MEMORANDA FOR THE CLAIMANT

Transcription

1 MEMORANDA FOR THE CLAIMANT TEAM 23 Valentine Chatelier Sophie Li Spyridon Papadas Georgios Rigoutsos 1

2 Table of Contents MEMORANDA FOR THE CLAIMANT... 3 TABLE OF CASES... 3 BIBLIOGRAPHY... 6 STATEMENT OF FACTS... 8 PART ONE: ARBITRATION The Claimant gave the notice on time or alternatively the requirement of giving notice of claim has been waived by the Respondent The Claimant successfully commenced the Arbitration At the time of merger, RTI and the Claimant is one and the same Alternatively, there is a misnomer that the Claimant applies to have corrected PART TWO: MERITS The sum of US$4,945, is due by way of freight Freight is deemed earned upon lifting of subjects Reliable Tankers Standard Terms Clause 4 prevails over ASBATANKVOY Clause Freight is deemed earned upon lifting of subjects There is no lack of consideration The rules of consideration do not apply to advanced freight Alternatively, there is no total failure of consideration Freight is an accrued debt upon lifting on subjects Any loss of the Respondent has arisen in an indirect way and is therefore of a consequential nature The Claimant committed no breach of contract The approach voyage to the loading port had commenced The Respondent s own fault contributed to the non-payment of the security fees There was no misstatement concerning the ETA provision In order for the liability of the Claimant to be established, the condition precedent of gross negligence needs to be met The Tribunal lacks jurisdiction to decide on tortious matter Further or alternatively, no acts or neglects on the part of the Claimant can be interpreted as gross negligence The Respondent s cancellation of the charter relieved both parties from performing any further obligations or liability arising thereunder The charter was cancelled The charter was cancelled by the operation of the Respondent contractual termination, without recourse to either party whatsoever There is no ground for a claim for damage Further or alternatively, the respondent s early repudiation of the charter amounted to a breach of contract There is no anticipatory right to cancel The respondent failed to take reasonable steps to mitigate their loss, which deprived them of any ground to recover nominal damages In any event, the claimant is not liable for any delay occurring out of the ship s arrest by a third party CONCLUSION

3 MEMORANDA FOR THE CLAIMANT TABLE OF CASES A Ackerman v. Lay [2009] 1 WLR Anns v. Merton LBC [1977] 2 WLR B Colonial Bank v. European Grain & Shipping Ltd (The Dominique) [1987] 1 Lloyd s Rep 239; [1988] 1 Lloyd s Rep 215. Bayoil SA v. Seawind Tankers Corp (The Leonidas) [2001] 1 Lloyd s Rep 533. Borries v. Hutchinson (1865) 19 C.B.(N.S.) 445. C Camarata Property Inc v. Credit Suisse Securities (Europe) Ltd [2011] EWHC 479 (Comm). Cheikh Boutros Selim El-Khoury v. Ceylon Shipping Lines (The Madeleine) [1967] 2 Lloyd s Rep 224. Compania Naviera General SA v. Kerametal Ltd (The Lorna I) [1983] 1 Lloyd s Rep 373. D Dakin v. Oxley 143 ER 938. Deutsche Schachtbau-und Tiefbohrgesellschaft mbh v. Ras Al-Khaimah National Oil Co [1987] 2 All ER 769. E Esso Petroleum Co Ltd v. Mardon [1976] QB 801. Evera SA Commercial v. North Shipping Co Ltd (The North Anglia) [1956] 2 Lloyd s Rep 367. F Fercometal Sarl v. MSC Mediterranean Shipping Co SA (The Simona) [1989] AC 788. Financings Ltd v. Baldock [1963] 2 QB

4 H Hedley Byrne & Co Ltd v. Heller & Partners Ltd [1964] AC 465. M Maredelanto Compania Naviera SA v. Bergbau-Handel GmbH (The Mihalis Angelos) [1971] 1 QB 164. Marifortuna Naviera S.A. v. Government of Ceylon [1970] 1 Lloyd s Rep Mutual Life & Citizens Assurance v. Evatt [1971] AC 793. N National Bank of Greece and Athens SA v. Metliss [1958] AC 509. Nea Agrex SA v. Baltic Shipping Co Ltd (The Agios Lazaros) [1976] 2 WLR 925. P Progressive Casualty Insurance Co v. CA Reaseguradora Nacional de Venezuela 991 F 2d 42 (2nd cir 1993). R Red Sea Tankers Ltd v. Papachristidis (The Hellespont Ardent) [1997] 2 Lloyd s Rep 547. Films Rover International Ltd v. Cannon Film Sales Ltd [1987] 1 WLR 670. S Samuel Sanday & Co v. Cox McEuen & Co (1922) 10 LI.L Rep 459. The Satya Kailash [1984] 1 Lloyd s Rep SEB Trygg Holding AB v. Manches [2006] 1 WLR Smith v. Dart & Son (1884) 14 QBD 105. Sotiros Shipping Inc v. Sameiet Soholt (The Soholt) [1983] 1 Lloyd s Rep 605. Stinnes Interoil GmbH v. A Halcoussis & Co (The Yanxilas) [1982] 2 Lloyd s Rep 445. T Tradigrain SA & Ors v. Intertek Testing Services (ITS) Canada Ltd & Anor [2007] EWCA Civ

