MEMORANDUM FOR RESPONDENT - Murdoch University...Harrison v Huddersfield SS Co (1903) 19 TLR 386...

18th Annual International Maritime Law Arbitration Moot

In the matter of an arbitration under the SCMA Arbitration Rules

UNIVERSITY OF QUEENSLAND

A U S T R A L I A

MEMORANDUM FOR

RESPONDENT

CLAIMANT

Furnace Trading Pty Ltd

2 Marina Boulevard #19-05

Singapore

v

RESPONDENT

Inferno Resources SDN BHD

2/3 SW Pasar Borong Pandan

Malaysia

TEAM 1

COUNSEL

ANTONIA BELLAS | PENELOPE BRISTOW | JANE HALL | MATTHEW PATERSON

Team 1 Memorandum for the Respondent

ii

TABLE OF CONTENTS

LIST OF ABBREVIATIONS v

LIST OF AUTHORITIES vi

STATEMENT OF FACTS 1

CHARTERPARTY CHAIN 3

PRELIMINARY MATTERS 3

A. Law of the arbitration 3

SUBMISSIONS ON INTERIM ORDER FOR SALE OF THE CARGO 4

I. THE TRIBUNAL CANNOT, AND SHOULD NOT, ORDER THE SALE OF THE CARGO 4

A. The Tribunal does not have jurisdiction to order the sale of the Cargo 4

B. In any event, the Tribunal should not order the sale of the Cargo 5

(i) Failure to sell the Cargo will not cause FURNACE irreparable harm 5

(ii) The harm caused to INFERNO and IDONCARE by the sale of the Cargo substantially outweighs the

harm that would otherwise be caused to FURNACE 6

(iii) Urgent relief is not required 7

SUBMISSIONS ON THE LIEN OVER CARGO ISSUE 8

II. FURNACE IS NOT ENTITLED TO EXERCISE A LIEN OVER THE CARGO 8

A. FURNACE is not entitled to a lien on the Cargo for advance freight 8

(i) FURNACE cannot exercise a conventional lien as it does not possess the Cargo 8

(ii) FURNACE is not entitled to a common law or statutory lien over the Cargo 8

(iii) FURNACE is not entitled to any form of contractual lien over cargo belonging to IDONCARE 9

B. FURNACE cannot receive the benefit of a lien on the Cargo exercised by IMLAM 9

(i) IMLAM did not assign a contractual right of lien to FURNACE 10

(ii) IMLAM did not exercise a right of lien as trustee for FURNACE 10


iii

(iii) In any event, the BoL between IMLAM and IDONCARE did not incorporate a lien clause 11

C. In any event, FURNACE did not validly exercise a lien over the cargo as insufficient notice was given

to INFERNO and IDONCARE 12

D. FURNACE is unlawfully detaining the Cargo 13

SUBMISSIONS ON THE LIEN OVER SUB-FREIGHT ISSUE 14

III. FURNACEIS NOT ENTITLED TO SUB-FREIGHT PAYABLE TO INFERNO 14

A. FURNACE has no contractual right to a lien on sub-freight 14

B. FURNACE has no right to intercept sub-freight 15

SUBMISSIONS ON TERMINATION 16

V. FURNACE DID NOT HAVE THE RIGHT TO TERMINATE THE VCP 16

A. INFERNO did not breach a condition of the VCP 16

B. INFERNO did not breach an innominate term such that FURNACE was deprived of substantially the

whole benefit of the VCP 17

C. INFERNO did not repudiate the VCP 18

D. INFERNO was entitled to terminate the VCP 20

SUBMISSIONS ON DAMAGES 21

V. FURNACE IS ENTITLED TO NO MORE THAN NOMINAL DAMAGES 21

A. FURNACE is only entitled to nominal damages for breach of the VCP 21

B. FURNACE is not entitled to damages for costs and expenses of exercising the lien 21

(i) FURNACE did not validly exercise a lien 21

(ii) In any event, FURNACE did not exercise its lien reasonably 22

C. FURNACE is not entitled to damages for detention 22

(i) Detaining the Vessel at Singapore broke the chain of causation 23

(ii) In any event, FURNACE failed to take reasonable steps to mitigate its loss 23


iv

PRAYER FOR RELIEF 24

ANNEXURE A: MAP OF PORTS 25


v

LIST OF ABBREVIATIONS

ABBREVIATION TERM

BoL Bill of lading

Cargo The 84,000.052 metric tonnes of coal on board the Vessel

Expert Report Expert Report of Caleb Coalman dated 3 December 2016

FURNACE Furnace Trading Pte Ltd

IAA International Arbitration Act (Chapter 143A) 2002 rev ed

IDONCARE Idoncare Berjaya Utama Pty Ltd

INFERNO Inferno Resources Sdn Bhd

IMLAM Imlam Consignorist GmbH

Master Master of MV Tardy Tessa, Captain Tan Xiao Ming

Model Law 1985 UNCITRAL Model Law on International Commercial Arbitration

(1985)

Model Law 2006 UNCITRAL Model Law on International Commercial Arbitration

(rev ed 2006)

Moot Scenario International Maritime Law Arbitration Moot 2017 ‘Moot Scenario’

NYPE 2015 New York Produce Exchange Charterparty 2015

PMT Per metric tonne

SCMA Rules Singapore Chamber of Maritime Arbitration Rules (3rd edition)

SCP Sub-voyage charterparty (between INFERNO and IDONCARE)

TCP Time charterparty (between IMLAM and FURNACE)

VCP Voyage charterparty (between FURNACE and INFERNO)

Vessel MV Tardy Tessa


vi

LIST OF AUTHORITIES

A. Articles and books

Aikens LJ et al Bills of Lading (Informa Law from Routledge, 2nd edition, 2015)

Christopher Huntley, ‘The Scope of Article 17: Interim Measures under the UNCITRAL Model

Law’ (2005) 9 Vindobona Journal of International Commercial Law and Arbitration 1

Clerk & Lindsell on Torts, 20th Edition

Coghlin et al Time Charters (Informa Law, 7th edition, 2014)

Cooke et al Voyage Charterers (Informa Law, 4th edition, 2014)

Gary Born, International Commercial Arbitration (Kluwer Law International, 2nd edition, 2009)

McGregor on Damages, 18th edn (Sweet & Maxwell, London, 2011)

Melis Ozdel, ‘Bills of Lading Incorporating Charterparties’ (Hart Publishing, Oxford, 2015)

Mika Savola, ‘Interim measures and emergency arbitrator proceedings’ (2016) 23 Croatian

Arbitration Yearbook 73

Neil McDonnell, ‘The Availability of Provisional Relief in International Commercial Arbitration’

(1984) 22 Columbia Journal of Transnational Law 273

Snell’s Equity (Sweet & Maxwell, 31st edition, 2005)

B. Cases

Afovos Shipping Co SA v R Pagnan and Flli (The ‘Afovos’) [1982] 1 WLR 848

Alan Ramsay Sales & Marketing Ltd v Typhoo Tea Ltd [2016] EWHC 486 (Comm)

Albemarle Supply Co Ltd v Hind & Co [1928] 1 KB 307

American Cyanamid v Ethicon Ltd [1975] AC 396

Bangladesh Chemical Industries Co v Henry Stephens Shipping Co Ltd & Anor (The ‘SLS Everest’)

[1981] 2 Lloyd’s Rep 389

Behzadi v Shaftesbury Hotels Ltd [1992] Ch 1

Bremer Handelsgesellschaft Schaft mbh v Vanden Avenne Izegem pvba [1978] 2 Lloyd's Rep 109

British Commonwealth Holdings v Quadrex Holdings Ltd [1989] QB 842


vii

Bunge Corporation v Tradax Export SA [1981] 1 WRL 711

Castleton Commodities Shipping Company Pte Ltd v Silver Rock Investments (The ‘Clipper

Monarch’) [2015] EWHC 2584

Cehave NV v Bremer Handelgesellschaft mbH (The ‘Hansa Nord’) [1976] QB 44

Cho Yang Shipping Co Ltd v Coral (UK) Ltd [1997] 2 Lloyd’s Rep 641

Chuan Hong Petrol Station Pte Ltd v Shell Singapore (Pte) Ltd [1992] 2 SLR 729

Dalkia Utilities Plc v Celtech International Ltd [2006] 1 Lloyd’s Rep 599

Darbishire v Warran [1963] 1 WLR 1067

Decro-Wall International SA v Practitioners in Marketing Ltd [1971] 1 WLR 361

Dry Bulk Handy Holding Inc and Another v Fayette International Holdings Ltd and Another (The

‘Bulk Chile’) [2013] 2 Lloyd’s Rep 38

Federal Commerce and Navigation Ltd v Molena Alpha Inc (The ‘Nanfri’) [1978] 1 Lloyd’s Rep 581

Fercometal SARL v Mediterranean Shipping Co SA [1989] AC 788

Five Ocean Corporation v Cingler Ship Pte Ltd [2015] SGHC 311

Fulton Shipping Inc of Panama v Grobalia Business Travel SAU (The ‘New Flamenco’) [2014] 2

