fourteenth annual international maritime law …€¦ · 2.2 the cargo was not damaged at the...
TRANSCRIPT
FOURTEENTH ANNUAL INTERNATIONAL MARITIME LAW ARBITRATION
MOOT COMPETITION 2013
IN THE MATTER OF AN ARBITRATION HELD AT SOUTHAMPTON
MEMORANDA FOR THE CLAIMANT
ON BEHALF OF:
Aardvark Limited
CLAIMANT
AGAINST:
Twilight Carriers Incorporated
RESPONDENT
TEAM 23
LUCINDA BRABAZON
AARON BROOKS
EMILY CHALK
JAMES SEMIT
II
TABLE OF CONTENTS
1. Twilight is liable to Aardvark for the breach of the contract of carriage..........................4
1.1 Twilight, as the shipowner, is party to the bills of lading due to the signature of its agent....4
1.2 Aardvark, as the lawful holder of the bills of lading, has rights of suit under the contract of
carriage....................................................................................................................................4
1.3 The contract of carriage incorporates the terms of the charterparty........................................4
2. Twilight breached Article III r 2 of the Hague-Visby Rules by failing ‘to properly and
carefully load, handle, stow, carry, keep, care for and discharge the goods carried’.......4
2.1 Twilight had a duty to act properly and carefully towards the cargo during the
voyage........................................................................................................................................4
2.2 The cargo was not damaged at the commencement of the voyage......................................4
2.3 The cargo was damaged during the voyage ........................................................................4
2.4 Twilight breached its duty to act properly and carefully towards the cargo by failing to
comply with the instructions to heat the cargo during the voyage to Fujairah..........................5
3. Further and alternatively, Twilight breached clause 16 of the charterparty by failing to
heat the cargo...........................................................................................................................6
3.1. Twilight had a duty to heat the cargo during the voyage....................................................6
3.2 Twilight breached its duty to exercise due diligence in maintaining the cargo
temperatures requested by Aardvark.........................................................................................6
3.2.1 Twilight did not maintain the cargo temperatures requested by Aardvark.................6
3.2.2 Maintaining the cargo temperatures requested by Aardvark was not beyond
Twilight’s control................................................................................................................6
3.3 Aardvark has discharged the burden of proving that Twilight’s failure to exercise due
diligence in maintaining the cargo temperatures caused the diminution in the value of the
goods...........................................................................................................................................7
III
4. Twilight breached Article III r 1 of the Hague-Visby Rules by failing to exercise due
diligence to ensure the seaworthiness of the Twilight Trader. Twilight’s breach caused
the damage to the cargo...........................................................................................................7
4.1 The Hague-Visby Rules were incorporated into the contract of carriage................................8
4.2 Twilight was required to exercise due diligence to make the Twilight Trader seaworthy......8
4.3 The definition of seaworthiness is objective but context-dependent.......................................8
4.3.1 Ordinary perils of the voyage..................................................................................9
4.3.2 What a prudent ship owner would have done to guard against those perils..........10
4.4 Physical Seaworthiness.........................................................................................................10
4.4.1 Navigational Route......................................................................................................10
4.4.2 Equipment...................................................................................................................11
4.5 Organisational Seaworthiness............................................................................................13
4.6 The causal link between Twilight’s breach of Article III r 1 of the Hague-Visby Rules and
the damage to the goods has been established...................................................................15
4.7 Twilight has not discharged the burden of proving due diligence under Article IV r 1 of
the Hague-Visby Rules.......................................................................................................15
4.8 Twilight cannot use the protections provided by the ‘Rights and Immunities’ in Article IV
r 2 of the Hague-Visby Rules..............................................................................................15
4.9 Twilight Traders cannot rely on clause 17 of the charterparty, the ‘General Exceptions
Clause’................................................................................................................................16
5. Twilight has breached the common law undertaking not to deviate from the agreed
route........................................................................................................................................16
5.1 The agreed route was from Pasir Gudang, Malaysia to Liverpool, Merseyside................16
5.2 The delivery of the cargo to Rotterdam and not Merseyside constituted a breach of the
common law principle of deviation...................................................................................16
IV
5.3 There was no valid reason for the breach..........................................................................17
5.3.1 Twilight cannot rely on the common law exception of ‘justifiable deviation’......17
5.3.2 The respondents are not afforded immunity by the Hague-Visby Rules as the
deviation was not a ‘reasonable deviation’ under Article IV r 4...........................17
5.3.3 Clause 29 ‘Liberty Clause’ of the charterparty does not exempt Twilight from its
duty not to deviate from the agreed route..............................................................18
6. Twilight breached the contractual condition that it was only to discharge the cargo at
Merseyside against presentation of the bills of lading, by discharging the cargo at
Rotterdam against a letter of indemnity………………...............……………….………..19
6.1. The contract between Aardvark and Twilight was contained in the bills of lading and the
charterparty.…………………………….……..…………………......…….……………19
6.2. The contracts contained a term that the cargo was only to be discharged at Merseyside
against presentation of the bills of lading........................………………………….……19
6.3. The contractual term not to discharge the cargo other than at Merseyside on presentation
of the bills of lading was a condition…...…..……......................………………….……19
6.3.1. Aardvark and Twilight had intended the contractual term not to discharge the
cargo other than at Merseyside on presentation of the bills of lading to be a
condition…..…………………………….…………………………….……………20
6.3.2. In the alternative, the contractual term not to discharge the cargo other than at
Merseyside on presentation of the bills of lading should be construed as a condition
to provide commercial certainty………...………................………………….……20
6.4. Twilight breached the contractual condition not to discharge the cargo other than at
Merseyside on presentation of the bills of lading....….........................…………………21
6.5. Twilight is strictly liable for the breach of contract……………....…...……………..…21
V
7. Twilight breached its common law duty not to convert the cargo by discharging the
cargo to Beatles against a letter of indemnity instead of to Aardvark on presentation of
the bills of lading...…...……………………………………………………………….……21
7.1. Twilight had a common law duty not to convert the cargo..............................................21
7.1.1. Twilight was a common law bailee for the cargo…...……………..……….……21
7.1.2. Twilight had a common law duty not to convert the cargo. …...…………..……22
7.2. Twilight breached its common law duty not to convert the cargo. …...……….….……22
7.2.1. Twilight’s actions were ‘intentional positive conduct’. …...……………….……22
7.2.2. The cargo was ‘goods’……………………...…...………………………….……22
7.2.3. Aardvark had ‘possession’ of the bailed cargo. …...……………………….……23
7.2.4. Twilight’s discharge of the cargo to Beatles was ‘seriously inconsistent’ with
Aardvark’s possession of the cargo…...…………………………………….……23
7.3. Twilight’s common law duty not to convert the cargo is not changed by the contracts of
carriage for the cargo…………………………………...………………………….……23
7.4. Twilight is strictly liable for the conversion. ……………...……………………………23
8. Quantum.................................................................................................................................24
8.1. Aardvark is entitled to damages based on the value of the undamaged cargo at
Merseyside on the date when it should have been delivered............................................24
8.2. Further and/or alternatively, Aardvark is entitled to its costs of buying in the additional
cargo for on-sale, less the price it received from those buyers.........................................24
8.3. Aardvark is also entitled to recover its costs incurred as a consequence of the
proceedings in the Dutch courts.......................................................................................25
8.4. Aardvark is entitled to compound interest........................................................................25
Prayer for Relief……………...…………………………………………..……………….……25
VI
LIST OF AUTHORITIES
Cases
-‐ Actis Co. Ltd. v. The Sanko Steamship Co. Ltd; The Aquacharm [1982] 1 Lloyd’s Rep
7...........................................................................................................................................8
-‐ Albacora SRL v Westcott & Laurance Line Ltd [1966] 2 Lloyd’s Rep 53..........................4
-‐ Anglo-Danubian Transport Co Ltd v Ministry of Food [1949] 2 All ER 1068.................17
-‐ Arcos v Ronaasen [1933] AC 470………………………………………………….……21
