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INTERNATIONAL MARITIME LAW

ARBITRATION MOOT COM PETITION

SINGAPORE

YEAR 2011

MEMORANDUM FOR THE CLAIMANT

TEAM 14

TWELFTH ANNUAL INTERNATIONAL MARITIME LAW

ARBITRATION MOOT COMPETITION

2011

NATIONAL LAW SCHOOL OF INDIA UNIVERSITY

India – Team 14

IN THE MATTER OF AN ARBITRATION HELD IN SINGAPORE

NO. AR/SING/18/10

(Under the AMTAC Arbitration Rules)

MEMORANDUM FOR THE CLAIMANT

On behalf of: Against:

Blue Sky Holding Inc., Neuland Petroleum Refinery Company Ltd., Level 22, 80 Greater South Street, 48 King Street, Panama City, Makai City, Panama. Neuland. CLAIMANT RESPONDENT

TEAM

ANKITA GODBOLE • ARCHIT DHIR • VATSALA SAHAY • VRINDA BHANDARI

MEMORANDUM FOR THE CLAIMANT II

12TH

INTERNATIONAL MARITIME LAW ARBITRATION MOOT 2011 | TEAM 14

TABLE OF CONTENTS

LIST OF ABBREVIATIONS ___________________________________________________ III

INDEX OF AUTHORITIES ___________________________________________________ IV

STATEMENT OF FACTS ______________________________________________________ 1

ISSUES _____________________________________________________________________ 3

WRITTEN SUBMISSIONS _____________________________________________________ 4

1. THE ARBITRAL TRIBUNAL HAS JURISDICTION TO HEAR THIS MATTER . ________________ 4

1.1 THE B/L PROVISIONS ARE BINDING ON THE RESPONDENT. _____________________________ 4

1.2. AN ARBITRATION AGREEMENT HAS BEEN VALIDLY INCORPORATED INTO THE 11 JULY 2005 B/L_ 4

1.2.1. The Arbitration Clause has not been Incorporated by Reference to another Contract. _ 5

1.2.2. The incorporation fulfils single contracts incorporation standards. _______________ 5

2. THE RESPONDENT HAS BREACHED ITS CONTRACT OF CARRIAGE WITH THE CLAIMANT . __ 8

2.1. THE RESPONDENT HAD A CONTRACTUAL DUTY TO DISCHARGE IN COMMON LAW. ___________ 8

2.2. IT IS AN IMPLIED TERM OF THE CONTRACT THAT THE RESPONDENT’S RESPONSIBILITY TOWARDS

THE CARE OF CARGO EXTENDED TO PROVIDING SAFE DISCHARGE EQUIPMENT. _____________ 9

2.3. THE RESPONDENT BREACHED ITS CONTRACT OF CARRIAGE WITH THE CLAIMANT. __________ 10

3. THE RESPONDENT IS LIABLE UNDER THE TORT OF NEGLIGENCE FOR THE TOTAL

CONSTRUCTIVE LOSS OF THE VESSEL THE ALPHA STAR. ______________________________ 11

3.1. THE ARBITRAL TRIBUNAL CAN DECIDE A TORTIOUS CLAIM. __________________________ 11

3.1.1. The language of the arbitration clause in the B/L permits the consideration of a tortious claim. ______________________________________________________________ 11

3.1.2. There is sufficient nexus between the tortious and contractual claim. ____________ 11

3.2. THE RESPONDENT IS LIABLE FOR THE TORT OF NEGLIGENCE. ________________________ 12

3.2.1. The Respondent owed a duty of care to the Claimant to safely discharge cargo ____ 12

3.2.2. The breach of the duty caused the Claimant’s loss. __________________________ 13

3.2.3. The actions of the terminal employee and the crew member do not constitute a ‘nova causa interveniens’. ___________________________________________________ 15

4. THE COUNTERCLAIM FILED BY THE RESPONDENT IS NOT ADMISSIBLE . _______________ 16

4.1. THE COUNTERCLAIM IS TIME BARRED UNDER ARTICLE III, RULE 6(3) OF THE RULES. _______ 16

4.1.1. ‘Suit’ includes arbitration proceedings. ____________________________________ 16

4.1.2. Delivery took placed on 27 July 2005. ____________________________________ 17

4.2. ARGUENDO, THE CLAIMANT IS NOT LIABLE FOR LOSS OF CARGO. ______________________ 18

4.2.1. The negligence of the Respondent caused the loss of the Cargo. ________________ 18

4.2.2. The Alpha Star was not unseaworthy. _____________________________________ 18

4.2.3. Arguendo, Alpha Star’s unseaworthiness was not the cause of the loss of cargo. ___ 20

4.2.4. The Claimant has discharged its obligation under Article III, Rule 2 of the Rules. __ 20

4.2.5. The Claimant’s liability is wholly exonerated under Article IV, Rule 2(b) of the Rules. ___________________________________________________________________ 21

5. HEADS OF DAMAGES . _______________________________________________________ 21

PRAYER ___________________________________________________________________ 25

MEMORANDUM FOR THE CLAIMANT III

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LIST OF ABBREVIATIONS

§ Section

¶/para Paragraph

AMTAC Australian Maritime and Transport Arbitration Commission

B/L Bill of Lading

COGSA Carriage of Goods by Sea Act, 1992

ESD Emergency Shut Down systems

i.e. That is

IBA International Bar Association

IFIC Independent Fire Investigation Consultants

ISGOTT International Safety Guide for Oil Tankers and Terminals

ISM Code International Safety Management Code

LPG Liquefied Petroleum Gas

Problem IMLAM Moot Problem, 2011

r/w Read with

Rules/ HVR Hague Visby Rules

SOLAS International Convention for the Safety of Life at Sea, 1974

UNCITRAL Model Law, 1985

United Nation Commission on International Trade Law, Model Law on International Commercial Arbitration, 1985

YBCA Yearbook Commercial Arbitration

MEMORANDUM FOR THE CLAIMANT IV

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INDEX OF AUTHORITIES

A. CASE L AW

CANADA

1. March v. Stramare (1991) 171 CLR 506…………………………………………………...15

2. Horsley v. McLaren 1972 SCR 441………………………………………………………...13

3. BP Refinery (Westernport) Pty Ltd v. Shire of Hastings (1977) 180 CLR 266……………...9

UNITED KINGDOM

1. 7E Communications Ltd v. Vertex Antennentechnik GmbH [2007] 1 WLR 2175………….. 6

2. Aegean Sea Traders Corp v. Repsol Petroleo SA (The Aegean Sea) [1998] 2 Lloyd’s Rep

39……………………………………………………………………………………………..9

3. Africa Express Line Ltd v. Socofi S.A High Court [2009] EWHC 3223 (Comm)………….. 5

4. Aggeliki Charis Compania Maritima SA v. Pagnan SpA (The Angelic Grace) [1995] 1

Lloyd’s Rep 87…………………………………………………………………………….. 11

5. AIG Europe (UK) Ltd v. The Ethniki [2000] Lloyd’s Rep 343……………………………... 5

6. Albacora S.R.L. v. Westcott & Laurance Line Ltd. [1966] 2 Lloyd’s Rep 53………………20

7. Andre et Cie SA v. J. H. Vantol [1952] 2 Lloyd’s Rep 282…………………………………23

8. Asfar & Co. v. Blundell [1896] 1 QB 123…………………………………………………..17

9. Ashville Investment v. Elmer Ltd. [1989] QB 488…………………………………………..11

10. Astro Vencedor Compania Naviera SA of Panama v. Mabanaft GmbH (The Damianos)

[1971] 2 All ER 1301……………………………………………………………………….11

11. Attorney General of Belize v. Belize Telecom Ltd [2009] UKPC 10………………………..9

12. B. Sunley & Co Ltd v. Cunard White Star Ltd [1940] 1 KB 740…………………………...24

13. Bacon v. Cooper (Metals) Ltd. [1982] 1 All ER 397……………………………………….23

14. Balfour Breatty Construction (Scotland) Ltd v. Scottish Power Plc (1994) SLR 807……...22

15. Ballantyne & Co. v. Paton & Hendry 1912 SC 246…………………………………………8

16. Bank of Nova Scotia v. Hellenic Mutual War Risks Association (Bermuda) Ltd [1992] 1 AC

233…………………………………………………………………………………………22

17. Barnet v. Chelsea [1969] 1 QB 428………………………………………………………...13

18. Blyth v. Birmingham Waterworks (1856) 11 Ex. 781………………………………………12

19. Booth Steamship Company Ltd v. Cargo Fleet Iron Company [1916] 2 KB 570……………8

20. British Columbia etc., Saw Mill Co Ltd v. Nettleship (1868) LR 3 CP 499………………..24

MEMORANDUM FOR THE CLAIMANT V

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21. Cambridge Water Co. v. Eastern Counties Leather Plc [1994] 2 AC 264…………………22

22. Caparo Industries v. Dickman [1990] 2 AC 605…………………………………………...12

23. Compania Portorafti Commerciale S. A. v. Ultramar Panama Inc. [1990] 1 Lloyd’s Rep

310…………………………………………………………………………………………..17

24. Corr v. IBC Vehicles [2008] UKHL 13……………………………………………………..13

25. Davies v. Mann (1842) 10 M&W 546………………………………………………………16

26. Davies v. Swan Motor Co. (Swansea) LD [1949] 2 KB 291………………………………..16

27. Deutsche Bank AG v. Sebastian Holdings Inc [2009] EWHC 2132 (Comm)……………….9

28. Excess Insurance Co Ltd v. Mander [1997] 2 Lloyd’s Rep 119……………………………..5

29. Excomm Ltd v. Ahmed Abdul-Qawi Bamaodah (The St. Raphael) [1985] 1 Lloyd’s Rep

403……………………………………………………………………………………………6

30. F.C. Bradely & Sons Ltd. v. Federal Navigation and Steam Co. [1926] 24 Lloyd’s Law Rep

446…………………………………………………………………………………………..18

31. Federal Bulk Carriers Inc v. C. Itoh & Co. Ltd (The Federal Bulker) [1989] 1 Lloyd’s Rep

103……………………………………………………………………………………………5

32. Gebruder Metelmann GmBH v. NBR (London) Ltd [1984] 1 Lloyd’s Rep 614…………23

33. Gee v. Lancs & Yorks Railway (1860) 6 H&N 211………………………………………...24

34. Grant v. Australian Knitting Mills Ltd [1936] AC 85………………………………………22

35. H. Parsons Livestock Ltd. v. Uttley Ingham & Co. Ltd. [1978] QB 791 (CA)……………..22

36. Habas Sinai Ve Tibbi Gazlar Isthisal Endustri A.S. v. Sometal S.A.L [2010] EWHC 29

(Comm)……………………………………………………………………………...…passim

37. Hadley v. Baxendale (1854) 9 Exch 341………………………………………………..22, 23

38. Harbutt’s “Plasticine” Ltd v. Wayne Tank and Pump Co Ltd [1970] 1 QB 447…………..21

39. Haynes v. Harwood [1935] 1 KB 146………………………………………………………15

40. Henry Kendall & Sons v. William Lillico & Sons Ltd [1969] 2 AC 31…………………….21

41. Heskell v. Continental Express Ltd [1950] 1 All ER 1033……………………………..23, 23

42. Home Office v. Dorset Yatch Co. Ltd. [1970] AC 1004…………………………………….15

43. Horne v. Midland Railway (1873) LR 8 CP 131……………………………………………24

44. In Re An Arbitration between Polemis and Another and Furness, Withy and Company,

Limited [1921] 3 KB 560…………………………………………………………………...14

45. Jackson v. Royal Bank of Scotland [1949] 2 KB 528………………………………………22

46. Jackson v. Watson [1909] 2 KB 193………………………………………………………..22

47. Jindal Iron and Steel Co Limited and Others v. Islamic Solidarity Shipping Company

Jordan Inc.(The Jordan II) [2004] UKHL 49........................................................................20

