FIFTEENTH ANNUAL INTERNATIONAL MARITIME LAW ARBITRATION MOOT COMPETITION 2014

Transcription

1 FIFTEENTH ANNUAL INTERNATIONAL MARITIME LAW ARBITRATION MOOT COMPETITION 2014 IN THE MATTER OF ARBITRATION BETWEEN: RELIABLE TANKERS INC SUPER CHARTERS INC Claimants/Owners ers Respondents/Charter RELIABLE BUTTERLY AND IN THE MATTER OF ARBITRATION BETWEEN: SUPER CHARTERS INC Claimants/Charterers RELIABLE HOLDINGS INC Respondents/Owners MEMORANDUM FOR CLAIMANT/OWNER TEAM NO. 24 Mustaqim Mohd Marsidi Nur Amalina Isyqie binti Imran Hadzalie Hazirah binti Roslan Syaza Jamilah Inani binti Jaafar

2 TABLE OF CONTENTS LIST OF AUTHORITIES i STATEMENT OF FACTS...1 PART ONE: JURISDICTION A THE ARBITRATION HAS BEEN VALIDLY COMMENCED BY THE CLAIMANT... 3 (a) Reliable Tankers Inc. had merged with Reliable Holdings Inc. at the time the arbitration was commenced B THE CLAIMANT COMMENCED THE ARBITRATION BEFORE THE TIME PROVIDED IN CLAUSE 4 OF THE RESPONDENT S STANDARD TERMS C AN ACTION BY RELIABLE TANKERS INC WAS NO DOUBT AN ACTION BY THE RELIABLE HOLDINGS INC...5 (a) The Reliable Tankers Inc and Reliable Holdings Inc are one entity as a result of the merger...5 (b) The Arbitration claim commenced by the same entity is valid and therefore, the Reliable Holdings Incorporation own, inter alia, the RELIABLE BUTTERFLY...7 i

3 D ALTERNATIVELY, IT IS A CLEAR MISNOMER IN THE CLAIMANT S NOTICE OF APPOINTMENTS AND IT DOES NOT RENDER THE ARBITRATION CLAIM INVALID....8 (a) The misnomer is immaterial and has already been corrected by the Claimant...9 PART TWO: MERITS I Breach of Charterparty A THE CLAIMANT DOES NOT BREACH THE CHARTERPARTY.. 11 (a) The Charter was automatically cancelled on 17 November by the operation of the Owner s Standard Terms that were incorporated into the Charter thus, making the Charter cancelled without recourse...11 B THE CLAIMANT SHALL NOT BE RESPONSIBLE FOR ANY DELAY IN PERFORMING THE CHARTER BY VIRTUE OF CLAUSE 19 (PART II) OF THE ASBATANKVOY FORM...12 C THE CHARTER WAS FRUSTATED WHEN THE RELIABLE BUTTERFLY WAS ARRESTED BY THE BUNKER SUPPLIERS D IN THE FURTHER ALTERNATIVE, FAILURE TO PAY THE BUNKER SUPPLIERS WAS CAUSED BY ECONOMIC DURESS AND THEREFORE, THE CLAIMANT HAS NOT COMMITTED ANY BREACH ON THEIR PART ii

4 E THE CLAIMANT HAS NOT COMMITTED ANY REPUDIATORY BREACH...20 F THE APPROACH VOYAGE WAS DEEMED COMMENCED WHEN THE CHARTER WAS CONCLUDED 21 G THE ARREST/MARITIME LIEN BY THE BUNKER SUPPLIER WAS NOT RECOGNISED BY ENGLISH LAW AND THIS LED TO AN UNLAWFUL ARREST II ENTITLEMENT OF PAYMENT OF FREIGHT A THE RESPONDENT HAS FAILED TO MAKE PAYMENT OF FREIGHT TO THE CLAIMANT AND THUS, BREACHED THE CHARTER PARTY...23 (a)the claimant is entitled for the 95% of the freight which was deemed to be earned in full, discountless, non-returnable upon lifting of subject...24 B CLAUSE 4 OF THE OWNER S STANDARD TERMS IS UNAMBIGUOUS AND HAS CLEARLY IMPOSED AN OBLIGATION TO THE CHARTERER FOR THE PAYMENT OF FREIGHT...24 III PRAYER OF RELIEF...26 iii

5 LIST OF AUTHORITIES NO. STATUTES 1. Arbitration Act 1996 (UK) 2. Limitation Act 1980 (UK) 3. Rules of Supreme Court (UK) NO. CASES AND ARBITRAL AWARDS 1. Automatic Electric Telephone Co. v. Union Steamship Co 2. Bank of Boston Connecticut v European Grain and Shipping Ltd; The Dominique [1989] 1 All ER Dubai Bank Ltd v Galadari (No 4) [1990] 2 All ER 738; (1990) 134 Sol Jo 986; [1990] 1 WLR E. L. Oldendorff & Co. GmbH v Tradax Export S.A. (The Johanna Oldendorff) [1974] AC Eastern Capital Holdings v Fitter (unreported) 6. Edwinton Commercial Corporation & Anor v Tsavliris Russ (Worldwide Salvage & Towage) Ltd - The "Sea Angel" [2006] EWHC 1713 (Comm) 7. Eurosteel Ltd v Stinnes AG,[1999] All ER (D) Finmoon Ltd & Another v Baltic Reefers Management Ltd and Others (2012) EWHC (920) 9. London Arbitration 18/06 (2006) 702 LMLN 3 iv