Lloyd’s Rep 230

Galoo v Bright Grahame Murray [1994] 1 WLR 1360 CA

Giebel v Smith (1872) LR 7 QB 404

Golden Strait Corp v Nippon Yusen Kubishika Kaisha (The ‘Golden Victory’) [2007] 2 AC 353

Goodpasture Inc v The Pollux (1979) AMC 2515

Grand China Logistics Holding (Group) Co v Spar Shipping [2016] EWCA (Civ) 982

Harrison v Huddersfield SS Co (1903) 19 TLR 386

Homburg Houtimport BV v Agrosin Private Ltd (The ‘Starsin’) [2004] 1 AC 715

Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26

Howard v Pickford Tool [1951] 1 KB 417

India Steamship Co v Louis Dreyfus Sugar Ltd (The ‘Indian Reliance’) [1997] 1 Lloyd's Rep 52


viii

Inverkip SS Co Ltd v Bunge [1917] 2 KB 193

Itex Itagrani Export SA v Care Shipping Corporation and Others (The ‘Cebu’) (No 2) [1990] 2

Lloyd’s Rep 316

K/S A/S Seateam Co v Iraq National Oil Co and Ors (The ‘Sevonia Team’) [1983] 2 Lloyd’s Rep 640

Koch Marine Inc v d’Amica Societa di Navigazione ARL (The ‘Elena d’Amico’) [1980] 1 Lloyd’s

Rep 75

Kodros Shipping Corp of Monrovia v Empresa Cubana de Fletes (The ‘Evia’) (No 2) [1983] 1 AC

736

Larner v Fawcett [1950] 2 All ER 727

Leeds Shipping Co Ltd v Société Française Bunge (The ‘Eastern City’) [1958] 2 Lloyd’s Rep 127

Limerick v Coker (1916) 33 TLR 103

Lyle Shipping v Cardiff Corp [1900] 2 QB 638

Malayawata Steel Bhd v Government of Malaysia [1975] 1 MLJ 22

Manchester Trust v Furness, Withy [1895] 2 QB 539 (CA)

Metall Market OOO v Vitorio Shipping Co Ltd (The ‘Lehmann Timber’) [2014] QB 760

Molthes Rederi v Ellerman’s Wilson Line (1926) 26 Lloyd’s Law Reports 259

Motis Exports Ltd v Dampskibsselskabet AF 1912 [2000] 1 Lloyd's Rep 211

Multi-Veste 226 BV v NI Summer Row Unitholder BC [2011] EWHC 2026

Navigazione Alta Italia v Svenska Petroleum (The ‘Nai Matteini’) [1988] 1 Lloyd’s Rep 452

Pacific Molasses v Entre Rio (The ‘San Nicholas’) [1976] 1 Lloyd’s Rep 8

Partenreederei M/S “Heidberg” & Anor v Grosvenor Grain and Feed Co Ltd & Anor (The

‘Heidberg’) [1994] 2 Lloyd’s Rep 287

Paterson, Zochonis & Co v Elder Dempster [1924] AC 552

Petroleo Brasileiro SA v ENE Kos 1 Ltd (The ‘Kos’) [2012] 2 AC 164

Phelps v Spon-Smith & Co [2001] BPIR 326

Photo Production v Securior [1980] AC 827


ix

Robinson v Harman (1848) 1 Ex 850

Ross T Smyth & Co Ltd v T D Bailey, Son & Co [1940] 3 All ER 60

Samarenko v Dawn Hill House Ltd [2011] EWCA (Civ) 1445

Samuel v West Hartlepool (1906) 11 Com Cas 111

Sandeman v Scurr (1866) LR 2 QB 86

Santiren Shipping Ltd v Unimarine SA (The ‘Chrysovalandou Dyo’) [1981] 1 Lloyd’s Rep 159

Singapore Press Holdings Ltd v Brown Noel Trading Pte Ltd & Ors [1994] 3 SLR 151

Smailes v Hans Dessen and Co (1906) 12 Com Cas 117

Societe Generale v Geys [2012] 1 AC 513

Stanton v Richardson (1872) LR 7 CP 421

Steelwood Carriers Inc of Monrovia v Evimeria Compania Naviera SA of Panama (The ‘Agios

Giorgis’) [1976] 2 Lloyd’s Rep 192

Stocznia Gdanska SA v Latvian Shipping Co (No 2) [2002] 2 Lloyd’s Rep 436

Tage Berglund v Montoro Shipping Corp Ltd (The ‘Dagmar’) [1968] 2 Lloyd’s Rep 563

Tarrabochia v Hickie (1856) 1 H&N 183

Taxfield Shipping Ltd v Asiana Marine Inc & Ors [2006] HKCFI 271

Telford Homes (Creekside) Limited v Ampurius NU Homes Holdings Limited [2013] EWCA Civ 577

Tenax Steamship Co v The Owners of the Motor Vessel Brimnes (The ‘Brimnes’) [1975] QB 929

The ‘Titan Unity’ (No 2) [2014] SGHCR 4

The Rewia [1991] 2 Lloyd’s Rep 325

The Vinson (2005) 677 LMLN 1

Tillmanns v Knutsford [1908] 2 KB 385

Torvald Klaveness A/S v Arni Maritime Corporation (The ‘Gregos’) [1995] 1 Lloyd’s Rep 1

Tradigrain SA and ors v King Diamond Marine Ltd (The 'Spiros C') [2000] EWCA Civ 217

Tsu Soo Sin v Oei Tjiong Bin [2008] SGCA 46

Turner v Haji Goolam (The ‘Bombay’) [1904] AC 826


x

Universal Cargo Carriers Corporation v Citati [1957] 2 WLR 713

Universal Steam Navigation Co v James McKelvie & Co [1923] AC 492

Valilas v Januzaj [2014] EWCA Civ 436

Wehner v Dene [1905] 2 KB 92

Welex AG v Rosa Maritime Ltd (The ‘Epsilon Rosa’) [2002] 2 Lloyd’s Rep 81

Western Bulk Shipping [2012] EWHC 1224

Wilston Steamship SS Co v Andrew Weir Co Ltd (1925) 22 LIoyd’s Law Reports 521

Wuhan Ocean Economic and Technical Cooperation Co Ltd v Shiffahrts-Gesellschaft Murcia GmbH

KG (The ‘Hansa Murcia’) [2012] EWHC 3104 (Comm)

C. Arbitral awards

Biwater Gauff (Tanzania) Ltd v United Republic of Tanzania (Procedural Order No 1) (ICSID

Arbitral Tribunal, Case No AEB/05/22, 31 March 2006)

City Oriente Ltd v Ecuador (Decision on Revocation of Provisional Measures) (ICSID, Case No.

ARB/06/21, 13 May 2008)

Emilio Agustin Maffezini v Spain (Procedural Order No. 2) (ICSID arbitration, Case No ARB/97/7

London Arbitration 17/91 (1991) 307 Lloyd’s Maritime Law Newsletter

London Arbitration 5/92 (1992) 321 Lloyd’s Maritime Law Newsletter

Occidental Petroleum Corporation v Ecuador (Decision on Provisional Measures) (ICSID, Case No.

ARB/06/11, 17 August 2007)

Plama Consortium Ltd v Republic of Bulgaria (Order) (ICSID, Case No. ARB/03/24, 6 September

2005), [38].

Quiborax SA & Ors v Bolivia (Decision on Provisional Measures), (ICSID Arbitral Tribunal, Case

No ARB/06/02, 26 February 2010)

Sapiem v Bangladesh (Decision on Jurisdiction and Recommendation on Provisional Measures)

(ICSID, Case No. ARB/05/07, 21 March 2007)


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Sergei Paushok & Ors v The Government of Mongolia (Order on Interim Measures) (2 September

2008)

Tokios Tokeles v Ukraine (Procedural Order No. 3) (ICSID, Case No. ARB/02/18, 18 January 2005)

D. Legislation

High Court (Admiralty Jurisdiction) Act 2001 (Chapter 123)

International Arbitration Act (Chapter 143A)

Sale of Goods Act (Chapter 393) (Singapore)

UNCITRAL Model Law on International Commercial Arbitration (1985)

UNCITRAL Model Law on International Commercial Arbitration (2006, rev ed)

E. Other

Chartered Institute of Arbitrators, International Arbitration Practice Guideline: Applications for

Interim Measures (2016)

New York Produce Exchange Charterparty 2015

The Baltic and International Maritime Council Uniform General Charter 1994


1

STATEMENT OF FACTS

1 On 15 February 2016, IMLAM, owners of the MV Tardy Tessa (Vessel), entered into a time

charterparty (TCP) with FURNACE (the Claimant). On 1 September 2016, FURNACE entered into a

voyage charterparty (VCP) with INFERNO (the Respondent). INFERNO subsequently entered into a

sub-voyage charterparty (SCP) with IDONCARE.

2 Clause 15 of the VCP provided that freight of USD $771,120.48 was to be paid within five banking

days after the completion of loading, and signing and release of the BoLs.1

3 On 4 October 2016, the Vessel was loaded with 84,000.052 metric tonnes of coal (Cargo), and the

Bills of Lading (BoLs) were signed by the Master of the Vessel and released. IDONCARE were named

as shippers, however no carrier was specified. The special instructions on the BoLs read, ‘freight

payable as per charterparty’. Clause 1 of the BoLs stated ‘all terms and conditions, liberties and

exceptions of the Charter Party, dated as overleaf… are herewith incorporated’.

