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 RESPONDENT Megan CHEN Anthony LO Johnson NG Muran ZHU

2 TABLE OF CONTENTS LIST OF ABBREVIATIONS i LIST OF AUTHORITIES ii SUMMARY OF ARGUMENTS 1 SUMMARY OF FACTS 1 LEGAL SUBMISSIONS 1 THE TRIBUNAL HAS NO JURISDICTION TO CONSIDER THE CLAIMS The Tribunal is competent to rule on its own jurisdiction The Claimant is not entitled to enforce any arbitration clause 3 2 THE CLAIMANT DOES NOT HAVE TITLE TO SUE The Bill of Lading is a ship s bill under the Charter Party The Claimant is not a lawful holder of the Bills of Lading The Claimant does not have right of suit under the Contract of Carriage The Claimant does not have title to sue the Respondent in tort Summary 9 3 THE RESPONDENT DID NOT BREACH THE CONTRACT OF CARRIAGE General The Respondent fulfilled its duty under Article III r.2 of HVR The Respondent is entitled to rely on Article IV r.2 of the HVR The Respondent fulfilled its duty under Article III r.1 of the HVR The Respondent s deviation to Rotterdam was justified The Respondent did not mis-deliver the Cargo Contractual defences under the Charterparty 18 4 THE RESPONDENT DID NOT COMMIT CONVERSION OF CARGO The Kuwait test for the tort of conversion The Claimant s lack of title to sue in tort means there is no conversion Conclusion 19 5 CALCULATION OF DAMAGES Calculation of damages if the Claimant establishes title to sue The Claimant is not entitled to damages of USD per mt even if there the 21 Respondent breached Art. III of the HVR 5.3 The Claimant is not entitled to damages of USD per mt even if the Respondent committed conversion 22 2

3 5.4 The Claimant is not entitled to court fees of USD138, and legal fees of USD 107, 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 GMQ 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 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 [1953] 1 WLR 644 (CA) Glyn v Margetson & Co [1893] A.C. 351 Gosse Millard v Canadian Government Merchant Marine Ltd [1927] 2 KB 432 Great China Metal Industries Co. Ltd v. Malaysian International Shipping Corporation Berhad, (The Bunga Seroja ) (1996) 441 LMLN 2 Hammond v Bussey (1888) 20 Q.B.D. 79 CA Healy v Howlett & Sons [1917] 1 KB 337 Heugh v L&NW Ry Co (1870) L.R. 5 Ex. 51 Hussmann (Europe) Ltd v Al Ameen Development & Trade Co & Ors [2000] C.L.C J L Lyons & Co Ltd v May and Baker Ltd [1923] 1 K.B. 685 Kuwait 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 Milan Nigeria Ltd v Angeliki B Maritime Co [2011] EWHC 892 (Comm.) 5

6 Morris v CW Martin & Sons Ltd [1966] 1 Q.B. 716 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 Photo Production v Securicor [1980] AC 827 Russell v Niemann (1864) 17 C.B. (N.S.) 163 Rustal Trading Ltd v Gill & Duffus SA [2000] 1 Lloyd's Rep 14 Short v Kalloway (1839) 11A. & E. 29 at 31. 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 Standard Chartered Bank v Pakistan National Shipping Corp [2001] 1 All ER (Comm) 822 CA Steel v State Line SS Co (1877) 3 App. Cas. 72 Sze Hai Tong Bank Ltd v Rambler Cycle Co Ltd [1959] AC 576 The Arpad [1934] CA 189 The Athenian Harmony [1998] 2 Lloyd s Report 410 The Fiona [1993] 1 Lloyd s Rep 257 The Future Express [1993] 2 Lloyd s Rep 524 The Giovanna [1999] 1 Lloyd's Rep. 870 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 Trafigura Beheer BV v Mediterranean Shipping Co (The MSC Amsterdam) [2007] 2 Lloyd s Rep 622 Vogan v Oulton L.T.384 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) Chitty and Beale, Chitty on Contract (31 st ed, Sweet & Maxwell 2012) 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) 6

7 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

8 SUMMARY OF ARGUMENTS This memorandum will seek to establish the following: the Arbitral Tribunal does not have jurisdiction to hear either the contract or tort claims, the Claimant does not have title to sue in contract or tort, the Respondent did not breach the Contract of Carriage or commit the tort of conversion, and the Respondent is not liable to pay any damages to the Claimant. 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 ( HVR ) 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 8

9 the agreed terms. In reply, Beatles denied liability, stating 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 produced by Beatles. 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.. 9

