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SIXTEENTH ANNUAL INTERNATIONAL MARITIME LAW ARBITRATION MOOT COMPETITION 2015
International Shipping Law School
East China University of Political Science and Law
IN THE MATTER OF AN ARBITRATION HELD IN MELBOURNE
————————— Claimant/Owners Respondent/Charterers Western Tankers Inc LTD Ptd
AND
Claimant/Charterers Respondent/Owners
LTD Ptd Western Tankers Inc
————————— MEMORANDUM FOR THE CHARTERERS
TEAM NO. 22
Yuwei Yang
Lin Fang
Chao Qian
Fuzhou Bai
Sen Wang
I
TABLE OF CONTENTS
TABLE OF AUTHORITIES: BOOKS ................................................................... III
TABLE OF AUTHORITIES: CASES AND ARBITRAL AWARDS ..................IV
TABLE OF AUTHORITIES: LEGISLATION ......................................................VI
LIST OF ABBREVIATIONS ................................................................................. VII
STATEMENT OF FACTS .......................................................................................... 1
PART ONE: JURISDICTION.................................................................................... 3
A. This Tribunal has the power to rule on its own jurisdiction .................................. 3
B. The Charterparty contains a valid arbitration clause, which specifies London as
the seat ........................................................................................................................ 3
C. Every dispute arising out of this Charterparty is admissible in this arbitration .... 4
PART TWO: BREACH OF THE CHARTERPARTY ............................................ 6
A. The Charterers failed to provide the Owners with bunkers ................................... 6
B. The Owners were entitled to hires due .................................................................. 6
I. Payment of hire is the absolute obligation of the Charterers .............................. 6
II. The Master strictly followed orders and the off-hire clauses shall not be
applied .................................................................................................................... 8
III. The Owners are entitled to the sums claimed as damages for breach .............. 9
C: The Vessel involved was fit for service ................................................................ 9
I. The Vessel was fit for service ........................................................................... 10
II. The Master was competent and had followed anti-precautions ....................... 11
III. Alternatively, the causation between the Owners’ duty and the Charterers’
loss had been interrupted by the Charterers’ tort of fraud .................................... 12
D. The Charterers were in breach of the Contract .................................................... 14
I. The Charterers directed the Vessel to proceed to unsafe places in breach of the
Charterparty .......................................................................................................... 14
II. A quantity of Cargo was discharged without the authorization of the Owners
and in breach of the Charterparty ......................................................................... 15
E. The Owners was not liable for the loss of cargo. ................................................. 16
I. The Owners shall not be liable for the loss of cargo under the Charterparty. ... 16
II. The Owners shall not be liable for the loss of cargo under Hague-Visby
Rules. .................................................................................................................... 16
II
a. The Owners shall not be liable for the loss due to breach of Article III, Rule
2 of Hague-Visby Rules ....................................................................................... 16
(1) Hague-Visby Rules should be applied to the claim of loss of the cargo 17
(2) The Owners discharged their obligation of properly and carefully carry,
keep and care for the cargo under Article III, Rule 2 ........................................... 17
b. The Owners may rely on the excepted perils under Article IV, Rule 2. ...... 18
(1) Piracy is a kind of perils, dangers of the sea. .......................................... 19
(2) Piracy is an act of war ............................................................................. 19
(3) Piracy is any other cause arising without the actual fault and privity of
the Owners ................................................................................................................ 20
PART THREE: TORT OF FRAUD ...................................................................... 20
A. The representations were untrue. ......................................................................... 21
B. The Charterers knew that those representations were untrue .............................. 21
C. The Charterers had the intention that the representations be relied upon............ 22
D. The Owners actually relied on the representations made by the Charterers and
their agents. .............................................................................................................. 24
E. The Charterers’ fraud caused damage to the Owners .......................................... 24
PRAYER FOR RELEF ............................................................................................. 25
III
TABLE OF AUTHORITIES: BOOKS
Andrew W. Baker & Hatty Sumption, Time Charters (Lloyd’s Shipping Law Library,
7th ed, 2014) ............................................................................................... 10, 11, 18, 21
Clare Ambrose &Karen Maxwell, London Maritime Arbitration (3rd ed, 2009) .......... 4
G. E. Dal Pont, The law of Agency, (7th ed, 1996) ...................................................... 22
H. L. A. Hart& Tony Honore, Causation in the Law (Oxford University Press, 2nd
ed) ................................................................................................................................ 13
John F Wilson, Carriage of Goods by Sea (Pearson Education Limited, 7th ed,
2010) ........................................................................................................................... 7,9
Paul Todd, Maritime Fraud and Piracy (Informa Publishing, 2nd ed, 2010) ................ 19
Peter MacDonald Eggers, Deceit: The Lie of the Law (Informa Law, 2009) ........... 24
Simon Baughen, Shipping Law,(Routledge-Cavendish, 4th ed, 2009). ....................... 10
Sir Bernard Eder et al, Scrutton on Charterparties and Bills of Lading(Sweet
&Maxwell, 22nd ed, 2011) ............................................................................................. 3
IV
TABLE OF AUTHORITIES: CASES AND ARBITRAL AWARDS
A.
Albacora v Westcott and Laurance Line [1966] 2 Lloyd’s Rep 53 ........................... 17
Atlantic Consolidated Foods Ltd. v. “(The Doroty”), 1978 CarswellNat 78 .............. 18
Atlasnavios Navegacao Lda (formerly Bnavios Navegacao Lda) v Navigators
Insurance Co Ltd 2014 WL 6862527 .......................................................................... 20
C.
Chender v. Lewaskewicz, 2007 CarswellNS 497, 16. .................................................. 22
CV Sheepvartondereneming Ankergracht v. Stemcor (Australasia) Ptd Ltd [2007]
FCAFC 77. ................................................................................................................... 17
D.
Davy v. Garrett (1878), 7 Chancery Division 473....................................................... 20
F.
Falconbridge Nickel Mines Ltd. v. Chimo Shipping Ltd.1969 CarswellNat 362 ........ 18
French Marine v. Compagnie Napolitaind’Eclairage et de Chauffage par le Gaz [1921]
2 AC 494……………………………………………………………………………….8
G.
