17TH ANNUAL INTERNATIONAL MARITIME LAW ARBITRATION MOOT COMPETITION 2016

King’s College London

Respondent’s Memorandum

Claimant: Zeus Shipping and Trading Company Respondent: Hestia Industries

Team No: 16

Daniel Ask Alex Braune

Cristina Harshman Joshua Thomson

 

 

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CONTENTS LIST OF AUTHORITIES..............................................................................................3 SUMMARY OF THE FACTS…………………………………………………….......6 PART I - Arbitration Agreement…...……………….………………………..……….8

1) The law applicable to the arbitration agreement…………………………....8 2) The scope of the arbitration agreement……………………………………10 3) The tribunal does not have jurisdiction to determine the claimant’s

demurrage pleading………………………………………………………..14

PART II - Laytime and Demurrage…………..…...………………………………….15

1) The Vessel left the territorial limits of Hades……………………………...15 2) The Vessel left the loading place…………………………………………..16 3) The Owners were at fault…………………………………………………..18 4) Laytime was suspended……………………………………………………19

PART III - Frustration……………...………………………………………………………….....20

1) The Charter Party was frustrated by delay……………………………....20 2) The commercial risk undertaken by the parties……………………….....22 3) Effect of frustration on the Charter Party…………………………….….23

PART IV - Salvage……………………………………..……………………………23

1) A recognised operation of salvage……………………….........................23 2) Salvage reward…………………………………………………………...27

PART V – Prayer for Relief…………………………………………………………

 

 

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LIST OF AUTHORITIES

A. LEGISLATION Commonwealth of Australia Navigation Act 2012 International Salvage Convention 1989

B. CASES Adelfamar SA v Silos e Mangimi Martini SpA (The Adelfa) [1988] 2 Lloyd’s Rep 466 Arsanovia Ltd & Ors v Cruz City 1 Mauritius Holdings [2012] EWHC 3702 Bank Line Ltd v Arthur Capel and Co [1919] AC 435 Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251 Barret v Dutton (1815) 4 Camp 333 Blane Steamships Ltd v Minister of Transport [1951] 2 KB 965 Chartbrook Homes Ltd v Persimmon Homes Ltd [2009] UKHL 38 Classic Maritime Inc v Lion Diversified Holdings Berhad [2009] EWHC 1142 Compania Naviera Aeolus SA v Union of India (The Spalmatori) [1964] AC 868 DGM Commodities Corp v Sea Metropolitan SA (The Andra) [2012] EWHC 1984 Edwinton Commercial Corp v Tsavliriss Russ (Worldwide Salvage and Towage) Ltd (The Sea Angel) [2007] 1 Lloyd's Rep 335 EL Oldendorff & Co GmbH v Tradax Export SA [1974] AC 479 Ellis Shipping Corp v Voest Alpine Intertrading (The Lefthero) [1991] 2 Lloyd's Rep 599 FA Tamplin Steamship Co Ltd v Anglo-Mexican Petroleum Products Co Ltd [1916] 2 AC 397 Federal Commerce and Navigation Co Ltd v Tradax Export SA [1978] AC 1 French Marine v Compagnie Napolitaine d'Eclairage et de Chauffage par le Gaz [1921] 2 AC 494 Geipel v Smith (1871-2) LR 7 QB 404 Gem Shipping Co of Monrovia v Babanaft (Lebanon) SARL (The Fontevivo) [1975] 1 Lloyd's Rep 339

 

 

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Hirsch v The Zinc Corp Ltd (1917) 24 CLR 34; [1917] VLR 680 Inverkip Steamship Co Ltd v Bunge & Co [1917] 2 KB 193 Investors Compensation Scheme Ltd v West Bromwich Building Society (No.1) [1998] 1 WLR 896 Jackson v Union Marine Insurance Co Ltd (1874) LR 10 CP 125 Premium Nafta Products Limited and others v. Fili Shipping Company Limited and others (“Fiona Trust”) [2007] UKHL 40 Price v Livingstone (1882) 9 QBD 679 Rainy Sky SA v Kookmin Bank [2011] UKSC 50 Re Ropner Shipping Co Ltd and Cleeves Western Valleys Anthracite Collieries Ltd [1927] 1 KB 879 Scottish Navigation Co Ltd v WA Souter & Co [1917] 1 KB 222 Sulamerica CIA Nacional de Seguros SA and others v Enesa Engenharia SA and others [2012] EWCA Civ 638 Taylor v Caldwell (1863) 3 B & S 826 The Aztecs (1870) 2 Asp MLC 326 The Charlotte (1843) 2 Wm Rob 68 The Duke of Manchester (1847) 6 Moo P C 90 The Gas Float Whitton (No 2) [1897] AC 337 The Lord Dufferin (1848) 7 N.O.C. xxxiii The Pa Mar [1999] 1 Lloyd’s Rep 338 The Strathnaver (1875) 1 App Cas 58 The  Sava  Star  [1995]  2  Lloyd’s  Rep.  134 Troilus (Cargo Owners) v Glenogle (Owners, Masters and Crew) (The Troilus) [1951] AC 820

