FOURTEENTH INTERNATIONAL MARITIME LAW ARBITRATION MOOT 2013

Transcription

1 FOURTEENTH INTERNATIONAL MARITIME LAW ARBITRATION MOOT 2013 THE UNIVERSITY OF HONG KONG Team 8 MEMORANDUM FOR THE CLAIMANT Megan CHEN Anthony LO Johnson NG Muran ZHU

2 TABLE OF CONTENTS LIST OF ABBREVIATIONS ii LIST OF AUTHORITIES iii SUMMARY OF ARGUMENTS 1 SUMMARY OF FACTS 1 LEGAL SUBMISSIONS 1 THE TRIBUNAL HAS JURISDICTION TO CONSIDER THE CLAIMS The Tribunal is competent to rule on its own jurisdiction There is a valid arbitration agreement The Tribunal has jurisdiction over the Claimant s Contract Claim The Tribunal has jurisdiction over the Claimant s Tort Claim 4 2 THE CLAIMANT HAS TITLE TO SUE The Bill of Lading is a ship s bill under the Charterparty The Claimant is the indorsee of the Bill of Lading The Claimant has and remains to have title to sue the Respondent in contract The Claimant has title to sue the Respondent in tort 6 3 THE RESPONDENT BREACHED THE CONTRACT OF CARRIAGE General The Respondent breached Article III r.1 of the HVR The Respondent breached Article III r.2 of the HVR The Respondent could not rely on Article IV r.2 of the HVR The Respondent breached the contract of carriage by deviating to Rotterdam The Respondent breached the contact of carriage by delivering the Cargo without presentation of the Bills of Lading 17 4 THE RESPONDENT COMMITTED THE TORT OF CONVERSION BY DISCHARGING THE CARGO TO BEATLES The Kuwait Airways test for conversion is satisfied Beatles indemnity does not exonerate the Respondent from tortious liability 19 5 CALCULATION OF DAMAGES General principles in contract and tort Mitigation An available market exists at Liverpool The relevant time for taking market price 21 2

3 5.5 Actual cost of replacement purchased in mitigation should be awarded The Claimant is entitled to the costs incurred in previous proceedings Summary 24 PRAYER FOR RELIEF 25 3

4 LIST OF ABBREVIATIONS Bills of Lading/ Bills Collectively the Congen Bills of Lading No. PG1/2/3/4 issued by the Respondent on 25 October 2008 Beatles Beatles Oils & Fats Ltd Cargo 4000mt of PFAD covered by the Bills of Lading Carrier Twilight Carriers Charterparty The voyage charterparty between Twilight Carriers (Respondent) and Beatles regarding the vessel Twilight Trader Claimant Aardvark Ltd Contract of Carriage The contract for the carriage by sea service of the Respondent as evidenced by the Bills of Lading Contract of Sale The sale of 4000mt of PFAD on CIF Liverpool terms by Beatles to the Claimant HVR / Hague-Visby Rules The Hague Rules as amended by the Brussels Protocol 1968 Respondent Twilight Carriers Vessel Twilight Trader 4

5 LIST OF AUTHORITIES Ordinances/Rules/Regulations Arbitration Act 1996 Carriage of Goods by Sea Act 1992 Hague-Visby Rules Sale of Goods Act 1979 Torts (Interference with Goods) Act 1977 Cases Aegean Sea [1998] 2 Lloyd s Rep 39 Ahmad v Mitsui OSK Lines Ltd (ARB ) [2005] FCA 731 Albacora SRL v Westcott & Laurence Line Ltd [1966] 2 Lloyd s Rep 53 Astro Vencedor Compania Naviera SA of Panama v Mabanaft GmbH (The Damianos) [1971] 2 QB 588 Banco de Portugal v Waterlow [1932] AC 452, 506 British Westinghouse Electric Co Ltd v Underground Electric Rys [1912] AC 673, 689. Carlos Federspiel v Charles Twigg & Co. Ltd [1957] 1 Lloyd s Rep. 240 De Franco v Commissioner of Police of the Metropolis, The Times, 8 May 1987 CA East West Corp v DKBS 1912 AF A/S [2003] 1 Lloyd s Rep 239 Evans & Reid v Cournouaille, (1921) 8 Ll. L. Rep. 76 Fiona Trust v Privalov [2008] 1 Lloyd s Rep. 254 Frenkel v MacAndrews & Co Ltd [1929] A.C. 545 G.E. Crippen & Associates Ltd v Vancouver Tug Boat Co Ltd [1971] 2 Lloyd s Rep. 207 General & Finance v Cooks Cars [1963] 1 WLR 644 (CA) at 649 Glyn v Margetson & Co [1893] A.C. 351 Gosse Millard v Canadian Government Merchant Marine Ltd [1927] 2 KB 432 Hammond v Bussey (1888) 20 Q.B.D. 79 CA Healy v Howlett & Sons [1917] 1 KB 337 Hussmann (Europe) Ltd v Al Ameen Development & Trade Co & Ors [2000] C.L.C IBL Ltd v Coussens [1991] 2 All ER 133 (CA) Kuwant Airways Corp v Iraqi Airways Corp (No. 4 and 5) [2002] UKHL 19; [2002] AC 883 Kwei Tek Chao v British Traders and Shippers Ltd [1954] 2 Q.B. 459 McFadden v Blue Star Line [1905] 1 K.B. 697 Maxine Footwear Co Ltd v Canadian Government Merchant Marine Ltd [1959] 2 Lloyd s Rep 105 Morris v CW Martin & Sons Ltd [1966] 1 Q.B. 716 Morton-Norwich Products v Intercen (No.2) [1981]F.S.R. 337 Motis Export Ltd v Dampskibsselkabet AF 1912 Aktiesekkab, [1999] 1 Lloyd s Rep. 837 Paterson SS Ltd v Canadian Co-operative Wheat Producers Ltd [1934] AC 538 5

