Memorandum for Claimant Team No - Murdoch University · 2019-12-18 · Memorandum for Claimant TEAM NO.8 v INDEX OF AUTHORITES REFERRED ARTICLES REFERRED: 1. Gunther J. Horvath, The

International Maritime Law Arbitration Moot 2016

GUJARAT NATIONAL LAW UNIVERSITY

Memorandum for Claimant

Team No.8

ADITI GUPTA • MRUDUL DESAI • NIKHILA DEWASTHALE

Gujarat • India

On behalf of

Zeus Shipping and Trading

Company (CLAIMANT)

Against

Hestia Industries (RESPONDENT)

Memorandum for Claimant TEAM NO.8

i

TABLE OF CONTENTS

TABLE OF CONTENTS .......................................................................................................... i

INDEX OF ABBREVIATIONS ............................................................................................. iii

INDEX OF AUTHORITES REFERRED ............................................................................... v

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

ARGUMENTS ......................................................................................................................... 2

Issue 1: The Tribunal Has Jurisdiction Over The Dispute. ...................................................... 2

A. A Claim for demurrage arises under the Charterparty .................................................. 2

B. Frustration is a dispute arising under the Charterparty. ................................................ 3

i. The Arbitration clause survives the frustration of a contract. ................................ 3

ii. Frustration is an implied term under the contract. ................................................. 4

iii. Clause 30 of the Charterparty dated 21st July 2014 does not reflect intention to

exclude frustration. ....................................................................................................... 5

C. The courts of Poseidon are likely to refer the matter back to arbitration. .................... 7

i. Courts of Poseidon (Western Australia) adopts a pro-arbitration jurisprudence .. 7

ii. The parties have not agreed to any alternative remedy in the contract .................. 8

Issue 2: The Claimant Is Entitled To Their Demurrage Claim. ............................................... 9

A. The Charterer is liable to pay $17.2 million as demurrage ........................................... 9

i. Demurrage accrued in accordance to clause 10. .................................................... 9

a) Athena had not exited the port of Hades .......................................................... 10

b) The Charterer is liable for delays on the loading port. .................................... 11

c) Without prejudice, the Claimant is entitled to damages for detention. ............ 11

ii. The case doesn’t fall within the exceptions under clause 9(e). ............................ 13

iii. Force Majeure clause 19 does not exempt demurrage. ........................................ 14

B. The Charterparty is not frustrated as alleged by Hestia. ............................................. 14

i. Contract expressly makes provision for supervening event. ............................... 14


ii

a) Force Majeure in clause 19 of the Charterparty excludes the operation of the

doctrine of frustration. ............................................................................................. 15

b) Hestia didn’t exercise the option to cancel within the limitation under clause

19(ii). ....................................................................................................................... 17

ii. In any event, the object of the contract was not radically vitiated. ...................... 18

iii. Claimant will be prejudiced in an event of discharge by frustration. .................. 19

C. Without prejudice, the claimant is entitled to pre-frustration demurrage, damages for

detention and lien. .............................................................................................................. 20

Issue 3: The Claimant Is Not Liable For Salvage Reward To Hestia .................................... 21

A. The arbitral tribunal does not have the jurisdiction to pass an award with regard to the

salvage claim ...................................................................................................................... 21

B. Hestug is a separate legal entity and Hestia will not receive any reward for their

actions................................................................................................................................. 22

C. Arguendo, the claimants will only be liable to the extent of the salvage of the vessel.24

Request for Relief .................................................................................................................. 25


iii

INDEX OF ABBREVIATIONS

$

&

Dollars

And

A.C. Law Reports Appeal Cases

ALR Adelaide Law Review

App. Cas. Law Reports Appeal Cases (House of Lords)

Art. Article

Bundle Moot Scenario

CA Court of Appeal Reports

Ch. Chapter

Cir. Circuit

CLR Commonwealth Law Reports

Co. Company

Corp. Corporation

Ed. Edition

Etc. Etcetera

EWHC England and Wales High Court

FCA Federal Court of Australia

FLR Federal Law Review

HLNG Hades Shale Gas

i.e. That is

IAA International Arbitration Act

ICC International Chamber of Commerce

ICCA International Council for Commercial Arbitration

Id./Ibid. Ibidem

K.B. Law Reports King’s Bench

LLC Limited Liability Company

Lloyd’s Rep. Lloyd’s Law Reports

LR Law Reports

Ltd. Limited

No. Number

P./Pg. Page

Para. Paragraph

pp. Pages

Q.B. Law Reports Queen’s Bench

S./Sec. Section


iv

SHINC Sundays and Holidays Included

U.K. United Kingdom

U.S. United States

USD United States Dollar

v. Versus

Vol. Volume

WA Western Australia

WASCA Western Australia Court of Appeal

WWD Weather Working Days


v

INDEX OF AUTHORITES REFERRED

ARTICLES REFERRED:

1. Gunther J. Horvath, The Duty of the Tribunal to Render an Enforceable Award , 18 JOURNAL

OF INTERNATIONAL ARBITRATION 2.

2. Julian D.M Lew, The Law Applicable to the Form and Substance of theArbitration Clause,

ICCA CONGRESS SERIES 9 (1998).

BOOKS REFERRED:

1. ALEX BAYKITCH, ARBITRATION LAW OF AUSTRALIA: PRACTICE AND PROCEDURE (2013).

2. CHITTY ON CONTRACTS (Vol. 1, 30th ed. 2008).

3. CHITTY ON CONTRACTS (Vol. 2, 30th ed. 2008).

4. CHRISTOPH BRUNNER, FORCE MAJEURE AND HARDSHIP UNDER GENERAL CONTRACT

PRINCIPLES: EXEMPTION FOR NON-PERFORMANCE IN INTERNATIONAL ARBITRATION (2008).

5. EMMANUEL SAVAGE GAILLARD AND JOHN FOUCHARD, FOUCHARD GAILLARD AND GOLDMAN

ON INTERNATIONAL COMMERCIAL ARBITRATION (1999).

6. FRANCIS D ROSE, KENNEDY AND ROSE ON THE LAW OF SALVAGE (6th ed 2002).

7. GERARD MCMEEL, THE CONSTRUCTION OF CONTRACTS (2d ed. 2011).

8. GRANT GILMORE & CHARLES L. BLACK, THE LAW OF ADMIRALTY (2d ed. 1975).

9. H G BEALE, W D BISHOP & M. P. FURMSTON, CONTRACT CASES & MATERIALS 157 (5th ed.

2007).

10. JACOB GRIERSON AND ANNET VAN HOOFT, ARBITRATING UNDER THE 2012 ICC RULES

(2012).

11. JOHN F. WILSON, CARRIAGE OF GOODS BY SEA (4th ed. 2001).

12. JOHN SCHOFFIELD, LAYTIME AND DEMURRAGE (6th ed. 2011).

13. JULIAN COOKE, TIM YOUNG ET AL, VOYAGE CHARTERS (3d ed. 2014).


vi

14. M.W. White, Salvage; Towage; Wreck and Pilotage in M.W. WHITE, AUSTRALIAN MARITIME

LAW (2000).

15. NIGEL BLACKABY AND CONSTANTINE PARTISIDES, REDFERN AND HUNTER ON

INTERNATIONAL ARBITRATION (6th ed. 2015).

16. PAUL TODD, PRINCIPLES OF THE CARRIAGE OF GOODS BY SEA (2015).

17. SIR KIM LEWISON, THE INTERPRETATION OF CONTRACTS (5th ed. 2011).

18. SIR GUENTER TREITEL, FRUSTRATION AND FORCE MAJEURE (3d ed. 2014).

19. THOMAS EDWARD SCRUTTON, SCRUTTON ON CHARTERPARTIES AND BILLS OF LADING (23d

ed. 2015).

