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TRANSCRIPT
Team 7
IN THE MATTER OF AN ARBITRATION
THE 16TH ANNUAL INTERNATIONAL MARITIME LAW ARBITRATION MOOT 2015
WESTERN TANKERS INC
CLAIMANT
V
LESS DEPENDABLE TRADERS PTE
RESPONDENT
MEMORANDUM FOR THE RESPONDENT
Jessica Duncan | Zackary George | Leo Rees-Murphy | Georgia Williams
TEAM NUMBER: 7
2
TABLE OF CONTENTS
REFERENCE LIST
SUMMARY OF ARGUMENT
SUMMARY OF FACTS
(1) THE PROPER SEAT AND FORUM FOR THIS ARBITRATION IS SINGAPORE
(2) THE RESPONDENT IS NOT LIABLE TO PAY HIRE
(3) THE RESPONDENT DID NOT COMMIT THE TORT OF FRAUD
(4) THE CLAIMANT BREACHED THE CHARTERPARTY
AS THE VESSEL WAS NOT FIT FOR SERVICE
(5) THE CLAIMANT BREACHED ITS DUTIES AS A BAILEE
AND/OR CONVERTED THE CARGO
(6) COMPOUND INTEREST SHOULD BE AWARDED
RELIEF SOUGHT
TEAM NUMBER: 7
3
REFERENCE LIST
Cases
Adamastos Shipping Co Ltd v Anglo-Saxon Petroleum Co Ltd (“The Saxon Star”) [1959] AC
133
Afovos Shipping Co SA v R Pagnan & Fratelli (“The Afovos”) [1983] 1 WLR 195
Akt. De Danske Sukkerfabrikker v S Baghamar Cie Nav (“The Torenia”) [1983] 2 Lloyd’s
Rep. 210
Alfred C. Toepfer Schiffahrtsgesellschaft GmbH v Tossa Marine Co Ltd (“The Derby”)
[1985] 2 Lloyd’s Rep. 325
Angus v Clifford [1891] 2 Ch 449
Anvil Knitwear, Inc. v Crowley American Transport, Inc. 2001 AMC 2382
ASM Shipping Ltd of India v TTMI Ltd of England (“The Amer Energy”) [2009] 1 Lloyd’s
Rep. 293
Athenian Tankers Management S.A. v Pyrena Shipping Inc. (“The Arianna”) [1987] 2
Lloyd’s Rep. 376
Bank Line Limited v Arthur Capel & Co [1919] AC 435, 456
Benham v United Guarantee and Life Assurance Co (1852) 7 Exch. 744
Blane Steamships v Minister of Transport [1951] 2 KB 965
Borgship Tankers Inc v Product Transport Corp Ltd (“The Casco”) [2005] 1 Lloyd's Rep. 565
Bringinshaw v Briginshaw (1938) 60 CLR 336
C Czar-nikow Ltd v Koufos (“The Heron II”) [1969] 1 AC 350
Cheikh Boutros Selim El-Khoury v Ceylon Shipping Lines Ltd (“The Madeleine”) [1967] 2
Lloyd’s Rep. 224
Christopher Brown v Genossenschaft Osterreichlischer Waldbesitzer Holzwirt-Shaftsbetriebe
Registrierte GmbH [1954] 1 QB 8
Compania Naviera Micro SA v Shipley International Inc (“The Parouth”) [1982] 2 Lloyd’s
Rep. 351
Corney v Barrellier [1923] 16 Lloyd’s Rep. 39
Countess of Warwick Steamship Company v Le Nickel Societe Anonyme and Anglo-
Northern Trading Company Ltd v Emlyn Jones & Williams [1918] 1 KB 372
Court Line v Dant & Russell [1939] 3 All ER 314
Davis Contractors Ltd v Fareham Urban DC [1956] AC 696
Derry v Peek (1889) 14 App.Cas. 337
Dornoch Ltd v Mauritius Union Assurance Co Ltd [2006] 2 Lloyd's Rep 475
TEAM NUMBER: 7
4
East West Corporation v DKBS 1912 and Ors. [2003] 1 Lloyd’s Rep. 239
Edgington v Fitzmaurice (1885) 29 Ch.D. 459
Edwinton Commercial Corp & Anor v Tsavliris Russ (Worldwide Salvage & Towage) Ltd
(“The Sea Angel”) [2007] 2 Lloyd's Rep. 517
Effort Shipping Co Ltd v Linden Management SA (“The Giannis NK”) [1998] AC 605
Egon Oldendorff v Liberia Corp [1995] 2 Lloyd’s Rep. 64
Egyptian International Foreign Trade Co v Soplex Wholesale Supplies Ltd (“The Rafaella”)
[1985] 2 Lloyd’s Rep. 36
Elderslie v Borthwick [1905] AC 93
Empresa Exportadora De Azucar v Industria Azucarera Nacional S.A (“The Playa Larga" and
"The Marble Islands") [1983] 2 Lloyd's Rep. 171
Eridania SpA v Rudolf A Oetker (“The Fjord Wind”) [1999] 1 Lloyd’s Rep. 307
Eridania SpA v Rudolf A Oetker (“The Fjord Wind”) [2000] 2 Lloyd’s Rep. 191
F.C. Bradley & Sons v Federal Steam Navigation [1926] 24 Lloyd’s Rep. 446
Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32
Fiona Trust & Holding Corp. v Privalov [2008] 1 Lloyd’s Rep. 254
Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480
The Future Express [1993] 2 Lloyd’s Rep. 542
Hadley v Baxendale (1854) 9 Exch. 341
Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549
Hirji Mulji v Cheong Yue Steamship Co Ltd [1926] AC 497
Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd (“The Hongkong Fir”) [1961] 2
WLR 716
Hornal v Neuberger Products Ltd [1957] 1 QB 247
Galoo v Bright Grahame Murray [1994] 1 WLR 1360
Gosse Millerd v. Canadian Government Merchant Marine [1929] AC 223
International Air and Sea Cargo GmbH v Owners of the Chitral [2000] 1 All ER (Comm) 932
Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] WLR 896
Jackson v Union Marine Insurance Co Ltd (1874-75) L.R. 10 C.P. 125
John Carter (Fine Worsteds) Ltd v Hanson Haulage (Leeds) Ltd [1965] 2 QB 495
Joseph Constantine Steamship Line Ltd v Imperial Smelting Corporation Ltd [1942] AC 154
Kemp v Tolland [1956] 2 Lloyd’s Rep 681
Krell v Henry [1903] 2 KB 740
TEAM NUMBER: 7
5
Kuwait Petroleum Corporation v I & D Oil Carriers Ltd (“The Houda”) [1994] 2 Lloyd’s
Rep. 541
Leigh & Sillivan Ltd v Aliakmon Shipping Co Ltd (“The Aliakmon”) [1986] 2 Lloyd’s Rep.
