14TH INTERNATIONAL MARITIME LAW ARBITRATION · PDF file14TH INTERNATIONAL MARITIME LAW ARBITRATION MOOT 2013 . IMLAM Moot organised by School of Law, Murdoch University

14TH INTERNATIONAL MARITIME LAW ARBITRATION MOOT 2013

IMLAM Moot organised by School of Law, Murdoch University

Oral rounds hosted by School of Law, University of Southampton

MOOT SCENARIO

RELEASED 7 DECEMBER 2012 Note (1): Students are to assume that all necessary documentation has been provided. Should a document refer to a document(s) which has not been provided students are to assume that the referred document(s) is/are not relevant to the matter. Note (2): Students are to assume that where a Bill of Lading is identified as 'signed 3/3 original Bills of Lading', all three original Bills of Lading are identical to one another. We request that teams intending to register for the competition inform the moot organisers as soon as possible as numbers are required to assist us with planning: [email protected] Registration forms, the schedule of important dates and other information for competitors can be found at the website: http://www.law.murdoch.edu.au/maritimemoot/index.html

mailto:[email protected]�

http://www.law.murdoch.edu.au/maritimemoot/index.html�

From: Tom Williams [[email protected]] Sent: 23 May 2008 17:47 To: Paul Taylor [[email protected]] Subject: PFAD contract 1234 23rd May 2008 Tom Williams (Vegetable Oil Broker) 1 Appleby Lane Oxshott Surrey Attention: Paul We confirm following business Seller: Beatles Oils & Fats Ltd Buyer: Aardvark Ltd Quantity: 2000mt Commodity: Palm Fatty Acid Distillate – Malay/ Indonesian origin@sellers option Min 70% ffa (as Palmitic), min 95% TSM, Max 1% M&I @time of shipment GMQ Price: US$ 705.00 pmt CIF Rotterdam (Incoterms 2000) Packing: Bulk – Outturn Weights Shipment: October 2008 – from origin Payment: CAD 99% on presentation Conditions: FOSFA 81 – current T Williams (Vegetable Oil Broker)

1

From: Tom Williams [[email protected]] Sent: 23 May 2008 18:10 To: Paul Taylor [[email protected]] Subject: PFAD contract 1235 23rd May 2008 Tom Williams (Vegetable Oil Broker) 1 Appleby Lane Oxshott Surrey Attention: Paul We confirm following business Seller: Beatles Oils & Fats Ltd Buyer: Aardvark Ltd Quantity: 2000mt Commodity: Palm Fatty Acid Distillate – Malay/ Indonesian origin@sellers option Min 70% ffa (as Palmitic), min 95% TSM, Max 1% M&I @time of shipment GMQ Price: US$ 705.00 pmt CIF Rotterdam (Incoterms 2000) Packing: Bulk – Outturn Weights Shipment: October 2008 – from origin Payment: CAD 99% on presentation Conditions: FOSFA 81 – current T Williams (Vegetable Oil Broker)

2

From: John Walker [[email protected]]

Sent: 12 September 2008

To: Paul Taylor [[email protected]]

Subject: Fixture re-cap – Twilight Trader

We have pleasure in confirming the following fixture concluded today in accordance with your

authority, all subjects lifted and fixture reconfirmed by owners:

TITLE

CHARTERER: BEATLES OILS & FATS LTD

OWNER: TWILIGHT CARRIERS INC

BROKER: WALKER BROKERS

CHARTER PARTY: VEGOIL VOY

DATED: 12 SEPTEMBER 2008

VESSEL

VESSEL: TWILIGHT TRADER

CLASSED: NKK

….

CARGO

CARGO: FULL CARGO TO FULL CUBIC CAPACITY VARIOUS GRADES CRUDE AND

REFINED PALM/ COCONUT OILS INCLUDING PFAD WITHIN VESSELS NATURAL

SEGREGATION.

PORTS

LOADING: 1-2 SAFE PORTS/ 1 SAFE BERTH KUANTAN/BELAWAN RANGE INCLUDING

DUMAI, SHIFTING AND COSTS TO BE FOR CHARTERERS ACCOUNT AND TIME

TO COUNT AS LAYTIME, PROVIDED ONLY 1 PORT COST APPLIES. IF DOUBLE

PORT COSTS ARE DUE THEN TO BE CONSIDERED AS 2 PORTS IN

COMPUTATION OF FREIGHT.

DISCHARGING: 1 SAFE PORT MERSEY

3

LAYTIME ETC

TOTAL LAYTIME: 175 METRIC TONS PER HOUR FOR LOADING AND 175 METRIC TONS PER

HOUR FOR DISCHARGING, SUNDAYS AND HOLIDAYS INCLUDED. REVERSIBLE

FREIGHT RATE: USD 99 PER MT TON ON BASIS 2-1

DEMURRAGE: USD 25,000 PDPR

LAW AND JURISDICTION: ENGLISH LAW TO APPLY. LONDON ARBITRATION.

HAGUE-VISBY RULES INCORPORATED INTO CHARTERPARTY.

SAVE AS ABOVE AS PER STANDARD VEGOIL VOY FORM. “VEGOILVOY 1/27/50”

4

5

6

7

8

9

10

11

12

From: Tom Williams [[email protected]] Sent: 23 September 2008 19:15 To: Paul Taylor [[email protected]] Subject: Amended PFAD contracts 1234 & 1235 23rd September 2008 Tom Williams (Vegetable Oil Broker) 1 Appleby Lane Oxshott Surrey Attention: Paul Please note it has been mutually agreed that above mentioned contracts are to be amended as follows: Price: US$ 747.50 pmt CIF Merseyside, Gladstone Dock (Incoterms 2000) Please amend your records Kind regards, T Williams (Vegetable Oil Broker)

13

CONGENBILL 2007 BILL OF LADING

To be used with charter parties Page 1

Shipper VEGETABLE OILS SDN BHD PASIR GUDANG INDUSTRIAL ESTATE 81700 PASIR GUDANG

Bill of Lading No. PG1

Reference No.

Consignee TO ORDER Vessel MT “TWILIGHT TRADER”

Notify address BEATLES OILS & FATS LTD, 1 WESTBOURNE PARK ROAD, LONDON, W2

Port of loading PASIR GUDANG, MALAYSIA

Port of discharge LIVERPOOL, MERSEYSIDE, UK

Shipper’s description of goods PALM FATTY ACID DISTILLATE, CLEAN ON BOARD STOWAGE 2P, 2S, 7P, 7S, SLOP P & SLOP S SLIP MELTING POINT 47.2 DEG c VISCOSITY 10.2mPas at 60 DEG C

(of which on deck at shipper’s risk; the Carrier not being responsible for loss or damage howsoever arising)

Gross weight 496.906 MTS

Freight payable as per CHARTER PARTY dated: FREIGHT PAYABLE AS PER CHARTERPARTY

SHIPPED at the Port of Loading in apparent good order and condition on the Vessel for carriage to the Port of Discharge or so near thereto as the Vessel may safely get the goods specified above. Weight, measure, quality, quantity, condition, contents and value unknown. IN WITNESS whereof the Master or Agent of the said vessel has signed the number of Bills of Lading indicated below all of this tenor and date, any one of which being accomplished the others shall be void. FOR CONDITIONS OF CARRIAGE SEE OVERLEAF.

FREIGHT ADVANCE Received on account of freight: Date shipped on board Place and date of issue

PASIR GUDANG, MALAYSIA, DATED 25TH OCTOBER 2008

Number of original Bills of Lading 3 (THREE) ORIGINALS

Signature: (i) ......................................................................................Master Master’s name and signature

Or (ii) HAWK SHIPPING SERVICES (MALAYSIA) SDN BHD. ………………………………………………………………………………………as Agent for the Master Agent’s name and signature Or (iii) ....................................................................................as Agent for the Owner* Agent’s name and signature ..........................................................................................Owner *if option (iii) filled in, state Owner’s name above