20. YVONNE BAATZ, MARITIME LAW (2014).

CASES REFERRED:

1. ACD Tridon Inc v. Tridon Australia Pty Ltd.,[2002] NSWSC 896.

2. AED Oil Ltd. v. Puffin FPSO Ltd., (No 2) (2010) 27 VR 22.

3. Aktieselskabet Reidar v Arcos Ltd (1926) 25 Ll L Rep 513.

4. Allergen Pharmaceuticals Inc v. Bausch Inc, [1985] ATPR 40-636; McHutchinson v.

Western Research and Development Ltd, [2004] FCA 1234.

5. Bangladesh Import-Export Co Ltd v. Sucden Kerry SA, [1995] 2 Lloyd's Rep 1.

6. Bremer Handelsgesellschaft m .b.H . v. Vanden Avenne-Izegem P .V .B .A .,[1977] 1

Lloyd’s Rep. 133.

7. British and Commonwealth Holdings Ltd. v. Quadrex Holdings Ltd., [1989] QB 842.

8. Bulk Transport Group Shipping Co Ltd v Seacrystal Shipping Ltd (The Kyzikos). [1989] AC

1264

9. Casaceli v Natuzzi SpA, (2012) 292 ALR 143; Cape Lambert Resources Pty Ltd v. MCC

Australia Sanjin Mining Pty Ltd., [2013] WSACA 66.

10. Chandler v. Webster [1904] 1 KB 493.

11. Charnoc v. Liverpool Corp, [1968] 1 WLR 1498.


vii

12. Chartbrook v Persimmon Homes Ltd, [2009] UKHL 38.

13. Codelfa Constructions Pty Ltd. v. State Rail Authority (NSW), [1982] 149 CLR 337.

14. Comandate Marine Corp v. Pan Australia Shipping Pty Ltd, [2006] FCAFC 192.

15. Compania Naviera Aeolus SA v.Union of India, [1964] A.C. 868; The Dias, [1978] 1 Lloyd’s

Rep. 325.

16. Comptoir Commercial Anversois v. Power Son & Co. [1920] 1 K.B. 868.

17. Davis Contractors v. Fareham, UDC [1956] AC 696.

18. Dow Chemical France, the Dow Chemical Company and others v. Isover Saint Gobain,

International Chamber of Commerce Interim Award No. 4131.

19. ERG Raffinerie Mediterranee SpA v Chevron USA Inc (The Luxmar), [2007] 2 Lloyd’s Rep

542.

20. Fairclough Dodd & Jones Ltd.v. J.H. Vantol Ltd.,[1956] 1 W.L.R. 136.

21. Ferris v. Plaister, [1994] 34 NSW LR 474.

22. Fiona Trust v. Privalov, [2007] 1 All ER (Comm) 81.

23. Francis Travel Marketing Pty Ltd v. Virgin Atlantic Airways Ltd, [1996] 39 NSWLR 160.

24. Franklins Pty Ltd v. Metcash Trading Ltd., [2009] NSWCA 407.

25. Freedom Maritime Corp. v. International Bulk Carrier S.A. (The Khian Captain), [1985] 2

Lloyd’s Rep. 212.

26. Government of Gibaltrar v. Kenney, [1956] 2 Q.B. 410.

27. Heyman v. Darwins [1942] 1 All ER 337.

28. Hilton Oil Transport v Oil Transport Co., (659 So, 2d 1141 (CA Fla 1995).

29. Hirji Mulji v. Cheong Yue Steamship Co Ltd [1926] A.C 497.

30. HL.J Lauritzen AS v. Wijsmuller BV (The Super Servant Two), [1990] 1 Lloyd’s Rep.1 CA.

31. Incitec Ltd v. Alkimos Shipping Corporation, (2004) 138 FCR 496.

32. Inverkip Steamship Co v. Bunge & Co, (1917) 22 CC 200.

33. Islamc republic of Iran Shipping Lines v, Ierax Shipping, [1991] 1 Lloyd’s Rep. 81.

34. J Lauritzen v. Wijsmuller, [1990] 1 Lloyd’s Rep.1 CA.


viii

35. James Scott v. Del Sel, (1923) 14 Ll.L.Rep. 65.

36. Joseph Constantine SS Line v. Imperial Smelting Corp Ltd., [1942] AC 154, 163.

37. Kruse v. Questier and co.,[1953] 1 Q.B. 669.

38. Kudos Catering (UK) Limited v. Manchester Central Convention Complex Limited, [2012]

EWHC 1192 (QB).

39. Kuwait Supply Co v. Oyster Marine Management (The Safeer), [1994] 1 Lloyd’s Rep. 637.

40. Lebeaupin v. Richard Crispin & Co.,[1920] 2 KB 714.

41. Malaysian Airline System Berhad, (2008) 217 FLR 376; Transfield Philippines Inc v. Pacific

Hydro Ltd., [2006] VSC 175.

42. Manuchar Steel Hong Kong Limited v. Star Pacific Line Pvt. Ltd, [2014] SGHC 181.

43. Metropolitan Water Board v. Dick Kerr & Co. Ltd.,[1918] A.C 119.

44. Moneypenny v. Moneypenny, 310 Ky.9 (Ky.Ct.App.1949).

45. National Carriers Ltd. v. Panalpina (Northern) Ltd.[1981] 1 All ER 161.

46. Nicola v. Ideal Image Development Corporation Inc., [2009] FCA 1177.

47. Nissho-Iwai Co. v. Occidental Crude Sales, 729 F.2d 1530 (5th Cir. 1984

48. Oldendorff (EL) & Co GmbH v. Tradax Export SA (The Johanna Oldendorff), [1973] 2

Lloyd’s Rep 285.

49. Paal Wilson &. Co. A /S v. Partenreederei Hannah Blumenthal ( The Hannah Blumenthal),

[1983] 1 A.C. 854.

50. Paharpur Cooling Towers Ltd v. Paramount (WA) Ltd., [2008] WASCA 110, [34].

51. Paradine v. Jane, [1647] EWHC KB J5.

52. Pioneer Shipping Ltd. v. BTP Tioxide Ltd. (the Nema) [1982] A.C. 724.

53. Postlethwaite v. Freeland [1880] 5 App.Cas 599.

54. Premium Nafta Products v. Fili Shipping Co, [2007] UKHL 40.

55. Prenn v Simmonds, [1971] 1 WLR 1381.

56. Schoenkopf v. Brown & Williamson Tobacco Corp, 483 F. Supp. 1185 (E.D.Pa.1980).


ix

57. Secretary of State for Transport v. Stagecoach Southwestern trains Ltd., [2010] 1 Llyod’s

Rep 175.

58. SHV Gas Supply and Trading SAS v. Naftomar Shipping and Trading Co Inc., [2006] 1

Lloyd’s Rep 163.

59. Suisse Atlantique Societe d’Armement Maritime SA v NV Rotterdamsche Kolen Centrale,

[1965] 1 Lloyd’s Rep 533 (CA).

60. Tamplin Steamship Company v. Anglo-Mexican Petroleum Products, [1916] 2 A.C. 397.

61. The Calypso, (1828) 2 Hagg 209; The Five Steel Barges, (1890) 15 PD 142.

62. The Forum Craftsman, [1991] 1 Lloyd;s Rep.91.

63. The Hestia, [1895] P 193; The Neptune, (1824) 1 Hagg 227.

64. Tsakrioglou & Co. Ltd. v. Noblee Thorel GMBH [1960] 2 QB 318 (affirmed in [1962] AC

93)

65. Union of India v. Compania Naviera Aeolus SA (The Spalmatori), [1964] AC 868.

66. Universal Cargo Carriers Corporation v. Citati., [1957] 2 Q.B. 401.

67. WesTrac Pty Ltd v. Eastcoast OTR Tyres Pty Ltd.,[2008] NSWSC 894.

68. Whitecap Leisure Ltd. v. John H Rundle [2008] 2 Lloyd’s Rep. 216.

69. Williams v. Manisselian Freres, (1923) 17 LILR 72; The Hermine, [1979] 1 Lloyd’s Rep 212.

70. WJ Tatem Ltd. v. Gamboa, [1939] 1 K.B. 132.

STATUTES AND CONVENTIONS REFERRED:

STATUTES:

1. Carriage of Goods By Sea Act (1991).

2. Commercial Arbitration Act (1974).

3. International Arbitration Act (2010).

4. Navigation Act (1912).


x

5. Supreme Court Act (WA) (1935).

CONVENTIONS:

6. Hague-Visby Rules (1968).

7. International Convention on Salvage (1989).

8. United Nations Convention on Law Of The Sea (1982).


1

STATEMENT OF FACTS

The parties to the dispute are Zeus Shipping and Trading Company (hereinafter referred to as

the Claimant) and Hestia Industries (hereinafter referred to as the Respondent).

