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15 t h I N T E R N A T I O N A L MA R I T I M E LA W AR B I T R A T I O N MO O T, 2014
N A T I O N A L L A W U N I V E R S I T Y O D I S H A
I N D I A
[ T E A M N O . 5 ]
M E M O R A N D U M f o r R E L I A B L E H O L D I N G S I N C .
In the matter of an Arbitration between
RELIABLE TANKERS INC. (CLAIMANTS/OWNERS)
SUPER CHARTERS INC. (CLAIMANTS/CHARTERERS)
AND AND
SUPER CHARTERS INC. (RESPONDENTS/CHARTERERS)
RELIABLE HOLDINGS INC. (RESPONDENTS/OWNERS)
TEAM
ANMOL AWASTHI ♦ HARNEET KAUR ♦ KSHETRAGYA NATH SINGH ♦ PRAKHAR RAJA BISHNOI
TEAM NO. 5 MEMORIAL for RELIABLE HOLDINGS
TABLE OF CONTENTS | PAGE II
TABLE OF CONTENTS
TABLE OF AUTHORITIES IV
LIST OF ABBREVIATIONS XIII
ISSUES PRESENTED XV
STATEMENT OF FACTS 1
PRELIMINARY ISSUES 3
I. THE ARBITRAL TRIBUNAL HAS THE JURISDICTION TO HEAR THE PRESENT DISPUTE 3
A. The Fixture Confirmation Recap constitutes the Charter Party 3
B. The Arbitration Clause evidences a valid agreement to arbitrate 3
II. THE ARBITRATION WAS VALIDLY COMMENCED ON 28TH JANUARY 2012 3
A. Notice of Appointment dated 28th Jan 2012 was valid 4
B. The second reference stands unfounded 5
MERITS 5
I. THE APPROACH VOYAGE HAD COMMENCED 5
A. The obligation to ‘start in time’ attached from the time the charter was entered into 5
B. The absolute obligation to start in time is non-recurring 6
C. The bunker port was not the last port of call 6
II. THE OWNERS ARE NOT IN BREACH OF THE OBLIGATIONS UNDER ASBATANKVOY PART
II CL.1 7
A. The delay is not attributable to non exercise of due diligence to make the vessel
financially seaworthy 7
B. In any case, the owners may rely on the exceptions under Clause 19 of
ASBATANKVOY Part II 9
C. The owner is not liable for breach of his obligation to proceed with ‘convenient
despatch’ 12
III. ALTERNATIVELY, ASSUMING APPROACH VOYAGE HAD NOT COMMENCED, FAILURE TO
START IN TIME WAS NOT REPUDIATORY 12
A. The start in time obligation is an intermediate term 12
TEAM NO. 5 MEMORIAL for RELIABLE HOLDINGS
TABLE OF CONTENTS | PAGE III
B. Failure to commence approach voyage was not repudiatory 12
IV. THE PRESENCE OF THE ENTIRE AGREEMENT CLAUSE PRECLUDES RELIANCE ON EXTRINSIC
EVIDENCE 13
A. The EAC precludes reliance on prior negotiations for construction 13
B. The EAC prevents incorporation of new term through rectification 15
V. CLAUSE 2 OF OWNER’S STANDARD TERMS RELEASES BOTH PARTIES FROM ALL
LIABILITIES 15
A. The words ‘Without recourse to either party whatsoever’ should be given their
ordinary meaning 16
B. The principle of Contra proferentem is not applicable 17
C. The contract is binding on its true construction even if parties were not in agreement
17
D. Purposive construction cannot override contractual language 17
VI. RECTIFICATION CANNOT BE PLEADED 18
A. There was mistake in formation of common intention and not documentation 18
B. Absence of qualifying knowledge or conduct counters the claim for unilateral mistake
rectification 19
VII. THE ADVANCE FREIGHT IS NOT RECOVERABLE BY THE CHARTERERS 19
A. Advance freight was unconditionally earned on lifting of subjects 20
B. Advance Freight is irrecoverable in nature 20
VIII. HEADS OF DAMAGES 21
A. The alleged losses are consequential, excluding the liability of the owners 21
B. There has been no gross negligence by the owners 23
C. The damages for increased freight should be awarded considering the market scenario
23
D. Alternatively, Set off is not allowed against freight accrued 24
PRAYER 25
TEAM NO. 5 MEMORIAL for RELIABLE HOLDINGS
TABLE OF AUTHORITIES | PAGE IV
TABLE OF AUTHORITIES
CASES
[ A ] A/S Awilco of Oslo v. Fulvia S PA di Navigazione of Cagliari — “The Chikuma” [1981] 1 WLR 314 (HL)
14,17
ABB Lummus Global Ltd. v. Keppel Fells Ltd. [1999] 2 Lloyd’s Rep. 24 3
Agip S.p.A. v. Navigazione Alta Italia S.p.A.— “ Nai Genova, Nai Superba” [1984] 1 Lloyd’s Rep. 353
19
Ailsa Craig Fishing Co. Ltd. v. Malvern Fishing Ltd. [1983] 1 WLR 964 (HL) 18
Allianz Versicherungs- Aktiengesellschaft v. Fortuna Co. Inc. — “The Baltic Universal” [1999] 1 Lloyd’s Rep. 497
4
Allison v. Bristol (1875) 1 AC 209 20
Alstom Ltd. v. Yokogawa Australia Pty. Ltd. (No.7) [2012] SASC 49 18
Aries Tanker Corp. v. Total Transport Ltd. — “The Aries” [1977] 1 All ER 398 24
ASM Shipping Ltd. v. TTMI Ltd. —“The Amer Energy” [2009] 1 Lloyd’s Rep. 293 22
AXA Sun Life Services Plc. v. Campbell Martin Ltd. [2011] EWCA Civ. 133 15
[ B ] Bank of Australasia and Others v. Clan Line Steamers Limited [1916] 1 KB 39
8
Bank of Australasia v. Palmer [1897] AC 540 PC (Australia) 13
Bank of Credit and Commerce International SA v. Ali [2001] UKHL 8 16
Bank of Nova Scotia v. Hellenic Mutual War Risks Association (Bermuda) Ltd. [1992] 1 AC 233
22
Baron de Bode v. The Queen (1845) 8 QB 208 4
Beaufort Developments (NI) Ltd. v. Gilbert — “Ash NI Ltd.” [1999] AC 266 (HL) 16
BHP Petroleum v. British Steel [1999] 2 Lloyd’s Rep. 583 22
Blackgold Trading v. Almare SPA — “The Almare Seconda” [1981] 2 Lloyd’s Rep. 433
12
TEAM NO. 5 MEMORIAL for RELIABLE HOLDINGS
TABLE OF AUTHORITIES | PAGE V
British Columbia Saw Mill Company v. Nettleship (1868) LR 3 CP 499 21
British Fermentation Products Ltd. v. Compair Reavell Ltd. [1999] BLR 352 17
Bunge Corporation v. Tradax Export SA [1981] 1 WLR 711 12
Byrne v. Schiller (1871) LR 5 Ex 319 20
[ C ] Carmichael v. National Power Plc. [1999] 1 WLR 2042 (HL)
13
Charles H Windschuegl Ltd. v. Alexander Pickering and Co. Ltd. (1950) 80 Lloyd’s Rep. 89
9
Chartbrook Ltd. v. Persimmon Homes Ltd. [2007] EWHC 409 19
Classic Maritime v. Lion Diversified Holdings [2009] EWHC 1142 (Comm.) 22
Club Cape Schanck Resort Co. Ltd. v. Cape Country Club Pty. Ltd. (2001) 3 V.R. 526
19
Codelfa Construction Pty. v. State Rail Authority of New South Wales (1982) 149 CLR 337
17
Colonial Bank (Now Bank of Boston Connecticut) v. European Grain and Shipping Ltd. — “The Dominique” [1989] 1 Lloyd's Rep. 431 (HL)
20,24
[ D ] Daventry DC v. Daventry and District Housing Ltd. [2011] EWCA Civ. 1153
19
Davies Middleton and Davies Ltd. v. Toyo Engineering Corporation 1997 WL 1105718
16
Deepak Fertilizers & Petrochemicals v. ICI [1999] Lloyd’s Rep. 38 22
Dolphin Tanker SRL v. Westport Petroleum Inc.[2010] EWHC 2617 (Comm.) 16
Dubai Islamic Bank PJSC v. PSI Energy Holding Company BSC [2011] EWHC 2718 (Comm.)
18
[ E ] Easybiz Investments v. Sinograin Chinatex [2011] 1 Lloyd’s Rep. 688
4
Elena Shipping Ltd. v. Aidenfield Ltd. [1986] 1 Lloyd's Rep. 425 24
Etablissements Georges et Paul Levy v. Adderley Navigation Co. — “The Olympic Pride” [1980] 2 Lloyd’s Rep. 67
15, 19
TEAM NO. 5 MEMORIAL for RELIABLE HOLDINGS
TABLE OF AUTHORITIES | PAGE VI
Evera S A Commercial v. North Shipping Company [1956] 2 Lloyd's Rep 367 6,7,12,13
[ F ] Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd. [1943] AC 32
20
Forest Oak Steam Shipping Co. v. Richard (1899) 6 Com. Ca. 100 7
Frederick E Rose (London) Ltd. v. William H Pim Junior & Co. Ltd. [1953] 2 QB 450
17
[ G ] Geogas SA v. Trammo Gas Ltd. — “The Baleares” [1993] 1 Lloyd's Rep. 215
6
George Wimpey UK Ltd. v. VI Construction Ltd. [2005] EWCA Civ. 77 19
Goldman v. Thai Airways [1983] 1 WLR 1186 23
[ H ] Hadley v. Baxendale [1854] EWHC Exch. J 70
22
Handelsbanken Svenska v. Dandridge — “The Aliza Glacial” [2002] 2 Lloyd’s Rep. 421
11
Harper Versicherungs AG (also known as Harper Insurance Ltd. and formerly Turegum Versicherungsgesellschaft and Turegum Insurance Co.) v. Indemnity Marine Assurance Co. Ltd. [2006] EWHC 1500 (Comm.)
4
Harrison v. Garthorne (1872) 26 L.T. (N.S.) 508 5
Heyman v. Darwins Ltd. [1942] AC 356 (HL) 16
Holt & Co. v. Collyear (1881) 16 Ch D 718 16
Hourani v. Harrison (1927) 32 Com. Cas. 305 10
Hudson v. Hill (1874) 43 L.J.C.P. 273 5
Hydraulic Engineering Co. Ltd. v. McHaffe Goslet & Co. (1878) 4 QBD 670 22
Hyundai Heavy Industries Co. Ltd. v. Papadoupoulous [1980] 1 WLR 1129 16
[ I ] Inntrepreneur Pub Co. v. East Crown Ltd. [2000] 2 Lloyd's Rep. 611 Ch D.