MEMORANDUM FOR THE CLAIMANT VI

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48. Koufos v. Czarnikow (C) Ltd (The Heron II) (1969) 1 AC 350…………………………….22

49. Kuwait Airways Corp. v. Iraqi Airways Co (Nos 4 and 5) [2002] UKHL 19………………13

50. Lamb v. Camden London Borough Council [1981] QB 625………………………………..15

51. Liverpool City Council v. Irwin [1977] AC 239……………………………………………..9

52. Marsh v. Joseph [1897] 1 Ch 213…………………………………………………………..22

53. Maxine Footwear Co. Ltd. v. Canadian Government Merchant Marine Ltd. [1959] AC

589…………………………………………………………………………………………21

54. Mediterranean Salvage & Towage Ltd v. Seamar Trading & Commerce Inc (The Reborn)

[2010] 1 All ER (Comm) 1…………………………………………………………………..9

55. Minister of Pensions v. Chennell [1947] KB 250…………………………………………..15

56. M'Kew v. Holland, Hannen, Cubitts (Scotland) Ltd 1970 SC (HL) 20……………………..16

57. Modern Building Wales Ltd v Limmer & Trinidad Co Ltd [1975] 1 WLR 1281…………6, 7

58. Monarch SS Co Ltd v. Karlshamns Oliefabriker (A/B) [1949] AC 196……………………22

59. Mowbray v. Merryweather [1895] 2 QB 640……………………………………………….23

60. Odfifell Seachem v. Continentale des Petorles [2005] 1 Lloyd’s Rep 275…………………17

61. Overseas Tankship (U.K.) Ltd. v. Morts Dock & Engineering Co. Ltd (Wagon Mound I)

[1961] 2 WLR 126 …......................................................................................................14, 22

62. Papera Traders Co. Limited & Others v. Hyundai Merchant Marine Co. Ltd., The Keihin

Co. Ltd. (The Eurasian Dream) [2002] EWHC 118 (Comm)…………………………passim

63. Peterson v. Freebody & Co. [1895] 2 QB 294……………………………………………….8

64. Photo Production Ltd v. Securior Transport Ltd [1980] AC 827…………………………..21

65. Pine Ton Insurance v. Unione Italiana Analo Saxon Reinsurance [1987] 1 Lloyd’s Rep

476……………………………………………………………………………………………7

66. Priest v. Last [1903] 2 KB 148……………………………………………………………..22

67. Pyrene v. Scindia [1954] 2 QB 402……………………………………………………........20

68. Reigate v. Union Manufacturing Co (Ramsbottom) Limited [1918] 1 KB 592……………...9

69. Renton v. Palmyra [1957] AC 149………………………………………………………….20

70. Richard Holdon Ltd v. Bostok & Co Ltd (1902) 18 TLR 317………………………………23

71. Riverstone Meat Co. Pty. Ltd. v. Lancashire Shipping Co. [1961] AC 807 (The Muncaster

Castle)………………………………………………………………………………………18

72. Sea Trade Maritime Corp v. Hellenic Mutual War Risks Association (Bermuda) (The

Athena) (No. 2) [2007] 1 Lloyd’s Rep 280……………………………………………passim

73. Dampskip Selskab Svendborg v. London Midland and Scottish Railway Co. [1930] 1 KB

83……………………………………………………………………………………………..8

MEMORANDUM FOR THE CLAIMANT VII

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74. Siboti K/S v. BP France SA [2003] EWHC 1278 (Comm)…………………………………5

75. Skips A/S Nordheim v. Syrian Petroleum Co. Ltd. (The Varenna) [1983] 2 Lloyd’s Rep

592…………………………………………………………………………………………5, 7

76. Smith, Hogg & Co. v. Black Sea & Baltic General Insurance Co. [1940] 67 Lloyd’s Rep

253…………………………………………………………………………………………..20

77. Spencer v. Wincanton Holdings Ltd. [Wincanton Logistics Ltd.] [2009] EWCA Civ

1404…………………………………………………………………………………………15

78. Stansbie v. Troman [1948] 2 KB 48………………………………………………………...15

79. Streford v. Football Association [2007] EWCA Civ 238…………………………………...6

80. Supershield Ltd. v. Siemens Building Technologies FE Ltd. [2010] EWCA Civ 7………...22

81. Sylvia Shipping Co. Ltd. v Progress Bulk Carriers Ltd. [2010] EWHC 542 (Comm)….22,23

82. The Amer Energy [2009] 1 Lloyd’s Rep 293……………………………………………….23

83. The Amstelot [1963] 2 Lloyd’s Rep 40……………………………………………………..18

84. The Annefield [1971] 1 Lloyd’s Rep 1…………………………………………………….5, 7

85. The Argentino (1889) 14 AC 519 (HL)……………………………………………………..22

86. The Arpad (1934) P. 189 (CA)……………………………………………………………...22

87. The Canadian Transporter 43 Lloyd’s List Law Rep 409 (CA 1932)……………………22

88. The Ert Stefanie [1989] 1 Lloyd’s Rep 349………………………………………………...21

89. The Europa [1908] P. 84……………………………………………………………………20

90. The Fjord Wind [1999] 1 Lloyd’s Law Rep 307……………………………………………18

91. The Jaederen [1892] P. 351 (Probate Divorce and Admiralty Division)…………………….8

92. The Kapitan Sakharov [2000] 2 Lloyd’s Rep 225………………………………………….18

93. The Makedonia [1962] 1 Lloyd’s Law Rep 316…………………………………………...19

94. The Marion [1984] 1 AC 563………………………………………………………………19

95. The Merak [1964] 2 Lloyd’s Rep 527………………………………………………………16

96. The Oropesa [1943] P. 32…………………………………………………………………15

97. The Paolo de’Alesio [1994] 2 Lloyd’s Rep 366 (QB)……………………………………..11

98. The Playa Larga and Marble Islands [1983] 2 Lloyd’s Rep 171…………………………..11

99. The Rena K [1979] QB 377…………………………………………………………………..7

100. The Seki Rolette [1998] 2 Lloyd’s Rep 638………………………………………………...17

101. The Star Sea [1995] 1 Lloyd’s Rep 651…………………………………………………….19

102. The Toledo [1995] 1 Lloyd’s Rep 40……………………………………………………….18

103. Total Liban SA v. Vitol Energy SA [2001] QB 643…………………………………………23

104. Tracomin SA v. Sudan Oil Seed Co [1983] 1 Lloyd’s Rep 560……………………………6

MEMORANDUM FOR THE CLAIMANT VIII

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105. Transfield Shipping Inc. v. Mercator Shipping Inc. (The Achilleas) [2008] 3 WLR

345…………………………………………………………………………………..22, 23, 24

106. TW Thomas & Co v. Portsea Co Ltd [1912] AC 1…………………………………………..7

107. Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd. [1949] 2 KB 528………..22, 23

108. Wroth v. Tyler [1973] 1 All ER 897………………………………………………………...22

109. Wyndham Rather Ltd v. Eagle Star & British Dominions Insurance Company Ltd (1925) 21

Lloyd’s Law Rep 214………………………………………………………………………...6

UNITED STATES OF AMERICA

1. Cuomou v. United States 107 F.3d 290 (5th Cir. 1997)……………………………………..13

2. Earl & Sttodart Inc v. Ellerman Wilson Line Ltd. 1993 AMC 1…………………………...21

3. In re Transrol Nevegacao SA 782 F. Supp. 848 (SDNY 1992)……………………………...7

4. JMA Investments v. C. Rijkaart B.V 11 YBCA 578 (1986)………………………………….5

5. Kermarec v. Compagnie Generale Transatlantique 358 US 625 (1959)…………………..13

6. Melerine v. Avondale Shipyards, Inc. 659 F.2d 706 (5th Cir. 1981)……………………….13

7. Richmond Marine Panama v. United States 350 F. Supp. 1210 (SDNY 1972)…………...13

8. Son Shipping Co v. DeFosse & Tanhge 199 F 2d 687 (1952)……………………………...16

9. VerolmeBotlek BV v. Lee C. Moore Corp. XXI YBCA 824 (1996)……………………........7

EUROPEAN UNION

1. Compagnie de Navigation et Transports S.A. v. Mediterranean Shipping Company 21

YBCA 690 (1996)…………………………………………………………………………5, 7

2. Obergericht Basel XXI YBCA 685 (1996)…………………………………………………..5

3. Société Bomar Oil v. Entreprise Tunisienne d’Activités Pétrolières XIII YBCA 466 (1988)

(Cour d’Appel, Paris)……………………………………………………………………...6, 7

4. Tradax Export SA (Panama) v. Amoco Iran Oil Company (US) XI YBCA 53 (1986)..5, 6, 7

HONG KONG

1. China Nanhai Oil Joint Serv. Corp. Shenzhen Branch v. Gee Tai Holdings Co. XX YBCA

671 (H.K. High Court, S.Ct. 1994) (1995)………………………………………………...6, 7

B. STATUTES

1. AMTAC Arbitration Rules.

MEMORANDUM FOR THE CLAIMANT IX

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2. Carriage of Goods by Sea Act, 1992.

