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FOURTEENTH INTERNATIONAL MARITIME LAW
ARBITRATION MOOT COMPETITION 2013
AARDVARK LTD Claimants
And
TWILIGHT CARRIERS INC Respondents
MEMORANDUM FOR THE CLAIMANTS
Felix Cheung
Winnie Chung
Matthew Hui
Barry Yip
TEAM 7 CLAIMANTS’ MEMORANDUM
I
TABLE OF CONTENTS
TABLE OF CONTENTS ................................................................................................................................................ I
LIST OF ABBREVIATIONS ...................................................................................................................................... III
LIST OF AUTHORITIES............................................................................................................................................ IV
QUESTIONS PRESENTED ..................................................................................................................................... VIII
SUMMARY OF FACTS ................................................................................................................................................. 1
ARGUMENTS ................................................................................................................................................................. 2
I. THE TRIBUNAL HAS JURISDICTION TO HEAR THE DISPUTE UNDER THE ARBITRATION
ACT 1996. ................................................................................................................................................................. 2
A. There is a valid arbitration agreement between the Claimants and the Respondents. .................................... 2
B. The Respondents consented to the substantive jurisdiction of the Tribunal. ................................................... 4
C. The Respondents failed to object to the Tribunal’s jurisdiction promptly as required by section 31(1)
of the 1996 Act. ................................................................................................................................................ 4
D. Any delayed objection should not be justified.................................................................................................. 4
II. THE CLAIMANTS HAVE THE RIGHTS OF SUIT AGAINST THE RESPONDENTS IN
CONTRACT BY VIRTUE OF SECTION 2(1) OF THE CARRIAGE OF GOODS BY SEA ACT 1992. ..... 5
A. The Claimants are the lawful holders of the Bills of Lading. .......................................................................... 5
B. In any event, the Claimants never rejected the cargo and hence have retained their rights as the lawful
holders of the Bills of Lading. .......................................................................................................................... 7
III. THE RESPONDENTS BREACHED THE CONTRACT OF CARRIAGE BY DELIVERING THE
CARGO AT ROTTERDAM INSTEAD OF LIVERPOOL. ................................................................................ 8
A. The departure of the Vessel constituted an unjustifiable deviation. ................................................................ 8
B. The deviation was not justified by the Liberty Clauses contained in Clause 29 of the Charterparty. ............. 9
C. The Respondents could not justify the deviation by alleging the Claimants’ consent to it. ........................... 10
IV. THE RESPONDENTS BREACHED THE CONTRACT OF CARRIAGE BY DELIVEREY OF THE
CARGO OTHER THAN AS AGAINST PRESENTATION OF THE BILLS OF LADING. ........................ 12
A. The Respondents breached the contract of carriage by delivery without bills of lading. .............................. 12
B. The fact that the Seller might have a better title did not justify the delivery without the Bills of Lading. ..... 13
C. The letter of indemnity did not justify the delivery without the Bills of Lading. ............................................ 13
II
V. THE RESPONDENTS BREACHED THE CONTRACT OF CARRIAGE BY DELIVERY OF THE
CARGO TO THE SELLER INSTEAD OF THE CLAIMANTS WHO WERE THE LAWFUL
HOLDERS OF THE BILLS OF LADING AND WERE IMMEDIATELY ENTITLED TO
POSSESSION THEREOF. ................................................................................................................................... 14
A. The Claimants were the lawful holders of the Bills of Lading and were entitled to the immediate right
to possession of the cargo. ............................................................................................................................. 14
B. The Seller neither was the holder of the Bills of Lading nor had any immediate right to possession of
the cargo. ....................................................................................................................................................... 15
VI. THE RESPONDENTS BREACHED THEIR DUTIES UNDER ARTICLE III RULE 2 AND RULE 1
OF THE HAGUE-VISBY RULES BY FAILING TO COMPLY WITH THE STANDARD
INDUSTRIAL PRACTICES. ............................................................................................................................... 15
A. The Respondents breached the duties under Article III Rule 2 as they failed to comply with the BMP4. ..... 15
B. The Respondents breached the duty of seaworthiness under Article III Rule 1 as they failed to comply
with the ISPS Code. ....................................................................................................................................... 16
C. The exceptions under Article IV Rule 2 are inapplicable and hence the Respondents are fully liable
under Article III Rule 1 and 2. ....................................................................................................................... 18
VII. THE RESPONDENTS ARE ACCOUNTABLE IN CONVERSION FOR MISDELIVERING THE
CARGO TO THE SELLER. ................................................................................................................................. 18
A. The Claimants have the rights of suit under the tort of conversion as they have the immediate right to
possession of the cargo. ................................................................................................................................. 19
B. The Respondents converted the Claimants’ cargo by delivery without bills of lading. ................................. 19
VIII. THE RESPONDENTS ARE ACCOUNTABLE IN BAILMENT FOR MISDELIVERY OF AND
DAMAGE TO THE CARGO. .............................................................................................................................. 19
A. The Claimants became the bailor of the cargo upon the transfer of the Bills of Lading to them. ................. 20
B. The Respondents breached their duties in bailment because they misdelivered the cargo and did not
carefully and properly carry the cargo. ......................................................................................................... 22
IX. THE CLAIMANTS ARE ENTITLED TO DAMAGES FROM THE RESPONDENTS. ............................... 22
A. The deterioration of the quality and non-delivery of the cargo. .................................................................... 23
B. The cost of Claimants’ reasonable attempt to mitigate their loss.................................................................. 24
C. The cost of the Dutch proceedings. ................................................................................................................ 25
PRAYER FOR RELIEF ............................................................................................................................................... 26
III
LIST OF ABBREVIATIONS
Aardvark Ltd The Claimants/the Buyer
Arbitration Act 1996 The 1996 Act
Beatles Oil & Fats Ltd. The Seller/the Charterer
Best Management Practices for Protection against Somalia Based BMP4
Piracy Version 4
Bills of lading PG1, PG2 and PG3 The Bills of Lading
Carriage of Goods by Sea Act 1992 COGSA
Cost, Insurance, Freight CIF
Good Merchantable Quality GMQ
International Management Code for the Safe Operation of ISM
Ships and for Pollution Prevention
International Ship and Port Facility Security Code ISPS
Palm Fatty Acid Distillate PFAD
Sale of Goods Act 1979 SOGA
The Federation of Oils, Seeds, and Fats Associations FOSFA
The Hague Rules as amended by the Brussels Protocol 1968 The Hague Visby Rules
Twilight Carriers Inc The Respondents
Twilight Trader The Vessel
Vegoil Voy Tanker Voyage Charter Party together with fixture re-cap The Charterparty
IV
LIST OF AUTHORITIES
BOOKS
Aikens R and the others, Bills of Lading (Informa, London 2006).
Ambrose C and Maxwell K, London Maritime Arbitration (LLP, London 1996).
Baughen S, Shipping Law (5th
edn Routledge, New York 2012).
Beale HG and the others (eds), Chitty on Contracts: Vol 1 General Principles (31st edn Sweet & Maxwell,
London 2012).
Bridge M, The International Sale of Goods Law and Practice (2nd
edn OUP, Oxford 2007).
Debattista C, Bills of Lading in Export Trade (3rd
edn Tottel, Haywards Heath 2009).
Eder B and the others (eds), Scrutton on Charterparties and Bills of Lading (22nd
edn Sweet & Maxwell,
London 2011).
Girvin S, Carriage of Goods by Sea (2nd
edn OUP, Oxford 2007).
Harris B and the others, The Arbitration Act 1996: A Commentary (4th
edn Blackwell Publishing, Oxford
2007).
Richard L and Bools M, Bills of Lading (Informa, London 2006).
McGregor H (ed), McGregor on Damages (17th
edn Sweet & Maxwell, London 2003).
Palmer NE, Palmer on Bailment (3rd
edn Sweet & Maxwell, London 2009).
Treitel G and Reynolds FMB, Carver on Bills of Lading (3rd
edn Sweet & Maxwell, London 2011).
Cooke J and the others, Voyage Charters (3rd
edn Informa, London 2007).
Wilson J F, Carriage of Goods by Sea (7th
edn Pearson, Harlow 2010).
CHAPTER IN BOOK
Dromgoole S and Baatz Y, ‘The Bill of Lading as a Document of Title’ in Palmer N and McKendrick E
(eds), Interests in Goods (2nd
edn LLP, London 1998).
CASES
Aegean Sea Traders Corp v Repsol Petroleo SA (“The Aegean Sea”) [1998] 2 Lloyd’s Rep 39.
Albacora SRL v Westcott & Laurance Line Ltd [1966] 2 Lloyd’s Rep 53.
Anglo-Danubian Transport Co v Ministry of Food (1949) 83 Ll L Rep 137.
Anonima Petrali Italiana SpA v Marlucidez Armadora SA (“The Filiatra Legacy”) [1991] 2 Lloyd’s Rep
337.
V
Athenian Tankers Management SA v Pyrena Shipping (“The Arianna”) [1987] 2 Lloyd’s Rep 376.
Bangladesh Chemical Industries Corporation v Henry Stephens Shipping Co Ltd & Tex-Dilan Shipping Co
Ltd (“The SLS Everest”) [1981] 2 Lloyd’s Rep 389.
Bayoil SA v Seawind Tankers Corp (“The Leonidas”) [2001] 1 All ER (Comm) 392; [2001] 1 Lloyd’s Rep
533.
Bergerco USA v Vegoil Ltd [1984] 1 Lloyd’s Rep 440.
Borealis AB v Stargas Ltd and Another (“The Berge Sisar”) [1999] QB 863.
Brandt v Bowlby (1831) 2 B & Ad 932.
Braun v Bergenske SS Co (1921) 8 Ll L Rep 51.
Brook’s Wharf and Bull Wharf v GoodmanBros [1937] 1 KB 534.
