FIFTEENTH INTERNATIONAL MARITIME LAW ARBITRATION MOOT COMPETITION 2014 MEMORANDUM FOR THE CLAIMANTS IN THE MATTER OF AN ARBITRATION BETWEEN.

Transcription

1 FIFTEENTH INTERNATIONAL MARITIME LAW ARBITRATION MOOT COMPETITION 2014 MEMORANDUM FOR THE CLAIMANTS IN THE MATTER OF AN ARBITRATION BETWEEN RELIABLE TANKERS INC Claimants and SUPER CHARTERS Respondents TEAM NO. 2 CHU, Joshua Allen Kiu Wah YIM, Choi Wai Bridget SO, Lok Kan HUI, Ka Lam

2 TEAM 2 CLAIMANTS MEMORANDUM

3 TABLE OF CONTENTS LIST OF ABBREVIATIONS... II LIST OF AUTHORITIES... II SUMMARY OF FACTS... 1 ARGUMENTS... 3 I. The Tribunal Has the Jurisdiction to Hear this Dispute (i) All rights and liabilities in relation to the Charter-party have already been transferred from the CLAIMANTS to RHI by virtue of universal succession (ii) RHI is equally bound as a party to the arbitration proceedings as a result of universal succession... 4 (iii) The arbitration proceedings were commenced within the time frame as stipulated by the time bar clause... 5 II. English Law Governs the Charter-party Contract III. The Charter-party was Validly Cancelled by Both Parties without Recourse IV. The Charter-party was also Breached by the Respondents A. The RESPONDENTS breached their duty to co-operate (i) The RESPONDENTS breached their duty to co-operate when they failed to accept any later laycan or ETA (ii) The RESPONDENTS failed their duty to cooperate when they failed their legal duty to provide the CLAIMANTS with reasonable time to remedy the situation B.The RESPONDENTS have no right to pre-emptively cancel the Charter-party. 10 (i) The RESPONDENTS have no automatic right to repudiation for anticipatory breach (ii) The RESPONDENTS do not have any legal or contractual right to pre-emptively repudiate the contract (iii) The RESPONDENTS prediction that the CLAIMANTS will miss the date of the laycan is still a mere prediction at best V. The CLAIMANTS Are Entitled to Freight and Damages A. Freight has already been earned by the CLAIMANTS (i) Freight was deemed earned upon lifting of the subject pursuant to Clause (ii) Charter-party was cancelled without recourse to either party (iii) The RESPONDENTS must not be allowed to go back on their promise B. Alternatively, the CLAIMANTS are entitled to sum of freight by way of damages C. The CLAIMANTS has taken all reasonable steps to mitigate losses D. The RESPONDENTS cannot claim damages (i) The CLAIMANTS did not breach the Charter-party (ii) The damages that the RESPONDENTS suffered were self-inflicted pg. I

4 LIST OF ABBREVIATIONS Reliable Tankers Inc. Reliable Holdings Inc. Reliable Butterfly ASBATANKVOY FORM 1977 together with fixture re-cap RTI RHI The Vessel The Charter-party LIST OF AUTHORITIES BOOKS B Eder and others (eds), Scrutton on Charterparties and Bills of Lading (22nd edn, Sweet & Maxwell 2011) B Harris and others, The Arbitration Act 1996: A Commentary (4th edn, Blackwell Publishing 2007) C Ambrose, K Maxwell and A Parry, London Maritime Arbitration (3rd edn, Informa Law 2009) David St John Sutton, Judith Gill and Matthew Gearing, Russell on Arbitration (23rd edn, Sweet & Maxwell 2010) Edwin Peel, Treitel on the Law of Contract (13th edn, Sweet & Maxwell 2011) HG Beale and others (eds), Chitty on Contracts: Vol 1 General Principles (31st edn, Sweet & Maxwell 2012) H McGregor (ed), McGregor on Damages (17th edn, Sweet & Maxwell, London 2003) Julian Cooke and others, Voyage Charters (3rd edn, Informa Law 2007) Kim Lewison, The Interpretation of Contracts (4th edn, Sweet & Maxwell 2007) Nigel Blackaby, Constantine Partasides and Alan Redfern Martin Hunter, Redfern and Hunter on International Arbitration (Student Version) (5th edn, Oxford University Press 2009) S Girvin, Carriage of Goods by Sea (2 nd edn, OUP 2007) CHAPTER IN BOOK William W Park, Non-Signatoriares and International Contracts: An Arbitrator s Dilemma in Belinda Macmahon (ed), Multiple Party Actions in International Arbitration: Consent, Procedure and Enforcement (Oxford University Press 2009) pg. II

