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I
THIRTEENTH ANNUAL INTERNATIONAL MARITIME LAW ARBITRATION MOOT
COMPETITION 2012
UNIVERSITY OF QUEENSLAND AUSTRALIA
IN THE MATTER OF AN ARBITRATION HELD AT BRISBANE
MEMORANDUM FOR THE CLAIMANT
ON BEHALF OF:
Markka Trading Company
10 Crow Street
Schilling
CLAIMANT
AGAINST:
Lira Steamship Company
Level 4
West Circle
Peseta
RESPONDENT
TEAM NO. 13
MITCHELL BEEBE
BIANCA KABEL
KATHERINE STODULKA
JOSH UNDERWOOD
II
TABLE OF CONTENTS
1. THE TRIBUNAL HAS JURISDICTION TO HEAR THESE PROCEEDINGS AND IS VALIDLY
CONSTITUTED. .................................................................................................................................................. 3
1.1 The Tribunal is competent to rule on its own jurisdiction pursuant to Article 16(1) of the UNCITRAL
Model Law. ...................................................................................................................................................... 3
1.2 All matters before the Tribunal may be settled by arbitration. ............................................................. 3
1.3 All matters before the Tribunal „aris[e] out of or in connection with‟ the Charterparty. ..................... 4
1.4 The Respondent‟s claim to limit its liability should be resolved in conjunction with all other matters
in dispute. ......................................................................................................................................................... 6
1.5 The Tribunal is validly constituted. ...................................................................................................... 6
2. BY DEVIATING TO THE PORT OF GUILDER THE RESPONDENT BREACHED THE
CHARTERPARTY. .............................................................................................................................................. 7
2.1 There was a Force Majeure Event. ....................................................................................................... 7
2.2 The rights and obligations of the parties changed on 11 January 2011. ............................................... 7
2.3 The Respondent was not at liberty to deviate to Guilder for the purpose of saving life or property. .. 8
2.4 Deviation to Guilder was not a reasonable step to minimise delay. ..................................................... 8
2.5 The Claimant elected to terminate the contract in light of the Respondent‟s deviation. .................... 11
2.6 The Claimant did not affirm the contract after the Respondent‟s repudiation. .................................. 12
3. THE RESPONDENT CANNOT CLAIM GENERAL AVERAGE........................................................ 13
3.1 The Charterparty had been terminated before the General Average act occurred. ............................ 13
3.2 Even if the Respondent‟s General Average claim can be sustained, it cannot claim damages for the
lost revenue of the Drachma. ......................................................................................................................... 13
III
4. THE RESPONDENT IS LIABLE FOR THE DAMAGE TO THE WHARF AND RELATED LOSS.
14
4.1 The Respondent owed a duty of care to the Claimant. ....................................................................... 14
4.2 The Respondent breached its duty of care to the Claimant. ............................................................... 16
4.3 The Respondent‟s breach of duty caused the Claimant‟s loss. ........................................................... 18
4.4 The loss and damage suffered by the Claimant was not too remote. ................................................. 19
5. THE RESPONDENT MAY NOT LIMIT ITS LIABILITY UNDER THE LIMITATION
CONVENTION FOR PURE ECONOMIC LOSS AND COSTS OF CARGO TRANSPORT. ................... 20
5.1 The pure economic loss of the Claimant does not fall within the Limitation Convention. ................ 20
5.2 Pure economic loss is not „consequential loss‟. ................................................................................. 21
5.3 The pure economic loss of the kind suffered by the Claimant is not „infringement of rights other than
contractual rights‟. ......................................................................................................................................... 22
5.4 Further, the Respondent may not limit its liability for its unreasonable deviation to Guilder. .......... 22
5.5 Alternatively, if the Respondent may limit its liability for the loss suffered by the Claimant, it may
not constitute a single Limitation Fund because there are two „distinct occasions‟ that gave rise to the
Claimant‟s loss. .............................................................................................................................................. 23
PRAYER FOR RELIEF..................................................................................................................................... 25
IV
LIST OF AUTHORITIES
CASES
Adeels Palace v Moubarak (2009) 239 CLR 420 ................................................................................................. 18
Alma Shipping Corp v Union of India [1971] 2 Lloyd‟s Rep 491 .......................................................................... 4
Amaca Pty Ltd v Ellis; The State of South Australia v Ellis; Millennium Inorganic Chemicals Ltd v Ellis (2010)
263 ALR 576 ..................................................................................................................................................... 18
Astro Vencedor Compania Naviera SA of Panama v Mabanaft GmbH (The Damianos) [1971] 2 QB 588 .......... 5
Australian Horizons (Vic) Pty Ltd v Ryan Land Co Pty Ltd [1994] 2 VR 463..................................................... 12
Bryan v Maloney (1995) 182 CLR 609................................................................................................................. 16
Callide Power Management Pty Ltd v Callide Coalfields (Sales) Pty Ltd [2008] QCA 182 ................................ 7
Caltex Oil v The Dredge Willemstad (1976) 136 CLR 529 ............................................................................ 15, 16
China National Foreign Trade Transportation Corp v Evolgia Shipping Co SA of Panama (The Mihalios Xilas)
[1978] 2 Lloyd's Rep 397 .................................................................................................................................. 12
Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co of Australia
Ltd (1931) 46 CLR 41 ....................................................................................................................................... 14
Comandate Marine Corp v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45 .............................................. 4, 6
Commonwealth of Australia v Citra Constructions (1985) 2 BCL 285 ................................................................. 5
Donoghue v Stevenson [1932] AC 562 ................................................................................................................. 15
Erlanger v The New Sombrero Phosphate Co (1878) 3 App Cas 1218 ............................................................... 12
Esso Petroleum Co Ltd v Hall Russell & Co Ltd (The Esso Bernicia) [1989] AC 643.................................. 15, 22
Fermometal SARL v Mediterranean Shipping Co SA (The Simona) [1989] AC 788 ........................................... 11
Fiona Trust & Holding Corp v Privalov [2007] UKHL 40 .................................................................................... 6
Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways (1996) 39 NSWLR 160 .......................................... 4
Garnac Grain Co Ltd v HM Faure & Fairclough Ltd [1966] 1 QB 650 ............................................................. 13
General Billposting Co Ltd Atkinson [1909] AC 118 ........................................................................................... 13
Government Insurance Office of New South v Atkinson-Leighton Joint Venture (1979) 146 CLR 206 ................ 5
Heyman v Darwins Ltd [1942] AC 356 ................................................................................................................ 12
Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (No 5) (1998) 90 FCR 1 ......................................................... 5
Hughes v Lord Advocate [1963] AC 837 .............................................................................................................. 19
Hyundai Merchant Marine Co Ltd v Dartbrook Coal (Sales) Pty Ltd (2006) 236 ALR 115 .............................. 11
IBM Australia Ltd v National Distribution Services Pty Ltd (1991) 22 NSWLR 466 ........................................... 4
ICL Shipping Ltd and Steamship Mutual Underwriting Association (Underwriting) Ltd v Chin Tai Steel
Enterprise Co Ltd and Others (The ICL Vikraman) [2004] 1 Lloyd‟s Rep 21 ................................................... 5
Jenkin v Godwin (The Ignition) [1983] 1 Lloyd‟s Rep 382 .................................................................................. 17
Larken Pty Ltd v Lloyd Energy Systems Pty Ltd (2011) 279 ALR 772 ................................................................. 3
LK v Director-General, Department of Community Services (2009) 237 CLR 582 ............................................ 23
March v Stramare (1991) 171 CLR 506 ......................................................................................................... 18, 19
