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14 TH INTERNATIONAL MARITIME LAW ARBITRATION MOOT, 2013 NATIONAL LAW SCHOOL OF INDIA UNIVERSITY TEAM NO. 21 MEMORANDUM FOR THE RESPONDENT ON BEHALF OF AGAINST Twilight Carriers Inc. Aardvark Limited RESPONDENTS CLAIMANTS TEAM Pranav Manjesh Bidare Tarun Krishnakumar Vinodini Srinivasan Manasa Sundarraman

14TH INTERNATIONAL MARITIME LAW ARBITRATION MOOT 2013 · 14th international maritime law arbitration moot, 2013 national law school of india university team no. 21 memorandum for

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Page 1: 14TH INTERNATIONAL MARITIME LAW ARBITRATION MOOT 2013 · 14th international maritime law arbitration moot, 2013 national law school of india university team no. 21 memorandum for

14TH

INTERNATIONAL MARITIME LAW ARBITRATION MOOT, 2013

NATIONAL LAW SCHOOL OF INDIA UNIVERSITY

TEAM NO. 21

MEMORANDUM FOR THE RESPONDENT

ON BEHALF OF AGAINST

Twilight Carriers Inc. Aardvark Limited

RESPONDENTS CLAIMANTS

TEAM

Pranav Manjesh Bidare

Tarun Krishnakumar

Vinodini Srinivasan

Manasa Sundarraman

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TABLE OF CONTENTS

TABLE OF CONTENTS ..................................................................................................................... II

LIST OF ABBREVIATIONS ................................................................................................................ IV

INDEX OF AUTHORITIES ................................................................................................................. V

QUESTIONS PRESENTED ............................................................................................................... XV

STATEMENT OF FACTS ................................................................................................................... 1

ARGUMENT ..................................................................................................................................... 3

I. THE ARBITRATION TRIBUNAL DOES NOT HAVE JURISDICTION OVER THE PRESENT DISPUTE. ................................... 3

A. The incorporation of the arbitration clause into the b/l fails on account of linguistic inapplicability .............. 3

B. The seat of the arbitration is to be New York and not London. ......................................................................... 4

II. THE RESPONDENTS ARE NOT LIABLE FOR ANY LOSS ARISING OUT OF THE VESSEL’S UNSEAWORTHINESS ............ 5

A. The Twilight Trader was seaworthy for the contractual voyage ....................................................................... 5

III. THE RESPONDENTS ARE NOT LIABLE FOR LOSS DUE TO BREACH OF ARTICLE III, RULE 2 ....................................... 6

A. The Respondents did not breach their obligation to ‘property and carefully’ carry cargo under Article III,

Rule 2 of the HVR ........................................................................................................................................................ 7

B. In any case, The Respondents may rely on the excepted perils under article iv rule 2 ..................................... 7

IV. THE RESPONDENTS DID NOT BREACH THE CONTRACT OF CARRIAGE BY DISCHARGING AT ROTTERDAM ............. 12

A. The Liberty Clause Justifies the Owners’ Actions ........................................................................................... 13

B. The Claimant-Receivers consented to the discharge at Rotterdam ................................................................. 14

V. THE RESPONDENTS DID NOT BREACH CONTRACT OF CARRIAGE BY DELIVERING THE CARGO TO THE SELLERS ..... 14

A. Property in the Cargo Revested in the Beatles ................................................................................................ 15

B. The Claimants are not the Lawful Holders of the Bill of Lading ..................................................................... 17

C. Claimants are not entitled to any damages ...................................................................................................... 20

VI. RESPONDENTS ARE NOT LIABLE IN BAILMENT ...................................................................................................... 20

VII. RESPONDENTS ARE NOT LIABLE FOR CONVERSION ........................................................................................... 21

VIII. QUANTIFICATION OF DAMAGES ........................................................................................................................ 21

A. The Respondents are not liable for Cost of Dutch Court Proceedings ............................................................ 21

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B. The Respondents are not liable for damage to the cargo ................................................................................ 22

C. The Respondent’s Liability is Limited to non-delivery of cargo ...................................................................... 24

PRAYER ......................................................................................................................................... 25

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LIST OF ABBREVIATIONS

s. Section

¶ Paragraph

Aardvark Aardvark Limited

Art Article

B/L Bill of Lading

Beatles Beatles Oils & Fats Ltd

CIF Cost, Insurance and Freight

Cl. Clause

Claimant Aardvark Limited

COGSA Carriage of Goods by Sea Act, 1992 (UK)

Factsheet IMLAM Moot Scenario, 2013

FOSFA Federation of Oils, Seeds and Fats Associations

HVR/Rules Protocol to Amend the International Convention for the

Unification of Certain Rules of Law Relating to Bills of

Lading (Hague-Visby Rules)(Brussels 1968)

Lloyd’s Rep. Lloyd’s Law Reports.

LOI Letter of Indemnity

mt Metric Tonnes

Owner Twilight Carriers

PFAD Palm Fatty Acid Distillate

Respondent Twilight Carriers Inc.

USD United States Dollars

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INDEX OF AUTHORITIES

CASES

Referred to in:

Aegan Sea Traders Corp v. Respol Petroleo SA [1998] CLC 1090. 19, 20

Albacora S.R.L. v. Westcott & Laurence Line Ltd [1966] 2 Lloyd's Rep 53. 13

American Trading and Production Corporation v. Shell International Marine

Ltd.[1972] 1 Lloyd’s Rep 463

13

Athens Maritime Enterprises Corporation v. Hellenic Mutual War Risks

Association (Bermuda) Ltd – The “Andreas Lemos” [1982] 2 QB (Com. Ct) 483,

490.

8, 9

Attorney General of the Republic of Ghana v. Texaco Overseas Tankships Ltd –

The “Texaco Melbourne” [1994] 1 Lloyd's Rep 473 (HL). 26, 27

Ben Line Steamers Ltd v. Pacific Steam Navigation Co – The “Benlawers” [1989]

2 Lloyd's Rep 51. 5

Biddle v. bond. 4 LJQ B 137 22

British Columbia Saw Mill Company v. Nettleship (1868) LR 3 CP 499. 25

British Racing Drivers Club Ltd v. Hextall Erskine & Co [1996] 3 All ER 667

(Ch). 25

C Czarnikow Ltd v. Koufos [1967] UKHL 4. 25

Caltex Refining Co Pty Ltd v. BHP Transport Ltd - The “Iron Gippsland” (1994)

34 NSWLR 29 13

CV Sheepvartondereneming Ankergracht v. Stemcor (Australasia) Ptd Ltd [2007]

FCAFC 77. 13

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Daval Aciers d’Usinor et de Sacilor & Others v. Armare SRL - The “Nerarno”

[1996] 1 Lloyd’s Rep 1. 3, 4

Demand Shipping Co Ltd v. Ministry of Food Government of the People’s

Republic of Bangladesh and Another - The “Lendoudis Evangelos II” [2001] 2

Lloyd's Rep 304.

5

Dixon v. Sadler (1839) 5 M & W 405 414. 5

Dominion Natural Gas Co Ltd v. Collins & Perkins [1909] AC 640 (PC). 25

East West Corporation v. DKBS 1912 and AKTS Svenborg [2003] QB 1509. 21

Edward v. Amos (1945) 2 WN (NSW) 204 22

Empresa Cubana Importada de Alimentos v. Iasmos Shipping Co SA – The “Good

Friend” [1984] 2 Lloyd’s Rep 586. 5

F. C. Bradley & Sons Ltd v. Federal Steam Navigation Company, Ltd (1926) 24

Lloyd’s Rep 446. 5

Federal Commerce & Navigation Ltd v. Molena Alpha Inc - The Nanfri [1979]

AC 757. 18

Freeth v. Burr (1874) L.R. 9 C.P. 208. 17

Fry v. Chartered Mercantile Bank of India (1866) LR 1 CP 689. 14

Galoo Ltd v. Bright Grahame Murray [1995] 1 All ER 16 (CA). 24

Gatoil International v. Tradax Petroleum Ltd – “The Rio Sun” [1985] 1 Lloyd’s

Rep 350. 13, 14

Gill & Duffus v. Berger 1984 AC 382. 17, 18

Rosenthal and Sons v. Esmail [1965] 1 WLR 1117. 17

Glynn v. Margetson [1893] AC 351. 15

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Gosse Millerd Ltd v. Canadian Government Merchant Marine Ltd [1929] AC 223. 11

Great China Metal Industries Co Limited v. Malaysian International Shipping

Corporation Berhad – The “Bunga Seroja” (1998) 72 ALJR 1592 (McHugh, J.) 81. 5, 7, 9, 10

Hadley v. Baxendale (1854) 9 Exch 341. 26

Hamilton v. Mackie (1889) 5 TLR 677. 3

Hamilton, Fraser and Co v. Pandorf and Co (1887) 12 AC 518. 8

Hardy & Co (London) Ltd v. Hillerns & Fowler [1923] 2 KB 490. 17

Hathaway v. Barrow 1 Campb. 151. 24

Hourani v. Harrison (1927) 32 Com Cas 305. 11

Commission Car Sales (Hastings) Ltd v Saul [1957] NZLR 144 (Supreme Court of

New Zealand) 19

JL Lyons & Co v. May & Baker [1923] 1 KB 685 (KB) 688. 19, 20

Kopitoff v. Wilson (1876) 1 QBD 377. 5

Kwei Tek Chao v. British Traders and Shippers Ltd [1954] 2 QB 459. 17, 20

Leduc & Co. v. Ward (1888) 20 QBD 475. 14

Leesh River Tea Co Ltd v. British India Steam Navigation Co Ltd [1967] 2 QB

250. 11, 12

Leigh and Sillavan v. Aliakmon Shipping Company- The Aliakmon [1986] AC

785. 22, 23

Lickbarrow v. Mason (1787) 2 TR 63. 20

M.D.C Ltd v. N.V. Zeevaart Maatschappij - The “Beursstraat” [1962] 1 Lloyd’s

Rep 180. 5

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MCC Proceeds Inc v. Lehman Bros International (Europe)[1998] 4 All ER 675. 23

McDonald v. Dennys Lascelles Ltd (1933) 48 CLR 457 (High Court of Australia). 19

McFadden v. Blue Star Line, [1905] 1 K.B. 697 703. 5

Minister of Food v. Reardon Smith Line [1951] 2 Lloyd’s Rep 265. 6

Miramir Maritime Corp v. Holborn Oil – The “Miramir” [1984] AC 676. 3

Modern Building Wales Ltd v. Limmer & Trinidad Co Ltd [1975] 1 WLR. 3, 4

Montevideo Gas Co v. Clan Line [1921] 37 TLR. 25

Morris v. Martin [1966] 1 QB 716. 12

Morse v. Slue (1671) 1 Vent 190. 9

Mulvenna v. Royal Bank of Scotland plc [2003] EWCA Civ 1112. 25

National Westminster Bank v. Rabobank Nederland [2007] EWHC 1742 (Comm). 24

Navigazione Alta Italia v. Svenska Petroleum [1988] 1 Lloyd’s Rep 452. 3

Nissho Co Ltd v. NG Livanos [1941] 69 Ll L Rep 125. 27

Northern Shipping Co v. Deutsche Seereederei G.M.B.H. and Others –The

“Kapitan Sakharov” [2000] 2 Lloyd's Rep 255. 5

Omak Maritime Ltd v. Mamola Challenger Shipping Co & Ors [2010] EWHC

2026 (Comm). 26

Panchaud Freres SA v. Establissments General Grain Co [1970] 1 Lloyd's Rep 53

(CA). 18

Paterson Steamships Ltd v. The Canadian Co-operative Wheat Producers Ltd

[1935] SCR 617. 11

Pendle and Rivett Ltd v. Ellerman Lines (1927) 29 Lloyd’s Rep. 12

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Pickering v. Barclay (1672) Style 132. 9

