respondent (semi)final - murdoch university · cowper v jg goldner pty ltd (1986) 40 sasr 457 7...

__________________________________________________________________________________

MEMORANDUM FOR RESPONDENT

TEAM 19 _________________________________________________________________________________

TEAM 19 MEMORANDUM FOR RESPONDENT

II

TABLE OF CONTENTS

ABBREVIATIONS V

LIST OF AUTHORITIES VI

STATEMENT OF FACTS 1

ARGUMENTS ON JURISDICTION 2

I. THE TRIBUNAL DOES NOT HAVE JURISDICTION 2

A. The proper law of the arbitration agreement is NSW law 2

B. The Tribunal does not have jurisdiction because the dispute does not arise out of

or in connection with the Charterparty

3

C. The dispute needs to be referred to expert determination 5

ARGUMENTS ON THE MERITS OF THE CLAIM 5

II. THE RESPONDENT DID NOT BREACH THE CHARTERPARTY 6

A. The respondent did not breach its obligation to take the most direct route to

Dillamond

6

B. The Respondent took reasonable care of the Claimant’s cargo 7

C. The Respondent provided a seaworthy ship 7

III. ANY BREACHES BY THE RESPONDENT WERE DUE TO FORCE MAJEURE EVENTS 8

A. The solar flares were a Force Majeure Event which excuse the ship’s late arrival

and deviation

8

i. The solar flares were an Act of God 8

ii. In any event, the solar flares were an unforeseen weather event

iii. The solar flares prevented performance

9

9


III

B. The storm was a Force Majeure Event which excuses the late arrival and damage

to the cargo

i. The storm was an unforeseen weather event

ii. The storm was an Act of God

iii. The storm caused flooding

iv. The storm prevented performance

10

10 10 10 11

IV. THE HAGUE-VISBY RULES LIMIT THE RESPONDENT’S LIABILITY 11

A. Clause 28 of the Charterparty incorporates the Hague-Visby Rules 11

B. The Hague-Visby Rules excuse any breaches, because they were due to Article

4(2) Force Majeure Events

i. The storm was a peril of the sea

ii. The storm and solar flares were Acts of God

iii. The deviation was an attempt to save property at sea

iv. The Respondent is not liable for losses arising from the use of the short

term sealant

C. The Hague-Visby Rules excuse any breaches, because any such breaches

a were the act of the Master in the navigation of the ship

D. The Hague-Visby Rules limit the Respondent’s liability to $152,944.05

i. Article 4(5) limits the Respondent’s liability to $152,944.05

ii. In any event, Article 4A(6) limits the Respondent’s liability to

$500,000

12

12 13 13 13 14 14 14 15

V. THE CLAIMANT IS NOT ENTITLED TO ALL THE DAMAGES IT SEEKS 16

A. The Claimant cannot recover both the value of the damaged coffee and the cost 16


IV

of its replacement.

B. The Claimant failed to mitigate its loss on the legal settlement 17

VI. THE CLAIMANT IS NOT ENTITLED TO A LIEN OVER THE MADAM DRAGONFLY 18

A. English law governs the existence of the lien

B. The Claimant cannot be subrogated to the crew’s lien for wages

C. No lien arises from the provision of necessaries

D. No lien arises from the damage to the cargo

18

18 19 20

ARGUMENTS ON THE MERITS OF THE COUNTER-CLAIM 20

VII. THE RESPONDENT IS ENTITLED TO THE AMOUNTS CLAIMED 20

A. The respondent is contractually entitled to the amounts sought in the counter-

a claim

i. The Respondent is contractually entitled to freight

ii. The Respondent is entitled to agency fees at the Port of Spectre under the

a York Antwerp Rules

iii. The Respondent is entitled to the cost of repairs under the York Antwerp Rules

iv. The Respondent is contractually entitled to agency fees at the Port of Dillamond

v. The Respondent is contractually entitled to demurrage

vi. The Respondent is contractually entitled to fees for the use of electronic access

systems at the Port of Dillamond

20

20 21 22

23 23

23

B. There has not been a total failure of consideration precluding the Respondent’s

a counter-claim

25

REQUEST FOR RELIEF 25


V

ABBREVIATIONS

Charterparty The voyage Charterparty between the Claimant

and Respondent

Claimant Cerulean Beans and Aromas Ltd

Clarifications Procedural Order No. 2

Force Majeure Event An event listed in Clause 17 of the Charterparty

The Hague-Visby Rules International Convention for the Unification of

Certain Rules of Law relating to Bills of Lading

of 25 August 1924, as amended by the Protocol of

23 February 1968, opened for signature 21

December 1979, 1412 UNTS 127 (entered into

force 14 February 1984)

The Hamburg Rules United Nations International Convention on the

Carriage of Goods by Sea, signed 31 March 1978,

1695 UNTS 3 (entered into force 1 November

1992)

NASA National Aeronautics and Space Administration

NSW New South Wales, Australia

Parties Claimant and Respondent

Record 2018 International Maritime Law Arbitration

Moot Scenario

Respondent Dynamic Shipping LLC

The Vessel The ship Madam Dragonfly

The York Antwerp Rules The York Antwerp Rules 2016


VI

LIST OF AUTHORITIES

CASES AND ARBITRAL AWARDS REFERRED TO AT PAGE:

ACD Tridon v Tridon Australia [2002] NSWSC 896 3

Admiralty Commissioners v Valverda (Owners) [1938] AC 173 4, 18

Aries Tanker Corp v Total Transport [1977] 1 All ER 398 21

Arsanovia Ltd v Cruz City 1 Mauritius [2013] 1 Lloyd's Rep 235 2

Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (in liq) (1978) 141 CLR 335

19

Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662

25

Baltic Shipping Co v Dillon (“The Mikhail Lermontov”) (1993) 176 CLR 344

25

Bank of Credit and Commerce International SA v Ali [2002] AC 251 4

Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 19

Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 10

Berliner Bank AG v C Czarnikow Sugar Ltd ("The Rama") [1996] 2 Lloyd's Rep 281

20

Bonython v Commonwealth (1948) 75 CLR 589 2

Boys v Chaplin [1971] AC 356 18

Breavington v Godleman (1988) 169 CLR 41 18

Buckley v Bennell Design & Constructions Pty Ltd (1978) 140 CLR 1 3

Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653 17

CFMEU v The Australian Industrial Relations Commission (2001) 203 CLR 645

3

Chapmans Ltd v Australian Stock Exchange Ltd (1996) 67 FCR 402 12

Clippens Oil Co Ltd v Edinburgh and District Water Trustees [1907] AC 291

17


VII

Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337

2, 4, 5, 6, 10, 21, 23

Cohen v Cohen (1929) 42 CLR 91 19

Comandate Marine Corp v Pan Australia Shipping Pty Ltd [2006] FCAFC 192

3

Commissioner of Railways (WA) v Stewart (1936) 56 CLR 520 9, 10

Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 17

Commonwealth v Verwayen (1990) 170 CLR 394 19

Compagnie Tunisienne de Navigation SA v Compagnie d’Armement Maritime SA [1971] AC 572

2

Cowper v JG Goldner Pty Ltd (1986) 40 SASR 457 7

Crabb v Arun District Council [1975] 3 WLR 847 19

Dakin v Oxley (1864) 143 ER 938 21

Dallah Real Estate and Tourism Co v Ministry of Religious Affairs of the Government of Pakistan [2011] 1 AC 763

2

De Rosa v John Barrie (Contractor) Ltd [1974] 1 WLR 946 10

Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 343 ALR 58

2, 4, 5, 6, 10, 21, 23

Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7

3, 4, 5, 6, 23

Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32

25

Fiona Trust and Holding Corporation v Privalov [2007] Bus LR 1719 2, 4

Fraser v The Irish Restaurant & Bar Co Pty Ltd [2008] QCA 270 4

Gates v City Mutual Life Assurance Society (1986) 160 CLR 1 17

Great China Metal Industries Co Ltd v Malaysian International Shipping Corporation (1998) 196 CLR 161

8

Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296 19

Henriksens Rederi A/S v THZ Rolimpex (“The Brede”) [1974] QB 233 21


VIII

Henry v Hammond [1913] 2 KB 515 19

Hobbs v Petersham Transport Co Pty Ltd (1971) 124 CLR 220 4

Homburg Houtimport BV v Agrosin Private Ltd [2004] 1 AC 715 4

Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26

8

Houghland v RR Low (Luxury Coaches) Ltd [1962] 1 QB 694 4

Houssein v Under Secretary of Industrial Relations (1982) 148 CLR 88 10

In Re Dawdy (1885) 15 QBD 426 5

Investors Compensation Scheme Ltd v West Bromwich Building [1998] 1 WLR 896

2, 3, 4, 5, 6, 10, 21, 23

Iran Amanat v Kmp Coastal Oil (1999) 196 CLR 130 20

Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314

5

Legal Services Board v Gillespie-Jones (2013) 249 CLR 493 19

Leon Fink Holdings v Australian Film Commission (1979) 141 CLR 672 12

Liberty Mutual Insurance Co (UK) Ltd v HSBC Bank Plc [2002] EWCA Civ 691

4, 18

Liberty Mutual Insurance Co v HSBC Bank Plc [2001] Lloyd’s Rep Bank 224

18

McKain v RW Miller and Co (SA) Pty Ltd (1992) 174 CLR 1 18

Menelaou v Bank of Cyprus Plc [2016] AC 176 18

Montgomery & Co v Indemnity Mutual Marine Insurance Co Ltd [1902] 1 KB 734

22

Morris v CW Martin and Sons Ltd [1966] 1 QB 716 4, 7

Nea Agrex SA v Baltic Shipping Co Ltd [1976] 2 Lloyd’s Rep 47 11, 12

Northbuild Constructions Pty Ltd v Discovery Beach Project Pty Ltd [2008] QCA 160

