Grand Resources Ltd. v. North China Lines Ltd. & Others

HCCL000039/2000

HCCL39/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO.39 OF 2000

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

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

Coram : Hon Chu J in Court

Dates of Hearing : 9-11, 15, 17 and 23 October 2001

Date of Determination : 6 February 2002

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

DETERMINATION  ON

PRELIMINARY   ISSUE

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

Introduction

1.This action concerns a dispute over a charterparty for the carriage of fishmeal from Peru to China on the vessel called "Heibei 3" ("the Vessel"). The Vessel is owned by Heibei 3 Shipping Co. Ltd and managed by Heibei Ocean Shipping Co. ("Heibei Shipping"), and was at the material time chartered to the 2nd defendant under a time charter. The fishmeal was purchased by the plaintiff for resale in China. It was loaded on the Vessel at the Peruvian ports of Chimbote and Paita and was to be discharged at the Chinese ports of Huangpu and Nantong.

2.Disputes arose as to the order of the discharge of the cargo. The plaintiff contends that the Vessel should first discharge at Huangpu before proceeding to Nantong to discharge the rest of the cargo. Instead, the Vessel had deviated to Nantong first and all the cargo was discharged at Huangpu. The plaintiff therefore commenced this action to claim the difference in the market price occasioned by the late arrival of goods that was bound for Huangpu and also the costs of transporting part of the cargo from Huangpu to Nantong.

3.The 1st and 2nd defendants deny there is any contract between the plaintiff and either or both of them. They contend that the contract of carriage was between the 2nd and 3rd defendants. As for the 3rd defendant, it is a Mainland company and the plaintiff has not been able to serve the proceedings on it.

4.By the order of Stone J dated 28 September 2000, it is ordered that there be a trial on the preliminary issue, namely, whether the Charterparty in question was a contract between the plaintiff and the 1st or 2nd defendants. Counsel for both sides have agreed that, though phrased in those terms, it is possible for this court to conclude that the Charterparty is neither between the plaintiff and the 1st defendant nor between the plaintiff and the 2nd defendant. In short, the preliminary issue for determination is whether the Charterparty was a contract between the plaintiff and the 1st or 2nd defendant or none.

Background

5.Much of the background leading to the dispute is evidenced by documents and not in dispute.

6.By an Agency Agreement dated 28 October 1998, the 2nd defendant appointed the 1st defendant as its general agent for chartering and cargo business. Pursuant to a Fixture Note dated 13 November 1998, the 2nd defendant chartered the Vessel from Heibei Shipping. The 1st defendant's assistant manager in the chartering department, Mr Li Wen Bin ("Mr Li"), therefore approached a shipbroker in Tianjin called Ever Strong International Trading and Transportation Service Co. Ltd ("Ever Strong") to find cargo or sub-charterer for the Vessel.

7.At around the same time, the plaintiff had contracted to sell Peruvian fishmeal to various Chinese buyers. The plaintiff then entered into discussions with the 3rd defendant with a view to chartering a vessel to carry the cargo.

8.The negotiations between Ever Strong and Mr Li culmulated into a fixture recap dated 18 November 1998 from Ever Strong to the 1st defendant under which the charterer was identified as "Sinochem Group". It is not in dispute that Sinochem Group is a reputable commercial entity in the Mainland. There was further exchange of fax between Ever Strong and Mr Li. Eventually on 23 November 1998, Ever Strong faxed to the 1st defendant the confirmed details of the fixture ("Ever Strong's Fixture"). Again, the charterer was described as "Sinochem Group". The 1st defendant replied on 24 November 1998 and provided details of the bank account for the payment of freight. The bank account was held in the name of Hai Kwang Shipping Co. Ltd ("Hai Kwang"). The 1st defendant also asked for a signed copy of the charterparty, which was never forthcoming.

9.On the other hand, the discussions between the plaintiff and the 3rd defendant resulted in the 3rd defendant sending on 23 November 1998 to the plaintiff a fixture recap for the charter of the Vessel ("the plaintiff's Fixture"). The plaintiff accepted and signed the plaintiff's Fixture, in which the plaintiff was identified as the charterer.