C. TREATISES Halsbury’s Laws of Australia

 

 

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Kennedy & Rose, Law of Salvage (6th edition, Sweet and Maxwell, 2002)

 

 

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Summary of the facts On 1 July 2014, Hestia Industries (the Charterers) made a request to Zeus Shipping

and Trading Company (the Owners) for a proposal for a voyage charter to transport

the Charterers’ cargo of LNG from Hades to Poseidon. The Charterers’ request made

it clear that the voyage conceived of was to be completed by 30 October 2014 +/- 3

days. The parties completed an agreement for a voyage charter (the Charter Party)

of the MV Athena (the Vessel) on 22 July 2014. The Charterers and the Owners

agreed that any dispute arising under the agreement would be arbitrated in London,

while any dispute not arising out of the terms of the Charter Party could not be so

arbitrated.

The Vessel arrived at the Port of Hades at 0914 on 3 October 2014, when the Master

tendered his Notice of Readiness to load. At midday on 3 October 2014 there were

protests in the Port of Hades, which were observed by the Master. The Master

reported his observations to the Owners by email at 1208 on 3 October 2014,

requesting instruction whether to proceed with loading. The Master proceeded with

loading at 1430 on 3 October 2014. The Owners later instructed the Master to proceed

with the loading at 1300 on 4 October 2014. The loading was completed by 2350 on 6

October 2014. The protests did not seem to interrupt the process of loading in any

significant way.

The Vessel received Customs clearance, Port clearance and had the Vessel’s papers

returned to the Master, at which point the Vessel’s visit to the Port of Hades came to

an end. At 0900 on 7 October 2014 the Vessel had embarked on the carrying voyage

 

 

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and was under the complete control of the Owners. The Charterer had no obligations

to fulfil under the Charter Party during the carrying voyage.

In an unexpected turn of events, a coup backed by the Hades Military overthrew the

incumbent Parliament. The President of the new regime instructed the Hades Coast

Guard to intercept the Vessel and have it return to the port. The Coast Guard

intercepted the Vessel, at some time on 7 October 2014, once it was already outside

the territorial limits of Hades. The Master returned the Vessel to the Port of Hades, in

the mistaken belief that as the Vessel was Hades flagged he was obliged to follow the

Coast Guard’s instruction. The Owners were made aware of the Master’s errors at

1608 and relieved him of his duties in response at 1800 on 8 October 2014.

The Charterers were only made aware of the Vessel returning to the berth through the

Owners’ shipping portal and expressed their concerns, requesting from the Owners an

explanation for the deviation of the Vessel from the carrying voyage. On 15 October

2014 the Owners claimed that the Vessel was within the territorial limits of Hades, in

contravention of all of the evidence and in a cynical attempt to claim that laytime had

continued to accrue, so that the Charterers would be liable for demurrage on the

expiration of the remaining laydays.

The Charterers immediately rejected this position, reminding the Owners of their

liability to deliver the Charterers’ cargo to Poseidon by 2 November 2014 +/- 3 days,

a date which must have been in the contemplation of the Owners, having drawn up

the contracts for the voyage Charter Party in response to the Charterers’ request for

delivery to take place within those dates.

 

 

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PART I

THE ARBITRATION AGREEMENT

1) THE LAW APPLICABLE TO THE ARBITRATION AGREEMENT

1. It is submitted that the law governing the arbitration agreement is the same as the

law of the seat of the arbitration (lex arbitri). The lex arbitri is the law of

England and Wales.

2. Traditionally English courts have applied the law governing the substantive

contract to the arbitration agreement. However, more recent judgments have

revisited this approach and applied the law of the seat of the arbitration.

3. The leading case on determining the law governing the arbitration agreement is

SulamericaCIA Nacional de Seguros SA and others v Enesa Engenharia SA and

others1, which has authoritatively been cited in more recent case law2.

1. In Sulamerica, the Court of Appeal considered an appeal against an anti-

suit injunction restraining Brazilian proceedings and gave guidance on

determining the law governing an arbitration agreement between the

parties.

2. Moore-Bick LJ, giving the leading judgment identified a three-stage test to

determine the law of the arbitration agreement:

3. whether the parties had made an express choice as to what law should

govern the arbitration agreement;

4. whether the parties had made an implied choice as to what law should

govern the arbitration agreement;

                                                                                                               1 [2012] EWCA Civ 638. 2 Arsanovia Ltd v Cruz City 1 Mauritius Holdings [2012] EWHC 3702 (Comm). 2 Arsanovia Ltd v Cruz City 1 Mauritius Holdings [2012] EWHC 3702 (Comm).

 

 

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5. what jurisdiction the arbitration agreement has its closest and most real

connection to.

4. In Sulamerica, Moore-Bick LJ was unable to find anything in the contract

between the parties which amounted to an express choice of law governing the

arbitration agreement. He then considered whether or not the parties’ choice of

Brazilian law as the substantive law of the contract amounted to an implied

choice of Brazilian law as the law governing the arbitration agreement. He

concluded that this was not the case, because the parties’ choice of London as the

seat of the arbitration meant that they must have foreseen and intended for

English law to apply to any arbitration commenced under the contract,

suggesting that they intended for English law to apply to all aspects of the

arbitration clause, and under Brazilian law Enesa would have to consent to the

arbitration agreement for it to be enforceable—something which would

undermine the entire purpose of the arbitration clause.