1
Lloyds TSB Foundation for Scotland v Lloyds Banking Group plc [2013] 1 WLR 366
Mackender v Feldia A.G. [1967] 2 QB 590
The Makednoia [1962] 1 Lloyd's Rep. 316
Manifest Shipping & Co Ltd v Uni-Polaris Insurance Co Ltd and La Réunion Européene
(“The Star Sea") [1997] 1 Lloyd’s Rep. 360
Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] AC 524
Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500
Midgulf International Ltd v Groupe Chimique Tunisien [2010] 1 CLC 113
Midwest Shipping Company Ltd Inc v D. I. Henry (Jute) Ltd [1971] 1 Lloyd's Rep. 375
Monarch S.S. Co Ltd v Karlshamns Oljefabriker (A/B) [1949] AC 196
National Carriers v Panalpina (Northern) Ltd [1981] AC 675
Naviera de Canarias SA v Nacional Hispanica Aseguradora SA (“The Playa de las Nievas”)
[1978] AC 853
Navigazione Alta Italia S.p.A. v Concordia Maritime Chartering A.B. (“The Stena Pacifica”)
[1990] 2 Lloyd’s Rep. 234
Ove Skou v Rudolf A Oetker (“The Artic Skou”) [1985] 2 Lloyd’s Rep. 478
Paal Wilson & Co v Partenreederei Hannah Blumenthal (“The Hannah Blumenthal”) [1983] 1
AC 854
Papera Traders Co Ltd v Hyundai Merchant Marine Co Ltd (“The Eurasian Dream”) [2002] 1
Lloyd’s Rep. 719
Pickering v Barkley (1648) 82 ER 587
Potts v Miller (1940) 64 CLR 282
The Roberta (1938) 60 Lloyd’s Rep. 84
Ruben v Great Fingall Consolidated [1906] AC 439
Re H (Minors) [1996] AC 563
Smith Hogg & Co v Black Sea & Baltic Insurance Co [1940] AC 997
Smith New Court Securities v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254
Standard Oil Co of New York v Clan Line Steamers Ltd [1924] AC 100
Sulamérica Cia Nacional de Seguros SA v Ensa Engenharia SA [2012] 1 Lloyd's Rep. 671
TEAM NUMBER: 7
6
Svenska Petroleum Exploration AB v Government of the Republic of Lithuania [2006] 1
Lloyd's Rep. 181
Sylvia Shipping Co Ltd v Progress Bulk Carriers Ltd (“The Sylvia”) [2010] 2 Lloyd’s Rep.
81
Taylor v Caldwell (1863) 122 ER 309
Taylor v Ashton (1843) 11 M & W 401
Tradax Export SA v Dorada Sompania Naviera SA of Panama (“The Lutetian”) [1982] 2
Lloyd’s Rep. 140
Trafigura Beheer BV v Navigazione Montanari Spa (“The Valle Di Cordoba”) [2015] 1
Lloyd’s Rep. 26
Transfield Shipping Inc v Mercator Shipping Inc (“The Achilleas”) [2008] 2 Lloyd’s Rep.
275
Turnbull, Martin & Co v Hull Underwriters' Association Ltd [1900] 2 QB 402
Union of India v N.V. Reederij Amsterdam (“The Amstelslot”) [1963] 2 Lloyd’s Rep. 223
WJ Tatem Ltd v Gamboa [1939] 1 KB 132
XL Insurance Ltd v Owens Corning [2000] 2 Lloyd’s Rep. 500
Books
Cartwright, John, Misrepresentation, Mistake and Non Disclosure, (Sweet & Maxwell, 3rd ed,
2012)
Coghlin et al, Time Charters (Informa, 7th ed, 2014)
Dal Pont, G. E., Law of Agency (Lexis Nexis Butterworths, 3rd ed, 2014)
Han, Tan Cheng, The Law of Agency (Academy Publishing, 1st ed, 2010)
Jones, Michael (ed), Clerk & Lindsell on Torts (Sweet & Maxwell, 20th ed, 2010)
Watts, Peter and F.M.B. Reynolds, Bowstead & Reynolds on Agency (Sweet & Maxwell,
19th ed, 2010)
Journal Articles
Curwen, N, ‘Title to Sue in Conversion’ [2004] Conv 308
Other
Protocol (SDR Protocol) amending the International Convention for the Unification of
Certain Rules of Law relating to Bills of Lading of 25 August 1924 (The Hague Rules), as
amended by the Protocol of 23 February 1968 (Visby Rules)
TEAM NUMBER: 7
7
ICC International Maritime Bureau, ‘Piracy and Armed Robbery Against Ships: Report for
the Period 1 January 2013 – 31 March 2014’ (Report, Q1 2014, ICC International Maritime
Bureau, April 2014) 20
International Group (IG), Piracy FAQs (August 2013) International Group (IG)
<http://www.igpandi.org/downloadables/piracy/Piracy_FAQs_28%20August%202013.pdf>
Legislation
Arbitration Act 1996 (UK)
TEAM NUMBER: 7
8
SUMMARY OF ARGUMENT
1. The Respondent does not accept the Tribunal’s jurisdiction to determine the substantive
issues in dispute. The parties agreed that the seat and forum of the arbitration was to be
Singapore.
2. Payment of the second instalment of hire would have been due and payable on 4 July
2014 under the Charterparty. The Respondent is not liable to pay hire because the piracy
attack on that date either frustrated the Charterparty or, alternatively, caused the Vessel to
go off-hire.
3. The Respondent did not commit the tort of fraud. The statements about bunkers were
both true and made with an honest belief in their truth. The Respondent is not liable for
the statements of the rogue entity ASA2 because at no time was that entity an agent of the
Respondent.
4. The Claimant breached the Charterparty by failing to follow the Best Management
Practices for Protection against Somalia Based Piracy (“the BMP4”) and make the
Vessel seaworthy both physically and by appointing a competent master. As a result of
those breaches the Respondent is entitled to damages for the lost cargo and loss of the
follow on fixture.
5. The Claimant breached its duty as a bailee because cargo was lost whilst in its
possession. Alternatively, the Claimant converted the cargo. The Respondent is entitled
to compensation for the lost cargo.
6. Compound interest would reflect the loss the Respondent suffered by not having full use
of the value of the cargo and any profits from the follow on fixture that was lost.
TEAM NUMBER: 7
9
SUMMARY OF FACTS
THE PARTIES AND THE CHARTER AGREEMENT
1. Western Tankers Inc (“the Claimant”) own the Western Dawn (“the Vessel”) which was
chartered to Less Dependable Traders Pte (“the Respondent”). The charter agreement
was fixed on 26 May 2014 as an amended Shelltime 4 pro-forma (“the Shelltime”) with
rider clauses for a period of three months, plus or minus 30 days at the Charterer’s option
(“the Charterparty”). The Vessel left Singapore on 8 June 2014 on a voyage to OPL
Luanda, where oil cargo was to be discharged at a Ship to Ship Transfer (“STS”)
location.
2. As the Vessel approached Luanda, Captain William Anya on behalf of an entity named
ASA2 (“ASA2”) made contact with the Vessel purporting to be an agent of the
Respondent. The rogue identity used a different email address from that of the
Respondent’s actual discharge port agents, Atlantic Services Agency (“ASA”). The
Master followed instructions from this rogue third party to proceed to alternative STS
coordinates, and arrived in position on 4 July 2014. The Respondent issued an off-hire
notice on this date.
3. From this time there was no contact with the Vessel until 17 July 2014, when the Master
reported the Vessel had been seized by pirates on 4 July 2014. Throughout the seizure
part of the cargo was discharged by the pirates. At no time during the voyage did the
Claimant comply with the BMP4, despite the known risks in West Africa.
TEAM NUMBER: 7
10
SUBMISSIONS
(1) THE PROPER SEAT AND FORUM FOR THIS ARBITRATION IS SINGAPORE
1. This Tribunal lacks jurisdiction to rule on this dispute. The parties amended clause 46 of
the Shelltime to provide the seat and forum of arbitration is Singapore.