10.The Vessel arrived at Chimbote on 3 December 1998. After loading, it proceeded to Paita. Loading in Paita was completed on 20 December 1998. It then sailed for China. A set of three bills of lading dated 10 December 1998 covering the cargo loaded at Chimbote was issued by the 2nd defendant as agent for the carrier. Another set of two bills of lading dated 15 December 1998 covering the cargo loaded at Paita was issued by Inchcape Shipping Services as agent and on behalf of the ship master. It is common ground that these bills of loading were backdated to enable the plaintiff to meet the conditions for payment under its letter(s) of credit.

11.On 15 December 1998, Hai Kwang issued an invoice for part of the freight in the sum of US$211,409.95. It was addressed to Sinochem. The invoice was not given to the plaintiff. But on the 3rd defendant's instruction, the plaintiff paid US$220,000, as part of the freight, into Hai Kwang's bank account on 16 December 1998. Also on the 3rd defendant's instruction, the plaintiff made a further payment of freight in the sum of US$36,000 into a bank account held under the name of Liu Wei on 21 December 1998. The evidence before the court does not show who this person is.

12.There were at the same time communications between the plaintiff and the 3rd defendant on the arrangement for switching bills of lading. It was a term of both Ever Strong's Fixture and the plaintiff's Fixture that, if required, a second set of bills of lading will be issued in Hong Kong against the charterer's letter of indemnity. The communications between the plaintiff and the 3rd defendant extended to the details to appear on the letter of indemnity to be given by the plaintiff in exchange for the switch bills of lading.

13.On 22 December 1998, on the 3rd defendant's instruction, the plaintiff sent its staff to the office of the 1st defendant to switch the bills of lading, bringing also a letter of indemnity in favour of the owner of the Vessel care of the 2nd defendant. The 1st defendant refused to issue the second set of bills of lading giving the reason that the plaintiff was not the charterer of the Vessel. On the same day, Ever Strong made a request by fax to the 2nd defendant for changing the name of the charterer. The 1st defendant replied to Ever Strong by fax setting out the conditions for effecting the change. One of the conditions required the plaintiff to make a declaration that the charterer under the Ever Strong's Fixture is not Sinochem Group but the plaintiff and that the plaintiff will unconditionally assume the responsibilities, obligations and risks of the charterer under that contract.

14.There were then further exchanges of fax between, on the one hand, the plaintiff and the 3rd defendant, and between the 1st and/or 2nd defendants and Ever Strong and the 3rd defendant on the other hand. Eventually, on 24 December 1998, a meeting took place between the representatives of the plaintiff and of the 1st and/or 2nd defendants ("the 24/12 Meeting"). What transpired at this meeting and the effect of this meeting is subject to serious dispute, to which I shall return later. It is, however, common ground that the plaintiff's letter of indemnity was accepted and the second set of bills of lading was handed to the plaintiff's representatives shortly after the meeting. In the same afternoon, the plaintiff faxed to the 1st defendant a copy of the plaintiff's Fixture. Before the meeting on the same day, the 1st defendant informed Ever Strong by fax that the 3rd defendant's offer that it be substituted as the charterer was rejected.

15.Then on 28 December 1998, the 1st defendant sent to the plaintiff an invoice issued by Hai Kwang for the balance of the freight. This led to exchanges of fax between Miss Helen Ho ("Miss Ho") of the plaintiff and Mr Li over the calculation of the freight. Finally on 29 December 1998, the 1st defendant sent to the plaintiff a revised invoice for the sum of US$118,232.82. Before that, the plaintiff had on 28 December 1998 paid US$118,524.60 into the bank account of Hai Kwang for the balance of the freight. A copy of the payment order for this payment was sent by the plaintiff to the 1st defendant on 29 December 1998.

16.As from 12 January 1999, there were meetings and discussions between Mr Li and the representatives of the plaintiff on the discharge of cargo. On 29 January 1999, the Vessel arrived in Huangpu after calling at Nantong. Discharge at Huangpu was completed on 3 February 1999.