The Claimant is based in the city of Poseidon, in the country of Demeter. The Respondent is

situated in the city state of Hades. Hades and Demeter have adopted the laws of Western

Australia.

1 July 2014 The Respondent sent a “Request for Proposal” for shipment of Hades Shale

Natural Gas (HLNG).

14 July 2014 The Claimant replied with the proposed Voyage Charter-party for The

Athena.

16 July 2014 The Respondent sought to amend the arbitration clause to include only

disputes “arising out of” and not “that relate to” the Charterparty.

21 July 2014 The parties executed a Voyage Charterparty at Poseidon.

3 Oct. 2014 The Master issued a Notice of Readiness and thereby laytime commenced.

4 Oct. 2014 Protests against the export of HLNG reported at the port of Hades.

7 Oct. 2014 The Athena, enboard the cargo was intercepted by the Coast Guard and

returned to the berth.

15 Apr 2015 The Claimant sent an interim claim for demurrage accrued.

30 Apr 2015 The Respondent denied liability for demurrage and alleged discharge of

obligations by frustration due to the delay in delivery.

5 Oct. 2015 The Athena was released. Towage services were provided Hestug.

6 Oct. 2015 The Claimant sent the claim for demurrage amounting to USD 17.2 million

16 Nov.2015 The Claimant referred the dispute to Arbitration.


2

ARGUMENTS

ISSUE 1: THE TRIBUNAL HAS JURISDICTION OVER THE DISPUTE.

1. Zeus Shipping and Trading (claimant) and Hestia Industries (respondent) executed a voyage

Charterparty on the 21st of June 20141 for the shipping of HLNG from Hades to Poseidon.

Both parties, through clause 302 of the same, agreed to arbitrate all disputes arising under the

Charterparty.

2. However, the respondent has claimed that the Charterparty was terminated as an

unreasonable delay frustrated it. They further claim that as the Charterparty was frustrated,

the arbitral tribunal has no jurisdiction over the disputes that have arisen as frustration is not

an issue ‘arising under’ the Charterparty. It is, however, the claimant’s contention that the

tribunal does indeed have jurisdiction because: a claim for demurrage arises under the

Charterparty (A), frustration is a dispute arising under the Charterparty (B), and the courts of

Poseidon are likely to refer the matter back to arbitration (C).

A. A Claim for demurrage arises under the Charterparty

3. Clause 10 of the Charterparty expressly provides for Demurrage as per the rate mentioned in

Box 24. In this light, the Claimant submits that a claim for demurrage expressly arises under

the Charterparty. Furthermore, the Respondents contend that the Tribunal does not have

jurisdiction because the dispute over frustration does not arise under the contract. It is the

respondent’s case that the dispute over frustration is antecedent to the claim for demurrage.

1 Page 27 of Bundle.

2 Page 45, 46 of Bundle.


3

4. At the very outset, the claimant argues that the Tribunal needs to look into the alleged

frustration only to determine the claim for demurrage. The genesis of the dispute is the claim

for demurrage, Thus, without prejudice, the claimant contends that the arbitrability of

frustration doesn’t impede the arbitrability of the claim for demurrage.

B. Frustration is a dispute arising under the Charterparty.

5. The claimant stipulates that the issue of frustration of the Charterparty as contended by the

respondent is also an issue arising under the Charterparty and the tribunal has the jurisdiction

to decide on the same. This is because, the arbitration clause survives the frustration of a

contract (i), frustration is an implied term under the contract (ii) and the arbitration clause of

the Charterparty dated 21st July 2014 does not reflect intention to exclude frustration.

i. The Arbitration clause survives the frustration of a contract.

6. An arbitration clause in a contract is considered to be separate from the main contract of

which it forms a part and as such survives the termination of the contract of which it is part.3

Thus, the arbitration clause survives the termination of the contract for the purposes of the

assessment of any consequential claim under the Charterparty.4

7. An arbitration clause or an arbitration agreement covering disputes under the contract

survives its frustration for the purpose of settling, inter alia, whether the contract has been

frustrated and the consequences of such frustration.5 The claimant therefore argues that the

3 NIGEL BLACKABY AND CONSTANTINE PARTISIDES, REDFERN AND HUNTER ON INTERNATIONAL ARBITRATION

(6th ed. 2015); Heyman v. Darwins [1942] 1 All ER 337; Ferris v. Plaister, [1994] 34 NSW LR 474; Comandate

Marine Corp v. Pan Australia Shipping Pty Ltd, (2006) 157 FCR 45 [229]; Commercial Arbitration Act (WA)

art.16 (2012);CHITTY ON CONTRACTS 121 (Vol. 2, 30th ed. 2008). 4 CHITTY ON CONTRACTS 121 (Vol. 2, 30th ed. 2008); Kruse v. Questier and co.,[1953] 1 Q.B. 669

5CHITTY ON CONTRACTS 122 (Vol. 2, 30th ed. 2008); Heyman v. Darwins,[1942] A.C 356; Kruse v. Questier

and co., [1953] 1 Q.B. 669; Government of Gibaltrar v. Kenney, [1956] 2 Q.B. 410.


4

Tribunal has the jurisdiction to determine whether the contract has been repudiated by

frustration.

ii. Frustration is an implied term under the contract.

8. A binding contract containing a general arbitration clause may stipulate that in certain events,

the contract shall come to an end.6 This stipulation may be an express clause for termination

etc. or implied understanding of the same. In this light, frustration depends on an implied

term in the contract of the parties.7 A difference about the applicability of the implied term is

just as much within the arbitration clause as if it were a difference about an express term of

the contract.8

9. It is the Respondent’s case that the dispute of frustration does not ‘arise out of’ or ‘under’ the

terms of the Charterparty.9 The Claimant argues the words ‘out of’ and ‘under’ should be

widely construed10

and should include within their ambit implied terms. In this light,

frustration being an implied term of the contract, ‘arises under’ the terms of the Charterparty.

10. The case of Scott and sons v. Del Sel11

saw similar facts to the situation at hand. The issue

contended was that because of an order of the Govenor-General in Council prohibiting the

export of jute to the River Plate, the contract between the parties was, (as regards the 1875

bales not shipped) frustrated and destroyed. The question of arbitrability of frustration arose

because the arbitration clause merely held that "Any dispute that may arise under this

contract to be settled by arbitration in Dundee" and this question could not be determined by

the arbiter. Lord Dunedin, in his judgement, held that in such a dispute, there must be either

6 Heyman v. Darwins, ,[1942] A.C 356.

7 Joseph Constantine Steamship line v. Imperial Smelting Corporation, [1942] AC 154.

8 Heyman v. Darwins,[1942] A.C 356

9 Page 25 of Bundle.

10 Premium Nafta Products v. Fili Shipping Company, [2007] UKHL 40.

11 James Scott v. Del Sel, (1923) 14 Ll.L.Rep. 65.


5

an express or implied term in the contract to the effect of discharge from liabilty.12

With

either view, they have got to have recourse to the contract and the dispute is a dispute under

the contract.

11. The Claimant contends that the dispute at hand includes a dispute of whether frustration of

the contract occurred or not. Both parties have recourse to the contract and the dispute arises

under the Charterparty.

iii. Clause 30 of the Charterparty dated 21st July 2014 does not reflect intention to

exclude frustration.

