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19TH ANNUAL INTERNATIONAL MARITIME

LAW ARBITRATION MOOT COMPETITION

2018

IN THE MATTER OF AN ARBITRATION HELD IN BRISBANE

CLAIMANT’S MEMORANDUM

Claimant: Respondent:

Cerulean Beans and Aromas Ltd Dynamic Shipping LLC

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Ebubekir Bal

Oğul Şahin Ateş

Ata Deniz

Pınar Demiralp

Zeynep Kiriş

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TABLE OF CONTENTS

LIST OF ABBREVIATIONS………………………………..…………………………...……vi

LIST OF AUTHORITIES………………………………..…………………………...………vii

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

A. The Parties…………………………..…………………...………………………………….1

B. The Voyage Charterparty…………………………..…………………...………………….1

C. The Performance of the Charterparty…………………………..…………………...…….1

ARGUMENTS PRESENTED…………………………………………….………………...….2

A. THE TRIBUNAL DOES HAVE JURISDICTION TO DETERMINE

CLAIMANT’S CLAIMS ABOUT DAMAGES …………………………………..2

I. The Tribunal has a Power to Determine its Own Jurisdiction……………………………2

II. Seat of Arbitration Does Not Necessarily Have to Correspond to Where the Hearings Will

Be

Held……………………………………………………………………………………..3

III. Non-Fulfillment of the Expert Determination Pre-Arbitral Step Prior to the Arbitration

Does Not Prejudice the Jurisdiction of the Tribunal………………………………………….3

i. Expert Determination is an Unenforceable Condition for the Commencement of

the Arbitration …………………………………………………………………………………...3

ii. Pre-Arbitration Expert Determination under Clause 27(d) is a Non-Mandatory Condition for

the Commencement of Arbitration…………………………………………………………...4

IV. The Respondent Have Waived Their Right to Object to the Jurisdiction of the

Tribunal by Their Conduct……………………………………………………………...……..…5

CLAIMS FOR DAMAGES AND EXPENSES ……………………………………………….5

A. CLAIMANT IS NOT LIABLE FOR WATER DAMAGE ………………………………5

I. According to The Hague Visby Rules, the Respondent’s Liability is not Limited for Water

Damage Claim………………………………………………………………………….....5

i. Unqualified General Clause Paramount Refers to Hague Visby Rules (“the Visby

Rules”)………………………………………………………………………………...5

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ii. The Respondent Cannot Avail Themselves from the Limitation of Liability under

Art4(5)(e) of The Hague Visby Rules ……………………………………….…………5

iii. Alternatively, the Claimant’s Water Damage Claim does not Exceed the Limits in

Art4(5) of The Hague Visby Rules………….…………………………………………6

II. Water Damage is not Attributable to the Claimant ………………………………………...6

i. Delivery was not Completed Until the Claimant Collected the Cargo and the Damage

Occurred while the Respondent still had the Possession of the Cargo …………………..6

ii. The Respondent Acted Negligently When Delivering the Cargo ………………...……7

a. The Respondent Breached their Obligation to Take Care of the Goods ………………7

b. The Respondent was Liable for not Discharging the Cargo to a Fit and Safe Place ….9

iii. Discharging the Cargo to the Warehouse is not Contractual ……………………………9

iv. The Respondent should have Waited for the Permitted time for Unloading to Cargo in

Safe ………………………………………………...……………………………...…10

B. REPLACEMENT COFFEE EXPENSES AND SETTLEMENT FEE…………………………10

I. The Respondent Breached the Contract by deviating from the route and using an

unseaworthy vessel ………………………………………………………………………………………………………10

i. The Respondent’s Vessel was Unseaworthy and did not Comply with Australia

Navigation Act Provisions ………………………………………………………………………………………10

ii. Solar Flare is not a Force Majeure Event under Clause 17(3) therefore the Deviation is

not Justifiable …………………………………………………………………………………………………………………11

iii. The Claimant is Entitled to be Compensated Regardless of Whether or not They Have

Affirmed the Contract ………………………………………………………………………………………………12

iv. Even if it is Accepted that the Deviation is Justifiable; This does not Prevent

Compensation Claims ………………………………………………………………………………………………12

II. Effective Causation ………………………………………………………………………………………………………13

i. Initial Unseaworthiness and Deviation are the Effective Causes of the Expenses

Incurred……………………………………………………………………………………………………………………13

ii. Intervening Event (Storm) does not Break the Chain of Causation between the Breach of

Contract (Initial Unseaworthiness and Deviation) and the Expenses Incurred ……………..14

III. Remoteness of the Damages …………………………………………………………………………………..……..14

i. Replacement Coffee …………………………………………………………………………………………………15

a. Replacement Coffee Expense was Foreseeable and was not Remote ………………………15

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b. Replacement Coffee Expense was Made Reasonably and should be Compensated …15

ii. Settlement Fee …………………………………………………………………………………………………………16

a. Settlement Fee is Compensable According to the Ordinary Rules of Remoteness and