5 CASES AUSTRALIAN CASE Secured Income Real Estate Ltd v St. Martins Investment Pty [1979] 144 CLR 596 UK CASES Amin Rasheed Shipping Corp v Kuwait Insurance Co [1984] AC 50 The Aries [1977] 1 WLR 185 (HL) Berger v Gill & Dufus [1984] 1 AC 382 Bulkhaul Ltd v Rhodia Organique Fine Ltd [2008] EWCA Civ 1452; [2009] 1 Lloyd's Rep 353 Cheikh Boutros Selim El-khoury and Others v Ceylon Shipping Lines Ltd (The Madeleine ) [1967] 2 Lloyd's Rep 224 Colonial Bank (Now Bank of Boston Connecticut) v European Grain & Shipping Ltd (The Dominique ) [1989] 1 Lloyd s Rep 431 Cook v Jennings (1797) 7 TR 381; 101 ER 1032 Denny, Mott & Disckeon Ltd v Lynn Shipping Co Ltd [1963] 1 Lloyd s Rep 339 Egon Oldendroff v Libera Corp No.2 [1996] 1 Lloyd s Rep 380 Eurosteel Ltd v Stinnes AG [2000] 1All ER 964 Fercometal SARL v Mediterranean Shipping Co SA [1986] 1 Lloyd's Rep 171 Fiona Trust & Holding Corp v Privalov [2007] EWCA Civ 20 Foster v Dawber [1851] 6 Exch 839 Front Carriers Ltd v Atlantic and Orient Shipping Corporation (The Double Happiness ) [2007] EWHC 421 (Comm) Hadley v Baxendale (1854) 9 Ex 341 The Hollandia [1983] 1 AC 565 Investors Compensation Scheme Ltd v West Bromwhich Building Society [1998] 1 WLR 896 Johnstone v Milling (1886) 16 QBD 460 Linklaters Business Services v Sir Robert McAlpine Limited [2010] EWHC 3123 (TCC) Mackay v Dick and Stevenson [1881] 6 App Cas 251 National Westminister Bank Plc v Spectrum Plus Limited & Ors [2005] UKHL 41[2005] 2 AC 680 Nisshin Shipping Co Ltd v Cleaves & Co Ltd [2003] EWHC 2602 Nittan (UK) Ltd v Solvent Steel Fabrications Ltd [1981] 1 Lloyd s Rep 633 Photo Production Limited v Securicor Transport Ltd [1980] UKHL 2 Rawson v Samuel (1841) Cr & Ph 161 Re Helbert Wagg Co Ltd [1956] Ch 323 pg. III

6 SEB Trygg Holding Aktiebolag v Manches [2005] EWHC 35; [2005] 2 Lloyds Rep 129 Shipton v Thornton (1838) 9 A & E 314; 112 ER 1231 Suisse Atlantique Societe d'armament SA v NV Rotterdamsche Kolen Centrale [1967] 1 AC 361 Tenax Steamship Company Limited v Reinante Transcocenica Nevegacion SA [1973] 1WLR 386 Vita Food Products Inc v Unus Shipping Co [1939] AC 277 STATUTES The Arbitration Act 1996 JOURNAL ARTICLES Raphael Powell, Good Faith in Contracts [1956] 9 CLP 16 pg. IV

7 SUMMARY OF FACTS 1. On 19 th November, the CLAIMANTS, Reliable Tanker Inc. ( RTI ) entered into a voyage charter-party agreement ( the Charter-party ) with the RESPONDENTS, Super Charters. 1 The agreement was in the standard ASBATANKVOY 1977 form, 2 which incorporated amendments agreed to by the parties by way of a fixture recap and parties special terms. 2. Pursuant to the Charter-party, the CLAIMANTS agreed to provide a fixture to the RESPONDENTS for the purpose of transporting cargos of crude oil in exchange for freight payable by the RESPONDENTS to the CLAIMANTS Within the aforesaid Charter-party, the parties also agreed to a London arbitration clause for the purpose of resolving any dispute. 4 The parties also agreed that the arbitration will be governed by English law. 4. Subsequently, the initial Vessel, namely, the Reliable Butterfly, was arrested by a third party, causing the Reliable Butterfly to fail to meet her laycan. The agreed date for laycan was set on 5 th December In the midst of negotiation with the 3 rd party, and when the CLAIMANTS was attempting to free the Reliable Butterfly before the CLAIMANTS could even issue a revised laycan and ETA, 6 on 27 th November, RESPONDENTS wrote to the CLAIMANTS indicating that they are no longer willing to cooperate by accepting any revised laycan and also cancelling the Charter-party at the same time As a result, on 28 th November, in response to the RESPONDENTS notice of 1 Facts Facts Facts Facts 6. 5 Facts Facts Facts 96. cancellation, the CLAIMANTS duly accepted and further clarified that the pg. 1