5 U United Parcel Service of America Inc v. Government of Canada 46 ILM 922 (2007). V Vagres Compania Maritima SA v. Nissho-lwai American Corp (The Karin Vatis) [1988] 2 Lloyd s Rep

6 BIBLIOGRAPHY Statute Arbitration Act 1996 (UK) c. 23. Books Berlingieri F., Berlingieri on Arrest of Ships (5 th ed.), 2011, Informa Law. Burrows A, The Law of Restitution (3 rd ed.), 2010, Oxford. Coghlin T., Baker A., Kenny J., Time Charters (6 th ed.), 2014, Informa Law. Cooke J., Young T., Taylor A., Kimball J., Martowski D., Lambert L., Voyage Charters (3 rd ed.), 2007, Informa Law. Dockray M., Cases & Materials on the Carriage of Goods by Sea (3 rd ed.), 2004, Routledge Cavendish. Eder B., Bennett H., Berry S., Foxton D., Smith C., Scrutton on Charterparties and Bills of Lading (22 nd ed.), 2013, Sweet & Maxwell. Girvin S., Carriage of Goods by Sea (2 nd ed.), 2011, Oxford University Press. Jones M., Dugdale A., Clerk & Lindsell On Torts (20 th ed.), 2013, Sweet & Maxwell. McGregor H., McGregor on Damages (19 th ed.), 2012, Sweet & Maxwell. Merkin R., Flannery L., Arbitration Act 1996 (4 th ed), 2008, Informa Law from Routledge. Stopford M., Maritime Economics (3 rd ed.) 2008, Routledge. Tweeddale A., Tweeddale K., Arbitration of Commercial Disputes: International and English Law and Practice (1 st ed.), 2007, Oxford University Press. Wilson J., Carriage of Goods by Sea (7 th ed.), 2010, Pearson Education. 6

7 Articles Peels W.E., The Termination Paradox (2013) LMCLQ 520. Seng Y., Sweating over an implied duty of good faith (2013) LMCLQ 418. Tettenborn A., Consequential Damages in Contract The Poor Relation (2008) 42 Loy L.A.L. Rev

8 STATEMENT OF FACTS On 10 October 2011, Super Charters (The Respondent) informed Reliable Holdings Inc (The Claimant) that they were interested in chartering one of their VLCC to transport a full cargo of crude oil. A contract evidenced by a Fixture Recap dated 19 November 2011 was concluded between the parties, on amended ASBATANKVOY form with Rider Clauses (The Charter). The Claimant thereby agreed to let their vessel Reliable Butterfly (The Vessel) for a voyage from BlueLand to IndigoLand. The Charter provided for Freight being deemed earned in full discountless non-returnable and 95% of minimum freight payable upon lifting of subjects. Under the contract, the Vessel was to leave Bunker Port by 25 November so as to sail on time from LoadPort. Due to unforeseen events beyond the Claimant s control however, the Vessel was retained at her Bunker Port and it therefore transpired that she would miss her laycan. As a result of the above, the Respondent chose to exercise their contractual right of cancellation under the Charter on 27 November, which had the effect of releasing both parties from performing any obligations or further liabilities arising thereunder. The subjects were lifted on 19 November, hence pursuant to the Charter; the Respondent owes the Claimant the sum of US$4,945, by way of freight. The Respondent refused to pay such sum or any other, as a result of which the Claimant successfully commenced arbitration Proceedings (the Arbitration) on 28 November, claiming the sum of US$4,945, as due and owing under the Charter. 8

9 PART ONE: ARBITRATION The Claimant argues that Arbitration was not time-barred and that they successfully commenced proceedings. 1. The Claimant gave the notice on time or alternatively the requirement of giving notice of claim has been waived by the Respondent. The requirement of giving Notice was in the Respondent s Standard Terms which stated that All claims against Super Charters must be notified to Super Charters within 10 days of 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 further 10 days thereafter. The expected discharge date was 10 January. The Claimant gave Notice of their claim on freight on the 28 November; long before the latest date provided for doing so under the Charter (20 January). It is therefore argued that the Claimant duly fulfilled the obligation to give Notice of Claim. Alternatively, if the Tribunal finds that the Claimant has not given Notice on time; it is submitted that the requirement of giving Notice of Claims was in any case waived by the Respondent. Indeed, on 12 February, the Respondent informed the Claimant that the Notice of Appointment was invalid due to the fact that Reliable Tankers no longer existed as an entity, without any mention to the Notice of claims whatsoever. It is argued that the Respondent waived the requirement of Notice of Claims and can therefore only question the parties capacity; any claim regarding the timing of giving Notice would be inadmissible. 9

