memorandum for the claimant - murdoch university · memorandum for the claimant on behalf of:...

FOURTEENTH ANNUAL INTERNATIONAL MARITIME LAW

ARBITRATION MOOT COMPETITION

2013

SRI LANKA LAW COLLEGE

SRI LANKA- TEAM 15

IN THE MATTER OF THE ARBITRATION HELD IN THE UNITED KINGDOM

MEMORANDUM FOR THE CLAIMANT

On behalf of: Against:

Aardvark Limited Twilight Trader

(Claimant) (Respondent)

Team

Kamal Mohamed Shehan

Thilini Delangalie Aluthnuwara

Wedage Oshada Rodrigo

[MEMORANDUM FOR THE CLAIMANT] TEAM NO 15

2

TABLE OF CONTENTS 1

List of Abbreviations ............................................................................................................... 3 2

Index of Authorities ................................................................................................................. 4 3

Summary of Arguments .......................................................................................................... 7 4

Summary of Facts .................................................................................................................... 8 5

Parties ............................................................................................................................. 8 6

Facts ............................................................................................................................... 8 7

Pleadings ................................................................................................................................. 11 8

Breach of Article iii, r. 2 of the HVR ......................................................................... 11 9

Respondent rely on exception (e), (f), (q) of Article IV 2 ............................... 11 10

Respondent in breach of Article III 2 of HVR ................................................ 12 11

Breach of the contract of carriage ................................................................................ 15 12

Claimant acted to take reasonable steps .......................................................... 15 13

They rely on Liberty Clause ........................................................................... 15 14

Respondent discharged the cargo to unlawful holder for letter of indemnity.............. 17 15

Aardvark repudiated the contract .................................................................... 17 16

Ship owner must discharge the goods ............................................................. 18 17

Respondent discharged the cargo .................................................................... 19 18

Cargo Must Be Discharged To The Lawful Holders ...................................... 20 19

Respondent is unanswerable and liable for tort of conversion .................................... 21 20

Elements of Tort of Conversion ...................................................................... 22 21

Aardvark is entitled to claim the goods at discharge ...................................... 22 22

Claimant in possession to sue against Respondent ......................................... 23 23

Respondent acts contrary to the Claimant‟s Orders ........................................ 24 24

Damages can be recovered from Respondent ................................................. 25 25

Prayer for Relief .................................................................................................................... 26 26

27


3

1

LIST OF ABBREVIATIONS 2

3

PFAD: Palm Fatty Acid Distillate 4

Aardvark: Aardvark Limited, the buyer 5

Beatles: Beatles Oils & Fats Limited, the seller and sub charterer 6

Twilight: Twilight Trader, the carrier 7

CIF: Cost Insurance Freight 8

Mt: Metric Ton 9

UK: The United Kingdom 10

FOSFA: Federation of Oils, Seeds and Fats Associations Limited 11

IMO: International Maritime Organization 12

COGSA: Carriage of Goods by Sea Act 13

GMQ: Good Merchantable Quality 14

USD: American US Dollars 15

HVR: Hague Visby Rules 16


4

1 INDEX OF AUTHORITIES 2

3

Case Law 4

5 Wing v London Gen, omnibus Co (1909) 248 at Page 652 6

7 North Western Utilities Ltd v London Guarantee and Accident Co Ltd 8

9 Donoghue v Stevenson 1932 All ER Rep 1, 1932 AC 562, House of Lords 10

11 Bolam v Friern Hospital Management Committee (1952)1 WLR 582 12

13 Arnhold Kurberg & Co v Blythe, Green, Jourdain & Co (1915) 2 K.B 379 at 388, 14

(1916) 1 K.B 495 CA 15 16 Procter & Gamble Philippine Manufacturing Corporation v. Kurt A. Becher G.m.b.H. 17

& Co. K.G.. 1988 2 Lloyd's Law Report 21 18 19

Kuwait Petroleum Corporation v I & D Oil Carriers Ltd (The Houda) [1994] 2 20 Lloyd‟s Rep 541 21

22 Sanders v Maclean, 2006 L.M.C.L.Q 539 23

24

Albacora SRL v Westcott and Laurance 25

26 Connolly Shaw Ltd v A/S Det Nordenfielske D/S 27

28

Hollins v Fowler 29 30

Sanders v Maclean 31 32 Glyn Mills Currie & Co v. East and West India Dock Co 33

34 The Sormovskiy 2068 [1994] 2 Lloyd‟s Rep 266 35

36

The Sagona 1 Lloyd‟s Rep 194 at 204 37

38 2013 1 Lloyd‟s Rep 117 39

40 2013 1 Lloyd‟s Rep 117 at Page 125 41

42

Sanders v Maclean, 2006 L.M.C.L.Q 539 at Page 542 43 44 The Future Express 1993 1 Lloyd‟s Rep 542, 2013 1 Lloyd‟s Rep 117 at Page 128 45