14
Investors Compensation Scheme Ltd. v. West Bromwich Building Society [1998] 1 WLR 896
14
TEAM NO. 5 MEMORIAL for RELIABLE HOLDINGS
TABLE OF AUTHORITIES | PAGE VII
[ J ] Jackson v. Bank of Scotland [2005] UKHL 3
22
Jahn (t/a CF Otto Weber) v. Turnbull Scott Shipping Co. Ltd. — “The Flowergate” [1967] 1 Lloyd’s Rep. 1
9
JJ Huber (Investments) Ltd. v The Private DIY Co. Ltd. (1995) 70 P. & C.R. D 33 Ch D
18
Johnson v. Agnew [1980] AC 362 16
[ K ] Kingsley IT Consulting Ltd. v. McIntosh [2006] EWHC 1288 (Ch)
14
Kleinwort Benson Ltd. v. Sherkate Sahami Sakht — “The Myrto” [1984] 2 Lloyd’s Rep. 341
6,12
Kopitoff v. Wilson (1876) 1 QBD 377 8
[ L ] Lay v. Ackerman [2004] EWCA Civ. 184
4
Leesh River Tea Co. Ltd. v. British India Steam Navigation Co. Ltd. —“The Cheybassa” [1967] 2 QB 250
10
London County Council v. Henry Boots & Sons Ltd. [1959] 1 WLR 1069 (HL) 17
Louis Dreyfus v. Lauro (1938) 60 Lloyd’s Rep. 94 6
[ M ] M D C Ltd. v. N V Zeevaart Maatschappij — “ The Beursstraat” [1962] 1 Lloyd’s Rep. 180
8
MacDonald v. Shinko Australia Pty. Ltd. [1999] 2 Qd. R. 152 18
Mander Pty. Ltd. v. Clements (2005) 30 W.A.R. 46 19
Mannai Investment Co. Ltd. v. Eagle Star Life Assurance Co. Ltd. [1997] AC 749 4
Mare Schiffahrtskontor v. M/V Ocean Haven, 763 F.2d 633, (4th Cir. 1985) 8
Maredelanto Compania Naviera SA v. Bergbau-Handel GmbH — “The Mihalis Angelos" [1971] 1 QB 164
6
Marex Financial Ltd. v. Fluxo-Cane Overseas Ltd. [2010] EWHC 2690 (Comm.) 23
McCain Foods GB Limited v. ECO-TEC (Europe) Limited [2011] EWHC 66 (TCC) 22
TEAM NO. 5 MEMORIAL for RELIABLE HOLDINGS
TABLE OF AUTHORITIES | PAGE VIII
McFadden v. Blue Star Line [1905] 1 KB 697 8, 9
Millar's Machinery Co. Ltd. v. David Way & Son (1935) 40 Com. Cas. 204 22
Mitsui OSK Lines v. Garnac Grain Co. Inc. [1984] 2 Lloyd's Rep. 449 6
Monroe Bros. v. Ryan [1935] 2 KB 28 6,10
Morrisey v. The S S A & J Faith 252 F. Supp. 54 (N.D. Ohio 1965) 8
[ N ] National Bank of Greece and Athens SA v. Metliss [1958] AC 509
4
National Justice Compania Naviera SA v. Prudential Assurance Co.—“The Ikarian Reefer” [1993] 2 Lloyd's Rep. 68
4
National Westminster Bank v. Utrecht-America Finance Co. [2001] EWCA Civ. 658
17
Nelson v. Bridport (1845) 8 Beav. 527 4
New York and Cuba Mail Steamship Co. v. Eriksen and Christensen (1922) 27 Com. Cas. 330
8
Northern Shipping Co. v. Deutsche Seereederei GmbH and Others — “The Kapitan Sakharov” [2000] 2 Lloyd's Rep. 255
8
NSW Medical Defence Union Ltd. v. Transport Industries Insurance Co. Ltd. (1986) 6 N.S.W.L.R. 740
19
[ O ] Overseas Buyers Ltd. v. Grenadex SA [1980] 2 Lloyd’s Rep. 608
9
Owners of the Sardinia Sulcis v. Owners of the Al Tawwab, Al Tawwab — “The Sardinia Sulcis” [1991] 1 Lloyd's Rep. 201
4
[ P ] Papera Traders v. Hyundai Merchant Marine — “The Eurasian Dream” [2002] 1 Lloyd’s Rep. 719
8
Photo Productions Ltd. v. Securicor [1980] AC 827 16
Potash Company of Canada, Ltd. v. S S Raleigh 361 F. Supp. 120 (1973) 8
Procter & Gamble [2012] EWHC 498 (Ch) 15
TEAM NO. 5 MEMORIAL for RELIABLE HOLDINGS
TABLE OF AUTHORITIES | PAGE IX
Proforce Recruit Ltd. v. The Rugby Group Ltd. [2006] EWCA Civ. 69 14,17
Pukallus v. Cameron (1982) 180 C.L.R. 447 19
[ Q ] Quest-4-Finance Ltd. v. Maxfield [2007] EWHC 2313 (QB)
14
[ R ] Red Sea Tankers Ltd. v. Papachristidis [1997] 2 Lloyd’s Rep. 547
23
Reed v. Page [1927] 1 KB 743 8
Rowett Leakey & Co. v. Scottish Provident Institution [1927] 1 CH 55 16
Ryanair Ltd. v. SR Technics Ireland Ltd. [2007] EWHC 3089 (QB) 16
[ S ] Saint Line v. Richardsons Westgarth [1940] 2 KB 99
23
Satef-Huttenes Albertus SpA v. Paloma Tercera Shipping Co. SA — “The Pegase” [1981] 1 Lloyd’s Rep. 175 (QB)
21
Scandinavian Trading Tanker Co. A.B. v. Flota Petrolera Ecuatoriana — “The Scaptrade” [1983] 2 AC 694
13
Scott v. Foley (1899) 5 Com. Cas. 53 8
Seabridge Shipping AB v. Orsleff’s EFTS A/S [1999] 2 Lloyd’s Rep. 685 4
SEB Trygg Holding AB v. Manches [2005] EWHC 35 (Comm.) 4
SERE Holdings Ltd. v. Volkswagen Group UK Ltd. [2004] EWHC 1551 (Ch) 14
Smith v. Tregarthen (1887) 56 L.J.Q.B. 437 23
Soc. D’Avances Commerciales Ltd. v. A Besse and Co. Ltd. [1952] 1 Lloyd’s Rep. 242
9
Societe Anonyme Marocaine de l’Industrie du Raffinage v. Notos Maritime Corp. — “The Notos” [1987] 1 Lloyd’s Rep. 503
10
Starways Ltd. v. UN (1969) 44 ILR 433 4
Sucden Financial v. Fluxo-Cane Overseas Ltd. [2010] EWHC 2133 (Comm.) 23
Surgicraft Limited v. Paradigm Biodevices Inc. [2010] EWHC 1291 14, 15
Surgicraft Ltd. v. Paradigm Biodevices Inc. [2010] EWHC 1291 (Ch) 18, 19
TEAM NO. 5 MEMORIAL for RELIABLE HOLDINGS
TABLE OF AUTHORITIES | PAGE X
Swiss Bank Corporation v. Novrissiysk Shipping [1995] 1 Lloyd’s Rep. 202 3
Sylvia Shipping Corporation Co. Ltd. v. Progress Bulk Carriers Ltd. — “The Sylvia” [2010] EWHC 542 (Comm.)
22
[ T ] The Athenian Harmony [1998] 2 Lloyd’s Rep. 35
24
The Maria Jose T SMA No. 2205 (1986) 8
The Procter & Gamble Company, Procter & Gamble International Operations SA, Procter & Gamble Product Supply (UK) Ltd. v. Svenska Cellulosa Aktiebolaget SCA, SCA Hygiene Products UK Ltd. [2012] EWHC 498 (Ch)
15
The Union of India v. N V Reederij Amsterda — “The Amstelslot” [1963] 2 Lloyd’s Rep. 223
8,9
Thomas Witter Ltd. v. TBP Industries Ltd. [1996] 1 All ER 573 14
Tilden Rent-A-Car Co. v. Clendenning (1978) 83 D.L.R. (3d) 400 14
Total Gas Marketing Ltd. v. Arco British Ltd. [1998] 2 Lloyd’s Rep. 209 (HL) 17
Tradigrain SA v. Internek Testing Services [2007] EWCA Civ. 154 23
Transfield Shipping Inc. v. Mercator Shipping Inc. — “The Achilleas” [2008] UKHL 48
21
Transworld Oil Ltd. v. North Bay Shipping — “The Rio Claro” [1987] 2 Lloyd’s Rep. 173
10
[ U ] Union Eagle Ltd. v. Golden Achievement Ltd., [1997] AC 514
13
Union Trans-Pacific Co. Ltd. v. Orient Shipping Rotterdam BV [2002] EWHC 1451 (Comm.)
4
Unisys International Services Ltd. (formerly Sperry Rand) v. Eastern Counties Newspapers Group [1991] 1 Lloyd's Rep. 538
4, 5
[ V ] Vagres Compania Maritime SA v. Nissho-Iwai American Corporation — “The Karin Vatis” [1988] 1 Lloyd’s Rep. 330
20
Vallejo v. Wheeler (1774) 1 Cowper’s Rep. 143 18
Victoria Laundry (Windsor) Ltd v. Newman Industries Ltd. [1949] 2 KB 528 21,22
TEAM NO. 5 MEMORIAL for RELIABLE HOLDINGS
TABLE OF AUTHORITIES | PAGE XI
[ W ] Welex A.G. v. Rosa Maritime Ltd. — “The Epsilon Rosa” [2003] 2 Lloyd’s Rep. 509
3
West of England Ship Owners Mutual Protection and Indemnity Association (Luxembourg) Ltd. v. Hellenic Industrial Development Bank SA [1999] 1 Lloyd’s Rep. 93
4
White v. Bristol Rugby Ltd. [2002] I.B.L.R. 204 14
[ Z ] Zurich Insurance (Singapore) Pte. Ltd. v. B-Gold Design & Construction Pte. Ltd. [2008] SGCA 27
17
BOOKS
A Burrows CONTRACT TERMS (Oxford University Press 2007,1st Ed. ) 15
Bruce Harris et. al.
THE ARBITRATION ACT, 1996: A COMMENTATORY, (Wiley Blackwell 2014, 5th Ed.)
4
Bryan A. Garner
Black’s Law Dictionary, (West Group 2009, 9th Ed.) 16
Catherine Mitchell
INTERPRETATION OF CONTRACTS: CURRENT CONTROVERSIES IN
LAW (Routledge-Cavendish 2007, 1st Ed.) 14
D Hodge RECTIFICATION (Sweet &Maxwell 2010) 18
Francesco Berlingieri
BERLINGIERI ON ARREST OF SHIPS, (Informa 2011, 5th Ed.) 8
Gerald Mc Meel THE CONSTRUCTION OF CONTRACTS – INTERPRETATION, IMPLICATION AND RECTIFICATION (Oxford University Press 2011, 2nd Ed.)