Potts v. Union SS Co of New Zealand [1946] NZLR 276. 12

President of India v. West Coast S.S.Co, [1963] 2 Lloyd’s Rep 278. 5

Pride Shipping Corp. v. Chung Hwa Pulp Corp - The “Oinoussin Pride” [1991] 1

Lloyd’s Rep 126 (QB). 3, 4

Primetrade AG v. Ythan Ltd [2005] EWHC 2399 (Comm) [76]. 20, 21

Quaker Oats v. M/V Torvanger 734 F2d 238. 12

Quinn v. Burch Bros Ltd [1966] 2 All ER 283 (CA). 24, 25

Renton v. Palmyra [1957] AC 149, at 166. 13

Republic of Bolivia v. Indemnity Mutual Marine Assurance Co Ltd [1909] 1 KB

785 (Williams LJ) 798. 8

Robinson v. Harman [1848] 1 Exch 850 (HL) 855 (Parke). 27

Rodocanachi Sons & Co v. Milburn Brothers (1886) 18 QBD 67. 26

Ruxley Electronics and Constructions Ltd v. Forsyth [1995] UKHL 8. 26

Sanders Bros v. Maclean & Co (1883) 11 QBD 327. 20, 23

Satef-Huttenes Albertus SpA v. Paloma Tercera Shipping Co SA –“The

Pegase” [1981] 1 Lloyd’s Rep 175(QB) 183 (Goff J). 25

Select Commodities Ltd. v. Valdo SA [2006] EWHC 1137 (Comm). 13

Shelbury v. Scotsford. Yelv. 23 22

Shipping Corporation of India v. Gamlen Chemical Co A/Asia Pty Ltd (1980) 147

CLR 142. 7

SK Shipping (S) Pte Ltd v. Petroexport Ltd [2009] EWHC 2974 (Comm). 17

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Skandia Insurance Co Ltd v. Skoljarev (1979) 142 CLR 375. 9

Skips A/S Nordheim v. Syrian Petrolem – The “Varenna” [1984] QB 599. 3

South Australia Asset Management Corp v. York Montague Ltd [1996] UKHL 10. 25

Stanton v. Richardson (1874) LR 7 CP 421. 5

Sucre Export SA v. Northern River Shipping Ltd - The Sormovskiy 3068 [1994]

CLC 433. 21

Taylor and Sons Ltd v. Bank of Athens (1922) 91 LJ KB 776. 18

Thames and Mersey Marine Insurance Co v. Hamilton, Fraser and Co (1887) 12

AC 484. 8

Thames Water Utilities Ltd v. London Regional Transport (2004) 95 Con LR 127. 6

The Annefield [1971] P 168. 3

The Danica White (Danish High Court, 3 October 2010). 6, 12, 13

The Federal Bulker [1989] 1 Lloyd’s Rep 103. 3

The Guilia (1914) 218 F 744. 9

The Maltasian [1966] 2 Lloyd’s Rep 53, at 63. 7

The Xantho (1887) 12 AC 503. 8

The City of Baroda (1926), 25 Lloyd’s Rep 437. 12, 13

The Delos [2001] 1 Lloyd’s Rep 703. 3

The Elizabeth H [1962] Lloyd’s Rep 172. 3

The Future Express [1993] 2 Lloyd’s Rep 542 (CA). 22, 23

The Houda [1994] 2 Lloyd’s Rep 541. 21

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The Nai Matteini [1988] 1 Lloyd’s Rep. 4

The Pioneer Container [1994] 2 AC 324

The Rena K [1978] 1 Lloyd’s Rep 545. 3

Thomas v. Portsea [1912] AC 1. 3

Transfield Shipping Inc v. Mercator Shipping Inc –“The Achilleas” [2008] UKHL

48. 25

Victoria Laundry (Windsor) Ltd v. Newman Industries Ltd [1949] 1 All ER

997(KB). 25, 26, 27

Walker v. Dover Navigation (1950) 83 Lloyd’s Rep 84. 6

Weld-Blundell v. Stephens [1920] AC 956 (HL). 25

Welex A.G. v. Rosa Maritime Ltd – The “Epsilon Rosa” [2003] 2 Lloyd’s Rep

510. 4

Wertheim (Sally) v. Chicoutimi Pulp Co [1911] A.C. 301(PC) 307. 27

Williams Brothers v. Ed. T. Agius Ltd [1914] AC 510. 26

Woodar Investment Development Ltd v. Wimpey Construction UK Ltd [1980] 1

WLR 277. 18

Woodley & Co v. Michell & Co (1883) 11 QBD 47. 10

BOOKS

Referred to in:

Best Management Practices for Protection against Somali Based Piracy (Version

4, 2011).

5, 10, 15

Black's Law Dictionary (9th ed. 2009). 6

Douglas Hodgson, The Law of Intervening Causation (Ashgate, 2008). 25

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Edwin Peel, Treitel: The Law of Contract (12th

edn, Sweet & Maxwell, 2011). 26

Gunter Treital and Francis Reynolds, Carver on Bills of Lading (Sweet and

Maxwell, 3rd

edn, 2012).

3, 8, 9, 11, 20,

21

Halsbury’s Laws (5th

edn, 2008). 11, 14, 18

Harvey McGregor, McGregor on Damages (18th

edn, Sweet & Maxwell 2009). 24, 26, 27

Hodges, Law of Marine Insurance (Cavendish, 1996). 10

Hugh Beale (ed) Chitty on Contracts (30th edn, Sweet & Maxwell 2008). 24, 25

Indira Carr, International Trade Law (4th

edn., 2010). 3, 5, 11

Jervis, Reeds Marine Insurance, (Adlard Coles, 2005). 10

Julian Clark and Jeffrey Thomson, Carriage of Goods under the Rotterdam Rules

(2010, Informa Law).

11

Julian Cooke et. al, Voyage Charters (Lloyd’s of London Press, 1993). passim

Dominic. O'Sullivan, Steven Ballantyne Elliott, Rafal Zakrzewski, The Law of Rescission (Oxford

University Press, 2008)

19

Lord Justice Aikens, Richard Lord QC, Michael Bools, Bills of lading (1st edn,

2006).

12, 25, 26

M Bridge (ed), Benjamin’s Sale of Goods (8th

edn, Sweet & Maxwell, 2010). 17, 18, 19

Martin Dockray and Katherine Reece Thomas, Cases & Materials on the Carriage

of Goods by Sea (Routledge, 2004).

9

NJ Margetson, ‘Article IV(1) and some of the Exceptions of Article IV(2) H(V)R’

in ML Hendriksen, HN Margetson and NJ Margeston (eds.), Aspects of Maritime

Law: Claims under Bills of Lading (Wolters Kluwer, 2008).

passim

Norman Palmer, Palmer on Bailment (3rd

edn., Sweet & Maxwell, 2009). 23

Paul Todd, Maritime Fraud and Piracy (2nd

edn, Informa Publishing, 2010). 8, 10, 18, 21

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Robert Bradgate, Commercial Law (3rd

edn, Butterworths, 2000) 18

Roy Goode, Commercial Law (2nd

edn, Butterworths, 1995) 18

Steward C. Boyd, Scrutton on Charterparties and Bills of Lading (21st edn, Sweet

and Maxwell, 2008).

Passim

Terence Coghlin, Andrew W. Baker, Julian Kenny and John D. Kimball, Time

Charters (6th

edn, 2008).

11

Tetley, Marine Cargo Claims (3rd

edn, 1988). 8, 11

ARTICLES

Referred to in:

Adam Kramer, ‘An Agreement-Centred Approach to Remoteness and Contract

Damage’ in Nili Cohen and Ewan McKendrick (eds), Comparative Remedies for

Breach of Contract (2005).

25

Aref Fakhry, ‘Piracy Across Maritime Law: Is there a problem of Definition?’ in

The Regulation of International Shipping: International and Comparative

Perspectives: Essays in Honor of Edgar Gold (2012) 116.

11

J Cartwright, ‘Remoteness of Damage in Contract and Tort: A Reconsideration’

(1996) 53 Cambridge Law Journal 488.

25

JW Carter, 'Regrettable Developments in the Law of Contract?' (1980) 39 CLJ

256.

18

P Todd, ‘The Bill of Lading and Delivery: Common Law Actions’ [2006] LMCQ

539.

23

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STATUTES

Referred to in:

Arbitration Act, 1996. 23

Hague-Visby Rules, 1968 4, 5, 7

Carriage of Goods by Sea Act 1992. 19

MISCELLANEOUS

Referred to in:

Catlin Asset Protection, Piracy 2012: Managing the Risk (June 2012) at page 8

<http://www.catlin.com/flipbook/piracy-2012/files/inc/1486791582.pdf>

5, 13

Law Commission, Rights of Suit in Respect of Carriage of Goods by Sea (Law

Com. No. 196).

20, 22

Quy-Toan Do, The Pirates of Somalia: Ending the Threat, Rebuilding a Nation

(The World Bank Regional Vice-Presidency for Africa, 2013)

<http://siteresources.worldbank.org/INTAFRICA/Resources/pirates-of-somalia-

main-report-web.pdf>

11

Comite Maritime International, Travaux Preparatoires of the Hague Rules and

the Hague-Visby Rules, 408.

<http://www.comitemaritime.org/Uploads/Publications/Travaux%20Preparatoires

%20of%20the%20Hague%20Rules%20and%20of%20the%20Hague-

Visby%20Rules.pdf>

11

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QUESTIONS PRESENTED

I. Whether the Arbitral Tribunal has jurisdiction to try the dispute between the Claimants and

Respondents?

II. Whether the Respondents can validly invoke the exceptions to liability enumerated in Article IV

Rule 2 of the Hague Visby Rules?

III. Whether the Respondents were in breach of its duty to ‘properly and carefully’ carry the cargo

under Article III Rule 2 of the Hague Visby Rules?

IV. Whether the Respondents were in breach of contract of carriage by discharging the cargo at

Rotterdam?

V. Whether the Respondents were justified in delivering the cargo without presentation of the B/L?

VI. Whether the Respondents are liable to the Claimants in bailment?

VII. Whether the Respondents are liable under tort of conversion?

VIII. Whether the Respondents are liable to pay damages to the Claimants?

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STATEMENT OF FACTS

THE PARTIES AND THE SALE CONTRACT

Aardvark Ltd (the ‘Claimants’) was the buyer of commodities including PFAD from Beatles Oils &

Fats Ltd. (the ‘Sellers’) on CIF Liverpool terms. The goods were to be carried on board the vessel

Twilight Trader (“the Vessel”) owned by Twilight Carriers (the ‘Respondents’) from Malaysia to

Merseyside, Liverpool. The Respondents sub-chartered the Vessel to the Seller by way of a

charterparty which included a liberty clause.

