raised no objection to the authenticity but the relevancy thereof. It has been verified as identical with the original, the court ascertains the authenticity thereof. It can prove that the Plaintiff has spent RMB50,825 for lawyer’s fee of two cases including this case. In respect of the evidence submitted by Xinghai Company: As to evidence 1, the Plaintiff raised objection to the relevancy and held the agreement could not challenge a third party. Since it has been verified as identical with the original and the contents thereof has been confirmed by the counterparty namely the Defendant WANG Yongqiang, the court ascertains the authenticity thereof. It can prove M.V. FUYANG 88 is actually owned by WANG Yongqiang and registered under the name of Xinghai Company in paper. As to evidence 2 and evidence 3, Xinghai Company raised no objection to the relevancy, the court ascertains the authenticity thereof. It can prove Xinghai Company is the registered owner and operator of M.V. FUYANG 88, which has the qualification to be engaged in waterway transportation in domestic coast and middle-lower reaches of Yangtze River. As to evidence 4 and evidence 5, the Plaintiff questioned the relevancy and held the effectiveness of the assignment of the ship should be subject to the registration, otherwise it could not challenge a third party. The time of assignment recorded in evidence 4 is February 25, 2013 rather than the time of the bunkering. The court holds it is irrelevant to this case, so the relevancy thereof cannot be ascertained. Evidence 5 is a letter of entrustment signed by WANG Yongqiang, which has been verified as identical with the original and is consistent with the statements of WANG Yongqiang in his defence, the court ascertains the authenticity thereof and the effect of evidence thereof shall be identified in combination with the facts and other evidence.

1016

M. Davies and J. Lin

As to evidence 6, the Plaintiff raised no objection to the authenticity but the relevancy thereof. The court holds that this evidence is log book, it is unilateral documentary evidence of the Defendant, in the case where no other evidence can corroborate, it cannot be the evidence to separately determine the facts of this case, and the effect of evidence thereof cannot be ascertained. As to evidence 7, the Plaintiff held it was irrelevant to this case, the court holds that it is the report of the request of Xinghai Company to terminate the trial of this case and transfer to the Customs police department, but is not used to prove the facts involved, in addition, the court have informed the Defendant it can report to the competent authority, therefore the effect of evidence thereof cannot be ascertained. As to evidence 8, the Plaintiff held that it was irrelevant to this case, the court holds that it is an official documentary evidence available to the public and the court ascertains the authenticity thereof, it can prove the Ministry of Transport and the General Administration of Customs jointly issued a document to forbid the ships engaged in domestic routes sailing overseas without authorization for VAT-free fuels in any way. As to evidence 9, the Plaintiff raised no objection thereto and the court ascertains the authenticity thereof. The certificates of crew shows that WANG Zhenzhu is a sailor on the voyage involved, which can be corroborated by the Plaintiff’s statements that WANG Zhenzhu signed evidence 1 and evidence 2 on behalf of WANG Yongqiang. As to evidence 10, the Plaintiff raised objection thereto and held whether the civil judgment had come into effect could not be confirmed, and the judgment had nothing to do with this case. The court holds that Xinghai Company failed to prove whether the judgment of first instance has taken effect and the legal dispute adjudged by the judgment is not the same legal relationship of this case, hence the court does not ascertain the effect of evidence thereof. In respect of the evidence obtained by the court, the Plaintiff and the Defendant raised no objection thereto, the court ascertains the authenticity thereof. On basis of the above analysis and ascertainment of the evidence, combined with the record of hearing, the court finds the following facts: M.V. FUYANG 88 was a general dry cargo ship, the port of registry was Jiujiang, its registered owner and operator was Xinghai Company which had the qualification to transport general cargo in domestic coast and middle-lower reaches of Yangtze River. The registered co-ownership of the ship was 51% for Xinghai Company and 49% for Guangxi Evergreen Marine Co., Ltd. The actual ownership of M.V. FUYANG 88 was WANG Yongqiang, which was registered in the name of Xinghai Company in paper. The Plaintiff, Wing Wah Bunkers Ship Co., Ltd., was solely funded by LV Yongle and a sole proprietorship enterprise registered in Hong Kong, which was engaged in wholesale of fuels such as diesels and gasolines etc., the ship owned by it had acquired Operation License issued by the Maritime Department of Hong

Wing Wah Bunkers Ship Co., Ltd. v. Jiangxi Xinghai …

1017

Kong Special Administrative Region. Lamma Island, located in the southwest of Hong Kong Island, was under the jurisdiction of the Hong Kong SAR, there was a use area for supply of fuels in the west of Lamma Island designated by the Customs of Hong Kong. Before the bunkering of M.V. FUYANG 88, WANG Yongqiang contacted with LV Yongle by telephone in advance. On February 20, 2012, M.V. FUYANG 88 purchased 8 tons of 0 # diesel from the Plaintiff with a unit price of RMB6,700 per ton in the anchorage area of Lamma Island in Hong Kong, the price was RMB53,600; and 55 tons of IF180 millennium oil with a unit price of RMB4,960 per ton, the price was RMB272,800. The foregoing price of the bunkers totally amounted to RMB326,400. During the bunkering, the bill of sales was stamped with the ship’s seal of M.V. FUYANG 88 and signed by the sailor, WANG Zhenzhu on behalf of WANG Yongqiang to sign in the blank signature of receiver. Meanwhile, it was specified in the arrears conformation letter provided by the Plaintiff that “M.V. FUYANG 88 owed Wing Wah Bunkers Ship Co., Ltd., RMB326,400 on February 20, 2012, the above arrears shall be remitted to the designated account … within 15 days”; “if the arrears is not paid off within the period above, I agree to voluntarily bear the interest with a rate of 1.5% each month to compensate the loss of earning of Wing Wah, in addition, all the litigation costs arising out of recovering the arrears shall be totally born by the arrears party.” The ship’s name in the arrears conformation letter was stamped with the seal of M.V. FUYANG 88, WANG Zhenzhu signed the blank of person in charge on behalf of WANG Yongqiang and noted with the ID card number of WANG Zhenzhu. After purchasing the bunkers, WANG Yongqiang paid the price in amount of RMB50,000 to the Plaintiff. It is also found out that Emergency Notice jointly issued by the Ministry of Transport and the General Administration of Customs came into force on July 22, 1999, in which it was stipulated the ships engaged in domestic routes should not sail overseas without authorization for VAT-free fuel in any way. During the trial of this case, the Plaintiff applied to the court for property preservation to arrest the ship involved, M.V. FUYANG 88. On April 23, 2013, the court approved the application by rendering (2013) Xia Hai Fa Shang Chu Zi No.166 Civil Ruling and on the same day, M.V. FUYANG 88 was arrested in Suao, Pingtan Country in Fujian Province. Then Shanghai Yuandeyang Logistics Co., Ltd., a third party, raised objection thereto. The Plaintiff also applied to freeze the bank account of Xinghai Company in amount of RMB356,362. On April 25, 2013, the court made (2013) Xia Hai Fa Shang Chu Zi No. 166-2 Civil Ruling to permit its preservation application, and froze the bank account deposit of Xinghai Company in amount of RMB2,116.85 on April 26, 2013. On April 28, 2013, CHEN Renqiang, an outsider, provided a cash security in amount of RMB356,362 to the court for the debt arising out of M.V. FUYANG 88 and Xinghai Company. Upon the Plaintiff’s application, the court made (2013) Xia Hai Fa Shang Chu Zi No.166-3 Civil Ruling to release the arrest of M.V. FUYANG 88, and notified Shanghai Yuandeyang Logistics Co., Ltd. that the court would not try the objection it raised since the ship had been discharged. On May 2, 2013, the court made (2013)

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M. Davies and J. Lin

Xia Hai Fa Shang Chu Zi No. 166-4 Civil Ruling to discharge the freeze of Xinghai Company’s bank account. It is also found out that the Plaintiff prepaid preservation application fees of this case in amount of RMB2,302. On March 22, 2013, the Plaintiff paid the lawyer’s fee in amount of RMB50,825 for this case and the action of (2013) Xia Hai Fa Shang Chu Zi No.167. The court holds that this case is arising from dispute over the ship stores and spares supply contract. Since the Plaintiff is a legal person registered in Hong Kong and the bunkering occurred in the waters of Hong Kong, the case is contract dispute related to Hong Kong, therefore, the two parties shall firstly clear the governing law of this case. There is no agreement between the two parties in advance, the Plaintiff claimed the case should apply the laws of Hong Kong in the hearing, while the Defendant claimed the laws of the People’s Republic of China should apply, in accordance of Article 19 of the Interpretations of the Supreme People’s Court on Several Issues concerning Application of Law of the People’s Republic of China on Choice of Law for Foreign-Related Civil Relationships (I), the governing law of this case shall be the Law of the Application of Law. In this case, the Plaintiff is the party which supplied the bunkers, its performance most represents the features of the contract involved, and the location of bunkering, namely the place of performance, is at Lamma Island in HongKong, and the Plaintiff’s habitual residence and the place of the most significant relationship are both Hong Kong. According to Article 41 of the Law of the Application of Law, this case shall apply the laws of Hong Kong to deal with the disputes involved. However, in accordance with Article 10 Paragraph 2 of the Law of the Application of Law, the Plaintiff as the party which alleged this case shall be governed by the laws of Hong Kong, but it failed to provide and the court cannot ascertain the relevant laws, the Plaintiff actually quoted the domestic laws to advocate its rights in the hearing, the Defendant also defended accordingly, the laws of the People’s Republic of China shall be the governing law of this case. The court holds that the principal outstanding issues of this case are that: 1. Whether the bunkering exists and whether the ship stores and spares supply contract is established effectively; 2. The way and the scope of the compensation liability of the two Defendants. Firstly, in respect of the issue whether the bunkering exists and whether the ship stores and spares supply contract is established effectively. The Plaintiff held that according to the bill of sales, the arrears conformation letter and the record of the Customs it provided, the fact of bunkering really existed and had been confirmed by WANG Yongqiang, whether the contract involved was valid should be determined according to the laws of Hong Kong and the legality of the bunkering should be decided by the subject, qualification of the parties as well as the bunkering area. It was a company legally established and registered according to the laws of Hong Kong, its bunkering business was within the specific area in Lamma Island, and it used its tanker with the Operation License to refuel the

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1019

ships entering into the area. In summary, the ship stores and spares supply contract involved was valid. Xinghai Company argued that the bill of sales and the arrears conformation letter provided by the Plaintiff was not signed by WANG Yongqiang, and there was no bunkering record in the log book of M.V. FUYANG 88, so the bunkering claimed by the Plaintiff did not actually exist; even if the supply of bunkers was real, the bunkers products sold by the Plaintiff were used for the production of fishing ships, inland ships, yachts and ocean ships engaged in maritime operation under the supervision of the HK Customs, no matter whether the place of bunkering is in mainland China or Hong Kong, the Plaintiff could not supply bunkers to the ships navigating in domestic waters. M.V. FUYANG 88 was a sea-going ship navigating in domestic waters, the Plaintiff failed to fulfill the duty to review and supplied bunkers to the ship, it violated the laws of Hong Kong and was illegal transaction. Besides, according to the Emergency Notice, the bunkers trade overseas between the Plaintiff and M.V. FUYANG 88 owned by WANG Yongqiang was illegal smuggling, in accordance with Article 52 Paragraph 5 of the Contract Law, the contract involved was null and void. The court holds that although the bill of sales and the arrears conformation letter provide by the Plaintiff are not signed by WANG Yongqiang, he confirmed the bunkering involved in his defence as well as the quantity and price of the bunkers specified therein, in addition, the above evidence are stamped with the ship’s seal of M.V. FUYANG 88 and WANG Yongqiang paid the price in amount of RMB50,000 to the Plaintiff, the court ascertains the fact of bunkering to M.V. FUYANG 88 claimed by the Plaintiff actually exists, Xinghai Company denied the fact, but it failed to provide other evidence to refute except for the log book which is a unilateral record, the court does not adopt its defence. Xinghai Company also alleged, according to Article 1 of the Emergency Notice, the Plaintiff’s supplying bunkers to M.V. FUYANG 88 which is a ship navigating in domestic waters is smuggling, the contract involved was invalid. The court holds that Emergency Notice is jointly issued by the Ministry of Transport and the General Administration of Customs, it falls into divisional regulations rather than laws or administrative regulations stipulated in Article 52 Paragraph 5 of the Contract Law, hence there was no legal basis for the allegation of Xinghai Company that the contract was invalid. In addition, the regulated objects of the Emergency Notice are limited to ships operating international, Hong Kong, Macao and domestic routes within the territory of the People’s Republic of China, so the Plaintiff is not included. The Plaintiff is established and registered according to the laws of Hong Kong, it has acquired the Operation License issued by Hongkong Maritime Department and the operation qualification, besides, the Plaintiff ran bunkering business within the area designated by the HK Customs, the Defendant failed to provide evidence to prove the Plaintiff’s bunkering violated the laws of Hong Kong, accordingly the court will not support the Defendant’s allegation that the contract involved is null and void. In summary, the bunkering involved really exists and the ship stores and the spares supply contract is valid.

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Secondly, in respect of the way and scope of the compensation liability of the two Defendants. The Plaintiff held that Xinghai Company was the registered co-owner, it was shipowner of the ship involved, since the registration effectiveness and registration antagonism were adopted in the administration over ships in our country, whether the ship was operated under the name in paper or transferred, it could not challenge a third party before registration, Xinghai Company should have the liability to pay off the price of bunkers to the Plaintiff, and it was irrelevant to the Plaintiff that whether it would recover the loss from others after bearing the liabilities. WANG Yongqiang, as the receiver and the actual user of the goods involved, should be jointly and severally liable. The arrears conformation letter specified if the arrears was not paid off timely, the Defendant should bear the interest and the litigation costs, hence the scope of compensation the two Defendants should be jointly and severally liable to include the outstanding bunkers price in amount of RMB276,400 and the corresponding interest calculated at the rate of 1.5% each month, together with the attorney’s fee in amount of RMB30,210, the property preservation fee and case acceptance fee and other litigation fees. Xinghai Company held that Xinghai Company was not the actual shipowner of the ship involved and it did not actual possess, use and operate the ship, so the bunkering did not really exist. Although the bill of sales and the arrears conformation letter were stamped with the ship’s seal, but the seal was not the corporation seal, it could not be identified as the corporation’s act of Xinghai Company and Xinghai Company could not accordingly be identified as the counterpart to the contract. Since the contractual relationship between Xinghai Company and the Plaintiff was not established, Xinghai Company had no liability to compensate. The court holds that firstly, according to Article 10 and Article 31 of the Regulations of the People’s Republic of China Governing the Registration of Ships (hereinafter referred to as the “Regulations on Ship Registration”), each ship shall have only one name and the name shall be approved by the registration authority. Each ship shall have related marks for the administrative authority and the interested party to identify in the process of safe navigation, business management and transportation of goods. In this case, the bill of sales and the arrears conformation letter are stamped with the ship’s seal of M.V. FUYANG 88, although Xinghai Company did not confirm the seal, it failed to provide other ship’s seals using in the business management, the Plaintiff is the supplier and the object of supply is M.V. FUYANG 88, hence it is proper to identify Xinghai Company as the party to the bunkers supply contract according to the shipowner demonstrated by the ship’s seal; secondly, in accordance with Article 5 Paragraph 1 and Article 14 Paragraph 1 Sub-paragraph 10 of the Regulations on Ship Registration, the shipowner and the operator shall be registered in accordance with the law. In this case, Xinghai Company, as the registered shipowner and the operator of this ship, shall not challenge a third party by the reason that the ship is owned, used and controlled by WANG Yongqiang. The agreement about ship’s debts and liability between Xinghai Company and WANG Yongqiang is an internal agreement and it not have external countermine effectiveness; finally, the essence of the affiliated operation of

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the ship lies in lending management right of a company, the affiliated company shall be responsible for the management of the ship, therefore Xinghai Company shall be responsible for the debts arising out of bunkering during the navigation of M.V. FUYANG 88. In conclusion, Xinghai Company, as the registered shipowner and the operator of the ship which received the bunkers, is the subject under the ship stores and spares supply contract. Besides, the blank of receiver in the bill of sales is stamped with the ship’s seal and signed by the sailor WANG Zhenzhu on behalf of WANG Yongqiang. WANG Yongqiang, as the actual shipowner, actually used the bunkers and enjoyed the benefits, and he confirmed the facts and confessed he was the subject of liabilities, so WANG Yongqiang is also the party to the contract. In summary, the court identifies Xinghai Company and WANG Yongqiang as the parties to the ship stores and spares supply contract. According to Article 87 of the General Principles of the Civil Law of the People’s Republic of China, in the case the Plaintiff fulfilled its obligation to supply bunkers, the two Defendants, as the joint debtors, shall be jointly and severally liable to pay off the price of the bunkers. Furthermore, it is specified in the arrears conformation letter provided by the Plaintiff that if the arrears is not paid off within the period above (within 15 days from February 20, 2012), I agree to voluntarily bear the interest with the rate of 1.5% each month to compensate the loss of Wing Wah Bunkers Ship Co., Ltd.” The arrears conformation letter is affixed with the ship’s seal and the signed by WANG Yongqiang, the term shall be deemed as an agreement of the two parties about the responsibility for deferred payment. Because two Defendants did not request the court to reduce the amount, and the agreed calculation standard of interest does go against the laws of Hong Kong where the bunkering involved occurred, accordingly the court supports the interest. The Defendant received the bunkers on February 20, 2012, it is specified in the arrears conformation letter all the price of the bunkers shall be paid off within 15 days after receiving the bunkers, therefore the two Defendants shall pay the sum to the Plaintiff before March 5, 2012. The two Defendants shall also pay the late payment interest on the price of the bunkers in amount of RMB276,400 calculated at 1.5% each month from March 6, 2012. It is agreed in the arrears conformation letter the party in arrears shall bear all the litigation costs, the two Defendants shall be responsible for the lawyer’s fee and litigation fees. In respect of the lawyer’s fee, because the amount of the invoice of lawyer’s fee provided by the Plaintiff is two lawsuits and the Plaintiff failed to provide the relevant commission contract, the court decides the lawyer’s fee of this case shall be half of the amount of RMB50,825 indicated in the invoice, namely RMB25,412. In summary, in accordance with Article 87 of the General Principles of the Civil Law of the People’s Republic of China, Article 60 Paragraph 1 and Article 107 of the Contract Law of the People’s Republic of China and Article 64 Paragraph 1 and Article 144 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows:

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1. The Defendants, Jiangxi Xinghai Shipping Co., Ltd. and WANG Yongqiang, shall be jointly and severally liable to pay the Plaintiff, Wing Wah Bunkers Ship Co., Ltd., the price of bunkers in amount of RMB276,400 together with the interest calculated at 1.5% per month from March 6, 2012 to the date specified by this judgment within ten days after this judgment takes effect; 2. The Defendants, Jiangxi Xinghai Shipping Co., Ltd. and WANG Yongqiang, shall be jointly and severally liable to pay the Plaintiff, Wing Wah Bunkers Ship Co., Ltd., the lawyer’s fee in amount of RMB25,412.5 within ten days after this judgment takes effect; 3. Reject other claims of the Plaintiff against the two Defendants. If the Defendants, Jiangxi Xinghai Shipping Co., Ltd. and WANG Yongqiang, fail to perform their obligation of pecuniary payment within the period specified by this judgment, shall pay in double of the interest on debt for the period of such delay in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee for this case in amount of RMB6,646, the Defendants, Jiangxi Xinghai Shipping Co., Ltd. and WANG Yongqiang, shall jointly pay RMB6,596 and the Plaintiff, Wing Wah Bunkers Ship Co., Ltd., shall pay RMB50. Preservation application fee in amount of RMB2,302 shall be jointly paid by the Defendants, Jiangxi Xinghai Shipping Co., Ltd. and WANG Yongqiang. In case of dissatisfaction with this judgment, the Plaintiff, Wing Wah Bunkers Ship Co., Ltd., may within 30 days upon service of this judgment and the Defendants, Jiangxi Xinghai Shipping Co., Ltd. and WANG Yongqiang, may within 15 days upon service of this judgment, submit a statement of appeal to the court, together with copies in accordance with the number of the opposite party, to lodge an appeal to the Fujian High People’s Court. Presiding Judge: ZHOU Chengyou Judge: HONG Zhifeng Acting Judge: ZHU Xiaojing November 18, 2013 Clerk: LIN Qian

Appendix: Relevant Laws 1. General Principles of the Civil Law of the People’s Republic of China Article 87 When there were two or more creditors or debtors to a deal, each of the joint creditors shall be entitled to demand that the debtor fulfill his obligations, in accordance with legal provisions or the agreement between the parties; each of the joint debtors shall be obliged to perform the entire debt, and the

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debtor who performs the entire debt shall be entitled to ask the other joint debtors to reimburse him for their shares of the debt. 2. Contract Law of the People’s Republic of China Article 60 Paragraph 1 Each party shall fully perform its own obligations as agreed upon. Article 107 If a party fails to perform its obligations under a contract, or its performance fails to satisfy the terms of the contract, it shall bear the liabilities for breach of contract such as to continue to perform its obligations, to take remedial measures, or to compensate for losses. 3. Law of the Application of Law for Foreign-related Civil Relations of the People’s Republic of China Article 41 The parties concerned may choose the laws applicable to contracts by agreement. If the parties do not choose, the laws at the habitual residence of the party whose fulfillment of obligations can best reflect the characteristics of this contract or other laws which have the closest relation with this contract shall apply. Article 10 Paragraph 2 If foreign laws cannot be ascertained or there are no provisions in the laws of this country, the laws of the People’s Republic of China shall apply. 4. Regulations of the People’s Republic of China Governing the Registration of Ships Article 5 Paragraph 1 The acquisition, assignment or extinction of the ownership of a ship shall be registered at the ship registration authority; no acquisition, assignment or extinction of the ship’s ownership shall act against a third party unless registered. Article 10 Paragraph 1 Each ship shall have only one name. Article 14 Paragraph 1 Sub-paragraph 10 The Ship Registration Administration, having examined and verified the application for registration of ownership, shall issue to the ship owner whose application meets the requirements of these Regulations the Certificate of Registration of Ship’s Ownership within 7 days after the date of receipt of the application, whereupon an official registration number shall be granted to the registered ship and the following particulars shall be recorded in the Register of Ships: … (10) Name and address of bare boat charterer or ship operator, and name of his legal representative, if the ship owner is not the one who operates or actually controls the ship;

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Article 31 A ship shall be marked as follows: (a) Ship’s name in Chinese on both sides of the stem and at the stern; (b) Port of registry below the name at the stern; (c) The corresponding Chinese phonetic alphabets below the ship’s name and port of registry; (d) Draft scale on both sides of the stem and the stern; (e) Load line mark on both sides of middle part of the ship. Where a ship being constrained by its type and size is unable to be marked as above, it shall be marked with its name and port of registry at an easily-seen position. 5. Civil Procedure Law of the People’s Republic of China Article 64 Paragraph 1 A party shall have the burden to provide evidence for its claims. Article 130 If the Defendant, having been served with a summons, refuses to appear in court without justified reason, or if he withdraws from a court session without the permission of the court, the court may make a judgment by default. 6. Civil Procedure Law of the People’s Republic of China Article 239 The time limit for the submission of an application for execution shall be two year. Suspension or interruption of the time limit of application for execution shall apply to the provisions on the suspension and interruption of the limitation of action concerned in the law.

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Fujian High People’s Court Civil Judgment Wing Wah Bunkers Ship Co., Ltd. v. Jiangxi Xinghai Shipping Co., Ltd. et al. (2014) Min Min Zhong Zi No.146 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 1009. Cause of Action 225. Dispute over contract for marine stores and spare parts supply. Headnote Shipowner held liable to pay for bunkers provided to vessel in Hong Kong, despite allegations of smuggling in relation to the bunkers; Chinese law applied, despite the fact that bunkers were provided in Hong Kong, because no evidence was given about Hong Kong law. Summary Bunker Supplier (“the Plaintiff”) brought suit to hold a ship’s Registered and Actual Owners (“the Defendants”) jointly and severally liable for unpaid bunkers, interest, and attorneys’ fees. Plaintiff, licensed by the Hong Kong SAR, supplied bunkers to Defendant’s ship in Hong Kong waters. Plaintiff argued Hong Kong law applied, but it did not provide that law to the court. The bill of sale was signed by a sailor on behalf of the Actual Owner and stamped with the ship’s seal. The bill of sale bound the ship to pay interest and all litigation fees. The Actual Owner partially paid for the bunkering. The ship’s logbook did not mention the bunkering. In trial, the court held that: (1) the bunkering occurred because the bill of sales had the ship’s seal and the Actual Owner partially paid for the order even though the ship’s logbook did not reflect the bunkering. (2) An Emergency Notice did not prohibit Plaintiff’s business operations nor did smuggling occur. (3) The Plaintiff could recover half of the attorneys’ fees because when it requested fees from two suits while only having the commission contract for one. Here, the court held that: (1) the PRC’s Law on Application of Law applies. Accordingly, Hong Kong law applies. Because no party provided Hong Kong law to the court, the PRC’s Law on the Application of Law provides that PRC law applies. (2) The Actual Owner confirmed that bunkering had occurred. (3) The logbook’s omission of the bunkering was inconsequential. (3) The Defendants did not prove Plaintiff violated Hong Kong law or that smuggling occurred. (4) The Emergency Notice was an administrative rule rather than laws and administrative regulations and could not determine whether the supply contract was valid. (5) The Plaintiff did not fall

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within the authoritative scope of the Emergency Notice. (6) The Registered Owner and Actual Owner are jointly and severally liable to the Plaintiff. (7) The Registered Owner and Actual Owner’s internal agreement did not affect the Plaintiff’s right to recover. (8) The trial court properly granted reasonably lawyer’s fee.

Judgment The Appellant (The Defendant of First Instance): Jiangxi Xinghai Shipping Co., Ltd. Domicile: No. 63, P.O. Box, Yuen Long, New Territories, East New District, Yihuang County, Jiangxi. Legal representative: CHEN Renxin, manager. Agent ad litem: LIN Weixian, lawyer of Fujian Shihao Law Firm. Agent ad litem: CAI Wenhui, lawyer of Fujian Shihao Law Firm. The Respondent (The Plaintiff of First Instance): Wing Wah Bunkers Ship Co., Ltd. Domicile: No. 63, P.O. Box, Yuen Long, New Territories, Hongkong Special Administrative Region. Legal representative: LV Yongle, person in charge. Agent ad litem: FENG Jiancheng, lawyer of Guangdong (Shenzhen) Ge Lin Law Firm. The Defendant of First Instance: WANG Yongqiang, Male, Born on September 15, 1967, Han, Living in Pingtan Country, Fujian. With respect to the case arising from dispute over marine stores and spares supply contract between the Appellant Jiangxi Xinghai Shipping Co., Ltd. (hereinafter referred to as “Xinghai Company”) and the Respondent Wing Wah Bunkers Ship Co., Ltd. (hereinafter referred to as “Wing Wah Company”), the Defendant of first instance WANG Yongqiang, the Appellant dissatisfied with (2013) Xia Hai Fa Shang Chu Zi No.166 Civil Judgment rendered by the Xiamen Maritime Court and appealed to the court. The court, after accepting the case, organized a collegiate panel in accordance with law and held a hearing in public on March 6, 2014. LIN Weixian and CAI Wenhui, agents ad litem of Xinghai Company, LV Yongle, the legal representative of Wing Wah Company, and FENG Jiancheng, agent ad litem of Wing Wah Company, appeared at court and participated in the action. WANG Yongqiang, the Defendant of the first instance, upon summons by the court, refused to appear in court without proper reason. Now the case has been concluded. In the first instance, Wing Wah Company requested the court to judge that Xinghai Company and WANG Yongqiang should be jointly and severally liable to pay the price of bunkers in amount of RMB276,400 and the interest thereon calculated at a rate of 1.5% per month to the day of payment (the interest temporarily calculated from the due date for payment to March 9, 2013 was RMB49,752); as well as the

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litigation fees, property preservation fee and lawyer’s fee in total amount of RMB30,210 and other fees arising out of this case. The court of first instance found out the following facts: M.V. FUYANG 88 was a general dry cargo ship, of which the port of registry was Jiujiang, its registered owner and operator was Xinghai Company which had the qualification to transport general cargo in domestic coast and middle-lower reaches of Yangtze River. The registered co-ownership of the ship was 51% for Xinghai Company and 49% for Guangxi Evergreen Marine Co., Ltd. The actual ownership of M.V. FUYANG 88 was WANG Yongqiang, which was registered in the name of Xinghai Company in paper. Wing Wah Company was solely funded by LV Yongle and a sole proprietorship enterprise registered in Hong Kong, which was engaged in wholesale of fuels such as diesels and gasolines etc., the ship owned by it had acquired Operation License issued by the Maritime Department of Hong Kong Special Administrative Region. Lamma Island, located in the southwest of Hong Kong Island, was under the jurisdiction of the Hong Kong SAR, there was a use area for supply of fuels in the west of Lamma Island designated by the Customs of Hong Kong. Before the bunkering of M.V. FUYANG 88, WANG Yongqiang contacted with LV Yongle by telephone in advance. On February 20, 2012, M.V. FUYANG 88 purchased 8 tons of 0# diesel from Wing Wah Company with a unit price of RMB6,700 per ton in the anchorage area of Lamma Island in Hong Kong, the price was RMB53,600; and 55 tons of IF180 millennium oil with a unit price of RMB4,960 per ton, the price was RMB272,800. The foregoing price of the bunkers totally amounted to RMB326,400. During the bunkering, the bill of sales was stamped with the ship’s seal of M.V. FUYANG 88 and signed by the sailor, WANG Zhenzhu on behalf of WANG Yongqiang to sign in the blank signature of receiver. Meanwhile, it was specified in the arrears conformation letter provided by Wing Wah Company that “M.V. FUYANG 88 owed Wing Wah Bunkers Ship Co., Ltd., RMB326,400 on February 20, 2012, the above arrears shall be remitted to the designated account … within 15 days”; “if the arrears is not paid off within the period above, I agree to voluntarily bear the interest with a rate of 1.5% each month to compensate the loss of earning of Wing Wah, in addition, all the litigation costs arising out of recovering the arrears shall be totally born by the arrears party.” The ship’s name in the arrears conformation letter is stamped with the seal of M.V. FUYANG 88, WANG Zhenzhu signed the blank of person in charge on behalf of WANG Yongqiang and noted with the ID card number of WANG Zhenzhu. After purchasing the bunkers, WANG Yongqiang paid the price in amount of RMB50,000 to Wing Wah Company. It was also found out that Emergency Notice jointly issued by the Ministry of Transport and the General Administration of Customs came into force on July 22, 1999, in which it was stipulated the ships engaged in domestic routes shall not sail overseas without authorization for VAT-free fuel in any way. During the trial of this case, Wing Wah Company applied to the court of first instance for property preservation to arrest the ship involved, M.V. FUYANG 88.

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On April 23, 2013, the court of first instance approved the application by rendering (2013) Xia Hai Fa Shang Chu Zi No.166 Civil Ruling and on the same day, M.V. FUYANG 88 was arrested in Suao, Pingtan Country in Fujian. Then Shanghai Yuandeyang Logistics Co., Ltd., an outsider, raised objection thereto. Wing Wah Company also applied to freeze the bank account of Xinghai Company in amount of RMB356,362. On April 25, 2013, the court of first instance made (2013) Xia Hai Fa Shang Chu Zi No.166-2 Civil Ruling to permit its preservation application, and froze the bank account deposit of Xinghai Company in amount of RMB2,116.85 on April 26, 2013. On April 28, 2013, CHEN Renqiang, an outsider, provided a cash security in amount of RMB356,362 to the court of first instance for the debt arising out of M.V. FUYANG 88 and Xinghai Company. Upon Wing Wah Company’s application, the court of first instance made (2013) Xia Hai Fa Shang Chu Zi No.166-3 Civil Ruling to release the arrest of M.V. FUYANG 88, and notified Shanghai Yuandeyang Logistics Co., Ltd. that the court of first instance would not try the objection it raised since the ship had been discharged. On May 2, 2013, the court of first instance made (2013) Xia Hai Fa Shang Chu Zi No.166-4 Civil Ruling to discharge the freeze of Xinghai Company’s bank account. It was also found out that Wing Wah Company prepaid preservation application fees of this case in amount of RMB2,302. On March 22, 2013, Wing Wah Company paid the lawyer’s fee in amount of RMB50,825 for this case and the action of (2013) Xia Hai Fa Shang Chu Zi No.167. The court of first instance held that this case was arising from dispute over the ship stores and spares supply contract. Since Wing Wah Company was a legal person registered in Hong Kong and the bunkering occurred in the waters of Hong Kong, the case was contract dispute related to Hong Kong, therefore, the two parties should firstly clear the governing law of this case. There was no agreement between the two parties in advance, Wing Wah Company claimed the case should apply the laws of Hong Kong in the hearing, while the Defendant claimed the laws of the People’s Republic of China should apply, in accordance of Article 19 of the Interpretations of the Supreme People’s Court on Several Issues concerning Application of Law of the People’s Republic of China on Choice of Law for Foreign-Related Civil Relationships (I), the governing law of this case should be the Law of the Application of Law. In this case, Wing Wah Company was the party which supplied the bunkers, its performance most represented the features of the contract involved, and the location of bunkering, namely the place of performance, was at Lamma Island in Hong Kong, and Wing Wah Company’s habitual residence and the place of the most significant relationship were both Hong Kong. According to Article 41 of the Law of the Application of Law, this case should apply the laws of Hong Kong to deal with the disputes involved. However, in accordance with Article 10 Paragraph 2 of the Law of the Application of Law, Wing Wah Company as the party which alleged this case should be governed by the laws of Hong Kong, but it failed to provide and the court of first instance could not ascertain the relevant laws, Wing Wah Company actually quoted the domestic laws to advocate its rights in the hearing, the Defendant also defended accordingly, the laws of the People’s Republic of China should be the governing law of this case.

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The original court held that the principal outstanding issues of this case were whether the bunkering exists and whether the ship stores and spares supply contract was established effectively; and the way and the scope of the compensation liability of Xinghai Company and WANG Yongqiang. Firstly, in respect of the issue whether the bunkering existed and whether the ship stores and spares supply contract was established effectively. Wing Wah Company held that according to the bill of sales, the arrears conformation letter and the record of the Customs it provided, the fact of bunkering really existed and had been confirmed by WANG Yongqiang, whether the contract involved was valid should be determined according to the laws of Hong Kong and the legality of the bunkering should be decided by the subject, qualification of the parties as well as the bunkering area. It was a company legally established and registered according to the laws of Hong Kong, its bunkering business was within the specific area in Lamma Island, and it used its tanker with Operation License to refuel the ships entering into the area. In summary, the ship stores and spares supply contract involved was valid. Xinghai Company argued that the bill of sales and the arrears conformation letter provided by Wing Wah Company was not signed by WANG Yongqiang, and there was no bunkering record in the logbook of M.V. FUYANG 88, so the bunkering claimed by Wing Wah Company did not actually exist; even if the supply of bunkers was real, the bunkers products sold by Wing Wah Company were used for the production of fishing ships, inland ships, yachts and ocean ships engaged in maritime operation under the supervision of the HK Customs, no matter whether the place of bunkering was in mainland China or Hong Kong, Wing Wah Company could not supply bunkers to the ships navigating in domestic waters. M.V. FUYANG 88 was a sea-going ship navigating in domestic waters, Wing Wah Company failed to fulfill the duty to review and supplied bunkers to the ship, it violated the laws of Hong Kong and was illegal transaction. Besides, according to Emergency Notice, the bunkers trade overseas between Wing Wah Company and M.V. FUYANG 88 owned by WANG Yongqiang was illegal smuggling, in accordance with Article 52 Paragraph 5 of the Contract Law, the contract involved was null and void. The court of first instance held that although the bill of sales and the arrears conformation letter provide by Wing Wah Company were not signed by WANG Yongqiang, he confirmed the bunkering involved in his defence as well as the quantity and price of the bunkers specified therein, in addition, the above evidence were stamped with the ship’s seal of M.V. FUYANG 88 and WANG Yongqiang paid the price in amount of RMB50,000 to Wing Wah Company, the court of first instance ascertained the fact of bunkering to M.V. FUYANG 88 claimed by Wing Wah Company actually existed, Xinghai Company denied the fact, but it failed to provide other evidence to refute except for the logbook which was a unilateral record, the court of first instance did not adopt its defence. Xinghai Company also alleged, according to Article 1 of Emergency Notice, Wing Wah Company’s supplying bunkers to M.V. FUYANG 88 which was a ship navigating in domestic waters was smuggling, the contract involved was invalid. The court of first instance

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held that Emergency Notice was jointly issued by the Ministry of Transport and the General Administration of Customs, it fell into divisional regulations rather than laws or administrative regulations stipulated in Article 52 Paragraph 5 of the Contract Law, hence there was no legal basis for the allegation of Xinghai Company that the contract was invalid. In addition, the regulating objects of the Emergency Notice were limited to ships operating international, Hong Kong and Macao and domestic routes within the territory of the People’s Republic of China, Wing Wah Company was not included. Wing Wah Company is established and registered according to the laws of Hong Kong, it had acquired the Operation License issued by Hongkong Maritime Department and the operation qualification, besides, Wing Wah Company ran bunkering business within the area designated by the HK Customs, the Defendant failed to provide evidence to prove Wing Wah Company’s bunkering violated the laws of Hong Kong, accordingly the court of first instance would not support the Defendant’s allegation that the contract involved was null and void. In summary, the bunkering involved really existed and the ship stores and the spares supply contract was valid. Secondly, in respect of the way and scope of the compensation liability of Xinghai Company and WANG Yongqiang. Wing Wah Company held that Xinghai Company was the registered co-owner, it was shipowner of the ship involved, since the registration effectiveness and registration antagonism were adopted in the administration over ships in our country, whether the ship was operated under the name in paper or transferred, it could not challenge a third party before registration, Xinghai Company should have the liability to pay off the price of bunkers to Wing Wah Company, and it was irrelevant to Wing Wah Company that whether it would recover the loss from others after bearing the liabilities. WANG Yongqiang, as the receiver and the actual user of the goods involved, should be jointly and severally liable. The arrears conformation letter specified if the arrears was not paid off timely, the Defendant should bear the interest and the litigation costs, hence the scope of compensation Xinghai Company and WANG Yongqiang should be jointly and severally liable to include the outstanding bunkers price in amount of RMB276,400 and the corresponding interest calculated at the rate of 1.5% each month, together with the lawyer’s fee in amount of RMB30,210, the property preservation fee and case acceptance fee and other litigation fees. Xinghai Company held that Xinghai Company was not the actual shipowner of the ship involved and it did not actual possess, use and operate the ship, so the bunkering did not really exist. Although the bill of sales and the arrears conformation letter were stamped with the ship’s seal, but the seal was not the corporation seal, it could not be identified as the corporation’s act of Xinghai Company and Xinghai Company could not accordingly be identified as the counterpart to the contract. Since the contractual relationship between Xinghai Company and Wing Wah Company was not established, Xinghai Company had no liability to compensate. The court of first instance held that, firstly, according to Article 10 and Article 31 of the Regulations of the People’s Republic of China Governing the Registration of Ships (hereinafter referred to as the “Regulations on Ship Registration”), each ship

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should have only one name and the name shall be approved by the registration authority. Each ship should have related marks for the administrative authority and the interested party to identify in the process of safe navigation, business management and transportation of goods. In this case, the bill of sales and the arrears conformation letter were stamped with the ship’s seal of M.V. FUYANG 88, although Xinghai Company did not confirm the seal, it failed to provide other ship’s seals using in the business management, Wing Wah Company was the supplier and the object of supply was M.V. FUYANG 88, hence it was proper to identify Xinghai Company as the party to the bunkers supply contract according to the shipowner demonstrated by the ship’s seal; secondly, in accordance with Article 5 Paragraph 1 and Article 14 Paragraph 1 Sub-paragraph 10 of the Regulations of the People’s Republic of China Governing the Registration of Ships, the shipowner and the operator should be registered in accordance with the law. In this case, Xinghai Company, as the registered shipowner and the operator of this ship, should not challenge a third party by the reason that the ship was owned, used and controlled by WANG Yongqiang. The agreement about ship’s debts and liability between Xinghai Company and WANG Yongqiang was an internal agreement and it did not have external countermine effectiveness; finally, the essence of the affiliated operation of the ship lied in lending management right of a company, the affiliated company should be responsible for the management of the ship, therefore Xinghai Company should be responsible for the debts arising out of bunkering during the navigation of M.V. FUYANG 88. In conclusion, Xinghai Company, as the registered shipowner and the operator of the ship which received the bunkers, was the subject under the ship stores and spares supply contract. Besides, the blank of receiver in the bill of sales was stamped with the ship’s seal and signed by the sailor WANG Zhenzhu on behalf of WANG Yongqiang. WANG Yongqiang, as the actual shipowner, actually used the bunkers and enjoyed the benefits, and he confirmed the facts and confessed he was the subject of liabilities, so WANG Yongqiang was also the party to the contract. In summary, the court of first instance identified Xinghai Company and WANG Yongqiang as the parties to the ship stores and spares supply contract. According to Article 87 of the General Principles of the Civil Law of the People’s Republic of China, in the case Wing Wah Company fulfilled its obligation to supply bunkers, Xinghai Company and WANG Yongqiang, as the joint debtors, should be jointly and severally liable to pay off the price of the bunkers. Furthermore, it was specified in the arrears conformation letter provided by Wing Wah Company that “if the arrears is not paid off within the period above (within 15 days from February 20, 2012), I agreed to voluntarily bear the interest with the rate of 1.5% each month to compensate the loss of Wing Wah Bunkers Ship Co., Ltd.” The arrears conformation letter was affixed with the ship’s seal and the signed by WANG Yongqiang, the term should be deemed as an agreement of the two parties about the responsibility for deferred payment. Because two Defendants did not request the court to reduce the amount, and the agreed calculation standard of interest did not go against the laws of Hong Kong where the bunkering involved occurred, accordingly the court of first instance supported the interest. The ship received the bunkers on February 20, 2012, it was specified in the