6 10. McDonald v Dennys Lascelles Ltd (1933) 48 CLR Metliss v National Bank of Greece [1957] 2 Q.B National Carrier v Panalpina (1981) AC North Ocean Shipping v Hyundai Construction (The Atlantic Baron) [1979] QB Pao On v Lau Yiu Long [1980] AC 614; [1979] 3 All ER 65; [1979] 3 WLR Progress Bulk Carriers v. Tube City. IMS LLC [2012] 16. RKO Pictures Inc v Cannon Screen Entertainment Ltd [1990] BCLC Tyman Ltd v Craven [1952] 1 All ER Universe Tankships Inc of Monrovia v International Transport Workers Federation (The Universe Sentinel) [1983] 1 AC 366 NO. BOOKS 1. A. Anderson,Time and Voyage Charters: Proceeding to Loading Port, Loading, and Related Problems, Tulane Law Review John Bouvier, Robert Kelham, (1839) A Law Dictionary: Adapted to the Constitution and Laws of the United States of America, and of the Several States of the American Union : with References to the Civil and Other Systems of Foreign Law, Volume 2, p John F Wilson, Carriage of Goods by Sea, (7 th edition,2010), Pearson Education Limited 4. Julian Cooke, Timothy Young, Andrew Taylor, John D. Kimball, David Martowski, LeRoy Lambert, Voyage Charter, (1993), Lloyd s of London Press Ltd 5. Philip Bush, Delay and Detention, (1978) 41 Modern Law Review 137 v

7 NO. OTHER arbitration/commencing-an-arbitration-the-requirements-of-arbitration-notices htm vi

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9 STATEMENT OF FACTS 1. On 19 th November 2011, Super Charters Inc. (Respondent) entered into an agreement with Reliable Tankers Inc. (Claimant) to charter the Claimant s VLCC to load 900,000 BLS NHC (+/-) 5% at two terminals from BlueLand to IndigoLand which superseded and replaced in its entirety all of their previous correspondence. In an on the same date, it was explained that the vessel was supposed to go on a 30- day voyage and the discharge should have been completed on 10 th January. 2. On 20 th November, upon discovering unworkably strict time bar type provision in the Respondent s Standard Terms, Chris, the representative of the Respondent agreed to give the Claimants a few more days. This consequently resulted in the extension of 30 days of commencing suit from 20 days of commencing suit previously. 3. On 22 nd November, the Respondent clarified that they narrowed down the laycan to 5 th December. 4. On 23 rd November through an internal notice, the Claimant clarified to have had limited fund to pay the bunker suppliers for security. This issue would not have accrued if the Respondent had paid for freight in which they failed to, and consequently resulting in the arrest of the Reliable Butterfly. The Claimant alternatively negotiated with the bunker suppliers to get a more sensible figure in order to get the Reliable Butterfly sailed by 25 th December. 5. On 25 th November, the Claimant informed the Respondent that despite strenuous efforts, they were not able to have the Reliable Butterfly released from arrest and therefore, the Reliable Butterfly will not make her laycan. The Claimant would give the Respondent a revised laycan when they were able to do so. 1

10 6. On 27 th November through a notice of cancellation, the Respondent refused to accept the Claimant s new ETA and laycan even if a proper revised ETA and laycan were given. The Respondent then claimed for damages. 7. On 28 th November, the Claimant confirmed that the charter was cancelled without recourse upon rejection by the Respondent of the new revised ETA and laycan. The Claimant rejected in full any suggestion that they were in breach of the charter. The Claimant also confirmed that the freight remained outstanding and was unaffected by the cancellation. The Claimant also offered another sister VLCC of the Reliable Butterfly which may be suitable to perform the fixture in her place. 8. On 3 rd January 2012, it was reported in the local newspaper that Reliable Tankers Inc. had merged with Reliable Holdings Inc. ( Claimant ) since December On 28 th January 2012, the Claimant commenced an arbitration suit against the Respondent as a result of the Respondent s breach of the Charter party by a letter of appointment of an arbitrator. 10. On 12 th February 2012, the Respondent rejected the Claimant s notice of appointment and therefore commenced a new appointment of an arbitrator. 11. On 24 th February 2012, the Claimant disagreed with the Respondent s opportunistic suggestion that the arbitration has not been validly commenced as Reliable Holdings Inc. and Reliable Tankers Inc. were the same entity for all purposes. Alternatively, it was just a very clear misnomer in the Claimant s notice of appointment that the Respondent could have been under no genuine misapprehension. The Claimant therefore once again appointed their arbitrator. 2

11 PART ONE: JURISDICTION A THE ARBITRATION HAS BEEN VALIDLY COMMENCED BY THE CLAIMANT (a) Reliable Tankers Inc. (hereinafter RT ) had merged with Reliable Holdings Inc. (hereinafter RH ) at the time the arbitration was commenced. 12 Reliable Tanker Inc. had merged with Reliable Holdings Inc. and the latter company became the surviving entity in December The arbitration was commenced on January 28 th 2012 which was after the merger and it was known by the Respondent 2. This merger is proven to be true by the expert report of Mr. Tim Bowman who affirmed that the merger of RT and RH by way of universal succession is established under the Claimant s domestic law, Fruitland law 3. B THE CLAIMANT COMMENCED THE ARBITRATION BEFORE THE TIME PROVIDED IN CLAUSE 4 OF THE RESPONDENT S STANDARD TERMS. 13 Clause 4 of the Respondent s Standard Terms provides that all claims again Super Charters must be notified to Super Charters within 10 days discharge/re-delivery and/or when discharge/re-delivery would have taken place if for whatever reason it did not (as appropriate) and any suit or proceedings must be commenced within a 1 Moot problem, Moot problem, Moot problem, 113 3

