1

INTERNATIONAL MARITIME LAW ARBITRATION MOOT

2016

THE UNIVERSITY OF HONG KONG

TEAM 5

MEMORANDUM FOR THE RESPONDENT

HUEN KA KI

LEE KA YEE

NG CHUN WAI JONATHAN

WONG KRISTY

2

TABLE OF CONTENT

I. SUMMARY OF FACTS 1

II. SUMMARY OF ISSUES 4

III. THIS TRIBUNAL HAS NO JURISDICTION TO CONSIDER THE CLAIMS (1) Principles of contractual interpretation (2) The objective meaning of the Arbitration Clause

4 5 6

IV. THERE IS FRUSTRATION (1) When would force majeure clause preclude frustration (2) Principles of construction for force majeure clause (3) The Force Majeure Clause does not provide for the Frustrating Event (4) Application of the doctrine of frustration

(i) The Frustrating Event is not reasonably foreseeable (ii) The detention of the Vessel for over one year radically changed the

obligation (iii) Frustration occurs immediately following the seizure of the Vessel

7 8 9 9 11 11 12

15

V. THE RESPONDENT IS NOT LIABLE FOR DEMURRAGE (1) The Vessel did in fact leave the Loading Place on 7 October 2014 (2) Further or alternatively, the Vessel was prevented from leaving the Loading

Place because of the Master’s fault or negligence (i) The Master was negligent in returning to the Port (ii) The interception by the Coast Guard was unlawful

(3) Further or alternatively, Clause 9(e) of the Charterparty applied to exempt the Respondent from liability

(4) The Demurrage Clause should be struck down (5) Limitation on the days of demurrage

16 16 18 19 20 20 21 22

VI. CLAIM FOR SALVAGE REWARD (1) The Respondent is entitled to salvage reward

(i) The Vessel was in peril when salvage services were rendered (ii) The salvage operation was rendered “voluntarily” and was successful

(2) The Claimant is solely liable for the salvage reward

22 22 23 24 24

VII. CONCLUSION 25

3

Authorities Acetylene Co of G B v Canada Carbide Co (1922) 8 Ll. L. Rep. 456

Anderson, Tritton & Co. v Ocean Steamship Co. (1884) 10 App. Cas. 107

Bisognin v Hera Project Pty Ltd [2016] V.S.C. 75

Brown (Christopher) Ltd v Genossenschaft Oesterreichischer Waldbesitzer Holzwirtschaftsbetriebe

Registrierte GmbH [1954] 1 Q.B. 8

Cavendish Square Holdings BV v Makdessi [2015] U.K.S.C. 67

Chartbrook Ltd v Persimmon Homes Ltd [2009] U.K.H.L. 38, [2009] 1 A.C. 1101

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 C.L.R. 337

Davis Contractors Ltd v Fareham U.D.C. [1956] A.C. 696

Denny, Mott & Dickson Ltd v James B. Fraser & Co Ltd [1944] A.C. 265

E. L. Oldendorff & Co. G.M.B.H. v Tradax Export S.A. (The Johanna Oldendorff) [1974] A.C. 479

East Ham Corp v Bernard Sunley & Sons Ltd [1965] 1 W.L.R. 30

Edwinton Commercial Corp & Another v Tsavliris Russ (Worldwide Salvage & Towage) Ltd (The

Sea Angel) [2007] E.W.C.A. Civ. 547

Embiricos v Sydney Reid & Co [1914] 3 K.B. 45

Empresa Exportadora De Azucar v Industria Azucarera Nacional S.A. (The Playa Larga) [1983] 2

Lloyd’s Rep. 171

F. A. Tamplin Steamship Company Ltd. v Anglo-Mexican Petroleum Products Company Ltd [1916] 2

A.C. 397

Hang Fung Shipping and Trading Co Ltd v Mulliln and Co Ltd [1966] 1 Lloyd’s Rep 511.

Harris v Best, Ryley & Co (1892) 68 L.T. 76

Hirji Mulji v Cheong Yue S.S. Co [1926] A.C. 497

Horlock v Beal [1916] 1 A.C. 486

4

Jackson v Union Marine Insurance Co (1874-75) L. R. 10 C.P. 125

Krell v Henry 1903] 2 K.B. 740

Leeds Shipping Co Ltd v. Duncan Fox & Co Ltd (1932) 37 C.C. 213

Lilly v Stevenson (1895) 22 R (Ct of Sessions) 278

Louis Dreyfus & Cie v Parnaso [1959] 1 Q.B. 498

Lyndon v Standbridge (1857) 2 M. & N. 45

Maritime New Zealand v Page [2013] D.C.R. 102

Masterton Homes Pty Ltd v Palm Assets Pty Ltd (2009) A.L.R. 382

Metropolitan Water Board v Dick, Kerr & Co Ltd [1918] A.C. 119

Mopani Copper Mines Plc v Millenum Underwriting Ltd [2008] E.W.H.C. 1331 (Comm)

Mottram Consultants Ltd v Sunley (Bernard) & Sons Ltd [1975] 2 Lloyd’s Rep. 197

MSC Mediterranean Shipping Company SA v Cottonex Anstalt [2015] E.W.H.C. 283 (Comm)

Queensland Power Co Ltd v Downer Edi Mining Pty Ltd [2009] Q.S.C. 006, [2010] 1 QdR 180

(08/6106)

R v Regos & Morgan (1947) 74 C.L.R. 613

S.S. Magnhild v Mclntyre Brothers & Co [1920] 3 K.B. 321

Sailing-Ship Garston Co v Hickie & Co (1855) 15 Q.B.D. 580

Select Commodities Ltd v Valdo SA (The Florida) [2007] 1 Lloyd’s Rep. 1.

Sellers v Maritime Safety Inspector [1999] 2 N.Z.L.R. 44 (CA)

Sinochem International Oil (London) Ltd v Mobil Sales and Supply Corp [2000] 1 Lloyd’s Rep 339

Sir Lindsay Parkinson & Co Ltd v Commissioners of Works [1949] 2 K.B. 632

Tam Wing Chuen v Bank of Credit and Commence Hong Kong [1996] U.K.P.C. 69

Tennants (Lancashire) Ltd v CS Wilson & Co [1917] A.C. 495

The Elton [1891] P. 265

5

The Glacus (1948) 81 Ll. L. Rep. 262

The Investors Compensation Scheme v West Bromwich Building Society [1998] 1 W.L.R. 896 (HL)

The Lomonosoff [1921] P. 97

The Penelope [1928] P. 180

The Phantom (1866) L.R. 1, A. & E. 58

The Port Victor (Cargo ex) [1901] P. 243

The Renpor (1883) 8 PD 115, 5 Asp. M.L.C. 98 (CA)

The Sarpedon (Cargo ex) (1877) 3 PD 28, 3 Asp. M.L.C. 509

The Sarpen [1916] 306, 13 Asp. M.L.C. (CA)