46 Sanders v Maclean, 2006 L.M.C.L.Q 539 Page 541 47

48

49 50


5

1 2

Books 3 4 Carver on Bills of Lading, 2

nd Edition 2005, page 610, 9-216 5

6 Carver on Bills of Lading, 2

nd Edition 2005, page 610, 9-216 7

8 Carver on Bills of Lading, 2011, page 713, 9-224 9

10

Carver on Bills of Lading, 2nd

Edition 2005, page 617, 9-230 11 12

Simon Baughen 2nd

Edition at Page 117 13 14 Carver on Bills of Lading, 2

nd Edition 2005, page 616, 9-228 15

16 Simon Baughen 2

nd Edition at Page 94 17

18 Simon Baughen 2

nd Edition at Page 194 19

20 The Santa Clara 1996 2 Lloyd‟s Rep 225 21


nd Edition 2005, page 01, 1-012 23

24

Prof William Tetley Q.C,2004ELT 287-344 25

26 Salmond on the Las of Torts 15

th Edition at Page 129 27

28

Salmond on The Law of Torts 15th

Edition at Page 129 29 30

Simon Baughen 2nd Edition at Page 7 31 32 Harry Street, The Law of Torts 33

34 An Epitome of 9

th Edition Salmon of tort, J Glyn Barrel 35

36

37

38

Statutes 39 40 Carriage of Goods By Sea Act 1992 Sec 5(2)b- 41

42

Sales of goods by Sea Act1992 Sec 4 43 44 45 46 47

48

49 50


6

1

Treaties 2 3 Hague Visby rules IV (4) 4

5

FOSFA 81-clause 6-Insurance 6 7 Hague Visby rules Article 3(3), 4 8

9 Hague Visby rules Article 3(8) 10


7

1

SUMMARY OF ARGUMENTS 2

3

1. It is contended that the Beatles (Corp.). were in breach of Article III, r. 2 of the 4

Hague-Visby Rules, by reason that the owners failed to properly and/or carefully load, 5

handle, stow, carry, keep, care for and discharge the goods carried in that they 6

allowed the vessel to be taken over by pirates and during the period the Vessel was 7

hijacked no cargo care measures were taken. 8

9

2. Accounting for the fact that the contractual discharge port for both cargos was 10

Liverpool; it is contended that they were also in breach of the contract by the 11

respondent delivering the cargo at Rotterdam and not Liverpool. 12

13

3. Further, the Respondent delivered the cargo for letter of indemnity other than as 14

against presentation of the Bills of Lading, in breach of the contract of carriage. In 15

breach of the contract of carriage the Respondent delivered the cargo to Beatles and 16

not to Claimant who were the lawful holders of the bills of lading and the persons 17

immediately entitled to possession thereof. 18

19

4. Claimant has an unanswerable claim against the Respondent for breach of their duty 20

to deliver the cargo against presentation of the Bills of Lading and at the correct 21

discharge port. They equally have an unanswerable claim in the tort of conversion. 22

Claimant claims damages for breach of the Respondent duties under the Bills of 23

Lading and/or in bailment for the tort of conversion. 24

25

26

27

28

29

30


8

1

SUMMARY OF FACTS 2

3

Parties 4

5

1. Aardvark (Claimant) is the buyers and receivers of 4000MT of PFAD carried on board of 6

the vessel Twilight Tanker (the vessel) under the bill of lading PG1 to PG4. Twilight 7

carriers are the disponent owners of the vessel (Respondent), who sub chartered the vessel 8

to Beatles by way of a charter party on 12th

September 2008. The Bills of Lading were all 9

signed by Agents for and on behalf of the Master. 10

11

Facts 12

13

2. All the Bills of Lading provided for the discharge of cargo in Liverpool, Merseyside. The 14

contracts of carriage contained in or evidenced by the Bills of Lading incorporated the 15

Hague-Visby Rules which were materially provided in Article III r. 2 that the carrier shall 16

“properly and carefully load, handle, stow, carry, keep, care for and discharge the goods 17

carried.” 18

19

3. The cargo carried under the Bills of Lading was sold to Claimant by Beatles on CIF 20

terms. The contractual delivery port for both cargoes was therefore Liverpool, UK. A 21

separate cargo of about 14,500Mt Crude Palm Oil and PFAD was on board sold by 22

Beatles to another buyer under different bills of lading. Respondent were the contractual 23

carriers under the bill of lading. 24

25

4. While it was proceeding to Liverpool the vessel was captured and seized by Somali 26

pirates in Somalia between 15th

November 2008 and 13th

February 2009. This fact, 27

however, is not pertinent to the cause of action in the present case. 28

29

5. On the 26th

January 2009 Claimant paid for the cargo and the bills of lading were 30

endorsed to the claimant. 31


9

1

6. After receiving the insurance policy on the 6th

of March 2009, dispute arises regarding the 2

Insurance contract which was given by Beatles incompliance with the contractual 3

