MEMORANDUM FOR THE CLAIMANT - Murdoch University · ARBITRATION MOOT COMPETITION 2013 NATIONAL UNIVERSITY OF SINGAPORE TEAM NO. 20 MEMORANDUM FOR THE CLAIMANT Team ... Surveys Inc

THE 14TH INTERNATIONAL MARITIME LAW ARBITRATION MOOT COMPETITION

2013

NATIONAL UNIVERSITY OF SINGAPORE

TEAM NO. 20

MEMORANDUM FOR THE CLAIMANT

Team

Ho Pey Yann Mubin Shah Ramazan

Shiah Zi Han Yu Kanghao

Team 20 – Memorandum for the Respondent

I

TABLE OF CONTENTS

TABLE OF CONTENTS............................................................................................... I

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

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

QUESTIONS PRESENTED......................................................................................VII

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

PLEADINGS................................................................................................................. 3 I. THE RESPONDENT WAS JUSTIFIED TO DISCHARGE THE CARGO TO BEATLES.................................................................................................................. 3 II. THE RESPONDENT WAS JUSTIFIED TO DISCHARGE THE GOODS AT THE PORT OF ROTTERDAM. ............................................................................... 6

A. The contractual obligation to discharge the goods at the port of Liverpool, Merseyside can be altered by Clause 29(a) of the charterparty............................ 6 B. The respondent exercised his liberty under clause 29(a) in a fair and reasonable manner ................................................................................................ 8

III. THE RESPONDENT DISCHARGED HIS DUTY TO LOAD, HANDLE, STOW, CARRY, KEEP, CARE FOR AND DISCHARGE THE CARGO PROPERLY AND CAREFULLY. ........................................................................... 9

A. The Hague-Visby Rules are applicable to this contract of carriage. ............. 9 B. The claimant has not proven that the damage and losses suffered in relation to the cargo occurred while the cargo was in the care of the respondent........... 10

1.The Claimant cannot raise a prima facie presumption that the damage to the cargo occurred while the Cargo was in the care of the Respondent because the Bills of Lading issued were claused “quality...unknown”. .... 11

2.The Respondent is not liable for damage and losses suffered because the Claimant has not proved he has suffered actual loss. ................................ 12

C. If the claimant can raise a prima facie presumption that the damage to the cargo occurred while the cargo was in the care of the respondent, the respondent is entitled to exempt his liability under art. iv rule 2(c) and/or 2(f) and/or 2(q) because the damage was caused by piracy.......................................................... 13

1.The damage to the cargo was caused by the piracy.................................................................................................................... 13 2.Piracy is an exempted peril under the Hague-Visby Rules................................................................................................................... 15

D. The vessel was in a seaworthy condition to carry out the voyage................ 17 IV. IF, WHICH IS DENIED, THAT THE RESPONDENT WAS FOUND TO BE LIABLE TO THE CLAIMANT FOR DAMAGES AND LOSSES FOR DISCHARGING THE CARGO TO BEATLES, THE CORRECT MEASURE OF DAMAGES IS THE MARKET VALUE OF NON-GMQ PFAD AT THE PORT OF ROTTERDAM. ................................................................................................. 19


II

A. The correct measure of damages is the market value of non-GMQ PFAD at the port of Rotterdam........................................................................................... 19 B. If, which is denied, the cargo should have been delivered in the port of Liverpool, Merseyside the claimant is only entitled to the market value of non-GMQ PFAD at the port of Rotterdam plus freight costs from the port of Rotterdam to the port of Liverpool, Merseyside. ................................................. 20

V. THE RESPONDENT IS NOT LIABLE FOR COSTS OF THE DUTCH PROCEEDINGS CLAIMED AS COSTS IN THE CURRENT ARBITRATION UNDER SECTIONS 61 AND 63 OF THE ARBITRATION ACT 1996............... 21 VI. THE RESPONDENT IS NOT LIABLE FOR COMPOUND INTERESTS PURSUANT TO SECTION 49 OF THE ARBITRATION ACT 1996 AND COSTS WITH SUCH COMPOUND INTERESTS. ............................................................ 22 VII. PRAYER FOR RELIEF................................................................................. 23


III

LIST OF ABBREVIATIONS

Claimant Aardvark Limited

Respondent Twilight Carriers Inc

Beatles Beatles Oil & Fats Ltd

PFAD Palm Fatty Acid Distillate

Cargo 4,000 Metric Tonnes of PFAD

Vessel M.T. Twilight Trader

Master Master of the M.T. Twillight Trader

Chief Officer Chief Officer of the M.T. Twillight Trader

Bills of Lading Bill of Lading No. PG 1-4, dated 25 October 2008

Charterparty Vegoil Voy 1/27/50 Tanker Voyage Charter Party form

M.T. Metric Tonnes

GMQ General Merchantable Quality

Hague-Visby Rules International Convention for the Unification of Certain Rules relating to Bills of Lading, as amended by the Visby Protocol, 1968

IMO Circular on Piracy Prevention

Guidance to Shipowners and Ship Operators, Shipmasters and Crews on Preventing and Suppressing Acts of Piracy and Armed Robbery Against Ships, IMO Doc. MSC/Circ. 623/Rev. 3 (May 29, 2002)

Aspinall Lewis International Report

Aspinall Lewis International, MT Twillight Trader: Inspection of the Cargo of Palm Oil After Hijacking at Somalia November 2008 – Febuary 2009, dated 19 March 2009

Thomas, Cropper, Benedict Report

Thomas, Cropper, Benedict fax to Charterers Inc, dated 18 March 2009

Surveys Inc. Report Survyes Inc. report for Insurance Co PLC, dated 9 June 2009

Dutch Surveyoyrs B.V. Dutch Surveyors B.V. Report, reference no.


IV

Report 14782.079/WS/EB

ICC Annual Report on Piracy 2007

ICCInternationalMaritimeBureau,“PiracyandArmed Robbery Against Ships,” Annual Report, January 2007, at http://www.southchinasea.org/docs/ ICC-IMB-PRC-2007.pdf (June 8, 2009).

