THE 14TH INTERNATIONAL MARITIME LAW
ARBITRATION MOOT COMPETITON
2013
MEMORANDUM FOR THE RESPONDENT
SINGAPORE MANAGEMENT UNIVERSITY
TEAM NO. 9
TEAM MEMBERS:
Benjamin MUI
Jeremiah Jason CUNNINGHAM
Joey PANG
Kim Beverly Dy SAMSON
Table of Contents
List of Abbreviations ...................................................................................................................................... iv Index of Authorities ..................................................................................................................... v Statement of Facts ....................................................................................................................... 1 Summary of Pleadings ................................................................................................................. 2 Pleadings..................................................................................................................................... 2 I. THE CLAIMANT AND RESPONDENT HAVE NO PRIVITY OF CONTRACT .......................... 2 A. The Claimant is not the “lawful holder of the Bills of Lading” ........................................................... 3 1. The Claimant is not the holder of the bill of lading ........................................................................... 4 2. The Claimant is not the holder of the bills of lading in good faith .................................................... 5 II. THE RESPONDENT HAS THE RIGHT TO SAIL TO ROTTERDAM ......................................... 6 A. The Claimant agreed to call and discharge at Rotterdam ..................................................................... 6 B. There was no deviation ......................................................................................................................... 7 C. Even if there was devidation, the Respondent can rely on the Liberty Clause ..................................... 7 III. THE RESPONDENT IS NOT LIABLE FOR DELIVERY TO BEATLES .................................... 9 A. The Respondent is entitled to deliver as against indemnity .................................................................. 9 1. The Claimant agreed to delivery at Rotterdam .................................................................................. 9 2. The Respondent was required to deliver the cargo against an indemnity.......................................... 9 3. The Respondent is not liable for delivery other than against the bill of lading ................................. 9 B. The Claimant had no title over the Cargo .......................................................................................... 10 IV. THE RESPONDENT IS NOT LIABLE FOR ANY DETEORIATION OR DAMAGE TO THE
CARGO CAUSED BY THE HIJACKING OF THE VESSEL ............................................................. 12 ii
A. Article III Rule 2 duty of care has not been breached ....................................................................... 12 1. The Respondent had a sound system in place with regard to avoiding pirate attacks .................... 12 2. The Respondent is not liable for failure to care for cargo during captivity .................................... 13 B. Further, the Respondent is entitled to rely on the exceptions in Article IV Rule 2(e), (f), or (q) ...... 13 1. The Piracy incident falls under the act of war exception ................................................................ 14 2. Alternatively, the piracy will fall under the act of public enemies exception which is distinguished
from act of war ..................................................................................................................................... 14 3. In any case, neither the pirate attack nor the lack of cargo care measures during captivity took
place with the fault or privity of the Respondent ................................................................................. 15 V. DAMAGES ............................................................................................................................................ 16 A. The Claimant is only entitled to claim USD1.4 million in damages under conversion ...................... 16 1. The Claimant is only entitled to claim USD1.4 million in damages ............................................... 16 2. The Claimant should be barred from claiming mitigated damages ................................................. 17 B. In the alternative, damages for breach of contract is limited to USD1.52 million............................. 18 VI. PRAYER FOR RELIEF ...................................................................................................................... 19 iii
List of Abbreviations
Contract In Freight
CIF
Good Merchantable Quality
GMQ
Carriage of Goods by Sea Act 1992
COGSA 1992
Carriage of Goods by Sea Act 1971
COGSA 1971
Hague Visby Rules
HVR
Per metric tonne
per mt
United States Dollar
USD
Sale of Goods Act 1979
SOGA 1979
iv
Index of Authorities
Cases
Acatos v Burns (1878) 3 Ex. D.282 ................................................................................................................. 16
Aegean Sea Traders Corp v Repsol Petroleo S.A (The Aegean Sea)............................................................. 4, 5
Ahmad v Mitsui OSK Lines Ltd [2005] FCA 731 ............................................................................................. 6
Albacora v Westcott and Laurance Line [1966] 2 Lloyd’s Rep 53 ................................................................. 12
Astro Valiente Compania Naviera SA v Government of Pakistan Ministry of Food and Agriculture, The
Emmanuel Colocotronis (No 2) [1982] 1 Lloyd’s Rep 286............................................................................... 8
Attorney General of the Republic of Ghana v Texaco Overseas Tankships, The Texaco Melbourne [1994] 1
Lloyd’s Rep. 473.............................................................................................................................................. 16
Baer & Co v Hookes [1929] 149 SE 719 ......................................................................................................... 11
Brandt v Bowlby [1831] 2B. & Ad. 932 .......................................................................................................... 18
Burmah Trading Corp v Mirza Mahomed (1878) L.R. 5 Ind.App 130 ........................................................... 16
Darbishire v Warran [1963] 1 WLR 1067 CA................................................................................................ 17
Dimond v Lovell [2002] 1 AC 384................................................................................................................... 17
Ewbank v Nutting (1849) 7 CB 797 ................................................................................................................. 16