Building and Civil Engineering Holidays Scheme Management v Post Office [1966] QB 247.
Chapman v Morton (1843) 11 M & W 534.
Cobelfret Bulk Carriers NV v Swissmarine Services SA (“The Lowlands Orchid”) [2009] EWHC 2883
(Comm); [2010] 2 All ER (Comm) 128.
Compania Portorafti Commerciale SA v Ultramar Panama Inc (“The Captain Gregos”) (No 2) [1990] 2
Lloyd’s Rep 395.
Daval Acier D’Unisor et de Sacilor v Armare Srl (“The Nerarno”) [1996] 1 Lloyd’s Rep 1.
Davis v Garratt (1830) 6 Bing 716.
Enichem Anic SPA v Ampelos Shipping Co Ltd (“The Delfini”) [1990] 1 Lloyd’s Rep 252.
Evans & Reid v ‘Cournouaille’ (1921) 8 Lloyd’s Rep 76.
FC Bradley & Sons Ltd v Federal Steam Navigation Co (1926) 24 LI L Rep 446.
Frenkel v MacAndrews & Co Ltd [1929] AC 545.
GH Renton & Co Ltd v Palmyra Trading Corp of Panama (“The Caspiana”) [1956] 1 Lloyd’s Rep 379,
[1956] 1 QB 462.
Gosse Millard v Canadian Government Merchant Marine [1927] 2 KB 432.
Grannhandel T Vink BV v European Grain & Shipping Ltd [1989] 2 Lloyd’s Rep 531.
Heskell v Continental Express Ltd (1949) 83 Lloyd’s Rep 438.
Joseph Thorley Ltd v Orchis Steamship Co Ltd [1907] 1 KB 660.
Joyner v Weeks [1891] 2 QB 31.
Koufos v C Czarnikow Ltd (“The Heron II”) [1969] 1 AC 350.
Kuwait Airways Corp v Iraqi Airways Corp (Nos 4 and 5) [2002] UKHL 1923.
Kuwait Petroleum Corp v I&D Oil Carriers Ltd (“The Houda”) [1994] 2 Lloyd’s Rep 541.
Laemthong International Lines Co Ltd v Abdullah Mohammed Fahem & Co [2005] EWHC Civ 519.
Leigh and Sillivan Ltd v Aliakmon Shipping Co Ltd (“The Aliakmon”) [1986] 1 AC 785.
VI
London Joint Stock Bank Ltd v British Amsterdam Maritime Agency Ltd (1910) 11 Asp MLC 571.
Maxine Footwear Co Ltd v Canadian Government Merchant Marine Ltd (“The Mayruebbe”) [1959] 2
Lloyd’s Rep 105.
MCC Proceeds Inc v Lehman Brothers International (Europe) [1998] 4 All ER 675.
Mitsui & Co Ltd v Novorossoysk Shipping Co (“The Gudermes”) [1993] 1 Lloyd’s Rep 311.
Modern Building Wales Ltd v Limmer & Trinidad Co Ltd [1975] 1 WLR 1281.
Morris v CW Martin & Sons Ltd [1966] 1 QB 716.
Motis Exports Ltd v Dampskilbsselsabet AF 1992, Aktieselskab [2000] 1 Lloyd’s Rep 211.
O’Hanlan v The Great West Railway Co (1865) 6 B & S 484.
Official Assignee of Madras v Mercontile Bank of India Ltd [1935] AC 53.
Pacific Molasses Co & United Molasses Trading Co Ltd v Entre Rios Compania Naviera SA (“The San
Nicholas”) [1976] 1 Lloyd’s Rep 8.
Pagnan SpA v Tradax Ocean Transportation SA [1987] 2 Lloyd’s Rep 342.
Papera Traders Co Ltd and Others v Hyundai Merchant Marine Co Ltd and Another (“The Eurasian
Dream”) [2002] EWHC 118 (Comm); [2002] 1 Lloyd’s Rep 719.
Petroleum Oil & Gas Crop of South Africa (Pty) Ltd v FR8 Singapore PTE Ltd (“The Eternity”) [2008]
EWHC 2480 (Comm); [2009] 1 Lloyd’s Rep 107.
Port Swettenham Authority v TW Wu & Co (m) Sdn Bhd [1979] AC 580 PC.
Reardon Smith Line Ltd v Ministry of Agriculture, Fisheries and Food [1962] 1 QB 42.
Rio Tinto Co Ltd v Seed Shipping Co Ltd (1926) 24 Ll L Rep 316.
Rodocanachi v Milburn (1887) 18 QBD 61.
SA Sucre Export v Northern River Shipping Ltd (“The Sormovskiy 3068”) [1994] 2 Lloyd’s Rep 266.
Select Commodities Limited v Valdo SA (“The Florida”) [2006] EWHC 1137 (Comm).
Sonicare International v East Anglia Freight Terminal [1997] 2 Lloyd’s Rep 48.
Stag Line Ltd v Foscolo, Mango & Co Ltd [1932] AC 328.
Sze Hai Tong Bank, Ltd v Rambler Cycle Co, Ltd [1959] AC 576.
Terna Bahrain v Ali Marzook [2012] EWHC 3283 (Comm).
The Aramis [1989] 1 Lloyd’s Rep 213.
The Future Express [1992] 2 Lloyd’s Rep 79.
The Future Express [1993] 2 Lloyd’s Rep 542.
The Kapetan Markos (No 2) [1987] 2 Lloyd’s Rep 321.
The Pegase [1981] 1 Lloyd’s Rep 175.
The Pioneer Container [1994] 2 AC 324.
VII
The Toledo [1995] 1 Lloyd’s Rep 40.
Tradax Export SA v European Grain & Shipping Ltd [1983] 2 Lloyd’s Rep 100.
Vargas Pena Apezteguia Y Cia Saic v Peter Cremer GmbH [1987] 1 Lloyd’s Rep 394.
Vee Networks Ltd v Econet Wireless International Ltd [2004] EWHC 2909 (Comm).
Venezelos v Soc Commerciale de Cereales (“The Prometheus”) [1974] 1 Lloyd’s Rep 350.
Welex AG v Rosa Maritime Limited (“The Epsilon Rosa”) [2003] EWCA Civ 938; [2003] 2 Lloyd’s Rep
509.
STATUTES
The Arbitration Act 1996.
The Carriage of Goods by Sea Act 1971.
The Carriage of Goods by Sea Act 1992.
The Sales of Goods Act 1979.
JOURNAL ARTICLES
McMeel G, “The Redundancy of Bailment” [2003] LMCLQ 169.
Soyer B and Williams R, “Potential legal ramifications of the International Ship and Port Facility Security
(ISPS) Code on Martitime Law” [2005] LMCLQ 515.
Williams R, “The Effect of Maritime violence on Contracts of Carriage by Sea” (2004) 10(4) JIML 343.
MISCELLANEOUS
Best Management Practices for Protection against Somalia Based Piracy Version 4 (BMP4).
International International Management Code for the Safe Operation of Ships and for Pollution Prevention
(ISPS)
International Maritime Organisation, “Status of Convention”
<http://www.imo.org/About/Conventions/StatusOfConventions/Pages/Default.aspx>.
International Management Code for the Safe Operation of Ships and for Pollution Prevention (ISM)
VIII
QUESTIONS PRESENTED
PRELIMINARY ISSUES
I. Whether this Arbitral Tribunal has jurisdiction to hear the dispute.
SUBSTANTIVE ISSUES – CONTRACT
II. Whether the Claimants have the rights of suit under the contract of carriage.
III. Whether the Respondents are liable for deviation under the contract of carriage.
IV. Whether the Respondents are liable for delivery without bills of lading under the contract of
carriage.
V. Whether the Respondents are liable for the alleged damage to the cargo concerned caused by
the hijacking of Somali pirates under the contract of carriage.
SUBSTANTIVE ISSUES – TORT OF CONVERSION AND BAILMENT
VI. Whether the Respondents are liable for the alleged misdelivery of the cargo concerned in the
tort of conversion.
VII. Whether the Respondents are liable for the alleged misdelivery of and damage to the cargo
concerned in bailment.
DAMAGES
VIII. Whether the Respondents have to pay damages and what the correct calculation of damages
should be.
1
SUMMARY OF FACTS
1. On 23 May 2008, the Claimants, Aardvark Ltd purchased 4,000 mt of Palm Fatty Acid Distillate (“PFAD”)
from Beatles Oils & Fats Ltd (“the Seller”). The sale contract was based on CIF Liverpool terms and adopted
all conditions under the FOSFA 81 standard contract form which contained specific insurance requirements.
2. The Respondents, Twilight Carriers Inc, chartered Twilight Trader (“the Vessel”) to the Seller by the Vegoil
Voy Tanker Voyage Charter Party (“the standard Charter Party”) with a fixture re-cap, which together formed
a charterparty contract (“the Charterparty”). It provided for discharge at Liverpool and stipulated the English
law as the applicable law with the Hague-Visby Rules incorporated. The parties agreed for London arbitration.
3. On 25 October 2008, the Respondents issued four Congen bills of lading (“the Bills of Lading”). The Bills of
Lading incorporated the Charterparty and stipulated for Liverpool as the discharge port.
4. Upon completion of the loading of the cargo containing the PFAD, the Vessel proceeded to Liverpool. It was
hijacked and held off by Somali pirates between 15 November 2008 and 13 February 2009.
5. The Seller presented the shipping documents to the Claimants in or about mid-January 2009. The purchase
price was paid to the Seller and the Bills of Lading were endorsed to the Claimants.
6. On 6 March 2009, the Claimants advised the Seller of their repudiatory breach of the sale contract in failing to
arrange insurance of the cargo in conformity with the sale contract. The Seller refused to repay the purchase
price or to agree on alternative destinations for the delivery of the cargo. The Claimants retained the Bills of
Lading. They informed the Respondents that they were the lawful holders of the Bills on 20 March 2009.
