14TH INTERNATIONAL MARITIME LAW ARBITRATION MOOT · PDF file14th 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 CLAIMANT

ON BEHALF OF AGAINST

Aardvark Limited Twilight Carriers Inc.

CLAIMANTS RESPONDENTS

TEAM

Tarun Krishnakumar

Vinodini Srinivasan

Pranav Manjesh Bidare

Manasa Sundarraman

TEAM NO. 21 | MEMORANDUM FOR THE CLAIMANT

ii

TABLE OF CONTENTS

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

LIST OF ABBREVIATIONS ......................................................................................................................... III

INDEX OF AUTHORITIES .......................................................................................................................... IV

QUESTIONS PRESENTED ......................................................................................................................... XII

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

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

I. THE TRIBUNAL HAS JURISDICTION TO HEAR THESE PROCEEDINGS. ...................................................... 3

II. THE RESPONDENTS MAY NOT INVOKE THE EXCEPTIONS UNDER ARTICLE IV RULE 2 OF THE HVR. ..... 5

III. THE RESPONDENTS BREACHED THEIR OBLIGATIONS UNDER ARTICLE III RULE 2 OF THE HVR ......... 13

IV. THE RESPONDENT BREACHED THE CONTRACT OF CARRIAGE BY DISCHARGING AT ROTTERDAM ....... 15

V. THE RESPONDENTS BREACHED THE CONTRACT OF CARRIAGE BY DELIVERING OTHERWISE THAN

AGAINST THE PRESENTATION OF THE BILLS OF LADING. ............................................................................. 17

VI. THE RESPONDENTS ARE LIABLE TO THE CLAIMANTS IN BAILMENT .................................................... 20

VII. THE RESPONDENTS ARE LIABLE TO THE CLAIMANTS IN CONVERSION FOR THE NON-DELIVERY OF

THE CARGO .................................................................................................................................................... 21

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

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


iii

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

Claimants 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

Respondents Twilight Carriers Inc.

USD United States Dollars

VEGOILVOY Vegetable Oil Voyage Charter (Series 1/27/50)


iv

INDEX OF AUTHORITIES

CASES

Albacora v Westcott and Laurance Line [1966] 2 Lloyd‟s Rep 53 13

Athens Maritime Enterprises Corporation v Hellenic Mutual War Risks

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

11

Attorney General of the Republic of Ghana v Texaco Overseas Tankships

Ltd – The “Texaco Melbourne” (1993) 1 Lloyd‟s Rep 471 (CA)

24, 25

Ben Line Steamers Ltd v Pacific Steam Navigation Co – The “Benlawers”

[1989] 2 Lloyd's Rep 51

6

Bence Graphics International Ltd v Fasson UK Ltd [1996] EWCA Civ 748 25

Brown v KMR Services Ltd [1995] 2 Lloyd's Rep 513 (CA) 24

C Czarnikow Ltd v Koufos (The Heron II) [1967] UKHL 4, [1969] 1 AC

350

23

Caltex Refining Co Pty Ltd v BHP Transport Ltd - The “Iron Gippslan”

(1994) 34 NSWLR 29

13

Campfire (Pan-American Trade and Credit Corp v Campfire) 156 F 2d 603 12

Daval Aciers d‟Usinor et de Sacilor & Others v Armare SRL - The

“Nerarno” [1996] 1 Lloyd's Rep 1

4

David Crystal Inc v Ehrlich-Newmark Trucking Co 314 N Y S 2d 559

(1970)

13

De la Bere v Pearson Ltd [1908] 1 KB 280 (CA) 23

Derby Resources AG v Blue Corinth Marine Co Ltd – “The Athenian

Harmony” [1998] 2 Lloyd‟s Rep 410

25

Empresa Cubana Importada de Alimentos v Iasmos Shipping Co SA – The 6


v

“Good Friend” [1984] 2 Lloyd‟s Rep 586

Encyclopaedia Britannica v Hong Kong Producer 422 F 2d 7 12

Fiumana Societa di Navigazione v Bunge and Co Ltd [1930] 2 KB 47 3, 4

Foreman & Ellams Ltd v Federal Steam Navigation Co [1928] 2 KB 424 12

Forward v Pittard (1785) 1 TR 27 13

Galoo Ltd & Ors v Bright Grahame Murray [1994] BCC 319 23

Gatoil International v Tradax Petroleum Ltd - The “Rio Sun” [1985] 1

Lloyd‟s Rep 350

13

Gosse Millerd Ltd v Canadian Government Merchant Marine Ltd [1929]

AC 223

8, 12, 13, 15

Great China Metal Industries Co Limited v Malaysian International

Shipping Corporation Berhad – The “Bunga Seroja” (1998) 72 ALJR 1592

6

Hadley v Baxendale [1854] EWHC Exch J70 23

Hamilton v Mackie (1889) 5 TLR 677 3

Hourani v Harrison (1927) 32 Com Cas 305 8

Jackson v Royal Bank of Scotland Plc [2005] UKHL 3 24

Kawasaki Kisen Kabushiki Kaisha of Kobe v Bantham Steamship Company

(1939) 63 Lloyd‟s Rep 155

9, 10

Kopitoff v Wilson (1876) 1 QBD 377 6

Kwei Tek Chao v British Traders and Shippers Ltd (1954) 98 SJ 163, [1954]

2 QB 459

25

Leesh River Tea Co Ltd v British India Steam Navigation Co Ltd – The

“Cheybassa” [1967] 2 QB 250

8


vi

Lennard's Carrying Co v Asiatic Petroleum Co [1915] AC 705 9

Leval v Colonial Steamships [1961] 1 Lloyd's Rep 560 9

Leyland Shipping Co v Norwich Union Fire Insurance Society [1918] AC

350 (HL)

23

London Joint Stock Bank v Macmillan [1918] AC 777 (HL) 23

Maxine Footwear Co Ltd v Canadian Government Merchant Maritime

Marine Ltd – “The Maurienne” [1959] AC 589

5

McFadden v Blue Star Line [1905] 1 KB 697 6, 7

Mediterranean Freight Services v BP Oil International – “The Fiona” [1993]

1 LR 257

5

Miramir Maritime Corp v Holborn Oil – The “Miramir” [1984] AC 676 4

Monarch Steamship Co Ltd v Karlshamns Oljefabriker [1949] AC 196 (HL) 23

Morse v Slue (1671) 1 Vent 190 11

National Oil Co of Zimbabwe v Sturge [1991] 2 Lloyd‟s Rep 281 10

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

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

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

6

P Samuel & Co Ltd v Dumas [1924] AC 431 11

Papera Traders Co Ltd v Hyundai Merchant Marine Co Ltd (The Eurasian

Dream) [2002] 1 Lloyd‟s Rep 719

7

Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd [1977] EWCA Civ 13 24

Paterson Steamships Ltd v The Canadian Co-operative Wheat Producers

Ltd [1935] S C R 617

8


vii

Pickering v Barclay (1672) Style 132 11

Pride Shipping Corp v Chung Hwa Pulp Corp - The “Oinoussin Pride”

[1991] 1 Lloyd‟s Rep 126

4

Queensland National Bank Ltd v Peninsular and Oriental Steam Navigation

Co [1898] 1 QB 567

6

Re Piracy Jure Gentium [1934] AC 586 (PC) 11

Reeves v Commissioner of Police of the Metropolis [2000] 1 AC 360 (HL) 23

Renton v Palmyra [1957] AC 149 13

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

1 KB 785

11

Rodocanachi v Milburn (1886) 18 QBD 67 (CA) 30, 31

Russell v Niemann (1864) 17 CBNS 163 13

Seafood Imports v ANL Singapore [2010] FCA 702 21 13

Sharpe (C) & Co Ltd v Nosawa & Co [1917] 2 KB 814 (KB) 24

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

Slater v Hoyle & Smith Ltd [1920] 2 KB 11 (CA) 25

Smith, Hogg & Co, Ltd v Black Sea & Baltic Insurance Company Ltd

[1940] 67 Lloyd‟s Rep 25

6

Spence v Chadwick (1847) 10 QB 517 13

Spinney‟s (1948) Ltd v Royal Insurance Co Ltd [1980] 1 Lloyd‟s Rep 406 10

Stansbie v Troman [1948] 2 KB 48 (CA) 23

Sunkist Growers Inc v Adelaide Shipping Lines, Ltd 603 F 2d 1327 12


viii

T W Thomas and Co Ltd v Portsea Shipping Co Ltd [1912] AC 1 3, 4

Tai Hing Cotton Mill Ltd v Kamsing Knitting Factory [1979] AC 91 24

Thames and Mersey Marine Insurance Co v Hamilton Fraser and Co – The

“Inchmaree” (1887) 12 App Cas 484

11

The Annefield [1971] P 168 3 3

The Arpad (1934) 49 Ll L Rep 313 (CA) 25

The Christel Vinnen [1924] P 208 7

The Delos [2001] 1 Lloyd‟s Rep 703 4

The Edmund Fanning 201 F 2d 281 9

The England [1973] 1 Lloyd's Rep 373 9

The Europa [1908] P 84 6

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

The Lady Gwendolen [1965] 2 All ER 283 14 9

The Maori King [1895] 2 QB 550 6

The Nai Matteini [1988] 1 Lloyd‟s Rep 452 4

The Rena K [1978] 1 Lloyd‟s Rep 545 4

The Star Sea [1995] 1 Lloyd‟s Rep 651 7

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

UKHL 48

23

Transworld Oil Ltd v North Bay Shipping Corp – “The Rio Claro” [1987] 2

Lloyd‟s Rep 173

24

Varian Assocs v C. G. T. 85 Cal App 3d 369 12


ix

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

(CA)

