FOURTEENTH A I MEMORANDUM FOR RESPONDENT€¦ · 14th International Maritime Law Arbitration Moot...

FOURTEENTH ANNUAL INTERNATIONAL MARITIME LAW ARBITRATION MOOT COMPETITION 2013 ________________________________________________________________________

MEMORANDUM FOR RESPONDENT

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ROHIT AYYAGARI • SAMTA GODIWALA • CHANDNI PATEL • SHANTANU GUPTA • HARSHVARDHAN SHUKLA

TEAM NO. 13

14th International Maritime Law Arbitration Moot 2013

I MEMORANDUM for RESPONDENT

TABLE OF CONTENTS

LIST OF AUTHORITIES ........................................................................................................................ II

Books Referred .......................................................................................................................... II

Cases……………………………………………………...………………………………..III

Index of Statutes, Rules and Treaties ................................................................................... IV

List of Abbreviations ....................................................................................................................... VI

Statement of Facts ........................................................................................................................... IX

Written submissions ........................................................................................................................... 1

PART ONE: JURISDICTION ......................................................................................................... 1

(A) The arbitration clause in the contract is not valid. ........................................................... 1

(B) The Tribunal is not validly constituted. ........................................................................... 1

PART TWO: BREACH OF CONTRACT OF CARRIAGE OF GOODS. .............................. 2

(B) Delivery of the cargo was in consonance with the contract of carriage of goods ......... 4

(C) Alternatively, The Claimant's rejection of goods disentitled them to delivery of cargo………………………………………………………………………………………….5

(D) Conclusion ......................................................................................................................... 7

PART THREE: BREACH OF CONTRACT OF BAILMENT .................................................. 7

PART FOUR: THE LETTER OF INDEMNITY IS VALID - THE RESPONDENT ACTED IN GOOD FAITH AND THUS NOT LIABLE: ........................................................................................................... 12

(A) The Respondent acted in good faith ............................................................................... 12

(C) The Respondent is entitled to a counter claim: .............................................................. 15

REQUEST FOR RELIEF ............................................................................................................... 17


II MEMORANDUM for RESPONDENT

LIST OF AUTHORITIES

Books Referred

1. Aengus Richard & Martyn Fogarty, Merchant Shipping Legislation, Lloyd’s of London

Press (2nd Ed. London, 2004).

2. Carole Murray; David Holloway;Daren Timson-Hunt, Schmitthoff: The Law and Practice

of International Trade, Giles Dixon, Sweet & Maxwell,(12th Ed. 2012)

3. Charles Abbott, A Treatise of the Law Relatvie to Merchant Ships And Seamen, Saunders

and Benning (Vol I 6th Ed. Great Britain, 1840).

4. Edward B. Watt & Richard M.F. Coles, Ship Registration: Law and Practice, Informa

Publishing (2nd Ed. London, 2009).

5. Francesco Berlingieri & Patrick Giggs, Berlingieri on Arrest of Ships, Lloyd’s of London

Press (5th Ed. London, 2011).

6. Gary B. Born, International Commercial Arbitration, Volume I, Kluwer Law

International, Alphen aan den Rijn, 2009.

7. Jeremy Farr, Patrick Griggs & Richard Williams, Limitation of Liability for Maritime

Claims, Lloyd’s of London Press (4th Ed., London,2005).

8. John A. C. Cartner, Richard P. Fiske & Tara L. Leiter, International Law of the

Shipmaster, Informa Publishing (1st Ed. London, 2009),

9. Lord Justice Aikens, Michael Bools & Richard Lord QC, Bills of Lading, Informa Law

from Routledge (1st Ed., New York, 2006).

10. Lord Justice Aikens, Michael Bools & Richard Lord QC, Bills of Lading, Informa Law

from Routledge (1st Ed. New York, 2006).

11. Michael Bundock, Shipping Law Handbook, Informa Law from Routledge (5th Ed. New

York, 2011).

12. Peter R. Brodie, Dictionary of Shipping Terms, Informa Law (5th Ed. New York, 2007)


III MEMORANDUM for RESPONDENT

Cases

A

Albacora v Westcott & Laurence Line, [1966] 2 Lloyd's Rep. 53.

Am. Diagnostica Inc. v Gradipore Ltd, XXIV a Y.B. Comm. Arb. 574, 581-582 (N.S.W.

S.Ct. 1998) (1999).

B

Biddell Bros v E Clemens Horst Co., [1912] A.C. 18.

Bristol Airport plc v. Powdrill, [1990] Ch. 744.

C

Commercial Fibres (Ireland) Ltd. v Zabaida, [1975] 1 Llyod's Rep. 27.

Compania Portorafti,Commerciale S.A. V. Ultramar Panama Inc. and Others (The "Captain

Gregos"), Lloyd’s Law Reports (1990) Vol. 2, 395.

D

Dublin City Distillery Ltd v Doherty, [1914] A.C. 823, 847-848.

E

E Reynolds & Sons (Chingford) Ltd. v Hendry Bros. Ltd., [1955] 1 Lloyd's Rep. 258.

EEOC v Waffle House, Inc., 534 U.S. 279, 294 (U.S. S.Ct. 2002).

G

Gill & Duffus SA v Berger & Co Inc., [1984] 2 W.L.R 95 AT 104, HL.

Gosling v Birnie, (1831) 7 Bing. 337.

H

Henderson & Co v Williams, [1895] 1 Q.B. 521.

Homildoc, [1950] A.M.C. 1973.

Howsam v Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (U.S. S.Ct. 2002).

J

JL Lyons & Co v May & baker, [1923] 1 K.B. 685.

K

Kwei Tek Chao v British Traders and Shippers Ltd., [1954] 2 Q.B. 459.

L

Laurie and Morewood v Dudin & Sons, [1926] 1 K.B. 223.


IV MEMORANDUM for RESPONDENT

M

Marcq v Christie, Manson & Woods Ltd, [2003] EWCA Civ 731; [2004] Q.B.

Mitsui & Co. Ltd. v. Novorossisyk Shipping Co. (The "Gudermes"), [1993] 1 Lloyd's Rep.

311.”

