fourteenth annual international maritime law …

FOURTEENTH ANNUAL INTERNATIONAL MARITIME LAW

ARBITRATION MOOT COMPETITION 2013

In The Matter Of An Arbitration Held At Southampton

MEMORANDUM FOR THE CLAIMANTS

ON BEHALF OF: AGAINST:

Aardvark Ltd Twilight Carriers Inc Aardvark House

The High Street

Bootle

Merseyside

CLAIMANTS RESPONDENTS

Team Number 24

Cederic Van Eccelpoel, Véronique Beeckx

i

TABLE OF CONTENTS

A. LIST OF ABBREVIATIONS................................................................................. iii

B. LIST OF AUTHORITIES....................................................................................... iv

C. TABLE OF EXHIBITS........................................................................................... vii

D. STATEMENT OF FACTS...................................................................................... 1

E. ARGUMENTS PRESENTED................................................................................ 2

1. JURISDICTION...................................................................................................... 2

2. APPLICABLE LAW............................................................................................... 2

3. ADMISSIBILITY OF THE CLAIM....................................................................... 3

3.1. RIGHT OF SUIT IN CONTRACT......................................................................... 3

A. Claimants have a right of suit as lawful holders of the Bills of Lading...... 3

B. An implied contract with Respondents can be established.......................... 5

3.2. RIGHT OF SUIT IN TORT................................................................................. 6

4. MERITS OF THE CASE........................................................................................ 8

4.1. RESPONDENTS ARE LIABLE IN CONTRACT..................................................... 8

A. Liability for misdelivery.............................................................................. 8

a) Duty to deliver the cargo against presentation of the Bills of

Lading .............................................................................................. 8

b) Claimants did not give up their rights under the Bills of Lading..... 10

c) The Letter of Indemnity does not affect the rights of Claimants 10

B. Liability for delivery at the wrong discharge port....................................... 12

a) Duty to deliver the cargo at the correct discharge port.................... 12

b) The liberty clause of the Charter Party is null and void................... 13

ii

c) Claimants did not agree to delivery in Rotterdam.......................... 14

C. Liability for damage to the goods................................................................ 14

a) Presumption of liability.................................................................... 14

b) Burden and order of proof................................................................ 16

c) No excepted peril............................................................................. 17

d) Breach of art. 3(2) of the Hague-Visby Rules................................. 18

e) Unseaworthiness of the ship at the beginning of the voyage........... 20

4.2. RESPONDENTS ARE LIABLE IN TORT............................................................. 22

A. Tort of conversion........................................................................................ 22

B. Tort of negligence........................................................................................ 23

4.3. NO LIMITATION OF LIABILITY....................................................................... 24

5. CLAIM FOR RELIEF............................................................................................. 24

iii

A. LIST OF ABBREVIATIONS

Beatles Beatles Oils & Fats Ltd

Bills of Lading Congen bills of lading no. PG1, PG2, PG3 and PG4, dated

25 October 2008

Charter Party Charter party (Vegoil voy) dated 12 September 2008

Claimants Aardvark Ltd

COGSA 1992 Carriage of Goods by Sea Act 1992

FOSFA Federation of Oils, Seeds and Fats Associations Limited

GMQ Good Merchantable Quality

PAI Product Authentication International Ltd

PFAD Palm Fatty Acid Distillate

Respondents Twilight Carriers Inc

Vessel mv “Twilight Trader”

iv

B. LIST OF AUTHORITIES

CASES

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

A/S Hansens Tangens Rederi III v Total Transport Corp (The Sagona) [1984] 1 Lloyd’s Rep.

194 at p. 201.

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

Ben Line Steamers Ltd v Pacific Steam Navigation Co. (The Benlawers) [1989] 2 Lloyd’s Rep.

51.

Brandt v Liverpool, Brazil & River Plate Steam Navigation Co Ltd [1924] 1 K.B. 575.

CHS Inc Iberica SL and CHS Europe SA v Far East Marine SA (The Devon) [2012] EWHC

3747.

East West Corp. v DKBS 1912 [2003] 1 Lloyd’s Rep. 239.

Empresa Cubana Importada de Alimentos “Alimport” v Iasmos Shipping Co. SA (The Good

Friend) [1984] 2 Lloyd's Rep. 586.

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

Homburg Houtimport B.V. v Agrosin Private Ltd. and others (The Starsin) [2003] 1 Lloyd's

Rep. 571.

Ilyssia Compania Naviera SA v Bamaodah (The Elli 2) [1985] 1 Lloyd's Rep. 107.

J. I. MacWilliam Co. Inc v Mediterranean Shipping Co. SA (The Rafaela S) [2005] 1 Lloyd’s

Rep. 347.

Keppel Tatlee Bank Ltd v Bandung Shipping Private Ltd [2003] 1 Lloyd's Rep. 619.

Leigh & Sillavan Ltd v Aliakmon Shipping Co Ltd (The Aliakmon) [1986] 2 Lloyd’s Rep. 1.

Kuwait Airways Corp. v Iraqi Airways Co. (Nos. 4 & 5) [2002] UKHL 19.

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

Margarine Union v Cambay Prince S.S. Co [1969] 1 Q.B.D. 219.

Maxine Footwear Company, Ltd., and Morin v. Canadian Government Merchant Marine, Ltd.

[1959] 2 Lloyd's Rep. 105 (CA).

MB Pyramid Sound NV v Briese Schiffahrts GmbH and Co KG MS Sina and Latvian Shipping

Association Ltd (The Ines) [1995] 2 Lloyd’s Rep. 144.

javascript:xrefLink('LLR:1963010081');

v

Mitsui & Co Ltd v Flota Mercante Grancolombiana SA [1988] 2 Lloyd’s Rep. 208.

Morrison & Co v Shaw, Savill & Co [1916] 2 KB 783.

Motis Exports v Dampskibsselskabet AF 1912 [2000] 1 Lloyd’s Rep. 211.

Nippon Yusen Kaisha v Ramjiban Serourgee [1938] A.C. 429.

Pacific Molasses Co. and United Molasses Trading Co. Ltd v Entre Rios Compania Naviera

S.A. (The San Nicholas) [1976] 1 Lloyd's Rep. 8.

Pickering v Barkley (1648) Styles 132.

Robin Hood Flour Mills, Ltd. v N. M. Paterson & Sons, Ltd.(The Farrandoc) [1967] 2 Lloyd’s

Rep. 276 (CA).

SA Sucre Export v Northern River Shipping Ltd (The Sormovskiy 3068) [1994] 2 Lloyd’s Rep.

266.

Stag Line v Foscolo Mango [1932] AC 328.

Sze Hai Tong Bank Ltd v Rambler Cycle Co. Ltd [1959] AC 576.

The Aramis [1989] 1 Lloyd’s Rep. 213.

The “Dolphina” [2012] 1 Lloyd’s Rep. 304.

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

The Theodegmon [1990] 1 Lloyd’s Rep. 52.

The Torenia [1983] Lloyd's Rep. 210 at p. 216.

The Skarp [1935] P. 134.

The Stettin (1889) 14 PD 142.

The Stone Gemini [1999] 2 Lloyd’s Rep. 255.