12. An arbitration clause must be construed according to its language as well as in the light of the

circumstances in which it is made.13

The justification as to a wide interpretation of the

arbitration agreement is the intention of the parties and a respect for their autonomy.14

13. Clause 30 of the voyage Charterparty between Zeus and Hestia Industries reads as follows:

“30. ARBITRATION: (a) Any dispute arising under this contract shall be referred to

arbitration in London by a tribunal of 3 arbitrators in accordance with the Arbitration Rules

of the Maritime Law Association of Australia and New Zealand. [...] (d) The parties hereby

agree that:- (i) the Arbitrators may determine any questions by reference to consideration of

general justice and fairness [...]”. 15

14. The question is not what the parties may have intended to do by entering into the deed,16

but,

what is the intention of the parties reflected in such words to the deed. This intention must be

imputed to parties keeping in mind the ordinary commercial business scenario where, if the

parties want to exclude something from the scope of the arbitration agreement, they must

12

Tamplin Steamship Cmpany v. Anglo-Mexican Petroleum Products, [1916] 2 A.C. 397, Metropolitan Water

Board v. Dick Kerr & Co. Ltd.,[1918] A.C 119. 13

Heyman v. Darwins, [1942] A.C 356. 14

Francis Travel Marketing Pty Ltd v. Virgin Atlantic Airways Ltd, [1996] 39 NSWLR 160. 15

Pages 45, 46 of Bundle. 16

Moneypenny v. Moneypenny, 310 Ky.9 (Ky.Ct.App.1949)


6

expressly mention the same in the agreement itself.17

The claimant argues that frustration has

not been expressly excluded from the scope of the above clause and therefore it is the parties

intention to arbitrate over it. Furthermore, courts often rely on principles of fairness and

justice while adjudicating a dispute over frustration.18

The claimant argues that by Clause

30(d) of the Charterparty, the parties expressly confer such powers to the Tribunal and

thereby this clause reflects the intention of the parties to submit disputes like frustration to

arbitration proceedings.

15. It may be the Respondent's case that the removal of words “including [...] termination” in the

amended Charterparty reflects an intention to exclude frustration. However, relying on the

Prior Negotiations principle, declarations of subjective intent, including draft documents and

discussions before the contract was actually formed, remain inadmissible and irrelevant.19

The claimant contends that the intention of the parties with relation to the arbitration

agreement must be understood through a reading of the words in the agreement itself and not

any previous draft or negotiation between the parties including the prior draft of the

Charterparty.

16. In the event of an ambiguity with regards to intention of the parties in the contract,

necessitating the tribunal to look into subjective intent, the claimant argues that the arbitration

clause must be given a wide interpretation. The common law doctrine of contra-proferentum

stipulates that the contract must be interpreted against the party in whose benefit the clause

operates20

or the person relying upon that clause21

. The clause in question was amended at the

17

Fiona Trust v. Privalov, [2007] 1 All ER (Comm) 81. 18

J. Lauritzen A.S. v. Wjsmuller B.V, [1990] 1 Lloyd’s Rep 1; Hirji Mulji v. Cheong Yue Steamship Co Ltd

[1926] A.C 497; Joseph Constantine Steamship Ltd. v. Imperial Smelting Corp. Ltd, [1942] AC 154.; National

Carriers Ltd v. Panalpina (Northern) Ltd., [1981] A.C. 675. 19

Prenn v Simmonds, [1971] 1 WLR 1381; Chartbrook v Persimmon Homes Ltd, [2009] UKHL 38; Codelfa

Construction Pvt Ltd v. State Rail Authority of New South Wales (New South Wales), [1982] 149 CLR 337;

Franklins Pty Ltd v. Metcash Trading Ltd., [2009] NSWCA 407. 20

SIR KIM LEWISON, THE INTERPRETATION OF CONTRACTS (5th ed. 2011). 21

Whitecap Leisure Ltd. v. John H Rundle [2008] 2 Lloyd’s Rep. 216.


7

behest of the Respondents by the their letter dated 16 July, 2014.22

It therefore operates to the

benefit of the Respondent. In this light, the Claimant argues that the clause must be

interpreted against the Respondent who is seeking to rely on it to exclude frustration.

C. The courts of Poseidon are likely to refer the matter back to arbitration.

17. The claimant also contends that the courts of Poseidon will refer the matter back to the

arbitral tribunal if jurisdiction is given to them because: they adopt a pro-arbitration stance

(i), and the parties have not agreed to any alternative remedy in the contract (ii).

i. Courts of Poseidon (Western Australia) adopts a pro-arbitration jurisprudence

18. Australian courts are required to stay proceedings brought in breach of an international

arbitration agreement,23

insofar as the matters in dispute in the litigation are capable of

settlement by arbitration, unless the arbitration agreement is null and void, inoperative or

incapable of being performed.24

The courts have given a broad interpretation to arbitration

clauses to reflect party autonomy and intention of parties.25

19. In this light, the claimants contend that if the matter is referred to the courts of Poseidon

(which follow laws that are pari materia to the laws of Western Australia)26

, have a pro-

arbitration stance. The courts will be required to stay such proceedings and refer the dispute

back to arbitration. The proceedings in the court of Poseidon will be completely unnecessary.

22

Page 25 of Bundle. 23

WesTrac Pty Ltd v. Eastcoast OTR Tyres Pty Ltd.,[2008] NSWSC 894; Nicola v. Ideal Image Development

Corporation Inc., [2009] FCA 1177; Casaceli v Natuzzi SpA, (2012) 292 ALR 143; Cape Lambert Resources

Pty Ltd v. MCC Australia Sanjin Mining Pty Ltd., [2013] WSACA 66. 24

International Arbitration Act, sec.7(5), (2010), r/w New York Convention. 25

ACD Tridon Inc v. Tridon Australia Pty Ltd.,[2002] NSWSC 896; Paharpur Cooling Towers Ltd v.

Paramount (WA) Ltd., [2008] WASCA 110, [34]. 26

Page 79 of Bundle.


8

ii. The parties have not agreed to any alternative remedy in the contract

20. The trend of interpretation of arbitration agreements by courts has been to give a flexible and

wide meaning to the same.27

There is a presumption that the parties, in an ordinary business

transaction are likely to have intended that all disputes arising out of their relationship are to

be decided by the same tribunal28

. In 2006 the Full Court of the Federal Court of Australia, in

Comandate Marine Corp v. Pan Australia Shipping Pty Ltd29

, decided that courts must strive

to give a broad and flexible interpretation to arbitration agreements with the aim of referring

as many of the parties’ claims to arbitration as possible. This approach is justified by both

party autonomy and the needs of international commerce which require certainty and

efficiency in dispute resolution.

21. The presumption of one-stop arbitration will only not apply when a contract contains both a

choice of jurisdiction clause as well as an arbitration clause.30

This is not the situation at

hand. Further, in the Fiona Trust case31

, the English court relied on the fact that parties had

not stipulated any alternative means of dispute resolution in the contract, as a reflection of

their intention to arbitrate over the dispute. This showed intention of the parties to settle all

disputes through means of arbitration.

22. The claimant argues that the parties in the Charterparty dated July 21, 201432

have not agreed

upon any alternative remedy. This calls for the presumption of the principle of “one-stop

shop” by the courts and reflects the parties intention to confer broad jurisdiction over the

Tribunal and have frustration be settled by the tribunal itself.

27

Incitec Ltd v. Alkimos Shipping Corporation, (2004) 138 FCR 496; Malaysian Airline System Berhad, (2008)

217 FLR 376; Transfield Philippines Inc v. Pacific Hydro Ltd., [2006] VSC 175. 28

Fiona Trust v. Privalov, [2007] 1 All ER (Comm) 81; Premium Nafta Products v. Fili Shipping Co, [2007]

UKHL 40. 29

Comandate Marine Corp v. Pan Australia Shipping Pty Ltd, [2006] FCAFC 192. 30

Secretary of State for Transport v. Stagecoach Southwestern trains Ltd., [2010] 1 Lloyd’s Rep 175. 31

Fiona Trust v. Privalov, [2007] 1 All ER (Comm) 81. 32

Page 27 of Bundle.


9

23. CONCLUSION: In light of the above submissions the Claimant urges the tribunal to

declare that it has jurisdiction over the dispute. The claim for demurrage arises under the

contract as the parties expressly agreed for it. The claim for frustration, being an issue

necessary to determine the dispute for demurrage and not being excluded by the parties from

the scope of the arbitration agreement, would arise under the Charterparty.