P

Pendle & Rivett Ltd. v Ellerman Lines Ltd, 29 Ll. L. Rep. 133.

Perdana Properties Bhd. V. United Orient Leasing Co. Sdn. Bhd., [1981] 1 W.L.R. 1496.

R

Re London Wine Co (Shippers) Ltd, [1986] P.C.C. 121.

Re Savoy Estate Ltd., [1949] Ch. 622.

Riley v Russell, 34 Mo. 524, 528 (Mo. 1864).

S

SA Surce Export v. Northern River Shipping: The Sormovsky 3608, [1994] 2 Llyod's Rep.

266.

Smith, Hogg & Co Ltd v Black Sea and Baltic General Insurance Co Ltd, [1940] 3 All E.R.

405.

T

The Happy Ranger, [2002] 2 Lloyd’s Rep. 257,363.

The Kommunar; 36 (1997) Lloyd’s Rep 22

Thomas Wilson, Sons & Co v Xantho, (1887) 12 App Cas 503 at 512.

U

Unwin v Adams, (1858) 1 F. & F. 312.

W

Watkins-Johnson v Bank Saderat Iran, Award no. 429-370-1 (28 July 1989), 22 Iran-US

C.T.R. 218, 296 (1989).

William France, Fenwick & Co Ltd v North of England Protecting and Indemnity

Association, [1917] 2 KB 522.

Index of Statutes, Rules and Treaties

1. Arbitration Act, 1996


V MEMORANDUM for RESPONDENT

2. Bill of Lading Act, 1855

3. Brussels Convention of 1924

4. Brussels Convention of 1924

5. Convention on Limitation of Liability for Maritime Claims

6. English Contract Law

7. English Tort Law

8. International Convention for the Unification of Certain Rules of Law relating to Bills of

lading (Hague-Visby-Rules 1968)

9. New York Convention

10. Sale of Goods Act, 1979

11. The Carriage of Goods by Sea Act, 1992

12. Torts (Interference with Goods) Act, 1977

13. United Nations Convention on the Law of the Sea (UNCLOS)


VI MEMORANDUM for RESPONDENT

LIST OF ABBREVIATIONS

$ United States Dollar

% Percentage

& And

@ At the

£ Great Britain Pound

A.C Appeals Cases

Abbreviation Full Form

AII ER All England Reporter

App Cas Application for Case

Arb Arbitration

BOL Bills Of Lading

BOP Beatles Oils And Fats Limited

BSE Bovine Spongiform Encephalopathy(A disease)

C & F Cost And Freight

C/P Charter Party

CAD Cash Against Documents

Ch. Chapter

CIF Cost, Insurance, Freight

Co. Company

Comm Commercial

CP Charter Party

CPO Crude Palm Oil

Ed. Edition

EWCA England & Wales Court of Appeal

FEMAS Feed Materials Assurance Scheme

FFA Free Fatty Acid

FOB Free On Board

FOSFA Federation of Oils, Seeds and Fats Association.


VII MEMORANDUM for RESPONDENT

FOT Free On Truck

GBP Great Britain Pound

GC Analysis Gas Chromatography Analysis

GMQ Good Mercantile Quality

H.L. House of Lords

ICP Analysis Inductively Coupled Plasma Analysis

Inc. Incorporation

Iran – US CTR Iran – United States of America Claims Tribunal Reports

J Justice

K.B. Kings Bench

Lloyd’s Rep Llyod’s Reporter

Ltd Limited Company

MIN Minimum

MLC Maritime Labour Commission

Mo. Marine Officer

MT/mt Metric Tonnes

MV Motor Vessel

No. Number

P & I Protction and Indemnity

p. Page

P.C.C. Pure Car Carrier

P.D. Primary Deficit

PAI Product Authentication International

Para Paragraph

PFAD Palm Fatty Acid Distillate

PMT Per Metric Ton

pp. Printed Pages

Q.B. Queens Bench

Q.B.D Queen’s Bench Division

R Rule

Rep. Reporter


VIII MEMORANDUM for RESPONDENT

SDN BHD Sendirian Berhad

UK United Kingdom

UKHL United Kingdom House Of Lords

UNCLOS United Nations Convention on the Law of the Sea

US Unite State

US$ United States Dollar

USD United States Dollar

VOB Vegetable Oil Broker

Vol Volume

W.L.R. Weekly Law Report

Y.B. Ytterbium


IX MEMORANDUM for RESPONDENT

STATEMENT OF FACTS

1. The Claimant Limited (The Claimant) authorised ABC brokers for purchasing Palm Fatty

Acid Distillate (hereinafter referred to as PFAD), as a result Beatles Oils and Fats

Ltd.(Beatles Oils Ltd.) entered into contract with The Claimant as on 23rd May 2008.

2. On 12th September 2008, Walker brokers mailed The Claimant about fixture concluded

between Beatles Oils Ltd. and Twilight Carriers Inc. (Twilight Carriers) wherein both the

parties entered into charterparty.

3. On 23rd September, the contract between Beatles Oils Ltd. and The Claimant was

amended by changing the price and discharge port of the contract and following this all

the bills of lading from PG1 to PG4 was drawn from Pasir Gudang, Malaysia which is

port of loading till Liverpool, Merseyside, UK i.e. port of discharge as mentioned in bills

of lading as on 25th October, 2008.

4. On 15th November 2008, the vessel carrying cargo by Twilight carriers was hijacked by

Somali Pirates and was released on 16th February 2009. In about mid January Beatles

Oils Ltd. presented the shipping documents to The Claimant who paid the purchase price

and thus became endorsee of the bills of lading.

5. The Claimant entered into a sales contract with Delta Ltd. on 2nd December, 2008,

similarly it also entered into contract with Caspian BV dated 20th January for the sale of

PFAD.

6. On 6th March 2009, The Claimant received Insurance policy and thereafter wrote a mail

to Beatles Oils Ltd. telling them that they were in repudiatory breach as cargo was not

insured under agreed terms. They also said that due to pirate attack the cargo was of no

value and demanded repayment of purchase price. Beatles Oils Ltd. on 15th March 2009,

replied by saying that The Claimant is clearly giving notice of anticipatory breach which

they accept and therefore the vessel will not sail to Liverpool. The Claimant agreed to

this decision on 16th March 2009.

