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CISG CASE PRESENTATION

China 5 March 2002 Guangxi Beihai Maritime Court (Sino-Add (Singapore) PTE. Ltd. v. Karawasha Resources Ltd.) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/020305c1.html]

Primary source(s) of information for case presentation: Wu Dong

Case Table of Contents


Case identification

DATE OF DECISION: 20020305 (5 March 2002)

JURISDICTION: Peoples Republic of China

TRIBUNAL: Beihai Maritime Court, Guangxi Zhuang Autonomous Region

JUDGE(S): NI Xuewei (Chief Judge); LIU Qiaofa. TAN Qinghua (Judges)

CASE NUMBER/DOCKET NUMBER: (2001) Haishangchuzi No.119

CASE NAME: Sino-Add (Singapore) PTE. Ltd. v. Karawasha Resources Ltd.

CASE HISTORY: 1st instance

SELLER'S COUNTRY: Hong Kong, China (defendant)

BUYER'S COUNTRY: Singapore (plaintiff)

GOODS INVOLVED: Indian Iron Ore


Classification of issues present

APPLICATION OF CISG: This is a lawsuit involving claims having to do with the hire of a voyage charter and other fees with a certain mention of the underlying sales contract. The court stated:

"The two parties did not choose the applicable law and the destination of the transportation contract is located in the jurisdiction of the court. Therefore, pursuant to Article 269 of the Maritime Law of the People's republic of China, which stipulates that 'where the parties do not choose the applicable law, the law of the nation holding the closest connection with the contract shall be applied', the Maritime Law of the People's Republic of China, the Contract Law of the People's Republic of China and the relevant international conventions shall be applied to this case."

In its comments on the sales contract, the court refers to "Chinese Law" without specifically mentioning the CISG. To the extent the CISG applies to the sales contract, the following provisions would appear relevant.

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 6 ; 41 ; 74 ; 78

Classification of issues using UNCITRAL classification code numbers:

6B [Agreements to apply Convention: contract silent on choice of law];

41A [Seller's obligation to deliver goods free from any third-party right or claim];

74A [General rules for measuring damages: loss suffered as consequence of breach];

78B [Rate of interest]

Descriptors: Choice of law ; Delivery ; Third-party claims ; Damages ; Legal costs ; Interest

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Chinese): <http://www.ccmt.org.cn/hs/writ/judgementDetial.php?sId=477>; see also CISG-China Case [HPC/07]: <http://aff.whu.edu.cn/cisgchina/en/news_view.asp?newsid=94>

Translation: Unavailable

CITATIONS TO COMMENTS ON DECISION

English: Article 78 and rate of interest: Mazzotta, Endless disagreement among commentators, much less among courts (2004) [citing this case and 275 other court and arbitral rulings]

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Guangxi Beihai Maritime Court [5 March 2002]
Sino-Add (Singapore) PTE Ltd. v. Karawasha Resources Ltd.

Translation [*] by Wu Dong [**]

[PROCEEDINGS]

PARTIES AND COUNSEL. Plaintiff: Sino-Add (Singapore) PTE. Ltd. [Buyer]. Domicile: 10 Anson Road #35-08 International Plaza, Singapore 079903. Legal Representative: Fan, Heli, Vice President. Attorney: Zhao, Xudong, Male, Han, Teacher of China University of Political Science and Law, Domicile: Beitaipingzhuang Mid-Road Jia 10#, Haidian District, Beijing. Defendant: Karawasha Resources Ltd. [Seller]. Domicile: 28/F Soundwill Plaza, 38 Russell Street, Causeway Bay, Hong Kong.

In respect of the lawsuit of [Buyer] claiming against [Seller] for the hire of a voyage charter and other fees, the court on 13 August 2001 accepted it, established the tribunal according to the law and on 5 December held open hearing. [Buyer]'s legal representative (FAN Heli) and attorney (ZHAO Xudong) attended the hearing. However, [Seller] after being summoned refused to appear before the court without proper reason. Now, the trial on the present case is completed.

[POSITION OF THE PARTIES]

[Buyer]'s position. [Buyer] and [Seller] entered into a sales contract for 60,000 tons of Indian iron ore, in which they stipulated the quantity, place and time of delivery. Thereafter, [Buyer] according to the contract concluded a voyage charter with Transfield Shipping Inc. Panama (hereinafter referred to as "Transfield"). However, [Seller] did not deliver the goods as promised in the contract. As a result, [Buyer] could not load the goods according the voyage charter. This led to a gross loss to the shipping company and thus [Buyer] compensated it US $ 550,000 for its breach of contract. Based on the aforesaid, [Buyer] requested the court to direct [Seller] to reimburse [Buyer]'s loss under the voyage charter in the amount of US $ 550,000, plus interest at the London Interbank Offered Rate from 26 September 2001 to the payment date, attorneys' fee of Singapore $ 39,424.17 and HK $ 85,979.42, the lawsuit fee of the present case, and the fee of pre-hearing custody of property.

