The High People's Court of Liaoning Province
Civil Judgment
15 March 2022
Haicheng Magnesium Fertilizer Industry Co.
Vs
Maximas Internation Group Limited
[2021] LMZ No. 955
Presiding Judge: Zhang Yansong
Judges: He Lichun, Liu Shanchao
Judge's Assistant: Zhang Tong
Clerk: Lin Bin
Appellant （Defendant in the first instance): Haicheng Magnesium Fertilizer Industry Co.
Place of residence: Anshan City, Liaoning Province, Haicheng Pailou Town Magnesia Industrial Park.
Appellee (Plaintiff in the first instance): Maximas Internation Group Limited
Place of residence: Room 2701, 27/F., Kwong Fat Commercial Centre, 48 Kwong Wah Street, Mongkok, Kowloon, Hong Kong Special Administrative Region.
Defendant in the first instance: Dalian Xinyi Trading Co.
Place of residence: Room 4402, No. 9-1, Haifu Road, Dalian Free Trade Zone, China (Liaoning) Pilot Free Trade Zone.
In the case involving dispute over a voyage charter party contract with the appellee Maximas International Group Limited (hereinafter referred to as "Maximas") and the original defendant Dalian Xinyi Trading Co. (hereinafter referred to as "Xinyi Trading"), the appellant Haicheng Magnesium Fertilizer Industry Co. (hereinafter referred to as “Haicheng Magnesium Fertilizer”) appealed against [2019] L72MC No. 160 civil judgment of Dalian Maritime Court. After docketing this case on May 24, 2021, the Court lawfully formed a collegial trial panel and held a public hearing. Trial of the case has now been concluded.
I Appeal request of Appellant
1. Haicheng Magnesium Fertilizer appealed and requested: to revoke the original judgment and instead affirm that it was not liable for demurrage, and to accurately determine the demurrage time and amount. The facts and reasons are as follows:
(1) Haicheng Magnesium Fertilizer had never made a statement to replace the status of Xinyi Trading in the contract, but stated that it would pay part of the freight in lieu of Xinyi Trading. This belongs to "third-party performance" and Haicheng Magnesium Fertilizer did not become a contracting party. The first-instance court determined that Haicheng Magnesium Fertilizer replaced Xinyi Trading as the party responsible for the demurrage fee, but this determination lacked factual and legal basis, and was erroneous in determining the facts and applying the law.
(2) The first-instance court wrongly determined the starting time for unloading, failed to deduct the time lost due to rain that prevented unloading, failed to deduct the time lost due to strikes, failed to deduct the time lost due to the crane's malfunction, failed to deduct the time lost due to the ship's failure to load according to schedule and delay in unloading, failed to deduct the time lost due to the ship's fault causing delay in berthing and unloading, and failed to deduct the time lost due to Maximas's refusal to open the hatch for unloading for excuse of non-payment of demurrage by Xinyi Trading, resulting in the determination of a much longer period of delay than the reasonable period of delay.
II Defence of appellee
2. Maximas argues that:
(1) Magnesium Fertilizer was the actual performing party and the freight payer of the voyage charter contract, and regardless of whether it is based on the contract agreement or the nature of the additional freight, it should bear the responsibility for the demurrage.
(2) The existing evidence proves that Maximas submitted the Notice of Readiness before 12:00, according to Article 8 of the contract involved, the laytime should be counted from 13:00 on April 26, 2018, which was reasonable. After deducting 4 hours of rainy time and 7 days of free laytime, the demurrage period began at 17:00 of May 3, 2018. According to the international principle of "once on demurrage, always on demurrage", any rainy time thereafter cannot be deducted. The strike from 00:00 to 13:30 on April 29, 2018, did not exceed 48 hours and charterer did not give instruction to change port of call. According to Article 16 (b) and (c) of the Gencon 94, the 0.56 hours of the strike should not be deducted. According to Article 6 of the contract involved, Maximas was not responsible for loading, unloading, dunnage, and trimming, and was not responsible for the slow unloading caused by inefficient unloading methods and tools. Haicheng Magnesium Fertilizer's claim that only two cranes out of four could work simultaneously was not true. The main reason for slow unloading was the unloading process and tools, not the cranes. The sequence of stowage was not related to the appellee and the appellee should not bear corresponding responsibilities. The waiting time and visiting of foreign guests were not caused by the appellee, and the relevant time should not be deducted. According to Article 8 of the contract involved, the demurrage generated in the discharge port should be settled before the completion of the discharge. Maximas’ closing the hatch and refusing to unload for a period of time was an act of exercising its right of lien as the shipowner to protect its interests from being infringed. The resulting time loss should not be borne by Maximas.
(3) Therefore, Maximas requests that Haicheng Magnesium Fertilizer's lawsuit be dismissed in accordance with the law.