Causation ………………………………………………………………………………………………………………16

b. Settlement Fee is Payable According to the Biggin Rule ………………………………………….16

IV. Conclusion …………………………………………………………………………………………………………………..17

DEFENCES TO THE CLAIMS OF RESPONDENT ……………………………………….17

A. THE RESPONDENT IS NOT ENTITLED TO FREIGHT ……………………………..17

I. Delivery was not Made to Charterer or its Agents ………………………………………17

II. Delivery was not Made on Time ………………………………………………………….18

III. The Cargo were not in a Merchantable Condition when Delivered ………………………18

B. THE RESPONDENT IS NOT ENTITLED TO DEMURRAGE ……………………………19

I. Through the Exception Clause (Clause 8(e) of the Charterparty), the Claimant’s Duty to

Pay Demurrage is Waived in Case of a Bad Weather …………………………………….19

II. Demurrage did not Accrue because 29 July could be Considered as a Weather Working Day

(“WWD”) ……………………………………………………………………………….19

III. Demurrage did not Accrue because the Laytime had not Expired ………………………...20

C. THE CLAIMANT IS NOT LIABLE TO PAY COST OF REPAIRS TO HULL

DAMAGE …………………………………………………………………………………20

I. There was no General Average Act ………………………………………………………20

i. YAR 1994 should be Applied while Adjusting the GA Contribution ……………….21

ii. Repair Costs Incurred was not an Extraordinary Loss ……………………………….21

iii. There was an Ordinary Peril when the Respondent Incurred Cost of Repairs ……….21

iv. Fault of the Respondent Hinder them to Claim Contribution for GA ………………...22

II. Alternatively, the Respondent was not Entitled to Claim Total Amount of USD875,000 ….22

D. AGENCY FEES AND USAGE OF ELECTRONIC ACCESS ………………………….22

I. Agency Fee and Usage of Electronic Access at Port of Dillamond were Non-

Contractual……………………………………………………………………………...22

II. The Claimant shall not be Held Liable for the Agency Fee at Port of Spectre Because Clause

12(a) of the Charterparty does not Cover Devious Voyage ………………….………………23

PRAYER FOR RELIEF ………………………………………………..…………………......23

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LIST OF ABBREVATIONS

All ER All England Law Reports

Art Article

Cargo Coffee Beans

Charterparty Voyage Charter

Claimant Cerulean Beans and Aromas Ltd

i.e That is

Respondent Dynamic Shipping LLC

LMAA London Maritime Arbitration Association

Lloyd’s Rep Lloyd’s Law Reports

Para Paragraph

r. Rule

s. Section

Vessel Madam Dragonfly

YAR York-Antwerp Rules

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LIST OF AUTHORITIES

CASES

A v. B [2006] EWHC 591, 617 (Comm)

Agius v. Great Western Colliery Co. [1899] 1 Q.B. 413

Alghussein Establishment v Eton College [1988] 1 W.L.R. 587

Antclizo Shipping Corp. v Food Corporation India (The Antclizo) (No.2) [1992] 1 Lloyd’s Rep.

558

Asfar v. Blundell [1896] 1 Q.B. 123

British Shipowners v. Grimond (1876) 3 Rett. 968

British Racing Drivers’s Club Ltd v. Hextall Erskine & Co. [1996] 3 All ER 667

Browner International Ltd v Monarch Shipping Co. Ltd (The European Enterprise) [1989] 2

Lloyd’s Rep. 185

Canadian Dredging Co v. The Mike Corry [1919] 19 Ex. C.R. 61, (1919) D.L.R. 495

Chartered Bank v. British India S. N. Co. [1909] A.C. 369

Compania Naviera Azuero v. British Oil and Cake Mills [1957] 1 Lloyd’s Rep. 312

County Ltd v Giorzentrale Securities [1996] 3 ALL E.R. 834, CA

Courtney & Fairbairn Ltd v. Tolaini Bros. (Hotels) Ltd (1975) 1 WLR 297

Dakin v Okley [1864] 15 CBNS 646

Dow Chemical (Nederland) v. B.P. Tanker Co. (The Vorras) [1983] 1 Lloyd’s Rep. 579

Dubai Islamic Bank PJSC v. Paymentech Merchant Servs. Inc. [2001] 1 All ER (Comm)

El Greco (Australia) Pty Ltd v Mediterranean Shipping Co SA [2004] FCAFC 202; 140 FCR 296

Empirnall Holdings Pty Ltd v. Machon Paull Partners Pty Ltd (1988) 14 NSWLR 527

Eriksen v. Barkworth (1858) 3 H. & N. 601

Excess Insurance Co. Ltd and Home Overseas Insurance Co. Ltd v. CJ Mander [1997] 2 Lloyd’s