4 The Vessel arrived at Singapore on 10 October 2016. When the Vessel passed Singapore, INFERNO

was to nominate a safe discharge port in China per Cl 8 of the VCP.2 Due to congestion at Chinese

ports, INFERNO nominated Busan, South Korea, on 16 October 2016, and again on 19 October 2016.

FURNACE rejected these nominations and on 19 October issued INFERNO a notice giving INFERNO only

23 hours’ notice to perform its obligations under the VCP.

5 On 20 October 2016, FURNACE emailed Inferno a ‘notice of lien’ on the Cargo for unspecified losses

and costs, ‘not limited to’ freight. FURNACE also emailed IDONCARE a ‘notice of lien on sub-freight’,

directing Idoncare to pay FURNACE sub-freight owing to INFERNO.

6 INFERNO nominated Ningbo (listed in Cl 8 of the VCP) on 21 October 2016, and requested a variation

to the manner of payment of freight. After receiving this valid nomination, FURNACE wrongfully

attempted to terminate the VCP on 22 October 2016. INFERNO accepted this as a repudiation, and

terminated the VCP on 22 October 2016.

1 As specified in the Fixture Recap at point 19: Moot Scenario, p 22. 2 As specified in the Fixture Recap at point 16: Moot Scenario, p 21.


2

7 On FURNACE’s authority, the Vessel has been kept adrift on the open seas since 11 October 2016. On

30 November, the Master reported that the Vessel and the Cargo were at a high risk of being damaged

or lost due to monsoon weather, and noted signs of the Cargo overheating. Furhter, he reported that

the crew’s health was at risk due to lack of fresh food, fresh water, and medicine.

8 FURNACE issued INFERNO and IDONCARE with notices of arbitration on 25 November 2016 in

accordance with Cl 29 of the VCP. The matters were consolidated on 11 December 2016.


3

CHARTERPARTY CHAIN

This diagram depicts the contractual relationships between the parties for the purpose of the following

submissions.

PRELIMINARY MATTERS

A. The laws of Singapore govern this arbitration

1 Pursuant to Cl 29 of the VCP,3 this arbitration is governed by the laws of Singapore and is to be

conducted per the Singapore Chamber of Maritime Arbitration Rules (3rd edition) (SCMA rules).

Therefore, the International Arbitration Act (IAA) governs this arbitration.4 Section 3(1) of the IAA

incorporates the UNCITRAL Model Law on International Commercial Arbitration (1985) (Model

Law 1985) into the law of Singapore.5

3 Moot Scenario, p 23. 4 International Arbitration Act (Chapter 143A), s 5. See also Moot Scenario, pp 70, 76, 83, 86, 89, 92, 94, 103. 5 International Arbitration Act (Chapter 143A), s 3(1).


4

SUBMISSIONS ON INTERIM ORDER FOR SALE OF THE CARGO

I. THE TRIBUNAL CANNOT, AND SHOULD NOT, ORDER THE SALE OF THE CARGO

2 The Tribunal cannot make an interim order the sale of the Cargo because (A) the Tribunal does not

have jurisdiction to do so. In any event, (B) the Tribunal should not order the sale of the cargo.

A. The Tribunal does not have jurisdiction to order the interim sale of the Cargo

3 Section 12(1)(d) of the IAA gives the Tribunal power to make orders or give directions to any party

for the interim sale of property which forms part of the subject matter of the dispute. ‘Party’ is defined

in s 2(1) of the IAA as a party to the arbitration agreement, or a party to the arbitration itself.6 IMLAM,

which has control of the Cargo, is not a party to whom the Tribunal can make or give directions. This

is because IMLAM is not a party to the arbitration agreement contained in Cl 29 of the VCP,7 and

IMLAM is not a party to this arbitration.8 Therefore, the Tribunal cannot issue an order for interim sale

of the Cargo, as such an order would have a binding effect on a third party,9

4 Further, the Tribunal does not have the power to order a party to the arbitration to take steps vis-a-vis

a third party. Where such a power does exist, it is confined to very specific relationships (eg between

a corporate entity and its subsidiary)10 and must be ‘necessary to accomplish justice’.11 Here,

FURNACE could have taken steps pursuant to Rule 33.2 of the SCMA Rules, to join IMLAM as a party

to these proceedings. INFERNO and IDONCARE’s interests should not be prejudiced because of

FURNACE’s failure to do so. Therefore, the Tribunal cannot require FURNACE to order IMLAM to sell

the Cargo.

6 International Arbitration Act (Chapter 143A), s 2(1). See also Christopher Huntley, ‘The Scope of Article 17: Interim

Measures under the UNCITRAL Model Law’ (2005) 9 Vindobona Journal of International Commercial Law and

Arbitration 1, 86. 7 Cf The ‘Titan Unity’ (No 2) [2014] SGHCR 4, [39] (Leong Li Shiong AR). 8 Moot Scenario, p 103. 9 Gary Born, International Commercial Arbitration (Kluwer Law International, 2nd edition, 2009) 1966; Neil

McDonnell, ‘The Availability of Provisional Relief in International Commercial Arbitration’ (1984) 22 Columbia

Journal of Transnational Law 273, 283. 10 Gary Born, International Commercial Arbitration (Kluwer Law International, 2nd edition, 2009) 1966. 11 Gary Born, International Commercial Arbitration (Kluwer Law International, 2nd edition, 2009) 1966.


5

B. In any event, the Tribunal should not order the interim sale of the Cargo

5 Interim measures are ‘extraordinary measures not to be granted lightly’.12 Art 17 of the Model Law

1985 indicates that the Tribunal must consider interim orders to be ‘necessary’. It is insufficient to

show that sale of the Cargo is merely convenient or appropriate.13 The Tribunal does not have

unfettered discretion when granting interim relief.14

6 In international commercial arbitration, three factors are considered relevant when granting interim

relief: urgency, risk of irreparable or serious harm, and proportionality.15 Taking these factors into

consideration, the Tribunal should not order the sale of the Cargo because: (i) failure to sell the Cargo

will not cause FURNACE irreparable harm; (ii) any harm suffered by FURNACE does not substantially

outweigh the harm that is likely to be incurred by INFERNO if the Cargo is sold; and (iii) urgent relief

is not required.

(i) Failure to sell the Cargo will not cause FURNACE irreparable harm

7 The grant of provisional measures requires evidence of ‘irreparable’ harm,16 or harm that cannot be

repaired by an award of damages.17 At a minimum, ‘serious’ or ‘substantial’ harm is required.18 In

either case, a possible increase in damages does not warrant provisional relief.19 Therefore, there are

two reasons why the Tribunal should not order the sale of the Cargo.

12 Sergei Paushok & Ors v The Government of Mongolia (Order on Interim Measures) (2 September 2008), [39];

Emilio Agustin Maffezini v Spain (Procedural Order No. 2) (ICSID arbitration, Case No ARB/97/7, 28 October 1999). 13 Sergei Paushok & Ors v The Government of Mongolia (Order on Interim Measures) (2 September 2008), [39]. 14 Gary Born, International Commercial Arbitration (Kluwer Law International, 2nd edition, 2009) 1980. 15 See, eg, UNCITRAL Model Law on International Commercial Arbitration (2006 rev ed), Art 17A; Chartered Institute

of Arbitrators, International Arbitration Practice Guideline: Applications for Interim Measures (2016) Art 2. See also,

Gary Born, International Commercial Arbitration (Kluwer Law International, 2nd edition, 2009) 1981; Mika Savola,

‘Interim measures and emergency arbitrator proceedings’ (2016) 23 Croatian Arbitration Yearbook 73, 82. Note also

that these standards are comparable to those applied by Singaporean Court when granting interim measures. See, eg,

Singapore Press Holdings Ltd v Brown Noel Trading Pte Ltd & Ors [1994] 3 SLR 151, 158; Chuan Hong Petrol

Station Pte Ltd v Shell Singapore (Pte) Ltd [1992] 2 SLR 729, 742-743 applying American Cyanamid v Ethicon Ltd

[1975] AC 396, 407-408 (Lord Diplock). 16 Tokios Tokeles v Ukraine (Procedural Order No. 3) (ICSID, Case No. ARB/02/18, 18 January 2005), [8]. See also,

Plama Consortium Ltd v Republic of Bulgaria (Order) (ICSID, Case No. ARB/03/24, 6 September 2005), [38]. 17 Quiborax v Bolivia (Decision on Provisional Measures) (ICSID, Case No. ARB/06/02, 26 February 2010), [156];

Sapiem v Bangladesh (Decision on Jurisdiction and Recommendation on Provisional Measures) (ICSID, Case No.