12 further 10 days hereafter. 4 The arbitration commenced by the Claimant was on 28 th January which was before the time bar provided by the Respondent in its Standard Terms under Clause Alternatively, if the Tribunal were to find the arbitration commencement was time barred, it would then fall under the exception of Section 35(5) 6 of the Limitation Act The arbitration suit commenced by RT on 28 th January and RH on 12 th February are the same claim and as the result of merger, the substitution of the new party, RH is valid for the determination of the original action. The substitution by the RH is in accordance with section 35(6)(a) 8 because the RH is substituted for a RT whose name was given in the arbitration commencement in mistake for the RH's name. 4 Moot problem, 88 5 Moot Problem, 88 6 Limitation Act 1980, Section 35(5); a) in the case of a claim involving a new cause of action, if the new cause of action arises out of the same facts or substantially the same facts as are already in issue on any claim previously made in the original action; (b) in the case of a claim involving a new party, if the addition or substitution of the new party is necessary for the determination of the original action. 7 Applicable under Section 13 of Arbitration Act Limitation Act 1980, Section 35(6); The addition or substitution of a new party shall not be regarded for the purposes of subsection (5)(b) above as necessary for the determination of the original action unless either :(a) the new party is substituted for a party whose name was given in any claim made in the original action in mistake for the new party's name 4

13 C AN ACTION BY RELIABLE TANKERS INC WAS NO DOUBT AN ACTION BY THE RELIABLE HOLDINGS INC (a) The Reliable Tankers Inc. and Reliable Holdings Inc. are one entity as a result of the merger. 15 Both RT and RH are to be regarded as one entity after the merger through universal succession. The Notice of Appointment on 28 January by RT was validly commenced and was necessarily on behalf of the merged entity, RH. 16 Parker L.J. in Metliss v National Bank of Greece 10 elaborated universal succession in this manner: It is when the new entity continues the personality of another and all rights and liabilities transferred and vested in the latter. The new person or new entity succeeds per universitam. In the case of Eurosteel Ltd v Stinnes AG 11, Longomore J stated that English law is not so impotent at least in cases of universal succession. The whole point of universal succession is that the successor is treated as the same person as the person to whom he succeeds. The court in this case held that the arbitration commenced did not die immediately on dissolution of the merged company and it is still in existence and notice to maintain or continue the proceedings can be given. Applying the principle to the current case, even though RT was dissolved the arbitration claim commenced by them still exists and should still be treated as a valid claim. 9 Moot Problem, page Metliss v National Bank of Greece [1957] 2 Q.B. 33, 11 Eurosteel Ltd v Stinnes AG,[1999] All ER (D)

14 17 Alternatively, the non-existent party which initiated the proceedings in the court may apply to the court to substitute themselves with the surviving party after merger has occurred under the Order and under Order 20(6) 13 of Rules of Supreme Court. In the case of RKO Pictures Inc. v Cannon Screen Entertainment Ltd 14, the instructions were given to solicitors to institute proceedings to recover money allegedly due under an agreement. RKO Pictures Inc. was an incorporated company and ceased to exist. It had merged prior to the issue of writ, with another company; Entertainment Acquisition Co Inc. (EAC) was thereafter the sole person entitled to sue under the agreement. Later, the solicitors took out summons asking for an order that EAC be substituted for RKO as plaintiffs. The matter came before Master Turner who ordered, so far as presently relevant, that EAC 'be substituted as plaintiffs herein for RKO Pictures Incorporated and all references in the pleadings to RKO Pictures Incorporated to be treated where appropriate as Entertainment Acquisition Company 12 Order 15(6) of Rules of Supreme Court : '... the Court may on such terms as it thinks just and either of its own motion or on application (a) order any person who has been improperly or unnecessarily made a party or who has for any reason ceased to be a proper or necessary party, to cease to be a party; (b) order any of the following persons to be added as a party, namely (i) any person who ought to have been joined as a party...' 13 Order 20(5) of Rules of Supreme Court: (1) Subject to Order 15, rule 6 and the following provisions of this rule, the Court may at any stage of the proceedings allow the plaintiff to amend his writ... (3) An amendment to correct the name of a party may be allowed... notwithstanding that it is alleged that the effect of the amendment will be to substitute a new party...' 14 RKO Pictures Inc v Cannon Screen Entertainment Ltd [1990] BCLC 364 6

15 Incorporated'. The Defendant appealed against the order made by the Master. Thus question rose before the court is whether the court has jurisdiction to substitute the post-merger company for the pre-merger company as plaintiff. Schiemann J held that the amendment can be made, both under Ord 15(6) and under Ord 20(5) of Rules of Supreme Court. Further the court has, in his judgment, an inherent jurisdiction which it ought to exercise to discourage people from wasting time and money. The appeal by Defendant was dismissed. Returning to the current case, RH may apply to the arbitral tribunal to substitute RH with RT as the claimant. 18 According to the cases cited above, the RH and RT are for all purposes considered as one entity. (b) The Arbitration claim commenced by the same entity is valid and therefore, the Reliable Holdings Incorporation own, inter alia, the RELIABLE BUTTERFLY. 19 The proceedings may be validated by virtue of Section 356(6) where a company shall be deemed to have continued in existence as if its name had not been struck off or ceased. In the case of Tymans Ltd v Craven 15, the court held that where a company had been struck off the register pursuant to Section 356(5) of the Companies (Consolidation) Act 1908, it was therefore a non-existent person at the time of court proceedings. However it was validated when an order made under section 353(6) where the non-existent company was deemed to be continued in existence. The decision was followed in the case of Eastern Capital Holdings v Fitter 16 where a plaintiff company was dissolved after proceedings had been commenced. The 15 Tyman Ltd v Craven [1952] 1 All ER Eastern Capital Holdings v Fitter (unreported) 7