5

Nugent v Smith (1876) 1 CPD 423 9


IX

Orakpo v Manson Investments Ltd [1978] AC 95 18

Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 4, 5, 6

Paper Products Pty Ltd v Tomlinsons (Rochdale) Ltd (1993) 43 FCR 439

2

Parry v Cleaver [1970] AC 1 17, 21

Patersons Securities Ltd v Financial Ombudsman Service Ltd (2015) 108 ACSR 483

4

QH Tours Ltd v Ship Design and Management (Aust) Pty Ltd (1991) 105 ALR 371

2

R (Trail Riders’ Fellowship) v Dorset County Council [2015] 1 WLR 1406

12

Re Associated Securities Ltd [1981] 1 NSWLR 742 19

Re Australian Elizabethan Trust (1991) 102 ALR 681 19

Rinehart v Welker [2012] NSWCA 95 3

Ripon City [1897] P 226 20

Robins v Incentive Dynamics Pty Ltd (in liq) (2003) 175 FLR 286 19

Robinson v Harman (1848) 154 ER 363 17

Seeley International v Electra Air [2008] FCA 29 3

Sharp v Batt (1930) 25 Tas LR 33 9, 10

Sidhu v Van Dyke (2014) 251 CLR 505 19

Sulamérica Cia Nacional de Seguros SA v Enesa Engenharia SA [2013] 1 WLR 102

2

TCL Air Conditioner (Zhongshan) Co Ltd v The Judges of the Federal Court of Australia (2013) 87 ALJR 410

3

The Halcyon Isle [1981] AC 221 18

The Janet Wilson (1857) ER 1127 19

The MV Fjellvang [1999] 2 Lloyd’s Rep 685 11, 12

The Petone [1917] P 198 19


X

The Pioneer Container [1994] 2 AC 324 4

The Ruta [2000] 1 WLR 2068 18

The Ship "Sam Hawk" v Reiter Petroleum Inc [2016] FCAFC 26 18

The Theta [1894] P 280 20

The Tolten [1946] P 135 4, 18

The Turiddu [2000] ICR 354 18

The Two Ellens (1871) LR 3 AE 345 20

Thomas National Transport (Melbourne) Pty Ltd v May & Baker (Aust) Pty Ltd (1966) 115 CLR 353

7

Transco Plc v Stockport Metropolitan Borough Council [2004] 2 AC 1 9, 10

Twinsectra Ltd v Yardley [2002] 2 AC 164 19

UI International P/L v Interworks Architects P/L [2007] QCA 402 17, 21

United Firefighters' Union v Metropolitan Fire and Emergency Services Board (2003) 198 ALR 466

3

United States Trust Co of New York v Master & Crew of Ship “Ionian Mariner” (1997) 77 FCR 563

18

Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603

17

Ust-Kamenogorsk Hydropower Plant JSC v AES Ust-Kamenogorsk Hydropower Plant LLP [2013] 1 WLR 1889

2

Workers’ Compensation Dust Diseases Board of NSW v Cook [2015] NSWCA 270

17, 21

Yngvar Hansen-Tangen v Sanko Steamship Co [1976] 1 WLR 989 5, 6

Zhu v Treasurer of NSW (2004) 218 CLR 530 3, 23

BOOKS REFERRED TO AT PAGE:

Born, Gary, International Commercial Arbitration (Kluwer Law International, 2nd ed, 2014)

4


XI

Boyd, Stewart, Andrew Burrows, and David Foxton, Scrutton on Charterparties (Sweet & Maxwell, 20th ed, 1996)

8, 9

Christopher, Kenneth, Port Security Management (CRC Press, 2009) 25

Girvin, Stephen, Carriage of Goods by Sea (Oxford University Press, 2007)

11, 12

Heydon, Dyson and Mark Leeming, Jacobs’ Law of Trusts in Australia (LexisNexis Australia, 2014)

19

Jones, Doug, Commercial Arbitration in Australia (Thomson Reuters, 2nd ed, 2013)

2

Pike, Dag, Storms and Wild Water (Bloomsbury, 2009) 12

Rose, Francis, General Average: Law and Practice (Lloyd’s of London Press, 2nd ed, 2005)

22

Rowbotham, Mark, Introduction to Marine Cargo Management (CRC Press, 2014)

25

Tetley,William, Maritime Liens and Claims (International Shipping Publications, 2nd ed, 1998)

20

JOURNAL ARTICLES REFERRED TO AT PAGE:

Allsop, James, ‘Admiralty jurisdiction: Some basic considerations and some recent Australian cases’ [2007] Federal Judicial Scholarship 5

4, 18

Garston, Sue, ‘Electronic data interchange (EDI) in port operations’ (1995) 8(2) Logistics Information Management 30

25

Gray, LJ, ‘Solar influences on climate’ (2010) 48(4) Reviews of Geophysics 1, 40

9

King, JW, ‘Sun-weather relationships’ (1975) 13(4) Aeronautics and Astronautics 10

9

Schatzman, E, ‘Stellar and solar flares’ (1967) 1 Solar Physics 411 9

Shibata, Kazunari and Tetsuya Magara, ‘Solar flares: Magnetohydrodynamic processes’ (2011) 8 Living Reviews in Solar Physics 6

9

Stewart, PA, ‘Mechanisms of solar flares’ (1969) 7(1) Annual Review of 9


XII

Astronomy and Astrophysics 149

Tinsley, Brian, ‘Solar variability influences on weather and climate: Possible connections through cosmic ray fluxes and storm intensification’ 94 Journal of Geophysical Research 792

9

INTERNATIONAL INSTRUMENTS REFERRED TO AT PAGE: Protocol amending the International Convention for the Unification of

Certain Rules of Law relating to Bills of Lading of 25 August 1924, as

amended by the Protocol of 23 February 1968, opened for signature 21

December 1979, 1412 UNTS 127 (entered into force 14 February 1984)

16

Rome I Regulation (Regulation (EC) No 593/2008) 2

UNCITRAL Model Law on International Commercial Arbitration (New

York, 21 June 1985)

2

United Nations International Convention on the Carriage of Goods by

Sea, signed 31 March 1978, 1695 UNTS 3 (entered into force 1

November 1992)

16

Voyage Charter Party Laytime Interpretation Rules 1993 23

York Antwerp Rules 2016 16

OTHER REFERRED TO AT PAGE:

Australian Maritime Safety Authority, Chief Mate and Master Certificate of Competency for Royal Australian Navy Seaman Officer (22 October 2015) <https://www.amsa.gov.au/qualifications-training/international-qualifications-and-training/chief-mate-and-master- certificate>

6

Bhanawatl, Abhishek, ‘What Seafarers Should Do After The Vessel Receives Storm Warning’, Marine Insight (online), 30 September 2017, <https://www.marineinsight.com/marine-navigation/what-seafarers-should-do- when-encountering-storm-warning/>

12

Bright Hub Engineering, Sea Captain: Master of the Ship (March 2009) <https://www.brighthubengineering.com/seafaring/29397-sea-captain-master-of-the-ship/>

6


XIII

Doherty, William A Captain's Responsibility, by a Former Norwegian Cruise Lines Safety Manager and Ship Master Forbes Business (online) 19 January 2012 <https://www.forbes.com/sites/gcaptain/2012/01/19/a-captains- responsibility-by-a-former-norwegian-cruise-lines-safety-manager-and-ship-master/#64f7f1b25c6c>

14

International Monetary Fund, SDRs per Currency Unit (22 March 2018) <https://www.imf.org/external/np/fin/data/rms_five.aspx>

15

Liddy, Matt, ‘7 times solar storms have affected Earth’, Australian Broadcasting Corporation (online), 2 April 2015 <http://www.abc.net.au/news/2014- 09-12/how-solar-storms-affect-earth/5740454>

8

Macquarie Dictionary, ‘Flood’ (24 March 2018) <https://www.macquariedictionary.com.au/features/word/search/?word=flood&search_word_type=Dictionary>

10

Maritime New Zealand, The Roles of the Ship Operator and the Ship’s Master (2015) <https://www.maritimenz.govt.nz/commercial/safety/health-and-safety/documents/roles-operator-master-HSWA.pdf>

14

National Weather Service, Wind, Swell and Rogue Waves National Weather Service <https://www.weather.gov/jetstream/waves>

12

O'Brien, Bennett, ‘Three hazards of shipping by sea and how to avoid them’, Trade Ready (online), 13 February 2015, <http://www.tradeready.ca/2015/trade-takeaways/three-hazards- shipping-by-sea-avoid/>

12

Oxford English Dictionary, ‘Flooding’ (22 March 2018) <https://en.oxforddictionaries.com/definition/flooding>

10

Smith-Strickland, Kiona, ‘How ships survive a hurricane at sea’, Popular Mechanics (online), 5 June 2014 <https://www.popularmechanics.com/adventure/outdoors/tips/a10688/how-ships-survive-a-hurricane-at-sea-16862613/>

13

Weather Online, Swell, Weather Online <https://www.weatheronline.co.uk/reports/wxfacts/Swell.htm>

12

Wheatland, Mike, Amanda Karakas, Alan Duffy, and Murray Parkinson, Solar storms (20 June 2016) Australian Academy of Science <https://www.science.org.au/curious/space-time/solar-storms>

8


XIV

Williams, Diana What Is a Swell in the Ocean? (24 April 2017) Sciencing <https://sciencing.com/swell-ocean-5052569.html>

12

Woods Hole Oceanographic Institution, Safety Management Manual 5.1 Master’s Responsibilities and Authority (2004) <https://www.whoi.edu/marine/PDF/05.1%20Masters%20Responsibilities%20and%20Authority.pdf >

6


1

STATEMENT OF FACTS

1. Cerulean Beans and Aromas Ltd (Claimant) is a coffee supplier. It sought to charter a ship, the

Madam Dragonfly, from Dynamic Shipping LLC (Respondent) for the purpose of transporting

exceptionally rare, high quality coffee from Cerulean to Dillamond.

2. The Claimant and the Respondent signed a voyage Charterparty. Clause 27(d) provided that any

dispute as to technical matters would be referred to expert determination. Clause 17 excluded

liability if a Force Majeure Event delayed or prevented performance. Clause 28 provided that the

Charterparty incorporated ‘Clause Paramount’ and that the Respondent would ‘have the benefit of

Article 4(5)’. Box 11 provided for a freight rate of $500,000.

3. During the voyage, solar flares disabled the satellite and communication systems of the Madam

Dragonfly. As a result, the vessel had to deviate to Spectre using the hard copy maps on board. The

systems did not require repairs and came back on when the effects of the solar flares ceased.

4. Before arriving at Dillamond the ship encountered an unexpected and violent storm. The ship had

to remain approximately 100nm out from Dillamond since the storm caused congestion at the port

and there was nowhere to berth. As a result, the ship’s hull was damaged when its anchor became

entangled in a coral bed.

