TWENTIETH ANNUAL INTERNATIONAL MARITIME …...Standard Chartered Bank v Pakistan National Shipping...

TWENTIETH ANNUAL

INTERNATIONAL MARITIME LAW ARBITRATION MOOT

2019

MEMORANDUM FOR RESPONDENT

TEAM 9

ON BEHALF OF:

AGAINST:

OMEGA CHARTERING LIMITED

PANTHER SHIPPING INC

Respondent Claimant COUNSEL

ENNING CHANG OLIVER TSE

BENJAMIN POON MARCO SIU

Team 9 MEMORANDUM FOR THE RESPONDENT

II

TABLE OF CONTENTS

ABBREVIATIONS IV

LIST OF AUTHORITIES V-X1

STATEMENT OF FACTS 1

A. DETENTION AT WAHANDA 1

B. THE HULL-CLEANING INCIDENT 1-2

C. THE CARGO DAMAGE INCIDENT 2

D. THE ARBITRAL PROCEEDINGS 2

ARGUMENTS ON MERITS OF CLAIM 3

A. THERE IS NO BREACH FOR NOT CLEANING THE HULL BEFORE

REDELIVERY

3

(I) No inspection and hence no obligation to clean 3-4

(II) Respondent was prevented from cleaning 4-7

(III) No liability for failure to agree on a lump sum 7-8

B. DAMAGES ON BREACH OF CLAUSE 83 8

(I) Hull cleaning costs 9

(II) Costs of voyage to South Island 9-10

(III) Hull cleaning costs 10-11

(IV) Costs of voyage to South Island 11

C. DAMAGES ON LATE REDELIVERY SHOULD NOT INCLUDE THE

LOSS OF HIRE UNDER THE NEXT FIXTURE

11

(I) Loss of hire under Next Fixture is not recoverable 11-13


III

(II) Only loss of 2 years’ hire can be recovered 13-14

(III) Credit must be given for hire received under the Replacement Fixture 14

ARGUMENTS ON MERITS OF COUNTER-CLAIM 14

A. CARGO CLAIM 14

(I) The Cargo Claim is not time-barred under Clause 6 of the ICA 14-17

(II) Apportionment under Clause 8 of the ICA 17-20

B. VESSEL WAS OFF HIRE FROM 7 MAY 2016 TO 26 JUNE 2016 20

(I) The Vessel should be off hire 20-21

(II) Quarantine triggers off-hire 21

C. INTEREST 21-22

REQUEST FOR RELIEF 22


IV

ABBREVIATIONS

BIMCO Baltic and International Maritime Council

Cargo The cargo containing 1720×5mt big bags of English Breakfast Tea

Cargo Claim The indemnity of the Receiver’s claim for damage to the Cargo against the

Respondent is seeking from the Claimant

Charterparty The time charterparty between the Claimant and the Respondent

Claimant Panther Shipping Inc.

ICA Inter-Club New York Produce Exchange Agreement

LMAA London Maritime Arbitration Association

Next Fixture The 2-year charterparty between the Claimant and Champion Chartering Corp

NYPE 2015 New York Produce Exchange Form 2015

Receivers The receivers of the Cargo

Record International Maritime Law Arbitration Moot 2019 Moot Scenario (v3)

Replacement Fixture The charterparty between the Claimant and Fairwind International

Report The Preliminary Survey Report dated 30.06.2016 done by the Surveyors

Respondent Omega Chartering Limited

Surveyors Mekon Surveyors Inc.

Vessel M/V “THANOS QUEST”


V

LIST OF AUTHORITIES

CASES AND TRUBUNAL AWARDS REFERRED TO AT PAGE

Ali v Petroleum Co of Trinidad and Tobago [2017] UKPC 2, [2017] ICR

531

7

Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602

13

Arnold v Britton [2015] UKSC 36, [2015] AC 1613

3

Atlantic Shipping and Trading Co Ltd v Louis Dreyfus and Co [1922] AC

250

15

Attica Sea Carriers Corp v Ferrostaal (Puerto Buitrago) [1976] 1 Lloyd’s

Rep 250

6

Audre & Cie S.A. v Orient Shipping (Rotterdam) B.V. (The Laconian

Confidence) [1997] 1 Lloyd’s Rep 139

21

Banco de Portugal v Waterlow & Sons Ltd [1932] AC 452

8

Barbudev v Eurocom Cable Management Bulgaria EOOD [2012] EWCA

Civ 548, [2012] 2 All ER (Comm) 963

7

Beck & Co v Szymanowski & Co [1924] AC 43

15


VI

Braspetro Oil Services Co v FPSO Construction Inc [2007] EWHC 1359

(Comm) 22

British Westinghouse Electric Co Ltd v Underground Electric Rys [1912]

AC 673

8

Cebercus Software Ltd v Rowley [2001] EWCA Civ 74

14

Compania Financiera v Hamoor Tanker Corporation (The Borag) [1981] 1

WLR 274 8

D/S A/S Idaho v Peninsular and Oriental Steam Navigation Co (The

Strathnewton) [1983] 1 Lloyd’s Rep 219

17

Evans Marshall & Co. v Bertola [1976] 2 Lloyd’s Rep 17

14

Foley v Classique Coaches Ltd [1934] 2 KB 1

10

Foreman & Ellams Ltd v Federal Steam Navigation Co Ltd [1928] 2 KB

424

18

Galoo v Bright Grahame Murray [1994] 1 WLR 1360

8

Gosse Millard v Canadian Government Merchant Marine Ltd [1928] 1 KB

717

18


VII

Hadley v Baxendale (1854) 9 Ex. 341

11

Handelsbanken Norwegian Branch of Svenska Handelsbanken AB (Publ.) v

Dandridge [2002] EWCA Civ 577, [2002] 2 Lloyd’s Rep 421

3

Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503

10

Homburg Houtimport BV v Agrosin Private Ltd [2003] UKHL 12, [2004] 1

AC 715

3

International Fina Services AG v Katrina Shipping Ltd [1995] 2 Lloyd’s

Rep 344

3

Kassiopi Maritime Co Ltd v Fal Shipping Co Ltd [2015] EWHC 318

(Comm), [2015] 1 Lloyd’s Rep 473

15

Koufos v C Czarnikow Ltd (The Heron II) [1969] 1 AC 350

11

Kurt A. Becher GmbH & Co K.G. v Roplak Enterprises SA (The World

Navigator) [1991] 2 Lloyd’s Rep 23

7

Longden v British Coal Corp [1998] AC 653

14

Lukoil Asia Pacific Pte Ltd v Ocean Tankers (Pte) Ltd (The “Ocean

Neptune”) [2018] EWHC 163 (Comm), [2018] 1 Lloyd’s Rep 654 3


VIII

Mackay v Dick (1881) 6 App Cas 251 7

Miramar Maritime Corp v Holborn Oil Trading Ltd [1984] AC 676

3

Monarch SS Co v Karlshamns Oljefabriker (A/B) [1949] AC 196

8

Morris-Garner v One Step (Support) Ltd [2018] UKSC, [2018] 2 WLR

1353

8, 10

Murray Holdings Ltd v Oscatello Investments Ltd [2018] EWHC 162

3

National Shipping Co of Saudi Arabia v BP Oil Supply Co (The Abqaqi)