6 Photo Production v Securicor [1980] AC 827 Pow v Davis (1861) 1B. & S. 220 Rolph v Crouch (1867) L.R. 3 Ex. 44 Russell v Niemann (1864) 17 C.B. (N.S.) 163 Rustal Trading Ltd v Gill & Duffus SA [2000] 1 Lloyd's Rep 14 SS Matheos v Louis Dreyfus & Co [1925] AC 654 Stag Line Ltd v Foscolo Mango & Co Ltd [1932] A.C. 328 Standard Chartered Bank v Dorchester LNG (2) Ltd [2013] EWHC 808 Steel v State Line SS Co (1877) 3 App. Cas. 72 The Arpad [1934] CA 189 The Future Express [1993] 2 Lloyd s Rep 524 The Iron Gippsland [1994] 1 Lloyd s Rep. 335 The Rewia [1991] 2 Lloyd s Rep 325 The Starsin [2003] 1 Lloyd s Rep 571 Thompson (WL) Ltd v Robinson (Gunmakers) Ltd [1955] Ch 117 Wincanton Ltd v P&O Trans European Ltd [2001] EWCA Civ 227 Textbooks Benjamin s Sale of Goods (8th ed, Thompson Sweet & Maxwell 2010) Clerk & Lindsell on Torts (6th ed, Sweet & Maxwell 2010) Coote, Exception Clauses (Sweet & Maxwell 1964) Green and Randall, The Tort of Conversion (Hart Publishing 2009) Lewison, The Interpretation of Contracts (5th ed, Sweet & Maxwell 2011) McGregor, McGregor on Damages (18th ed, Sweet & Maxwell 2011) Palmer, Palmer on Bailment (3 rd ed, Sweet & Maxwell 2009) Tetley, W, Marine Cargo Claims, 4 th edition, Blais (2008) Treitel and Reynolds, Carver on Bills of Lading (3rd ed, Thomson Sweet & Maxwell 2011) Cooke, Young, Taylor, Kimball, Martowski and Lambert, Voyage Charters (3rd ed, Informa 2007) Articles Cashmore, The legal nature of the doctrine of deviation [1989] JBL 492 Curwen, Title to sue in Conversion [2004] Conv. 308 Piracy and Armed Robbery against Ships in Waters off the Coast of Somalia, IMO, MSC.1/Circ.1233, 15 June 2007 Guidance to shipowners and ship operators, shipmasters and crews on preventing and suppressing acts of piracy and armed robbery against ships, IMO, MSC/Circ.623/Rev.3, 29 May 2002 Interim Guidance to private maritime security companies providing contracted armed security personnel on board ships in the High Risk Area, IMO, MSC.1/Circ.1443, 25 May

7 SUMMARY OF ARGUMENTS This memorandum seeks to establish the following: the Tribunal has jurisdiction to hear both the contract and tort claims; the Claimant has title to sue in both cases; the Respondent did breach the Contract of Carriage and committed tort of conversion; and the Claimant is entitled to the damages claimed. SUMMARY OF FACTS On 23 September 2008, the Claimant, Aardvark Limited, by a Contract of Sale purchased 4000 mt of Palm Fatty Acid Distillate (PFAD) (the Cargo ) from Beatles Oils & Fats Ltd ( Beatles ) at USD per mt CIF Merseyside. The Contract of Sale incorporated FOSFA 81 as conditions. On 12 September 2008, the Respondent, Twilight Carriers Inc., who is the owner of the Twilight Trader ( the Vessel ), sub-chartered the Vessel to Beatles. The Respondents issued Bills of Lading with Liverpool named as the discharge port, incorporating the Hague-Visby Rules and all the terms of the Charterparty. On 15 November 2008, Somali pirates hijacked the Vessel. It was subsequently released on 13 February, During captivity, the entire crews of twenty three men were confined, twenty four hours per day, to the bridge of the Vessel. In mid-january 2009, Beatles presented relevant shipping documents in respect of the cargo to the Claimant. The Claimant paid the full purchase price, and the Bills of Lading were endorsed to the Claimant. However, on 6 March 2009, the Claimant advised Beatles that they were in repudiatory breach of the sale contract in failing to insure the Cargo under the agreed terms. In reply, Beatles denied liability, stating 7

8 that the Claimant s previous constituted anticipatory breach. Beatles maintained that the Claimant had abandoned the cargo and any rights in relation to the Cargo. On 18 March 2009, Beatles asked the Claimant to return the Bills of Lading to Beatles. The Claimant did not do so. On 20 March 2009, the Claimant informed the Respondent that it was the lawful holder of the Bills of Lading and asked the Respondent not to discharge the Cargo to Beatles in Rotterdam. Between 20 and 22 March 2009, the Respondent discharged the Cargo in Rotterdam to Beatles against a letter of indemnity. On 23 March 2009, Beatles arrested the Cargo in Rotterdam as security for alleged claims against the Claimant. The Dutch Court rejected the Claimant s appeal. An order for selling the Cargo was granted by the District Court of Rotterdam on 24 July 2009 and the Cargo was sold on 25 August 2009 for USD 1,695,752.38, proceeds of which are held by the Dutch court. On the same day, the Claimant arrested the Vessel in Rotterdam as security for their claims against the Respondent. On 16 April 2009, the Claimant purchased 7000 mt PFAD from D&F Brokers Ltd in Liverpool at USD per mt. 8