PIRACY ATTACK

En route to Merseyside, the Vessel was hijacked by Somali pirates between 15 November 2008 and

13 February 2009. The Somali pirates contaminated the GMQ cargo, causing it to become non-

GMQ.

TRANSACTIONS BETWEEN THE CLAIMANTS AND SELLERS

Based on the admitted correspondence between the Claimants and the Sellers, the Sellers had sent

to the Claimants, shipping documents including a B/L indorsed in blank. Upon receipt, the

Claimants paid the entire purchase price of 747.50 per mt. Subsequently, the Claimants discovered

that the insurance policy was not in conformity with the contract and gave notice to the Seller of

their repudiatory breach. In turn, the Seller held the Claimants for anticipatory breach and

terminated the contract. The Claimants agreed to send the B/L in their possession to the Seller and

demanded the return of the purchase price. However, upon realising that the Sellers were unwilling

to return the purchase price, the Claimants sent the B/L to their agent in Rotterdam.

DISCHARGE OF CARGO

On 19th

March, 2009, the Owners were issued a LOI by the Seller requesting delivery of cargo at

Rotterdam. The Owners began discharging the cargo to them the next day. On 20th

March, 2009, the

Claimants sent a mail to the Respondents claiming to be the lawful holders of the B/L.

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DUTCH COURT PROCEEDINGS

For security for their claims against the Claimants, the Seller arrested the cargo which the Claimants

unsuccessfully tried to set aside in the courts of Rotterdam. Court of Rotterdam rejected Aardvark’s

appeal to set aside the arrest of the cargo

THE CLAIMS

The Claimants commenced arbitration proceedings against the Respondents on 6 April 2010,

contending that they are the lawful holders of the B/L. They alleged the breach of contract of

carriage in the following ways:

By the Owners delivering the cargo to the Seller other than as presentation of the B/L.

By the Owners delivering the cargo at Rotterdam as opposed to Liverpool - the destination

as per the B/L

For the Respondents’ failure to discharge their duties under Article III, Rule 2 of the HVR.

Furthermore, they seek to hold the Respondents liable under tort of conversion and bailment

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ARGUMENT

I. THE ARBITRATION TRIBUNAL DOES NOT HAVE JURISDICTION OVER THE PRESENT DISPUTE.

A precondition for the arbitral tribunal to have jurisdiction is the existence of a valid agreement to

arbitrate disputes arising between the parties. In the present case, Claimants submit that [A] there

was no valid agreement as the Arbitration Clause was not validly incorporated into the B/L and that

[B] in any case, assuming that there was a valid agreement to arbitrate, the seat of such arbitration

was to be New York and not London.

A. THE INCORPORATION OF THE ARBITRATION CLAUSE INTO THE B/L FAILS ON ACCOUNT

OF LINGUISTIC INAPPLICABILITY

1. The two conditions for a successful incorporation of an arbitration clause into a B/L are that first,

the incorporating provisions must expressly refer to the arbitration clause1 and second that the

words the clause itself must be capable of being read into a B/L.2 Admittedly, in the present case,

the clause is expressly referred to, and therefore the first issue is not germane. With regard to the

second issue, the Charterparty’s arbitration clause applies to “Any dispute arising from the making,

performance or termination of this charter party …”3

2. Admittedly through decisions such as The Rena K4, The Nerarno5 and The Delos6 it was

recognised that where there is express incorporation, the clauses can be manipulated to give

‘practical effect’7 to the intention of the parties. However, these decisions are distinguishable from

the present case as they concerned broad arbitration clauses that applied to “any dispute” arising

1 Hamilton v Mackie (1889) 5 TLR 677; Thomas v Portsea [1912] AC 1; The “Annefield” [1971] P 168; Skips A/S

Nordheim v Syrian Petrolem – The “Varenna” [1984] QB 599; Navigazione Alta Italia v Svenska Petroleum [1988] 1

Lloyd’s Rep 452; The “Federal Bulker” [1989] 1 Lloyd’s Rep 103; Steward C. Boyd, Scrutton on Charterparties and

Bills of Lading (21st edn, Sweet and Maxwell, 2008) Article 40; Julian Cooke et. al, Voyage Charters (Lloyd’s of

London Press, 1993) 377; Gunter Treital and Francis Reynolds, Carver on Bills of Lading (Sweet and Maxwell, 3rd

edn,

2012) 3-033. 2 For instance see The Rena K [1978] Lloyd’s Rep 545; Miramir Maritime Corp v Holborn Oil – The “Miramir” [1984]

AC 676; Navigazione Alta Italia v Svenska Petroleum [1988] 1 Lloyd’s Rep 452. 3 Cl. 32 of Charter Party, at Page 11 of Bundle.

4 The Rena K [1978] 1 Lloyd’s Rep 545.

5 Daval Aciers d’Usinor et de Sacilor & Others v Armare SRL - The “Nerarno” [1996] 1 Lloyd's Rep 1

6 The Delos [2001] 1 Lloyd’s Rep 703.

7 Pride Shipping Corp. v Chung Hwa Pulp Corp - The “Oinoussin Pride” [1991] 1 Lloyd’s Rep 126 (QB).

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under or out of the respective Charterparty. This is to be contrasted with Modern Building8, citing

The Elizabeth H9, the same clause was held to be “wholly inappropriate” to the B/L.10 Given that the

decision in The Elizabeth H was based on the same clause as in the present case, it is more

applicable than those subsequent to it.

3. In any event, where the language of the arbitration clause applies only to disputes arising from

the Charter, the courts may not “manipulate” it to facilitate incorporation. Such a conclusion was

reached by Gatehouse, J. in The Nai Matteini11 - which despite not being followed in subsequent

cases12 – has not been overruled and is therefore applicable.

4. Hence, the incorporation of the Charterparty’s arbitration clause fails and a valid arbitration

agreement is not constituted between the Claimants and Respondents.

B. THE SEAT OF THE ARBITRATION IS TO BE NEW YORK AND NOT LONDON.

5. As per the terms of the Charter, the seat of the arbitration was to be New York and not London.

Admittedly, in The Epsilon Rosa, a ‘fixture recap’ has been held to constitute a Charterparty when

read in conjunction with a standard form Charter.13 However, that decision is distinct from this case

as there was a handwritten amendment to the arbitration clause Charter was also present.14 Here, no

such amendment has been made to the arbitration clause of the standard VEGOILVOY

Charterparty. Considering facts such as the capitalised reference to the “Charterparty”, and that the

fixture recap was an email not confirmed by both parties15, the unchanged VEGOILVOY is the

charter referred to in the B/L. Hence, the fixture recap may not be taken together with the standard

form to constiteu the Charterparty for the purposes of the B/L. Hence, the tribunal is to be vacated

in favour of arbitration in New York under the US Arbitration Act, 1996.16

8 Modern Building Wales Ltd v Limmer & Trinidad Co Ltd [1975] 1 WLR

9 The Elizabeth H [1962] Lloyd’s Rep 172.

10 Modern Building Wales Ltd v Limmer & Trinidad Co Ltd [1975] 1 WLR 1281, 1288.

11 The Nai Matteini [1988] 1 Lloyd’s Rep.

12 Daval Aciers d’Usinor et de Sacilor & Others v Armare SRL - The “Nerarno” [1996] 1 Lloyd’s Rep 1; Pride

Shipping Corporatio v Chung Hwa Pulp Corporation & Another - The “Oinoussin Pride” [1991] 1 Lloyd’s Rep 126. 13

Welex A.G. v Rosa Maritime Ltd – The “Epsilon Rosa” [2003] 2 Lloyd’s Rep 510. 14

Welex A.G. v Rosa Maritime Ltd – The “Epsilon Rosa” [2003] 2 Lloyd’s Rep 515. 15

Page 4 of Bundle (“Fixture Recap”). 16

Cl. 32 of Charter Party, at Page 11 of Bundle.

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II. THE RESPONDENTS ARE NOT LIABLE FOR ANY LOSS ARISING OUT OF THE VESSEL’S

UNSEAWORTHINESS

6. In the present case, the Twilight Trader was attacked and hijacked by Somali pirates in the Gulf

of Aden. Given the plethora of anti-piracy measures available today, the successful attack raises

questions of whether the vessel in question was seaworthy17, properly manned and equipped18 to

undertake the contractual voyage. Under Article III Rule 1, the carrier is under an obligation to take

due diligence to ensure that these characteristics are met. In the present case, Claimants submit that

due diligence was exercised to ensure that the Vessel was seaworthy (A) and that there is no causal

link between unseaworthiness and damage to the cargo. (B)

A. THE TWILIGHT TRADER WAS SEAWORTHY FOR THE CONTRACTUAL VOYAGE

7. Seaworthiness refers to the state of a ship that ‘is fit in design and structure’ and is suitably

equipped to encounter the ordinary, foreseeable19 perils on the voyage.20 In the present case,

Claimants submit that sufficient anti-piracy measures were taken to protect against pirate attacks

which, in any case, were not ‘ordinary perils’

i. The Respondents took sufficient anti-piracy measures

8. To satisfy the due diligence requirement under Article III Rule 1, a carrier must demonstrate that

he acted as per standard practices of the industry21 prevailing at the time of the incident and not at

the time of the trial.22 In the present case, the Twilight Trader instituted an anti-piracy watch when

in dangerous waters.23 Indeed, this is form of anti-piracy measure is well-recognized.24 Furthermore,

17

Article III, Rule 1(a), Hague-Visby Rules, 1968. 18

Article III, Rule 1(b), Hague-Visby Rules, 1968. 19

Empresa Cubana Importada de Alimentos v Iasmos Shipping Co SA – The “Good Friend” [1984] 2 Lloyd’s Rep 586;

Ben Line Steamers Ltd v Pacific Steam Navigation Co – The “Benlawers” [1989] 2 Lloyd's Rep 51. 20

Northern Shipping Co v. Deutsche Seereederei G.M.B.H. and Others –The “Kapitan Sakharov” [2000] 2 Lloyd's Rep

255. at 266; Great China Metal Industries Co Limited v Malaysian International Shipping Corporation Berhad – The

“Bunga Seroja” (1998) 72 ALJR 1592 citing Dixon v Sadler (1839) 5 M & W 405 414; McFadden v Blue Star Line,

[1905] 1 K.B. 697 703; Stanton v Richardson (1874) LR 7 CP 421; Indira Carr, International Trade Law (4th

edn.,

2010) 208; NJ Margetson, ‘Duties of the Carrier’ in ML Hendriksen, HN Margetson and NJ Margeston (eds.), Aspects

of Maritime Law: Claims under Bills of Lading (Wolters Kluwer, 2008) 72. 21

Kopitoff v Wilson (1876) 1 QBD 377; M.D.C Ltd v N.V. Zeevaart Maatschappij - The “Beursstraat” [1962] 1 Lloyd’s

Rep 180. 22

F. C. Bradley & Sons Ltd v Federal Steam Navigation Company, Ltd (1926) 24 Lloyd’s Rep 446; President of India v

West Coast S.S.Co, [1963] 2 Lloyd’s Rep 278, 281; Demand Shipping Co Ltd v Ministry of Food Government of the

People’s Republic of Bangladesh and Another - The “Lendoudis Evangelos II” [2001] 2 Lloyd's Rep 304. 23

Page 41 of Bundle.