requirements. 4

5

6.1. The policy stated in the terms is not agreed value policy of 105% of invoice value, 6

but rather the unvalued policy with the insured value limited to its market value on 7

departure plus cost of freight and insurance. 8

9

6.2. It is also subject to German Law and our contract requires an insurance policy 10

governed by English Law. 11

12

13

7. On this basis, the Claimant repudiated the contract and required immediate repayment of 14

contract price with interest. Beatles accept the repudiation but did not repay the contract 15

price. As payers of the purchase price and holders of the Bills of Lading, Claimant was 16

established as the clear legal owners of the cargo and accordingly had to dispose of the 17

cargo themselves. Given that the vessel was proceeding to Rotterdam to unload the other 18

cargo, Claimant considered selling the cargo to alternative buyers in Rotterdam. 19

20

8. As the lawful holder of bill of lading they tried to mitigate cost as best of their means, 21

despite the lackadaisical response of the Beatles. They requested the Bill of lading to 22

discharge the cargo without delay to the vessel. The claimants sent their bill of lading to 23

Johnson and Johnson and advised them to release it after paying the purchase price. 20th

24

March 2009 claimant acknowledges Twilight traders that the claimants are the lawful 25

holder of bill of lading and compelled to follow their instruction. They wrongly claim that 26

the claimants abandoned the cargo. 27

28

9. Notwithstanding the notice, they discharged the cargo for the letter of indemnity without 29

production of bill of lading. Further, they discharged the cargo in Rotterdam not in 30

Liverpool. 31

32

33

34


10

1

10. On the 23rd

of March Beatles arrested the cargo as security claim against Claimant despite 2

prohibited by FOSFA governing sales contract. Claimant tried to set aside the arrest of 3

cargo in Rotterdam courts but failed. Beatles then obtained permission from Dutch Court 4

for cargo to be sold. Court of Rotterdam rejected Claimant‟s appeal to set aside arrest of 5

cargo. 6

7

11. On the 23rd

of March 2009 Claimant arrested the vessel as security for their claims for 8

damages against the Respondent discharged the cargo without production of bill of 9

lading. The vessel was released against security provided by Beatles on behalf of 10

Respondent. Respondent appealed against the arrest of vessel the Dutch Court of Appeal 11

maintained the arrest. 12

13

12. For the reasons stated above Claimant, claim damages against the Owners for breach of 14

their duties under the Bills of Lading and/or in the tort of conversion. 15

16

17

18

19

20

21

22

23

24

25

26

27

28

29


11

1

PPLLEEAADDIINNGGSS 2

3

1) BREACH OF ARTICLE III, R. 2 OF THE HAGUE-VISBY RULES, BY 4

REASON THAT THE OWNERS FAILED TO PROPERLY AND/OR 5

CAREFULLY LOAD, HANDLE, STOW, CARRY, KEEP, CARE FOR AND 6

DISCHARGE THE GOODS 7

8

Respondents counter arguments rely on exception article IV (2) of Hague Visby rules. 9

They are in breach of Article 3 (2) of Hague Visby rules, which is subject to Article IV. 10

Article III (2) is subject to article IV (2) (e), (f), (q). 11

12

A) Respondent Rely On Exception (E), (F), (Q) Of Article Iv 2 Which Does Not 13

Include Piracy 14

15

Hague Visby rules Article IV (2) is not exempted the liability of piracy. Article IV (2) e 16

Act of War - This is wider than the English law “queen‟s enemies” exception. In that 17

words can include acts during a war which are done against the ship of a neutral, or such 18

acts where there is no formal state of hostilities but what would “in a common sense way” 19

be called a war or hostile act connected with a civil war lesser disorder could rank “riots 20

and civil war commotions”. On general principle, it should not apply if the carrier is 21

negligent in becoming involved.1 22

23

Article IV (2) on Act of public enemy - This may be regarded as originally a non-24

Monarchical version of the queen‟s enemy‟s exception. But the less personal wording 25

leads itself to application to pirates, whether operating on the high seas or not, and this can 26

be said of terrorist also. It is again inapplicable where the carrier is negligent in carrying 27

the risk. Non-compliance with relevant security codes, Such as the IMO International ship 28


nd Edition 2005, page 610, 9-216


12

and port facility security code or the procedures or requirements of the container security 1

initiate, could be evidence of this.2 2

3

In United Kingdom this would become “ King‟s Enemies” when the head of the state woes 4

or is a king; in the Hague and Hague Visby rules and elsewhere the less specific term 5

“public enemy‟s” is used. The exception probably refers to enemies of the sovereign of the 6

ship-owner. It is said that it does not apply to pirates.3 7

8

In this case, Respondent proceeds from Malaysia to Liverpool. Their route was to proceed 9

through Gulf of Aden close to Somalia. It is reasonably foreseen that there is a threat to 10

the vessel when they proceed through that area. But there is no any evidence they got any 11

reasonable steps to secure from it. There is International Maritime Organization and other 12

