memorandum for claimant - murdoch university€¦ · fourteenth international maritime law...

FOURTEENTH INTERNATIONAL MARITIME LAW ARBITRATION MOOT

2013

MEMORANDUM FOR CLAIMANT

NATIONAL LAW UNIVERSITY, JODHPUR

Team No. 26

ON BEHALF OF: AGAINST:

AARDVARK LTD TWILIGHT TRADERS

CLAIMANT RESPONDENT

AKRITI GAUR - GAURI DEVPURA - VISHNU PRASAD REGE

AUBERT SEBASTIAN - AAYUSH SOOD


MEMORANDUM FOR CLAIMANT | 2

TABLE OF CONTENTS

INDEX OF AUTHORITIES ........................................................................................................ 6

SUMMARY OF FACTS............................................................................................................... 9

WRITTEN SUBMISSIONS ....................................................................................................... 12

I. THE PRESENT CLAIMS ARE MAINTAINABLE ..................................................................... 12

A. TRANSFER OF RIGHTS OF SUIT UNDER CONTRACTS CONTAINED IN OR EVIDENCED BY

BILLS OF LADING AS PER THE CARRIAGE OF GOODS BY SEA ACT, 1992 ................................ 12

a. Claimants are the lawful holders of the Bills of Lading ............................................. 13

B. JURISDICTION/COMPETENCE OF THE ARBITRAL TRIBUNAL WAS NOT CHALLENGED BY THE

RESPONDENTS IN THE FIRST INSTANCE ................................................................................... 14

b. Settled law as per the UNCITRAL Model Law on International Commercial

Arbitration (MAL) ............................................................................................................. 15

c. Settled law as per the English Arbitration Act 1996 .................................................. 16

II. THE OWNERS HAVE BREACHED ARTICLE III, R. 2 OF THE HAGUE-VISBY RULES IN THEIR

FAILURE TO TAKE CARGO CARE MEASURES AND ALLOW THE VESSEL TO BE TAKEN OVER BY

PIRATES ..................................................................................................................................... 17

A. COMMON LAW REGIME IMPOSES STRICT LIABILITY ON THE CARRIER ............................ 18



B. EXCEPTIONS TO THE RULE IN HAGUE VISBY CANNOT BE CLAIMED BY THE RESPONDENTS .

........................................................................................................................................ 18

a. The Respondents failed to conduct due-diligence to make the ship seaworthy .......... 19

b. The Respondents did not take “anti-piracy measures” as an element of seaworthiness

and due-diligence .............................................................................................................. 20

III. THE DELIVERY OF THE CARGO AT ROTTERDAM AND NOT LIVERPOOL IS A VIOLATION

OF THE CONTRACT OF CARRIAGE ........................................................................................... 21

A. THE DEVIATION IS UNLAWFUL UNDER COMMON LAW .................................................... 21

B. THE DEVIATION IS UNLAWFUL UNDER THE HAGUE VISBY RULES ................................... 22

C. THE DEVIATION IS NOT COVERED BY THE DEVIATION CLAUSE IN THE CHARTER PARTY . 22

D. THE LIBERTY CLAUSE IN THE CHARTER PARTY WILL NOT PROTECT THE DEVIATION OF

THE RESPONDENT .................................................................................................................. 23

E. UNLAWFUL DEVIATION WILL RENDER THE RESPONDENT A COMMON CARRIER .............. 24

F. DEVIATION RENDERS THE CHARTER PARTY TO BE FUNDAMENTALLY BREACHED AND

REPUDIATED .......................................................................................................................... 24

IV. DELIVERY OF THE CARGO TO BEATLES AND NOT TO THE CLAIMANT WHO IS THE

LAWFUL HOLDER OF THE BILLS OF LADING CONSTITUTES A VIOLATION OF THE CONTRACT

OF CARRIAGE ........................................................................................................................... 25

A. ORDER BILL IS A “DOCUMENT OF TITLE TO GOODS” ........................................................ 25



B. VIOLATION OF THE PRESENTATION RULE IS A VIOLATION OF THE CONTRACT OF

CARRIAGE .............................................................................................................................. 26

a. Holder of the Bills of Lading is Entitled to the Possession of the Goods ................... 26

b. The Presentation Rule is an Established Principle .................................................... 26

c. The Presentation Rule has been violated by Twilight Traders ................................... 27

C. THE ACTIONS OF TWILIGHT TRADERS ARE NOT COVERED BY THE EXCEPTIONS TO THE

PRESENTATION RULE ............................................................................................................. 27

D. OWNERSHIP OF THE CARGO WAS TRANSFERRED FROM BEATLES TO THE CLAIMANT ....... 28

E. THE RESPONDENT IS IN VIOLATION OF THE CONTRACT OF CARRIAGE ............................. 28

V. THE RESPONDENT IS LIABLE FOR THE TORT OF CONVERSION ....................................... 29

A. VIOLATION OF THE CONTRACT OF CARRIAGE WILL CONSTITUTE A TORT OF CONVERSION .

........................................................................................................................................ 29

B. THE CLAIMANT HAS A CLAIM IN THE TORT OF CONVERSION AGAINST THE RESPONDENT 31

VI. THE RESPONDENTS ARE LIABLE TO PAY DAMAGES TO THE CLAIMANTS. ....................... 31

A. THE RESPONDENTS ARE LIABLE TO PAY DAMAGES TO THE CLAIMANTS FOR FAILURE TO

TAKE PROPER CARE OF CARGO. .............................................................................................. 31

B. THE RESPONDENTS ARE LIABLE TO PAY DAMAGES TO THE CLAIMANTS FOR FAILURE TO

DELIVER THE GOODS TO THE RIGHTFUL OWNERS .................................................................... 32



C. ALTERNATIVELY, RESPONDENTS ARE LIABLE TO PAY DAMAGES FOR THE EXPENDITURE

INCURRED BY THE CLAIMANTS FOR BUYING CARGO. ............................................................. 33

D. RESPONDENTS ARE LIABLE TO PAY COSTS OF DUTCH PROCEEDINGS. ............................. 34

PRAYER FOR RELIEF ........................................................................................................... 355



INDEX OF AUTHORITIES

[TREATISES]

Abbott, Charles, A Treatise of the Law Relative to Merchant Ships and Seamen, (Exeter, Edward

Little and Co., 1810) ................................................................................................................. 10

Aikens, Richard & Bools, Michael, Bills of Lading, (London, Informa 2006) ............................ 20

Annual of China Maritime Trial, The People’s Communication Press, 1999 .............................. 21

Bennett, H, The Law of Marine Insurance, (Oxford University Press, 2nd ed., 2007) ................. 10

C.H Spurin, Charterparties, (3rd Ed. 2005) ................................................................................. 15

Davies, Martin & Dickey, Anthony, Shipping Law, (Lawbook Co., 3rd ed., 2004) ..................... 18

Debattista Charles, Bills of lading in Export Trade, (Tottel, 2009) .............................................. 17

E.R.H. Ivamy, Carriage of Goods by Sea, (13th Edition, 1989). ................................................. 12

Eder, Bernard et al., Scrutton on Charterparties and Bills of Lading (London, Sweet & Maxwell,