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arrears conformation letter all the price of the bunkers shall be paid off within 15 days after receiving the bunkers, therefore Xinghai Company and WANG Yongqiang should pay the sum to Wing Wah Company before March 5, 2012. Xinghai Company and WANG Yongqiang should also pay the late payment interest on the price of the bunkers in amount of RMB276,400 calculated at 1.5% each month from March 6, 2012. It was agreed in the arrears conformation letter that the party in arrears should bear all the litigation costs, Xinghai Company and WANG Yongqiang should be responsible for the lawyer’s fee and litigation fees. In respect of the lawyer’s fee, because the amount of the invoice of lawyer’s fee provided by Wing Wah Company was two lawsuits and Wing Wah Company failed to provide the relevant commission contract, the court of first instance decided the lawyer’s fee of this case should be half of the amount of RMB50,825 indicated in the invoice, namely RMB25,412. In summary, in accordance with Article 87 of the General Principles of the Civil Law of the People’s Republic of China, Article 60 Paragraph 1 and Article 107 of the Contract Law of the People’s Republic of China and Article 64 Paragraph 1 and Article 144 of the Civil Procedure Law of the People’s Republic of China, the court of first instance judged that Xinghai Company and WANG Yongqiang should be jointly and severally liable to pay Wing Wah Company the price of bunkers in amount of RMB276,400 together with the interest calculated at 1.5% per month from March 6, 2012 to the date specified by the judgment, as well as the lawyer’s fee in amount of RMB25,412.5, within ten days after the judgment took effect; reject other claims of Wing Wah Company against Xinghai Company and WANG Yongqiang. After the judgment of first instance was made, the Defendant of first instance, Xinghai Company, dissatisfied the judgment and lodged an appeal to the court, it filed the following allegations: 1. The court of first instance unclearly ascertained the facts, and leaved a question on whether the fact existed. Firstly, M.V. FUYANG 88 was a ship operated by WANG Yongqiang in the name of Xinghai Company, which did not actually participate in the operation and management of the ship and could not confirm the bunkering. The fact alleged by Wing Wah Company according to the bill of sales and the arrears confirmation letter conflicted with the fact proved by the log book provided by Xinghai Company, besides, the bill of sales and the arrears confirmation letter were not signed by WANG Yongqiang. The logbook was important evidence in the process of navigation of the ship. The court of first instance ignored the importance of the evidence, in the case where no contrary evidence could overturn its authenticity and the parties concerned and the agents of Wing Wah Company did not appear in court and cross-examine, it was incorrect that the court of first instance did not admit the logbook on the ground that it was a unilateral evidence; secondly, although the invoice and the arrears confirmation letter were affixed with the seal of M.V. FUYANG 88, Wing Wah Company contended that WANG Yongqiang remitted RMB50,000,

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but supplied bunkers to several ships of Xinghai Company, there was no evidence could prove that RMB50,000 was the outstanding sum in this case. The situation where other crew members or WANG Yongqiang affixed the seal for the purpose of malicious lawsuit could not be excluded, the court of first instance was too hasty to identify the facts and it was obviously unfair; 2. Even if the bunkering existed, it was illegal transaction which constituted to smuggling, and the contract should be determined to be null and void. Firstly, the case was contract dispute over the outstanding price of bunkers, the price of bunkers claimed by Wing Wah Company was settled in RMB currency and the agreed payer and the payee were both in the territory of China, Wing Wah Company claimed that the laws of Hong Kong should apply, but it failed to provide the laws of Hong Kong and quoted the domestic laws to defend, accordingly, the domestic laws should be the governing law of this case; secondly, the trade of bunkers claimed by Wing Wah Company constituted smuggling stipulated in the Criminal law. It was expressly prohibited in Emergency Notice jointly issued by the Ministry of Transport and the General Customs Administration the ships navigating in domestic waters bunkering overseas. The court of first instance should know the trade was smuggling but it did not transfer the case to the public security organ in accordance with the provisions of the Opinions of the Supreme People’s Court on Several Procedure Issues of Criminal Offences Involved in the Trial of Cases of Civil Disputes and the Regulations on Issues of the Suspicion of Economic Crimes involved in Economic Dispute Cases, it was incorrect for the court of first instance to identify the contract was valid on the ground that Emergency Notice was divisional regulations rather than laws and administrative regulations stipulated in Article 52 of the Contract Law; thirdly, since the domestic laws should be the governing law of this case, it was provided in the domestic laws that it was illegal act that the ships navigating in domestic waters bunkered overseas, even the supplier was in Hong Kong and the period of validity of the operating license and the contract to prove the source of the bunkers provided by Wing Wah Company could not prove the legality of the bunkering, moreover, it failed to provide regulations of the Hong Kong government which allowed ship navigating in domestic waters to refuel in Lamma Island. According to the High-sour Red Bunkers Trading Record submitted by Wing Wah Company to the Task Force of Hong Kong Customs, Wing Wah Company concealed the fact that the ship navigating in domestic waters bunkered by changing the type of the ship into inland river ship in the bunkering record, it suggested Hong Kong Government did not allow to supply bunkers to the ships navigating in domestic waters; 3. The court of first instance mistakenly determined the subject of the contract and the act of the ship’s seal. Firstly, it was a common phenomenon in the shipping industry in China that an individual-owned ship was operated in the name of a company, the shipowner was responsible for its own profits and loss, the external debt should not be born by the company in the name of which the ship was registered; secondly, this case was contract dispute rather than tort dispute, the two parties which signed the contract with true intentions should be

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identified as the subjects of the contract. Wing Wah Company supplied bunkers to M.V. FUYANG 88 and signed the contract with WANG Yongqiang, WANG Yongqiang was the actual owner of the ship and the beneficiary to the contract, he should be the subject of the contract. Although the bill of sales and the arrears confirmation letter were stamped with the ship’s seal of Xinghai Company’s the name, which was not awarded by Xinghai Company nor the statutory seal having been filed for depository, Xinghai Company knew nothing about that and was not the receiver or the beneficiary of the bunkers, the behavior of stamped the ship’s seal could not be identified as the Xinghai Company’s genuine intention unless it was confirmed by Xinghai Company. Therefore it was incorrect for the court of first instance to determine Xinghai Company as the subject of the contract; thirdly, according to Article 9 of the Guiding Opinions of the Supreme People’s Court on the Legal Issues of Dispute over Domestic Water Transport, where the actual owner of the individual-owned ship registered in the name of a company to acquire operation qualification signed the transportation contract in its own name, it should be identified as the carrier of the transportation contract and should assume corresponding contract liability. This case was not arising from transportation contract, but in essence it was the same, they were disputes over economic contracts signed by the actual shipowner in its own name, the provision could be a reference absolutely. The ship involved was arising from dispute over a loan contract because of bunkers with the third party of the case, it was decided in the effective judgment made by the Wuhan Maritime Court that the debts arising out of operation of an individual-owned ship registered in the name of a company to acquire operation qualification should be born by the actual owner. It was incorrect that the court of first instance rejected defence of Xinghai Company on the ground that the judgment had nothing to do with this case; fourthly, it was well known that the company of which the ship was registered in the name could not control the external debts incurred in the course of the operation of the ship, if such debts should be born by the company, litigation exhaustion of the shipping company would increase and the shipping company was unable to bear, it was obviously unfair and. WANG Yongqiang was unable to repay the debt of the ship involved, it owed the bank loans of RMB6 million. WANG Yongqiang entrusted Xinghai Company to sell the ship, but the sale price was insufficient to repay the bank loan and the advanced sum about RMB1 million paid by Xinghai Company was not given back. The outstanding payment of the bunkers involved was not a maritime lien claims took priority and Xinghai Company was not entitled to take priority, so it should be repaid by Xinghai Company. Besides, the determination of the court of first instance on the lawyer’s fees of Xinghai Company had no merit, the amount recorded in the bill of sales submitted by Xinghai Company namely RMB50,000 was for two lawsuits, it could not be determined as the lawyer’s fees for this case. To sum up, Wing Wah Company requested the court to revoke the judgment of first instance and rejected all claims of Xinghai Company.

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Wing Wah Company responded as follows: 1. The court of first instance held that the evidence to prove the fact that M.V. FUYANG 88 of Xinghai Company purchased bunkers from it and defaulted in the price of bunkers fully conclusive. Firstly, the facts had been confirmed by the actual shipowner of M.V. FUYANG 88, WANG Yongqiang. M.V. FUYANG 88 was an individual-owned ship operated in the name of Xinghai Company, whose registered shipowner was Xinghai Company, it could restrict M.V. FUYANG 88 to be transferred for the purpose of claiming against WANG Yongqiang. Therefore, it was impossible for WANG Yongqiang to collude with Wing Wah Company and fabricate the facts; secondly, the invoice and the arrears confirmation letter were stamped with the ship’s seal of “Jiangxi Xinghai Shipping Co., Ltd. Fuyang 88” by the crew member of M.V. FUYANG 88, it suggested the ship had received the bunkers supplied by Wing Wah Company. The ship’s seal showed that the ship was an individual-owned ship operated in the name of Xinghai Company and represented Xinghai Company. If Xinghai Company challenged the authenticity of the ship’s seal, it should provide other seals used over the same period to compare; thirdly, WANG Zhenzhu, the crew member of M.V. FUYANG 88, on behalf of WANG Yongqiang signed in the bill of sales and the arrears confirmation letter, it could also prove the ship had received the bunkers supplied by Wing Wah Company; fourthly, the logbook, as the unilateral record of Xinghai Company, in the case where no other evidence could corroborate, was insufficient to prove the facts; 2. The sales of bunkers in this case was not smuggling, the seller was not entitled nor had the obligation to examine whether the buyer’s bunkers were used to smuggling. Firstly, according to the definition of smuggling in the Customs Law of the People’s Republic of China, smuggling referred to those who, in violation the Customs Law and other relevant laws or administrative regulations, committed any of the following acts by evading supervision and control of the Customs, taxes payable, or prohibited or restricted management over entry and exit. In this case, the sales of bunkers involved did not violate the provisions of the law, so it did not constitute the smuggling prescribed by the law of mainland China. Only in the case where the bunkers purchased by M.V. FUYANG 88 were not declared to the Customs when transported to the mainland China to evade the supervision and control of the Customs as well as the taxes payable, the action might constitute smuggling. But Xinghai Company failed to provide evidence to prove the ship committed the action above. If Xinghai Company had evidence to prove that M.V. FUYANG 88 transported the bunkers it purchased to the mainland China without declaration to the Customs to evade the supervision and control of the Customs and the taxes payable, it should surrender itself or report to the Customs; secondly, the Emergency Notice did not apply in Hong Kong, let alone it was not provided that a Hong Kong company, when supplying bunkers to a ship of mainland China navigating in wasters of Hong Kong, had the right or obligation to investigate whether the ship was engaged in

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operation of domestic voyages or international voyages. There was no provision in other laws of the mainland and Hong Kong; The registered owner of M.V. FUYANG 88 was Xinghai Company, so it should be responsible for credit and debit incurred in the process of the operation. The ship’s seal was in the name of Xinghai Company, it suggested the ship was owned by Xinghai Company. Wing Wah Company carried out a transaction out of the trust on the publicized content of the ship, the debt arising therefrom should be born by Xinghai Company; The so-called actual owner of M.V. FUYANG 88 was WANG Yongqiang, without registration in the ship registration authority, the ownership could not challenge a third party; Ship Entrusted Management and Loan Agreement between WANG Yongqiang and Xinghai Company was an internal management agree and was not binding on Wing Wah Company, the dispute arising out of the agreement did not fall into the scope of the trial for the case; Article 9 of the Guiding Opinions of the Supreme People’s Court on the Legal Issues of Dispute over Carriage of Goods by Waterway within China was aimed at providing the circumstance where the actual owner of an individual-owned ship registered in the name of a company to acquire operation qualification signed a transportation contract in his own name, this case was not dispute over transportation contract, therefore, the Guiding Opinions should not apply to this case; The relevant judgment, which was rendered by the Wuhan Maritime Court, provided by Xinghai Company could not support its claims, on the contrary, it could prove that the court’s opinions were in line with those of the court of first instance.

In the second instance, apart from that Xinghai Company raised objection to the fact that M.V. FUYANG 88 purchased bunkers from Wing Wah Company and Xinghai Company did not question other facts decided by the court of first instance. Accordingly, the court ascertains the facts to which the two parties raised no objection. After the second instance trial, Wing Wah Company supplemented to submit the following evidence to the court: 1. Receipt of notary fee, to prove that it paid notary fees in amount of HKD6,880 to conduct notarization for this action; 2. Operating license of Wing Wah Company from January 5, 2012 to January 4, 2013, to prove that it had the qualification to sell the bunkers involved; 3. Agency contract, to prove that its expenditure of lawyer’s fees for this case; 4. Bill and receipt of notary fee, to prove that it paid the notary fee of the first instance of this case in amount of HKD13,800. Hereto, upon cross-examination, Xinghai Company held that: there was no seal on evidence 1, the authenticity thereof could not be confirmed and Xinghai Company did not claim for the notary fee in the first trial; it had no objection to the authenticity of evidence 2,

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but even so the existence and its legality of the bunkering could not be ascertained; the authenticity of evidence 3 could not be ascertained and it was contradictory with the invoice of attorney’s fees submitted by Xinghai Company in the first instance; the opinion on evidence 4 was the same with that of evidence 1. The court holds that: in view that Wing Wah Company did not claim for notary fee in the first instance, the two receipts of the notary fee submitted by Wing Wah Company after the hearing of the second instance shall be deemed as irrelevant with the dispute of this case; as to the operating license having been notarized submitted by Wing Wah Company, Xinghai Company had no objection to the authenticity thereof, it could be the basis to ascertain the facts; Xinghai Company challenged the authenticity of the commission contract but it failed to provide sufficient evidence to refute, therefore, the court ascertains the authenticity of this evidence, but whether it can prove the fact to be proved shall be identified by other evidence. The court holds that Wing Wah Company is a legal person of Hong Kong, and the bunkering involved happened in waters of Hong Kong, so this case is the contract dispute with Hong Kong-related factors. According to the Article 19 of the Interpretations (I) of the Supreme People’s Court on the Application of the Law of the People’s Republic of China on the Application of Law to Foreign-related Civil Relations, the applicable of law for this case shall apply to the Law of the Application of Law to Foreign-related Civil Relations of the People’s Republic of China. In the case, the place of performance and the habitual residence of Wing Wah Company are both in Hong Kong, according to Article 41 of the Law of the Application of Law, the case shall apply to the laws which has the most significant relationship with the contract involved, namely the laws of Hong Kong. But due to the two parties failed to provide the laws of Hong Kong and the court cannot ascertain relevant laws, according to Article 10 Paragraph 1 of the Law of the Application of Law, the case shall apply to the laws of the People’s Republic of China. The disputes between Wing Wah Company and Xinghai Company and the analysis and ascertainment of the court are as follows: 1. As to whether the fact M.V. FUYANG 88 purchased bunkers from Wing Wah Company exists, the court holds the claim of Wing Wah Company that M.V. FUYANG 88 purchased bunkers from it could be proved by the bill of sales and the arrears confirmation letter, in addition, WANG Yongqiang, as the actual shipowner and the operator of M.V. FUYANG 88, confirmed the bunkering involved in his defence in the first instance and recognized the quantity and amount of the bunkers specified in the bill of sales, hence it is proper that the court of first instance ascertained the fact that M.V. FUYANG 88 purchased bunkers from Wing Wah Company indeed existed. Although Wing Wah Company denied the aforesaid fact for the reason that there was no bunkering record in the log book of M.V. FUYANG 88, absence of bunkering record on the log book cannot prove nonexistence of the bunkering. On the contrary, based on the record of the log book submitted by Xinghai Company in the first

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instance, on February 20, 2012, M.V. FUYANG 88 was at latitude 22°28′366”, east longitude 115°09′021”, which corresponded to the anchorage area of Lamma Island in Hong Kong where Wing Wah Company operated the bunkering business. Therefore, the allegation of Xinghai Company that the bunkering involved did not exist cannot stand, the court does not admit; 2. As to whether the contract of buying bunkers is null and void. The court holds that the bunkering happened in waters of Hong Kong, Wing Wah Company had already acquired the operating license issued by Hong Kong Maritime Department and acquired the operation qualification to operate the business of the bunkers involved, and the act of bunkering occurred within Wing Wah Company’s supply area designated by the Hong Kong Customs, Xinghai Company failed to provide evidence to prove Wing Wah Company’s bunkering violated the laws of Hong Kong. Xinghai Company also held, according to the Emergency Notice on Seriously Making a Good Job of Transport Ships Bunkering Overseas jointly issued by the Ministry of Transport and the General Customs Administration, the bunkering act involved was smuggling and the contract involved was null and void. But the Notice is administrative rules rather than laws and administrative regulations provided in Article 52 Paragraph 5of the Contract Law, hence it cannot serve as the basis to determine whether the civil contract is valid or not. In addition, the objects under regulation of the Notice are limited to the transport ships operating international, Hong Kong and Macao and domestic voyages in the territory of the People’s Republic of China, Wing Wah Company is not included. Even if, in accordance with the laws of mainland China, the act that Xinghai Company or WANG Yongqiang transported the bunkers to the mainland China without declaration to the Customs constitutes smuggling, the corresponding liability shall be born by Xinghai Company or WANG Yongqiang, no evidence can prove that Wing Wah Company jointly committed with clear knowledge, it still cannot be ascertained the act that Wing Wah Company sold bunkers to M.V. FUYANG 88 is smuggling, Xinghai Company after purchasing bunkers from Wing Wah Company, refused to pay for the price of bunkers for the reason that purchasing bunkers was smuggling, it is obviously malicious defence. Therefore, Xinghai Company’s claim that the bunkers purchase contract involved was null and void lacks factual and legal basis, the court does not admit; 3. As to whether Xinghai Company shall be jointly and severally liable to the debt of the case, the court holds that Xinghai Company, as the registered shipowner and the operator of this ship involved, shall be responsible for the debt occurred in the process of the ship management. Although Xinghai Company argued that WANG Yongqiang actually possessed, use and controlled the ship, and the relationship between WANG Yongqiang and it was the affiliated operation, which was an internal agreement between it and WANG Yongqiang and could not challenge a third party. Besides, the company in the name of which the ship is registered shall be responsible for the management and operation of the

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ship. Xinghai Company alleged it was not liable for the debt according to Article 9 of the Guiding Opinions of the Supreme People’s Court on the Legal Questions of Dispute over Domestic Water Transport within China, but the provision aims at regulating the circumstance where the actual owner of the ship signs a water transport contract in its own name, which shall not apply to the case. Xinghai Company argued that it was not jointly and severally liable for the debt according to (2013) Wu Hai Fa Shang Zi No.00377 Civil Judgment rendered by the Wuhan Maritime Court, but in light with the judgment, that case is dispute over the personal loan of WANG Yongqiang, and the facts thereof are different from the facts of this case. Therefore, it is proper that the court of first instance judged that Xinghai Company should bear joint and several liability for the debt involved; 4. As to whether the lawyer’s fee of Wing Wah Company for this case determined by the court of first instance are reasonable, the court holds that although the amount of RMB50,825 on the invoice of the lawyer’s fee provided by Wing Wah Company in the first instance is total sum of two lawsuits, the commission contract submitted in the second instance cannot reflect the specific costs for each case, under the condition that the specific costs for each case cannot be clearly distinguished, it is proper that the court of first instance decided the lawyer’s fee of this case should be half of the total sum in amount of RMB50,825 namely RMB25,412. What’s more, the amount is approximately equivalent to the charge of first instance and second instance provided in the Government-directed Price of Lawyers Service in Guangdong published by Guangdong Justice Department. Therefore, this ground of the appeal of Xinghai Company cannot stand and the court does not admit. In conclusion, the facts are clearly ascertained and the laws are correctly applied in the original judgment. According to Article 170 Paragraph 1 Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance in amount of RMB6,646, shall be paid by Jiangxi Xinghai Shipping Co., Ltd., court acceptance fee of first instance and other litigation fees shall be enforced in accordance with the original judgment. The judgment is final. Presiding Judge: LIN Zexin Acting Judge: HUANG Zhixin Acting Judge: BAI Yu May 23, 2014 Clerk: LIU Dingpeng

Dalian Maritime Court Civil Judgment WU Jie v. Dalian Keni Dredging Engineering Co., Ltd. et al. (2013) Da Hai Shi Chu Zi No. 86 Related Case(s) None. Cause of Action 200. Dispute over liability for personal injury at sea. Headnote Liability for personal injury apportioned between contractual employer and operator of worksite where Plaintiff was injured. Summary The Plaintiff in this case filed a claim to recover for damages for his injury that was caused by unsatisfactory conditions on the vessel he worked on while employed by the Defendants. The Defendants disputed liability between each other and to the Plaintiff. The court held that the first Defendant was 65% liable to the Plaintiff because, while there was no direct contractual relationship between the Plaintiff and the first Defendant, the first Defendant was responsible for the conditions of the workplace and failed to ensure that the conditions were satisfactory. The court held that the second Defendant was 30% liable for not properly instructing the Plaintiff, their employee, on safety instructions. The court also held the Plaintiff 5% liable for acting negligently as a trained and experienced employee. The first Defendant owed the Plaintiff RMB189,229.40. The second Defendant owed the Plaintiff RMB154,665.40.

Judgment The Plaintiff: WU Jie, Male, Born on July 5, 1972, Han, Living in Xiao Wulou Team, Wudian Village, Hewu Town, Xincai Country, Henan Agent ad litem: WANG Hongjun, lawyer of Liaoning Xinhua Law Firm. The Defendant: Dalian Keni Dredging Engineering Co., Ltd. Domicile: Room 302, F2 Zhongqin Building, HaiTian Road, DaLian Bonded Area. Legal representative: ZENG Hua, general manager. Agent ad litem: GUO Yukun, lawyer of Beijing Rongshang Law Firm Dalian Office. © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_55

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The Defendant: WANG Chun, Male, Born on February 19, 1974, Han, 57 New Street of Dalian Bay, Ganjingzi District, Dalian, Liaoning With respect to the case arising from dispute over personal injury at sea or sea waters connected with sea filed by the Plaintiff WU Jie (hereinafter referred to as “the Plaintiff”) against the Defendant Dalian Keni Dredging Engineering Co., Ltd. (hereinafter referred to as “the first Defendant”) and the Defendant WANG Chun hereinafter referred to as “the second Defendant”), after accepting this case, the court applied to summary procedure in accordance with law and held an open trial. WANG Hongjun, the agent ad litem of the Plaintiff GUO Yukun, the agent ad litem of the first Defendant and WANG Chun, the second Defendant attended the hearing. The subject case has now been concluded. The Plaintiff alleged that on March 3, 2013, the Plaintiff was employed by the first Defendant to work on M/V Keni1 owned by it. The Plaintiff was suffocated and severely injured due to causes of the vessel. The first Defendant took the Plaintiff to the hospital and paid a portion of the medical expenses but did not pay other compensation to the Plaintiff. Because the Plaintiff was employed by the second Defendant according to the conclusion of the survey conducted by Dalian Maritime Safety Administration the second Defendant should be liable to compensate the Plaintiff. The Plaintiff filed an action to request the court to judge that the two Defendants should indemnify the Plaintiff RMB477,812.83 as compensation for personal injury jointly and severally. The first Defendant argued that it did not agree with the claim of the Plaintiff. On February 27, 2013, the first Defendant came to an agreement with the second Defendant that the second Defendant contracted the work of hold garbage cleaning, the second Defendant independently completed the work hold by his own equipment, tools, technical skills, labor and work arrangements, and the second Defendant settled related fees with the first Defendant. The Plaintiff was hired by the second Defendant, the specific work was arranged by the second Defendant and the remuneration was paid by the second Defendant. The second Defendant control and manage the Plaintiff. The rules and regulations formulated by the first Defendant were not applicable to the Plaintiff and there was no employment relationship between the Plaintiff and the first Defendant. The cleaning work which the Plaintiff was engaged in was not a part of the first Defendant's business and hold it did not require qualification. The first Defendant advanced the medical expenses in amount of RMB150,212.6 for the Plaintiff. The Plaintiff, as an adult and a chief engineer who had cleaned up three holds and previously done hold clean-up work, was familiar with hold clean-up work, so it had major fault at the accident. The second Defendant argued that it did not employ the Plaintiff, so it should not take liability for compensation, and it had paid the Plaintiff RMB15,000 as medical expenses. After trial, the court finds out that on February 27, 2013, the first Defendant and second Defendant reached a verbal agreement that the hold cleaning work on M/V Keni1 was contracted by the second Defendant. The second Defendant hired the Plaintiff, YANG Zhiguo and others to carry out this operation. On March 3, 2013,

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when the Plaintiff was cleaning the left rear air tank air tank of M/V Keni1, the Plaintiff slipped into a coma for lack of oxygen because the Plaintiff did not ventilate or conduct any test of oxygen and explosion after opening the air tank in which the air circulation was restricted and the space was anoxic due to hold’s long-time closure. On the same day, the Plaintiff was taken to the First Affiliated Hospital of Dalian Medical University and was discharged on March 21, 2013. a total medical expenses in sum of RMB78,619.33 incurred during the period, the first Defendant paid RMB74,800, the Plaintiff paid RMB1,819.33 and the second Defendant paid RMB2,000. Then the Plaintiff entered Dalian Boshui Corporation Hospital for rehabilitation treatment for 214 days. The Plaintiff paid RMB10,000 for medical expenses. The first Defendant paid the Plaintiff RMB75,412.6 for medical expenses. The Plaintiff was accompanied by his wife on duration of hospital stay. In 2014, the Mental Illness Judicial Appraisal Department of Dalian Seventh Hospital issued Judicial Appraisal Submissions, stating that the Plaintiff was suffering mental disorders due to the acute hypoxic encephalopathy, and the accident in this case was a direct pathogenic factor. Liaoning Academe Judicial Appraisal Center issued Judicial Appraisal Submissions on May 6, 2014, stating it accepted the commission on April 25, 2014 to identify the level of disability. The conclusion was that the injury the Plaintiff suffered from the accident in this case was grade 8 in disability degree. The vacation could be taken since the injury occurred to one day before this identification came out. A person could be set during hospitalization after the injury. Nutrition fees could be given during hospitalization after the injury. The medical advice and the usages of drugs on the Plaintiff on duration of hospitalization after injury were rational. The follow-up treatment would not be under consideration because of the disability appraisal. If there was a change in the future, the matters related to identification could be discussed separately. The Plaintiff paid the appraisal fees in amount of RMB7,634. Dalian Maritime Safety Administration issued Proposals on Safety Management of Maritime Accidents to the first Defendant, stating that on February 27, 2013, the first Defendant reached a verbal agreement with WANG Chun, which stipulated that Wang contracted the hold cleaning work of M/V Keni1. Around 0800, March 3, when YANG Zhiguo and WU Jie, workers hired by WANG Chun, was cleaning the left rear air tank of M/V Keni1, the accident occurred, resulting in the death of YANG Zhiguo and the coma of WU Jie. After investigation, Dalian Maritime Safety Administration found that the left rear air tank of M/V Keni1 was lack of oxygen because of the poor air circulation due to the hold had been closed for a long time. After the air tank were opened, the cleaning workers blindly entered into the enclosed workplaces without ventilation as well as oxygen and explosion test. Eventually, suffocation for lack of oxygen leaded to coma and death. It was also found in the investigation that Dalian Keni Dredging Engineering Co., Ltd. lacked work regulations for external personnel and failed to take effective measures to supervise and manage to external personnel to operate safely.

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WU Dawei, son of the Plaintiff was born on May 15, 2000; WU Xiangxin, father of the Plaintiff was born on November 7, 1934 and lives in Wudian Village, Wu Town of Xincai Country; WANG Xiaofang, mother of the Plaintiff, was born on July 8, 1936 and lived in Wudian Village, Wu Town of Xincai Country; WU Xiangxin and WANG Xiaofang had five children. Dalian Bay Primary School of Ganjingzi District, Dalian City issued a certificate, stating that WU Dawei studied in this primary school since September 1, 2008. The Dependents Commission of Dalian Marine Fisheries Corporation of Liaoning issued Certificate of Residence, stating that the Plaintiff lived in No.446 Zhenzi School, Dalian Bay, Dalian City since February 2012 to July 2014. It is also found out that the urban per capita disposable income of Dalian in 2013 was RMB30,283, the urban per capital annual expenditure on consumption in 2013 was RMB22,516, the rural per capita annual living expenditure in 2013 was RMB8871, and the workers’ average monthly wages in 2013 was RMB4,870. The facts above can be proved by inquiry record of the police, medical certificate issued by the First Affiliated Hospital of Dalian Medical University, discharge record, confirmation of hospitalization costs, receipts of medical expenses, receipts of Dalian Boshui Corporation Hospital, receipt of Dalian Liaoyu Hospital, proof of enrollment, proofs of the villagers committee and police station, Certificate of Residence proved by village committee and the police and issued by the Dependents Family Commission receipt of appraisal fee, two Judicial Appraisal Submissions, household register, marine report, proposals on safety management of maritime accidents, sound recording, (2014) Da Hai Shi Chu Zi No.43 Civil Judgment and statements in the trial, and upon cross-examination, the court confirms. The court holds that the second Defendant contracted the work to clean up the ship’s holds from the first Defendant, and the first Defendant hired the Plaintiff to complete the specific clean-up work; the first Defendant has no obligation to pay remuneration to the Plaintiff, so a contractual relationship for work is established between the first Defendant and second, and a contractual relationship of employment is established between the Plaintiff and the second Defendant, but there is no employment relationship established between the Plaintiff and the first Defendant. The left rear air tank of M/V Keni1 was lack of oxygen because of the poor air circulation due to hold being closed for a long time. Since the first Defendant assigned the work to the second Defendant it was responsible to supervise and manage the second Defendant and its employees, set and provide necessary safety regulations, give safety instructions and provide a safe working environment, but it failed to perform its obligations, so it was at fault for the plaintiff’s injury in the process of cleaning up the hold. The second Defendant, as the employer of the Plaintiff, should supervise and manage the Plaintiff and give safety instructions when carrying out employment activities, but he failed to complete its obligations either, so it was also at fault for the Plaintiff’s injury in the process of cleaning up the hold. The Plaintiff, as a worker who was engaged in cleaning up holds, blindly entered into the enclosed workplaces without ventilation as well as test of oxygen

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and explosion after opening the air tank, eventually slipped into coma for lack of oxygen, so he was also at fault for his injury. The faults of the two Defendants and the Plaintiff together caused the Plaintiff’s injury. According to Article 6 Paragraph 1 of the Tort Liability Law of the People’s Republic of China, the two Defendants shall be subject to the tort liability; according to Article 26 of the Tort Liability Law of the People’s Republic of China, where the victim of a tort is also at fault as to the occurrence of the harm, the liability of the tortfeasor may be mitigated, the two Defendants shall bear 95% of the liability for the personal injury suffered by the Plaintiff; according to Article 12 of the Tort Liability Law of the People’s Republic of China, where two or more person commit torts respectively, causing the same harm, if the seriousness of liability of each tortfeasor can be determined, the tortfeasors shall assume corresponding liabilities respectively, so the first Defendant shall bear 65% of the liability for the Plaintiff's personal injury and the second Defendant shall bear 30% of the liability (adding up to 95% of the total liability). According to Article 16 of the Tort Liability Law, the amount of compensation for personal injury of the plaintiff was as follows: medical expenses in sum of RMB164,031.93 (75,412.6 + 10,000 + 78,619.33)], food subsidies in sum ofRMB11,650 [(214 + 19)  50], nutrition fees in sum of RMB11,650 [(214 + 19)  50], nursing fees in sum of RMB27,960 [(214 + 19)  120], compensation for the infliction of mental distress in sum of RMB30,000. The Plaintiff provided the medical record of JIANG Xuehua to prove WU Dawei’s birth date was May 14, 2002. Since the Plaintiff’s wife was JIANG Xiaohua, while the Plaintiff could not prove JIANG Xuehua and JIANG Xiaohua was the same person, the medical record would not be admitted. WU Dawei’s birth date should be determined in accordance with the household register. Certificate of Enrolment and Certificate of Residence issued by the Family Commission of Dalian Marine Fisheries Corporation of Liaoning of WU Dawei can comprehensively prove the habitual residence of the Plaintiff is a town in Dalian and the main source of income is city. So the plaintiff's disability compensation shall be calculated in accordance with the urban per capita disposable income, namely RMB207,285 [30,283  20  30% + 22,516  (18–12)  30%  2 + 8,871  5  30%  5 2]. Since the Plaintiffs could neither prove that he had a fixed income, nor prove the average income of the last three years, its lost wages shall be calculated with reference to the average wages of workers in Dalian in 2013, and the amount is RMB69,641 (4,568  14 + 4,568  30  9). In summary, the total amount of compensation for personal injury of the Plaintiff is RMB522,217.93. The first Defendant shall pay the Plaintiff RMB339,442 (522,217.93  65%), since it has already paid RMB150,212.6 (74,800 + 75,412.6), it still needs to pay RMB189,229.4. The second Defendant shall pay the Plaintiff RMB156,665.4 (522,217.93  30%). It claimed that it had paid the Plaintiff RMB15,000 for medical expenses, but because the hospital receipt vouchers were copies and it is not noted that the payer is the second Defendant, the court only ascertains RMB2,000 recognized by the Plaintiff, the first Defendant and the second Defendant but not the other RMB13,000. So the second Defendant shall pay RMB154,665.4.

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The travel expenses in amount of RMB2,314 as requested by the Plaintiff resulted from visit of the Plaintiff’s relatives, the court will not ascertain, because the Plaintiff was nursed by his wife on duration of hospital stay, and the vouchers of travel expenses provided by the Plaintiff were not expenses that actually incurred from medical treatment or transfer to other hospital cost by the Plaintiff or the necessary nursing person. The Plaintiff paid the medical fees for examination in amount of RMB399.5 in the orthopedics department of Dalian Liaoyu Hospital on December 19, 2013. Because the Plaintiff could not prove its relevancy to the accident in this case, the court disaffirms that fees. The other claims as requested by the Plaintiff have no factual and legal basis, and shall be disaffirmed. To sum up, in accordance with Article 6 Paragraph 1, Article 12, Article 16, Article 26 of the Tort Liability Law of the People’s Republic of China, the judgment is as follows: 1. The Defendant, Dalian Keni Dredging Engineering Co., Ltd., shall compensate the Plaintiff for personal injury in amount of RMB189,229.4 in a lump sum within 10 days after this judgment comes into effect; 2. The Defendant, WANG Chun, shall indemnify the Plaintiff a one-off compensation for personal injury in sum of RMB154,665.4 within 10 days after this judgment comes into effect; and 3. Reject other claims of the Plaintiff. Court acceptance fee in amount of RMB8,467, expertise fee in amount of RMB7,634 (repaid by the Plaintiff), the Plaintiff shall bear RMB4,512.7, the first Defendant shall bear RMB6,376.5 and the second Defendant shall bear RMB5,211.8. The fees which are born by the two Defendants shall be paid to the Plaintiff together with the payment ascertained above. For failure to fulfill the obligation of payment within the period designated by this judgment, interest on the debt for the delayed period shall be doubled, according to Article 229 of the Civil Procedure Law of the People’s Republic of China. In case of dissatisfaction with this judgment, the Plaintiff and the two Defendants may within 15 days upon the service of this judgment, submit a statement of appeal to the court, together with 8 copies. The court of second instance shall be the Liaoning High People’s Court. Judge: WU Hanshuang October 14, 2014 Clerk: ZHANG Lei

Xiamen Maritime Court Civil Judgment Xiamen Hongliang Import and Export Co., Ltd. v. Xiamen Hongbase International Freight Forwarding Co., Ltd. et al. (2013) Xia Hai Fa Shang Chu Zi No. 178 Related Case(s) None. Cause of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote Unsuccessful action by the Plaintiff exporter against the Defendants, freight forwarder and carrier, for changing name of shipper on bill of lading without permission, as court held that there was no contract of carriage between the Plaintiff and Defendants. Summary The Plaintiff, an exporter of goods, argued that the Defendants, a freight forwarder and the agent for the actual carrier, had caused it loss by changing the name of the shipper on the bill of lading issued by the Defendants for goods shipped by the Plaintiff, without authorization by the Plaintiff. The court held that the Plaintiff’s claims should be rejected, as the evidence suggested that there was no contract of carriage between the Plaintiff and the Defendants, who were acting on behalf of the Plaintiff’s buyer, the importer of the goods.

Judgment The Plaintiff: Xiamen Hongliang Import and Export Co., Ltd. Domicile: Room 2301, No.100, Tiyu Road, Siming District, Xiamen, Fujian. Legal representative: ZHANG Huan, general manager. Agent ad litem: RUAN Jiaming, lawyer of Beijing Dentons (Xiamen) Law Firm. Agent ad litem: HU Wentao, staff of the company.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_56

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The Defendant: Xiamen Hongbase International Freight Forwarding Co., Ltd. Domicile: Room 304, No.3, Haitian Road, Huli District, Xiameng, Fujian. Legal representative: HUANG Qingqian, general manager. Agent ad litem: QU Xiaodong, lawyer of Fujian Mingjia Law Firm. Agent ad litem: ZHANG Hongda, staff of the company. The Defendant: Shenzhen Yonghang International Shipping Agency Co., Ltd. Xiamen Branch Domicile: Unit F, Floor 25th, Xiamen International Bank Building, No.8 Lujiangdao, Siming District, Xiamen, Fujian. Person in charge: CAI Minfeng, deputy manager. Agent ad litem: LI Rongcun, lawyer of Guangdong WANG JING & Co. (Xiamen). Agent ad litem: LUO Mingqin, lawyer of Guangdong WANG JING & Co. (Xiamen). The Third Party: Qingdao Jingfurui Import and Export Co., Ltd. Domicile: Room 0218, No.38, Beijing Road, Shinan District, Qingdao, Shandong. Agent ad litem: GONG Xiaohong, lawyer of Fujian Guande Law Firm. Agent ad litem: LIN Jiaojiao, lawyer of Fujian Guande Law Firm. With respect to the case arising from a dispute over contract of carriage of goods by sea between the Plaintiff, Xiamen Hongliang Import & Export Co., Ltd. (hereinafter referred to as “Hongliang”), and the Defendants, Xiamen Hongbase International Freight Forwarding Co., Ltd. (hereinafter referred to as “Hongbase”), Shenzhen Yonghang International Shipping Agency Co., Ltd. Xiamen Branch (hereinafter referred to as “Yonghang Xiamen”), the Plaintiff filed an action before the court on April 15, 2013. The court formed a collegiate panel according to law after accepting the case and notified Qingdao Jingfurui Import & Export Co., Ltd. (hereinafter referred to as “Jingfurui”) for participation in the lawsuit as the Third Party on May 24, 2013. During the procedure, the parties applied for two months of reconciliation outside of the trial. The court held four hearings in public on July 2, 2013, September 9, 2013, October 25, 2013, and November 25, 2013. Agents ad litem of the Plaintiff, RUAN Jiaming and HU Wentao (the first and second hearings), agents ad litem of the Defendant Hongbase, QU Xiaodong and ZHANG Hongda (the first, second, and third hearings), agents ad litem of the Defendant Yonghang Xiamen, LI Rongxun (the first, second and third hearings) and LUO Mingqin (the first, second and third hearings), agents ad litem of the Third Party Jingfurui, GONG Xiaohang (the first hearing) and LIN Jiaojiao, appeared in court to attend the hearings. The case has now been concluded. The Plaintiff Hongliang claimed that on November 24, 2012, the Plaintiff entrusted Hongbase to ship 5 containers of mushrooms to Hamburg, Germany, and Yonghang Xiamen issued a bill of lading. The Plaintiff declared to Xiamen Customs to be the consignor, and Yonghang Xiamen should issue the bill of lading

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for which the Plaintiff was the consignor. However, if, in the event that the Plaintiff did not receive the letter of guarantee from the Plaintiff, the Plaintiff would change the bill of lading according to the instructions of Hongbase. However, in this case, the plaintiff claimed that the consignor failed to control the bill of lading, and the final payment of USD32,392 was not received. The Plaintiff pleaded to the court that the two Defendants should be jointly and severally liable to pay the Plaintiff the payment of goods (USD32,392). The Defendant Hongbase argued that it never accepted the Plaintiff’s entrusted carriage for the goods involved, and the Plaintiff sued for a dispute over the contract of carriage of goods by sea, which had no legal basis. This case involved a bill of lading and a correction to the letter of guarantee. Furthermore, the seal was suspected of being counterfeited, which was a violation of criminal law. The trial of this case should be stopped, and a trial should be conducted in regard to the forged seal. The Defendant Yonghang Xiamen argued that, firstly, the Plaintiff was not the shipper of the contract of carriage of goods by sea, and the domestic trade contract between the Plaintiff and the Third Party did not need to be based on international cargo transportation. From the Plaintiff’s contract with the Third Party, 30% of the payment was required in advance and 70% within 10 days after seeing the B/L. Moreover, the Third Party was booked to Hongbase instead of the Plaintiff. The Plaintiff only delivered the goods on behalf of the Third Party, not the shipper, and it was not entitled to claim against the carrier and the carrier’s agent under the maritime carriage contract. Secondly, the Defendant was only the carrier’s agent, not a party to the maritime carriage contract, and was not liable for disputes arising under the contract. Thirdly, the act of acting as an agent to change the bill of lading on behalf of the carrier was based on Bill of Lading Correction Letter of Guarantee issued by the Plaintiff, so the Defendant should not be liable. Fourthly, the change to the bill of lading did not cause the loss claimed by the Plaintiff. The quality of the goods and the unpaid balance of the goods between the Plaintiff and the Third Party Jingfurui had been negotiated and resolved, and the Plaintiff had no losses. Fifthly, even for unpaid purchases, it was only USD11,300, instead of the claims of the Plaintiff. Therefore, the Defendant pleaded that the court reject the claims of the Plaintiff. The Third Party Jingfurui argued that, firstly, according to the principle of ignorance in civil lawsuits, the Plaintiff demanded that Hongbase and Yonghang Xiamen should both bear responsibility, so the Third Party was not responsible. Secondly, the Third Party’s trade contract with the Plaintiff was FOB, if the goods passed the ship’s rail, the ownership would be transferred to the Third Party. Third, according to the purchases and sales contract, the customs declaration form raised the price of the exported goods and was suspected of a fraudulent tax refund. Fourth, from the Plaintiff’s contract with the Third Party, 30% of the payment was required in advance and 70% within 10 days after seeing the B/L. Because the customs declaration was different from the consignor, the Plaintiff needed to provide Bill of Lading Correction Letter of Guarantee to have a formal bill of lading.