23

Virginia Carolina Chemical Co v Norfolk and North American Steam

Shipping Co [1912] 1 KB 229

6

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

Rep 509

5

Westinghouse Electric Corp v M/V Leslie Lykes 734 F 2d 199 9

BOOKS

American Jurisprudence (2nd

edn) 15

Black's Law Dictionary (9th edn 2009) 6

Douglas Hodgson, The Law of Intervening Causation (Ashgate, 2008) 23

Edwin Peel, Treitel: The Law of Contract (12th edn, Sweet & Maxwell, 2011) 24

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

Maxwell, 3rd

edn, 2012)

3,6, 15

Halsbury‟s Laws (5th edn, 2010) vol 7 6, 15

HG Beale (ed), Chitty on Contracts (Common Law Library, 31st edn, Sweet &

Maxwell, 2012)

23, 24

Hodges, Law of Marine Insurance (Cavendish, 1996) 13

Indira Carr, International Trade Law (4th edn, 2010) 9

Jason Chuah, The Law of International Trade (3rd

edn, 2009) 6

Jervis, Reeds Marine Insurance (Adlard Coles, 2005) 13

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


x

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

2006)

12

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

of Goods by Sea (Routledge, 2004)

13

Paul Todd, Maritime Fraud and Piracy (2nd

edn, Informa Publishing, 2010) 7, 8, 13, 14

Robert Markin, Arbitration Law (Informa, 2012) 3

Simon Baughen, Shipping Law (4th edn, T and F Publishing, 2009) 6, 7, 8

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

and Maxwell, 2008)

3, 13, 14, 16

Tetley, Marine Cargo Claims (3rd

edn, 1988) 10

Yvonne Baatz, „Arbitration‟ in Maritime Law, Yvonne Baatz (ed) (2nd

edn, Sweet

and Maxwell, 2011)

4

ARTICLES

Lars Gerspacher, „The Ambiguous Incorporation of Charter parties into bills

of lading under English law: A Case of too many cooks?‟ (2006) 12 JIML

192

3

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)

9,10

Paul Todd, „Incorporation of arbitration clauses into bills of lading‟ (1997)

Journal of Business Law, Jul, 331

3

MISCELLANEOUS

Best Management Practices for Protection against Somali Based Piracy (Version

7, 8, 11


xi

4, 2011)

Comite Maritime International, Travaux Preparatoires of the Hague Rules and the

Hague-Visby Rules, 408

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

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

Visby%20Rules.pdf>

14

International Maritime Bureau Database on Piracy Incidents <http://icc-

ccs.org/piracy-reporting-centre/request-piracy-report> 7

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

(The World Bank Regional Vice-Presidency for Africa, 2013) at 2, Figure 1.1(a)

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

main-report-web.pdf>

7

The International Maritime Organisation (IMO), „IMO and shipping industry

bodies urge continued application of anti-piracy measures‟, Briefing: 05, January

17, 2013

< www.imo.org/MediaCentre/pressbriefings/pages/05-piracy.aspx>

9

STATUTES

Arbitration Act, 1996 3

Bill of Lading Act, 1855 19, 21

Carriage of Goods by Sea Act, 1992 18


xii

QUESTIONS PRESENTED

I. Does the Arbitral Tribunal have the jurisdiction to hear the present dispute?

II. Have the Respondents have failed to discharge their obligations under Article III Rule 2 of the

Hague-Visby Rules resulting in damage to the cargo?

III. May the Respondents invoke the excepted perils available under Article IV Rule 2 of the Hague-

Visby Rules?

IV. Are the Respondents liable for the discharge of cargo at Rotterdam as opposed to Liverpool?

V. Are the Respondents liable to the Claimant for delivering the cargo other than as against the

presentation of the Bill of Lading?

VI. Are the Respondents liable to the Claimant in bailment?

VII. Are the Respondents liable to the Claimant under the tort of conversion?

VIII. If the Respondents are liable to the claimant under any of the above heads, to what extent are

they so liable?


1

STATEMENT OF FACTS

THE PARTIES AND THE SALE CONTRACT

Aardvark Ltd (“the Claimants”) were the buyers 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 Sellers by way of a

Charterparty which included a liberty clause. The Charterparty, including its Law and Arbitration

Clause, have been incorporated into the bills of lading issued by the Respondents.

PIRACY ATTACK

En route to Merseyside, 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 CLAIMANT AND SELLER

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

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

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 sent an email holding the Sellers in

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 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 Respondents were issued a LOI by the Seller requesting delivery of cargo

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

March,

2009, the Claimant sent a mail to the Respondents claiming to be the lawful holders of the B/L.


2

DUTCH COURT PROCEEDINGS

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

unsuccessfully tried to set aside in the courts of Rotterdam. The Claimants successfully arrested the

Vessel as security for their claims. On the guarantee of the Paradox Bank in favour of the Claimants

for the claim amount, the Vessel has been released.

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.


3

ARGUMENT

I. THE TRIBUNAL HAS JURISDICTION TO HEAR THESE PROCEEDINGS.

1. The jurisdiction of the arbitration tribunal is premised on the existence of a valid agreement

to arbitrate between the parties.1 Under s. 30(1) of the Arbitration Act, 1996, a tribunal may rule on

its own jurisdiction.

2. At the outset, it is submitted that the Respondents are precluded by the operation of estoppel

from challenging the jurisdiction of this Tribunal. Not only did the Respondents consent, by

signature, to the terms of the Charterparty but also failed to object to the express incorporation of the

arbitration clause by the B/L. Hence, they may not challenge the jurisdiction of this Tribunal.

3. In any case, Claimants submit that there existed a valid agreement to arbitrate as the

Arbitration clause of the Charterparty was validly incorporated into the B/L [A] and the fixture recap

constituted the Charterparty [B].

A. The Arbitration clause was validly incorporated into the B/L

There are two issues to be considered before an Arbitration clause is validly incorporated into a B/L.

First, the incorporating provision must expressly incorporate the Arbitration clause, and second, the

language of the Arbitration clause itself must facilitate incorporation. In the present case, both these

conditions being fulfilled, a valid incorporation takes place.

i.THERE IS AN EXPRESS INCORPORATION OF THE ARBITRATION CLAUSE.

4. An arbitration clause must be expressly referenced by the incorporating provision for a

successful incorporation.2 In the present case, Clause (1) on the reverse of the CONGENBILL

expressly provides that for the incorporation of the arbitration clause: “All terms and conditions,

1 Robert Markin, Arbitration Law (Informa, 2012) 5.1-5.2.

2 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.


4

liberties and exceptions…including the Law and Arbitration/Dispute Resolution Clause, are

herewith incorporated”.3 Thus, as there is express reference to the Arbitration clause, the first

condition for valid incorporation has been fulfilled.

ii.THE LANGUAGE OF THE ARBITRATION CLAUSE FACILITATES INCORPORATION.

5. The second consideration is that of „linguistic inapplicability‟ which arises when the language of

an arbitration clause is not conducive to being read into the B/L.4 In the present case, the arbitration

clause governs “any dispute arising from the making, performance or termination of this Charter

Party…”5 This clause, if read into the B/L would be “embarrassing and ambiguous”6 as its text

applied to disputes only under the Charter.7 However, where the intention of parties to arbitrate

disputes has been clearly discernible courts have been willing to “manipulate or adapt part of the

wording of that clause in order to give effect to that intention”.8 Beginning in The Rena K, express

references which „identify and specify‟9 arbitration clauses have been held to express the intention of

parties to arbitrate. In fact in The Delos10, the court applied this very principle in relation to the

CONGEN bill – the B/L in the present dispute.

6. As indicated above, there is express incorporation of the arbitration clause. This is sufficient to

discern the parties‟ intention to submit disputes arising between them to arbitration.11 Hence, the

court may „manipulate‟ the language of the clause to apply to B/L as well. Thus, both conditions for

valid incorporation being fulfilled, the arbitration clause is incorporated into the B/L and constitutes

an agreement to arbitrate.