22nd ed., 2011) ............................................................................................................................. 4

Fawcett, James & Carruthers, Janeen M.,Cheshire, North and Fawcett-Private International

Law, (Oxford University Press, 14th ed., 2008) .......................................................................... 5

Girvin, Stephen, Carriage of Goods by Sea, (Oxford, 2nd ed.,2011) ............................................ 17

Hill, Christopher, Maritime Law, (London, LLP, 6th edn., 2003)................................................ 16

Li Zhang-Jun, “On Legal Natures of Bill of Lading in Practice and Theory of Maritime Justice”,

(Law Press, 1st ed., 2002) .......................................................................................................... 21

Padhi, P.K., Legal Aspects of Business, (PHI Learning Private Limited, 2013, ISBN-978-81-203-

4675-8) ........................................................................................................................................ 7

Purchase, Documents of Title to Goods (Sweet and Maxwell, 1931) ........................................... 16



Rubino-Sammartano, Mauro, International Arbitration Law and Practice, (Kluwer Law

International, 2nd ed., 2001) ........................................................................................................ 5

Treitel, Guenter & Reynolds, Carver on Bills of Lading, (London, Thomas Reuters, 3rd ed.,

2011) ......................................................................................................................................... 10

Wilson John F., Carriage of Goods by Sea, (Pearson , 7th Ed., 2010). ....................................... 15

Zekos, Georgios I., International Commercial and Marine Arbitration, (New York, Routledge-

Cavendish, 2008) ........................................................................................................................ 5

[CASES]

1 Sch 16/01, Decided on December 20 2001, Highest Regional Court -Oberlandesgericht

Stutgart (Germany) ..................................................................................................................... 6

ABN Amro Bank Canada v. Krupp MakMaschinenbau GmbH (1994) 20 O.R. (3d) 36 (Gen. Div.)

..................................................................................................................................................... 6

Aegean Sea Traders Corp. v RepsolPetroleo SA [1998] 2 Lloyd’s Rep. 39 .................................. 4

Athens Maritime Enterprises Corp v Hellenic Mutual War Risks Association (Bermuda) Ltd

[1982] 2 Lloyd’s Rep. 483 ........................................................................................................ 11

Barclays Bank Ltd. v. Commissioners of Customs and Excise, [1963] 1 Lloyd’s Rep. 81 .......... 20

Baxter’s Leather Co v Royal Mail Co [1908] 1 KB 796 ................................................................ 9

Boyle v Sacker (1888) 39 Ch D 249................................................................................................ 5

Brealy v Board of Management of Royal Perth Hospital (1999) 21 WAR 79 ............................... 5

Cabintree of Wis., Inc. v. Kraftmaid Cabinetry, Inc., 50 F. 3d 388 (7th Cir. 1995) ........................ 8

Case No. 2009‐26129, Filed in Harris County Court (USA) 270, on April 29, 2009 .................. 11

Catterpillar Overseas, S.A v. Farrell Lines, Inc.1988 AMC 2894 ............................................... 24

Cowan v Stanhill Estates Pty Ltd No 2, [1967] VR 641 ............................................................... 24



Dixon v. Sadler, (1839) 5 M&W 405 ........................................................................................... 10

East West Corp. v DKBS AF 1912 A/S [2003] EWCA Civ 83 ...................................................... 4

Frenkel v. MacAndrews & Co. Ltd., [1929] A.C. 545 .................................................................. 14

Gates v City Mutual Life Association Society Ltd (1986) 160 CLR 1 .......................................... 24

Glynn v.Margetson& Co., [1893] A.C. 351 .................................................................................. 14

Gosse Millerd v Canadian Government Merchant Marine [1929] AC 223 ................................... 9

Hain SS v Tate & Lyle, [1936] 2 All ER 597 ................................................................................ 15

Haviv Holdings Pty Ltd v Howards Storage World Pty Ltd (2009) 254 ALR 273 ...................... 24

Hostetter v. Park, 137 U. S. 30. .................................................................................................... 12

Johnson v Perez (1988) 166 CLR 351 .......................................................................................... 22

Joseph Thorley v Orchis, (1907) 1 KB 660 .................................................................................. 15

Koufos v C. Czarnikow Ltd. [1967] 3 W.L.R. 1491................................................................ 22, 23

Kwei Tek Chao and Others (Trading As Zung Fu Co.) v British Carriers and Shippers LD,

[1954] 2 Q.B. 459 ..................................................................................................................... 23

Law Debenture Trust Corp Plc. v Elektrim Finance BV [2005] EWHC 1412 ............................... 7

Livingstone v Rawyards Coal Co (1880) 5 App Cas 25 ............................................................... 24

London and South African Bank v Donald Currie and Co., 1875 Buch 29 ................................... 4

Louis Dreyfus v Lauro, (1938) 60 LL.L Rep. 94. ........................................................................ 12

Manta Line Inc v Sofianites and Midland Bank plc [1984] I Lloyd’s Rep 14, CA. ....................... 5

McFadden v Blue Star Line [1905] 1 K.B. 697 ............................................................................ 10

McGregor v Huddart Parker (1919) 26 CLR 336 ........................................................................ 10

Monarch S.S. Co v Karlshamns [1949] A.C. 196 ......................................................................... 11

Nugent v Smith (1875) 1 C.P.D. 19 ................................................................................................. 9



Pickering v Barclay, 2 Roll. Ad. 248 ............................................................................................ 10

Reid v. Fairbanks (1853) 13 C.B. 692 .......................................................................................... 23

Scaramanga v Stamp, (1880) 5 C.P.D. 295 (CA). ........................................................................ 12

Steel v State Line Steamship Co (1877) 3 App. Cas. 72 ................................................................. 9

Supreme Court of Sweden in NyttJurisdixktArkiv 1997, 866 (decided on October 15, 1997) ....... 5

Sze Hai Tong Bank Ltd. v. Rambler Cycle Co. Ltd., (1959) A.C. 576.......................................... 21

The Arpad, [1934] ......................................................................................................................... 23

The Muncaster Castle, [1961] 1 Lloyd's Rep 57 .......................................................................... 10

The Prinz Adalbert, [1917] A.C. 586 ............................................................................................ 16

The Stettin, (1889) 14 PD 142 ....................................................................................................... 17

UR Power v Kuok Oils, [2009] 2 Ll Rep 495 ................................................................................. 7

Victoria Laundry Ltd.(windsor) v. Newman Industries Ltd.; Coulson & Co. Ltd. [1949] 2 K.B.

528............................................................................................................................................. 22

Youle v. Harbottle, I Peake 68 ...................................................................................................... 22

[OTHER AUTHORITIES]

MSC.1/Circ.1405/Rev.1- Interim guidance for shipowners and operators, 16th September 2011;

MSC.1/Circ.1406 - Interim Guidance for Flag States. ............................................................. 20

MSCHOA, BMP4 Best Management Practices for Protection against Somalia based Piracy

(Edinburgh, Witherby Publishing Group Ltd.,Version 4, 2011) .............................................. 21



SUMMARY OF FACTS

May 23, 2008: Agreement for sale was made between the Claimants; Aardvark Ltd.