3. Xinyi Trading states that it agrees with the opinion of Haicheng Magnesium Fertilizer.
4. Maximas requested in the first instance that Xinyi Trading and Haicheng Magnesium Fertilizer jointly pay a total of RMB 433,188.55 for the demurrage and fuel consumption costs incurred during its transfer and berthing relating to vessel MV "Toyomaru", as well as interest from May 20, 2018, until the date specified in the judgment for payment.
III Finding of facts by first instance court
The first-instance court found the following facts:
5. On March 26, 2018, Maximas and Xinyi Trading signed a voyage charter party, which stipulated that Maximas would provide MV "Toyomaru" for carriage of no more than 6,700 tons of fertilizer. The loading port was a safe berth in China's Bayuquan Port, and the discharge port was a safe anchorage in Banjarmasin, Indonesia. The loading period was from April 2 to April 8, 2018, and the discharge time was 7 weather working days, including Sundays and holidays. Based on one loading and one discharge port, the shipowner was not responsible for loading, unloading, dunnage, or trimming. The freight rate was 30.5 USD/ton, and the demurrage fee was 4,000 USD/day. If the cargo or documents were not ready for loading or unloading at the two ports, the charterer had to pay the daily delay loss or demurrage fee of 4,000 USD. The demurrage or delay costs incurred at the discharge port had to be settled before the completion of the unloading operation. Once the vessel arrived at the loading or discharge anchorage, it could submit a notice of readiness at any time, including day or night, Saturdays, Sundays, or holidays. The laytime would be calculated from 0800 or 1300 hours based on the "Gencon 94" clause, unless the vessel started working immediately after arrival, and the laytime would be calculated from the actual start of the operation. The charterer was responsible for shore crane fees and could use the ship's crane to unload cargo free of charge. If it was necessary to move the vessel to a safe berth in order to unload the cargo, the charterer should pay the PAD for the move to the shipowner. Other provisions were in accordance with the "Gencon 94".
6. On April 12, 2018, the loading operation was completed at Bayuquan Port. On the same day, Haicheng Magnesium Fertilizer requested to change the consignor of the bill of lading (bill of lading number BYQ201807) to Longhui Mining (Hong Kong) Co., Ltd. and issued a letter of guarantee to Maximas, guaranteeing compensation for Maximas and its agents for any liability, loss or damage suffered as a result of the change of the consignor's name.
7. As the agent of the carrier, Yingkou Haidi Shipping Agency Co., Ltd. issued three bills of lading on the same day with the bill of lading numbers BYQ201806, BYQ201807, and BYQ201808, respectively. All three bills of lading indicated that the consignee and notify party were PT Graha Intijaya from Indonesia, the carrying vessel voyage was MV "Toyomaru" voyage No. 1802, the loading port was Bayuquan, China, and the unloading port was Banjarmasin Port, Indonesia. The loaded goods were 3,150,980 kilograms of magnesium sulfate fertilizer, 1,464,450 kilograms of nitrogen phosphorus fertilizer, and 2,018,066 kilograms of nitrogen phosphorus fertilizer, respectively. The consignors of the bills of lading numbered BYQ201806 and BYQ201808 were both Haicheng Magnesium Fertilizer, while the consignor of the bill of lading numbered BYQ201807 was Longhui Mining (Hong Kong) Co., Ltd.
8. On April 19, 2018, Haicheng Magnesium Fertilizer signed a voyage charter contract with Maximas. Except for the change in the quantity of goods to a maximum of 2018.066 tons of fertilizer and the change in the freight unit price to 42 USD per ton, the other terms, including the vessel voyage and the carrying period, were consistent with the voyage charter contract between Xinyi Trading and Maximas.
9. On April 20, 2018, Haicheng Magnesium Fertilizer paid Maximas a freight of 84,758.77 USD based on the quantity and unit price of the goods specified in the contract.
10. On April 26, 2018 at 11:05, the vessel "Toyomaru" arrived at Taboneo anchorage in Indonesia, and the shipmaster submitted a notice of readiness. Unloading started at 21:20 on April 26. Work was stopped from 12:00 to 16:00 on April 28 due to rain. From 00:00 to 13:30 of April 29, the workers went on strike, causing unloading to stop. The unloading at the anchorage was completed at 24:00 on April 29 and the vessel started waiting for berthing plan. The vessel berthed at 16:15 on May 4 and started unloading at the port. Unloading was stopped on May 5 and the vessel left for Reith anchorage to wait for berthing plan at 23:45 on May 5. The vessel berthed at 21:05 on May 7 and started unloading at 21:42 on May 7. Work was stopped due to rain from 15:00 to 19:00 on May 8, and resumed at 19:00. The vessel left for Reith anchorage and anchored to wait for berthing plan at 02:45 on May 9. The vessel berthed at 09:10 on May 10, but the shipowner refused to open the hatch for unloading until the charterer paid the demurrage. Unloading resumed at 19:00 on May 10 and was completed on May 19 at 04:30. During this period, unloading was stopped due to rain from 20:00 to 21:00 on May 12, 14:20 to 15:45 on May 14, and 16:20 to 24:00 on May 15. Additionally, on December 4, 2018, the mid-point exchange rate of the US dollar to the Chinese yuan was 1 USD to 6.8938 yuan.