Institution to protect vessel from Piracy. Furthest Expert shows that there was a possibility 13

of introducing arsenic into the cargo during the captivity. However, Master did not take 14

any steps to well secure the containers to protect the cargo unauthorized access. 15

16

Respondent cannot rely on Exception (q) of same Article. Before proceeding to Liverpool, 17

they failed to arrange reasonable security measures. In addition, they shall reasonably 18

foresee such danger when they proceed through Gulf of Aden. Actual fault or privity must 19

be established in the carrier himself. For this, it is necessary to have regard to the directing 20

mind of the carrier himself. For this, it is necessary to have regard to the directing mind of 21

the carrier or of the part of the carrier‟s operation.4 22

23

B) They Are In Breach Of Article iii 2 Of Hague Visby Rules 24

25

Article III 2 Subject to the provisions of Article IV, the carrier shall properly and carefully 26

load, handle, stow, carry, keep, care for, and discharge the goods carried. 27



3 Carver on Bills of Lading, 2011, page 713, 9-224




13

The obligation extends beyond mere care in the carriage. The word „properly‟ was held by 1

House of Lords in Albacora SRL v Westcott and Laurance Line held “To impose an 2

additional duty to adopt a system „which is sound in light of all the knowledge which the 3

carrier has or ought to have about the nature of goods”5 4

This wording is of course different from that of “due diligence”, and is could be argued 5

that while “carefully” denotes no more than the absence of negligence, “properly” could 6

impose something nearer to strict liability, at least unless excepted peril can be proved.6 7

8

To prove negligence it is necessary to prove three elements, 9

Duty of care 10

Defendant was in breach his duty as he did not comply with the standard of 11

care of the reasonable person 12

Claimant suffered damages as a result of breach of duty. 13

14

There must be reasonable evidence of negligence, but where the thing is shown to be 15

under the management of defendant or his servant. In addition, is the accident is such as in 16

the ordinary course of things does not happen if those who have the management proper 17

care.7 Lord Wright said, “The degree of care which that duty involves must be 18

proportioned to the degree of risk involved if the duty of care should not be fulfilled.”8 19

20

Lord Atkin observed that “The concept of Negligence is based upon “ a sentiment of 21

moral wrongdoing (for) which the offender must pay “ Not every moral wrong can have a 22

practical effect in Law so it must be limited to taking” reasonable care to avoid acts or 23

omissions which can reasonably foresee would be likely to injure your neighbor”9 24

25

26

27

5 Simon Baughen 2

nd edition at page 117



7 Wing v London Gen, omnibus Co (1909) 248 at page 652

8 North Western Utilities Ltd v v London Guarantee and Accident Co Ltd

9 Donoghue v Stevenson 1932 All ER Rep 1, 1932 AC 562, House of Lords


14

1

McNair J held that "A man need not possess the highest expert skill; it is … sufficient if he 2

exercises the ordinary skill of an ordinary competent man exercising that particular art."10

3

Respondent reasonably know this route is highly threat of pirates. They do not need any 4

expert knowledge. Due to the negligent in the part of Respondent, Claimant suffered a 5

loss. 6

7

Respondent could avoid piracy if they got necessary security measures. Moreover, if 8

Cargo containers were protected from unauthorized access it would not be contaminated. 9

Respondent reasonably foresee their route lies through Gulf of Aden and close to Somalia 10

Sea. Any reasonable prudent person can foresee that there is a threat of piracy. Any 11

evidence does not show that they got any steps to protect the vessel from piracy. It is clear 12

respondent acted in negligently. 13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

10

Bolam v Friern Hospital Management Committee (1952)1 WLR 582


15

1

2) IN BREACH OF THE CONTRACT OF CARRIAGE THE OWNERS 2

DELIVERED THE CARGO AT ROTTERDAM AND NOT LIVERPOOL 3

4

Contractual port for the both cargo was Liverpool under the bill of lading. However, 5

Respondent sail the ship to Rotterdam without following the instruction of Claimant. 6

7

A) Claimant Acted To Take Reasonable Steps To Mitigate The Cost 8

9

Due to the negligent cargo care measures of Respondent, cargo was contaminated. However, 10

same time dispute arose regarding Insurance policy and claimant repudiated the contract, 11

which latter Beatles accepted.11

Until paying the purchase price, they were obliged to 12

mitigate the cost to the best of their means,12

until paying the purchase price Claimant 13

nominates various ports, which can obtain a best return.13

14

15

B) They Rely On Liberty Clause Of Charter Party 16

A deviation may also be justified by the terms of a specific clause in the bill of lading or 17

charter party giving the ship-owner a „liberty‟ to call at additional ports during the voyage. 18