The Tramp [2007] 2 Lloyd’s Rep. 363

The Wilhelmine (1842) 1 Notes of Cases 376

W J Tatem Ltd v Gamboa [1939] 1 K.B. 132

Westminster City Council v National Asylum Support Services [2002] U.K.H.L. 38

Youell v Bland Welch & Co Ltd [1992] 2 Lloyd’s Rep 127

Others

The Customs Act 1901 (Cth)

The International Convention on Salvage 1989

The Navigation Act 2012 (Cth)

The Navigation Regulation 2013

The United Nations Convention on the Law of the Sea (UNCLOS 1982)

Guenter Treitel, Frustration and Force Majeure (3rd Edition)

H Beale (ed), Chitty on Contracts (32nd Edition)

6

John AC Cartner, Richard P Fiske and Tara L Leither, The International Law of the Shipmaster

Julian Cooke and others, Voyage Charters (4th Edition)

John Reeder QC, Brice on Maritime Law of Salvage (5th Edition)

John Schofield, Laytime and Demurrage (6th Edition)

Michael White, Australian Maritime Law (2nd Edition)

Simon Baughen, Summerskill on Laytime (5th Edition)

Bloomberg (2016, April 07), Bloomberg Markets NG1 Commodity Quote. Retrieved April 07, 2016,

from http://www.bloomberg.com/quote/NG1:COM

1

I. Summary of Facts

(1) The Parties

1. The Claimant, Zeus Shipping and Trading Company, is the owner of the Athena (“Vessel”), a

vessel flying the flag of Hades and one of the newest vessels for the safe transport of Liquefied

Natural Gas (“LNG”) produced from Hades Shale Gas (“HLNG”). The Respondent, Hestia

Industries, is a company based in Hades and produces HLNG.

(2) The Charterparty

2. On 1 July 2014, the Respondent invited the Claimant to submit terms of a voyage charter for the

proposed voyage from Hades to Poseidon to transport HLNG. On 14 July 2014, the Claimant

offered to charter the Vessel to the Respondent on the terms contained in a draft charterparty

(“Draft Charterparty”). Clause 30 of the Draft Charterparty provides that “[a]ny dispute

arising out of or in connection with this contract, including any question regarding its existence,

validity, or termination, shall be referred to arbitration” (“Proposed Arbitration Clause”).

3. On 16 July 2014, the Respondent indicated acceptance of the terms of the Draft Charterparty

saved for the Proposed Arbitration Clause, stating that it was only prepared “to arbitrate

disputes in London which arise out of the provisions of the charterparty such as a dispute about

demurrage…” On 22 July 2014, the parties entered into a voyage charterparty (“Charterparty”)

(with amendments based on the Draft Charterparty), containing, inter alia, the following

clauses:

a. Clause 9(c) provides that “Time permitted for loading (calculated from when NOR is

tendered until the vessel leaving the Loading Place) is 10 WWD SHINC” and “Loading

Place” is defined in Box 5 as “1 safe port, Hades” (“Loading Place”).

2

b. Clause 9(e) provides that laytime is not to be counted during the period of such delay or

hindrance and demurrage not to accrue even if the vessel is already on demurrage “… in the

event of any delay or hindrance in procuring, preparing, carrying, loading, stowing,

shipping or discharging the particular cargo intended for shipment or the cargo actually

shipped by reason of… inability or inefficiency of the ship to load or discharge”.

c. Clause 10 and Box 24 provide that demurrage over and above the laydays is calculated at

the rate of US$50,000 per day (“Demurrage Clause”).

d. Clause 17(a)(i) provides that the Claimant should ensure that the Vessel complies with the

applicable requirements of the Commonwealth of Australia Navigation Act 2012 and the

Regulations thereunder.

e. Clause 19 provides that neither party shall be liable for any failure to perform or delay in

performing its obligations under the Charterparty, where the party is being delayed,

interrupted or prevented from doing so by reasons of any force majeure event (“Force

Majeure Event”) as defined under subparagraphs (a) to (d) (“Force Majeure Clause”).

f. Clause 30(a) provides that, “Any dispute arising under [the Charterparty] shall be referred

to arbitration in London…” (“Arbitration Clause”).

g. Clause 31 provides for the governing law to be the laws of the State of Western Australia.

(3) Performance of the Charterparty

4. On 3 October 2014 at 0915, Captain Marcus Yi (“Master”) of the Vessel tendered a Notice of

Readiness (“NOR”). On 7 October 2014, the Master tendered a statement indicating that the

Vessel left the Port of Hades (“Port”) and sailed from Hades on 7 October 2014 at 0900

(“Statement of Facts”). On the same day, a coup broke out and Jacqueline Simmons, the leader

of Hades Opposition Party, seized control of the parliament. Immediately upon becoming the

3

President of Hades, she ordered the Hades coast guard (“Coast Guard”) to intercept the Vessel

and escort it back to the Port.

5. On 7 October 2014, the Coast Guard successfully intercepted the Vessel and directed it to the

Port around the boundary of the territorial waters of Hades. It was said that the Master complied

with the demand only after the Coast Guard reminded him that the Vessel carried the Hades flag.

On 15 October 2014, the Claimant notified the Respondent that the Vessel was detained and a

long delay could be anticipated. The Claimant further alleged that laytime continued to run and

demurrage would accrue after exhaustion of laytime. On 22 October 2014, the Respondent urged

the Claimant to take all necessary steps to secure the release of the Vessel. The Respondent

further denied that laytime would run or that demurrage might accrue.

6. On 30 April 2015, the Respondent asserted that the Charterparty was frustrated as the adventure

had become radically different. The delay had been more than 6 times the length of the

anticipated voyage, with the Vessel still being detained by the Coast Guard. On the same day,

the Respondent attempted to arrange for an alternative vessel to undertake the same voyage but

failed, as the Vessel was the only vessel in the world suitable to carry out the intended voyage.

7. On 30 September 2015, Jacqueline Simmons resigned. On 5 October 2015, the Vessel was

released. On 6 October 2015, the Claimant notified the Respondent that the Vessel had been

released and further claimed for demurrage of US$17.9 million.

8. After towlines were released from the Vessel, both propeller shafts of the Vessel broke. The

Respondent’s tug company then offered salvage rescue to the Vessel.

4

9. On 16 November 2015, the Claimant notified the Respondent that it had referred the dispute to

arbitration pursuant to the Arbitration Clause. On 23 November 2015, the Respondent opposed

to referring the dispute to arbitration and counterclaimed for salvage reward.

II. Summary of Issues

10. The issues in this case are: (1) whether this Tribunal has jurisdiction to hear the present dispute;

(2) whether the Charterparty is frustrated by the delay of the Vessel; (3) whether the Respondent

is liable for demurrage in respect of 358 days; and (4) whether the Respondent is entitled to the

salvage reward.