5. Finally, Moore-Bick LJ considered to which jurisdiction the arbitration

agreement had its closest and most real connection. He had the following to say

on the issue: “In my view an agreement to resolve disputes by arbitration in

London, and therefore in accordance with English arbitral law, does not have a

close juridical connection with the system of law governing the policy of

insurance, whose purpose is unrelated to that of dispute resolution; rather, it has

its closest and most real connection with the law of the place where the

arbitration is to be held and which will exercise the supporting and supervisory

 

 

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jurisdiction necessary to ensure that the procedure is effective. It’s closest and

most real connection is with English law.”3

6. In the present case the parties have failed to make an express choice as to what

law should govern the arbitration agreement. It is also submitted that there is no

evidence to suggest that they have impliedly chosen for the substantive law of the

Charter Party (the law of Western Australia) to govern the arbitration agreement.

In fact, the parties’ choice of London as the seat of the arbitration suggests that

they foresaw and intended for English law to apply to any arbitration proceeding,

further suggesting that they thereby intended for English law to apply to all

aspects of the arbitration agreement.

7. Additionally, it is submitted that the arbitration agreement has its closest and

most real connection to English law. The purposes of the Charter Party and the

arbitration agreement are very different, the purpose of the former is to lay out

the terms of the agreement between the two parties, whereas the purpose of the

latter is to determine how and where disputes arising out of the Charter Party

should be adjudicated. Accordingly, the arbitration agreement does not have a

close juridical connection with the system of law governing the Charter Party.

The agreement to have disputes in London, in accordance with English arbitral

law, is indicative of the fact that the parties, objectively speaking, intended for

English law to govern all aspects of the arbitration agreement.

                                                                                                               3 Sulamerica CIA Nacional de Seguros SA v Enesa Engenharia SA [2012] EWCA Civ 638, [32].

 

 

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2) THE SCOPE OF THE ARBITRATION AGREEMENT

1. In Fiona Trust4  the House of Lords held that in construing the scope of an

arbitration agreement, the starting point should always be a strong presumption

that the parties to the agreement intended for all of their disputes to be

determined in a single forum, unless the language of the arbitration clause,

properly construed, suggested otherwise5. Lord Hoffman, quoting from the

judgment of Longmore LJ in the Court of Appeal, acknowledged that this

presumption can easily be rebutted by saying: “if any businessman did want to

exclude disputes about the validity of a contract, it would be comparatively easy

to say so.”6

2. It is submitted that, properly construed, the arbitration agreement rebuts the

presumption that Owner and Charterer wanted all of their disputes to be

determined through arbitration.

3. In construing a contractual clause one must have regard to Lord Hoffman’s

speech in Investors Compensation Scheme7. Lord Hoffman set out five key

principles for interpreting contractual clauses:

1. Interpretation is the ascertainment of the meaning which the document

would convey to a reasonable person having all the knowledge which

would reasonably have been available to the parties in the situation in

which they were at the time of the contract;

                                                                                                               4 Premium Nafta Products Limited v Fili Shipping Company Limited (“Fiona Trust”) [2007] UKHL 40. 5 Ibid, [13]. 6 Ibid. 7 Investors Compensation Scheme v West Bromwich Building Society [1997] UKHL 28.

 

 

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2. Background knowledge includes absolutely anything which would have

affected the way in which the language of the document would have been

understood by a reasonable man;

3. It excludes the pre-contractual negotiations of the parties and their

declarations of subjective intent;

4. The meaning of the words in the contract must be deduced with against the

relevant background information i.e. contextually and not literally;

5. The language of the document must be interpreted on the assumption that

people do not easily make linguistic mistakes.

4. In BCCI8 Lord Hoffman elaborated on the principles he set out four years prior

by saying that there were “no conceptual limits” as to what can be regarded as

background information.9

5. In Chartbrook10 Lord Hoffman acknowledged that allowing evidence of previous

communication between the parties to the contract “would not be inconsistent

with the English objective theory of contractual interpretation”.11 He also

provided useful guidance on the exclusionary (third) rule, stating: “The rule

excludes evidence of what was said or done during the course of negotiating the

agreement for the purpose of drawing inferences about what the contract meant.

It does not exclude the use of such evidence for other purposes: for example, to

establish that a fact which may be relevant as background was known to the

parties…”.12  

                                                                                                               8 Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251. 9 Ibid, [39]. 10 Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38 11 Ibid, [33]. 12 Ibid, [42].

 

 

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6. In order to properly construe the arbitration agreement it is imperative to have

regard to a letter from Charterers’ managing director to the Owners dated 16 July

2014.13 The letter made it abundantly clear that Hestia was not prepared to

arbitrate disputes that do not arise out of the terms of the Charter Party, such as

an allegation that one party or the other was induced to enter into the contract by

way of a misrepresentation.