Trafigura Beheer v Mediterranean Shipping (The MSC Amsterdam) [2007] 2 Lloyd’s Rep. 622.

http://www.i-law.com/ilaw/doc/view.htm?queryString=(San+Nicholas)%3aHEADNOTE&sort=date&dateRange=100&sort=date&databaseMatchName=LawReports&searchType=case-search&se=10&id=147413&searched=true


vi

STATUTES

Arbitration Act 1996

Carriage of Goods by Sea Act 1971

Carriage of Goods by Sea Act 1992

Sale of Goods Act 1979

CONVENTIONS AND RULES

New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958

Hague-Visby Rules - Hague Rules as amended by the Brussels Protocol 1968

OTHER AUTHORITIES

G.H. TREITEL and F.M.B. REYNOLDS, Carver on Bills of Lading, London, Sweet & Maxwell, 3

Ed., 2011

S. BAUGHEN, Shipping Law, London, Routledge-Cavendish, 4 Ed., 2009

W. TETLEY, Marine Cargo Claims, 3 Ed., 1988, Chap. 18, “Peril of the Sea and Similar

Exceptions”

W. TETLEY, “The Burden and Order of Proof in Marine Cargo Claims”, available at

http://www.mcgill.ca/files/maritimelaw/burden.pdf

The Travaux Préparatoires of the Hague Rules and of the Hague-Visby Rules

vii

C. TABLE OF EXHIBITS

1. Email from Tom Williams to Paul Taylor, dated 23 May 2008, PFAD contract 1234

[page 1 Moot Problem]

2. Email from Tom Williams to Paul Taylor, dated 23 May 2008, PFAD contract 1235


3. Charter Party (fixture re-cap, standard VEGOIL voy form. “VEGOILVOY 1/27/50”)

[page 3 – 12 Moot Problem]

4. Email from Tom Williams to Paul Taylor, dated 23 September 2008, Amended PFAD

contracts 1234 & 1235


5. Bill of Lading, CONGENBILL 2007, PG1

[page 14-15 Moot Problem]






[page 20-21Moot Problem]

9. Sales contract between Aardvark Limited and Delta Limited, No. 54028, dated 2

December 2008


10. Sales contract between Aardvark Limited and Caspian BV, No. 01206, dated 20 January

2009


11. Email from Chris Smith to Ben Thompson, dated 25 February 2009 (02:32), PFAD


12. Email from Paul Taylor to Mark Wiggins, dated 6 March 2009 (14:00), PFAD contracts


viii

13. Email from Mark Wiggins to Paul Taylor, dated 15 March 2009 (21:00), PFAD contracts




















23. Message from Aardvark Limited to Owners of the Twilight Trader, dated 20 March 2009,

Twilight Trader - Top Urgent, Bills of Lading PG1 to PG4


24. Fax from Thomas, Cropper & Benedict to Charterers Inc, dated 18 March 2009, mv

TWILIGHT TRADER – Analysis


ix

25. Experts report Aspinall Lewis International, 19 March 2009, Inspection of the Cargo of

Palm Oil After Hijacking at Somalia November 2008 - February 2009, MT TWILIGHT

TRADER


26. Message from Paradox Bank to Aardvark Ltd, dated 3 April 2009, bank guarantee No.

478 in favour of Aardvark Ltd for USD 1,400,000, Rotterdam Guarantee Form 2008,

guarantee No. 478, dated 3 April 2009


27. Sales note between D&F Brokers Ltd and Aardvark Ltd, No. 0164, dated 16 April 2009


28. Sales note between D&F Brokers Ltd and Aardvark Ltd, No. 0178, dated 7 May 2009


29. Report of Surveys Inc, dated 9 June 2009


30. Experts report of Dutch Surveyors BV, Inquiries regarding the value of Palm Fatty Acid

Distillate (PFAD) and regarding the quality of the product during transport/ storage under

various conditions


31. Agreed statement of facts for the arbitration: the Dutch proceedings and sale of the cargo


32. Single joint expert report of Kevin Ackroyd, dated 29 October 2012


33. Message from Horatio Brigden (Caspian BV) to Paul Taylor (Aardvark Ltd), dated 23

November 2009, PFAD ex TWILIGHT TRADER after release from piracy


34. Message from Geronimo McKegney (Delta Limited) to Paul Taylor (Aardvark Ltd),

dated 25 November 2009, PFAD ex TWILIGHT TRADER after release from piracy


x

35. Message from Mark Wiggins to Twilight Carriers, Freight rates and PFAD prices


36. FOSFA 79 contract



39. FOSFA Rules of arbitration and appeal

1

D. STATEMENT OF FACTS

Claimants are the buyers of a cargo of 4,000 mt of PFAD carried on board the Vessel under the

Bills of Lading. Respondents are the disponent owners of the Vessel and the contractual carriers

under the Bills of Lading. Beatles, who sold the cargo to Claimants on CIF Liverpool terms, are

the charterers of the Vessel. All the Bills of Lading provided for discharge in Liverpool,

Merseyside.

While the Vessel was en route to Merseyside it was held off Somalia by Somali pirates between

15 November 2008 and 13 February 2009. By reason of the piracy the cargo went from being

GMQ PFAD to non-GMQ PFAD, meaning that it could no longer be used in the food/feed

chain.

After the purchase price was paid to Beatles, the Bills of Lading were delivered to Claimants.

Later on there was a discussion between Beatles and Claimants regarding the cargo insurance

policy. Claimants sent a message to Beatles stating that they were in repudiatory breach of the

sales contracts in failing to insure the cargo under the agreed terms. Claimants never abandoned

the cargo, nor did they give up their rights under the Bills of Lading. They always remained

holders of the Bills.

On 20 March 2009 Claimants wrote to Respondents informing them that they were the lawful

holders of the Bills of Lading. Notwithstanding that notification Respondents discharged the

cargo on or about 20-22 March 2009 to Beatles in Rotterdam against a Letter of Indemnity.

2

E. ARGUMENTS PRESENTED

1. JURISDICTION

The Tribunal has jurisdiction to hear any dispute – whether in contract or tort - arising out of the

Bills of Lading. The Law and Arbitration Clause of the Charter Party dated 12 September 20081

provides for London arbitration. This particular clause has been validly incorporated into the

Bills of Lading, as the incorporation clause makes specific reference to it.2 The fact that the Bills

of Lading refer to an undated charter party does not cause any problems. The usual presumption

under English law is that if the charter party is undated then the reference is to the head charter,

at least if the head charter is a voyage charter.3 In the present case the Charter Party of 12

September 2008 governing the voyage is the head charter.

The United Kingdom is a party to the New York Convention on the Recognition and

Enforcement of Foreign Arbitral Awards. Article 2 of that Convention provides that each

Contracting State shall recognize an agreement in writing under which the parties undertake to

submit their disputes to arbitration. An arbitral clause in a contract is such an “agreement in

writing”.

2. APPLICABLE LAW

Pursuant to the Law and Arbitration Clause, which has been incorporated into the Bills of

Lading by specific reference, English law shall be applied to this dispute. The General

Paramount Clause of the Bills of Lading4 provides for application of the Hague-Visby Rules as

enacted in the country of shipment (Malaysia), or in the country of destination (United

1 See exhibit 3.

2 See exhibit 5, 6, 7 and 8.

3 Pacific Molasses Co. and United Molasses Trading Co. Ltd v Entre Rios Compania Naviera S.A. (The San

Nicholas) [1976] 1 Lloyd's Rep. 8. 4 See exhibit 5, 6, 7 and 8.