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The Third Party received the copy of the Plaintiff’s bill of lading before continuing to pay for the goods. There were still outstanding balances. In order to support the claims, the Plaintiff Hongliang submitted the following evidence: evidence 1, customs declaration and outbound cargo clearance form, to prove that the Plaintiff exported 5 containers of mushrooms to Hamburg, Germany, with a cargo export value of USD150,500; evidence 2, list of arrangement of carriage, to prove that the Plaintiff entered Haicang Terminal; evidence 3, the expense confirmation and transfer slip, to prove that Hongbase exported the Plaintiff’s 5 containers of mushrooms as the agent; evidence 4, mails, to prove that Hongbase required the Plaintiff to issue a bill of lading letter of guarantee to change the consignor, but the Plaintiff rejected and stated that the payment had not been received; evidence 5, trend of the five containers, to prove that the Plaintiff’s five containers at the destination port had been taken away; evidence 6, customer payment transfer form, to prove that the Plaintiff also had outstanding payment of USD32,392; evidence 7, two records of QQ, the first one was to prove that the Third Party knew that the Plaintiff exported 17,500 container of goods, and the Plaintiff did not have the problem of deceiving the Third Party to export the goods, and the second one was to prove that on December 19, 2012, the Plaintiff and the Third Party were still talking about the payment of the arrears and the delivery of the bill of lading. The Plaintiff did not issue a letter of guarantee to the Third Party, which was obviously a forgery of the Third Party. In order to support the defense, the Defendant Hongbase submitted the following evidence: evidence 1, a detailed list of bookings, to prove that Hongbase and Jingfurui had a contractual relationship for carriage of goods by sea; evidence 2, marine freight invoices and a China Merchants Bank statement, and certificate, to prove that Qingdao Ruizhihang International Logistics Co., Ltd. paid the freight charges of the disputed goods on behalf of Jingfurui; evidence 3, freight and port charges invoices, Bank of China remittance application, and China Merchants Bank payment statement, to prove that Hongbase paid Xiamen Hansiwei International Freight Forwarding Co., Ltd. for the freight and port charges; evidence 4, business license, freight and port charges invoices of Xiamen Hansiwei International Freight Forwarding Co., Ltd., to prove that Xiamen Hansiwei International Freight Forwarding Co., Ltd. paid for sea freight and port charges for the disputed goods of United Express Logistics (Xiamen) Co., Ltd.; evidence 5, freight and port charges invoices, to prove that United Express Logistics (Xiamen) Co., Ltd. paid the freight and port charges for the disputed goods of Sinotrans Fujian Xiamen Branch; evidence 6, statement, business license, product purchases and sales contract, and electronic receipt, to prove that Hongbase accepted the entrustment of Jingfurui for the transportation of the disputed goods. Jingfurui and the Plaintiff had a dispute over the quality of the contract for the sale of the goods; evidence 7, B/L correction letter of guarantee and statement, to prove that after the letter of guarantee for the correction of the bill of lading of the dispute was provided by Jingfurui, Hongbase handled it according to the instructions; supplementary evidence, evidence 1, Everbright Bank electronic receipt invoice, to prove that Qingdao Ruizhihang International Logistics Co., Ltd. paid port charges on behalf of Jingfurui; evidence

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2, detail list of payment, China Merchants Bank statement, to prove that Hongbase was entrusted by Jingfurui to collect money from the Plaintiff. In order to support the defense, the Defendant Yonghang Xiamen submitted the following evidence: evidence 1, bill of lading, to prove that Yonghang Xiamen issued the bill of lading as the carrier’s agent; evidence 2, business license, to prove that Yonghang Xiamen’s business scope was limited to international shipping agency business, it was impossible to issue a bill of lading for the cargo involved as a carrier; evidence 3, bill of lading correction letter of guarantee, to prove that Yonghang Xiamen changed the bill of lading in response to the proactive request of the Plaintiff and the booker, United Express Logistics (Xiamen) Co., Ltd., and any loss caused thereby should be born by the Plaintiff; evidence 4, electronic booking order, evidence 5, taking bill of lading letter of guarantee, to prove that it was United Express Logistics (Xiamen) Co., Ltd. that contacted Yonghang Xiamen for booking and receiving the bill of lading, and Yonghang Xiamen had no direct business relationship with the Plaintiff; supplementary evidence 1 bill of lading Chinese translation; supplementary evidence 2 D/R, to prove that the delivery of original bill of lading was correct, it should not be liable for the loss of control of B/L. In order to support the defense, the Third Party submitted the following evidence: Evidence 1, product purchases and sales contract, to prove that the Plaintiff and the Defendant signed a product purchases and sales contract. The total contract price was USD 33,200, and the quantity was 18,000 containers. Evidence 2, outbound cargo clearance form, to prove that the Plaintiff only shipped 17,500 containers; evidence 3, bill of lading correction letter of guarantee, to prove that the Plaintiff could only issue a formal bill of lading to the third party by providing a bill of lading correction letter of guarantee, the Third Party paid the Plaintiff in accordance with the purchases and sales contract; therefore, the bill of lading correction letter of guarantee was issued by the Plaintiff itself, and the Third Party did not need perpetrate fraud; evidence 4, quality inspection report issued by overseas inspection authority, to prove that there was a quality problem with the goods provided by the Plaintiff, and the Third Party should not pay the remaining payment; evidence 5, certificate of origin, to prove that the Plaintiff engraved the certificate in private and did not file it to the Public Security Bureau; evidence 6, registration of change of business name, to prove that the Plaintiff changed the company name of Xiamen Hongliang Import and Export Co., Ltd. (different Chinese characters) to Xiamen Hongliang Import and Export Co., Ltd. in March 2011. Regarding the evidence submitted by the Plaintiff, Hongbase cross-examined that: evidence 1 customs declaration, no objection to authenticity, but it had objection to the price of goods recorded, and the outbound cargo clearance form had no original copy, so the authenticity could not be recognized; evidence 2, list of arrangement of carriage had no original copy, so the authenticity could not be recognized; evidence 3 and evidence 4, no objection to authenticity; evidence 5, no original copy, so the authenticity could not be recognized; evidence 6, no objection to authenticity, but it could not prove the payment of goods received but not

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payment of goods non-received; supplementary evidence 1 and 2, the authenticity could not be recognized. Yonghang Xiamen cross-examined that: evidence 1, no objection, but the price of goods should be confirmed by the purchases and sales contract between the Plaintiff and the Third Party; evidence 2, no original copy, so the authenticity could not be recognized; evidence 3, no objection to authenticity; evidence 4, the authenticity could not be recognized, but it respected the opinions of the parties of the mails; evidence 5, no objection to authenticity, the carrier released the goods by bill of lading at the port of destination in accordance with normal procedures; evidence 6, no objection to authenticity, but it could not prove the payment of goods non-received; supplementary evidence 1 and 2, the authenticity could not be recognized. The cross-examination opinions of the Third Party to evidence 1–6 were the same as those of Yonghang Xiamen, and it also reminded the court to note that the price of the customs declaration was not the same as the price of the purchases and sales contract. It recognized the authenticity of supplementary evidence 1 and 2, but the balance of goods was only about USD11,000. Regarding the evidence submitted by the Defendant Hongbase, the Plaintiff cross-examined that: it had no objection to the authenticity of evidence 1, the ownership of goods was with the Plaintiff, so the Third Party had no right to book anything on its own; it recognized the authenticity of evidence 2, 3, 4, and 5, but stated that there was no relevancy to those items of evidence; it had objection to evidence 6, no objection to the business license and to the product purchases and sales contract, but the contract was not actually performed; it had no objection to the authenticity of electronic receipt; it stated that the authenticity of evidence 7 could not be recognized, and the letter of guarantee was not issued by the Plaintiff; it stated that the authenticity of supplementary evidence 1 and 2 could be recognized, but it had objection to the object of proof. Yonghang Xiamen recognized the authenticity of the above evidence except supplementary evidence 2. The Third Part had no objection to the above evidence. Regarding the evidence submitted by the Defendant Yonghang Xiamen, the Plaintiff cross-examined that: it recognized the authenticity of evidence 1, but the B/L was issued by Yonghang Xiamen, as it was the carrier; it recognized the authenticity of evidence 2; it had objection to evidence 3, the Plaintiff did not issue the letter of guarantee, the seal on the L/G was not the Plaintiff’s; it did not recognize the authenticity, legality, or relevancy of evidence 4 and 5; it had no objection to the authenticity of supplementary evidence 1 and 2. The Defendant Hongbase and the Third Party had no objection to evidence 1–5, and they recognized the authenticity of supplementary evidence 1 and 2, the Third Party held that the B/L did not lose control. Regarding the evidence submitted by the Third Party, the Plaintiff cross-examined that: it recognized the authenticity of evidence 1, but the contract was not performed, other clauses of the contract were changed except 5 containers; no objection to the authenticity of evidence 2; it had objection to the authenticity of evidence 3; the authenticity of evidence 4 could not be recognized as there was no relevancy; it recognized the authenticity of evidence 5 and 6. The Defendant Hongbase had no objection to the above evidence. The Defendant Yonghang

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Xiamen had no objection to the above evidence but held that evidence 5 and 6 had no relevancy. After the first hearing, the Plaintiff applied to the court to investigate the electronic carriage arrangement from China Ocean Shipping Agency Xiamen to determine that the consignor was in fact the Plaintiff. The Third Party applied to the court for all of the customs declaration materials to determine the Plaintiff’s declaration price and basis. The court investigated the relevant materials according to the law, but the goods were conducted by China Ocean Shipping Agency Fujian, so the electronic carriage arrangement was investigated from that company. The Plaintiff, the Defendants, and the Third Party, had no objection to the authenticity of evidence. The Third Party held that there was always only one contract between it and the Plaintiff. The contract between the Plaintiff and the German buyer attached to the declaration was produced by the Plaintiff itself. The two Defendants cross-examined that the contract attached to the declaration form was made purely for the purpose of customs declaration. The actual sales contract should be determined by the Plaintiff’s contract with the Third Party. After the third hearing, at the request of the court, the Third Party submitted a scanned copy of its sales contract with the German buyer, and neither the Defendants nor the Plaintiff could recognize the authenticity. After the third hearing, Hongbase submitted to the court the evidence from February 27, 2013, to prove that the Plaintiff did not request a bill of lading from it for the first time until that day. The Plaintiff cross-examined that since Hongbase changed the bill of lading, a dispute occurred during its on-site negotiation, and it also called the police on the same day. The Plaintiff held that, the bill of lading was requested from Hongbase before, but it was only urged by telephone. The Plaintiff did not prove this. After cross-examination, the court confirms and analyzes the above evidence as follows: the parties had no objection to the authenticity of evidence 1, 3, and 6 of the Plaintiff, so the court confirms the evidence; evidence 2 of the Plaintiff was the same as the information in the electronic arrangement of carriage from China Ocean Shipping Agency Fujian, so the court confirms it, whereas Hongbase recognized the authenticity of evidence 4 emails between the Plaintiff and the Defendant, other parties did not recognize the evidence by the reason that there was no original, but the court did not accept the opinion. For the same reasons, the party of records of QQ in supplementary evidence 1 and 2, namely the Third Party, recognized the authenticity, so the court confirms the authenticity; evidence 5 of the Plaintiff will be confirmed and combined with other evidence by the court. The parties had no objection to the authenticity of evidence 1, 2, 3, 4, 5 and product purchases and sales contract in evidence 6 and supplementary evidence 1, so the court confirms the evidence. Other effect of proof will be confirmed by the court combined with other evidence. The parties had no objection to the authenticity of evidence 1, 2, and supplementary evidence 1 and 2 of the Defendant Yonghang Xiamen, so the court confirms the evidence. Other effect of proof will be confirmed by the court combined with other evidence. The parties had no objection to the authenticity of evidence 1, 2, 3, 5 and 6 of the Third Party, so the court confirms the evidence. Evidence 4 quality inspection report was issued by overseas inspection authority, there was no original copy, and there was no translation, notarization, or

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confirmation. The court does not confirm the evidence according to Article 11 of the Several Provisions of the Supreme People’s Court on Evidence in Civil Procedure. the court confirms the authenticity of the two evidence investigated by the court by the application of the parties. According to the analyses and confirmation of the above evidence, combined with the hearings, the court finds out that: On October 9, 2012, the Third Party, as the buyer, and Hongliang, as the seller, entered into a product purchase and sale contract. The contract name was canned mushrooms, size 12  400G, quantity 18,000 boxes, unit price FOB Qingdao USD7.40 per box, total amount USD 133,200; delivery period was before November 10, 2012 (delivery within three weeks of receiving the prepayment, which was based on the date of receipt of the prepayment); the port of Qingdao; the quality requirements must meet the national export standards; objection of quality and quantity/weight was stipulated in the claim clause “if the buyer finds that the quality and/or quantity/weight of the goods does not conform to the contract stipulations after the goods arrive at the port of destination, the buyer shall be subject to the inspection certificate issued by the agreed inspection agency challenges the seller …” It was stipulated in the settlement method of the goods that 30% was to be paid in advance, and 70% was to be paid within ten days from seeing the copy of the bill of lading. The Plaintiff claimed that the contract was changed, and the amount, port of shipment, number of pieces, and place of delivery were also changed. Except for five containers, the entire contract was changed during the performance. The port of departure became Xiamen and the number of exported mushrooms became 17,500 boxes. USD8.6 per box, in aggregate amount of USD150,500. The Plaintiff also claimed that it did not sign a new purchase and sale contract with the Third Party. The contract changes were all through QQ (instant messaging), but the Plaintiff failed to submit the relevant evidence of QQ (instant messages). The Third Party held that the change was only a departure port for Xiamen, the actual loading of the goods was reduced due to restrictions on shipping conditions, but the remaining contract terms, such as the unit price of the goods and payment methods, were not changed. On December 23, 2012, the Plaintiff entrusted Xiamen Tengde Logistics Co., Ltd. to arrange for the trailer to transport the exported mushrooms to the yard to deliver to the ship’s agent, Sinotrans Fujian Xiamen Branch. The Plaintiff entrusted Xiamen Kaiersi Customs Declaration Co., Ltd. to declare to Xiamen Customs. The customs declaration recorded that: the export port was Xiamen Haicang Port, the consignor Hongliang, the waterway transportation means, “HAN JIN SOOHO / 0004W”, the bill of lading number EGLV146200622808, the settlement telegraphic transfer method, arrived in Germany, port in order Hamburg, the transaction method FOB, canned mushrooms, 17,500 boxes, the final destination country unit price was USD8.6, the total price was USD150,500, customs declaration form and five containers. The accompanying documents of the customs declaration form included invoices, packing lists, contracts, and export cargo customs clearance stamped by PRC Zhangzhou Entry-Exit Inspection Seal. Among them, the customer recorded on the invoice and packing list issued by the Plaintiff was

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OTTO FRANCK IMPORT KG, and the unit price of the invoice was FOB Xiamen USD8.6, and the total price was USD150,500. The accompanying contract recorded the Plaintiff (seller) and OTTO FRANCK IMPORT KG (buyer). The goods were 17,500 boxes of canned mushrooms. The unit price and total price record were consistent with the invoice. The contract was signed on November 12, 2012. The place where the contract was signed was Xiamen. The buyer’s signature office was not stamped; only Sunny was signed. At hearing, the Plaintiff stated that it had not directly signed the sales contract with OTTO FRANCK IMPORT KG. The contract was sent to the Plaintiff by the Third Party, but it was impossible to prove the mailing situation, and the Third Party emphasized that it had only a domestic trade contract with the Plaintiff. The contract was produced by the Plaintiff. The international shipping of the above five container cargoes was arranged by Hongbase, which was first arranged to Xiamen Hansiwei International Cargo Agency Co., Ltd., then to United Express Logistics (Xiamen) Co., Ltd., who then contacted the shipping agent, Sinotrans Fujian Xiamen Branch, since then, Yonghang Xiamen as the agent of the actual carrier Evergreen Shipping UK Co., Ltd. issued the bill of lading. After the bill of lading was issued, it was collected by United Express Logistics (Xiamen) Co., Ltd. and finally delivered by Hongbase to the Third Party. The consignor recorded in the bill of lading was SUNNY LINK LIMITED, the consignee had instructions, the notify party was OTTO FRANCK IMPORT KG, the date and place of the bill of lading was Xiamen, November 24, 2012. The endorsement of the bill of lading was complete, and OTTO FRANCK IMPORT KG was based on the original bill of lading. The bill of lading’s cancellation date was December 18, 2012, namely the actual carrier released the goods on the day that it received the original B/L. SUNNY LINK LIMITED paid the plaintiff's payment of USD 5,000 on October 18, 2012; the Plaintiff paid USD15,000 on October 30, 2012, and the Plaintiff paid of USD 98,200 on December 24, 2012. Due to German buyer’s objection to the mushroom quality, the Plaintiff did not receive the remaining payment as claimed. From the evidence provided by Hongbase, the Third Party booked the cargo export to Hongbase, and the Third Party paid Hongbase the freight of USD5,775 and port fees of 4,582 through Qingdao Ruizhihang International Logistics Co., Ltd. After receiving the above payment, Hongbase paid the corresponding sea freight and port charges to the next Xiamen Hansiwei International Freight Forwarding Co., Ltd., and Xiamen Hansiwei International Freight Forwarding Co., Ltd. then paid United Express Logistics (Xiamen) Co., Ltd. agent freight and agent port charges, and United Express Logistics (Xiamen) Co., Ltd. then paid Sinotrans Fujian Xiamen Branch for export ocean freight, port operation fees, and documentation fees. Hongbase issued a sea freight and pre-port fee confirmation to the Plaintiff on November 26, 2012, requesting payment of a total of 4,972 yuan in port fees such as booking fees, THC, document fees, quarantine fees, port construction fees, and operating fees. Xiamen Tengde Logistics Co., Ltd. paid this fee to Hongbase on November 28, 2012 on behalf of the Plaintiff. For the reason why Hongbase charged the Plaintiff and the Third Party for a freight, Hongbase stated that it

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charged the Plaintiff’s freight forwarding fee based on the Third Party’s request. The Third Party had previously paid for the freight forwarding fee. From the transfer remittance statement submitted by Hongbase, on December 7, 2012, Hongbase transferred 4,592.64 yuan from its legal representative HUANG Qingqian’s account to the Third Party’s legal representative XIE Chengwen. The remark indicated “Qingdao Ruizhihang 2012.11.24,” Hongbase explained that it received 4,972 yuan from the Plaintiff after deducting the invoice tax point, which was 4,592.64 yuan. It had paid the Third Party as required by the Third Party. During the trial, the Third Party stated that the export freight charges should be born by the Plaintiff in accordance with its trading practices with the Plaintiff, and the Plaintiff recognized the above situation. Both Hongbase and Yonghang Xiamen submitted a bill of lading correction letter of guarantee. This letter of deposit was dated November 28, 2012 and was stamped with the seal of the Plaintiff and United Express Logistics (Xiamen) Co., Ltd. The letter requested that the bill of lading shipper should be changed from the Plaintiff to SUNNY LINK LIMITED, and the gross weight, the name of the goods, and the shipping marks should also be changed. The Plaintiff stated that the letter of guarantee had never been submitted and that the seal on the guarantee was not its company seal. The Third Party stated that the letter of guarantee was sent by Little Wu of the Plaintiff, which was then transferred to Hongbase, but the Third Party could not prove the mailing situation. In this case, SUNNY LINK LIMITED paid the Plaintiff three times. The Plaintiff held that the payments received were for the export of mushrooms. The Plaintiff submitted the QQ (instant message) records to the Third Party for the payment, and the Third Party stated that SUNNY LINK LIMITED was subject to the direction to pay to the Plaintiff. The above circumstances together showed that it was the Third Party who had the obligation to pay the payment to the Plaintiff and who had actually paid the payment. On November 26, 2012, Little Huang of Hongbase sent an email to the Plaintiff’s Mr. Hu, asking for the alteration of the bill of lading to be stamped with the official seal of the customs consignor, namely the Plaintiff. On November 27, 2012, the Plaintiff’s Andy addressed to Little Huang of Hongbase in an email stating that “this letter of guarantee cannot be covered for you at the moment! Involving the change of the consignor, we must cover it after receiving the final payment!” Until February 27, 2013, the Plaintiff went to Hongbase to negotiate with the company because no final payment was received. Both parties had disputes over the bill of lading, and both reported the dispute to the police. There was no evidence that the Plaintiff had previously requested Hongbase to deliver the bill of lading. The court holds that the Plaintiff sued the two Defendants, pleaded that they should be responsible for the issuance of the bill of lading. The Plaintiff stated that it entrusted the Defendant Hongbase to ship the goods to Germany, and the Defendant Yonghang Xiamen, as the issuer of the bill of lading, according to the instructions of Hongbase, without receiving the bill of lading changed in accordance with the letter of guarantee issued by the Plaintiff. Also, the shipper in the bill

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of lading was changed without authorization of the Plaintiff, leading to the inability to control the bill of lading, which resulted in loss of payment. According to the facts of this case, it is found out that there was only one set of original bills of lading involved in the transportation, which was issued by Yonghang Xiamen on behalf of the actual carrier, Evergreen Shipping UK Co., Ltd. The issues of the case can be analyzed as follows: first, whether there is contract of carriage of goods by sea relationship between the Plaintiff and Hongbase, second, the determination of the loss of the Plaintiff, third, whether the two Defendants are at fault for the changes to the shipment, and fourth, whether there is causal relationship between the loss of the Plaintiff and the issuance of B/L. Firstly, whether there is contract of carriage of goods by sea relationship between the Plaintiff and Hongbase. Through the facts of this case, it is found out that the Plaintiff did not sign a written transportation contract with Hongbase, and the relevant shipping documents cannot reflect that the Plaintiff had a de facto contractual relationship with Hongbase. The Plaintiff only mentioned the documents that it entrusted Xiamen Tengde Logistics Co., Ltd. for short-distance haulage and the documents that it entrusted Xiamen Kaersi Customs Declaration Co., Ltd. as customs declaration. These two items are separate freight forwarding matters, and they have no relationship with Hongbase. The Third Party provided evidence to prove that it paid the sea freight and agency fees to Hongbase. From the evidence of the Defendant and the Third Party, it can be seen that the shipping contract relationship and the freight forwarding relationship in this case are entrusted layer by layer. The Third Party asked Hongbase to transport, and Hongbase again entrusted Xiamen Hansiwei International Freight Forwarding Co., Ltd., Xiamen Hansiwei International Freight Forwarding Co., Ltd. again entrusted United Express Logistics (Xiamen) Co., Ltd. to contact the carrier, the port of departure agent, Sinotrans Fujian Xiamen Branch, then Yonghang Xiamen issued ocean bill of lading as shipowner agent. The transfer of the entire transportation relationship involves many subjects, cumbersome business processes, and complex layers of transfers, but it was in this complicated transfer relationship that the records of the documents, the payment of the relevant sea freight, agency fees, and the reverse transfer process after the issuance of the bill of lading have fully explained that there was a maritime contract relationship between the Third Party and Hongbase. After the issuance of the bill of lading, the freight would be finally delivered to the Third Party by Hongbase. Therefore, the Third Party is the shipper of the carriage. The Plaintiff emphasized that it was the shipper of the bill of lading and objected to any person changing the SHIPPER stated in the bill of lading without its consent. Namely it claimed that it was the SHIPPER. As mentioned above, in the absence of a charter party and booking contract, the Plaintiff is not the contracting shipper of the contract of carriage, according to the Chinese Maritime Code Article 42 Paragraph 1 Sub-paragraph 3 Sub-sub-paragraph 2, the person by whom or in whose name or on whose behalf the goods have been delivered to the carrier involved in the contract of carriage of goods by sea can be the shipper; namely the

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carrier who delivers the goods in marine practice, the Plaintiff can, at most, claim the rights of the actual shipper. In addition, though, the Plaintiff paid the freight forwarding fee including the booking fee to Hongbase, so it has been found in the court hearing that this fee is a fee charged by Hongbase, and it cannot be inferred that the two parties had a contractual relationship in transportation. Secondly, regarding the losses of the Plaintiff. The Plaintiff did not form an international sales contract relationship through an offer, and the Plaintiff only had a domestic trade contract relationship with the Third Party. Therefore, the Plaintiff’s loss of payment should be calculated according to the domestic trade contract. The Third Party proved the purchase and sale contract between the Third Party and the Plaintiff. Although the contract was changed and fulfilled, the Plaintiff could not prove that there was a new agreement on the unit price and payment of the contract. According to the purchase and sale contract, both parties to the transaction knew that the goods were to be exported abroad, but the contract clearly stipulated that the Third Party was responsible for the payment of the payment to the Plaintiff. In actual implementation, SUNNY LINK LIMITED was paid by the third party to the Plaintiff for most of the payment, so the calculation and payment of the final payment should be based on the purchase and sale contract. According to the contract, after deducting the three payment that the Plaintiff received, the Third Party did not pay the Plaintiff USD11,300. The Plaintiff broke away from the basic contractual relationship of the sales contract, requiring the balance of the payment of USD32,392 to be calculated based on the unit price of the export declaration, and requiring the two Defendants to bear the balance due to the bill of lading. The court holds that the loss claimed by the Plaintiff cannot be expanded by the record of customs declaration. Therefore, the Plaintiff’s claim that the loss of balance should be calculated at the unit price in the customs declaration lacks factual or legal basis, so the court does not support it. Thirdly, whether the two Defendants have fault due to the change of shipper. As mentioned earlier, based on the shipping relationship, the Plaintiff can become the actual shipper in this case. When delivering the goods, it also has the right to ask the carrier or its agent to list it as the SHIPPER of the bill of lading. The Plaintiff delivered the goods to Sinotrans Fujian Xiamen Branch through Xiamen Tengde Logistics Co., Ltd. According to the electronic shipping information of Sinotrans, it was listed in the name of SHIPPER, stating that it intended to become the shipper of B/L. In addition, when Hongbase wanted to change the SHIPPER and asked the Plaintiff for a letter of guarantee by mail, the Plaintiff did not receive the payment for the goods and did not agree to issue a bill of lading correction letter of guarantee. On the next day, Hongbase obtained the letter of guarantee from the Third Party and submitted it to the owner’s agent Yonghang Xiamen. Yonghang Xiamen changed the SHIPPER of the bill of lading based on the promise of the guarantee. Although the Plaintiff’s seal on the bill of lading changed, the Plaintiff insisted that it had never been issued to the Third Party or Hongbase, and the stamped seal was not its seal of record The Third Party claimed that it obtained the bill of lading correction letter of guarantee from the Plaintiff, but no evidence was

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provided. Hongbase did not verify the letter of guarantee with the Plaintiff, so it has inadvertently made mistakes in reviewing and using the guarantee. By the same reason, the shipping agency company Yonghang Xiamen has not fulfilled its review obligations. Although it was very common in maritime practice not to review the letter of guarantee transmitted based on the contractual relationship, the two Defendants cannot use this to reduce their review obligations. Accordingly, the court holds that, the two Defendants have fault due to the change of shipper. Fourthly, whether there is a causal relationship between the loss of the Plaintiff and the issuance of B/L. 1. Whether the purchase and sale contract must be settled by control of B/L. The Plaintiff and the Third Party’s purchase and sale contract agreed to pay 30% in advance, and 70% of the bill of lading should be paid within 10 days after seeing the B/L, which indicates that the Plaintiff did not need to control the bill of lading for the collection of payment. If the Plaintiff intends to do so, it can agree to pay the balance in the sales contract in exchange for the bill of lading. In fact, the third payment of USD98,200 was received one month after the Plaintiff’s cargo was delivered to the terminal. At this time, the bill of lading had been issued for one month. In the case that the Plaintiff did not hold the bill of lading, the Third Party still paid the Plaintiff. Therefore, the payment of goods should not use the transfer of B/L of the Plaintiff. 2. Document of title of the bill of lading cannot be absolute. A bill of lading is a document of creditor’s rights. In some cases it is a document of title. A bill of lading is the most important document for foreign transportation and trade. From the point of view of payment of goods, this case is one regarding domestic trade, but because the goods are to be exported, some of the provisions contain foreign-related factors. However, this does not change the nature of the domestic trade in this case. The bill of lading relationship in this case cannot be applied to the Plaintiff. In the domestic trade contract, the ownership of the subject matter is transferred from the delivery of the subject matter, namely when the Plaintiff delivers the goods to the first carrier, the ownership has been transferred to the Third Party. Therefore, even if the Plaintiff holds the bill of lading, it does not represent a document of title; at most, it is only a guarantee. 3. Only delivery of the B/L to the Plaintiff can protect the rights of the Plaintiff. To whom the carrier or its agent issues a bill of lading, though it is important, holding a bill of lading is more important than issuing a bill of lading. In this case, the two Defendants did not issue a bill of lading to the Plaintiff. It is faulty to change SHIPPER, but this is not enough to cause the Plaintiff’s alleged loss. As long as the Plaintiff asks for and controls the bill of lading in time, it can control the delivery of the port of destination by keeping the bill. 4. The Plaintiff did not claim delivery of bill of lading to the carrier or relevant agent within a reasonable time. According to the Chinese Maritime Code, the bill of lading is not necessarily required. Article 72 stipulates that when the goods have been taken over by the

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carrier or have been loaded on board, the carrier shall, on demand of the shipper, issue to the shipper a bill of lading. The law on the time limit for issuing a bill of lading is also not expressly stipulated, but generally this time is very short after the goods have been received or loaded by the carrier. From the requirements of commercial activities, the role of the bill of lading is to take the goods. Since there is no bill of lading, there is no way to control payment through the bill of lading. The bill of lading was issued on November 24, 2012 and changed on November 28. The time for the taking of the goods at the port of destination was December 18, 2012, and the balance of the trade contract was not received until February 27, 2013. The fact that the Plaintiff requested a bill of lading from Hongbase fully demonstrates that the Plaintiff did not want to control the collection of the payment through the bill of lading. 5. Reason for the Plaintiff’s failure to receive payment in this case. Regarding the goods sold by the Plaintiff to the Third Party in this case, because the consignee had objections to the quality at the destination port in Germany, the Third Party withheld the remaining balance due from the Plaintiff. The Plaintiff’s own QQ chat records also recorded that fact. Therefore, according to the Contract Law of the People’s Republic of China Article 133, Article 141, the Maritime Code of the People’s Republic of China Article 71, Article 72, the Civil Procedure Law of the People’s Republic of China Article 64 Paragraph 1, Article 144, the judgment is as follows: Reject the claims of the Plaintiff, Xiamen Hongliang Import & Export Co., Ltd. Court acceptance fee in amount of 4,322 yuan, shall be born by the Plaintiff, Xiamen Hongliang Import and Export Co., Ltd. If unsatisfied with this judgment, within 15 days of the days of the date of delivery of the judgment, the parties can submit an appeal to the court and summit copies of the original petition according to number of people of the other parties, and appeal to the Fujian High People’s Court. Presiding Judge: LI Tao Judge: CHEN Pingping Acting Judge: LIU Yurong December 12, 2013 Clerk: TANG Wan

Guangzhou Maritime Court Civil Judgment Xiamen Huizuan Import and Export Co., Ltd. v. Operasia International Freight Forwarding (Shanghai) Co., Ltd. (2013) Guang Hai Fa Chu Zi No. 1118 Related Case(s) None. Cause of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote The Defendant carrier delivered goods at the port of destination without presentation of the original bill of lading, but was held not liable to the Plaintiff cargo owner, who had been paid in full by the consignee and thus had suffered no loss as a result of the Defendant’s breach of the bill of lading contract. Summary The Plaintiff entrusted the Defendant to carry plastic sandals from the port of Yantian, Shenzhen, PRC to the port of Barcelona, Spain. The Defendant issued a bill of lading to the Plaintiff. The Plaintiff claimed that another party received the sandals without presenting the original bill of lading and so that the Plaintiff was not paid the purchase price. The Defendant said that the Plaintiff had been paid in full. Held—the evidence showed that the Plaintiff had been paid in full for the goods, so the Defendant’s delivery of goods without presentation of the bill of lading had not caused any loss to the Plaintiff. The claims were rejected.

Judgment The Plaintiff: Xiamen Huizuan Import and Export Co., Ltd. Domicile: Floor 4, Unit 25, No.398 Jiahe Road, Huli District, Xiamen, Fujian. Legal representative: SU Yuping, general manager. Agent ad litem: WANG Darong, lawyer of Dacheng Law Firm Xiamen Office. Agent ad litem: CAI lihong, trainee lawyer of Dacheng Law Firm Xiamen Office.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_57

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The Defendant: Operasia International Freight Forwarding (Shanghai) Co., Ltd. Domicile: Room 2806, No. 885 Renmin Road, Huangpu District, Shanghai. Legal representative: Jose M. San Roman, chairman. Agent ad litem: WANG Yuzhong, lawyer of Joinway Law Firm. Agent ad litem: XIA Xiaoping, lawyer of Joinway Law Firm. With respect to the case arising from dispute over contract of carriage of goods by sea filed by the Plaintiff, Xiamen Huizuan Import and Export Co., Ltd., against the Defendant, Operasia International Freight Forwarding (Shanghai) Co., Ltd. After accepting the case on August 27, 2013, the court organized the collegiate panel consisting of Presiding Judge, CHANG Weiping, Judge PINGYANG Danke and Acting Judge, JIANG He, and appointed ZHUANG Zhifa as Clerk. The court summoned the parties to exchange evidence before trial on January 8, 2014. And the court held a court session on the same day. WANG Darong as agent ad litem authorized by the Plaintiff and XIA Xiaoping as agent ad litem authorized by the Defendant appeared in court to attend the hearing. Now the case has been concluded. The Plaintiff claimed that in May 2013, the Plaintiff entrusted the Defendant to carry a batch of plastic sandals, the value was USD156,600 (RMB966,190.68) from port of Yantian, Shenzhen PRC to port of Barcelona, Spain. The goods were loaded in two containers. The Defendant arranged the shipment of the goods and issued a bill of lading to the Plaintiff. The Plaintiff had not gotten the payment of goods. After inquiry, it was told the goods were taken away by others at the Port of Barcelona. The Plaintiff still held the original bill of lading. The Defendant should assume the responsibility as carrier. So the Plaintiff requested the court to judge that the Defendant should compensate for the loss of the Plaintiff in amount of RMB966,190.68 and interest thereon (the interest should be calculated at the bank loan interest rate over the same period from June 20, 2013, and bear the litigation fees. The Plaintiff submitted the following evidence within the time limit of producing evidence: 1. All emails and attachments thereof between the Defendant and the Plaintiff on May 7, 2013; 2. Bill of lading; 3. Export goods declaration form; 4. Commercial invoices; 5. Records of containers on August 21, 2013; 6. Packing list; 7. Shipping order; 8. Export goods declaration form (the copy of export rebate); 9. Export goods declaration form (the copy for company); 10. Record of container on December 27,2013.

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After the hearing began, the Plaintiff submitted the following evidence: 11. The trade contract between the Plaintiff and the Sanwin Industries Ltd. and invoices in 2012 and 2013; 12. Details of payment of Sanwin Industries Ltd. The Defendant alleged that it noticed the consignee after the goods arrived at the port of destination. The consignee said it had paid to the Plaintiff and provided relevant vouchers. The Plaintiff confirmed that it detained the bill of lading. In order to avoid loss, the Defendant delivered the goods to the consignee. Further, the Defendant reserved the right to recourse demurrage caused by the Plaintiff’s detainment of bill of lading. Thus the Defendant requested the court to reject the claims of the Plaintiff. The Defendant submitted the following evidence in the time limit of producing evidence: 1. Emails between the Plaintiff and the consignee; 2. Letter from the Plaintiff to the consignee, records of payment and commercial invoices. The Defendant had no objection to the authenticity of evidence 1, 2, 4, 6, 7 and No.PY345 commercial invoice in evidence 11. The court ascertains the probative force of the aforementioned evidence; although evidence 8 of the Plaintiff namely the Export Goods Declaration Form (the copy of export rebate) is a copy, its content corresponds with evidence 1 and 2 of the Plaintiff which have been ascertained, and it is sealed by the No.3 Tax Source Management Subsection of the Taxation Sub-bureau Affiliated with Xiamen City Administration of State Taxation (hereinafter “No.3 TSMS”). The court ascertains the probative force of evidence 8. Evidence 3 and 9 are the copy of export goods declaration form for company, which are consistent with evidence 8, thus the court ascertains the two evidence. The Plaintiff confirmed the authenticity of evidence 2 (records of payment) of the Defendant namely, and the court ascertains probative force thereof. Based on the verification of the evidence, the court ascertains the following facts: on May 7, 2013, the Plaintiff booked shipping space via email and entrusted the Defendant to transport the plastic sandals under the contract numbered with PY345 from Shengzhen to Spain, of which the value was USD156,600. It was stated in No.531620130165778985 Export Goods Declaration Form that the date of declaration was May 16 and the date of export was May 21; the shipper was the Plaintiff; the number of the contract was PY345 (1); the number of the container was MRKU0523793; the goods were 67,500 pairs of plastic sandals and the total price was USD78,300. It was stated in No.531620130165783774 export goods declaration form, the date of declaration was May 17 and the date of export was May 21; the shipper was the Plaintiff; the number of the contract was PY345 (2); the number of the container was PONU1528277; the goods were 67,500 pairs of plastic sandals and the total price was USD78,300. The contents of the export goods declaration form (the copy of export rebate) were same with those of the export goods declaration form (the copy for company), and both the copy of export rebate was sealed by No.3 TSMS.