(Buyer) and Beatles Oils & Fats Ltd. (Seller) for 2000 mt. of Palm Fatty Acid Distillate (PFAD)

at price US $ 705 by ABCD brokers.

September12, 2008: The Respondents are the disponent owners of the vessel

(“Owners”). The Owners sub-chartered the vessel (TWILIGHT TRADER) to Beatles by way of

a charter party. The Owners are the contractual carriers under the bills of lading. All the bills of

lading provided for discharge in Liverpool, Merseyside.

October 25, 2008: The Owners issued Congenbills of lading; the contracts of carriage

contained in the bills of lading incorporated the Hague-Visby Rules.The bills of lading provide

that all terms and conditions, liberties and exceptions of the charter party dated 12th September

2008, including the law and arbitration clause are herewith incorporated.

November 15, 2008:While the vessel was en route to Merseyside, it was captured by

Somali pirates. It was in captivity till 13th February 2009. Later on, it was observed through

expert reports that due to captivity, the Cargo cannot be used as a food or feed ingredient and

also cannot be disposed to any non-feed or food use because of risk of entering food/feed chain

(non GMQ).

Mid-January 2009: Beatles presented the shipping documents for the cargo to the

Claimants. Purchase price was paid to Beatles and the bills of lading were endorsed to the

Claimants.

March 6, 2009: The Claimants were not satisfied with Beatles’ insurance policy, and

advised Beatles that they were in a repudiatory breach of the sale contract in failing to insure the



cargo under the agreed terms. The Claimants demanded that Beatles repay the purchase price.

However, Beatles refused to do so. As payers of the purchase price and holders of the bills of

lading, the Claimants are established as the clear legal owners of the cargo and would dispose off

the cargo themselves. They considered selling the cargo to alternative buyers in Rotterdam.

Soon, it became clear that Beatles were actively seeking to obtain security for their claim

against the Claimants in respect of entirely different sales contracts. The Claimants were not

prepared to give the bills of lading to Beatles. Beatles on the other hand, wrongly claimed that

the Claimants had abandoned the cargo.

March 19, 2009: Beatles issued letters of indemnity to the Owners asking them to

deliver the cargo to them at Rotterdam without production of the bills of lading. The Claimants

later discovered this.

March 20, 2009: Beatles refused to change the destination in the bills of lading to

Rotterdam and stated that the Claimants had no entitlement to give them or the Owners in respect

of the cargo. The Claimants wrote to the Owners informing them that they were the lawful

owners of the bills of lading. Despite the aforementioned notification, the Owners discharged the

cargo to Beatles.

March 23, 2009: Beatles arrested the cargo as security for their claims against the

Claimants despite this being prohibited by the FOFSA terms governing sales contracts. The

Claimants tried to set aside the arrest in Rotterdam Courts but failed to do so in the first instance

as well as the Appellate stage. Beatles then obtained permission from the Dutch Court for the

Cargo to be sold. Subsequently, the Claimants arrested the Vessel in Rotterdam as security for



their claims against the Owners. The Owners appealed against the arrest of the vessel. The Court

of Appeal maintained the arrest.

WRITTEN SUBMISSIONS

I. THE PRESENT CLAIMS ARE MAINTAINABLE

In the present matter, Aardvark Ltd. has enforced the Arbitration clause contained in the

Charter Party. The bills of lading are on the Congen Form and provide that all terms and

conditions, liberties and exceptions of the Charter Party dated 12September 2008, including the

Law and Arbitration Clause are herewith incorporated.1 The question to be considered is whether

the Claimants can enforce the Arbitration Clause even though they are not privy to the Charter

Party (an agreement between the owners and Beatles Oils & Fats Ltd.)2. It is argued that [A] the

right of suit under the contracts contained in the bills of lading is transferred to the Claimants as

per the Carriage of Goods by Sea Act, 1992and [B] since the jurisdiction of the tribunal was not

questioned in the preliminary written submissions of the Respondents, they can not do so at this

stage.

A. TRANSFER OF RIGHTS OF SUIT UNDER CONTRACTS CONTAINED IN OR EVIDENCED BY BILLS

OF LADING AS PER THE CARRIAGE OF GOODS BY SEA ACT, 1992

The Carriage of Goods by Sea Act (“COGSA 92”), 1992 dissociates the transfer of rights

of suits from the passing of property in favour of the transfer of possession of the bill of lading

into the hands of a holder in good faith3. The “lawful holder” of the bill of lading shall “by virtue

of becoming the holder of the bill...have transferred to and vested in him all rights of suit under

1 Moot Scenario, p. 66 2 Ibid. 3 Eder, Bernard et al., Scrutton on Charterparties and Bills of Lading (London, Sweet & Maxwell, 22nd ed., 2011); East West Corp. v DKBS AF 1912 A/S [2003] EWCA Civ 83



the contract of carriage as if he had been a party to that contract.”4 This law operates in favour of

a lawful holder of a bill of lading. A “lawful holder” is someone who becomes the holder of the

bill of lading in good faith5, which imports only that the holder acquired that status honestly6. In

relation to a bill of lading, “contract of carriage” means the contract contained in or evidenced by

the bill7.

a. Claimants are the lawful holders of the Bills of Lading

In the present case, when the purchase price of the goods was paid to Beatles, the bills of

lading were endorsed to the Claimants8, the Claimants are therefore the lawful holders of bills of

lading. The Arbitration Clause in the bills of lading have been taken from the Charter Party.9

In London and South African Bank v Donald Currie and Co.,10it was emphasised that the

role of the bill of lading, taken to the order of a shipper, is a "symbol of property". It was also

recognized that a constructive delivery to transfer the property in goods (as opposed to an actual

delivery) is a valid one. Bill of lading is the symbol of the property in the goods shipped on

board.11

Therefore, even if the goods were not delivered to the Claimants, they are in possession

of the bills of lading, which amounts to constructive delivery thereby giving them the right to

resort to arbitration. It has been held that the arbitration clause travels with the contract in which

it is incorporated and that consequently it binds a party, which acquires rights under the

4 s. 2(1) of the Carriage of Goods by Sea Act, 1992 5 s. 5(2) of the Carriage of Goods by Sea Act, 1992. 6Aegean Sea Traders Corp. v RepsolPetroleo SA [1998] 2 Lloyd’s Rep. 39 at p.60 7 s. 5(1)(a) of the Carriage of Goods by Sea Act, 1992. 8 Moot Scenario, p. 67 9 Moot Scenario, p. 15, s.1, Conditions of Carriage 10 London and South African Bank v Donald Currie and Co., 1875 Buch 29 11 Ibid.



contract12. The one who is being assigned rights to which an arbitral clause is connected is bound

by the same.13

B. JURISDICTION/COMPETENCE OF THE ARBITRAL TRIBUNAL WAS NOT CHALLENGED BY THE

RESPONDENTS IN THE FIRST INSTANCE

According to the principles of private international law, if the respondent does not apply

to the court for an order declaring that it has no jurisdiction, he is deemed to have submitted to

the said court’s jurisdiction14. Even if the respondent instructs a solicitor to accept services on his

behalf, he is deemed to have submitted to the jurisdiction15. A defendant who acknowledges

service and contests the case on its merits will be held to have submitted to the jurisdiction.16

This concept in relation to Arbitration has been laid down in the UNCITRAL Model Law on

International Commercial Arbitration (MAL) and the English Arbitration Act, 1996.

