Viivi Varakas – Katariina Koivisto – Katja Zimmermann – Christopher Mondschein Team 16

 

INTERNATIONAL MARITIME LAW ARBITRATION MOOT COMPETITION

2013

SOUTHAMPTON

 

 

MEMORANDUM for

CLAIMANT  

MAASTRICHT UNIVERSITY

 

ON BEHALF OF CLAIMANT

Aardvark Ltd

AGAINST RESPONDENT

Twilight Carriers

I    

TABLE OF CONTENT

SUMMARY OF ARGUMENTS 1

STATEMENT OF FACTS 1

ARGUMENTS ON JURISDICTION 2

I. The Tribunal may rule on its own jurisdiction 3

II. There is a valid Arbitration Agreement 3

1. The arbitration clause has been incorporated into the Bills of

Lading

4

2. The terms of the Fixture Recap take precedence over

incorporated pro-forma terms of the Charter Party

5

III. The proper seat of arbitration is London 5

IV. The applicable law to this dispute is English law 6

ARGUMENTS ON THE MERITS 7

V. The Claimant has title to sue the Respondant for the damages they

have occured

7

1. The Claimant was lawful holder of the Bills of Lading at all

times

7

2. The Respondent held the chattel in bailment for the Claimant 8

2.1 The Claimant has to be regarded as bailor 8

2.2. The Respondent has to be regarded as bailee 10

2.3. The terms of the bailment are the terms of the Bills of

Lading

10

3. The Claimant held legal title to the chattel at all times 10

3.1. The PFAD could be specified from the larger bulk 11

3.2. Alternatively, the PFAD form part of a larger bulk,

which was itself identified in the Bills of Lading

11

II    

3.3. As the Claimant hold legal title to the chattel, they can

sue the Respondent for tort in conversion

12

VI. The Respondant is liable for the decrease in value of the goods as

they allowed the vessel to be taken over by pirates and neglected to

take the necessary cargo care measures

12

1. The Respondent has breached the Bills of Lading 13

1.1. The Respondent has the duty to properly and carefully

care for the goods under Article III, r.2 HVR

13

1.2. The Respondent has breached their duty of care

towards the goods under Article III, r. 2 of the Hague-Visby

Rules

14

2. Alternatively, the Respondent is liable for breach of bailment 14

2.1. The Respondent has breached their duties as bailee 14

3. The Respondent’s conduct has lead to damages on the side of

the Claimant

14

3.1. Piracy 14

3.2. Contamination of the goods 15

4. The Respondent cannot invoke the exception clauses under

Article IV, r.2 HVR

16

5. The Claimant is entitled to claim damages 16

VII. The Claimant is entitled to sue the Respondent as they had the

duty to deliver the cargo at the correct port of discharge against the

original Bills of Lading

16

1. These duties have arisen out of the Bills of Lading 17

1.1. The Respondent has breached this duty under the

contract by not delivering the cargo at the correct discharge

port

17

1.1.1. The exception clauses contained in the Charter

Party cannot alter this conclusion

18

1.2. The Respondent has breached their duties under the 18

III    

contract by not delivering the cargo against presentation of

the Bills of Lading

2. Alternatively, these duties have arisen out of the bailment

relationship

19

2.1. The Respondent has breached this duty under bailment

by not delivering the cargo at the correct discharge port

20

2.2. The Respondent has breached their duties as a bailee

by not delivering the cargo against presentation of the Bills

of Lading

20

3. Alternatively, the Respondent is liable under the tort in

conversion

21

4. The Claimant is entitled to damages 21

4.1. The Claimant is entitled to damages as a result of

breach of contract

21

4.1.1. The Claimant claims damages in breach of

contract for legal fees incurred in the Netherlands

22

4.1.2. The Claimant claims damages for costs of

replacing goods as a result of Respondent’s breach of

contract

23

4.2. Alternatively, the claimant claims damages that have

occurred as a result of the Respondent’s breach of duty as a

bailee of the goods

23

4.3. The Claimant claims damages as a result of tort in

conversion

24

4.4. The Claimant is entitled to interests 24

4.5. The Claimant is entitled to recover costs of arbitration 24

PRAYER FOR RELIEF 25

IV    

TABLE OF AUTHORITIES

I. Case Law

• A/B Legis v V Berg & Sons Ltd [1964] 1 Lloyd’s Rep 203

• Albacora S.R.L. v. Westcott & Laurance Line Ltd. (The Maltesian), [1966] 2 Lloyd's

Rep 53

• The Berge Sisar [2002] AC 205

• Bunga Seroja, High Court of Australia, 22 October 1998, [1999] 1 Lloyd’s Rep. 512

• Butler v Egg and Egg Pulp Marketing Board (1966) 114 CLR 185

• C v D [2007] EWA Civ 1282; [2008] 1 Lloyd’s Rep 360

• Chris Foodstuffs Ltd. v. Nigerian National Shipping Line [1967] 1 Lloyd's Rep 293

• Coggs v Bernard [1703] 2 Ld Ray 909

• Colbelfret Bulk Carriers NV v Swissmarine Services SA [2009] EWHC 2883 (Comm)

• Constantine SS Co v Imperial Smelting Corp [1942] AC 154

• Dolphina [2011] SGHC 273; [2012] 1 Lloyd’s Rep 304

• East West Corp v DKBS 1912 Utaniko Ltd v P&O Nedlloyd BV [2003] EWCA Civ 83

• The ‘Eternity’ [2009] 1 Lloyd Rep 107

• Federal Bulk Carriers Inc v. C. Itoh & Co. Ltd (The Federal Bulker) [1989] 1 Lloyd’s

Rep 103

• Fiona Trust & Holding Corp Ltd v Privalov (sub nom Premium Nafta Products Ltd

(20th Defendant) & Ors v Fili Shipping Company Ltd & Ors [2007] UKHL 40; [2008]

1 Lloyd’s Rep 254

• Foster v Mackinnon [1869] LR 4 CP 704

• The Glendorach [1966] P 226

• Glyn Mills Currie & Co. v. East and West India Dock Co., [1882] 7 App.Cas.

• Hadley v Baxendale [1854] EWHC J70

• Hellenic Dolphin [1978] 2 Lloyd’s Rep 336

• The Houda [1994] 2 Lloyd's Rep 541 108

• Hyndai Merchant Marine Co Ltd v Americas bulk Transport Ltd ("The Pacific

Champ”) [2013] EWHC 470 (Comm)

• Jahn (Trading as C. F. Otto Weber) v Turnbull Scott Shipping Company, Ltd., and

Nigerian National Line, Ltd. (The Flowergate) [1967] 1 Lloyd’s Report 2

V      

• Kuwait Airways Corp v IAC (No. 6) [2002] UKHL 19; [2002] 2 AC 883

• Leigh & Sillivan Ltd v. Aliakmon Shipping Co Ltd [1986] AC 785

• The ‘Leonidas’ [2001] 1 Lloyd’s Rep 533

• Lloyds Bank v Waterhouse [1991] FLR. 97

• Luanda Exportadora SARL etc v Wahbe Tamari & Sons Ltd and Jaffa Trading Co

[1967] 2 Lloyd’s Rep 353

• M.B. Pyramid Sound N.V. v Briese Schiffahrts G.M.B.H. and Co. K.G. M.S. "Sina"

and Latvian Shipping Association Ltd. (The "Ines") Lloyd’s Law Reports [1995] Vol.

2

• Minerva Navigation Inc v. Oceana Shipping Ag (The “Athena”) [2012] EWHC 3608

(Comm), Lloyd’s Law Reports [2013] Vol. 1

• Modern Building Wales Ltd v Limmer & Trinidad Co Ltd [1975] 1 WLR 1281

• Morris v Martin [1966] 1 QB 716

• Motis Exports Ltd v Dampskibsselskabet Af 1912, Aktieselskab and Another [1999] 1

Lloyd's Rep 837

• The ‘Northgate’ [2008] 1 Lloyd’s Rep 511

• Notara v Henderson (1872) LR 7 QB 225

• Official Assignee of Madras v Mercantile Bank of India Ltd [1935] AC 53

• Pagnan SpA v Tradax Ocean Transportation SA [1987] 2 Lloyd’s Rep 342

• Portorafti Commerciale S.A. v Ultramar Panama Inc. (No. 2) [1990] 1 Lloyd’s Rep

310

• Silversandal (Bache v. Silver Line Inc.) 110F.2d 60, 1940 AMC 731 (2 Cir. 1940)

• Société Cooperative Swiss de Céréales et Matieres Fourrageres v La Plata Cereal

Company SA (1947) 80 Lloyd’s Rep 530

• The Sormovskiy 3068 (1994) 2 Lloyd's Rep 266

• Sonicare International Ltd. v. East Anglia Freight Terminal Ltd. And Others and

