18th Annual International Maritime Law Arbitration Moot
In the matter of an arbitration under the SCMA Arbitration Rules
UNIVERSITY OF QUEENSLAND
A U S T R A L I A
MEMORANDUM FOR
RESPONDENT
CLAIMANT
Furnace Trading Pty Ltd
2 Marina Boulevard #19-05
Singapore
v
RESPONDENT
Inferno Resources SDN BHD
2/3 SW Pasar Borong Pandan
Malaysia
TEAM 1
COUNSEL
ANTONIA BELLAS | PENELOPE BRISTOW | JANE HALL | MATTHEW PATERSON
Team 1 Memorandum for the Respondent
ii
TABLE OF CONTENTS
LIST OF ABBREVIATIONS v
LIST OF AUTHORITIES vi
STATEMENT OF FACTS 1
CHARTERPARTY CHAIN 3
PRELIMINARY MATTERS 3
A. Law of the arbitration 3
SUBMISSIONS ON INTERIM ORDER FOR SALE OF THE CARGO 4
I. THE TRIBUNAL CANNOT, AND SHOULD NOT, ORDER THE SALE OF THE CARGO 4
A. The Tribunal does not have jurisdiction to order the sale of the Cargo 4
B. In any event, the Tribunal should not order the sale of the Cargo 5
(i) Failure to sell the Cargo will not cause FURNACE irreparable harm 5
(ii) The harm caused to INFERNO and IDONCARE by the sale of the Cargo substantially outweighs the
harm that would otherwise be caused to FURNACE 6
(iii) Urgent relief is not required 7
SUBMISSIONS ON THE LIEN OVER CARGO ISSUE 8
II. FURNACE IS NOT ENTITLED TO EXERCISE A LIEN OVER THE CARGO 8
A. FURNACE is not entitled to a lien on the Cargo for advance freight 8
(i) FURNACE cannot exercise a conventional lien as it does not possess the Cargo 8
(ii) FURNACE is not entitled to a common law or statutory lien over the Cargo 8
(iii) FURNACE is not entitled to any form of contractual lien over cargo belonging to IDONCARE 9
B. FURNACE cannot receive the benefit of a lien on the Cargo exercised by IMLAM 9
(i) IMLAM did not assign a contractual right of lien to FURNACE 10
(ii) IMLAM did not exercise a right of lien as trustee for FURNACE 10
Team 1 Memorandum for the Respondent
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(iii) In any event, the BoL between IMLAM and IDONCARE did not incorporate a lien clause 11
C. In any event, FURNACE did not validly exercise a lien over the cargo as insufficient notice was given
to INFERNO and IDONCARE 12
D. FURNACE is unlawfully detaining the Cargo 13
SUBMISSIONS ON THE LIEN OVER SUB-FREIGHT ISSUE 14
III. FURNACEIS NOT ENTITLED TO SUB-FREIGHT PAYABLE TO INFERNO 14
A. FURNACE has no contractual right to a lien on sub-freight 14
B. FURNACE has no right to intercept sub-freight 15
SUBMISSIONS ON TERMINATION 16
V. FURNACE DID NOT HAVE THE RIGHT TO TERMINATE THE VCP 16
A. INFERNO did not breach a condition of the VCP 16
B. INFERNO did not breach an innominate term such that FURNACE was deprived of substantially the
whole benefit of the VCP 17
C. INFERNO did not repudiate the VCP 18
D. INFERNO was entitled to terminate the VCP 20
SUBMISSIONS ON DAMAGES 21
V. FURNACE IS ENTITLED TO NO MORE THAN NOMINAL DAMAGES 21
A. FURNACE is only entitled to nominal damages for breach of the VCP 21
B. FURNACE is not entitled to damages for costs and expenses of exercising the lien 21
(i) FURNACE did not validly exercise a lien 21
(ii) In any event, FURNACE did not exercise its lien reasonably 22
C. FURNACE is not entitled to damages for detention 22
(i) Detaining the Vessel at Singapore broke the chain of causation 23
(ii) In any event, FURNACE failed to take reasonable steps to mitigate its loss 23
Team 1 Memorandum for the Respondent
iv
PRAYER FOR RELIEF 24
ANNEXURE A: MAP OF PORTS 25
Team 1 Memorandum for the Respondent
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LIST OF ABBREVIATIONS
ABBREVIATION TERM
BoL Bill of lading
Cargo The 84,000.052 metric tonnes of coal on board the Vessel
Expert Report Expert Report of Caleb Coalman dated 3 December 2016
FURNACE Furnace Trading Pte Ltd
IAA International Arbitration Act (Chapter 143A) 2002 rev ed
IDONCARE Idoncare Berjaya Utama Pty Ltd
INFERNO Inferno Resources Sdn Bhd
IMLAM Imlam Consignorist GmbH
Master Master of MV Tardy Tessa, Captain Tan Xiao Ming
Model Law 1985 UNCITRAL Model Law on International Commercial Arbitration
(1985)
Model Law 2006 UNCITRAL Model Law on International Commercial Arbitration
(rev ed 2006)
Moot Scenario International Maritime Law Arbitration Moot 2017 ‘Moot Scenario’
NYPE 2015 New York Produce Exchange Charterparty 2015
PMT Per metric tonne
SCMA Rules Singapore Chamber of Maritime Arbitration Rules (3rd edition)
SCP Sub-voyage charterparty (between INFERNO and IDONCARE)
TCP Time charterparty (between IMLAM and FURNACE)
VCP Voyage charterparty (between FURNACE and INFERNO)
Vessel MV Tardy Tessa
Team 1 Memorandum for the Respondent
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LIST OF AUTHORITIES
A. Articles and books
Aikens LJ et al Bills of Lading (Informa Law from Routledge, 2nd edition, 2015)
Christopher Huntley, ‘The Scope of Article 17: Interim Measures under the UNCITRAL Model
Law’ (2005) 9 Vindobona Journal of International Commercial Law and Arbitration 1
Clerk & Lindsell on Torts, 20th Edition
Coghlin et al Time Charters (Informa Law, 7th edition, 2014)
Cooke et al Voyage Charterers (Informa Law, 4th edition, 2014)
Gary Born, International Commercial Arbitration (Kluwer Law International, 2nd edition, 2009)
McGregor on Damages, 18th edn (Sweet & Maxwell, London, 2011)
Melis Ozdel, ‘Bills of Lading Incorporating Charterparties’ (Hart Publishing, Oxford, 2015)
Mika Savola, ‘Interim measures and emergency arbitrator proceedings’ (2016) 23 Croatian
Arbitration Yearbook 73
Neil McDonnell, ‘The Availability of Provisional Relief in International Commercial Arbitration’
(1984) 22 Columbia Journal of Transnational Law 273
Snell’s Equity (Sweet & Maxwell, 31st edition, 2005)
B. Cases
Afovos Shipping Co SA v R Pagnan and Flli (The ‘Afovos’) [1982] 1 WLR 848
Alan Ramsay Sales & Marketing Ltd v Typhoo Tea Ltd [2016] EWHC 486 (Comm)
Albemarle Supply Co Ltd v Hind & Co [1928] 1 KB 307
American Cyanamid v Ethicon Ltd [1975] AC 396
Bangladesh Chemical Industries Co v Henry Stephens Shipping Co Ltd & Anor (The ‘SLS Everest’)
[1981] 2 Lloyd’s Rep 389
Behzadi v Shaftesbury Hotels Ltd [1992] Ch 1
Bremer Handelsgesellschaft Schaft mbh v Vanden Avenne Izegem pvba [1978] 2 Lloyd's Rep 109
British Commonwealth Holdings v Quadrex Holdings Ltd [1989] QB 842
Team 1 Memorandum for the Respondent
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Bunge Corporation v Tradax Export SA [1981] 1 WRL 711
Castleton Commodities Shipping Company Pte Ltd v Silver Rock Investments (The ‘Clipper
Monarch’) [2015] EWHC 2584
Cehave NV v Bremer Handelgesellschaft mbH (The ‘Hansa Nord’) [1976] QB 44
Cho Yang Shipping Co Ltd v Coral (UK) Ltd [1997] 2 Lloyd’s Rep 641
Chuan Hong Petrol Station Pte Ltd v Shell Singapore (Pte) Ltd [1992] 2 SLR 729
Dalkia Utilities Plc v Celtech International Ltd [2006] 1 Lloyd’s Rep 599
Darbishire v Warran [1963] 1 WLR 1067
Decro-Wall International SA v Practitioners in Marketing Ltd [1971] 1 WLR 361
Dry Bulk Handy Holding Inc and Another v Fayette International Holdings Ltd and Another (The