16 defendant argued that the action should be dismissed because the party had ceased to exist. The court later held that that an action might be revived under Section 653(2) or (3) of the Companies Act Applying to the current case, the Claimant s commencement of arbitration can be validated by virtue of section 353(6) of the Companies (Consolidation) Act. D ALTERNATIVELY, IT IS A CLEAR MISNOMER IN THE CLAIMANT S NOTICE OF APPOINTMENTS AND IT DOES NOT RENDER THE ARBITRATION CLAIM INVALID 20 Nihil Facit Error Nominis Cum De Corpore Constat is a general principle of Law which clearly states that an error in the name is nothing when there is certainty as to the persons. In general, when a party can be ascertained, a mistake in the name will not avoid the contract. 17 Particularly in relation to the issue, a misnomer in suits or actions, when the mistake is in the name of one of the parties, it must be pleaded in abatement, 18 for the misnomer of one of the parties sued, is not material on the general issue, when the identity is proved. 19. In any event, the general principle of English Law is that, if a plaintiff or defendant named in English proceedings does not exist at the date the proceedings were commenced, then the proceedings are a nullity, is not absolute and is subject to exception 20. The exception is where if a mistake occurred in naming the a party, that mistake may be cured under Ord 20, r5(3) of 17 John Bouvier, Robert Kelham, (1839) A Law Dictionary: Adapted to the Constitution and Laws of the United States of America, and of the Several States of the American Union : with References to the Civil and Other Systems of Foreign Law, Volume 2, p Ibid East, R Dubai Bank Ltd v Galadari (No 4)(1990) 8

17 Rules of Supreme Court 21.The name used in the Notice of Appointment by The Reliable Holding Inc. is The Reliable Tankers Inc., the old name of the company before it was merged by universal succession to become The Reliable Tankers. 22 The Claimant does concede that it is a mistake on their part. However; the Claimant contends that the mistake does not render the notice of appointment invalid. 21 The mistake is just a mere misnomer that is clear and reasonable enough that the Respondent could be under no genuine misapprehension as to who was commencing the arbitration. The main details of the arbitration commencement have already been incorporated in the letter dated 28 th January and it was well established to the knowledge of the Respondent that The Reliable Tankers Inc. and The Reliable Holdings Inc. had already merged by that time. 23 The claimant in bona fide, thought that the Reliable Tankers Inc. was the then current name of the Respondent s counterparty under the Charter which the Claimant has already corrected in the letter on 24 th February (a) The misnomer is immaterial and has already been corrected by the Claimant. 21 Rules of the Supreme Court, Ord 20, r 5(3) : An amendment to correct the name of a party may be allowed under paragraph (2) notwithstanding that it is alleged that the effect of the amendment will be to substitute a new party if the court is satisfied that the mistake sought to be corrected was a genuine mistake and was not misleading or such as to cause any reasonable doubt as to the identity of the person intending to sue or, as the case maybe, intended to sue 22 Moot Problem, Moot Problem, 100 9

18 22 The Claimant has corrected the misnomer in the letter dated 24 th February by stating that there was a clear misnomer in the Notice of Appointment in that they, in error, thought that Reliable Tankers Inc. was the then current name of the Respondent s contractual counterparty under the Charter. 24 In any event, the misnomer is still immaterial. This can be highlighted in the case of Finmoon Ltd & Another v Baltic Reefers Management Ltd and Others 25 where it gives rise to an important issue on whether an arbitrator can be properly be appointed if there are errors in the identification of the subject matter in the request for appointment In this case, the claimants lawyers prepared a letter of appointment to the arbitrator which contained typographical errors as to the names of certain vessels and without mentioning the contracts of affreightment. On acceptance of the arbitrator s appointment, the claimant s lawyers served a notice of commencement of arbitration proceedings to BRM which did not refer to the contracts of affreightment. Instead, it stated the appointment was made in respect of all claims under the bills of lading and the above charterparty It was the statutory requirement in the U.K. that the claimants have to serve on the respondents a notice requiring them to appoint or agree to the appointment of arbitration. 27 In determining whether the arbitration was duly commenced under section 4(1) above, the test is whether it is clear on objective grounds that arbitration in respect of the relevant dispute has been commenced. The court held that the disputes submitted to arbitration were plainly the cargo damage 24 Moot Problem, Finmoon Ltd & Another v Baltic Reefers Management Ltd and Others (2012) EWHC (920) Section 4(1) of Arbitration Act