7. It is submitted that a dispute as to whether or not the Charter Party is frustrated is

not a dispute arising out of the terms of the Charter Party, because, like

misrepresentation, it is a vitiating factor and therefore does not stem from or arise

out of the terms of a contract but is rather a factor which affects the terms and the

validity of a contract.

8. It is submitted that, on an objective reading, Hestia’s letter to Zeus establishes a

fact known to both parties—that disputes which do not arise out of the terms of

the Charter Party are not to be arbitrated and therefore forms part of the relevant

background. This relevant background information is key in understanding the

scope of the arbitration agreement, because a reasonable person, having access to

this relevant background information, would understand that the arbitration

agreement excludes disputes that do not arise out of the terms of the Charter

Party, such as a dispute as to whether or not the contract is frustrated.

9. Alternatively, it is submitted that the letter sent from Hestia to Zeus, dated July

16th 2014, does not form part of the pre-contractual negotiations but amounts to a

counter-offer, in which Hestia clearly establishes the scope of the arbitration

agreement, and to which Zeus assents without complaint.

                                                                                                               13 Letter from Hestia Industries to Zeus Shipping, dated 16 July 2014 (p 25).

 

 

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10. It is further submitted that, following Fiona Trust14, there is no distinction

between the phrases ‘arising out of’ and ‘arising under’ or any other variation of

those phrases and that, in the premises, whatever phrase is used in the Charter

Party it has the same meaning.

11. Rainy Sky15 established that where the words used in a contract are unambiguous

the court must give effect to those words, even if their construction leads to an

uncommercial result. The words used in the arbitration agreement are

unambiguous and properly construed the agreement excludes a dispute as to

demurrage. Effect must be given to the meaning of the words.

3) THE TRIBUNAL DOES NOT HAVE JURISDICTION TO DETERMINE

THE CLAIMANT’S DEMURRAGE PLEADING

1. If the Charter Party is found to be frustrated, the outcome of the demurrage

pleading, whatever it may be, will be irrelevant. It follows that the arbitral

tribunal cannot make a conclusive decision as to the demurrage pleading until the

frustration issue is resolved and therefore does not, at the present moment, have

jurisdiction to determine the demurrage pleading.

2. Furthermore, general considerations of justice and fairness, by which the

arbitration proceedings may be governed16, demand that arbitration of the

demurrage pleading be stayed until the frustration issue is resolved because it

would be inequitable for the arbitral tribunal to enforce an award of damages if

the Charter Party would later be found to be frustrated.

                                                                                                               14 Premium Nafta Products Limited v Fili Shipping Company Limited (“Fiona Trust”) [2007] UKHL 40. 15 Rainy Sky SA v Kookmin Bank [2011] UKSC 50. 16 Clause 30(d)(i) of the Charter Party (p 21).

 

 

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3. In DGM Commodities17 the Charterer’s argued that a frustrating event released

them from paying demurrage to the cargo receivers. The arbitral tribunal held

that the Charter Party was not frustrated and that the charterers were required to

pay demurrage to the cargo receivers. The charterers appealed to the Commercial

Court which ruled on both the frustration and demurrage pleadings. The outcome

was the same.

4. The important point which can be deduced from this case is that had the Court

decided that the Charter Party was frustrated the tribunal’s decision with regards

to the damages owed to the cargo receivers would have been pointless. The

frustration pleading and the demurrage pleading are inextricably linked and

having the tribunal decide on one and not the other is of no practical use.

5. If two inextricably linked claims which relied heavily on the same evidence were

to be heard by two separate entities (a Court and an arbitral tribunal) a great deal

of uncertainty would be cast on the independence of arbitral tribunal’s because of

the possibility of the arbitrator’s being influenced by the Court’s findings of fact

and and law. This would amount to judicial supervision of arbitral proceedings,

something which would contradict the principle of judicial non-interference.

6. It follows that the tribunal does not have jurisdiction to rule on the demurrage

pleading.

                                                                                                               17 DGM Commodities Corp v Sea Metropolitan Sa [2012] EWHC 1984 (Comm).

 

 

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PART II

LAYTIME AND DEMURRAGE

1) THE VESSEL LEFT THE TERRITORIAL LIMITS OF HADES

1. The respondent denies that the Vessel was prevented from leaving the Port of

Hades by the Coast Guard, because the Vessel did in fact leave the Port of Hades.

The facts support the inference that the Vessel was outside the territorial limits of

Hades. It would be illogical to hold that the Vessel could simultaneously be

positioned both within the Port of Hades, where it is subject to the laws of Hades,

and outside the territorial limits of Hades, where it is not so subject.

1. First, the Master told the Coast Guard that the Vessel was outside the territorial

limits of Hades.18

2. Secondly, the Coast Guard was not really sure whether the Master was correct

about the Vessel being outside of the territorial limits of Hades and did not

have the capacity to verify the Master's assertion.19

3. Thirdly, the Coast Guard did not attempt to rely on the position of the ship in

ordering it to return to the berth. Instead, he relied on the fact that the Vessel

was Hades flagged, in order to get the Master to comply with his directions.20

1. These circumstances indicate a tacit understanding between the Coast

Guard and the Master that Vessel was more likely than not outside the

territorial limits of Hades. The flagging of the Vessel was the critical factor

which led the Master to follow the Coast Guard's direction to return to the

berth.

