ELEVENTH ANNUAL INTERNATIONAL MARITIME LAW ARBITRATION MOOT

2010

THE UNIVERSITY OF TECHNOLOGY

SYDNEY

IN THE MATTER OF AN ARBITRATION HELD AT GAMMA

MEMORANDUM FOR THE RESPONDENT

ON BEHALF OF: AGAINST:

SSP Pty Ltd

New England Chartering and Trading Company

LLC

The Ship ‘MV SUPER P’

A Charter Party Dated 19 July 2008

RESPONDENT

CLAIMANT

TEAM NO. 1

SAYAK BHATTACHARYA

MICHAEL GORRIE DUNCAN MCKAY

SARATH SEETHAMRAJU

ELEVENTH ANNUAL INTERNATIONAL MARITIME LAW ARBITRATION MOOT

2010

TEAM NO 1

IN THE MATTER OF AN ARBITRATION HELD AT GAMMA

MEMORANDUM FOR THE RESPONDENT

ON BEHALF OF: AGAINST:

SSP Pty Ltd

New England Chartering and Trading Company

LLC

The Ship ‘MV SUPER P’

A Charter Party Dated 19 July 2008

RESPONDENT

CLAIMANT

SAYAK BHATTACHARYA MICHAEL GUNCAN MCKAY SARATH SEETHAMRAJU

I

TABLE OF CONTENTS

TABLE OF CONTENTS .................................................................................................................... I

LIST OF ABBREVIATIONS .......................................................................................................... III

TABLE OF AUTHORITIES ........................................................................................................... IV

SUMMARY OF FACTS...................................................................................................................... 1

THRESHOLD ARGUMENTS ........................................................................................................... 5

PROCEDURAL LAW ......................................................................................................................... 5

I. THE ARBITRAL PROCEDURE IS GOVERNED BY CLAUSE 19(D) OF THE CHARTER

PARTY AGREEMENT ..................................................................................................................... 5

A. THE ARBITRATION IS TO BE CONDUCTED ACCORDING TO THE RULES OF THE

MARITIME LAW ASSOCIATION OF AUSTRALIA AND NEW ZEALAND ......................... 5

B. Gamma is the seat of the Arbitration ...................................................................................... 6

1. The International Arbitration Act 1974 (Upsilon) is the lex arbitri of the dispute .............. 6

SUBSTANTIVE LAW ......................................................................................................................... 6

II. THE CHARTER PARTY IS SUBJECT TO THE LAW OF GAMMA, UPSILON .................... 6

A. THE TRIBUNAL IS TO DETERMINE THE SUBSTANTIVE LAW OF THE

AGREEMENT PURSUANT TO THE CONFLICT OF LAWS RULES IT CONSIDERS

APPLICABLE ................................................................................................................................ 6

B. The law of Gamma, Upsilon is the proper law of the Charter Party ....................................... 7

JURISDICTION OF THE ARBITRAL TRIBUNAL ...................................................................... 8

III. THE TRIBUNAL HAS NO JURISDICTION TO DETERMINE ANY PART OF THE

CLAIM WHICH RELIES UPON THE LETTER OF 6 OCTOBER 2008 ......................................... 8

A. THE TRIBUNAL’S JURISDICTION IS LIMITED TO MATTERS PERTAINING TO

THE CHARTER PARTY ONLY................................................................................................... 8

1. The Letter of 6 October 2008 is part of a collateral contract subject to the exclusive

jurisdiction of the Courts of Omicron ......................................................................................... 8

ARGUMENTS AS TO MERITS ...................................................................................................... 10

IV. THE RESPONDENT IS NOT LIABLE FOR THE CLAIM BY THETA IN THE AMOUNT

OF U$4,999,889 ............................................................................................................................... 10

A. THE CLAIMANT IS LIABLE FOR ALL LOSSES ARISING FROM THE MASTER

ISSUING A THE CLEAN BILL OF LADING ........................................................................... 10

B. FURTHER THE CLAIMANT HAS BREACHED ITS DUE DILIGENCE OBLIGATIONS

PURSUANT TO THE HAGUE-VISBY RULES AND CANNOT RELY ON EXCEPTION TO

LIABILITY THEREIN ................................................................................................................ 11

1. The Claimant has not exercised due diligence to provide a seaworthy vessel under Article

3 r 1 of the Hague Visby Rules. ................................................................................................ 12

II

C. FURTHER THE CLAIMANT HAS BREACHED ITS OBLIGATIONS UNDER CLAUSE

20 OF THE CHARTER PARTY AGREEMENT ........................................................................ 14

1. The Claimant is under an obligation to provide clean holds so as to satisfy Upsilon

Quarantine Standards ................................................................................................................ 14

2. The Claimant is unable to show it has not caused cargo contamination and is therefore

liable .......................................................................................................................................... 15

D. THE CLAIMANT CANNOT RELY ON THE LETTER OF 6 OCTOBER 2008 TO SEEK

INDEMNITY FOR THETA’S CLAIM AS IT HAS NO CONRACTUAL FORCE .................. 16

1. The letter of 6 October 2008 is not capable of creating binding obligations on the

Respondent as there are no clear offer or acceptance of its terms ............................................ 16

2. Alternatively the terms of the letter of 6 October 2008 are void for lack of consideration

18

E. ALTERNATIVELY, IF THE LETTER OF 6 OCTOBER 2008 HAS CONTRACTUAL

FORCE, THE WARRANTY HAS NOT BEEN BREACHED ................................................... 19

F. ALTERNATIVELY, IF THE LETTER OF 6 OCTOBER 2008 HAS BEEN BREACHED,

THE CLAIMANT HAS SUFFERED NO LOSS AS A RESULT ............................................... 19

V. THE RESPONDENT IS NOT LIABLE FOR THE PROSPECTIVE CLAIM BY BETA BETA

20

A. THE CLAIMANT HAS BREACHED CLAUSE 5 OF THE CHARTER PARTY ............. 20

B. FURTHER AND IN THE ALTERNATE, THE CLAIMANT HAS BREACHED

ARTICLE 3(2) OF THE HAGUE-VISBY RULES IN FAILING TO PROPERLY MAN,

EQUIP AND SUPPLY THE SHIP BY FAILING TO ENSURE THE CRANES WERE

ADJUSTED CORRECTLY ......................................................................................................... 21

VI. THE RESPONDENT IS NOT LIABLE FOR FREIGHT UNPAID IN THE AMOUNT OF

U$635,874.69 AND DAMAGES FOR DETENTION IN THE AMOUNT OF U$11,633,500 ....... 22

A. CLAIMS FOR FREIGHT AND DETENTION ARE CONSEQUENT UPON BREACH OF

THE CHARTER PARTY AGREEMENT OUTLINED AT IV .................................................. 22

B. FURTHER AND ALTERNATIVELY THE CLAIMANT HAS FAILED TO MAKE OUT

CONTRACTUAL CONDITIONS PRECEDENT TO ESTABLISH A BASIS FOR A

DAMAGES CLAIM..................................................................................................................... 23

1. LAYTIME HAS NOT EXPIRED UNDER THE ADDENDUM THEREFORE

DEMURRAGE AND/OR DAMAGES ARE NOT YET PAYABLE ...................................... 23

2. FURTHER AND ALTERNATIVELY THE CLAIMANT HAS AGREED TO

PAYMENT OF DEMURRAGE AND HAS FAILED TO ESTABLISH CONDITIONS

GIVING RISE TO A DAMAGES CLAIM .............................................................................. 24

3. THE CLAIMANT HAS FAILED TO SHOW BREACH OF AN IMPLIED SAFE PORT

WARRANTY ........................................................................................................................... 25