ISSUE 2: THE CLAIMANT IS ENTITLED TO THEIR DEMURRAGE CLAIM.

24. There was a delay in the delivery of the cargo to Poseidon because of a Presidential Decree

that directed the Coast Guards of Hades to intercept and redirect the Athena to its berth at

Hades before it left the port. This delay has caused the claimant to claim demurrage from the

respondent and on failure of the respondent to pay such demurrage, the claimant referred the

dispute to arbitration.

A. The Charterer is liable to pay $17.2 million as demurrage

25. The Claimant contends that the Charterer is liable to pay $17.2 million as demurrage because

Demurrage accrued in accordance with clause 10 (i)33

, the present case is not exempted under

clause 9(e) (ii)34

and finally, the force majeure clause doesn’t exempt demurrage (iii)35

.

i. Demurrage accrued in accordance to clause 10.

26. It is the Claimant’s submission that demurrage accrues against the Respondent because:

Athena had not exited the port of Hades (a); and, the Charterer is liable for delays on the

33 Page 36 of Bundle. 34


Page 40,41 of Bundle.


10

loading port (b). Without prejudice to the same, the Claimant is entitled to detention damages

(c).

a) Athena had not exited the port of Hades

27. If a charterer detains the vessel at a load port beyond the agreed laydays, he must pay

liquidated damages in form of demurrage.36

Liability for demurrage accrues immediately on

the expiration of laydays and runs continuously37

until the completion of the functions that

would have stopped the laytime running.38

Laytime stops running on the completion of

loading operations.39

The process of loading includes not only placing goods into the vessel

but also securing operations necessary to ensure that the vessel enboard the cargo, can

proceed on her voyage in safety. 40

28. In The Johanna Oldendorff,41

Lord Diplock divided the adventure contemplated by a voyage

charter into four successive stages. There cannot be any gap between the stages, nor is there

any overlap.42

The second stage is the loading operation, and the third stage is the voyage of

the vessel from the place of loading to the place specified place of delivery.43

29. The Claimant contends that the Athena never commenced its voyage from the loading port of

Hades. Thus, stage three had never commenced and the stage of loading operations was still

in footing. In this light, laytime continued to run and on expiry of which demurrage accrued.

Thus, the Respondent is liable for the payment of demurrage accrued until the Athena finally

sailed from the port of Hades on October 7, 201544

.

36

JOHN F. WILSON, CARRIAGE OF GOODS BY SEA 79 (4th ed. 2001). 37

JOHN F. WILSON, CARRIAGE OF GOODS BY SEA 80 (4th ed. 2001). 38

JULIAN COOKE, TIM YOUNG ET AL, VOYAGE CHARTERS 418 (3d ed. 2014). 39

JOHN SCHOFFIELD, LAYTIME AND DEMURRAGE (6th ed. 2011). 40


Oldendorff (EL) & Co GmbH v. Tradax Export SA (The Johanna Oldendorff), [1973] 2 Lloyd’s Rep 285. 42

JOHN SCHOFFIELD, LAYTIME AND DEMURRAGE (6th ed. 2011). 43

Oldendorff (EL) & Co GmbH v. Tradax Export SA (The Johanna Oldendorff), [1973] 2 Lloyd’s Rep 285. 44

Page 54 of Bundle.


11

b) The Charterer is liable for delays on the loading port.

30. The nature and purpose of demurrage is compensation for the owner's’ loss of the use of the

vessel.45

Detention of the vessel prevents the owners using the vessel as a freight-earning

instrument.46

Demurrage is provided for in the Charterparty so that, if the vessel has to

remain in port in order to enable the charterers to complete loading or discharge, the

compensation to be paid for detention is certain.47

Time taken for loading is to a large extent

within the control of the charterer because he will have a say at the port of loading.48

Furthermore, a traditional allocation of delay risks is to make charterers responsible for risks

that relate specifically to the port as they chose the loading port.49

31. The claimant contends that the Charterer is liable for the delay of the ship on the port of

Hades. This was a consequence of the ongoing protests against the export of HLNG by

Hestia. The protests were ongoing at the time of loading. Consequently, the opposition party

formed the government and stranded the Athena at the port. In footing of such blatant

opposition and protests, Hestia undertook the risk of loading the port of Hades. In this light,

the Respondent is liable to compensate the Claimant for the risk undertaken by the former.

c) Without prejudice, the Claimant is entitled to damages for detention.

32. Only upon the completion of the loading operation, the risk of subsequent delay would revert

to the owner.50

Consequently the charterer would not be liable to pay demurrage for any

delay that has occurred after the charterer has completed loading.51

It may be the

Respondent’s case that they are not liable for demurrage as the ship had already set sail

45

Aktieselskabet Reidar v Arcos Ltd (1926) 25 Ll L Rep 513. 46

ERG Raffinerie Mediterranee SpA v Chevron USA Inc (The Luxmar), [2007] 2 Lloyd’s Rep 542; Suisse

Atlantique Societe d’Armement Maritime SA v NV Rotterdamsche Kolen Centrale, [1965] 1 Lloyd’s Rep 533

(CA). 47

Aktieselskabet Reidar v Arcos Ltd., (1926) 25 Ll L Rep 513. 48

PAUL TODD, PRINCIPLES OF THE CARRIAGE OF GOODS BY SEA (2015). 49

Bulk Transport Group Shipping Co Ltd v Seacrystal Shipping Ltd (The Kyzikos). [1989] AC 1264; PAUL

TODD, PRINCIPLES OF THE CARRIAGE OF GOODS BY SEA (2015). 50

Williams v. Manisselian Freres, (1923) 17 LILR 72; The Hermine, [1979] 1 Lloyd’s Rep 212. 51

JOHN F. WILSON, CARRIAGE OF GOODS BY SEA 79 (4th ed. 2001).


12

during laytime. However, without prejudice to the earlier contentions, the Charterer would be

liable for detention damages in case of a delay in delivery after the process of loading has

been completed.52

The charterer may also be liable for detention of the ship by a third party

due to his default.53

As mentioned above, the Charterer undertook the risk of loading his

cargo even in light of the circumstances in Hades.54

Thus, the claimant pleads that without

prejudice to its claim for demurrage, the Tribunal at the very least, awards damages for

detention.

33. Damages for detention are awarded where the delay is not by fault of the Owners.55

The Bills

of Lading clause56

incorporates the Carriage of Goods by Sea Act, 1991 and consequently the

Hague Rules.57

Art. III(2) of the Rules imposes a liability on the Master for care of goods.58

The Rules exempt the master from liability in case of loss where the cause is due to ‘restraint

of princes’ or ‘any other cause arising without the fault or neglect of the master.’59

The onus

of proving the exemption circumstance lies on the party seeking to rely on it.60

The Claimant

presents that the detention at the port of Hades was by way of a Presidential Decree against

the cargo on board The Athena.61

In light of exclusive jurisdiction of the flag state over the

vessel,62

The Athena was forced to comply with the order of the Coast Guard and turn back.63

Thus, relying on the exception under the Rules, the ship/master is not liable for the delay

caused by detention.

52

THOMAS EDWARD SCRUTTON, SCRUTTON ON CHARTERPARTIES AND BILLS OF LADING, 273 (23d ed. 2015).;

Inverkip Steamship Co v. Bunge & Co, (1917) 22 CC 200; Aktieselskabet Reidar v. Arcos Ltd, (1926) 25 Ll L

Rep 513; Union of India v. Compania Naviera Aeolus SA (The Spalmatori), [1964] AC 868. 53



Erg Raffinerie Mediterranee SpA v. Chevron USA Inc (The Luxmar), [2006] 2 Lloyd’s Rep. 543. 56


Carriage of Goods By Sea Act, sec.7, 1991. 58

Hague Rules Article III(2) (1968): “the carrier shall properly and carefully load, handle, stow, carry, keep,

care for, and discharge the goods carried.” 59

Hague Rules Article IV(2)(g), IV(2)(q) (1968). 60

Hague Rules Article IV(2)(q) (1968). 61

Page 55 of the Bundle. 62

United Nations Convention on Law Of The Sea, Art. 92, 1982. 63

Page 60 of Bundle.