-‐ Ardennes (Cargo Owners) v Ardennes (Owners) [1951] 1 KB 55………...…………….19
-‐ Ashby v Tolhurst [1937] 2 KB 242……………………………………………………....22
-‐ Barclays Bank Ltd. v Commissioners o/Customs and Excise [1963] 1 Lloyd's Rep 81....21
-‐ Bradley v Federal Steam Navigation (1926) 24 Lloyd’s Rep 446....................................12
-‐ Bunge Corporation v Tradax Export SA [1981] 2 Lloyd's Rep……………………….…21
-‐ Carlberg v Wemyss [1915] SC 616……………………………………………………....21
-‐ Caxton Publishing Co Ltd v Sutherland Publishing Co [1939] AC 178………………...22
-‐ Cho Yang Shipping Co Ltd v Coral (UK) Ltd [1997] 2 Lloyd’s Rep 641……………….19
-‐ Cole v North Western Bank (1874-75) LR 10 CP 354…………..………………………23
-‐ Compagnie Commerciale Sucres et Denrees v C Czarnikow Ltd; The Naxos [1991] 1
Lloyd's Rep 29…………….………………………………………………………….….20
-‐ Compagnie Generale Maritime v Diakan Spirit SA; The Ymnos [1982] 2 Lloyd’s Rep
574…………...……………………………………………………………………….….20
-‐ Compania Portorafti Commerciale SA v Ultramar Panama Inc; The Captain Gregos (No
2) [1990] 2 Lloyd's Rep 395. ……………………...………………….......………….….22
-‐ Shaw Ltd v A/S Det Nordenfjeldske D/S (1934) Lloyd’s Rep 183..............................18-19
-‐ Dixon v Sadler (1841) 151 ER 172................................................................................9-10
-‐ Duncan v Koster; The Teutonia (1872) LR 4 PC 171.....................................................10
VII
-‐ East West Corp v Dampskibsselskabet AF 1912 A/S [2003] QB 1509........................22-23
-‐ Elder Dempster & Co v Paterson Zochonis & Co [1924] AC 522................................9-10
-‐ Enichem Anic SpA v Ampelos Shipping Co Ltd; The Delfini [1990] 1 Lloyds Rep
252........……………………………………………………………………….………....23
-‐ Glebe Island Terminals Pty v. Continental Seagram Pty; The Antwerpen [1994] 1
Lloyd’s Rep 213…………………...………………………………………………….….23
-‐ Glyn Mills Currie & Co. v East and West India Dock Company [1882] 7 AC 591..........21
-‐ Great China Metal Industries Co Ltd v Malaysian International Shipping Corp Bhd; The
Bunga Seroja (1998) 72 ALRJ 1592.................................................................................16
-‐ Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26..........13-14
-‐ Hedley v Pinkney & Sons SS Co [1894] AC 222.................................................................9
-‐ Irish Spruce; Irish Shipping Ltd.Lim.procs (1975) AMC 2259, 2568 (SDNY
1975)..................................................................................................................................12
-‐ KH Enterprise v Pioneer Container; The Pioneer Container [1994] 2 AC 324...............22
-‐ Kuwait Airways Corporation v Iraqi Airways Corporation (No. 6) [2002] 2 AC
883...............................................................................................................................22, 24
-‐ Kuwait Petroleum Corporation v KD Oil Carriers Limited; The Houda [1994] 2 Lloyd's
Rep 541....................…………………………………………...……………...…............21
-‐ Leduc & Co v Ward (1880) 20 QBD 475..........................................................................18
-‐ Manifest Shipping & Co. Ltd. v Uni-Polaris Insurance Co. Ltd. and la Réunion
Europeene; The Star Sea [1997] 1 Lloyd's Rep 360.........................................................14
-‐ Marcus v Official Solicitor (1997) 73 P & CR D46..........................................................22
-‐ McFadden v Blue Star Line [1905] 1 KB 697.....................................................................8
-‐ 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……...………...……...…21
-‐ Moorgate Mercantile Co Ltd v Finch and Read [1962] 1 QB 701………………………23
VIII
-‐ Morris v C. W. Martin & Sons Ltd. [1966] 1 QB 716.......................................................22
-‐ Motis Exports Ltd v Dampskibsselskabet AF 1912 A/S [1999] 1 Lloyd’s Rep 837.........21
-‐ Notara v Henderson (1870) Lloyd’s Rep 5 QB 346..........................................................17
-‐ Nelson v Nelson Line [1908] AC 108...........................................................................11,16
-‐ OBG v Allan [2005] QB 76; [2008] 1 AC 1.................................................................22-24
-‐ Papera Traders Co. Ltd. and Others v Hyundai Merchant Marine Co. Ltd. and Another;
The Eurasian Dream [2002] 1 Lloyd's Rep 719..........................................................14, 15
-‐ Photo Production Ltd v Securicor (Transport) [1980] AC 827........................................20
-‐ President of India v West Coast S.S. Co; S.S. Portland Trader [1963] 2 Lloyd’s Rep
278.....................................................................................................................................12
-‐ Queensland National Bank Ltd v Peninsular and Oriental Steam Navigation Co [1898] 1
QB 567...............................................................................................................................12
-‐ Sandeman Coprimar SA v Transitos y Integrales SL [2003] QB 1270………………….22
-‐ Sanders v Maclean (1883) ll QBD 327.............................................................................23
-‐ Sanko SS Co Ltd v Sumitomo Australia Ltd (No 2) ; The Sanko Harvest (1996) 63 FCR
227................................................................................................................................11,15
-‐ Scaramanga & Co v Stamp (1880) 5 CPD 295.................................................................17
-‐ Stag Line Ltd v Foscolo Mango & Co Ltd [1931] 2 KB 48; [1932] AC 328....................18
-‐ Standard Oil Co v Clan Line Steamers Ltd [1924] AC 100..............................................14
-‐ Steel v State Line SS Co (1877) 3 AC 72.............................................................................9
-‐ Sze Hai Tong Bank v Rambler Cycle Co Ltd [1959] AC 576......................................21, 23
-‐ The Farrandoc [1967] 1 Lloyd's Rep 232.........................................................................14
-‐ The Fjord Wind [2002] Lloyd’s Rep 191..........................................................................16
-‐ The Future Express [1993] 2 Lloyd's Rep 79…………….……………………………..22
-‐ The Glenfruin (1885) 10 PD 103.......................................................................................16
-‐ The Garden City [1982] 2 Lloyd’s Rep 382......................................................................12
IX
-‐ The Kamsar Voyage [2002] 2 Lloyd’s Rep 57..................................................................16
-‐ The Lady Gwendolen [1965] 1 Lloyd’s Rep 335...............................................................12
-‐ The Makedonia [1962] 1 Lloyd’s Rep 316........................................................................14
-‐ The Petro Ranger [2001] 2 Lloyd’s Rep 348....................................................................16
-‐ The Stettin (1889) 14 PD 142. ……………………………………………………….….21
-‐ The Toledo [1995] 1 Lloyd’s Rep 40.................................................................................16
-‐ Thiess Bros (Queensland) Pty Ltd v Australian SS Pty Ltd [1955] 1 Lloyd’s Rep 459....19
-‐ Trafigura Beheer BV And Another v Mediterranean Shipping Company Sa; The MSC
Amsterdam [2007] 2 Lloyd's Rep 622…...………………………………………….…...23
-‐ Youl v Harbottle (1791) 170 ER 81..............................................................................22-23
Statutes
-‐ Carriage of Goods by Sea Act 1992 (UK)...........................................................................4
Rules and Forms
-‐ The International Convention for the Unification of Certain Rules of Law relating to Bills
of Lading signed at Brussels on 25 August 1924 as amended by the Protocol signed at
Brussels on 23 February 1968 (‘the Hague-Visby Rules’)…………….......…4,8,16-18,24
Other Authorities
-‐ Ahmad Hussam Kassem, The Legal Aspects of Seaworthiness: Current Law and
Development (University of Wales, 2006) .............................................................10-12,14
-‐ ER Hardy Ivamy, Payne and Ivamy’s Carriage of Goods by Sea (Butterworths, 13th ed,
1989). ………………………………………………….…………………………….…..20
-‐ International Maritime Bureau, IMB Piracy Map 2008 International Maritime Bureau
http://home.kpn.nl/zacha002/arrangementen/piraterij/piraterij.htm..................................11
X
-‐ International Maritime Organization, ‘International Safety Management Code’
(incorporated into Safety of Life at Sea (SOLAS) Convention under Chapter IX, came
into force in two stages July 1998 and July 2002).............................................................15
-‐ International Maritime Organization, ‘Piracy and Armed Robbery Against Ships’
(approved and revised at the 75th session of The Maritime Safety Committee, 15th to 24th
May 2002)....................................................................................................................12-13
-‐ International Maritime Organization, Piracy in waters off the coast of Somalia,
International Maritime Organization
www.imo.org/blast/mainframe.asp?topic_id=1178...........................................................9
-‐ International Maritime Organisation, ‘Reports on Acts of Piracy and Armed Robbery
Against Ships’, Annual Report 2008...................................................................................9
-‐ International Maritime Organisation, ‘Reports on Acts of Piracy and Armed Robbery
Against Ships’, August – October Monthly Reports 2008...........................................13-14
-‐ Jacob E Nelson, Ocean Piracy (Nova Science Publishers, Inc. 2010) .............................11
-‐ Jeannie Paterson, Andrew Robertson, Arlen Duke, Principles of Contract Law (Thomson
Reuters, 3rd ed, 2009)..…………………………….………………………………….20-21
-‐ John F Wilson, Carriage of Goods by Sea (Pitman Publishing, 6th ed, 1988) 207...........18
-‐ John Murphy, Street on Torts (Oxford University Press, 12th ed, 2007)...........................22
-‐ J W Carter, G J Tolhurst, Elisabeth Peden, ‘Developing the Intermediate Term Concept’
(2006) 22 Journal of Contract Law 268............................................................................20
-‐ Lauren Ploch, Christopher M. Blanchard, Ronald O’Rourke, R. Chuck Mason, Rawle O.