International Arbitration Act

International Arbitration Act 1974 (Cth)

Commercial Arbitration Act

Commercial Arbitration Act 1990 (Qld)

Navigation Act Navigation Act 1912 (Cth)

LMAA London Maritime Arbitrators Association


V

INDEX OF AUTHORITIES

International Conventions

Hague-Visby Rules .............................................................................................. passim

Domestic Legislation

Factors Act 1889 ........................................................................................................... 3 Sale of Goods Act 1979 ................................................................................................ 3

Cases

Albacora S.R.L v Westcott & Laurance Line Ltd. [1966] 2 Lloyd’s Rep 53 .............. 13 Anglo-Danubian Transport Co. Ltd. v Ministry of Food (1949) 83 Lloyd’s Rep 137 . 6 Barber v Meyerstein (1870) LR 4 HL 317.................................................................... 3 Barclays Bank Ltd v Commissioners of Custom and Excise [1963] 1 Lloyd’s Rep 81 4 Bradt v Liverpool, Brazil and Riverplate Steam Navigation Co. [1924] 1 KB 575 ... 11 Compania Naviera Vacongada v Churchill & Sim [1906] 1 KB 237......................... 11 East West Corpn v DKBS AF 1912 A/S and another Utaniko Ltd v P & O Nedlloyd

BV [2003] QB 1509 ................................................................................................... 5 Finlay v The Liverpool and Great Western Steamship Co Ltd (1870) 23 L.T. 251...... 4 G. H. Renton & Co v Palmyra Tarding Corporation [1956] 2 Lloyd’s Rep 379......... 9 Glyn Mills & Co. v East and West India Dock Co. (1882) 7 App. Cas. 591 ................ 5 Kopitoff v Wilson (1876) 1 QBD 377.......................................................................... 18 Leduc v Ward (1888) 20 QBD 475 ............................................................................... 6 Lickbarrow v Mason (1794) 5 TR 683.......................................................................... 3 Maxine Footwear Co Ltd v Canadian Government Merchant Marine Ltd [1959] AC

589 ..................................................................................................................... 17, 18 Mitchell Cotts & Co (Middle East) v Hairco Ltd (1944) 77 Lloyd’s Rep 106 ............. 3 National Petroleum Company v “Athelviscount” (Owners) [1934] 48 Lloyd’s Rep

164 ........................................................................................................................... 11 P Samuel & Co v Dumas [1923] 1 KB 592 ................................................................ 15 Pandorf & Co. v Hamilton, Fraser, & Co. [1886] 17 Q.B.D. 670 ............................. 15 Paterson Steamships v Canadian Co-operative Wheat Producers [1934] A.C. 538.. 16 Pendle & Rivett Ltd. V Ellerman Lines Ltd [1927] 29 Lloyd’s Rep. 133 ................... 14 Phillips & Co. v. Clan Line Steamers (Smithfield Ltd) (1943) 78 Lloyd’s. Rep. 58 .. 14 Pickering v Barclay (1648) Styles 132 ....................................................................... 16 Reardon Smith Line Ltd. v Ministry of Agriculture, Fisheries and Food [1961] 1

Lloyd’s Rep 385 ........................................................................................................ 6 Rice v Baxendale (1861) 7 H & N 96 ......................................................................... 19 Sanders Bros v Maclean & Co (1883) 11 QBD 327..................................................... 3 The Bunga Seroja [1999] 1 Lloyd’s Rep 512 ............................................................. 15 The Florida [2006] EWHC 1137 .................................................................................. 7 The Good Friend [1984] 2 Lloyd’s Rep 586 .............................................................. 17 The Hellenic Dolphin [1978] 2 Lloyd’s Rep 336........................................................ 11


VI

The Lady Gwendolen [1965] 1 Lloyd’s Rep 335 ........................................................ 16 The Product Star (No. 2) [1993] 1 Lloyd’s Rep 397 .................................................... 8 The Sormovskiy 3068 [1994] 2 Lloyd’s Rep 266.......................................................... 4 The Texaco Melbourne [1993] 1 Lloyd’s Rep 471 ..................................................... 19 The Washington Trader [1972] 1 Lloyd’s Rep 463 ...................................................... 7 Wilson & Sons v Owners of cargo per the Xantho (1887) 12 App. Cas. 503 ............. 15

Arbitral Awards

New York seller v Californian buyer, Final Award, ICC Case No. 6268, 18 May 1990................................................................................................................................. 22

Southern Pacific Properties (Middle East) Limited, Southern Pacific Properties Limited v The Arab Republic of Egypt, ICSID Case No. ARB/84/3, 20 May 1992 22

Books and Book Chapters

Cooke, Young and Kimball et. al., Voyage Charters, 3rd ed. (London: Informa, 2007)................................................................................................................................. 15

Guenter Treitel & F.M.B. Reynolds, Carver on Bills of Lading, 2nd ed. (London: Sweet & Maxwell, 2005)......................................................................................... 15

John Gotanda, Supplemental Damages in Private International Law, (Kluwer Law International, 1998) ................................................................................................. 21

Others

Guidance to Shipowners and Ship Operators, Shipmasters and Crews on Preventing and Suppressing Acts of Piracy and Armed Robbery Against Ships, IMO Doc. MSC/Circ. 623/Rev. 3 (May 29, 2002) ................................................................... 17


VII

QUESTIONS PRESENTED

1. Whether the Respondent was entitled to discharge the Cargo without the

production of the original bills of lading.

2. Whether the Respondent was entitled to discharge the cargo without the

production of the Bills of Lading.

3. Whether the Respondent was justified to discharge the Cargo in the port at

Rotterdam under Clause 29 of the Charterparty.

4. Whether the Respondent was in breach of its obligation to properly and/or

carefully load, handle, stow, carry, keep, care for and discharge the Cargo.

5. Whether the Claimants is entitled to damages for the direct losses resulting

from the Respondent’s breach of contract.

6. Whether the Claimant took reasonable steps to mitigate its losses.

7. Whether the Claimant is entitled to claim costs for the collateral proceedings

in the Dutch Court.

8. Whether the Claimant is entitled to interests on a compound basis.

9. Whether the Claimant is entitled to claim costs with compound interests on

costs.


