Case of dispute over ship mortgage filed by Corn¨¨r Banca S.A. against Jiangmen Yinhu Shipbreaking Co., Ltd and others
¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡ Guangzhou Maritime Court of the People¡¯s Republic of China
¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡ Civil Judgment
¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡ (2010)GHFCZ No.737
Claimant: Corn¨¨r Banca S.A.
Address: Via Canova 16, 6901 Lugano, Switzerland.
Legal Representative: T. Arsuffi, Assistant Vice President
Agent ad litem: CAO Yanghui, atttorney from Wang Jing & Co.
Agent ad litem: WANG Weisheng , attorney from Wang Jing & Co.
Defendant: Jiangmen Yinhu Shipbreaking Co., Ltd.
Address: Shadui County, Xinhui District, Jiangmen City, Guangdong, China
Legal Representative: LIAO Zhaowen, Chairman
Agent ad litem: YANG Yunfu, atttorney from Yang & Lin Co.
Agent ad litem: REN Yanbin , attorney from Yang & Lin Co.
Defendant: Minmetals Australia Pty Ltd
Address: Level 8 564 ST Kilda Road Melbourne Australia
Legal Representative: LIU Zhilong, General Manager
Agent ad litem: ZHANG Shuzhen, attorney from Beijing Dacheng Law Office
Agent ad litem: WANG Yan, attorney from Beijing Dacheng Law Office
Defendant: Guangdong Metal Recycling Corporation
Address: 21F, 12#, Bei Jiao Chang Road, Guangzhou City, Guangdong of China
Legal Representative: ZHANG Xiongwen, General Manager
Agent ad litem: LIU Mei, Manager of Import & Export Branch of Guangdong Metal Recycling Corporation
Agent ad litem: WANG Xinchun, Assistant Manager of Import & Export Branch of Guangdong Metal Recycling Corporation
The Claimant Corn¨¨r Banca S.A. sues Defendants Jiangmen Yinhu Shipbreaking Co., Ltd (¡°Yinhu¡±), Minmetals Australia Pty Ltd (¡°Minmetals¡±), Guangdong Metal Recycling Corporation (¡°Recycling Corporation¡±) pertaining to the dispute of ship mortgage. The claimant submitted a case to the Court against Yinhu on 2 November 2010 and the Court, after accepting it, established collegiate panel in accordance with law. On 19 April 2011, Claimant applied to the Court to place Minmetals and Recycling Corporation as addition defendants to the case, which was granted by the Court. The Court notified Minmetals and Recycling Corporation as Defendants to the case on 31 May 2011 and heard the case in open court on 8 September 2011. CAO Yanghui, WANG Weisheng, the agent ad litem on behalf of Claimant, YANG Yunfu, REN Yanbin, the agent ad litem on behalf of Defendant Yinhu, ZHANG Shuzhen, WANG Yan, the agent ad litem on behalf of Defendant Minmetals, LIU Mei, WANG Xinchun, the agent ad litem on behalf of Defendant Recycling Corporation appeared in court and participated in the litigation. Now the case has been closed.
Claimant claimed that on 24 May 2006, the Claimant signed a Loan Agreement with Marbel Trading Corp. (¡°Marbel¡±), wherein the Claimant provided Marbel Trading Corp. a loan of two million five hundred thousand Dollars in the currency of the United States of America. On the same day, they signed a first preferred Panamian ship mortgage, wherein Marbel mortgaged M/T ¡°Black Pearl¡± to the Claimant in the amount of three million one hundred and ninety thousand Dollars in the currency of the United States of America (USD 3,190,000), as security for Marbe¡¯s due and punctual repayment of the Loan and interest thereon in accordance with the terms of the Loan Agreement. The above mortgage of M/T ¡°Black Pearl¡± has been (and was at all material times) registered with the Registry Public of Panama. Owing to the fact that Marbel failed to perform such repayment obligation as agreed in the Loan Agreement, Claimant, on 17 July 2007, issued a written notice, demanding Marbel to remedy the above Events of Default. Till 31 December 2009, the principal and accrued interest owed by Marbel to the Claimant are USD2,176,807.96. In September 2009, without notifying Claimant and obtaining permission from Claimant, Marbel sold M/T ¡°Black Pearl¡± to Minmetals who sold the vessel to Recycling Corporation and Recycling Corporation subsequently resold it to Yinhu. At the beginning of 2010, Yinhu imported M/T ¡°Black Pearl¡± to Jiangmen for scrapping. The Claimant notified Yinhu repeatedly that M/T ¡°Black Pearl¡± is subject to the lawful registered mortgage in favor of the Claimant and requested Yinhu not to infringe upon the Claimant¡¯s lawful right and stop scrapping. However, Yinhu finally scrapped M/T ¡°Black Pearl¡± irrespective of objection from Claimant. The above acts of Defendants infringe upon the lawful rights and interests of the Claimant, as a result, the Claimant could not implement its mortgage over M/T ¡°Black Pearl¡±. Therefore the Defendants shall be severally and jointly liable to compensate the loss of the Claimant. Claimant requests the Defendants to severally and jointly compensate the Claimant for the loss of loan USD 2,083,334 plus interest (the interest shall be calculated to the actual payment day according to the rate provided in the contract) and bear the court fee for this case as well as all other costs the Claimant has paid or will pay for this case.