If a party does not object to the tribunal’s competence within a certain period of time, that

party may lose the right to object 17. Participation in arbitration without objection to

jurisdictional or procedural errors prevents subsequent challenges to the awards on these grounds

and it can be implied that the party has consented to the procedure of arbitration. In the present

scenario, the Respondents did not raise the issue of arbitrability in the written submissions

presented to the arbitral tribunal.

12 Supreme Court of Sweden in NyttJurisdixktArkiv 1997, 866 (decided on October 15, 1997) 13 BGH 277, 33, 35; Rubino-Sammartano, Mauro, International Arbitration Law and Practice, (Kluwer Law International, 2nd ed., 2001) 14 Fawcett, James & Carruthers, Janeen M.,Cheshire, North and Fawcett-Private International Law, (Oxford University Press, 14th ed., 2008). 15 Civil Procedure Rules (UK), r 6.4(2); Manta Line Inc v Sofianites and Midland Bank plc [1984] I Lloyd’s Rep 14, CA. 16Boyle v Sacker (1888) 39 Ch D 249, CA; Brealy v Board of Management of Royal Perth Hospital (1999) 21 WAR 79. 17Zekos, Georgios I., International Commercial and Marine Arbitration, (New York, Routledge-Cavendish, 2008)



b. Settled law as per the UNCITRAL Model Law on International Commercial

Arbitration (MAL)

A plea as to the lack of jurisdiction of the arbitral tribunal has to be submitted by the

respondent in due time, not later than the statement of defence 18. The phrase ‘Not later than’

can be interpreted in various ways and has been differently understood by courts in different

jurisdictions. In one of these cases, a Canadian court declared that a separate plea to the

jurisdiction is required prior to any statement on the substance.

In one reported case, a request was filed with the parties’ first statement on the substance

of the dispute was regarded to be untimely19. The court also stated that correct procedure in such

a case should be to apply for a stay of court proceedings after receiving the statement of claim

(before submitting the statement of defence)20. Ideally, the clause “no later than when

submitting....first statement of substance” should be interpreted in the most common sense, i.e.

challenge to the jurisdiction of an arbitral tribunal should be raised before, or simultaneously

with the statement on substance of the dispute. It has been held that a party regularly loses its

right to raise the lack or invalidity of the arbitration agreement in the setting aside proceedings if

there was no objection to jurisdiction in the arbitral proceedings21.

“ A party must object to the jurisdiction of the tribunal or to the arbitrability of a claim

or counterclaim no later than the filing of the statement of defence, as provided in Article 3, to

the claim or counterclaim that gives rise to the objection”22.A plea that the arbitral tribunal is

exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the

18 Art. 16(2), UNCITRAL Model Law on International Commercial Arbitration 19ABN Amro Bank Canada v. Krupp MakMaschinenbau GmbH (1994) 20 O.R. (3d) 36 (Gen. Div.) 20 Ibid. 21 1 Sch 16/01, Decided on December 20 2001, Highest Regional Court -Oberlandesgericht Stutgart (Germany). 22 Article 15(3) of the ICDR Rules of the American Arbitration Association



scope of its authority is raised during the arbitral proceedings23. The Respondents in the instant

case failed to do so. Objections filed to the jurisdiction of the arbitral tribunal after filing a

statement of defence cannot be entertained, as the lack of objection in the first instance (before

filing the statement of defence) has to be construed as the waiver of the right to object.

c. Settled law as per the English Arbitration Act 1996

As per s. 31 of the English Arbitration Act, 1996; A party is entitled to register an

objection to an assertion of jurisdiction by the arbitrators, thereby preserving his right to

challenge the award on the ground of want of jurisdiction at a later date24. The Act25 also lays

down certain basic principles regarding the right of a party not to participate in arbitration

proceedings26.

If the objection to jurisdiction or procedure is not made at the appropriate time, and the

tribunal does not extend time under its power to do so in s. 31(3), the objection is considered

invalid and the party is believed to have waived the jurisdictional issue.27

In UR Power v Kuok Oils28, The applicants did not question the jurisdiction of the arbitral

tribunal at the first tier but asserted lack of jurisdiction at the second tier. It was held that if a

party contemplates a jurisdictional challenge, it must do so at the earliest stage otherwise, it

maybe at a risk of losing this right29. Parties that claim that they did not agree to arbitrate a

dispute have every reason to press this allegation at the outset in order to avoid the risk that they

23Padhi, P.K., Legal Aspects of Business, (PHI Learning Private Limited, 2013, ISBN-978-81-203-4675-8) 24 s. 32, English Arbitration Act, 1996 25s.72, English Arbitration Act, 1996 26Law Debenture Trust Corp Plc. v Elektrim Finance BV [2005] EWHC 1412; relied on s. 72(1) AA 1996 27s.73(1), English Arbitration Act, 1996 28 UR Power v Kuok Oils, [2009] 2 Ll Rep 495 29 Ibid.



will be held to have waived their objections if they do not raise those objections immediately.30

This principle is also well settled in under MAL rules (as mentioned above) as well as some

national arbitration laws.31

II. THE OWNERS HAVE BREACHED ARTICLE III, R. 2 OF THE HAGUE-VISBY RULES IN THEIR

FAILURE TO TAKE CARGO CARE MEASURES AND ALLOW THE VESSEL TO BE TAKEN OVER

BY PIRATES

While the vessel was en route to Merseyside, it was held off in Somalia by Somali pirates

between 15th November and 13th February 200932. It is submitted that the owners have breached

Art. III, r.2 of the Hague-Visby Rules as they failed to properly and/ or carefully load, handle,

stow, carry, keep, care for and discharge the goods carried in that they allowed the vessel to be

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

taken33.

It is argued that the Respondents cannot claim the exception under Hague-Visby Rules34

as they did not ensure that the ship was seaworthy for the voyage to be undertaken (including the

piracy risks involved) and even during the period of hijack, no cargo care measures were

taken35(due to which the goods were declared to be of Non Merchantable Quality and worthless,

resulting in a loss for the Claimants)36.

30Cabintree of Wis., Inc. v. Kraftmaid Cabinetry, Inc., 50 F. 3d 388 (7th Cir. 1995) 31 Art. 6(8), Croatian Law on Arbitration; Art. 7(2), MAL echoes the same principle. 32 Moot Scenario, p. 66 33Moot Scenario, p. 69 34 Art IV, r.2, Hague-Visby Rules 35Supra n. 33 36 Ibid.



A. COMMON LAW REGIME IMPOSES STRICT LIABILITY ON THE CARRIER

As per the common law regime, it is understood that in the absence of special terms, the

carrier under a bill of lading is strictly liable to deliver the goods at destination in as good a

condition as that in which they were when delivered to him, subject to the common law

exceptions37. He was and even sometimes still is referred to as an insurer38. At common law a

ship-owner by contracting to carry goods on a voyage in a ship, in the absence of express

stipulation, impliedly undertakes that his ship is seaworthy39.

