The GA Case Handled by Hihonor Lawyers Was Selected into Ten Typical Cases

of Qingdao Maritime Court

The remarks of Qingdao Maritime Court on this case as follows-

Case 7: The GA Case -

Agility Shipping Company vs. China-Base Ningbo Foreign Trade Co., Ltd. and China Life Property & Casualty Company Limited.

This foreign related GA case involved very complicated legal relationships and many issues disputed between the parties, so it is quite difficult for judges in the application of laws. While GA is the base legal relationship in this case, bareboat charter, time charter, marine insurance and other relationships are also involved. The parties have disputes in whether GA conditions are satisfied, who is entitled to claim the GA contribution, whether the measures taken by shipowners and the costs are reasonable, whether the costs occurred after the cargo was discharged from vessel should be allowed as GA etc. The application of the foreign laws and international practices are also involved in this case. Getting all the abovementioned difficulties over, the judgment of this case identified the legal relationships clearly and summarized the key issues correctly. This judgment provides important reference on the constituted requisites of GA and the effect of GA adjustment report. Now the judgment of this case has been fully enforced. This Judgment shows the leading role of maritime court judgments in the handling of GA disputes.

In this case, Hihonor lawyers' legal opinions were accepted by the courts of first and second instances, the above judgment of Qingdao Maritime Court is in favor of our client, and was affirmed by Shandong High People’s Court (the Appeal court). Under able help of Hihonor Lawyers, the head owner client successfully received the GA contribution plus interest amouting to around USD 1.6M.

Pls. refer to our previous report of this case-

Chinese Court Upholds and Enforces a Foreign Owner’s Claim for USD1.6million General Average Contribution against Cargo Interests

In March 2011, HIHONOR was instructed by the foreign head owner of MV Sea Agility (“the Head Owner”) to handle the disputes arising from the GA incident that occurred on 18 November 2010 in the Persian Gulf. The vessel was bound for China from port Bandar Abbas Iran, in laden condition with 83,972.099 m/tons of iron ore onboard.  The vessel lost her power after the intermediate shaft of the main engine broke down suddenly. The main engine stopped thereafter.  After the incident, the owner declared General Average (“GA”) on 3^rd December 2011.  We assisted the ship owner with obtaining Average Bond and Average Guarantee from the cargo receiver and cargo underwriter (“the Cargo Side”) respectively before the cargo was discharged from the vessel in mid-May 2011.

Although the vessel was under a bareboat charter and was operated by the bareboat charterer during this voyage, the charterer did not take active measures following the GA incident.  It was the Head Owner that took timely measures to ensure the safety of the vessel and cargo.  The measures included the urgent dispatch of a tug and arranging for the towage of the vessel to the safe anchorage of port Colombo, Sri Lanka. Having considered all available alternatives, the ship owner signed a TOWCON contract and hired an ocean-going tug and two assistant tugs from a Singapore-based tug company.  The vessel in dead ship condition was towed all the way from her refuge port Colombo to her B/L destination, port Qingdao China, and completed discharge of her cargo in mid-May 2011.

The Head Owner paid over US$3 millions of GA expenses for taking these measures.  In accordance with the Adjustment Report prepared by Richards Hogg Lindley (“RHL”), about US$ 1.62 million should be contributed by the Cargo Side to the Owners’ GA expenses.  The RHL Adjustment Report was issued on 7^th January 2013.  The Cargo Side rejected to pay GA contribution to the Head Owner by alleging that the Head Owner was not a contractual party under the B/L, and thus should not be entitled to claim for GA contribution.  Acting on behalf of the Head Owner, we filed a GA contribution lawsuit against the Cargo Side as co-defendants in Qingdao Maritime Court.  The key issues in dispute included:

1)       Whether the Head Owner was a proper plaintiff to claim GA contribution from the Cargo Side?

2)       Which adjustment rules should apply to the GA adjustment in this case?

3)       Whether the Adjustment Report by RHL could be the basis of GA contribution?

4)       Whether the Head Owner was negligent or at fault which barred the Head Owner from claiming the GA expenses from the Cargo Side?

5)       What was the nature of the Average Guarantee and the guaranty period and time limit to sue the cargo underwriter?

6)       Whether RHL average adjuster should attend the PRC court hearing to clarify queries raised by the Cargo Side?

7)       Whether the Cargo Side could apply to court to appoint adjusters other than RHL to make a separate adjustment?

The expertise of our lawyers in handling GA disputes and our thorough understanding of the China Maritime Code were instrumental in our client’s success. We prepared persuasive defense arguments, attorney’s opinions and arguments against every defense point and objection raised by the Cargo Side.

In particular, we successfully argued against the conclusion of the Survey Report, produced on behalf of the cargo underwriter, that the vessel was allegedly not seaworthy before and at commencement of the voyage, the crack of the intermediate shaft was not hidden and it was not difficult for the crew to find the crack during their routine inspection. It was further alleged that as a consequence the owners/carrier were negligent and at fault for the intermediate shaft breakdown incident, could not exempt liability for such negligence/fault and therefore could not claim GA contribution from the Cargo Side.

We appointed expert surveyors on the Owner’s behalf to issue a Technical Consultation Report disproving the above cargo surveyor’s opinion, and arranged for the Experts to attend the court in support of our arguments on the issues of seaworthiness and causation. Consequently, we successfully established that the carrier/owners were not negligent for the GA incident.

Our legal opinions were accepted by the courts of first and second instances. In December 2015 Qingdao Maritime Court handed its judgment in favor of our client, the decision was affirmed in end Sept. 2016 by the Shandong High People’s Court (the Appeal court).

Immediately after the expiration of the time limitation for performance of the payment obligation provided by the effective judgment, our lawyers filed an Enforcement Application at Qingdao Maritime Court for the GA contribution to be paid by the Cargo Side.  The swift enforcement action by our lawyers enabled the court to attach the full judgment fund from the cargo interests’ bank account without delay.

The GA judgment fund was successfully enforced in full by the Head Owner, and over RMB11million (around USD1.6 million) were safely received in December 2016 by the vessel’s mortgagee (foreign bank).  The time frame from our receiving instructions from the Head Owner in March 2011 to the safe receipt of the GA judgment fund in December 2016 spanned over 5 years.

Maritime courts in China rarely hear GA cases with the majority settled prior to judgment. There are very few judgments that could be referred to when handling a GA dispute. The opinions of the judges in this case have clarified a number of fundamental and intricate issues and will serve as an important reference in future GA cases.