SOVEREIGN PACIFIC S.A. v. MAIN FORTUNE LTD.

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

Case No: 1989, A5431

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JUDGMENT

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The Dispute.

1. By a charterparty dated 21 September 1988, Guangzhon Ocean Shipping company ('Cosco'), as dispoment owners, let and the Plaintiff, as charterers, hired the vessel 'Orient Princess' ('the vessel') for the period from 23 October, 1988 until 31 December, 1991.

2. In the middle of May 1989, the Defendant succeeded to the rights and liabilities of Cosco under the charterparty by novation. On 2 October 1989, the Defendant purported to withdraw a coesent for casino operations on board the vessel'. In essence, the Plaintiff says that this purported withdrawal was 'invalid and/or ineffective', and asks, amongst other relief, for me to declare it so.

The Plaintiff's Evidence

3. The bulk of the Plaintiff's evidence came from Mr Hsia Tse Ming, the general manager of the Asia Pacific Group of companies, which includes the Plaintiff.

4. Mr Hsia says that, towards the end of 1988, the group was looking for a vessel on which to operate off shore gambling operations. The 'Orient Princess' had been operating as a gambling ship in neighbouring waters, with occasional visits to Hong Kong, for some time, and, in early spring of 1988, had become based in Hong Kong. A Mr Lan, who was the general manager of the group at that time, but who has since moved overseas, visited the vessel in Auguat 1988. The result of this was that the group became interested in chartering the vessel and got in tonch with Cosco. Mr Hsia, with others who did not give evidence, visited Cosco in Guangzhon in September 1988, with a view to negotiating a charter.

5. Mr Hsia negotiated the charter with a Mr Ho of Cosco. Mr Ho was supported by a Mr Chan, a Mrs Kwok and another, who acted as kind of secretary. There was a meeting on 20 September and two others on 21 September before agreement was finalised. After oral agreement was reached, there was a celebratory dinner, during which the written charterparty was prepared in the English lauguage by the secretary and produced for signature. The discussions had been conducted in Cantonese and Putonghua.

6. There are two clauses in the charterparty that are of particular importance to this case and it is convenient to set these out here:

"36 Notwithstanding the provisions of this Charter, in case Charterers are unable to manage performance of the Charter Party under any circumstances of hardship, they could decide to terminate this Charter prematurely by paying Owners 3 months charter hire as compensation for the damages suffered by Owners arising from such premature termination. However, it's Charters duty to give Owners notice of premature termination as earlier as possible but at least 7 days before the date to terminate.

37. It is mutually agreed that Owners will allow Charterers to set up casino operations on board the vessel.

    The Charterers have the right to terminate the Charter Party whenever the Owners withdraw their consent of the said condition. Under this circumstances the Owners should notify the Charterers one week in advance and to compensate the Charterers by paying 3 (three) months charter hire for damages suffered.

7. Mr Hsia says that, although he knew that the vessel had been operating as a gambling ship, he was conscious of the need to approach the Hong Kong authorities to ensure that they would be able to operate the vessel for gambling purposes out of Hong Kong in international waters. The authorities he was thinking about were the Immigration Department, because they would be transporting passengers into and out of Hong Kong on a regular basis, the harbour authorities, because they would need berthing facilities, and the customs' authorlties, because they would have a duty-free shop an board.

8. Mr Hsia says he asked Mr Ho for a hire-free period of one month in which to do renovation and redecoration work to suit the vessel for casino operations, but Mr Ho would agree to only three weeks for this purpose; that is, up to 23 October 1988. They also spoke of a bank guarantee for the hire; Mr Hsia offered three months guarantee, but Mr Ho insisted on six months. This was, apparently, because Cosco had already had experience of charterers not fulfiling the full term of the charter.

9. Mr Hsia says that, in this context, he told Mr Ho that there would be a lot of alterations to be done to set up the casino and they may went to pull out of the charter if they had difficulties with the Hong Kong authorities Mr. Hsia wanted his group to be at risk for only three months hire if these difficulties eventuated. This was agreed, he says; that, if during the renovation period allowed, there were difficulties with the Hong Kong authorities, his group could pull out of the charter and be liable only for three months hire. Thus, clause 36 found its way into the charter-party. Both parties, Mr Hsia insists, were clear that clause 36 only applied during the renovation period; not after the vessel was delivered to be put into service.