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On May 21, Shenzhen Vanocean International Freight Limited, on behalf of the Defendant issued original bill of lading with a number of HKHKG663050162 to the Plaintiff. It was stated in the bill of lading that the shipper was the Plaintiff, the consignee to order, the notify party was Sanwin Company, the port of loading was Yantian, the port of discharge was Barcelona, the goods were plastic sandals, the net weight was 45,917 kg, the numbers of the FEU were MRKU0523793 and PONU1528277, the quantities were 5,402 boxes (equal contributions in one container), the shipper was responsible for packing, calculation and seals, freight payable at destination. The shipment date was May 21. On March 25, 2013 and May 14, 2013, Hong Kong Branch (Bank of India) entrusted the Sanwin to pay the Defendant USD30,000 (including formality fee USD25), USD126,625 (including formality fee USD25), amount to USD156,625. In terms of the facts in dispute, the court ascertains as follows: In respect of delivery of goods without original bill of lading, in order to prove the fact that the Defendant delivered the goods without original bill of lading, the Plaintiff provided evidence 2 (the original bill of lading), evidence 5 (records of the containers on August 21, 2013) and evidence 10 (records of the containers on December 27,2013). According to the records of the containers, the containers involved were taken away on June 19, 2013 and June 20, 2013, and the goods were transferred in other voyage. The Defendant alleged that in order to avoid further loss, it delivered the goods to the consignee. Afterwards, the Defendant alleged the goods were unpacked by the customs and delivered to the consignee. And the Defendant did not confirm the records of the containers and held they could not prove the Defendant delivered the goods without original bill of lading. The court holds that the Plaintiff provided evidence to prove that the goods have been taken away and transferred at the port of discharge, and it still holds the full set of original bill of lading until the hearing. And the Defendant confirmed the goods had been delivered to the consignee. So the court ascertains the allegation of Plaintiff that the Defendant delivered the goods without original bill of lading. The allegation of the Defendant that the goods were unpacked by the customs is unreasonable and do not correspond to the practice. And the Defendant, as the issuer, did not produce evidence to prove that, so the court does not ascertain. In respect of the actual loss of the Plaintiff, in order to prove the loss in amount of USD156,600, the Plaintiff provided evidence 4 (commercial invoices), evidence 6 (packing list), evidence 7 (shipping order and evidence 2, 8 and 9 (the export goods declaration form), evidence 11 (the contract and invoices in 2012 and 2013 between the Plaintiff and the Sanwin Industries Ltd.), evidence 12 (details of payment of the Sanwin Industries Ltd.). Evidence 4 (No. PY345 commercial invoice) was issued to the Plaintiff on May 6, 2013, which records the goods are 13,500 pairs of plastic sandals packed in 5,402 boxes and the value is USD156,600; the quantities recorded in evidence 6 (packing list) and evidence 7 (shipping order) comply with the record in evidence 4; No.PY345 Commercial invoices in evidence 11 records the details of the payment of goods, the mode of payment is 20% as deposit, the rest sum is paid as per the bill of lading; evidence 12 records several payments in 2012 and 2013 between the Plaintiff and Sanwin Company. In the

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commercial invoices No.PY345, the contract date is April 25, 2013, the invoice date is 6 May and shipment date is 21 May. The Plaintiff got the payment of goods in amount of USD30,000 on April 25, 2013 and USD126,600 on May 15. The Plaintiff claimed the two sums were not payment under the contract involved, the debts of Sanwin Company were offset chronologically, it meant the debts of which the invoice time were earlier would be paid off first. The Defendant defended that the Plaintiff had gotten all payments of the goods and provided evidence 1 (emails between the Plaintiff and the consignee) and evidence 2 (letters from the Plaintiff to the consignee, records of payment, commercial invoices). Evidence 1 is to prove that Sanwin Company had made all payments to the Plaintiff. Evidence 2 was a letter regarding confirmation of the payment for No.PY345 invoice sent by Sanwin Company to the Plaintiff, in which it was recorded we (Sanwin Company) had pay the following sums to your account according to No.PY345 invoice of which the day was on May 6, 2013, it was hereby confirmed; USD30,000 (advance payment) on March 25, 2013, USD126,600 (the rest of the payment) on May 14, 2013; the total amount was USD156,600. The Defendant confirmed the Plaintiff’s evidence 7, evidence 4 and No.PY345 commercial invoices in evidence 11, and held the deposit, rest payment and total amount in No.PY345commercial invoices and the contract date, invoice date and the receipt of the two sums of the goods in evidence 12 of the Plaintiff corroborated the record of payment which was entrusted by Sanwin Company to Bank of India and the letter Sanwin Company sent to the Plaintiff in evidence 2 of the Defendant. In view of the above, the Defendant alleged that the two sums were paid for the goods involved and the Plaintiff had got the all payments for goods. The court holds that the Plaintiff’s evidence 4 (commercial invoices), evidence 6 (packing list) and evidence 7 (shipping order) corroborate the export goods declaration form, and they also comply with the Defendant’s evidence 2. So the court ascertains above-mentioned evidence of the Plaintiff and commercial invoices in the Defendant’s evidence 2, accordingly ascertains the value of the goods involved is worth USD156,600. The Defendant’s evidence 2 letter in terms of confirmation the payment of No.PY345 commercial invoice was submitted earlier than evidence 11 and 12 of the Plaintiff. The contents of the letter correspond to No.PY345 commercial invoices in evidence 12 of the Plaintiff namely the details of the payment of Sanwin Company (the date of contract was March 25, 2013 and the date of invoice was May 6, 2013; the Plaintiff got a payment of goods in amount of USD30,000 on March 25, 2013 and a payment of goods in amount USD126,600 on 15 May; as well as the mode of payment in No.PY345 commercial invoices namely “20% as deposit and the sum shall be paid as per the bill of lading). The court ascertains the letter in the Defendant’s evidence 2. In view that fact that the Plaintiff got the payment of goods in amount of USD30,000 on March 25, 2013 and a payment of goods in amount USD126,600 on May15 corresponds the mode of payment and payment time in the commercial invoices No.PY345, and the Plaintiff failed to provide evidence to rebut, therefore the court holds the allegation of the Plaintiff

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that it did not get the payment of goods cannot stand. The court ascertains the two payments are mad for the goods involved, namely the Plaintiff has received all payments. During the hearing, the parties chose Chinese laws as governing laws. The court holds that the case is arising from dispute over contract of carriage of goods by sea. The goods were transported from Yantian, Shenzhen PRC to Barcelona, Spain by sea. The case involves foreign-related factor. According to Article 1 of the Interpretations of the Supreme People’s Court on the Application of the Special Maritime Procedure Law of the People’s Republic of China, Article 11 of the Several Provisions of the Supreme People’s Court on the Scope of Cases to be Entertained by Maritime Courts, this case is under exclusive jurisdiction of maritime court. The port of departure is Shenzhen, which falls into the jurisdiction of the court. According to Article 27 of the Civil Procedure Law of the People’s Republic of China, an action instituted for a dispute arising from a transportation contract shall be under the jurisdiction of the people’s court at the place of departure. The court has jurisdiction over the suit. The parties chose Chinese laws as governing laws to the settle the disputes involved. So, according to Article 269 of the Maritime Code of the People’s Republic of China, the case shall be tried according to the laws and regulations of China. It is provided in Article 71 of the Maritime Code of the People’s Republic of China, a bill of lading is a document which serves as an evidence of the contract of carriage of goods by sea and the taking over or loading of the goods by the carrier, and based on which the carrier undertakes to deliver the goods against surrendering the same. A provision in the document stating that the goods are to be delivered to the order of a named person, or to order, or to bearer, constitutes such an undertaking. The Plaintiff is the shipper involved, and the Defendant, as the carrier, issued the bill of lading involved and carried out the carriage of the goods involved by sea. So, the contract of carriage of goods by sea has been established. The contract is legal and valid, which both parties shall perform as agreed. According to Article 2 of the Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Cases of Dispute over Delivery of Goods without Original Bill of Lading, where a carrier delivers goods without an original bill of lading in violation of law, damaging the rights of the holder of the original bill of lading under the bill of lading, the holder of the original bill of lading may require the carrier to bear the civil liability for the losses resulting therefrom. The Plaintiff still holds full set original bill of lading. The Defendant delivered the goods at the port of destination without the original bill of lading. It violates the above laws and damages the rights of the Plaintiff as shipper. So, the Plaintiff is entitled to claim against the Defendant to bear civil liability for the consequent losses. According to the facts found in the hearing, the Plaintiff has received the payment of the goods. The delivery of goods without bill of lading of the Defendant does not cause any loss to the Plaintiff. The claim of the Plaintiff that the Defendant should compensate loss of the goods and the interest lacks factual basis, and shall be rejected.

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In summary, according to Article 71 of the Maritime Code of the People’s Republic of China, Article 64 of the Civil Procedure Law of the People’s Republic of China, Article 2 of the Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Cases about Delivery of Goods without an Original Bill of Lading, the judgment is as follows: Reject the claims of the Plaintiff. Court acceptance fee in amount of RMB13,553.58, shall be born by the Plaintiff. In case of dissatisfaction with this judgment, any party may within 15 days upon service of this judgment submit a statement of appeal to the court, together with copies in accordance with the number of the opposite parties, to lodge an appeal to the Guangdong High People’s Court. Presiding Judge: CHANG Weiping Judge: PINGYANG Danke Acting Judge: JIANG He March 28, 2014 Clerk: ZHUANG Zhifa

Wuhan Maritime Court Civil Judgment Yangpu Hongyang Shipping Co., Ltd. v. Jiangsu Dongfang Huayuan Shipping Co., Ltd. (2014) Wu Hai Fa Shi Zi No. 00051 Related Case(s) None. Cause of Action 193. Dispute over liability for ship collision damage. Headnote Collision held to be 100% the fault of vessel that suffered sudden engine failure and veered across the path of oncoming vessel, which performed all necessary navigational maneuvers. Summary The ship M.V. “Hongyang Mountain”, owned by the Plaintiff, collided with M.V. “Oriental 08”, owned by the Defendant. Following the collision, the Plaintiff filed suit against the Defendant, alleging a maritime tort. The court found that, due to a sudden engine failure of “Oriental 08,” the vessel drifted into the path of the oncoming M.V. “Hongyang Mountain”. M.V. “Hongyang Mountain” performed the proper evasive maneuvers, but due to the speed at which both vessels were legally traveling, the collision, nonetheless, occurred. The court found the actions of the Plaintiff’s vessel proper and ruled that the Defendant should bear full liability for the collision and compensate the Plaintiff for the necessary repairs to M. V. “Hongyang Mountain”.

Judgment The Plaintiff: Yangpu Hongyang Shipping Co., Ltd. Domicile: R.1005–1010, 10th Floor, Building A of World Trade Centre, 45 Haiyu North Road, Changshu, Jiangsu. Organization Code: 79314816-X. Legal representative: WU Xuehai, chairman. Agents ad litem: ZHU Guolin andZHANG Yuchao, lawyers of Shanghai Hightime Law Office. © The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_58

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The Defendant: Jiangsu Dongfang Huayuan Shipping Co., Ltd. Domicile: Floor 26, Building 1, Riverside Plaza, 301 Jiangdong North Road, Nanjing, Jiangsu. Organization Code: 768673908-7. Legal representative: DING Liuxi. Agent ad litem: WU Fuhong, MA Xinyi, lawyers of Jiangsu Suyuan Law Firm. The Third Party: People’s Property & Casualty Insurance Company of China Gaochun Branch. Domicile: 65 of Baota Road, Chunxi Town, Gaochun County, Nanjing, Jiangsu. Organization Code: 83584782–4. Legal representative: CHEN Qingwei. Agents ad litem: LI Hongwei and GAO Peifang, lawyers of Shanghai Wintell & Co. Zhoushan Office. With respect to the case arising from dispute over liability for ship collision damage filed by the Plaintiff, Yangpu Hongyang Shipping Co., Ltd., against the Defendant, Jiangsu Dongfang Huayuan Shipping Co., Ltd. The Plaintiff raised an application for arresting M.V. “Oriental 08”, which was owned by the Defendant, Jiangsu Dongfang Huayuan Shipping Co., Ltd., on March 25, 2014. The Plaintiff also required the Defendant to provide a guarantee of RMB28,000,000, and on that day, the court rendered a civil ruling numbered (2014) Wu Hai Fa Bao Zi No.00112, allowing its maritime claim preservation, which had since been implemented. On June 10 of the same year, the Plaintiff applied to discharge the arrest of M.V. “Oriental 08” while forbidding the transfer of ownership and the establishment of registration for mortgage or demise charter. (2014) Wu Hai Fa Bao Zi No.00112-1 Civil Ruling was rendered on that day allowing the change of maritime claim preservation, which has been implemented. On June 28, the Plaintiff applied to the court for rescinding the maritime claim preservation measure and the court rendered (2014) Wu Hai Fa Bao Zi No.00112-2 Ruling allowing the application, which was issued and had been implemented on that very day. On July 1, the Plaintiff brought a lawsuit against the Defendant before the court. As a maritime tort dispute arising from ship collision, it was under the exclusive jurisdiction of maritime courts. Moreover, the Defendant’s domicile, Nanjing Jiangsu, was under the jurisdiction of the court. According to Article 6 Paragraph 2 Sub-paragraph 1 of the Special Maritime Procedure Law of the People’s Republic of China, the court had jurisdiction over this case. After accepting this case on July 3, 2014, the court appointed Judge ZHOU Da to try this case alone. The insurer of the ship M.V. “Oriental 08”, People’s Property & Casualty Insurance Company of China Gaochun Branch (hereinafter referred to as “PICC Gaochun”) requested to participate in the action as a Third Party due to the legal stake concerning the result of this case; the court permitted the action. The court tried the case in public on July 31 and August 27, 2014. ZHU Guolin and ZHANG Yuchao, agents ad litem authorized by the Plaintiff; DING Liuxi, the legal representative of the Plaintiff, WU Fuhong, agent

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ad litem of the Defendant, and LI Hongwei, agent ad litem of the Third Party PICC Gaochun, appeared in court to attend the hearings. Now the case has now concluded. The Plaintiff alleged that on January 25, 2014, the Defendant’s ship M.V. “Oriental 08” lost control when navigating along Beicao channel in Yangtze estuary and hit the Plaintiff’s ship M.V. “Hongyang Mountain”, which was navigating in the outward channel; the latter was severely damaged. Including repair costs, self-bought materials, and so on, the Plaintiff suffered a total loss of RMB11,194,731, with RMB3 million prepaid by the insurer and RMB8,194,731 left unpaid. After investigation, the MSA concluded that due to an engine failure, M.V. “Oriental 08” lost control, crossed the dividing navigation line, and hit M.V. “Hongyang Mountain” which was sailing in the reverse line. So M.V. “Oriental 08” should take full responsibility of the collision. The Plaintiff alleged that as the owner of M.V. “Oriental 08”, the Defendant should thus bear the compensation liability. The Plaintiff requested the court to judge that the Defendant should indemnify the losses of RMB8,194,731 and the interest (calculated from January 1, 2014 to the date of the judgment at a loan interest rate of Bank of China over the correspondent period); and bear the litigation costs. The Defendant argued that the collision accident was mainly caused by the engine failure of M.V. “Oriental 08”, but according to the related navigation rules of inland waterway vessel, M.V. “Hongyang Mountain” should take measures to avoid the collision. Since it did not, the Defendant refused to accept the identification of responsibility made by the MSA which affirmed that M.V. “Oriental 08” should assume total liability for this accident and that M.V. “Hongyang Mountain” should assume 30% of negligence liability. The Defendant also argued that the Plaintiff’s claim for the loss of repair was overcharged and requested the court to try the case according to law. The Third Party stated that: the Plaintiff did not adduce evidence to prove that M. V. “Hongyang Mountain” was seaworthy and complied with the rules of navigation, such as keeping reasonable lookout duty and taking effective measures to avoid collision. Therefore the court should presume that the Plaintiff bear the negative consequences. Even as described by the MSA survey of the collision, M. V. “Hongyang Mountain” should at least take 30% of the liability. After the accident, the Plaintiff, the Defendant, the Third Party, and other relevant parties signed a Meeting Minutes, which determined the range of repair work and the payment scheme of repair costs. Knowing that the MSA held M.V. “Oriental 08” fully responsible for the accident, the Plaintiff ignored the Meeting Minutes and signed a ship repair contract, in which the price was well above market level and the agreed price. So the repair range was expanded, and hereby settled the final repair costs. The additional cost other than agreed in the Summary should be born by the Plaintiff. Moreover, the cross-examination and statement of the Third Party did not mean that he agrees to assume insurance liability of the accident.

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The Plaintiff submitted the following evidence to support its claims: 1. (1) Certificate of ownership of M.V. “Hongyang Mountain”; (2) certificate of ownership of M.V. “Oriental 08”, to prove that the Plaintiff was the owner of M.V. “Hongyanshan” and the Defendant was the owner of M.V. “Oriental 08”. The Defendant and the Third Party had no objection to the evidence. 2. (1) The contract of ship repair signed by the Plaintiff and China Shipping Industry Co., Ltd. Lixin Shipyard (hereinafter referred to as “Lixin Shipyard”) and the quotation of Lixin Shipyard; (2) price list of Lixin Shipyard; (3) project acceptance sheet of Lixin Shipyard; (4) price statement of ship repair project; (5) receipts of repair costs paid by the Plaintiff via bank; (6) invoices of repair costs, to prove that the Plaintiff signed a ship repair contract with Lixin Shipyard after the accident. After the completion of repair, both parties confirmed the repair costs as RMB12,094,693, including the above waterline project of RMB5,914,875, below waterline project of RMB4,656,432, and special paint coat (ballast tank special paint coat) RMB1,523,386. By mutual agreement, the final statement price was RMB10,580,000 and was already paid by the Plaintiff. The cross-examination opinions of the Defendant and the Third Party are as follows: The Defendant and the Third Party did not admit the authenticity and legality of evidence (1) and held the collision occurred on January 25, 2014 while the ship repair contract was signed on April 4, 2014. During the two months, the Plaintiff did not make additional inquires and reduced the repair costs through a normal bidding process. The unit price of the ship repair contract was significantly higher than the confirmed price in the Meeting Minutes signed between the interested parties on February 18, 2014 and was also higher than Lixin Shipyard’s quotation on February 8, 2014. In addition, the Plaintiff signed the ship repair contract after March 25, 2014, on which date the MSA determined that M.V. “Hongyang Mountain” took no responsibility for the accident, indicating that the Plaintiff expanded the repair costs after knowing that it would not bear the liability for the accident. The Defendant and the Third Party did not admit the authenticity and legality of evidence (2) as well as evidence (4) and argued the unit price was obviously over charged and the repair was beyond the general average range. The authenticity of evidence (3) was admitted while its legality was not. The Plaintiff knew that the Defendant was very likely to bear all the repair costs and part of that was not even caused by the collision. The authenticity and legality of evidence (5) were admitted but it could not prove its relevancy with the repair costs of M.V. “Hongyang Mountain”. The authenticity of evidence (6) was admitted but combining (5), the remark in the RMB3.58 million receipt was inconsistent with the four receipts of the total RMB7 million, so RMB3.58 million was not applicable as ship repair costs. 3. (1) Mail issued by the surveyor of Shanghai Bureau of China Classification Society (hereinafter referred to as “CCS Shanghai”) on April 3, 2014; (2) average survey report issued by CCS Shanghai; (3) detailed list of survey of CCS Shanghai; (4) receipt of inspection fee paid by the Plaintiff via bank;

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(5) inspection fee invoices of CCS Shanghai, to prove that preliminary inspection was performed by CCS Shanghai and the Plaintiff paid RMB 85,852 as the inspection fee. The Defendant and the Third Party admitted the authenticity, legality, and relevancy of the above set of evidence but argued that M.V. “Hongyang Mountain” had defects before the accident in the survey report (ninth, chart RA6, Page 9 stated that: the top side tank No.1 in port was renovated completely, so deleting the chart GMG003 in regard of survey condition in the chart GP; chart GP3, Page 3 stated that the memorandum No.CMG003 had been removed) and accordingly this part of repair costs should be deducted from the Plaintiff’s claim of loss. (1) Notice of prepaid case acceptance fees issued by the court; (2) receipts of application fee for maritime preservation, security deposit, and ship guard costs paid by the Plaintiff via bank, to prove that the Plaintiff paid RMB5,000 to the court for applying maritime preservation. The Defendant and the Third Party raised no objection to the evidence. A list of the estimated losses of M.V. “Hongyang Mountain”, to prove that the Plaintiff suffered an estimated loss of RMB11,194,731 from this collision accident to the date of the filing of the action. The Defendant and the Third Party argued that the list was merely a unilateral statement and did not constitute evidence. A report about the responsibility of maritime traffic accident numbered Hu Hai Song Ze Zi (2014) 03-02 made by Maritime Safety Administration Wusong Bureau, to prove that M.V. “Oriental 08” hit M.V. “Hongyang Mountain” in the north canal of Yangtze River, resulting in the latter to suffer deformation on a large scale in the front of port side and damage all around and M.V. “Oriental 08” should take full responsibility. The Defendant and the Third Party admitted the authenticity, legality, and relevancy of the evidence but argued that the facts and liability of the collision accident should be determined combining the related materials collected by MSA. (1) The sales contract signed by the Plaintiff and Shanghai International Paint Co., Ltd. (hereinafter referred to as “Paint Company”); (2) receipt of paint; (3) receipt of payment for paint paid by the Plaintiff to Paint Company via bank; (4) invoices issued by Paint Company, to prove that in order to repair M. V. “Hongyang Mountain”, the Plaintiff paid RMB281,395.09 to buy paint from Paint Company. The Defendant and the Third Party admitted the authenticity, legality, and relevancy of the above set of evidence but argued that the Plaintiff could not prove all the paint was used in the average repair and that the 17% VAT tax should not be counted as damage to the Plaintiff. (1) The sale contract signed by the Plaintiff with Shanghai Aihang Industry and Trade Co., Ltd., which was for the purpose of repairing the left-side cathodic protection project of M.V. “Hongyang Mountain”; (2) statement note and delivery note issued by Shanghai Aihang Industry and Trade Co., Ltd.; (3) receipt of fees paid by the Plaintiff to Shanghai Aihang Industry and Trade Co.,

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Ltd.; (4) invoices issued by Shanghai Aihang Industry and Trade Co., Ltd., to prove that the Plaintiff paid RMB33,500 to repair the port side cathodic protection project of M.V. “Hongyang Mountain”. The Defendant and the Third Party admitted the authenticity, legality, and relevancy of the above set of evidence but argued that it was not sufficient to demonstrate that the cost was relevant with average repairs caused by this accident. (1) The processing contract signed by the Plaintiff with Nantong Xinlong Metal Casting Co., Ltd. was for the purpose of getting custom-made ballast tank zinc blocks for M.V. “Hongyang Mountain”; (2) delivery note of Nantong Xinlong Metal Casting Co., Ltd.; (3) payment receipt of zinc block fee paid by the Plaintiff to Nantong Xinlong Metal Casting Co., Ltd.; (4) Invoices issued by Nantong Xinlong Metal Casting Co., Ltd., to prove that the Plaintiff paid RMB8,103.24 to fix ballast tank zinc blocks (8.2 kg/block). The Defendant and the Third Party admitted the authenticity of the above set of evidence but argued that the processing contract was the macro-contract containing RMB8,103.24 zinc blocks and RMB10,980 zinc blocks; the delivery note and invoices are incomplete; the RMB10,980 zinc blocks were not reflected by the payment receipt and the contract. So, there was the possibility that the Plaintiff repaired other projects. Emails issued by the Plaintiff’s agent ad litem on April 5, 7, and 10 in 2014 to the Defendant and Lixin Shipyard, to prove that the Defendant offered to do PSPC special paint coat but failed to put forward the substantive program. To avoid the delay of the ship’s schedule, the Plaintiff informed the shipyard to do PSPC special paint coat for M.V. “Hongyang Mountain”. The Defendant and the Third Party admitted the authenticity of the evidence but argued that the initially confirmed special paint coat area was 5,000 square meters; eventually more than 10,000 square meters was repaired and the price was overcharged. Faxes and emails between the Plaintiff, the Defendant, and the Defendant’s insurance assessor with regard to M.V. “Hongyang Mountain” average loss inspection, to prove that the Plaintiff repeatedly invited the Defendant and its insurance assessor in written to attend negotiation meetings about average loss inspection and repair costs. The Defendant and the Third Party admitted the authenticity of the evidence, but the Defendant argued that some emails were irrelevant to the Defendant, and the Plaintiff did not inform the Defendant when settling the repair works. The Third party argued that some faxes and emails are incomplete, and most of them are formed after the Plaintiff knew that M.V. “Oriental 08” should take full responsibility. (1) Liquidity loan contract entered by the Plaintiff and the Bank of Communications, Changshu Branch and the Withdrawal Form; (2) loan agreement entered by the Plaintiff and Yangpu Yonglian Industries Co., Ltd.; (3) receipt of a RMB20 million loan from Yangpu Yonglian Industries Co., Ltd. to the Plaintiff via bank, to prove that the Plaintiff borrowed money on bank loan interest rate 6.55% for the corresponding period from an outsider to add liquidity. The Defendant and the Third Party admitted the authenticity and legality of the evidence but argued that they had nothing to do with this case.

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13. Maritime guarantee letter issued by PICC Nanjing Branch, to prove that the Third Party should bear joint liability for the Plaintiff’s repair costs and interest caused by the accident and costs of preservation application. The Defendant and the Third Party admitted the authenticity and legality of the evidence but argued that the Third Party should only bear joint liability for related costs, which should be paid by the Defendant to the Plaintiff confirmed by an effective judgment. The guarantee letter could not achieve the Plaintiff’s purpose of proof. The Defendant submitted the following evidence to prove its arguments: 1. proof showing that the Defendant’s security management system met the regulations in the Ship Safety Operation and Pollution Prevention Management Rules of People’s Republic of China; 2. Ship Inspection Certificate, Minimum Safety Manning Certificate, Safety Management Certificate, Seaworthiness Certificate, Business Certificate, Ownership Certificate, Nationality Certificate of M.V. “Oriental 08”; 3. the Defendant’s Water Transportation License, to prove that the Defendant’s ship M.V. “Oriental 08” was seaworthy. The Third Party admitted the authenticity, legality, and relevancy of the above evidence, but argued that they could only prove M.V. “Oriental 08” was seaworthy when the certificate was issued. Whether it was seaworthy at the time of the accident should be determined by other evidence of this case. The Defendant admitted the authenticity of the evidence but argued that it could not prove the seaworthiness of M.V. “Oriental 08”. The Third Party submitted the following evidence to prove its statements: 1. (1) Proposal form of M.V. “Oriental 08”; (2) coastal inland vessel insurance clauses (2009); (3) policy of M.V. “Oriental 08”, to prove that the insurance contract enabled Third Party to participate in the proceedings of this case. The Plaintiff and the Defendant both admitted the evidence. 2. (1) Quotation issued by Linxin Shipyard on February 8, 2014; (2) Meeting Minutes signed on February 18, 2014, to prove that based on the quotation by Lixin Shipyard and combining ship repair market conditions, a price standard of the repair costs of M.V. “Hongyang Mountain” was agreed in the Meeting Minutes, but the repair costs paid by the Plaintiff was beyond that standard and thus the loss of repair costs was expanded. The Plaintiff argued that it did not know about the quotation and it was not an original. Furthermore, many average items were not finally decided when estimating the repair costs, so the quotation did not have a reasonable basis for Meeting Minutes. Authenticity of Meeting Minutes was admitted but it was based only on the damage above the waterline, damage below the waterline could not be inspected when Summary was drafted. In addition, current market conditions should be taken into consideration. The Defendant admitted the evidence effect of this set of evidence. 3. Record of joint survey of repair work of M.V. “Hongyang Mountain” by the insurer of the Plaintiff and the Defendant on March 19, 2014, to prove the repair scope of M.V. “Hongyang Mountain”. The Plaintiff and the Defendant admitted

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its authenticity, but the Plaintiff pointed out that not all but only visible repair works were reflected in this record. 4. The loss investigation report and the verification report (attachments included) of M.V. “Hongyang Mountain” issued by Teamhead Company Jiangsu Branch (hereinafter referred to as “Teamhead Company”), to prove that according to the investigation and verification by Teamhead Company, the repair costs of this accident should not exceed RMB7.25 million. The Plaintiff admitted the authenticity and relevancy of the evidence but not the legality. This report was not submitted on July 31, 2014 when the court organized the parties concerned to exchange evidence. On August 27, 2014 when the trial proceeded, it had surpassed the time limit for adducing evidence. The business scope of Teamhead Company was the object of insurance, meaning that he could only assess the insurance money between the insurer and the insured instead of the loss of the Plaintiff who was out of the insurance relationship. This insurance surveyor failed to make a comprehensive survey, so the report could not cover the actual loss of the Plaintiff. This report also proved that the Defendant took part in the damage inspection of M.V. “Hongyang Mountain” and the Defendant admitted the authenticity, validity, and relevancy of it. In order to find out whether the repair costs of M.V. “Hongyang Mountain” are reasonable, the Third Party applied YANG Ming and ZHANG Kezhao, appraisers of Teamhead Company, who participated in the loss inspection of M.V. “Hongyang Mountain” to appear in court as witnesses, which had been permitted by the court. The two witnesses made the following statements when questioned by interested parties: “After the accident, we inspected M.V. ‘Hongyang Mountain’ in Linxin Shipyard focusing on the hull above the waterline while the parts below the waterline and invisible parts were left out, which was the same as the classification society’s inspection scope. The repair costs of M.V. ‘Hongyang Mountain’ were determined on the basis of the quotation submitted by Lixin Shipyard on February 18, 2014. Lixin Shipyard did not give us written notice about PSPC special paint coat repair work of M.V. ‘Hongyang Mountain’, so we could not invite another professional construction team with a more reasonable price to implement the project. When we proposed to delegate another professional construction team to complete this project, Lixin Shipyard required M.V. ‘Hongyang Mountain’ to be tugged away from the shipyard, and the towing charges were on us. So we had to give up looking for another professional PSPC special paint coat construction team. RMB12.09 million repair costs of M.V. ‘Hongyang Mountain’ contained items other than the average damage, but we did not count them. We participated in the negotiations about the repair costs of M.V. ‘Hongyang Mountain’ between the ship owners and the shipyard, but our price was not admitted.” To prove that the repair costs of M.V. “Hongyang Mountain” was reasonable, the Plaintiff applied ZHENG Bo, vice director of Lixin Shipyard who was in charge of the repair project, to appear in court as a witness, which has been permitted by

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the court. ZHENG Bo made the following statements when questioned by interested parties. 1. “With respect to whether the Waigaoqiao factory of China Shipping Industry Co., Ltd. has the capacity to repair M.V. ‘Hongyang Mountain’, Lixin Shipyard has three factories and can coordinate the company’s internal resources such as Changxing Shipyard Before repairing M.V. ‘Hongyang Mountain’, Lixin Shipyard undertook repair work of a foreign ship with PSPC special paint coat requirements, so it has the capacity and qualification to repair M.V. ‘Hongyang Mountain’. There will be frequent transfer of the ship and thus be more expensive and time-consuming if the repair work is solely done in Linxin’s Donggou factory, while cost will be saved if the work is partly done in Waigaoqiao factory and partly done in Changxing Shipyard The three factories of Lixin Shipyard and Changxing Shipyard are all qualified to repair M.V. ‘Hongyang Mountain’, so it makes no difference which factory undertakes which part of the work. 2. In respect of why there are charges for the tug’s service in the actual quotation and project acceptance report which did not appear in the quotation on February 8, 2014. The quotation on February 8 is based on a preliminary inspection of the repair work, without the damage conditions below the waterline, so it is not a final and complete quotation. Only a complete inspection combined with the schedule of the shipyard and the port plan can form the final price of each project. After docking, the range of repair work turned out much larger than what was estimated earlier and thus former plans of shipyard and docking needed to be adjusted. There were other ships under repair in Lixin Shipyard, so in order to make use of the wharf, dock of Linxin Shipyard and Changxing Shipyard within the shortest possible time, it is necessary for M.V. ‘Hongyang Mountain’ to be towed within site and thus generated tug fees. 3. In respect of the steel weight of the repair work determined, why is it 330 tons of steel by the estimation of the Defendant and the Third Party but 450 tons by the shipyard? 450 tons is the actual amount used in the repair work while 330 tons is only an estimated figure based on drawings, so there is inevitably a gap between these two. There is no way that shipyard charges repair costs on the amount calculated from drawings but not on those actually used. The actual amount also includes auxiliary materials. 4. In respect of bed-jig: the repair work of M.V. ‘Hongyang Mountain’ is divided by the waterline to ensure the quality and short repair cycle, so bed-jig and auxiliary materials are needed. Some bed-jigs are made of new material while others are of old steel after necessary modification. The steel weight of a bed-jig is calculated by the actual consumption. The repair work of M.V. ‘Hongyang Mountain’ does need bed-jigs and auxiliary materials of different specifications noted on the acceptance report according to the repairing technology of M.V. ‘Hongyang Mountain’. The note made by the ship owner’s supervisor shows that the cost of bed-jigs associated with average repair costs is more than

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RMB500,000. Lixin shipyard surrendered profits of more than RMB1,500,000 when negotiating repair costs. In respect of acceptance report and price statement: acceptance report is signed when the major repair work is done and the project is accepted by stages, which is a routine of ship repairing work to verify the project scale without noting the cost. Shipyard will issue a price statement and negotiate about the final cost with the owner after the acceptance report is signed by both parties. The repair cost is finally determined by the project bill from the shipyard to the owner. In respect of the unit price of material cost for steel processing: it is determined from the time needed, level of business of the factory, time slot of the port and dock, market conditions, and the workload and difficulty of the project. The unit price of steel processing material cost submitted on February 8, 2014 is based on a preliminary inspection of the average damage above the waterline combining average condition, project quantity, and condition and schedule of the wharf, dock, manpower resource of the shipyard. On February 22, the condition of M. V. ‘Hongyang Mountain’ turned out to be worse when inspected after docking. Lixin shipyard adjusted the price offer according to the comprehensive average condition, workload, wharf, berth condition, schedule of dock, market conditions, project difficulty, and the repair service which can be provided by the shipyard. The unit price of steel RMB 18 -19 /kg is determined considering price rising factors (double bottom, inside the dock, high strength steel, hyperbola, linear, flat bulb steel, steel plate pretreatment), which is the industry valuation regulation of the steel engineering, shipyard berth, and schedule adjustments subjecting to the final price on delivery of the ship. RMB 12/kg by the Third-Party supervisor does not consider the price rising factors. The shipyard surrendered profits of more than RMB 1,500,000. The data is based on comprehensive cost, such as the auxiliary material used, paint coat project progress, and so on. In respect of PSPC special paint coat repair of M.V. ‘Hongyang Mountain’: as a ship with PSPC special paint coat specification requirements, the shipyard that undertakes the average repair must meet the relevant qualifications. This is the first domestic average repair according to the PSPC standards, so the risk is high. PSPC special paint coat quotation is completely based on the technical standard, difficulty, and risk of the project. We had told the owner when signing the contract that if they can find a lower price while meeting PSPC special paint coat repair specification approved by CCS, the work can be done by a third party. But eventually, they chose our construction team. As far as I know the owner also invited the Defendant and the Third-Party supervisor to find qualified PSPC special paint coat repair factory, but all failed. In respect of whether the repair project covers only average repair, non-average repair work is noted out in the acceptance report.”

The court admitted the authenticity of the witness statement above. The court observed the investigation materials including collision accident investigation report, investigation and interrogation record, captain’s statement of

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M.V. “Hongyang Mountain”, accident report of M.V. “Oriental 08,” and so on copied from Wusong MSA to the interested parties during the trial. All parties raised no objection to the authenticity, legality, and relevancy of the materials. But the Defendant pointed out that conclusion of whether the host cylinder oil lubricator of M.V. “Oriental 08” had a defect should be based on a joint survey by maritime authorities and the manufacturer and the ship’s technical performance are subject to the inspection certificate. Furthermore, there is no operation and maintenance standard of host cylinder oil lubricator in our country now. This accident was caused by the crew’s operating error rather than the owner’s management. M.V. “Oriental 08” was seaworthy at the beginning of the voyage. The Third-Party argued that when making the accident responsibility identification, MSA did not consider the following fault of M.V. “Hongyang Mountain”: 1) The ship was of light condition in this voyage with a mean draft of less than 7 m (forward draft 4.6 m, aft draft 7.1 m) so it should not sail in the deep-water channel, which is one of the causes of the accident. 2) M.V. “Oriental 08” alleged that it called M.V. “Hongyang Mountain” via VHF telephone but M.V. “Hongyang Mountain” said there was no contact between them. Maritime authorities made inaccurate responsibility identifications without necessary investigation. The court ascertains the authenticity, legality, and relevancy of the above survey materials. Given that all parties have no evidence to prove M.V. “Oriental 08” was forbidden to depart from the port by local maritime authorities at the time of sailing or was asked to make rectifications about safety problems, the court is positive about the ship’s seaworthiness at the beginning of the voyage. According to relevant provisions in Safety Management Measures of Yangtze Deepwater Estuary Channel (12.5 m) During the Period of Trial Navigation, the vessel is allowed to sail in the deep water channel as long as the actual draft is no less than 7 m on average. The aft draft of M.V. “Hongyang Mountain” is 7.1 m so the Third Party’s opinion that the sailing of M.V. “Hongyang Mountain” in deep water channel partly caused the accident is not admitted by the court. MSA usually needs to investigate comprehensively about the cause and process of each accident before making accident responsibility identification. Whether M.V. “Oriental 08” called M.V. “Hongyang Mountain” via VHF telephone and whether there was contact between the two vessels does not affect the maritime administration in making an accident responsibility identification based on other facts of the case, so the Third Party’s defense that the responsibility identification was inaccurate is not supported by the court. Combining the above testimony and investigation materials, the court makes the following affirmation for the evidence put forward by the interested parties. With respect to evidence submitted by the Plaintiff: evidence 1, evidence 4, and evidence 11 are confirmed as a basis of this case. The authenticity of evidence 2 is confirmed. The average repair cost of the ship is usually based on the market

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conditions and does not necessarily require a bidding process. The average repair of M.V. “Hongyang Mountain” includes special paint coat repair, and Lixin Shipyard is qualified for this project. Lixin Shipyard’s repair quotation on February 8, 2014 was based on a preliminary investigation for damage situation of M.V. “Hongyang Mountain” before docking rather than a complete investigation after docking. Meeting Minutes on February 18, 2014 requested that the repair price should be based on CSSC92 yellow book with consideration to the market, which is a principle request and did not make certain the repair unit price or repair charge. The Defendant and the Third Party asserted that the repair costs of M.V. “Hongyang Mountain” were too high and the Plaintiff expanded the repair costs expecting not to be liable for the accident, which does not have sufficient evidence. The single payment of RMB3.58 million, part of the RMB10.58 million paid by the Plaintiff to Linxin Shipyard is admitted as repair costs although its bank receipt did not note it as repair costs since it corroborates with other evidence. So, this evidence is confirmed as the basis of this case. The authenticity of evidence 3 is confirmed. The Defendant and the Third Party put forward that the average repair of M.V. “Hongyang Mountain” includes its defects before the accident but did not submit evidence to prove it. Therefore, their opinion is ignored, and this evidence is treated as a basis of this case. The court adopts the testimony of the Defendant and the Third Party, and evidence 5 is not admitted as a basis of this case. Evidence 6 is corroborated by the accident investigation and its probative force is confirmed. The authenticity of evidence 7 is confirmed. Since the Defendant and the Third Party failed to provide evidence to refute, this set of evidence should be confirmed as a basis of the case. The value-added tax is levied in accordance with the law when buying paint. It cannot be refunded or taken on by a third party since the paint did not enter the commercial circulation field and it should be included in the Plaintiff’s damage, so the contradictory opinion of the Defendant and the Third Party is not adopted by the court. The authenticity of evidence 8 is confirmed. M.V. “Hongyang Mountain” suffered hull damage in this accident; the Defendant and the Third Party failed to provide evidence to refute, so this group of evidence is confirmed as a basis of the case. The evidence effect of 9 is confirmed. Although the processing contract includes RMB8,103.24 zinc block (8.2 kg/piece) and RMB10,980 zinc block (25 kg/piece), the Plaintiff claims only RMB8,103.24, the fee of 8.2 kg/piece zinc block with the corresponding delivery note and invoice. The Plaintiff’s failing to submit evidence of 25 kg/piece zinc block does not affect the trial of this case. The evidence of group 10 is admitted as a basis of this case since the Defendant failed to submit enough evidence to prove the irrationality of the area and range of PSPC special paint coat repair. The authenticity of evidence 12 is confirmed, but it shows no connection with this case and does not make the trial basis. The authenticity of evidence 13 is confirmed, but given that the Plaintiff does not claim the Third Party to undertake liability in this case, it does not make the trial basis. With respect to evidence submitted by the Defendant, the court confirms its authenticity and admits it as a basis of the case. Given that all parties have no evidence to prove M.V. “Oriental 08” ever was forbidden to leave port by local maritime authorities or was required to rectify safety problems at the beginning of

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this voyage, the court does not deny the Defendant’s opinion that the ship was seaworthy at the beginning of this voyage. With respect to evidence submitted by the Third Party: evidence 1 is the basis of this case. The quotation of evidence 2 is a copy, and the Plaintiff does not admit it, so it does not make a basis of this case. Meeting Minutes makes a basis of this case. The record of evidence 3 counts as a basis of this case, but it only reflects visible repair work rather than all. The authenticity of evidence 4’s report is confirmed. Although the Third Party submits it beyond the time limit for adducing evidence, he has been admonished by the court. According to the sixty-fifth clause of the Civil Procedure Law of the People’s Republic of China, the court allows the Third Party’s report to be submitted as evidence. Since it is not objective for Teamhead Company to determine the repair costs of M.V. “Hongyang Mountain” based only on the survey above the waterline without the portion below the waterline and invisible, this set of evidence cannot reflect the actual repair costs and thus bears no probative force. The court ascertains the following facts based on investigation in the trial: At 1615 on January 19, 2014, M.V. “Oriental 08” was loaded with coal and sailed from Zhoushan Laotangshan to Nantong Rugao with forward draft of 10.05 m and aft draft of 10.34 m. At 2310 on January 24, the vessel passed buoy light D3 and entered Beicao Channel (Yangtze estuary deep channel) at the full speed of 10.5 Knots and was controlled by the Captain, who using hand steering. At 0004 of the next day, M.V. “Oriental 08” sailed along the entrance traffic lane of Beicao channel at the speed of 10.9 Knots and course of 301º. In the meantime, M. V. “Hongyang Mountain” sailed along the exit traffic lane of Beicao channel, 1.5 miles away and relatively 350º from M.V. “Oriental 08”. At 0009, as M.V. “Oriental 08” sailed along the Beicao entrance traffic lane to the downstream of buoy light D14, the Cab received “SLD” alarm (slow down alarm), then the host speed dropped to “dead slow ahead”, with the hull quickly shifting to the left. It moved towards M.V. “Hongyang Mountain” which was sailing in the set course of the exit channel. At this point, M.V. “Hongyang Mountain” was sailing in Beicao exit channel, 0.6 miles away from M.V. “Oriental 08”, and the relative position was about 320º. At 0011, the left bow of M.V. “Oriental 08” hit the front of the portside of M.V. “Hongyang Mountain”. When the host speed of M.V. “Oriental 08” dropped, all the personnel on duty felt a shake of the ship, so the chief engineer immediately conducted troubleshooting. Five minutes later, fault was excluded, but the collision has already happened. At 17:05 of January 24, 2014, M.V. “Hongyang Mountain” set sail in ballast from Changshu to Tangshan Jingtang Port with forward draft of 10.05 m and aft draft of 10.34 m. At 2130 of that day, passing Yuanyuansha lightship, M.V. “Hongyang Mountain” entered the Beicao Channel at the speed of 10 to 11 knots. At 0004 the next day, the vessel was sailing along Beicao Channel exit traffic lane at a speed of 9.9 Knots, heading 124º, while M.V. “Oriental 08” was sailing along the Beicao entrance traffic lane, 1.5 miles away and relatively 340º from M.V. “Hongyang Mountain”. At 0010, when M.V. “Hongyang Mountain” reached the upstream of buoy light D14 at the speed of 10.3 Knots and heading 125º, the crew in the cab found that the front left vessel M.V. “Oriental 08”

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of the entrance traffic lane suddenly turned left, moving towards M.V. “Hongyang Mountain”. The captain ordered an immediate stop and full right rudder of the ship. At 0011, the left bow of M.V. “Oriental 08” hit the front portside of M.V. “Hongyang Mountain”. The collision angle of M.V. “Hongyang Mountain” and M. V. “Oriental 08” was about 0004º, and the collision spot is between buoy light D14 and D16 in the exit traffic lane of Beicao Channel. Beicao Channel is a deepwater channel connecting the Yangtze River estuary precautionary area A and precautionary area of Yuanyuansha with a separated traffic lane. When the collision happened, the tide of Beicao Channel was flowing southeast and about to end. After the collision, the two vessels drifted towards the south part of Beicao Channel under the effect of inertia and separated. The crew on each vessel checked the damage and then reported to Maritime Safety Administration Wusong Bureau VTS about the accident. Subsequently, the Maritime Bureau VTS agreed the two vessels to drop anchor at the mouth of Wusong. This collision accident caused varying degrees of damage to M.V. “Hongyang Mountain” and M.V. “Oriental 08”. According to a preliminary survey, M.V. “Hongyang Mountain” had a large sunken area in the front of portside bearing four broken spots: (1) a 0.25 m-long crack on the No.1 cargo hold of the portside under the waterline, through which water slightly filtrated into the hold; (2) two holes (one 2*0.4 m and the other 0.3*0.3 m) also on the No.1 cargo hold of the portside under the waterline; (3) a 3*0.2 m crack on the third ballast tank of the portside (two meters above the waterline); (4) a 0.3*0.2 hole on the No.4 cargo hold of the portside under the waterline. M.V. “Oriental 08” suffered a 6-m long deformation of the ship bow and was missing the left anchor which was set on the hull of M.V. “Hongyang Mountain”. M.V. “Hongyang Mountain” was a vessel with a gross tonnage of 32,899 mt, net tonnage of 19,142 mt, total length of 189.99 m, width of 32.26 m and depth of 18 m. Its registered owner was the Plaintiff and operator Huayang Maritime Center. M.V. “Oriental 08” was a vessel with a gross tonnage of 24,798, net tonnage of 13,886, total length of 189.99 m, width of 30.2 m and depth of 15.2 m; the Defendant was its registered owner and operator. Both vessels were bulk carriers suitable for coastal navigation. On February 18, 2014, representatives of ship owners, insurers, insurance appraisers delegated by the insurers, and lawyers of the shipowner of M.V. “Oriental 08” attended a brief meeting about the flow-up issues of the accident at Wusong MSA and formed a Meeting Minutes. About the ship repair, the Summary says that after the meeting, ship owners of both sides should complete relevant formalities as soon as possible and arrange repair work. The cost of other projects should be subject to the 92 Yellow Book while the repair costs will be based on the 92 Yellow Book with a coefficient of 0.95 and negotiated according to market price. Insurance surveyor of both sides should be informed 24 h in advance about the ship’s entering factory, docking, or major repair work so that appraisers can arrange on-site inspection properly. The owner’s representatives and the insurance surveyor of both sides should participate in negotiations about the repair costs and fulfill the mitigation of damage obligation on the basis of making the ship return to the original state.