III

LIST OF ABBREVIATIONS

Claimant New England Chartering and Trading Company LLC

Respondent SSP Pty Limited

Charter Party The Charter Party Agreement between New England Chartering

and Trading Company LLC and Trading Company LLC and SSP

Pty Limited on 19 July 2008

Vessel MV Super P

The Cargo 25,000 mt (±10%) of free flowing Single Super Phosphate

The Master The Master of the MV Super P

UQIS Upsilon Quarantine and Inspection Service

Clean Bill of Lading Bill of Lading No. BL000001 for the voyage undertaken by New

England Chartering and Trading Company LLC on behalf of SSP

Pty Limited from Alpha, Rholand to Gamma, Upsilon

Second Clean Bill of Lading Bill of Lading No. BL000002 for the voyage undertaken by New

England Chartering and Trading Company LLC on behalf of Theta

from Gamma, Upsilon to Zeta, Qoppa

Theta Theta Pty Limited

Beta Beta Beta Beta Pty Limited

MLAANZ Rules Maritime Law Association of Australia and New Zealand

The Hague-Visby Rules The modified Hague Visby Rules as contained in Schedule 1A of

the Carriage of Goods by Sea Act 1991 (Commonwealth)

International Arbitration Act International Arbitration Act 1974 (Commonwealth)

The Model Law UNCITRAL Model Law

IV

TABLE OF AUTHORITIES

Cases

Actis Steamship Co Ltd v Sthe sanko Steamship Co Ltd (The Aquacharm) [1982] 1 WLR 119 (CA).

Ashville Investments v Elmer Ltd [1989] 1 QB 488 (CA).

Australian Woollen Mills v Commonwealth (1954) 92 CLR 424.

Bellgrove v Eldridge (1954) 90 CLR 613.

Bonython v Commonwealth (1948) 75 CLR 589.

Brambles Holdings Limited v Bathurst City Council (2001) 53 NSWLR 153.

Carlill v Carbolic Smokeball Company [1893] 1 QB 256.

Chatenay v Brazillian Submarine Telegraph Co Ltd (1891) 1 QB 79.

Cheikh Boutros Selim El-Khoury v Ceylon Shipping Lines Ltd, The Medeleine [1967] 2 Lloyd’s Rep

224.

Commonwealth v Amann Pty Ltd (1992) 174 CLR 64.

Commonwealth v Burns Philp & Co (1946) 46 SR (NSW) 307.

Currie v Misa (1875) LR 10 Ex 153.

Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500.

Empresa Cubana Importada De Alimentos Alimport v Iasmos Shipping Co SA (The Good Friend)

[1984] 2 Lloyd’s Rep 586.

V

ERG Raffinerie Mediterranee SpA v Chevron USA Inc (The Luxmar) [2006] 2 Lloyd’s Rep 543.

Eridania SpA v Oetker (The Fjord Wind) [2000] 2 Lloyd’s Rep 191 (CA).

Evans v James Webster and Brother Limited (1928) 32 L1 LRep 218.

Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160.

Grant v Norway (1851) 10 CB 665.

Great China Metal Industries Co Ltd v Malaysian International Shipping Corp Berhad (1998) 196

CLR 161.

Hadley v Baxendale (1854) 156 ER 145.

Holman v FT Everard & Sons Ltd (The Jack Wharton) [1986] 2 Lloyd’s Rep 382.

Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26.

Hunter Grain Pty Ltd v Hyundai Merchant Marine Co Ltd and Malaysian International Shipping

Corporation (1993) 117 ALR 507.

Hyde v Wrench (1840) 3 Beav 334.

Inverkip Steamship Co Ltd v Bunge & Co [1917] 2 KB 193 (CA).

Kuo International Oil Ltd v Daisy Shipping Co Ltd (The Yamatogawa) [1990] 2 Lloyd’s Rep 39.

Lambos v The Commonwealth (1967) 41 ALJR 180.

Lindsay v Klein: the Tatkana [1911] AC 194.

Mahon v Osborne [1939] 2 KB 14.

March v EH Stramare (1991) 171 CLR 506.

VI

McDermid v Nash Dredging & Reclamation Co Ltd [1986] QB 965.

Mediterranean Salvage and Towage Ltd v Seamar Trading and Commerce Inc (The Reborn) [2009]

1 All ER (Comm) 411.

Mobil Oil Australia Ltd v Wellcome International Pty Ltd & Anor (1998) 81 FCR 475.

Mount Albert Borough Council v Australasian Temperance & General Mutual Life Assurance

Society Ltd (1938) AC 224.

Mummery v Irvings Pty Ltd (1956) 96 CLR 99.

Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723.

Oceanfocus Shipping Ltd v Hyundai Merchant Marine Co Ltd (The Hawk) [1999] 1 Lloyd’s Rep

176, 185.

Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451.

Papera Traders Co Ltd v Hyundai Merchant Marine Co Ltd (The Eurasian Dream) [2002] EWHC

118 (Comm).

Peninsular & Oriental Steam Navigation Co v Shand [1865] Eng R 616.

Phillips Petroleum Co v Cabaneli Naviera SA (The Theodegmon) [1990] 1 Lloyd’s Rep 52.

Pinnel’s Case (1884) 9 App Case 605.

Reed & Co Ltd v Page Son & East Ltd [1927] 1 KB 743.

Riverstone Meat Co Pty Ltd v Lancashire Shipping Co Ltd (The Muncaster Castle)[1960] 1 QB 536

Robinson v Harman (1848) 154 ER 363.

Roscorla v Thomas (1842) 3 QB 234, 114 ER 496.

VII

Schellenberg v Tunnel Holdings Pty Ltd (2000) 200 CLR 121.

Stevenson Jacques & Co v McLean (1880) 5 QBD 346.

Sweet Dreams Unlimited Inc v Dial-A-Mattress 1 F.3d 639.

The Australia Star (1940) 67 LIL Rep 110.

The Gang Cheng (1998) 6 MLJ 488.

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

The Peter der Gross (1875) 1 PD 414.

Trade Star Line Corp v Motsui & Co Ltd [1996] 2 Lloyd’s Rep 449.

Tronson v Dent (1853) 8 Moo PCC 419.

Union of India v NC Reederij Amsterdam [1962] 1 Lloyd’s Rep 539.

Walter v Knight [1969] 2 NSWLR 79.

Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1.

Statutes

Carriage of Goods by Sea Act 1991 (Upsilon) including Schedule 1A Hague-Visby Rules as

Modified.

International Arbitration Act 1974 (Upsilon) and Schedules (including UNCITRAL Model Law).

Articles and Books

Ambrose C and Maxwell K London Maritime Arbitration (2nd

edition, 2002).

Davies M and Dickey A, Shipping Law (3rd Edition, 2004).

VIII

Macquarie Dictionary, Federation Edition.

Redfern A Hunter M Law and Practice of International Commercial Arbitration (5th

edition, 2003).

Tetley QC, William, Marine Cargo Claims, ( 3rd Edition, 1988).

Wells, Michael John, Demurrage and the Availability of General Damages, [2008] ANZMLJ 8.