Claimant submitted such evidential materials to the Court within evidence submission period as follows: 1. Loan Agreement; 2. Naval Mortgage Agreement; 3. Registry information of the vessel; 4. Three contract of ship purchase; 5. Ship Import Application and Ship Entry Notice; 6. Two default notices; 7. Three notices and delivery record; 8. Lending and repayment record; 9. Photos.
Defendant Yinhu defended that:¡¡1. Claimant does not produce any evidence proving it has provided the loan to Marbel subject to Loan Agreement, Marbel has actually received the loan, and that Marbel fails to repay the loan; 2. The ship mortgage claimed by Claimant has not been recorded on the certificate of ship registry. The Claimant fails to submit the original mortgage registration certificate and it cannot be evidenced that the mortgage has been publicized. Therefore, the mortgage cannot be used against the third party; 3. In the chain of contract of ship purchase, there is no contractual relationship between Yinhu and Marbel. Yinhu knew nothing about mortgage on M/T ¡°Black Pearl¡± and has paid in full to Recycling Corporation. Yinhu is therefore a bona fide third party; 4. Yinhu has fulfilled obligation of declaration and obtained permission of competent authorities in order to purchase and scrap M/T ¡°Black Pearl¡± as scrap steel ship and no illegal acts exist therein. In sum, Defendant requests the Court to reject the claims of Claimant and the court fee shall be borne by Claimant.
Defendant Yinhu submitted such evidential materials to the Court within evidence submission period as follows: 1. Contract of ship purchase and annex thereof, commercial invoice; 2. Sales contract; 3. Three guarantees; 4. Certificate of ship registry; 5. Payment instruction and payment voucher; 6. Contract of scrap steel ship; 7. Representation; 8. Ship files; 9. Customs declaration and annex thereof; 10. Import Goods Declaration Form; 11. Quarantinable treatment certificate for conveyance; 12. Import Application; 13. Scrap steel ship into the waters declaration form; 14. Scrap steel ship into port notices; 15. Scrap steel ship berthing scheme; 16. Residual oil /oil water receiving and hold cleaning declaration form; 17. ship-scrapping application.
Defendant Minmetals defended that: 1. Minmetals, Recycling Corporation and Yinhu do not jointly commit tort and cannot cause the same damage and shall not bear the several and joint liability; 2. Without the signature and chop by Marbel on Loan Agreement and Naval Mortgage Agreement, the two documents are not in effect and cannot prove the loan and mortgage exist legally; 3. Claimant fails to produce legal and effective ship mortgage registry certificate. The witness statement made by Johel Antonio Coccio, officer in Panama Public Registry, cannot be admitted as convincing evidence due to the fact that the witness did not appear in court to be questioned; 4. The mortgage claimed by Claimant did not go through public process and cannot be used against the third party. Minmetals, when purchasing M/T ¡°Black Pearl¡±, has performed duty of care as a buyer and paid in full. Thus, Minmetals is a bona fide third party without any fault, and does not infringe upon the mortgage of Claimant. In sum, Defendant Minmetals requests the Court to reject the claims of Claimant and the court fee shall be borne by Claimant.
Defendant Minmetals submitted such evidential materials to the Court within evidence submission period as follows: 1. Contract of ship purchase; 2. Commercial invoices; 3. Sales contract; 4. Certificate of ship registry; 5. Payment instruction and payment voucher; 6. Commission agreement and commission disbursement voucher; 7. E-mails.
