SIXTEENTH ANNUAL INTERNATIONAL MARITIME LAW ARBITRATION MOOT COMPETITION 2015

International Shipping Law School

East China University of Political Science and Law

IN THE MATTER OF AN ARBITRATION HELD IN MELBOURNE

————————— Claimant/Owners Respondent/Charterers Western Tankers Inc LTD Ptd

AND

Claimant/Charterers Respondent/Owners

LTD Ptd Western Tankers Inc

————————— MEMORANDUM FOR THE CHARTERERS

TEAM NO. 22

Yuwei Yang

Lin Fang

Chao Qian

Fuzhou Bai

Sen Wang

I

TABLE OF CONTENTS

TABLE OF AUTHORITIES: BOOKS ................................................................... III

TABLE OF AUTHORITIES: CASES AND ARBITRAL AWARDS ..................IV

TABLE OF AUTHORITIES: LEGISLATION ......................................................VI

LIST OF ABBREVIATIONS ................................................................................. VII

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

PART ONE: JURISDICTION.................................................................................... 3

A. This Tribunal has the power to rule on its own jurisdiction .................................. 3

B. The Charterparty contains a valid arbitration clause, which specifies London as

the seat ........................................................................................................................ 3

C. Every dispute arising out of this Charterparty is admissible in this arbitration .... 4

PART TWO: BREACH OF THE CHARTERPARTY ............................................ 6

A. The Charterers failed to provide the Owners with bunkers ................................... 6

B. The Owners were entitled to hires due .................................................................. 6

I. Payment of hire is the absolute obligation of the Charterers .............................. 6

II. The Master strictly followed orders and the off-hire clauses shall not be

applied .................................................................................................................... 8

III. The Owners are entitled to the sums claimed as damages for breach .............. 9

C: The Vessel involved was fit for service ................................................................ 9

I. The Vessel was fit for service ........................................................................... 10

II. The Master was competent and had followed anti-precautions ....................... 11

III. Alternatively, the causation between the Owners’ duty and the Charterers’

loss had been interrupted by the Charterers’ tort of fraud .................................... 12

D. The Charterers were in breach of the Contract .................................................... 14

I. The Charterers directed the Vessel to proceed to unsafe places in breach of the

Charterparty .......................................................................................................... 14

II. A quantity of Cargo was discharged without the authorization of the Owners

and in breach of the Charterparty ......................................................................... 15

E. The Owners was not liable for the loss of cargo. ................................................. 16

I. The Owners shall not be liable for the loss of cargo under the Charterparty. ... 16

II. The Owners shall not be liable for the loss of cargo under Hague-Visby

Rules. .................................................................................................................... 16

II

a. The Owners shall not be liable for the loss due to breach of Article III, Rule

2 of Hague-Visby Rules ....................................................................................... 16

(1) Hague-Visby Rules should be applied to the claim of loss of the cargo 17

(2) The Owners discharged their obligation of properly and carefully carry,

keep and care for the cargo under Article III, Rule 2 ........................................... 17

b. The Owners may rely on the excepted perils under Article IV, Rule 2. ...... 18

(1) Piracy is a kind of perils, dangers of the sea. .......................................... 19

(2) Piracy is an act of war ............................................................................. 19

(3) Piracy is any other cause arising without the actual fault and privity of

the Owners ................................................................................................................ 20

PART THREE: TORT OF FRAUD ...................................................................... 20

A. The representations were untrue. ......................................................................... 21

B. The Charterers knew that those representations were untrue .............................. 21

C. The Charterers had the intention that the representations be relied upon............ 22

D. The Owners actually relied on the representations made by the Charterers and

their agents. .............................................................................................................. 24

E. The Charterers’ fraud caused damage to the Owners .......................................... 24

PRAYER FOR RELEF ............................................................................................. 25

III

TABLE OF AUTHORITIES: BOOKS

Andrew W. Baker & Hatty Sumption, Time Charters (Lloyd’s Shipping Law Library,

7th ed, 2014) ............................................................................................... 10, 11, 18, 21

Clare Ambrose &Karen Maxwell, London Maritime Arbitration (3rd ed, 2009) .......... 4

G. E. Dal Pont, The law of Agency, (7th ed, 1996) ...................................................... 22

H. L. A. Hart& Tony Honore, Causation in the Law (Oxford University Press, 2nd

ed) ................................................................................................................................ 13

John F Wilson, Carriage of Goods by Sea (Pearson Education Limited, 7th ed,

2010) ........................................................................................................................... 7,9

Paul Todd, Maritime Fraud and Piracy (Informa Publishing, 2nd ed, 2010) ................ 19

Peter MacDonald Eggers, Deceit: The Lie of the Law (Informa Law, 2009) ........... 24

Simon Baughen, Shipping Law,(Routledge-Cavendish, 4th ed, 2009). ....................... 10

Sir Bernard Eder et al, Scrutton on Charterparties and Bills of Lading(Sweet

&Maxwell, 22nd ed, 2011) ............................................................................................. 3

IV

TABLE OF AUTHORITIES: CASES AND ARBITRAL AWARDS

A.

Albacora v Westcott and Laurance Line [1966] 2 Lloyd’s Rep 53 ........................... 17

Atlantic Consolidated Foods Ltd. v. “(The Doroty”), 1978 CarswellNat 78 .............. 18

Atlasnavios Navegacao Lda (formerly Bnavios Navegacao Lda) v Navigators

Insurance Co Ltd 2014 WL 6862527 .......................................................................... 20

C.

Chender v. Lewaskewicz, 2007 CarswellNS 497, 16. .................................................. 22

CV Sheepvartondereneming Ankergracht v. Stemcor (Australasia) Ptd Ltd [2007]

FCAFC 77. ................................................................................................................... 17

D.

Davy v. Garrett (1878), 7 Chancery Division 473....................................................... 20

F.

Falconbridge Nickel Mines Ltd. v. Chimo Shipping Ltd.1969 CarswellNat 362 ........ 18

French Marine v. Compagnie Napolitaind’Eclairage et de Chauffage par le Gaz [1921]

2 AC 494……………………………………………………………………………….8

G.