9 1. THE TRIBUNAL HAS JURISDICTION TO CONSIDER THE CLAIMS 1.1 The Tribunal is competent to rule on its own jurisdiction Pursuant to section 30(1) of the Arbitration Act 1996, the Tribunal is competent to rule on its own substantive jurisdiction. 1.2 There is a valid arbitration agreement to which English Law applies There is an agreement that any dispute of the Contract of Carriage is to be submitted to London Arbitration, to which English law applies 1. This arbitration clause, being recorded in writing, satisfies the formality under sections 5 and 6 of the Arbitration Act The Tribunal has jurisdiction over the Claimant s Contract and Tort Claim The Claimant s Contract Claim concerns several breaches of the Contract of Carriage, which are naturally covered by the arbitration clause The Claimant claims for the tort of conversion. It was established in Fiona Trust 2 that an arbitration clause should be given a wide interpretation so as to include any dispute arising out of the relationship into which the parties have entered, unless clear language to the contrary is shown. The claim concerns the delivery of the Cargo to the wrong person, thus sufficiently connected with the contractual claim of non-delivery 3. The Claimant s tort claim falls within the arbitration clause. 1 Para (1) at the bank of the Bills of Lading incorporates the Arbitration Clause of the Charter Party. While Clause 31 of the Standard Vegoil Voy Form refers to arbitration by New York law, in an dated 12 September 2008, it was recorded that ENGLISH LAW TO APPLY. LONDON ARBITRATION 2 Fiona Trust v Privalov [2008] 1 Lloyd s Rep Astro Vencedor Compania Naviera SA of Panama v Mabanaft GmbH (The Damianos) [1971] 2 QB 588 9

10 1.3.3 In short, given the valid arbitration agreement between the Claimant and the Respondent, the Tribunal has jurisdiction over the Contract and Tort Claims. 2. THE CLAIMANT HAS TITLE TO SUE 2.1 The Bills of Lading are ship s bills under the Charterparty Each of the Bills of Lading was signed by Hawk Shipping Services (Malaysia) SDN BHD as Agent for the Master on the front. It follows that, pursuant to The Rewia 4 and The Starsin 5, unless the Respondent can prove otherwise, the Respondent is the contractual carrier under the Contract of Carriage. 2.2 The Claimant is the transferee of the Bills of Lading In or around mid-january 2009, each of the Bills of Lading were indorsed and delivered to the Claimant 6 as bearer bills. Section 5(2)(b) of the Carriage of Goods by Sea Act 1992 ( COGSA 1992 ) provides that a lawful holder of a bill of lading includes a person with possession of a bearer bill, [as a result of] any other transfer of the bill The Claimant received the four sets of bearer bills in or around mid-january 2009, in which the transferor (agent for Beatles) had the requisite intention to deliver and the Claimant had the relevant intention to receive the Bills under the Contract of Sale 7. The Claimant became a lawful holder of the 4 The Rewia [1991] 1 Lloyd s Rep 69, p72 5 The Starsin [2003] 1 Lloyd s Rep 571, p578 6 Facts, p.67: Claims Submission 7 Aegean Sea [1998] 2 Lloyd s Rep 39, p

11 Bills of Lading as the transferee in good faith The Claimant has and continues to have title to sue the Respondent in contract By becoming the lawful holder, the Claimant acquired the right of suit under the Contract of Carriage under section 2(1)(a) of the COGSA The Claimant purported to accept Beatles repudiatory breaches, namely, the non-conforming insurance policy and defective goods as a result of piracy, on 6 March and 16 March respectively 9, thereby bringing the Contract of Sale to an end. Beatles denied any breach on its part and insisted that the Claimant breached the Contract, which breach it accepted However, even though the Contract of Sale was terminated, the Claimant was still entitled to keep the Bills of lading. Under section 36 of the Sale of Goods Act 1979 ( SOGA 1979 ), a buyer does not need to return the rejected goods if he intimates to the seller that he refuses to accept them. By analogy, the Claimant does not need to make sure the physical transfer of the Bills to Beatles but could just make it available for the latter s collection The COGSA , changing the previous position, makes the criteria of becoming a lawful holder of a bill of lading and having the right of suit independent of the question of whether the lawful holder has the property in the cargo 12. In this case, the Claimant retained actual possession of the Bills of 8 Ahmad v Mitsui OSK Lines Ltd (ARB ) [2005] FCA Facts, p. 25 and Facts, p. 26 and Especially section 2 12 Standard Chartered Bank v Dorchester LNG (2) Ltd [2013] EWHC 808, para 38 & 52 11

12 Lading at all material times. Although the Claimant physically transferred the Bills to Johnson & Johnson in Rotterdam 13, it definitely retained control of the Bills 14. The elements under section 5(2)(b) of the COGSA 1992 were still satisfied. Section 2(5) of the 1992 Act has not operated to extinguish the Claimant s right of suit any time before the discharge of the Cargo to Beatles Even if, which is denied, the Claimant was not entitled to retain the Bills and should have returned it to Beatles, the Claimant still retains the right of suit. Although in this case the Claimant might be held to be holding the Bills as agent for Beatles, the East West Corp 15 case shows that it is the agent in possession of the Bills that has the right of suit. Accordingly, the Claimant is entitled to sue for the contractual breaches referred to in section The Claimant has title to sue the Respondent in tort It has been well settled that title to sue for the tort of conversion lies in the Claimant s superior possessory right over the Respondent s 16. It is not ownership, but possession (possessory right), that is necessary for establishing title to sue for the tort of conversion. Ownership per se is neither necessary nor sufficient 17. As for possession, it can be either the right to immediate possession 18 or actual possession. 13 Facts, p Para 6 of the Procedural Order No East West Corp v DKBS 1912 AF A/S [2003] 1 Lloyd s Rep 239, p The Tort of Conversion, p75; Clerk & Lindsell, 17-43; Palmer, Clerk & Lindsell, Green and Randall s view that constructive possession, legal possession and right to immediate possession are substantively synonymous is adopted here, see The Tort of Conversion, p86 12