3. IBA Rules on the Taking of Evidence in International Arbitration, 2010.

4. International Convention for the Unification of Certain Rules relating to Bills of Lading,

1924 (Hague Rules) as amended by the Visby Protocol, 1968 (Hague-Visby Rules).

5. International Safety Management Code, 1997 (Chapter IX SOLAS).

6. Law Reform (Contributory Negligence) Act, 1945.

7. The English Arbitration Act, 1996.

8. The Singapore International Arbitration Act, 2002.

9. UNCITRAL Model Law on International Commercial Arbitration, 1985.

C. TREATISES

1. Albert Jan van den Berg, THE NEW YORK ARBITRATION CONVENTION OF 1958, TOWARDS A

UNIFORM JUDICIAL INTERPRETATION (1981).

2. Christopher Walton (ed.), CHARLESWORTH AND PERCY ON NEGLIGENCE (2010).

3. Edwin Peel (ed.), TREITEL ON THE LAW OF CONTRACT (2007).

4. Emmanual Gaillard and John Savage (eds), FOUCHARD GAILLARD GOLDMAN ON

INTERNATIONAL COMMERCIAL ARBITRATION (1999).

5. Gary B. Born, INTERNATIONAL COMMERCIAL ARBITRATION (2009).

6. Guenter H. Treitel and Francis M. B. Reynolds (eds), CARVER ON BILLS OF LADING, (2001).

7. Hugh Beale (ed.), CHITTY ON CONTRACTS, VOLUME I and II (2008).

8. ISGOTT (INTERNATIONAL SAFETY GUIDE FOR OIL TANKERS AND TERMINALS) 5TH EDITION

(2006).

9. John D. Mayne, A TREATISE ON THE LAW OF DAMAGES (1856).

10. John F. Wilson, CARRIAGE OF GOODS BY SEA (2007).

11. Julian D. M. Lew et al., COMPARATIVE INTERNATIONAL COMMERCIAL ARBITRATION (2003).

12. Karl-Heinz Böckstiegel et al., ARBITRATION IN GERMANY: THE MODEL LAW IN PRACTICE

(2007).

13. Michael J. Mustill and Stewart C. Boyd, THE LAW AND PRACTICE OF COMMERCIAL

ARBITRATION IN ENGLAND (2001).

14. Stewart C. Boyd et al. (eds), SCRUTTON ON CHARTERPARTIES (2008).

15. Thomas J. Schoenbaum, ADMIRALTY AND MARITIME LAW (1994).

16. W.V.H. Rogers (ed.), WINFIELD AND JOLOWICZ ON TORT (2010).

17. William Laurence Craig et al., INTERNATIONAL CHAMBER OF COMMERCE ARBITRATION

(2001).

MEMORANDUM FOR THE CLAIMANT X

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18. William Tetley, MARINE CARGO CLAIMS (1978).

D. ARTICLES

1. Adam Kramer, “An Agreement-Centered Approach to Remoteness and Damages” in Nili

Cohen and Ewan McKendrick (eds), COMPARATIVE REMEDIES FOR BREACH OF

CONTRACT (2005).

2. Andrew Tweeddale and Keren Tweeddale, “Incorporation of Arbitration Clauses

Revisited”, 76(4) ARBITRATION 656 (2010).

3. Andrew Tweeddale, “Incorporation of Arbitration Clauses”, 68 ARBITRATION 48 (2002).

4. Anne Veronique Schlaepfer and Philippe Bartsch, “A Few Reflections on the Assessment of

Evidence by International Arbitrators”, 3 INTERNATIONAL BUSINESS LAW JOURNAL 211 (2010).

5. Gary Richard Coveney, “Damages for Late Delivery under Time Charters: Certainty at

Last?”, 23 AUSTRALIAN & NEW ZEALAND MARITIME LAW JOURNAL 205 (2009).

6. Janet O’Sullivan, “Damages for Lost Profits for Late Redelivery: How Remote is Too

Remote?”, 68(1) CAMBRIDGE LAW JOURNAL 34 (2009).

7. “Korean Maritime Law Update: 2009”, 41 JOURNAL OF MARITIME LAW AND COMMERCE 369

(2010).

8. Masood Ahmed, “Arbitration Clauses: Fairness, Justice and Commercial Certainty” in

William W. Park (ed.) 26 (3) ARBITRATION INTERNATIONAL 409 (2010).

9. Rolf Trittmann and Inka Hanefeld., “Part II – Commentary on the German Arbitration Law,

Chapter II- Arbitration Agreement” in Karl-Heinz Böckstiegel et al. (eds) ARBITRATION IN

GERMANY: THE MODEL LAW IN PRACTICE (2007).

10. Vera van Houtte, “Consent to Arbitration Through Agreement to Printed Contracts: The

Continental Experience”, 16 (1) ARBITRATION INTERNATIONAL 1 (2000).

11. William Tetley, “Properly Carry, Keep and Care for Cargo – Art. III(2) of the Hague/Visby

Rules”, [2001] ETL 9.

12. William Tetley, “Responsibility of Fire in the Carriage of Goods by Sea”, [2002] ETL 1.

13. William Tetley, “The Burden and Order of Proof in Marine Cargo Claims” available at <

http://www.mcgill.ca/files/maritimelaw/burden.pdf> .

MEMORANDUM FOR THE CLAIMANT 1

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STATEMENT OF FACTS

THE PARTIES

Blue Sky Holdings Inc. (the ‘Claimant’ ) is a company incorporated under the laws of the

Republic of Panama and is the owner of the Alpha Star. Neuland Petroleum Refinery Co. (the

‘Respondent’) is a company incorporated under the laws of Neuland and is an oil importer.

THE SALE CONTRACT

In April 2005, the Respondent invited tender applications for the supply and delivery of 53,000

metric tonnes of LPG mixture. Far East Maritime Petroleum Transport Co. (the ‘Charterer’ or

‘Shipper’ ) together with Brit Petroleum submitted the successful bid and was awarded the

tender on 27 April 2005. The Charterer and the Respondent share a long standing business

relationship, the former being a regular supplier of gas cargoes to the latter.

THE TIME CHARTER PARTY

The Claimant and Charterer entered into a time charter party substantially on the SHELLTIME

4 format for the vessel Alpha Star on 10 January 2005. During the currency of this charter

party and pursuant to the sale contract, the Charterers ordered the Alpha Star to load

consignments of LPG mixture on inter alia 11 July 2005 for discharge at Makai Port, Neuland.

THE SHIPMENTS

Eight shipments of LPG were carried against B/L on the Charterer’s standard form. The

dispute arose with respect to the fifth shipment made on 11 July 2005. The B/L incorporated

the standard form arbitration clause on its reverse side about which the Respondent was aware.

The Respondent was the endorsee and holder of the 11 July 2005 B/L. The cargo was

discharged on 27 July 2005. The Ship/shore safety checklists were completed before discharge.

THE INCIDENT

Shortly after the discharge operations commenced, an initial small cloud of white gas was seen

to escape from the vessel’s rail side of the manifold reducer. A terminal employee and a crew


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member were in attendance at the manifold. While the crew member moved away on seeing

the gas cloud, the terminal employee approached the leaking reducer with a spanner. As he

bent over, a non- intrinsically safe metal cased torch fell from his overall pocket. The torch

struck the manifold drip tray just as a large cloud of pressurized gas escaped. This was

followed by an orange flame and an explosion. The Alpha Star was rendered a total contructive

loss as a result of the ensuing fire and both terminal employee and crew member died due to

the same.

THE CLAIMS

The Claimants commenced arbitration proceedings on 15 August 2010 against the Respondent

claiming damages for breach of their contractual duty to exercise reasonable care in supplying

and maintaining a suitable manifold reducer for discharge operations, which combined with the

negligence of the terminal employee, caused the fire that destroyed the Alpha Star.

The Respondents have denied all allegations put forth by the Claimant. They have

counterclaimed seeking damages against the Claimant for breach of contractual duty to deliver

cargo specified in the 11 July 2005 B/L.


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ISSUES

In light of the Preliminary Submissions made by the Claimant, the following issues arise for

consideration before the Arbitral Tribunal:

I. WHETHER THE ARBITRAL TRIBUNAL HAS JURISDICTION TO TRY THE DISPUTE BETWEEN THE

CLAIMANT AND RESPONDENT.

II. WHETHER THE RESPONDENT IS LIABLE UNDER CONTRACT FOR THE TOTAL CONSTRUCTIVE

LOSS OF THE ALPHA STAR.

III. WHETHER THE RESPONDENT IS LIABLE UNDER THE TORT OF NEGLIGENCE FOR THE TOTAL

CONSTRUCTIVE LOSS OF THE ALPHA STAR.

IV. WHETHER THE CLAIMANT IS LIABLE UNDER THE CONTRACT OF CARRIAGE FAILURE TO

DELIVER CARGO DESCRIBED ON THE B/L DATED 11 JULY 2005.

V. WHETHER THE CLAIMANT IS ENTITLED TO THE RELIEFS SOUGHT.


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WRITTEN SUBMISSIONS

1. THE ARBITRAL TRIBUNAL HAS JURISDICTION TO HEAR THIS MATTER.

1. The arbitral tribunal has jurisdiction to hear this matter as first, the provisions incorporated in

the B/L are binding on the claimant and secondly, the arbitration agreement has been validly

incorporated by reference into the 11 July 2005 B/L.

1.1 THE B/L PROVISIONS ARE BINDING ON THE RESPONDENT.

2. The lawful holder of the B/L has the title to sue and be sued if the B/L had been transferred to

him as a result of a contractual or other transaction made before the B/L ceased to function as a

document of title.1 In the instant case, the Respondent has taken delivery of the goods and the

incident of fire took place after the commencement of the discharging operation.2 The B/L

identifies the Respondent as the receiver of the cargo and the latter has signed the B/L as an

indorsee through the intermediate bank.3 Therefore, there is a transfer of rights and liabilities to

the Respondent. Hence any obligations contained in the B/L are binding on the Respondent.

1.2. THE ARBITRATION CLAUSE HAS BEEN VALIDLY INCORPORATED INTO THE 11 JULY 2005

B/L.

3. A reference to a document containing an arbitration clause constitutes a valid arbitration

agreement if the clause is made a part of the contract.4 This includes incorporation by reference

in a bill of lading.5 It is submitted that an arbitration agreement has been validly incorporated

into the B/L for the 11 July 2005 shipment.

1Section 2(1)(a), COGSA 1992; Section 3, COGSA 1992.

2Problem, at 81.

3Problem, at 56.