7. On 16th March 2009, Beatles Oils Ltd. informed The Claimant that they have abandoned

their cargo and is in anticipatory breach. On 18th March 2009, The Claimant wrote to

Beatles Oils Ltd. asking them where to deliver bills of lading. On the same day, Beatles

Oils Ltd. replied that they be forwarded to their office by courier. On the same day, The


X MEMORANDUM for RESPONDENT

Claimant informed Beatles Oils Ltd. that they have given bills of lading to Johnson &

Johnson who will give to Beatles Oils Ltd. once they pay the purchase price. On 19th

March, Beatles issued indemnity to Twilight asking them to deliver cargo at Rotterdam.

The Claimant came to knew about this later.

8. On 20th March 2009, Beatles informed The Claimant that as they didn't provide bills of

lading, the vessel will sail to Rotterdam where cargo will remain in storage pending

resolution between them. The Claimant agreed but said that cargo be delivered at

Liverpool as they were legal owners. They also sent a mail to Twilight Carriers informing

them that cargo should be delivered at Liverpool.

9. On or about 23rd March 2009 Beatles arrested the cargo as security for their claims

against The Claimant. The Claimant tried to set aside the arrest of the Cargo, which was

not allowed. Subsequently, the Beatles acquired permission from the Dutch Court for sale

of the said cargo and the same was allowed. The proceeds are held in the Dutch Court

Account, pending a decision in London Arbitration.

10. The Court of Rotterdam rejected The Claimant’s appeal to set aside the arrest of the

cargo. Subsequently, on 23rd March 2009, The Claimant arrested the vessel in Rotterdam

as security for their claims for damages against the Owners (Twilight Carriers) for the

delivery of the cargo in Rotterdam without the production of the Bills of Lading. The

vessel was released against security provided by Beatles on behalf of Twilight Carriers.

11. Finally, Matter was submitted to Arbitration Act, 1996 on 6th April 2009.


1 MEMORANDUM for RESPONDENT

WRITTEN SUBMISSIONS ______________________________________________________________________________

PART ONE: JURISDICTION

With due respect to this Arbitral Tribunal, the respondent argues that it is not competent to hear

this dispute because (A) the arbitration clause in the contract of carriage is not valid; (B)

Alternatively, the Tribunal is not validly constituted.

(A) The arbitration clause in the contract is not valid.

The foundation of almost every international arbitration is a valid agreement. Arbitration is a

matter of contract and a party cannot be required to submit to arbitration any dispute which he

has not agreed to submit.1 Arbitration rests on will and consent of the parties2 and it is the parties'

consent that determines the scope, limits and area of an arbitrator's authority and jurisdiction.3

The law and arbitration clause which the claimant seeks to enforce is the one that was agreed as

between the respondent and the Beatles Oils Ltd. which is not a party to this dispute. The

enforcement by the claimant of the arbitration clause that was never agreed between the parties is

not valid.

(B) The Tribunal is not validly constituted.

The respondent further argues that even if it was to be considered that there is a valid arbitration

agreement persisting between the claimant and the respondent, this Tribunal is not validly

constituted.

The arbitral seat is the nation where an international arbitration has its legal domicile, the laws of

which generally govern the arbitration proceedings in significant respects.4The procedural law of

1 Howsam v Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (U.S. S.Ct. 2002); EEOC v Waffle House, Inc., 534 U.S. 279, 294 (U.S. S.Ct. 2002) 2 Riley v Russell, 34 Mo. 524, 528 (Mo. 1864) 3 Watkins-Johnson v Bank Saderat Iran, Award no. 429-370-1 (28 July 1989), 22 Iran-US C.T.R. 218, 296 (1989). 4 Gary Born, International Commercial Arbitration, Kluwer Law International p. 1246.



arbitration is frequently assumed to be the same as the arbitration legislation of the arbitral seat.5

Although the law governing the conduct of the arbitration is said to be concerned only with

procedural matters, it goes beyond this and the appointment, removal and replacement of

arbitrators, time-limits, interim relief, consolidation of arbitrations, representation before the

arbitrator, the form and validity of the award, and the finality of the award are amongst the

matters which can fall within the lex arbitri.6

In the present case as the arbitration clause specifies London as the seat of the arbitration,

English law becomes the lex arbitri. Therefore the procedures of this arbitration are to be

governed by the Arbitration Act, 1996.7

The arbitration is silent on the procedure to be followed during arbitration. Also, apart from seat

of the arbitration which is London and the law which is English law, the arbitration clause

doesn't provide the number of the arbitrators to be appointed.8 Section 15(3) of the Arbitration

Act, 1996 provides that where there is no agreement as to number of arbitrators, the Tribunal

shall consist of sole arbitrator.

The present Tribunal consists of three arbitrators instead of one and therefore, the same cannot

be said to be valid in the light of the express provisions of the Arbitration Act, 1996.

Article V(1)(d) of the New York Convention provides that recognition and enforcement of the

award may be refused where the composition of arbitral authority was not in accordance with

the agreement of the parties, or, failing such agreement, was not in accordance with the law of

the country where the arbitration took place. The respondent argues that the arbitral tribunal

consisting of three arbitrators is in violation of section 15(3) of the Arbitration Act, 1996.

PART TWO: BREACH OF CONTRACT OF CARRIAGE OF GOODS.

Contract of carriage of goods as between the Ship owner and the Consignee is governed by bills

of lading. The contractual liability of a ship owner is to deliver the goods as per bills of lading. In

the instant case it argued (A) Respondents had taken due care of the cargo; (B) Delivery of the 5 Ibid.,p. 1310. 6 Am. Diagnostica Inc. v Gradipore Ltd, XXIV a Y.B. Comm. Arb.574, 581-582 (N.S.W. S.Ct. 1998) (1999). 7 s.2(1), Arbitration Act, 1996 8 Factsheet p. 4



cargo was in consonance with the contract of carriage of goods; (C) Alternatively, The

Claimant's rejection of goods disentitled them to delivery of cargo.

(A) Respondents had taken due care of cargo.