13 2.4.2 The Claimant never had actual possession of the Cargo as it has not had any physical control over the Cargo 19. However, a bill of lading is regarded as the symbol of the goods, so that possession of the bill gives its possessor constructive possession of the goods 20 (emphasis added) From 3.3 above, the Claimant became and remained in possession of the Bills of Lading at all material times, and had constructive possession of the Cargo. The Claimant is thus the immediate bailor 21 while the Respondent is the bailee. As Palmer puts it, A person can occupy the position of bailor though he never has possession of the chattel before the bailee goes into possession.a superior possessory right will suffice for this purpose irrespective of prior possession. A carrier bailee owes a general duty not to convert the bailed goods 22, and should redeliver the chattel in original form or altered form by instruction 23. Thus the Respondent s possessory interest in the Cargo is subordinate to that of the Claimant However, under section 8(1) of the Torts (Interference with Goods) Act 1977, the Respondent is entitled to raise the jus tertii defence, i.e. some named third party having superior possessory title than the Claimant at the time of the conversion 25. Hence, Beatles might be a possible named third party. 19 Actual possession is defined as manual (as opposed to cognitive) control over an asset and the right to use that asset at least temporarily, see The Tort of Conversion, p88 20 Carver, Palmer, 2-015; see also Sonicare v EAFT [1997] 2 Lloyd s Rep 48; Transcontainer Express Ltd v Custodian Security Ltd [1988] 1 Lloyd s Rep East West Corp v DKBS 1912 AF A/S [2003] 1 Lloyd s Rep 239, p Wincanton Ltd v P&O Trans European Ltd [2001] C.L.C 962, p Morris v CW Martin & Sons Ltd [1966] 1 Q.B. 716, p De Franco v Commissioner of Police of the Metropolis, The Times, 8 May 1987 CA 13

14 2.4.5 It is submitted however that Beatles does not have a superior title to that of the Claimant. In this respect the issue of property might indicate possessory interests 26. In this case, the Claimant obtained property of the Cargo upon payment of purchase price either because at that time the contracted 4000mt of PFAD was ascertained 27 and had been unconditionally appropriated to the Contract of Sale, in accordance with section 16 and section 18 r.5(1)(2) of the SOGA 1979, or the Claimant was a pro rata owner of the bulk on board, pursuant to section 20A of the SOGA 1979 or clause 15 of FOSFA Pursuant to Kwei Tek Chao 28, the property in the Cargo revested in Beatles at the time of the Claimant s rejection of the Cargo. However, the Bills give the lawful holder constructive possession 29. Cases decided the contrary can be distinguished. East West Corp can be distinguished since it was decided on the fact that the Chilean banks were agents at the outset solely for the purpose of collecting the price; whereas the Claimant obtained the Bills of Lading as a buyer who paid for the Cargo under the Contract of Sale. Unlike the bank in The Future Express, which only obtained the relevant bill of lading after the goods were discharged to a third party, the Claimant here obtained the Bills when the goods were still in transit. The Claimant retained constructive possession of the Cargo The Claimant is the lawful holder of the Bills and had the right of immediate possession of the Cargo. 26 East West Corp v DKBS 1912 AF A/S [2003] 1 Lloyd s Rep 239, p From the Bills of Lading, the PFAD was stored in the same ship s tanks, i.e. 2P/S, 7P/S, SL P/S. While the vessel carried a separate cargo of PFAD, as can be seen in the report produced by SURVEYS INC dated 9 June 2009, it was stored in another ship s tank. The PFAD to be sold to the Claimant was already ascertained in load-port. 28 Kwei Tek Chao v British Traders and Shippers Ltd [1954] 2 Q.B. 459, p Carver,

15 It is entitled to sue the Respondent for breach of the Contract of Carriage and tort of conversion. 3. THE RESPONDENT BREACHED THE CONTRACT OF CARRIAGE 3.1 General The Respondent committed to following breaches under the Contract of Carriage and should be liable to compensate the Claimant for the loss or damage to the Cargo: (1) failing to provide proper and careful care in breach of Article III r.2 of the Hague-Visby Rules ( HVR ), (2) failing to exercise due diligence to ensure the Vessel s unseaworthiness in breach of Article III r.1 of the HVR, (3) unreasonably deviating from the contracted route, and (4) delivering the Cargo to Beatles without presentation of the Bills of Lading. 3.2 The Respondent breached Article III r.1 of the HVR The Respondent has a overriding duty in respect of the Vessel s seaworthiness Art III, r.1 of the HVR provides that a carrier should exercise due diligence to make the ship seaworthy 30 ; properly man, equip and supply the ship 31 ; and make the holds, refrigerating and cool chambers, and all other parts of the ship in which goods are carried, fit and safe for their reception, carriage and preservation 32. In other words, the Respondent undertook a warranty of seaworthiness to furnish a ship that was fit to encounter the ordinary perils of the voyage, and to make it suitable for carrying the cargo contemplated Article III r.1(a), Hague Visby Rules 31 Article III r.1(b), Hague Visby Rules 32 Article III r.1(c), Hague Visby Rules 33 McFadden v Blue Star Line [1905] 1 K.B. 697 at