10 1. THE TRIBUNAL DOES NOT HAVE 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, unless the parties agree otherwise, the Tribunal is competent to rule on its own substantive jurisdiction. 1.2 The Claimant is not entitled to enforce any arbitration clause There was an agreement to go for London Arbitration and apply English Law 1, which was incorporated into the Contract of Carriage under the Bills of Lading 2. However, as will be explained in section 2.2 below, since the Claimant is no longer the lawful holder of the Bills of Lading, and is not entitled to enforce the terms of the Contract of Carriage, including the arbitration clause. As will be seen in section 2.4 below, since the Claimant did not have sufficient possessory interest to sue in tort, Tribunal has no jurisdiction over the tort claim. 2. THE CLAIMANT DOES NOT HAVE TITLE TO SUE 2.1 The Bill of Lading is a ship s bill under the Charter Party Each of the Bills of Lading was signed for the Master. It is admitted that, pursuant to The Rewia 3 and The Starsin 4, the Respondent is the contractual carrier under the Contract of 1 Recorded in an dated 12 September 2008, from John Walker of Walker Brokers to the Claimant that ENGLISH LAW TO APPLY. LONDON ARBITRATION see p. 3-4 of the Facts 2 Paragraph (1) of the Conditions of Carriage on p. 2 of the each of the Bills of Lading 3 The Rewia [1991] 1 Lloyd s Rep 69, p72 4 The Starsin [2003] 1 Lloyd s Rep 571, p578 10

11 Carriage evidenced by the Bills of Lading. 2.2 The Claimant is not a lawful holder of the Bills of Lading It is admitted that in or around mid-january 2009, each of the Bills of Lading were indorsed and delivered as bearer bills to the Claimant 5. At this point, pursuant to section 5(2)(b) of the Carriage of Goods by Sea Act 1992, the Claimant became the transferee and thus lawful holder of the Bills of Lading However, the Claimant purported to accept Beatles repudiatory breaches, namely, the non-conforming insurance policy and defective Cargo as a result of piracy, on 6 March and 16 March respectively 7. Beatles denied any breach on its part and insisted that it was the Claimant who was in breach, which Beatles accepted 8. Although the Claimant sought to make its acceptance of repudiation conditional upon the return of the purchase price 9, there is no middle way between affirmation of contract and acceptance of repudiation 10, and the Claimant did make it clear that the Contract of Sale was brought to an end Upon termination of the Contract of Sale, the Claimant cannot exercise any lien over the rejected Cargo in respect of the repayment of the price 12. The Claimant should under section 5 Facts, p. 67: Claim Submissions 6 Aegean Sea [1998] 2 Lloyd s Rep 39; Ahmad v Mitsui OSK Lines Ltd (ARB ) [2005] FCA Facts, p. 25 and 27 8 Facts, p. 26 and 28 9 Facts, p Chitty, Facts, p J L Lyons & Co Ltd v May and Baker Ltd [1923] 1 K.B. 685, p686 11

12 36 of the Sale of Goods Act 1979 make the Bills of Lading available for the collection of Beatles. Accordingly, even though the Claimant retained the physical control of the Bills of Lading, it was merely holding it as agent 13 and/or bailee 14 for Beatles From this point, while the Claimant could still be said to be a holder of the Bills of Lading (in the physical sense) through itself or its agent Johnson & Johnson 15, it was no longer a lawful holder because the constructive possession of the Bills of Lading was passed to Beatles. In The Giovanna 16, Rix J accepted that under section 5(b) of the Carriage of Goods by Sea Act 1992, (constructive) possession of the bill of lading can be passed at the time of handing the same to a courier as long as there is sufficient indorsement In the present case, no special indorsement is needed for bearer bills. If Rix J s approach is adopted, the (constructive) possession of the Bills was passed to Beatles when the Bills of Lading were made available for Beatles to collect (in the hand of Johnson & Johnson acting for the Claimant in Rotterdam) 18. Accordingly, Beatles became the new lawful holder of the Bills of Lading Further or alternatively, the Claimant was merely an agent and/or bailee holding the Bills of 13 East West Corp v DKBS 1912 AF A/S [2003] 1 Lloyd s Rep See section below 15 Para 6, Procedural Order No The Giovanna [1999] 1 Lloyd's Rep Ibid, p Facts, p. 33. The Claimant s assertion that the Bills were only available conditional upon the return of purchase is simply invalid as it cannot have lien over the Bills 12

