THE 14TH INTERNATIONAL MARITIME LAW ARBITRATION MOOT COMPETITON

2013

MEMORANDUM FOR THE CLAIMANT

SINGAPORE MANAGEMENT UNIVERSITY TEAM NO. 9

TEAM MEMBERS: Benjamin MUI

Jeremiah Jason CUNNINGHAM Joey PANG

Kim Beverly Dy SAMSON

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Table of Contents

List of Abbreviations ....................................................................................................................................... v  

Index of Authorities ........................................................................................................................................ vi  

Statement of Facts ............................................................................................................................................ 1  

Summary of Pleadings ..................................................................................................................................... 3  

Pleadings ........................................................................................................................................................... 4  

I. THE CLAIMANT HAS A CONTRACTUAL RIGHT TO SUE THE RESPONDENT UNDER

THE CONTRACT FOR CARRIAGE ....................................................................................................... 4  

A. The Claimant is the “lawful holder of the Bills of Lading” ................................................................. 4  

1. The Claimant is the holder of the bills of lading ............................................................................... 5  

2. The Claimant is the holder of the bills of lading in good faith .......................................................... 6  

B. The Respondent is estopped from denying that the claimant can bring claims against the respondent

under the contract of carriage in the bills of lading ................................................................................... 7  

II. THE RESPONDENT WAS WRONG IN DISCHARGING THE CARGO ...................................... 9  

A. The Respondent’s discharge of the cargo was in breach of the contract of carriage ............................ 9  

1. The Respondent breached the contract of carriage when it discharged the cargo other than against

the presentation of the bills of lading ..................................................................................................... 9  

2. The Respondent’s discharge of the cargo other than against the bills of lading was improper under

the Hague Visby Rules ......................................................................................................................... 10  

3. The Respondent breached the contract of carriage when it discharged the cargo in Rotterdam ..... 11  

B. The Respondent’s discharge of the cargo is an act of conversion ...................................................... 11  

1. The Claimant possesses title to the cargo ........................................................................................ 11  

2. The Respondent’s unauthorised discharge of cargo is an act of conversion ................................... 12  

III. THE RESPONDENT WAS WRONG TO SAIL TO ROTTERDAM ............................................ 13  

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A. The Respondent deviated by sailing to rotterdam and breached the contract of carriage .................. 13  

1. The Respondent deviated when it sailed to Rotterdam .................................................................... 13  

2. The Respondent’s deviation will not be saved by the deviation clause ........................................... 15  

3. The Respondent’s deviation is not justified in common law ........................................................... 16  

4. The Respondent’s deviation is not justified under the Hague Visby rules ...................................... 16  

B. The Respondent repudiated the contract of carriage by deviation to rotterdam ................................. 17  

IV. THE RESPONDENT IS RESPONSIBLE FOR CARGO DAMAGE UNDER THE HAGUE

VISBY RULES ........................................................................................................................................... 18  

A. The Respondent failed to exercise due diligence to ensure its holds were fit and safe for carriage of

the Claimant’s goods ................................................................................................................................ 18  

B. In any case, the Respondent is liable for failing to properly and carefully carry, keep, and care for

the cargo ................................................................................................................................................... 20  

1. Article IV Rule 2(e) is not made out ................................................................................................ 21  

2. Article IV Rule 2(f) is made out but Article 3 Rule 2 has been breached in any case .................... 21  

3. Article IV Rule 2(q) is not made out ............................................................................................... 22  

V. DAMAGES DUE TO THE CLAIMANT ........................................................................................... 22  

A. Damages for carrier’s liability for failing to carefully and properly handle the cargo and for failing to

deliver cargo to the claimants .................................................................................................................. 22  

1. The Claimant is entitled to reliance loss for the cargo in light of unascertainable expectation loss22  

2. The Claimant’s right to mitigate prevented by Twilight’s wrongful discharge ............................... 23  

B. Further or in the alternative, mitigated damages for either tort of conversion or breach of contract . 24  

1. The Claimant is entitled to mitigated damages for tort of conversion ............................................. 24  

2. The Claimant is entitled to mitigated damages for breach of contract ............................................ 24  

C. Additional damages ............................................................................................................................. 25  

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VI. PRAYER FOR RELIEF ..................................................................................................................... 25  

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List of Abbreviations

Contract In Freight CIF

Good Merchantable Quality GMQ

Carriage of Goods by Sea Act 1992 COGSA 1992

Carriage of Goods by Sea Act 1971 COGSA 1971

Per metric Tonne per mt

United States Dollar USD

Hague Visby Rules HVR

Federation of Oils, Seeds and Fats Association FOSFA

Sale of Goods Act 1979 SOGA 1979

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Index of Authorities

Cases

Aegean Sea Traders Corp v Repsol Petroleo S.A (The Aegean Sea) ......................................................... 4, 5, 7

Aegean Sea Traders Corp v Repsol Petroleo S.A (The Aegean Sea), [1998] 2 Lloyd’s Rep 39 ....................... 4

Albacora v Westcott and Laurance Line (Albacora) [1966] 2 Lloyd’s Rep 53 ............................................... 21

Anglia Television Ltd v Reed [1972] 1QB 60 .................................................................................................. 23

Astro Valiente Compania Naviera SA v Government of Pakistan Ministry of Food and Agriculture, The

Emmanuel Colocotronis (No 2) [1982] 1 Lloyd’s Rep 286 ............................................................................. 15

Barclays Bank Ltd. v. Commissioners of Customs and Excise [1963] 1 Lloyd’s Rep. 81 (Barclays) ............. 10

Carl Zeiss Stiftung v Rayner & Keeler Ltd [1967] 1 AC 853 ............................................................................ 8

Carlberg v Wemyss Coal Co [1915] SC 616 ................................................................................................... 10

Constantine SS Co v Imperial Smelting Corp [1942] AC 154 ......................................................................... 21

Cunard Steamship Co Ltd v Buerger [1926] All ER Rep 103 ................................................................... 14, 21

Davies v Oswell (1837) 7 C. 7 ......................................................................................................................... 24

Desert Sun Loan v. Hill [1996] 2 All E.R. 847 .................................................................................................. 9

Foreman & Ellams Ltd v Federal S.N. Co Ltd [1928] 2 KB 424 .................................................................... 20

Gatoil International v Tradax Petroleum .......................................................................................................... 6

Glyn Mills v. East and West India Dock Co (1882) 7 App. Cas. 591 .............................................................. 17

Golden Strait Corp v Nippon Yusen Kubishika Kaisha (The Golden Victory) [2007] UKHL 12 ................... 23

Hain SS Co v Tate & Lyle (1936) 41 Com Cas 350 ......................................................................................... 18

Ireland v Livingstone [1872] LR 5 HL 395 ....................................................................................................... 6

Johnson v Agnew [1980] AC 367 .................................................................................................................... 22

Johnson v Taylor Bros & Co Ltd [1920] AC 144 .............................................................................................. 6

Kawasaki Kisen Kaisha v Bantham Steamship Co [1939] 2 KB 544 ........................................................ 21, 22

Kenya Railways v Antares Co Pte Ltd (The Antares) [1987] 1 Lloyd's Rep. 424 ........................................... 18

Kirin Amegen Inc v Boehringer Mannheim Gmbh [1997] Fleet Reports 289 [U.K.] ........................................ 8

Kish v Taylor [1912] AC 604........................................................................................................................... 16

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Kuwait Airways Corp v IAC (Kuwait) [2002] UKHL 19; [2002] 2 AC 883 ................................................... 13

Kuwait Petroleum Corpn v I & D Oil Carriers Ltd (The Houda) [1994] 2 Lloyd’s Rep 541 ......................... 10