III. Jurisdiction

11. It is clear that the Tribunal has the power to rule on its own jurisdiction pursuant to the

Kompetenz-Kompetenz principle.1 In order to resolve the jurisdictional issue, this Tribunal has

to consider the precise nature of the dispute which has arisen and determine whether on a proper

construction of the Arbitration Clause, the Respondent’s claim of frustration falls within the

jurisdiction of the Tribunal.

12. As a defence to the Claimant’s demurrage claim, the Respondent submits that the Charterparty

was frustrated. The details of the defence are set out in Part IV below. In short, the Respondent

submits that as a result of the interception of the Vessel by the Coast Guard (“Frustrating

Event”), the delay in the delivery of HLNG became so disproportionate to the length of time

contemplated for the voyage such that the Charterparty was frustrated.2

13. The Respondent submits that this Tribunal has no jurisdiction to hear the frustration claim.

1 Brown (Christopher) Ltd v Genossenschaft Oesterreichischer Waldbesitzer Holzwirtschaftsbetriebe Registrierte GmbH [1954] 1 Q.B. 8 at 12-13 (per Devlin J). 2 Moot Scenario at 76.

5

(1) Principles of contractual interpretation

14. When interpreting a contract, the court will ascertain the meaning which the document would

convey to a reasonable person having all the background knowledge which would reasonably

have been available to the parties at the time of the contract.3 The words in a contract must be

understood in its context. It requires the document to be read as a whole4 and to be read against

the purpose of the transaction. 5 It is crystal clear that ambiguity need not be established before

surrounding circumstances may be taken into account.6

15. The scope of the parol evidence rule is unclear7 and that rule serves little practical purpose in

modern era.8 As such, previous negotiation may be admissible as surrounding circumstances so

that the words of the contract are to be read against the objective facts reasonably known to both

parties.9

16. Draft agreements which do not represent the final consensus are generally not admissible.10

However, it is in principle open for the court to deduce parties’ intention from deletions in a

3 The Investors Compensation Scheme v West Bromwich Building Society [1998] 1 W.L.R. 896 (HL) at 912. 4 East Ham Corp v Bernard Sunley & Sons Ltd [1965] 1 W.L.R. 30 at 43 (CA); affirmed in [1966] A.C. 406 (HL). 5 Sinochem International Oil (London) Ltd v Mobil Sales and Supply Corp [2000] 1 Lloyd’s Rep 339 at [24]. 6 The Investors Compensation Scheme v West Bromwich Building Society [1998] 1 W.L.R. 896 (HL) at 912-913. and Westminster City Council v National Asylum Support Services [2002] U.K.H.L. 38, [2002] 1 W.L.R. 2956 at [5]. It is an unsettled point of law in Australia as to whether ambiguity is required before surrounding circumstances can be considered, but it appears that Australian law is moving in the direction of the English approach in The Investors Compensation Scheme v West Bromwich Building Society [1998] 1 W.L.R. 896 (HL) since the New South Wales Court of Appeal held that “the identification of ambiguity is not a precondition for examining contextual and background materials in Masterton Homes Pty Ltd v Palm Assets Pty Ltd (2009) A.L.R. 382 at [3]. In any event, even if ambiguity remains the prerequisite, the Australian courts have been quick to find that the words of the contract is “ambiguous or susceptible of more than one meaning”, thereby permitting the admission of evidence of surrounding circumstances, see Bisognin v Hera Project Pty Ltd [2016] V.S.C. 75 at [155]-[157]. The Respondent submits that the Arbitration Clause is ambiguous. 7 The Investors Compensation Scheme v West Bromwich Building Society [1998] 1 W.L.R. 896 (HL) at 912-913. 8 Chartbrook Ltd v Persimmon Homes Ltd [2009] U.K.H.L. 38, [2009] 1 A.C. 1101 at 1136; H Beale (ed), Chitty on Contracts (32rd Edition) at [13-101]-[13-102] citing Law Com.154, 1986, Cmnd.9700. 9 Youell v Bland Welch & Co Ltd [1992] 2 Lloyd’s Rep 127; Chartbrook Ltd v Persimmon Homes Ltd [2009] U.K.H.L. 38, [2009] 1 A.C. 1101 at 1109 and Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 C.L.R. 337 at 348. 10 Queensland Power Co Ltd v Downer Edi Mining Pty Ltd [2009] Q.S.C. 006, [2010] 1 QdR 180 (08/6106) at [70] (per Chesterman J).

6

standard form of contract.11 When the parties use a printed form and delete parts of it, the

deleted words may be admissible as part of the surrounding circumstances to construe what they

have chosen to leave in.12 If the deletion shows what the parties did not agree, the court must not

put in words that have been deliberately struck out.13

17. The contra proferentem principle may also apply against a party responsible for drafting the

document.14

(2) The objective meaning of the Arbitration Clause

18. In arriving at the proper interpretation of the Arbitration Clause, it is submitted that significant

weight should be attached to the correspondences between the parties between 14 and 22 July

2014 (“Negotiation Emails”) and the Draft Charterparty as part of the circumstantial evidence

to establish the common intention of the parties.

19. It is clear from the Negotiation Emails that:

a. The Respondent was not satisfied with the wordings of the Proposed Arbitration Clause, in

particular the inclusion of the phrase “arising out of or in connection with this contract,

including any question regarding its existence, validity, or termination”.

b. Therefore, on 16 July 2014, the Respondent requested the Claimant to amend the Draft

Charterparty by: (i) limiting the issues submitted to arbitration to those that arise out of the

provisions of the Charterparty (such as demurrage) and (ii) excluding disputes that “relate

to but do not arise out of the terms of the Charterparty” from arbitration. The Respondent

made it to be known that this was non-negotiable.

11 Louis Dreyfus & Cie v Parnaso [1959] 1 Q.B. 498 at 513; reversed on other grounds [1960] 2 Q.B. 49 (CA). 12 Mottram Consultants Ltd v Sunley (Bernard) & Sons Ltd [1975] 2 Lloyd’s Rep. 197 at 209. 13 Mopani Copper Mines Plc v Millennium Underwriting Ltd [2008] E.W.H.C. 1331 (Comm); [2008] Bus. L.R. D121 at [120] and [122]. 14 Tam Wing Chuen v Bank of Credit and Commence Hong Kong [1996] U.K.P.C. 69 at 77 (per Lord Mustill), [1996] 2 B.C.L.C. 69. The application of the principle required ambiguity.

7

c. The Proposed Arbitration Clause was amended accordingly and the Charterparty was

delivered to the Respondent for execution on 21 July 2014.