3 Cl (1) of „Conditions of Carriage‟, Pages. 17,19 and 21 of Bundle.

4 Thomas v Portsea [1912] AC 1; 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;

Paul Todd, „Incorporation of arbitration clauses into bills of lading‟ (1997) Journal of Business Law, Jul, 331. 5 Cl. 32 of Charter Party, at Page 11 of Bundle.

6 Thomas v Portsea [1912] AC 1, at 10 (Robson, J.)

7 The Nai Matteini [1988] 1 Lloyd‟s Rep.452 following Miramir Maritime Corp v Holborn Oil – The “Miramir” [1984]

AC 676. 8 The Rena K [1978] 1 Lloyd‟s Rep. 545, at 551 (Brandon, J.); Pride Shipping Corp. v Chung Hwa Pulp Corp - The

“Oinoussin Pride” [1991] 1 Lloyd‟s Rep. 126; Yvonne Baatz, „Arbitration‟ in Maritime Law, Yvonne Baatz (ed) (2nd

edn, Sweet and Maxwell, 2011 5. 9 Daval Aciers d‟Usinor et de Sacilor & Others v Armare SRL - The “Nerarno” [1996] 1 Lloyd's Rep. 1.

10 The Delos [2001] 1 Lloyd‟s Rep. 703 ;approved in The Wa SUDR [2009] EWHC 196 (Comm).

11 Daval Aciers d‟Usinor et de Sacilor & Others v Armare SRL - The “Nerarno” [1996] 1 Lloyd's Rep. 1; The Delos

[2001] 1 Lloyd‟s Rep. 703.


5

B. Moreover, the Fixture Recap constitutes the Charter Party.

7. The Respondents may contend that the VEGOILVOY12

Charter Party being unmodified and

unsigned was not validly executed or, that if it was, it subjected the parties to arbitration seated in

New York under American Law.13

Such a contention is without merit in light of the decision of the

Court of Appeal in The Epsilon Rosa.14

In that case, the question before the court was whether an

arbitration clause could be incorporated from a fixture recap where the Charterparty itself was

improperly executed. The Court, in that case, affirmed that a recap did „reduce the contract into

writing‟ and hence served to „constitute the Charter-party for the purposes of incorporation.‟15

8. Applying the ratio to the present case, the fixture recap email present here would be sufficient

basis for incorporation. Therefore, the “English Law. London Arbitration” clause of the fixture recap

would be incorporated into the B/L.

II. THE RESPONDENTS MAY NOT INVOKE THE EXCEPTIONS UNDER ARTICLE IV RULE 2 OF THE

HVR.

9. In this case, the Twilight Trader was attacked and hijacked by pirates in the Gulf of Aden.

The Respondents seek to rely on the exceptions to liability under Article IV Rule 2 of the HVR.

However, it is well settled that immunities under Article IV may not be relied upon unless the

„overriding obligation‟16

under Article III Rule 1 is fulfilled. Claimants submit that these exceptions

may not be invoked by the Respondents as they failed to take due diligence to provide a seaworthy

vessel as mandated by Article III Rule 1. In any case, none of the exceptions under Article IV Rule 2

are applicable to the present scenario.

12

VEGOILVOY Charter 1/27/50. 13

Cl. 32 of Charter Party, at Page 11 of Bundle. 14

Welex A.G. v Rosa Maritime Ltd – The “Epsilon Rosa” [2003] 2 Lloyd‟s Rep. 509. 15

Welex A.G. v Rosa Maritime Ltd – The “Epsilon Rosa” [2003] 2 Lloyd‟s Rep. 509, at ¶ 21, 31 (Tuckey, LJ.) 16

Maxine Footwear Co Ltd. v Canadian Government Merchant Maritime Marine Ltd. – “The Maurienne” [1959] AC

589; Mediterranean Freight Services v BP Oil International – “The Fiona” [1993] 1 LR 257; 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) 751.


6

A. The Respondents did not fulfil their due diligence obligation under Article III

Rule 1 to ensure that the Twilight Trader was seaworthy

10. Under Article III Rule 1, a carrier must take due diligence to provide a ship that is seaworthy

i.e. the ship must be „properly equipped‟, „sufficiently strong‟17 and „in a condition to perform the

voyage then about to be undertaken‟.18 In effect, the vessel be „reasonably fit to withstand the perils

which may foreseeably be encountered on the voyage‟.19 To establish liability for a breach of Article

III Rule 1, it must be shown that the carrier did not take due diligence to provide a seaworthy vessel.

In addition, the Claimants must also establish that the unseaworthiness contributed to the

deterioration in quality of the goods being carried.20

11. In the present case, Claimants submit that (i) the Respondents failed to take due diligence to

provide a seaworthy vessel and (ii) the resultant unseaworthiness contributed to the damage to cargo.

i. THE RESPONDENTS FAILED TO TAKE DUE DILIGENCE TO PROVIDE A SEAWORTHY VESSEL

12. Carriers must ensure that due diligence is taken to so that vessel is „properly equipped‟21 to

withstand the „ordinary incidents‟22 of the contractual voyage.23 To comply with this provision, a

carrier must employ “the standards of a reasonable ship owner taking into account international

standards and the particular circumstances of the problem at hand”.24 On the present facts, the

17

Black's Law Dictionary (9th ed. 2009), seaworthy 18

Kopitoff v Wilson (1876) 1 QBD 377, 380 (Field J.); Virginia Carolina Chemical Co v Norfolk and North American

Steam Shipping Co [1912] 1 KB 229; Simon Baughen, Shipping Law (T and F Publishing, 4th

edn, 2009) 88; Julian

Cooke et. al, Voyage Charters (Lloyd‟s of London Press, 1993) 162; Jason Chuah, The Law of International Trade (3rd

edn, 2009) 234. 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; Halsbury‟s Laws

(5th

edn, 2010) vol 7, para 465. 20

McFadden v Blue Star Line, [1905] 1 K.B. 697 703; See also The Europa [1908] P. 84, Smith, Hogg & Co., Ltd v

Black Sea & Baltic Insurance Company Ltd [1940] 67 Lloyd‟s Rep. 253, 258; Simon Baughen, Shipping Law (T and F

Publishing, 4th

edn, 2009) 92. 21

The Maori King [1895] 2 QB 550; Queensland National Bank Ltd v Peninsular and Oriental Steam Navigation Co

[1898] 1 QB 567. Article III Rule 2, Hague-Visby Rules, 1968. 22

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

255; Article III Rule 2, Hague-Visby Rules, 1968. 23

Simon Baughen, Shipping Law (T and F Publishing, 4th

edn, 2009) 88; Article III Rule 2, Hague-Visby Rules, 1968. 24

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

255 (Auld, LJ.); Great China Metal Industries Co Limited v Malaysian International Shipping Corporation Berhad –

The “Bunga Seroja” (1998) 72 ALJR 1592; Paul Todd, Maritime Fraud and Piracy (2nd

edn, Informa Publishing, 2010)

1.114.


7

Respondents by omitting to take sufficient measures to counter the threat of piracy, failed to meet the

standards of a „reasonable ship owner‟.

13. At the time of the contractual voyage, there was an extremely high risk of pirate attacks in the

Gulf of Aden in 200825 – which was on the route to Europe from Indonesia. Thus, any „reasonable

ship-owner‟ would take precautions to mitigate the threat posed to their vessels. If not for the safety

of the crew or cargo, a reasonable owner would have taken precautions to reduce the insurance

premiums that would otherwise be incurred.26

14. However, the Respondents did not implement any such precautions27 which could have

included water-curtains28, citadels29, razor-wire30 and even armed guards.31 Neither did it train its

crew to deal with high-risk voyages.32 Thus, due diligence was not taken to ensure that the Vessel

was seaworthy or that it was properly manned. Thus, the Respondents were in breach of their

obligations under Article III Rule 1(a) and Rule 1(b).

ii. THE UNSEAWORTHINESS OF THE TRADER CONTRIBUTED TO THE DETERIORATION IN

QUALITY OF ITS CARGO

With regard to the second requirement, even a minimal contribution is sufficient to establish

causation.33 On the present circumstances, the taking of anti-piracy measures has been found, to

25

See International Maritime Bureau Database on Piracy Incidents < http://icc-ccs.org/piracy-reporting-centre/request-

piracy-report> as cited in Quy-Toan Do, The Pirates of Somalia: Ending the Threat, Rebuilding a Nation (The World

Bank Regional Vice-Presidency for Africa, 2013) at 2, Figure 1.1(a)

<http://siteresources.worldbank.org/INTAFRICA/Resources/pirates-of-somalia-main-report-web.pdf> 26

Quy-Toan Do, The Pirates of Somalia: Ending the Threat, Rebuilding a Nation (The World Bank Regional Vice-

Presidency for Africa, 2013) xxiii, 24 <http://siteresources.worldbank.org/INTAFRICA/Resources/pirates-of-somalia-

main-report-web.pdf> 27

¶ 5, Procedure Order No.2. 28

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




edn, Informa Publishing, 2010) 1.111; Best Management Practices for

Protection against Somali Based Piracy (Version 4, 2011) ¶ 8.15 at Page 39. 32


edn, Informa Publishing, 2010) 1.116; Papera Traders Co Ltd v Hyundai

Merchant Marine Co Ltd (The Eurasian Dream) [2002] 1 Lloyd‟s Rep 719; The Star Sea [1995] 1 Lloyd‟s Rep. 651

affirmed by [1997] 1 LR 360. 33

McFadden v Blue Star Line, [1905] 1 K.B. 697 703; Simon Baughen, Shipping Law (T and F Publishing, 4th

edn,

2009) 92; The Christel Vinnen [1924] P 208, CA.