10 2. The Claimant successfully commenced the Arbitration. According to Clause 24 of ABASTANKVOY, English law and London Arbitration apply to this contract. As a consequence, English law governs the Arbitration Agreement 1. The Claimant successfully sent a Notice of Appointment to the Respondent on 28 January in respect of Article 14(4) of Arbitration Act At the time of merger, RTI and the Claimant is one and the same. In the expert s opinion provided by Mr. Bowman 2, in the case of a merger under the Law of Fruitland, all the rights and liabilities of the constituent companies are transferred to the surviving entity automatically, without more as a matter of law, and there is no requirement of any notice to be given for this process to be effective including arbitration issues. Therefore, it is submitted that the Claimant was under no requirement to inform the Respondent of the change of entity. RTI and the Claimant are one and the same; and an action in the name of RTI is therefore necessarily an action by the Claimant Alternatively, there is a misnomer that the Claimant applies to have corrected. It is stated that English Law regards all matters relating to the status of a new company as being governed by the law of this company s domicile 3. In the present case, the concept of universal succession should be considered under the law of Fruitland. However, the concept of misnomer should be explained under English Law, which governs the underlying contract, rather than the law of Fruitland. 1 Deutsche Schachtbau-und Tiefbohrgesellschaft GmbH v. Ras Al Khaimah National Oil Corporation [1987] 2 All ER Page 113 of the Problem Question. 3 National Bank of Greece & Athens v. Metiliss [1958] AC

11 In SEB v. Manches 4, before arbitration, OAR had ceased to exist and all of its rights and liabilities had been transferred to AMB. However, OAR rather than AMB was named arbitration claimants.. It was held that there was a misnomer, and the test was to determine who would reasonably have been understood to be the entity bringing the claim by the party against whom the claim was asserted. The facts of SEB v. Manches are almost identical to the present case. Indeed, it is clear from the evidences that the Respondent knew who the party against them was. Firstly, it is worth noting that the Respondent brought up the issue of an alleged wrong appointment of arbitrators only two days after 10 February, which under the contract was the last day to commence Arbitration. It is argued that the Respondent deliberately waited until the Arbitration had expired. Moreover, it was held in Lay v. Ackerman 5 that the Notice of Appointment is valid if it leaves the tenant in no doubt that it comes from the landlord. Applying the reasoning to the present case, the Respondent could not have been under any uncertainty as to knowing who the Claimant was. Indeed, the merger between Reliable Holdings and Reliable Tankers was public knowledge, as it had made the front page of a newspaper about twenty-five days before the Notice of Appointment. It is thus submitted that there is a clear and intentional misnomer from the part of the Respondent. More generally, English courts tend to interpret the requirement for a Notice of Appointment commencing arbitral proceedings in a very flexible way. In Nea Agrex SA v. Baltic Shipping Co 6, the learned judge described a flawed Notice of Appointment as irregular but effective, rather than void, as the necessary step was taken, and procedural step whose form and terms do not call for an excessively strict scrutiny. Therefore, the Notice of Appointment given on 28 January by the Claimant is valid. It 4 [2005] EWCA Civ [2004] HLR [1976] 2 Lloyd s Rep

12 follows that the Arbitration was successfully commenced by the Claimant. PART TWO: MERITS 3. The sum of US$4,945, is due by way of freight Freight is deemed earned upon lifting of subjects. It is submitted that Clause 4 of Reliable Tankers Standard Terms is the relevant freight clause, which is incorporated into the contractual arrangement by both recaps between the parties. They mention both parties special terms are fully incorporated as per attached. The Reliable Tankers standard terms are attached, so the recap properly incorporates them, as a part of the contractual arrangement. The stipulation for the freight in the recap itself does not contradict with Standard Terms Clause 4, but specifies the amount of freight that is due Reliable Tankers Standard Terms Clause 4 prevails over ASBATANKVOY Clause 2 Where Reliable Tankers Standard Terms clause 4 (Clause 4) provides for freight being deemed earned upon lifting of subjects, ASBATANKVOY Clause 2 states that payment of freight shall be made upon delivery, The general rule at Common Law in cases of inconsistencies between the standard form and special terms or riders of a contract is that in the absence of a hierarchy clause, the riders will prevail. This rule has long been established by case law 7, the latest of which being The Leonidas 8, where it was stipulated 7 Marifortuna Naviera S.A. v. Government of Ceylon [1970] 1 Lloyd s Rep. 247; The Satya Kailash [1984] 1 Lloyd s 12