However, court tender to construe this narrowly.14

19

20

“29. Liberty clause (a) in any situation whatsoever and wheresoever’s occurring … 21

which in the judgment of the Owner or Master is likely to give rise to risk of … delay 22

or disadvantage to … the Vessel or any part of her cargo, or 23

To make it unsafe, imprudent or unlawful for any reason to commence or proceed on 24

or continue the voyage or to enter or discharge the cargo at the port of discharge… 25

11

Moot Problem at page 25, 26 12

Moot Problem at page 45 13


Simon Baughen 2nd

edition at page 94


16

the Owner or Master may discharge … the cargo … The Owner may, when practicable, have 1

the Vessel call and discharge the cargo at another or substitute port declared or requested by 2

the Charterers.”15

3

4

Charter party permits to discharge the cargo on particulars. But delay and disadvantage 5

already suffered by the owners of the cargo due to the lack of cargo care measures of 6

Respondent. Above liberty clause permits of “likely rise to risk”. It is not permitted to 7

deviate which is already occurred. Vessel proceeding to Liverpool and discharging is not 8

unsafe, imprudent or unlawful. An even more extreme example of courts‟ willingness to cut 9

back the apparent width of the language used in the clause can be seen in Connolly Shaw Ltd 10

v A/S Det Nordenfielske D/S …. Although the clause covered the particular deviation, 11

Branson J held that he would have been prepared to disregard those parts of it which 12

conflicted with the main purpose.16

It is clear discharging the goods in Rotterdam is breach of 13

the contract and incompliance with the bill of lading. 14

15

Under the Hague Visby rules Article IV (4) read as follows; “Any deviation in saving or 16

attempting to save life or property at sea or any reasonable deviation shall not be deemed to 17

be an infringement or breach of these Rules or of the contract of carriage, and the carrier 18

shall not be liable for any loss or damage resulting there from.”17

19

20

21

22

23

24

25

26

27

15


Simon Baughen 2nd

edition at page 194 17

HVR IV (4)


17

1

3) RESPONDENT DISCHARGED THE CARGO UNLAWFUL HOLDER FOR 2

LETTER OF INDEMNITY WHICH WAS GIVEN BY BEATLES WITHOUT 3

THE PRESENTATION OF BILL OF LADING 4

5

Aardvark paid for the 4000Mt of cargo in or mid January the received the shipping 6

Documents. As the payer of cargo Aardvark is lawful holder of Bill of lading. Beatles were in 7

breach of the contract that they were not insured policy with compliance to contractual 8

requirements. 9

10

A) Aardvark Repudiated The Contract But Still Entitled To The Cargo 11

12

Under CIF contracts, it is sales of document rather than sales of goods. Scrutton J observed 13

that “I am strongly of the opinion that the key to many of the difficulties arising in CIF 14

contract is to keep firmly in mind the cardinal distinction that a CIF sale is not a sale of 15

goods, but a sale of documents relating to goods. It is not a contract that goods shall arrive, 16

but a contract to ship goods complying with the contract of sale…”18

17

18

Further he stated that “in my view, therefore the relevant question will generally be not „what 19

at the time of declaration or tender of documents is the condition of goods?‟ but „what, at the 20

time of tender of documents, was the condition of these document as to compliance with the 21

contract of sale?” In this case, Insurance policy sent by Beatles incompliance with sales 22

contract. Aardvark repudiated the contract due to seller are in breach of FOSFA 81 term 6 23

“policies and/or Letters of Insurance required under this contract shall be for not less than 24

5% over the invoice amount including freight.19

Letter dated 15th

March 2009 seller accepted 25

it by stating “this allows us to immediately place you in repudiation of this shipment and in 26

default, thereby bringing the contract to an end”20

Lord Steyn stated that “An act of 27

18

Arnhold Kurberg & Co v Blythe, Green, Jourdain & Co (1915) 2 K.B 379 at 388, (1916) 1 K.B 495 CA 19

FOSFA 81-clause 6-Insurance- policies and/or Letters of Insurance required under this contract shall be for

not less than 5% over the invoice amount including freight. 20

Email to Aardvark by Beatles 15th

March 2009 21:00


18

acceptance of repudiation requires no particular form: a communication does not have to be 1

couched in the language of acceptance.”21

2

3

Aardvark asked for the contract price which has been paid before. However, they have not 4

repudiated the shipment until paying the purchase price. There are two rights to reject, a right 5

to reject documents, and a right to reject goods, and the two things are quite distinct.22

6

7

B) Ship Owner Must Discharge The Goods Against The Presentation Of Bill Of Lading 8

9

Bill of Lading is not identified the consignee but merely marked as “to order” which can be 10

defined as bearer bill of lading. The holder of the bearer Bill of lading is the lawful holder of 11

the Bill of lading.23

The transfer of bearer bill of lading can be affected by delivery.24

12

13

Ship owner must discharge the goods against the presentation of Bill of lading.25