New South Wales v Lepore; Samin v Queensland; Rich v Queensland (2003) 212 CLR 511 ............................. 14
Overseas Tankship (UK) Ltd v Miller Steamship Co Pty Ltd (The Wagon Mound) (No 1) [1961] AC 388 ........ 19
Perre v Apand (1999) 198 CLR 180 ............................................................................................................... 15, 16
Photo Production Ltd v Securicor Transport Ltd [1980] AC 827 .......................................................................... 5
Port Kembla Coal Terminal Ltd v Braverus Maritime Inc (2004) 212 ALR 158 ................................................ 14
V
Qenos Pty Ltd v Ship APL Sydney (2009) 260 ALR 692 .......................................................................... 20, 21, 22
Rigney v Browne (2004) Aust Tort Reports 81-765 ............................................................................................. 18
Stag Line v Foscolo Mango & Co Ltd [1932] AC 328 ................................................................................... 11, 21
Strong Wise Ltd v Esso Australia Resources Pty Ltd (2010) 267 ALR 259 ............................................. 17, 23, 24
Swiss Bank Corp v Novorossiysk Shipping [1995] 1 Lloyd‟s Rep 202 .................................................................. 4
The Shipping Corporation of India Limited v Gamlen Chemical Co [A/Asia] Pty Ltd (1980) 147 CLR 142 ..... 21
TNT Bulkships Ltd v Hopkins and Interstate Pty Ltd (Unreported, Northern Territory Supreme Court, Asche J,
17 December 1987) ............................................................................................................................................. 5
Ulysses Compania Naviera SA v Huntingdon Petroleum Services Ltd [1990] 1 Lloyd‟s Rep 160........................ 5
Vitol SA v Norelf Ltd [1996] AC 800 .................................................................................................................... 12
Wetherall & Co v London Assurance [1931] 2 KB 448 ....................................................................................... 13
Wyong Shire Council v Shirt (1980) 146 CLR 40 ................................................................................................ 17
Yukon Line of Korea v Rendsburg Investments Corporation of Liberia [1996] 2 Lloyd‟s Rep 604 .................... 12
STATUTES
Civil Liability Act 2003 (Qld) ........................................................................................................... 4, 5, 16, 17, 18
International Arbitration Act 1974 (Cth) ................................................................................................................ 3
Limitation of Liability for Maritime Claims Act 1989 (Cth)......................................................................... 4, 5, 20
Navigation Act 1912 (Cth) .................................................................................................................................... 17
CONVENTIONS, ORDERS AND RULES
1976 Protocol to Amend the Convention on Limitation of Liability for Maritime Claims ................................... 20
Convention on Limitation of Liability for Maritime Claims ................................................................... 3, 5, 20, 23
Convention on the International Regulations for Preventing Collisions at Sea ................................................... 17
International Maritime Authority, International Maritime Dangerous Goods Code (2010) vol 2 .................. 9, 17
Marine Orders Part 30, Issue 8 (Prevention of Collisions) 2009 (Cth) ............................................................... 17
Marine Orders Part 41, Issue 10 (Carriage of Dangerous Goods) 2012 (Cth) ............................................... 9, 17
UNCITRAL Model Law on International Commercial Arbitration, Art 16(1), incorporated into Australian law
by the International Arbitration Act 1974 (Cth) sch 2 ........................................................................................ 3
Vienna Convention on the Law of Treaties ........................................................................................................... 21
York-Antwerp Rules 1994 ..................................................................................................................................... 13
OTHER AUTHORITIES
Danuta Mendelson, The New Law of Torts (Oxford University press, 2nd
ed, 2010) ........................................... 19
David St John Sutton, Judith Gill and Matthew Gearin, Russell on Arbitration (Sweet & Maxwell, 23rd
ed,
2007).................................................................................................................................................................... 4
Joachim Delaney and Katherina Lewis, „The Presumptive Approach to the Construction of Arbitration
Agreements and the Principle of Separability -- English Law Post Fiona Trust and Australian Law
Contrasted‟ (2008) UNSW Law Journal 31(1) 341 ............................................................................................. 6
John Tyrill, „Arbitration Agreements and Arbitrator‟s Jurisdiction‟ (1996) Australian Construction Law
Newsletter 4 ......................................................................................................................................................... 5
Julian Cooke and Richard Cornah, Lowndes and Rudolf’s The Law of General Average and The York-Antwerp
Rules (Sweet & Maxwell, 13th ed, 2008) ........................................................................................................... 4
Julian Cooke et al, Voyage Charters (Informa, 3rd
ed, 2007) ................................................................................. 9
VI
Lawbook, The Laws of Australia (at 1 February 1999) 13 Dispute Resolution „7 Arbitration‟ ............................. 5
LexisNexis, Halsbury’s Laws of Australia (at 10 June 2009) 25 Arbitration, „6 Jurisdiction of Arbitrator‟ ......... 5
M Mustill and S Boyd, Law and Practice of Commercial Arbitration in England (Butterworths, 2nd
ed, 2001) .. 4
N Geoffrey Hudson, The York-Antwerp Rules: The Principles and Practice of General Average Adjustment
(LLP, 2nd
ed, 1996) ............................................................................................................................................ 13
National Marine Guidance Manual, „Guidelines for Marine Pilotage Standards in Australia‟ (at November
2008).................................................................................................................................................................. 17
Patrick Griggs, Richard Williams and Jeremy Farr, Limitation of Liability for Maritime Claims (LLP, 4th
edition, 2005) 66 ................................................................................................................................................. 5
The Maritime Law Association of Australia and New Zealand, Policy to Join Panel of Arbitrators, MLAANZ
Arbitration <http://www.mlaanz.org/Uploads/Policy_to_Join_Panel_of_Arbitrators.pdf> ............................... 6
The Travaux Préparatoires of the LLMC Convention, 1976 and of the Protocol of 1996 (Comite Maritime
International Headquarters, Belgium, 2000) ............................................................................................... 21, 22
1
Summary of Arguments
Markka Trading Company („Claimant‟) sues the Lira Steamship Company („Respondent‟) for breach
of contract and negligence. The Claimant contends that the Respondent breached the Charterparty
by unreasonably deviating to the Port of Guilder. Following the Respondent‟s breach, the Claimant
terminated the Charterparty, which extinguished the Respondent‟s contractual right to claim in
General Average. The Claimant contends that the Respondent is liable in negligence for all loss
relating to the Claimant‟s berth. The Claimant rejects that the Respondent may limit its liability
under a Limitation Fund in certain respects. The Claimant accepts the jurisdiction and competence
of the Tribunal to determine all matters before it.
Summary of Facts
1. Markka Trading Company contracted with Lira Steamship Company to use the Respondent‟s
vessel, the MV Drachma („Drachma‟) by Charterparty dated 30 November 2010
(„Charterparty‟). The Charterparty required the Respondent to transport 15,000mt of bagged
Ammonium Nitrate to Schilling.
2. Loading was completed at Escudo on 25 December 2010 and the vessel proceeded to Schilling.
On 3 January 2011, extreme weather conditions commenced at Schilling, including high levels of
rainfall and localised flooding. At 0900 hours on 11 January 2011, the Port of Schilling was
closed. Subsequently, by letter dated 11 January 2011, the Respondent notified the Claimant of
an event of force majeure and of its intention to sail to the Port of Guilder to discharge the
Claimant‟s cargo.
3. By letter dated 12 January 2011, the Claimant rejected the Respondent‟s notice of force majeure.
The Claimant directed the Respondent to wait at least 30 days for the event of force majeure to
pass before taking any steps inconsistent with the Charterparty.
2
4. On 30 January 2011, the Drachma departed Schilling and began sailing to Guilder. During its
voyage, the propeller shaft was damaged and the vessel could not continue under its own power.
The Respondent engaged the Koruna Salvage and Tug Company, which towed the vessel to
Koruna for repairs. On 31 January 2011, the Respondent claimed General Average.