10. Mr Ho, says Mr Hsia, then said, in effect, we want the same provision: If your damage is to be limited to three months hire it you cannot take up the charter during the renovation period, we want the same. Mr Ho said he also had to discuss the charter with higher authority to see if there would be say problem, and, if there was, they would also have the right, during the renovation period, to cancel the charterparty by giving one week's notice and paying three months' hire charges. In this way, says Mr Hsia, clause 37 came to be written into the agreement, although, as can be seen, clause 37 does not, in fact, give Cosco any right to cancel the charterparty.

11. Mr Hsia says his group would not have taken the charter if Cosco could stop the casino operations at any time. The group incurred considerable expense in renovating and redecorating the vessel, hiring staff and leasing premises.

12. After returning to Hong Kong, Mr Hsia arranged, through an agent, to clear the way for the operation of the vessel with the Hong Kong authorities, and was done during the renovation period. As arranged, the Plaintiff was allowed access to the vessel before 23 October 1988, and carried out the renovation and redecoration work, and installation of equipment, including gambling equipment, at a cost of about $5.5 million.

13. The vessel was delivered on 23 October and sailing commenced on that day. For the first couple of months, the vessel sailed six days a week, and, thereafter, seven days a week. The venture proved to be highly popular with the gambling public, successful and profitable.

14. Early in 1989, the Plaintiff invited people from Coseo to come to Hong Kong as its guests. Mr Ho and two others cams. Mr Ho told Mr Hsia that they had been under pressure 'from above', meaning from people in Beijing. Coseo is a state-owned corporation of the People's Republic of China. Mr Ho told Mr Hsia that, after consideration, it was possible they would transfer the rights regarding the vessel to another company so that, whenever they encountered similar pressure, they could, in effect, shrug their shoulders and say the vessel was no longer under their control. At that stage, Mr Ho did not give the name of the possible transferee, or say who would control it. He did say it would be a Hong Kong company. Nothing was said at this meeting about what would happen to the charterparty and the casino operations if the transfer took place.

15. The Plaintiff produced a hearsay notice in which it is stated that it desired to give in evidence a statement by the Cosco people on this occasion to the effect that Cosco had to pass the charter party on to someone else and that the Plaintiff should not worry because Cosco would pass it on to a Hong Kong company whom they controlled. The substance of this is not supported by Mr Hsia's evidence who says this was said at a meeting in May 1989. Another hearsay notice, reflecting that in May 1989, the Cosco people said that they intended to transfer the charterparty to the Defendant and that this company would be a creature of Cosco, was handed in.

16. This ingenious device for putting before the court the evidence of the Cosco people fails if it is not established that they said the things attributed to them.

17. In May 1989, Mr Lau asked Mr Hsia to go to Guangzhou to discuss further the possibility of the transfer of the vessel. Mr Hsia went to Guangzhou and spoke to Mr Ho and Mrs Kwok. Mr Lau was not at this meeting. The Cosco people told him they intended to act defensively by transferring the vessel as they had envisaged. This, they said, would reduce future difficulties concerning the operations of the vessel. They wanted a good charterer who would pay promptly: Their idea would protect themselves and the charterer. They said they intended to transfer the charterparty to the Defendant, but the Plaintiff could continue to have confidence because Cosco would remain in control. Although no specific mention was made of the casino operations, they assured Mr Hsia that all would remain the same. From this, Mr Hsia assumed that no notice to terminate the casino operations would be given, although why he should think, or be concerned, about this is not clear; according to him, the right to withdraw consent applied only during the renovation period. On this basis, Mr Hsia signed the transfer agreement, although he did not seem sure of the details surrounding this. Later, under cross-examination, Mr Hsia said that Mr Lau had signed the novation agreement.

18. During cross-examination, it was put to Mr Hsia that clause 37 was raised by his side. Mr Hsia said this was 'absolutely absurd'; why should he raise a clause that was disadvantageous to them? He was not worried about the Chinese authorities objecting to the casino because the vessel had already been operating in this way.

19. Mr Hsia said that the secretary for Cosco had drafted clauses 36 end 37 so as not to reflect what had been agreed. He was asked if it was possible that clause 37 was drafted by his side in English, but Mr Hsia replied that this was impossible. Then he identified Exhibit 5, which is a hand-written version of clause 37, as a document written by him. He then agreed that he had prepared this draft and it had been taken away and typed by the secretary. He agreed this was when, at the last minute, his side raised clause 37, to provide equality with clause 36. In re-examination, Mr Hsia changed tack again. When asked at whose instigation clause 37 was included, he paused for some time and then said both parties instigated it.