20. A simple comparison between the Proposed Arbitration Clause and the Arbitration Clause

demonstrates the Claimant’s agreement to the Respondent’s request for amendment. The

deletion of the phrase in the Proposed Arbitration Clause demonstrates that the parties agreed to

exclude from arbitration any disputes arising in connection with the Charterparty, including any

question regarding its existence, validity, or termination. Further, upon receiving the

Respondent’s request to submit to arbitration only issues that “arise out of the provisions of the

Charterparty”, the Claimant replaced the phrase “out of the Charterparty” in the Proposed

Arbitration Clause with the more specific reference phrase “under the Charterparty”. Therefore,

the parties must have intended to use the phrase “under the Charterparty” to narrow the scope of

the Arbitration Clause, such that it includes only disputes that arise on the basis of the provisions

of the Charterparty. Thus, the Arbitration Clause must be construed narrowly to include only

disputes arising out of the provisions of the Charterparty. The Arbitration Clause must be

interpreted in light of this unique factual matrix.

21. As the Respondent’s claim of frustration does not arise on the basis of the provisions of the

Charterparty, it falls outside the scope of the Arbitration Clause, and thus the jurisdiction of this

Tribunal.

IV. Frustration

22. Frustration takes place where, without default of either party, there is a supervening event not

reasonably foreseeable by the parties that renders the performance of a contractual obligation

8

radically different from that which was undertaken by the contract.15 Where a contract has been

frustrated, both parties are excused from further performance but the contract remains valid and

effective up to the moment when the frustration occurs.16

23. The Respondent has two submissions: (1) the Force Majeure Clause did not preclude the

operation of the doctrine of frustration; and (2) there was frustration as the detention of the

Vessel was not reasonably foreseeable and rendered the commercial purpose of the Charterparty

fundamentally different.

(1) When would force majeure clause preclude frustration

24. Force majeure clause precludes frustration if the provision for the event is full and complete.17

The test is multi-factorial. The court will take into account relevant factors such as the terms of

the contract, its matrix or context, nature of the supervening event and the parties’ knowledge

and contemplations of risk as at the time of the contract.18

25. Even if a contract includes a suspension clause providing for the consequences of “delay” due to

specified causes, the word “delay” should be read as being limited to normal and moderate delay

and does not include delay which is so abnormal in degree and magnitude that it could not have

been contemplated by the parties.19 Thus in Bank Line v Capel (Arthur) Co, a 5-month delay to a

12-month time charter was held to be so substantial to fall outside the ambit of the cancellation

clause.20

15 Davis Contractors Ltd v Fareham U.D.C. [1956] A.C. 696 at 729. 16 Julian Cooke and others, Voyage Charters (4th Edition) at [22.34]. 17 Select Commodities Ltd v Valdo SA (The Florida) [2007] 1 Lloyd’s Rep. 1. 18 Edwinton Commercial Corp & Another v Tsavliris Russ (Worldwide Salvage & Towage) Ltd (The Sea Angel) [2007] E.W.C.A. Civ. 547, [2007] 2 Lloyd’s Rep 517 at [111]-[112]. 19 Sir Lindsay Parkinson & Co Ltd v Commissioners of Works [1949] 2 K.B. 632 at 665, citing Metropolitan Water Board v Dick, Kerr & Co Ltd [1918] A.C. 119 as “a good illustration of this”. 20 [1919] A.C. 435.

9

(2) Principles of construction of force majeure clause

26. The principles of construction as set out in paragraphs 14-17 above are equally applicable in

interpreting the Force Majeure Clause. In addition, if a clause contains a list of items which has

some common characteristics and constitutes a genus, the ejusdem generis principle should

apply so that the general words which follow the list ought to be limited to things of that

genus.21 The test is whether the specific things which precede the general words possess some

common and dominant features so that they can be placed under some common category.22

(3) The Force Majeure Clause does not provide for the Frustrating Event

27. Applying the above principles and reading the Force Majeure Clause as a whole, the risk of the

Frustrating Event is not allocated under Clause 19(c). First, the phrase “hindrance of whatever

nature” should be narrowly construed; otherwise other sub-clauses which provided for different

specific exceptions would be rendered otiose. Second, the word “hindrance” in Clause 19(c)

should be interpreted to mean obstacles which would be really difficult to overcome, as opposed

to “prevention” which renders performance not merely difficult but impossible.23 The Claimant

failed to secure the release of the Vessel as demanded by the Respondent on 22 October 2014.24

The Vessel was detained and physically prevented from completing the voyage.

28. Further, “inability to obtain or delays in securing transportation facilities” and “stoppages of the

Shipper’s fuel supply” can be placed under the common category of obstacles in securing

transportation utilities. Since the preceding specific exceptions constitute a genus, “hindrance of

whatsoever nature” which follows should be limited to the same genus. Clause 19(c) ought to be

limited to cover only obstacles of whatsoever nature in securing transportation utilities. 21 Lyndon v Standbridge (1857) 2 M. & N. 45 at 51. 22 S.S. Magnhild v Mclntyre Brothers & Co [1920] 3 K.B. 321, followed by R v Regos & Morgan (1947) 74 C.L.R. 613 at 624. 23 Tennants (Lancashire) Ltd v CS Wilson & Co [1917] A.C. 495 at 510. 24 Moot Scenario at 61.

10

29. Moreover, the Charterparty is in standard form, as irrelevant events like “mining and

processing” are also included as force majeure events in Clause 19(c). As such, the Respondent

submits alternatively that Clause 19(c) has not been tailored to the particular situation which

may or may not arise from the contemplated voyage from Hades and this Tribunal should be

slow to conclude that Clause 19(c) is a complete provision.

30. Neither does Clause 19(d) allocate the risk of the Frustrating Event. First, the Coast Guard

cannot be “customs authorities” referred to therein.25 Second, the enumerated events that

precede “or other similar cause” are of a wide variety including and not limited to regulatory

measures, court proceedings and illegal interruptions. As they do not form a genus, the ejusdem

generis principle is inapplicable. Therefore, the phrase “other similar cause” must be read in

conjunction with the last item of the list and be interpreted narrowly to cover only cause “similar

to robbers by land or sea”. This clearly would not cover the present case.

31. Alternatively, even if the Tribunal were to apply the ejusdem generis principle in construing

Clause 19(d), the Frustrating Event does not fall within other causes which are similar to any of

the events therein.

32. As such, the Force Majeure Clause is not a full and complete provision of the Frustrating Event.

33. In any event, for reasons set out in paragraph 37 below, the Respondent submits that the extent

of the delay was so abnormal and unforeseeable that it fell outside the ambit of the Force

Majeure Clause.

25 Coast guards does not fall within the definition of an “officer of Customs” under section 4 of Customs Act 1901 (Cth), which is defined as “the Secretary of the Departments, the Australian Border Force Commissioner, an APS employee in the Department; or a person authorised under subsection (1B) or (1D) to exercise all the powers and perform all the functions of an officer of Customs”.