Defendant Recycling Corporation defended that: 1. Only signatures of Claimant and INTERSEA MANAGENT SA and no signature and chop of Marbel appear on Loan Agreement and Naval Mortgage Contract. Besides, Claimant fails to produce evidences to prove INTERSEA MANAGEMENT SA is the authorized representative of Marbel. Therefore, it cannot be proved that Marbel is a party to the contract and involved into the Loan Agreement and Naval Mortgage Contract with Claimant; 2. The ship mortgage claimed by Claimant is based on the loan to Marbel and since Claimant fails to submit any effective arbitral award or judgment to prove Marbel does not pay back all the loan, there is no factual and legal basis for Claimant to claim ship mortgage; 3. The ship registry certificate submitted by Marbel indicates Marbel is the owner of M/T ¡°Black Pearl¡± without any endorsement of valid mortgage. Thus, it is not possible for Minmetals, Recycling Corporation and Yinhu to be aware of mortgage on M/T ¡°Black Pearl¡± and they are bona fide buyers without subjective fault and shall not bear the liability of tort; 4. Pursuant to the notice of default of Claimant, Marbel has failed to return the loan since 17 July 2007, but Claimant did not enforce mortgage nor apply to seize the ship till M/T ¡°Black Pearl¡± was finally purchased and scrapped by Yinhu. The fact that Claimant delayed in enforcing mortgage indicates the hesitation and uncertainty of Claimant towards the legal existence of mortgage; 5. The scrapping of M/T ¡°Black Pearl¡± results in the destruction of mortgaged property as well as the mortgage attached to it. In accordance with the essence of Reply of Supreme Court on Whether Bona Fide Transferee of Registered Mortgage Property shall indemnify mortgagee after the destruction of Mortgaged Property, Recycling Corporation, as a bona fide transferee, shall not bear the indemnification liability. In sum, Defendant requests the Court to reject the claims of Claimant and the court fee shall be borne by Claimant.
Defendant Recycling Corporation submitted such evidential materials to the Court within evidence submission period as follows: 1. Contract of ship purchase; 2. Payment voucher; 3. Ship certificate; 4. Ship sales certificate; 5. Sales Contract for scrap steel ship.
After cross-examination of evidences submitted by both parties in court trial and in consideration of cross-examination submission of Claimant and Defendants, the collegiate panel ascertains the facts as follows:
On 24 May 2006, Claimant and Marbel signed a Loan Agreement in Lugano, Switzerland, wherein: Claimant provides Marbel a loan of USD 2,500,000. Marbel, three months after withdrawing the loan, repays to Claimant by installment of USD 208,333 every quarter and the interest shall be calculated at the three-month interbank rate in London plus two percentage interest margin. The interest rate shall be adjusted every three month; Marbel, before or on the day when withdrawing the loan, signed a contract where Claimant enjoys a first preferred mortgage on the ship registered pursuant to Panamanian law and passed it to Claimant for registration; The Loan Agreement is governed by Swiss law whilst the mortgage property is applied by Panama law. On the same day, both parties signed a first preferred Panamanian ship mortgage, wherein: To guarantee return of the loan, Marbel acknowledges Claimant enjoys a first preferred mortgage on M/T ¡°Black Pearl¡± and the secured amount in the mortgage contract is USD 3,190,000; Within three days after conclusion of the contract, Marbel submits to Claimant an original document of ship mortgage officially endorsed by Panama Ship Registry, to evidence the mortgage of M/T ¡°Black Pearl¡± has been registered; One week after the temporary registration of document of ship mortgage in Panama Ship Registry, Marbel shall submit a new certificate from Panama Ship Registry to evidence the temporary registration has been changed to official registration.
In the Loan Agreement and Ship Mortgage Contract, the columns indicating borrower and mortgagor have been chopped ¡°INTERSEA MANAGEMENT SA¡± without signature and chop of Marbel.
Pursuant to the registry certificate of M/T ¡°Black Pearl¡± issued on 8 January 2009 by Panama Merchant Ship Registry, the owner of M/T ¡°Black Pearl¡± is Marbel, the construction location is Aichi, Japan and the construction date is in 1981 (keel laid), steel tanker. The length is 170 m, the width is 32.2 m, the depth is 19.2 m, the gross tonnage is 29,864 and the net tonnage is 12,528. The validity of certificate is till 7 January 2010.