13

34. Furthermore, even where the owner’s fault delays or impedes the cargo operations but

doesn’t deprive the charterer of access to the vessel or the cargo, the onus lies on the charterer

to prove how much delay was actually caused by the fault.64

Consequently, the Claimant is

entitled to damages for detention as compensation for time lost.

ii. The case doesn’t fall within the exceptions under clause 9(e).

35. At the outset, the Claimant argues that where there is a stipulation as to demurrage, the

charterer will bear the burden to show that one of the exceptions to the running of laytime has

occurred.65

36. In any event, the Claimant submits that an interruption clause needs to be construed

narrowly.66

When construing an interruptions clause, care must be taken to reflect the

contemplated intent of the parties.67

The intention cannot be to give the clause so wide an

ambit as to deprive one party's stipulations of all contractual force.68

37. Clause 9(e) of the Charterparty allows exemption from demurrage in the following cases:

“Acts of God, war, public enemies, arrests; interruption, stoppage or shortage of shippers’

fuel supply [...] the laytime not to count during the period of such delay or hindrance and

demurrage not to accrue even if the vessel is already on demurrage.”69

The claimant presents

that the cause of delay of The Athena was an interception ordered by a Presidential Decree

against the cargo on board. The interruptions to laytime clause does not cover any

circumstance where delay caused is in direct relation to the nature of cargo. Thus, in light of

64

Islamic republic of Iran Shipping Lines v, Ierax Shipping, [1991] 1 Lloyd’s Rep. 81; JULIAN COOKE, TIM

YOUNG ET AL, VOYAGE CHARTERS (3d ed. 2014). 65

Freedom Maritime Corp. v. International Bulk Carrier S.A. (The Khian Captain), [1985] 2 Lloyd’s Rep. 212.;

THOMAS EDWARD SCRUTTON, SCRUTTON ON CHARTERPARTIES AND BILLS OF LADING, 274 (23d ed. 2015). 66

The Forum Craftsman, [1991] 1 Lloyd;s Rep.91; SHV Gas Supply and Trading SAS v. Naftomar Shipping

and Trading Co Inc., [2006] 1 Lloyd’s Rep 163. 67

Kudos Catering (UK) Limited v. Manchester Central Convention Complex Limited, [2012] EWHC 1192

(QB). 68

Suisse Atlantique case, [1967] 1 AC 361. 69

Page 35 of Bundle.


14

the narrow interpretation accorded to exception clauses, the claimant argues that the claim for

demurrage does not fall within the exceptions under the Charterparty.

iii. Force Majeure clause 19 does not exempt demurrage.

38. A force majeure clause cannot be equated with an exemption clause.70

When once a vessel is

on demurrage no exceptions will operate to prevent demurrage continuing to be payable

unless the exceptions clause is clearly worded so as to have that effect.71

The Claimant asserts

that Clause 1972

of the Charter-party makes no express provision to exempt demurrage. In

this light, the Respondent is precluded from relying on the force Majeure Event to escape the

liability of demurrage in arrears.

B. The Charterparty is not frustrated as alleged by Hestia.

39. The Claimant presents that the charter-party was not frustrated as alleged by Hestia because,

The Contract expressly makes provision for supervening event (i), in any event, the object of

the contract was not radically vitiated (ii) and finally because the Claimant will be prejudiced

if the Tribunal discharges the contract by frustration.

i. Contract expressly makes provision for supervening event.

40. The Claimant contends that the Charterparty has not been frustrated by the delay in the

delivery of HLNG and that the delay caused therein had been provided for by the force

majeure clause in the Charterparty. The grounds of the Claimant’s argument are: Force

70

Gerard McMeel, The Construction Of Contracts 631 (2d ed. 2011); Fairclough Dodd & Jones Ltd.v. J.H.

Vantol Ltd.,[1956] 1 W.L.R. 136; HL.J Lauritzen AS v. Wijsmuller BV (The Super Servant Two), [1990] 1

Lloyd’s Rep.1 CA. 71

THOMAS EDWARD SCRUTTON, SCRUTTON ON CHARTERPARTIES AND BILLS OF LADING, (23d ed. 2015).

Compania Naviera Aeolus SA v.Union of India, [1964] A.C. 868; The Dias, [1978] 1 Lloyd’s Rep. 325. 72

Pages 40,41 of Bundle.


15

Majeure in clause 19 of the Charterparty excludes the operation of the doctrine of frustration

(a); and, Hestia didn’t exercise the option to cancel within the limitation under clause 19(ii)

(b).

a) Force Majeure in clause 19 of the Charterparty excludes the operation of the doctrine of

frustration.

41. The doctrine of frustration is applicable when a contract has become impossible to perform

because of circumstances that would render the performance radically different to what was

contracted for.73

Three elements are normally necessary for the doctrine of frustration to

apply: (1) the event giving rise to the claim must be totally unexpected and unforeseeable; (2)

the risk of the event must not be provided for, either by the language of the Charterparty or

by custom; (3) the performance of the contract must be impossible or commercially

impracticable.74

42. It is clear that in order for the common law doctrine of frustration to be applicable to a

particular circumstance, the causal event must be unforeseen. Unforeseen circumstances in

relation to the frustration of the performance of a contract are those circumstances which are

not provided for in the contract or by custom.75

A clause in the contract which is intended to

deal with the event which has occurred will preclude the application of the doctrine.76

43. The essence of frustration is that it should not be due to the act or election of the party

seeking to rely on it. Parties with a duty or charge under a contract are bound to make good of

73

Davis Contractors v. Fareham, UDC [1956] AC 696; Codelfa Constructions Pty Ltd. v. State Rail Authority

(NSW), [1982] 149 CLR 337; GRANT GILMORE & CHARLES L. BLACK, THE LAW OF ADMIRALTY 224 (2d ed.

1975). 74

Hilton Oil Transport v Oil Transport Co., (659 So, 2d 1141 (CA Fla 1995). 75

WJ Tatem Ltd. v. Gamboa, [1939] 1 K.B. 132; Codelfa Constructions Pty Ltd. v. State Rail Authority (NSW),

[1982] 149 CLR 337; Paal Wilson &. Co. A /S v. Partenreederei Hannah Blumenthal ( The Hannah

Blumenthal), [1983] 1 A.C. 854. 76

Kuwait Supply Co v. Oyster Marine Management (The Safeer), [1994] 1 Lloyd’s Rep. 637; Bangladesh

Import-Export Co Ltd v. Sucden Kerry SA, [1995] 2 Lloyd's Rep 1; CHITTY ON CONTRACTS (Vol. 1, 30th ed.

2008).


16

such duty or charge, notwithstanding any accident by inevitable necessity, because they

might have provided against it in his contract.77

44. Force Majeure clauses are inserted into contracts to reduce the practical significance of the

doctrine of discharge by frustration. These clauses create an express provision in the contract

or Charterparty itself for supervening events that may frustrate the contract.78

A force

majeure clause should be construed with close attention to the words that precede or follow it

and with due regard to the nature and general terms of the contract. 79

There is no room for

doctrine of frustration to apply if the event is provided for in the elaborate force majeure

clause.80

45. The Charterparty between Hestia Industries and Zeus Trading, via its clause 19, has

attempted to internalize the delay caused by a supervening event through a force majeure

clause. In the present dispute the Claimants contend that the supervening event that the

Respondents are relying on as one that frustrates the contract has been envisaged and whose

risks have been internalised within the contract by virtue of the parties incorporating the

Clause 19, the force majeure clause.

46. The respondents have claimed that the frustration of the Charterparty arose because of an

inordinate delay in the delay of HLNG to Poseidon. This delay was caused due to a

Presidential Decree passed in Hades that directed the Coast Guard of Hades to intercept the

Athena before it could leave the port and cause it to return to it’s berth. The Athena was not

allowed to leave its berth for a period of 1 year.