Finaly v Liverpool and Great Wester Steamship Co. Ltd [1870] 23 L.T. 251 ................................................ 10
Goodwin, Ferreira & Co., and others v Lamport & Holt [1929] 34 LILR 192 .............................................. 15
Hain Steamship Co Ltd v Tate and Lyle Ltd [1936] ALL ER 597 .................................................................... 6
Hamer and Barrow v Coca-Cola[1962] NZLR 723 ........................................................................................ 11
Hardy v Hillers [1923] 2 KB 490 .................................................................................................................... 11
Kwei Tek Chao v British traders and Shippers [1954] 2 QB 459 ................................................................... 11
Leesh River Tea Co v British India SN Co [1966] 2 Lloyd’s Rep 198 ............................................................ 15
Lyons v Baker [1923] 1 KB 685 ...................................................................................................................... 11
Miramar Maritime Corporation v Holborn Oil Trading Ltd, The Miramar [1984] AC 676 ............................ 8
O’Hanlan v Great Western Railway [ 1865] 6 B & S 484 .............................................................................. 18
Payzu v Saunders [1919] 2 KB 581 ................................................................................................................. 17
v
Pendle & Rivet Ltd v Ellerman Lines Ltd (1927) 33 Com. Cas. 70................................................................. 15
Pesquerias y. Secaderos de Bacalao de Espana SA v Beer [1949] 1 All ER 845n ......................................... 14
Porteus v Watney [1878] 3 QBD 534 ................................................................................................................ 8
Rice v Bacendale [1861] 7 H. 7 N. 96 ............................................................................................................. 18
Russell v Niemann [1864] 16 CB (NS) 163 ..................................................................................................... 14
Smith v Tregarthen [1887] 56 L.J.Q.B. 437 .................................................................................................... 18
Sucre Export SA v Northern River Shipping Ltd (Sormovkiky 3068) [1994] 2 Lloyd’s Rep 266, QB .............. 9
The Siam Venture v Darfur [1987] 1 Lloyd’s Rep. 147 .................................................................................... 9
The Wise [1989] 1 Lloyd’s Rep 96 .................................................................................................................. 11
Thomas & Co Ltd v Portsea Steamship Co Ltd [1912] AC 1 ...................................................................... 8, 10
UCO Bank v Golden Shore Transportation Pte Ltd [2006] 1 SLR(R) .............................................................. 5
Varley v Whipp [1906] 1 QB 193 .................................................................................................................... 11
Vigers v Sanderson [1901] 1 KB 608 ............................................................................................................. 11
Statutes
Bills of Exchange Act 1882 (c 61) s 90 ............................................................................................................. 5
Carriage of Goods by Sea Act 1992 (c 50) (UK)............................................................................................... 3
Sales of Goods Act 1979 (c 54) (UK) s61(3) .................................................................................................... 5
Rules
Hague Visby Rules Article III Rule 2 .............................................................................................................. 13
Hague Visby Rules Article IV Rule 2(e) ......................................................................................................... 13
Hague Visby Rule Article IV Rule 2(f) ........................................................................................................... 13
Hague Visby Rule Article IV Rule 2(q) .......................................................................................................... 13
Other Authorities
Carver on Carriage by Sea (Stevens & Sons, 13th ed, 1982) ......................................................................... 14
Halsbury's Laws of England, Carriage and Carriers Vol 7 (Butterworths, 5th Ed, 2008)............................... 8
Keith Michel, War, Terror and Carriage by Sea (Informa Law, 2004) .......................................................... 15
Harvey McGregor, McGregor on Damages (Sweet & Maxwell, 18th Ed, 2012) ..................................... 16, 17
vi
Articles/Reports
An agent’s authority to sign bills of lading, UK P&I Club, Clifford Chance Maritime Review ...................... 6
United Nations Security Council Resolution 1851 (2008) .............................................................................. 12
vii
Statement of Facts
1. Beatles chartered Twilight’s (“the Respondent”) vessel MT Twilight Trader (“the vessel”) under a
voyage charter party on 12 September 2008. Separately, Aardvark (“the Claimant”) contracted with
Beatles to purchase 4,000 metric tons (“mt”) of palm fatty acid distillate (“PFAD”) on 23 September
2008. Along with the Claimant’s 4,000 mt of PFAD (“the cargo”), approximately 14,493 mt of other
PFAD and palm oil products were loaded onto the MT Twilight Trader at ports in Malaysia and
Indonesia in October 2008. With regard to the Claimant’s cargo, the Respondent issued the bill of lading
on 25 October 2008 to Beatles.
2. On 15 November 2008, Somali pirates off the Gulf of Aden hijacked the vessel. The pirates held the
vessel captive until 12 February 2009. Upon its release, the vessel continued on the voyage to its
destination port to discharge its cargo.
3. On instruction by Beatles, the charterer, the Respondent sailed to and arrived at Rotterdam on 20 March
2009 in order to discharge its cargo. The discharge of the 14,493 mt of PFAD and palm oil products,
which did not belong to the Claimant, took place without incident.
4. With regard to the 4,000 mt of PFAD that was the subject of the 23 September 2008 contract between
the Claimant and Beatles, the Respondent was instructed by Beatles on 20 March 2009 to discharge the
cargo into their possession without presentation of the bill of lading. The Respondent was issued with a
letter of indemnity in respect of this request. On the same day, the Respondent received an email from
the Claimant asserting to be the lawful holders of the bill of lading.
1
Summary of Pleadings
5. There is no privity of contract between the Claimant and Respondent with regard to the contract of
carriage. The Claimant is not the lawful holder of the bills of lading and the Respondent owes no duty,
contractual or otherwise, to the Claimant.
