ELEVENTH ANNUAL INTERNATIONAL MARITIME LAW ARBITRATION MOOT COMPETITION

2010

THE UNIVERSITY OF TECHNOLOGY SYDNEY

IN THE MATTER OF AN ARBITRATION HELD AT SYDNEY (Under the Maritime Law Association of Australia and New Zealand Rules) MEMORANDUM FOR THE CLAIMANT ON BEHALF OF:

AGAINST:

New England Chartering and Trading Company

SSP Pty Ltd

LLC

CLAIMANT

RESPONDENT

TEAM NO. 1 SAYAK BHATTACHARYA MICHAEL GORRIE DUNCAN MCKAY SARATH SEETHAMRAJU

ELEVENTH ANNUAL INTERNATIONAL MARITIME LAW ARBITRATION MOOT COMPETITION

2010

TEAM NO 1

IN THE MATTER OF AN ARBITRATION HELD AT SYDNEY (Under the Maritime Law Association of Australia and New Zealand Rules) MEMORANDUM FOR THE CLAIMANT ON BEHALF OF:

New England Chartering and Trading Company

AGAINST:

SSP Pty Ltd

LLC

CLAIMANT

RESPONDENT

TABLE OF CONTENTS TABLE OF CONTENTS ..................................................................................................................................... I LIST OF ABBREVIATIONS ............................................................................................................................ IV TABLE OF AUTHORITIES ............................................................................................................................... V SUMMARY OF FACTS ..................................................................................................................................... 1 ARBITRATION ARGUMENTS ........................................................................................................................ 6 PROCEDURAL LAW ........................................................................................................................................ 6 I.

THE ARBITRAL PROCEDURE IS GOVERNED BY CLAUSE 19(d) OF THE CHARTER PARTY. 6

A. THE ARBITRATION IS TO BE CONDUCTED ACCORDING TO THE RULES OF THE MARITIME LAW ASSOCIATION OF AUSTRALIA AND NEW ZEALAND. .................................................. 6 B.

GAMMA IS THE SEAT OF THE ARBITRATION ............................................................................. 7 (I) THE INTERNATIONAL ARBITRATION ACT 1974 (UPSILON) IS THE LEX ARBITRI OF THE DISPUTE..................................................................................................................................................... 7

SUBSTANTIVE LAW........................................................................................................................................ 8 II.

THE CHARTER PARTY IS SUBJECT TO THE LAW OF GAMMA, UPSILON. ................................. 8 A. THE TRIBUNAL IS TO DETERMINE THE SUBSTANTIVE LAW OF THE AGREEMENT PURSUANT TO THE CONFLICT OF LAWS RULES IT CONSIDERS APPLICABLE. .......................... 8 B.

THE LAW OF GAMMA, UPSILON IS THE PROPER LAW OF THE CHARTER PARTY. ............ 8

JURISDICTION OF THE ARBITRAL TRIBUNAL ......................................................................................... 9 III. THE TRIBUNAL HAS JURISDICTION TO DETERMINE THE ENTIRETY OF THE CLAIM AS DETAILED IN CLAIMANT’S POINTS OF CLAIM. ....................................................................................... 9 A. CLAUSE 19(d) OF THE CHARTER PARTY GIVES THE TRIBUNAL JURISDICTION TO HEAR MATTERS ‘ARISING OUT OF OR IN CONNECTION WITH’ THE CHARTER PARTY. ...................... 9 B. THE TRIBUNAL HAS JURISDICTION TO DETERMINE DISPUTES ARISING OUT OF THE SUBSTANCE OF THE LETTER OF 6 OCTOBER 2008. .......................................................................... 10 (I) THE RESPONDENT’S PURPORTED VARIATION OF CLAUSE 19(D) DOES NOT REMOVE DISPUTES CONCERNING THE LETTER OF 6 OCTOBER 2008 FROM THE TRIBUNAL’S JURISDICTION. ....................................................................................................................................... 10 (II) THE LETTER OF 6 OCTOBER 2008 IS TO BE INTERPRETED ACCORDING TO THE LAW OF UPSILON ............................................................................................................................................ 12 CLAIM BY THETA AND LIABILITY TO BETA BETA .............................................................................. 13 IV. THE RESPONDENT IS LIABLE TO REIMBURSE THE CLAIMANT FOR THE SETTLED CARGO CLAIM OF THETA PTY LTD FOR THE VALUE OF $4,999,889. ................................................ 13 A. THE RESPONDENT’S LETTER OF 6 OCTOBER 2008, ISSUED TO PROCURE A CLEAN BILL OF LADING, CONTAINED A WARRANTY. ........................................................................................... 13 (i)

THE LETTER OF 6 OCTOBER 2008 CONTAINED A WARRANTY. ......................................... 13 I

(ii) THE RESPONDENT BREACHED THE WARRANTY, CONTAINED IN THE LETTER OF 6 OCTOBER 2008, CAUSING THETA’S LOSS. ...................................................................................... 14 (iii) CONTAMINATED TIMBER FALLS WITHIN THE SCOPE OF THE WARRANTY GIVEN BY THE RESPONDENT IN THE LETTER OF 6 OCTOBER 2008. ............................................................ 15 V. THE RESPONDENT IS LIABLE TO COMPENSATE THE CLAIMANT FOR LIABILITY ARISING FROM THE CLAIM BY BETA BETA IN RELATION TO THE DAMAGE TO BETA BETA’S PROCESSING FACILITIES. ........................................................................................................................... 16 A. THE RESPONDENT’S WARRANTY OF 6 OCTOBER 2008 REMAINED OPERATIVE EVEN WHEN THE CARGO WAS ONSOLD BY THETA TO BETA BETA....................................................... 16 B. IN RELATION TO THE BITUMEN, THE RESPONDENT BREACHED THE WARRANTY CONTAINED IN THE LETTER OF 6 OCTOBER 2008. ........................................................................... 17 C. THE CLAIMANT’S LIABILITY TO BETA BETA WAS CAUSED BY THE RESPONDENT’S BREACH OF WARRANTY. ........................................................................................................................ 17 D. THE CLAIM AGAINST THE CLAIMANT BY BETA BETA FALLS WITHIN THE SCOPE OF THE WARRANTY GIVEN BY THE RESPONDENT IN THE LETTER OF 6 OCTOBER 2008. ........... 18 DEFENCE TO CROSS-CLAIM ....................................................................................................................... 18 VI.

