Russo Orient Shipping Co. Ltd. v. The Owners and/or Demise Charterers of the Vessel "Kuzma Gnidash" and The Vessels Listed in the Attached Schedule
Read the full judgment text of HCAJ 328/1999 on BabelCite. This HCAJ judgment was delivered on 6 August 2001.
1. The plaintiff claims in this admiralty action in rem against the ship KUZMA GNIDASH based on alleged breaches of an agreement dated 21 April 1997 ("the Agreement") made between the plaintiff and Kamchatka Shipping Co. ("the Owners"), the defendant herein.
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HCAJ000328/1999 HCAJ328/1999 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ADMIRALTY ACTION NO.328 OF 1999 ---------------------- Admiralty action in rem against the vessel "KUZMA GNIDASH" (Russian Flag) and
----------------------- Coram: Hon Waung J in Court
Date of Judgment: 6 August 2001 ------------------------- J U D G M E N T ------------------------- 1.The plaintiff claims in this admiralty action in rem against the ship KUZMA GNIDASH based on alleged breaches of an agreement dated 21 April 1997 ("the Agreement") made between the plaintiff and Kamchatka Shipping Co. ("the Owners"), the defendant herein. 2.The intervener challenged the plaintiff's right to invoke the jurisdiction in rem of the High Court and the question before this court is whether any of the three separate claims set out in the Statement of Claim falls within the admiralty in rem jurisdiction of the High Court. The three separate claims are :-
3.The statutory scheme whereby the High Court is granted the admiralty in rem jurisdiction is set out in sections 12A and 12B of the High Court Ordinance ("the Ordinance"). Section 12A(1)(a) of the Ordinance confers admiralty jurisdiction on the Court of First Instance of the High Court to hear and determine certain questions and claims. This case is concerned with the claims mentioned in sections 12A(2)(h), (l) and (o), being :
Section 12B(4) deals with the specific mode of exercise of admiralty jurisdiction in rem which is the jurisdiction relied on by the plaintiff. Section 12B(4) reads :-
4.The dispute between the parties on jurisdiction is not in relation to section 12B(4) but in relation to whether each of the three claims comes within the relevant provision in section 12A(2). The specific dispute is in fact within the narrow compass of whether Claim A and Claim B come within paragraph (h) of section 12A(2) and whether Claim C comes within paragraph (h), (l) or (o) of section 12A(2). A proper understanding of the Agreement is therefore essential for the determination of the jurisdictional dispute. 5.The Agreement is not a long document and its contents according to the English translation at pages 36-8, can be summarised as containing the following essential features :-
6.It seems to me that the key nature of the Agreement is the combination by the plaintiff of efficient movement of containers and of the defendant's Zhukov ships so as to enable very efficient freight to be earned by the defendant ships of the Container Line and for this work by the plaintiff, the defendant is to pay the plaintiff, firstly 7.5% gross freight as commission and secondly all disbursements or liabilities incurred by the plaintiff for the defendant (on basis that the defendant is responsible to bear all operating costs). Having regard to that aforesaid key nature of the Agreement, the critical question is whether it can be said :-
Claim A and Claim B 7.Claim A is the sum total of earned but unpaid commission arising out of the gross freight earned on five ships of the defendant in the Container Line. The five ships in question are the Nicolai Zhukov, Grigory Kovanchuk, Vitaliy Kruchina, Roslavl and Rzhev. Nicolai Zhukov, Grigory Kovanchuk and Vitaliy were owned by the defendant at the time of the making of the Agreement and they started being employed in the Container Line from about May 1997. Roslavl and Rzhev joined the Container Line somewhat later mainly as replacement for Grigory Kovalchuk. The case of the plaintiff under Claim A is that total gross freight earned by the aforesaid five ships in the Container Line amounted to US$6,633,180.07 and therefore 7.5% of that gross freight comes to US$497,488.51 which is the amount of earned but unpaid commission due to the plaintiff. 8.Claim B is for loss of future commission under the Agreement which ought to have been earned by the plaintiff but was denied to the plaintiff because of the wrongful withdrawal by the defendant of its ships from the Container Line. The steady withdrawal of the defendant's ships from the Container Line was from April 1998 until April 1999. The amount claimed to have been lost by way of this wrongful withdrawal of the defendant's ships from the Container Line is US$310,100.78. 