Kwei Tek Chao v British Traders and Shippers Ltd [1954] 2 QB 459 ............................................................ 12

Landauer & Co v Craven & Speeding Bros [1912] 2 KB 94 .......................................................................... 23

Leduc v Ward [1888] QBD 475 ....................................................................................................................... 16

Maxine Footwear Co Ltd v Canadian Government Merchant Marine [1959] AC 589 .................................. 18

MB Pyramid Sound NV v Briese Schiffahrts GmbH and Co (The Ines) [1995] 2 Lloyd’s Rep 144 ............... 10

McRae v Commonwealth Disposals Commission [1951] 84 CLR 377 ........................................................... 23

Miramar Maritime Corporation v Holborn Oil Trading Ltd, The Miramar [1984] AC 676 .......................... 15

Motis Exports Ltd v Dampskibsselskabet AF 1912 Aktieselskab And Aktieselskabet Dampskibsselskabet

svendborg [1999] 1 Lloyd’s Rep 837 .............................................................................................................. 13

Notara v Henderson [1870] LR 5 QB 346 ....................................................................................................... 16

OJSC Oil Company Yugraneft v Abramovich & Ors (Rev 1,) [2008] EWHC 2613 (Comm) ........................... 8

Petrofina SA v AOT Ltd [1992] QB 571 ............................................................................................................ 6

Photo Production Ltd v Securicor Transport Ltd [1980] AC 827 ................................................................... 18

Plainar Ltd v Waters Trading Co Ltd [1945] 72 CLR 304 ............................................................................... 6

Porter v Secretary of State for Transport [1996] 3 All E.R. 693 ...................................................................... 8

Porteus v Watney (1878) 3 QBD 534 .............................................................................................................. 15

Primetrade AG v Ythan Ltd (The Ythan) [2006] 1 All E.R. 367 ........................................................................ 4

Primetrade AG v Ythan Ltd [2005] EWHC 2399 Comm; [2006] 1 All E.R. 367 ......................................... 5, 6

R v Edwards and Stacey [1877] 13 Cox CC 384 ............................................................................................. 12

Re Sadler, ex parte Davies [1881] 19 ChD 86 ................................................................................................. 10

Rodocanachi v Milburn [1886] 18 QBD 67 CA .............................................................................................. 22

Russell v Niemann [1864] 17 CB (NS) 163 ..................................................................................................... 21

Scaramanga v Stamp [1880] 5 CPD 295 ......................................................................................................... 16

Schmoll Fils & Co Inc v Scriven Bros & Co [1924] 19 Lloyd’s Law Rep 118 ............................................... 12

Shipping Corp of India Ltd v Gamelan Chemical Co (Australasia) Pty Ltd [1980] 147 CLR 142 ................. 20

viii

Skibsaktieselskapet Thor v Tyrer [1929] 35 L.IL.R. 163 ................................................................................. 10

Smyth & Co v Bailey Sons & Co [1940] 3 All E.R. 60 (Ross T ......................................................................... 6

Stagline v Foscolo, Mango & Co [1932] AC 328 ........................................................................................... 17

Suisse Atlantique Societe d'Armament SA v NV Rotterdamsche Kolen Centrale [1967] 1 AC 361 ................ 18

Tancil v Seaton [1877] 28 Gratt 601, 26 Am Rep 380 ................................................................................... 12

The Amestelslot [1963] 2 Lloyd’s Rep 223 ...................................................................................................... 19

The Antigoni [1991] 1 Lloyd’s Rep 209 .......................................................................................................... 19

The Hellenic Dolphin [1978] 2 Lloyd’s Rep 336 ............................................................................................ 19

The MSC Amsterdam. Trafigura Beheer BV v Mediterranean Shipping Co SA [2007] EWHC 944 (Comm);

[2007] 2 All ER (Comm) 149 .......................................................................................................................... 11

The Sennar (No. 2) [1985] 1 WLR 490 ............................................................................................................. 8

Thomas & Co Ltd v Portsea Steamship Co Ltd [1912] AC 1 .......................................................................... 15

Wallems v Muler [1927] 2 KB 99 .................................................................................................................... 16

Statutes

Bills of Exchange Act 1882 (c 61) s 90 ............................................................................................................. 5

Carriage of Goods by Sea Act 1971 (c 59) (UK) Schedule Article III Rule 8 ................................................ 18

Carriage of Goods by Sea Act 1971 (c 59) (UK) Schedule Article Rule 1(c) ................................................. 15

Carriage of Goods by Sea Act 1992 (c 50) (UK) s 21(1)(a) .............................................................................. 3

Sales of Goods Act 1979 (c 54) (UK) s61(3) .................................................................................................... 5

Rules

Hague Visby Rules Article III Rule 1 .............................................................................................................. 20

Hague Visby Rule Article III Rule 2 ............................................................................................................... 20

Hague Visby Rules Article IV Rule 1 .............................................................................................................. 19

Hague Visby Rules Article IV Rule 2 .............................................................................................................. 19

Hague Visby Rules Article IV Rule 2(e) ......................................................................................................... 22

Hague Visby Rules Article IV Rule 2(f) .......................................................................................................... 22

Hague Visby Rules Article IV Rule 2(q) ......................................................................................................... 22

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Treatises

David Howell, “Issue Estoppel Arising out of Foreign Interlocutory Court Proceedings in International

Arbitration”, Journal of International Arbitration, Vol 20 Issue 2 .................................................................... 8

Other Authorities

Carver on Bills of Lading (Sweet & Maxwell, 3rd ed, 2012) ............................................................................. 7

Edwin Peel, Treitel on the Law of Contract (Sweet & Maxwell, 13th Edition, 2010) a ................................. 23

Halsbury's Laws of England, Carriage and Carriers Vol 7 (Butterworths, 5th Ed, 2008) .............................. 15

John Richardson, A Guide to the Hague and Hague Visby Rules, Llyod’s of London Press, 1989 ................ 21

John Wilson, Carriage of Goods by Sea (Pearson, 7th Edition, 2010) ........................................................... 14

ATS Shipping and Transportation Trading, Ship Operation Manual, 1 March 2005 ..................................... 20

 

1

Statement of Facts

1. This dispute arises from Twilight Carriers’ (“ the Respondent”) failure to deliver the contracted for cargo

to the consignee Aardvark Limited (“the Claimant”), in breach of a valid contract of carriage between

the two parties as evidenced by the bills of lading for the cargo concerned.

2. The cargo concerned is 4,000 metric tonnes (“mt”) of Palm Fatty Acid Distillate (“PFAD”) bought by

the Claimants from Beatles Oils & Fat Ltd (“the Seller”). On 23 September 2008,1 a sale contract on CIF

terms that provided for the delivery of the cargo to Merseyside was concluded between the Claimant and

the Seller. Under the CIF contract, the Claimant was to pay USD747.50 per metric ton (per mt)2 for the

4,000 mt of PFAD.

3. The cargo was loaded onto the Respondent’s vessel at the port of Pasir Gudang, Malaysia and the bills of

lading for the cargo, three in total, were issued by the Respondent on 25 October 2008. The

Respondent’s vessel was chartered by the Sellers under a voyage charter party, concluded on 12

September 2008, stipulating a voyage from Pasir Gudang, Malaysia to Merseyside, London, UK

(“Merseyside”). The only safe port nominated for discharge of cargo in the charter party was

Merseyside.

4. On the bills of lading, Vegetable Oils Sdn Bhd (“the Shipper”) was noted as the shipper of the cargo and

the only port of discharge recorded was Merseyside.3 The bills were clean and negotiable, and contained

the terms of the contract of carriage between the Shipper and the Respondent for the cargo. Among the

terms is a clause that incorporated the charter party between the Seller and the Respondent.