3

Kingdom) when the Hague-Visby Rules are not enacted in the country of shipment. As Malaysia

is only a party to the Hague Rules5 and not to the Hague-Visby Rules

6, the Hague-Visby Rules

as enacted in the United Kingdom by the Carriage of Goods by Sea Act 1971 are applicable to

the contract under the Bills of Lading.

3. ADMISSIBILITY OF THE CLAIM

3.1. RIGHT OF SUIT IN CONTRACT

A. Claimants have a right of suit as lawful holders of the Bills of Lading

According to section 2(1) COGSA1992, rights of suit under the contract of carriage pass upon

the transfer of a negotiable bill of lading to the new lawful holder of the bill. The term “holder”

denotes either a person with possession of the bill and who is identified in the bill as the

consignee of the goods, or a person who comes into possession as a result of negotiation of the

bill by delivery or by endorsement and delivery.7

The Bills of Lading in question are expressed to be “to order”.8 They are not consigned to a

named party. The Bills are endorsed in blank by the shipper (Vegetable Oils).9 Where a bill of

lading has been endorsed in blank, it becomes like a bearer bill and can be transferred simply by

delivering the bill to the intended transferee without any further endorsement.10

The cargo

carried under the Bills of Lading was sold to Claimants by Beatles on CIF terms.11

After the

purchase price was paid to Beatles, the Bills of Lading were delivered to Claimants.12

As a

5 See at the ratification page of the depositary: http://diplomatie.belgium.be/nl/binaries/I-4a_tcm314-79747.pdf.

6 See at the ratification page of the depositary: http://diplomatie.belgium.be/nl/binaries/I-4b_tcm314-79721.pdf.

7 COGSA 1992 s.5(2)(a), (b).


9 The back of the Bills of Lading only contains the shipper’s name and signature. See exhibit 5, 6, 7 and 8.

10 Keppel Tatlee Bank Ltd v Bandung Shipping Private Ltd [2003] 1 Lloyd's Rep. 619 at p. 622.

11 See exhibit 1 and 2.

12 See exhibit 16.

http://diplomatie.belgium.be/fr/binaries/I-4a_tcm313-79747.pdf

http://diplomatie.belgium.be/fr/binaries/I-4a_tcm313-79747.pdf

4

result, Claimants came into possession of these blank endorsed negotiable Bills of Lading,

documents to which COGSA 1992 applies.

In The Aegean Sea13

Thomas J. held that in order for a person to qualify as a “holder” for

purposes of COGSA 1992, a consensual element must be present. The endorsee/transferee must

not only receive the bill of lading but he is also required to accept delivery of the bill before he

can become a “holder”.14

This condition is met by Claimants. Their acceptance can be derived

from (1) payment of the purchase price to Beatles, who delivered the Bills of Lading to

Claimants15

and (2) Claimants informed Respondents that they were the lawful holders of the

Bills of Lading.16

Claimants’ message17

to Beatles that they were in repudiatory breach of the

sales contracts in failing to insure the cargo under the agreed terms does not imply non-

acceptance of the Bills of Lading.

Claimants did not abandon the cargo. Only on receipt of confirmation that Beatles would repay

the purchase price Claimants intended to arrange for the Bills of Lading to be returned to

Beatles. Following a series of messages18

it became apparent that Beatles were not going to

repay the purchase price meaning that Claimants remained holders of the Bills of Lading.

A person shall be regarded for the purposes of COGSA 1992 as having become the lawful

holder of a bill of lading wherever he has become the holder of the bill in good faith.19

The Act

does not provide a definition of the concept of good faith. In The Aegean Sea20

Thomas J.

referred to this concept in a narrow means: "In the commercial context of bills of lading, the

13 Aegean Sea Traders Corp v Repsol Petroleo SA (The Aegean Sea) [1998] 2 Lloyd’s Rep. 39.

14 Aegean Sea Traders Corp v Repsol Petroleo SA (The Aegean Sea) [1998] 2 Lloyd’s Rep. 39 at p. 59-60.

15 See exhibit 16.

16 See exhibit 23.

17 See exhibit 12.

18 See exhibit 13, 15 and 17.

19 COGSA 1992 s.5(2).

20 Aegean Sea Traders Corp v Repsol Petroleo SA (The Aegean Sea) [1998] 2 Lloyd’s Rep. 39.

5

meaning of the term good faith should be clear, capable of unambiguous application and be

consistent with the usage in other contexts and countries." In his view, it imports only that the

holder of the bill of lading acquired that status honestly.21

The requirement of “honest conduct” cannot be precisely defined. Good faith would be

negatived where the holder had acquired possession of the bill by means of some fraud or by

actually stealing it. It may also be negatived by the fact that the holder, having bought the goods

from the shipper (or other previous holder) had acquired possession of the bill from the seller

without complying with the conditions (typically as to payment) which under the contract of

sale he was required to perform so as to become entitled to such possession.22

Claimants certainly did not obtain the Bills of Lading by means of fraud. Beatles delivered the

Bills of Lading to Claimants after the purchase price was paid. There can be no doubt that the

circumstances in which Claimants acquired the Bills of Lading were honest. They became

holders in good faith.

For the above reasons Claimants are the lawful holders of the Bills of Lading and thus entitled to

sue Respondents, being the contractual carriers under the Bills of Lading.

B. An implied contract with Respondents can be established

Even if Claimants would not be considered as the lawful holders of the Bills of Lading and

COGSA 1992 would therefore not apply, which is denied, an implied ‘Brandt v Liverpool’23

contract with Respondents can be established, given all the circumstances of the case.

21 Aegean Sea Traders Corp v Repsol Petroleo SA (The Aegean Sea) [1998] 2 Lloyd’s Rep. 39 at p. 60.

22 See G.H. TREITEL and F.M.B. REYNOLDS, Carver on Bills of Lading, London, Sweet & Maxwell, 3 Ed., 2011, at

p. 231; S. BAUGHEN, Shipping Law, London, Routledge-Cavendish, 4 Ed., 2009, at p. 44. 23

Brandt v Liverpool, Brazil & River Plate Steam Navigation Co Ltd [1924] 1 K.B. 575.

6

In a message of 20 March 200924

Claimants informed Respondents that they were the lawful

holders of the Bills of Lading, meaning that they intended to obtain delivery of the goods carried

under these Bills. Claimants’ conduct should be understood as an offer to enter into a contract

with Respondents on the terms of the Bills of Lading.

Since the decision of the Court of Appeal in ‘The Elli 2’25

, the test of business necessity appears

to have taken hold as the proper basis for inferring the contract. In the present case, a contract

between Claimants and Respondents should be implied, as it is necessary in order to give

business reality to the transaction and to create enforceable obligations between them. Claimants

and Respondents were dealing with one another in circumstances in which Claimants expected

that business reality and those enforceable obligations to exist.26

After all, without the

instructions of Beatles Respondents would have delivered the cargo to Claimants, being the

holders of the Bills of Lading.