G.H. Renton & Co. v. Palmyra Trading Corp. of Panama [1957] A.C. 149 .............. 18

Great China Metal Industries Co Ltd v Malaysian International Shipping

Corporation Berhad 196 CLR 161 ...................................................................... 18, 19

H.

Hadley v Baxendale(1854)9 Ex 341,254 ..................................................................... 12

K.

Kuwait Rocks Co v AMN Bulkcarriers Inc (The Astra) [2013] EWHC 865 (Comm) 7,9

Kent Line International Ltd., Solym Carriers Ltd.2012 WL 2500470, [2012] EWHC

1888 (Comm) ............................................................................................................. 14

L.

Leyland Shipping v. Norwich Union(1918) AC 350 (HL) ........................................... 13

Lensen v Anglo-Soviet Shipping Co (1935) 52 LlLR 14 ................................................ 8

N.

Nourse v Elder, Dempster (1922) 13 LlLR 197; ........................................................... 9

P.

Pan Ocean Shipping v. Creditcorp [1994]1 WLR 161,168-9(HL) ................................ 8

Paterson et al. v. Livingstone, [1931] 1 D.L.R. 386 .................................................. 20

Potts v Union SS Co of New Zealand [1946] NZLR 276 ........................................ 4, 20

Pacific Basin IHX Ltd v Bulkhandling Handymax AS 2011 WL 5105123 ................. 20

V

Pickering v Barkley (1648) Style 132 [82 ER 587] ................................................... 19

R.

Royal Greek Government v Minister of Transport (No 1) (1948) 82 LlLR 196 ............ 9

S.

Savage v. Greco Donair Francise Ltd. 1981 CarswellNB 299 ................................... 21

T.

Tonnelier and Bolckow,Vanghan and Co v. Smith & Weatherill & Co(1897)2 Com.

Cas.258...........................................................................................................................8

The Derby [1984] 1 Lloyd’s Rep ................................................................................. 11

The Starsin [2003]1 Lloyd’s Rep ................................................................................... 4

The Portland Trader [1963]2 Lloyd’s Rep ................................................................ 10

The “Aliza Glacial” [2002] 2 Lloyd’s Rep ............................................................... 13

The Heron II[1969]1 AC 350,384-5,425 ..................................................................... 12

The Achilleas[2009]1 AC61,81 ................................................................................... 12

Taokas Navigation SA v Komrowski Bulk Shipping KG (GmbH & Co), Kent Line

International Ltd., Solym Carriers Ltd.2012 WL 2500470, [2012] EWHC 1888

(Comm) ........................................................................................................................ 15

The Tilia Gorthon [1985] 1 Lloyd's Rep 552 (QB) ..................................................... 19

Thomas Wilson Sons & Co v Owners of Cargo of the Xantho (The Xantho) (1887) LR

12 App Cas 503 (HL); per Lord Herschell at [509] ..................................................... 19

Thames and Mersey Insurance Co Ltd v Hamilton Fraser & Co (1887) LR 12 App

Cas 484(H L) .............................................................................................................. 19

U.

United British Steamship Company Ltd v Minister of Food [1951] 1 Lloyd’s Rep .... 3

V.

Victoria Laundry(Windsor)Ltd v Newman Industries Ltd [1949]2 KB 528,539 ......... 12

W.

Wallingford v. Mutual Society (1880), 5 A.C. 697 ...................................................... 20

OTHERS

[2007] 4 All E.R. 951 ..................................................................................................... 5

VI

TABLE OF AUTHORITIES: LEGISLATION

The 1996 Arbitration Act ............................................................................................... 3

Protocol to Amend the International Convention for the Unification of Certain Rules

of Law Relating to Bills of Lading (Hague-Visby Rules, 1968) ................................... 4

VII

LIST OF ABBREVIATIONS

The Charterers : LDT PTE

The Owners : Western Tankers INC

The Master : Master of Western Dawn

Shelltime 4 : Shelltime 4 (Issued December 1984 amended

December 2003)

The Charterparty An amended Shelltime 4 Charterparty with rider

clauses

BIMCO : BIMCO STS Clause of the LDTP Rider Clauses

Hague-Visby Rules : International Convention for the Unification of

Certain Rules of Law relating to Bills of Lading

BMP4 : Best Management Practices for Protection against

Somalia Based Piracy

The Vessel : Western Dawn

ANTELOPE : The Vessel regarding bunker supply and

discharging cargo at STS Area 1

Area 1 : STS Area 1

Mr. Anya : William Anya, the agent of the Charterers

1

STATEMENT OF FACTS

THE CHARTERPARTY

1. On 26 May 2014, Western Tanker Inc (Owners) entered into a Charterparty with

LDT Pte (Charterers) to transport 30,000mt Jet A1 and 70,000mt gasoil from

Singapore to OPL Luanda, with redelivery in the Mediterranean area on the

“Western Dawn” (Vessel).

2. The Charterparty was the amended Shelltime 4, comprised of the North American

ECA clause, Bunker Emissions Clause, STOPIA/TOPIA Clause, Piracy Clause,

LDTP Rider Clause, Owners Additional Clause and Intertanko’s Standard Tanker

Chartering Questionnaire 88.

3. The Charterparty required the Charterers to stem sufficient bunkers.

THE PERFORMANCE OF THE CHARTERPARTY

4. On 27 May 2014, the Vessel was ordered to proceed to OPL Luanda for discharge

of the cargo.

5. On 3 June 2014, the Vessel found the stem was not for the full quantity requested,

which was only enough to discharge area plus the bad weather reserve. On 8 June

2014, the Vessel completed loading of the cargo, and on the same day, full payment

was received by the Charterers.

6. On 28 June 2014, the Charterers and/or persons acting on their behalf directed the

Vessel to proceed to an alternative discharge place in international waters off the

Angolan coast, without the authorization of the Owners.

7. During the discharge, 28,190mt of gasoil had been discharged without the

2

authorization of Owners and the Vessel suffered material damage. As a result of

the above, the Vessel was unable to meet her discharge target date and discharge

full cargo to the buyer.

THE HIRE DUE

8. Hire was due and owing under the Charterparty monthly in advance.

9. On 3 July 2014, the Owners notified the Charterers, as of COB London, payment

for second hire period was due.