16 3.2.3 By virtue of Art. IV r.1 of the HVR, the burden of proving the exercise of due diligence is on the Respondent if it seeks to rely on any Art. IV HVR exemptions The Vessel was not cargoworthy The Vessel must attain the degree of fitness which an ordinary careful and prudent owner would require his vessel to have at the commencement of her voyage having regard to all the probable circumstances of it 34. As there was a worrying increase of acts of piracy against ships reported in the waters off the coast of Somalia since , the warranty of seaworthiness thus cargoworthiness required the Respondent to adopt sufficient anti-piracy measures according to the guidelines issued by the International Maritime Organization ( IMO ), including but not limited to radio watchkeeping, routing away from areas where attacks are known to have taken place 36, and even use of privately contracted armed security personnel (PCASP) on board ships 37. The Respondent failed to do so The Vessel was boarded by Somali pirates and was ordered to sail to the Somali coast on 15 November The Respondent s only anti-piracy measure was the anti-piracy watch 38. Save for that, there is no evidence with regard to the sufficiency of equipment and the competence of the crew against piracy, inter alias, the measures under the IMO guidelines. 34 Article III r.1, Hague Visby Rules 35 Piracy and Armed Robbery against Ships in Waters off the Coast of Somalia, IMO, MSC.1/Circ.1233, 15 June Guidance to shipowners and ship operators, shipmasters and crews on preventing and suppressing acts of piracy and armed robbery against ships, IMO, MSC/Circ.623/Rev.3, 29 May Interim Guidance to private maritime security companies providing contracted armed security personnel on board ships in the High Risk Area, IMO, MSC.1/Circ.1443, 25 May Facts, P.41: Inspection Report by Aspinall Lewis International, 19 March 2009 at para

17 3.2.7 The Respondent s non-compliance with the IMO guidelines constituted breach of duty under Art. III r.1 of the HVR. Hence, the Respondent cannot rely on any of the Art. IV exceptions. 3.3 The Respondent breached Article III r.2 of the Hague-Visby Rules The Respondent was under a duty to properly and carefully care for the Cargo, including but not limited to handling, carrying and keeping it 39. Carefully means the absence of negligence 40, whereas properly requires that, in addition to taking care of the Cargo, the crew on the Vessel has to demonstrate the exercise of reasonable skills 41 and adoption of a sound system in light of the knowledge which the Carrier has or ought to have about the nature of the goods During the hijack period, the Respondent took no cargo care measures to avoid any contamination and deterioration in the quality of the Cargo The contamination of the Cargo, evidenced by the arsenic levels found in tanks 3 P&S and 7 P&S, which were 50 times higher than those for the remainder of the tanks 43, suggests that contaminants were introduced into the tanks during the voyage. As per the Master and Chief Officer of the Vessel, there was no visible sign of the hatches having been opened during the period of captivity 44, hence it is unlikely that the contaminant was introduced by the pirates. The contamination could only have 39 Article III, r.2, Hague-Visby Rules 40 Gosse Millard v Canadian Government Merchant Marine Ltd [1927] 2 KB 432, at 434 per Wright J 41 The Iron Gippsland [1994] 1 Lloyd s Rep. 335 (where carrier should have known special features of cargo, no defence that shipper s instruction did not deal with them) 42 Albacora SRL v Westcott & Laurence Line Ltd [1966] 2 Lloyd s Rep 53, at 58 per Lord Reid 43 Facts, P.38: Analysis by Thomas, Cropper, Benedict, 18 March 2009, at para 4 44 Facts, P.41: Inspection Report by Aspinall Lewis International, 19 March 2009, at para

18 been caused by the Respondent The carrying instructions were to heat the Cargo during the voyage and in the last week prior to arrival 45, however heating was not applied to the Cargo during the period of captivity or during the subsequent voyage to Fujairah 46. As a result of the Respondent s failure to heat the Cargo as instructed, the quality of the Cargo suffered from the fluctuating temperature As damage was caused to the Cargo, the Claimant has discharged its burden of proving a prima facie case that the Respondent did not fulfill its duties under Art. III r. 2 of the HVR. 3.4 The Respondent could not rely on Article IV r.2 of the Hague-Visby Rules The duty under Art. III r.2 may be displaced or modified by some provision of Article IV 48. However, a shipowner who was negligent cannot avail himself of excepted perils of the sea 49, which renders Art. IV of the HVR to be inoperative or operative only in part The burden is on the Respondent to bring itself within the defence (The Starsin 50 ) by proving the damage was caused by one of the Art. IV r.2 excepted perils rather than its failure to discharge his Art. III r.2 responsibilities Even if, which is denied, the Respondent is able to bring itself within the Art. IV r.2 exceptions, the Respondent cannot rely on them as the Cargo damage was caused by the Vessel s uncargoworthiness 45 Facts, P.41: Inspection Report by Aspinall Lewis International, 19 March 2009, at para Ibid, at para Facts P.51: Surveyors Report by Dutch Surveyors B.V 48 Ibid, at Steel v State Line SS Co (1877) 3 App. Cas. 72 at [2003] UKHL 12, at 138 per Lord Hobhouse 18