Neptune Orient Lines Ltd. (Third Party), Q.C. Lloyd’s Law Reports [1997] Vol. 2

• The Stone Gemini [1999] 2 Lloyd’s Rep 225

• Sze Hai Tong Bank Ltd. v. Rambler Cycle Co. Ltd [1959] A.C. 576

• Thompson Dominy [1845] 14 M & W 403

• The Tuyuti [1984] 2 Lloyd’s Rep 51

• The Vasiliy Golovnin (2008) 756 LMLN 3

VI    

• Welex AG v Rosa Maritime Ltd [2002] APP.L.R. 04/25

• Westminster Chemicals and Produce Ltd v Eichholz and Loeser [1954] 1 Lloyd’s Rep

99

II. Treaties

• International Convention for the Unification of Certain Rule of Law Relating to Bills

of Lading signed at Brussels on 25 August 1924, as amended by the Protocol signed at

Brussels on 23 February 1968

• United Nations Security Council Resolution 1816, adopted by the Security Council at

its 5902nd meeting on June 2008

III. Legislation

• Arbitration Act 1996

• Carriage of Goods by Sea Act 1992 (COGSA)

IV. Secondary Literature

• Aikens, LJ, Richard Lord QC and Bools, M., Bills of Lading, Chapter 9: Claims other

than in Contract, (2006) Available

at:http://www.ilaw.com/ilaw/doc/view.htm?queryString=bailment+%22duty+of+care

%22&sort=date&querySector=Maritime+and+Commercial&practiceArea=Maritime+

and+Commercial&sort=date&searchType=advanced-

search&se=39&id=131046&searched=true)n, last visited 22.4.2013

• Ahmed, M., “Arbitration Clauses: Fairness, Justice and Commercial Certainty”,

Arbitration International, 415 (2010)

• Ambrose, C., Maxwell, K., and Parry A., London Maritime Arbitration, (3rd Edition),

Informa Law, London, 2009) (

• Baughen, S., Misdelivery claims under bills of lading and international conventions

for the carriage of goods by sea, in: D Rhidian Thomas, Carriage of Goods under the

Rotterdam Rules, Informa Law, London, (2010) Available at:http://www.i-

law.com/ilaw/doc/view.htm?queryString=misdelivery+&sort=date&querySector=Mar

itime+and+Commercial&practiceArea=Maritime+and+Commercial&sort=date&searc

hType=advanced-search&se=1&id=315695&searched=true, last visited 22.4.2013

VII    

• Baughen, S., Shipping Law, Oxon, New York, (2012)

• Best Management Practice for Protection against Somalia based Pirates BMP4,

Version 4, Witherby Publishing Group Ltd, Edinburgh, (2011)

• Born, G. B., International Commercial Arbitration, Kluwer Law International, The

Netherlands, (2009)

• Boyd, S. C., et. al., Scrutton on Charterparties and Bills of Lading, (20nd Edition),

Sweet & Maxwell, The United Kingdom, (1996)

• Central London County Court (Business List), 08.01.1997

• Hansen, S.J., Piracy in the Greater Gulf of Aden – Myths, Misconceptions and

Remedies, Norwegian Institute for Urban and Regional Research Report, (2009), no. 9

• Hooydonk, van E., (Ed), English and Continental Maritime Law: After 115 Years of

Maritime Law Arbitration: a Search for Differences between Common Law and Civil

Law, Maklu, Antwerpen-Appeldoorn, (2003)

• Lew, J.D.M., et al., Comparative International Commercial Arbitration, Kluwer Law

International, The Hague, (2003)

• Lloyd’s Maritime Law Newsletter 11.11.2008

• Lloyd’s Maritime Law Newsletter (2012) 853 LMN 2

• The London Maritime Arbitrators Association Available at:

http://www.lmaa.org.uk/cost-and-interest.aspx, last visited 22.4.2013

• Low, R., Replacing the Paper Bill of Lading with an Electronic Bill of Lading:

Problems and Possible Solutions, in: University of Queensland, International Trade

and Business Law Annual, Cavendish Publishing Ltd, Newport, (2000)

• Schwebel, S., International Arbitration: Three Salient Problems, Cambridge

University Press, Cambridge, (1987)

• Todd, P., Bills of Lading and Bankers Documentary Credits, Chapter 5: The

Documents As Security I, in: Lost, Damaged or Misdescribed Goods, (2007)

Available at: http://www.i-

law.com/ilaw/doc/view.htm?queryString=tort+of+conversion+bailment+&sort=date&

querySector=Maritime+and+Commercial&practiceArea=Maritime+and+Commercial

&sort=date&searchType=advanced-search&se=6&id=315060&searched=true, last

visited 22.4.2013.

VIII    

TABLE OF ABBREVIATIONS

Aardvark Aardvark Limited (Buyers of Commodities including

PFAD)

Beatles Beatles Oils & Fats Ltd (Sellers of Commodities

including PFAD)

Bills of Lading The Bills of Lading dated 25 September 2008 covering

the shipment the subject of these proceedings.

Charter Party Voyage Charter Party (VEGOIL VOY FORM

“VEGOILVOY 1/27/50”)

CIF Cost, Insurance, Freight

COGSA 1971 The Carriage Of Goods by Sea Act 1971

COGSA 1992 The Carriage Of Goods by Sea Act 1992

Fixture Recap The Fixture Recap sent by email on 12 September 2008

from jwalker@walkerbrokers.com to

paul.taylor@aardvark.com

FOSFA The Federation of Oils, Seeds and Fats Associations

GMQ Good Merchantable Quality

Hague Visby Rules Protocol to Amend the International Convention for the

Unification of Certain Law Relating to Bills of Lading

(Brussels 1968)

IX    

PFAD Palm Fatty Acid Distillate

Twilight Twilight Carriers Inc. (The Owner of the Vessel

Twilight Trader)

Vessel Twilight Trader

1    

SUMMARY OF ARGUMENTS

The Arbitration Tribunal has jurisdiction over the dispute at hand as there is a valid

Arbitration Agreement. The arbitration clause has been incorporated into the Bills of

Lading. It is that arbitration clause that is decisive since the terms of the Fixture Recap take

precedence over the arbitration clause laid down in the Charter Party. The Claimant has title

to sue the Respondent for damages. This is due to three reasons: first, the Claimant was

lawful holder of the Bills of Lading at all times, second, the Respondent is to holding the

chattel as bailee for the Claimant, and third, the Claimant held legal title to that chattel at all

times. The Respondent is liable for the decrease in value of the goods. This is due to the

fact that they allowed the vessel to be taken over by pirates and neglected to take the

necessary cargo care measures. The Respondent has thereby breached their duties arising out

of the Bills of Lading and the bailment relationship. In this regard, it is argued that the

Respondent cannot invoke the exception clauses under Article IV, r.2 of the Hague Visby

Rules. As a result, the Claimant suffered damages, which they are entitled to claim from the

Respondent. The Claimant is entitled to sue the Respondent because they failed to deliver

the cargo at the correct port of discharge against the original Bills of Lading. The

Respondent has breached their duties arising out of the Bills of Lading and under bailment. In

addition, the Respondent cannot successfully invoke the exception clauses laid down in the

Charter Party. These breaches have led to damage which the Claimant is entitled to claim

from the Respondent.

STATEMENT OF FACTS

Aardvark Ltd. is a buyer of commodities situated in Liverpool, Merseyside, UK, dealing inter

alia with vegetable oils. Aardvark has contracted with Beatles Oils & Fats Ltd. on 23 May

2008 for the purchase of 4,000 mt of PFAD to be shipped from Malaysia to Rotterdam under

CIF Incoterm 2000. On 23 September 2008 the sales contract was amended to set the

purchase price at USD 747,50 per mt and to deliver the goods CIF Merseyside.

2    

Beatles chartered the vessel Twilight Trader from Twilight Carriers Inc. to bring the goods

from Malaysia to Merseyside by charter-party on 12 September 2008. Twilight Carriers Inc.

issued four Congengbills (‘The Bills of Lading’) on 25 October 2008 all stating Liverpool,

Merseyside, UK, as port of discharge. On 15 November 2008 the Twilight Trader was

hijacked by pirates in the Gulf of Aden but was released on 12 February 2009. During the

period of captivity no cargo care measures were taken. After the release of the vessel the crew

was debriefed and replaced and the goods were subjected to testing. The Twilight Trader

subsequently sailed to Rotterdam where the PFAD was discharged between 20 and 22 March

2009 against an indemnity from Beatles Oils & Fats Ltd. On 23 March 2009 Beatles Oils &

Fats commenced proceedings to garnish property before judgement in Rotterdam.

Subsequently, Aardvark Ltd. made an application for the arrest of the Twilight Trader and the

vessel was arrested on 23 March 2009. During the Dutch proceedings it was held that the

arrest of the vessel could be lifted against a security of USD 1.4 million. Further, Beatles Oils

& Fats Ltd. was able to obtain permission by the Court to sell the goods by judgement of 25

August 2009. Beatles Oils & Fats Ltd. sold the PFAD to AB Buyers on 25 August 2009 for

the sum of USD 1,695,752.38. During the time of the Dutch proceedings and as a result

thereof, Aardvark incurred Court fees of USD 138,843.14 and legal fees in support of the

proceedings in the sum of USD 107,913.12. Further, Aardvark had to buy replacement goods

on 16 April 2009 worth in total USD 2,090,000.