IV Reasoning of first instance court
The first-instance courts held that
11. Maximas' domicile is in the Hong Kong Special Administrative Region, and this case was a Hong Kong related case. In accordance with Article 19 of the Interpretation (I) of the Supreme People's Court on Several Issues Concerning the Application of the Law of the People's Republic of China on Foreign-Related Civil Relations, the law application of this case should be based on the provisions of the Interpretation (I).
12. All parties in the case clearly stated that Chinese law should be applied, and they all cited Chinese law. In accordance with Article 3 of the Law of the People's Republic of China on the Application of Law to Foreign-Related Civil Relations and Article 8 of the Interpretation (I) of the Supreme People's Court on Several Issues Concerning the Application of the Law of the People's Republic of China on Foreign-Related Civil Relations, Chinese law should be applied to this case. The issue in this case is: (1) time and amount of demurrage; (2) fuel consumption costs for transfer of berth; (3) subjects liable for demurrage.
13. Regarding time and amount of demurrage:
(1) The parties in the contract did not have dispute regarding the time of discharge and the demurrage of the ship in the port of discharge, but disputed the start of the discharge and the specific calculation of the demurrage time. Xinyi Trading and Haicheng Magnesium Fertilizer held that the time of discharge should be calculated according to the actual start time of the discharge because Maximas didn’t prove the time of submitting the notice of readiness. The two voyage charter partys in question both clearly agreed that once the ship arrived at the anchorage of the loading and unloading port, it could submit the notice of readiness at any time, and the laytime would be counted from 08:00 or 13:00. The fact MV “Toyomaru” arrived at the anchorage by 11:05 on April 26 2018 have been proved by Maximas. The authenticity of notice of readiness was not disputed by Xinyi Trading or Haicheng Magnesium Fertilizer. According to the contract, the laytime should be counted from 13:00 on April 26 2018. In accordance with the agreement of the contract regarding the unloading time of 7 weather working days (including Sundays and holidays), deducting the time when the loading and unloading operations were stopped due to rain from 12:00 to 16:00 on April 28, the demurrage time should be counted from 17:00 on May 3.
(2) Xinyi Trading and Haicheng Magnesium Fertilizer referred to Article 16 (c) of the Gencon 1994, which states that the charterer shall not be responsible for the consequences of strikes preventing or affecting the loading of cargo, and claimed that the time lost due to the strike should be deducted from the discharge time. However, Article (a) and Article (b) of the same article provide provisions for calculating the laytime affected by the strike and for paying demurrage at the discharge port, and the "consequences" in Article (c) do not include the extension of laytime. The two voyage charterparties in question did not stipulate that the strike time should be deducted from the laytime. Therefore, Xinyi Trading and Haicheng Magnesium Fertilizer's claim had no factual or legal basis, and the court did not support it.
(3) Xinyi Trading and Haicheng Magnesium Fertilizer claimed that 21 hours and 50 minutes of delay caused by rain after May 8 should be deducted from the discharge time. The shipowner in the voyage charterparties had already borne the time loss caused by the interruption of loading and unloading due to weather conditions within the allowable laytime. Therefore, the demurrage incurred after the allowable time was due to the charterer's failure to complete the loading and unloading operations as agreed. Thus, the time loss caused by weather conditions after the start of demurrage should be borne by the charterer. Xinyi Trading and Haicheng Magnesium Fertilizer's claim did not comply with the international practice of "once on demurrage, always on demurrage," and the court did not support their claim.
(4) The contract stated that the shipowner was not responsible for loading, unloading, dunnage, or trimming the cargo holds. If the charterer needed to transfer the ship to a safe port for unloading, they should pay the port charges to the shipowner for vessel transfer. Xinyi Trading and Haicheng Magnesium Fertilizer argued that the stowage was done so improperly by Maximas and it seriously affected the unloading speed, and related time lost should be deducted from the time of unloading. However, their defense had no contractual basis and was not supported by the first-instance court.