8

substantially reduce the risk of a pirate hijacking.34 Thus, in increasing the pirates‟ chances of a

successful hijacking, the vessel‟s unseaworthiness directly contributed to the damage to the cargo.

B. In any case, the Respondents may not rely upon any of the exceptions

enumerated in Article IV Rule 2

15. In the event, if the Tribunal is of the opinion that the Respondents may rely on the exceptions

under Article IV Rule 2, the Claimants submit that the piracy of the Twilight Trader would not

qualify under any of the exceptions in Article IV Rule 2 of the HVR.

i. THE RESPONDENTS CANNOT INVOKE THE CATCH-ALL EXCEPTION AVAILABLE UNDER

ARTICLE IV RULE 2(Q) OF THE HAGUE-VISBY RULES

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

occasioned by events that arose without their „actual fault or privity‟ or the „the fault or neglect of its

agents or servants‟. In order to validly invoke this exception, the onus is on the carrier to establish

both of the above-stated conditions.35 On the facts of the present case, Claimants submit that the

hijacking of the Twilight Trader by pirates was occasioned by the „actual fault‟ of the Respondents in

omitting to take sufficient anti-piracy measures.

a. The Respondents did not take „reasonable care‟ to protect the Vessel

17. Under the burden imposed by Rule 2(q), it is incumbent on the carrier to disprove that his

„actual fault or privity‟ lead to the loss or damage of the cargo being carried. „Fault or privity‟ here

refers to any negligent or reckless act or omission of the carrier.36 In the present context, „negligence‟

may be adjudged with reference to the level of care taken by a „reasonable and prudent ship owner‟

whose vessel was transiting on the same route through the Gulf of Aden.

34

See for example The International Maritime Organisation (IMO), „IMO and shipping industry bodies urge continued

application of anti-piracy measures‟, Briefing: 05, January 17, 2013 <

www.imo.org/MediaCentre/pressbriefings/pages/05-piracy.aspx> 35

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]

S.C.R. 617; Gosse Millerd Ltd. v Canadian Government Merchant Marine Ltd. [1929] AC 223. 36

William Tetley, „Responsibility for Fire in the Carriage of Goods by Sea‟ [2002] ETL 1-35.


9

18. In the present case, the omission of the carrier to take sufficient anti-piracy measures

amounted to „fault‟. This conclusion is buttressed by the fact that the Respondents despite being fully

aware that the Twilight Trader would be transiting through the pirate-infested waters of the Gulf of

Aden, did not take anti-piracy precautions that a „reasonable or prudent‟ owner would have taken.37

Thus, the Respondent was at „fault‟ by omitting to take sufficient anti-piracy measures.

b. Moreover, this „fault‟ can be attributed personally to the carrier

19. This lack of „care‟ is however insufficient to debar the carrier from invoking the catch-all

exception. Under this clause, it is necessary for the fault to be attributable to be that of the company

itself. While it was previously required the fault to be of „a senior officer or employee‟ of the

carrier38, subsequent developments in corporate liability have diluted this requirement.39 Now, even a

low-level officer or supervisor can be held to act as the company for the purposes of attribution of

fault. Thus, where it was company policy to not take anti-piracy measures, the fault – whether of a

director or security officer– can be attributed to be that of Respondents..

ii. THE RESPONDENTS CANNOT RELY ON THE „ACT OF WAR‟ EXCEPTION AVAILABLE UNDER

ARTICLE IV RULE (2)(E)

In order to validly invoke the exception under Article IV Rule 2(e) of the HVR, the carrier must

show that the loss or damage to cargo arose on account of „an act of war‟. In the present case, it is

submitted that the attack by Somali pirates cannot be considered as an „act of war‟ and hence, this

exception cannot be relied upon.

20. While the existence of „war‟ is a question of fact not hinging on technical international law

definitions40 or formal declarations41, it is settled that the term must be given an import centred on

37

¶ 5, Procedure Order No.2. 38

Lennard's Carrying Co. v Asiatic Petroleum Co. [1915] A.C. 705, at 713-714; Westinghouse Electric Corp. v M/V

Leslie Lykes 734 F.2d 199, at 206-207; Leval v Colonial Steamships [1961] 1 Lloyd's Rep. 560; 39

The Lady Gwendolen [1965] 2 All E.R. 283; The England [1973] 1 Lloyd's Rep. 373; The Edmund Fanning 201 F.2d

281, 1953 AMC 86 (2 Cir. 1953). 40

Julian Cooke et. al, Voyage Charters (Lloyd‟s of London Press, 1993) 762. 41

Kawasaki Kisen Kabushiki Kaisha of Kobe v Bantham Steamship Company (1939) 63 Lloyd‟s Rep. 155.


10

„ordinary business meaning‟42 and „commercial common-sense‟43. One accepted definition is that of

Professor Westlake who defines war as „the state or condition of Governments contending by

force‟.44 While authorities have „studiously avoided‟45 any attempt at a definition of war, the decision

of Mustill J. in Spinney‟s provides guidance: “(1) Can it be said that the conflict was between

opposing „sides‟? (2) What were the objectives of the „sides‟ and how did they set about pursuing

them? What was the scale of the conflict, and of its effect on the public order and on the life of the

inhabitants?”46

21. The piracy of the Twilight Trader neither arose on account of hostilities between „two sides

or Goevernments‟ nor was occasioned by „political considerations or objectives‟.47 It was merely an

„armed robbery‟48 for personal gain of the pirates. Moreover, it was a „localised‟ and „sporadic‟

occurrence which itself had no impact on the public order or life. Thus, it would not meet the

requirement to be an „act of war‟ under Rule 2(e) of the HVR.

22. Such a conclusion is supported by the treatment of piracy as a „marine risk‟ in the maritime

insurance field. While the position of piracy has fluctuated between „marine risk‟ and a „war risk‟, it

is settled, as noted by Hodges49 and Jervis50, that piracy today is purely a „marine risk‟51 does not

amount to an „act of war‟.

42

National Oil Co. of Zimbabwe v Sturge [1991] 2 Lloyd‟s Rep. 281. 43

Kawasaki Kisen Kabushiki Kaisha of Kobe v Bantham Steamship Company (1939) 63 Lloyd‟s Rep. 155, at 164; Lord

Justice Aikens, Richard Lord QC, Michael Bools, Bills of lading (1st edn, 2006) 10.221.

44 Professor Westlake, International Law, Part II, p. 1 cited with approval in Kawasaki Kisen Kabushiki Kaisha of Kobe v

Bantham Steamship Company (1939) 63 Lloyd‟s Rep. 155, at 164. 45

Lord Justice Aikens, Richard Lord QC, Michael Bools, Bills of lading (1st edn, 2006) 10.221.

46 Spinney‟s (1948) Ltd v Royal Insurance Co Ltd [1980] 1 Lloyd‟s Rep 406, 438 (Mustill J).

47 Spinney‟s (1948) Ltd v Royal Insurance Co Ltd [1980] 1 Lloyd‟s Rep 406, 438 (Mustill J); Julian Cooke et. al, Voyage

Charters (Lloyd‟s of London Press, 1993) 763; 48

Julian Cooke et. al, Voyage Charters (Lloyd‟s of London Press, 1993) 763; 49

Hodges, Law of Marine Insurance (Cavendish, 1996) 212. 50

Jervis, Reeds Marine Insurance, (Adlard Coles, 2005) 57. 51


edn, Informa Publishing, 2010) 1.042.


11

iii. THE RESPONDENTS CANNOT RELY ON THE „PERILS OF THE SEA‟ EXCEPTION AVAILABLE

UNDER ARTICLE IV RULE 2(C)

23. A „peril of the sea‟ must be “of” the sea or navigable water in the sense that it is unique to or

„characteristic of maritime adventures‟.52 In the present case, Claimants submit that Piracy was not a

phenomenon that was „characteristic of‟ or „unique to‟ the maritime context (a) and moreover that

the precedent which treated piracy as a peril of the sea is no longer applicable (b).

a. Piracy is not a phenomenon „characteristic of‟ or „unique to‟ the maritime context

24. Piracy, by definition53, is an act of robbery or depredation which happens to occur in a

maritime context. Such offences are not restricted to targeting marine vessels or characteristic

maritime carriage. Claimants submit that they are merely „perils of transport‟ which could occur „just

as much as land as on the water‟.54 Hence, piracy cannot be characterised as a peril which is

characteristic to the sea under the meaning of Rule 2(c).

b. The decision in Pickering v. Barclay is no longer applicable.