King, Piracy off the Horn of Africa (28 September 2009) The Navy Department Library
<http://www.history.navy.mil/library/online/piracy_hornafrica.htm#contact>.............9,11
-‐ N E Parker Bailment (Sweet and Maxwell, 3rd ed, 1991)..................................................22
-‐ Sze Ping-fat, Carrier’s Liability under the Hague Visby and Hamburg Rules (Kluwer
Law International, 2002) .....................................................................................................8
XI
-‐ W Tetley, Marine Cargo Claims (Blais, 3rd edn, 1988) ...................................................17
-‐ William K W Leung, ‘Misdelivery under forged bills and misdelivery in the absence of
original bills and exemption clauses’ (2002) 6 Mountbatten Journal of Legal Studies
86.....…………………………………………………………..….……………….….21,23
XII
SUMMARY OF ARGUMENTS
Aardvark Ltd (‘Aardvark) contracted with Twilight Traders Incorporated (‘Twilight’) to carry
cargo on the vessel the Twilight Trader MT (‘the Twilight Trader’). The cargo was to be carried
from Pasir Gudang, Malaysia to Merseyside, England and was to be discharged to Aardvark on
presentation of the bills of lading. This did not occur due to Twilight’s breach of its contractual
and common law obligations. First, the Twilight Trader was inadequately prepared for the
voyage and was hijacked by pirates, causing damage to the cargo. Secondly, after the Twilight
Trader was released from captivity, Twilight failed to care for the cargo in the way that it had
agreed to, causing further damage to the cargo. Thirdly, Twilight breached both its contractual
and common law obligations by discharging the cargo to Beatles Oils and Fats Ltd (‘Beatles’) in
Amsterdam against a letter of indemnity. Consequently, Aardvark sues Twilight for damages
caused to the cargo by its failure to act properly and carefully towards the cargo, failure to ensure
that the Twilight Trader was seaworthy, for deviating from the agreed route, for discharging the
cargo to a party that was not entitled to it, and for conversion of the cargo. Aardvark accepts the
jurisdiction and competence of the tribunal to determine all matters before it.
1
SUMMARY OF FACTS
The Sales Contracts, Fixture Arrangements and Bills of Lading
1. On 23 May 2008, the cargo seller Beatles Oils and Fats Limited (‘Beatles’) and the cargo
buyer Aardvark Limited (‘Aardvark’) concluded PFAD contracts 1234 and 1235 (‘the 5
sales contracts for the cargo’) for 4,000mt of Palm Fatty Acid Distillate (‘PFAD’) at USD
$ 705.00/mt CIF (Incoterms 2000) to be discharged at Rotterdam in the Netherlands.
2. On 12 September 2008, the cargo seller Beatles and the cargo carrier Twilight Carriers
(‘Twilight’) confirmed the fixture arrangement for the carriage of the cargo (‘the fixture
arrangement’) on the Twilight Trader MT (‘Twilight Trader’) from the Kuantan/ Belawan 10
range in Malaysia to Merseyside in England. The fixture arrangement was concluded
subject to Vegoil Voy 1/27/50 (‘the charterparty’). The preamble to the charterparty
provided that ‘the vessel should [deliver the cargo] … to the port ... of discharge, or so
near thereto as she may safely get … and there [on presentation of the bills of lading]
discharge the cargo.’ The Hague-Visby Rules were also incorporated into that 15
charterparty.
3. On 23 September 2008, Beatles and Aardvark amended the sales contracts for the cargo
by mutual agreement. The price was increased to USD $747.50/mt CIF (Incoterms 2000)
and the port of discharge was changed to Merseyside.
4. On 25 October 2008, agents acting for Beatles and Twilight concluded Congen Bills of 20
Lading PG1, PG2, PG3 and PG4 (‘the bills of lading’). All the bills of lading described
the goods as ‘clean on board’, stated that the port of discharge was Merseyside, and listed
the consignee as ‘to order’.
The Voyage and Hijacking
5. On 5 November 2008, the Twilight Trader commenced its voyage. The crew received 25
instructions to heat the cargo during the voyage and in the last week prior to arrival.
2
6. On 14 November 2008, as the Twilight Trader entered the Gulf of Aden, the crew began
an anti-pirate watch. This was the only anti-piracy measure taken.
7. On 15 November 2008, Somali pirates hijacked the Twilight Trader. The pirates ordered
the crew to sail to the Somali coast, where the vessel and the crew were held captive. 30
From this date onwards no cargo heating occurred.
The Release from Hijack
8. From 12-13 February 2009, the Somali pirates released the Twilight Trader from hijack.
The Twilight Trader proceeded to Fujairah in the United Arab Emirates.
9. On 21 February 2009, the Twilight Trader arrived at Fujairah. That afternoon, a new 35
crew embarked on the Twilight Trader and the existing crew disembarked. There was no
cargo care taken throughout the voyage from Somalia to Fujairah.
The Debriefing of the Crew and Sampling of the Cargo
10. On 22 February 2009, surveyors debriefed the Master and the Chief Officer of the
Twilight Trader concerning the care of the cargo during the period of captivity. 40
11. On 25 February 2009, surveyors for both Aardvark and Twilight sampled the cargo.
12. Product Authentication International Limited (PAI), the certifying body for the English
Feed Materials Assurance Scheme, confirmed that due to the piracy the PFAD could not
be used as a food/feed ingredient and could not be disposed to any non-food/ feed use.
However, between the 23rd and 25th of November 2009 the buyers that Aardvark had 45
arranged for the cargo confirmed that they would have purchased the cargo despite
possible contamination, as long as it tested as perfectly normal for fatty acid purposes.
The Results from the Sampling of the Cargo
13. On 18 – 19 March 2009, surveyors for both Aardvark and Twilight communicated that
the quality of the cargo could have been affected by the solidification and re-heating of 50
the cargo. Further, the surveyors advised that there were high levels of arsenic in the
3
cargo; they could not discount the possibility that there had been unauthorized access to
the cargo in which arsenic was introduced into the tanks.
Further Communications and Arrangements Concerning the Cargo
14. On 19 March 2009, Beatles requested that Twilight deliver the cargo to them in 55
Rotterdam without the bills of lading and produced a letter of indemnity (‘a/the letter of
indemnity’) for Twilight as an inducement to do so.
15. On 20 March 2009, Aardvark advised Twilight that it was the legal owner of the cargo.
Aardvark further informed Twilight that it had not authorised Beatles to discharge the
cargo in Rotterdam, and that if Twilight complied with Beatles’ instructions that Twilight 60
would be in breach of the contract of carriage and be responsible for all damages
sustained. Twilight opened this email within ten minutes of the time at which it was sent.
16. Despite Aardvark’s notice, from 20-22 March, Twilight discharged the cargo to Beatles
against a letter of indemnity and the cargo was put into storage at Rotterdam port.
The Dutch Court Proceedings 65
17. On 23 March 2009, Beatles successfuly petitioned a Dutch court (‘the Court’) to arrest
the Twilight Trader.
18. On 23 May 2009, Beatles applied to the Court for an order for sale of the cargo. By
judgment delivered on or about 24 July 2009, the arrest of the Twilight Trader was
upheld and the order for sale was granted. 70
19. Aardvark has been ordered to pay € 9750 in court fees and lawyers’ fees. Aardvark has
invoices for US $ 138,843.14 in court fees and US $ 107,913.12 in lawyers’ fees.
Reports on the Cargo and the Resale of the Cargo
20. Between 9 June and 29 October 2012, single and joint expert reports were received
concerning the cargo. 75
21. On 25 August 2009, Beatles sold the cargo to A B Buyers for US$ 1,695,752.38. The
proceeds of that sale are currently held by the Dutch Court.
4
ARGUMENTS PRESENTED
1. Twilight is liable to Aardvark for the breach of the contract of carriage.
1.1 Twilight, as the shipowner, is party to the bills of lading due to the signature of 80
its agent.
1.2 Aardvark, as the lawful holder of the bills of lading, has rights of suit under the
contract of carriage.1
1.3 The contract of carriage incorporates the terms of the charterparty.2
85
2. Twilight breached Article III r 2 of the Hague-Visby Rules by failing ‘to properly and
carefully load, handle, stow, carry, keep, care for and discharge the goods carried.’
2.1 Twilight had a duty to act properly and carefully towards the cargo during the
voyage.
The duty imposed by Article III r 2 is a duty to act ‘properly and carefully’3 towards the 90
cargo during the voyage. It is an ‘obligation to adopt a system which is sound in light of
all the knowledge which the carrier has or ought to have about the nature of the goods.’4
2.2 The cargo was not damaged at the commencement of the voyage.
A clean bill of lading was issued with the cargo ‘in apparent good order and condition’,
providing prima facie proof that the cargo was undamaged prior to the voyage. 95
2.3 The cargo was damaged during the voyage.
All of the tanks were chemically treated prior to loading to remove any traces of arsenic.
Expert analysis of the cargo after the arrival of the vessel in Fujairah on the 25th of
January found relatively high levels of arsenic in two tanks. The levels of arsenic in these
tanks were 50 times higher than the levels in the remainder of the tanks. Expert reports 100
state that a high level of care was taken throughout the sampling process, and discount
1 Carriage of Goods by Sea Act 1992 (UK.) s 2(1). 2 Facts 15 (bills of lading cl 1); 10 (charterparty cl 24). 3 Hague-Visby Rules Article III r 2. 4 Albacora SRL v Westcott & Laurance Line Ltd [1966] 2 Lloyd’s Rep 53, 58 (Lord Reid).