B. EXCEPTIONS TO THE RULE IN HAGUE VISBY CANNOT BE CLAIMED BY THE RESPONDENTS

Once the carrier establishes that the ship was seaworthy at the commencement of the

voyage, the burden of proof is on the claimant to establish that the carrier is not entitled to relief

under one of the exceptions in Art 4(2) of the Hague-Visby Rules40. The onus of proof is

sequential41. Arrival of the ship with failure to deliver the goods in the same good order and

condition is prima facie evidence of breach of contract by the carrier and owner, and probably

negligence42. The carrier and owner must prove prima facie that the cause of the loss was one of

the exceptions and that they took all possible measures to avoid the crisis43. Where there is more

than one cause, the carrier and owner must prove the proportion due to the exception. 44 In the

instant case, the Respondents failed to secure the ship for the impending voyage. The

Respondents being experts in the shipping industry are assumed to have been well aware of the

37Nugent v Smith (1875) 1 C.P.D. 19 at 33, per Brett J 38Ibid. 39Steel v State Line Steamship Co (1877) 3 App. Cas. 72 40Supra n. 3 41 Ibid. 42Baxter’s Leather Co v Royal Mail Co [1908] 1 KB 796 43 Ibid. 44Gosse Millerd v Canadian Government Merchant Marine [1929] AC 223



risks involved in the passage of the ship through the Gulf of Aden. Despite the glaring dangers,

they failed to ensure the seaworthiness of the ship.

Arguendo, if it is assumed that the present situation is categorized as a “peril of the sea”

and the carriers are not answerable45; this claim can only be valid if the ship does not fall into the

hands of pirates by any negligence or fault of the master.46 In the instant case, the ship did fall

into the hands of the pirates due to the negligence of the Respondents; such a situation could

have been avoided.

a. The Respondents failed to conduct due-diligence to make the ship seaworthy

According to Art. IV of the Hague-Visby Rules, the carrier is required to exercise due

diligence to make the ship seaworthy at the commencement of the voyage, and carries the burden

of proving compliance with Art III(1).47The case of Dixon v. Sadler48 defined seaworthiness as

the act of making the ship fit to encounter ordinary perils of the voyage.49

This definition of seaworthiness50 as an inescapable personal obligation of the carrier was

echoed in the Muncaster castle case51. The carrier must be capable of carrying the goods and

fulfill the voyage or safe shipment, which is the primary duty of seaworthiness.52 Liability may

arise if unseaworthiness is a cause of the loss, though other causes, for which the ship-owner

may be covered by express exceptions, may contribute53. The law of marine insurance attaches

45Pickering v Barclay, 2 Roll. Ad. 248 46 Abbott, Charles, A Treatise of the Law Relative to Merchant Ships and Seamen, (Exeter, Edward Little and Co., 1810) 47McGregor v Huddart Parker (1919) 26 CLR 336.

48 Dixon v. Sadler, (1839) 5 M&W 405 49 McFadden v Blue Star Line [1905] 1 K.B. 697 at 703. 50Treitel, Guenter & Reynolds, Carver on Bills of Lading, (London, Thomas Reuters, 3rd ed., 2011) 51The Muncaster Castle, [1961] 1 Lloyd's Rep 57 52 Bennett, H, The Law of Marine Insurance, (Oxford University Press, 2nd ed., 2007) 53Monarch S.S. Co v Karlshamns [1949] A.C. 196 at p.226.



great importance to the matter of seaworthiness and generally adopts common law

phraseology54.

b. The Respondents did not take “anti-piracy measures” as an element of seaworthiness

and due-diligence

Piracy is “robbery and depredation on the sea or navigable rivers, etc., or by descent from

the sea upon the coast, by persons not holding a commission from an established civilized

state”55. The Maersk Alabama case is one such case involving an attack on a ship by armed

pirates and the claimants holding the carrier responsible for failure to provide adequate safety

measures. The question to be considered in this case is; to what extent can a carrier be held liable

for failure to prevent a piracy attack on high seas56.

Various organisations such as the International Maritime Organisation (Maritime Safety

Committee) and other Shipping Industry organisations (such as Maritime Safety Centre, Horn of

Africa) have laid down Best Management Practices that must be adhered to by the carriers.

Security measures to avoid piracy on the high seas might include outfitting the vessel with anti-

boarding equipment, providing citadels aboard the vessel to protect the crew if pirates do board,

57 arming the crew or otherwise having armed guards onboard, and hiring private security escorts

to accompany the vessel through zones with high levels of piratical activity.58 MSCHOA

54s.39, Marine Insurance Act 1906 (Warranty of seaworthiness of ship) 55Athens Maritime Enterprises Corp v Hellenic Mutual War Risks Association (Bermuda) Ltd [1982] 2 Lloyd’s Rep. 483 56Case No. 2009‐26129, Filed in Harris County Court (USA) 270, on April 29, 2009 57 International Maritime Organisation, IMOIiInterim guidance for shipowners and operators, MSC.1/Circ.1405/Rev.1, 16th September 2011; International Maritime Organisation, Interim Guidance for Flag States, MSC.1/Circ.1406.

58 Ibid.



recommends that every ship that transits through the High Risk Area must register to ensure

safety59. These facts and expert guidelines can be very useful to combat maritime piracy.

III. THE DELIVERY OF THE CARGO AT ROTTERDAM AND NOT LIVERPOOL IS A VIOLATION

OF THE CONTRACT OF CARRIAGE

Deviation means departure from the prescribed or ordinary route which the ship should

follow in fulfillment of a contract of carriage.60 Respondent ship has failed to uphold its duty not

to depart voluntarily61 without justifiable, necessary62 or reasonable cause, from the contractual

route.63 The deviation was neither for the purpose of [A] saving life or property or of landing any

ill or injured person on board; [B] calling for fuel or stores at any port or ports in or out of the

regular course of voyage. Hence the delivery of the cargo by the respondent to Rotterdam and

not Liverpool will be an unlawful deviation and hence constitute a violation of the contract of

carriage.

A. THE DEVIATION IS UNLAWFUL UNDER COMMON LAW

Under the established principles of common law the carrier is entitled to only depart from

the normal route for any purpose connected with the safety of the voyage. The carrier is also

entitled under common law to deviate only in order to save life but may not deviate to save

property when the circumstances are not related to the safety of the voyage. For instance the

carrier may not deviate to tow a ship when life is not in danger.64

59Maritime Safety Centre, Horn of Africa, MSCHOA, BMP4 Best Management Practices for Protection against Somalia based Piracy (Edinburgh, Witherby Publishing Group Ltd.,Version 4, 2011) 60E.R.H. Ivamy, Carriage of Goods by Sea, (13th Edition, 1989). 61Dockray, Deviation: a doctrine all at sea?[2000] LMCLQ 76. 62Hostetter v. Park, 137 U. S. 30. 63Louis Dreyfus v Lauro, (1938) 60 LL.L Rep. 94. 64Scaramanga v Stamp, (1880) 5 C.P.D. 295 (CA).