On 19 March 2009, Johel Antonio Coccio certified that: M/T ¡°Black Pearl¡± was registered on 22 June 2006 and the owner is Marbel. Claimant is the first preferred ship mortgagee and the secured amount is USD 3,190,000. The registration number is 1001224 and registration date is 24 August 2006. The mortgage is still on registry till the issue of the certification. The certification is stamped by Panama Public Registry.
During the trial, the agent ad litem on behalf of Claimant asserted the existence of original ship mortgage documents and was requested by the collegiate panel to submit them before deadline. However, so far Claimant has not submitted documents of ship mortgage.
The lending record and repayment record presented by Claimant demonstrated that: Claimant provided Marbel a loan of USD 2,500,000 on 30 June 2006. By 31 December 2006, Marbel was still in a debt of USD 2,125,561.97 to Claimant. There are no signature and chop of Marbel in the lending record and repayment record.
On 15 September 2009, Minmetals and Marbel signed a memorandum of agreement, wherein: Minmetals purchases M/T ¡°Black Pearl¡± from Marbel at a price of USD 2,553,337.41, calculated at 9,086.61 long ton (equal to 9,232 MT) with USD 281 per long ton CIF Xinhui, China. The payment shall be remitted to the account of SEA DARN BROKERS SA as beneficiary designated by Marbel. The date of ship delivery is 10/15 November 2009. Minmetals respectively pays USD 619,184.33, USD 19,150.02, USD 1,838,402.93, adding up to USD 2,476,737.28 to SEA DARN BROKERS SA on 18 September 2009, 22 September 2009 and 24 December 2009. Marbel issues a USD 2,553,337.41commercial invoice and a sales contract to Minmetals, guaranteeing that M/T ¡°Black Pearl¡± is free and clear of any registered mortgage, maritime lien, property encumbrance, claims and any other debt constraint.
On 18 September 2009, Recycling Corporation and Minmetals signed a contract of ship purchase, wherein: Recycling Corporation purchases M/T ¡°Black Pearl¡± from Minmetals at a price of USD 2,544,250.80; The date of ship delivery is 10/15 November 2009 and the delivery location is Xinhui, China. Recycling Corporation pays USD 2,544,250.80 to Minmetals on 28 December 2009 for ship purchase and Minmetals issues a USD 2,544,250.80 commercial invoice to Recycling Corporation.
On 22 September 2009, Yinhu and Recycling Corporation signed a contract of scrap steel ship purchase, wherein: Yinhu purchases M/T ¡°Black Pearl¡± from Recycling Corporation at a price of RMB 21,093,491.08; The location of ship delivery is subject to foreign contract. The date of ship delivery is subject to foreign contract at the option of ship owner. Yinhu pays RMB 21,103,032.24 to Minmetals on 25 December 2009 for ship purchase. Recycling Corporation issues an RMB 21,103,032.24 commercial invoice to Yinhu.
M/T ¡°Black Pearl¡± arrived at shipyard of Yinhu on 26 December 2009. Upon the application of Recycling Corporation, Guangzhou Huangpu Exit and Entry Inspection and Quarantine Bureau issued quarantinable treatment certificate for conveyance on 30 December, permitting the scrapping; Guangzhou Huangpu Old Port Customs approved and verified import on 19 January 2010. Upon the application of Yinhu, Jiangmen MSA, after examination and verification, approved scrapping. M/T ¡°Black Pearl¡± now has been finished scrapping.
All members of collegiate panel unanimously opine that: the case is pertaining to a dispute of ship mortgage. In accordance with article 38 of Some Provisions of the Supreme People's Court on the Scope of Cases to be Entertained by Maritime Courts, the case is within the scope of cases entertained specially by maritime court. The place of tort in the case is the waters of Jiangmen City of People¡¯s Republic of China and the addresses of Defendant Recycling Corporation and Yinhu are within jurisdiction of the Court. In accordance with Article 6 of Special Maritime Procedure Law of the People's Republic of China and Article 29 of Civil Procedure Law of the People's Republic of China related to the provision of ¡°A lawsuit filed for tort act shall be under the jurisdiction of the people s court in the place where the tort act took place or where the defendant has his domicile¡±, the Court has jurisdiction over the case.