5. The Respondent notified the Claimant that the cargo had arrived at 8:42pm on 29 July 2017. The

Claimant did not take delivery of the cargo until two days later on 31 July 2017. During this time,

despite the exceptionally strong sealant the Respondent had applied, the unprecedented rainfall

caused water damage to the cargo.

6. The Claimant commenced arbitral proceedings for breach of the Charterparty and to enforce a

maritime lien over the Madam Dragonfly. The Respondent cross-claimed for amounts due under the

Charterparty.


2

ARGUMENTS ON JURISDICTION

I. THE TRIBUNAL DOES NOT HAVE JURISDICTION TO DETERMINE THE DISPUTE

1. The Tribunal has authority to determine its own jurisdiction1 by construing the arbitration agreement

according to its proper law.2 (A) The proper law of the arbitration agreement is NSW law. Under that

law, the Tribunal lacks jurisdiction for two reasons. (B) First, the Tribunal does not have jurisdiction to

determine the dispute because it does not arise out of or in connection with the contract. (C) Second, the

dispute needs to be referred to expert determination rather than arbitration.

A. The proper law of the arbitration agreement is NSW law

2. If the parties have made an express choice of the law governing the arbitration agreement, that law is

the agreement’s proper law,3 notwithstanding that the seat of the arbitration is in England.4 Clause 28

of the Charterparty provides:5

28. LAW

This Charterparty shall be governed by the laws of New South Wales, Australia.

3. This provision means that the law of NSW governs both the substantive shipping agreement and the

arbitration agreement, not just the substantive shipping agreement.

4. First, the ordinary meaning6 of ‘Charterparty’ includes the arbitration agreement because the arbitration

agreement is itself a clause in the Charterparty.

1 QH Tours Ltd v Ship Design and Management (Aust) Pty Ltd (1991) 105 ALR 371, 384 (Foster J); Dallah Real Estate and Tourism Co v Ministry of Religious Affairs of the Government of Pakistan [2011] 1 AC 763, 830 [84] (Lord Collins); Ust-Kamenogorsk Hydropower Plant JSC v AES Ust-Kamenogorsk Hydropower Plant LLP [2013] 1 WLR 1889, 1902 (Lord Mance); UNCITRAL Model Law on International Commercial Arbitration, art 16(1), incorporated into UK and Australian domestic law by Arbitration Act 1996 (UK), s 30(1) and International Arbitration Act 1974 (Cth), s 16. 2 Paper Products Pty Ltd v Tomlinsons (Rochdale) Ltd (1993) 43 FCR 439, 444 (French J); Fiona Trust and Holding Corporation v Privalov [2007] Bus LR 1719, 1724 [11] (Lord Hoffmann); Doug Jones, Commercial Arbitration in Australia (Thomson Reuters, 2nd ed, 2013), 161. 3 Bonython v Commonwealth (1948) 75 CLR 589, 601 (Latham CJ); Compagnie Tunisienne de Navigation SA v Compagnie d’Armement Maritime SA [1971] AC 572, 586 (Lord Morris), 593 (Viscount Dilhorne), 604-605 (Lord Diplock); Rome I Regulation (Regulation (EC) No 593/2008), article 3(1), incorporated into UK law by the Contracts (Applicable Law) Act 1990 (UK), s 2(1). 4 Sulamérica Cia Nacional de Seguros SA v Enesa Engenharia SA [2013] 1 WLR 102 [8]-[9] (Moore-Bick LJ), [48] (Hallett LJ), [49] (Lord Neuberger MR); Arsanovia Ltd v Cruz City 1 Mauritius [2013] 1 Lloyd's Rep 235 [13] (Smith J). 5 Record 12. 6 Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 [45] (Aickin J); Investors Compensation Scheme Ltd v West Bromwich Building [1998] 1 WLR 896, 913 (Lord Hoffmann); Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 343 ALR 58, 84-85 (Nettle J).


3

5. Second, this construction is the most commercially sensible.7 The substantive shipping agreement is

governed by the law of NSW,8 and Clause 15(a)(i) of the Charterparty states that the owners need to

ensure that the ship complies with Australian regulations.9 If the arbitration agreement were governed

by English law and the rest of the substantive shipping agreement by NSW law, this would complicate

dispute resolution as the arbitrators and lawyers would need to have an understanding of both English

and NSW law. The parties should not be presumed to intend such an uncommercial result.

B. The Tribunal does not have jurisdiction because the dispute does not arise out of or in

connection with the Charterparty

6. Clause 27 of the Charterparty provides:10

27. ARBITRATION

(a) Any dispute arising out of or in connection with this contract, including any question

regarding its existence, validity, or termination, shall be referred to arbitration in London by a

tribunal of three arbitrators...

7. On its proper construction, this dispute does not ‘arise out of or in connection with’ the contract.

8. First, in Australia the presumption of one-stop arbitration is not adopted automatically.11 Arbitration is

a consensual process,12 and the parties are entitled to draw limits on the jurisdiction of the Tribunal.13

Rather, the precise words of the arbitration clause are construed by reference to what a reasonable

7 Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 898 (Lord Goff), 912-913 (Lord Hoffmann), 918 (Lord Hope), 918 (Lord Clyde); Zhu v Treasurer of NSW (2004) 218 CLR 530 [83] (Gleeson CJ, Gummow, Kirby, Callinan and Heydon JJ); Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7 [35] (French CJ, Hayne, Crennan and Kiefel JJ). 8 Record 12. 9 Record 8. 10 Record 12. 11 ACD Tridon v Tridon Australia [2002] NSWSC 896 [135]-[136] (Austin J); Seeley International v Electra Air [2008] FCA 29 [37] (Mansfield J); Rinehart v Welker [2012] NSWCA 95 [121] (Bathurst CJ), [204] (McColl JA). 12 Buckley v Bennell Design & Constructions Pty Ltd (1978) 140 CLR 1 [16] (Stephen J); Comandate Marine Corp v Pan Australia Shipping Pty Ltd [2006] FCAFC 192 [165] (Allsop J); TCL Air Conditioner (Zhongshan) Co Ltd v The Judges of the Federal Court of Australia (2013) 87 ALJR 410 [81] (French CJ and Gageler J). 13 CFMEU v The Australian Industrial Relations Commission (2001) 203 CLR 645, 658 [31] (Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ); Seeley International v Electra Air [2008] FCA 29 [37] (Mansfield J); United Firefighters' Union v Metropolitan Fire and Emergency Services Board (2003) 198 ALR 466 [57]-[58] (Goldberg J).


4

businessperson would consider the terms to mean.14 In particular, Clause 27 rebuts any presumption of

one-stop arbitration because it expressly refers some disputes to expert determination rather than

arbitration, and refers to ‘legal proceedings (including arbitral proceedings under this clause)’,

indicating that non-arbitral legal proceedings were also contemplated.15

9. Second, the ordinary meaning16 of the terms favours this approach. The parties’ dispute neither arises

out of nor in connection with the Charterparty as it consists of multiple issues unrelated to the contract.

The duty to take reasonable care for the goods arises out of a common law bailment relationship between

the Claimant and the Respondent.17 The same duty would arise if the bailment were gratuitous18 and the

Charterparty did not exist. Further, the alleged maritime lien is not provided for in the Charterparty and

was allegedly created by payments not required by the contract. Any such right could only arise through

operation of law rather than from the contract.19 Since aspects of the dispute can only be resolved

through litigation, allowing arbitration would require multiple proceedings. This increases the cost and

complexity of dispute resolution, contrary to the commercial purpose of arbitration clauses.20 Therefore

the entire dispute should be litigated.

10. Third, any ambiguity as to whether the dispute falls within Clause 27(a) is to be construed in favour of

the Respondent’s right to resolve disputes through litigation. A party may only surrender such a right

by express words or clear implication,21 but for the reasons given above, the clause is at least ambiguous.

14 Homburg Houtimport BV v Agrosin Private Ltd [2004] 1 AC 715 [10] (Lord Bingham); Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 [22] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ); Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640, 656 (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ). 15 Record 12, Clause 27(d)-(e). 16 Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 [45] (Aickin J); Investors Compensation Scheme Ltd v West Bromwich Building [1998] 1 WLR 896, 913 (Lord Hoffmann); Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 343 ALR 58, 84-85 (Nettle J). 17 Morris v CW Martin and Sons Ltd [1966] 1 QB 716, 726 (Lord Denning); Hobbs v Petersham Transport Co Pty Ltd (1971) 124 CLR 220, 237-238 (Windeyer J); The Pioneer Container [1994] 2 AC 324, 342 (Lord Goff). 18 Houghland v RR Low (Luxury Coaches) Ltd [1962] 1 QB 694, 696-698 (Ormerod LJ); Hobbs v Petersham Transport Co Pty Ltd (1971) 124 CLR 220, 237-238 (Windeyer J). 19 Admiralty Commissioners v Valverda (Owners) [1938] AC 173, 180 (Lord Atkin), 180, 186 (Lord Wright), 195 (Lord Maugham), 200 (Lord Roche); The Tolten [1946] P 135, 150 (Scott LJ); James Allsop, ‘Admiralty jurisdiction: Some basic considerations and some recent Australian cases’ [2007] Federal Judicial Scholarship 5, 7. 20 Fiona Trust and Holding Corporation v Privalov [2007] Bus LR 1719, 1723 (Lord Hoffmann); Gary Born, International Commercial Arbitration (Kluwer Law International, 2nd ed, 2014), 73; Patersons Securities Ltd v Financial Ombudsman Service Ltd (2015) 108 ACSR 483 [97] (Mitchell J). 21 Bank of Credit and Commerce International SA v Ali [2002] AC 251 [17] (Lord Bingham), [21] (Lord Browne-Wilkinson); Liberty Mutual Insurance Co (UK) Ltd v HSBC Bank Plc [2002] EWCA Civ 691 [56] (Rix LJ), [115] (Judge LJ); Fraser v The Irish Restaurant & Bar Co Pty Ltd [2008] QCA 270 [1] (McMurdo P), [66] (Wilson J).


5

C. The dispute needs to be referred to expert determination


(d) However, any dispute as to technical matters arising out of or in connection with this contract

shall be referred to expert determination by an independent Master Mariner.