THE RESPONDENT’S COUNTER-CLAIM MUST BE DISMISSED. .............................................. 18

A. EVEN IF THE CLAIMANT BREACHED CLAUSE 20 OF THE CHARTER PARTY, THE RESPONDENT SUFFERED NO RECOVERABLE LOSS......................................................................... 18 (i) THE RESPONDENT CANNOT RECOVER UNDER THE CHARTER PARTY ANY LOSSES WHICH ARE NOT RECOVERABLE UNDER THE HAGUE VISBY RULES. ...................................... 18 (ii) ANY ATTEMPT BY THE CLAIMANT TO INCREASE HIS RESPONSIBILITIES OR OBLIGATIONS IN EXCESS OF THOSE PRESCRIBED IN THE HAGUE VISBY RULES MUST FAIL. 19 B. THE RESPONDENT HAS NOT ESTABLISHED ANY BREACH OF ARTICLE 3 OF THE HAGUE VISBY RULES................................................................................................................................................ 19 (i) THE RESPONDENT HAS FAILED TO ESTABLISH ANY BREACH BY THE CLAIMANT OF ARTICLE 3(1) OF THE HAGUE VISBY RULES IN RESPECT OF THE TIMBER DUNNAGE IN THE HOLD. ....................................................................................................................................................... 19 C. THE CLAIMANT IS ABLE TO RELY ON THE IMMUNITIES IN ARTICLE 4 OF THE HAGUE VISBY RULES WHICH PROTECT IT FROM THE RESPONDENT’S CLAIM CONCERNING TIMBER DUNNAGE IN THE HOLD. ........................................................................................................................ 23 (i) THE CLAIMANT RELIES ON THE EXEMPTION FROM LIABILITY UNDER ARTICLE 4(2) OF THE HAGUE VISBY RULES. ............................................................................................................. 23 FREIGHT CLAIM ............................................................................................................................................ 24 VII. THE RESPONDENT IS LIABLE TO INDEMNIFY THE CLAIMANT IN RESPECT OF FREIGHT IN THE VALUE OF U$635,874.69 AND DAMAGES FOR DETENTION IN THE AMOUNT OF U$11,633,500 .................................................................................................................................................... 24 A. THE RESPONDENT HAS BREACHED ITS IMPLIED OBLIGATION TO NOMINATE A REACHABLE PORT, ENTITLING THE CLAIMANT TO DAMAGES FOR DETENTION. .................. 24

II

III

LIST OF ABBREVIATIONS

Claimant

New England Chartering and Trading Company LLC

Respondent

SSP Pty Limited

Charter Party

The Charter Party Agreement between New England Chartering and Trading Company LLC and SSP Pty Limited on 19 July 2008

Vessel

The MV Super P

The Cargo

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

The Master

The Master of the MV Super P

UQIS

Upsilon Quarantine and Inspection Service

Clean Bill of Lading

Bill of Lading No. BL000001 for the voyage undertaken by New England Chartering and Trading Company LLC on behalf of SSP Pty Limited from Alpha, Rholand to Gamma, Upsilon

Second Clean Bill of Lading

Bill of Lading No. BL000002 for the voyage undertaken by New England Chartering and Trading Company LLC on behalf of Theta Pty Limited from Gamma, Upsilon to Zeta, Qoppa

Theta

Theta Pty Limited

Beta Beta

Beta Beta Pty Limited

MLAANZ Rules

Maritime Law Association of Australia and New Zealand Rules

The Hague Visby Rules

The modified Hague Visby Rules as contained in Schedule 1 of the Carriage of Goods by Sea Act 1991 (Upsilon)

International Arbitration Act

International Arbitration Act 1974 (Upsilon)

The Model Law

UNCITRAL Model Law

IV

TABLE OF AUTHORITIES

Cases Actis Co Ltd v Sanko Steamship Co Ltd (The “Aqua Charm”) [1982] 1 Lloyd's Rep 7 Aktieselskabet Reidar v Arcos Ltd (1927) 1 KB 352. Ashville Investments v Elmer Ltd [1989] 1 QB 488 Bellgrove v Eldridge (1954) 90 CLR 61 Bonython v Commonwealth (1948) 75 CLR 589 Chatenay v Brazillian Submarine Telegraph Co Ltd (1891) 1 QB 79 Ciampa v British India Steam Navigation Co Ltd [1915] 2 KB 774 Commandate Marine Corp v Pan Australia Shipping Pty Ltd [2006] FCFCA 192. Commonwealth v Amann Pty Ltd (1991) 174 CLR 64 Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500 Empresa Cubana Importada de Alimentos `Alimport' v Iasmos Shipping Co SA (The “Good Friend”) [1984] 2 Lloyd's Rep 586 ERG Raffinerie Mediterranee SpA v Chevron USA Inc (The Luxmar) [2006] 2 Lloyd’s Rep 543. Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160 Great China Metal Industries Co Ltd v Malaysian International Shipping Corp Berhad (1999) 196 CLR 161 Hadley v Baxendale (1854) 156 ER 145

V

Incitec v Alkimos [2004] FCA 698 Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 at 912 Ismail v Polish Ocean Lines (The “Ciechocinek”) [1976] QB 893 Jones v Dunkel (1959) 101 CLR 298 L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 March v E and EH Stramare Pty Ltd and Another (1991) 171 CLR 506 Mediterranean Salvage and Towage Ltd v Seamar Trading and Commerce Inc (The “Reborn”) [2008] EWHC 1875 (Comm), 42. Mount Albert Borough Council v Australasian Temperance & General Mutual Life Assurance Society Ltd (1938) AC 224 Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 Peninsular & Oriental Steam Navigation Co v Shand [1865] Eng R 616 Robinson v Harman (1848) 154 ER 363 Schellenberg v Tunnel Holdings Pty Ltd (2000) 74 ALJR 743 Smith v Dart & Son (1884) 14 QBD 105. Sweet Dreams Unlimited Inc v Dial-A-Mattress (1993) 1 F.3d 639 The Bonde [1991] 1 Lloyd’s Rep 136. Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 Wilson v Anderson (2002) 213 CLR 401 Statutes VI

International Arbitration Act 1974 (Upsilon) including Schedule 1 (UNCITRAL Model Law) Carriage of Goods by Sea Act 1991 (Upsilon) including Schedule 1A (Hague Visby Rules as amended) Textbooks Ambrose C and Maxwell K London Maritime Arbitration (2nd edition, 2002), Davies M and Dickey A, Shipping Law (3rd edition, 2004) Girvin, S, Carriage of Goods by Sea, (1st edition, 2007) Redfern A Hunter M Law and Practice of International Commercial Arbitration (5th edition, 2003) Tetley, W, Marine Cargo Claims, (3rd edition, 1988) Articles Gerard McMeel, 'The Rise of Commercial Construction in Contract Law' [1998] LMCLQ 382. Other Maritime Law Association of Australia and New Zealand Rules