‘Bulk Chile’) [2013] 2 Lloyd’s Rep 38
Federal Commerce and Navigation Ltd v Molena Alpha Inc (The ‘Nanfri’) [1978] 1 Lloyd’s Rep 581
Fercometal SARL v Mediterranean Shipping Co SA [1989] AC 788
Five Ocean Corporation v Cingler Ship Pte Ltd [2015] SGHC 311
Fulton Shipping Inc of Panama v Grobalia Business Travel SAU (The ‘New Flamenco’) [2014] 2
Lloyd’s Rep 230
Galoo v Bright Grahame Murray [1994] 1 WLR 1360 CA
Giebel v Smith (1872) LR 7 QB 404
Golden Strait Corp v Nippon Yusen Kubishika Kaisha (The ‘Golden Victory’) [2007] 2 AC 353
Goodpasture Inc v The Pollux (1979) AMC 2515
Grand China Logistics Holding (Group) Co v Spar Shipping [2016] EWCA (Civ) 982
Harrison v Huddersfield SS Co (1903) 19 TLR 386
Homburg Houtimport BV v Agrosin Private Ltd (The ‘Starsin’) [2004] 1 AC 715
Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26
Howard v Pickford Tool [1951] 1 KB 417
India Steamship Co v Louis Dreyfus Sugar Ltd (The ‘Indian Reliance’) [1997] 1 Lloyd's Rep 52
Team 1 Memorandum for the Respondent
viii
Inverkip SS Co Ltd v Bunge [1917] 2 KB 193
Itex Itagrani Export SA v Care Shipping Corporation and Others (The ‘Cebu’) (No 2) [1990] 2
Lloyd’s Rep 316
K/S A/S Seateam Co v Iraq National Oil Co and Ors (The ‘Sevonia Team’) [1983] 2 Lloyd’s Rep 640
Koch Marine Inc v d’Amica Societa di Navigazione ARL (The ‘Elena d’Amico’) [1980] 1 Lloyd’s
Rep 75
Kodros Shipping Corp of Monrovia v Empresa Cubana de Fletes (The ‘Evia’) (No 2) [1983] 1 AC
736
Larner v Fawcett [1950] 2 All ER 727
Leeds Shipping Co Ltd v Société Française Bunge (The ‘Eastern City’) [1958] 2 Lloyd’s Rep 127
Limerick v Coker (1916) 33 TLR 103
Lyle Shipping v Cardiff Corp [1900] 2 QB 638
Malayawata Steel Bhd v Government of Malaysia [1975] 1 MLJ 22
Manchester Trust v Furness, Withy [1895] 2 QB 539 (CA)
Metall Market OOO v Vitorio Shipping Co Ltd (The ‘Lehmann Timber’) [2014] QB 760
Molthes Rederi v Ellerman’s Wilson Line (1926) 26 Lloyd’s Law Reports 259
Motis Exports Ltd v Dampskibsselskabet AF 1912 [2000] 1 Lloyd's Rep 211
Multi-Veste 226 BV v NI Summer Row Unitholder BC [2011] EWHC 2026
Navigazione Alta Italia v Svenska Petroleum (The ‘Nai Matteini’) [1988] 1 Lloyd’s Rep 452
Pacific Molasses v Entre Rio (The ‘San Nicholas’) [1976] 1 Lloyd’s Rep 8
Partenreederei M/S “Heidberg” & Anor v Grosvenor Grain and Feed Co Ltd & Anor (The
‘Heidberg’) [1994] 2 Lloyd’s Rep 287
Paterson, Zochonis & Co v Elder Dempster [1924] AC 552
Petroleo Brasileiro SA v ENE Kos 1 Ltd (The ‘Kos’) [2012] 2 AC 164
Phelps v Spon-Smith & Co [2001] BPIR 326
Photo Production v Securior [1980] AC 827
Team 1 Memorandum for the Respondent
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Robinson v Harman (1848) 1 Ex 850
Ross T Smyth & Co Ltd v T D Bailey, Son & Co [1940] 3 All ER 60
Samarenko v Dawn Hill House Ltd [2011] EWCA (Civ) 1445
Samuel v West Hartlepool (1906) 11 Com Cas 111
Sandeman v Scurr (1866) LR 2 QB 86
Santiren Shipping Ltd v Unimarine SA (The ‘Chrysovalandou Dyo’) [1981] 1 Lloyd’s Rep 159
Singapore Press Holdings Ltd v Brown Noel Trading Pte Ltd & Ors [1994] 3 SLR 151
Smailes v Hans Dessen and Co (1906) 12 Com Cas 117
Societe Generale v Geys [2012] 1 AC 513
Stanton v Richardson (1872) LR 7 CP 421
Steelwood Carriers Inc of Monrovia v Evimeria Compania Naviera SA of Panama (The ‘Agios
Giorgis’) [1976] 2 Lloyd’s Rep 192
Stocznia Gdanska SA v Latvian Shipping Co (No 2) [2002] 2 Lloyd’s Rep 436
Tage Berglund v Montoro Shipping Corp Ltd (The ‘Dagmar’) [1968] 2 Lloyd’s Rep 563
Tarrabochia v Hickie (1856) 1 H&N 183
Taxfield Shipping Ltd v Asiana Marine Inc & Ors [2006] HKCFI 271
Telford Homes (Creekside) Limited v Ampurius NU Homes Holdings Limited [2013] EWCA Civ 577
Tenax Steamship Co v The Owners of the Motor Vessel Brimnes (The ‘Brimnes’) [1975] QB 929
The ‘Titan Unity’ (No 2) [2014] SGHCR 4
The Rewia [1991] 2 Lloyd’s Rep 325
The Vinson (2005) 677 LMLN 1
Tillmanns v Knutsford [1908] 2 KB 385
Torvald Klaveness A/S v Arni Maritime Corporation (The ‘Gregos’) [1995] 1 Lloyd’s Rep 1
Tradigrain SA and ors v King Diamond Marine Ltd (The 'Spiros C') [2000] EWCA Civ 217
Tsu Soo Sin v Oei Tjiong Bin [2008] SGCA 46
Turner v Haji Goolam (The ‘Bombay’) [1904] AC 826
Team 1 Memorandum for the Respondent
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Universal Cargo Carriers Corporation v Citati [1957] 2 WLR 713
Universal Steam Navigation Co v James McKelvie & Co [1923] AC 492
Valilas v Januzaj [2014] EWCA Civ 436
Wehner v Dene [1905] 2 KB 92
Welex AG v Rosa Maritime Ltd (The ‘Epsilon Rosa’) [2002] 2 Lloyd’s Rep 81
Western Bulk Shipping [2012] EWHC 1224
Wilston Steamship SS Co v Andrew Weir Co Ltd (1925) 22 LIoyd’s Law Reports 521
Wuhan Ocean Economic and Technical Cooperation Co Ltd v Shiffahrts-Gesellschaft Murcia GmbH
KG (The ‘Hansa Murcia’) [2012] EWHC 3104 (Comm)
C. Arbitral awards
Biwater Gauff (Tanzania) Ltd v United Republic of Tanzania (Procedural Order No 1) (ICSID
Arbitral Tribunal, Case No AEB/05/22, 31 March 2006)
City Oriente Ltd v Ecuador (Decision on Revocation of Provisional Measures) (ICSID, Case No.
ARB/06/21, 13 May 2008)
Emilio Agustin Maffezini v Spain (Procedural Order No. 2) (ICSID arbitration, Case No ARB/97/7
London Arbitration 17/91 (1991) 307 Lloyd’s Maritime Law Newsletter
London Arbitration 5/92 (1992) 321 Lloyd’s Maritime Law Newsletter
Occidental Petroleum Corporation v Ecuador (Decision on Provisional Measures) (ICSID, Case No.
ARB/06/11, 17 August 2007)
Plama Consortium Ltd v Republic of Bulgaria (Order) (ICSID, Case No. ARB/03/24, 6 September
2005), [38].
Quiborax SA & Ors v Bolivia (Decision on Provisional Measures), (ICSID Arbitral Tribunal, Case
No ARB/06/02, 26 February 2010)
Sapiem v Bangladesh (Decision on Jurisdiction and Recommendation on Provisional Measures)
(ICSID, Case No. ARB/05/07, 21 March 2007)
Team 1 Memorandum for the Respondent
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Sergei Paushok & Ors v The Government of Mongolia (Order on Interim Measures) (2 September
2008)
Tokios Tokeles v Ukraine (Procedural Order No. 3) (ICSID, Case No. ARB/02/18, 18 January 2005)
D. Legislation
High Court (Admiralty Jurisdiction) Act 2001 (Chapter 123)
International Arbitration Act (Chapter 143A)
Sale of Goods Act (Chapter 393) (Singapore)
UNCITRAL Model Law on International Commercial Arbitration (1985)
UNCITRAL Model Law on International Commercial Arbitration (2006, rev ed)
E. Other
Chartered Institute of Arbitrators, International Arbitration Practice Guideline: Applications for
Interim Measures (2016)
New York Produce Exchange Charterparty 2015
The Baltic and International Maritime Council Uniform General Charter 1994
Team 1 Memorandum for the Respondent
1
STATEMENT OF FACTS
1 On 15 February 2016, IMLAM, owners of the MV Tardy Tessa (Vessel), entered into a time
charterparty (TCP) with FURNACE (the Claimant). On 1 September 2016, FURNACE entered into a
voyage charterparty (VCP) with INFERNO (the Respondent). INFERNO subsequently entered into a
sub-voyage charterparty (SCP) with IDONCARE.