[2011] EWCA Civ 1127, [2012] 1 Lloyd’s Rep 18

15

Petromec Inc v Petroleo Brasileiro SA Petrobas [2005] EWCA Civ 891,

[2006] 1 Lloyd’s Rep 121

7

PM Law Ltd v Motorplus Ltd [2018] EWCA Civ 1730

3

Polish Steamship Co. v Atlantic Maritime Co (The Garden City) (The

Garden City) [1985] QB 41

21

Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900

3

Robinson v Harman (1848) 1 Ex. 850

8


IX

Saleem Jaura v Saeeda Ahmed [2002] EWCA Civ 210 CA

21

Seven Seas Properties Ltd v Al-Essa [1988] 1 WLR 1272

8

Sidemar S.p.A. v Apollo Corporation (the “Apollo”) [1978] 1 Lloyd’s Rep

200

20

Sig. Bergesen D.Y & Co. and Others v Mobile Shipping and Transportation

Co. (The Berge Sund) [1993] 2 Lloyd’s Rep 453

20

Sirius International Insurance (Publ) v FAI General Insurance Ltd [2004]

UKHL 54, [2004] 1 WLR 3251

3

Standard Chartered Bank v Pakistan National Shipping Corp [1999] 1 All

ER (Comm) 417

8

Stevens v Kabushiki Kaisha Sony [2005] HCA 58, 224 CLR 193

5

Sunbeam Shipping Co Ltd v President of India [1973] 1 Lloyd’s Rep 482

7

Supershield Ltd v Siemens Building Technologies FE Ltd [2010] EWCA Civ

7, [2010] 1 Lloyd’s Rep 349

12

Suzuki & Co Ltd v T Benyon & Co Ltd (1926) 24 LlL Rep 49

17


X

Sylvia Shipping Co Ltd v Progress Bulk Carriers Ltd (The Sylvia) [2010]

EWHC 542 (Comm), [2010] 2 Lloyd’s Rep 81 12

Transfield Shipping Inc v Mercator Shipping Inc (The Achilleas) [2008]

UKHL 48, [2009] 1 AC 61

11, 12, 13

Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528

11

Walford v Miles [1992] 2 AC 128

7

Wood v Capita Insurance Services Ltd [2017] UKSC 24, [2017] AC 1173

3

Yam Seng Pte Ltd v International Trade Corp Ltd [2013] EWHC 111 (QB),

[2013] 1 All ER (Comm) 1321

7

BOOKS AND ARTICLES REFERRED TO AT PAGE

Angus Stevenson, Oxford Dictionary of English (Oxford University Press,

3rd edn, 2010) 3, 5, 19, 21

BIMCO Hull Fouling Clause for Time Charterparties Explanatory Notes

5, 10

Carriage of Goods by Sea (Oxford University Press, 2nd edn, 2011)

6

Carver on Charterparties (London: Sweet & Maxwell, 2017)

22

Coghlins and Others, Time Charters (Informa Law from Routledge, 2014) 6, 20


XI

H. G. Beale, Chitty on Contracts: Volume 1 (London: Sweet & Maxwell, 33rd

edn, 2018)

3, 8, 10, 12

London Arb 16/02 (2002) 600 LMLN 2

15

Sir Kim Lewison, The Interpretation of Contracts, (London: Sweet &

Maxwell, 6th edn, 2015)

15

Treitel on the Law of Contract (London: Sweet & Maxwell, 14th edn, 2015) 12

“Underwater Ship Husbandry: Nature of Discharge” (EPA-842-R-99-001)

in Phase I Final Rule and Technical Development Document of Uniform

National Discharge Standards (United States Environmental Protection

Agency, April 1999)

4

STATUTES REFERRED TO AT PAGE

Arbitration Act 1996 (UK) 21

WEBSITES REFERRED TO AT PAGE

London Maritime Arbitrators Association, What about Interest? Available at http://www.lmaa.london/faq.aspx?pkFaqCatID=285190bc-3d22-4c18-832d-4 235ea36b308 (visited 26 Apr 2019)

22


1

STATEMENT OF FACTS

1. On 18.03.2016, the Claimant chartered the Vessel to the Respondent on the Charterparty for a trip of

about 50-55 days from West Coast to Wahanda with a cargo of loose leaf English Breakfast Tea.

A. DETENTION AT WAHANDA

2. Although the Vessel arrived at Wahanda Port on 07.05.2016, it was quarantined from 11.05.2016 to

26.06.2016 after the Port State Control found some crew members with high fever and feared they

might carry Ebola Virus. On 11.05.2016, the Respondent notified the Claimant that the Vessel was off-

hire during the detention.

3. As a result of the overstay, on 28.06.2016, the Claimant missed the laycan at East Coast and Champion

Chartering Corp cancelled the Next Fixture with the Claimant .

B. THE HULL-CLEANING INCIDENT

4. On 08.06.2016, the Claimant asked the Respondent about the arrangement regarding the Vessel’s

bottom and if inspection/cleaning was necessary under Rider Clause 83 of the Charterparty.

5. On 09.06.2016, the Respondent replied and asked for the Claimant’s advice as cleaning was impossible

at Wahanda. The Respondent further proposed, for the first time, to pay a lump sum in lieu. The

Claimant insisted and promised to arrange for inspection and cleaning at the next convenient port. The

Respondent agreed to pay for the cleaning against invoice.

6. On 26.06.2016, the Claimant made further inquiries with the Respondent about the arrangement for

inspection and cleaning.

7. On 27.06.2016, the Respondent responded that given the limited time before redelivery, hull cleaning

was no longer possible before redelivery except at North Titan Port which was only half a day sail from

Wahanda. The Respondent also made a second lump sum offer.

8. Receiving no reply from the Claimant for two days, on 29.06.2016, the Respondent finally served a

redelivery notice to the Claimant. Nevertheless, the Claimant accused the Respondent of premature


2

redelivery and made a sudden request for inspection and cleaning at South Island Port.

9. On 30.06.2016, the Respondent explained that since it was prevented from cleaning before redelivery,

parties should agree on a lump sum under Clause 83. It repeated its offer of USD 30,000 in full and

final settlement of the matter, which was based on a quote from Titan Shipbuilders. Yet, the Claimant

refused to engage in discussion of the sum and insisted the Respondent to clean the hull.

10. The Vessel was eventually redelivered without cleaning. On 01-03.07.2016, the Claimant cleaned the

hull at South Island before delivering the Vessel to Fairwind International on 04.07.2016 in accordance

with the Replacement Fixture.

C. THE CARGO DAMAGE INCIDENT

11. On 27.06.2016, the Respondent informed the Claimant by way of an email that the Cargo was found to

be severely damaged by water ingress when it was about to be discharged. The Respondent

immediately notified the Claimant through email, receipt of which was acknowledged by the Claimant.

The Receivers of the cargo brought the Cargo Claim against the Respondent.

12. The Preliminary Survey Report dated 30.06.2016 found that the damage to the Cargo was solely due to

the negligence of a crew member who opened the wrong valves.