19 claims in respect of the bananas carried on the disputed voyages. Although the arbitrator was not initially appointed in respect of the claims under the contracts of affreightment and the omitted vessels, prior to the letter of appointment, BRM received a letter from the claimants lawyers which attached a copy of the contracts of affreightment entitled charterparty. The court observed that the claimants at most erred in referring to the charterparties of specific dates (as specified in the bills of lading) as the contracts of carriage in the notice of commencement of arbitration. Since the parties had by subsequent conduct proceeded on the basis that the arbitrator had been duly appointed in respect of the claims, the court was satisfied that there were due commencement and appointment in the arbitration. 28 The Reliable Tankers Inc. is a well known name that had been long established before the merger took place. A copy of Charterparty was also appended to the notice which gives no doubt on who was commencing the arbitration. 29 We submit that the misnomer that occurred did not invalidate the commencement of arbitration by the Claimant. PART TWO: MERITS I Breach of Charterparty A THE CLAIMANT DOES NOT BREACH THE CHARTERPARTY. (a) The Charter was automatically cancelled on 17 November by the operation of the Owner s Standard Terms that were incorporated into the Charter thus, making the Charter cancelled without recourse 24 Upon notice of cancellation given by the Respondent dated 27 th November, both parties are free from subsequent liabilities to further perform the Charter Party. By 28 Edger J in Finmoon Ltd & Another v Baltic Reefers Management Ltd and Others(2012) EWH (920) 29 Moot Problem,

20 virtue of Clause 2 of the Claimant s Standard Terms, if the vessel has not given any notice of readiness (NOR) at load port by 1700 hours local time on the cancelling date, laytime shall commence upon the vessel s arrival in berth or 72 hours after not tendered, whichever occurs first. If it becomes evident that the ship will miss her cancelling date, owner is to give a new ETA and laycan which the charterer must either confirm or decline within 72 hours. If the charterer elects to confirm, then the Charter Party remains in full effect with a new laycan. If the charterer elects to decline, then the charterparty is to be cancelled without recourse to either party whatsoever. In this case, the Charterer chose to decline the new ETA and laycan given by the Respondent on 27 th November This consequently released the Owner from any subsequent obligations and therefore, the Owner was in fact never, in breach of the charter party. Under Common Law, neither party may have recourse for a remedy by virtue of this clause. B THE OWNER SHALL NOT BE RESPONSIBLE FOR ANY DELAY IN PERFORMING THE CHARTER BY VIRTUE OF CLAUSE 19 (PART II) OF THE ASBATANKVOY FORM 26 Clause of the ASBATANKVOY form is a general exception clause. The wording the vessel, her Master and Owner shall not unless otherwise in this chapter 30 Moot problem, 55, Clause 19,ASBATANKVOY FORM : The Vessel, her Master and Owner shall not, unless otherwise in this Charter expressly provided, be responsible for any loss or damage, or delay or failure in performing hereunder, arising from: - any act, neglect, default or barratry of themaster, pilots, mariners or other servants of the Owner in the navigation or management of the Vessel; - fire, unless caused by the personal design or neglect of the Owner; - collision, stranding or peril, danger or accident of the sea or other navigable waters; - saving or attempting to save life or property; - wastage in weight or bulk, or any other loss or damage arising from inherent defect, 12

21 expressly provided, be responsible for any loss or damage, or delay or failure in performing herunder, arising or resulting..from any other cause of whatsoever kind arising without the actual fault or privity of the Owner is a catch-all exclusion 31. According to the present case, the delay of the preliminary voyage by the Owner is due to a third party s intervention. The Owner had done its best to proceed immediately from its previous obligation to the loading port 32. On 22 nd November 2011, the Reliable Butterfly reached the bunker port as provided in its itinerary 33. It gave the impression that the Owner performed the preliminary voyage with all reasonable despatch. However, due to the arrest, the Reliable Butterfly cannot make her laycan and it was not within the control of the Owner to prevent the arrest. C THE CHARTER WAS FRUSTATED WHEN THE RELIABLE BUTTERFLY WAS ARRESTED BY THE BUNKER SUPPLIERS quality or vice of the cargo; - any act or omission of the Charterer or Owner, shipper or consignee of the cargo, their agents or representatives; - insufficiency of packaging; - insufficiency or inadequacy of marks; - explosion, bursting of boilers, breakage of shafts, or any latent defect in hull, equipment or machinery; - unseaworthiness of the Vessel unless caused by want of due diligence on the part of the Owner to make the Vessel seaworthy or to have her properly manned, equipped and supplied; or - from any other cause of whatsoever kind arising without the actual fault or privity of the Owner. And neither the Vessel nor Master or Owner, nor the Charterer, shall, unless otherwise in this Charter expressly provided,be responsible for any loss or damage or delay or failure in performing hereunder, arising or resulting from: 31 Julian Cooke, Timothy Young, Andrew Taylor, John D. Kimball, David Martowski, LeRoy Lambert, Voyage Charter, (1993), Lloyd s of London Press Ltd, p Moot problem, Moot problem, 47 13

22 27 Frustration of a contract takes place when there is extraneous event (without default of either party and for which the contract makes no sufficient provision) which so significantly changes the nature of the outstanding contractual rights and/or obligations from what the parties could reasonably have contemplated at the time of its execution that it would be unjust to hold them to the literal sense of its stipulations in the new circumstances. 34 According to John F Wilson, when performance of the contract is delayed due to the occurrence of some event, a contract may be frustrated if the resulting delays likely to be so prolonged as to defeat the object of parties in entering the contract of affreightment In relation to the current issue, the Reliable Butterfly was arrested at the bunker port on 22 nd November 36. The Owner had done their best to release her from the arrest and get her to sail by the 25 th in order to meet the laycan. 37 Unfortunately, the Owner could not release her and took the step not to provide a revised laycan as it would be futile until they knew when the arrest would be elevated. It can be deduced from the circumstances that the approach voyage would be delayed due to the intervention of a third party and it was unknown to the Owner when the vessel would be released. This led to the frustration of the charter. 29 In the case of Edwinton Commercial Corporation & Anor v Tsavliris Russ 38, the Tsavliris (Salvors) chartered a vessel named Sea Angel from Edwington (the Owner). 34 National Carrier v Panalpina (1981) AC John F Wilson, Carriage of Goods by Sea, Pearson Education Limited, (7 th edition,2010),page Moot problem, Moot problem, Edwinton Commercial Corporation & Anor v Tsavliris Russ (Worldwide Salvage & Towage) Ltd - The "Sea Angel" [2006] EWHC 1713 (Comm) 14