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at the time of the attack in 2008, It was only post the escalation of pirate-attacks in late 2008 that

the industry-level awareness and responses to this threat first began to manifest. In light of this lack

of uniform industry safety practices, the Respondents cannot be held to have been negligent in

applying practices accepted by the shipping industry.

9. In any event, even current measures are mere improvisations of the existing capabilities of

vessels. For instance, even the latest BMP4 practices25 suggest high-speed26, evasive manoeuvres27

and fire hoses28 as primary measures to deter pirates from boarding. Given that these are existing

capabilities of any vessel, Claimants submit that nothing apart from the anti-piracy watch was

necessary to meet the due diligence standard for seaworthiness.

10. Hence, the anti-piracy measures taken by the Respondents were sufficient to discharge its

obligations under Article III Rule 1.

ii. In any case, piracy cannot be regarded as an ‘ordinary’ peril

11. Seaworthiness of a vessel depends on the ability of a vessel to withstand the ordinary and

foreseeable perils on a particular voyage. Piracy attacks, by nature being fortuitous and

unforeseeable, do not occur ‘in regular course’29 of a voyage. Consequently, they are not ‘ordinary’

perils. On the present facts, such a conclusion equally applies to voyages through the Gulf of Aden

where pirate attacks are merely more frequent but not ordinary occurrences. Hence, piracy is not an

ordinary peril.

III. THE RESPONDENTS ARE NOT LIABLE FOR LOSS DUE TO BREACH OF ARTICLE III, RULE 2

The text of Article III Rule 2 provides that the obligations under it are to operate ‘subject to the

provisions of Article IV’. Article IV, in turn, contains inter alia an enumeration of ‘excepted’ perils

24

Catlin Asset Protection, Piracy 2012: Managing the Risk (June 2012) 8 <http://www.catlin.com/flipbook/piracy-

2012/files/inc/1486791582.pdf>; Best Management Practices for Protection against Somali Based Piracy (Version 4,

2011) ¶ 8.2 at Page 23. 25

Best Management Practices for Protection against Somali Based Piracy (Version 4, 2011). 26

Best Management Practices for Protection against Somali Based Piracy (Version 4, 2011) ¶ 3.4 at Page 7. 27

Best Management Practices for Protection against Somali Based Piracy (Version 4, 2011) ¶ 8.8 at Page 35. 28

Best Management Practices for Protection against Somali Based Piracy (Version 4, 2011) ¶ 8.6 at Page 32. 29

Black's Law Dictionary (9th ed. 2009), ‘ordinary’.

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for which a carrier is exempt from liability for damage to cargo.30 It is settled that a carrier may

discharge liability for breach of Article III Rule 2 by relying on an exception under Article IV.31 In

the present case, Respondents submit that the pirate attack (A) did not arise out of breach of Article

III Rule 2 and that (B) In any case, it amounted to an excepted peril under Article IV Rule 2.

A. THE RESPONDENTS DID NOT BREACH THEIR OBLIGATION TO ‘PROPERTY AND

CAREFULLY’ CARRY CARGO UNDER ARTICLE III, RULE 2 OF THE HVR

12. Under Article III, Rule 2 of the HVR, a carrier is obligated to properly and carefully ‘load,

handle, stow, carry, keep, care for and discharge’ the goods being carried. ‘Properly’ means ‘with

skill and as per a sound system’32 while ‘carefully’ means that care must have been taken in

implementing that system.33 Respondents contend that there was no breach of obligations in

carrying the cargo in question.

13. It is settled that adherence to or compliance with an industry’s ‘standard’ or ‘general’ practices

is the touchstone by which ‘proper and careful’ carriage of goods is to be evaluated.34 As submitted,

there did not exist any standard industry practices regarding piracy in the Gulf of Aden at the time

of the attack. Therefore, the Respondents cannot be held liable for failure to meet industry practices.

B. IN ANY CASE, THE RESPONDENTS MAY RELY ON THE EXCEPTED PERILS UNDER ARTICLE

IV RULE 2

14. Where the cargo owner alleges a breach of Article III Rule 2 and the carrier relies on the

exceptions of Article IV Rule 2 in defence, the liability of the carrier ‘turns on’ whether the damage

to the cargo arose from a breach of Article III Rule 2 or from an excepted peril.35 Respondents

30

Article IV Rule 2, Hague-Visby Rules, 1968. 31

The “Maltasian” [1966] 2 Lloyd’s Rep 53, at 63 (Lord Pearson); NJ Margetson, ‘Duties of the Carrier’ in ML

Hendriksen, HN Margetson and NJ Margeston (eds.), Aspects of Maritime Law: Claims under Bills of Lading (Wolters

Kluwer, 2008) 100, Julian Cooke et. al, Voyage Charters (Lloyd’s of London Press, 1993) 722. 32

Steward C. Boyd, Scrutton on Charterparties and Bills of Lading (21st edn, Sweet and Maxwell, 2008) 389. Renton v

Palmyra [1957] AC 149, at 166; Albacora v Westcott and Laurance Line [1966] 2 Lloyd’s Rep 53; Gatoil International

v. Tradax Petroleum Ltd – “The Rio Sun” [1985] 1 Lloyd’s Rep 350; Caltex Refining Co Pty Ltd v BHP Transport Ltd -

The “Iron Gippsland” (1994) 34 NSWLR. 29; CV Sheepvartondereneming Ankergracht v. Stemcor (Australasia) Ptd

Ltd [2007] FCAFC 77. 33

Albacora S.R.L. v Westcott & Laurence Line Ltd [1966] 2 Lloyd's Rep 53; Julian Cooke et. al, Voyage Charters

(Lloyd’s of London Press, 1993) 723. 34

Gatoil International v. Tradax Petroleum Ltd – “The Rio Sun” [1985] 1 Lloyd’s Rep 350. 35

Great China Metal Industries Co Limited v Malaysian International Shipping Corporation Berhad – The “Bunga

Seroja” (1998) 72 ALJR 1592 (McHugh, J.) ¶ 91.

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submit that that ‘looking beyond the proximate cause, that the effective cause of loss’ to the cargo

was the exemption claimed.36 On the present facts, the most ‘proximate’ cause of the deterioration

in quality of the PFAD was the inability of the crew to protect the cargo against contamination. This

inability arose as the crew were held hostage by the Somali pirates. The crew were confined to the

bridge and unable to maintain a permanent lookout over the deck.37 Thus, the ‘effective’ or ‘actual’

cause of the breach of Article III Rule 2 was the actions of the Somali hijackers.

iii. The Respondents are exempted from liability under the ‘perils of the sea’ excep tion

contained in Article IV Rule 2(c) of the Hague-Visby Rules

15. Article IV Rule 2(c) of the HVR exempts carriers from liability for loss or damage arising from

‘perils, dangers and accidents of the sea or other navigable waters’.38 While a non-rigid39 and

circumstance-specific40 formulation of this exception has long been advocated, it has come to

include within its scope ‘all perils…of a marine character, or of a character incident to a ship as

such’.41 Respondents submit that (a) piracy was a phenomenon of the sea and that it satisfied the (b)

unforeseeability and ‘extraordinary’ nature requirements of the ‘perils of the sea’ exception under

Rule 2(c).

a) Piracy is distinctly a maritime phenomenon

16. Piracy is defined as ‘forcible robbery at sea, whether committed by marauders from outside the

ship, or by mariners or passengers within it.’42 Respondents submit that given its inherent

connection to maritime carriage and commerce, piracy is a phenomenon ‘of the sea’. Such a

36

Shipping Corporation of India v Gamlen Chemical Co A/Asia Pty Ltd (1980) 147 CLR 142 (Mason and Wilson, JJ.)

as cited in Great China Metal Industries Co Limited v Malaysian International Shipping Corporation Berhad – The

“Bunga Seroja” (1998) 72 ALJR 1592 (McHugh, J.) ¶ 95. 37

¶ 1.2.5, Page 41 of Bundle (“Inspection of the Cargo of Pail Oil After Hijacking at Somalia, 19 March 2009”). 38

Paul Todd, Maritime Fraud and Piracy (2nd

edn, Informa Publishing, 2010) 1.119. 39

For example, see the decisions in Thames and Mersey Marine Insurance Co v Hamilton, Fraser and Co (1887) 12 AC

484; The “Xantho” (1887) 12 AC 503; Hamilton, Fraser and Co v Pandorf and Co (1887) 12 AC 518; Tetley, Marine

Cargo Claims (3rd

edn, 1988) 437 – 438; NJ Margetson, ‘Article IV(1) and some of the Exceptions of Article IV(2)

H(V)R’ in ML Hendriksen, HN Margetson and NJ Margeston (eds.), Aspects of Maritime Law: Claims under Bills of

Lading (Wolters Kluwer, 2008) 171. 40

Thames and Mersey Marine Insurance Co v Hamilton, Fraser and Co (1887) 12 AC 484 (Lord MacNaughten). 41

Thames and Mersey Marine Insurance Co v Hamilton, Fraser and Co (1887) 12 AC 484, 492 (Lord Bramwell). 42

Athens Maritime Enterprises Corporation v Hellenic Mutual War Risks Association (Bermuda) Ltd – The “Andreas

Lemos” [1982] 2 QB (Com. Ct) 483, at 491; Republic of Bolivia v Indemnity Mutual Marine Assurance Co Ltd [1909] 1

K.B. 785, at 802 (Kennedy, LJ.); Julian Cooke et. al, Voyage Charters (Lloyd’s of London Press, 1993) 518; Carver

518.

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conclusion was reached in Republic of Bolivia43, where Williams, L.J. acknowledged that “whatever

the definition of piracy may be, in my opinion piracy is a maritime offence”44 Thus, piracy is a

distinctly maritime phenomenon being of the sea.

b) Piracy satisfies the ‘foreseeability’ and ‘extraordinary nature’ requirement of the exception

17. Second, the phenomenon under consideration must be of an unforeseeable nature.45 Under

English law – the applicable law in the present case – ‘unforeseeability’ is merely one of many

factual indicia to be considered.46 Weightage must also be given to whether phenomenon was

‘fortuitous’, ‘accidental’ or ‘unexpected’.47 Here, the attack by Somali pirates while not ‘accidental’

– being deliberate acts by a third party – was clearly ‘fortuitous’ and ‘unexpected’.