VII

SUMMARY OF FACTS

1. The Claimant is a company incorporated under the laws of Omicron and carries on the business of a ship owner. The Respondent is a company incorporated under the laws of Upsilon and is engaged in the manufacture of Single Super Phosphate. 2. On 19 July 2008, the Claimant entered into a Charter Party for the carriage of the Cargo on the Vessel between the ports of Alpha, Rholand and Gamma, Upsilon. 3. The Cargo was loaded onto the Vessel between the dates 27 and 29 September 2008. 4. The holds were inspected by an independent surveyor after loading of the Cargo had been completed. 5. The Master, acting in his capacity as an agent for the Claimant, intended to clause the Bill of Lading in respect of the Cargo to indicate that it contained detritus. 6. On 6 October 2008 the Respondent wrote to the Claimant noting that its surveyors had inspected the ship and had found in hold 1 some fragments of bitumen and one piece of timber. Notwithstanding this, the Respondent in its letter of 6 October 2008 warranted that the Cargo met the product specifications in relation to moisture absence of foreign objects (of the type discovered), neither of which would affect the handling, storage or use of the Cargo. The warranty purported to be subject to the laws of Omicron, and stipulated that each party irrevocably and unconditionally submitted to the exclusive jurisdiction of the courts of Omicron. 7. On the basis of this warranty, the Claimant issued the clean Bill of Lading for the Cargo. The clean Bill of Lading noted that the Cargo shipped at Gamma, Upsilon, the Port of Loading, was in “apparent good order and condition”. The Claimant relied on the Respondent’s letter as he was

1

entitled to do in a case where the Respondent was in a better position to judge the affect of detritus on the Cargo. 8. On 16 October 2008 the Vessel arrived in Upsilon and was inspected by UQIS. 9. On 19 October 2008 the UQIS ordered the Vessel into quarantine on the grounds that a piece of dunnage found in hold number 1 contained residue of Omicron Barley which was a prohibited import into Upsilon. Pratique was refused until UQIS could be satisfied that steps had been taken to remove all residue of Omicron barley in the Cargo. 10. On 19 October 2009 the Claimant wrote to the Respondent contending that the dunnage containing residue of Omicron barley was the subject of the Respondent’s letter of 6 October 2008. In this letter of 19 October 2009, the Claimant put the Respondent on notice that the clean Bill of Lading was issued in reliance on the Respondent’s letter of 6 October 2008. The Claimant indicated that it would be seeking indemnity from the Respondent in respect of any claim made against the Vessel by the indorsee of the clean Bill of Lading. 11. On 20 October 2008 the Claimant received a letter from the Respondent. The Respondent contended that the letter of 6 October 2008 did not record that the piece of timber was contaminated with residue of Omicron Barley and the foreign object in question (the piece of timber) was not the cause of the Cargo being ordered into quarantine. Accordingly, the Respondent rejected liability to indemnify the Claimant in respect of any claim made against the Vessel by the indorsee of the clean Bill of Lading. 12. Further, the Respondent’s letter of 20 October 2008 contending that the letter issued by the Respondent on 6 October 2008 did not request or direct the Master to issue the clean Bill of Lading and stipulated that in the Respondent’s view the Master should have taken reasonable steps to inform himself as to whether it was appropriate for a clean Bill of Lading to be issued. The Claimant denies this contention as the only commercial explaination as to why a clean Bill

2

of Lading would have been issued is based upon the Claimant’s reliance upon the Letter of 6 October 2008. 13. On 20 October 2008 the Claimant received a letter from Theta, the indorsee of the clean Bill of Lading. In this letter of 20 October 2008, Theta noted that the Vessel had been ordered into quarantine. On this basis Theta communicated that notwithstanding the existence of the clean Bill of Lading there was clear evidence of contamination in the Cargo and/or the Vessel. Theta further stated that it had investigated possible options of decontaminating the Cargo and had submitted a number of proposals to UQIS on these findings; all of which had been rejected. Theta stated that it had been ordered by UQIS to re-export the Cargo and accordingly, Theta had negotiated a sale to the Omega Phosphorous Company (of which Beta Beta is a wholly-owned subsidiary) in Zeta, Qoppa on a CFR basis. In this letter of 20 October 2008, Theta claimed from the Claimant damages in the amount of US$4,999,889 for the loss on re-sale of the Cargo plus any transport costs associated with re-export of the Cargo from Gamma, Upsilon to Zeta, Qoppa. 14. On 21 October 2008 the Claimant wrote to the Respondent enclosing the 20 October 2008 letter from Theta to the Claimant. In this letter of 21 October 2008, the Claimant informed the Respondent that having thoroughly considered and being satisfied that the sum of $4,999,889 claimed by Theta was reasonable, the Claimant had paid that amount in damages. The letter demanded that the Claimant be indemnified by the Respondent in the amount of US$4,999,889. The letter required the Respondent to enter into an Addendum to the Charter Party to facilitate the transport of the Cargo from Gamma, Upsilon to Zeta, Qoppa. The letter claimed that costs incurred by the Claimant for the voyage from Gamma, Upsilon to Zeta, Qoppa were to be accounted for by the Respondent pursuant to the terms of the Respondent’s letter of 6 October 2008. 15. On 22 October 2008, the Claimant received a letter from the Respondent which denied liability to indemnify the Claimant against the claim made by the Theta. However, the Respondent asserted 3

in this letter that it had in fact signed the Addendum to assist the resolution of the dispute so the Cargo could be shipped but had done so on a ‘without prejudice’ basis. The Respondent reserved all rights to claim any amount of freight it had paid in respect of the Claimant’s voyage from Gamma, Upsilon to Zeta, Qoppa on the basis that the need for this further voyage was necessitated by the Claimant’s breach of the Charter Party. 16. The Vessel arrived in Zeta, Qoppa on 5 November 2008 and customs clearance was granted on 6 November 2008. However, on 8 November 2008 the Government of Qoppa imposed an embargo on the unloading of the Vessel. 17. On 8 November 2008 the Claimant wrote to the Respondent informing them of the embargo imposed on the unloading of the Cargo, and that it was unknown how long the embargo would last. The Claimant informed the Respondent that as the Respondent was the voyage charterer under Addendum No. 1 to the Charter Party, the Respondent was under an obligation to nominate a safe port at which the Vessel could discharge the Cargo in a timely manner. The Claimant sought lawful orders from the Respondent with which the Vessel could comply so as to have the Cargo on board discharged without further delay. 18. On 10 November 2008 the Claimant received a letter from the Respondent. In this letter, the Respondent claimed that as it was no longer the owner of the Cargo (which had, by this time, been on-sold by Theta the indorsee of the clean Bill of Lading to Beta Beta), it was not in a position to give orders in the stead of the rightful Cargo owners. The Respondent directed the Claimant to seek further instructions from Beta Beta and reserved all rights in respect of the alleged breach of the Charter Party. 19. On 8 April 2009 the Claimant wrote to the Respondent, and informed them that demurrage had been accruing pursuant to the Charter Party. The Claimant informed the Respondent that demurrage was no longer an adequate remedy for the losses being suffered, and now sought