4Section 6(2), The English Arbitration Act 1996; Article 7(6), UNCITRAL Model Law 1985, as amended in

2006 r/w Section 2(1), The Singapore International Arbitration Act 2002 (“Singapore Act”). See Masood

Ahmed, “Arbitration Clauses: Fairness, Justice and Commercial Certainty” in William W. Park (ed.),

ARBITRATION INTERNATIONAL 415 (2010); Habas Sinai Ve Tibbi Gazlar Isthisal Endustri A.S. v. Sometal S.A.L

[2010] EWHC 29 (Comm) (“Habas Sinai”).

5Section 2, Singapore Act.


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1.2.1. THE ARBITRATION CLAUSE HAS NOT BEEN INCORPORATED BY REFERENCE TO ANOTHER

CONTRACT.

4. An arbitration clause can be incorporated into a contract by reference to another contract (such

as the incorporation of an arbitration clause into the B/L by referring to the charter party

agreement) or to another document containing the relevant term(s).6 A stricter burden exists in

order to prove the former.7 The rationale for this is the recognized distinction between

referencing a standard form agreement or a separate document of whose terms both parties are

privy to and reference to another contract, to which one of the parties is not privy to.8

The B/L does not incorporate any clause of the charterparty.9 It incorporates clauses present on

the reverse side of the B/L. The Respondent is a party to the contract of carriage evidenced by

the B/L. Therefore the B/L does not incorporate clauses present in another contract. The higher

standard for incorporation is not applicable here.

1.2.2. THE INCORPORATION FULFILS SINGLE CONTRACTS INCORPORATION STANDARDS.

5. When parties share a long business relationship or when trade usage is shown, a greater degree

of familiarity can be imputed to each party.10 Hence a reference by A in an agreement with B

to terms contained in past agreements with B or to standard terms requires relaxed

incorporation standards; a general reference to standard terms and conditions is held to be

6See Masood Ahmed, Supra note 4, at 413.

7Africa Express Line Ltd v. Socofi S.A High Court [2009] EWHC 3223 (Comm); The Annefield [1971] 1 Lloyd’s

Rep 1; Skips A/S Nordheim v. Syrian Petroleum Co. Ltd. (The Varenna) [1983] 2 Lloyd’s Rep 592 (“The

Varenna”); Federal Bulk Carriers Inc v. C. Itoh & Co. Ltd (The Federal Bulker) [1989] 1 Lloyd’s Rep 103(“The

Federal Bulker”); Julian D. M. Lew et al., COMPARATIVE INTERNATIONAL COMMERCIAL ARBITRATION 142 (2003).

8AIG Europe (UK) Ltd v. The Ethniki [2000] Lloyd’s Rep 343; Siboti K/S v. BP France SA [2003] EWHC 1278

(Comm); Karl-Heinz Böckstiegel et al., ARBITRATION IN GERMANY: THE MODEL LAW IN PRACTICE 136 (2007);

Andrew Tweeddale, “Incorporation of Arbitration Clauses”, 68 ARBITRATION 48, 56 (2002); Andrew

Tweeddale and Keren Tweeddale, “Incorporation of Arbitration Clauses Revisited”, 76(4) ARBITRATION 656

(2010); Habas Sinai; Excess Insurance Co Ltd v. Mander [1997] 2 Lloyd’s Rep 119.

9See Problem, Claimant’s Submission, ¶ 6 r/w Respondent’s Submissions, ¶ 7.

10Michael J. Mustill and Stewart C. Boyd, THE LAW AND PRACTICE OF COMMERCIAL ARBITRATION IN ENGLAND

(2001); Vera van Houtte, “Consent to Arbitration Through Agreement to Printed Contracts: The Continental

Experience”, 16 (1) ARBITRATION INTERNATIONAL 1, 10 (2000); Julian D. M. Lew et al., Supra note 7, at 129-165;

Tradax Export SA (Panama) v. Amoco Iran Oil Company (US) XI YBCA 53, 5332 (1986) (“Tradax”);

Obergericht Basel XXI YBCA 685 (1996); Compagnie de Navigation et Transports S.A. v. Mediterranean

Shipping Company 21 YBCA 690 (1996) (“Mediterranean Shipping Co.”); JMA Investments v. C. Rijkaart B.V 11

YBCA 578 (1986).


12TH


sufficient and in consonance with commercial practice.11 Further, a party’s conduct can

“provide a basis for deeming such (formal) requirements satisfied in appropriate cases” and

estopp it from denying the existence of the arbitration clause.12 Such broad interpretation of

form requirements is in tune with the pro-arbitration approach adopted by the drafters of the

New York Convention.13 In light of such judicial opinion, it is submitted that the facts of the

present case support a conclusion that the arbitration clause was validly incorporated.

6. First, the Respondent has admitted that Clauses 1 to 5 were the standard terms present in a

standard Far East bill of lading.14 Therefore the reference was made to standard terms and

conditions, used for all similar transshipments, and not to another contract to which the

Respondent was not privy.

7. Second, the Respondent shares a long standing business relationship with the Charterer. This

includes contracts for the supply of gas by FEMPTC.15 The 11 July 2005 shipment was similar

to the many shipments that had been carried out earlier between the Charterer and the

Respondent. In this, like the earlier shipments, the Charterer was the supplier of the gas and the

Respondent was the receiver. It is reasonable to assume that the Respondent is familiar with

11Julian D. M. Lew et al, Supra note 7, at 134; Andrew Tweeddale and Keren Tweeddale, Supra note 8, at

656; Modern Buildings Wales Ltd v. Limmer & Trinidad Co Ltd [1975] 2 Lloyd’s Rep 318; Habas Sinai; Sea

Trade Maritime Corp v. Hellenic Mutual War Risks Association (Bermuda) Ltd. (The Athena) [2007] 1 Lloyd’s

Rep 280 (“The Athena”); Tracomin SA v. Sudan Oil Seed Co [1983] 1 Lloyd’s Rep 560; Excomm Ltd v. Ahmed

Abdul-Qawi Bamaodah (The St. Raphael) [1985] 1 Lloyd’s Rep 403 (“The St. Raphael”); Wyndham Rather Ltd

v. Eagle Star & British Dominions Insurance Company Ltd (1925) 21 Lloyd’s Law Rep 214; Streford v.

Football Association [2007] EWCA Civ 238.

12Gary B. Born, INTERNATIONAL COMMERCIAL ARBITRATION 597 (2009).

13Gary B. Born, Ibid., at 597; See for example China Nanhai Oil Joint Serv. Corp. Shenzhen Branch v. Gee Tai

Holdings Co., XX YBCA 671 (H.K. High Court, S.Ct. 1994) (1995) (“China Nanhai Oil”) (doctrine of good faith

and estoppel apply as international principles under Articles II(2) and V(1) of the New York Convention on

the Recognition and Enforcement of Foreign Arbitral Awards: “on a true construction of the Convention

there is indeed a duty of good faith” requiring award debtor to raise jurisdictional objection”); Albert Jan

van den Berg, THE NEW YORK ARBITRATION CONVENTION OF 1958, TOWARDS A UNIFORM JUDICIAL INTERPRETATION

185 (1981) (“the principle of good faith may be deemed enshrined in the Convention's provisions”);

Tradax, at 532; W. Laurence Craig et al., INTERNATIONAL CHAMBER OF COMMERCE ARBITRATION 74 (2001); Société

Bomar Oil v. Entreprise Tunisienne d’Activités Pétrolières XIII YBCA 466, 469 (1988) (Cour d'Appel, Paris)

(“Bomar Oil”); 7E Communications Ltd v. Vertex Antennentechnik GmbH [2007] 1 WLR 2175.

14Problem, Respondent’s Submissions, ¶ 6.

15Problem, Claimant’s Submission, ¶ 8 r/w Respondent’s Submission, ¶¶ 7, 9.


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the form of the standard Far East bills of lading and thus that it was aware of what Clauses 1 to

5 referred to.

8. Third, in the 11 July B/L, it has been mentioned that Clauses 1 to 5 have been incorporated

under the heading “INCORPORATION”. When the objecting party is a seasoned businessmen

and where reference has been made to standard terms and conditions, a statement that the

“terms and conditions” are incorporated would also have been valid.16 However here, the

reference, mentioned below the heading “INCORPORATION”, has been made to 5 particular

Clauses, and not to general terms.17 The fifth clause is the arbitration clause.18 The form of

reference is thus specific enough to make the incorporation valid.19 In fact, in single contract

cases, an arbitration clause is binding even on a party unaware of it and the underlying

ignorance is “irrelevant”.20

9. It is also relevant to note that the Respondent did not question the validity of the incorporation

till 29 August 2010 and took delivery of all eight shipments.21 In fact, the bill of lading for the

eighth shipment contained the arbitration clause on its reverse;22 yet the Respondent took

delivery without questioning the presence of the arbitration clause.23 The continued

endorsement of all the bills of lading gave the Claimant the “right to believe in good faith” that

the Respondent approved of the form and content of the bill.24 This conduct coupled with the

16Emmanual Gaillard and John Savage (eds), FOUCHARD GAILLARD GOLDMAN ON INTERNATIONAL COMMERCIAL

ARBITRATION 272, 492 (1999); The Athena; TW Thomas & Co v. Portsea Co Ltd [1912] AC 1; The Annefield

[1971] 1 Lloyd’s Rep 1; The Rena K [1979] QB 377; Pine Ton Insurance v. Unione Italiana Analo Saxon

Reinsurance [1987] 1 Lloyd’s Rep. 476; Habas Sinai; Bomar Oil; Tradax; The Varenna.

17See Problem at 43, 46, 49, 52, 55, 61 and 64.

18Problem, at 65.

19Andrew Tweeddale and Keren Tweeddale, Supra note 8, at 656; The Athena; Modern Building Wales Ltd v

Limmer & Trinidad Co Ltd [1975] 1 WLR 1281.

20The St. Raphael; The Athena.

21Problem, Respondent’s Submission, ¶ 9.

22Problem, Page 65.

23Problem, Claimant’s Submission ¶ 21 r/w Respondent’s Submission, ¶ 9.

24See Mediterranean Shipping Co.; VerolmeBotlek BV v. Lee C. Moore Corp., XXI YBCA 824, 827 (1996); In re

Transrol Nevegacao SA 782 F. Supp. 848, 851 (SDNY 1992); China Nanhai Oil; Gary B. Born, Supra note 12,

at 592; Rolf Trittmann and Inka Hanefeld., “Part II – Commentary on the German Arbitration Law, Chapter


12TH


long standing business relationship the Respondent enjoyed with Charterer and its commercial

experience in this trade, estopps the Respondent from asserting that the agreement to arbitrate

did not exist simply because the formal requirement of affixing the clauses to the reverse of the

bill of lading was not fulfilled.