7. The Respondents nonetheless discharged the cargo to the Seller on 20-22 March 2009 at Rotterdam against a
letter of indemnity. On 23 March 2009, the Seller arrested the cargo. The cargo was subsequently sold. The
Claimants applied for arresting the Vessel. The Vessel was arrested, and was later released upon the security
provided by the Respondents.
8. On 6 April 2010, the Claimants referred to this arbitration to claim damages against the Respondents for
breach of their duties under the Bills of Lading, in the tort of conversion and in bailment.
2
ARGUMENTS
I. THE TRIBUNAL HAS JURISDICTION TO HEAR THE DISPUTE UNDER THE
ARBITRATION ACT 1996.
1. The current dispute between the Claimants and the Respondents is governed by the Arbitration Act 1996 (“the
1996 Act”) as a lex arbitri pursuant to section 2(1) since the parties explicitly chose London as the seat of the
arbitration.1 By virtue of section 30(1), the Tribunal has the competence to rule on its own jurisdiction.
2. The Tribunal has jurisdiction to hear the dispute, because (A) there is a valid arbitration agreement between
the Claimants and the Respondents, (B) the Respondents consented the substantive jurisdiction of the Tribunal,
(C) the Respondents failed to object to the Tribunal’s jurisdiction promptly as required by section 31(1) of the
1996 Act, and (D) any delayed objection should not be justified.
A. There is a valid arbitration agreement between the Claimants and the Respondents.
3. There is a valid arbitration agreement in the Bills of Lading between the disputing parties. In particular, (i) the
“LAW AND JURISDICTION” clause of the fixture re-cap and Clause 31 of the standard Charter Party should
read together as a sole Arbitration Clause in the Charterparty, and (ii) the Arbitration Clause of the
Charterparty is effectively incorporated into the Bills of Lading.
(i) The “LAW AND JURISDICTION” clause of the fixture re-cap and Clause 31 of the standard Charter
Party should read together as a sole Arbitration Clause in the Charterparty.
4. There are two relevant clauses to the arbitration, namely the “LAW AND JURISDICTION” clause of the
fixture re-cap and Clause 31 of the standard Charter Party. The former stipulates “ENGLISH LAW TO APPLY.
LONDON ARBITRATION”,2 whereas the latter states that arbitration is to be held in “New York” in
accordance with the “United States Arbitration Act”.3 Hence, there is inconsistency
4 between the two.
1 Facts 4.
2 Facts 3.
3 Facts 5.
4 For the explanation of inconsistency, see Pagnan SpA v Tradax Ocean Transportation SA [1987] 2 Lloyd’s Rep 342.
3
5. Where there is inconsistency, the clauses should be sensibly and commercially read together,5 and the
negotiated terms should prevail over the incorporated standard terms.6
6. Here, the two clauses are read sensibly and commercially together, and the “LAW AND JURISDICTION”
prevails.7 Clause 31 remains valid, while “London” is the seat of arbitration, and “English Law” is the
applicable law. This constitutes a sole arbitration clause in the Charterparty (“The Arbitration Clause”).
(ii) The Arbitration Clause of the Charterparty is effectively incorporated into the Bills of Lading.
7. An arbitration clause in a charterparty can only be incorporated in a bill of lading by clear wordings.8 Here,
the specific words were used in Clause 1 on the reverse side of the Bills of Lading. It reads “All terms and
conditions … of the Charter Party, dated as overleaf … including the Law and Arbitration Clause … are
herewith incorporated.”9
8. Although the Bills of Lading refer to an undated standard Charter Party, it is not fatal to the incorporation.10
In The Epsilon Rosa,11
the printed box in the bill of lading which said “Freight payable as per
CHARTER-PARTY dated” was left blank likewise.12
The court concluded that the arbitration clause was
effectively incorporated as it showed a clear intention to refer to the charterparty and the subject chartered.13
9. Here, the parties’ intention to incorporate the Arbitration Clause is clear. The charterparty and the cargo can be
ascertained easily. Further, the Bills of Lading were issued by the Respondents. The incorporation was
effected by the Respondents, and they are not entitled to deny it.
5 Petroleum Oil & Gas Crop of South Africa (Pty) Ltd v FR8 Singapore PTE Ltd (“The Eternity”) [2008] EWHC 2480 (Comm); [2009]
1 Lloyd’s Rep 107, [20], citing Bayoil SA v Seawind Tankers Corp (“The Leonidas”) [2001] 1 All ER (Comm) 392; [2001] 1
Lloyd’s Rep 533, 536 (per Langley J). 6 Cobelfret Bulk Carriers NV v Swissmarine Services SA (“The Lowlands Orchid”) [2009] EWHC 2883 (Comm); [2010] 2 All ER
(Comm) 128, [20]; Modern Building Wales Ltd v Limmer & Trinidad Co Ltd [1975] 1 WLR 1281, 1289F. 7 The Lowlands Orchid (n 6) [21], [40], [42].
8 See, for example, Daval Acier D’Unisor et de Sacilor v Armare Srl (“The Nerarno”) [1996] 1 Lloyd’s Rep 1, 4, where the bill of
lading incorporation clause stated: “All terms and conditions liberties exceptions and arbitration clause of the Charterparty, dated
as overleaf, are herwith incorporated.” 9 Facts 15, 17, 19, 21 (emphasis added).
10 Pacific Molasses Co & United Molasses Trading Co Ltd v Entre Rios Compania Naviera SA (“The San Nicholas”) [1976] 1 Lloyd’s
Rep 8; Bangladesh Chemical Industries Corporation v Henry Stephens Shipping Co Ltd & Tex-Dilan Shipping Co Ltd (“The SLS
Everest”) [1981] 2 Lloyd’s Rep 389. 11
Welex AG v Rosa Maritime Limited (“The Epsilon Rosa”) [2003] EWCA Civ 938; [2003] 2 Lloyd’s Rep 509. 12
The Epsilon Rosa (n 11) [7]. 13
The Epsilon Rosa (n 11) [27].
4
B. The Respondents consented to the substantive jurisdiction of the Tribunal.
10. The Respondents issued the Bills of Lading and they are the original party to the Charterparty. The
incorporation was effected by them. They therefore consented to resolve disputes under the Bills of Lading by
London arbitration. They are not entitled now to argue against the Tribunal’s jurisdiction.
11. Further, the Respondents’ Defence Submissions did not challenge to the Tribunal’s substantive jurisdiction.14
Instead, they admitted that the Law and Arbitration Clause were incorporated into the Bills of Lading.15
Thus,
the Respondents consented to, or alternatively waived their right to object to, the Tribunal’s jurisdiction.
C. The Respondents failed to object to the Tribunal’s jurisdiction promptly as required by section
31(1) of the 1996 Act.
12. Section 31(1) of the 1996 Act is a mandatory provision.16
It provides that:
an objection that the arbitral tribunal lacks substantive jurisdiction at the outset of the proceedings
must be raised by a party not later than the time he takes the first step in the proceedings to contest
the merits of any matter…
13. Accordingly, the Respondents must raise objections to the Tribunal’s jurisdiction, if any, in the Defence
Submissions or in any prior occasions.17
Any objection now raised would fail to satisfy section 31(1) of the
1996 Act. The Tribunal should refuse the objection.
D. Any delayed objection should not be justified.
14. It is admitted that section 31(3) of the 1996 Act provides the Tribunal with discretion to admit any delayed
objection if it finds the delay justifiable. The Claimants argue that the Tribunal should not admit any delayed
objection by the Respondents as the delay would be clearly unjustified.
15. There is no relevant judicial decision on how to exercise the discretion under section 31(3). Yet, to decide
14
Facts 71. 15
Defence Submissions [5]; Claim Submissions [8]. 16
Arbitration Act 1996 s 4(1), sch 1. 17
Harris B and the others, The Arbitration Act 1996: A Commentary (4th
edn Blackwell Publishing, Oxford 2007) [31D]. In Vee
Networks Ltd v Econet Wireless International Ltd [2004] EWHC 2909 (Comm), Column J at [65(vii)] expressed “[t]he first step in
the proceedings by EWN was the service of the defence”.
5
whether a delay is justified, the Tribunal can make reference to the factors considered by a court when
deciding whether to extend the time limit for an appeal. In Terna Bahrain v Ali Marzook,18
at issue was
whether the court could extend the time limit for the challenge of an arbitration award. The primary factors
considered by the court included “the length of the delay” and “whether the party who … delayed was acting
reasonably in the circumstances in doing so”.19
16. Here, the Respondents had all the relevant materials20
and time to raise objections to the Tribunal’s
jurisdiction. All the shipping documents have been available to them and they had more than two months to
make the Defence Submissions.21
Still, no objections were made in the Submissions or in the subsequent
three-year period until this stage. Thus, any objection raised now would be subject to tremendous delay and
thus be extremely unreasonable.22
II. THE CLAIMANTS HAVE THE RIGHTS OF SUIT AGAINST THE RESPONDENTS IN
CONTRACT BY VIRTUE OF SECTION 2(1) OF THE CARRIAGE OF GOODS BY SEA ACT 1992.
17. The Carriage of Goods by Sea Act 1992 (“the COGSA”) applies to bills of lading.23
Section 2(1) provides
that the Claimants shall “have transferred to and vested in [them] all rights of suit under the contract of
carriage” once they become the “lawful holders” of the Bills of Lading in light of section 5(2).
18. The Claimants have the rights of suit against the Respondents in contract, because (A) the Claimants are the
lawful holders of the Bills of Lading, and (B) in any event, the Claimants never rejected the cargo and hence
have retained their rights as the lawful holders of the Bills of Lading.