Rep 119

Federal Commerce v. Tradax Export (The Maratha Envoy) [1978] A.C. 1

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Fenwick v Boyd (1846) 15 M. & W. 632

Frenkel v. MacAndrews & Co., Ltd., [1929] A.C. 545

Galoo v Bright Grahame Murray [1994] 1 W.L.R. 1360

Gebr. Broere v. Saras Chimica [1982] 2 Lloyd’s Rep. 436

Gebruder Metelmann Gmbh v. NBR (London) Ltd [1984] 1 Lloyd’s Rep. 614

George Scarr-Hall v ISS (UK) Ltd [2017] EWHC 689

Gibaud v. Great Eastern Rly [1921] 2 K.B. 426

Glynn v Margetson [1893] AC351 [1907] 1 KB 660

Grebert-Borgnis v J. and W. Nugent [1885] 15 Q.B.D. 85

Hadley v Baxendale [1854] 9 Exch. 341

Hain Steamship Company Ltd v Tate&Lyle Ltd [1936] 2 All ER 597

Harrison v Bank of Australia [1872] LR 7 Ex 39.

Koufos v. C. Czarnikow, Ltd. (“The Heron II”) [1969] 1 A.C. 350

Heskell v Continental Express Ltd. [1950] Q.B 137

Islamic Republic of Iran Shipping Lines v Ierax Shipping Co. [1991] 1 Lloyd’s Rep. 81

J.&E. Kish v Charles Taylor, Sons&Co [1912], AC 604

James Morrison & Co. Ltd. v Shaw, Savill and Albion Co Ltd [1916-1917] All E.R Rep 1068

Karaha Bodas Co. LLC v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara [2003]

HKCFI 390

Killarney Investments Pty Ltd v Macedonian Community of WA (Inc) [2007] WASCA 180

Knight v. Fleming (1898) 25 Rett 1070

Lesotho Highlands Dev. Auth. v. Impregilo SpA [2006] 1 AC 221

MDC Ltd. v. NV Zeevaart Maatschappij Beursstraat [1962] 1 Lloyd’s Rep. 180,

Margaronis Navigation Agency Ltd v Henry W Peabody & Co. Of Londan Ltd. [1965] 2 QB 430

McFadden v Blue Star Line [1905] 1 KB 697

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Monarch Steamship Co. LTD v Karlshmans Oljefabriker (A/B) [1949] A.C. 196

Montedison S.p.A. v Icroma S.p.A. (the Caspian Sea) [1980] 1 Lloyd’s Rep. 91

Pierside Terminal Operators v M/V Floridan, 374 F.Supp. 27, 1974 AMC 602

Procter, Garrett, Marston v. Oakwin SS. Co. [1926] 1 K.B. 244

PS Chellaram & Co. Pty Limited v China Ocean Shipping Co. [1989] 1 Lloyd’s Rep. 413

R. Shashoua v. Mukesh Sharma [2009] EWHC 957 (Comm)

Raguz v. Sullivan [2000] NSWCA 240

Re.R. and H. Hall Ltd and W.H. Pim (Junior)&Co.’s Arbitration [1928] ALL E.R. Rep. 763

Reardon Smith Line v Ministry of Agriculture, Fisheries and Food [1963] A.C. 691

S.S. Pharmaceutical co. Ltd. And another v Qantas Airways Ltd. (1988) 1 Lloyds Law Reports

319

SA Nouvelle v Spillers [1917] 1 K.B. 865

Schloss v. Heriot [1863] 14 CB(NS) 59.

Sellers Fabrics Pty Ltd v Hapag-Lloyd AG. [1998] N.S.W.S.C. 646

Shepherd v Kottgen (1877) 2 C.P.D. 585

Ship Hako Endeavour v Programmed Total Marine Services Pty Ltd [2013] FCAFC 21

Shire Council v Shirt [1980] HCA 12; (1980) 146 CLR 40

Smith Hogg &Co., LTD. V Black Sea &Baltic General Insurance Company, LTD [1940]

LI.L.Rep Vol.67

SS Pharmaceutical Co Ltd v Qantas Airways Ltd [1988] 92 FLR 231

Strang v Scott (1889) 14 App.Cas. 601

Suisse Atlantique Societe d'Armament SA v NV Rotterdamsche Kolen Centrale (“Suisse

Atlantique”) [1967] 1 A.C. 361

Sulamérica Cia Nacional de Seguros SA and others v Enesa Engelharia SA and others [2013] 1

WLR 102

Tate & Lyle Ltd v Hain Steamship Company Ltd [1936] 41 Com. Cas. 350

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The Bona [1895] P 125

The Mary Thomas [1894] P 108

The Victoria Laundry [1949], 2 K.B 539-540

The Word Beauty [1970]