23 The vessel was delivered into service under the charter party on 26 th August On 5 September 2003, the vessel completed loading her final parcel and completed discharge the transshipment vessel on 9 th September. On the assumption that the vessel would sail from Karachi that day, Salvors gave 3 days notice of redelivery. However, the vessel did not depart from Karachi until 26 th December and was not redelivered until 1 st January, 2004 because the port authority refused to issue a No Demand Certificate (NDC), a condition precedent to port clearance. The period of detention was unknown. The risk of the delay was not reasonably foreseen by both parties but later the vessel was released but there was only 20 days before the expired period ended. 30 In the occurrence of delay and in the anticipation of a future delay, a charterparty can be amounted to frustration. However, for a time-charter party the voyage still can be continued after the release, so it did not amount to frustration. 31 Distinguishing it from our case, the charter was a voyage charter party and the arrest prevented the Reliable butterfly from resuming her voyage to the load port. Despite the Owner s strenuous effort to release the vessel, she was still detained on 25 th November and could not meet the laycan as the carrying voyage would take 30 days and the discharging process must be on time (10 th January) before the refinery shut down on 15 th January. It would be of no use even if the vessel was released after 25 th November because she could still not meet the due date on 15 th January where the refinery was supposed to be shut down. The charter party was frustrated and therefore it did not amount to a repudiatory breach. D IN THE FURTHER ALTERNATIVE, FAILURE TO PAY THE BUNKER SUPPLIERS WAS CAUSED BY ECONOMIC DURESS AND 15

24 THEREFORE, THE OWNER HAS NOT COMMITTED ANY BREACH ON THEIR PART 32 The term economic duress refers to pressure of an economic, commercial or financial nature that is similarly effective in procuring a contractual assent. 33 The best illustration to explain the concept of economic duress is highlighted in the case of Universe Tankships Inc. of Monrovia v International Transport Workers Federation (The Universe Sentinel) 39, the financial consequences of the blacklisting of a supertanker under a time charter were found to be so catastrophic as to amount to economic duress. As Lord Scarman put it: The classic case of duress is,..., not the lack of will to submit but the victim s intentional submission arising from the realisation that there is no other practical choice open to him : at The economic duress in that case vitiated the shipowner s consent to certain agreements made by it with the International Transport Worker Federation and payments made by it to the Federation An authoritative examination of economic duress was made by the Privy Council in Pao On v Lau Yiu Long. 42 The threat was to breach a contract. The Privy Council observed that there was nothing contrary to the principle in recognizing economic duress as a factor that may render a contract voidable, provided always that the basis 39 Universe Tankships Inc of Monrovia v International Transport Workers Federation (The Universe Sentinel) [1983] 1 AC 366; [1982] 2 All ER 67; [1982] 2 WLR 803; [1982] IRLR Ibid 41 Ibid 42 Pao On v Lau Yiu Long [1980] AC 614; [1979] 3 All ER 65; [1979] 3 WLR 435: see [100,410] 16

25 of that recognition is that the duress must amount to a coercion of will which vitiates consent. 43 When determining whether there has been that coercion of the will the court should examine such issues as whether: the person alleged to have been coerced protested, there was an alternative course of action such as an adequate legal remedy, open to him at the time of the alleged coercion, and after having entered into the arrangement, he took any action to avoid it This issue was dealt with in the recent case of Progress Bulk Carriers v. Tube City. 45 The vessel CENK K was chartered by owners to charterers on 2 April 2009 to carry shredded scrap from the Mississippi to China, under a sale contract made with the buyers. The laycan was April. However, on 7 April the owners then chartered the vessel to a third party. This made the original charter impossible to perform, and amounted to a repudiatory breach of the charter. On the 16 April the charterers discovered this fact, and faced a huge predicament. The market was declining and they needed the vessel. To arrange a substitute would require the buyer s consent which could involve receiving a reduced price. However, the owners promised to arrange a substitute vessel to load between the April and to cover charterers losses. The charterers relied on this promise, and did not seek to locate another carrier for the scrap. Charterers buyers agreed to a deferred shipment to 15 May but on terms of a US$ 8pmt discount to the price. Charterers were also incurring costs from the barges waiting to load the scrap in Mississippi. 43 Ibid 44 Ibid 45 Progress Bulk Carriers v. Tube City. IMS LLC [2012]. 17

26 37 On the 28 April, and despite exchanges between owners and charterers on the terms of settlement, owners made a take it or leave it offer involving owners providing a substitute ship only in return for a full waiver of all claims. The inconsistency with owner s previous position was self-evident, but the charterer considered it had no choice but to accept these terms under protest. 38 The charterer successfully applied to set aside the settlement agreement on the grounds of economic duress. It succeeded before an arbitration tribunal and the owners were unsuccessful in challenging that decision before the English court. 39 The Court recognized the distinction between economic duress and the normal rough and tumble of commercial life and bargaining in contracts. However, it stated that lawful but unethical acts can, in extreme circumstances, amount to economic duress. Two elements were required for duress; causation and illegitimate pressure. 46 Causation is applying the but for test. It can be illustrated this way; but for the illegitimate pressure, the innocent party would never have entered into the contract. In assessing illegitimate pressure, these factors are taken into account: whether guilty party acted in bad faith 2. whether there was any realistic practical alternative to the innocent party, but to submit to the pressure 3. whether protest was made at the time 4. whether the innocent party affirmed and sought to rely on the contract 40 The court affirmed the position that in the context of economic duress the illegitimacy need not involve an illegal or criminal act and was careful to point out that that it was 46 Ibid 47 Ibid 18