G.H. Renton & Co. v. Palmyra Trading Corp. of Panama [1957] A.C. 149 .............. 18
Great China Metal Industries Co Ltd v Malaysian International Shipping
Corporation Berhad 196 CLR 161 ...................................................................... 18, 19
H.
Hadley v Baxendale(1854)9 Ex 341,254 ..................................................................... 12
K.
Kuwait Rocks Co v AMN Bulkcarriers Inc (The Astra) [2013] EWHC 865 (Comm) 7,9
Kent Line International Ltd., Solym Carriers Ltd.2012 WL 2500470, [2012] EWHC
1888 (Comm) ............................................................................................................. 14
L.
Leyland Shipping v. Norwich Union(1918) AC 350 (HL) ........................................... 13
Lensen v Anglo-Soviet Shipping Co (1935) 52 LlLR 14 ................................................ 8
N.
Nourse v Elder, Dempster (1922) 13 LlLR 197; ........................................................... 9
P.
Pan Ocean Shipping v. Creditcorp [1994]1 WLR 161,168-9(HL) ................................ 8
Paterson et al. v. Livingstone, [1931] 1 D.L.R. 386 .................................................. 20
Potts v Union SS Co of New Zealand [1946] NZLR 276 ........................................ 4, 20
Pacific Basin IHX Ltd v Bulkhandling Handymax AS 2011 WL 5105123 ................. 20
V
Pickering v Barkley (1648) Style 132 [82 ER 587] ................................................... 19
R.
Royal Greek Government v Minister of Transport (No 1) (1948) 82 LlLR 196 ............ 9
S.
Savage v. Greco Donair Francise Ltd. 1981 CarswellNB 299 ................................... 21
T.
Tonnelier and Bolckow,Vanghan and Co v. Smith & Weatherill & Co(1897)2 Com.
Cas.258...........................................................................................................................8
The Derby [1984] 1 Lloyd’s Rep ................................................................................. 11
The Starsin [2003]1 Lloyd’s Rep ................................................................................... 4
The Portland Trader [1963]2 Lloyd’s Rep ................................................................ 10
The “Aliza Glacial” [2002] 2 Lloyd’s Rep ............................................................... 13
The Heron II[1969]1 AC 350,384-5,425 ..................................................................... 12
The Achilleas[2009]1 AC61,81 ................................................................................... 12
Taokas Navigation SA v Komrowski Bulk Shipping KG (GmbH & Co), Kent Line
International Ltd., Solym Carriers Ltd.2012 WL 2500470, [2012] EWHC 1888
(Comm) ........................................................................................................................ 15
The Tilia Gorthon [1985] 1 Lloyd's Rep 552 (QB) ..................................................... 19
Thomas Wilson Sons & Co v Owners of Cargo of the Xantho (The Xantho) (1887) LR
12 App Cas 503 (HL); per Lord Herschell at [509] ..................................................... 19
Thames and Mersey Insurance Co Ltd v Hamilton Fraser & Co (1887) LR 12 App
Cas 484(H L) .............................................................................................................. 19
U.
United British Steamship Company Ltd v Minister of Food [1951] 1 Lloyd’s Rep .... 3
V.
Victoria Laundry(Windsor)Ltd v Newman Industries Ltd [1949]2 KB 528,539 ......... 12
W.
Wallingford v. Mutual Society (1880), 5 A.C. 697 ...................................................... 20
OTHERS
[2007] 4 All E.R. 951 ..................................................................................................... 5
VI
TABLE OF AUTHORITIES: LEGISLATION
The 1996 Arbitration Act ............................................................................................... 3
Protocol to Amend the International Convention for the Unification of Certain Rules
of Law Relating to Bills of Lading (Hague-Visby Rules, 1968) ................................... 4
VII
LIST OF ABBREVIATIONS
The Charterers : LDT PTE
The Owners : Western Tankers INC
The Master : Master of Western Dawn
Shelltime 4 : Shelltime 4 (Issued December 1984 amended
December 2003)
The Charterparty An amended Shelltime 4 Charterparty with rider
clauses
BIMCO : BIMCO STS Clause of the LDTP Rider Clauses
Hague-Visby Rules : International Convention for the Unification of
Certain Rules of Law relating to Bills of Lading
BMP4 : Best Management Practices for Protection against
Somalia Based Piracy
The Vessel : Western Dawn
ANTELOPE : The Vessel regarding bunker supply and
discharging cargo at STS Area 1
Area 1 : STS Area 1
Mr. Anya : William Anya, the agent of the Charterers
1
STATEMENT OF FACTS
THE CHARTERPARTY
1. On 26 May 2014, Western Tanker Inc (Owners) entered into a Charterparty with
LDT Pte (Charterers) to transport 30,000mt Jet A1 and 70,000mt gasoil from
Singapore to OPL Luanda, with redelivery in the Mediterranean area on the
“Western Dawn” (Vessel).
2. The Charterparty was the amended Shelltime 4, comprised of the North American
ECA clause, Bunker Emissions Clause, STOPIA/TOPIA Clause, Piracy Clause,
LDTP Rider Clause, Owners Additional Clause and Intertanko’s Standard Tanker
Chartering Questionnaire 88.
3. The Charterparty required the Charterers to stem sufficient bunkers.
THE PERFORMANCE OF THE CHARTERPARTY
4. On 27 May 2014, the Vessel was ordered to proceed to OPL Luanda for discharge
of the cargo.
5. On 3 June 2014, the Vessel found the stem was not for the full quantity requested,
which was only enough to discharge area plus the bad weather reserve. On 8 June
2014, the Vessel completed loading of the cargo, and on the same day, full payment
was received by the Charterers.
6. On 28 June 2014, the Charterers and/or persons acting on their behalf directed the
Vessel to proceed to an alternative discharge place in international waters off the
Angolan coast, without the authorization of the Owners.
7. During the discharge, 28,190mt of gasoil had been discharged without the
2
authorization of Owners and the Vessel suffered material damage. As a result of
the above, the Vessel was unable to meet her discharge target date and discharge
full cargo to the buyer.
THE HIRE DUE
8. Hire was due and owing under the Charterparty monthly in advance.
9. On 3 July 2014, the Owners notified the Charterers, as of COB London, payment
for second hire period was due.