6. With regard to the act of sailing to Rotterdam, it is submitted that the Claimant had no cause of action as
the cargo had not passed to the Claimant. In any case, even if it did have ownership of the cargo, it had
agreed with Beatles, agent for the Respondent, that the destination should be changed to Rotterdam.
7. As to the delivery of the cargo to Beatles, the Claimant has no cause of action as it had no title to the
cargo. In any case, delivery of the cargo was to a letter of indemnity, even if there was no bill of lading
presented at discharge.
8. As for the damage to the cargo caused by the piracy incident, the Respondent is exempted from all
liability for the alleged cargo damage by reason of Article IV Rule 2(e), (f) or (q) of the Hague Visby
rules.
Pleadings
I. THE CLAIMANT AND RESPONDENT HAVE NO PRIVITY OF CONTRACT
9. Under a contract of carriage, only a shipper would be able to enforce contractual rights against the
carrier. In this case, the Claimant is prima facie barred from bringing a claim against the Respondent as
there is no privity of contract; the carrier under the contract of carriage, evidenced by the bills of lading,
is the Respondent, while the shipper stated in the bill is Vegetable Oils Sdn Bhd.1
1 Compromis at 14, 16, 18
2
10. However, as explained in the succeeding section, the Claimant may be able to bring a claim under the
contract of carriage as if it was the shipper if it was found to be a lawful holder of the bills of lading.
A. THE CLAIMANT IS NOT THE “LAWFUL HOLDER OF THE BILLS OF LADING”
11. As stated in the bills of lading, the contract of carriage has, under clause 1, incorporated “all terms and
conditions, liberties and exceptions to the charter party […] including the Law and Arbitration clause”.2
Since the charter party between the Respondent and Beatles stipulated English law as the governing
law,3 English law also governs the contract of carriage concerned.
12. Under English law, specifically s 1(a) of the Carriage of Goods by Sea Act 1992 (“COGSA 1992”),4 the
act applies to any bill of lading. Thus COGSA 1992 will apply to the bills of lading concerned in this
case. Specifically, under s 2(1)(a), “a person who becomes the lawful holder of a bill of lading shall [..]
have transferred to and vested in him all rights of suit under the contract of carriage as if he had been a
party to that contract.” The Claimant would therefore be entitled to sue on the contract of carriage as
evidenced by the bills of lading if it could show that it was the lawful holder of the bills of lading
concerned.
13. Whether a person is the lawful holder of the bill of lading is stipulated in s 5 of COGSA 1992.
Specifically, under s 5(2) of COGSA 1992, a person will be the lawful holder of a bill of lading if it is
(1) the holder of the bill of lading and (2) in good faith. On the facts, it is submitted that the Claimant is
not the lawful holder of the bills of lading.
2 Compromis at 15, 17, 19
3 Compromis at 4
4 Carriage of Goods by Sea Act 1992 (c 50) (UK)
3
1. The Claimant is not the holder of the bill of lading
14. The Claimant is not the holder of the bills of lading as it does not have effective possession of the bills of
lading concerned. Although the prima facie position under s 5(2)(b) of COGSA 1992 states that a person
becomes the holder of a bill of lading if the bill is delivered to that person, this position is subjected to
the Claimant accepting delivery.5
a. Acceptance of the delivery of the bills of lading
15. In The Aegean Sea,6 Thomas J stated that, “Although the sending and receipt of a document through the
post often constitutes service of a document, the sending of a bill of lading through the post does not
without more constitute delivery; the person receiving it [the bill of lading] has to receive it into his
possession and accept the delivery before he becomes the holder.”7
16. Here, the Claimant clearly rejected the delivery of the bill. Even though the bills of lading were sent to
the Claimants, it rejected the delivery and even tried to send the bills back to the Respondents. On 17
March 2009, the Claimant noted that it “had received the bills of lading” and sought advice from the
Respondents as to the bills’ disposal8. On 18 March 2009, the Claimant asked the Respondent where it
wanted the bills of lading to be sent9 and the Respondent replied that it was to be sent to the latter’s
office10. The Claimant would accordingly not be the holder of the bills.
5 Aegean Sea Traders Corp v Repsol Petroleo S.A (The Aegean Sea), [1998] 2 Lloyd’s Rep 39 at 59-60
6 Supra n5
7 Supra n5 at 59-60
8 Compromis at 29
9 Compromis at 31
10 Compromis at 32
4
2. The Claimant is not the holder of the bills of lading in good faith
17. Further, the Claimant is also not the lawful holder of the bill of lading as they did not hold the bill in
good faith. As “good faith” is not defined in COGSA 1992, courts have looked at other statutes for its
meaning. In The Aegean Sea, Thomas J11 looked to the Sale of Goods Act 197912 (“SOGA 1979”) and
held that the basis of “good faith” lies in honest conduct.
18. By repudiating the CIF contract with Beatles and rejecting the cargo under the bills of lading concerned,
the Claimant has lost its right to assert dominion over the cargo and by extension, the bills. On 6 March
2009, the Claimant wrote to Beatles through email and terminated the CIF contract between them.13 On
16 March 2009, the Claimant in an email to Beatles stated in no uncertain terms that Beatles was the
cargo owner, an explicit acknowledge that it has no title to the cargo and by extension the bills of
lading.14 On 17 March 2009, the Claimant had sought Beatles’ advice on where to send the bills of
lading concerned,15 and this is further evidence that the Claimant knew that it should not be holding on
to the bills of lading.