ARGUMENTS ON JURISDICTION

I. THE TRIBUNAL MAY RULE ON ITS OWN JURISDICTION

Although English law has traditionally precluded tribunals from ruling on its own jurisdiction,

the Arbitration Act of 1996 has implemented the doctrine of Kompetenz-Kompetenz.1 On the

basis of Article 30 of the Act, the Arbitration Tribunal may rule on its own substantive

                                                                                                                         1 Article 30 (1) of the Arbitration Act 1996, which provides that “Unless otherwise agreed by the parties, the arbitral tribunal may rule on its own substantive jurisdiction, that is, as to (a) whether there is a valid arbitration agreement, (b) whether the

3    

jurisdiction, unless otherwise agreed by the parties. As there is presently no agreement

between the parties that precludes the Arbitration Tribunal to do so, this Tribunal shall make

an initial ruling on its jurisdiction to hear this dispute. Further, in accordance with the doctrine

of separability, the validity of the arbitration agreement will not depend on the existence, or

continued existence, of the host contract which itself contains the arbitration agreement.2 The

arbitration agreement would be impeached only in situations where there are independent

vitiating factors, which directly affect the arbitration agreement, e.g. a mistake as to the

identity of the contracting parties, non est factum,3 or where there has been a failure to reach

any agreement at all.4 It is obvious from the written evidence that any such situation is out of

the question in the present dispute submitted before this Arbitration Tribunal. The identity of

the parties is apparent from the relevant shipping documents.5 Further, there has been a clear

understanding of the underlying legal relations, which is evident from the correspondence.6

Lastly, and on which it will subsequently be elaborated in more detail, there is no doubt that

the parties have reached an agreement. Therefore, the question of validity of the Arbitration

Agreement is to be assessed by this Tribunal. In the following, it will established that the

parties have indeed concluded an express Arbitration Agreement by way of a Fixture Recap

referred to in the Bills of Lading, and amending the terms of the Charter Party.

II. THERE IS A VALID ARBITRATION AGREEMENT

                                                                                                                         2 Section 7 (2) of the Arbitration Act 1996, which reads “Unless otherwise agreed by the parties, an arbitration agreement which forms or was intended to form part of another agreement (whether or not in writing) shall not be regarded as invalid, nonexistent or ineffective because that other agreement is invalid, or did not come into existence, or has become ineffective, and it shall for that purpose be treated as a distinct agreement.” A similar principle can also be found by implication in Article V(1)(a) New York Convention. For this, see G. B. Born, International Commercial Arbitration, Kluwer Law International, The Netherlands, 2009, p. 319; See also: S. Schwebel, International Arbitration: Three Salient Problems, Cambridge University Press, Cambridge, 1987. 3 See Foster v Mackinnon [1869] LR 4 CP 704; Lloyds Bank v Waterhouse [1991] FLR. 97. 4 See Fiona Trust & Holding Corp Ltd v Privalov (sub nom Premium Nafta Products Ltd (20th Defendant) & Ors v Fili Shipping Company Ltd & Ors [2007] UKHL 40; [2008] 1 Lloyd’s Rep 254. The Court of Appeal indicated that only in these kinds of situations it could be established that there has never been an agreement between the parties and that therefore the alleged arbitration agreement never existed. The House of Lords upheld this decision. 5 Moot Problem, pp. 3-21. 6 Moot Problem, p. 36.

4    

The 1996 Act requires a valid arbitration agreement which provides the Tribunal with

substantive jurisdiction.7 Formation of an arbitration agreement is subject to the basic rules of

English law, which require three elements to be present: agreement, consideration and an

intention to create legal relations.8 In the present case, all elements are fulfilled and the

arbitration clause in the Charter Party, as amended by the fixture recap, has been validly

incorporated into the Bills of Lading. As an arbitration agreement does not need to be signed,

no objection may be based on the fact that the fixture recap does not contain a signature of the

parties. 9

1. The arbitration clause has been incorporated into the Bills of Lading

An arbitration clause can be incorporated into a contract by reference to another contract, such

as the charter party or the fixture recap.10 With regard to the latter, a less stringent burden of

proof exists,11 since the Respondent was privy to the contents of the fixture recap, which the

Respondent explicitly confirmed.12 In the present case, the Bills of Lading do not include the

date of the Charter Party, nor has a Charter Party been drawn up. However, the fixture recap

specifically incorporates the Charter Party VEGOILVOY 1/27/50, and, amends that Charter

Party in respect of i.a. the arbitration clause, as evident from the sentence “save as above as

per standard VEGOIL VOY FORM “VEGOILVOY 1/27/50”)”.13 The Court of Appeal

decided in similar circumstances in the case of Welex AG v. Rosa Maritime Ltd (‘The Epsilon

Rosa’) that the terms of a recap fixture, including the choice of forum and the applicable law,

could be incorporated into the bill of lading, and the Appeal Court held that they were be

incorporated in that case. The Fixture Recap email sent by the Charter Party broker John

                                                                                                                         7 Section 30 (a) of the 1996 Act. 8 Clare Ambrose, Karen Maxwell and Angharad Parry, London Maritime Arbitration, 3rd Edition, 2009. See Chapter 4, ‘Arbitration Agreement’. 9 Section 5 (1) and (2) of the Arbitration Act 1996. 10 Masood Ahmed, “Arbitration Clauses: Fairness, Justice and Commercial Certainty”, Arbitration International, 415 (2010), p. 413. 11 Federal Bulk Carriers Inc v. C. Itoh & Co. Ltd (The Federal Bulker) [1989] 1 Lloyd’s Rep 103(“The Federal Bulker”); Julian D.M. Lew et al., Comparative International Commercial Arbitration, Kluwer Law International, The Hague, (2003), p. 142. 12 Moot Problem, p. 4. 13 Problem at 4.

5    

Walker from Walker Brokers, evidences an intended contract between the parties, because it

contained an agreement on all the relevant aspects of the business; e.g. the place of loading

and the place of delivery, total laytime, freight rate, demurrage.14 On its face, the Fixture

Recap was complete and clearly a result of previous negotiations as it stated “all subjects

lifted and fixture reconfirmed by owners”.15 The parties have showed consideration by

continuous performance of their obligations under the contract. Without a doubt there has

been a valid contract containing an express arbitration clause, which has been incorporated

into the Bills of Lading.

2. The terms of the Fixture Recap take precedence over incorporated pro-forma

terms of the Charter Party

Where there is an inconsistency between negotiated terms and incorporated pro-forma or

standard terms, the former will prevail.16 In particular, where a term of Charter Party is

inconsistent with a term of the Fixture Recap in such manner that the two may not be read

together, the latter must take precedence over the incorporated pro-forma.17 As Bingham LJ

stated, “it is not enough if one term qualifies or modifies the effect of another; to be

inconsistent a term must contradict another term or be in conflict with it, such that effect

cannot fairly be given to both clauses”.18 Whereas the default clause of the Charter Party

(Clause 31) states that “any dispute arising from the making, performance or termination of

                                                                                                                         14 See Hyndai Merchant Marine Co Ltd v Americas bulk Transport Ltd ("The Pacific Champ”) [2013] EWHC 470 (Comm), where it was accepted that no agreement was entered into by means of the first fixture recap, which was not on its face “complete” as it did not specify the place of redelivery. As no consensus was reached whether the cargo could be carried, there was no agreement and therefore no arbitration clause. 15 Moot Problem, p. 3. 16 Modern Building Wales Ltd v Limmer & Trinidad Co Ltd [1975] 1 WLR 1281, at 1289 per Buckley, LJ; Société Cooperative Swiss de Céréales et Matieres Fourrageres v La Plata Cereal Company SA (1947) 80 Lloyd’s Rep 530 at 537 per Morris J; The ‘Leonidas’ [2001] 1 Lloyd’s Rep 533, at 536 per Langley J; and The ‘Eternity’ [2009] 1 Lloyd Rep 107’ at 113 per David Steel J; The ‘Northgate’ [2008] 1 Lloyd’s Rep 511; and Colbelfret Bulk Carriers NV v Swissmarine Services SA [2009] EWHC 2883 (Comm). 17 Welex AG v Rosa Maritime Ltd [2002] APP.L.R. 04/25; Colbelfret Bulk Carriers NV v Swissmarine Services SA [2009] EWHC 2883 (Comm); Also see Lloyd’s Maritime Law Newsletter (2012) 853 LMN 2 which discusses a similar set of facts in another recent case: [T]he parties’ most specific intentions are those formulated in the recap. Where there is a conflict with the pro forma, the latter has to give way, since it has been incorporated by reference and thus is subsidiary, and comes at the end of the fundamental agreement reflected by the recap. […] The “main terms” were those set out in the recap itself. Giving effect to those words meant that it was necessary to ignore any provisions of the pro forma that were inconsistent with the agreement the parties seem clearly to have reached in the recap. […]. 18 Pagnan SpA v Tradax Ocean Transportation SA [1987] 2 Lloyd’s Rep 342.