(e) A party may not commence legal proceedings (including arbitral proceedings under this

clause) in respect of dispute unless clause (d) has been complied with first…

(g) In this clause, ‘technical matters’ means matters surrounding the technical aspects of the

performance of the Charterparty, such as the vessel's route, loading and unloading of cargo,

storage conditions and other matters which can reasonably be considered to be within the expert

technical knowledge of a Master Mariner.

12. Because the issues in dispute between the parties are ‘technical matters’ falling within Clause 27(d),

Clause 27(e) prevents arbitration.

13. First, the clause’s ordinary meaning23 favours this approach. Clause 27(g) defines ‘technical matters’

broadly, to include ‘matters surrounding the technical aspects of the performance’. The dispute between

the parties relates to a number of ‘technical matters’ specifically identified in clause 27(g) including the

‘vessel’s route’, ‘loading and unloading of cargo’ and the ‘storage conditions’ of the cargo.

14. Second, the clause’s commercial purpose favours this approach.24 Clause 27(d) distinguishes matters

for arbitration from those for expert determination. The distinction between arbitration and expert

determination is that an arbitrator considers the matter judicially whereas an expert makes a decision

based on their knowledge and skill.25 A Master Mariner should make determinations about a vessel’s

route and storage conditions because of their specialist knowledge of navigation and the carriage of

22 Record 12. 23 Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 [45] (Aickin J); Investors Compensation Scheme Ltd v West Bromwich Building [1998] 1 WLR 896, 913 (Lord Hoffmann); Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 343 ALR 58, 84-85 (Nettle J). 24 Yngvar Hansen-Tangen v Sanko Steamship Co [1976] 1 WLR 989, 995-996 (Lord Wilberforce), 1001 (Lord Simon), 1001 (Lord Kilbrandon); Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 [22] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ); Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7 [35] (French CJ, Hayne, Crennan and Kiefel JJ). 25 In Re Dawdy (1885) 15 QBD 426, 429-430 (Lord Esher MR); Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314, 336 (McHugh JA); Northbuild Constructions Pty Ltd v Discovery Beach Project Pty Ltd [2008] QCA 160 [79]-80] (Muir JA), [107] (Mackenzie JA) [121]-[123] (Atkinson J).


6

goods by sea.26 Further, a broad reading Clause 27(d) reduces the parties’ legal expenses as it reduces

the need for legal representation and the costs of both sides briefing their own expert witnesses.

15. Third, Clause 27(d) is not satisfied. Expert reports have been obtained from an expert engineer and

surveyor, but not a Master Mariner. 27 Additionally, not all technical matters have been resolved by the

reports. They do not address the deviation or its reasonableness, which is a technical matter because it

goes to the complexities of navigating a ship. Therefore, it is best determined by a Master Mariner.

ARGUMENTS ON THE MERITS OF THE CLAIM

II. THE RESPONDENT DID NOT BREACH THE CHARTERPARTY

16. The Respondent did not breach (A) the obligation to take the most direct route to Dillamond, (B) the

obligation to take reasonable care of the cargo, or (C) the obligation to provide a seaworthy ship.

A. The respondent did not breach its obligation to take the most direct route to Dillamond

17. Clause 17 of the Charterparty provides for ‘liberty to deviate for the purpose of saving life or property

(including the vessel)’.28 The ship’s deviation to Spectre falls within Clause 17.

18. First, Clause 17 should be construed broadly. Its ordinary meaning29 is broad; the words ‘in all situations

whatsoever’ indicate the clause covers all situations where a deviation is required. Further, the

commercial purpose30 of Clause 17 indicates a broad power of deviation was intended. Requiring the

Respondent to travel across dangerous seas with no navigational systems and limited fuel could lead to

commercial loss in the form of property damage to both the ship and the cargo.

19. Second, the Madam Dragonfly deviated for the purpose of saving the cargo and the vessel. The ship

26 Woods Hole Oceanographic Institution, Safety Management Manual 5.1 Master’s Responsibilities and Authority (2004) <https://www.whoi.edu/marine/PDF/05.1%20Masters%20Responsibilities%20and%20Authority.pdf >; Australian Maritime Safety Authority, Chief Mate and Master Certificate of Competency for Royal Australian Navy Seaman Officer <https://www.amsa.gov.au/qualifications-training/international-qualifications-and-training/chief-mate-and-master-certificate>; Bright Hub Engineering, Sea Captain: Master of the Ship (March 2009) <https://www.brighthubengineering.com/seafaring/29397-sea-captain-master-of-the-ship/>. 27 Record 43-44. 28 Record 9. 29 Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 [45] (Aickin J); Investors Compensation Scheme Ltd v West Bromwich Building [1998] 1 WLR 896, 913 (Lord Hoffmann); Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 343 ALR 58, 84-85 (Nettle J). 30 Yngvar Hansen-Tangen v Sanko Steamship Co [1976] 1 WLR 989, 995-996 (Lord Wilberforce), 1001 (Lord Simon), 1001 (Lord Kilbrandon); Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 [22] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ); Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7 [35] (French CJ, Hayne, Crennan and Kiefel JJ).


7

only deviated once the solar flares caused its navigational systems to fail.31 For the reasons given at

[18], deviation was therefore necessary to save the cargo and vessel.

B. The Respondent took reasonable care of the Claimant’s cargo

20. The Respondent’s duty was not to guarantee the cargo’s safe arrival, but to take reasonable care to

protect it.32 The Respondent satisfied this duty.

21. First, the sealant was strong enough to store the coffee. As stated in the expert report, the sealant was

‘exceptionally strong’ and only failed in combination with ‘unprecedented rainfall’.33 The Respondent’s

duty of reasonable care does not require it to provide conditions of storage that could handle exceptional

and unexpected stress. Further, the fact that one of the containers did not leak even during

‘unprecedented rainfall’ suggests the sealant was very powerful.34

22. Second, the sealant was appropriate for the voyage length. The sealant was in accordance with industry

standard conditions and sourced from a specialty contractor for short voyages.35 The journey was

intended to take four days and eight hours,36 and the sealant designed to last for five days,37 providing

for sixteen hours of unforeseen delays. This was a reasonable amount of leeway for the Madam

Dragonfly to arrive at Dillamond and deliver the cargo. Indeed, but for the extraordinary events of the

solar flares and the storm, the Madam Dragonfly would have arrived at Dillamond on time.

23. Third, the Respondent reasonably assumed that the Claimant would promptly collect its goods. Instead,

the Claimant allowed them to sit on the pier exposed to extremely heavy rainfall despite having agents

in Dillamond,38 even though the Claimant was told that a short term sealant had been applied.39

C. The Respondent provided a seaworthy ship

24. To be seaworthy, a ship need not have the latest and best technology; rather, it is sufficient that it is

31 Record 19. 32 Morris v CW Martin & Sons Ltd [1966] 1 QB 716, 726 (Denning MR), 732 (Diplock LJ), 738 (Salmon LJ); Thomas National Transport (Melbourne) Pty Ltd v May & Baker (Aust) Pty Ltd (1966) 115 CLR 353, 365 (McTiernan, Taylor and Owen JJ); Cowper v JG Goldner Pty Ltd (1986) 40 SASR 457, 462-463 (Bollen J). 33 Record 43. 34 Record 35. 35 Record 14. 36 Clarification 7. 37 Record 43. 38 Record 19. 39 Record 14.


8

reasonably fit for the voyage.40 The fact that the ship’s navigational system failed and that it did not

carry hard copy maps did not render it unseaworthy. The ship had operational satellite navigational

systems which, but for the solar flares, would have been entirely sufficient. The fact that a Cerulean

newspaper of unknown distribution and readership reported on the flares does not mean the flares were

foreseen.41 Solar flares happen frequently, but only rarely impact on communications, as the fact that

this was reported as a newsworthy occurrence indicates.42 Given the rare impact of flares on

communications, it is unreasonable to expect carrier ships to carry hard copy maps on every voyage.

III. ANY BREACHES BY THE RESPONDENT WERE DUE TO FORCE MAJEURE EVENTS

Clause 17 of the Charterparty provides:43

17. FORCE MAJEURE

Neither party shall be liable for any failure to perform or delay in performing its obligations

under this Contract, where the party is being delayed, interrupted or prevented from doing so by

reasons of any Force Majeure Event.

25. In this case, there were two Force Majeure Events that prevented the Respondent from fulfilling its

obligations. (A) First, the solar flares were a Force Majeure Event which excuses the Respondent’s late

arrival and deviation. (B) Second, the storm was a Force Majeure Event which excuses the late arrival

and damage to the cargo.

A. The solar flares were a Force Majeure Event which excuses the ship’s late arrival and deviation

26. The solar flares were (i) an Act of God, or in any event (ii) an unforeseen weather event, which (iii)

prevented performance.

i. The solar flares were an Act of God

27. Clause 17(b) defines ‘Force Majeure Event’ to include ‘Acts of God’. An event is an ‘Act of God’ if it

40 Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26, 62 (Upjohn LJ); Stewart Boyd, Andrew Burrows and David Foxton, Scrutton on Charterparties (Sweet & Maxwell, 20th ed, 1996) 97; Great China Metal Industries Co Ltd v Malaysian International Shipping Corporation (1998) 196 CLR 161 [28] (Gaudron, Gummow and Hayne JJ). 41 Record 35. 42 Matt Liddy, ‘7 times solar storms have affected Earth’, ABC (online), 2 April 2015 <http://www.abc.net.au/news/2014-09-12/how-solar-storms-affect-earth/5740454>; Mike Wheatland et al, Solar storms (20 June 2016) Australian Academy of Science <https://www.science.org.au/curious/space-time/solar-storms>. 43 Record 9.