10. On 4 July 2014, the Charterers confirmed that it would not pay the second hire.

THE PIRACY

11. On 4 July 2014, the Vessel arrived OPL Luanda to acquire bunkers for the voyage

and cargo transfer. However, the STS v/l ANTELOPE was not arrived.

12. The Vessel knew the Charterers were intending redelivery on completion discharge

Augusta on about 4 August 2014.

13. On 17 July 2014, the Vessel resumed contact with the Owners and the Charterers

and urgently reminded them of the cargo loss and the Vessel damage because of

the pirate attack and cargo diversion and her action of proceeding to Cape Town

for assistance due to no instruction from Charterer and no bunker supply.

ARBITRAL PROCEEDINGS

14. On 1 November 2014 Owners served the Claimant to arbitration and the Charterers

disputed involved allegations and counterclaimed, issuing their own notice of

arbitration on 29 November 2014.

3

PART ONE: JURISDICTION

1. The Owners argue that this Tribunal has jurisdiction to bear all below merits of this

dispute because: (A) this Tribunal has the power to rule on its own jurisdiction; (B)

the Charterparty contains a valid arbitration agreement, which specifies London as

the seat; and (C) every dispute arising out of this Chapter is admissible in this

arbitration.

A. This Tribunal has the power to rule on its own jurisdiction

2. It is well-established that the arbitral tribunal is entitled to rule on its on jurisdiction,

including the validity of the arbitration agreement 1 , which is the principle of

international arbitration. The claimant argues that this Tribunal has the inherent

power to rule on its own jurisdiction. Under the Arbitration Act 1996, Article 30

has stipulated the competence of tribunal to rule on its own jurisdiction, therefore

this Tribunal has the rule on its own jurisdiction.

B. The Charterparty contains a valid arbitration clause, which specifies London

as the seat

3. The Charterparty contains two conflicting arbitration statements: the first is

contained in one of the emails between Charterers and Bill at IMWMB on 23rd

May 2 ; the second is contained in the amended Shelltime 4 and provides for

arbitration in London3.The Claimant argues London Arbitration Clause prevails.

4. First, in identifying which seat the parties intended to designate, tribunals will

1 The 1996 Arbitration Act (UK), clause 30(1). 2 Moot problem, 2. 3 Shelltime 4, clause 46(b).

4

certainly give greater weight to the terms that the parties drafted, negotiated and

specifically included in the contract agreed by both. 4 The Shelltime 4 form

contract has been amended with more than thirty amended clauses. Besides,

referring to their recap, the item of “LAW AND LITIGATION”5 was left blank,

meaning that they have no dispute over this issue.

5. Secondly, the arbitration clause contained fulfills every requirement as it is clear in

writing6 and contains the requisite degree of certainty.7 On the contrary, the email

mentioned was just a kind of willingness not only lacking the certainty required

but also declared by only one of both parties, which was not equivalent to an

agreement by both. Furthermore, the Charterers only sent the email to the broker,

who was not a party of this dispute.

6. Finally, the Respondent’s email was made on 23rd May, much earlier than the time

when their final agreement was reached and no one has even mentioned about the

Singapore arbitration before.

C. Every dispute arising out of this Charterparty is admissible in this

arbitration

7. Under the Clause 46(b) of the amended Shelltime 4, the Claimant argues that fraud

is admissible in this arbitration, and the tort of fraud is within the meaning of

“disputes arising out of this charter”. In terms of the disputes hereof, on the one

4 The Starsin [2003]1 Lloyd’s Rep 571,577; United British Steamship Company Ltd v Minister of Food [1951] 1

Lloyd’s Rep 111,114; Sir Bernard Eder et al, Scrutton on Charterparties and Bills of Lading (Sweet &Maxwell,

22nd ed, 2011), 22. 5 Moot Problem, 6. 6 The 1996 Arbitration Act (UK), s 5(2)(a). 7 Clare Ambrose and Karen Maxwell, London Maritime Arbitration (Informa, 3rd ed, 2009), 31.

5

hand, the Charterers shall provide and pay for all fuel8. On the other hand, the

Charterers shall from time to time give the Master all requisite instructions and

sailing directions9, and the Master (although appointed by the Owners) shall be

under the orders and direction of the Charterers.

8. Giving true, accurate and in-time orders is the Charterers’ obligation specified in

the Charterparty while the Master shall implement the Charterers’ orders and

directions, which was the obligation of the Owners specified in the Charterparty as

well. However, the representations concerning the supply of bunkers given by the

Charterers to the Owners were untrue and dishonest from the very beginning,

which constituted the material cause leading to the encounter with pirates and final

suffering of cargo losses. Therefore, the tort of fraud was closely linked with the

Charterparty.

9. Alternatively, even if the Tribunal finds the Charterers have not conduct any fraud,

the construction of an arbitration clause has to start from the assumption that the

parties, as rational businessmen, were likely to have intended any dispute arising

out of the relationship into which they have entered, or purported to have entered,

to be decided by the same tribunal. The clause had to be construed in accordance

with that presumption unless the language made it clear that certain questions were

intended to be excluded from the arbitrator’s jurisdiction. 10 Accordingly, the

clauses shall be applied to the disputes.

8 Shelltime 4,clause 7(a). 9 Ibid, clause 12. 10 [2007] UKHL 40; [2007] 4 All E.R. 951; [2007] 2 All E.R. (Comm) 1053; [2007] Bus. L.R. 1719; [2008] 1

Lloyd's Rep. 254; [2007] 2 C.L.C. 553; 114 Con. L.R. 69; [2007] C.I.L.L. 2528; (2007) 104 (42) L.S.G. 34; (2007)

151 S.J.L.B. 1364.

6

PART TWO: BREACH OF THE CHARTERPARTY

10. The Claimant argues that the Charterers breached the Charterparty because: (A)

The Charterers failed to provide the Owners with bunkers; (B) The Owners were

entitled to the hires due; (C) the Vessel involved was fit for service; (D) The

Charterers were in breach of the Charterparty; (E) The Owners ware not liable for

the loss of cargo.

A. The Charterers failed to provide the Owners with bunkers

11. Under Clause 7 of Shelltime 4, the Charterers shall provide and pay for all fuel

unless bunkers are consumed for Owners’ purposes or while the vessel is off-hire.11

The Charterers may contend that the Owners should pay for the bunkers themselves

from July 4 to July 17 because the Vessel was off-hire during that time. However,

the Owners constantly followed the instructions of the Charterers and their agents

and the loss of the cargo was not caused by the Owners. Thus, the Charterers have

the obligation to provide the Owners with bunkers all time.

