Modhulika Bose Rachana Rautray Shivam Bhardwaj Udbhav Tiwari€¦ · Modhulika Bose Rachana Rautray Shivam Bhardwaj Udbhav Tiwari FOURTEENTH ANNUAL INTERNATIONAL MARITIME LAW ARBITRATION

Modhulika Bose Rachana Rautray Shivam Bhardwaj Udbhav Tiwari

FOURTEENTH ANNUAL INTERNATIONAL MARITIME LAW ARBITRATION

MOOT COMPETITION, 2013

The West Bengal National University of Juridical Sciences

Kolkata, India

Memorandum for the Claimant

In the Matter of an Arbitration between:

Claimants Limited v. Respondents Carriers Inc.

(Claimant) (Respondent)

Team No: 12

FOURTEENTH ANNUAL INTERNATIONAL MARITIME LAW ARBITRATION

MOOT COMPETITION, 2013

MEMORANDUM FOR THE CLAIMANTS

In the Matter of Arbitration between:

Claimants Limited v. Respondents Carriers Inc.

(Claimant) (Respondent)

Team 12

Memorandum for the Claimants Page I

TABLE OF CONTENTS

A. List of Abbreviations.................................................................................................III

B. Table of Authorities...................................................................................................IV

C. Statement of Facts........................................................................................................1

D. Questions Presented.....................................................................................................2

E. Summary of Arguments..............................................................................................3

F. Proper law and Jurisdiction

1. The Tribunal has substantive jurisdiction over the present Dispute. .......................... 6

1.1. The Arbitration Clause incorporated in the Bills of Ladings provides for an

Arbitration in London, governed by the Arbitration Act of 1996. ......................................... 6

1.1.1. The Arbitration Clause contained in the Charterparty has been incorporated into

the Bill of Ladings. ............................................................................................................. 6

1.1.2. London is the designated seat of arbitration ........................................................ 8

1.1.3. The Arbitration Act, 1996 governs the arbitration. .............................................. 8

1.2. Respondents are barred from challenging the Substantive Jurisdiction of this

Arbitration Tribunal. .............................................................................................................. 8

2. Claimants have a title to sue Respondents for contractual breaches........................... 9

2.1. The Bill of Lading is governed by COGSA 1996 ....................................................... 9

2.2. Claimants are the lawful holders of the Bill of Ladings. .......................................... 10

2.3. Claimants have a title to sue under the Bill of Lading and the underlying Contract of

Carriage. ............................................................................................................................... 10

G. Substantive Claims

3. Respondents have breached its ‘Duty of care’ under Art. III (2) of the Hague Visby

Rules. ....................................................................................................................................... 11

3.1. Respondents owed a duty of care towards the cargo under Art. III(2) of H(V)R to act

properly and carefully and take appropriate cargo care measures. ...................................... 11

3.1.1. Duty to take precautions against anticipated threat to the Cargo. ...................... 11

Memorandum for the Claimants Page II

3.1.2. The vessel crew was negligent to the extent that proper or required heating was

not applied to the cargo. ................................................................................................... 12

3.2. Exemption under Article IV (2) (c) is not available to the Respondents. ................. 12

3.2.1. Respondents have failed to discharge a duty of care towards the goods. .......... 12

3.2.2. Respondents have failed to show non-negligent behaviour. .............................. 12

3.3. Injury caused to the claimants has been aggravated by the peril resulting from the

negligence of the carriers acting through its crew. ............................................................... 13

4. Respondents have, in breach of the contract of carriage, delivered the cargo at

Rotterdam instead of Liverpool. ........................................................................................... 13

4.1. Respondents have a duty to deliver the Cargo at Liverpool. .................................... 13

4.2. The Respondents delivered the cargo at Rotterdam in breach of their contractual

duty. 14

4.3. The Respondents cannot rely on the Liberty clause contained in the Charterparty. . 14

4.3.1. Liberty Clause should be held repugnant. ......................................................... 14

4.3.2. Alternatively, on a reasonable construction of the Liberty clause, the same

would be inapplicable in the present case. ....................................................................... 15

4.4. As against the Respondent Carriers, the Claimants never proposed to take the

delivery at Rotterdam. .......................................................................................................... 15

5. Respondents breached the contract of Carriage by delivering without the

presentation of Bills of Lading. ............................................................................................. 16

5.1. Respondents had a Duty to deliver the Cargo only against the presentation of

Original Bills of lading. ........................................................................................................ 16

5.2. Claimants had the intention to take delivery of goods. ............................................. 17

5.3. Respondents breached the contract of carriage by delivering goods to Beatles. ...... 17

5.3.1. Respondents duty to deliver against Bills of Lading remains unaffected by any

contesting proprietary claims made against the Cargo. .................................................... 17

5.3.2. Respondents should not have issued the Cargo against the Letter of

Indemnity….. .................................................................................................................... 18

5.3.3. Alternatively, but without Prejudice to the above contentions, Claimants, in

fact, had a title to the Cargo. ............................................................................................. 19

5.3.4. Claimants have possessory rights under the bill of lading ................................. 20

6. Respondents are liable for a tort of Conversion. ......................................................... 21

6.1. Claimants have the right to possess the cargo. .......................................................... 21

6.2. There exists a relationship of bailment between the Claimant and the Respondent. 21

6.3. Respondents have breached their duty as a bailee. ................................................... 22

6.4. Respondent has committed a Tort of Conversion ......................................................... 22

Memorandum for the Claimants Page III

H. Damages ........................................................................................................................... 22

Claims................................................................................................................................... 22

Claim I .............................................................................................................................. 22

Claim II ............................................................................................................................. 23

Reply to Respondents defense on Submissions. ....................................................... 23

I. Prayer...................................................................................................................25

Memorandum for the Claimants Page IV

A. LIST OF ABBREVIATIONS

Claimant: Claimants Ltd.

Respondents: Respondents Carriers Inc.

Charterparty: Charterparty dated 12 September, 2009.

Bill of Lading: Bill of lading No. 1, No 2, No 3, issued on 25 October, 2008

PDAF : Palm Fatty Acid Distillate

Cargo: Palm Fatty Acid Distillate (PFAD)

H(V)R: The Hague-Visby Rules - The Hague Rules as Amended by the

Brussels Protocol (1968)

Art. : Article

¶ : Paragraph

Memorandum for the Claimants Page V

B. TABLE OF AUTHORITIES

CASES

Anonymous Greek Co of Insurances, The Ethniki v. AIG Europe (UK) & Ors [2002] 2 All

ER 566 ................................................................................................................................... 5

Aegean Sea Traders Corpn v Repsol Petroleo SA, The Aegean Sea [1998] 2 Lloyd’s Rep 39 9

Albacora SRL v. Westcott & Laurance Line (The Maltasian) [1966] 2 Lloyd’s Rep 53 ........ 10

Aluminum Industrie Vassem B.V. v. Romalpa Aluminium Ltd [1976] 1 Lloyd's Rep 443 ...... 19

American Trading and Production Corporation v. Shell International Marine Ltd ( The

Washington Trader), [1972] 1 Lloyd’s Rep. 463 ................................................................. 14

Attorney General of the Republic of Ghana Ghana National Petroleum Corporation v Texaco

Overseas Tankships Limited “Texaco Melbourne” [1993] 1 Lloyd's Rep. 471 .................. 13

Barber v. Meyerstein (1866) LR 2 CP 38 ................................................................................ 19

Barber v. Meyerstein (1870) LR 4 HL 317 .............................................................................. 15

Barclays Bank Ltd v. Commissioners of Custom and Excise [1963] 1 Lloyd’s Rep 81 .......... 21

Biddell Brothers v. E. Clemens Horst & Co.[1911] 1 K.B. 934 .............................................. 15

Borealis Ab v. Stargas Limited and Others and Bergesen [2002] 1 A.C. 205 ........................ 21

Browne v. Hare (1859) 4 H. & N............................................................................................. 20

Bunga Seroya ([1999] 1 Lloyd’s Rep. 512 .............................................................................. 10

C. Sharpe & Co. Ltd. v. Nosawa & Co. [1917] 2 K.B. 814 ..................................................... 15

Cheetham & Co. Ltd. v. Thornham Spinning Co. Ltd. [1964] 2 Lloyd's Rep. 17 .................... 16

Coastal Bermuda Petroleum Ltd v. VIT Vulcan Petroleum Sa (The Marine Star) (No. 2)

[1994] 2 Lloyd’s Rep. 629 ................................................................................................... 16

Cole v. North Western Bank (1875) LR 10 CP 354, Ex Ch ..................................................... 18

Dracachi v. Anglo-Egyptian Navigation Co. [1868] L.R. 3 C.P. 190 ..................................... 21