19 under Art. III r.1 of HVR Art. IV r.2(e) of the HVR Act of war This exception includes acts during a war which are done against the ship of a neutral state, or such acts where there is no formal state of hostilities but would in a common sense way be called a war 52. There was no war declared by or against the Somali pirates. It did not involve any acts that could be called a war. Therefore the damage of Cargo was not within this excepted peril sought to be relied on by the Respondent Art. IV r.2(f) of the HVR Act of public enemies This exception operates as a non-monarchical version of the common law Queen s enemies exception, which does not apply to pirates If, which is denied, the adoption of the term Public enemies denotes a broader interpretation so as to cover piratical events, the exception is operative only if without the negligence of the Respondent in incurring the risk 54. As mentioned above at 3.2.5, the Respondent failed to comply with guidelines issued by the IMO Maxine Footwear Co Ltd v Canadian Government Merchant Marine Ltd [1959] 2 Lloyd s Rep 105, at Carver, at Russell v Niemann (1864) 17 C.B. (N.S.) 163 at 171, cited in Carver, at Carver, at Guidance to shipowners and ship operators, shipmasters and crews on preventing and suppressing acts of piracy and armed robbery against ships, IMO, MSC/Circ.623/Rev.3, 29 May

20 3.4.9 Art. IV r.2(q) of the HVR Catch-all Provision This clause is invoked only where other exceptions do not apply 56. The burden of proof is expressly put on the person claiming the benefit of this exception, i.e. the Respondent. The Respondent must not only showed no fault or negligence on its part, but also what other cause was responsible Unexplained loss or damage shall not suffice for entitling the Respondent to invoke r.2(q). The quality of the Cargo suffered from contamination and repeated heating and cooling down, as submitted at , was due to the Respondent s negligence. Unless the Respondent can prove there was no fault or negligence on its part, and to show the other responsible cause(s), the Respondent should not be entitled to rely on the Art. IV, r.2(q) defence In short, the deterioration in quality of the Cargo was caused by the Respondent s breach of duty under Art. III r.1 and r.2 of the HVR, and that the Respondent should not be entitled to rely on the exceptions under Art. IV, r.2(e), (f) and (q). Therefore the Respondent should be liable to compensate for the loss suffered by the Claimant from the damage of Cargo. 3.5 The Respondent breached the Bills of Lading by deviating to Rotterdam The Respondent deviated to Rotterdam instead of honouring the terms of the Bills of Lading by sailing to Liverpool. The legitimacy of the deviation would affect the assessment of damages as to whether the price at Rotterdam or at Liverpool should be adopted Deviation has been defined as an intentional and unreasonable change in the geographic route of the 56 G.E. Crippen & Associates Ltd v Vancouver Tug Boat Co Ltd [1971] 2 Lloyd s Rep Paterson SS Ltd v Canadian Co-operative Wheat Producers Ltd [1934] AC 538, at

21 voyage as constructed 58, and it is the Respondent s implied obligation that the Vessel will not deviate from the contract voyage. By not delivering the Cargo to Liverpool, the contracted port of discharge, the Respondent deliberately deviated from the contract voyage under the Bills The Respondent s deviation was not justifiable Under Art IV, r.4 of the HVR, the carrier is not liable for any resulted loss or damage if the deviation was in saving or attempting to save life or property at sea or is a reasonable deviation. Lord Atkin provided a test of reasonable deviation in Stag Line 59 : what departure from the contract voyage might a prudent person controlling the voyage at the time make and maintain, having in mind all the relevant circumstances existing at the time, including the terms of the contract and the interests of all parties concerned, but without obligation to consider the interests of any one as conclusive The Respondent failed to consider the interest of the Claimant, the legal holder of the Bills and owner of the Cargo, and acted in breach of the contract The Respondent shall not be protected by the liberty clause The Respondent has sought to rely on the liberty clause 60, which allowed the Respondent to have the vessel call and discharge the cargo at another or substituted port declared or requested by the charterer, on the condition that the discharge of cargo at the designated port of discharge would give rise to delay or disadvantage to or loss of the vessel or any part of her cargo Tetley, W, Marine Cargo Claims, 4 th edition, Blais (2008), at p Stag Line Ltd v Foscolo Mango & Co Ltd [1932] A.C. 328 at Facts, P.71: Defence Submissions, at para 1 61 Facts, P.11: Tanker Voyage Charter Party, cl

22 3.5.8 The deviation should not be covered by the liberty clause. Since there was no prohibition against importing PFAD, even if non-gmq, into the United Kingdom, as evidenced by the presence of available markets for both GMQ and non-gmq PFAD at Liverpool 62, the Cargo could have been discharged at Liverpool without any delay, disadvantage or loss caused to the Respondent, thus the deviation was outside the scope of the liberty clause In light of the potential far-reaching effect of liberty clauses, the courts apply the principle of contra proferentem and where possible give them an extremely restricted interpretation 63. The essence of the interpretation of such clause is its consistency with the voyage contemplated. In Frenkel v MacAndrews & Co Ltd 64, a liberty to deviate was held to be subordinate to the described voyage and cannot frustrate it. The Respondent, by discharging the Cargo at Rotterdam, went beyond the liberty allowed as the discharge was inconsistent with the contemplated voyage The Claimant did not agree to the Cargo being delivered in Rotterdam The Respondent s allegation that the Claimant agreed to the Cargo being delivered in Rotterdam and not Liverpool 65 is denied. On 20 th March 2009, the Claimant wrote a letter to the Respondent notifying it that the Claimant was the lawful holder of the Bills of Lading, and that the Claimant did not authorize Beatles to discharge the Cargo in Rotterdam 66. In addition, the sent from the 62 Facts, P.58: Single Joint Expert Report, at para C - F 63 Wilson, J, Carriage of Goods by Sea, 7 th Edition, Pearson (2010), at p [1929] A.C. 545 at Facts, p. 73: Defence Submissions, at para 10(2) 66 Facts, p. 36: Letter from Aardvark to Owners of Twilight Trader 22