Bill of 14

lading is conclusive evidence against the carrier of the shipment of goods.26

Ship owner 15

cannot discharge the cargo without the presentation of bill of lading.27

16

17

Staughton J stated that “as is in my view the case, after the bill of lading has been issued 18

under which the ship-owner became liable, it was not lawful under the contract to require 19

him without his consent (which, of course, involves his being consulted) to deliver to anybody 20

else, or to instruct or direct the captain to deliver to anybody else.”28

21

22

23

21

The Santa Clara 1996 2 Lloyd’s Rep 225 22

Procter & Gamble Philippine Manufacturing Corporation v. Kurt A. Becher G.m.b.H. & Co. K.G.. 1988 2

Lloyd's Law Report 21 23

Carriage of Goods By Sea Act 1992 Sec 5(2)b- a person with possession of the bill as a result of the

completion, by delivery of the bill, of any endorsement of the bill or , in the case of a bearer bill, of any other

transfer of the bill; 24

Carver on Bills of Lading, 2nd

Edition 2005, page 01, 1-012 25

The Sormovskiy 2068 [1994] 2 Lloyd‟s Rep 266 26

Sales of goods by Sea Act1992 Sec 4 27

Hague Visby rules Art 3(3), 4 28

The Sagona 1 Lloyd‟s Rep 194 at 204


19

1

C) Respondent Discharged The Cargo For Letter Of Indemnity Which Is Not 2

Permitted 3

4

Charter party clause 24 states that “the Charterer shall indemnify the Owner, the master, and 5

the vessel from all consequences or liabilities that may arise from the Charterer or its agent 6

or the Master or Vessel’s agents signing bills of lading or other documents inconsistent with 7

this Charterer or from any irregularity in papers supplied by the Charter or its agents, or 8

from complying with any orders of the Charterer or its agent”. It permits to indemnify if 9

there was inconsistent with bill of lading or any other document which is given by charterer 10

or its agent or the master or Vessel‟s agent. But in this case inconsistent occurs regarding the 11

Insurance policy which is given by seller. So charter party also does not allow to indemnify. 12

13

In some exceptional cases they can discharge the goods against the letter of indemnity. Letter 14

of indemnity have been used on rare occasions when original bills of lading have been 15

presumably lost or stolen and duplicate originals are issued. 16

17

In this case Ship owner has discharged the cargo against the letter of indemnity. 20th

March 18

2009 Aardvark sent letters for ship-owner to make aware that Aardvark are the lawful owner 19

of cargo.29

Further, they have sent to Johnson and Johnson without delay to discharge the 20

cargo. Without any reasonable grounds they discharged the cargo for letter of indemnity. 21

22

Article. 3(8) “Any clause, covenant, or agreement in a contract of carriage relieving the 23

carrier or the ship from liability for loss or damage to, or in connection with, goods arising 24

from negligence, fault, or failure in the duties and obligations provided in this article or 25

lessening such liability otherwise than as provided in these Rules, shall be null and void and 26

of no effect. A benefit of insurance in favor of the carrier or similar clause shall be deemed to 27

be a clause relieving the carrier from liability”.30

28

29

29

Email Aardvark to Twilight carriers 20th

March 30

Hague Visby rules Article 3(8)


20

1

William Tetley commented that Article 3 (8) forbids any agreement whereby the carrier's 2

responsibilities under the Rules are reduced and, in consequence, a letter of indemnity would 3

be “null and void and of no effect”.31

4

5

D) Cargo Must Be Discharged To The Lawful Holders Of The Bill of Lading 6

7

Under the section, 5(2) b of COGSA 1992 holder of bearer bill of lading is the lawful holder 8

of bill of lading. He can claim the goods at the discharge port. Neill LJ stated, “The general 9

principle that once a bill of lading has been issued only a holder of the bill can demand 10

delivery of the goods at the port of discharge. It is because of the existence of this principle 11

that a bill of lading can be used as a document of title so that the transfer of the document 12

transfers also the right to demand the cargo from the ship at discharge.”32

13

14

Under the terms of section 3 of COGSA 1992, a lawful holder of a bill of lading becomes 15

subject to liabilities under the contract of carriage where it “(a) takes or demands delivery 16

from the carrier of any of the goods to which the document relates; (b) makes a claim under 17

the contract of carriage against the carrier in respect of any of the goods; or (c) is a person 18

who, at a time before those rights were vested in him, took or demanded delivery from the 19

carrier of any of those goods”. Respondent breach the contract of carriage and discharged the 20

cargo not to the lawful holder of the bill of lading and act in consistent to COGSA 1992. 21

22

23

24

25

26

27

31

Prof William Tetley Q.C,2004ELT 287-344,Letter of Indemnity at shipment and letter of guarantee at discharge 32 Kuwait Petroleum Corporation v I & D Oil Carriers Ltd (The Houda) [1994] 2 Lloyd‟s Rep 541


