THIRTEENTH ANNUAL INTERNATIONAL MARITIME AW … the International Arbitration Act 1974 (Cth) ... 21...

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.

http://www.mlaanz.org/Uploads/Policy_to_Join_Panel_of_Arbitrators.pdf























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, 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


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 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


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


(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


(entered into force 1 December 1986), art 2.1. 109


(entered into force 1 December 1986), art 2.1(a); cf Qenos Pty Ltd v Ship “APL Sydney” (2009) 260 ALR 692. 110


(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


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


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


(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].

25

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.

THIRTEENTH ANNUAL INTERNATIONAL MARITIME AW … the International Arbitration Act 1974 (Cth) ... 21...

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