1 Compromis at 13 2 Compromis at 13 3 Compromis at 16, 18 and 20

2

5. En route to Merseyside, the Respondent’s vessel (“the vessel”) was hijacked by pirates near the Gulf of

Aden on 15 November 2008 and was held captive until 13 February 2009.4 During this period, the

vessel’s Master and his crew were held hostage on the vessel but the crew was allowed to perform basic

maintenance of the vessel’s functions.5 As a result of this piracy incident, the cargo was deemed to be of

non-good merchantable quality (“GMQ”) by Product Authentication International Ltd (“PAI”),6 the

Certification Body for FEMAS, and the trade assurance scheme under which the Claimant was

regulated.7

6. After its release, the vessel called at Faijurah, UAE on 21 February 2009;8 while there, a new crew

boarded the vessel and the previous crew disembarked9 and debriefed. Separately, surveys were

conducted on the cargo, which subsequently revealed that part of the cargo was contaminated by

arsenic.10 The vessel then set sail for Merseyside. However, on 16 March 2009, the Seller, being also the

charterer, announced that the vessel would no longer sail to Merseyside.11 Instead, the vessel sailed to

and called at Rotterdam, Netherlands.

7. On 20 March 2009, the Claimant put the Respondent on notice that the Claimant was the lawful holder

of the bills of lading for the cargo and warned the Respondent against discharging the cargo in

Rotterdam.12 On 20 to 22 March 2009, despite the warning, the vessel discharged the cargo into storage

at Rotterdam. On 23 March 2009, the Seller under a Dutch court order arrested the cargo in storage. On

the same day, the Claimant also procured a Dutch court order and arrested the vessel. Subsequently on 3

April 2009, the vessel was released to the Respondent after Paradox Bank issued a guarantee of US$1.4

million as security.13

4 Compromis at 41 5 Compromis at 42 6 Compromis at 25 7 Compromis at 75 8 Compromis at 41 9 Compromis at 41 10 Compromis at 48 and 43 11 Compromis at 28 12 Compromis at 36 13 Compromis at 44

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8. On 23 May 2009, the Seller applied to the Dutch court for an order of sale for the arrested cargo and the

order was finally granted on 21 August 2009 after the failure of the Claimant’s appeal against the order.

On 25 August 2009, the cargo were sold for about US$1.7 million and the proceeds of the sale are

currently held in the Dutch court pending the outcome of this arbitration between the Claimant and

Respondent.14

Summary of Pleadings

9. The Claimant is the lawful holder of the bills of lading and is entitled to sue the Respondent for its

breach of the contract of carriage embodied in the terms of a bill of lading.

10. The Respondent breached the contract of carriage by discharging the cargo other than as against the bill

of lading. The Respondent has also breached its duty as ship owner under the Article III rule 2 of the

Hague Visby rules (“HVR”) for the improper discharge. The Respondent is also liable for the tort of

conversion as a result of its improper discharge of the Claimant’s cargo to Beatles. The Claimant has

title to the cargo as the full set of shipping documents was tendered and the full purchase price paid.

11. Further, the Respondent is in repudiatory breach of the contract of carriage for its deviation to

Rotterdam. Having repudiated the contract, the Respondent cannot rely on the charter party exemption

clauses, the common law deviation exceptions, or the HVR exceptions.

12. Finally, the Respondent breached its duties under HVR. Under Article III rule 1, the Respondent needs

to exercise due diligence to ensure its holds are fit and safe for carriage of cargo but failed to do so and

contaminated the cargo. In the alternative, the Respondent breached Article III rule 2 when it did not

exercise due care to preserve the cargo and allowed pirates to contaminate the cargo. Further the

Respondent cannot rely on the Article IV rule 2 exceptions.

14 Compromis at 54, 68 and 73

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Pleadings

I. THE CLAIMANT HAS A CONTRACTUAL RIGHT TO SUE THE RESPONDENT

UNDER THE CONTRACT FOR CARRIAGE

A. THE CLAIMANT IS THE “LAWFUL HOLDER OF THE BILLS OF LADING”

13. Under clause 1 of the bills of lading, the contract of carriage shall incorporate “all terms and conditions,

liberties and exceptions to the Charter Party […] including the Law and Arbitration clause”.15 As the

charter party between the Respondent and Beatles stipulated English law as the governing law of the

charter party,16 this means that English law also governs the contract of carriage concerned.

14. Under English law, specifically s 1(a) of the Carriage of Goods by Sea Act 1992 (“COGSA 1992”),17

COGSA 1992 applies to all bills of lading. Thus in this case, COGSA 1992 will apply to the bills of

lading concerned in this case. Specifically, under s 2(1)(a), “a person who becomes the lawful holder of

a bill of lading shall [...] have transferred to and vested in him all rights of suit under the contract of

carriage as if he had been a party to that contract.” The claimant would therefore be entitled to sue on the

contract of carriage as evidenced by the bills of lading on showing that it was the lawful holder of the

bills of lading concerned.

15. Determination of whether a person is the lawful holder of a bill of lading is stipulated in s 5 of COGSA

1992.18 Specifically, under s 5(2) of COGSA 1992,19 a person will be the lawful holder of a bill of lading

if it is the holder of the bill of lading in good faith. On the facts, it is submitted that the Claimant is the

lawful holder of the bills of lading.

15 Compromis at 15, 17 and 19 16 Compromis at 4 17 Carriage of Goods by Sea Act 1992 (c 50) (UK) 18 Aegean Sea Traders Corp v Repsol Petroleo S.A (The Aegean Sea), [1998] 2 Lloyd’s Rep 39 19 Primetrade AG v Ythan Ltd (The Ythan) [2006] 1 All E.R. 367

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1. The Claimant is the holder of the bills of lading

16. Under s 5(2)(a) of COGSA 1992, a holder of a bill of lading is “a person with possession of the bill who,

by virtue of being the person identified in the bill, is the consignee of the goods to which the bill relates”.

Here, the Claimant has physical possession of the bills of lading that were endorsed to the Claimant in

January 2009.20 The Claimant hence is the consignee and more importantly, the holder of the bills of

lading concerned under s 5(2)(a) of COGSA 1992.

17. However, the Claimant might have to fulfill two additional requirements before it can be held as a holder

of the bills of lading. Firstly, it must have accepted the delivery of the bills;21 and secondly, the bills

must be transferred in “the normal course of trading a bearer bill of lading”.22

a. Acceptance of the delivery of the bills of lading

18. In The Aegean Sea,23 Thomas J stated that, “the person receiving it [the bill of lading] has to receive it

into his possession and accept the delivery before he becomes the holder.”24 On or about 17 March 2009,

the Claimant received the bill of lading concerned25 into its possession and it is submitted that since the

Claimant did not reject the bills, it accepted the delivery of the bills concerned. Although on 17 March

2009, the Claimant offered to transfer the bills to the Sellers,26 it is submitted that this should not be

viewed as a rejection of the delivery of the bills as this offer to transfer the bills was made subject to the

rights of the Claimant to dispose of the cargo itself. That the Claimant continues to hold the bills and did

not deliver them to Sellers further affirms the Claimant’s acceptance of the bill’s delivery.