The Carrier is under a duty to properly and carefully load, handle, stow, carry, keep, care for and

discharge the goods.9 The question whether relevant operations have been carried out properly

and carefully is one of fact and the appropriate degree depends on the cargo, the voyage, the

vessel and the knowledge of each of these which the parties have or ought to have.10 The carrier

has a duty to make the vessel seaworthy.11

The duty of the carrier is to be considered with reference to the knowledge possessed by the

carrier about the nature of the goods.12 Carrier is required to take due diligence which means

doing everything reasonable, not everything possible.13 In the present case, the respondents had

taken due care to maintain the cargo before the Somali pirate attack. Knowing the nature of the

route, the carriers had taken measures to prevent pirate attack by commencing an anti-pirate

watch.14

Respondent argues that at the commencement of the voyage, the ship was seaworthy. Also as

due diligence was taken by the carrier as is suggested by the expert opinions. After, the pirate

attack the respondents couldn't take care of the cargo as they were held hostage by the Somali

Pirates and all the crew were confined to the bridge, except for meals in the mess room and only

a team of two engineers was allowed to maintain the auxiliary engine in the engine room.15

Therefore in the light of the aforementioned arguments, respondents had taken reasonable care of

the cargo.

There is an exculpatory exception available to carriers which state that neither the carrier nor the

ship shall be liable for loss or damage arising from any other cause without the fault or neglect of

9 Article III r.2, Hague Visby Rules 10 Lord Justice Aikens, Richard Lord QC & Michael Bools, Bills of Lading (1st Ed. 2006) ¶ 10.146. 11 Supra note 9, Article III, r.1 12 ALbacora v Westcott & Laurence Line, [1966] 2 Lloyd's Rep. 53 13 Homildoc, [1950] A.M.C. 1973 at p. 1985. 14 Fact Sheet p. 41, ¶ 1.2.2 15 Id p. 42 ¶¶ 1.2.5,1.2.6



the agents or servants of the carrier.16 The burden is on carrier to show that goods were lost and

taken out of the case without any fault or privity on the part of the carrier or neglect by his

servants.17

In the present case, the claimant alleges that respondents didn't carry out their duty as they

allowed the Vessel to get arrested by the pirates. Respondents argue that the route of Gulf of

Aden is pirate attack zone. The respondents took anti-piracy measures by commencing an anti-

pirate watch. However, respondents got unlucky as on their next day in Gulf of Aden, they were

held hostage by the pirate attack and from 15th November to 16th February they were kept in a

very hostile and unsuitable environment.

Therefore, respondent contends that as no reasonable person would want to subject themselves to

get captured by pirates they took proper measures against piracy and thus shouldn't be held liable

for the vessel getting captured by pirates.

(B) Delivery of the cargo was in consonance with the contract of carriage of goods

The respondent argues that the delivery of the cargo to Rotterdam was in consonance with the

contract of carriage of goods. In a bill of lading to order, the cargo is to be delivered as per the

order of the shipper.18 The Owner's duty is to deliver the cargo at port specified in the bills of

lading.

In the instant case, the contract of carriage of goods provides that the port of discharge can be

changed by way of special agreement in writing between the Charterer and the Owner.19 The

Charterer had sent a letter of indemnity directing the respondent to deliver the cargo at

Rotterdam instead of Liverpool.20

In Sze Hai Tong bank v Rambler Cycle Co Ltd21, Lord Denning had made it clear that the carrier

who delivers the goods without presentation of bills of lading does so at his own peril. However,

subject to the terms of the contract, the master may deliver the goods without presentation of bill

16 Supra note 9, Article IV r.2(q). 17 Pendle & Rivett Ltd. v Ellerman Lines Ltd, 29 Ll. L. Rep. 133 at p. 136 18 Peter Broodie, Dictionary of Shipping Terms, Informa (5th Ed) p. 174 19 Clause 6(c) of Charterparty, Factsheet p. 7 20 Factsheet p. 53 21 [1959] A.C. 576



of lading, provided that he is reasonably satisfied that the person requesting the goods is entitled

to them and there is a reasonable explanation for the absence of the bill.22

Pearce L.J. said23, "Trust is the foundation of trade; and bills of lading are important

documents...In trivial matters and in cases of bona fide dispute where the difficulty of

ascertaining the correct state of affairs is out of proportion to its importance, no doubt the

practice [of accepting indemnities] is useful."

In the present case, the Respondents were approached by the Beatles Oils Ltd., the sellers, who

asked the former to deliver the goods to Rotterdam instead of Liverpool.24 The Respondents had

reason to obey their orders because they were the sellers and therefore owner of the goods.

Further Beatles had asked for bills of lading from the Claimant which they failed to deliver and

thus there was satisfactory reason for delivery without non-presentation of bills of lading.

The respondent was given indemnity by the Beatles Oils Ltd.25 to deliver the cargo at Rotterdam

and considering the circumstance, the Respondent accepted the same. Therefore, due to the

circumstances of the present situation, the respondent delivered the cargo without presentation of

bills of lading and against indemnity provided by the Beatles Oils Ltd. In the light of these

arguments respondent claims that delivery of cargo at Rotterdam didn't constitute breach of

contract of carriage.

(C) Alternatively, The Claimant's rejection of goods disentitled them to delivery of cargo.