Thiess v. Australin SS. [1955] 1 Lloyd’s Rep. 459

Trafigura Beheer BV v Mediterranean Shipping Co SA (The MSC Amsterdam) [2007] EWCA

Civ 794; [2007] 2 Lloyd’s Rep 622

Transgrain Shipping v. Global Transporte Oceanico (The Mexico I) [1990] 1 Lloyd’s Rep. 507

Triton Navigation Limited v Vitol S.A. (The Nikmary) [2003] EWCA Civ 1715

Turner, Nott & Co., LTD. v. The Lord Mayor, Alderman and Burgesses of the city of Bristol and

D/S A/S DAGBJORG. (“Bristol”) [1928] 31 Lloyd’s Rep. 359

Ust-Kamenogorsk Hydropower Plant JSC v. AES Ust-Kamenogorsk Hydropower Plant LLP

[2013] UKSC 35

Voaden v. Champion (The Baltic Surveyor) [2002] 1 Lloyd’s Rep. 623 (

Wagon Mound (No. 1) [1961] UKPC 1; (1961) AC 388

Wagon Mound (No. 2) [1966] UKPC 1; (1967) 1 AC 617

Wah (Aka Alan Tang) & Anor v Grant Thornton International Ltd & Ors, [2012] EWHC 3198

Waldorf v Miles [1992] 2 AC 128

Yemgas FZCO v Superior Pescadores SA Panama (The Superior Pescadores) [2016] EWCA Civ

101

STATUTES

Arbitration Act 1996

Australian Navigation Act 2012

Civil Liability Act 2002 (NSW)

RULES

The Hague Rules 1924

The Hague Visby Rules 1968

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York-Antwerp Rules 1994

York-Antwerp Rules 2004

SECONDARY MATERIALS

Bernard Eder and others, Scrutton on Charterparties and Bills of Lading (23rd edn, Sweet &

Maxwell 2015)

Born, Gary, International Commercial Arbitration. (2nd edn, Kluwer Law International 2014), v.1

Cooke and Cornah, Lowndes&Rudolf:General Average and York-Antwerp Rules (13th edn,

Sweet&Maxwell 2008)

Hudson and Harvey, The York-Antwerp Rules (4th edn, Informa 2017)

Julian Cooke and others, Voyage Charters (4th edn, Informa 2014)

Rose, Francis D., General Average (3rd edn, Informa 2017)

White, Michael, Australian Maritime Law, (3rd edn, Federation Press 2014)

William Tetley, ‘Assignment and Transfer of Maritime Liens: Is There Subrogation of the

Privilege?’ (1984) 15 Journal of Maritime Law and Commerce

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STATEMENT OF FACTS

A. The Parties

[1] The Claimant is Cerulean Beans and Aromas Ltd, a company in Cerulean. The Respondent is

Dynamic Shipping LLC, a shipping company settled in Dillamond. The Respondent owns the

vessel Madam Dragonfly (the “Vessel”).

B. The Voyage Charter

[2] On or around 22 July 2017 the Respondent chartered the Vessel to the Claimant to carry 1000

bags of rare and high quality green coffee (the “Cargo”) into 4 containers. The port of departure

is the Port of Cerulean and the Discharge Port is the Port of Dillamond. The Cargo is expected to

arrive on 28 July at 1700h to Dillamond.

C. The Performance of the Charterparty

[3] Prior to the voyage the Claimant paid USD100,000 for the crew wages on separate bank account.

[4] The Cargo has shipped and departed from Cerulean on 24th of July at 0900h.

[5] The Vessel deviated to the Port of Spectre for replacement of hard copy maps because they did not

have the required maps available for navigation. There was no connection with the ship between 25th

of July 2132h and 26th of July 1432h. The deviation was not reported by the Respondent.

[6] The Claimant’s staff arrived at the port of Dillamond on 28th of July at1630h to collect the Cargo,

but the Vessel did not arrive to the port at the expected time and the staff had to wait at the port all

night in the pouring rain.

[7] The Respondent did not respond to the Claimant’s emails concerning the arrival of the Vessel. On

29 July at 0858h the Respondent informed the Claimant that the Vessel stuck ~100nm out from

Dillamond and the Vessel’s hull was damaged.

[8] The Vessel arrived at the port of Dillamond on 29 July at 1628h and the Respondent stated that the

ship would approach to the berth in 30 minutes and delivery of cargo would be available

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approximately 2 hours later. However, the Cargo was available to be collect at 2042h on 29 July. The

Respondent also issued a document containing a barcode which warrants access to a warehouse. The

Cargo was discharged by the Respondent to the Warehouse in the Port of Dillamond and the barcode

was activated at 0002h on 30 July. The Claimant did not deliver the Cargo until approximately 1355h

on 31 July and realized that 3 out of 4 containers of coffee were water-damaged. The invoice for the

expenses incurred was issued by the Respondent on 7th of August.