                                                                                                               18 Memorandum from Jim Payne, Commander of the Hades Coast Guard, to President Simmons and General Makepeace, dated 8 October 2014 (p 57). 19 The Hades Advocate, 'Inside a Coast Guard operation' (25 October 2014) (p 62). 20 Memorandum from Jim Payne, Commander of the Hades Coast Guard, to President Simmons and General Makepeace dated 8 October 2014 (p 57).

 

 

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4. Furthermore, the Owners believed that the Vessel was outside the territorial

limits of Hades, to the extent that the Master’s conduct in thinking otherwise

was ‘unacceptable’.21

2) THE VESSEL LEFT THE LOADING PLACE

2. Even if the Vessel was not outside of Hades’ territorial waters, it had nevertheless

left the loading place for the purposes of the Charter Party, so that laytime ceased

to accrue and liability to pay demurrage did not eventuate.

1. First, the Vessel was outside the port in its ordinary commercial sense, at

which point it was both ready to proceed and did in fact proceed on the

carrying voyage.

1. The carrying voyage typically begins when the ship has finally sailed from

the loading port and is outside the limits of such port in the ordinary

commercial sense.22

2. The Vessel must be, and was, ready to proceed.23

2. Secondly, the Vessel was at the immediate and effective disposition of the

Owners and not the Charterers. By drawing an analogy for when a vessel is

considered an ‘arrived ship’, it is possible to construct a similar test for when a

vessel can be considered to have left the loading place.

1. A vessel is an arrived ship for the purposes of a port charter party, where it

is at the immediate and effective disposition of the charterer.24

                                                                                                               21 Emails between the Owners and the Master dated 8 October 2014 (p 58). 22 Price v Livingstone (1882) 9 QBD 679 at 681 per Jessel MR, CA (port must be understood in its ordinary commercial sense). 23 EL Oldendorff & Co GmbH v Tradax Export SA [1974] AC 479 at 556 per Lord Diplock, HL. 24 Ibid, p 535 (per Lord Reid).

 

 

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2. To be an arrived ship the vessel must also be within the limits of the port

concerned.25

1. The Vessel was no longer at the immediate and effective disposition of the

Charterers, when it left the berth at 0900 on 7 October 2014, because the

Charterers no longer had any commercial interests to pursue within the

port in relation to the cargo. This means that the Vessel can properly be

considered to have finally sailed for the purposes of embarking on the

carrying voyage.26

2. Furthermore, the Vessel was at the immediate and effective disposition of

the Owners, since the Charterers had no obligations in relation to the

shipping of the cargo, while it was clearly the duty of the Owners to

proceed with all reasonable speed on completion of loading to a safe berth

at Poseidon.27 This is particularly so since the Master recorded that loading

was completed by 2350 on 6 October 2014.28

3. Clause 11 of the Charter Party is further indicative of the Owners’ control

during the carrying voyage, since it provides that they have an absolute

lien over the cargo for the payment of freight and demurrage.29

3) THE OWNERS WERE AT FAULT 3. In any event, liability for demurrage ceases once loading or unloading is

completed; then, delays not attributable to the Charterers are not the Charterers'

responsibility.30

                                                                                                               25 See Federal Commerce and Navigation Co Ltd v Tradax Export SA [1978] AC 1 at 13 per Lord Reid, HL. 26 Statement of facts in respect of MV Athena at Hades (p 54). 27 Clause 1 (p 31) and Box 9 (p 29) of the Charter Party. 28 Statement of facts in respect of MV Athena at Hades (p 54). 29 Clause 11 of the Charter Party (p 36).

 

 

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1. The general rule is said to be ‘once on demurrage always on demurrage’.31

2. However, demurrage does not continue to accrue where the Vessel is delayed

beyond the laytime by the default of the Owners.32

3. The Master was at fault in returning to the port under the direction of the Coast

Guard, because the Vessel had left the loading place. There is no authority for

the proposition that the Hades Coast Guard has the power, under the directions

of the Hades President, or otherwise, to order a Hades flagged Vessel to return

to berth at Hades from outside Hades’ territorial limits. The logical extension

of that proposition would be that a Hades flagged Vessel could be recalled by

the Hades Coast Guard from anywhere in the world. This would defeat the

commercial expectations of the parties. Once the cargo is loaded, the owner

takes responsibility for the remainder of the voyage. A finding that the Vessel

was in fact at the Charterers’ risk until it arrived at the load port would

fundamentally disrupt the allocation of risk in a voyage charter party contract.

4. In any event, even if demurrage did begin to accrue, it ceased to do so at the point

that the commercial purpose of the Charter Party became frustrated.33

1. The effect of the frustration is that, in the absence of provisions to the

contrary within the contract, the losses should lie where they fall.34

2. The terms of the Charter Party make no provision for the distribution of

liabilities arising from demurrage in the event of frustration.

