FIFTEENTH ANNUAL INTERNATIONAL MARITIME LAW ARBITRATION MOOT COMPETITION 2014 UNIVERSITAS GADJAH MADA INDONESIA TEAM 6 MEMORANDUM FOR THE RESPONDENT

Transcription

1 FIFTEENTH ANNUAL INTERNATIONAL MARITIME LAW ARBITRATION MOOT COMPETITION 2014 UNIVERSITAS GADJAH MADA INDONESIA TEAM 6 MEMORANDUM FOR THE RESPONDENT ON BEHALF OF: AGAINTS: SUPER CHARTERS INC. RELIABLE HOLDINGS INC. RESPONDENT TEAM CLAIMANT CINDY RACHEL JESSICA DZULYAN WISHARDY ALWI KATINKA RACHEL SISWANTO MUHAMMAD ELDWIN ISLAMEY PULKERIA PROPRIETA DEWI EKARISTI KAY JESSICA

2 FIFTEENTH ANNUAL INTERNATIONAL MARITIME LAW ARBITRATION MOOT COMPETITION 2014 TEAM NO 6 MEMORANDUM FOR THE RESPONDENT ON BEHALF OF: AGAINST: SUPER CHARTERS INC. RELIABLE HOLDINGS INC. RESPONDENT CLAIMANT

3 TABLE OF CONTENTS TABLE OF CONTENTS... i LIST OF ABBREVIATIONS... iii TABLE OF AUTHORITIES... iv SUMMARY OF FACTS... 1 I. THE ARBITRAL TRIBUNAL HAS NO JURISDICTION TO HEAR THE DISPUTE... 3 A. The Respondent has the right of challenging the jurisdiction of this tribunal... 3 B. The Claimant has breached Clause 4 of the Respondent s Standard Terms... 3 C. This arbitral tribunal is not properly constituted... 5 I. THE CLAIMANT HAS BREACHED THE CHARTER PARTY... 7 A. The Respondent is entitled to repudiate the Charter Party... 7 B. The Respondent s act in enacting the repudiation is justifiable... 8 C. The Respondent has the right to claim losses... 9 D. The Respondent has the right to mitigate its losses as they see it fit II. THE CLAIMANT HAS NOT EXERCISED DUE DILIGENCE TO MAKE THE SHIP SEAWORTHY A. The Claimant has not fulfilled its obligation to exercise due diligence to make the ship seaworthy as it is written in the Hague-Visby Rules B. The financial unseaworthiness of the Vessel caused its arrestment at the bunker port which lead to damages and loss suffered by the Respondent III. THE CLAIMANT S FAILURE TO PROVIDE INFORMATION WHEN THE VESSEL WAS ARRESTED CONSTITUTES AS AN ACT OF OMISSION IV. THE CLAIMANT HAS NOT FULFILLED THE CONVENIENT DISPATCH AS STATED IN CLAUSE 2 OF THE CHARTER PARTY V. THE TERM OF CANCELLATION WITHOUT RECOURSE IN THE CLAIMANT S STANDARD TERMS CLAUSE 2 DOES NOT RELEASE EITHER PARTY FROM LIABILITY VI. THE RESPONDENT IS ENTITLED TO RECEIVE DAMAGES VII. THE CLAIMANT IS LIABLE FOR FREIGHT AND DAMAGES IN THE AMOUNT OF US$ , A. The Claimant is liable to pay increasing freight in the amount of us$ due the failure of the Claimant to meet the laycan i

4 B. The Respondent is not liable to pay the damages in full, as US$4,935,369.75, is considered as a contributory negligence C. The Respondent is entitled to get sums, due to delayed arrival in the loadport terminal, in the amount of US$450, PRAYER FOR RELIEF ii

5 LIST OF ABBREVIATIONS CLAIMANT: RESPONDENT: VESSEL: CHARTER PARTY: Reliable Holdings Inc. / Reliable Tankers Inc. Super Charterers The Reliable Butterfly Asbatankvoy Charter party between the Claimant and the Respondent STANDARD TERMS: The standard terms of each respective party ARBITRATION ACT: The Arbitration Act 1996 NOC: NOA: NOM: THE EXPERT REPORT: THE HAGUE-VISBY RULES: Notice of Cancellation Notice of Appointment Notice of Merger The report made by the expert Tim Bowman Protocol to Amend the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading (Brussels 1968) FIXTURE RECAP: The written recap telex sent by by both parties ETA: Estimated Time of Arrival of the vessel iii

6 TABLE OF AUTHORITIES Cases Afovos Shipping Co SA v R Pagnan & Fratelli (The Afovos) (1983). 1 Lloyd s Report Alfred C. Toepfer Schiffahrtsgesellschaft G.M.B.H v Tossa Marine Co. Ltd. (The Derby) [1984] 1 Lloyd s Rep AMB Generali Holding AG & Ors v SEB Trygg Holding Aktiebolag & Ors [2005] 1 WLR Associated Metals & Minerals Corp. v Alexander s Unity MV [1995] 41 F.3d Bank of Boston Connecticut v European Grain and Shipping Ltd. (The Dominique) [1989] A.C. 1056, Barker v. MacAndrew [1985] 18 CB (NS) Bentsen v Taylor [1893] 2 Q.B CA... 4 British Westinghouse Electric and Manufacturing Co. Ltd. v Underground Electric Railways Company of London Ltd., [1912] A.C Bunge Corporation v Tradax Export SA. (1981) 2 Llyod s Report Cehave NV v Bremer Handelsgesellschaft mbh (The Hansa Nord) [1975] 3 All ER Commonwealth v Amann.Aviaton Pty Ltd (1991) 174 CLR Cory v Thames Ironworks Co [ ] All ER Rep Decro-Wall International S.A. v Practitioners in Marketing Ltd [1971] 1 WLR Easybiz Investments v Sinograin Chinatex [2011] 1 Lloyd s Rep F.C. Bradley & Sons Ltd. v Federal Steam Navigation Co [1926] 24 Lloyd s Rep 446, iv