10. On 4 July 2014, the Charterers confirmed that it would not pay the second hire.
THE PIRACY
11. On 4 July 2014, the Vessel arrived OPL Luanda to acquire bunkers for the voyage
and cargo transfer. However, the STS v/l ANTELOPE was not arrived.
12. The Vessel knew the Charterers were intending redelivery on completion discharge
Augusta on about 4 August 2014.
13. On 17 July 2014, the Vessel resumed contact with the Owners and the Charterers
and urgently reminded them of the cargo loss and the Vessel damage because of
the pirate attack and cargo diversion and her action of proceeding to Cape Town
for assistance due to no instruction from Charterer and no bunker supply.
ARBITRAL PROCEEDINGS
14. On 1 November 2014 Owners served the Claimant to arbitration and the Charterers
disputed involved allegations and counterclaimed, issuing their own notice of
arbitration on 29 November 2014.
3
PART ONE: JURISDICTION
1. The Owners argue that this Tribunal has jurisdiction to bear all below merits of this
dispute because: (A) this Tribunal has the power to rule on its own jurisdiction; (B)
the Charterparty contains a valid arbitration agreement, which specifies London as
the seat; and (C) every dispute arising out of this Chapter is admissible in this
arbitration.
A. This Tribunal has the power to rule on its own jurisdiction
2. It is well-established that the arbitral tribunal is entitled to rule on its on jurisdiction,
including the validity of the arbitration agreement 1 , which is the principle of
international arbitration. The claimant argues that this Tribunal has the inherent
power to rule on its own jurisdiction. Under the Arbitration Act 1996, Article 30
has stipulated the competence of tribunal to rule on its own jurisdiction, therefore
this Tribunal has the rule on its own jurisdiction.
B. The Charterparty contains a valid arbitration clause, which specifies London
as the seat
3. The Charterparty contains two conflicting arbitration statements: the first is
contained in one of the emails between Charterers and Bill at IMWMB on 23rd
May 2 ; the second is contained in the amended Shelltime 4 and provides for
arbitration in London3.The Claimant argues London Arbitration Clause prevails.
4. First, in identifying which seat the parties intended to designate, tribunals will
1 The 1996 Arbitration Act (UK), clause 30(1). 2 Moot problem, 2. 3 Shelltime 4, clause 46(b).
4
certainly give greater weight to the terms that the parties drafted, negotiated and
specifically included in the contract agreed by both. 4 The Shelltime 4 form
contract has been amended with more than thirty amended clauses. Besides,
referring to their recap, the item of “LAW AND LITIGATION”5 was left blank,
meaning that they have no dispute over this issue.
5. Secondly, the arbitration clause contained fulfills every requirement as it is clear in
writing6 and contains the requisite degree of certainty.7 On the contrary, the email
mentioned was just a kind of willingness not only lacking the certainty required
but also declared by only one of both parties, which was not equivalent to an
agreement by both. Furthermore, the Charterers only sent the email to the broker,
who was not a party of this dispute.
6. Finally, the Respondent’s email was made on 23rd May, much earlier than the time
when their final agreement was reached and no one has even mentioned about the
Singapore arbitration before.
C. Every dispute arising out of this Charterparty is admissible in this
arbitration
7. Under the Clause 46(b) of the amended Shelltime 4, the Claimant argues that fraud
is admissible in this arbitration, and the tort of fraud is within the meaning of
“disputes arising out of this charter”. In terms of the disputes hereof, on the one
4 The Starsin [2003]1 Lloyd’s Rep 571,577; United British Steamship Company Ltd v Minister of Food [1951] 1
Lloyd’s Rep 111,114; Sir Bernard Eder et al, Scrutton on Charterparties and Bills of Lading (Sweet &Maxwell,
22nd ed, 2011), 22. 5 Moot Problem, 6. 6 The 1996 Arbitration Act (UK), s 5(2)(a). 7 Clare Ambrose and Karen Maxwell, London Maritime Arbitration (Informa, 3rd ed, 2009), 31.
5
hand, the Charterers shall provide and pay for all fuel8. On the other hand, the
Charterers shall from time to time give the Master all requisite instructions and
sailing directions9, and the Master (although appointed by the Owners) shall be
under the orders and direction of the Charterers.
8. Giving true, accurate and in-time orders is the Charterers’ obligation specified in
the Charterparty while the Master shall implement the Charterers’ orders and
directions, which was the obligation of the Owners specified in the Charterparty as
well. However, the representations concerning the supply of bunkers given by the
Charterers to the Owners were untrue and dishonest from the very beginning,
which constituted the material cause leading to the encounter with pirates and final
suffering of cargo losses. Therefore, the tort of fraud was closely linked with the
Charterparty.
9. Alternatively, even if the Tribunal finds the Charterers have not conduct any fraud,
the construction of an arbitration clause has to start from the assumption that the
parties, as rational businessmen, were likely to have intended any dispute arising
out of the relationship into which they have entered, or purported to have entered,
to be decided by the same tribunal. The clause had to be construed in accordance
with that presumption unless the language made it clear that certain questions were
intended to be excluded from the arbitrator’s jurisdiction. 10 Accordingly, the
clauses shall be applied to the disputes.
8 Shelltime 4,clause 7(a). 9 Ibid, clause 12. 10 [2007] UKHL 40; [2007] 4 All E.R. 951; [2007] 2 All E.R. (Comm) 1053; [2007] Bus. L.R. 1719; [2008] 1
Lloyd's Rep. 254; [2007] 2 C.L.C. 553; 114 Con. L.R. 69; [2007] C.I.L.L. 2528; (2007) 104 (42) L.S.G. 34; (2007)
151 S.J.L.B. 1364.
6
PART TWO: BREACH OF THE CHARTERPARTY
10. The Claimant argues that the Charterers breached the Charterparty because: (A)
The Charterers failed to provide the Owners with bunkers; (B) The Owners were
entitled to the hires due; (C) the Vessel involved was fit for service; (D) The
Charterers were in breach of the Charterparty; (E) The Owners ware not liable for
the loss of cargo.