6    

this Charter Party shall be settled in New York ...”, the Fixture Recap expressly states that

“English law to apply. London Arbitration”. Thus, the two may not be sensibly and

commercially read together but the latter must be given full effect. Unquestionably the term of

the Fixture Recap reflects parties’ intention to modify the Charter Party as regards to the

arbitration clause and therefore there is no doubt that the parties have indented this Tribunal to

have jurisdiction to hear any dispute arising under (or above) the Contract of Carriage.

III. THE PROPER SEAT OF ARBITRATION IS LONDON

The London Arbitration has jurisdiction to hear this dispute. The arbitration agreement is

contained in and evidenced by the Fixture Recap email dated on 12 September 2008. The

Fixture Recap clearly provides for London Arbitration.19.20

IV. THE APPLICABLE LAW TO THIS DISPUTE IS ENGLISH LAW

By concluding this Arbitration Agreement the parties have submitted to arbitration their

present or future disputes (both contractual and non-contractual).21 As the Arbitration

Agreement is made in written form, the remedial and supervisory regime of 1996 is applicable

to this dispute and there is no doubt that the correct seat of arbitration is London.22 Even if

there was no written evidence available, which there is, English law recognizes the possibility

of an implied arbitration agreement arising as a consequence of the parties’ conduct, for

example when each of them is taking positive steps to progress with arbitration without raisin

any objection.23 As evident from respondent’s defense submission, they do not intend to raise

an objection to the jurisdiction of this Tribunal.24 There is, therefore, nothing to prevent this

Tribunal from hearing this dispute. The general words of incorporation in the Bills of Lading

                                                                                                                         19 Moot Problem, p. 4. 20 The Arbitration Act 1996 applies where the seat of an arbitration is England, Wales of Northern Ireland. In most cases the arbitration agreement is also governed by English law; See C v D [2007] EWA Civ 1282; [2008] 1 Lloyd’s Rep 360. 21 Section 6 (1) of the Arbitration Act 1996. 22 Clare Ambrose, Karen Maxwell and Angharad Parry, London Maritime Arbitration, 3rd Edition, Informa Law, London, (2009); See Chapter 4, ‘Arbitration Agreement’. 23 See Westminster Chemicals and Produce Ltd v Eichholz and Loeser [1954] 1 Lloyd’s Rep 99 (appointment of arbitrations by each side); A/B Legis v V Berg & Sons Ltd [1964] 1 Lloyd’s Rep 203 (submission to an umpire); Luanda Exportadora SARL etc v Wahbe Tamari & Sons Ltd and Jaffa Trading Co [1967] 2 Lloyd’s Rep 353 (submission to an umpire); The Tuyuti [1984] 2 Lloyd’s Rep 51 at 58. See also section 5 (5) of the Arbitration Act 1996. 24 Moot Problem, pp. 71-74.

7    

are apt to incorporate the applicable law clause from the Charter Party.25 As established above

in the context of jurisdiction, the Fixture Recap will prevail over the conflicting or

contradicting terms of the Charter Party on parts where it is inconsistent with the term of the

latter.26 Whereas the Charter Party makes a reference Carriage of Goods by Sea Act 1936 of

the United States,27 the Fixture Recap email sent along with it on 12 September 2008

explicitly states that English law is to apply. These two terms may not sensibly be read

together, and therefore an effect must be given to the express negotiated term of the Fixture

Recap, which clearly reflects the intention of the parties. For this reason, and given the

conclusions above, it is nothing but rational to establish that the parties have chosen English

law to govern their relationship. The Claimants as lawful owners of the goods carried are

therefore correctly basing their claims against the Respondent, the carrier of those goods, on

Contract of Carriage as regulated by the Carriage of Goods by Sea Act 1971, otherwise

known as The Hague Visby Rules, The Carriage Of Goods by Sea Act 1992, and on relevant

principles at common law. Where, and if, the necessary nexus to establish contract is lacking,

the relationship between the Claimant and Responded is governed by the English law of

bailment and/or the English law of tort.

ARGUMENTS ON MERITS

V. THE CLAIMANT HAS TITLE TO SUE THE RESPONDENT FOR THE

DAMAGES THEY HAVE INCURRED

As lawful holder of the Bills of Lading, Aardvark is entitled to sue Twilight for breach of

contract under section 2 of the COGSA. Alternatively, Aardvark is entitled to sue Twilight, as

bailee, for breach of bailment. Alternatively, Aardvark holds legal title to the chattel and is

entitled to sue Twilight for tort of conversion.

                                                                                                                         25 See Dolphina [2011] SGHC 273; [2012] 1 Lloyd’s Rep 304. In Dophina (paras. 121-132) the general words of incorporation were comparable to those used in the B/Ls governing this dispute. The relevant part read as follows: “[…] all conditions, liberties, whatsoever of the said Charter apply to and govern the rights of the parties concerned in this shipment”. 26 See supra note 16 - 18 and accompanying text. 27 Moot Problem, p. 10, Clause 23 (b) of the Charterparty.

8    

1. The Claimant was lawful holder of the Bills of Lading at all times

The Bills of Lading Act 1855 created a statutory implied contract to enable the endorsee of a

Bills of Lading to sue the carrier for post shipment damage to cargo, a right that had not

previously existed under common law.28 The 1855 Act has been now replaced by the COGSA

1992, which, as was earlier established, applies to the dispute at hand. First, Section 1 (1) of

the 1992 Act provides that the Act applies to “…any bill of lading…”. The Claimant hereby

submits that the Respondent has breached his duties under the respective Bills of Lading,

which as such fall under the substantive jurisdiction of the 1992 Act. Second, Section 5 of the

Act29 provides that a lawful holder of a Bill of Lading shall be a person with possession of the

bill as a result of ‘…any indorsement of the bill…’. As it appears from the evidence, in full

accordance with the sales contracts concluded between the Claimant and the Respondent’s

Charterer, ‘Beatles’30, the Claimant fulfilled its contractual obligations by paying the agreed

purchase price on or about mid January 2009, and in return, had the Bills of Lading

transferred to himself. Since then the Claimant has held a legal document title to those goods

that the Bills of Lading are in relation to, namely the cargo subject to those sales contracts

carried by the Respondent. In relation to the latter, Section 5 of the 1992 Act logically

requires that one may become a lawful holder of a Bill of Lading only by means of acting in

good faith.31 The Claimant acquired the Bills of Lading in good faith and equally at all times

acted as such. Third, Section 2 provides a lawful holder of a Bill of Lading with a right of suit

under the Contract of Carriage as set out in the Bill of Lading. The Claimant is hereby

exercising their rights that directly flow from the Act. The Claimant faithfully submits that as

                                                                                                                         28 See Thompson Dominy [1845] 14 M & W 403. The case established that that under common law, the bill of lading did not originally transfer any contractual rights under the contract of carriage between a shipper and a carrier to the endorsee of the bill of lading. 29 Section 5 of the Carriage of Goods by Sea Act 1992 (COGSA) on relevant parts read as follows: “… (2) References in this Act to the holder of a bill of lading are references to any of the following persons, that is to say … (b) a person with possession of the bill as a result of the completion, by delivery of the bill, of any endorsement of the bill or, in the case of a bearer bill, of any other transfer of the bill …”. 30 PFAD contracts 1234 & 1235. See Moot Problem, pp. 1-2 and p. 13. 31 Section 5 (2) of the COGSA, the last paragraph reads “…and a person shall be regarded for the purposes of this Act as having become the lawful holder of a bill of lading wherever he has become the holder of the bill in good faith…”.

9    

they are, and at all times has been, the lawful holder of Bills of Lading, thereby de facto,

pursuant to Section 2 of the COGSA 1992, have an implied right of suit against the

Responded under the Contract of Carriage, as if they had been party to that contract.32

2. The Respondent held the chattel in bailment for the Claimant

In addition to the claim under the contractual obligations, the Claimant has independently an

unanswerable claim against the Defendant for breach of their duties on the basis of bailment

for reward.33 In this bailment relationship, the Defendant is the bailee while the Claimant is

the bailor.

2.1 The Claimant has to be regarded as bailor

Despite the common law principle of privity of contract, an action of bailment allows the

Claimant, who was not party to the original contract concluded between the Responded and

Beatles, to sue Responded due to the fact that they have to be regarded as bailor.34 This is

argued on the basis of first, simple bailment and second, bailment by attornment. The

Claimant has replaced Beatles as bailor in the relationship towards the Respondent. Under the

original construction, Beatles had transferred the title to possession of the chattel to Twilight.

As a result, Beatles was legally characterized as the bailor while the Respondent became

bailee. Regarding the first argument, the Claimant has become bailor as a consequence of

receiving legal title to the cargo by paying the purchase price, as set out below.35 Although

generally an action of attornment is required to change this original construction, it derives

from legal doctrine that exceptions to that general rule are admitted. As was held by Judge

Hallgarten in Sonicare International Ltd. V. East Anglia Freight Terminal Ltd. and Others

and Neptune Orient Lines Ltd, “if, as in the present case the original bailor has caused the

                                                                                                                         32 Section 2 (1) (a) of the COGSA reads: “a person who becomes a lawful holder of the bills of lading shall (by virtue of becoming the holder of the bills of lading) have transferred to and vested in him all rights of suit under the contract of carriage as if he had been party to that contract.” 33 Coggs v Bernard [1703] 2 Ld Ray 909; Also see Alison Clarke & Paul Kohler, Property Law: Commentary and Materials, Cambridge University Press, Cambridge, (2005), pp. 649-650. 34 East West Corp v DKBS 1912 Utaniko Ltd v P&O Nedlloyd BV [2003] EWCA Civ 83, para. 27; Also see Lord Justice Aikens, Richard Lord QC & Michael Bools, Bills of Lading, Chapter 9 Claims other than in Contract, 2006. 35 See paragraph 3.