East West Corp v. DKBS 1912 & AKTS Svendborg [2003] QB 1509 ............................... 20, 21

Memorandum for the Claimants Page VI

Edwards v. Skyways Ltd [1964] 1 W.L.R. 349 ........................................................................ 16

Falk v. Fletcher (1865) C.B.N.S. ............................................................................................. 20

Gabarron v. Kreeft (1875) L.R. 10 Exch. 274 ......................................................................... 16

Ginzberg v. Barrow Haemetite Steel Co [1966] 1 Lloyd’s Rep 343 ....................................... 19

Glyn, Mills, Currie & Co. v. The East and West India Dock Co. (1882) 7 App. Cas. 591 ..... 19

Glynn and Others Appellants v. Margetson & Co. [1893] A.C. 35 ................................... 12, 13

Grill v. General Iron Screw Collier Co. 1860 LR 1 CP 612 ................................................... 11

Gulf Interstate Oil Corp LLC v ANT Trade & Transport Ltd of Malta, The Giovanna [1999] 1

Lloyd’s Rep 867 ..................................................................................................................... 9

Gurney v. Behrend (1854) 3 E & B 622 .................................................................................. 18

Hibbert v. Carter (1787) 1 T.R. 746 ........................................................................................ 16

Homburg Houtimport BV and Others v Agrosin Private Ltd and Another, (The Starsin)

[2004] 1 A.C. 715 ................................................................................................................ 12

Homburg Houtimport BV v. Agrosin Private Ltd (The Starsin) [2003] UKHL 12 ................. 21

Hourani v T&J Harrison, (1927) 32 KB 305 .......................................................................... 10

Ishag v. Allied Bank International, Fuhs and Kotalimborg [1981] 1 Lloyd's Rep. 92 ............ 16

Kuwait Airways Corp. v. Iraqi Airways Co (No. 6) [2002] 2 A.C. 883 .................................. 22

Kuwait Petroleum Corporation v I & D Oil Carriers Ltd (The Houda) [1994] 2 Lloyd’s Rep

541........................................................................................................................................ 18

LG Caltex Gas Co Ltd v China Petroleum Corp [2001] 4 All E.R. 875 ................................... 8

Lickbarrow v. Mason (1787) 2 TR 63 ............................................................................... 18, 19

Mamidoi-Jetoil Greek Petroleum Co SA v. Okta Crude Oil Refinery AD [2003] Lloyd’s Rep 1

.............................................................................................................................................. 16

Maxine Footware Co. Ltd v Canadian Govt Merchant Marine Ltd. [1959] AC 589 .............. 10

Maynegram Pty v. Compafina Bank (1984) 58 A.L.J.R .......................................................... 22

Memorandum for the Claimants Page VII

Meyer v Sharpe (1813) 5 Taut 74 ............................................................................................ 18

Meyerstein v. Barber (1870) L.R. 4 H.L. 317 .......................................................................... 19

Mitchell Cotts & Co. (Middle East) Ltd. v. Hairco Ltd. (1943) 77 Ll. L. Rep. 106 ................ 15

Motis Export Ltd v. Dampskibsselkabet AF 1912 Aktiesekkab [1999] (33 37) 1 Lloyd’s Rep.

837........................................................................................................................................ 15

Motis Export Ltd v. Dampskibsselkabet AF Aktiesekkab [1999] 1 Llyod’s Rep. 837 ....... 15, 21

Napier v.Dexters Ltd. (1926) 26 Ll .......................................................................................... 20

Nathan v Giles (1814) 5 Taunt 558.......................................................................................... 18

Nippon Yusen Kaisha v. Ramjiban Serowgee [1938] A.C. 429............................................... 18

Official Assignee of Madras v. Mercantile Bank of India Ltd (1935) AC 53 .......................... 19

Pease v. Gloahec, The Marie Joseph (1866) LR 1 pc 219 ...................................................... 18

RUSTAL TRADING LTD V. GILL & DUFFUS SA, [2000] C.L.C. 231 ................................................ 8

SA Sucre Export v. Northern River Shipping Ltd [1994] 2 Lloyd's Rep. ................................ 17

Sanders v Maclean (1883) 11 QBD 327 .................................................................................. 15

Schnell & Co. v. S.S. Vallescura, 293 U.S. 296 ....................................................................... 12

Sea Trade marine Corp v Hellenic War Risks Assocoiation Bermuda Ltd (The “Athena”) No.

2 [2006] EWHC 25 ................................................................................................................ 5

Select Commodities Limited v Valdo S.A. (The “Florida”) [2006] EWHC 1137 .................... 14

Shepherd v. Harrison (1871) L.R. 5 H.L ........................................................................... 16, 20

Short v. Simpson (1866) LR 1 CP 248 ..................................................................................... 16

Silver v Ocean SS Co [1930] 1 KB 416 ................................................................................... 12

Sze Hai Tong Bank Ltd v. Rambler Cycle Co. Ltd [1959] A.C. 577 ........................................ 17

The Captain Gregos (No.2) [1990] 2 Lloyd’s Rep. 395 .......................................................... 21

The Flowergate, [1967] 1 Lloyd’s Rep 1................................................................................. 10

The Nordic Freedom, [1999] SGHC 256 ................................................................................. 18

Memorandum for the Claimants Page VIII

The Owners of the ‘Yaoki’ Admiralty Action No. 134 of 2005: [2006] HKCFI 411 .............. 11

The Parchim [1918] A.C. 157.................................................................................................. 15

The Pioneer Container [1994] 2 AC 324 ................................................................................ 21

The Stettin (1889) 14 PD 142................................................................................................... 16

The Ythan [2006] 1 Lloyd’s Rep. 456 ...................................................................................... 18

Thomas v. Portsea [ 1912] AC 1 ............................................................................................... 5

Tri-MG Intra Asia Airlines BV v. Norse Air Charterer Ltd [2009] 1 Lloyd’s Rep. 258 ......... 14

Trygg Hansa Insurance Co v. Equitas Ltd [1998] 2 Lloyd’s Rep 439 ...................................... 5

TTMI Sarl v Statoil ASA, [2011] EWHC 1150 (Comm) ............................................................ 6

Turner v. The Trustees of the Liverpool Docks (1851) 6 Exch. ............................................... 20

Vee Networks Ltd v Econet Wireless International Ltd [2004] EWHC 2909 ........................... 8

Walley v. Montgomery (1803) 3 East. 585 .............................................................................. 16

Welex AG v Rosa Maritime Ltd (The Epsilon Rosa) (No.1) [2002] EWHC 762 (Comm) ........ 6

Wright v Campbell (1767) 4 Burr 2046 ................................................................................... 18

STATUTES

Arbitration Act, 1996 ................................................................................................................. 5

Carriage of Goods by Sea Act, 1992 ................................................................................... 9, 12

TREATISES

ASARIOTIS AND BAATZ, BILL OF LADING: LAW AND PRACTICE, London (2000) ..................... 12

Bruce Harris, Rowan Planterose, Jonathan Teck, THE ARBITRATION ACT 1996: A

COMMENTARY, (2008) ........................................................................................................... 8

Sir Guenter Treitel, QC; Professor Francis M B Reynolds, QC, CARVER ON BILLS OF

LADING, Sweet & Maxwell, (2011) ................................................................................ 9, 20

Sir Frederick Pollock, POSSESSION IN THE COMMON LAW, Calderon Press (1988) ................ 12

Memorandum for the Claimants Page IX

R.M Goode, PROPRIETARY RIGHTS AND INSOLVENCY UNDER SALE TRANSACTIONS, Sweet &

Maxwell, (1989) ................................................................................................................... 12

M. Bools, THE BILL OF LADING: A DOCUMENT OF TITLE TO GOODS, L.L.P. (1997) .............. 19

LORD JUSTICE LEWISON, THE INTERPRETATION OF CONTRACTS, Sweet & Maxwell(2011)12, 13

Julian Cooke; Timothy Young QC; John Kimball; LeRoy Lambert; Andrew Taylor; David

Martowski; VOYAGE CHARTERS, Informa Publishing, (2007) ....................................... 12, 14

David St John Sutton; Judith Gill; Matthew Gearing, RUSSELL ON ARBITRATION, Sweet and

Maxwell (2007)……………………………………………………………………...……8

Alan Redfern; Martin Hunter and Others; REDFERN AND HUNTER ON INTERNATIONAL

ARBITRATION, Sweet and Maxwell, (2009)

REPORTS

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

Com No.196) (1991) ............................................................................................................ 17

UNCTAD Secretariat , Report on Bills of Lading, Doc No E72 II D2,1971,.........................18

TREATIES AND CONVENTIONS.