25. While in Pickering, piracy was considered a peril of the sea55, Claimants submit this notion it

is antiquated and inapplicable in the modern context. Moreover, its validity has been doubted by

scholars including Scrutton56 and Todd.57 Recent trends in interpreting the „perils of the sea‟ can be

discerned from cases of intentional scuttling – which being malicious damage caused by third party

actors – are comparable to piracy-caused damage.58 In Dumas, the House of Lords ruled that

intentional scuttling was not „fortuitous‟, and hence could not be considered a „peril of the sea‟.59

52

Julian Cooke et. al, Voyage Charters (Lloyd‟s of London Press, 1993) 758; Thames and Mersey Marine Insurance Co.

v Hamilton Fraser and Co. – The “Inchmaree” (1887) 12 App. Cas. 484 (Bramwell at 492). 53

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

Piracy Jure Gentium [1934] AC 586 (PC); Athens Maritime Enterprises Corporation v Hellenic Mutual War Risks

Association (Bermuda) Ltd – The “Andreas Lemos” [1982] 2 QB (Com. Ct) 483; Thames and Mersey Marine Insurance

Co. v Hamilton, Fraser and Co .- The “Inchmaree” (1887) 12 AC 484 54

Julian Cooke et. al, Voyage Charters (Lloyd‟s of London Press, 1993) 85.283. 55

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 56

Steward C. Boyd, Scrutton on Charterparties and Bills of Lading (21st edn, Sweet and Maxwell, 2008) 214.

57 Paul Todd, Maritime Fraud and Piracy (2

nd edn, Informa Publishing, 2010) 1.119.

58 Paul Todd, Maritime Fraud and Piracy (2

nd edn, Informa Publishing, 2010) 1.120.

59 P Samuel & Co Ltd v Dumas [1924] AC 431.


12

Scholars such as Todd in affirming this approach have all but concluded that neither scuttling nor

piracy could be considered a „peril of the sea‟.60

iv. THE RESPONDENTS CANNOT RELY ON THE „ACT OF PUBLIC ENEMIES‟ EXCEPTION

AVAILABLE UNDER ARTICLE IV RULE 2(C)

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

„acts of public enemies‟. In the present case, Claimants submit the meaning of the exception is

unclear, and therefore cannot be reconciled with the strict interpretation that must be accorded to it.

a. Whether acts of piracy are covered by the „acts of public enemy‟ exception is doubtful

27. Scrutton notes that its meaning is „unclear‟, and that the exception quaere covers the actions

of pirates.61 Clark and Thomson point out that there persists doubt and uncertainty as to its „full

meaning, application and interpretation‟.62 Such a level of uncertainty persisted at the time of

drafting the Rules as well – with the Travaux Preparatoires indicating that, despite an explicit

reference to piracy, there was no agreement on its coverage by the clause.63

b. When construed strictly, the „act of public enemies‟ exception would not cover pirates.

28. The exceptions in the HVR under Article IV Rule 2 are to be construed narrowly64 and

strictly65 so as to preserve the compromise between the interests of carriers and shippers provided for

in the HVR.66 If such a restrictive construction is adopted in the context of Rule 2(f), it is submitted

that the term „public enemy‟ would extend to cover the acts of enemies of the state of the ship owner.

60


edn, Informa Publishing, 2010) 1.124. 61

Steward C. Boyd, Scrutton on Charterparties and Bills of Lading (21st edn, Sweet and Maxwell, 2008) 202.

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

63 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%2

0and%20of%20the%20Hague-Visby%20Rules.pdf> 64

Gosse Millerd, Ltd. v Canadian Merchant Marine, Ltd. (1928) 32 Lloyd‟s Rep. 91. 65

William Tetley, „Seven Rules of Interpretation (Construction) of Bills of Lading‟ in Liber Amicorum Robert Wijffels

(Antwerp, 2001) 359; Foreman & Ellams Ltd. v Federal Steam Navigation Co., [1928] 2 K.B. 424 at p. 439 (Wright, J.). 66

Encyclopaedia Britannica v Hong Kong Producer, 422 F.2d 7 at p. 11, (2 Cir. 1969), cert. denied, 397 U.S. 964. See

also Campfire (Pan-American Trade and Credit Corp. v Campfire) 156 F.2d 603 at p. 605; and Varian Assocs. v C. G.

T. 85 Cal. App. 3d 369 at p. 375; Sunkist Growers, Inc. v Adelaide Shipping Lines, Ltd. 603 F.2d 1327, at 1331.


13

29. Such an approach is line with the views of Scrutton who states that the equivalent67 „Queen‟s

Enemies‟ exception would only refer to states recognised as at war with the ship-owner‟s state and

not to piratical or traitorous subjects68 or to states at peace.69 Furthermore, decisions such as those in

Ehrlich-Newmark Trucking Co.70 have accorded similar interpretations to „public enemies‟, holding

that thieves, robbers or hijackers – who „although at war with social order, are not in a legal sense

defined as public enemies‟71 – would not fall within the ambit of the exception.

30. Thus, in light of the strict construction that is to be accorded to the exception, the acts of

pirates cannot be covered under the „acts of public enemies‟ exception.

III. THE RESPONDENTS BREACHED THEIR OBLIGATIONS UNDER ARTICLE III RULE 2 OF THE HVR

31. Carriers are under an absolute obligation to properly and carefully handle the goods being

carried.72 This translates to carefully implementing a „sound system‟ of carriage.73 The soundness of

a system is to be adjudged in relation to the „general practice of carriage of goods by sea‟.74

A. The inapplicability of the exceptions under Article IV of the Rules ipso facto

results in a breach of the obligations under Article III Rule 2

32. Carver suggests that while „carefully‟ under Article III Rule 2 denotes no more than the

absence of negligence, „properly‟ imports something „nearer to strict liability‟75 – unless an excepted

peril can be proved.76 As Article IV Rule 2 is inapplicable herein, the mere fact that there was

67

Halsbury‟s Laws (5th

edn, 2010) vol 7, para 389. 68

Russell v Niemann (1864) 17 CBNS 163, at 175 (Byles J.); Marshal or Marshalsea‟s Case and comments thereon,

Holmes Common Law, pp. 177, 201; Forward v Pittard (1785) 1 T.R. 27, at 34 (Lord Mansfield). 69

Spence v Chadwick (1847) 10 QB 517. 70

David Crystal Inc. v Ehrlich-Newmark Trucking Co. 314 N Y S 2d 559 (1970). 71

American Jurisprudence (2nd

edn), Carriers §546. 72

Article III Rule 2, Hague-Visby Rules, 1968. 73

Scrutton on Charterparties and Bills of Lading (21st edn, Sweet and Maxwell, 2008) 389; Renton v Palmyra [1957]

A.C. 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

Gippslan” (1994) 34 NSWLR 29; CV Sheepvartondereneming Ankergracht v Stemcor (Australasia) Pvt Ltd [2007]

FCAFC 77; Seafood Imports v ANL Singapore [2010] FCA 702. 74

Albacora v Westcott and Laurance Line [1966] 2 Lloyd‟s Rep. 53 (Lord Pearce). 75

Gosse Millard v Canadian Government Merchant Marine Ltd. [1927] 2 K.B. 432 at 434 (Wright, J.). 76

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

edn, 2012) 9-146, 671


14

deterioration in the quality of cargo is sufficient to attach strict liability to Twilight for breach of its

obligation to properly carry its cargo under Article III Rule 2.

B. Respondents failed to implement a ‘sound system’ of anti-piracy measures

33. Here, the Respondents were fully aware that the voyage about to be prosecuted involved a

high-piracy area i.e. the Gulf of Aden. Accordingly, they were obligated to implement a system that

was capable of mitigating if not eliminating the risk posed by Somali pirates. As submitted above, no

precautionary measures – in line with „reasonable‟ conduct or „industry practice‟ were taken. Thus,

the Respondents did not employ a sound system of carriage and breached Article III Rule 2.

C. The Respondents breached their obligations under Article III Rule 2 by not

taking cargo care measures during the period the vessel was hijacked.

34. Furthermore, the Respondents were under an obligation to „stow‟ and „care for‟ the cargo in

question.77 This included the obligation to ensure that no contamination occurred to it. While, the

Respondents may submit that they were disabled from discharging this obligation due to the actions

of the Somali pirates, such an argument is unsustainable as has been established. The „negligence‟ of

the Respondents contributed to the success of the pirate attack. Consequently, the Respondents may

not rely on any exculpatory exception and must be held liable for the breach of Article III Rule 2.