2 Clause 15 of the VCP provided that freight of USD $771,120.48 was to be paid within five banking
days after the completion of loading, and signing and release of the BoLs.1
3 On 4 October 2016, the Vessel was loaded with 84,000.052 metric tonnes of coal (Cargo), and the
Bills of Lading (BoLs) were signed by the Master of the Vessel and released. IDONCARE were named
as shippers, however no carrier was specified. The special instructions on the BoLs read, ‘freight
payable as per charterparty’. Clause 1 of the BoLs stated ‘all terms and conditions, liberties and
exceptions of the Charter Party, dated as overleaf… are herewith incorporated’.
4 The Vessel arrived at Singapore on 10 October 2016. When the Vessel passed Singapore, INFERNO
was to nominate a safe discharge port in China per Cl 8 of the VCP.2 Due to congestion at Chinese
ports, INFERNO nominated Busan, South Korea, on 16 October 2016, and again on 19 October 2016.
FURNACE rejected these nominations and on 19 October issued INFERNO a notice giving INFERNO only
23 hours’ notice to perform its obligations under the VCP.
5 On 20 October 2016, FURNACE emailed Inferno a ‘notice of lien’ on the Cargo for unspecified losses
and costs, ‘not limited to’ freight. FURNACE also emailed IDONCARE a ‘notice of lien on sub-freight’,
directing Idoncare to pay FURNACE sub-freight owing to INFERNO.
6 INFERNO nominated Ningbo (listed in Cl 8 of the VCP) on 21 October 2016, and requested a variation
to the manner of payment of freight. After receiving this valid nomination, FURNACE wrongfully
attempted to terminate the VCP on 22 October 2016. INFERNO accepted this as a repudiation, and
terminated the VCP on 22 October 2016.
1 As specified in the Fixture Recap at point 19: Moot Scenario, p 22. 2 As specified in the Fixture Recap at point 16: Moot Scenario, p 21.
Team 1 Memorandum for the Respondent
2
7 On FURNACE’s authority, the Vessel has been kept adrift on the open seas since 11 October 2016. On
30 November, the Master reported that the Vessel and the Cargo were at a high risk of being damaged
or lost due to monsoon weather, and noted signs of the Cargo overheating. Furhter, he reported that
the crew’s health was at risk due to lack of fresh food, fresh water, and medicine.
8 FURNACE issued INFERNO and IDONCARE with notices of arbitration on 25 November 2016 in
accordance with Cl 29 of the VCP. The matters were consolidated on 11 December 2016.
Team 1 Memorandum for the Respondent
3
CHARTERPARTY CHAIN
This diagram depicts the contractual relationships between the parties for the purpose of the following
submissions.
PRELIMINARY MATTERS
A. The laws of Singapore govern this arbitration
1 Pursuant to Cl 29 of the VCP,3 this arbitration is governed by the laws of Singapore and is to be
conducted per the Singapore Chamber of Maritime Arbitration Rules (3rd edition) (SCMA rules).
Therefore, the International Arbitration Act (IAA) governs this arbitration.4 Section 3(1) of the IAA
incorporates the UNCITRAL Model Law on International Commercial Arbitration (1985) (Model
Law 1985) into the law of Singapore.5
3 Moot Scenario, p 23. 4 International Arbitration Act (Chapter 143A), s 5. See also Moot Scenario, pp 70, 76, 83, 86, 89, 92, 94, 103. 5 International Arbitration Act (Chapter 143A), s 3(1).
Team 1 Memorandum for the Respondent
4
SUBMISSIONS ON INTERIM ORDER FOR SALE OF THE CARGO
I. THE TRIBUNAL CANNOT, AND SHOULD NOT, ORDER THE SALE OF THE CARGO
2 The Tribunal cannot make an interim order the sale of the Cargo because (A) the Tribunal does not
have jurisdiction to do so. In any event, (B) the Tribunal should not order the sale of the cargo.
A. The Tribunal does not have jurisdiction to order the interim sale of the Cargo
3 Section 12(1)(d) of the IAA gives the Tribunal power to make orders or give directions to any party
for the interim sale of property which forms part of the subject matter of the dispute. ‘Party’ is defined
in s 2(1) of the IAA as a party to the arbitration agreement, or a party to the arbitration itself.6 IMLAM,
which has control of the Cargo, is not a party to whom the Tribunal can make or give directions. This
is because IMLAM is not a party to the arbitration agreement contained in Cl 29 of the VCP,7 and
IMLAM is not a party to this arbitration.8 Therefore, the Tribunal cannot issue an order for interim sale
of the Cargo, as such an order would have a binding effect on a third party,9
4 Further, the Tribunal does not have the power to order a party to the arbitration to take steps vis-a-vis
a third party. Where such a power does exist, it is confined to very specific relationships (eg between
a corporate entity and its subsidiary)10 and must be ‘necessary to accomplish justice’.11 Here,
FURNACE could have taken steps pursuant to Rule 33.2 of the SCMA Rules, to join IMLAM as a party
to these proceedings. INFERNO and IDONCARE’s interests should not be prejudiced because of
FURNACE’s failure to do so. Therefore, the Tribunal cannot require FURNACE to order IMLAM to sell
the Cargo.
6 International Arbitration Act (Chapter 143A), s 2(1). See also Christopher Huntley, ‘The Scope of Article 17: Interim
Measures under the UNCITRAL Model Law’ (2005) 9 Vindobona Journal of International Commercial Law and
Arbitration 1, 86. 7 Cf The ‘Titan Unity’ (No 2) [2014] SGHCR 4, [39] (Leong Li Shiong AR). 8 Moot Scenario, p 103. 9 Gary Born, International Commercial Arbitration (Kluwer Law International, 2nd edition, 2009) 1966; Neil
McDonnell, ‘The Availability of Provisional Relief in International Commercial Arbitration’ (1984) 22 Columbia
Journal of Transnational Law 273, 283. 10 Gary Born, International Commercial Arbitration (Kluwer Law International, 2nd edition, 2009) 1966. 11 Gary Born, International Commercial Arbitration (Kluwer Law International, 2nd edition, 2009) 1966.
Team 1 Memorandum for the Respondent
5
B. In any event, the Tribunal should not order the interim sale of the Cargo
5 Interim measures are ‘extraordinary measures not to be granted lightly’.12 Art 17 of the Model Law
1985 indicates that the Tribunal must consider interim orders to be ‘necessary’. It is insufficient to
show that sale of the Cargo is merely convenient or appropriate.13 The Tribunal does not have
unfettered discretion when granting interim relief.14
6 In international commercial arbitration, three factors are considered relevant when granting interim
relief: urgency, risk of irreparable or serious harm, and proportionality.15 Taking these factors into
consideration, the Tribunal should not order the sale of the Cargo because: (i) failure to sell the Cargo
will not cause FURNACE irreparable harm; (ii) any harm suffered by FURNACE does not substantially
outweigh the harm that is likely to be incurred by INFERNO if the Cargo is sold; and (iii) urgent relief
is not required.
(i) Failure to sell the Cargo will not cause FURNACE irreparable harm
7 The grant of provisional measures requires evidence of ‘irreparable’ harm,16 or harm that cannot be
repaired by an award of damages.17 At a minimum, ‘serious’ or ‘substantial’ harm is required.18 In
either case, a possible increase in damages does not warrant provisional relief.19 Therefore, there are
two reasons why the Tribunal should not order the sale of the Cargo.
12 Sergei Paushok & Ors v The Government of Mongolia (Order on Interim Measures) (2 September 2008), [39];
Emilio Agustin Maffezini v Spain (Procedural Order No. 2) (ICSID arbitration, Case No ARB/97/7, 28 October 1999). 13 Sergei Paushok & Ors v The Government of Mongolia (Order on Interim Measures) (2 September 2008), [39]. 14 Gary Born, International Commercial Arbitration (Kluwer Law International, 2nd edition, 2009) 1980. 15 See, eg, UNCITRAL Model Law on International Commercial Arbitration (2006 rev ed), Art 17A; Chartered Institute
of Arbitrators, International Arbitration Practice Guideline: Applications for Interim Measures (2016) Art 2. See also,
Gary Born, International Commercial Arbitration (Kluwer Law International, 2nd edition, 2009) 1981; Mika Savola,
‘Interim measures and emergency arbitrator proceedings’ (2016) 23 Croatian Arbitration Yearbook 73, 82. Note also
that these standards are comparable to those applied by Singaporean Court when granting interim measures. See, eg,
Singapore Press Holdings Ltd v Brown Noel Trading Pte Ltd & Ors [1994] 3 SLR 151, 158; Chuan Hong Petrol
Station Pte Ltd v Shell Singapore (Pte) Ltd [1992] 2 SLR 729, 742-743 applying American Cyanamid v Ethicon Ltd
[1975] AC 396, 407-408 (Lord Diplock). 16 Tokios Tokeles v Ukraine (Procedural Order No. 3) (ICSID, Case No. ARB/02/18, 18 January 2005), [8]. See also,
Plama Consortium Ltd v Republic of Bulgaria (Order) (ICSID, Case No. ARB/03/24, 6 September 2005), [38]. 17 Quiborax v Bolivia (Decision on Provisional Measures) (ICSID, Case No. ARB/06/02, 26 February 2010), [156];
Sapiem v Bangladesh (Decision on Jurisdiction and Recommendation on Provisional Measures) (ICSID, Case No.