(5) Although Xinyi Trading and Haicheng Magnesium Fertilizer claimed that the shipowner refused to pay for mooring fees and tips to pilot, which led to the ship's inability to dock for unloading in a timely manner, under the voyage charter party, providing a safe berth is the charterer's obligation. Xinyi Trading and Haicheng Magnesium Fertilizer did not provide evidence that they had paid the shipowner, nor did they prove that the ship's failure to dock in a timely manner was due to Maximas's reasons, therefore the first-instance court did not support their claim.
(6) According to the contract provisions, demurrage charges or delay charges arising from unloading port operations should be resolved before the end of unloading operations. As of May 10, 2018, several days had passed since the commencement of the demurrage period. Maximas had the right to claim demurrage charges from the charterer at any time in accordance with the contract provisions. In the event that the charterer did not pay in a timely manner, Maximas's refusal to unload to protect its own rights was not inappropriate. Xinyi Trading and Haicheng Magnesium Fertilizer's claim to deduct the corresponding unloading time had no legal basis and was not supported by the first-instance court.
(7) Although Xinyi Trading and Haicheng Magnesium Fertilizer submitted emails between themselves and the consignee to prove that the slow unloading was caused by the inability to use all of the ship's cranes, this email was an unilateral statement by the consignee (who had interest in this case) and was not confirmed by Maximas. Maximas replied immediately that the slow unloading was due to slow forklifts, small trucks, and suggested that the consignee switch to larger trucks. Therefore, this email did not fully prove that the slow unloading was caused by the ship's cranes and the first-instance court did not support Xinyi Trading and Haicheng Magnesium Fertilizer's claim. Furthermore, although Xinyi Trading and Haicheng Magnesium Fertilizer claimed that a visit by guests on May 4, 2018 affected the unloading of the ship, they did not provide evidence to prove that the visit was due to the shipowner's reasons, nor did they have any contractual basis. Therefore, the first-instance court did not support their claim to deduct the corresponding unloading time.
(8) In summary, demurrage in question should start counting from 17:00 on May 3, 2018 to 04:30 on May 19, 2018 when the discharge was completed, with a total demurrage time of 15 days and 11.5 hours(15.48 days). Based on the contracted demurrage rate of 4,000 USD/day, the total demurrage incurred at the discharge port is 61,920 USD.
14. Fuel consumption costs for transfer of mooring:
(1) According to the voyage charter party, the unloading of the cargo in question should be carried out at the anchorage. For speeding discharging of the cargo, the charterers agreed to berth at the wharf to continue discharging the cargo, and the additional oil consumption arising from the berthing should be borne by the charterers.
(2) Maximas submitted the engine room logbook, invoices and bank slip to prove the quantity and unit price of light oil consumed. However, marine light oil is usually used for the operation of various auxiliary engines of the ship. The consumption of light oil that would certainly occur if the ship continued to unload at the anchorage, and the consumption that would certainly occur should be borne by Maximas. The engine log submitted by Maximas did not sufficiently prove the difference of oil consumption between the ship's berthing, transfer of berthing and the ship's unloading at anchorage, and the first-instance court did not support the request of Maximas to pay for the oil consumption cost of 916.5 USD from berthing and transfer of berthing.
15. Subjects liable for demurrage:
(1) Maximas requested that Xinyi Trading and Haicheng Magnesium Fertilizer assume joint and several liability for the payment of the demurrage fees, for reason that they had commingling of legal personality.
(2) Maximas argued that the email and WeChat chat records between the parties showed that Zhang X and Feng X represented Xinyi Trading and Haicheng Magnesium Fertilizer simultaneously in communication with Maximas, and Maximas could not distinguish the true identities of the two persons, and there was a situation of commingling of persons.
(3) However, Maximas failed to provide sufficient evidence to prove that there was crossing or commingling of business, finance and other aspects between Xinyi Trading and Haicheng Magnesium Fertilizer, and such commingling resulted in its inability to distinguish their respective properties and the loss of independent legal personality. Therefore, the first-instance court did not support Maximas's claim.
(4) Regarding the same voyage and batch of goods in question, Xinyi Trading and Haicheng Magnesium Fertilizer successively signed two voyage charter partys with Maximas before loading and after the vessel sailed, with all terms identical except for the quantity of goods and freight rate. The cargo loaded was also owned by Haicheng Magnesium Fertilizer, and Xinyi Trading did not raise any objections to the voyage charter party signed by Haicheng Magnesium Fertilizer and Maximas. Therefore, it should be recognized that all three parties have determined that the later voyage charter party replaced the previous one, except for the quantity of goods and freight rate. Although Xinyi Trading and Haicheng Magnesium Fertilizer claim that the contract between Haicheng Magnesium Fertilizer and Maximas was only for the payment of freight, their claim indicates that all parties confirmed that Haicheng Magnesium Fertilizer was the party responsible for the payment of freight in question. That is, the provision in the contract that Haicheng Magnesium Fertilizer would perform the obligation to pay the freight to Maximas reflected its true intent, and this provision was also accepted by Maximas. Demurrage is a provision in the voyage charter party that requires the charterer to pay the shipowner for the delay in loading or unloading beyond the agreed time. It is a supplementary charge for the freight due to overtime loading and unloading, and is of the same nature as the freight charge. Since Haicheng Magnesium Fertilizer and Maximas did not exclude their obligation to pay demurrage in the voyage charter party, Haicheng Magnesium Fertilizer was the party responsible for the payment of demurrage in question.