The parties' contentions

17.For the plaintiff, it is contended that, as a result of the 24/12 Meeting, the plaintiff was accepted and treated by the 1st defendant as the charterer. Accordingly, a contract came into existence between the plaintiff and the 1st defendant as from 24 December 1998 either by express agreement or as a matter of inference. Although the evidence now shows that the 1st defendant acted as the agent for the 2nd defendant, the plaintiff says that this was not made known at the time, hence the 2nd defendant is an undisclosed principal and the plaintiff is entitled to elect to go after the 1st defendant.

18.The 1st and 2nd defendants, on the other hand, contend that the only contract was made with the 3rd defendant by the 2nd defendant, acting through the 1st defendant.

19.The crucial point for the determination of whether there was any contract between the plaintiff and the 1st or 2nd defendant is the 24/12 Meeting. As different accounts of the meeting have been given by the plaintiff's representatives and the defendant's representatives, it becomes necessary to assess the credibility and reliability of these witnesses and their evidence.

The witnesses and their evidence

20.The plaintiff called two witnesses, Miss Ho and a Mr Wong Wan Leung ("Mr Wong"). Mr Wong is the plaintiff's managing director and had been mainly responsible for liaising and negotiating with the 3rd defendant. His evidence is that it was Mr Xiao Da ("Mr Xiao") of the 3rd defendant who approached him offering to find suitable vessel for the plaintiff. Mr Wong had previously dealt with Mr Xiao when the latter was working for another shipping company. It was Mr Wong's understanding that the 3rd defendant was a broker acting for the owner of the Vessel. Mr Wong was aware that the 3rd defendant was not the vessel owner, but he did not know the identity of the owner. Mr Wong said he dealt with the 3rd defendant on the basis that it was an agent for the vessel owner. Although the 3rd defendant had contracted with the plaintiff under the plaintiff's Fixture, the 3rd defendant was contracting in the capacity as an agent.

21.Mr Wong said that after the 2nd defendant refused to issue the second set of bills of lading, there were discussions between Mr Li and Miss Ho and a meeting was set up to attempt to resolve the matter. This was the 24/12 Meeting, which was attended by Mr Wong and Miss Ho for the plaintiff and Mr Li and Mr Gao Yan Ming ("Mr Gao"), the director of the 1st defendant and the managing director of the 2nd defendant.

22.It is Mr Wong's evidence that he had at the meeting explained the reasons for requiring the second set of bills of lading and the consequences that may arise from the bills of lading not being switched in time to meet the deadline stipulated in the letter of credit. Mr Gao then informed him that the 3rd defendant was not a party to the charterparty, that the 1st defendant's broker was Ever Strong and that the 3rd defendant's request to be substituted as the charterer had been refused by the 1st defendant. Mr Gao also said that the charterer under the Ever Strong's Fixture was Sinochem and he showed Mr Wong a copy of Ever Strong's Fixture. As a result of these exchanges, it became apparent that two brokers were involved and that it was possible that one or both of the brokers had acted dishonestly. According to Mr Wong, he and Mr Gao agreed that the performance of the charterparty should not be affected. They therefore agreed that the plaintiff and the 1st defendant would cease to deal indirectly through Ever Strong and the 3rd defendant. Instead, they would deal with each other directly with a view to completing the voyage under the terms of the plaintiff's Fixture. After the meeting, the plaintiff faxed to the 1st defendant the plaintiff's Fixture together with the duplicate copy of the second set of bills of lading. This, Mr Wong said, was to confirm the terms of the plaintiff's Fixture were as what had been related by Mr Wong and Miss Ho during the 24/12 Meeting. According to Mr Wong, upon their return to the 1st defendant's office after lunch, Mr Li handed the second set of bills of lading to Mr Ho after receiving the letter of indemnity dated 24 December 1998 from the plaintiff. The letter of indemnity was addressed to the owner of the Vessel care of the 2nd defendant.