B. The Owners were entitled to hires due

12. Under Clause 9 of the Shelltime 4, the Owners argue that the Charterers were liable

to pay hire because: (I) payment of hire is the absolute obligation of the Charterers;

(II) the Master strictly followed orders and thus the off-hire clauses shall not be

applied; (III) the Owners are entitled to the sums claimed as damages for breach.

I. Payment of hire is the absolute obligation of the Charterers

13. The Vessel was on hire from 4 June 2014,12 thus it was 3 July 2014 that was the

11 Shelltime 4, clause 7. 12 Moot Problem, 29.

7

exact day of paying hire for the second month. On 3 July 2014, the Owners sent a

notice of second period hire payment to the Charterers. On 4 July 2014, the

Charterers sent an off-hire notice, stating that they refused to pay the same or any

part thereof,13 which breached the Charterparty. Hire-attaining is the Owners’

determinant purpose of letting the vessel. Payment of hire clause was a condition

based on its seriousness and importance of time-cost and certainty in commercial

transactions.14

14. On the one hand, the Charterers may argue that the Charterparty was frustrated by

no later than 4 July 2014. With reference to the case of the National Carriers v.

Panalpina, an event which so significantly changes the nature of the outstanding

contractual rights and/or obligations from what the parties could reasonably have

contemplated at the time of execution, that it would be unjust to hold them to the

literal sense of its stipulations in the new circumstances and the burden of proving

frustration will fall on the party alleging it.15 Accordingly, lack of contact was for

such a short period that would not change the nature of the contractual rights and

obligations.

15. On the other hand, the Vessel was released on 17 July 2014, much less than ninety-

first days, thus under Clause(f) of the BIMCO Piracy Clause for time Charter

Parties 2013,16 the hire payment shall not be affected. Besides, the Owners argue

that the Charterers shall pay the hire in full whatever would happen after the

13 Ibid, 41. 14 Kuwait Rocks Co v AMN Bulk Carriers Inc (The Astra) [2013] EWHC 865 (Comm). 15 John F Wilson, Carriage of Goods by Sea (Pearson Education Limited, 7th ed, 2010), 41. 16 Moot Problem, 11.

8

payment. There are numerous cases can demonstrate the Charterers were liable to

pay a full month’s hire at the beginning of each month.17 Furthermore, even if the

vessel had been requisitioned after an installment of advance hire had become due,

leading to the frustration of the charterparty, the charterers were still liable to pay

the hire in full.18 Even if after the happening of that event charterers would have a

right of set-off as against a future installment of hire of a right of repayment, the

right to receive the payment of the hire installment was separate.19

16. This case shared the same situation thus the above cases can be applied. Moreover,

the off-hire periods claimed by the Charterers were disputed and not experienced

until 3 July 2014, thus no reduction would be allowed.

II. The Master strictly followed orders and the off-hire clauses shall not be

applied

17. In terms of the Charterers’ counterclaim,20 the Owners contend that the Master

was completely competent when he followed instructions from the Charterers and

their agents, thus the off-hire clauses21 were not activated.

18. At the later stages, the Master contacted with the Charterers’ agent, but the

Charterers argue that ASA2 is not, and has never been the agent of Charterers, thus

here comes to the issue of agency and Charterers’ fraud, which will be discussed

in the part of tort of fraud hereafter. In any event, Mr. Anya was the agent of the

Charterers and the Master has always strictly followed instructions from the

17 Tonnelier and Bolckow, Vanghan and Co v. Smith & Weatherill & Co (1897) 2 Com.Cas.258. 18 French Marine v. Compagnie Napolitaind’Eclairage et de Chauffage par le Gaz [1921] 2 AC 494. 19 Pan Ocean Shipping v. Creditcorp [1994]1 WLR 161,168-9(HL). 20 Moot problem, 68. 21 Shelltime 4, clause 21.

9

Charterers. In terms of the Charterers’ untrue and dishonest orders during the whole

process, it is worth mentioning that there is some authority for suggesting that the

off-hire clause will not operate where the specified event results from a breach of

contract by the Charterer22. Even if the vessel did go off-hire in such an event,

presumably the owner could include the loss of hire in his claim for damages for

breach.23

19. Furthermore, the operation of the off-hire clause is triggered merely by the

occurrence of one of the specified events irrespective of any fault on the part of the

shipowner. Being a “no fault” clause, its provisions are strictly construed, and the

burden of proof rests firmly with the charterer.24 In addition, those clauses must

be read in favor of the owners because the charterer is attempting to cut down the

owners’ right to hire.25 In conclusion, the off-hire clause shall not be applied.

III. The Owners are entitled to the sums claimed as damages for breach

20. The payment of hire clause is a condition in a charterparty. A condition is an

essential contract term, breach of which entitles the innocent party to treat himself

as discharged from further performance of the contract, even if he has suffered no

prejudice. The innocent party can also claim damages for any loss suffered.

Accordingly, a breach of that condition, namely failure to pay hire, entitles the

owner to terminate the contract and claim damages for losses suffered.26

C. The Vessel involved was fit for service

22 Nourse v Elder, Dempster (1922) 13 LlLR 197; Lensen v Anglo-Soviet Shipping Co (1935) 52 LlLR 141. 23 John F Wilson, Carriage of Goods by Sea (Pearson Education Limited, 7th ed, 2010), 97. 24 John F Wilson, Carriage of Goods by Sea (Pearson Education Limited, 7th ed, 2010), 96-97. 25 Royal Greek Government v Minister of Transport (No 1) (1948) 82 LlLR 196 at p 199. 26 Kuwait Rocks Co v AMN Bulk Carriers Inc (The Astra) [2013] EWHC 865 (Comm).

