fourtheenth annual international maritime law … · 2020-05-09 · fourtheenth annual...

FOURTHEENTH ANNUAL INTERNATIONAL MARITIME LAW

ARBITRATION MOOT COMPETITION

2013

UNIVERSITAS GADJAH MADA

IN THE MATTER OF AN ARBITRATION HELD AT LONDON

MEMORANDUM FOR THE CLAIMANT

On behalf of:

Aadvark Ltd.

Aadvark House

The High Street, Bootle,

Merseyside

CLAIMANT

Against:

Twilight Carriers Inc.

RESPONDENT

TEAM

DZULYAN WISHARDY ALWI • KENNY CETERA • RUDI YUDHO SARTONO

SHITA PINA SAPHIRA • VULKANIA NEYSA ALMANDINE

INTERNATIONAL MARITIME LAW ARBITRATION MOOT 2013

MEMORANDUM FOR THE CLAIMANT

TEAM NUMBER 18

TEAM 18 − MEMORANDUM FOR THE CLAIMANT | i

14

TH INTERNATIONAL MARITIME LAW ARBITRATION MOOT 2013

TABLE OF CONTENTS

TABLE OF CONTENTS ......................................................................................................... i

LIST OF ABBREVIATIONS ............................................................................................... iii

TABLE OF AUTHORITIES .................................................................................................. v

SUMMARY OF FACTS.......................................................................................................... 1

QUESTIONS PRESENTED ................................................................................................... 2

ARGUMENTS PRESENTED................................................................................................. 2

I. THE LONDON TRIBUNAL HAS JURISDICTION TO HEAR THE DISPUTE .... 2

A. The matters brought to this proceedings are governed under the Arbitration Clause

within the Charterparty ................................................................................................ 2

i. The Claimant is entitled to rely on the Arbitration Clause as a benefiting third-

party to the Charterparty ........................................................................................ 3

ii. The Claimant is entitled to invoke the incorporated Arbitration Clause through

the B/L ..................................................................................................................... 3

B. Alternatively, the matters brought under this proceeding are governed by the

Arbitration Clause under tort ....................................................................................... 4

II. THE RESPONDENT HAS BREACHED ITS DUTY TO DELIVER THE CARGO

TO THE CLAIMANT IN LIVERPOOL ...................................................................... 5

A. The Respondent is obliged to deliver the cargo to the Claimant ................................. 5

i. The Claimant is entitled to receive delivery of the cargo under the B/L due to its

appointment as consignee ....................................................................................... 5

ii. The Claimant’s entitlement to receive delivery of the cargo also emanates from

its position as the cargo owner under the PFAD contract ..................................... 6

B. The Respondent breached its obligation to deliver by discharging the cargo without

the presentation of the Bills of Lading ........................................................................ 6

C. The Respondent was bound to deliver the cargo at Liverpool, as the port of

discharge has not been modified to Rotterdam ............................................................ 7

i. The Liberty Clause cannot justify discharge at Rotterdam, as this would defeat

the purpose of the Charterparty .............................................................................. 7

ii. Alternatively, the change of port of discharge to Rotterdam was not validly made

................................................................................................................................. 8

D. The LOI issued by the Beatles did not justify the discharge at Rotterdam ................. 9

E. The Respondent’s obligation to deliver the cargo to the Claimant is not exhausted by

the discharge .............................................................................................................. 10

III. THE RESPONDENT HAS BREACHED ARTICLE III RULE 2 OF THE HAGUE-

VISBY RULES .............................................................................................................. 11

TEAM 18 − MEMORANDUM FOR THE CLAIMANT | ii

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A. The Respondent is obliged to properly and carefully handle, carry, keep, and care for

the goods carried ........................................................................................................ 11

B. The Respondent failed its obligation to properly care for the cargo ......................... 12

i. The Respondent failed to maintain the quality of cargo to be of a Good

Merchantable Quality ........................................................................................... 12

ii. The Respondent had failed to implement a system of care for the cargo due to its

unseaworthiness .................................................................................................... 13

C. The Respondent cannot rely upon the exemptions of liability under Article IV Rule 2

of the Hague-Visby Rules .......................................................................................... 14

i. The peril was foreseeable ..................................................................................... 14

ii. The peril was surmountable .................................................................................. 14

D. The Respondent did not take cargo care measures during the captivity nor its

subsequent voyage ..................................................................................................... 16

IV. THE RESPONDENT IS LIABLE FOR LOSSES INCURRED BY THE

CLAIMANT DUE TO ITS NEGLIGENCE ............................................................... 16

A. The Respondent’s actions fulfills the element of causation ...................................... 16

B. The damages incurred as a result of the Respondent’s actions fulfills the test of

remoteness ................................................................................................................. 18

i. The loss was foreseeable ....................................................................................... 18

ii. The Respondent had assumed responsibility for its failure to deliver the goods to

Liverpool ............................................................................................................... 19

C. The types of damages invoked by the Claimant are reasonable ................................ 20

i. The Claimant is entitled to be restituted of the PFAD losses ............................... 20

ii. The Claimant is entitled towards replacement expenses for the damages arising

from the Respondent’s actions .............................................................................. 21

iii. The Respondent is obliged to cover the expenses of the Dutch proceedings ........ 22

D. The proper standard of damages applied is the prices of PFAD at Liverpool ........... 22

E. The Claimant has not excessively mitigated its losses by purchasing substitute cargo

in Liverpool ............................................................................................................... 23

PRAYER FOR RELIEF........................................................................................................ 25

TEAM 18 − MEMORANDUM FOR THE CLAIMANT | iii

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LIST OF ABBREVIATIONS

¶ Paragraph

B/L The bills of lading dated 25 October 2008 covering the

shipment the subject of these proceedings

Beatles Oils & Fats Ltd. Beatles Oils & Fats Ltd./ Charterer of the Twilight

Trader/Sellers of PFAD for Claimant

BMP Best Management Practices for Protection against

Somalia Based Piracy

CAD Cash Against Document

CIF Cost, Insurance and Freight

Claimant Aadvark Ltd.

COGSA Carriage of Goods by Sea

FOSFA Federation of Oils, Seeds and Fats Associations

GMQ Good Merchantable Quality

LOI Letter of Indemnity

PFAD Palm Fatty Acid Distillate

pp. Pages

Respondent Twilight Carriers Inc.

The Charterparty The charter party concluded between Beatles Oils &

Fats Ltd. and Twilight Carriers Inc.

The Dutch proceedings The District Court of Rotterdam proceeding,

commencing on 15 July 2009 and its appeal to the

Court of Appeal on 21 August 2009

TEAM 18 − MEMORANDUM FOR THE CLAIMANT | iv

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The Hague-Visby Rules Protocol to Amend the International Convention for the

Unification of Certain Rules of Law Relating to Bills of

Lading (Brussels 1968)

The Tribunal The current London arbitration proceedings to hear the

dispute between Aadvark Ltd. and Twilight Carriers

Vessel The Twilight Trader

TEAM 18 − MEMORANDUM FOR THE CLAIMANT | v

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TABLE OF AUTHORITIES

CASES

Aktieselskabet de Danske Sukkerfabrikker v Bajamar Compania Naviera SA (The

Torenia) [1983] 2 Lloyd's Rep. 210 .................................................................................... 18

Alexander v Railway Executive [1951] 2 KB 882 ................................................................... 11

Anns v Merton London Borough Council [1978] AC 728 ......................................................... 4

Associated Metals v Olympic Mentor [1997] AMC 1140 (SD NY 1997) ............................... 13

Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 11 .......... 4

Astro Vencedor Compania Naveria SA of Panama v Mabanaft GmbH 204 [1971] 2 All ER

1301.................................................................................................................................... 4, 5

Banco de Portugasl v Waterlow [1932] AC 452 ..................................................................... 24

Barclay’s Bank Ltd v Customs and Excise [1963] 1 Lloyd’s Rep. 81 ....................................... 7

Barnett v Chelsea & Kensington Hospital [1968] 1 All ER 1068 ........................................... 17

Borealis AB v Stargas Ltd (The Berge Sisar) [2002] 2 AC 205 ................................................ 4

British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railway

Co of London Ltd [1912] AA 673 .................................................................................. 21, 24

Bulkhaul Ltd v Rhodia Organique Fine Ltd [2008] EWCA Civ 1452 .................................... 24

C Czarnikow Ltd v Koufos (The Heron II) [1969] 1 AC 350 ............................................ 19, 20

C Sharpe & Co Ltd v Nosawa [1917] 2 KB 814................................................................ 21, 23

Caparo Industries v Dickman [1990] UKHL 2 ......................................................................... 4

Carewins Development (China) Ltd v Bright Fortune Shipping Ltd [2006] 4 HKC 1 ............ 11

Center Optical (HongKong) Ltd v Jardine Transport Service (China) Ltd and Pronto Cargo

Corporation [2001] 2 Lloyd’s Rep. 678 ................................................................................ 3

Cia Portorafti Commerciale v Ultramar Panama Inc. (The Captain Gregos) [1990] 1 Lloyd’s

Rep. 310 ............................................................................................................................... 12

Compania Commercial Naviera San Martin SA v China National Foreign Trade

Transportation Corp (The Costanza) [1981] 2 Lloyd’s Rep. 148 ......................................... 3

Compania Financiera ''Soleada'' SA v Hamoor Tanker Corp Inc (The Borag) [1981] 1 WLR

274........................................................................................................................................ 22

TEAM 18 − MEMORANDUM FOR THE CLAIMANT | vi

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Davidson v Gwynne 104 E.R. 149 [1810] 12 East 381 .......................................................... 8, 9

Diamond Cutting Works v Treifus [1956] 1 Lloyd’s Rep. 216 ................................................ 25

Donoghue v Stevenson [1932] UKHL 100 ................................................................................ 4

Dunkirk Colliery Co v Lever [1878] 9 Ch D 20....................................................................... 24

