MARINE LORD LTD. v. GITANES ENGINEERING CO. LTD.

1995 No. A1963

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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J U D G M E N T

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FACTS

1. By a Vessel Hire Agreement in writing dated 30th June 1992 supplemented by 4 several undated Memoranda made between the Plaintiff and the Defendant the Plaintiff let to the Defendant 4 barges for a period of 24 months at the rate of HK$160,000.00 per month for each barge for the first 12 months and HK$170,000.00 for the next 12 months. Particulars of the barges and commencement date of hire are as follows:

Barge Name	Date of commencement of hire
HB1005S	24th October 1992
HB1006S	19th October 1992
HB1007S	12th October 1992
HB1008S	24th October 1992

2. The said agreement was subject to the General Conditions of Hire which contained, inter alia, the following terms:-

1. The agreement could be terminated by giving 14 days prior notice by either party such prior notice to expire not earlier than 24 months after the commencement of the hire.

2. Any variation or amendment to the agreement will only be effective if made in writing and signed by an authorised signatory of both parties.

3. Pursuant to the said agreement the Plaintiff delivered the said barges to the Defendant on the respective dates of commencement of hire.

4. By February 1994 there was a down turn in the demand of barges in Hong Kong and the Defendant having completed the work which required the use of those 4 barges. It tried to negotiate for an earlier determination of the hire with the Plaintiff and by June 94 the Defendant had towed all the 4 barges to Tokwawan Typhoon Shelter where the 4 barges were originally anchored.

THE ISSUE

5. The Plaintiff now claims against the Defendant the hiring charges for the remaining period of the hire but the Defendant contends that by 22nd April 1994 they had reached one agreement whereby the Plaintiff had agreed that the Vessel Hire Agreement had been terminated effective 1st June 1994 on the following terms:-

(i) The Defendant would pay rental on all 4 barges up to 31st May 1994.

(ii) Barges HB1006S and HB1007S would be returned to the Plaintiff on "as is" basis.

(iii) Barges HB1005S and HB1008S would be repaired by the Defendant to an acceptable relicensing condition and thereafter returned to the Plaintiff.

(iv) 4 sets of Automatic Self Monitoring System on board the 4 barges would be transferred to the Plaintiff at the agreed price of HK$42,000.00 per set.

6. The only issue therefore is whether the Defendant had reached a concluded agreement with the Plaintiff for an earlier determination of the hire of those 4 barges.

WAS THERE A CONCLUDED AGREEMENT

I DEMAND FOR BARGES

7. There is no dispute that by February 1994 the Defendant no longer required those 4 barges as the Defendant's fleet was also idle and that the market for barge hire was in its ebb. Chu Yiu Wong for the Defendant gave evidence to the effect that in early 1994 Defendant's need for barges declined because of Defendant's cancellation of sub-contract for civil and marine work in Central Reclamation Project, Defendant's unsuccessful tender for a number of marine jobs and a delay in the Tung Chung Project.

II FIRST NEGOTIATION

8. Chu on behalf of Defendant in February 1994 negotiated with the Plaintiff for early determination of the 4 barges' hire agreement. This was flatly rejected by the Plaintiff and the Plaintiff had by letters dated the 28th February 1994, 1st March 1994 and 5th March 1994 stated in no uncertain terms that they are sticking to the terms of the hire agreement and would accept the barges only if Defendant paid all hiring charges until October 1994.

III SUBSEQUENT NEGOTIATIONS

9. Despite of the rejection by the Plaintiff Mr. Chu continued to re-open negotiation for early determination of the hire agreement and by 22nd April 1994 Chu said he had reached an agreement the terms of which were as set out in the letter dated 29th April 1994 from the Defendant to the Plaintiff and are as follows:-

"Dear Mr. Cheung,

Re: Termination of Split Barges "M-HB1005s, M-HB1006s, M-HB1007s, and M-HB1008s"

As per the discussion between your goodself, Mr. James Cheung and the undersigned on 22 April 1994 in your office regarding the captioned subject. We would like to confirm our agreement as the followings:

1. Termination of the above said four vessels shall be effective from 1 June 1994. All rental shall be terminated at the same date.

2. M-HB1006s and M-HB1007s will be returned to you in as is condition.

3. M-HB10005s and M-HB1008s will be repaired to an acceptable relicensing condition when off hire before turning to you.

4. Four sets of Automatic Self Monitoring System which being mounted on board will be transferred to your account at HK$42,000.00 each. Gitanes will arrange a checking served by Radio Holland before the transference."

IV FACTS IN SUPPORT OF DEFENDANT'S CONTENTION

10. In support of this contention, the Defendant relied on the following facts:-

(1) The Plaintiff did not give a reply to the letter of the 29 April 1994.