10

21. The Charterers argue that the Vessel was not fit for service on the ground that the

Master was incompetent and failed to take anti-piracy precautions. On the one hand,

the Owners do not admit this allegation totally and contends that the Vessel was

absolutely fit for service as required by the Charterparty. On the other hand, the

actions throughout the charter service which a prudent Master must be based on

the type of vessel and the voyage to be undertaken and further, the requirement to

exercise due diligence does not extend to protect against all conceivable

hazard.27Therefore, (I) the Vessel was fit for service and; (II) the Master was

competent and had followed anti-precautions;

I. The Vessel was fit for service

22. The Vessel was fit for service based on three main reasons. Firstly, the stipulations

in Clause 1 of this Shelltime 4 contain undertakings applicable at the date of

delivery, which impose absolute obligations. However, in regard to claims arising

out of “any loss of or damage to or in connection with cargo”, if they are subject to

the Hague or Hague-Visby Rules pursuant to Clause 27(c)(ii), the effect of Article

IV, rule 1 of the Rules will be to reduce the obligation of seaworthiness from an

absolute obligation to an obligation to exercise due diligence to make the ship

seaworthy.28 In this case, the Vessel is classed BV. To be classed BV a vessel must

meet stringent requirements as to safety equipment and electronic systems and the

Owners ensured that the Vessel possessed all the necessary documents such as the

Safety Equipment Certificate, Safety Radio Certificate, Safety Construction

27 The Portland Trader [1963] 2 Lloyd’s Rep 278, 281 28 Andrew W. Baker&Hatty Sumption,Time Charters (Lloyd’s Shipping Law Library,7th ed 2014), 660.

11

Certificate and Safety Management Certificate.29

23. Secondly, the general requirement in Clause 1(c) of the amended Shelltime 4

constitutes an express undertaking of seaworthiness.30 Considering the words “in

every way fit for the service”, if the fitness must be fairly generally construed, one

may be laying the owners open to having to fulfill conflicting and inconsistent

obligations depending on which contingency is taken into account and the owners

are required, at the time of delivery, to anticipate and provide in advance for every

contingency.31 In other words, at the date of delivery, the Owners are not required

to take everything into consideration, which is not possible as well.

24. The third reason is concerned with the words “throughout the charter service.”

Whether they not only constitute absolute undertakings applicable at the date of

delivery, but absolute and continuing undertakings that the ship will always possess

all of those attributes in full, which are thought to be incorrect readings. It would

involve the owners in an extravagant promise and is contradicted by Clause 3(a) in

which the owners undertake only an obligation to exercise due diligence to

maintain or restore the ship.32 Owners therefore argue they exercised the requisite

degree of due diligence to the make Vessel seaworthy.

II. The Master was competent and had followed anti-precautions

25. The Respondent counterclaim that the Master was incompetent33 and failed to

29 Moot Problem,49 30 Andrew W. Baker&Hatty Sumption, Time Charters (Lloyd’s Shipping Law Library, 7th ed 2014), 661. 31 The Derby [1984] 1 Lloyd’s Rep.635, at page 641, upheld by the Court of Appeal at [1985] 2 Lloyd’s Rep.325. 32 Andrew W. Baker&Hatty Sumption, Time Charters (Lloyd’s Shipping Law Library, 7th ed 2014), 662. 33 It is the issue about whether the Master has strictly followed instructions, which has been discussed elsewhere,

thus there is no specific and duplicated statement here.

12

follow anti-piracy precautions, which was denied by the Claimant based on three

main reasons.

26. Firstly, on the one hand, Clause (b) of the BIMCO STS Clause has put the

obligation of providing necessary items for the conduct of ship to ship operations

on the shoulder of Charterers. On the other hand, in accordance with the Clause(c)

of BIMCO Piracy Clause for Time Charter Parties 2013, it is not a strict obligation

but is at the Owners’ disposal. Besides, there is no term that specifies the exact time

for taking protective measures.

27. Secondly, under sub-clause (6) of the Piracy Clause of Special Provisions to ST4

Proforma, it is for the Owners to determine the level of threat and the measures

considered appropriate to discharge that obligation.34 Even so, in order to protect

this Vessel, the Owners have contacted their Safety Department to attend the Vessel

assisting in the plan and upgrade of systems and equipment on 27th May in

consideration of the WAF area, a known piracy threat area.35 Thus the Owners did

everything possible to protect the Vessel.

28. Thirdly, due to some problems with freighting parts, the Owners decided to provide

items concerned in Durban, 36 which was in accordance with the Charterers’

guidance that “we have alternative bunker supply available passing Durban or Cape

Town reverting” and these items were all prepared in Durban. However, the

constant changing guidance was not only out of the Owners’ control and not within

34 Moot Problem, 9 35 Ibid, 22. 36 Ibid, 27

13

the “reasonable range.”37

III. Alternatively, the causation between the Owners’ duty and the Charterers’

loss had been interrupted by the Charterers’ tort of fraud

29. The first task of the Court is to look to see whether one of the causes is plainly the

proximate cause of the loss.38 Causation is not a chain but a net and at the point

where these various influences meet. It is for the judgment as upon a matter of fact

to declare which of the causes thus joined at the point of effect was the proximate

and which was the remote cause. The cause which is truly proximate is that which

is proximate in efficiency.39

30. The real efficient cause in this section lies in the Charterers’ tort of fraud. In terms

of systems and equipment needed in piracy threat area. The Owners had planned

to provide those items at Durban based on the Charterers’ previous guidance and

Charterers demonstrated that “everything is under control” on 3 June 2014.

However, during this course of things, Charterers did not provide the bunkers, even

had no intention of passing Durban. Therefore, the Owners’ actions did not cause

any damage and it was the misrepresentations and fraud by the Charterers that

directed the Vessel to another discharge place, leading to the losses.

31. We are concerned to inquire how far in the law of tort, when causal connection

between a wrongful act and harm is an element in responsibility. The decisions of

the courts have been controlled by the principle that this connection is negative if

37 Ibid, 26 38 The “Aliza Glacial” (2002) 2 Lloyd’s Rep. 421. 39 Leyland Shipping v. Norwich Union (1918) AC 350 (HL).

14

the factors required, in addition to the wrongful act, for the production of the harm

include a voluntary human action or an abnormal occurrence.40 The Charterers’

tort of fraud, a voluntary human action, was more serious and proximate than the

claimed incompetence of the Master.