ARGUMENTS PRESENTED

A. THE TRIBUNAL DOES HAVE JURISDICTION TO DETERMINE CLAIMANT’S

CLAIMS ABOUT DAMAGES

I. The Tribunal has a Power to Determine its Own Jurisdiction

[9] There is a valid and binding arbitration clause1 and it constitutes the primary source of the

Tribunal’s authority to decide any dispute arising out of or in connection with the Charterparty. Claims

for damages made by the Claimant are within the scope of the jurisdiction of the arbitral panel.

[10] The parties agreed upon the London Maritime Arbitration Association (LMAA) Terms the

“Terms”) as the procedural rules of the arbitration. Given the reference through the Terms, one of the

powers of the Tribunal determined within the Arbitration Act 1996 (the “Arbitration Act”) is

Kompetenz-Kompetenz principle, i.e., the competence of the Tribunal to rule on its jurisdiction

regarding what matters have been submitted to arbitration in accordance with the arbitration

agreement.2 3 Therefore, the Tribunal has jurisdiction to decide over the question of fulfilment of the

expert determination procedure as a pre-arbitration procedural requirement in accordance with the

principle of Kompetenz-Kompetenz.

1 Moot Scenario p.12, Charterparty Clause 27 2 Arbitration Act 1996, s. 30 3 Ust-Kamenogorsk Hydropower Plant JSC v. AES Ust-Kamenogorsk Hydropower Plant LLP [2013] UKSC 35 (UK

Supreme Court has also affirmed that Kompetenz-Kompetentz is no doubt a general principle of law according to which

a tribunal in an international commercial arbitration has the power to consider its own jurisdiction)

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II. Seat of Arbitration Does Not Necessarily Have to Correspond to Where the Hearings Will Be Held

[11] The seat of arbitration means the juridical seat of arbitration, which may be independent of where

the hearings are being held.4 In fact, it is accepted that an agreement for seat of arbitration constitutes

an exclusive jurisdiction clause.5 The seat of arbitration is a legal concept and not a physical or

geographical location.6 Therefore, even if the Parties have agreed on the seat of arbitration as London;

holding hearings in Brisbane, Australia shall not prejudice the jurisdiction of the Tribunal on the

ground that where the hearings are held does not need to be identical to the seat of arbitration.

III. Non-Fulfillment of the Expert Determination Pre-Arbitral Step Prior to the Arbitration Does Not

Prejudice the Jurisdiction of the Tribunal

i. Expert Determination is an Unenforceable Condition for the Commencement of the

Arbitration

[12] English courts have consistently held that indefinite and uncertain pre-arbitration procedural

requirements are invalid and unenforceable.7 In Clause 27 of the Charterparty, the steps are prescribed

as pre-conditions for referring the dispute for arbitration and they do not constitute a detailed process

that needs to be sufficiently certain for being legally enforceable. It does not contain which steps each

party is required to take to initiate expert determination process and to participate thereto. The Parties

did not clarified8 the provisions regarding how the pre-arbitral process shall be exhausted and at which

point the Parties shall become entitled to refer the dispute to arbitration.9 For a pre-arbitral condition

to be enforceable, it should be unambiguous, sufficiently clear and certain.10 For all these reasons

4 Arbitration Act 1996, s.3; Lesotho Highlands Dev. Auth. v. Impregilo SpA [2006] 1 AC 221 at para. 20 (HL); Dubai

Islamic Bank PJSC v. Paymentech Merchant Servs. Inc. [2001] 1 All ER (Comm) 514 (HC.); Born, Gary, International

Commercial Arbitration. (2nd edn Kluwer Law International 2014), at p.1570 5 R. Shashoua v. Mukesh Sharma [2009] EWHC 957 (Comm) (HC); Raguz v. Sullivan [2000] NSWCA 240, at para. 95

(CA.); A v. B [2006] EWHC 591,617 (Comm) (HC) 6 Born, Gary, International Commercial Arbitration. (2nd edn Kluwer Law International 2014), at p.1538; Dubai Islamic

Bank PJSC v. Paymentech Merchant Servs. Inc. [2001] 1 All ER (Comm) 514, at para.33 (HC); Karaha Bodas Co. LLC

v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara [2003] HKCFI 390, at para.18 7 Sulamerica CIA Nacional De Seguros SA v Enesa Engenharia, [2012] EWCA Civ 638; Wah (Aka Alan Tang) & Anor

v. Grant Thornton International Ltd & Ors, [2012] EWHC 3198, at para.57; Courtney & Fairbairn Ltd v. Tolaini Bros.