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On February 22, 2014, M.V. “Hongyang Mountain” entered Lixin Shipyard for repair work, representatives from ship owners and insurance surveyor of both sides and the shipyard conducted a joint inspection on the spot about the damage conditions of M.V. “Hongyang Mountain”. On February 25, Lixin Shipyard started the vessel’s repair work above the waterline. The Plaintiff and the shipyard signed a ship repair contract agreeing on an estimated repair cost of RMB12.25 million (hidden implications and extension project excluded), which was subject to the actual price. The unit price would be determined on the final settlement after the completion of the project. The contract also agreed on some other matters. M.V. “Hongyang Mountain” suffered damage below the waterline, so it needed docking. On April 19, 2014, M.V. “Hongyang Mountain” shifted berth from Lixin Shipyard to anchorage waiting to dock because there were other vessels docked at that time. After internal coordination, M.V. “Hongyang Mountain” docked in Changxing Shipyard of China Shipping Industry on April 21, and the repair project finished on May 1. M.V. “Hongyang Mountain” was a vessel whose ballast tank needed a special paint coat (hereinafter referred to as PSPC special paint coat standard), and the PSPC special paint coat was damaged in the accident. Before the PSPC special paint coat repair work started, appraisers from Teamhead Company (entrusted by the Third Party) raised that the quotation of Lixin Shipyard was too high and wanted to delegate another professional construction team with a more reasonable price. But weighing the cost, Teamhead Appraisers Co., Ltd. did not seek another PSPC special paint coat team. Fearing delay of the repair work, the Plaintiff required Lixin Shipyard to complete the PSPC special paint coat work. On May 2, 2014, M.V. “Hongyang Mountain” docked, and the PSPC special paint coat repair was completed by Lixin Shipyard the same year on May 22. After acceptance of the repair work of M.V. “Hongyang Mountain”, the Plaintiff and Lixin Shipyard signed a ship repair work statement confirming the total cost of the repair project RMB12,094,693 (RMB5,914,875 above the waterline, RMB4,656,432 below the waterline and RMB1,523,386 of the PSPC special paint coat). By mutual agreement, the final settlement price was RMB10.58 million. The Plaintiff paid the repair costs of RMB10.58 million to Lixin Shipyard, RMB1 million on April 11, 2014, RMB2 million on April 18, 2014, RMB3 million on May 21, RMB1 million on June 6, 2014, and RMB3.58 million on July 28, 2014. During the repair period of M.V. “Hongyang Mountain”, the Plaintiff bought 7454Lt ship using paint from Shanghai International Paint Co. at the cost of RMB281,395.09, which was paid on July 28, 2014. The Plaintiff bought 54 pieces of ballast tank zinc block (8.2 kg/piece) from Nantong Xinlong Metal Casting Co. at the costs of RMB8,103.24, which was paid on May 29, 2014. The Plaintiff also bought materials needed in the left-side cathodic protection project of M.V. “Hongyang Mountain” from Shanghai Aihang Industry and Trade Co. and paid RMB33,500 on July 15, 2014. CCS Shanghai conducted an inspection for M.V. “Hongyang Mountain” before and after the repair work, and the Plaintiff paid the inspection fee of RMB85,852 to CCS Shanghai on July 28, 2014.

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The insurer of M.V. “Oriental 08” was the Third Party, China Life Property Insurance Co., Ltd. Suzhou center branch (hereinafter referred to as Suzhou Life Property Insurance Co.). Suzhou Life Property Insurance Co. paid 3 million prepaid insurance indemnities to the Plaintiff after the completion of the repair work on June 6, 2014. According to Wusong MSA’s liability report, M.V. “Oriental 08” lost control due to an engine failure, crossed the dividing navigation line when navigating along Beicao channel in Yangtze estuary, and hit M.V. “Hongyang Mountain”. The direct cause of this accident was that M.V. “Oriental 08” crossed the dividing navigation line and sailed against the traffic flow. So, the Bureau argued that M.V. “Oriental 08” should take full responsibility while M.V. “Hongyang Mountain” take none. The court treats the case as a damage compensation dispute caused by ship collision accident. As the owner of M.V. “Hongyang Mountain”, the Plaintiff’s tort suit claim against The Defendant, the owner of M.V. “Oriental 08” for civil compensation on the fault liability of M.V. “Oriental 08” in this accident is in accordance with the relevant provisions of law and thus supported by the court. According to the claims of both parties, the court makes the following judgment upon the key problems such as how the fault liability of the accident is born by the two parties and how much compensation the Defendant should pay to the Plaintiff. As to how the fault liability is born by the Plaintiff and the Defendant in this accident. From the above facts, the cause and fault liability of this accident can be summarized as follows: firstly, crossing the dividing navigation line and sailing in the adjacent reverse traffic lane against the traffic flow of M.V. “Oriental 08” is the main reason that caused the close quarters situation of the two vessels. The two vessels were 0.6 miles apart and both sailed normally in respective traffic lanes, one entering and the other exiting the Yangtze Estuary. Then M.V. “Oriental 08” lost control. Its starboard bow was influenced by ebb current from the southeast, and the hull suddenly turned left and crossed the dividing navigation line into the exist traffic lane, forming immediate danger with the normally sailing vessel M.V. “Hongyang Mountain”. Although M.V. “Hongyang Mountain” immediately took anticollision measures of stop and full right rudder, the collision still occurred; secondly, the loss of control of M.V. “Oriental 08” due to an engine failure is a great reason for this collision accident. When reaching near the buoy light D14 of Beicao Channel, its engine speed dropped dramatically within a short time because the engine pressure in the inlet oil pump dropped, which led to the loss of control of the ship; thirdly, both vessels having insufficient time and space to take measures is the objective cause of this accident. When M.V. “Oriental 08” lost control, the two vessels were rather close and traveling relatively fast. There were just two minutes between M.V. “Oriental 08” losing control and the collision, so M.V. “Hongyang Mountain” taking a sharp turn and lowering speed did not avoid the speed with which the vessels were moving. Based on the above analysis, the court affirms that M.V. “Oriental 08” crossing the dividing navigation line and sailing against the traffic flow in the reverse line resulted in a dangerous situation with M.V. “Hongyang Mountain” and directly

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caused this collision accident. M.V. “Oriental 08” violated Article 8 Paragraph 1 of the Safety Management Measures of Yangtze Deepwater Estuary Channel (12.5 m) During the Period of Trial Navigation, Article 10 of Yangtze River Ships Routing System in Shanghai Section and Article 10 Paragraph 2 of the International Regulations for Preventing Collisions at Sea 1972. M.V. “Hongyang Mountain” taking anti-collision measurements of stop and full right rudder of the ship did not avoid the accident, but it had done the necessary action. The Defendant and the Third Party refused to accept the identification of responsibility made by the MSA but failed to submit enough evidence to refute, so the court decides to adopt Wusong MSA’s liability report that M.V. “Oriental 08” takes full responsibility of this accident. The counter plea of the Defendant and the Third Party that they should not assume full responsibility for the accident has no foundation of fact and thus shall be denied by the court. The court does not deny the Defendant’s opinion that M.V. “Oriental 08” was seaworthy at the beginning of this voyage. The accident in this case happened between two sea-going vessels, so Article 4 of the Provisions of the Supreme People’s Court on Several Issues Concerning the Trial of Ship Collision Disputes should be applied in determining the fault liability of the involved parties of this case. The Defendant, as the owner, should be responsible for the fault liability of M.V. “Oriental 08” in this case. The compensation paid by the Defendant for the loss or costs to the Plaintiff. According to the facts affirmed by the trial, the loss or costs of the Plaintiff due to the damage suffered by M.V. “Hongyang Mountain” in the involved accident are as follows: (1) repair costs RMB10.58 million, including RMB1 million paid on April 11, 2014, RMB2 million on April 18, 2014, RMB3 million on May 21, RMB1 million on June 6, 2014, RMB3.58 million on July 28, 2014. (2) Ship inspection fee RMB85,852 paid on July 28, 2014. (3) Paint fee RMB281,395.09 paid on July 28, 2014. (4) Cost of ballast tank zinc block RMB8,103.24 paid on May 29, 2014. (5) Repair costs of the left-side cathodic protection project RMB33,500 paid on July 15, 2014. The above costs are necessary and reasonable costs spending in repairing the average damage of M.V. “Hongyang Mountain” and thus the court confirms that the Defendant should compensate the Plaintiff’s loss. Since Suzhou Life Property Insurance Co. paid RMB3 million prepaid insurance indemnities to the Plaintiff after the completion of repair work. So, excluding the RMB3 million repair charges which were paid by the Plaintiff earlier (RMB1 million on Apr. 11, 2014 and RMB2 million on APRIL 18, 2014), the Defendant should compensate the Plaintiff the repair costs of RMB7,988,850.33 in total. The Defendant shall bear the Plaintiff’s loss of interest. In accordance with Article 13 of the Provisions of the Supreme People’s Court on Compensation for Losses in Cases of Ship’s Touch and Collision: the calculation of interest loss: the interest loss of ship value shall be calculated from the date of stopping the calculation of loss for detention to the day appointed by a ruling or mediation that the interests should be paid; the interest of other losses shall be counted from the date of the occurrence of the loss or costs to the date day appointed by a ruling or mediation that the interests should be paid; the interest shall be calculated according to the interest rate for the corresponding period as capital. The Plaintiff’s claims for

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compensation in this case belong to other losses in this rule, so the interest loss shall be calculated from the date of the occurrence of the loss or costs. In conclusion, the loss or costs of the Plaintiff resulting from the collision accidents shall be paid by the owner of M.V. “Oriental 08”, The Defendant, in proportion (100%) for his faults, in an amount of RMB7,988,850.33 and the interest loss from the date of the occurrence of the costs to the date appointed by this ruling with the loan interest rate for the corresponding period. The insurance company is admitted as Third Party without independent claim and the Plaintiff does not claim civil liability to the Third Party. Therefore, the court shall withhold judgment on whether the third party, the insurance company, bears civil liability. On these grounds, in accordance with Article 6 Paragraph 1, Article 15 Paragraph 1 Sub-paragraph 6 of the Tort Liability Law of People’s Republic of China, and Article 142 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: 1. The Defendant, Jiangsu Dongfang Huayuan Shipping Co., Ltd., shall pay the cost of repairs to the Plaintiff, Yangpu Hongyang shipping Co., Ltd., in an amount of RMB7,988,850.33; 2. The Defendant, Jiangsu Dongfang Huayuan Shipping Co., Ltd., shall compensate the Plaintiff, Yangpu Hongyang Shipping Co., Ltd., the interest on RMB3 million calculated from the date May 21, 2014 to the date designated by this judgment on the basis of the loan interest rate published by People’s Bank of China over the corresponding period; 3. The Defendant, Jiangsu Dongfang Huayuan Shipping Co., Ltd., shall compensate the Plaintiff, Yangpu Hongyang Shipping Co., Ltd., the interest on RMB8,103.24 calculated from May 29, 2014 to the date designated by this judgment on the basis of the loan interest rate published by People’s Bank of China over the corresponding period; 4. The Defendant, Jiangsu Dongfang Huayuan Shipping Co., Ltd., shall compensate the Plaintiff, Yangpu Hongyang Shipping Co., Ltd., the interest on RMB1 million calculated from June 6, 2014 to the date designated by this judgment on the basis of the loan interest rate published by People’s Bank of China over the corresponding period; 5. The Defendant, Jiangsu Dongfang Huayuan Shipping Co., Ltd., shall compensate the Plaintiff, Yangpu Hongyang shipping Co., Ltd., the interest on RMB33,500 calculated from July 15, 2014 to the date designated by this judgment on the basis of the loan interest rate published by People’s Bank of China over the corresponding period; 6. The Defendant, Jiangsu Dongfang Huayuan Shipping Co., Ltd., shall compensate the Plaintiff, Yangpu Hongyang shipping Co., Ltd., the interest on RMB3.58 million, RMB85,852, and RMB281,395.09, amounting to RMB3,947,247.09 calculated from July 15, 2014 to the date designated by this judgment on the basis of the loan interest rate published by People’s Bank of China over the corresponding period;

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7. The Defendant shall pay off the above first to the sixth reparations and the corresponding interest at one-time within seven days after this judgment takes effect; 8. Reject other claims of the Plaintiff. In event of the failure to perform their obligation of pecuniary payment within the period given by this judgment, interest on the debt for the delayed period shall be doubled in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of RMB69,163, according to the charge rules of summary procedure, the court fee shall be charged in half, namely RMB34,581.5. Preservation application fee in amount of RMB5,000, and together with the litigation fee, the total amount is RMB39,581.5, of which the Plaintiff shall pay RMB1,187.5, and the Defendant shall pay RMB38,394. Due to the Plaintiff having paid the preservation application fee and the case acceptance fee when applying for property preservation and filing the action before the court, the Defendant shall pay the reparations given by this judgment together with the litigation fees for which he should be responsible. In case of dissatisfaction with this Judgment, either party can appeal to the Hubei High People’s Court by submitting one appeal petition to the court together with 4 copies within 15 days after service of this judgment. When the Appellant sends the petition, the Appellant needs to pay the litigation fee of the appeal in advance according to the amount dissatisfied and Article 13 Paragraph 1 of the regulations on litigation fee. The receiver of the payment: the non-tax income finance account of Fiscal revenue departments of Hubei Province and the account number is 05xxx69–1. The bank is Wuhan East Lake branch of China Agricultural Bank. (The pay should give clear indication of the Hubei High People’s Court). If the Appellant does not pay the litigation fee of appeal within seven days after the expiration date for appealing, the appeal will be withdrawn automatically. Judge: ZHOU Da September 5, 2014 Clerk: WANG Fang

Dalian Maritime Court Civil Judgment Yangpu Success Logistics Co., Ltd. v. China Railway Modern Logistics Technology Co., Ltd. Dalian Branch (2014) Da Hai Shang Chu Zi No. 331 Related Case(s) None. Cause of Action 202. Dispute over contract of carriage of goods by sea or sea-connected waters. Headnote Intermediary held to have contracted with carrier as principal and thus obliged to pay freight for carriage in its own name, despite contract provision making obligation to pay conditional on payment of freight by third party, which was held to be relevant only to timing of freight obligation. Summary The Plaintiff carrier brought a claim against the Defendant shipper for failure to pay freight under a contract for carriage of goods. The Defendant argued that no contract ever existed, and that it was simply commissioned by the Plaintiff to set up a relationship of transport contract with a third party purchaser. In the event that a contract did exist, the Defendant argued that payment to the Plaintiff was conditioned upon the Defendant receiving payment from the third party purchaser. Since the Defendant had not yet received such payment from the third party, it argued that it was not contractually obliged to pay the Plaintiff for the carriage of goods. The court held that a contract existed, that the defendant failed to pay which constituted a breach. Furthermore, the court found that terms of payment could not be conditioned upon future performance by a third party. The condition of payment by the third party was relevant only to the timing of the Defendant’s obligation to pay the Plaintiff. Held: by the Dalian Maritime Court that the Defendant was liable to the Plaintiff.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_59

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Judgment The Plaintiff: Yangpu Success Logistics Co., Ltd. Domicile: Room 209, Floor 2, Block C, SDIC Yangpu Port Hostel, Xipu Road, Yangpu District, Hainan. Legal representative: HONG Anqian, general managerm Agent ad litem: YANG Zhaohui, lawyer of Liaoning Xingzhong Law Firm. The Defendant: China Railway Modern Logistics Technology Co., Ltd. Dalian Branch Domicile: Room 202-1, Public Warehouse Building, Da Yaowan Bonded Port District, Dalian, Liaoning. Person in charge: CHEN Jiufeng, general manager. Agent ad litem: HOU Jianwen, lawyer of Liaoning Xiangyuan Law Firm. Agent ad litem: HOU Guangqiang, employee, male, Han, born on June 21. With respect to the case arising from dispute over contract of carriage of goods by sea or sea-connected waters filed by the Plaintiff, Yangpu Success Logistics Co., Ltd. (hereinafter referred to as the Plaintiff), against the Defendant, China Railway Modern Logistics Technology Co., Ltd. Dalian Branch (hereinafter referred to as the Defendant), the court, after accepting the case, formed a collegiate panel in accordance with law and held a hearing in public. YANG Zhaohui as agent ad litem of the Plaintiff, HOU Jianwen and HOU Guangqiang as agents ad litem of the Defendant, appeared in court to attend the hearing. Now the case has been concluded. The Plaintiff claimed that on April 26, 2013, the Defendant signed the waterway transport contract with it. It was agreed that the Plaintiff arranged M.V. ZHOU SHENG to carry the steel wire delivered by the Defendant from Dandong Port to Qinshan Port, Haiyan County, Jiaxing City; the freight was RMB67 per ton (including tax and insurance); the carrier was in charge of tally; the quantity should be determined according to the port receipt; and the freight should calculated by the actual amount. On April 27, 2013, the Defendant delivered 2,932 packages steel with a weight of 5,799.42 tons actually. With confirmation of the carrier and the port of shipment, that was described in the delivery list. On May 5, 2013, the goods mentioned above were carried to Qinshan Port safely and the delivery was completed on the same day. The Plaintiff had fully performed its obligation for transport. According to the waterway transport contract, the Defendant should pay the freight in amount of RMB388,561.14 to the Plaintiff. The Plaintiff issued a Road and Inland Waters Cargo Transport Industry Uniform Invoice to the Defendant on May 2, 2013, but the Defendant refused to pay the freight with various reasons. The Plaintiff claimed that the waterway transport contract was lawful and effective and the Plaintiff fulfilled all of its obligations pursuant to the contract, so the Defendant should pay the freight. Thus the case was brought to the court. The Plaintiff requested the court to judge that the Defendant should pay the freight in sum of RMB388,561.14 to the Plaintiff and bear the litigation costs.

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The Defendant argued that Plaintiff commissioned it to establish a relationship of transport contract with Fengcheng Municipality Steel Co., Ltd. (hereinafter referred to as “Fengcheng Company”), the Defendant signed the contract with Fengcheng Company in its own name. Before signing the contract, the Defendant had made it clear that it would sign the contract, only if the Plaintiff accepted the condition that it would pay the freight after Fengcheng Company paid the money to it. It was provided in the contract that the Defendant would pay the freight within five days after Fengcheng Company paid to the Defendant. So the condition of payment had not been accomplished, the Defendant should not pay the Plaintiff the freight. After trial, the court holds that on April 26, 2013, the Plaintiff as the carrier and the Defendant as the shipper signed the waterway transport contract. It was agreed the ship’s name was M.V.ZHOU SHENG, the goods was steel, the port of shipment was Dandong Port, the port of destination was Qinshan Port, Haiyan County, Jiaxing City, the freight was RMB67 per ton (tax and insurance included); the shipper promised to provide 5,900 tons goods and the quantity should be settled by the actual number; the payment should be paid in one time after the vessel arrived at the port of destination and the carrier issued invoice to the shipper within five working days after Fengcheng Company paid the freight. On April 27, 2013, the Defendant actually provided 2,932 packages steel wire, weighing 5,799.42 tons to the Plaintiff. Then the Plaintiff performed its obligation for transport pursuant to the contract and issued a Road and Inland Waters Cargo Transport Industry Uniform Invoice to the Defendant on May 2, 2013, which stated the carrier was the Plaintiff, the shipper is the Defendant, the goods was steel, the quantities (qualities) were 5,799.42 tons, the unit freight was RMB67, and the total amount was RMB388,561.14. The facts above can be proved by evidence the waterway transport contract and Inland Waters Cargo Transport Industry Uniform Invoice evidence and trial transcripts on record, so the court holds they are admissible. The court holds that the waterway transport contract signed by the Plaintiff and the Defendant is true expression of intent, it is lawful and effective. The contractual relationship of carriage of goods by sea or waters connected with sea is established. The Defendant did submit any relevant evidence to prove it claim that it is commission relationship established between the two parties, so the court will not ascertain. The waterway transport contract submitted by the Defendant is irrelevant to the case, it shall not be adopted. The Plaintiff, as the carrier, shall perform its obligation for transport in accordance with the contract, and the Defendant, as the shipper, shall deliver the goods and pay the freight as agreed. But a dispute over the terms of payment provided in the waterway transport contract occurred between the Plaintiff and the Defendant, the Plaintiff held the terms of payment was subject to a conditional time period, but the period was not clear, it should be deemed no agreement upon this had been reached, the Plaintiff may claim for the freight against the Defendant at any time; even if the terms of payment was subject to certain condition, it was invalid for violation of the regulations on the one-year time bar of domestic waterway transport contract. The Defendant argued that the terms of payment was subject to certain condition, it was expressed clearly. Fengcheng

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Company did not pay the freight, so the condition was not achieved and the Defendant should not pay the freight to the Plaintiff. As prescribed in Article 45 Paragraph 1 of the Contract Law of the People’s Republic of China (hereinafter referred to as the “Contract Law”), the parties may agree on that the effectiveness of a contract be subject to certain conditions. A contract whose effectiveness is subject to certain conditions shall become effective when such conditions are accomplished. The contract with dissolving conditions shall become invalid when such conditions are satisfied. A clause which is subject to certain condition attached to the entry into force conditions of the terms of the contract is behavior person to perform a contract in the future may or may not occur the objective situation occurs as the additional conditions, the nature of the condition is that the entry into force of the contract terms on the basis of whether there is uncertain. If the Plaintiff, the Defendant to the manner of payment agreed system attached to the entry into force of the conditions of the terms of the contract, the fulfillment of the conditions, the Defendant to the Plaintiff payment freight; if the condition is not satisfied or may not occur, the Defendant has may forever exemption and no need to pay the freight to the Plaintiff. Plaintiff, the Defendant signed the water transport contract, the Plaintiff, the Defendant both sides of the subjective intent of the Defendant's payment obligations. Therefore, the Plaintiff, the Defendant on the terms of payment should not be attached to the entry into force of the terms of the contract terms. The Plaintiff and the Defendant agreed in the contract that the shipper would pay off the freight within five days after Fengcheng Company paid, such an agreement is there is no dolt that that the Defendant of course bears the obligation of paying freight to the Plaintiff, only to fulfill the payment obligations of the time. Plaintiff, the Defendant agreed to pay in the form of payment to the Fengcheng Steel Corp to the shipper, the amount of time, the amount of the agreement is not clear, belonging to the parties to fulfill the terms of the agreement. According to Article 62 Sub-paragraph 4 of the Contract Law, the deadline is not clear for the performance, the obligor may at any time to perform. The creditor may also demand the fulfillment at any time, but it should be to each other the time required for preparation. In this case, the Plaintiff may claim for the freight against the Defendant, but it shall give necessary time for preparation. The Plaintiff according to the contract to finish the transportation and to the Defendant invoiced, the invoice delivered to the Defendant’s time the Plaintiff to the Defendant contended that the ocean freight. Therefore, the Plaintiff's to the Defendant claims the freight USD388,561.14 (67 yuan/ton * 5,799.42 tons), the court to be supported. In summary, according to Article 45 Paragraph 1, Article 60 Paragraph 1, Article 62 Sub-paragraph 4, Article 109 of the Contract Law of the People’s Republic of China, the judgment is as follows: The Defendant, China Railway Modern Logistics Technology Co., Ltd. Dalian Branch, shall pay the freight in sum of RMB388,561.14 to the Plaintiff, Yangpu Success Logistics Co., Ltd., within ten days as of the effectiveness of this judgment. Court acceptance fee in amount of RMB7,128 (prepaid by the Plaintiff) together with the sum aforesaid shall be paid by the Defendant to the Plaintiff.

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In case of any failure of payment within the period specified in this judgment, the Defendant shall pay double interest on the debt for the belated payment in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. In the event of dissatisfaction with this judgment, any party may within 15 days upon the service of this judgment, submit a statement of appeal to the court, together with ten duplicates, to lodge an appeal to the Liaoning High People’s Court. Presiding Judge: SUN Guang Judge: XIN Xin Acting Judge: DONG Shihua August 5, 2014 Clerk: WANG Cuicui

Qingdao Maritime Court Civil Judgment Yantai Xiangyu Materials Co., Ltd. v. China Continent Property & Casualty Insurance Co., Ltd. Yantai Sub-Branch et al. (2012) Qing Hai Fa Hai Shang Chu Zi No. 899 Related Case(s) None. Cause of Action 230. Dispute over marine insurance contract on the sea or sea-connected waters. Headnote Two cargo insurers, one which produced the policy and the other of which collected the premium, held jointly liable for loss sustained by cargo owner. Summary The Plaintiff purchased all risks and war risks insurance from the Defendants. Defendant CCIC Shandong produced the insurance policy, and Defendant CCIC Yantai issued the policy and collected policyholders’ premiums. The Plaintiff’s policy covered shortages occurring during the port of loading and port of destination. Plaintiff alleged Defendants’ policy should cover its shortage losses, and Defendants should pay interest, translation, litigation, and other fees arising from the refusal of coverage. Initially, CCIC Yantai argued that CCIC Shandong was liable, and CCIC Shandong argued that it had nothing to do with the Plaintiff’s claim. The Defendants then argued that Plaintiff’s goods were defective and their natural characteristics caused the shortage. Defendants alleged the goods were easily fluidized and were flushed out with the bilge drainage. As such, the Defendants could not be liable for Plaintiff’s loss.

Judgment The Plaintiff: Yantai Xiangyu Materials Co., Ltd. Domicile: Room 2705, No. 13 Erma Road, Zhifu District, Yantai, Shandong. Legal representative: HAN Shujiang, chairman. Agent ad litem: LI Cheng, lawyer of Shandong Binhai Zhengda Law Firm. Agent ad litem: WANG Lei, lawyer of Shandong Binhai Zhengda Law Firm.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_60

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The Defendant: China Continent Property & Casualty Insurance Co., Ltd. Yantai Sub-branch Domicile: No. 58 Huanshan Road, Zhifu District, Yantai, Shandong. Person in charge: CAO Xuemei, general manager. Agent ad litem: ZHANG Chongwu, lawyer of Shangdong Sunsum Law Firm. Agent ad litem: JIANG Lei, lawyer of Shangdong Sunsum Law Firm. The Defendant: China Continent Property & Casualty Insurance Co., Ltd. Shangdong Branch Domicile: F6, Building C, Three Qing Century Wealth Center, No. 28 South Gongye Road, High-Tech Industrial Development Zone, Jinan, Shandong. Person in charge: TANG Junqiang, General Manager Agent ad litem: ZHANG Chongwu, lawyer of Shangdong Sunsum Law Firm. Agent ad litem: JIANG Lei, lawyer of Shangdong Sunsum Law Firm. With respect to the case arising from dispute over marine insurance contract of sea or waters connected with sea filed by the Plaintiff, Yantai Xiangyu Materials Co., Ltd. (hereinafter referred to as “Xiangyu Company”), against the Defendant, China Continent Property & Casualty Insurance Co., Ltd. Yantai Sub-branch (hereinafter referred to as “CCIC Yantai”) to the court on August 29, 2012, after accepting the case, the court formed a collegiate panel according to law and heard the case in public. During the trial, the Plaintiff applied with the court to add China Continent Property & Casualty Insurance Co., Ltd. Shangdong Branch (hereinafter referred to as “CCIC Shandong”) as co-Defendant of this case, the court allowed and notified the company to participate in the action as co-Defendants. LI Cheng and WANG Lei as agents ad litem of the Plaintiff, ZHANG Chongwu and JIANG Lei as agents ad litem of the two Defendants, appeared in court to attend the hearing. Now the case has been concluded. The Plaintiff alleged that on November 24, 2011, the Plaintiff purchased all risks insurance from the Defendants for 45,742.22 t petroleum coke carried by M.V. “Kristin Picer”, and the insurance policy number was PYII201137011704000019. The insurance contract appointed that the Defendants underwrote the risk of shortage of the goods during the period from port of loading, Davant Port, New Orleans, USA, to port of destination, Qinzhou Port, China, draft number of Commodity Inspection after shipment at the port of loading and draft number of Commodity Inspection at the port of destination as basis to determine the amount of shortage. When this goods finished shipment at port of loading, Draft Survey Report proved that deadweight tonnage of this goods was 45,742.22 t, and unloaded goods 44,524.695 t after the ship arrived at Qinzhou Port, China, the shortage amount of the goods was 1217.525 t, the unit price of goods was USD124 per ton, the Defendants should indemnify the Plaintiff in sum of USD150,973.10 for shortage of goods according to the appointment. In order to safeguard the Plaintiff’s legitimate interest, the Plaintiff requested the court to judge that: 1. the Defendants should pay insurance compensation to the Plaintiff in sum of USD150,973.10 according to insurance contract, but changed request during the

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court hearing which request the court to judge that the Defendants should pay RMB958,679.18 and the interest which should be calculated at the loan interest rate of the same period provided by the People’s Bank of China; 2. the Defendants paid translation fee of files in sum of RMB1,733.33; 3. the litigation costs and others should be born by the Defendants. CCIC Yantai defended that the involved insurance policy was issued by CCIC Shandong, the insurer in the insurance policy was CCIC Shandong, not CCIC Yantai. CCIC Shandong defended that it was neither the issuer of the insurance policy involved, nor the insurer of the goods involved, had nothing to do with this case. According to the current practice of insurance industry, it was usually to make standard policy which would be given to CCIC Yantai to issue the policy in the name of their own. Standard terms in the policy was usually the standard policy of CCIC Shandong Branch. Person in charge of CCIC Yantai issued this policy, and CCIC Yantai charged related insurance premium and dealt with related endorsement operation. And CCIC Yantai was the issuer of the insurance policy involved. Based thereon, CCIC Yantai was either the issuer of insurance policy of the goods involved, or the insurer of the goods. The Plaintiff presented the following evidence to support its claim, cross-examination views of the two Defendants and attestation opinions of the court were as follows: Evidence one, bill of lading, and evidence two, certificate of weight, to prove that M.V. “Kristin Picer” actually loaded cargo 47,042.22 t at the port of loading. Evidence three, insurance policy and endorsement, and evidence four, invoice of insurance premium, to prove that the Plaintiff insured all risks for carriage of the goods involved and paid insurance premium, there was insurance contractual relationship between the Plaintiff and the Defendants. Evidence five, certificate of weight, to prove that M.V. “Kristin Picer” unloaded goods 44,524.695 t at Qinzhou Port, the shortage amount of the goods was 1217.525 t. Evidence six, commercial invoice, to prove that the price of shortage goods was USD124 per ton. Evidence seven, invoice, to prove that the Plaintiff paid the cost to translate related files in sum of RMB5200. Evidence eight, claim letter, to prove that the Plaintiff had already sent an letter to the ship owner involved to claim for losses. Evidence nine, sales contract, to prove that the Plaintiff signed a sales contract with seller. Contract No.: 1Q-1110-01-064; description of goods: petroleum coke; quantity of goods: 45,000 t (± 10%). Evidence ten, front and back of bill of lading, to prove that M.V. “Kristin Picer” actually loaded cargo 47,042.22 t at the port of loading and issued two bills of lading by 1300 and 45,742.22 t. The Plaintiff took delivery of goods by original bill of lading and was consignee.

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Evidence eleven, customs declaration form, to prove that: 1. the Plaintiff handled import declaration for 47,042.22 t petroleum coke carried by M.V. “Kristin Picer”. Number of customs declaration was 47,042.22 t, the unit price was USD124 per ton; 2. bill of lading/waybill number in Certificate of Weight of port of discharging in evidence five was marked based on bill of lading/waybill number showed on customs declaration form. Evidence twelve, payment voucher, to prove that the Plaintiff made a full payment to the seller according to the seller’s invoice price of goods. Evidence thirteen, explanation, to prove that evidence two, certificate of weight and evidence six, commercial invoice presented by the Plaintiff were directly delivered to Industrial Bank Co., Ltd. Yantai Branch by foreign related bank, and were the documentary of this commercial letter of credit. Evidence fourteen, translation of insurance policy terms, to prove that the Defendants should not be entitled to enjoy 1% deductible excess. Evidence fifteen, explanation (supplemented covered seal of Industrial Bank Co., Ltd. Yantai Branch), to prove that evidence two, certificate of weight and evidence six, commercial invoice presented by the Plaintiff were directly delivered to Industrial Bank Co., Ltd. Yantai Branch by foreign related bank, and was the documentary of this commercial letter of credit. Evidence sixteen, explanation, to prove that certificate of weight and commercial invoice of 1300 t cargo carried by voyage involved were directly delivered to Bank of Communications Yantai Branch by foreign related bank, and were the documentary of this commercial letter of credit. Evidence seventeen, Civil Judgment (2013) Qing Hai Fa Hai Shang Chu Zi No. 455 of Qingdao Maritime Court, to prove that the court had held that Ping An Insurance Co., Ltd. should bear liability for insurance of shortage according to the proportion of 1300 t cargo against the whole cargo the ship carried. The rest amount of shortage liability should be born by the Defendants. After verification of the original, cross-examination views of the two Defendants were as follows: The two Defendants questioned the authenticity, legality and relevancy of evidence one, evidence two, evidence six, evidence eleven. The two Defendants had no objection to the authenticity and legality of evidence three, evidence four, evidence five, evidence twelve, evidence fifteen, but questioned the relevancy. The two Defendants had no objection to the authenticity of evidence ten, evidence thirteen, evidence fifteen, evidence sixteen, evidence seventeen. The two Defendants had no objection to the authenticity of evidence seven, but questioned the legality and relevancy. The two Defendants were not sure about the authenticity of evidence eight. Concerning evidence nine, the two Defendants thought it was copy, not original, and the Plaintiff did not submit the translation, if the Plaintiff could submit the original and the Defendant’s translation was correct, it was clearly recorded in the original contract that the moisture content of goods was

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between 8 and 10%, the part more than 8% should be deducted from the FOB price, at the same time, the trade terms agreed by the parties to the contract was CFR (China). The two Defendants could not guarantee the accuracy of evidence fourteen, translation of insurance policy terms, moreover, the translation could not prove the facts the Plaintiff claimed. Attestation opinions of the court for the evidence presented by the Plaintiff are as follows: Evidence one and evidence ten presented by the Plaintiff are the same one. The Plaintiff did not provide the clause of two copies of bill of lading in evidence one, and submitted them in evidence ten. Due to the two Defendants had no objection to the authenticity of evidence ten, based hereon, the court confirms the authenticity of these two evidence. For evidence two, evidence six, evidence thirteen presented by the Plaintiff, the two Defendants had no objection to the authenticity of evidence thirteen, based hereon, the court confirms the authenticity of it. For evidence two, evidence six, the two Defendants claimed that they were not original and should perform notarial certification procedures due to they were formed abroad, so the two Defendants could not ascertain the authenticity of them. But according to evidence thirteen, explanation issued by Industrial Bank Co., Ltd. Yantai Branch, these two evidence were the documentary of this commercial letter of credit and were directly delivered to Industrial Bank Co., Ltd Yantai Branch, and based thereon, the court ascertains the source and authenticity of these two evidence. The court disaffirms the two Defendants’ other claim for they did not put forward the concrete reason and submit contrary evidence. For evidence three, evidence four, evidence five, evidence twelve presented by the Plaintiff, the two Defendants had no objection to the authenticity and legality, the court adopts the authenticity of these four evidence. In evidence three, insurance policy, the insurer” was CCIC Shandong, CAO Xuemei sealed in “the authorized person to sign”, CAO Xuemei was person in charge of CCIC Yantai. The two Defendants had no objection to the authenticity of evidence seven, the court ascertains the authenticity. But this evidence did not have direct relevancy with other translation of English evidence in this case, therefore, the court does not ascertain the problems this evidence attempted to prove. Evidence eight is in accordance with the original through the court’s check, the court affirms authenticity based hereon. For evidence nine, for the reason that the Plaintiff did not submit original evidence, and did not conform to the evidence form, the court does not ascertain this evidence. Evidence eleven is in accordance with the original through check, the two Defendants did not confirm the authenticity of the evidence, but they did not put forward the concrete reason and submit contrary evidence, the court adopts the authenticity.