D. THE ARBITRAL PROCEEDINGS

13. On 09.11.2018, the Claimant commenced the present arbitral proceedings for the costs of hull cleaning

and damages for late re-delivery with interest. The Respondent counter-claimed for an indemnity for

100% of the Cargo Claim (and alternatively damages). It was further claimed that the Vessel was off-

hire between 07.05.2016 and 26.06.2016 such that it was entitled to repayment of overpaid hire in the

sum of USD 735,000. For the sake of completeness, it is noted that parties have agreed under Rider

Clause 80 of the Charterparty that any dispute shall be resolved by arbitration in London and that the

Charterparty shall be construed (and implicitly, be governed) by English law. Clause 54(b) of NYPE

2015 further provides for the arbitration to be conducted in accordance with LMAA Terms.


3

ARGUMENTS ON MERITS OF CLAIM

A. THERE IS NO BREACH FOR NOT CLEANING THE HULL BEFORE REDELIVERY

14. The Respondent argues that it was not in breach of Clause 83 for not cleaning the Vessel’s hull for the

following reasons: (I) The Respondent need not clean the hull because no inspection was undertaken

yet; (II) Even if the Respondent had the obligation to clean, it was prevented from doing so and was

only obliged to agree a lump sum with the Claimant; and (III) The Respondent was in no way liable for

the failure by the parties to agree on a lump sum.

(I) No inspection and hence no obligation to clean

15. Construction of contract is a unitary and iterative exercise. The court has to ascertain the objective

meaning of the language in the contract, considering what a reasonable person who has all the

background knowledge reasonably available to the parties at the time of contracting would have

understood the contract to mean.1 Further, the court would consider the language used, the overall

purpose of the relevant clause(s) as a whole2 and check rival interpretations of a clause against their

commercial consequences with commercial common sense.3

16. Under Clause 83(d), the Charterers are obliged to carry out “cleaning in accordance with this Clause”

(emphasis added) prior to redelivery. This means that the Charterer is only obliged to conduct cleaning

strictly “in a manner conforming with” 4 Clause 83. In particular, Clause 83 provides that the

Respondent is obliged to clean the Vessel’s underwater parts in the following circumstances:

(1) If the Vessel remained at a place for the specified aggregated period (Clause 83(a));

(2) Either party calls for inspection (Clause 83(b)); and 1 See Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900 at [21]; Wood v Capita Insurance Services Ltd [2017] UKSC 24, [2017] AC 1173 at [11]; Murray Holdings Ltd v Oscatello Investments Ltd [2018] EWHC 162 (Ch) at [17] and [40]; Lukoil Asia Pacific Pte Ltd v Ocean Tankers (Pte) Ltd (The “Ocean Neptune”) [2018] EWHC 163 (Comm), [2018] 1 Lloyd’s Rep 654 at [8]; H. G. Beale, Chitty on Contracts: Volume 1 (London: Sweet & Maxwell, 33rd edn, 2018) at 13-047 & 13-051. 2 Wood v Capita at [10]; PM Law Ltd v Motorplus Ltd [2018] EWCA Civ 1730 at [12]. 3 Handelsbanken Norwegian Branch of Svenska Handelsbanken AB (Publ.) v Dandridge [2002] EWCA Civ 577, [2002] 2 Lloyd’s Rep 421 at [24] (“a businesslike interpretation in the context in which [the words] appear”); Homburg Houtimport BV v Agrosin Private Ltd [2003] UKHL 12, [2004] 1 AC 715 at [10] (“a business sense”); Sirius International Insurance (Publ) v FAI General Insurance Ltd [2004] UKHL 54, [2004] 1 WLR 3251 at [19] (“a … commercial approach”); Miramar Maritime Corp v Holborn Oil Trading Ltd [1984] AC 676, 682; International Fina Services AG v Katrina Shipping Ltd [1995] 2 Lloyd’s Rep 344, 350 and Arnold v Britton [2015] UKSC 36, [2015] AC 1613 at [19]. 4 As defined in Oxford English Dictionary. See Angus Stevenson, Oxford Dictionary of English (Oxford University Press, 3rd edn, 2010).


4

(3) “[A]s a result of the inspection either party calls for cleaning of any of the underwater parts”

(Clause 83(c) (emphasis added));

then “such cleaning shall be undertaken by the Charterers…” (Clause 83(c)).

17. There is no dispute that Condition (1) is satisfied as Wahanda is not in a tropical zone5 and the Vessel

had stayed there for more than 30 days.

18. As for Conditions (2) and (3), reading Clause 83(c) closely, the phrase “the inspection” must naturally

be referring to the inspection either parties called for under the preceding Clause 83(b). Therefore,

Clause 83(c) should be construed to mean that, as a result of the inspection which either party called

under Clause 83(b), either party may call for cleaning. In other words, Clause 83 expressly requires the

completion of inspection to be a pre-condition for either party to call for cleaning. If there is no

inspection, then neither party has the right to call for any cleaning, let alone for the Claimant to impose

an obligation on the Respondent to clean the Vessel.

19. This interpretation is commercially sensible and in line with actual practice. Prior underwater

inspection helps to ascertain the precise extent of fouling, including any bent or damaged blades,

cavitation damage, hull cracks, clogged sea chest grids etc., and assists in deciding the extent and

manner of cleaning.6 This further allows for the assessment of the potential risks and costs involved in

the cleaning. Thus, it is not unusual in practice for inspection to be carried out prior to cleaning of the

hull.

20. As such, since no inspection was ever carried out, it is submitted that neither party was entitled to call

for cleaning, and the Respondent had no obligation to clean before redelivery under Clause 83(d).

(II) Respondent was prevented from cleaning

21. Even if the Claimant was entitled to call for cleaning, Clause 83(d) provides an escape mechanism: If

the Respondent was “prevented from carrying out such cleaning, the parties shall, prior to but latest on

redelivery, agree a lump sum payment in full and final settlement of [the Claimant’s] cost and expenses

5 Record p. 81. 6 “Underwater Ship Husbandry: Nature of Discharge” (EPA-842-R-99-001) in Phase I Final Rule and Technical Development Document of Uniform National Discharge Standards (United States Environmental Protection Agency, April 1999), Appendix A.


5

arising as a result of or in connection with the need for cleaning…” (emphasis added).

22. The natural meaning of the word “prevent” is to “keep something from happening”.7 Therefore, the

phrase “prevented from” means something is “kept from happening”,8 “impracticable or impossible”.9

The BIMCO Explanatory Note also highlights that this escape mechanism kicks in if cleaning before

redelivery “cannot be done”.10

23. It is submitted that the Respondent was “prevented from” cleaning before redelivery because:

(a) The redelivery date was 30 June 2016 and it was impossible or impracticable to conduct or complete

inspection and cleaning before that date; and

(b) The redelivery was a valid one that need not be postponed.