As the nationality of the involved M/T ¡°Black Pearl¡± is Panama and the domiciles of Claimant and Defendant Minmetals are not in People¡¯s Republic of China, the case is foreign factor-related. In accordance with Article 146 of General Principles of Civil Law of People¡¯s Republic of China, which provides that ¡°The law of place where the tort took place shall apply to damages arising from tort¡±, in the case the law of People¡¯s Republic of China shall be applicable to deal with substance of the dispute.
The dispute is centered on: 1. Whether the claim of mortgage loss by Claimant can be established; 2. Whether Defendants infringe upon ship mortgage of Claimant by the act of purchasing M/T ¡°Black Pearl¡±.
1. Whether the claim of mortgage loss by Claimant can be established.
Ship mortgage is a secure method to guarantee creditor¡¯s interests by ship. The ship mortgage placed is to guarantee a certain creditor¡¯s right to be realized. Ship mortgage is an accessory right and exists when the secured primary creditor¡¯s right exists and extinguishes when the secured primary creditor¡¯s right extinguishes. Therefore, enforcement of ship mortgage by mortgagee is premised on whether the primary creditor¡¯s right exists. The mortgage could only exist when the primary creditor¡¯s right exists and mortgagee is consequently entitled to enforce the mortgage on the mortgaged ship transferred by debtor. Claimant maintains that Defendants infringe upon its mortgage and requests Defendants to compensate the loss, but Claimant fails to provide effective evidence to prove Marbel has not repaid the loan pursuant to Loan Agreement and the loan of Marbel still exists. Therefore, Claimant shall bear the disadvantageous litigation result for failure to discharge burden of proof. As the Claimant cannot prove the existence of primary creditor¡¯s right, the claim of accessory creditor¡¯s right, i.e. mortgage loss is lack of factual and legal basis and cannot be supported.
2. Whether Defendants infringe upon ship mortgage of Claimant by the act of purchasing M/T ¡°Black Pearl¡±
Claimant maintains that the mortgage of M/T ¡°Black Pearl¡± has been registered in Panama registry and submits the certification issued by Johel Antonio Coccio. The certification from Johel Antonio Coccio is merely witness statement and is not as effective as Ship Mortgage Certificate and thus cannot be used to prove M/T ¡°Black Pearl¡± has been registered in registry of flag state. Besides, Johel Antonio Coccio did not appear in court as witness. Without other evidences to confirm it, the certification of Johel Antonio Coccio is not adopted. In the trial, Claimant maintains that except the certification from Johel Antonio Coccio, there are documents of ship mortgage registry but fails to submit to the court. Because Claimant fails to prove the mortgage of M/T ¡°Black Pearl¡± has been registered, the mortgage provided in the contract of ship mortgage with Marbel does not have public effect. Defendants, when purchasing M/T ¡°Black Pearl¡±, has examined the certificate of ship registry and sales contract provided by Marbel and thus has performed the duty of care and paid the price. Owing to the fact that there is no record of ship mortgage in both certificate of ship registry and sales contract, Defendants cannot be aware of mortgage placed on M/T ¡°Black Pearl¡± and they are bona fide buyers without subjective fault and cannot infringe upon mortgage of Claimant. In accordance with Article 13(1) of Maritime Law of People¡¯s Republic of China, which provides that the mortgage of a ship shall be established by registering the mortgage of the ship with the ship registration authorities jointly by the mortgagee and the mortgagor. No mortgage may act against a third party unless registered, Defendants shall not be liable for the tort.
In sum, in accordance with Article 64(1) of the Civil Procedure Law of People¡¯s Republic of China and Article 13(1) of Maritime Law of People¡¯s Republic of China, the civil judgment is hereby rendered as follows:
Reject the claims of Claimant Corn¨¨r Banca S.A.
The court fee RMB 109,075 shall be borne by Claimant.
If not satisfied with this Civil Judgment, Claimant Corn¨¨r Banca S.A.and Defendant Minmetals Australia Pty Ltd. may, within thirty days upon receipt of the Judgment, Defendant Jiangmen Yinhu Shipbreaking Co., Ltd and Guangdong Metal Recycling Corporation may, within fifteen days upon receipt of the Judgment, submit petition for appeal to the Court with copies in the number of the opponent/concerned parties for filing an appeal with Guangdong Provincial Higher Court.
Presiding Judge: CHEN Bin
Acting Judge: XIONG Shaohui
Acting Judge: YANG Yousheng
Date: 22 December 2011
Certified as true to the original
Court Clerk: ZHUANG Zhifa
The translation is provided by Wang Jing & CO.