16
Hugh Beale CHITTY ON CONTRACTS (Sweet & Maxwell 2008, 30th Ed.) 21
I C F Spry THE PRINCIPLES OF EQUITABLE REMEDIES: SPECIFIC
PERFORMANCE, INJUNCTIONS, RECTIFICATION AND EQUITABLE
DAMAGES (Thomson Reuters 2013, 9th Ed.)
18
TEAM NO. 5 MEMORIAL for RELIABLE HOLDINGS
TABLE OF AUTHORITIES | PAGE XII
Julian Cooke et. al.
VOYAGE CHARTER (Informa 2007, 3rd Ed.) passim
K Lewison THE INTERPRETATION OF CONTRACTS (Sweet & Maxwell 2011, 5th Ed.)
15
Maurice Waite OXFORD DICTIONARY & THEASURUS (Oxford University Press 2007, 2nd Ed.)
16
R Stevens OBJECTIVITY, MISTAKE AND THE PAROL EVIDENCE RULE IN
CONTRACT TERMS (Oxford University Press 2007) 13
Redfern & Hunter et. al.
REDFERN AND HUNTER ON INTERNATIONAL ARBITRATION (Oxford University Press 2009, 5th Ed.)
4
Robert Merkin ARBITRATION ACT 1996 (Informa 2005, 3rd Ed.) 3, 4
Simon Baughen SHIPPING LAW (T and F Publishing 2009, 4th Ed.) 8, 9
Sir Guenter Treitel et. al.
CARVER ON BILLS OF LADING (Sweet & Maxwell 2011, 3rd Ed.) 7
Stephen Girvin CARRIAGE OF GOODS BY SEA (Oxford University Press 2011, 2nd Ed.)
20
Steven J Hazelwood & David Semark
P&I CLUBS LAW AND PRACTICE (Informa 2010, 4th Ed.) 9, 11
ARTICLES
Chan Leng Sun ‘What Can We Expect from the “Expected Ready to Arrive” Clause’ (1993) 14 Sing L. Rev. 382
7, 10
David Gek Sian Chong
‘Reasonable Despatch in Voyage Charterparties’ (1993) Sing. J. Legal Stud. 419
6, 12
David McLauchlan
‘The "Drastic" Remedy of Rectification for Unilateral Mistake’ (2008) L.Q. Rev. 608
19
David McLauchlan
‘The Entire Agreement Clause: Conclusive or a Question of Weight?’ (2012) L.Q. Rev
15
Dewey R ‘The Concept of Due Diligence in Maritime Law’ (1971) 2 Journal 8
TEAM NO. 5 MEMORIAL for RELIABLE HOLDINGS
TABLE OF AUTHORITIES | PAGE XIII
Villareal of Maritime Law and Commerce 776
E Palser ‘Rectification for Unilateral Mistake: How Heavy is the Burden of Proof?’ [2006] LMCLQ 139
19
E Peden & J W Carter
‘Entire Agreement—and Similar—Clauses’ (2006) 22 J.C.L. 1 14
G Williams ‘Mistake and Rectification in Contract’ (1954) 17 M.L. Rev. 154 17
J Cartwright ‘Remoteness of Damage in Contract and Tort: A Reconsideration’ (1996) 53 Cambridge Law Journal 488
21
J J Spigelman ‘Contractual Interpretation: A Comparative Perspective’ (2011) 85 A.L.J. 412
14
J W Carter ‘Termination Clauses’ (1990) 3 J.C.L 90 16
Matthew Barber
‘The Limits of Entire Agreement Clauses’ (2012) 6 Journal of Business Law 486
14, 15
Raymond A Connell
‘Charter Party Termination and the Approach Voyage’ (2000-2001) 25 Tulane Maritime Law Journal 469
6
S Rowan ‘For the Recognition of Remedial Terms Agreed Inter Parties’ (2010) 126 L.Q. Rev. 448
16
Simon Crookenden
‘Correction of the Name of a Party to an Arbitration’ (2009) 25 Arbitration International 207
5
LIST OF ABBREVIATIONS
s. Section
¶ Paragraph
ASBATANKVOY Tanker Voyage Charter Party, (Association of Ship Brokers and Agents (U.S.A.), Inc., 1977)
Cl. Clause
ETA Estimated Time of Arrival
TEAM NO. 5 MEMORIAL for RELIABLE HOLDINGS
TABLE OF AUTHORITIES | PAGE XIV
EAC Entire Agreement Clause
Lloyd’s Rep. Lloyd’s Law Reports
USD United States Dollars
Owner Reliable Tankers Inc. (merged into Reliable Holdings Inc.)
P&I Protection and Indemnity
Charterer Super Charters
VLCC Very Large Crude Carrier
TEAM NO. 5 MEMORIAL for RELIABLE HOLDINGS
ISSUES PRESENTED | PAGE XV
ISSUES PRESENTED
1. Does the arbitration tribunal have jurisdiction to hear the present dispute?
2. Did arbitration validly commence in the first reference?
3. Whether the approach voyage to the loading port had commenced?
4. Did failure to commence approach voyage amount to repudiatory breach?
5. Whether the owners are in breach of obligations under ASBATANKVOY Part II Clause
1?
6. Does presence of Entire Agreement Clause preclude reliance on extrinsic evidence?
7. Does Clause 2 of owner’s Standard terms release both parties of all liabilities?
8. Are the grounds for seeking rectification of the final fixture confirmation recap well
founded?
9. Is the charterer liable to pay advance freight to the owner?
10. To what extent is the owner liable for damages and is charterer entitled to set-off its claim
for damages against the owner’s claim for freight?
TEAM NO. 5 MEMORIAL FOR RELIABLE HOLDINGS
STATEMENT OF FACTS | PAGE 1
STATEMENT OF FACTS
THE PARTIES AND THE CHARTER
Reliable Tankers Inc. (the Owners) and Super Charters (the Charterers) entered into a single
voyage charterparty on 19th Nov 2011 for carriage of a cargo of crude oil on board the Owner’s
vessel Reliable Butterfly (the Vessel) from Blueland to Indigoland. The charter was on an
amended ASBATANKVOY form and contained rider clauses.
ARREST AND THE PERFORMANCE OF THE CHARTER
On 22nd Nov 2011, the vessel was arrested by third party bunker suppliers at an en route bunker
port, Redland (the Bunker Port). The laycan was narrowed to 5th Dec 2011 by the charterers and
it was agreed by both the parties that the vessel had to sail from the Bunker Port by 25th Nov
2011 in order to meet the laycan. As the arrest could not be lifted by 25th Nov 2011, it was
informed to the charterers that the vessel would not meet her laycan. It was also informed that a
revised laycan would be given when the same would be possible.
TERMINATION OF THE CHARTER
On 27th Nov 2011, the charterers sent a Notice of Cancellation to the owners, declining to accept
any later laycan and invoking their right to cancel under Clause 2 of the owner’s standard terms
to terminate the charter party. Through their e-mail dated 28th Nov 2011, the owners confirmed
the cancellation of charter party and informed the charterers about the outstanding freight which
was unaffected by the charterer’s decision to cancel. A sister VLCC was also offered to the
charterers for the performance of the fixture. Subsequently, Reliable Holdings Inc. Became the
successor of Reliable Tankers Inc. By universal succession.
TEAM NO. 5 MEMORIAL FOR RELIABLE HOLDINGS
STATEMENT OF FACTS | PAGE 2
THE CLAIMS
On 28th Jan 2012, the owners commenced arbitration proceedings in the name of ‘Reliable
Tankers Inc.’ against the charterers contending the alleged breach of the charter by the charterers
in failing to pay the deemed earned freight. They claimed the same as owing under the charter or
alternatively, as damages for the breach by the charterer.
By their e-mail dated 12th Feb 2012, the charterers contended the invalidity of the owner’s
Notice of Appointment on grounds of claimant being a non-existent entity, and commenced
another separate arbitration proceedings against the owners. They also noted that the owners
were time barred in this reference due to the operation of the contractual time bar present in
Clause 4 of charterer’s standard terms.
By their e-mail dated 24th Feb 2012, the owners denied the allegation that arbitration was not
validly commenced by them and clarified that the intended claimant was the surviving entity,
that is, Reliable Holdings Inc., pleading a genuine misnomer in the alternative.
TEAM NO. 5 MEMORIAL FOR RELIABLE HOLDINGS
ARGUMENTS ADVANCED | PAGE 3
PRELIMINARY ISSUES
I. THE ARBITRAL TRIBUNAL HAS THE JURISDICTION TO HEAR THE
PRESENT DISPUTE
1. The jurisdiction of the arbitral tribunal is premised on a valid agreement to arbitrate between the
parties.1 Under s. 30(1) of the Arbitration Act, 1996, a tribunal can rule on its own jurisdiction. It
is submitted that the fixture confirmation recap constitutes the Charter Party (A) and, there exists
a valid agreement to arbitrate between the parties (B).
A. THE FIXTURE CONFIRMATION RECAP CONSTITUTES THE CHARTER PARTY
2. A fixture recap constitutes a valid Charter Party when a final agreement on all the essential terms
has been reached and when the recap is read in conjunction with a standard form charter.2 Thus,
the fixture confirmation recap dated 19th Nov 2011 constitutes a valid Charter Party and the same
is substantiated by Rider Cl. 43 which details on Charter Party administration.
B. THE ARBITRATION CLAUSE EVIDENCES A VALID AGREEMENT TO ARBITRATE
3. Clause 24 of ASBATANKVOY Part II and the “English Law and London to apply”3 amendment
in confirmation recap, evidence the existence of a valid agreement to arbitrate.
II. THE ARBITRATION WAS VALIDLY COMMENCED ON 28TH JANUARY 2012
4. S.14 of the Arbitration Act, 1996 lays down the requirements of valid commencement of arbitral
proceedings which must be construed in a broad and flexible manner.4 On the present facts, it is
1 ABB Lummus Global Ltd. v. Keppel Fells Ltd. [1999] 2 Lloyd’s Rep. 24; See also, Robert Merkin, ARBITRATION
ACT 1996 (Informa 2005, 3rd Ed.) 83. 2 Welex A.G. v. Rosa Maritime Ltd. — “The Epsilon Rosa” [2003] 2 Lloyd’s Rep. 509. 3 Swiss Bank Corporation v. Novrissiysk Shipping [1995] 1 Lloyd’s Rep. 202. 4 West of England Ship Owners Mutual Protection and Indemnity Association (Luxembourg) Ltd. v. Hellenic
TEAM NO. 5 MEMORIAL FOR RELIABLE HOLDINGS
ARGUMENTS ADVANCED | PAGE 4
submitted that (A) the Notice of Appointment (hereinafter, the NOA) dated 28th Jan 2012 was
valid, and therefore, the second reference stands unfounded (B).