20. Mr Hsia was asked why his side had agreed to the novation if they had a non-terminable charterparty with a corporation they trusted and he answered that their motive was to to help Cosco because they understood the way of the Communist Party.

21. The Plaintiff celled another witness to give evidence; Mr Clifford Pang, who, in May 1989, became a substantial shareholder in the Asia Pacific group. He told me that on 6 September, 1989 he went to the offices of the Defendant and met a Mr Richard Hang, who gave him a name card describing himself as general manager of the Defendant. The purpose of the meeting was for Mr Pang to introduce himself and 'discuss a few things'.

22. He told Mr Pang that it was the Plaintiff's intention to redecorate the vessel and increase accommodation for passengers, but, as a considerable amount of money was involved is this, he wanted an additional three years' charter. Mr Hang said he could not commit the Defendant; he was only an agent and not employed full time by the Defendant. He said a Mr Chi was the boss in Hong Kong representing Cosco. He said the Defendant was just a front for Cosco; that was why it had no staff Mr Hang said be would contact Mr Pang the following week.

23. Mr Pang met Mr Chi the following week. Mr Chi quoted some newspaper articles that reported adversely on the Plaintiff's activities on the vessel. Mr Chi said he was under tremendous pressure from the Chinese authorities and that the Plaintiff should fight back against the rumours. Mr Pang explained that they were doing so. Mr Chi said that they planned to replace the Chinese crew on the vessel with Filipinos so that the Chinese authorities would not bother them any more, and Mr Pang said he had no objection to that if the standard of service was maintained. Mr Hang said they might have to raise the hire charges because of the change, but Mr Pang said they could not do this during the balance of the present charter period. Mr Chi suggested that Mr Pang should talk to Mr Stanley Ho, the casino operator in Macau, saying that he was a powerful man who was supplying tainted facts to the Chinese, who believed them. Mr Chi said that if they could come to terms with Stanley Ho that would save both sides from trouble. Mr Chi said that the Plaintiff was like a piece of sand in Mr Ho's eye. Mr Chi said they would have another meeting the following week.

24. Mr Pang met Mr Chi on 20 September 1989. Mr Chi said he had bad news and read a letter of that date. This letter stated, firstly, that the Plaintiff had committed a breach of a fundamental term of the charterparty by 'your illegal use and trade of the vessel' in Chinese waters, and, secondly, that, under clause 37 of the charterparty, the Defendant was withdrawing 'the consent for casino operations on board the vessel'. Mr Chi said he had no choice but to do this to show the Chinese authorities that he was taking some action. When Mr Pang protested, Mr Chi said that they could carry on casino operations by bribing the Master of the vessel to keep quiet about it. Mr Chi appealed to Mr Pang to understand his position; that he was involved in China trade and his business was hurting. Mr Pang said that he would consult a lawyer. Mr Chi said he should not involve lawyers; there was no need to waste good money on advice - they would both be losers and Stanley Ho would be the only one to gain.

The Defendant's Evidence.

25. The Defendant presented no oral evidence.

26. By a hearsay notice, the Defendant put forward a fax from Mr Ho of Cosco denying that clauses 36 and 37 related only to the renovation period and produced notes and a report prepared by Mr Ho and Mrs Kwok relating to the September 1989 meeting in Guangzhou, which, if accepted, support that there was no such limitation.

27. By another hearsay notice, the Defendant produces an affirmation by Mr Ho of Cosco in which he says that clauses 36 and 37 were intended to operate at any time, not just during the renovation period, and that Cosco had the right at any time to withdraw consent to casino operations on the vessel. Mr Ho also makes it clear that no undertakings, express of implied, were given at any time regarding the continuation of the casino operations. Mr Ho also denies that there was any representation that the Defendant was controlled by Cosco. By oversight, or otherwise, there is no express statement by Mr Ho that, in fact, Cosco does not control the Defendant.

The Plaintiff's Case.

28. The Plaintiff pursues its claim on three bases:

1. The pure construction point: It says that on the true construction of the charterparty, in the light of the 'factual matrix', the right to withdraw consent related only to the permission 'to set up casino operations on board the vessel' and this setting up was completed on 23 October 1988. It is said that, after 23 October 1988, the Defendant had no right to withdraw consent to the casino operations on the vessel, or that any such withdrawal is ineffective.