13 that the Courts would try to reconcile any conflict, failing which the rider will prevail. The Claimant thus argues that the provision made under Clause 4 prevails over the contract s Standard form. In the recap telex, it is mentioned that ASBATANKVOY along with the 1-61 Super Charters Terms are the basis of the contract, and that they are amended logically and specifically by the terms included therein. Consequently Reliable Tankers Standard terms are riders. What is alleged to be the inconsistency lies in the statement regarding when, and how, freight is earned. Indeed, ASBATANKVOY mentions that freight is earned upon discharge, whereas Clause 4 provides for freight being earned upon lifting of subjects. In the present case, discharge never occurred which is not disputed by either party - and it would logically follow from the interpretation of ASBATANKVOY that freight is not earned. Conversely, it would follow from the interpretation of Clause 4 that the condition precedent to freight being deemed earned, namely the lifting of subjects, occurred on 19 November. On a proper construction of the contract, and following the common law rule aforementioned, it is therefore submitted that freight is deemed earned Freight is deemed earned upon lifting of subjects The Claimant further argues that the Respondent s refusal to pay freight is based on an incorrect understanding of the construction of Clause 2; and that the Respondent fails to address the Claimant s submission on that matter. Clause 2 reads as follows: FREIGHT DEEMED EARNED IN FULL DISCOUNTLESS NON-RETURNABLE AND 95 OF MINIMUM FREIGHT PAYABLE UPON LIFTING Rep Bayoil SA v. Seawind Tankers Corp (The Leonidas) [2001] 1 Lloyd s Rep

14 SUBJECTS [ ]. In the light of relevant case law 9 it is submitted that it would be incorrect to put forward a construction suggesting that lifting of subjects only refers to 95% being payable at that point, as opposed to the previous stipulation on freight being earned containing no time specification. If the Tribunal accepts that freight is earned upon discharge, it will accordingly not give effect to the word deemed. Lord Brandon in The Dominique 10 suggests that freight payable upon discharge is used without any qualifying epithet and is just called freight, whereas freight payable at an early stage of the voyage, such as on completion of signing of bills of lading [...] is called advance freight. It logically follows from this interpretation that the use of deemed earned when freight is actually earned upon discharge is a non-sense, and consequently the Respondent s understanding of Clause 2 has to be disregarded. The reasoning of the Court in The Karin Vatis 11 further supports this submission. Slade L.J there tried to make a construction of a clause Freight deemed earned as cargo loaded, which was followed, after a full stop, by a 95% of freight paid after three days. In his view, the use of the full stop clearly demonstrated a separation between the two provisions; so that the whole freight was earned on cargo loading, and the 95% part indicated that this proportion was payable after three days. In the present there is no full top separating the freight deemed earned from the 95%, so that they share a common time point and consequently, freight is earned in full upon lifting of subjects. Furthermore, it is evident from the drafting of the clause that it was attempted to be as short as possible, and this is, perhaps, why the drafters seem to commingle the time when freight becomes deemed earned and the 95% payable. So in a poorly drafted clause like 9 Dakin v. Oxley 143 ER 938 is the landmark case on actual freight, where the Court held that the Claimant must, unless otherwise agreed, carry the cargo to the destination provided for in the charterparty and be ready to deliver it there, in order to earn freight. The Dominique and the Karin Vatis are also examined. 10 Colonial Bank v. European Grain & Shipping Ltd (The Dominique) [1987] 1 Lloyd s Rep 239; [1988] 1 Lloyd s Rep Vagres Compania Maritima SA v. Nissho-lwai American Corp (The Karin Vatis ) [1988] 2 Lloyd s Rep

15 this, an interpretation, which gives full effect to its words must be sought, so that a construction of a term does not render ineffective other terms of the clause. In contrast with the Respondent interpretation, our construction gives full effect to all the terms of clause 4, and is consistent with the agreement of the parties. Finally, the Claimant s interpretation of Clause 2 is consistent with the view of the House of Lords in the Dominique 12, where the freight clause read Freight shall be prepaid within five days of signing [...], full freight deemed to be earned on signing bills of lading [...]. It was held that the effect of the two phrases taken together was that the claimant s right to the freight accrued on signing, while it was payable at a different point in time. The Court supported that any contrary view would give no effect to the second part of the clause. Accordingly, a provision deemed earned such as in the present case will render advance freight irrecoverable but yet payable even if the voyage is not completed. In a case with similar factual complex and similar clause freight deemed earned on signing of b/ls, the House of Lords held that even though the charter was terminated, the freight was still due There is no lack of consideration The rules of consideration do not apply to advanced freight. The Claimant argues that the freight concerned in the present case is advance freight, to which the normal rules of consideration do not apply, and therefore the Respondent s submission for failure of consideration is inadmissible. Mr. Justice Hobhouse said in the Dominique 13 that advance freight should not be treated as a contractual obligation, to which the rules of failure of consideration or partial failure, apply as in other branches of law. Once earned, advance freight is at the risk of 12 Colonial Bank v. European Grain & Shipping Ltd (The Dominique) [1987] 1 Lloyd s Rep 239; [1988] 1 Lloyd s Rep ibid 15