A. NOTICE OF APPOINTMENT DATED 28TH JAN 2012 WAS VALID
5. A mistake to a claimant’s name in the NOA can be corrected if it was a genuine mistake5 not
amounting to fundamental error,6 and was within the contemplation of a reasonable respondent.7
On the present facts, Reliable Holdings Inc. was the universal successor8 of the original
contracting party (Reliable Tankers Inc.) and had acquired all its contractual rights and liabilities9
before the NOA was made. The same is substantiated by the report10 of jointly appointed
expert.11 The NOA was thus made with the authority12 of Reliable Holdings Inc. and correctly
described the intended dispute,13 evidenced by the appended charter party. Further, the misnomer
Industrial Development Bank SA [1999] 1 Lloyd’s Rep. 93; See also, Allianz Versicherungs- Aktiengesellschaft v. Fortuna Co. Inc. — “The Baltic Universal” [1999] 1 Lloyd’s Rep. 497; Seabridge Shipping AB v. Orsleff’s EFTS A/S [1999] 2 Lloyd’s Rep. 685. 5 Harper Versicherungs AG (also known as Harper Insurance Ltd. and formerly Turegum Versicherungsgesellschaft and Turegum Insurance Co.) v. Indemnity Marine Assurance Co. Ltd. [2006] EWHC 1500 (Comm.); See also, Bruce Harris et. al., THE ARBITRATION ACT, 1996: A COMMENTARY (Wiley Blackwell 2014, 5th Ed.) 62. 6 Unisys International Services Ltd. (formerly Sperry Rand) v. Eastern Counties Newspapers Group [1991] 1 Lloyd's Rep. 538; See also Robert Merkin, ARBITRATION ACT 1996 (Informa 2005, 3rd Ed.) 54. 7 Owners of the Sardinia Sulcis v. Owners of the Al Tawwab, Al Tawwab — “The Sardinia Sulcis” [1991] 1 Lloyd's Rep. 201; See also Bruce Harris et. al., THE ARBITRATION ACT, 1996: A COMMENTARY (Wiley Blackwell 2014, 5th Ed.) 62. 8 MOOT PROPOSITION, p.100; See also, Redfern & Hunter et. al., REDFERN AND HUNTER ON INTERNATIONAL
ARBITRATION (Oxford University Press 2009, 5th Ed.) 105. 9 Starways Ltd. v. UN (1969) 44 ILR 433; See also, Union Trans-Pacific Co. Ltd. v. Orient Shipping Rotterdam BV [2002] EWHC 1451 (Comm.); National Bank of Greece and Athens SA v. Metliss [1958] AC 509. 10 MOOT PROPOSITION, p. 113. 11 Baron de Bode v. The Queen (1845) 8 QB 208, 246-247; See also, Nelson v. Bridport (1845) 8 Beav. 527, 536; National Justice Compania Naviera SA v. Prudential Assurance Co.—“The Ikarian Reefer” [1993] 2 Lloyd's Rep. 68, 81-82. 12 SEB Trygg Holding AB v. Manches [2005] EWHC 35 (Comm.); See also, Eurosteel Ltd. v. Stinnes AG [2000] 1 All ER (Comm.) 964. 13 Lay v. Ackerman [2004] EWCA Civ. 184; See also; Mannai Investment Co. Ltd. v. Eagle Star Life Assurance Co. Ltd. [1997] AC 749; Easybiz Investments v. Sinograin Chinatex [2011] 1 Lloyd’s Rep. 688.
TEAM NO. 5 MEMORIAL FOR RELIABLE HOLDINGS
ARGUMENTS ADVANCED | PAGE 5
was genuine as it concerned only the name of the intended claimant14 and was within the
contemplation of the charterers. Thus, being technical in nature, the mistake should be corrected
and the fact that such correction will deprive the charterers of their accrued time bar defense does
not amount to significant prejudice to the charterers.15
B. THE SECOND REFERENCE STANDS UNFOUNDED
6. Since arbitration was validly commenced by the owners within the contractual limitation period
in the first reference and the misnomer in the NOA dated 28th Jan 2012 was corrected by the
owners, it makes the second reference unfounded.
MERITS
I. THE APPROACH VOYAGE HAD COMMENCED
7. Approach voyage begins at that point in time when the vessel embarks upon the chartered
service.16 It is submitted that the obligation to ‘start in time’ attached from the time the charter
was entered into (A). The obligation to start in time is non-recurring (B), and does not reattach at
every port the vessel halts. Further, the bunker port cannot be characterized as the last port of call
as being fully bunkered was a contractual requirement and hence, a part of the chartered service
(C). Therefore, the vessel had embarked upon its chartered service on 19th Nov 2011.
A. THE OBLIGATION TO ‘START IN TIME’ ATTACHED FROM THE TIME THE CHARTER WAS
ENTERED INTO
14 Unisys International Services Ltd. (formerly Sperry Rand) v. Eastern Counties Newspapers Group [1991] 1 Lloyd's Rep. 538. 15 Simon Crookenden, ‘Correction of the Name of a Party to an Arbitration’, (2009) 25 Arbitration International 207-216. 16Julian Cooke et. al., VOYAGE CHARTER (Informa 2007, 3rd Ed.) 92-95; See also, Harrison v. Garthorne (1872) 26 L.T. (N.S.) 508; Hudson v. Hill (1874) 43 L.J.C.P. 273.
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8. Indeed, the vessel was under an obligation to ‘start in time’, conferred by the conjunct reading of
the express qualified obligation to proceed to the loading port ‘with convenient despatch’ under
ASBATANKVOY Part II Clause 1 and the Estimated Time of Arrival (hereinafter, the ETA) at
load port.17 The start in time date is computed by reference to the ETA as the end date by which
the vessel has to arrive at the load port.18 It is submitted that 19th Nov 2011 should be
contemplated to be the ‘start in time date’.19 Taking into account the terminal shutdown at
disport, the vessel was required to start from wherever she was20 in sufficient time21 and with
reasonable despatch to proceed to the load port to meet the ETA.22 As the charter was entered
into on 19th Nov 2011, the obligation to start in time attached from that day.
B. THE ABSOLUTE OBLIGATION TO START IN TIME IS NON-RECURRING
9. Once the approach voyage has commenced, the ship owner's duty is limited to proceed with
reasonable despatch.23 There is no absolute duty to "start in time" at every stop along the route
during the approach voyage.24 Since the owner in the present case had started in time when the
charter was signed, his duty did not reattach from the bunker port.
C. THE BUNKER PORT WAS NOT THE LAST PORT OF CALL
17 Evera SA Commercial v. North Shipping Company [1956] 2 Lloyd's Rep. 367, 37; See also, Monroe Bros. v. Ryan [1935] 2 KB 28; Kleinwort Benson Ltd. v. Sherkate Sahami Sakht — “The Myrto” [1984] 2 Lloyd’s Rep. 341; Mitsui OSK Lines v. Garnac Grain Co. Inc. [1984] 2 Lloyd's Rep. 449; Geogas SA v. Trammo Gas Ltd. — “The Baleares” [1993] 1 Lloyd's Rep. 215. 18 Geogas SA v. Trammo Gas Ltd. — “The Baleares” [1993] 1 Lloyd's Rep. 215; See also, Maredelanto Compania Naviera SA v. Bergbau-Handel GmbH — “The Mihalis Angelos" [1971] 1 QB 164. 19Mitsui OSK Lines v. Garnac Grain Co. Inc. [1984] 2 Lloyd's Rep. 449; See also, Louis Dreyfus v. Lauro (1938) 60 Lloyd’s Rep. 94; Geogas SA v. Trammo Gas Ltd. — “The Baleares”[1993] 1 Lloyd's Rep. 215. 20 Louis Dreyfus v. Lauro (1938) 60 Lloyd’s Rep. 94. 21 David Gek Sian Chong, ‘Reasonable Despatch in Voyage Charterparties’, (1993) Sing. J. Legal Stud. 401. 22 Mitsui OSK Lines v. Garnac Grain Co. Inc. [1984] 2 Lloyd's Rep. 449. 23 David Gek Sian Chong, ‘Reasonable Despatch in Voyage Charterparties’, (1993) Sing. J. Legal Stud. 401. 24 Raymond A Connell, ‘Charter Party Termination and the Approach Voyage’, (2000-2001) 25 Tulane Maritime Law Journal 469.
TEAM NO. 5 MEMORIAL FOR RELIABLE HOLDINGS
ARGUMENTS ADVANCED | PAGE 7
10. The ‘last port of call’ refers to the last port of call under an intermediate charter party.25 In the
present case, the visit to the en route bunker port (Redland) was not an intermediate
engagement26 but a part of performing the contractual requirement of ‘being fully bunkered’.27
The itinerary clearly provided for ETA at bunker port as 22nd Nov. 2011 This suffices to show
that the vessel started in time with convenient despatch from 19th Nov. 2011, to meet the
expected date at bunker port. Therefore, the vessel had embarked upon its chartered service on
19th Nov 2011 as she was free of her previous engagements and was proceeding to the loading
port for the purpose of loading cargo. 28
II. THE OWNERS ARE NOT IN BREACH OF THE OBLIGATIONS UNDER
ASBATANKVOY PART II CL.1
11. ASBATANKVOY Part II Cl.1 expressly obliges the owner to proceed to the loading port ‘with
all convenient despatch’, while ‘being seaworthy’ and ‘in every respect fitted for the voyage’. In
the present case, the delay is not attributable to non exercise of due diligence to make the vessel
financially seaworthy and, (A) in any case, the owners are exempted under Clause 19 of
ASBATANKVOY Part II (B). Therefore, the owner is not liable for breach of its obligation to
proceed with convenient despatch (C).
A. THE DELAY IS NOT ATTRIBUTABLE TO NON EXERCISE OF DUE DILIGENCE TO MAKE THE
VESSEL FINANCIALLY SEAWORTHY
25 Chan Leng Sun, ‘What Can We Expect from the “Expected Ready to Arrive” Clause’, (1993) 14 Sing. L. Rev. 382. 26 Evera SA Commercial v. North Shipping Co. Ltd. [1956] 2 Lloyd's Rep. 367. 27 Forest Oak Steam Shipping Co. v. Richard (1899) 6 Com. Ca. 100; See also, Sir Guenter Treitel et. al., CARVER ON BILLS OF LADING (Sweet & Maxwell 2011, 3rd Ed.) 294. 28 Evera SA Commercial v. North Shipping Co. Ltd. [1956] 2 Lloyd's Rep. 367; See also, Julian Cooke et. al., VOYAGE CHARTER (Informa 2007, 3rd Ed.) 98.