The deviation of the carrier to Rotterdam when the contract clearly specified that it was

to proceed to Liverpool65 will not be covered under the exceptions under Common Law as the

deviation was neither in the interest of the safety of the voyage nor was it for the purpose of

saving lives. Hence the deviation is clearly unlawful and constitutes a clear violation of the

contract of carriage.

B. THE DEVIATION IS UNLAWFUL UNDER THE HAGUE VISBY RULES

When the Hague Visby rules apply, it will be a contract clause between the two parties.

The Hague Visby rules permit deviation only to save either life or property.66 The deviation to

Rotterdam will be unlawful under the Hague Visby rules as it was neither to save life or property

and thus it will constitute a violation of the contract of carriage.

C. THE DEVIATION IS NOT COVERED BY THE DEVIATION CLAUSE IN THE CHARTER PARTY

Under the deviation clause in the charter party agreement the vessel may deviate under

only the following circumstances;

i. to save life or property on board

ii. to land any ill or injured persons on board

iii. to call for fuel or stores at any port67

The deviation to Rotterdam when the vessel was supposed to proceed to Liverpool is

clearly unlawful as the purpose of the deviation was not covered by the deviation clause in the

charter party. Thus, the unlawful deviation by the respondent results in a clear violation of the

contract of carriage.

65 Moot Scenario p. 14 66Article IV.4 Hague Visby Rules 67 Moot Scenario p. 10, Clause 21 Charter Party Agreement



D. THE LIBERTY CLAUSE IN THE CHARTER PARTY WILL NOT PROTECT THE DEVIATION OF THE

RESPONDENT

The liberty clause is a special clause in the Charter Party agreement which purport to

permit what would otherwise be deviations. Established case law has however shown that

however widely a liberty clause is drafted, they have to be interpreted consistent with the

provisions of the charter party agreement.

The two parts of a bill of lading; the described voyage and the liberty to deviate must be

read together and the liberty clause, however generally worded must be subordinate to the

described voyage.68 A permitted liberty must be consistent with the main object of the contract.69

Further the court has gone on to state the supremacy of this principle by expressing the opinion

that proceeding in a direction not contemplated by the Charter Party is an unlawful deviation

even though allowed by the Charter Party through a liberty clause.70

Under the liberty clause, the respondent may not deviate in any circumstance unless there

is a risk of capture, seizure, detention, damage, delay or disadvantage to or the loss of the vessel

or any part of the cargo.71 The purpose of the deviation to Rotterdam is not covered by the liberty

clause and is beyond the scope of the liberty clause.

As proceeding to Rotterdam defeats the main purpose of the contract and is

fundamentally different from the voyage contemplated in the Charter Party, the liberty clause

will not protect or justify the deviation. The clause does not allow the respondent to nullify the

68Frenkel v. MacAndrews & Co. Ltd., [1929] A.C. 545 69Glynn v.Margetson& Co., [1893] A.C. 351. 70Ibid. 71 Moot Scenario p. 11, Clause 29(a) Charter Party Agreement



contract but the respondent has done so by performing something fundamentally different from

the purpose of the contract by unloading the cargo at Rotterdam instead of Liverpool.

E. UNLAWFUL DEVIATION WILL RENDER THE RESPONDENT A COMMON CARRIER

Once there is an unjustifiable deviation the respondent is strictly liable as a common

carrier.72 The Respondent will only be entitled to defenses under Common Law and not under

the Charter Party. The respondent has no valid defense under Common Law as has previously

been shown.

F. DEVIATION RENDERS THE CHARTER PARTY TO BE FUNDAMENTALLY BREACHED AND

REPUDIATED

The Respondent has sought to unlawfully avoid the Charter Party contract by deviating as

is the case.73 A deviation which voluntarily substitutes another voyage for the contract voyage is

a fundamental breach.74A deviation, however slight, if unjustified, amounts to repudiation75 and

breach of the Charter Party.76

The main object of the Charter Party, which is provided within and in the correspondence

between the Respondent and Claimant prior to its signing, is to deliver goods from Pasir Gudang

in Malaysia to Liverpool in England.77 This object has been fundamentally failed due to

Deviation. Hence, the breach is fundamental.78

72Joseph Thorley v Orchis, (1907) 1 KB 660. 73 C.H Spurin, Charterparties, (3rd Ed. 2005). 74 Wilson John F., Carriage of Goods by Sea, (Pearson , 7th Ed., 2010). 75Hain SS v Tate & Lyle, [1936] 2 All ER 597. 76Supra n. 63 77Supra n. 65 78 Lord Devlin, The Treatment of Breach of Contract, The Cambridge Law Journal 1966.



IV. DELIVERY OF THE CARGO TO BEATLES AND NOT TO THE CLAIMANT WHO IS THE

LAWFUL HOLDER OF THE BILLS OF LADING CONSTITUTES A VIOLATION OF THE

CONTRACT OF CARRIAGE

The holder of the bill of lading is considered to be the lawful owner of the goods.79 The

presentation rule which is an established principle in maritime law clearly states that the cargo

must be handed over only to the holders of the bill of lading.80 Thus the respondent has violated

the contract of carriage by not handing over the cargo to the claimant who is the lawful holder of

the bills of lading.

A. ORDER BILL IS A “DOCUMENT OF TITLE TO GOODS”

An order bill is one which provides for delivery of the goods to be made to the order of a

person named in the bill.81 A bill of lading which states that goods have been shipped on board

and which is either an order bill or a bearer bill is a document of title relating to those goods.82 It

is regarded as the symbol of the goods,83 so possession of the bill gives its possessor constructive

possession of the goods.

The bills of lading sent by Beatles to Aardvark is an order bill of the second type of Order

Bill.84

79 Hill, Christopher, Maritime Law, (London, LLP, 6th edn., 2003) 80 Supra n. 74, p.143 81 Supra n. 50 82 Purchase, Documents of Title to Goods (Sweet and Maxwell, 1931) 83The Prinz Adalbert, [1917] A.C. 586 84Moot Scenario, p. 20



B. VIOLATION OF THE PRESENTATION RULE IS A VIOLATION OF THE CONTRACT OF CARRIAGE

a. Holder of the Bills of Lading is Entitled to the Possession of the Goods

The bill of lading is considered to symbolize the goods and its transfer leads to the

transfer of the rights to the cargo. It constitutes a title of ownership of the goods and its

possession is the same as the possession of the goods.85The corollary of this function is that the

lawful holder of the bill of lading has the right to require the delivery of the goods from the

carrier without the need to provide evidence of ownership of the cargo86.

b. The Presentation Rule is an Established Principle

The presentation rule states that from the carriers point of view, he should only deliver

the goods to the holder of the bill of lading. This is an obligation for the carrier. If the goods are

delivered without the production of the bill of lading, the carrier will be in breach of the carriage

contract.87

In countries of Common Law, the presentation rule was established in the 19th century,

based on the theory of bailment and constructive possession.88 As far back as 1889 the courts had

stated that a carrier would not be entitled to deliver goods without the production of the bill of

lading. Further, the carrier would be liable for the consequences of having delivered the goods

without the production of the bill of lading .89

The presentation rule is confirmed today in the majority of international legislations. The