UNCITRAL Model Law (1985) ................................................................................................ 8

OTHER PUBLICATIONS

Chartered Institute of Arbitrators: Practice Guideline 6: Guidelines for Arbitrators Dealing

with Jurisdictional Problems, Arbitration ........................................................................ 8, 12

http://www.sweetandmaxwell.co.uk/Catalogue/Results.aspx?ntt=David%20St%20John%20Sutton&n=0+0+0+0&pagesize=20&d=David%20St%20John%20Sutton&ns=sort_ProductFormat&ntk=AUTHOR-SEARCH

http://www.sweetandmaxwell.co.uk/Catalogue/Results.aspx?ntt=Judith%20Gill&n=0+0+0+0&pagesize=20&d=Judith%20Gill&ns=sort_ProductFormat&ntk=AUTHOR-SEARCH

http://www.sweetandmaxwell.co.uk/Catalogue/Results.aspx?ntt=Matthew%20Gearing&n=0+0+0+0&pagesize=20&d=Matthew%20Gearing&ns=sort_ProductFormat&ntk=AUTHOR-SEARCH

Memorandum for the Claimants 1

C. STATEMENT OF FACTS

1. The Claimant, Aardvark Ltd, are the holders of the Bill of Ladings PG 1, PG2, PG3 and

PG4. covering a Cargo constituting 4,000 mt of Palm Fatty Acid Distillate (PFAD) that

Aardvark has bought from Beatles Oils & Fats ( Sellers). Respondents, Twilight Carriers

Inc. are the owners of m.v. Twilight Trader which was chartered to carry the above stated

cargo under the above stated Bills of Lading.

2. The Respondents had charted the vessel out to Beatles Oils & Fats via a charterparty

dated 12th

September, 2008 for the transport of the said cargo to Liverpool, Merseyside.

3. The vessel, enroute to Merryside, Liverpool with its cargo, was captured and held off for

a period of 90 days (15th

November 2008 to 13 February, 2009) by Somalian Pirates off

the coast of Somalia.

4. January 2009, Aardvark received the shipping documents (except for the insurance

policy) from Beatles and having found them in order paid the c.i.f price of the full Cargo

and in return received the endorsed Bill of Ladings PG 1, PG2, PG3 and PG4.

5. On the 6th

of March, after receiving the insurance documents Aardvark found them to be

not in accordance with the contract of Sale and hence informed Beatles that as a seller

they were in breach of the contract of sale, demanding immediate repayment of the

contract price of USD 2,986,671.38.

6. In several communications between Beatles and Aardvark, the parties were contemplated

discharging the cargo an alternative destination, Rotterdam, and to that effect, on

repayment of contract price by Beatles, Aardvark was ready to deliver the Bills of Lading

at Rotterdam.

7. On 19th

March, Beatles instructed the Carriers to deliver and discharge the cargo at

Rotterdam against a Letter of Indemnity furnished by them.


8. 20th

March, 2009 Beatles confirmed that they had no intention to return the contract price

to Aardvark but intended to receive the Cargo at Rotterdam nevertheless. Aardvark, in

reply, through correspondence, informed both Beatles as well as Owners of Twilight

Trader that as the holder of bills of Lading they intended to take the delivery of the Cargo

at Liverpool as stipulated in the Bill of Ladings.

9. The Owners released Cargo to Beatles between the 20th

and the 22nd

of March, at

Rotterdam against the Letter of Indemnity given by Beatles.

10. The Beatles got the cargo arrested as security for claims against Aardvark. Beatles

subsequently then obtained an order form the Dutch Court to sell the Cargo. On 25th

August, 2009, Beatles sold the Cargo for USD 1,695,752.38. Sale proceeds are currently

held by the Dutch Court.

11. Simultaneously, on 23rd

March, 2009 Aardvark instituted proceedings before the Dutch

Court to arrest ‘Twilight Trader’, and against its owners for wrongfully delivering the

Cargo to Beatles in absence of Bills of Ladings. The Carriers obtained an order for release

by furnishing a security ( Bank Guarantee in favour Aardvark) against a security of USD

1.4 million. The figure was reached at by the court after assessing the value of the Cargo

as well as assumed legal costs of USD 200,000.

12. The present Arbitral Proceedings have been instituted by Aardvark against the Carriers

Twilight Carriers, claiming damages for alleged wrongful delivery of the Cargo at

Rotterdam, to Beatles.


D. QUESTIONS PRESENTED.

1. Whether this Tribunal has jurisdiction to preside over the present

proceedings?

2. Whether the Respondent has failed to discharge his duty of care under H(v)R

Art III:2 and is liable for the damages , if any, so caused?

3. Whether the Respondent, in breach of the Contract of carriage, has

wrongfully delivered the Cargo at Rotterdam instead of Liverpool?

4. Whether the Respondent, in breach of the Contract of carriage, has

wrongfully delivered the Cargo to Beatles, in absence of a Bills of Lading?

5. Whether the respondents are liable for a tort of Conversion?

E. SUMMARY OF ARGUMENTS

1. THE TRIBUNAL HAS SUBSTANTIVE JURISDICTION OVER THE PRESENT DISPUTE

The arbitration clause contained in the fixture note has been incorporated in the four Bills of

Lading and provides for arbitration proceeding to be held in London, and conducted in

accordance with Arbitration Act, 1996. Under the Arbitration Act, by virtue §31 and 73 the

Respondents are deemed to have waived their right to challenge the substantive jurisdiction

of the tribunal. Therefore not only does the Tribunal have valid jurisdiction under the

arbitration agreement, the have lost the right to Respondent dispute the same.

2. TWILIGHT HAS BREACHED ITS ‘DUTY OF CARE’ UNDER ART. III (2) OF THE HAGUE

VISBY RULES.

The owners failed to properly and/or carefully load, handle, stow, carry, keep, care for and

discharge the goods carried in that they allowed the vessel to be taken over by pirates. In


failing to maintain proper storage temperature for the cargo and taking no measure to guard

the cargo against anticipated piratical attacks, Twilight has breached its duty of care under

Art III (2) of the H(V)R and is ineligible for exemptions provided for under Art IV of H(V)R

as well as the Charterparty.

3. RESPONDENTS HAVE, IN BREACH OF THE CONTRACT OF CARRIAGE, DELIVERED THE

CARGO AT ROTTERDAM INSTEAD OF LIVERPOOL.

The respondents are admittedly the contractual carriers under the Bill of Lading. The primary

object and intent of a bill of lading and the underlying contract of carriage is to deliver the

cargo at the port of discharge as identified in the bill of lading, the designated port itself being

a fundamental term of the contract. The same was breached by the Respondents in delivering

the Cargo at Rotterdam instead of Liverpool, to Beatles. Further the Respondents cannot take

recourse of the Liberty Clause contained in the Charterparty as the same is either a

commercially repugnant clause or on reasonable construction is inapplicable to the present

fact situation.

4. TWILIGHT BREACHED THE CONTRACT OF CARRIAGE BY DELIVERING WITHOUT THE

PRESENTATION OF BILLS OF LADING

The Claimants being the lawful holders of the Bill of Ladings were entitled under the contract

and/or otherwise to receive the delivery of the of the Cargo. The respondents, as carriers,

were not expected to test the validity of the proprietary interest of the Claimants in deciding

to deliver the Cargo to Beatles on their instructions and against a Letter of Indemnity

furnished by them, and where they did so, they did it at their own peril . Respondent was

contractually bound to deliver the Cargo only against the production of original bill of

ladings. This duty was breached by the Respondent in the act of delivering the cargo without

the Bill of Lading to Beatles.


5. THE RESPONDENTS ARE LIABLE FOR A TORT OF CONVERSION.

Respondents have intentionally delivered the goods to Beatles Oils & Fats at the port of

Liverpool who were not the owners of the Bill of Lading or of the Cargo. The conduct of

the Respondents who acting as a Bailor of the Cargo in favour of an indorse of the Bill of

Ladings has resulted in a breach of the duty to redeliver the goods to the Claimants, in

accordance with the Bills of Lading, making them liable for the tort of conversion.


PLEADINGS

F. PROPER LAW AND JURISDICTION

1. THE TRIBUNAL HAS SUBSTANTIVE JURISDICTION OVER THE PRESENT DISPUTE.

[1] The Claimants submits that this tribunal has the substantive jurisdiction to adjudicate upon

the present dispute [1.1] and furthermore the Respondents are barred from challenging this

jurisdiction by virtue of § 31read with §73 of the Arbitration Agreement [1.2.1.2].