13 Lading for Beatles. Indeed, since the Bills are bearer bills, as Carver argues, the Claimant was left with a very minor (ministerial) role (holding the Bills until Beatles collected them) 19, unlike the banks in East West Corp which were named as consignee. The decision that it is the agent who is the lawful holder can therefore be distinguished. This view is supported by Thomas J in East West Corp 20, and Teare J in Standard Chartered Bank 21. Thus, the lawful holder was Beatles as the principal rather than the Claimant The Claimant does not have right of suit under the Contract of Carriage Based on section 2.2 above, the Claimant was no longer the lawful holder of the Bills of Lading at the time of delivery. Thus by losing its status as a lawful holder the Claimant also lost the right of suit The Claimant does not have title to sue the Respondent in tort The Claimant sues the Respondent for the tort of conversion. It has been well settled that the title to sue for the tort of conversion lies in the Claimant s superior possessory right over the Respondent s (if any) 24. Ownership per se is neither necessary nor sufficient 25. As for possession, it can be either the right to immediate possession 26 or actual possession. The 19 Carver, East West Corporation v DKBS [2002] 2 Lloyd s Rep 182, p188 (para 29) 21 Standard Chartered Bank v Dorchester LNG (2) Ltd [2013] EWHC 808, para Carver, Section 2(5) of the Carriage of Goods by Sea Act 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 13

14 Claimant never had actual possession of the Cargo 27. What the Claimant can rely on is only a right to immediate possession While 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 28 (emphasis added), as explained in section 2.2 above, the Claimant was no longer the lawful holder of the Bills of Lading after the termination of the Contract of Sale. The Claimant merely held the Bills of Lading as an agent 29 for Beatles, without itself having any rights in relation to the Bills Accordingly, even though the Claimant retained the physical control of the Bills of Lading, the Claimant did not have symbolic possession, i.e. right to immediate possession, of the Cargo. Thus, the Claimant was not entitled to delivery of the Cargo and has no title to sue under the tort of conversion Alternatively, even if, which is denied, the Claimant still retained some possessory interest in relation to the Cargo, pursuant to section 8(1) of the Torts (Interference with Goods) Act 1977, the Respondent is entitled to raise the jus tertii defence, i.e. a named third party having superior possessory title than the Claimant at the time of the conversion In this regard, Beatles had a superior possessory interest over the Claimant s at the time of substantively synonymous is adopted here, see The Tort of Conversion, p86 27 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 28 Carver, East West Corp v DKBS 1912 AF A/S [2003] 1 Lloyd s Rep De Franco v Commissioner of Police of the Metropolis, The Times, 8 May 1987 CA 14

15 delivery. The Claimant held the Bills as a bailee for the seller, pending the latter to collect the Cargo at any time 31. As mentioned in section 2.2.2, the Claimant was not entitled to make the return of the Bills conditional upon the return of the purchase price. Therefore, Beatles, at the time of discharge in Rotterdam, had a superior possessory interest over the Cargo. The Claimant therefore has no title to sue in the tort of conversion Moreover, while it is admitted that the Respondent, as the contractual carrier, was the bailee of the Cargo, its duty as a bailee was not owed to the Claimant. It was held that the operation of sections 2 and 5 of the Carriage of Goods by Sea Act 1992 do not necessarily transfer rights under bailment The property in the Cargo revested in Beatles pursuant to Kwei Tek Chao 33, and the Claimant held the Bills of Lading as agent and/or bailee for Beatles. At the time of delivery, the Claimant did not have any reversionary interest, or right to immediate possession 34 to establish bailment. As a result, any claim that the Respondent breached its duty as a bailee by delivering the Cargo to Beatles is unfounded Summary The Claimant, after the end of the Contract of Sale, ceased to be the lawful holder of the Bills, 31 Heugh v L&NW Ry Co (1870) L.R. 5 Ex. 51; Benjamin, East West Corp v DKBS 1912 AF A/S [2003] 1 Lloyd s Rep 239, p Kwei Tek Chao v British Traders and Shippers Ltd [1954] 2 Q.B. 459, p Palmer, See section 4.3 below 15