9

is due ‘to natural causes directly and exclusively, without human intervention, and could not have been

prevented by any amount of foresight and pains and care reasonably to be expected.’44 It is the event,

rather than any consequential damage, which must be unpreventable.45

28. First, the solar flares were an astrological event, due entirely to natural rather than human causes.46

29. Second, the solar flares were an unforeseen, ‘unprecedented global emergency’.47 The fact that they

were forecast in a single newspaper does not establish that the parties were aware of their existence. In

particular, while both parties were aware of the local news in Dillamond,48 the only newspaper report

predicting the solar flares that the Claimant has been able to produce was from Cerulean.49

30. Third, the occurrence of the flares was unpreventable. A solar flare is an event on the sun’s surface

causing a sudden increase in its brightness.50 The Respondent has no control over the occurrence of solar

flares, and thus the event was irresistible.

ii. In any event, the solar flares were an unforeseen weather event

31. Clause 17(b) defines ‘Force Majeure Event’ to include ‘unforeseen weather events’. First, for the

reasons given at [29], the solar flares were unforeseen. Second, the solar flares amount to a weather

event. In particular, solar flares and their effects on the Earth’s magnetic field are responsible for

observable weather effects such as changes in local temperature and the strength of winds.51

iii. The solar flares prevented performance

32. The solar flares rendered the ship’s navigation systems inoperable.52 For the reasons given at [19], the

44 Sharp v Batt (1930) 25 Tas LR 33, 50 (Clark J); Commissioner of Railways (WA) v Stewart (1936) 56 CLR 520, 528-529 (Latham CJ), 537 (Dixon J); Transco Plc v Stockport Metropolitan Borough Council [2004] 2 AC 1 [59] (Lord Hobhouse). 45 Nugent v Smith (1876) 1 CPD 423, 441 (Cockburn CJ); Commissioner for Railways v Stewart (1936) 56 CLR 520, 529 (Latham CJ); Stewart Boyd et al, Scrutton on Charterparties (Sweet & Maxwell, 20th ed, 1996) 219. 46 E Schatzman, ‘Stellar and solar flares’ (1967) 1 Solar Physics 411, 415; PA Stewart, ‘Mechanisms of solar flares’ (1969) 7(1) Annual Review of Astronomy and Astrophysics 149, 152; Kazunari Shibata and Tetsuya Magara, ‘Solar flares: Magnetohydrodynamic processes’ (2011) 8 Living Reviews in Solar Physics 6, 6. 47 Record 35. 48 Clarification 1. 49 Record 35. 50 E Schatzman, ‘Stellar and solar flares’ (1967) 1 Solar Physics 411, 415; PA Stewart, ‘Mechanisms of solar flares’ (1969) 7(1) Annual Review of Astronomy and Astrophysics 149, 152; Kazunari Shibata and Tetsuya Magara, ‘Solar flares: Magnetohydrodynamic processes’ (2011) 8 Living Reviews in Solar Physics 6, 6. 51 Brian Tinsley, ‘Solar variability influences on weather and climate: Possible connections through cosmic ray fluxes and storm intensification’ 94 Journal of Geophysical Research 792, 793; JW King, ‘Sun-weather relationships’ (1975) 13(4) Aeronautics and Astronautics 10, 12; LJ Gray, ‘Solar influences on climate’ (2010) 48(4) Reviews of Geophysics 1, 40. 52 Record 17.


10

ship was therefore forced to deviate from the most direct route and navigate towards Spectre to preserve

the ship and its cargo. This prevented the ship from taking the most direct route and arriving on time.

B. The storm was a Force Majeure Event which excuses the late arrival and damage to the cargo

33. The storm was (i) an unforeseen weather event, (ii) an Act of God, or (iii) flooding, which (iv) prevented

performance.

i. The storm was an unforeseen weather event

34. As explained at [31], Clause 17(b) defines ‘Force Majeure Event’ to include ‘unforeseen weather

events’.53 The storm was undeniably a weather event. Further, it was unforeseen. Because this storm

was a ‘once in a lifetime’ occurrence featuring ‘unprecedented rainfall’, it went beyond the usual

foreseeable type of rainy weather.54 Further, it was only detected by weather instruments 45 minutes

before it arrived.55 The storm was therefore an unforeseen weather event.

ii. The storm was an Act of God

35. As explained at [27], clause 17(b) defines ‘Force Majeure Event’ to include for ‘Acts of God’, which

must be due to natural rather than human causes, unforeseen and incapable of prevention by the parties.56

36. First, for the reasons given above at [34], the storm was unforeseen.

37. Second, the occurrence of the storm could not have been prevented by the Respondent, because it was

entirely due to natural rather than human causes which were beyond the Respondent’s control.

iii. The storm caused flooding

38. Clause 17(b) defines ‘Force Majeure Event’ to include ‘flooding’. By contrast to the references to ‘Acts

of God’ or ‘unforeseen weather events’, the flooding need not be unforeseen.57

39. The storm caused flooding. First, the ordinary meaning58 of flooding is the covering or submerging of

53 Record 9. 54 Record 21, 43. 55 Record 21. 56 Sharp v Batt (1930) 25 Tas LR 33, 50 (Clark J); Commissioner of Railways (WA) v Stewart (1936) 56 CLR 520, 528-529 (Latham CJ), 537 (Dixon J); Transco Plc v Stockport Metropolitan Borough Council [2004] 2 AC 1 [59] (Lord Hobhouse). 57 De Rosa v John Barrie (Contractor) Ltd [1974] 1 WLR 946, 957 (Lord Hailsham), 960 (Lord Simon); Houssein v Under Secretary of Industrial Relations (1982) 148 CLR 88, 94 (Stephen, Mason, Aickin, Wilson and Brennan JJ); Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334, 348-349 (Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ). 58 Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 [45] (Aickin J); Investors Compensation Scheme Ltd v West Bromwich Building [1998] 1 WLR 896, 913 (Lord Hoffmann); Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 343 ALR 58, 84-85 (Nettle J).


11

normally dry land with a large amount of water,59 which includes an intense storm with heavy rainfall.

Second, newspapers report that the storm caused flooding of low-lying areas, including the port where

the cargo was stored.60

iv. The storm prevented performance

40. The storm prevented the Respondent from fulfilling its obligations. First, it delayed the ship from

reaching port on time by causing congestion.61 Second, it damaged the cargo, both in that the delay

weakened the sealant and in that the rainfall damaged the coffee.62

IV. THE HAGUE-VISBY RULES LIMIT THE RESPONDENT’S LIABILITY

41. (A) Clause 28 of the Charterparty incorporates the Hague-Visby Rules. The Hague-Visby Rules (B)

excuse any breaches, because they were due to Article 4(2) Force Majeure Events; (C) excuse any

breaches, because any such breaches were the act of the Master in the navigation of the ship; and in any

event (D) limit the Respondent’s liability to $152,252.10.

A. Clause 28 of the Charterparty incorporates the Hague-Visby Rules


This Charterparty shall be governed by the laws of New South Wales, Australia. Incorporating

Clause Paramount: Owners to have benefit of Article 4(5).

43. On its proper interpretation, Clause 28 incorporates the Hague-Visby Rules.

44. First, the language of the clause favours that interpretation. ‘Clause Paramount’ is a precise legal term

used to refer to the Hague-Visby Rules,64 and the parties are thus presumed to intend its legal meaning.65

Further, Article 4(5) limits the liability of ship owners, which is consistent with Clause 28’s statement

59 Oxford English Dictionary, ‘Flooding’ (22 March 2018) <https://en.oxforddictionaries.com/definition/flooding>; Macquarie Dictionary, ‘Flood’ (24 March 2018) <https://www.macquariedictionary.com.au/features/word/search/?word=flood&search_word_type=Dictionary>. 60 Record 36. 61 Record 24-25. 62 Record 43. 63 Record 12. 64 Nea Agrex SA v Baltic Shipping Co Ltd [1976] 2 Lloyd’s Rep 47, 50-51 (Lord Denning MR); The MV Fjellvang [1999] 2 Lloyd’s Rep 685, 689 (Thomas J); Stephen Girvin, Carriage of Goods by Sea (Oxford University Press, 2007) 232-233. 65 Gutheil v Ballarat Trustees (1922) 30 CLR 293, 299 (Knox CJ); Fisher v Bell [1961] 1 QB 394, 400 (Lord Parker CJ), 401 (Ashworth J), 401 (Ewles J); Wickman Machine Tool Sales Ltd v L Schuler AG [1974] AC 235, 265 (Lord Simon).


12

that the Owners are to have the benefit of it.66

45. Second, courts have adopted a liberal approach to the incorporation of the Hague-Visby Rules,

repeatedly holding that a ‘slapdash’ reference to ‘Clause Paramount’ is sufficient.67 This is the most

commercial construction, as otherwise the words ‘Clause Paramount’ would be rendered meaningless.68

B. The Hague-Visby Rules excuse any breaches, because they were due to Article 4(2) Force

Majeure Events

46. Article 4(2) of the Hague-Visby Rules provides:

Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from...

(c) Perils, dangers and accidents of the sea or other navigable waters...

(d) Act of God...

(l) Saving or attempting to save life or property at sea...

(n) Insufficiency of packing...

i. The storm was a peril of the sea

47. Storms are a threat to ships at sea because their winds can cause ships to stagnate, or be diverted from

their course towards threats such as coral reefs.69 Further, storm winds can cause waves and swell,

endangering ships and their cargo.70 Preparation for such danger, and awareness of the likely location,

intensity and duration of storms, is a major concern for seafarers.71

66 Record 12. 67 Nea Agrex SA v Baltic Shipping Co Ltd [1976] 2 Lloyd’s Rep 47, 50-51 (Lord Denning MR); The MV Fjellvang [1999] 2 Lloyd’s Rep 685, 689 (Thomas J); Stephen Girvin, Carriage of Goods by Sea (Oxford University Press, 2007) 232-233. 68 Leon Fink Holdings v Australian Film Commission (1979) 141 CLR 672, 674 (Barwick CJ), 679 (Mason J), 680 (Aickin J); Chapmans Ltd v Australian Stock Exchange Ltd (1996) 67 FCR 402, 411 (Lockhart and Hill JJ); R (Trail Riders’ Fellowship) v Dorset County Council [2015] 1 WLR 1406 [102] (Lord Neuberger). 69 Dag Pike, Storms and Wild Water (Bloomsbury, 2009) 9; Bennett O'Brien, ‘Three hazards of shipping by sea and how to avoid them’, Trade Ready (online), 13 February 2015, <http://www.tradeready.ca/2015/trade-takeaways/three-hazards-shipping-by-sea-avoid/>; Abhishek Bhanawatl, ‘What seafarers should do after the vessel receives a storm warning’, Marine Insight (online), 30 September 2017, <https://www.marineinsight.com/marine-navigation/what-seafarers-should-do-when-encountering-storm-warning/>. 70 National Weather Service, Wind, Swell and Rogue Waves National Weather Service <https://www.weather.gov/jetstream/waves>; Weather Online, Swell, Weather Online <https://www.weatheronline.co.uk/reports/wxfacts/Swell.htm>; Diana Williams, What Is a Swell in the Ocean? (24 April 2017) Sciencing <https://sciencing.com/swell-ocean-5052569.html>. 71 Abhishek Bhanawat, ‘What seafarers should do after the vessel receives a storm warning’, Marine In Sight (online) , 30 September 2017 <https://www.marineinsight.com/marine-navigation/what-seafarers-should-do-when-encountering-storm-warning/>; Bennett O'Brien, ‘Three hazards of shipping by sea and how to avoid them’ Trade Ready, Blog for International Trade Experts, 13 February 2015 <http://www.tradeready.ca/2015/trade-takeaways/three-hazards-shipping-by-sea-avoid/>; Kiona Smith-Strickland, ‘How Ships Survive a Hurricane at Sea’, Popular Mechanics, 5 June, 2014 <https://www.popularmechanics.com/adventure/outdoors/tips/a10688/how-ships-survive-a-hurricane-at-sea-16862613/>.