14

CONGENBILL 2007 BILL OF LADING To be used with charter parties Page 2

Conditions of Carriage

(1) All terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf, including the Law and Arbitration Clause/Dispute Resolution Clause, are herewith incorporated. (2) General Paramount Clause The International Convention for the Unification of Certain Rules of Law relating to Bills of Lading signed at Brussels on 25 August 1924 (“the Hague Rules”) as amended by the Protocol signed at Brussels on 23 February 1968 (“the Hague-Visby Rules”) and as enacted in the country of shipment shall apply to this Contract. When the Hague-Visby Rules are not enacted in the country of shipment, the corresponding legislation of the country of destination shall apply, irrespective of whether such legislation may only regulate outbound shipments. When there is no enactment of the Hague-Visby Rules in either the country of shipment or in the country of destination, the Hague-Visby Rules shall apply to this Contract save where the Hague Rules as enacted in the country of shipment or if no such enactment is in place, the Hague Rules as enacted in the country of destination apply compulsorily to this Contract. The Protocol signed at Brussels on 21 December 1979 (“the SDR Protocol 1979”) shall apply where the Hague-Visby Rules apply, whether mandatorily or by this Contract. The Carrier shall in no case be responsible for loss of or damage to cargo arising prior to loading, after discharging, or while the cargo is in the charge of another carrier, or with respect to deck cargo and live animals. (3) General Average General Average shall be adjusted, stated and settled according to York-Antwerp Rules 1994 in London unless another place is agreed in the Charter Party. Cargo’s contribution to General Average shall be paid to the Carrier even when such average is the result of a fault, neglect or error of the Master, Pilot or Crew. (4) New Jason Clause In the event of accident, danger, damage or disaster before or after the commencement of the voyage, resulting from any cause whatsoever, whether due to negligence or not, for which, or for the consequence of which, the Carrier is not responsible, by statute, contract or otherwise, the cargo, shippers, consignees or the owners of the cargo shall contribute with the Carrier in General Average to the payment of any sacrifices, losses or expenses of a General Average nature that may be made or incurred and shall pay salvage and special charges incurred in respect of the cargo. If a salving vessel is owned or operated by the Carrier, salvage shall be paid for as fully as if the said salving vessel or vessels belonged to strangers. Such deposit as the Carrier, or his agents, may deem sufficient to cover the estimated contribution of the goods and any salvage and special charges thereon shall, if required, be made by the cargo, shippers, consignees or owners of the goods to the Carrier before delivery. (5) Both-to-Blame Collision Clause If the Vessel comes into collision with another vessel as a result of the negligence of the other vessel and any act, neglect or default of the Master, Mariner, Pilot or the servants of the Carrier in the navigation or in the management of the Vessel, the owners of the cargo carried hereunder will indemnify the Carrier against all loss or liability to the other or non-carrying vessel or her owners in so far as such loss or liability represents loss of, or damage to, or any claim whatsoever of the owners of said cargo, paid or payable by the other or non-carrying vessel or her owners to the owners of said cargo and set-off, recouped or recovered by the other or non-carrying vessel or her owners as part of their claim against the carrying Vessel or the Carrier. The foregoing provisions shall also apply where the owners, operators or those in charge of any vessel or vessels or objects other than, or in addition to, the colliding vessels or objects are at fault in respect of a collision or contact.

VEGETABLE OILS sdn bhD

15





Reference No.













Signature: (i) ......................................................................................Master Master’s name and signature Or

(ii) HAWK SHIPPING SERVICES (MALAYSIA) SDN BHD. as Agent for the Master Agent’s name and signature Or (iii) ....................................................................................as Agent for the Owner* Agent’s name and signature ..........................................................................................Owner *if option (iii) filled in, state Owner’s name above

16





17





Reference No.














(ii) HAWK SHIPPING SERVICES (MALAYSIA) SDN BHD.as Agent for the Master Agent’s name and signature Or (iii) ....................................................................................as Agent for the Owner* Agent’s name and signature ..........................................................................................Owner *if option (iii) filled in, state Owner’s name above

18





19





Reference No.














(ii) HAWK SHIPPING SERVICES (MALAYSIA) SDN BHD .as Agent for the Master Agent’s name and signature Or (iii) ....................................................................................as Agent for the Owner* Agent’s name and signature ..........................................................................................Owner *if option (iii) filled in, state Owner’s name above

20





21

Aardvark Limited

SALES CONTRACT

Delta Limited Alexander House Lancaster Date 2nd December 2008 WE CONFIRM HAVING SOLD TO YOU: CONTRACT NUMBER: 54028 YOUR REFERENCE: BV-2081482 PRODUCT: Palm Fatty Acid Distillate CONTRACT QUANTITY: 1,600 Metric Tonnes CONTRACT PRICE: GBP 340 Per Metric Ton DELIVERY PERIOD: Delivery January to October 2009 DELIVERY: Delivered Shotton Malindo Production CONTRACT TERMS: FOSFA 91 PAYMENT TERMS: 28 days after date of delivery

22

Aardvark Limited

SALES CONTRACT

Caspian BV 7-15 Love Lane Bromborough Date 20th January 2009 WE CONFIRM HAVING SOLD TO YOU: CONTRACT NUMBER: 01206 YOUR REFERENCE: A/210978 PRODUCT: Palm Fatty Acid Distillate CONTRACT QUANTITY: 3,365 Metric Tonnes CONTRACT PRICE: GBP 418.50 Per Metric Ton DELIVERY PERIOD: Delivery February to August 2009 DELIVERY: Delivered Bromborough CONTRACT TERMS: FOSFA 79 PAYMENT TERMS: 20th day following month.

23

From: Chris Smith [[email protected]] Sent: 25 February 2009 02:32 To: Ben Thompson [[email protected]] Subject: PFAD Dear Ben, Our clients, Aardvark Ltd, have heard of a potential buyer in Southern Italy who would be interested in receiving the cargo for burning. A price of around $325 CIF has been indicated for the whole cargo, subject to specifications. If this interest I real then it would achieve a much greater return for the cargo than burning in the UK, with all the difficulty and expense which that would entail. Are your clients agreeable to our clients investigating this further, or would they prefer to do so themselves? Kind regards, Chris Smith

24

From: Paul Taylor [[email protected]] Sent: 6 March 2009 14:00 To: Mark Wiggins [[email protected]] Subject: PFAD contracts Dear Sirs, We have finally received your cargo insurance policy. It appears from this that contrary to the terms of our sales contract, the policy is not an agreed value policy for 105% of the invoice vale, but rather than unvalued policy with the insured value limited to its market value on departure plus costs of freight and insurance. It is also subject to German law and our contract requires an insurance policy governed by English law. It is clear that by reason of the piracy the cargo will have no value on arrival in Liverpool. In the circumstances we have no alternative but to accept these breaches of contract as repudiatory breaches of our contract bringing it to an end, which we hereby do. We require immediate repayment of the contract price of USD 2,986,671.38 paid to you on 26th January 2009 together with interest. For your information the vessel was released by the pirates on 13 February and we understand that it is now en route to Liverpool, although PAI, who are the certifying body for FEMAS – the trade assurance scheme under which we are regulated, have confirmed that by reason of the piracy the cargo cannot be used as a food or feed ingredient and also cannot be disposed to any non-food/ feed use due to the risk of by products entering the food/ feed chain. Yours faithfully Paul Taylor

25

From: Mark Wiggins [[email protected]] Sent: 15 March 2009 21:00 To: Paul Taylor [[email protected]] Subject: PFAD contracts Dear Paul, Beatles are not liable for alleged losses that you may have suffered in consequence of the vessel’s delay. Nor for that matter do we believe are insurers, a point that they have made to you previously. The reality here is that the value of the cargo has dropped significantly between the date of contract, shipment and today. The hijack in the Gulf of Aden was wholly unexpected and the sole cause of this protracted voyage. However that is a risk that Aardvark always took. Your message is already a clear notice of an anticipatory breach of contract, which we accept. This allows us to immediately place you in repudiation of this shipment and in default, thereby bringing the contract to an end. We will then be forced to sail the Twilight Trader elsewhere and dispose of the cargo in mitigation of our losses. Those losses will then be claimed from you and we will be taking steps to secure those claims by way of attachment. Kind regards, Mark

26

From: Paul Taylor [[email protected]] Sent: 16 March 2009 15:20 To: Mark Wiggins [[email protected]] Subject: PFAD contracts Dear Mark, I was extremely disappointed to receive your message. You have no answer to the PAI ruling that this cargo cannot now be used in the feed/ food chain, which all in the business know is simply the obvious application of the precautionary principle and the imperatives of traceability, in an industry which has suffered hugely from a series of unlikely contamination disasters, including BSE. In breach of contract you are insisting that we take delivery of cargo which you know is not GMQ and can never be. We have made it clear from the outset, whilst reserving our rights, that we did not consider that the cargo should be sent to Liverpool where it would have no value. We have also made it clear however that this is a decision for you as cargo owners and charterers to make. The position needs to be crystallised so that proper mitigating steps can be taken. Accordingly, and with regret we hereby accept your messages and the whole of your conduct as repudiatory and/or renunciatory breach of contract bringing it to an end. You know full well that better alternative destinations for the cargo are the bio energy buyers that we identified for you in Italy or you have found in Spain or Holland, who are able to burn the cargo and realise a higher value. All our rights are reserved. Regards, Paul

27

From: Mark Wiggins [[email protected]] Sent: 16 March 2009 18:19 To: Paul Taylor [[email protected]] Subject: PFAD contracts Dear Paul, Thank you for your message purporting to terminate the contract on the basis of an alleged repudiation by ourselves. For the avoidance of doubt that contention is rejected. We are not in anticipatory repudiatory breach of contract or in renunciation of it at all. To the contrary, the totality of your conduct to date, including your purported termination, clearly evinces an intention by you that you do not intend to be bound by the terms of the contract for the shipment of the Twilight Tanker and places you in repudiatory/ renunciatory breach of it. We hereby accept that conduct/ repudiation/ renunciation as bringing the contract for the Twilight Tanker shipment to an end. We will not now sail to Liverpool. She will, in mitigation of our losses, now sail elsewhere where we hope find a buyer for the full cargo (i.e. 14,500 mt). You have abandoned your rights in relation to the 4,000 mt of cargo you bought from us. Kind regards, Mark

28

From: Paul Taylor [[email protected]] Sent: 17 March 2009 14:22 To: Mark Wiggins [[email protected]] Subject: PFAD contracts Dear Mark, We have received the bills of lading for the cargo but have not heard from you how you wish to proceed with the disposal of the above cargo. We have already paid for it and we may have to dispose of it on your behalf. Can you please assist us by providing us with the full details of your proposed sales and the destination of the other remaining Beatles material on the Twilight Trader. Kind regards, Paul

