IN THE COURT OF FIRST INSTANCE OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION No. 970 OF 2012
____________
BETWEEN
WESTERN LIMITED CORPORATION
Plaintiff
and
HONGKONG-PHILIPPINE INTERNATIONAL NAVIGATION SERVICES LTD
and JUAN P. MASIPAG
Defendants
____________
Before: His Honour Judge Kent Yee in Court
Dates of Hearing: 23-25 September 2012
Date of Judgment: 28 December 2012
_______________________________________
JUDGMENT
_______________________________________
Introduction
1.

WESTERN EAGLE, LTD., is a corporation duly created and organized

under the laws of the Special Administrative Region of Hong Kong, with main
corporate address at Room 1, 17th Floor, Tower 1, World Financial Tower,
Causeway Road, Hong Kong. HONGKONG-PHILIPPINE INTERNATIONAL

NAVIGATION SERVICES LTD is a Hong Kong registered and based company

acting as ships agent, up to and until the company closed shop sometime in the first
quarter of 2011, when shipping business collapsed worldwide; that the said
company held office at 34-35 Connaught Road, Central Hong Kong and later
transferred to Caxton House at Duddel Street, Hong Kong, until the company
closed shop in 2011. JUAN P. MASIPAG is the personal guarantor of
HONGKONG-PHILIPPINE INTERNATIONAL NAVIGATION SERVICES LTD
in the contract of sale it entered into with WESTERN EAGLE LTD.
2.

Due to the insolvency of HONGKONG-PHILIPPINE

INTERNATIONAL NAVIGATION SERVICES LTD, WESTERN EAGLE, LTD

now brings this case against JUAN P. MASIPAG for the payment of the sum of
USD 1,810,265.40 or its equivalent in Hong Kong currency at the time of payment
with legal interest from December 28, 2012 until fully paid and Interest on the sum
of USD 1,500.00 at 9.87% per annum from October 31, 2012 to December 28,
2012.
Background Facts
3.

The following background facts are either undisputed or indisputable.

They are largely evidenced by documentary evidence. The background to this

dispute is two agreements and associated security documents for the construction,
sale and purchase for a total consideration of about US$2.1 million of an oil-tanker
designated Hull No. PC440-2 by a Chinese shipyard.
4.

The plaintiff as a financier entered into a ship building agreement with

the yard and at the same time arranged in terms of a back to back agreement to sell
the ship to HONGKONG-PHILIPPINE INTERNATIONAL NAVIGATION

SERVICES LTD (Navigation), Juan Masipags company. Masipag guaranteed the

obligations of Navigation to the plaintiff, Western Ltd. Co.
5.

Navigation only ever paid the first 10% deposit, but has defaulted on the

payment of the 90% balance of about US$ 1.8 million, despite the completion of
the vessel and its launch in December 2009.
6.

Navigation entered into discussions in September 2010 in an attempt to

sell the vessel with the benefit of a charter but Navigation never made any attempt
to tender the outstanding purchase price to enable it to take delivery. In the end,
Masipag acknowledged that he was unable to find a buyer for the vessel and
Navigation failed to pay the 90% balance remaining due.
7.

The plaintiff, Western Limited, claims that Masipag is liable as guarantor

to make good the deficiency of the purchase price which Navigation agreed to pay
for the vessel.
8.

The statutory demand which was served on Masipag and Navigation was

in the sum of USD 1,810,265.40. The petition was founded on this.

Issues to be Determined
9.

The issues which had to be determined by the Judge were whether the

claim which was being made by the plaintiff is chargeable to Juan Masipag as the
guarantor and whether there is a substantial dispute in the matter.

Courts Findings
10.