7 Fercometal Sarl v Mediterranean Shipping Co SA [1989] A.C Freeman v Taylor [1831] 8 Bing , 16, 17 Hadley v Baxendale [1854] 156 ER , 21 Harbour & General Works v Environment Agency (2000) 1 W.L.R Heyman v Darwins Ltd [1942] A.C 356, Hong Kong Fir Shipping Co v Kawasaki Kisen Kaisha [1962] 2 QB Karen Janet Eagle v Garth Maynard Chambers [2003] EWCA Civ Kopitoff v Wilson (1876) 1 QBD Korbetis v Transgrain Shipping BV (2005) EWHC 1345 (QB)... 4 lsaacs & Son v McAllum (1921) 3 KB MacAndrew v Chapple [1866] LR 1 CP , 16 Marbienes Compania Naviera S.A. v Ferrostaal A.G, (The Democritos) [1976] 2 Lloyd s Report Maredelanto Compania Naviera SA v Bergbau-Handel GmbH (The Mihalis Angelos) [1971] 1 Q.B. 164, , 9 Maredelanto Compania Naviera SA v Bergbau-Handel GmbH, (The Mihalis Angelos) [1970] 3 All 123 ECWA Civ , 18 McDonald v Dennys Lascelles Ltd. [1933] 48 C.L.R Mcfadden v Blue Star Line, (1905) 1 K.B Monella v Pizza Express (Restaurants) (2003) EWHC 2966 (Ch)... 4 Morrisey v S.S.A. & J. Faith [1965] 252 F. Supp , 13, 14 Pacific Interlink Sdn Bhd v Owner of the Asiar Star (The Asia Star) [2009] 2 Lloyd's Rep Radley v London & Northwestern Ry. Co [1874] L. R. 9 Ex Robinson v Harman [1848] 154 ER v

8 Routh v McMillan [1863] 2 H & C Taylor v Great Northern Rly Co [1866] LR 1 CP Tharros Shipping Co Ltd v Bias Shipping Ltd (The Griparion) [1994] 1 Lloyd s Rep The Henry W. Breyer. [1927] 17 F.2d Tidebrook Maritime Corporation v Vitol SA (The Front Commander) [2006] EWCA Civ 944, [2006] 2 All ER Comm Toryald Klaveness A/S v Arni Maritime Corp (The Gregos) [1995] 1 Lloyds Rep p Tuff v Warman [1875] 2 C. B. N. S Universal Cargo Carriers Corporation v Citati [1957] 2 Q.B Vitol SA v Norelf Ltd (The Santa Clara) [1996] A.C. 800; [1996] 3 All ER , 8 White and Carter v McGregor [1961] 3 All E.R Yamashita Shinninon Steamship Co v Elios SpA (The Lily Prima) (1976) 2 Lloyd s Rep Statutes Law Reform (Contributory Negligence) UK Act , 22 The Arbitration Act The Hague-Visby Rules... 11, 13 Other Authorities Black s Law Dictionary 4 th Edition Books Aikens, Sir Richard., Lord, Richard., and Bools, Michael D. (2006). Bills of Lading. United Kingdom: Informa Professional vi

9 Griggs, Patrick., Williams, Richard., and Farr, Jeremy. (2005). Limitation of Liability for Maritime Claims. 4 th Edition. New York: LLP McGee, A. (1998).Limitations Period. 3rd Ed.London: Sweet & Maxwell Tetley, W. (2008). Marine Cargo Claims (4th ed.). Toronto: Thomson Carswell... 18, 19 The Measurement of Damages in Carriage of Goods by Sea A Comparative Study of English and Chinese Law with a View to Possible Revisions to the Chinese Maritime Code and Other Legislation. UK:University of Exeter Wilson, John. (2010). Carriage of Good By Sea. 7 th Edition. UK : Pearson Journals Peter Aeberli. (2005). Jurisdictional Disputes under the Arbitration Act 1996: A Procedural Route Map. Arbitration International Vol. No. 3, LCIA,... 3 vii

10 SUMMARY OF FACTS 1. Reliable Tankers Inc. ( the Claimant ) is the ship owner of a VLCC (Very Large Crude Carrier), the Reliable Butterfly ( the Vessel ) and Super Charters ( the Respondent ) is an offshore entity who has chartered the Vessel. 2. On 10 th October 2011, the Respondent offered a proposal to conduct a business to load 900,000 BLS NHC in one of the Claimant s vessel from Blue Land to Indigo Land. 3. On 19 th November 2011, the Respondent and the Claimant had finally entered into a deal. The Respondent confirmed fully fixed, with subjects lifted at The Claimant confirmed that the Vessel had finished discharging cargo from the recent contract and started heading to bunker port a few days ago. 4. On 22 th November 2011, the Respondent learned from the back channels that the Vessel had been arrested at bunker port. The Respondent emphasized that if she does not sail by 25 th November, then she would not make the laycan, which could lead to disastrous effects at both load port and discharge port. The laycan was also narrowed to be 5 th December. 5. On 25 th December 2011, the Claimant finally confirmed that the Vessel could not be released from its arrestment in the bunker port and therefore cannot make her laycan. 6. On 27 th November 2011, the Respondent cancelled the Charter Party despite any revision on it; the Respondent would have declined them. The Respondent also had reserved all of their rights in relation to the Charter Party. The Respondent then claimed for the losses resulting from the breach of Charter Party conducted by the Claimant. 1