16 the charterer. It is commonly accepted that advance is the freight that is payable in advance, thus the present freight is an advance freight, as the 95% of it is payable upon lifting subjects. If Lord Justice Mustill held in The Dominique that, where there was an effective failure of consideration, the owners could not recover freight when they did not perform, it is thereby submitted that this view cannot be applied where there is a deemed earned clause. The Claimant argues that it is the view of the House of Lords that should be applied to the present case, i.e. that in such a clause, the right to freight survives the termination of the charterparty. The House of Lords did not deal with the question of consideration itself, but is derives from its argumentation on whether freight was an accrued debt and its survival that it would certainly align with the view of Hobhouse J, thus leaving no room for consideration issues in advance freight Alternatively, there is no total failure of consideration Alternatively, if the Tribunal finds that the rules of consideration do apply to the present case, in the light of Rover v. Cannon 14, they are not applicable in this contractual arrangement. In this case it was stated that The question is whether there was any consideration in the nature of part performance for which the installment was payable. In the present case the approach voyage has begun, as the vessel is heading to the bunkering port, in accordance with her contractual duty to be fully bunkered at the port of loading. Consequently, part of the performance did begin, and thus there cannot be a total failure of consideration. The Courts have consistently held that the lack of consideration needs to be total, and that partial lack of consideration does not suffice. Although criticised, this requirement is necessary, because a contrary rule would cause great uncertainty in 14 Films Rover International Ltd v. Cannon Film Sales Ltd [1987] 1 WLR

17 contract law, as valuation would be very difficult in partial failure. Regardless of its correctness, the requirement for total failure is still the law in the United Kingdom, as the latest decisions indicate, thus if the court accepts that the approach voyage has begun, there would be only partial failure of consideration, which does not suffice Freight is an accrued debt upon lifting on subjects The House of Lords in The Dominique 15 upheld that the right to freight accrued by the time freight was deemed earned. This is consistent with the Karin Vatis 16 that supported that since full freight was deemed earned on loading, it became an accrued debt. Consequently, if the Tribunal holds that freight is deemed earned upon lifting of subjects, it follows than it then became an accrued debt, and therefore the Claimant claim the sum of US$4,945, as due and owing under the Charter Any loss of the Respondent has arisen in an indirect way and is therefore of a consequential nature. As a general rule, losses that are related to and dependent on the position of the particular plaintiff are considered as consequential 17. It has long been established that, in cases where the party interested in on-time delivery suffers a dislocation of their business arrangements and thus are involved in further expenses due to a fault of the Claimant, this expenditure (e.g. extra freight or insurance) is only recoverable in the way of consequential damages 18. In this case, the Respondent alleged losses are not arising directly from any faulty performance or non-performance of the contractual obligations, but are a result of the 15 Colonial Bank v European Grain & Shipping Ltd (The Dominique) [1987] 1 Lloyd s Rep 239; [1988] 1 Lloyd s Rep ibid 17Andrew Tettenborn, Consequential Damages in Contract The Poor Relation, 42 Loy L.A.L. Rev. 177 (2008), p Borries v. Hutchinson (1865) 19 C.B.(N.S.)

18 Respondent own business motives. As long as such motives are extraneous to the charterparty, there cannot be a possibility of direct loss for a subsequent fixture. Any liability of the Claimant in this regard shall therefore be considered as consequential. At any rate it is suggested that the alleged losses of the Respondent concerning damages from their pre-existing obligations towards sellers and buyers of the cargo, as well as the loadport and disport terminals, are not recoverable as for lack of foreseeability. The test applied by Bingham J. in Stinnes v. Halcoussis (The Yanxilas) 19 of whether the loss in question was fairly and reasonably within the contemplation of the parties, as at the date of the contract, as a probable result of the breach which has in fact occurred, is not fulfilled and no damages may thus be awarded on those points The Claimant committed no breach of contract The approach voyage to the loading port had commenced The approach voyage to the loadport commenced on 19 November, which is the day when the contract was concluded. At that time, the vessel was already en route to the bunkering port in order to be supplied for performing her contractual voyage. Moreover, the ASBATANKVOY deviation clause provides that the vessel shall have liberty ( ) to call for fuel at any port or ports in or out of the regular course of the voyage. The call at the bunkering port of Redland was a prerequisite towards delivering a vessel fully bunkered and operational for the purposes of the charterparty and, as a result, such a stop was for the benefit of the Respondent. In any case, the obligation to commence the approach voyage punctually, which is a facet of the paramount obligation to proceed with reasonable dispatch, is an innominate term of 19 [1982] 2 Lloyd s Rep. 445 at p