27 not seeking to extend the concept of economic duress to lawful act duress in a commercial context. The court felt this would introduce uncertainty in commercial bargaining and instances of economic duress would be rare. However, the court in assessing the illegitimacy of the act had the entitlement to assess the impropriety of the conduct by reference to it being morally or socially unacceptable in the commercial context, or that it involved a level of impropriety. 41 Applying the principle to the present case, the Owner s reason for not paying the bunkers was because of their limited fund. They could have paid the bunker suppliers if only the Charterer had paid the freight beforehand in which they did not. 48 This consequently became the very reason for the Owner for not taking the Protection & Indemnity Insurance or P&I Insurance as it will lead to an increment of payment rate, which the Owner cannot afford to pay. There were elements of causation in this case between the bunker suppliers and the Owner where but for the illegitimate pressure by the bunker suppliers, the Owner would never have entered into the contract of providing security between them and the suppliers which consequently amounted to the problems arising between the Owner and the Charterer. On the issue of whether there was any realistic practical alternative to the innocent party, but to submit to the pressure and whether protest was made at the time, the Owner were already in negotiations to see whether they can get a more sensible figure. 49 This impliedly showed that the alternative and protest made by the Owner about the limited fund they had during that time are among the factors of assessing illegitimate pressure as highlighted by the Court in the case of Progress Bulk Carriers v. Tube 48 Moot Problem, Moot Problem, 93 19

28 City. 50 Knowing the fact that the Owner will be unable to get the Protection & Indemnity Insurance, the bunker suppliers still, arrested the Reliable Butterfly from continuing her voyage. 42 The principle of economic duress had also been highlighted in the case of North Ocean Shipping v Hyundai Construction (The Atlantic Baron) 51. The defendants agreed to build a ship for the claimants for a certain price specified in US dollars. After entering into the contract the US dollar was devalued by 10%. The defendants threatened not to complete the contract unless the claimants paid an additional 10% on the contractually agreed price. The claimants had a valuable charter lined up so they agreed to pay the additional sums and did pay them without protest. 8 months after delivery of the ship the claimants brought an action to recover the additional sums paid. It was held that the contract was voidable for duress. However, since the claimants had left it so long in bringing their claim they had affirmed the contract and lost their right to rescind. E THE OWNER HAS NOT COMMITTED ANY REPUDIATORY BREACH 43 The terms of a contract have been traditionally classified as either conditions or warranties. 52 A condition is a basic term, non-performance of which would render performance of the remaining terms something substantially different from what was originally intended 53. The defaulting party who commits a breach of condition 50 Ibid 51 North Ocean Shipping v Hyundai Construction (The Atlantic Baron) [1979] QB John F Wilson, Carriage of Goods by Sea, Pearson Education Limited, (7 th edition,2010), p John F Wilson, Carriage of Goods by Sea, Pearson Education Limited, (7 th edition,2010), p

29 demonstrates a repudiatory breach. Repudiatory breach covers the fundamental breach; breach which has the result of depriving the innocent party of the total benefit of the agreed consideration; and fundamental term; a breach which has the result of depriving the innocent party of the substantial benefit of the agreed consideration 54.Conversely, a warranty is a minor term, breach of which can be adequately compensated for by the award of damages 55. In the current case, the ASBATANKVOY form, clause 1, part II is a warranty which provided that the vessel shall proceed as ordered to the loading port with reasonable despatch. Reliable Butterfly had proceeded to the loading port with reasonable despatch but because of the arrest, she could not make it and this led to the breach of the warranty as stated above. If the Tribunal were to find that the Owner had indeed committed a breach, we submit that the breach was not a repudiatory breach as a whole, but was merely a breach of the warranty. Therefore, it is again our concrete submission that there has not been any repudiatory breach on the part of the Owner. F THE APPROACH VOYAGE WAS DEEMED COMMENCED WHEN THE CHARTER WAS CONCLUDED 44 The adventure contemplated by a voyage charter involves four successive stages. The first stage is the loading voyage, viz the voyage of the chartered vessel from wherever she is at the date of the charter party to the place specified in it as the place of loading 56 ; it is the preliminary voyage to the specified port of loading If the 54 Delay and Detention,Philip Bush, 41 Mod. L. Rev , page John F Wilson, Carriage of Goods by Sea, Pearson Education Limited, (7 th edition,2010),page E. L. Oldendorff & Co. GmbH v Tradax Export S.A. (The Johanna Oldendorff) [1974] AC

