NATIONAL MARINE CORPORATION v. ASIA POWER SHIPPING (HK) LTD.

DCCJ 1627/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1627 OF 2002

--------------------

--------------------

---------------------------------------

DECISION

---------------------------------------

1. This is an application taken out by the Plaintiff against the Defendant under Order 29 Rule 10, 11 and 14 of the Rules of the District Court for, inter alia, an order that the Defendant do make to the Plaintiff an interim payment of US$25,000.00 on account of the damages claimed in this action.

BACKGROUND

2. The Plaintiff is the owner of a vessel called "Isla Bohol" which was chartered out to Guangdong Industrial Equipment Installation Company ("GIEIC") and Pacific Shipway Company Limited ("PSCL") under a Fixture Note dated 12th January 2000 ("the Note") through the Defendant who acted as a shipbroker for PSCL in Hong Kong. There were other sub-charterers involved and PSCL was one of the sub-charterers. GIEIC was the Head-Charterer.

3. Certain demurrage payment was payable by GIEIC to the Plaintiff. After negotiations the amount of demurrage payment was agreed at US$55,000.00 payable by GIEIC to the Plaintiff ("the Agreed Sum").

4. The Agreed Sum of US$55,000.00 was paid to the Defendant on 15th October 2000 by GIEIC to be paid over to the Plaintiff. On 6th December 2000 the Defendant paid to the Plaintiff a sum of US$30,000.00 only and retained a sum of US$25,000.00. The Defendant says that that was retained to settle work done and services rendered by the Defendant to the Plaintiff in assisting the Plaintiff to negotiate and settle its demurrage claim with GIEIC.

THE ACTION

5. On 14th March 2002 the Plaintiff issued a Writ of Summons in this action against the Defendant claiming for the return of the sum of US$25,000.00. On 23rd May 2002 the Defendant filed a Defence denying the Plaintiff's claim. In the Defence the Defendant claims, inter alia, that the Plaintiff agreed to pay to the Defendant US$3,000.00 per month for the assistance rendered by the Defendant to the Plaintiff in negotiating with GIEIC over the demurrage claim. The Defendant claims that it had assisted the Plaintiff from March to October 2000 in the negotiations and hence was entitled to deduct money from the Agreed Sum to settle their fee for assisting the Plaintiff with the negotiation and settlement with GIEIC.

THE PRESENT APPLICATION

6. On 26th August 2002 the Plaintiff took out a Summons applying for, inter alia, an order that the Defendant do pay to the Plaintiff an interim payment of US$25,000.00 on account of the damages claimed in this action ("the Interim Payment Summons").

7. An affirmation of Chau Oi Wan was filed on 27th August 2002 in support of the Interim Payment Summons. The Defendant filed an affirmation of Hung Chun Keung Wales on 12th September 2002 ("Hung's Affirmation") to oppose this application. Another affirmation of Chau Oi Wan was filed on 27th September 2002 by the Plaintiff in reply.

8. At the hearing of the Interim Payment Summons Ms M. Chau of Messrs Weir & Associates appeared for the Plaintiff and Mr R. Chak of Messrs Richard Tai & Co appeared for the Defendant.

9. Ms Chau submits that this application falls within Order 29 Rule 11(1)(a) of the Rules in that the Defendant had admitted liability for the Plaintiff's damages in that the Defendant admitted that it had received the Agreed Sum of US$55,000.00 from GIEIC which was meant to be paid to the Plaintiff.

10. Ms Chau however accepted that the Defendant raises a set off argument in that the Defendant claims that it was entitled to set off a sum that was owed to it by the Plaintiff.

11. For this purpose Order 29 Rule 11(1) provides:-

" .... If on the hearing of an application under Rule 10 in an action for damages, the Court is satisfied -

(a) that the defendant (in this paragraph referred to as "the respondent") has admitted liability for the plaintiff's damages ....

the Court may, if it thinks fit ... order the respondent to make an interim payment of such amount as it thinks just, not exceeding a reasonable proportion of the damages which in the opinion of the Court are likely to be recovered by the plaintiff after taking into account (my emphasis) ... any set off, cross-claim or counterclaim on which the respondent may be entitled to rely."

12. First, I am not entirely sure that this application falls within Order 29 Rule 11(1) because in this action the Plaintiff's claim against the Defendant is not for damages. In the Statement of Claim the Plaintiff simply claims for the sum of US$25,000.00 (or its Hong Kong dollars equivalent), interests and costs. There is no plea for damages. Nevertheless this point was not taken by the Defendant at the hearing.

13. Assuming this application falls within Order 29 Rule 11, the issue that I have to decide is whether there is any merits with the Defendant's set off claim.

THE SET-OFF ARGUMENT

14. The amount which the Defendant sought to set off from the Agreed Sum is set out in the Defendant's letter to the Plaintiff dated 5th December 2000. Page 1 of Exhibit WH-1 of Hung's Affirmation. The relevant part of this letter is reproduced below.

"...... PLEASE BE ADVISED YOU THAT THE BALANCE DEMURRAGE PAYMENT IS REMITTED TO YOU AS FOLLOWING:

DEMURRAGE CHARGES - LUMPSUM		USD55,000
LESS
5% BROKAGE COMMISSION	USD2,750
EXPENDITURES AND SERVICE FEE FOR MARCH	3,000
" " FOR APRIL	3,000
" " FOR MAY	3,000
" " FOR JUNE	3,000
" " FOR JULY	3,000
" " FOR AUGUST	3,000
" " FOR SEPT.	3,000
" " FOR OCT.	3,000
	USD26,750
DEDUCT: CASH ADVANCE TO MR. WATANABE	1,500
CASH ADVANCE BY MR. UMALI TO MR. HUNG AT 25/JUNE AT GUANGZHOU	250
	25,000
BALANCE DUE TO OWNERS		USD30,000

PLS NOTE THAT THE ABOVE EXPENDITURES AND SERVICE FEES FROM APRIL 2000 WAS AGREED BY MR. UMALI AFTER SECOND TIME MEETING WITH CHARTERERS ON 25 JUNE AT GUANGZHOU.