A. The Charterers failed to provide the Owners with bunkers
11. Under Clause 7 of Shelltime 4, the Charterers shall provide and pay for all fuel
unless bunkers are consumed for Owners’ purposes or while the vessel is off-hire.11
The Charterers may contend that the Owners should pay for the bunkers themselves
from July 4 to July 17 because the Vessel was off-hire during that time. However,
the Owners constantly followed the instructions of the Charterers and their agents
and the loss of the cargo was not caused by the Owners. Thus, the Charterers have
the obligation to provide the Owners with bunkers all time.
B. The Owners were entitled to hires due
12. Under Clause 9 of the Shelltime 4, the Owners argue that the Charterers were liable
to pay hire because: (I) payment of hire is the absolute obligation of the Charterers;
(II) the Master strictly followed orders and thus the off-hire clauses shall not be
applied; (III) the Owners are entitled to the sums claimed as damages for breach.
I. Payment of hire is the absolute obligation of the Charterers
13. The Vessel was on hire from 4 June 2014,12 thus it was 3 July 2014 that was the
11 Shelltime 4, clause 7. 12 Moot Problem, 29.
7
exact day of paying hire for the second month. On 3 July 2014, the Owners sent a
notice of second period hire payment to the Charterers. On 4 July 2014, the
Charterers sent an off-hire notice, stating that they refused to pay the same or any
part thereof,13 which breached the Charterparty. Hire-attaining is the Owners’
determinant purpose of letting the vessel. Payment of hire clause was a condition
based on its seriousness and importance of time-cost and certainty in commercial
transactions.14
14. On the one hand, the Charterers may argue that the Charterparty was frustrated by
no later than 4 July 2014. With reference to the case of the National Carriers v.
Panalpina, an event which so significantly changes the nature of the outstanding
contractual rights and/or obligations from what the parties could reasonably have
contemplated at the time of execution, that it would be unjust to hold them to the
literal sense of its stipulations in the new circumstances and the burden of proving
frustration will fall on the party alleging it.15 Accordingly, lack of contact was for
such a short period that would not change the nature of the contractual rights and
obligations.
15. On the other hand, the Vessel was released on 17 July 2014, much less than ninety-
first days, thus under Clause(f) of the BIMCO Piracy Clause for time Charter
Parties 2013,16 the hire payment shall not be affected. Besides, the Owners argue
that the Charterers shall pay the hire in full whatever would happen after the
13 Ibid, 41. 14 Kuwait Rocks Co v AMN Bulk Carriers Inc (The Astra) [2013] EWHC 865 (Comm). 15 John F Wilson, Carriage of Goods by Sea (Pearson Education Limited, 7th ed, 2010), 41. 16 Moot Problem, 11.
8
payment. There are numerous cases can demonstrate the Charterers were liable to
pay a full month’s hire at the beginning of each month.17 Furthermore, even if the
vessel had been requisitioned after an installment of advance hire had become due,
leading to the frustration of the charterparty, the charterers were still liable to pay
the hire in full.18 Even if after the happening of that event charterers would have a
right of set-off as against a future installment of hire of a right of repayment, the
right to receive the payment of the hire installment was separate.19
16. This case shared the same situation thus the above cases can be applied. Moreover,
the off-hire periods claimed by the Charterers were disputed and not experienced
until 3 July 2014, thus no reduction would be allowed.
II. The Master strictly followed orders and the off-hire clauses shall not be
applied
17. In terms of the Charterers’ counterclaim,20 the Owners contend that the Master
was completely competent when he followed instructions from the Charterers and
their agents, thus the off-hire clauses21 were not activated.
18. At the later stages, the Master contacted with the Charterers’ agent, but the
Charterers argue that ASA2 is not, and has never been the agent of Charterers, thus
here comes to the issue of agency and Charterers’ fraud, which will be discussed
in the part of tort of fraud hereafter. In any event, Mr. Anya was the agent of the
Charterers and the Master has always strictly followed instructions from the
17 Tonnelier and Bolckow, Vanghan and Co v. Smith & Weatherill & Co (1897) 2 Com.Cas.258. 18 French Marine v. Compagnie Napolitaind’Eclairage et de Chauffage par le Gaz [1921] 2 AC 494. 19 Pan Ocean Shipping v. Creditcorp [1994]1 WLR 161,168-9(HL). 20 Moot problem, 68. 21 Shelltime 4, clause 21.
9
Charterers. In terms of the Charterers’ untrue and dishonest orders during the whole
process, it is worth mentioning that there is some authority for suggesting that the
off-hire clause will not operate where the specified event results from a breach of
contract by the Charterer22. Even if the vessel did go off-hire in such an event,
presumably the owner could include the loss of hire in his claim for damages for
breach.23
19. Furthermore, the operation of the off-hire clause is triggered merely by the
occurrence of one of the specified events irrespective of any fault on the part of the
shipowner. Being a “no fault” clause, its provisions are strictly construed, and the
burden of proof rests firmly with the charterer.24 In addition, those clauses must
be read in favor of the owners because the charterer is attempting to cut down the
owners’ right to hire.25 In conclusion, the off-hire clause shall not be applied.
III. The Owners are entitled to the sums claimed as damages for breach
20. The payment of hire clause is a condition in a charterparty. A condition is an
essential contract term, breach of which entitles the innocent party to treat himself
as discharged from further performance of the contract, even if he has suffered no
prejudice. The innocent party can also claim damages for any loss suffered.
Accordingly, a breach of that condition, namely failure to pay hire, entitles the
owner to terminate the contract and claim damages for losses suffered.26
C. The Vessel involved was fit for service
22 Nourse v Elder, Dempster (1922) 13 LlLR 197; Lensen v Anglo-Soviet Shipping Co (1935) 52 LlLR 141. 23 John F Wilson, Carriage of Goods by Sea (Pearson Education Limited, 7th ed, 2010), 97. 24 John F Wilson, Carriage of Goods by Sea (Pearson Education Limited, 7th ed, 2010), 96-97. 25 Royal Greek Government v Minister of Transport (No 1) (1948) 82 LlLR 196 at p 199. 26 Kuwait Rocks Co v AMN Bulk Carriers Inc (The Astra) [2013] EWHC 865 (Comm).