8 cancellation was valid without recourse. 8 In order to conclude the cancellation, the CLAIMANTS informed the RESPONDENTS that 95% of freight was outstanding as it was already earned upon lifting of the subjects, as agreed by the parties. 7. In December 2011, the CLAIMANTS underwent a merger with Reliable Holdings Inc. ( RHI ). 9 As a result, by way of universal succession and pursuant to the law of Fruitland, 10 all rights and obligations of the CLAIMANTS are thus automatically transferred to RHI. The CLAIMANTS and RHI can thus be regarded as the same entity and therefore both companies can be referred to interchangeably. 8. This dispute between the CLAIMANTS and the RESPONDENTS is brought forward to the tribunal for arbitration. The notice of arbitration was validly served to the RESPONDENTS on 28 th January when the CLAIMANTS nominated Mr. Smith as an arbitrator On 12 th February, the RESPONDENTS turned a blind eye to the CLAIMANTS effective exercise of its legal rights under the established legal doctrine universal succession by objecting to the CLAIMANTS valid appointment of their arbitrator. 12 The RESPONDENTS, being aware of the weaknesses of their arguments, proceeded to appoint their own arbitrator nevertheless Facts Facts Facts Facts Facts Facts 103. pg. 2

9 ARGUMENTS I. The Tribunal Has the Jurisdiction to Hear this Dispute. 1. The CLAIMANTS argue that this Tribunal has the jurisdiction to hear this dispute because (i) all rights and liabilities in relation to the Charter-party have already been transferred from the CLAIMANTS to RHI by virtue of universal succession; (ii) RHI is equally bound as the party to the arbitration proceedings as a result of universal succession; and (iii) the arbitration proceedings were commenced within the time frame stipulated by the time bar clause. (i) All rights and liabilities in relation to the Charter-party have already been transferred from the CLAIMANTS to RHI by virtue of universal succession. 2. Pursuant to the expert report, 14 RHI and the CLAIMANTS have merged by way of universal succession under the laws of Fruitland. As this universal succession was a proper assignment, the CLAIMANTS and RHI thus were one and the same legal entity as a result of the merger. 3. The effect of universal succession is to treat RHI as the CLAIMANTS, thus the arbitration agreement equally binds RHI. In Eurosteel Ltd v Stinnes AG, 15 Longmore J stated that [t]he whole point of universal succession is that the successor is treated as the same person as the person to whom he succeeds. Additionally, Gloster J in SEB Trygg Holding Aktiebolag extended on the point that where a party has ceased to exist by reason of universal succession, the arbitration does not lapse and the tribunal is entitled to continue. 16 Even the 14 Facts [2000] 1All ER 964, [2005] EWHC 35; [2005] 2 Lloyds Rep 129. pg. 3

10 CLAIMANTS have ceased to exist, RHI, as the successor, is treated as the CLAIMANTS and has automatically taken all rights and liabilities. 4. The universal succession is effective even without the delivery of notice to the RESPONDENTS. The general rule is stated in SEB Trygg Holding Aktiebolag that notice was a mere procedural formality, which did not affect the substance of the transfer. 17 In the same case, the judge referred to the earlier passage of Longmore J in Eurosteel to further support the proposition that the universal successor seeks to gather in his assets may or may not require him to give formal notice of his existence before award or judgment. 18 Pursuant to the above cases and the said expert report, 19 there is no requirement for any notice to be given for the universal succession to be effective under the law of Fruitland. (ii) RHI is equally bound as a party to the arbitration proceedings as a result of universal succession. 5. Pursuant to Clause 24 of the fixture recap, 20 which was agreed to by the parties, the governing law of this arbitration is English law and the seat of arbitration is London. In the absence of agreed procedural rules to this arbitration, the Arbitration Act of 1996 is a lex arbitri Since Gloster J in SEB Trygg Holding Aktiebolag v Manches stated that English law would recognize the effect of universal succession with regard to all matters relating to the status of the companies merged as being governed by the law of those companies domicile, the universal succession between the CLAIMANTS and 17 SEB Trygg Holding Aktiebolag (n 16) para ibid. 19 Facts Facts Arbitration Act 1996, s2 (1). pg. 4

11 RHI in Fruitland must be recognised by the Tribunal and thus the CLAIMANTS position as maintained in their submission can be legally substantiated Moreover, RHI can enforce Clause 24 as the wording of the clause was apt to cover the current disputes. It is stated there that [a]ny and all differences and disputes of whatsoever nature arising out of this Charter shall be put to arbitration. 23 The phrase disputes arising out of contract is considered by the Court of Appeal in Fiona Trust who concluded that this phrase covers every dispute that arises from the contract except the issue as to whether there is a contract at all. 24 Thus, the ambit of the Clause 24 in issue is wide enough to encompass the current dispute between the CLAIMANTS and the RESPONDENTS and even RHI as a result of universal succession. (iii) The arbitration proceedings were commenced within the time frame as stipulated by the time bar clause. 8. The CLAIMANTS have properly commenced the arbitration proceedings. The CLAIMANTS appointed the arbitrator, Mr. Smith on 28 th January. 25 By universal succession, the CLAIMANTS, i.e. RHI, have properly appointed the arbitrator. In any case, both parties have appointed arbitrators and have given sufficient notice to opposing party on the appointment of arbitrators. 9. It is the CLAIMANTS position that in the letter dated 28 th January, 26 the use of letterhead RTI is merely a misnomer that will neither affect the commencement nor result of the arbitration proceedings. This position is supported by the judgment 22 SEB Trygg Holding Aktiebolag (n 16) 131 para Facts 13, Fiona Trust & Holding Corp v Privalov [2007] EWCA Civ 20; [2007] 1 ALL ER (Comm) 891; David St John Sutton, Judith Gill and Matthew Gearing, Russell on Arbitration (23rd edn, Sweet & Maxwell 2010) para Facts ibid. pg. 5