In ‘The Aramis’27

the implied contract has failed because no promise to deliver goods could be

imputed to the carrier, there being no more goods to deliver. In the relation between Claimants

and Respondents there was a bill of lading to present and a cargo to deliver. As the two essential

features are present, an implied contract could be established. Respondents can be sued under

that implied contract for failure to deliver the cargo on the Bill of Lading terms.

3.2. RIGHT OF SUIT IN TORT

If Claimants would not succeed in their contract action, they still have a right to sue

Respondents in tort.

24 See exhibit 23.

25 Ilyssia Compania Naviera SA v Bamaodah (The Elli 2) [1985] 1 Lloyd's Rep. 107.

26 See Ilyssia Compania Naviera SA v Bamaodah (The Elli 2) [1985] 1 Lloyd's Rep. 107 at p. 115.

27 The Aramis [1989] 1 Lloyd’s Rep. 213 at p. 225.

7

After the decision of the House of Lords in ‘The Aliakmon’28

, it is now settled that a claimant

cannot sue in tort unless he can prove that, at the time of the alleged tort causing the loss or

damage complained of, he had a proprietary interest in the goods. This proprietary interest can

involve legal ownership or a possessory title.29

The goods in respect of which Claimants sue are part of a bulk shipped on board one vessel.30

Pursuant to the FOSFA 81 terms governing the PFAD contracts English law is applicable to

these contracts.31

Where there is a contract for the sale of a specified quantity of unascertained

goods, section 20A of the Sale of Goods Act 1979 is to be applied. According to this section,

property in an undivided share in the bulk is transferred to the buyer and the buyer becomes an

owner in common of the bulk, as soon as the three conditions specified in paragraphs (a) and (b)

of subsection 20A(1) are met or at such later time as the parties may agree.32

The first condition, laid down in section 20A(1)(a), is that the goods or some of them must

"form part of a bulk". Secondly, section 20A(1)(a) requires the bulk to be "identified either in

the contract or by subsequent agreement between the parties". The third condition, stated in

section 20A(1)(b), is that the buyer must have "paid the price for some or all of the goods which

are the subject of the contract and which form part of the bulk".

The goods in question formed part of a bulk, as specified in the sales contracts between Beatles

and Claimants. The bulk, Palm Fatty Acid Distillate, was identified in these contracts.33

28 Leigh & Sillavan Ltd v Aliakmon Shipping Co Ltd (The Aliakmon) [1986] 2 Lloyd’s Rep. 1.

29 Leigh & Sillavan Ltd v Aliakmon Shipping Co Ltd (The Aliakmon) [1986] 2 Lloyd’s Rep. 1 at p. 4 (negligence).

See also Margarine Union v Cambay Prince S.S. Co [1969] 1 Q.B.D. 219 (negligence); Mitsui & Co Ltd v Flota

Mercante Grancolombiana SA [1988] 2 Lloyd’s Rep. 208 (conversion); Nippon Yusen Kaisha v Ramjiban

Serourgee [1938] A.C. 429 (conversion); Homburg Houtimport B.V. v Agrosin Private Ltd. and others (The

Starsin) [2003] 1 Lloyd's Rep. 571 (negligence). 30

See exhibit 1 and 2. 31

See clause 31 of the FOSFA 81 contract (exhibit 37). 32

Sale of Goods Act 1979 s.20(A)(2). 33

See exhibit 1 and 2.

8

Claimants had also paid for the goods.34

Given that the three conditions were fulfilled,

Claimants became owners in common of the bulk and thus acquired a proprietary interest for the

purpose of the rule in ‘The Aliakmon’35

.

In addition, Claimants have a proprietary interest in the goods pursuant to their sales contracts

with Beatles. These contracts are governed by the FOSFA 81 terms.36

Clause 15 of the FOSFA

81 contract regarding “unascertained goods” provides: “... the Buyer of the parcel is a pro rata

owner of the whole of the larger quantity in common with Seller/s and Buyer/s of other parts of

the larger quantity.”37

Claimants had a proprietary interest at the time the goods were damaged as a result of the pirate

attack and at the time the goods were misdelivered to Beatles. By virtue of that interest,

Claimants are entitled to recover damages from Respondents for, respectively, the tort of

negligence and the tort of conversion.

4. MERITS OF THE CASE

4.1. RESPONDENTS ARE LIABLE IN CONTRACT

A. Liability for misdelivery

a) Duty to deliver the cargo against presentation of the Bills of Lading

In modern commercial usage a bill of lading operates as “a document of title to the goods which

enables the consignee to take delivery of the goods at their destination or to dispose of them by

the endorsement and delivery of the bill of lading”.38

The carrier has a duty to deliver the cargo

against presentation of the bill of lading. Production of the original negotiable bill of lading to

34 See exhibit 16.

35 Leigh & Sillavan Ltd v Aliakmon Shipping Co Ltd (The Aliakmon) [1986] 2 Lloyd’s Rep. 1.


37 See exhibit 37.

38 J. I. MacWilliam Co. Inc v Mediterranean Shipping Co. SA (The Rafaela S) [2005] 1 Lloyd’s Rep. 347 at p. 357.

9

the carrier is sufficient proof to the carrier that he is entitled to deliver the cargo to that person.

In other words, under a bill of lading contract a carrier is both bound and entitled to deliver the

goods against production of an original bill of lading.39

A carrier cannot be made to deliver to anyone other than the person entitled to possession of the

goods under the bill of lading. He may therefore decline to deliver except to the holder of the

bill of lading.40

If the carrier does deliver to someone other than the holder, he does so at his

peril41

and will be liable for breach of the bill of lading contract.42

As Respondents delivered the

cargo to Beatles without production of the Bills of Lading, they are liable to Claimants, who are

the lawful holders of these Bills. Respondents should have refused to deliver to Beatles since

Beatles were not able to present the Bills of Lading.

Respondents cannot be protected by the following clause in the Bills of Lading: “The Carrier

shall in no case be responsible for loss of or damage to cargo arising prior to loading, after

discharging, ...” Clauses exempting the shipowner from loss or damage “after discharge” do not

apply to “misdelivery”, in the sense of delivery to a party who is not the holder of the original

bill of lading.43

39 Motis Exports v Dampskibsselskabet AF 1912 [2000] 1 Lloyd’s Rep. 211 at p. 216. See also Glyn Mills Currie &

Co. v East and West India Dock Co. (1882) 7 App. Cas. 591; The Stettin (1889) 14 PD 142; Sze Hai Tong Bank Ltd

v Rambler Cycle Co. Ltd [1959] AC 576; Barclays Bank Ltd v Commissioners of Customs and Excise [1963] 1

Lloyd’s Rep. 81; Kuwait Petroleum Corporation v I&D Oil Carriers Ltd (The Houda) [1994] 2 Lloyd’s Rep. 541;

J. I. MacWilliam Co. Inc v Mediterranean Shipping Co. SA (The Rafaela S) [2005] 1 Lloyd’s Rep. 347. 40

Kuwait Petroleum Corporation v I&D Oil Carriers Ltd (The Houda) [1994] 2 Lloyd’s Rep. 541 at p. 556. 41