[Seller]'s position. [Seller] made no response.

FINDINGS OF THE COURT OF FIRST INSTANCE

After trial, the court found:

On 15 March 2001, [Buyer] and [Seller] concluded Sales Contract No. KRL/2001/02, in which it is stipulated:

After the conclusion of the contract, [Buyer]'s downstream customer, China Guizhou Shuicheng Steel Group Import and Export Company, established an irrevocable L/C (No. UZXLC0100241) under Contract No. KRL/2001/02 via China Construction Bank Guizhou Branch. On the L/C, China Construction Bank Hong Kong Branch is listed as the notifying bank, [Seller] as the beneficiary and the valid time is till 20 August 2001. It also provides that the total price is US $ 943,578, the loading port is Napaji India, the unloading port is Zhanjiang or Fangcheng China, the latest loading time is 15 May 2001 and the goods are 60,000 tons (+-10%) of iron ore in bulk.

On 24 April 2001, [Buyer] informed [Seller] that it was decided that ship "MV V-Trade" would transport the aforesaid goods and it would arrive at Panaji on 10 May. However, [Seller] rejected that as there would be other ships to be loaded on that day. [Seller] suggested that the date of loading be changed to 13 to 20 May and assured that the goods would be loaded during this new period of loading. [Buyer] agreed that:

The date of loading would be 13-20 May, 20,000 tons per day, rest days and festivals included; demurrage was US $ 8,000 per day; dispatch money was 50% off; the ship was "MV Angelic Spirit"; the expected arrival date was 14 May.

After the two parties altered the transportation clause in the sales contract and agreed on the aforesaid stipulations, [Buyer] concluded a voyage charter with Transfield and agreed that:

[Buyer] chartered "MV Angelic Spirit" of Transfield to transport 60,000 tons of iron ore from Panaji India to Fangcheng or Zhanjiang China; the freight was US $ 7.15 per ton; the expected preparing day was 13 May and the discharging day was 20 May; the loading speed was 20,000 tons per sunny day (Sundays and festivals included); suspension of loading due to wind or wave (except rain) was also counted into loading time; demurrage was US $ 8,000 per day; dispatch money was US $ 4,000 per day.

After conclusion of the voyage charter, before the arrival of "MV Angelic Spirit", [Seller] requested to change the loading port to Mormugao and [Buyer] consented. At 20:30 on 13 May, when "MV Angelic Spirit" arrived at Mormugao, it submitted the "Notice of Prepared to be Loaded" to the authorities of the port. At 00:00 on 17 May, "MV Angelic Spirit" commenced to be loaded.

From 20 May to 1 June, it was impossible to load due to the wind and waves; the ship waited in the port according to [Seller]'s direction. Meanwhile, [Seller] requested that the ship proceed to Chennai, another port in east shore of India, and assured that the goods would be prepared there. On 1 June, "MV Angelic Spirit" arrived at Chennai according to [Seller]'s direction. But it was found there were no goods prepared there. The B/L showed that the shipper was Indian Tungabhadra Special products of Division of Tungabhadra Minerals Limited. So, only 20,000 tons of goods were loaded onto "MV Angelic Spirit" at Mormugao. After waiting at Chennai for several days, "MV Angelic Spirit" left there on 7 June for Fangcheng and arrived there on 17 June. On 11 August, according to [Buyer]'s application, the court levied on the 22,442.36 tons of iron ore carried by "MV Angelic Spirit". To mitigate the loss, the court on 28 September decided to sell the goods to Yunan Kunming Steel Group Import and Export Company and obtained Renminbi [RMB] 3,654,658.79.

Based on the aforesaid facts, Transfield sued [Buyer] in Singapore and claimed for compensation under the voyage charter. It applied to the court to freeze [Buyer]'s deposit of US $ 700,000. On 19 September, [Buyer] and Transfield entered into a Settlement Agreement stipulating that [Buyer] compensate Transfield US $ 550,000 as the relative freight, dead freight, demurrage and fee of alteration of port. [Buyer] paid Transfield the aforesaid compensation on 26 September and therefore the latter withdrew its lawsuit against [Buyer] in Singapore. In addition, [Buyer] paid HK $ 85,975.42 of attorneys' fee to settle the dispute of the "MV Angelic Spirit" in Hong Kong and Singapore $ 39,424.17 of attorneys' fee to settle the dispute of the voyage charter in Singapore.