ARB/05/07, 21 March 2007), [182]. 18 UNCITRAL Model Law on International Commercial Arbitration (2006, rev ed), Art 17A(1)(a); Sergei Paushok v

Mongolia (Order on Interim Measures) (UNCITRAL, 2 September 2008), [68-69]. 19 Occidental Petroleum Corporation v Ecuador (Decision on Provisional Measures) (ICSID, Case No. ARB/06/11, 17

August 2007), [99]; City Oriente Ltd v Ecuador (Decision on Revocation of Provisional Measures) (ICSID, Case No.

ARB/06/21, 13 May 2008), [64].


6

8 First, sale of the Cargo is not necessary to alleviate the risk currently posed to the Vessel, Cargo and

crew.20 By discharging the Cargo at Singapore, or any other port, FURNACE would avoid this harm.

The Vessel would no longer be subject to monsoon weather, the Cargo could be safely warehoused,

and the Crew could restock the Vessel. This is a reasonable alternative because any purported lien

rights would be recognised by Singaporean law,21 and there is no indication that it would be

commercially or physically impractical to maintain the purported lien in a Singaporean port.22 Instead

FURNACE is voluntarily and unnecessarily endangering the Vessel, Cargo and crew to exercise a

purported lien over the Cargo.

9 Second, any potential loss of business venture incurred by FURNACE is a purely economic loss and is

readily compensable by an award of damages.23 No interim relief should be awarded on this basis.

(ii) The harm caused to INFERNO and IDONCARE by the sale of the Cargo substantially outweighs

the harm that would otherwise be caused to FURNACE

10 The balance of convenience24 favours IDONCARE and INFERNO. Both parties will suffer significant

harm if the Tribunal orders the interim sale of the Cargo.

11 IDONCARE will be robbed of its ability to sell the Cargo to third parties of its choosing. This would

deny IDONCARE the capacity to contract freely for the sale of the Cargo. As indicated in the Expert

Report, interim sale of the Cargo is likely to greatly reduce the sale price of the Cargo, causing

IDONCARE to lose up to $652,680.41 in profit.25 Further, if IDONCARE has already contracted for the

sale of the Cargo such an order would harm IDONCARE’s reputation and goodwill, and expose them

to claims of breach of contract.

20 Moot Scenario, p 37. 21 Sale of Goods Act (Chapter 393) (Singapore) s 43. Cf Five Oceans Corporation v Cingler Pte Ltd [2015] SGHC 311,

[61] (Ang Saw Ean J). 22 Five Oceans Corporation v Cingler Pte Ltd [2015] SGHC 311, [2] (Ang Saw Ean J). 23 Occidental Petroleum Corporation v Ecuador (Decision on Provisional Measures) (ICSID, Case No. ARB/06/11, 17

August 2007), [99]; City Oriente Ltd v Ecuador (Decision on Revocation of Provisional Measures) (ICSID, Case No.

ARB/06/21, 13 May 2008), [64]. 24 Sergei Paushok & Ors v The Government of Mongolia (Order on Interim Measures) (2 September 2008), [79]. See,

eg, UNCITRAL Model Law on International Commercial Arbitration (2006, rev ed) Art 17A(1)(a). 25 Moot Scenario, p 101.


7

12 INFERNO’s reputation and goodwill could also be irreparably damaged if the interim sale causes harm

to third parties.

(iii) Urgent relief is not required

13 Urgent relief is not required for two reasons. First, the Cargo’s value is likely to remain stable

throughout the arbitration. As stated in the Expert Report, the Tribunal can assume the value of the

Cargo is not affected by any global market downward trends.26 Further, there is no evidence that the

Cargo is degrading.27 Second, FURNACE can alleviate any imminent harm to Vessel and crew by other

means, such as discharging the Cargo at Singapore,28 therefore it is not necessary to sell the Cargo

before the issuance of the final award.29

26 Moot Scenario, p 100. 27 Moot Scenario, pp 97-102. Cf orders for the sale of perishable goods see, eg, Taxfield Shipping Ltd v Asiana Marine

Inc & Ors [2006] HKCFI 271, [22] (Chan J); Larner v Fawcett [1950] 2 All ER 727, 729 (Somervell LJ). 28 Cf, Five Oceans Corporation v Cingler Pte Ltd [2015] SGHC 311, [61] (Ang Saw Ean J). 29 See, eg, Biwater Gauff (Tanzania) Ltd v United Republic of Tanzania (Procedural Order No 1) (ICSID Arbitral

Tribunal, Case No AEB/05/22, 31 March 2006) [76]; Quiborax SA & Ors v Bolivia (Decision on Provisional

Measures), (ICSID Arbitral Tribunal, Case No ARB/06/02, 26 February 2010) [150]; City Oriente Ltd v Republic of

Ecuador and Petroecuador (Decision on Provisional Measures) (ICSID Arbitral Tribunal, Case No ARB/06/21, 19

November 2007) [67].


8

SUBMISSIONS ON THE LIEN OVER CARGO ISSUE

II. FURNACE IS NOT ENTITLED TO EXERCISE A LIEN OVER THE CARGO

14 FURNACE is not entitled to a lien on cargo because: (A) FURNACE is not entitled to a lien on the Cargo

for advance freight; and (B) FURNACE cannot receive the benefit of a lien over the cargo exercised by

IMLAM; and (C) in any event FURNACE did not validly exercise a lien over the Cargo.

A. FURNACE is not entitled to a lien on the Cargo for advance freight

15 FURNACE is not entitled to a lien on the Cargo for advance freight because: (i) FURNACE cannot

exercise a conventional lien as it does not possess the Cargo; (ii) FURNACE is not entitled to a common

law or statutory lien; and (iii) FURNACE is not entitled to any form of contractual lien on cargo owned

by IDONCARE.

(i) FURNACE cannot exercise a conventional lien as it does not possess the Cargo

16 A lien is a defence grounded in possession.30 IMLAM, as ship owner, has physical possession of the

Cargo.31 Absent actual possession, FURNACE cannot exercise a conventional lien.32

(ii) FURNACE is not entitled to a common law or statutory lien over the Cargo

17 FURNACE is claiming advance freight under the VCP.33 A common law lien is confined to freight

payable on delivery.34 Therefore, FURNACE cannot claim a common law lien. Further, FURNACE

cannot claim a statutory lien because no Singaporean legislation allows for a claim for advance

freight.35

30 Santiren Shipping Ltd v Unimarine SA (The ‘Chrysovalandou Dyo’) [1981] 1 Lloyd’s Rep 159, 165 (Mocatta J). 31 Five Oceans Corporation v Cingler Pte Ltd [2015] SGHC 311, [22] (Ang Saw Ean J). 32 Castleton Commodities Shipping Company Pte Ltd v Silver Rock Investments (The ‘Clipper Monarch’) [2015]

EWHC 2584, [9] (Waksman J); Five Oceans Corporation v Cingler Pte Ltd [2015] SGHC 311, [32]-[33] (Ang Saw

Ean J). 33 Moot Scenario, p 22. 34 Cooke et al Voyage Charterers (Informa Law, 4th edition, 2014) [17.15]. 35 Claims which can be enforced by way of a statutory lien are set out in s s 3(1)(a)-(r) of the High Court (Admiralty

Jurisdiction) Act 2001 (Chapter 123).


9

(iii) FURNACE is not entitled to any form of contractual lien over cargo belonging to IDONCARE

18 Cl 19(a) of the VCP entitles FURNACE to a contractual lien against INFERNO ‘on the cargo for

freight’.36 This contractual lien creates a right only as between INFERNO and FURNACE.37 INFERNO

does not own the Cargo; it is owned by IDONCARE.38 Cl 19(a) does not entitle FURNACE ‘to a lien on

the goods of persons who have come under no contract with them conferring a lien for the freight

payable under the [VCP]... A right to seize one person’s goods for another person’s debt must be

clearly and distinctly conferred’.39 Therefore, without IDONCARE’s consent, Cl 19(a) cannot give

FURNACE the right to detain cargo belonging to IDONCARE.40

19 The BoLs do not evidence a contract between FURNACE and IDONCARE, therefore IDONCARE cannot

have consented to FURNACE’s purported lien over the Cargo. The BoLs were signed by the Master,

therefore there is an overriding presumption that the BoLs evidence a contract between IDONCARE

and the shipowner, IMLAM.41 This interpretation is supported by the fact that IMLAM’s name appears

prominently on the face of the BoLs,42 and that the Master did not qualify the capacity in which he

signed the BoLs.43

B. FURNACE cannot receive the benefit of a lien on the Cargo exercised by IMLAM

20 FURNACE cannot receive the benefit of a lien on the Cargo exercised by IMLAM because: (i) IMLAM

did not assign a contractual right of lien to FURNACE; (ii) IMLAM did not exercise a right of lien as

36 Moot Scenario, p 31. 37 Coghlin et al. Time Charters (Informa Law, 7th edition, 2014) [30.8]. 38 Moot Scenario, p 41. 39 Turner v Haji Goolam (The ‘Bombay’) [1904] AC 826 (Lord Lindley). See also Coghlin et al Time Charters (Informa

Law, 7th edition, 2014) [30.9]. 40 Steelwood Carriers Inc of Monrovia v Evimeria Compania Naviera SA of Panama (The ‘Agios Giorgis’) [1976] 2