ARB/05/07, 21 March 2007), [182]. 18 UNCITRAL Model Law on International Commercial Arbitration (2006, rev ed), Art 17A(1)(a); Sergei Paushok v
Mongolia (Order on Interim Measures) (UNCITRAL, 2 September 2008), [68-69]. 19 Occidental Petroleum Corporation v Ecuador (Decision on Provisional Measures) (ICSID, Case No. ARB/06/11, 17
August 2007), [99]; City Oriente Ltd v Ecuador (Decision on Revocation of Provisional Measures) (ICSID, Case No.
ARB/06/21, 13 May 2008), [64].
Team 1 Memorandum for the Respondent
6
8 First, sale of the Cargo is not necessary to alleviate the risk currently posed to the Vessel, Cargo and
crew.20 By discharging the Cargo at Singapore, or any other port, FURNACE would avoid this harm.
The Vessel would no longer be subject to monsoon weather, the Cargo could be safely warehoused,
and the Crew could restock the Vessel. This is a reasonable alternative because any purported lien
rights would be recognised by Singaporean law,21 and there is no indication that it would be
commercially or physically impractical to maintain the purported lien in a Singaporean port.22 Instead
FURNACE is voluntarily and unnecessarily endangering the Vessel, Cargo and crew to exercise a
purported lien over the Cargo.
9 Second, any potential loss of business venture incurred by FURNACE is a purely economic loss and is
readily compensable by an award of damages.23 No interim relief should be awarded on this basis.
(ii) The harm caused to INFERNO and IDONCARE by the sale of the Cargo substantially outweighs
the harm that would otherwise be caused to FURNACE
10 The balance of convenience24 favours IDONCARE and INFERNO. Both parties will suffer significant
harm if the Tribunal orders the interim sale of the Cargo.
11 IDONCARE will be robbed of its ability to sell the Cargo to third parties of its choosing. This would
deny IDONCARE the capacity to contract freely for the sale of the Cargo. As indicated in the Expert
Report, interim sale of the Cargo is likely to greatly reduce the sale price of the Cargo, causing
IDONCARE to lose up to $652,680.41 in profit.25 Further, if IDONCARE has already contracted for the
sale of the Cargo such an order would harm IDONCARE’s reputation and goodwill, and expose them
to claims of breach of contract.
20 Moot Scenario, p 37. 21 Sale of Goods Act (Chapter 393) (Singapore) s 43. Cf Five Oceans Corporation v Cingler Pte Ltd [2015] SGHC 311,
[61] (Ang Saw Ean J). 22 Five Oceans Corporation v Cingler Pte Ltd [2015] SGHC 311, [2] (Ang Saw Ean J). 23 Occidental Petroleum Corporation v Ecuador (Decision on Provisional Measures) (ICSID, Case No. ARB/06/11, 17
August 2007), [99]; City Oriente Ltd v Ecuador (Decision on Revocation of Provisional Measures) (ICSID, Case No.
ARB/06/21, 13 May 2008), [64]. 24 Sergei Paushok & Ors v The Government of Mongolia (Order on Interim Measures) (2 September 2008), [79]. See,
eg, UNCITRAL Model Law on International Commercial Arbitration (2006, rev ed) Art 17A(1)(a). 25 Moot Scenario, p 101.
Team 1 Memorandum for the Respondent
7
12 INFERNO’s reputation and goodwill could also be irreparably damaged if the interim sale causes harm
to third parties.
(iii) Urgent relief is not required
13 Urgent relief is not required for two reasons. First, the Cargo’s value is likely to remain stable
throughout the arbitration. As stated in the Expert Report, the Tribunal can assume the value of the
Cargo is not affected by any global market downward trends.26 Further, there is no evidence that the
Cargo is degrading.27 Second, FURNACE can alleviate any imminent harm to Vessel and crew by other
means, such as discharging the Cargo at Singapore,28 therefore it is not necessary to sell the Cargo
before the issuance of the final award.29
26 Moot Scenario, p 100. 27 Moot Scenario, pp 97-102. Cf orders for the sale of perishable goods see, eg, Taxfield Shipping Ltd v Asiana Marine
Inc & Ors [2006] HKCFI 271, [22] (Chan J); Larner v Fawcett [1950] 2 All ER 727, 729 (Somervell LJ). 28 Cf, Five Oceans Corporation v Cingler Pte Ltd [2015] SGHC 311, [61] (Ang Saw Ean J). 29 See, eg, Biwater Gauff (Tanzania) Ltd v United Republic of Tanzania (Procedural Order No 1) (ICSID Arbitral
Tribunal, Case No AEB/05/22, 31 March 2006) [76]; Quiborax SA & Ors v Bolivia (Decision on Provisional
Measures), (ICSID Arbitral Tribunal, Case No ARB/06/02, 26 February 2010) [150]; City Oriente Ltd v Republic of
Ecuador and Petroecuador (Decision on Provisional Measures) (ICSID Arbitral Tribunal, Case No ARB/06/21, 19
November 2007) [67].
Team 1 Memorandum for the Respondent
8
SUBMISSIONS ON THE LIEN OVER CARGO ISSUE
II. FURNACE IS NOT ENTITLED TO EXERCISE A LIEN OVER THE CARGO
14 FURNACE is not entitled to a lien on cargo because: (A) FURNACE is not entitled to a lien on the Cargo
for advance freight; and (B) FURNACE cannot receive the benefit of a lien over the cargo exercised by
IMLAM; and (C) in any event FURNACE did not validly exercise a lien over the Cargo.
A. FURNACE is not entitled to a lien on the Cargo for advance freight
15 FURNACE is not entitled to a lien on the Cargo for advance freight because: (i) FURNACE cannot
exercise a conventional lien as it does not possess the Cargo; (ii) FURNACE is not entitled to a common
law or statutory lien; and (iii) FURNACE is not entitled to any form of contractual lien on cargo owned
by IDONCARE.
(i) FURNACE cannot exercise a conventional lien as it does not possess the Cargo
16 A lien is a defence grounded in possession.30 IMLAM, as ship owner, has physical possession of the
Cargo.31 Absent actual possession, FURNACE cannot exercise a conventional lien.32
(ii) FURNACE is not entitled to a common law or statutory lien over the Cargo
17 FURNACE is claiming advance freight under the VCP.33 A common law lien is confined to freight
payable on delivery.34 Therefore, FURNACE cannot claim a common law lien. Further, FURNACE
cannot claim a statutory lien because no Singaporean legislation allows for a claim for advance
freight.35
30 Santiren Shipping Ltd v Unimarine SA (The ‘Chrysovalandou Dyo’) [1981] 1 Lloyd’s Rep 159, 165 (Mocatta J). 31 Five Oceans Corporation v Cingler Pte Ltd [2015] SGHC 311, [22] (Ang Saw Ean J). 32 Castleton Commodities Shipping Company Pte Ltd v Silver Rock Investments (The ‘Clipper Monarch’) [2015]
EWHC 2584, [9] (Waksman J); Five Oceans Corporation v Cingler Pte Ltd [2015] SGHC 311, [32]-[33] (Ang Saw
Ean J). 33 Moot Scenario, p 22. 34 Cooke et al Voyage Charterers (Informa Law, 4th edition, 2014) [17.15]. 35 Claims which can be enforced by way of a statutory lien are set out in s s 3(1)(a)-(r) of the High Court (Admiralty
Jurisdiction) Act 2001 (Chapter 123).
Team 1 Memorandum for the Respondent
9
(iii) FURNACE is not entitled to any form of contractual lien over cargo belonging to IDONCARE
18 Cl 19(a) of the VCP entitles FURNACE to a contractual lien against INFERNO ‘on the cargo for
freight’.36 This contractual lien creates a right only as between INFERNO and FURNACE.37 INFERNO
does not own the Cargo; it is owned by IDONCARE.38 Cl 19(a) does not entitle FURNACE ‘to a lien on
the goods of persons who have come under no contract with them conferring a lien for the freight
payable under the [VCP]... A right to seize one person’s goods for another person’s debt must be
clearly and distinctly conferred’.39 Therefore, without IDONCARE’s consent, Cl 19(a) cannot give
FURNACE the right to detain cargo belonging to IDONCARE.40
19 The BoLs do not evidence a contract between FURNACE and IDONCARE, therefore IDONCARE cannot
have consented to FURNACE’s purported lien over the Cargo. The BoLs were signed by the Master,
therefore there is an overriding presumption that the BoLs evidence a contract between IDONCARE
and the shipowner, IMLAM.41 This interpretation is supported by the fact that IMLAM’s name appears
prominently on the face of the BoLs,42 and that the Master did not qualify the capacity in which he
signed the BoLs.43
B. FURNACE cannot receive the benefit of a lien on the Cargo exercised by IMLAM
20 FURNACE cannot receive the benefit of a lien on the Cargo exercised by IMLAM because: (i) IMLAM
did not assign a contractual right of lien to FURNACE; (ii) IMLAM did not exercise a right of lien as
36 Moot Scenario, p 31. 37 Coghlin et al. Time Charters (Informa Law, 7th edition, 2014) [30.8]. 38 Moot Scenario, p 41. 39 Turner v Haji Goolam (The ‘Bombay’) [1904] AC 826 (Lord Lindley). See also Coghlin et al Time Charters (Informa
Law, 7th edition, 2014) [30.9]. 40 Steelwood Carriers Inc of Monrovia v Evimeria Compania Naviera SA of Panama (The ‘Agios Giorgis’) [1976] 2
Lloyd’s Rep 192, 204 (Mocatta J). 41 Wehner v Dene [1905] 2 KB 92, 98 (Channell J); Homburg Houtimport BV v Agrosin Private Ltd (The ‘Starsin’)
[2004] 1 AC 715, [45] (Lord Steyn), [73] (Lord Hoffman); Tillmanns v Knutsford [1908] 2 KB 385 (Farwell LJ);
Wilston Steamship SS Co v Andrew Weir Co Ltd (1925) 22 LIoyd’s Law Reports 521 (Roche J); The Rewia [1991] 2
Lloyd’s Rep 325, 333 (Dillon LJ); Turner v Haji Goolam (The ‘Bombay’) [1904] AC 826 (Lord Lindley); Limerick v
Coker (1916) 33 TLR 103; Sandeman v Scurr (1866) LR 2 QB 86 (Cockburn CJ). 42 Homburg Houtimport BV v Agrosin Private Ltd (The ‘Starsin’) [2004] 1 AC 715; cf Paterson, Zochonis & Co v Elder
Dempster [1924] AC 552; Samuel v West Hartlepool (1906) 11 Com Cas 111. 43 Cf Harrison v Huddersfield SS Co (1903) 19 TLR 386; Homburg Houtimport BV v Agrosin Private Ltd (The
‘Starsin’) [2004] 1 AC 715, [45] (Lord Steyn), [73] (Lord Hoffman). See also, Manchester Trust v Furness, Withy
[1895] 2 QB 539 (CA) (Lopes LJ); Universal Steam Navigation Co v James McKelvie & Co [1923] AC 492, 499 (Lord
Shaw); Homburg Houtimport BV v Agrosin Private Ltd (The ‘Starsin’) [2004] 1 AC 715, [128].