2. Estoppel by convention: The Plaintiff alleges that the Defendant is estopped from contending that it is entitled to so withdraw the consent because the Plaintiff and Cosco entered into the charter party in September 1988 'on the agreed basis and/or common assumption' that the purpose of clause 37 was solely to allow Cosco to withdraw the consent before casino operations commenced, and the Plaintiff and the Defendant acted on this when the novation was agreed.

3. The 'High Trees' estoppel: The Plaintiff alleges that in the course of negotiating the novation of the charter party in May 1989 Cosco represented to the Plaintiff that the novation was necessary for the smooth running of the casino operations during the remainder of the hire period and the Plaintiff could rest assured that the casino operations would continue. The Plaintiff entered into the novatiom on reliance on these representations.

29. The Plaintiff says that the Defendant has no greater rights than Cosco under the charter party and is bound by the same equities and estoppels as the Plaintiff could have asserted against Cosco.

The Defendant's Case.

30. The written terms of the charterparty are not in dispute, and it is admitted that, under the novation, the Defendant assumed the rights and liabilities of Cosco under the charterparty.

31. The Defendant admits that the substantial work to set up the vessel for casino operations was carried out during the period from early October to 23 October, that is, up to the date of the commencement of the charterparty, with the permission of Cosco at a cost of about HK$5.5 million.

32. The Plaintiff's construction of the charterperty as to the withdrawal of consent to the casino operations is denied. The Defendant says that the consent could be withdrawn at any time, and that, upon such withdrawal, the Plaintiff was bound to cease the casino operations.

33. The Defendant denies both the factual basis and the legal validity of the Plaintiff's allegations of conventional and 'High Trees' estoppels.

34. By an amendment to the defence granted during the trial, the Defendant seeks to turn the tables on the Plaintiff by alleging that the Plaintiff is estopped from denying that clause 37 is valid and subsisting and that the Defendant could validly invoke it. This allegation proceeds, in essence, on the ground that, because clause 37 was not deleted at the time of the novation, the Plaintiff represented, or there was a common agreement or assumption, that clause 37 was valid and subsisting, and the Defendant entered into the novation relying on this. There is no formal reply to this on the pleadings, but I can safely take it that it is denied by the Plaintiff.

The Estoppels.

35. Most of the evidence adduced in this case related to an attempt by the Plaintiff to establish the factual basis for the estoppels alleged Much of this evidence is not admissible on the question of pure construction. If for no other reason that to clear my own mind of evidence that is not relevant to the point of construction, I intend to deal, firstly, with the evidence that is said to form the basis for the estoppels. Clearly, if facts sufficient to support the estoppels are not established, there is no point in tackling any legal difficulties that may lie in the Plaintiff's path.

The Facts on the Estoppel by convention.

36. I have already outlined the evidence on this. The Plaintiff's case depends on the acceptance of the evidence of Mr Hsia.

37. Mr Hsia was, initially, vehement in his denials that clause 37 emanated from him. He said it would have been 'absolutely absurd' for him to have advanced a clause that was disadvantageous to his side for inclusion in the charterparty, and, indeed, this does seem a bit silly. He said the clause was Mr Ho's idea, and he gives some detail as to why Mr Ho wanted it. It was impossible, he said, that clause 37 was drafted by his side in English. Then he is shown Exhibit 5, concedes that this is a hand-written version of clause 37 prepared by him and admits that his side raised clause 37 at the last minute, which is a version of the facts that substantially coincides with the facts stated by Mr Ho and Mrs Kwok. Mr Clarke's attempt in re-examination to rescue his case on this point failed. Instead of, perhaps, a frank admission that his memory had failed him on the matter, Mr Hsia tried, after some consideration, another version; that, in fact, both parties had instigated the clause.

38. I am not satisfied that Mr Hsia is to be relied upon in this regard. Indeed, I am not sure which of Mr Hsia's versions of the genesis of clause 37 I am being asked to accept. The Plaintiffs case, essentially, rests on his first version, and he has withdrawn this.

39. If I cannot rely on Mr Hsia on this point, there is no acceptable evidence, especially in the face of the versions of the facts by Mr Ho and Mrs Kwok, that can establish the factual basis for the estoppel pleaded here.