10
21. The Charterers argue that the Vessel was not fit for service on the ground that the
Master was incompetent and failed to take anti-piracy precautions. On the one hand,
the Owners do not admit this allegation totally and contends that the Vessel was
absolutely fit for service as required by the Charterparty. On the other hand, the
actions throughout the charter service which a prudent Master must be based on
the type of vessel and the voyage to be undertaken and further, the requirement to
exercise due diligence does not extend to protect against all conceivable
hazard.27Therefore, (I) the Vessel was fit for service and; (II) the Master was
competent and had followed anti-precautions;
I. The Vessel was fit for service
22. The Vessel was fit for service based on three main reasons. Firstly, the stipulations
in Clause 1 of this Shelltime 4 contain undertakings applicable at the date of
delivery, which impose absolute obligations. However, in regard to claims arising
out of “any loss of or damage to or in connection with cargo”, if they are subject to
the Hague or Hague-Visby Rules pursuant to Clause 27(c)(ii), the effect of Article
IV, rule 1 of the Rules will be to reduce the obligation of seaworthiness from an
absolute obligation to an obligation to exercise due diligence to make the ship
seaworthy.28 In this case, the Vessel is classed BV. To be classed BV a vessel must
meet stringent requirements as to safety equipment and electronic systems and the
Owners ensured that the Vessel possessed all the necessary documents such as the
Safety Equipment Certificate, Safety Radio Certificate, Safety Construction
27 The Portland Trader [1963] 2 Lloyd’s Rep 278, 281 28 Andrew W. Baker&Hatty Sumption,Time Charters (Lloyd’s Shipping Law Library,7th ed 2014), 660.
11
Certificate and Safety Management Certificate.29
23. Secondly, the general requirement in Clause 1(c) of the amended Shelltime 4
constitutes an express undertaking of seaworthiness.30 Considering the words “in
every way fit for the service”, if the fitness must be fairly generally construed, one
may be laying the owners open to having to fulfill conflicting and inconsistent
obligations depending on which contingency is taken into account and the owners
are required, at the time of delivery, to anticipate and provide in advance for every
contingency.31 In other words, at the date of delivery, the Owners are not required
to take everything into consideration, which is not possible as well.
24. The third reason is concerned with the words “throughout the charter service.”
Whether they not only constitute absolute undertakings applicable at the date of
delivery, but absolute and continuing undertakings that the ship will always possess
all of those attributes in full, which are thought to be incorrect readings. It would
involve the owners in an extravagant promise and is contradicted by Clause 3(a) in
which the owners undertake only an obligation to exercise due diligence to
maintain or restore the ship.32 Owners therefore argue they exercised the requisite
degree of due diligence to the make Vessel seaworthy.
II. The Master was competent and had followed anti-precautions
25. The Respondent counterclaim that the Master was incompetent33 and failed to
29 Moot Problem,49 30 Andrew W. Baker&Hatty Sumption, Time Charters (Lloyd’s Shipping Law Library, 7th ed 2014), 661. 31 The Derby [1984] 1 Lloyd’s Rep.635, at page 641, upheld by the Court of Appeal at [1985] 2 Lloyd’s Rep.325. 32 Andrew W. Baker&Hatty Sumption, Time Charters (Lloyd’s Shipping Law Library, 7th ed 2014), 662. 33 It is the issue about whether the Master has strictly followed instructions, which has been discussed elsewhere,
thus there is no specific and duplicated statement here.
12
follow anti-piracy precautions, which was denied by the Claimant based on three
main reasons.
26. Firstly, on the one hand, Clause (b) of the BIMCO STS Clause has put the
obligation of providing necessary items for the conduct of ship to ship operations
on the shoulder of Charterers. On the other hand, in accordance with the Clause(c)
of BIMCO Piracy Clause for Time Charter Parties 2013, it is not a strict obligation
but is at the Owners’ disposal. Besides, there is no term that specifies the exact time
for taking protective measures.
27. Secondly, under sub-clause (6) of the Piracy Clause of Special Provisions to ST4
Proforma, it is for the Owners to determine the level of threat and the measures
considered appropriate to discharge that obligation.34 Even so, in order to protect
this Vessel, the Owners have contacted their Safety Department to attend the Vessel
assisting in the plan and upgrade of systems and equipment on 27th May in
consideration of the WAF area, a known piracy threat area.35 Thus the Owners did
everything possible to protect the Vessel.
28. Thirdly, due to some problems with freighting parts, the Owners decided to provide
items concerned in Durban, 36 which was in accordance with the Charterers’
guidance that “we have alternative bunker supply available passing Durban or Cape
Town reverting” and these items were all prepared in Durban. However, the
constant changing guidance was not only out of the Owners’ control and not within
34 Moot Problem, 9 35 Ibid, 22. 36 Ibid, 27
13
the “reasonable range.”37
III. Alternatively, the causation between the Owners’ duty and the Charterers’
loss had been interrupted by the Charterers’ tort of fraud
29. The first task of the Court is to look to see whether one of the causes is plainly the
proximate cause of the loss.38 Causation is not a chain but a net and at the point
where these various influences meet. It is for the judgment as upon a matter of fact
to declare which of the causes thus joined at the point of effect was the proximate
and which was the remote cause. The cause which is truly proximate is that which
is proximate in efficiency.39
30. The real efficient cause in this section lies in the Charterers’ tort of fraud. In terms
of systems and equipment needed in piracy threat area. The Owners had planned
to provide those items at Durban based on the Charterers’ previous guidance and
Charterers demonstrated that “everything is under control” on 3 June 2014.
However, during this course of things, Charterers did not provide the bunkers, even
had no intention of passing Durban. Therefore, the Owners’ actions did not cause
any damage and it was the misrepresentations and fraud by the Charterers that
directed the Vessel to another discharge place, leading to the losses.
31. We are concerned to inquire how far in the law of tort, when causal connection
between a wrongful act and harm is an element in responsibility. The decisions of
the courts have been controlled by the principle that this connection is negative if
37 Ibid, 26 38 The “Aliza Glacial” (2002) 2 Lloyd’s Rep. 421. 39 Leyland Shipping v. Norwich Union (1918) AC 350 (HL).
14
the factors required, in addition to the wrongful act, for the production of the harm
include a voluntary human action or an abnormal occurrence.40 The Charterers’
tort of fraud, a voluntary human action, was more serious and proximate than the
claimed incompetence of the Master.