Sze Hai Tong Bank Ltd v Rambler Cycle Co. Ltd [1959] AC 576; Barclays Bank Ltd v Commissioners of Customs

and Excise [1963] 1 Lloyd’s Rep. 81. 42

MB Pyramid Sound NV v Briese Schiffahrts GmbH and Co KG MS Sina and Latvian Shipping Association Ltd

(The Ines) [1995] 2 Lloyd’s Rep. 144 at p. 151. See also Sze Hai Tong Bank Ltd v Rambler Cycle Co. Ltd [1959]

AC 576; Kuwait Petroleum Corporation v I&D Oil Carriers Ltd (The Houda) [1994] 2 Lloyd’s Rep. 541; SA Sucre

Export v Northern River Shipping Ltd (The Sormovskiy 3068) [1994] 2 Lloyd's Rep. 266; The “Dolphina” [2012] 1

Lloyd’s Rep. 304. 43

SA Sucre Export v Northern River Shipping Ltd (The Sormovskiy 3068) [1994] 2 Lloyd’s Rep. 266; MB Pyramid

Sound NV v Briese Schiffahrts GmbH and Co KG MS Sina and Latvian Shipping Association Ltd (The Ines) [1995]

2 Lloyd’s Rep. 144; Motis Exports v Dampskibsselskabet AF 1912 [2000] 1 Lloyd’s Rep. 211; East West Corp. v

DKBS 1912 [2003] 1 Lloyd’s Rep. 239; Trafigura Beheer v Mediterranean Shipping (The MSC Amsterdam) [2007]




10

b) Claimants did not give up their rights under the Bills of Lading

There may be some special defences for the carrier to discharge his liabilities from the delivery

without bill of lading, for example the fact that the lawful holder of the bill of lading has given

up his rights under that bill of lading.

Because Beatles had not agreed to repay the purchase price of the cargo, Claimants were not

prepared to return the Bills of Lading to Beatles. Claimants did not abandon the cargo to

Beatles. In a message of 20 March 200944

Claimants presented themselves to Respondents as the

lawful holders of the Bills of Lading, which clearly indicates that they did not give up their

rights under the Bills of Lading. Claimants expressly informed Respondents that they did not

authorise Beatles to discharge the cargo in Rotterdam.

The carrier can only be relieved from his duty to deliver against presentation of the bill of lading

where it is proved that the person presenting the bill is not entitled to immediate possession of

the goods.45

Respondents did not have any reason to believe that Claimants had no right to

possession of the goods, nor was it proved to Respondents’ reasonable satisfaction that Beatles,

seeking delivery of the goods, were entitled to possession. After all, Respondents had no

primary knowledge of the contractual arrangements between Beatles and Claimants or the

correspondence which has passed between them.

c) The Letter of Indemnity does not affect the rights of Claimants

Respondents discharged the cargo to Beatles against a Letter of Indemnity.46

It frequently occurs

that a carrier is asked to deliver without production of original bills of lading when the vessel is

2 Lloyd’s Rep. 622. 44

See exhibit 23. 45

SA Sucre Export v Northern River Shipping Ltd (The Sormovskiy 3068) [1994] 2 Lloyd's Rep. 266 at p. 271. 46

See exhibit 31.

11

voyage or time chartered. It was recognised in The Sagona47

and in The Houda48

that there was

a practice in the oil cargo trade for cargoes to be delivered against a letter of indemnity.

Delivery against production of a bill of lading is the obligation upon the carrier, and the case law

in recent years indicates that there is no compulsory duty on the carrier to accept a letter of

indemnity. For example, in The Houda, Neill L. J. observed that “it does not seem to me that the

existence of the practice or the right to a letter of indemnity can impose on the owners a

contractual obligation which does not otherwise exist,” though the practice is so common and

the reasons for this practice are various.49

Beatles are the charterers of the Vessel. Clause 24 of the Charter Party contains the following

provision: “The Charterer shall indemnify the Owner, the Master, and the Vessel from all

consequences or liabilities that may arise ... or from complying with any orders of the Charterer

or its agents.” This wording does not go so far as to oblige Respondents to deliver without

presentation of the Bills of Lading.

In respect to a similar clause in The Houda Neill L. J. stated: “Clauses 13 and 50 do not in my

view impose any express obligation on the charterers to discharge a cargo in the absence of the

bill of lading. They merely provide for a letter of indemnity if such discharge takes place. But I

do not construe the clauses as imposing a contractual duty on the owners.”50

Even if Respondents were contractually obliged to deliver the cargo without presentation of the

Bills of Lading, which is denied, the rights of Claimants would not be affected. In the Stone

47 A/S Hansens Tangens Rederi III v Total Transport Corp (The Sagona) [1984] 1 Lloyd’s Rep. 194 at p. 201. 48



Kuwait Petroleum Corporation v I&D Oil Carriers Ltd (The Houda) [1994] 2 Lloyd’s Rep. 541 at p. 551.

12

Gemini51

, an Australian decision, it was held that “the fact that there is a practice that vessels

will discharge against letters of indemnity cannot detract from the rights of the holder of a bill

of lading”.

A letter of indemnity is just an agreement between the carrier and the issuer. It shall not affect

the liability of the carrier for delivery without a bill of lading when he faces a lawful holder of

the original bill of lading. As the holder of the bill of lading is concerned, delivery against a

letter of indemnity does not operate as the delivery of the goods. It is a wrongful delivery, and

the carrier runs the risks on himself.52

In other words, Respondents remain liable to Claimants,

who are the lawful holders of the Bills of Lading, notwithstanding the fact that they delivered

the cargo to Beatles against a Letter of Indemnity.

B. Liability for delivery at the wrong discharge port

a) Duty to deliver the cargo at the correct discharge port

It is the duty of the carrier to proceed to the port of discharge provided by the bill of lading and

the carrier may be held liable for discharging cargo at a port not so agreed. As all the Bills of

Lading provided for discharge in Liverpool, Merseyside53

, the cargo should have been delivered

in Liverpool and not in Rotterdam. Respondents breached their duty under the Bills of Lading to

deliver the cargo at the correct discharge port, namely Liverpool.

Beatles, not being the lawful holders of the Bills of Lading, had no entitlement to give

Respondents orders in respect of the cargo. At the time Beatles requested Respondents to deliver

the cargo at Rotterdam54

the Bills of Lading had already been transferred to Claimants. Beatles’

51 The Stone Gemini [1999] 2 Lloyd’s Rep. 255 at p. 266.

52 Sze Hai Tong Bank Ltd v Rambler Cycle Co. Ltd [1959] AC 576.


54 See the letter of indemnity issued by Beatles on 19 March 2009 (exhibit 31).

13

control over the cargo moved away from them with the documents and from then on

Respondents should have taken instructions only from Claimants. By complying with Beatles’

instructions Respondents breached the contract of carriage contained in or evidenced by the

Bills of Lading, and are liable to Claimants.

b) The liberty clause of the Charter Party is null and void

The Charter Party contains the following liberty clause (clause 29): “(a) ... The Owner may,

when practicable, have the Vessel call and discharge the cargo at another or substitute port

declared or requested by the Charterer. ... When the cargo is discharged from the Vessel, as

herein provided, it shall be at its own risk and expense; such discharge shall constitute complete

delivery and performance under this contract and the Owner shall be freed from any further

responsibility. ...”55

The liberty clause of the Charter Party, when assumed to be incorporated into the Bills of

Lading, is rendered invalid and void by article 3(8) of the Hague-Visby Rules, as the provision

purports to give Respondents greater protection than that which they are afforded by the Rules.

