EIGHTEENTH ANNUAL INTERNATIONAL MARITIME LAW ARBITRATION MOOT 2017
MEMORANDUM FOR CLAIMANT
NALSAR UNIVERSITY OF LAW
TEAM 16
ON BEHALF OF: AGAINST:
FURNACE TRADING PTE LTD. INFERNO RESOURCES SDN BHD
AND IDONCARE BERJAYA UTAMA PTY. LTD.
IN THE MATTER OF AN ARBITRATION UNDER THE INTERNATIONAL
ARBITRATION ACT (CAP 143A, REV ED 2002) AND THE SINGAPORE
CHAMBER OF MARITIME ARBITRATION RULES
COUNSEL
SWINI NIPUNA SAMIHA PRAKHAR
KHARA VARMAN GOPAL GUPTA
TEAM 16 MEMORANDUM FOR CLAIMANTS
I
TABLE OF CONTENTS
LIST OF ABBREVIATIONS ......................................................................................................... III
INDEX OF AUTHORITIES ......................................................................................................... IV
STATEMENT OF FACTS .............................................................................................................. 1
I. THIS TRIBUNAL HAS THE JURISDICTION AND/OR POWER TO GRANT LIBERTY TO THE
CLAIMANT TO SELL THE CARGO ON BOARD THE MV TARDY TESSA PENDENTE LITE. ...... 3
(A) SINGAPORE IS THE SEAT OF ARBITRATION .................................................................... 3
(B) SINGAPORE LAW AS PER SCMA RULES GIVES ARBITRAL TRIBUNALS THE POWER TO
ORDER INTERIM RELIEF ............................................................................................................ 4
(C) THE ARBITRATION CLAUSE IS WIDE ENOUGH TO COVER THIS DISPUTE .......................... 5
II. CLAIMANT IS ENTITLED TO DETENTION AND/OR OTHER DAMAGES UNDER THE
VOYAGE CHARTERPARTY. ........................................................................................................ 7
(A) REPUDIATORY BREACH OF THE CHARTERPARTY ........................................................ 7
(B) THERE IS NO BREAK IN THE CHAIN OF CAUSATION. ................................................. 11
(C) REMOTENESS OF DAMAGE ......................................................................................... 12
(D) FREIGHT IS EARNED ................................................................................................... 12
III. THE CLAIMANT IS ENTITLED TO EXERCISE LIEN ON CARGO ........................................ 13
(A) THERE IS A CONTRACTUAL RIGHT UNDER THE CHARTERPARTIES FOR THE
CLAIMANT TO EXERCISE LIEN. ............................................................................................. 14
(I) THE LIEN CLAUSE HAS SUCCESSFULLY BEEN INCORPORATED IN THE BILL OF
LADING. ............................................................................................................................. 14
(II) CLAIMANT IS A PARTY TO CONTRACT OF CARRIAGE ............................................... 15
TEAM 16 MEMORANDUM FOR CLAIMANTS
II
(B) THE CLAIMANT HAS THE ABILITY TO EXERCISE LIEN .............................................. 16
(I) FREIGHT IS EARNED ................................................................................................... 16
(II) CLAIMANT IS IN THE RIGHTFUL POSSESSION OF THE CARGO ...................................... 16
(III) LIEN CAN BE EXERCISE BEFORE COMPLETION OF VOYAGE ................... 17
(C) CLAIMANT CAN EXERCISE LIEN ON SUB-FREIGHTS ................................ 18
(I) LIEN IS NOT LOST ................................................................................... 19
(II) SHIPOWNER CAN EXERCISE LIEN ON BEHALF OF THE CLAIMANT ........... 19
IV. IT IS JUST AND NECESSARY FOR THE CARGO TO BE SOLD PENDENTE LITE .. 20
(A) THE TRIBUNAL HAS UNFETTERED JURISDICTION TO ORDER INTERIM
MEASURES ........................................................................................................ 20
(B) THERE IS NO PREJUDGMENT OF MERITS ................................................. 21
(C) IT IS URGENT TO PREVENT IRREPARABLE HARM ....................................... 21
(D) BALANCE OF HARDSHIPS TIPS IN FAVOUR OF RELIEF ............................... 22
(E) IT IS JUSTIFIED FOR THIS TRIBUNAL TO MAKE AN ORDER ON COSTS .......... 24
REQUEST FOR RELIEF .......................................................................................... 26
TEAM 16 MEMORANDUM FOR CLAIMANTS
III
LIST OF ABBREVIATIONS
BBB Before Breaking Bulk
Claimant Furnace Trading Pte Ltd.
Disponent Owner Furnace Trading Pte Ltd.
IAA International Arbitration Act, 2009
Headowners Imlam Consignorist GmbH.
Master Master of M.V. Tardy Tessa:- Tan Xiag Ming
Moot Problem International Maritime Law Arbitration Moot,
2017 Moot Scenario
Parties Claimant and Respondents
Respondent Inferno Resources Sdn Bhd.
SCMA rules Singapore Chamber of Maritime Arbitration,
2015
Shipper Idoncare Berjaya Utama Pty Ltd.
Time Charterer Furnace Trading Pte Ltd.
Time Charterparty Time Charterparty between Imlam Consignorist
GmbH and Furnace Trading Pte Ltd.
dated 15th
February, 2016.
UNCITRAL Model Law The United Nations Commission on
International Trade Law Model Law on International
Commercial Arbitration, 1985.
Vessel M.V. Tardy Tessa
Voyage Charterer Inferno Resources Sdn. Bhd.
Voyage Charterparty Voyage Charterparty between Furnace Trading
Pte Ltd. and Inferno Resources Sdn. Bhd.
dated 1st September, 2016.