A. The Claimants are the lawful holders of the Bills of Lading.
19. The Claimants argue that they have been the lawful holders of the Bills of Lading, because (i) the Claimants
possess the Bills of Lading as a result of endorsement and delivery of the Bills of Lading, (ii) the Claimants
obtained the Bills of Lading in good faith, and (iii) the Claimants never endorsed the Bills of Lading away.
18
Terna Bahrain v Ali Marzook [2012] EWHC 3283 (Comm). 19
Terna Bahrain v Ali Marzook (n 18) [27]. 20
Vee Networks Ltd v Econet Wireless International Ltd (n 17) [65]. 21
Facts 70, 74. 22
Ambrose C and Maxwell K, London Maritime Arbitration (LLP, London 1996) 57. 23
See COGSA s 1(2).
6
(i) The Claimants possess the Bills of Lading as a result of endorsement and delivery of the Bills of
Lading.
20. Here, the Bills of Lading were initially issued as bearer bills.24
According to section 5(2)(b) of the COGSA, a
holder of a bearer bill of lading is “a person with possession of the bill as a result of the completion, by
delivery of the bill, of any indorsement … or … of any other transfer of the bill”. In The Aegean Sea, “delivery”
under section 5(2)(b) requires physical receipt, the transferor’s intention to deliver the bill to the recipient and
the recipient’s intention to accept the delivery.25
21. The Bills of Lading were presented by the Seller to the Claimants in mid-January 2009. The Claimants made
payment against documents26
and the Bills of Lading were endorsed to the Claimants.27
Physical transfer was
completed and both parties had the requisite intentions. The Claimants are the holders of the Bills of Lading.
(ii) The Claimants obtained the Bills of Lading in good faith.
22. According to section 5(2) of the COGSA, a person becomes the lawful holder of a bill of lading if he has
become the holder in good faith. According to The Aegean Sea, good faith connotes “honest conduct”.28
23. The burden of proof is on the Respondents who allege any lack of good faith.29
When the Claimants became
the holders of the Bills of Lading in mid-January 2009, they did so in good faith with full payment of the
purchase price.30
Although there were subsequent disputes to the sale contract, the Claimants kept the Bills of
Lading on the basis of the honest belief that they were entitled to the Bills.
(iii) The Claimants never endorsed the Bills of Lading away.
24. One is qualified as a holder of a bill of lading through actual custody of a bill or custody of a bill by an
agent.31
A lawful holder only ceases to have the rights under a bill of lading if he transfers or endorses it
24
Eder B and the others (eds), Scrutton on Charterparties and Bills of Lading (22nd
edn Sweet & Maxwell, London 2011) [1-003]. 25
Aegean Sea Traders Corp v Repsol Petroleo SA (“The Aegean Sea”) [1998] 2 Lloyd’s Rep 39, 59-60. 26
Claim Submissions [11]. 27
Claim Submissions [11]. 28
The Aegean Sea (n 25) 60. 29
Aikens R and the others, Bills of Lading (Informa, London 2006) [8.55]. 30
Claim Submissions [11]. 31
Aikens and the others (n 29) [8.38].
7
away.32
25. Here, the Claimants have at all times retained the Bills of Lading via themselves or their agents, Johnson &
Johnson.33
The Bills of Lading were never endorsed to the Seller or anyone else. Thus, the Claimants have
remained as the lawful holder and have the rights of suit under contract.
B. In any event, the Claimants never rejected the cargo and hence have retained their rights as the
lawful holders of the Bills of Lading.
26. The COGSA was implemented to replace the Bills of Lading Act 1855. Under the new regime, the endorsees
of a bill of lading have the rights of suit once they become the lawful holders. No acquisition of the ownership
in goods is required.34
Thus, the Claimants have the rights of suit regardless of the ownership of the cargo.
27. In any event, the Claimants argue that they have the ownership of the cargo because they paid the purchase
price in mid-January 2009 and did not reject the cargo.
28. In order to reject goods, a buyer must give a clear notice that the goods are not accepted and are at the risk of
the seller. In Vargas Pena,35
Saville J stated that “a clear and unequivocal rejection is one where buyers
indicate that they want and will have nothing more to do with the goods.”36
Notices which leave a seller with
any reasonable doubt are insufficient,37
and the whole of the buyer’s communications and conducts would be
considered.38
In Chapman v Morton, there was no unequivocal rejection when the buyer expressed his will to
sell the goods for the account of the seller but sold them in his own name.39
29. Here, the Claimants have never made any unequivocal rejection of the cargo. The Claimants’ clear intention
was to sell the non-GMQ cargo and to mitigate loss in the best interests of the parties, while reserving their
rights and ownership of the cargo. Although they preferred the Seller to sell the cargo,40
they were always
32
Borealis AB v Stargas Ltd and Another (“The Berge Sisar”) [1999] QB 863, 867E. 33
Procedural Order no 2, [6]. 34
The Berge Sisar (n 32) [867D]. 35
Vargas Pena Apezteguia Y Cia Saic v Peter Cremer GmbH [1987] 1 Lloyd’s Rep 394. 36
Vargas Pena Apezteguia Y Cia Saic (n 35) 398. 37
Grannhandel T Vink BV v European Grain & Shipping Ltd [1989] 2 Lloyd’s Rep 531. 38
Grannhandel T Vink BV v European Grain & Shipping Ltd (n 37). 39
Chapman v Morton (1843) 11 M & W 534. 40
Facts 27.
8
ready to take delivery of the cargo themselves and sell it. Since February 2009, the Claimants had been
looking for alternative buyer in Europe41
and at Liverpool.42
Their email on 17 March 2009 also indicates
that they were willing “to dispose of [the cargo] on [the Seller’s] behalf.”43
30. There was no reason for the Claimants to reject the cargo as they wanted to secure the repayment of the
purchase price. They retained the Bills of Lading via themselves, their agent and superintendents.44
This
reiterates their lack of intention to abandon the cargo.45
III. THE RESPONDENTS BREACHED THE CONTRACT OF CARRIAGE BY DELIVERING THE
CARGO AT ROTTERDAM INSTEAD OF LIVERPOOL.
31. The Respondents breached the contract of carriage as they delivered the cargo at Rotterdam instead of
Liverpool. Particularly, (A) the departure of the Vessel constituted an unjustifiable deviation, (B) the deviation
was not justified by the Liberty Clauses contained in Clause 29 of the Charterparty, (C) the Respondents could
not justify the deviation by alleging the Claimants’ consent to it.
A. The departure of the Vessel constituted an unjustifiable deviation.
32. The departure of the Vessel to Rotterdam constituted an unjustifiable deviation because (i) the departure
constituted a deviation, and (ii) the deviation was unjustifiable.
(i) The departure constituted a deviation.
33. A shipowner’s obligation to carry the goods to the contractual destination and not to deviate from the
contractual voyage is an implied condition which goes to the substance of the contract.46
Unjustifiable
departure from the contract route, unless involuntary, constitutes a deviation.47
41
Facts 24. 42
Facts 35. 43
Facts 29. 44
Facts 29, 33. 45
Bridge M, The International Sale of Goods Law and Practice (2nd
edn OUP, Oxford 2007) [10.25]. 46
Girvin S, Carriage of Goods by Sea (2nd
edn, OUP, Oxford 2007) [31.34]; Joseph Thorley Ltd v Orchis Steamship Co Ltd [1907] 1
KB 660, 667. 47
Davis v Garratt (1830) 6 Bing 716.
9
34. Here, by virtue of Condition 1 of the Bills of Lading, the terms of the Charterparty were incorporated.48
The
“DISCHARGING” clause of the fixture reads “1 safe port Mersey”,49
and the Preamble of the standard
Charter Party requires the Vessel to deliver the cargo “as ordered on signing bills of lading to the port or ports
of discharge”.50
The port of discharge stipulated in the Bills of Lading is “Liverpool, Merseyside, UK”.51
Since the nominated discharge port is in Liverpool, the departure to Rotterdam constituted a deviation.
(ii) The deviation was unjustifiable.
35. Under the common law, a deviation can be justified if the ship deviates for the purpose of saving human life or
avoiding danger to the ship or goods.52
Similar justifications are provided in Article IV Rule 4 of the
Hague-Visby Rules. Yet, these justifications are not applicable in the current case.
36. Article IV Rule 4 further provides that “reasonable deviation” does not constitute an unjustifiable deviation.
“Reasonable deviation” was strictly interpreted by the courts. In Stag Line Ltd v Foscolo, Mango & Co Ltd,
the court found a deviation to land engineers unreasonable.53
Here, the Respondents deviated the Vessel to
Rotterdam upon the Seller’s request without any legal basis. The deviation is unreasonable.
37. A shipowner is liable for an unjustifiable deviation unless it is involuntary.54
Here, the Respondents were the
issuer of the Bills of Lading. They knew Liverpool was the specified discharge port. Also, on 20 March 2009,
the Claimants sent an email to the Respondents and emphasised that the Vessel should discharge the cargo at
Liverpool. Still, the Respondents deviated the Vessel to Rotterdam. The deviation was voluntary and unlawful.
B. The deviation was not justified by the Liberty Clauses contained in Clause 29 of the Charterparty.
38. The deviation of the Vessel was not exempted by the Liberty Clauses contained in Clause 29 of the
Charterparty. In particular, (i) Clause 29 should be restrictively interpreted, and (ii) the deviation did not fall
within the situations stipulated in Clause 29.
48
Facts 14, 16, 18, 20. 49
Facts 3. 50
Facts 5. 51
Facts 14, 16, 18, 20. 52
Girvin S (n 46) [25.06]. 53
Stag Line Ltd v Foscolo, Mango & Co Ltd [1932] AC 328. 54
Rio Tinto Co Ltd v Seed Shipping Co Ltd (1926) 24 Ll L Rep 316.