4

damages for detention, calculated at market rates, rather than the demurrage rate specified in Clause 7 and Box 20 of the Charter Party. 20. On 1 September 2008 the Omicron Daily News reported that despite a recent spike in hire prices for large Cargo vessels which reached U$50,000 a day, leading shipping experts had predicted that the hire rate for a Handymax size vessel could be as low as U$2000 a day by the New Year. 21. The embargo was eventually lifted on 29 October 2009, the Cargo was discharged from the Vessel by 5 November 2009 and upon completion of the discharge of the Cargo, the Vessel sailed from Zeta, Qoppa. 22. In a letter to the Respondent dated 30 November 2009 the Claimant noted that there had been no response by the Respondent to the Claimant’s letter of 8 April 2009, or payment of the freight costs for the voyage from Gamma, Upsilon to Zeta, Qoppa. The Claimant noted that in such circumstances there was clearly a dispute and foreshadowed the referral of this dispute for resolution to arbitration, pursuant to Clause 19 (and Box 25) of the Charter Party. 23. Further, in the letter of 30 November 2009 the Claimant informed the Respondent that the Claimant had received a claim from Beta Beta, the eventual purchaser of the Cargo. The claim by Beta Beta arose out of damage sustained by its production system as a result of fragments of bitumen in the Cargo. In this letter of 30 November 2009, the Claimant noted that the Respondent’s letter of 6 October 2008 included a warranty that the discovered fragments of bitumen would not affect the handling, storage, or use of the Cargo. Relying on this warranty in relation to the fragments of bitumen, the Claimant contends that the Respondent is liable to indemnify the Claimant against any claim made by Beta Beta against the Vessel. 24. On 4 December 2009, the Claimant received a letter from the Respondent which gave notice as to the appointment of an Arbitrator. In this letter of 4 December 2009, the Respondent purported

5

to reserve all rights as to the Arbitral Panel’s competency and jurisdiction to hear the dispute as framed in the Claimant’s course of correspondence. 25. As to the claim by Beta Beta against the Claimant, the Respondent advised the Claimant that it had undertaken further investigations as to how the bitumen fragments found their way into the Cargo and by expert evidence had discovered that on the loading of the Cargo, the Vessel’s cranes had over-extended and ‘grabbed’ at the bitumen dock. On this basis, as well as for the reasons outlined above, the Respondent denied any liability to indemnify the Claimant against the claim by Beta Beta in respect of the bitumen fragments. The Claimant contends that the Respondent is liable for this damage.

ARBITRATION ARGUMENTS PROCEDURAL LAW

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

A.

THE ARBITRATION IS TO BE CONDUCTED ACCORDING TO THE RULES OF THE MARITIME LAW ASSOCIATION OF AUSTRALIA AND NEW ZEALAND.

1. Clause 19(d) of the Charter Party states ‘Any dispute arising out of or in connection with this contract including any question regarding it [sic] existence, validity, or termination, shall be referred to arbitration in Gamma by a Tribunal of 3 arbitrators in accordance with the Arbitration Rules of th [sic] Maritime Law Association of Australia and New Zealand’.1

1

Facts p 9.

6

2. The use of arbitration to resolve commercial disputes must be obtained from “the existence of an agreement between the parties” 2 and is dependent upon the parties consent.3

3. By virtue of this clause, the Claimant and Respondent, on an ordinary contextual reading of its terms,4 have consented to matters arising out of or in connection with the Charter Party being resolved by arbitral procedure.

4. The procedural rules of the arbitration are those of the MLAANZ Rules.

B.

GAMMA IS THE SEAT OF THE ARBITRATION

5. Clause 19(d) of the Charter Party specifies Gamma, Upsilon as the location of the Arbitration. From the Arbitration location, one can infer that this location is to be the arbitral ‘seat’. Subject to the MLAANZ Rules, once a seat is established, the procedural law of the seat applies.5

(I)

THE INTERNATIONAL ARBITRATION ACT 1974 (UPSILON) IS THE LEX ARBITRI OF THE DISPUTE.

6. In Upsilon the International Arbitration Act applies as the Arbitration’s procedural law. The parties have not expressly sought to oust the Model Law.6 In the absence of express intention, the Model Law has the force of law for the purposes of this dispute.7

nd

2

Ambrose C and Maxwell K London Maritime Arbitration 2 ed. Sweet & Maxwell 2002, p. 25.

3

Redfern A Hunter M Law and Practice of International Commercial Arbitration 3 ed. Sweet & Maxwell London 2003, at [1-06].

4

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

5

Maritime Law Association of Australia and New Zealand, Rule 15, Redfern and Hunter above n 3, [3.39].

6

International Arbitration Act 1974 (Upsilon) s 21.

7

International Arbitration Act 1974 (Upsilon) s 16; UNCITRAL Model Law Art 1.

rd

7

SUBSTANTIVE LAW II.

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

A.

THE TRIBUNAL IS TO DETERMINE THE SUBSTANTIVE LAW OF THE AGREEMENT PURSUANT TO THE CONFLICT OF LAWS RULES IT CONSIDERS APPLICABLE.

7. The Charter Party does not provide a substantive law pursuant to which disputes are to be determined. Where the parties have not designated a substantive law to govern the Charter Party, the Tribunal shall apply the substantive law as determined by the conflict of laws rules which it considers applicable.8 In making such a determination the Tribunal is to consider the terms of the Charter Party and take account of all trade usages applicable to the transaction.9

B.

THE LAW OF GAMMA, UPSILON IS THE PROPER LAW OF THE CHARTER PARTY.

8. A contract’s proper law is to be determined by reference to the law of a place with which it has ‘the most real connection’.10 The place at which the Charter Party has its “most real connection” can be determined by reference to where the Charter Party is made11 or where its obligations are performed.12 The classification is dependent on the Claimant and Respondent’s intention at the time of making the agreement.13

8

UNCITRAL Model Law Art 28(2).

9

UNCITRAL Model Law Art 28(4).

10

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

11

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

12

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

13

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

8

9. It is submitted that the applicable law is the law of Gamma, Upsilon as the Charter Party was agreed in Gamma (the “lex locus contractus”)14 and the agreement is to be substantially performed in Gamma. Additionally, the failure to select substantive law gives deference to the arbitral seat (“qui indiscem forum elegit jus”).15

JURISDICTION OF THE ARBITRAL TRIBUNAL III.

THE TRIBUNAL HAS JURISDICTION TO DETERMINE THE ENTIRETY OF THE CLAIM AS DETAILED IN CLAIMANT’S POINTS OF CLAIM.

A.

CLAUSE 19(d) OF THE CHARTER PARTY GIVES THE TRIBUNAL JURISDICTION TO HEAR MATTERS ‘ARISING OUT OF OR IN CONNECTION WITH’ THE CHARTER PARTY.

10. The Arbitration Clause is a contractual clause. The clause must be construed in accordance with its natural and ordinary meaning so as to best give effect to the intention of the parties.16

11. The Arbitration Clause provides for arbitration of disputes “arising out of or in connection with the Charter Party.”