Under the Hague-Visby Rules a carrier is responsible for the goods during the period from

loading to discharging. Discharge under a bill of lading contract means discharge at the port

provided by the bill of lading. The liberty clause tries to relieve Respondents from liability by

stipulating that discharge at another port requested by the Charterer shall constitute complete

delivery and that the Owner (Respondents) shall be freed from any further responsibility.

As clause 29 of the Charter Party is null and void and of no effect, Respondents cannot rely on

this clause against Claimants and they were not entitled to discharge the cargo at Rotterdam

instead of Liverpool.

55 See exhibit 3.

14

c) Claimants did not agree to delivery in Rotterdam

In their message of 20 March 200956

Claimants expressly informed Respondents that they did

not authorise Beatles to discharge the cargo in Rotterdam. Claimants only considered selling the

cargo to alternative buyers in Rotterdam and they were prepared for Beatles to organise a sale

on their behalf to the buyers purchasing the other cargoes, as long as Beatles agreed to transfer

the sale proceeds immediately to Claimants. Beatles refused to cooperate with Claimants’

request to alter the destination of the Bills of Lading in order to find the best buyers. They also

did not agree to transfer the sale proceeds to Claimants. Therefore Claimants were obliged to

take the cargo in Liverpool as called for by the sales contract and as specified in the Bills of

Lading. They retained the Bills so that they could discharge the cargo in Liverpool.57

Claimants

clearly did not agree to the cargo being delivered in Rotterdam.

C. Liability for damage to the goods

a) Presumption of liability

During the voyage the cargo went from being GMQ PFAD to non-GMQ PFAD which was

worthless, alternatively was worth considerably less than GMQ PFAD.58

A PAI59

ruling

confirmed that by reason of the piracy the cargo could not be used in the food/feed chain.60

Pursuant to article 3(6) of the Hague-Visby Rules, notice of loss or damage and the general

nature of such loss or damage must be given in writing to the carrier or his agent at the port of

discharge before or at the time of the removal of the goods into the custody of the person

entitled to delivery thereof under the contract of carriage, or, if the loss or damage is not

56 See exhibit 23.

57 See exhibit 22.

58 See exhibit 32.

59 PAI (Product Authentication International Ltd.) is the certifying body for FEMAS (Feed Materials Assurance

Scheme). 60

See exhibit 12.

15

apparent, within three days. In the absence of any notice of loss or damage, such removal shall

be prima facie evidence of the delivery by the carrier of the goods as described in the bill of

lading.

Claimants never gave notice of damage to Respondents, but even in the absence of this timely

protest, no prima facie evidence of delivery conform the description on the Bills of Lading is

possible because the goods were delivered to Beatles and Beatles, not being the lawful holders

of the Bills of Lading, were not the persons entitled to delivery of these goods under the contract

of carriage. Only Claimants had, as lawful holders of the bill of lading, the right to get the goods

delivered by Respondents. Respondents never delivered the goods to Claimants, meaning that

there is no prima facie evidence that Respondents delivered the goods as described in the Bills

of Lading.

The carrier is prima facie liable for all loss or damage to cargo received in good order and out-

turned short or in bad order. The loss or damage is presumed to have occurred while the goods

were in its custody.61

According to the Bills of Lading, the goods were shipped “in apparent good order and

condition”.62

Article 3(4) of the Hague-Visby Rules provides that a bill of lading is to be prima

facie evidence of the receipt by the carrier of the goods in accordance with the description in the

bill of lading. This article also stipulates that proof to the contrary is not allowed when the bill

of lading has been transferred to a third party acting in good faith. 63

In other words, the Bills of

Lading in the hands of Claimants are conclusive evidence against Respondents of the shipment

of the goods. Respondents are estopped from denying that they have shipped cargo which was in

61 See e.g. The Torenia [1983] Lloyd's Rep. 210 at p. 216; The Hellenic Dolphin [1978] 2 Lloyd's Rep. 336 at p.

339; The Theodegmon [1990] 1 Lloyd’s Rep. 52 at pp. 53 and 54. 62

See exhibit 5, 6, 7 and 8. 63

See also COGSA 1992 s.4.

16

good condition. The addition of the words “condition unknown” on the Bills of Lading does not

nullify the effect of the words “shipped in apparent good order and condition”. Such a clause

merely protects the carrier against any “condition” which is not apparent.64

As the cargo in question was shipped in apparent good order and condition and was delivered

damaged (not suitable to enter the food/feed chain), a prima facie case of Respondents’ breach

of article 3(2) of the Hague-Visby Rules has been made.

b) Burden and order of proof

In order to rebut Claimants’ prima facie case, Respondents have the affirmative burden of

proving that the cause of the damage was one of the excepted perils, for which they have no

responsibility under the Bills of Lading or under article 4(2) of the Hague-Visby Rules.65

If the carrier succeeds in establishing one of the exceptions, the onus shifts back to the cargo

owner who may displace the carrier’s defence by proving that the carrier breached article 3(2) or

article 3(1) of the Hague-Visby Rules and that this was the cause of the loss or damage. In the

case of breach of article 3(1) the onus shifts to the carrier who must prove that the

unseaworthiness of the ship was not caused by its lack of due diligence. This is the “traditional

order of proof”.66

It should be noted that there is another possible way of shifting the burden of proof, the one

where the carrier first of all has to prove due diligence to make the ship seaworthy before and at

the beginning of the voyage in respect of the loss or damage.67

This order of proof is the most

64 The Skarp [1935] P. 134.

65 See e.g. The Hellenic Dolphin [1978] 2 Lloyd's Rep. 336.

66 See e.g. The Hellenic Dolphin [1978] 2 Lloyd's Rep. 336.

67 See W. TETLEY, “The Burden and Order of Proof in Marine Cargo Claims”, available at

http://www.mcgill.ca/files/maritimelaw/burden.pdf.

17

reasonable as it protects the weaker party, namely the cargo interest. In The Farrandoc68

for

example, Thurlow J. disagrees with Noël J. and would seem to follow this order of proof, by

citing Lord Somervell in Maxine Footwear Co.69

as to the due diligence provision of article 3(1)

of the Hague-Visby Rules being an overriding obligation.70

c) No excepted peril

The general exceptions clause (clause 17) of the Charter Party71

starts with a long paragraph of

exclusions from liability for loss or damage arising or resulting from a long list of possible

causes. This clause, when assumed to be incorporated into the Bills of Lading, is without any

validity or effect whatsoever, in so far as it seeks to claim exemptions not permitted under the

Hague-Visby Rules.72

Claimants are as third party holders of the Bills of Lading protected by

the Rules as a matter of law. According to article 3(8) of the Hague-Visby Rules any provision

in a contract of carriage lessening the carrier’s liability under these Rules shall be null and void

and of no effect.