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The Plaintiff translated evidence fourteen by itself, under the situation that the two Defendants questioned the authenticity, the court does not ascertain this evidence. The two Defendants had no objection to the authenticity of evidence fifteen, evidence sixteen, evidence seventeen, the court adopts the three evidence. The two Defendants jointly presented the following evidence to support the pleas: Evidence one, business license and certificate of organization code of CCIC Yantai, to prove the identity of the subject of litigation of CCIC Yantai. Evidence two, insurance slip of the Plaintiff, to prove that the Plaintiff did not inform the Defendants that the goods was wet mine and the moisture content when insured, the Plaintiff informed the Defendants that the goods insured was chemicals. Evidence three, two copies of bill of lading, to prove that: 1. the consignee of two batch of goods was not the Plaintiff; 2. both the shipment time of goods was November 25, 2011; 3. the weight indicated in the bill of lading was respectively 1300 and 45,742.2 t; 4. The endorsement seal of the bill of lading provided by our party was the seal of the Plaintiff, different from the bill of lading provided by the Plaintiff. Evidence four, quality certificate and draft survey report of port of loading, to prove that: 1. Loading time was from November 23 to 25, 2011; 2. the time to issue the quality certificate for the inspection agency, Sabine Surveyors Ltd., was November 30, 2011; 3. the moisture content of goods in the port of loading was 7.18%; 4. the weight of the whole goods in the port of loading was 45,742.22 t. Evidence five, draft survey record, to prove that the weight inspected by surveyors in the port of discharging was 45,790.1 t, there was not a shortage of goods compared with quality certificate port of loading. Evidence six, ship’s bilge sewage drainage log and its abstract and translation, to prove that the ship drained bilge sewage of cargo hold 1254.57 t during the carriage of goods. Evidence seven, e-mail of the Plaintiff and its translation, to prove that: 1. the Plaintiff had confirmed the moisture content of goods in the port of loading was 7.18%; 2. the Plaintiff had known the shortage of goods was the bilge sewage drained during the carriage of goods. Evidence eight, data of drainage of the ship and so on the Plaintiff applying to the court to obtain, to prove that the ship drained bilge sewage of cargo hold 1254.57 t during the carriage of goods. Evidence nine, the related provisions of International Maritime Solid Bulk Cargoes (IMSBC) Code, to prove that: 1. the petroleum coke the Plaintiff imported was goods of class B provided in International Maritime Solid Bulk Cargoes (IMSBC) Code, that having chemical dangerous when it is transported in bulk; 2. the goods was black powder, granular, and the moisture content was high, so the goods at the same time had the characteristics of easy fluidized solid bulk cargo, the goods was also goods of class A provided in International Maritime Solid Bulk Cargoes (IMSBC) Code.

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Evidence ten, notice on executing the Implementation of International Maritime Solid Bulk Cargoes (IMSBC) Code by Ministry of Transportation, to prove that International Maritime Solid Bulk Cargoes (IMSBC) Code and its amendment applied in China. Evidence eleven, Document No. 638 (2011) of Ministry of Transport, to prove that the petroleum coke the Plaintiff imported was goods which having chemical dangerous when it was transported in bulk, and at the same time having the characteristics of easy fluidized solid bulk cargo, based hereon, according to the requirements of International Maritime Solid Bulk Cargoes (IMSBC) Code and Document No. 638 (2011) of Ministry of Transport, the ship should take emergency measures such as drainage due to safety concerns. Evidence twelve, the cause and details of the accident of M.V. “Mar Reina” and the correspondence (including translation) between the Plaintiff and seller in USA attached by the Plaintiff, to prove that: 1. the Plaintiff had already known the moisture content of the petroleum coke imported in July was high at the time she sent the letter of claim to foreign shipper, the water in the goods was as much as 5411.83 t; 2. the reason of shortage of goods was the bilge sewage of 1240 t drained during the carriage of goods. Evidence thirteen, the goods quality certificate issued by Guangxi commodity inspection the Defendants applying to the court to obtain, to prove that the moisture content of goods involved at port of destination was 5.27%. Cross-examination views of the Plaintiff are as follows: The Plaintiff had no objection to evidence one. The Plaintiff questioned the authenticity of evidence two. The Plaintiff believed evidence three was a copy, the original bill of lading submitted to the court by the Plaintiff of should prevail. The Plaintiff ascertained the authenticity of quality certificate in evidence four, but the test standard of moisture content of this quality certificate was ASTM D4931. The Plaintiff disaffirmed the authenticity of other evidence in evidence four for they were not original. The Plaintiff had no objection to evidence five. The Plaintiff questioned the authenticity of evidence six and evidence seven due to they were copies. The Plaintiff questioned the authenticity, legality and relevancy of evidence eight. The Plaintiff had no objection to the authenticity of evidence nine, ten and eleven, but questioned the relevancy for they could not prove what the Defendants claimed. The Defendants only provided the scanning copy of correspondence on November 24, 2011 of evidence twelve, the Plaintiff disaffirmed the authenticity of correspondence. The Plaintiff ascertained the authenticity of evidence twelve, the cause and details of the accident of M.V. “Mar Reina” and etc., but believed that the translation was inaccurate. The Plaintiff held that the evidence could not prove that the reason of shortage of goods was the bilge sewage drainage.

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The Plaintiff had no objection to the authenticity of evidence thirteen, but this evidence indicated that the test standard of moisture content was SH-T0032-1990. Attestation opinions of the court for the evidence presented by the two Defendants are as follows: The Plaintiff had no objection to evidence one and evidence five, based hereon, the court ascertains these two evidence. Evidence two is in accordance with the original through the court’s check, the court affirms authenticity based hereon. For evidence three and seven, for the reason that the two Defendants did not submit original evidence, and did not conform to the form of evidence, the court deem the evidence inadmissible. For evidence four, the Plaintiff adopted the authenticity of quality certificate, the court ascertains it based hereon. For the reason that the two Defendants did not submit original evidence, and did not conform to the form of evidence, the court deems other evidence in evidence four inadmissible. Evidence six and evidence eight are the same one. Evidence eight was applied by the Defendants and obtained from China Certification & Inspection Group Guangxi Co., Ltd. Qinzhou Branch by the court, therefore, the court confirms the authenticity of these two evidence. Ship’s bilge sewage drainage log should be recorded in log and engine log, the form of evidence six was abstract, no related log and engine log to prove, could not fully prove the fact that the ship drained sewage 1254.57 t. Because the Plaintiff had no objection to the authenticity of evidence nine, ten and eleven, the court ascertains the authenticity. According to the provisions of these three pieces of evidence, the petroleum coke was goods of class B provided in International Maritime Solid Bulk Cargoes (IMSBC) Code, not the listed cargo in water transport easy fluidized solid bulk cargo list. China make directory management on water transport easy fluidized solid bulk cargo. The Defendants only provided the scanning copy of correspondence on November 24, 2011 of evidence twelve which did not conform to the legal evidence form, the Plaintiff disaffirmed the authenticity of it, based hereon, the court disaffirms the correspondence; the Plaintiff ascertained the authenticity of the cause and details of the accident of M.V. “Mar Reina” and etc., the court ascertains it; the translation was translated by the Defendants themselves, the court disaffirms it. This evidence can not prove that the reason of shortage of goods was the bilge sewage drainage. The Plaintiff had no objection to the authenticity of evidence thirteen, the court adopt this evidence. In combination of the valid evidence above and statement of parties in trial, the court ascertains the following facts through investigation: Both the two Defendants are subject matter of other forms of organization, obtain business license in domicile and engage in related business activities. CCIC Shandong sets up CCIC Yantai.

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The Plaintiff purchased all risks insurance from CCIC Yantai for 45,742.22 t of 47,042.22 t petroleum coke she imported according to Ocean Marine Cargo Clause of the People’s Insurance Company (Group) of China Limited (1981/1/1), and insured institute war risk to this Defendant according to Institute War Clauses (Cargo) (1982/1/1), and filled insurance slip. The Plaintiff specified on the insurance slip: applicant, Yantai Xiangyu Materials Co., Ltd.; the insured, Yantai Xiangyu Materials Co., Ltd.; commercial invoice amount, USD5,580,550.84; insurance value, USD6,138,605.924; percentage of addition, 110%; goods quantity and weight, 45,742.22 t; description of goods, petroleum coke; insured amount, USD6,138,605.924; term of coverage, from Davant Port, New Orleans, USA, to Qinzhou Port, China; sail depart date, November 25, 2011; transportation, M.V. “Kristin Picer”; insurance and special agreement, all risks according to Ocean Marine Cargo Clause of the People’s Insurance Company (Group) of China Limited (1981/1/1), and institute war risk (cargo), including Institute War Clauses (Cargo) (1982/1/1), and risk of shortage in weight for shortage of the whole batch of goods more than 1%. Term of coverage of risk of shortage in weight was from port to port, draft number of Commodity Inspection after shipment at the port of loading and draft number of Commodity Inspection at the port of destination as basis to determine the amount of shortage. Cargo transportation insurance policy was issued on November 24, 2011, the insurer in the insurance policy was printed CCIC Shandong, CAO Xuemei sealed in “the authorized person to sign”, CAO Xuemei was person in charge of CCIC Yantai. The insurance policy recorded, package and quantity, 45,742.22 t; description of goods, petroleum coke; insured amount, USD6,138,605.924; sail depart date, November 25, 2011; transportation, M.V. “Kristin Picer”; term of coverage, from Davant Port, New Orleans, USA, to Qinzhou Port, China; insurance and special agreement, all risks according to Ocean Marine Cargo Clause of the People’s Insurance Company (Group) of China Limited (1981/1/1), and institute war risk (cargo), including Institute War Clauses (Cargo) (1982/1/1), and risk of shortage in weight for shortage of the whole batch of goods more than 1%. Term of coverage of risk of shortage in weight was from port to port, draft number of Commodity Inspection after shipment at the port of loading and draft number of Commodity Inspection at the port of destination as basis to determine the amount of shortage. On November 25, 2011, the carrier of goods involved issued two copies of the original bill of lading No. 001 and No. 002. No. 001 bill of lading recorded: shipper, Mitsui & Co., Ltd. America Branch; consignee: to order of Bank of Communications Yantai Branch; ship: M.V. “Kristin Picer”; port of loading: Davant Port, New Orleans, USA; port of discharging: Port of China; goods: petroleum coke; weight: 1300 t. No. 002 bill of lading recorded, shipper, Mitsui & Co., Ltd. America Branch; consignee: to order; ship, M.V. “Kristin Picer”; port of loading: Davant Port, New Orleans, USA; port of discharging, Port of China; goods, petroleum coke; weight, 45,742.22 t. The weight of goods checked draft by Commodity Inspection in the port of loading was 45,742.22 t.

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On December 2, 2011, CCIC Yantai issued invoice of insurance premium to the Plaintiff. On December 8, 2011, CCIC Yantai issued endorsement to change the insured amount of insurance policy above into USD6,239,238.81. On December 12, 2011, CCIC Yantai charged the insurance premium of endorsement and issued invoice of it. On December 12, 2011, the seller of goods involved Mitsui & Co., Ltd. issued invoice of goods to the Plaintiff. The invoice indicated that, quantity of goods: 45,742.22 t; unit price: USD124; amount of goods: USD5,672,035.28. On January 8, 2012, M.V. “Kristin Picer” arrived at Qinzhou Port, China and started discharging and finished on January 10, 2012. After draft check by Commodity Inspection, weight of discharging was 45,790.1 t, the shortage was 1252.12 t. After the finish of the voyage involved, party of M.V. “Kristin Picer” signed abstract of sewage drainage log of the voyage involved, this abstract recorded this ship once drained bilge sewage 1254.57 t. On January 20,2012, the Plaintiff handled import declaration in Qinzhou, China, for 47,042.11 t petroleum coke imported by it. Bill of lading/waybill numbers marked in the customs declaration were 001, 001-1, 001-2, 001-3, 001-4. The Plaintiff paid to the seller for 45,742.22 t of goods of No. 002 bill of lading according to the invoice issued by the seller on February 14, 2012, the price of goods was USD5,672,035.28; paid to the seller for 1300 t of goods of No. 001 bill of lading on February 17, 2012, the price of goods was USD161,200. The other identified, on August 29, 2012, the central parity rate published by State Administration of Foreign Exchange was USD1 equivalent to RMB6.34. The facts above are proved enough by evidence and trial record in volume. The court holds that the issues of dispute of this case are that: 1. whether the two Defendants should undertake insurance liability to compensate for the Plaintiff’s goods shortage loss; 2. whether the two Defendants can enjoy the franchise according to the 1% coverage franchise specified in the insurance policy; 3. how to ascertain the amount claimed by the Plaintiff. 1. Whether CCIC Yantai should undertake insurance liability to compensate for the Plaintiff’s goods shortage loss, and whether CCIC Shandong should undertake supplementary insurance liability to compensate for the Plaintiff’s goods shortage loss as set-up company. Both the two Defendants are subject matter of other forms of organization, obtain business license in domicile and engage in related business activities, can participate in litigation as the parties of the case. (1) This case was with respect to dispute over insurance contract by sea or waters connected with sea. The Plaintiff purchased all risks insurance for 45,742.22 t petroleum coke according to Ocean Marine Cargo Clause of the People’s Insurance Company (Group) of China Limited (1981/1/1). According to the record of insurance policy, the insurer was CCIC Shandong, CAO Xuemei sealed in “the authorized person to sign”, CAO Xuemei was person in charge of

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CCIC Yantai, CCIC Yantai charged insurance premium and issued invoice of it. In practice, the insurance policy is uniformly printed by CCIC Shandong, its authorized branch seals and charges insurance premium when its branch signs insurance contract with client, act of seal shall be deemed as the actual issue of insurance policy. The claim of CCIC Yantai that she did not issue the insurance policy and was not the insurer of this case could not stand, the Defendant shall bear insurance compensation liability as the insurer, that this Defendant shall compensate the Plaintiff according to the actual loss after the occurrence of shortage. CCIC Shandong is set-up company of CCIC Yantai, and is the producer of standard insurance policy, providing to CCIC Yantai to use for business. CCIC Shandong as set-up company, should undertake supplementary insurance compensation liability beyond the scope of insurance compensation liability of CCIC Yantai. (2) The Defendants argued that the shortage was due to defects in the goods itself and natural characteristics. Petroleum coke is goods of class B provided in International Maritime Solid Bulk Cargoes (IMSBC) Code (having chemical dangerous when it is transported in bulk), and at the same time had the characteristics of goods of class (easy fluidized solid bulk cargo). Petroleum coke was easily fluidized when it was transported, water seeped into the bilge from the goods, the ship drained infiltration sewage during the carriage, the act of the ship to drain sewage was the reason of shortage, the Defendants shall not compensate for it. Ascertained in trial, sewage drainage log issued by the party of ship was an abstract in form, no related log and engine logbook to prove, cannot fully prove the fact that the ship drained sewage 1254.57 t, more importantly, the Defendants did not have evidence to prove the sewage drained by the ship came from goods itself. According to the provisions of Article 5 of Regulations for the Safety Management of Easy Fluidized Solid Bulk Cargo by Water Transportation of Ministry of Transport, China make directory management on water transport easy fluidized solid bulk cargo, petroleum coke is not the listed cargo in water transport easy fluidized solid bulk cargo list, there is not any evidence to indicate it has the characteristic that easy fluidized in transport. The claim of the Defendants that the shortage was due to defects in the goods itself and natural characteristics that petroleum coke was easily fluidized when it was transported, lack a proper basis, and shall be disaffirmed. The Plaintiff marked description of goods, package and transportation in the insurance slip, for the situation the insurer knows or should know in general business, if the insurer does not ask, the Plaintiff do not need to inform, there is no evidence to prove that the Plaintiff was not truth disclosure. The court disaffirms the claim of the two Defendants that the Defendants shall not bear compensation liability because the Plaintiff was not truth disclosure.

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(3) According to Ocean Marine Cargo Clause of the People’s Insurance Company (Group) of China Limited (1981/1/1), all risk include not only Particular Average and With Particular Average, but also total loss or partial loss of insured goods caused by external reasons. Term of coverage of the Defendants was from port to port, ended in discharging to dock warehouse/yard of port of destination. Draft number of Commodity Inspection at the port of loading and draft number of Commodity Inspection at the port of destination as basis to determine the amount of shortage. There was shortage of goods compared with draft number at port of loading when the goods insured by the Plaintiff arrived at port of destination, Qinzhou Port, by sea, the two Defendants did not prove that the short amount of the Plaintiff’s goods was not the insurance compensation range provided by law or appointed by the parties. To sum up, CCIC Yantai shall indemnify the Plaintiff for shortage loss in the insurance compensation range. 2. Whether the two Defendants can enjoy the franchise according to the 1% coverage franchise specified in the insurance policy. Firstly, the Plaintiff filled out the insurance slip when insured for the goods of this case, content in the insurance slip besides insurance and special agreement was written by the Plaintiff, insurance and special agreement was printed, content of franchise was in English. The court holds that, the insurance clause of exemption from liability of the insurer shall make prominent tips and intuitive expression, in this case franchise clause was in English, without Chinese translation, was not sufficient to constitute a reminder and a clear explanation to the insurer, the Defendants also did not provide evidence to prove that they had made written or oral explanation of this franchise clause to the Plaintiff. There are major differences in understanding of the policy and franchise clause in insurance slip between the parties of this case. The Plaintiff held that, according to the record of policy, the expression of insurance were a sentence of Chinese and English explanation, franchise for 1% shortage was written in English and was the explanation for Institute War Risk (Cargo) written in Chinese; the Defendants believed, franchise for 1% shortage was applied in shortage loss caused by all the risk of all risks or war risk. Based hereon, according to the provisions of Article 30 of Insurance Law of the People’s Republic of China, interpretation should be made in favor of the insurer. Secondly, for the understanding of 1%, the insurance company shall be entitled to enjoy the franchise in the range of less than 1%; the insurance company shall not enjoy the franchise in the range of more than 1%. Due to that the shortage of draft inspection between port of destination and port of loading was 1217.525 t, the total weight of goods in the port of loading was 45,742.22 t, the two division was more than 2%, exceeded 1% franchise range claimed by the Defendants. To sum up, the two Defendants cannot enjoy the franchise according to the 1% coverage franchise specified in the insurance slip and policy.

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3. Ascertain the amount claimed by the Plaintiff. M.V. “Kristin Picer” loaded cargo of the Plaintiff in 47,042.22 t at Davant Port, New Orleans, USA and issued two bills of lading by 1300 t and 45,742.22 t. The Plaintiff insured to the Defendants for 45,742.22 t among these, and insured the other 1300 t to Pingan Insurance Co., Ltd. M.V. “Kristin Picer” unloaded goods 44,524.695 t after the ship arrived at Qinzhou Port, China, the shortage amount of the goods was 1217.525 t. The Plaintiff claimed that the Defendants should bear the insurance liability for the 45,742.22 t of goods which is covered by the goods of the whole ship, the proportion of the goods to the shortage (namely 1252.12  45,742.22/47,042.22 = 1217.52 t), the court holds that the claim of the Plaintiff is reasonable and adopts it. For the amount of loss of the Plaintiff, the court holds that, the Plaintiff paid the whole amount of goods according to the invoice issued by the seller of goods involved, the actual loss of the Plaintiff shall be determined according to invoice price, that is USD124 per ton. To sum up, CCIC Yantai shall compensate to the Plaintiff in accordance with USD124 per ton, a total loss of goods for 1217.52 t, in sum of USD150,972.48, equivalent to RMB957,165.52 (dollars is calculated at the central parity rate published by State Administration of Foreign Exchange was USD1 equivalent to RMB 6.34). The fees of translation as requested by the Plaintiff, not the necessary litigation fees, shall be disaffirmed. To sum up, according to Article 221, Article 237 of the Maritime Code of the People’s Republic of China, Article 9, Article 14 and Article 20 of Interpretation II of the Supreme People’s Court on Several Issues concerning the Application of the Insurance Law of the People’s Republic of China, the judgment is as follows: 1. The Defendant China Continent Property & Casualty Insurance Co., Ltd. Yantai Branch shall indemnify the Plaintiff Yantai Xiangyu Materials Co., Ltd. for the loss of shortage in sum of RMB957,165.52 and the interest calculated from August 29, 2012, to the actual payment day at corresponding interest rate on bank loans. The obligations of paying the above-mentioned amounts shall be fulfilled within 10 days as of the effectiveness of this judgment. 2. Reject other claims of the Plaintiff Yantai Xiangyu Materials Co., Ltd. against the Defendant China Continent Property & Casualty Insurance Co., Ltd. Yantai Branch. 3. The Defendant China Continent Property & Casualty Insurance Co., Ltd. Shandong Branch should bear supplementary compensation liability for the above liability of the Defendant China Continent Property & Casualty Insurance Co., Ltd. Yantai Branch. 4. Reject the other claims of the Plaintiff Yantai Xiangyu Materials Co., Ltd. against the Defendant China Continent Property & Casualty Insurance Co., Ltd. Shandong Branch.

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Any party who fails to perform the obligation of paying above-mentioned amounts within the period prescribed herein, shall in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China, double pay the interest for the period of delayed performance. Court acceptance fee in amount of RMB13,406, RMB45 shall be born by the Plaintiff, and RMB13,361 shall be born by the two Defendants. In event of dissatisfaction with this judgment, the parties may, within 15 days upon service of this judgment, file an application with the court for review, six originals, with duplicates being submitted in terms of the number of the other parties, to lodge an appeal to the Shandong High People’s Court. Presiding Judge: LIU Minggao Judge: YU Wenbin Judge: QIN Tao August 8, 2014 Clerk: ZHAO Feifei

Guangzhou Maritime Court Civil Judgment Yicheng Yaxin Home Textile Co., Ltd. v. Guangzhou Max Dragon International Freight Forwarding Co., Ltd. Shenzhen Branch et al. (2014) Guang Hai Fa Chu Zi No. 133 Related Case(s) None. Cause of Action 223. Dispute over freight forwarding contract on the sea or sea-connected waters. Headnote Freight forwarder issuing a bill of lading on behalf of an NVOCC held to be jointly and severally liable with the NVOCC for misdelivery of cargo without presentation of the original bill of lading because the form of the NVOCC’s bill of lading had not been registered with the transportation authorities in China. Summary The Plaintiff shipper claimed that it entrusted Defendants with the carriage of its home textile goods from China to Costa Rica. The Defendants were acting as agents for a Hong Kong-based non-vessel-owning common carrier (NVOCC), and issued a bill of lading in the NVOCC’s name. However, the NVOCC’s bill of lading had not been registered with the transport authorities in China. The Plaintiff alleged that the consignee picked up the goods in Costa Rica without presenting the original bill of lading and refused to pay the rest of the purchase price. The Plaintiff sought to be compensated for the loss of goods plus interest. Held—that the Defendants should bear the liability for compensation for the loss of the goods involved. When a freight forwarding enterprise issues a bill of lading on behalf of a non-vessel operating common carrier in a form that has not been registered with the transport authority in China, the freight forwarder and the NVOCC are jointly and severally liable for any loss under the bill of lading. Thus, the Defendants were jointly and severally liable with the Hong Kong-based NVOCC for the misdelivery of the goods in Costa Rica.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_61

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Judgment The Plaintiff: Yicheng Yaxin Home Textile Co., Ltd. Legal representative: PAN Wenjie, chairman. Agent ad litem: LIN Yunpeng, lawyer of Guangdong Pengcheng Sunshine Law Firm. The Defendant: Guangzhou Max Dragon International Freight Forwarding Co., Ltd. Shenzhen Branch Domicile: Room 24B, Building B, First World Square, West Hongli Road, Futian District, Shenzhen, Guangzhou. Person in charge: QIN Wen. The Defendant: Guangzhou Max Dragon International Freight Forwarding Co., Ltd. Domicile: Room 914, 201 West Huangpu Avenue, Tianhe District, Guangzhou, Guangdong. Legal representative: QIN Wen, general manager. With respect to the case arising from dispute over freight forwarding contract filed the Plaintiff, Yicheng Yaxin Home Textile Co., Ltd., against the Defendant, Guangzhou Max Dragon International Freight Forwarding Co., Ltd. Shenzhen Branch (hereinafter referred to as “Max Dragon Shenzhen”) with the court on September 27, 2013. After accepting the case, the court organized a collegiate panel consisting of LI Lifei, Presiding Judge, PINGYANG Danke, Judge, and JIANG He, Acting Judge. Parties in this case were summoned to exchange evidence on April 15, 2014 and a hearing in public was held on the same day. The application filed by the Plaintiff to add Guangzhou Max Dragon International Freight Forwarding Co., Ltd. (hereinafter referred to as “Max Dragon Company”) as Defendant was accepted by Max Dragon Company. It abandoned corresponding time limit for producing evidence and agreed to hold a hearing in public on that very day. LIN Yunpeng, agent ad litem and the person in charge of the Plaintiff, as well as QIN Wen, the legal representative of the Defendant, appeared in court to attend the hearings. Now the case has been concluded. The Plaintiff claimed that it concluded a contract of sales of home textiles with a foreign customer in February 2012. In April of the same year, the Plaintiff entrusted Max Dragon Shenzhen with the carriage of its goods from China to the Republic of Costa Rica, of which the total price was USD54,604.69. Max Dragon Shenzhen accepted such commission and issued a set of original bill of lading in triplicate to the Plaintiff. After the goods arrived at the port of destination, due to the default of the two Defendants, the consignee picked up the cargo without original B/L and then rejected to pay the rest of the payment. The Plaintiff therefore requested the court to judge that the two Defendants should compensate the loss of goods in amount of USD28,114.72 together with the interest thereon from May 1, 2012 to June 30, 2013 as well as the litigation cost of this case jointly and severally.

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Evidential materials submitted by the Plaintiff within the time limit of producing evidence are as follows: 1. Bill of lading, to prove that Max Dragon Company issued the original B/L in triplicate which was still possessed by the Plaintiff; 2. Shipping order, to prove that the Plaintiff entrusted Max Dragon Shenzhen with the carriage of the goods involved; 3. Customs declaration form, to prove that the total value of the goods involved was USD54,604.69; 4. Proforma invoice, to prove that the sales contract was actually concluded between the Plaintiff and the foreign buyer; 5. Printed copies of e-mails, to prove that the Plaintiff contacted with Max Dragon Company in respect of the carriage of goods and the Plaintiff hastened the foreign buyer to pay for the goods. The Defendants, Max Dragon Company and Max Dragon Shenzhen, jointly argued that they were merely freight forwarders who issued bill of lading and arranged carriage on behalf of the actual carrier, Max Dragon Shipping (HK) Limited (hereinafter referred to as “Max Dragon (HK)”) and should not take the obligation for indemnity arising from delivery of goods without original bill of lading. Additionally, according to the laws of the Republic of Costa Rica, the goods having not been taken delivery of within 30 days of the arrival at the port of Costa Rica, shall be treated as abandoned goods and will be auctioned publicly if customs clearance thereof cannot be finished within 6 months. The Plaintiff failed to surrender the B/L and pay the price of the goods involved, so loss therefrom should be born by itself. The two defendants requested the court reject all claims of the Plaintiff. Within the time limit of producing evidence, evidence jointly provided by the two Defendants are as follows: 1. Agency agreement of carriage of goods by sea, to prove that the fact that Max Dragon Company issued bills of lading on behalf of Max Dragon (HK); 2. Bill of lading, to prove that the contract of carriage of goods between the Plaintiff and Max Dragon (HK) was concluded; 3. Printed copies of e-mails, to prove that it was nearly 4 months after delivery of the goods that the Plaintiff informed the two Defendants that the foreign buyer did not fulfill the payment. Upon cross-examination in the hearing, the parties raised no objection to the authenticity, legality, relevancy of the evidence submitted by each other, the court ascertains according to law. Based on the evidence above together with the trial, the court finds out the facts as follows: On February 15, 2012, Inversiones Sala Colon Co., Ltd. (hereinafter referred to as “Sala Company”), which was located in the Republic of Costa Rica, ordered textiles including quilts and pillows from the Plaintiff. The price was fixed in the form of FOB Wuhan. In early April 2012, the Plaintiff entrusted Max Dragon

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Shenzhen with the carriage of its goods by sea from Wuhan, China to San Jose, Costa Rica. Max Dragon Shenzhen then entrusted Max Dragon (HK) with the shipment of the goods involved. On April 24, Max Dragon Company, as the agent of Max Dragon (HK), issued an original bill of lading numbered with MS1204015 in triplicate with a title of Max Dragon (HK) for the goods involved to the Plaintiff. The Plaintiff was shipper and both the consignee and the notify party were Sala Company. The port of loading was Wuhan, China and the port of discharge was Puerto Limon, Costa Rica. The place of delivery was San Jose, Costa Rica. The day of shipment was April 24, the vessel was M.V. “Run Fa 818”, the voyage was V.006E and the goods were quilts and pillows, which were loaded in two FEUs numbered with CBHU8981403 and CBHU8186064. In addition, it was agreed that delivery terms was CFS-DOOR and freight to collect. On June 6, the Plaintiff hastened Sala Company to fulfill the payment after the goods involved arrived at the port of discharge. On June 9, Sala Company promised to arrange the rest payment in the next week in email. On August 29, the Plaintiff informed Max Dragon Shenzhen that it still held original bills of lading but had not collected all payment, and requested the carrier not deliver the goods to the consignee via email. The Plaintiff still holds the original bill of lading in triplicate. The Defendants confirmed in trial that the goods were lost and the Plaintiff could not take delivery with original B/L. According to the customs declaration form with number of 47082012000 0019341, the goods in total value of USD54,604.69 were loaded in containers numbered with CBHU8981403 and CBHU8186064. The Plaintiff claimed that Sala had paid USD6,089 and USD20,400.91 by two installments and the rest USD28,114.72 were still to be collected. The two defendants affirmed the facts above. It is also found out that on August 10 2011, Max Dragon Company and Max Dagon (HK) concluded the freight forwarding agreement, providing that Max Dagon (HK) accepted the entrustment of Max Dragon Company to book space, stow and carry the goods, carry out trailer carriage and handle customs clearance in the port of discharge, as well as issue bill of lading with a title of Max Dragon (HK) according to instruction of Max Dragon (HK); the agreement should be valid for a period of 5 years from the date of effectiveness of the agreement. Max Dragon (HK) did not register its bill of lading on record with the Ministry of Transport. In the trial, all parties agreed to choose laws of China as governing laws to try the case. The court holds that the Plaintiff entrusted Max Dragon Shenzhen with the carriage of goods involved from China to Costa Rica, this case is arising from dispute over foreign-related freight forwarding contract. According to Article 23 of the Some Provisions of the Supreme People’s Court on the Scope of Cases to be Entertained by Maritime Courts, this case falls within exclusive jurisdiction of maritime courts. The domiciles of the two Defendants are in Guangdong, which are under the jurisdiction of the court, according to Article 24 of the Civil Procedure Law of the People’s Republic of China, a lawsuit brought on a contract dispute shall be under the jurisdiction of the people’s court of the place where the Defendant has

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his domicile or where the contract is performed, the court has jurisdiction over this case. The Plaintiff and the two Defendants chose to apply Chinese laws, according to Article 126 Paragraph 1 of the Contract Law of the People’s Republic of China, Chinese laws are applicable for resolution of the dispute in this case. Max Dragon Shenzhen accepted the commission from the Plaintiff and assigned the carriage of goods by sea to Max Dragon (HK). Max Dragon (HK) issued the bill of lading in its own name with number of MS1204015 after receiving the goods, on which it is stated the Plaintiff is the shipper and legal holder. There is certain relationship of contract of carriage of goods established between the Plaintiff and Max Dragon (HK), which is evidenced by the bills of lading. Max Dragon (HK), as the actual carrier of goods under the bill of lading, shall properly and carefully carry, keep and care for the goods and deliver the goods against surrendering the bill of lading. The goods involved were missing since its arrival at destination on June 6, 2012, the goods shall be deemed as lost as a result, the Plaintiff still holds the original bill of lading but lost the control of the goods involved. The loss of the goods occurred during the period of carrier’s responsibility, and there is no exemption as provided in Article 51 of the Maritime Code of the People’s Republic of China, therefore Max Dragon (HK) shall bear liability for compensation of the loss of the goods involved. Max Dragon Company accepted commission of Max Dragon (HK), whose bill of lading has not been registered with the Ministry of Transport to issue the bill of lading involved. According to Article 12 Paragraph 1 of the Provisions of the Supreme People’s Court on Several Issues concerning the Trial of Cases of Disputes over Marine Freight Forwarding, if a freight forwarding enterprise issues a bill of lading as entrusted by a non-vessel operating common carrier who does not handle the registration of bill of lading with the authority of transport of China, and the parties hence claim the freight forwarding enterprise and such carrier shall be severally and jointly liable for any loss under the bill of lading, the people’s court shall support such claim, therefore Max Dragon Company and Max Dragon (HK) shall take liability for any loss under the bill of lading numbered with MS1204015 severally and jointly, and such claim raised by the Plaintiff is legal and shall be supported. Max Dragon Shenzhen did not exercise due diligence when carrying out the Plaintiff’s entrustment on carriage of goods by sea, which consequently caused loss of the cargo. According to Article 1 of the Provisions of the Supreme People’s Court on Several Issues concerning the Trial of Cases of Disputes over Marine Freight Forwarding, if a freight forwarding enterprise, without performing its obligation of diligence, enters into contract of carriage of goods by sea with a non-vessel operating common carrier who does not handle the registration of bill of lading with the authority of transport of China, and hence causes any loss to the principal, such freight forwarding enterprise shall bear relevant liabilities for indemnification, therefore Max Dragon Shenzhen shall be liable for the loss of the goods involved. Due to the fact that Max Dragon Shenzhen is a branch of Max Dragon Company and is not qualified as a legal person, its civil liability shall fall onto Max Dragon Company, and such liability shall be jointly burdened by the two Defendants.

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As for the specific amount of indemnity that Max Dragon Company and Max Dragon Shenzhen shall be liable, ae prescribed in Article 55 of the Maritime Code of the People’s Republic of China, the amount of indemnity for the loss of the goods shall be calculated on the basis of the actual value of the goods so lost. The actual value shall be the value of the goods at the time of shipment plus insurance and freight, since the price terms is FOB Wuhan, the loss of the goods shall be the value, of the goods at the time of shipment of which the amount is USD28,114.72. The Plaintiff alleged to offset the payment for goods in amount of USD6,089 and USD20,400.97 having been paid by the consignee. Its claim only for the unpaid amounts complies with the law and shall be supported by the court. So does the claim for the corresponding interest thereon. Given that none of the parties in this case can identify the actual date of the goods’ loss, the interest shall be calculated from next day that the Plaintiff hastened the consignee to fulfill the payment after the goods involved arrived at the port of destination, namely June 7, 2012, to the day requested by the Plaintiff, namely June 30, 2013. Whereas the interest rate of foreign currency loan has been opened to the market and is fixed by financial institutions since September 21, 2000 according to the Notice of the People’s Bank of China on Reform of the Management System of Foreign Currency Deposit and Loan Interest Rates, there is currently no uniformed foreign currency loan interest rate. In order to confirm a reasonable interest in this case, the principal shall be converted into RMB according to the middle rate of RMB to USD nominated by the People’s Bank of China (1:6.3170) on the day designated above, and the interest rate shall be fixed according to the loan interest rate over the same period published by the People’s Bank of China. In conclusion, according to Article 11 and Article 12 Paragraph 1 of the Provisions of the Supreme People’s Court on Several Issues concerning the Trial of Cases of Disputes over Marine Freight Forwarding and Article 14 Paragraph 1 of the Company Law of the People’s Republic of China, the judgment is as follows: The Defendants, Guangzhou Max Dragon International Freight Forwarding Co., Ltd. and Guangzhou Max Dragon International Freight Forwarding Co., Ltd. Shenzhen Branch, shall jointly compensate the Plaintiff for the goods in sum of USD28,114.72 and the interest thereon from June 7, 2012 to June 30, 2013 (calculated at middle rate of RMB to USD nominated by Bank of China on the date of June 7, 2012). Court acceptance fee in amount of RMB4,008.25, shall be jointly born by the two Defendants. The obligations of paying the above-mentioned amount shall be fulfilled within 10 days after this judgment takes effect. If the defendants failed to perform the obligation, the interest shall be doubled for the period of delayed performance according to Article 253 of the Civil Procedure Law of the People’s Republic of China.