29

From: Mark Wiggins [[email protected]] Sent: 17 March 2009 18:30 To: Paul Taylor [[email protected]] Subject: PFAD contracts Thank you for your message. In mitigation we intend to ask Owners, Twilight Carriers, to take this cargo to Rotterdam where we are arranging for it (and other cargo) to be sold. In order to do this we need the bills of lading from you. Please send us the bills asap. Mark

30

From: Paul Taylor [[email protected]] Sent: 18 March 2009 11:00 To: Mark Wiggins [[email protected]] Subject: PFAD contracts Mark, Please advise where you want the bills lading sending. Paul

31

From: Mark Wiggins [[email protected]] Sent: 18 March 2009 15:19 To: Paul Taylor [[email protected]] Subject: PFAD contracts Paul, Please forward the original bills of lading to our office by courier today advising us at the same time of the courier number to allow us to track the package. Mark

32

From: Paul Taylor [[email protected]] Sent: 18 March 2009 16:01 To: Mark Wiggins [[email protected]] Subject: PFAD contracts Mark, Because you have not agreed to refund us the purchase price of the cargo we have couriered the bills to Johnson & Johnson in Rotterdam for them to make available when the vessel arrives (and when you have provided the return of the purchase price) Paul

33

From: Mark Wiggins [[email protected]] Sent: 20 March 2009 12:30 To: Paul Taylor [[email protected]] Subject: PFAD contracts Paul, You made your position quite clear. You have abandoned the cargo and you are no longer the legal holder of the bills of lading in respect of it. You have no entitlement to give Owners orders in respect of the cargo. You have been asked to surrender the bills of lading and deliver them to us. It is our intention to remove this cargo from the vessel and you should provide the bills to prevent their being any delay to the vessel. In the absence of your positive response within that deadline, then please note that there is storage available in Rotterdam and this cargo will be discharged into that storage pending resolution of issues between us. Mark

34

From: Paul Taylor [[email protected]] Sent: 20 March 2009 16:01 To: Mark Wiggins [[email protected]] Subject: PFAD contracts Mark, We are in dispute with you over the cargo and have placed you in breach of contract. You have refused to accept that you are in breach of contract and this dispute will be pursued through normal FOSFA contractual channels. In the meantime it is our obligation to dispose of the cargo to the best of our means in order to mitigate costs. With your refusal to cooperate with our request to alter the destination of the Bills of Lading in order for us to find the best buyers we shall therefore be obliged to take the cargo in Liverpool as called for by the contract and as specified in the bills of lading. Accordingly, I have asked for our Superintendents to retain the bills of lading so that we may discharge the cargo in Liverpool. Paul

35

Aardvark Limited To Owners of the Twilight Trader 20th March 2009 Re: Twilight Trader – Top Urgent Bills of Lading PG1 to PG4 We are the lawful holders of the above bills of lading. We have a short while ago been put on notice by your charterers Beatles Oils & Fats Ltd that they intend to discharge the above cargo in Rotterdam this afternoon. Please be advised that we have not authorised Itochu to do this and if you comply with their instructions without any authority to do so you will be in breach of the contract of carriage and responsible for all loss and damage we sustain. Regards, Paul Taylor

36

BY FAX

TCB Thomas, Cropper, Benedict

Consulting mariners, engineers & scientists TO: Charterers Inc No: of pages: Date: 18 March 2009 IMPORTANT NOTICE: This fax is confidential and may be covered by legal professional privilege. It must not be read, copied, disclosed or used by any person other than by the above – named addressee. Unauthorised use, disclosure or copying is strictly prohibited and may be unlawful. If you have received this fax in error please contact us immediately. Re: mv TWILIGHT TRADER – Analysis In accordance with your instructions we have analysed the samples drawn by SGS on our behalf from the above vessel’s tanks off Fujairah on 25th February 2009. We now report as follows: 1. The samples drawn

4 x 1 litre skim top and 4 x 1 litre running samples were drawn from each of the vessel’s tanks by SGS. One set of samples drawn was handed to each participating party, and the TCB samples were subsequently despatched by SGS to the TCB laboratory in Swansea for analysis.

2. The analysis undertaken We had been instructed to perform certain key FOSFA test to verify the product quality and to establish whether there was any evidence of contamination. 3. The FOSFA analysis The specified FOSAFA tests were undertaken on a gravimetric composite of vessel’s running samples for each of the grades loaded at the various loadports. The results were as follows: PFAD 1: samples ex tanks 2 P/S, 7 P?S SLP P/S FFA content: 81.1% as palmitic acid Insoluble impurities 0.01% Moisture/ volatiles: 0.88% Unsaponifiable matter: 2.06% TSM content 97.17%

37

Flash point greater than 200oC PFAD 2: samples ex tanks 1 P/S, 3 P/S ,6 P/S FFA content: 86.8% as palmitic acid Insoluble impurities 0.04% Moisture/ volatiles: 0.63% Unsaponifiable matter: 1.82% TSM content 97.4% Flash point greater than 200oC The above results are within normal limits and do not give any indication of significant contamination or deterioration in the cargo quality. However it is important to note that the running samples drawn may not have been fully representative of the total tank contents, so the above results may not properly represent the overall quality of the cargo. Further, it is possible that the quality of the cargo will be/ has been affected by the solidification and re-heating that has arisen in this matter. This will only become apparent if the cargo is sampled and analysed at the discharge port. 4. The contamination analysis The skim top samples drawn from the cargo surface of each vessel’s tank were tested for the presence of contaminates. The GC analysis found no apparent evidence of organic contaminates in the cargo, However, the ICP analysis indicated relatively high levels of arsenic in the skim top samples drawn from tanks 3 P&S and 7 P&S. The results obtained were confirmed both by repeat analysis on these samples and also by separate analysis on the water extracts from the relevant running samples. The arsenic levels found in tanks 3 P&S and 7 P&S are below the UK maximum legal limits for foodstuffs. Therefore, based upon the arsenic result alone, the cargo would remain suitable for use in the human food chain. However, such levels are around 50 times higher than those for the remainder of the tanks, which suggests that there was some contamination evidence to those particular samples. We do not consider it likely that the contamination could have arisen during the sampling process. Furthermore there does not appear to have been any significant differences between the vessel’s preparations of tanks 3 P&S and 7 P&S and any other thanks on the vessel as all these tanks were passivated with nitric acid prior to loading. This process should have removed any arsenic that may have been present. Therefore there remains the possibility that arsenic (or material containing arsenic) was introduced into the tanks during the period of captivity off Somalia. In this regard, the vessel’s Master and Chief Officer reported that his crew members did not observe any attempts to access the cargo during the period of capacity, although they added that the tank opening were only ovserved periodically from the bridge. Therefore based on the available evidence, we are unable to discount the possibility that there was some unauthorized access to the cargo during the period of captivity.

38

For Thomas, Cropper & Benedict

W.H. Cropper

39

Aspinall Lewis International

MT TWILIGHT TRADER

Inspection of the Cargo of Palm Oil After Hijacking at Somalia November 2008 – February 2009

19 March 2009

Incident Investigation & Claims Analysis, Food & Agricultural Products, Marine & Shipping

40

INTRODUCTION 1.1 Terms of Reference

1.1.1 Aspinall Lewis International was instructed by Aardvark Ltd, the receivers of a

cargo of approximately 18,493.217 mt of Crude Palm Oil (CPO) and Palm Fatty Acid Distillate (PFAD) carried by the MT TWILIGHT TRADER to attend the vessel after she was released from hijacking in Somalia to investigate the circumstances under which the cargo was kept during the hijacking period and the condition of the cargo upon release.

1.1.2 The author of this report is Julia Mynott of Aspinall Lewis International. She is a

Master Mariner with tanker and vegetable oil experience. 1.1.3 Julia Mynott attended the ship after the ship had arrived in Fujairah. On 22

February I arrived in Fujairah. In the afternoon there was a brief session whereby the attending cargo surveyors, acting for the cargo receivers, the cargo underwriters, the charterers and the owners’ P&I Club could question the Master and Chief Officer who were on board during the hijacking, with regard to the cargo. On 23 and 25 February, I attended on board the vessel to obtain documents, inspect the vessel with regard to the cargo and inspect the cargo in her 22 tanks.

1.2 Background 1.2.1 The TWILIGHT TRADER had loaded a full cargo of 3,994.516 mt of Palm Fatty

Acid Distillate (“PFAD”) at Pasir Gudang (Malaysia), 4,999.282 mt of PFAD and 9,449.419 mt of Crude Palm Oil (“CPO”) at Dumai (Indonesia) in all her tanks, 1-10 port and starboard and in the port and starboard slop tanks, in total in 22 tanks. After completion of loading she sailed from Dumai on 5 November 2008 and proceeded to Liverpool, where she had to discharge the cargo, via the Gulf of Aden and the Suez Canal. The vessel’s crew had received carrying instructions for heating the cargo during the voyage and heating up the cargo in the last week prior to arrival.