12. The Letter of 6 October 2008 arises out of or in connection with the Charter Party, and accordingly the Tribunal has jurisdiction to determine any dispute arising out of this document, as outlined in the Claimant’s points of claim.

14

Facts p 1.

15

Ibid.

16

Pacific Carriers above n 4, Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500, 510.

9

B.

THE TRIBUNAL HAS JURISDICTION TO DETERMINE DISPUTES ARISING OUT OF THE SUBSTANCE OF THE LETTER OF 6 OCTOBER 2008.

(I)

THE RESPONDENT’S PURPORTED VARIATION OF CLAUSE 19(D) DOES NOT REMOVE DISPUTES CONCERNING THE LETTER OF 6 OCTOBER 2008 FROM THE TRIBUNAL’S JURISDICTION.

13. The Respondent has purported to vary Clause 19(d) by stipulating the letter of 6 October 2008 will be subject to the jurisdiction of the courts of Omicron.17

14. The words ‘arising out of or in connection with’ are of wide import such as to extend to determination of disputes connected to the letter of 6 October 2008. 18As such, clause 19(d) is of sufficient breadth to grant the Tribunal jurisdiction to determine the effect of the final paragraph of the letter of 6 October 2008.

15. An arbitral jurisdiction is prefaced on the consent and agreement of the parties to arbitration, and the parties should not be held to have agreed to bifurcate disputes between arbitration and court jurisdiction in circumstances where the parties have not evidenced a clear intention to do so.19An intention to allow an arbitration clause to apply partially to a dispute should not be lightly inferred, and needs to be expressly provided for and consented to by the parties.20

16. The Respondent has asserted the letter of 6 October 2008, on its true construction, must be excluded from the Tribunal’s jurisdiction by virtue of its terms: ‘Each party irrevocably and

17

Facts p 11.

18

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

19

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

20

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

10

unconditionally submits to the exclusive jurisdiction of the courts of Omicron.’21 The Tribunal must read down the Respondent’s purported variation of Clause 19(d) on the basis its terms are not sufficiently clear so as to expressly exclude those disputes concerning the letter of 6 October 2008 being submitted to arbitration pursuant to Clause 19(d) of the Charter Party.

17. The facts point to the Claimant accepting the Respondent’s indemnity and/or warranty contained in the letter of 6 October 2008, however, to the extent that this letter purports to remove the Claimant’s rights to refer disputes to arbitration, such a purported excise of jurisdiction must be considered too uncertain.

18. The words “exclusive jurisdiction” are not sufficiently clear to excise the letter from the Tribunal’s jurisdiction. The uncertainty of the ambit of the terms clearly amount to ambiguity as there are two competing constructions as follows: (1) this dispute must be bifurcated such that part is heard is in arbitration and part is heard in the Omicron Courts; and (2) that the reference to “exclusive jurisdiction” is tantamount to a supervisory or administrative jurisdiction, such that in the case of irreconcilable dispute or fault in arbitration pertaining to that document and its terms, those disputes are to be finally arbitrated by the Omicron Courts. As the terms of Respondent’s letter of 6 October 2008 relating to jurisdiction are ambiguous, the jurisdiction clause must be construed contra proferentem.22

19. Accordingly, the jurisdiction clause in the letter of 6 October 2008 must be construed against the Respondent such that the Tribunal has jurisdiction to determine matters “arising out of or in connection” to this letter , and by extension, the Tribunal must have jurisdiction to determine the merits of claims prefaced on it.

21

Facts p 11.

22

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

11

(II)

THE LETTER OF 6 OCTOBER 2008 IS TO BE INTERPRETED ACCORDING TO THE LAW OF UPSILON

20. The letter of 6 October 2008 purports to be governed by the laws of Omicron,23 However the operation of this jurisdiction clause is ambiguous, as pleaded at [x]-[x]. Further, the law of Upsilon should be applied by the Tribunal when construing and determining the effect of the letter and any dispute arising out of same by reason of substantive similarity between Upsilon and Omicron law.

21. If the letter is to be determined according to the law of Omicron, then it is submitted that the effect of the law of Omricon is identical in its effect to the the law of Upsilon (which governs the Charter Party) to the extent that the interpretation and effect of the letter is concerned.24 As such, the application of either law will result in a substantially like result.

22. While the Claimant is bound by the choice of law clause, by reason of similarity between Omicron and Upsilon law of contractual interpretation the application of either law is of no substantial consequence. As such, it is submitted Upsilon law will apply to the entire Arbitral dispute.

23

Facts p 10.

24

Incitec v Alkimos [2004] FCA 698; Commandate Marine Corp v Pan Australia Shipping Pty Ltd [2006] FCFCA 192.

12

CLAIM BY THETA AND LIABILITY TO BETA BETA IV.

THE RESPONDENT IS LIABLE TO REIMBURSE THE CLAIMANT FOR THE SETTLED CARGO CLAIM OF THETA PTY LTD FOR THE VALUE OF $4,999,889.

A.

THE RESPONDENT’S LETTER OF 6 OCTOBER 2008, ISSUED TO PROCURE A CLEAN BILL OF LADING, CONTAINED A WARRANTY.

(i)

THE LETTER OF 6 OCTOBER 2008 CONTAINED A WARRANTY.

22. The Respondent in the letter of 6 October 2008 warranted that the “foreign objects, of the type discovered”25 would not “affect the handling, storage and use of the Cargo”26. Contrary to the Respondent’s warranty, the presence of “one piece of timber”27 did in fact affect the “handling, storage and use of the Cargo”.28

23. The warranty contained in the letter of 6 October 2008 is valid and enforceable as there is a genuine dispute between the Claimant and the Respondent concerning the condition of the Cargo. Further it cannot be contended by the Respondent, on the facts, that the Master in any way acted fraudulently in issuing the clean Bill of Lading in reliance on the letter of 6 October 2008.29

25

Facts p 11.

26

Ibid.

27

Ibid.

28

Ibid.

29

Brown,Jenkinson & Co Ltd v Percy Dalton (London) Ltd [1957] 2 QB 621 at 639 per Pearce LJ.

13

(ii)

THE RESPONDENT BREACHED THE WARRANTY, CONTAINED IN THE LETTER OF 6 OCTOBER 2008, CAUSING THETA’S LOSS.