23.Mr Wong's first witness statement, which he had adopted as evidence, also dealt with the negotiations in January 1999 regarding the discharge of cargo. For the purpose of the preliminary issue, it is not necessary to go into that.

24.As for Miss Ho, she is a director and trade manager of the plaintiff. Her evidence is mainly on the 24/12 Meeting and the subsequent discussions she had with Mr Li regarding the payment of the balance of the freight. On the 24/12 Meeting, Miss Ho's evidence is substantially in line with Mr Wong. She confirmed that Mr Gao had shown them a copy of Ever Strong's Fixture. After looking at the terms, she informed Mr Wong that the freight rate stated in Ever Strong's Fixture was different from that under the plaintiff's Fixture and that Ever Strong's Fixture made no reference to Huangpu being the first port of discharge.

25.According to Miss Ho, no reference was made to the 2nd defendant during the meeting. Neither had Mr Gao nor Mr Li mentioned that NCL was a shipping agent. The business card produced by Mr Gao also made no reference to the 2nd defendant. When Mr Gao mentioned that "we" were vessel owner, Miss Ho thought that he was referring to the 1st defendant.

26.Miss Ho gave evidence that after she received the invoice dated 28 December 1998 for the balance of the freight, she had several discussions with Mr Li over phone and by fax on the calculation, including the detention charges and demurrage. Eventually she informed Mr Li by phone that the plaintiff would pay the detention charges based on the rate stated in the 28 December 1998 invoice, but the demurrage was to be calculated and paid later. Miss Ho explained that the amount of US$118,524.60 paid by the plaintiff on 28 December 1998 was calculated by adopting the freight rate stated in the plaintiff's Fixture. She set out the calculation on exhibit P1 and it is reproduced below :

	Freight ($29.50/MT x 12,350 MT)	US$364,325.00
less :	1st payment of freight	220,000.00
	2nd payment of freight	36,000.00
plus :	detention charges (1.8993 days x $4,000)	7,597.20
	shifting expenses	2,602.40
		_____________
		US$118,524.60

27.The rate of $29.50/MT under the plaintiff's Fixture is $1.50 more than the rate under Ever Strong's Fixture. For the detention charges, Miss Ho had adopted the figures in the invoice dated 28 December 1998. It is Miss Ho's evidence that she had informed Mr Li of the calculation before arranging for the payment to be effected. The revised invoice only came afterwards on 29 December 1998.

28.Mr Gao and Mr Li gave evidence for the defendants. Mr Gao is a director of the 1st defendant and the managing director of the 2nd defendant. He was not involved in the negotiations leading to Ever Strong's Fixture. His only involvement was the 24/12 Meeting. Mr Gao's evidence is that before the meeting, Mr Li had informed him that there were problems with the plaintiff over switching the bills of lading, but no details were given. Mr Gao said he was also informed that the general manager of the plaintiff had come to their office to switch the bills of lading. Out of courtesy, he met with Mr Wong and Miss Ho and their meeting lasted for a few minutes only. Mr Gao accepted that he had spoken to Mr Wong, but he said they only talked generally about the business of the plaintiff and of the 1st and 2nd defendants. The discussions on switching bills of lading were done by Mr Li and Miss Ho. Mr Gao disagreed that he had shown a copy of Ever Strong's Fixture to Mr Wong, but he believed that Mr Li might have done so in order to demonstrate that the plaintiff was not the charterer under it. Mr Gao also denied that he had agreed to cut out the brokers and that the parties should deal with each other directly.

29.Mr Gao also gave evidence that he had a telephone conversation with Mr Li on 25 December 1998, during which he authorized Mr Li to accept the 3rd defendant's request to be substituted as the charterer under Ever Strong's Fixture. He explained that this was because the identity of the 3rd defendant had become clear as a result of the 24/12 Meeting and the plaintiff's Fixture which was faxed over after the meeting. It was clear that the 3rd defendant was the real charterer and it could be accepted as such.