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ARGUMENTS ADVANCED | PAGE 8
12. Cl.1 of ASBATANKVOY Part II imposes an express obligation29 on the owners to provide a
seaworthy vessel for the contractual voyage, including the approach voyage30 and the duty is
qualified by the exercise of due diligence. It is submitted that the owners exercised due diligence
to make the vessel financially seaworthy (i), and there exists no causal link between the
unseaworthiness and the loss to the charterers (ii).
i. The owners exercised due diligence to make the vessel financially seaworthy
13. Seaworthiness refers to that degree of fitness that a prudent owner31 would require his vessel to
have at the commencement of the voyage32 to undergo the ordinary perils of the sea and includes
the financial condition of the vessel.33 On the present facts, the demand for an unreasonably high
security was a custom of the bunker port, as is evident from the internal report of the owners
dated 23rd Nov 2011.34 As a matter of business efficacy35 and commercial prudence,36 the owners
did exercise due diligence by strenuously negotiating to reduce the security amount to a
reasonable figure.
14. In any event, the obligation of due diligence only requires the taking of reasonable efforts on a 29 Bank of Australasia and Others v. Clan Line Steamers Limited [1916] 1 KB 39; See also, (Board of Trade) Minister of Materials v. Steel Brothers & Co. Ltd. [1952] 1 Lloyd's Rep. 485. 30 Reed v. Page [1927] 1 KB 743, 754; See also, New York and Cuba Mail Steamship Co. v. Eriksen and Christensen (1922) 27 Com. Cas. 330, 336; Scott v. Foley (1899) 5 Com. Cas. 53. 31 M D C Ltd. v. N V Zeevaart Maatschappij — “ The Beursstraat” [1962] 1 Lloyd’s Rep. 180; See also, McFadden v. Blue Star Line [1905] 1 KB 697, 706; Papera Traders v. Hyundai Merchant Marine — “The Eurasian Dream” [2002] 1 Lloyd’s Rep. 719. 32 McFadden v. Blue Star Line [1905] 1 KB 697, 706; See also, Kopitoff v. Wilson (1876) 1 QBD 377, 380; Simon Baughen, SHIPPING LAW (T and F Publishing 2009, 4th Ed.) 88. 33 Morrisey v. The S S A & J Faith 252 F. Supp. 54 (N.D. Ohio 1965); See also, The Maria Jose T SMA No. 2205 (1986); Mare Schiffahrtskontor v. M/V Ocean Haven 763 F.2d 633 (4th Cir. 1985) 637-39; Potash Company of Canada, Ltd. v. S S Raleigh 361 F. Supp. 120 (1973); Dewey R. Villareal, ‘The Concept of Due Diligence in Maritime Law’, (1971) 2 Journal of Maritime Law and Commerce 776-777. 34 MOOT PROPOSITION, p. 93. 35 Northern Shipping Co. v. Deutsche Seereederei GmbH and Others — “The Kapitan Sakharov” [2000] 2 Lloyd's Rep. 255, 266. 36 The Union of India v. N V Reederij Amsterdam –—“The Amstelslot” [1963] 2 Lloyd’s Rep. 223, 235; See also, Francesco Berlingieri, BERLINGIERI ON ARREST OF SHIPS, (Informa 2011, 5th Ed.) 334-335.
TEAM NO. 5 MEMORIAL FOR RELIABLE HOLDINGS
ARGUMENTS ADVANCED | PAGE 9
balance of probabilities37 and not the undertaking of any method which could be unreasonably
hazardous to the ship owner.38 Thus, owing to their financial condition at the time of the arrest39,
it was not reasonable on the part of the owners to agree to the unreasonable security and for the
same reasons, no immediate Letter of Indemnity40 was sought from the P&I Club41 before
reasonable negotiations.
ii. No causal link exists between the vessel’s unseaworthiness and loss to the charterer
15. The chain of causation is broken if due diligence was actually exercised but it failed to produce
any successful result.42 On the present facts, want of due diligence and resultant unseaworthiness
were not the effective causes of the loss.43 The owners satisfied the requirement of a reasonable
carrier by negotiating with the bunker suppliers on reasonable grounds to reduce the
preposterous amount of security. Since, the tests of commercial prudence and business efficacy
were duly followed by the owners, they are not in breach of the due diligence obligation under
Clause 1 of ASBATANKVOY Part II.
B. IN ANY CASE, THE OWNERS MAY RELY ON THE EXCEPTIONS UNDER CLAUSE 19 OF
ASBATANKVOY PART II
37 Jahn (t/a CF Otto Weber) v. Turnbull Scott Shipping Co. Ltd. — “The Flowergate” [1967] 1 Lloyd’s Rep. 1; See also, Julian Cooke et. al., VOYAGE CHARTER (Informa 2007, 3rd Ed.) 1035. 38 The Union of India v. N V Reederij Amsterda — “The Amstelslot” [1963] 2 Lloyd’s Rep. 223, 235; See also, Julian Cooke et. al., VOYAGE CHARTER (Informa 2007, 3rd Ed.) 970. 39 MOOT PROPOSITION, p.93, 100. 40 “The Oakwell” [1991] 1 Lloyd’s Rep. 253. 41 Steven J Hazelwood & David Semark, P&I CLUBS LAW AND PRACTICE (Informa 2010, 4th Ed.) 307-309. 42 Charles H Windschuegl Ltd. v. Alexander Pickering and Co. Ltd. (1950) 80 Lloyd’s Rep. 89, 92; See also, Soc. D’Avances Commerciales Ltd. v. A Besse and Co. Ltd. [1952] 1 Lloyd’s Rep. 242, 249; Overseas Buyers Ltd. v. Grenadex SA [1980] 2 Lloyd’s Rep. 608, 612. 43 McFadden v. Blue Star Line [1905] 1 KB 697, 703; See also, Simon Baughen, SHIPPING LAW (T and F Publishing 2009, 4th Ed.) 92.
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ARGUMENTS ADVANCED | PAGE 10
16. The general rule is that the exceptions clause44 applies from the time the chartered service
commences, including the approach voyage.45 Thus, the arrest of the Reliable Butterfly and the
subsequent delay are covered under the exceptions contained in Clause 19 of ASBATANKVOY
Part II.
i. The Owners are exempted from liability under the ‘catch-all exception contained in
Clause 19 of ASBATANKVOY Part II
17. The owners are exempted from failure and delay in performance resulting from ‘any other cause
of whatsoever kind’ provided that it occurs ‘without the actual fault or privity’ of the owner. The
onus is on the ship owner to establish the above condition.
a. Arrest is within the meaning of ‘any other cause of whatsoever kind’
18. The effect of the term ‘whatsoever’ is to show the generality of the exception and to exclude the
eiusdem generis rule.46 Thus, ‘arrest of the vessel’ would be within its scope.
b. The loss occurred ‘without the actual fault or privity of the owner’
19. ‘Actual fault’ refers to a negligent act or omission and is equated with want of due diligence on
the part of the owner.47 On the present facts, the owners were not at fault for the inevitable delay
arising out of the prevalent custom of the bunker port to demand an unreasonably high security.
As the obligation of due diligence was discharged by the owners by prudently negotiating with
the bunker suppliers, they can rely on this exception. 44 Chan Leng Sun, ‘What Can We Expect from the "Expected Ready to Arrive” Clause’, (1993) 14 Sing L. Rev. 384-385. 45 Monroe v. Ryan [1935] 2 KB 28; See also, Transworld Oil Ltd. v. North Bay Shipping — “The Rio Claro” [1987] 2 Lloyd’s Rep. 173. 46 Societe Anonyme Marocaine de l’Industrie du Raffinage v. Notos Maritime Corp. — “The Notos” [1987] 1 Lloyd’s Rep. 503; See also, Julian Cooke et. al., VOYAGE CHARTER (Informa 2007, 3rd Ed.) 35-36, 886. 47 Leesh River Tea Co. Ltd. v. British India Steam Navigation Co. Ltd. —“The Cheybassa” [1967] 2 QB 250; See also, Hourani v. Harrison (1927) 32 Com. Cas. 305.
TEAM NO. 5 MEMORIAL FOR RELIABLE HOLDINGS
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ii. The owners may rely on the ‘unseaworthiness’ exception contained in Clause 19 of
ASBATANKVOY Part II
20. To invoke this exception, the owner has to establish that he exercised due diligence to make the
vessel seaworthy. It is submitted that owing to the means available at the time of the arrest, the
owners discharged their obligation of due diligence by taking the reasonable steps that would
have been taken by a prudent carrier in the given circumstances.
iii. The Owner may rely on the ‘seizure under legal process’ exception contained in
Clause 19 of ASBATANKVOY Part II
21. To invoke this exception, it must be established by the owners that they promptly furnished the
bond for security to release the vessel.
a. Arrest is within the meaning of ‘seizure under legal process’
22. The phrase ‘seizure under legal process’ covers any forcible dispossession or taking of ship in
accordance with the ordinary judicial processes.48 Seizure refers to every act of effective
possession at the suit of a non-governmental person or body utilizing ordinary legal processes,49
and thus, covers arrest.
b. The owners took reasonable efforts to ‘promptly’ furnish the bond for security
23. ‘Promptly’ here refers to without unreasonable delay and within a reasonable time, and should
be adjudged on the basis of surrounding circumstances and means available at the time of the
arrest.50 As evident from the internal report, the custom of the bunker port was such that despite
all the reasonable efforts, the amount of security could not be reduced to a reasonable figure
48Julian Cooke et. al., VOYAGE CHARTER (Informa 2007, 3rd Ed.)1033. 49 Handelsbanken Svenska v. Dandridge — “The Aliza Glacial” [2002] 2 Lloyd’s Rep. 421. 50 Steven J Hazelwood & David Semark, P&I CLUBS LAW AND PRACTICE (Lloyd’s List 2010, 4th Ed.) 307-309.
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within three days of the arrest. Thus, as the owners took all the reasonable efforts to release the
vessel, they can rely on this exception.
C. THE OWNER IS NOT LIABLE FOR BREACH OF HIS OBLIGATION TO PROCEED WITH
‘CONVENIENT DESPATCH’
24. As established above, the owners discharged their obligation of due diligence and are in any case
exempted under Clause 19 of ASBATANKVOY Part II. Thus, the loss resulting out of delay is
not attributable to the owners as the vessel did proceed with convenient despatch.
III. ALTERNATIVELY, ASSUMING APPROACH VOYAGE HAD NOT
COMMENCED, FAILURE TO START IN TIME WAS NOT REPUDIATORY
25. It is submitted that the obligation to start in time is an intermediate term (A), and failure to
commence approach voyage was not repudiatory (B).