11 7. On 28 th December 2011, the Claimant confirmed that the Charter Party was cancelled without recourse. The Claimant rejected that they had breached the Charter Party. 8. On 3 rd January 2012, there was an article from a newspaper declaring that Reliable Tankers Inc. had merged with Reliable holdings Inc. and became Reliable Holdings Inc. by way of universal succession. 9. Both parties agreed to settle the dispute on 28 th January 2012 using arbitration in London, in accordance with the Arbitration Act or amendments thereto. The Claimant sent notice of arbitration to the Respondent and appointed Mr. Smith as arbitrator and Mr. John as the arbitrator for the Respondent. 10. On 12 th February 2012, the Respondent considered the Claimant s appointment of arbitrator as invalid because Reliable Tankers Inc. no longer existed as an entity, as it is had merged. Hence, the Respondent, in the separate letter, declared that the dispute had arisen because of breach of Charter Party that performed by the Claimant. 11. On 14 th March 2012, the Claimant gave its submissions in the name of Reliable Holdings Inc. and the Respondent submitted their defense and counterclaim submissions to Reliable Holdings Inc. 2

12 ARGUMENTS AS TO JURISDICTION I. THE ARBITRAL TRIBUNAL HAS NO JURISDICTION TO HEAR THE DISPUTE 1. The Respondent contends that this arbitral tribunal has no jurisdiction to hear the dispute because: (a) The appointment of arbitrator by the Respondent does not prevent the Respondent from the right of challenging the jurisdiction of this tribunal; (b) The Claimant has breached Clause 4 of Super Charter s Standard Terms; (c) This Arbitral Tribunal is not properly constituted. A. The Respondent has the right of challenging the jurisdiction of this tribunal 2. An appointment of an arbitrator by a party in an arbitral proceeding does not prevent the party to raise jurisdictional objections. 1 In this present case, the Respondent appointed an arbitrator by a letter on 12 th February The Respondent may challenge the jurisdiction of the arbitral tribunal, including the questions as to the propriety of the constitution of tribunal. 3 B. The Claimant has breached Clause 4 of the Respondent s Standard Terms 3. The Respondent s Standard Terms are incorporated into the Charter Party. 4 This means that both parties are intended to give binding effect on the terms. 5 The 1 The Arbitration Act 1996, s. 30 (1); Peter Aeberli. (2005). Jurisdictional Disputes under the Arbitration Act 1996: A Procedural Route Map. Arbitration International Vol. No. 3, LCIA, pg , retrieved from: 2 Evidence Brief, p The Arbitration Act 1996 section 30 (1). 4 Evidence Brief, p Maredelanto Compania Naviera SA v Bergbau-Handel GmbH Mihalis Angelos [1970] 2 Lloyds Rep 43 CA at 47; White and Carter v McGregor [1961] 3 All E.R. 1178; Vitol SA v Norelf Ltd (The Santa Clara) [1995] Lloyds Rep ; Toryald Klaveness A/S v Arni Maritime Corp (The Gregos) [1995] 1 Lloyds Rep p3; 3

13 Respondent submits that the application of Clause 4 of the Respondent s Standard Terms debars the Claimant in commencing this proceeding as it proceeded as "Reliable Tanker Inc" at the first instance. Clause 4 of the Respondent s Standard Terms contains the stipulation on limitation of time for the Claimant in submitting claims against the Respondent as those limitations of time is considered as a timebar provision. 6 Time-bar is a contractual time limit for commencing arbitration that require claims and supporting documents to be delivered to the other party within a specific period, for example, 60 days from the completion of discharge which the claims are waived and time barred and so cannot be pursued in arbitration There were a total of 20 days for the Claimant to commence suit after the discharge would have been completed which was 30 th January Eventually, the Respondent has agreed to extend the limit from 20 days to 30 days for the Claimant to commence the suit, which is 12 th February. 9 However, the acceptance for the Claimant to commence suits it still invalid, 10 since it was merely only an oral agreement that has not been written formally. 11 This is conflicting with Clause 5 of the Respondent s Standard Terms, which stated that all changes must be in a written form. 12 Bentsen v Taylor [1893] 2 Q.B CA; lsaacs & Son v McAllum (1921) 3 KB 377; Routh v McMillan [1863] 2 H & C McGee, A. (1998).Limitations Period. 3rd Ed.London: Sweet & Maxwell. 7 Korbetis v Transgrain Shipping BV (2005) EWHC 1345 (QB); Harbour & General Works v Environment Agency (2000) 1 W.L.R. 950; Monella v Pizza Express (Restaurants) (2003) EWHC 2966 (Ch). 8 Evidence Brief, p Ibid, p Ibid. 11 Ibid. 12 Ibid, p

14 C. This arbitral tribunal is not properly constituted 5. The Respondent contends that the appointment of arbitrator by Reliable Tankers Inc dated 28 th January 2012 was not valid. According to the Arbitration Act article 12 (3) (4) the commencement of arbitration is defined: Where the arbitrator or arbitrators are to be appointed by the parties, arbitral proceedings are commenced in respect of a matter when one party serves on the other party or parties notice in writing requiring him or them to appoint an arbitrator or to agree to the appointment of an arbitrator in respect of that matter. In this present case, the Claimant appointed an arbitrator in the letter dated 28 th January The commencement was invalid because the Claimant used the incorrect company name, which was Reliable Tanker Inc, instead of Reliable Holding Inc as the surviving company due to the merger by both companies. 14 The Claimant informed the Respondent that there was a misnomer through the letter dated 24 th February If an arbitration has been commenced in the name of or against the incorrect party as the name of either party has been changed due to merger, the notice may nevertheless be valid, as long as the error was due to an oversight misnomer, in these circumstances, the error can be corrected by amending the relevant document. 16 The Claimant could not plead that it was only a misnomer and act as the first party in the arbitration proceedings. Even if the misnomer could be corrected, the Claimant is bound by the time-bar provision in the Clause 4 of 13 Evidence Brief, p Ibid. 15 Ibid, p AMB Generali Holding AG & Ors v SEB Trygg Holding Aktiebolag & Ors [2005] 1 WLR