(a) Impossible to conduct cleaning before redelivery

24. It was impossible to carry out cleaning before redelivery on 30 June 2016:

(i) It is common ground between the parties that cleaning was impossible in Wahanda12 or East

Coast Ports13;

(ii) The Vessel was detained from 11.05.2016 until 26.06.2016;

(iii) The North Titan Port was suggested by the Respondent on 27.06.2016.14 Yet, under sub-clause

(c), such cleaning shall be undertaken “in consultation with the Owners”. It is submitted that the

meaning of “in consultation with” should be understood as requiring the Claimant’s approval and

consent with regard to the location and performance of cleaning. This is particularly so if we read

Clause 83 as a whole, especially in light of Clause 83(c)(iii), which gives the Claimant a power

to refuse to permit cleaning despite the availability of suitable facilities and equipment.15 Thus,

even if the Respondent was obliged to carry out cleaning, it must await the consent of the

7 As defined in the Oxford English Dictionary. 8 BIMCO Hull Fouling Clause for Time Charterparties Explanatory Notes, available at www.bimco.org/contracts-and-clauses/bimco-clauses/hull_fouling_clause_for_time_charter_parties (last accessed on 22 March 2019), p. 2. 9 Stevens v Kabushiki Kaisha Sony [2005] HCA 58, 224 CLR 193 at [51], fn (43). 10 BIMCO Explanatory Notes at p. 2. 12 Record p. 26. 13 Record p. 34. 14 Record p. 39. 15 Although the Claimant’s warranties as to speed and consumption shall be reinstated from the time of such refusal (Clause 83(c)(iii)), the Claimant still has the power to do so if it is willing to bear the risk of potential breach of warranties as to speed etc.


6

Claimant before actually starting to clean the hull. It is submitted that the Respondent had no

right to sail to North Titan for cleaning without the Claimant’s approval. Eventually, this option

was rejected by the Claimant.16

(iv) The Claimant only suggested the South Island Port on 29.06.2016 after the Respondent had

already issued the redelivery notice.17 As the Vessel would be redelivered in 1 day, there was

obviously insufficient time to accommodate the Respondent’s sudden demand to sail to South

Island, complete inspection, carry out cleaning and then return to Wahanda before redelivery.

(b) The redelivery was valid and need not be postponed

25. The Respondent rejects any challenge that redelivery was premature and somewhat an escape from its

obligation to clean.18 Firstly, the Respondent had every right to serve the 1-day notice upon discharging

the cargo.19 Generally, a charterer has the right to redeliver after the end of the minimum charter

period20 regardless of the condition of the Vessel at the time of redelivery.21 In the present case, the

Vessel was chartered for 50-55 days. The Charterparty started on 18.03.2016 and would last through to

around 7-11.05.2016. Even discounting the time for which the Vessel was off-hire (i.e. from

07.05.2016 to 26.06.2016), the Charterparty had already long expired.22 Therefore, by 29.06.2016, the

Respondent had every right to serve the notice and hence redeliver the next day.

26. Secondly, the Respondent should not be expected to postpone exercising its right of redelivery after

inspection or cleaning; otherwise, it would be contrary to the express provision of Clause 83(d). If the

Respondent could be asked to postpone redelivery indefinitely until inspection and cleaning were done,

then it would never be “prevented from” carrying out cleaning. This would render the escape provision

nugatory.

27. As such, the Respondent was entitled to rely on Clause 83(d) and sought to agree a lump sum payment 16 Record p. 43. 17 Ibid. 18 Ibid. 19 Record p. 44. 20 Coghlins and Others, Time Charters (Informa Law from Routledge, 2014) at 15.5. 21 Attica Sea Carriers Corp v Ferrostaal (Puerto Buitrago) [1976] 1 Lloyd’s Rep 250, 255; Stephen Girvin, Carriage of Goods by Sea (Oxford University Press, 2nd edn, 2011) at 33.125. 22 Record p. 4: “DURATION ABT 50-55 DAYS WOG”.


7

with the Claimant latest on redelivery.

(III) No liability for failure to agree on a lump sum

28. If the Tribunal accepts that the Respondent was prevented from carrying out cleaning, then under

Clause 83(d), both parties “shall… agree a lump sum in full and final settlement of” the Claimant’s

cleaning costs.

29. Even if the Respondent accepts this agreement to agree as enforceable,23 it is submitted that in order to

facilitate negotiation between the parties and for a settlement lump sum to be reached, a duty must be

implied to the effect that each party is to cooperate and do what is necessary in his part to facilitate such

agreement.24 Once such duty to cooperate is discharged, the cooperating party is not liable for the

eventual failure to reach the agreement. The degree of cooperation required depends on the express

obligation and surrounding circumstances.25

30. Here, since Clause 83(d) states that parties “shall agree” on a lump sum, upon proper interpretation, this

obligation should be duly fulfilled with best endeavours. Besides, the purpose of the escape mechanism

is to provide an approximate compensation for the Owner’s potential cleaning expenses in case

cleaning was not possible with a prescribed deadline, i.e. latest on redelivery. Therefore, the level of

cooperation should be high to facilitate agreement on a genuine sum within a limited time frame.

31. The duty to cooperation should requir both parties: (a) to propose/negotiate a reasonable sum (based on

a fair quote) that facilitates reaching an agreement and fairly reflects the potential cleaning costs the

Owner may spend, and (b) to show genuine willingness and encouragement to the other party to reach

agreement before the deadline. It is submitted that the Respondent clearly discharged such duty.

32. The Respondent has at all times acted in good faith and made several offers, the first of which was as

23 See Walford v Miles [1992] 2 AC 128; Barbudev v Eurocom Cable Management Bulgaria EOOD [2012] EWCA Civ 548, [2012] 2 All ER (Comm) 963 at [52]; c.f. Petromec Inc v Petroleo Brasileiro SA Petrobas [2005] EWCA Civ 891, [2006] 1 Lloyd’s Rep 121 at [115]–[125]. 24 See Mackay v Dick (1881) 6 App Cas 251, 263; Yam Seng Pte Ltd v International Trade Corp Ltd [2013] EWHC 111 (QB), [2013] 1 All ER (Comm) 1321 at [139] and Ali v Petroleum Co of Trinidad and Tobago [2017] UKPC 2, [2017] ICR 531 at [8]. Specifically, in maritime context, see also Sunbeam Shipping Co Ltd v President of India [1973] 1 Lloyd’s Rep 482, 486. 25 See in maritime context: Kurt A. Becher GmbH & Co K.G. v Roplak Enterprises SA (The World Navigator) [1991] 2 Lloyd’s Rep 23, 30, 31, 34.


8

early as 09.06.2016. The latest offer was USD 30,00026, and it was based on the fair quote of USD

33,000 obtained from Titan Shipbuilders.27 Thus, the Respondent did continuously proposed reasonable

sum to facilitate negotiations. Besides, the Respondent also encouraged the Claimant to confirm the

acceptance of the sum “ASAP” to draw a line on the matter.28 This shows great willingness to reach an

agreement before redelivery. If there was anything, it was the Claimant which displayed every

unwillingness to cooperate and to reach an agreement, as shown in the email correspondence.29

33. All in all, the Respondent was not in breach of Clause 83 in any respect.

B. DAMAGES ON BREACH OF CLAUSE 83

34. The Claimant is seeking damages under two heads: (I) hull cleaning costs (USD 41,000); and (II) costs

of voyage to South Island to perform hull cleaning (USD 55,567.42) (in the total sum of USD

96,567.42). Should the Tribunal find the Respondent to be in breach of Clause 83, damages should be

assessed as follows.