Lloyd’s Rep 192, 204 (Mocatta J). 41 Wehner v Dene [1905] 2 KB 92, 98 (Channell J); Homburg Houtimport BV v Agrosin Private Ltd (The ‘Starsin’)

[2004] 1 AC 715, [45] (Lord Steyn), [73] (Lord Hoffman); Tillmanns v Knutsford [1908] 2 KB 385 (Farwell LJ);

Wilston Steamship SS Co v Andrew Weir Co Ltd (1925) 22 LIoyd’s Law Reports 521 (Roche J); The Rewia [1991] 2

Lloyd’s Rep 325, 333 (Dillon LJ); Turner v Haji Goolam (The ‘Bombay’) [1904] AC 826 (Lord Lindley); Limerick v

Coker (1916) 33 TLR 103; Sandeman v Scurr (1866) LR 2 QB 86 (Cockburn CJ). 42 Homburg Houtimport BV v Agrosin Private Ltd (The ‘Starsin’) [2004] 1 AC 715; cf Paterson, Zochonis & Co v Elder

Dempster [1924] AC 552; Samuel v West Hartlepool (1906) 11 Com Cas 111. 43 Cf Harrison v Huddersfield SS Co (1903) 19 TLR 386; Homburg Houtimport BV v Agrosin Private Ltd (The

‘Starsin’) [2004] 1 AC 715, [45] (Lord Steyn), [73] (Lord Hoffman). See also, Manchester Trust v Furness, Withy

[1895] 2 QB 539 (CA) (Lopes LJ); Universal Steam Navigation Co v James McKelvie & Co [1923] AC 492, 499 (Lord

Shaw); Homburg Houtimport BV v Agrosin Private Ltd (The ‘Starsin’) [2004] 1 AC 715, [128].


10

trustee for FURNACE; and (iii) in any event, the BoL between IMLAM and IDONCARE did not

incorporate a lien clause.

(i) IMLAM did not assign a contractual right of lien to FURNACE

21 FURNACE cannot exercise any contractual right of lien purported to be held by IMLAM unless IMLAM

assigned this right to FURNACE.

22 Any purported assignment was not valid at law. Section 8(3) of the Civil Law Act 1999 (Chapter 43)

requires any assignment to be by way of express notice in writing to IDONCARE. No such notice was

given to IDONCARE.

23 Any purported assignment was not valid in equity. There are three settled requirements for an

effective equitable assignment:44 an intention to assign, clear identification of the chose being

assigned, and some act by the assignor showing that it is passing the chose in action to the assignee.

24 On 20 October 2016, IMLAM agreed to assist FURNACE in exercising a lien over the Cargo, ‘insofar

as such assistance is within the boundaries of the [T]CP’.45 This email did not evince any intention

to assign IMLAM’s contractual right of lien to FURNACE. Any contractual right of lien purported to be

held by IMLAM would arise under the BoL, not the TCP. At best, IMLAM was indicating that it intended

to comply with FURNACE’s orders not to discharge the Cargo, so long as such conduct did not breach

the terms of the TCP. At worst, IMLAM was merely reaffirming the operation of the TCP.

(ii) IMLAM did not exercise a right of lien as trustee for FURNACE

25 The High Court of Singapore, in Five Oceans Shipping Corporation v Cingler,46 suggested that in

very narrow circumstances, a shipowner may exercise a lien as trustee for a time charterer.47 The

current case is distinguishable for the following reasons. First, in Five Oceans Shipping, the

shipowner provided an affidavit expressly stating that it was exercising a lien over the cargo for the

44 Tsu Soo Sin v Oei Tjiong Bin [2008] SGCA 46, [16] (Rajah JA); Phelps v Spon-Smith & Co [2001] BPIR 326, [39]-

[41]; Malayawata Steel Bhd v Government of Malaysia [1975] 1 MLJ 22, 24 (Azmi J). See also John McGhee, Snell’s

Equity (Sweet & Maxwell, 31st edition, 2005) [3-13]-[3-19]. 45 Moot Scenario, p 36. 46 [2015] SGHC 311. 47 Five Ocean Corporation v Cingler Ship Pte Ltd [2015] SGHC 311, [36] (Ang Saw Ean J).


11

time charterers benefit. This manifested an intention to create an express trust.48 Second, the

shipowner exercised a lien over the Cargo in its own right49 and was a party to the arbitration.50 In

the absence of these facts, an express trust in favour of FURNACE cannot be inferred. In any case,

FURNACE would not be able to enforce its rights as beneficiary directly against IDONCARE.

(iii) In any event, the BoL between IMLAM and IDONCARE did not incorporate a lien clause

26 The BoLs contain two references to an unidentified charterparty: (1) the special instructions box reads

‘freight payable as per charter party’; and (2) item 1 of the Conditions of Carriage incorporates the

terms of the ‘Charter Party, dated as overleaf’.51 Where a BoL fails to identify the relevant

charterparty there is a presumption that the head charterparty was intended to be incorporated.52 This

presumption is displaced where the head charterparty is a time charterparty and a relevant voyage

charterparty exists.53 This is because the terms of a time charter are in many respects inapposite to

the carriage of goods on a voyage.54 In addition, the reference to ‘freight’ in the in the special

instructions, ‘freight payable as per charter party’,55 indicate that the BoLs incorporate a voyage

charter, not a time charter.56 Consequently, the TCP was not the relevant charter party incorporated

into the BoLs.

48 Cf Five Ocean Corporation v Cingler Ship Pte Ltd [2015] SGHC 311, [35] (Ang Saw Ean J). 49 Cf Five Ocean Corporation v Cingler Ship Pte Ltd [2015] SGHC 311, [16] (Ang Saw Ean J). 50 See [3] above. 51 Moot Scenario, pp 45-46. 52 Pacific Molasses v Entre Rio (The ‘San Nicholas’) [1976] 1 Lloyd’s Rep 8, 11 (Lord Denning MR); Bangladesh

Chemical Industries Co v Henry Stephens Shipping Co Ltd & Anor (The ‘SLS Everest’) [1981] 2 Lloyd’s Rep 389, 391-

392 (Lord Denning MR); K/S A/S Seateam Co v Iraq National Oil Co and Ors (The ‘Sevonia Team’) [1983] 2 Lloyd’s

Rep 640, 644 (Lloyd J); Welex AG v Rosa Maritime Ltd (The ‘Epsilon Rosa’) [2002] 2 Lloyd’s Rep 81, [27] (Steel J);

Navigazione Alta Italia v Svenska Petroleum (The ‘Nai Matteini’) [1988] 1 Lloyd’s Rep 452, 459 (Gatehouse J). 53 Federal Commerce and Navigation Ltd v Molena Alpha Inc (The ‘Nanfri’) [1978] 1 Lloyd’s Rep 581, 591 (Kerr J);

Bangladesh Chemical Industries Co v Henry Stephens Shipping Co Ltd & Anor (The ‘SLS Everest’) [1981] 2 Lloyd’s

Rep 389, 392 (Lord Denning MR); Partenreederei M/S “Heidberg” & Anor v Grosvenor Grain and Feed Co Ltd &

Anor (The ‘Heidberg’) [1994] 2 Lloyd’s Rep 287, 309 (Diamond J); The Vinson (2005) 677 LMLN 1. See also, Melis

Ozdel, ‘Bills of Lading Incorporating Charterparties’ (Hart Publishing, Oxford, 2015) 49-50, 53-54; Aikens LJ et al

Bills of Lading (Informa Law from Routledge, 2nd edition, 2015) [7.114]. 54 Bangladesh Chemical Industries Co v Henry Stephens Shipping Co Ltd & Anor (The ‘SLS Everest’) [1981] 2 Lloyd’s

Rep 389, 392 (Lord Denning MR). 55 Moot Scenario, p 41. 56 Itex Itagrani Export SA v Care Shipping Corporation and Others (The ‘Cebu’) (No 2) [1990] 2 Lloyd’s Rep 316, 321

(Sheen J); Five Ocean Corporation v Cingler Ship Pte Ltd [2015] SGHC 311, [28] (Ang Saw Ean J).


12

27 It is unlikely that the parties intended to incorporate the VCP, as opposed to the SCP. This is because

‘it would be surprising… if a shipper intended or agreed to pay freight in accordance with a charter-

party whose terms were unknown to him and which might specify an entirely different rate of freight

and different terms of payment from those which he had agreed under his contract’.57 It makes no

commercial sense for IDONCARE to incorporate the terms of the VCP, of which it has no knowledge.

Consequently, the BoLs incorporated the terms of the SCP. On the evidence before the Tribunal, it is

unclear what the terms of the SCP are, therefore FURNACE cannot claim IMLAM has a lien on cargo.

C. In any event, FURNACE did not validly exercise a lien over the cargo as insufficient notice

was given to INFERNO and IDONCARE

28 In order for a lien to be validly exercised, ‘a person claiming a lien must either claim it for a definite

amount or give the owner [of the cargo] particulars from which he himself can calculate the amount

for which the lien is due’.58 In the ‘notice of lien’ sent to INFERNO on 20 October 2016,59 FURNACE

claimed ‘substantial losses, costs, expenses and damages… which includes, but is not limited to…

freight’. This demand was ambiguous as it is unclear for what amount the lien was being exercised.