D. The Charterers were in breach of the Charterparty

32. The Charterers were in breach of the Charterparty because: (I) The Charterers

directed the Vessel to proceed to Angola in breach of the Charterparty; (II) The

Charterers directed the Vessel to proceed to an alternative discharge place without

the authorization of the Owners and in breach of the Charterparty; (III) A quantity

of Cargo was discharged from the Vessel at an alternative discharge place without

the authorization of the Owners and in breach of the Charterparty.

I. The Charterers directed the Vessel to proceed to unsafe places in breach

of the Charterparty

33. Under clause 4(a) of the Shelltime 4, it stipulates issues about period, trading limits

and safe places, providing that in any part of the world always to exclude Angola

and other places.41 Under Article 4(c) of Shelltime 4, the Charterers shall use due

diligence to ensure that the vessel is only employed between and at safe places

where she can safely lie always afloat.42 Additionally, the Charterers shall direct

the Vessel to a safe area for the conduct of such ship to ship operations but always

subject to the Master’s approval.43 The Charterers shall obtain any and all relevant

40 H. L. A. Hart & Tony Honore.Causation in the Law (Oxford University Press; 2nd revised edition). 41 Shelltime 4, clause 4(b). 42 Ibid, clause 4(c) 43 BIMCO STS Clause of the LDTP Rider Clauses, clause (b); Moot problem, 10.

15

permission from proper authorities.44

34. The Owners argue that the Charterparty includes a safe port warranty by reason of

the express terms and the terms expressly exclude the areas of high pirate risks,

which is an implicit reference to avoiding the risk of piracy and indicates the

Owners’ unwillingness to bear that risk. The Charterparty is no warrant for

construing clause 4 as an agreement by the Owners that the Vessel can be instructed

by the Charterers to proceed to any port or place other than the excluded areas.45

The alternative discharge place known as Area 1 is near Angola and of high pirate

risk. Both the OPL Luanda and Area 1 are not safe places which are excluded by

Charterparty. Therefore, the Charterers have breached the contract.

35. The Charterers directed the Vessel to proceed to Area 1 without the authorization

of the Owners and in breach of the Charterparty. Although the Master agreed to go

there and, to some extent, the Master could act on behalf of the Owners. However,

the Charterers should still obtain the Owners’ authorities.

II. A quantity of Cargo was discharged without the authorization of the

Owners and in breach of the Charterparty

36. Under BIMCO (c), the Charterers shall obtain any and all relevant permissions

from proper authorities to perform ship to ship operations.46

37. On 4 July, the Master informed the Charterers and their agent that the Vessel was

ready for discharge of cargo and tendered notice of readiness. However,

44 BIMCO STS Clause of the LDTP Rider Clauses, clause (c); Moot problem, 10, 11. 45 Taokas Navigation SA v Komrowski Bulk Shipping KG (GmbH & Co), Kent Line International Ltd., Solym

Carriers Ltd. [2012] EWHC 1888 (Comm). 46 BIMCO STS Clause of the LDTP Rider Clauses, clause (c); Moot Problem, page 10, 11.

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ANTELOPE was not there and the Charterers sent the Owners an off-hire notice

confirming that it would not pay the second off-hire. 47 Area 1 is an area with high

risk of piracy. Rader also showed what looks like 2 small fishing boats 5 miles to

west.48 These 2 small boats were fairly like pirate ships. If the Charterers would

like to perform the ship to ship operations, they should obtain both the authorities

from the Master and the Owners. But they did not have the Owners’ authorities.

E. The Owners was not liable for the loss of cargo

38. The Owners was not liable for the loss of cargo because: (I) the Owners shall not

be liable for the loss of cargo under the Charterparty; (II) the Owners shall not be

liable for the loss of cargo under Hague-Visby Rules.

I. The Owners shall not be liable for the loss of cargo under the Charterparty

39. The charterers directed the Vessel to proceed to Area 1 for discharging the cargo.

During the process of ship to ship operations, the Vessel was attacked by the pirates.

According to the Charterparty, all such ship to ship transfers shall be at the

Charterers’ risk, cost, expense and time. 49 And the Charterers should also

indemnify the Owners including the loss of cargo. 50 Thus, the Owners shall not

be liable for the loss of cargo because it was at the Charterers’ risk instead of the

Owners.

II. The Owners shall not be liable for cargo loss under Hague-Visby Rules

40. The Owners shall not be liable for the loss of cargo because: (a) the Owners shall

47 Moot Problem, 41. 48 Ibid, 40. 49 BIMCO STS Clause of the LDTP Rider Clauses, clause (a); Moot Problem, page 40. 50 BIMCO STS Clause of the LDTP Rider Clauses, clause (f); Moot Problem, page 41.

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not be liable for the loss due to breach of Article III, Rule 2 of Hague-Visby Rules;

(b) the Owners may rely on the excepted perils under Article IV, Rule2.

a. The Owners shall not be liable for the loss due to breach of Article III, Rule

2 of Hague-Visby Rules

41. Under Clause 27 and Clause 38 of Shelltime 4, the Hague-Visby Rules shall be

applied to the claim of loss of the cargo. And the Owners discharged their

obligation of properly and carefully carry, keep and care for the cargo under Article

III, Rule 2.

(1) Hague-Visby Rules should be applied to the claim of loss of the cargo

42. Clause 27(c)(ii)51 and Clause 3852 of Shelltime 4 provides that any claim arising

out of any loss of or damage to or in connection with cargo shall be subject to the

Hague-Visby Rules. Moreover, if any term of this bill of lading is repugnant to the

Hague-Visby Rules, as applicable, such term shall be void to that extent but no

further. Thus, Hague-Visby Rules should be applied here.