The terms of the performance guarantee which had been executed by

Masipag were clear and unambiguous. They were in these terms:

Date: 15th March, 2009
To:

Western Limited Corporation, Hongkong

PERFORMANCE GUARANTEE (Dalian Hull No. PC440-2)

Dear Sirs,
In consideration of your execution of (i) a Ship Sales Contract (such
contract as originally executed or as the same may from time to time be
amended, the Ship Sales Contract) dated 15h March, 2009 with
Navigation Shipping Agency Corp. (the BUYER) relative to the
construction and purchase of a 44,000 Metric Tons Deadweight Product/
Crude Oil Tanker having SHIPYARDs Hull No.PC440-2 (the VESSEL)
and (ii) an agreement (such agreement as originally executed or as the
same may from time to time be amended, the Agreement) dated 16th
October, 1997 with the Buyer (the Ship Sales Contract and the Agreement,
collectively called the Contract), I hereby absolutely, unconditionally
and irrevocably guarantee:
(1)

the due and punctual payment by the BUYER in accordance with

the terms and provisions of the Contract of any and all sums which
are now or at any time hereafter payable by the BUYER under or
in respect of the Contract in accordance with terms and conditions
thereof including (without limitation) all claims or moneys due and
to become due to you thereunder and all claims for damages in
respect of any breach by the BUYER of the Contract (the Contract
Liabilities); and

(2)

the due and punctual performance of all obligations of the BUYER

under and in respect of the Contract other than the Contract
Liabilities (the Contract Obligations).

If the BUYER fails to make payment of any of the Contract Liabilities

when and as the same shall become due and payable I hereby covenant
that I will pay to you upon demand the amount equal to any sum or sums
in respect of which the BUYER shall not have made payment, and will
indemnify you against all losses, damages, costs or expenses suffered or

incurred by you in consequence of the BUYERs failure to perform or

comply with the Contract Obligations.
The guarantee contained in this letter will not be discharged or affected
by:
1.

any granting of time or other indulgence or modification, transfer,

extension, renewal, acceptance, forbearance or release in respect of
any Contract Liabilities or Contract Obligations; or

2.

any corporate reorganization, reconstruction, amalgamation,

dissolution, merger, acquisition of or by or other alteration in the
corporate existence or structure of the BUYER: or

3.

any other act or omission to act of any kind by you or any other
person or any other circumstance whatsoever which might
constitute a legal or equitable discharge of me.

It being my intention that the guarantee set out herein shall be irrevocable,
absolute and unconditional in any and all circumstances.
The guarantee herein contained shall remain in full force and effect until
final performance in full of all Contract Liabilities and performance in full
of all Contract Obligations whatsoever in accordance with the terms and
provisions of the Contract notwithstanding the insolvency or liquidation of
the BUYER or any other event whatsoever.
I hereby irrevocably waive acceptance of this guarantee, diligence,
presentment, discussion, demand, protest and notice of any kind
whatsoever and confirm that this guarantee may be enforced by you as
often as the need may arise.
I hereby also irrevocably waive my right of being informed by either the
BUYER or your company and/or any other company/person on any
modification or amendment on Specifications and/or drawing or on any
alteration or modification on any terms and conditions of the Contract, and
any such modification or amendment or alteration, if there is any, as if I,
as the guarantor, had been informed.
Until the whole of the Contract Liabilities shall have been paid in full and
the Contract Obligations fully performed, I shall not by paying off any
sum recoverable hereunder or under the Contract or by any other means or
on any other grounds claim any set-off or counterclaim against the
BUYER in respect of any liability to the BUYER or be entitled to the
benefit of any other security which you may now or hereafter hold for any

part of the Contract Liabilities or the Contract Obligations nor shall I have
any other right of surety discharging its liability, and I will not without
your prior written consent prove in the insolvency, winding-up or
liquidation of the BUYER in competition with you and will give you the
benefit of any proof to which I may be entitled and all moneys received in
respect thereof.

Any certificate by you of the amount due from the BUYER in respect of
the Contract Liabilities shall in the absence of manifest error be conclusive
and binding upon me.
I shall not be entitled to any rights of remedies, legal or equitable, of a
surety as regard any of the indebtedness, obligations or liabilities of
ourselves under or pursuant to this Guarantee.
I confirm that all necessary consents, permits and approvals applicable to
this guarantee, if any, have been granted.
This guarantee shall be in addition to and not in substitution for any other
rights which you may have under or by virtue of the Contract or any
collateral or security securing the BUYERs indebtedness and may be
enforced without requiring you first having recourse to any such rights and
without requiring you to take any steps or proceedings against the BUYER
This guarantee shall be governed by the laws of England and I hereby
irrevocably submit to the non-exclusive jurisdiction of the English Court
and appoint Marine Agency Limited, Bilbao House, 36/38 New Board
Street, London EC2M INH, England, as my agent to accept service of
proceedings in such courts.
Yours faithfully,
Sd. Juan Masipag
I hereby certify that Mr. Juan Masipag, who is 53 of age, has signed this
performance guarantee in my presence.
Sd. So Fuk Ching
Notary Public, Hong Kong.
William Sin & So
15 Oct 2009

11.