5
the possibility of contamination during the sampling.5 This is consistent with
contamination of the cargo during the captivity of the vessel. 6
Furthermore, the Product Authentication International Limited (PAI), the certifying body
for the English Feed Materials Assurance Scheme, confirmed that due to the piracy the 105
PFAD could not be used as a food/feed ingredient and could not be disposed to any non-
food/ feed use.7
Additionally, two separate reports found that the lack of care concerning the temperature
of the cargo had, in all likelihood, affected the quality of the PFAD.8 The serious delay of
the vessel and the solidification and re-heating of the cargo exposed the PFAD to 110
fluctuating storage temperatures, which have likely affected the merchantable quality of
the goods. The extent of the effect would only be apparent if the cargo was sampled and
analysed at the discharge port.9 However, this further sampling did not occur. The
contamination and deterioration of the quality of the cargo constitutes a breach of the
obligation imposed on Twilight pursuant to Hague-Visby Rules Article III r 2.10 115
2.4 Twilight breached its duty to act properly and carefully towards the cargo by
failing to comply with the instructions to heat the cargo during the voyage to
Fujairah.
Twilight had actual knowledge of the requirement to heat the cargo and complied with
these instructions before the hijack of the Twilight Trader.11 Although the nature of the 120
hijack prevented the crew from heating the cargo during the period of captivity, the cargo
could have been, and was required to have been, heated between the date of the release of
5 Facts 38, 42. 6 Facts 38. 7 Facts 25. 8 Facts 38, 51. 9 Facts 38. 10 Facts 37-38, 51. 11 Facts 41.
6
the Twilight Trader from captivity and the arrival of the vessel at Fujairah.12 Twilight’s
failure to do so is a breach of Article III r 2 of the Hague-Visby Rules.
125
3. Further and alternatively, Twilight breached clause 16 of the charterparty by failing to
heat the cargo.
3.1 Twilight had a duty to heat the cargo during the voyage.
In accordance with clause 16 of the charterparty, on Aardvark’s request for the heating of
the cargo Twilight ‘shall exercise due diligence to maintain the temperatures requested.’13 130
Twilight shall only be relieved of the duty to maintain such temperatures ‘by reason of
any cause beyond the Owner’s control.’14
3.2 Twilight breached its duty to exercise due diligence in maintaining the cargo
temperatures requested by Aardvark.
3.2.1 Twilight did not maintain the cargo temperatures requested by Aardvark. 135
Aardvark requested that Twilight heat the cargo during the voyage and in the week
prior to the arrival of the Twilight Trader. The cargo was heated neither during nor
after the period of captivity.
3.2.2 Maintaining the cargo temperatures requested by Aardvark was not
beyond Twilight’s control. 140
Maintaining the requested temperature of the cargo was beyond Twilight’s control
during the period of captivity.15 However, once the Twilight Trader was released
from hijack, the ability to maintain the requested temperature of the cargo was within
Twilight’s control.
12 Facts 41. 13 Facts 9 (charterparty cl 16(a)). 14 Facts 9 (charterparty cl 16(a)). 15 Facts 42.
7
3.3 Aardvark has discharged the burden of proving that Twilight’s failure to 145
exercise due diligence in maintaining the cargo temperatures caused the diminution
in the value of the goods.
Two separate export reports found that the lack of care concerning the temperature of the
cargo had in all likelihood affected the quality of the PFAD.16 The serious delay of the
vessel and the solidification and re-heating of the cargo meant that the PFAD was 150
exposed to fluctuating storage temperatures that has likely affected the merchantable
quality of the goods. The extent of the effect would only be apparent if the cargo was
sampled and analysed at the discharge port.17 However this further sampling did not
occur. Therefore Twilight’s failure to heat the cargo in accordance with its contractual
obligations under clause 16 of the charterparty caused this damage to the goods. 155
4. Twilight breached Article III r 1 of the Hague-Visby Rules by failing to exercise due
diligence to ensure the seaworthiness of the Twilight Trader. Twilight’s breach caused the
damage to the cargo.
Overview 160
Twilight failed to exercise the requirement of due diligence under Article III r 1 of the Hague-
Visby Rules to make the Twilight Trader seaworthy. A prudent ship owner, recognising piracy
as an ordinary peril of the voyage would have taken precautions to ensure that the vessel was to
the standard of physical and operational seaworthiness to deal with an attack. Twilight’s failure
to ensure this standard of seaworthiness allowed the hijacking of the vessel. The hijack and 165
subsequent arrest of the vessel was the operative cause of the damage to the cargo.18 The causal
link is satisfied, as the loss to the cargo would not have occurred had the vessel been in a
seaworthy condition to deal with the ordinary peril of piracy. Therefore, Twilight is liable for
16 Facts 38, 51. 17 Facts 38. 18 Facts 37-8, 51.
8
all damage and subsequent loss arising out of the breach of Article III r 1 of the Hague-Visby
Rules. 170
4.1 The Hague-Visby Rules were incorporated into the contract of carriage.
The Hague-Visby rules were incorporated into the contract of carriage by the ‘General
Paramount’ clause.19 A breach of these rules is accordingly a breach of the contract of
carriage.20
4.2 Twilight was required to exercise due diligence to make the Twilight Trader 175
seaworthy.
The Hague-Visby Rules Article III r 1(a) required Twilight to, before and at the beginning
of the voyage, exercise due diligence to make the Twilight Trader seaworthy.
The Definition of Seaworthiness
4.3 The definition of seaworthiness is objective but context-dependent. 180
The seaworthiness of a vessel is dependent on its suitability for the particular voyage. The
Hague-Visby Rules have not altered the common law concept of seaworthiness.21
Seaworthiness ‘means that the vessel – with her master and crew – is herself fit to
encounter the perils of the voyage and she is also fit to carry the cargo safely on that
voyage.’22 To be seaworthy a vessel ‘must have that degree of fitness which an ordinary 185
careful and prudent owner would require his vessel to have at the commencement of her
voyage having regard to all the probable circumstances of it.’23 To ascertain
seaworthiness, courts consider whether ‘a prudent owner [would] have required that it
(the defect) be made good before sending his ship to sea, had he known of it.’24
Therefore, determining seaworthiness is a two pronged test: 190
1. to first identify the ordinary perils of the voyage; and 19 Facts 15 (bills of lading cl 1). 20 Facts 15 (bills of lading cl 1). 21 Sze Ping-fat, Carrier’s Liability under the Hague Visby and Hamburg Rules (Kluwer Law International, 2002) 48. 22 Actis Co. Ltd. v The Sanko Steamship Co. Ltd; The Aquacharm [1982] 1 Lloyd’s Rep 7, 9 (Lord Denning). 23 McFadden v Blue Star Line [1905] 1 KB 697, 706 (Channel J). 24 McFadden v Blue Star Line [1905] 1 KB 697, 706 (Channel J).
9
2. to consider what the prudent ship owner would have done to guard against those
perils.
A causal link must then be established between the unseaworthiness of the vessel and the
damage to the goods. 195
4.3.1 Ordinary perils of the voyage.
On sailing, the Twilight Trader should have been fit to carry the cargo safely on that
voyage vis-à-vis the ordinary perils to which such a cargo would be exposed on such
a voyage,25 as distinct from ‘extraordinary eventualities.’26
The Twilight Trader left Pasir Gudang, Malaysia on the 5th of November 2008. At 200
the date the Twilight Trader embarked on its journey, reported pirate attacks in the
waters off the coast of Somalia had risen ‘astronomically’ in comparison to previous
years.27 In 2008, the number of attacks had doubled in comparison to 2007 and
accounted for an estimated 40% of the 293 pirate attacks worldwide.28 In the ten
months prior to the attack on the Twilight Trader on the 15th of November 2008, the 205
International Maritime Organization (‘IMO’) reports show that from January –
March 2008 there were 11 pirate attacks in this region, 23 attacks in April- June and
50 attacks from July-September.29 In total there were 95 reports of piracy attacks on
merchant vessels in the Gulf of Aden in 2008 with 39 of these attacks resulting in
capture and/or kidnappings and ransom of crew members.30 210
25 Steel v State Line SS Co (1877) 3 AC 72, 86 (Lord Blackburn); Hedley v Pinkney & Sons SS Co [1984] AC 222, 227-8 (Lord Herschell). 26 Dixon v Sadler (1841) 151 ER 172, 175 (Parke B); Elder Dempster & Co v Paterson Zochonis & Co [1924] AC 522, 539 (Viscount Finlay). 27 International Maritime Organization, Piracy in waters off the coast of Somalia, International Maritime Organization < www.imo.org/blast/mainframe.asp?topic_id=1178>. 28 Lauren Ploch, Christopher M. Blanchard, Ronald O’Rourke, R. Chuck Mason, Rawle O. King, Piracy off the Horn of Africa (28 September 2009) The Navy Department Library <http://www.history.navy.mil/library/online/piracy_hornafrica.htm#contact>. 29 International Maritime Organisation, ‘Reports on Acts of Piracy and Armed Robbery Against Ships’, Annual Report 2008. 30 Lauren Ploch, Christopher M. Blanchard, Ronald O’Rourke, R. Chuck Mason, Rawle O. King, Piracy off the Horn of Africa (28 September 2009) The Navy Department Library <http://www.history.navy.mil/library/online/piracy_hornafrica.htm#contact>.