                                                                                                                                                                                                                                                                                                                             30 Barret v Dutton (1815) 4 Camp 333. 31 Ellis Shipping Corp v Voest Alpine Intertrading (The Lefthero) [1991] 2 Lloyd's Rep 599. 32 Gem Shipping Co of Monrovia v Babanaft (Lebanon) SARL (The Fontevivo) [1975] 1 Lloyd's Rep 339 at 343 per Donaldson J, QB; Re Ropner Shipping Co Ltd and Cleeves Western Valleys Anthracite Collieries Ltd [1927] 1 KB 879 at 888 per Sargant LJ, CA. 33 Inverkip Steamship Co Ltd v Bunge & Co [1917] 2 KB 193 at 201 per Scrutton LJ, CA; (See PART III: FRUSTRATION). 34 Chandler v Webster [1904] 1 KB 493 at 497 per Collins MR, CA.

 

 

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3. The Owners made their first claim for the payment of demurrage on 15

April 2015, at which point the Charter Party had already been frustrated by

the delay. The losses should lie where they fell before this date.35

4) LAYTIME WAS SUSPENDED 5. Finally, Clause 9(e) provides that laytime does not run and demurrage does not

accrue even if on demurrage in the event of any delay or hindrance in shipping the

cargo actually shipped by reason of war or arrests. This is a clearly worded

exclusion in the Charter Party which provides that demurrage is no longer to

continue to be payable in the current situation.36

6. The Hades Government arrested the Vessel for the purposes of the interruption to

laytime clause. The Charter Party does not require the arrest to be legal to

constitute a suspension event.

1. First, arrests are not automatically limited to the legal actions of governments

or local authorities. In The Adelfa ‘the receivers arrested the ship’, but the

Charterers were not held not liable for the receivers’ conduct which prevented

the ship from sailing away.37

2. Secondly, there are no grounds to imply a term into the Charter Party that an

arrest would have to be legal to act as a valid suspension event, since such a

term is not a necessary incident to these kinds of contracts. It is insufficient for

the term to be a reasonable one to imply.38

                                                                                                               35 Letters and invoice from Owners to Charterers (pp 63-4). 36 Compania Naviera Aeolus SA v Union of India (The Spalmatori) [1964] AC 868 at 879. 37 DGM Commodities Corp v Sea Metropolitan SA (The Andra) [2012] EWHC 1984 (Comm) at [22]-[27] per Popplewell J; Adelfamar SA v Silos e Mangimi Martini SpA (The Adelfa) [1988] 2 Lloyd’s Rep 466. 38 Liverpool City Council v Irwin [1977] AC 239 at 256-7 per Lord Wilberforce, HL.

 

 

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3. Neither is such a term, amongst other things, ‘so obvious that it goes without

saying’ or ‘necessary to give business efficacy to the contract’, so that the

parties can be considered to have intended such a term to be included.39

7. Further, a coup is a sudden, violent and illegal seizure of power from a

government and should be considered analogous to war for these purposes, war

being capable of interrupting laytime.40

                                                                                                               39 Attorney General of Beliz v Beliz Telecom Ltd [2009] UKPC 10 at [26-7] per Lord Hoffmann, PC. 40 Oxford English Dictionary.

 

 

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PART III

FRUSTRATION

1) THE CHARTER PARTY WAS FRUSTRATED BY DELAY 8. The Charter Party was frustrated by reason of the delay which occurred in the

delivery of the cargo. The delay was so disproportionate in relation to the length

of time contemplated for the voyage that it rendered the Charter Party frustrated.

In particular, it was the uncertain nature of the delay which both parties knew

could last for many months that frustrated the Charter Party.41

1. The charter party has been frustrated because fulfillment of the commercial

purpose of the charter party was rendered impossible by the delay.42

2. The delay significantly changed the nature, and not merely the expense or

onerousness, of the contractual obligations in the contemplation of the parties,

such that it would be unjust to hold them to their stipulations.43

3. Clause 1 of the Charter Party required the Vessel to proceed with all reasonable

speed to the discharge port once the Vessel had been loaded. It was in the

contemplation of the parties that the Vessel would arrive at Poseidon on 30

October 2014 +/- 3 days, since the letters between the Charterers and Owners

indicated not only that that was what the Charterers wanted, but also that the

Owners, who did not object to the suggestion, would be able to fulfill the

Charterers’ needs.44 These letters indicate that the Vessel departing on 7

October 2014 and proceeding at all reasonable speed would have arrived at

                                                                                                               41 Geipel v Smith (1871-2) LR 7 QB 404 at 412 per Blackburn J. 42 FA Tamplin Steamship Co Ltd v Anglo-Mexican Petroleum Products Co Ltd [1916] 2 AC 397 at 404 per Earl Loreburn, HL. 43 Classic Maritime Inc v Lion Diversified Holdings Berhad [2009] EWHC 1142 (Comm) at [51] per Cooke J, QB. 44 Letters between Owners and Charterers (pp 2-3).