1.1.The Arbitration Clause incorporated in the Bills of Ladings provides for an Arbitration

in London, governed by the Arbitration Act of 1996.

1.1.1. The Arbitration Clause contained in the Charterparty has been incorporated

into the Bill of Ladings.

[2] The present dispute has arisen under the Bill of Ladings numbered PG1, PG 2, PG3 and PG4.

The “Conditions of Carriage” on the reverse of the two Bills of Ladings, under clause (1)

explicitly incorporates ‘all terms and conditions’ of the charterparty of 12 September, 20081,

including, specifically, the ‘Law and Arbitration Clause/Dispute Resolution Clause’. It is

settled law that where incorporating words in a Bill of Lading expressly refer to an arbitration

clause contained in a charterparty, the Arbitration clause of the charterparty stands

incorporated in the Bill of Ladings. 2 This presumption is further strengthened where the Bill

of Lading is in Congenbill form3. Therefore the arbitration clause provided in the

Charterparty is also the operative arbitration clause under the Bill of Ladings. Since the Bill

1 Charterparty of 12 September, 2008, hereinafter referred to as ‘the Charterparty’.

2 See: § 6(2) of the Arbitration Act. Also see: Sea Trade Marine Corp v Hellenic War Risks Association

Bermuda Ltd (The “Athena”) No. 2 [2006] EWHC 25; Thomas &Co Ltd v. Portsea SS Company Ltd [ 1912]

AC 1; Owners of Cargo v. Delos Shipping Ltd. [2001] 1 All ER 763; See Generally : Aughton Ltd v. MF Kent

Services Ltd. Sir John Megaw’s opinion. Cited with approval in Trygg Hansa Insurance Co v. Equitas Ltd

[1998] 2 Lloyd’s Rep 439 and Anonymous Greek Co of Insurances, The Ethniki v. AIG Europe (UK) & Ors

[2002] 2 All ER 566, 3 Welex AG v Rosa Maritime Ltd (The Epsilon Rosa (No. 2) [2003] EWCA Civ 938, ¶ 25;


of Lading does not contain a separate and independent arbitration clause, the present

arbitration proceeding will be governed by the arbitration clause contained in the

Charterparty4.

1.1.1.1. ‘Fixture recap’ is binding on the parties and represents the incorporated

Charterparty.

[3] Fixture recaps are a binding agreement on the essential terms of a charterparty. 5 Further,

where in addition to the essential terms of the charterparty, such a recap incorporates a

standard form of a charterparty, the recap fixture itself constitutes the charter-party6.

Therefore the fixture recap sent to the claimants on 12 September, 2008, along with the terms

of the standard Vegoilvoy charterparty constitutes the Charterparty which has been

incorporated into the four BOLs.

1.1.1.2. The fixture recap of 12 September, 2008 has amended the Standard

Arbitration Clause contained in the Charterparty .

[4] The terms contained in the fixture recap, where applicable, amend/override the terms

contained in the standard ‘Vegoilvoy 1/27/50’ form7. This has been made evident in the

contract by incorporating the words “save as above as per standard Vegoilvoy form...”.8 The

clause on “law and jurisdiction” contained in the fixture recap states that the governing law of

the contract is ‘English law’ and that all arbitrations under the Charterparty are to be

conducted in London. The said clause therefore overrides and nullifies the arbitration clause

4 The ‘Rena K’ [1979] 1 QB 377,391

Also see David Joseph QC, JURISDICTION AND ARBITRATION AGREEMENTS

AND THEIR ENFORCEMENT (2010) ¶5.24

5 TTMI Sarl v Statoil ASA, [2011] EWHC 1150 (Comm)¶ 27; Welex AG v Rosa Maritime Ltd (The Epsilon

Rosa) (No.1) [2002] EWHC 762 (Comm)¶27. A similar position has also been taken by the U.S. BS Sun

Shipping Monrovia V. Citgo Petroleum Corp. 509 F.Supp.2d 334 (2007) 6 Id. TTMI v Statoli ¶ 33

7 David Joseph QC, JURISDICTION AND ARBITRATION AGREEMENTS AND THEIR ENFORCEMENT (2010) ¶5.30;

8Fact file, 11


(clause 31) contained in the standard ‘Vegoilvoy 1/27/50’ form accompanying the fixture

note. Therefore the Charterparty requires ‘London arbitration’9.

1.1.2. London is the designated seat of arbitration

[5] The term “London Arbitration”, denotes that the parties to the Charterparty intended the

arbitration to take place in London. In absence of the parties specifically designating a

different seat of arbitration the place of arbitration is presumed to be the seat of

Arbitration.10

Therefore London is the seat of current arbitration proceedings.

1.1.3. The Arbitration Act, 1996 governs the arbitration.

[6] In absence of an express intention to the contrary, law of seat of arbitration is deemed to be

the curial (or procedural) law governing the arbitration proceedings11

. Therefore as the

amended clause in the fixture recap does not refer to a curial of a different jurisdiction, the

English law of arbitration, i.e. the Arbitration Act of 1996, is the applicable law which

governs the present arbitration proceedings.

1.2.Respondents are barred from challenging the Substantive Jurisdiction of this

Arbitration Tribunal.

[7] It is submitted that the Respondents have not contested the substantive jurisdiction12

of the

Tribunal in their first set of defence submissions filled on 16, June 201013

and neither have

they reserved their rights to challenge the same subsequently. The aforesaid statement of

defence being the ‘first step in the proceedings to contest the merits of any matter in relation

9 The Epsilon Rosa ( No. 2) ¶28; The Epsilon Rosa (No.1) ¶ 23

10 Roger Shashoua v Mukesh Sharma [2009] EWHC 957 (Comm)¶ 32 and 34; See generally: David St John

Sutton; Judith Gill;Matthew Gearing, RUSSELL ON ARBITRATION, (2007) ¶ 2-100 11

C v D, [2007] EWCA Civ 1282, ¶16 ; Union of India v Mc Donnell Douglas [1993] 2 Lloyd’s Rep 48, at 50.

See Generally: RUSSELL ON ARBITRATION, ¶ 2-101; Alan Redfern, Martin Hunter and Others, REDFERN AND

HUNTER ON INTERNATIONAL ARBITRATION (2009) ¶ 3.51 and 3.60.; Andrew Tweeddale and Keren Tweeddale,

ARBITRATION OF COMMERCIAL DISPUTES- INTERNATIONAL AND ENGLISH LAW AND PRACTICE. 12

Arbitration Act of 1996 (hereinafter ‘Arbitration Act’’), §82 defines ‘substantive jurisdiction’ as referring to

matters specified in § 30 (1) (a), (b) and (c), i.e. existence of a valid agreement; proper constitution of the

tribunal; scope of reference. 13

Fact File , 71-74

http://www.bailii.org/ew/cases/EWHC/Comm/2009/957.html



http://www.sweetandmaxwell.co.uk/Catalogue/Results.aspx?ntt=Judith%20Gill&n=0+0+0+0&pagesize=20&d=Judith%20Gill&ns=sort_ProductFormat&ntk=AUTHOR-SEARCH

http://www.sweetandmaxwell.co.uk/Catalogue/Results.aspx?ntt=Matthew%20Gearing&n=0+0+0+0&pagesize=20&d=Matthew%20Gearing&ns=sort_ProductFormat&ntk=AUTHOR-SEARCH


to which he challenges the tribunal’s jurisdiction’14

, the Respondents are deemed to have

waived their right to object to the substantive jurisdiction of the tribunal by virtue of § 31(1)

and (2) read with §73 of Arbitration Act of 199615

and are therefore barred from bringing a

challenge against the jurisdiction of this tribunal.

[8] The conduct of the Respondents, specifically evidenced through the Procedural Order 2

issued by the Tribunal, shows that the Respondents have implicitly accepted/admitted to the

jurisdiction of the Tribunal and wishes to pursue the dispute only on merits. Therefore

Respondents’ conduct would be inconsistent with their position on the jurisdictional issues in

case respondent challenge the substantive jurisdiction of this tribunal at this stage of the

arbitral proceedings16

. This attracts the application of §73(1) (a) which precludes

Respondents from raising any subsequent objection to the constitution or jurisdiction of the

Tribunal or dispute the existence of valid arbitration agreement17

.

[9] Further, since the Respondents have failed to bring on record any new facts that may have a

bearing on the substantive issues of this arbitral tribunal and/or raise a challenge against the

jurisdiction of the tribunal in the past three years, §31 (3) cannot, in all fairness and in

accordance with the principles laid out in §33, be applied in this case18

.