15. Ms Chau submits that there could not have been any agreement by the Plaintiff to pay the Defendant the service fee as that set out in the above letter. Ms Chau relies mainly on two grounds.

16. On the 1st ground she submits that as the Defendant acted as the broker between the ship owner and the Charterers under the terms of the Note the Defendant had a duty to assist the Plaintiff to collect the payment under the terms of the Note for that is what the Defendant was paid for under the terms of the Note. Therefore there was no reason for the Plaintiff to pay additional fee to the Defendant to do that. Ms Chau however accepts that there is no express term in the Note imposing such a duty on the Defendant and she said that such duty was implied. However she was unable to produce any legal authority to support this submission. Although I have taken some time to look up this point I too was unable to find any useful authorities to support Ms Chau's submission. In the circumstances I cannot accept Ms Chau's submission that there was such a duty on the part of the Defendant to assist the Plaintiff to collect payment.

17. The 2nd ground relied upon by Ms Chau is that the documentary evidence does not support there to be any agreement reached between the parties under which the Defendant was to be paid service fee.

18. In the document in P.23A of Exhibit WH-1 of Hung's Affirmation, which appears to be an internal memo within the Plaintiff's office, in it it was suggested that Mr Umali of the Plaintiff had instructed Mr Santos to inform the Defendant to deduct US$3,000.00 from the money collected from the Head Charterer. Ms Chau explained that this document only goes to show what happened within the Plaintiff's office internally but does not go to show that the Plaintiff had ever notified the Defendant of their agreement for them to deduct this sum from the money collected.

19. There was another document in P.31A of Exhibit WH-1 of Hung's Affirmation which shows some handwritten note signed by Mr Santos addressed to the Defendant amongst which it appears that the Plaintiff had agreed to reimburse the Defendant's expenses of US$3,000.00 and also agreed that to be deducted from the demurrage collection. Here Ms Chau explained that the document was dated 1st April 2000, which was well before the settlement was reached in October 2000. She submits that at that stage i.e. on 1st April 2000 the Plaintiff had in mind that the Defendant could recover a sum from the Head Charterer well exceeded the sum of US$55,000.00 hence the agreement reached at that time was that the Defendant could deduct US$3,000.00 as expenditure only on the basis that the Defendant could recover the amount of demurrage payment then outstanding i.e. more than the Agreed Sum. Hence, this Note cannot be used as evidence to show that there was an agreement for the Defendant to deduct US$3,000.00 from the Agreed Sum as service fee.

FINDINGS

20. Despite Ms Chau's explanations, I find that there is evidence to show that there was probably such an agreement. These are the documents referred to in paragraph 18 and 19 above. They show that at certain stage the Plaintiff did appear to have agreed to pay US$3,000.00 to the Defendant for their services for the month of March. If the Plaintiff disputes this, they should at least have Mr Santos and Mr Umali's evidence on this point because only Mr Santos and Mr Umali could explain what happened at that time and the reasons behind those documents.

21. As for the Defendant's claim that there was an oral agreement under which the Plaintiff agreed to pay the Defendant's service fee at US$3,000.00 a month, this evidence was given in paragraph 6(o) of Hung's Affirmation. He said that the oral agreement was reached between himself and Mr Umali of the Plaintiff during the meetings between April and June 2000. Mr Hung was the person responsible for the transactions in question and have direct knowledge of the transactions at the time. The Plaintiff however did not put in any direct evidence to rebut this point. Mr Umali did not make any affirmation to deny this point. The only evidence filed by the Plaintiff was the two affirmations made by Ms Chau, who is the solicitor acting for the Plaintiff in this case and does not have any direct knowledge of the transactions at the material time. If the Plaintiff genuinely objects to Mr Hung's allegation that there was an oral agreement reached between him and Mr Santos at the material time, the Plaintiff should have filed an affirmation made by Mr Umali refuting that allegation. However this was not done.

22. Accordingly, the evidence before me at this stage is that there is evidence to show that there was probably such an oral agreement reached.

23. Because of the reasons set out in paragraphs 20, 21 and 22, I also find that the Defendant's claim for set off does have some merits. The Defendant's claim for set off cannot be decided upon without hearing direct evidence given by Mr Santos and Mr Umali for the Plaintiff.

ORDER

24. Accordingly, I do not think interim payment should be ordered in this case given that I have found that the Defendant has merits with its set off claim. I would therefore dismiss the Interim Payment Summons with costs to the Defendant, which costs would include the costs of the hearing on 11th September 2002.

25. As I have dismissed the Interim Payment Summons, I will make the following directions:-

(i) Each party in this proceedings do serve on the other within 14 days from the date of this Order their List of Documents.

(ii) There be inspection of documents within 7 days thereafter.

(iii) Signed written statements of all witnesses as to fact to be mutually exchanged and filed with the Court within 60 days of close of discovery and inspection. Such statements to stand as evidence in chief unless the trial judge orders otherwise.

(iv) There be an early trial.