15 Respondent s Standard Terms which the time-bar provision is counted 20 days after the discharging would have been completed. In addition, no notice has been given before the time-bar has elapsed. The Claimant was supposed to give the notification as soon as possible after the commencement of arbitration on 28 th January, in order for the Respondent to understand the commencement that has been conducted by the Claimant. 17 Therefore, this arbitral tribunal has not been properly constituted and the valid commencement of arbitration has been conducted by the Respondent on 12 th February The Respondent has acted as the first moving party through the commencement of arbitration on 12 th February. 18 The time-bar provision only applies to a party that will submit a claim against the Respondent. 19 Since there is no time-bar provision by the Claimant, the commencement of arbitration dated 12 th February by the Respondent is legally valid. This is strengthened by the letter dated 24 th February from the Claimant which had appointed an arbitrator in the respect of the commencement by the Respondent dated 12 th February Easybiz Investments v Sinograin Chinatex [2011] 1 Lloyd s Rep Evidence Brief, p Ibid, p Ibid, p

16 ARGUMENTS AS TO MERITS I. THE CLAIMANT HAS BREACHED THE CHARTER PARTY A. The Respondent is entitled to repudiate the Charter Party 8. The Claimant as the owner of the Vessel is bound by the Charter Party as a contract with the Respondent as the charterer. It is stated in the Charter Party that the Claimant and the Respondent had agreed upon a laycan date which was dated 5 th December A laycan date is the earliest day upon which an owner can expect his charterer to load and the latest day upon which the vessel can arrive at its appointed loading place without being at risk of being cancelled. 22 The Claimant as the ship-owner is obliged to ensure that the Vessel was to meet her laycan. The Respondent submits that the Claimant had failed to ensure this duty. 9. In accordance with the communication between the Respondent and the Claimant, the Vessel was planned to sail by the date of 25 th November. It was specifically stated by the Respondent that if the Vessel had not sailed by the date of 25 th November it would bring disastrous effect at the loadport and disport. The Vessel was arrested and was unable to fulfill the specific date agreed upon by both parties. The Claimant has informed the Respondent that the Vessel is unable to meet its laycan time and is unable to give an updated laycan date until the Vessel has been released. 23 The Claimant had accepted this as a repudiation of the contract as the Respondent had sent a NOC to the Claimant Ibid.p Tidebrook Maritime Corporation v Vitol SA (The Front Commander) [2006] EWCA Civ 944, [2006] 2 All ER Comm Evidence Brief, p Ibid, p

17 10. The act of the Claimant by stating that they cannot fulfill the laycan date can be considered as a breach to the contract. To constitute repudiation, it must fulfill the requirements of which the threatened breach must be such as to deprive the injured party of a substantial part of the benefit to which he is entitled under the contract. 25 The failure to proceed to the loading port has substantially deprived the benefit of the Respondent as loading process could not start. The letter given by the Claimant to the Respondent regarding that the Vessel which is unable to meet its laycan date is a clear and directed breach of the contract to the Respondent which allows them to repudiate the contract. B. The Respondent s act in enacting the repudiation is justifiable 11. The Respondent is able to treat the contract as repudiated in reliance of anticipatory breach. An anticipatory breach is similar to repudiatory breach as in they take the form of a clear and unequivocal statement that the performance will not be forthcoming. 26 Anticipatory breach applies when the promisor is such as to lead a reasonable person to the conclusion that he does not intend to fulfill his obligations under the contract when the time for performance arrives. As in this case the Claimant has the obligation to perform, which was not conducted by way of the letter given to the Respondent stating the failure to fulfill the specified laycan date In order for the Respondent to enact the repudiation it first must be accepted by the Claimant. 28 There is no particular form of accepting the repudiation. 29 Therefore, through communicating with the party at fault noticing that they are at 25 Decro-Wall International S.A. v Practitioners in Marketing Ltd [1971] 1 WLR Cehave NV v Bremer Handelsgesellschaft mbh (The Hansa Nord) [1975] 3 All ER Evidence Brief, p Vitol SA v Norelf Ltd (The Santa Clara) [1996] A.C. 800; [1996] 3 All ER Ibid. 8

18 the decision to terminate the contract is sufficient enough, 30 as the Respondent had conducted by sending the NOC to the Claimant. 13. A party is allowed to anticipate an inevitable event and is not obliged to wait until the circumstances occur. 31 The letter given by the Claimant to the Respondent stating that it is unable to fulfill the specified laycan date is enough to be considered as an anticipatory breach as the performance will not be achieved. 14. In the alternative, the Respondent s act is justifiable as it is exercising its rights under article 2 of the Claimant s standard terms. Article 2 stipulates that, if it becomes evident that ship will miss her cancelling date, owner to give a new eta and laycan which charterer must either confirm or decline within 72 hours if charterer elects to decline, then Charter Party to be cancelled 32 Hence, the Respondent is not obliged to accept the new laycan date suggested by the Claimant as they have the right to choose whether to accept the newly adjusted date or not. Therefore, the Respondent is entitled to cancel the charter based on article 2 as the Vessel is unable to meet its laycan time in accordance with the terms of the Charter Party. 33 C. The Respondent has the right to claim losses 15. When a party to a contract, upon a breach by the other contracting party of a condition of the contract elects to treat the contract as no longer binding upon him both parties are discharged from further performance of the contract, but the 30 Heyman v Darwins Ltd [1942] A.C 356, 361; Maredelanto Compania Naviera SA v Bergbau-Handel GmbH (The Mihalis Angelos) [1971] 1 Q.B. 164, Universal Cargo Carriers Corporation v Citati [1957] 2 Q.B Evidence Brief, p Fercometal Sarl v Mediterranean Shipping Co SA [1989] A.C