(Hotels) Ltd (1975) 1 WLR 297, at p.301-02 (CA) 8 Sulamérica Cia Nacional de Seguros SA and others v Enesa Engelharia SA and others [2013] 1 WLR 102 “the parties'

rights and obligations must be defined with sufficient certainty to enable it to be enforced.” 9 Wah (Aka Alan Tang) & Anor v Grant Thornton International Ltd & Ors, supra, at para.60-61 10 Waldorf v Miles [1992] 2 AC 128

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above, the pre-arbitration procedural requirement of expert determination is unenforceable as regards

the commencement of arbitration and non-fulfilment of this process shall not prejudice the jurisdiction

of the Tribunal.

ii. Pre-Arbitration Expert Determination under Clause 27(d) is a Non-Mandatory Condition

for the Commencement of Arbitration

[13] Even if the Tribunal is of the view that the above-mentioned argument is not tenable, expert

determination is a non-mandatory condition and any breach thereof does not bar the Parties from

commencing arbitral proceedings. The international arbitration agreements including the pre-arbitral

steps shall be interpreted in accordance with the rules of generally-applicable principles of contract

formation.11 The Tribunal shall take into consideration the mutual intention of the Parties12 in the

course of interpreting the Charterparty. The Parties could not have intended, and indeed did not in this

case, that had the expert determination process failed, they would not have been entitled to refer the

dispute to arbitration. As the word “may”13 which is incorporated in Clause 27(e), reflects the Parties’

intention, the Parties’ main intention was to have a non-mandatory expert opinion on technical matters

before the dispute was brought before the Tribunal, as opposed to the taking of an expert opinion as

a required step in the dispute resolution process.

[14] The Respondent appointed an arbitrator before the fulfilment of expert determination process and

this indicates that their intention was also against qualifying the expert determination process as a pre-

arbitral procedural requirement. Therefore, the Parties agreed to qualify the expert determination as a

non-mandatory pre-arbitration procedural requirement and the expert determination report, which is

provided through Tribunal’s request before the Hearings, served the intention of the Parties as such

and constituted merely a support from an expert on technical matters to solve the dispute.

11 Born, Gary, International Commercial Arbitration. (2nd edn Kluwer Law International 2014), at p.740 12 Excess Insurance Co. Ltd and Home Overseas Insurance Co. Ltd v. CJ Mander [1997] 2 Lloyd’s Rep 119. 13 Born, Gary, International Commercial Arbitration. (2nd edn Kluwer Law International 2014) at p.927

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IV. The Respondent have Waived Their Right to Object to the Jurisdiction of the Tribunal by Their

Conduct 14

[15] Even if the pre-arbitration procedural requirement was considered as mandatory, the respondent

have waived their right to object to the jurisdiction of the Tribunal15 by appointing an arbitrator on

their behalf before the exhaustion of the expert determination procedure. Therefore, the non-

compliance with the pre-arbitration procedural step would not affect the jurisdiction of the Tribunal.

CLAIMS FOR DAMAGES AND EXPENSES

A. CLAIMANT IS NOT LIABLE FOR WATER DAMAGE

I. According to The Hague Visby Rules, the Respondent’s Liability is not Limited for Water Damage

Claim

i. Unqualified General Clause Paramount Refers to Hague Visby Rules (“the Visby Rules”)

[16] In Clause 28 of the Charterparty, Parties incorporated a general clause paramount without any

qualification. In this respect, English courts held that, the Hague Visby Rules “the Visby Rules”

should be applied16 rather than the Hague Rules (“the Rules”).17

ii. The Respondent Cannot Avail Themselves from the Limitation of Liability under Art

4(5)(e) of The Hague Visby Rules

[17] The Respondent lost their opportunity to rely on the limitation of liability stipulated in Art 4(5) of

the Visby Rules, because of their reckless conduct.18 It was held that ‘to have cargo, which is

particularly vulnerable to damage by rain, and leave it exposed to the elements without particular

precautions, is reckless’.19 Therefore, the Respondent lost their right to limit their liability.20

14 Empirnall Holdings Pty Ltd v. Machon Paull Partners Pty Ltd (1988) 14 NSWLR 527 15 George Scarr-Hall v ISS (UK) Ltd [2017] EWHC 689 “An exclusive expert determination clause can be waived…” 16 Yemgas FZCO v Superior Pescadores SA Panama (The Superior Pescadores) [2016] EWCA Civ 101 17 Trafigura Beheer BV v Mediterranean Shipping Co SA (The MSC Amsterdam) [2007] 2 Lloyd’s Rep 622 at p.627 (CA)

per Lord Longmore (instead of the Rules, the Visby Rules shall be applied, because compared to the Visby Rules, four

decades passed after the Rules came into force) 18 Sellers Fabrics Pty Ltd v Hapag-Lloyd AG. [1998] N.S.W.S.C. 646. 19 SS Pharmaceutical Co Ltd v Qantas Airways Ltd [1988] 92 FLR 231 (SC) (SS Pharmaceutical) at p.246. The case was

affirmed on appeal: Qantas Airways Ltd v SS Pharmaceutical Co Ltd [1991] 1 Lloyd’s Rep 288 (CA) 20 Browner International Ltd v Monarch Shipping Co. Ltd (The European Enterprise) [1989] 2 Lloyd’s Rep. 185.