A. THE START IN TIME OBLIGATION IS AN INTERMEDIATE TERM
26. As established above, the obligation to ‘start in time’ is derived from the obligation to proceed
with ‘convenient despatch’ and the ETA at loadport.51 Since failure to ‘start in time’ relates to
owner’s failure to exercise convenient despatch in commencement of the approach voyage,
which in itself is an intermediate term,52 it is submitted that the ‘start in time’ obligation should
be characterized as an intermediate term. Further, when the charter contains an express
termination clause, the term cannot be regarded as a condition.53
B. FAILURE TO COMMENCE APPROACH VOYAGE WAS NOT REPUDIATORY
51 Evera S A Commercial v. North Shipping Company [1956] 2 Lloyd's Rep. 367, 371; See also, Kleinwort Benson Ltd. v. Sherkate Sahami Sakht — “The Myrto” [1984] 2 Lloyd’s Rep. 341. 52 David Gek Sian Chong, ‘Reasonable Despatch in Voyage Charterparties’, (1993) Sing. J. Legal Stud. 419. 53Blackgold Trading v. Almare SPA — “The Almare Seconda” [1981] 2 Lloyd’s Rep. 433, 435; See also, Bunge Corporation v. Tradax Export SA [1981] 1 WLR 711.
TEAM NO. 5 MEMORIAL FOR RELIABLE HOLDINGS
ARGUMENTS ADVANCED | PAGE 13
27. Cl.2 of owners’ standard terms was invoked as it became evident that the vessel would not be
able to meet her laycan. However, non-meeting of laycan was not decisive of owner’s ability to
ensure fulfilling the commercial purpose had the charterers continued with the charter party. The
itinerary shows that reasonable margin of time was saved for contingencies that commonly arise
in mercantile trade during the laden voyage. The laycan was narrowed down to 5th Dec 2011 by
the charterers saving a day, and the vessel would have finished discharging by 10th Jan 2012,
which was five days before the terminal shutdown. Therefore, the delay did not frustrate the
commercial purpose of the charter.54 Hence, it is not a case of repudiatory breach.55
IV. THE PRESENCE OF THE ENTIRE AGREEMENT CLAUSE PRECLUDES
RELIANCE ON EXTRINSIC EVIDENCE
28. The Entire Agreement Clause (hereinafter, the EAC) integrates the contract and calls for non-
reliance on extrinsic evidence to “allow, contradict, vary, add to or subtract from the terms of a
written contract”.56 It is submitted that on consideration of totality of evidence, the EAC
precludes reliance on prior negotiations for the purpose of construction (A) and, prevents the
effect of incorporation of a new term through rectification (B).
A. THE EAC PRECLUDES RELIANCE ON PRIOR NEGOTIATIONS FOR CONSTRUCTION
i. Inclusion of the EAC was a result of common intention of the parties
29. The totality of evidence is used to determine whether the agreement was exclusively contained
54Evera S A Commercial v. North Shipping Company [1956] 2 Lloyd's Rep. 367, 371. 55 Scandinavian Trading Tanker Co. A.B. v. Flota Petrolera Ecuatoriana — “The Scaptrade” [1983] 2 AC 694, 703; See also, Union Eagle Ltd. v. Golden Achievement Ltd. [1997] AC 514. 56 Bank of Australasia v. Palmer [1897] AC 540 PC (Australia); See also, R Stevens, OBJECTIVITY, MISTAKE AND THE PAROL EVIDENCE RULE IN CONTRACT TERMS (Oxford University Press 2007) 110.
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ARGUMENTS ADVANCED | PAGE 14
and integrated in the contract. 57 In the present contract, the EAC was a part of the Rider Clauses
of Charterers. Further, the fact of its inclusion was explicitly mentioned in the offer and final
fixture recaps, during negotiations through travelling drafts. Therefore, it cannot be contended
that such inclusion was without charterer’s knowledge.58
ii. The presence of an EAC is decisive on the application of the parol evidence rule
30. Prior negotiations and declaration of subjective intentions are not admissible for the purpose of
construction 59 and the incorporation of EAC reiterates such principles of parol evidence rule.60
It is submitted that in the present case, the EAC has a binding effect, in the absence of fraud,
misrepresentation or non est factum, and the charterer will be bound by the terms even if the
document had not been read.61
iii. Effect to non-reliance should be given in case of arm’s length negotiation
31. The phrase ‘supersedes any earlier agreements and discussions’ in the EAC points that the things
superseded are to have no bearing on the meaning of the agreement.62 Such declaration of non-
reliance was to ensure that in the interests of certainty,63 the rights of the parties should be
governed by the terms of the written contact64 and pre-defined extent of commercial risks,
57 Carmichael v. National Power Plc. [1999] 1 WLR 2042 (HL). 58 Catherine Mitchell, INTERPRETATION OF CONTRACTS: CURRENT CONTROVERSIES IN LAW (Routledge-Cavendish 2007, 1st Ed.) 131; See also, Surgicraft Limited v. Paradigm Biodevices Inc. [2010] EWHC 1291. 59 Investors Compensation Scheme Ltd. v. West Bromwich Building Society [1998] 1 WLR 896. 60 J J Spigelman, ‘Contractual Interpretation: A Comparative Perspective’, (2011) 85 A.L.J. 412. 61 E Peden & J W Carter, ‘Entire Agreement—and Similar—Clauses’ (2006) 22 J.C.L. 1; See also, Tilden Rent-A-Car Co. v. Clendenning (1978) 83 D.L.R. (3d) 400. 62 Proforce Recruit Ltd. v. The Rugby Group Ltd. [2006] EWCA Civ. 69; See also, Matthew Barber, ‘The Limits of Entire Agreement Clauses’, (2012) 6 Journal of Business Law 486. 63 White v. Bristol Rugby Ltd. [2002] I.B.L.R. 204; See also, SERE Holdings Ltd. v. Volkswagen Group UK Ltd. [2004] EWHC 1551 (Ch); Kingsley IT Consulting Ltd. v. McIntosh [2006] EWHC 1288 (Ch). 64 Quest-4-Finance Ltd. v. Maxfield [2007] EWHC 2313 (QB).
TEAM NO. 5 MEMORIAL FOR RELIABLE HOLDINGS
ARGUMENTS ADVANCED | PAGE 15
remedies and relief.65 The owners and charterers bargained at arm’s length 66 and had equal
bargaining power. The fact that EAC was incorporated shows the intention of the parties to
delineate reliance on prior statements.67
B. EAC PREVENTS INCORPORATION OF NEW TERM THROUGH RECTIFICATION
32. The presence of an EAC does not prevent the recourse to rectification. However, rectification is
available only ‘to correct an errant provision’ and ‘not to bring in terms presently not there’.68 On
ending the cancellation clause at ‘without recourse’, the charterer seeks to bring a change in the
post discharge liability regime, by making parties liable for incurred obligations and liabilities,
when in fact there was no provision to such effect. Such deletion amounts to de facto
incorporation of a new term, hence supplementing rather than correcting a mistake.69 Such
incorporation of terms through rectification is impermissible70 and the conclusion is reinforced
by the presence of an EAC, incorporated to provide legal certainty71 and prevent such disputes.
V. CLAUSE 2 OF OWNER’S STANDARD TERMS RELEASES BOTH PARTIES
FROM ALL LIABILITIES
33. On a true construction of the contract, it is submitted that the words ‘without recourse to either
65 Inntrepreneur Pub Co. v. East Crown Ltd. [2000] 2 Lloyd's Rep. 611 Ch D. 66 A/S Awilco of Oslo v. Fulvia SPA di Navigazione of Cagliari —“The Chikuma” [1981] 1 WLR 314 (HL); See also, Thomas Witter Ltd. v. TBP Industries Ltd. [1996] 1 All ER 573. 67 K Lewison, THE INTERPRETATION OF CONTRACTS (Sweet & Maxwell 2011, 5th Ed.) ¶ 3.11, 3.15; AXA Sun Life Services Plc. v. Campbell Martin Ltd. [2011] EWCA Civ. 133. 68 Procter & Gamble [2012] EWHC 498 (Ch); See also, Matthew Barber, ‘The Limits of Entire Agreement Clauses’, (2012) 6 Journal of Business Law 486. 69 David McLauchlan, ‘The Entire Agreement Clause: Conclusive or a Question of Weight?’, (2012) L.Q. Rev; See also, Procter & Gamble [2012] EWHC 498 (Ch). 70Etablissements Georges et Paul Levy v. Adderley Navigation Co. — “The Olympic Pride” [1980] 2 Lloyd’s Rep. 67; See also, A Burrows, CONTRACT TERMS (Oxford University Press 2007, 1st Ed.) 77. 71 Surgicraft Limited v. Paradigm Biodevices Inc. [2010] EWHC 1291; See also, The Procter & Gamble Company, Procter & Gamble International Operations SA, Procter & Gamble Product Supply (UK) Ltd. v. Svenska Cellulosa Aktiebolaget SCA, SCA Hygiene Products UK Ltd. [2012] EWHC 498 (Ch).
TEAM NO. 5 MEMORIAL FOR RELIABLE HOLDINGS
ARGUMENTS ADVANCED | PAGE 16
party whatsoever’ must be given their ordinary meaning (A) and, the principle of contra
proferentum is not applicable (B). Further, the contract is binding even if parties were not in
agreement (C) and lastly, purposive construction cannot override contractual language (D).
A. THE WORDS ‘WITHOUT RECOURSE TO EITHER PARTY WHATSOEVER’ SHOULD BE GIVEN
THEIR ORDINARY MEANING
34. Cl.2 of owner’s standard term was an express termination clause where parties were free to
devise their own express regime for termination of the contract.72 The primary source for
understanding what the parties meant is by interpreting their language in accordance with
conventional usage.73 The dictionary meaning suffices to point out the ordinary meaning.74
‘Without recourse’ refers to lack of such means through which a judgment or a reimbursement
can be obtained against an entity. 75 It negates the enforcement of, or a method for enforcing a
right.76 Further, the word ‘whatsoever’ which means ‘at all’77 simply acts to reinforce the
absence of such a right. Together, they seek to negate the remedies which arise by operation of
law on discharge,78 for liabilities incurred before termination.79 Therefore, the phrase ‘without
recourse to either party whatsoever’ is clearly indicative of the intention of the parties to release 72 S Rowan, ‘For the Recognition of Remedial Terms Agreed Inter Parties’, (2010) 126 L.Q. Rev. 448; See also, J W Carter, ‘Termination Clauses’, (1990) 3 J.C.L 90. 73 Bank of Credit and Commerce International SA v. Ali [2001] UKHL 8. 74 Holt & Co. v. Collyear (1881) 16 Ch D 718; See also, Rowett Leakey & Co. v. Scottish Provident Institution [1927] 1 CH 55. 75 Bryan A Garner, BLACK’S LAW DICTIONARY (West Group 2009, 9th Ed.) 1159. 76 Ibid 1388, 1740. 77 Maurice Waite, OXFORD DICTIONARY & THEASURUS (Oxford University Press 2007, 2nd Ed.) 1177; See also, Davies Middleton and Davies Ltd. v. Toyo Engineering Corporation 1997 WL 1105718; Dolphin Tanker SRL v. Westport Petroleum Inc.[2010] EWHC 2617 (Comm.). 78 Heyman v. Darwins Ltd. [1942] AC 356 (HL); See also, Ryanair Ltd. v. SR Technics Ireland Ltd. [2007] EWHC 3089 (QB). 79 Beaufort Developments (NI) Ltd. v. Gilbert — “Ash NI Ltd.” [1999] AC 266 (HL) 279-80; See also, Johnson v. Agnew [1980] AC 362, 392-3; Photo Productions Ltd. v. Securicor [1980] AC 827; Hyundai Heavy Industries Co. Ltd. v. Papadoupoulous [1980] 1 WLR 1129; Gerald McMeel, THE CONSTRUCTION OF CONTRACTS – INTERPRETATION, IMPLICATION AND RECTIFICATION (Oxford University Press 2011, 2nd Ed.) 53.