10. Consequently, in light of the above submissions, it is shown that the 11 July 2005 B/L is a

standard FEMPTC B/L. The effect of the incorporation has been such as to make Clauses 1 to

5, particularly the arbitration clause, part of the 11 July bill of lading. Therefore the arbitral

tribunal has jurisdiction to hear this matter.

2. THE RESPONDENT HAS BREACHED ITS CONTRACT OF CARRIAG E WITH THE

CLAIMANT.

2.1. THE RESPONDENT HAD A CONTRACTUAL DUTY TO DISCHARGE IN CO MMON LAW .

11. In common law, the carrier is said to have fulfilled its contractual duty when it has “reached a

point where the consignee or the person taking delivery is bound to do something…”25 The

carrier performs the principal part of its contractual obligation when it puts the goods over the

rail of the ship26 and is deemed to have discharged the goods when they are put in a position

enabling the consignee to take delivery thereof.27 Therefore, the activity of discharging is not to

be performed only by the carrier, the consignee also has a duty of taking delivery of the cargo.

Each party has to “act within his own department” and the activity of discharge is only

complete when both parties act simultaneously.28

II – Arbitration Agreement” in Karl-Heinz Böckstiegel et al. (eds), ARBITRATION IN GERMANY: THE MODEL LAW IN

PRACTICE 132 (2007). 25Booth Steamship Company Ltd v. Cargo Fleet Iron Company [1916] 2 KB 570.

26See Dampskip Selskab Svendborg v. London Midland and Scottish Railway Co. [1930] 1 KB 83; Ballantyne &

Co. v. Paton & Hendry 1912 SC 246; The Jaederen [1892] P. 351 (Probate Divorce and Admiralty Division).

27Peterson v. Freebody & Co. [1895] 2 QB 294.

28Ibid.


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12. In the instant case, the Claimant’s contractual duty extended to providing a seaworthy vessel

and appropriate cargo structures, fittings and pipe works.29 However, oil discharge operations

require equipment to be provided both from the ship and the shore for completion.30 The

Respondent’s duty to take delivery of the cargo thus included the responsibility to provide safe

shore-end discharge equipment. Hence, if any damage to the cargo or the vessel is attributable

to faulty shore-end equipment, the Respondent will be in breach of its contractual duty to

discharge.

2.2. IT IS AN IMPLIED TERM OF THE CONTRACT THAT THE RESPONDENT’S RESPONSIBILITY

TOWARDS THE CARE OF CARGO EXTENDED TO PROVIDING SAF E DISCHARGE

EQUIPMENT .

13. A term can be implied in a contract if first, it is necessary to give business efficacy to the

contract; secondly, it is obvious and “it goes without saying”; thirdly, it does not contradict any

express terms of the contract and fourthly, it is reasonable and equitable.31

14. Discharge operations are jointly conducted by the ship and the shore with equipment and

personnel from both sides participating.32 Given the joint responsibility shared for discharge

operations, it is submitted that it was obvious, reasonable, equitable and efficacious that the

Respondent had the responsibility of providing the appropriate shore side discharge

equipment. This would include supplying and maintaining a suitable manifold reducer and

ensuring that it was in a proper condition prior to it being fitted to the vessel the Alpha Star.

29Problem, Neupetrol Tender/2/2005 ¶ 3 clause I, p. 5 r/w FEMPTC Commercial Offer, clause 2.7, p. 11.

30ISGOTT (INTERNATIONAL SAFETY GUIDE FOR OIL TANKERS AND TERMINALS) GUIDELINES 5TH EDITION, ¶ 22.4.2.2 –

22.6 (2006) (“ISGOTT”).

31Mediterranean Salvage & Towage Ltd v. Seamar Trading & Commerce Inc (The Reborn) [2010] 1 All ER

(Comm) 1; Deutsche Bank AG v. Sebastian Holdings Inc [2009] EWHC 2132 (Comm); Aegean Sea Traders

Corp v. Repsol Petroleo SA (The Aegean Sea) [1998] 2 Lloyd’s Rep 39; Liverpool City Council v. Irwin [1977]

AC 239; Attorney General of Belize v. Belize Telecom Ltd [2009] UKPC 10; BP Refinery (Westernport) Pty Ltd

v. Shire of Hastings (1977) 180 CLR 266; Reigate v. Union Manufacturing Co (Ramsbottom) Limited [1918] 1

KB 592.

32ISGOTT, Supra note 30, at ¶ 26.3.1.


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2.3. THE RESPONDENT BREACHED ITS CONTRACT OF CARRIAGE WITH TH E CLAIMANT .

15. The IFIC Report is relevant, admissible and should be accorded due probative value while

being assessed by the Tribunal.33 In the present case, no rupture, damage or leak was found in

or from any of the vessel’s cargo structures, pipes and other fittings.34 The gas leak was from

the forward end of the reducer, which forms a part of the shore-side discharge equipment.35 All

the equipment on the vessel was secure and consequently the Claimant has fulfilled its

contractual duty of care towards the cargo.36 However, grooving was found at the forward end

of the reducer,37 which had been supplied by the Respondent. Given the high risk involved in

oil discharge operations, it is necessary to provide secure equipment so as to avoid any leaks

and spills and thus, the Respondent had a duty to provide secure equipment for discharge.

Consequently, the Respondent has breached its duty under the contract of carriage with the

Claimant to ensure safe discharge of cargo, by supplying a defective reducer.

16. Furthermore, it is submitted that the grooving was the cause of the fire. It is evident that a high

pressure liquid will escape into an area of low pressure through the orifices as a gas. The

grooving on the manifold provided such an opportunity for the LPG to escape while under high

pressure. Although the terminal employee’s actions purportedly ignited the fire, LPG mixed

with air in the right proportions is inflammable38 and so the gas leak owing to the deficient

reducer was in itself very dangerous. Given the leak, the terminal employee’s actions were not

the only circumstances under which the fire could have occurred. Hence, the damage to the

cargo and the vessel is attributable to the Respondent’s breach of its contract of carriage by it

failing to provide a suitable reducer.

33Rule 23.2 AMTAC Rules, Articles 9.1 and 9.2, IBA Rules on the Taking of Evidence in International

Arbitration 2010; Anne Veronique Schlaepfer and Philippe Bartsch, “A Few Reflections on the Assessment

of Evidence by International Arbitrators”, 3 INTERNATIONAL BUSINESS LAW JOURNAL 211, 213 (2010).

34Problem, ¶ 11(ii) Independent Fire Investigation Consultants Report (“IFIC Report”), at 91.

35Problem, IFIC Report, at 91.



38ISGOTT, Supra note 30, at ¶¶ 1.1 – 1.1.1.


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3. THE RESPONDENT IS LIABLE UNDER THE TORT OF NEGLIGEN CE FOR THE

TOTAL CONSTRUCTIVE LOSS OF THE VESSEL THE ALPHA STA R.

3.1. THE ARBITRAL TRIBUNAL CAN DECIDE A TORTIOUS CLAIM .

17. An Arbitral Tribunal is competent to decide a tortious claim if, first, the arbitration clause is so

worded and secondly, if there is sufficient nexus between the contractual and tortious claim.

3.1.1. THE LANGUAGE OF THE ARBITRATION CLAUSE IN THE B/L PERMITS THE CONSIDERATION OF A

TORTIOUS CLAIM.

18. It is well established that an arbitration clause in a contract employing the terms “arising out

of” or “in relation to” while referring to the subject matter of arbitration is wide enough to

cover a tortious claim.39 In the present case, the arbitration clause incorporated in the 11 July

2005 B/L clearly states that “all differences and disputes arising out of this B/L shall be

decided by Arbitration…”40 It is submitted that this phrase evidences the intent of the

contracting parties to give a wide ambit to the arbitration clause, inasmuch as it can cover cases

of torts that arise in connection with a contractual dispute.

3.1.2. THERE IS SUFFICIENT NEXUS BETWEEN THE TORTIOUS AND CONTRACTUAL CLAIM.

19. There is sufficient nexus between a tortious and contractual claim if, in an agreement to

arbitrate one would necessarily involve a consideration of the other.41 The resolution of the

dispute in the instant case involves determining whether the Respondent failed to take

reasonable care as required under the contract. Such a determination will inevitably lead to

considering whether the tort of negligence has been committed or not. This is because failure to

take reasonable care is one of the essential elements of proving negligence. Therefore there is a

sufficient nexus between the tort and contractual claims to grant the Tribunal jurisdiction.

39Astro Vencedor Compania Naviera SA of Panama v. Mabanaft GmbH (The Damianos) [1971] 2 All ER 1301;

Aggeliki Charis Compania Maritima SA v. Pagnan SpA (The Angelic Grace) [1995] 1 Lloyd’s Rep 87; The Playa

Larga and Marble Islands [1983] 2 Lloyd’s Rep 171. 40Problem, at 98.

41Ashville Investment v. Elmer Ltd. [1989] QB 488; The Paolo de’Alesio [1994] 2 Lloyd’s Rep 366 (QB).


12TH


3.2. THE RESPONDENT IS LIABLE FOR THE TORT OF NEGLIGENCE .

20. It is submitted that the Respondent breached his duty of care to the Claimant42 and that this

negligence caused the total constructive loss of the Claimant’s vessel the Alpha Star.

3.2.1. THE RESPONDENT OWED A DUTY OF CARE TO THE CLAIMANT TO SAFELY DISCHARGE CARGO

21. The test for determining the existence of a duty of care as laid down in Caparo Industries v.

Dickman43 stipulates that the damage should be reasonably foreseeable; that there must be a

close proximate relationship between the parties and finally, the law must consider it fair, just

and reasonable that such a duty be imposed.

3.2.1.1. The Respondent owed a duty of care to supply a suitable manifold reducer

22. Discharge operations in case of oil cargo are jointly conducted by the ship and shore and

responsibility to provide men and equipment is divided between the two. Thus, equipment for

discharge has to be provided by the shore as well.44 In the present case, the Respondent

provided the manifold reducer and the entire discharge operation was controlled by the

terminal.45 The Respondent was aware of the high levels of risk involved in oil cargo discharge

operations. Therefore, he was under a duty not only to provide a suitable and fit manifold

reducer, but also to maintain it in the same condition during the course of the discharge

operation.