20 Compromis at 67 21 Aegean Sea Traders Corp v Repsol Petroleo S.A (The Aegean Sea), [1998] 2 Lloyd’s Rep 39 at 59-60 22 Primetrade AG v Ythan Ltd (The Ythan) [2006] 1 All E.R. 367 at 80 23 [1998] 2 Lloyd’s Rep 39 24 [1998] 2 Lloyd’s Rep 39 at 59-60 25 Compromis at 29 26 Compromis at 29

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b. Transfer of the bill in “the normal course of trading a bearer bill of lading”

19. Further, in The Ythan,27 Justice Aikens held that only a transfer of a bill of lading in, “the normal course

of trading a bearer bill of lading” is effective. On the facts, it is submitted that the bills were transferred

within, “the normal course of trading a bearer bill of lading” as the seller was contractually bound to

transfer the bills to the Claimant. Beatles’ contractual obligations arise from the CIF contract’s

incorporation of the FOSFA 81 standard form and INCOTERMS 2000 Rules on CIF contracts.28 Under

clause 11(2) of FOSFA 81 and INCOTERMS 2000 Rules CIF A(8), the Seller is required to transfer the

bills of lading to the Claimant. Thus by transferring the bills of lading to the Claimant after payment by

the latter in or about mid-January 2009,29 the Seller merely discharged its contractual obligation and the

transfer is therefore one in the “normal course of trading” a bill of lading.

20. Besides, it is also trite in law30 that a CIF seller in Beatles’ position is obliged to tender any bill of lading

to its buyer. The Seller’s transfer of the bills in this case thus was in “the normal course of trading a

bearer bill of lading”.

2. The Claimant is the holder of the bills of lading in good faith

21. It is also submitted that the Claimant is the lawful holder of the bills of lading as they held the bills of

lading in good faith. As “good faith” is not defined in COGSA 1992, courts have looked at other statutes

for meaning to this term. In The Aegean Sea, Thomas J31 looked to the Sale of Goods Act 197932 (SOGA

1979) and held that the basis of “good faith” lies in honest conduct. More pertinently, it has been noted33

27 Supra n18 28 Compromis at 2 29 Compromis at 67 30 Ireland v Livingstone [1872] LR 5 HL 395 at 406; Johnson v Taylor Bros & Co Ltd [1920] AC 144 at 155-156; Smyth & Co v Bailey Sons & Co [1940] 3 All E.R. 60 (Ross T); Gatoil International v Tradax Petroleum, Plainar Ltd v Waters Trading Co Ltd [1945] 72 CLR 304; [1985] 1 Lloyd’s Rep 351 at 357-359; Petrofina SA v AOT Ltd (The Maersk Nimrod) [1992] QB 571 at 575-576 31 Supra n2 32 Sales of Goods Act 1979 (c 54) (UK) s61(3); Bills of Exchange Act 1882 (c 61) s 90, “A thing is deemed to be done in good faith within the meaning of this Act when it is in fact done honestly, whether it is done negligently or not”. 33 Carver on Bills of Lading (Sweet & Maxwell, 3rd ed, 2012) at 231-233

7

that the obtaining of a bill of lading through theft or fraud or with the knowledge that the transfer of the

bill of lading was done in breach of a contract would mean that “good faith” is not made out.

22. In this case, the Claimant conducted itself honestly as it did not obtain the bills through fraud, theft or

breach of contract. In fact as explained in the earlier section, the bills were endorsed to the Claimant as

part of the Seller’s obligation under the CIF contract after the Claimant paid good consideration in or

about mid-January 2009,34 it is thus submitted that the Claimant had received and held onto the bills in

“good faith”.

23. Further, it is submitted that the Claimant’s eventual retention of the bills of lading35 despite an initial

offer36 to transfer the bills of lading to the Seller was not an act of bad faith. This is because the offer

was made conditional on the Seller returning to the Claimants the purchase price paid by the latter under

the by then repudiated CIF contract.37 Since the Seller had through their conduct demonstrated that they

are not amenable to fulfilling this condition, the Claimant was not in bad faith by retaining the bills of

lading; the Seller consistently denied their repudiation of the CIF contract38 and even tried to claim the

cargo for itself by alleging that the Claimant abandoned the cargo.39

24. The Claimant is thus a lawful holder of the bills of lading under COGSA 1992 as it held on the bills of

lading in “good faith”.

B. THE RESPONDENT IS ESTOPPED FROM DENYING THAT THE CLAIMANT CAN BRING

CLAIMS AGAINST THE RESPONDENT UNDER THE CONTRACT OF CARRIAGE IN THE

BILLS OF LADING

34 Compromis at 67 35 Compromis at 33 and 35 36 Compromis at 29 37 Compromis at 29, 33, and 35 38 Compromis at 26 and 28 39 Compromis at 34

8

25. The Respondent is also estopped from denying the Claimant’s right to bring claims against the

Respondent under the contract of carriage in the bills of carriage as an issue estoppel is made out on the

facts. Four requirements40 are required for an issue estoppel. First, the issue in question must have been

decided by a court of competent jurisdiction; second, the issue must arise between parties who are

parties to the decision; third, the issue must be decided finally and one which an issue estoppel can

apply; fourth, the issue which the estoppel is said to operate must be the same as that previously decided.

26. In this case, all four requirements are met. The first two requirements are fulfilled as the Dutch court is a

court of competent jurisdiction41 and both the Claimant and Respondent were parties to the Dutch

proceedings, which allowed and later upheld the Claimant’s arrest of the Respondent’s vessel in

Rotterdam.

27. The third requirement is also satisfied. Here the issue that must be finally decided is the Claimant’s right

to bring claims against the Respondent under the contract of carriage. In Kirin-Amgen Inc. v Boehringer

Mannheim Gmbh,42 it was held by Aldous LJ that to establish an issue estoppel the findings relied upon

had to be fundamental or necessary to the extent that the earlier decision could not stand without such

findings.43 On the facts, this requirement has been satisfied. By granting the application for arrest of the

vessel,44 the Dutch court must have first decided that the Claimant had the right to bring claims against

the Respondent under the contract of carriage; otherwise, the Claimant would not even be able to ask for

security for claims much less arrest the vessel.

28. Further, even though the issue of whether the Claimant had the right to bring claims against the

Respondent was decided in an interlocutory proceeding, in this case, an application for security for

40 Carl Zeiss Stiftung v Rayner & Keeler Ltd [1967] 1 AC 853; Porter v Secretary of State for Transport [1996] 3 All E.R. 693 41 The Sennar (No. 2) [1985] 1 WLR 490; OJSC Oil Company Yugraneft v Abramovich & Ors (Rev 1,) [2008] EWHC 2613 (Comm) 42 [1997] Fleet Reports 289 [U.K.] 43 See also David Howell, “Issue Estoppel Arising out of Foreign Interlocutory Court Proceedings in International Arbitration”, Journal of International Arbitration, Vol 20 Issue 2 pp at 155-156 44 Compromis at 54

9

claims, this does not mean that the issue was not finally decided. In Desert Sun Loan Corp. v. Hill,45 the

Court of Appeal considered the question of whether an issue estoppel can arise from interlocutory

proceedings generally and concluded in the affirmative. Specifically, Evans LJ stated that the “fact that

procedural or interlocutory issues do not involve ‘causes of action’ in the strict sense does not mean that

their independent existence cannot be recognized in appropriate circumstances.”46 Hence in this case, it

is submitted that while the merits of the claim could not be said to be decided finally in view of the

interlocutory proceedings, the right of the Claimant to bring claims against the Respondent under the

contract of carriage should be viewed as decided finally.

29. Lastly, the Dutch courts also previously decided the issue, which the estoppel is said to operate. As

explained earlier, the right of the Claimant to bring claims against the Respondent under the contract of

carriage is a threshold issue that must have been adjudicated in the Claimant’s favour by the Dutch Court

as the Dutch court allowed the ship arrest as security for the Claimant’s claim against the Respondent.