10    

benefit of the contract representing the head bailment to be assigned - i.e. by negotiation of

the VTP Bill of Lading - then it seems to me that the transferee does indeed step into the

shoes of the original bailor and is to be treated to all intents and purposes as the bailor“.36

Beatles has transferred the Bills of Lading to the Claimant as a result of which the latter has

become the beneficiary of the contract. Therefore, attornment was not of required for the

Claimant to replace Beatles as bailor. Regarding the second argumentation, even if it is to be

concluded that an action of attornment is of the essence, it can be derived from legal doctrine

that this has been done so in advance to any holder of the Bills of Lading by simply issuing

them. As has also been held by Lord Hobhouse in The Berge Sisar, “a bill carried with it a

transferable attornment”.37

2.2 The Respondent has to be regarded as bailee

In both cases, Twilight is to be legally characterized as bailee as they – on a voluntary basis -

hold a possessory title to the cargo to which the Claimant holds a legal title.38 Twilight has

accepted this possessory title of the cargo when it was loaded in Pasir Gudang (Malaysa) and

has issued the Bills of Lading which also fulfill the function of a receipt.39 From this point of

time onwards, the baileeship begun.

2.3 The terms of the bailment are the terms of the Bills of Lading

The bailment is governed by the terms of bailment which are those of the Bills of Lading.40

As has already established, the Bills of Lading incorporate the Charter Party as well as the

                                                                                                                         36 Central London County Court (Business List), 08.01.1997, Sonicare International Ltd. v. East Anglia Freight Terminal Ltd. And Others and Neptune Orient Lines Ltd. (Third Party), before His Honour Judge Hallgarten, Q.C. Lloyd’s Law Reports [1997] Vol.2.; Also see Simon Baughen, Shipping Law, Oxon, New York, (2012). 37 The Berge Sisar [2002] AC 205, para. 18; Also see Lord Justice Aikens, Richard Lord QC & Michael Bools, Bills of Lading, Chapter 9 Claims other than in Contract, (2006). 38 Alison Clarke and Paul Kohler, Property Law: Commentary and Materials, Cambridge University Press, Cambridge, (2005), pp. 649-650; Also see The Pioneer Container [1994] 2 AC 324. 39 Article III (4) of the Hague Visby Rules (HVR); Also see Rouhshi Low, Replacing the Paper Bill of Lading with an Electronic Bill of Lading: Problems and Possible Solutions, in: University of Queensland, International Trade and Business Law Annual, Cavendish Publishing Ltd, Newport, (2000), p.159. 40 Paul Todd, Bills of Lading and Bankers Documentary Credits, Chapter 5 The Documents As Security I: Lost, Damaged or Misdescribed Goods, (2007).

11    

Fixture Recap and refer to the Hague Visby rules.41 Hereby, the bailment relationship between

Respondent and the Claimant are subject to the same conditions as the bailment relationship

between Respondent and Beatles, since the Conditions of Carriage as laid down in the Bills of

Lading have not been altered.42

3. The Claimant held legal title to the chattel at all times

In the following, it will be established that in as far as the Palm Fatty Acid that was bought by

the Claimant could be specified from the larger bulk, the Claimant became owner at that

moment in time on the basis of section 17 of the Sales of Goods Act in conjunction with

section 15 of the FOSFA 81 contract. In as far as the Palm Fatty Acid that was bought by the

Claimant form part of a larger bulk, but were specified in the Bills of Lading as totaling

4000mt, the Claimant became owner in common of the larger bulk at that time, on the basis of

section 20A of the Sales of Goods Act in conjunction with section 15 of the FOSFA 81

contract.43

3.1 The Palm Fatty Acid could be specified from the larger bulk

The PFAD can be clearly identified as the exact quantity that was due to the Claimant as

clearly indicated in the Bills of Lading.44 Moreover, the Bills of Lading indicate the separate

tanks into which the Palm Fatty Acid was loaded, namely into 2P, 2S, 7P, 7S, SLOP P &

SLOP S.45 Section 15 of the FOSFA contract provides that, buyers will become pro rate

owners, when the purchase price has been paid, without segregation being necessary. Seeing

that the Palm Fatty Acid that was sold can in fact be specified and ascertained it is to be

concluded that transfer has in any case taken place after the Bills of Lading had been

transferred to the Claimant in exchange for the purchase price.

                                                                                                                         41 Bills of Lading, clauses 1 and 2. 42 Leigh & Sillivan Ltd v. Aliakmon Shipping Co Ltd [1986] AC 785, 812; Also see Portorafti Commerciale S.A. v. Ultramar Panama Inc. (No. 2) [1990] 1 Lloyd’s Rep. 310; Also see Lord Justice Aikens, Richard Lord QC & Michael Bools, Bills of Lading, Chapter 9 Claims other than in Contract, (2006). 43 Moot Problem, pp. 14-21. 44 Moot Problem, pp.14, 16, 18, 20. 45 Moot Problem, pp. 14, 16, 18, 20.

12    

3.2 Alternatively, the Palm Fatty Acid form part of a larger bulk, which was itself

identified in the Bills of Lading

Section 20A of the Sale of Goods Act 1979 provides that where there is a contract for the sale

of a specified quantity of unascertained goods, which form part of a bulk which is identified

in the contract or by subsequent agreement between the parties and for which the buyer has

paid the price, property in an undivided share in the bulk is transferred to the buyer and the

buyer becomes an owner in common of the bulk. Upon receipt of the Bills of Lading, the

Claimant paid the full purchase price of USD 2,986,671.38 to Beatles on the 26 January

2009.46 Further, the bulk of the PFAD that was carried by the Respondent is clearly identified

in subsequent agreements between Beatles and the Claimant. First, the Fixture Recap

stipulates the exact vessel into which the bulk was to be loaded and that the vessel was to be

loaded to full cubic capacity, with various grades of crude and refined palm/coconut oils

including PFAD within the vessels natural segregation. Second, the Bills of Lading, which

were issued to Claimant by Beatles, indicate the exact gross weight of the Palm Fatty Acid

that was loaded on board for the Claimant; the vessel with which it was to be carried; and the

tanks in to which it was stored. As a result, there can be no doubt that the bulk was

sufficiently identified for the purposes of section 20A of the Sale of Goods Act. Therefore, it

needs to be concluded that the Claimant held legal title (in common) to the chattel at all times.

3.3 As the Claimant hold legal title to the chattel, they can sue the Respondent for

tort in conversion

The Claimant’s right to sue for tort in conversion originates from the fact that they had the

legal title to possession of the cargo when the misdelivery occurred.47 This has been clearly

established in the foregoing. Nevertheless, it deserves to be added that, as it derives from

Official Assignee of Madras v Mercantile Bank of India Ltd, suing for tort in conversion – in

                                                                                                                         46 Moot Problem, p. 25. 47 Simon Baughen, Misdelivery claims under bills of lading and international conventions for the carriage of goods by sea, in: D Rhidian Thomas, Carriage of Goods under the Rotterdam Rules, Informa Law, London, (2010).

13    

opposite to an action under bailment - does not require an action of attornment when the Bills

of Lading are being transferred.48

VI. THE RESPONDENT IS LIABLE FOR THE DECREASE IN VALUE OF

THE GOODS AS THEY ALLOWED THE VESSEL TO BE TAKEN OVER

BY PIRATES AND NEGLECTED TO TAKE THE NECESSARY CARGO

CARE MEASURES

As previously established, the Claimant is entitled to sue the Respondent on the basis of first,

breach of the Bills of Lading and second, breach under bailment.

1. The Respondent has breached the Bills of Lading

As previously established, the Claimant is the lawful holder of the Bills of Lading. Pursuant

to Article I (b)49 in conjunction with Article X (c) of the Hague Visby Rules, contracts for

carriage by sea covered under a bill of lading are governed by the Hague Visby Rules if ‘the

contract contained in or evidenced by the bill of lading provides that these Rules or legislation

of any State giving effect to them are to govern the contract’.