3.2.1.2. The Respondent breached his duty to take reasonable care in supplying and

maintaining the manifold reducer

23. The Respondent must exercise reasonable care in the supply and maintenance of the manifold

reducer.46 Industry standards and trade practices elaborated in the ISM Code and ISGOTT

42Problem, Claimant’s Submissions, ¶ 22.

43Caparo Industries v. Dickman [1990] 2 AC 605.


45Problem, at 89.

46Christopher Walton (ed.), CHARLESWORTH AND PERCY ON NEGLIGENCE 461, 462, (2010); Blyth v. Birmingham

Waterworks (1856) 11 Ex. 781, 784 per Alderson B.


12TH


Guidelines can be used as a yardstick for assessing ‘reasonable conduct’47 as they lay down

best practices employed in the shipping industry, specifically by oil tankers and the terminals

they serve.48 Reasonable care would require compliance with these standards.49 They stipulate

that all the equipment must be suitable and checked so that it does not present a risk of spillage

or oil leaks during discharge operations.50 In the present case, the manifold reducer had

grooving on its 8 inch face while all other equipment was in order.51 Therefore, it is submitted

that by providing a faulty reducer, the Respondent failed to exercise reasonable care.

3.2.2. THE BREACH OF THE DUTY CAUSED THE CLAIMANT’S LOSS.

24. In order to impute liability on the defendant for the loss suffered by the plaintiff, it must be

shown first on balance of probabilities that the breach of duty caused the plaintiff’s loss 52 and

secondly that the loss was within the defendant’s scope of liability.

3.2.2.1. The actions of the Respondent caused the Claimant’s loss.

25. The test for determining cause in fact is the “but for test”, i.e. but for the acts of the defendant,

the plaintiff would not have suffered any injury. This test acts as a preliminary filter to

determine whether or not the defendant’s acts should be excluded from the conspectus of

events which contributed towards the plaintiff’s loss.53 It is only necessary to ascertain that the

defendants act was a cause of the loss and not whether it was the sole or primary cause.54

47CHARLESWORTH AND PERCY, Ibid, at 475; Antonio J. Rodriguez and Mary Campbell Hubbard, “The

International Safety Management (ISM) Code: A New Level of Uniformity”, 73 TULANE LAW REVIEW 1585

(1999); Thomas J. Schoenbaum, ADMIRALTY AND MARITIME LAW 157 (1994); Kermarec v. Compagnie Generale

Transatlantique 358 US 625, 630-31 (1959).

48ISGOTT, Supra note 30; The International Convention for the Safety of Life at Sea, 1974 (SOLAS) as

amended by Resolution 9 (adopted on 27 November 1997), Chapter IX International Safety Management

Code.

49Rodriguez, Supra note 47, at 1600; Thomas J. Schoenbaum, Supra note 47; Cuomou v. United States 107

F.3d 290, 295 (5th Cir. 1997); Melerine v. Avondale Shipyards, Inc. 659 F.2d 706, 708, 710-12 (5th Cir. 1981);

Richmond Marine Panama v. United States 350 F. Supp. 1210, 1218-19 (SDNY 1972).

50ISGOTT, Supra note 30.

51Problem, at 91.

52W.V.H. Rogers (ed.), WINFIELD AND JOLOWICZ ON TORT 311 (2010); CHARLESWORTH AND PERCY, Supra note 46, at

413.

53Barnet v. Chelsea [1969] 1 QB 428; Horsley v. McLaren 1972 SCR 441.

54Kuwait Airways Corp. v. Iraqi Airways Co (Nos 4 and 5) [2002] UKHL 19; Corr v. IBC Vehicles [2008] UKHL

13.


12TH


In the instant case, the Respondent supplied a manifold reducer with grooving on its 8 inch

face. This implies that the connection with the manifold was not air tight and the escape of the

cargo from a high pressure to a low pressure zone was imminent and unavoidable. On mixing

with the surrounding air, LPG becomes highly inflammable. It is thus submitted that, but for

the Respondent’s negligence in supplying a faulty reducer, the loss would not have transpired.

3.2.2.2. The loss suffered as a result of the Respondent’s negligence fell within its scope of

liability.

26. The Respondent’s scope of liability extends to all those losses which are a reasonably

foreseeable consequence of its breach.55 The test is whether a reasonable man, in the

defendant’s position and having the defendant’s knowledge could have foreseen the damage. If

there is a substantial chance or risk of a particular event happening, then the defendant must

take all necessary steps to eliminate that risk.56

27. Risk of fire in oil discharge operations is a known fact and hence, a recognised substantial risk.

It is for the very purpose of mitigating this risk that safety precautions are stipulated by trade

usage and practice. Consequently, it is necessary to ensure that all the equipment employed in

discharge operations is secure to prevent any risk of leakage. In the instant case, it was

reasonably foreseeable that defective machinery for discharge operations would increase the

risk of highly inflammable LPG escaping. Fire is a recognised risk and consequence of LPG

leakage. Therefore, it is submitted that the damage due to fire was reasonably foreseeable in

the circumstances and given the Respondent’s knowledge, thus falls within its scope of

liability. Thus, the breach of the duty caused the loss.

55Overseas Tankship (U.K.) Ltd. v. Morts Dock & Engineering Co. Ltd [1961] 2 WLR 126 (“Wagon Mound I”)

overruling In Re An Arbitration between Polemis and Another and Furness, Withy and Company, Limited

[1921] 3 KB 560.

56Wagon Mound I.


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3.2.3. THE ACTIONS OF THE TERMINAL EMPLOYEE AND THE CREW MEMBER DO NOT CONSTITUTE A

‘NOVA CAUSA INTERVENIENS’.

28. The Respondent may argue that the acts of the terminal employee and the crew member

constitute a nova causa interveniens, thus exonerating it of liability for the tort of negligence.

Nevertheless, in order to break the chain of causation between the breach and the loss, the nova

causa interveniens must be wholly extraneous and unreasonable. Moreover, it must be outside

the Respondent’s control.57 If the intervening event is reasonably foreseeable, it will not break

the chain of causation.58 Furthermore, where the defendant has a duty to guard against certain

consequences and the act which was to be guarded against occurs, resulting in loss, there is no

nova causa interveniens.59

3.2.3.1. The acts of the terminal employee do not break the chain of causation.

29. It is submitted that the acts of the terminal employee do not exonerate the Respondent of its

liability as they do not break the chain of causation, being neither unreasonable nor wholly

extraneous. It is reasonable for the terminal employee to approach a point of leakage on the

vessel with the purpose of fixing it. Since the terminal did not follow ISGOTT, no policy or

regulation prevented the terminal employee from carrying non-intrinsically safe objects.

Furthermore, the shore personnel were supposed to be instructed on fire fighting procedures by

the terminal representative, i.e. the Respondent. This evidences the control exercised by the

Respondent in terms of how these personnel would have acted in a fire emergency and

consequently, the actions of the terminal employee were not wholly extraneous.60 It was the

Respondent’s duty to guard against leakage leading to the risk of fire. It failed to discharge the

same and thus the acts of the terminal employee do not constitute an intervening cause.

57The Oropesa [1943] P. 32, 37; Minister of Pensions v. Chennell [1947] KB 250.

58Home Office v. Dorset Yatch Co. Ltd. [1970] AC 1004; Lamb v. Camden London Borough Council [1981] QB

625.

59Stansbie v. Troman [1948] 2 KB 48; Spencer v. Wincanton Holdings Ltd. [Wincanton Logistics Ltd.] [2009]

EWCA Civ 1404; Haynes v. Harwood [1935] 1 KB 146; March v. Stramare (1991) 171 CLR 506.

60ISGOTT, Supra note 30, at ¶ 26.3.2; Problem, at 73.


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3.2.3.2. The actions of the crew member do not constitute an intervening cause.

30. It is submitted that the Claimant has not contributed to its own loss and therefore the damages

payable by the Respondent should not be accordingly reduced.61 It is well established that if

the negligence perpetrated by the pursuer becomes functus officio, i.e. it ceases to be an

operating factor, then the responsibility to take reasonable care rests on the defendant and there

is no case of contributory negligence.62 Arguendo there was negligence by the crew member, it

is submitted that it had become functus officio by virtue of the actions of the terminal

employee, which were the primary cause of fire.

4. THE COUNTERCLAIM FILED BY THE RESPONDENT IS NOT ADM ISSIBLE.

4.1. THE COUNTERCLAIM IS TIME BARRED UNDER ARTICLE III, RULE 6(3) OF THE RULES.

31. The claim for cargo damage is governed by the Hague-Visby Rules.63 Under Article III, Rule

6, ¶ 3 of the Rules, the suit must be brought within one year of the delivery of cargo. It is

submitted that a counterclaim in an arbitration proceeding is included within the meaning of

‘suit’ and is barred as it has been brought beyond the stipulated period of ‘one year from the

date of delivery’.

4.1.1. ‘SUIT’ INCLUDES ARBITRATION PROCEEDINGS.

32. It has been held that the words “suit is bought within one year” should be construed to mean

“proceedings should be commenced within one year”.64 Consequently, the counterclaim falls

within the ambit of Article III, Rule 6(3) and the one year bar applies to arbitration claims.

61Section 1, Law Reform (Contributory Negligence) Act 1945; Steven Yannoulidis, “Common Sense

Approach to Causation”, 27 MONASH UNIVERSITY LAW REVIEW 319; Winfield, Supra note 52, at 360; M'Kew v.

Holland, Hannen, Cubitts (Scotland) Ltd 1970 SC (HL) 20.

62Davies v. Mann (1842) 10 M&W 546; Davies v. Swan Motor Co. (Swansea) LD [1949] 2 KB 291. 63The Hague and Hague Visby Rules are interchangeable as far as the issue of liability is concerned. See

Papera Traders Co. Limited & Others v. Hyundai Merchant Marine Co. Ltd., The Keihin Co. Ltd. (The Eurasian

Dream) [2002] EWHC 118 (Comm) (“The Eurasian Dream”).

64The Merak, [1964] 2 Lloyd’s Rep 527, at 532; John F. Wilson, CARRIAGE OF GOODS BY SEA 205 (2007). See in

contradistinction, the American position in Son Shipping Co v. DeFosse & Tanhge 199 F 2d 687 (1952).


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4.1.2. DELIVERY TOOK PLACED ON 27 JULY 2005.