18. Third, While it is uncertain whether English law mandates a ‘peril of the sea’ to be of an

extraordinary character48, acts of piracy – being fortuitous events that does not arise in the ordinary

course of sea carriage – would have no difficulty in fulfilling this requirement.

c) In any case, it is settled by precedent that acts of piracy are ‘perils of the sea’

19. Acts of pirates have ‘on the evidence of merchants’ long been held to constitute ‘perils of the

sea’.49 While the authority for this proposition is dated, there is nothing to indicate that such an

interpretation has been departed from. On the contrary, the conclusion in Pickering has been cited

in support of the same proposition in several modern decisions.50

iv. The Respondents may rely on the ‘ act of war’ exception under Article IV Rule 2(e)

43

Republic of Bolivia v Indemnity Mutual Marine Assurance Co Ltd [1909] 1 KB 785 (Williams LJ) 798. 44

Republic of Bolivia v Indemnity Mutual Marine Assurance Co Ltd [1909] 1 KB 785, at 798 (Williams, LJ.);Athens

Maritime Enterprises Corporation v Hellenic Mutual War Risks Association (Bermuda) Ltd – The “Andreas Lemos”

[1982] 2 QB (Com. Ct) 483, 490. 45

NJ Margetson, ‘Article IV(1) and some of the Exceptions of Article IV(2) H(V)R’ in ML Hendriksen, HN Margetson

and NJ Margeston (eds), Aspects of Maritime Law: Claims under Bills of Lading (Wolters Kluwer, 2008) 171. 46

Great China Metal Industries Co Limited v Malaysian International Shipping Corporation Berhad – The “Bunga

Seroja” (1998) 72 ALJR 1592 (Kirby, J.) ¶ 147. 47

Great China Metal Industries Co Limited v Malaysian International Shipping Corporation Berhad – The “Bunga

Seroja” (1998) 72 ALJR 1592 (McHugh, J.) ¶ 101. 48

NJ Margetson, ‘Article IV(1) and some of the Exceptions of Article IV(2) H(V)R’ in ML Hendriksen, HN Margetson

and NJ Margeston (eds.), Aspects of Maritime Law: Claims under Bills of Lading (Wolters Kluwer, 2008) 175; citing

Carver on Bills of lading (2005) 213,; Skandia Insurance Co Ltd v Skoljarev (1979) 142 CLR 375, at 386-387. 49

Pickering v Barclay (1672) Style 132; Morse v Slue (1671) 1 Vent 190; Martin Dockray and Katherine Reece

Thomas, Cases & Materials on the Carriage of Goods by Sea (Routledge, 2004) 30. 50

Woodley & Co v Michell & Co (1883) 11 QBD 47; Great China Metal Industries Co Limited v Malaysian

International Shipping Corporation Berhad – The “Bunga Seroja” (1998) 72 ALJR 1592 (McHugh, J.) ¶ 81.

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20. While it is conceded that no isolated act of piracy would ordinarily fall within the meaning of an

‘act of war’, there is scholarly authority for the proposition that if piracy becomes ‘more localised’

in certain ‘hot spots’, typical war clauses could apply to it.51 On the present facts, the Twilight

Trader, having passed the 54th

East Longitude on 14 November 200852, was in an internationally

recognised53 piracy hot-spot. Thus, the attack on the Twilight Trader can be classified as an ‘act of

war’.

21. This conclusion is supported by the treatment of piracy as a ‘war risk’ in marine insurance

practice. While piracy has traditionally been treated as a marine risk covered under general marine

insurance policies, this position as noted by Hodges54 and Jervis55 has fluctuated with time. In the

modern context, there has been a recent move towards treating it as a ‘war risk’.56 This shift is, no

doubt, in response to modern piratical acts being ‘localised’ into certain warzone-like ‘hot spots’

such as the Gulf of Aden.57 Thus, pirate attacks may be considered ‘acts of war’ under Rule 2(e).

v. The Respondents are exempted under the ‘public enemies exception’ under Article IV

Rule 2(f) of the HVR

Article IV Rule 2(f) of the HVR exempts carriers from liability for loss or damage arising from the

‘acts of public enemies’. Respondents submit that the actions of pirates would fall within the scope

of ‘public enemies’ for the purposes of this exception.

a) Pirates are within the scope of ‘public enemies’

22. This exception, broader than pre-Hague formulations such as “acts of the King’s [or Queen’s]

Enemies”, is understood to refer to all ‘enemies of mankind’.58 While, there persists debate over the

exception’s full meaning, application and interpretation59, it is beyond doubt that the actions of

51

Paul Todd, Maritime Fraud and Piracy (2nd

edn, Informa Publishing, 2010) 1.166. 52

¶ 1.2.2, Page 41 of Bundle (“Inspection of the Cargo of Pail Oil After Hijacking at Somalia, 19 March 2009”) 53

Best Management Practices for Protection against Somali Based Piracy (Version 4, 2011) ¶ 2.4 at Page 4. 54

Hodges, Law of Marine Insurance (Cavendish, 1996) 212. 55

Jervis, Reeds Marine Insurance, (Adlard Coles, 2005) 57. 56

Paul Todd, Maritime Fraud and Piracy (2nd

edn, Informa Publishing, 2010) 1.042. ANDREAS LEMOS!! 57

Best Management Practices for Protection against Somali Based Piracy (Version 4, 2011) ¶ 2.4 at Page 4. 58

Julian Cooke et. al, Voyage Charters (Lloyd’s of London Press, 1993) 763. 59

Julian Clark and Jeffrey Thomson, Carriage of Goods under the Rotterdam Rules (2010, Informa Law) 8.31.

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pirates – considered hostes humanis generis60 – are included within its fold.61 This is supported by

the Travaux where Lord Phillimore and Sir Hill agreed that the exception “may mean pirates”.62

23. The ‘public enemies’ exception’ may especially be applicable to the activities of land-based

pirates who unlike their seagoing counterparts do not as easily qualify to be ‘perils of the sea’.63

Thus, Somali pirates fit the definition of being land-based and fall within the scope of Rule 2(f).

vi. The Respondents are exempted on account of Article IV Rule 2(q) of the HVR

24. Article IV Rule 2(q) of the HVR exempts carriers from liability for damage to or loss of goods

occasioned by ‘any other cause’ but without their ‘actual fault or privity’ or the ‘the fault or neglect

of their agents or servants’. Here, the onus is on the carrier to establish that both of the above-stated

conditions of the clause are inapplicable.64

a) Piracy is within the meaning of ‘any other cause’

25. ‘Any other cause’ is to be read ejusdem generis with the preceding exceptions in Article IV rule

2.65 However as no genus common to all exceptions can be identified, the phrase is to be interpreted

to include all cases where no neglect or fault is involved.66 Thus, seizure by pirates would be within

its scope.

b) Neither the carrier not its servants were contributed to the damage

26. It is trite that mere factum of damage to goods being carried is not sufficient to establish the

negligence by carrier. On the present facts, the hijacking of the Twilight Trader by Somali pirates

60

Steward C. Boyd, Scrutton on Charterparties and Bills of Lading (21st edn, Sweet and Maxwell, 2008) 400.

61 Steward C. Boyd, Scrutton on Charterparties and Bills of Lading (21

st edn, Sweet and Maxwell, 2008) Article 114;

Aref Fakhry, ‘Piracy Across Maritime Law: Is there a problem of Definition?’ in The Regulation of International

Shipping: International and Comparative Perspectives: Essays in Honor of Edgar Gold (2012) 116.

Carver Carriage by Sea para 536, Gunter Treital and Francis Reynolds, Carver on Bills of Lading (Sweet and Maxwell,

3rd

edn, 2012) 9-224; Julian Cooke et. al, Voyage Charters (Lloyd’s of London Press, 1993) 85.303; Gunter Treital and

Francis Reynolds, Carver on Bills of Lading (Sweet and Maxwell, 3rd

edn, 2012) 9-224; Halsbury’s Laws (5th

edn,

2008) para 276; Terence Coghlin, Andrew W. Baker, Julian Kenny and John D. Kimball, Time Charters (6th

edn, 2008)

¶ 27.8; Indira Carr, International Trade Law (4th

edn, 2010) 251. 62

Comite Maritime International, Travaux Preparatoires of the Hague Rules and the Hague-Visby Rules, 408.

<http://www.comitemaritime.org/Uploads/Publications/Travaux%20Preparatoires%20of%20the%20Hague%20Rules%

20and%20of%20the%20Hague-Visby%20Rules.pdf> 63

Julian Cooke et. al, Voyage Charters (Lloyd’s of London Press, 1993) 85.303. 64

Leesh River Tea Co Ltd v British India Steam Navigation Co Ltd – The “Cheybassa” [1967] 2 QB 250; Hourani v

Harrison (1927) 32 Com Cas 305 Paterson Steamships Ltd v The Canadian Co-operative Wheat Producers Ltd [1935]

SCR 617, Gosse Millerd Ltd v Canadian Government Merchant Marine Ltd [1929] AC 223. 65

Scrutton on Charterparties and Bills of Lading (21st edn, Sweet and Maxwell, 2008) 403.

66 Steward C. Boyd, Scrutton on Charterparties and Bills of Lading (21

st edn, Sweet and Maxwell, 2008) citing Potts v

Union SS Co of New Zealand [1946] NZLR 276; Lord Justice Aikens, Richard Lord QC, Michael Bools, Bills of lading

(1st edn, 2006) 10.260.

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was a malicious and fortuitous occurrence occasioned by strangers67 that ‘did not arise’ out of any

act or omission of the Respondents. Moreover, the Respondents discharged their obligation to take

‘reasonable care’.

The Respondents discharged their obligation to take ‘reasonable care’

27. Where damage is caused to goods by the malicious acts of third-parties, the carrier may

disprove fault on his part by establishing that ‘reasonable’ care was taken to guard against such

acts.68 In the present case, the Respondents having discharged its obligation to take ‘reasonable’

care by instituting an anti-piracy watch69 – an acceptable level of vessel security70 – was not at fault.

No amount of care by the Respondents could have prevented the hijacking

28. In absolving ship-owners of negligence in taking insufficient piracy-prevention measures, courts

have gone as far as to rule that even the taking of comprehensive anti-piracy measures by a vessel

would not prevent hijacking.71 In light of the same, the Respondents’ ‘actual fault or privity’ did not

contribute to the success of the pirate attack on the Twilight Trader.

IV. THE RESPONDENTS DID NOT BREACH THE CONTRACT OF CARRIAGE BY DISCHARGING AT

ROTTERDAM

29. The Claimants contend that the Respondents have breached the contract of carriage by

discharging the cargo at Rotterdam, instead of Liverpool. Admittedly, the goods must be delivered

at the place of delivery mentioned in the B/L.72 Hence, ordinarily, a discharge at an alternative port

amounts to a breach of contract. However, the Owner is not liable for such a breach when, “bill of

lading issued under the charter incorporates the terms of the charter or contains suitable liberties…

67

Leesh River Tea Co Ltd v British India Steam Navigation Co Ltd [1967] 2 QB 250. 68

The City of Baroda (1926), 25 Lloyd’s Rep 437. 69

¶ 1.2.2, page 41 of Bundle (“Inspection of the Cargo of Pail Oil After Hijacking at Somalia, 19 March 2009”). 70

Catlin Asset Protection, Piracy 2012: Managing the Risk (June 2012) at page 8

<http://www.catlin.com/flipbook/piracy-2012/files/inc/1486791582.pdf>. 71

The “Danica White” (Danish High Court, 3 October 2010), reported at: UfR 2011.354 H, ‘Danica White’. 72

Halsbury’s Laws (5th

edn, 2008) para 290.313.