(2) The barges had been towed back to the typhoon shelter.

(3) No invoices had been issued by the Plaintiff after June 1994 in respect of the hire charges.

(4) The Plaintiff had deducted the amount for the 4 sets of Automatic Self Monitoring System from the rental.

11. In further support of this Contention when the question of consideration was raised at the trial the Defendant applied for further amendment to plead that it was also a term of the 22nd April 1994 agreement that the Plaintiff was entitled to take possession of all 4 barges to re-let them on or before 31st May 1994 and the Defendant would continue to pay rental up to 31st May 1994. On balance I do not accept that there was such a term for the following reasons:-

(1) It was not stated in the letter of the 29th April.

(2) It was not pleaded even after numerous amendments

(3) It was not in the statement but only the supplemental statement of Ken Chu.

12. The Defendant further pleaded estoppel as an alternative Defence. The particulars of representation raising the estoppel pleaded are as follows:-

PARTICULARS OF REPRESENTATION AND CONDUCT RAISING ESTOPPEL

(a) On or about 22nd April 1994, the Plaintiff and the Defendant entered into the Termination Agreement, particulars of which are pleaded in paragraph 9 above.

(b) In reliance on the Termination Agreement, the Defendant returned the 4 barges to the Plaintiff by delivering them to To Kwa Wan Typhoon Shelter on 1st June 1994.

(c) In reliance on the Termination Agreement, the Defendant repaired Barges Nos. HB1005s and HB1008s to relicensing condition.

(d) In reliance on the Termination Agreement, the Defendant transferred the 4 sets of Automatic Self Monitoring System on the 4 barges to the Plaintiff for HK$42,000.00 per set.

(e) Upon return of the 4 barges to the Plaintiff on 1st June 1994, the Plaintiff consistent with the Termination Agreement stopped issuing invoices to the Defendant for rental from 31st May 1994 onwards. Further, the Plaintiff did not give any notice or indicate to the Defendant that it did not accept the validity of the Termination Agreement or the return of the 4 barges, during or before the expiry of the respective hire periods of the four barges under the Agreements.

13. Both witnesses James Cheng and Cheung Kam Wing who at the material time were employees of the Plaintiff but had since left agreed that they had seen the letter of the 29th April 1994 but the Plaintiff had not replied. Their explanation for not giving a reply was that there was no agreement and that the Plaintiff was not the owner of the barges and had to seek instructions from the owner.

14. Mr. Cheng admitted he had instructed the Plaintiff's accounts department to stop issuing invoices. His explanation was that the Plaintiff "was never in doubt that they (Defendant) remained liable to pay hire after they had dumped the barges. The fact that Marine Lord (Plaintiff) did not invoice them was not conclusive ...". "Gitanes were never in any doubt that they remained liable to pay hire after they had dumped the barges. The fact that Marine Lord did not invoice them was not conclusive, as I have already explained that Marine Lord made a last effort to find alternative hirers without success. Further, it afforded Gitanes time to find the money to pay the outstanding hire, which was demanded by me by my letter, dated 25th January 1995."

V FACTS IN FAVOUR OF THE PLAINTIFF

15. It is by no means a straight forward case of fact finding. The facts in support of the Defendant's contention seemed logical and attractive. On the other hand the facts in favour of the Plaintiff are equally convincing.

16. I have to consider the demand for barges during the period between February and April 1994. It is an undisputed fact that there was no market for hiring of barges at that time. In fact according to Ken Chu, for the Defendant, in early 1994 Defendant's need for barges declined because the contract for reclamation in Central was cancelled, the Tung Chung project was delayed and the Defendant had been unsuccessful in bidding for a number of marine jobs. Hence he approached Plaintiff with a view to procure an early determination of the hire agreement. This was flatly rejected by the Plaintiff as can be seen from the letters sent by the Plaintiff to the Defendant dated 28th February 1994, 1st March 1994 and 5 March 1994. I find on balance that those letters had been sent to the Defendant despite of Ken Chu's denial. It seems that despite of the outright refusal by the Plaintiff to accept an early determination of the agreement, the Defendant had continued to press the Plaintiff for an agreement because Ken Chu in his witness statement said "I went on leave from 19th to 31st March 1994. When I returned from my holiday, I learnt from Mr. William Chan that during my absence, there was a meeting between Mr. William Chan and Messrs. Jacky Cheung and James Cheng in which the parties had amended the First Agreement in that all the 4 vessel agreements were to be terminated on 30th June 1994 ("Second Agreement").

17. I felt disappointed by Marine Lord having taken an advantage of my absence to negotiate the Second Agreement and hence I approached Marine Lord again to re-open the negotiation for early determination of the agreements."