5. The Drachma arrived at Guilder on 25 February 2011. At 2003 hours, Harbour Control informed
the Master of the Drachma that Guilder was a compulsory pilotage port. Regardless, the Master
attempted to manoeuvre into port to berth. The Drachma struck the Claimant‟s berth. The
Guilder Maritime Inspection Services estimated the damage to be USD$40 million, reported that
the Drachma had failed to comply with directions from the Harbour Master and found that the
Drachma was travelling at excessive speed. Investigations also revealed that the alarm on the
Harbour Master‟s auto-tracking system was muted. For that reason, the duty controller was
unaware that the Drachma had moved from its position until after the collision occurred.
6. By letter dated 1 March 2011, the Claimant sought USD$47.75 million from the Respondent for
losses associated with the Drachma‟s deviation to Guilder and damage to the berth.
7. The Respondent denied liability by letter dated 10 March 2011 and sought payment of General
Average.
8. By letter dated 30 June 2011, the Claimant referred the dispute to arbitration, appointing Mr
Silvio Papandreou as its arbitrator. The Respondent by letter dated 1 July 2011, reserved its rights
concerning the jurisdiction of any arbitral panel, denied all liability, and appointed Mr Jose
Mengel to the panel.
3
ARGUMENTS PRESENTED
A. JURISDICTIONAL ISSUES
1. THE TRIBUNAL HAS JURISDICTION TO HEAR THESE PROCEEDINGS AND IS
VALIDLY CONSTITUTED.
1.1 The Tribunal is competent to rule on its own jurisdiction pursuant to Article 16(1) of the
UNCITRAL Model Law.1
1. The matters for determination are:
a) Whether the Respondent breached the Charterparty by deviating to the Port of Guilder
(„matter (a)‟);
b) Whether the Respondent may claim General Average for losses incurred by the
Drachma during its voyage to Guilder („matter (b)‟);
c) Whether the Respondent is liable for damage to the Claimant‟s berth at Guilder
(„matter (c)‟); and
d) Whether the Respondent may limit its liability to USD$28 million pursuant to the
Convention on the Limitation of Liability for Maritime Claims2 („matter (d)‟).
1.2 All matters before the Tribunal may be settled by arbitration.3
2. The general rule is that any matter which may be the subject of an enforceable award may be
settled by arbitration.4 All matters involved in this dispute may be the subject of an enforceable
award.
1 UNCITRAL Model Law on International Commercial Arbitration, Art 16(1), incorporated into Australian law by the
International Arbitration Act 1974 (Cth) sch 2. 2 Convention on Limitation of Liability for Maritime Claims, opened for signature 19 November 1976, [1991] ATS 12
(entered into force 1 December 1986). 3 See International Arbitration Act 1974 (Cth) s 7(2)(b).
4 Larken Pty Ltd v Lloyd Energy Systems Pty Ltd (2011) 279 ALR 772, 782 [62].
4
3. This general rule shall apply except where some legitimate public interest in the subject matter of
the dispute renders its private resolution outside the national court system inappropriate.5 There
is no public interest that any of the matters involved in this dispute be resolved by a national
court. Although matters (c) and (d) of this dispute involve consideration of relevant legislation,6
there is no legitimate public interest that disputes involving legislation be resolved exclusively by
courts, and there is authority that consideration of relevant legislation falls within the jurisdiction
of an arbitral Tribunal.7
4. Further, a General Average claim, such as matter (b) of this dispute, is capable of settlement by
arbitration and need not be determined by a General Average Adjuster.8 While all claims of
General Average shall be settled in Tolar,9 it is proper that the General Average claim be
resolved by arbitration in Brisbane because it is a „dispute … in connection with the contract‟10
as opposed to a mere claim capable of settlement.
1.3 All matters before the Tribunal ‘aris[e] out of or in connection with’ the Charterparty.11
5. The phrase „arising out of or in connection with this contract‟ has a very wide scope.12 The
phrase clearly encompasses matters concerning the interpretation of the contract, and thus
includes matters (a) and (b) of this dispute. This is so, even though the contract has been
5 Ibid 782 [63], citing Comandate Marine Corp v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45, 98 [200]. See
generally, M Mustill and S Boyd, Law and Practice of Commercial Arbitration in England (Butterworths, 2nd ed, 2001)
ch 10. 6 Civil Liability Act 2003 (Qld) and Limitation of Liability for Maritime Claims Act 1989 (Cth), respectively.
7 See, eg, Comandate Marine Corp v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45; IBM Australia Ltd v National
Distribution Services Pty Ltd (1991) 22 NSWLR 466. 8 Alma Shipping Corp v Union of India [1971] 2 Lloyd‟s Rep 491; Swiss Bank Corp v Novorossiysk Shipping [1995] 1
Lloyd‟s Rep 202, 206. See generally Julian Cooke and Richard Cornah, Lowndes and Rudolf’s The Law of General
Average and The York-Antwerp Rules (Sweet & Maxwell, 13th ed, 2008) [30.21]. 9 Facts, p 36: Charterparty cl 27.
10 Facts, p 39: Charterparty cl 36. (emphasis added)
11 Facts, p 39: Charterparty cl 36(a).
12 IBM Australia Ltd v National Distribution Services Pty Ltd (1991) 22 NSWLR 466, 472-477, 483; Francis Travel
Marketing Pty Ltd v Virgin Atlantic Airways (1996) 39 NSWLR 160, 165. See generally, David St John Sutton, Judith
Gill and Matthew Gearin, Russell on Arbitration (Sweet & Maxwell, 23rd ed, 2007) [2-079].
5
terminated.13 The phrase also encompasses matters concerning rights and obligations prescribed
by tort and statute where there is a sufficiently close nexus between the contract and the tortious
or statutory rights or obligations.14
6. Matter (c) of this dispute concerns rights and obligations prescribed by the common law of
negligence and by statute.15 The modern position is that an arbitrator will have jurisdiction to
determine a claim in negligence where the arbitration clause is wide.16 Several cases have
confirmed the jurisdiction of an arbitrator to resolve matters arising from tort in circumstances
where the arbitration clause is synonymous with the clause relevant to this dispute.17 It makes no
difference that, according to the lex fori of this dispute, some elements of the negligence claim
are governed by common law whereas others are governed by statute.18
7. Matter (d) of this dispute concerns the Respondent‟s right to limit its liability under the
Convention on the Limitation of Liability for Maritime Claims („Limitation Convention‟).19
Disputes concerning matters related to this Convention have been held to be capable of resolution
by arbitration.20 Further, the Respondent‟s claim to limit its liability arises „in connection with‟
the contract because the Respondent‟s liability for costs associated with the transport of the
13
Facts, p 39: Charterparty cl 36(a). See also discussion in Photo Production Ltd v Securicor Transport Ltd [1980] AC
827, 850 (Lord Diplock). 14
Lawbook, The Laws of Australia (at 1 February 1999) 13 Dispute Resolution „7 Arbitration‟ [13.7.14]. 15
Civil Liability Act 2003 (Qld) and Limitation of Liability for Maritime Claims Act 1989 (Cth), respectively. 16
Astro Vencedor Compania Naviera SA of Panama v Mabanaft GmbH (The Damianos) [1971] 2 QB 588; Hi-Fert Pty
Ltd v Kiukiang Maritime Carriers Inc (No 5) (1998) 90 FCR 1. See generally, LexisNexis, Halsbury’s Laws of Australia
(at 10 June 2009) 25 Arbitration, „6 Jurisdiction of Arbitrator‟ [25-345]. 17
See, eg, Ulysses Compania Naviera SA v Huntingdon Petroleum Services Ltd [1990] 1 Lloyd‟s Rep 160;
Commonwealth of Australia v Citra Constructions (1985) 2 BCL 285; TNT Bulkships Ltd v Hopkins and Interstate Pty
Ltd (Unreported, Northern Territory Supreme Court, Asche J, 17 December 1987). See also discussion in John Tyrill,
„Arbitration Agreements and Arbitrator‟s Jurisdiction‟ (1996) Australian Construction Law Newsletter 4. 18
Government Insurance Office of New South v Atkinson-Leighton Joint Venture (1979) 146 CLR 206, 235. 19
Convention on the Limitation of Liability for Maritime Claims, opened for signature 19 November 1976, [1991] ATS
12 (entry into force 1 December 1986) incorporated into Australian law by Limitation of Liability for Maritime Claims
Act 1989 (Cth). 20
ICL Shipping Ltd and Steamship Mutual Underwriting Association (Underwriting) Ltd v Chin Tai Steel Enterprise Co
Ltd and Others (The ICL Vikraman) [2004] 1 Lloyd‟s Rep 21, 30-32. See generally, Patrick Griggs, Richard Williams
and Jeremy Farr, Limitation of Liability for Maritime Claims (LLP, 4th edition, 2005) 66.