30. As the requirements of an issue estoppel are made out on the facts, the Respondent should thus be

estopped from denying the Claimant’s status as a lawful holder of the bills of lading.

II. THE RESPONDENT WAS WRONG IN DISCHARGING THE CARGO

A. THE RESPONDENT’S DISCHARGE OF THE CARGO WAS IN BREACH OF THE

CONTRACT OF CARRIAGE

1. The Respondent breached the contract of carriage when it discharged the cargo other than against the

presentation of the bills of lading

45 Desert Sun Loan v. Hill [1996] 2 All E.R. 847, 859 46 Supra n45 at 856

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31. Under a contract of carriage, carriers have a duty to discharge cargo only on presentation of the bill of

lading47 and are not easily liable for delay or wrongful delivery48 if they refuse to do so in the absence of

a bill. When carriers discharge without the bill of lading or against an indemnity, they do so at their own

risk.49 The Respondent’s discharge of cargo other than against the bills of lading is a clear breach of their

duty as a carrier.

32. This duty to discharge only upon the presentation of the bill applies even if there is uncertainty over the

ownership of the bill or cargo concerned. Carriers in such a position ought to request the parties

interplead and only discharge cargo to the lawfully determined owner.50

33. As the Claimant put the Respondent on notice of the former’s status as the lawful holder of the bills of

lading,51 the Respondent should have refused to discharge the cargo. The Respondent’s discharge of

cargo to Beatles, despite the arguably disputed status of the cargo, is in breach of their duty to discharge

only upon the presentation of the bill of lading. The Respondent’s acceptance of a letter of indemnity is

no defence to a clear breach of their obligation not to deliver other than as against the bill of lading.52

2. The Respondent’s discharge of the cargo other than against the bills of lading was improper under the

Hague Visby Rules

34. By discharging the cargo other than against the BOL, the Respondent is in breach of its duty under

Article III rule 2 of the HVR to properly discharge cargo . In MSC Amsterdam,53 Aikens J noted that the

language of Article III rule 2 could include the act of wrongful delivery.54 Specifically, a misdelivery of

47 Barclays Bank Ltd. v. Commissioners of Customs and Excise (Barclays) [1963] 1 Lloyd’s Rep. 81 48 Carlberg v Wemyss Coal Co [1915] SC 616, 624; Kuwait Petroleum Corpn v I & D Oil Carriers Ltd (The Houda) [1994] 2 Lloyd’s Rep 541, 556; MB Pyramid Sound NV v Briese Schiffahrts GmbH and Co (The Ines) [1995] 2 Lloyd’s Rep 144, 151 49 Skibsaktieselskapet Thor v Tyrer [1929] 35 L.IL.R. 163, 170 50 Re Sadler, ex parte Davies [1881] 19 ChD 86 at 90 51 Compromis at 36 52 Carlberg v Wemyss Coal Co [1915] SC. 616, 624 53 The MSC Amsterdam. Trafigura Beheer BV v Mediterranean Shipping Co SA [2007] 2 All ER (Comm) 149 54 Supra n53 at 105-106

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cargo could amount to a carrier not, “properly and carefully… discharg[ing] the goods carried.”55

Therefore, by failing to deliver the cargo to the rightful owner, the Respondent has failed in its duty to

properly and carefully deliver; it is in breach of the HVR. As the HVR in the contract of carriage is

implied by law through the Carriage of Goods by Sea Act 1971 (“COGSA 1971”), any improper

discharge is a breach of the contract of carriage.

3. The Respondent breached the contract of carriage when it discharged the cargo in Rotterdam

35. The Respondent’s discharge of the cargo in Rotterdam was also in breach of the contract of carriage.

Under the bills of lading56 held by the Claimant, the port of discharge was explicitly and exclusively

stated as, “Liverpool, Merseyside, UK”; this constitutes an express term for the Respondent to discharge

the cargo in Liverpool under the contract of carriage. The respondent’s discharge of the cargo in

Rotterdam was thus in breach of this term.57

B. THE RESPONDENT’S DISCHARGE OF THE CARGO IS AN ACT OF CONVERSION

36. Alternatively, the Respondent’s discharge of the cargo to Beatles was an act of conversion as the

Claimant has title to the cargo.

1. The Claimant possesses title to the cargo

37. Under a CIF contract, title to the cargo passes to the buyer when the seller loads the cargo on the vessel

and the buyers accepted the documents required under the contract tendered by the seller.58 In this case,

55 Article III Rule 2 of the Hague Visby Rules 56 Compromis at 14, 16, 18 57 Supra n1 58 Kwei Tek Chao v British Traders and Shippers Ltd [1954] 2 QB 459 at 486

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the Claimant has title to the cargo as the cargo was loaded onto the respondent’s vessel and it accepted

the necessary documents tendered by the Seller in or around mid-January 2009.59

2. The Claimant did not abandon the cargo.

38. In this case, it is submitted that the Claimant did not abandon the cargo and title to the cargo remains

with the Claimant. In order to make out abandonment, two elements are required viz, the manifestation

of an intention by the original owner to renounce its title to the property and that the property must then

be received into the lawful possession of a third party.60

39. On the facts, it is submitted that both elements are absent. Firstly, the Claimant did not renounce its title

to the cargo. Even though the Claimant had initially offered to the Seller possession of the cargo for

sale,61 this was predicated on the Seller agreeing to compensate the Claimant by returning the original

purchase price under the CIF contract.62 On this view, as the Seller did not agree to the Claimant’s

condition, it is submitted that the Claimant did not renounce its title to the cargo.

40. Secondly, possession of the cargo continued to be vested in the Claimant by virtue of the fact that the

bills of lading are in the physical possession of the Claimant. As stated in Schmoll Fils & Co Inc v

Scriven,63 the bill of lading, when transferred, operates as constructive delivery and, is a symbol of

possession in lieu of an actual possession. Thus by continuing to hold on to the bills of lading,

possession of the cargo remains with the Claimant and it is submitted that the Claimant did not abandon

the cargo.

2. The Respondent’s unauthorised discharge of cargo is an act of conversion

59 Compromis at 67 60 R v Edwards and Stacey [1877] 13 Cox CC 384 at 385; Tancil v Seaton [1877] 28 Gratt 601, 26 Am Rep 380 at 382; Vincent v State Bank of NSW Ltd 61 Compromis at 29 62 Compromis at 29, 33, and 35 63 Schmoll Fils & Co Inc v Scriven Bros & Co [1924] 19 Lloyd’s Law Rep 118

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41. By discharging the cargo to the Seller, the Respondent is liable for the conversion of the cargo. As

stated by Nicholls LJ in Kuwait Airways Corp v IAC (Kuwait),64 three elements are needed to find

liability under the tort of conversion. First, the defendant’s conduct was inconsistent with the rights of

the owner; second, the conduct was deliberate, not accidental; and third, the conduct was so extensive

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

42. Even if the Respondent believed Beatles was the cargo owner, this belief cannot be relied on when title

to the cargo is disputed before discharge.65 Conversion by the Respondent of the cargo is thus made out

on the facts.

43. Further, that the Claimant was unable to defeat the garnishee petition by Beatles, which also constituted

conversion by the Respondent. In The MSC Amsterdam,66 Atkin J held an additional act of conversion

was made out when the lawful holder of the BOL was not able to get his wrongfully discharged goods

released from the customs authority. The instant case is directly analogous.

III. THE RESPONDENT WAS WRONG TO SAIL TO ROTTERDAM

A. THE RESPONDENT DEVIATED BY SAILING TO ROTTERDAM AND BREACHED THE

CONTRACT OF CARRIAGE

1. The Respondent deviated when it sailed to Rotterdam

44. It is submitted that the Claimant did not give consent to the Seller to change the port of discharge to

Rotterdam. The Respondent’s voyage to Rotterdam thus constitutes deviation. Further, the delivery to

Rotterdam constituted a substituted voyage that was against the Claimant’s wishes.