Team 1 Memorandum for the Respondent
10
trustee for FURNACE; and (iii) in any event, the BoL between IMLAM and IDONCARE did not
incorporate a lien clause.
(i) IMLAM did not assign a contractual right of lien to FURNACE
21 FURNACE cannot exercise any contractual right of lien purported to be held by IMLAM unless IMLAM
assigned this right to FURNACE.
22 Any purported assignment was not valid at law. Section 8(3) of the Civil Law Act 1999 (Chapter 43)
requires any assignment to be by way of express notice in writing to IDONCARE. No such notice was
given to IDONCARE.
23 Any purported assignment was not valid in equity. There are three settled requirements for an
effective equitable assignment:44 an intention to assign, clear identification of the chose being
assigned, and some act by the assignor showing that it is passing the chose in action to the assignee.
24 On 20 October 2016, IMLAM agreed to assist FURNACE in exercising a lien over the Cargo, ‘insofar
as such assistance is within the boundaries of the [T]CP’.45 This email did not evince any intention
to assign IMLAM’s contractual right of lien to FURNACE. Any contractual right of lien purported to be
held by IMLAM would arise under the BoL, not the TCP. At best, IMLAM was indicating that it intended
to comply with FURNACE’s orders not to discharge the Cargo, so long as such conduct did not breach
the terms of the TCP. At worst, IMLAM was merely reaffirming the operation of the TCP.
(ii) IMLAM did not exercise a right of lien as trustee for FURNACE
25 The High Court of Singapore, in Five Oceans Shipping Corporation v Cingler,46 suggested that in
very narrow circumstances, a shipowner may exercise a lien as trustee for a time charterer.47 The
current case is distinguishable for the following reasons. First, in Five Oceans Shipping, the
shipowner provided an affidavit expressly stating that it was exercising a lien over the cargo for the
44 Tsu Soo Sin v Oei Tjiong Bin [2008] SGCA 46, [16] (Rajah JA); Phelps v Spon-Smith & Co [2001] BPIR 326, [39]-
[41]; Malayawata Steel Bhd v Government of Malaysia [1975] 1 MLJ 22, 24 (Azmi J). See also John McGhee, Snell’s
Equity (Sweet & Maxwell, 31st edition, 2005) [3-13]-[3-19]. 45 Moot Scenario, p 36. 46 [2015] SGHC 311. 47 Five Ocean Corporation v Cingler Ship Pte Ltd [2015] SGHC 311, [36] (Ang Saw Ean J).
Team 1 Memorandum for the Respondent
11
time charterers benefit. This manifested an intention to create an express trust.48 Second, the
shipowner exercised a lien over the Cargo in its own right49 and was a party to the arbitration.50 In
the absence of these facts, an express trust in favour of FURNACE cannot be inferred. In any case,
FURNACE would not be able to enforce its rights as beneficiary directly against IDONCARE.
(iii) In any event, the BoL between IMLAM and IDONCARE did not incorporate a lien clause
26 The BoLs contain two references to an unidentified charterparty: (1) the special instructions box reads
‘freight payable as per charter party’; and (2) item 1 of the Conditions of Carriage incorporates the
terms of the ‘Charter Party, dated as overleaf’.51 Where a BoL fails to identify the relevant
charterparty there is a presumption that the head charterparty was intended to be incorporated.52 This
presumption is displaced where the head charterparty is a time charterparty and a relevant voyage
charterparty exists.53 This is because the terms of a time charter are in many respects inapposite to
the carriage of goods on a voyage.54 In addition, the reference to ‘freight’ in the in the special
instructions, ‘freight payable as per charter party’,55 indicate that the BoLs incorporate a voyage
charter, not a time charter.56 Consequently, the TCP was not the relevant charter party incorporated
into the BoLs.
48 Cf Five Ocean Corporation v Cingler Ship Pte Ltd [2015] SGHC 311, [35] (Ang Saw Ean J). 49 Cf Five Ocean Corporation v Cingler Ship Pte Ltd [2015] SGHC 311, [16] (Ang Saw Ean J). 50 See [3] above. 51 Moot Scenario, pp 45-46. 52 Pacific Molasses v Entre Rio (The ‘San Nicholas’) [1976] 1 Lloyd’s Rep 8, 11 (Lord Denning MR); Bangladesh
Chemical Industries Co v Henry Stephens Shipping Co Ltd & Anor (The ‘SLS Everest’) [1981] 2 Lloyd’s Rep 389, 391-
392 (Lord Denning MR); K/S A/S Seateam Co v Iraq National Oil Co and Ors (The ‘Sevonia Team’) [1983] 2 Lloyd’s
Rep 640, 644 (Lloyd J); Welex AG v Rosa Maritime Ltd (The ‘Epsilon Rosa’) [2002] 2 Lloyd’s Rep 81, [27] (Steel J);
Navigazione Alta Italia v Svenska Petroleum (The ‘Nai Matteini’) [1988] 1 Lloyd’s Rep 452, 459 (Gatehouse J). 53 Federal Commerce and Navigation Ltd v Molena Alpha Inc (The ‘Nanfri’) [1978] 1 Lloyd’s Rep 581, 591 (Kerr J);
Bangladesh Chemical Industries Co v Henry Stephens Shipping Co Ltd & Anor (The ‘SLS Everest’) [1981] 2 Lloyd’s
Rep 389, 392 (Lord Denning MR); Partenreederei M/S “Heidberg” & Anor v Grosvenor Grain and Feed Co Ltd &
Anor (The ‘Heidberg’) [1994] 2 Lloyd’s Rep 287, 309 (Diamond J); The Vinson (2005) 677 LMLN 1. See also, Melis
Ozdel, ‘Bills of Lading Incorporating Charterparties’ (Hart Publishing, Oxford, 2015) 49-50, 53-54; Aikens LJ et al
Bills of Lading (Informa Law from Routledge, 2nd edition, 2015) [7.114]. 54 Bangladesh Chemical Industries Co v Henry Stephens Shipping Co Ltd & Anor (The ‘SLS Everest’) [1981] 2 Lloyd’s
Rep 389, 392 (Lord Denning MR). 55 Moot Scenario, p 41. 56 Itex Itagrani Export SA v Care Shipping Corporation and Others (The ‘Cebu’) (No 2) [1990] 2 Lloyd’s Rep 316, 321
(Sheen J); Five Ocean Corporation v Cingler Ship Pte Ltd [2015] SGHC 311, [28] (Ang Saw Ean J).
Team 1 Memorandum for the Respondent
12
27 It is unlikely that the parties intended to incorporate the VCP, as opposed to the SCP. This is because
‘it would be surprising… if a shipper intended or agreed to pay freight in accordance with a charter-
party whose terms were unknown to him and which might specify an entirely different rate of freight
and different terms of payment from those which he had agreed under his contract’.57 It makes no
commercial sense for IDONCARE to incorporate the terms of the VCP, of which it has no knowledge.
Consequently, the BoLs incorporated the terms of the SCP. On the evidence before the Tribunal, it is
unclear what the terms of the SCP are, therefore FURNACE cannot claim IMLAM has a lien on cargo.
C. In any event, FURNACE did not validly exercise a lien over the cargo as insufficient notice
was given to INFERNO and IDONCARE
28 In order for a lien to be validly exercised, ‘a person claiming a lien must either claim it for a definite
amount or give the owner [of the cargo] particulars from which he himself can calculate the amount
for which the lien is due’.58 In the ‘notice of lien’ sent to INFERNO on 20 October 2016,59 FURNACE
claimed ‘substantial losses, costs, expenses and damages… which includes, but is not limited to…
freight’. This demand was ambiguous as it is unclear for what amount the lien was being exercised.