6
Claimant‟s cargo from Guilder to Schilling depends upon whether the contract has been
breached.21
1.4 The Respondent’s claim to limit its liability should be resolved in conjunction with all other
matters in dispute.
8. Given that a limitation of liability claim is capable of resolution by arbitration, it is appropriate
that it be determined in conjunction with the other matters that are the subject of dispute. The
commercial purpose of the contract indicates that the parties intended to establish a „one-stop
method of adjudication‟, whereby all matters in dispute would be determined together.22
9. In the alternative, the Tribunal‟s lack of jurisdiction to resolve the Respondent‟s claim to limit its
liability has no effect on the competence of the Tribunal to determine all other matters in
dispute.23
1.5 The Tribunal is validly constituted.
10. The Tribunal must be constituted by three persons recognised by Maritime Law Association of
Australia and New Zealand („MLAANZ‟) as having expertise in shipping or maritime matters.24
11. Generally, arbitrators recognised by MLAANZ are persons „of standing in the maritime
community with an interest in maritime affairs‟.25 MLAANZ „prefers‟26 persons to be: (a)
21
See Facts, p 57: Claimant‟s Statement of Claim [3]-[4]. 22
Fiona Trust & Holding Corp v Privalov [2007] UKHL 40; Comandate Marine Corp v Pan Australia Shipping Pty Ltd
(2006) 157 FCR 45. See generally, Joachim Delaney and Katherina Lewis, „The Presumptive Approach to the
Construction of Arbitration Agreements and the Principle of Separability -- English Law Post Fiona Trust and Australian
Law Contrasted‟ (2008) UNSW Law Journal 31(1) 341. 23
Hi-Fert Pty Ltd and Anor v Kiukiang Maritime Carriers Inc and Another (1998) 159 ALR 142, 163 (Emmett J);
Government Insurance Office of New South v Atkinson-Leighton Joint Venture (1979) 146 CLR 206. 24
Facts, p 39: Charterparty cl 36(c). 25
The Maritime Law Association of Australia and New Zealand, Policy to Join Panel of Arbitrators, MLAANZ
Arbitration <http://www.mlaanz.org/Uploads/Policy_to_Join_Panel_of_Arbitrators.pdf> 26
Ibid.
7
accredited by the Institute of Arbitrators and Mediators Australia, or similar body; or (b) a lawyer
with at least ten years of relevant practice.27 Satisfaction of these criteria is not required:
recognition by MLAANZ ultimately depends on the President‟s „broad discretion‟.
12. All persons nominated to arbitrate this dispute meet the standard set by the parties. Mr
Papandreou‟s lengthy experience as a Prime Minister of a large shipping nation28 indicates
expertise in shipping matters and is sufficient to meet MLAANZ‟s broad and inclusive standards.
B. THE RESPONDENT’S ENTITLEMENT TO GENERAL AVERAGE
2. BY DEVIATING TO THE PORT OF GUILDER THE RESPONDENT BREACHED THE
CHARTERPARTY.
2.1 There was a Force Majeure Event.
13. The Claimant concedes that there was a Force Majeure Event as defined by the Charterparty.29
2.2 The rights and obligations of the parties changed on 11 January 2011.
14. During a Force Majeure Event, the contractual rights and obligations of the parties are those
prescribed by the force majeure clause: all other contractual rights and obligations are
suspended.30
15. The contractual position of the parties alters when the party seeking to invoke the force majeure
clause validly notifies the other party of the occurrence of a Force Majeure Event.31 On 11
27
Ibid. 28
Facts, p 54: Claimant‟s letter dated 30 June 2010. 29
Facts, p 13: Charterparty, cl 25. 30
See Callide Power Management Pty Ltd v Callide Coalfields (Sales) Pty Ltd [2008] QCA 182 [49]-[53]. 31
Facts, p 35: Charterparty cl 25. See generally, Guenter Treitel, Frustration and Force Majeure (Sweet & Maxwell,
2nd
, 2004) ch 12.
8
January 2011, the Respondent delivered the Claimant a valid force majeure notice, which
triggered a change in its rights and obligations.32
16. From 11 January 2011, the contractual position of the Respondent was as follows. The
Respondent had „liberty to deviate for the purpose of saving life or property‟,33 an obligation to
„take all reasonable steps to minimise any delay‟ caused by the Force Majeure Event,34 and a
right to terminate the contract if the Force Majeure Event lasted for at least 30 days.35
2.3 The Respondent was not at liberty to deviate to Guilder for the purpose of saving life or
property.
17. Waiting for the Port of Schilling to reopen posed no risk to life or property. There is no evidence
that the weather experienced at the Port of Schilling had any effect on the Drachma.36
Thus, the
Respondent‟s deviation from Schilling to Guilder cannot be justified in respect of its liberty to
deviate for the purpose of saving life and property.
2.4 Deviation to Guilder was not a reasonable step to minimise delay.
18. During the Force Majeure Event, the Respondent was obliged „to take all reasonable steps to
minimise any delay‟ caused by the Force Majeure Event.37
The Respondent breached this
obligation because its deviation to Berth No 3 at the Port of Guilder was not reasonable.
19. Primarily, it was not reasonable for the Respondent to have deviated to Berth No 3 at the Port of
Guilder because it was not safe to discharge the Drachma‟s cargo of Ammonium Nitrate at that
berth. The Report of the Guilder Maritime Inspection Services states that „berth 3 [was] not
32
Facts, p 45: Respondent‟s letter dated 11 January 2011. 33
Facts, p 35: Charterparty cl 25. 34
Facts, p 35: Charterparty cl 25(i). 35
Facts, p 35: Charterparty cl 25(ii). 36
See Facts, p 44: The Schilling Daily newspaper report. 37
Facts, p 35: Charterparty cl 27(i).
9
licensed to receive dangerous or explosive cargoes‟.38
Ammonium Nitrate is a dangerous
cargo.39
It follows that, in effect, the Respondent sought to deviate to and discharge dangerous
cargo at a berth that was not licensed to receive it. Such an enterprise is inherently unsafe and
cannot be regarded as reasonable.
20. The unreasonableness of the Respondent‟s enterprise is not mitigated by asserting that the
Claimant should have nominated an alternative safe berth. Whereas the charterer is obliged to
nominate a safe berth in order to conclude the Charterparty, the charterer is under no obligation
to nominate another safe berth if the first berth subsequently becomes unsafe.40
In this case, in
the context of a Force Majeure Event, the specific obligation to nominate an alternative safe berth
rested with the Respondent. This specific obligation was an aspect of its general obligation to
take all reasonable steps to minimise delay.
21. Nor is the unreasonableness of the Respondent‟s enterprise mitigated by asserting that the
Claimant should have notified the Respondent that Berth No 3 was unsafe. Shippers are well
placed to ascertain for themselves whether a berth is safe: indeed, under Australian law, shippers
are required at all times to have regard to and comply with numerous safety regulations.41
Further, the parties have given this general duty contractual force.42
The Respondent cannot
complain that the Claimant did not actively forewarn the Respondent of its imprudence.