19 rights are not divested or discharged which have already been unconditionally acquired. 34 Therefore, although the Charter Party has been cancelled, the Respondent still has the rights as the charterer to claim for losses from the Claimant. 16. As it was held in the case of The Derby 35, a charterer may claim for losses of profits from the owner of the vessel on a voyage charter which could not be performed because of delays due to the owner s fault, as long as the loss could be proven. To prove that the losses received by the Respondent were clear enough, it can be seen from the Respondent s need to find another vessel to deliver the cargo. Thus, the Respondent has the right to claim losses from the Claimant as the voyage charter could not be performed in the specified laycan date. D. The Respondent has the right to mitigate its losses as they see it fit 17. Upon a breach of contract the injured party has the obligation to take reasonable steps to mitigate its losses. 36 In mitigating its losses the Respondent is not under any obligation other than which a reasonable and prudent man would ordinarily take in the course of his business After learning that the Vessel was unable to meet its laycan, the Respondent had looked for a replacement vessel. Although the Claimant had offered a sister VLCC, the Respondent had already found 2 suezmaxes. If the Respondent had 34 First established in McDonald v Dennys Lascelles Ltd. [1933] 48 C.L.R 457, affirmed by Lord Brandon of Oakbrook in Bank of Boston Connecticut v European Grain and Shipping Ltd. (The Dominique) [1989] A.C. 1056, Alfred C. Toepfer Schiffahrtsgesellschaft G.M.B.H v Tossa Marine Co. Ltd. (The Derby) [1984] 1 Lloyd s Rep British Westinghouse Electric and Manufacturing Co. Ltd. v Underground Electric Railways Company of London Ltd., [1912] A.C Ibid. 10

20 taken the Claimant s offer they would have suffered losses such as risk of production shutdown and fees at loadport terminals The Respondent has no obligation to adopt the method as suggested by the Claimant by using the sister VLCC if there is a far more reasonable method. It was held in the case of The Griparion, 39 in mitigating its losses the party is entitled to adopt the more reasonable method as it would have incurred less costs. Therefore, the Respondent is entitled to choose the two 2 suezmax as they would have incurred more costs if they had stuck with the Vessel. 40 II. THE CLAIMANT HAS NOT EXERCISED DUE DILIGENCE TO MAKE THE SHIP SEAWORTHY A. The Claimant has not fulfilled its obligation to exercise due diligence to make the ship seaworthy as it is written in the Hague-Visby Rules 20. The ship-owner is always under an obligation to exercise due diligence to make the vessel seaworthy. 41 It is written in Article 3 (1A) of The Hague Visby Rules that the ship-owner shall be bound before, and at the beginning of the voyage to exercise due diligence to make the ship seaworthy. 42 Due diligence is an act with a certain standard of care, to make the vessel seaworthy. To be deemed seaworthy, the vessel must have that degree of fitness which an ordinary careful owner would require his vessel to have at the commencement of her voyage having regard to all the probable circumstances of it Evidence Brief, p Tharros Shipping Co Ltd v Bias Shipping Ltd (The Griparion) [1994] 1 Lloyd s Rep Evidence Brief, p The Hague-Visby Rules Article 3 (1A). 42 Ibid. 43 F.C. Bradley & Sons Ltd. v Federal Steam Navigation Co [1926] 24 Lloyd s Rep 446,

21 21. Seaworthiness could be defined as the fitness of the vessel in all respects to encounter the ordinary perils of the sea that could be expected on her voyage, and to deliver the cargo safely to its destination. 44 In the case of Morrisey v S.S.A. & J. Faith, the court reasoned that the term seaworthy should not be limited to its denotation. The seaworthiness analysis requires more than an inquiry into its physical facilities. Rather, carrying on the tradition of expanding the connotative ambit of the term, the court concluded that the duty to provide a seaworthy vessel imposed the obligation so that the ship-owner must make reasonable effort to furnish a vessel which can complete the voyage for which she solicits business The Vessel was arrested in the bunker port before its voyage to the loading port, because the Claimant had not paid its debt nor put up security to the bunker port. 46 A ship is not seaworthy if, when it sails, it is susceptible of being arrested. 47 In the case of Morrisey v S.S. A. & J. Faith, the vessel was arrested by unsatisfied creditors because of the ship-owner s due debt that has not been paid. It was held in the case that, If the ship-owner leaves the vessel unprotected against the foreseeable seizure or arrest by creditors, then she is just as liable as if she were left unprotected against the ordinary perils of the navigation. 48 Therefore as the vessel had been arrested the Claimant is liable for not providing a seaworthy vessel. 44 Mcfadden v Blue Star Line, (1905) 1 K.B. 697, also in Kopitoff v Wilson (1876) 1 QBD Morrisey v S.S.A. & J. Faith [1965] 252 F. Supp Evidence Brief, p Morrisey v S.S.A. & J. Faith [1965] 252 F Supp Judgment of the Judge Cornell JC in Morrisey v S.S.A. & J. Faith [1965] 252 F. Supp

22 23. The arrestment of the Vessel in bunker port caused its failure to meet her laycan that lead to damages suffered by the Respondent, 49 and disastrous effect in the loading port as well as in the discharging port. 50 Thus, the duty to exercise due diligence to provide a seaworthy vessel is breached when the financial status of the ship-owners is such that interruption or termination of the voyage is foreseeable Where the Respondent can show that the Claimant has failed to exercise due diligence to provide a seaworthy, properly manned, and cargoworthy vessel, the Claimant is unable to rely upon the liability exceptions contained in Article 4 (2) of the Hague-Visby Rules. 52 Therefore, the Claimant has to be liable for the damages and loss suffered by the Respondent, because they had not exercised due diligence to make the ship financially seaworthy. 53 B. The financial unseaworthiness of the Vessel caused its arrestment at the bunker port which lead to damages and loss suffered by the Respondent 25. Financial unseaworthiness was firstly known in the case of Henry W. Breyer where the vessel was seized by the creditors by reason of the ship-owner s financial inability to pay for the debt. 54 In this case, the Vessel was arrested by the third party in the bunker port before its voyage to the loading port, on the ground that the Claimant has indebted to the bunker suppliers, and has not paid the due 49 Evidence Brief, p Ibid, p Morrisey v S.S.A. & J. Faith [1965] 252 F. Supp The Hague-Visby Rules Article 4 (2). 53 Ibid. (1). 54 The Henry W. Breyer. [1927] 17 F.2d