1.2.2 At 0742 on 14 November 2008 the vessel passed the line 54o East Longitude

which is the entrance to the Gulf of Aden, north of the Island of Socotra and commenced anti-pirate watch. At 1250 hrs on 15 November 2008 the vessel was boarded by Somali pirates and was ordered by the pirates to sail to the Somali coast where the vessel and the vessel’s crew was held hostage until she was released on 12 February 2009. No details were obtained as to the exact position of the vessel during this period. At about noon on 13 February 2009 the last pirate left the ship and the MT TWILIGHT TRADER proceeded to Fujairah (UAE) where she arrived and dropped anchor in the roads at 1426 hrs on 21 February 2009 A new crew boarded the vessel at 1600 hrs and at 1730 hrs, all on the same day, the old crew was disembarked

1.2.3 Between 1525 and 1545 hrs on 22 February the surveyors, including Julia

Mynott, were allowed to debrief the Master and Chief Officer with regard to the care of the cargo during the hijacking period.

41

1.2.4 Having spoken to the Master and Chief Officer the following was ascertained:

• There was no heating applied to the cargo during the period of captivity nor during the subsequent voyage to Fujairah.

• There were no daily records of cargo temperature recorded during the period of captivity.

• The vessel’s crew were mostly confined to the bridge. A permanent lookout over the deck was not maintained, but the vessel’s position was verified at intervals not exceeding 1 hour during which time the deck area could be observed. The deck was illuminated at night.

• Part of the vessel’s crew were allowed onto the deck on occasions to attend to the anchor in periods of heavy weather.

• The Master and Chief Officer stated that they did not observe any broaching of the cargo tanks during the period of captivity.

• Whilst on passage to Fujairah, the Master & Chief Officer, accompanied by the Bosun, 1 AB seamen, 2 ordinary seaman and the deck trainee opened the cargo hatch to each cargo tank. The Master and Chief Officer reported that there was no visible sign of the hatches having been opened, and that in their view, the corrosion present indicated that the hatches had not been opened during the period of captivity.

1.2.5 The Master and Chief Officer told us that once anchored somewhere, most

likely near the Somali coast, the entire crew of 23 men was confined all 24 hours per day to the bridge, except for meals in the mess room. They lived in the clothes they had on with one blanket on the bridge where they were only allowed to sit or lie and not allowed to stand or look outside. At times there were some 30 pirates on board who lived in the crew accommodation. I understand from the Master that the number of pirates varied and that there was communication by boat from and to the shore.

1.2.6 During captivity no maintenance or inspections on deck were allowed

whatsoever. A team of two engineers was only allowed to maintain the auxiliary engine in the engine room and keep it running.

2.0 SAMPLING 2.1 On 25 February 2009 the surveyors attended on board in the presence of SGS personnel. Between 1030 and 2200 hrs all tanks were sampled by SGS in the presence of the surveyors. SGS used a stainless steel sampler. Samples were taken from the tank entrance hatch. Prior to sampling the sampler and the buckets used for the sampling were thoroughly cleaned. A clean rope was used to lower the sampler. The samplers wrote rubber gloves. Care was taken during the whole operation from taking the samples to filing the plastic sample bottles that the cargo could not be contaminated.

42

2.2 From each tank one sample was drawn from the upper layer and one running sample from top to bottom of the liquid phase above the solidified cargo. The two samples taken from each tank were separately split into 5 similar copies of the sample into 5 new and clean plastic bottles, to be closed with an inner seal and a screw cap. In total 2x5 samples per tank for 22 tanks is 220 samples were taken. 3. DISCUSSION AND COMMENT 3.1 Although I have seen no evidence that the tanks at any location were opened and cargo was taken out or something dropped into the cargo it is without any doubt that the tanks could have been opened (and closed) at any stage of the 3 months of capticity while the pirates, at times as many as 30 pirates, were in charge of the vessel. 4. STATEMENT 4.1 The facts within this report are within my own direct knowledge and have been identified as such and are true. 4.2 the opinions expressed within this report represent my true professional opinions. Julia Mynott Associate Director Aspinall Lewis International LLP

43

<iAnnotate iPad User>

Pencil

- PARADOX BANK - BY COURIER Aardvark Ltd Aardvark House The High Street Bootle Merseyside Amsterdam, April 3, 2009 Re: bank guarantee No. 478 in favour of Aardvark Ltd for USD 1,400,000 Upon instructions given by our principals we have issued above mentioned guarantee. Please find attached our original guarantee plus two copies. Please acknowledge receipt Yours faithfully Paradox Bank

44


Pencil

ROTTERDAM GUARANTEE FORM 2008

GUARANTEE NO. 210978 The undersigned, PARADOX BANK of AMSTERDAM, THE NETHERLANDS, waiving and renouncing all rights and defences conferred on guarantors, and in particular the provisions of the articles 7:852 and 7:855 Dutch Civil Code, hereby irrevocably declares to bind itself as surety to and in favour of Aardvark Ltd with its registered office Aardvark House, The High Street, Bootle, Merseyside (“the Creditor”) by way of security for the true and proper payment by Beatles Oils & Fats Ltd with its registered office at 23 Fleet Street, London, EC4Y 1AU(“the Principal Debtor”) of the amount the Principal Debtor may be found to be indebted to the Creditor by virtue of a judgment rendered against the Principal Debtor by a competent court of law having jurisdiction in the matter hereinafter mentioned, or by virtue of a valid arbitration award which is not or no longer subject to appeal or by virtue of an amicable settlement between the parties, in respect of the principal amount, interest and costs of suit relating to a claim at present estimated by the Creditor at USD 2.9 million for the breach of conditions under the Bills of Lading with numbers PG1 to PG4 dated 25 October regarding delivery of in total 3994.516 mt PFAD. This guarantee is hereby given without any prejudice and for a maximum amount of USD 1,400,000 for the purpose of the release from and/or the prevention of a prejudgment attachment of the mt “TWILIGHT TRADER” on account of the above mentioned claims. This guarantee is governed by the law of the Netherlands. The undersigned and the Creditor submit to the non-exclusive jurisdiction of the competent court of law in Rotterdam fir disputes and claims in respect of this guarantee. Issued in Amsterdam 3 April 2009.

45

D&F BROKERS LTD

COMMODITY BROKERS AND SHIPPERS FOR VEGETABLE OIL AND FATS Aardvark Ltd Aardvark House The High Street Bootle Merseyside Date: 16 April 2009 SALES NOTE No. 0164 We have this day sold to you: Description: About 7,000 M. Tonnes Palm Fatty Acid Distillate Quality: Tel Quel. Price: USD 522.50 per MT Packing: In bulk Parity: Ex tank Liverpool. Shipment/ Delivery: 24th April – 5th June 2009 Payment: Nett cash against invoice before release. Goods to be released immediately after funds received at Seller’s bank or copy of Swift payment from Buyer’s bank to confirm payment made, whichever the earlier. Other terms: As per FOSFA 79 All goods remain the property of D&F Brokers Ltd until paid in full. Collection at Buyer’s call not later than: 1,000 MT each: 24th April 2009, 1st May 2009, 8th May 2009, 15th May 2009, 22nd May 2009, 29th May 2009, 5th June 2009.

46

D&F BROKERS LTD

COMMODITY BROKERS AND SHIPPERS FOR VEGETABLE OIL AND FATS Aardvark Ltd Aardvark House The High Street Bootle Merseyside Date: 7 May 2009 SALES NOTE No. 0178 We have this day sold to you: Description: About 4,000 M. Tonnes Palm Fatty Acid Distillate Quality: Tel Quel. Price: USD 627.50 per MT Packing: In bulk Parity: Ex tank Liverpool. Shipment/ Delivery: June/ July 2009 delivery. Payment: Nett cash against invoice before release. Goods to be released immediately after funds received at Seller’s bank or copy of Swift payment from Buyer’s bank to confirm payment made, whichever the earlier. Other terms: As per FOSFA 79 All goods remain the property of D&F Brokers Ltd until paid in full. Buyer anticipates to take equal quantities over the contract period, but subject to their requirements.

47

SURVEYS INC We, SURVEYS INC, Average Agents and Marine Surveyors at Rotterdam. The Netherlands having on 7 April 2009 been requested by INSURANCE CO PLC to survey and report on the nature, extent and circumstances regarding the consignments of PFAD: 3,994.516 mton PFAD: 4,999.282 mton 9,499.419 mton herewith certify that we have been appointed our own staff surveyor Mr. S Hosking and cab report as follows: TRANSPORT DETAILS Conveyance: mt TWILIGHT TRADER From/ to: Pasir Gudand and Dumai, Indonesia to Merseryside UK Re-directed to: Rotterdam, where arrived 20 March 2009 PARTIES Shippers/ Sellers: Unknown, Indonesia Consignees: Beatles Oils & Fats Ltd Carriers: Gamma Navigation, Panama Storage Terminal: Vopak Terminal, Vlaardingen BV CIRCUMSTANCES Application for survey was made in connection with possible quality issues, as supposed result of the hijack of the vessel between 15 November 2008 and 13 February 2009, by Somali pirates in the Gulf of Eden. DATE AND PLACE OF SURVEY Initial survey was held at the Vopak Terminal Vlaardingen BV on or about 20 March 2009. STOWAGE IN SHIP’s TANK HOLD Subject consignments in bulk were stowed in the following ships tanks: PFAD – 3,994.516 mton ship tanks 2 P/S, 7 P/S, SL P/S PFAD 4,999.282 mton ship tanks 1 p/s, 3 p/s, 6 p/s CPO 9,499.419 mton ship tanks 4 P/S, 5 P/S, 8 P/S, 9 P/S, 10 P/S STEPS TAKEN/ ASSESSMENT OF DAMAGE We learned that as a supposed result of the hijack and fear of deterioration of the product(s) the initial buyer in Liverpool, UK rejected the consignments. For this reason the consignee and trader [insert] re-directed the vessel to Rotterdam. Here the vessel discharge the majority of the VegOils into their own tanks at Vopak