22. Further, the terms of the contract and the correspondence between the parties indicate that safety
was important to them. On 15 November 2011, the Respondent stated its commitment to ensure
the „safe and efficient transport of the [Claimant‟s] cargo‟.43
Further, the parties have required
38
Facts, p 50: Guilder Maritime Inspection Services Report. 39
International Maritime Authority, International Maritime Dangerous Goods Code (2010) vol 2, compliance with
which is mandatory under Australian law: Marine Orders Part 41, Issue 10 (carriage of dangerous goods) 2012 (Cth). 40
Julian Cooke et al, Voyage Charters (Informa, 3rd ed, 2007). 41
See, Navigation Act 1912 (Cth) s 410. 42
Facts, p 33: Clause 22. 43
Facts, p 2: Respondent‟s email dated 15 November 2010.
10
safety in the provision of berths,44
docks or wharves,45
the loading and discharge of cargo,46
the
use of cranes,47
and the employment of crew.48
The Respondent must also at all times comply
with all relevant safety regulations.49
23. It is appropriate to construe the Respondent‟s obligation to take all reasonable steps to minimise
delay in light of the importance that the parties evidently placed on safety. The Respondent‟s
obligation to take all reasonable steps to minimise delay should be understood as requiring the
Respondent to have taken steps that were at least safe. The Respondent‟s action to deviate to a
berth that was not licensed to receive dangerous cargo was not a reasonably safe action. On that
basis the Respondent breached the Charterparty.
24. Alternatively, it was not reasonable for the Respondent to have deviated to Guilder when it did.
It is significant that the parties agreed to extend to 30 days the period that each party must wait to
cancel delivery on account of delay caused by a Force Majeure Event.50
Further, the force
majeure clause stipulates that all contractual obligations shall resume if the Force Majeure Event
ceases.51
In this context, it would have been reasonable for the Respondent to deviate from
Schilling only if it was reasonably likely that the Force Majeure Event would last for at least 30
days, thus making waiting at Schilling futile. When the Respondent deviated from Schilling after
only 19 days of delay, it was not in a position to conclude that the Force Majeure Event would
last at least 30 days. By deviating to Guilder, the Respondent exposed itself to the real risk that if
the Force Majeure Event ceased before the expiration of 30 days it would be obliged by the
44
Facts, pp 24-25: Charterparty Boxes 5 and 9. 45
Facts, p 31: Charterparty cl 31. 46
Facts, p 28: Charterparty cl 9. 47
Facts, p 34: Charterparty cl 23. 48
Facts, p 42: Charterparty cl 51. 49
Facts, pp 33-34: Charterparty cl 22. 50
See Facts, pp 21-22: Claimant‟s letter dated 16 November 2011 and Respondents reply dated 30 November 2011. See
also Facts, p 35: Charterparty cl 25(ii). 51
Facts, p 35: Charterparty cl 25(ii).
11
Charterparty to return to Schilling and discharge its cargo there. In order to minimise
unnecessary travel at sea, which is inherently dangerous, it was reasonable for the Respondent to
have waited more than 19 days so that it could reliably ascertain that it was reasonably likely that
the delay would continue for at least 30 days and that anchorage off Schilling was futile. By
failing to adopt this course the Respondent breached the Charterparty.
25. In the further alternative, it was not reasonable for the Respondent to have deviated to Guilder
because it was not the in mutual interest of the parties to do so. Deviation will be regarded as
reasonable only if it is in the mutual interest of the shipper and the charterer.52
The Claimant‟s
strong direction that the Respondent not deviate from Schilling53
indicates that such deviation
was not in both parties‟ interest. Further, the Respondent‟s statement to the Guilder Harbour
Master that it was important for it to discharge its cargo to meet a commercial commitment54
suggests that the Respondent‟s deviation was motivated by commercial self-interest rather than
mutual interest. This motivation has been held to be unreasonable.55
Thus, by deviating in a
manner that was not in the mutual interest of the parties, the Respondent breached the
Charterparty.
2.5 The Claimant elected to terminate the contract in light of the Respondent’s deviation.
26. The Respondent‟s journey from Schilling to Guilder was an unreasonable deviation that
amounted to a repudiation of the contract. The Respondent‟s repudiation entitled the Claimant to
elect to terminate the contract.56
A clear and unequivocal act is necessary and sufficient to
terminate a contract, but what constitutes a clear and unequivocal act depends on the particular
52
Stag Line v Foscolo Mango & Co Ltd [1932] AC 328. 53
Facts, p 46: Claimant‟s letter dated 12 January. 54
Facts, p 49: Transcript of Radio Communications. 55
Hyundai Merchant Marine Co Ltd v Dartbrook Coal (Sales) Pty Ltd (2006) 236 ALR 115, 130 [62]. 56
Fermometal SARL v Mediterranean Shipping Co SA (The Simona) [1989] AC 788.
12
contractual relationship and the circumstances particular to the case.57
A positive act
demonstrating an intention to terminate is not required: it will be sufficient that the promisee
„makes plain‟ its intention to terminate.58
The Claimant made plain its intention to terminate the
contract if the Respondent persisted with its foreshadowed repudiatory conduct when it notified
the Respondent that it would „seek all costs and losses‟. The Respondent was left in no doubt that
the Claimant would treat the contract as being at an end, and would sue for damages, if the
Respondent deviated to Guilder contrary to the Claimant‟s instructions.
2.6 The Claimant did not affirm the contract after the Respondent’s repudiation.
27. It is for the Respondent to prove that the Claimant has affirmed the contract.59
The Respondent
must prove the existence of a clear and unequivocal act60
on the basis of „very clear evidence‟.61
The Respondent cannot prove affirmation because there is no such „clear evidence‟ in this case.
28. Further, the Respondent cannot imply affirmation on the basis of the Claimant‟s demand to
remain at Schilling. Insistence by the injured party that the repudiating party perform the
contract is equivocal.62
29. Nor can the Respondent imply affirmation on the basis of the Claimant‟s intention to pursue the
Respondent for „costs and losses‟. Although the commencement of an action claiming damages
57
Vitol SA v Norelf Ltd [1996] AC 800, 811. 58
Heyman v Darwins Ltd [1942] AC 356, 361. 59
Erlanger v The New Sombrero Phosphate Co (1878) 3 App Cas 1218, 1283; Australian Horizons (Vic) Pty Ltd v Ryan
Land Co Pty Ltd [1994] 2 VR 463, 499. 60
China National Foreign Trade Transportation Corp v Evolgia Shipping Co SA of Panama (The Mihalios Xilas) [1978]
2 Lloyd‟s Rep 397. 61
Yukon Line of Korea v Rendsburg Investments Corporation of Liberia [1996] 2 Lloyd‟s Rep 604, 608. 62
Ibid.
13
for breach has been held, in some cases, to be equivocal,63
the circumstances of this case
demonstrate the Claimant‟s unequivocal election to terminate rather than to affirm.64
3. THE RESPONDENT CANNOT CLAIM GENERAL AVERAGE
3.1 The Charterparty had been terminated before the General Average act occurred.
30. The Claimant‟s election to terminate the contract took effect when the Respondent deviated to
Guilder sometime after 11 January 2012.65
Henceforth all the contractual rights of the parties,
including the parties‟ right to claim General Average, ceased. Because the General Average act
occurred after the parties‟ contractual right had ceased, the Respondent‟s claim for General
Average cannot be sustained.
3.2 Even if the Respondent’s General Average claim can be sustained, it cannot claim damages
for the lost revenue of the Drachma.