Other

Maritime Law Association of Australia and New Zealand Rules.

1

SUMMARY OF FACTS

1 The Claimant is an Omicron company and carries on the business of ship ownership. The

Respondent is an Upsilon company and is engaged in the manufacture and sale of fertilisers.

2 On 19 July 2008, the Respondent entered into a Voyage Charter Party with the Claimant to

transport the Cargo on the Vessel between the ports of Alpha, Rholand and Gamma, Upsilon.

3 The Cargo was loaded onto the Vessel between 27 and 29 September 2008.

4 The Respondent was made aware by an independent surveyor as to the presence of some

fragments of bitumen and one piece of timber on the surface of the Cargo.

5 The Charter Party provides in Clause 20 that the Claimant is under an obligation to provide clean

holds free of residues of previous cargoes such that it satisfies Upsilon ‘zero tolerance’

quarantine standards.

6 The Respondent communicated to the Claimant by letter of 6 October 2008 that the presence of

timber and bitumen would not affect the ‘handling, storage and use’ of the Cargo. The

Respondent stipulated that any dispute arising under the letter be exclusively reserved for

determination by the courts of Omicron and that its terms be governed by the law of Omicron.

7 The Claimant issued a clean Bill of Lading in respect of the Cargo noting it to be in ‘apparent

good order and condition’.

8 On 15 October 2008 the Cargo was purchased by Theta of Upsilon. Payment was made via Letter

of Credit.

2

9 On 19 October 2008 the Respondent received a letter from the Claimant where the Claimant had

indicated that the Vessel had arrived at Upsilon and had been quarantined because of the

presence of Omicron Barley on the timber in the cargo. The Claimant contended that the clean

Bill of Lading was issued in reliance on the terms of the Respondent’s letter of 6 October 2008

and indicated an intention to claim indemnity in the event of claim being made by the indorsee of

the clean Bill of Lading.

10 By letter of 20 October 2008 the Respondent denied that the letter of 6 October 2008 was issued

in consideration for the clean Bill of Lading. The Respondent denied any indemnity and was of

the view the letter did not request or direct the Bill of Lading to be issued “clean”. The

Respondent made it clear that the decision to issue a clean or claused Bill of Lading was entirely

a matter for the Master to decide at the time of receiving the surveyor’s report.

11 On 21 October 2008, the Respondent received a letter from the Claimant containing details of

correspondence between it and Theta. The letters communicated that the Cargo had been on-sold

and required shipment to Port of Zeta, Qoppa. The Claimant indicated that it had paid

U$4,999,889 to Theta in consideration for their loss in on-selling the Cargo and that it claimed

indemnity pursuant to the terms of the letter of 6 October 2008. The Claimant enclosed an

addendum to the Charter Party for the Qoppa voyage and requested it be signed by the

Respondent.

12 By letter of 22 October 2008 the Respondent refused indemnity for Theta’s claim. The

Respondent agreed to sign the addendum ‘without prejudice’ to assist in the matter’s resolution.

The Respondent reserved its right to claim amounts payable for freight.

13 On 8 November 2008 the Respondent received a letter from the Claimant, in which the Claimant

stipulated that the Vessel had arrived at Zeta on 5 November 2008 and the Vessel was the subject

of embargo and was unable to unload. The Claimant requested instructions on the basis the

3

Respondent as voyage charterer was under an obligation to nominate a port at which the vessel

could unload the cargo in a timely manner.

14 By letter of 10 November 2008 the Respondent wrote to the Claimant that the:

a. Respondent was no longer the owner of the Cargo; and

b. Respondent was not in a position to give instructions to the Claimant which may infringe

on third party rights; and

c. Claimant should seek instructions from the Cargo owners (Beta Beta); and

d. Respondent reserves all rights in respect of the Claimant’s purported breach of the

Charter Party.

15 On 8 April 2009 the Respondent received a letter from the Claimant regarding the Vessel’s

ongoing embargo, where the Claimant stipulated that ‘by virtue of extended delay’ demurrage

was no longer an adequate mechanism for compensation for the Claimant’s loss of chance.

Accordingly, the Claimant sought damages for detention because of changes in the cost of vessel

charters. The Claimant justified its claim for damages for detention by contending that protracted

delay was not contemplated by the terms of the Charter Party and that there was no indication as

to when the embargo would be lifted.

16 Reports in Omicron on 1 September 2008 indicated a fall in charter rates for vessels from rates of

about U$50,000 per day to rates of about U$2,000 per day by the year’s end. Reports indicated

this reduction was because of the Global Financial Crisis.

17 On 30 November 2009 the Respondent received a letter from the Claimant in which the Claimant

stated that:

a. They discharged the cargo and the vessel had sailed from Zeta; and

4

b. By virtue of the Respondent not replying to the Claimant’s letter of 8 April 2009 and not

paying freight costs, a dispute had arisen; and

c. That dispute would be referred to arbitration pursuant to Clause 19 of the Charter Party

Agreement; and

d. Beta Beta, the purchaser of the Cargo in Qoppa, had made a claim arising out of damage

to its equipment caused by bitumen in the Cargo; and

e. The Claimant sought indemnity on the basis of the letter of 6 October 2008 for contingent

losses.

18 By letter of 4 December 2009, the Respondent replied to the Claimant that the:

a. Respondent had appointed an arbitrator and reserved all rights with respect to arbitral

jurisdiction; and

b. Respondent had obtained an expert’s report evidencing bitumen had arrived in the Cargo

by virtue of poor adjustment of the Vessel’s cranes; and

c. Respondent was not liable to indemnify the Claimant in respect of claims by Beta Beta on

any basis.

19 The dispute has been scheduled for Arbitration at Sydney from 2 July 2010.

5

THRESHOLD ARGUMENTS

PROCEDURAL LAW

I. THE ARBITRAL PROCEDURE IS GOVERNED BY CLAUSE 19(D) OF THE

CHARTER PARTY AGREEMENT

A. THE ARBITRATION IS TO BE CONDUCTED ACCORDING TO THE RULES OF THE

MARITIME LAW ASSOCIATION OF AUSTRALIA AND NEW ZEALAND

1 Clause 19(d) of the Charter Party states “Any dispute arising out of or in connection with this

contract including any question regarding it [sic] existence, validity, or termination, shall be

referred to arbitration in Gamma by a Tribunal of 3 arbitrators in accordance with the Arbitration

Rules of th [sic] Maritime Law Association of Australia and New Zealand”.1

2 The use of Arbitration to resolve commercial disputes must be obtained from “the existence of an

agreement between the parties’ and is dependent upon the parties” consent. 2

3 By virtue of this clause, the Parties, on an ordinary contextual reading of its terms,3 have

consented to matters arising out of or in connection with the Charter Party being resolved by

Arbitral procedure. It will subsequently agitated the parties did not consent to matters relating to

the letter of 6 October 2008 being subject of Arbitration.

4 The procedural rules of the Arbitration are those of the Maritime Law Association of Australia

and New Zealand (“the MLAANZ Rules”).

1 Facts page 9.

2 Ambrose C and Maxwell K London Maritime Arbitration (2nd

edition, 2002), 25.; Redfern A Hunter M Law and Practice of

International Commercial Arbitration (5th

edition, 2003), [1.06].

3 Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451.