(5) In summary, it shall be determined that Haicheng Magnesium Fertilizer should pay demurrage fees of 61,920 USD to Maximas. Maximas requested that the amount be converted to RMB based on the mid-point exchange rate on the day of signing the complaint (December 4, 2018), which was in accordance with the law. Xinyi Trading and Haicheng Magnesium Fertilizer didn’t raise any objections, and the first instance court approved the demurrage fees to be RMB 426,864. According to the contract between the two parties, Haicheng Magnesium Fertilizer should have paid the above-mentioned demurrage fees before the completion of unloading. The goods involved in the case completed unloading on May 19, 2018. Maximas requested that Haicheng Magnesium Fertilizer bear the interest loss from May 20, 2018, until the date of payment determined by the judgment, which was in accordance with the contract and legal provisions. The first-instance court also supports it.
V Judgment of first instance court
16. Pursuant to Article 109 of the Contract Law of the People's Republic of China, Articles 92, 98 of the Maritime Law of the People's Republic of China, and Article 64 of the Civil Procedure Law of the People's Republic of China, the judgment is as follows:
(1) Haicheng Magnesium Fertilizer shall pay Maximas demurrage fees of RMB 426,864 and interest within 10 days from the effective date of this judgment. Regarding interest before August 20, 2019, it shall be calculated based on the benchmark loan interest rate for the same period announced by the People's Bank of China from May 20, 2018, to the date of payment determined by this judgment. Regarding interest afterwards, it shall be calculated based on the loan market quotation rate published by the National Interbank Funding Center.
(2) Dismiss other litigation requests of Maximas.
(3) The court acceptance fee is RMB 8,080 (already prepaid by Maximas), and Maximas shall bear RMB 118, and Haicheng Magnesium Fertilizer shall bear RMB 7,962.
VI Evidence of the parties during second instance trial
17. During the second-instance proceedings, Haicheng Magnesium Fertilizer submitted three sets of new evidence:
(1) The first set of evidence consists of the invoice for the expected port charges issued by PT. Samudera Jaya Makmur (hereinafter referred to as "PT Company"), which was used to prove that PT Company was the unloading agent of the shipowner. In an email sent to the consignee, PT Company admitted that the vessel "Toyomaru" could only have a maximum of two cranes working at the same time and acknowledged that the insufficient number of cranes would increase the unloading time. Originally, the unloading was expected to take ten days, but due to the insufficient number of cranes, four additional days of berth fees were incurred, and eventually Maximas issued an invoice to the consignee for an additional five days of berth fees due to the prolonged unloading time.
(2) Second set of evidence: WeChat conversation records related to the loading plan between Jia X and Feng X. It is intended to prove that Jia X is the legal representative of Maximas. This evidence, combined with Jia X and Feng X's other WeChat conversation screenshots and the letter of objection to the recording method, as well as Maximas' evidence of the complete loading plan, was to prove that Xinyi Trading's proposed loading plan was to load the large bags first and then the small bags. However, Maximas rejected Xinyi Trading's loading plan for reason of the port's disapproval. In reality, the ship was loaded with the small bags first and then the large bags. However, no evidence was provided to prove the port's opinion, which resulted in the need to unload the large bags first before unloading the small bags onto the barge. Then the large bags had to be loaded back onto the ship, which seriously affected the unloading speed and caused an increase in unloading time by 24 hours.
(3) Third set of evidence: PT Company's destination port payment project invoices and bills, domestic bank transfer records, and WeChat chat records related to pilotage fees between Jia X and Feng X. It was intended to prove that the consignee paid all fees to the shipowner on time according to the shipowner agent's bill. However, the shipowner and Maximas still demanded illegal fees from Xinyi Trading. Xinyi Trading did not satisfy their demands, resulting in the vessel's failure to berth and unload cargo on time. The waiting time for berthing (4 days, 16 hours, and 15 minutes) was caused by Maximas and the shipowner, and should not be included in the unloading time.
18. Maximas cross-examination opinions against these three sets of evidence are as follows:
(1) As for the first group of evidence, Maximas claims that the source of the evidence is unclear, and the authenticity and the purpose of evidence are unapproved. The shipping agent should settle the relevant costs on behalf of the shipowner, while the bill, settled by the consignee, cannot prove that the agent is acting on behalf of the shipowner.