24. The Claimant has suffered loss in the sum of $4,999,899. This amount was paid by the Claimant to settle the claim made by Theta.30The use of the Cargo was severely affected as the Cargo was unfit for use at its intended place of discharge. The damage to the Cargo was economic and is evidenced by its substantially diminished value upon re-sale to Beta Beta.31 25. Theta’s claim arose from the clean Bill of Lading issued by the Claimant which made no mention of any contamination or presence of foreign objects. The Claimant in this case agreed to issue a clean Bill of Lading in return for an indemnity and/or warranty from the Respondent to cover any loss the Claimant may incur in an action subsequently brought by the receiver of the Cargo. In any such action by a receiver of the Cargo, the Claimant would be (and was) estopped from denying that the goods were shipped in apparent good order and condition.32 26. Since the clean Bill of Lading was issued in exchange for the letter of 6 October 2008, had the warranty in the letter of 6 October 2008 not been given, a claused Bill of Lading would have been issued.33 If a claused Bill of Lading had been issued, the Claimant would have incurred no such liability to receivers of the Cargo. 27. Therefore, but for the breach of the warranty in the letter of 6 October 2008, the Claimant would not have suffered loss. Accordingly, the breach of the warranty in the letter of 6 October 2008 caused the Claimant to suffer loss.

30

Facts pp 18-20.

31

See eg, Facts pp 18 – 19.

32

Hunter Grain Pty Limited v Hyundai Merchant Marine Co Ltd (1993) 117 ALR 507.

33

Facts pp 15-16.

14

(iii)

CONTAMINATED TIMBER FALLS WITHIN THE SCOPE OF THE WARRANTY GIVEN BY THE RESPONDENT IN THE LETTER OF 6 OCTOBER 2008.

28. The letter of 6 October 2008 warrants that notwithstanding the discovery of “one piece of timber”, the “handling, storage or use of the Cargo” would remain unaffected.34 29. The piece of timber was discovered on the surface of the Cargo by the surveyor after loading was completed.35 It is reasonably inferable that at the time of the contract,36 both the Claimant and Respondent knew (or reasonable persons in their respective positions should have known) that the piece of timber was dunnage from a previous Cargo. This was affirmed by UQIS in its letter to the Claimant of 19 October 2008. 30. Upon discovery of the piece of timber on the surface of the Cargo, a reasonably competent surveyor would have accounted for the fact that Single Super Phosphate is a bulk Cargo (and does not require timber dunnage for its packing or otherwise). Even if the Cargo did require dunnage, the fact that the timber was found on the surface of the Cargo would reasonably have indicated to the surveyor that the timber was in the hold prior to the loading of the Single Super Phosphate (which is assumed to be clean in the absence of facts to the contrary). Therefore, the surveyor could have drawn only one conclusion in the circumstances; that the discovered timber was a remnant of a previous Cargo. 31. Further, if it was apparent to UQIS officers (who were in no better position than the surveyor) at the end of the voyage that the piece of timber was actually dunnage from a previous Cargo37, this should reasonably have been apparent to a competent surveyor at the beginning of the voyage. 32. Therefore, the Respondent in its letter of 6 October 2008 has actually warranted that dunnage from a previous Cargo would not “affect the handling, storage and use of the Cargo”38 of Single 34

Facts p 11.

35

Ibid.

36

Wilson v Anderson (2002) 213 CLR 401 at 418; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 461, [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179. 37

Facts p 14.

15

Super Phosphate. Accordingly, the timber dunnage (inclusive of its constituents and any residue/s contained thereon) falls within the scope of the warranty contained in the letter of 6 October 2008.

33. It is to be expected that packing material from a previous voyage/s may contain residue/s of the cargo/s of the previous voyage/s. Notwithstanding this fact the Respondent having given the warranty with full knowledge of the source of the piece of timber must be taken to have been warranting that the piece of timber (inclusive of its constituents and any residue/s contained thereon) would not affect the handling, storage or use of the Cargo. When the phrase “one piece of timber” is construed in accordance with its commonsense plain and ordinary meaning,39 it is clear that this phrase extends the indemnity and/or warranty to include damage arising from the piece of timber dunnage (inclusive of its constituents and any residue/s contained thereon).

V.

THE RESPONDENT IS LIABLE TO COMPENSATE THE CLAIMANT FOR LIABILITY ARISING FROM THE CLAIM BY BETA BETA IN RELATION TO THE DAMAGE TO BETA BETA’S PROCESSING FACILITIES.

A.

THE RESPONDENT’S WARRANTY OF 6 OCTOBER 2008 REMAINED OPERATIVE EVEN WHEN THE CARGO WAS ONSOLD BY THETA TO BETA BETA.

34. Beta Beta relied on the second clean Bill of Lading issued by the Claimant in respect of the voyage from Upsilon to Qoppa.40 Similarly, the second clean Bill of Lading was issued by the

38

Facts p 11.

39

Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500; Gerard McMeel, 'The Rise of Commercial Construction in Contract Law' [1998] LMCLQ 382. 40

Facts pp 29-30.

16

Claimant in reliance on the warranty contained in the letter of 6 October 2008.41 This warranty continued to operate in the Claimant’s favour in respect of claims by receivers of the Cargo.

B.

IN RELATION TO THE BITUMEN, THE RESPONDENT BREACHED THE WARRANTY CONTAINED IN THE LETTER OF 6 OCTOBER 2008.

35. The Respondent warranted in its letter of 6 October 2008 that the surveyor’s discovery of “some fragments of bitumen”42 would not “affect the handling, storage or use of the Cargo.43 Contrary to the Respondent’s warranty, the presence of the bitumen did affect the use and handling of the Cargo as the bitumen caused damage to Beta’s processing facilities.44

C.

THE CLAIMANT’S LIABILITY TO BETA BETA WAS CAUSED BY THE RESPONDENT’S BREACH OF WARRANTY.

36. Beta Beta purchased the distressed Cargo from Theta with notice of the presence of Omicron Barley, and with the knowledge of the economic damage that the Cargo had sustained.45 Accordingly, Article 3(4) Hague-Visby Rules prevent Beta Beta from claiming damages from the Claimant in respect of the contamination of timber dunnage (inclusive of its constituents and any residue/s contained thereon). However, having purchased on the basis of the second clean Bill of Lading for the Qoppa voyage, Beta Beta did not have notice of the letter of 6 October 2008 or of the presence of the fragments of bitumen in the Cargo.46 Therefore, Beta Beta Pty Ltd is able to claim and recover damages in respect of the Cargo’s bitumen contamination.

41

Facts pp 15-16.

42

Facts p 11.

43

Ibid.

44

Facts p 34.

45

Facts p 17.

46

Facts pp 29-30.

17

37. As stated above, the second clean Bill of Lading was issued by the Claimant in exchange for the letter of 6 October 2008. Had the warranty in the letter of 6 October 2008 not been given, the second clean Bill of Lading would not have been issued.47 If a claused Bill of Lading had been issued, Beta Beta would have had notice of the detritus in the Cargo. Accordingly, for the reasons stated above, the Respondent caused the loss to Beta Beta. 38. Therefore, but for the breach of the warranty in the letter of 6 October 2008, the Claimant would not have suffered loss. Accordingly, the breach of the warranty in the letter of 6 October 2008 caused the Claimant to suffer loss.

D.

THE CLAIM AGAINST THE CLAIMANT BY BETA BETA FALLS WITHIN THE SCOPE OF THE WARRANTY GIVEN BY THE RESPONDENT IN THE LETTER OF 6 OCTOBER 2008.