The aforesaid facts were proved by the following evidence provided by [Buyer]:

  1. The sales contract, No. KRL/2001/02, to prove the sales of iron ore between the two parties and the relevant rights and obligations.
  2. The L/C established by China Guizhou Shuicheng Steel Group Import and Export Company to prove that [Buyer] had established an irrevocable L/C to pay the price.
  3. The voyage charter between [Buyer] and Transfield, to prove that [Buyer] concluded the charter to implement its obligation under the sales contract.
  4. The e-mail, fax between the two parties, the record of arrival at the port, to prove [Buyer]'s act of implementing its obligation and [Seller]'s act of breach.
  5. Settlement Agreement, court's decision, cash account bill, to prove that [Buyer] did not implement its obligation under the voyage charter due to [Seller]'s breach of contract and compensated Transfield US $ 550,000.
  6. Taxed invoices, to prove that [Buyer] paid HK $ 85,975.42 and Singapore $ 39,424.17 to settle the dispute as to the charter.
  7. The B/L, to prove the goods under the present case were consigned by Indian Tungabhadra Special products of Division of Tungabhadra Minerals Limited, the consignee was up to direction, the notifier was China Guizhou Shuicheng Steel Group Import and Export Company, the transporter was Transfield.

The Court deems that the present case is a dispute on the reimbursement of the hire under the voyage charter and other fees. [Buyer], as a Singaporean legal person, applied to the Court for levying on the goods under the sales contract and sued another legal person located in Hong Kong Special Administrative Region, which is out of the court's jurisdiction. As [Seller] did not reply to the claim, nor raise any objection as to the jurisdiction or other matters, it should be deemed that it had accepted the court's jurisdiction. According to Article 243 of the Civil Procedure Law of the People's Republic of China, the court has the jurisdiction on this case.

The two parties did not choose the applicable law and the destination of the transportation contract is located in the jurisdiction of the court. Therefore, pursuant to Article 269 of the Maritime Law of the People's Republic of China, which stipulates that "where the parties do not choose the applicable law, the law of the nation holding the closest connection with the contract shall be applied", the Maritime Law of the People's Republic of China, the Contract Law of the People's Republic of China and the relevant international conventions shall be applied to this case.

In respect of the sales contract of iron ore between the parties, it was concluded on the basis of equality and free will and its contents that it did not violate Chinese law. Therefore, this sales contract is valid and thus shall be effective to both parties. In the contract they agreed that the price term was FOB ST, which meant [Buyer] should charter a ship and book the cabins, then inform [Seller] of the information of the ship, its time of arrival and so on, and [Seller] should deliver the goods conforming to the contract and the corresponding invoices or electronic documents, load the goods to the assigned ship in the agreed time at the agreed port and trim cabin. In order to implement its obligations under the sales contract, [Buyer] concluded a voyage charter with Transfield and chartered "MV Angelic Spirit" to transport the goods. The ship arrived at the appointed port in time and submitted the "Notice of Prepared to be Loaded". Whereupon [Buyer], who according the sales contract had implemented its obligations in a proper and reasonable manner, informed [Seller] of the ship's data and time of arrival in time. On the other hand, [Seller] was obligated to deliver the goods at the loading port in the agreed time. However, [Seller] did not implement this obligations in proper manner - it delivered merely about 20,000 tons of goods, which caused the "MV Angelic Spirit" to suffer gross dead freight. Because [Seller] did not prepare enough goods at the loading port, the ship had to wait for the goods at port and the suspension of loading due to wind and waves was counted into the loading time. The ship was delayed for a long time which led to a large mount of demurrage paid by [Buyer] to the owner of the ship. Then, according to [Seller]'s direction and promise, the "MV Angelic Spirit" headed to Chennai from Mormugao. But, at Chennai it was found again that there were no goods to be loaded and the ship waited there for 6 days for nothing and then had to leave for Fangcheng China. These transportation fees and demurrage charges were also a direct loss due to [Seller]'s act of not delivering enough goods. In respect of the charter contract between [Buyer] and Transfield, after the arrival of the ship at the appointed port, the goods were not prepared there. This caused the dead freight, demurrage, transportation fee and other losses to the owner of the ship. As these fees were incurred by [Buyer]'s breach of the charter contract, [Buyer] was obligated to compensate all of these fees. The evidence shows that [Buyer] paid US $ 550,000 to Transfield. According to the charter, the freight was US $ 7.15 per ton; as the final amount of the goods was 22,442.36 tons, the total freight was US $ 160,462.87. If the goods had been delivered to [Buyer] as required by the contract, the freight would be counted into the cost of the goods as consideration or payment to the owner of the ship so that it could not be regarded as additional loss. However, in the present case, [Seller]'s breaches of contract led to the impossibility of implementing the contract. Hence, [Buyer] did not receive the goods at last. Moreover, [Buyer] had to pay the freight under the charter. Therefore, the freight could not be deemed as part of the cost of the goods because [Buyer] did not receive them, but a kind of compensation paid by [Buyer] to the owner of the ship after [Buyer]'s breach. When reviewing the whole case, the reason why [Buyer] could not implement the charter was [Seller]'s act of breach, i.e., [Seller] did not deliver full amount of goods at the appointed port. If [Seller] had delivered the goods in the right amount and at the right time, [Buyer] would have been able to implement the charter and would not have breached the charter. Therefore, [Buyer]'s claim against [Seller] for the compensation it paid to the ship-owner is legal and supported by the court. However, [Buyer]'s claim for the interest counted at the London Interbank Offered Rate was not proper. To be fair, the interest shall be counted at the contemporary lending rate of the liquid capital promulgated by the People's Bank of China. The attorneys' fees paid by [Buyer] in Hong Kong and Singapore were necessary expenses to settle disputes in a society governed by law, so they shall be borne by [Seller] as well.