13

48. For the reasons given at [40], the losses sought to be recovered by the Claimant resulted from the storm.

First, the storm delayed the ship from reaching port on time by causing congestion.72 Second, it

weakened the sealant and damaged the coffee.73

ii. The storm and solar flares were Acts of God

49. For the reasons given at [35]-[37] and [27]-[30] respectively, the storm and solar flares were Acts of

God. The losses sought to be recovered by the Claimant resulted from the storm for the reasons given

at [40]. They also resulted from the solar flares, because the solar flares rendered the ship’s navigation

systems inoperable.74 This forced the ship to deviate, which caused the delay and thus the late arrival.75

The replacement coffee payment and the settlement payment76 were incurred because the coffee’s late

arrival meant that it could not be used at the Coffees of the World festival.77 The damage to the coffee

would not have occurred had the coffee arrived on time,78 before the storm79 and before the sealant

expired.80 Thus, each loss resulted from the solar flares.

iii. The deviation was an attempt to save property at sea

50. The delayed delivery of the cargo was caused by the deviation. The ship only deviated from its planned

course because the solar flares caused its navigational systems to fail.81 Other than deviation, its only

choices were to remain adrift at sea with limited fuel supplies, or travel blindly towards Dillamond

without knowing if it was on course.82 Deviation was therefore an attempt to save the cargo and the

vessel.

iv. The Respondent is not liable for losses arising from the use of the short term sealant

51. If the Claimant is correct and the use of the short term sealant was inappropriate, this amounts to

‘insufficient packing’ for which the Respondent is not liable. Sealing the containers was a necessary

72 Record 24-25. 73 Record 43. 74 Record 17. 75 Record 18-19. 76 Record 38. 77 Record 27, 29. 78 Clarification 7. 79 Record 19. 80 Record 14. 81 Clarification 10. 82 Record 20.


14

step in the packing process, between packing the coffee bags into the containers and packing the

containers inside the ship’s cargo area. Therefore, the Respondent is not responsible for any damage

resulting from the use of the short term sealant.

C. The Hague-Visby Rules excuse any breaches, because any such breaches were the act of the

Master in the navigation of the ship

52. Article 4(2)(a) of the Hague-Visby Rules provides:

Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from:

(a) Act, neglect or default of the master, mariner, pilot, or the servants of the carrier in the

navigation or in the management of the ship.

53. First, the decision to deviate was an act of the master in the navigation of the ship. The master of the

ship makes decisions about deviation,83 and here the master must have made that decision without

consulting with the Respondent because the ship’s communications systems were disabled.84

54. Second, all of the losses sought to be recovered by the Claimant were ultimately caused by the decision

to deviate. The decision to deviate caused the delay, which, as explained at [48], caused the late arrival

of the coffee85 and thus the damage to the coffee, payment for the replacement coffee and settlement

payment.

D. The Hague-Visby Rules limit the Respondent’s liability to $152,944.05

i. Article 4(5) limits the Respondent’s liability to $152,944.05

55. Article 4(5) of the Hague-Visby Rules provides:

Unless the nature and value of such goods have been declared by the shipper before shipment

and inserted in the sea carriage document, neither the carrier nor the ship shall in any event be

or become liable for any loss or damage to or in connection with the goods in an amount

exceeding 666.67 units of account per package or unit or 2 units of account per kilogramme of

83 William Doherty, ‘A Captain's Responsibility, by a Former Norwegian Cruise Lines Safety Manager and Ship Master’ Forbes Business (online) 19 January 2012 <https://www.forbes.com/sites/gcaptain/2012/01/19/a-captains-responsibility-by-a-former-norwegian-cruise-lines-safety-manager-and-ship-master/#64f7f1b25c6c>; Maritime New Zealand, The roles of the ship operator and the ship’s master (2015) <https://www.maritimenz.govt.nz/commercial/safety/health-and-safety/documents/roles-operator-master-HSWA.pdf>. 84 Record 17-18. 85 Record 18-19.


15

gross weight of the goods lost or damaged, whichever is the higher.

56. Here, while the coffee’s value was disclosed in email correspondence, that value was not agreed and

inserted into the sea carriage document (the Charterparty), so the limitation in Article 4(5) applies.

57. As at 18 April 2018, the value of a unit of account is US$1.456610.86 Therefore the Respondent’s

liability could be calculated on two bases.

a. The first basis is that three containers of goods were damaged.87 The Respondent’s liability is limited

to the higher of the calculations on the basis of three containers (666.67 x $1.456610 x 3 = $2,913.23)

or on the basis of 750 bags of goods, each weighing 70 kilograms88 (2 x $1.456610 x 750 x 70 =

$152,944.05). Therefore it is limited to $152,944.05.

b. The second basis is that 750 bags of goods were damaged.89 The Respondent’s liability is limited to

the higher of the calculations on the basis of 750 bags (666.67 x $1.456610 x 750 = $728,308.64) or

on the basis of 750 bags of goods, each weighing 70 kilograms90 (2 x $1.456610 x 750 x 70 =

$152,944.05). Therefore it is limited to $728,308.64.

58. The limitation should be calculated on the first basis, that is, that three containers were damaged, rather

than 750 bags. Article 4(5)(c) of the Hague-Visby Rules provides:

(c) Where a container, pallet or similar article of transport is used to consolidate goods, the

number of packages or units enumerated in the sea carriage document as packed in such article

of transport shall be deemed the number of packages or units for the purpose of this paragraph

as far as these packages or units are concerned.

59. Here, the 750 bags were consolidated into three containers, as the Respondent proposed and the

Claimant accepted by delivering its goods to the port to be shipped on those terms.91 Therefore the

Respondent’s liability is limited to $152,944.05.

ii. In any event, Article 4A(6) limits the Respondent’s liability to $500,000.

86 International Monetary Fund, SDRs per Currency Unit (18 April 2018) <https://www.imf.org/external/np/fin/data/rms_five.aspx>. 87 Record 44. 88 Clarification 3. 89 Clarification 3. 90 Clarification 3. 91 Record 14.


16

60. Article 4A(6) of the Hague-Visby Rules provides:

The quantum of the carrier's liability for loss caused by delay is limited to whichever is the lesser

of:

(a) the actual amount of the loss; or

(b) two and a half times the sea freight payable for the goods delayed; or

(c) the total amount payable as sea freight for all of the goods shipped by the shipper concerned

under the contract of carriage concerned.

61. Each loss claimed was ultimately caused by the delay. As explained at [49], the replacement coffee

payment and the settlement payment92 were incurred because the late arrival of the coffee meant that it

could not be used at the Coffees of the World festival.93 The damage to the coffee94 would not have

occurred had the coffee arrived on time,95 before the storm96 and before the sealant expired.97

62. Applying Article 4A(6):

a. The actual amount of the loss claimed by the Claimant is $30.2 million.98

b. Two and a half times the sea freight payable for the goods delayed is two and a half times $500,000,99

that is $1.25 million.

c. The total amount payable as sea freight for all of the goods shipped by the shipper under the contract

of carriage is $500,000.100

63. Therefore the Respondent’s liability is limited to $500,000.

V. THE CLAIMANT IS NOT ENTITLED TO ALL THE DAMAGES IT SEEKS

64. (A) The Claimant cannot recover both the value of the damaged coffee and the cost of its replacement.

(B) The Claimant failed to mitigate its loss on the legal settlement.

A. The Claimant cannot recover both the value of the damaged coffee and the cost of its

92 Record 38. 93 Record 27, 29. 94 Record 38. 95 Clarification 7. 96 Record 19. 97 Record 14. 98 Record 38. 99 Record 3, Box 11. 100 Record 3, Box 11.


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replacement

65. Damages in contract put the Claimant into the position they would have been in but for the breach.101

Here, damages could do that by either compensating the Claimant for the coffee that had been damaged,

or paying the cost of replacement coffee. However, allowing the Claimant to recover both the cost of

the damaged coffee and the cost of its replacement is impermissible double recovery for the same loss.102

Therefore the Claimant cannot recover both sums.

B. The Claimant failed to mitigate its loss on the legal settlement

66. A claimant’s failure to take reasonable steps to mitigate loss reduces its entitlement to damages.103 Here,

the Claimant’s settlement of Coffees of the World’s claim for five million dollars was unreasonable.

67. First, the amount of the settlement indicates the Claimant did not take reasonable steps to mitigate its

loss. The amount of five million dollars104 is extremely large, and the Claimant seeks it in addition to

the cost of replacement coffee.105 Further, Coffees of the World acknowledged that their loss was

minimised and their festival was very successful.106 Finally, five million dollars is an apparently

arbitrary round figure, and does not seem to correspond to any particular provable losses.107

68. Second, the manner of settlement indicates that the Claimant did not take reasonable steps to mitigate

its loss. Cerulean became aware of the water damage to the coffee sometime after 4:21pm on 31 July,108

and settled with Coffees of the World the next day109 without consulting with the Respondent.110 Settling

so quickly without longer negotiations or without even any attempt to gather evidence from the

Respondent was a failure to take reasonable steps to mitigate.