As per section 61 of Sale of Goods Act, 1979 "delivery" means the "voluntary transfer of

possession from one person to another".26 In c.i.f. contract, the goods are deemed to be delivered

when the bill of lading is delivered to the buyer.27 Also in c.i.f. contract in which seller has taken

out bill of lading, the bill is delivered to the buyer or his agent, the inference is that the property

which is intended to pass to the buyer is only conditional28 which means property subject to

22 SA Surce Export v. Northern River Shipping The Sormovsky 3608, [1994] 2 Llyod's Rep. 266 23 [1957] J.B.L. 173 24 Factsheet p. 72 25 Id. 26 E Reynolds & Sons (Chingford) Ltd. v Hendry Bros. Ltd., [1955] 1 Lloyd's Rep. 258 at 259; Commercial Fibres (Ireland) Ltd. v Zabaida, [1975] 1 Llyod's Rep. 27 27 Biddell Bros v E Clemens Horst Co. [1912] A.C. 18 at 22 28 Schmittoff p.



condition subsequent that the goods shall revert to the seller if, upon examination they are found

to be not in accordance with the contract.29

A buyer has right to reject the goods if he finds upon inspection that they are not in accordance

with the contract.30 Also a buyer who wishes to reject the goods has to intimate within a

reasonable time to seller that he refuses to accept them.31 The property in rejected goods revests

in the seller when he accepts the rejection.32 A buyer who has paid the price in advance and then

rejects the goods is not entitled to retain them by virtue of an "unpaid buyer's lien" until the price

is refunded.33

The Claimant argues that it wanted GMQ goods however due to pirate attack, the cargo became

non-GMQ34 and therefore Beatles were in breach of condition. Exercising their right under

section 11(3) of Sale of Goods Act, 1975, the claimants rejected the goods35 saying that they

were not in accordance with their contract between Beatles Oils Ltd.36 and asked the Beatles Oils

Ltd. for repayment of purchase price.37

The Respondent accepts that when bills of lading were transferred38 to the Claimant, the property

in them was also transferred but the same reverted back to seller when they rejected the goods

and same was accepted by the sellers.39

The respondent argues that the Claimant, pursuant to its conduct, no longer remained legal owner

of the cargo. Further, the Charterparty which is incorporated into the bills of lading also provides

that Owner may discharge the cargo at some other port as declared by the charterer and such

discharge shall constitute complete delivery and performance under the contract and is freed

29 Kwei Tek Chao v British Traders and Shippers Ltd., [1954] 2 Q.B. 459 at 487; Gill & Duffus SA v Berger & Co Inc., [1984] 2 W.L.R 95 AT 104, HL 30 s.11(3), Sale of Goods Act, 1979; Kwei Tek Chao v British Traders and Shippers Ltd., [1954] 2 Q.B. 459 at 487; Gill & Duffus SA v Berger & Co Inc., [1984] 2 W.L.R 95 AT 104, HL 31 s.36, Sale of Goods Act, 1979 32 JL Lyons & Co v May & baker, [1923] 1 K.B. 685 at 688. 33 Id. 34 Factsheet p. 25, 27 35 Factsheet p. 27 ¶ 2 36 Factsheet p. 25 ¶ 2 37 Factsheet p. 25 38 Factsheet p. 67 ¶ 11 39 Factsheet p. 28



from any further responsibility.40 The Charterer had declared to the respondent to deliver the

goods at Rotterdam41 and respondents' doing the same constitutes completion of the performance

under the contract.

(D) Conclusion

The Respondent contends that there was no breach of contract because they had due care of the

cargo and the pirate attack was not the cause of their negligence; delivery of goods against

presentation of bills of lading was justified due to the circumstances of the situation and

delivering at Rotterdam was also as per the contract of carriage; Alternatively, the claimant had

rejected the goods beforehand which disentitled them from the delivery.

PART THREE: BREACH OF CONTRACT OF BAILMENT

There are two main points which proves that there was no breach on behalf of the respondent (A)

There was a contract of bailment between The Respondent and Beatles Oils Ltd. and not between

The Claimant. (B) If at all, there is a contract of bailment between respondent and claimant then

Attornment to Bailment will apply.

The concept of attornment42 is an exception to the contract of bailment which goes like, if the

bailor directs the bailee to hold the goods, also the goods should be of specific nature for the

exception of attornment to apply43 in his possession on behalf of a third person (the claimant)

and the bailee thereupon attorns to the claimant by accepting the bailor’s direction,44 or by

acknowledging the claimant that the claimant now has title to the goods,45 the bailee will become

the bailee of the claimant.46 At common law the bailee was also stopped from denying the

40 Factsheet p. 11 41 Factsheet p. 28, 72 ¶ 7 42 N. Norman E. Palmer, Ewan Mckendrick, Interest in Goods, Lloyd’s Commercial Law Library (2nd Ed. Revised LLP, 1998), p. 1378. at Ch.21. 43 Unwin v Adams (1858) 1 F. & F. 312; Laurie and Morewood v Dudin & Sons [1926] 1 K.B. 223. Cf, Re London Wine Co (Shippers) Ltd [1986] P.C.C. 121 44Gosling v Birnie, (1831) 7 Bing. 337; Laurie and Morewood v Dudin & Sons. 45 Re Savoy Estate ltd, [1949] Ch. 622 46 Henderson & Co v Williams, [1895] 1 Q.B. 521; Dublin City Distillery Ltd v Doherty, [1914] A.C. 823, 847-848.



claimant’s title, but by statute the bailee may now set up the title of a third person in reply to the

bailor’s demand for redelivery of the goods.47

Beatles Oils Ltd. consent is not necessary to effect an attornment by the Respondent to the

Claimant48 in the sense of creating an obligation owed by the Respondent to the Claimant

However, without such consent the Respondent will be liable to Beatles Oils Ltd. for breach of

the original terms of the bailment if he delivers to the Claimant Ltd’s order not Beatles Oils

Ltd.'s order, and in practice The Respondent's action in attorning to The Claimant will almost

invariably be at the direction of Beatles Oils Ltd.49 Attornment operates as an estoppel as

between The Respondent and The Claimant rather than a form of “novation” of the relationship

of bailment. The attornment gives The Claimant, who becomes a bailor for this purpose, rights

(at least) to damages as against The Respondent, but gives no absolute right to the goods.

Attornment is only effective if the “acknowledgement” is communicated to the Claimant50 If

Beatles Oils Ltd. delivers goods to The Respondent with an instruction to deliver to The

Claimant this may make The Claimant the original bailor if Beatles Oils Ltd. acts as the

Claimant's agent but these facts do not in themselves constitute attornment, in such cases the

Claimant has no right for possession of the goods51

As per Aliakmon52, the effect of attornment is that the Claimant irrevocably becomes the bailor in

substitution for Beatles Oils Ltd.; however Beatles Oils Ltd.’s right cannot be extinguished

without his consent and the Respondent is estopped from denying the Claimant's rights in

relation to the goods. There is no reason why in general the simple act of attornment should

mean that The Respondent's new relationship as bailee of The Claimant should be on the same

terms as the original relationship as bailee of Beatles Oils Ltd. However, in “The

Aliakmon and Compania Portorafti Commerciale S.A. v. Ultramar Panama Inc” (The Captain

Gregos) (No. 2)53, the courts considered that any attornment would be on the bill of lading terms.