19 the contract at any rate where the contract contains a cancelling clause 20. In Smith v. Dart & Son 21, the existence of a cancelling clause was explained not to be a contractual promise but a right to be exercised at the will of the Respondent, should the vessel arrive late. Therefore, as long as the option to cancel existed, in the event where the vessel was not able to meet the laycan, the Respondent had an absolute right to terminate the contract. The Claimant was eager to perform their part of the contractual obligations and has it not been for the subsequent cancellation by the Respondent, would have proceeded to the loading port with utmost dispatch as soon as the ship was released from the arrest The Respondent s own fault contributed to the non-payment of the security fees. The arrest of the ship at the bunkering port was an unforeseeable event for the Claimant, who had no knowledge of the existence of such a possibility. From the time the arrest took place, the Claimant made great efforts towards releasing the vessel, rendering thus possible the performance of the contractual voyage. Ultimately, despite the strenuous struggles of the Claimant to this end, the release of the ship could not be concluded in such a time as to meet her laycan. The main reason for this failure to provide the necessary security was the lack of adequate funds available to the Claimant. However, had the Respondent paid the sum that fell due from 19 November, the date where subjects were lifted and where, as per the terms of the charter, 95% freight became payable, the Claimant would have been able to secure the necessary amount of money for the release of the vessel. It is submitted, therefore, that no liability can be allocated to the Claimant for failure to 20 Evera SA Commercial v. North Shipping Co Ltd (The North Anglia) [1956] 2 Lloyd s Rep (1884) 14 QBD

20 provide security in order to release the vessel, as long as the payment of freight remained outstanding. It is the Respondent default in payment of freight that made the release of the vessel impossible There was no misstatement concerning the ETA provision. It has long been established that whether a statement by the Claimant concerning the estimated time of arrival of the vessel is a breach of the expected readiness condition depends on whether the Claimant honestly expected, at the time of entering into the contract, that the vessel would be ready to load at the stipulated date, and had reasonable grounds for that expectation 22. Similarly to the expected readiness clause, an ETA clause looks to the reasonableness of the Claimant estimate at the time when it was given, rather than at subsequent events. The sent to the Respondent on 23 November contained no dishonest or unreasonable statement in relation to the ETA, but rather the truthful expectation on behalf of the Claimant that the vessel would be released on time. As long as it became apparent that such an event would take place at a time that it would not be possible for the ship to make the laycan, the Claimant communicated their thoughts to the Respondent ( on 25 November). Indeed, the fact that the exact date of the vessel s release remained unknown to the Claimant made it impossible for a revised ETA to be provided. Consequently, there was no misstatement by the Claimant that could be interpreted as dishonest or unreasonable and therefore the necessary elements for their liability to be established are not present. 22 Samuel Sanday & Co v. Cox McEuen & Co (1922) 10 LI.L Rep

21 3.6. In order for the liability of the Claimant to be established, the condition precedent of gross negligence needs to be met The Tribunal lacks jurisdiction to decide on tortious matter Under English law, negligence is categorised as a tort, and is therefore dependent on a pre-existing duty of care among the parties. Arbitration, however, is a creature of contract and the jurisdiction of the arbitral tribunal arises out of the arbitration agreement. It is the essence of the arbitration that the tribunal has only the authority conferred on it by the agreement under which it is established 23. The limits of the arbitral tribunal s powers are determined by the wording of the arbitration agreement. Where the parties have made an agreement to arbitrate, therefore, they will be held to that arbitral agreement. 24 Under common law, a detailed analysis of the wording of the arbitration clause is required, in order to ascertain the extent of the arbitral tribunal s jurisdiction. As a result, an arbitral tribunal will not have jurisdiction to deal with claims in tort, such as the tort of negligence, if the arbitration agreement states that only disputes related to the contract can be arbitrated 25. Clause 5 of the Reliable Tankers Standard Terms limits the liability of the Claimant, as far as consequential damages are concerned, to cases where gross negligence is identified. However, as the Arbitral Tribunal has no jurisdiction to rule on tortious matters, no damages may be awarded for any consequential losses whatsoever. 23 United Parcel Service of America Inc v. Government of Canada 46 ILM 922 (2007). 24 Tweeddale A., Tweeddale K., Arbitration of Commercial Disputes: International and English Law and Practice. 25 Progressive Casualty Insurance Co. v. Reaseguradora Bacional de Venezuela 991 F 2d 42 (2nd cir 1993), where the US District Court held that it would apply ordinary contract law principles in order to determine the meaning of these words and whether the dispute in hand was covered by the arbitration clause, therefore adopting a literal and strict interpretation of the wording. 21