19. In its email to Beatles on 20 March 2009, the Claimant also made it clear that it has decided to retain the
bills of lading as it was unable to get Beatles to refund the purchase price it paid for the cargo.16 By
choosing to retain the bills as leverage simply because it perceived Beatles’ unwillingness to give in to
their demands for the return of the purchase price, the Claimant had acted in bad faith.
20. That the Claimant could always litigate or arbitrate the dispute with Beatles and garnish the goods as
Beatles did in Rotterdam if judgment was given in its favour meant that it should not have held on to the
11 Supra n4
12 Under Sales of Goods Act 1979 (c 54) (UK) s61(3) and the Bills of Exchange Act 1882 (c 61) s 90, “A thing is deemed to be
done in good faith within the meaning of this Act when it is in fact done honestly, whether it is done negligently or not”.
13 Compromis at 25
14 Compromis at 27
15 Compromis at 29
16 Compromis at 35
5
bills of lading willfully. The Claimant’s holding of the bill would thus not be in “good faith”,17 and
consequently the Claimant is not a lawful holder of the bills of lading under s 5(2) of COGSA 1992.
II. THE RESPONDENT HAS THE RIGHT TO SAIL TO ROTTERDAM
A. THE CLAIMANT AGREED TO CALL AND DISCHARGE AT ROTTERDAM
21. The moment the charterer negotiates the bill of lading to a consignee, and property in the cargo has
passed to the consignee, a new contract arises between the ship owner and the consignee.18
22. It is submitted that property in the cargo has not passed to Aardvark because there is a dispute as to
whether it is the lawful holder.19 Even if property in the cargo has passed, and a contract has arisen
between the Claimant and the Respondent, the Respondent is not liable for any contractual breach
because the Claimant agreed to the cargo being discharged at Rotterdam.
23. Firstly, Beatles informed the Claimant of its intention to give orders to the Respondent to take the cargo
to Rotterdam.20 The Claimant’s reply implicitly shows that it has agreed by taking orders from Beatles as
to where the bill of lading should be sent.21 Secondly, the Claimant intended to send the bill of lading to
Johnson & Johnson in Rotterdam to make it available for when the vessel arrives there.22
24. It is submitted that Beatles was an agent for the Respondent when, in concurrence by the Claimant, the
port of discharge was varied. A ship owner performing the voyage without protest could amount to
ratification of the acts of its agent.23 The Respondent, without protest, proceeded with the voyage to
17 Ahmad v Mitsui OSK Lines Ltd [2005] FCA 731
18 Hain Steamship Co Ltd v Tate and Lyle Ltd [1936] ALL ER 597
19 Part I of this memorandum
20 Compromis at 30
21 Compromis at 31
22 Compromis at 33
23 An agent’s authority to sign bills of lading, UK P&I Club, Clifford Chance Maritime Review
<http://www.ukpandi.com/knowledge/article/an-agents-authority-to-sign-bills-of-lading-1555/> (accessed 11 April 2013).
6
Rotterdam that has been agreed between Beatles and the Claimant. By doing so, the Respondent has
ratified the acts of its agent, Beatles.
B. THERE WAS NO DEVIATION
25. Lord Atkin clarified the law on deviation:
The departure from the voyage contracted to be made is a breach by the ship owner of his contract,
but a breach of such a serious character that however slight the deviation the other party to the
contract is entitled to treat it as going to the root of the contract, and to declare himself as no longer
bound by any of its terms.24
26. The Respondent had not departed from the voyage contracted for because the Claimant had agreed with
Beatles, the Respondent’s agent, to change the port of discharge from Liverpool to Rotterdam. The
Respondent has not committed any breach of the bill of lading.
C. EVEN IF THERE WAS DEVIATION, THE RESPONDENT CAN RELY ON THE LIBERTY
CLAUSE
27. Even if there had been a failure to vary the terms of the contractual voyage, the Respondent is saved by
the liberty clause.
28. The bill of lading incorporates the terms and exceptions contained in the charter party.25 Where a bill of
lading incorporates clauses from the charter party, and the bill of lading comprises the contract of
carriage between the ship owner and the cargo owner, the clauses are deemed incorporated if three
24 Supra n19 at 601
25 Compromis at 15
7
conditions are met.26 Firstly, if the incorporation clause in the bill of lading is in general terms, only
charter party terms that are germane to the subject matter of the bill of lading, such as shipment, carriage
and discharge of the cargo, and payment of freight, shall be incorporated.27 Secondly, the clause sought
to be incorporated must be intelligible within the context of the bill of lading.28 There must be no need to
manipulate the clause to give it a different meaning within the bill of lading.29 Lastly, the charter party
clause must be consistent with other terms in the bill of lading.30
29. In this case, the liberty clause satisfies all three conditions. Firstly, it regulates the discharge of cargo by
the Respondent. Secondly, the clause is intelligible within the context of the bill of lading as it speaks of
the rights available to the Respondent with regard to the holder of the bill of lading. Lastly, it is
consistent with other terms in the bill of lading.
30. In the instant case, the liberty clause provides that “the Owner may, when practicable, have the
Vessel call and discharge the cargo at another or substitute port declared or requested by the
Charterer…such discharge shall constitute complete delivery and performance under this
contract and the Owner shall be freed from any further responsibility.”