9.The Agreement may not have been well drafted (as appears in the English translation) but there is no doubt that the nature of the Agreement is to put the defendant's fleet, at least the three Zhukov ships, to better usage by going into the Container Line. This is to be achieved by means of the proper management, organisation and employment by the plaintiff of these container ships and containers to be carried therein. This Agreement is therefore not any conventional management agreement. It seems to me that in these circumstances, legal authorities bearing on other contracts or claims (such as sale of ship contract or management contract etc.) are not of a great deal of assistance in resolving the primary dispute between the parties, namely whether Claim A and Claim B come within (h) as being a "claim arising out of an agreement relating to the use of a ship". Take for example the first vessel put into service of the Container Line, the Nicolai Zhukov which was admittedly owned at the time of the Agreement by the defendant and being part of the defendant's container fleet referred to in the Agreement. Can it be said that the Agreement is an agreement relating to the use of Nicolai Zhukov. I believe yes. It is not necessary for the Agreement to provide the plaintiff to use Nicolai Zhukov, whether physically or not. The usage required by section 12A(2)(h) could be that of the defendant. What is important is the subject matter of the Agreement must be on the use of Nicolai Zhukov. The whole object of the Agreement is to put Nicolai Zhukov to an efficient Container Line use (see "Purpose of the agreement" on page 36). This is not a case where it might be argued that the use of the defendant's container ships has some marginal bearing on the performance of the contract. The use of these ships is the object and at the heart of the Agreement. I have therefore no doubt that this Agreement relates to the use of Nicolai Zhukov, Grigory Kovanchuk, Vitaliy Kruchina, Roslavl and Rzhev, even though their names were not specifically stated in the Agreement. 10.Claim B is really the other side of the coin of Claim A. Whereas Claim A looks to the past, Claim B looks to the future. Once it is clear that Claim A falls within (h) as being a claim arising out of an agreement relating to the use of a ship, then it inevitably follows that in respect of the breach of the Agreement by the wrongful withdrawal of defendant's ships, this Claim B also falls within (h), namely arises out of an agreement relating to the use of ships. Claim C 11.Claim C in the amount of US$1,180,508.15 is made up of the following alleged disbursements made for and on behalf of the defendant and/or liabilities incurred by the plaintiff for the defendant arising out of the Agreement :-
12.The above 22 sub-claims (making up the total of Claim C) are of course disputed by the intervener. But on the hearing of the jurisdictional dispute, the approach of the court must be to assume that the claim can be substantiated and decide the jurisdiction question on the factual assumption asserted by the plaintiff. 13.The first and simple question on Claim C jurisdiction dispute is whether all these 22 sub-claims can be said to arise from the Agreement because if they can, then Claim C in the light of what had been determined earlier falls within (h) of section 12A(2). The 22 sub-claims are of course diverse in nature but in essence as I understand the case of the plaintiff it was the existence of the Agreement which gave rise to the incurring of the expenditure or liabilities by the plaintiff and in many cases due to the breach of the Agreement by the defendant. Claim C in substance therefore is a claim which arises from the Agreement which relates to the use of the five ships. Mr Smith for the intervener argued that there was no sufficient connection between each of the sub-claims and a relevant ship but it seems to me that this is not the correct approach to this jurisdictional problem. Once it is accepted that the Agreement is an agreement within paragraph (h) (on the basis there is a sufficient connection between the Agreement and the use of the ship) then the remaining question is whether the sub-claims in question arise out of the Agreement. If it can be clearly shown that one particular sub-claim could not possibly arise from the Agreement then there may be some force in the jurisdictional objection to that particular part of Claim C. I am however not satisfied that such a case has been made out by the intervener and I am therefore of the judgment that Claim C comes within paragraph (h) of section 12A(2). 14.Having decided that Claim C falls within paragraph (h), it is not necessary for me to consider the alternative case of the plaintiff that Claim C or part of it could also come within paragraph (l) or (o) of section 12A(2). 15.The objection of the intervener to the in rem jurisdiction of the court over Claim A, Claim B and Claim C therefore fails. The intervener must pay to the plaintiff the costs of this jurisdiction dispute.
Representation: Mr Colin Wright, instructed by Messrs Crump & Co., for the Plaintiff Mr Clifford Smith, S.C., instructed by Messrs Clyde & Co., for the Intervener | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||