18. Since the Plaintiff had rejected the first proposal by the Defendant it is difficult to understand why within less than a month when the market for barges was still in the doldrums the Plaintiff would have turned round and changed its attitude to accept the 2nd agreement. No doubt the Plaintiff and Defendant had a long commercial relationship but then the hire agreement was a business transaction and the Plaintiff had to account to its shareholders. I see no reason why the Plaintiff would forego its revenue derived from the hire agreement just because of the long commercial relationship.

19. It seems that the Defendant would not take "No" for an answer and it had towed all the 4 barges back to the typhoon shelter. There was no proper procedure for the handing over of the barges in the way that Lee Chi Cheong described. According to Lee the handover or re-delivery procedure should be as follows:-

(a) A notice should first be sent to the hirer and/or owner. If the hirer/or owner accepts, they will inform the other party and arrange for a day for the delivery.

(b) A representative will be sent to a particular site to accept the redelivery of the vessels.

(c) The hired vessel should first be inspected and examined for defects, disrepair and/or damage by a representative of the owner or main hirer. In the event of any such defects, disrepair and/or damage, the owner or main hirer normally refuses to accept the hired vessel until the same has been satisfactorily repaired and/or put back into the same condition that it was in prior to the relevant hire or sub-hire commencement date.

(d) The representative normally sign an acknowledgement of acceptance of redelivery of the hired vessel.

20. Although Lee said that normally there must be someone from the Plaintiff to accept re-delivery, if all the crews were crews of the Plaintiff it would be different. He went on to say that there was a need for someone from the Plaintiff to take charge and that the hirer should notify the owner of the re-delivery. It would also be unusual not to sign an acknowledgement of acceptance of re-delivery.

21. In the present case the 4 barges were just towed back to the typhoon shelter without notification by the Defendant nor was there any acknowledgement of acceptance of re-delivery. Had the Plaintiff accepted the agreement I would have thought the Defendant would have asked for an acknowledgement from the Plaintiff.

22. Cheng Shum Ming on the return of the barges said 2 barges were towed to Tokwuwan Typhoon Shelter in March and 2 were towed there later by the Defendant. The Plaintiff did not collect those barges. It is obvious that by April 94 the Plaintiff realised that the Defendant had evinced an intention not to be bound by the contract. To mitigate its loss according to Cheng the Plaintiff did try to contact other customers but without success. It is logical for the Plaintiff to purchase from the Defendant the four Automatic Self Monitoring System as they might facilitate the Plaintiff in trying to re-let those barges to mitigate its loss.

23. Having carefully considered the pros and cons of the facts in favour of the parties, I find on balance that the Plaintiff had not agreed to the early determinations of the hire agreement as suggested in the letter of the 29th April 1994.

24. Even if there was an agreement, according to the terms set in the letter of the 29th April 1994 the agreement is not enforceable for the following reasons:

(1) According to Cl.17 of the General conditions of Hire, any variation or amendment had to be in writing and to be signed by both parties. There was no acknowledgement by the Plaintiff in writing.

(2) There was no consideration. I have found on balance that there was no double hire provision as Ken Chu said in evidence. The purchase of the self-monitoring system was not consideration.

(3) There was a lack of certainty in the terms of the alleged agreement as to the date of the return of the vessels at the time of the alleged agreement.

ESTOPPEL

25. To rely on estoppel, the Defendant must prove that the Plaintiff made a representation, the Defendant relied on the representation and had suffered detriment.

26. The representation relied on by the Defendant is the alleged termination agreement which I have already found that there was no such agreement. Silence on the part of the Plaintiff was not an unequivocal representation. There was no acknowledgement by the Plaintiff of such terms. The representation founding an estoppel has to be clear and unequivocal. (Woodhouse AC Isvael Cocoa Ltd v. Nigeriam Produce Marketing Co. Ltd. [1972] A.C. 741). Further the Defendant has failed to show that it suffered any detriment. The Defendant was under an obligation to pay the hire charges under the hire agreement. There was no evidence from the Defendant that it had assumed other liabilities which it would not otherwise have incurred.

27. In the circumstances I do not find the Defendant had succeeded in establishing a case on estoppel.

28. By reasons aforesaid I find that the Defendant is in breach of the hire agreement and there be judgment for the Plaintiff in the sum of $3,144,999.99 with interests at 10% p.a. from date of writ to judgment.

29. I make the following order nisi in respect of costs:-

(1) The costs of and incidental to and occasioned by the adjournment be the Plaintiff's in any event.

(2) Costs of this action save as otherwise ordered be the Plaintiff's.

(Wesley Wong)

Deputy Judge of the Court of First Instance