31. Applying the liberty clause, the Respondent had the right to discharge the cargo at Rotterdam as declared
by Beatles, and such discharge amounts to complete performance of the Respondent’s obligations to
both Beatles under the charter party and the Claimant under the bill of lading, by virtue of the liberty
clause having been incorporated in the bill of lading. Accordingly, there is no breach of the contract of
carriage by the Respondent when it called at Rotterdam.
26 Astro Valiente Compania Naviera SA v Government of Pakistan Ministry of Food and Agriculture, The Emmanuel
Colocotronis (No 2) [1982] 1 Lloyd’s Rep 286 at 289
27 Thomas & Co Ltd v Portsea Steamship Co Ltd [1912] AC 1
28 Porteus v Watney [1878] 3 QBD 534 at 541
29 Miramar Maritime Corporation v Holborn Oil Trading Ltd, The Miramar [1984] AC 676
30 Halsbury's Laws of England, Carriage and Carriers (Volume 7 (2008) 5th Edition) para 361
8
III. THE RESPONDENT IS NOT LIABLE FOR DELIVERY TO BEATLES
A. THE RESPONDENT IS ENTITLED TO DELIVER AS AGAINST INDEMNITY
1. The Claimant agreed to delivery at Rotterdam
32. As discussed in paragraph 23 of this paper, the email communication between the Claimant and
Respondent indicate that the Claimant intended to let the Respondent take the cargo and deliver it to a
location other than Liverpool.31 Consequently, it would be unreasonable to claim that delivery in an
alternate location is now a breach of contract.
2. The Respondent was required to deliver the cargo against an indemnity
33. The Respondent could accrue loss if they choose not to deliver the cargo when given an indemnity.
According to The Siam Venture,32 if the carrier refuses to act when faced with a guarantee from a
reputable bank, it may be considered as acting unreasonably and would be denied demurrage. Therefore,
the Respondent would have suffered if it had not delivered the goods against the indemnity.
3. The Respondent is not liable for delivery other than against the bill of lading
34. The Respondent was not in breach of the bill of lading when it delivered against the indemnity because
this is an exception to the rule that delivery should be against presentation of the bill of lading, as noted
by Clarke J In Sormovkiky.33 Specifically, that it is “necessary to imply a term that the master must
deliver cargo without production of an original bill of lading in circumstances where it is proved to his
reasonable satisfaction both that the person seeking delivery of the goods is entitled to possession and
what has become of the bill of lading.” In the present case, Beatles is an owner entitled to possession and
31 Compromis at 27, 28, 29
32 The Siam Venture v Darfur [1987] 1 Lloyd’s Rep. 147,
33 Sucre Export SA v Northern River Shipping Ltd (Sormovkiky 3068) [1994] 2 Lloyd’s Rep 266, QB
9
there is clear explanation why the bill of lading is not at Rotterdam. Consequently, delivery to Beatles
against an indemnity was valid.
35. Mere possession of the bill of lading does not automatically give rise to the right of delivery and the
right to sue. In Finlay,34 while one party had the bill of lading at the time of delivery, it was not deemed
the rightful owner of the cargo because it had obtained the bill of lading through fraud. While the
Claimant was holding the bill of lading at the material time, they were no longer the rightful owners of
the cargo. They had, through wrongful repudiation and rejection of the goods and documents, retested
the title to Beatles. Accordingly, the Claimant does not have the right to sue the Respondent.
B. THE CLAIMANT HAD NO TITLE OVER THE CARGO
36. Title of the cargo has either reverted back to Beatles through the Claimant’s actions, or remained with
Beatles the entire time. Two potential actions arise upon rejection of the cargo. Either the buyers have
rejected the cargo with basis, or they have rejected the cargo with no basis. It is submitted that either
action would result in the same consequence – title would be with the seller.
37. It is submitted that the Claimant rejected the cargo. On 6 March 2009, Paul Taylor, on behalf of the
Claimant, using the reason that the cargo had no value in Liverpool, stated that there was “repudiatory
breach of the contract bringing it to an end”.35 In later emails the Claimant appears to have relinquished
any right to the cargo. On 16 March 2009, Paul Taylor reiterated that the breach has brought the contract
to an end.36 Additionally, Paul Taylor stated, “we may have to dispose of it on your behalf (emphasis
added)”. The Claimant’s intention was to ensure that the title over the cargo be vested with Beatles.
34 Finaly v Liverpool and Great Wester Steamship Co. Ltd [1870] 23 L.T. 251
35 Compromis at 25
36 Supra n27
10
38. Firstly, the Claimant’s rejection of the cargo with basis results in Beatles possessing the title. If cargo is
rejected based on a reason accepted in law, property in the cargo reverts to the seller.37 In Kwei Tek
Chao38 Devlin J held that the cargo did not correspond with the seller’s description but the conditional
property of the cargo passed to the buyer subject to a reversionary right of revestment in the seller if they
were rejected. Another approach, as discussed in Varley,39 is that the cargo does not pass if it does not
correspond to the seller’s description.40 Applying Kwei Tek Chao, if the cargo was of a kind that could
be accepted despite not corresponding to Beatles’ description, but due to the Claimant’s rejection of the
cargo, title has reverted to Beatles. Applying Varley, title over the cargo never passed to the Claimant
because the cargo did not match what was contracted for between Beatles and the Claimant.