101 Robinson v Harman (1848) 154 ER 363, 855 (Parke B); Gates v City Mutual Life Assurance Society (1986) 160 CLR 1, 11-12 (Mason, Wilson and Dawson JJ); Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 [80] (Mason CJ and Dawson J). 102 Parry v Cleaver [1970] AC 1, 13 (Lord Reid); UI International P/L v Interworks Architects P/L [2007] QCA 402 [79] (Keane JA); Workers’ Compensation Dust Diseases Board of NSW v Cook [2015] NSWCA 270 [44] (Macfarlan JA). 103 Clippens Oil Co Ltd v Edinburgh and District Water Trustees [1907] AC 291, 303 (Lord Collins); Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653, 675 (Brennan J); Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603, 607 (Brennan CJ). 104 Record 29. 105 Record 38. 106 Record 29. 107 Record 29. 108 Record 24. 109 Record 29. 110 Record 30.


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VI. THE CLAIMANT IS NOT ENTITLED TO A MARITIME LIEN OVER THE MADAM DRAGONFLY

69. (A) English law governs the existence of the lien. (B) The Claimant cannot be subrogated to the crew’s

lien for wages, and no lien arises from (C) the provision of necessaries or (D) damage to the cargo.

A. English law governs the existence of the lien

70. Whether the lien is characterised as a matter of procedure or substance,111 English law governs its

existence. If the lien is characterised as a matter of procedure, the lex fori applies,112 which is English

law because the arbitration is taking place in London.113 If the lien is characterised as a matter of

substance, the lex causae applies,114 which is English law because the ship is registered in,115 and all the

relevant acts took place in, settlements applying English law.116 That the Charterparty is governed by

NSW law is irrelevant because the lien arises by operation of law, not by the Charterparty.117

B. The Claimant cannot be subrogated to the crew’s lien for wages

71. While the crew members hold a maritime lien securing their claim for unpaid wages,118 the Claimant

cannot be subrogated to this lien. The doctrine of subrogation can arise where A discharges their secured

debt to B using money provided by C for this purpose. C is then entitled to take the benefit of B’s

security against A.119 The Claimant cannot rely on the doctrine of subrogation since the debt to the crew

has not been discharged. In any event, even if the Claimant had paid the wages, a volunteer who pays

crew members’ wages can only be subrogated to their lien if the payment is made with an admiralty

111 See the differences of opinion in The Halcyon Isle [1981] AC 221, 235 (Lord Diplock); McKain v RW Miller and Co (SA) Pty Ltd (1992) 174 CLR 1 [30] (Mason CJ); The Ship "Sam Hawk" v Reiter Petroleum Inc [2016] FCAFC 26 [180] (Allsop CJ and Edelman J), [261] (Kenny and Besanko JJ), [429] (Rares J). 112 Boys v Chaplin [1971] AC 356, 378 (Lord Hodson), 394 (Lord Wilberforce); Breavington v Godleman (1988) 169 CLR 41, 98-99 (Wilson and Gaudron JJ), 135-136 (Deane J); McKain v RW Miller and Co (SA) Pty Ltd (1992) 174 CLR 1 [13] (Mason CJ), [17] (Brennan, Dawson, Toohey and McHugh JJ), [8] (Deane J). 113 Record 12, Clause 27(a). 114 Boys v Chaplin [1971] AC 356, 378 (Lord Hodson), 394 (Lord Wilberforce); Breavington v Godleman (1988) 169 CLR 41, 98-99 (Wilson and Gaudron JJ), 135-136 (Deane J); McKain v RW Miller and Co (SA) Pty Ltd (1992) 174 CLR 1 [13] (Mason CJ), [17] (Brennan, Dawson, Toohey and McHugh JJ), [8] (Deane J). 115 Record 37, 40. 116 Record 45. 117 Admiralty Commissioners v Valverda (Owners) [1938] AC 173, 180 (Lord Atkin), 180, 186 (Lord Wright), 195 (Lord Maugham), 200 (Lord Roche); The Tolten [1946] P 135, 150 (Scott LJ); James Allsop, ‘Admiralty jurisdiction: Some basic considerations and some recent Australian cases’ [2007] Federal Judicial Scholarship 5, 7. 118 United States Trust Co of New York v Master & Crew of Ship “Ionian Mariner” (1997) 77 FCR 563, 590 (Black CJ), 593 (Lockhart J), 593-594 (Burchett J); The Ruta [2000] 1 WLR 2068, 2074 (Steel J); The Turiddu [2000] ICR 354, 360 (Brooke LJ). 119 Orakpo v Manson Investments Ltd [1978] AC 95, 105 (Lord Diplock); Liberty Mutual Insurance Co v HSBC Bank Plc [2001] Lloyd’s Rep Bank 224, 225 (Morritt V-C); Menelaou v Bank of Cyprus plc [2016] AC 176, 179-180 (Lord Clarke).


19

court’s consent,120 which did not occur here.

72. In any event, the lien does not arise because the Claimant has a proprietary interest in the $100,000

rather than the ship. A loan to a borrower for a specific purpose where the borrower is not free to apply

the money for any other purpose gives rise to a so-called Quistclose trust.121 The Claimant advancing

$100,000 to the Respondent meets those requirements. First, the Respondent expressly requested that

the money be paid as the crew’s wages so that they would sail.122 Second, the money was paid into a

‘separate sort of trust account’,123 and not the Respondent’s general account, indicating that the

Respondent was not free to use it for other business purposes.124 This segregation of funds is recognised

as the archetypal sign of a Quistclose trust.125 Third, the parties contemplated that the funds would be

treated as the Claimant’s property. The Claimant referred to them as ‘our funds’ and the parties regarded

them as going to be ‘used as security by the crew’.126

73. The consequence of the Quistclose trust is that the Claimant has a proprietary interest in the $100,000,127

which it can claim directly from the Respondent and trace into the hands of third parties.128 There is no

need for an additional lien over the ship, which may be worth many millions of dollars, in accordance

with the principle that in crafting a remedy the Court should apply the minimum equity.129

C. No lien arises from the provision of necessaries

120 The Janet Wilson (1857) ER 1127, 1128 (Dr Lushington); The Petone [1917] P 198, 205-7 (Hill J). 121 Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567, 580 (Lord Wilberforce); Twinsectra Ltd v Yardley [2002] 2 AC 164 [1] (Lord Slynn), [7] (Lord Steyn), [12] (Lord Hoffmann), [68]-[69] (Lord Millett). 122 Record 1. 123 Record 33. 124 Henry v Hammond [1913] 2 KB 515, 521 (Channel J); Cohen v Cohen (1929) 42 CLR 91, 101 (Dixon J); Re Associated Securities Ltd [1981] 1 NSWLR 742, 749 (Needham J); Re Australian Elizabethan Trust (1991) 102 ALR 681, 689 (Gummow J). 125 Henry v Hammond [1913] 2 KB 515, 521 (Channel J); Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (in liq) (1978) 141 CLR 335, 353 (Gibbs CJ); Re Australian Elizabethan Trust (1991) 102 ALR 681, 689 (Gummow J). 126 Record 1. 127 Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567, 581-582 (Lord Wilberforce); Legal Services Board v Gillespie-Jones (2013) 249 CLR 493, 523-524 (Bell, Gageler and Keane JJ); Dyson Heydon and Mark Leeming, Jacobs’ Law of Trusts in Australia (LexisNexis Australia, 2014) 13. 128 Robins v Incentive Dynamics Pty Ltd (in liq) (2003) 175 FLR 286 [73]-[74] (Mason P); Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296, 304 (Finn, Stone and Perram JJ); Dyson Heydon and Mark Leeming, Jacobs’ Law of Trusts in Australia (LexisNexis Australia, 2014) 13. 129 Crabb v Arun District Council [1975] 3 WLR 847, 863 (Scarman LJ); Commonwealth v Verwayen (1990) 170 CLR 394, 429 (Brennan J); Sidhu v Van Dyke (2014) 251 CLR 505 [85] (French CJ, Kiefel, Bell and Keane JJ).


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74. A claim for necessaries only gives rise to a right in rem and not to a maritime lien.130 The Claimant

therefore cannot enforce a maritime lien by arguing that they provided necessaries to the ship.

D. No lien arises from the damage to the cargo

75. A claim for damage to cargo only gives rise to a right in rem and not to a maritime lien.131 Further, a

requirement for this claim to succeed is that the damage must be done by the ship. In this case the

damage occurred after the cargo had been unloaded at the Port of Dillamond.132 The Claimant therefore

cannot claim a maritime lien for the damage to the cargo.

ARGUMENTS ON THE MERITS OF THE COUNTER-CLAIM

VII. THE RESPONDENT IS ENTITLED TO THE AMOUNTS CLAIMED

76. (A) The Respondent is contractually entitled to the amounts sought in the counter-claim. (B) There has

not been a total failure of consideration precluding the Respondent’s counter-claim.

A. The Respondent is contractually entitled to the amounts sought in the counter-claim

i. The Respondent is contractually entitled to freight

77. Box 11 of the Charterparty provides:133

Freight Rate (Cl 22) $500,000


Freight to be calculated on Bill of Lading weight on completion of load (Shipper's weights

according to independent surveyor provided by the Suppliers to be accepted as tonnage shipped,

the Master having the right to check the weights during loading), in full of all port charges,

pilotages, light dues and all other dues usually paid by vessels.

79. On the proper construction of Clause 22, any damage to the cargo does not prevent freight being owed.

130 The Two Ellens (1871) LR 3 AE 345, 357 (Sir Robert Phillimore); Ripon City [1897] P 226, 236-237 (Barnes J); William Tetley, Maritime Liens and Claims (International Shipping Publications, 2nd ed, 1998) 555; Iran Amanat v Kmp Coastal Oil (1999) 196 CLR 130 [22] (Gleeson CJ, McHugh, Gummow, Kirby and Hayne JJ). 131 Record 43; The Two Ellens (1871) LR 3 AE 345, 357 (Sir Robert Phillimore); Ripon City [1897] P 226, 236-237 (Barnes J); William Tetley, Maritime Liens and Claims (International Shipping Publications, 2nd ed, 1998) 729; Iran Amanat v Kmp Coastal Oil (1999) 196 CLR 130 [22] (Gleeson CJ, McHugh, Gummow, Kirby and Hayne JJ). 132 The Theta [1894] P 280, 284 (Bruce J); Berliner Bank AG v C Czarnikow Sugar Ltd ("The Rama") [1996] 2 Lloyd's Rep 281, 293 (Clarke J); William Tetley, Maritime Liens and Claims (International Shipping Publications, 2nd ed, 1998) 730-731. 133 Record 3. 134 Record 11.


