Re 'Kuzma Gnidash'

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Re Kuzma Gnidash
Hong Kong High Court: Admiralty: Waung J: [2001] HKEC 929: August 2001

Mr. Colin Wright, instructed by Messrs. Crump, for the plaintiff
Mr. Clifford Smith, instructed by Messrs. Clyde & Co., for the Intervener
Claims by the managers of a Container Line against the shipowners providing tonnage to the Line, relating to commissions earned on freight and to payments for services rendered to the Line’s ships and for the hire of containers, were held to be claims arising ‘out of an agreement relating to …. the use of a ship’ within the meaning of section 12A(h) of the High Court Ordinance of Hong Kong. The Admiralty jurisdiction of the Court was therefore rightly invoked as regards an action in rem against the ‘Kuzma Gnidash’.

DMC Category Rating: Confirmed

In April 1997, the plaintiffs, described as ‘operators of container ships’ entered into an agreement with the defendants, Kamchatka Shipping Co., the owners of certain container ships. The agreement provided for the establishment of a container shipping line between Hong Kong, Chinese ports and the Russian Far East port of Vostochny. Kamchatka were to provide the ships required, whilst the plaintiffs were to be responsible for the commercial deployment of the ships and the provision and management of the container fleet. The plaintiffs were responsible for collecting freight and for paying for services rendered by third parties to the ships in the Container Line. In return, the plaintiffs were entitled to a 7.5% commission on the gross freight and to reimbursement from Kamchatka of the payments to third parties.

Kamchatka’s ships were first deployed in the Container Line service in about May 1997 but, in breach of contract, were progressively withdrawn from the service over the period April 1998 to April 1999.

By the time of the action, the plaintiffs had claims for a) earned but unpaid commission amounting to US$ 497,489, b) damages due to loss of future commission amounting to US$ 310,101 and c) disbursements and liabilities incurred on behalf of Kamchatka amounting to US$1,180,508.

The issue was whether these claims were claims sufficient to found Admiralty jurisdiction under the relevant Hong Kong statute, the High Court Ordinance of ……in particular under section 12A(h) of that Act, which referred to ‘any claim arising out of any agreement relating to the carriage of goods in a ship or to the use or hire of a ship’.

The judge found that the nature of the Agreement was ‘to put the defendant’s [Kamchatka] fleet … 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 thereon. This Agreement is not any conventional management agreement…. 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 [was] 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 the Nicolai Zhukov? I believe, yes. It is not necessary for the Agreement to provide for the plaintiff to use the Nicolai Zhukov, whether physically or not. The usage required by section 12A(h) could be that of the defendant. What is important is that 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…. The use of these ships is the object and at the heart of the Agreement.’

The judge then found that all three claims arose from the Agreement and on that basis, arose from an agreement as to the use of a ship within the meaning of section 12A(h) of the Act. In consequence, the Admiralty jurisdiction of the court had been correctly invoked and judgment was given in the plaintiff’s favour.


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