2. CLAIMANTS HAVE A TITLE TO SUE RESPONDENTS FOR CONTRACTUAL BREACHES.

2.1.The Bill of Lading is governed by COGSA 1996

14

Arbitration Act, §31(1); Also see: Article 16(2) of the UNCITRAL Model Law, 1985 (Hereinafter Model

Law) ; Bruce Harris, Rowan Planterose, Jonathan Teck, The Arbitration Act 1996: A Commentary,(2008) p 32-

33 Vee Networks Ltd v Econet Wireless International Ltd [2004] APP.L.R. 12/14 , ¶ 26 15

Vee Networks Ltd v Econet Wireless International Ltd [2004] APP.L.R. 12/14 , ¶ 26; LG Caltex Gas Co Ltd v

China Petroleum Corp [2001] 4 All E.R. 875 16

Chartered Institute of Arbitrators , Practice Guideline 6: Guidelines for arbitrators dealing with jurisdictional

problems, Arbitration 2011, 77(2), 220-234, ¶ 4.3 17

§73(1) (a), Arbitration Act, 1996 18

Rustal Trading Ltd v. Gill & Duffus Sa, [2000] C.L.C. 231, p 237-239


[10] Clause 2 or the General Paramount Clause contained in the Bill of Lading provides that the

domestic law, of the country of destination, enacting the Hague Visby Rule will be the law

applicable to the contract, i.e. the Bill of Lading. Therefore COGSA, 1996 is the proper law

of contract19

and will regulate the contractual rights and liabilities of the parties to the

contract.

2.2.Claimants are the lawful holders of the Bill of Ladings.

[11] Firstly, the Claimants have at all times been in possession of the Bill of Lading20

. Secondly,

Bill of Lading being ‘To Order’ and blank indorsed by the Shipper/Consignor, are freely

transferable21

and in this case were transferred and delivered to Claimants against payment

for the goods under the contract of sale. Thirdly, the same were received by the Claimant in

good faith22

. Therefore the Claimants are ‘lawful holders’ of the Bill of Lading in accordance

with § 5(2)(b) of COGSA 1992.

2.3.Claimants have a title to sue under the Bill of Lading and the underlying Contract of

Carriage.

[12] The Claimants are the lawful holders of the Bill of Ladings and therefore by virtue of §2(1)

of the COGSA, 1992, are vested with all rights of suit contained in the underlying contract

of carriage as if they had been a party to that contract themselves. Therefore Claimants have a

right to proceed against the Respondents for breaches of contractual duties under the Bill of

Lading and the underlying contract of carriage.

19

See: Section 1 of COGSA, 1996. 20

The Giovanna [1999] 1 Lloyd’s Rep 867 at 874 that for a cargo- interest to be a ‘holder’ with ‘possession of

the bill’: it was enough if the bill of lading had been indorsed and transmitted to the ‘holder’ by courie 21

Section 5(2) b ; Also, ‘To order’ and blank indorsed Bill of Ladings are effectively bearer Bills of Lading.

See: Primetrade AG v Ythan Ltd. [2006] 1 All E.R. 367; See generally: Sir Guenter Treitel, F.M.B. Reynolds,

CARVER ON BILLS OF LADING , (2011) ¶ 5-018. 22

Section 5(2) Carriage of Goods by Sea Act 1992; Aegean Sea Traders Corpn v Repsol Petroleo SA, The

Aegean Sea [1998] 2 Lloyd’s Rep 39 at 60 per Thomas J: ‘good faith’ connotes honest conduct and not a

broader concept of good faith such as ‘the observance of reasonable commercial standards of fair dealing in the

conclusion and performance of the transaction concerned’.


G. SUBSTANTIVE CLAIMS

3. RESPONDENTS HAVE BREACHED ITS ‘DUTY OF CARE’ UNDER ART. III (2) OF THE

HAGUE VISBY RULES.

[13] The owners failed to properly and/or carefully load, handle, stow, carry, keep, care for and

discharge the goods carried in that they allowed the vessel to be taken over by pirates. In

failing to maintain proper storage temperature for the cargo and taking no measure to guard

the cargo against anticipated piratical attacks, Respondents have breached their duty of care

under Art III (2) of the H(V)R and is ineligible for exemptions provided for under Art IV of

H(V)R as well as the Charterparty.23

3.1. Respondents owed a duty of care towards the cargo under Art. III(2) of H(V)R to act

properly and carefully and take appropriate cargo care measures.

3.1.1. Duty to take precautions against anticipated threat to the Cargo.

[14] Respondents was imposed with a non-delegable24

duty to act both ‘carefully’ and ‘properly’

thus were obligated to adopt a system which was sound in the light of all the knowledge

which it had or ought to have possessed about the goods.25

The carriers, should have

anticipated that while passing off the coast of Somalia there was a high risk of pirate attack26

.

Thus in light of previous experiences and the new knowledge available to them, 27

thus they

should have employed precautionary measures which could have prevented the loss so

occasioned to the claimants by such an attack.28

23

Maxine Footware Co. Ltd v Canadian Govt Merchant Marine Ltd. [1959] AC 589 24

Hourani v T&J Harrison, (1927) 32 KB 305 25

Albacora SRL v. Westcott & Laurance Line (The Maltasian) [1966] 2 Lloyd’s Rep 53 26

The wide publicity given to the rampant instances of pirate attacks off the coast of Somalia in the better half

of 2007 and 2008 and the adoption of resolution 1838 by the United Nations Security Council provides enough

ground to believe that carriers should have anticipated the possibility of a piratical attack.

27

The Flowergate, [1967] 1 Lloyd’s Rep 1 28

Bunga Seroya ([1999] 1 Lloyd’s Rep. 512, 91, 92


3.1.2. The vessel crew was negligent to the extent that proper or required heating

was not applied to the cargo.

[15] The vessel’s crew had received carrying instructions for heating the cargo during the voyage

and in the last week prior to its arrival but heating was neither applied to the cargo during the

captivity nor during the subsequent voyage to Fujairah after its release.29

The resultant loss in

the cargo quality due to solidification and reheating30

is contrary to the agreed Clause of the

Charterparty which states that the owner has to exercise due diligence in maintaining required

temperatures if the Charterer requests the Owner to heat the cargo.31

[16] Therefore Respondents have been found to be in breach of its obligations

3.2.Exemption under Article IV (2) (c) is not available to the Respondents.

3.2.1. Respondents have failed to discharge a duty of care towards the goods.

[17] Respondents, acting through the vessel crew, explicitly did not observe any attempts to

access the cargo during the period of captivity.32

Thus their reliance on the event of piracy,

which falls squarely under the heading of perils of the sea exemption,33

is wholly unfound

since the exemption so provided requires a duty of care as a pre-requisite to successfully

absolve the carriers of the liability. Non observance of measures clearly stipulated under

Charterparty34

disentitles a claim of any exemption put forth by the carriers.

3.2.2. Respondents have failed to show non-negligent behaviour.

[18] The exceptions so relied upon by the respondents namely exceptional clauses (e) and (f) of

Article IV shall have no applicability if the carrier is negligent in becoming involved.35

Respondents have been negligent to the extent that the cargo care measures were insufficient,

29

Fact File p. 41 ¶ 1.2.1, 1.2.4 30

Fact File p. 38 31

Fact File p. 9 ¶ 16 32

Fact File p. 38 33

Grill v. General Iron Screw Collier Co. 1860 LR 1 CP 612; 34

Fact File 9 16, 17 35

Sir Guenter Treitel, QC; Professor Francis M B Reynolds, QC, CARVER ON BILLS OF LADING, Sweet &

Maxwell, (2011) 56


since there is no recorded evidence that the vessel crew applied heating to the cargo even

prior to the captivity during which the cargo was, for all practicality, forsaken by the crew36

clearly indicating a negligent behavior disentitling the carriers to seek protection under

Clause (e) and (f) of Article IV of the H(V)R.

3.3.Injury caused to the claimants has been aggravated by the peril resulting from the

negligence of the carriers acting through its crew.

[19] The injury so caused by the seizure of the vessel by pirates off the coast of Somalia was

aggravated to the extent that the loss so occasioned could have been substantially less had

proper cargo care measures were taken by the crew of the vessel.37

Required amount of heat,

handling and stowage was not provided for by the carriers making the carriers entirely liable

for the claims of the owners of the cargo resulting from the seizure, even if the seizure could

be covered under any of the exceptions.38

4. RESPONDENTS HAVE, IN BREACH OF THE CONTRACT OF CARRIAGE, DELIVERED THE

CARGO AT ROTTERDAM INSTEAD OF LIVERPOOL.

4.1.Respondents have a duty to deliver the Cargo at Liverpool.