35. The purpose of awarding damages is to compensate the loss suffered by the innocent party as a result of

the breach and put it in the position as if the contract had been performed.30 As such, the innocent party

can only recover damages for a loss of which the breach was the effective cause; in other words, that

the breach of contract substantially caused the claimant’s loss.31 Further, the innocent party is under a

duty to mitigate its loss; it cannot claim damages for losses that could have been avoided by taking

reasonable steps.32 Should the innocent party act unreasonably, it cannot recover any extra loss he

suffers as a result. 33

26 Record p. 43. 27 Record pp. 35-37. 28 Record pp. 42-43. 29 Ibid. 30 The classic position stated in Robinson v Harman (1848) 1 Ex. 850, 855; this standard rule of compensatory nature of damages was recently reaffirmed in Morris-Garner v One Step (Support) Ltd [2018] UKSC 20 at [35]. 31 Galoo v Bright Grahame Murray [1994] 1 WLR 1360, 1374–1375; Chitty at 26-066. See also the application of the principle of causation in maritime context: Monarch SS Co v Karlshamns Oljefabriker (A/B) [1949] AC 196 at 226. 32 British Westinghouse Electric Co Ltd v Underground Electric Rys [1912] AC 673, 689; Standard Chartered Bank v Pakistan National Shipping Corp [1999] 1 All ER (Comm) 417 (upheld [2001] 1 All ER (Comm) 822, CA). 33 Compania Financiera v Hamoor Tanker Corporation (The Borag) [1981] 1 WLR 274; Seven Seas Properties Ltd v Al-Essa [1988] 1 WLR 1272 at 1276; Banco de Portugal v Waterlow & Sons Ltd [1932] AC 452.


9

If Tribunal finds breach for not cleaning the hull

(I) Hull cleaning costs

36. It was unreasonable for the Claimant to sail to South Island instead of North Titan for cleaning:

(a) The total cleaning cost in North Titan was just USD 33,00034, which was substantially lower (around

25%) than the USD 41,000 in South Island35;

(b) North Titan was a perfectly viable option for the Claimant. Suppose after the ship was redelivered on

30.06.2016, the Vessel sailed to North Titan, which would take half a day only,36 cleaning could still

be completed there on or around 03.07.2016 (spending around 3-4 days).37 There would still be

abundant time to sail to South Island for the next laycan on 4-6 July 2016;38 and

(c) Although South Island was clearly a much more expensive option, the Claimant still chose it purely

out of personal convenience at the unnecessary financial detriment of the Respondent, simply

because the laycan for the Replacement Fixture was at South Island39.

37. As such, the Claimant acted unreasonably and failed to mitigate its loss. It cannot recover extra loss. It

is only entitled to USD33,00040 being the cost of cleaning at North Titan.

(II) Costs of voyage to South Island

38. Under this head, the Claimant is claiming: (a) the hire rate from sailing to South Island until cleaning

was completed (i.e. 30.06.2016-04.07.2016); and (b) bunkers consumed during the voyage.

(a) Hire rate

39. The Claimant is not entitled to the hire rate as claimed after the Charterparty came to an end on

30.06.2016. Further, as the Vessel would have to sail to South Island in any event for the Replacement

34 Record p. 35. 35 Record p. 50-51. 36 Record p. 39. 37 As it took 3 days for the Claimant to clean at South Island (Record p.68), the period of time spent for cleaning at North Titan would likely to be similar. 38 Record p. 68. 39 Record p. 55. 40 Record p. 35.


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Fixture, there is no causal link between any breach of Clause 83 and the hire rate as claimed.

(b) Bunkers consumed

40. Similarly, as the Claimant would have to sail to South Island anyway, bunkers would have to be

consumed during this voyage in any event and so it is not recoverable.

41. All in all, the Claimant is only entitled to USD33,000.

If Tribunal finds liability for failing to agree a lump sum

(III) Hull cleaning costs

42. In the event that the Respondent is liable for the failure to agree on a lump sum, the Respondent

submits that the Claimant is not entitled to any damages for the loss of the hypothetical bargain. Such

“negotiating damages” is limited to cases where the breach of contract involves infringement of

proprietary right and where damages are awarded in lieu of injunction.41

43. Even if the law were to imply that a reasonable price should be paid,42 if the contract has not specified

the price of payment but has laid down at least some criteria or reference as to how that price should be

obtained, the damages payable should be assessed by reference to these objective criteria.43 Therefore,

in the present case, even if the Respondent was liable, it should only pay a sum representing what the

parties would have agreed. Clause 83(d) provided a reference that such lump sum should be “a result of

or in connection with the need for cleaning”. The BIMCO Explanatory Note also indicated that the

lump sum should be “based on quotes from cleaning companies as opposed to actual invoices” and

does not “reflect the exact amount of the owners’ costs”.44

44. Therefore, the Respondent submits that such a reasonable price is represented by the quote of UD

33,000 from North Titan. The reason why the cleaning costs at South Island was unreasonable is

explained at [36] above. Therefore, the Respondent could only recover USD 33,000.

45. For the sake of completeness, on a proper interpretation of Clause 83, the Claimant cannot recover the 41 Chitty at 26-050; Morris-Garner v One Step (Support) Ltd at [3]. 42 Foley v Classique Coaches Ltd [1934] 2 KB 1, 11-12. 43 Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503. 44 BIMCO Explanatory Note at p. 2.


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actual cleaning cost under this head because it would defeat the operation of Clause 83(d). If the

Claimant could recover the actual cost when there was no agreement, this would have encouraged the

Claimant to refuse to agree on any lump sum and then claim the final cost later. Such reading is clearly

against commercial sense and business efficacy.

(IV) Costs of voyage to South Island

46. The arguments in [38]-[40] above are repeated.

47. All in all, the Claimant is only entitled to damages for hull cleaning costs in a sum not exceeding

USD33,000.

C. DAMAGES ON LATE REDELIVERY SHOULD NOT INCLUDE THE LOSS OF HIRE

UNDER THE NEXT FIXTURE

48. Subject to the Respondent’s off-hire claim, should the Tribunal find the Respondent to have redelivered

the Vessel late, (I) the Claimant is not liable for the loss of hire under the Next Fixture; alternatively,

(II) only loss of 2 years’ hire can be recovered. In any event, (III) credit must be given for the hire

received under the Replacement Fixture.

(I) Loss of hire under Next Fixture is not recoverable

49. In order for losses to be recoverable, they must not be remote. Under the traditional formulation in

Hadley v Baxendale,45 losses would not be considered to be too remote if the loss is within the ordinary

course of things or the party has actual knowledge of special circumstances.46 A higher degree of

probability is required in contract than in tort: there must be a “serious possibility”, “real danger”, or

“very substantial” probability of loss.47

50. In the recent decision of The Achilleas,48 the House of Lords held that even if a loss is not unusual,

45 (1854) 9 Ex. 341, 354. 46 Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528, 539. 47 Koufos v C Czarnikow Ltd (The Heron II) [1969] 1 AC 350. 48 Transfield Shipping Inc v Mercator Shipping Inc (The Achilleas) [2008] UKHL 48, [2009] 1 AC 61.