64 [2002] UKHL 19; [2002] 2 AC 883 at 39. 65 Motis Exports Ltd v Dampskibsselskabet AF 1912 Aktieselskab And Aktieselskabet Dampskibsselskabet svendborg [1999] 1 Lloyd’s Rep 837 at 844. 66 [2007] EWHC 944 (Comm); [2007] 2 All ER (Comm) 149

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45. In Cunard Steamship Co. Ltd v Buerger (“Cunard”),67 the cargo owners and the charterers agreed to

change the port of discharge from Odessa to Batoum for safety reasons. The question before the House

of Lords was whether the bill of lading was put to an end by consent of both parties and the goods were

to be carried under a fresh contract, making the charterers liable as a common carrier, or whether the

agreement was simply to substitute a new port of destination in the bill of lading.68 Their Lordships

found for the latter because the parties had come to an agreement as to the new destination.

46. On this point, Cunard is distinguished. The Seller and the Claimant failed to come to an agreement as to

the port of discharge, so the Claimant crystallised the position by stating that it would take the cargo in

Liverpool “as called for by the contract and as specified in the bills of lading”.69 The Claimant did not

consent to the delivery of the goods to Rotterdam. Accordingly, the Respondent has deviated and it

cannot rely on the exceptions in the bill of lading to relieve itself of liability.

47. Furthermore, the Respondent has deviated because its delivery to Rotterdam was “an intentional and

unreasonable change in the geographic route of the voyage as contracted”,70 which in this case is the bill

of lading that indicated the ports of loading and discharge as Pasir Gudang, Malaysia and Merseyside,

Liverpool, UK, respectively.

48. In Cunard it was held that where a carrier delivers the goods to a port not agreed upon, not for a

temporary purpose but as goods reaching their destination and without intention to resume the transit,

the carrier’s actions amount to a “fundamental departure from the course of the agreed transit”71 after

which the exception clauses in the bill of lading would be inapplicable.

67 [1926] All ER Rep 103 68 Supra n1 at 104 69 Compromis at p 35 70 John Wilson, Carriage of Goods by Sea (Pearson, 7th Edition, 2010) at p 236 71 Supra n1 at 106

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49. Twilight embarked on a new voyage without the consent of Aardvark, rendering the exception clauses

inapplicable. Twilight is liable for deviation.

2. The Respondent’s deviation will not be saved by the deviation clause

50. Although there is a deviation clause72 via the charter party that is incorporated in the bill of lading, this

clause will not exempt the Respondent from liability.

51. Where a bill of lading incorporates clauses from the charter party, and the bill of lading comprises the

contract of carriage between the ship owner and the cargo owner, the clauses are incorporated only if

three conditions are met.73 First, if the incorporation clause in the bill of lading is in general terms, only

charter party terms that are germane to the subject matter of the bill of lading, such as shipment,

carriage and discharge of the cargo, and payment of freight, shall be incorporated.74 Second, the clause

sought to be incorporated must be intelligible within the context of the bill of lading.75 The clause shall

not be manipulated to give it a different meaning within the bill of lading.76 Third, the charter party

clause must be consistent with other terms in the bill of lading.77

52. The Claimant does not dispute the incorporation of the deviation clause into the bill of lading. However,

the Respondent cannot rely on the clause for two reasons.

72 Compromis at 10, “The Vessel shall have liberty to call at any ports in any order, to sail with or without pilots, to tow or be towed, to go to the assistance of vessels in distress, to deviate for the purpose of saving life or property or of landing any ill or injured person on board, and to call for fuel or stores at any port or ports in or out of the regular course of the voyage. Any salvage shall be for the sole benefit of the Owner”. 73 Astro Valiente Compania Naviera SA v Government of Pakistan Ministry of Food and Agriculture, The Emmanuel Colocotronis (No 2) [1982] 1 Lloyd’s Rep 286 at 289 74 Thomas & Co Ltd v Portsea Steamship Co Ltd [1912] AC 1 75 Porteus v Watney (1878) 3 QBD 534 at 541 76 Miramar Maritime Corporation v Holborn Oil Trading Ltd, The Miramar [1984] AC 676 77 Halsbury's Laws of England, Carriage and Carriers Vol 7 (Butterworths, 5th Ed, 2008) at para 361

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53. Firstly, while the clause gives the Respondent the “liberty to call at any ports in any order”, this “must

be ports substantially on the course of the voyage”78 and not any port in the world. Twilight’s delivery

to Rotterdam amounted to a new voyage altogether.

54. Secondly, the Respondent did not sail to Rotterdam under any of the four purposes that are permitted by

the deviation clause which are to go to the assistance of vessels in distress, to save life or property, to

land any ill or injured person on board, or to call for fuel. The Respondent therefore cannot rely on the

deviation clause to relieve itself from liability for deviating.

3. The Respondent’s deviation is not justified in common law

55. The Respondent cannot invoke the common law right to deviation for its passage to Rotterdam.

Common law allows deviation only to save human life,79 to avoid danger to the ship,80 or if it is

necessary due to some default on the part of the charterer.81

56. These conditions are not made out on the facts. The Respondent’s deviation to Rotterdam was not to

save human life or avoid danger to the vessel but merely to discharge the cargo to Beatles. There was

also apparently no default by the charterers, Beatles, which required deviation to Rotterdam. Twilight’s

deviation is not justified under common law.

4. The Respondent’s deviation is not justified under the Hague Visby rules

57. The Respondent cannot rely on the HVR. Although there are some overlaps between the HVR and the

common law in the exceptions that justify deviation, under Article IV rule 4, there are two further

exceptions, viz, to save property at sea or if deviation was reasonable.

78 Leduc v Ward [1888] QBD 475 at 482 per Lord Esher 79 Scaramanga v Stamp [1880] 5 CPD 295 at 304 80 Notara v Henderson [1870] LR 5 QB 346; Kish v Taylor [1912] AC 604 81 Wallems v Muler [1927] 2 KB 99

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58. On the facts, the exceptions are inapplicable. The first exception is not made out; the Respondent did not

call on Rotterdam to save property at sea. With regard to the latter exception, it is submitted that the

deviation was unreasonable.

59. As stated by Lord Atkin, a reasonable deviation is one which, “a prudent person controlling the voyage

at the time [might] make and maintain, having in mind all the relevant circumstances existing at the

time, including the terms of the contract and interests of all parties concerned, but without obligation to

consider the interests of any one as conclusive”.82

60. The Respondent’s deviation was unreasonable because it did not act as a “prudent person controlling the

voyage” when it decided to deviate by only considering the interests of Beatles and not the Claimant.

The Claimant alerted the Respondent that it is the lawful holder of the bill of lading through its letter

dated 20th March 2009.83 Nonetheless, the Respondent discharged the cargo at Rotterdam without

making inquiries,84 which was unreasonable having regard to the circumstances.

B. THE RESPONDENT REPUDIATED THE CONTRACT OF CARRIAGE BY DEVIATION TO

ROTTERDAM

61. The Respondent is in repudiatory breach of the bill of lading and this gives the Claimant the right to

terminate the contract.