10
A ship owner practiced in the industry, cognizant of this recent rise in piracy on the
planned route of the vessel, could not have viewed the possibility of a pirate attack as
an ‘extraordinary eventuality’, but must have instead understood piracy as an ordinary
peril of the voyage through the Gulf of Aden.31
4.3.2 What a prudent ship owner would have done to guard against those perils. 215
A prudent ship owner would have taken a higher degree of care against the peril of
piracy than that exercised by Twilight. A prudent owner would have taken measures to
make the vessel seaworthy, so that it and the crew were properly prepared to deal with
the threat of piracy. A prudent ship owner would have taken precautionary measures to
ensure the Twilight Trader’s: 220
1. Physical Seaworthiness; and/or
2. Operational Seaworthiness.
Application of the Seaworthiness Requirements
4.4 Physical Seaworthiness.
The physical seaworthiness of the vessel concerns the state of the Twilight Trader and its 225
readiness to encounter the ordinary perils of the sea that it might face during its voyage.32
These considerations include the route that the Twilight Trader was to take and its
equipment.
4.4.1 Navigational Route.
Obligations in High Risk Areas 230
A deviation to avoid waters with a known risk of piracy would be a step that a
prudent ship owner would take to avoid that peril.33 A failure to heed warnings,
31 Dixon v Sadler (1841) 151 ER 172, 175 (Parke B); Elder Dempster & Co v Paterson Zochonis & Co [1924] AC 522, 539 (Viscount Finlay). 32 Ahmad Hussam Kassem, The Legal Aspects of Seaworthiness: Current Law and Development, University of Wales, 2006) 25. 33 Duncan v Koster; The Teutonia (1872) LR 4 PC 171, 179.
11
charts and other publications concerning the perils of certain waters has been found
to render a ship unseaworthy.34
As referred to in submission 4.3.1, the number of pirate attacks in the Gulf of Aden 235
prior to the attack on the Twilight Trader was unprecedented. The cost of insuring a
container that was to travel through this area increased from $900 in 2007 to $9000
in the closing months of 2008. The International Maritime Bureau (‘IMB’), in co-
operation with the Maritime Security Centre Horn of Africa (‘MSCHOA’)
recommended that vessels keep as far away as possible from the Somali coast, 240
preferably more than 600 nautical miles from the coastline.35 In response to these
attacks and warnings, other vessels circumnavigated the southern Cape of Good
Hope rather than risk attack in the Gulf of Aden.36 This evidences that the shipping
industry recognised the Gulf of Aden as a high-risk area.37
Twilight’s Actions 245
There is evidence that prudent shipowners, having regard to the risk of piracy and
warnings given, chose to protect their ships and cargo and took a safer route.
Conversely, Twilight did not pay heed to the warnings given and planned a voyage
into a high risk area at the peak of the piracy attacks. In so doing, Twilight failed to
act in a way that a prudent shipowner would act in light of the peril and failed to 250
exercise due diligence to ensure the seaworthiness of the Twilight Trader.
34 Sanko SS Co Ltd v Sumitomo Australia Ltd (No 2); The Sanko Harvest’ (1996) 63 FCR 227, 245-7, 250-1, 281 (Sheppard J). 35 International Maritime Bureau, IMB Piracy Map 2008 International Maritime Bureau <http://home.kpn.nl/zacha002/arrangementen/piraterij/piraterij.htm>. 36 Jacob E Nelson, Ocean Piracy (Nova Science Publishers, Inc. 2010) 64. 37 Lauren Ploch, Christopher M. Blanchard, Ronald O’Rourke, R. Chuck Mason, Rawle O. King, Piracy off the Horn of Africa (28 September 2009) The Navy Department Library <http://www.history.navy.mil/library/online/piracy_hornafrica.htm#contact>.
12
4.4.2 Equipment 255
Twilight failed to exercise the due diligence to ensure that the equipment on the
vessel would guard against the ordinary peril of piracy to provide the safe delivery of
the cargo.38 On the facts there was no equipment on the ship to deter or to respond to
a pirate hijack.
Existing Knowledge 260
The seaworthiness of the Twilight Trader is dependent on the prevailing practice of
the shipping industry at the date of the voyage.39 The tribunal must take into account
the existing practice, knowledge and technology available to the shipping industry at
the time of the incident.40 Once the new practice, knowledge or technology proves to
offer a safer environment for the vessel, its crew and cargo, and becomes widely 265
used and acceptable, if a ship is not then fitted with such equipment it can be
considered unseaworthy.41 For instance, in 1960 it was not necessary in order for the
vessel to be seaworthy, to have on board radar or loran and at that time a vessel was
considered to be seaworthy even if she did not have them.42 However, in 1975 the
use of radar and such equipment on board the vessel made her unseaworthy.43 270
The 2002 International Maritime Organisation (‘IMO’) ‘Guidance to ship-owners
and ship operators, shipmasters and crews on preventing and suppressing acts of
piracy and armed robbery against ships’ states recommended anti-piracy practices
based on reported incidents.44 The recommended ship security plan requires the need
38 ‘Equipment’ is included in the test of seaworthiness: Queensland National Bank Ltd v Peninsular and Oriental Steam Navigation Co [1898] 1 QB 567. 39 Ahmad Hussam Kassem, The Legal Aspects of Seaworthiness: Current Law and Development, University of Wales, 2006) 31. 40 Ahmad Hussam Kassem, The Legal Aspects of Seaworthiness: Current Law and Development, University of Wales, 2006) 31. 41 Bradley v Federal Steam Navigation (1926) 24 Lloyd’s Rep 446, 454-5 (Scrutton LJ); The Garden City [1982] 2 Lloyd’s Rep 382, 395 (Staughton J); The Lady Gwendolen [1965] 1 Lloyd’s Rep 335, 339 (Sellers LJ), 351(Winn LJ). 42 President of India v West Coast S.S. Co; S.S. Portland Trader [1963] 2 Lloyd’s Rep 278, 281. 43 Irish Spruce; Irish Shipping Ltd.Lim.procs (1975) AMC 2259, 2568 (SDNY 1975). 44 International Maritime Organization, ‘Piracy and Armed Robbery Against Ships’ (approved and revised at the 75th session of The Maritime Safety Committee, 15th to 24th May 2002) 1-2.
13
for enhanced surveillance, use of lighting, detection equipment and radio alarms.45 In 275
addition the report emphasises that alarm signals should be sounded on the approach
of attackers and distress flares should be used when there is imminent danger.46
Prevailing Practice
The International Maritime Organization reports from August - October 2008,
demonstrate that the use of such anti-piracy devices was common practice in the 280
shipping industry. In the three months prior to the hijacking of the Twilight Trader,
28 out of 40 vessels that were attacked by pirates in the Gulf of Aden used alarm
signals on the approach of attackers; 18 of these 40 also put in place extra anti-piracy
measures such as the use of flares.47
Twilight did not equip the vessel with enhanced surveillance or detection equipment 285
or flares or alarm signals. The practice of using such equipment was not a novel
practice requiring further acceptance and use by the shipping industry. Arming a
vessel with this equipment was a widely recommended and used practice as a
precaution against piracy. Consequently the failure of Twilight to supply the vessel
with such equipment was a failure to exercise due diligence in assuring the 290
seaworthiness of the vessel to resist the hijacking of the vessel in light of the
circumstances of the voyage through the Gulf of Aden.
4.5 Organisational Seaworthiness
Twilight failed to exercise due diligence to ensure the competency of the vessel’s crew.48
The failure to equip a vessel with a competent crew generally deems the vessel 295
45 International Maritime Organization, ‘Piracy and Armed Robbery Against Ships’ (approved and revised at the 75th session of The Maritime Safety Committee, 15th to 24th May 2002) 3. 46 International Maritime Organization, ‘Piracy and Armed Robbery Against Ships’ (approved and revised at the 75th session of The Maritime Safety Committee, 15th to 24th May 2002) 4, 7, 8, 19. 47 International Maritime Organisation, ‘Reports on Acts of Piracy and Armed Robbery Against Ships’, August Monthly Report 2008; International Maritime Organisation, ‘Reports on Acts of Piracy and Armed Robbery Against Ships’, September Monthly Report 2008; International Maritime Organisation, ‘Reports on Acts of Piracy and Armed Robbery Against Ships’, October Monthly Report 2008. 48 Hongkong Fir Shipping v Kawasaki Kisen Kaisha [1962] 2 QB 26.
14
unseaworthy.49 Twilight’s crew was incompetent to the extent that they lacked the skill
and/or care in ‘dealing with the problem that arose during the voyage’,50 namely piracy.