48


FreeText

Terminal. Reportedly part of the consignment was transhipped into the mt “TANKER 1” for secondary buyers [insert] in Stockholm. SOUND MARKET VALUE OF THE AFFECTED GOODS PFAD values were received on a FOB Malaysia basis: USD 465/mton (Sep/Oct) – Oct/Nov USD 335/mton – Nov/Dec USD 320/mt – Dec/Jan USD 335/mton – Jan/Feb USD 325/mton – Feb/Mar USD 325/mton – Mar/Apr USD 360/mton. For CIF Rotterdam value add USD 65 to 70/mton. Public Ledger states an average value in March 2009 of USD 603/mton and in November 2008 of USD 548.63/mton on basis of FOSFA 80 contract. This report is based on the facts presently known to us and is submitted without prejudice to the rights of whom it may concern. All our findings and comments are subject to the underlying insurance policy conditions, if applicable. The right to amend or supplement this report at any time is reserved. 9 June 2009

SURVEYS INC

49

DUTCH SURVEYORS B.V EXPERTS - CARGO SURVEYORS - INTERNATIONAL LOSS ADJUSTERS

Dear Mr. Taylor, Re: Inquiries regarding the value of Palm Fatty Acid Distillate (PFAD) and regarding the quality of the product during transport/storage under various conditions. Your ref: unknown. Our ref: 14782.079/WS/EB. We refer to your esteemed instructions of 3rd July 2009. We, Dutch Surveyors B.V., surveyors loss adjusters at Rotterdam have already more than 40 years evidence in the handling of cargo damages, amongst which in vegetable oils and related products. In these matters we acted on behalf of cargo interest, (liability) underwriters and storekeepers. For example, we are dedicated surveyors for Vopak, one of the largest storekeepers for liquids, including vegetable oils and related products. Our surveyor, Mr. William Smit, is already working more than 20 years for our company. It was learned that a consignment of PFAD, which was loaded on board of a sea vessel in Malaysia in October 2008, was finally discharged at Rotterdam in March 2009. The arrival of the cargo was seriously delayed since the concerning vessel had been hijacked off the coast of Somalia. The subject cargo is stored in a shoretank at Rotterdam since March 2009. Considering the circumstances the cargo was exposed to, including transit and storage during 8 months under fluctuating storage temperatures, it was questioned how long the cargo will remain of good merchantable quality. Palm fatty acid distillate is a by-product of the palm oil refining process. It is a light brown solid at room temperature, melting to a brown liquid on heating. It has a high free fatty acid level and a PH range between 1.5 and 7. Recommended product temperatures are in range of 42°C / 50°C during storage and transit and between 55°C and 70°C during unloading and transfer. We made enquiries with laboratories, storekeepers and traders and learned somewhat contradictory information. Naturally pfad will age and oxidize as any other vegetable product. However, at what point the product then should be considered as of not merchantable quality anymore remained unknown and is also depending on the use. In general, the oxidation level of a vegetable product (oil) and it tendency to get (more) rancid is depending on the number of peroxides present in the product. Insaturated free fatty acids in the product react with oxygen and form peroxides, which determine a series of chain reactions that generate the production of volatile substances that bring the typical rancid off smell. Those reactions are accelerated by high temperature and by light and by oxygen exposure. In particular it was questioned whether PFAD, which could have a low PH, should be regarded as vegetable product (oil) with could get more rancid, since it is already quite acid and mainly consisting of free fatty acids. Except for P, for which there is a wide range, there are no clear guidelines/specifications as to the keeping qualities of this product. At present the product is stored in unheated condition in a shoretank with air above the product, under which condition the product is solid and the aforementioned oxidation reactions will only develop slowly.

50

Storekeepers indicated to have records about parcels of unheated pfad which were stored in tank for about a year. In case the product is heated and/or exposed to fluctuating temperatures, in general, aging and oxidation will take place much quicker. The extent and speed of these oxidation reactions can not be forecasted at all and is strongly depending on the quality of the product and its history. In general it can be said that any handling such as transfer and heating to the required temperature will affect the quality of the oil/product in the end. In this matter the product was heated and cooled down for several times and therefore it is likely that the quality of the product has suffered from these handlings to some extent. As mentioned before, it cannot be indicated to what extend, since this is depending on various factors. Palm fatty acid distillate is a commodity, the value of which is depending on world supply and demand. To give you an idea we have listed the sound market value of the product, as published “The Public Ledger”, which reports on world commodities on a weekly basis. We noted the following prices over 2009 on a basis Free on board Malaysia ports (A) resp. Cost and Freight Merseyside (UK) (B), both in USD per mton on the following dates: Date (A) (B) 12/01 360.00 435.00 19/01 365.00 435.00 26/01 345.00 435.00 02/02 330.00 440.00 09/02 335.00 440.00 16/02 340.00 440.00 23/02 320.00 440.00 02/03 325.00 440.00 09/03 330.00 440.00 16/03 340.00 440.00 23/03 340.00 440.00 30/03 360.00 430.00 06/04 370.00 360.00 13/04 405.00 360.00 20/04 485.00 535.00 27/04 485.00 535.00 04/05 505.00 580.00 11/05 565.00 580.00 18/05 575.00 650.00 25/05 560.00 650.00 01/06 565.00 650.00 08/06 570.00 650.00 15/06 540.00 650.00 22/06 510.00 635.00 29/06 490.00 635.00 According to these quotations, the sound market value for the product is fluctuating and at present considerably higher that earlier this year.

51

For our intervention and further outlays we take the liberty to debit your account as per enclosed debit-note. In the meantime we remain, Yours faithfully, Dutch Surveyors BV

52


Pencil

AGREED STATEMENT OF FACTS FOR THE ARBITRATION RE: THE DUTCH

PROCEEDINGS AND SALE OF THE CARGO

It is agreed by the parties to the arbitration that the following is an accurate statement of facts as to the Dutch proceedings.

1. Between 20 and 22 March 2009 the Owners discharged the cargo to Beatles against a letter

of indemnity. The cargo was put into storage at Rotterdam port.

2. The letter of indemnity materially provided as follows:

“Bills of lading PG1 to PG4 … The above cargo was shipped on the MT Twilight Trader by

Vegetable Oils Sdn Bhd and signed to ORDER with notifying to Beatles Oils & Fats for delivery at

the port of Liverpool, Merseyside, UK. We, Beatles Oils & Fats Ltd, hereby request you to deliver

the said cargo at Rotterdam, The Netherlands without production of the original bills of lading.

In consideration of your complying with our above request, we hereby agree as follows:

1. To indemnity you, your servants and agents and to hold all of you harmless in respect of any

liability, loss, damage or expense of whatsoever nature which you may sustain by reason of

delivering the cargo in accordance with our request.

2. In the event of proceedings being commenced against you or any of your servants or agents in

connection with the delivery of the cargo as aforesaid, to provide you or them on demand with

sufficient funds to defend the same.

… This indemnity shall be governed by and construed in accordance with English law and each

and every person liable under this indemnity shall at your request submit to the jurisdiction of

the High Court of Justice of England.

…”

3. On 23 March 2009 Beatles brought a petition to garnish property before judgment as well

as to attach moveable goods. Aardvark was a defendant to those proceedings.

53

4. Aardvark made an application in the Dutch Court to arrest the Vessel and the Vessel was

arrested on 23 March 2009. On 27 March 2009 the Rotterdam Court ordered that the arrest

could be lifted in return for the Owners (Twilight Carriers) (or Beatles on behalf of the

Owners) providing security of USD 1.4 million. This figure was based on the Court’s

assessment of the value of the cargo as having a value of USD 1.2 million “During the

session, the interlocutory judge (re)assessed the loss at the value which the palm oil in question

would have had if it had been sold as lamp oil. During the session, the interlocutory court gave the

parties the opportunity to make comments in this context and set the loss at USD 1.2 million and

that taking into account interest and costs “Aardvark’s claim against [Owners] shall therefore,

taking into account interest and costs be estimated at USD 1.4 million” . On 3 April 2009 a

Guarantee was issued by the Bank of Tokyo-Mitsubishi UFJ (Holland) NV in the sum of

USD 1.4 million (a copy of the guarantee is in the trial bundle).

5. On 23 May 2009 Beatles issued an application for an order for sale.

6. On 15 July 2009 a hearing took place before the District Court of Rotterdam and by a

judgment handed down on or about 24 July 2009 the Court upheld the arrest and granted

an order for sale. Aardvark brought an appeal by writ on 21 August 2009 to suspend

enforcement of the sale but they were unsuccessful.

7. By a contract of sale dated 25 August 2009 Beatles sold to A B Buyers the cargo for USD

1,695,752.38 and the proceeds are currently held with the Dutch Court.

8. The Dutch courts awarded the following costs:

(1) In a judgment dated 24 July 2009 the District Court of Rotterdam ordered at

paragraph 5.5 that Aardvark should pay the costs of this procedure since its claim

has been rejected. It then assessed the costs at Euro 262 for disbursements and

Euro 816 for legal fees.

54

(2) In relation to the sale of the goods the Court ordered that there be no costs

awarded because it was not “not opportune in this procedure, also taking account of the

order of costs in the injunction proceedings related to this application proceedings”.