23 debt or put up security since its fund was limited. 55 In the case of Associated Metals & Minerals Corp. v Alexander s Unity MV, the vessel suffered several arrests in its voyage because of its outstanding debt to numerous group of creditor, and the court held that the ship-owner is at fault for providing the vessel that was considered as financially unseaworthy Financial unseaworthiness of the Vessel gave rise to its arrestment in the bunker port by the third party, even it virtually generated loss and damages suffered by the Respondent. 57 The vessel can be deemed as financially unseaworthy when it is being a subject of arrest by the third party because of the ship-owner s inability to pay for the due debt or because of the ship-owner s financial crisis. 58 III. THE CLAIMANT S FAILURE TO PROVIDE INFORMATION WHEN THE VESSEL WAS ARRESTED CONSTITUTES AS AN ACT OF OMISSION 27. An act of omission is the failure to do something that is legally required, 59 which in this case occurs when the Claimant did not report complete and important information as the vessel was arrested. 60 The Claimant s standard terms stated they are obliged to [..] to advise immediately if ETA changes by 3 hours or more. 61 The arrest in bunkerport is a probable cause of delay and change of ETA, however the Claimant did not inform the Respondent properly towards the circumstances. The Respondent otherwise has incurred the information through 55 Evidence Brief, p Associated Metals & Minerals Corp. v Alexander s Unity MV [1995] 41 F.3d Evidence Brief, p Morrisey v S.S.A. & J. Faith [1965] 252 F.Supp Black s Law Dictionary 4 th Edition. pg Evidence Brief, p Ibid, p

24 back channels on 22 th November and the Claimant had responded with their inability to lift the arrest and to provide a revised ETA Article 4 (5) (e) of the Hague-Visby Rules provides that a carrier or ship-owner shall be liable when it is proven that the damages had been the result from the act or omission of the carrier done with the intent to cause damage, or recklessly and with the knowledge that damage would probably result. Probable damage has been viewed as something likely to happen. 63 Actual knowledge can be proven by direct evidence or by the drawing of inferences based on the facts of the case. 64 The Respondent contends that the Claimant has satisfied the requirement. 29. The Claimant has knowledge that delay from the date will cause disastrous effect in the loadport and disport as they have been informed by the Respondent about the probable damage. 65 Thus, the Respondent insisted that the vessel is to sail on 25 th November and narrow the laycan to 5 th December. 66 The Claimant fulfills the intention and knowledge requirement under article 4 (5) (e) and is at fault towards the omission of information. IV. THE CLAIMANT HAS NOT FULFILLED THE CONVENIENT DISPATCH AS STATED IN CLAUSE 2 OF THE CHARTER PARTY 30. In a voyage Charter Party the ship-owner has the obligation to proceed with reasonable dispatch not only to the contract voyage itself, but also on the approach voyage. 67 Reasonable dispatch is the reasonable time which within a 62 Ibid, p Aikens, Sir Richard., Lord, Richard., and Bools, Michael D. (2006). Bills of Lading. United Kingdom: Informa Professional. Pg Griggs, Patrick., Williams, Richard., and Farr, Jeremy. (2005). Limitation of Liability for Maritime Claims. 4 th Edition. New York: LLP. pg Ibid. 65 Evidence Brief, p Ibid. 67 Freeman v Taylor [1831] 8 Bing 124; MacAndrew v Chapple [1866] LR 1 CP

25 carrier can deliver using reasonable exertions. 68 The approach voyage implies for the voyage from the place which the vessel is situated when the charter has been signed to the loading port or the place of delivery specified in the charter. 31. The Claimant submits that the Respondent had not fulfilled the express term contained in the Charter Party regarding the convenient dispatch. It was held in the case of The Mihalis Angelos, 69 that once a condition in the charter party was clearly breached the Charterers are able to terminate the contract on the basis of repudiation. There is an express term in the Charter Party for the Claimant to proceed with reasonable dispatch. It is stated in part 2 clause 1 of the Charter Party, The vessel shall, with all convenient dispatch, proceed as ordered to Loading Port(s)... It is clearly seen that the Claimant has breached this clause as the Vessel had not arrived at the loading port in the specified time in the Charter Party. 32. Therefore, the Respondent is able to treat the contract with the Claimant as being repudiated. The charterer is able to treat the contract between the ship-owner as repudiated if the delay has deprived the charterer of the whole benefit of the contract. 70 As the Vessel had not arrived at the loading port as stated in article 1 of the Charter Party it has deprived the Respondent of the whole benefit of the contract which enables the Respondent to treat the contract as repudiated. Alternatively, the act done by the Respondent in cancelling the Charter Party was 68 Taylor v Great Northern Rly Co [1866] LR 1 CP Maredelanto Compania Naviera SA v Bergbau-Handel GmbH (The Mihalis Angelos) [1970] 2 Lloyd s Rep MacAndrew v Chappie [1866] L.R. 1 C.P. 643, Freeman v Taylor [1831] 8 Bing 124, Hong Kong Fir Shipping Co v Kawasaki Kisen Kaisha [1962] 2 QB