(2) The Owners discharged their obligation of properly and carefully carry,

keep and care for the cargo under Article III, Rule 2

43. The Owners were fit for services under Hague-Visby Rules.53 And under Article

III, rule 2 of the Hague-Visby Rules, the carrier shall properly and carefully load,

handle, stow, keep, care for and discharge the goods carried.54 “Properly” adds to

the requirement of care a requirement that the carrier's function be performed in

51 Shelltime 4, clause 27(c) (ii). 52 Shelltime 4, clause 28. 53 Ibid. 54 Hague-Visby Rules a (III)(2)

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accordance with a sound system, having regard to the nature of the cargo55 while

“carefully” means that care must have been taken when the Owners maintain a

sound system throughout the voyage56. The requirement “properly and carefully

carry and discharge the goods carried” means that the Owners must perform the

duties of carriage and discharge imposed upon them by the contract in a proper and

careful manner.57

44. On the present facts, the Vessel loaded the cargo of 30 mt Jet A1 and 72mt Gasoil

at Singapore on June 8.58 After that, the cargo was kept in a proper and careful

management. And there was no loss of the cargo until the vessel was attacked by

the pirates.59

b. The Owners may rely on the excepted perils under Article IV, Rule2

45. Under Article III, Rule 2, the carrier’s obligations of proper and careful carriage of

goods are subject to the Article IV, rule 2 of the Hague-Visby Rules.60 The Owners

remain under an obligation to “properly and carefully load, handle, stow, carry,

keep, care for and discharge the goods carried”. But the Owners is not liable if the

“loss or damage” to the goods arises or results from one of the matters identified

in paragraph (a)-(q) of Article IV, Rule 2. Where the Charterers allege a breach of

Article III, Rule 2 and the Owners rely on one of the identified matters in paragraph

(a)-(q) as a defense, the liability of the Owners will turn on whether the loss or

55 Albacora v Westcott and Laurance Line [1966] 2 Lloyd’s Rep 53, 64; CV Sheepvartondereneming Ankergracht

v. Stemcor (Australasia) Ptd Ltd [2007] FCAFC 77, 29. 56 Atlantic Consolidated Foods Ltd. v. The Doroty, 1978 CarswellNat 78 57 Falconbridge Nickel Mines Ltd. v. Chimo Shipping Ltd.1969 CarswellNat 362; G.H. Renton & Co. v. Palmyra

Trading Corp. of Panama [1957] A.C. 149 58 Moot Problem, 29. 59 Ibid, 42. 60 Hague-Visby Rules a (IV)(2).

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damage arose or resulted from the breach or from the identified matters.61

(1) Piracy is a kind of perils, dangers of the sea

46. Article IV Rule 2(c) of the HVR exempts carriers from liability for loss or damage

arising from ‘perils, dangers and accidents of the sea or other navigable waters’.62

There was no criterion which alone would identify whether what happened as

properly to be called a peril of the sea; all of the facts and circumstances concerning

the voyage must be examined.63 But a peril of the seas can only be unforeseeable

events that cannot be avoided by the reasonable person64, thus no peril is one

"which could be foreseen as one of the necessary incidents of the adventure65". To

some extent, piracy actions are unexpected and fortuitous. The Owner was unable

to foresee the attack of the pirates. And it is not a kind of ordinary perils. Not every

vessel will be attacked by the pirates. Thus, loss to the goods which have been held

to be caused by perils of the sea include piracy. Many cases were in support of this

conclusion.66

(2) Piracy is an act of war

47. Article IV Rule 2(e) of the HVR exempts carriers from liability for loss or damage

arising from acts of war.67 These is an academic view that if piracy becomes “more

localized” in certain “hot spots”, typical war clauses could apply to it.68 Also, in

61 Great China Metal Industries Co Ltd v Malaysian International Shipping Corporation Berhad 196 CLR 161, 22 62 Paul Todd, Maritime Fraud and Piracy (Informa Publishing, 2nd ed, 2010) 1.119. 63 Great China Metal Industries Co Ltd v Malaysian International Shipping Corporation Berhad 196 CLR 161, 2 64 Thames and Mersey Insurance Co Ltd v Hamilton Fraser & Co (1887) LR 12 App Cas 484(H L); The Tila

Gorthon, [1985] 1 Lloyd’s Rep. 552. 65 Thomas Wilson Sons & Co v Owners of Cargo of the Xantho (The Xantho) (1887) LR 12 App Cas 503 (HL);

per Lord Herschell at [509] 66 Pickering v Barkley (1648) Style 132 [82 ER 587]; Great China Metal Industries Co Ltd v Malaysian

International Shipping Corporation Berhad 196 CLR 161; Thomas Wilson Sons & Co v Owners of Cargo of the

Xantho (The Xantho) (1887) LR 12 App Cas 503 (HL); 67 Hague-Visby Rules, a (IV)(2e). 68 Paul Todd, Maritime Fraud and Piracy (Informa Publishing, 2nd ed, 2010) 1.166.

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some war risk clauses69, piracy is regarded as a kind of war risks.70 Area 1 was a

High Risk Area. Thus, the attack of the pirates can be identified as an ‘act of war’.

(3) Piracy is any other cause arising without the actual fault and privity of the

Owners

48. Acticle IV, Rule 2(q) of the HVR provides that carriers shall not be liable for

damages resulting from any other cause arising without the actual fault and privity

of the Owners.71

49. It is impossible to identify all exceptions. The phrase of any other cause is to be

interpreted to include all cases where these is no fault or privity.72 Privates acts

certain fall within the scope of the meaning. On the present facts, piracy was

unforeseeable and extraordinary. The Owners, including their servants, were

unable to foresee it and not contributed to the loss of cargo. Also, they discharged

their obligation of protecting the safety of the Vessel, crew and cargo, which also

in compliance with BMP4. The Owners had no fault or privity.

PART THREE: TORT OF FRAUD

50. If the Charterers intended the representations to be acted upon and that they knew

them to be untrue, the representations made by the Charterers can be regarded as

fraud.73 The rule in regard to allegations of fraud is that the Owners must allege

that (A) the representations were untrue; (B) the Charterers knew that they were

69 Institute Wars and Strikes Clauses 1/10/83; “BIMCO Standard War Risk Clause for Time Charters, 1993 Code

Name: ‘CONWARTIME 1993’ 70 Atlasnavios Navegacao Lda (formerly Bnavios Navegacao Lda) v Navigators Insurance Co Ltd 2014 WL

6862527; Pacific Basin IHX Ltd v Bulkhandling Handymax AS 2011 WL 5105123 71 Hague-Visby Rules, a (IV)(2q) 72 Potts v Union SS Co of New Zealand [1946] NZLR 276 73 Davy v. Garrett (1878), 7 Chancery Division 473, Thesiger, L.J., at 489; Wallingford v. Mutual Society (1880), 5

A.C. 697, per Lord Hatherley, at 701; Paterson et al. v. Livingstone, [1931] 1 D.L.R. 386, at 387.