Therefore, the demand was invalid.

29 A failure to make any demand at all invalidates the exercise of the lien.60 Neither IMLAM nor FURNACE

made a demand for sub-freight to IDONCARE. This was not remedied at any point.61

57 Partenreederei M/S “Heidberg” & Anor v Grosvenor Grain and Feed Co Ltd & Anor (The ‘Heidberg’) [1994] 2

Lloyd’s Rep 287, 312 (Diamond J). 58 Albemarle Supply Co Ltd v Hind & Co [1928] 1 KB 307, 318 (Scrutton LJ). 59 Moot Scenario, p 65. 60 Cooke et al Voyage Charterers (Informa Law, 4th edition, 2014) [17.25]. 61 Cf Santiren Shipping Ltd v Unimarine SA (The ‘Chrysovalandou Dyo’) [1981] 1 Lloyd’s Rep 159; cf London

Arbitration 17/91 (1991) 307 Lloyd’s Maritime Law Newsletter.


13

D. FURNACE is unlawfully detaining the Cargo

30 Without the defence offered by a valid lien, FURNACE will be liable in tort to IDONCARE.62 The tort of

conversion is one of strict liability.63 Therefore, FURNACE’s continued detention of the Cargo, in a

manner inconsistent with IDONCARE’s interests, constitutes a conversion of the Cargo.64

62 Clerk & Lindsell on Torts, 20th Edition, [17-71], cited in Metall Market OOO v Vitorio Shipping Co Ltd (The

‘Lehmann Timber’) [2014] QB 760, [49] (Rix LJ). 63 Motis Exports Ltd v Dampskibsselskabet AF 1912 [2000] 1 Lloyd's Rep 211. 64 Goodpasture Inc v The Pollux (1979) AMC 2515.


14

SUBMISSIONS ON THE LIEN OVER SUB-FREIGHT ISSUE

III. FURNACE IS NOT ENTITLED TO SUB-FREIGHT PAYABLE TO INFERNO

31 FURNACE claimed a ‘lien’ on sub-freight when it issued IDONCARE with a ‘notice of lien on sub-

freight’.65 However, FURNACE is not entitled to this sub-freight because: (A) FURNACE has no

contractual right of lien on sub-freight; and (B) FURNACE has no right to intercept sub-freight.

A. FURNACE has no contractual right to a lien on sub-freight

32 A lien on sub-freight is a specific right that arises out of a contract.66 Therefore, to have a right of lien

on sub-freight, FURNACE must establish that it was entitled to such a right under the VCP. FURNACE

has failed to do so. Cl 19(a) of the VCP only entitles FURNACE to ‘a lien on the cargo for freight,

deadfreight, demurrage and general average contribution’.67 Omitting the right to a lien on sub-

freights from the VCP appears to have been a deliberate omission. Other standard form charters

include a lien on sub-freights. For example, the standard form NYPE 2015 Cl 23 expressly grants a

‘lien upon all cargoes, sub-hires and sub-freights (including deadfreight and demurrage)’.68 Similarly,

Cl 8 of the Gencon Charter 1994 provides for ‘a lien on the cargo and on all sub-freights payable in

respect of the cargo, for freight’.69

33 FURNACE was at liberty to include a right of lien on sub-freight in the VCP. FURNACE could have

added a clause in the email of 1 September 2016 where FURNACE and INFERNO agreed upon other

contractual inclusions.70 It did not. As such, FURNACE has no contractual right to exercise a lien on

sub-freights.

65 Moot Scenario, p 66. 66 See eg Western Bulk Shipping [2012] EWHC 1224. 67 Moot Scenario, p 30. 68 New York Produce Exchange Charterparty 2015, Cl 23. 69 The Baltic and International Maritime Council Uniform General Charter 1994, Cl 8. 70 Moot Scenario, pp 20-23.


15

B. FURNACE has no right to intercept sub-freight

34 A ‘notice of lien on sub-freight’ can also be interpreted as an exercise of a shipowner’s right to

intercept BoL freight.71

35 This right to intercept sub-freight arises by virtue of the words ‘freight payable as per charterparty’

appearing in a BoL, which incorporate the charter party terms relating to the payment of freight.72

Therefore, freight is ‘due to the shipowner, as his consideration for the agreed carriage, but the

shipowner directs that it be paid in the manner set out in the sub-charter’.73 The shipowner may cancel

this direction at any time and direct that freight should instead be paid to itself.74 In this way, the

shipowner can intercept freight directly from the shipper under the BoL.75

36 However, FURNACE has no such right of interception because, as established at paragraph 21, the

BoLs evidence a contract between IMLAM and IDONCARE. Freight is only due to the carrier under the

BoLs.76 IMLAM, not FURNACE, is the carrier under the BoLs. Therefore IMLAM is the only party with

a right to intercept sub-freight. IMLAM did not exercise this right.

37 FURNACE had no right to intercept sub-freight, therefore the ‘notice of lien on sub-freight’ was

ineffective.

71 Dry Bulk Handy Holding Inc and Another v Fayette International Holdings Ltd and Another (The ‘Bulk Chile’)

[2013] 2 Lloyd’s Rep 38, [22] (Tomlinson LJ). 72 India Steamship Co v Louis Dreyfus Sugar Ltd (The ‘Indian Reliance’) [1997] 1 Lloyd's Rep 52, 57-58 (Rix LJ). 73 Tradigrain SA and ors v King Diamond Marine Ltd (The ‘Spiros C') [2000] EWCA Civ 217, [57] (Rix LJ). 74 Molthes Rederi v Ellerman’s Wilson Line (1926) 26 Lloyd’s Law Reports 259; Wehner v Dene [1905] 2 KB 92. 75 Tradigrain SA and ors v King Diamond Marine Ltd (The 'Spiros C') [2000] EWCA Civ 217, 331 (Rix LJ). Note that

the right to intercept BoL freight must be distinguished from the contractual right of lien contained in Cl 23 of the TCP.

See, eg, Molthes Rederi v Ellerman’s Wilson Line (1926) 26 Lloyd’s Law Reports 259, 262 (Greer J). 76 Cho Yang Shipping Co Ltd v Coral (UK) Ltd [1997] 2 Lloyd’s Rep 641, 643 (Hobhouse LJ).


16

SUBMISSIONS ON TERMINATION

V. FURNACE DID NOT HAVE THE RIGHT TO TERMINATE THE VCP

38 FURNACE did not have the right to terminate the VCP on the basis of INFERNO’s alleged breaches as:

(A) INFERNO did not breach a condition of the VCP; (B) INFERNO did not breach an innominate term

such that FURNACE was deprived of substantially the whole benefit of the VCP; and (C) INFERNO did

not repudiate the VCP. Therefore, (D) INFERNO was entitled to terminate the VCP.

A. INFERNO did not breach a condition of the VCP

39 The parties did not intend for the obligation to pay freight under Cl 15 of the VCP and the election of

a discharge port under Cl 8 of the VCP to be contractual conditions that would give rise to a right to

terminate if breached in any way. Accordingly, INFERNO’s alleged breaches of these terms did not

give rise to a right to terminate the VCP.

40 There is a general reluctance to interpret contractual clauses as conditions due to the potential for

trivial breaches to have disproportionate consequences.77 Unless the parties expressly intend for a

contractual term to be a warranty or condition, the term will be construed as innominate terms.78

41 As a general rule, late payment under a charterparty is not breach of a condition.79 Therefore Cl 15

was not a condition of the VCP. Similarly, the parties did not intend that the slightest breach of Cl 8

would give rise to a right to terminate the VCP. The wording used, ‘when the vessel passes Singapore

77 See Grand China Logistics Holding (Group) Co v Spar Shipping [2016] EWCA (Civ) 982, [59], [65] (Gross LJ);

Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26, 69-70 (Diplock LJ); Bremer

Handelsgesellschaft Schaft mbh v Vanden Avenne Izegem pvba [1978] 2 Lloyd's Rep 109, 113 (Lord Wilberforce);

Bunge Corporation v Tradax Export SA [1981] 1 WLR 711, 727 (Lord Roskill). See also Cehave NV v Bremer

Handelsfesellshaft mbH (The ‘Hansa Nord’) [1976] QB 44, 83 (Omrod LJ) where the Court of Appeal expressed a

general reluctance to interpret contractual clauses as conditions. 78 Grand China Logistics Holding (Group) Co v Spar Shipping [2016] EWCA (Civ) 982, [52] (Gross LJ), [92]

(Hamblen LJ) following Bunge Corporation v Tradax Export SA [1981] 1 WRL 711, 715-6 (Lord Wilberforce), 717

(Lord Scarman), 727 (Lord Roskill). 79 Grand China Logistics Holding (Group) Co v Spar Shipping [2016] EWCA (Civ) 982, [62] (Gross LJ).