Apart from the consideration of commercial expediency, it has been suggested this could be

47 See Chitty, vol 2, para 33-015 an 33-017. 48Supra note 42, pp. 1368-1369

49 See Chitty, para. 33-030. 50 Supra note 42, pp. 1369-1371.

51 In Benjamin, para. 18-058; The Berge Sisar [2002] 2 A.C. 205, para. 18. 52 [1986] AC 785 53 [1995] 1 Lloyd’s Rep. 1



justified on the basis of a normal assignment, incorporation of terms by reference or bailment on

terms.54 This question is bound up with that of bailment on terms, considered below. If originally

there is a bailment on terms, then the relationship between the attornor (The Respondent) and the

attornee (The Claimant) can in principle be on the same terms but only if the The Claimant

consents, expressly or impliedly, to those terms. In The Aliakmon55 Lord Brandon pointed out

that the mere transfer of a bill of lading did not itself constitute an attornment. But in The Berge

Sisar Lord Hobhouse stated that a bill “carried with it a transferable attornment”.56 The Court of

Appeal in East West described this subject as “a difficult area”.57 Plainly the act of attornment

cannot be “transferable” in the normal sense. Lord Hob-house may have meant by that phrase

that the bailee could attorn to more than one person, one after the other. There could be serial

attornments by the carrier/bailee where cargo is sold several times during a voyage. Alternatively

it may be that Lord Hob-house was indicating that when a bill of lading is transferred from one

to another then possession of the bill of lading carried with it the possibility that the carrier/bailee

would attorn to the holder of the bill of lading and that this possibility (not readily characterized

as a “right”) will be transferred if the bill is itself transferred on to another.58 The two primary

(and related) duties are to take reasonable care of the goods59and to redeliver them to the bailor

or his order on demand or in accordance with the terms of the bailment.60

Attornment will apply because the respondent is not the bailee for the claimant but for Beatles.

Beatles and The Respondent entered into a contract in which Beatles gave the Respondent goods

which are to be delivered at a port. This contract was under a bills of lading agreement governed

by the charter party. During that period of delivering the goods at the destination port, the

Respondent will be having the possessory rights over the goods. This means that there was no

express contract of bailment but there is an implied contract of bailment between beatles and the

Respondent. This makes the Respondent bailees and beatles, bailor. The Respondent will have to

deliver goods as on the order of the bailor. Here, the Claimant is claiming to be a bailor, which is

54Supra note 42, p. 1378. 55 [1986] A.C. 786, 818. 56Supra note 51, The Berge Sisar. 57 Para. 42, per Mance L.J. 58 See Benjamin para. 18-058 59 Chitty, para. 33-048; Morris v. Martin, [1966] 1 Q.B. 716, 726. 60 Chitty, para. 33-010; East West, para. 59.



not possible because there was no contract between both. The Claimant will be in position to be a

bailor only when

Beatles instruct the Respondent to deliver the goods to the Claimant instead of beatles/its

agent again, and

After such instruction, the Respondent are ready to comply with the instructions and

Be bailees for the new bailor that is the Claimant, and give the ownership as well as

possession to them.

These are all the conditions that have to be fulfilled before the Claimant becomes the bailor. In

our case there has been no such instruction from the bailor’s company and so the bailee cannot

give away possession to a third party.

There can be a refusal of party to perform the promise wholly, If Beatles bails goods to The

Respondent and then Beatles transfers property in the goods to the Claimant this does not in

itself create the relationship of bailment between the Respondent and the Claimant.61

If Beatles Oils Ltd. bails goods to the Respondent, the Respondent may by attornment

nevertheless owe duties in bailment to the Claimant instead of to Beatles Oils Ltd.62 In the words

of the Court of Appeal in The Gudermes:63

“Attornment by a bailee consists in an acknowledgment that someone other than the original

bailor now has title to the goods and is entitled to delivery of them. There may be an attornment

sub modo; in other words, the bailee acknowledges the right to delivery but only on terms. That a

bailee will naturally do for his own protection in many instances. And if there is an attornment

on terms, the new bailor can also rely on the terms if he wishes to do so.”

The withdrawal by the bailor of consent to the bailee continuing in possession of the goods does

not necessarily operate to terminate the contractual relationship which exists between bailor and

bailee.64 The respondent were not intending to take all the rights as of the owner as they have

only proprietary interest in the transaction.65 Although a person who receives goods from their

61Supra note 53. 62 See Chitty, para. 33-030 63 Mitsui & Co. Ltd. v. Novorossiysk Shipping Co. The Gudermes, [1993] 1 Lloyd's Rep. 311 at 324 64 Perdana Properties Bhd. V. United Orient Leasing Co. Sdn. Bhd., [1981] 1 W.L.R. 1496 65 Bristol Airport plc v. Powdrill, [1990] Ch. 744



apparent owner and simply redelivers them to him when they are unsold is not liable in

conversion provided that he has acted in good faith and without knowledge of any adverse claim

to them.66

Arguendo:

The main emphasis in carriage of goods cases is on the duty of the bailee, but the duty of the

bailor to accept redelivery of the goods is also important, particularly where goods which have

been rejected or damaged are left in a vessel; in such cases obligation will itself arise67 In the

present case, The Claimant rejected the delivery of the goods to them as they brought the

contract to an end and held Beatles in breach of contract.68 The Claimant further communicated

to Beatles on 16th March 2009 that the cargo cannot now be used in the feed/food chain.69

Further The Claimant said in the same communication that they have made it clear from the

outset that they did not consider that the cargo should be sent to Liverpool where it would have

no value.70 Also they have said,” We have also made it clear that this is a decision for you as

cargo owners and charterers to make”.71

Beatles informed The Claimant that they accept that conduct/repudiation/renunciation as

bringing the contract for the Twilight Tanker shipment to an end.72 Beatles further inform The