(2) Maximas claims that the authenticity of the second group of evidence is unapproved, since shipowner was not liable to loading and unloading operation. The shipowner just needed to decide whether the cargo stowage would affect stability of the ship. The shipowner neither affected nor had the right to decide whether the big sacks should be put at the top or bottom of the cargo. The WeChat chat records have shown the final results of the allocated loading plan.
(3) Maximas claims that the authenticity of the third group of evidence is unapproved, because the bill shows that the payment time is May 23, while the ship left the port on May 19. Therefore, Haicheng Magnesium Fertilizer’s allegation that paying the fee first and then releasing the ship was untrue.
19. Xinyi Trading cross-examination opinions are as follows:
(1) Xinyi Trading admits the first group of evidence. The ships calling at foreign ports naturally needs to have a shipping agent. Since the consignee is obliged to provide a berth for the ship, the shipping agent shall charge berthing fees to the consignee and pay to a third person.
(2) Xinyi Trading admits the second group of evidence. Loading the ship with large sacks first and then with small sacks is for convenience and efficiency, otherwise when unloading the small sacks, the cranes have to unload the large ones first, and lift the large ones back to the ship, resulting in long unloading time. Maximas claimed that they are not liable to loading and unloading operation, but now it is the loading order/sequence that is in dispute. Xinyi Trading have been emphasizing the loading order with the agent beforehand. It is because Maximas agreed to the loading order/sequence that Xinyi Trading signed the voyage charter party. However, Maximas denied this later for excuse of the safety regulations of the port.
(3) Xinyi Trading admitted the third group of evidence. The pilot fee and berthing fees were already paid.
20. The Court’s opinions regarding these evidences are as follows:
(1) The first group of evidence is not accepted, because the source of evidence is unclear, the identity of PT company is unknown, and the allegation of insufficient number of cranes needs other evidence to support.
(2) As for the second group of evidence, the authenticity is recognized, but it cannot prove that the two parties changed the contract that the shipowner is not liable to loading and unloading operation. Nor could it prove that Maximas demonstrated consent of liability for loading.
(3) The authenticity of the third group of evidence is accepted, but the chat record shows that the time is before April 18, and the bill shows that the payment time is May 17 when the last payment was delivered. It cannot prove that the shipowner and Maximas demanded illegal fees from Xinyi Trading, which caused the ship failing to berth and unload in time and caused waiting time for berthing (4 days, 16 hours and 15 minutes).
21. The facts found in the first instance are corroborated by the evidence, and the second instance Court confirms them.
22. The second instance court found the following facts: Article 8 of the Voyage Charter Party in dispute agreed that: “Demurrage and liquidated damages incurred at the loading port shall be settled together with freight. Demurrage and liquidated damages incurred at the unloading port shall be settled before the completion of the unloading. The vessel may deliver the notice of readiness at any time, day or night, including Saturdays, Sundays and holidays, once it arrives at the port of loading or unloading. The laytime shall be counted from 0800 or 1300 in accordance with the Gencon 94, unless the ship starts operations immediately upon arrival, and the laytime shall be counted from the actual time of commencement of operations.”
23. The General Strike Clause in Clause 16 of Gencon 94 stipulates that:
16.General Strike Clause
(a)If there is a strike or lock-out affecting or preventing the actual loading of the cargo, or any part of it, when the Vessel is ready to proceed from her last port or at any time during the voyage to the port or ports of loading or after her arrival there, the Master or the Owners may ask the Charterers to declare, that they agree to reckon the laydays as if there were no strike or lock-out. Unless the Charterers have given such declaration in writing (by telegram, if necessary) within 24 hours, the Owners shall have the option of cancelling this Charter Party. If part cargo has already been loaded, the Owners must proceed with same,(freight payable on loaded quantity only)having liberty to complete with other cargo on the way for their own account.
(b)If there is a strike or lock-out affecting or preventing the actual discharging of the cargo on or after the Vessel's arrival at or off port of discharge and same has not been settled within 48 hours, the Charterers shall have the option of keeping the Vessel waiting until such strike or lock-out is at an end against paying half demurrage after expiration of the time provided for discharging until the strike or lock-out terminates and thereafter full demurrage shall be payable until the completion of discharging, or of ordering the Vessel to a safe port where she can safely discharge without risk of being detained by strike or lock-out. Such orders to be given within 48 hours after the Master or the Owners have given notice to the Charterers of the strike or lock-out affecting the discharge. On delivery of the cargo at such port, all conditions of this Charter Party and of the Bill of Lading shall apply and the Vessel shall receive the same freight as if she had discharged at the original port of destination, except that if the distance to the substituted port exceeds 100 nautical miles, the freight on the cargo delivered at the substituted d port to be increased in proportion.