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certain losses may be too remote if the breaching party has not assumed responsibility for it. Examples

would include cases where it is market understanding that such loss should not be recovered49; that the

loss is unquantifiable and unpredictable,50 and even disproportionate to the value of the contract.51 As

Treitel noted, this “assumption of responsibility” test does not represent a fundamental departure from

the traditional understanding of the test of remoteness.52 The reformulated approach would apply in

narrower cases 53 where the traditional approach would not reflect the expectation or intention

reasonably imputed to the parties.54

51. In the present case, applying the traditional test, the loss of the Next Fixture is too remote. The

Claimant represents its business in a very broad and indeterminate way by claiming that it runs a “fleet

of bulk cargo vessels”.55 There is no evidence on the Claimant’s exact scope or mode of business, such

as the number of vessels in service at any one time, the usual length of charterparties and whether all

vessels “[serviced] the medium term time charter market”. The single message on the Claimant’s

Chatter account dated 01.03.2016 stating that it was looking to fix the Vessel for 3-5 years was not

enough to show that the ordinary course of the Claimant’s business was to enter into charterparties

similar to the Next Fixture, let alone that there was a serious possibility that the loss of the Next Fixture

would be an ordinary course of thing upon the Respondent’s late re-delivery.

52. Second, despite allegation to the contrary,56 the Respondent did not have any special knowledge of the

Next Fixture when entering into the Charterparty. Indeed, the Charterparty was entered on

18.03.2016,57 but the Next Fixture was only entered into two months later on 15.06.2016.58

53. Even applying the test of “assumption of responsibility” in The Achilleas, the loss is still too remote:

49 The Achilleas at [6] and [10]; Sylvia Shipping Co Ltd v Progress Bulk Carriers Ltd (The Sylvia) [2010] EWHC 542 (Comm), [2010] 2 Lloyd’s

Rep 81 at [40]. 50 The Achilleas at [24], [34] and [36]. 51 Chitty at 26-144; see also Andrew Burrows, A Restatement of The English Law of Contract (Oxford University Press, 2016), pp. 128-130. 52 Treitel on the Law of Contract (Sweet & Maxwell, 14th edn, 2015) at 20-110. 53 The Sylvia at [41]; Treitel at 20-110. 54 Supershield Ltd v Siemens Building Technologies FE Ltd [2010] EWCA Civ 7, [2010] 1 Lloyd’s Rep 349 at [43]; Treitel at 20-110. 55 Record p. 1. 56 Record p. 77. 57 Record p. 65. 58 Record p. 67.


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(a) It is the understanding of the shipping industry that a charterer’s liability for late re-delivery is

confined to the difference between the market rate and the charter rate for the overrun period.

Any departure from this rule would lead to serious commercial uncertainty which the industry as

a whole would regard as undesirable.59

(b) The Next Fixture only came to being on 15.06.2016,60 which was around three months after the

Charterparty was entered into. The terms of the Next Fixture, in particular the option to renew,

were something the Respondent had no control of. Thus, the total hire which the Claimant may

earn under the Next Fixture was far from quantifiable.61

(c) The value of the Charterparty was around USD 100k but the damages claimed amounts to USD

some 15.33 million, or around 160 times the contract value. This is wholly disproportionate.62

The Respondent could not have been treated as having resumed responsibility for such an open-

ended and disproportionate liability.

(II) Only loss of 2 years’ hire can be recovered

54. As mentioned above, there must be a causal link between the breach and the loss claimed. The loss of

the further two years in the Next Fixture is a mere loss of chance. It has been held that where the

plaintiff’s loss of chance depends on the hypothetical action of a third party, he has to show that he has

a substantial chance rather than a speculative one to obtain that benefit.63

55. In the present case, it cannot be shown that there was a substantial chance that Champion Corp would

renew the Next Fixture after the two years. Whether the Next Fixture would be renewed is solely at

Champion Corp’s option and it is highly speculative. A lot of factors may sway its decision such as the

business conditions of Champion Corp and the Claimant by then, whether it was satisfied with the

Claimant’s service, the market rate of chartering a similar vessel etc.

56. Thus, whether the Claimant would have lost the hire for the further two years is purely speculative and

59 The Achilleas at [6] (per Lord Hoffmann); [34] (per Lord Hope). 60 Record pp. 30-33. 61 The Achilleas at [34]. 62 Comparing the net balance to the Owner at Record p. 52 and the amount claimed for the loss of hire under the Next Fixture at Record p. 69. 63 Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602 at 1611A-B; 1614D (per Stuart-Smith LJ).


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it may loss the hire in any event, the Claimant cannot recover this sum.

(III) Credit must be given for hire received under the Replacement Fixture

57. Further, if the innocent party to a contract has benefitted from performing his duty to mitigate, such

benefits must be deducted from the damages for late redelivery,64 for the award of damages is to

“compensate for his loss, not to enrich him”.65 As such, the Claimant’s earnings in the Replacement

Fixture must be credited for.

58. To conclude, the Respondent is not liable for any loss of profit. Even if it were, the Respondent were

only liable to the hire of the first 2 years under the Next Fixture less the hire received under the

Replacement Fixture.

ARGUMENTS ON MERITS OF COUNTER-CLAIM

A. CARGO CLAIM

59. Pursuant to Clause 53 of the Charterparty, liability for cargo claims between the Owners and the

Charterers shall be apportioned in the manner as specified by the Inter-Club New York Produce

Exchange Agreement (“the ICA”). It is submitted that: (I) the Cargo Claim is not time-barred under

Clause 6 of the ICA; and (II) the Claimant should be 100% responsible under Clauses 8(a) and (d) of

the ICA, or alternatively, 50% responsible under Clause 8(b).

(I) The Cargo Claim is not time-barred under Clause 6 of the ICA

60. The Respondent is not barred from bringing an indemnity claim (“the Cargo Claim”) under Clause 6

of the ICA which provides that:

“[r]ecovery… by [a] Charterer shall be deemed to be waived and absolutely barred unless written

notification of the cargo claim has been given to the other party… within 24 months of the date of

delivery of the cargo or the date the cargo should have been delivered… Such notification shall if

possible include details of the contract of carriage, the nature of the claim and the amount claimed.” 64 Evans Marshall & Co. v Bertola [1976] 2 Lloyd’s Rep 17; Cebercus Software Ltd v Rowley [2001] EWCA Civ 74. 65 Longden v British Coal Corp [1998] AC 653 at 662.


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(Emphasis added)

(a) The limitation period

61. The usual time limit to bring a claim is 24 months. However, adding the two 3-month time extension

granted the Claimant in the email correspondences dated 29.05.2017 and 28.08.2017,66 the applicable

limitation period in this case was 30 months. As the Cargo should have been delivered on or around

30.06.2016,67 the limitation period should run till around 30.12.2018. The reason why the Respondent

asked for time extension as early as in 2017 is immaterial and cannot be ascertained. It, however, does

not affect the validity of the extensions granted by the Claimant.

(b) The counterclaim is not time barred as the Respondent served written notification in 2016

62. Generally, the requisite content and the level of details to be provided in a valid notice is a question of

interpretation of the time bar clause.68 While time bar clause is a kind of limitation clause and hence

should be interpreted strictly and contra proferentem,69 the purpose of providing written notification

like the one specified in Clause 6 of the ICA is to enable the recipient to investigate the potential claim

and to make preparations to deal with it.70 Thus, the touchstone of whether the recipient is notified is “a

requirement of clarity sufficient to achieve certainty rather than a requirement of strict compliance

which, if applied inflexibly, can lead to uncommercial results” (emphasis added).71 This approach is

consistent with the wordings of Clause 6 of the ICA which provides for various details to be “if

possible include[d]”.