39. The fact that the claim has not been quantified does not prevent the Tribunal from determining the issue of liability and the making of an appropriate award. Arguments as to quantum are capable of being heard in a separate sitting as and when such information becomes available.

DEFENCE TO CROSS-CLAIM VI.

A.

THE RESPONDENT’S COUNTER-CLAIM MUST BE DISMISSED.

EVEN IF THE CLAIMANT BREACHED CLAUSE 20 OF THE CHARTER PARTY, THE RESPONDENT SUFFERED NO RECOVERABLE LOSS.

(i)

THE RESPONDENT CANNOT RECOVER UNDER THE CHARTER PARTY ANY LOSSES WHICH ARE NOT RECOVERABLE UNDER THE HAGUE VISBY RULES.

47

Facts pp 15-16.

18

40. The Respondent contends that the Claimant has breached Clause 20 of the Charter Party and is thereby obliged to indemnify the Respondent for all losses (including consequential losses) to the Cargo arising from a failure to clean the holds adequately pursuant to Clause 20. 48 The loss and damage to the Cargo was caused by a piece of timber contaminated with Omicron barley, and accordingly, it is submitted that the obligations and liabilities of the Claimant to the Respondent are those detailed in the Hague Visby Rules and the Bill of Lading.

(ii)

ANY ATTEMPT BY THE CLAIMANT TO INCREASE HIS RESPONSIBILITIES OR OBLIGATIONS IN EXCESS OF THOSE PRESCRIBED IN THE HAGUE VISBY RULES MUST FAIL.

41. As the loss and damage to the Cargo was caused by the piece of timber contaminated with Omicron barley, Clause 20 of the Charter Party, whilst purporting to increase the obligations of the Claimant in respect of the Cargo, is not contained in the terms of the clean Bill of Lading. The Hague Visby Rules require that any increase in the Claimant’s obligation must be embodied in a sea carriage document (which in this case refers to the clean Bill of Lading) which is to be issued to the Respondent, pursuant to requirements in Article 5. Therefore, whilst the Hague Visby Rules are operational in respect of the Cargo, Clause 20 has no application and damages cannot be claimed thereunder.

B.

THE RESPONDENT HAS NOT ESTABLISHED ANY BREACH OF ARTICLE 3 OF THE HAGUE VISBY RULES.

(i)

THE RESPONDENT HAS FAILED TO ESTABLISH ANY BREACH BY THE CLAIMANT OF ARTICLE 3(1) OF THE HAGUE VISBY RULES IN RESPECT OF THE TIMBER DUNNAGE IN THE HOLD.

48

Facts p 39 in Respondent’s cross claim at points 16 and 17.

19

42. Article 3(1) of the Hague Visby Rules provides that a carrier shall be bound at the beginning of the voyage to exercise due diligence to (a) make the ship seaworthy; and (c) make the holds…and all other parts of the ship which goods are carried, fit and safe for their reception, carriage and preservation. 43. In Great China Metal Industries Co Ltd,49 Gaudron, Gummow and Hayne JJ described the obligations imposed by paragraph (c) of Article 3(1) as being the “direct expression” of some of the “many and varied matters” relevant to the question of seaworthiness.50 44. Given the breadth of the definition of seaworthiness (which extends to the cargoworthiness of the ship) the obligations imposed in Article 3(1) merely spell out aspects of the Claimant’s general obligations with respect to seaworthiness before and at the beginning of the voyage.51

a)

THE RESPONDENT HAS NOT DISCHARGED THE ONUS OF ESTABLISHING UNSEAWORTHINESS.

45. The Respondent bears the onus of showing that the Claimant failed to exercise due care and diligence before and at the beginning of the voyage thereby making the vessel uncargoworthy and/or unseaworthy.52 46. Generally speaking, a vessel must be cargoworthy in order to be seaworthy.53 In The Good Friend,54 Straughton J stated that: “…the undertaking of seaworthiness at common law in my opinion includes, under the heading of what is sometimes called Cargoworthiness, an

49

Great China Metal Industries Co Ltd v Malaysian International Shipping Corp Berhad (1998) 196 CLR 161

50

Ibid at 197-202

51

Ibid

52

Commonwealth v Burns Philip & Co. (1946) 46 SR (NSW) 307, 312; Great China Metal Industries Co Ltd v Malaysian International Shipping Corp Berhad (1998) 196 CLR 161, 194. 53

Actis Co Ltd v Sanko Steamship Co Ltd (The “Aqua Charm”) [1982] 1 Lloyd's Rep 7.

54

Empresa Cubana Importada de Alimentos `Alimport' v Iasmos Shipping Co SA (The “Good Friend”) [1984] 2 Lloyd's Rep 586.

20

undertaking that the ship shall be reasonably fit to receive and carry the Cargo and deliver it at the specific destination.”55 47. In that case, the infestation of insects had physically damaged the soyabean in the holds and the Cargo could not be unloaded at the specified destination. 48. The Good Friend56 can be distinguished from the present case. It is submitted that in a case where the damage sustained to the Cargo was not physical (i.e. the barley did not harm the Cargo), but rather the damage caused to the Cargo was an economic damage arising from Upsilon quarantine restrictions, then the Vessel cannot be held to be uncargoworthy and/or unseaworthy. 49. Similarly, in Actis Co Ltd57 the English Court of Appeal held that a vessel that was carrying too much Cargo to pass through the Panama Canal was not uncargoworthy by virtue of being overloaded. The Court said that: “it may be that she had to lighten her load to pass through the Panama Canal, but that did not make her unfit.” The Court distinguished that case from Ciampa58 where a vessel with a contaminated hold had to be fumigated causing physical damage to the Cargo. Again, in circumstances where there was no physical damage to the Cargo, the Vessel should not be deemed uncargoworthy and/or unseaworthy. The damage suffered to the Cargo was economic damage. 50. Notwithstanding the above, as already stated the Respondent bears the onus of proving that the damage to the Cargo was caused by the Vessel’s uncargoworthiness and/or unseaworthiness. It is submitted that there is not sufficient evidence, on the facts of the case, for the Respondent to meet the onus of establishing a want of due diligence which gives rise to uncargoworthiness and/or unseaworthiness in breach of Article 3(1) of the Hague Visby Rules.

55 56 57

Ibid at 589. Ibid. Actis Co Ltd v Sanko Steamship Co Ltd (The “Aqua Charm”) [1982] 1 Lloyd's Rep 7.

58

Ciampa v British India Steam Navigation Co Ltd [1915] 2 KB 774; as discussed in Actis Co Ltd v Sanko Steamship Co Ltd (The “Aqua Charm”) [1982] 1 Lloyd's Rep 7 at 8-11.