(A) The Tribunal has the power to rule on its own jurisdiction, and should do so in
accordance with English Law
2. This Tribunal may rule on its jurisdiction under the doctrine of competence-competence.1
In determining whether it has jurisdiction, this Tribunal should apply the proper law of
the contract.2 The choice of law clause3 renders the proper law of the contract as the law
of England.4
(B) The Amendment changed the seat and forum of the arbitration to Singapore
3. The purpose of contractual interpretation is to ascertain the objective intentions of
reasonable people in the position of the parties.5
4. The lack of text next to the words “LAW AND LITIGATION:” in the recap email gives
rise to ambiguity as to what the parties intended. It is unlikely the heading itself was
accidentally included. The preferable analysis is that the parties intended to amend the
“Law and Litigation” section of the Shelltime and that intended amendment was
mistakenly omitted.
5. The inference that “London and London Arbitration” was to be replaced is supported by
correspondence on 23 May 2014 which stated the Respondent was “really not keen on
1 Christopher Brown v Genossenschaft Osterreichlischer Waldbesitzer Holzwirt-Shaftsbetriebe Registrierte GmbH [1954] 1 QB 8, 12-13; Arbitration Act 1996 (UK) c 23, s 30. 2 Midgulf International Ltd v Groupe Chimique Tunisien [2010] 1 CLC 113, [56]; Dornoch Ltd v Mauritius Union Assurance Co Ltd [2006] 2 Lloyd's Rep 475, [14]-[17]; Compania Naviera Micro SA v Shipley International Inc (“The Parouth”) [1982] 2 Lloyd’s Rep. 351, 353-354; Egon Oldendorff v Liberia Corp [1995] 2 Lloyd’s Rep. 64, 72; XL Insurance Ltd v Owens Corning [2000] 2 Lloyd’s Rep. 500, 508; Mackender v Feldia A.G. [1967] 2 QB 590, 601-602. 3 Shelltime 4, cl 46(a). 4 Sulamérica Cia Nacional de Seguros SA v Ensa Engenharia SA [2012] 1 Lloyd's Rep. 671, 679; XL Insurance Ltd v Owens Corning [2000] 2 Lloyd’s Rep. 500, 508; Svenska Petroleum Exploration AB v Government of the Republic of Lithuania [2006] 1 Lloyd's Rep. 181, [76]. 5 Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] WLR 896, 912-913; Lloyds TSB Foundation for Scotland v Lloyds Banking Group plc [2013] 1 WLR 366, [31].
TEAM NUMBER: 7
11
London arbitration”. This is part of the factual matrix to which it is permissible to have
regard in construing the contract.6
6. The Tribunal should infer that the text erroneously omitted would have nominated
Singapore as the seat and forum of the arbitration. This alternative insertion is supported
as Singapore is the domicile of LDTP, and the location of the delivery port.
(2) THE RESPONDENT IS NOT LIABLE TO PAY HIRE
(A) Hire was due and owing on 4 July 2014, Singapore time
7. The Charterparty obliges the Respondent to pay for “hire of the vessel… from the time
and date of her delivery (local time) to [the Respondent] until the time and date of her
redelivery (local time) to the [the Claimant].”7 Therefore, the obligation to pay hire arose
on the date of delivery of the Vessel, which was on 4 June 2014 at 00:01 (UTC+8), which
is Singapore time.8
8. As the words “local time” are in parenthesis directly following the word “delivery”, the
Claimant submits that the words “local time” serve to clarify what time zone governs the
time and date of delivery. This construction is supported by the start date of the Laycan
which commenced on 4 June 2014, not any earlier date.9
9. The construction of clause 8 must be dictated by the parties’ language irrespective of
whether it leads to what might be considered an uncommercial result.10 Therefore,
payment of the first hire instalment fell due on 4 June 2014. Under clause 9 of the
Shelltime, hire is to be payable “per calendar month in advance”, therefore the second
payment of hire fell due on 4 July 2014.
6 Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896. 7 Shelltime 4, cl 8. 8 Facts, pp 28-29. 9 Facts, p 5. 10 Ove Skou v Rudolf A Oetker (“The Artic Skou”) [1985] 2 Lloyd’s Rep. 478, 481.
TEAM NUMBER: 7
12
10. The Afovos establishes that the payment of hire may be made any time until midnight on
the due date.11 Therefore, hire was not due until 2359 Singapore time on 4 July 2014. The
Claimant’s submission that hire was due at “Close of Business, GMT” on 3 July 2014 is
unsustainable as nothing in the Charterparty displaces the approach taken in The
Afovos.12
(B) The Charterparty was frustrated on 4 July 2014
11. The capture of the Vessel by pirates, and consequent need to repair the substantial
damage sustained by the Vessel, frustrated the Charterparty on 4 July 2014 on the basis
of impossibility in performance or inordinate delay.
12. A contract is frustrated when a supervening event, occurring without default of either
party and for which the contract makes no sufficient provision, significantly changes the
nature of the contract from what the parties could reasonably have contemplated that it
would be unjust to hold them to the literal sense of its stipulations in the new
circumstances.13
(i) The Charterparty has been frustrated because performance has been rendered impossible
13. It is open to the Tribunal to conclude that the Vessel has been so damaged that, although
capable of being repaired at some point in the future, no further performance of the charter
is practically possible. In the piracy attack the main deck hose crane was rendered
unserviceable which meant the cargo could not be properly discharged. Further, all
systems (excluding one radar) were damaged which rendered the Vessel unable to proceed
with the voyage.14
14. In light of this damage, the Respondent submits that the circumstances in which
performance is called for “render it a thing radically different from that which was
11 Afovos Shipping Co SA v R Pagnan & Fratelli (“The Afovos”) [1983] 1 WLR 195, 199-202. 12 Afovos Shipping Co SA v R Pagnan & Fratelli (“The Afovos”) [1983] 1 WLR 195, 199-202. 13 National Carriers v Panalpina (Northern) Ltd [1981] AC 675, 700; Paal Wilson & Co v Partenreederei Hannah Blumenthal (“The Hannah Blumenthal”) [1983] 1 AC 854. 14 Facts, p 42.
TEAM NUMBER: 7
13
undertaken by the contract”.15 The Vessel has missed the discharge date for the oil cargo,
the laycan for the follow on fixture and, likely, the redelivery date.
(ii) Alternatively, the inordinate delay is a supervening event that frustrated the Charterparty
15. A Charterparty is frustrated for delay when it is clear the delay will be so inordinate as to
defeat the commercial purpose of the agreement.16 This is assessed by comparing the
probable length of the delay with the total period of the Charterparty.17
16. The Tribunal must estimate, at the time the event occurred, the likely duration for which
the Respondent would be deprived of use of the Vessel.18 The seizure itself was likely to
last a reasonable period where it would involve discharging an oil tanker using only
piratical STS transfers, and given the nature of piracy attacks was also likely to result in
damage to the Vessel that may render it incapable of further performance for some
time.19 Several cases have considered that delay on the basis of repairs may frustrate a
contract.20 This probable delay was large in comparison to the remaining Charterparty
period: the Respondent had exercised its option to redeliver after only two months,
meaning there was only one month left on the charter period when the attack occurred.21
17. Though subsequent events do not determine the probable delay,22 those events may assist
in showing what the probabilities were if they had been reasonably forecasted. The
Vessel was seized for 13 days and the damage inflicted on the Vessel rendered the Vessel
15 Davis Contractors Ltd v Fareham Urban DC [1956] AC 696, 729. 16 Davis Contractors Ltd v Fareham Urban DC [1956] AC 696, 716, 729; National Carriers v Panalpina (Northern) Ltd [1981] AC 675, 688; Krell v Henry [1903] 2 KB 740, 748-749; Taylor v Caldwell (1863) 122 ER 309, 312; Blane Steamships v Minister of Transport [1951] 2 KB 965, 985. 17 National Carriers v Panalpina (Northern) Ltd [1981] AC 675, 700; Countess of Warwick Steamship Company v Le Nickel Societe Anonyme and Anglo-Northern Trading Company Ltd v Emlyn Jones & Williams [1918] 1 KB 372, 378-379. 18 National Carriers v Panalpina (Northern) Ltd [1981] AC 675, 707. 19 National Carriers v Panalpina (Northern) Ltd [1981] AC 675, 707; Edwinton Commercial Corp & Anor v Tsavliris Russ (Worldwide Salvage & Towage) Ltd (“The Sea Angel”) [2007] 2 Lloyd's Rep. 517 [88], [111]. 20 Turnbull, Martin & Co v Hull Underwriters' Association Ltd [1900] 2 QB 402 cited in Naviera de Canarias SA v Nacional Hispanica Aseguradora SA (“The Playa de las Nievas”) [1978] AC 853, 882; Corney v Barrellier [1923] 16 Ll. L. Rep. 39, 41; see generally Coghlin et al, Time Charters (Informa, 7th ed, 2014) [26.10]-[26.11]. 21 Facts, p 40. 22 Bank Line Limited v Arthur Capel & Co [1919] AC 435, 456; Court Line v Dant & Russell [1939] 3 All ER 314, 322.