10
(i) Clause 29 should be restrictively interpreted.
39. Liberty clauses should be given a restrictive interpretation. According to Frenkel v MacAndrews & Co Ltd, a
liberty clause must be interpreted so as to be consistent with the contemplated voyage.55
It must not frustrate
the voyage.56
In The Caspiana, the liberty clause, which was wide and literally allowed “indefinite delay”,
was held to be inconsistent with the voyage, and thus the clause did not exempt the carrier’s liability.57
40. Specifically, Clause 29(a) can only be used in limited circumstances. It does not allow a shipowner to have an
indefinite power to discharge the cargo at a substituted port, as such power would be inconsistent with the
term under the Charterparty. The Clause can only be applied where the contractual performance is likely to
frustrate the charter as illustrated below.
(ii) The deviation did not fall within the situation stipulated in Clause 29.
41. In The Florida, the same liberty clauses as in the present dispute was held to apply to situations which were
“likely to give rise to…the effect of frustrating the charter”. As the delivery of the cargo in that case would be
illegal in the country of performance where the goods were banned, the Court found there was a real risk of
frustration of the charter.58
42. Here, the mere “risk of … delay or disadvantage to … the Vessel or any part of her cargo” as suggested by the
Respondents is not sufficient.59
To rely on the Liberty Clauses, the Respondents would have to show that
sailing the Vessel to and discharging the cargo at Liverpool was likely to constitute a frustration of the
Charterparty, which the Respondents could never prove.
C. The Respondents could not justify the deviation by alleging the Claimants’ consent to it.
43. The Respondents could not rely on any alleged consent by the Claimants to justify the deviation, because (i)
no party has the contractual right to change the nomination of the discharge port, and (ii) in any event, there
was no agreement between the parties to change the nomination of the discharge port.
55
Frenkel v MacAndrews & Co Ltd [1929] AC 545. 56
Frenkel v MacAndrews & Co Ltd (n 55) 562. 57
GH Renton & Co Ltd v Palmyra Trading Corp of Panama (“The Caspiana”) [1956] 1 QB 462. 58
Select Commodities Limited v Valdo SA (“The Florida”) [2006] EWHC 1137 (Comm). 59
Defence Submissions [1].
11
(i) No party has the contractual right to change the nomination of the discharge port.
44. The deviation in the current case involved the change of nomination of the discharge port. In a voyage charter,
to nominate a port of discharge is the charterer’s duty.60
The nomination, once made, is irrevocable.61
Here,
after the Seller nominated Mersey as the discharge port, the Claimants did not have the contractual rights to
change the discharge port. 62
Thus, even the Claimants’ consent, if any, could not justify the deviation.
(ii) In any event, there was no agreement between the parties to change the nomination of the discharge
port.
45. Even if an agreement can effect a change, there should be a clear agreement among the Seller, the Claimants
and the Respondents. Such agreement was never reached.
46. As admitted by the Respondents, they had no knowledge of the arrangements between the Claimants and the
Seller.63
Although the Claimants and the Seller did discuss a change of the discharge port, the discussions
could not be relied on by the Respondents as a justification. The Claimants insisted in their email
correspondences to the Respondents on the discharging of the cargo at Liverpool.64
In case of any doubt as to
the title of the Claimants, the Respondents should attempt to make appropriate enquiry.
47. Although some communications from the Claimants might lead to the false impression that they were willing
to agree to a deviation, those were made upon a perception that the Seller would repay the purchase price. The
Claimants had always wanted to secure their interests by reserving their rights to the cargo or the Bills of
Lading. Thus, if the Respondents made any enquiry, the Claimants would likely disallow such deviation
pending repayment. In fact, on 20 March 2009, they did decide not to discharge the cargo at Rotterdam.65
60
Cooke J and the others, Voyage Charters (3rd
edn Informa, London 2007) [5.10]. 61
Cooke J and the others (n 60) [5.10]. 62
Anglo-Danubian Transport Co v Ministry of Food (1949) 83 Ll L Rep 137; Reardon Smith Line Ltd v Ministry of Agriculture,
Fisheries and Food [1962] 1 QB 42, 90, 115, 128; Venezelos v Soc Commerciale de Cereales (“The Prometheus”) [1974] 1 Lloyd’s
Rep 350, 353-355. 63
Facts 72. 64
Facts 36. 65
Facts 36
12
IV. THE RESPONDENTS BREACHED THE CONTRACT OF CARRIAGE BY DELIVEREY OF THE
CARGO OTHER THAN AS AGAINST PRESENTATION OF THE BILLS OF LADING.
48. The Claimants argue that (A) the Respondents breached the contract of carriage by delivery without bills of
lading; (B) the fact that the Seller might have a better title did not justify the delivery without the Bills of
Lading; and (C) the letter of indemnity did not justify the delivery without the Bills of Lading.
A. The Respondents breached the contract of carriage by delivery without bills of lading.
49. Due to the fact that (i) the Respondents were obliged to deliver the cargo against presentation of the Bills of
Lading, and (ii) the Respondents delivered the cargo without presentation of the Bills of Lading at their own
peril, the Respondents breached the contract of carriage by delivering the cargo to the Seller without
presentation of the Bills of Lading.
(i) The Respondents were obliged to deliver the cargo against presentation of the Bills of Lading.
50. A carrier has the duty to deliver goods to the holder of a bill of lading who presents the bill for delivery of the
goods.66
Where a contract of carriage is silent on such duty, the duty may be an implied term of the contract.67
51. Although the Bills of Lading here did not expressly state the presentation rule, it contained the same provision
as in The Sormovskiy 3068.68
The duty to delivery against presentation of the Bills of Lading was an implied
term of the contract. This was in accordance with commercial sense to the Seller and the Respondents,69
and
was not precluded by any terms in the contract or exceptional circumstances.
(ii) The Respondents delivered the cargo without presentation of the Bills of Lading at their own peril.
52. Lord Denning in Sze Hai Tong expressed that “[i]t is perfectly clear law that a shipowner who delivers
without … bill of lading does so at his peril”.70
In other words, the owners would fail to fulfill their
66
London Joint Stock Bank Ltd v British Amsterdam Maritime Agency Ltd (1910) 11 Asp MLC 571. 67
SA Sucre Export v Northern River Shipping Ltd (“The Sormovskiy 3068”) [1994] 2 Lloyd’s Rep 266, 272 where Clarke J referred to
Sze Hai Tong Bank, Ltd v Rambler Cycle Co, Ltd [1959] AC 576 and quoted Julian Cooke, Voyage Charters (2nd
edn LLP, London
1993) at 387: “the bill of lading, by implication if not expressly, makes the goods deliverable upon, and only upon, the surrender of
the bill of lading”. 68
Facts 14, 16, 18, 20. 69
Debattista C, Bills of Lading in Export Trade (3rd
edn Tottel, Haywards Heath 2009) [2.16]. 70
Sze Hai Tong Bank, Ltd v Rambler Cycle Co, Ltd (n 67) 586. See also Evans & Reid v ‘Cournouaille’ (1921) 8 Lloyd’s Rep 76 where
13
contractual obligations should they deliver the cargo to a person who cannot present the bill of lading.71
This
remains true even where the carrier delivers to a person entitled to possession of the cargo.72
53. The Respondents discharged the cargo to the Seller without presentation of the Bills of Lading on 20 March
2009.73
They clearly breached their implied contractual obligation. Any allegations that the Seller was entitled
to the possession of the cargo would not assist the Respondents.
B. The fact that the Seller might have a better title did not justify the delivery without the Bills of
Lading.
54. If a shipowner is aware of adverse claims, he should interplead and refuse to deliver the goods until the rival
claimants have resolved the issue in court at their own expense.74
In case of delivery to a wrong person, the
shipowner may be deprived of any protection under the limitations or exceptions in the bill of lading.75
55. Although the Seller requested the delivery of the cargo against a letter of indemnity on 19 March 2009, the
Claimants advised the Respondents of their title.76
The Claimants’ message was read by the Respondents
shortly.77
Still, the Respondents made a random delivery without bills of lading. This is simply unacceptable.
The Respondents are liable for breach of contract and are not protected by any exemptions in the contract.
C. The letter of indemnity did not justify the delivery without the Bills of Lading.
56. In reality, the prospect of delay may tempt the parties to agree on delivery of the goods without presentation of
the bill of lading.78
A typical framework of indemnities is where the seller gives an indemnity to the buyer for
payment without tendering the bill of lading while the buyer subsequently gives an indemnity to the carrier for
delivery without the bill of lading.79
Hill J at 77 opined that “the transaction between the buyers and [the shippers] has nothing to do with the shipowners. The latter were
only concerned with the fulfillment of their Bill of Lading contract”. 71
Kuwait Petroleum Corp v I&D Oil Carriers Ltd (“The Houda”) [1994] 2 Lloyd’s Rep 541, 552. 72
Richard L and Bools M, Bills of Lading (Informa, London 2006) [5.33]. 73
Facts 53; Claim Submissions [17]; Defence Submissions [8]. 74
Wilson J F, Carriage of Goods by Sea (7th
edn Pearson, Harlow 2010) 82. 75
Sze Hai Tong Bank, Ltd v Rambler Cycle Co, Ltd (n 67) 587. 76
Facts 36. 77
Procedural Order no 2 [7]. 78
Debattista C (n 69) [2.22]. 79
Debattista C (n 69) [2.22]; see Enichem Anic SPA v Ampelos Shipping Co Ltd (“The Delfini”) [1990] 1 Lloyd’s Rep 252.