1

STATEMENT OF FACTS

10. This dispute arises out of four Bills of Lading issued by the Respondent,

Twilight Carriers, on 25 October 2008 in respect of four thousand metric

tonnes of Palm Fatty Acid Distillate (PFAD) carried on board the MT

TWILIGHT TRADER. The Bills of Lading were delivered and endorsed to the

Claimants, the buyers of the PFAD, in January 2009, upon payment of the

purchase price to the sellers of the PFAD, Beatles Oils & Fats Ltd. Beatles

charterered the vessel from the Respondent, the owners of the Vessel, under a

Charterparty dated 12 September 2008.

11. The Bills of Lading stipulated Liverpool, Merseyside as the port of discharge,

and were duly signed by Hawk Shipping Services as Agent for the Master.

The Bills of Lading were also clean upon their issuance, and incorporated the

Hague-Visby Rules and all terms, conditions, liberties and exceptions

contained within the Charterparty. In addition, the Bills of Lading were

claused with the words “shipped...in apparent good order and condition” and

“Weight, measure, quality, quantity, condition, contents and value unknown”.

12. Before the Vessel entered the Gulf of Aden, she commenced anti-pirate

watch. Nevertheless, the Vessel and crew was hijacked and captured by

Somali pirates and held hostage from 15 November 2008 to 15 February

2009. Surveys of the Cargo after the Vessel was released reveal that there was

no apparent evidence of organic contaminates although there was a possibilty

of arsenic contamination. As a result of the piracy, traceability of the PFAD

was lost and the Cargo was regarded as being of non-Good Merchantable

Quality and unsuitable for entry into the human food chain.


2

13. An exchange of messages between the Claimant and Beatles ensued

subsequent to the release of the Vessel by the pirates, and the Vessel was

directed by Beatles to proceed to Rotterdam where Beatles intended to sell the

Cargo. Beatles indemnified the Respondent in respect of any liability arising

from the delivery of the PFAD to Beatles without production of the Bills of

Lading, and the Respondent delivered the cargo to Beatles at Rotterdam.

14. The following proceedings took place before the Dutch court:

(i) Beatles petitioned to garnish the Cargo before judgment and attach

the Cargo.

(ii) Aardvark applied to arrest the Vessel. The application was granted,

but the arrest was lifted in return for Beatles providing security.

(iii) Beatles applied for and received an order for sale, the proceeds of

which are held by the Dutch court pending the outcome of the

current Arbitration.


3

PLEADINGS

I. THE RESPONDENT WAS JUSTIFIED TO DISCHARGE THE CARGO TO BEATLES.

15. The Respondent was justified to deliver the cargo to Beatles because the

Claimant had failed to produce the bills of lading despite being put on notice

that the Respondent intended to discharge the cargo at Rotterdam.

Subsequently, Beatles, the original shipper of the cargo, proved to the

Respondent’s reasonable satisfaction, that he was entitled to the possession of

the cargo.

16. In Lickbarrow v Mason1, the House of Lords recognised that a bill of lading,

by which goods were stated to have been “shipped by any person or persons to

be delivered to order or assigns” was “negotiable and transferable”. This

would enable the holder, by transferring the bill, to transfer the property in the

goods to the transferee.

17. The principle that the bill of lading operates as a document of title was further

developed in Barber v Meyerstein,2 where Lord Hatherley, held that the bill of

lading represented the goods and that possession of the bill of lading was

treated as equivalent to possession of the good covered by it.3 The status of

the bills of lading as a document of title is also buttressed by legislature under

the Factors Act 1889.4 Section 1(4) provides that ‘the expression “document

of title” shall include any bill of lading’ and is incorporated, by reference, in

section 61(1) of the Sale of Goods Act 1979.5

1 (1794) 5 TR 683, 685-6 2 (1870) LR 4 HL 317 3 Ibid at 329-30. See also Mitchell Cotts & Co (Middle East) v Hairco Ltd (1944) 77 Lloyd’s Rep 106, 110 (Atkinson J); Sanders Bros v Maclean & Co (1883) 11 QBD 327, 341 (Bowen LJ) 4 52 & 53 Vict, c45 5 c 54


4

18. Thus, in the absence of an express term of the contract, the shipowner must

only deliver the cargo to the holder of the bills of lading when the bills of

lading is presented to him.

19. However, in the absence of the production of the original bills of lading at the

port of loading, it is necessary to imply a term that the shipowner can deliver

the cargo without production of the original bill of lading in circumstances

where it is proved to his reasonable satisfaction that the person seeking

delivery of the goods is entitled to possession and why the bills of lading

cannot be produced.6

20. However, the rule that the shipowner must deliver the cargo to the holder of

the bills of lading upon production of the bills of ladin is not immutable.

Three exceptions have been carved out. First, in Barclays Bank Ltd v

Commissioners of Custom and Excise7, Lord Diplock held that until the bills

of lading are produced, unless at any rate its absence can be satisfactorily

accounted for, the shipowner is entitled to retain possession of the goods. The

corollary of Lord Diplock’s holding is that the shipowner can deliver the

cargo in the absence of bills of lading provided the absence can be

satisfactorily accounted for.

21. Second, when it is proved that the person presenting the bills of lading is not

entitled to immediate possession of the cargo, the shipowner is not entitled to

deliver the cargo to that person.8 In that case, the bills of lading were

fraudulently endorsed to the consignee and hence title did not pass to the

6 The Sormovskiy 3068 [1994] 2 Lloyd’s Rep 266, 272 7 [1963] 1 Lloyd’s Rep 81, 89 8 Finlay v The Liverpool and Great Western Steamship Co Ltd (1870) 23 L.T. 251


5

consignee. The shipowner was entitled to deliver the cargo to its rightful

owners in the absence of the production of bills of lading.

22. Lastly, a shipowner is not entitled to deliver to a holder of a bill of lading

when he has notice of competing claims or knowledge of any circumstances

raising a reasonable suspicion that the holder of the bill of lading is not

entitled to the goods, in which case he must interplead.9

23. The three exceptions show that the shipowner may be obliged to deliver cargo

otherwise than against the presentation of the original bills of lading. In The

Sormovskiy, Clarke J. held that a fourth exception – the rule stated in para. 18;

was consistent with the three exceptions to the rule in The Stettin.