47. The Claimant asserts that the interception of the Athena was a circumstance foreseen by the

parties and is expressly provided for in the Charterparty dated 21st July 2014. Clause 19

77

Paradine v. Jane, [1647] EWHC KB J5. 78

Joseph Constantine SS Line v. Imperial Smelting Corp Ltd., [1942] AC 154, 163. 79

Lebeaupin v. Richard Crispin & Co.,[1920] 2 KB 714. 80

Bremer Handelsgesellschaft m .b.H . v. Vanden Avenne-Izegem P .V .B .A .,[1977] 1 Lloyd’s Rep. 133.


17

(Force Majeure clause), specifically through its sub clause (c) provide for the delay in

performance due to “(c)hindrances of whatsoever nature in [...] shipping or discharging of

products occurring without the negligence of the Charterer.”

48. Alternatively, sub clause (d) of the same clause provides for “Mobilisation, war (declared or

undeclared), [...] Court issued arrest proceedings, [...] or other similar cause.” It is the

claimant’s contention that such words of a catch all provision that follow the enumeration of

specific events are to be construed having their natural and larger meaning.81

If a force

majeure clause includes a list of force majeure events, such a list is usually meant to be non-

exhaustive and aimed at illustrating the general definition of the clause.82

49. Thus there is considerable support both in principle and in authorities for the view that

foresight or foreseeability of the supervening event excludes frustration. 83

In light of the

same the claimants would like to state that by virtue of the parties agreeing to incorporate a

force majeure clause within the provisions of the Charterparty, the defence of frustration

cannot be claimed by the Respondents as a means of vitiating the liabilities of the charter-

party.

b) Hestia didn’t exercise the option to cancel within the limitation under clause 19(ii).

50. Having allocated the risk by their contract, the parties should not be discharged if the event

indeed occurs.84

The Claimant contends that Clause 19(ii) allows either party to cancel the

contract by giving notice between 30-45 days of the force majeure event. The Respondent

gave no notice of cancellation until April 30, 2015.85

Thus, the Respondent did not exercise a

81

CHITTY ON CONTRACTS (Vol. 1, 30th ed. 2008); CHRISTOPH BRUNNER, FORCE MAJEURE AND HARDSHIP

UNDER GENERAL CONTRACT PRINCIPLES: EXEMPTION FOR NON-PERFORMANCE IN INTERNATIONAL

ARBITRATION (2008). 82

Nissho-Iwai Co. v. Occidental Crude Sales, 729 F.2d 1530 (5th Cir. 1984). 83

SIR GUENTER TREITEL, FRUSTRATION AND FORCE MAJEURE 902 (3d ed. 2014). 84

SIR GUENTER TREITEL, FRUSTRATION AND FORCE MAJEURE 901 (3d ed. 2014); Comptoir Commercial

Anversois v. Power Son & Co. [1920] 1 K.B. 868. 85

Page 65 of Bundle.


18

right of cancellation provided under the contract. In this light, the Claimant argues that the

Respondent is precluded from exercising discharge by frustration.

ii. In any event, the object of the contract was not radically vitiated.

51. The Claimant submits that the delay did not radically vitiate the object of the Contract

because time is not of essence to the present contract.

52. The phrase that ‘time is of essence to a contract’ can be misleading. The question as to

whether the failure to comply with a contractual provision within the time limited by a

contract would construe a repudiation of the contract. However, this would only apply if there

is a specific and express provision in the Charterparty or contract that mentions a limitation

for performance by the parties.86

53. It is the claimant’s contention that when construing whether time is of essence to a contract

two essential questions must be answered: (1) What importance have the parties expressly

ascribed to the consequence to delaying the performance?; (2) If no express agreement, what

consequence must be attached to the delay, having regard to the contract as a whole?87

54. The claimant’s stipulation is that the voyage Charterparty dated 21st July 201488

did not have

an express clause providing for a time within which the claimant was meant to perform

obligations under the contract. No consequences were attached to any delay in performance,

either expressly or impliedly.

55. Where no precise time for performance is specified, the law implies an obligation to perform

the act within a reasonable time having regard to circumstances of the case.89

A charterer is

86

British and Commonwealth Holdings Ltd. v. Quadrex Holdings Ltd., [1989] QB 842. 87

Id. 88


CHITTY ON CONTRACTS 1109 (Vol. 1, 30th ed. 2008); Postlethwaite v. Freeland, [1880] 5 App.Cas 599;

Charnoc v. Liverpool Corp, [1968] 1 WLR 1498; Universal Cargo Carriers Corporation v. Citati., [1957] 2 Q.B.

401.


19

bound to dispatch the cargo within a reasonable time with regard to every impediment which

might arise.90

56. In this light, the claimant seeks to confirm that the performance of the obligation was

completed within a reasonable time. A delay, if any, in the discharge of goods was caused

due to a Presidential Decree against the shipping of the Charterer’s cargo in Hades and the

subsequent berthing of the Athena by the Coast Guard of Hades. This delay was provided for

in the Charterparty (clause 19) as a force majeure event with the words “Neither party shall

be liable for any failure to perform or delay in performing its obligations under this contract

[...]”.

iii. Claimant will be prejudiced in an event of discharge by frustration.

57. Frustration is not lightly to be invoked to relieve contracting parties of the normal

consequences of imprudent commercial bargains.91

The courts will refuse the application of

the doctrine of frustration if it does not produce a fair result.92

The Tribunal must rely on the

intention of the parties to determine the consequent imbalance in the agreed risk allocation.93

The Claimant will be prejudiced if the contract is discharged by frustration. In the matter at

hand, the Claimant was stranded at the port of Hades because of the HLNG on board.94

The

Respondents did not make any attempt to unload the cargo off The Athena. In their

communication alleging frustration,95

the Respondent had communicated that they were

arranging for an alternate vessel to transport the HLNG. There was no further communication

in this respect. The Claimant was thereby prevented using the vessel as a freight-earning

90

Postlethwaite v. Freeland [1880] 5 App.Cas 599; Tsakrioglou & Co. Ltd. v. Noblee Thorel GMBH [1960] 2

QB 318 (affirmed in [1962] AC 93) 91

Pioneer Shipping Ltd. v. BTP Tioxide Ltd. (the Nema) [1982] A.C. 724, 752 92

H G BEALE, W D BISHOP & M. P. FURMSTON, CONTRACT CASES & MATERIALS 157 (5th ed. 2007). 93

Schoenkopf v. Brown & Williamson Tobacco Corp., 483 F. Supp. 1185 (E.D.Pa.1980). 94


Page 65 of Bundle.


20

instrument. Thus, in an event that the Tribunal discharges the contract, the loss suffered by

the Claimant without any fault of its own, will be uncompensated.

58. Furthermore, the contract cannot be discharged by frustration if a party has performed its

obligations.96

The Claimant performed the contract as soon as the disability was removed.97

On lifting of such Force Majeure event, the claimants proceeded to resume the performance

of their obligations within a reasonable time. Moreover, the Respondent assisted this

performance by providing tug boats for towage.98

C. Without prejudice, the claimant is entitled to pre-frustration demurrage, damages

for detention and lien.

59. Frustration does not rescind the contract ab intio; it brings a contract to an end forthwith99

releasing parties from any further performance of the contract.100

Frustration does not affect

the obligations which had accrued prior to the date of frustration.101

Without prejudice to

their claim for demurrage, the Claimant contends that the Respondent must, at the very least,

pay demurrage accrued before the date of frustration.

60. Moreover, frustration releases both parties from the performance of the contract.102

The

Claimant performed the obligations under the contract. Hence, is entitled for damages of

detention after the frustrating event.

61. Finally, in an event of non-payment by the Respondent, the Claimant reserves their right of

lien on cargo, provided under Clause 11 of the Charterparty.103

96

Davis Contractors v. Fareham, UDC [1956] AC 696. 97


Id. 99

Hirji Mulji v. Cheong Yue Steamship Co., [1926] AC 497; J Lauritzen v. Wijsmuller, [1990] 1 Lloyd’s Rep.1

CA. 100

CHITTY ON CONTRACTS (Vol. 1, 30th ed. 2008). 101

Chandler v. Webster [1904] 1 KB 493. 102

Joseph Constantine v. Imperial Smelting Corp. Ltd., [1942] AC 154; National Carriers Ltd. v. Panalpina

(Northern) Ltd.[1981] 1 All ER 161.


