UGLAND SHIPPING A/S AND ANOTHER v. INTERMARE TRANSPORT GMBH AND OTHERS

cacv 393/2007

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 393 of 2007

(on appeal from HCCT NO. 47 of 2006)

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J U D G M E N T

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Hon Rogers VP:

1.  This matter comes to this court on appeal from an order of Reyes J made on 3 December 2007.  By that order, the judge made an order further to his order of 15 June in terms that there be released to the 1st defendant’s solicitors, Messrs Stephenson Harwood & Lo, all funds remaining in court in respect of the proceeds of sale of the cargo lately laden on board the motor vessel “Jorita” and interest accrued on such proceeds of sale in respect of the reasonable expenses of the sale and that the costs of and occasioned by the opposition to the application by the 6th defendant be to the 2nd defendant, to be taxed if not agreed.

2.  In short, this relates to a matter of some long standing now.  The 6th defendant was the purchaser of a cargo of cement which was going from the Mainland to Nigeria.  For reasons which it is unnecessary to go into, once the cargo reached Nigeria, the cargo could not be unloaded for administrative reasons.  In those circumstances, the cargo had to go somewhere else.  Because it was cement, it was liable to cake and if cement cakes, it is quite obvious that great problems will arise and even more problems will arise if it is on board a ship because the ship will become damaged.  So, inevitably, the parties very sensibly came to the conclusion that the sooner this cargo was sold, the better.  But this was already deteriorating cargo and it was not that easy, I suspect, for a buyer to be found.  Eventually, a buyer in Kuwait was found and so the judge made the order on 15 June 2006 enabling this cargo to be sold.

3.  We are told that at that stage, the ship, on which this cargo was, was probably about four days out of Port Durban in South Africa.  It then went to Kuwait, it discharged the cargo and then went to Muscat which was the port where it had to be delivered.

4.  At that stage, the first defendant had considered that the voyage charter had been frustrated - or that is, at any rate, the words that were used in some of the documents - and that that was the voyage from the Mainland to Nigeria.  But there is no evidence that the charter party itself, between the plaintiffs and the 1st defendant had been frustrated and that two documents that we have been shown in the bundles - the one from the 1st defendant to the 2nd defendant relating to the claim made in respect of the voyage on to Muscat and the one from the solicitors acting on behalf of the plaintiffs where they refer to the clients having terminated the bill of lading contract on the basis of frustration or repudiation - do not take the matter further.

5.  When the matter came before the court, Mr Kerry, who was the solicitor for the 6th defendant said this at paragraph 13:

“Given the first sub-charter terminated on 23 May 2006, the daily hire rate set out therein, cannot apply.  The 2nd defendant’s application is concerned only with the reasonable expenses of the 1st defendant in connection with the sale of the cargo.  In the premises, the court ought to have regard only to the obligations of the 1st defendant.  As is clear, the 1st defendant was liable to pay a daily rate of $17,100 pursuant to the terms of the Head Time Charter.  There is no evidence that suggests that the Head Time Charter had been terminated.  The daily rate set out in the Head Time Charter should, therefore, apply.  Indeed, it is inconceivable that the 1st defendant would have paid a higher rate, in my respectful submission.  This, in itself, casts doubt on the reliability of the letter referred to in paragraph 10.”

6.  So when the matter came before the judge, it was the 6th defendant’s case that the Head Time Charter was still extant and, quite simply, the cargo was on this ship.  The Head Time Charter was simply running and, at the very minimum, even on the 6th defendant’s case, in order to sell this cargo, the ship would have had to have been taken to the new purchaser in Kuwait because there was no other way of getting the cargo there so, thus a minimum, the figure of US$17,100 a day would be payable.

7.  Then one comes to the point made today that it was actually the plaintiffs themselves who sold the cargo and not the 1st defendant or the 2nd defendant.  That seems to me to be to disregard the point that the vessel was under charter; the charter had to be paid; the only way of getting the cargo to the destination point was to make use of the charter; and that seems to be the end of that.

8.  Mr Sheppard, who appeared on behalf of the 6th defendant today, raised a number of points which all seem to revolve around the same points which I have endeavoured to outline.  As the judge pointed out, whether one takes the rate of the 2nd defendant’s charter with the 1st defendant, namely, $21,000 per day, or the rate of the Head Time Charter, $17,100 a day, it does not make any difference.  All the money in court would be swallowed up.  Some suggestion was made that the vessel should have got to Kuwait much quicker than it actually did.  This does not take into account what, in my view, are the reasonable expenses in selling the cargo and those include the expenses which have been incurred before the order of 15 June 2006.  Mr Sheppard tried to argue that anything that was incurred prior to 15 June 2006 should not be taken into account.  I cannot see on the wording of that order that there is any validity in that point whatever.  Paragraph 5 of the order of 15 June 2006 simply states that:

“The parties be entitled to recover their reasonable expenses of sale from the sum paid into court in accordance with paragraph 2 herein and to make an application to the court in respect thereof.  Expenses of sale shall be treated as having equal first priority over the fund.”

9.  That order is quite plain, in my view, and it refers to all the expenses whether they have been incurred before the date of that order or after the date of that order.  So the expenses that were incurred in taking the vessel from Nigeria to Muscat are all part of the cost of selling the cargo and unloading it.

10.  Try as I may, I have failed to see any merit in this appeal whatever.  In my view, the judge came swiftly to the correct conclusions and I would not disturb them.

Hon Le Pichon JA:

11.  I agree.