6

B. Gamma is the seat of the Arbitration

5 Clause 19(d) of the Charter Party specifies Gamma, Upsilon as the location of the Arbitration.

From the Arbitration location, one can infer that this location is to be the arbitral “seat”. Subject

to the MLAANZ Rules, once a seat is established, the procedural law of the seat applies.4

1. The International Arbitration Act 1974 (Upsilon) is the lex arbitri of the dispute

6 In Gamma, Upsilon, the International Arbitration Act 1974 (Upsilon) applies as the Arbitration’s

procedural law. The parties have not expressly sought to oust the UNCITRAL Model Law.5 In

the absence of express intention, the Model Law has the force of law for the purposes of this

dispute.6

SUBSTANTIVE LAW

II. THE CHARTER PARTY IS SUBJECT TO THE LAW OF GAMMA, UPSILON

A. THE TRIBUNAL IS TO DETERMINE THE SUBSTANTIVE LAW OF THE

AGREEMENT PURSUANT TO THE CONFLICT OF LAWS RULES IT CONSIDERS

APPLICABLE

7 The Charter Party does not provide a substantive law pursuant to which disputes are to be

determined. Where the parties have not designated a substantive law to govern the agreement, the

tribunal shall apply the substantive law as determined by the conflict of laws rules which it

considers applicable.7 In making such a determination the tribunal is to consider the terms of the

contract and take account of all trade usages applicable to the transaction.8

4 Maritime Law Association of Australia and New Zealand, Rule 15, Redfern and Hunter above n 2, [3.39].

5 Section 21 International Arbitration Act 1974 (Upsilon).

6 Section 16 International Arbitration Act 1974 (Upsilon), Article 1 UNCITRAL Model Law.

7 Art 28(2) UNCITRAL Model Law.

8 Art 28(4) UNCITRAL Model Law.

7

B. The law of Gamma, Upsilon is the proper law of the Charter Party

8 A contract is to be interpreted according to its proper law. A contract’s proper law is to be

determined by reference to the law of a place with which it has “the most real connection”.9 The

most real connection to a contract can be determined by reference to where a contract is made10

or where its obligations are performed.11 The classification is dependent on the parties’ intention

at the time of making the agreement.12

9 To affirm Gamma law as the applicable law, the Charter Party was made in Gamma.13

Additionally, the agreement is to be substantially performed in Gamma (“lex locus contractus”)

(that is the goods are to be delivered in Gamma, the purchaser is resident in Gamma and the

Respondent (the seller) has its place of business in Gamma). Additionally, the failure to select

substantive law gives deference to the arbitral seat (“qui indiscem forum elegit jus”). As the seat

is Gamma, this must be construed as supportive of an intention to apply Gamma law to the

Charter Party.

10 Gamma law must be construed as the proper law of the Charter Party.

9 Bonython v Commonwealth (1948) 75 CLR 589, 601-602.

10 Peninsular & Oriental Steam Navigation Co v Shand [1865] Eng R 616.

11 Chatenay v Brazillian Submarine Telegraph Co Ltd (1891) 1 QB 79.

12 Mount Albert Borough Council v Australasian Temperance & General Mutual Life Assurance Society Ltd (1938) AC 224.

13 Facts page 1.

8

JURISDICTION OF THE ARBITRAL TRIBUNAL

III. THE TRIBUNAL HAS NO JURISDICTION TO DETERMINE ANY PART OF THE

CLAIM WHICH RELIES UPON THE LETTER OF 6 OCTOBER 2008

A. THE TRIBUNAL’S JURISDICTION IS LIMITED TO MATTERS PERTAINING TO

THE CHARTER PARTY ONLY

11 Clause 19(d) of the Charter Party provides the Tribunal’s jurisdiction. It must be construed

according to its natural and ordinary mean so as to best reflect the intentions of the parties.14

12 The clause provides for Arbitration of disputes “arising out of or in connection with” the Charter

Party. The Claimant’s contention that this extends to the letter of 6 October 2008 is inconsistent

with Clause 19(d) and the terms of that letter.

1. The Letter of 6 October 2008 is part of a collateral contract subject to the exclusive jurisdiction

of the Courts of Omicron

13 The words “arising out of or in connection with” are of wide import such as to extend to

determination of disputes connected to the letter of 6 October 2008. 15 As such, clause 19(d) is of

sufficient breadth to grant the Tribunal jurisdiction to determine the effect of the final paragraph

of the letter of 6 October 2008.

14 An arbitral jurisdiction is prefaced on contract and parties should not be compelled to arbitrate

disputes in circumstances where they clearly do not evince an intention to do so.16 By extension,

the Tribunal should not seek to bifurcate disputes unless the parties have clearly intended to do

so.17 The intention of the parties’ intention to exclude disputes concerning the letter of 6 October

14 Pacific Carriers above n 3, Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500, 510.

15 Ashville Investments v Elmer Ltd [1989] 1 QB 488 (CA), 493.

16 Sweet Dreams Unlimited Inc v Dial-A-Mattress (1993) 1 F.3d 639, [5].

17 Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160.

9

2008 from Arbitration is clear by reason of the Claimant’s unqualified acceptance of the terms of

the letter of 6 October 2008 in return for the Claimant issuing a clean Bill of Lading.18

15 The Respondent asserts the letter on its true construction must be excluded from the Tribunal’s

jurisdiction by virtue of its terms: ‘Each party irrevocably and unconditionally submits to the

exclusive jurisdiction of the courts of Omicron.’19 The choice of Omicron courts as the forum for

dispute resolution excludes Arbitration as a means of dispute resolution.

16 The facts point to the parties (1) accepting the terms of the Charter Party (including Arbitration)

and (2) issuing a clean Bill of Lading on acceptance of terms of 6 October 2008. Point (2) results

in the Parties varying or limiting their arbitral obligations in (1) to the extent that dispute

connected to the Respondent’s letter of 6 October 2008 must be determined exclusively by

Omicron courts. The Respondent’s terms, as accepted by the Claimant, constitute mutual

agreement to hear disputes pertaining to the Respondent’s letter to the Omicron courts.

17 The Tribunal must determine the Claimant’s right of action in respect of the letter of 6 October

2008 lies in the Omicron courts. As such, the Claimant’s claim for indemnity is beyond the

Tribunal’s jurisdiction.

18 Facts page 15, Claimant’s Points of Claim 6.

19 Facts page 11.

10

ARGUMENTS AS TO MERITS

IV. THE RESPONDENT IS NOT LIABLE FOR THE CLAIM BY THETA IN THE

AMOUNT OF U$4,999,889

A. THE CLAIMANT IS LIABLE FOR ALL LOSSES ARISING FROM THE MASTER

ISSUING A THE CLEAN BILL OF LADING

18 The Master is the Claimant’s servant,20 and has issued a clean Bill of Lading.

19 The Claimant must indemnify the respondent from any claims arising from the Bill of Lading

issued by the master concerning the “apparent order and condition of the goods”. 21 The Bill of

Lading assurance as to the apparent external condition of the goods22 made by the Claimant

includes the provision of a clean Bill of Lading for the express delivery of the goods to Upsilon.