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untrue and (C) the Charterers had the intention that the statement be relied upon.74

A. The Representations were untrue

51. On 27 May, the Owners required about 1500 mt FO for the voyage. 75 The

Charterers only gave 950mt IFO 380cst but promised that there were alternative

bunker supplies available passing Durban or Cape Town on 3 July.76 However, on

28 June, they changed bunker supply and discharge coordinated in Area 1 instead

of Durban or Cape Town. 77 In the end, there were no bunker supply neither in

Durban or Cape Town nor in Area 1. After leaving Singapore, the Vessel has never

been provided with bunkers.

B. The Charterers knew that those representations were untrue

52. The voyage route was regulated by the Charterers and they knew where the Vessel

would go before the Charterparty had been signed. Thus, the Charterers had a clear

conception on how much bunker would be required during the whole voyage. And

they also knew whether they had the financial ability of affording it. Otherwise,

they would not agree to sign the Charterparty. The Charterers have the obligation

to provide bunkers to the Owners under the Charterparty. Of necessity, the ability

of the Charterers to provide the ship with the correct quantity of bunkers requires

the co-operation of the owners and their offices.78 On 27 May, the Charterers did

not deny the quantity ordered by the Owners. Additionally, when the Charterers

gave these instructions to the Owners, they did not explain the reasons why they

74 Savage v. Greco Donair Francise Ltd. 1981 CarswellNB 299, 3. 75 Moot Problem, 20. 76 Ibid, 25, 26. 77 Moot Problem, 34. 78 Terence Coghlin, Andrew Baker, et al, Time Charters (7th ed, informa law, 2014), page 249.

22

had to change discharge coordinate and bunker supply. If there actually exists some

problems or factual information, they shall tell the Owners what happened.

53. Further, the Owners were a new comer in this field and they have had a tough time

with their tanker experiment.79 They did not have much relevant experience during

the whole voyage. And whether Area 1 is an area with high risk of piracy is still in

dispute. Thus, the Master was not aware that Area 1 may be dangerous and they

followed the Charterers’ instructions to go to the Area 1.

C. The Charterers had the intention that the representations be relied upon

54. Under Shelltime 4, the Charterers had the intention that the Owners would rely on

those representations because under Shelltime 4, the Charterers had the right to

instruct Owners and the Owners shall be subject to the instructions from the

Charterers.

55. Additionally, ASA2 is the Charterers’ agent. To establish that, some intricate

analysis should be attached to the facts and the nature of the relationship between

the parties. 80 It is the effect in law of the way the parties have conducted

themselves that must be investigated in order to determine whether the agency

relationship has come into existent.81

56. The Owners argue that William Edward Anya, the STS coordinator of Atlantic STS

Agency Ltd, is the agent of the Charterers. Atlantic Services Agency first appeared

on 8 June when the Master sent a copy of an email to it.82 On 28 June, the

79 Moot Problem, 44. 80 Chender v. Lewaskewicz, 2007 CarswellNS 497, 16. 81 G. E. Dal Pont, The law of Agency (Butterworth’s, 7th ed, 1996), 13. 82 Moot Problem, 29.

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Charterers sent a copy to Mr. Anya whose email address was

“William@ASA.com.an”. 83 This email was about discharge coordinate, next

bunker supply and information of next voyage. After few minutes, Mr. Anya sent

an email to the Master as an STS coordinator and he emphasized that the charterers

had passed control of the owner’s vessel to them for local instruction. Its address

was “Captain. William.Anya_GM@asa2.com.an”.84 From 28 June to 4 July, Mr.

Anya kept in contact with the Master and there was no instruction from the

Charterers. Until 4 July, the Charterers sent an email to the Master which required

him to continue to liaise with the STS coordinator. 85 During that time, the

Charterers did not raise any objection and there was no STS coordinator else

contacted the Master. If Mr. Anya was not the agent of the charterers, it is certain

that the Charterers would raise objections or inform the Master that the agent was

another person. Special attention should also be paid to a problem that why ASA2

knew all the details about the voyage. ASA2 not only answered the question raised

by the Master about where Area 1 was, but also told the Master that there would

be bunker supply and the cargo should be discharged there. If ASA2 was not the

agent of the Charterers, he would not have known all these details. Thus, although

the two email addresses are different, they both belong to Mr. Anya. And the

Charterers implied that Mr. Anya is the agent of them because the Charterers knew

and accepted him.

83 Ibid, 33. 84 Ibid, 35 85 Ibid, 40.

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D. The Owners actually relied on the representations made by the

Charterers and their agents

57. On the present facts, both the Owners and WTI believed that the Vessel would pass

Durban or Cape Town. When there were some problems with the freighting parts

resulting in the failure of providing items in Singapore, WTI and the Owners

agreed to provide them in Durban. The Vessel always travelled towards Durban or

Cape Town. After the Charterers’ changing discharge coordinate in Area 1, the

Owners immediately asked the Charterers the coordinates of Area 1.86 On account

of the Charterers’ only promising supplying 300mt of bunkers, the Owners warned

that 300mt were only enough for discharge and passage to Bonny and required

more bunkers at Bonny.87

E. The Charterers’ fraud caused damage to the Owners

58. Each of the fraudulent states of mind behind the misrepresentation and the damage

consequent upon the fraud has been described as the “gist” of the action. Absent a

fraudulent state of mind, there is no deceit; absent damage, these is no cause of

action at common law. 88 On account of the Charterers’ fraudulent instructions

which increasing the dangers of attacking by the pirates, the Owners suffered

material damages. Also, as the bailee, part of the cargo was lost and there were five

people injured.89

86 Ibid 34. 87 Ibid 38. 88 Peter MacDonald Eggers, Deceit: The Lie of the Law (Informa Law, 2009), 1.12 89 Moot Problem, 42.

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PRAYER FOR RELEF

For reasons set out above, the Claimant requests the Tribunal to:

I. Declare that this Tribunal has the jurisdiction to hear the merits of the Claimant’s

claim;

II. Find that the Respondent is reliable for the breach of contract, the HVR, and the

tort of fraud as argued above; and

III. Award damages as particularized in the phase of this arbitration relating to

quantification of damages, the hire due to the Claimant and interest on the amounts

claimed.