East Ham Corp v Bernard Sunlley & Sons Ltd [1966] AC 406 .............................................. 19

East West Corp v DKBS 1912 [2003] 1 Lloyd’s Rep. 239 ........................................................ 6

Erie Countty National Gas and Fuel Co Ltd v Caroll [1911] AC 105 .................................... 25

Fercometal S.A.R.L. v Mediterranean Shipping Co SA [1989] AC 788 .................................. 24

Fiona Trust and Holding Corp and Others v Yuri Privalov and Others [2007] EWCA Civ 205

Fyffes Group Ltd v Reefer Express Lines Pty Ltd (The Kriti Rex) [1996] 2 Lloyd’s Rep. 171

........................................................................................................................................ 13, 23

GH Renton & Co Ltd v Palmyra Trading Corp [1956] 2 Lloyd’s Rep. 379 ..................... 12, 13

Ginzberg and Others v Barrow Haematite Steel Company, Ltd and McKellar [1996] 1

Lloyd’s Rep. 343 ................................................................................................................... 6

Glynn v Margetson [1893] AC 351 [1907] 1 KB 660 ............................................................... 8

Goodfellow Lumber v Verreault [1971] SCR 522 ................................................................... 15

Goose Millerd v Canadian Government Merchant Marine [1928] 32 Lloyd’s Rep. 91 ......... 12

Goulandris Bros v Goldmann & Sons [1958] 1 QB 74 ........................................................... 13

H Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd [1978] QB 791 ................................... 19

Hadji Ali Akbar & Sons Ltd v Anglo-Arabian and Persian SS Co Ltd [1906] 11 Com Cas 219

................................................................................................................................................ 8

Hadley v Baxendale [1854] EWHC J70 .................................................................................. 18

Hinde v Liddel [1875] LR 10 QB 1265 ................................................................................... 25

Howard v Shepherd [1850] 9 CB 297........................................................................................ 4

International Coffee and Fertilizer Trading Co v Mermaid Shipping Co Ltd [2002] New York

Arbitration ................................................................................................................ 19, 21, 22

Kanematsu GMBH v Acadia Shipbrokers Limited [1999] 2 FC D-71 .................................... 10

Kemp v Intasun Holidays Ltd [1987] 2 FTLR 234 .................................................................. 20

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KH Enterprise v Pioneer Container (The Pioneer Container) [1994] 2 AC 324 ...................... 4

Kruger Inc v Baltic Shipping Co [1987] .................................................................................. 14

Leduc v Ward [1888] 20 QBD 475 ........................................................................................... 3

Lekas & Drivas v Basil Goulandri [1962] AMC 2366 ........................................................... 17

Leyland Shipping Company Ltd v Norwich Union Fire Insurance Society Ltd [1918] HL AC

350........................................................................................................................................ 17

Libling and Feldman [1979] 95 LQR 270 ............................................................................... 24

Lickbarrow v Mason [1794] 5 TR 683, 101 ER 380 ................................................................. 6

Lombard North Central Plc v Butterworth [1987] Q.B 527 .................................................... 24

Lotus Cars Ltd and others v Southampton Cargo Handling Plc and Others and Associated

British Ports (The Rigoletto) [2000] 2 Lloyd’s Rep. 532 ...................................................... 5

Manbre Sacchrie Co Ltd v Corn Products Co Ltd [1919] 1 KB 198 ........................................ 6

Mehmet Dogan Bey v GG Abdeni & Co Ltd [1951] 2 KB 405................................................ 19

Mendala III Transport v Total Transport Corporation Total International Ltd and Addax Ltd

(The Wilomi Tanana) [1993] 2 Lloyd’s Rep. 41, 45-46 ........................................................ 8

Minerva Navigation Inc v Oceana Shipping AG (The Athena) [2012] EWHC 3608 (Comm) . 9

Moore v DER Ltd [1971] 1 WLR 1467 ................................................................................... 24

Motis Exports Ltd v Dampkibsselskabet Af 1912 [2000] 1 Lloyd’s Rep. 211 ........................... 7

Nisshin Shipping Co Ltd v Cleaves & Co Ltd [2003] EWHC 2602 .......................................... 3

Pacific Interlink Sdn Bhd v Owner of the Asia Star (The Asia Star) [2009] 2 Lloyd’s Rep. 387

.............................................................................................................................................. 19

Postlethwaite v Freeland [1880] 5 App Cas 599 ..................................................................... 20

Radford v De Froberville [1977] 1 WLR 1262 ....................................................................... 24

Re Polemis and Furness, Withy & Co [1921] 3 KB 560 ....................................................... 4, 5

Rey Banano del Pacifico CA v Transported Nav Ecuatorianos (The Isla Fernandina) [2000]

2 Lloyd’s Rep. 15 ................................................................................................................. 16

Robinson v Harman [1848] 1 Exch. 850 ................................................................................. 21

Sally Werheim v Chicoutimi Pulp Co [1911] AC 301 ............................................................. 21

Sedco Inc v Strathewe [1986] 800 F.2d 27, AMC 2801 (2 Cir. 1986). ................................... 16

TEAM 18 − MEMORANDUM FOR THE CLAIMANT | viii

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Seguris Banvenez SA v Oliver Drescher [1986] AMC 2168 (2 Cir NY 1985) ........................ 23

Siemens Building Technologies FE Ltd v Supershield Ltd [2010] 2 All ER (Comm) 1185 ... 19,

20

Sogem-Afrimet, Inc v M/V Ikan Selayang [1998] AMC 1366, 1384 (S.D. N.Y. 1996) ........... 23

Soules CAF v PT Transap of Indonesia [1999] 1 Lloyd's Rep. 917 .......................................... 9

South Australia Asset Management Corpn v York Montague Ltd and Banque Bruxelles

Lambert SA v Eagle Star Insurance Co Ltd [1996] UKHL 10 ............................................ 17

Spectra International v Hayesoak [1997] 1 Lloyd’s Rep. 153 ................................................. 5

Stovin v Wise [1996] AC 923 ................................................................................................... 17

Strutt v Whitnell [1975] 1 WLR 870 ........................................................................................ 24

Sucre Export SA v Northern River Shipping Ltd (The Sormovskiy 3068) [1994] 2 Lloyd’s

Rep. 266 ........................................................................................................................... 9, 10

Sun Co Inc v SS Overseas Arctic [1995] AMC 57.................................................................. 16

Sze Hai Tong Bank Ltd v Rambler Cycle Co Ltd [1959] 2 Lloyd’s Rep 114 ..................... 7, 11

The Houda [1994] 2 Lloyd’s Rep. 541 ................................................................................ 8, 10

The Queen Mary [1949] 82 Lloyd’s Rep. 303 ................................................................... 23, 24

The Rafaela S [2003] EWCA Civ 556 [2003] All E.R. (D) 289 (Apr.) (CA) ......................... 10

The Rena K [1978] 1 Lloyd’s Rep. 545 ..................................................................................... 3

The Solholt [1983] 1 Lloyd’s Rep. 602 .................................................................................... 24

The Stettin [1889] 14 PD 142..................................................................................................... 7

The Stone Gemini [1999] 2 Lloyd's Rep. 255 ...................................................................... 9, 10

The Washington [1976] 2 Lloyd’s Rep. 453 ............................................................................ 14

The Zhi Jiang Kou [1996] 1 Lloyd's Rep. 493 ......................................................................... 11

Theiss Bros v Australian SS [1955] 1 Lloydʹs Rep. 459 ............................................................ 8

Thyssen Inc v Calypso Shipping Corp SA [2000] Lloyd’s Rep. 243 ......................................... 5

Trade Star Line Corp v Mitsui & Co Ltd (The Arctic Trader) [1996] 2 Lloyd’s Rep. 449 ....... 3

Trafigura Beheer BV and another v Mediterranean Shipping Company SA (The MSC

Amsterdam) [2007] 2 Lloyd’s Rep. 622 ................................................................................ 7

TEAM 18 − MEMORANDUM FOR THE CLAIMANT | ix

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Tredegar Iron and Coal Co (Ltd) v Hawthorn Brs & Co [1902] 18 TLR 716 ........................ 24

Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528 ................... 19, 20

Vrinera Marine Co Ltd v Eastern Rich Operations Inc (The Vakis T) [2004] EWHC 1752 .. 18

Wallace [1980] 96 LQR 101 .................................................................................................... 24

White & Son Ltd v White Star Line Ltd (The Hobsons Bay) [1933] 46 Lloyd’s Rep. 189 ...... 16

White and Carter (Councils) Ltd v McGregor [1962] AC 413 ............................................... 24

STATUTES

COGSA (Carriage of Goods By Sea Act of 1992) ................................................................ 3, 4

Contracts (Rights of Third Parties) Act 1999 ............................................................................ 3

English Sale of Goods Act 1979 .............................................................................................. 12

OTHER AUTHORITIES

FOSFA (Federal Oil, Seeds and Fats Association), Contract No. 81 .................................. 6, 12

"Best Management Practices for Protection against Somalia Based Piracy”, available at

<http://www.mschoa.org/docs/public-documents/bmp4-low-res_sept_5_2011.pdf> ......... 14

Ingrid Mellingen International Maritime Security Association in cooperation with Berger

Risk Solutions, “Gulf Of Aden Piracy: Background Forecast Practical Prevention

Strategies”, available at <http://www.bergenrisksolutions.com/index.php?dokument=377>

.............................................................................................................................................. 14

Karen Troy-Davies, “An Introduction to Bills of Lading”, available at

<http://www.essexcourt.net/uploads/publications/BILLOFLD.doc> ............................... 3, 4

U.N. Security Council (UNSC), Report of the Secretary-General Pursuant to Security

Council Resolution 1897 (2009), S/2010/556, 27 October 2010 ......................................... 15

BOOKS

Aleka Mandaraka-Sheppard, Modern Maritime Law: And Risk Management (Routledge,

2007) ................................................................................................................................... 17