11

(4) Application of the doctrine of frustration

(i) The Frustrating Event is not reasonably foreseeable

34. There are two aspects in assessing whether an event is reasonably foreseeable, namely the

degree of foreseeability and the extent of the event.26 First, the event is not reasonably

foreseeable if the degree of foreseeability is merely remote. In Krell v Henry,27 contracts were

made for the hire of rooms to watch the King’s coronation processions. The coronation was later

postponed due to the King’s illness. The court held that frustration still applied despite rumours

that the King had got ill at the time of contract formation.

35. Second, frustration is not precluded if the extent of the delay is not foreseeable.28 This is

illustrated in W J Tatem Ltd v Gamboa.29 The defendant chartered a ship for 30 days until 30

July at the times of the Spanish Civil War, and the ship was seized on 14 July for nearly two

months. Goddard J. held that the contract was frustrated as it was not foreseeable that the ship

would be detained “not only for the period of her charter but for a long period thereafter”.30

36. It is submitted that when the Charterparty was concluded, the possibility of the occurrence of the

Frustrating Event was low:

a. The plan to build a plant to liquefy HLNG for export was announced back in 2010.31 There

was no evidence of any prior government intervention on the extraction, production and

potential export of HLNG.

b. The situation changed abruptly after the military coup initiated by the Hades Opposition

Party on 7 October 2014. In an attempt to stop the export of HLNG, Jacqueline Simmons

26 Guenter Treitel, Frustration and Force Majeure (3rd Edition) at [13-011]. 27 [1903] 2 K.B. 740 28 Guenter Treitel, Frustration and Force Majeure (3rd Edition) at [13-013]. 29 [1939] 1 K.B. 132. 30 Ibid at 135. 31 Moot Scenario at 26.

12

adopted the drastic measure of issuing a presidential order to detain the ship.32 Neither party

would have expected a change of regime which led to a sudden change of policy in banning

HLNG export.

c. This analysis is further reinforced by the financial restraints of the Coast Guard and their

poor equipment. The Coast Guard was described as “amounting to no more than two men

with a rubber dinghy”.33 It was reasonable for the parties to assume that the government

lacked the ability to detain the Vessel. Indeed, as explained below at paragraph 51(b), the

Vessel was only intercepted due to an obvious trickery of the Coast Guard.

37. It is further submitted that the extent of the delay was beyond the parties’ contemplation. The

estimated voyage time was only one month originally,34 but the Vessel was detained for nearly

one year.35 No reasonable person would have foreseen a substantial delay for a short voyage.

Further, although protests would have been foreseeable and this may lead to a short delay, the

extent of the present delay was exceptional as in W J Tatem Ltd v Gamboa. Commercial sense

dictates that parties would not have embarked upon such bargain if a substantial delay were

reasonably foreseeable.

(ii) The detention of the Vessel for over one year radically changed the obligation

38. There is no hard and fast rule as to whether the delay has resulted in a fundamental change from

the obligation originally undertaken. The relevant factors include the nature of the commercial

purpose, the length of the temporary impossibility and any increase in the cost of performance.36

32 Moot Scenario at 55. 33 Ibid. 34 Moot Scenario at 2. 35 Moot Scenario at 68. 36 Julian Cooke and others, Voyage Charters (4th Edition) at [22.10].

13

39. In relation to the length of the interruption, as compared to a time charter, a shorter delay would

generally be sufficient to destroy the object of commercial adventure of a voyage charter.37 The

leading case is Jackson v Union Marine Insurance Co,38 where a ship was chartered to carry a

cargo of iron rails. The ship ran aground and resulted in a 7-month delay. Despite the absence of

any provision as to the arrival time, the Court rejected the argument that the contract was for a

voyage to carry a cargo at some and any future time, however distant. Instead, Bramwell B was

willing to imply a condition that if the voyage became impossible of completion within a

reasonable timeframe, the contract should be frustrated.39

40. Secondly, the contract could be discharged when temporary impossibility caused an increase in

the cost of performance.40 In Acetylene Co of G B v Canada Carbide Co,41 the war-time

requisitioning of ships caused a delay of three years and the contract was frustrated as the market

conditions had radically changed.

41. It is submitted that the aggregate effect of the long delay and extraordinary increase in cost

constituted a radical change in contractual obligations of the parties. First, the delay was

exceptionally long as in Bank Line, being at least 12 times more than the estimated length of the

journey. Complicated storage requirements of the HLNG further highlight the extraordinary

nature of the delay. Given its low boiling point, it would be both costly and potentially

dangerous to store the HLNG on board for a long time.42

37 F. A. Tamplin Steamship Company Ltd v Anglo-Mexican Petroleum Products Company Ltd [1916] 2 A.C. 397 at 420 and 425. See also Julian Cooke and others, Voyage Charters (4th Edition) at [22.21]. 38 (1874-75) L. R. 10 C.P. 125. 39 Ibid, 142-143. See also The Penelope [1928] P. 180 where the court held that a coal strike causing a delay of over eight months had frustrated a one-year time charterparty. 40 Guenter Treitel, Frustration and Force Majeure (3rd Edition) at [6.30]-[6.31]. 41 (1922) 8 Ll. L. Rep. 456. 42 Moot Scenario at 2.

14

42. In the present case, it is inconceivable that the commercial purpose would remain the same after

the substantial delay for the following reasons:

a. The Charterparty concerns a definite voyage to transport HLNG to Poseidon by 2

November 2014, but not merely a shipment at any time.43 The case for frustration is

substantially stronger than that in Jackson as an express time limit had been communicated

to the Claimant. In any event, the cargo must arrive within a reasonable period to meet the

Respondent’s foreseeable contractual obligations with third parties for the sale of HLNG.

b. The price of natural gas plummeted by 40% approximately during the period of delay.44

Following Acetylene Co, the constant market fluctuation of the cargo dictates that it should

be delivered promptly.

c. In view of the delayed completion of the gas liquefaction plant, there was clearly an urgent

need for the Respondent to ship the HLNG right after the plant commenced production in

September 2014 in order to boost their share price.45

43. Second, it is further submitted that the costs of chartering would have increased drastically

should the Claimant’s demurrage claim be successful. The alleged demurrage amounts up to

US$17.9 million,46 whereas the original voyage only costs US$2.6 million.47 The cost of

demurrage was nearly seven times more than the original cost. The extraordinary increase in

cost represents a radical change in obligation and further supports a finding of frustration.

43 Moot Scenario at 2. 44 Bloomberg (2016, April 07), Bloomberg Markets NG1 Commodity Quote. Retrieved April 07, 2016, from http://www.bloomberg.com/quote/NG1:COM. 45 Moot Scenario at 26. 46 Moot Scenario at 70. 47 Moot Scenario at 1 and 2. Freight was set to be at a rate of US$10/m3, while the amount of cargo was 260,000 m3, resulting in a cost of US$2.6 million.