12 in Nittan (UK) Ltd v Solvent Steel Fabrications Ltd, 27 where Brightman LJ held that the courts have jurisdiction to correct a misnomer according to the construction of the contract. Since RHI is the only surviving entity in this case, the use of RTI as the letterhead clearly referred to RHI, who is the successor of the CLAIMANTS. 10. As an alternative, the disputed time-bar clause is inapplicable as the contemplated disputes from the performance of the Charter-party, or, to be more precise, disputes after the loading operation commences, whereby in this case the Charter-party had never been performed. 28 Such an interpretation is in line with the words employed in the clause including discharge, re-delivery and discharge /re-delivery would have taken place. It is strange that this clause made no reference to loading or loading would have taken place. This is in line with the fact that the clause is contained in the standard terms of the RESPONDENTS. It is unlikely that the RESPONDENTS, as the Charterer, contemplated any liabilities prior to the loading operation. This method of interpretation is in line with the well-established rule of contractual interpretation laid down in Investors Compensation Scheme Ltd v West Bromwhich Building Society, 29 where Lord Hoffman held that if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. 30 II. English Law Governs the Charter-party Contract. 11. In the absence of an express choice of law clause in the Charter-party, it is the CLAIMANTS position that the Charter-party is governed by English law. With 27 Fiona Trust & Holding Corp (n 24) Facts 45 and Investors Compensation Scheme Ltd v West Bromwhich Building Society [1998] 1 WLR ibid 913. pg. 6

13 reference to Egon Oldendroff v Libera Corp No.2, 31 the seat of arbitration indicates the choice of law of the contract. Having London as the seat of the arbitration evinces the true intention of the parties that they have chosen English law as the governing law of the contract. 12. The CLAIMANTS further argue that the choice of law cannot be U.S. law despite the use of the American form, ASBATANKVOY Form. Rather, the choice of English law provided in Clause 24 more explicitly evinces the common intention of both parties. 32 Thus, the English law is the implied choice of law governing this Charter-party. III. The Charter-party was Validly Cancelled by Both Parties without Recourse. 13. The CLAIMANTS are entitled to validly confirm the cancellation because the RESPONDENTS proposed to the CLAIMANTS that they wished to cancel the Charter-party and the CLAIMANTS accepted the cancellation proposed by the RESPONDENTS. 14. The CLAIMANTS argued that the RESPONDENTS intimated to the CLAIMANTS on 27 th November that they wish to cancel the contract. 33 According to Foster v Dowber, 34 where a contract is executory on both sides and neither party has finished performance of its obligations, it may be rescinded by mutual agreement The acceptance of the aforesaid cancellation proposed by the RESPONDENTS on 27 th November was accepted on 28 th November when the CLAIMANTS wrote to 31 Egon Oldendroff v Libera Corp No.2 [1996] 1 Lloyd s Rep Vita Food Products Inc v Unus Shipping Co. [1939] AC 277, 290. See Re Helbert Wagg Co Ltd [1956] Ch 323; The Hollandia [1983] 1 AC 565; Amin Rasheed Shipping Corp v Kuwait Insurance Co [1984] AC Facts Foster v Dawber [1851] 6 Exch 839, HG Beale and others (eds.), Chitty on Contracts: Vol 1 General Principles (31st edn, Sweet & Maxwell 2012) para pg. 7

14 the RESPONDENTS in reply of their proposed cancellation. 36 The Charter-party was therefore validly cancelled upon acceptance on 28 th November without further recourse to the RESPONDENTS. 16. The legal effect of repudiation of contract by the innocent party was concerned in McDonald v Dennys Lascelles Ltd. Where the consequences of the breach are so serious as to frustrate the commercial purposes, repudiation will discharge the parties from further performance of the contract, leaving liabilities already incurred unaffected This position is also supported contractually by Clause 2 of the RTI s standardterms, it was agreed by the parties that in the event of cancellation of the Charterparty, such cancellation will be without recourse. 38 As a result, no new liabilities can be imposed on the parties for subsequent developments while obligations existing prior to the date of cancellation would remain. IV. The Charter-party was also Breached by the Respondents. 18. The charter-party was breached by the RESPONDENTS as (A) the RESPONDENTS breached their duty to co-operate; (B) there is no pre-emptive right to cancellation; and (C) the cancellation made by the RESPONDENTS was before the agreed date of laycan. A. The RESPONDENTS breached their duty to co-operate. 19. The RESPONDENTS breached their duty to co-operate when they (i) refused to accept any later laycan or ETA and (ii) failed to provide the CLAIMANTS with reasonable time to remedy the situation. 36 Facts McDonald v Dennys Lascelles Ltd [1933] 48 CLR Facts 87. pg. 8