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or the receiver otherwise consents”.73 The Owners submit that this case falls within both the

exceptions.

A. THE LIBERTY CLAUSE JUSTIFIES THE OWNERS’ ACTIONS

30. In the instant case, the B/L, incorporate the terms of the Charterparty.74 Under Clause 29 of the

Charterparty, “The Owner may, when practicable, have the Vessel call and discharge the cargo at

another or substitute port declared or requested by the Charterers”.75 This clause, merely by virtue

of its incorporation in the B/L, is not to be read in such a manner as to confer the right of re-

nomination upon consignees.76 On the proper interpretation of the contract, the word “Charterers” is

not to be substituted with “consignees” and the right to re-nominate continues with the former.

Hence, the B/L allows the Owner to discharge at a substitute port upon re-nomination by the

charterers. Thus, the Owners were entitled to discharge the cargo at Rotterdam upon the charter’s

request and must not be held liable for the same.

31. The Claimants may argue that the liberty clause has always had a limited scope, usually

interpreted with the interest of the original voyage being preserved.78 The cases that do interpret the

liberty clause narrowly pertain to situations where the Owner had been given the discretion to

deviate from the original voyage. Such a narrow interpretation does not operate to curtail the right

of the Charterer to nominate conferred under the contract.79 The only requirement is that such a

clause be expressly provided for.80 In the instant case, the Charterers had instructed the Owners to

discharge the cargo at Rotterdam, and the Owners have done so, exercising their right under the

Liberty clause.

73

Julian Cooke et. al, Voyage Charters (Lloyd’s of London Press, 1993) 5.54 74

Fry v Chartered Mercantile Bank of India (1866) LR 1 CP 689, Leduc & Co v Ward (1888) 20 QBD 475. 75

Cl. 29 of Charterparty, at Page 11 of Bundle. 76

Miramir Maritime Corp v Holborn Oil – The “Miramir” [1984] AC 676; Navigazione Alta Italia v Svenska

Petroleum [1988] 1 Lloyd’s Rep 452. 78

Glynn v Margetson [1893] AC 351. 79

American Trading and Production Corporation v Shell International Marine Ltd.[1972] 1 Lloyd’s Rep 463. 80

Select Commodities Ltd. v Valdo SA [2006] EWHC 1137 (Comm).

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32. Furthermore, it has been established in law that the language of a liberty clause can be used by

the parties to operate outside this limitation, allowing the liberty clause to completely control the

terms of the voyage itself.82

B. THE CLAIMANT-RECEIVERS CONSENTED TO THE DISCHARGE AT ROTTERDAM

33. The correspondence between the Charterers and the Claimants, during the course of the voyage

indicates that the Claimants acquiesced to the change of destination.86 The only express

disagreement of the Claimants came on 20th

of March.87

34. The cargo was discharged at Rotterdam between the 20th

, and the 22nd

of March, 2009. In a

letter dated 16th

of March 2009, the Claimants expressed their belief that the decision concerning

the location of discharge is one that the Sellers and the Charterers must make, and that one of the

better alternatives to Liverpool would be Holland, as found by the Shippers themselves. They

expressly disavowed Liverpool as the intended destination for the cargo. They did not indicate any

disapproval they had to the Sellers’ proposal to sail to Liverpool. Instead, they replied on the 17th

of

March 2009, enquiring about the details of the voyage, and the details of the proposed sale, in the

context of disposing of the bills of lading, which they possessed. Till this date, they continue to

make the bills of lading available at Rotterdam with their agents. Hence, having acquiesced to the

discharge at Rotterdam, the Claimants have no cause of action against the Respondents.

V. THE RESPONDENTS DID NOT BREACH CONTRACT OF CARRIAGE BY DELIVERING THE

CARGO TO THE SELLERS

35. On 6th

of March, 2009 the Claimants notified the Sellers, that they elect to terminate the contract

for alleged repudiatory breaches.88 On 18th

of March, they offered to return the B/L and

subsequently reneged on that commitment. The Respondents then delivered the cargo to the Sellers

82

Frenkel v MacAndrews & Co Ltd [1929] AC 545. 86

Paragraph 10 (2), Page 73, Defence Submissions 87

Page 36 of Bundle. 88

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on their request and on the strength of their indemnity.89 The Claimants allege that the Respondents

are liable for delivering the cargo to the Sellers without presentation of the B/L. The Owners submit

that the Claimants subsequent to the termination of the contract, of sale all rights of property and

possession in the cargo reverted to the Sellers. (A) Hence, the Claimants are no longer the lawful

holders of the B/L and do not have title to sue under the contract of carriage. (B) Arguendo, the

Claimants are in possession of the B/L as Beatles’ bailee and cannot assert an independent right of

delivery superior to its bailor’s. (C) In any event, the Claimants are not entitled to any damages

from the Respondents for the breach of contract of carriage evidenced by the bill of lading as

delivery was made to the true owner of the cargo (D).

A. PROPERTY IN THE CARGO REVESTED IN THE BEATLES

36. It is well-established in cases like Chao90 that property under a CIF contract passes to the buyer

on the condition that it will revest in the seller upon rejection of the shipping documents.

Accordingly, Aardvark only obtained a “conditional property” with Beatles retaining a

“reversionary interest” in the cargo.91 Respondents submit that this “conditional property” in the

cargo revested in Beatles on 6th

of March because (i) the sellers exercised their right to terminate the

contract as the Claimants renounced the contract and wrongfully rejected the documents (ii) In any

case, a legitimate rejection would also lead to reversion.

i. The Sellers rightfully terminated the Contract

37. The Respondents submit that the correspondence between the parties clearly indicates that

Beatles by their e-mail dated March 15th

have rightfully terminated the contract.

38. Firstly, the Claimants renounced the contract entitling the Seller to terminate it. It is well-settled

that when one party evinces an intention not to go on with the contract, the other party may treat the

contract as discharged for anticipatory breach.92 In the instant case, Aardvark’s email to Beatles

89

Page 53 of Bundle. 90

Kwei Tek Chao v British Traders and Shippers Ltd (1954) 98 SJ 163, [1954] 2 QB 459 (HL); Hardy & Co (London)

Ltd v Hillerns & Fowler [1923] 2 KB 490; Gill & Duffus; Tradax; Rosenthal and Sons v. Esmail [1965] WLR 91

Kwei Tek Chao v British Traders and Shippers Ltd (1954) 98 SJ 163, [1954] 2 QB 459 (HL); M Bridge (ed),

Benjamin’s Sale of Goods (8th

edn, Sweet & Maxwell, 2010) 1644 92

Freeth v Burr (1874) L.R. 9 C.P. 208, 213, per Lord Coleridge C.J.

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constitutes a notice of renunciation. The contents of the letter are unequivocal, and certainly lead a

reasonable person to conclude that the Claimants did not intend to fulfil its part of the contract by

taking delivery of the goods.93 Subsequent conduct and exchange between the parties are consistent

with this inference, as Aardvark refers to Beatles as the “cargo-owner”94 and offers to comply with

Beatles’ demands with respect to the B/L.95 Therefore, the Claimants’ renunciation of the contract

entitles the Beatles’ to rightfully terminate this contract.

39. Claimants may adopt the defence in Woodar96 contending that the repudiation was contingent

on repayment of purchase price. The Woodar defence disallows discharge for anticipatory breach

when the repudiation was a good faith mistake on a genuinely doubtful point of law. Such an

approach is inconsistent with other authorities97 and has also received wide criticism98 for being

contrary to commercial prudence. It is submitted that Woodar is inapplicable in the instant case as it

was not a case of “honest misapprehension” of the buyer, but an attempt to avoid the contract in a

falling market. In any case, even in Woodar, the “subjective intention is not decisive”99 by itself and

the objective “impact on the other party”100 is still relevant. The letter dated 6th

March, 2009,

objectively construed is a clear, absolute and immediate repudiation of the contract.

40. Secondly, the Claimants wrongfully rejected the documents permitting the Seller to terminate

the contract of sale. A wrongful rejection is a repudiation of the contract,101 which upon acceptance

revests title in the seller.102 The Respondents submit that the email dated 6th

of March was such a

wrongful rejection as there was no breach of contract by Beatles in their failure to tender an

insurance policy as FOSFA 81 permits delivery of insurance policy subsequent to payment.103 In

any case, in January, the buyers accepted the shipping documents with its defects, without any

93

SK Shipping (S) Pte Ltd v Petroexport Ltd [2009] EWHC 2974 (Comm). 94

Page 27 of Bundle. 95

Page 29, 31 of Bundle. 96

Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277 (HL). 97

Federal Commerce & Navigation Ltd v Molena Alpha Inc - The “Nanfri” [1979] AC 757, [1979] 1 All ER 307 (HL). 98

JW Carter, 'Regrettable Developments in the Law of Contract?' [1980] 39 CLJ 256. 99

Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277 (HL) (Wilberforce LJ.) 100

Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277 (HL) (Wilberforce LJ) 101

Berger and Co Inc v Gill & Dufus SA [1984] AC 382 (HL) 102

Roy Goode, Commercial Law (2nd

edn, Butterworths, 1995) 361; M Bridge (ed), Benjamin’s Sale of Goods (8th

edn,

Sweet & Maxwell, 2010); Berger and Co Inc v Gill & Dufus SA [1984] AC 382 (HL) 103

Clause 11, Federation of Oil, Seeds and Fats Association 81 Terms

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exceptions or express reservations and paid for them. Accordingly, they have waived the right to

reject the documents.104

41. The buyers may not cite non-conformity of goods as a reason for rejection of documents. 105

Therefore, the buyers were not entitled to reject the documents.

42. Hence, the Buyers renunciation and wrongful rejection of the contract entitled the Seller to

terminate. Upon a termination de futuro the parties are devested of their conditional accrued

rights.106 Here, the Claimants had only a conditional right to the cargo.

ii. Claimant rejected the documents

43. In any event, even if the Claimants were entitled to reject the documents and the sellers were

not entitled to terminate the contract, as per Chao, rejection of documents revests title. The e-mail

dated 6th

March is clear notice of rejection of documents

B. THE CLAIMANTS ARE NOT THE LAWFUL HOLDERS OF THE BILL OF LADING

44. Only the lawful holder of a B/L has the title to sue the carrier under the terms of the contract

contained therein.107 As a consequence of their rejection of the documents, the Claimants are in

possession of the bills of lading as the Sellers’ bailees (i). Even if the Claimants’ possession is not

imputed to the Sellers, the Claimants are not holders in good faith (i) and are not in possession after

the completion of delivery (ii). Thus no rights of suit for any alleged breach of the contract of

carriage have vested in Aardvark.

i. The Claimants hold the Bills of Lading as the Sellers’ bailee

45. Under S.5(2)(b) of the COGSA, a person in possession upon completion by delivery of any

endorsement or transfer of the B/L is a holder . In the instant case, the B/L was initially made out to

the order of the shipper, with the Sellers as the notifying party.108 The Sellers then indorsed the B/L

104

Panchaud Freres SA v Establissments General Grain Co [1970] 1 Lloyd's Rep 53 (CA); Taylor and Sons Ltd v Bank

of Athens (1922) 91 LJ KB 776. 105

M Bridge (ed), Benjamin’s Sale of Goods (8th

edn, Sweet & Maxwell, 2010) 1628; Lord Diplock in Gill & Duffus v.