(c)Except for the obligations described above, neither the Charterers nor the Owners shall be responsible for the consequences of any strikes or lock-outs preventing or affecting the actual loading or discharging of the cargo.
24. The above facts, supported by the Voyage Charter Party and General Strike Clause in Clause 16 of Gencon 94, which were proved and cross-examined, are sufficient to be accepted.
25. The Court is of the view that the domicile of Maximas is in Hong Kong Special Administrative Region, and the case is a Hong Kong-related case. In accordance with Article 3 of the Law of the People's Republic of China on the Application of Law Relating to Foreign-related Civil Relations, Article 8 and Article 19 of the Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of the Law of the People's Republic of China on the Application of Law Relating to Foreign-related Civil Relations (I), the parties have clearly advocated the application of Chinese law during the trial of the case, and all of them have invoked Chinese law, so Chinese law should be applied in this case .
26. According to the respective claims made by the parties in the second-instance trial, the issue in this case is: (1) whether Haicheng Magnesium Fertilizer is the party liable for the demurrage fees, and (2) whether the demurrage time determined in the first instance trial is appropriate.
27. Firstly, on the issue of whether Haicheng Magnesium Fertilizer is liable to demurrage:
(1) Maximas signed the Voyage Charter Party with Xinyi Trading before signing the contract with Haicheng Magnesium Fertilizer. The same operators performed for two contracts, representing Xinyi Trading and Haicheng Magnesium Fertilizer respectively. The two contracts have the same voyage, the same ship, the same loading and unloading port, and all the terms and conditions are the same except the quantity of goods, freight unit price, and loading rate/unloading rate. The purpose of signing the latter contract is to facilitate the payment. After the payment by Haicheng Magnesium Fertilizer, Xinyi Trading shall pay Haicheng Magnesium Fertilizer in Hong Kong, which is accepted by Maximas.
(2) In the actual performance of contract, Maximas claimed the cost against Haicheng Magnesium Fertilizer in accordance with the freight unit price in the first contract. Neither Haicheng Magnesium Fertilizer nor Xinyi Trading objected to it. Haicheng Magnesium Fertilizer paid the fee according to the first contract. Laytime was also in accordance with the first contract. Therefore, three parties performed in accordance with the first contract, changing it by the performance and including Haicheng Magnesium Fertilizer into the first contract. Haicheng Magnesium Fertilizer thereby has the obligation to pay the fee to Maximas. After the payment, Xinyi Trading should pay Haicheng Magnesium Fertilizer in accordance with the agreement.
(3) Article 44, paragraph 1 of the Contract Law of the People's Republic of China provides that: “The contract established in accordance with law is effective from the time of its establishment”; Article 60 provides that “The parties shall fully perform their obligations in accordance with the agreement”; Article 77, paragraph 1, provides that “The parties can change the contract by consensus”. Accordingly, the change of contract is the true intention of the parties. Since it does not violate the mandatory provisions of laws and administrative regulations, it is established and valid in accordance with law, and is legally binding on the three parties. It is wrong that the first instance court decided that Maximas and Haicheng Magnesium Fertilizer were performing the latter contract. Haicheng Magnesium Fertilizer is the party of the first contract due to the change by the performance and it has the obligation to pay the fee to Maximas. The first instance court’s decision that Haicheng Magnesium Fertilizer is liable to the demurrage is correct. (The issue regarding whether Xinyi Trading is also liable for demurrage has not been contested by any of the three parties and therefore it does not fall within the scope of trial of the second instance.)
28. Secondly, on the issue of whether the first-instance court was correct in its determination of the time of demurrage, the Court has following opinions:
(1) Time of commencement. It is clearly agreed in the Voyage Charter Party that “The ship can submit the notice of readiness at any time, day or night, “including Saturdays, Sundays and holidays, once the ship arrives at the loading or discharging port anchorage. The laytime shall be counted from 08:00 or 13:00 in accordance with the terms and conditions of GENCON 1994, unless the vessel starts operation immediately upon arrival, and the laytime shall be counted from the actual time of commencement of operation.” The three parties all admit that the ship arrived at 11:00 on April 26, 2018, and did not immediately start unloading operations. As such, Haicheng Magnesium Fertilizer’s claim that the laytime should be calculated from 21:20 of the actual operation of the day is not consistent with the agreement. The Court does not support the claim. Meanwhile, according to the laytime records from the unloading port, the ship arrived at 11:00 at the agreed anchorage, and at 11:45 the consignee’s work shift boarded the ship and was ready to unload. If the consignee did not receive the notice of readiness, the consignee’s work shift could not have boarded the ship on time to prepare for unloading. Therefore, it can be concluded that Maximas submitted the notice of readiness in time. The first instance court determined that the unloading time should be calculated from 13:00 on April 26, 2018, which has contractual and factual basis.