D. The Respondents breached their obligations under Article III Rule 2 by not

‘properly discharging’ the cargo

35. A carrier is said to „properly discharge‟ its cargo when it is delivered from the ship‟s tackle „in

the same apparent order and condition as on shipment‟.78 Case in fact, the PFAD that was finally

discharged from the vessel exhibited higher concentrations of arsenic which resulted in the PFAD no

longer being of a quality fit for human consumption. In other terms, the PFAD discharged was not in

the same order and condition as on shipment. Thus, it is submitted that the PFAD was not „properly

discharged‟ by the Respondents resulting in a breach of their obligations under Article III Rule 2.

77

Article III Rule 2, Hague-Visby Rule, 1968. 78

Gosse Millard v Canadian Government Merchant Marine Ltd. [1927] 2 K.B. 432 at 434 (Wright J.)


15

IV. THE RESPONDENT BREACHED THE CONTRACT OF CARRIAGE BY DISCHARGING AT ROTTERDAM

36. The Respondent, by discharging the cargo at Rotterdam, Netherlands breached the contract of

carriage which named Liverpool, UK as the port of discharge.

A. The B/L constitutes the contract of carriage between the Claimants and

Respondents

37. A B/L while only „evidence of the contract of carriage‟ in the hands of the shipper, itself

becomes the contract of carriage in the hands of a third party to whom the B/L has been indorsed.79

In the present case, the B/L served as the contract of carriage between the Respondents and the

Claimants who were third-party indorsees. Once indorsement is complete, this contract cannot be

modified or altered by any agreement of the shipper and the respondent.80

B. The terms of the contract of carriage were breached by the Respondents

38. The ship owner is under a duty to proceed without delay to the specified port of discharge

and to deliver the cargo there.81 In the absence of a „lawful excuse‟, this duty cannot be derogated

from.82 In the present case, the Respondents not only failed to deliver the cargo at the agreed-upon

port of discharge i.e. Liverpool but are not saved from liability by any exception in law or contract.

i. THE LIBERTY CLAUSE IS NULL AND VOID UNDER ARTICLE III RULE 8

39. Article III Rule 8 of the HVR has the effect of nullifying any „clause‟ if it purports to relieve

or lessen the liability for „fault or failure in the duties and obligations provided in this Article‟.83 On

facts, the present Liberty Clause84 is void as it seeks to relieve the liability of the Respondents for

failures to discharge obligations under Article III Rule 2 of the HVR to properly discharge cargo. It

is settled that when a failure to deliver the goods to the correct receiver arises from “something done

79

Indira Carr, International Trade Law (4th

edn, 2010) 251; Glyn Mills & Co v East and West India Dock Co (1882) 7

App Cas. 591 (HL); Bank of Australasia and Ors v Clan Line Steamers Ltd [1916] 1 KB 39. 80

Fry v Chartered Mercantile Bank of India (1866) LR 1 CP 689; Leduc & Co v Ward (1888) 20 QBD 475. 81


edn, 2008) vol 7, para 477, 520. 82


edn, 2008) vol 7, para 520. 83

Julian Cooke et. al, Voyage Charters (Lloyd‟s of London Press, 1993), 744 – 745. 84

Clause 29(a) of the Charterparty.


16

during the carriage prior to discharge”, there is a breach of Article III Rule 2.85 In the instant case,

the failure to deliver the goods to the Claimant arose on account of a deviation – something that was

clearly in the course of the carriage. Hence, there is a duty under Article III Rule 2 upon the

Respondents to deliver cargo to the correct receiver. As the Liberty Clause in the present case – due

to its wide import – seeks to absolve the carrier from breach of this obligation of „proper delivery to

correct receiver‟, it is null and void.

ii. IN ANY CASE, THE LIBERTY CLAUSE CANNOT BE APPLIED TO SAVE THE RESPONDENT

40. Even if the Liberty Clause is assumed to be valid, it cannot operate to justify the

Respondents‟ „change of voyage‟. It is well-settled that however widely such clauses have been

drafted, they must be interpreted so as to be consistent with „the overall voyage contemplated‟86 and

„the main object of the contract‟.87 Per Lord Sumner, “…a liberty to deviate however generally

worded cannot frustrate, but must be subordinate to the described voyage”88 It is clear in the instant

case, that the clause cannot be permitted to allow the abandonment of the described voyage –

transport of cargo from Malaysia to Liverpool – as evidenced by the B/L.89 Such a deviation, if

allowed, would frustrate the main object of the contract..

C. The Claimants did not acquiesce to the deviation to Rotterdam

41. In no correspondence which involved the Claimants was there explicit approval to delivery at

Rotterdam. If anything, the email addressed to the Respondents, dated 20th

March, 2009, discloses

explicit disapproval towards such a proposal.90 The same disapproval is again expressed by the

Claimants, to the Shipper, in another communication dated 20th

March 2009.

85

Cia Portorafti Comerciale v Ultramar Panama Inc. – The “Captain Gregos” [1990] 1 Lloyd‟s Rep 310; Julian Cooke

et. al, Voyage Charters (Lloyd‟s of London Press, 1993) 723. 86

Foreman & Ellams Ltd v Federal SN Co.Ltd [1928] 2 KB 424. 87

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

edn, 2012) 9-041. 88

Frenkel v MacAndrews and Co Ltd [1929] AC 545, 562. 89

Page 14, 16, 18, 20 of Bundle. 90

Page 36 of Bundle.


17

V. THE RESPONDENTS BREACHED THE CONTRACT OF CARRIAGE BY DELIVERING OTHERWISE

THAN AGAINST THE PRESENTATION OF THE BILLS OF LADING.

42. On 6th

of March 2009, the Claimants notified the sellers of the termination of the contract of

sale due to non-tender of essential documents by the sellers.91 However, the Claimants were by then

already in possession of the B/L that had been delivered to them against the payment of the purchase

price.92 The Claimants offered to return the documents. On receiving no commitment from the

Sellers on the repayment of the purchase price, they forwarded the B/L to their agent, to hold on their

behalf until the receipt of the price.93 Subsequently, the Respondents, released the cargo to the Sellers

without the presentation of the B/L.94

43. A B/L contains or evidences the contract of carriage between the carrier and the shipper. 95 By

virtue of s. 2(1) of the COGSA96, a “lawful holder” of the B/L has vested in him all rights of suit

under the contract of carriage. 97 The Claimants submit that they are the lawful holders of the B/L (A)

who have the right to delivery of the cargo under the contract of carriage (B). The Respondents are

thus liable for breaching for breaching the contract of carriage by discharge without the presentation

of the bills of lading (C). The Respondents‟ liability is de hors the rights of the claimant under

underlying contract of sale (D).

A. The Claimants are the Lawful Holder of the Bill of Lading

44. A person with the possession of the B/L as a result of completion of the delivery of the B/L

by transfer or endorsement is a “lawful holder” under s. 5(2)(b) of the COGSA. The Claimants

submit that the shipper has indorsed the B/L issued to their order in blank. The B/L now functions as

a bearer bill and can be transferred by delivery alone without indorsement.98 The Claimants are in

91

Page 25 of Bundle. 92

Page 29 of Bundle. 93

Pages 31, 33 of Bundle. 94

Paragraph 17, Page 68, Claims Submissions 95

Glyn Mills & Co. v East and West India Dock Co [1882] 7 App. Cas. 591, 596. 96

Hereinafter COGSA. 97

Borealis AB v Stargas Ltd and another -The Berge Star [2002] 2 AC 205, 226 [30] 98

GH Treitel and FMB Reynolds, Carver on Bills of Lading ( 3rd

ed. , Sweet and Maxwell, 2011) 12.


18

possession by virtue of delivery99, and are thus the lawful holders of the B/L. Additionally, they are

the holders of the B/L in good faith under s. 5(2) of the COGSA as they hold the B/L on the payment

of entire purchase price on the cargo. 100 All „rights of suit‟ under the B/L contract thus stand

transferred to the Claimants.101

B. The Claimants are entitled to the delivery of the cargo

45. The words “rights of suit” have not been defined under the COGSA. However, East West

Corporation102 recognized that the right includes the right to delivery of the cargo on the presentation

of the B/L. Any interpretation of the “rights of suit” to the contrary would lead to an absurdity as the

carrier can circumvent any potential claim under the contract of carriage merely by withholding

delivery.103 Accordingly, the contractual right to the delivery of the cargo is vested in the Claimants.

The Respondents have breached the contract of carriage by delivering the goods to the Sellers, and

are liable to the Claimants for the same.