[20] The Respondents are admittedly the contractual carriers under the Bills of Lading. 39

The

primary object and intent of a bill of lading and the underlying contract of carriage is to

deliver the cargo at the port of discharge as identified in the bill of lading40

, the designated

port itself being a fundamental term of the contract.41

Therefore it was a fundamental

contractual duty of the Respondents to deliver the Cargo at Liverpool, as stated on the Bills

of Lading.

36

Fact File p. 51 37

Silver v Ocean SS Co [1930] 1 KB 416 38

Schnell & Co. v. S.S. Vallescura, 293 U.S. 296 39

See: ¶ 8 of the Claimants Submission, p 66 of Fact File and ¶ 5 in the Fact File of the Respondents

Submission admitting to the contents therein 40

Glynn and Others Appellants; v Margetson & Co. [1893] A.C. 35 41

Homburg Houtimport BV and Others v Agrosin Private Ltd and Another,(The Starsin) [2004] 1 A.C. 715, ¶

186


4.2.The Respondents delivered the cargo at Rotterdam in breach of their contractual duty.

[21] The Respondents, however, delivered the Cargo in Rotterdam, on or about 20-22 March,

2009, in clear breach of their contractual duty to deliver the same at the Liverpool. The

Respondents are therefore liable for claims of non-delivery of Cargo42

4.3.The Respondents cannot rely on the Liberty clause contained in the Charterparty.

[22] The Respondents in their statement of defence have relied on the Liberty clause ( Clause 29)

contained in the Charterparty to justify the delivery at Rotterdam instead of Liverpool. In

doing so the Respondents seem to suggest that the said clause allows them complete

discretion to deliver the cargo at any port of their choice at the instance of the Charterers and

the same would constitute, without prejudice, a ‘complete delivery and performance’ under

the Charterparty.

4.3.1. Liberty Clause should be held repugnant.

[23] A clause being inconsistent with the main object of a contract is liable to be rejected.43

Carriage and delivery of cargo at the designated port of discharge being the main object of

the contract of carriage, a clause which allows wide and arbitrary discretion to override this

intrinsic obligation is inconsistent with the contract as whole and should be rejected.44

Further, the clause is commercially repugnant, as it allows the Charterer and the Carrier to

unilaterally nullify the rights of an indorsee under the a bill of lading and thus frustrates the

very commercial and contractual character of the instrument45

.

42

Attorney General of the Republic of Ghana Ghana National Petroleum Corporation v Texaco Overseas

Tankships Limited “Texaco Melbourne” [1993] 1 Lloyd's Rep. 471 43

See generally, Sir Kim Lewison, THE INTERPRETATION OF CONTRACTS (2011), 499 44

Glynn v. Margretson [1893] AC 351 45

Gullischen v. Stewart (1884) 13 Q.B.D. 317. As quoted in VOYAGE CHARTERS by Julian Cooke, Timothy

Young QC, John Kimball, LeRoy Lambert, Andrew Taylor, David Martowski 3rd Edition, 2007 ¶ 18.56


4.3.2. Alternatively, on a reasonable construction of the Liberty clause, the same

would be inapplicable in the present case.

[24] Where an alternate, harmonious and reasonable interpretation may be given to an otherwise

inconsistent clause, the same should be adopted while interpreting it.46

Further, since the

Liberty clause, as interpreted and relied upon by the Respondents, gives rise to a

commercially unreasonable and unfair result, an alternative interpretation should be sought.47

Accounting for the above principles, while interpreting the Liberty Clause in The Washington

Trader the New York District Court held that “a more reasonable construction of this

Liberties Clause is that...it is principally intended to compensate and/or hold harmless the

owner when it renders unusual protection or services to the cargo in transit or at any port or

place” and that the clause merely “confer(s) upon the master of the vessel certain

discretionary powers when circumstances unexpected and beyond control of the owner

threaten the security of the vessel or cargo”. 48

The Claimants submit that in clear absence of

any such supervening event the Claimants cannot rely on Clause 29 to defend their breach of

the Contract of Carriage by delivering the Cargo at Rotterdam instead of Liverpool.

4.4.As against the Respondent Carriers, the Claimants never proposed to take the delivery

at Rotterdam.

[25] The Respondents in their defence submissions have alleged that Claimants had ‘agreed to the

cargo being delivered in Rotterdam and not Liverpool’49

. Claimants submit that this claim is

unsustainable on the facts. Assuming, but not accepting, that Claimants had, during

preliminary correspondences with Beatles, contemplated for the Cargo to be received at

46

Lewison, 506, Cited with approval in Tri-MG Intra Asia Airlines BV v. Norse Air Charterer Ltd [2009] 1

Lloyd’s Rep. 258 47

Sir Kim Lewison, THE INTERPRETATION OF CONTRACTS (2011) 400 48

American Trading and Production Corporation v. Shell International Marine Ltd ( The Washington Trader),

[1972] 1 Lloyd’s Rep. 463, 468, Note that this decision has been accepted and cited with approval by English

Courts in Select Commodities Limited v Valdo S.A. (The “Florida”) [2006] EWHC 1137 49

Fact File, 73, ¶ 10(2)


Rotterdam, an agreement to that effect was never reached between Beatles and Claimant and

correspondingly no change effectuating the same was incorporated into the Bill of Lading.

[26] Further, by their communication dated 20 March, 2009, Claimants had specifically notified

the Respondents that as lawful holders of the Bill of lading, they intended to take the Cargo at

Liverpool, in accordance with the Bill of Lading.

[27] Therefore the conduct of Respondents remains inconsistent with the terms of the Bill of

Lading and was evidently motivated by the Indemnity offered by Beatles.

5. RESPONDENTS BREACHED THE CONTRACT OF CARRIAGE BY DELIVERING WITHOUT

THE PRESENTATION OF BILLS OF LADING.

5.1.Respondents had a Duty to deliver the Cargo only against the presentation of Original

Bills of lading.

[28] It is the essence of contract, that a ship owner is both entitled and bound to deliver the goods

against production of an original bill of lading provided that he has no other claim or better

title.50

As bills of lading are symbols51

/representation52

of the cargo as well as a receipt of the

same being in possession of the Carrier for its carriage to the port of discharge, their

possession gives its holder control over goods during transit. Hence, it is an undertaking by

the carrier that the cargo will be delivered to the person presenting the bill of lading at the

port of discharge. Further Respondents cannot be discharged of their contractual obligation as

a carrier irrespective of it being a bona fide act to deliver without the production of the bill of

lading.53

50

Motis Export Ltd v. Dampskibsselkabet AF 1912 Aktiesekkab [1999] (33 37) 1 Lloyd’s Rep. 837, 840 upheld

by Court of Appeal [2000] 1 Lloyd’s Rep. 211 51

Barber v. Meyerstein (1870) LR 4 HL 317; As per Bowen, L. J. In Sanders v Maclean (1883) 11 QBD 327,

341 (28, 34) 52

Mitchell Cotts & Co. (Middle East) Ltd. v. Hairco Ltd. (1943) 77 Ll. L. Rep. 106, “The bill of lading in law

and fact represents the goods. Possession of the bill of lading places the goods at the disposal of the

purchaser”; C. Sharpe & Co. Ltd. v. Nosawa & Co. [1917] 2 K.B. 814, 818; The Parchim [1918] A.C. 157, 171-

172; Biddell Brothers v. E. Clemens Horst & Co.[1911] 1 K.B. 934, 956 53

Short v. Simpson (1866) LR 1 CP 248; The Stettin (1889) 14 PD 142


5.2.Claimants had the intention to take delivery of goods.

[29] Where the Transferor’s intends to transfer the property into a subsequent indorsee on

delivering the bill of lading to the indorsee , there is a presumption that the property in the

cargo covered by the instrument has been transferred to such indorsee 54

. Such intention can

be ascertained as per the terms of the contract, conduct of parties and circumstances of the

case.55

In the instant matter, the bill of lading was issued pursuant to the sale contract and was

delivered after a complete payment under the contract was made by the Claimants56

.

Additionally, Claimants sent a specific communication57

to the Respondents stating that they

intended to take the delivery in accordance with the Bill of Ladings as they were their lawful

holders.

[30] The onus to prove that there was no such intention is on the party who asserts that no legal

effect is intended.58

The same has not been discharged by the Respondents.

5.3. Respondents breached the contract of carriage by delivering goods to Beatles.

5.3.1. Respondents duty to deliver against Bills of Lading remains unaffected by

any contesting proprietary claims made against the Cargo.