16 and lost its right of suit in both contract and tort. Therefore, the Tribunal has no jurisdiction. 3. THE RESPONDENT DID NOT BREACH THE CONTRACT OF CARRIAGE 3.1. General The Respondent submits: (1) the Respondent fulfilled its duty under Art. III r.2 of the HVR by providing proper and careful care to the Cargo, and is entitled to rely upon one or more of the exceptions under Art. IV r.2 of the HVR, (2) the Respondent fulfilled its duty under Art. III r.1 of the HVR as the Vessel was seaworthy, (3) the Respondent reasonably deviated from the contracted route, and (4) the Respondent did not mis-deliver the Cargo The Respondent fulfilled its duty under Article III r.2 of HVR The Respondent s duty was to properly and carefully care for the Cargo carried by the Vessel. Carefully means the absence of negligence 36, whereas properly requires taking care of the cargo, exercise of reasonable skills by the crew 37 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 The Respondent denies the alleged negligence regarding the contamination of Cargo and the hijack of the Vessel. The Vessel s tanks storing the Cargo were passivated prior to loading to remove any arsenic that may have been present 39, and that the twenty three people-crew commenced an anti-piracy watch when the Vessel passed the line 54 o East Longitude at Gosse Millard v Canadian Government Merchant Marine Ltd [1927] 2 KB 432, at 434 per Wright J 37 The Iron Gippsland [1994] 1 Lloyd s Rep Albacora SRL v Westcott & Laurence Line Ltd [1966] 2 Lloyd s Rep 53, at 64 per Lord Pearson 39 Facts, p. 38: Analysis of mv TwilightTrader by Thomas, Cropper, Benedict, at 4 16

17 hrs 40. These measures comply with the International Safety Management (ISM) Code 41 of properly man the vessel with qualified crew 42 and maintain the vessel The contamination or deterioration in the Cargo quality was de minimis The results under the key FOFSA tests were within normal limits and did not give any indication of significant contamination or deterioration in Cargo quality 44. The arsenic levels found in tanks 3 P&S and 7 P&S were below the UK maximum legal limits for foodstuff and remained suitable for use in the human food chain 45. The Respondent submits that the alleged contamination or deterioration in quality of the Cargo was de minimis The Respondent is not responsible for the contamination of the Cargo The contamination resulted from introduction of the arsenic into the tanks. According to the Claimant s expert report, the tanks could have been opened while the pirates were in charge of the Vessel 46. This is outside the Respondent s control and involved no negligence on the Respondent s part The Respondent is not responsible for not heating the Cargo The burden of proving the failure to exercise due diligence shall be on the person claiming 40 Facts, p 41: Inspection Report by Aspinall Lewis International, 19 March 2009 at para ISM Code and Guidelines on Implementation of the ISM Code 2010, IMO, Resolution A.741(18) as amended by MSC.104(73), MSC.179(79), MSC.195(80) and MSC.273(85) 42 Ibid, at part 6 43 Ibid, at part Facts, p.37: Analysis of mv Twilight Trader by Thomas, Cropper, Benedict, at 3 45 Ibid, at 4 46 Facts, p.43: Inspection Report by Aspinall Lewis International, 19 March 2009 at para

18 damage or other relief 47, i.e. the Claimant. The Respondent shall not be responsible if the temperatures were not maintained by reason of any cause beyond the Respondent s control 48, i.e. during the hijack period As for the voyage to Fujairah, the absence of heating in fact kept the Cargo in a solid state and prevented the Cargo from suffering from accelerated aging and oxidation which would have occurred under heating and/ or fluctuating temperatures 49. There was also no indication as to what extent the Cargo has suffered from such handling The Respondent is entitled to rely on Article IV r.2 of the HVR The Respondent s duty under Art. III, r.2 of the HVR may be displaced or modified by some provision of Art. IV 51. The Respondent only needs to establish a prima facie case that the loss or damage was caused by one of the Art. IV, r.2 excepted perils, then it is up to the Claimant to prove unseaworthiness Art. IV r.2(c) of the HVR Perils, dangers and accidents of the sea This exception includes any damage to the goods carried caused by sea-water, storms, collision, stranding, or other perils peculiar to the sea or to a ship at sea, which could not be foreseen and guarded against by the shipowner or his servants as necessary or probable 47 Facts, p. 9: Charterparty at cl Ibid 49 Ibid, p Ibid, p Albacora SRL v Westcott & Laurence Line Ltd [1966] 2 Lloyd s Rep 53, at 63 18