63. The Respondent has conveyed its intention to make a claim against the Claimant with respect to the

damaged cargo with sufficient clarity and certainty in the email dated 07.07.2016. 72 The email

66 Record pp. 57-58. 67 Record p. 46. Although the Record does not stipulate the exact date of delivery of cargo, it is logical to contemplate that delivery was effected on or around 30.06.2016 as Preliminary Survey Report provides that “[t]he Receivers will take delivery of the cargo, and they will see if any of the tea can be salvaged or re-conditioned.” 68 Sir Kim Lewison, The Interpretation of Contracts, (London: Sweet & Maxwell, 6th edn, 2015) at 12.17. 69 Atlantic Shipping and Trading Co Ltd v Louis Dreyfus and Co [1922] AC 250; Beck & Co v Szymanowski & Co [1924] AC 43. 70 London Arb 16/02 (2002) 600 LMLN 2. 71National Shipping Co of Saudi Arabia v BP Oil Supply Co (The Abqaqi) [2011] EWCA Civ 1127, [2012] 1 Lloyd’s Rep 18; Kassiopi Maritime Co Ltd v Fal Shipping Co Ltd [2015] EWHC 318 (Comm), [2015] 1 Lloyd’s Rep 473. 72 Record p. 45.


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expressly stated its status as a formal notice of cargo claim against the Claimant. In addition, the

Preliminary Survey Report by Mekon Surveyors (“the Report”) attached to the email outlined various

details as required under Clause 6 of the ICA:73

a. Nature of the claim:

The Report stated that the cargo damage was resulted from the improper use of ballasting

system by the crew. The nature of the claim was therefore negligence of the crew in the

management of the Vessel; and

b. The amount claimed:

Although the Report did not specify for the exact quantum to be claimed, it provided market

price estimation from which the approximate quantum could be calculated from (i.e. as

between USD 516,000,000 to 559,000,000). In any event, failure in providing an exact

amount does not render the notice invalid since: (i) It was impossible to include the quantum

into the notice as the Respondent had to wait for the Receivers to assess their options;74 and

(ii) The estimated quantum is sufficient to fulfil the commercial purpose of the written

notification requirement, i.e. to enable the Claimant to prepare for the Cargo Claim. It is also

worth noting that the Claimant itself did not ask for nor insist on the provision of the exact

quantum in subsequent correspondences.

64. Therefore, the Respondent submits that the email dated 07.07.2016 (together with its attachment)

constitutes a clear and unequivocal written notice of the Cargo Claim. There was no need to include the

details of the contract of carriage as there was only one contract from which a claim can possibly arise

between the parties. It is immaterial that the email did not mention or refer to the actual Cargo Claim;

they had already notified the Claimant by email as early as on 27.06.2016 about the cargo damage and

that they “hold the Owners fully liable for all claims and costs arising from the negligence of the crew”

once an underlying claim was made against them.75 Reading these correspondences together, the

Claimant has sufficient information to prepare for a cargo claim. 73 Record p. 46. 74 Ibid. 75 Record p. 38.


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(c) Alternatively, written notification was given on 23.11.2017 or latest by 17.12.2018

65. Even if the aforesaid emails dated 07.07.2016 and 27.06.2016 fell short of being a written notification

of the Cargo Claim as per Clause 6 of the ICA, the Respondent submits that sufficient notification was

made in the email dated 23.11.2017, which specified that the Respondent was ready to bring a cargo

claim as soon as the Receivers would have commenced action. 76 In the further alternative, the

Counterclaim is a clear and unequivocal notification of the cargo claim and it was served well before

the limitation period expires on around 30.12.2018.

(II) Apportionment under Clause 8 of the ICA

(a) The Claimant is 100% responsible as the claim arise out of error in management of the Vessel

66. The ICA provides for a mechanical apportionment of the financial liability of claims arising under the

NYPE forms.77 Insofar as relevant, Clauses 8(a) provides that:

“(8) Cargo claims shall be apportioned as follows:

(a) Claims in fact arising out of unseaworthiness and/or error or fault in navigation or

management of the vessel: 100% Owners

save where the Owner proves that the unseaworthiness was caused by the loading, stowage,

lashing, discharge or other handling of the cargo, in which case the claim shall be

apportioned under sub-Clause (b).” (emphasis added)

67. The phrase “management of the vessel” has no precise legal meaning78 and goes beyond navigation to

include acts which do not affect the sailing of the vessel but do affect the vessel herself.79 It is trite that

ballasting of the vessel during discharge is an act for management of the vessel. In The Glenochil,80 the

engineer of the ship ran water into a ballast tank during the discharge of cargo to stiffen the ship but as

a result of his negligence in so doing, goods suffered damage due to water ingress. The Court

76 Record p. 57. 77 D/S A/S Idaho v Peninsular and Oriental Steam Navigation Co (The Strathnewton) [1983] 1 Lloyd’s Rep 219 at 224. 78 Suzuki & Co Ltd v T Benyon & Co Ltd (1926) 24 Ll.L.Rep 49 at 54. 79 The Glenochil [1896] P 10 at 16. 80 Ibid.


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recognized the distinction between want of care of cargo and want of care vessel indirectly affecting the

cargo but nevertheless found that ballasting exercise was an act to manage the vessel.

68. The decision was subsequently affirmed in Greer LJ’s dissenting speech in the Court of Appeal

decision of Gosse Millard81 (which was upheld by the House of Lords).82 His Lordship referred to The

Glenochil,83 where the damage was caused by negligent ballasting, which was done in order to keep the

ship afloat in proper trim, and was done for the benefit of the ship, as a ship. It was held there that the

negligence was in the management of the ship.

69. In a similar vein, Wright J stated in Foreman & Ellams Ltd v Federal Steam Navigation Co Ltd that:84

“A modern steamship is not only a complicated steel structure… ballast tanks and pumps and

elaborate piping. Negligence in handling these directly affects the ship in its essential functions of

floating… if the sea connections are improperly opened, and so on, there is a fault in navigation and

management of the ship which directly affects the ship…” (Emphasis added)

70. Therefore, the cargo damage at hand arose out of error or fault in management of the Vessel beyond

doubt. In accordance with the Report, the damage was caused by improper use of the ballasting system

as a crew member opened the wrong valves. The ballasting exercise was carried out to ready the

Vessel’s departure once the Cargo had been discharged. The exercise must thus be an act for the

management of the Vessel for the purpose of Clause 8(a) of the ICA. As a result of the crew’s error or

fault, 2000mt of cargo consisting of loose leaf English Breakfast tea suffered severe water damage.

Accordingly, the Claimant is 100% responsible for the damages of the cargo damage claimed: (2000 x

1000 kg) x USD 50/kg = USD 100,000,000 and the Respondent is entitled to a complete indemnity of

the Cargo Claim.

81 Gosse Millard v Canadian Government Merchant Marine Ltd [1928] 1 KB 717 at 744. 82 [1929] 1 AC 223. 83 See n 78. 84 [1928] 2 KB 424 at 439.


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(b) Alternatively, the Claimant is 100% responsible as the claim arose out of the act or neglect of

the Claimant’s servant

71. Clause 8(d) of the ICA provides that:

“(d) All other cargo claims whatsoever… : 50% Charterers 50% Owners unless there is clear and

irrefutable evidence that the claim arose out of the act or neglect of the one or the other (including

their servants or sub-contractors) in which case that party shall then bear 100% of the claim.”