Andrew Tettenborn, “Hadley v Baxendale Foreseeability: A Principle Beyond its Sell-by

Date?” 23 Journal of Contract Law [2007] ......................................................................... 20

Clive R. Symmons (Eds.), Selected Contemporary Issues in the Law of the Sea (Martinus

Nijhoff Publishers, 2011) ..................................................................................................... 15

David Erickson, Edible Fats and Oils Processing: Basic Principles and Modern Practices -

World Conference Proceedings (The American Oil Chemists, 1990) ................................ 12

TEAM 18 − MEMORANDUM FOR THE CLAIMANT | x

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Debattista Charles, Bills of Lading in Export Trade (3rd

Edition, Tottel, 2009).................. 7, 10

Harvey McGregor and John Dawson Mayne, McGregor on Damages (Sweet & Maxwell,

1997) .............................................................................................................................. 17, 22

J. Judah Philip Benjamin, Benjamin’s Sales of Goods (7th

Edition, Sweet & Maxwell, 2006)

.............................................................................................................................................. 23

J.F. Wilson, “The Presentation Rule Revisited” [1995] LMCLQ 289 ....................................... 7

James Kraska, Contemporary Maritime Piracy: International Law, Strategy, and Diplomacy

at Sea (ABC-CLIO, 2011) ................................................................................................... 15

John F. Wilson, Carriage of Goods by Sea (5th Edition, Pearson & Longman, 2004) ............. 3

Joseph Chitty and H. G. Beale, Chitty on Contracts, Volume I (Sweet & Maxwell, 2000) .. 18,

19, 21, 24

Julian Cooke, et al., Voyage Charters (3rd

Edition, Informa Law, 2007) .................................. 6

Leon E. Trakman, The Law Merchant; The Evolution of Commercial Law (Fred B. Rothman

& Co., 1983) .......................................................................................................................... 4

N. Palmer and E. McKendrick (Eds.), Interests in Goods (2nd

Edition, Informa Law, 1998) ... 6

Nicholas Kouladis, Principles of English Law Relating to International Trade (Springer

Science Business Media, 2006) ............................................................................................. 7

Nili Cohen and Ewan McKendrick (Eds.), Comparative Remedies for Breach of Contract,

(Hart Publishing, 2004) ........................................................................................................ 20

Pierre Bonassies and Christian Scapel, Droit Maritime (2nd

Edition, L.G.D.J, 2010) ............ 10

Simon Baughen, Shipping Law (4th

Edition, Routledge) ..................................................... 7, 12

Steven J. Hazelwood, P & I Clubs: Law and Practice (3rd

Edition, LLP, 2000) .................... 10

Thomas Gilbert Carver, et al., Carver on Bills of Lading (Sweet & Maxwell, 2012)............... 4

William Tetley, Marine Cargo Claims, Volume I (4th

Edition, Thomson Carswell, 2008) ... 14,

16, 21

William Tetley, Marine Cargo Claims, Volume II (4th

Edition, Thomson Carswell, 2008) ... 9,

10

ARTICLES

Andrew Robertson, “The Basis of the Remoteness Rule in Contract” [2008] 28 Legal Studies

.............................................................................................................................................. 20

Bernard Marguet, “La Piraterie Maritime” (1999) ................................................................ 14

TEAM 18 − MEMORANDUM FOR THE CLAIMANT | xi

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C.H. Spurin, “The Law of International Trade and Carriage of Goods: Chapter Six,

Conventions Governing Contracts for the Carriage of Goods by Sea”, available at

<http://www.nadr.co.uk/articles/published/shipping/006CHAPTERSIXTRADE1.pdf> ....... 8

House of Commons Foreign Affairs Committee, “Piracy Off the Coast of Somalia: Tenth

Report of Session 2010-12”, available at <

http://www.publications.parliament.uk/pa/cm201012/cmselect/cmfaff/1318/1318.pdf> .... 15

John H. Pendleton, “Maritime Security: Actions Needed to Assess and Update Plan and

Enhance”, available at <http://www.gao.gov/new.items/d10856.pdf > ............................... 15

M.J. Hight, Mike Rodriguez, “Proceedings of the Marine Safety & Security Council” [2011]

69 The Coast Guard Journal of Safety & Security at Sea 3 ................................................ 15

TEAM 18 − MEMORANDUM FOR THE CLAIMANT | 1

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SUMMARY OF FACTS

THE PARTIES

Aardvark Limited (the “Cl t”) is the buyers of PFAD from Beatles Oils & Fats Ltd. and the

vessel Twilight Trader (the “V l”) is the vessel that carries the cargo. Twilight Carriers Inc. is

the disponent owner of the Vessel (the “R p t”)

THE SALE CONTRACT

Beatles Oils & Fat Ltd. (‘Beatles’) had sold the PFAD cargo carried by the Vessel to the Claimant

on Cost, Insurance and Freight (‘CIF’) Liverpool terms. The Claimant then entered into sub-sales

agreements for the PFAD with its buyers, Delta Limited on 2 December 2008, and Caspian BV on

20 January 2009.

THE VEGOIL VOYAGE CHARTER PARTY

The Respondent had sub chartered the Vessel to Beatles by way of a Charterparty dated 12

September 2008 (the “Ch rt rp rty”) for a voyage from the Port of Pasir Gudang, Malaysia to

Liverpool, United Kingdom.

THE SHIPMENTS

The Claimant’s cargo abroad the Vessel consisted of four shipments of PFAD weighing in a total of

4,000 metric tonnes. The cargo was shipped under B/L made in Pasir Gudang, Malaysia on 25

October 2008 (‘B/L’). The B/L incorporates the clauses of the Charterparty, including its

Arbitration Clause. The Claimant had received the B/L from Beatles on 17 March 2009.

THE INCIDENT

The cargo had sailed on 5 November 2008 from Dumai en route to Liverpool via Gulf of Aden and

Suez Canal. While the Vessel was en route from Dumai to Merseyside, it was seized by Somali

Pirates in the Gulf of Aden and was held there from 15 November 2008 to 13 February 2009. After

the release of the Vessel, the Claimant hired Aspinall Lewis International to investigate the

condition of the cargo after the hijacking in Gulf of Aden. The result of the report was that there


14


had been a contamination of arsenic in the cargo and was speculated that the cargo could have been

opened during the hijacking as the crew were detained to the bridge and was not allowed to leave

the premises. It was noted by Aspinall Lewis International that the cargo was not heated during the

piracy and after the release during the voyage to Fujairah as explained by the Master and Chief

Officer. On 20 March 2009 Beatles informed the Claimant that they had abandoned their cargo and

has then changed the destination of the cargo to Rotterdam where there is available storage and will

be discharged into the storage pending resolution of issues with the Claimant. On 20-22 March

2009 Respondent followed Beatles orders and discharged the cargo against a LOI in Rotterdam

without the production of B/L.

THE CLAIMS

On 23 March 2009 the Claimant commenced arbitration proceedings in accordance with Clause 31

of the Charterparty, citing the Respondent’s alleged breach of duties under the B/L for delivering

the cargo without the production of a B/L. Another claim has been made for compensation intended

for the damages to the cargo by the Respondent.

QUESTIONS PRESENTED

1. Whether the Tribunal has the jurisdiction to hear this dispute according to arbitration clause

contained in Article 31 of the Charterparty.

2. Whether the Respondent has the right to change the destination of the cargo.

3. Whether the Respondent has fulfilled their obligation in taking care of the cargo.

4. Whether the Claimant is entitled to recover the sum of damages which it presents.

ARGUMENTS PRESENTED

I. THE LONDON TRIBUNAL HAS JURISDICTION TO HEAR THE DISPUTE

A. The matters brought to this proceedings are governed under the Arbitration Clause

within the Charterparty


14


i. The Claimant is entitled to rely on the Arbitration Clause as a benefiting third-

party to the Charterparty

1. An owner of the cargo, despite not being addressed explicitly within the Charterparty, may

demand its enforcement as a benefiting third-party thereunder.1 Cargo owners are consistently

regarded as beneficiaries to a charter party.2 The Claimant is the purchaser of the cargo

carried on the Vessel. Hence the Claimant, apart from the shipper and charterer addressed

under the Charterparty, shall be held equally entitled to submit claims thereunder.3

2. The Claimant’s standing as a beneficiary to the Charterparty is further evinced vis-à-vis the

issued B/L.4 As held in The Arctic Trader, bills of lading issued under a charter party is

conclusive evidence of the holder’s right to claim under the contract of carriage.5 Therefore,

the Claimant is entitled to rely on the Arbitration Clause as third party to the Charterparty.6

ii. The Claimant is entitled to invoke the incorporated Arbitration Clause through

the B/L

3. A holder of the B/L is entitled to seek recourse under a Charterparty when the latter’s

Arbitration Clause is incorporated in the B/L.7 Since the B/L issued by the Respondent makes

explicit reference to incorporate the Arbitration Clause of the Charterparty, 8

the incorporation

of the clause in the B/L shall be deemed effective and the terms and conditions of the

Charterparty shall apply.9

1 Section 1, Contracts (Rights of Third Parties) Act 1999.

2 Center Optical (Hong Kong) Ltd v Jardine Transport Service (China) Ltd and Pronto Cargo Corporation [2001] 2

Lloyd’s Rep. 678. 3 Nisshin Shipping Co Ltd v Cleaves & Co Ltd [2003] EWHC 2602.

4 Section 5(1), COGSA (Carriage of Goods By Sea Act of 1992); Compania Commercial Naviera San Martin SA v

China National Foreign Trade Transportation Corp (The Costanza) [1981] 2 Lloyd’s Rep. 148, 150. 5 Trade Star Line Corp v Mitsui & Co Ltd (The Arctic Trader) [1996] 2 Lloyd’s Rep. 449, 455.

6 Karen Troy-Davies, “An Introduction to Bills of Lading”,

www.essexcourt.net/uploads/publications/BILLOFLD.doc, pp. 4-5; Leduc v Ward [1888] 20 QBD 475. 7 Nissin Shipping Co Ltd v Cleaves & Co Ltd [2003] EWHC 2602.