26 justified on the basis of the cancellation clause contained in the Charter Party and the repudiation done by the Claimant. V. THE TERM OF CANCELLATION WITHOUT RECOURSE IN THE CLAIMANT S STANDARD TERMS CLAUSE 2 DOES NOT RELEASE EITHER PARTY FROM LIABILITY 33. The Respondent contends the fact that the Charter Party was cancelled without recourse did not release either party from liabilities therein. The cancelling clause merely affords the charterer an opportunity to repudiate any further obligation under the Charter Party, 71 but still entitling of recoverable damages if the shipowner has breached his obligation to proceed to the loading with reasonable dispatch Thus the Respondent as a voyage charterer who exercises the right to cancel is not entitled to damages for any delay involved in the vessel failing to meet the cancellation date, unless such delay is the result of the ship-owner s failure to exercise reasonable dispatch. 73 By that means liability of damages does not ceased during cancellation as long as there is a proven breach of the Charter Party, a breach of providing a reasonable dispatch. 35. In this present case, the Respondent is entitled to receive damages as the delay constitute as multiple violations of the Charter Party including failure to proceed with reasonable dispatch. 74 In a voyage charter, it is an implied undertaking that the vessel must proceed on the voyage, load, and discharge at the time agreed or 71 Marbienes Compania Naviera S.A. v Ferrostaal A.G, (The Democritos) [1976] 2 Lloyd s Report Wilson, John. (2010). Carriage of Goods by Sea. 7 th Edition. UK : Pearson pg Afovos Shipping Co SA v R Pagnan & Fratelli (The Afovos) (1983). 1 Lloyd s Report 335, (per Lord Diploc), Bunge Corporation v Tradax Export SA. (1981) 2 Llyod s Report 1, (per Lord Roskill). 74 Charter Party Clause 1. 17

27 within a reasonable time when the contract does not expressly fix any time for the performance The Claimant has failed to deliver the Vessel with convenient dispatch as the Vessel was arrested in bunker port before she began her voyage. The Vessel was unable to sail as scheduled on 25 th November 2011 and failed to meet her laycan on 5 th December The tribunal in the case of Freeman v Taylor opines that a delay must be sufficiently long to frustrate the object of the charter. 77 In this case, the Claimant was informed of this inability of Vessel to make her laycan which could have disastrous effect at the loadport and disport. 78 However, the Claimant was neither able to lift the arrest nor give a revised laycan with specific dates. 79 This uncertainty has put the Respondent at risk of a possible prolonged and unnecessary delay. A prolonged and unnecessary delay gives the injured party right to claim for damages. 80 The breach of the Charter Party may occur even before the cancelling date arrives; 81 hence, it justifies the Respondent s action of terminating the Charter Party on 27 th November In conclusion, the term without recourse will not release the Claimant s liability as the cancellation is followed by failure to proceed with reasonable dispatch, which was sufficient to claim for damages. 75 Wilson, John. (2010). Carriage of Good By Sea. 7 th Edition. UK : Pearson. pg Evidence Brief, p Freeman v Taylor [1831] 8 Bing Evidence Brief, p Ibid, p Barker v. MacAndrew [1985] 18 CB (NS) Maredelanto Compania Naviera SA v Bergbau-Handel GmbH, (The Mihalis Angelos) [1970] 3 All 123 ECWA Civ 4. 18

28 VI. THE RESPONDENT IS ENTITLED TO RECEIVE DAMAGES 38. It is a well-established principle of common law that any innocent party is entitled to receive damages to be put it in the same position it would have been had the contract been performed. 82 In the case of Hadley v Baxendale, 83 it was held that, the innocent party ought to receive damages which are damages which arise naturally or damages which arise from special circumstances Firstly, the damages which arise naturally arise from breach of contract and have to be reasonably accepted and known as the result of such breach of contract by parties at the time of making contract. Secondly, the damages which arise from special circumstances arise from special situations which have been communicated by parties at the time of making the contract and can be reasonably expected to have foreseen as a probable effects of breach. 85 In this present case, the Respondent suffered the damages which arise naturally. 40. The Claimant is in breach of the Charter Party as they had failed to exercise due diligence and convenient dispatch. 86 This breach caused the repudiation of the Charter Party by Respondent and the Respondent had to make replacement fixtures for alternative It is common in shipping contracts that, when the ship-owner fails to provide a vessel, it is reasonably foreseeable that the charterers will seek for a substitute vessel for alternative. 88 In this present case, the Claimant has failed to provide the 82 Tetley, W. (2008). Marine Cargo Claims (4th ed.). Toronto: Thomson Carswell, p Hadley v Baxendale (1854) EWHC Exch J70; (1854) 9 Ex Ch 341; 156 ER Tetley, W. (2008). Marine Cargo Claims (4th ed.). Toronto: Thomson Carswell, p Tetley, W. (2008). Marine Cargo Claims (4th ed.). Toronto: Thomson Carswell, p Argument Supra II and IV. 87 Evidence Brief, p Yamashita Shinninon Steamship Co v Elios SpA (The Lily Prima) (1976) 2 Lloyd s Rep 487; Wei, Fan The Measurement of Damages in Carriage of Goods by Sea A Comparative Study of English and Chinese Law with a View to Possible Revisions to the Chinese Maritime Code and Other Legislation. 19

29 Vessel and it caused the Respondent to repudiate the Charter Party. Consequently, the Respondent made the replacement fixtures to replace the Vessel and it is reasonably foreseeable by both parties. 42. The replacement fixtures caused an increase in freight in the amount of approximately US$824,000 and losses suffered from delayed planned maintenance work to the load port and disport terminals in the amount of US$100,000 and US$300, The Respondent submits that the amounts stated are the damages which arise naturally which is resulted from the repudiation of the Charter Party due to the breach of the Charter Party which caused the fixture replacements. Therefore, the Respondent as the innocent party submits that it is entitled to receive damages of the amount stated. VII. THE CLAIMANT IS LIABLE FOR FREIGHT AND DAMAGES IN THE AMOUNT OF US$ ,00 A. The Claimant is liable to pay increasing freight in the amount of us$ due the failure of the Claimant to meet the laycan 43. The inability of the Vessel to meet her laycan because of its arrestment in the bunker port had evidently caused the Respondent to suffer losses and damages, including the increase of freight in the amount of approximately US$ 824,000,00, that being the difference between the charter freight and the amount payable under the replacement fixtures secured by the Charterers. 90 UK:University of Exeter, p. 211, retrieved from: 89 Evidence Brief, p Evidence Brief, p