Therefore, the demand was invalid.
29 A failure to make any demand at all invalidates the exercise of the lien.60 Neither IMLAM nor FURNACE
made a demand for sub-freight to IDONCARE. This was not remedied at any point.61
57 Partenreederei M/S “Heidberg” & Anor v Grosvenor Grain and Feed Co Ltd & Anor (The ‘Heidberg’) [1994] 2
Lloyd’s Rep 287, 312 (Diamond J). 58 Albemarle Supply Co Ltd v Hind & Co [1928] 1 KB 307, 318 (Scrutton LJ). 59 Moot Scenario, p 65. 60 Cooke et al Voyage Charterers (Informa Law, 4th edition, 2014) [17.25]. 61 Cf Santiren Shipping Ltd v Unimarine SA (The ‘Chrysovalandou Dyo’) [1981] 1 Lloyd’s Rep 159; cf London
Arbitration 17/91 (1991) 307 Lloyd’s Maritime Law Newsletter.
Team 1 Memorandum for the Respondent
13
D. FURNACE is unlawfully detaining the Cargo
30 Without the defence offered by a valid lien, FURNACE will be liable in tort to IDONCARE.62 The tort of
conversion is one of strict liability.63 Therefore, FURNACE’s continued detention of the Cargo, in a
manner inconsistent with IDONCARE’s interests, constitutes a conversion of the Cargo.64
62 Clerk & Lindsell on Torts, 20th Edition, [17-71], cited in Metall Market OOO v Vitorio Shipping Co Ltd (The
‘Lehmann Timber’) [2014] QB 760, [49] (Rix LJ). 63 Motis Exports Ltd v Dampskibsselskabet AF 1912 [2000] 1 Lloyd's Rep 211. 64 Goodpasture Inc v The Pollux (1979) AMC 2515.
Team 1 Memorandum for the Respondent
14
SUBMISSIONS ON THE LIEN OVER SUB-FREIGHT ISSUE
III. FURNACE IS NOT ENTITLED TO SUB-FREIGHT PAYABLE TO INFERNO
31 FURNACE claimed a ‘lien’ on sub-freight when it issued IDONCARE with a ‘notice of lien on sub-
freight’.65 However, FURNACE is not entitled to this sub-freight because: (A) FURNACE has no
contractual right of lien on sub-freight; and (B) FURNACE has no right to intercept sub-freight.
A. FURNACE has no contractual right to a lien on sub-freight
32 A lien on sub-freight is a specific right that arises out of a contract.66 Therefore, to have a right of lien
on sub-freight, FURNACE must establish that it was entitled to such a right under the VCP. FURNACE
has failed to do so. Cl 19(a) of the VCP only entitles FURNACE to ‘a lien on the cargo for freight,
deadfreight, demurrage and general average contribution’.67 Omitting the right to a lien on sub-
freights from the VCP appears to have been a deliberate omission. Other standard form charters
include a lien on sub-freights. For example, the standard form NYPE 2015 Cl 23 expressly grants a
‘lien upon all cargoes, sub-hires and sub-freights (including deadfreight and demurrage)’.68 Similarly,
Cl 8 of the Gencon Charter 1994 provides for ‘a lien on the cargo and on all sub-freights payable in
respect of the cargo, for freight’.69
33 FURNACE was at liberty to include a right of lien on sub-freight in the VCP. FURNACE could have
added a clause in the email of 1 September 2016 where FURNACE and INFERNO agreed upon other
contractual inclusions.70 It did not. As such, FURNACE has no contractual right to exercise a lien on
sub-freights.
65 Moot Scenario, p 66. 66 See eg Western Bulk Shipping [2012] EWHC 1224. 67 Moot Scenario, p 30. 68 New York Produce Exchange Charterparty 2015, Cl 23. 69 The Baltic and International Maritime Council Uniform General Charter 1994, Cl 8. 70 Moot Scenario, pp 20-23.
Team 1 Memorandum for the Respondent
15
B. FURNACE has no right to intercept sub-freight
34 A ‘notice of lien on sub-freight’ can also be interpreted as an exercise of a shipowner’s right to
intercept BoL freight.71
35 This right to intercept sub-freight arises by virtue of the words ‘freight payable as per charterparty’
appearing in a BoL, which incorporate the charter party terms relating to the payment of freight.72
Therefore, freight is ‘due to the shipowner, as his consideration for the agreed carriage, but the
shipowner directs that it be paid in the manner set out in the sub-charter’.73 The shipowner may cancel
this direction at any time and direct that freight should instead be paid to itself.74 In this way, the
shipowner can intercept freight directly from the shipper under the BoL.75
36 However, FURNACE has no such right of interception because, as established at paragraph 21, the
BoLs evidence a contract between IMLAM and IDONCARE. Freight is only due to the carrier under the
BoLs.76 IMLAM, not FURNACE, is the carrier under the BoLs. Therefore IMLAM is the only party with
a right to intercept sub-freight. IMLAM did not exercise this right.
37 FURNACE had no right to intercept sub-freight, therefore the ‘notice of lien on sub-freight’ was
ineffective.
71 Dry Bulk Handy Holding Inc and Another v Fayette International Holdings Ltd and Another (The ‘Bulk Chile’)
[2013] 2 Lloyd’s Rep 38, [22] (Tomlinson LJ). 72 India Steamship Co v Louis Dreyfus Sugar Ltd (The ‘Indian Reliance’) [1997] 1 Lloyd's Rep 52, 57-58 (Rix LJ). 73 Tradigrain SA and ors v King Diamond Marine Ltd (The ‘Spiros C') [2000] EWCA Civ 217, [57] (Rix LJ). 74 Molthes Rederi v Ellerman’s Wilson Line (1926) 26 Lloyd’s Law Reports 259; Wehner v Dene [1905] 2 KB 92. 75 Tradigrain SA and ors v King Diamond Marine Ltd (The 'Spiros C') [2000] EWCA Civ 217, 331 (Rix LJ). Note that
the right to intercept BoL freight must be distinguished from the contractual right of lien contained in Cl 23 of the TCP.
See, eg, Molthes Rederi v Ellerman’s Wilson Line (1926) 26 Lloyd’s Law Reports 259, 262 (Greer J). 76 Cho Yang Shipping Co Ltd v Coral (UK) Ltd [1997] 2 Lloyd’s Rep 641, 643 (Hobhouse LJ).
Team 1 Memorandum for the Respondent
16
SUBMISSIONS ON TERMINATION
V. FURNACE DID NOT HAVE THE RIGHT TO TERMINATE THE VCP
38 FURNACE did not have the right to terminate the VCP on the basis of INFERNO’s alleged breaches as:
(A) INFERNO did not breach a condition of the VCP; (B) INFERNO did not breach an innominate term
such that FURNACE was deprived of substantially the whole benefit of the VCP; and (C) INFERNO did
not repudiate the VCP. Therefore, (D) INFERNO was entitled to terminate the VCP.
A. INFERNO did not breach a condition of the VCP
39 The parties did not intend for the obligation to pay freight under Cl 15 of the VCP and the election of
a discharge port under Cl 8 of the VCP to be contractual conditions that would give rise to a right to
terminate if breached in any way. Accordingly, INFERNO’s alleged breaches of these terms did not
give rise to a right to terminate the VCP.
40 There is a general reluctance to interpret contractual clauses as conditions due to the potential for
trivial breaches to have disproportionate consequences.77 Unless the parties expressly intend for a
contractual term to be a warranty or condition, the term will be construed as innominate terms.78
41 As a general rule, late payment under a charterparty is not breach of a condition.79 Therefore Cl 15
was not a condition of the VCP. Similarly, the parties did not intend that the slightest breach of Cl 8
would give rise to a right to terminate the VCP. The wording used, ‘when the vessel passes Singapore
77 See Grand China Logistics Holding (Group) Co v Spar Shipping [2016] EWCA (Civ) 982, [59], [65] (Gross LJ);
Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26, 69-70 (Diplock LJ); Bremer
Handelsgesellschaft Schaft mbh v Vanden Avenne Izegem pvba [1978] 2 Lloyd's Rep 109, 113 (Lord Wilberforce);
Bunge Corporation v Tradax Export SA [1981] 1 WLR 711, 727 (Lord Roskill). See also Cehave NV v Bremer
Handelsfesellshaft mbH (The ‘Hansa Nord’) [1976] QB 44, 83 (Omrod LJ) where the Court of Appeal expressed a
general reluctance to interpret contractual clauses as conditions. 78 Grand China Logistics Holding (Group) Co v Spar Shipping [2016] EWCA (Civ) 982, [52] (Gross LJ), [92]
(Hamblen LJ) following Bunge Corporation v Tradax Export SA [1981] 1 WRL 711, 715-6 (Lord Wilberforce), 717
(Lord Scarman), 727 (Lord Roskill). 79 Grand China Logistics Holding (Group) Co v Spar Shipping [2016] EWCA (Civ) 982, [62] (Gross LJ).