33. Delivery and discharge are to be construed differently.65 The period of limitation begins to run

when the cargo has been delivered or from the date on which it should have been delivered.66

The term delivery has not been defined under the Rules. Nonetheless, in case of liquid cargos,

delivery is said to take place when the cargo passes the vessel’s hose connections and enters

the receiver’s hoses.67

34. In the present case, delivery took place when the LPG passed the manifold flange connection

of the Alpha Star.68 This took place on 27 July 2005 and the period of limitation should be

calculated from this day. The time period for filing a suit is exactly one year from the date of

delivery, and is construed strictly since it is intended to achieve finality. 69 The counter-claim

was filed on 29 August 201070 resulting in the Claimant being “discharged from all liability

whatsoever in respect of the goods”.

35. Additionally, it is submitted that the claim made by the Respondent is in the nature of a

counterclaim and not a defence of equitable set off. In any event, equitable set off is also barred

under the HVR.71

65Article III, Rule 2 and Article III, Rule 8 of the Hague/Hague-Visby Rules.

66William Tetley, MARINE CARGO CLAIMS 331 (1978); The Seki Rolette [1998] 2 Lloyd’s Rep 638; Odfifell

Seachem v. Continentale des Petorles [2005] 1 Lloyd’s Rep 275; Asfar & Co. v. Blundell [1896] 1 QB 123.

67Tetley, ibid, at 284; Thomas J. Schoenbaum, Supra note 47, at ¶10.17; Centerchem Products v. A/S Rederiet

Odfjell et Al 1972 AMC 373, Docket No. 2008da33818, Korean Supreme Court (15 October 2009) c.f.

“Korean Maritime Law Update: 2009”, 41 JOURNAL OF MARITIME LAW AND COMMERCE 369 (2010).

68Problem, at 13, Sale Contract Clause 8.

69Tetley, Supra note 66, at 333; Compania Portorafti Commerciale S. A. v. Ultramar Panama Inc. [1990] 1

Lloyd’s Rep 310; William Leung, “Misdelivery of Cargo without Production of Original Bill of Lading:

Applicability of the Mandatory Legal Regime of Hague-Visby and the One Year Time Bar”, 39 JOURNAL OF

MARITIME LAW AND COMMERCE 205, 209 (2008).

70Problem, at 103. 71Aries Transport Corp. v. Total Transport Ltd. [1977] 1 WLR 185.


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4.2. ARGUENDO, THE CLAIMANT IS NOT LIABLE FOR LOSS OF CARGO .

4.2.1. THE NEGLIGENCE OF THE RESPONDENT CAUSED THE LOSS OF THE CARGO.

36. It has already been proved that the cargo was lost due to the fire caused by the negligence of

the Respondent.72 The fire was the actual cause of the loss and thus the Claimant is not prima

facie liable for loss of cargo received in good order but out turned in short or bad order.

4.2.2. THE ALPHA STAR WAS NOT UNSEAWORTHY.

37. The Claimant (carrier) has an obligation under Article III, Rule 1 of the HVR to exercise due

diligence to provide a seaworthy vessel before and at the beginning of the voyage.73

Seaworthiness requires the ship to have that degree of fitness which an ordinary and careful

owner would require his vessel to have at the commencement of her voyage, having regard to

all the probable circumstances of it.74 A vessel will be unseaworthy if it is not properly manned

with a competent crew.75 It is submitted that the Claimant has exercised due diligence to

properly man and equip the vessel.

4.2.2.1. The Claimant carrier has exercised due diligence to make the vessel seaworthy.

38. The exercise of due diligence is an inescapable personal obligation76 and requires the exercise

of reasonable skill and care.77 It is submitted that the ISM Code and ISGOTT guidelines are

relevant criteria to determine the exercise of due diligence and seaworthiness.78 The duty to

exercise due diligence can be delegated to managers and officers if the carrier is a corporation,

but even in such cases, the responsibility will still be imputed to the carrier.79

72Memorandum for the Claimant, Submission 3.

73Stewart C. Boyd et al., Scrutton ON CHARTERPARTIES, 387, 388 (2008); Riverstone Meat Co. Pty. Ltd. v.

Lancashire Shipping Co. [1961] AC 807 (“The Muncaster Castle”); The Toledo [1995] 1 Lloyd’s Rep 40.

74F.C. Bradely & Sons Ltd. v. Federal Navigation and Steam Co. [1926] 24 Lloyd’s Law Rep 446, 454 per

Scrutton L.J.

75Article III, Rule 1(b) of the Rules.

76SCRUTTON, Supra note 73 at 387.

77The Kapitan Sakharov [2000] 2 Lloyd’s Rep 225, SCRUTTON, Supra note 73, at 388.

78The Amstelot [1963] 2 Lloyd’s Rep 40, 50; The Eurasian Dream; Rodriguez, Supra note 47, at 1602.

79The Fjord Wind [1999] 1 Lloyd’s Law Rep 307, 315; TREITEL & REYNOLDS, CARVER ON BILLS OF LADING, ¶ 9 -

125 (2001).


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39. In the instant case, the duty of managing the vessel was delegated to Trident Overseas Inc.

(“Trident”), the Claimant’s technical managers. It is submitted that the Alpha Star was

seaworthy because firsly, Trident followed internationally accepted best practices and secondly,

the crew member was not incompetent.

4.2.2.2. Trident followed best practices delineated by ISGOTT for determining discharge

procedures.

40. In the instant case, the vessel is ISM certified. This entails conformity with internationally

accepted standards of marine tonnage and requires the maintenance of documents with

procedures to ensure safe operations of vessels, including the reporting of emergencies.80 Prior

to discharge, Trident employed ship/shore safety checklists in conformity with the

requirements under ISGOTT.81 This implies that the crew would have been instructed on the

manner of discharge and all the procedures to be followed in emergencies.

4.2.2.3. The crew member was not incompetent.

41. The crew will be competent if they are properly instructed as to the systems and procedures in

place on the vessel so as to ensure the proper discharge of their duties.82 Incompetence is a

question of fact. It is different from negligence and merely one mistake on the part of one of

the crew members does not give rise to an inference of incompetence.83 The Respondent may

argue that the crew member stationed at the manifold was incompetent due to his omitting to,

inter alia, activate the ESD on observing the leak. Even assuming that the crew member’s

actions were deficient, it does not raise an inference of incompetence.

42. It is submitted that the omission in question is merely the negligent act of an otherwise

competent crew member as opposed to negligence by an incompetent crew member. In any

event, there is insufficient evidence to establish conclusively or otherwise that the crew was 80Rodriguez, supra note 47, at 1596.


82Tetley, Supra note 66, at 161; The Marion [1984] 1 AC 563, 575; The Makedonia [1962] 1 Lloyd’s Law Rep

316, 335; The Eurasian Dream, at 737.

83The Star Sea [1995] 1 Lloyd’s Rep 651, 658; The Eurasian Dream.


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incompetent. Therefore, it is submitted that Trident has exercised due diligence on behalf of the

Claimant and consequently the Alpha Star is not unseaworthy.

4.2.3. ARGUENDO, ALPHA STAR’S UNSEAWORTHINESS WAS NOT THE CAUSE OF THE LOSS OF CARGO.

43. It must be shown that the unseaworthiness caused the loss of the cargo.84 It is submitted that

the actual loss of the cargo was due to the fire set off by the deficient reducer and the negligent

acts of terminal employee and not the alleged unseaworthiness of the vessel.85

4.2.4. THE CLAIMANT HAS DISCHARGED ITS OBLIGATION UNDER ARTICLE III, RULE 2 OF THE HVR.

44. The Claimant has an obligation under Article III, Rule 2 of the HVR to “properly and

carefully… discharge the cargo.” The extent of the carrier’s liability under this Rule depends

upon the type of cargo.86 Proper discharge entails adopting a sound system in light of all the

knowledge which the Carrier has about the cargo.87 It is not merely taking care, but also acting

competently, keeping in mind contemporary industry standards.88 It is submitted that the

carrier has properly and carefully discharged cargo.

45. The ship/shore safety checklists complying with industry standards were completed

satisfactorily, as required by Trident. They were in fact not even mandated by the terminal.

This clearly evidences that all steps were taken to ensure that the entire discharge operation

would be safe. As per the IFIC Report there was no defect in the equipment of the vessel and

the Claimant discharged its obligations of bringing the cargo till the vessel’s rail.89 The

Respondent was at fault in providing a defective reducer. Therefore, the Claimant has

discharged his obligation under Article III, Rule 2.

84The Europa [1908] P. 84; Smith, Hogg & Co. v. Black Sea & Baltic General Insurance Co. [1940] 67 Lloyd’s

Rep 253.

85Memorandum for the Claimant, Submissions 2 and 3.

86Pyrene v. Scindia [1954] 2 QB 402; Renton v. Palmyra [1957] AC 149; Jindal Iron and Steel Co Limited and

Others and Others v. Islamic Solidarity Shipping Company Jordan Inc (“The Jordan II”) [2004] UKHL 49.

87Albacora S.R.L. v. Westcott & Laurance Line Ltd. [1966] 2 Lloyd’s Rep. 53, 64.

88William Tetley, “Properly Carry, Keep and Care for Cargo – Art. III(2) of the Hague/Visby Rules”, [2001]

ETL 9.

89Problem, at 91.


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4.2.5. THE CLAIMANT’S LIABILITY IS WHOLLY EXONERATED UNDER ARTICLE IV, RULE 2(B) OF THE

HVR.

46. The Claimant is entitled to the exceptions under Article IV of the Rules, once it has proved the

exercise of due diligence.90 The carrier is exonerated from any liability if it can prove the

application of the enumerated exceptions to the loss of goods.91 In the instant case, as proved

above, the loss was due to fire and hence the carrier is exonerated under Article IV, Rule 2(b)

of the Rules. Moreover, this loss was not caused as a result of the actual fault or privity of the

carrier. The burden of proving actual fault or privity lies on the Respondent and the actual fault

or privity must be of the carrier or managers of the vessel and not its servants or agents.92

47. The Respondent may allege that Trident did not discharge its duty of properly instructing the

crew in safety procedures, that their fault caused the fire and consequently the Claimant cannot

except his liability. However, it is submitted that Trident fully discharged its obligations in the

present case.93 Furthermore, even in the event that there was any negligence at all, it was that

of a crew member, and cannot be imputed to the Claimant.

5. HEADS OF DAMAGES

5.1. THE CLAIMANT IS ENTITLED TO DAMAGES IN RESPECT OF ACTUAL LOSSES SUFFERED.

48. The Claimant has suffered actual losses in relation to the destruction of the Alpha Star.94 These

are jurisprudentially established claims95 and have arisen as a result of the breach of the

contract by the Respondent. Therefore, the Respondent shall be liable for all losses that were

within the reasonable contemplation of the parties at the time the contract was concluded, as a

90Maxine Footwear Co. Ltd. v. Canadian Government Merchant Marine Ltd. [1959] AC 589.