14
57. Here, the Claimants strongly opposed to the Respondents’ delivery without the Bills of Lading.80
The letter of
indemnity offered by the Seller also substantially differed from the typical scenario of indemnities as there
was no participation of the Claimants. Although the letter of indemnity might be enforceable between the
Seller and the Respondents, it bears no legal consequence upon the Claimants’ contractual rights. Its sole
purpose was to indemnify the Respondents if they were sued for delivery without the Bills of Lading.81
V. THE RESPONDENTS BREACHED THE CONTRACT OF CARRIAGE BY DELIVERY OF THE
CARGO TO THE SELLER INSTEAD OF THE CLAIMANTS WHO WERE THE LAWFUL
HOLDERS OF THE BILLS OF LADING AND WERE IMMEDIATELY ENTITLED TO
POSSESSION THEREOF.
58. The claimants argue that (A) the Claimants were the lawful holders of the Bills of Lading and were entitled to
the immediate right to possession of the cargo, whereas (B) the Seller neither was the holder of the Bills of
Lading nor had any immediate right to possession of the cargo.
A. The Claimants were the lawful holders of the Bills of Lading and were entitled to the immediate
right to possession of the cargo.
59. The Claimants were the lawful holders of the Bills of Lading. A function of the bills of lading is to transfer the
constructive possession of the cargo from the seller to the buyer.82
Two requirements must be satisfied to
effect such transfer. First, as Diamond J in The Future Express emphasized, the parties must intend that “the
transferee should have some property in or possessory right to the goods”.83
Second, the subject matter of the
transfer must be identifiable, for example in the sale contract.84
60. The Seller presented the Bills of Lading to the Claimants in mid-January 2009. Payment was made and the
Bills were endorsed to the Claimants.85
Undoubtedly, the intention of the Seller and the Claimants is to grant
the latter the property in or possessory right to the cargo. Any unilateral change of intention cannot interrupt
80
Facts 36. 81
See Laemthong International Lines Co Ltd v Abdullah Mohammed Fahem & Co [2005] EWHC Civ 519. 82
Baughen S, Shipping Law (5th edn Routledge, New York 2012) 6.
83 The Future Express [1992] 2 Lloyd’s Rep 79, 96 as approved in [1993] 2 Lloyd’s Rep 542.
84 Dromgoole S and Baatz Y, ‘The Bill of Lading as a Document of Title’ in Palmer N and McKendrick E (eds), Interests in Goods (2
nd
edn LLP, London 1998) 553. 85
Claim Submissions [11].
15
the Claimants’ constructive possession. Moreover, the subject matter of the transfer, namely the cargo, was
clearly identified in the Bills of Lading which indicated their description and stowage.86
As a result, the Seller
did in fact transfer to the Claimants the immediate right to the possession of the cargo.
B. The Seller neither was the holder of the Bills of Lading nor had any immediate right to possession
of the cargo.
61. The Claimants have never rejected the cargo or transferred the Bills of Lading to the Seller. The Seller has not
obtained possession of the Bills to qualify as a “holder”, let alone a “lawful holder”, under section 5(2) of the
COGSA. The property or immediate right to possession of the cargo also has not revested to the Seller.87
62. Combining the effect of the two arguments above, the Respondents’ insistent delivery of the cargo to the
Seller clearly breached their duties under the contract of carriage and caused substantial loss to the Claimants.
VI. THE RESPONDENTS BREACHED THEIR DUTIES UNDER ARTICLE III RULE 2 AND RULE 1
OF THE HAGUE-VISBY RULES BY FAILING TO COMPLY WITH THE STANDARD
INDUSTRIAL PRACTICES.
63. The Respondents were in breach of Article III Rule 2 and Rule 1 of the Hague-Visby Rules by failing to
comply with the standard industrial practices. In particular, (A) the Respondents breached the duties under
Article III Rule 2 as they failed to comply with the Best Management Practices for Protection against Somalia
Based Piracy Version 4 (“the BMP4”), and (B) the Respondents breached the duty of seaworthiness under
Article III Rule 1 as they failed to comply with the International Ship and Port Facility Security (“the ISPS”)
Code. As a consequence of the Vessel being unseaworthy, (C) the exceptions under Article IV Rule 2 are
inapplicable and hence the Respondents are fully liable under Article III Rule 1 and 2.
A. The Respondents breached the duties under Article III Rule 2 as they failed to comply with the
BMP4.
64. Article III Rule 2 of the Hague-Visby Rules requires the Respondents shipowner to “properly and carefully …
86
Facts 14, 16, 18, 20. 87
Compare Tradax Export SA v European Grain & Shipping Ltd [1983] 2 Lloyd’s Rep 100, 107.
16
carry … care for … the goods carried”. In this context, “carefully” means taking care88
without negligence.89
“Properly” means the employment of skills and a sound system in light of the circumstances,90
and connotes
virtually strict liability.91
When goods arrive in a damaged condition, a shipowner is prima facie in breach of
the duty under Article III Rule 2.92
The burden to disprove this presumption is on the shipowner.
65. The BMP4 sets out standard practices for ships transiting the Gulf of Aden which is a high risk area with
Somali pirates.93
Where the Vessel was to transit the Gulf, the Respondents should have taken effective
precautionary measures in accordance with the BMP4. A mere anti-pirate watch94
was insufficient. The Vessel
did not follow the convoy or was not escorted by the royal navy. Thus, the BMP4 was not properly followed.
Had there been a compliance with the BMP4, the razor wire, water spray, and alarm would be employed, and
the pirates would not be able to board the Vessel and interfered with the cargo.
66. Here, the cargo deteriorated from GMQ to non-GMQ due to the hijacking. The Respondents were prima facie
in breach of Article III Rule 2. The Respondents did not carefully or properly carry or care for the cargo due to
non-compliance with the BMP4. They lacked solid and justifiable evidence to disprove the breach.
B. The Respondents breached the duty of seaworthiness under Article III Rule 1 as they failed to
comply with the ISPS Code.
67. The Claimants argue that (i) the Respondents had the duty to maintain seaworthiness of the Vessel pursuant to
Article III Rule 1. However, (ii) the Respondents breached the ISPS Code by violating the BMP4, (iii) the
Respondents were bound to comply with the ISPS Code, and (iv) the Vessel was unseaworthy due to the
Respondents’ non-compliance with the ISPS Code.
88
Albacora SRL v Westcott & Laurance Line Ltd [1966] 2 Lloyd’s Rep 53, 64 (per Lord Pearson). 89
Treitel G and Reynolds FMB, Carver on Bills of Lading (3rd
edn Sweet & Maxwell, London 2011) [9-146]. 90
Albacora SRL (n 88) 68 (per Lord Pearson and Lord Reid); GH Renton & Co Ltd v Palmyra Trading Corp of Panama [1956] 1
Lloyd’s Rep 379, 388 (per Viscount Kilmuir). 91
Treitel G and Reynolds FMB (n 89) [9.146]. 92
Gosse Millard v Canadian Government Merchant Marine [1927] 2 KB 432. 93
Best Management Practices for Protection against Somalia Based Piracy s 2.2; Staff Writer, “Heavily armed pirates spark regional
shipping alert” (24 December 2007)
<http://www.arabianbusiness.com/heavily-armed-pirates-spark-regional-shipping-alert-194603.html> accessed 14 April 2013. 94
Facts 41.
17
(i) The Respondents had the duty to maintain seaworthiness of the Vessel pursuant to Article III Rule 1.
68. Article III Rule 1 requires a shipowner to exercise due diligence in ensuring the ship’s seaworthiness before
and at the beginning of the voyage. This duty is non-delegable.95
In FC Bradley & Sons,96
it was held that the
ship must be fit as an ordinary careful owner would deem as such, in light of all probable circumstances of the
voyage.97
Hence, the Respondents must exercise due diligence to maintain the Vessel’s seaworthiness.
(ii) The Respondents breached the ISPS Code by violating the BMP4.
69. The Respondents’ non-compliance with the BMP4 showed their lack of planning to implement any security
measures before or at the beginning of the voyage in light of the frequent risk of piracy in the Gulf of Aden.
This in turn suggested the violation of the ISPS Code. Rules 2.1(4) and 9.1 of the ISPS Code stipulate that a
ship must have a security plan. Under Rule 11, the shipowner has to appoint a Company Security Officer
whose duties include providing security training to ship staff and developing a security plan. Here, all these
were not done. The Respondents were in breach of the ISPS Code.
(iii) The Respondents were bound to comply with the ISPS Code.
70. According to The Arianna,98
a shipowner must comply with any requirements that he can reasonably
foresee.99
Hence, a shipowner should comply with the ISPS Code if he can know or reasonably foresee that
goods are to be discharged at an ISPS compliant port. Here, before the Vessel departed from the loading port,
the Respondents had had the knowledge that the discharge port was at Liverpool,100
and therefore ISPS
compliant.101
The Respondents must then comply with the requirements of the ISPS Code.
95
Papera Traders Co Ltd and Others v Hyundai Merchant Marine Co Ltd and Another (“The Eurasian Dream”) [2002] EWHC 118
(Comm); [2002] 1 Lloyd’s Rep 719, [127]-[128] (per Cresswell J). 96
FC Bradley & Sons Ltd v Federal Steam Navigation Co (1926) 24 LI L Rep 446. 97
FC Bradley & Sons (n 96) 454. 98
Athenian Tankers Management SA v Pyrena Shipping (“The Arianna”) [1987] 2 Lloyd’s Rep 376. 99
The Arianna (n 98) 387. 100
Facts 3 (the standard Charter Party); Facts 14, 16, 18, 20 (the Bills of Lading). 101
Both the United Kingdom and the Netherlands are State Parties to the International Convention for the Safety of Life at Sea
(“SOLAS”) 1974, as amended by the subsequent Protocols where the ISPS Code is annexed to. See International Maritime
Organisation, “Status of Convention” <http://www.imo.org/About/Conventions/StatusOfConventions/Pages/Default.aspx> accessed
14 April 2013.
18
(iv) The Vessel was unseaworthy due to the Respondents’ non-compliance with the ISPS Code.