39. Secondly, the Claimant’s rejection of the cargo with no basis reverts the title to the seller upon the
seller’s acceptance of the buyer’s wrongful repudiation.41 The Claimant has rejected the cargo with no
basis. On 6 March 2009, Mark Wiggins, on behalf of Beatles, expressly stated that they accept the
anticipatory breach made by the Claimant.42 This results to the title over the cargo reverting to Beatles.
40. Alternatively, if the Claimant is deemed not to have rejected the cargo, the Claimant rejected the
documents, and this has caused the title over the cargo to revert back to the seller. Paul Taylor on behalf
of the Claimant, in allegation of repudiatory breach on Beatles’ part, used the inconsistency of the
insurance as reason.43 The Claimant’s rejection of the documents resulted to the title reverting to Beatles.
41. The Claimant, by virtue of its rejection of the cargo and/or the documents, has caused the title to remain
with, or revert to, Beatles.
37 Kwei Tek Chao v British traders and Shippers [1954] 2 QB 459
38 Supra n37
39 Varley v Whipp [1906] 1 QB 193
40 The Wise [1989] 1 Lloyd’s Rep 96; Vigers v Sanderson [1901] 1 KB 608; Hamer and Barrow v Coca-Cola[1962] NZLR 723
41 Lyons v Baker [1923] 1 KB 685; Hardy v Hillers [1923] 2 KB 490, 496; Baer & Co v Hookes [1929] 149 SE 719
42 Compromis at 26
43 Compromis at 25
11
IV. THE RESPONDENT IS NOT LIABLE FOR ANY DETEORIATION OR
DAMAGE TO THE CARGO CAUSED BY THE HIJACKING OF THE VESSEL
A. ARTICLE III RULE 2 DUTY OF CARE HAS NOT BEEN BREACHED
42. It is submitted that the Respondent is not liable for any breach of its duties as carrier under Article III
Rule 2 of the HVR. The Claimant asserted that the Respondent failed this duty under two heads: (a)
failing to prevent the pirate attack from taking place and (b) failing to care for the cargo during captivity.
43. In Albacora v Wescott and Laurance Line (“Albacora”), the House of Lords held that ‘properly’ meant
that “the obligation is to adopt a system which is sound in light of all the knowledge which the carrier
has or ought to have about the nature of the goods”,44 and that it should be a “sound system under all the
circumstances in relation to the general practice of carriage of goods by sea”. In the Albacora, the carrier
had loaded the cargo properly and carefully into its holds, which were unrefrigerated. The only
instruction given to the carrier was to keep the cargo away from the boiler and engine room, and not that
the goods had to be refrigerated. The subsequent damage to the goods was not found to be in breach the
duty of care of the carrier to “properly and carefully” care for the goods.
1. The Respondent had a sound system in place with regard to avoiding pirate attacks
44. With regard to anti-piracy measures, it is submitted that the carrier had a sound system in place as it had
entered into an “anti-pirate” watch upon entering the at-risk area near the entrance of the Gulf of Aden.
It is submitted that these measures were sufficient to fulfil its duty of care under Article III Rule 2 of the
Hague Visby Rules.
44 Albacora v Westcott and Laurance Line [1966] 2 Lloyd’s Rep 53
12
45. The carrier had no special knowledge that the cargo must not be captured by pirates, for which the cargo
would suffer a reduction in value. The carrier did have a sound system which, akin to the Albacora case,
is sufficient to fulfil its duty of care under Article III Rule 2 of the Hague Visby Rules. There was no
evidence of any greater obligation to prevent pirate attacks (e.g., requirement to provide armed guards,
locked holds to prevent unauthorised access) that was imposed on the carrier.
2. The Respondent is not liable for failure to care for cargo during captivity
46. The burden of proof rests with the Claimant to show that, in line with the facts in the Albocora case, it
lies within the duty of the Respondent to continue to care for the cargo even during captivity. It is
submitted that the Claimant has no case, and that the actions of the Master and the crew during captivity
in maintaining vital ship functions is to be distinguished from the duty to care for the goods. There was
no special instruction to the carrier to exercise every effort to continue to care for the goods when it was
under captivity or unable to move. This is similar to the Albacora case where when there was no special
instruction to keep the cargo in refrigerated holds, there is no liability for the carrier as long as it had a
sound system for the carriage of goods.
B. FURTHER, THE RESPONDENT IS ENTITLED TO RELY ON THE EXCEPTIONS IN
ARTICLE IV RULE 2(E), (F) AND (Q)
47. Article III Rule 2 is also subject to the exceptions in Article IV Rule 2, which states that the carrier is not
liable for any damage caused to the cargo arising out of an act of war, an act of public enemies, or any
cause without the actual fault or privity of the carrier, or without the fault or neglect of its agents or
servants. While it is undisputed that the cargo has been considered by the Claimants to be damaged, the
Claimants themselves submit that this was the result of the hijacking incident.45 It is submitted that the
piracy incident falls within either the “act of war” or “act of public enemies” exceptions, or in any case,
45 Compromis at 69
13
the whole incident, including the lack of cargo care measures during the hijacking incident, took place
without the actual fault or privity of the Respondent, its agents or servants.