Berger 1984 AC 106

McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 (High Court of Australia) 476-477; Dominic. O'Sullivan,

Steven Ballantyne Elliott, Rafal Zakrzewski, The Law of Rescission (Oxford University Press, 2008) 7; Commission

Car Sales (Hastings) Ltd v Saul [1957] NZLR 144 (Supreme Court of New Zealand). 107

Carriage of Goods by Sea Act 1992, s 2(1). 108

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in blank.109 The B/L is therefore a bearer bill, giving its possessor the “rights of suit”.110 Claimants

obtained possession as the buyer of the cargo, but subsequently rejected the documents. However,

they continue to retain possession of the documents.

46. It is well settled mere physical possession of a B/L is not by itself constitutive of the status of a

lawful holder.111 A person holding the goods on behalf of another is not said to be ‘in possession’

for the purposes of the COGSA, and it is the other person who is consider the ‘actual holder’ of the

B/L.112 Respondents submit that subsequent to rights of possession and property revesting in the

seller;113 the Claimants merely hold the B/L on their behalf as bailees. The Sellers are infact the

lawful holders under the COGSA.

47. A bailment is constituted between two parties if one party is in voluntary possession of the

other’s goods or documents, regardless of the other party’s consent.114 Hence, a Seller who retains

the goods after the transfer of property to the buyer holds in the capacity of a bailee.115 Similarly,

the Owners submit that the Claimants are in possession of the documents after rejection.116 The

Claimants acknowledged the Sellers as the owners of the cargo, and as the party entitled to the

possession of the cargo.117 They thus hold the B/L as bailees on Beatles’ behalf. Beatles retain

constructive possession of the bill. All rights under the contract including the right to delivery vest

in Beatles. Claimants may not assert an independent and superior title to the delivery of the goods

that are now in the Beatles possession. Thus, the Owners are not in breach for delivery to Beatles.

109

Pages 17, 19, 21 of Bundle, Halsbury’s Laws (5th

edn, 2008) para 355. 110

Gunter Treital and Francis Reynolds, Carver on Bills of Lading (Sweet and Maxwell, 3rd

edn, 2012) 12. 111

Primetrade AG v Ythan Ltd - The “Ythan” [2005] EWHC 2399 (Comm); [2006] 1 Lloyd’s Rep 457 [77]; The Cherry

[2003] 1 SLR 471 [12] 112

The Cherry [2003] 1 SLR 471 [12], East West Corporation v DKBS 1912 and AKTS Svenborg [2002] EWHC 83

(Comm) [29]; Paul Todd, Maritime Fraud and Piracy (2nd edn, Informa Publishing, 2010) 547; Primetrade AG v

Ythan Ltd - The “Ythan” [2005] EWHC 2399 (Comm); [2006] 1 Lloyd’s Rep 457 [77]; Gunter Treital and Francis

Reynolds, Carver on Bills of Lading (Sweet and Maxwell, 3rd edn, 2012), 164, [5–017]. 113

See above at V(A) 114

The Pioneer Container [1994] 2 AC 324 115

Michael Gerson (Leasing) Ltd v Wilkinson and another [2001] QB 514 116

Robert Bradgate, Commercial Law (3rd

edn, Butterworths, 2000) 312; Roy Goode, Commercial Law (2nd

edn,

Butterworths, 1995) 49. 117

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ii. The Claimant is not a Holder in Good Faith

48. . A holder under s. 5(2)(b) shall be regarded as a lawful holder whenever he becomes a holder in

“good faith”. 118 ‘Good faith’ connotes ‘honest conduct’ on the part of the holder. 119

49. Respondents submit that the Claimants’ conduct in retaining the B/L evinces a lack of good

faith. Upon the claimant’s rejection of the documents, all rights to the goods including the right to

possess the documents that symbolize them120 reverted to the sellers, 121 the “owners” of the B/L.122

The Claimants did not even possess a limited interest to retain the B/L as security for the repayment

of purchase price as such a right of an “unpaid” buyer is expressly disavowed.123 The Claimants are

thus in possession of the B/L dishonestly, despite having no entitlement thereto. Hence, the

Claimants are not lawful holders in good faith within s. 5 of the COGSA.

iii. The “delivery” of the Bill of Lading is Not Complete

50. Under s. 5(2)(b) of the COGSA, a lawful holder is in possession of the B/L as a result of the

completion by delivery of any transfer of the bill. In Aegean Sea Traders124 it was held that the

delivery of the bill is not complete until the recipient accepts the B/L as its transferee or indorsee.

Thomas, J. opined that the delivery would not be complete if the Claimants refused to accept the

indorsement of the B/L after obtaining possession of the goods. 125

51. The Claimants rejected the bills of lading in the instant case and terminated the contract of

sale.126 Thus, delivery to the Claimants is not complete by way of acceptance. Hence, the Claimants

are not the lawful holders of the B/L and are not entitled to the right to delivery thereunder. The

Respondents submit that the rule must extend to all cases where documents are not accepted, and

there is no reason to confine it to cases of mistaken endorsement.

118

Carriage of Goods by Sea Act 1992, s 5(2). 119

Aegan Sea Traders Corp v. Respol Petroleo SA [1998] CLC 1090, 1118. 120

Lickbarrow v Mason (1787) 2 TR 63; Sanders Bros v Maclean & Co (1883) 11 QBD 327. 121

Kwei Tek Chao v British Traders and Shippers Ltd (1954) 98 SJ 163, [1954] 2 QB 459. 122

Primetrade AG v Ythan Ltd [2005] EWHC 2399 (Comm) [76] 123

JL Lyons & Co v. May & Baker [1923] 1 KB 685 (KB) 688. 124

Aegean Sea Traders Corp v. Respol Petroleo SA [1998] CLC 1090 (Court) 1115-1118 125

Aegean Sea Traders Corp v. Respol Petroleo SA [1998] CLC 1090 (Court) 1117. 126

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C. CLAIMANTS ARE NOT ENTITLED TO ANY DAMAGES

52. In any event, the Respondents submit that the Claimants are not entitled to damages if the cargo

is delivered to the true owner of the goods.127 Admittedly, s. 2(4) of the COGSA permits the

Claimants to recover on behalf of another party with interest in the cargo.128 However, such other

party in this case is Beatles, and they have suffered no loss as the cargo has been delivered to

them.129 Thus, the Claimants cannot raise a claim for damages for delivery to Beatles

.

VI. RESPONDENTS ARE NOT LIABLE IN BAILMENT

53. The Owners submit that the Claimants do not have the rights to sue for misdelivery in bailment

as they do not have an immediate right to possession of the cargo.130 Even if the Claimants are the

lawful holders of the B/L, they shall acquire a right to sue the carrier in bailment if “the right to

possession” of the goods passes to the carrier due to the intention of the parties.131 Though the

Claimants were in possession of the B/L in both the Aliakmon132 and the Future Express133 mere

possession of the bill of lading gave no standing to sue in bailment.

54. The Claimants may contend that that the carrier has attorned to deliver the goods to any

endorsee in possession of the B/L. The Owners previously submitted that the owners are not the

lawful holders of the B/L,134 and thus the carrier cannot be said to have attorned to the owners.

Assuming, but not conceding that the carrier attorned to the Claimants, they are still in possession

of the bill as the Seller’s bailees. Even if the Respondents stood in relation to the Claimants as

bailees, they are discharged from any claim for delivery by their delivery to the true owners on

127

Kuwait Petroleum Corporation v. I & D Oil Caterers - The Houda [1994] 2 Lloyd’s Rep 541 , 553; Sucre Export SA

v Northern River Shipping Ltd - The Sormovskiy 3068 [1994] CLC 433, 442 128

Carriage of Goods by Sea Act 1992, s 2(4); Law Commission, Rights of Suit in Respect of Carriage of Goods by Sea

( Law Com. No. 196) Para 2.27 129

Paragraph 17, Page 68 of Claim Submissions. 130

Leigh and Sillavan v. Aliakmon Shipping Company- The Aliakmon [1986] AC 785, East West Corporation v DKBS

1912 and AKTS Svenborg [2002] EWHC 83 (Comm); East West Corporation v DKBS 1912 and AKTS Svenborg [2003]

QB 1509. 131

Lord Justice Aikens, Richard Lord QC, Michael Bools, Bills of lading (1st edn, 2006) 5.19-5.23.

132 Leigh and Sillavan v. Aliakmon Shipping Company- The Aliakmon [1986] AC 785

133 The Future Express [1993] 2 Lloyd’s Rep 542 (CA)

134 ¶48, 49, Memorandum of the Claimant.

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demand.135 The bailee has no better title than the bailor, and it is well recognised in law that he is

liable in conversion if he interferes with the rights of the true owner.136 Thus, he is entitled to deliver

the goods to the true owner; and his bailor’s title is evicted by title paramount.137 Upon such

eviction, the bailee is not estopped from denying the title of the bailor upon demand for delivery.138

Here, as previously submitted, the Sellers are the true owners of the cargo and delivery has been

effected in their favour. Thus, the Owners are discharged by delivery to the true owners; and are not

liable to their immediate bailees.

VII. RESPONDENTS ARE NOT LIABLE FOR CONVERSION

55. Conversion is ‘wrongful interference with the right to possession of a chattel’. 139 A person with

the “immediate right to the possession” of the goods may claim in conversion in the case of

misdelivery.140 The Owners submit that the Claimants have no immediate right of possession.

Admittedly, the B/L is a symbol of the goods,141 however a mere holder of the B/L does not have

title to sue in conversion if the right to possession has not passed.142 Thus, both in The Aliakmon143

and The Future Express144 the Claimants did not have title to sue in conversion though they were in

possession of the B/L.

VIII. QUANTIFICATION OF DAMAGES

A. THE RESPONDENTS ARE NOT LIABLE FOR COST OF DUTCH COURT PROCEEDINGS

56. Claimants claim the costs of the Dutch Proceedings for the arrest of the cargo, commenced by

Sellers, and for the costs of the arrest of the Vessel commenced by the Claimants.145

135

Shelbury v. Scotsford 80 E.R 17; Rogers & Co. v. Lambert & Co [1891] 1 Q.B. 318. ; Edward v. Amos (1945) 2 WN

(NSW) 204, 206. 136

Biddle v. Bond 122 E.R 1179, 1182 137

Shelbury v. Scotsford 80 E.R 17 138

Norman Palmer, Palmer on Bailment (3rd

edn., Sweet & Maxwell, 2009) 282-283. 139

MCC Proceeds Inc v. Lehman Bros International (Europe)[1998] 4 All ER 675 140

Roger v. Kennay (1840) 9 QB 594-596. 141

Sanders v. Maclean (1883) 11 QBD 327, 341 142

Leigh and Sillavan v. Aliakmon Shipping Company- The Aliakmon [1986] AC 785; 143

Leigh and Sillavan v. Aliakmon Shipping Company- The Aliakmon [1986] AC 785; ( a case of negligence, but the

principles governing title to sue are the same. See P Todd, ‘The Bill of Lading and Delivery: Common Law Actions’

[200] LMCQ 539, 546-548.) 144

The Future Express [1993] 2 Lloyd’s Rep 542 (CA); P Todd, ‘The Bill of Lading and Delivery: Common Law

Actions’ [2006] LMCQ 539, 546-548 146

Arbitration Act, 1996, s. 59.