TEAM 16 MEMORANDUM FOR CLAIMANTS
IV
INDEX OF AUTHORITIES
CASES
Andreas Vergottis v. Robinson David & co. ltd. (1928) 31 Ll.L.rep. 23 15
Ashville Investment Ltd v Elmer Contractors Ltd [1989] QB 488 6
Banque Keyser Ullmann S.A. v Skandia (UK) Insurance Co. [1990] Q.B. 665 11
Bhudra Chand v Betts [1915] 22 Cal LJ 566: 33 IC 347 10
Bunge v Tradax Export [1981] 2 Lloyd‟s Rep 1 7, 8, 18
Canastrand Industries Ltd. v the "Lara S”, [1993] 2 F.C.R. 553 15
Care Shipping Corporation v Latin American Shipping Corporation, [1983] 1
Lloyd‟s Rep 302 20
Cetelem SA v Roust Holdings Ltd [2005] 1 WLR 3555 22
Colonial Bank v European grain & Shipping ltd [1989] 1 Lloyd‟s Rep.431 13
Coppée Lavalin v Ken-Ren (UK), [1994] 2 Lloyd's Rep. 109 25
Dubai Islamic Bank PJSC v Paymentech Merchant Services Inc [2001] 1
Lloyd‟s Rep 65 3
Duncan v Koster (The Teutonia) [1872] LR 4 PC 171 9
Ellis Shipping Corp v Voest Alpine intertrading [1991] 2 Lloyd‟s Rep.599 13
Emilia Shipping Co v State Enterprise for Pulp and Paper Industry, [1991] 1
SLR 411 5, 22
Ethiopian Oilseeds & Pulses Export Corp v Rio del Mar Foods Inc, [1990] 1
Lloyd's Rep 86, 6
Federal Commerce Ltd v Molena Alpha Inc (The Nanfri) [1978] 1 Lloyd‟s
Rep. 287 14
Fiona Trust & Holding Corporation and others v Privalov and others [2007]
2 All ER (Comm) 1053 6
TEAM 16 MEMORANDUM FOR CLAIMANTS
V
Five Ocean Corporation v Cingler Ship Pte Ltd (PT Commodities & Energy
Resources, intervener) 17, 24
Galoo Ltd and Others v Bright Grahame Murray [1994] 1 W.L.R. 1360 11
Gorrisen v Challoner [1925] 23 Lloyd‟s Rep.61 15
Great Elephant Corp. v Trafigura Beheer BV (The Crudesky) [2014] 1
Lloyd‟s Rep. 1 11
Hadley v Baxendale [1854] 9 Ex 341 12
Heskell v Continental Express [1950] 83 Ll. L. Rep. 438 11
HKL Group Co Ltd v Rizq International Holdings Pte Ltd [2013] SGHCR 5 4, 24, 25
Hong Kong Fir Shipping Co. Ltd. v Kawasaki Kisen Kaisha Ltd. [1962] 2 QB
26 (CA) [Hong Kong Fir] 7
ICC case no 8113, 11(1) ICC Bulletin 65 (2000) 67 21
K. Karunanidhi v R. Renganathan, AIR 1973 Mad 443 20
K/S Penta Shipping A/S v Ethiopean Shipping Lines Corp(The Saga Cob)
[1991] 2 Lloyd‟s Rep 398 9
Kaverit Steel Crane Ltd v Kone Corporation [1992] 87 DLR (4th) 129 (refd) 6
Lall v 53–55 Hall Street Pty Ltd [1978] 1 NSWLR 310 20
Lombard North Central plc v Butterworth [1987] QB 527 (CA) 10
Maldives Airport Co Ltd v GMR Male International Airport Pte Ltd
[2013] SGCA 16 24
Miramar Maritime Corporation v Holborn Oil Trading Ltd.(The Miramar)
[1984] 3 WLR 1 15, 20
Molthes Rederi v Ellerman‟s Wilson Line [1926] 26 LI.L. Rep. 259 19
Parker LJ in K/S Penta Shipping AS v Ethiopian Shipping Lines Corp (The 9
TEAM 16 MEMORANDUM FOR CLAIMANTS
VI
Saba Cob) [1992] 2 Lloyd‟s Rep, 545
Photo Production Ltd v Securicor Transport Ltd [1980] AC 827 10, 11, 17, 19
Reardon Smith Line Ltd v Ministry of Agriculture, Fisheries and Food [1961]
3 W.L.R. 110 8
Santiren Shipping Ltd v Unimarined S.A (The Chrysovalandou dyo) [1981] 1
Lloyd‟s Rep 159 15
SIB International S.R.L. v. Metallgesellschaft Corporation (“The Noel Bay”)
[1989] 1 Lloyd‟s Rep. 361 9, 10
Sulame´rica Cia Nacional de Seguros SA& Ors v Enesa Engelharia Saa &
Ors [2012] EWCA Civ 638 4
The China National Foreign Trade Transportation Corp v Evolgia Shipping
Co. Ltd (Mihalios Xilas), [1978] 2 Lloyd's Rep 186 17
The Evia (No.2) [1982] 2 Lloyd‟s Rep 307 8
The Stelios B Maritime Ltd. v Ibeto Cement Co (The „Stelios B‟) [2006]
EWHC 672 (Comm.), 2007 711 LMLN 2 44F 22
Vagres Compania Maritime SA v Nissho-Iwai America Corp (The Karin
Vatis)[1988] 2 Lloyd‟s Rep.330 13
STATUTES
Chinese Maritime Code,1992 (“The CMC”) 18
International Arbitration Act, 2009 4
SCMA rules, (3rd
edn., 2015) 4, 20
UNICTRAL Model Law (1985) 5
OTHER AUTHORITIES
Born, Gary, International Commercial Arbitration (2nd
edn., Kluwer Law
International, 2014) 5
TEAM 16 MEMORANDUM FOR CLAIMANTS
VII
Higgins, Interim Measures in Transnational Maritime Arbitration, 65 Tulane
L. Rev. 1519, 1535-36 (1991). 5
John F Wilson, Carriage of Goods by Sea (7th
edn., Pearson Education Ltd,
2010) 7, 8
Julian Cooke et al., Voyage Charterers (4th
edn, Informa Law from
Routledge, 2014) 11
LEW/Mistelis/Kroll, Comparitive International Commercial Arbitration (1st
edn., Kluwer Law International 2003) 5
Scrutton, Thomas E, Stewart C. Boyd, A S. Burrows, and David Foxton,
Scrutton on Charterparties and Bills of Lading, (22nd
edn. Sweet & Maxwell
2011)
7, 14, 15, 19,
20, 21
Van den Berg, Yearbook Commercial Arbitration (41st edn., Kluwer Law
International Arbitration 2016). 25
Y. C. Ong & M. P. O'Reilly, Costs in International Arbitration, 83,
(LexisNexis 2016) 20
TEAM 16 MEMORANDUM FOR CLAIMANTS
1
STATEMENT OF FACTS
1. Furnace Trading Pvt Ltd (hereinafter “Claimant”) is a company based in Singapore
who chartered the ship M.V.Tardy Tessa from Imlam Consignorist GmbH
(Hereinafter “Head owners”) under a Time Charterparty for a period of two years.
The Claimant sub-chartered the vessel to Inferno Resources Sdn Bhd (hereinafter
“Respondent”) for the carriage of 84,000.052 MT of Australian Steam Coal.
2. The Claimant is unable to verify the further sub-chartering of the vessel by the Inferno
to Idoncare Berjaya Utama Pty. Ltd (hereinafter referred to as Idoncare) and no
corresponding Charterparty has been identified. A Bill of Lading was issued dated 4th
October 2016, in favour of Idoncare, listing the cargo as 84,000.052 MT of Australian
Steam Coal, and as per Clause (1) of the conditions of carriage on the reverse of the
Bill of Lading, it incorporates all “terms and conditions, liberties and exceptions of
the Charter Party, dated as overleaf”. However, no Charterparty has been identified.
3. The vessel, M.V. Tardy Tessa was carrying coal from Australia to China. The
discharge port had to be selected from a list of eight previously nominated ports as
specified in the Voyage Charterparty, viz. Dalian, Jinzhou, Yingkou, Yantai, Qingdao,
Shanghai, Tianjin, Ningbo. As per the Voyage Charter, the Respondent had to
nominate a discharge port before the vessel passed Singapore for bunkering.
However, the vessel reached the Singapore on 11th
October 2016 and they failed to do
so. The Respondent requested the Claimant to discharge at Busan, South Korea on
16th
October 2016 but the request was denied due to the zombie outbreak in Busan
which made it an unsafe port and non-permissible under both Voyage and Head
Charterparties.
4. Further, respondent had not made payments of freight to the Claimant which, as per
Voyage Charter party, had been due in five banking days after the bill of lading was
TEAM 16 MEMORANDUM FOR CLAIMANTS
2
issued. Respondent alleges that the payment of freight was not made as they did not
receive freight payable from Idoncare. The freight was not paid after repeated
requests by the Claimant. Thus, in order to enforce payment of freight, Claimant sent
a notice of lien on cargo to the respondent, and put Idoncare on notice of lien on
subfreight payable to the respondent.
5. Subsequently, the Respondent nominated the port of Ningbo as the port of discharge
on the 22nd
October along with the declaration that they shall make the payment of
freight after discharge of cargo. However, Claimant took this to be a renunciation of
contract along with the failure to nominate legitimate discharge ports and thereby
terminated the contract.