24. The exception that the shipowner can deliver the cargo without production of

the original bill of lading in circumstances where it is proved to his reasonable

satisfaction that the person seeking delivery of the goods is entitled to

possession and why the bills of lading cannot be produced has been doubted.10

However, East West can be distinguished on the grounds that the Court of

Appeal was not expressly considering the issue raised in this pleading but was

concerned with the issue of whether the shipowners were entitled and bound

to deliver against an original bill of lading when a right of suit of bailment

may arise.

25. On 20th March 2009, the Respondent received an email by the Claimant that

the Claimant was put on notice that the Respondent intended to discharge the

cargo at the Port of Rotterdam.11 However, the Claimant did not present the

9 Glyn Mills & Co. v East and West India Dock Co. (1882) 7 App. Cas. 591 10 East West Corpn v DKBS AF 1912 A/S and another Utaniko Ltd v P & O Nedlloyd BV [2003] QB 1509, 1539 11 See email correspondence from Claimant to Respondent at pg 36


6

bills of lading at the port to receive the cargo. In the absence of the production

of bills of lading, the Respondent was entitled to deliver the cargo to Beatles

because while the email sent put him on notice of the possibility of competing

claims, Beatles was the original shipper of all the cargo onboard the Vessel.

26. Meanwhile, the Claimant, who knew that the Respondent intended to

discharge the cargo, did not show up at the port with the bills of lading.

Hence, the Respondent was reasonably satisfied that Beatles was entitled to

possession of the cargo and was justified in delivering the cargo to Beatles.

II. THE RESPONDENT WAS JUSTIFIED TO DISCHARGE THE GOODS AT THE PORT OF ROTTERDAM.

A. THE CONTRACTUAL OBLIGATION TO DISCHARGE THE GOODS AT THE

PORT OF LIVERPOOL, MERSEYSIDE CAN BE ALTERED BY CLAUSE 29(A)

OF THE CHARTERPARTY.

27. The Respondent was justified to deliver the cargo at the Port of Rotterdam

because the hijacking of the Vessel triggered the right to rely on Clause 29(a)

of the Charterparty to make delivery at a substitute port requested by Beatles.

28. In Leduc v Ward12, the English Court of Appeal held that the bill of lading

would be conclusive evidence as to the terms of the contract of carriage once

it has been endorsed to a third party. In the absence of any special provision in

a charterparty, the effect of the nomination of a loading or discharging port by

the charterer is that the charterparty must thereafter be treated as if the

nominated port had originally been written into the charterparty and that the

charterer has neither the right nor the obligation to change that nomination.13

12 (1888) 20 QBD 475 13 Anglo-Danubian Transport Co. Ltd. v Ministry of Food (1949) 83 Lloyd’s Rep 137; Reardon Smith Line Ltd. v Ministry of Agriculture, Fisheries and Food [1961] 1 Lloyd’s Rep 385


7

29. However, Clause 29(a) of the Charterparty allows a shipowner to discharge

the cargo at a substitute port. The shipowner can invoke the liberty to

discharge the cargo at a substitute port if he encounters practical difficulties in

the performance of the contract of carriage.

30. In The Washington Trader14, the United States District Court held that Clause

29(a) “confers upon the master of the vessel certain discretionary powers

when circumstances unexpected and beyond the control of the owner threaten

the security of the vessel or cargo, including the right to proceed or return, or

to stop at any safe port, or to discharge the cargo at any safe place or port.”

31. This construction was accepted by the English High Court in The Florida.15

The High Court held that “the trigger for application of the clause is merely

something which ‘in the judgment of the owner or the Master’ is likely to give

rise to a range of risks some of which could have the effect of frustrating the

charter”.

32. The scope of such practical difficulties only include situations where the ship

or the cargo encounters unexpected hazards, detentions, delays or threats of

seizure of destruction or when it is unsafe, imprudent or unlawful for the ship

to proceed on its voyage or to discharge the cargo at the port of discharge.

33. The Respondent has the right to make delivery at a substitute port in situations

where the ship or the cargo encounters unexpected hazards, detentions, delays

or threats of seizure of destruction. On 15 November 2008, Somali pirates

14 [1972] 1 Lloyd’s Rep 463 15 [2006] EWHC 1137


8

hijacked the Vessel while it was on route to the Port of Liverpool, Merseyside.

The ship and her crew were held hostage for approximately four months.16

34. The hijacking of the ship was an unexpected circumstance which was beyond

the control of the Respondent and threatened the security of the ship and the

cargo. Clause 29(a) was thus triggered and the Respondent was entitled to

have the Vessel call and discharge her cargo at the Port of Rotterdam.

B. THE RESPONDENT EXERCISED HIS LIBERTY UNDER CLAUSE 29(A) IN A

FAIR AND REASONABLE MANNER

35. The Respondent in discharging the Cargo to Beatles exercised his liberty

under Clause 29(a) in a fair and reasonable manner.

36. The liberty to discharge the cargo at a substitute port confers the shipowner

the discretion to determine if his vessel would encounter unexpected hazards,

detentions, delays or threats of seizure of destruction in her performance of

the contract of carriage. The discretion must be exercised honestly and in

good faith such that the outcome is fair as between both parties. It must not be

exercised arbitrarily, capriciously or unreasonably.

37. In The Product Star (No. 2), the English Court of Appeal decided that

contractual discretion under a charterparty had to be exercised honestly and in

good faith.17 Leggatt L.J. held that the owners were not entitled to exercise

their contractual discretion in an arbitrary, capricious or unreasonable manner,

without having regard to the provision in question. Instead, shipowners should

properly consideration the matter before him after making necessary inquiries.