30.As for Mr Li, he is the assistant manager of the chartering department of the 1st defendant. He is not an employee of the 2nd defendant. Mr Li testified that upon the receipt of the confirmed details of the fixture on 23 November 1998, he considered that a voyage charter had been concluded between the 2nd defendant as disponent owner and Sinochem as the charterer. Although Mr Li had continuously asked for a signed copy of charterparty, it was never sent by Ever Strong.

31.Mr Li said that on 21 and 22 December 1998 after he received from Ever Strong the letter of indemnity provided by the plaintiff and the fax describing the plaintiff as the head charterer, he became aware of the involvement of the plaintiff in the transaction and of the plaintiff's interest in the cargo. Ever Strong then communicated to Mr Li its desire to replace Sinochem with the plaintiff in the charterparty. Mr Li therefore set out the conditions on which the plaintiff could be accepted as the charterer. When the plaintiff's staff came later to switch the bills of lading, Mr Li refused to hand over the second set of bills of lading since the plaintiff was not the charterer and he did not know who the plaintiff's staff was. Mr Li argued that he had on 24 December 1998, by fax to Ever Strong, refused to accept the 3rd defendant as charterer and insisted that the negotiation was with Sinochem.

32.On the 24/12 Meeting, Mr Li said that while Mr Wong had introduced the business activities of the plaintiff, he and Mr Gao had spoken about the vessels under their management. Mr Li said that it was he who showed Mr Wong a copy of Ever Strong's Fixture. Mr Li also said he had agreed to inform the plaintiff of the subsequent movements of the Vessel and to co-operate with the plaintiff in the unloading of cargo. According to Mr Li, the possibility of the plaintiff and the 2nd defendant signing a charterparty had been discussed, but the suggestion was refused by Mr Wong. Mr Li said that Mr Gao had made clear to Mr Wong that the 1st defendant only acted as the 2nd defendant's agent.

33.It is also Mr Li's evidence that on 25 December 1998, Ever Strong by fax requested the plaintiff to reconsider accepting the 3rd defendant as the charterer in place of Sinochem. Mr Li's evidence is that he had no choice but to accept the 3rd defendant as the charterer. In cross-examination, Mr Li said he had sought authorization from Mr Gao before indicating to Ever Strong that the 3rd defendant was accepted as charterer in place of Sinochem.

34.Mr Li denied that Miss Ho had informed him how the payment of US$118,524.60 was calculated. He said he did not notice that the plaintiff had paid more than the amount under the invoice dated 29 December 1998 because the difference was so small.

35.Having seen the witnesses and considered their evidence, I have to say I find Miss Ho a very impressive and convincing witness. She has a clear recollection of the events and her account of the events is very credible. On the other hand, the account given by Mr Gao and Mr Li strikes me as inherently improbable and difficult to accept. This is particularly so with regard to the 24/12 Meeting. Mr Gao had described the visit by Mr Wong and Miss Ho to be a courtesy visit. Yet both he and Mr Li accepted that the purpose of the visit was to discuss the switching of bills of lading. Mr Gao accepted in cross-examination that it was not his practice to meet with people who came to switch bills of lading. He also stated that he would not be involved in or consulted on the day-to-day operation and that he would only be involved when problems had arisen and his subordinates found difficulties in solving them. Mr Gao's insistence that Mr Wong and Miss Ho were merely paying a courtesy visit and that he had not been briefed by Mr Li prior to the 24/12 Meeting are therefore incredible. As Mr Li agreed, the switching of bills of lading was at the time a material issue between the parties and the meeting was set up to deal with it. By any view, it could not have been a courtesy visit. There is also no plausible reason for Mr Li not to properly brief Mr Gao on the background. There is no point for Mr Gao to go to the meeting if he knew nothing about the issue. Mr Wong and Miss Ho's account that Mr Gao indicated at the meeting that he was aware of the business and financial background of the plaintiff is, in my view, more logical and probable.