[31] Firstly, Claimants contend that, specifically under COGSA 1992, title in the property of the

goods is of no consequence to the carrier, being statutorily obligated to deliver the goods to

the holder of a bill of lading. Where he has knowledge of a better proprietary claim, as

alleged at present, “he must either deliver at his own peril to the rightful claimant or

54

Hibbert v. Carter (1787) 1 T.R. 746; Walley v. Montgomery (1803) 3 East. 585, 590-591(132) Also, whether

the seller's transfer of the bill of lading amounts to a proprietary appropriation is dependent upon his intention,

but that intention is judged objectively: Cheetham & Co. Ltd. v. Thornham Spinning Co. Ltd. [1964] 2 Lloyd's

Rep. 17, 22; Shepherd v. Harrison (1871) L.R. 5 H.L. 116, 125 and 129 and Ishagv. Allied Bank International,

Fuhs and Kotalimborg [1981] 1 Lloyd's Rep. 92, 97.Contra, see Gabarron v. Kreeft (1875) L.R. 10 Exch. 274.

The buyer's intention that property be transferred is manifested in his assent to the appropriation, Sale of Goods

Act, 1979, s. 18, r. 1 55

§ 17(2) Sale of Goods Act, 1979 56

Fact File pg. 25, 29 57

Fact File pg. 36 58

Edwards v. Skyways Ltd [1964] 1 W.L.R. 349, 355; Coastal Bermuda Petroleum Ltd v. VIT Vulcan Petroleum

Sa (The Marine Star) (No. 2) [1994] 2 Lloyd’s Rep. 629, 632 (173, 164); Mamidoi-Jetoil Greek Petroleum Co

SA v. Okta Crude Oil Refinery AD [2003] 1 Lloyd’s Rep 1 at [159]


interplead” 59

. Further where a delivery is made against an LoI, the carrier is not discharged

under the bill of lading but is financially protected against any liability60

[32] Secondly, As opposed to the position under Bills of Lading Act, 1855, under §2 (2) of

COGSA 1996, the rights and liabilities relating to delivering/receiving of the cargo has been

the attached to the ‘possession’ of the Bill of Lading rather than title in the ‘property’ of the

Cargo. Allowing the Respondents to resort to considerations of rightful ‘title’ would in effect

be reverting to 1855 position and militates against the legislative intent underlying §2(2) of

COGSA, 199261

5.3.2. Respondents should not have issued the Cargo against the Letter of

Indemnity.

[33] Claimants contend that after the enactment of COGSA, 1992, a delivery against a letter of

indemnity can be held valid under a Contract of Carriage only where a Bill of Lading relating

to the cargo has not reached the intended buyer before the carrier vessel reaches the port of

discharge. In the present case however the Claimants had, through correspondence, informed

the Respondents that they were lawful holders of the Bills of Lading and intended to take

delivery at Liverpool, the designated port of discharge on the Bill of Lading. Where

Respondents, in spite of the correspondence, chose to believe otherwise they cannot be

discharged from their duty under the Contract of carriage for lack of better judgment as

delivery under a letter of indemnity does not diminish a carriers liability under the Contract

of Carriage62

.

59

Scrutton, 187 ( Note 2) 60

SA Sucre Export v. Northern River Shipping Ltd [1994] 2 Lloyd's Rep. 226, 274; Sze Hai Tong Bank Ltd v.

Rambler Cycle Co. Ltd [1959] A.C. 577, 586; Barclays Bank Ltd v. Commissioners of Customs and Excise

[1963] 1 Lloyd's Rep. 81,87 61

Law Commission, ‘Rights of Suit in Respect of Carriage of Goods by Sea’, (Law Com no.196,1991) ¶2.2–

2.10 62

See: Kuwait Petroleum Corporation v I & D Oil Carriers Ltd (The Houda) [1994] 2 Lloyd’s Rep 541 ; The

Nordic Freedom, [1999] SGHC 256 as quoted in Girvin ¶10.26


5.3.3. Alternatively, but without Prejudice to the above contentions, Claimants, in

fact, had a title to the Cargo.

[34] As per mercantile practice63

, Article 1(4) of the Carriage of Goods by Sea Act, 1971

(COGSA) and Article I (b) of the Hague Visby Rules the bills of lading are documents of

title64

. When the bill of lading is blank indorsed and has the words ‘to order’ it may be treated

as a bearer bill.65

Being transferable by way of sale66

, the proprietary interest in the subject

matter covered therein, through the medium of the Bill of lading, is transferred into the

indorsee. 67

Thus, transfer of bill of lading is prima facie evidence of the intention to divest

property.68

[35] Thus as the Bill of Ladings in the present case was indorsed and delivered to the Claimants,

against payment, with prima facie intent to transfer the proprietary interest therein, the

property of the Cargo covered by it was transferred to Claimants as well. .

[36] In a CIF contract, sale of ascertained goods will typically pass property against transfer of bill

of lading and payment by buyer.69

It is common practice on part of the seller to reserve the

right of disposal and or title over the sold Cargo until delivered to the buyer, usually through

a Rompala clause70

. However in the instant matter the existence of same can neither be

evidenced through the contract nor the intention of the seller or the buyer. In the instant

63

Lickbarrow v. Mason (1787) 2 TR 63, 100 ER 35 64

Secretariat of the United Nations Conference on Trade and Development Bills of Lading (United Nations,

New York, 1971) 22 65

As in The Ythan [2006] 1 Lloyd’s Rep. 456 (87, 89) 66

Wright v. Campbell (1767) 4 Burr 2046; Sewell v. Burdick (1884) 10 App. Cas. 74 (Lord Bramwell) 67

Lickbarrow v. Mason (1794) 5 Term Rep 683 Cole v. North Western Bank (1875) LR 10 CP 354, Ex Ch. See

also Gurney v. Behrend (1854) 3 E & B 622 at 636 per Lord Campbell CJ; Pease v. Gloahec, The Marie Joseph

(1866) LR 1 pc 219 at 228 68

Wright v Campbell (1767) 4 Burr 2046; even without transfer of the bill property may still pass if that is the

intention as in Meyer v Sharpe (1813) 5 Taut 74; Nathan v Giles (1814) 5 Taunt 558; For intention to divest see

Nippon Yusen Kaisha v. Ramjiban Serowgee [1938] A.C. 429 69

Ginzberg v. Barrow Haemetite Steel Co [1966] 1 Lloyd’s Rep 343 70

Aluminum Industrie Vassem B.V. v. Romalpa Aluminium Ltd [1976] 1 Lloyd's Rep 443 (Mocatta J)


matter, as a valid consideration has been tendered and a sale contract existing under the bill

of lading its delivery acts entitles Claimants to ownership of the goods.71

5.3.4. Claimants have possessory rights under the bill of lading

[37] Bill of lading first establishes symbolic possession72

whose effect was to place its holder

with the same rights as one would have if they were in actual possession73

or constructive

possession of the cargo.74

Under common law the bill of lading is the only document that

passes constructive possession without attornment, which is effected automatically provided

that is the intention of the transferor.75

Such intention is evidenced by the sales contract

concluded between Beatles and Claimants and the arrival of the said bills even after the act of

piracy on the carrier. Claimants is entitled to delivery if there exists possession and

intention76

where the latter has been established in submission 1.2.77

Additionally, possessory

rights precede proprietary rights78

. The justification being retention of bill implying property

is that if there exists mere retention then the buyer can never legitimately obtain goods79

and

that the buyer can never hold property as the carrier acts as the seller’s agent vesting property

in him80

. Hence, it is Claimants’ submission that there exist possessory rights to the cargo.

[38] In light of the above contentions the Claimants submit that Claimants, being lawful holders of

the Bill of Lading and having valid possessory and proprietary rights in the cargo were

71

Barber v. Meyerstein (1866) LR 2 CP 38, 45 affirmed in Meyerstein v. Barber (1870) L.R. 4 H.L. 317; 72

Lickbarrow v. Mason (1794) 5 TR 683; Official Assignee of Madras v. Mercantile Bank of India Ltd. [1935]

A.C. 53, 60 73

Bools, The Bill of Lading: A Document of Title to Goods, L.L.P. (1997), at 180-181 74

Ibid. 75

Official Assignee of Madras v. Mercantile Bank of India Ltd (1935) AC 53, PC 59 76

As per the Aegean Sea [1998] 2 Lloyd’s Rep 39, 77

Fact File 29, 33, 36 78

Buyers were able to recover for misdelivery even though the purported owners received the goods, The Jag

Shakti (1986) AC 337 79

Glyn, Mills, Currie & Co. v. The East and West India Dock Co. (1882) 7 App. Cas. 591. The ship-owner who

delivers without requiring the production of a bill of lading does so at his peril: Sze Hai Tong Bank

Ltd. v. Rambler Cycle Co. Ltd. [1959] A.C. 576. 80

Shepherd v. Harrison (1871) L.R. 5 H.L. 116, 128; Turner v. The Trustees of the Liverpool Docks (1851) 6

Exch. 543, 567; Falk v. Fletcher (1865) C.B.N.S. 403, 409; Browne v. Hare (1859) 4 H. & N. 822, 830 and The

Charlotte [1908] P. 206, 216. On the same argument with respect to mate's receipts, see Napier v.Dexters

Ltd. (1926) 26 Ll. L. Rep. 184, 187.


entitled to its delivery against the Bill of Lading. In failing to do so Respondents have

breached the contract of carriage by delivering goods to Beatles who are not immediately

entitled to its possession or property.