 

 

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Poseidon by 2 November 2014 +/- 3 days. Since it became impossible for the

Owners to fulfill this obligation the Charter Party was frustrated from 2

November 2014.

2) THE COMMERCIAL RISK UNDERTAKEN BY THE PARTIES

9. Delay is an incident of marine adventure, but in these circumstances the delay lay

outside of the commercial risk undertaken by the parties.45

1. First, the risk of delay was not taken on by either party, but made the

performance of the Charter Party commercially impracticable by defeating its

object, to transport HLNG from Hades to Poseidon within a reasonable

timeframe.46

2. Secondly, there was no default on the part of the Charterers for which the

doctrine of frustration should be made not to apply.47

3. Thirdly, the Charterers cannot be considered to have induced the frustrating

event which was completely outside of their control.48

1. The Owners themselves recognized by 10 October 2014 that effective and

timely relief could not be anticipated. ‘Plainly, if effective and timely relief

could be anticipated, the charterparty could not yet be regarded as

frustrated’,49 but that was not the case here.50

2. The current facts can be distinguished from those in The Andra and likened

to The Adelpha, since it is the fault of neither party that the Vessel was                                                                                                                45 Edwinton Commercial Corp v Tsavliriss Russ (Worldwide Salvage and Towage) Ltd (The Sea Angel) [2007] 1 Lloyd's Rep 335 at [83] per Gross J, QB. 46 Scottish Navigation Co Ltd v WA Souter & Co [1917] 1 KB 222 at 237-8 per Swinfen Eady LJ, CA; Clause 1 of the Charter Party. 47 Bank Line Ltd v Arthur Capel and Co [1919] AC 435 at 452 per Lord Sumner, HL; Ibid (No 45), [132]-[133] per Rix LJ (on the dictates of justice). 48 .(No 45), [85] per Gross J, QB. 49 Ibid. 50 Letter from the Owners to the Charterers dated 10 October 2014 (p 60).

 

 

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arrested by the Hades Government on 8 October 2014.51 Although the

arrest did not itself frustrate the Charter Party, the continuing restraint of

the Vessel did, some time before 2 November 2014, when it became

impossible for the Owners to fulfil their obligations under the Charter

Party, to proceed with all reasonable speed to the discharge port, through no

fault of their own.52

3. The Charter Party was frustrated even if the Vessel’s detention was in the

contemplation of the parties at the time they entered into the agreement.53

3) THE EFFECT OF FRUSTRATION ON THE CHARTER PARTY

4. Since the Charter Party is frustrated it ceases to bind either party.54 Parties are

relieved of their obligations under the contract after the occurrence of the

frustrating event.55 The parties’ accrued obligations, however, continue.56

5. The Charterers have no accrued obligations under the Charter Party, since

payment of freight was to take place on discharge and did not, therefore,

become due before the Charter Party was frustrated.57

                                                                                                               51 Memorandum of Coast Guard and emails between the Owners and Master (pp 57-8). 52 Ibid (No 37). 53 WJ Tatem Ltd v Gamboa [1939] 1 KB 132 at 140 per Goddard J. 54 Jackson v Union Marine Insurance Co Ltd (1874) LR 10 CP 125 at 144 per Bramwell B. 55 Hirsch v The Zinc Corp Ltd (1917) 24 CLR 34; Taylor v Caldwell (1863) 3 B & S 826, HL. 56 Blane Steamships Ltd v Minister of Transport [1951] 2 KB 965, CA. 57 French Marine v Compagnie Napolitaine d'Eclairage et de Chauffage par le Gaz [1921] 2 AC 494.

 

 

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PART IV

REWARD FOR SALVAGE

1) A RECOGNISED OPERATION OF SALVAGE

1. A salvage operation is defined by Article 1 of the International Salvage

Convention 1989 as “any act or activity undertaken to assist a vessel or any

other property in danger in navigable waters or in any other waters

whatsoever.” The International Salvage Convention 1989 is incorporated into

Australian law by virtue of the Commonwealth of Australia Navigation Act

2012.

2. There are four requirements for a salvage operation to have taken place58: (1)

There must have been a recognized subject of salvage, (2) which came into a

position of danger and required a salvage service to prevent it from being

damaged, (3) the salvage service must have been conducted by a person

falling within the definition of salvors (volunteers), (4) and that person must

have successfully or at least meritoriously contributed to success in

preventing the subject from danger.

1. In The Gas Float Whitton No. 259 Lord Esher M.R. identified the ship as

a recognized subject of salvage. Article 1 of the International Salvage

Convention 1989 also provides that the meaning of vessel is “any ship or

craft, or any structure capable of navigation”.

2. The cargo a vessel is carrying also falls within the classification of a

recognized subject of salvage.60

                                                                                                               58 Kennedy & Rose, Law of Salvage (6th edition, Sweet and Maxwell, 2002), p 1. 59 [1897] AC 337. 60 Ibid (No 58), p 95.

 

 

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3. It is submitted that following the above mentioned authority, the Vessel

and its cargo fall within the classification of a recognized subject of

salvage.