31. Lost revenue pertaining to disuse of the Drachma is not a form of loss caused by or as a direct
consequence of a General Average event.66
Indeed, lost revenue pertaining to disuse of the
Drachma arises „by reason of delay‟ in the use of the Drachma and is „indirect‟ to the costs
related to the repair of the Drachma, and therefore shall not be admitted as General Average.67
63
General Billposting Co Ltd Atkinson [1909] AC 118; Garnac Grain Co Ltd v HM Faure & Fairclough Ltd [1966] 1
QB 650. 64
See above, para 26. 65
Facts, p 45: Respondent‟s letter dated 11 January 2012. Cf Facts, p 47: Respondent‟s letter dated 31 January 2011. 66
See York-Antwerp Rules 1994, Rule C: “Only such losses, damages or expenses which are the direct consequence of
the General Average act shall be allowed as General Average.” The York Antwerp Rules 1994 have been adopted by the
parties: Facts, p 36: Charterparty cl 27. 67
Ibid: “Demurrage, loss of market, and any loss or damage sustained or expense incurred by reason of delay, whether on
the voyage or subsequently, and any indirect loss whatsoever, shall not be admitted as General Average.” See Wetherall
& Co v London Assurance [1931] 2 KB 448; N Geoffrey Hudson, The York-Antwerp Rules: The Principles and Practice
of General Average Adjustment (LLP, 2nd
ed, 1996) 55-56.
14
C. COLLISION ISSUES
4. THE RESPONDENT IS LIABLE FOR THE DAMAGE TO THE WHARF AND
RELATED LOSS.
32. The Respondent owed a duty of care to the Claimant to take reasonable care to avoid reasonably
foreseeable risks of damage to the Claimant‟s berth at Guilder. Further, the Respondent is liable
for negligently causing the Claimant to suffer pure economic loss. The Respondent breached its
duty of care and is liable for the harm suffered by the Claimant, being the damage to the berth at
Guilder and related loss, and the pure economic loss suffered by way of payments made under
contractual obligations to third parties.
33. The Claimant must prove four elements to succeed in its claim, namely, that:
a) the Respondent owed a duty of care to the Claimant;
b) the Respondent breached this duty of care;
c) the breach of duty caused the Claimant‟s loss and damage; and
d) the Claimant‟s loss and damage is not too remote to be recoverable.
4.1 The Respondent owed a duty of care to the Claimant.
34. A shipper owes a duty of care to avoid acts that are likely to damage bridges, wharves and
jetties.68
A berth, such as the Claimant‟s, is effectively the same as a wharf or jetty. Thus, the
Master of the Drachma owed a duty of care to the Claimant to avoid causing reasonably
foreseeable damage to the berth. The Respondent is liable for the breach of this duty because it is
vicariously liable for the actions of the Master of the Drachma.69
68
See, for example, Port Kembla Coal Terminal Ltd v Braverus Maritime Inc (2004) 212 ALR 158, [322]. 69
See, for example, Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co of
Australia Ltd (1931) 46 CLR 41; New South Wales v Lepore; Samin v Queensland; Rich v Queensland (2003) 212 CLR
511.
15
35. The Respondent also has a duty to avoid causing the Claimant pure economic loss. The
Claimant‟s pure economic loss arises from claims made on it by third parties for breach of
contract.70
These claims constitute pure economic loss notwithstanding that the event underlying
the payments was damage to the berth. Thus, the cause of the Claimant‟s loss was its contractual
obligation to indemnify third parties.71
36. To determine whether the Respondent owed a duty of care to the Claimant, the ultimate issue is
whether the Respondent should have had the Claimant in mind when it pursued conduct that
caused the Claimant damage.72
There is no general rule that people have a duty to take care not to
cause reasonably foreseeable financial harm to their neighbours.73
A duty of care for pure
economic loss requires that a person should have foreseen that their neighbour would suffer
economic loss, and that a special relationship exists between the parties, so that the first party
should have had the other party particularly in mind as likely to suffer economic loss.74
37. A number of factors are relevant to whether a special relationship exists.75
First, the loss must be
reasonably foreseeable. Here, it is plainly foreseeable that the Claimant might periodically loan
out its berth and suffer loss associated with its disuse. However, foreseeability alone does not
establish a duty of care to avoid pure economic loss.76
The imposition of a duty of care must not
impose on the defendant indeterminate liability. The Respondent is not exposed to such liability
because the Claimant belongs to an ascertainable class of persons to whom economic loss could
70
Facts p 51: Claimant‟s email dated 1 March 2011: “Claims by other port users with whom Markka had contracted the
use of its berth”. 71
Esso Petroleum Co Ltd v Hall Russell & Co Ltd (The Esso Bernicia) [1989] AC 643, 678 (Lord Tulichettle). 72
Donoghue v Stevenson [1932] AC 562, 580 (Lord Atkin). 73
Caltex Oil v The Dredge Willemstad (1976) 136 CLR 529, 555, 558-559, 592, 598; Perre v Apand (1999) 198 CLR
180, 192 [4] (Gleeson CJ), 197 [25] (Gaudron J), 253 [198] (Gummow J). 74
Caltex Oil v The Dredge Willemstad (1976) 136 CLR 529, 558. 75
See, for example, Perre v Apand (1999) 198 CLR 180, 231 [133] (McHugh J). 76
Perre v Apand (1999) 198 CLR 180, 198 [27] (Gaudron J); 222 [111] (McHugh J).
16
be foreseen as a result of the Respondent‟s negligence,77
namely, berth-owners at the Port of
Guilder. Thirdly and importantly, the Claimant was vulnerable.78
The Claimant was wholly
vulnerable to the Respondent‟s exercise of care because there was no other action (apart from
insurance, which is not a relevant factor)79
that the Claimant could have engaged in to protect
itself from the loss that the Respondent caused. Fourthly, the imposition of a duty does not
unduly interfere with the Respondent‟s commercial freedom. McHugh J suggested that where a
person is already under a duty to take reasonable care with respect to a particular person, it is
unlikely that their commercial freedom would be interfered with in such a way to prevent the
imposition of a duty to avoid causing pure economic loss.80
Finally, the position of the
Respondent is closely analogous to a relationship where one person is in a position to control the
exercise or enjoyment of legal rights by another.81
The Respondent knew, or ought reasonably to
have known, that its conduct could cause loss or impairment of the legal rights possessed,
enjoyed or exercised by the Claimant.
4.2 The Respondent breached its duty of care to the Claimant.
38. The Claimant must satisfy three elements to establish a breach of duty, namely, that the risk of
harm was foreseeable, not insignificant, and that a reasonable person in the circumstances would
have taken better precaution.82
39. The Respondent breached its duty in two respects. First, it failed to engage a pilot at a
compulsory pilotage port.83
Secondly, it failed to approach the berth at a „safe speed‟.84
77
Ibid, 198 [32] (Gaudron J), 222 [109] (McHugh J); Caltex Oil v The Dredge Willemstad (1976) 136 CLR 529, 568
(Stephen J), 591 (Mason J); see also Bryan v Maloney (1995) 182 CLR 609, 618-19. 78
Caltex Oil v The Dredge Willemstad (1976) 136 CLR 529, 555, 576-577, 593; Perre v Apand (1999) 198 CLR 180,
220 [104], 225 [118] (McHugh J). 79
Perre v Apand (1999) 198 CLR 180, 204 [50], 230 [130] (McHugh J); Caltex Oil v The Dredge Willemstad (1976) 136
CLR 529, 580-581 (Stephen J). 80
Ibid, 204 [50], 225 [117] (McHugh J). 81
See Perre v Apand (1999) 198 CLR 180, 202 [41] (Gaudron J). 82
Civil Liability Act 2003 (Qld), s 9.
17
40. A reasonable person in the circumstances would not have proceeded without a pilot on board.85
In considering what a reasonable person would have done, it is necessary to have regard to the
probability of the harm occurring if care was not taken, the likely seriousness of the harm, the
burden of taking precautions and the social utility of the activity giving rise to the risk.86
In the
present case, there was a real possibility of harm if the regulations were disobeyed. A pilot is in
the best position to navigate a port safely because they have expertise and the appropriate
knowledge (amongst other things) of the physical geography of the port, port infrastructure and
port-specific risks.87
As such, reckless disregard for the requirement of a pilot exposed the
Claimant‟s berth to jeopardy. Further, the potential harm was serious. Given the highly explosive
cargo aboard the Drachma,88
the consequences of careless navigation could have been dire.