6. The dispute was submitted to arbitration on 25th
November 2016, but the vessel was
still stranded OPL Singapore, and the crew, not being prepared for such a long
voyage, were suffering from shortage in supplies. Further, the cargo on board was
also deteriorating. To the best of the Claimant‟s knowledge, the vessel remains adrift
OPL Singapore till date.
7. The Claimant intending to exercise lien on cargo on board Tardy Tessa, has requested
the Tribunal to grant them the power to sell the cargo pendente lite, and demands
damages for detention and other damages. The Claimant commenced the arbitral
proceedings to exercise lien over cargo, receipt of damages, and to sell the cargo
pendente lite. The Respondent has denied the claims and has challenged the
jurisdiction of the Tribunal.
TEAM 16 MEMORANDUM FOR CLAIMANTS
3
ARGUMENTS ADVANCED
I. THIS TRIBUNAL HAS THE JURISDICTION AND/OR POWER TO GRANT LIBERTY TO
THE CLAIMANT TO SELL THE CARGO ON BOARD THE MV TARDY TESSA
PENDENTE LITE.
The Claimant, Furnace Trading Pte Ltd sub chartered the vessel, Tardy Tessa, to the
Respondent. Tardy Tessa has been adrift the off-port limits of Singapore since 11th
October, 2016, the vessel carries perishable cargo i.e. coal which is overheating to the
extent of apprehension of danger of self-ignition and explosion. Meanwhile, there is a
diabetic person on board and the food and medical supplies are running out. The
Claimant has asked for the permission to sell the cargo on board pendente lite.
Pursuant to S. 16(1) of the International Arbitration Act, 2009 (hereinafter IAA) and
Rule 20(a) of the SCMA rules, which encapsulate the Kompetenz-Kompetenz
principle which is widely accepted in international arbitration, this Tribunal has the
power to rule on its own jurisdiction.
The Tribunal has been approached by the Claimant to allow the sale of cargo on board
the Tardy Tessa pendente lite, as the vessel is adrift and has not been discharged. The
Tribunal has the jurisdiction to hear the proceedings because (A) Singapore is the seat
of arbitration (B) the arbitration Clause covers this dispute (C) the SCMA rules allow
the Tribunal to order interim relief as per the lex arbitri.
(A) SINGAPORE IS THE SEAT OF ARBITRATION
1. As per the Voyage Charterparty concluded between Furnace and Inferno dated
1/9/2016, under Clause 291 this Tribunal has the jurisdiction to hear the proceedings.
Since no seat has been nominated explicitly, it must be determined having regard to
the parties‟ agreement and all the relevant circumstances.2 There is always a strong
1 Voyage Charterparty, Clause 29, Moot Problem, p. 23.
2 Dubai Islamic Bank PJSC v Paymentech Merchant Services Inc [2001] 1 Lloyd‟s Rep 65.
TEAM 16 MEMORANDUM FOR CLAIMANTS
4
presumption that the law of the arbitration agreement should be the law which is most
closely connected to it.3 Therefore, since the contract is governed by Singapore Law
and one of the parties is from Singapore, the law of the arbitration agreement should
also be Singaporean Law. Further, the indication of which procedural rules shall
apply is an indicator of intent as to the seat of arbitration.4 The SCMA rules provide
that where no seat has been declared, “The juridical seat of arbitration shall be
Singapore. Where the seat of arbitration is Singapore, the law of the arbitration under
these Rules shall be Singapore law and the (International Arbitration) Act.” 5
Therefore, it is submitted that Singapore is the seat of arbitration.
(B) SINGAPORE LAW AS PER SCMA RULES GIVES ARBITRAL TRIBUNALS THE POWER TO
ORDER INTERIM RELIEF
2. According to Rule 33(h), the Tribunal has the power to “make orders or give such
directions as it deems fit so far as they are not inconsistent with the (International
Arbitration) Act or any statutory re-enactment thereof… or such law which is
applicable.”6 Where the arbitral rules are silent, the Tribunal may fill in those gaps
with the provisions of the lex arbitri.7 S. 12(1)(d) of the International Arbitration Act,
“12(1) Without prejudice to the powers set out in any other provision of this Act and
in the Model Law, an Arbitral Tribunal shall have powers to make orders or give
directions to any party for –(d) the preservation, interim custody, or sale of any
property which is or forms part of the subject-matter of the dispute;”8 Art. 17 of the
UNCITRAL Model Law (1985) states “Unless otherwise agreed by the parties, the
Arbitral Tribunal may, at the request of a party, order any party to take such interim
3 Sulame´rica Cia Nacional de Seguros SA& Ors v Enesa Engelharia Saa & Ors [2012] EWCA Civ 638.
4 Ibid.
5 22, SCMA rules, (3
rd edn., 2015).
6 HKL Group Co Ltd v Rizq International Holdings Pte Ltd [2013] SGHCR 5.
7 Born, International Commercial Arbitration, 411-13, (2nd edn., Kluwer Law International, 2014), Rubins, In
God We Trust All Others Pay Cash; Security For Costs In International Commercial Arbitration, 11 Am Rev
Intl Arb 307. 8 S.12(1)(d), International Arbitration Act, 2009.
TEAM 16 MEMORANDUM FOR CLAIMANTS
5
measure of protection as the Arbitral Tribunal may consider necessary in respect of
the subject matter of the dispute.”9 In the Voyage Charterparty, it is evident prima
facie that the parties have not barred the provision of interim relief by the Arbitral
Tribunal. By expressly consenting to the arbitration of their dispute in a jurisdiction
that unambiguously gives the Tribunal to order such a sale, the parties have implicitly
consented to the Tribunal‟s jurisdiction to do so. Further, in the Claimant‟s
application to the Tribunal dated 1/12/2016, it is clear that it is an application
concerning a request to sell cargo pendente lite. Additionally, both parties have
brought it up in their petition/response. Such an arbitration Clause ought to be
interpreted to mean that such powers extend not only to the main subject matter of the
dispute, but also to all matters incidental thereto.10
Thus, even if the breach of
Charterparty or lien is considered to be the subject-matter of the dispute, the cargo
also forms a part of the same because it is the subject of the Charter party and the
lien.11
Thus, it is submitted that the parties conferred the Tribunal with jurisdiction to
award interim relief.
(C) THE ARBITRATION CLAUSE IS WIDE ENOUGH TO COVER THIS DISPUTE
3. The crafting of the Law and Dispute Resolution Clause, implies that the parties‟
intention was that it corresponds to Clause 26(c) which provides for arbitration in the
forum of the parties‟ choice. Usually, the kind of dispute that may be validly
submitted to arbitration are contractual claims or claims arising in connection with
contracts, and usually not tortuous, criminal, familial or statutory claims.18
9 Art.17, UNICTRAL Model Law (1985).
10 Higgins, Interim Measures in Transnational Maritime Arbitration, 65 Tulane L. Rev. 1519, 1535-36 (1991).
11 Emilia Shipping Co v State Enterprise for Pulp and Paper Industry, [1991] 1 SLR 411.
18 LEW/Mistelis/Kroll, Comparitive International Commercial Arbitration, 129-164 (1
st edn., Kluwer Law
International 2003); Born, Gary, International Commercial Arbitration, 636-670, (2nd
edn., Kluwer Law
International, 2014)
TEAM 16 MEMORANDUM FOR CLAIMANTS
6
Accordingly, Clause 26(c) states that “any dispute arising out of or in connection with
this Charter Party shall be referred to arbitration.” This Clause is wide enough to
bring within its scope any claim that relied on the existence of a contractual
relationship, even if the claim itself was a claim in tort.19
The Claimant is referring
this dispute to the Tribunal based on the contractual relationship of the (disponent)
Owner and Charterer. Therefore, it is submitted that this dispute is covered by the
arbitration agreement.