6. RESPONDENTS ARE LIABLE FOR A TORT OF CONVERSION.

[39] Respondents have intentionally delivered the goods to Beatles Oils & Fats at the port of

Liverpool. The conduct has resulted into breach of the duty to redeliver the goods to the

claimants in accordance with the bills of lading, making them liable under the tort of

conversion.

6.1.Claimants have the right to possess the cargo.

[40] Claimants have a right to the possession of Cargo [5.2.4.]

[41] Claimants have paid the purchase price under the c.i.f contract thus obtaining title on the

cargo.81

The Bills of lading were endorsed, after such payment,82

with the intention to

transfer the property in the goods to the claimants.83

The transfer of bill of lading passed the

right to possession to the claimants since a value for the said transfer was given.84

The title

thus validates the claim of Claimants for delivery of the cargo.85

6.2.There exists a relationship of bailment between the Claimant and the Respondent.

[42] Carriers assumed the duties of a bailee by voluntarily undertaking the possession of

claimant’s goods.86

The bill of lading having acknowledged the receipt of the goods from the

81

Sir Guenter Treitel, QC; Professor Francis MB Reynolds, CARVER ON BILLS OF LADING (Sweet &

Maxwell, 2011) 151; See East West Corp v. DKBS 1912 & AKTS Svendborg [2003] QB 1509 ¶ 28; fact file 67 ¶

11 82

Fact File p. 67 ¶ 11 83

Fact File p. 14, 16, 18, 20 84

Dracachi v. Anglo-Egyptian Navigation Co. [1868] L.R. 3 C.P. 190 85

Barclays Bank Ltd v. Commissioners of Custom and Excise [1963] 1 Lloyd’s Rep 81 (CA), 88; Homburg

Houtimport BV v. Agrosin Private Ltd (The Starsin) [2003] UKHL 12 86

The Pioneer Container [1994] 2 AC 324


carrier to Liverpool and its delivery there to the claimant evidenced a bailment with the

carrier, who is carrying the goods as the bailee and the consignee as the bailor.87

6.3. Respondents have breached their duty as a bailee.

[43] The duty of the carrier was to deliver the goods to the claimant since a clear relationship of

bailment was in existence.88

The delivery made to Beatles Oils & Fats was without the

procurement of the original bill of lading89

hence Claimants’s claim on the breach of the

afore-stated duty is justified.90

6.4. Respondent has committed a Tort of Conversion.

[44] Tort of conversion entails an intentional act done by the bailee which is inconsistent with the

bailor’s right of property therein.91

By deliberately delivering the goods to Beatles Oils &

Fats at Rotterdam notwithstanding the terms specifying port of delivery as Liverpool in the

bills of lading and the right to receive the cargo under the said document of title, the carriers

denied the claimants of their possessory interest or the title in the goods.92

H. DAMAGES

Claims

Claim I

1) Respondents’ failure to discharge his obligations under the Bill of Lading, in accordance with

Article III:2 of HVR [III] allowed the status of PDAF to fall from GMQ to a non GMQ

status leading to a substantial erosion of the value of the goods. The Damage so caused would

87

Borealis Ab v. Stargas Limited and Others and Bergesen [2002] 1 A.C. 205 at [18] 88

The Captain Gregos (No.2) [1990] 2 Lloyd’s Rep. 395 at 405 89

Fact File p. 36. 90

The situation is similar to the delivery made in return of forged bills of lading, Motis Exports Ltd v.

Dampskibsselskabet AF 1912, A/S [1999] SGCA 71 91

East West Corp v. DKBS 1912 A/S [2003] Q.B. 1509 92

Kuwait Airways Corp. v. Iraqi Airways Co (No. 6) [2002] 2 A.C. 883 ¶ 39, 40; Maynegram Pty v. Compafina

Bank (1984) 58 A.L.J.R. 389 at 392; Barclays Bank Ltd. v. Commissioners of Customs and Excise [1963] 1

Lloyd’s Rep. 81; Fact File p. 35, 36.


be the difference between the price paid for by the Claimants for the PDAF and the market

value of the non-GMQ ( damaged) PDAF on the day the Cargo should have been delivered

i.e. USD(747.50-522.50) x 4000 mt. which is USD 900,000.

2) As the Respondents are liable for non-delivery and/or misdelivery of the Cargo[IV]

[V] , the respondents are liable compensate the Claimants for having to procure the

same form the place where the delivery should have been made properly which in this

case would the market in Liverpool i.e. USD522.50 x 4000 mt. which is

USD2,090,000.

3) As the Respondents’ conduct in clear breach of the Contract of Carriage compelled

the Claimants to initiate the Arrest proceeding in Rotterdam in all fairness the

Respondents are also liable to compensate the Claimant for Court fees and Counsel

Fess which cumulatively stands at USD246756.26

Therefore Respondents are liable for a total claim of USD 323,656.26

Additionally and/or Alternatively

Claim II

1) Respondents are liable for to Claimants for the amount spent to procure goods to

sell to sub-buyers in Liverpool. i.e. USD522.50 x 4000 mt.

2) Respondents are to pay for Claimants’ Court and Counsel fess [Claim I (2), (3)].

Therefore Respondents are liable for a total claim of USD 2,336,756.26

In addition to the Claims above, compound interest on same pursuant to Section 49, of the

Arbitration Act.

Reply to Respondents defense on Submissions.

1) Claimants content that the Damages have to calculated according to the prevailing

prices in the market where the Cargo should have properly delivered. [Claim I (2)]


and not according to prevailing prices of the place where they have been wrongfully

delivered.

2) It is submitted without prejudice that Respondents estimation of the market value

prevailing in Rotterdam based on the one-off sale transaction made by Beatles on 19

March, 2009 is without any commercial merit as the prevailing average market value

of PDAF between 20-30 March, 2009 was USD43093

.

3) The valuation of the cargo as done by the Dutch Court, at USD300 per mt. was based

on the prevailing market value in Rotterdam and as on 27 March, 2009. Firstly, this

was substantially below the prevailing average market value of the goods between 20-

30 March and was also below the average market rate prevailing on 27 March, i.e.

USD430. The Arrest proceedings assessment of the security claim therein (including

costs) being in the nature of preliminary and interim findings should not conclusively

bind the legitimate cargo interests of the Claimant in these arbitral proceedings.

Secondly, Claimants contend that the correct valuation is the value of the goods as

prevailing in Liverpool and not Rotterdam.

4) For the reason stated above Claimants submit that the figure of USD 1.52 million is

based on a misguided understanding of facts and law and that the same should be

rejected by the Tribunal.

93

Fact file, 63


I. PRAYER FOR RELIEF

For all the reasons submitted above, the Claimants respectfully requests this arbitral panel to:

DECLARE that this arbitral panel has jurisdiction to hear these proceedings; and

ADJUDGE that the Respondent is liable to the Claimant for the following amounts

claimed:

a) Damage caused to the quality and hence value of the PDAF being carried of USD900,000;

and

b) Amount spent on procuring substitute Cargo in Liverpool of 2,090,000; and

c) Court Fees paid during Dutch Court proceedings of USD 138,843.14; and

d) Counsel Fee paid during Dutch Court proceedings of USD 138,843.14;

e) Compound Interest on the above claims as under Section 49 of the Arbitration Act.

Additionally and/or Alternatively,

ADJUDGE that the Respondent is liable to the Claimant for the following amounts claimed:

a) Amount spent on procuring substitute Cargo in Liverpool, to sell to sub-buyers, of

2,090,000; and

b) Court Fees paid during Dutch Court proceedings of USD 138,843.14; and

c) Counsel Fee paid during Dutch Court proceedings of USD 138,843.14;

d) Compound Interest on the above claims as under Section 49 of the Arbitration Act.

- On Behalf of the Claimants -


Documents

Modhulika Bose Rachana Rautray Shivam Bhardwaj Udbhav Tiwari€¦ · Modhulika Bose Rachana Rautray Shivam Bhardwaj Udbhav Tiwari FOURTEENTH ANNUAL INTERNATIONAL MARITIME LAW ARBITRATION