(3) In relation to the appeal the Court of Appeal ordered that Aardvark pay the costs

of the proceedings in the cross appeal estimated on the side of Owners at Euro

1341 in lawyer’s fees and on the side of Itochu to date at Euro 1341 in lawyer’s

fees. The Court also ordered that Itochu paid the costs of appeal to Owners and

Aardvark and assessed the costs due to Aardvark to be Euro 313 in court fees and

Euro 2682 in lawyer’s fees.

(4) There is a further order of the Court of Appeal which provides that the contested

judgment of the interlocutory court will be upheld and as the unsuccessful party

Aardvark will be ordered to pay Beatles costs of the appeal proceedings which

were assessed at Euro 313 in disbursements and Euro 2682 in lawyer’s fees.

9. Aardvark have provided copies of invoices showing that they have incurred the following

(although there is no evidence that they have been paid):

(1) Dutch Court fees of USD 138,843.14; and

(2) English solicitors fees in support of the Dutch proceedings (i.e. the fees of

Reynolds Solicitors) in the sum of USD 107,913.12.

55

SINGLE JOINT EXPERT REPORT

I, Kevin Ackroyd, was jointly instructed by Twilight Carriers and Aardvark Limited to answer

the following specific questions. I was not shown or given any documentation relating to this

dispute.

A. Is the price of PFAD highly variable? If so, how does it vary? How is the price of

PFAD decided?

B. Between 20 and 30 March 2009 was there a market in Liverpool and/or Rotterdam for

4,000 mt PFAD that have been subjected to piracy and thus non GMQ/ not suitable to

enter the human food chain? In other words were there nay buyers out there who would

have bought the non GMQ product?

C. If there was such a market what type of buyer would buy such non G MQ product in

Liverpool and/or Rotterdam and for what uses?

D. Taking into account the types of buyers that would buy this quantity of such non GMQ

PFAD, would the market value of the pirated goods in Liverpool be different to GMW

PFAD and/or would their non GMQ status/ unsuitability to enter the food chain affect

their market value?

E. Would the type of buyer who would purchase this quantity of such non GMQ PFAD

expect to buy it at a discount due to its non GMQ status and would he obtain such a

discount?

F. What was the market value of 4,000 m t of such non G MQ PFAD in Liverpool and

Rotterdam between 20 and 30 March? i.e. what would prospective cif Liverpool buyers

have paid for such material in March/ April 2009 and what would prospective cif

Rotterdam buyers have paid for such material in March/ April 2009?

1. I am 53 years old and have been a broker for 25 years, specialising in tropical oils. In this

time I have sourced Crude Palm Oil and Palm Fatty Acid Distillate from the Far East into

56

Europe. My customers have included Animal Feed Fat Blenders, Food Refineries, Soap

Manufacturers, Oleochemical Splitters and Biofuel Burners.

2. I confirm that in so far as the facts stated in this report are within my knowledge I have

made clear which they are and I believe them to be true and that the opinions I have

expressed represent my true and complete professional opinion. I understand my duty to the

Court to give impartial and honest advice within my expertise. I have complied with and

will continue to comply with that duty.

3. Taking each question in turn my answers are as follows:

A. The price of PFAD is broadly linked to its parent material Crude Palm Oil (“CPO”).

PFAD is the acid faction removed from CPO during the refining process and usually

constitutes about 5% of the Crude Palm. Historically it was considered a waste product

and was usually bought by the Oleochemical industry to produce distilled Fatty Acids.

But during the 1970s it began to be used as a constituent in blended feed fats for

animals. It has also been used for many years to produce low grade soaps. M ore

recently (early 200s) Biofuel companies have bought it as an extender/ cheapener for

burning.

Each of these uses has an influence on the price paid for PFAD. As a very rough

calculation PFAD usually trades as a percentage of the price of CPO. This range has

varied greatly in the past ten years between 80 and 95% of the CPO price. It is

important however to recognise that due to EU legislation in the past 20 years PFAD for

Animal Feed had a number of quality restrictions. T hese included heavy metal and

Dioxin limits along with traceability. If parcels of PFAD from the Far East failed these

tests then it would be downgraded to technical use only i.e. soap, oleo or burning.

PFAD does not require any additives or other intervention by the vessels crew to

prevent it becoming unstable or unusable.

B. Yes. There has always been a market for non GMQ PFAD in the UK and so there were

buyers who would have bought such product at the end of March 2009. There is also a

market for non GMQ PFAD in Europe (which the technical grade is in fact also

57

produced). In the European market (which is mainly in Holland, Spain and Italy) the

non GMQ PFAD which is produced retails at about 60-70% of the price of GMQ

PFAD.

C. During 2009 this ongoing interest in Liverpool for non GMQ PFAD would have come

from the Oleochemical and low grade soap trade. In Rotterdam the interest would have

come from the Oleochemical and bio-fuels industry.

D. Pirated PFAD would have lost its traceability and consequently not have been

acceptable to the animal feed trade but this would not have affected the price that the

Oleochemical and low grade soap trade (technical use buyers) would have paid for the

goods in Liverpool. The price for non GMQ PFAD in the rest of Europe is about 60-

70% of the price of GMQ PFAD.

E. Generally as a technical buyer they would be comparing the PFAD price against other

commodities, they would not normally expect a discount in Liverpool due to the

product’s non G MQ feed status (whereas they would expect a discount due to the

product’s non GMQ feed status in the rest of Europe). A technical buyer would still

have expected the PFAD he was buying to meet his own standard PFAD specifications.

F. As far as I can remember from looking at my diary for March and April 2009 there was

only GMQ PFAD available on the open market in Liverpool. If there were also non

GMQ product available I would have normally have expected UK technical buyers to

buy it at the same price as the GMQ product. The PFAD available in March/ April

2009 was as follows (I have simply called the companies Company A, B etc so as to

preserve confidentiality):

- On 24th March 2009 company A offered 500mt FOT Rotterdam at Euro 350 per

mt, approximately USD 475 per mt.

- Company B offered 500mt at Euro 345 per mt FOB Rotterdam, approximately

USD 468 per mt

- Company C offered 500mt at USD 650 FOB Rotterdam

- On 25th March saw offer at USD 440 CIF Rotterdam for a ship loading in Far

East 1st to 10th April 2009

58

- Traded 1,000 m t on 25 M arch Company A to Ardvark Ltd at Euro 345 FOB

Rotterdam, approximately USD 465 per mt.

As the above mentioned cargoes were in Rotterdam a cif buyer in Liverpool would have had to

ship the goods to Liverpool. Freight indication on 25th March for vessels was at Euro 37.50 per

mt loading 2nd to 5th April in Rotterdam (approx USD 50 per mt). There would be insurance at

approximately USD 1.3 per mt to bring the cargo from Rotterdam to Liverpool. Thus the total

cif Liverpool price is about USD 517 per mt.

An alternative means of transporting the goods to Liverpool would have been road tank cars.

These would have charging approximately £40 per mt haulage during 2009 (about USD 58 per

mt). However as there are limited hauliers available, it would be extremely difficult and incur

heavy premiums to transport more than 200mt per week by this method.

As PFAD is not a daily market, the next offers I saw were on Thursday 2nd April

- Company D offered 800 mt PFAD FOB Amsterdam at Euro 365 per mt (about

USD 485 per mt)

- Company E offered 750 mt PFAD FOB Rotterdam at Euro 395 per mt (about

USD 525 per mt).

Signed

Kevin Ackroyd

29/10/2012

59


Pencil

Caspian BV 7-15 Love Lane Bromborough 23/11/2009 Dear Paul, Re: PFAD ex TWILIGHT TRADER after release from piracy Further to our conversations earlier this year I confirm that the contracts we had outstanding with Aardvark were for oleochemical manufacture and the nature of our operation at this site where we use Category 2 (inedible) tallow, is such that we were able to guarantee that no by-products from the processing of the PFAD could enter the human food chain. Accordingly we were prepared to take the piracy material provided it tested as perfectly normal for fatty acid purposes which I understand from you it did. Kind regards, Horatio Brigden Purchasing Manager

60


Pencil

Delta Limited Alexander House Lancaster 25th November 2009 Dear Paul, Re: PFAD ex TWILIGHT TRADER after release from piracy Further to our conversations earlier this year I confirm that the contracts we had outstanding with Aardvark were for industrial soap manufacture and the nature of that operation at this site, where we use inedible UK tallow, is such that we were able to guarantee that no by-products from the processing of the PFAD could enter the human food chain. Accordingly we were prepared to take the piracy material provided it tested as perfectly normal for fatty acid purposes which I understand from you it did. Kind regards, Geronimo McKegney Purchasing Manager

61


Pencil

Dear Twilight Carriers, Re: Freight rates and PFAD prices I am told that you have asked Beatles Oils & Fats to provide you with any factual information available on:

1. The applicable freight rate from Rotterdam to Liverpool during March 2009; and

2. The price of GMQ PFAD during the period March to August 2009. Beatles Oils & Fats has passed on your request to me. I am a consultant employed by Beatles. I have made some enquiries and set out the information I have received below. I provide the information to you as I received it. I am not able to verify the accuracy of the information myself although I have no reason to doubt its accuracy. Freight Rates I contacted RJH Shipbrokers Ltd to enquire about freight rates for March 2009. They estimated that 4,000 mt palm products Rotterdam to Mersey would have achieved a freight rate between Euro 24-28 per mt in March 2009. I also contacted CBC chartering. They estimated the rate in March 2009 for a voyage from Rotterdam to Mersey would be in the region of USD 30-32 per mt. I was Beatles’ trade representative at a FOSFA arbitration relating to sale contracts related to PFAD on board the Chemstar Venus and the freight rate used in the arbitration for a journey from Rotterdam to Mersey in March 2009 was USD 30 per mt. PFAD Prices I asked Pro Palm to provide me with a copy of their chart and prices for the period requested. The prices are given in USD per mt for Spot plus 2 months forward shipped from Malaysia/ Indonesia to CIF Rotterdam. E nclosed with this letter is a printout of the excel spreadsheet containing this data and the chart depicting it. Kind regards, Mark Wiggins Consultant Beatles Oils & Fats

62


Pencil

2.3.093.3.09

4.3.095.3.09

6.3.099.3.09

10.3.0911.3.09

12.3.0913.3.09

16.3.0917.3.09

18.3.0919.3.09

20.3.0923.3.09

24.3.0925.3.09

26.3.0927.3.09

30.3.0931.3.09

395395

400400

400400.00

420.00415

400405

405410

390390

430435

430425

435430

430430

1.4.092.4.09

3.4.096.4.09

7.4.098.4.09

9.4.0910.4.09

13.4.0914.4.09

15.4.0916.4.09

17.4.0920.4.09

21.04.0922.4.09

23.4.0924.4.09

27.4.0928.4.09

29.4.0930.4.09

440470

470470

455470

490490

520550

550540

560560

560565

565565

575570

575595

1.5.094.5.09

5.5.096.5.09

7.5.098.5.09

11.5.0912.5.09

13.5.0914.5.09

15.5.0918.5.09

19.5.0920.5.09

21.5.0922.5.09

25.5.0926.5.09

27.5.0928.5.09

29.5.09

595595

600630

635635

575640

670670

650640

640645

630630

630630

645645

645

1.6.092.6.09

3.6.094.6.09

5.6.098.6.09

9.6.0910.6.09

11.6.0912.6.09

15.6.0916.6.09

17.06.0918.6.09

19.06.0922.06.09

23.06.0924.06.09

25.06.0929.06.09

30.06.09

650645

630630

620615

615615

610610

600600

600590

590560

560560

560560

555

1.07.092.07.09

3.07.096.07.09

7.07.098.07.09

9.07.0910.07.09

13.07.0914.07.09

15.07.0916.07.09

17.07.0920.07.09

21.07.0922.07.09

23.07.0924.07.09

27.07.0928.07.09

29.07.0930.07.09

31.07.09

565550

540540

520510

510515

515510

520515

520540

505510

525515

515520

515520

540

03.08.0904.08.09

05.08.0906.08.09

07.08.0910.08.09

11.08.0912.08.09

13.08.0914.08.09

17.08.0918.08.09

19.08.0920.08.09

21.08.0924.08.09

25.08.0926.08.09

27.08.0928.08.09

31.08.09

555550

550545

545555

560560

560545

545545

535540

545555

550545

540545

545

Jul-09

Aug-09

CHA

RT DA

TA

Mar-09

Apr-09

May-09

Jun-09

63

Cif PFA

D Prices 2009

300

400

500

600

700

8000

100

200

300

2.3.09

11.3.09

20.3.09

31.3.09

9.4.09

20.4.09

29.4.09

8.5.09

19.5.09

28.5.09

8.6.09

17.06.09

29.06.09

8.07.09

17.07.09

28.07.09

06.08.09

17.08.09

26.08.09

64

IN THE MATTER OF THE ARBITRATION ACT 1996

AND

IN THE MATTER OF AN ARBITRATION

BETWEEN:

AARDVARK LTD

Claimants

And

TWILIGHT CARRIERS

Respondents/ Owners

_____________________________________ CLAIM SUBMISSIONS

______________________________________

1. The Claimants, Aardvark Ltd, are the buyers and receivers of a cargo of 4,000 mt of Palm

Fatty Acid Distillate (PFAD) carried on board the vessel TWILIGHT TRADER (the

vessel) under the following bills of lading:

(1) On 25 October 2008 the Owners issued a Congen Bill of Lading No. PG 1 at Pasir

Gudang, Malaysia for 496.906 mt of PFAD.

(2) On 25 October 2008 the Owners issued a Congen Bill of Lading No. PG 2 at Pasir

Gudang, Malaysia for 500.494 mt of PFAD.

(3) On 25 October 2008 the Owners issued a Congen Bill of Lading No. PG 3 at

Pasir Gudang, Malaysia for 1998.177 mt of PFAD.

(4) On 25 October 2008 the Owners issued a Congen Bill of Lading No. PG 4 at

Pasir Gudang, Malaysia for 999.970 mt of PFAD.

65

2. The Respondents are the Disponent owners of the Vessel (“the Owners”). The Owners

sub chartered the vessel to Beatles Oils & Fats Ltd (“Beatles”) by way of a charterparty

dated 12 September 2008 (“the Charterparty”).

3. The Bills of Lading were all signed by Agents for and on behalf of the Master. All the

Bills of Lading provided for discharge in Liverpool, Merseyside.

4. The contracts of carriage contained in or evidenced by the Bills of Lading incorporated

the Hague-Visby Rules which materially provided at Article III r. 2 that the carrier shall

“properly and carefully load, handle, stow, carry, keep, care for and discharge the goods carried.”

5. The cargo carried under the Bills of Lading was sold to Aardvark by Beatles.

6. A separate cargo of about 14,500 mt of Crude Palm Oil and PFAD (which is not the

subject of these proceedings) was sold by Beatles to another purchaser Ecclestone Oils

and also carried on board the Vessel under different bills of lading.

7. The cargo was sold to Aardvark on CIF Liverpool terms. The contractual delivery port

for both cargoes was therefore Liverpool, UK.

8. The Bills of Lading are on the Congen Form and provide that all terms and conditions,

liberties and exceptions of the Charter Party dated 12 September 2008, including the Law

and Arbitration Clause are herewith incorporated.

9. The Owners were the contractual carriers under the Bills of Lading.

10. While the Vessel was en route to Merseyside it was held off Somalia by Somali pirates

between 15 November 2008 and 13 February 2009.

66

11. Beatles presented the shipping documents for the cargo to Aardvark in or about mid

January 2009. The shipping documents appeared to be in compliance with the

contractual requirements and so the purchase price was paid to Beatles and the Bills of

Lading were endorsed to the Claimants.

12. After receiving Beatles’ insurance policy, on 6 March 2009, Aardvark advised Beatles

that they were in repudiatory breach of the sale contract in failing to insure the cargo

under the agreed terms. Aardvark demanded that Beatles repay the purchase price to

them. On receipt of confirmation that Beatles would repay the purchase price they

intended to arrange for the bills of lading to be returned to Beatles.

13. Following a series of messages (which appear in the accompanying bundle) it became

apparent that Beatles were not going to repay the purchase price. As payers of the

purchase price and holders of the Bills of Lading, Aardvark were therefore established as

the clear legal owners of the cargo and accordingly would have to dispose of the cargo

themselves. Given that the vessel was proceeding to Rotterdam to unload the other

cargo, Aardvark considered selling the cargo to alternative buyers in Rotterdam.

14. Aardvark were also prepared for Beatles to organise a sale on their behalf to the buyers

purchasing the other cargoes, as long as they agreed to transfer the sale proceeds

immediately to Aardvark. However, during this period, it became increasingly clear

that Beatles were actively seeking to obtain security for their claim against Aardvark in

respect of entirely different sales contracts. As a result Aardvark were not prepared to

give Beatles the bills of lading.

15. Beatles wrongly claimed that Aardvark had abandoned the cargo and said that

Aardvark should release the Bills of Lading to them. In a message of 20 March 2009

Beatles refused to change the destination in the Bills of Lading to Rotterdam and said

that Aardvark had no entitlement to give them or the Owners orders in respect of the

Cargo.

67

16. On 20 March 2009 Aardvark wrote to the Owners informing them that they were the

lawful holders of the Bills of Lading. Notwithstanding that notification the Owners

discharged the cargo on or about 20-22 March 2009 to Beatles.

17. Aardvark later discovered that on or about 19 March 2009 Beatles issued letters of

indemnity to the Owners asking them to deliver the cargo to them (i.e. Beatles) at

Rotterdam without production of the bills of lading.

18. On or about 23 March 2009 Beatles arrested the cargo as security for their claims against

Aardvark despite this being prohibited by the FOSFA terms governing sales contracts.

Aardvark tried to set aside the arrest of the Cargo in the Rotterdam Courts, but failed at

first instance. Beatles then obtained permission from the Dutch Court for the Cargo to

be sold. This sale has now taken place and, as ordered, by the Dutch Court, the proceeds

are held in the Dutch Court account, pending a decision in the London arbitration.

19. The Court of Rotterdam rejected Aardvark’s appeal to set aside the arrest of the cargo.

On 23 March 2009 Aardvark arrested the Vessel in Rotterdam as security for their claims

for damages against the Owners for delivery of the cargo in Rotterdam without

production of the Bills of Lading the sum of Euros 2,375,000. The Vessel was released

against security provided by Beatles on behalf of the Owners.