TEAM NUMBER: 7
14
unserviceable.23 The Vessel was not properly operational once it regained contact, by
which time it had already missed the delivery date at Luanda and the laycan for the
follow on fixture from Bonny.24
(iii) The cause of the frustration has not been provided for by the parties
18. The piracy clauses in the Charterparty do not automatically exclude the doctrine of
frustration, because those stipulations do not, on a true interpretation, afford full and
complete provision for the event that has occurred.25
19. The Special Piracy Provision does not provide for the seizure of or damage to the Vessel,
merely that if the Claimant takes the stipulated anti-piracy precautions, the Vessel will
remain on-hire. While the BIMCO piracy clause provides for such matters as seizure and
time lost due to repairs required following that seizure, the clause is silent on the situation
where the Vessel is unavailable for the entirety of the remaining hire period and the
contemplated voyage cannot be completed. The Respondent therefore submits that the
clause did not envisage the situation of non-performance that has arisen.
(iv) The Respondent is therefore not liable for future obligations under the Charterparty
20. On the occurrence of a frustrating event, the contract is discharged prospectively by
operation of law, meaning the parties are relieved of all financial obligations yet to
accrue.26
21. As the Charterparty was frustrated when pirates attacked the Vessel on 4 July 2014, the
Respondent is not liable to pay hire as that obligation did not fall due until midnight on
that date.
(C) The Vessel was off-hire at the time hire was due and owing on 4 July 2014
23 Facts, p 42. 24 Facts, pp 34, 40. 25 Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32, 40; WJ Tatem Ltd v Gamboa [1939] 1 KB 132, 137-138; Jackson v Union Marine Insurance Co Ltd (1874-75) L.R. 10 C.P. 125, 127; Bank Line Limited v Arthur Capel & Co [1919] AC 435, 456. 26 National Carriers v Panalpina (Northern) Ltd [1981] AC 675, 700; Hirji Mulji v Cheong Yue Steamship Co Ltd [1926] AC 497, 505; Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] AC 524, 527; Joseph Constantine Steamship Line Ltd v Imperial Smelting Corporation Ltd [1942] AC 154, 163, 170-171, 187, 200.
TEAM NUMBER: 7
15
22. The Vessel was off-hire by 4 July 2014 for the Master’s breach of orders or neglect of
duty. Under the Charterparty, whenever there is a loss of time due to “breach of orders or
neglect or duty on the part of the master, officers or crew” the Vessel shall be off-hire
“from the commencement of such loss of time until she is again ready and in an efficient
state to resume her service”.27
23. The Master followed instructions issued by ASA2, which was not an agent of the
Respondent.
(i) ASA2 was not an agent of the Respondent
24. First, there was no actual authority 28 conferred on ASA2 by the Respondent.
Representations as to the authority of Atlantic Services Agency (“ASA”), the
Respondent’s actual agents at the discharge port,29 applied to that agency only as there is
no known relationship between ASA and ASA2.30
25. Further, ASA2 had no apparent authority. For the Respondent to be bound by the acts of
ASA2 on this basis, the Claimant bears the onus of showing that the Respondent made a
representation that ASA2 were agents,31 and that the Claimant acted reasonably on the
faith of this authority to their detriment.32
The Respondent made no representation as to the authority of ASA2
26. The representations by ASA2 as to its authority cannot be relied upon as a basis for
apparent authority, because the representation must be made by the principal.33 The
Respondent made no such representation.
27 Shelltime 4, cl 21(a)(ii). 28 Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480, 502-503; Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549, 583. 29 Facts, p 34. 30 Procedural Order no 2 [12]. 31 Tan Cheng Han, The Law of Agency (Academy Publishing, 1st ed, 2010) 70-71; Peter Watts and F.M.B. Reynolds, Bowstead & Reynolds on Agency (Sweet & Maxwell, 19th ed, 2010) 372. 32 Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480; Tan Cheng Han, The Law of Agency (Academy Publishing, 1st ed, 2010) 71. 33 Egyptian International Foreign Trade Co v Soplex Wholesale Supplies Ltd (“The Rafaella”) [1985] 2 Lloyd’s Rep. 36, 43.
TEAM NUMBER: 7
16
27. The Respondent was unaware of the communications between ASA2 and the Master until
being copied into one email on 30 June 2014, days after the single communication from
ASA2.34 The lack of response to one indirectly received email which did not disclose full
details of the dealings is insufficient to amount to a representation.
The Master’s reliance on the representations of ASA2 was not reasonable
28. It was not reasonable for the Master to act on the instructions given by ASA2 given the
suspicious circumstances in which ASA2’s orders were issued requiring him to deviate
from the agreed voyage route and further from the destination port.
29. The Master had sent multiple emails to the Respondent’s appointed agent, ASA.35
Therefore, when contacted by the rogue party ASA2, the Master ought to have been put
on notice that ASA2 were not the nominated agents of the Respondent. Three facts
support this conclusion: the materially different email address from that of ASA;36 the
different company name provided in the email of 28 June 2014;37 and the Respondent
was not copied in on messages from ASA2 which contravened the parties’ established
practice.
(ii) The Master breached the Respondent’s orders by following the instructions of ASA2
30. In deciding whether a Master has breached an order, it is necessary to consider the
responsibility of the Master in a “broad and comprehensive manner”.38
31. On 28 June 2014 the Respondent instructed the Master to proceed to an STS location.39
However, later that day the Master followed the instructions of ASA2 to proceed to a
different STS location40 in breach of the obligation to follow the charterer’s orders
imposed by clause 13(a) of the Charterparty. Therefore the Vessel was off-hire from the
34 Facts, p 37. 35 Facts, p 29. 36 Facts, pp 29, 37. 37 Facts, p 35. 38 Kuwait Petroleum Corporation v I & D Oil Carriers Ltd (“The Houda”) [1994] 2 Lloyd’s Rep. 541, 549, 553, 555. 39 Facts, pp 33-34. 40 Facts, p 35.
TEAM NUMBER: 7
17
time when the Master disobeyed the Respondent’s orders and began to follow those of
ASA2.
32. As established above, ASA2 was not authorised to give orders on behalf of the
Respondent. The Master confirmed these orders and proceeded to that location without
notifying the Respondent.41 There is no evidence to suggest the Master considered
whether this order was fraudulent, despite some evidence to suggest it was. Therefore, the
Master disobeyed orders given to him by the Respondent.