16 See Aspinall Lewis International Report at para. 1.2.2 17 [1993] 1 Lloyd’s Rep 397, 404


9

38. This principle has been applied in cases involving the discretion to discharge

cargo “so near as she may safely get”. In G. H. Renton & Co v Palmyra

Tarding Corporation, Lord Somervale held that the discretion must be

exercised in light of the reasonable interests of both parties.18

39. After the Vessel was released, Beatle requested the Vessel to unload her

Cargo at the Port of Rotterdam instead of the Port of Liverpool, Merseyside. It

was fair and reasonable for the Respondent to accede to Beatle’s request to

discharge at the Port of Rotterdam instead of the Port of Liverpool,

Merseyside because Beatles, as the shippers of all the cargo onboard the

Twilight Trader, were in the best position to decide where it would be prudent

to discharge the cargo in light of the hijacking.

40. The Respondent exercised Clause 29(a) in the Bills of lading in a fair and

reasonable manner and thus was justified in delivering the cargo in the Port of

Rotterdam.

III. THE RESPONDENT DISCHARGED HIS DUTY TO LOAD, HANDLE, STOW, CARRY, KEEP, CARE FOR AND DISCHARGE THE CARGO PROPERLY AND CAREFULLY.

A. THE HAGUE-VISBY RULES ARE APPLICABLE TO THIS CONTRACT OF

CARRIAGE.

41. The Hague-Visby Rules are applicable because it has been specifically

incorporated by a paramount clause contained in the Bills of lading.19

42. Section 5(5) of the Carriage of Goods by Sea Act 1992 provides that the

Hague-Visby Rules shall have the force of law in the United Kingdom.

Accordingly, Article X(c) of the Hague-Visby Rules is applicable to a bill of

18 [1956] 2 Lloyd’s Rep 379 at 392-3 19 Bills of Lading No. PG1, PG2, PG3 and PG4, Clause 2


10

lading governed under English law. Article X(c) states that the provisions of

the Hague-Visby Rules shall be applicable to a bill of lading relating to the

carriage of goods between ports of two different states if the contract

contained in or evidenced by the bill of lading provides that these rules are to

govern the contract.

43. On the facts of this case, the paramount clause contained on the reverse of the

bills of lading provides that “when the Hague-Visby Rules are not enacted in

the country of shipment, the corresponding legislation of the country of

destination shall apply, irrespective of whether such legislation may only

regulate outbound shipments”. Accordingly, the Hague-Visby Rules will

apply because the United Kingdom is the country of destination and the

Carriage of Goods by Sea Act 1992 provides that the Hague-Visby Rules shall

have the force of law.

B. THE CLAIMANT HAS NOT PROVEN THAT THE DAMAGE AND LOSSES

SUFFERED IN RELATION TO THE CARGO OCCURRED WHILE THE CARGO

WAS IN THE CARE OF THE RESPONDENT.

44. The Claimant does not have a prima facie case against the Respondent for the

losses suffered in relation to the deterioration of the nature of the Cargo from

a GMQ product to a non-GMQ product because the deterioration was a

deterioration of the internal quality of the condition. As the bills of lading

were claused with the words “quality...unknown”, the onus of proving that the

damage occurred onboard the Vessel is on the Claimant. The Claimant has

neither proved he has suffered actual loss nor that the deterioration occurred

on the Vessel. Hence, the Respondent is not liable for the losses suffered in

relation to the Cargo.


11

1. The Claimant cannot raise a prima facie presumption that the

damage to the cargo occurred while the Cargo was in the care of

the Respondent because the Bills of Lading issued were claused

“quality...unknown”.

45. Representations on the bills of lading as to the condition of cargo shipped are

conclusive evidence in the hands of a bona fide purchaser for value and the

shipowner is estopped from denying that the cargo was shipped in good

condition.20 Hence, the cargo owner can raise a prima facie presumption that

the damage to the cargo occurred while the cargo was in the care of the

shipowner by showing that cargo which had been shipped in “good order and

condition” was damaged on arrival.21

46. However, the phrase “in apparent good order and condition” refers only to the

external and apparent condition of the cargo and thus, a representation as to

the condition of the goods is not one as to the internal condition or quality of

the cargo since the internal condition or quality of the cargo cannot be verified

by the shipowner.22

47. When the internal condition or quality of the cargo is deteriorated, the

shipowner is entitled to allege that the deterioration in the internal condition or

quality of the cargo occurred prior to loading if the deterioration would not

have been apparent to reasonable inspection at loading provided the bills of

lading issued are claused with the phrase “quality and condition unknown”.23

The onus of proving that the damage occurred onboard the vessel is shifted to

the claimant.

20 Compania Naviera Vacongada v Churchill & Sim [1906] 1 KB 237 21 Bradt v Liverpool, Brazil and Riverplate Steam Navigation Co. [1924] 1 KB 575; The Hellenic Dolphin [1978] 2 Lloyd’s Rep 336, 339 22 Supra note 20 23 National Petroleum Company v “Athelviscount” (Owners) [1934] 48 Lloyd’s Rep 164, 170


12

48. The Respondent is not liable for damage and losses suffered in relation to the

cargo because the deterioration of the nature of the Cargo from a GMQ

product to a non-GMQ product is not a deterioration of the internal quality of

the cargo. Both products are physically identical and it would not have been

apparent to reasonable inspection the nature of the Cargo (i.e. whether it was

GMQ or non-GMQ) at the port of loading.

49. The onus shifts to the Claimant to prove that the Cargo was GMQ PFAD and

not non-GMQ PFAD prior to loading at the Port of Pasir Gudang, Malaysia.

On the face of the Bills of lading issued, the Cargo is described only as PFAD

and no mention is made whether the Cargo was GMQ or non-GMQ product.

The Respondent would also not have been able to verify that the Cargo loaded

was GMQ or non-GMQ because it would not have been apparent to him due

to the fact that GMQ and non-GMQ PFAD is identical.

50. The Claimant has failed to show that the Cargo was not a non-GMQ product

prior to loading and hence cannot raise a prima facie case against the

Respondent for the losses suffered in relation to the deterioration of the nature

of the Cargo.

2. The Respondent is not liable for damage and losses suffered

because the Claimant has not proved he has suffered actual loss.

51. The Claimant alleges that the Cargo suffered damage when it lost its status as

a GMQ product.