21

51. The Claimant accepts that as a general rule the Respondent may be able to rely on inference in order establish the Vessel’s unseaworthiness was the cause of the loss. However, in this case it is submitted that the Respondent cannot rely on inference or the doctrine of res ipsa loquitur by asserting that the existence of one piece of timber in the hold, at the beginning of the voyage, is sufficient evidence to establish a want of due care and diligence or unseaworthiness on the part of the Claimant in breach of its obligations under Article 3(1) of the Hague Visby Rules.59 52. In this case, an assertion that a piece of timber in the Cargo is tantamount to a want of due care and diligence or unseaworthiness is not sustainable, in the absence of direct evidence in support. Such a contention amounts to mere conjecture or a guess concerning the conduct of the Claimant in having the Vessel’s hold’s cleaned. It is submitted that the evidence must give rise to a positive inference rather than allowing mere conjecture or a guess as to the facts. There must be sufficient evidence to enable the Tribunal to make a deduction, or a positive inference, that more likely than not the Claimant was at fault.60 It is submitted that no such evidence exists. 53. In Schellenberg,61 the High Court held that the maxim res ipsa loquitur had no application because the cause of the accident in which the plaintiff was injured was known. Similarly, the maxim res ipsa loquitur has no application in this case because the cause of the loss, namely the timber in the hold, is known. 54. Further, in Schellenberg, Gleeson CJ and McHugh J said: “In our opinion…the principle of res ipsa loquitur had no application once the learned trial judge found that the hose separated from the jamec coupling. The question then because whether the plaintiff had proved that the separation of the hose from the jamec coupling occurred in circumstances of negligence.”62 55. Accordingly, the question in this case must be whether the presence of one piece of timber in the hold is sufficient to establish that the Claimant was negligent and/or failed to exercise due care

59

Lindsay v Klein: The Tatjana [1911] AC 194; The Hellenic Dolphin [1974] 2 Lloyd’s Rep 336, 339 per Lloyd J.

60

Jones v Dunkel (1959) 101 CLR 298, pp 304-05 per Dixon J.

61

Schellenberg v Tunnel Holdings Pty Ltd (2000) 74 ALJR 743, 135.

62

Ibid.

22

and diligence. This, it is submitted, is a question of reasonableness as to whether the existence of this one piece of timber made the Vessel uncargoworthy and/or unseaworthy. It is submitted that no such evidence exists, and accordingly that the maxim res ipsa loquitur cannot apply. It is submitted that the Vessel must be seaworthy.

C.

THE CLAIMANT IS ABLE TO RELY ON THE IMMUNITIES IN ARTICLE 4 OF THE HAGUE VISBY RULES WHICH PROTECT IT FROM THE RESPONDENT’S CLAIM CONCERNING TIMBER DUNNAGE IN THE HOLD.

(i)

THE CLAIMANT RELIES ON THE EXEMPTION FROM LIABILITY UNDER ARTICLE 4(2) OF THE HAGUE VISBY RULES.

a)

THE CLAIMANT RELIES ON ARTICLE 4(2)(i)

56. This exception may apply in cases where the shippers conduct, which is relied upon by the owner, gives rise to damage to the Cargo. In such cases there ought to be no difficulty for the Claimant in relying on this defence.63 57. In this case the Respondent, by virtue of the Letter of 6 October 2008 gave the Claimant a warranty, constituting advice, as to the stowage and/or carriage of the goods and that the timber in the hold would not affect the “handling, storage or use” of the Cargo. The Claimant relied on that advice in issuing the bill of lading and but for the issue of a clean Bill of Lading the Claimant would not have been required to indemnify Beta Beta Pty Limited. 58. In Ismail v Polish Ocean Lines64 the charterer persuaded the Master that the ship could be loaded with a greater quantity of potatoes than the Master believed, and the Cargo arrived damaged for

63

See eg, Ismail v Polish Ocean Lines (The Ciechocinek)[1976] QB 893 (CA), 903 per Lord Denning MR.

23

that reason. The Majority of the Court of Appeal relied on an estoppel against the charterer in rejecting his claim, but Lord Denning MR also held that the carriers could rely on this exception. 59. For the reasons pleaded above in respect of the loss being caused by the Respondent’s letter of 6 October 2008, the Claimant relies on the Hague Visby exception of Article 4(2)(i).

FREIGHT CLAIM VII.

THE RESPONDENT IS LIABLE TO INDEMNIFY THE CLAIMANT IN RESPECT OF FREIGHT IN THE VALUE OF U$635,874.69 AND DAMAGES FOR DETENTION IN THE AMOUNT OF U$11,633,500

60. The Respondent has agreed to the terms of the Addendum.65 The Respondent is bound by the terms of the Addendum and, as such, must pay freight owing pursuant thereto.

A.

THE RESPONDENT HAS BREACHED ITS IMPLIED OBLIGATION TO NOMINATE A REACHABLE PORT, ENTITLING THE CLAIMANT TO DAMAGES FOR DETENTION.

61. In order to establish a claim in damages in addition or in lieu of demurrage the Claimant must establish anterior breach of contract upon which the damages claim must rest.66 The Claimant must demonstrate that the additional loss is different in character from loss of use and stems from a breach of an additional and/or independent obligation.67 It is submitted that the Respondent, in the circumstances, has breached an additional and/or independent obligation and is hence liable to pay to the Claimant damages for detention.

64 65

Ibid. Facts page 25.

66

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

67

The Bonde [1991] 1 Lloyd’s Rep 136.

24

62. The Respondent has signed the Addendum and is hence bound by its terms.68 The Addendum requires the Respondent to warrant that the Cargo is to be discharged at 1-2 safe anchorages in Zeta.69 Along-with this express obligation imposed on the Respondent by the Addendum, the Respondent is additionally taken to have impliedly warranted that the berth (or berths) nominated is/are possible for the Vessel to reach.70

63. Ability to reach in this context is inextricably linked with the ability to unload the Cargo. This is the case because Beta Beta, the final purchaser of the Cargo can only derive the benefit of its purchase once the Cargo is unloaded and is completely at Beta Beta’s disposal.71 At any interim point between the re-export of the Cargo from Gamma, Upsilon to Zeta, Qoppa the Cargo remains in transit.

64. It is submitted that the embargo imposed on the unloading of the Vessel by the Government of Qoppa72 hampered the ability to unload the Cargo. Therefore, Zeta, the port nominated by the Respondent is not a reachable port and this fact caused the detention of the vessel.

65. The Respondent has therefore breached an obligation additional and/or independent to the Charter Party or Addendum.

66. Accordingly, the Respondent must be liable to pay to the Claimant damages for detention, calculated at the market rate.

END

68

Facts p 25.

69

Facts p 21.

70

Mediterranean Salvage and Towage Ltd v Seamar Trading and Commerce Inc (The “Reborn”) [2008] EWHC 1875 (Comm), 42.

71

Smith v Dart & Son (1884) 14 QBD 105.

72

Facts p 27.

25