21

1

4) RESPONDENT IS UNANSWERABLE AND LIABLE FOR TORT OF 2

CONVERSION 3

4

Under the bill of lading consignee‟s named as “to order”. Therefore, it is a bearer bill of 5

lading who is the holder of bill of lading is the lawful holder of the bill of lading. However, 6

Respondent discharged the cargo not to the person who is lawful holder of the bill of lading 7

and entitled to immediate possession. As Claimant, we argue that respondent is liable for tort 8

of conversion. 9

10

A) Elements of Tort of Conversion 11

12

Conversion can take many forms. At its core, an act of conversion occurs when there is an 13

unauthorized taking of possession of a chattel with the “intention of exercising a permanent 14

or temporary dominion over it. Conversion has also been characterized as “conduct which has 15

the effect of denying the claimant of his superior possessory title in the goods.33

Every person 16

is guilty of a conversion who, without lawful justification, deprives a person of his goods by 17

delivering them to someone else, so as to change the possession.34

18

19

To succeed in a claim for conversion, a plaintiff must show that: 20

21

i. It has actual possession of, or the right to immediate possession of the chattel 22

converted; and that 23

ii. The right to sue for conversion existed at the time of the conversion; and that 24

iii. The defendant acted in a manner inconsistent with the plaintiff's superior possessory 25

title. 26

27

33

2013 1 Lloyd’s Rep 117 34

Salmond on the Las of Torts 15th

edition at pg 129


22

These elements have been set out in The Cherry [2003] 1 SLR 471 at Paragraph 58,35

1

2

B) Aardvark Is Entitled To Claim The Goods At Discharge 3

4

Claimant as payer of the bill of lading and for other document he is entitled for the goods. 5

The property need not to have passed to a buyer in conversion to have right to immediate 6

possession. Bill of lading is the symbolic possession of the bill of lading. 7

The leading case is Hollins v Fowler, a rogue obtained Fowler‟s cotton, an offered it for sale 8

to Hollins, a broker; Hollins sold and delivered it to Micholls & Co, who work it to yarn. 9

Hollin accounted for the proceeds to rogue, who disappeared. Hollins was liable in 10

conversion to Fowler, even though he had acted in good faith and obtained only a broker‟s 11

commission from Micholls & Co. so an auctioneer who sells and delivers stolen property or 12

property subject to a bill of sale is liable to the true owner or to the bill of sale holder, even 13

though ignorant of any such adverse title and even though he has already paid over the 14

proceeds to his own client.36

15

16

Further Bowen LJ in Sanders v Maclean observed that “A cargo at sea while in the hands of 17

the carrier is necessarily incapable of physical delivery. During this period of transit and 18

voyage the bills of lading, by the law merchant is universally recognized as its symbol and 19

the endorsement and the delivery of the bill of lading operates as a symbolic delivery of the 20

cargo. Property in the goods passes by such endorsement and delivery of the bill of lading 21

whenever it is the intention of the parties that the property should pass, just as under similar 22

circumstances the property should pass by an actual delivery of the goods…It is the key in 23

which, in the hands of the rightful owner, is intended to unlock the door of the warehouse, 24

floating or fixed, in the goods may chance to be."37

In other words, Holder of the bill of 25

lading has right to immediate possession at the discharge of cargo. 26

27

28

35

2013 1 Lloyd’s Rep 117 at p 125 36

Salmond on The Law of Torts 15th

edition at page 129 37

Sanders v Maclean, 2006 L.M.C.L.Q 539


23

1

C) Claimant In Possession To Sue Against Respondent 2

3

Constructive possession will entitle the holder of the bill of lading to claim the goods from 4

the carrier at port of discharge and to sue the carrier in conversion if the goods have been 5

delivered to someone else. Such a mis delivery claim can also be made in contract, provided, 6

as generally is the case, the bill of lading constitute a contract between its holder and the 7

carrier. Where a „bearer‟ bill is involved, constructive possession can be transferred by 8

simple physical delivery.38

9

10

It is necessarily implicit in the power to order the issue of bills of lading which make the 11

goods deliverable “to order” that the obligation is accepted to deliver to the holder upon 12

production of the bill of lading. It is an incident of the bill of lading contract that delivery is 13

to be affected only against the bill of lading.39

14

15

once it is held that the effect of a transfer of a bill of lading depends on the presumed 16

intention of the parties, then it makes sense only to recognize that the parties have used a bill 17

of lading to pass constructive possession of the goods to the transferee if it was intended that 18

following the transfer the transferee should have some property in or possessory right to the 19

goods. This seems to me the reason why there is no reported case where the law has provided 20

remedy to a party who can establish no more than that he is the lawful holder of a bill of 21

lading.40

22

23

Under the Carriage of Goods by Sea Act section 5(2) b the holder of the bearer bill of lading 24

is the lawful holder of the bill of lading. Respondent discharged the goods not to the lawful 25

holder of bill of lading. As payer for the cargo claimant is having right to immediate 26

possession of the cargo and request the cargo at the port of discharge. Beatles wrongly 27

claimed that claimant repudiate the shipment. But claimant repudiated only the contract and 28

still is entitled for goods. Until paying the contract price claimant are not ready to waive the 29 38