30 charter party sets forth a fixed date on which the vessel is to be tendered at the designated port, the shipowner s first duty will be to proceed to that port by the date fixed, the performance of this undertaking being a condition precedent to the charterer's obligation to load. 58 It was further supported that the voyage definition includes loading time, preliminary voyage to a port to load and thence to some objective port would, in the event of loading at some intermediate point, be part of a voyage, as to the goods first loaded By virtue of Clause 4 (a) of Part II of the ASBATANKVOY form, the Charterer shall name the loading port or ports at least 24 hours prior to the vessel s readiness to sail from the last previous port of discharge.the charter party was agreed on the 19 November and the Charterer had named the load port as mentioned in the recap. According to the itinerary, the Reliable Butterfly at that time was heading from Orangeland to the bunker port, Redland before heading to Blueland (load port). Therefore, the preliminary or approach voyage had already been commenced on the 19 November as the vessel was on her way to the load port. G THE ARREST/MARITIME LIEN BY THE BUNKER SUPPLIER WAS NOT RECOGNISED BY ENGLISH LAW AND THIS LED TO AN UNLAWFUL ARREST A. ANDERSON,TIME AND VOYAGE CHARTERS: PROCEEDING TO LOADING PORT, LOADING, AND RELATED PROBLEMS CROMWELL 49 Tul. L. Rev Automatic Electric Telephone Co. v. Union Steamship Co 60 Moot problem, 46 22

31 46 Under English law, the following five categories of claim are recognised as giving rise to maritime liens; Damage done by a vessel; Salvage; Seamen's wages; Bottomry and respondentia; and Master's wages and disbursements 61. The maritime lien or arrest by the bunker supplier however does not fall under the 5 categories listed `above. Hence, the maritime lien by the bunker suppliers is not recognized under English law. 47 This principle was exemplified in the case of Bominflot Inc. v and Anr v The M/V Heinrich S 62, where a bunker supplied bunkers to the Defendant and later brought an action in the US District Court claiming the maritime lien from the court. However it was dismissed because English law applied as the standard terms and conditions of the charter party did not recognised such lien. This position was further affirmed in the case of The Fresco Angara 63 where the recognition of a right to enforce a maritime lien was a matter to be determined according to the lex fori. Under English law, there was no maritime lien for the supply of bunkers. Applying this principle to the current case, the charterparty provided that English law is applicable in the matter of arbitration. The third party bunker supplier had no right to arrest Reliable Butterfly and the arrest was unlawful. II ENTITLEMENT OF PAYMENT OF FREIGHT A THE CHARTERER HAS FAILED TO MAKE PAYMENT OF FREIGHT TO THE OWNER AND THUS, BREACHED THE CHARTER PARTY. 61 Nigel Meeson, Admiralty Jurisdiction & Practice, (3 rd ed, LLP 2003) at Bominflot Inc. and Anr v. The M/V Heinrich S (2006) 704 LMLN 4 63 Fesco Angara (Angara Maritime Ltd v OceanConnect UK Ltd [2011] 1 Lloyd s Rep 61 23

32 (a) The Owner is entitled for the 95% of the freight which was deemed to be earned in full, discountless, non-returnable upon lifting of subjects 48 The Owner is entitled to freight in the amount 0f US$ Clause 4 of the Owner s standard terms plainly stated that 95% of freight was deemed payable upon lifting of subjects. Even though the charter party had been terminated on 27 th November 64, the subjects were already lifted on 19 th November If a contracting party elects to treat the contract as no longer binding on him upon breach, it does not diminish the obligations provided by the contract before the termination. 66 Though the contract had been terminated, the claimant s right to the payment of freight had been unconditionally acquired before termination of the charter party and was not discharged by the termination 67. It is therefore sufficient to adduce that the Owner is entitled to the payment of freight. B CLAUSE 4 OF THE OWNER S STANDARD TERMS IS UNAMBIGUOUS AND HAS CLEARLY IMPOSED AN OBLIGATION TO THE CHARTERER FOR THE PAYMENT OF FREIGHT 49 The use of the words lifting of subjects had been clearly used as the conclusion of agreement between two parties as highlighted in the London Arbitration 18/06 (2006) 702 LMLN Moot problem, Moot problem, McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at Bank of Boston Connecticut v European Grain and Shipping Ltd; The Dominique [1989] 1 All ER London Arbitration 18/06 (2006) 702 LMLN 3 24

33 50 In London Arbitration 18/06 (2006) 702 LMLN 3, 69 the Tribunal considered the admitted misdescription by Owners of the vessels cubic capacity and the date on which the fixture had become binding. Owners initially described the vessel to Charterers during negotiations as having a grain capacity of 59,421 cbm. Negotiations headed to a close on 23 December with Charterers brokers sending a message setting out the agreed terms and providing sub chrs reconfirmation latest 1500 hours London time 24 Dec provided questionnaire and description page completed today. Charterers provided a blank questionnaire and description page. The latter expressly said on its face that it was to be fully incorporated into any resulting Charterparty. Upon return by Owners, that latter document stated the vessels grain capacity as 57, cbm, which Charterers failed to note. On 24 December, Charterers reconfirmed and subjects were lifted. Owners noted the error in the original description first and brought this to the Charterers attention. Because of that, the Charterers claimed loss of freight and made a deduction from hire. Owners brought a claim for the hire deducted on the basis that no fixture had been concluded until Charterers lifted subjects on 24 December and by that time, the Charterers had the correct grain capacity in the description page that superseded the previous formed part of the Charterparty. The Charterers contended that as the main terms had been agreed by on 23 December it was not open to Owners to thereafter change any of those. 51 Clause 4 of the Claimant s standard terms clearly works as the term imposing the obligation to pay freight on the Respondent which the Respondent has failed, to pay. 69 London Arbitration 18/06 (2006) 702 LMLN 3 25

34 III PRAYER OF RELIEF For the reasons set out above, the Claimant requests this Tribunal to: a) DECLARE that this Tribunal has jurisdiction to hear the merits of this dispute; b) DECLARE the cancellation as set out above; c) AWARD the sum of US$4,935, by way of freight or damages in the same amount; d) AWARD interest, costs and further of other relief as the Tribunal sees fit. 26