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In case of dissatisfaction with this judgment, any party may within 15 days upon the service of this judgment, submit a statement of appeal to the court, together with copies in accordance with the number of the opposite parties, to lodge an appeal to the Guangdong High People’s Court. Presiding Judge: LI Lifei Judge: PINGYANG Danke Acting Judge: JIANG He April 29, 2014 Clerk: ZHUANG Zhifa

Dalian Maritime Court Civil Judgment ZHAO Xiaofeng v. COSCO International Air Freight Forwarding Co., Ltd. Dalian Branch (2013) Da Hai Shang Chu Zi No. 333 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 1124. Cause of Action 223. Dispute over freight forwarding contract on the sea or sea-connected waters. Headnote The Defendant freight forwarder held liable for failing to obtain special import license for the Plaintiff’s motorboat confiscated and sold by Customs authorities, but the Plaintiff held 40% responsible because of his failure to reclaim motorboat from Customs authorities before auction. Summary The Plaintiff contracted with the Defendant to ship a motorboat from Japan to China. Shortly after the contract was made, and while the motorboat was being transported, a new Chinese law was made, mandating that all motorboats must be declared with a special import license and reported to Customs. When the motorboat arrived in Dalian, China, it was held by Customs agents because neither the plaintiff nor the defendant had obtained a special import license. The defendant argued that it was the plaintiff’s obligation to notify the carrier about the import licensing law. One year later, the motorboat was auctioned by Chinese Customs authorities because neither the Plaintiff nor the Defendant applied to the Customs agency to claim the motorboat. The Plaintiff sued the defendant. The court held that the Defendant was liable for not submitting the proper import license when the law became active but the Plaintiff was liable for contributory fault of 40% due to the lapse of time in claiming the motorboat from Customs.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_62

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Judgment The Plaintiff: ZHAO Xiaofeng, male, han nationality, born on February 4, 1961, living in Zhongshan District, Dalian Agent ad litem: FENG Yinglu, lawyer of Liaoning Hengyi Law Firm. The Defendant: COSCO International Air Freight Forwarding Co., Ltd. Dalian Branch Domicile: No. 2 Gangwan Road, Zhongshan District, Dalian. Legal representative: LIU Guoqi, chairman. Agent ad litem: ZHANG Hongkai, lawyer of Goodwell Law Firm. Agent ad litem: GAN Hongxia, lawyer of Goodwell Law Firm. With respect to the case arising from dispute over freight forwarding contract by sea or waters connected with sea filed by the Plaintiff ZHAO Xiaofeng (hereinafter referred to as the Plaintiff) against the Defendant COSCO International Air Freight Forwarding Co., Ltd. Dalian Branch (hereinafter referred to as the Defendant), the court made (2010) Da Hai Shang Chu Zi No. 208 Civil Judgment on January 7, 2011. After judgment, the Plaintiff disagreed with the judgment and instituted an appeal. Liaoning High People’s Court made (2011) Liao Min San Zhong Zi No. 122 Civil Ruling on November 7, 2011, holding that in the original judgment the facts were not clearly ascertained and the evidence was insufficient, and remanded the case to the court for retrial. The court re-accepted the case numbered as (2013) Da Hai Shang Chu Zi No. 333 on August 13, 2013, formed a new collegiate bench, and heard the case in public. FENG Yinglu as agent ad litem of the Plaintiff, ZHANG Hongkai and GAN Hongxia as agents ad litem of the Defendant, appeared in court to attend the hearing. Now the case has been concluded. The Plaintiff alleged that HOSYUHAMO, a Japanese, gave his Yamaha motorboat (type: SRV23) as a gift to his wife ZHAO Xiaoyun’s elder brother ZHAO Xiaofeng, namely the Plaintiff in this case. Then the Plaintiff entrusted the Defendant to carry the motorboat back to China from Japan and handle all the entry and exit formalities, all costs incurred therefrom were paid by the Plaintiff. The Plaintiff’s sister was instructed by the Plaintiff to connect with a Japanese staff appointed by the Defendant. She went through relevant exit formalities, disregistered the motorboat’s Japanese nationality and obtained an export license by virtue of arrangement of the Defendant on June 27, 2008. Subsequently, the motorboat was given to the Defendant to undergo relevant transport formalities. During this period, the Defendant showed the Customs Import Catalog to the Plaintiff for many times and told him that it would handle all customs formalities and no certificate like license would be required after motorboat’s arriving in port. The Plaintiff considered that the Defendant was a professional freight forwarder and it had strong professional skills, hence the Plaintiff appointed the Defendant as the consignee according to the instruction of the Defendant and entrusted it to go through import and export formalities. On July 6, 2008, the Defendant informed the Plaintiff that

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the motorboat had been carried to Dalian and required the Plaintiff to pay the agency lump sum fees in amount of RMB8500, and it was responsible for handling the customs declaration, switching B/L, customs clearance, harbor service, etc. On July 7, 2008, the Plaintiff paid the agency lump sum fees in amount of RMB8500 (including fees of switching B/L, customs clearance, harbor service and documents, etc.) to the Defendant. By that time, the Defendant did not tell the Plaintiff that importing the motorboat needed an import license. Then the Plaintiff repeatedly asked the Defendant when the motorboat import formality could be done and when the motorboat could be taken. The Defendant delayed on the excuse of handling special license and did not undergo customs declaration formality for the Plaintiff. The Plaintiff argued that the Defendant failed to submit relevant materials of customs declaration, customs clearance, switching B/L, etc. to Dalian Customs within the time limit stipulated by the Customs Law of the People’s Republic of China (hereinafter referred to as the Customs Law) according to the agreement between them, as a result, the motorboat owned by the Plaintiff was auctioned by Dalian Customs as bona vacantia without declaration in 2009 according to relevant provision of the Customs Law. Because of the Defendant’s mistake, the motorboat was auctioned by the Customs, the Plaintiff suffered a heavy loss. The Plaintiff sued to the court and requested the court to rule the Defendant to return the agency lump sum fees in amount of RM8500, compensate the Plaintiff’s loss arising from the confiscation of the motorboat (actual amount should depend on the expert conclusion) and the freight in amount of RMB20,000 (388,689 Yen converted into RMB according to rate of the date of filing the action namely June 23, 2010), and pay the litigation costs. In the trial, the Plaintiff waived to identify the motorboat’s value and alleged the motorboat’s value to be calculated by the customs auction price, namely RMB110,000. The Defendant argued as follows: 1. The Plaintiff failed to prove his ownership of the motorboat, therefore, the Plaintiff did not have title to sue; 2. The Plaintiff directly entrusted Japanese freight forwarder to charter ship and book space for the motorboat, the Defendant did not appoint any Japanese staff for the Plaintiff to do that, and no chartering and booking contract relation between the Defendant and maritime carrier involved in the case established; 3. The agency relationship between the Plaintiff and the Defendant established formally on July 7, 2008, and agency fees stated in the lump sum fees receipt were prepaid money. In terms of customs declaration, the Plaintiff and the Defendant only reached an intention on whether customs declaration was entrusted, in the case where the Plaintiff had not given relevant files required for the customs declaration to the Defendant, the Plaintiff could entrust others to declare. If the Plaintiff gave the Defendant the files for declaration and entrusted the Defendant to make a customs declaration, but the Defendant failed to customs clearance, usually the Defendant would return corresponding fees, however, it could not indicate that the freight forwarding contract between the

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Plaintiff and the Defendant contained an agreement on agency of customs declaration; 4. Even if there was an agency relationship of customs declaration between the Plaintiff and the Defendant, according to relevant regulations of the General Administration of Customs, the consignor should sign a standard letter of authorization for customs declaration and give all required documents to the assignee, therefore it was the Plaintiff’s statutory obligation to handle the license for customs declaration of the motorboat and the Defendant, as a freight forwarder, had no right or qualification to agent that. The Plaintiff did not give the license required to the Defendant, as a result, the Defendant could not complete the customs declaration or apply for an extension to declare; 5. Motorboat was goods limited in importation, according to Article 30 of the Customs Law, such goods was not allowed to be transported back and would only be confiscated by the Customs without import license, hence, the Defendant could not transport back the motorboat; and 6. The Plaintiff did not produce evidence to prove the value of the motorboat, and motorboat was built ten years ago, it was almost fully depreciated, even if it had value, the value was very little. After trial, the court ascertains the following facts: in March 2008, HOSYUHAMO, a Japanese, gave his motorboat (type: Yamaha SRV23) named Ai Yuan as a gift to his wife ZHAO Xiaoyun’s elder brother ZHAO Xiaofeng (the Plaintiff). On June 10, 2008, the motorboat was shipped from Japan by the vessel DOOWOO BUSAN. On July 6, 2008, the motorboat arrived in Dalian. The freight was 388, 689 Yen. It was stated in the bill of lading (No. CNLCMYJ080600014) issued by the agent of the carrier, Liaoning Sanfeng International Freight Forwarding Co., Ltd. that the Defendant was the consignee and the freight had been paid. On July 7, 2008, the Defendant charged the agency lump sum fees in sum of RMB8500 from the Plaintiff, including switching B/L fee, customs clearance fee, port fees, document fee, etc. On the same day, the Defendant paid the terminal handling charges and additional charge amounting to RMB860 for the motorboat in advance on behalf of the Plaintiff. After June 1, 2008, motorboats were listed in the Measures for Administration of Import of Specified Used Mechanical and Electronic Products (hereinafter referred to as the Measures), which was issued jointly by the Ministry of Commerce of the People’s Republic of China, General Administration of Customs, and General Administration of Quality Supervision, Inspection and Quarantine of the People’s Republic of China, therefore, relevant import procedures should be handled in accordance with the Measures, it means export of motorboats was under license control. Because the Defendant failed to inform the Plaintiff that he should undergo import license for the motorboat, the Plaintiff did not go through the formality and the Defendant could not handle the declaration procedure. According to the Plaintiff’s application, on November 28, 2010, the court got all relevant materials regarding to the motorboat (the type was Yamaha SRV23) auctioned by Dalian Customs in 2009, which was shipped by the vessel

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DOOWOO BUSAN from Busan, Japan to Dalian (No. CNLCMYJ080600014 B/ L). On December 1, 2010, Dalian Customs issued a statement suggesting the price of the motorboat auctioned by them on November 9, 2009 was RMB110,000. After the motorboat was auctioned by the Customs, the Plaintiff and the Defendant did not require Dalian Customs to return the money, it had been turned over to the State Treasury. The court ascertains all facts above, because the bill of lading, payment notice, receipt, testimonial and the trial record can prove. Disputes in the case are as follows: 1. Whether the Plaintiff enjoys the ownership of the motorboat; 2. Whether the freight forwarding contract is established between the Plaintiff and the Defendant and whether the contract includes agency of customs declaration; and 3. Who shall take responsibility for the losses of the Plaintiff. It is ascertained as follows: In respect of whether the Plaintiff enjoys the ownership of the motorboat, the court holds the evidence submitted by the Plaintiff that have been notarized can prove that HOSYUHAMO gave his motorboat to the Plaintiff and the motorboat has arrived in Dalian. The gift contract has been performed actually, therefore, the Plaintiff enjoys the ownership of the motorboat and he is entitled to claim for the losses due to the customs auction of the motorboat. In respect of whether the freight forwarding contract between the Plaintiff and the Defendant is established and whether the contract contents contains the agency service of customs declaration, there is no freight forwarding contract in written signed by the Plaintiff and the Defendant, but the evidence prove that the Defendant actually accepted the Plaintiff’s entrustment to handle switching B/L, customs clearance, etc. for the motorboat, and the Defendant paid the port handling charge and additional charge for the motorboat in advance on behalf of the Plaintiff from the date that the Defendant charged agency lump sum fees (including switching B/L fee, customs clearance fee, harbor service fee, etc.) from the Plaintiff, therefore, the freight forwarding contract between the Plaintiff and the Defendant is established and valid according to the law. The Defendant has charged the customs clearance fee and according to Article 24 of the Customs Law, the consignee of import goods and consignor for export goods shall make a truthful declaration to the Customs and submit export licenses and relevant documents for examination. The Defendant as the consignee recorded in the bill of lading, has a duty to handle customs clearance procedure of the motorboat for the Plaintiff. In respect of who shall take responsibility for the Plaintiff’s losses, the Plaintiff in the trial did not apply for identifying the value of the motorboat because he was unable to find the motorboat, and he claimed that the losses for the motorboat should be subjected to the transaction price of the auction conducted by Dalian Customs namely RMB110,000 yuan. The court holds that the transaction price shall be affirmed, because it can reflect the real value of the motorboat to a certain extent.

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As prescribes in Article 60 Paragraph 2 of the Contract Law of the People’s Republic of China (hereinafter referred to as the Contract Law) that the Plaintiff and the Defendant shall abide by the principle of good faith, and perform obligations of notification, assistance, and confidentiality, etc. in accordance with the nature and purpose of the contract and the transaction practice. The Defendant was entrusted by the Plaintiff to declare customs, it shall notify the Plaintiff that the Plaintiff shall issue a letter of authorization for customs declaration and get an import license, such obligation is collateral obligation of contract performance. The Defendant failed to prove that it had fulfilled such collateral obligation, the motorboat was auctioned by Customs for lack of formalities like letter of authorization for customs declaration and import license, so the Defendant was at fault. It is provided in Article 30 of the Customs Law that there the receiver fails to declare the import goods to the Customs office within three months of the arrival of the means of transport, the goods shall be confiscated and sold off according to law by the Customs office. After the costs of transport, loading and unloading, storage, and duties and taxes are deducted from the money obtained from the sale, the remaining sum, if any, shall be returned to the receiver provided he submits an application to the Customs office within one year of the sale of the goods according to law. If the importation of such goods is under state restriction, the receiver shall provide the appropriate import license; otherwise the money shall not be returned. If no one applies within the time limit, the money shall be turned over to the State Treasury. Article 7 of the Measures for Administration of Import of Specified Used Mechanical and Electronic Products prescribes that an application for import of key used mechanical and electrical products shall be filed by the ultimate user. The Motorboat was auctioned by the Customs on November 9, 2009. According to the statement of the Plaintiff that he knew the motorboat was auctioned at the end of 2009, therefore, the Plaintiff who is the ultimate user has nearly one year to handle import license and inform the Defendant as the consignee to claim for auction sale against the Customs. But the Plaintiff, as the motorboat’s owner, neither handled relevant documents in time, nor he notified the Defendant to claim for the auction sale, eventually the auction sale was unable to get back. So the Plaintiff also has fault. In addition, the Defendant argued that it knew the motorboat was auctioned when it received the pleading in the trial, as the agent, the Defendant shall pay attention to the situation of the motorboat, but it delayed in preforming its obligations, and failed to communicate with the Plaintiff about the import license timely and claim the auction sale against the Customs. Whereas the fault of the Plaintiff and the Defendant, the court decides that the Plaintiff shall assume 40% liability and the Defendant shall assume 60% of liability, it means the Defendant shall bear RMB66,000 (RMB110,000 * 60%). As for other losses claimed by the Plaintiff, since the Plaintiff failed to prove that the freight forwarding relationship between the Plaintiff and the Defendant had established before the motorboat arrived in Dalian and the Customs attained value at the destination of the motorboat, containing the cost and the freight through auctioning, the Plaintiff’s claim that Defendant should bear the freight lacks factual and legal basis, the court will not ascertain. As for the freight forwarding fee, what

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the Defendant charged was lump sum fees containing advancements and freight forwarding fee. The Plaintiff failed to prove that how much money should be returned after the Defendant fulfilled part of the freight forwarding matters. Therefore, the claim raised by the Plaintiff that the Defendant should return lump sum fees will not be ascertained. In conclusion, according to Article 60 Paragraph 2, Article 396 and Article 406 Paragraph 1 of the Contract Law of the People’s Republic of China, the judgment is as follows: 1. The Defendant, COSCO International Air Freight Forwarding Co., Ltd. Dalian Branch, shall compensate the Plaintiff, ZHAO Xiaofeng, the loss for motorboat in amount of RMB66,000 within ten days from the date of the effectiveness of the judgment; 2. Reject other claims of the Plaintiff ZHAO Xiaofeng. Court acceptance fee in amount of RMB3070 yuan (prepaid by the Plaintiff), the Plaintiff shall bear RMB1607.04 and the Defendant shall bear RMB1462.96, and Defendant shall pay the court acceptance fee to the Plaintiff with mentioned compensation. If the Defendant fails to perform the obligation of payment within the period designated by this judgment, interest on the debt for the delayed period shall be doubled in accordance with Article 253 of the Civil Procedure Law of the People’s Republic of China. In event of dissatisfaction with this judgment, both parties may, within 15 days upon service of this judgment, submit a bill of appeal together with ten duplicates to the court to file an appeal to the Liaoning High People’s Court. Presiding Judge: SUN Guang Judge: XIN Xin Acting Judge: DONG Shihua December 16, 2013 Clerk: WANG Cuicui

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Liaoning High People’s Court Civil Judgment ZHAO Xiaofeng v. COSCO International Air Freight Forwarding Co., Ltd. Dalian Branch (2014) Liao Min San Zhong Zi No. 99 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 1117. Cause of Action 223. Dispute over freight forwarding contract on the sea or sea-connected waters. Headnote Affirming lower court decision holding the Defendant freight forwarder liable for failing to obtain special import license for the Plaintiff’s motorboat confiscated and sold by Customs authorities, but the Plaintiff held 40% responsible because of his failure to reclaim motorboat from Customs authorities before auction. Summary The plaintiff contracted with the Defendant to ship a motorboat from Japan to China. Shortly after the contract was made, and while the motorboat was being transported, a new Chinese law was made, mandating that all motorboats must be declared with a special import license and reported to Customs. When the motorboat arrived in Dalian, China, it was held by Customs agents because neither the plaintiff nor the Defendant had obtained a special import license. The Defendant argued that it was the Plaintiff’s obligation to notify the carrier about the import licensing law. One year later, the motorboat was auctioned by Chinese Customs authorities because neither the Plaintiff nor the defendant applied to the Customs agency to claim the motorboat. The Plaintiff sued the Defendant. The court of first instance held that the Defendant was liable for not submitting the proper import license when the law became active but the Plaintiff was liable for contributory fault of 40% due to the lapse of time in claiming the motorboat from Customs. The Defendant appealed, arguing that the Plaintiff should be liable because he failed to obtain an import license, but the appeal court affirmed the judgment of the lower court.

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Judgment The Appellant (the Defendant of first instance): COSCO International Air Freight Forwarding Co., Ltd. Dalian Branch Domicile: No. 2 Gangwan Road, Zhongshan District, Dalian. Legal representative: LIU Guoqi, chairman. Agent ad litem: TIAN Zeng, lawyer of Liaoning Hengjing Law Firm. The Respondent (the Plaintiff of first instance): ZHAO Xiaofeng, male, Han, born on February 4, 1961, living in Zhongshan District, Dalian Agent ad litem: FENG Yinglu, lawyer of Liaoning Hengyi Law Firm. The Appellant, COSCO International Air Freight Forwarding Co., Ltd. Dalian Branch (hereinafter referred to as “COSCO Air Dalian Branch”), disagreed with (2013) Da Hai Shang Chu Zi No. 333 Civil Judgment with respect to a dispute over the freight forwarding contract between it and the Respondent, ZHAO Xiaofeng, made by Dalian Maritime Court and appealed to the court. After accepting the case, the court formed a collegiate panel in accordance with the law and heard the case in public on April 24, 2014. TIAN Zeng, agent ad litem of the Appellant, and FENG Yinglu, agent ad litem of the Respondent, appeared in court to attend the hearing. Now the case has been concluded. After trial, the court of first instance ascertained that in March 2008, HOSYUHAMO, a Japanese person, gave his motorboat (type: Yamaha SRV23) named Aiyuan as a gift to his wife’s elder brother, ZHAO Xiaofeng (the Plaintiff). On June 10, 2008, the motorboat was shipped from Japan by the vessel DOOWOO BUSAN. On July 6, 2008, the motorboat arrived in Dalian. The freight was 388,689 Yen. It was stated in the bill of lading (No. CNLCMYJ080600014) issued by the agent of the carrier, Liaoning Sanfeng International Freight Forwarding Co., Ltd., that the Defendant was the consignee and the freight had been paid. On July 7, 2008, the Defendant charged the agency lump sum fees of RMB8500 from the Plaintiff, including switching B/L fee, customs clearance fee, port fees, document fee, etc. On the same day, the Defendant paid the terminal handling charges and additional charge amounting to RMB860 for the motorboat in advance on behalf of the Plaintiff. After June 1, 2008, motorboats were listed in the Measures for Administration of Import of Specified Used Mechanical and Electronic Products (hereinafter referred to as the Measures), which was issued jointly by the Ministry of Commerce of the People’s Republic of China, General Administration of Customs, General Administration of Quality Supervision, and Inspection and Quarantine of the People’s Republic of China. Therefore, relevant import procedures should be handled in accordance with the Measures, meaning that export of motorboats was under license control. Because the Defendant failed to inform the Plaintiff that he should undergo import license for the motorboat, the Plaintiff did not go through the formality and the Defendant could not handle the declaration procedure.

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According to the Plaintiff’s application, on November 28, 2010, the court received all relevant materials regarding the motorboat (Yamaha SRV23) auctioned by Dalian Customs in 2009, which was shipped by the vessel DOOWOO BUSAN from Busan, Japan to Dalian (No. CNLCMYJ080600014 B/L). On December 1, 2010, Dalian Customs issued a statement suggesting the price of the motorboat auctioned by them on November 9, 2009 was RMB110,000. After the motorboat was auctioned by Customs, the Plaintiff and the Defendant did not require Dalian Customs to return the money. Instead, it had been turned over to the State Treasury. The court of first instance ascertained the disputes in the case were that: 1. Whether the Plaintiff enjoyed the ownership of the motorboat; 2. Whether the freight forwarding contract was established between the Plaintiff and the Defendant and whether the contract included freight forwarding of customs declaration; 3. Who should take responsibility for the losses of the Plaintiff. In respect to whether the Plaintiff enjoyed the ownership of the motorboat, the court of first instance held the evidence submitted by the Plaintiff that had been notarized could prove that HOSYUHAMO gave his motorboat to the Plaintiff and the motorboat had arrived in Dalian. The gift contract had actually been performed, therefore, the Plaintiff enjoyed the ownership of the motorboat and he was entitled to claim for the losses due to the customs auction of the motorboat. In respect to whether the freight forwarding contract between the Plaintiff and the Defendant had been established and whether the contract contents contain the agency service of customs declaration, there was no freight forwarding contract in written signed by the Plaintiff and the Defendant. However, the evidence proved that the Defendant actually accepted the Plaintiff’s assignment to handle switching B/L, customs clearance, etc. for the motorboat, and the Defendant paid the port handling charge and additional charge for the motorboat in advance on behalf of the Plaintiff from the date that the Defendant charged agency lump sum fees (including switching B/L fee, customs clearance fee, harbor service fee, etc.) from the Plaintiff. Therefore, the freight forwarding contract between the Plaintiff and the Defendant was established and was valid according to the law. The Defendant had charged the customs clearance fee and according to Article 24 of the Customs Law, the consignee of import goods and consignor for export goods should make a truthful declaration to Customs and submit export licenses and relevant documents for examination. The Defendant, as the consignee recorded in the bill of lading, had a duty to handle the customs clearance procedure of the motorboat for the Plaintiff. In respect to who shall take responsibility for the Plaintiff’s losses, the Plaintiff in trial did not apply for identifying the value of the motorboat because he was unable to find the motorboat, and he claimed that the losses for the motorboat should be subjected to the transaction price of the auction conducted by Dalian Customs namely RMB110,000 yuan. The court of first instance held that the transaction price should be affirmed, because it reflected the real value of the motorboat to a certain extent. As prescribed in Article 60 Paragraph 2 of the

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Contract Law of the People’s Republic of China (hereinafter referred to as the Contract Law) the Plaintiff and the Defendant should abide by the principle of good faith and perform obligations of notification, assistance, and confidentiality, etc. in accordance with the nature and purpose of the contract and the transaction practice. The Defendant was entrusted by the Plaintiff to declare customs. It should accordingly notify the Plaintiff that the Plaintiff must issue a letter of authorization for customs declaration and get an import license. Such obligation was a collateral obligation of contract performance. The Defendant failed to prove that it had fulfilled such collateral obligation, the motorboat was auctioned by Customs for lack of formalities, such as the letter of authorization for customs declaration and import license, therefore the Defendant was at fault. It was provided in Article 30 of the Customs Law that if the receiver failed to declare the import goods to the Customs office within three months of the arrival of the means of transport, the goods should be confiscated and sold. After the costs of transport, loading and unloading, storage, and duties and taxes were deducted from the money obtained from the sale, the remaining sum, if any, should be returned to the receiver provided he submitted an application to the Customs office within one year of the sale of the goods according to law. If the importation of such goods was under state restriction, the receiver should provide the appropriate import license; otherwise the money should not be returned. If no one applied within the time limit, the money should be turned over to the State Treasury. Article 7 of the Measures for Administration of Import of Specified Used Mechanical and Electronic Products prescribes that an application for import of key used mechanical and electrical products should be filed by the ultimate user. The Motorboat was auctioned by Customs on November 9, 2009. According to the statement of the Plaintiff, he knew the motorboat was auctioned at the end of 2009, therefore, the Plaintiff, who was the ultimate user, has nearly one year to handle import license and inform the Defendant as the consignee to claim for auction sale against Customs. But the Plaintiff, as the motorboat’s owner, neither handled relevant documents in time, nor did he notify the Defendant to claim for the auction sale. Eventually the auction sale was unable to retrieve the motorboat. Therefore, the Plaintiff was also at fault. In addition, the Defendant argued that it knew the motorboat was auctioned when it received the pleading In trial. As the freight forwarder, the Defendant should pay attention to the situation of the motorboat. Instead it delayed in preforming its obligations and failed to timely communicate with the Plaintiff about the import license and claim the auction sale against Customs. Whereas the fault of the Plaintiff and the Defendant, the court of first instance decided that the Plaintiff should assume 40% liability and the Defendant should assume 60% liability, meaning the Defendant should bear RMB66,000 (RMB110,000 * 60%). As for other losses claimed by the Plaintiff, since the Plaintiff failed to prove that the freight forwarding relationship between the Plaintiff and the Defendant was established before the motorboat arrived in Dalian and Customs evaluated the value at the time of delivery of the motorboat, including the cost and the freight through auctioning, the Plaintiff’s claim that Defendant should bear the freight cost lacked factual and legal basis. The court of first instance would therefore not support the

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claim. As for the freight forwarding fee, what the Defendant charged was lump sum fees containing advancements and freight forwarding fees. The Plaintiff failed to prove how much money should be returned after the Defendant fulfilled part of the agency matters. Therefore, the claim raised by the Plaintiff that the Defendant should return lump sum fees would not be supported. In conclusion, according to Article 60 Paragraph 2, Article 396, and Article 406 Paragraph 1 of the Contract Law of the People’s Republic of China, the judgment was that: 1. the Defendant, COSCO International Air Freight Forwarding Co., Ltd. Dalian Branch, should compensate the Plaintiff, ZHAO Xiaofeng, for the loss of the motorboat in the amount of RMB66,000 within ten days from the date of the effectiveness of the judgment; 2. reject other claims of the Plaintiff ZHAO Xiaofeng. Court acceptance fee of first instance in amount of RMB3070 yuan (prepaid by the Plaintiff), the Plaintiff should bear RMB1607.04 and the Defendant should bear RMB1462.96. The Defendant should pay the court acceptance fee to the Plaintiff with mentioned compensation. After judgment of first instance, COSCO Air Dalian Branch disagreed with the original judgment and appealed to the court. COSCO Air Dalian Branch that: 1. The original judgment affirmed that COSCO Air Dalian Branch did not inform ZHAO Xiaofeng that the import of the motorboat needed an import license and other related procedures, it constituted a mistake in determination of fact; 2. The original judgment affirmed that COSCO Air Dalian Branch should bear the liability for compensation because of its faults, it constituted a mistake in application of law. Firstly, the motorboat was a good that was limited in importation, but ZHAO Xiaofeng shipped the motorboat to Dalian without import license. His behavior violated relevant regulations, so the consequence that the motorboat was auctioned should be born by himself and it had nothing to do with COSCO Air Dalian Branch. Secondly, the involved contract was a freight forwarding contract. COSCO Air Dalian Branch only handled procedures of customs declaration, inspection declaration, customs clearance, etc., but ZHAO Xiaofeng did not provide a letter of authorization for customs declaration. It indicated the agency relationship of customs declaration between ZHAO Xiaofeng and COSCO Air Dalian Branch was not established, so COSCO Air Dalian Branch should not bear the compensation liability. In conclusion, COSCO Air Dalian Branch requested the court to find the facts and change the judgment of first instance in accordance with the law. ZHAO Xiaofeng argued that: 1. COSCO Air Dalian Branch never told him that an import license of the motorboat needed to be handled by himself. He concluded a shipping agency relationship with COSCO Air Dalian Branch after consultation in February 2008. COSCO Air Dalian Branch confirmed that the involved commission contract contained charter and switching B/L in the two sessions of the first instance, therefore, the facts ascertained in the first instance were proper;

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2. When he commissioned COSCO Air Dalian Branch to handle the import procedures for the motorboat, the motorboat had not yet been incorporated into the Import List of Key Used Mechanical and Electronic Products, however COSCO Air Dalian Branch did not inform him after the motorboat was defined as a good limited in importation, therefore he suffered the losses; 3. COSCO Air Dalian Branch charged related fees in the sum of RMB8500 when the involved motorboat arrived in Dalian port. He had performed his obligation of payment, but COSCO Air Dalian Branch never told him to issue the letter of authorization for custom declaration. In the period of the first instance, COSCO Air Dalian Branch admitted that it was the freight forwarder for the involved motorboat when it raised a challenge to the jurisdiction of the case tried by the Dalian Municipality Zhongshan District People’s Court, hence the freight forwarding contract was established and valid. In conclusion, the original judgment was clear in the determination and correct in the application of relevant laws. The facts ascertained by the court of second instance are the same as the facts found by the court of first instance. The court holds that COSCO Air Dalian Branch charged the agency fees in an amount of RMB8500, including customs declaration fee, inspection declaration fee, etc., and paid the terminal handling charge and additional charges amounting to RMB860 for the motorboat on behalf of ZHAO Xiaofeng after the involved motorboat arrived in Dalian port. In other words, COSCO Air Dalian Branch had performed part of the freight forwarder’s obligation, therefore, the fact ascertained by the court of first instance that the freight forwarding contract was established and had come into effect is proper. In addition, according to the Provisions of the People’s Republic of China on the Customs Administration of Declaration for the Import and Export of Goods, the freight forwarding declaration enterprise shall examine the authenticity and integrity of the materials provided by the client, including materials that can the prove actual situation of the goods, the relevant contract, invoice, shipping documents, license required and accompanying documents, etc. If the customs declaration enterprise fails to perform the obligation for reasonable examination or declare in violation of the provisions of the Customs, it shall take corresponding legal responsibilities. According to Article 60 of the Contract Law, the parties shall abide by the principle of good faith and perform collateral obligations of notification, etc. in accordance with the nature and purpose of the contract and the transaction practice. According to the Measures for Administration of Import of Specified Used Mechanical and Electronic Products, which was issued on April 7, 2008 and came into force as of May 1, 2008, an application for import of key-used mechanical and electrical products shall be filed by the ultimate user. The scope of matters entrusted to COSCO Air Dalian Branch by ZHAO Xiaofeng did not contain handling an import license, however COSCO Air Dalian Branch has an obligation to review the integrity of the materials provided by ZHAO Xiaofeng before declaring. If customs declaration cannot be undergone because of ZHAO Xiaofeng’s failure to handle the import license, COSCO Air Dalian Branch shall push ZHAO Xiaofeng to submit the application

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for a license and inform him of relevant results that will be generated from the failure of timely customs declaration for lack of having a license. COSCO Air Dalian Branch failed to produce evidence to prove that it had performed the obligation of notification, as a result the involved motorboat was confiscated and auctioned by the Customs because it was not declared to customs. Accordingly, COSCO Air Dalian Branch was at fault for ZHAO Xiaofeng’s losses. The judgment of first instance, which compelled COSCO Air Dalian Branch to undertake corresponding liability for compensation based on its degree of fault and ascertained the value of the motorboat in the auction, is appropriate. To summarize, the original judgment was clear in the determination of the facts and correct in the application of relevant laws. According to Article 170 Paragraph 1 Sub-paragraph 1 of the Civil Procedure Law of the People’s Republic of China, the judgment is as follows: Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance in amount of RMB1462.96, shall be born by COSCO International Air Freight Forwarding Co., Ltd. Dalian Branch. The judgment is final. Presiding Judge: HE Baoyan Acting Judge: ZHANG Yansong Acting Judge: LIU Shanchao June 11, 2014 Clerk: ZHANG Tong

Qingdao Maritime Court Civil Judgment Zhoushan Haiji Waterway Dredging Engineering Co., Ltd. v. Shandong Tianbao Excavating Co., Ltd. et al. (2013) Qing Hai Fa Hai Shang Chu Zi No. 71 Related Case(s) This is the judgment of first instance and the judgment of second instance is on page 1142. Cause of Action 235. Dispute over channel and port dredging contract. Headnote The Plaintiff subcontractor held to be entitled to recover cost of performing dredging works even though the subcontract was invalid because not permitted by law; head contractor held to be not jointly and severally liable to pay sum owed by intermediate contractor to subcontractor. Summary The Defendant, CCCC, undertook the construction of Shandong Haiyang nuclear power plant. It then contracted with the other Defendant, Tianbao Company, to perform dredging tasks on terms that prohibited Tianbao from subcontracting any of the work. Nevertheless, Tianbao Company subcontracted part of the dredging project to the Plaintiff, which performed the work. Tianbao Company confirmed that the Plaintiff’s work met the required conditions for removal of dredged material. Although the contract between the Plaintiff and Tianbao Company was invalid, Tianbao Company was held liable to pay the Plaintiff the project price sum of 596,596 yuan and the interest thereon because it had accepted the work done by the Plaintiff. The Defendant CCCC was not jointly and severally liability for the sum owed to the Plaintiff; it had paid Tianbao and was not liable to Tianbao’s subcontractor, with whom it had no contractual relationship.

© The Author(s), under exclusive license to Springer-Verlag GmbH, DE, part of Springer Nature 2021 M. Davies and J. Lin (eds.), Chinese Maritime Cases, Chinese Maritime Cases Series, https://doi.org/10.1007/978-3-662-63239-0_63

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Judgment The Plaintiff: Zhoushan Haiji Waterway Dredging Engineering Co., Ltd. Domicile: Room 102, 16 Building, HuaFeng Apartment, Shenjiamen Street, Putuo District, Zhoushan, Zhejiang. Legal representative: WANG Binghai, chairman. Agent ad litem: XUE Kairu, staff of the company. Agent ad litem: TANG Jie, legal worker of Zhoushan Bingcheng Law Service Office. The Defendant: Shandong Tianbao Excavating Co,. Ltd. Domicile: 2 XinHua Road, Yishui County, Shandong. Legal representative: GU Jianfeng, chairman. Agent ad litem: WANG Lina, staff of Qingdao Jianming Maritime Advisory Services Co., Ltd. Agent ad litem: SUN Jingjing, staff of Qingdao Jianming Maritime Advisory Services Co., Ltd. The Defendant: No. 2 Engineering Co., Ltd. of CCCC First Harbor Engineering Co., Ltd. Domicile: 16 Fuzhou City Road, Qingdao, Shandong. Legal representative: CUI Kelin, chairman. Agent ad litem: LI Yuliang, staff. Agent ad litem: CHEN Bian, staff. With respect to the case arising from dispute over dredging contract filed by the Plaintiff, Zhoushan Haiji Waterway Dredging Engineering Co., Ltd., against the Defendants, Shandong Tianbao Excavating Co., Ltd. (hereinafter referred to as Tianbao Company) and No. 2 Engineering Company Ltd. of CCCC First Harbor Engineering Co,. Ltd. (hereinafter referred to as CCCC), after accepting the case, the court formed a collegiate panel in accordance with the law and heard the case in public. TANG Jie, agent ad litem of the Plaintiff, WANG Lina and SUN Jingjing, agent ad litem of Tianbao Company, LI Yuliang and CHEN Bian, agent ad litem of CCCC, appeared in court to attend the hearing. This case has been concluded. The Plaintiff claimed that the Plaintiff signed sub-contract of Haiyang Nuclear Power dredging construction projects with the Defendant Tianbao Company. After conclusion of the contract, the Plaintiff fully performed all the obligations of the contract, appointed the grab dredger Haiji 6 and self-propelled barge Haiji 1. It was confirmed by the Defendant Tianbao Company and the owner that the dredging quantity was 92,000 m3, slag removal quantity was 39,059.1 m3 and the amount was RMB2,321,773 yuan. In addition, the Plaintiff suspended working for 24 days from September 21, 2009 to October 14 due to the reason of the Defendant Tianbao Company, and suffered losses of 360,000 yuan. The Defendant Tianbao Company defaulted the payments for Fengcheng project in amount of 1,247,500 yuan (including slag removal compensation in amount of 560,000 yuan, which had been

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paid by the Defendant to the Defendant Tianbao Company). During this period, the Defendant Tianbao Company had paid the project price and oil fees in amount of 1,825,177 yuan to the Plaintiff. The Defendant Tianbao Company should pay the Plaintiff 2,104,096 yuan. It was found that the Defendant CCCC outsourced the two projects to the Defendant Tianbao Company. The Plaintiff instituted the case to request the Defendant Tianbao Company to pay the project price together with the interest in amount of 2,104,096 yuan since June 1, 2011 calculated at corresponding interest rate on bank loan (including the interest on 1.15 million yuan since January 16, 2010 calculated at corresponding interest rate on bank loan) and requested the Defendant Tianbao Company to assume the responsibility within the scope of project price. In the process of the trial, the Plaintiff withdrew the claim for the payment of Fengcheng project, only claimed against the second Defendant regard to the Haiyang nuclear power dredging project, and altered part of the facts as the Defendant Tianbao Company had paid Plaintiff the project payment and oil fees in amount of 1,725,177 yuan (477,677 yuan was the payment of Haiyang nuclear power dredging project). On the basis of this, the Plaintiff altered the claim amount to 2,204,096 yuan. The Plaintiff submitted the following evidence to the court to support its claim: 1. Haiyang Nuclear Power Dredging Project Sub-contract (the original document), to prove the parties and the contents of the contract. The contract should be affirmed to be null and void in accordance with Article 52 of the Contract Law, because it violated Article 272 Paragraph 3 of the Contract Law and Article 1 of the Interpretations of Supreme People’s Court on Law Application Issues in the Trial of Cases Concerning Dispute over Contracts for Construction Projects. 2. Confirmation of project quantity (the original document), to prove that the Plaintiff and the Defendant Tianbao Company confirmed Haiyang project had been accepted after inspection on January 16, 2010, and the Defendant Tianbao Company confirmed the construction quantity and the project price in accordance with the contract. 3. Project statement (the original document), to prove that the Plaintiff and the Defendant Tianbao Company had no objection to the total payment in amount of 1,725,177 yuan in respect of Haiyang project and Fengcheng project involved paid by the Defendant Tianbao Company for project price and oil fees. 4. Confirmation of project quantity (the original document), to prove that slag removal quantity in the nuclear power projects was 39,059.1 m3, calculated by 30 yuan per cubic meter according to the contract, the Defendant Tianbao Company should pay 1,171,773 yuan. The Defendant Tianbao Company had confirmed the quantity and the amount in written. 5. Ownership registration certificate (copy), to prove Haiyang project was done by the ship Haiji 6 and Haiji 1. Both Defendants challenged the authenticity of evidence except evidence 1 provided by the Plaintiff.

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The Defendant Tianbao Company argued that firstly, the contract involved was null and void because it violated the prohibitive provisions of the law, whereas this, the claim of the Plaintiff to request the Defendant for project price on basis of the invalid contract involved should not be supported. Secondly, in this case, the Plaintiff confirmed the project price and oil fees paid by the Defendant Tianbao Company had nothing to do with Fengcheng project. The Defendant Tianbao Company submitted the following evidence to support its defense: 1. Notice of technical disclosure and the completion drawings (copy), to prove that according to the notice of technical disclosure provided by CCCC to the Defendant Tianbao Company and the Defendant Tianbao Company had delivered related materials and requirements to the Plaintiff in line with the agreement of the concerned contract and related practice, and required the Plaintiff to carry out the construction following the drawings and quality standard. 2. Calculation chart of underwater cleaning slag quantity. It was exported from the instrument of surveying and mapping of the inspection ship and where was no original document. It was used to prove that the Plaintiff and the Defendant CCCC and Tianbao Company inspected the quality of the project construction after the operation ships left, the quality inspection of engineering involved on August 15, 2011, the quality inspection was only joint periodic inspection of the construction site at the request of the Defendant Tianbao Company. There were many shallow points in the construction project that the Plaintiff participated in, the quality of the project did not conform with the quality standards as agreed upon by both parties. The Plaintiff objected evidence 1 and 2 submitted by the Defendant Tianbao Company, the Defendant CCCC had no objection to the authenticity of evidence 1, but challenged evidence 2. The Defendant CCCC argued that firstly, there was no relationship between the Defendant CCCC and the Plaintiff, it had no legal or agreed obligation of payment; secondly, the project payment paid by the Defendant CCCC to Tianbao Company exceeded the amount of balance, there was no payment in arrears; thirdly, according to the contract should assume the liability for breach of contract and pay liquidated damages according to the contract, even if the Defendant CCCC did not pay the project payment, it had the right to deduct the liquidated damages from the project payment. The Defendant CCCC submitted the following evidence to support its defense: 1. Enterprise legal person business license (copy). 2. Safety production license (copy). 3. Excavating engineering construction qualification certificate (copy). Evidence 1, 2 and 3 was to prove that Tianbao Company had legal qualification of subject and construction.

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4. Sub-contract for construction project (the original document) signed by the two Defendants, to prove that there established a relation of engineering construction sub-contract between CCCC and Tianbao Company, Tianbao Company was in charge of excavating reefs under water of the construction of Haiyang nuclear power circulating project; second, according to Article 13 of the sub-contract, it was provided that Party B could not contract or sub contract the project of the contract involved in the case to others again. Otherwise, Party B should bear the liability for breach of contract at cost of 15% of the contract price. If this caused any costs or losses to Party A, it was entitled to deduct the amount directly from the project price owed by Party B. 5. Final accounts document (printed copy), to prove that CCCC had confirmed it should pay the settlement price to Tianbao Company in amount of 10,787,283.92 yuan, after deducting quality assurance deposit, the amount should be 10,229,250.77 yuan. 6. A financial payment voucher (the original document), to prove that CCCC had paid 11,050,000 yuan to Tianbao Company. 7. Contract for water intake and outlet of circulation water and quarry construction projects of Shandong Haiyang Nuclear Power Plant (the original document). The Plaintiff had no objection to the authenticity of evidence produced by the Defendant CCCC. The Defendant Tianbao Company had no objection to other evidence. Upon examination, the court ascertains the evidence submitted by the parties as follows: since the other parties had no objection to the authenticity of evidence 1, 2, 3, 4, 6 and 7 submitted by the Plaintiff, the court ascertains the evidence. Evidence 2 and 4 of the Plaintiff is the original documentary evidence, the court will adopt. Evidence 3 of the Plaintiff has no relevancy to the case, the court does not confirm. Evidence 5 of the Plaintiff is a copy and cannot be checked with the original document, so the court will not adopt. Evidence 1 of the Defendant CCCC is a notice of technical disclosure between the two Defendants and evidence 2 of the Defendant Tianbao Company is statement of one party, the court will determine the two evidence in combination with other evidence. The source of evidence 2 of the Defendant Tianbao Company is unknown, so the court will not affirm. According to the admitted evidence and cross-examining opinions, and combined with the statements of the parties in the trial, the court ascertains the following relevant facts: on December 25, 2008, Shandong Nuclear Power Co., Ltd. (the client) signed the contract for water intake and outlet of circulation water and quarry construction projects of Shandong Nuclear Power Co., Ltd., including the south groyne project at the water intake canal, excavating project (rock explosion) at the water intake canal, dredging project at the water intake canal and so on, the quality of the projects should meet the national or professional quality evaluation standard, the client, the designer of the project and related department would examine the entity and the documents of the projects.