Simon Baughen 2n edition at p 7 39

Sanders v Maclean, 2006 L.M.C.L.Q 539 at page 542 40

The future express 1993 1 Lloyd’s Rep 542, 2013 1 Lloyd’s Rep 117 at Page 128


24

1

rights as cargo owner. Claimant refused to return the bill of lading if it is returned it transfers 2

the right to possession. 3

4

D) Respondent acts contrary to the Claimant’s Orders 5

6

Assuming title to sue, a conversion action can be brought, should the carrier refuse to deliver 7

or mis deliver the goods. Conversion is a common law action, tortuous in form, imposing 8

strict liability for a wrongful interference with the right to possession of a chattel. It consists 9

of any act of willful interference, without lawful justification, with any chattel in any manner 10

inconsistent with the right of another, whereby that other is deprived of the use and 11

possession of it.41

12

13

The interference must, however, be wrongful, and without lawful justification. This best 14

explains Glyn Mills Currie & Co v. East and West India Dock Co, where the carrier was 15

protected from suit, having delivered to someone not entitled, but on production of an 16

original bill of lading. The carrier is also entitled to refuse to deliver except on production of 17

an original bill of lading.42

Respondent is not protected from suit and he is not entitled to 18

refuse to discharge the cargo for claimant. 19

20

Claimant notified to respondent that “We are the lawful holders of the above bills of lading… 21

Please be advised that we have not authorized Beatles to do this and if you comply with their 22

instructions without any authority to do so you will be in breach of the contract of carriage 23

and responsible for all loss and damage we sustain.”43

24

25

41

Sanders v Maclean, 2006 L.M.C.L.Q 539 st p 541 42

Ibid 541 43

Moot Problem, Page 36


25

As payer for cargo and lawful holder of bill of lading, Respondent acted in a manner 1

inconsistent with Claimant superior title. It is well-established rule that a refusal to surrender 2

a chattel upon lawful and reasonable demand is evidence of a conversion.44

3

4

Therefore, it clear as the lawful holder of bill of lading they are in a position to immediate 5

possession of cargo and sue against the ship-owner. Further ship-owner acted contrary to the 6

orders of Claimant and discharge without the bill of lading. At any time, Claimant does not 7

transfer the title of the cargo. Respondent committed a tort of conversion. 8

9

E) Damages Can Be Recovered From Respondent 10

11

Conversely, it seems that a bailer, though already indemnified by his bailey, can still recover 12

the full value from a third person who has converted the property, but he must account to the 13

bailey for the money so recovered. In addition to recovering the value of the property or his 14

interest, the plaintiff can always recover any further damage due to conversion if; it is 15

pleaded, it is not too remote, the defendant knew of the circumstances giving rise to it.45

16

Therefore, Respondent is liable for the damages for the tort of conversion. 17

18

19

20

21

22

23

24

25

26

27

44

Harry Street, The Law of Torts 45

An Epitome of 9th

edition Salmon of tort, J Glyn Barrel


26

1

PRAYER FOR RELIEF 2

3

For the above reasons Aardvark, claim damages for breach of the Owners‟ duties under the 4

Bills of Lading and/or in bailment for the tort of conversion. 5

6

By reason of their failure to properly and/or carefully load, handle, stow, carry, keep, care for 7

and discharge the cargo the cargo went from being GMQ cargo to non-GMQ cargo which 8

was worthless, alternatively was worth considerably less than GMQ cargo. In the premises 9

Aardvark are entitled to the difference between the price they paid for the cargo, namely USD 10

747.50 per mt and its value at Liverpool on or about 30 March 2009 when it should have 11

been delivered, plus its value at Liverpool on or about 30 March 2009 because it was not 12

delivered i.e. USD 747.50 per mt x 4,000 mt = USD2,990,000 plus the Dutch court costs (as 13

set out below) namely USD 3,236,756.26 14

15

Further and/or alternatively Aardvark paid USD 522.50 per mt to buy goods in to sell to their 16

sub-buyers in Liverpool. Their sub-buyers have since confirmed that they would have 17

accepted the non-GMQ cargo following the piracy as they were not intended for the human 18

food chain. Aardvark further incurred legal fees in relation to the Dutch proceedings. 19

Accordingly, Aardvark claim USD 2,329,912.26 plus interest and costs as follows: 20

21

USD 522.50 per mt x 4,000 = USD 2,090,000 22

Court fees of USD 138,843.14; and 23

Legal fees in respect of the Court proceedings of USD 107,913.12. 24

25

AND the Claimants claim: 26

USD 3,236,756.26, alternatively USD 2,329,912.26, alternatively damages; and 27

Interest on a compound basis pursuant to s. 49 of the Arbitration Act 1996; and 28

Costs with compound interest on costs. 29

30