1.1 The Respondent has the duty to properly and carefully care for the goods under

Article III, r. 2 Hague Visby Rules

The carrier’s obligation under Article III, r. 2 Hague Visby Rules is a prima facie obligation

on the carrier during the voyage. Whether the goods are properly and carefully stored depends

on the conditions that may be expected during the voyage and may vary thereupon.50 Further,

the notion of ‘properly and carefully’ in Article III, r. 2 denotes a duty of care supplemented

with an element of skill and a sound system of storage.51 Additionally, Lord Reid held in The

Maltesian that the meaning of ‘properly’ includes "[...] the obligation to adopt a system which

                                                                                                                         48 Official Assignee of Madras v Mercantile Bank of India Ltd [1935] AC 53 (PC). 49International Convention for the unification of certain rule of law relating to bills of lading signed at Brussels on 25th August 1924, as amended by the Protocol signed at Brussels on 23 February 1968. 50 Bunga Seroja, High Court of Australia, 22 October 1998, [1999] 1 Lloyd’s Rep. 512, paras. 34-35. 51 Lord Pearson in Albacora S.R.L. v. Westcott & Laurance Line Ltd. (The Maltesian), [1966] 2 Lloyd's Rep 53 at p. 64 (H.L.); Also see Silversandal (Bache v. Silver Line Inc.) 110F.2d 60, 1940 AMC 731 (2 Cir. 1940).

14    

is sound in light of all the knowledge which the carrier has or ought to have about the nature

of the goods."52

1.2 The Respondent has breached their duty of care towards the goods under Article III,

r. 2 of the Hague Visby Rules

Twilight breached their duty towards the goods by allowing the vessel to be taken over by

pirates and not taking any cargo care measures during the period the Vessel was hijacked.53

The lack of cargo care measures led to damage to the goods in form of (i) the contamination

of the goods and to (ii) the accelerated deterioration of the goods due to the lack of heating

and temperature fluctuations, both resulting in the non-GMQ classification of the goods due

to lack of traceability.

2. Alternatively, the Respondent is liable for breach of bailment

Under the bailment relationship, Twilight owes the Claimant a “general duty to take

reasonable care”.54 If these terms are yet breached, strict liability is to be applied.55 In

addition, as has been established above, duties under bailment include the duties laid down in

the Bills of Lading as the latter are to be seen as the terms of the bailment.

2.1 The Respondent has breached their duties as bailee

The Defendant has clearly breached his duties as a bailee. This is due to two reasons: on one

hand, the Respondent has breached their duties under the Bills of Lading and thus the terms of

bailment, and on the other hand, the Defendant has not fulfilled the requirement to take this

general duty of reasonable care. First, their vessel has been hijacked by pirates in the Gulf of

Aden and second, they neglected the important cargo care measure during this period so that

the cargo lost its QMV qualification.

3. The Respondent’s conduct has lead to damages on the side of the Claimant                                                                                                                          52 Ibid., p. 58; See also Chris Foodstuffs Ltd. v. Nigerian National Shipping Line [1967] 1 Lloyd's Rep 293 at p. 297 (C.A.); See also Stewart C. Boyd et. al., Scrutton on Charterparties and Bills of Lading, 20 Ed., Sweet & Maxwell, The United Kingdom, (1996), p. 430. 53 Moot Problem p. 68. 54 Alison Clarke & Paul Kohler, Property Law: Commentary and Materials, Cambridge: Cambridge University Press, 2005, p.651. 55 Ibid.

15    

The goods were damaged following the hijacking of the vessel caused by the negligent

conduct of the Carrier. This makes the hijacking of the vessel the causa sine qua non to the

subsequent damage in form of (i) contamination of the goods and (ii) the accelerated

deterioration of the goods due to the lack of heating.

3.1. Piracy

Twilight ought to be able to foresee and properly react of the existing problem of piracy in the

Gulf of Aden.56 In The Flowergate it was held that the carrier is expected to have knowledge

of perils which have previously occurred and which are likely to occur in the future, leading

to the damaging of the goods.57 In light of the knowledge of the piracy problem in the Gulf of

Aden, Twilight could have realistically foreseen possible problems. Therefore, further

preparation and safety measures on behalf of the carrier were necessary to prevent the vessel

from being hijacked by pirates.58 Hence, the general obligation to have a sound system that is

implied in Article III, r.2 HVR is not fulfilled. The only measure of preparation taken by the

crew was the posting of anti-pirate watch when entering the Gulf of Aden.59 The Best

Management Practice60 provides for additional measure, e.g. securing the bridge, adding

physical barriers such as barbed wire, making use of water spray and foam monitors as well as

manoeuvring the vessel to fend off attacks.61 These additional measures could be reasonably

expected from the carrier since the danger of piracy is known.

3.2 Contamination of the goods

It is evident that the goods were damaged during the hijacking in the Gulf of Aden, rendering

it impossible to use them as food or feed ingredients or utilize the goods in any other way due

to the risk of contamination, based on the precautionary principle and the traceability of

                                                                                                                         56 See United Nations Security Council Resolution 1816, adopted by the Security Council at its 5902nd meeting on June 2008; And Hansen, Piracy in the Greater Gulf of Aden – Myths, Misconceptions and Remedies, NIBR Report, (2009), no. 9. 57 Jahn (Trading as C. F. Otto Weber) v Turnbull Scott Shipping Company, Ltd., and Nigerian National Line, Ltd. (The Flowergate) [1967] 1 Lloyd’s Report 2. 58 Best Management Practice for Protection against Somalia based Pirates BMP4, Version 4, (2011), pp. 25ff, pp. 41ff. 59 Moot Problem, p. 41. 60 Best Management Practice for Protection against Somalia based Pirates BMP4, Version 4, (2011), pp. 25ff, pp. 41ff. 61 Ibid.

16    

goods.62 The goods have lost their GMQ during the period in which Twilight had a duty of

care for the goods. The damage is apparent from the expert reports drawn up.63 The expert

reports show that it is impossible to rule out that the contamination of the goods during the

period of captivity in the Gulf of Aden. A strong indication that the tanks have been opened

and contamination of the goods occurred is presented in the fact that the arsenic content in

tanks 3 P&S and 7 P&S is 50 times higher the arsenic content in the other tanks. This

warrants a strong presumption that the tanks have been opened and the goods were

contaminated with arsenic added to the tanks during the period of captivity.64 The goods,

therefore, disqualify as GMQ due to the necessary application of the precautionary principle

and their lack of traceability.65 Further, the crew was not able to rule out the contamination of

the goods since access to and visibility of the tanks holding the goods was not possible during

the hijacking. The crew was not able inspect, maintain or view the tanks due to their

confinement on the bridge and prohibition of standing up and looking outside.66

4. The Respondent cannot invoke the exception clauses under Article IV, r. 2 Hague

Visby Rules

It is established that Twilight breached their obligations under Article III, r. 2 Hague Visby

Rules, resulting in the goods being damaged since they are non-GMQ. Therefore, Twilight is

strictly liable for the damage and could have only availed itself by invoking the exceptions

under Article IV, r. 2.67 The Respondent cannot escape liability by invoking the exceptions of

Article IV, r. 2 (e), (f), (q) since they clearly breached their duty of care towards the goods.

The burden to disprove is on the Respondent to show that they applied due care.68

5. The Claimant is entitled to claim damages

                                                                                                                         62 Moot Problem, pp. 50, 57-58. 63 Moot Problem, pp. 37-38, 41-43, 50-51, 57-58. 64 Moot Problem p. 38. 65 Moot Problem pp. 50, 57-58. 66 Moot Problem p. 42. 67 Hellenic Dolphin [1978] 2 Lloyd’s Rep 336 p. 339; Notara v Henderson (1872) LR 7 QB 225 p. 525. 68 The Glendorach [1966] P 226; Viscount Simon LC and Lord Wright in Constantine SS Co v Imperial Smelting Corp [1942] AC 154 p. 164 and p. 194.

17    

Pursuant to Article IV, r. 5 (b) of the Hague Visby Rules the Claimant is entitled to the total

amount recoverable calculated by reference to the value of such goods at the place and time at

which the goods are discharged from the ship in accordance with the contract or should have

been discharged. Therefore, the amount of damages should be calculated for GMQ PFAD at

the port in Merseyside in the period of 20-30 March 2009, the date of the planned delivery.

VII. THE CLAIMANT IS ENTITLED TO SUE THE RESPONDENT AS

THEY HAD THE DUTY TO DELIVER THE CARGO AT THE

CORRECT PORT OF DISCHARGE AGAINST THE ORIGINAL BILLS

OF LADING

The Respondent owes duties towards the Claimant on the basis of first, the bailment

relationship and second, their contractual obligations laid down in the Bills of Lading.

1. These duties have arisen out of the Bills of Lading

From the Bills of Lading, two main duties related to misdelivery can be extracted. First and

foremost, the carrier may only discharge the cargo against the original Bills of Lading.69

Second, the Bills of Lading indicate Liverpool (UK) as port of discharge so that the

Respondent is under the duty to actually deliver the cargo at this specific port.

1.1 The Respondent has breached this duty under the contract by not delivering the

cargo at the correct discharge port

The Bills of Lading state Liverpool as port of discharge.70 Nevertheless, the Respondent has

discharged the cargo in Rotterdam. A change of destination would have required a change of

the Bills of Lading and such a change would be accomplished by the re-issuing and signing of

                                                                                                                         69 Simon Baughen, Misdelivery claims under bills of lading and international conventions for the carriage of goods by sea, in: D Rhidian Thomas, Carriage of Goods under the Rotterdam Rules, Informa Law, London, (2010). M.B. Pyramid Sound N.V. v. Briese Schiffahrts G.M.B.H. and Co. K.G. M.S. "Sina" and Latvian Shipping Association Ltd. (The "Ines") Lloyd’s Law Reports [1995] Vol. 2.and The Houda [1994] 2 Lloyd's Rep 541 108, The Sormovskiy 3068 (1994) 2 Lloyd's Rep 266; Sze Hai Tong Bank Ltd. v. Rambler Cycle Co. Ltd [1959] A.C. 576 and Glyn Mills Currie & Co. v. East and West India Dock Co., (1882) 7 App.Cas. 591 per Lord Blackburn. 70 Moot Problem, p. 14, 16, 18, 20.