40. If there is no acceptable evidence of the common assumption alleged as between the Plaintiff and Cosco, there can be no such common assumption upon which the parties to this litigation could have acted when they agreed to the novation. In any event, there is no evidence of the facts, as pleaded, that Cosco conveyed to the Defendant that they had represented or agreed that clause 37 operated only before the casino operations commenced.

41. In this connection, the Plaintiff also alleges that the Defendant is controlled by, or closely related to, Cosco so as to be fixed with knowledge of the limited operation of clause 37, and that Cosco was the Defendant's agent in representing in May 1989 that the casino operations would continue.

42. The allegation of control is founded on alleged statements by the Cosco people that the charterparty would be transferred to a company controlled by them. In his opening, and this is also suggested in the pleadings, Mr Clarke said that this statement about transfer to a controlled company was first said to Mr Hsia early in 1989. As I have pointed out, Mr Hsia did not say this in evidence. He expressly denied that he had been told this in early 1989. He says he was told this in May 1989. He pleadings say that he and Mr Lau were told this, but Mr Hsia says that Mr Lau was not present when he was told this in May 1989. In evidence, Mr Pang said that, in early September 1989, Mr Hang had said that the Defendant was a front for Cosco, but this is not alleged in the pleadings in response to requests for particulars in this regard, presumably because the Plaintiff did not consider that it could rely on such a statement, either because Mr Hang could not be said to be the Defendant's agent to make the statement, or for some other reason.

43. I cannot find that there is any reliable evidence that the Defendant is controlled by, or closely related, to Cosco. It may be so, but I do not think it is established by the evidence.

The Facts an the 'High Trees' Estoppel.

44. It is said in this connection that, in the course of the novation negotiations in May 1989, the Cosco people represented that the novation was necessary to ensure the smooth running of the casino operations during the remainder of the hire period, and, if the Plaintiff agreed to the novation, it could rest assured that the casino operations would continue for the remaining length of the charter period. It is alleged that the Plaintiff entered into the novation in reliance on these representations.

45. One of the major difficulties in the Plaintiff's path in establishing the 'High Trees' estoppel is showing that the Plaintiff relied on any representaions that might have been made. Mr Hsia says that nothing was said specifically about the casino operations; he assumed that, when the Cosco people said words to the effect that things would continue as before, this meant that the casino operations also would continue. The problem for the Plaintiff is that it is unlikely that Mr Hsia would have applied it mind to the casino operations at all if it is true that, as is said, the Plaintiff believed that no question of a consent to the casino activities being withdrawn arose because the time for that had long past. On the Plaintiff's case, the casino operations were not mentioned and there was no need to think about them, so I do not understand how there could have been any reliance on a non-stated representation concerning them.

46. The Plaintiff alleges that these representations regarding the continuation of the casino operations were made to Mr Hsia and Mr Lau and repeated similar oral representations early in 1989. On the evidence, similar representations were not made in early 1989 and, as I have already said, Mr Hsia says that Mr Lau was not at the meeting when the representations are alleged to have been made.

47. No attempt is made in the pleadings dealing with this aspect of the matter to fix the Defendant specifically with knowledge of these representations. There is, of course, the general allegation that the Defendant is bound by the same equities and estoppels as the Plaintiff could have asserted against the Defendant.

48. Given the proved unsatisfactory nature of Mr Hsia's evidence in other respects, the inconsistencies between his evidence and the Plaintiff's pleadings and the improbability relating to reliance that I have mentioned, I am not satisfied that the Plaintiff's allegations of fact sufficient to support this estoppel are established. It is not necessary to decide whether, if established, the Defendant would be bound by this estoppel on the basis of the general allegation made. I would think not on the ground that there is no reason, in conscience, why it should be.

The Estoppel alleged by the Defendant.

49. I find that the estoppel alleged by the Defendant is not established. It rests on the basis that clause 37 was not deleted at the time of the novation and, therefore, the Plaintiff represented that it was valid and subsisting. It is said that, if it related only to the renovation perod, it was spent and should have been struck out. I would regard it is very unusual if the parties, in these circumstances, had gone through the charterparty meticulously to delete or amende clauses so that the agreement was brought up to date. I consider it perfectly natural for the charterparty to be novated as it stood and I believe nothing at all can be deduced from the fact that clause 37 was left in place.

The Construction Point.