36.Secondly, it is unlikely that the meeting only lasted for a few minutes as stated by Mr Gao, having regard to Mr Li's description of the matters that were canvassed at the meeting. It also appears from Mr Li's evidence that Mr Gao's account that the negotiations on the switching of bills of lading were conducted by Mr Li and Miss Ho is incorrect. Mr Li's evidence suggests that Mr Wong and Mr Gao had mentioned about the 3rd defendant and also some of the terms of the Fixtures. Mr Li also agreed that Mr Gao and Mr Wong did most of the talking.

37.More importantly, if, as Mr Gao and Mr Li said, no agreement was reached to cut out the agents and to deal with each other directly, it is difficult to understand why Mr Li would accept the letter of indemnity provided by the plaintiff and would also issue the 2nd set of bills of lading. Mr Li explained that as a result of the 24/12 Meeting, the plaintiff's status as the head charterer had been confirmed; consequentially its letter of indemnity was accepted and the 2nd set of bills of lading issued. In the first place, Mr Li's understanding of the term "head charterer" is at variance with the ordinary usage of the term. Mr Li said the plaintiff was the head charterer because Ever Strong's Fixture and the plaintiff's Fixture are back-to-back contracts. On this analysis, the head charterer should be Ever Strong and the plaintiff should only be a sub-contractor.

38.Quite apart from that, it will appear from the documents before the court that prior to the 24/12 Meeting, there were already clear indications from Ever strong and the 3rd defendant that the plaintiff was the charterer. Neither Mr Gao nor Mr Li could say precisely what it was at the 24/12 Meeting that "confirmed" the plaintiff's status as charterer. Mr Gao suggested that if the plaintiff was not the charterer and not entitled to the cargo, then it would not be so anxious to obtain the 2nd set of bills of lading. But admittedly, the plaintiff had since 22 December 1998 been anxious to obtain the 2nd set of bills of lading. If its anxiety is a final proof of the plaintiff's status, the proof was there before the 24/12 Meeting. Mr Li on the other hand suggested that Mr Wong and Miss Ho had demonstrated their familiarity with the terms of the Fixture and this goes to show that the plaintiff is the charterer. This explanation is similarly unsustainable.

39.In my view, the fact that after the 24/12 Meeting, the 1st defendant no longer refused to accept the plaintiff's letter of indemnity and further issued the 2nd set of bills of lading, is a clear indication that certain agreement had been reached between the parties on the completion of the remainder of the voyage. The account of Mr Wong and Miss Ho that Mr Gao and Mr Wong had reached agreement for the plaintiff and the 1st defendant to deal with each other directly and to be accountable to each other is a natural and credible one. The risk of two holders presenting the bills of lading at the same time is such that experienced shipping personnel like Mr Gao and Mr Li would not be prepared to undergo it, unless it is certain that the plaintiff is the charterer.

40.At the same time, the faxing over of the plaintiff's Fixture shortly after the 24/12 Meeting also lends credence to the plaintiff witnesses' account that an agreement had been agreed. Mr Li said that the plaintiff's Fixture was faxed over only for the purpose of showing the plaintiff's identity. But there is no need to prove the plaintiff's identity since the 2nd set of bills of lading had already been issued on the strength of the plaintiff's letter of indemnity. It is more probable that the plaintiff's Fixture was faxed to the 1st defendant to enable it to confirm the terms therein.

41.In addition, subsequent to the 24/12 Meeting, the plaintiff and the 1st defendant had been communicating directly with each other on the performance of the charterparty. As late as 29 December 1998, Ever Strong was writing to the 1st defendant complaining about the failure to switch the bills of lading. This shows that Ever Strong was not aware that the 2nd set of bills of lading had been issued to the plaintiff, which is indicative of the fact that the brokers had dropped out of the picture. Further in the documents issued by the 1st defendant after the 24/12 Meeting, the plaintiff had been referred to and described as the charterer.