71. In The Eurasian Dream,102
it was commented that non-compliance with the International Management Code
for the Safe Operation of Ships and for Pollution Prevention (“the ISM Code”) could amount to
unseaworthiness of a ship. Overwhelming academic authorities suggested that the scope of the ISPS Code
should have the same effect as the ISM Code if the ship is to trade to an ISPS-compliant port.103
Therefore,
the Vessel could not be seaworthy unless it satisfied the requirements of the ISPS Code.104
72. Here, the Respondents’ non-compliance with the BMP4 and the ISPS Code amounted to unseaworthiness of
the Vessel. The Respondents breached the duty under Article III Rule 1 of the Hague-Visby Rules.
C. The exceptions under Article IV Rule 2 are inapplicable and hence the Respondents are fully
liable under Article III Rule 1 and 2.
73. Under Article IV Rule 1, a carrier shall be liable unless he has exercised due diligence to maintain the ship
seaworthy. According to The Toledo,105
the burden to prove due diligence rests on the Respondents.106
Yet,
there is no evidence that the Respondents exercised due diligence. Thus, they breached Article III Rule 1.
74. In The Mayruebbe,107
Article III Rule 1 is an overriding obligation, non-fulfillment of which renders all the
exceptions under Article IV Rule 2 inapplicable. Therefore, the Respondents cannot rely on Article IV Rule 2
to evade liability for their breach of duties under Article III Rule 1 and 2.
VII. THE RESPONDENTS ARE ACCOUNTABLE IN CONVERSION FOR MISDELIVERING THE
CARGO TO THE SELLER.
75. The Respondents are accountable in conversion to the Claimants, because (A) the Claimants have the rights of
suit under the tort of conversion as they have the immediate right to possession of the cargo, and (B) the
102
The Eurasian Dream (n 95) [143]. 103
The Eurasian Dream (n 95) [143]; Williams R, “The Effect of Maritime violence on Contracts of Carriage by Sea” (2004) 10 (4)
JIML 343, 350-351; Soyer B and Williams R, “Potential legal ramifications of the International Ship and Port Facility Security
(ISPS) Code on Martitime Law” [2005] LMCLQ 515, 523-534. 104
Cooke J. and the Others (n 60) 11.41; Soyer B and Williams R (n 103) 524. 105
The Toledo [1995] 1 Lloyd’s Rep 40. 106
The Toledo (n 105) 50. 107
Maxine Footwear Co Ltd v Canadian Government Merchant Marine Ltd (“The Mayruebbe”) [1959] 2 Lloyd’s Rep 105.
19
Respondents converted the Claimants’ cargo by delivery without bills of lading.
A. The Claimants have the rights of suit under the tort of conversion as they have the immediate
right to possession of the cargo.
76. The party with the immediate right to possession of goods is entitled to sue in conversion.108
The Claimants,
being the lawful holder of the Bills of Lading, had the immediate right possession of the cargo.109
By virtue
of this, the Claimants are entitled to sue the Respondents in conversion.
77. Alternatively, property in goods suffices to confer title to sue in conversion.110
The CIF contract here requires
payment against documents.111
Property passed when the Bills of Lading were transferred to the Claimants
against payment in mid-January 2009.112
The Claimants were conferred the title to sue in conversion.
B. The Respondents converted the Claimants’ cargo by delivery without bills of lading.
78. The law of conversion imposes strict liability for voluntary113
and wrongful interference with the right to
possession of goods.114
Delivery to a wrong person was voluntary.115
In Motis Exports Ltd,116
the carriers
were held liable even when they delivered goods against forged bills of lading. Innocence and delivery in
good faith was no defence. Here, the Respondents voluntarily delivered the cargo to the Seller without
presentation of the Bills of Lading. This was plainly inconsistent with the Claimants’ right to possession of the
cargo. Thus, the Respondents must be liable in conversion.
VIII. THE RESPONDENTS ARE ACCOUNTABLE IN BAILMENT FOR MISDELIVERY OF AND
DAMAGE TO THE CARGO.
79. The Respondents are accountable in bailment to the Claimants, because (A) the Claimants became the bailor
of the cargo upon the transfer of the Bills of Lading to them, and (B) the Respondents breached their duty as
108
Kuwait Airways Corp v Iraqi Airways Corp (Nos 4 and 5) [2002] UKHL 1923. 109
See above [60]. 110
Anonima Petrali Italiana SpA v Marlucidez Armadora SA (“The Filiatra Legacy”) [1991] 2 Lloyd’s Rep 337. 111
FOSFA 81 cl 11. 112
Facts 67. 113
Kuwait Airways Corp (n 108). 114
MCC Proceeds Inc v Lehman Brothers International (Europe) [1998] 4 All ER 675, 686. 115
The Aramis [1989] 1 Lloyd’s Rep 213. 116
Motis Exports Ltd v Dampskilbsselsabet AF 1992, Aktieselskab [2000] 1 Lloyd’s Rep 211.
20
the bailee for misdelivery of and damage to the cargo.
A. The Claimants became the bailor of the cargo upon the transfer of the Bills of Lading to them.
80. The Claimants became the bailor of the cargo, because (i) the Bills of Lading were transferred to the
Claimants by the Seller. Further, (ii) actual attornment was unnecessary for an effective transfer of the
bailment relationship.
(i) The Bills of Lading were transferred to the Claimants by the Seller.
81. In a CIF shipping contract, a bailment relationship arises between a seller bailor and a shipowner bailee.117
An initial bailment relationship arose between the Seller as the bailor and the Respondents as the bailee.
82. In The Pioneer Container,118
the Privy Council held that bailment is founded exclusively on the bailee’s
voluntary possession of goods that belong to another. A bill of lading “contains a statement by the master of a
ship that he is in possession of cargo, and an undertaking to deliver it”.119
Hence, a shipowner who issues a
bill of lading is in voluntary possession of goods for the lawful holder of the bill of lading.120
Here, upon the
Claimants becoming the lawful holder of the Bills of Lading,121
the Respondents would cease to be in
voluntary possession of cargo for the Seller, but for the Claimants.
83. Furthermore, bills of lading are the only document of title recognized in common law.122
The holder of a bill
of lading generally identifies himself as the bailor with constructive possession of the goods.123
As recognised
by the Court of Appeal in The Kapetan Markos (No 2):124
When the bill of lading was endorsed and delivered by [the charterer] to the [endorsee], that
transferred constructive possession of the cargo to [the endorsee], and put [the endorsee] in a position
117
Leigh and Sillivan Ltd v Aliakmon Shipping Co Ltd (“The Aliakmon”) [1986] 1 AC 785; Bergerco USA v Vegoil Ltd [1984] 1
Lloyd’s Rep 440, 443. 118
The Pioneer Container [1994] 2 AC 324. 119
Heskell v Continental Express Ltd (1949) 83 Lloyd’s Rep 438, 453. 120
Debattista C (n 69) [2.3]. 121
See above [17]-[30]. 122
Official Assignee of Madras v Mercontile Bank of India Ltd [1935] AC 53. 123
Debatista C (n 69) [2.7]. 124
The Kapetan Markos (No 2) [1987] 2 Lloyd’s Rep 321.
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to sue the [ship]owners as [the endorsee’s] bailee.125
In accordance with this mechanism, the bailment between the Seller and the Respondents became one
between the Claimants and the Respondents upon the transfer of the Bills of Lading.
84. The court in the Kapetan case also clarified that “[a]n action in bailment depends on possession”.126
Academics opined that a rational distinction cannot be made between the right to sue in bailment and the
transfer of constructive possession.127
By virtue of becoming the lawful holders of the Bills of Lading, the
Claimants acquired the constructive possession of the cargo. This entitles the Claimants to sue in bailment.
(ii) Actual attornment was unnecessary for an effective transfer of the bailment relationship.
85. The Claimants argue that attornment was unnecessary for them to become the bailor. Attornment serves as an
acknowledgement that an attornor holds goods as a bailee for an attornee.128
It takes effect as a contract by
means of an estoppel, whereby the attornor is estopped from denying the attornee’s title of goods.129
86. Before the implementation of the COGSA, since the seller is the original bailor, the buyer does not have the
rights of suit in bailment unless the shipowner has attorned to the buyer.130
With the effect of the COGSA,
this no longer represents the correct legal position.
87. Section 2(a) of the COGSA creates a contract of carriage between the lawful holder of the bill of lading and
the shipowner.131
This view is approved in Sonicare International v East Anglia Freight Terminal:132
If the original bailor had caused the benefit of the contract representing the … bailment to be assigned
by negotiation of the … bill of lading, then the transferee did step into the shoes of the original bailor
and was to be treated to all intents and purposes as the bailor.133
125
The Kapetan Markos (No 2) (n 124) 340 (per Dillon LJ). 126
The Kapetan Markos (No 2) (n 124) 340 (per Dillon LJ). 127
McMeel G, “The Redundancy of Bailment” [2003] LMCLQ 169. 128
Palmer NE, Palmer on Bailment (3rd
edn Sweet & Maxwell, London 2009) [20-015]. 129
Palmer NE (n 128) [25-002]. 130
See, for example, The Aliakmon (n 117) 815; Compania Portorafti Commerciale SA v Ultramar Panama Inc (“The Captain
Gregos”) (No 2) [1990] 2 Lloyd’s Rep 395, 405-406; Mitsui & Co Ltd v Novorossoysk Shipping Co (“The Gudermes”) [1993] 1
Lloyd’s Rep 311; The Future Express [1993] 2 Lloyd’s Rep 542. 131
Debattista C (n 69) [2.07]. 132
Sonicare International v East Anglia Freight Terminal [1997] 2 Lloyd’s Rep 48. 133
Sonicare International (n 132) 53.