33. The Vessel was off-hire from the point that there was a loss of time consequential on
following ASA2’s orders. This occurred when the Vessel was seized by pirates following
ASA2’s orders.
34. The Respondent is not obliged to pay an installment of hire on the due date if the Vessel
is off-hire at the time,42 and the obligation to pay hire in advance does not recommence
until the Vessel is back on-hire.43 As the Vessel was off-hire from when pirates attacked
on 4 July 2014, hire for the period commencing on that date was not due and owing.
(ii) The specific piracy provisions do not affect the application of clause 21
35. Neither the Special Piracy Provision,44 nor the BIMCO Piracy Clause keep the Vessel on-
hire during the period of its seizure.
36. The Special Piracy Provision keeps the Vessel on hire only where the BMP4 has been
complied with. For the reasons stated below [59] – [62] this is not the case here.
37. The operation of clause 21 is not affected by any other provision in the contract, despite
the existence of two provisions dealing with piracy and its consequences for the Vessel in
terms of being on or off hire.
41 Facts, p 35. 42 Tradax Export SA v Dorada Sompania Naviera SA of Panama (“The Lutetian”) [1982] 2 Lloyd’s Rep. 140, 149-150, 153. 43 Tradax Export SA v Dorada Sompania Naviera SA of Panama (“The Lutetian”) [1982] 2 Lloyd’s Rep. 140, 149-150, 153. 44 Facts, pp 8-9.
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18
38. This is because both deal with the obligations and liberties of the Claimant in taking
precautions to protect the Vessel from piracy attacks. The Respondent therefore submits
that any purported remedy cannot be applied in a situation where those obligations or
liberties have been met or taken, as this would exceed the risk assumed under the
contract. In this respect, it is necessary not only to “look at the event, but to look at the
scope of the clause and the remedy it purports to provide”.45
39. The special piracy provision should be preferred to the BIMCO Piracy Clause. This is
because the BIMCO Piracy Clause has been specially drafted rather than being a standard
form.46
(3) THE RESPONDENT DID NOT COMMIT THE TORT OF FRAUD
40. The allegedly fraudulent statements pleaded by the Claimant are that on 3 June 2014 the
Respondent represented that a supply of bunkers would be “available passing Durban or
Cape Town”47 and twice on 28 June 2014 the Respondent represented that sufficient
supply of bunkers would be available “on arrival STS Area 1”48 (“the alleged fraud by
the Respondent”). Further, on 28 June 2014, ASA2 instructed the Vessel that she would
“discharge 72,000mts gasoil / balance of cargo TBN” at a nominated STS location, and
receive “300MT IFO bunkers”49 (“the alleged fraud by ASA2”).
41. The Respondent submits that (A) the fraud claim is inadmissible in this arbitration (B)
the alleged fraud by ASA2 is not actionable as ASA2 was not an agent of the
Respondent, (C) in respect of the alleged fraud by the Respondent, the statements were
not false or made with the requisite state of mind and (D) any reliance on the alleged
fraud did not cause the loss to the Claimant.
45 Empresa Exportadora De Azucar v Industria Azucarera Nacional S.A (“The Playa Larga" and "The Marble Islands") [1983] 2 Lloyd's Rep. 171, 189. 46 Homburg Houtimport BV v Egrosin Private Ltd (“The Starsin”) [2004] 1 AC 715, 737. 47 Facts, p 26. 48 Facts, p 33, 34. 49 Facts, p 35.
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19
(A) The fraud claim is not admissible in these proceedings
42. Clause 46(b) of the Shelltime states that the Tribunal has jurisdiction to hear “all disputes
arising out of this charter”. This clause should not cover fraud. First, the allegation
concerns the conduct of persons not parties to the Charterparty and did not have a
legitimate interest in the way in which it was carried out. Therefore, the fraud allegation
did not arise out of the charter, but out of the conduct of a “rogue” not under the direction
of either party.50 Second, an allegation of fraud is a serious one and the Respondent
submits it is more appropriate that such findings of fact be made by the Court system.
(B) The alleged fraudulent statements by the Respondent were not false or made with
the requisite state of mind
43. Two elements of fraud are not satisfied, specifically that there must be a false
representation of fact and that representation must have been made fraudulently.51 Given
its seriousness, the courts treat an allegation of fraud very cautiously.52
44. There is nothing on the facts to suggest that, at the time the Respondent made
representations as to their intention of providing bunker, the representations were untrue.
A statement of intention is a representation about the speaker’s present plan for future
conduct, which is not false unless that intention is not actually held.53 Nothing on the
facts suggests that the Respondent did not intend to provide bunkers. The Respondent
had an approved credit line of US$650,000 from Equator Bunkers, which would be
extended “towards the million” after “first trades”,54 so was capable of providing
bunkers.
50 Cf Fiona Trust & Holding Corp. v Privalov [2008] 1 Lloyd’s Rep. 254. 51 Michael Jones (ed), Clerk & Lindsell on Torts (Sweet & Maxwell, 20th ed, 2010) 1191-1222. 52 Re H (Minors) [1996] AC 563, 586 Hornal v Neuberger Products Ltd [1957] 1 QB 247, 258. ; 53 Edgington v Fitzmaurice (1885) 29 Ch.D. 459, 483; Benham v United Guarantee and Life Assurance Co (1852) 7 Exch. 744, 752-753. 54 Facts, p 21.
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20
45. If the representation was true at the time when it was relied upon by the representee there
is no fraud, even where the representation has subsequently become untrue.55 Therefore
though the Respondent did not in fact supply bunkers at Durban, Cape Town, or the STS
location, 56 this does not, at the time when the Claimant relied on the statements by
continuing the voyage, falsify the earlier intention to do so.
46. The Claimant bears the onus of proving that the Respondent lacked honest belief in the
truth of its statements.57 Having established the Respondent’s capacity to provide bunker,
there is nothing pointing to a contrary intention on part of the Respondent. The Claimant
has therefore not made out the serious allegation of a fraudulent state of mind.
(D) Any reliance on the representations did not cause the loss to the Claimant
47. Reliance on the representations made by the Respondent did not cause the loss of the
Claimant. If the cause of the loss is “independent”, “extrinsic” or “supervening” then the
loss cannot be properly said to have followed from the fraudulent statement.58 The piracy
attack was a supervening event that was not caused by the representations as to bunker
made by the Respondent. It is submitted that there is no causal link between the first and
second representations and the piracy attack.
(4) THE CLAIMANT BREACHED THE CHARTERPARTY AS THE VESSEL WAS
NOT FIT FOR SERVICE
48. The Respondent submits that the Vessel was not fit for the service owing to the
incompetence of the Master and failure to take piracy precautions, including the lack of
adherence to the BMP4 and Interim Guidelines (“the BMP4”) as required under the
Charterparty.
55 Benham v United Guarantee and Life Assurance Co (1852) 7 Exch. 744, 752-753. 56 Facts, p 21. 57 Derry v Peek (1889) 14 App.Cas. 337, 359, 367, 370-371, 374; Taylor v Ashton (1843) 11 M & W 401, 415; 152 ER 860; Angus v Clifford [1891] 2 Ch 449, 472. 58Smith New Court Securities v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254, 259 approving Potts v Miller (1940) 64 CLR 282, 298-299.
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21
49. In respect of these breaches, the Respondent seeks to recover for two losses suffered:
a. The loss of the follow on fixture from Bonny to Augusta as a consequence of
the Vessel’s detention by pirates (“the Non-Cargo Claim”); and
b. The loss of cargo that was discharged from the Vessel by pirates (“the Cargo
Claim”).
50. Different provisions under the Charterparty are enlivened for these two types of losses,
so each loss is addressed separately below.