This was made with the carrier having prior notice of Upsilon quarantine standards. It is noted

that no reservations are present in the Bill of Lading, which further binds the Master to his

statement, as the facts suggest he exercised reasonable skill in making such a determination. 23

20 The Tribunal should enforce the Claimant’s obligations in issuing a clean Bill of Lading due to

the Master’s conduct as the “honesty and integrity in relation to the signing of receipts for goods

the subject of bills of lading is essential if persons engaged in international trade are to have any

confidence in documents” affecting such trade.24 Bills of Lading have been recognised by courts

20 Tronson v Dent (1853) 8 Moo PCC 419, 449 per Sir John Patteson, PC. See Holman v FT Everard & Sons Ltd (The Jack

Wharton) [1986] 2 Lloyd’s Rep 382 (liability of owners for injury to chief officer by negligence of master). See also McDermid v

Nash Dredging & Reclamation Co Ltd [1986] QB 965;[1986] 2 All ER 676; [1986] 2 Lloyd’s Rep 24CA (affirmed McDermid v Nash

Dredging & Reclamation Co Ltd [1987] AC 906; [1987] 2 All ER 878; [1987] 2 Lloyd’s Rep 201 HL, Grant v Norway (1851) 10 CB 665 at 687; 138 ER 263 at 271-2per Jervis CJ.

21 Art 3 r 3(c) Hague-Visby Rules.

22 The Peter der Gross (1875) 1 PD 414, 420 (Sir Robert Phillimore).

23 Trade Star Line Corp v Motsui & Co Ltd [1996] 2 Lloyd’s Rep 449 (CA), 458 [Evans LJ}; Oceanfocus Shipping Ltd v Hyundai

Merchant Marine Co Ltd (The Hawk) [1999] 1 Lloyd’s Rep 176, 185 (Judge Diamond QC).

24 Hunter Grain Pty Ltd v Hyundai Merchant Marine Co Ltd and Malaysian International Shipping Corporation (1993) 117 ALR 507, [50] per Sheppard J.

11

as being “documents of dignity”. Courts have sought to ensure the integrity of such documents in

international trade as “confidence is of the essence”.25 This is to ensure that third parties may

accept bills of lading documents at face value. 26

21 The Claimant is liable for losses which flow from the issue of a clean Bill of Lading.

B. FURTHER THE CLAIMANT HAS BREACHED ITS DUE DILIGENCE OBLIGATIONS

PURSUANT TO THE HAGUE-VISBY RULES AND CANNOT RELY ON EXCEPTION

TO LIABILITY THEREIN

22 The Hague-Visby Rules apply to the Bill of Lading documents issued by the Carrier, by force of

Clause 10 of the Charter Party and the Carriage of Goods by Sea Act 1991 (Upsilon).27

23 The Claimant has failed to exercise due diligence28 in order to ensure the vessel was seaworthy29

at the beginning of the voyage,30 and to ensure the holds and other parts of the ship in which

goods are carried are fit and safe for their reception, carriage and preservation. 31

24 Where the Respondent can show the Claimant has failed to exercise due diligence to provide a

seaworthy, properly manned and cargoworthy vessel, the Claimant is unable to rely upon the

liability exceptions contained in Art 4 r 2 Hague-Visby Rules.32

25 William Tetley QC, Marine Cargo Claims, ( 3rd Edition, 1988), 266, citing The Carso (Italian Importing Co. v Navigazione) 1930 AMC 1743, Woolsey J.

26 Evans v James Webster and Brother Limited (1928) 32 L1 LRep 218, Wright J at 223.

27 Facts page 5.

28 Art 3 r 1(a) Hague-Visby Rules.

29 Art 3 r 1(a) Hague-Visby Rules.

30 Commonwealth v Burns Philp & Co (1946) 46 SR (NSW) 307, 312, per Jordan CJ; Great China Metal Industries Co Ltd v

Malaysian International Shipping Corp Berhad (1998) 196 CLR 161, 194 per McHugh J.

31 Art 3 r 1(c) Hague-Visby Rules.

32 Art 4 r 1 Hague-Visby Rules, Great China Metal Industries Co Ltd above n 30; Empresa Cubana Importada De Alimentos Alimport

v Iasmos Shipping Co SA (The Good Friend) [1984] 2 Lloyd’s Rep 586.

12

1. The Claimant has not exercised due diligence to provide a seaworthy vessel under Article 3 r 1

of the Hague Visby Rules.

25 The obligations under the Hague-Visby Rules include the obligation of the Carrier to undertake

due diligence to ensure the vessel is seaworthy; properly manned; and cargoworthy at the start

and during the voyage. This includes requiring the carrier to exercise ‘reasonable skill, care and

competence in the light of the circumstances reasonably apparent at the time’. 33

26 Adequate due diligence must be exercised to ensure seaworthiness of the Vessel prior to voyage.

Seaworthiness is to be determined according to ‘the conditions the vessel will encounter…

depending on the whole nature of the adventure … Fitness for the voyage may also encompass

other considerations as, for example, the fitness of the vessel to carry the particular kind of

goods’. 34 Furthermore, In the Fjord Wind, Clarke CJ stated, ‘Seaworthiness is concerned with

the state of the vessel rather than whether the owners acted prudently or with due diligence. The

only relevance of the standard of the reasonably prudent owner is to ask whether, if he had

known of the defect, he would have taken steps to rectify it.’35 The Rule is reflective of the

common law definition of seaworthiness, where ‘the vessel…with her master and crew… is

herself fit to encounter the perils of the voyage and also that she is fit to carry the cargo safely on

that voyage’.36

27 Seaworthiness in the present instance includes ensuring the holds of the vessel were free from

known contaminants, and in particular, the known quarantine conditions the voyage is subject to

33 Union of India v NC Reederij Amsterdam [1962] 1 Lloyd’s Rep 539; The Australia Star (1940) 67 LIL Rep 110; Kuo International

Oil Ltd v Daisy Shipping Co Ltd (The Yamatogawa) [1990] 2 Lloyd’s Rep 39 at 50, per Hobhouse J (‘a reasonable difference of opinion does not amount to want of due diligence’).

34 Great China Metal Industries Co Ltd above n 30, 174 per Gaudron, Gummow and Hayne JJ; Hong Kong Fir Shipping co Ltd v

Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26.

35 Eridania SpA v Oetker (The Fjord Wind) [2000] 2 Lloyd’s Rep 191 (CA).

36 The Good Friend above n 32, 592 (per Staughton J); Actis Steamship Co Ltd v Sthe sanko steamship co ltd (The Aquacharm) [1982] 1 WLR 119 (CA); The Gang Cheng (1998) 6 MLJ 488; Great China Metal Industries Co Ltd above n 30.

13

(UQIS),37 which thus reflects consideration of the relative nature of the cargo and the destination.

The state of the vessel is that it remained contaminated prior to the voyage’s commencement, as

will be presently canvassed.

28 The Master knew of UQIS standards. These must be construed as part of ‘the conditions the

vessel will encounter in its voyage’. In the present instance, the contaminant substance (Omicron

Barley) existed prior to the voyage, which demonstrates that the vessel was unseaworthy prior to

its departure, and further, unable to satisfy one of the conditions of the voyage. 38

29 This extends to appropriately cleaning the holds prior to loading to ensure Upsilon Quarantine

standards would not be breached. The Master knew the Vessel’s prior cargo would not meet

UQIS standards. This, it is submitted, amounts to uncargoworthiness in the context of Art 3 r 1(c)

of the Hague-Visby Rules.