D. The Charterers were in breach of the Charterparty
32. The Charterers were in breach of the Charterparty because: (I) The Charterers
directed the Vessel to proceed to Angola in breach of the Charterparty; (II) The
Charterers directed the Vessel to proceed to an alternative discharge place without
the authorization of the Owners and in breach of the Charterparty; (III) A quantity
of Cargo was discharged from the Vessel at an alternative discharge place without
the authorization of the Owners and in breach of the Charterparty.
I. The Charterers directed the Vessel to proceed to unsafe places in breach
of the Charterparty
33. Under clause 4(a) of the Shelltime 4, it stipulates issues about period, trading limits
and safe places, providing that in any part of the world always to exclude Angola
and other places.41 Under Article 4(c) of Shelltime 4, the Charterers shall use due
diligence to ensure that the vessel is only employed between and at safe places
where she can safely lie always afloat.42 Additionally, the Charterers shall direct
the Vessel to a safe area for the conduct of such ship to ship operations but always
subject to the Master’s approval.43 The Charterers shall obtain any and all relevant
40 H. L. A. Hart & Tony Honore.Causation in the Law (Oxford University Press; 2nd revised edition). 41 Shelltime 4, clause 4(b). 42 Ibid, clause 4(c) 43 BIMCO STS Clause of the LDTP Rider Clauses, clause (b); Moot problem, 10.
15
permission from proper authorities.44
34. The Owners argue that the Charterparty includes a safe port warranty by reason of
the express terms and the terms expressly exclude the areas of high pirate risks,
which is an implicit reference to avoiding the risk of piracy and indicates the
Owners’ unwillingness to bear that risk. The Charterparty is no warrant for
construing clause 4 as an agreement by the Owners that the Vessel can be instructed
by the Charterers to proceed to any port or place other than the excluded areas.45
The alternative discharge place known as Area 1 is near Angola and of high pirate
risk. Both the OPL Luanda and Area 1 are not safe places which are excluded by
Charterparty. Therefore, the Charterers have breached the contract.
35. The Charterers directed the Vessel to proceed to Area 1 without the authorization
of the Owners and in breach of the Charterparty. Although the Master agreed to go
there and, to some extent, the Master could act on behalf of the Owners. However,
the Charterers should still obtain the Owners’ authorities.
II. A quantity of Cargo was discharged without the authorization of the
Owners and in breach of the Charterparty
36. Under BIMCO (c), the Charterers shall obtain any and all relevant permissions
from proper authorities to perform ship to ship operations.46
37. On 4 July, the Master informed the Charterers and their agent that the Vessel was
ready for discharge of cargo and tendered notice of readiness. However,
44 BIMCO STS Clause of the LDTP Rider Clauses, clause (c); Moot problem, 10, 11. 45 Taokas Navigation SA v Komrowski Bulk Shipping KG (GmbH & Co), Kent Line International Ltd., Solym
Carriers Ltd. [2012] EWHC 1888 (Comm). 46 BIMCO STS Clause of the LDTP Rider Clauses, clause (c); Moot Problem, page 10, 11.
16
ANTELOPE was not there and the Charterers sent the Owners an off-hire notice
confirming that it would not pay the second off-hire. 47 Area 1 is an area with high
risk of piracy. Rader also showed what looks like 2 small fishing boats 5 miles to
west.48 These 2 small boats were fairly like pirate ships. If the Charterers would
like to perform the ship to ship operations, they should obtain both the authorities
from the Master and the Owners. But they did not have the Owners’ authorities.
E. The Owners was not liable for the loss of cargo
38. The Owners was not liable for the loss of cargo because: (I) the Owners shall not
be liable for the loss of cargo under the Charterparty; (II) the Owners shall not be
liable for the loss of cargo under Hague-Visby Rules.
I. The Owners shall not be liable for the loss of cargo under the Charterparty
39. The charterers directed the Vessel to proceed to Area 1 for discharging the cargo.
During the process of ship to ship operations, the Vessel was attacked by the pirates.
According to the Charterparty, all such ship to ship transfers shall be at the
Charterers’ risk, cost, expense and time. 49 And the Charterers should also
indemnify the Owners including the loss of cargo. 50 Thus, the Owners shall not
be liable for the loss of cargo because it was at the Charterers’ risk instead of the
Owners.
II. The Owners shall not be liable for cargo loss under Hague-Visby Rules
40. The Owners shall not be liable for the loss of cargo because: (a) the Owners shall
47 Moot Problem, 41. 48 Ibid, 40. 49 BIMCO STS Clause of the LDTP Rider Clauses, clause (a); Moot Problem, page 40. 50 BIMCO STS Clause of the LDTP Rider Clauses, clause (f); Moot Problem, page 41.
17
not be liable for the loss due to breach of Article III, Rule 2 of Hague-Visby Rules;
(b) the Owners may rely on the excepted perils under Article IV, Rule2.
a. The Owners shall not be liable for the loss due to breach of Article III, Rule
2 of Hague-Visby Rules
41. Under Clause 27 and Clause 38 of Shelltime 4, the Hague-Visby Rules shall be
applied to the claim of loss of the cargo. And the Owners discharged their
obligation of properly and carefully carry, keep and care for the cargo under Article
III, Rule 2.
(1) Hague-Visby Rules should be applied to the claim of loss of the cargo
42. Clause 27(c)(ii)51 and Clause 3852 of Shelltime 4 provides that any claim arising
out of any loss of or damage to or in connection with cargo shall be subject to the
Hague-Visby Rules. Moreover, if any term of this bill of lading is repugnant to the
Hague-Visby Rules, as applicable, such term shall be void to that extent but no
further. Thus, Hague-Visby Rules should be applied here.