17

for bunkering,’ was too vague to be strictly complied with.80 On proper construction, Cl 8 was an

innominate term.81

42 This position was not altered by FURNACE’s attempt to issue a notice to perform in the email of 19

October 2016 at 1320h.82 Even if the notice was effective,83 FURNACE would only have had the right

to terminate on this basis if INFERNO’s alleged breaches went to the root of the contract.84

B. INFERNO did not breach an innominate term such that FURNACE was deprived of

substantially the whole benefit of the VCP

43 INFERNO’s alleged breaches of Cl 15 and Cl 8 of the VCP did not deprive FURNACE of substantially

the whole benefit of the VCP, and FURNACE was not entitled to terminate the VCP on these bases.

44 The breach of an innominate term will give rise to a right to terminate the contract where the breach

is ‘so serious that it goes to the root of the contract’85 and deprives the non-breaching party of

‘substantially the whole benefit that the parties intended that he should obtain from the contract’.86

This requires considering the benefit that the non-breaching party expected to obtain from

performance of the contract and the loss suffered by that party as a result of the breach.87

45 Where performance of a contractual obligation is delayed, the proper test to determine whether the

non-breaching party is entitled to terminate the contract is to inquire whether the commercial purpose

80 See British Commonwealth Holdings v Quadrex Holdings Ltd [1989] QB 842, 857, 858 (Browne-Wilkinson VC)

where the phrase ‘as soon as reasonably practical’ was considered to be too vague to be a clause making time of the

essence. 81 Bunge Corporation v Tradax Export SA [1981] 1 WLR 711, 715-716 (Wilberforce LJ), 717 (Scarman LJ), 727

(Roskill LJ); Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26, 69-70 (Diplock LJ). See

Samarenko v Dawn Hill House Ltd [2011] EWCA (Civ) 1445, [42] (Lewison LJ). 82 Moot Scenario, pp 63-64. 83 See Afovos Shipping Co SA v R Pagnan and Flli (The ‘Afovos’) [1982] 1 WLR 848, 854 (Lord Denning MR); see

Behzadi v Shaftesbury Hotels Ltd [1992] Ch 1, 19-20 (Nourse LJ), 32 (Purchas LJ). 84 Dalkia Utilities Plc v Celtech International Ltd [2006] 1 Lloyd’s Rep 599, [131] (Christopher Clarke J); Samarenko v

Dawn Hill House Ltd [2011] EWCA (Civ) 1445, [37]-[43] (Lewison LJ); Multi-Veste 226 BV v NI Summer Row

Unitholder BC [2011] EWHC 2026, [195] (Lewison J). 85 Cehave NV v Bremer Handelgesellschaft mbH (The ‘Hansa Nord’) [1976] QB 44, 60 (Lord Denning MR). 86 Photo Production v Securior [1980] AC 827, 849 (Lord Diplock); Hongkong Fir Shipping v Kawasaki Kisen Kaisha

[1962] 2 QB 26, 66 (Diplock LJ). 87 Telford Homes (Creekside) Limited v Ampurius NU Homes Holdings Limited [2013] EWCA Civ 577, [54] (Lewison

LJ).


18

of the venture was frustrated by the delay.88 The delay must have been so long that it went to the root

of the contract.89 An ‘unreasonable’ delay is insufficient.90

46 There were only 10 days between freight falling due and FURNACE’s purported termination. Such a

delay in payment was not ‘unreasonable’, did not go to the root of the VCP, and certainly did not

frustrate the commercial purpose of the VCP.91 As freight was calculated on the basis of the elected

discharge port, the benefit FURNACE stood to receive under the VCP, USD $771,120.48 in freight,

did not change as a result of the delay. Therefore, FURNACE was not deprived of any material benefit

as a consequence of the delay.92 Any losses incurred as a result of the delay in payment could be

adequately compensated by an award of damages.93

47 FURNACE has not provided any evidence that the nomination of Busan on 16 October 2016 deprived

FURNACE of substantially the whole benefit of the VCP. Busan falls within the trading limits permitted

by Cl 1(b) of the TCP, namely ‘within Asia and Australia’.94 FURNACE would not have been in breach

of its obligations under the TCP by sailing to Busan.

48 None of these alleged breaches entitled FURNACE to terminate the VCP.

C. INFERNO did not repudiate the VCP

49 INFERNO remained ready and willing to perform the VCP and did not renounce its contractual

obligations.

88 Inverkip SS Co Ltd v Bunge [1917] 2 KB 193, 201 (Scrutton LJ); Tarrabochia v Hickie (1856) 1 H&N 183; Stanton v

Richardson (1872) LR 7 CP 421; Giebel v Smith (1872) LR 7 QB 404. 89 Universal Cargo Carriers Corporation v Citati [1957] 2 WLR 713, 722 (Devlin J). 90 Inverkip SS Co Ltd v Bunge [1917] 2 KB 193, 201 (Scrutton LJ); Tarrabochia v Hickie (1856) 1 H&N 183; Stanton v

Richardson (1872) LR 7 CP 421; Giebel v Smith (1872) LR 7 QB 404; Hongkong Fir Shipping v Kawasaki Kisen

Kaisha [1962] 2 QB 26, 60 (Sellers LJ), 65 (Upjohn LJ); see Wuhan Ocean Economic and Technical Cooperation Co

Ltd v Shiffahrts-Gesellschaft Murcia GmbH KG (The ‘Hansa Murcia’) [2012] EWHC 3104 (Comm), [53]-[54] (Cooke

J). 91 Hongkong Fir Shipping v Kawasaki Kisen Kaisha [1962] 2 QB 26, 60 (Sellers LJ), 65 (Upjohn LJ); see Wuhan

Ocean Economic and Technical Cooperation Co Ltd v Shiffahrts-Gesellschaft Murcia GmbH KG (The ‘Hansa Murcia’)

[2013] 1 Lloyd’s Rep 273, [53]-[54] (Cooke J). 92 Telford Homes (Creekside) Limited v Ampurius NU Homes Holdings Limited [2013] EWCA Civ 577, [54] (Lewison

LJ). 93 Valilas v Januzaj [2014] EWCA Civ 436, [71] (Arden LJ). 94 Moot Scenario, p 1.


19

50 A party will not be in repudiation unless it ‘evince[s] an intention to not be bound’ by the

charterparty.95 A persistent refusal to perform a contractual obligation will amount to a repudiation

only where it is sufficient to demonstrate that the defaulting party no longer intends to perform their

obligations.96

51 The fact that INFERNO did not pay freight on time was not in itself sufficient to demonstrate that

INFERNO did not intend to be bound by the contract.97 Indeed, INFERNO expressly stated its willingness

to meet its obligations and compensate FURNACE for costs incurred as a result of delay.98

52 Further, nominating Busan on 16 October 2016 and 19 October 2016 was not ‘substantially

inconsistent’ with INFERNO’s contractual obligations such as to constitute an intention to no longer

be bound by the VCP.99 INFERNO originally nominated Busan as a solution to the problem of

congestion at Chinese ports.100 Rather than evincing an intention to no longer be bound, this suggests

that INFERNO was ready and willing to make contingency plans in order to ensure the VCP could be

executed. Further, Busan is proximate to the ports listed under Cl 8.101

53 Accordingly, INFERNO remained ready and willing to perform its contractual obligations at all times,

and did not repudiate the VCP.

54 In the alternative, FURNACE did not have the right to terminate the VCP as it did not accept any alleged

repudiation. It is well settled that an innocent party must accept a repudiation in order for a contract

to be brought to an end.102 This must be done clearly and unequivocally.103 Mere inactivity or

acquiescence is not sufficient.104 Where an innocent party does not exercise its election immediately,

95 Tenax Steamship Co v The Owners of the Motor Vessel Brimnes (The ‘Brimnes’) [1975] QB 929, 956 (Davies LJ). 96 Torvald Klaveness A/S v Arni Maritime Corporation (The ‘Gregos’) [1995] 1 Lloyd’s Rep 1, 9 (Lord Mustill). 97 Petroleo Brasileiro SA v ENE Kos 1 Ltd (The ‘Kos’) [2012] 2 AC 164, [7] (Lord Sumption JSC), [52] (Lord Mance

JSC). 98 Moot Scenario, p 69. 99 Ross T Smyth & Co Ltd v T D Bailey, Son & Co [1940] 3 All ER 60; Decro-Wall International SA v Practitioners in

Marketing Ltd [1971] 1 WLR 361. 100 Moot Scenario, p 57. 101 See Annexure A. 102 Howard v Pickford Tool [1951] 1 KB 417, 421 (Asquith LJ). 103 Alan Ramsay Sales & Marketing Ltd v Typhoo Tea Ltd [2016] EWHC 486 (Comm), [68] (Flaux J); Societe Generale

v Geys [2012] 1 AC 513, [17] (Lord Hope DPSC). 104 Alan Ramsay Sales & Marketing Ltd v Typhoo Tea Ltd [2016] EWHC 486 (Comm), [68] (Flaux J).


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it runs the risk that the party in repudiation will recommence performing the contract and it will lose

its right to accept the repudiation as terminating the contract.105

55 If INFERNO’s course of conduct amounted to a repudiation of the VCP (as alleged by FURNACE),106

by nominating Ningbo on 21 October 2016,107 INFERNO recommenced performance of the VCP and

FURNACE lost its chance to accept any alleged repudiation by INFERNO.