62. On the common law traditional view, the Claimant can terminate the contract of carriage as deviation

was, “a breach of such a serious character that, however slight the deviation, the other party to the

82 Stagline v Foscolo, Mango & Co [1932] AC 328 at 343-4 83 Compromis 36 84 Glyn Mills v. East and West India Dock Co (1882) 7 App. Cas. 591(A carrier has no duty to make inquires with regard to

unendorsed bills of lading and it will not be liable if he has no notice of, inter alia, any assignment)

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contract is entitled to treat it as going to the root of the contract, and to declare himself as no longer

bound by any of the contract terms.”85

63. The Respondent’s deviation to Rotterdam is a serious breach that goes to the root of the bill of lading

because the voyage contracted for should have ended at Liverpool. The Respondent embarked on an

entirely different voyage that ended at Rotterdam.

64. On the alternative view,86 deviation would be repudiatory if as a matter of construction, the terms of the

bill of lading were not intended to be applicable to the substitute voyage. Given that Twilight deviated to

Rotterdam when it was obligated to go to Liverpool, the parties would not have intended the bill of

lading to cover this voyage.

65. Applying both views, the Respondent repudiated the contract when it deviated to Rotterdam. Aardvark

has the right to terminate the contract for deviation and claim against Twilight as a common carrier.

IV. THE RESPONDENT IS RESPONSIBLE FOR CARGO DAMAGE UNDER THE

HAGUE VISBY RULES

A. THE RESPONDENT FAILED TO EXERCISE DUE DILIGENCE TO ENSURE ITS HOLDS

WERE FIT AND SAFE FOR CARRIAGE OF THE CLAIMANT’S GOODS

66. As carrier, the Respondent has a duty to exercise due diligence to ensure that their holds are fit and safe

for the carriage of the Claimant’s goods.87 This duty is an overriding one and the Respondent, having

breached this duty, cannot rely on the exceptions listed in Article IV Rule 2.88

85 Lord Atkin in Hain SS Co v Tate & Lyle (1936) 41 Com Cas 350 at p 354 86 Suisse Atlantique Societe d'Armament SA v NV Rotterdamsche Kolen Centrale [1967] 1 AC 361; Photo Production Ltd v Securicor Transport Ltd [1980] AC 827; Kenya Railways v Antares Co Pte Ltd (The Antares) [1987] 1 Lloyd's Rep. 424, 430 87 Carriage of Goods by Sea Act 1971 (c 59) (UK) Schedule Article Rule III 1(c) 88 Maxine Footwear Co Ltd v Canadian Government Merchant Marine [1959] AC 589 at 603

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67. Once the shipper proves the prima facie case that the damage to his goods is attributable to the vessel

being unfit and unsafe for carriage of goods before or at the beginning of the voyage,89 the burden of

proving due diligence rests with the carrier.90

68. The skim top samples from the four tanks (3 P&S and 7 P&S) contained 50 times the amount of arsenic

compared to the samples from the other 12 tanks, and “separate analysis on the water extracts from the

relevant running samples” confirmed the elevated arsenic levels in those four tanks.91 The Master and

Chief Officer told the incident investigators that they did not observe any “broaching of the cargo tanks

during the period of captivity”, and in their opinion the corrosion on the tank hatches indicated that the

hatches remained unopened. This is evidence that the tanks were never opened from the start of the

voyage until the date of sampling and the Claimant has made out the prima facie case that the arsenic

contamination to the goods is attributable to the carrier failing to make its holds fit and safe before or at

the beginning of the voyage.92

69. The burden of proof to show on a balance of probabilities that it exercised due diligence now rests on the

carrier.93 The test for the “lack of due diligence is negligence”94 and it has been suggested this is the

“traditional criterion of foresight of possible dangers”.95 It is therefore submitted the Respondent has

failed to exercise due diligence to make the holds fit and safe. Despite the assertion that passivation of

the tanks, “should have removed any arsenic that may have been present”,96 the fact was that arsenic was

only in four of the 16 tanks and the objective evidence indicates that none of the tanks were opened

during the voyage. The possibility of arsenic being introduced by the pirates was only acknowledged to

be “a possibility”, which in any case contradicts the testimony of the Master. In addition, the industry

practice of passivating the tanks with nitric acid is a procedure that is done only to build up a “passive

89 The Hellenic Dolphin [1978] 2 Lloyd’s Rep 336 at 339 90 Article IV Rule 1 of the Hague Visby Rules 91 Compromis at 38 92 Supra n 43 93 The Antigoni [1991] 1 Lloyd’s Rep 209 at 212 94 The Amestelslot [1963] 2 Lloyd’s Rep 223 at 235 95 Carver on Bills of Lading (Sweet & Maxwell, 3rd ed, 2012) at p666 96 Compromis at 38

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chromium layer on the tank surface… to increase its resistance to corrosion”, not to remove arsenic and

other contaminants.97

B. IN ANY CASE, THE RESPONDENT IS LIABLE FOR FAILING TO PROPERLY AND

CAREFULLY CARRY, KEEP, AND CARE FOR THE CARGO

70. In the alternative, if it is found that, on the balance of probabilities, the contamination to the cargo did

not occur “before and at the beginning of the voyage” in breach of Article III Rule 1, but was instead due

to the piracy incident, the Respondent may still liable for failing its duty to properly and carefully carry,

keep and care for the goods delivered, in breach of Article III Rule 2 of the HVR, subject to the Article

IV Rule 2 exceptions.

71. The prima facie case is made out as, due chiefly to the hijacking incident, or in the alternative via arsenic

contamination by the pirates or uneven heating of the cargo during captivity, the goods have become

non-GMQ in transit.98 The carrier must, to avail itself of the defences under Article IV Rule 2, show that

these causes fall under any one of the exceptions.

72. There are two ways a claimant may strike out a defence based on the Article IV Rule 2 exceptions. The

first method is to show that the exception has not been made out. The contra proferentem principle

applies and “the presumption is that the exception is narrower than the obligation”.99 The alternative

method is to show that in spite of any Article IV Rule 2 exception being made out, the carrier is still

liable via a breach of Article III Rule 2. This position is espoused in Carver on Bills of Lading,100 citing

the proposition in Shipping Corp of India Ltd v Gamelan Chemical Co (Australasia) Pty Ltd101 that “(it)

does not mean that… if an excepted peril is established as a cause of the loss in question, and there has

97 ATS Shipping and Transportation Trading, Ship Operation Manual at page 19, 1 March 2005 <http://www.nasmaritime.com/DOCUMENTS/OPERATION%20MANUAL.pdf> accessed on 19 March 2013 98 Compromis at 25 99 Foreman & Ellams Ltd v Federal S.N. Co Ltd [1928] 2 KB 424 per Wright J 100 Carver on Bills of Lading (Sweet & Maxwell, 3rd ed, 2012) 101 [1980] 147 CLR 142

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also been a breach of Article III Rule 2, there is no liability on the carrier”.102 Professor John F Wilson

in his textbook103 also stated this position, referencing the decision in The Glendarroch104 and the dicta

in Constantine SS Co v Imperial Smelting Corp105, that “should (the carrier) succeed in bringing the loss

within an exception, the carrier will escape liability unless the cargo owner can then establish a breach of

the carrier’s duty of care within Article III Rule 2”.106 In Albacora v Westcott and Laurance Line

(Albacora),107 the House of Lords held that the obligation in Article III Rule 2 was “to adopt a system

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

the goods”, and that it should be a “sound system under all the circumstances in relation to the general

practice of carriage of goods by sea”.