8 Evidence Brief, p. 15.

9 John F. Wilson, Carriage of Goods by Sea (5th Edition, Pearson & Longman, 2004), p. 236; The Rena K [1978] 1

Lloyd’s Rep. 545.


14


4. Under “to order” terms, a B/L is transferable via its delivery or endorsement. 10

The

endorsement of the B/L had been conducted legitimately by the Claimant vis-à-vis its

payment of the cargo price on 26 January 2009.11

This action complies with CAD terms of the

PFAD contract, which stipulates that the Claimant is entitled of the B/L upon the payment of

the price.12

The Claimant’s rightful endorsement hence extinguishes the rights of any prior

holder of the B/L, and transfers such to the Claimant.13

B. Alternatively, the matters brought under this proceeding are governed by the

Arbitration Clause under tort

5. The Tribunal has jurisdiction to assess the Claimant’s losses under tort. 14

Duty of care may be

owed to another even in the absence of contractual relations. 15

As stipulated by Lord Atkin in

Donoghue v Stevenson, a person near to the property of another is bound to a duty to not to

commit injury to it.16

Accordingly, it is held that cargo owners may sue carriers in tort for

damage to cargo.17

The Respondent, having carried the Claimant’s cargo, is hence bound by

its proximity to exercise such duty of care upon the Claimant.18

6. Under tort, the Claimant has the right to sue on bailment having received the ownership of the

goods through the transfer of bills of lading.19

When one person entrusts another person with

10

Karen Troy-Davies, “An Introduction to Bills of Lading”, available at,

<www.essexcourt.net/uploads/publications/BILLOFLD.doc>, pp. 4-5. 11

Article II(1), Carriage of Goods by Sea Act 1992 (COGSA 1992) ; Evidence Brief, p. 25. 12

Leon E. Trakman, The Law Merchant; The Evolution of Commercial Law (Fred B. Rothman & Co., 1983), p. 31. 13

Borealis AB v Stargas Ltd (The Berge Sisar) [2002] 2 AC 205. 14

Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 11, p. 18. 15

Astro Vencedor Compania Naveria SA of Panama v Mabanaft GmbH 204 [1971] 2 All ER 1301, 1307; Re Polemis

and Furness, Withy & Co [1921] 3 KB 560. 16

Donoghue v Stevenson [1932] UKHL 100. 17

Thomas Gilbert Carver, et al., Carver on Bills of Lading (Sweet & Maxwell, 2012), pp. 214-215; Howard v

Shepherd [1850] 9 CB 297. 18

Anns v Merton London Borough Council [1978] AC 728, 751; Caparo Industries v Dickman [1990] UKHL 2. 19

KH Enterprise v Pioneer Container (The Pioneer Container) [1994] 2 AC 324, 338.


14


the possession of goods to deliver to them (the bailor), the bailee is obliged to ensure the

condition of the goods.20

7. Claims on tort would not fall outside of the broad scope of the Arbitration Clause of the

Charterparty. The Arbitration Clause contained under Article 31 of the Charterparty includes

“any disputes arising from the Charter Party”. When the arbitration clause of a charter party

covers “all disputes” arising from its performance, its jurisdiction extends to claims of tort.21

8. Thyssen Inc v Calypso Shipping Corp addressed the question of the standing of non-signatory

parties to a charter party in submitting tort claims. The court held in the affirmative,

maintaining that the breadth of the arbitration clause which is parallel to the provision in the

present case to extend to all disputes including those under the charter party and bills of

lading including those involving non-signatories.22

9. The exceptions to a broad reading of the Arbitration Clause can only be had when it makes

specific limitations to the scope of disputes that are to be referred to arbitration.23

As no such

limitations are present under the Charterparty, the Tribunal has jurisdiction to assess the

Respondent’s obligation to the Claimant under tort.24

II. THE RESPONDENT HAS BREACHED ITS DUTY TO DELIVER THE CARGO TO

THE CLAIMANT IN LIVERPOOL

A. The Respondent is obliged to deliver the cargo to the Claimant

i. The Claimant is entitled to receive delivery of the cargo under the B/L due to its

appointment as consignee

10. It is the Respondent’s obligation, as the party with physical possession of the cargo, to deliver

20

Spectra International v Hayesoak [1997] 1 Lloyd’s Rep. 153; Lotus Cars Ltd and others v Southampton Cargo

Handling Plc and others and Associated British Ports (The Rigoletto) [2000] 2 Lloyd’s Rep. 532. 21

Re Polemis and Furness, Withy & Co Ltd [1921] 3 KB 560; Astro Vencedor Compania Naviera SA of Panama v

Mabanaft GmbH (The Damianos) [1971] 2 QB 588. 22

Thyssen Inc v Calypso Shipping Corp SA [2000] Lloyd’s Rep. 243, 245. 23

Fiona Trust and Holding Corp and Others v Yuri Privalov and Others [2007] EWCA Civ 20. 24

Astro Vencedor Compania Naviera SA of Panama v Mabanaft GmbH (The Damianos) [1971] 2 QB 588.


14


the goods to the holder of the document and to no one else.25

As documents of title, bills of

lading entitle its holder the right of possession of the cargo.26

11. The available B/L provides that delivery shall be made to consignee “to order,” a practice

which is accepted in trading customs.27

In “to order” bills of lading, the carrier should only

deliver the goods to the person who can present the bills of lading,28

which in the present case

is the Claimant.

ii. The Cl t’ t tl t t r c v l v ry f th c rg also emanates from its

position as the cargo owner under the PFAD contract

12. The Claimant and Beatles had agreed to the sales of cargo carried by the Respondent on CIF

terms.29

Under a CIF sales contract, the title of goods passes to the buyer whenever the

transport document had been transferred and the payment has been made.30

Hence, ownership

of the cargo is fulfilled by the delivery of documents and not by the physical delivery of the

goods.31

13. Given that the payment of the price of the cargo was made on 26 January 2009, and the B/L

was received on 17 March 2009, the Claimant has become the rightful owner of the cargo by

the time the Respondent discharged the cargo in Rotterdam on 20-22 March 2009.32

Therefore, the Claimant is entitled to receive delivery of the cargo.

B. The Respondent breached its obligation to deliver by discharging the cargo without the

presentation of the Bills of Lading

25

N. Palmer and E. McKendrick (Eds.), Interests in Goods (2nd

Edition, Informa Law, 1998), p. 549. 26

Julian Cooke, et al., Voyage Charters (3rd

Edition, Informa Law, 2007), p. 502. 27

Lickbarrow v Mason [1794] 5 TR 683, 101 ER 380. 28

East West Corp v DKBS 1912 [2003] 1 Lloyd’s Rep. 239. 29

FOSFA (Federal Oil, Seeds and Fats Association), Contract No. 81; Evidence Brief, p. 2. 30

Ginzberg and Others v Barrow Haematite Steel Company, Ltd and McKellar [1996] 1 Lloyd’s Rep. 343. 31

Manbre Sacchrie Co Ltd v Corn Products Co Ltd [1919] 1 KB 198. 32

Evidence Brief, pp. 25, 29, 68, 72.


14


14. Delivering cargo to a person who is not entitled to its possession would amount to a

misdelivery in breach of the Respondent’s obligation to deliver.33

Under English law, the

Respondent is obliged to only discharge its cargo with the presentation of the B/L.34

As held

in the case of Motis Exports, carriers would be acting negligently were they to deliver goods

not against the production of the original bills of lading.35

The Respondent had breached this

duty by unloading the cargo at Rotterdam without the B/L on 20-22 March 2009.36

15. A carrier who delivers goods without the presentation of the bills of lading is held to always

bear liability for any losses suffered from that act.37

The bearing of such a risk on discharge is

especially held true when the carrier is aware that “the person to whom he surrenders

possession is not in fact entitled to the goods.” 38

The Respondent was made aware by the

Claimant’s notice of 20 March 2009 that it was the rightful owner of the cargo, and to not

discharge at Rotterdam.39

Therefore, any expenses incurred by the Claimant due to the

unloading of the goods in Rotterdam instead of the agreed port of destination are within the

Respondent’s liability.40

C. The Respondent was bound to deliver the cargo at Liverpool, as the port of discharge

has not been modified to Rotterdam

i. The Liberty Clause cannot justify discharge at Rotterdam, as this would defeat the

purpose of the Charterparty

16. The Respondent cannot rely on the Liberty Clause set out under Clause 29 of the Charterparty

33

Trafigura Beheer BV and another v Mediterranean Shipping Company SA (The MSC Amsterdam) [2007] 2 Lloyd’s

Rep. 622. 34

Motis Exports Ltd v Dampkibsselskabet Af 1912 [2000] 1 Lloyd’s Rep. 211, 216; Simon Baughen, Shipping Law (4th

Edition, Routledge, 2009), p. 64; Nicholas Kouladis, Principles of English Law Relating to International Trade

(Springer Science Business Media, 2006), p. 265; Debattista Charles, Bills of Lading in Export Trade (Tottel,

United Kingdom, 2009), p. 26-27. 35

Motis Exports Ltd v Dampkibsselskabet Af 1912 [2000] 1 Lloyd’s Rep. 211, 216. 36

Evidence Brief, p. 68. 37

J.F. Wilson, “The Presentation Rule Revisited” [1995] LMCLQ 289; The Stettin [1889] 14 PD 142; Sze Hai Tong

Bank Ltd v Rambler Cycle Co Ltd [1959] AC 576. 38

Barclay’s Bank Ltd v Customs and Excise [1963] 1 Lloyd’s Rep. 81, 89. 39


The Stettin [1889] 14 PD 142.