1. The Piracy incident falls under the act of war exception
48. This exception has been held to include acts during a war which were done against a ship from a neutral
state.46 War has been taken to include hostile acts connected with a civil war.47 The piracy incident
involved Somali pirates and occurred at the Gulf of Aden near Somalia.48 The United Nations Security
Council Resolution 1851 dated 16 December 2008 recognised the “crisis situation in Somalia, and the
lack of capacity of the Transitional Federal Government (of Somalia) to prosecute pirates”.49
49. It is submitted that piracy off the Somalia coast, conducted by Somali nationals, is a direct consequence
of the state of civil war in Somalia in 2008. There has been information suggesting that Piracy incidents
by Somali nationals therefore should come under the “act of war” exception in the Hague Visby rules.
2. Alternatively, the piracy will fall under the act of public enemies exception which is distinguished from
act of war
50. Alternatively, there has been growing acceptance that all piracy incidents may fall under the “act of
public enemies” exceptions. As put forth by Carver in Carriage by Sea,50 citing Russell v Niemann,51 the
term “public enemies” in the Hague Visby rules is distinguished from its common law predecessor of
“King’s enemies” and should include pirates. In a modern context, the creation of international security
46 Carver on Carriage by Sea (Stevens & Sons, 13th ed, 1982) at p712
47 Pesquerias y. Secaderos de Bacalao de Espana SA v Beer [1949] 1 All ER 845
48 Compromis at 41
49 United
Nations
Security
Council
Resolution
1851
<http://www.un.org/ga/search/view_doc.asp?symbol=S/RES/1851> (2008)
50 Carver on Carriage by Sea (Stevens & Sons, 13th ed, 1982) at p14,15
51 Russell v Niemann [1864] 16 CB (NS) 163
(2008),
accessed
at
14
codes and procedures to combat maritime piracy can also be taken to be evidence that pirate attacks
should be considered “acts of public enemies”.52
51. It is submitted that even if the “acts of war” exception is not made out, the more broadly worded and
relevant “acts of public enemies” must stand in favour of the Respondent.
3. In any case, neither the pirate attack nor the lack of cargo care measures during captivity took place with
the fault or privity of the Respondent
52. If, which is denied, the cause of the deterioration of the cargo was the result of some other cause not
covered under either of the act of war or act of public enemies exceptions, the Respondent remains
entitled to avoid liability by proving that the cause of the damage involved no fault or privity of the
Respondent, his agents or servants.53
53. In Leesh River Tea Co v British India SN Co,54 the court held that acts of thieves who had stolen a storm
valve cover from the hull of the ship, rendering it unseaworthy and causing sea water contamination of
the cargo, was not the fault or privity of the carrier. The present case is a clear affirmation of this
position. The acts of the pirates cannot be said to be the fault or privity of the Respondent, it agents or
servants.
54. Further, it cannot be said that the fact that the pirate attack took place was due to the fault or privity of
the Respondent. In asking the Respondent to prove a negative, it is not necessary that the carrier must
prove how the attack occurred and that it was not at fault for the incident. It is possible to simply prove
that all care was taken.55 In the present case, it is submitted that based on the information available on
pirate attacks in the Gulf of Aden at the time of the incident, the Respondent had taken all care to
52 Keith Michel, War, Terror and Carriage by Sea, 2004, at 20-18.
53 Goodwin, Ferreira & Co., and others v Lamport & Holt [1929] 34 LILR 192
54 Leesh River Tea Co v British India SN Co [1966] 2 Lloyd’s Rep 198
55 Pendle & Rivet Ltd v Ellerman Lines Ltd (1927) 33 Com. Cas. 70
15
prevent itself from encountering pirates and that the eventual attack could not be said to have been with
the fault or privity of the Master and crew of the vessel.
V. DAMAGES
A. THE CLAIMANT IS ONLY ENTITLED TO CLAIM USD1.4 MILLION IN DAMAGES UNDER
CONVERSION
55. The normal measure of damages for conversion is the market value of the cargo at the time and place of
conversion.56
1. The Claimant is only entitled to claim USD1.4 million in damages
56. In this case, the Claimant is only entitled to the price of USD350 per mt or USD1.4 million in total, this
being the likely market price of the cargo at Rotterdam on 20 March 2009 where the alleged conversion
took place.
57. In Attorney General of the Republic of Ghana v Texaco Overseas Tankships, The Texaco Melbourne,57 it
was held that a divergence between the buying price and the selling price in the market does not matter,
as long as there is an available market. In the present case, expert evidence was provided that there is no
daily market for PFAD58 and that the next available price was only on 24 March 2009. Therefore, it is
submitted that the price at which Beatles sold the other parcel of PFAD at Rotterdam is indicative of the
relevant market price of PFAD at the time and place of conversion, which was 20 March 2009.59 The
damages that the Claimant is entitled to is thus limited to USD1.4 million.
56 Burmah Trading Corp v Mirza Mahomed (1878) L.R. 5 Ind.App 130; Ewbank v Nutting (1849) 7 CB 797; Acatos v Burns
(1878) 3 Ex. D.282; See McGregor on Damages 18th Edition at 33-042
57 Attorney General of the Republic of Ghana v Texaco Overseas Tankships, The Texaco Melbourne [1994] 1 Lloyd’s Rep. 473
58 Compromis at 58
59 Compromis at 68
16
2. The Claimant should be barred from claiming mitigated damages
58. Further, the Claimant is also not entitled to claim for the mitigated damages at USD522.50 per mt or
USD2.09 million in total as the Claimant was unreasonable in their mitigation.