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57. First, Aardvark submits that the costs are not recoverable under the Arbitration Act, 1996.

Although “costs of arbitration” may be awarded by the Arbitration Tribunal under s. 59 of the

Act,146 the Respondents submit that the costs of commencing proceedings for the arrest of ship and

the subsequent costs of appeal are per se irrecoverable as they are “costs of obtaining security” and

not “costs of arbitration” under. s. 59.147 Hence, these costs cannot be recovered.

58. Admittedly, the costs of foreign proceedings may be recovered as damages when they arise

reasonably and foreseeably from the breach of a contract.148 The Respondents submit that the costs

of the proceedings for the arrest of the cargo are per se irrecoverable as they arise from the contract

of sale subsisting between the Claimants and the Sellers, and the alleged breach of the terms of the

FOSFA. The Owners are in no way responsible for the dispute over the ownership of the cargo, and

any breach on their part is not the cause of any proceedings between Aardvark and Beatles.149 In any

event, the costs of appeal from the order for the sale of the cargo do not arise from the Owners’

breach of the contract of carriage; but from the defendant’s own actions to challenge the court’s

order. 150 Finally, the Claimants are entitled to costs as damages only if there has been no

adjudication upon costs by the foreign court.151 This is distinct from a situation where there has been

an adjudication that there has been no order as to costs. The Dutch Court has already adjudicated

upon both cases and passed appropriate orders as to costs.152 Thus, Aardvark is not entitled to

recover the costs in any subsequent arbitration proceeding.

B. THE RESPONDENTS ARE NOT LIABLE FOR DAMAGE TO THE CARGO

59. If the Respondents are adjudged to be negligent or in breach of contract, it is not liable for the

damage to the cargo because first, there is no causal link between the breach and loss suffered (i);

146

Arbitration Act, 1996, s. 59. 147

London Arbitration 5/03, Lloyd’s Maritime Law Newsletter, 609 (17th

March, 2003). 148

Union Cal v. Zoller [2001] EWCA Civ 1755; National Westminster Bank v. Rabobank Nederland. [2007] EWHC

3163 (Comm). 149

Harvey McGregor, McGregor on Damages (18th

edn, Sweet & Maxwell 2009) [?] 150

Union Cal v. Zoller [2001] EWCA Civ 1755[16] ; Jack L. Israel v. Ocean Dynamic SA [1982] 2 LLR 88 151

Hathaway v. Barrow [1807] 1 Camp 151; Quartz Hill Consolidated Gold Mining Company v. Eyre [1882-1883]

Lloyd’s Law Report 11 QBD 674 CA. 152

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secondly, the Respondents did not assume responsibility for deterioration of cargo from GMQ to

non-GMQ (ii) and thirdly, the damage is not foreseeable (iii).

i. Piracy operates as novus actus interveniens to sever the chain of causation

60. The Claimants must show that the breach was the “effective or dominant cause”, 153 and not

merely an occasion for the damage.154 The damage to the PFAD did not flow from the “negligence

of the defendant but the conscious act of another volition”.155 A premeditated, wilful act like piracy

severs the causal connection.156 When there is such a “new and independent cause”157 of the

damage, even if such an intervening act was foreseeable,158 the Respondents are not liable. 159

ii. The Respondents did not assume liability for change from GMQ to Non-GMQ

61. Damages are recoverable only if the Respondents is said to have assumed liability for such

damage.160 Mere foresight that damage is not unlikely is insufficient;161 knowledge of purpose162 and

special circumstances163 determines the scope of assumed responsibility. Moreover, carriers receive

the benefit of a rigid application of the contemplation doctrine as they “know less than a seller

about the purposes for which the buyer or consignee needs the goods”.164 Particularly, in chemical

trade, if the contamination (if any) is so slight rendering it less valuable to the Claimants, such

slight contamination leading to a loss is beyond the fair reasonable contemplation of the Owner.165

Case in fact, the Respondents could not have known the specificities of the cargo and its purpose

153

Galoo Ltd v Bright Grahame Murray [1995] 1 All ER 16 (CA). 154

Quinn v Burch Bros Ltd [1966] 2 All ER 283 (CA); Hugh Beale (ed) Chitty on Contracts (30th edn, Sweet &

Maxwell 2008) [26-032]. 155

Dominion Natural Gas Co Ltd v Collins & Perkins [1909] AC 640 (PC) 156

Douglas Hodgson, The Law of Intervening Causation (Ashgate, 2008) 77. 157

Weld-Blundell v Stephens [1920] AC 956 (HL). 158

Weld-Blundell v Stephens [1920] AC 956 (HL). 159

Weld-Blundell v Stephens [1920] AC 956 (HL); Quinn v Burch Bros Ltd [1966] 2 All ER 283 (CA); British Racing

Drivers Club Ltd v Hextall Erskine & Co [1996] 3 All ER 667 (Ch). 160

Transfield Shipping Inc v Mercator Shipping Inc –“The Achilleas” [2008] UKHL 48; J Cartwright, ‘Remoteness of

Damage in Contract and Tort: A Reconsideration’ (1996) 53 Cambridge Law Journal 488, 505; South Australia Asset

Management Corp v York Montague Ltd [1996] UKHL 10; Adam Kramer, ‘An Agreement-Centred Approach to

Remoteness and Contract Damage’ in Nili Cohen and Ewan McKendrick (eds), Comparative Remedies for

Breach of Contract (2005). 161

Satef-Huttenes Albertus SpA v Paloma Tercera Shipping Co SA –“The Pegase” [1981] 1 Lloyd’s Rep 175(QB) 183

(Goff J); Hugh Beale (ed) Chitty on Contracts (30th edn, Sweet & Maxwell 2008) 26-100A; Mulvenna v Royal Bank of

Scotland plc [2003] EWCA Civ 1112. 162

Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528. 163

British Columbia Saw Mill Company v Nettleship (1868) LR 3 CP 499 164

Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528; C Czarnikow Ltd v Koufos

[1967] UKHL 4; Montevideo Gas Co v Clan Line [1921] 37 TLR [544], [545]. 165

Lord Justice Aikens, Richard Lord QC, Michael Bools, Bills of lading (1st edn, 2006) 13.11.

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unless it was expressly communicated to it. Therefore, it cannot fairly be said to have assumed

responsibility for such unusual losses such as unfitness of the cargo for the food/feed chain.

iii. The damage is not foreseeable

62. The claim must fail because the loss was too remote, and not reasonably foreseeable as likely to

result from the breach.166

It was not possible for the Owner to know that such a loss was not

unlikely to occur as a consequence of breach, as the type of loss is peculiar to PFAD.

63. Furthermore, the calculation of damages using the contract price as true value of goods is

contrary to established principles of common law. In fact, the true measure of damages is market

value of the sound arrived goods at the intended time and place of delivery.167 Using the

Claimants’s calculation would make the Respondents liable not just for his breach, but damages

resulting from the Claimants’s bad bargain.168 The purpose of damages is “not to provide a

gratuitous benefit to the aggrieved party”,169 by making the defendant akin to an insurer of a non-

profitable contract. 170 Here, the Claimants would have suffered similar loss even if there was no

breach.171 Therefore, Claimants may not use the Malaysian contract price as true value of goods.

C. THE RESPONDENT’S LIABILITY IS LIMITED TO NON-DELIVERY OF CARGO

64. For non-delivery, damages payable is the market value at the time and place at which they

should have been delivered.172 There is no need to deduct the “any value which the goods have at

the port of loading, freight and other savings” as they have already been paid.173 Thus, the damages

166

Hadley v Baxendale (1854) 9 Exch 341; Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 1 All ER

997(KB) (Asquith LJ) 167

Rodocanachi Sons & Co v Milburn Brothers (1886) 18 QBD 67 168

Omak Maritime Ltd v Mamola Challenger Shipping Co & Ors [2010] EWHC 2026 (Comm) 169

Ruxley Electronics and Constructions Ltd v Forsyth [1995] UKHL 8; Edwin Peel, Treitel: The Law of Contract (12th

edn, Sweet & Maxwell, 2011) 1056. 170

Omak Maritime Ltd v Mamola Challenger Shipping Co & Ors [2010] EWHC 2026 (Comm). 171

Edwin Peel, Treitel: The Law of Contract (12th

edn, Sweet & Maxwell, 2011) 1002. 172

Rodocanachi Sons & Co v Milburn Brothers (1886) 18 QBD 67; Attorney General of the Republic of Ghana v

Texaco Overseas Tankships Ltd – The “Texaco Melbourne” [1994] 1 Lloyd's Rep 473 (HL); Steward C. Boyd, Scrutton

on Charterparties and Bills of Lading (21st edn, Sweet and Maxwell, 2008) 402; McGregor, McGregor on Damages

(18th

edn, Sweet & Maxwell 2009) __; Lord Justice Aikens, Richard Lord QC, Michael Bools, Bills of lading (1st edn,

2006); Williams Brothers v Ed. T. Agius Ltd [1914] AC 510 173

McGregor, McGregor on Damages (18th

edn, Sweet & Maxwell 2009) 27-003

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are quantified at 1.4 million USD using the best evidence of the market value174 at Rotterdam.175

This way Claimants are restored to the position “as if the contract had been performed”176.

65. Alternatively, Liverpool may be adjudged to be the contractual port of destination. Evidence of

market price at a different place may be considered for quantification of loss.177 The Claimants

could in mitigation of his losses have the goods carried by another vessel178 to the intended port.179

In light of this, Respondents submit that its liability is limited to 1.52 million USD – the market

price at Rotterdam plus cost of engaging substitute transport from Rotterdam to Liverpool.

PRAYER

In light of the above submissions, the Respondents request the Tribunal to:

DECLARE that this Tribunal has no jurisdiction in the present issue.

ADJUDGE that the Respondent was not liable -

1. For breach of its obligation to “properly and carefully” carry the cargo under Article

III, Rule 2 of the Hague-Visby Rules.

2. For discharge of the cargo at Rotterdam instead of Liverpool.

3. For delivering the cargo other than as against presentation of Bill of Lading.

4. Under tort of conversion

5. Under bailment.

6. That the Claimants are not entitled to damages.

7. Alternatively, the Claimants is entitled to damages only for non-delivery of cargo.

174

Page 73 of Bundle. 175

¶29-34, Memorandum for the Claimant. 176

Robinson v Harman [1848] 1 Exch 850 (HL) 855 (Parke); Wertheim (Sally) v Chicoutimi Pulp Co [1911] A.C.

301(PC) 307 (Atkinson J); Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 1 All ER 997(KB). 177

Attorney General of the Republic of Ghana v Texaco Overseas Tankships Ltd – The “Texaco Melbourne” [1994] 1

Lloyd's Rep 473 (HL) (Goff J). 178

Nissho Co Ltd v NG Livanos [1941] 69 Ll L Rep 125 179

McGregor, McGregor on Damages (18th

edn, Sweet & Maxwell 2009) 27-023.