52. This claim is unfounded. Although the Cargo lost its status as a GMQ product,

the physical nature of the Cargo was not altered. In fact, when surveyed, the

FFA content, TSM content and M&I results of the cargo were all within the


13

specifications stipulated in PFAD contracts 1234 and 1235.24 The Respondent

is not liable for damage and losses suffered because the lost of the Cargo’s

status as a GMQ product is not actual loss.

C. IF THE CLAIMANT CAN RAISE A PRIMA FACIE PRESUMPTION THAT THE

DAMAGE TO THE CARGO OCCURRED WHILE THE CARGO WAS IN THE

CARE OF THE RESPONDENT, THE RESPONDENT IS ENTITLED TO EXEMPT

HIS LIABILITY UNDER ART. IV RULE 2(C) AND/OR 2(F) AND/OR 2(Q)

BECAUSE THE DAMAGE WAS CAUSED BY PIRACY.

53. In the event that the Claimant can raise a prima facie presumption that the

damage to the cargo occurred while the Cargo was in the care of the

Respondent, the Respondent can rebut the presumption by proving that the

loss was caused by an excepted peril provided for in Article IV Rule 2 of the

Hague-Visby Rules. A shipowner who seeks to rely on any immunity under

Article IV of the Hague-Visby Rules must prove that the damage was caused

by an excepted peril or cause.25

54. The deterioration in the quality of the Cargo was caused by the hijacking of

the Vessel by Somali pirates off the Gulf of Aden. The Respondent is entitled

to exempt its liability because loss that is caused by piracy is an exempted

peril under the Hague-Visby Rules.

1. The damage to the cargo was caused by the piracy.

55. The damage that was sustained by the Cargo was caused by piracy. The

Respondent has discharged the burden of prove, on a balance of probabilities,

that the damage to the cargo was caused by the piracy.

24 See PFAD Contracts between the Claimant and Beatles at pg 1 & 2 25 Albacora S.R.L v Westcott & Laurance Line Ltd. [1966] 2 Lloyd’s Rep 53, 64


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56. In Pendle & Rivett Ltd. V Ellerman Lines Ltd26, the English High Court held

that the carrier has the onus of explaining the cause of loss or damage. This

principle was applied in Phillips & Co. v. Clan Line Steamers (Smithfield

Ltd)27 where Atkinson J held that “if the damage is entirely unexplained, it is

difficult to see how the onus [of rebutting prima facie liability] can be

discharged”.

57. In the Claim Submissions, the Claimant submitted and the Respondent agreed

that the Vessel was held off Somalia by Somali pirates between 15 November

2008 and 13 February 2009.28 The Aspinall Lewis International Report

revealed that during the hijacking, no heating was applied to the cargo during

the period of captivity, although instructions were given to heat the cargo

throughout the voyage.29

58. Furthermore, although there is no evidence that the tanks at any location were

opened and cargo was taken out or something was dropped into the cargo,

there is no doubt that during the hijacking, the tanks could have been open and

closed at any stage during the period of the hijacking.30 If any damage or loss

occurred arising out of the deterioration of the cargo, it would have occurred

during the hijacking by Somali pirates.

59. The Respondent has proved, on a balance of probabilities, that the damage to

the cargo was caused by the piracy.

26 [1927] 29 Lloyd’s Rep. 133 27 (1943) 78 Lloyd’s. Rep. 58 28 See Claim Submissions at para. 10 29 Aspinall Lewis International Report at para. 1.2.4 30 Ibid at para. 3.1


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2. Piracy is an exempted peril under the Hague-Visby Rules

a. Article IV Rule 2(c) – Perils of the sea

60. The term “perils of the seas” occurs frequently in policies of marine insurance

but should be construed in the same way in bills of lading or charterparties31,

although care and discrimination must be shown in applying decisions about

marine insurance to the Hague-Visby Rules.32 Perils of the seas are those

perils which are peculiar to the carrying on of business on the sea. The peril

must be an unforeseen and evitable accident, not a contemplated and

inevitable result and it must be of the seas, not merely on the seas.33

61. “Perils of the seas” include the violence of the sea itself and danger which is

caused to things being on the sea by reason of the action of other elements

which act upon the sea. It is mercantile custom that piracy is considered a

peril of the sea.34 Since Somali pirates caused the damage or loss during the

hijacking, the Respondent is entitled to rely on Article IV, Rule 2(c) to exempt

itself from liability.

b. Article IV Rule 2(f) – Act of Public Enemies

62. The term “act of public enemies” applies to pirates whether operating on the

high seas or not.35 The authors of Voyage Charterparties36 suggest that the

introduction of Article IV Rule 2(f) was to include land-based pirates under

31 Wilson & Sons v Owners of cargo per the Xantho (1887) 12 App. Cas. 503, 509 32 The Bunga Seroja [1999] 1 Lloyd’s Rep 512 33 P Samuel & Co v Dumas [1923] 1 KB 592, 618 34 Pandorf & Co. v Hamilton, Fraser, & Co. [1886] 17 Q.B.D. 670 at 676, 685 35 Guenter Treitel & F.M.B. Reynolds, Carver on Bills of Lading, 2nd ed. (London: Sweet & Maxwell, 2005) at 9-217 36 Cooke, Young and Kimball et. al., Voyage Charters, 3rd ed. (London: Informa, 2007)


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the exceptions of Article IV Rule 2 because previously only only seagoing

pirates had been held to be a “peril of the sea”.37

63. The damage to the cargo was caused by the piracy and hence, the Responsible

is entitled to rely on Article IV, Rule 2(f) to exempt itself from liability.

c. Article IV Rule 2(q) – Any other cause arising without the

actual fault or privity of the carrier

64. Article IV Rule 2(q) exempts liability for losses that are caused by piracy if

the carrier can establish that the loss occurred without his own fault or privity

and it did not result from any fault or neglect on the part of his servants or

agents.

65. Rule 2(q) allows the shipowner to avoid liability for any damage or loss not

falling within the named exceptions provided that he can establish that the

damage or loss occurred without his own fault or privity and that it also did

not result from any fault or neglect on the part of his servants.38

66. In The Lady Gwendolen39, the Court of Appeal held that the test to be applied

in judging whether there has been actual fault must be an objective test in

accordance with the standards of a hypothetical reasonable shipowner having

the management and control of his vessel in similar circumstances.