4. Even if the Respondent submits that Clause 26(c) cannot correspond to the dispute
resolution Clause, there is always a strong presumption that the parties as
businessmen intended to submit all disputes to arbitration unless expressly agreed
otherwise.20
In the absence of a clear intention to the contrary, it should not be
supposed that parties wanted a split jurisdiction.21
There is no clear contrary intention
expressed on the face of the instrument, and further, the COAL-OREVOY form
provides for only arbitration as a method of dispute resolution. In the light of the
same, it would be erroneous to assume that the parties wanted to submit certain
disputes to litigation, absent express intention. In the light of ambiguities judicial
trends22
worldwide mandate an interpretation which gives effect to the arbitration
clause over one which does not.23
It is therefore submitted that this dispute is covered
by the arbitration agreement and should be adjudicated upon by the Tribunal.
19
Kaverit Steel Crane Ltd v Kone Corporation [1992] 87 DLR (4th) 129 (refd) 20
Fiona Trust & Holding Corporation and others v Privalov and others [2007] 2 All ER (Comm) 1053. 21
Landgericht Hamburg, 20 April 1977, IV YBCA 261 (1979); Ashville Investment Ltd v Elmer Contractors Ltd
[1989] QB 488, 517: “very slow to attribute to a reasonable party an intention that there should in any
foreseeable eventuality be two sets of proceedings”; see also Ethiopian Oilseeds & Pulses Export Corp v Rio del
Mar Foods Inc, [1990] 1 Lloyd's Rep 86, 97: presumption against having two sets of proceedings arising from a
particular transaction. 22
Id at 20. 23
Id at 20.
TEAM 16 MEMORANDUM FOR CLAIMANTS
7
II. CLAIMANT IS ENTITLED TO DETENTION AND/OR OTHER DAMAGES UNDER THE
VOYAGE CHARTERPARTY.
Detention of the vessel caused by the Charterer‟s breach of contract by not giving
orders in due time can hold him liable for damages.30
The Respondent has failed to
nominate a safe port on time and has failed to make the payment of freight within the
stipulated period of time. The vessel has been detained for 10 days prior to the
termination of the contract on 22nd
October, 2016. The additional costs have been
adding up to USD 101,666.67. The Claimant is entitled to detention and other
damages because of (A) the repudiatory breach of the Charterparty (B) there is no
break in chain of causation (C) the damage is not remote (D) the freight is earned.
(A) REPUDIATORY BREACH OF THE CHARTERPARTY
5. The Tardy Tessa is adrift OPL of Singapore, detained for 10 days until the
termination of the Charterparty and the Respondent has not paid freight and refuses to
pay freight until the discharge of cargo. The non-payment of freight has been
considered a repudiatory breach of the contract by the Respondent.
6. A condition is a fundamental term, non-performance of which would entitle the
innocent party to consider the contract as repudiated and itself as discharged from all
outstanding obligations.31
The breach of such a condition deprives the innocent party
substantially the whole benefit of the Charterparty and is generally treated as a
repudiatory breach.32
In absence of indicators, the time clauses of mercantile contracts
are often treated as conditions, so that the innocent party can ascertain the course of
action whether to wait or exercise their rights for breach.33
30
Scrutton, Thomas E, Stewart C. Boyd, A S. Burrows, and David Foxton, Scrutton on Charterparties and Bills
of Lading, 381-389, (22nd
edn. Sweet & Maxwell 2011). 31
John F Wilson, Carriage of Goods by Sea, 348, (7th
edn., Pearson Education Ltd, 2010). 32
Hong Kong Fir Shipping Co. Ltd. v Kawasaki Kisen Kaisha Ltd. [1962] 2 QB 26 (CA) [Hong Kong Fir]. 33
Lord Roskill in Bunge v Tradax Export [1981] 2 Lloyd‟s Rep 1 at p 12.
TEAM 16 MEMORANDUM FOR CLAIMANTS
8
7. An essential term like nomination of a port is a condition as the performance of the
contract by one party depends on the other party‟s performance of another term.34
Here, Clause 16 of the head Voyage Charterparty specifies that the Charterers may
decide the discharge port when the vessel passes Singapore for bunkering. Hence, it is
a temporal/time clause as it sets the specific event before which the discharge port
should be nominated. Hence, the completion of voyage and performance of contract
depends on the Charterers‟ duty to nominate the port of discharge and the term is a
condition to contract.
8. The Respondent failed to nominate the port of discharge by the time the vessel
reached i.e. 11th
October in violation of the condition of the contract. After repeated
requests, the Respondent finally nominated Busan, South Korea as port of discharge
due to congestion at the Chinese ports. The Claimant could not allow the vessel to
proceed to the port of Busan for the two reasons:
1) Busan is not among the list of nominated ports under the Voyage Charterparty
and the vessel is not obliged to proceed to any port not mentioned in the
Charterparty.35
2) Clause 1(b) and 1(c) of the Head Time Charterparty permits “lawful trades
between safe ports and safe places within Asia and Australia”. However, Busan is
not within the permitted range as it is unsafe due to the zombies arriving from
Seoul and the vessel is unequipped to combat any attack. The Charterer is under
the obligation to nominate a safe port36
and not an impossible port.37
The presence
of zombies in Busan is a threat covered under war risks mentioned in Clause
34
Ibid, at p 15. 35
Supra n.31, at 16-20. 36
The Evia (No.2) [1982] 2 Lloyd‟s Rep 307. 37
Reardon Smith Line Ltd v Ministry of Agriculture, Fisheries and Food [1961] 3 W.L.R. 110.
TEAM 16 MEMORANDUM FOR CLAIMANTS
9
34(a)38
of the Head Time Charterparty and Clause 18(a)(ii)39
of the Voyage
Charterparty. The Charterers have not nominated a safe port. The safety of a port
can be ascertained through the test of foreseeability.40
The reasonable foresight of
the Master of the vessel41
and the Charterers can give them the benefit of
declining the vessel to proceed to the nominated port. Clause 34 (b) and Clause
18(c) mention that the vessel is not obliged to continue to proceed to a port which
by reasonable judgment may be exposed to war risk. The need for having razor
wires, armed guards etc. on-board signify the gravity of the situation. Despite the
request of assurance by the Respondent, the vessel is not obligated to proceed due
to reasonable apprehension of danger. The Claimant has not expressly accepted
the repudiation of the Charterparty by delayed nomination of an unsafe port
because the Claimant has recognized the secondary obligation of the Respondent
to nominate a safe port.42
Also, the secondary obligation arises under the Clause
18 of the Head Voyage Charterparty which states that the Respondent may
nominate any other safe port and the contract may be cancelled only if such port is
not nominated within 48 hours of receipt of such notice of requirement. Here, the
Respondent has not nominated the port within 48 hours of refusal of accepting
Busan as the port of discharge through communication dated 17th
October, 2016.