Hamburg Rules, specify that carriers undertake to deliver the goods against surrender of the bill

85Debattista Charles, Bills of lading in Export Trade, (Tottel, 2009), p. 26 86Girvin, Stephen, Carriage of Goods by Sea, (Oxford, 2nd ed.,2011) p. 142 87Supra n. 63, pp. 37 88Supra n. 83, pp. 29 89The Stettin, (1889) 14 PD 142



of lading.90 Likewise, the Rotterdam Rules indicate that in the case of issue of a negotiable

transport document (bill of lading), the holder of it has the right to claim the delivery of the

goods by the carrier at the place of destination against surrender of the bill of lading. The carrier

refuses to deliver the goods if these requirements are not fulfilled.91

With the adoption of the Carriage of Goods by Sea Act of 1992, the presentation

principle is now codified in English law. According to the act, a person who becomes the lawful

holder of a bill of lading shall (by virtue of becoming the holder of the bill) have transferred to

and vested in him all rights of suit under the contract of carriage as if he had been a party to that

contract92.

c. The Presentation Rule has been violated by Twilight Traders

In the present matter, the actions of Twilight Traders of delivering the cargo to Beatles

without the production of the bills of lading93 is a clear violation of the presentation rule.

C. THE ACTIONS OF TWILIGHT TRADERS ARE NOT COVERED BY THE EXCEPTIONS TO THE

PRESENTATION RULE

The exceptions to the presentation rule are mainly of three types: firstly the parties have

the possibility of contractually agreeing that the delivery will be made without production of the

bill of lading94. The parties can also decide that if the bill of lading is not available at the time of

the delivery, the consignee can provide other documents given by the shipper95. Finally, the law

90Article 1.7 Hamburg Rules 91Article 47 Rotterdam Rules 92Article 2, Carriage of Goods by Sea Act, 1992 93 Moot Scenario p. 34 94Davies, Martin & Dickey, Anthony, Shipping Law, (Lawbook Co., 3rd ed., 2004)p. 165 95Supra n. 74, p. 158



of the place of discharge or the customary practices of the port sometimes allows delivery

without the bill of lading96.

In the present matter, none of the exceptions qualify for the agreement between the

claimant and Beatles. Neither did they agree for delivery without the production of the bills of

lading, nor did they agree that alternate documents would be provided instead of the bill of

lading. Finally the customary and statutory practices at Liverpool were in line with the common

law view which gives importance to the necessity for the production of the bill of lading to take

possession of the goods. Thus exceptions to the presentation rule may not be used in this case.

D. OWNERSHIP OF THE CARGO WAS TRANSFERRED FROM BEATLES TO THE CLAIMANT

As proved above the bills of lading sent by Beatles to Aardvark are a document of title of

the goods and the fact that Beatles sent the bills of lading to Aardvark97 signifies the ownership

of the cargo by Aardvark. By virtue of Aardvark becoming the legal holders of the bills of

lading, the ownership of the goods was transferred to them.

E. THE RESPONDENT IS IN VIOLATION OF THE CONTRACT OF CARRIAGE

The contract of carriage between Beatles and the claimant was for the delivery of cargo at

Liverpool.98 The respondent was the shipper contracted by a charter party agreement for the

voyage.99 When the respondent violated the deviation clause in the charter party and delivered

the cargo at Rotterdam100 to Beatles, they violated the contract of carriage as they had not

96Supra n. 84, pp. 143 97Moot Scenario p. 23 98Supra n. 65 99Ibid. 100Supra n. 91



presented the cargo to Aardvark101 who was the lawful owner of the cargo as Beatles had

transferred the bills of lading102 to Aardvark.

Thus, the respondent is in violation of the Contract of Carriage for delivery of the cargo

other than against the presentation of the bills of lading as well as delivery of the cargo to Beatles

and not to the claimant who was the lawful holder of the bills of lading and thus entitled to the

possession of the goods.

V. THE RESPONDENT IS LIABLE FOR THE TORT OF CONVERSION

A carrier who delivers the cargo without production of the bill of lading will not only

violate the contract of carriage but will also be liable for the tort of conversion.103 Thus Twilight

Traders will be liable for the tort of conversion as they delivered the cargo at Rotterdam without

the production of the Bill of Lading.

A. VIOLATION OF THE CONTRACT OF CARRIAGE WILL CONSTITUTE A TORT OF CONVERSION

The principle whereby the bill of lading must be produced upon delivery of the goods is

strongly stated both in national and international legal texts and case law. A carrier who accepts

to deliver goods without a bill of lading violates the carriage contract and runs the risk of having

to pay damages to the lawful holder of the title.104

The carrier must not deliver the goods other than against presentation of an original bill

of lading. The carrier who delivers the goods without production of a bill of lading does so at his

101Supra n. 95 102Supra n. 65 103Aikens, Richard & Bools, Michael, Bills of Lading, (London, Informa 2006) p. 99 104Article 5.1 Hamburg Rules



own risk. If the goods are delivered to a person who was not entitled to receive them, the carrier

will be liable for breach of contract and for conversion of the goods.105

In English law, the carrier will be liable not only in contract but also in the conversion. In

the opinion of the privy council the delivery of the cargo by the carrier without production of the

bill of lading would make the carrier liable for the breach of contract as well as the tort of

conversion.106 Delivery without bill of lading constitutes a concurrence of the actions of tort and

breach of contract.107In Shuangyao Ltd., v. Xiaogang Industry Crude Materiel Shipping Agency

Co. Guangzhou it was held that delivery without bill of lading is deemed a tortious act by

thecarrier.108 Based on the theory that bill of lading is a document of title and the holder enjoys

the property (or title) of the goods under the bill it was held in Choushao Import and Export Co.

Fujian Province v. Yanfeng (China) Ltd. Co., Jieteke Shipping Co. that the delivery of goods to a

person other than the holder is a infringement to the titles by the holder and constitutes a tort.109

In most cases, delivery without bill of lading is a concurrence of a tort and a breach of the

obligation under contract of carriage and/or bill of lading instrument because a bill of lading

generally represents both the title (at least the possession) to the goods and the obligatory right or

contractual right to the delivery of goods, and the holder is the only person entitled to demand

the goods.

105Barclays Bank Ltd. v. Commissioners of Customs and Excise, [1963] 1 Lloyd’s Rep. 81 106Sze Hai Tong Bank Ltd. v. Rambler Cycle Co. Ltd., (1959) A.C. 576 107 Li Zhang-Jun, “On Legal Natures of Bill of Lading in Practice and Theory of Maritime Justice”, (Law Press, 1st ed., 2002) pp. 70-72 108Annual of China Maritime Trial, The People’s Communication Press, 1999,pp.335-339 109Ibid, pp. 405-409



B. THE CLAIMANT HAS A CLAIM IN THE TORT OF CONVERSION AGAINST THE RESPONDENT

The contract of carriage was to deliver the cargo, on the production of bills of lading, to

the claimant who was entitled under the bills of lading to take delivery of the cargo.110 The

respondent did not deliver the goods to the claimant but delivered them to Beatles.111 They are

therefore liable for breach of the contract carriage. The delivery of the cargo was made the

without production of the bills of lading112 to Beatles. Any misdelivery of property by a carrier

will be regarded as conversion.113 Thus the claimant has a claim against the carriers in the tort of

conversion.