TEAM NO. 5 MEMORIAL FOR RELIABLE HOLDINGS
ARGUMENTS ADVANCED | PAGE 17
both the parties from all liabilities.
B. THE PRINCIPLE OF CONTRA PROFERENTEM IS NOT APPLICABLE
35. It is well acknowledged that ship owners and charterers bargain at arm’s length.80 In such a case,
where parties had equal bargaining power, shared responsibility and an elective choice to include
a particular provision, it is submitted that the principle of contra proferentem becomes
inapplicable.81
C. THE CONTRACT IS BINDING ON ITS TRUE CONSTRUCTION EVEN IF PARTIES WERE NOT IN
AGREEMENT
36. The purpose of interpretation is to give effect to the intention of the parties as objectively
ascertained.82 The difference of opinion as to the scope of a particular clause, if not clarified in
the contract, will have no effect on the binding nature of the contract.83 Prior negotiations that
are reflective of parties’ actual intentions and expectations are thus, not receivable.84
37. In any case, even if reliance be placed on prior negotiations, it suggests decision on words and
not the effect of the words. On the present facts, the evidence is declarative of parties’ subjective
state of mind and does not show that the parties negotiated on an agreed basis that particular
words bore a particular meaning. Thus, the disparity in subjective intentions of the parties has no
effect on the clarity and fixity of what was objectively agreed upon.85
D. PURPOSIVE CONSTRUCTION CANNOT OVERRIDE CONTRACTUAL LANGUAGE 80 A/S Awilco of Oslo v. Fulvia S PA di Navigazione of Cagliari — “The Chikuma” [1981] 1 WLR 314 (HL). 81 British Fermentation Products Ltd. v. Compair Reavell Ltd. [1999] BLR 352; See also, National Westminster Bank v. Utrecht-America Finance Co. [2001] EWCA Civ. 658. 82 Zurich Insurance (Singapore) Pte. Ltd. v. B-Gold Design & Construction Pte. Ltd. [2008] SGCA 27. 83 London County Council v. Henry Boots & Sons Ltd. [1959] 1 WLR 1069 (HL). 84 Codelfa Construction Pty. v. State Rail Authority of New South Wales (1982) 149 CLR 337, 348; See also, Proforce Recruit v. The Rugby Group [2007] EWHC 1621 (QB) 87. 85 Frederick E Rose (London) Ltd. v. William H Pim Junior & Co. Ltd. [1953] 2 QB 450, 462; See also, G Williams, ‘Mistake and Rectification in Contract’, (1954) 17 M.L. Rev. 154.
TEAM NO. 5 MEMORIAL FOR RELIABLE HOLDINGS
ARGUMENTS ADVANCED | PAGE 18
38. Purposive interpretation cannot override express contractual language86 and expressed objective
intention of the parties.87 The express contractual language of Cl. 2 of owners’ standard terms
depicts clear objective intention of the parties to oust both parties of all liabilities on its
invocation. Thus, the difficulty in construction of the phrase does not amount to ambiguity.88
VI. RECTIFICATION CANNOT BE PLEADED
39. It is submitted that there was a mistake in formation of the common intention and not the
documentation (A) and, absence of qualifying knowledge or conduct counters the claim for
unilateral mistake rectification (B).
A. THERE WAS MISTAKE IN FORMATION OF COMMON INTENTION AND NOT
DOCUMENTATION
40. The prerequisite for seeking rectification on ground of common mistake89 and unilateral
mistake90 is proving common continuing intention.91 It is submitted the objective prior accord of
deleting the said phrase ceased to continue when on 19th Nov 2011, the owner removed the
amendment to Cl.2 from the final fixture recap. This change in the final fixture recap clearly
signalled the owner’s deviation from the objective prior accord. It was clear from the change that
owner did not intend to commit on the terms previously finalised.
86 Total Gas Marketing Ltd. v. Arco British Ltd. [1998] 2 Lloyd’s Rep. 209 (HL). 87 Vallejo v. Wheeler (1774) 1 Cowper’s Rep. 143. 88 Ailsa Craig Fishing Co. Ltd. v. Malvern Fishing Ltd. [1983] 1 WLR 964 (HL). 89 Dubai Islamic Bank PJSC v. PSI Energy Holding Company BSC [2011] EWHC 2718 (Comm.); See also, Surgicraft Ltd. v. Paradigm Biodevices Inc. [2010] EWHC 1291 (Ch) 73; JJ Huber (Investments) Ltd. v The Private DIY Co. Ltd. (1995) 70 P. & C.R. D 33 Ch D; MacDonald v. Shinko Australia Pty. Ltd. [1999] 2 Qd. R. 152; Alstom Ltd. v. Yokogawa Australia Pty. Ltd. (No.7) [2012] SASC 49 ¶ 355; D Hodge, RECTIFICATION (Sweet &Maxwell 2010) ¶ 3.165–3.168. 90 D Hodge, RECTIFICATION (Sweet &Maxwell 2010) ¶ 3.165–3.168. 91 C H Pearce & Sons Ltd. v. Stonechester Ltd. The Times 17 November 1983; See also, I C F Spry, THE PRINCIPLES
OF EQUITABLE REMEDIES: SPECIFIC PERFORMANCE, INJUNCTIONS, RECTIFICATION AND EQUITABLE DAMAGES (Thomson Reuters 2013, 9th Ed.) 612.
TEAM NO. 5 MEMORIAL FOR RELIABLE HOLDINGS
ARGUMENTS ADVANCED | PAGE 19
41. The charterer was negligent in proof-reading the final fixture and also, did not make changes
under Rider Cl.43 within three days of lifting of subjects. The effective cause of charterer’s
mistake was his negligence.92 In the present case, mistake occurred in the formation of an
objective intention as opposed to documentation of the objective intention. 93
B. ABSENCE OF QUALIFYING KNOWLEDGE OR CONDUCT COUNTERS THE CLAIM FOR
UNILATERAL MISTAKE RECTIFICATION
42. If the tribunal deems fit to consider the case for unilateral rectification, it is submitted that in the
present case the request is unfounded as the requirement of qualifying knowledge or conduct94 is
not satisfied. Actual knowledge here is the sole basis of relief, 95 in absence of other vitiating
factors. The knowledge of mistake on the part of the charterer, cannot be established in the
present case96, and therefore, rectification for unilateral mistake should not be granted when such
knowledge is not conclusively proven.97
VII. THE ADVANCE FREIGHT IS NOT RECOVERABLE BY THE CHARTERERS
43. On the present facts, it is submitted that advance freight was unconditionally earned on lifting of
subjects (A) and it is irrecoverable in nature (B). 92 Daventry DC v. Daventry and District Housing Ltd. [2011] EWCA Civ. 1153; See also, David McLauchlan, ‘Refining Rectification’, (2014) L.Q. Rev.608. 93 Pukallus v. Cameron (1982) 180 C.L.R. 447; See also, Club Cape Schanck Resort Co. Ltd. v. Cape Country Club Pty. Ltd. (2001) 3 V.R. 526; Mander Pty. Ltd. v. Clements (2005) 30 W.A.R. 46; NSW Medical Defence Union Ltd. v. Transport Industries Insurance Co. Ltd. (1986) 6 N.S.W.L.R. 740; David McLauchlan, ‘The "Drastic" Remedy of Rectification for Unilateral Mistake’, (2008) L.Q. Rev. 608. 94Etablissements Georges et Paul Levy v. Adderley Navigation Co. — “The Olympic Pride” [1980] 2 Lloyd’s Rep. 67. 95 Gerald McMeel, THE CONSTRUCTION OF CONTRACTS – INTERPRETATION, IMPLICATION AND RECTIFICATION (Oxford University Press 2011, 2nd Ed.) 511. 96 Agip S.p.A. v. Navigazione Alta Italia S.p.A.— “ Nai Genova, Nai Superba” [1984] 1 Lloyd’s Rep. 353, 365, CA; See also, George Wimpey UK Ltd. v. VI Construction Ltd. [2005] EWCA Civ. 77; E Palser, ‘Rectification for Unilateral Mistake: How Heavy is the Burden of Proof?’, [2006] LMCLQ 139. 97 Surgicraft Ltd. v. Paradigm Biodevices Inc. [2010] EWHC 1291 (Ch) ¶ 69; See also, Chartbrook Ltd. v. Persimmon Homes Ltd. [2007] EWHC 409.
TEAM NO. 5 MEMORIAL FOR RELIABLE HOLDINGS
ARGUMENTS ADVANCED | PAGE 20
A. ADVANCE FREIGHT WAS UNCONDITIONALLY EARNED ON LIFTING OF SUBJECTS
44. The liability for freight is treated as a liability in debt98 when it is accrued as a result of freight
being deemed to have been earned. Advance freight is not adjustable according to what
subsequently occurs and is not repayable on subsequent incidents and misfortune of voyage.99 It
is not treated as a contractual obligation to which rules of failure of consideration, or partial
consideration apply.100 Once earned, advance freight is at the risk of the charterer.101 The only
necessary condition is that, the right of advance freight must accrue unconditionally before the
termination of charter party.102 Cl.4 of owners’ standard terms states that the freight was deemed
to be earned in full, discountless, non-returnable and 95% of minimum freight was payable upon
lifting of subjects. In the present case, on 19th Nov, on lifting of subjects, the owners had
unconditionally acquired the right to 95% of the freight and it became payable, before
termination of the charter party on 27th Nov 2011.103
B. ADVANCE FREIGHT IS IRRECOVERABLE IN NATURE
45. The irrecoverable nature of the payment is determined by custom or law unless the contract
stipulates otherwise.104 Under English law, the advance payment of freight is irrecoverable even
if the consideration fails.105 As there was no stipulation in the charter party which made the
advance freight recoverable in nature, therefore by way of custom, the advance freight cannot be
98 Stephen Girvin, CARRIAGE OF GOODS BY SEA (Oxford University Press 2011, 2nd Ed.) 351. 99 Byrne v. Schiller (1871) LR 5 Ex 319, 325; See also, Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd. [1943] AC 32; Colonial Bank (Now Bank of Boston Connecticut) v. European Grain and Shipping Ltd. — “The Dominique” [1989] 1 Lloyd's Rep. 431 (HL). 100 Stephen Girvin, CARRIAGE OF GOODS BY SEA (Oxford University Press 2011, 2nd Ed.) 355. 101 Allison v. Bristol (1875) 1 AC 209, 253. 102 Vagres Compania Maritime SA v. Nissho-Iwai American Corporation — “The Karin Vatis” [1988] 1 Lloyd’s Rep. 330. 103 MOOT PROPOSITION, p. 96. 104 Byrne v. Schiller (1871) LR 5 Ex 319. 105 Allison v. Bristol (1875) 1 AC 209, 253.