30 To evade liability for presenting a boat fraught with uncargoworthiness, the Claimant must show

it exercised due diligence in cleaning holds. This exercise is equivalent to the exercise of

reasonable care and skill. Lack of due diligence is analogous to negligent conduct. 39 Though

prior to voyage a survey was conducted, the Claimant cannot rely on it as evidence of due

diligence or otherwise.40

31 On the subsequent reasoning at (C) it is inferred that the contamination was brought about by the

previous voyage, and remnants of the material on the dunnage found by the Respondent’s

37 Facts page 10, Clause 20 Charter Party.

38 The Good Friend above n 32.

39 Papera Traders Co Ltd v Hyundai Merchant Marine Co Ltd (The Eurasian Dream) [2002] EWHC 118 (Comm) per Cresswell J.; Riverstone Meat Co Pty Ltd v Lancashire Shipping Co Ltd (The Muncaster Castle)[1960] 1 QB 536.

40 Facts page 10, Charter Party Clause 20.

14

surveyors. Furthermore, the Claimant is unable to show they have discharged their due diligence

obligations to adequately clean the hulls, or providing instructions to a similar affect.41

32 As such the Claimant is unable to rely on exceptions to liability contained in Art 4 r 2 of the

Hague-Visby Rules.

C. FURTHER THE CLAIMANT HAS BREACHED ITS OBLIGATIONS UNDER CLAUSE

20 OF THE CHARTER PARTY AGREEMENT

1. The Claimant is under an obligation to provide clean holds so as to satisfy Upsilon Quarantine

Standards

33 Clause 20 of the Charter Party Agreement outlines the obligation of the Claimant to ensure the

Vessel’s holds and hatches were clean of any previous residue, and satisfy the Upsilon

Quarantine and Inspection Service (‘UQIS’) requirements. The clause stipulates the Claimant

“agree(s) to indemnify Charters with respect to any loss” as caused by the presence of any

residues of previous cargoes in the holds of the vessel.42

34 The clause creates an obligation upon the Claimant and must be interpreted according to its

“natural and ordinary meaning, read in light of the contract as a whole”.43

35 Clause 20 on its face admits of a common sense construction requiring the Claimant be strictly

responsible for cleaning the ship’s holds, that the Claimant is aware of UQIS standards and its

“zero tolerance policy” and that in the event residues of former cargoes are cause for quarantine,

the Claimant shall be liable for failure to clean the Vessel’s holds.

41 The Fjord Wind above n 35.

42 Facts page 25.

43 Darlington Futures Ltd above n 14.

15

36 The independent surveyor discovered timber in the ship’s hold following cargo loading.44 The

timber found in the hold inferentially was dunnage from a previous cargo.45 The Vessel had

carried a cargo of Omicron Barley in January 2008.46 The Tribunal must conclude inferentially

that barley infestation is by reason of failure to clean the holds to the requisite standard.47

2. The Claimant is unable to show it has not caused cargo contamination and is therefore liable

37 The Respondent raises a res ipsa loquitur48 case to affirm the Claimant’s failure to provide clean

holds.49 In order to establish such a case, the Respondent must show (1) the Claimant was in

exclusive control of events; (2) in the ordinary course of events contamination would not have

occurred but for negligence; and (3) there is no evidence to suggest alternate cause.50

38 Factually considered, the Claimant inferentially was in exclusive control of the vessel and

cleaning of its holds prior to loading of the Respondent’s cargo. Secondly, barley infestation

would not have occurred in circumstances where a fertiliser owner loads their cargo on board a

clean vessel without the vessel’s holds being unclean, whether from previous voyage or

otherwise.51 Thirdly, evidence does not point to a specific event leading to contamination of the

cargo other than a failure to clean the holds. In sum, timber dunnage is not found in a clean hold.

39 It is a ‘matter of common knowledge’ timber dunnages are not found in clean holds and will be

present where there has been a negligent failure to properly clean holds. This will give rise to a

44 Facts page 11.

45 Procedural Order 2, Facts Page 14; Respondent’s Point of Claim 8.

46 Procedural Order 2.

47 Procedural Order 2.

48 Schellenberg v Tunnel Holdings Pty Ltd (2000) 200 CLR 121.

49 Lindsay v Klein: the Tatkana [1911] AC 194; The Hellenic Dolphin [1978] 2 Lloyd’s Rep 336 at 339 per Lloyd J; Phillips

Petroleum Co v Cabaneli Naviera SA (The Theodegmon) [1990] 1 Lloyd’s rep 52 at 54, per Phillips K.

50 Schellenberg above n 48.

51 Mummery v Irvings Pty Ltd (1956) 96 CLR 99.

16

current cargo tainted by a prior cargo.52 On this basis, the Respondent establishes a prima facie

case to which the Claimant must respond with affirmative evidence to rebut the presumption of

fault.53

40 The Claimant cannot point to alternate evidence which goes to the cause of barley infestation.

41 On this basis, the Claimant has breached their contractual obligations pursuant to Clause 20 of

the Charter Party and are liable to indemnify the Respondent for all losses consequent upon

breach of this clause.54

D. THE CLAIMANT CANNOT RELY ON THE LETTER OF 6 OCTOBER 2008 TO SEEK

INDEMNITY FOR THETA’S CLAIM AS IT HAS NO CONRACTUAL FORCE

1. The letter of 6 October 2008 is not capable of creating binding obligations on the Respondent

as there are no clear offer or acceptance of its terms

42 In order for contractual obligations to arise, parties to an agreement must accept unconditionally

offers put by the opposing party.55 In the event a party purports to accept an offer subject to

conditions, the parties cannot be taken to have reached agreement ad idem; conditional

acceptance constitutes a counter-offer which itself must be accepted.56

43 In respect of offers put, the facts must point to certain terms upon which the parties will be

bound.57 Offers are capable of unilateral (i.e. uncommunicated) acceptance58 however this is only

possible once a firm offer has been put.

52 Lambos v The Commonwealth (1967) 41 ALJR 180; Mahon v Osborne [1939] 2 KB 14.

53 Schellenberg above n 48, 135 per Gleeson CJ and McHugh J.

54 Hadley v Baxendale (1854) 156 ER 145.

55 Carlill v Carbolic Smokeball Company [1893] 1 QB 256.

56 Hyde v Wrench (1840) 3 Beav 334, Stevenson Jacques & Co v McLean (1880) 5 QBD 346.

57 Walter v Knight [1969] 2 NSWLR 79, Mobil Oil Australia Ltd v Wellcome International Pty Ltd & Anor (1998) 81 FCR 475.

17

44 The letter of 6 October 2008 purports to warrant that ‘the Cargo meets product specifications in

relation to moisture and absence of foreign objects ... neither of which would affect the handling,

storage or use of the Cargo.’ The letter does not direct, request or otherwise refer to the issue of

Bills of Lading and does not refer to “indemnity”.59

45 In order for the Claimant to bind the Respondent to the terms of its letter, it must point to

antecedent facts or particulars which constitute this letter as a document evidencing offer or

acceptance of contractual obligations. Alternatively the Claimant must point to it forming part of

a course of dealings which unequivocally places the parties in a contractual relationship.60

46 The facts show the Cargo was loaded on the Vessel on 29 September 200861 and that the

Respondent communicated by letter of 6 October the results of its surveyor’s report.62 The Bill of

Lading must have been issued subsequently to 6 October 2008. The Claimant did not otherwise

communicate with the Respondent with respect to the letter of 6 October, the Bill of Lading or

related matters until after the Vessel was placed in quarantine at Upsilon on 19 October 2008.63

47 In order for the Claimant to bind the Respondent to its letter of 6 October 2008, it must show this

course of events gave rise to a firm offer and unconditional acceptance. To conclude in such a

manner, the Tribunal must find that beyond correspondence evidenced in the letters and Bill of

Lading admitted to evidence there was antecedent correspondence between the Parties relating to

the Master’s reservations as to cargo condition following the surveyor’s report; either an offer of

a clean bill in exchange for a letter of indemnity or correspondence evidencing that the

58 Carlill above n 55.

59 Respondent’s Point of Claim 4, Facts page 16.

60 Brambles Holdings Limited v Bathurst City Council (2001) 53 NSWLR 153.

61 Facts page 12.

62 Facts page 11.

63 Facts page 15.

18

Respondent was willing to be bound by the terms of its letter of 6 October 2008 in exchange for a

clean Bill; and evidence the Claimant unequivocally accepted those terms.