59. It is trite law60 that the Claimant has a duty to mitigate his loss and cannot recover for losses which it
could have avoided by taking reasonable steps. Specifically, when assessing reasonableness, it was held
in Darbishire v Warran61 that “the true question was whether the plaintiff acted reasonably as between
himself and the defendant and in view of his duty to mitigate the damages”.
60. In Payzu v Saunders,62 the leading case on the non-recovery of mitigated damages,63 a Claimant who
procured substitutes at higher prices when it had an opportunity to purchase the same substitutes at a
lower price was held to be unreasonable in mitigating its loss.
61. Here, it is submitted that the Claimant had mitigated their loss unreasonably. Specifically, the Claimant
should had purchased substitutes to the lost cargo in Liverpool on or shortly after 23 March 2009, the
day noted by the Claimant64 when it failed to set aside the arrest of the cargo in Rotterdam. As a result,
the price of PFAD increased by more than 25% in the intervening period; on 23 April 2009 the price of
PFAD was at USD440 per mt65 but increased to USD552.5066 per mt on 16 April 2009, the day that the
Claimant finally decided to take steps to mitigate.67
60 Payzu v Saunders [1919] 2 KB 581; Darbishire v Warran [1963] 1 WLR 1067 CA; Dimond v Lovell [2002] 1 AC 384
61 [1963] 1 WLR 1067
62 Payzu v Saunders [1919] 2 KB 581; See McGregor on Damages 18th Edition at 7.004;
63 McGregor on Damages (Sweet & Maxwell, 18th Edition, 2012) at 7-046
64 Compromis at 67
65 Compromis at 51
66 Compromis at 46
67 Compromis at 46
17
62. By the unnecessary delay in mitigation, the Claimant missed out on opportunities to procure PFAD on
better terms, and as such, the Claimant’s mitigation was unreasonable. The Claimant should thus be
disentitled from claiming damages at the mitigated prices.
B. IN THE ALTERNATIVE, DAMAGES FOR BREACH OF CONTRACT IS LIMITED TO
USD1.52 MILLION
63. The Claimant, when seeking damages for breach of contract, is entitled to a maximum of USD380 per
mt x 4,000 mt = USD1,528,000. A carrier who has failed to deliver goods is liable for damages, in
breach of contract, for the cost of the cargo at the time and place at which they ought to have been
delivered.68 On the facts, this would mean the cost of the goods in Liverpool on 30 March 2009.
However, no market existed in Liverpool during this relevant time. Therefore, it is not possible to
accurately quantify the value of the cargo.
64. Due to the lack of market in Liverpool, the Claimant should be entitled to the cost of the cargo in
Rotterdam, where we have a certain value of the goods, plus the cost of freight to ship the goods to
Liverpool. In O’Hanlan,69 it was held that in this special situation, the lack of market could require an
alternate measure of damages; specifically, the cost of the goods plus the price of shipping to the place
of delivery. In our case it is important to note that there is a market for PFAD in Rotterdam. Further, that
we have a court value of the goods on which we can rely.
65. The cost of the cargo in Rotterdam, plus the cost of freight to Liverpool, amounts to USD380 per mt.
The best evidence of the market value for the cargo in Rotterdam is with regard to another parcel of
PFAD that was sold in Rotterdam by Beatles for USD350 per mt.70 Also, the cost of freight for 4,000 mt
of palm products from Rotterdam to Liverpool is estimated to be between USD30-32 per mt.
68 Brandt v Bowlby [1831] 2B. & Ad. 932; Rice v Bacendale [1861] 7 H. 7 N. 96; Smith v Tregarthen [1887] 56 L.J.Q.B. 437
69 O’Hanlan v Great Western Railway [ 1865] 6 B & S 484
70 Compromis at 73
18
Accordingly, the Claimant is entitled to USD 350 + 30-32 per mt, which equals to anywhere between
USD1,520,000, and USD1,528,000.
VI. PRAYER FOR RELIEF
For the reasons submitted above, the Respondent respectfully requests this Tribunal to:
DECLARE that the Claimant is not the lawful holder of the bills of lading concerned and thus not entitled
to bring a claim against the Respondent under the contract of carriage;
Further,
DECLARE that pursuant to clause 29 of the charter party, as incorporated into the Bills of Lading, the
Respondent was entitled to discharge the cargo at Rotterdam;
Further or in the alternative,
DECLARE that the Claimant had abandoned the cargo to Beatles and therefore were not entitled to delivery
of the cargo;
Further or in the alternative,
DECLARE that the Claimant had in any case agreed for the cargo to be delivered to Rotterdam and not
Liverpool;
And in these premises,
19
ADJUDGE that the Respondent is not liable to the Claimant for any damages arising neither from the claim,
nor for any of the costs from the Dutch proceedings.
Should the Tribunal find the Respondent liable for the claim,
ADJUDGE that the Respondent is liable to the Claimant for USD1,400,000, which is the fair market value
of the goods at the date and place where the breach occurred.
Alternatively,
ADJUDGE that the Respondent is liable to the Claimant for USD1,520,000, which is the fair market value
of the goods at the date and place where the breach occurred plus freight costs to send the goods to the
original place of discharge, which was Liverpool.
20