22 Further or alternatively, no acts or neglects on the part of the Claimant can be interpreted as gross negligence. Lord Wilberforce in Anns v. Merton L.B.C. 26 opined that in order to establish that a duty of care arises in a particular situation ( ) first, one has to ask whether as between the wrongdoer and the person who has suffered damage there is a sufficient relationship of proximity or neighborhood such that, in the reasonable contemplation of the former, carelessness on his part may be likely to cause damage to the latter, in which case a prima facie duty of care arises. Secondly, if the first question is answered affirmatively, it is necessary to consider whether there are any considerations which ought to negative or to reduce or limit the scope of the duty. Clause 5 of the Reliable Tankers Standard Terms essentially limits the scope of the duty, providing that, in order for consequential damages to be awarded, gross negligence of the Claimant, their servants or their agents must exist. In addition, no special relationship, as introduced in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd 27 existed between Claimant and Respondent, as the application of this particular case was later confined only to cases where a person carries on the business of giving the type of advice that is sought, or claims to possess considerable skill and competence in it 28. Further to this argument, It is submitted that he presence of both negligence and gross negligence in the contract terms, indicates that some distinction must be intended, as for the parties to have chosen to use these words, they must be given some meaning in special 29. Moreover, English courts have recognised that the concept of gross negligence should be interpreted as a standard requiring a party to act in a manner more negligent than ordinary 26 [1977] 2 WLR [1964] A.C Mutual Life & Citizens Assurance Co. Ltd. v. Evatt [1971] AC 793, Esso Petroleum Co. Ltd. v. Mardon [1976] QB Tradigrain SA & Ors v. Intertek Testing Services (ITS) Canada Ltd & Anor [2007] EWCA Civ

23 negligence, capable thus of embracing not only the conduct undertaken with actual appreciation of the risks involved, but also serious disregard of or indifference to an obvious risk 30. Mr. Justice Mance in The Hellespont Ardent 31 referred to conduct so seriously negligent that the defendant should not be entitled to rely on the exemption clause, acknowledging that the question is very much a matter of degree and judgment. It is therefore suggested that gross negligence is used interchangeably with the terms willful misconduct and deliberate default, which are better understood under English law. As a result of the above, there are no grounds upon which even the possibility of negligent behavior of the Claimant could be based, so the requirement of willful misconduct is a majore ad minus excluded. 4. The Respondent s cancellation of the charter relieved both parties from performing any further obligations or liability arising thereunder The charter was cancelled The charter was cancelled by the operation of the Respondent contractual termination, without recourse to either party whatsoever. It is submitted that the cancellation was not the result of a breach from the part of the Claimant, but the decision of the Respondent to exercise their right under the charter. Therefore, it was a contractual termination of the charterparty. Clause 2 of the Claimant s Standard Terms clearly states If charterers elect to decline, 30 Camarata Property Inc v. Credit Suisse Securities (Europe) Ltd [2011] EWHC 479 (Comm). 31 [1997] 2 Lloyd s Rep

24 then charter to be cancelled without recourse to either party whatsoever. The Respondent have indeed so elected, as evidenced by the Notice of Cancellation dated 27 November, accepted by the Claimant 32. By analogy with the reasoning in The Kurt Illies 33, where in the absence of an effective notice of cancellation, the charter was held to be in full force and effect, a fortiori in the face of the evidences of the present case, the charter is to be held properly cancelled. Therefore, and on a proper construction, both parties were automatically relieved from performing any further obligations and liabilities arising out of the contract There is no ground for a claim for damage It follows from this submission that the Claimant cannot be held liable for damages, as the Respondent suffered no loss of bargain. Indeed, it was held in Financings Ltd v. Baldock 34 that it is only where the contract is terminated for repudiatory breach that a claim may be made for damages as a consequence of the loss of bargain (i.e. loss which accrue as a consequence of the premature determination of the contract 35 ). No such breach occurred here, since, as demonstrated above, the charter was cancelled as a result of the exercise of the Respondent s contractual right. The Claimant did not commit any breach in the performance of their contractual obligations prior to the Respondent s decision to cancel, and therefore the Claimant argues that it is not liable for any sum whatsoever. 32 dated 28 November, page 97 of the Problem Question. 33 The Kurt Illies, SMA 2778 (1991) ; cited in Julian Cooke on Voyage Charters, 3rd ed (thereafter Cooke), Chapter [1963] 2 QB Cooke, Chapter