In the case of Noel Bay43
, it was held that waiting for a couple of days before
accepting repudiation was not an unreasonable delay as it is within reasonable
prospect of the Claimant that the nomination of a safe port would be nominated
38
Time Charterparty, Clause 34 (b), Moot Problem, p. 13. 39
Voyage Charterparty, Clause 18(a)(ii), Moot Problem, p. 30. 40
Charles G. C.H. Baker and Paul Davids, “The Politically Unsafe Port” (1986), L.M.C.L.Q. 112; Reardon
Smith Line Ltd v Ministry of Agriculture, Fisheries and Food [1961] 3 W.L.R. 110; K/S Penta Shipping A/S v
Ethiopean Shipping Lines Corp(The Saga Cob) [1991] 2 Lloyd‟s Rep 398 a. 41
Parker LJ in K/S Penta Shipping AS v Ethiopian Shipping Lines Corp (The Saba Cob) [1992] 2 Lloyd‟s Rep,
545 at 551. 42
Duncan v Koster (The Teutonia) [1872] LR 4 PC 171. 43
SIB International S.R.L. v. Metallgesellschaft Corporation (“The Noel Bay”) [1989] 1 Lloyd‟s Rep. 361.
TEAM 16 MEMORANDUM FOR CLAIMANTS
10
and the payment would be made. Therefore, initial non-acceptance of the
repudiation does not amount to unreasonableness and failure of mitigation on the
part of the Claimant. However, they are entitled to damage for the detention from
the failure to nominate till the termination of Charterparty.44
The nomination of port of Ningbo was nominated after the completion of 48 hours
in violation of the term of the Charterparty. Further, the nomination of Ningbo as
a final port of discharge was accompanied with renunciation of performance for
contractual obligations through communication dated 21st October, 2016. The
acceptance of such renunciation and repudiation was made through
communication dated 22nd
October, 2016. Thus, the contract was repudiated due
to non-nomination of port of discharge thereby raising claims for damages and
detention.
9. Further, Clause 19 of the Voyage Charterparty mentions that freight should be paid
within 5 Banking days of the singing and releasing the bills of lading i.e. 9th
October,
2016. The time period is the essence of the contract.45
If time period was not the
essence of the contract, the Respondent would not have asked for an extension of the
time.46
Therefore, non-payment of freight will substantially deprive the innocent party
of the whole benefit of the contract as it is the main purpose making it a very
fundamental term of the contract. Hence, the payment of freight is a condition to the
contract.
10. Upon the breach of a contract by one of the parties, the innocent party has the right to
claim damages. Non-performance of the primary obligation of the Charterparty arises
the secondary obligation to pay damages.47
Liability of to pay freights is an essential
44
ibid. 45
Lombard North Central plc v Butterworth [1987] QB 527 (CA). 46
Bhudra Chand v Betts [1915] 22 Cal LJ 566: 33 IC 347 47
Photo Production Ltd v Securicor Transport Ltd [1980] AC 827 at 848−849.
TEAM 16 MEMORANDUM FOR CLAIMANTS
11
term to the contract and is a primary obligation. Non- payment of freight can arise a
cause for damages.
11. In the present case, despite repeated demands the Respondent has failed to make the
payment of freight. Communication dated 21st October, 2016 indicates the
renunciation of the Charterparty by the Respondent as they have failed to remit the
freight payment within 5 banking days of the loading, and signing/releasing of the
bills of lading. The request for remitting payment after discharge of cargo is clearly in
repudiation of the object of the agreement and breach of the Charterparty condition.
Therefore, this breach gives rise to liability of damages.
(B) THERE IS NO BREAK IN THE CHAIN OF CAUSATION.
12. The validity of the claim of damages depends on the factors like remoteness and
causation.48
The Respondent did not appoint a port of discharge which left the Tardy
Tessa adrift. If there is a break in chain of causation then no damages can be claimed.
13. Damages can be claimed when the cause responsible for loss is dominant and
effective and not necessarily the only cause.49
Ascertaining the break in chain of
causation is highly fact sensitive.50
For a break in the chain of causation, the act of the
Claimant should be unreasonable and impactful enough to obliterate the breach by the
Respondent.51
14. The Respondent first breached the Charterparty by not nominating the port of
discharge before the vessel passed Singapore. The port finally nominated was Busan,
South Korea which was refused by the Claimant on the grounds of war risks under
48
Julian Cooke et al., Voyage Charterers, 448, (4th
edn, Informa Law from Routledge, 2014). 49
Heskell v Continental Express [1950] 83 Ll. L. Rep. 438 at p. 457 and Banque Keyser Ullmann S.A. v Skandia
(UK) Insurance Co. [1990] Q.B. 665, 813–814; cf. Galoo Ltd and Others v Bright Grahame Murray [1994] 1
W.L.R. 1360, where the phrase “dominant or effective cause” was used to contrast recoverable loss from loss
which arose merely because of an opportunity afforded by a breach of contract: see the incisive analysis by
Poole in [2007] L.M.C.L.Q. 63. 50
Great Elephant Corp. v Trafigura Beheer BV (The Crudesky) [2014] 1 Lloyd‟s Rep. 1, at para. 45. 51
Supra n.47, at 635.
TEAM 16 MEMORANDUM FOR CLAIMANTS
12
Clause 18 of the Voyage Charterparty. The refusal of Busan as discharge port and
non-acceptance of repudiation by the Claimant was not unreasonable. Further, the
nomination of port of Ningbo as the discharge port was accompanied by renunciation
of the Charterparty which was duly accepted. Hence, it is submitted that the
Respondent is solely liable for causing the damage and there is no break in the chain
of causation.
(C) REMOTENESS OF DAMAGE
15. Losses cannot be recovered through claims for damages if the loss is a remote
consequence of the breach of Charterparty.52
The only proximate losses are those
which can reasonably foreseeable by the parties during the formation of the contract
and may occur in the due course of nature.53
16. In the present case, nomination of an unsafe port and non-payment of freight is
reasonably foreseeable by the parties. The presence of Clause 18 of the Voyage
Charterparty which provides for the re-nomination of port in case of previous
nomination of an unsafe port indicates that the parties have reasonably foreseen the
possibility of such a breach of contract.
17. Thus, the breach of Charterparty in nomination of discharge port was foreseeable and
was in due course of action and performance of obligations. Therefore, the damage
caused is not too remote. Hence, the Respondent can be held liable for damages and
detention.
(D) FREIGHT IS EARNED
52
Hadley v Baxendale [1854] 9 Ex 341 at p 354. 53
ibid.
TEAM 16 MEMORANDUM FOR CLAIMANTS
13
18. A provision that freight is “deemed earned” will normally enable a Shipowner to
recover any balance of freight to be payable on the completion of the voyage, even
when the voyage is not completed.54
19. Clause 15(b) of the standard coal and ore Voyage Charterparty states that the freight
is deemed to be earned after shipment and the number of days as decided within
which the amount of freight is earned.
20. The Respondent has failed to pay the freight amount of USD 771,120.48 in breach of
Clause 19 of the Voyage Charterparty which states that, Inferno failed to pay the
freight amount within 5 banking days of signing of the Bills of Lading by the Master
resulting in breach of Charterparty. The freight has been earned and is due as per the
conditions of the Charterparty and the question of freight being due at BBB does not
arise. Non-payment by the Respondent is a serious breach of the Charterparty. Hence,
the Respondent is liable to pay the damages.
III. THE CLAIMANT IS ENTITLED TO EXERCISE LIEN ON CARGO
The Respondent has failed to pay the freight amounting to USD 771,120.48 and
additional costs amounting to USD 101,666.67 despite repeated demands from the
Claimant. Hence, the Claimant has ordered the vessel to stay adrift off port limits of
Singapore.
The Claimant seeks to exercise rightful lien over cargo and the sub-freights for breach
of Charterparty terms, the Claimant has the right for the same because (A) there is a
contractual right under Charterparties for the Claimant to exercise lien, (B) the
Claimant has ability to exercise lien.
54
Vagres Compania Maritime SA v Nissho-Iwai America Corp (The Karin Vatis)[1988] 2 Lloyd‟s Rep.330;
Colonial Bank v European grain & Shipping ltd [1989] 1 Lloyd‟s Rep.431; Ellis Shipping Corp v Voest Alpine
intertrading [1991] 2 Lloyd‟s Rep.599.