The clause in question explicitly refers to “pirates” as a general exception. A pirate attack

might be considered as a peril of the sea73

or a similar exception (“act of public enemies”) under

article 4(2) of the Hague-Visby Rules. Though, perils of the sea or similar exceptions constitute

perils only if they are unavoidable or if they would not be expected in the area of the voyage, at

68 Robin Hood Flour Mills, Ltd. v N. M. Paterson & Sons, Ltd.(The Farrandoc) [1967] 2 Lloyd’s Rep. 276 (CA).

69 Maxine Footwear Company, Ltd., and Morin v. Canadian Government Merchant Marine, Ltd. [1959] 2 Lloyd's

Rep. 105 at p. 113 (CA). 70

Robin Hood Flour Mills, Ltd. v N. M. Paterson & Sons, Ltd.(The Farrandoc) [1967] 2 Lloyd’s Rep. 276 at p. 281

(CA). 71

See exhibit 3. 72

See e.g. Homburg Houtimport B.V. v Agrosin Private Ltd. and others (The Starsin) [2003] 1 Lloyd's Rep. 571 at

p. 609. 73

Pickering v Barkley (1648) Styles 132.

18

that time of the year.74

Piracy was known to occur frequently in the waters concerned (Gulf of Aden) and could have

been averted if Respondents had put in place additional on-board surveillance procedures and if

they had installed barbed wire. Measures like employing armed guards on board the Vessel

would have significantly reduced the risk of being hijacked. It is also submitted that

Respondents, not being prepared to deal with a pirate attack, should have taken a safe and

reasonable alternative route to the discharge port. Respondents do not prove that they have taken

any of these measures. As a result, Respondents cannot rely on the piracy as an excepted peril

under article 4(2) of the Hague-Visby Rules, nor can they rely on the general exceptions clause,

as the provision in respect of “pirates” purports to give Respondents greater protection than that

which they are afforded by the Hague-Visby Rules.

In addition, a carrier who commits a deviation will not be able to rely on any exception clause to

protect him against claims, as the deviation constitutes a fundamental breach of contract.75

In

the present case, the Vessel deviated from the intended route when she was boarded by Somali

pirates on 15 November 2008 and was ordered to sail to the Somali coast.76

Respondents are

responsible for this deviation since the pirate attack could have been avoided by taking

appropriate precautions. The Vessel also deviated by sailing to Fujairah (UAE) after she was

released from hijacking, instead of immediately proceeding to Liverpool.

d) Breach of art. 3(2) of the Hague-Visby Rules

If Respondents could raise the piracy as an exculpatory exception, which is denied, Claimants

can contradict this exception by proving lack of proper and careful care of cargo as the real

74 See the definition of W. TETLEY in Marine Cargo Claims, 3 Ed., 1988, Chap. 18, “Peril of the Sea and Similar

Exceptions”. 75

See Morrison & Co v Shaw, Savill & Co [1916] 2 KB 783; Stag Line v Foscolo Mango [1932] AC 328. 76

See exhibit 25.

19

cause of the damage. In breach of article 3(2) of the Hague-Visby Rules Respondents failed to

properly and/or carefully carry, keep and care for the goods carried in that they did not take the

appropriate measures (e.g. barbed wire, on board surveillance) to avoid the Vessel being taken

over by pirates and during the period the Vessel was hijacked no cargo care measures were

taken.

PFAD is a by-product of the palm oil refining process. It is a light brown solid at room

temperature, melting to a brown liquid on heating. It has a high free acid level and a PH range

between 1.5 and 7. Recommended product temperatures are in range of 42°C/50°C during

storage and transit and between 55°C and 70°C during unloading and transfer.77

After the Vessel was released from hijacking in Somalia, surveyors of Aspinall Lewis

International (instructed by Claimants) investigated the circumstances under which the cargo

was kept during the hijacking period and the condition of the cargo upon release.78

The Vessel’s crew had received carrying instructions for heating the cargo during the voyage

and heating up the cargo in the last week prior to arrival. Though, the Master and Chief Officer

ascertained that there was no heating applied to the cargo during the period of captivity nor

during the subsequent voyage to Fujairah and that there were no daily records of cargo

temperature recorded during the period of captivity. They also reported that the crew members

did not observe any attempts to access the cargo during the period of captivity, although they

added that the tank opening was only observed periodically from the bridge.

In their report the surveyors reached the conclusion that the tanks could have been opened and

something could have dropped into the cargo at any stage of the 3 months of captivity. It is

77 See exhibit 30.

78 See exhibit 25.

20

submitted that Respondents could have taken appropriate measures to avoid the resulting

damage to the goods.

To keep, carry and care for the goods properly and carefully is an essential duty of the carrier.79

It is perhaps the most basic of all the obligations which the carrier and the ship owe to cargo

during the voyage. Respondents breached this duty by negligence in ensuring that proper

measures are taken to protect the goods while they are aboard the Vessel from dangers. The fact

that the cargo was heated and cooled down for several times and the possibility that there was

some unauthorized access to the cargo during the period of captivity have resulted in a

deterioration in the cargo quality, for which Respondents are liable.

e) Unseaworthiness of the ship at the beginning of the voyage

“Seaworthiness” means that the ship, her equipment and crew must be fit to withstand the perils

which can foreseeably be encountered on the contemplated voyage and that she is also fit to

carry the cargo safely despite such perils.80

It is submitted that piracy has an impact on the seaworthiness if the ship sails through waters

where piracy is known to occur frequently. It goes without saying that the Gulf of Aden is such

an area. It is important for a carrier to make proper preparations and to take appropriate

precautions to minimise the risk of being hijacked. He should carefully assess the risks involved

with a transit through a dangerous zone like the Gulf of Aden. This involves such matters as an

analysis of the locations and circumstances of previously reported hijackings. Furthermore, the

carrier should carefully plan the ship’s route and have contingency plans for dealing with a

79 See The Travaux Préparatoires of the Hague Rules and of the Hague-Visby Rules, at p. 186.

80 Empresa Cubana Importada de Alimentos “Alimport” v Iasmos Shipping Co. SA (The Good Friend) [1984] 2

Lloyd's Rep. 586 at p. 592; Ben Line Steamers Ltd v Pacific Steam Navigation Co. (The Benlawers) [1989] 2

Lloyd’s Rep. 51 at p. 59.

21

pirate attack, which should be tested at drills. The crew members should know what procedures

they are to follow to prepare for and deal with this sort of emergency.

The shipping industry publishes a “Best Management Practices” (“BMP”) guide for ship owners

which sets out the suggested planning and operational practices to be followed by ships

transiting the Gulf of Aden and off the coast of Somalia. This BMP guide is regularly updated

and revised, and should have been Respondents’ primary point of reference, which it clearly

wasn’t as they did not take the basic recommendations such as pre-transit planning and

establishing physical barriers like barbed wire fencing on the external perimeter of the vessel.

Considering the fact that the Vessel was boarded by Somali pirates at 12.50 hrs, in the middle of

the day, and the entire crew was held hostage, it is clear that Respondents did not ensure

increased vigilance and that the Vessel’s crew was not prepared to deal with such an attack.

In breach of article 3(1) of the Hague-Visby Rules Respondents failed to exercise due diligence

to make the Vessel seaworthy before and at the beginning of the voyage, since they did not take

appropriate precautions to avoid the Vessel being hijacked.