67. On 14 November 2008, as the Vessel entered the Gulf of Eden, she

commenced anti-pirate watch.40 This is accordance to IMO Circular on Piracy

Prevention which states that when “ships are in, or approaching areas where

37 Pickering v Barclay (1648) Styles 132 38 Paterson Steamships v Canadian Co-operative Wheat Producers [1934] A.C. 538, 549 39 [1965] 1 Lloyd’s Rep 335, 346 40 Aspinall Lewis International Report at para. 1.2.2


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attacks take place, bridge watches and look-outs should be augmented”.41 The

Master of the Vessel, in commencing anti-pirate watch, has acted in

accordance with the standards of a reasonable shipowner and hence the

Respondent is entitled to rely on Article IV, Rule 2(q) to exempt itself from

liability.

D. THE VESSEL WAS IN A SEAWORTHY CONDITION TO CARRY OUT THE

VOYAGE.

68. The Respondent can rely on the Article IV Rule 2 of the Hague-Visby Rules

to exempt its liability as the Vessel was a seaworthy vessel. The duty to

exercise due diligence to make the vessel seaworthy under the Article III rule

1 of the Hague-Visby Rules is an overriding obligation which the Respondent

has discharged.

69. In Maxine Footwear Co Ltd v Canadian Government Merchant Marine Ltd,

the Judicial Committee of the Privy Council held that the obligations stated in

Article III Rule 1 is an overriding one, such that the carrier could not raise any

defences in Article IV, Rule 2 if he has breached it.42 Lord Somervell opined

that this principle is based on “the natural construction apart from the opening

words of Article III, Rule 2. The fact that the rule is made subject to the

provisions of Article IV Rule 1 and is not so conditioned makes the point clear

beyond argument”.

70. The carrier’s obligations under Article III, rule 1 embraces the distinct aspects

of the seaworthiness obligation recognized at common law.43 It does not add

41 Guidance to Shipowners and Ship Operators, Shipmasters and Crews on Preventing and Suppressing Acts of Piracy and Armed Robbery Against Ships, IMO Doc. MSC/Circ. 623/Rev. 3 (May 29, 2002) 42 [1959] AC 589, 602 43 The Good Friend [1984] 2 Lloyd’s Rep 586, 592


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nor extend the ordinary meaning of ‘seaworthy’ as understood by the courts.

Thus the obligation under Article III, Rule 1 is for the shipowner to ensure

that his vessel is one that is “fit to meet and undergo the perils of the sea and

other incidental risks to which of necessity she must be exposed in the course

of a voyage”.44

71. The standard required of seaworthiness is relative to the nature of the ship, the

particular voyage contracted for, the cargoes that have been contracted to be

carried as well as the state of knowledge and standards prevailing at the

material time.

72. However, under the Hague-Visby Rules, the absolute undertaking of

seaworthiness is replaced by an undertaking that the shipowner will, before

and at the beginning of the voyage, exercise due diligence to make the vessel

seaworthy. This obligation will be discharged if the carrier has demonstrated

that he exercised the level of due diligence that is expected from a reasonably

prudent shipowner to make the ship seaworthy before and at the beginning of

the voyage.45

73. The Respondent exercised due diligence to make the Twilight Trader

seaworthy by taking appropriate preventive measures such as commencing

anti-pirate watch before it proceeded into the Gulf of Aden and hence the

vessel was in a seaworthy condition to carry out the voyage.

44 Kopitoff v Wilson (1876) 1 QBD 377, 380 45 Supra note 42


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IV. IF, WHICH IS DENIED, THAT THE RESPONDENT WAS FOUND TO BE LIABLE TO THE CLAIMANT FOR DAMAGES AND LOSSES FOR DISCHARGING THE CARGO TO BEATLES, THE CORRECT MEASURE OF DAMAGES IS THE MARKET VALUE OF NON-GMQ PFAD AT THE PORT OF ROTTERDAM.

A. THE CORRECT MEASURE OF DAMAGES IS THE MARKET VALUE OF NON-

GMQ PFAD AT THE PORT OF ROTTERDAM.

74. The Respondent was justified to discharge the cargo at the Port of Rotterdam

and hence the damages due to the Claimant, if any, would be the value of non-

GMQ PFAD at Rotterdam on 20 March 2009 which is USD 1.4 million.

75. The established measure of damages is the market value of goods at the time

and place of supposed delivery.46 The market value of non-GMQ PFAD

should be used because the Respondent is not liable to the Claimant for the

loss of GMQ status of the cargo as a result of piracy. Further and/or in the

alternative, the loss of GMQ status does not alter the physical nature of the

Cargo and the Claimant has failed to prove damage or actual loss to the

Cargo.

76. In the presence of an available market for the Cargo, market value should be

assessed by reference to the market price of the goods.47 The market price of

non-GMQ PFAD is evidenced by the sale of the other parcel of PFAD

onboard the Vessel by Beatles at USD 350/m.t. This is further supported by

the Single Joint Expert Report which states that the price of non-GMQ PFAD

is 60-70% of the price of GMQ PFAD.48

46 Rice v Baxendale (1861) 7 H & N 96; The Texaco Melbourne [1993] 1 Lloyd’s Rep 471, 475 47 The Texaco Melbourne, supra 48 Single Joint Expert Report at para. 3.D


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77. The various sources indicate an average of USD 504/m.t.49 for the value of

GMQ PFAD on or around 20 March 2009. On application of the discount due

to the non-GMQ status, the market price should be within the range of USD

303/m.t. to USD 353/m.t. and is consistent with the price of USD 350/m.t.

78. Therefore, in these premises, the quantum of damages due to the Claimant, if

any, is USD 1.4 million.

B. IF, WHICH IS DENIED, THE CARGO SHOULD HAVE BEEN DELIVERED IN THE

PORT OF LIVERPOOL, MERSEYSIDE THE CLAIMANT IS ONLY ENTITLED TO

THE MARKET VALUE OF NON-GMQ PFAD AT THE PORT OF ROTTERDAM

PLUS FREIGHT COSTS FROM THE PORT OF ROTTERDAM TO THE PORT OF

LIVERPOOL, MERSEYSIDE.