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On March 28, 2009, CCCC (the general contractor) of the Defendant Tianbao Company (sub-contractor) signed sub-contract for construction project with CCCC (the contractor), it was agreed that the Defendant Tianbao Company constructed the project of Shandong Haiyang Nuclear Power Plant, the name of the project was excavating reefs under water of Haiyang nuclear power circulating project, including excavating reefs under water of water intake project and dredging mud under the south groyne, the quality of the project should comply to the requirements of the main contract and reach the qualified evaluation standard The quality standard of the hydraulic project applied to the Evaluation Standard for Quality Inspection of Port Projects, the way of contract was comprehensive unit price and the project price was 13,612,637 yuan. The inspection should be carried out by the engineers organized by the Defendant after receiving the completion report. It was agreed that the Defendant Tianbao Company should not contract or subcontract to others again. JIANG Lidong assigned by the Defendant Tianbao Company as project manager in the construction site under the contract, WANG Ruijin, the original legal representative of Tianbao Company and NIU Deguang, the agent of Tianbao Company signed the contract. The Defendant CCCC paid 11.05 million yuan to the Defendant Tianbao Company. In April 2009, the Defendant Tianbao Company (Party A) signed the sub-contract for Haiyang nuclear power dredging project with the Plaintiff (Party B), it was agreed that the Plaintiff carried out part of Haiyang nuclear power dredging project. Party A provided the scope of the project within the scope of Haiyang nuclear power dredging construction projects, Party B dredged to the depth specified by the owner and the quality of the dredging project shall meet the standards set by the owner. The technical specifications of the main contract and the sub-contract should be applied to Party B completely. The construction equipment was grab ship Haiji 6 and self-propelled barge Haiji 1. The acceptance standard was executed according to the Quality Inspection Standards of Dredging Projects of the Ministry of Transport (JTJ324-96), it should be inspected through sea sweeping and meet the qualified standard The time limit of the project: the project was started from April 20, 2009 and completed on August 31, 2009, the time can be extended because of climate. the quantity of the project should be ascertained as 460,000 m3 temporarily (including 360,000 m3 of the mud and of 100,000 m3 of slag removal) according to the subcontract dredging drawings of Haiyang nuclear power project provided by Party A and should be ascertained according to the final dredging drawings confirmed by both parties. The project price and terms of payment: 1. the comprehensive unit price of dredging was 12.50 yuan/cubic meter and the comprehensive unit price of slag removal was 30 yuan/cubic meter. 2. The progress payment should be accounted based on actual billing quantity and the comprehensive unit price, after the monthly actually measured by the parties and confirmed by Party A and the owner, 90% of monthly progress payment completed by the subcontractor would paid to Party B after receiving the corresponding progress payment form the owner, 5% would be paid after the project was completed and the remaining 5% would be paid off in two years; and 4. Upon the acceptance of the owner, the billing quantity should be accounted by actual amount of settlement

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construction confirmed by both parties. The Defendant Tianbao Company authorized NIU Deguang and the Plaintiff authorized XUE Kairu to sign the contract with company stamp. After signing the contract, the Plaintiff carried out the construction of the dredging mud project, and constructed the slag removal project under water together with the ship Guangxinjun 8. The Plaintiff and the Defendant Tianbao Company confirmed the projects above had been completed in the trial. In respect to the construction situation of dredging mud projects, the Plaintiff submitted the Periodic Confirmation of Quantity of Dredging Mud Project of Shandong Tianbao Excavating Co,. Ltd. on September 11, 2009 to the court, it was stated Shandong Tianbao Excavating Co,. Ltd. undertook dredging mud project of south groyne of Haiyang nuclear power plant, upon the joint acceptance inspection by Party A and the owner, the dredging quantity was affirmed as 90,000 m3, to add up 2000 m3 assisting CCCC in dredging mud. ZHOU Xuehua (unidentified), XUE Kairu, WANG Zhishan signed the confirmation. In respect to the construction situation of slag removal project under water, the Plaintiff submitted Statement of Quantity on May 12, 2011, YE Jiali (unidentified) signed the statement and the triangulation method calculation sheet, confirming the total quantity of the dredging area 60,018 m3, the remaining quantity (Haiji 6) measured on September 29, 2009 was 29,165.1 m3, the remaining quantity (Gangxinjun 8) measured on May 21, 2010 was 12,832.7 m3, the remaining quantity (Haiji 6) measured on March 28, 2011 was 4626.5 m3, the ship Gangxinjun 8 completed 16,332.4 m3, the total quantity of dredging mud area minus the quantity completed by the ship Gangxinjun 8 and the remaining quantity of March 28, 2011, it could be concluded that the total quantity of slag removal of Haiji 6 was 39,059.1 m3. In respect to ZHOU Xuehua and YE Jiali, after the trial, the two Defendants denied they were their staff and the Plaintiff did not prove the identity of the two people. In respect to WANG Zhishan, CCCC confirmed he contacted with CCCC regard to Haiyang nuclear power projects on behalf of the Defendant Tianbao Company in the trial. In addition, evidence 5 of CCCC shows WANG Zhishan took the project payment in amount of 500,000 yuan on behalf of the Defendant Tianbao Company from the Defendant CCCC on October 23, 2009. In respect to the quantity of dredging mud and slag removal, the preliminary statement which was made on November 22, 2011 by CCCC based on its own data and the report data of the Defendant Tianbao Company shows, in the reef excavating under water of the water intake and outlet projects, the quantity of slag removal was 57,974.50 m3 and the quantity of mud dredging was 104,306.80 m3. The Plaintiff and the Defendant Tianbao Company confirmed the Defendant Tianbao Company had paid the advance payment to the Plaintiff and oil fees in sum of 1,725,177 yuan, but there are other contractual relations between the two parties, therefore, both parties have dispute over which contractual relation the payment is based on. The Plaintiff argued that the Defendant Tianbao Company only paid 477,677 yuan under the contract involved, while the Defendant Tianbao Company claimed 1,725,177 yuan was all based on the contract involved.

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The parties thereto provided no evidence to prove that Shandong Haiyang nuclear power plant circulating water intake and outlet construction project had been completed and passed the acceptance inspection or had been put into use. The court holds that the case is concerning the dispute over the subcontract under sub-contract for construction project. The Defendant CCCC undertook the construction projects of Shandong Haiyang nuclear power plant, then it contract part of the construction to the Defendant Tianbao Company and the Defendant Tianbao Company subcontract part of the projects to the Plaintiff. It obviously violates the compulsory provision in Article 272 Paragraph 3 of the Contract Law of the People’s Republic of China that the contractor is banned to assign the contracted construction project again. According to Article 52 Sub-paragraph 5 of the Contract Law, a contract shall be null and void if it violates compulsory provisions of laws and administrative regulations, as a result, the subcontract for Haiyang nuclear power dredging construction project signed by the Plaintiff and the Defendant Tianbao Company shall be determined to be invalid, and the three parties have no objection to this. As for the quantity of the projects involved, firstly, in respect of the dredging of quantity: it is provided in Article 49 of the Contract Law that a person who lacks agency authority, who acted beyond his agency authority or whose agency authority is concluded on his behalf by a contract, the other party has reason to believe that the offender has the agency, the act of agency is valid. WANG Zhishan not only represented the Defendant Tianbao Company to contact with CCCC in respect to Haiyang nuclear power engineering business, but also received the corresponding payment of the project on behalf of the Defendant Tianbao Company from the Defendant CCCC, it fully shows that he has the right to perform civil juristic acts on behalf of the Defendant Tianbao Company, his signature on the confirmation of the Tianbao on periodic quantities of dredging projects on September 11, 2009 shall be deemed to be the acceptance of the Defendant Tianbao Company, therefore the Plaintiff’s quantity of dredging mud shall be ascertained to be 92,000 m3. Second, in respect of the quantity of slag removal: according to Article 75 of the Some Provisions of the Supreme People´s Court on Evidence in Civil Procedures, where there is evidence to prove that a party possesses the evidence but refuses to provide it without good reasons and if the other party claims that the evidence is unfavorable to the possessor of the evidence, it may be deduced that the claim stand. In this case, the record of the Plaintiff and the Defendant Tianbao Company of quantity and situations of the construction is necessary and reasonable, the Plaintiff submitted the statement of quantity of May 12, 2011, while the Defendant Tianbao Company possessed related work records, but it refused to provide and did not produce proof to the contrary, therefore the claims of the Plaintiff should be deduced to stand. In addition, although the identity of YE Jiali who signed the statement of quantities of May 12, 2011 is unknown, the statement

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is almost consistent with evidence 5 provided by the Defendant CCCC. To sum up, the quantity of slag removal conducted by the Plaintiff shall be ascertained according to the statement of quantity as 39,059.1 m3. As for the completion time of the projects involved, the court holds that the completion time of the dredging mud project shall be based on date of signing the confirmation of the Defendant Tianbao Company on periodic quantity of dredging project of September 2009 and the completion time of slag removal project shall be affirmed according to the record of the statement of quantity of March 2011. It is provided in Article 2 of the Interpretations of Supreme People’s Court on Law Application Issues in the trial of Cases concerning Dispute over Contracts for Construction Projects, where the construction project contract is invalid, the completed construction project has gone through the acceptance inspection, the contractor’s request for the price according to the contract shall be supported. Therefore, where the contract is invalid, but the dredging project has been completed, the premise of the Plaintiff’s request for the project price is the dredging projects involved in this case have reached the conditions of acceptance. In this case, the Plaintiff and the Defendant Tianbao Company though did not appoint the time for acceptance inspection clearly, in view of the existing objective sedimentation in the dredging project, the contractor shall conduct the acceptance inspection within a reasonable period after the project has been completed. Moreover, although the two parties agreed the owner conducted the acceptance inspection, in the case where the owner did not inspect timely, such obligation should be born by the Defendant Tianbao Company. The Defendant Tianbao Company delayed in performance of the contractual obligations after the project was completed, thus it should bear the adverse legal consequences. At the same time, neither did Tianbao Company require the Plaintiff to compensate or restore because of the poor quality of the project, nor it provided any evidence to prove that the project was not in conformity with the acceptance conditions, and it signed the confirmation of quantity. It suggests Tianbao Company has no objections to the quality of the projects. In conclusion, although there is no formal acceptance between the Plaintiff and the Defendant Tianbao Company, through the actual performance of the Defendant Tianbao Company, it is enough to identify the fact that Tianbao Company has confirmed that the quality of the projects met qualified conditions, it shall pay the project price according to the Haiyang nuclear power dredging project sub-contract. The Plaintiff’s dredging project price should be calculated based on the unit price of 12.50 yuan/cubic meter and the quantity of 92,000 m3, and the amount is 1,150,000 yuan. The slag removal project price should be calculated based on 30 yuan/cubic meter and the quantity of 39,059.1 m3, and the amount is 1,171,773 yuan. To sum up, the total amount of the construction price is 2,321,773 yuan. The Defendant Tianbao Company has paid the advance payment and oil fees to the Plaintiff in an amount of 1,725,177 yuan, although the Plaintiff argued that the Defendant Tianbao Company only paid 477,677 yuan based on the contract

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involved in the case, but it did not provide evidence to prove that. Therefore, the argument of the Defendant Tianbao Company that 1,725,177 yuan has been paid based on the contract involved shall be ascertained, the amount can be deducted from project price that shall be paid by the Defendant Tianbao Company to the Plaintiff. In conclusion, the Defendant Tianbao Company shall pay the Plaintiff the project price in sum of 596,596 yuan and the interest thereon, which shall be calculated from the date of the action, namely December 5, 2012. As prescribed in Article 26 Paragraph 2 of the Interpretations of Supreme People’s Court on Law Application Issues in the Trial of Cases concerning Dispute over Contracts for Construction Projects, the developer only bear the liability for the actual constructor within the owing project price. In this case, CCCC, as the developer of the Defendant Tianbao Company, has paid the Defendants Tianbao Company 1.105 million yuan, the Plaintiff failed to produce evidence to prove the Defendants CCCC defaulted the project price and the Defendant Tianbao Company did not claim the Defendant CCCC defaulted its project price. The project price in sum of 1.105 million yuan paid by the Defendant is enough to pay off the claims raised by the Plaintiff, so the Defendant CCCC does not need to bear joint and several liability for the project price owed by Tianbao Company. The loss in sum of 360,000 yuan for shut-down for 24 days from September 21, 2009 to October 14 claimed by the Plaintiff lacks a factual and legal basis and shall be rejected. After research of the Adjudication Committees of the court, according to Article 272 Paragraph 3 of the Contract Law of the People’s Republic of China, Article 2 and Article 26 Paragraph 2 of the Interpretations of Supreme People’s Court on Law Application Issues in the Trial of Cases concerning Dispute over Construction Project Contract, the judgment is as follows: 1. The Defendant Shandong Tianbao Excavating Co., Ltd. shall pay the project price in amount of 596,596 yuan and corresponding interest from the date of this judgment being made at the rate on bank loans over the same period to the Plaintiff; 2. Reject the claims filed by the Plaintiff Zhoushan Haiji Waterway Dredging Engineering Co., Ltd. against the Defendant No. 2 Engineering Company Ltd. of CCCC First Harbor Engineering Company Ltd.; 3. Reject other claims of the Plaintiff Zhoushan Haiji Waterway Dredging Engineering Co., Ltd. The above payment, the Defendant Shandong Tianbao Excavating Co., Ltd. shall be fulfilled within 10 days after this judgment comes into effect. If a failure to fulfill the obligation of payment within the period designated by this judgment, interest on the debt for the delayed period shall be doubled, according to Article 229 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee in amount of 23,633 yuan, the Plaintiff shall bear 17,236 yuan and the Defendant Shandong Tianbao Excavating Co., Ltd. shall bear 6397 yuan.

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In event of dissatisfaction with this judgment, the parties may file an application to the court for review within 15 days upon service of this judgment with six duplicates to lodge an appeal to the Shandong High People’s Court. Presiding Judge: LI Hua Acting Judge: CHI Huande Acting Judge: GUO Junli August 23, 2013 Clerk: XU Wenwen

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Shandong High People’s Court Civil Judgment Zhoushan Haiji Waterway Dredging Engineering Co., Ltd. v. Shandong Tianbao Excavating Co., Ltd. (2014) Lu Min Si Zhong No. 20 Related Case(s) This is the judgment of second instance, and the judgment of first instance is on page 1131. Cause of Action 235. Dispute over channel and port dredging contract. Headnote Dredging sub-contractor held to be entitled to recover value of dredging work done, despite formal invalidity of dredging contract. Summary The developer of a nuclear power plant engaged a general contractor, which engaged a sub-contractor, which engaged a dredging sub-sub-contractor. The sub-contractor did not pay the sub-sub-contractor, which filed suit against the sub-contractor and the general contractor. The trial court held that although the contract between the sub-contractor and the sub-sub-contractor was formally invalid because the sub-contractor was not permitted by Article 272 of the Contract Law of the People’s Republic of China to sub-contract, nevertheless, the sub-contractor should pay the sub-sub-contractor for the work done. The general contractor was held not to be jointly and severally liable to the sub-sub-contractor. The sub-contractor appealed. The court affirmed and held that the sub-contractor should pay the sub-sub-contractor the unpaid amount stipulated in the contract.

Judgment The Appellant (the Defendant of first instance): Shandong Tianbao Excavating Co., Ltd. Domicile: No. 2 XinHua Road, Yishui County, Shandong. Legal representative: GU Jianfeng, chairman. Agent ad litem: ZHANG Haiyan.

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The Respondent (the Plaintiff of first instance): Zhoushan Haiji Waterway Dredging Engineering Co., Ltd. Domicile: Room 102, 16 Building, HuaFeng Apartment, Shenjiamen Street, Putuo District, Zhoushan, Zhejiang. Legal representative: WANG Binghai, chairman. Agent ad litem: TANG Jie, legal worker of Zhoushan Bingcheng Law Service Office. The Defendant of first instance: No. 2 Engineering Co., Ltd. of CCCC First Harbor Engineering Co., Ltd. Domicile: 16 Fuzhou City Road, Qingdao, Shandong. Legal representative: CUI Kelin, chairman. Agent ad litem: LI Yuliang, staff. Agent ad litem: LI Kai, staff. The Appellant Shandong Tianbao Excavating Co., Ltd. (hereinafter referred to as Tianbao Company) disagreed with (2013) Qing Hai Fa Hai Shang Chu Zi No. 71 Civil Judgment made by the Qingdao Maritime Court with respect to the case of dispute over dredging contract against the Respondent Zhoushan Haiji Waterway Dredging Engineering Co., Ltd. (hereinafter referred to as Haiji Company), and the Defendant of first instance, No. 2 Engineering Co,. Ltd. of CCCC First Harbor Engineering Co,. Ltd. (hereinafter referred to as CCCC), and appealed to the court. After accepting the case, the court formed a collegiate panel in accordance with law and heard the case in public. ZHANG Haiyan as agent ad litem of Tianbao Company, TANG Jie as agent ad litem of Haiji Company, and LI Kai as agent ad litem of CCCC, appeared in court to attend the hearing. The case has been concluded. Haiji Company filed the case to the court of first instance and claimed that Haiji Company signed sub-contract of Haiyang Nuclear Power dredging construction projects with Tianbao Company. After conclusion of the contract, Haiji Company fully performed all the obligations of the contract, arranged the grab dredger Haiji 6 and self-propelled barge Haiji 1. It was confirmed by Tianbao Company and the owner that the dredging quantity was 92,000 m3, slag removal quantity was 39,059.1 m3 and the amount was RMB2,321,773 yuan. In addition, Haiji Company suspended working for 24 days from September 21, 2009 to October 14, 2009 due to the reason of Tianbao Company and suffered a loss in amount of 360,000 yuan. Tianbao Company defaulted the payment for Fengcheng project in amount of 1,247,500 yuan (including slag removal compensation in amount of 560,000 yuan, which had been paid by CCCC to Tianbao Company). During this period, Tianbao Company paid the project price and oil fees in amount of 1,825,177 yuan to Haiji Company. Thus Tianbao Company should pay Haiji Company 2,104,096 yuan. It was found that CCCC outsourced the two projects to Tianbao Company. Haiji Company instituted the case to request Tianbao Company to pay the project payment together with the interest in amount of 2,104,096 yuan calculated from June 1, 2011 at corresponding interest rate on bank loan (including the interest of 1.15 million yuan since January 16, 2010 calculated at corresponding interest rate on

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bank loan) and requested Tianbao Company to assume the responsibility within the scope of project payment. In the process of the trial, Haiji Company withdrew the claim for the payment of Fengcheng project, only claimed its right on the Haiyang nuclear power dredging project, and altered part of the facts as Tianbao Company had paid Haiji Company the project price and oil fees in amount of 1,725,177 yuan (477,677 yuan was the payment of Haiyang nuclear power dredging project). On the basis of this, Haiji Company altered the amount to 2,204,096 yuan. The court of first instance ascertained that on December 25, 2008, Shandong Nuclear Power Co., Ltd. (the client) signed the contract for water intake and outlet of circulation water and quarry construction project of Shandong Nuclear Power Co., Ltd., including the south groyne project at the water intake canal, blasting project (rock blasting) at the water intake canal, dredging project at the water intake canal and so on, the quality of the projects should meet the national or professional quality evaluation standard, the client, the designer of the project and related department would examine the project and the completion documents thereof. On March 28, 2009, CCCC (the general contractor) of Tianbao Company (sub-contractor) signed sub-contract for construction project with CCCC (the contractor), it was agreed that Tianbao Company constructed the project of Shandong Haiyang Nuclear Power Plant, the name of the project was blasting reefs under water of the construction of Haiyang nuclear power circulating water project, including blasting reefs under water of water intake project and dredging mud under the south groyne, the quality of the project should conform to the requirements of the main contract and reach the qualified evaluation standard The quality standard of the hydraulic project applied to the Evaluation Standard for Quality Inspection of Port Projects, the way of contract was comprehensive unit price, the construction price was 13,612,637 yuan. The inspection should be carried out by the engineers organized by the Defendant after receiving the completion report. It was provided that Tianbao Company should not contract or subcontract to others again. Tianbao Company assigned JIANG Lidong as project manager in the construction site under the contract, WANG Ruijin, the original legal representative of Tianbao Company and NIU Deguang, the agent of Tianbao Company signed the contract. CCCC had paid 11.05 million yuan to the Defendant Tianbao Company. In April 2009, Tianbao Company (Party A) signed the sub-contract for Haiyang nuclear power dredging projects with Haiji Company (Party B), it was agreed that Haiji Company carried out part of Haiyang nuclear power dredging projects. Party A provided the scope of the project within the scope of Haiyang nuclear power dredging project construction and Party B dredged to the depth specified by the owner. The quality of the dredging project should meet the standards set by the owner. The technical specifications of the main contract and the sub-contract should be applied to Party B completely. The construction equipment is grab ship Haiji 6 and self-propelled barge Haiji 1. The acceptance standards should be executed according to the Quality Inspection Standards of Dredging Projects of the Ministry of Transport (JTJ324-96). The projects should be inspected through sea sweeping and meet the qualified standards. The time limit for a project was as follows: the project was started from April 20, 2009 and completed on August 31, 2009, the

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time could be extended because of the climate. According to the dredging drawings of Haiyang nuclear power project provided by Party A, the quantity of the project should be ascertained as 460,000 m3 temporarily (including 360,000 m3 of the mud and 100,000 m3 of slag removal) and should be finally ascertained according to the dredging drawings confirmed by both parties. The project price and terms of payment was as follows: 1. The comprehensive unit price of dredging was 12.50 yuan/cubic meter and the comprehensive unit price of slag removal was 30 yuan/ cubic meter; 2. the progress payment should be accounted based on actual billing quantity and the comprehensive unit price, after the monthly actual measurement of the parties confirmed Party A and the owner, 90% of monthly progress payment completed by the subcontractor would paid to Party B after it received the corresponding progress payment form the owner, 5% would be paid after the project was completed, and the remaining 5% would be paid off in two years; and 3. upon the acceptance of the owner, the billing quantity should be calculated at actual amount of settlement construction confirmed by both parties. The Defendant Tianbao Company authorized NIU Deguang and Haiji Company authorized XUE Kairu to sign the contract with company stamp. After signing the contract, Haiji Company carried out the construction of the dredging mud project and constructed the slag removal project under water together with the ship Guangxinjun 8. Haiji Company and Tianbao Company confirmed the projects above had been completed in the trial. In respect of the construction situation of dredging mud project, Haiji Company submitted the Periodic Confirmation of Quantity of Dredging Mud Project of Shandong Tianbao Excavating Co,. Ltd. on September 11, 2009 to the court, it was stated that Tianbao Company undertook dredging mud project of south groyne of Haiyang Nuclear Power Plant, upon the joint acceptance inspection of Party A and the owner, the dredging quantity was 90,000 m3, to add up, 2000 m3 for assisting CCCC in dredging mud. ZHOU Xuehua (unidentified), XUE Kairu and WANG Zhishan signed the confirmation. In respect of the construction situation of slag removal project under water, Haiji Company submitted a statement of quantity on May 12, 2011, YE Jiali (unidentified) signed the statement and the triangulation method calculation sheet, confirming the total quantity of the dredging area was 60,018 m3, the remaining quantity (Haiji 6) measured on September 29, 2009 was 29,165.1 m3, the remaining quantity (Gangxinjun 8) measured on May 21, 2010 was 12,832.7 m3, the remaining quantity (Haiji 6) measured on March 28, 2011 was 4626.5 m3, the quantity completed by ship Gangxinjun 8 was 16,332.4 m3. The total quantity in dredging mud area deducted the quantity completed by the ship Gangxinjun 8 and the remaining quantity of March 28, 2011, it could be figured out that the total quantity of slag removal of Haiji 6 was 39,059.1 m3. Regarding to ZHOU Xuehua and YE Jiali, after the trial, Tianbao Company and CCCC both denied they were their staff, and Haiji Company did not prove the identity of the two people. Regarding to WANG Zhishan, CCCC confirmed he contacted with CCCC with respect to Haiyang nuclear power projects on behalf of Tianbao Company in the trial. In addition, evidence 5 of CCCC showed that WANG Zhishan took the project payment in amount of 500,000 yuan on behalf of the

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Defendant Tianbao Company from the Defendant CCCC on October 23, 2009. Regarding to the quantity of dredging mud and slag removal, the preliminary statement made on November 22, 2011 by CCCC which was based on its own data and the report data of the Defendant Tianbao Company showed, in the reef blasting under water of the intake and outlet of water projects, the quantity of slag removal was 57,974.50 m3 and the quantity of mud dredging was 104,306.80 m3. Haiji Company and Tianbao Company confirmed Tianbao Company had paid the advance payment and oil fees in total amount of 1,725,177 yuan to Haiji Company, but there were other contractual relationships between the two parties, both parties had dispute over which contractual relationship the payment was based on, Haiji Company argued that Tianbao Company only paid 477,677 yuan under the contract involved, while Tianbao Company claimed all the payment in sum of 1,725,177 yuan were based on the contract involved. The parties thereto provided no evidence to prove that circulating water intake and outlet construction project of Shandong Haiyang Nuclear Power Plant had been completed and passed the acceptance inspection or put into use. The court of first instance held that the case was concerning the dispute over subcontract under a subcontract for construction project. CCCC undertook related construction projects of Shandong Haiyang Nuclear Power Plant, then it contracted part of the construction to Tianbao Company, and Tianbao Company subcontracted part of the construction to Haiji Company. It obviously violated compulsory provisions in Article 272 Paragraph 3 of the Contract Law of the People’s Republic of China that the contractor was banned to assign the contracted construction project again. According to Article 52 Sub-paragraph 5 of the Contract Law, “a contract shall be null and void if it violates compulsory provisions of laws and administrative regulations”, as a result, the subcontract for Haiyang nuclear power dredging construction project signed by Haiji Company and Tianbao Company should be deemed to be invalid, the three parties had no objection to this. As for the quantity involved, firstly, in respect of the of quantity of dredging mud, the court of first instant held it was provided in Article 49 of the Contract Law that a person who lacked agency authority, who acted beyond his agency authority or whose agency authority was concluded on his behalf by a contract, the other party had reason to believe that the offender has the agency, the act of agency was valid. WANG Zhishan not only represented the Defendant Tianbao Company to contact with CCCC in respect to Haiyang nuclear power projects, but also received the corresponding payment of the projects on behalf of Tianbao Company from CCCC, it fully showed that he had the right to perform civil juristic acts on behalf of Tianbao Company, his signature on the confirmation of the Tianbao on periodic quantity of the dredging mud projects on September 11, 2009 should be deemed as the acceptance of Tianbao Company, therefore Haiji Company’s quantity of dredging mud should be ascertained to be 92,000 m3. Secondly, in respect of the quantities of slag removal, the court of first instant held according to Article 75 of the Provisions of the Supreme People’s Court on Evidence in Civil Procedures: “where there are evidence to prove that a party possesses the evidence but refuses to provide it without good reasons and if the other party claims that the evidence is

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unfavorable to the possessor of the evidence, it may be deduced that the claim stands”, in this case, the record of Haiji Company and Tianbao Company of quantity and situations in the construction was necessary and reasonable, Haiji Company submitted the statement of quantity of May 12, 2011, Tianbao Company possessed related work records, but it refused to provide and did not produce proof to the contrary, therefore the claims of Haiji Company should be deduced to stand. In addition, although the identity of YE Jiali who signed the statement of quantities of May 12, 2011 was unknown, the statement was almost consistent with evidence 5 provided by CCCC. To sum up, the quantity of slag removal conducted by Haiji Company should be ascertained according to the statement of quantity as 39,059.1 m3. As for the completion time of the project involved, the court of first instance held the completion time of the dredging mud project should be based on date of signing the confirmation of Tianbao Company on periodic quantity of dredging projects of September 2009. The completion time of slag removal project should be affirmed according to the record of the statement of quantity of March 2011. It was provided in Article 2 of the Interpretations of Supreme People’s Court on Law Application Issues in the Trial of Cases Concerning Dispute over Contracts for Construction Projects, where the construction project contract was invalid, the completed construction project had gone through the acceptance inspection, the contractor’s request of the price according to the contract shall be supported. Therefore, the court of first instance held that where the contract was invalid, but the dredging project had been completed, the premise of Haiji Company’s request for the project price was the dredging project involved had reached the conditions of acceptance. In this case, Haiji Company and Tianbao Company though did not appoint the time for acceptance inspection clearly, whereas the existing objective sedimentation of the dredging project, the contractor should conduct the acceptance inspection within a reasonable period after the project had been completed. Moreover, although the two parties agreed the owner conducted acceptance inspection, in the case where the owner did not inspect timely, obligation should be born by Tianbao Company. In this case, Tianbao Company delayed in performance of the contractual obligations after the project was completed, thus it should bear the adverse legal consequences. At the same time, neither did Tianbao Company require Haiji Company to compensate or repair because of the quality of the project, nor it provided any evidence to prove that the project was not in conformity with the acceptance conditions, and furthermore it signed the confirmation of quantity. It suggested it had no objections to the quality of the project of Haiji Company. In conclusion, although there was no formal acceptance between Haiji Company and Tianbao Company, through the actual performance of Tianbao Company, it was enough to identify the fact that Tianbao Company had confirmed that the quality of the project had met the qualified conditions, it should pay the project price according to the subcontract for Haiyang nuclear power dredging project. Haiji Company’s dredging project price should be calculated at the unit price of 12.50 yuan/cubic meter and the quantity of 92,000 m3, which amounted to 1,150,000 yuan, and the slag removal project price should be calculated based on 30 yuan/

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cubic meter and the quantity of 39,059.1 m3 up to 1,171,773 yuan, which amounted up to 2,321,773 yuan. Tianbao Company had paid the advance payment and oil fees in a total amount of 1,725,177 yuan to Haiji Company, although Haiji Company argued that Tianbao Company only paid 477,677 yuan based on the contract involved in the case, but it did not provide evidence to prove it. Therefore, the argument of Defendant Tianbao Company that 1,725,177 yuan was paid under the contract involved should be supported, the amount could be deducted from project price paid by Tianbao Company to Haiji Company. To sum up, Tianbao Company should pay Haiji Company the project price in sum of 596,596 yuan and the interest thereon, and the interest should be calculated from the date of the action, namely December 5, 2012. As prescribed in Article 26 Paragraph 2 of the Interpretations of Supreme People’s Court on Law Application Issues in the Trial of Cases concerning Dispute over Contracts for Construction Projects, the developer only bore the liability for the actual constructor within the owing project price, the court of first instance held that, in this case, CCCC, as the developer of Tianbao Company, had paid Tianbao Company 1.105 million yuan, Haiji Company failed to produce evidence to prove that CCCC defaulted the project price, Tianbao Company did not raise CCCC defaulted its project price, and the project price in sum of 1.105 million yuan paid by the Defendant was enough to pay off the claims filed by Haiji Company, so CCCC did not need to bear joint and several liability for the project price owed by Tianbao Company. The loss in sum of 360,000 yuan for shut-down for 24 days from September 21, 2009 to October 14 claimed by Haiji Company was rejected for lack of a factual and legal basis. After research of the Adjudication Committees of the court of first instance, according to Article 272 Paragraph 3 of the Contract Law of the People’s Republic of China, Article 2 and Article 26 Paragraph 2 of the Interpretations of Supreme People’s Court on Law Application Issues in the Trial of Cases concerning Dispute over Construction Project Contract, the judgment of first instance was as follows: 1. Tianbao Company should pay the project price in amount of 596,596 yuan and corresponding interest thereon from the date of judgment being made at the rate on bank loan over the same period to Haiji Company; 2. Reject the claims filed by Haiji Company against CCCC; 3. Reject other claims of Haiji Company. The payment, Tianbao Company should be fulfilled within 10 days after this judgment came into effect, if it failed to fulfill the obligation of payment within the period designated by this judgment, interest on the debt for the delayed period should be doubled according to Article 229 of the Civil Procedure Law of the People’s Republic of China. Court acceptance fee of first instance in amount of 23,633 yuan, Haiji Company should bear 17,236 yuan and Tianbao Company should bear 6397 yuan.

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The Appellant Tianbao Company appealed that, firstly, the evidence was insufficient to prove that Tianbao Company had the obligation to pay. Without affirmation of Tianbao Company, the confirmation of quantity and the statement of project submitted by Haiji Company were insufficient to prove that Tianbao Company had the obligation of payment. Secondly, the subcontract for Haiyang nuclear power dredging project signed by Tianbao Company and Haiji Company was invalid due to violation of compulsory provisions of the law, Haiji Company had no right to claim for the project price based on contract project. According to Article 2 of the Interpretations of Supreme People’s Court on Law Application Issues in the Trial of Cases concerning Dispute over Construction Project Contract, payment claimed by Haiji Company should be on the premise of project completion acceptance. Haiji Company did not inform Tianbao Company the involved project had been completed, let along filed an apply for acceptance inspection, in addition, the involved project had not be consigned to use. At the same time, the acceptance of the project involved should depend on the main project (namely circulating water intake and outlet project of Shandong Haiyang Nuclear Power Plant). The affirmation of the court of first instance that Tianbao Company delayed in performing the obligation of contract for a long time after the projects were completed lacked a basis of facts. Thirdly, through the acceptance inspection, the construction project constructed by Haiji Company was deemed as unqualified, Haiji Company should fulfill its obligation to repair. Tianbao Company applied to the original court for quality identification of the projects involved, but the court did not permit. In September 2013, CCCC entrusted Shangdong Hangwu Navigation Engineering Co., Ltd., a third-party inspection institution to supervise the acceptance and issued a technical report on the underwater topography of the intake of Haiyang Nuclear Power Plant. According to the measuring results, there were a large number of shallow points (of which the depth of water was less than 7 m). CCCC sent a notice on ratification (repair) of construction project on September 16, 2013, Tianbao Company informed the content of the notice to Haiji Company. Haiji Company had not completed the rectification of the projects involved and the projects had not met the acceptance standards, the claim for project price is not standing. Tianbao Company requested to revoke the original judgment and rejected the claims of Haiji Company. The Respondent Haiji Company defended that the subcontract for Haiyang nuclear power dredging project signed between Tianbao Company and Haiji Company was null and void, but Tianbao Company should pay project price to Haiji Company. Although Article 2 of the Interpretations of Supreme People’s Court on Law Application Issues in the Trial of Cases concerning Dispute over Construction Project Contract, qualified acceptance inspection was the precondition of Haiji Company’s request for payment, but the legislative purpose of the Interpretation was, only when the quality of the project was unqualified and it could not be restored, could the payment be relieved. Haiji Company constructed according to the contract, the part that Tianbao Company claimed the depth had not reached the requirements of the contract was slag removal of reef blasting part of the contract, while reef blasting was Tianbao Company’s obligation, and Tianbao

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Company did not provide evidence of the quantity of reef blasting, refusing to pay on the basis of the technical report lacked factual and legal basis. It was agreed in Article 9 of the contract involved that Tianbao Company should pay the progress payment to Haiji Company by the actual quantity and the comprehensive unit price, whether the project was qualified did not affect the payment. CCCC had paid the project price to Tianbao Company in full amount, it showed its affirmation on the obligation performed by Haiji Company. This case was to solve the relationship of rights and obligations between Tianbao Company and Haiji Company, it should be determined in accordance with the contract signed by both parties and not be restricted by contracts signed by Tianbao Company and other parties. Haiji Company requested the court to affirm the original judgment. CCCC, the Defendant of first instance, stated that there established a legal subcontracting relation between it and Tianbao Company, it had paid the project price agreed in the contract, so there was no unpaid money. Tianbao Company submitted the following evidence in the second instance: 1. Notice of acceptance and express bill to prove Tianbao Company had noticed Haiji Company the projects would be inspected on August 28, 2013 in advance; 2. Technical Report on the Underwater Topography of the Intake of Haiyang Nuclear Power Plant, to prove that the depth of part places was less than 7 meters and the result of the acceptance of the project was unqualified; 3. Notice on Ratification (Restore) of Construction Project, to prove that the project acceptance inspection was unqualified and CCCC requested Haiji Company to ratify the project; 4. Notice on Ratification (Restore) of Construction Project and the express bill, to prove that Tianbao Company had notified Haiji Company the report of project acceptance inspection organized by CCCC and requested Haiji Company to ratify within a time limit; 5. The contract to hire the ship Boxiang Project 7 and Zhepu Barge 606, to prove that CCCC was repairing the unqualified project, CCCC was appointed to take charge of the repair by Tianbao Company and Haiji Company, because the repair work had not been completed, the final costs could not be ascertained for the time being. The cross-examining opinions of Haiji Company are as follows: as for evidence 1, it held the project involved started from 2009 and ended in 2011, there was mud silting back in the process of dredging. Tianbao Company requested Haiji Company to conduct acceptance inspection two years later, but the project did not conform with dredging specification requirements. The basis of slag removal was blasting reef, Tianbao Company did not provide any relevant report suggesting the project met the requirements of blasting reef. And the acceptance inspection was not in the charge of Haiji Company in accordance with the contract. As for evidence 2, it held the report lacked legality, authenticity and relevancy. The report was expressly authorized by who, there is no attached measuring mechanism and the measurement personnel qualification certificate. The Measurement

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area was dredging the slag removal of reef blasting section, Tianbao Company should provide evidence to prove it had completed its obligation for reef blasting. Haiji Company objected legality, authenticity and relevancy of evidence 3, 4 and 5, the opinion on the insufficient depth of water was same with cross-examining opinion on evidence 2. Haiji Company objected the legality, authenticity and relevancy of evidence 5, it held Tianbao Company should provide the rent payment vouchers, the ownership certificate of the ship and navigation visa of the ship concerned. CCCC had no objection to the authenticity of the evidence 2, 3 and 5, and did not comment on other evidence. Tianbao Company submitted the following evidence after the trial of second instance: 1. Reply of CCCC on the issues of shallow points of slag removal of underwater blasting project of Haiyang Nuclear Power Plant, suggesting shallow points in the area of underwater were caused by slipping back rather than slag removal had not met the designed standard height. 2. Work Contact List of CCCC, the content was request for Tianbao Company to remove slag again in order to meet the designed requirements. 3. Hydraulic Engineering Quota in Coastal Ports of the Ministry of Transport, according to section of the above quota of dredging mud under water, the quota of clearing layer was higher than that of dredging mud, so the expenses to clear shallow points (calculated by quantity) was higher than the comprehensive unit price agreed with Haiji Company. The court ascertains that according to the provisions on two-cubic meter dredging grab ships of the Hydraulic Engineering Quota in Coastal Ports of the Ministry of Transport, the quota of clearing coverage is higher than the quantity of dredging mud. According to Note 1 of this part, the quota of clearing coverage refers to clearing up mud deposited for many years and coursed rocks, if it is layer of mud and the layer is more than 1 m, then the Quota shall be implemented. The court finds out that the other facts are the same as the facts determined the original judgment. The court holds that the issues in the case lie in the quantity completed by Haiji Company and the amount that should be paid by Tianbao Company to Haiji Company. 1. As for the quantity completed by Haiji Company Firstly, in respect of the quantity of dredging mud, WANG Zhishan represented Tianbao Company signed the confirmation of the Tianbao on periodic quantity of dredging mud project on September 11, 2009, it shall be deemed to be a conformation of the quantity of dredging mud of Tianbao Company. Secondly, in respect of the quantity of slag removal, Tianbao Company possessed related work records, but it refused to provide and did not produce other proof to the contrary, therefore the claims of the plaintiff shall be deduced to stand. In addition, the statement is almost consistent with evidence provided by CCCC. The determination of the court of first instance on the quantity of projects is correct.

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2. As for the amount that should be paid by Tianbao Company to Haiji Company The subcontract for Haiyang nuclear power dredging project signed by Tianbao Company and Haiji Company is invalid for breach of compulsory provisions of the law. According to Article 2 of the Interpretations of Supreme People’s Court on Law Application Issues in the Trial of Cases concerning Dispute over Contracts for Construction Projects, where the construction project contract is invalid, the completed construction project has gone through the acceptance inspection, the contractor’s request for the price according to the contract shall be supported. The court holds that Haiji Company and Tianbao Company affirmed the project had been completed, Tianbao Company did not inspect and accept project for a long time after the completion, Tianbao Company cannot refuse to fulfill the obligation of payment on the ground that the condition to pay is unaccomplished as the acceptance inspection of the completed project has not been conducted. Haiji Company conducted the dredging mud and slag removal operations to fulfill the contract signed with Tianbao Company, so Tianbao Company shall pay the project price for the work that has done by Haiji Company. Tianbao Company argued that the billing method agreed in the contract involved in this case is comprehensive unit price, the unfinished part of the project was much tougher than that had been completed and the unit price thereof was higher, therefore the part has been finished by Haiji Company should not be calculated at the unit price of the contract involved in the case. The basis provided by Tianbao Company is the quantity of clearing coverage provided in the Quota of Hydraulic Projects in Ports of the Ministry of Transport is higher than that of dredging mud. Clearing coverage in the Quota means clearing up mud deposited for many years and coursed rocks, if it is layer of mud and the layer is more than 1 m, then the Quota shall be implemented. Tianbao Company failed to produce evidence to the prove the operation of clearing up of shallow points is the clearing coverage mentioned in the Quota. It cannot be deduced the expenses to clear up shallow points is more than the amount of slag removal conducted by Haiji Company, therefore the claim filed by Tianbao Company shall be disaffirmed. Tianbao Company has no evidence to prove the agreed project price is higher than a reasonable price, so the project price that Tianbao Company should pay to Haiji Company can be calculated based on the unit price agreed by the parties. Tianbao Company also advocated the project that Haiji Company took part in was unqualified, the term to pay could not stand before fulfilling its obligation to repair. The court holds that Tianbao Company has no right to request Haiji Company to continue to perform its obligations and it shall pay the project price only for the work that has been done by Haiji Company. The claim of Tianbao Company refusing to pay on the grounds that the project has yet to repair shall be disaffirmed. To sum up, the grounds of appeal of Tianbao Company have no factual and legal basis, and shall not be adopted. The original judgment is clear in the determination of the facts and correct in the application of relevant laws, the judgment is as follows:

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Dismiss the appeal, and affirm the original judgment. Court acceptance fee of second instance in amount of 9766 yuan shall be born by the Appellant Shandong Tianbao Excavating Co., Ltd. The judgment is final. Presiding Judge: LI Wei Judge: ZHAO Tong Judge: DONG Bing April 28, 2014 Clerk: LIU Fugui