Moreover, there was little burden in taking aboard a pilot. A reasonable offer of pilotage was
made.89
Harbour Control indicated that a pilot would be with the Drachma „shortly‟.90
Any
assertion by the Respondent that taking on board a pilot would have caused unreasonable delay is
baseless. Additionally, there was no overriding or alternative duty that required the Master of the
Drachma, or a reasonable person in the circumstances, to proceed to the berth without a pilot.91
41. The Respondent also failed to approach the berth at a safe speed. Rule 6 of the Convention on the
International Regulations for Preventing Collisions at Sea92
requires that a vessel must at all
83
Facts, p 50: Guilder Maritime Inspection Services Report. 84
Ibid. 85
See Civil Liability Act 2003 (Qld), s 9(1)(c). 86
Civil Liability Act 2003 (Qld), s 9(2); Wyong Shire Council v Shirt (1980) 146 CLR 40, 47 (Mason J); Road and
Traffic Authority of New South Wales v Dederer (2007) 234 CLR 330. 87
National Marine Guidance Manual, „Guidelines for Marine Pilotage Standards in Australia‟ (at November 2008). 88
International Maritime Authority, International Maritime Dangerous Goods Code (2010) vol 2, compliance with
which is mandatory under Australian law: Marine Orders Part 41, Issue 10 (carriage of dangerous goods) 2012 (Cth). 89
See generally, Jenkin v Godwin (The “Ignition”) [1983] 1 Lloyd‟s Rep 382. 90
Facts, p 49: Transcript of Radio Communications, Port of Guilder. 91
Cf Strong Wise Ltd v Esso Australia Resources Pty Ltd (2010) 267 ALR 259. 92
Convention on the International Regulations for Preventing Collisions at Sea, opened for signature 20 October 1972
(entered into force 15 July 1977); see Marine Orders - Part 30: Prevention of Collisions, Issue 8; Navigation Act 1912
(Cth), s258.
18
times proceed at a safe speed. The Guilder Maritime Inspection Services Report („the Report‟)93
states that the Respondent approached the berth at „too high speed‟. Approaching the berth at an
excessive speed was unsafe: this was a breach of duty of care as there was a reasonably
foreseeable and not insignificant risk that damage might arise. Further, the existence of the berths
and other port infrastructure, the fact that it was night-time94
and the highly explosive cargo
aboard the Drachma exacerbated the danger of travelling at an excessive speed.95
4.3 The Respondent’s breach of duty caused the Claimant’s loss.
42. To prove negligence the Claimant must demonstrate that the Respondent‟s act caused or „was
intimately connected with and contributed to‟ the harm suffered. It must be shown that the breach
of duty was a necessary condition of the occurrence of harm („factual causation‟).96
43. The requirement of factual causation requires an examination of the „but for‟ test. It must be
determined whether the defendant‟s particular breach of the duty of care, rather than some other
cause was, more probably than not, a necessary precondition for the plaintiff‟s injury.97
On the
balance of probabilities, had the Respondent engaged a pilot and approached the berth at a safe
speed, the collision would not have occurred. The Report states that the damage occurred „as a
consequence‟ of the Drachma‟s excessive speed.98
44. The Respondent may escape liability if it can show that the causal link was severed by a „novus
actus interveniens’.99
To prove a novus actus interveniens, the Respondent cannot rely on the
93
Facts, p 50: Guilder Maritime Inspection Services Report. 94
Facts, p 49: Transcript of Radio Communications, Port of Guilder. 95
See, for example, Rigney v Browne (2004) Aust Tort Reports 81-765, [38]-[39]; see Facts p 1: Claimant‟s email dated
1 November 2010. 96
Civil Liability Act 2003 (Qld), s 11(1)(a); Adeels Palace v Moubarak (2009) 239 CLR 420, 440 [45]; Amaca Pty Ltd v
Ellis; The State of South Australia v Ellis; Millennium Inorganic Chemicals Ltd v Ellis (2010) 263 ALR 576, 587 [40]. 97
Adeels Palace v Moubarak (2009) 239 CLR 420, 440 [45]; Amaca Pty Ltd v Ellis; The State of South Australia v Ellis;
Millennium Inorganic Chemicals Ltd v Ellis (2010) 263 ALR 576, 587 [40]. 98
Facts, p 50: Guilder Maritime Inspection Services Report. 99
See for example, March v Stramare (1991) 171 CLR 506.
19
fact that they were not stopped and apprehended by the Harbour Authority.100
March v
Stramare101
makes clear that where a defendant‟s wrongful conduct has generated the very risk
of injury resulting, the defendant will not be able to rely on the doctrine of novus actus
interveniens. Here, the risk of harm is generated by the Respondent‟s wrongful conduct in
disobeying the compulsory pilotage regulations. It is inconsequential that the auto-tracking
system was muted, and the Respondent cannot rely on that fact as a break in the chain of
causation.
4.4 The loss and damage suffered by the Claimant was not too remote.
45. The loss or damage suffered must not be too remote.102
The relevant question is whether it „is
appropriate for the scope of liability of the person in breach to extend to the harm so caused‟.103
46. Essentially, the issue is whether responsibility for harm should be imposed upon the Respondent.
In the present case, the Respondent has recklessly disregarded regulations and thereby has placed
the Claimant‟s property at risk. In doing so, the Respondent has caused the Claimant to suffer
loss from which it was not able to protect itself. The law of negligence aims to ensure that those
who can reasonably foresee the occurrence of harm avoid its infliction.104
47. Further, the damage suffered by the Claimant was of the same kind, class, character and type as
that which was reasonably foreseeable.105
That is, the physical damage and related loss was a
reasonably foreseeable consequence of careless navigation. It was reasonably foreseeable that
careless navigation or excessive speed when berthing could result in damage to the berth.
Further, pure economic loss was a reasonably foreseeable consequence of a failure to take
100
Facts, p 50: Guilder Maritime Inspection Services Report. 101
(1991) 171 CLR 506, 518-9 (Mason CJ). 102
See generally, Overseas Tankship (UK) Ltd v Miller Steamship Co Pty Ltd (The “Wagon Mound”) (No. 1) [1961] AC
388. 103
Civil Liability Act 2003 (Qld), s 11(1)(b). 104
Danuta Mendelson, The New Law of Torts (Oxford University press, 2nd
ed, 2010) 278. 105
See Hughes v Lord Advocate [1963] AC 837 (Lord Reid).
20
reasonable care. It was reasonably foreseeable that a berth might be loaned to other parties and
that economic loss would flow from contractual claims by these parties.
D. LIMITATION OF LIABILITY ISSUES
5. THE RESPONDENT MAY NOT LIMIT ITS LIABILITY UNDER THE LIMITATION
CONVENTION FOR PURE ECONOMIC LOSS AND COSTS OF CARGO TRANSPORT.
5.1 The pure economic loss of the Claimant does not fall within the Limitation Convention.
48. The Limitation Convention,106
under which the Respondent has constituted a single Limitation
Fund,107
entitles the certain parties to limit their liability for applicable claims. The Claimant has
suffered pure economic loss by its contractual liability to third parties for their loss of the use of
its berth. This kind of pure economic loss falls outside the ambit of the Limitation Convention.
As such, the Respondent‟s claim to limits its liability must fail.