TEAM NO. 5 MEMORIAL FOR RELIABLE HOLDINGS
ARGUMENTS ADVANCED | PAGE 21
recovered by the charterers. The same is further substantiated by Cl.4 of owners’ standard terms
which states that once earned,106 the advance freight is non-returnable.
VIII. HEADS OF DAMAGES
46. It is submitted that the owners are not responsible to pay damages because losses are
consequential and thus, the owners are excluded from any kind of liability due to operation of
Cl.5 of owners’ standard terms (A). Further, the owners cannot be held liable for gross
negligence (B) and, the damages for increased freight should be awarded considering the market
scenario (C). Lastly, the charterers are not entitled to set-off damages against the freight (D).
A. THE ALLEGED LOSSES ARE CONSEQUENTIAL, EXCLUDING THE LIABILITY OF THE
OWNERS
i. Owners did not assume responsibility for such losses
47. Damages are recoverable only if one is said to have assumed liability for such damage.107 Mere
foresight that damage is not unlikely is insufficient;108 knowledge of purpose109 and special
circumstances110 determines the scope of assumed responsibility. On the present facts, it was not
possible for the owners to know that such a loss was not unlikely to occur as a consequence of
breach111 in relation to relevant sale contracts entered by the charterers at the loading and
discharge port.112
106 MOOT PROPOSITION, p. 87. 107 Transfield Shipping Inc. v. Mercator Shipping Inc. — “The Achilleas” [2008] UKHL 48; See also, J Cartwright, ‘Remoteness of Damage in Contract and Tort: A Reconsideration’, (1996) 53 Cambridge Law Journal 488, 505. 108 Satef-Huttenes Albertus SpA v. Paloma Tercera Shipping Co. SA — “The Pegase” [1981] 1 Lloyd’s Rep. 175 (QB) 183; See also, Hugh Beale, CHITTY ON CONTRACTS (Sweet & Maxwell 2008, 30th Ed.) 1660. 109 Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd. [1949] 2 KB 528. 110 British Columbia Saw Mill Company v. Nettleship (1868) LR 3 CP 499. 111 Victoria Laundry (Windsor) Ltd v. Newman Industries Ltd. [1949] 2 KB 528. 112 MOOT PROPOSITION, p. 112.
TEAM NO. 5 MEMORIAL FOR RELIABLE HOLDINGS
ARGUMENTS ADVANCED | PAGE 22
ii. The alleged losses are consequential
48. Consequential damages are those which are not the direct and natural result of the breach113and
which are special to the circumstances of the particular plaintiff.114 On the present facts, the
contracts entered by the charterers at the loading and discharge port and loss suffered thereon,
are consequential losses and owners will be protected under Cl.5 of their standard terms.
49. Further, consequential damages are recoverable only on proof of special circumstances.115 It is
submitted that such special circumstances are absent and even if such special circumstances
existed, owners had no knowledge116 of the same. Such knowledge must have existed at or
before the making of the contract.117 On the present facts, the owners had no knowledge about
contracts entered by the charterers at the loading and discharge port.118
iii. Cl. 5 of owners’ standard terms excludes liability from consequential losses
50. It has been held119 that a clause excluding liability for consequential damages excludes liability
only for damages which would be recoverable under the second limb of Hadley v. Baxendale.120
It is submitted that damages in the present case are covered under the second limb of the
aforesaid rule and continues to be applied in majority cases.121
51. Where a contracting party seeks to protect himself from liability for damages recoverable by law
113 Millar's Machinery Co. Ltd. v. David Way & Son (1935) 40 Com. Cas. 204, 210. 114 Ibid. 115 BHP Petroleum v. British Steel [1999] 2 Lloyd’s Rep. 583. 116 Bank of Nova Scotia v. Hellenic Mutual War Risks Association (Bermuda) Ltd. [1992] 1 AC 233. 117 Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd. [1949] 2 KB 528; See also, Jackson v. Bank of Scotland [2005] UKHL 3; Hydraulic Engineering Co. Ltd. v. McHaffe Goslet & Co. (1878) 4 QBD 670. 118 MOOT PROPOSITION, p. 112. 119 Deepak Fertilizers & Petrochemicals v. ICI [1999] Lloyd’s Rep. 38;See also BHP Petroleum v. British Steel [1999] 2 Lloyd’s Rep. 583; McCain Foods GB Limited v. ECO-TEC (Europe) Limited [2011] EWHC 66 (TCC). 120 Hadley v. Baxendale [1854] EWHC Exch. J 70. 121 ASM Shipping Ltd. v. TTMI Ltd. —“The Amer Energy” [2009] 1 Lloyd’s Rep. 293; See also, Classic Maritime v. Lion Diversified Holdings [2009] EWHC 1142 (Comm.); Sylvia Shipping Corporation Co. Ltd. v. Progress Bulk Carriers Ltd. — “The Sylvia” [2010] EWHC 542 (Comm.).
TEAM NO. 5 MEMORIAL FOR RELIABLE HOLDINGS
ARGUMENTS ADVANCED | PAGE 23
for breach of contract, he must do so in clear and unambiguous language122 by using terminology
which has settled meaning in English law.123It is submitted that wordings of Cl. 5 are clear and
unambiguous and protects the owners from consequential damages.
B. THERE HAS BEEN NO GROSS NEGLIGENCE BY THE OWNERS
52. If the tribunal is of the opinion that owners have been negligent, it is submitted that the degree
was not such that it would qualify to be gross negligence. Although English authorities have
regarded gross negligence and negligence as the same,124 it is submitted that gross negligence
involves the intention to inflict the damage or recklessness and knowledge that damage would
probably result.125 In the present case, the owner’s duty to proceed with convenient despatch and
provide a seaworthy vessel was qualified by due diligence, which was well exercised, as already
proven.126 Further, the burden of proving the requisite mental element is on the charterers, which
has not been discharged.
C. THE DAMAGES FOR INCREASED FREIGHT SHOULD BE AWARDED CONSIDERING THE
MARKET SCENARIO
53. On breach, when a suitable alternate vessel is obtained, damages are fixed with reference to the
market.127 The charterer’s decision was merely a decision triggered off by the breach but had not
122 Saint Line v. Richardsons Westgarth [1940] 2 KB 99. 123Gerald McMeel, THE CONSTRUCTION OF CONTRACTS – INTERPRETATION, IMPLICATION AND RECTIFICATION (Oxford University Press 2011, 2nd Ed.) 81. 124 Sucden Financial v. Fluxo-Cane Overseas Ltd. [2010] EWHC 2133 (Comm.); See also, Marex Financial Ltd. v. Fluxo-Cane Overseas Ltd. [2010] EWHC 2690 (Comm.); Tradigrain SA v. Internek Testing Services [2007] EWCA Civ. 154. 125 Goldman v. Thai Airways [1983] 1 WLR 1186; See also, Red Sea Tankers Ltd. v. Papachristidis [1997] 2 Lloyd’s Rep. 547. 126 Refer to Issue II. 127 Julian Cooke et. al., VOYAGE CHARTER (Informa 2007, 3rd Ed.) 613; See also, Smith v. Tregarthen (1887) 56 L.J.Q.B. 437
TEAM NO. 5 MEMORIAL FOR RELIABLE HOLDINGS
ARGUMENTS ADVANCED | PAGE 24
caused any breach.128 Considering the Spot tanker Market Report of Week 48, it is evident that
the market had thin availability of VLCCs and the prices for Suez maxes were on a high end.
Also, the rates for VLCC in the 48th week were also higher compared to the 47th week. Although
the owners gave the charterers an option to continue on the same terms with another sister VLCC
of Reliable Butterfly, the charterers chose to go with the two Suez maxes for a much higher rate.
Considering the market scenario, the choice to pay an extra USD 824,000 was not prudent.
D. ALTERNATIVELY, SET OFF IS NOT ALLOWED AGAINST FREIGHT ACCRUED
54. If the tribunal is of the opinion that advance freight is recoverable, it is submitted that as a
defense to a claim for freight, the claimant is not entitled to set-off for damage suffered by him
by reason of some breach of contract by the defendant for causing loss or damage.129 The
principle of no set-off against freight applies to all categories of breach130 including both a
repudiatory and a non-repudiatory breach of the charter party.131 In light of this rule, it is
submitted that even if there has been a repudiatory breach of the charter party, the charterers are
not allowed to set-off the damages against the right to freight accrued of the owners.
128 The Athenian Harmony [1998] 2 Lloyd’s Rep. 35. 129 Aries Tanker Corp. v. Total Transport Ltd. — “The Aries” [1977] 1 All ER 398. 130 Elena Shipping Ltd. v. Aidenfield Ltd. [1986] 1 Lloyd's Rep. 425. 131 Colonial Bank (Now Bank of Boston Connecticut) v. European Grain and Shipping Ltd. — “The Dominique” [1989] 1 Lloyd's Rep. 431 (HL).
TEAM NO. 5 MEMORIAL FOR RELIABLE HOLDINGS
PRAYER | PAGE 25
PRAYER
In light of the above submissions, the owner requests the tribunal to declare:
(i) That the tribunal has the jurisdiction to adjudge the present dispute.
(ii) The arbitration was validly commenced in the first reference.
(iii) The approach voyage to the loading port had commenced on 19th November 2011.
(iv) The Charter was automatically cancelled without recourse on 27th November 2011,
relieving both the parties of all liabilities.
(v) 95% of freight was deemed earned on 19th November 2011 and is due to the owner.
To adjudge:
(i) The owners are not in breach of the charter.
(ii) The charters are in breach of the charter by failing and refusing to pay the advance
freight.
And therefore award the owner:
(i) USD 4,935,368.75 as freight, or alternatively the same amount as damages.
(ii) Interest on a compound interest basis pursuant to s. 49 of the Arbitration Act, 1996.
(iii) Costs with compound interest on costs; and
(iv) Any other relief as deemed fit.