48 The Tribunal is unable to make an affirmative finding on such matters by virtue of insufficiency

of evidence thereof. Therefore the Claimant is unable to rely upon the terms of the Respondent’s

letter as forming part of binding contractual obligations (which are not admitted). Therefore the

Letter does not create any rights or liabilities for the Claimant to impose upon the Respondent.

2. Alternatively the terms of the letter of 6 October 2008 are void for lack of consideration

49 For the Respondent to be bound to the terms of its letter of 6 October 2008 the Claimant must

show that it gave consideration for its execution.64 The Claimant must show that by issuing the

bill of lading as “clean”, it has not violated the rule against past consideration.65

50 The Claimant is bound by the Charter Party to issue bills of lading.66 The Claimant alleges the

clean bill of lading was executed in reliance on the terms of the Respondent’s letter of 6 October

2008 such that one was given is consideration for the other. By reason of the Claimant’s existing

obligation to issue bills of lading pursuant to the Charter Party, the Claimant cannot rely on the

terms of 6 October 2008 as the Claimant has not given consideration for them; issue as such

remained an existing legal duty. 67

51 The Claimant is unable to establish this arrangement constituted a practical benefit to the

Respondent: whether a bill of lading was issued claused or clean, the letter of 6 October 2008

64 Currie v Misa (1875) LR 10 Ex 153, Australian Woollen Mills v Commonwealth (1954) 92 CLR 424.

65 Roscorla v Thomas (1842) 3 QB 234, 114 ER 496.

66 Clause 10 Charter Party, Facts page 5.

67 Pinnel’s Case (1884) 9 App Case 605.

19

cannot be construed as being provided on the basis that but for its existence, no bill of lading

would be issued.68

52 The Claimant is unable to demonstrate cause for the terms of 6 October 2008 to bind the

Respondent. On this basis, the Claimant cannot rely on its terms to seek indemnity or

contribution for loss.

E. ALTERNATIVELY, IF THE LETTER OF 6 OCTOBER 2008 HAS CONTRACTUAL

FORCE, THE WARRANTY HAS NOT BEEN BREACHED

53 On an ordinary construction of the warranty, the warranty can only extend to the fragments of

bitumen and one piece of timber such that the cargo thus meets product specifications relating to

moisture and the “absence of foreign objects, of the type discovered” [emphasis added].

54 The identified elements of the warranty, the piece of timber identified, did not state explicitly that

it extended to the Omicron barley later discovered at Upsilon. The warranty only extended to the

timber “of the type discovered”, and not the contaminating substances identified.

55 The Claimant cannot rely on the warranty to cover damages and loss arising from the Omicron

barley contaminant attached to the dunnage, as the warranty is limited to the effect of the

identified timber, and not latent or undiscoverable objects thereon not explicitly enumerated in

the letter of 6 October 2008.

F. ALTERNATIVELY, IF THE LETTER OF 6 OCTOBER 2008 HAS BEEN BREACHED,

THE CLAIMANT HAS SUFFERED NO LOSS AS A RESULT

56 The damages incurred by Theta are the result of the Claimant’s breach of condition to provide

clean holds (as outlined at (C)), rather than due to any breach of the warranty by the Respondent.

68 Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1, Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723.

20

57 The warranty, on an ordinary and plain construction, extends to the timber and bitumen identified

by the surveyor. This warranty does not extend to any damage or loss arising from the Claimant’s

breach of Clause 20 of the Charter Party. The cause of the losses incurred is wholly by virtue of

the Claimant’s failure to clean the Vessel’s hold adequately to eradicate any contaminating

substances, rather than breach of subsequent warranty.

58 It is on this basis that the warranty does not afford the Claimant exemption from any losses

incurred, as the losses incurred are not referrable to breach of warranty on the part of the

Respondent; but are referable to breach of Clause 20 of the Charter Party on the part of the

Claimant.

V. THE RESPONDENT IS NOT LIABLE FOR THE PROSPECTIVE CLAIM BY BETA

BETA

A. THE CLAIMANT HAS BREACHED CLAUSE 5 OF THE CHARTER PARTY

59 Clause 5 of the Charter Party provides:

“(b) … the Owners shall throughout the duration of loading/discharging give free use of the

Vessel’s cargo handling gear and of sufficient motive power to operate all such cargo handling

gear. All such equipment will be in good working order.” [emphasis added]

As outlined at IV, the same approach to contractual interpretation must be applied.

60 The Claimant provided the ship’s cranes for loading of superphosphate.69 The bitumen arrived in

the cargo by virtue of the cranes ‘grabbing at the dock’; as certified by an expert report.70 The

expert report has been admitted to evidence.71

69 Facts page 1; Charter Party Box 15.

70 Facts page 35.

71 Procedural Order 2.

21

61 This clause warrants the Claimant will accept responsibility for loss which arises out of its gear

not being ‘in good working order’. Working order can be defined as ‘the state of something, as a

mechanism, when it functions properly’.72 This suggests the gear will function so as to not cause

damage or introduce foreign material to the cargo shipped on board. On such a construction,

these words are sufficient to give rise to a breach of condition on the part of the Claimant

disentitling them from seeking indemnity.

62 This cause of loss disentitles the Claimant from seeking indemnity pursuant to the terms of the

Respondent’s letter of 6 October 2008 on the basis the cause of loss was maladjusted cranes

rather than breach of warranty.

B. FURTHER AND IN THE ALTERNATE, THE CLAIMANT HAS BREACHED

ARTICLE 3(2) OF THE HAGUE-VISBY RULES IN FAILING TO PROPERLY MAN,

EQUIP AND SUPPLY THE SHIP BY FAILING TO ENSURE THE CRANES WERE

ADJUSTED CORRECTLY

63 The Claimant is obliged under the Hague-Visby rules to undertake due diligence to ensure that

the vessel is seaworthy, 73 which extends to ensuring the vessel is appropriately ‘equipped’ as

well as ensuring the ship is properly equipped to load and store the Cargo

64 On the facts, seaworthiness extends the vessel being adequately fit to receive the cargo, and to

carry it to port of the destination. This by analogy, extends to the appropriate adjustment of the

ships cranes prior to the loading of cargo.