19 incidents of the adventure 52. The definition would include piracy, as recognized in Pickering v Barkley 53 as cited by The Bunga Seroja Art. IV r.2(f) of the HVR Act of public enemies According to Carver, Art. IV r.2 of the HVR is applicable to piratical events if without the negligence of the Respondent in incurring the risk 55. Also, Scrutton suggests that the adoption of the term public enemies as opposed to the common law Queen s/ King s enemies implies a wider scope of interpretation which includes piracy Art. IV r.2(e) of the HVR Act of war Art. IV r.2(e) includes acts where there is no formal state of hostilities but would in a common sense way be called a war 57. The use of armed force by the Somali pirates, and various countries response against the piracy, including sending navy vessels to guard their own countries vessels, can be interpreted as a state of war against the Somali pirates in a common sense way Art. IV r.2(q) of the HVR Catch-all provision If the above exceptions are not applicable, r.2(q) is invoked 58. The burden is on the 52 Scrutton on Charterparties and Bills of Lading (20 th ed., 1996), at (1648) Sty Great China Metal Industries Co. Ltd v. Malaysian International Shipping Corporation Berhad, (The Bunga Seroja ) (1996) 441 LMLN 2 55 Carver, at Scrutton, at pp Carver, at G.E. Crippen & Associates Ltd v Vancouver Tug Boat Co Ltd [1971] 2 Lloyd s Rep

20 Respondent as the person claiming the benefit of this exception to prove it had no fault or negligence, and what other cause was responsible Regarding the contamination, arsenic was introduced into the tanks from some unauthorized access during the period of captivity off Somalia 60. As the entire crew was confined 24 hours per day to the bridge of the Vessel, and no maintenance or inspections on deck were allowed 61, the only possible access to the tanks which caused the contamination was by the pirates, hence there was no fault or negligence on the Respondent s or its agents part The Cargo also suffered from deterioration in quality. A probable cause is repeated heating and cooling down 62, however it cannot be indicated to what extent the product has suffered from the handlings 63. As submitted in section 3.3.7, the absence of heating during the hijacking period was outside the scope of the Respondent s duty according to Clause 16(a) of the Charterparty The absence of heating during the subsequent voyage to Fujairah only continued the unheated condition of the Cargo. This did not cause the deterioration in Cargo quality as submitted in sections Having fulfilled its duties under Art. III r.1 and Art. III r.2 of the HVR, the Respondent is 59 Paterson SS Ltd v Canadian Co-operative Wheat Producers Ltd [1934] AC 538, at Facts, p. 38: Analysis of mv Twilight Trader by Thomas, Cropper, Benedict, at 4 61 Facts, p. 42: Inspection Report by Aspinall Lewis International, 19 March 2009 at para Facts, p.50: Surveyors Report by Dutch Surveyors B.V 63 Facts, p.51: Surveyors Report by Dutch Surveyors B.V 20

21 entitled to rely on the exceptions under Art. IV r.2(c), (e), (f), and/or (q) and is not liable for the loss or damage caused by the piratical event Even if, which is denied, the Respondent s negligence contributed to the loss as a concurrent factor together with the excepted perils, the Respondent is not liable to the extent that the loss or damage was caused by the excepted peril alone 64, which the Respondent s liability, if any, for the whole damage ought to be reduced The Respondent fulfilled its duty under Article III r.1 of the HVR According to Art. IV r.1 of the HVR, a carrier shall not be liable for loss or damage arising or resulting from unseaworthiness unless it was caused by want of due diligence. Once the Respondent proves that due diligence has been exercised to make the Vessel seaworthy under Art. III r.1, the burden of proof would return to the Claimant to displace that defence The Respondent s duty was to exercise due diligence to make the Vessel seaworthy 67 ; properly man, equip and supply the Vessel 68 ; and make the holds, refrigerating and cool chambers, and all other parts of the Vessel in which goods are carried, fit and safe for their reception, carriage and preservation The Fiona [1993] 1 Lloyd s Rep 257, at 288 (first instance), per Judge Diamond Q.C.; Milan Nigeria Ltd v Angeliki B Maritime Co [2011] EWHC 892 (Comm.) 65 Gosse Millard v Canadian Government Merchant Marine Ltd [1927] 2 KB 432, at 241 per Lord Summer 66 SS Matheos v Louis Dreyfus & Co [1925] AC 654, at Art. III r.1(a), Hague Visby Rules 68 Art. III r.1(b), Hague Visby Rules 69 Art. III r.1(c), Hague Visby Rules 21