(A) The Non-Cargo Claim regarding the Vessel’s fitness
51. Clause 27(c)(ii) of the Shelltime provides that claims “arising out of any loss of or
damage to or in connection with cargo” are subject to the Hague-Visby Rules59 (“the
HV Rules”). On the authority of The Casco60 and The Stena Pacifica,61 it is apparent
the clause does not apply to this claim for the lost fixture as it cannot properly be
regarded as such a cargo claim.62
52. Therefore other provisions of the Charterparty, identified below, are applicable to issues
of the Vessel’s fitness in respect of the loss of fixture.
(i) The Claimant breached the obligation of seaworthiness under the Charterparty
53. The Claimant breached clause 1(c) of the Charterparty that required it to ensure the
Vessel was “fit for the service” at the date of delivery.
54. “Fit for the service” imposes a more onerous obligation than seaworthiness,63 requiring
the Vessel to be physically fit to encounter all such perils as would be reasonably
59 Protocol (SDR Protocol) amending the International Convention for the Unification of Certain Rules of Law relating to Bills of Lading of 25 August 1924 (The Hague Rules), as amended by the Protocol of 23 February 1968 (Visby Rules). 60 Borgship Tankers Inc v Product Transport Corp Ltd (“The Casco”) [2005] 1 Lloyd's Rep. 565, 61 Navigazione Alta Italia S.p.A. v Concordia Maritime Chartering A.B. (“The Stena Pacifica”) [1990] 2 Lloyd’s Rep. 234. 62 Shelltime 4, clause 27(c)(ii). 63 See generally Cheikh Boutros Selim El-Khoury v Ceylon Shipping Lines Ltd (“The Madeleine”) [1967] 2 Lloyd’s Rep. 224; Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd (“The Hongkong Fir”) [1961] 2 Lloyd’s Rep. 478; Alfred C. Toepfer Schiffahrtsgesellschaft GmbH v Tossa Marine Co Ltd (“The Derby”) [1985] 2 Lloyd’s Rep. 325, 331-333.
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22
foreseeable”,64 and the Vessel “must have that degree of fitness which an ordinary
careful owner would require his [or her] vessel to have at the commencement of her
voyage having regard to all the probable circumstances of it”.65
55. At the time when the Vessel was in port at Singapore, a piracy attack was a foreseeable
circumstance of the voyage.66 An competent master would therefore have deployed
physical protection measures listed in the BMP4, such as razor wire. The Claimant’s
Safety and Security Department assessed that razor wire was needed,67 however it was
never loaded onto the Vessel.
56. As the Vessel lacked suitable physical protection measures, it was unseaworthy.
(ii) The Claimant breached the express terms of the Charterparty relating to piracy
57. The Claimant breached the Special Piracy Clause68 which compels compliance with the
BMP4.
58. OPL Luanda was the discharge location and there were no other scheduled calls to any
other port. Luanda has a recent history of piracy attacks,69 and is in close proximity to
the Gulf of Guinea, a piracy hotspot. Therefore the Vessel was “proceed[ing] to” OPL
Luanda which is an area “at current risk of piracy” within the meaning of the clause so
the obligations thereunder were enlivened.
59. The clause transforms the BMP4 from a set of guidelines 70 to a prescriptive
requirement. The words “will at all times adhere to” require complete compliance with
64 Alfred C. Toepfer Schiffahrtsgesellschaft GmbH v Tossa Marine Co Ltd (“The Derby”) [1985] 2 Lloyd’s Rep. 325, 331-333; Athenian Tankers Management S.A. v Pyrena Shipping Inc. (“The Arianna”) [1987] 2 Lloyd’s Rep. 376, 389. 65 F.C. Bradley & Sons v Federal Steam Navigation [1926] 24 Lloyd’s Rep. 446. 66 ICC International Maritime Bureau, ‘Piracy and Armed Robbery Against Ships: Report for the Period 1 January 2013 – 31 March 2014’ (Report, Q1 2014, ICC International Maritime Bureau, April 2014) 20 . 67 Facts, p 27. 68 Facts, p 8. 69 An oil tanker was hijacked at Luanda anchorage 6 months before the contract had been finalised: ICC International Maritime Bureau, ‘Piracy and Armed Robbery Against Ships: Report for the Period 1 January 2013 – 31 March 2014’ (Report, Q1 2014, ICC International Maritime Bureau, April 2014) 20. 70 BMP4, p ii.
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23
the BMP4, which is consistent with commercial practice that also supports complete
compliance.71
60. The BMP4 recommends the use of physical protection measures including razor wire,72
which the Claimant’s Safety and Security Department recommended then attempted to
obtain.73 However, this equipment was not loaded onto the Vessel.74 There is no
evidence to suggest other physical protection measures were deployed.
61. Whilst the Master stated the Vessel was doing its best “to comply with BMP4”,75 the
wording of the Special Piracy Clause means that attempted or partial compliance is
insufficient.
62. Therefore the Claimant did not comply with the BMP4 and consequently the Special
Piracy Clause.
(iii) The Master was incompetent
63. Clause 2(a)(i) of the Charterparty imposes an absolute obligation on the Claimant to
provide an efficient master76 at the date of delivery and throughout the charter period.
64. A vessel will not be fit for the service where the ship is manned with a master that is not
competent and sufficient for the purposes the voyage.77 Whether a master is competent
depends on whether “a reasonably prudent owner, knowing the relevant facts, [would]
have allowed this vessel to be put to sea with this Master and crew, with their state of
knowledge, training and instruction”.78 A Master is incompetent if he has a “disabling
71 International Group (IG), Piracy FAQs (August 2013, International Group (IG)) <http://www.igpandi.org/downloadables/piracy/Piracy_FAQs_28%20August%202013.pdf>. 72 BMP4, pp 28-29. 73 Facts, p 27. 74 Facts, p 27. 75 Facts, p 36. 76 Efficiency has been held to be an equivalent standard to competency, see Papera Traders Co Ltd & Ors v Hyundai Merchant Marine Co Ltd & Anor (“The Eurasian Dream”) [2002] 1 Lloyd’s Rep. 719, 736. 77 Alfred C. Toepfer Schiffahrtsgesellschaft GmbH v Tossa Marine Co Ltd (“The Derby”) [1985] 2 Lloyd’s Rep. 325, 333. 78 Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd (“The Hongkong Fir”) [1962] 2 QB 26, 34; The Roberta (1938) 60 Lloyd’s Rep. 84.
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24
want of skill”,79 a “disabling want of knowledge”80 or a “disabling lack of will to use
his [or her] skills or knowledge”.81
65. A competent Master would have appreciated the need for caution, vigilance, and
physical protection in a piracy area. The Tribunal may draw an inference that the Master
was incompetent because he lacked such skill and knowledge.
66. First, the Master immediately followed the orders of the rogue agency ASA2 without
verifying their legitimacy with the Respondent. The Master was not obliged to
immediately comply with an order; he was only obliged to act reasonably.82 It has been
said that if a master is one “who would immediately act upon any order from charterers
without further consideration, he [or she] would probably be unfitted for that post."83
Given ASA2’s orders were to deviate from the agreed route to almost 350 nautical
miles away from the Port of Luanda, a master acting reasonably would have delayed
compliance and verified the orders. The Master then continued to the alternative STS
location despite receiving no further correspondence from ASA2 or contacting the
Respondent directly. This supports a finding as to the Master’s lack of caution and
vigilance.
67. Further, the Master failed to notify the Respondent about the importance of stopping at
Durban to obtain the physical protection measures. This shows that the Master did not
appreciate the importance of such measures in piracy risk areas.