49. The Limitation Convention defines the relevant heads of damage for which liability can be
limited.108
Pure economic loss is not expressly recoverable. Nor is the pure economic loss in this
case an example of „consequential loss‟109
or the „infringement of rights other than contractual
rights‟.110
106
Convention on Limitation of Liability for Maritime Claims, opened for signature 19 November 1976, [1991] ATS 12
(entered into force 1 December 1986); 1976 Protocol to Amend the Convention on Limitation of Liability for Maritime
Claims, opened for signature 2 May 1996, [2004] ATS 16 (entered into force 13 May 2004); see also Limitation of
Liability for Maritime Claims Act 1989 (Cth). 107
Facts, p 58: Respondent‟s Statement of Claim, [5]. 108
Convention on Limitation of Liability for Maritime Claims, opened for signature 19 November 1976, [1991] ATS 12
(entered into force 1 December 1986), art 2.1. 109
Convention on Limitation of Liability for Maritime Claims, opened for signature 19 November 1976, [1991] ATS 12
(entered into force 1 December 1986), art 2.1(a); cf Qenos Pty Ltd v Ship “APL Sydney” (2009) 260 ALR 692. 110
Convention on Limitation of Liability for Maritime Claims, opened for signature 19 November 1976, [1991] ATS 12
(entered into force 1 December 1986), art 2.1(c).
21
5.2 Pure economic loss is not ‘consequential loss’.
50. The Limitation Convention should be interpreted in good faith in accordance with the ordinary
meaning to be given to the terms of the treaty in their context and in the light of its object and
purpose.111
51. Where the text of the Limitation Convention is ambiguous, the Tribunal should have regard to the
travaux préparatoires and the circumstances in which the Limitation Convention was
concluded.112
The travaux préparatoires state that consequential damage extends both to physical
damage and abstract damage.113
However, such damage must arise from loss or damage in the
„concrete sense‟, which the travaux préparatoires defines as „physical loss and broadly speaking,
physical damage‟.114
For the reasons given in paragraph 37, the Claimant suffered economic
loss. Such loss is not damage in the concrete sense. It follows that it does not come within the
ambit of „consequential loss‟.
52. The decision of Qenos Pty Ltd v APL Sydney115
should not be followed. Principles of domestic
law have little, if any, application in the construction of international conventions.116
As such,
reference to Australian decisions which focus upon a domestic curial process are unhelpful,
particularly in the context of an international commercial arbitration.117
111
Vienna Convention on the Law of Treaties, opened for signature 23 May 1969, 1155 UNTS 331 (entered into force 27
January 1980), art 31(1). 112
Ibid, art 32. 113
The Travaux Préparatoires of the LLMC Convention, 1976 and of the Protocol of 1996 (Comite Maritime
International Headquarters, Belgium, 2000), 62. 114
Ibid, 62. 115
(2009) 260 ALR 692. 116
Stag Line v Foscolo Mango & Co Ltd [1932] AC 328, 350; The Shipping Corporation of India Limited v Gamlen
Chemical Co [A/Asia] Pty Ltd (1980) 147 CLR 142, 159. 117
See, for example, Qenos Pty Ltd v Ship “APL Sydney” (2009) 260 ALR 692.
22
5.3 The pure economic loss of the kind suffered by the Claimant is not ‘infringement of rights
other than contractual rights’.
53. Article 2.1(c) of the Limitation Convention permits the Respondent to limit liability for loss for
„claims in respect of other loss resulting from infringement of rights other than contractual rights,
occurring in direct connexion with the operation of the ship or salvage operations‟.
54. The travaux préparatoires makes clear that this extends to abstract loss, not arising from concrete
damage, which, prima facie, includes pure economic loss.118
55. However, the losses in question are not in „direct connexion with the operation of the ship‟. The
loss essentially arises from the Claimant‟s liability to third parties for contractual breaches.119
This is not a matter that can be considered to be in direct connexion with the operation of the
ship. The loss arises only indirectly from the operation of the ship. In Qenos v APL Sydney,120
the claim arose directly against the shipowner in tort for its negligent act and the resulting pure
economic loss, rather losses arising from breaches of a contractual right which occurred by
reason of the negligent act.
5.4 Further, the Respondent may not limit its liability for its unreasonable deviation to Guilder.
56. For the Respondent to be entitled to limit its liability under the fund, it must be shown that the
claim for breach of contract comes within one of the heads of damage as outlined in Article 2.1
of the Limitation Convention.
57. The Claimant‟s claim of USD$250,000 for breach of contract arising from the Respondent‟s
unreasonable deviation to the Port of Guilder cannot reasonably be said to come within any of the
118
The Travaux Préparatoires of the LLMC Convention, 1976 and of the Protocol of 1996 (Comite Maritime
International Headquarters, Belgium, 2000), 69. 119
Esso Petroleum Co Ltd v Hall Russell & Co Ltd (The Esso Bernicia) [1989] AC 643, 678 (Lord Tulichettle). 120
(2009) 260 ALR 692.
23
named heads of damage in the Limitation Convention. As such, it is not capable of limitation
under the Limitation Fund.
5.5 Alternatively, if the Respondent may limit its liability for the loss suffered by the Claimant,
it may not constitute a single Limitation Fund because there are two ‘distinct occasions’
that gave rise to the Claimant’s loss.121
58. Article 6(1)(b) of the Limitation Convention entitles a shipowner to limit its liability to a fund for
claims “arising on any distinct occasion”. In the event that multiple distinct occasions occur,
multiple funds must be constituted.
59. In Strong Wise Limited v Esso Australia Resources Pty Ltd,122
the Federal Court of Australia
considered the question of whether the losses suffered by the applicant were the result of one or
more „distinct occasions‟. Rares J suggested that, in light of the context and text of the Limitation
Convention, it is a matter of commonsense whether two events can be considered sufficiently
discrete to be called „distinct‟.123
60. The first distinct occasion arose on 30 January 2011 when the Drachma left anchorage at
Schilling.124
This action caused loss to the Claimant in costs associated with road transport of the
cargo back to Schilling.125
61. The second distinct occasion arose on 25 February 2011 when the Master of the Drachma
deliberately disobeyed the directions of the Harbour Master and proceeded to berth without a
pilot on board.126
121
Convention on Limitation of Liability for Maritime Claims, opened for signature 19 November 1976, [1991] ATS 12
(entered into force 1 December 1986), art 6. 122
(2010) 267 ALR 259. 123
Ibid, 276 [57], 282 [77]-[80]; LK v Director-General, Department of Community Services (2009) 237 CLR 582, [36]
(French CJ, Gummow, Hayne, Heydon and Kiefel JJ). 124
Facts, p 47: Respondent‟s email dated 31 January 2011. 125
Facts, p 52: Claimant‟s email dated 1 March 2011. 126
Facts, p 50: Guilder Maritime Inspection Services Report.
24
62. The second occasion caused loss or damage to the Claimant that is different from, or separately
identifiable to, the first occasion.127
63. The Respondent must therefore create two Limitation Funds, one for each „distinct occasion‟, if it
may limit its liability in respect of both.
127
Strong Wise Ltd v Esso Australia Resources Pty Ltd (2010) 267 ALR 259, 281-2 [78]-[80].
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PRAYER FOR RELIEF
For the reasons submitted above, the Claimant respectfully requests this Tribunal to:
DECLARE that it does have jurisdiction to hear all disputes arising out of the Charterparty;
Further,
ADJUDGE that the Respondent is liable to the Claimant for:
1. Road and transport costs for transportation of the cargo from Guilder to Schilling of
USD$250,000.00;
2. Damage to the berth at Guilder of USD$35,000,000.00;
3. Loss of use of the berth at Guilder of USD$5,000,000.00; and
4. Payment of claims to third parties of USD$7,500,000.00.
Further,
ADJUDGE that the Claimant is not liable to the Respondent for General Average;
Further,
ADJUDGE that the Respondent is not entitled to limit its liability in respect of the claims for pure
economic loss and breach of contract under the Limitation of Liability for Maritime Claims Act 1989
(Cth).
Further and alternatively,
ADJUDGE that the Respondent is not entitled to limit its liability in respect of the claims for under
the Limitation of Liability for Maritime Claims Act 1989 (Cth) to a single fund.