79. The Respondent is only liable for the market value of non-GMQ PFAD at the

Port of Rotterdam plus freight costs from the Port of Rotterdam to the Port of

Liverpool, Merseyside which is USD 1.52 million due to the Claimant’s

failure to mitigate his losses when he bought GMQ PFAD in Liverpool. The

Respondents cannot be liable for the extra costs incurred by the Claimants in

obtaining a product of a higher grade.

80. The Claimant had been informed that the cargo was to be discharged at the

Port of Rotterdam by Beatles.50 This puts the Claimant on notice of the

alleged contractual breach and thus a duty to mitigate arises. The Claimant did

not take reasonable steps to mitigate his losses when he purchased GMQ

49 The average is obtained by tabulating and averaging the prices of PFAD provided in the various reports contained in the Moot Scenario (Survey by Surveys Inc at pg 49 – USD 603/m.t; PFAD prices attached to letter from Beatles to Twilight Carriers at pg 63 – USD 430/m.t; Prices provided in Single Joint Expert Report at pg 58-59 – USD 475/m.t, USD 468/m.t, USD 650/m.t, USD 440/m.t, USD 465/m.t) 50 See email correspondence from Claimant to Respondent at pg 36


21

PFAD in Liverpool only on the 16th of April.51 The delay in purchasing

shows that the Claimant did not take reasonable steps to mitigate by acquiring

non-GMQ PFAD from other markets instead.

81. On the facts, the Claimant should have mitigated his losses by taking delivery

of the purportedly damaged cargo or purchase replacement stock in Rotterdam

and transport it to Liverpool. Therefore, the correct measure of damages is the

price of non-GMQ PFAD at Rotterdam plus the freight costs to transship the

cargo from the Port of Rotterdam to the Port of Liverpool, Merseyside which

is USD 380/m.t.

82. Hence, the quantum of damage due to the Claimant, if any, is USD 1.52

million.

V. THE RESPONDENT IS NOT LIABLE FOR COSTS OF THE DUTCH PROCEEDINGS CLAIMED AS COSTS IN THE CURRENT ARBITRATION UNDER SECTIONS 61 AND 63 OF THE ARBITRATION ACT 1996.

83. The Tribunal should find the Respondent not liable for costs incurred by the

Claimant in the Dutch court proceedings because such costs are not “costs of

the arbitration” as stipulated under Section 61 of the Arbitration Act 1996, and

the power of the Tribunal to award costs is limited to “costs of the

arbitration”. Costs and fees incurred in a collateral proceeding are generally

not recoverable in arbitration.52

51See email correspondence from Claimant to Respondent at pg 36 ; D&F Brokers Ltd. Sales Note at pg. 46 52 John Gotanda, Supplemental Damages in Private International Law, (Kluwer Law International, 1998) at 190


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84. In Final Award No. 6268, the tribunal decided that legal costs of ancillary

judicial proceedings were only recoverable as costs of the arbitration in the

event that they are damages for breach of the agreement to arbitrate.53

85. In Southern Pacific Properties (Middle East) Limited, Southern Pacific

Properties Limited v The Arab Republic of Egypt, the ICSID tribunal decided

that only such costs incurred in the production of work that was utilized not

only in the collateral proceeding but in the then-current arbitration were

recoverable as costs of the arbitration.54

86. On the facts, proceedings in the Dutch courts were related solely to the

application by Beatles to garnish property and attach moveable goods and the

application by the Claimant to arrest the Vessel. Those proceedings have no

bearing on the current claims and Twilight is not liable for the costs in the

Dutch court proceedings.

VI. THE RESPONDENT IS NOT LIABLE FOR COMPOUND INTERESTS PURSUANT TO SECTION 49 OF THE ARBITRATION ACT 1996 AND COSTS WITH SUCH COMPOUND INTERESTS.

87. The Tribunal’s powers to award interest on a simple or compound basis are

encapsulated within Section 49(2) of the Arbitration Act 1996. An award of

compound interest is to be based on the justice of the case, pursuant to Section

49(3) of the Arbitration Act 1996. The Tribunal should find the Respondent

not liable for compound interests because the justice of the case does not merit

compound interests.

88. Relevant to a finding that the Respondent is not liable to the Claimant for

compound interest are the facts that the Respondent took the necessary 53 New York seller v Californian buyer, Final Award, ICC Case No. 6268, 18 May 1990 at 125 54 Southern Pacific Properties (Middle East) Limited, Southern Pacific Properties Limited v The Arab Republic of Egypt, ICSID Case No. ARB/84/3, 20 May 1992 at 83


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precautions to prevent piracy by implementing the anti-pirate watch and that it

was proved to the Respondent’s satisfaction that Beatles was entitled to

possession before it delivered the cargo to Beatles.

89. Section 61(2) of the Arbitration Act 1996 stipulates that the Tribunal’s award

of “costs should follow the event” unless there are circumstances that justify

the Tribunal doing otherwise.

90. If the Tribunal finds the Respondent not liable in respect of the Claimants

claims in damages, costs should follow the event and the Tribunal should

make an award of costs in favour of the Respondent.

VII. PRAYER FOR RELIEF

91. For the foregoing reasons, the Respondent respectfully requests this Tribunal

to:

92. DECLARE that the Respondent was justified to discharge the cargo to

Beatles;

93. ADJUDGE that the Respondent discharged his duty to load, handle, stow,

carry, keep, care for and discharge the cargo properly and carefully;

94. and further

95. ADJUDGE that the Claimant is only liable for USD 1.4 million if the

Respondent is found to be liable to the Claimant for damages and losses

arising from the discharge of the cargo to Beatles at the Port of Rotterdam.

Documents

MEMORANDUM FOR THE CLAIMANT - Murdoch University · ARBITRATION MOOT COMPETITION 2013 NATIONAL UNIVERSITY OF SINGAPORE TEAM NO. 20 MEMORANDUM FOR THE CLAIMANT Team ... Surveys Inc