14


to justify their misdelivery to Rotterdam. It is the common standing to disregard and deem

liberty clauses inadmissible when it would defeat the object and intent of the charter party or

bills of lading under which it is contained.41

17. The Respondent attempts to rely on the Liberty Clause to exonerate their liability for

delivering at a port substituting Liverpool. However, the present Liberty Clause, if put into

operation, would essentially deny the Claimant of receipt of the cargo. Liberty clauses which

gives “power to the shipowners to proceed anywhere that they pleased” to select alternate

ports and discharge their liability there must be set aside.42

Hence, as its application would

defeat “the object of the bill of lading [that the Claimant] shall have their goods carried to

London”, the Respondent cannot rely on the clause to exempt itself of liability.43

ii. Alternatively, the change of port of discharge to Rotterdam was not validly made

18. Even if the Liberty Clause is held applicable, the change of port of discharge to Rotterdam

was not validly made, as the B/L was not properly altered to reflect the change. The alteration

of bills of lading cannot be made unilaterally, and require the concurrence of their current

holder.44

Once a carrier has complied with a direction or request to issue transferable bills of

lading under a specified contract, and is exposed to contractual liabilities to third parties, that

direction cannot subsequently be varied without the consent of the holder.45

19. As held in Davidson v Gwynne, a carrier cannot alter the destination of the vessel without

recalling the bills of lading.46

As nothing of the sort was stated, it was held that after giving an

order to the captain to go to the original port and then another order to go elsewhere, the

41

Theiss Bros v Australian SS [1955] 1 Lloydʹs Rep. 459; C.H. Spurin, “The Law of International Trade and Carriage

of Goods: Chapter Six, Conventions Governing Contracts for the Carriage of Goods by Sea”, available at

<http://www.nadr.co.uk/articles/published/shipping/006CHAPTERSIXTRADE1.pdf>, p.7 42

Glynn v Margetson [1893] AC 351 [1907] 1 KB 660. 43

Hadji Ali Akbar & Sons Ltd v Anglo-Arabian and Persian SS Co Ltd [1906] 11 Com Cas 219. 44

Mendala III Transport v Total Transport Corporation Total International Ltd and Addax Ltd (The Wilomi Tanana)

[1993] 2 Lloyd’s Rep. 41, 45-46. 45

The Houda [1994] 2 Lloyd’s Rep. 541, 558-559; Mendala III Transport v Total Transport Corporation Total

International Ltd and Addax Ltd (The Wilomi Tanana) [1993] 2 Lloyd’s Rep. 41, 45. 46

Davidson v Gwynne [1810] 104 ER 149 12 East 381, 389-390.


14


carrier is nonetheless liable to actions “for the breach of engagement upon all those bills of

lading.”47

To validly alter the port of discharge from Liverpool to Rotterdam, the Respondent

was legally required to approach the Claimant and issue a separate document containing the

proposed correction and issue that separate document to it.48

20. Additionally, the Claimant has no duty to transfer the B/L to Beatles or to receive the cargo in

Rotterdam without its consent. Having planned to take delivery in Liverpool and attempted to

seek out alternate buyers for the PFAD there, the Claimant cannot be expected to consent to a

change of delivery to Rotterdam. Instead, it would have been prudent for Respondent to

comply with the Claimant’s order when the latter rejected to discharge the cargo in

Rotterdam. 49

D. The LOI issued by the Beatles did not justify the discharge at Rotterdam

21. Beatles had issued an LOI to indemnify the Respondent against all losses in bringing the

cargo to Rotterdam.50

However, the Claimant submits that the LOI cannot preclude the

Respondent of liability for its wrongs to the Claimant.

22. Firstly, as a question of policy, the use of LOI to shift responsibility on damages is heavily

criticized under judicial decisions.51

The bypassing of the bills of lading through letters of

indemnity on discharge is deemed to devalue commercial purpose of the bills of lading as a

document of security. 52

Hence, as held by the scholar William Tetley, relying on such

procedure amounts to fraudulent misrepresentation and is deemed to be “especially

irresponsible.”53

23. Accordingly, it is the position of most courts to reject the application of LOI when the

47

Ibid. 48

Soules CAF v PT Transap of Indonesia [1999] 1 Lloyd's Rep. 917. 49

Minerva Navigation Inc v Oceana Shipping AG (The Athena) [2012] EWHC 3608 (Comm),¶16. 50


The Stone Gemini [1999] 2 Lloyds Rep. 255. 52

Sucre Export SA v Northern River Shipping Ltd (The Sormovskiy 3068) [1994] 2 Lloyd’s Rep. 266, ¶274. 53

William Tetley, Marine Cargo Claims, Volume II (4th

Edition, Thomson Carswell, 2008), p. 2014.


14


shipowner was aware that the issuer of the letter was not entitled to the cargo, yet had

nonetheless discharged the cargo upon the letter.54

As the Respondent was made aware by the

Claimant that Beatles was not the rightful owner of the cargo yet chose to discharge it

nonetheless,55

the LOI cannot provide the Respondent with “a [defense] to wrongful

discharge of the cargo against a letter of indemnity […].”56

24. Secondly, the use of LOI would not affect the Respondent’s liability to the Claimant.57

The

wording of the LOI, taken in its usual meaning, had not affected a shift of liability from the

Respondent to Beatles.58

The consequence of the LOI merely extends to require the signatory,

Beatles, to compensate the carrier for all consequences of the delivery without the B/L, but

not to displace the Respondent’s legal obligations to the Claimant as the holder of the B/L.59

25. This view is consistent with practice exhibited in The Houda, whereas a charterer who had

accepted a letter of indemnity in return for discharging without securing the bills of lading

was nonetheless liable to the holder of the bills of lading.60

Therefore, the Respondent is still

liable towards the loss suffered by the Claimant despite the existence of the LOI.

E. The R p t’ bl g t t l v r th c rgo to the Claimant is not exhausted by the

discharge

26. The provisions of the B/L and discharging in Rotterdam does not exempt the Respondent

from liability for its failure in delivering the cargo to the Claimant. Prima facie, the B/L

appears to liberate the Respondent from liability for loss or damage to cargo after its

54

Steven J. Hazelwood, P & I Clubs: Law and Practice (3rd

Edition, LLP, 2000), p. 193. 55


The Stone Gemini [1999] 2 Lloyd’s Rep. 255, at 266, 267; Sucre Export SA v Northern River Shipping Ltd (The

Sormovskiy 3068) [1994] 2 Lloyd’s Rep. 266, 274. 57

Debattista Charles, Bills of Lading in Export Trade (3rd

Edition, Tottel, 2009), pp. 40-41. 58

William Tetley, Marine Cargo Claims: Volume II (4th

Edition, Thomson Carswell, 2008), p. 2017. 59

Pierre Bonassies and Christian Scapel, Droit Maritime (2nd

Edition, L.G.D.J, 2010) , pp. 710-711; The Rafaela S

[2003] EWCA Civ 556, [2003] All ER (D) 289 (Apr.) (CA), ¶96. 60

The Houda [1994] 2 Lloyd’s Rep. 541; Kanematsu GMBH v Acadia Shipbrokers Limited [1999] 2 FC D-71.


14


discharging.61

However, the Respondent’s breach of obligation does not fall within the realms

of such accepted exceptions, as an obligation for the carrier to deliver the cargo to the

consignee may still persist even after its discharge. 62

27. Clauses of similar wording to the present case are found in Sze Hai Tong Bank Ltd.,63

whereas

the shipowner had protected themselves to end their responsibility “absolutely after [the

goods] are discharged.” Notwithstanding such provisions, it was found that such wording did

not cover misdelivery conducted by the shipowner, as misdelivery is considered as

fundamental breach that would debar shipowner from enforcing the exception clause.64

Hence, the Respondent cannot rely on the Exception Clause to preclude its liability despite

the fact that the goods were discharged at Rotterdam. 65

III. THE RESPONDENT HAS BREACHED ARTICLE III RULE 2 OF THE HAGUE-

VISBY RULES

A. The Respondent is obliged to properly and carefully handle, carry, keep, and care for

the goods carried

28. The Hague-Visby Rules, which has been incorporated to the B/L and the Charterparty by

means of the General Paramount Clause,66

binds the Respondent to respect its provisions. The

Claimant submits that the Respondent failed to complete its duty to properly and carefully

handle, carry, keep, and care for the goods carried, a duty stipulated under Article III Rule 2

of the Hague-Visby Rules.

29. As held in Canadian Government Merchant Marine, if the cargo was shipped in good order

and condition yet was delivered damaged “in a manner which was preventable and ought not

to have been allowed to occur”, there is sufficient evidence of a breach of obligation under

61

Evidence Brief, pp. 14-21. 62

The Zhi Jiang Kou [1996] 1 Lloyds Rep. 493, 554-555. 63

Sze Hai Tong Bank Ltd v Rambler Cycle Co Ltd [1959] 2 Lloyd’s Rep. 114. 64

Ibid., p. 121; Alexander v Railway Executive [1951] 2 KB 882. 65

Carewins Development (China) Ltd v Bright Fortune Shipping Ltd [2006] 4 HKC 1. 66

Evidence Brief, pp. 15, 17, 19, 21. The General Paramount Clause incorporates the Hague-Visby Rules into the B/L


14


Article III Rule 2.67

In the present case, the act of piracy off the Somalian coast68

had caused

the cargo to no longer comply with its GMQ specification.69

When a failure to deliver the

goods to the correct receiver arises through an act done during the carriage prior to discharge,

then there is a breach of an obligation under Article III Rule 2.70

B. The Respondent failed its obligation to properly care for the cargo

i. The Respondent failed to maintain the quality of cargo to be of a Good

Merchantable Quality

30. The oil carried by the Respondent is required to be of “a good merchantable quality of the

agreed description and specifications” at the place of delivery.71

Under Section 14(6) of the

English Sale of Goods Act 1979, goods are considered as Good Merchantable Quality

(‘GMQ’) when they are “fit for the purpose […] for which goods of that kind are commonly

bought […].” With regards to oil, PFAD purchased on GMQ basis or with a FOSFA

Certificate are most often used for edible consumption,72

much like in the present case.