23 Claimant to Beatles on 20 th March 2009 at 16:01 communicated the Claimant s intention to take the Cargo in Liverpool As the Respondent s deviation was not justified, the PFAD price at Liverpool as the designated discharge port should be used for assessing damages. 3.6 The Respondent breached the contact of carriage by delivering the Cargo without presentation of the Bills of Lading By delivering the Cargo to Beatles without presentation of the Bills of Lading, the Respondent breached its duty to deliver the Cargo owed to the Claimant, the lawful holder of the Bills, and is liable for mis-delivery The essence of a Contract of Carriage is that a shipowner is both entitled and bound to deliver the goods against production of an original bill of lading, provided that he has no notice of any other claim or better title 67. It is the Respondent s sole duty to perform the Contract of Carriage, i.e. to deliver the Cargo to the Claimant at Liverpool, the named port of discharge. The Respondent failed to fulfill its duty under the Contract of Carriage to ensure that the ship would not give delivery of the goods until the Bill of Lading, with the shipper s endorsement upon it, was presented to the Master The Respondent s mis-delivery of the Cargo constituted a breach of the Bill, and the Claimant should be entitled to damages as assessed below at section Motis Export Ltd v Dampskibsselkabet AF 1912 Aktiesekkab, [1999] 1 Lloyd s Rep. 837, at Evans & Reid v Cournouaille, (1921) 8 Ll. L. Rep. 76, per Hill J at 77 23

24 4. THE RESPONDENT COMMITTED THE TORT OF CONVERSION BY DISCHARGING THE CARGO TO BEATLES 4.1 The Kuwait Airways test for conversion is satisfied The Claimant has an alternative claim in the tort of conversion, which is a commonly pleaded in conjunction with non-delivery of goods The three elements of the tort of conversion are laid down in Kuwait Airways Corp v Iraqi Airways Corp (No. 4 and 5) 70. The nature of the duty is absolute and liability is strict, such that a party will remain liable notwithstanding that the mis-delivery was innocent Discharging the Cargo to Beatles satisfied the first limb because Beatles possessory right was inferior to that of the Claimant s, who had the right to immediate possession as the holder of the Bill of Lading, as established in section Concerning the second limb, the Respondent s deliberately discharged the Cargo at Rotterdam under Beatles instructions. It was not an accidental act. The Respondents were clearly aware of the Claimant s superior possessory right over the Cargo judging from the letter dated 20 March 2009 from the Claimant to the Respondent The Arpad [1934] CA [2002] UKHL 19; [2002] AC 883: First, the Respondent s conduct must be inconsistent with the rights of the person entitled to possession. Second, the conduct must be deliberate, not accidental. Third, the conduct must be so extensive an encroachment on the rights of the owner as to exclude him from the use and possession of the goods. 71 Motis case: carrier liable even when it delivered against what appeared to be an original bill of lading, which turned out to be a forgery. (not exactly the same facts, but principle still applicable) 72 Facts, p

25 4.1.5 The third limb is satisfied by the physical delivery of the cargo to a party not entitled to immediate possession Beatles indemnity does not exonerate the Respondent from tortious liability As long as the Claimant establishes title to sue in tort, the indemnity does not exonerate the Respondent from liability because it is an arrangement between Beatles and the Respondent which does not affect legal relations between the Claimant and the Respondent. 5. CALCULATION OF DAMAGES 5.1 General principles in contract and tort Contractual damages should place the Claimant in the same financial position as if the contract had been performed. 74 Art IV r. 5(b) of the HVR states that damages should reflect the market price of the goods at the place and time at which the goods are discharged from the ship in accordance with the contract or should have been so discharged Damages in tort are to award just compensation for the loss suffered by the Claimant. 75 The prima facie measure of damages in conversion is the market value of the converted asset at the date of conversion Baughen, S. Bailment or Conversion? Misdelivery claims against non-contractual carriers. LMCLQ (update citation) 74 The Texaco Melbourne [1994] 1 Lloyd s Rep Kuwait Airways Corp v Iraqi Airways Corp (No. 4 and 5) [2002] UKHL General & Finance v Cooks Cars [1963] 1 WLR 644 (CA) at

26 5.2 General principles of mitigation The Claimant is not under any obligation to do anything in mitigation other than in the ordinary course of business 77 and the standard is not a high one since the Respondent is the wrongdoer. The Claimant who took reasonable steps to mitigate will not be disentitled to recover costs of such measures merely because the Respondent can suggest that other measures less burdensome to him might have been taken An available market exists at Liverpool The Claimant submits that the relevant market to be considered Liverpool, which is the stipulated port of discharge in the Bill of Lading, and not Rotterdam. There was an available market from the Claimant s perspective as there was a sufficient number of sellers to meet readily all demands from prospective buyers. 79 This claim is supported by the Single Joint Expert Report dated 20 October Although there did not exist a daily supply of GMQ PFAD, the House of Lords accepted that there could be an available market from the buyer s perspective when he could buy in the cargo in small quantities separately spread over a period. 81 Here, the Claimant purchased substitutes on 25 March 2009 and subsequently 7,000 mt on 16 April These successive purchases may be said to cumulatively form the available market, which reflects the market value on which damages are 77 British Westinghouse Electric Co Ltd v Underground Electric Rys [1912] AC 673, Banco de Portugal v Waterlow [1932] AC 452, Thompson (WL) Ltd v Robinson (Gunmakers) Ltd [1955] Ch Facts, p. 56: Single Joint Expert Report 81 Garnac Grain Co Inc v HMF Faure and Fairclough Ltd [1968] AC 1130 at