15

(iii) Frustration occurs immediately following the seizure of the Vessel

44. Frustration occurs automatically and would not depend on any act of volition on the part of

either party.48 It should be a question for this Tribunal to decide objectively, as it is unclear

whether the parties consider the delay would be substantial as of October 2014.49 Further,

“businessmen must not be left in indefinite suspense”,50 and therefore the Court in Embiricos v

Sydney Reid & Co held that the charterparty was frustrated as there was a likelihood that the

restraint would continue so long.51 Likewise in The Playa Larga, the court held that there was no

possibility of the contract being further implemented after the coup.52

45. It is submitted that the Charterparty was frustrated right after the seizure of the Vessel by the

Coast Guard as the period of delay was long and indefinite. The Hades Opposition Party had

garnered the support of the military and it was reasonable to believe that the coup was successful

and the new regime would not be overturned within the immediate future. As such, it was

reasonably foreseeable that the government policy against the export of HLNG would not

change any time soon. Given the public pledge by the president of Hades and General

Makepeace to stop the export of HLNG,53 it was apparent that the new government would likely

detain the Vessel at Hades.54 The Claimant even admitted that “a long delay” for the Vessel

might be anticipated immediately after its seizure.55

48 Hirji Mulji v Cheong Yue S.S. Co [1926] A.C. 497 at 510 (per Lord Sumner); Davis Contractors Ltd v Fareham U.D.C. [1956] A.C. 696 at 728. 49 On one hand, the Claimant appeared to suggest that a long delay would be anticipated: Moot Scenario at 60; on the other hand, the Respondent requested the Claimant to secure the due release of the Vessel: Moot Scenario at 61. 50 Denny, Mott & Dickson Ltd v James B. Fraser & Co Ltd [1944] A.C. 265 at 277-278 (per Lord Wright); see also Horlock v Beal [1916] 1 A.C. 486 at 502 (per Lord Atkinson). 51 [1914] 3 K.B. 45 (per Scrutton J). 52 Empresa Exportadora De Azucar v Industria Azucarera Nacional S.A. (The Playa Larga) [1983] 2 Lloyd’s Rep. 171 at 188. The case concerns a contract between a Cuban state company and a Chilean state-owned company that would not have been made but for the close diplomatic and commercial relations between the two countries. 53 Moot Scenario at 55. 54 Moot Scenario at 60. 55 Ibid.

16

V. Laytime and Demurrage

46. In relation to the claim for demurrage, the Respondent’s position is that the Vessel did in fact

leave the Port on 7 October 2014, and only later returned to the Port as a result of the Master’s

negligence. Further or alternatively, the Vessel was prevented from leaving the Port because of

the Master’s negligence. Yet further or alternatively, Clause 9(e) of the Charterparty applied and

excused the Respondent from liability. In any event, the Charterparty was frustrated right after

the interception by reason of the delay, which stopped the demurrage from running.56 In any

event, the Demurrage Clause ought to be struck down. Lastly, even if the Claimant is entitled to

demurrage reward, such reward should only cover a reasonable period of time.

(1) The Vessel did in fact leave the Loading Place on 7 October 2014

47. The Respondent accepts that for the purpose of calculating laytime, the critical endpoint is the

Vessel’s departure from the Loading Place, i.e. the Port.

48. Although there is no clear evidence on whether the Vessel was within the Port at the time of

interception, it is submitted that a reasonable inference from the evidence supports the

conclusion that the Vessel was not within Hades water when being intercepted. In the Statement

of Facts issued by the Master which detailed the activities of the Vessel at Hades,57 it was noted

that on 7 October 2014 at 0900, the Vessel sailed from Hades. When the Vessel was intercepted

by the Coast Guard, it was already late on 7 October 2014 and the Vessel had set sail for nearly

a day. Furthermore, Captain Paynes and the Coast Guards’ considerable doubts on whether the

Vessel was within Hades waters should be given significant weight. All the circumstantial

56 Please refer to Part IV above. 57 Moot Scenario at 54.

17

evidence supports the inference that the Vessel was out of the territorial waters of Hades at the

time of interception.

49. The Claimant alleges that in the present case, this Tribunal should focus on the commercial

meaning of the word “port”. However, it is submitted that the commercial meaning of the word

“port” is inapplicable, and in any event, even if this Tribunal adopts the commercial meaning,

the interception location does not fall within the meaning. The cases cited by the Claimant

involved the determination of whether a ship has arrived at its destination, and not whether a

ship has departed from its origin.58 The principles involved are now part of the so-called “Reid

test” to ascertain whether a ship was within port and at the immediate and effective disposition

of the charterers.59 Unlike the present context, the courts, when applying the “Reid test”, were

concerned with giving practical expediency in favor of shipowners when “vessels that cannot go

straight to some particular places to which charterers will wish them to go are required by the

port authorities to wait in a specified area”.60 It is therefore submitted that the principles on the

commercial meaning of the word “port” are not directly applicable in this case.

50. Furthermore, the resort to the views of “port authorities” was criticised by Viscount Dilhorne, as

“port discipline may be exercised and submitted to over a wider area than the port in its

commercial sense”.61

51. In any event, even if one is to ascertain the commercial meaning of a port, it is submitted that the

interception area was not within the Port under such meaning:

58 Simon Baughen, Summerskill on Laytime (5th Edition) [4.12]-[4.13]. 59 E. L. Oldendorff & Co. G.M.B.H. v Tradax Export S.A. (The Johanna Oldendorff) [1974] A.C. 479 at 535 (per Lord Reid). 60 Ibid at 542 (per Lord Morris). 61 Ibid at 553.

18

a. It was held that when: (1) “port authorities” were exercising authority over ships within a

certain space of water, and that (2) shipowners and shippers who had ships within that space

of water were submitting to the jurisdiction which is claimed by those authorities, that was

“the strongest possible evidence that shipowners, the shippers and the port authorities have

all come to the conclusion to accept that space of water in which the authority is so

exercised as ‘the port’ of the place”.62

b. In the present case, there is no evidence indicating that the Coast Guard had any kind or

degree of control over the water at the interception point – other than this single incident of

interception of the Vessel. Although the Coast Guard had given orders to the Vessel to

return to the Port, the Coast Guard hesitated as to whether the interception location was

within the limits of the Port.63 This strongly suggests that the Coast Guard did not generally

patrol the location nor did they exercise any port discipline there before the interception.

The subsequent news reports also stated that it was purely luck and “quick thinking”, if not

actual trickery or deception, which led to the submission of the Master.64 These all indicated

that it was not the case where both port authorities and shippers accepted the interception

location as being within the Port.