31. The Claimant’s negligence had allowed for the occurrence of the piracy attack, which

rendered the PFAD to be not fit for the food/feed chain, and hence no longer GMQ.73

Examination of the cargo revealed that the PFAD was indeed contaminated as evidenced with

the increased presence of arsenic.74

32. Even without any physical damage to the cargo, neglect amounting to a fall of its market

value constitutes a failure of the Respondent’s obligation to prevent loss of the cargo.75

67

Goose Millerd v Canadian Government Merchant Marine [1929] AC 223, 234; [1928] 32 Lloyd’s Rep. 91, 95. 68


Ibid. 70

Cia Portorafti Commerciale v Ultramar Panama Inc (The Captain Gregos) [1990] 1 Lloyd’s Rep. 310. 71

FOSFA 81. Clause 2, Quality and Specifications. 72

David Erickson, Edible Fats and Oils Processing: Basic Principles and Modern Practices - World Conference

Proceedings (The American Oil Chemists, 1990), p. 374. 73


Ibid., p. 38. 75

Simon Baughen, Shipping Law (4th

Edition, Routledge, 2009), p. 124; GH Renton & Co Ltd v Palmyra Trading

Corporation of Panama [1957] AC 149.


14


Damages of cargo would include pure economic losses, such as the decline of sales value,

even in the absence of physical damage.76

33. Goods intended to be used in the food chain must abide by the principle of traceability, with

loss of value if the cargo is unaccounted for. 77

Due to the cargo being subjected to piracy, it

can no longer be used for the food chain and a loss on its sales value is incurred. It is shown,

ipso facto, the cargo was damaged under the Respondent’s care.

ii. The Respondent had failed to implement a system of care for the cargo due to its

unseaworthiness

34. The term “properly” attached to the Respondent’s obligation to carefully care for the cargo

under Article III Rule 2 denotes that the carrier must not only take care of the cargo, but also

apply some “element of skill”78

or a “sound system.” 79

In other words, the Respondent is

obliged to act prudently in the method chosen and agreed for performing the contract of

carriage.80

35. If a carrier fails to adhere to generally accepted professional standards in carrying the cargo, it

would be considered in breach of its obligation under Article III Rule 2. An unseaworthy

vessel, improperly equipped to undergo its journey, is deemed unfit for the care of its cargo.81

In the case of Associated Metals v Olympic Mentor, the Court held that the shipowner’s

failure to provide equipment to monitor the temperature condition of the cargo was a lack of

due diligence on the part of the carrier, which rendered the vessel unseaworthy to carry and

properly care for the goods of the type they were carrying.82

76

Goulandris Bros v Goldmann & Sons [1958] 1 QB 74, 104. 77


GH Renton & Co Ltd v Palmyra Trading Corp [1956] 2 Lloyd’s Rep. 379, 388; [1957] AC 149, 166; Albacora SRL

v Westcott & Laurance Line Ltd [1966] 2 Lloyd’s Rep. 53, p. 64 (HL). 79

GH Renton & Co Ltd v Palmyra Trading Corp [1957] AC 149, 166. 80

Ibid. 81

Fyffes Group Ltd v Reefer Express Lines Pty Ltd (The Kriti Rex) [1996] 2 Lloyd’s Rep. 171. 82

Associated Metals v Olympic Mentor [1997] AMC 1140 (S.D. N.Y. 1997).


14


36. In the present case, the Vessel was also unseaworthy as the Respondent had not provided

sufficient equipment and preparation measures to prevent the boarding of pirates on board the

Vessel. The Respondent had only commenced an anti-pirate watch,83

which could not be

rendered sufficient by the professional standards applicable today,84

as will be explained

infra. Thus, as a result, the Vessel was unable to properly care for the goods carried on board.

C. The Respondent cannot rely upon the exemptions of liability under Article IV Rule 2 of

the Hague-Visby Rules

i. The peril was foreseeable

37. The Respondent cannot exempt itself from liability by means of the protection of “peril of the

sea” clause enumerated in Article IV Rule 2 of the Hague-Visby Rules. Perils of the sea, or

similar exceptions, constitute perils only if they are unavoidable or if they “would not be

expected in the area of the voyage, at the time of the year […]”.85

Damages from perils that

could have been avoided should be ascribed to error in the care of the cargo, rather than to

peril, because the damage could have been avoided.86

38. In the present case, such acts of piracy were expected in the area of voyage, with the seas

around the Horn of Africa being the world’s number one target of piracy in 2008.87

ii. The peril was surmountable

39. The defense of a peril succeeds only where the carrier has been reasonably diligent in taking

precautions to avoid such foreseeable occurrences.88

It is the Respondent’s responsibility as

83


The measures that Respondent took did not comply with the Best Management Practices against Piracy, a standard

in marine protection against acts of piracy, see “Best Management Practices for Protection against Somalia Based

Piracy”, available at <http://www.mschoa.org/docs/public-documents/bmp4-low-res_sept_5_2011.pdf> 85



The Washington [1976] 2 Lloyd’s Rep. 453 at 459-460 (Fed. C. Can.); Kruger Inc v Baltic Shipping Co [1988] 1 FC

262 at pp. 227 and 278, [1987] 11 FTR 80 at p. 96 (Fed. C. Can.). 87

Ingrid Mellingen International Maritime Security Association in cooperation with Berger Risk Solutions, “Gulf Of

Aden Piracy: Background Forecast Practical Prevention Strategies”, available at

<http://www.bergenrisksolutions.com/index.php?dokument=377>, p. 4. 88

Bernard Marguet, “La Piraterie Maritime”, 1999, 99 at p. 104 as cited in William Tetley, Marine Cargo Claims,

Volume I (4th

Edition, Thomson Carswell, 2008), p. 1091.


14


carriers to take “seamanlike precautions” while navigating in areas with threat of piracy.89

If

negligence is established in employing self-protective measures in ship security plans, the

carrier is not entitled to rely on the peril of sea defense.90

40. The leading authoritative standards on prudent measures to be taken in deterring piracy are

the BMP.91

The BMP is considered as an accepted industry practice, codifying the

precautionary measures that owners should follow to protect their vessel off the coast of

Somalia. Failure to adhere to them is viewed as a breach of the duty of care of the owner to

persons on board and cargo.92

41. It is evident that the Respondent had failed to adhere to such protective measures, having

merely set up anti-piracy watch in face of the threat of piracy. Instituting anti-piracy watch

without any other protective measures has been shown to be insufficient in deterring pirates.93

There is no evidence that the Respondent had applied the prudent self-protection measures

mandated by the BMP, such as registering the voyage to local patrol agencies, using sea-water

sprays to hinder boarding, to rigging the deck of the ship with wire.94

42. Had proper measures in facing pirates been adhered to, the Vessel would not have been taken

as the measures prescribed under BMP have proven to effectively repel pirate attacks.95

Therefore, as the Respondent did not take sufficient prudent measures to repel the danger of

piracy, it may not rely on a defense of peril.

89

James Kraska, Contemporary Maritime Piracy: International Law, Strategy, and Diplomacy at Sea (ABC-CLIO,

2011), p. 203. 90

Goodfellow Lumber v Verreault [1971] SCR 522, 39. 91

John H. Pendleton, “Maritime Security: Actions Needed to Assess and Update Plan and Enhance”, available at

<http://www.gao.gov/new.items/d10856.pdf >, p. 59. 92

Clive R. Symmons (Eds.), Selected Contemporary Issues in the Law of the Sea (Martinus Nijhoff Publishers, 2011),

p. 161. 93

M.J. Hight and Mike Rodriguez “Proceedings of the Marine Safety & Security Council” [2011] 69 The Coast

Guard Journal of Safety & Security at Sea 3, p. 21; Clive R. Symmons (Eds.), Selected Contemporary Issues in the

Law of the Sea (Martinus Nijhoff Publishers, 2011), p. 161. 94

House of Commons Foreign Affairs Committee, “Piracy Off the Coast of Somalia: Tenth Report of Session 2010-

12”, available at < http://www.publications.parliament.uk/pa/cm201012/cmselect/cmfaff/1318/1318.pdf>, p. 19. 95

U.N. Security Council (UNSC), Report of the Secretary-General Pursuant to Security Council Resolution 1897

(2009), S/2010/556, 27 October 2010.


14


D. The Respondent did not take cargo care measures during the captivity nor its

subsequent voyage

43. The Respondent remains responsible to care for the cargo notwithstanding the incident of

piracy.96

The duty of care towards the cargo is not automatically absolved due to the

exemptions under Article IV Rule 2 of the Hague Visby Rules.97

The operation of an excepted

peril, which is then followed by a distinct failure to properly care for the goods carried, would

nonetheless attach the carrier liability for the consequences of that latter failure.98

44. As part of the duty to take “care” of the cargo, the Respondent must in its best ability take

care for the goods carried pursuant to the applicable standards of common carrier or in cases

of special goods, suited to the instructions of the charterer.99

Once a carrier receives special

instructions for cargo care, he must follow those instructions and be held responsible for non-

compliance.100

45. In accordance with the Charterparty, the Vessel’s crew members had received special

carrying instructions from the Charterer, i.e. to heat the cargo during the voyage and a week

prior to arrival.101

However, this duty is breached, as there was no heating applied to the cargo

taken during the period of captivity or during the subsequent voyage to Fujairah.102

This

neglect exhibits that the Respondent failed to “properly care for” the goods carried within its

Vessel.

IV. THE RESPONDENT IS LIABLE FOR LOSSES INCURRED BY THE CLAIMANT

DUE TO ITS NEGLIGENCE

A. The R p t’ ct fulf lls the element of causation

96

William Tetley, Marine Cargo Claims, Volume I (Thomson Carswell, 2008), p. 1335. 97

Sedco Inc v Strathewe 800 F.2d 27, [1986] AMC 2801 (2 Cir. 1986). 98

Rey Banano del Pacifico CA v Transported Nav Ecuatorianos (The Isla Fernandina) [2000] 2 Lloyd’s Rep. 15. 99

Sun Co Inc v SS Overseas Arctic [1995] AMC 57, 64. 100

White & Son Ltd v White Star Line Ltd (The Hobsons Bay) [1933] 46 Lloyd’s Rep. 189 101


Ibid.