(2) The Owners discharged their obligation of properly and carefully carry,
keep and care for the cargo under Article III, Rule 2
43. The Owners were fit for services under Hague-Visby Rules.53 And under Article
III, rule 2 of the Hague-Visby Rules, the carrier shall properly and carefully load,
handle, stow, keep, care for and discharge the goods carried.54 “Properly” adds to
the requirement of care a requirement that the carrier's function be performed in
51 Shelltime 4, clause 27(c) (ii). 52 Shelltime 4, clause 28. 53 Ibid. 54 Hague-Visby Rules a (III)(2)
18
accordance with a sound system, having regard to the nature of the cargo55 while
“carefully” means that care must have been taken when the Owners maintain a
sound system throughout the voyage56. The requirement “properly and carefully
carry and discharge the goods carried” means that the Owners must perform the
duties of carriage and discharge imposed upon them by the contract in a proper and
careful manner.57
44. On the present facts, the Vessel loaded the cargo of 30 mt Jet A1 and 72mt Gasoil
at Singapore on June 8.58 After that, the cargo was kept in a proper and careful
management. And there was no loss of the cargo until the vessel was attacked by
the pirates.59
b. The Owners may rely on the excepted perils under Article IV, Rule2
45. Under Article III, Rule 2, the carrier’s obligations of proper and careful carriage of
goods are subject to the Article IV, rule 2 of the Hague-Visby Rules.60 The Owners
remain under an obligation to “properly and carefully load, handle, stow, carry,
keep, care for and discharge the goods carried”. But the Owners is not liable if the
“loss or damage” to the goods arises or results from one of the matters identified
in paragraph (a)-(q) of Article IV, Rule 2. Where the Charterers allege a breach of
Article III, Rule 2 and the Owners rely on one of the identified matters in paragraph
(a)-(q) as a defense, the liability of the Owners will turn on whether the loss or
55 Albacora v Westcott and Laurance Line [1966] 2 Lloyd’s Rep 53, 64; CV Sheepvartondereneming Ankergracht
v. Stemcor (Australasia) Ptd Ltd [2007] FCAFC 77, 29. 56 Atlantic Consolidated Foods Ltd. v. The Doroty, 1978 CarswellNat 78 57 Falconbridge Nickel Mines Ltd. v. Chimo Shipping Ltd.1969 CarswellNat 362; G.H. Renton & Co. v. Palmyra
Trading Corp. of Panama [1957] A.C. 149 58 Moot Problem, 29. 59 Ibid, 42. 60 Hague-Visby Rules a (IV)(2).
19
damage arose or resulted from the breach or from the identified matters.61
(1) Piracy is a kind of perils, dangers of the sea
46. Article IV Rule 2(c) of the HVR exempts carriers from liability for loss or damage
arising from ‘perils, dangers and accidents of the sea or other navigable waters’.62
There was no criterion which alone would identify whether what happened as
properly to be called a peril of the sea; all of the facts and circumstances concerning
the voyage must be examined.63 But a peril of the seas can only be unforeseeable
events that cannot be avoided by the reasonable person64, thus no peril is one
"which could be foreseen as one of the necessary incidents of the adventure65". To
some extent, piracy actions are unexpected and fortuitous. The Owner was unable
to foresee the attack of the pirates. And it is not a kind of ordinary perils. Not every
vessel will be attacked by the pirates. Thus, loss to the goods which have been held
to be caused by perils of the sea include piracy. Many cases were in support of this
conclusion.66
(2) Piracy is an act of war
47. Article IV Rule 2(e) of the HVR exempts carriers from liability for loss or damage
arising from acts of war.67 These is an academic view that if piracy becomes “more
localized” in certain “hot spots”, typical war clauses could apply to it.68 Also, in
61 Great China Metal Industries Co Ltd v Malaysian International Shipping Corporation Berhad 196 CLR 161, 22 62 Paul Todd, Maritime Fraud and Piracy (Informa Publishing, 2nd ed, 2010) 1.119. 63 Great China Metal Industries Co Ltd v Malaysian International Shipping Corporation Berhad 196 CLR 161, 2 64 Thames and Mersey Insurance Co Ltd v Hamilton Fraser & Co (1887) LR 12 App Cas 484(H L); The Tila
Gorthon, [1985] 1 Lloyd’s Rep. 552. 65 Thomas Wilson Sons & Co v Owners of Cargo of the Xantho (The Xantho) (1887) LR 12 App Cas 503 (HL);
per Lord Herschell at [509] 66 Pickering v Barkley (1648) Style 132 [82 ER 587]; Great China Metal Industries Co Ltd v Malaysian
International Shipping Corporation Berhad 196 CLR 161; Thomas Wilson Sons & Co v Owners of Cargo of the
Xantho (The Xantho) (1887) LR 12 App Cas 503 (HL); 67 Hague-Visby Rules, a (IV)(2e). 68 Paul Todd, Maritime Fraud and Piracy (Informa Publishing, 2nd ed, 2010) 1.166.
20
some war risk clauses69, piracy is regarded as a kind of war risks.70 Area 1 was a
High Risk Area. Thus, the attack of the pirates can be identified as an ‘act of war’.
(3) Piracy is any other cause arising without the actual fault and privity of the
Owners
48. Acticle IV, Rule 2(q) of the HVR provides that carriers shall not be liable for
damages resulting from any other cause arising without the actual fault and privity
of the Owners.71
49. It is impossible to identify all exceptions. The phrase of any other cause is to be
interpreted to include all cases where these is no fault or privity.72 Privates acts
certain fall within the scope of the meaning. On the present facts, piracy was
unforeseeable and extraordinary. The Owners, including their servants, were
unable to foresee it and not contributed to the loss of cargo. Also, they discharged
their obligation of protecting the safety of the Vessel, crew and cargo, which also
in compliance with BMP4. The Owners had no fault or privity.
PART THREE: TORT OF FRAUD
50. If the Charterers intended the representations to be acted upon and that they knew
them to be untrue, the representations made by the Charterers can be regarded as
fraud.73 The rule in regard to allegations of fraud is that the Owners must allege
that (A) the representations were untrue; (B) the Charterers knew that they were
69 Institute Wars and Strikes Clauses 1/10/83; “BIMCO Standard War Risk Clause for Time Charters, 1993 Code
Name: ‘CONWARTIME 1993’ 70 Atlasnavios Navegacao Lda (formerly Bnavios Navegacao Lda) v Navigators Insurance Co Ltd 2014 WL
6862527; Pacific Basin IHX Ltd v Bulkhandling Handymax AS 2011 WL 5105123 71 Hague-Visby Rules, a (IV)(2q) 72 Potts v Union SS Co of New Zealand [1946] NZLR 276 73 Davy v. Garrett (1878), 7 Chancery Division 473, Thesiger, L.J., at 489; Wallingford v. Mutual Society (1880), 5
A.C. 697, per Lord Hatherley, at 701; Paterson et al. v. Livingstone, [1931] 1 D.L.R. 386, at 387.