18    

the Bills of Lading, which did not occur.71 As a result, the Respondent has breached their duty

to deliver the cargo at the correct port of discharge. In addition, as was held in Vasiliy

Golovnin, “antecedent agreements and other surrounding circumstances would not suffice to

vary the terms of a bill of lading, in particular, the port of discharge, unless known and agreed

to by all affected parties. In the present case the Bills of Lading were never altered to effect a

change in the port of discharge, e.g. the contract was never varied.”72 Therefore, the fact that

the Claimant did not disagree with the change of the port of discharge does not have an

influence on the conclusion that the Respondent has breached their duty as this was

conditional upon the repayment of the purchase price on the side of Beatles which did not

occur.73

1.1.1 The exception clauses contained in the Charter Party cannot alter this

conclusion

The exception clauses contained in Articles 21 and 29 of the Charter Party cannot alter this

conclusion. Article 21, the “Deviation Clause”, permits the Owner to deviate to another port.

However, this clause may only be invoked in a limited number of circumstances such as

“saving life or property” which are explicitly mentioned in the clause itself. Obviously, the

situation at hand does not fall within the ambit of this clause. The same holds true for Article

29, which contains the “Liberty Clauses”. According to paragraph (a), the port of discharge

may be changed by the Owner. Nevertheless, as was the case with Article 21, this power may

only be exercised in the circumstances enumerated in the very same paragraph such as the

“the risk of capture, seizure, detention, damage, delay or disadvantage to or loss of the

Vessel”. It becomes apparent that the “Liberty Clauses” only concern serious situations to

which the situation at hand cannot be counted. The only reason for the decision to change the

port of discharge from Liverpool to Rotterdam was of commercial nature; Beatles simply                                                                                                                          71 Minerva Navigation Inc v. Oceana Shipping Ag (The “Athena”) [2012] EWHC 3608 (Comm), Lloyd’s Law Reports [2013] Vol. 1. 72 The Vasiliy Golovnin (2008) 756 LMLN 3; Also see Lloyd’s Maritime Law Newsletter, 11.11.2008. 73 Moot Problem, p. 33.

19    

pursued an increase of their profit.74For the foregoing reasons, the Respondent cannot

successfully invoke the exception clauses.

1.2 The Respondent has breached their duties under the contract by not delivering

the cargo against presentation of the Bills of Lading

The Respondent has breached their duty under the contract by discharging the cargo to

Beatles merely against a letter of indemnity and not against the required Bills of Lading.75

Such a letter of indemnity does not take away the liability of the Respondent.76 As Lord

Denning held in Sze Hai Tong Bank “it is perfectly clear law that a shipowner who delivers

without production of the Bills of Lading does so at his peril”.77 It follows from case law that

such a breach is responded by strict liability.78 This can best be illustrated by the following

two rulings. In Motis, this liability was confirmed in a situation in which the carrier had

discharged the cargo against a Bill of Lading that emerged as a fake.79 In The Ines, Justice

Clark concluded that such a breach is even acknowledged in a case where the party receiving

the cargo – in failure of distributing the Bills of Lading – is entitled to its possession.80

2. Alternatively, these duties have arisen out of the bailment relationship

Under the bailment relationship, Twilight was under the primary duty to deliver the palm fatty

acid distillate to the correct bailor, thus to the Claimant.81 Thereby, they owe the Claimant a

                                                                                                                         74 Moot Problem, p. 27-28. 75 M.B. Pyramid Sound N.V. v. Briese Schiffahrts G.M.B.H. and Co. K.G. M.S. "Sina" and Latvian Shipping Association Ltd. (The "Ines") Lloyd’s Law Reports [1995] Vol. 2; and The Houda [1994] 2 Lloyd's Rep 541 108, The Sormovskiy 3068 (1994) 2 Lloyd's Rep 266; Sze Hai Tong Bank Ltd. v. Rambler Cycle Co. Ltd [1959] A.C. 576 and Glyn Mills Currie & Co. v. East and West India Dock Co., (1882) 7 App.Cas. 591 per Lord Blackburn. 76 The Stone Gemini [1999] 2 Lloyd’s Rep 225. 77 Sze Hai Tong Bank Ltd. v Rambler Cycle Co. Ltd [1959] A.C. 576; Also see Mohsin Hingun, The Receipt Function of Bills of Lading: Delivery Without Production of Bill of Lading, IUM Law Journal, Vol. 3 , No. 1, January 1993, p. 40. 78 Motis Exports Ltd v Dampskibsselskabet Af 1912, Aktieselskab and Another [1999] 1 Lloyd's Rep 837; Also see M.B. Pyramid Sound N.V. v Briese Schiffahrts G.M.B.H. and Co. K.G. M.S. "Sina" and Latvian Shipping Association Ltd. (The "Ines") Lloyd’s Law Reports [1995] Vol. 2; The Houda [1994] 2 Lloyd's Rep 541 108; Simon Baughen, Misdelivery claims under bills of lading and international conventions for the carriage of goods by sea, in: D Rhidian Thomas, Carriage of Goods under the Rotterdam Rules, Informa Law, London, (2010). 79 Motis Exports Ltd v Dampskibsselskabet Af 1912, Aktieselskab and Another [1999] 1 Lloyd's Rep 837; Also see Simon Baughen, Misdelivery claims under bills of lading and international conventions for the carriage of goods by sea, in: D Rhidian Thomas, Carriage of Goods under the Rotterdam Rules, Informa Law, London, (2010). 80 M.B. Pyramid Sound N.V. v Briese Schiffahrts G.M.B.H. and Co. K.G. M.S. "Sina" and Latvian Shipping Association Ltd. (The "Ines") Lloyd’s Law Reports [1995] Vol. 2. 81 Alison Clarke & Paul Kohler, Property Law: Commentary and Materials, Cambridge University Press, Cambridge, (2005), p. 651.

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“general duty to take reasonable care” as long as they fulfill the terms of the bailment”.82 If

these terms are yet breached, strict liability is to be applied.83 As has been established above,

the terms of the bailment equal the conditions laid down in the Bills of Lading. Last, it shall

be pointed out that bailment incorporates a reversal of the burden of proof.84 Therefore, the

Claimant can suffice with proving that a bailment relationship is present while it is for the

Respondent to actually establish that they have not breached their duties as a bailee.

2.1 The Respondent has breached this duty under bailment by not delivering the

cargo at the correct discharge port

First, the Respondent has breached his duties as a bailee. Since the terms of the bailment are

those of the Bills of Lading, it needs to be proven that the terms of the Bills of Lading have

been violated. Additionally, the bailment relationship incorporates the duty of the bailee to

deliver the cargo to the holder of the Bills of Lading.85 The Respondent has clearly breached

this duty since they discharged the cargo at an incorrect port.86 As earlier established, the

Respondent cannot successfully invoke the exception clauses.

2.2 The Respondent has breached their duties as a bailee by not delivering the cargo

against presentation of the Bills of Lading

It follows from the bailment relationship that the bailee owes the bailor the duty to deliver the

cargo to them.87 The Respondent has discharged the cargo to Beatles and not to the

Claimant.88 Thus, the Defendant has committed a breach of bailment. Furthermore, since the

terms of the bailment are those of the Bills of Lading, the Respondent has consequently also

                                                                                                                         82 Ibid. 83 Ibid. 84 Morris v Martin [1966] 1 QB 716; Also see East West Corp v DKBS 1912 & Utaniko Ltd v P&O Nedlloyd BV [2003] EWCA Civ 83, para. 68; Also see Eric van Hooydonk (Ed), English and Continental Maritime Law: After 115 Years of Maritime Law Arbitration: a Search for Differences between Common Law and Civil Law, Maklu, Antwerpen-Appeldoorn, (2003), p.69; and Lord Justice Aikens, Richard Lord QC & Michael Bools, Bills of Lading, Chapter 9 Claims other than in Contract, (2006). 85 East West Corp v DKBS 1912 Utaniko Ltd v P&O Nedlloyd BV [2003] EWCA Civ 83, para. 59; Also see Lord Justice Aikens, Richard Lord QC & Michael Bools, Bills of Lading, Chapter 9 Claims other than in Contract, (2006). 86 Moot Problem, p. 68. 87 East West Corp v DKBS 1912 Utaniko Ltd v P&O Nedlloyd BV [2003] EWCA Civ 83, para. 59; Also see Lord Justice Aikens, Richard Lord QC & Michael Bools, Bills of Lading, Chapter 9 Claims other than in Contract, (2006). 88 Moot Problem, p. 68.