1. Article IV Rule 2(e) is not made out

73. The Respondents cannot rely on Article IV rule 2(e). While Kawasaki Kisen Kaisha v Bantham

Steamship Co108 stands for the proposition that a declaration of war is not needed for this exception to be

made out, it is submitted that there remains the requirement for a state actor to be involved in the

hostilities for this exception to be relied on.109

2. Article IV Rule 2(f) is made out but Article 3 Rule 2 has been breached in any case

74. This exception is generally assumed to cover piracy.110 However, it is submitted that the Respondent had

nevertheless failed its Article III Rule 2 duty in any case. It is submitted the ‘anti-pirate watch’ was

wholly inadequate to mitigate a violent attack from pirates in an area known to have a high incidence of

attacks. There is no evidence that the vessel had any other operating procedure in place to take evasive

102 Carver on Bills of Lading (Sweet & Maxwell, 3rd ed, 2012) at pg 672 103 John J Wilson, Carriage of Goods by Sea (Longman, 7th Ed, 2010) 104 [1894] P 226 105 [1942] AC 154 per Viscount Simon LC and Lord Wright a 164 and 194 106 John J Wilson, Carriage of Goods by Sea (Longman, 7th Ed, 2010) at pg 192 107 [1966] 2 Lloyd’s Rep 53 108 [1939] 2 KB 544 109 Russell v Niemann [1864] 17 CB (NS) 163 at 174 110 John Richardson, A Guide to the Hague and Hague Visby Rules (Lloyd’s of London Press, 1989)

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action upon contacting pirates. Neither was there any evidence that the vessel had anti-boarding

measures in place to prevent unauthorised boarding. As such, the requirement of “a sound system”111 is

not met.

3. Article IV Rule 2(q) is not made out

75. The Respondent cannot rely on Article IV Rule 2(q). It is not disputed that even during the period of

captivity, the pirates permitted a team of two engineers to maintain the engine in the engine room and to

keep it running,112 the deck was illuminated at night, and a regular confirmation of the vessel’s position

was done, and even parts of the crew were allowed on deck to attend to the anchor when needed. There

is no reason why the cargo holds would not have been kept heated during this time. The failure to do so,

in spite of evidence that other ship functions remained in place during captivity is an indication that the

fault that occurred could not be said to have taken place without the fault or privity of the agents of the

Respondent.

V. DAMAGES DUE TO THE CLAIMANT

A. DAMAGES FOR CARRIER’S LIABILITY FOR FAILING TO CAREFULLY AND PROPERLY

HANDLE THE CARGO AND FOR FAILING TO DELIVER CARGO TO THE CLAIMANTS

1. The Claimant is entitled to reliance loss for the cargo in light of unascertainable expectation loss

76. The general rule is that a claimant will be entitled to damages to be assessed as to the date of the breach

of contract. This forms the expectation loss that the claimant suffers113 and for contracts for carriage of

goods by sea is usually taken to be the price of the good at the time and place where the cargo is

supposed to be delivered.114 However, the case of Golden Strait Corp v Nippon Yusen Kubishika Kaisha

111 Supra n 52 112 Compromis at 42 113 Johnson v Agnew [1980] AC 367 114 Rodocanachi v Milburn [1886] 18 QBD 67 CA

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(The Golden Victory)115 stands for the proposition that when a supervening event occurred and made it

impossible for performance according to the terms, it will not be fair for the losses to be crystallised at

the contracted for date of performance. The court may take into account events that are now known to

have happened and which reduced the value of the contract to the injured party.116

77. It is submitted that the actual date the cargo was to be delivered to Aardvark is supposed to be 27

November 2008 or thereabouts, based on the industry average for freight times between Malaysia and

Liverpool.117 While there is no explicit date of delivery in the contract of carriage, the goods must be

shipped within a reasonable time118 in accordance to industry practices. The piracy incident occurred on

15 November 2008119. At that time neither Claimant nor Respondent would have known how long the

period of capture would have lasted and therefore akin to the facts in Golden Victory, it is submitted that

the piracy incident represented a supervening event and that it would not have been fair to take the

expectation loss to be crystallised at 27 November 2008.

78. Therefore, it is submitted that the measure of damages due to the Claimant must be the reliance loss

where the value of the expectation if the contract had been performed cannot be proved.120 This is the

invoice value of the cargo at the time of the contract,121 which is USD2,990,000.

2. The Claimant’s right to mitigate prevented by Twilight’s wrongful discharge

79. The general rule is that the claimant has the duty to mitigate.122 However, because of the Respondent’s

wrongful discharge of the cargo to Beatles in Rotterdam, the Claimant was denied this right to mitigate.

In these premises, the mitigated damages, which would have been subtracted from the total claim

amount, must therefore be added back to the total sum of damages.

115 [2007] UKHL 12 116 Edwin Peel, Treitel on the Law of Contract (Sweet & Maxwell, 13th Edition, 2010) at p843 117 Sea Rates Website <http://www.searates.com/reference/portdistance/> (accessed 22 April 2013) 118 Landauer & Co v Craven & Speeding Bros [1912] 2 KB 94 at 106 119 Compromis at 41 120 Anglia Television Ltd v Reed [1972] 1QB 60 121 McRae v Commonwealth Disposals Commission [1951] 84 CLR 377 122 Edwin Peel, Treitel on the Law of Contract (Sweet & Maxwell, 13th Edition, 2010) at 1063

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B. FURTHER OR IN THE ALTERNATIVE, MITIGATED DAMAGES FOR EITHER TORT OF

CONVERSION OR BREACH OF CONTRACT

1. The Claimant is entitled to mitigated damages for tort of conversion

80. The Claimant is entitled to a mitigated normal measure of damages at USD$2,090,000. In this case, the

damages de minimis is USD$430123 per mt x 4,000 = USD$1,720,000 and this represents the fair market

value of the converted cargo at the time and place of tort. However, as the Claimant had in mitigation

moved to procure substitutes for the converted cargo, the damages post mitigation is assessed at

USD$522.50 per mt x 4,000 = USD$2,090,000.

81. Even though the mitigated position is greater than the resulting damage, the mitigated damages are

recoverable so long as the mitigation was reasonable.124 In this case, the Claimant had acted reasonably

to mitigate its losses by procuring substitute cargo in less than a month.125

2. The Claimant is entitled to mitigated damages for breach of contract

82. In the alternative, Claimant can claim for damages under the various breaches made out under Part II, III

and IV. As the contract breaches all end with the total loss of the cargo upon discharge in Rotterdam,

quantification of the damages would be identical. Specifically, the Claimant can, similar to the

alternative damage claim in conversion, be entitled to a mitigated measure of damages of

USD$2,090,000. The mitigated measure of damages is similarly derived from the Claimant’s reasonable

move to procure substitutes for the converted cargo on 16 April 2009.

123 Id at 63 (GMQ prices), Page 49 (Non GMQ Prices) 124 Davies v Oswell (1837) 7 C. 7 p. 804. 125 Compromis at 46

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C. ADDITIONAL DAMAGES

83. Finally, if the Claimant prevails in its claims against the Respondent, the Claimant is entitled to the cost

of court proceedings between the Claimant and the Respondent.

VI. PRAYER FOR RELIEF

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

DECLARE that the Claimant is the lawful holder of the bills of lading under COGSA1992;

Further,

DECLARE that the Claimant is the owner of the cargo under the bills of lading;

Further,

ADJUDGE that the Respondent is liable to the Claimant for USD$3,236,756.26 plus interest and cost as

follows:

(1) Damages in tort for conversion of cargo at USD$747.50 per mt x 4,000 = USD$2,990,000

(2) Court fess of USD$138,843.14; and

(3) Legal fees in respect of the Court proceedings of USD$107,913.12

Alternatively,

ADJUDGE that the Respondent is liable to the Claimant for USD$2,336,756.20 plus interest and cost as

follows:

(1) Damages breaches of contract at USD$522.50 per mt x 4,000 = USD$2,090,000

(2) Court fess of USD$138,843.14; and

(3) Legal fees in respect of the Court proceedings of USD$107,913.12.