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iii. Alternatively, the Claimant’s Water Damage Claim does not Exceed the Limits in Art 4(5)

of The Hague Visby Rules

[18] Even if the Tribunal were to decide that the prior claim would fail, the monetary limits imposed

in Art 4(5) of the Visby Rules for each package do not restrict the amount of water damage claimed.

The relevant units under Art 4(5) of the Visby Rules are considered as each coffee bags,21 which

means that the limitation of liability of 666.67 units of account would separately and individually

apply to each coffee bag. Additionally, the calculation of limitation shall be based on the package/unit

limits,22 because in the present case, the package/unit limits are higher than weight limits. Thus, the

limitation would be calculated as 666.670SDR (1000 x 666.67) per coffee bag (which needs to be

assessed on the date of judgment23 based on applicable rates of IMF) and will certainly exceed the

amount claimed for each coffee bag, which is USD21,000 (300$/kg x 70kg). For the above reasons,

the Claimant demands USD15,750,000 from the Respondent and the amount claimed does not exceed

the limits in Art 4(5) of the Visby Rules.

II. Water Damage is not Attributable to the Claimant

i. Delivery was not Completed Until the Claimant Collected the Cargo and the Damage

Occurred while the Respondent still had the Possession of the Cargo

[19] Merely discharging the cargo does not constitute delivery; therefore, the time of exact delivery

shall be considered as the time when the possession of the cargo passed the Claimant. The legal status

of delivery is a bilateral act24; in that regard it does not only consist of discharging the cargo, but also

includes the acceptance of the cargo by the consignee. According to the Chartered Bank v. British

India, delivery occurs when the cargo gets under the absolute control of the consignees.25 In the

21 PS Chellaram & Co. Pty Limited v China Ocean Shipping Co. [1989] 1 Lloyd’s Rep. 413 at p.426-427 “1 container

(20’) FCL/FCL shippers load, count and seal said to contain, 900 CTNS blank cassette cases”, each of the carton was

determined as a package and not the container. 22 The Hague Visby Rules, Art.IV r.5(a). 23 El Greco (Australia) Pty Ltd v Mediterranean Shipping Co SA [2004] FCAFC 202; 140 FCR 296, at p.370-371 per

Allsop J 24 Julian Cooke and others, Voyage Charters (4th edn, Informa 2014) at para.10.4 25 Chartered Bank v. British India S. N. Co. [1909] A.C. 369, 375; British Shipowners v. Grimond (1876) 3 Rett. 968,

972 “… the goods are so completely under control of the consignee that he may do what he likes with them.”

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present case, the goods were in the Warehouse and the possession of the cargo had not yet passed to

the Claimant.26 The Claimant did not have absolute control over the Cargo at the time as there was a

congestion and they were accordingly unable to reach the Cargo. Overall, the liability of the

Respondent over the cargo had not come to an end at the time of loss on the ground that they had not

properly performed their contractual obligation of delivery.

ii. The Respondent Acted Negligently When Delivering the Cargo

a. The Respondent Breached their Obligation to Take Care of the Goods

[20] Delivery of the Goods to the consignee in good condition is the primary right of the consignee. In

the present case, the Claimant has a right to expect the delivery of the Cargo in the same condition as

shipped.27 Moreover, the Respondent had a duty to take care of the Cargo which arises from the

Liability Act.28 However, their failure to exercise this duty proved that they were acting negligently

according to the definition stipulated in the Liability Act.29 The risk of the cargo damage, which is the

consequence of the negligent act of the Respondent, was foreseeable and not insignificant, and a

person in the same situation would have taken necessary measures.30 These aspects are analysed

below:

1. The risk was foreseeable31

[21] Prior to the voyage, the Claimant stated that the Cargo was very vulnerable.32 They also stated

that the Cargo can easily get damaged due to humidity or rain. Moreover, the Respondent were warned

that the containers must be entirely waterproof, thus, the Respondent knew the fact that the Cargo was

prone to damages and protection of the cargo from water damage should have been provided by the

Respondent.33 However, the Respondent used sealants to seal the containers which could only last for

26 British Shipowners v. Grimond (1876) 3 Rett. 968, at p.972; Knight v. Fleming (1898) 25 Rett 1070. 27 White, Michael Australian Maritime Law, (3rd edn, Federation Press, 2014) at p. 222 28 Civil Liability Act 2002, Part 1A Sec.5B (Civil Liability Act is applicable because governing law of the Charterparty

is law of New South Wales, Australia) 29 Civil Liability Act 2002, Part 1A, s.5 30 Civil Liability Act 2002, Part 1A, s. 5B 31 Wagon Mound (No. 1) [1961] UKPC 1; (1961) AC 388; Wagon Mound (No. 2) [1966] UKPC 1; (1967) 1 AC 617 32 Moot Scenario, p.2 33 Moot Scenario, p.2

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5 days. The occurrence of water damage to the Cargo was foreseeable at the expiry of the 5 days given

also the heavy rain at the discharging port.