TEAM 16 MEMORANDUM FOR CLAIMANTS
14
(A) THERE IS A CONTRACTUAL RIGHT UNDER THE CHARTERPARTIES FOR THE
CLAIMANT TO EXERCISE LIEN.
The Claimant has claimed a right to exercise lien over the cargo and sub-freights. The
Respondent has failed to pay freight and therefore a lien over the cargo is necessary
for the Claimant to recover the costs, the Claimant has the right to exercise lien as (i)
the lien clause has successfully been incorporated in the bill of lading, (ii) Claimant is
a party to the contract of carriage.
(i) THE LIEN CLAUSE HAS SUCCESSFULLY BEEN INCORPORATED IN THE BILL OF
LADING.
21. Bills of lading are evidence to contract of carriage between the shipper and the
carrier.55
It is a common practise for bills of lading to have a provision which
incorporates the terms of the Charterparty.56
In cases of multiple Charterparties, the
Voyage Charterparty is incorporated in case the Head Charterparty is a Time
Charter.57
22. In the present case, the Claimant is the disponent Owner of the vessel, M.V. Tardy
Tessa, and has sub-chartered the vessel to Respondent under a Voyage Charterparty
which includes the terms under Clause 19 (a), which states that the Owners shall have
the right to exercise lien. Respondent further sub-chartered the vessel to Idoncare
under a bill of lading contract which includes an incorporation clause, the bill of
lading states “freight payable as per Charterparty.” Here, the Voyage Charterparty
has been included as the Charterparty, as it includes the conditions of freight payable
and not hire.
55
Supra n.30, at 1. 56
Supra n.30, at 91-106. 57
Federal Commerce Ltd v Molena Alpha Inc (The Nanfri) [1978] 1 Lloyd‟s Rep. 287.
TEAM 16 MEMORANDUM FOR CLAIMANTS
15
23. The above incorporation clause has wide words of incorporation and brings into the
bill of lading almost everything that is there in the Charterparty as long as they are
not inconsistent to the express provisions of the bill.58
Reference to „terms and
conditions‟ incorporated lien clauses.59
Hence, the Bill of lading validly incorporates
the lien clauses of the Voyage Charterparty.60
(ii) CLAIMANT IS A PARTY TO CONTRACT OF CARRIAGE
24. The Voyage Charterparty has been expressly incorporated in the bill of lading to
which the Claimant is a party. This incorporation makes Claimant a party to the
contract of carriage evidenced by bill of lading with the Idoncare. Where the vessel is
under a Time Charter, usually both the Charterer and Owners could be held liable as
carriers notwithstanding the existence of a demise clause in the bill of lading.61
Therefore, both the Charterer and the Owners are parties to contract of carriage
evidenced by the bill of lading between carriers and the shipper.
25. Clause 8 (a) of the Time Charterparty dated 15th
February, 2016 states the Master
will be under the directions and order of the Charterer for the purposes of employment
and agency.62
Bill of lading is a receipt for goods and a contract governing the receipt
carriage and delivery of goods.63
The Claimant has the authority to direct and order
the Master in regards to cargo handling which is evidenced in the bill of lading as
receipt of goods. The clause shows the intention and the knowledge of the Master
regarding cargo handling and the voyage in its entirety which is directed by the
Charterers. Thus, the signing of bills of lading is by the Master in his capacity as an
58
Andreas Vergottis v. Robinson David & co. ltd. (1928) 31 Ll.L.rep. 23 per Roche J. at pg. 26. 59
Gorrisen v Challoner [1925] 23 Lloyd‟s Rep.61. 60
Miramar Maritime Corporation v Holborn Oil Trading Ltd.(The Miramar) [1984] 3 WLR 1 ; Santiren
Shipping Ltd v Unimarined S.A (The Chrysovalandou dyo) [1981] 1 Lloyd‟s Rep 159. 61
Canastrand Industries Ltd. v the "Lara S, [1993] 2 F.C.R. 553. 62
Time Charterparty, Clause 8(a), Moot Problem, p. 3. 63
Supra n. 30, at 200-213.
TEAM 16 MEMORANDUM FOR CLAIMANTS
16
employee/agent of the Claimant as it signifies the details of the cargo. Hence, the
Charterer is a party to the contract with the Respondent.
(B) THE CLAIMANT HAS THE ABILITY TO EXERCISE LIEN
The Claimant has the right to exercise the lien over cargo and sub freights to recover
the cost for non-payment of freights. They have the ability to exercise such lien
because (i) the freight is earned, (ii) Claimant is in the rightful possession of the cargo
(iii) lien can be exercised before the completion of the voyage.
(i) FREIGHT IS EARNED
26. As argued above, freight has been deemed to be earned and is payable by the
Respondent as per Charterparty. As the due date for clearing all payments had already
passed and the repudiation has been accepted by the Claimant, the Respondent is in
breach of Charterparty. The breach of Charterparty for non-payment of freight by the
Respondent gives the Claimant a legitimate cause for exercising lien over the cargo.
(ii) CLAIMANT IS IN THE RIGHTFUL POSSESSION OF THE CARGO
27. From the signing and delivery of bills of lading while the goods are in course of
carriage without unreasonable delay and until they are delivered to the merchant, the
Master of the vessel has a lien on them for the freight due for such carriage, and
cannot be compelled to part with them till such freight is paid and the bills of lading
delivered up.
28. As per Clause 8(a) of the Time Charterparty the Master acts like an employee/agent of
the Claimant. The Master has physical possession of cargo and can exercise lien on
their behalf just as a Master exercises lien for the Ship Owner.
29. Even if, the Master cannot be considered to be an employee with the rights to exercise
possessory lien over the cargo, the Ship Owner can exercise lien over the cargo as
Master is appointed by the Ship Owner, as per Clause 8(a) of the Time Charterparty
TEAM 16 MEMORANDUM FOR CLAIMANTS
17
and has the physical possession over the cargo. According to the case of Five Oceans
Corp v Cingler Ship which is largely similar to the present case, a Shipowner who has
physical possession of the cargo can exercise lien as a trustee for the Time Charterer
and for his benefit.64
The Shipowner may seek and receive the due freight for the
benefit of a Charterer who has discharged his obligations to the Shipowner but who
may be owed freight under a sub-charter or booking note which is incorporated.65
30. Thus, Imlam Consignorist can exercise valid lien over the cargo on behalf of the
Claimant. This has been established in the email dated 20th
October, 2016 where the
Shipowner has extended support and help in exercising lien over the cargo. Hence, on
Claimant‟s orders, the Shipowner can justly exercise lien over cargo.
(iii) LIEN CAN BE EXERCISE BEFORE COMPLETION OF VOYAGE
31. Owners can validly exercise a lien on cargo before completing the carrying voyage in
exceptional circumstances: i.e., where it is impossible or commercially impracticable
to exercise the lien at or off the discharge port.66
This includes two reasons:
a. Cost: Exercising lien on cargo by bringing the vessel to the discharge port
would cause unnecessary expense and congestion at the port. Storing the cargo
in warehouses would further add to the cost of exercising lien.
b. Loss of right to lien: Exercising lien at berth would endanger the Owners‟
right to lien as they might be forced to discharge the cargo losing the right to
possession of cargo which is an essential condition for exercising lien.