(emphasis added)

72. Even if the Tribunal does not take the view that the ballasting exercise is an act for the management of

the Vessel, the Claimant should still be 100% responsible for the Cargo Claim as the Report is clear

and irrefutable expert evidence that the damage arose out of the act or neglect of the Claimant’s

servants. Although there is no known authorities discussing the meaning of “neglect” in the context of

charterparty exemptions or the ICA, the Respondent submits that negligent and improper use of the

ballasting system falls squarely within the natural meaning of the word “neglect”, which means “failure

to care for properly”.85 In any event, the damage arose out of the act of the Claimant’s servant in

opening the wrong valves and this has never been denied by the Claimant.

(c) Further alternatively, at least 50% of the cargo claim is for the Claimant’s account under

Clause 8(b)

73. Insofar as relevant, Clause 8(b) of the ICA states that:

“Claims in fact arising out of the loading, stowage, lashing, discharge, storage or other handling of

cargo: 100% Charterers unless the words ‘and responsibility’ are added in clause 8 or there is a

similar amendment making the Master responsible for cargo handling in which case: 50%

Charterers 50% Owners…” (emphasis added)

74. In the unlikely event where the Tribunal finds against both of the above arguments, the Claimant

remains 50% responsible for the Cargo Claim as the words “and responsibility” were added to Clause 8

85 As defined in the Oxford English Dictionary.


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pursuant to the Fixture Recap.86 In this situation, the Claimant is responsible for USD 50,000,000.

B. VESSEL WAS OFF HIRE FROM 7 MAY 2016 TO 26 JUNE 2016

(I) The Vessel should be off hire

75. Insofar as relevant, Clause 17 of NYPE 2015 provides that:

“In the event of loss of time from deficiency and/or default and/or strike of officers or ratings, or

deficiency of stores, fire, breakdown of, or damage to hull, machinery or equipment, grounding,

detention by the arrest of the Vessel … or detention by Port State control or other competent

authority for Vessel deficiencies… or by any other similar cause preventing the full working of the

Vessel, the payment of hire and overtime, if any, shall cease for the time thereby lost…” (Emphasis

added)

76. It is well settled that three elements must be established in order for a vessel to be off-hire:87

(a) The full working of the Vessel must have been prevented;

(b) It is prevented by one of the causes in the off-hire clause, i.e. Clause 17 of NYPE 2015; and

(c) There must have been a loss of time from the said cause.

77. The test for the first element is whether the Vessel is prevented from carrying out the next operation

that is necessary for performing the Charterers’ order; this requires consideration of what the

Charterer’s service actually requires.88 Full working is likely to be prevented when the Vessel has to do

something which is not in the ordinary way required by a time charter.89

78. A vessel is not usually subject to quarantine in the ordinary course of events and this clearly prevents

the full working of a vessel. In The Apollo,90 it was held that a 29.5-hour quarantine prevented the full

working of the vessel; although only 2 members of the crew were disembarked and hospitalised, there

was good cause for careful testing and disinfection before free pratique was granted. The quarantine in

this case must have prevented the full working of the Vessel since:

86 Record p. 5. 87 Coghlin and others at 25.6. 88 Sig.Bergesen D.Y& Co.and others v Mobile Shipping and Transportation Co. (The Berge Sund) [1993] 2 Lloyd’s Rep 453 at 460. 89 Coghlin and others at 25.14. 90 Sidemar S.p.A. v Apollo Corporation (the “Apollo”) [1978] 1 Lloyd’s Rep 200.


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(a) It was held at anchorage by the Wahanda Port State Control and was not allowed to berth and

discharge;91 and

(b) The Vessel was quarantined from 07.05.2016 until 26.06.2016, for a total of 50 days.92

79. For the second requirement, applying the principle of ejusdem generis, the phrase “any other similar

cause” must be interpreted to include any other cause of the same type as those previously mentioned.

Causes concerning physical condition or efficiency of the vessel would include that of its crew.93 Many

off-hire events included in Clause 17, such as damage to hull, machinery or equipment, grounding and

detention by Port State control for Vessel deficiency, are related to the physical condition or efficiency

of the Vessel. Therefore, detention of the Vessel arising from members of the crew being inefficient

due to physical illnesses constitutes an off-hire event.

(II) Quarantine triggers off-hire

80. Even if the Tribunal does not agree with the aforesaid, Clause 44 of the Rider Clauses is specifically

included to supplement Clause 17. Reading the clauses together, it is clear that the quarantine

constituted an off-hire event. Although there is no known authority defining “communication” in the

context of charterparty, it suffices that the natural meaning of the word means “social contact and

personal intercourse”.94

C. INTEREST

81. The Respondent claims interest on the whole of the amount awarded by the Tribunal pursuant to s.49 of

the Arbitration Act 1996.

82. The interest rate to be awarded in admiralty cases is the same as that in commercial cases.95 The law

allows for an uplift from the base rate to recognise the real cost of borrowing incurred.96 Base rates

awarded to commercial parties trading in USD but operating outside of the United States is assessed

91 Record p. 25. 92 Record p. 72. 93 Audre & Cie S.A. v Orient Shipping (Rotterdam) B.V. (The Laconian Confidence) [1997] 1 Lloyd’s Rep 139 at 150-151. 94 As defined in the Oxford English Dictionary. 95 Polish Steamship Co. v Atlantic Maritime Co (The Garden City) [1985] QB 41 at 67C. 96 Saleem Jaura v Saeeda Ahmed [2002] EWCA Civ 210 CA at [26].


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with reference to USD LIBOR 3-monthly rates on a compound basis instead of the US Prime Rate.97

Therefore, the suggested practice in this case is to award an uplift from the USD LIBOR rate98 as the

Respondent is based in Liechtenstein.99 As per the LMAA interest rate tables, the USD LIBOR rate as

of March 2019 is 2.60%. Thus, it is submitted that interest rate at 3.60% should be awarded.

REQUEST FOR RELIEF

83. For the reasons set out above, the Respondent requests that the Tribunal:

(I) Declare that the Claimant is not entitled to hull cleaning costs of USD41,000.00 and costs of

voyage to South Island of USD55,567.42;

(II) Declare that the Claimant is not entitled to damages for late redelivery whatever the quantum is;

(III) Award the Respondent 100% of the sum of Cargo Claim of USD 100,000,000; and

(IV) Award the Respondent restitution of the sum from the overstay period in Wahanda;

(V) Award the Respondent interest on all sum found to be due to it; and

(VI) Award further or other relief as the Tribunal considers fit.

97 Braspetro Oil Services Co v FPSO Construction Inc [2007] EWHC 1359 (Comm) at [309]. See also the London Maritime Arbitrators Association, What about Interest? Available at http://www.lmaa.london/faq.aspx?pkFaqCatID=285190bc-3d22-4c18-832d-4235ea36b308 (visited 26 Apr 2019). 98 Carver on Charterparties (London: Sweet & Maxwell, 2017) at 11-529. 99 Record p. 3.

TWENTIETH ANNUAL INTERNATIONAL MARITIME …...Standard Chartered Bank v Pakistan National Shipping...

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