In a recent case, ‘The Devon’81

, a successful claim was made by cargo interests against the

owners of a vessel for damage caused to a consignment of corn. The intended voyage took 59

days instead of 8 days due to a main engine breakdown, which resulted from the

unseaworthiness of the vessel at the beginning of the voyage. This reasoning can also be applied

to the present case, where the unseaworthiness was the operative causative breach which led to

the Vessel being taken over by pirates and the damage to the cargo, for which Respondents are

responsible.

81 CHS Inc Iberica SL and CHS Europe SA v Far East Marine SA (The Devon) [2012] EWHC 3747.

22

4.2. RESPONDENTS ARE LIABLE IN TORT

A. Tort of conversion

If a carrier delivers the cargo to someone other than the holder of the bill of lading, he will be

liable in the tort of conversion to the person entitled to delivery.82

In ‘The Sagona’83

Staughton

J. stated that “... the owners are at the very least not bound to obey an order to receiver Y, if in

fact it is receiver Z who is the owner of the cargo and entitled to delivery of it. By doing so the

owners, and their master as joint tortfeasors, would be liable for the tort of conversion, whether

or not they would also be liable to Z for breach of contract.”

The three elements of the tort of conversion were defined by Lord Nicholls of Birkenhead in

‘Kuwait Airways Corp. v Iraqi Airways Co.’84

as follows: “First, the defendant’s conduct was

inconsistent with the rights of the owner (or other person entitled to possession). Second, the

conduct was deliberate, not accidental. Third, the conduct was so extensive an encroachment on

the rights of the owner as to exclude him from use and possession of the goods.”

Delivery of cargo to a party that is not entitled to possession thereof clearly satisfies all three of

these elements. Misdelivery is “conduct inconsistent with the rights of the owner (or other

person entitled to possession)”, it is the effect of a voluntary act and it results in deprivation of

the owner’s possession.

As mentioned above, Claimants did not abandon the cargo. As payers of the purchase price and

lawful holders of the Bills of Lading Claimants were the persons immediately entitled to

possession of the cargo. Since Respondents intentionally delivered the cargo to Beatles without

production of the Bills of Lading, they are liable in the tort of conversion to Claimants. The fact

82 Sze Hai Tong Bank Ltd v Rambler Cycle Co. Ltd [1959] AC 576 at p. 586.

83 A/S Hansens Tangens Rederi III v Total Transport Corp (The Sagona) [1984] 1 Lloyd’s Rep. 194 at p. 198.

84 Kuwait Airways Corp. v Iraqi Airways Co. (Nos. 4 & 5) [2002] UKHL 19 at p. 39.

23

that Respondents believed that they were delivering to a party with a right to possession can be

no defence, no matter how reasonable that belief. Moreover, there was no reason for

Respondents to believe that Beatles were entitled to possession. In fact, Respondents had no

primary knowledge of the contractual arrangements between Beatles and Claimants or the

correspondence which has passed between them.

Claimants have suffered damages resulting from Respondents’ tort of conversion. As the cargo

was never delivered to Claimants, they had to buy other goods in to sell to their sub-buyers in

Liverpool.85

Their sub-buyers have confirmed that they would have accepted the non-GMQ

cargo following the piracy as they were not intended for the human food chain.86

Moreover,

being UK technical buyers, they would have bought it at the same price as the GMQ cargo.87

B. Tort of negligence

A carrier will be liable in tort to the owner of the goods or the person entitled to possession

thereof for loss of or damage to the goods by reason of his negligence or that of his servants.88

Respondents failed to care for the goods carried as they did not take the appropriate measures

(e.g. barbed wire, on board surveillance) to avoid the Vessel being taken over by pirates and

during the period the Vessel was hijacked no cargo care measures were taken. Claimants, being

the persons immediately entitled to possession of the cargo, have suffered damages resulting

from Respondents’ negligence. The fact that the cargo was heated and cooled down for several

times and the possibility that there was some unauthorized access to the cargo during the period

of captivity has resulted in deterioration of cargo's quality. The cargo went from being GMQ



87 See exhibit 32.

88 Margarine Union v Cambay Prince S.S. Co. Ltd [1967] 2 Lloyd’s Rep. 315; Leigh & Sillavan Ltd v Aliakmon

Shipping Co Ltd (The Aliakmon) [1986] 2 Lloyd’s Rep. 1.

24

PFAD to non-GMQ PFAD which was worthless, alternatively was worth considerably less than

GMQ PFAD.89

Therefore Respondents are liable in the tort of negligence to Claimants.

4.3. NO LIMITATION OF LIABILITY

According to article 4(5)(e) of the Hague-Visby Rules “neither the carrier nor the ship shall be

entitled to the benefit of the limitation of liability provided for in this paragraph if it is proved

that the damage resulted from an act or omission of the carrier done with intent to cause

damage, or recklessly and with knowledge that damage would probably result.” It is submitted

that Respondents acted recklessly as they did not take the appropriate measures (e.g. barbed

wire, on board surveillance) to avoid the Vessel being taken over by pirates and during the

period the Vessel was hijacked no cargo care measures were taken. They should have known

that damage would probably occur. By delivering the cargo to Beatles against a Letter of

Indemnity and without production of the Bills of Lading Respondents also acted recklessly.

Given the nature and purpose of a letter of indemnity they knew that damage would be caused to

the persons who turned out to be the lawful holders of the Bills of Lading. Therefore

Respondents are not entitled to limit their liability. They are liable to Claimants for the total

amount of damage, which is the full value of the cargo in the case of misdelivery.

5. CLAIM FOR RELIEF

By reason of Respondents’ failure to properly and/or carefully carry, keep and care for the cargo

the cargo went from being GMQ cargo to non-GMQ cargo which was worthless, alternatively

was worth considerably less than GMQ-cargo. In the premises Claimants are entitled to the

difference between the price they paid for the cargo, namely USD 747.50 per mt, and its value at

Liverpool (being the correct place of discharge pursuant to the Bills of Lading) on or about 30

89 See exhibit 32.

25

March 2009 when it should have been delivered, plus its value at Liverpool on or about 30

March 2009 because it was not delivered: USD 747.50 per mt x 4,000 mt = USD 2,990,000,

plus the Dutch court costs and legal fees (as set out below), i.e. USD 3,236,756.26.

Further and/or alternatively Claimants paid USD 522.50 per mt to buy goods in to sell to their

sub-buyers in Liverpool.90

Claimants incurred legal fees in relation to the Dutch proceedings.

Accordingly Claimants claim USD 2,336,756.20 plus interest and costs as follows:

(1) USD 522.50 per mt x 4,000 = USD 2,090,000

(2) Dutch Court fees of USD 138,843.1491

(3) Legal fees in respect of the Dutch Court proceedings of USD 107,913.1292

It should be noticed that the Dutch Court allowed Claimants to arrest the Vessel as security for

their claims for damages against Respondents for delivery of the cargo in Rotterdam without

production of the Bills of Lading. The arrest was lifted in exchange for a security of USD

1,400,000 provided by Beatles on behalf of Respondents.93

For the above reasons Claimants claim:

(1) USD 3,236,756.26, alternatively USD 2,336,756.20, alternatively damages; and

(2) Interest on a compound basis pursuant to s. 49 of the Arbitration Act 1996; and

(3) Costs with compound interest on costs.


91 See exhibit 31.

92 See exhibit 31.


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