It was common ground that Navigation had been in breach of the terms

of the ship sale agreement and that relevant notices had been served upon them in
relation to the default. Navigation breached the ship sale agreement by failing to
pay the installment payments as and when they became due and payable.

Mr

Ambrose Ho SC for the defendant argued that in relation to the 4th (and final)
installment, the payment obligation was concurrent with the petitioners obligation
to deliver the vessel.

Since the vessel was in fact not delivered to Chao, his

payment obligation has not arisen yet. With respect, Mr Hos argument ignores
two things:
(1)

a notice was duly given by the petitioner to Navigation pursuant

to the terms of the ship sale agreement informing Navigation
that the vessel was ready for delivery.

Navigation did not

respond to such notice;

(2)

the terms of the ship sale agreement relating to the method of

payment provided (among other things) that payment of the 4th
(and final) installment should be made by Navigation at least 3
business days before the scheduled day of delivery.

11.

Since no such installment was not made there was therefore no

concurrent obligation upon Western Limited to deliver the vessel. What is apparent
from this passage is that an obligation to pay installments which have already
accrued is not extinguished when a agreement comes to an end.

Rather than

supporting the arguments being advanced by Mr Ho this passage would tend to

support the submissions being made by Mr Scott.

12.

As to the personal guaranty of Mr. Juan Masipag, the document entitled

PERFORMANCE GUARANTEE is clear and unequivocal: If the BUYER fails

to make payment of any of the Contract Liabilities when and as the same shall
become due and payable I hereby covenant that I will pay to you upon demand the
amount equal to any sum or sums in respect of which the BUYER shall not have
made payment, and will indemnify you against all losses, damages, costs or
expenses suffered or incurred by you in consequence of the BUYERs failure to
perform or comply with the Contract Obligations.
13. Summarily, Western Limited entered into a contract (the Ship Sales Contract)
with HONGKONG-PHILIPPINE INTERNATIONAL NAVIGATION SERVICES
LTD (Navigation) to sell the vessel to Navigation. Mr. Masipag, the beneficial
owner of Navigation, guaranteed the payment and performance by Navigation.
14.

Navigation was to pay the contract sum of US$2.1 Million by four

installments. It managed only to pay one installment and failed to pay the other
three installments or take delivery of the vessel.
15.

Western Limited by a notice dated 18 June 2009 informed Navigation

and Mr. Masipag that, pursuant to Clause 4 of Article XI of the Ship Sales
Contract, the latter had defaulted in its installment payment. Respondents therefore
cannot claim lack of opportunity to settle the dispute without the aid of this court.
For despite demand by plaintiff, it failed to make the payments.

Conclusion and Orders

16.

Henceforth, I enter judgment against Mr. Juan Masipag for the

following:
USD 1,810,265.40 or its equivalent in Hong Kong
currency at the time of payment with legal interest from
December 28, 2012 until fully paid;
(1)

(2) Interest on the sum of USD 1,500.00 at 9.87% per

annum from October 31, 2012 to December 28, 2012; and
(3) HKD 905.00 at fixed cost in the action; and
(4) at least USD 80,000.00 representing attorney's fees,
litigation expenses and cost, with interest thereon from the
date of the judgment until fully paid.
50.

There is no reason why costs should not follow the event. I make a costs

order nisi that Masipag should pay Western Limited costs of this action with
certificate for counsel.
51.

I am impressed by the industry of both counsel and I thank them for their

able assistance.
(Kent Yee)
District Judge

Mr. John Scott SC, instructed by Messrs Deacons, for the Plaintiff
Mr Ambrose Ho SC and Mr Michael Yin, instructed by Messrs Hobson & Ma, for
the Defendants.