The incompetency of a crew is a question of fact51 and on the facts the only anti-piracy
measure was an anti-pirate watch which commenced after entrance into the Gulf of
Aden.52 300
Existing Knowledge
As previously indicated, the seaworthiness of the Twilight Trader is dependent on the
prevailing practice of the shipping industry at the date of the voyage.53 The International
Maritime Organization’s 2002 ‘Guidance to shipowners and ship operators, shipmasters
and crews on preventing and suppressing acts of piracy and armed robbery against ships’ 305
strongly recommends the ‘vigorous employment of’ evasive manoeuvring and use of
hoses to prevent seizure of vessels.54
Prevailing Practice
Use of hoses and evasive manoeuvring was frequently employed by crews whose vessels
were under attack prior to and at the time of the hijack of the Twilight Trader. The 310
International Maritime Organisation’s ‘Reports on Acts of Piracy and Armed Robbery
Against Ships’ from September - October 2008 demonstrates that these techniques were
frequently employed and were effective in preventing an attack. During these two months
prior to the hijack of the Twilight Trader, 24 out of the 37 vessels that were attacked in
the Gulf of Aden employed evasive manoeuvring and/or use of hoses to prevent hijack. 315
49Standard Oil Co v Clan Line Steamers Ltd [1924] AC 100; The Makedonia [1962] 1 Lloyd’s Rep 316; Hongkong Fir Shipping v Kawasaki Kisen Kaisha [1962] 2 QB 26. 50 Manifest Shipping & Co. Ltd. v Uni-Polaris Insurance Co. Ltd. and la Réunion Europeene; The Star Sea [1997] 1 Lloyd's Rep 360; The Farrandoc [1967] 1 Lloyd's Rep 232; Papera Traders Co. Ltd. and Others v Hyundai Merchant Marine Co. Ltd. and Another; The Eurasian Dream [2002] 1 Lloyd's Rep 719. 51 Manifest Shipping & Co. Ltd. v Uni-Polaris Insurance Co. Ltd. and la Réunion Europeene; The Star Sea [1997] 1 Lloyd's Rep 360, 373-4 (Leggatt LJ). 52 Facts 41. 53 Ahmad Hussam Kassem, The Legal Aspects of Seaworthiness: Current Law and Development, University of Wales, 2006) 31. 54 Ahmad Hussam Kassem, The Legal Aspects of Seaworthiness: Current Law and Development, University of Wales, 2006) 9.
15
All 24 vessels that used these anti-piracy measures were successful, and the assailing
pirates aborted their attempts.55
International Safety Management Code
In addition, a failure to observe the provisions of the International Safety Management
Code (‘the Code’) as enacted by the IMO, may point to a lack of due diligence on behalf 320
of the shipowner in the safe operation of his ship.56 Although the Code is not part of the
Hague-Visby Rules, it has been found to be a framework for what a prudent ship owner
would follow in order to provide a seaworthy vessel.57 The Code requires each owner or
shipping company to introduce a Safety Management System which complies with the
requirements of the Code and reflects good practice in the type of trade the vessel is 325
involved with.58 The Code requires in section 8 ‘Emergency Preparedness’, that the ship
owner ‘establish programmes for drills and exercises to prepare for emergency actions.’59
On the facts there is no evidence that Twilight had either a Safety Management System in
place or a crew that was trained to respond to an emergency situation such as piracy.
Alternatively, if it is discovered that Twilight did have a Safety Management System in 330
place, the lack of response to the hijack indicates a systemic failure in the training of the
crew.
The lack of the procedures required by the Code and lack of prevailing practices such as
evasive manoeuvring and use of hoses points to a lack of due diligence in providing a
competent crew and therefore a seaworthy vessel. 335
55 International Maritime Organisation, ‘Reports on Acts of Piracy and Armed Robbery Against Ships’, September Monthly Report 2008; International Maritime Organisation, ‘Reports on Acts of Piracy and Armed Robbery Against Ships’, October Monthly Report 2008. 56 Sanko SS Co Ltd v Sumitomo Australia Ltd (No 2); The Sanko Harvest (1996) 63 FCR 227, 281 (Sheppard J); 313 (Jordan CJ). 57 Papera Traders Co. Ltd. and Others v Hyundai Merchant Marine Co. Ltd. and Another; The Eurasian Dream [2002] 1 Lloyd's Rep 719, 143. 58 International Maritime Organization, ‘International Safety Management Code’ (incorporated into Safety of Life at Sea (SOLAS) Convention under Chapter IX, came into force in two stages July 1998 and July 2002) preamble. 59 International Maritime Organization, ‘International Safety Management Code’ (incorporated into Safety of Life at Sea (SOLAS) Convention under Chapter IX, came into force in two stages July 1998 and July 2002) s 8.2.
16
4.6 The causal link between Twilight’s breach of Article III r 1 of the Hague-Visby
Rules and the damage to the goods has been established.
The causal link is satisfied, as the loss to the cargo would not have occurred had the
vessel been in a seaworthy condition to deal with the ordinary peril of piracy.60 Therefore
Twilight Traders are liable for all damage and subsequent loss arising out of the breach of 340
Article III r 1 of the Hague-Visby Rules.
4.7 Twilight has not discharged the burden of proving due diligence under Article
IV r 1 of the Hague-Visby Rules.
There is nothing on the evidence that would assist the respondent to discharge the onus
which lies on it in relation to the exercise of due diligence. 345
4.8 Twilight cannot use the protections provided by the ‘Rights and Immunities’
in Article IV r 2 of the Hague-Visby Rules.
Twilight’s failure to exercise due diligence in providing a seaworthy vessel is a breach of
an overriding obligation that deprives Twilight of the exceptions to liability provided in
Article IV r 2 of the Hague-Visby Rules.61 350
4.9 Twilight Traders cannot rely on clause 17 of the charterparty, the ‘General
Exceptions Clause’.
In accordance with Article III r 8 of the Hague-Visby Rules Twilight is barred from
excluding or lessening its duties or liabilities to provide a seaworthy vessel.62 The
exemption of liability for ‘pirates or assailing thieves’63 attempts to relieve Twilight from 355
‘liability otherwise than as provided’ in the Hague-Visby Rules and ‘shall be null and
void and of no effect’. 64
60 The Toledo [1995] 1 Lloyd’s Rep 40, 50; The Fjord Wind [2002] Lloyd’s Rep 191; The Kamsar Voyage [2002] 2 Lloyd’s Rep 57. 61 Hague-Visby Rules Article IV r 2. 62 The Glenfruin (1885) 10 PD 103; Nelson v Nelson Line [1908] AC 108; Great China Metal Industries Co Ltd v Malaysian International Shipping Corp Bhd; The Bunga Seroja (1998) 72 ALRJ 1592, 1605 (McHugh J). 63 Facts 10 (charterparty cl 17). 64 Hague-Visby Rules Article III r 8; The Petro Ranger [2001] 2 Lloyd’s Rep 348.
17
5. Twilight has breached its common law undertaking not to deviate from the agreed
route. 360
5.1 The agreed route was from Pasir Gudang, Malaysia to Liverpool, Merseyside.
Although there is no port of discharge nominated in charterparty, clause 6(c) allows for
nomination. The port of Liverpool, Merseyside is nominated in the contract of carriage.
The nomination of Merseyside as the discharge port becomes irrevocable and ‘is to be
treated as if it had been written into the charterparty.’ It cannot be altered by the 365
charterers and to do so would be ‘to permit a unilateral alteration of the contract.’65
5.2 The delivery of the cargo to Rotterdam and not Merseyside constituted a breach
of the common law principle of deviation.
Twilight has breached the common law undertaking implied by the contract of carriage
that it will undertake the voyage without unjustifiable deviation. The precise route 370
envisaged by the contract is to the port of Merseyside, not Rotterdam. This is expressly
provided for by the contract of carriage and is incorporated in the charterparty. The
deviation from the agreed route was an ‘intentional and unreasonable change in the
geographical route of the voyage as contracted’.66
5.3 There was no valid reason for the breach. 375
5.3.1 Twilight cannot rely on the common law exception of ‘justifiable
deviation’.
The deviation to Rotterdam was a deliberate act on part of Twilight. The deviation
was not to save human life67 or avoid danger to the ship or cargo,68 so Twilight
cannot rely on the common law exceptions. 380
5.3.2 The respondents are not afforded immunity by Article IV r4 of the Hague-
Visby Rules.
65 Anglo-Danubian Transport Co Ltd v Ministry of Food [1949] 2 All ER 1068 (Devlin J). 66 W Tetley, Marine Cargo Claims (Blais, 3rd edn, 1988) 737. 67 Scaramanga & Co v Stamp (1880) 5 CPD 295, 304 (Cockburn CJ). 68 Notara v Henderson (1870) Lloyd’s Rep 5 QB 346.
18
The deviation of the Twilight Trader to Rotterdam was not ‘to save life or property at
sea’.69 Nor was the deviation a ‘reasonable deviation’. A ‘reasonable deviation’ has
been said to be ‘a deviation whether in the interests of the ship or the cargo-owner or 385
both, which no reasonably minded cargo-owner would raise any objection to’.70 On
the facts the deviation did not occur in the interest of the ship or the cargo-owner.