22 The Respondent exercised due diligence to make the tanks in which the Cargo was carried fit and safe for its reception, carriage and preservation by passivating the tanks storing the PFAD prior to loading If it is alleged that firearms should have been carried as an anti-piracy measure, it is submitted that their absence was reasonable as the carrying of firearms would had been in breach of the laws of both U.K. and the Netherlands The Respondent s deviation to Rotterdam was justified Under Art. IV r.4 of the HVR, a 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 guide to its application in Stag Line 72 : The true test seems to be 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 In light of the rejection of the Cargo by the initial buyer in Liverpool as a supposed result of the fear of deterioration of the Cargo, the Respondent acted reasonably to re-direct the Vessel to Rotterdam. The overall interest of all the cargoes on board, and not just the portion covered 70 Facts, p. 38: Analysis of mv Twilight Trader by Thomas, Cropper, Benedict, at 4 71 Private Armed Guards Regulations of different Flag States, International Chamber of Shipping (ICS) and European Community Shipowners Association (ECSA), July Stag Line Ltd v Foscolo Mango & Co Ltd [1932] A.C. 328 at

23 by the Bills, was considered: the right of Beatles as the charterer to designate a substitute discharging port 73, and also the Claimant s agreement to delivery in Rotterdam The Claimant expressed that it did not consider that the Cargo should be sent to Liverpool 74, and agreed that the decision to send the Cargo to an alternative port was for Beatles as cargo owners and charterers 75 to make. The Claimant also acknowledged that the better alternatives were to deliver the Cargo to buyers in Italy, Spain, or Holland 76. Also, the Claimant did not object to the change of destination, and instead couriered the Bills of Lading to Johnson & Johnson in Rotterdam The Claimant s letter to the Respondent which claimed that the Claimant did not authorize Beatles to discharge the Cargo in Rotterdam 78 was sent only on 20 th March 2009, when the Vessel had already arrived at Rotterdam, thus the letter should not have the effect of blocking delivery in Rotterdam The Respondent shall be protected by the liberty clause The liberty clause allowed the Respondent to have the Vessel call and discharge the cargo at another or substituted port declared or requested by the charterer, subject to the condition that the discharge of cargo at the designated port of discharge would give rise to delay or 73 Facts, p.11: Charterparty, clause 29(a) 74 Facts, p. 27: from Claimant to Beatles on 16 Match 2009, 15:20 75 Ibid 76 Ibid 77 Facts, p. 33: from Claimant to Beatles on 18 March 2009, 16:01 78 Facts, p. 36: Letter from Aardvark to Owners of Twilight Trader 23

24 disadvantage to or loss of the vessel or any part of her cargo As the Claimant emphasized that the Cargo would have no value in Liverpool, The Respondent s deviation aimed at mitigating the potential loss of the Cargo value, which entitled the Respondent to invoke the liberty clause A permitted liberty must be one consistent with the main object of the contract (Glyn v Margetson & Co 80 ). The contemplated voyage between the Respondent and Beatles was to deliver the Cargo to the port designated by Beatles. The discharge at Rotterdam was in accordance with Beatles right to change the discharging port 81, and was consistent with the contemplated voyage The Respondent did not mis-deliver the Cargo Based on the correspondence between the Claimant and Beatles, both parties claimed the other s conduct amounted to repudiatory breaches, and purported to accept the respective breaches 82. As explained in section 2.2.2, there is no middle way between affirmation of contract and acceptance of repudiation 83, and the Claimant made it clear that the Contract of Sale was brought to an end 84. Upon termination, the Claimant abandoned the Cargo As submitted in sections , Beatles was lawful holder of the Bills. The duty of the 79 Facts, p.11: Tanker Voyage Charter Party, clause [1893] A.C Facts, p. 7: Charterparty, clause 6(c) 82 Facts, p : s between Aardvark and Beatles 83 Chitty on Contract, Facts, p

25 Respondent was to deliver the Cargo to the person who had the right to present the Bills, i.e. Beatles, hence there was no mis-delivery Contractual defences under the Charterparty Pursuant to the clause 17(a) of the Charterparty, as incorporated into the Bills of Lading, the Respondent shall not be responsible for any loss of or damage or delay to or failure to discharge or deliver the cargo arising or resulting from act of public enemies, pirates or assailing thieves Besides, pursuant to clause 17(b) of the Charterparty, the Respondent shall not be liable for loss or damage due to contamination, deterioration, or change in quality of the Cargo unless there is negligence on the part of the Vessel. This clause effectively excludes the Respondent s liability as to the contamination and deterioration in quality of the cargo. 4. THE RESPONDENT DID NOT COMMIT CONVERSION OF CARGO 4.1. The first element of conversion, according to Kuwait Airways Corp) 86, is that the Respondent s conduct must be inconsistent with the rights of the person entitled to possession. The second is that the Respondent s conduct must be deliberate, not accidental. The third is that the Respondent s conduct must be so extensive an encroachment on the rights of the owner so as to exclude him from the use and possession of the goods. 85 Facts, p. 9: Charterparty at clause Kuwait Airways Corp v Iraqi Airways Corp (Nos 4 and 5) [2002] UKHL 19; [2002] AC