50. I am left with the pure construction point to decide.

51. Here, I exclude from consideration, in favour of one side or the other, all the evidence other than 'evidence of the factual background known to the parties at or before the date of the contract, including evidence of the "genesis" and objectively the "aim" of the transaction.' (Lord Wilberforce; Prenn v. Simmonds [1971] 1 W.L.R. 1381, 1385.) - sometimes called the 'factual matrix'. This will not be easy, as far as the interests of the Plaintiff are concerned, because its attempts to bolster the interpretation favoured by it have not left a good impression on me.

52. On this ground of the Plaintiff's claim, the Defendant is, of course, bound by the proper interpretation of the charterparty. The Defendant accepts that it succeeds to the rights and liabilities of Cosco, and this means the rights and liabilities according to the correct construction of the agreement. This would be strange if a natural reading of an agreement were affected by evidence of a factual background unknown to the new party, and I will have to consider this if it arises.

The Factual Matrix.

53. The factual matrix alleged by the Plaintiff against with the charterparty should be construed are the following facts existing at or prior to the conclusion of the charterparty:

1. The Plaintiff and Cosco knew that the Plaintiff intended to expend substantial sums and perform substantial work on the vessel initially to set up the casino operations.

2. That setting up involved altering, modifying, renovating and otherwise equipping the vessel for the profitable operation of the casino.

3. The parties were aware that the Plaintiff wished to set up the casino before the commencement of the charter period.

4. The parties were aware that government consents were necessary for the setting up of casino operations.

5. Three months' charter hire approximately equalled the cost of setting up casino operations.

54. The Defendant admits the facts alleged here, save, as to 5., it says that Cosco did not know what sum the Plaintiff proposed to expend.

55. In argument, Mr Waung suggested the following factual matrix against which I should construe the charterparty:

1. There was a long-term charterparty.

2. The vessel had a history of early termination by charterers.

3. The Plaintiff had no previous experience of operating a vessel of this kind.

4. Casco was a state corporation of considerable experience in shipping.

5. The crew of the vessel were Chinese nationals.

6. The operation of a casino might be considered undesirable by the Chinese authorities.

7. Substantial modification of the vessel by the Plaintiff was likely, and this was to be at the Plaintiff's expense.

8. The Plaintiff was given early access to the vessel by Cosco, without any contractual obligation to do so.

9. There was no real prospect that the venture would not get off the ground.

10. Over the long period of the charterparty, one or other of the parties might want to terminate.

56. While he would not quarrel greatly with most of these factors, Mr Clarke challenges fact 9. and points out, in regard to fact 6., that the Chinese authorities had already tolerated the use of the vessel for gambling for some time. He argues that the important facts of a matrix are:

1. The parties knew that the Plaintiff would do substantial work at considerable cost on the vessel before delivery.

2. The parties knew that there was, at least, a real possibility that there could be difficulties on the Hong Kong side carrying on the venture lawfully.

Fact 9. suggested by Mr Waung is not really consistent with his client's admission that government consents were necessary for the casino operation.

The Construction of Clause 37.

The Purpose of the Clause.

57. For the sake of convenience, I set out clause 37 again here:

'37. It is mutually agreed that Owners will allow Charterers to set up casino operations on board the vessel.

    The Charterers have the right to terminate the Charter Party whenever the Owners withdraw their consent of the said condition. Under this circumstances the Owners should notify the Charterers one week in advance and to compensate the Charterers by paying 3 (three) months charter hire for damages suffered.'

58. What was the purpose of this clause? Other provisions of the charterparty generally allowed the Plaintiff to use the vessel for pretty well any lawful purpose, and clause 32 specifically contemplated that one of the purposes to which the Plaintiff would, and could, put the vessel was to operate a casino. Clause 32 fears:

'32. Dancing, disco and casino activities shall be owned and shall be operated by Charterer' staffs at Charterers' solely risk. Any profit or loss shall be borne by the Charterers.'

59. It does not appear from the charterparty, therefore, that the purpose of clause 37 is to give the Plaintiff permission to operate casino activities on the vessel. Indeed, the clause does not say anything expressly about operating casino activities; it allows the Plaintiff 'to set up casino operations'. It also makes provision for a right vested in the Plaintiff to terminate the charter whenever the Owners withdraw the permission. It is this latter part of the clause that, in my view, reflects the purpose of the provision. I say this because an agreement that contemplates a party conducting casino activities must, of necessity, contemplate that the party will set them up, so there is no need for a specific clause giving permission to set up something that is allowed by that agreement. The purpose of the clause appears to be, on reading it and the rest of the agreement, not to give permission to operate casino activities, but to allow permission 'to set up casino operations' to be withdrawn and to give the Plaintiff a right to terminate if that is done.