The deviation was in the interest of the charterer to mitigate their own losses and to
‘find a buyer for the full cargo’ which included cargo other than Aardvark’s.71 This
fact, in conjunction with the extremely restricted interpretation given by the English 390
courts, 72 it is highly unlikely that the deviation to Rotterdam could be considered
‘reasonable’.
5.3.3 Clause 29 ‘Liberty Clause’ of the charterparty does not exempt
Twilight from its duty not to deviate from the agreed route.
The liberty in this clause to ‘stop at any such port or place whatsoever as the Master 395
or Owner may consider safe or advisable under the circumstances’ must, in
accordance with common law be construed contra proferentem in order to give a
restricted interpretation.73 A liberty to call at ‘any ports’ has been held to be a
freedom to call at only those ports that would be passed on the named voyage.74
Additionally, a liberty clause that allows calling at a port not mentioned in the 400
nominated voyage may not be enforced if the Court believes that such calling would
defeat the main object of the carriage contract.75 The ability to call at any port defeats
the purpose of the carriage contract to carry the goods from one agreed port, to the
69 Hague-Visby Rules Article IV r 4. 70 Stag Line Ltd v Foscolo Mango & Co Ltd [1931] 2 KB 48, 111 (Greer LJ). 71 Facts 28, 66. 72 John F Wilson, Carriage of Goods by Sea (Pitman Publishing, 6th ed, 1988) 207. 73 Stag Line Ltd v Foscolo Mango & Co Ltd [1932] AC 328; John F Wilson, Carriage of Goods by Sea (Pitman Publishing, 6th ed, 1988) 20. 74 Leduc & Co v Ward (1880) 20 QBD 475. 75 Connolly Shaw Ltd v A/S Det Nordenfjeldske D/S (1934) Lloyd’s Rep 183, 190-1.
19
other, being Merseyside, Liverpool. The parts of the clause repugnant to the main
purpose of the contract should be disregarded. 76 405
In Thiess Bros (Queensland) Pty Ltd v Australian SS Pty Ltd it was held that where
the vessel deviated to obtain bunkering for use in a new adventure, the carrier was
responsible for the cargo loss despite the existence of a liberty clause. This was due to
the fact that the deviation was not for the benefit of the voyage, and secondly, that,
‘since time is especially important where there is a possibility of heating’, the 410
deviation had defeated the main purpose of the carriage to deliver with all reasonable
despatch to the destination.77 This is analogous to the present facts. Twilight may not
rely on this liberty clause as the deviation was not for the benefit of the voyage, but
indeed to mitigate the losses of the carrier, and the deviation has defeated the main
purpose of the contract to deliver the PFAD will all reasonable despatch to 415
Merseyside, Liverpool.
6. Twilight breached the contractual condition that it was only to discharge the cargo
at Merseyside against presentation of the bills of lading, by discharging the cargo at
Rotterdam against a letter of indemnity. 420
6.1 The contract between Aardvark and Twilight was contained in the bills of lading
and the charterparty.
The charterparty is functioning as the contract of carriage; the terms of the contract are
evidenced in both the charterparty and the bills of lading (‘the contracts’).78
6.2 The contracts contained a term that the cargo was only to be discharged at 425
Merseyside against presentation of the bills of lading.
76 Connolly Shaw Ltd v A/S Det Nordenfjeldske D/S (1934) Lloyd’s Rep 183, 190-1. 77 Thiess Bros (Queensland) Pty Ltd v Australian SS Pty Ltd [1955] 1 Lloyd’s Rep 459, 462-464 (Kinsella J). 78 Ardennes (Cargo Owners) v Ardennes (Owners) [1951] 1 KB 55, 59-60 (Lord Goddard); Cho Yang Shipping Co Ltd v Coral (UK) Ltd [1997] 2 Lloyd’s Rep 641, 643 (Hobhouse LJ).
20
The charterparty stated that the cargo was only to be discharged at Merseyside, or so
close to that port as the Twilight Trader could safely get, and discharged against
presentation of the bills of lading. The bills of lading listed the consignee as ‘to order’
and the port of discharge as Merseyside. 430
6.3 The contractual term not to discharge the cargo other than at Merseyside on
presentation of the bills of lading was a condition.
The consequences of a breach of the contractual term only to discharge the cargo at
Merseyside against presentation of the bills of lading (‘the contractual term’) are
dependent on the construction of that contractual term.79 435
6.3.1 Aardvark and Twilight had intended the contractual term not to discharge
the cargo other than at Merseyside on presentation of the bills of lading to be a
condition.
The construction of the contractual term constituted a condition, an
intermediate/innominate term, or a warranty should be determined by considering the 440
totality of the circumstances and the intentions of Aardvark and Twilight at the date
of the formation of the contracts.80 Aardvark, or another party in Aardvark’s position,
would have intended the term to be a condition because every breach of the term
would have serious consequences for Aardvark, whose commercial operation is
dependent on being able to receive, transport, and sell the cargo as agreed. 445
6.3.2 In the alternative, the contractual term not to discharge the cargo other
than at Merseyside on presentation of the bills of lading should be construed as
a condition to provide commercial certainty.
79 Photo Production v Securicor (Transport) [1980] AC 827, 831 (Lord Wilberforce); Jeannie Paterson, Andrew Robertson, Arlen Duke, Principles of Contract Law (Thomson Reuters, 3rd ed, 2009), 324-5; J W Carter, G J Tolhurst, Elisabeth Peden, ‘Developing the Intermediate Term Concept’ (2006) 22 Journal of Contract Law 268, 270. 80 Compagnie Generale Maritime v Diakan Spirit SA; The Ymnos [1982] 2 Lloyd’s Rep 574, 584 (Goff J); ER Hardy Ivamy, Payne and Ivamy’s Carriage of Goods by Sea (Butterworths, 13th ed, 1989), 66-7.
21
A term may also be construed as a condition in order to provide commercial
certainty, as mercantile contracts are often part of a series of contracts in which the 450
performance of each contract is contingent on the timely performance of the others.81
Delivery of the cargo on presentation of the bills of lading is considered essential to
commercial contracts; even delivery of cargo to a party entitled to possession is a
breach of contract if that party did not obtain delivery by presenting the bills of
lading.82 Delivery of the cargo only on presentation of the bills of lading was of the 455
essence of the nature of the contract83 between Aardvark and Twilight, and delivery
without presentation of the bills of lading was at Twilight’s ‘peril’. 84
6.4 Twilight breached the contractual condition not to discharge the cargo other
than at Merseyside on presentation of the bills of lading.
In breach of the contractual condition, Twilight discharged the cargo at Rotterdam against 460
a letter of indemnity. Accordingly, Aardvark was entitled to terminate the contract and to
seek damages.85
6.5 Twilight is strictly liable for the breach of contract.
As liability for breach of contract is strict, it is no defence for Twilight to claim that it had
reasonable grounds to believe that it had delivered to the correct party.86 465
81 Bunge Corporation v Tradax Export SA [1981] 2 Lloyd's Rep 1, 5 (Lord Wilberforce), 9 (Lord Lowry), 12 (Lord Roskill). Compagnie Commerciale Sucres et Denrees v C Czarnikow Ltd; The Naxos [1991] 1 Lloyd's Rep 29, 37 (Lord Ackner); Paterson, Robertson and Duke, above n 79, 328-9. 82 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, 153 (Clarke J); The Stettin (1889) 14 PD 142, 147 (Butt J). 83 Glyn Mills Currie & Co. v East and West India Dock Company [1882] 7 AC 591, 613-4 (Lord Blackburn); Carlberg v Wemyss 1914 1 SLT 128, 128 (Lord Hunter). Sze Hai Tong Bank Ltd v Rambler Cycle Co Ltd [1959] 2 Lloyd's Law Rep 114, 120 (Lord Denning); Barclays Bank Ltd. v Commissioners o/Customs and Excise [1963] 1 Lloyd's Law Rep 81, 89 (Lord Diplock); Kuwait Petroleum Corp v I & D Oil Carriers Ltd; The Houda [1994] 2 Lloyd’s Rep 541, 556 (Millett LJ); William K Leung, ‘Misdelivery under forged bills and misdelivery in the absence of original bills and exemption clauses’ (2002) 6 Mountbatten Journal of Legal Studies 86, 87. 84 Sze Hai Tong Bank Ltd v Rambler Cycle Co Ltd [1959] 2 Lloyd's Law Rep 114, 120 (Lord Denning); William K Leung, ‘Misdelivery under forged bills and misdelivery in the absence of original bills and exemption clauses’ (2002) 6 Mountbatten Journal of Legal Studies 86, 88. 85 Arcos v Ronaasen [1933] AC 470, 480 (Lord Atkin). 86 Kuwait Petroleum Corporation v KD Oil Carriers Limited; The Houda [1994] 2 Lloyd's Law Report 541, 553 (Leggatt J); Motis Exports Ltd v Dampskibsselskabet AF 1912 A/S [1999] 1 Lloyd’s Rep 837; 841 (Rix J).
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7. Twilight breached its common law duty not to convert the cargo by discharging the
cargo to Beatles against a letter of indemnity instead of to Aardvark on presentation of
the bills of lading.