15 (i) The RESPONDENTS breached their duty to co-operate when they failed to accept any later laycan or ETA. 20. The RESPONDENTS have breached their duty to co-operate when the RESPONDENTS informed the CLAIMANTS that they will not accept any later laycan or ETA Under English Law, there is an implied duty to co-operate with each other in the performance of contractual obligations. The fact that the RESPONDENTS refused to accept later laycans proposed by the CLAIMANTS will amount to an abuse of discretion and evasion of duty to co-operate. 40 The general rule is that each party to a contract is taken to agree that it will do all such things as are necessary on its part to enable the other party to have the benefit of the contract. This principle can be traced to the case of Mackay v Dick and Stevenson 41 and was recently upheld by the High Court of Australia in Secured Income Real Estate Ltd v St. Martins Investment Pty When the RESPONDENTS refused to accept any revised laycan and ETA prior to the date of laycan, the RESPONDENTS have in effect breached their duty to cooperate with each other in their performance of contractual obligations. (ii) The RESPONDENTS failed their duty to cooperate when they failed their legal duty to provide the CLAIMANTS with reasonable time to remedy the situation. 23. The Charter-party was derailed when the RESPONDENTS by a letter dated 27 th November informed the CLAIMANTS that the revised-eta and laycan proposed by the CLAIMANTS was declined. It further stated that even if you had given us a proper revised ETA and laycan, no matter what the dates were, we would have 39 Facts Raphael Powell, Good Faith in Contracts [1956] 9 CLP Mackay v Dick [1881] 6 App Cas Secured Income Real Estate Ltd v St. Martins Investment Pty [1979] 144 CLR 596. pg. 9

16 declined them. 43 The RESPONDENTS, by taking such an act, prevented the CLAIMANTS from giving effect to the Charter-party regardless of whether the CLAIMANTS are able to provide with a viable alternative or not (such as freeing the Reliable Butterfly from arrest or providing a substitute fixture). 24. It is an established legal position that the failure to perform is a condition precedent or concurrent precedent for the other party not to perform. This rule is displaced if, before performance from the first party becomes due, the other party repudiated the contract by wrongfully refusing to accept performance. 44 The situation in this current dispute is exactly the same. 25. The repudiation induced the aggrieved party s, in this case the CLAIMANTS, failure to perform. The RESPONDENTS action can be described as a wrongful refusal to accept performance. 45 This concept is confirmed by Glencore Grain Rotterdam BV v LORICO 46 and Grant v Cigman By refusing to accept any subsequent revised-eta and laycan, there is no way for the CLAIMANTS to continue on with the performance of the contract. The performance of the Charter-party was therefore prevented by the RESPONDENTS. The CLAIMANTS are left with no alternative but to accept the RESPONDENTS notice of cancellation of the Charter-party. B. The RESPONDENTS have no right to pre-emptively cancel the Charterparty. 27. It is the CLAIMANTS position that the cancellation made by the RESPONDENTS was a pre-emptive cancellation because (i) there is no automatic repudiation for 43 Facts Edwin Peel, Treitel on the Law of Contract (13th edn, Sweet & Maxwell 2011) ibid [1997] 4 All ER [1996] 2 BCLC 24. pg. 10

17 anticipatory breach; (ii) the RESPONDENTS have no right of cancellation on or prior to 27 th November; and (iii) the anticipatory breach was only a mere prediction by the RESPONDENTS. (i) The RESPONDENTS have no automatic right to repudiation for anticipatory breach. 28. Under English Law, an anticipatory breach of contract will not automatically bring an end to the contract. According to Lord Esher, a renunciation of a contract, or, in other words, a total refusal to perform it by one party before the time for performance arrives, does not, by itself, amount to breach of contract. 48 Therefore, where a party wishes to repudiate a contract before the date of performance, the contract will continue until the other party accepts such repudiation. 49 This principle was confirmed by Fercometal SARL v Mediterranean Shipping Co SA. 29. The deed in this case includes a laycan clause, which provides that cancellation may only take place on a certain date. 50 It was held that the plaintiff had wrongfully repudiated the contract when they hired an alternative ship before the date of the laycan after which the defendant refused the pre-mature repudiation Applying the principle set forth by Fercometal, 52 it is the CLAIMANTS position that the contract had continued up to 28 th November where the RESPONDENTS first intimated that they wish to cancel the Charter-party in their letter dated 27 th November Johnstone v Milling [1886] 16 QBD 460, 467 (Lord Esher). 49 HG Beale (n 35) para Fercometal SARL v Mediterranean Shipping Co SA [1986] 1 Lloyd's Rep 171, ibid ibid. 53 Facts 96. pg. 11