32. In the present case, the Claimant was first requested by the Respondent to proceed
to Busan, South Korea due to congestion at Chinese ports. However, the Claimant
64
Five Ocean Corporation v Cingler Ship Pte Ltd (PT Commodities & Energy Resources, intervener)
[2015] SGHC 311. 65
Supra n. 47. 66
The China National Foreign Trade Transportation Corp v Evolgia Shipping Co. Ltd (Mihalios Xilas) [1978] 2
Lloyd's Rep 186.
TEAM 16 MEMORANDUM FOR CLAIMANTS
18
refused to divert due to legitimate reasons. First, Busan is not a safe port as within
the reasonable judgment and foresight of the Master and the Charterers. Secondly,
Busan is not among the list of nominated ports under the Voyage Charterparty
which does not oblige the vessel to proceed to any port not mentioned in the
Charterparty.67
33. The Claimant refused to proceed to Ningbo as the port of discharge as the
nomination of the discharge port was not accompanied with the freight payable.
Hence, the vessel is not obligated to move towards the nominated port as the
Respondent is in repudiatory breach of Charterparty. According to Section 87 of
Chinese Maritime Code68
the Chinese port Ningbo does not allow the exercise of
lien over cargo unless it is owned by the defaulting party. In the present case,
Respondent is the defaulting party due to non-payment of freight but is not the
Owner of the cargo. The loss of right to lien at the port would not be in the best
security interests of the party.
34. The cost of discharging and warehousing the goods would increase the costs of
exercising lien. Further, by discharging cargo at port would take away the
possession of the Claimant over the cargo as a security to exercise lien.
35. Hence, it is impossible and commercially impracticable to exercise lien at
discharge port. Therefore, despite Singapore being a port of bunkering, lien can be
exercised off port limits due to commercial impracticability and impossibility of
proceeding to the nominated discharge port.
(C) CLAIMANT CAN EXERCISE LIEN ON SUB-FREIGHTS
Despite repeated demands, the Respondent has failed to pay the freight and
drifting costs. In order to recover the amount of freight payable and security of
67
Supra n. 33. 68
S.87, Chinese Maritime Code,1992 (“The CMC”) .
TEAM 16 MEMORANDUM FOR CLAIMANTS
19
debt, the Claimant seeks to exercise lien on the sub-freights payable by Idoncare
to Respondent. The Claimant has right of exercising lien over sub-freights as (i)
the lien is not lost (ii) Shipowner can exercise lien on behalf of the Claimant.
(i) LIEN IS NOT LOST
36. Lien on sub-freights is the right of Owners to intercept sub freights as an equitable
charge on what is due from the shipper to the Charterer.69
The right of lien on sub-
freights is lost when the debt has been paid off to the Charterers.70
The notice for
exercising lien should be in time before the sub-freights have been paid.
37. Communication by the sub-charterers to the Claimant dated 19th
October, 2016
clearly mentions that the freights payable by the Idoncare have not been paid. The
notice of lien over sub-freights has been communicated over to the Respondent
through the e-mail dated 20th
October, 2016. Hence, the right of exercising lien is
not lost and can be exercised by the Claimant.
(ii) SHIPOWNER CAN EXERCISE LIEN ON BEHALF OF THE CLAIMANT
38. Time Charterer has the lawful power to order the Shipowner to exercise right of
lien on his behalf.71
The Shipowner acts like the trustee of the Time Charterer and
for his benefit exercises lien72
.
39. Though Voyage Charterparty has been incorporated into the Bill of Lading, the
Shipowner is still a party to the contract of carriage. The Bills of Lading has been
signed by the Master who is appointed as an employee by the Shipowner
according to Clause 8 of the Time Charterparty. Further, the Shipowner is a
69
Supra n.56. 70
Molthes Rederi v Ellerman‟s Wilson Line [1926] 26 LI.L. Rep. 259. 71
Supra n.63. 72
Supra n.47, at 105-113.
TEAM 16 MEMORANDUM FOR CLAIMANTS
20
carrier to the bill of lading.73
In usual practise, the carrier issues the bill of lading
to the shipper.74
Hence, the Headowners are a party to the contract of carriage.
40. Clause 23 of the Time Charterparty confers upon the Shipowner the right to
exercise lien on any sub-freights belonging or due to the Charterers. In the case of
Cebu, it was held that in an NYPE form of Charterparty, the term “sub-freights”
can be interpreted to include “sub-sub freights.”75
Furthermore, communication
dated 20th
October has extended support in exercise of lien. In the present case,
the Claimant can exercise their right of lien over sub-freights through the ship
Owners as they are trustees of the Claimant and can exercise valid right of lien on
the behalf of the Claimant.
IV. IT IS JUST AND NECESSARY FOR THE CARGO TO BE SOLD PENDENTE LITE
(A) THE TRIBUNAL HAS UNFETTERED JURISDICTION TO ORDER INTERIM MEASURES
41. Rule 33.1(h) of SCMA rules gives the Tribunal broad power to make “any order”
which does not conflict with the IAA or the Model Law.76
This rule extends to
making orders for security of costs and claims and/or preserving the subject matter
of the dispute. This power does not come with any predetermined interpretive test.
The statute does not provide any express exclusion of or qualification on the
power to order interim relief. Additionally, Claimant has a prima facie case in
light of the merit of submissions enumerated above. Since these submissions are
not scandalous or oppressive,77
clearly hopeless,78
or suffering from some other
obvious defect,79
it should be entitled to relief. However, with a view to cement
the Claimant‟s submissions, the Claimant will strive to prove it based on
73
Supra n.60. 74
Supra n.30, at 200-213. 75
Care Shipping Corporation v Latin American Shipping Corporation, [1983] 1 Lloyd‟s Rep 302. 76
33.1 (h), SCMA rules, (3rd
edn., 2015) 77
Y. C. Ong & M. P. O'Reilly, Costs in International Arbitration, 83, (LexisNexis 2016). 78
Lall v 53–55 Hall Street Pty Ltd [1978] 1 NSWLR 310 79
K. Karunanidhi v R. Renganathan, AIR 1973 Mad 443.
TEAM 16 MEMORANDUM FOR CLAIMANTS
21
international standards, i.e, that it is (A) there is no prejudgment of merits, (B) it is
urgent to prevent irreparable harm to the Claimant, (C) balance of hardships tips
in favour of relief, (D) the Tribunal should exercise its discretion to order costs.
(B) THERE IS NO PREJUDGMENT OF MERITS
42. Interim measures should not prejudge the merits of the case.80
This requirement
entails that the measures should not cover what is asked for in the final award.81
The Claimant has requested that the Tribunal hold the Respondent liable for their
repudiatory breach of contract, and to declare that the lien on the cargo is valid.
Ordering a sale of cargo does not prejudge the merits of the case because it does
not award the final relief. It does not hold the Respondent liable for their breach of
contract because the sale proceeds will be returned to them based on the final
determination of the issue. Similarly, a sale of cargo does not validate the lien
because a lien normally does not give rise to a right of sale.82
Therefore, it is
submitted that an order for sale of cargo would not prejudge the merits of the case.
(C) IT IS URGENT TO PREVENT IRREPARABLE HARM
43. The route between Australia to China on an average takes around 20-25 days, and
arrangements have been made accordingly. However, because of the Claimant‟s
actions, the voyage has now come to be 10 months long. The crew has been facing
several problems because of this, including risk to life, sickness and lack of
supplies. While the Claimant is unaware whether the crew members have been
evacuated by the Headowners, the crew has also threatened mass resignation and
complaint to the ITF, which would severely tarnish both the Claimant‟s and the
Headowner‟s reputations. Given the inhospitable conditions present on the ship, it
must be directed to a port as soon as possible.