68. The Respondent therefore invites the Tribunal to infer that the Master was incompetent
because he lacked these skills and knowledge necessary to operate in piracy areas.
(iv) These breaches caused the loss of the subsequent fixture
79 Standard Oil Co of New York v Clan Line Steamers Ltd [1924] AC 100, 121. 80 Standard Oil Co of New York v Clan Line Steamers Ltd [1924] AC 100, 121. 81 Papera Traders Co Ltd v Hyundai Merchant Marine Co Ltd (“The Eurasian Dream”) [2002] 1 Lloyd’s Rep. 719, 737; The Makednoia [1962] 1 Lloyd's Rep. 316. 82 Kuwait Petroleum Corporation v I & D Oil Carriers Ltd (“The Houda”) [1994] 2 Lloyd’s Rep. 541. 83 Midwest Shipping Company Ltd Inc v D. I. Henry (Jute) Ltd [1971] 1 Lloyd's Rep. 375, 379.
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25
69. The breach must have been an “effective” or “dominant” cause of the loss84 as a matter
of common sense.85 Importantly, where loss is caused by a combination of a breach and
an intervening event that was reasonably foreseeable, the causal chain will not be
broken.86 A piracy attack in West Africa was reasonably foreseeable, so the Vessel’s
capture does not break the causal chain.
70. Had the Vessel complied with either the “fit for the service” clause or the Special Piracy
Clause, the Vessel would have been physically protected against piracy. Physical
protection would have significantly reduced the chance of capture and any delay arising
therefrom. Had the Vessel not been captured, it would have met the laycan for the
subsequent fixture. Therefore the breach was a dominant cause of the lost fixture.
71. A competent master would have significantly reduced the chance of a pirate capture. As
a result, the incompetence of the Master was a dominant cause of the lost fixture.
(v) The loss of a fixture was not too remote
72. As the charter was for a period lasting for three months (plus or minus 30 days at the
charterer’s option) the Claimant ought to have realised that any delay in meeting the
Luanda discharge date would affect future trips. The loss of a subsequent fixture during
a time charter is a type of loss that has been held to fall squarly within the traditional
test of remoteness laid down in Hadley v Baxendale.87
(vi) Liability for the lost fixture cannot be excluded
73. Clause 27(a) does not operate to exclude the Claimant’s liability because those breaches
relate to clauses 1 and 2 of the Charterparty respectively. In respect of the breach of
Piracy Clause, clause 27(a) does not operate because the loss arose from a combination
84 Galoo v Bright Grahame Murray [1994] 1 WLR 1360, 1374-1375. 85 Galoo v Bright Grahame Murray [1994] 1 WLR 1360, 1374-1375. 86 Monarch S.S. Co Ltd v Karlshamns Oljefabriker (A/B) [1949] AC 196, 215-216; Beale et al Chitty on Contracts.(Sweet & Maxwell, 30th ed, 2010) vol 1 [26-040]. 87 ASM Shipping Ltd of India v TTMI Ltd of England (“The Amer Energy”) [2009] 1 Lloyd’s Rep. 293, 295; Sylvia Shipping Co Ltd v Progress Bulk Carriers Ltd (“The Sylvia”) [2010] 2 Lloyd’s Rep. 81, 84-87; C Czar-nikow Ltd v Koufos (“The Heron II”) [1969] 1 AC 350, 382G-383A; Hadley v Baxendale (1854) 9 Exch. 341; Transfield Shipping Inc v Mercator Shipping Inc (“The Achilleas”) [2008] 2 Lloyd’s Rep. 275.
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26
of excluded and non-excluded causes.88 That is, the loss was partly caused by the pirate
capture and piracy is not excluded under clause 27(a).
(B) Claims in respect of the loss of cargo
(i) The cargo claims are subject to the HV Rules
74. Clause 27(c)(ii) of the Charterparty stipulates that the HV Rules apply to any claims
“arising out of any loss of or damage to or in connection with cargo”. The effect of this
provision is to incorporate the HV Rules into the Charterparty. 89 The HV Rules apply
to cargo claims to the extent that the obligations under the Charterparty are co-extensive
with the obligations under the HV Rules.90
75. The effect of incorporating the HV Rules is to replace the absolute obligations under the
Charterparty to properly man the ship91 and ensure that the Vessel is “fitted for the
service”,92 with an obligation to exercise due diligence to make the ship seaworthy at
the beginning of the voyage.93
76. The onus of proving unseaworthiness under the HV Rules lies on the party alleging it.94
The Vessel was not unseaworthy for failing to take piracy precautions
77. The Claimant was required to exercise due diligence at the beginning of the voyage to
ensure that the Vessel was seaworthy.
78. Seaworthiness is not an absolute concept; it is relative to the nature of the ship, to the
particular voyage and even to the particular stage of the voyage on which the ship is
engaged.95
88 Akt. De Danske Sukkerfabrikker v S Baghamar Cie Nav (“The Torenia”) [1983] 2 Lloyd’s Rep. 210, 218; Smith Hogg & Co v Black Sea & Baltic Insurance Co [1940] AC 997, 1003-1005. 89 Borgship Tankers Inc v Product Transport Corporation Ltd (“The Casco”) [2005] 1 Lloyd's Rep. 565. 90 Navigazione Alta Italia S.P.A. v Concordia Maritime Chartering A.B. (“The Stena Pacifica”) [1990] 2 Lloyd’s Rep. 234, 237. 91 Shelltime 4, cl 2(a). 92 Shelltime 4, cl 1(c). 93 HV Rules, Art III rr 1(a), 1(b) has been held to import the common law standard of seaworthiness, and apply it throughout the charter period: Navigazione Alta Italia S.P.A. v Concordia Maritime Chartering A.B. (“The Stena Pacifica”) [1990] 2 Lloyd’s Rep. 234. 94 HV Rules, Art IV r 1Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd (“The Hongkong Fir”) [1962] 2 QB 26.
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79. The Claimant failed to exercise due diligence in ensuring that the Vessel had piracy
equipment on board. It was insufficient for the Claimant to reschedule delivery of the
razor wire at Durban. At no stage did the Claimant confirm with the Respondent that the
Vessel was to stop at Durban or communicate that the physical protection measures
were being sent to Durban. As a result the Vessel left port in an unseaworthy condition.
The Master was not incompetent
80. The Respondent relies on the same arguments raised above at [63] – [68] as to the
Master’s incompetence under the absolute Charterparty obligations, and submits the
same reasoning applies to demonstrate that the Vessel was not seaworthy.
81. The onus is on the Claimant to prove that due diligence, which refers to reasonable care
and skill,96 was exercised to ensure that the Master was competent.97 There is no
evidence on which the Claimant can rely to discharge this onus.
(5) THE CLAIMANT BREACHED ITS DUTIES AS A BAILEE AND/OR
CONVERTED THE CARGO
(A) The Claimant breached its duties as bailee
(i) The Respondent is entitled to bring an action in bailment
82. By loading the cargo onto the Vessel, but retaining title in the cargo until discharge, the
Respondent bailed the cargo to the Claimant.98 This bailment was on the terms of the
Charterparty.99
83. The Respondent can bring an action in bailment because it had an immediate right to
possession of the cargo at the time of the breach of bailment.100 This right existed
95 Eridania SpA v Rudolf A Oetker (“The Fjord Wind”) [1999] 1 Lloyd’s Rep. 307, 315 approved on appeal at [2000] 2 Lloyd’s Rep. 191, 197. 96 Papera Traders Co Ltd v Hyundai Merchant Marine Co Ltd (“The Eurasian Dream”) [2002] 1 Lloyd’s Rep. 719; Union of India v N.V. Reederij Amsterdam (“The Amstelslot”) [1963] 2 Lloyd’s Rep. 223, 235. 97 HV Rules, Art 4 r 1. 98 East West Corporation v DKBS 1912 & Ors [2003] QB 1509. 99 East West Corporation v DKBS 1912 & Ors [2003] QB 1509; Adamastos Shipping Co Ltd v Anglo-Saxon Petroleum Co Ltd (“The Saxon Star”) [1959] AC 133, 154.