91William Tetley, “Responsibility of Fire in the Carriage of Goods by Sea”, [2002] ETL 1; William Tetley, “The

Burden and Order of Proof in Marine Cargo Claims” available at

<http://www.mcgill.ca/maritimelaw/articles/>; The Eurasian Dream; Wilson, Supra note 64, at 211.

92Earl & Sttodart Inc v. Ellerman Wilson Line Ltd. 1993 AMC 1; The Ert Stefanie [1989] 1 Lloyd’s Rep 349.

93Memorandum for the Claimant, Submission 4.2.2.2., ¶ 39.

94Problem, at 92-93; Problem, Preliminary Submission of the Claimant, at 101.

95Hugh Beale (ed.), CHITTY ON CONTRACTS, VOLUME I 1648 (2008); Henry Kendall & Sons v. William Lillico &

Sons Ltd [1969] 2 AC 31; Harbutt’s “Plasticine” Ltd v. Wayne Tank and Pump Co Ltd [1970] 1 QB 447; Photo

Production Ltd v. Securior Transport Ltd [1980] AC 827.


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not unlikely result of the breach.96 In the absence of special circumstances requiring actual

knowledge,97 volatile market conditions98 and when the loss is predictable and quantifiable,99

mere knowledge of the “probable and natural” losses is sufficient.100 Here, the Respondent

need not specifically assume responsibility for the kind of loss and the Claimant is entitled to

recover its full loss regardless of the extent of loss ultimately incurred.101 In the instant case,

the actual losses, which consist of loss of vessel and loss of use of vessel, are clearly within the

contemplation of the parties as a natural and probable consequence of breaching the duty to

take care during discharge. Therefore the Claimant is entitled to recover damages in respect of

these losses from the Respondents.

5.2. THE CLAIMANT IS ENTITLED TO INDEMNITY IN RESPECT OF CONT INGENT LOSSES.

49. As proved above, the Respondent’s negligence coupled with the negligent actions of a terminal

employee caused the explosion on board the Alpha Star. Thus, the Respondent will be liable

for any damages that are caused by its breach of duty and are a reasonably foreseeable

consequence of its actions.102 Claims raised by the families of the deceased caused by a breach

of contract are also to be assessed on the low threshold of tortious ‘reasonable foreseeability

and reasonable user’ principles.103 The Claimant can recover all such reasonable costs and

96Hadley v. Baxendale (1854) 9 Exch 341 (“Hadley”); Victoria Laundry (Windsor) Ltd. v. Newman Industries

Ltd. [1949] 2 KB 528 CA; Koufos v. Czarnikow (C) Ltd (“Heron II”) (1969) 1 AC 350.

97Hadley.

98Supershield Ltd. v. Siemens Building Technologies FE Ltd. [2010] EWCA Civ 7; Adam Kramer, “The New

Test of Remoteness in Contract”, 125 LAW QUARTERLY REVIEW 408, 409 (2009).

99Transfield Shipping Inc. v. Mercator Shipping Inc. [2008] 3 WLR 345(“The Achilleas”); Hamblen J. in Sylvia

Shipping Co. Ltd. v. Progress Bulk Carriers Ltd. [2010] EWHC 542 (Comm).

100Monarch SS Co Ltd v. Karlshamns Oliefabriker (A/B) [1949] AC 196, 224; Balfour Breatty Construction

(Scotland) Ltd v. Scottish Power Plc (1994) SLR 807; Bank of Nova Scotia v. Hellenic Mutual War Risks

Association (Bermuda) Ltd [1992] 1 AC 233, 267.

101Lord Hoffmann, “The Achilleas: Custom and Practice or Foreseeablity?”, 14(1) EDINBURGH LAW REVIEW 47

(2010); Jackson v. Royal Bank of Scotland [1949] 2 KB 528; Wroth v. Tyler [1973] 1 All ER 897; H. Parsons

Livestock Ltd. v. Uttley Ingham & Co. Ltd. [1978] QB 791 (CA).

102Edwin Peel (ed.), TREITEL ON THE LAW OF CONTRACT 1047 (2007); Cambridge Water Co. v. Eastern Counties

Leather plc [1994] 2 AC 264; The Wagon Mound I at 426; Marsh v. Joseph [1897] 1 Ch. 213, 231; The

Canadian Transport 43 Lloyd’s List Law Rep 409, 410-11 (CA 1932) and The Arpad (1934) P. 189, 200 (CA);

The Argentino (1889) 14 AC 519 (HL).

103Grant v. Australian Knitting Mills Ltd [1936] AC 85; Jackson v. Watson [1909] 2 KB 193; Priest v. Last

[1903] 2 KB 148.


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damages paid by it to third parties and those incurred in mitigating the consequences of the

Respondent’s breach of duty104 and these amounts are recoverable even before they are

actually discharged by payment.105 Since it was the actions of the Respondent that caused the

loss and these losses are a reasonably foreseeable consequence of the breach of duty, the

Claimant is entitled to be indemnified by the Respondent against the aforementioned possible

claims.

5.3. THE CLAIMANT IS NOT L IABLE TO PAY DAMAGES FOR THE LOSS OF CARGO.

50. The Respondent has filed a counter-claim for the loss of cargo, loss of profits and costs

incurred for breach of forward contracts of sale. The general test of reasonable contemplation

enunciated in Hadley and modified by Heron II does not apply where its application leads to

unquantifiable, unpredictable or disproportionate liability with respect to types of losses within

contemplation.106 In such cases, as per The Achilleas, the party claiming damages has to show

that the party in breach assumed the responsibility for these extended damages, irrespective of

whether they were not unlikely to occur.107

51. In the instant case, the Claimant has no control over the sale agreements entered into by the

importer, the Respondent, with various sellers for the 4,491.334 metric tons of LPG. In fact,

carriers “commonly know less than a seller about the purposes for which the buyer or

consignee needs the goods”108 and this absolves it from liability for the plaintiff’s loss of

104Chitty, Supra note 95, at 1645 and Hugh Beale (ed.), CHITTY ON CONTRACTS, VOLUME II 1610 (2008); Richard

Holdon Ltd v. Bostok & Co Ltd (1902) 18 TLR 317; Heskell v. Continental Express Ltd [1950] 1 All ER 1033,

1046; Gebruder Metelmann GmBH v. NBR (London) Ltd [1984] 1 Lloyd’s Rep 614, 634; Bacon v. Cooper

(Metals) Ltd. [1982] 1 All ER 397; Mowbray v. Merryweather [1895] 2 QB 640.

105Total Liban SA v. Vitol Energy SA [2001] QB 643.

106Hamblen J. in Sylvia Shipping Co. Ltd. v Progress Bulk Carriers Ltd. [2010] EWHC 542 (Comm); Flauz J. in

The Amer Energy [2009] 1 Lloyd’s Rep 293; Janet O’Sullivan, “Damages for Lost Profits for Late Redelivery:

How Remote is Too Remote?”, (2009) 68(1) CAMBRIDGE LAW JOURNAL 34, at 36.

107The Achilleas; Gary Richard Coveney, “Damages for Late Delivery under Time Charters: Certainty at

Last?”, 23 AUSTRALIAN & NEW ZEALAND MARITIME LAW JOURNAL 205 (2009) adopted in Adam Kramer, “An

Agreement-Centered Approach to Remoteness and Damages” in Nili Cohen and Ewan McKendrick

(eds), COMPARATIVE REMEDIES FOR BREACH OF CONTRACT 249-286, 266 (2005). Kramer cites Maynes to counter

the rule of mere foreseeability in Hadley. See John D. Mayne, A TREATISE ON THE LAW OF DAMAGES 8 (1856).

108Heskell v. Continental Express Ltd [1950] 1 All ER 1033, 1049; Andre et Cie SA v. J. H. Vantol [1952] 2

Lloyd’s Rep 282; Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd. [1949] 2 KB 528, 537.


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profits.109 Specifically, the Claimant has neither knowledge of any forward contracts of sale

entered into by the Respondent, nor whether the Respondent was planning on selling the LPG

immediately or later at higher prices or whether it would give bulk discounts. It also lacked the

ability to predict the price of LPG in the volatile oil market. Thus, the loss of profits cannot be

awarded to the Respondent, since the quantification of the loss was nearly impossible, being

unpredictable, extensive and even subject to the vagaries of the individual contracts entered.

52. Cases of potentially extensive loss, as claimed by the Respondent as additional costs incurred

by way of penalties for failure to supply to third parties, need to be treated with extra

circumspection keeping in mind good commercial sense.110 These cases have as yet not been

filed and there is no account of any potential third party buyers. The damages claimed being

unquantifiable and more importantly unpredictable, attract the application of the assumption of

responsibility test. In the absence of any express or implied proof, the claims fail this test. It is

submitted that the Claimant did not assume responsibility for the extended damages suffered

by the Respondent and thus cannot be held liable.

109Gee v. Lancs & Yorks Railway (1860) 6 H.&N. 211; British Columbia etc., Saw Mill Co Ltd v. Nettleship

(1868) LR 3 CP 499; Horne v. Midland Railways (1873) LR 8 CP 131; B. Sunley & Co Ltd v. Cunard White Star

Ltd, [1940] 1 KB 740.

110Per Lord Roger in The Achilleas, at 364; Chitty, Supra note 95, at 1630.


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PRAYER

In light of the above submissions the Claimant requests this Arbitral Tribunal to:

DECLARE that this Tribunal has jurisdiction to hear the dispute.

ADJUDGE that the Respondent is liable –

a) To the Claimant for breach of contract and/or duty;

b) To the Claimant for liabilities incurred due to the Respondent’s breach of duty; and

c) To compensate the claimant in full for US$ 18,978,807.

And that the Respondent’s Counterclaim is not maintainable.

And that the Claimant is not liable for breach of contract to deliver LPG cargo.

And therefore AWARD the Claimant

a) Damages in respect of its actual losses amounting to US$ 9,055,967;

b) A declaration that the Claimant is entitled to indemnification (and or damages amounting

to an indemnity) of US$ 9, 922,840 in respect of,

(i) The claims made against it by third parties;

(ii) The future running expenses incurred for the vessel as a result of the incident.

d) Compound Interest pursuant to Section 49, Arbitration Act, 1996 (UK).

e) Costs.

TEAM 14

COUNSELS FOR THE CLAIMANT

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