26 4.2. The Respondent has submitted in section 2.4 above that the Claimant does not have the right to sue in tort and this position will be maintained because once it is accepted that the Claimant has no standing to sue, the Respondent is automatically exonerated from any alleged conversion To elaborate, if the Claimant has no right to sue in tort, by definition the Claimant would not have had a superior possessory right over the Respondent or Beatles. Delivering the Cargo to Beatles would thereby not be inconsistent with the Claimant s possessory right, if it had any. Hence, the first limb would not be satisfied It is conceded that the Respondent deliberately discharged the Cargo to Beatles. However, since the Kuwait Airways test is cumulative, as long as one limb is not satisfied, the Claimant s claim in conversion would fail As for the third limb, since the Claimant did not have the right to sue in tort, it was not entitled to delivery of the Cargo 87, and had no rights in relation to the use and possession of it. Hence, the Respondent would not have encroached on the rights of the owner so as to exclude him from use and possession of the goods by delivering them to Beatles To conclude, because the Claimant has no right, or at best, a questionable right to sue in tort, its case for conversion fails. Accordingly, the allegation that the Respondent breached its duty as bailee not to convert 88 must fail. 87 See section Facts, p. 69: Claim Submissions, at para 23 26

27 5. CALCULATION OF DAMAGES 5.1. Calculation of damages if the Claimant establishes title to sue If the Court holds that the Claimant has title to sue in tort and/or contract, which is denied on the basis that the Claimant already rejected the goods and terminated the Contract of Sale prior to the Respondent discharging the Cargo to Beatles, the amount of damages should be calculated in accordance with Art IV r.5(b) of the HVR, which states: The total amount recoverable shall be calculated by reference to the value of such 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. The value of the goods shall be fixed according to the commodity exchange price of goods of the same kind and quality For the relevant place and time, the Respondent submits that the Claimant acquiesced to a change of the port of discharge from Liverpool to Rotterdam following the hijacking 89. As a result, the correct calculation of contractual damages is the market value of the Cargo at Rotterdam. Since the time of delivery is not stipulated in the Bill of Lading, the Respondent submits that the relevant time should be the date on which the alleged conversion occurred 90, that is, around March The Claimant is not entitled to damages of USD per mt even if there the Respondent breached Art. III of the HVR 89 See section General & Finance v Cooks Cars [1953] 1 WLR 644 (CA) 27

28 The Claimant cannot recover damages for any part of its loss consequent upon the Respondent s breach of contract that the Claimant could have avoided, as a reasonable man, by taking reasonable steps. 91 The onus of proving the above is on the Respondent In the present case, the Claimant had two opportunities to mitigate its alleged loss. The first opportunity arose when it discovered that the Vessel was hijacked, which may render the Cargo valueless. The second opportunity arose when the Claimant learned that the Cargo was discharged to Beatles without the production of the Bill of Lading Regarding the first opportunity, the Claimant made no attempt to inquire whether the sub-buyers would accept the Cargo from the hijacked vessel, judging from the letter from sub-buyers to the Claimant dated November The sub-buyers indicated that they were prepared to take the after-piracy Cargos provided that they tested as perfectly normal for fatty acid purposes, which it did. In other words, it is very likely that the Claimant failed to carry out the simple task of asking whether the sub-buyers would still want the Cargo, which, if done, would have avoided all consequent loss. The Respondent therefore rejects any claim of the full contract price, USD2,990,000 (USD per mt), by the Claimant The Claimant is not entitled to damages of USD per mt even if the Respondent committed conversion 91 British Westinghouse Electric Co Ltd v Underground Electric Rys [1912] AC 673, Standard Chartered Bank v Pakistan National Shipping Corp [2001] 1 All ER (Comm) 822 CA 93 Facts, p