C. The Respondents are Liable for Delivery without Presentation of the B/L

46. It is the essence of the B/L contract that the carrier is bound to deliver only against the

presentation of the bill of lading.104 A carrier who delivers without the production of the B/L does so

at his risk and peril.105 He is liable for the breach of the B/L contract even if he has delivered to a

person entitled to the possession of the cargo. 106 Here, the Respondents have discharged the cargo to

the Sellers without the presentation of the B/L. They are thus liable in breach of contract to the

Claimants, the lawful holders of the B/L.

99

¶ 11, Page 67 of Bundle. 100

Aegean Sea Traders Corp v Repsol Petroleo SA & Anor- The “Aegean Sea” [1998] CLC 1090, 1118. 101

Carriage of Goods by Sea act, 1992, s 2(1). 102

East West Corporation v DKBS 1912 and AKTS Svenborg [2002] EWHC 83 (Comm) [50]; Borealis AB v Stargas Ltd

and another – The “Berge Star” [2002] 2 AC 205, 226 [Para 31]. 103

C Debattista, Bills of Lading in Export Trade (3rd

edn, Bloomsbury Professional, 2008) 2.8 104

Motis Exports Ltd v Dampskibsselskabet AF 1912, Aktieselskab & Anor [1999] CLC 914 ( Queen‟s Bench) 918; Sucre

Export SA v Northern River Shipping Ltd - The Sormovskiy 3068 [1994] CLC 433, 442; JI MacWilliam Co Inc v

Mediterranean Shipping Company SA – The Rafaela [2005] UKHL 11. 105

Sze Hai Tong Bank Ltd v Rambler Cycle Co. Ltd. [1959] AC 576, 586. 106

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.


19

D. The Respondents’ liability is de hors the contract of sale

47. The Respondents may contend that the Claimants are not entitled to the delivery of the cargo

as they abandoned the cargo upon terminating the contract of sale they had entered to with the

Sellers .The Claimants submit that they are the lawful holders of the B/L on the payment of the

purchase price107 and property in the cargo has thus passed to them.108 In any event, the Claimants

submit that a Court will not look behind the B/L to determine who is entitled to the delivery of the

goods. . Courts do not disregard the rights of the indorsee of a B/L, even though the indorsee has no

interest in the goods in order to hold the owners of the goods as lawful holders of the B/L. 109 Hence,

the lawful holder has vested in him all the rights under the contract of carriage regardless of his

interest in the goods according to the underlying contract. Consequently, a carrier who refuses to

deliver the goods to the lawful holder of the B/L is liable even if this is in pursuance of the unpaid

seller‟s right to stop the goods in transit. 110 Herein, the Claimants submit that they are the lawful

holders of the B/L111; and no recourse may be taken to the contract of sale to justify non-delivery.

48. Only such an interpretation consistent with the COGSA. The object and purpose of the

COGSA is to sever the link between contractual rights under the B/L and any property rights under

the contract of sale.112 It sought to remedy the injustices wrought by the 1855 Act which linked

contractual rights under the B/L to the ownership of goods by virtue of the indorsement of the B/L.113

Any attempt to restrict the right to delivery of the lawful holder on the basis of the property rights

107

¶11, Page 67 of Bundle; Page 29 of Bundle. 108

Benjamin, Sale of Goods (8th

edn, Sweet and Maxwell, 2010)18-116. 109

Bandung Shipping Pte Ltd v Keppel Tatlee Bank Ltd [2003] 1 SLR 295[27] ; East West Corporation v DKBS 1912 and

AKTS Svenborg [2002] EWHC 83 (Comm) [22] ; UCO Bank v Golden Shore Transportation Pte Ltd [2006] 1 SLR

1[22]. 110

C Debattista, Bills of Lading in Export Trade (3rd

edn, Bloomsbury Professional, 2008) 2.53 111

See above at V (A) 112

Law Commission, Rights of Suit in Respect of Carriage of Goods by Sea ( Law Com. No. 196) Para 2.27

; Aegan Sea Traders Corp v Respol Petroleo SA [1998] CLC 1090, 1117; Bandung Shipping Pte Ltd v Keppel Tatlee

Bank Ltd [2003] 1 SLR 295 ; Borealis AB v Stargas Ltd and another -The Berge Star [2002] 2 AC 205, 226 . 113

The Bill of Lading Act, 1855, s 1; The Future Express [1993] 2 Lloyd‟s Rep 542 (CA); Enichem Anic SpA v Ampelos

Shipping Company Ltd – The “Delfini” [1990] 1 Lloyd's Rep 252


20

under the underlying contract of sale would defeat the very objective of the 1992 act and restore the

position under the 1855 Act.114

49. The enforcement of the right to delivery against a carrier would be the most commercially

prudent interpretation of the rights under a B/L as the object of the COGSA is to uphold the security

of the B/L, and offer certainty to any holder of the B/L. The carrier, whose knowledge of the

transaction is restricted the contract of carriage must not be permitted to cause hardship to the holder

of the B/L based on an inadequate understanding of the contract of sale. Further, it would lead to no

injustice even in the event the seller has a superior claim in property as against the owner. That

question is strictly res inter alios acta and is to be determined in an arbitration / suit between the

buyers and the sellers and is of no relevance to the carrier concerned.115 If the sellers are successful in

the arbitration between the two parties, the Claimants will have a duty to account to them.116 It is well

recognized in common law that a duty to account to a third party is never a bar to recovering

damages in a suit. 117

50. The Respondents may contend that no such right to recover damages arises unless the

Claimants establish an interest in the goods, as it has suffered no loss. The Claimants submit that

such an argument is rendered otiose by Section 2(4) of the COGSA which expressly allows a party to

recover damages regardless of whether he suffered a personal loss, upon the strength of the B/L. 118

VI. THE RESPONDENTS ARE LIABLE TO THE CLAIMANTS IN BAILMENT

51. The Claimants submit that they have the title to sue the Respondents in bailment as they have

an immediate right to the possession of the goods 119 as the lawful holders of the B/L.120 The

114

Aegan Sea Traders Corp v Respol Petroleo SA [1998] CLC 1090, 1117; Bandung Shipping Pte Ltd v Keppel Tatlee

Bank Ltd [2003] 1 SLR 295 [27]; East West Corporation v DKBS 1912 and AKTS Svenborg [2002] EWHC 83 (Comm)

[22] 115

Law Commission, Rights of Suit in Respect of Carriage of Goods by Sea (Law Com. No. 196) Para 2.25. 116

Antariksa Logistics v McTrans Cargo [2012] SGHC 154 117

The Sanix Ace. [1987] 1 Lloyd‟s Law Rep.465. 118

Paul v National SS Co (1937) 43 Com Cas 68; The Kelo [1984] 2 Llyod‟s Rep. 85. 119

Borealis AB v Stargas Ltd and another -The Berge Star [2002] 2 AC 205, 226 [30] 120

See above at V. (A.)


21

Respondents were constituted as the bailee‟s carrier have attorned to the Claimants on the

indorsement of the B/L in their favour.121 Therefore, the Respondents hold the goods as the bailees of

the Claimants and are obliged to return the goods on presentation of the B/L.122 Hence, they are liable

to the Claimants for non-delivery of the cargo.

VII. THE RESPONDENTS ARE LIABLE TO THE CLAIMANTS IN CONVERSION FOR THE NON-

DELIVERY OF THE CARGO

52. A B/L is a “key to the warehouse”123 and a document transferring constructive possession of

goods. Thus, a holder of the B/L is entitled to the immediate possession of the goods.124 Wrongful

interference with this right constitutes conversion.125 In this case, by delivering the cargo to the

Sellers, the Respondents are liable under the tort of conversion.

VIII. QUANTIFICATION OF DAMAGES

A. Respondents are liable for non-delivery of cargo

53. Respondents are liable for non-delivery of cargo. The measure of damages for non-delivery is

the true value of the cargo, which is the market price of the goods at the time126 and place they ought

to have been delivered.127 In the present case, the contractual place of delivery was Liverpool.

Therefore, the Respondents are liable to the extent of market price at Liverpool.

54. Alternatively, the Respondents are liable to the extent of USD 522.50 per mt to buy goods to

sell to their sub-buyers in Liverpool. In general, the price in sub-sale is irrelevant to the assessment

121

Borealis AB v Stargas Ltd and another - The “Berge Star” [2002] 2 AC 205, 226 [30]; P Todd, „The Bill of Lading

and Delivery: Common Law Actions‟ [2006] LMCQ 539, 546-548. 122

Norman Palmer, Palmer on Bailment (3rd

edn., Sweet and Maxwell., 2009) 798 123

Sanders v Maclean (1883) 11 QBD 327, 341 124

P Todd, „The Bill of Lading and Delivery: Common Law Actions‟ [2006] LMCQ 4( Nov) 539, 545. 125

MCC Proceeds Inc v Lehman Bros International (Europe)[1998] 4 All ER 675, 686. 126

Sharpe (C) & Co Ltd v Nosawa & Co [1917] 2 KB 814 (KBD) 127

Tai Hing Cotton Mill Ltd v Kamsing Knitting Factory [1979] AC 91; Rodocanachi v Milburn (1886) 18 QBD 67

(CA); HG Beale (ed), Chitty on Contracts (Common Law Library, 31st edn, Sweet & Maxwell, 2012) 1856; Attorney

General of the Republic of Ghana v Texaco Overseas Tankships Ltd – “Texaco Melbourne” (1993) 1 Lloyd‟s Rep 471

(CA).