The more than 20,000 tons of iron ore carried by the "MV Angelic Spirit" were loaded to implement [Seller]'s obligations under the sales contract. Ever since the decision of the loading time, place, the actual amount, all the process was made according [Seller]'s direction. There was no third party involved. The B/L provided that the shipper was Indian Tungabhadra Special products of Division of Tungabhadra Minerals Limited, but Tungabhadra had no direct trade or charter connection with [Buyer] or Transfield. However, the goods consigned by it were loaded onto the ship chartered by [Buyer]. So the goods loaded should be those under the sales contract. According to Article 41 of the UN Convention on Contracts for the International Sale of Goods, "the seller must deliver goods which are free from any right or claim of a third party", [Seller] possessed the ownership of the goods carried by the "MV Angelic Spirit". As the sales contract was finally impossible to be implemented due to [Seller]'s breach, and [Buyer] did not pay the price, the ownership of the goods was not transferred to [Buyer]. On this basis, [Buyer] claimed for reimbursement, and the basis of [Seller]'s liabilities may be the goods carried by the "MV Angelic Spirit" or the money obtained after selling them according to the law.

According to Article 100 para. 2 of the Maritime Law of the People's Republic of China, "lessee shall bear the liabilities of compensation where lessor suffers loss because the agreed goods are not provided" and Article 107 of the Contract Law of the People's Republic of China, "where a party fails to perform its obligations under a contract, or rendered non-conforming performance, it shall bear the liabilities for breach of contract by specific performance, cure of non-conforming performance or payment of damages, etc." and Article 130 of the Civil Procedure Law of the People's Republic of China, "where the defendant refuses to appear before the court without proper reason after being summoned by the people's court, ... the court may render a judgment by default", the court hereby renders the following judgment:

  1. [Seller] shall compensate [Buyer] US $ 550,000, i.e., the losses of freight, dead freight, demurrage and transportation fee, and pay interest at the contemporary lending rate of the liquid capital promulgated by the People's Bank of China from 26 September 2001 to the payment date;
  2. [Seller] shall compensate [Buyer] the attorneys' fee of HK $ 85,979.42 and Singapore $ 39,424.17.

The aforesaid US $ 550,000 and its interest, HK $ 85,979.42 and Singapore $ 39,424.17 shall be paid in 10 days as of the effective date of this judgment.

The case accepting fee of RMB 133,459.15 and the fee of pre-hearing custody of property of RMB 20,000 shall be borne by [Seller] and shall be paid to the court in 10 days as of the effective date of this judgment.

If any of the parties are not convinced in this judgment, it may in 30 days after the arrival of the judgment submit a petition for appeal and copies corresponding to the number of the other party to the court and appeal before the Guangxi Zhuang Autonomous Region High People's Court. The appealing fee of RMB 133,459.15 is required to be submitted in advance in 7 days as from the due time of the appealing time. If it is not paid in time, and no application for postponement is raised, it will be deemed as an autonomous withdrawal of appeal.

Chief Judge: NI Xuewei
Judge: LIU Qiaofa
Judge: TAN Qinghua

5 March 2002

Clerk: FU Xiaoming


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff of Singapore is referred to as [Buyer]; Defendant of Hong Kong, China is referred to as [Seller]. Amounts in the currency of the United States (dollars) are indicated as [US $]; amounts in the currency of the People's Republic of China (Renminbi) are indicated as [RMB]; amounts in the currency of Singapore (dollars) are indicated as [Singapore $]; amounts in the currency of the Hong Kong Special administrative Region of the People's Republic of China (dollars) are indicated as [HK $].

** Wu Dong, LL.M. candidate, Peking University School of Law, Beijing, P.R. China, 2001 to present; LL.B. Peking University School of Law, 2001.

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