80
Partial Award in ICC CaseNo.8113, 11(1) ICCCt.Bull.65(2000). 81
ICC case no 8113, 11(1) ICC Bulletin 65 (2000) 67. 82
Supra n.74.
TEAM 16 MEMORANDUM FOR CLAIMANTS
22
44. Notwithstanding the Tribunal‟s unfettered power to order interim measures, one
of the standards laid down in the Model Law is that the measure ought to be
necessary to protect the subject matter of the dispute (here, the cargo). A sale of
cargo is required to preserve the cargo, not in terms of the physical entity, but in
terms of value.83
While a lien over cargo does not normally give rise to a right of
sale, the sale can be ordered if it is perishable in nature or likely to deteriorate if
kept or which for any good reason is desirable to sell forthwith.84
The value of the
cargo has been deteriorating continuously. The coal, being exposed to more and
more moisture, is absorbing it and hence becoming of a lower grade85
, and
therefore more likely to combust86
and the market value of coal is falling with no
projected recovery in the short-term.87
Additionally, the demurrage and other
storage costs being accrued are eroding the value of the cargo such that
prospective buyers and cargo interests would have no residual financial interest in
the cargo,88
leading to the outcome that after a certain point, the Respondent would
be willing to let the cargo remain onboard the vessel, having no remaining
financial interest in it. It is necessary to sell the cargo as urgently as possible to
preserve its value and to preserve the parties‟ interest in it.
(D) BALANCE OF HARDSHIPS TIPS IN FAVOUR OF RELIEF
45. The definition of irreparable harm ought not to be taken in the common-law
context of harm that cannot be repaired, but rather as grave, serious, or substantial
harm. It has already been shown above that the Respondent owes a significant
amount to the Claimant. In addition to this, Claimant is running the risk of loss of
83
Cetelem SA v Roust Holdings Ltd [2005] 1 WLR 3555. 84
Supra at 11. 85
Email dated 30/11/2016, Moot Problem, p. 37. 86
Ibid. 87
Parties‟ Joint Report, Moot Problem, p. 97-102. 88
The Stelios B Maritime Ltd. v Ibeto Cement Co (The „Stelios B‟) [2006] EWHC 672 (Comm.), 2007 711
LMLN 2 44F.
TEAM 16 MEMORANDUM FOR CLAIMANTS
23
life and possible damage to the vessel because of combustion of the cargo. Every
day that the cargo is exposed to moisture it runs a greater risk of combusting. If
damage is caused to the vessel because of this, the Claimant will be liable to the
Headowners for damages. Furthermore, in merchant shipping time is money, and
due to the Respondent‟s actions, the Claimant has been unable to make use of its
Charter, which is time bound. In the entire time the vessel has been adrift, it has
been on-hire, and the Claimant has been paying hire to the Headowners, while
being unable to earn any profits because the vessel is adrift. The Claimant is
facing serious losses and will continue to do so if the sale of cargo is not ordered.
On the other hand, the only loss the Respondent is facing is that the cargo value is
diminishing, but they neither have title to the cargo, nor do they have to answer to
prospective buyers about the cargo. Their only liability is to Idoncare, who has
anyway not paid sub-freight to the Respondent. Therefore, balancing the hardships
of the parties, it is clear that a greater deal of harm will be done to the Claimant if
the cargo is not sold than to the Respondent if the cargo is sold.
46. In the Parties‟ Joint Expert Report the expert estimates that at maximum, the cargo
could be valued at $3.1m, but that a more realistic expectation would be of around
$1.9 m - $2.5 m. The Respondent already has dues to the Claimant of around
$900,000, which is mounting daily due to the cost of exercising the lien. It is
likely that even at this stage the proceeds from the sale of cargo would not be
adequate to cover the Claimant‟s costs or damages which have been accruing
since October. Unless the cargo is sold as soon as possible, there will be no
adequate recompense for the Claimant‟s continuously piling costs, causing a great
deal of serious harm to the Claimant. A measure is considered to be necessary
TEAM 16 MEMORANDUM FOR CLAIMANTS
24
when no other reasonably available alternative exists.89
Here, there are no
available alternatives, because the vessel cannot proceed to the designated
discharge port in China as Chinese law does not allow or exercising lien once the
ship has docked and the cargo is discharged.90
Docking in Singapore would be
impracticable because it is commercially unviable to find warehousing space for
84,000MT of coal in Singapore (which takes up around 3,360,000 cu ft of space)91
and costs of warehousing, expensive given the high cost of property in Singapore,
would be similar to the cost of exercising lien while at sea.92
Furthermore, the
cargo cannot be expected to remain on board for indefinite period of time as there
does not seem to be any end to the impasse which has been created. Therefore, in
order to preserve the Claimant‟s rights, only one option exists: for this Tribunal to
order the sale of cargo.
(E) IT IS JUSTIFIED FOR THIS TRIBUNAL TO MAKE AN ORDER ON COSTS
47. As long as there are reasonable grounds for believing that a party‟s financial condition
is inadequate, a Tribunal is justified in concluding that there is a sufficient risk of
severe harm. 93
So far, Respondent has been unwilling or unable to meet any of their
financial commitments to the Claimant, including payments for freight and detention.
The reason they cited for this is that they have not received payment from their sub-
Charterers. This is indicative of the fact that they are operating from transaction to
transaction or at least that they have significant cash-flow problems. This is
worrisome because they are relying on payments from others to meet their financial
obligations. If they were unable to pay the relatively minor sums of freight because
89
Maldives Airport Co Ltd v GMR Male International Airport Pte Ltd [2013] SGCA 16. 90
Supra n.64. 91
Stopford M, Maritime Economics,575–576. (3rd
edn, Routeledge, 2009). 92
Ibid. 93
Supra n.6.
TEAM 16 MEMORANDUM FOR CLAIMANTS
25
they had not been paid, it is certainly plausible that they will be able to honour a final
award, which is likely to amount to much more.
48. Further, arbitrators derive their power to adjudicate from the agreement of the parties,
they should strive to match procedure and substance with the ex-ante expectations of
participants.94
Thus, it is submitted that the Tribunal should make an order consistent
with the parties‟ expectations and positions on security for costs.95
49. While it is true that the parties contracted with each other in the face of all the risks
inherent in that relationship, the probability that a contract would lead to conflict and
that one party would not meet a costs award was incorporated into the contract
price.96
However, parties often adopt governing rules to protect them against just such
contingencies.97
By selecting the SCMA Rules, which, unlike many arbitral regimes,
expressly provides for security for costs, the parties built into the contract protection
against the risk of non-payment. If the contractual mechanisms it bargained for are
withheld from Claimant, and it is successful in the arbitration, it would be an
ineffective remedy.98
94
Supra n.6. 95
Coppée Lavalin v Ken-Ren (UK), [1994] 2 Lloyd's Rep. 109 96
Supra n.6, at p.358. 97
Supra n.6, at p.364. 98
Van den Berg, Yearbook Commercial Arbitration, 143, (41st edn., Kluwer Law International Arbitration
2016).
TEAM 16 MEMORANDUM FOR CLAIMANTS
26
REQUEST FOR RELIEF
For the reasons set out above, Claimant requests that the Tribunal:
1. Declare that it has the jurisdiction and/or power to grant liberty to the Claimant to sell
the cargo on board the MV TARDY TESSA pendente lite.
2. Hold the Respondent is liable to the Claimant for detention and/or other damages
under the Voyage Charterparty.
3. Declare that the Claimant is entitled to exercise lien over the cargo and subfreight.
4. Allow the claimant liberty to sell the cargo on board the MV TARDY TESSA
pendente lite, as is just and necessary.