21

62. CONCLUSION: The Claimant presents that the Respondent is liable to pat demurrage along

with interests. In light of the doctrine of stages, The Athena was still in the loading stage and

consequently laytime was running. On expiry of laytime demurrage started to accrue.

Furthermore, demurrage isn’t exempted under the Charterparty as the exception clause

doesn’t cover the force majeure event. Without prejudice to their claim for demurrage, the

Claimant seeks damages for detention as the cause of delay was in direct relation to cargo on

board. Furthermore, without prejudice, the Claimant is exempted under the Hague-Visby

Rules.

ISSUE 3: THE CLAIMANT IS NOT LIABLE FOR SALVAGE REWARD TO HESTIA

63. The respondents have claimed a salvage reward for the services rendered to them by the

tugboats of Hestug, a business owned by the respondents. The claimants contend that they are

not liable to pay any such reward to the respondents because: the arbitral tribunal does not

have the jurisdiction to pass an award with regard to the salvage claim (A); Hestug is a

separate legal entity and Hestia will not receive any reward for their actions (B); and

arguendo, the claimants will only be liable to the extent of the salvage of the vessel.

A. The arbitral tribunal does not have the jurisdiction to pass an award with regard to

the salvage claim

64. The Claimant contends that the Respondent’s claim for a salvage reward is outside the scope

of this Tribunal. The Parties had not contracted over Salvage in the present Charter-party.

Clause 30 of the Charterparty only pertains to disputes ‘arising under’ the Charterparty. A

salvage award is given when the operation is not one which is contractual agreed upon by the

103

Page 36 of Bundle.


22

parties.104

The salvage operation and the reward claimed thereof is, at best, a dispute in

relation to the Charterparty at hand.

65. Further, the Claimant’s contention is that the jurisdiction in salvage cases in mostly of

equitable character.105

Therefore, the arbitral tribunal will not have the jurisdiction to present

such an award.

66. Thus, in an event the Tribunal passes an award granting salvage rewards to the Respondent,

the award is likely to be severed and set aside under Art. 34(2)(ii) of the Commercial

Arbitration Act.106

In light of the duty to render an enforceable award,107

the Claimant urges

the Tribunal to not arbitrate the Respondent’s counterclaim for a salvage reward.

B. Hestug is a separate legal entity and Hestia will not receive any reward for their

actions.

67. An arbitration agreement is an agreement between ‘parties’ to submit to arbitration, all

disputes that arise in respect of a ‘defined legal relationship’ between them.108

A party which

is bound by an arbitration agreement includes a person claiming “through or under” a party109

such as a subsidiary of a parent company that is party to the arbitration agreement110

or a

parent company of the subsidiary company that is a party to the arbitration agreement111

.112

104

M.W. White, Salvage; Towage; Wreck and Pilotage IN M.W. WHITE, AUSTRALIAN MARITIME LAW 241

(2000); FRANCIS D ROSE, KENNEDY AND ROSE ON THE LAW OF SALVAGE (6th ed 2002); The Hestia, [1895] P

193; The Neptune, (1824) 1 Hagg 227. 105

The Calypso, (1828) 2 Hagg 209; The Five Steel Barges, (1890) 15 PD 142. 106

Commercial Arbitration Act, art. 34(2)(ii), (2012). 107

Julian D.M Lew, The Law Applicable to the Form and Substance of theArbitration Clause, ICCA CONGRESS

SERIES 9 (1998); Gunther J. Horvath, The Duty of the Tribunal to Render an Enforceable Award , 18 JOURNAL

OF INTERNATIONAL ARBITRATION 2. 108

Model Law Art. 7, Opt. I (1986). 109

International Arbitration Act sec. 7(4) (2010). 110

Allergen Pharmaceuticals Inc v. Bausch Inc, [1985] ATPR 40-636; McHutchinson v. Western Research and

Development Ltd, [2004] FCA 1234. 111

AED Oil Ltd. v. Puffin FPSO Ltd., (No 2) (2010) 27 VR 22. 112

ALEX BAYKITCH, ARBITRATION LAW OF AUSTRALIA:PRACTICE AND PROCEDURE 22 (2013).


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68. A claim may not be brought about for a subsidiary company (being a third party), by a parent

company through an arbitration agreement between the parent company and another party.

Hestug is a tow company which is a business owned by Hestia Industries. In this light, a

claim for Hestug cannot be brought about by the respondent in the arbitral tribunal

constituted for purposes of the arbitration agreement between Zeus and Hestia. Thus, Hestia

as such would not be entitled to a salvage reward.

69. Even in the event that the respondent contends the subsidiary is effectively the same party, it

is the claimant’s contention that economic reality must be determined according to

requirements of international commerce and circumstances of the case.113

Two companies of

the same corporate group may form a single economic reality when one has no assets of its

own.114

This would not be true of Hestug if it was a tug company owning tugboats and other

ancillary equipment.

70. Furthermore, courts cannot recognize or enforce awards if the party against whom the award

is being invoked is not a party to the arbitration agreement pursuant to which it was

rendered.115

Thus, it is the respondent’s contention that, the tribunal must not extend the

Arbitration Agreement to include claims of a third party which does not arise under the

Charterparty.

113

Dow Chemical France, the Dow Chemical Company and others v. Isover Saint Gobain, International

Chamber of Commerce Interim Award No. 4131. 114

Manuchar Steel Hong Kong Limited v. Star Pacific Line Pvt. Ltd, [2014] SGHC 181. 115

New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Art. V(1)(a) 1958;

EMMANUEL SAVAGE GAILLARD AND JOHN FOUCHARD, FOUCHARD GAILLARD AND GOLDMAN ON

INTERNATIONAL COMMERCIAL ARBITRATION 1695 (1999); JACOB GRIERSON AND ANNET VAN HOOFT,

ARBITRATING UNDER THE 2012 ICC RULES 225 (2012).


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C. Arguendo, the claimants will only be liable to the extent of the salvage of the vessel.

71. The liability to pay the reward is incurred by the owners of the salved property in proportion

to the relative values of their property. Therefore, the liability will not only attach to the

shipowner but also to the cargo owners whose cargo was saved from danger.116

72. In any event, the claimants contend that they, as the ship-owners, are only liable in proportion

of the relative value of the vessel itself and not the cargo. The burden of the cargo will fall on

the cargo owners who are a parent company of the salvors.

73. CONCLUSION: The Tribunal does not have the jurisdiction to determine the counterclaim

for a salvage reward. The salvage operation did not arise under the Charterparty which

incorporated a narrow arbitration clause. Moreover, Hestug was not a party to the arbitration

agreement. In this light, an award granting salvage reward is likely to be severed and set

aside. Without prejudice to the same, the Claimant will only be liable to the amount due for

salvage of the ship but not the amount due for salvage of the cargo.

116

YVONNE BAATZ, MARITIME LAW (2014).


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REQUEST FOR RELIEF

On the basis of the foregoing arguments and the Claimant’s prior written pleadings, the

Claimant respectfully requests the Tribunal, while dismissing all contrary requests and

submissions by the Respondent,

To Adjudge and Declare that:

1. The Respondent is liable to pay demurrage accrued to the value of $17.2 million

along with all interests that accrue.

2. The Claimant is entitled to exercise its right of lien until demurrage in arrears is

discharged.

3. The delay did not frustrate the Charterparty.

4. The Respondent is not entitled to receive any salvage reward.

Submitted on behalf of :

Zeus Shipping & Trading Company

(Claimant)

Documents

Memorandum for Claimant Team No - Murdoch University · 2019-12-18 · Memorandum for Claimant TEAM NO.8 v INDEX OF AUTHORITES REFERRED ARTICLES REFERRED: 1. Gunther J. Horvath, The