18 (ii) The RESPONDENTS do not have any legal or contractual right to preemptively repudiate the contract 31. The CLAIMANTS further submit that when the RESPONDENTS cancelled the Charter-party on 27 th November, it was ultra vires of any legal or contractual rights entitled to the RESPONDENTS. As a result, the CLAIMANTS are entitled to damages which have resulted from such ultra vires repudiation. 32. It was held in Cheikh Boutros Selim El-khoury and Others v. Ceylon Shipping Lines Ltd ( The Madeleine ) that where there is a specified date of cancellation of the contract, there will be no anticipatory right of cancellation by the charterer, regardless of whether the ship-owner will be able to deliver the ship on time. 54 What Lord Roskill said is deserved to be quoted in some length here: I have great difficulty in seeing how, where there is an express right given to cancel an implied right can concurrently exist to cancel under the clause at some earlier point of time, namely, when it becomes inevitable that the stated cancelling date will not be able to be attained by the ship... however reasonable it might be to imply a term such as [counsel for the charterers] sought to imply, it cannot be said to be necessary so to do for the purpose of giving business efficacy to the contract. 55 (iii) The RESPONDENTS prediction that the CLAIMANTS will miss the date of the laycan is still a mere prediction at best. 33. In this case, upon the date where the RESPONDENTS issued the notice of cancellation on 27 th November, the date of laycan on 5 th December has not yet arrived. It is still entirely possible for the CLAIMANTS to supply the RESPONDENTS with either the Reliable Butterfly or a sister VLCC under its 54 Cheikh Boutros Selim El-khoury and Others v. Ceylon Shipping Lines Ltd ( The Madeleine ) [1967] 2 Lloyd's Rep ibid 241 (Roskill J). pg. 12

19 control to the RESPONDENTS by 5 th December. The RESPONDENTS cancellation of the Charter-party was only based on its prediction that it is unlikely, not impossible to meet her laycan By initiating a pre-emptive cancellation of the Charter-party, the RESPONDENTS have denied CLAIMANTS of the opportunity to still meet their laycan. Such preemptive cancellation is not supported by The Madeleine case It is therefore obvious the RESPONDENTS premature cancellation of contract was a breach of the laycan clause. V. The CLAIMANTS Are Entitled to Freight and Damages. 36. The CLAIMANTS are entitled to freight and damages as (i) freight has been deemed earned upon lifting of the subjects; (ii) the Charter-party was cancelled without recourse to either party; (iii) the CLAIMANTS are also entitled to the freight by way of damages; (iv) the CLAIMANTS have fulfilled their duty to mitigate losses; and (v) the RESPONDENTS cannot claim damages. A. Freight has already been earned by the CLAIMANTS. 37. The CLAIMANTS maintain that freight had already been earned by the CLAIMANTS because (i) freight was deemed earned upon lifting of the subject and (ii) the Charter-party was cancelled without recourse. (i) Freight was deemed earned upon lifting of the subject pursuant to Clause The CLAIMANTS argue that pursuant to Clause 4 of RTI s standard terms, which was agreed by the parties that freight is deemed earned upon lifting of the subject Facts The Madeleine (n 54). 58 Facts 87. pg. 13

20 The CLAIMANTS contend that this requirement was satisfied and therefore the CLAIMANTS should be entitled to the freight. 39. Furthermore, the CLAIMANTS acknowledge that while English Law provides the principle where normally, freight is deemed earned upon the completion of the voyage. 59 However, The Dominique has a new perspective on the principle, where the courts explored into whether freight can be earned without completion of the voyage. In this case, the parties had agreed to a clause which stipulates that freight will be deemed earned upon the loading of the cargo. Cargo was loaded but the ship sank during transit. The owners claimed that the freight was indefeasible pursuant to contract and it was consequently upheld by the court. 60 This doctrine of indefeasible freight is further supported by The Aries 61 and in an earlier case, Rawson v Samuel. It was held that a title to claim freight is not impeached by short delivery unless the breach concerned is a repudiatory breach The present situation is very similar to the Dominique case where Clause 4 of RTI s standard form has in effect created an indefeasible freight for the CLAIMANTS. 63 As the RESPONDENTS had cancelled the Charter-party after the lifting of the subjects, the CLAIMANTS freight was and is already earned and indefeasible. This is also in line with the established freedom of contract principle. 41. The CLAIMANTS argue that the breach was not so severe and relying on the case of Sussie Atlantique, a mere delay in missing the deadline is not a fundamental breach. 64 This is supported by the fact that even if the Reliable Butterfly is unable to reach the 59 Julian Cooke and others, Voyage Charters (3rd edn, Informa Law 2007) Colonial Bank (Now Bank of Boston Connecticut) v European Grain & Shipping Ltd (The Dominique) [1989] 1 Lloyd s Rep The Aries [1977] 1 WLR 185 (HL). 62 Rawson v Samuel [1841] Cr & Ph Facts Suisse Atlantique Societe d'armament SA v NV Rotterdamsche Kolen Centrale [1967] 1 AC 361. pg. 14