(2) Further or alternatively, the Vessel was prevented from leaving the Loading Place because

of the Master’s fault or negligence

52. Even if the Vessel had not left the Loading Place, it is well established that, whilst a charterer’s

obligation to complete loading within the prescribed days is unconditional, laytime and time on

demurrage thereafter will not run when there is a delay caused by the fault of the shipowner or

62 Sailing-Ship Garston Co v Hickie & Co (1855) 15 Q.B.D. 580 at 589 (per Brett MR). See also John Schofield, Laytime and Demurrage (6th Edition) at [3.60]. 63 Moot Scenario at 57. Even the particular Coast Guard in question, Captain Paynes, conceded he “was not really sure whether the Master was correct about the vessel being outside of Hades territorial water.” See Moot Scenario at 62. 64 Moot Scenario at 62.

19

those for whom he is responsible.65 It was held in Harris v Best, Ryley & Co that delay caused

by the acts and omissions of the master of the ship was deemed to be caused by the shipowner.66

In such case, a charterer is not liable to pay the agreed demurrage because the shipowner “has

not done his part in regard to something which it was within his power to do”.67 This is the case

even if the shipowner has not authorised the particular act of the master in question.68

(i) The Master was negligent in returning to the Port

53. A master has a duty to promptly and fully inform the owner of all matters that affect the owner’s

interests and to judge the situations of the ship and cargo and to decide the proper safety

measures during the voyage.69 Furthermore, an unreasonable refusal by the master to sail

amounts to a fault on the part of the master.70

54. The Master was negligent in returning to the Port on late 7 October 2014 and failed to promptly

and fully inform the Claimant about his decision to return.71 Furthermore, by bringing the Vessel

back to Hades, the Master subjected the HLNG and the Vessel to greater risk of damage since

mass protests were taking place in Hades against the export of the cargo and the Hades

government was keen on confiscating the cargo. Lastly, the decision to return was an improper

exercise of his discretion as there was no immediate, perceivable necessity to comply with the

orders. Other than merely asserting that the Vessel carried a Hades flag (which as submitted

below was not a valid ground for interception), the Coast Guard neither carried any weapons nor

issued any threat which necessitated the Vessel’s return.

65 John Schofield, Laytime and Demurrage (6th Edition) at [4.18]. 66 (1892) 68 L.T. 76. 67 Leeds Shipping Co Ltd v. Duncan Fox & Co Ltd (1932) 37 C.C. 213 at 217. 68 John AC Cartner, Richard P Fiske and Tara L Leither, The International Law of the Shipmaster at [8.14]. 69 Ibid at [10.1]. 70 Julian Cooke and others, Voyage Charters (4th Edition) at [15A.144]. 71 Moot Scenario at 58.

20

(ii) The interception by the Coast Guard was unlawful

55. It is submitted that there was no lawful authority for the Coast Guard to intercept the Vessel. The

leader of the Hades Opposition Party, Jacqueline Simmons, seized control of the parliament with

assistance by Hades military. There could be no lawful authority for Jacqueline Simmons to

issue a presidential decree after the coup. As such, the interception of the Coast Guard could not

be justified on any reasonable basis, whether within or outside Hades territories. The Master had

no obligation to comply with the purported directions by the Coast Guard.

56. On the other hand, the obligations imposed by Article 92 of The United Nations Convention on

the Law of the Sea (UNCLOS 1982) on a flag state intend to ensure safety at high seas.72 It

includes “such measures for ships flying its flag as are necessary to ensure safety at sea”.73

Therefore the jurisdiction enjoyed by Hades, if any, was intended to be confined to measures

regulating safety at sea, but not to facilitating any prohibition of cargo export.

(3) Further or alternatively, Clause 9(e) of the Charterparty applied to exempt the Respondent

from liability

57. Clause 9(e) of the Charterparty expressly provides that laytime is not to be counted and

demurrage not to accrue even if the Vessel has been already on demurrage during the period of

delay or hindrance in loading the cargo by reason of certain events listed in the clause. It is

submitted that the period during which the Vessel was kept at Hades was by reason of

“inability...of the ship to load” within the meaning under Clause 9(e):

a. On the basis that the Vessel was indeed prevented from leaving the Loading Place, and that

for the purpose of calculating laytime under this Charterparty, time permitted for loading

72 Sellers v Maritime Safety Inspector [1999] 2 N.Z.L.R. 44 (CA) at 46-47; Maritime New Zealand v Page [2013] D.C.R. 102 at [30] (per Judge Hastings). 73 Ibid at [28]. See also Article 94 of UNCLOS 1982.

21

ends only until the Vessel leaves the Loading Place, it is submitted that the period during

which the Vessel was kept at Hades was within the loading voyage.

b. The Claimant conceded that it was not clear “whether the vessel [would] be allowed to

leave Hades with the cargo” and that there was a rumour that “some in the new Hades

government [thought] the vessel should be kept at Hades”.74 It is therefore evident that

during the period of delay, the Vessel was unable to complete its loading voyage due to the

prohibition by the Hades Government. Laytime stopped on 8 October 2014 when such

interruption to laytime occurred, and thus demurrage had yet to accrue.

(4) The Demurrage Clause should be struck down

58. A demurrage clause, which fixes a rate of liquidated damages so high as to impose a detriment

to the Respondent so out of proportion to the Claimant’s legitimate interest, could be struck

down as being a penalty. 75 As long as the demurrage amount claimed is exorbitant or

unconscionable with regards to the innocent party’s interest in performance of the charterparty,

the sum would be considered as a penalty.76 Where a demurrage clause is struck down as being a

penalty, the court will consider the extent of actual loss suffered by the shipowner and will

compensate him accordingly.77 Although the Vessel was being detained by the Coast Guard at

berth, there is no evidence that the Claimant had to bear any cost as to berthing, crew or security

expenses. The most that the Claimant had incurred were maintenance expenses and on-board

storage cost of the HLNG. The demurrage rate of US$50,000 per day was excessive and

unconscionable, especially having regard to the substantial amount claimed by the Claimant.

74 Moot Scenario at 60. 75 Cavendish Square Holdings BV v Makdessi [2015] U.K.S.C. 67 at [32]. See also MSC Mediterranean Shipping Company SA v Cottonex Anstalt [2015] E.W.H.C. 283 (Comm), [2015] 2 All ER 614 at [111]. 76 Cavendish Square Holdings BV v Makdessi [2015] U.K.S.C. 67 at [256]. 77 Michael White, Australian Maritime Law (2nd Edition), at 152.

22

(5) Limitation on the days on demurrage

59. The length of time that a ship can be on demurrage, where it is not stated in the charterparty, will

be limited by what is reasonable in the circumstances.78 In the present case, a delay of one year

for a contemplated voyage of one month is hardly reasonable, especially in light of the

unexpected nature of the coup. Thus the Claimant should only be entitled to demurrage award

for a reasonable period of time as determined by this Tribunal.