Claimant they will now not be sailing the Twilight Trader to Liverpool and inform The Claimant

that they have abandoned their rights in relation to the 4,000 mt of cargo which they bought from

Beatles.73 The Claimant never disputed this fact and hence prima facie it seems that they

abandoned their rights to the cargo. On 17th March Beatles informed The Claimant they intend to

ask The Respondent to take the cargo to Rotterdam where they have arranged for it to be sold

and they would need the bills of lading from The Claimant for this purpose.74 The Claimant

further replied in positive on 18th March by asking Beatles to advise them about the destination

for the bills of lading to be sent.75 From this communication it is clear that The Claimant had a

66 Marcq v Christie, Manson & Woods Ltd, [2003] EWCA Civ 731; [2004] Q.B. 67 Supra note 42, pp. 705, 725.

68 Fact sheet p.25, para 2. 69 Fact sheet p.27, para 1. 70 Fact sheet p.27, para 2. 71 Fact sheet p.27, para 2. 72 Fact sheet p.28, para 4. 73 Fact sheet p.28, last para. 74 Fact sheet p.28, para 4. 75 Fact sheet p.31, first para.



very clear intention to reject the goods as they made it clear that it was their intention from the

very beginning as to not bring the goods to Liverpool which proves that they had no intention of

taking delivery of the goods. Also since The Claimant were ready to send the bills of lading to

Beatles and thereby giving up their rights in relation to the goods, they were not discharging the

duties of bailor under which they are claiming damages for the tort of conversion. Since they

have not discharged their duties as bailor, subsequently they have no right to claim damages

from The Respondent for failing in their duties as bailee.

Conclusion

the respondent hereby submit that they were the bailee for Beatles Oils Ltd. and not The

Claimant and even if as per the contract of carriage by Sea of Goods act, there arises a contract

of bailment between the Claimant and Respondent then exception of attornment will apply, as

per the discretion and business policy of the respondent.

PART FOUR: THE LETTER OF INDEMNITY IS VALID - THE

RESPONDENT ACTED IN GOOD FAITH AND THUS ARE NOT LIABLE:

(A) The Respondent acted in good faith

It is submitted that the Respondent accepted the Letter of Indemnity (LOI) issued by Beatles Oils

Ltd. in good faith. As submitted earlier, the Respondent does not have primary knowledge

regarding the contractual obligations between the Claimant and Beatles Oils Ltd., which shows

that they are not aware about the alleged breach, committed by Beatles Oils Ltd.

It is submitted that an order bill is one where the consignee is described either as “to order”, or

“X or order”, or “to the order of X”. A common method of naming a consignee is “to X or his

order”, or “to X or his assigns”76 and this wording also constitutes an order bill. It appears that

there is no difference for this purpose between “to X or order” and “to X or assigns” and an order

bill includes one where the consignee is simply a named person but other parts of the bill

76The Stettin, (1889) 14 P.D. 142.



indicate a requirement to deliver to his order and/or or assigns.77 It is, therefore, a negotiable

receipt and contract between carrier and shipper by which legal possession of the shipment may

be ordered by endorsement from person to person.

It is argued that the Letter of Indemnity is valid as the Respondent acted in good faith. In the

instant case, the Bills of lading, Pg1, Pg2, Pg3 and Pg4, are order bills of lading. The Respondent

argues that they are not aware about the contractual obligations between the Claimant and

Beatles Oils Ltd. and hence are also not aware about that the Claimant is the indorsee. However,

by the time the Respondent received a message from the Claimant, cargo was already being

discharged. Furthermore, the Respondent received instruction from Beatles Oils Ltd. before the

Claimant and also a Letter o indemnity from them which puts them in a safe situation.

(B) The Respondent is not liable to compensate for the damage caused to cargo

Even if the master has not been guilty of a breach of duty in relation either to the ship or to the

cargo, the carrier is nevertheless liable for any loss or damage which the cargo, may sustain

unless the cause of the loss or damage is covered by an exception in the contract78. However, the

shipowner cannot rely on an exception in the contract if a cause of the loss was

unseaworthiness79.

To exempt the carrier, it is not sufficient to prove that the loss or damage took place and that, at

the same time, an excepted peril happened80; he must show that the loss or damage was

proximately caused by the expected peril81.

In the instant case, Hague-Visby rules have been incorporated into the charterparty82; this shows

that the exceptions under the same are also applicable to the parties of the charterparty.

It is submitted that ‘piracy’ is an ‘expected peril’ under the Hague-Visby Rules. Neither the

carrier nor the ship shall be responsible for loss or damage arising or resulting from Act of God,

Act of public enemies etc.83 77The Happy Ranger, [2002] 2 Lloyd’s Rep. 257, 363, para. 29 78 Abbott’s Law of Merchant Ships and Seamen [14th Edn. 1901] 577 79 Smith, Hogg & Co Ltd v Black Sea and Baltic General Insurance Co Ltd, [1940] 3 AII ER 405 80 Thomas Wilson, Sons & Co v Xantho (cargo owners), (1887) 12 App Cas 503 at 512 81 William France, Fenwick & Co Ltd v North of England Protecting and Indemnity Association, [1917] 2 KB 522 82 Fact Sheet, p.4



“..Any other cause arising without the actual fault or privity of the carrier of the carrier, or

without the fault or neglect of the agents or servants of the carrier, but the burden of proof shall

be on the person claiming the benefit of this exception to show that neither the actual fault or

privity of the carrier nor the fault or neglect of the agents or servants of the carrier contributed to

the loss or damage.”84

The defences and limits of liability provided for in the Hague-Visby Rules shall apply in any

action against the carrier in respect of loss or damage to goods covered by a contract of carriage

whether the action be founded in contract or in tort85.

Piracy consists of any of the following act86s:

(a) Any illegal acts of violence or detention, or any act of depredation, committed for private

ends by the crew or the passengers of a private ship or a private aircraft, and directed:

(i) On the high seas, against another ship or aircraft, or against persons or property on

board such ship or aircraft;

(ii) Against a ship, aircraft, persons, or property in a place outside the jurisdiction of any

state.