VI. THE RESPONDENTS ARE LIABLE TO PAY DAMAGES TO THE CLAIMANTS.

The award of damages at common law should be Compensatory.114 Due to a breach of

contract by Respondents, the Claimants have suffered several losses which need to be

compensated by the Respondents.

A. THE RESPONDENTS ARE LIABLE TO PAY DAMAGES TO THE CLAIMANTS FOR FAILURE TO

TAKE PROPER CARE OF CARGO.

The measure of damages for any kind of breach of any kind of contract is such damage

actually caused by the breach as the defaulting party should reasonably have contemplated or

foreseen would flow from the breach115

In the present case, the pirated PFAD had lost its traceability and consequently was not

acceptable to the animal feed trade.116 The respondents have breached the implied warranty of

110Supra n. 96 111Moot Scenario p. 68 112Ibid. 113Youle v. Harbottle, I Peake 68. 114Johnson v Perez (1988) 166 CLR 351 at 355 115Koufos v C. Czarnikow Ltd. [1967] 3 W.L.R. 1491, Victoria Laundry Ltd.(windsor) v. Newman Industries Ltd.; Coulson & Co. Ltd. [1949] 2 K.B. 528



merchantability because by reason of their failure to properly keep the cargo the cargo went from

being GMQ cargo to non-GMQ cargo and cannot be used as a food/feed ingredient.117 Thus the

value of cargo dropped significantly.118In the case of a breach of warranty of quality, such loss is

prima facie the difference between the value of the goods at the time of delivery to the buyer and

the value they would have had if they had fulfilled the warranty.119 The measure of damages was

the difference between the contract price and the value of the goods when the buyers discovered

the sellers' breach.120

Hence, the Claimants are entitled to the difference between the price they paid for the

cargo (USD 747.50 per mt) and its value at Liverpool on or about 30 March 2009 when it should

have been delivered (USD 517 per mt121). The measure of damages is: (USD 747.50 per mt –

USD 517 per mt) × 4000mt = USD 922000

B. THE RESPONDENTS ARE LIABLE TO PAY DAMAGES TO THE CLAIMANTS FOR FAILURE TO

DELIVER THE GOODS TO THE RIGHTFUL OWNERS

As to the non-delivery of goods by the carriers, if the carrier fails to deliver the goods to

the destination, then it is settled law that the measure of damages is the market value which the

goods would have had at their destination if they had arrived pursuant to the terms of the

contract.122 The true measure of damages was the value of the goods at the date of the non-

delivery.123

116 Moot Scenario, p. 58 117 Moot Scenario, p. 25 118 Moot Scenario, p. 26 119s. 53(3)of the Sale of Goods Act 1979 120Kwei Tek Chao and Others (Trading As Zung Fu Co.) v British Carriers and Shippers LD, [1954] 2 Q.B. 459 121 Moot Scenario, p. 59 122Koufos v C. Czarnikow Ltd. [1967] 3 W.L.R. 1491 123In The Arpad, [1934] P. 189



On the alternative claim in tort for damages for conversion, the measure of damages was the

same i.e. the value of goods on the date of conversion.124

Since the goods were not delivered to the Claimants or their agents (Johnson and

Johnson) who were the holders of the Bills of Lading125, the damages for the non-delivery are to

be paid. The damages will amount to the value of cargo at Liverpool on or about 30 March 2009

i.e. USD 517 per mt126. Hence the damages for the non-delivery which Respondents are liable to

pay to the Claimants would be USD 2068000 (i.e. USD 517 per mt × 4000 mt).

C. ALTERNATIVELY, RESPONDENTS ARE LIABLE TO PAY DAMAGES FOR THE EXPENDITURE

INCURRED BY THE CLAIMANTS FOR BUYING CARGO.

Damages are awarded with the object of placing the claimant in the position in which he

would have been had the contract been performed as far as money can do it.127 Therefore he is

entitled to damages suffered, including expenditure incurred, in reliance on the contract (reliance

loss).128 Wherein the cargo was damaged, the claimant could purchase replacement goods (i.e.

goods of the equivalent kind and quality) and was awarded the replacement cost of such

substituted goods.129

The Claimants paid USD 522.50 per mt to buy goods in order to sell to their sub-buyers

in Liverpool.130 In reliance on the contract with the respondents the claimants had entered into

contracts for sale of PFAD with their sub-buyers. This expenditure would not have occurred if

the respondents had not delivered the goods to Beatles at Rotterdam because the sub-buyers had 124In The Arpad, [1934] P. 189, Reid v. Fairbanks (1853) 13 C.B. 692 125 Moot Scenario, p. 33 126 Moot Scenario, p. 59 127Cowan v Stanhill Estates Pty Ltd No 2, [1967] VR 641 at 648; Haviv Holdings Pty Ltd v Howards Storage World Pty Ltd (2009) 254 ALR 273, Livingstone v Rawyards Coal Co (1880) 5 App Cas 25 at 29 128Gates v City Mutual Life Association Society Ltd (1986) 160 CLR 1 129Catterpillar Overseas, S.A v. Farrell Lines, Inc.1988 AMC 2894 at pp. 2904-2905(E.D. Va. 1988) 130 Moot Scenario, p. 17



agreed to accept the non-GMQ cargo following the piracy. Hence further and/or alternatively the

claimants are entitled to damages amounting to USD 522.50 per mt × 4000 mt = USD 2,090,000.

D. RESPONDENTS ARE LIABLE TO PAY COSTS OF DUTCH PROCEEDINGS.

The Claimants further incurred legal fees in relation to the Dutch proceedings which

amounted to USD 138,843.14.131They have also incurred legal fees in respect of the Court

proceedings of USD 107,913.12.132

Hence, the total quantum of damages which the respondent are entitled to is USD

3,236,756.26 (USD 2990000+ USD 138843.14+ USD 107913.12) or alternatively USD

2,329,912.26 (USD 2090000+ USD 138843.14+ USD 107913.12).

131 Moot Scenario, p. 55 132Ibid.



PRAYER FOR RELIEF

The claimant [Aardvark Ltd.] requests the Arbitral Tribunal to:

Declare that the Claimants can enforce the Arbitration Clause contained in the Bills of Lading

and the Charter party and that the tribunal has complete jurisdiction to try the matter.

Further,

Adjudge that the Owners have breached Article III, r. 2 of the Hague-Visby Rules in their failure

to take cargo care measures and allow the vessel to be taken over by pirates

Further,

Adjudge that the Respondents is in breach of the contract of carriage for

i. Delivery of the cargo to Rotterdam and not Liverpool

ii. Delivery of the cargo other than against the presentation of the Bills of Lading

Further,

Hold the Respondents to be liable in the tort of conversion

Further,

Adjudge the Respondents to be liable for the following damages,

i. An award for damages for USD 3,236,756.26, alternatively USD 2,329,912.26.

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

iii. Costs with compound interest on costs.