22
Therefore, the Claimants, who have become the lawful holders of the Bills of Lading incorporating the
Charterparty, are to be treated as the bailors.
88. Alternatively, in The Berge Sisar,134
the House of Lords recognized a transferrable attornment in a bill of
lading when it is endorsed.135
In other words, an attornment can be automatically done by law.
89. Thus, attornment is either unnecessary or done automatically through the transfer of the Bills of Lading. The
Claimants, being the lawful holders of the Bills of Lading, were the new bailors with rights of suit in bailment.
B. The Respondents breached their duties in bailment because they misdelivered the cargo and did
not carefully and properly carry the cargo.
90. The bailee shipowner has the duties to take reasonable care of the bailed goods and to deliver the goods in
accordance with the terms of the bailment.136
Yet, the Respondents failed to fulfill any of these obligations.
91. First, the Respondents failed to take reasonable care of the cargo. Under the common law, the Respondents
were obliged to take active steps to protect the cargo from any foreseeable hazards.137
The duty is equivalent
to that in Article III Rule 2 of the Hague-Visby Rule, of which the Respondents were in breach.138
92. Second, the Respondents failed to deliver the cargo according to the terms of the bailment which are in fact
the terms of the contract of carriage.139
The Respondents by delivering the cargo to Rotterdam instead of
Liverpool without the Claimants’ approval were in breach of the duty.140
IX. THE CLAIMANTS ARE ENTITLED TO DAMAGES FROM THE RESPONDENTS.
93. The Claimants are entitled to claim damages in contract, tort and bailment. The normal contractual measure of
damages aims to place the injured party in the same situation as if the contract had been performed.141
As
134
The Berge Sisar (n 32). 135
The Berge Sisar (n 32) [18] (per Lord Hobhouse) whose judgement was unanimously agreed by other judges. 136
Port Swettenham Authority v TW Wu & Co (m) Sdn Bhd [1979] AC 580 PC; Brook’s Wharf and Bull Wharf v GoodmanBros [1937]
1 KB 534; Morris v CW Martin & Sons Ltd [1966] 1 QB 716, 731. 137
Morris v CW Martin & Sons Ltd (n 136). 138
See above [64]-[66]. 139
See above [87]-[89]. 140
See above [31]-[47]. 141
Koufos v C Czarnikow Ltd (“The Heron II”) [1969] 1 AC 350, 414B; Beale HG and the others (eds), Chitty on Contracts: Vol 1
General Principles (31st edn Sweet & Maxwell, London 2012) [26-001]; Wilson J F (n 74) 353.
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misdelivery of goods was involved, such measure also applies to the tort of conversion.142
The measure under
bailment is also the same as it largely follows contractual or tortious measures.143
94. The Claimants sue for (A) the deterioration of the quality and non-delivery of the cargo, or alternatively (B)
the cost of the Claimants’ attempt to mitigate their loss; and (C) the cost of the Dutch proceedings.
A. The deterioration of the quality and non-delivery of the cargo.
95. The cargo became non-GMQ. Consequently, (i) the Claimants are entitled to the loss of value of the cargo,
and (ii) the purchase price of the cargo should be its market value at Liverpool from March to April 2009.
Meanwhile, (iii) the Claimants are entitled to the market value of the non-GMQ cargo as it was not delivered.
(i) The Claimants are entitled to the loss of value of the cargo.
96. Where goods are damaged during transit, the normal calculation of damages is the diminished amount of
market value of the goods at the time and place at which they should be delivered.144
97. Here, the GMQ cargo was to be discharged at Liverpool on about 20 March 2009. It became non-GMQ during
the carriage. Accordingly, the normal calculation of damages should be the difference between the market
values of 4000 mt GMQ PFAD and non-GMQ PFAD at Liverpool on about 20 March 2009.
(ii) The purchase price of the cargo should be its market value in Liverpool from March to April 2009.
98. Where there is no available market at the time and place of delivery, the market value cannot be assessed.
According to The Pegase,145
the value of goods would be “assessed with reference to the value of the goods
to the innocent party”,146
which can be ascertained by considering the claimant’s “cost price”. 147
The “cost
price” is the market price at the place where the goods were delivered to the carrier.
99. Here, there was no available market at Liverpool from March to April 2009. The Single Joint Export Report
142
Brandt v Bowlby (1831) 2 B & Ad 932; Braun v Bergenske SS Co (1921) 8 Ll L Rep 51; McGregor H (ed), McGregor on Damages
(17th
edn Sweet & Maxwell, London 2003) [19-009]. 143
Building and Civil Engineering Holidays Scheme Management v Post Office [1966] QB 247. 144
Building and Civil Engineering Holidays Scheme Management (n 143); McGregor H (n 143) [27-004]; Wilson (n 74) 357. 145
The Pegase [1981] 1 Lloyd’s Rep 175. 146
The Pegase (n 145) 183. 147
O’Hanlan v The Great West Railway Co (1865) 6 B & S 484, 491.
24
solely provides data regarding the market of GMQ PFAD at Rotterdam.148
It further stated that “a cif buyer in
Liverpool would have had to ship the goods to Liverpool” as the cargo was at Rotterdam.149
100. Thus, when assessing the value of the cargo, the Tribunal should refer to the Claimants’ cost price. The best
evidence is the purchase price paid by the Claimants, USD 2,990,000. The damages is the purchase price less
the market value of 4000 mt non-GMQ PFAD.
(iii) The Claimants are entitled to the market value of the non-GMQ cargo as it was not delivered.
101. Non-delivery of goods includes wrongful delivery to someone other than the consignee.150
The normal
measure of damages for non-delivery is the market value of the goods at the time and place of due delivery.151
Here, the cargo was wrongfully delivered to the Seller, which constitutes a non-delivery. The Claimants are
entitled to the market value of 4000 mt non-GMQ PFAD.
B. The cost of Claimants’ reasonable attempt to mitigate their loss.
102. To mitigate loss, the Claimants paid USD 2,090,000 to purchase the equivalent amount of non-GMQ PFAD
from D&F Broker Ltd.152
Nonetheless, a person who breaches the contract is not less liable because substitute
goods are bought at a lower price.153
The Claimants are entitled to the purchase price as stated above.
103. Should the Tribunal does not accept the above calculation, the Claimants argue that they are entitled to the
cost of the mitigation of loss alternatively. An innocent party in a breach of contract is encouraged to minimise
his loss, and thus can recover the cost incurred in his reasonable attempt to mitigate loss.154
104. Here, the non-delivery of the cargo deprived the Claimants of 4000 mt PFAD. The Claimants reasonably
acquired the equivalent product from another source to mitigate loss. They are thereby entitled to the USD
2,090,000 as the cost of mitigation.
148
Facts 58. 149
Facts 59. 150
Brandt (n 142); Braun v Bergenske SS Co (n 142); McGregor (n 142) [27-002]. 151
Rodocanachi v Milburn (1887) 18 QBD 61, 76; McGregor (n 142) [27-003]; Wilson (n 74) 359. 152
Facts 46. 153
Joyner v Weeks [1891] 2 QB 31, 34. 154
Beale HG and the others (n 141) [26-099].
25
C. The cost of the Dutch proceedings.
105. Due to the Respondents’ fault, two Dutch court proceeding was initiated by the Claimants to arrest the Vessel.
Legal expenses including the court fee and the legal fee were incurred. The Respondents are liable to the cost,
because (i) the Respondents’ own acts caused the damages, and (ii) the damages are not remote.
(i) The Respondents’ own acts caused the damages.
106. As the Respondents discharge to cargo at the wrong port without the bills of lading, there was a prima facie
breach of contract of carriage. The Claimants’ rights were violated and they were deprived of the cargo. This
leaves the Claimants with no choice but to sue against the Respondents for damages. In order to secure the
claim, the Claimants were forced to arrest the Vessel.
(ii) The damages are not remote.
107. According to The Heron II,155
the contractual test is whether the loss in question is “a kind which the
defendant, when he made the contract, ought to have realised was not unlikely to result from a breach”.156
108. The essence of a voyage charterparty is that the shipowner is obliged to discharge the goods at the nominated
discharge port against the presentation of the bills of lading. The arrests of ships are very common when such
a fundamental term is breached. Thus, when the contract of carriage was entered into, the Respondents should
be able to contemplate these arrest proceedings followed by the legal cost. These damages are not remote.
155
The Heron II (n 141). 156
The Heron II (n 141) 382.
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PRAYER FOR RELIEF
The Claimants respectfully request the Arbitral Tribunal to rule:
1. That there is a valid arbitration agreement between the Claimants and the Respondents. Therefore the
Arbitral Tribunal has the substantive jurisdiction to hear the dispute between the Claimants and the
Respondents;
2. That the Claimants are the lawful holders of the Bills of Lading. Therefore the Claimants have the rights
of suit against the Respondents under the contract of carriage.
3. That the Claimants did not reject the cargo. Therefore the Claimants are entitled to the ownership and
possession of the cargo;
4. That the Respondents wrongfully discharged the cargo to the Seller at Rotterdam against a letter of
indemnity. Therefore the Respondents are liable in contract for unjustifiable deviation and delivery
without bills of lading;
5. That the Respondents failed to comply with the standard industrial practices and cannot rely on
exceptions under Article IV of the Hague-Visby Rules. Therefore the Respondents fail to comply with
their duty under Article III and are liable for damage to cargo because of the piracy;
6. That a bailment relationship was established between the Claimants and the Respondents. Therefore the
Respondents are liable for breaching their duties in bailment.
7. That the Claimants are entitled to the purchase price of the cargo together with the legal costs in the Dutch
Court proceedings as damages. Therefore the Claimants are awarded USD 3,236,756.26 as damages.
Respectfully submitted
Aardvark Ltd, the Claimants
(Team 7)