(b) Any act of voluntary participation in the operation of a ship or of an aircraft, with

knowledge of facts making it a pirate ship or aircraft;

(c) Any act of inciting or of intentionally facilitating an act described in subparagraph (a) or

(b).

It is argued that the pirate attack on the ship, MT Twilight Trader, and its subsequent detention

for a period three months is eligible under the exceptions of Hague-Visby Rules. The

Respondent argues the master and the crew of the ship were not in hold of the operations during

its detention. The master and crew had taken care of the prior to the hijack. Later, they were not

allowed beyond the bridge. Moreover, deploying Vessel Protection Detachments (VPDs) was out

of question; United Kingdom does not allow ships with its nationality to deploy VPDs87.

83 Supra note 9, Article IV, r.2, 84 Id Article IV, r.2 (q) 85 Id Article IV bis (1) 86 Article 101, United Nations Convention on the Law of the Sea (UNCLOS), 1994 8710th Report - Foreign Affairs Committee, UK Parliament, Piracy Off the Coast of Somalia (20th December, 2011) http://www.publications.parliament.uk/pa/cm201012/cmselect/cmfaff/1318/131807.htm



(C) The Respondent is entitled to a counter claim:

It is submitted that, as argued earlier, that the Respondent is not liable to the Claimant for the

damage caused to the cargo. However, the Respondent is entitled to a counter claim under the

Convention on Limitation of Liability for Maritime Claims, 1976.

Under the Convention on Limitation of Liability for Maritime Claims, shipowners88 and

salvors89 may limit their liability for claims that the convention makes subject to limitation. The

act of invoking limitation of liability does not constitute an admission of liability.90

In the instant case, the claims of the Claimant fall under Article 2(b) and (c) of the Convention

on Limitation of Liability for Maritime Claims. It is argued that the Respondent’s alleged tort of

conversion is not an act that triggers an infringement of direct contractual right of the Claimant;

however, it encompasses a loss resulting from infringement of rights other than contractual rights

occurring in direct connection with the operation of the ship. Therefore, the Respondent is

entitled to limit liability and also for a counter claim.

It is submitted that the Respondent suffered a huge loss due to the arrest of the vessel at

Rotterdam. The Respondent’s act of delivering cargo at Rotterdam in exchange for a Letter of

Indemnity was effected in good faith; however, the subsequent arrest by the Claimant restrained

the Respondent from any further trade using the vessel. It is further submitted that the Claimant

does not have a valid claim against the Respondent; which, therefore, makes the Respondent not

liable. The Claimant’s claim against an act resulting from the alleged collusion between the

Respondent and Beatles Oils Ltd. does not stand because the Respondent was not aware about

the contractual obligations between the Claimant and Beatles Oils Ltd. and acted in good faith.

It is submitted that the Claimant is liable to compensate the Respondent with respect to the loss

suffered due to the wrongful arrest. It is argued that the Claimant, being the wrongdoer [refused

to accept goods – however, they still intend to claim the cargo; which they showed by arresting 88 Article 1(2), Convention on Limitation of Liability for Maritime Claims, 1976 89 Id Article 1(3) 90 Id Article 1(7)



the vessel] does not have the right over cargo. They have waived their right over cargo the

moment they refused to accept the same; which removes their interest in the cargo. Therefore,

their claim does not amount to a maritime claim as under Article 1 of the 1952 International

Convention for the Unification of Certain Rules to the Arrest of Sea-Going Ships [Arrest

Convention, 1952]. Hence, it is argued the arrest of MT the Respondent amounts to a wrongful

arrest. Therefore, the Claimant is liable to compensate the Respondent with respect to the loss

that they suffered due to the restrain put on them as a result of the arrest; which did not let them

to complete their contractual obligations with the other consignee. About 14,500 MT of cargo is

sold to Ecclestone Oils by Beatles Oils Ltd; which was carried on MT the Respondent91. The

Respondent argues that wrongful arrest by the Claimant resulted in a contractual breach by the

Respondent. Therefore, the Claimant is liable to compensate the Respondent for the loss suffered

by them.

Freight rate from Liverpool to Rotterdam - 14,500 (tons) * USD 50 (per mt) = USD 725,000

The Claimant is also liable to pay freight charges from Liverpool to Rotterdam. The delivery

was effected due to non-acceptance of goods by the Claimant at Liverpool.

They are liable to pay –

- Freight rate from Liverpool to Rotterdam92: USD 50 (per mt) * 4,000 (tons) = USD

200,000

Moreover, the Claimant’s wrongful arrest of the vessel resulted in loss of business to the

Respondent. MT The Respondent was not available to its owner; which restrained them from

carrying on business using the same. Mala fides must be taken to exist in those cases where the

arresting party has no honest belief in its entitlement to arrest the ship93. In the instant case, the

Claimant does not have the entitlement to arrest the vessel since he refused to accept the goods;

which shows their mala fide intention of the Claimant. Furthermore, the guarantee provided by

the Claimant is not sufficient.

91 Fact Sheet, p-66 92 Fact Sheet, p-59 93 The Kommunar, 36 (1997) Lloyd’s Rep 22



REQUEST FOR RELIEF

In the light of the arguments submitted above, the respondent respectfully requests this arbitral

tribunal to:

DECLARE that this Tribunal does not have jurisdiction to hear this dispute.

Alternatively

DECLARE, that this Tribunal has jurisdiction to hear both the claimant and respondent's claims.

Further

FIND that the respondent is not liable for breach of contract of carriage of goods and conversion;

and

FIND that the claimant is liable to pay the costs with compound interest as per s. 49 of the

arbitration act, 1996.

Therefore

AWARD the respondent damages for:

1. The wrongful arrest of the vessel.

2. Loss suffered owing to non-payment of excess freight rates.

3. Loss suffered owing to damage to reputation and subsequent loss of business.

The total amount asked (counter-claim) by the respondent is USD 9,250,000 for direct loss and

other damages that the Tribunal deems fit.

FOURTEENTH A I MEMORANDUM FOR RESPONDENT€¦ · 14th International Maritime Law Arbitration Moot...

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