VI. Claim for Salvage Reward

60. On or about 6 October 2015, the Respondent provided salvage services to the Vessel through

Hestug. It is submitted that as there was no contractual relationship between the Claimant and

the Respondent regarding the salvage operation, the Respondent is entitled to salvage reward

under common law. Furthermore, since the Claimant was at fault in failing to ensure the

seaworthiness of the Vessel, the Claimant was solely liable for the salvage reward.

(1) The Respondent is entitled to salvage reward

61. Pursuant to Clause 31 of the Charterparty, the laws of the State of Western Australia, Australia

shall govern the Charterparty. The International Convention on Salvage (1989) (“Salvage

Convention”) has force of law in Australia pursuant to section 241 of the Navigation Act 2012

(Cth) and section 17 of the Navigation Regulation 2013.79 Pursuant to Article 6 of the Salvage

Convention, the master shall have the authority to conclude contracts for salvage operations on

behalf of the owner of the vessel. Therefore the Master had the authority to engage Hestug of the

Respondent for salvage operations on behalf of the Claimant on or about 6 October 2015.

78 Lilly v Stevenson (1895) 22 R (Ct of Sessions) 278 at 286. 79 Specifically, Articles 6 to 8, 12 to 19, 21 to 23, 26 and 30 of the Salvage Convention have the force of law in Australia.

23

62. Under common law, the Respondent is entitled to salvage reward if it shows that: (1) the Vessel

was in peril at sea or in navigable waters when salvage services were rendered;80 (2) the services

were rendered “voluntarily”, that is, without a legal duty to do so on the part of the salvor;81 and

(3) the salvage operation, complete or partial, was successful with a contribution to that success

being made to the salvor.82 It is submitted that all three conditions are satisfied in this case.

(i)The Vessel was in peril when salvage services were rendered

Mere immobilisation of ship qualifies as danger

63. As to whether there is danger to the ship and cargo, it is not necessary to have absolute danger in

order to constitute a valid salvage operation. Mere immobilisation of ship and cargo may

constitute a sufficient danger if the ship cannot readily be repaired at the place where she lies.83

It was held that a vessel not in substantial physical danger might suffer financially if it was to

remain immobilised.84 The possibility of incurring expenses and the effect of delay both upon

the ship and the cargo must be borne in mind.85

64. In this case, the Vessel could no longer proceed under its own power due to its complete loss of

motive powers from the brokerage of both propellers. It is possible that the Vessel may suffer

financially if remained immobilised. The potential losses and effect of delay upon both the

Vessel for future chartering and the cargo for sale were substantial. Accordingly, the Vessel was

in peril when Hestug offered towage services.

80 The Wilhelmine (1842) 1 Notes of Cases 376 at 378. 81 The Sarpen [1916] 306, 13 Asp. M.L.C. (CA) at 370. 82 The Sarpedon (Cargo ex) (1877) 3 PD 28, 3 Asp M.L.C. 509; The Renpor (1883) 8 PD 115, 5 Asp. M.L.C. 98 (CA); The Elton [1891] P. 265 at 269; The Port Victor (Cargo ex) [1901] P. 243 at 255-256, 9 Asp. M.L.C. 182 at 184 (CA). 83 John Reeder QC, Brice on Maritime Law of Salvage (5th Edition) at [1.168]. 84 Ibid at [1-166]. 85 Ibid. Also see The Glacus (1948) 81 Ll. L. Rep. 262 at 266. See also In The Troilus [1951] A.C. 820 at 830, where Lord Porter remarked that it was not a sufficient answer to say that a vessel can lie in a particular position of physical safety but from which no method of egress has been shown to exist, and where, unless some means of further progress is obtained, the ship must lie deteriorating and the cargo perishing.

24

A state of difficulty and reasonable comprehension of danger suffices

65. Further or alternatively, it was remarked by Dr. Lushington in The Phantom that it was not

necessary for absolute danger to exist, and a state of difficulty and reasonable comprehension of

danger would suffice.86 In The Tramp,87 Steel J laid down an objective test that the vessel must

have encountered a situation which would expose it to damage if the service was not rendered,

such that no reasonable person in charge of the vessel would refuse a salvor’s help if it was

offered to him upon the condition of paying a salvage award. In this case, the Vessel had been in

open waters when the propeller shafts broke and drifted in an uncontrolled manner. There was a

reasonably apprehended, if not absolute, danger caused to the Vessel and the HLNG but for the

rescue rendered by Hestug, particularly given the large quantity and value of the HLNG.

(ii) The salvage operation was rendered “voluntarily” and was successful

66. The fact that the Respondent has self-interest in undertaking the salvage operation does not

preclude it from claiming salvage rewards.88 Although the Respondent has retained a substantial

interest due to the HLNG on board the Vessel, it is not required to act out of charity or social

concern and is certainly entitled to its fair share of salvage. Lastly, the salvage operation was

successful in preserving the value of the Vessel and the HLNG.

(2) The Claimant is solely liable for the salvage reward

67. Although the Respondent owned the HLNG, it was not responsible for any part of the salvage

reward on the ground that, by reason of a breach of the express and/or implied duty of

seaworthiness of the Vessel, the Claimant was at fault in rendering the salvage operation

necessary and must accordingly discharge the Respondent’s share of the award.89

86 (1866) L.R. 1,A. & E. 58 at 60. 87 [2007] 2 Lloyd’s Rep. 363. 88 The Lomonosoff [1921] P. 97 at 102 (per Hill J). 89 Anderson, Tritton & Co. v Ocean Steamship Co. (1884) 10 App. Cas. 107 at 115.

25

68. Clause 17(a)(i) of the Charterparty provides that the Claimant should ensure that the Vessel

complies with the applicable requirements of the Navigation Act 2012 (Cth) and the Regulations

thereunder. Section 109 of the Navigation Act 2012 (Cth) stipulates that the owner of a vessel

must not cause or permit another person to take the vessel to sea if the vessel is unseaworthy.

Section 23 of the Navigation Act 2012 (Cth) provides that a vessel is seaworthy if, and only if it

is in a fit state as to the condition of hull and equipment, and machinery to encounter the

ordinary perils of the voyage undertaken.

69. Further or alternatively, in a voyage charterparty, the shipowner impliedly undertakes to provide

a seaworthy ship, in that it must be “fit to meet and undergo the perils of the sea and other

incidental risks to which, of necessity, she must be exposed in the course of voyage”.90

70. In this case, when the towage services were rendered, both propellers of the Vessel had been

tampered with and both propeller shafts broke. The Vessel was therefore sea unworthy, contrary

to the Claimant’s express and/or implied undertaking to provide a seaworthy ship.

VII. Conclusion

71. In light of the above, it is submitted that the Tribunal should not entertain the present dispute

between the parties. In any event, the Claimant’s claim for demurrage should be dismissed and

the Respondent’s counterclaim be allowed.

90 Hang Fung Shipping and Trading Co Ltd v Mulliln and Co Ltd [1966] 1 Lloyd’s Rep 511.