27 assessed. 5.4 The relevant time for taking market price That there was an available market on the date of breach does not automatically oblige the Court to take the same date as the date of taking market price. It was held in IBL Ltd v Coussens 82 that it is neither possible nor appropriate to attempt to lay down any rule which is intended to be of universal application as to the date by reference to which the value of goods is to be assessed. 83 The Court is free to select whatever date for assessment of the Claimant s loss that is most apt to provide just compensation for the Claimant. 84 The market price of GMQ PFAD at the date of conversion, 20 March 2009, was USD 440 per mt, but the Claimant actually spent USD per mt to purchase substitutes on 16 April It is submitted that the latter date should be taken to provide the Claimant adequate and just compensation Actual cost of replacement of Cargo in mitigation should be awarded The Claimant purchased substitutes within a month after the date of breach. Where a Claimant acts to purchase a replacement asset within a reasonable time of the conversion, and the market value of the asset has increased in the meantime, his aggregate recovery is likely to include the amount of such an increase. Given that GMQ PFAD does not have a daily market 86, and that finding a willing and able 82 [1991] 2 All ER 133 (CA) 83 Ibid at 139j 84 Green and Randall, The Tort of Conversion (Hart Publishing 2009) p Thompson (WL) Ltd v Robinson (Gunmakers) Ltd [1955] Ch See section

28 supplier for 4000 mt of PFAD would be difficult, it was not unreasonable that the Claimant had to spend a month searching for the ideal supplier. Therefore, it is reasonable for the Court to award USD per mt as damages to adequately compensate the Claimant. 5.6 The Claimant is entitled to the costs incurred in previous proceedings The Claimant claims as damages from the Respondent the Dutch Court fees and legal fees incurred in the Dutch proceedings between the Claimant and Beatles, who is a third party to the present proceeding Since the Claimant s appeal to Court of Appeal in Rotterdam was unsuccessful, the Claimant was ordered to pay for the cost of both proceedings, including lawyers fees incurred by the opponent, Beatles. It was established in Hammond v Bussey 87 that costs in such actions are recoverable as damages subject to the rules of remoteness of damage. The test of remoteness presents three hurdles First hurdle: contemplation of the parties in contract and reasonable foreseeability in tort The question in the case of breach of contract is whether it was in the contemplation of the parties that the Claimant would become involved in a legal action with a third party, i.e. Beatles. In tort, it was established in Morton-Norwich Products v Intercen (No.2) 88 that is necessary for the Claimant to show that the Respondent could reasonably have foreseen that the Claimant might become involved in legal proceedings with a third party. Litigation between the Claimant and Beatles is reasonably foreseeable, and therefore ought to be within the contemplation of the parties to this dispute, when the 87 (1888) 20 Q.B.D. 79 CA 88 [1981]F.S.R

29 Respondent delivered goods without the presentation of bill of lading. Hence, the first hurdle is overcome Second hurdle: reasonableness of defending or bringing the previous proceedings In order to pass the remoteness test, the Claimant must have acted reasonably in having decided to defend the action or prosecution brought against him. An unsuccessful defence in previous proceedings was held reasonable in Hammond v Bussey 89 and Rolph v Crouch 90. Although the Claimant s appeal was rejected by the Court of Appeal in Rotterdam, Beatles initiated the proceeding at the District Court of Rotterdam. Therefore, it is reasonable for the Claimant to answer the claim and appeal to the Court of Appeal after it received an unfavorable decision from the District Court. Hence, the second hurdle is overcome Third hurdle: causation If the costs would have been incurred by the Claimant even if the Respondent had not committed a tort or breach of contract against him, he cannot claim damages in respect of them from the Respondent. 91 The Claimant in the present case would not have incurred the costs of the Dutch proceedings if the Respondent had not committed conversion or breached the contract of carriage because Beatles would not be able to issue an application for an order for sale if the Respondent had not sent the Cargo to Rotterdam. Hence, the third hurdle is overcome. 89 (1888) 20 Q.B.D. 79 CA 90 (1867) L.R. 3 Ex Pow v Davis (1861) 1B. & S

30 5.6.9 Since the three hurdles presented by the remoteness test have been overcome, it is submitted that the Claimant is entitled to the Dutch Court fees of USD 138, and legal fees incurred in the Dutch proceedings in the sum of USD107, Summary In conclusion, the Claimant claims (i) USD 2,090,000; (ii) the Court fees of USD 138, and (iii) legal fees in respect of the Court proceedings of USD 107,

31 PRAYER FOR RELIEF For the reasons submitted above, the Claimant requests this Arbitral Tribunal to: DECLARE that it has jurisdiction to hear this dispute; And ADJUDGE that the Claimant has title to sue in both contract and tort; ADJUDGE that the Respondent breached the Contract of Carriage; ADJUDGE that the Respondent committed the tort of conversion; And therefore, AWARD the Claimant appropriate amounts for - (i) Damages calculated at replacement price of USD per mt (USD2,090,000); and (ii) Court fees (USD 138,843.14); and (iii) Legal fees in respect of the Court proceedings (USD 107,913.12); and (iv) Interest on a compound basis pursuant to s.49 of the Arbitration Act 1996; and (v) Costs with compound interest on costs. 31