Team 1 Memorandum for the Respondent
17
for bunkering,’ was too vague to be strictly complied with.80 On proper construction, Cl 8 was an
innominate term.81
42 This position was not altered by FURNACE’s attempt to issue a notice to perform in the email of 19
October 2016 at 1320h.82 Even if the notice was effective,83 FURNACE would only have had the right
to terminate on this basis if INFERNO’s alleged breaches went to the root of the contract.84
B. INFERNO did not breach an innominate term such that FURNACE was deprived of
substantially the whole benefit of the VCP
43 INFERNO’s alleged breaches of Cl 15 and Cl 8 of the VCP did not deprive FURNACE of substantially
the whole benefit of the VCP, and FURNACE was not entitled to terminate the VCP on these bases.
44 The breach of an innominate term will give rise to a right to terminate the contract where the breach
is ‘so serious that it goes to the root of the contract’85 and deprives the non-breaching party of
‘substantially the whole benefit that the parties intended that he should obtain from the contract’.86
This requires considering the benefit that the non-breaching party expected to obtain from
performance of the contract and the loss suffered by that party as a result of the breach.87
45 Where performance of a contractual obligation is delayed, the proper test to determine whether the
non-breaching party is entitled to terminate the contract is to inquire whether the commercial purpose
80 See British Commonwealth Holdings v Quadrex Holdings Ltd [1989] QB 842, 857, 858 (Browne-Wilkinson VC)
where the phrase ‘as soon as reasonably practical’ was considered to be too vague to be a clause making time of the
essence. 81 Bunge Corporation v Tradax Export SA [1981] 1 WLR 711, 715-716 (Wilberforce LJ), 717 (Scarman LJ), 727
(Roskill LJ); Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26, 69-70 (Diplock LJ). See
Samarenko v Dawn Hill House Ltd [2011] EWCA (Civ) 1445, [42] (Lewison LJ). 82 Moot Scenario, pp 63-64. 83 See Afovos Shipping Co SA v R Pagnan and Flli (The ‘Afovos’) [1982] 1 WLR 848, 854 (Lord Denning MR); see
Behzadi v Shaftesbury Hotels Ltd [1992] Ch 1, 19-20 (Nourse LJ), 32 (Purchas LJ). 84 Dalkia Utilities Plc v Celtech International Ltd [2006] 1 Lloyd’s Rep 599, [131] (Christopher Clarke J); Samarenko v
Dawn Hill House Ltd [2011] EWCA (Civ) 1445, [37]-[43] (Lewison LJ); Multi-Veste 226 BV v NI Summer Row
Unitholder BC [2011] EWHC 2026, [195] (Lewison J). 85 Cehave NV v Bremer Handelgesellschaft mbH (The ‘Hansa Nord’) [1976] QB 44, 60 (Lord Denning MR). 86 Photo Production v Securior [1980] AC 827, 849 (Lord Diplock); Hongkong Fir Shipping v Kawasaki Kisen Kaisha
[1962] 2 QB 26, 66 (Diplock LJ). 87 Telford Homes (Creekside) Limited v Ampurius NU Homes Holdings Limited [2013] EWCA Civ 577, [54] (Lewison
LJ).
Team 1 Memorandum for the Respondent
18
of the venture was frustrated by the delay.88 The delay must have been so long that it went to the root
of the contract.89 An ‘unreasonable’ delay is insufficient.90
46 There were only 10 days between freight falling due and FURNACE’s purported termination. Such a
delay in payment was not ‘unreasonable’, did not go to the root of the VCP, and certainly did not
frustrate the commercial purpose of the VCP.91 As freight was calculated on the basis of the elected
discharge port, the benefit FURNACE stood to receive under the VCP, USD $771,120.48 in freight,
did not change as a result of the delay. Therefore, FURNACE was not deprived of any material benefit
as a consequence of the delay.92 Any losses incurred as a result of the delay in payment could be
adequately compensated by an award of damages.93
47 FURNACE has not provided any evidence that the nomination of Busan on 16 October 2016 deprived
FURNACE of substantially the whole benefit of the VCP. Busan falls within the trading limits permitted
by Cl 1(b) of the TCP, namely ‘within Asia and Australia’.94 FURNACE would not have been in breach
of its obligations under the TCP by sailing to Busan.
48 None of these alleged breaches entitled FURNACE to terminate the VCP.
C. INFERNO did not repudiate the VCP
49 INFERNO remained ready and willing to perform the VCP and did not renounce its contractual
obligations.
88 Inverkip SS Co Ltd v Bunge [1917] 2 KB 193, 201 (Scrutton LJ); Tarrabochia v Hickie (1856) 1 H&N 183; Stanton v
Richardson (1872) LR 7 CP 421; Giebel v Smith (1872) LR 7 QB 404. 89 Universal Cargo Carriers Corporation v Citati [1957] 2 WLR 713, 722 (Devlin J). 90 Inverkip SS Co Ltd v Bunge [1917] 2 KB 193, 201 (Scrutton LJ); Tarrabochia v Hickie (1856) 1 H&N 183; Stanton v
Richardson (1872) LR 7 CP 421; Giebel v Smith (1872) LR 7 QB 404; Hongkong Fir Shipping v Kawasaki Kisen
Kaisha [1962] 2 QB 26, 60 (Sellers LJ), 65 (Upjohn LJ); see Wuhan Ocean Economic and Technical Cooperation Co
Ltd v Shiffahrts-Gesellschaft Murcia GmbH KG (The ‘Hansa Murcia’) [2012] EWHC 3104 (Comm), [53]-[54] (Cooke
J). 91 Hongkong Fir Shipping v Kawasaki Kisen Kaisha [1962] 2 QB 26, 60 (Sellers LJ), 65 (Upjohn LJ); see Wuhan
Ocean Economic and Technical Cooperation Co Ltd v Shiffahrts-Gesellschaft Murcia GmbH KG (The ‘Hansa Murcia’)
[2013] 1 Lloyd’s Rep 273, [53]-[54] (Cooke J). 92 Telford Homes (Creekside) Limited v Ampurius NU Homes Holdings Limited [2013] EWCA Civ 577, [54] (Lewison
LJ). 93 Valilas v Januzaj [2014] EWCA Civ 436, [71] (Arden LJ). 94 Moot Scenario, p 1.
Team 1 Memorandum for the Respondent
19
50 A party will not be in repudiation unless it ‘evince[s] an intention to not be bound’ by the
charterparty.95 A persistent refusal to perform a contractual obligation will amount to a repudiation
only where it is sufficient to demonstrate that the defaulting party no longer intends to perform their
obligations.96
51 The fact that INFERNO did not pay freight on time was not in itself sufficient to demonstrate that
INFERNO did not intend to be bound by the contract.97 Indeed, INFERNO expressly stated its willingness
to meet its obligations and compensate FURNACE for costs incurred as a result of delay.98
52 Further, nominating Busan on 16 October 2016 and 19 October 2016 was not ‘substantially
inconsistent’ with INFERNO’s contractual obligations such as to constitute an intention to no longer
be bound by the VCP.99 INFERNO originally nominated Busan as a solution to the problem of
congestion at Chinese ports.100 Rather than evincing an intention to no longer be bound, this suggests
that INFERNO was ready and willing to make contingency plans in order to ensure the VCP could be
executed. Further, Busan is proximate to the ports listed under Cl 8.101
53 Accordingly, INFERNO remained ready and willing to perform its contractual obligations at all times,
and did not repudiate the VCP.
54 In the alternative, FURNACE did not have the right to terminate the VCP as it did not accept any alleged
repudiation. It is well settled that an innocent party must accept a repudiation in order for a contract
to be brought to an end.102 This must be done clearly and unequivocally.103 Mere inactivity or
acquiescence is not sufficient.104 Where an innocent party does not exercise its election immediately,
95 Tenax Steamship Co v The Owners of the Motor Vessel Brimnes (The ‘Brimnes’) [1975] QB 929, 956 (Davies LJ). 96 Torvald Klaveness A/S v Arni Maritime Corporation (The ‘Gregos’) [1995] 1 Lloyd’s Rep 1, 9 (Lord Mustill). 97 Petroleo Brasileiro SA v ENE Kos 1 Ltd (The ‘Kos’) [2012] 2 AC 164, [7] (Lord Sumption JSC), [52] (Lord Mance
JSC). 98 Moot Scenario, p 69. 99 Ross T Smyth & Co Ltd v T D Bailey, Son & Co [1940] 3 All ER 60; Decro-Wall International SA v Practitioners in
Marketing Ltd [1971] 1 WLR 361. 100 Moot Scenario, p 57. 101 See Annexure A. 102 Howard v Pickford Tool [1951] 1 KB 417, 421 (Asquith LJ). 103 Alan Ramsay Sales & Marketing Ltd v Typhoo Tea Ltd [2016] EWHC 486 (Comm), [68] (Flaux J); Societe Generale
v Geys [2012] 1 AC 513, [17] (Lord Hope DPSC). 104 Alan Ramsay Sales & Marketing Ltd v Typhoo Tea Ltd [2016] EWHC 486 (Comm), [68] (Flaux J).