20. The Owners appealed against the arrest of the Vessel. The Dutch Court of appeal

maintained the arrest.

21. For the reasons given above Aardvark claim damages against the Owners for breach of

their duties under the Bills of Lading and/or in the tort of conversion.

PARTICULARS

(1) In breach of Article III, r. 2 of the Hague-Visby Rules the Owners failed to properly

and/or carefully load, handle, stow, carry, keep, care for and discharge the goods

68

carried in that they allowed the vessel to be taken over by pirates and during the

period the Vessel was hijacked no cargo care measures were taken; and/or

(2) In breach of the contract of carriage the Owners delivered the cargo at Rotterdam and

not Liverpool; and/or

(3) In breach of the contract of carriage the Owners delivered the cargo other than as

against presentation of the Bills of Lading; and/or

(4) In breach of the contract of carriage the Owners delivered the cargo to Beatles and not

to Aardvark who were the lawful holders of the bills of lading and the persons

immediately entitled to possession thereof.

22. Accordingly, Aardvark have an unanswerable claim against the Owners for breach of

their duty to deliver the cargo against presentation of the Bills of Lading and at the

correct discharge port. They equally have an unanswerable claim in the tort of

conversion.

23. For the above reasons Aardvark claim damages for breach of the Owners’ duties under

the Bills of Lading and/or in bailment for the tort of conversion.

24. By reason of their failure to properly and/or carefully load, handle, stow, carry, keep,

care for and discharge the cargo the cargo went from being GMQ cargo to non-GMQ

cargo which was worthless, alternatively was worth considerably less than GMQ cargo.

In the premises Aardvark are entitled to the difference between the price they paid for

the cargo, namely USD 747.50 per mt and its value at Liverpool on or about 30 March

2009 when it should have been delivered, plus its value at Liverpool on or about 30

March 2009 because it was not delivered i.e. USD 747.50 per mt x 4,000 mt =

USD2,990,000 plus the Dutch court costs (as set out below) namely USD 3,236,756.26.

69

25. Further and/or alternatively Aardvark paid USD 522.50 per mt to buy goods in to sell to

their sub-buyers in Liverpool. Their sub-buyers have since confirmed that they would

have accepted the non-GMQ cargo following the piracy as they were not intended for

the human food chain. Aardvark further incurred legal fees in relation to the Dutch

proceedings. Accordingly Aardvark claim USD 2,329,912.26 plus interest and costs as

follows:

(1) USD 522.50 per mt x 4,000 = USD 2,090,000

(2) Court fees of USD 138,843.14; and

(3) Legal fees in respect of the Court proceedings of USD 107,913.12.

AND the Claimants claim:

(1) USD 3,236,756.26, alternatively USD 2,329,912.26, alternatively damages; and

(2) Interest on a compound basis pursuant to s. 49 of the Arbitration Act 1996; and

(3) Costs with compound interest on costs.

Dated 6 April 2010

70

IN THE MATTER OF THE ARBITRATION ACT 1996

AND

IN THE MATTER OF AN ARBITRATION

BETWEEN:

AARDVARK LTD

Claimants

And

TWILIGHT CARRIERS

Respondents/ Owners

_____________________________________ DEFENCE SUBMISSIONS

______________________________________

References to paragraph numbers are to paragraphs in the Claim Submissions unless

otherwise stated. References to defined terms are to the defined terms in the Claim

Submissions unless otherwise stated.

1. Paragraphs 1 to 4 are admitted. The contract of carriage contained in or evidenced by

the Bills of lading materially provided as follows:

“29. Liberty clause

(a) In any situation whatsoever and wheresoever occurring … which in the judgment of

the Owner or Master is likely to give rise to risk of … delay or disadvantage to … the Vessel

or any part of her cargo, or to make it unsafe, imprudent or unlawful for any reason to

commence or proceed on or continue the voyage or to enter or discharge the cargo at the port

of discharge… the Owner or Master may discharge … the cargo … The Owner may, when

practicable, have the Vessel call and discharge the cargo at another or substitute port

declared or requested by the Charterers.”

71

2. The Hague-Visby Rules, to which the Owners will rely to their full terms and effect

materially provided:

“Article IV, r. 2 Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from … (e) act of war; (f) act of public enemies; … (q) any other cause arising without the actual fault and privity of the carrier, or without the fault or neglect of the agents or servants of the carrier, but the burden of proof shall be on the person claiming the benefit of this exception to show that neither the actual fault or privity of the carrier nor the fault or neglect of the agents or servants of the carrier contributed to the loss or damage.”

3. Paragraphs 5 and 7 are not admitted as the Owners have no primary knowledge of the

contractual arrangements between Aardvark and Beatles.

4. As to paragraph 6 it is admitted that other cargo was carried on board the Vessel under

separate bills of lading, save as aforesaid paragraph 6 is not admitted.

5. Paragraphs 8 to 10 are admitted.

6. Paragraphs 11 to 15 are not admitted as the Owners have no primary knowledge of the

contractual arrangements between Aardvark and Beatles or the correspondence which is

said to have passed between them.

7. As to paragraph 16 it is admitted that Aardvark wrote the letter set out therein and that

discharge took place between 20-22 March 2009 in Rotterdam. For the reasons set out

below it is denied that this was a breach of the contract of carriage contained in or

evidenced by the Bills of Lading.

8. As to paragraph 17 it is admitted that on 19 March 2009 Beatles issued a letter of

indemnity to the Owners.

72

9. Paragraphs 18 to 20 are admitted.

10. Paragraphs 21 to 23 are denied. It is denied that the Owners are liable to Aardvark as

alleged or at all:

(1) Pursuant to clause 29 of the Charterparty, as incorporated into the Bills of Lading,

the Owners were entitled to discharge the cargo at Rotterdam instead of Liverpool;

and/or

(2) Aardvark agreed to the cargo being delivered in Rotterdam and not Liverpool. The

Owners will rely on the correspondence in this regard; and/or

(3) Aardvark were not entitled to delivery of the cargo having purported to abandon the

cargo to their sellers, Beatles; and/or

(4) Pursuant to Article IV. r. 2 (e) and/or (f) and/or (q) the Owners are not liable for any

deterioration in the quality of the cargo by reason of the Vessel being hijacked by

Somali pirates.

26. If, which is denied, Owners are liable to Aardvark for delivering the cargo to Beatles

instead of Ardvark the correct calculation of damages is the market value of the cargo at

Rotterdam (having been the valid place of discharge pursuant to clause 29 and/or the

agreement referred to above). The best evidence of the market value of this cargo in

Rotterdam at or around 20 March 2009 is the price paid in Rotterdam on 19 March 2009

in respect of the other parcel of PFAD onboard the Vessel which was sold by Beatles at

USD 350 per mt C&F Rotterdam afloat. In the premises any claim is limited to USD 1.4

million.

27. Further and/or alternatively if, which is denied, the cargo should have been delivered in

Liverpool the market value of the cargo in Liverpool in or about 20-30 March 2009 is the

73

price paid in Rotterdam plus the freight costs from Rotterdam to Liverpool, namely USD

380 per mt, USD 1.52 million.

28. In the premises paragraphs 24 and 25 are denied. It is further denied that Aardvark are

entitled to the costs of the Dutch proceedings, the Dutch Courts made the appropriate

costs orders and these should not be revisited. Further and in any event the costs of the

unsuccessful appeal should not be allowed in any event because by definition it should

never have been brought.

Dated 16 June 2010.

74

Moot – Dramatis Personae

Companies Aardvark Limited Buyers of Commodities including PFAD

ABC Brokers Vegetable Oil Brokers, employed by Aardvark Ltd

AB Buyers Buyers of the salvaged sale of PFAD

Aspinall Lewis International LLP

Incident Investigation, Claims Analysis, Food & Agricultural Products, Marine & Shipping

Beatles Oils & Fats Ltd Sellers of Commodities including PFAD

Caspian BV

Buyers of Commodities including PFAD

D&F Brokers Ltd

Commodity Brokers and shippers for vegetable oils and fats

Delta Limited

Buyers of Commodities including PFAD

Dutch Surveyors BV

Cargo Surveyors and International Loss Adjusters

PAI Certifying body for FEMAS – the trade assurance scheme under which Aardvark are regulated

Paradox Bank

Issuers of Guarantee No. 478

Surveys Inc

Average Agents and Marine Surveyors at Rotterdam

Thomas, Cropper & Benedict

Consulting mariners, engineers & scientists

Walker Brokers Charterparty brokers

Individuals Kevin Ackroyd

Single Joint Expert

Horatio Bridgen

Purchasing Manager of Caspian BV

Geronimo McKegney

Purchasing Manager at Delta Limited

Julia Mynott

Associate Director, Aspinall Lewis International LLP

75

Chris Smith Solicitor at Reynolds Solicitors, acting on behalf of Aardvark Limited

Paul Taylor

Aardvark Limited

Ben Thompson Solicitor at Thompson Puxton, acting on behalf of Beatles Oils & Fats Ltd

John Walker

Charterparty broker working for Walker Brokers

Mark Wiggins

Beatles Oils & Fats Limited

Tom Williams Vegetable Oil broker at ABC Brokers

76

Documents

14TH INTERNATIONAL MARITIME LAW ARBITRATION · PDF file14TH INTERNATIONAL MARITIME LAW ARBITRATION MOOT 2013 . IMLAM Moot organised by School of Law, Murdoch University