21 loading port on the date of the laycan, the commercial object of the Charter-party is still viable. This is supported also by the fact that the CLAIMANTS could have easily supplied the RESPONDENTS with an identical replacement fixture by way of a sister-ship to the Reliable Butterfly which would have given effect to the Charterparty. 65 The RESPONDENTS need not prematurely cancel the Charter-party on 27 th November which in turn deprived the CLAIMANTS of any opportunity to give effect to the Charter-party. 66 (ii) Charter-party was cancelled without recourse to either party 42. The CLAIMANTS argue that the Charter-party was cancelled on 28 th November without recourse to either party. The CLAIMANTS therefore rely on Clause 2 and Clause 4 of RTI s standard terms, which were agreed to by the parties to argue that the CLAIMANTS are entitled to freight and that the CLAIMANTS are not liable to damages incurred by the RESPONDENTS after the date of the aforesaid cancellation as the cancellation was agreed to be without recourse The effect of repudiation is that it completely discharges the contract and cannot be revived. Normally, parties will frequently make express provisions for the restoration of money paid or services performed under the contract prior to repudiation. However, in the present case, it is the CLAIMANTS position that no such provision exists and therefore the RESPONDENTS cannot recover any sums. Besides, as already mentioned, freight has already been deemed earned and therefore is not a recoverable sum regardless Furthermore, as the contract was cancelled without recourse to the parties, the CLAIMANTS are in effect free from the performance of any further obligations 65 Facts Facts Facts HG Beale (n 35) para pg. 15

22 and also further liabilities. The CLAIMANTS therefore argue that the RESPONDENTS cannot claim damages as the damages were incurred subsequent to the RESPONDENTS own repudiation of the Charter-party. (iii) The RESPONDENTS must not be allowed to go back on their promise. 45. The CLAIMANTS argue that the RESPONDENTS must not be allowed to act against Clause 4 which they have been agreed to on their own accord. The parties upon entering into the Charter-party agreed to be governed under English law which enshrines the doctrine of pacta sunt servanda. 69 Terms entered into freely by the parties have historically been upheld by the courts which can be illustrated through the cases of Tenax Steamship 70 and Re Spectrum. 71 In Tenax Steamship, the courts held that on the principle of freedom of contract, the parties must abide by the terms of contract, no matter how strict it is. 72 In the Re Spectrum case, the House of Lords overruled a first instance judgment with a view to protecting free flow of trade. These cases show that as long as merchants trade in the Empire, their contracts should be honored. 46. Similarly, in this case, Clause 4 of the standard terms are clear that freight are deemed earned upon lifting of the subjects. As this sole requirement had already been satisfied by the parties, the CLAIMANTS are therefore entitled to the freight as guaranteed by law and contract. 69 HG Beale (n 35) para Tenax Steamship Company Limited v Reinante Transcocenica Nevegacion SA [1973] 1WLR National Westminister Bank Plc v Spectrum Plus Limited & Ors [2005] 2AC 680; [2005] 3WLR 58; [2005] UKHL Tenax Steamship Company Limited (n 70). pg. 16

23 B. Alternatively, the CLAIMANTS are entitled to sum of freight by way of damages 47. The classical rule is that the damages which the other party ought to receive, in respect of such breach of contract, should be such that may be within the parties contemplation at the time of contract formation. This principle was soundly established in the case of Hadley v Baxendale CLAIMANTS argue that when the RESPONDENTS wrongfully cancelled the Charter-party in the absence of a revised ETA and cancelled ahead of the date of laycan, they knew, or ought to know that such wrongful course of conduct would result in the breach of Clause 2 of RTI s standard term of the Charter-party Such an act is contrary to the intention of the parties, which is evident from the agreed contractual terms. Thus, breach of the Charter-party was contemplated by the parties at the conclusion of the Charter-party. As a consequence of the RESPONDENTS breach, the CLAIMANTS were prevented from performance, thereby unduly prevented them from earning their full freight. C. The CLAIMANTS has taken all reasonable steps to mitigate losses. 50. It is clichéd to restate the well-established principle of duty to mitigate. The principle has been reaffirmed in the recent cases of Bulkhaul Ltd v Rhodia Organique Fine Ltd 75 and Linklaters Business Services v Sir Robert McAlpine Limited. 76 The court in the latter case indicated that the duty to mitigate is not one of heavy burden. The burden of proving the CLAIMANTS not acting unreasonably in the context of incurring loss rests with the RESPONDENTS. 73 Hadley v Baxendale [1854] 9 Ex Facts Bulkhaul Ltd v Rhodia Organique Fine Ltd [2008] EWCA Civ 1452;[2009] 1 Lloyd's Rep. 353 para Linklaters Business Services v Sir Robert McAlpine Limited [2010] EWHC 3123 (TCC) para pg. 17