14


46. The Claimant is entitled to claim damages incurred due to the Respondent’s actions, as the

Respondent’s breach of duty was the operative cause to the Claimant’s losses with respect to

the devaluation and loss of the cargo.103

47. Firstly, as a cause-in-fact, Respondent is liable for the Claimant’s losses as such would not

have been incurred “but for” its negligence.104

Notwithstanding the chain of events leading to

the devaluation and loss of the cargo, the Respondent’s negligence was an essential

requirement of the inflicting of the damage.105

Had the Respondent been adequately prepared

for such peril, the “Vessel [could have been] successfully defended”,106

and the damage

caused by the piracy attack would not have occurred.

48. Secondly, as a matter in law, the Respondent’s actions were the proximate cause of the

contamination of the PFAD. The legal cause to damage is one which was proximate in

inefficiency, and hence is to be assessed through a test in intervening event.107

A defense of

novus actus interveniens to disprove causation would rely on a distinct event occurring

between the allegedly wrongful act and occurrence of harm as the actual cause of damage.108

However, this defense is unavailable when the negligence of the party at loss caused the

occurrence of the intervening event. 109

As without the Respondent’s negligence, the

intervening event of the piracy attack would not have occurred, it is not entitled to rely on this

defense.

49. Additionally, the Claimant submits that the Respondent’s liability for damages arising from

misdelivery to Rotterdam cannot be precluded by citing the need to alter its destination to

safeguard its interest or that of the cargo. Under this defense the need to discharge would only

103

Stovin v Wise [1996] AC 923, 931. 104

South Australia Asset Management Corp v York Montague Ltd and Banque Bruxelles Lambert SA v Eagle Star

Insurance Co Ltd [1996] UKHL 10. 105

Lekas & Drivas v Basil Goulandri [1962] AMC 2366, 2375 (2 Cir. 1962). 106

Barnett v Chelsea & Kensington Hospital [1968] 1 All ER 1068. 107

Leyland Shipping Company Ltd v Norwich Union Fire Insurance Society Ltd [1918] HL AC 350, 369. 108

Aleka Mandaraka-Sheppard, Modern Maritime Law: And Risk Management (Routledge, 2007), p. 612. 109

Harvey McGregor and John Dawson Mayne, McGregor on Damages (Sweet & Maxwell, 1997), ¶6-152.


14


arise as a consequence of the Respondent’s failure to deter the hijacking. Applying the views

in The Torenia, “where the facts disclose that the loss was caused by the concurrent causative

effects of an excepted and a non-excepted peril, the carrier remains liable.”110

Therefore, it is

shown that the link of causation between the Claimant’s damages and the Respondent’s

actions is established.

B. The damages incurred as a result of the R p t’ ct fulf ll th t t f

remoteness

50. The Respondent is to be held liable for the damages incurred by the Claimant as they satisfy

the test on remoteness established under English law, namely that of foreseeability and the

Respondent’s assumption of liability over the losses.111

i. The loss was foreseeable

51. A party in breach is liable for all and any damages which was a “probable result of the

breach” of contract at the time of its conclusion.112

For this requirement to be satisfied, it

suffices that damages are not unlikely; but it does not require that the damages be completely

foreseeable.113

52. The Respondent may submit that it was not directly aware of the Claimant’s intention to

immediately resell the cargo. However, they nonetheless remain liable for losses thereupon,

as it was within their reasonable contemplation that should the cargo fail to be delivered to the

Claimant, it was “not unlikely” that losses are to be incurred as a result of the breach.114

110

Aktieselskabet de Danske Sukkerfabrikker v Bajamar Compania Naviera SA (The Torenia) [1983] 2 Lloyd's Rep.

210, 218. 111

Hadley v Baxendale [1854] EWHC J70, Joseph Chitty and H. G. Beale, Chitty on Contracts, Volume I (Sweet &

Maxwell, 2000), ¶26-109. 112

Hadley v Baxendale [1854] EWHC J70. 113

Vrinera Marine Co Ltd v Eastern Rich Operations Inc (The Vakis T) [2004] EWHC 1752. 114

Brown v KMR Services Ltd [1995] 4 All ER 598, 621 (Stuart-Smith L.J.).


14


Applying the test of the use of cargo in the “usual course of things,”115

it is common practice

for PFAD to be resold,116

and for damages to be awarded for the innocent party’s disability in

concluding sub-agreements with a third-party.117

Hence the Respondent must remain liable, as

by the nature of its trade, should have possessed imputed knowledge of the loss; it must

therefore remain liable. 118

53. In any case, the Respondent could not have been unaware that should the cargo be damaged,

they would be liable for the expenses associated with its replacement.119

The losses incurred

by the Claimant can hardly be perceived as “unusual losses,”120

as notwithstanding the

purpose of the cargo, it was reasonable for the Respondent to perceive that its failure in

performing the Charterparty would lead to a need for the receiver to replace the undelivered

goods.121

The Respondent must accept responsibility for the loss is that of disappointment,

when the “important purpose of the contract was to provide enjoyment” of the goods.122

ii. The Respondent had assumed responsibility for its failure to deliver the goods to

Liverpool

54. Under the second limb of the remoteness test, the Claimant may recover the losses it incurred

as the Respondent had accepted responsibility thereof.123

55. The Respondent is liable for the claimed damages as it has “reasonably [been] regarded as

having assumed responsibility for losses of the particular kind suffered […].”124

The extent of

115

Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB. 528; East Ham Corp v Bernard Sunlley &

Sons Ltd [1966] AC 406, 450-451; C Czarnikow Ltd v Koufos (The Heron II) [1969] 1 AC 350; H Parsons

(Livestock) Ltd v Uttley Ingham & Co Ltd [1978] QB 791. 116

Pacific Interlink Sdn Bhd v Owner of the Asia Star (The Asia Star) [2009] SGHC 91, [2009] 2 Lloyd’s Rep. 387. 117

C Czarnikow Ltd v Koufos (The Heron II) [1969] 1 AC 350, 382-383. 118

Mehmet Dogan Bey v GG Abdeni & Co Ltd [1951] 2 KB 405. 119

Evidence Brief, pp. 22-23. Claimant has entered into a sales contract with Delta Limited and Caspian BV for the

PFAD that Respondent carried on its Vessel. 120

Joseph Chitty and H. G. Beale, Chitty on Contracts, Volume I (Sweet & Maxwell, 2000), ¶¶26-063; 26-100A;

Siemens Building Technologies FE Ltd v Supershield Ltd [2010] 2 All ER (Comm) 1185. 121

International Coffee and Fertilizer Trading Co v Mermaid Shipping Co Ltd, New York Arbitration: 2 April 2002. 122

Joseph Chitty and H. G. Beale, Chitty on Contracts, Volume I (Sweet & Maxwell, 2000), ¶26-125. 123

Ibid., ¶26-110A. 124

Ibid.


14


a party’s liability is founded on an interpretation of the contract as a whole and as seen in its

commercial setting.125

56. As the carrier of goods, the Respondent had undertaken to be liable for the delivery of the

cargo.126

Hence, despite being a third-party to the sale contract between the Claimant and

Beatles, the Respondent’s extent of work renders it nonetheless liable for the actions it took or

did not take to cause the non-delivery of the cargo127

as elaborated supra.

57. Additionally, the Respondent is deemed to have assumed liability when it had knowledge that

a risk of damage exists but it nonetheless proceeded with its actions.128

The Claimant had

made known to the Respondent by virtue of its letter on 20 March 2009 that their failure to

deliver would vest them with liability over its loss,129

and hence the Respondent cannot plead

lack of knowledge. 130

C. The types of damages invoked by the Claimant are reasonable

58. For the Respondent’s breach of obligation, the Claimant claims the value of the carried

PFAD, as well as the costs incurred in London associated with obtaining PFAD to satisfy the

requests of its sub-buyers.

i. The Claimant is entitled to be restituted of the PFAD losses

59. The Claimant submits that it is entitled to recover the full amount of the purchase price of the

undelivered PFAD, amounting to USD 2,990,000 at USD 747.50 per metric ton.131

Accordingly, compensation would ordinarily include the value of the promised performance

125

Andrew Robertson, “The Basis of the Remoteness Rule in Contract” [2008] 28 Legal Studies, p. 172- 196; Andrew

Tettenborn, “Hadley v Baxendale Foreseeability: A Principle Beyond its Sell-by Date?” [2007] 23 Journal of

Contract Law, p. 120-147; Nili Cohen and Ewan McKendrick (Eds.), Comparative Remedies for Breach of Contract

(Hart Publishing, 2004), p. 249 -286. 126

Postlethwaite v Freeland [1880] 5 App Cas 599, 619. 127

Siemens Building Technologies FE Ltd v Supershield Ltd [2010] 2 All ER (Comm) 1185. 128

C Czarnikow Ltd v Koufos (The Heron II) [1967] 3 All ER 686, 692; Victoria Loundry v Newman Industries, 2

[1949] 1 All ER 997. 129


Kemp v Intasun Holidays Ltd [1987] 2 FTLR 234. 131

Evidence Brief, p. 69.