60. The creation of these rights to withdraw and terminate is the effective part of clause 37; the opening words were only to identify the circumstances in which these rights would operate; that is in relation to the setting up of casino operations on board the vessel.

61. I accept, of course, that an effective withdrawal of consent to 'set up casino operations' would inevitably mean that the Plaintiff could not operate casino activities on the vessel. If to 'set up casino operations' is not the same thing as to operate casino activities, it must be a preliminary stage through which the Plaintiff would have to proceed before he could operate casino activities, and if the Plaintiff was effectively stopped from proceeding through the earlier stage, it could not reach its destination. This does mean, however, that the preliminary stage is the same as the destination. The question is, if to 'set up casino operations' is a preliminary stage, whether the Plaintiff has not reached, or is still at, that stage.  If the Plaintiff has passed that stage, it is futile to speak of preventing it from getting there.

The Words Used.

62. In seeking to define the circumstances in which the rights given by clause 37 may be exercised, the clause uses words to describe what may be withdrawn in relation to the casino different from those used to describe what is contemplated as a legitimate use to which the Plaintiff could put the vessel in connection with a casino. It appears to me, from the face of the document, that the clause is speaking of setting up casino operations as something different from operating casino activities. Otherwise, I would have thought, the agreement having already referred to 'casino activities' being 'operated', as a contemplated purpose to which the vessel would be put, would have used similar terminology if it were contemplated that it was these activities that were being spoken about in relation to the rights to withdraw and terminate.

63. I appreciate, of course, that the clause 37 was entered into by people whose native language is not English, and followed negotiations conducted in Cantonese and Putonghua, but I know of no rule of interpretation that would allow me to construe the document by trying to ascertain what a person whose first language is not English would mean or make of the words used, and counsel have not suggested otherwise to me.

64. It is, however, legitimate, I think, to assume that the parties to an agreement who are not native English speakers would be more likely than those adept in the language to use the same English words in one part of an agreement as in another to reflect the same intention. In other words, the general inclination to believe that the use of different words reflects a different intention must be somewhat stronger in a situation the people drafting the agreement are not native English speakers.

65. The consent given by clause 37 - what is allowed - is 'to set up casino operations'. The second sentence of clause 37 does not expressly say that the Owners may withdraw this consent, but clearly implies that they have a right to do so. So, the Owners, under this clause, have the right to withdraw the consent given to 'set up casino operations'. The letter from the Defendant's solicitors to the Plaintiff's solicitors dated 2 October 1989 states that the Defendant will not rely on the repudiation in the letter of 20 September and goes on to say '... we are instructed to provide your clients with a fresh notice to withdraw our clients' consent for casino operations on board the vessel pursuant to clause 37 of the charterparty'. The choice of words here is interesting. In giving a formal notice of this nature, one would expect a lawyer to use the words of the document giving rise to the right to give the notice. The document gives a right to withdraw a consent, not 'for casino operations', but 'to set up casino operations'.

66. I approach this problem of interpretation by considering what is the natural and ordinary meaning of the words 'to set up casino operations', and then considering whether this meaning should be qualified or modified in the light of the factual matrix.

67. The meanings of the words 'set up', in the present context, given by the Concise Oxford Dictionary are 'start' or 'establish (person) or provide with means of establishment or establish oneself in some capacity', and this, I accept, is their usual and ordinary meaning. If a man sets up his son in business, he provides him with the necessary finance, and perhaps other facilities, to enable him to commence that business. Once the man has done this, he will speak of the setting up of his son in the past tense; it is something he has already done and his action is complete. If I set up a charity, I have done so once I have signed the necessary papers appointing the trustees et cetera and have transferred the trust funds to them. My setting up of the charity is not a continuous action, but is complete after the trustees assume office and begin the administer the fund.

68. Mr Waung argues that 'to set up casino operations' plainly means to establish a casino business and the consent with which we are concerned relates to the establishment of that casino business. This is undoubtedly right, but the point goes now here to help the Defendant's case. When the vessel sailed on 23 October 1988 the casino business had been established; certainly, it had been established when the gambling commenced and even more certainly it had been well and truly established once the business proved to be so successful and profitable. Surely, no one in his right mind, with any basic knowledge of the structure and grammar of the English language, sailing on the 'Orient Princess' and seeing the gambling in operation, would have said that the Plaintiff was setting up casino operations or establishing a casino business at that time. He would have said that the Plaintiff had already 'set up casino operations' or established a casino business, and was doing jolly well out of it too.