21
untrue and (C) the Charterers had the intention that the statement be relied upon.74
A. The Representations were untrue
51. On 27 May, the Owners required about 1500 mt FO for the voyage. 75 The
Charterers only gave 950mt IFO 380cst but promised that there were alternative
bunker supplies available passing Durban or Cape Town on 3 July.76 However, on
28 June, they changed bunker supply and discharge coordinated in Area 1 instead
of Durban or Cape Town. 77 In the end, there were no bunker supply neither in
Durban or Cape Town nor in Area 1. After leaving Singapore, the Vessel has never
been provided with bunkers.
B. The Charterers knew that those representations were untrue
52. The voyage route was regulated by the Charterers and they knew where the Vessel
would go before the Charterparty had been signed. Thus, the Charterers had a clear
conception on how much bunker would be required during the whole voyage. And
they also knew whether they had the financial ability of affording it. Otherwise,
they would not agree to sign the Charterparty. The Charterers have the obligation
to provide bunkers to the Owners under the Charterparty. Of necessity, the ability
of the Charterers to provide the ship with the correct quantity of bunkers requires
the co-operation of the owners and their offices.78 On 27 May, the Charterers did
not deny the quantity ordered by the Owners. Additionally, when the Charterers
gave these instructions to the Owners, they did not explain the reasons why they
74 Savage v. Greco Donair Francise Ltd. 1981 CarswellNB 299, 3. 75 Moot Problem, 20. 76 Ibid, 25, 26. 77 Moot Problem, 34. 78 Terence Coghlin, Andrew Baker, et al, Time Charters (7th ed, informa law, 2014), page 249.
22
had to change discharge coordinate and bunker supply. If there actually exists some
problems or factual information, they shall tell the Owners what happened.
53. Further, the Owners were a new comer in this field and they have had a tough time
with their tanker experiment.79 They did not have much relevant experience during
the whole voyage. And whether Area 1 is an area with high risk of piracy is still in
dispute. Thus, the Master was not aware that Area 1 may be dangerous and they
followed the Charterers’ instructions to go to the Area 1.
C. The Charterers had the intention that the representations be relied upon
54. Under Shelltime 4, the Charterers had the intention that the Owners would rely on
those representations because under Shelltime 4, the Charterers had the right to
instruct Owners and the Owners shall be subject to the instructions from the
Charterers.
55. Additionally, ASA2 is the Charterers’ agent. To establish that, some intricate
analysis should be attached to the facts and the nature of the relationship between
the parties. 80 It is the effect in law of the way the parties have conducted
themselves that must be investigated in order to determine whether the agency
relationship has come into existent.81
56. The Owners argue that William Edward Anya, the STS coordinator of Atlantic STS
Agency Ltd, is the agent of the Charterers. Atlantic Services Agency first appeared
on 8 June when the Master sent a copy of an email to it.82 On 28 June, the
79 Moot Problem, 44. 80 Chender v. Lewaskewicz, 2007 CarswellNS 497, 16. 81 G. E. Dal Pont, The law of Agency (Butterworth’s, 7th ed, 1996), 13. 82 Moot Problem, 29.
23
Charterers sent a copy to Mr. Anya whose email address was
“[email protected]”. 83 This email was about discharge coordinate, next
bunker supply and information of next voyage. After few minutes, Mr. Anya sent
an email to the Master as an STS coordinator and he emphasized that the charterers
had passed control of the owner’s vessel to them for local instruction. Its address
was “Captain. [email protected]”.84 From 28 June to 4 July, Mr.
Anya kept in contact with the Master and there was no instruction from the
Charterers. Until 4 July, the Charterers sent an email to the Master which required
him to continue to liaise with the STS coordinator. 85 During that time, the
Charterers did not raise any objection and there was no STS coordinator else
contacted the Master. If Mr. Anya was not the agent of the charterers, it is certain
that the Charterers would raise objections or inform the Master that the agent was
another person. Special attention should also be paid to a problem that why ASA2
knew all the details about the voyage. ASA2 not only answered the question raised
by the Master about where Area 1 was, but also told the Master that there would
be bunker supply and the cargo should be discharged there. If ASA2 was not the
agent of the Charterers, he would not have known all these details. Thus, although
the two email addresses are different, they both belong to Mr. Anya. And the
Charterers implied that Mr. Anya is the agent of them because the Charterers knew
and accepted him.
83 Ibid, 33. 84 Ibid, 35 85 Ibid, 40.
24
D. The Owners actually relied on the representations made by the
Charterers and their agents
57. On the present facts, both the Owners and WTI believed that the Vessel would pass
Durban or Cape Town. When there were some problems with the freighting parts
resulting in the failure of providing items in Singapore, WTI and the Owners
agreed to provide them in Durban. The Vessel always travelled towards Durban or
Cape Town. After the Charterers’ changing discharge coordinate in Area 1, the
Owners immediately asked the Charterers the coordinates of Area 1.86 On account
of the Charterers’ only promising supplying 300mt of bunkers, the Owners warned
that 300mt were only enough for discharge and passage to Bonny and required
more bunkers at Bonny.87
E. The Charterers’ fraud caused damage to the Owners
58. Each of the fraudulent states of mind behind the misrepresentation and the damage
consequent upon the fraud has been described as the “gist” of the action. Absent a
fraudulent state of mind, there is no deceit; absent damage, these is no cause of
action at common law. 88 On account of the Charterers’ fraudulent instructions
which increasing the dangers of attacking by the pirates, the Owners suffered
material damages. Also, as the bailee, part of the cargo was lost and there were five
people injured.89
86 Ibid 34. 87 Ibid 38. 88 Peter MacDonald Eggers, Deceit: The Lie of the Law (Informa Law, 2009), 1.12 89 Moot Problem, 42.
25
PRAYER FOR RELEF
For reasons set out above, the Claimant requests the Tribunal to:
I. Declare that this Tribunal has the jurisdiction to hear the merits of the Claimant’s
claim;
II. Find that the Respondent is reliable for the breach of contract, the HVR, and the
tort of fraud as argued above; and
III. Award damages as particularized in the phase of this arbitration relating to
quantification of damages, the hire due to the Claimant and interest on the amounts
claimed.