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80. First, the ordinary meaning135 of the clause does not indicate that the state of the cargo upon delivery

affects the freight rate. Box 11 expresses the freight rate as a lump sum of $500,000. The only reference

to altering this lump sum in Clause 22 is by reference to the weight rather than the state of the goods.

81. Second, it is settled law that the cost of damage to cargo cannot be deducted from the lump sum

freight.136 Otherwise, the Claimant would be entitled to recover the same loss twice: once as damage for

breach, and once as a deduction from freight.137

82. Third, any damage was caused by the Claimant, and the Respondent’s freight should not be reduced for

it. When the Respondent delivered the cargo at 8:42pm on 29 July, it was not water damaged.138 The

expert opinion confirms the cargo was damaged in the 24 hours from 4:30am on 30 July,139 that is,

during the time it was left onshore at the Port of Dillamond.140 The Claimant is at fault for the water

damage that the cargo incurred while onshore at this port since they were not ready to collect the cargo

when it arrived and instead collected it two days later at 1:17pm on 31 July.141

ii. The Respondent is entitled to agency fees at the Port of Spectre under the York Antwerp Rules

83. Clause 19 of the Charterparty provides that general average shall be payable according to the York

Antwerp Rules. Rule X(a)(i) of those Rules provides:

When a ship shall have entered a port or place of refuge or shall have returned to her port or

place of loading in consequence of accident, sacrifice or other extraordinary circumstances

which render that necessary for the common safety, the expenses of entering such port or place

shall be allowed as general average;...

84. The agency fees are allowable as general average. First, the ship entered Spectre as a port of refuge

135 Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 [45] (Aickin J); Investors Compensation Scheme Ltd v West Bromwich Building [1998] 1 WLR 896, 913 (Lord Hoffmann); Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 343 ALR 58, 84-85 (Nettle J). 136 Dakin v Oxley (1864) 143 ER 938, 944 (Willes CJ); Henriksens Rederi A/S v THZ Rolimpex (“The Brede”) [1974] QB 233, 249-250 (Lord Denning MR); Aries Tanker Corp v Total Transport [1977] 1 All ER 398, 406 (Lord Glaisdale). 137 Parry v Cleaver [1970] AC 1, 13 (Lord Reid); UI International P/L v Interworks Architects P/L & Ors [2007] QCA 402 [79] (Keane JA); Workers’ Compensation Dust Diseases Board of NSW v Cook [2015] NSWCA 270 [44] (Macfarlan JA) 138 Record 43. 139 Record 43. 140 Record 23-24. 141 Record 24.


22

when its communications systems ceased to operate.142 Second, that entry was ‘in consequence of...

other extraordinary circumstances’, that is, the solar flares, because they were an ‘unprecedented

international emergency’ interfering with communications around the world.143 Third, entry was

‘necessary for the common safety’. For the reasons given at [19], deviation was necessary to save the

cargo and the vessel. Therefore the Claimant must contribute to the agency fees at the Port of Spectre.

iii. The Respondent is entitled to the cost of repairs under the York Antwerp Rules

85. Rule XVIII of the York Antwerp Rules provides:

The amount to be allowed as general average for damage or loss to the ship, her machinery

and/or gear caused by a general average act shall be as follows:

(a) When repaired or replaced, the actual reasonable cost of repairing or replacing such damage

or loss, subject to deductions in accordance with Rule XIII;

86. Rule A(1) of the York Antwerp Rules provides:

There is a general average act when, and only when, any extraordinary sacrifice or expenditure

is intentionally and reasonably made or incurred for the common safety for the purpose of

preserving from peril the property involved in a common maritime adventure.

87. First, the decision to drop the anchor in an area where there may be coral beds was a general average

act. It was an extraordinary sacrifice, because it ran the risk of the anchor becoming entangled on the

coral beds and damaging the ship’s hull,144 but the crew reasonably made it for the common safety in

the belief that they would prevent the storm damaging the ship and cargo by anchoring there.145 That

the ship would have been better off if it had gone into land does not render this decision unreasonable;

hindsight cannot be used to determine whether the general average act was reasonable, only the

circumstances that the ship was in at the time.146

88. Second, the general average act caused the damage to the ship. The choice to anchor the vessel in this

142 Record 17-18. 143 Record 35. 144 Record 20. 145 Record 20. 146 Montgomery & Co v Indemnity Mutual Marine Insurance Co Ltd [1902] 1 KB 734, 740 (Vaughan Williams LJ); FD Rose, General Average: Law and Practice (Lloyd’s of London Press, 2nd ed, 2005) 44.


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location caused the anchor to become tangled in a coral bed. This caused the damage to the ship’s hull.147

Therefore the Claimant must contribute to the cost of repairs under Rule XVIII(a).

iv. The Respondent is contractually entitled to agency fees at the Port of Dillamond

89. Clause 12(a) provides:148

The ship shall be consigned to Charterers’ Agents at the port or ports of load and discharge,

paying all customary fees at each port, for attending to matters concerning the cargo and the

vessel.

90. On its proper construction, Clause 12(a) requires the Claimant, rather than the Respondent, to pay the

agents’ customary fees for attending to matters regarding the cargo and vessel.

91. First, the ordinary meaning149 of the contract supports this construction. Box 12 identifies Clause 12’s

subject matter as the ‘Agency Fee at Discharge Ports’. Clauses 1, 3, 11, 12, and 19 identify the agents

as the ‘Charterer’s [Claimant’s] agents’, so the Claimant should be liable for their fees. Further, the

express reference in Clause 2 to the owner paying the agents’ fees at the loading port deliberately

distinguishes the position at the port of discharge.

92. Second, a contrary construction leads to commercially unreasonable results.150 It would be unreasonable

for the Respondent to have to pay fees for agents it did not select according to contracts it did not

negotiate.

v. The Respondent is contractually entitled to demurrage


Demurrage over and above the lay-days calculated and allowed at the loading port and at the

discharge port, to be paid to ship at the rate specified in Box 24 per day or part thereof pro-rata

147 Record 20. 148 Record 7. 149 Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 [45] (Aickin J); Investors Compensation Scheme Ltd v West Bromwich Building [1998] 1 WLR 896, 913 (Lord Hoffmann); Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 343 ALR 58, 84-85 (Nettle J). 150 Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 898 (Lord Goff), 912-913 (Lord Hoffmann), 918 (Lord Hope), 918 (Lord Clyde); Zhu v Treasurer of NSW (2004) 218 CLR 530 [83] (Gleeson CJ, Gummow, Kirby, Callinan and Heydon JJ); Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7 [35] (French CJ, Hayne, Crennan and Kiefel JJ). 151 Record 7.


24

and Despatch Money to be paid by Owners at the rate of one half of the Demurrage rate per day

or part thereof pro-rata, on all laytime saved in loading and discharging.

94. Demurrage began accruing from the moment the ship completed discharge at 7pm on 29 July 2017,152

and ceased to accrue at 12:02am on 30 July 2017 when the access authority pass was delivered.153 The

parties did not agree to allow any laytime at the discharge port. Box 6 and Clause 4 of the Charterparty

refer to laydays agreed at the loading port, but not the port of discharge;154 in any event, no specific

number of laydays is mentioned anywhere in the Charterparty. Box 24 specifies that the demurrage rate

is US$20,000 per hour.155 Because demurrage accrued for five hours between 7pm and 12:02 am, the

Respondent is entitled to demurrage of US$100,000.

95. Demurrage was not interrupted. Clause 8(e) provides:156

...demurrage not to accrue even if on demurrage and in the event of any delay or hindrance in

procuring, preparing, carrying, loading, stowing, shipping or discharging the particular cargo

intended for shipment or the cargo actually shipped by reason of Acts of God... rain; floods; bad

weather;... or from congestion of shipping or shore traffic consequent upon any one of the

aforesaid causes; or from inability or inefficiency of the ship to load or discharge, the laytime

not to count during the period of such delay or hindrance and demurrage not to accrue even if

the vessel is already on demurrage.

96. Clause 8(e) only applies to delays or hindrances ‘in procuring, preparing, carrying, loading, stowing,

shipping or discharging the particular cargo.’ The Respondent had already carried out these processes

and the delay was caused by the Claimant failing to collect the cargo when it had already been

discharged. Therefore demurrage was not interrupted.

vi. The Respondent is contractually entitled to fees for the use of electronic access systems at the

Port of Dillamond

152 Record 22. 153 Record 23. 154 Record 3, 5. 155 Record 3. 156 Record 6.


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97. Clause 12(a) of the Charterparty provides:157

The ship shall be consigned to Charterers’ Agents at the port or ports of load and discharge,

paying all customary fees at each port, for attending to matters concerning the cargo and the

vessel.

98. The electronic access fee is payable by the Charterers’ Agents, because the fee is customary and

concerns the cargo. The fee for the electronic access system is customary since this is a method of

delivery often used if the Charterers’ Agents are not at the port upon the ship’s arrival.158 It concerns

the cargo because it allows the Claimant to collect the cargo from port.

B. There has not been a total failure of consideration precluding the Respondent’s counter-claim

99. The Claimant cannot rely on the doctrine of a total failure of consideration since according to the expert

report only 75% of the cargo was damaged.159 This doctrine only applies where the failure of

consideration has been total, and here the Respondent gained at least some benefit from the contract.160

REQUEST FOR RELIEF

For the reasons set out above, the Respondent requests that the Tribunal:

a) declare that it does not have jurisdiction to hear the dispute;

b) declare that the Claimant is not entitled to the damages it seeks;

c) declare that the Claimant does not hold a maritime lien over the Madam Dragonfly; and

d) declare that the Respondent is entitled to the amounts it seeks by way of counter-claim.

157 Record 7. 158 Sue Garston, ‘Electronic data interchange (EDI) in port operations’ (1995) 8(2) Logistics Information Management 30, 32; Kenneth Christopher, Port Security Management (CRC Press, 2009) 257; Mark Rowbotham, Introduction to Marine Cargo Management (CRC Press, 2014) 363. 159 Record 44. 160 Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32 [61] (Lord MacMillan), [77] (Lord Porter); Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662 [12] (Mason CJ, Wilson, Deane, Toohey and Gaudron JJ); Baltic Shipping Co v Dillon (“The Mikhail Lermontov”) (1993) 176 CLR 344, 375 (Deane and Dawson JJ).

respondent (semi)final - murdoch university · cowper v jg goldner pty ltd (1986) 40 sasr 457 7...

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