21    

breached their bailment duties if they have breached the conditions contained in the Bills of

Lading. In addition, the Respondent has committed a tort in conversion in his qualification as

a bailee. In the following it will be established, that the Bills of Lading have not been

complied with and that a tort in conversion has occurred.

3. Alternatively, the Respondent is liable under the tort in conversion

Additionally, and/or alternatively, the Respondent has committed a tort in conversion.89

According to Lord Nicholls of Birkenhead in Kuwait Airways Corp v IAC, three elements

have to be met in order to establish a tort in conversion: (i) the “conduct was inconsistent with

the rights of the owner”, (ii) “the conduct was deliberate”, (iii) “the conduct was so extensive

an encroachment on the rights of the owner as to exclude him from use and possession of the

goods”.90 These cumulative elements have been met in the present case. First, Twilight’s

behavior has violated the Claimant’s rights as lawful holder of the Bills of Lading. Second,

the Respondent has discharged the cargo to Beatles although the Claimant had expressly

informed the Respondent on 20 March 2009, that Beatles was not the lawful holder of the

Bills of Lading.91 Third, due to the discharge to Beatles, the Claimant lost access to their

cargo.

4. The Claimant is entitled to damages

4.1. The Claimant is entitled to damages as a result of breach of contract

Because the Respondent wrongly discharged the cargo at wrong destination although it knew

that the Claimant was the rightful owner of the bills of lading, the Claimant is permitted to

claim the difference between the original price paid for the PFAD, and its value at Liverpool

approximately on 30 March 2009, when the cargo should have been rightfully delivered as a

result of breach of the contract of carriage. In addition, the Claimant claims damages for

breach of contract for the value of PFAD at Liverpool on approximately 30 March 2009 by                                                                                                                          89 Sze Hai Tong Bank Ltd. v. Rambler Cycle Co. Ltd [1959] A.C. 576; Also see Mohsin Hingun, The Receipt Function of Bills of Lading: Delivery Without Production of Bill of Lading, IUM Law Journal, Vol. 3 , No. 1, January 1993, p. 40. 90 Kuwait Airways Corp v IAC (No. 6) [2002] UKHL 19; [2002] 2 AC 883, para. 39. 91 Moot Problem, p. 36.

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reason of non-delivery of the cargo. According to and expert opinion92 the market value of

PFAD in Liverpool on 30 March was USD 430 pmt. However, irrespective of the actual

market value of the goods in Liverpool, the equation93 totals to the original purchase price of

the PFAD, which is in accordance with the principle of restitutio in integrum, which entitles

the claimant to be put in the same position it would have been in without the breach had taken

place.94 Applying the test established in Hadley v Baxendale,95 every reasonable person would

have foreseen at the time of entering into the contract that serious consequences would occur

when the Respondent knowingly breached their contractual duty by discharging the cargo at

wrong port to the wrong consignee. If the Respondent had not breached its contractual duty

the loss would not have occurred. The Claimant could not have mitigated the loss in any way,

as the Respondent possessed the goods at all times until the misdelivery.

4.1.1. The Claimant claims damages in breach of contract for legal fees incurred in the

Netherlands

As a result of Respondent’s breach of contract the Claimant sustained additional costs by

being required to involve in legal proceedings in Rotterdam. Beatles commenced the legal

proceedings in the Netherlands. Hence, the Claimant did not voluntarily enter into litigation,

which caused considerable costs. As a result of the proceedings the goods lawfully owned by

the Claimant were sold, which deprived the Claimant of the cargo. Although the Dutch court

already made costs orders,96 these were not in proportion to the real costs that were sustained

by the Claimant, namely USD 246 756.26.97 Moreover, the Dutch court did not award any

costs relating to the sale of goods, because the Court did not consider it to be appropriate with

respect to the proceedings in question.98 The claimant is accordingly entitled to recover legal

fees incurred in judicial proceedings in the Netherlands. Determining the remoteness of the                                                                                                                          92 Moot Problem, p. 51. 93 (747,50 – Y) x 4.000 + Y x 4.000 = 2.990.000,00, Y being the market value of the cargo in Liverpool. 94 Also see Butler v Egg and Egg Pulp Marketing Board (1966) 114 CLR 185. 95 Hadley v Baxendale [1854] EWHC J70. 96 Moot problem, p. 53-55. 97 Court fees USD 138.843,14 and Legal fees USD 107.913,12. 98 Moot Problem, pp. 55.

23    

damage the Claimant incurred as established in Hadley v Baxendale, a reasonable person

would have foreseen at the time of entering into the contract that by breaching a contractual

duty by misdelivery is very likely to result in a judicial dispute. The cause of the costs

incurred in the court proceedings cannot be any other than the wrong committed by the

Respondent. There was nothing the Claimant could have done in order to mitigate the loss as

the goods were in Twilight Carriers’ possession at all times before misdelivery took place.

4.1.2. The Claimant claims damages for costs of replacing goods as a result of

Respondent’s breach of contract

As a consequence of the Respondent’s breach of contract the Claimant was forced to buy

replacing goods to their sub-byers in Liverpool. The sub-buyers have confirmed that they

would have accepted the goods although its non-GMQ value, but the cargo could not be

delivered because of Respondent’s fault. As a direct consequence of the breach of contract the

Claimant is entitled to claim recovery of the costs incurred for the replacing goods. It was

reasonably foreseeable when entering into the contract that misdelivery of the cargo could

lead to the applicant having to buy replacing goods in order minimize the business losses. It is

also without doubt that the damage was caused because the goods were delivered at wrong

port to the wrong person. As the Respondent had possession of the cargo at all times before

the misdelivery, the Claimant did all within its power to mitigate the loss.

4.2. Alternatively, the claimant claims damages that have occurred as a result of the

Respondent’s breach of duty as a bailee of the goods

The Respondent breached their duty as bailee of the goods, as it failed to deliver the cargo to

the bailor, the Claimant. As the terms of bailment are identical to the bills of lading, the

Claimant is entitled to damages amounting to the full purchase price of the goods due to

breach of bailment for misdelivering the cargo in accordance with the principle of restitutio in

integrum. As the terms of bailment are identical to the bills of lading, it was foreseeable in the

time of entering into the contract that failing the duties of a bailee of the cargo would lead to

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loss to the bailor, the Claimant. The respondent as bailee failed to deliver the cargo to the

bailor, which caused the damage. Aardvark could not have mitigated the loss in any way

because the possession of the cargo was with the Respondent at all times before the

misdelivery.

4.3. The Claimant claims damages as a result of tort in conversion

The Claimant has a claim in tort in conversion against the Respondent because it was

deprived of the cargo which it was the lawful owner of. Consequently, the Claimant can claim

the full purchase price of the goods in tort in conversion in accordance with the principle of

restitutio in integrum. It was reasonably foreseeable at the time of concluding the contract that

by deliberately depriving the owner of the right to the cargo would lead to loss. The

Respondent discharging the cargo to Beatles instead of the Claimant was the cause of the loss,

and the Claimant could not mitigate the loss in any way because the possession of the cargo

was with the Respondent at all times before the misdelivery

4.4. The Claimant is entitled to interests

Pursuant to section 49 of the Arbitration Act 1996 the Tribunal has the discretionary power to

award simple or compound interest and on such rates it deems appropriate. Arbitrators usually

apply compound interest on three-monthly rests. When trading parties are located outside the

US but are still using US dollars the US Dollar LIBOR 3-monthly rate is customarily

applied.99 Accordingly Aardvark requests the tribunal to apply a US Dollar Libor 3 monthly-

rate in determining the appropriate interest rate from the date when the damage occurred, 15

November 2008, alternatively 20 March 2009, until the date of payment.

4.5. The Claimant is entitled to recover costs of arbitration

Pursuant to section 61 of the Arbitration Act 1996 the costs of arbitration should follow the

event although the tribunal has the discretion to allocate the costs between the parties as it

                                                                                                                         99 The London Maritime Arbitrators Association. Available at: http://www.lmaa.org.uk/cost-and-interest.aspx, last visited 22.4.2013.

25    

considers appropriate. If successful, the Claimant should be entitled to recover all costs

sustained in the present arbitration.

PRAYER FOR RELIEF

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

Declare that this Tribunal has jurisdiction to hear the case; and further

Adjudge that the Claimant is-

I. Lawful holder of the Bills of lading; and/or

II. Holder of legal title under bailment; and further

Adjudge that the Defendant is liable-

I. To the Claimant for breach of contract and/or duty under the Bills of Lading; and/or

II. To the Claimant for breach of duties under bailment; and/or

III. To the Claimant for damages as a result of tort in conversion; and therefore

Award the Claimant-

I. The costs for the goods had they been delivered under the terms of the contract; or the

purchase price of the goods, namely USD 2,990,000; and

II. The cost incurred in the Dutch proceedings amounting to USD 246,756.26; and

III. The costs incurred for the replacement of goods amounting to USD 2,090,000; and

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

V. Cost incurred in this proceeding pursuant to s. 61 of the Arbitration Act 1996; and

VI. Such other and further relief as the Tribunal deems just and proper.