25 4.2. Further or alternatively, the respondent s early repudiation of the charter amounted to a breach of contract There is no anticipatory right to cancel. Further or alternatively, if any breach were committed, it would be from the part of the Respondent, who cancelled the charterparty before the laycan was actually hit (on the 5-6 December). It is clear from The Madeleine 36, and in particular the judgement of Roskill J, that there is no anticipatory right to cancel at common law. The Respondent was not entitled to exercise a cancelling option before the relevant time had arrived. This view was followed and brought further in The Simona 37, where the Court held that a unilateral attempt to do so might amount to an anticipatory breach and repudiation of the charter. It logically follows from the authorities that the Respondent, by purporting to exercise a right to cancel before the cancelling date had arrived, is to be held in repudiatory breach by the Tribunal as his conduct amounted to an absolute refusal to perform his charter obligations. As a result of this breach, the Claimant is entitled to claim damages The respondent failed to take reasonable steps to mitigate their loss, which deprived them of any ground to recover nominal damages. In The Soholt 38, J Donaldson MR stated that A defendant is only liable for such part of the claimant s loss as is properly to be regarded as caused by the defendant s breach of duty. By dated 28 November, the Claimant offered to provide the Respondent with a sister VLCC. The Respondent did not refer to this offer in any further correspondence, and immediately chose to refer the dispute to Arbitration. It is argued that he failed to act reasonably and take available steps to mitigate his loss; consequently the loss he is 36 Cheikh Boutros Selim El-Khoury v. Ceylon Shipping Lines Ltd (The Madeleine) [1967] 2 Lloyd s Rep 224). 37 Fercometal v. Mediterranean Shipping (The Simona) [1989] A.C Sotiros Shipping Inc v. Sameiet Soholt (The Soholt) [1983] 1 Lloyd s Rep

26 claiming for is not attributable to the Claimant s -alleged, but denied- breach but to his inaction. Had the Claimant s offer been considered, the Respondent might have been able to obtain a better bargain, considering the state of the market at the time 39. It was held in The Mihalis Angelos 40 that the fact that the right to cancel would have accrued and been exercised may affect the owner s damage claim, who therefore may be entitled to nominal damages. Megaw LJ opined In my view, where there is an anticipatory breach of contract, the breach is the repudiation once it has been accepted, and the other party is entitled to recover by way of damages the true value of the contractual rights which he has thereby lost, subject to his duty to mitigate. However as the Claimant previously demonstrated, the Respondent failed to do so and is therefore deprived of any ground to recover even nominal damages In any event, the claimant is not liable for any delay occurring out of the ship s arrest by a third party. In the event where the Respondent s breach was not held to be an anticipatory breach, the Claimant would still not be liable for damages. Indeed, in The North Anglia 41, Devlin J held that If something occurs on the voyage to the port of loading which delays the ship without her fault, then the owners are not liable (under the ETA clause). The arrest of the ship at the bunker port is not imputable to the Claimant, who could note have reasonably foresee the decision of the port authorities to retain the vessel and who, as previously demonstrated, was neither wrongful nor negligent in his conduct. By analogy with Devlin J s reasoning, the Claimant argues that he cannot be held liable for any damages whatsoever, and that the cancellation of the charterparty by the Respondent does not affect the Claimant s claim for freight, which remains due as demonstrated at length above. 39 Market Report p.99 of the Problem Question. 40 Maredelanto v. Bergbau Handel (The Mihalis Angelos) [1971] 1 Q.B [1956] 2 Lloyd s Rep

27 CONCLUSION There are no grounds to argue that the arbitral proceedings were not properly commenced. The Claimants provided a Notice of Arbitration in time and successfully, as there could be no doubt as to the identity of the legal entity that initiated the Arbitration. On the merits, it derives straight from the wording of the Reliable Tankers Standard Terms, clause 4, that the sum of US$4,945, is earned and remains due to be paid by the Respondents by way of freight. The said amount was payable upon lifting of subjects and, although it was not challenged that this moment had passed, no payment whatsoever was made on behalf of the Respondents. In addition, no matter of lack of consideration may arise, as the sum clearly relates to freight that was agreed to be paid in advance. The Claimants were punctual with all the obligations laid up upon them through the charterparty, and therefore no breach of the carriage contract whatsoever may be considered to have arisen on their part. Any action in tort could not be presented in the course of the current proceedings, as the Arbitral Tribunal lacks jurisdiction to decide on tortious matters. Finally, as a matter of fact, the charter was cancelled on 27 November, as per the provisions of the Claimant Standard Terms, clause 2. The cancellation was effected without recourse to either party whatsoever, thus disallowing any subsequent claim for damages that the Respondents may have suffered as a result of their election to cancel the charter. 27