30 44. Freight costs under the Charter Party was US$ However due to the Vessel s failure to meet her laycan, and to provide a replacement vessel with the same sized tonnages on dates, the Respondent had found 2 suezmax with the costs of US$ The difference of the amount payable for freight between charter freight and her replacement by the charterer is equal to US$ The Claimant is entitled to pay the freight and damages suffered by the Respondent, because it is written in the Charter Party that damages for breach of the Charter Party shall include all provable damages, and all cost of suit and attorney fees incurred in any action hereunder. 94 The measure of damages when a party has not fulfilled his contract is what might be reasonably expected in the ordinary course of things to flow from the non-fulfillment of the contract, not more than that, but what might be reasonably expected to flow from the nonfulfillment of the contract in the ordinary state of things, and to be the natural consequences of it In the breach of contract, the party who has suffered detriment resulting from breach is to be placed in the position they would have been in before the breach. A party sustains loss by reason of a breach of contract, shall be compensated, with respect to damages, as if the contract had been performed. 96 Therefore, the breaching party shall be liable for all the losses that the contracting parties have foreseen Ibid, p Ibid, p Ibid. 94 Ibid, p Cory v Thames Ironworks Co [ ] All ER Rep Robinson v Harman [1848] 154 ER 363; Commonwealth v Amann.Aviaton Pty Ltd (1991) 174 CLR Hadley v Baxendale [1854] 156 ER

31 47. In The Asia Star, where the principle that is applied derived from English Authorities, it is decided by the court that where a contract of Carriage of Goods by Sea was breached because of the ship-owner s failure to provide the Charterer with the promised vessel, the usual mitigation measures involved the Charterer either engaging an alternative vessel to carry the same goods, or compensating the Charterer with certain sum of money. The Charterer has the right to select the best reasonable option that was available. 98 Therefore, the Respondent has the right to choose whether to accept or deny the alternative vessel which was offered by the Claimant. B. The Respondent is not liable to pay the damages in full, as US$4,935,369.75, is considered as a contributory negligence 48. The amount of US$4,935,369.75, were damages claimed by the Claimant on 14 th March. 99 English Law stipulates that, 100 a person cannot recover damages in full, if the damages suffered were the result of his own fault and partly from another, 101 the principle was known as contributory negligence. 102 As in this case, the damages amounts to US$4,935, were not one-sided fault; it is also the result of the Claimants fault. 49. Due to the facts that, the Claimant had failed to provide a proper ETA in result to the arrestment of the Vessel in the bunkerport which made the Vessel unable to meet its laycan. 103 The Claimant has an obligation under Clause 2 of the Standard Terms, which stipulates that, it is an obligation for the Claimant to give a revised 98 Pacific Interlink Sdn Bhd v Owner of the Asiar Star (The Asia Star) [2009] 2 Lloyd's Rep Evidence Brief, p Law Reform (Contributory Negligence) UK Act Radley v London & Northwestern Ry. Co [1874] L. R. 9 Ex. 71; Tuff v Warman [1875] 2 C. B. N. S Law Reform (Contributory Negligence) UK Act 1945 Art Evidence Brief, p

32 ETA, if it becomes evident that the Vessel will miss her cancelling date, 104 the Respondent is able to invoke the cancellation clause The damages in the amount of US$4,935, were part of the Claimant s failure to provide a performance, as it is explained on the argument above. In the case of Karen Janet Eagle v Garth Maynard Chambers, the Claimant had claimed damages from the Respondent, but the cause of the loss was not fully caused by the Respondent as the Claimant was partially at fault. It was held that the Respondent was only liable for 60% of the costs of the damages, as the damages were based on contributory negligence In relation with this case, if the Claimant had not failed to provide a performance, the Respondent subsequently would not cancel the contract, thus, the damages in the amount of US$4,935, does not need to arise. 107 Hence, the Respondent contends that they are not liable to pay damages in full, as UK Contributory Negligence Act 1945 stipulates that, the jury shall determine the total damages which would have been recoverable if the claimant had not been at fault and the extent to which those damages are to be reduced. 108 Therefore, the amount of US$4,935, shall be reduced due to UK Contributory Negligence C. The Respondent is entitled to get sums, due to delayed arrival in the loadport terminal, in the amount of US$450, The Claimant had ensured that the Vessel will begin its voyage on 25 th November, but in fact the Vessel was arrested in the bunker port and failed to 104 Ibid, p Ibid, p Karen Janet Eagle v Garth Maynard Chambers [2003] EWCA Civ Law Reform (Contributory Negligence) UK Act 1945, Art Ibid, Art.1 (6). 109 Ibid. 23

33 commence its voyage to the loading port. It caused detriment to the Respondent, because the sums due and payable to the loadport terminal/sellers pursuant to the relevant sale contract for delayed arrival, in the amount of US$ 150, The Respondent is entitled to get the sums, due to delayed arrival in the disport terminal, in the amount of US$300,000 in respect of losses suffered from delayed planned maintenance work Evidence Brief, p Ibid, p

34 PRAYER FOR RELIEF In light of the above submissions, the Respondent requests this Arbitral Tribunal to: DECLARE that this Tribunal does not have jurisdiction to hear this proceeding; REJECT the Claimant s claim that the Respondent is liable for paying the freight under the Charter Party ADJUDGE that the Claimant a) Is not entitled to receive Freight; b) They are at fault for the arrestment of the vessel; c) They are liable for not fulfilling the laycan; And, ADJUDGE that the Respondent a) Was entitled to repudiate the contract; b) Was able to rely on the cancellation clause contained in the Charter Party; c) Is entitled to receive damages in the amount of US$ ,00 25