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it runs the risk that the party in repudiation will recommence performing the contract and it will lose
its right to accept the repudiation as terminating the contract.105
55 If INFERNO’s course of conduct amounted to a repudiation of the VCP (as alleged by FURNACE),106
by nominating Ningbo on 21 October 2016,107 INFERNO recommenced performance of the VCP and
FURNACE lost its chance to accept any alleged repudiation by INFERNO.
D. INFERNO was entitled to terminate the VCP
56 FURNACE did not have a right to terminate the VCP. Therefore, by attempting to terminate the VCP
in its email of 22 October 2016 at 1120h,108 FURNACE repudiated the VCP.109 INFERNO accepted this
repudiation by its email of 22 October 2016 at 1628h,110 and the VCP was terminated.
105 Stocznia Gdanska SA v Latvian Shipping Co (No 2) [2002] 2 Lloyd’s Rep 436, [87] (Rix LJ). 106 Moot Scenario, p 68. 107 Moot Scenario, p 67. 108 Moot Scenario, p 68. 109 See Fercometal SARL v Mediterranean Shipping Co SA [1989] AC 788, 797, 806 (Lord Ackner). 110 Moot Scenario, p 68.
Team 1 Memorandum for the Respondent
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SUBMISSIONS ON DAMAGES
V. FURNACE IS ENTITLED TO NO MORE THAN NOMINAL DAMAGES
57 FURNACE is (A) only entitled to nominal damages for breach of the VCP. FURNACE is not entitled to
damages for: (B) costs and expenses of exercising its purported lien; and (C) damages for detention.
A. FURNACE is only entitled to nominal damages for breach of the VCP
58 INFERNO concedes that FURNACE is entitled to nominal damages for the delay in payment of freight
per Cl 15 of the VCP and the delay in nominating a discharge port per Cl 8 of the VCP. INFERNO did
not, however, breach the ‘safe port’ warranty under Cl 8 by nominating Busan, South Korea.
59 A port will be considered ‘safe’ if a vessel can, ‘reach it, use it and return from it without, in the
absence of some abnormal occurrence, being exposed to danger which cannot be avoided by good
navigation and seamanship.’111 Evidence of the zombie outbreak remains inconclusive. However, if
such an outbreak did occur it would be an abnormal or unexpected event falling outside the scope of
the safe port warranty.112 Therefore, INFERNO did not breach the safe port warranty by nominating
Busan.
B. FURNACE is not entitled to damages for costs and expenses of exercising the lien
60 FURNACE claims damages for the costs and expenses of exercising the lien. Such damages are
unavailable because: (i) FURNACE did not validly exercise a lien; and (ii) FURNACE did not mitigate
its loss.
(i) FURNACE did not validly exercise a lien
61 FURNACE’s purported lien over the Cargo is invalid or in any event invalidly exercised,113 therefore
FURNACE is not entitled to claim any loss resulting from its exercise.
111 Leeds Shipping Co Ltd v Société Française Bunge (The ‘Eastern City’) [1958] 2 Lloyd’s Rep 127, 131 (Sellers LJ). 112 Kodros Shipping Corp of Monrovia v Empresa Cubana de Fletes (The ‘Evia’) (No 2) [1983] 1 AC 736, 749 (Lord
Roskill); Tage Berglund v Montoro Shipping Corp Ltd (The ‘Dagmar’) [1968] 2 Lloyd’s Rep 563. 113 See [14]-[29] above.
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(ii) In any event, FURNACE did not exercise its lien reasonably
62 The availability of damages for the costs and expenses of exercising a lien depends on whether the
lien was exercised reasonably,114 and whether the lienor could mitigate its losses by discharging the
cargo.115 Therefore, in the event that FURNACE validly exercised a lien over the Cargo, it will not be
entitled to the associated costs of exercising its lien because it failed to exercise it in a reasonable
manner.116 In considering what is reasonable regard should be had to the various methods of
exercising the lien available, and the respective costs.117 The onus is on FURNACE to show that this
action was reasonable.118
63 FURNACE’s conduct was unreasonable for two reasons. First, there is no evidence that it was
impossible or practically difficult to discharge the cargo at Singapore, or any other port.119 Second,
there is no evidence that it would be more expensive to exercise the lien ashore than on board the
Vessel. Instead, FURNACE voluntarily and unnecessarily endangered the Vessel, Cargo and crew.120
C. FURNACE is not entitled to damages for detention
64 FURNACE is not entitled to damages for detention because: (i) detaining the Vessel at Singapore broke
the chain of causation; and (ii) in any event, FURNACE failed to take reasonable steps to mitigate its
loss.121
114 Smailes v Hans Dessen and Co (1906) 12 Com Cas 117. 115 Lyle Shipping v Cardiff Corp [1900] 2 QB 638. 116 Metall Market OOO v Vitorio Shipping Co Ltd (The ‘Lehmann Timber’) [2014] QB 760, [127] (Rix LJ); Santiren
Shipping Ltd v Unimarine SA (The ‘Chrysovalandou Dyo’) [1981] 1 Lloyd’s Rep 159. 117 London Arbitration 5/92 (1992) 321 Lloyd’s Maritime Law Newsletter 4. 118 London Arbitration 5/92 (1992) 321 Lloyd’s Maritime Law Newsletter 4. 119 Cf Five Oceans Corporation v Cingler Pte Ltd [2015] SGHC 311, [61] (Ang Saw Ean J). 120 Moot Scenario, p 37. 121 Fulton Shipping Inc of Panama v Grobalia Business Travel SAU (The ‘New Flamenco’) [2014] 2 Lloyd’s Rep 230,
[18] (Longmore LJ) referring to McGregor on Damages, 18th edn (Sweet & Maxwell, London, 2011), [7.003-7.006];
but see Darbishire v Warran [1963] 1 WLR 1067, 1075 (Pearson J) and Golden Strait Corp v Nippon Yusen Kubishika
Kaisha (The ‘Golden Victory’) [2007] 2 AC 353, [10] (Lord Bingham) where the rule is not framed as a positive duty,
rather that damages will be reduced to the extent that the claimant failed to reasonably mitigate its loss.
Team 1 Memorandum for the Respondent
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(i) Detaining the Vessel at Singapore broke the chain of causation
65 In cases of damages for breach of contract, the general rule is that the claimant is entitled to be placed
in the same position as it would have been in had the contract been performed.122 Damages are only
recoverable if the loss is caused by a breach of contract.123 The onus is on FURNACE to prove that
INFERNO’s breach resulted in the alleged loss.124
66 As a matter of common sense,125 loss caused by detention did not flow from the alleged breaches of
the VCP. FURNACE has kept the Vessel floating outside Singapore since 0800h on 11 October 2016
in an attempt to exercise an invalid lien on cargo.126 Given that FURNACE was not entitled to exercise
this lien, its conduct was unreasonable and broke the chain of causation between INFERNO’s alleged
breaches of the VCP and FURNACE’s alleged losses.
(ii) In any event, FURNACE failed to take reasonable steps to mitigate its loss
67 FURNACE failed to take any reasonable steps to mitigate any potential losses caused by INFERNO’s
alleged breach and therefore cannot claim damages for detention as these losses were avoidable.127
FURNACE failed to store the cargo, either at Ningbo or Singapore, and seek an alternative charter. The
losses FURNACE claims for detention of the Vessel were therefore avoidable losses and INFERNO is
not liable for the consequences of FURNACE’s inaction.
122 Robinson v Harman (1848) 1 Ex 850, 855 (Parke B); Golden Strait Corporation v Nippon Yusen Kubishika Kaisha
(The ‘Golden Victory’) [2007] AC 353, [29] (Lord Scott). 123 Koch Marine Inc v d’Amica Societa di Navigazione ARL (The ‘Elena d’Amico’) [1980] 1 Lloyd’s Rep 75, 88 (Goff
J). 124 McGregor on Damages, 18th edn (Sweet & Maxwell, London, 2011), [6.074]. 125 Galoo v Bright Grahame Murray [1994] 1 WLR 1360 CA, 1375 (Glidewell LJ). 126 Moot Scenario, p 67. 127 Fulton Shipping Inc of Panama v Grobalia Business Travel SAU (The ‘New Flamenco’) [2014] 2 Lloyd’s Rep 230,
[18] (Longmore LJ) referring to McGregor on Damages, 18th edn (Sweet & Maxwell, London, 2011), [7.003-7.006];
but see Darbishire v Warran [1963] 1 WLR 1067, 1075 (Pearson J) and Golden Strait Corp v Nippon Yusen Kubishika
Kaisha (The ‘Golden Victory’) [2007] 2 AC 353, [10] (Lord Bingham) where the rule is not framed as a positive duty,
rather that damages will be reduced to the extent that the claimant failed to reasonably mitigate its loss.
Team 1 Memorandum for the Respondent
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PRAYER FOR RELIEF
For the reasons set out above, INFERNO seeks the following orders and declarations:
a. a declaration that FURNACE is not entitled to exercise a lien on the Cargo (II/III);
b. a declaration that FURNACE is not entitled to exercise a lien on sub-freight (IV);
c. a declaration that INFERNO validly terminated the VCP (V);
d. an award for damages for termination of the VCP;
e. an award for interest under s 20 of the IAA; and
f. an order for costs.
Team 1 Memorandum for the Respondent
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ANNEXURE A: MAP OF PORTS