42.Apart from the 24/12 Meeting, I also find incredible Mr Gao and Mr Li's assertion that the 3rd defendant was accepted by the 2nd defendant to become the charterer in the place of Sinochem on 25 December 1998. It is not in dispute that on 25 December 1998 Ever Strong sent another fax asking Mr Li to re-consider whether to accept the 3rd defendant as the charterer. It is also common ground that Mr Li did not send a reply fax. Mr Li in his 1st witness statement simply said he realised that there was no option but to accept the 3rd defendant as the charterer. In his witness statement given after this trial had begun, Mr Gao said that he had a telephone conversation on 25 December 1998 with Mr Li during which he authorized Mr Li to accept the 3rd defendant as the charterer. In his oral testimony, Mr Li said similar things. He had however not explained why he made no mention of this in his first and supplemental witness statements, the latter was made shortly before trial. It is also very odd that Mr Li did not respond to the fax by writing. Instead, according to him, he spoke to the representative of Ever Strong. Mr Li said that he was unhappy about the situation so he responded to the request to substitute the 3rd defendant by saying : "What else can I do?" Mr Li said that this would be and was indeed understood by the representative of Ever Strong to mean that the 3rd defendant was accepted by the 1st defendant. This part of the evidence is in my view unconvincing and very odd.

43.In short, I find Mr Wong and Miss Ho reliable and credible witnesses. I prefer their evidence to that of Mr Gao and Mr Li where their evidence differs. I accept that the 24/12 Meeting did take place in the manner described by Mr Wong and Miss Ho and that agreement had been reached between Mr Wong and Mr Gao, on behalf of the plaintiff and the 1st defendant, for the completion of the remainder of the voyage in accordance with the plaintiff's Fixture. I reject Mr Li's evidence that the plaintiff had been invited to sign a contract with the 2nd defendant, but Mr Wong refused it.

Contract between the plaintiff and the 1st defendant or 2nd defendant?

44.I have found that the plaintiff and the 1st defendant had agreed to complete the remainder of the voyage under the terms of the plaintiff's Fixture. That being the case, it gives rise to an express agreement between the plaintiff and the 1st defendant whereby the parties were to observe and carry out the terms and conditions set out in the plaintiff's Fixture. The agreement came into being after the 24/12 Meeting.

45.Counsel for the defendants had, in the cross-examination of Mr Wong and also in final submissions, pointed out that it is rare to have an oral charterparty. While I agree that normally charterparties are reduced into writing, this is not an inflexible rule. In a case like the present, where the parties are driven by circumstances into an oral agreement at a time when the voyage was already underway, the fact that the charterparty is not in writing has little significance.

46.Leading counsel for the plaintiff submitted that as an alternative to express agreement, the court can imply from the conduct of the parties after the 24/12 Meeting that a contract existed between the plaintiff and the 1st defendant. As I have concluded that an express agreement came into being on 24 December 1998, it is not necessary to dwell into this aspect. It is sufficient to point out the conduct of the plaintiff and of the 1st defendant subsequent to the 24/12 Meeting is consistent with the existence of a contract between them. It is also possible to imply from the parties' conduct the existence of a contract. The relevant conduct includes the direct communication between the plaintiff and the 1st defendant, to the exclusion of the 3rd defendant and Ever Strong, and the reference to and the description of the plaintiff as charterer by Mr Li or the 1st defendant in several fax messages and documents issued after the 24/12 Meeting. Furthermore, ETA notices, which were required to be given to charterer, were given to the plaintiff. There is also the fact that the 1st and/or 2nd defendants have not yet paid the commission of the broker even though it is almost three years from the completion of the voyage.

47.Counsel for the defendants argued that the evidence of the plaintiff's witnesses is too vague and does not establish an intention to create contract. I cannot agree. As at the 24/12 Meeting, the cargo was already loaded and the Vessel was bound for the Chinese ports. Despite that, it became apparent that there was no charterer under Ever Strong's Fixture. The evidence shows clearly that Sinochem, who was said to be the charterer thereunder, had nothing to do with the cargo on board the Vessel nor the voyage in question. On the other hand, it was also apparent that the plaintiff did not in fact had a contract of carriage with the carrier since the 3rd defendant was not the agent of the vessel owner. The situation was rather critical both for the plaintiff and for the 1st and 2nd defendants. Accordingly, when the representatives came to discuss and agree on the performance of the remainder of the voyage, there can be no doubt they were serious and that they intended to create binding legal relationship. I also do not consider the terms of the agreement reached at the 24/12 Meeting to be too vague.