D. INFERNO was entitled to terminate the VCP

56 FURNACE did not have a right to terminate the VCP. Therefore, by attempting to terminate the VCP

in its email of 22 October 2016 at 1120h,108 FURNACE repudiated the VCP.109 INFERNO accepted this

repudiation by its email of 22 October 2016 at 1628h,110 and the VCP was terminated.

105 Stocznia Gdanska SA v Latvian Shipping Co (No 2) [2002] 2 Lloyd’s Rep 436, [87] (Rix LJ). 106 Moot Scenario, p 68. 107 Moot Scenario, p 67. 108 Moot Scenario, p 68. 109 See Fercometal SARL v Mediterranean Shipping Co SA [1989] AC 788, 797, 806 (Lord Ackner). 110 Moot Scenario, p 68.


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SUBMISSIONS ON DAMAGES

V. FURNACE IS ENTITLED TO NO MORE THAN NOMINAL DAMAGES

57 FURNACE is (A) only entitled to nominal damages for breach of the VCP. FURNACE is not entitled to

damages for: (B) costs and expenses of exercising its purported lien; and (C) damages for detention.

A. FURNACE is only entitled to nominal damages for breach of the VCP

58 INFERNO concedes that FURNACE is entitled to nominal damages for the delay in payment of freight

per Cl 15 of the VCP and the delay in nominating a discharge port per Cl 8 of the VCP. INFERNO did

not, however, breach the ‘safe port’ warranty under Cl 8 by nominating Busan, South Korea.

59 A port will be considered ‘safe’ if a vessel can, ‘reach it, use it and return from it without, in the

absence of some abnormal occurrence, being exposed to danger which cannot be avoided by good

navigation and seamanship.’111 Evidence of the zombie outbreak remains inconclusive. However, if

such an outbreak did occur it would be an abnormal or unexpected event falling outside the scope of

the safe port warranty.112 Therefore, INFERNO did not breach the safe port warranty by nominating

Busan.

B. FURNACE is not entitled to damages for costs and expenses of exercising the lien

60 FURNACE claims damages for the costs and expenses of exercising the lien. Such damages are

unavailable because: (i) FURNACE did not validly exercise a lien; and (ii) FURNACE did not mitigate

its loss.

(i) FURNACE did not validly exercise a lien

61 FURNACE’s purported lien over the Cargo is invalid or in any event invalidly exercised,113 therefore

FURNACE is not entitled to claim any loss resulting from its exercise.

111 Leeds Shipping Co Ltd v Société Française Bunge (The ‘Eastern City’) [1958] 2 Lloyd’s Rep 127, 131 (Sellers LJ). 112 Kodros Shipping Corp of Monrovia v Empresa Cubana de Fletes (The ‘Evia’) (No 2) [1983] 1 AC 736, 749 (Lord

Roskill); Tage Berglund v Montoro Shipping Corp Ltd (The ‘Dagmar’) [1968] 2 Lloyd’s Rep 563. 113 See [14]-[29] above.


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(ii) In any event, FURNACE did not exercise its lien reasonably

62 The availability of damages for the costs and expenses of exercising a lien depends on whether the

lien was exercised reasonably,114 and whether the lienor could mitigate its losses by discharging the

cargo.115 Therefore, in the event that FURNACE validly exercised a lien over the Cargo, it will not be

entitled to the associated costs of exercising its lien because it failed to exercise it in a reasonable

manner.116 In considering what is reasonable regard should be had to the various methods of

exercising the lien available, and the respective costs.117 The onus is on FURNACE to show that this

action was reasonable.118

63 FURNACE’s conduct was unreasonable for two reasons. First, there is no evidence that it was

impossible or practically difficult to discharge the cargo at Singapore, or any other port.119 Second,

there is no evidence that it would be more expensive to exercise the lien ashore than on board the

Vessel. Instead, FURNACE voluntarily and unnecessarily endangered the Vessel, Cargo and crew.120

C. FURNACE is not entitled to damages for detention

64 FURNACE is not entitled to damages for detention because: (i) detaining the Vessel at Singapore broke

the chain of causation; and (ii) in any event, FURNACE failed to take reasonable steps to mitigate its

loss.121

114 Smailes v Hans Dessen and Co (1906) 12 Com Cas 117. 115 Lyle Shipping v Cardiff Corp [1900] 2 QB 638. 116 Metall Market OOO v Vitorio Shipping Co Ltd (The ‘Lehmann Timber’) [2014] QB 760, [127] (Rix LJ); Santiren

Shipping Ltd v Unimarine SA (The ‘Chrysovalandou Dyo’) [1981] 1 Lloyd’s Rep 159. 117 London Arbitration 5/92 (1992) 321 Lloyd’s Maritime Law Newsletter 4. 118 London Arbitration 5/92 (1992) 321 Lloyd’s Maritime Law Newsletter 4. 119 Cf Five Oceans Corporation v Cingler Pte Ltd [2015] SGHC 311, [61] (Ang Saw Ean J). 120 Moot Scenario, p 37. 121 Fulton Shipping Inc of Panama v Grobalia Business Travel SAU (The ‘New Flamenco’) [2014] 2 Lloyd’s Rep 230,

[18] (Longmore LJ) referring to McGregor on Damages, 18th edn (Sweet & Maxwell, London, 2011), [7.003-7.006];

but see Darbishire v Warran [1963] 1 WLR 1067, 1075 (Pearson J) and Golden Strait Corp v Nippon Yusen Kubishika

Kaisha (The ‘Golden Victory’) [2007] 2 AC 353, [10] (Lord Bingham) where the rule is not framed as a positive duty,

rather that damages will be reduced to the extent that the claimant failed to reasonably mitigate its loss.


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(i) Detaining the Vessel at Singapore broke the chain of causation

65 In cases of damages for breach of contract, the general rule is that the claimant is entitled to be placed

in the same position as it would have been in had the contract been performed.122 Damages are only

recoverable if the loss is caused by a breach of contract.123 The onus is on FURNACE to prove that

INFERNO’s breach resulted in the alleged loss.124

66 As a matter of common sense,125 loss caused by detention did not flow from the alleged breaches of

the VCP. FURNACE has kept the Vessel floating outside Singapore since 0800h on 11 October 2016

in an attempt to exercise an invalid lien on cargo.126 Given that FURNACE was not entitled to exercise

this lien, its conduct was unreasonable and broke the chain of causation between INFERNO’s alleged

breaches of the VCP and FURNACE’s alleged losses.

(ii) In any event, FURNACE failed to take reasonable steps to mitigate its loss

67 FURNACE failed to take any reasonable steps to mitigate any potential losses caused by INFERNO’s

alleged breach and therefore cannot claim damages for detention as these losses were avoidable.127

FURNACE failed to store the cargo, either at Ningbo or Singapore, and seek an alternative charter. The

losses FURNACE claims for detention of the Vessel were therefore avoidable losses and INFERNO is

not liable for the consequences of FURNACE’s inaction.

122 Robinson v Harman (1848) 1 Ex 850, 855 (Parke B); Golden Strait Corporation v Nippon Yusen Kubishika Kaisha

(The ‘Golden Victory’) [2007] AC 353, [29] (Lord Scott). 123 Koch Marine Inc v d’Amica Societa di Navigazione ARL (The ‘Elena d’Amico’) [1980] 1 Lloyd’s Rep 75, 88 (Goff

J). 124 McGregor on Damages, 18th edn (Sweet & Maxwell, London, 2011), [6.074]. 125 Galoo v Bright Grahame Murray [1994] 1 WLR 1360 CA, 1375 (Glidewell LJ). 126 Moot Scenario, p 67. 127 Fulton Shipping Inc of Panama v Grobalia Business Travel SAU (The ‘New Flamenco’) [2014] 2 Lloyd’s Rep 230,

[18] (Longmore LJ) referring to McGregor on Damages, 18th edn (Sweet & Maxwell, London, 2011), [7.003-7.006];

but see Darbishire v Warran [1963] 1 WLR 1067, 1075 (Pearson J) and Golden Strait Corp v Nippon Yusen Kubishika

Kaisha (The ‘Golden Victory’) [2007] 2 AC 353, [10] (Lord Bingham) where the rule is not framed as a positive duty,

rather that damages will be reduced to the extent that the claimant failed to reasonably mitigate its loss.


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PRAYER FOR RELIEF

For the reasons set out above, INFERNO seeks the following orders and declarations:

a. a declaration that FURNACE is not entitled to exercise a lien on the Cargo (II/III);

b. a declaration that FURNACE is not entitled to exercise a lien on sub-freight (IV);

c. a declaration that INFERNO validly terminated the VCP (V);

d. an award for damages for termination of the VCP;

e. an award for interest under s 20 of the IAA; and

f. an order for costs.


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ANNEXURE A: MAP OF PORTS

MEMORANDUM FOR RESPONDENT - Murdoch University...Harrison v Huddersfield SS Co (1903) 19 TLR 386...

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Transcript of MEMORANDUM FOR RESPONDENT - Murdoch University...Harrison v Huddersfield SS Co (1903) 19 TLR 386...