7.1 Twilight had a common law duty not to convert the cargo. 470
7.1.1 Twilight was a common law bailee for the cargo.
A bailment relationship between Aardvark as bailor and Twilight as bailee was
created at common law, independent of the contracts of carriage, when Twilight
consensually took possession that was owned by Aardvark. 87
7.1.2 Twilight had a common law duty not to convert the cargo. 475
The standard of care owed at common law by Twilight as bailor to Aardvark as
bailee is conditional on the classification of the bailment as gratuitous or for valuable
consideration, the categorisation of the bailee as voluntary or involuntary, and other
circumstances including the purpose of the bailment. 88 However, irrespective of the
classification, categorisation, and other circumstances of this bailment relationship, 480
Twilight had a common law duty not to convert the cargo.89
7.2 Twilight breached its common law duty not to convert the cargo.
The elements of conversion, ‘intentional positive conduct’90 with ‘goods’91 that is
‘seriously inconsistent’92 with the ‘possession or right to immediate possession’93 of the
goods, are satisfied by Twilight’s actions in this case.94 485
87 Morris v C. W. Martin & Sons Ltd. [1966] 1 QB. 716, 731 (Diplock LJ); Compania Portorafti Commerciale SA v Ultramar Panama Inc; The Captain Gregos (No 2) [1990] 2 Lloyd's Rep 395, 405 (Bingham LJ); KH Enterprise v Pioneer Container; The Pioneer Container [1994] 2 AC 324, 341 (Lord Goff); East West Corp v Dampskibsselskabet AF 1912 A/S [2003] QB 1509, 1529 (Mance LJ); Sandeman Coprimar SA v Transitos y Integrales SL [2003] QB 1270, 1277 (Lord Phillips); N E Parker Bailment (Sweet and Maxwell, 3rd ed, 1991) 3. 88 Marcus v Official Solicitor (1997) 73 P & CR D46, D47 (Hutchison LJ). 89 Morris v C. W. Martin & Sons Ltd. [1966] 1 QB. 716, 733 (Diplock LJ); East West Corp v Dampskibsselskabet AF 1912 A/S [2003] QB 1509, 1531 (Mance LJ). 90 Ashby v Tolhurst [1937] 2 KB 242, 245 (Sir Greene MR); Caxton Publishing Co Ltd v Sutherland Publishing Co [1939] AC 178, 202 (Lord Porter); John Murphy, Street on Torts (Oxford University Press, 12th ed, 2007), 264. 91 OBG v Allan [2005] QB 76, [56] (Gibson LJ); Murphy, above n 91, 258. 92 Youl v Harbottle (1791) 170 ER. 81, 82 (Lord Kenyon); Murphy, above n 91, 265-7. 93 The Future Express [1993] 2 Lloyd's Rep 79, 87 (Diamond J). 94 Kuwait Airways Corporation v Iraqi Airways Corporation (No. 6) [2002] 2 AC 883, 1084-5 (Lord Nicholls).
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7.2.1 Twilight’s actions were ‘intentional positive conduct’.
Twilight actively chose to discharge the cargo to Beatles against a letter of
indemnity, with actual notice that Aardvark was the lawful holder of the bills of
lading and the legal owner of the cargo, with the natural and probable consequence 490
that Beatles would sell the cargo.95
7.2.2 The cargo was ‘goods’.
The cargo was tangible moveable property.96
7.2.3 Aardvark had ‘possession’ of the bailed cargo.
Although Twilight had physical possession of the cargo, Aardvark’s possession of 495
the bills of lading constituted constructive possession of the cargo itself.97
7.2.4 Twilight’s discharge of the cargo to Beatles was ‘seriously inconsistent’
with Aardvark’s possession of the cargo.
Twilight’s misdelivery of the cargo was seriously inconsistent with Aardvark’s
possession of the cargo.98 500
7.3 Twilight’s common law duty not to convert the cargo is not changed by the
contracts of carriage for the cargo.
Although a contract of carriage for the cargo may change a bailee’s common law duty not
to convert the cargo,99 the contracts of carriage in this case do not contain the requisite
clear and express provision to modify or remove Twilight’s common law duty not to 505
convert the cargo.100
95 Moorgate Mercantile Co Ltd v Finch and Read [1962] 1 QB 701, 712 (Willmer LJ). 96 Murphy, above n 91, 258-9. 97 Cole v North Western Bank (1874-75) L.R. 10 CP. 354, 361-2 (Blackburn J); Sanders v Maclean (1883) ll QBD 327, 341 (Bowen LJ); Enichem Anic SpA v Ampelos Shipping Co Ltd; The Delfini [1990] 1 Lloyds Rep 252, 268 (Purchas LJ). William K W Leung, ‘Misdelivery under forged bills and misdelivery in the absence of original bills and exemption clauses’ (2002) 6 Mountbatten Journal of Legal Studies 86, 87 98 Youl v Harbottle (1791) 170 ER. 81, 82 (Lord Kenyon); Murphy, above n 91, 265-7. 99 Sze Hai Tong Bank v Rambler Cycle [1959] AC 576, [ref](Lord Denning); East West Corp v Dampskibsselskabet AF 1912 A/S [2003] QB 1509, 1517 (Mance LJ); Glebe Island Terminals Pty v Continental Seagram Pty; The Antwerpen [1994] 1 Lloyd’s Rep 213, 219, 221-2 (Carruthers J). 100 Trafigura Beheer BV And Another v Mediterranean Shipping Company Sa (‘The MSC Amsterdam’) [2007] 2 Lloyd's Rep 622, 629-30 (Longmore LJ).
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7.4 Twilight is strictly liable for the conversion.
As liability for conversion is strict,101 Twilight is liable for the damages resulting from
the breach. Aardvark can claim both the value of the cargo converted and any loss as a 510
consequence of the conversion.102
8. Quantum
8.1 Aardvark is entitled to damages based on the value of the undamaged cargo at
Merseyside on the date when it should have been delivered. 515
Aardvark is entitled to damages in the difference between the value of the undamaged
cargo at Liverpool, which was the agreed port of discharge, on the date when it should
have been delivered (on or about 30 March 2009) and the market value of the cargo at
Liverpool in the condition it was delivered in.103 The CIF market price of the cargo at
Liverpool on or about 30th of March 2009 was USD $ 517 pmt.104 Therefore Aardvark is 520
entitled to damages of the amount of USD $517/ mt x 4,000 mt = USD $ 2,068,000.
8.2 Further and/or alternatively, Aardvark is entitled to its costs of buying in the
additional cargo for on-sale, less the price it received from those buyers.
Aardvark paid USD $ 627.50/ mt to buy goods in to sell to their sub-buyers in
Liverpool.105 Therefore Aardvark is entitled to claim damages in the amount of USD $ 525
522.50 x 4,000mt = USD $ 2,510,000 (although a deduction will be made for the price
received from the buyers).
101 OBG v Allan [2008] 1 AC 1, 42 (Lord Hoffmann). 102 Kuwait Airways Corporation v Iraqi Airways Corporation (No. 6) [2002] 2 AC 883, 1088 (Lord Nicholls). 103 Hague-Visby Rules Article IV rule 5(b) ‘The total amount recoverable shall be calculated by reference to the value of
such goods at the place and time at which the goods are discharged from the ship in accordance with the contract or should have been so discharged. The value of the goods shall be fixed according to the commodity exchange price, or, if there be no such price according to the current market price’; Facts 69.
104 Facts 59; this price is calculated on the purchase price on or about 30th of March (USD $ 465 per mt FOB), plus the freight price to Liverpool (approx USD $50 per mt) and insurance at approx USD $1.3 per mt to bring the cargo from Rotterdam to Liverpool. 105 Facts 46.
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8.3 Further Aardvark is also entitled to recover its costs incurred as a consequence
of the proceedings in the Dutch courts.
Aardvark is entitled to damages in the amount of Court fees of USD $ 138,843.14 and 530
legal fees in respect of the Court proceedings of USD $ 107, 913.12. The total costs being
USD $ 246,756.26.
8.4 Further, Aardvark is entitled to compound interest on the amount that may be
awarded by the Tribunal.
Where the parties have not agreed on the powers of the tribunal to the award of 535
interest,106 ‘the tribunal may award simple or compound interest from such dates, at such
rates and with such rests as it considers meets the justice of the case’.107 This interest may
be awarded on the amount awarded by the tribunal108 for all damages, including costs.
PRAYER FOR RELIEF 540
For the reasons submitted above, Aardvark respectfully requests this Tribunal to:
ADJUDGE that Twilight is liable to the Aardvark for damage and non-delivery of the cargo to
the value of USD $ 2,068,000 or alternatively USD $ 1,844,000.
Further,
ADJUDGE that Aardvark is entitled to claim damages for its costs of buying in the additional 545
cargo for on-sale, to the value of USD $ 2,510,000, less the price it received from those buyers.
Further,
ADJUDGE that Aardvark is entitled to the costs of USD $ 246,756.26.
Further,
ADJUDGE that Aardvark is entitled to compound interest on the amount that may be awarded 550
by the Tribunal.
106 Arbitration Act 1996 (UK) s 49(2). 107 Arbitration Act 1996 (UK) s 49(3). 108 Arbitration Act 1996 (UK) s 49(3)(a).