22

of damages.128 However, in cases where the parties can contemplate possible loss the buyer might

suffer by virtue of a sub-sale, further sales become relevant.129 Indeed, the replacement cost of the

goods in cases of non-delivery of damaged goods is an accepted measure of damages, unavailable

only if the Claimant has acted unreasonably.130 Here, Respondents can reasonably assume that the

cargo is used for further sales. Thus, sub-transactions of the Claimants are not res inter alia actos.

The replacement cost, i.e. 522.50 USD is reasonable, and thus the Respondent is liable to that extent.

B. The Claimants are entitled to the Costs of the Dutch proceedings

55. The Claimants submit that they are entitled to the costs of foreign proceedings incurred as a

natural consequence of the breach of contract by the Respondents.131 The rule that the costs of

foreign proceedings may not be awarded except as ordered by the foreign court has been displaced

by the court in Union Discount Co. Ltd where the costs may be allowed if they arise out of a separate

cause of action. 132 It is submitted that the Dutch proceedings were initiated for the arrest of the cargo

and the ship; but the current arbitration proceedings are for the breach of the contract of carriage

contained in the bill. Had the Respondents delivered the goods as per the B/L, in Liverpool; the

proceedings for the arrest of the cargo could not have been commenced in the Dutch Courts. In

addition, had the owners properly cared for the cargo and delivered the same on the presentation of

the bill, no cause for arrest of the ship would have arisen. Thus, the Respondents are liable to the

Claimants for the costs of the proceedings arising out of their breach.

C. The Respondents are liable for damage to the cargo

56. As proved above, the Respondents were negligent and in breach of contract and therefore

liable for the damage to the cargo. The Claimants submit that there is sufficient causal nexus

128

Kwei Tek Chao v British Traders and Shippers Ltd (1954) 98 SJ 163, [1954] 2 QB 459; Slater v Hoyle & Smith Ltd

[1920] 2 KB 11 (CA); Arpad, The (No. 2) (1934) 49 Ll L Rep 313 (CA); Derby Resources AG v Blue Corinth Marine Co

Ltd – “The Athenian Harmony” [1998] 2 Lloyd‟s Rep 410, 416 (QBD); Rodocanachi v Milburn (1886) 18 QBD 67 (CA) 129

Bence Graphics International Ltd v Fasson UK Ltd [1996] EWCA Civ 748. 130

Attorney General of the Republic of Ghana v Texaco Overseas Tankships Ltd – “Texaco Melbourne” (1993) 1

Lloyd‟s Rep 471 (CA). 131

Union Discount Co. Ltd v Zoller [2001] EWCA Civ 1755; National Westminster Bank v Rabobank Nederland. [2007]

EWHC 3163 (Comm); Hadley v Baxendale [1854] EWHC Exch J70. 132

Union Discount Co. Ltd v Zoller [2001] EWCA Civ 1755.


23

between the breach and the loss sustained (A), such a loss was reasonably within the contemplation

of the Respondent (B).

i. THERE IS A SUFFICIENT CAUSAL NEXUS BETWEEN THE BREACH AND THE LOSS SUSTAINED

57. Claimants submit that combined operation of the Respondents‟ breach of contract and piracy

caused the damage to the cargo. The mere fact of piracy will not excuse the Respondents as their

faults were a dominant cause of the loss.133 The test is whether the breach was an effective and

dominant cause of the loss134 and not immediacy in time135 Infact, the unseaworthiness “operates

directly as a cause” where the Vessel is unfit to meet a peril.136 Therefore, notwithstanding the piracy,

the Respondents are still liable for the loss sustained.

58. Respondents may rely on the doctrine of novus actus interveniens to contend that the

deterioration in the goods has been caused by a third party intervention breaking the chain of

causation. However, this doctrine is inapplicable in cases where the party in breach has a duty to

guard against such an intervening act137 or when such an intervention is foreseeable.138 Herein, the

Respondents were under such a duty to prevent damage to the cargo. Moreover, in light of the

frequency of pirate attacks, piracy can be reasonably be said to be foreseeable. Therefore, the

Respondents may not cite the act of piracy to sever the causal link between the breach and damage.

ii. THE LOSS WAS FORESEEABLE

59. Claimants can recover damages for losses that are fairly within the reasonable contemplation

by the parties.139 Moreover, in the absence of knowledge of special circumstances, the party is

133

De la Bere v Pearson Ltd [1908] 1 KB 280 (CA); Monarch Steamship Co Ltd v Karlshamns Oljefabriker [1949]

AC 196 (HL). 134

Galoo Ltd & Ors v Bright Grahame Murray [1994] BCC 319. 135

Leyland Shipping Co. v Norwich Union Fire Insurance Society [1918] AC 350 (HL). 136

Monarch Steamship Co Ltd v Karlshamns Oljefabriker AB [1949] AC 196 (HL). 137

London Joint Stock Bank v Macmillan [1918] AC 777 (HL); HG Beale (ed), Chitty on Contracts (Common Law

Library, 31st edn, Sweet & Maxwell, 2012) 1797; Stansbie v Troman [1948] 2 KB 48 (CA); Reeves v Commissioner of

Police of the Metropolis [2000] 1 AC 360 (HL); Douglas Hodgson, The Law of Intervening Causation (Ashgate,

2008) 70. 138

The Wilhelm (1866) 14 LT 636 as cited in Harvey Mcgregor, McGregor on Damages (18th

edn, Sweet & Maxwell,

2009) 6-153. 139

Hadley v Baxendale [1854] EWHC Exch J70; Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2

KB 528 (CA); C Czarnikow Ltd v Koufos [1967] UKHL 4, [1969] 1 AC 350


24

supposed to assume responsibility for the losses that are a natural and probable result of the

breach.140 Owing to the frequency of piracy attacks in the Gulf of Aden, the knowledge that the

Vessel was susceptible to an attack that potentially damages the cargo may be imputed to the

Respondents. This follows as a “probable and natural” consequence of breach of duty to carefully

carry and care the goods.

60. Moreover, the requirement of foreseeability extends only insofar as the type of loss and not

the degree of loss141 or the precise manner of its occurrence. 142 Therefore, it is sufficient for the

Respondents to have foreseen damage to the cargo; it need not have anticipated the precise nature of

deterioration, i.e. from GMQ to non-GMQ. Hence, Claimant is entitled to recover its full loss

regardless of the extent of loss ultimately incurred.

iii. MEASURE OF DAMAGES FOR DAMAGE TO CARGO

61. The measure of damages is difference between the value of the sound goods and the damaged

goods.143 Claimants submit that the value of the sound goods is evidenced by the purchase price of

the goods, i.e. 747.50 USD per mt. The value of the deteriorated goods is reflected by the market

price in Liverpool. Therefore, the Claimant is entitled to damages that is equal to the difference

between the two values.

140

Transfield Shipping Inc v Mercator Shipping Inc [2008] UKHL 48; C Czarnikow Ltd v Koufos [1967] UKHL 4,

[1969] 1 AC 350. 141

Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd [1977] EWCA Civ 13; Edwin Peel, Treitel: The Law of Contract

(12th

edn, Sweet & Maxwell, 2011) 1054 142

Transworld Oil Ltd v North Bay Shipping Corpn – “The Rio Claro” [1987] 2 Lloyd‟s Rep 173, 175

(Staughton J); Jackson v Royal Bank of Scotland Plc [2005] UKHL 3; Parsons (Livestock) Ltd v Uttley Ingham &

Co Ltd [1977] EWCA Civ 13; Brown v KMR Services Ltd [1995] 2 Lloyd's Rep 513 (CA). 143

Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd [1977] EWCA Civ 13.


25

PRAYER

In light of the above submissions, the Claimants request the Tribunal to declare:

1. That it has jurisdiction in the present issue.

2. The Respondents were in breach of its obligation to “properly and carefully” carry the cargo

under Article III Rule 2 of the HVR.

3. The Respondents were in breach of the contract of carriage in delivering the cargo at

Rotterdam and not at Liverpool.

4. The Respondents breached the contract of carriage by not delivering it to the Claimants

5. The Respondents are liable under tort of conversion or as a bailee.

And therefore award the Claimants:

(1) USD 3,236,756.26, alternatively USD 2,329,912.26, as 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.

Documents

14TH INTERNATIONAL MARITIME LAW ARBITRATION MOOT · PDF file14th international maritime law arbitration moot, 2013 national law school of india university team no. 21 memorandum for