3. The danger to the subject of salvage must, for the purpose of the second

requirement, have been a real and sensible danger but must not be immediate

or imminent.61

4. For a danger to be real it is enough that at the time assistance is rendered the

subject of salvage has encountered adversity which might possibly put it at

risk of suffering loss or damage if help is not provided.62

1. Kennedy and Rose then go on to summarize the authorities mentioned in

the footnotes for the above paragraph and point out that “in order to

warrant a salvage service, there must be such reasonable, present

apprehension of danger that, in order to escape or avoid the danger, no

reasonably prudent and skilful person in charge of the venture would

refuse a salvor’s help if it were offered to him upon the condition of his

paying a salvage reward.”63 The Lord Dufferin64 also tells us that the

subject matter must not be in danger of total loss, i.e. even if the degree

of danger is low, services rendered may be considered salvage services.

5. The Vessel was drifting uncontrollably and without a means of propulsion

could have been carried back to port by the currents of the sea and can

therefore be said to have encountered adversity which put her at risk of

suffering loss or damage if the tugs had not provided assistance. Any

                                                                                                               61 The Aztecs (1870) 2 Asp MLC 326. 62 The Charlotte (1843) 2 Wm Rob 68; confirmed in The Strathnaver (1875) 1 App Cas 58, 65 and The Mount Cynthos (1937) 58 L1 L Rep 18, 25. 63 Ibid (No 60). 64 (1848) 7 N O C xxxiii.

 

 

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reasonable man on board a ship of Vessel’s size would have realized that

without a means of propulsion and drifting uncontrollably the Vessel was in

danger of colliding with another vessel out in the water, colliding with

vessels at the port or colliding with port equipment, and could not reasonably

refuse a salvor’s help. It is therefore submitted that the Vessel was in real and

sensible danger.

6. A salvage reward “is not subject to the claimant’s proving himself to be a

‘volunteer’”65 but rather proving that he was not under a contractual or other

legal obligation to provide salvage services.66 They also point out that a

“claimant’s interest in the salved property does not per se disentitle him from

claiming salvage.67

7. Article 1(a) of the International Salvage Convention 1989 describes a salvor

as any person who engages in any act or activity undertaken to assist a vessel

or any other property in danger in navigable waters or in any other waters

whatsoever.

1. “There are no rigid categories of salvor. They include any volunteer who

renders services of a salvage nature.”68 With this statement in mind and

having regard to the case law on the subject, Kennedy and Rose have

formulated a threefold description of persons entitled to claim salvage

reward: (1) A person personally engaged in a salvage service; (2) or

entitled to possession of a vessel used to provide salvage service; (3) or

                                                                                                               65 Ibid (No 58), p 211. 66 The Duke of Manchester (1847) 6 Moo P C 90, 99. 67 Ibid (No 64). 68 The Sava Star [1995] 2 Lloyd’s Rep 134 at 141 per Clarke J.

 

 

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the owner or the person entitled to possession of other property which

was used to provide a salvage service.69

2. Furthermore, it has been firmly established that towage is a salvage

service.70

8. The tugs, upon releasing the tow lines connecting them to the Vessel, and on

beginning their journey back to port had completed their contractual duty,

which was to bring Vessel out to sea. Their decision to return to the Vessel’s

side when she found herself in a position of danger was entirely voluntary

and was not something the tugs were contractually obliged to do. They

provided salvage services which, according to the Hades Advocate, preserved

“millions of dollars’ worth of ship and cargo”.71 The tugs are salvors within

the scope of the description provided by the Salvage Convention.

2) THE SALVAGE REWARD

1. Article 12 of the Salvage Convention provides that for a salvage reward to be

awarded the salvage operations must have had a useful result. Seeing as the

cargo and vessel were preserved, it’s easy to conclude that the salvage

services yielded a useful result.

2. Furthermore, Hestia Industries, as the owner of the tugs operated by

Hestug72, is a person entitled to possession of the tugs and therefore a person

entitled to possession of a vessel used to provide salvage services. As a result,

Hestia Industries is entitled to claim salvage reward.

                                                                                                               69 Ibid (No 58), p 214. 70 Troilus (Cargo Owners) v. Glenogle (Owners, Masters and Crew) (The Troilus) [1951] AC 820; The Pa Mar [1999] 1 Lloyd’s Rep 338. 71 The Hades Advocate, online edition, 7 October 2015 (p 71). 72 Letter from Charterers to Owners, dated 23 November 2015 (p 73).

 

 

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3. Salvage reward is to be calculated by reference to Article 14 of the Salvage

Convention which includes but is not limited to considerations such as the

value of the cargo and ship, the nature and degree of the danger and the skill

and efforts of the salvors in salving the vessel, other property and life.

 

 

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PART V PRAYER FOR RELIEF

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

DECLINE jurisdiction of the arbitral panel on the frustration and demurrage issues.

DECLARE the Respondent has no liability to the claimant for demurrage.

FIND the Respondent is entitled to a reward for salvage.

AWARD costs in favour of the Respondent.