24 51. Immediately following the arrest of Reliable Butterfly, the CLAIMANTS responded sensibly and took reasonable steps to minimize his potential loss in earnings from the Charter-party. In particular, the CLAIMANTS offered appropriate substitute, namely, the sister VLCC to the Reliable Butterfly, which is identical to the Reliable Butterfly. 77 The CLAIMANTS also kept the option of negotiations for a fixture on similar terms open in case the RESPONDENTS did not find the replacement fit. 78 On the other hand, the RESPONDENTS ignored the offers provided by the CLAIMANTS. 79 It must be minded that the duty to mitigate is not a heavy one, 80 with the RESPONDENTS shutting their eyes and ears to viable options, the CLAIMANTS had at all times remain reasonable on their part. D. The RESPONDENTS cannot claim damages. 52. The RESPONDENTS cannot claim damages because (i) the CLAIMANTS did not breach the Charter-party and (ii) any damages suffered by the RESPONDENTS were self-inflicted. (i) The CLAIMANTS did not breach the Charter-party. 53. The CLAIMANTS argue that the RESPONDENTS breached the Charter-party when they refused to accept any revised ETA and later laycan, thereby making it impossible for the CLAIMANTS to perform their contractual obligations. It is the CLAIMANTS position that the CLAIMANTS have dutifully performed all obligations to earn its freight prior to the date of the aforesaid events. 54. Firstly, the CLAIMANTS primary obligation is to come to terms with the RESPONDENTS. It was agreed by the parties that the CLAIMANTS will have 77 Facts Facts Facts Linklaters Business Services (n 76). pg. 18

25 earned its freight upon lifting of the subjects, which the CLAIMANTS and RESPONDENTS had both accomplished. All subsequent obligations of delivering the vessel to the loading port were duly undertaken by the CLAIMANTS, during which the CLAIMANTS attempted at its best to perform. The CLAIMANTS only stopped performing upon the RESPONDENTS issuance of its notice of cancellation. Thus, up to the date of cancellation, no contractual obligations on the CLAIMANTS side have been breached. 55. The RESPONDENTS must also not be allowed to argue the CLAIMANTS failed to ensure that the Reliable Butterfly will make it to port by the date of the laycan. The fact is the RESPONDENTS claim, the Reliable Butterfly is not likely to reach the loading port, is only a prediction. Any accusation of breach of contract based on a mere prediction is not supported by the case law of The Madeleine. 81 (ii) The damages that the RESPONDENTS suffered were self-inflicted. 56. The CLAIMANTS further contend that the RESPONDENTS cannot claim any damages as the damages suffered were self-inflicted. 57. Firstly, it is the CLAIMANTS position that events leading to the cancellation of the Charter-party was entirely caused by the RESPONDENTS. It was established that had it not been for the RESPONDENTS refusal to accept a revised ETA and laycan, the CLAIMANTS could still have performed its contractual obligations. Furthermore, the rationale that the RESPONDENTS relied on for rejecting the revised ETA and laycan was due to its subjective prediction that the CLAIMANTS would be unlikely to supply a fixture by the date of the laycan. Such prediction is wholly unjustified. 81 The Madeleine (n 54). pg. 19

26 58. Secondly, CLAIMANTS argue losses arising out of the replacement vessel were also the result of the RESPONDENTS own acts. The CLAIMANTS had offered a sister ship to the Reliable Butterfly for the RESPONDENTS use as replacement fixture. This offer was not taken however. Furthermore, the RESPONDENTS, in their own negligence, did not find any ship which was suitable to serve as a replacement fixture, leading to it employing multiple vessels for the transportation of the aforesaid goods. 82 The resulting increase in expenses was entirely unnecessary had the RESPONDENTS even considered the use of the sister ships, which was offered by the CLAIMANTS. 59. Alternatively, even if the tribunal deemed that the RESPONDENTS are entitled to damages, it is the CLAIMANTS position that the damages are excessive and should be reduced. As mentioned, the added expense could have been avoided had the RESPONDENTS taken up the offer made by the CLAIMANTS for the supply of replacement fixture. Furthermore, any delays resulting from RESPONDENTS time taken to search for alternative fixture could also have been avoided. Therefore, the damages sought by the RESPONDENTS are grossly excessive. 82 Facts 98. pg. 20

27 PRAYERS FOR RELIEF The CLAIMANTS respectfully request the tribunal to declare that: 1. The tribunal has the power to rule in its own jurisdiction. 2. The parties are bound by the arbitration agreement. 3. The Charter-party was validly cancelled. 4. The RESPONDENTS breached the Charter-party. 5. The CLAIMANTS are entitled to the freight of $4,935, Respectfully submitted Reliable Holdings Inc., the Claimants (Team 2) pg. 21