65 It is evident that the Vessel’s cranes were not adjusted appropriately, whereby the ‘poor

adjustment of the ship’s cranes such that they were over-extending their reach and ‘grabbing’ at

72 The Macquarie Dictionary, Federation Edition.

73 Article 3 r 1 Hague-Visby Rules; see also Reed & Co Ltd v Page Son & East Ltd [1927] 1 KB 743 per Scrutton J at 755; The Good

Friend above n 32, 593; Cheikh Boutros Selim El-Khoury v Ceylon Shipping Lines Ltd, The Medeleine [1967] 2 Lloyd’s Rep 224; The

Aquacharm above n 36.

22

the dock’74 As a consequence, the presence of bitumen in the cargo is causally connected with

the failure of the Claimant to ensure the ship’s proper equipment in accordance with Art 3 r 2

Hague-Visby Rules. This amounts to a want of due diligence on the part of the Claimant to

provide a seaworthy vessel in the context of Artt 3 r 1, 4 r 1. Therefore the Claimant is unable to

rely on exceptions to liability contained in Art 4 r 2 Hague-Visby Rules.

66 Therefore the Claimant remains liable to Beta Beta.

VI. THE RESPONDENT IS NOT LIABLE FOR FREIGHT UNPAID IN THE AMOUNT OF

U$635,874.69 AND DAMAGES FOR DETENTION IN THE AMOUNT OF U$11,633,500

A. CLAIMS FOR FREIGHT AND DETENTION ARE CONSEQUENT UPON BREACH OF

THE CHARTER PARTY AGREEMENT OUTLINED AT IV

67 As submitted above, the Claimant has breached Clause 20 of the Charter Party Agreement as

above.

68 In breach of contract, the person who has suffered detriment resulting from breach is to be placed

in the position they would have been in but for the breach.75 The quantum of damages awarded

for breach of contract is to be that to rectify loss.76 Claims made must be causally linked to the

breach.77 Additionally, the person making claim for breach may only make claim for damage

suffered that is not “too remote”: the “natural consequence” of the breach.78

74 Facts page 35.

75 Robinson v Harman (1848) 154 ER 363, Commonwealth v Amann Pty Ltd 174 CLR 64.

76 Bellgrove v Eldridge (1954) 90 CLR 613.

77 March v EH Stramare 171 CLR 506.

78 Hadley v Baxendale above n 54.

23

69 The Claimant’s breach of Clause 20 has required the sale of cargo to Omega Phosphorus,

requiring voyage to Qoppa.79 On this analysis, the subsequent voyage is causally linked to the

Claimant’s failure to clean the holds: i.e. but for the failure to clean the holds, the Claimant

would not have been required to undertake its further voyage.

70 Freight and detention costs are not the Respondent’s liability by reason of antecedent breach.

Theta has on-sold the cargo on a CFR basis. By virtue of this fact, the causative nexus between

the Claimant’s failure to clean the holds and subsequent voyage remains unbroken. It was a

natural consequence of the contamination that the cargo would have to be on sold and transported

to Qoppa.

71 The Claimant is unable to claim for freight owing under the addendum and damages for

detention or, if any award be made in respect of this claim, the Respondent is able to recoup such

amount by way of counter-claim by virtue of breach of Clause 20 of the Charter Party as set out

at IV and the Respondent’s Points of Claim 14-18 inclusive.

B. FURTHER AND ALTERNATIVELY THE CLAIMANT HAS FAILED TO MAKE OUT

CONTRACTUAL CONDITIONS PRECEDENT TO ESTABLISH A BASIS FOR A

DAMAGES CLAIM

1. LAYTIME HAS NOT EXPIRED UNDER THE ADDENDUM THEREFORE DEMURRAGE

AND/OR DAMAGES ARE NOT YET PAYABLE

72 The addendum provides laytime shall commence 24 hours following receipt by the Respondent

of Notice of Readiness.80 The Claimant has lodged such notice validly.81

79 Facts page 24-25.

80 Facts page 22.

81 Facts page 40.

24

73 Further, the addendum provides where the vessel enters port and “fails to obtain free Pratique or

customs clearance, or is for any other reason found unfit to discharge the cargo [emphasis

added], then time shall cease to count as used laytime or time on demurrage until the vessel is

fully ready to proceed with the discharging operation.”82 Additionally, the addendum makes

provision for laytime exception in the event of restraint by recognised authority. The Qoppa

government, it is submitted, constitute a “recognised authority”.

74 The Vessel was placed under embargo on 8 November 2008.83 At such time the Vessel came

within the ambit of the laytime exception pursuant to the addendum. As laytime and/or time on

demurrage ceased to run, the Claimant is unable to claim demurrage and/or damages for

detention on the basis of delay.

2. FURTHER AND ALTERNATIVELY THE CLAIMANT HAS AGREED TO PAYMENT OF

DEMURRAGE AND HAS FAILED TO ESTABLISH CONDITIONS GIVING RISE TO A

DAMAGES CLAIM

75 Clause 7 of the Charter Party Agreement and the addendum provide for demurrage to be payable

in event of expiration of laytime days.84 Demurrage can be characterised as an agreement as to

liquidated payment for loss arising out of extension of time for loading or discharging beyond

laytime.85 As at (1), the Claimant has no right to demurrage on the basis of restraint of recognised

authority.

76 Clause 7 allows the Claimant to claim damages only in the event the Respondent has failed to

pay the Claimant’s invoices for demurrage.86 For an owner to maintain an action for damages in

82 Facts page 22.

83 Facts page 26.

84 Facts pages 5, 22.

85 Inverkip Steamship Co Ltd v Bunge & Co [1917] 2 KB 193 (CA), Michael John Wells, Demurrage and the Availability of General

Damages, [2008] ANZMLJ 8.

86 Facts page 5.

25

addition or in lieu of demurrage they must establish an antecedent breach of contract giving rise

to damage.87

77 The Claimant has failed to invoice the Respondent for demurrage owing and, additionally, has

failed to establish an antecedent breach of contract to found a basis for detention damages.

3. THE CLAIMANT HAS FAILED TO SHOW BREACH OF AN IMPLIED SAFE PORT

WARRANTY

78 The Claimant alleges the Respondent has breached its obligation to direct the Vessel to safe

port.88 Pursuant to the addendum, the Vessel is chartered to sail to Zeta and discharge ‘at 1-2 safe

anchorages’ but ‘Charterers do not warrant the working anchorage to be always accessible’.89

79 Aikens J indicates where a vessel is subject to a specific port voyage charter, the express words

of the charter party are the primary consideration. Notwithstanding the words of the charter party,

a term will always be implied to the effect the nominated berth is not ‘impossible’.90

80 The Claimant has agreed the Respondent does not warrant anchorage to be always accessible at

Qoppa. In such a circumstance, the Claimant must establish for reasons of ‘business efficacy’ a

safe ports warranty is to be implied.91 The Claimant has failed to establish such grounds.

81 The Claimant in accepting the charter is under an absolute obligation, not one contingent on

vessel safety.92 As such, the Claimant is unable to establish conditions such as to imply a term as

to port safety or impossibility. Accordingly their claim for damages for detention must fail.

87 ERG Raffinerie Mediterranee SpA v Chevron USA Inc (The Luxmar) [2006] 2 Lloyd’s Rep 543.

88 Facts page 27.

89 Facts page 21.

90 Mediterranean Salvage and Towage Ltd v Seamar Trading and Commerce Inc (The Reborn) [2009] 1 All ER (Comm) 411, 422 (d-f).

91 Ibid, 419(e).

92 Ibid, 420(a-b).

END