(2) Time of rain. According to the contract, the unloading should be completed within 7 weather working days. Due to the rain from 12:00 to 16:00 on April 28, 2018, the unloading time should be postponed to 17:00 on May 3, 2018. The time afterwards is not agreed by the parties whether to deduct holidays, rain and other factors. According to the international practice that “once on demurrage, always on demurrage”, the rain time after 17:00 on May 3 which Haicheng Magnesium Fertilizer claimed are not deductible. The opinion of the first instance court has legal basis and should be supported.
(3) Time of strike. The strike occurred in the unloading port for 13 hours and 30 minutes from 00:00 to 13:30 on April 29, 2018, which did not exceed 48 hours, and the shipowner did not receive instructions from the charterer to change ports. According to paragraph (a), (b), and (c) of Article 16 of Gencon 94, there is no circumstance of application of paragraph (a) or (b) in this case. According to paragraph (c), there is no special agreement other than the circumstance agreed in paragraph (a) and (b), i.e., there is no agreement that the laytime should be deducted due to the strike or stoppage of operation. The strike in this case did not exceeded 48 hours and the parties did not agree to deduct the strike time, so Haicheng Magnesium Fertilizer’s request for deduction of 13 hours and 30 minutes has no legal basis. The opinion of the first instance court is appropriate.
(4) The impact of the ship’s cranes. The mail from the consignee to Xinyi Trading and Haicheng Magnesium Fertilizer stated the ship’s cranes could not be used fully and caused slow unloading, but it was a unilateral statement of the consignee unaccepted by Maximas, who immediately replied that slow unloading was caused by slow forklift, small trucks and other reasons. Maximas also suggested the consignee change to use larger trucks. Therefore, Haicheng Magnesium Fertilizer and Xinyi Trading’s opinions on the impact of ship cranes are lack of evidence. Moreover, ship’s specification, photos and logbook of MV “Toyomaru” had no record of damages of the ship’s cranes that leads to malfunction. The four ship cranes were in normal working condition, with the maximum load capacity of each crane at 15 tons. As such, the claim of Haicheng Magnesium Fertilizer in this respect is lack of evidence, and the opinion of the first instance court is appropriate.
(5) Loading and unloading. Clause 6 of the Contract in dispute provides that the shipowner is not liable to loading, unloading, dunnage, or trimming. The WeChat records between Haicheng Magnesium Fertilizer and Xinyi Trading show that solely out of goodwill, the shipowner reminded the charterer of solving the problem of loading with the port as soon as possible. This does not constitute a change to the contract. Therefore, the method or the order/sequence of loading is not responsibility of Maximas. Haicheng Magnesium Fertilizer’s reasons to deduct demurrage is not consistent with the Clause 6. The first instance did not support this claim and it is appropriate to do so.
(6) Delay in berthing. Clause 3 of the Contract in dispute states that the unloading place shall be a safe anchorage; Clause 19 of the Contract states that if it is necessary to move the ship to a safe port berth for unloading, the charterer shall pay the port charges for the move to the shipowner. Therefore, Haicheng Magnesium Fertilizer’s argument that the shipowner's refusal to pay berthing fees caused a loss of time is inconsistent with the agreement. In addition, Haicheng Magnesium Fertilizer and Xinyi Trading have no evidence to prove that the visit of guests to the unloading port affected the unloading of the ship, and that this influence was due to the shipowner. Therefore, their reason for deducting the unloading time is not justified.
(7) Refusal to unload. Clause 8 of the Contract in dispute stipulates that demurrage arising from the unloading shall be settled before the completion of discharge. Article 8 of Gencon 94 provides that: “The Owners shall have a lien on the cargo and on all sub-freights payable in respect of the cargo, for freight, deadfreight, demurrage, claims for damages and for all other amounts due under this Charter Party including costs of recovering same.” The evidence submitted by Maximas proves that after the occurrence of demurrage, the charterer did not pay the charges in time, so the shipowner’s exercise of its right of lien is in accordance with the Clause and does not constitute a breach of contract. The damage from the loss of time should be borne by the charterer, and the corresponding reason of Haicheng Magnesium Fertilizer is not accepted.
VII Judgment of second instance trial court
29. In view of the above, the facts found and the law applied in the first instance are clear and correct, and should be upheld. The appeal request of Haicheng Magnesium Fertilizer cannot be accepted and should be dismissed. Pursuant to Article 177(1)(1) of the Civil Procedure Law of the People's Republic of China, the judgment is as follows:
30. The appeal is dismissed and the first instance judgement is upheld.
31. The litigation fee of RMB 7,962 shall be borne by Haicheng Magnesium Fertilizer.
32. This judgment is final.