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because the Respondent retained title to the oil cargo until discharge under the sale
contract with Angola Energy,101 and bailments between carriers and shippers are prima
facie bailments at will.102 As the bills of lading were straight bills of lading,103 and in
any case were unsigned, any transfer of bills of lading 104 has not divested the
Respondent of its right to immediate possession.105
(ii) Cargo was lost due to the Claimant’s breach of its duties as a bailee
84. Though the bills of lading were unsigned,106 there is sufficient evidence to prove a loss
has been sustained. The quantities stated in the bills of lading as loaded are affirmed in
the voyage correspondence,107 and by the Master.108 The precise amount is yet to be
verified by independent cargo inspectors.109
85. As this claim in bailment concerns the loss of cargo, clause 27(c)(ii) of the Charterparty
applies the HV Rules. As the goods have been lost, there is a prima facie presumption
that the Claimant is in breach of its obligation under Art III r 2.110
(iii) The Claimant cannot exclude liability under the HV Rules
86. The Respondent argues that the Claimant is unable to establish a defence under Article
IV because piracy does not fall within any exception under the HV Rules.111
87. Piracy is not a “peril of the sea” within the meaning of art IV r 2(c). The Tribunal
should avoid pre-1923 English domestic decisions when construing the Rules.112
100 The Future Express [1993] 2 Lloyd’s Rep. 542; Leigh & Sillivan Ltd v Aliakmon Shipping Co Ltd (“The Aliakmon”) [1986] 2 Lloyd’s Rep. 1; N Curwen ‘Title to Sue in Conversion’ [2004] Conv 308. 101 Procedural Order no 2, [22]. 102 East West Corporation v DKBS 1912 & Ors [2003] QB 1509. 103 International Air and Sea Cargo GmbH v Owners of the Chitral [2000] 1 All ER (Comm) 932. 104 Procedural Order no 2, [15]. 105 East West Corporation v DKBS 1912 & Ors [2003] QB 1509. 106 Facts, pp 43-44. 107 Facts, p 29. 108 Facts, p 42 stated that approximately 28190mt of gas oil cargo was discharged to pirates 109 Facts, p 70. 110 Gosse Millerd v. Canadian Government Merchant Marine [1929] AC 223, 234; Akt. De Danske Sukkerfabrikker v S Baghamar Cie Nav (“The Torenia”) [1983] 2 Lloyd’s Rep. 210. 111 Trafigura Beheer BV v Navigazione Montanari Spa (“The Valle Di Cordoba”) [2015] 1 Lloyd’s Rep. 26, [3]. 112 Effort Shipping Co Ltd v Linden Management SA (“The Giannis NK”) [1998] AC 605, 623.
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Therefore Pickering v Barkley,113 the only authority to directly place piracy within this
exception, should not be treated as determinative. A principled approach should be
preferred, which suggests that “peril of the sea” refers to an event that is fortuitous and
could not be reasonably guarded against.
88. Piracy is not an “act of public enemies” within the meaning of r 2(f). Acts of “public
enemies” have been held in other contexts to exclude thieves, rioters and robbers.114
Therefore the Respondent submits it would be illogical for the Tribunal to include
piracy in light of this approach, particularly given that the defences should be narrowly
construed against the carrier, and ambiguities of construction or uncertainties in
application should be resolved against excluding his liability.115
89. The Respondent submits that the Claimant cannot rely on r 2(q) “[a]ny other cause
arising without the actual fault or privity of the carrier” given that the failure to take
piracy precautions notwithstanding the Vessel was proceeding to an area at risk of
piracy. These were failings on the part of a person who could be considered as a
directing mind of the company, in this context someone exercising the function of an
owner.116 This person was Captain Evasion, who was CSO at the Claimant’s company
as part of the Operations and Safety Department.117
(B) The Claimant committed the tort of conversion
90. To bring an action in conversion a party must have, at the time of conversion,
possession or a right to immediate possession of the converted goods.118 As explained
above, the Respondent had an immediate right to possession119 and consequently is
entitled so sue in conversion.
113 Pickering v Barkley (1648) 82 ER 587. 114 Anvil Knitwear, Inc. v Crowley American Transport, Inc. 2001 AMC 2382. 115 As an application of the law on interpreting exclusion clauses Elderslie v Borthwick [1905] AC 93, 96. 116 Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500. 117 Facts pp 26-28. 118 The Future Express [1993] 2 Lloyd’s Rep. 542; Leigh & Sillivan Ltd v Aliakmon Shipping Co Ltd (“The Aliakmon”) [1986] 2 Lloyd’s Rep. 1. 119 See [57] above.
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91. The elements of conversion have been made out. First, discharging the cargo to pirates
is repugnant to the immediate right of possession of the Respondent. Secondly, despite
the fact that it was the pirates who physically discharged the cargo, the requisite
element of deliberateness by the Claimant can still be made out. By deliberately
transporting the ship to the alternative STS location and intending to discharge the
cargo to the rogue agency ASA2, the subsequent discharge of the cargo to the pirates
was sufficient to amount to conversion.
92. As the conversion claim relates to the loss of cargo, the HV rules also apply by virtue of
clause 27(c) of Charterparty. While the Art IV defences may also be raised in a tort
claim like conversion by virtue of Art IVbis, as discussed above piracy is not an
excluded peril for the purposes of Art IV and therefore the Claimant cannot exclude its
liability for conversion.
(6) COMPOUND INTEREST SHOULD BE AWARDED
93. Procedural Order no. 1 suggests the quantification of damages will be particularised in a
later phase of the arbitration. The Respondent advances a preliminary submission that
interest should be awarded on whatever sum is particularised on that date.
94. This Tribunal should exercise its discretion120 to award the Respondents compound
interest with respect to any damages awarded for the lost fixture and lost cargo. This
would compensate121 the Respondent for being kept out of its money.
95. Payments from the future fixture would have been deposited into a bank account. As
bank accounts ordinarily calculate interest at compounding rates, any payment would
have accumulated interest at a compounding rate. Awarding compound interest more
accurately reflects the money the Respondent would have had but for the breaches.
120 Arbitration Act 1996 (UK) c 24, s 49. 121 Kemp v Tolland [1956] 2 Lloyd’s Rep 681, 691.
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96. Compound interest should, in the interests of justice, also be awarded on any damages
for the cargo claim. This power should be exercised to compensate the Claimant for
being kept out of its money by the Respondent’s breaches and tortious conduct.
RELIEF SOUGHT
For the reasons submitted above, the Claimant respectfully requests the Tribunal to:
DECLARE that the Tribunal has no jurisdiction to hear this dispute; or
DECLARE that the Respondent is not liable to pay hire under the Charterparty or for
committing the tort of fraud; and
DECLARE that, although Procedural Order 1 suggests the quantification of damages will be
particularised a later date in the arbitration, the Respondent is entitled to the following:
a) Damages for the follow on fixture to Bonny;
b) Damages or an indemnity in respect of the lost cargo;
c) An award of compound interest of any sum found owing, in accordance with section
49 of the Arbitration Act 1996 (UK); and
d) Costs.