29 The second opportunity to mitigate arose after the Claimant learned that the Cargo had been discharged at Rotterdam. Even if the court rejects the change of discharge port from Liverpool to Rotterdam in the Contract of Carriage such that the prima facie market is that of Liverpool, the Respondent submits that the market value in Rotterdam should be the only relevant price because there was neither a GMQ PFAD market nor a non-gmq PFAD market at Liverpool at the date of breach: although there are records of transactions of GMQ PFAD in Liverpool 94, the supply was not sufficient to meet the demand 95. The Athenian Harmony 96 states that evidence of the market price of the goods at a different place could be the only means of quantification where there is no available market for the goods shipped at the time and place of due delivery. Therefore, the market value of non-gmq PFAD in Rotterdam, USD 350 per mt, is the only available and relevant price in quantifying damages In addition, in Kuwait Airways Corp v Iraq Airways Co. the decision to buy new, as opposed to used secondhand, aircraft as replacements for the planes converted was held not to be caused by the conversion because the price of new aircraft was too exorbitant. 97 By analogy, the Claimant s submission to claim the purchase price of the replacement goods should be rejected because USD is an exorbitant price. The Claimant s sub-buyers wrote to the Claimant indicating that they were willing to take the piracy material provided it tested as 94 Facts, p Thompson (WL) Ltd v Robinson (Gunmakers) Ltd [1955] Ch [1998] 2 Lloyd s Report [2002] 2 A.C. 883, CA 29

30 perfectly normal for fatty acid purposes. Therefore, even if conversion was committed by Respondent, which is denied, the Claimant would not be entitled to USD per mt in damages for purchasing price of expensive substitutes which were not caused by the conversion per se The Claimant is not entitled to costs incurred in previous Dutch Court proceedings General rule The Claimant claims as damages from the Respondent, the Dutch Court fees of USD 138, and legal fees incurred in the Dutch proceedings in the sum of USD107,913.12, incurred between the Claimant and Beatles, who is a third party to the present proceeding. Since the Claimant s appeal to the Court of Appeal in Rotterdam was unsuccessful, the Claimant was ordered to pay for the cost of both proceedings, including lawyer s fees incurred by Beatles It was established in Hammond v Bussey 98 that costs in such actions have been held recoverable as damages subject to the rules of remoteness of damage. It is submitted that even if the Claimant is entitled to claim damages based on the value of the Cargo, which is denied, the Claimant is not entitled to claim the costs it incurred in the previous Dutch proceedings because the court fees and legal fees are too remote on the basis that the Dutch proceedings 98 (1888) 20 Q.B.D. 79 CA 30

31 concern a different contract between the now Claimant and a third party. Therefore, the costs incurred are not reasonable and cannot be recovered The Claimant s claim fails the reasonableness requirement of the remoteness test In order to pass the remoteness test, the Claimant s having defended the action or prosecution brought against them must be reasonable. It was said in Short v Kalloway 99 that no person has a right to inflame his own account against another by incurring additional expense in the unrighteous resistance to an action which he cannot defend. The Claimant s appeal to the Court of Appeal in Rotterdam was rejected, and this was the final decision of the proceeding between the Claimant and Beatles It was established in Vogan v Oulton 100 that any of the costs involved in an unsuccessful appeal in the prior proceedings by the now Claimant after his failure at first instance will generally not be recoverable because they will not be held to have been reasonably incurred, and the now Respondent should not be held liable for them. By analogy, even if the Claimant is entitled to the costs incurred in the District Court proceeding, which is denied on the basis that it was never in the Respondent s contemplation that there would be a proceeding between the now Claimant and Beatles, the Claimant is not entitled to recover any costs incurred in the appeal. 99 (1839) 11A. & E. 29 at L.T

32 The court fees and legal fees the Claimant incurred in the previous Dutch proceedings are too remote. Therefore, the Claimant should not be entitled to them. If the court is of the view that the Claimant should be entitled to the costs of the District Court proceedings, which is denied, the Claimant is still not entitled to recover the costs incurred in the appeal To conclude, the Respondent submits that the Claimant is not entitled to damages, and that if any are awarded, the Claimant should only be allowed, at best, the value of PFAD at Rotterdam on 20 March 2009 (USD 350 per mt) as damages, plus the shipping costs from Rotterdam to Liverpool, which would bring the damages up to USD 380 per mt. The total amount should be capped at USD 380 per mt x 4000 = USD 1,520,000. PRAYER FOR RELIEF For the reasons submitted above, the Respondent requests this Arbitral Tribunal to: DECLARE that it does not have jurisdiction to hear this dispute; And ADJUDGE that the Claimant does not have title to sue in contract and tort; ADJUDGE that the Respondent did not breach the Contract of Carriage; ADJUDGE that the Respondent did not commit the tort of conversion; ADJUDGE that the Respondent is not liable to pay any damages to the Claimant and in any case the calculation should be capped at USD 380 per mt. (USD 1,520,000). 32