14


of which the party at loss was deprived of.132

Upon failure to satisfy a contract to transfer

goods to the Claimant, it is reasonably assumed that the Claimant will obtain performance by

purchasing substitute goods which conform to the contractual requirements.133

60. Under the principle restitutio in integrum, the Claimant is entitled to be monetarily restored to

his exact financial position prior to the occurrence of the Respondent’s breach.134

Had the

Respondent complied with its obligation to send the cargo to Liverpool as it is due, the

Claimant would have been in possession of the USD 747.50 per metric ton worth of PFAD

cargo. Therefore, the expenses of purchasing replacement PFAD are recoverable, as they

would have put the Claimant in the same position it would have occupied had the breach not

occurred. 135

ii. The Claimant is entitled towards replacement expenses for the damages arising

fr th R p t’ ctions

61. The Claimant is further entitled to claim damages of USD 522.50 pmt for the 4,000 metric

tonnes of replacement PFAD to sell to their sub-buyers in Liverpool. Damages flowing from a

breach are not limited to those necessary to put the aggrieved party where it would have been

no breach. Instead, damage could also include costs incurred in arranging substitute cargo.136

The Claimant is hence entitled to claim damages in the “difference between the costs […] of

the substitute purchase and the price fixed in the original contract […].”137

As these expenses

132



Joseph Chitty and H. G. Beale, Chitty on Contracts, Volume I (Sweet & Maxwell, 2000), pp. 1606-7, ¶20-016. 134


Edition, Thomson Carswell, 2008), p. 751; Robinson v

Harman [1848] 1 Exch. 850, 855 135

Sally Wertheim v Chicoutimi Pulp Co [1911] AC 301, 307; William Tetley, 2008, Marine Cargo Claims, Volume I

(4th

Edition, Thomson Carswell, 2008), p. 758; . 136

International Coffee and Fertilizer Trading Co v Mermaid Shipping Co Ltd, New York Arbitration: 2 April 2002; C

Sharpe & Co Ltd v Nosawa [1917] 2 KB 814. 137

Joseph Chitty and H. G. Beale, Chitty on Contracts, Volume I (Sweet & Maxwell, 2000), pp. 1606-7, ¶20-016.


14


are only made necessary with the Respondent’s non-fulfillment of delivery, Claimant’s

expenses of USD 2,090,000 are recoverable.138

iii. The Respondent is obliged to cover the expenses of the Dutch proceedings

62. The Respondent is to be held liable for the legal fees incurred by the Claimant in the Dutch

Proceedings. When fees are incurred in previous legal proceedings related to the securing of

the rights of the disputing parties, they shall be held recoverable. 139

63. The Dutch proceedings were undertaken to secure the Claimant’s right as legal owner of the

cargo by preventing its sale and arresting the Vessel as guarantee. As specifically affirmed in

The Borag, judicial expenses in proceedings prior to the present to obtain the disputed goods

following seizure is recoverable, as it was “reasonably foreseeable that the plaintiff would

seek to obtain its release and for that purpose would obtain a guarantee for [the fulfillment of

its rights].” 140

D. The proper standard of damages applied is the prices of PFAD at Liverpool

64. The standard of damages for which the Respondent is liable for shall refer to Liverpool PFAD

prices on or about 30 March 2009, being the agreed time and date of performance of the

Charterparty.141

65. The Hague-Visby Rules prescribe that the total amount of damages recoverable “shall be

calculated by reference to the value of such goods at the place and time at which the goods are

discharged from the ship in accordance with the contract, or should have been so

discharged.”142

66. Under both the Charterparty and the B/L, the PFAD cargo should have been discharged at

Liverpool, Merseyside. Reference to Liverpool prices instead of Rotterdam is further affirmed

138

Harvey McGregor and John Dawson Mayne, McGregor on Damages (Sweet & Maxwell, 1997), p. 1008. 139

International Coffee and Fertilizer Trading Co v Mermaid Shipping Co Ltd, New York Arbitration: 2 April 2002. 140

Compania Financiera ''Soleada'' SA v Hamoor Tanker Corp Inc (The Borag) [1981] 1 WLR 274. 141


Article IV Rule 5(b) of the Hague-Visby Rules.


14


in the The Kriti Rex proceedings, whereas damages arising from failure of having the cargo

“at the agreed destination when they ought to have arrived” were deemed to reflect the market

value of the goods at the agreed time and place.143

67. Even when the Respondent argues that the Vessel deviated from its course due to hindrances

at sea and in exercise of the Liberty Clause, the standard of damages remains to be the initial

agreed place of destination, and not the place of misdelivery.144

The standard place to

purchase replacement goods in non-delivery is their place of intended destination,

notwithstanding any claims that the replacement could have been obtained elsewhere.145

68. Furthermore, the nature of the terms of the sale of cargo pin-points Liverpool as the place of

reference of price.146

Amidst the numerous possible markets relevant for the purpose of

assessing damage, the primary test utilized for a CIF contract is that of the place of tender of

documents. 147

In C Sharpe & Co Ltd, the damages were assessed by reference to the London

market, as it was deemed as the relevant standard as it was the place at which the documents

should have been tendered.148

69. Hence, applying the proper measure for loss of cargo cases, the Claimant is entitled to claim

damages based upon the market value of the goods at Liverpool, being at the time and place

they were to have been delivered.149

E. The Claimant has not excessively mitigated its losses by purchasing substitute cargo in

Liverpool

143

Fyffes Group Ltd and Caribbean Gold Ltd v Reefer Express Lines Pty Ltd and Reefkrit Shipping Inc (The Kriti Rex)

[1996] QB 171, 193. 144

Ibid. 145

The Queen Mary [1949] 82 Lloyd’s Rep. 303, 320. 146


J. Judah Philip Benjamin, Benjamin’s Sales of Goods (7th

Edition, Sweet & Maxwell, 2006), ¶19-186 148

C. Sharpe & Co Ltd v Nosawa [1917] 2 KB 814; J. Judah Philip Benjamin, Benjamin’s Sales of Goods (7th

Edition,

Sweet & Maxwell, 2006), ¶19-178. 149

Seguris Banvenez SA v Oliver Drescher 761 F.2d 855, 860-61, [1986] AMC 2168 at p. 217 (2 Cir. N.Y. 1985). See

also Sogem-Afrimet, Inc v M/V Ikan Selayang [1998] AMC 1366, 1384 (S.D. N.Y. 1996).


14


70. The Claimant is fully entitled to the sum of damages it is applying for, as it has properly

mitigated its losses in light of the misdelivery of the PFAD cargo.150

71. The standard of mitigation is not a high one, as the Respondent remains a wrongdoer and

failure to mitigate would not exonerate its liability.151

Although the Respondent may suggest

that the Claimant should have made reference to Rotterdam PFAD prices, or purchased the

goods in Rotterdam and subsequently ship them to Liverpool, the Claimant, “will not be held

disentitled to recover the cost of [mitigation] measures merely because the party in breach can

suggest that other measures […] might have been taken.”152

72. In mitigating its losses, the Claimant is not under any obligation to do anything other than in

the ordinary course of business,153

which does not preclude the purchasing of replacement

goods at the Claimant’s place of business instead of elsewhere less convenient.154

In any case,

the rules of mitigation do not apply to the innocent party’s choice between different remedies

open to him following the other party’s breach of contract: even when the choice of remedy

which is less costly would be more reasonable to take, the Claimant is not bound to act

“reasonably” in exercising its choice.155

73. The Respondent furthermore cannot argue that it was more financially sound to seek

replacement of the goods in Rotterdam, as there is nothing obliging the Claimant to take the

most economical measure in mitigating its losses.156

The innocent party is not required to

guard against the increase of price in mitigating their losses.157

The Claimant is merely bound

150

Joseph Chitty and H. G. Beale, Chitty on Contracts, Volume I (Sweet & Maxwell, 2000), p. 1667, ¶16-101. 151

Bulkhaul Ltd v Rhodia Organique Fine Ltd [2008] EWCA Civ 1452. 152

Banco de Portugasl v Waterlow [1932] AC 452, 506. See also Moore v DER Ltd [1971] 1 WLR 1467, 1479. 153

Dunkirk Colliery Co v Lever [1878] 9 Ch D 20 (approved in British Westinghouse Electric Co Ltd v Underground

Electric Rys [1912] AC 673, 689). 154

The Queen Mary [1949] 82 Lloyd’s Rep. 303,320. 155

Strutt v Whitnell [1975] 1 WLR 870; The Solholt [1983] 1 Lloyd’s Rep. 602, 608-609 CA; Lombard North Central

Plc v Butterworth [1987] QB 527. 156

Tredegar Iron and Coal Co (Ltd) v Hawthorn Brs & Co [1902] 18 T.L.R. 716, 716; White and Carter (Councils)

Ltd v McGregor [1962] AC 413; Fercometal S.A.R.L. v Mediterranean Shipping Co SA [1989] AC 788. 157

Libling and Feldman [1979] 95 LQR 270, 282. See also Radford v De Froberville [1977] 1 WLR 1262, 1278; and

Wallace [1980] 96 LQR 101, 341.


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to recover damages on the basis of the cost of the nearest available equivalent of the lost

goods,158

which may be higher in price.159

74. Thus, the Claimant’s actions in mitigating its losses are deemed reasonable and the damages

sustained by them are recoverable.

PRAYER FOR RELIEF

For the reasons submitted above, the Claimant respectfully requests this Tribunal to:

DECLARE that this Tribunal has the jurisdiction to hear this proceeding;

Further,

ADJUDGE that the Respondent had breached the contract of carriage, its duties under the B/L

and/or in bailment for the tort of conversion;

Further,

ADJUDGE that the Respondent is liable to the Claimant for the following damages:

1) USD 2,990,000 for the loss of cargo, alternatively USD 2,090,000 for loss of use of the

cargo;

2) USD 138,843.14 in court fees and USD 107,913.12 in legal fees to secure the Claimant’s

ownership of the cargo with respect to the Dutch proceedings;

3) Interest on a compound basis pursuant to s. 49 of the Arbitration Act 1996; and

4) Costs with compound interest in costs.

158

Hinde v Liddel [1875] LR 10 QB 1265; Erie County National Gas and Fuel Co Ltd v Caroll [1911] AC 105, 117. 159

Diamond Cutting Works v Treifus [1956] 1 Lloyd’s Rep. 216.

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