48.The 1st and 2nd defendants also submitted that to the extent that the plaintiff's case is that the defendants had replaced the 3rd defendant, the consent of the 3rd defendant was required in order that there can be a valid novation of contract. However, the plaintiff's case is, not that there is a novation of the plaintiff's Fixture, but that there was a fresh oral agreement between the plaintiff and the 1st defendant whereby the parties were to complete the voyage in accordance with the terms of the plaintiff's Fixture. This argument is therefore misconceived.

49.I now turn to deal with whether the contract was made with the 1st or the 2nd defendant. The undisputed evidence is that although the 1st and 2nd defendants share the same office premises, there was no signboard of the 2nd defendant displayed at the office. While Mr Gao holds position in both the 1st and 2nd defendants, his business card does not include his position in the 2nd defendant and makes no reference to the 2nd defendant at all. Prior to this transaction, the plaintiff had not dealt with the 1st or 2nd defendant. Prior to the 24/12 Meeting, the liaison was between Miss Ho and Mr Li. Mr Li is an employee of the 1st defendant, but not of the 2nd defendant.

50.Although Mr Gao claimed that he had at the 24/12 Meeting stated that the 1st defendant was the agent of the 2nd defendant, this was denied by Miss Ho and Mr Wong. They both said that Mr Gao merely used the term "we" without specifying which company. For my part, I have reservation about Mr Gao's assertion. Even Mr Li accepted in cross-examination that Mr Gao frequently used the term "we". Mr Gao himself also does not differentiate carefully between the several companies in which he holds position. He, for instance, had said that the Vessel was owned by Heibei Shipping when it was in fact not so.

51.Viewing the above evidence objectively, I am satisfied that it is probable that the plaintiff did not know that the 1st defendant was acting as the agent of the 2nd defendant. The 2nd defendant is thus an undisclosed principal. In the circumstances, the plaintiff can elect to pursue its claim against the 1st defendant.

Contract between the 2nd defendant and the 3rd defendant?

52.This point needs only be dealt with briefly. It is plain from the documents that up to 23 December 1998, when the 3rd defendant requested to be substituted as a charterer, there was no contract between the 3rd defendant and the 1st or 2nd defendant. The request of the 3rd defendant was expressly rejected by Mr Li by fax on 24 December 1998. It is therefore clear that no contract existed between the 1st or 2nd defendant and the 3rd defendant by 24 December 1998.

53.The 1st and/or 2nd defendants sought to argue that the 3rd defendant had been accepted as a charterer in substitution for Sinochem as a result of the telephone conversation on 25 December 1998. I had in the earlier part of this Determination pointed out that it is very odd for Mr Li to respond in the way he said he did and to assume that the representative of Ever Strong would understand him to mean the 3rd defendant was accepted. That aside, it is difficult to understand the necessity of accepting the 3rd defendant as the charterer when the identity of the plaintiff as charterer had already been confirmed and that all that was remained to be done was the discharge of the cargo, in which the 3rd defendant had no interest. I reject this part of the evidence of Mr Gao and Mr Wong. I also reject the argument that there was a contract between the 2nd defendant and the 3rd defendant.

Conclusion

54.By reason of the matters aforesaid, I hold that the Charterparty in question was a contract between the plaintiff and the 3rd defendant. There had been some arguments as to what constitutes the Charterparty in question. In my view, that must be referring to the Charterparty particularized in paragraph 2 of the Statement of Claim.

55.I also make an order nisi that the plaintiff shall have the costs of the trial on the preliminary issue, to be taxed if not agreed. There be liberty to the parties to apply for directions on the further conduct of the case.

Representation:

Mr Charles Sussex, SC, instructed by Messrs Clyde & Co., for the Plaintiff

Mr David Stokes, instructed by Messrs Richards Butler, for the 1st and 2nd Defendants