69. In October, or, indeed, in September this year, the Plaintiff was doing nothing that required the Owner's consent under clause 37 because what it had been given permission to do by that clause had already been done. It cannot be said that, at that time, the Plaintiff was doing anything that could be described as setting up casino operations. That had been done and, thereafter, the casino operations were in full operation, not in the course of being set up.

70. Accordingly, I believe that the ordinary, fair and natural meaning of the phrase 'to set up casino operations' is that they refer to an act or series of acts having a fixed beginning and a definitive end. The precise time of that ending might be open to argument, but there can be no doubt at all that the casino operations had been set up long before the Defendant purported to withdraw a consent to that setting up.

71. A right to withdraw consent to the doing of something can only subsist if it is assumed that, at the time that right is to be exercised, that something has not already been done. If I give my consent to the marriage of my under age daughter, it is no earthly good for me to change my mind after the marriage and to seek to withdraw my consent.

Meaning in the Light of the Factual Matrix.

72. Should the straight-forward meaning of the phrase give way to any special meaning in the light of the factual matrix? I think not. I see nothing in those facts that would lead me to conclude that 'to set up casino operations' should be read to mean 'to operate a casino business' or to carry on casino operations.' In anything, the opposite is the case. The possibility of either the Chinese or Hong Kong authorities being difficult about the venture is something, one would have thought, that would eventuate or not within a definitive period, and this would be known before the Plaintiff had completed the setting up of the casino operations. There is no reason, in my view, to think that factual matrix indicates that the parties envisaged that the Plaintiff would expend a great deal of time, money and energy in setting up the casino operations, would put to sea and commence the gambling, but would face the possibility of Cosco, for any reason at all, or for no reason, immediately or at any time thereafter, withdrawing its consent to the continuation of the business.

73. Neither, in my judgment, is there anything particular in the rest of the charterparty, or in reading the agreement as a whole, to lead me to conclude that the natural and ordinary meaning of the clause in question should give way to some other interpretation.

74. It may be, in truth, that the negotiators at the meeting in September 1988 intended something quite different to be read into clause 37, but, of course, I must take the intention of the parties from the document, read in the light of the factual matrix, and not from any evidence I have before me as to what the negotiators might have intended to embody in their agreement.

75. It has been urged upon me that I should read clauses 36 and 37 together, but I do not see the matter that way, except in the sense that the entire charterparty should be read as a whole. Of course, if I have regard to the evidence of the intention of the negotiators, it does seem that the two clauses were intended to be linked, but, without that evidence, there is nothing, in my view, that makes the interpretation of clause 37 dependent in any way on a meaning to be ascribed to clause 36, or indicates that the construction of clause 37 should be influenced by the wording of clause 36, so as to change the fair meaning of the words used in the later clause.

The Result.

76. It follows from what I have said that the withdrawal of consent by the Defendant in so far as it purports to relate to the carrying on by the Plaintiff of the casino operations is misconceived and has no effect. In so far as that withdrawal can be said to relate to the setting up of casino operations, it is also ineffective because there was no setting up of casino operations at the time the consent was withdrawn.

77. On this basis, the Plaintiff is entitled to relief. My order in this respect is framed as far as it is necessary to go, as I see it, in the light of the relief claimed and my findings. If it is felt that I have got the detail or drafting of this wrong, I give liberty to apply to vary it.

78. I grant a declaration that the consent referred to in clause 37 of the charterparty between the Plaintiff and the Defendant relating to the vessel 'Orient Princess' does not apply to the operation of casino activities on board the vessel, and, accordingly, the Defendant does not, under that clause, have a right to withdraw consent to the Plaintiff's casino operations on board the vessel.

79. I also grant an injunction restraining the Defendant, its servants or agents from committing any act that interferes with the operation of the Plaintiff's casino activities on board the vessel 'Orient Princess', in so far as such an act purports to be done on the jusification that the Defendant is entitled to withdraw a consent to the operation of casino activities on board the vessel.

The Costs.

80. On the face of it, costs should follow the event. Accordingly, I made an order nisi to the effect that the Defendant pay the Plaintiff's costs.