2. The risk was not insignificant

[22] The Respondent used the sealants that guarantee the waterproofness of the containers for up to 5

days. Despite having the knowledge of the expiry of the sealants, they nevertheless discharged the

Cargo into a warehouse that increased the possibility of exposure of the cargo to rain. For this reason,

the possibility of the water damage was high and was not insignificant

3. Necessary Precautions should have been Taken by the Respondent, as being a Reasonable

Person34

[23] When sealing the containers, the Respondent should have considered some of the events which

can extend the duration of the shipment and as a precaution they should have used sealants that would

endure for a longer period:

[24] (a) The Cerulean Mail reported35 that the solar flares were disrupting communication systems.

(b) Due to the News on 5th of August36, the Respondent had been carrying out most of the shippings

to Dillamond, therefore they must have had the knowledge of the possible weather conditions in

Dillamond.

[25] In order to determine the precautions that would have been taken by a reasonable person against

the risk of harm, the Tribunal shall make considerations based on the following four factors:37

[26] (1) The probability of harm that would occur if care is not taken: The fact of deformed

sealants increased the probability of water damage.38 (2) The likely seriousness of the harm: Due to

the high risk of water damage, the coffee beans should have been shipped in waterproof containers.

(3) The burden of taking precautions to avoid the risk of harm: Since it was the Respondent’s

duty to provide waterproof containers,39 they were under the burden of taking precautions against

34 Shire Council v Shirt [1980] HCA 12; (1980) 146 CLR 40 35 Moot Scenario, p.35 36 Moot Scenario, p.36 37 Civil Liability Act 2002, s.5B Art.2 38 See para [21] 39 Moot Scenario, p.2; p.14

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water damage. (4) The social utility of the activity that creates the risk of harm: Taking

precautions, such as using more functional material, to make the container waterproof, would be

consistent with social utility in the present case.

[27] Due to the explanations stated above, the Respondent acted negligently and breached their duty

to care of the Cargo which directly caused the water-damage to the Cargo. Therefore, the Respondent

is liable for the water damage.40

b. The Respondent was Liable for not Discharging the Cargo to a Fit and Safe Place

[28] According to the reasons above, the Respondent’s act of discharging the Cargo to a place, which

is not waterproof, is reckless. The Australian Supreme Court accepted that leaving the vulnerable

cargo under an unfit place would be considered reckless41 for which the carrier should be held liable.

Therefore, the Respondent was liable for not discharging the cargo to a fit and safe place but into a

warehouse which was exposed to water.

iii. Discharging the Cargo to the Warehouse is not Contractual

[29] As mentioned in the contract,42 the Cargo should have been discharged by an agent of the

Claimant; therefore, the Respondent’s act of discharging the Cargo to a warehouse without an agent

of the Claimant constitutes a breach of the contract. The Respondent is liable for the water damage

since there is a direct link between their act of discharging the Cargo to the warehouse and the damage

occurred.

[30] In the case of Turner v. Bristol,43 the judge held that the Consignee’s non-objection and silence

about discharging to a non-contractual warehouse, did not preclude him from recovering damages.

Moreover, the Claimant’s mere silence shall not be considered as a waiver. Therefore, the Claimant

40 Wagon Mound (No. 1) [1961] UKPC 1; (1961) AC 388; Wagon Mound (No. 2) [1966] UKPC 1; (1967) 1 AC 617 41 S.S. Pharmaceutical co. Ltd. v. Qantas Airways Ltd. (1988) 1 Lloyds Law Reports 319, “…to have cargo, which is

particularly vulnerable to damage by rain, and leave it exposed to the elements without particular precautions, is

reckless” 42 The Charterparty, Clause 12(a) 43 Turner, Nott & Co., LTD. v. The Lord Mayor, Alderman and Burgesses of the city of Bristol and D/S A/S

DAGBJORG. (“Bristol”) [1928] 31 Lloyd’s Rep. 359 at p.360 per Judge Roche

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argues that the Respondent’s non-contractual act of discharging the goods to the warehouse is the

main cause of the water damage.

iv. The Respondent should have Waited for the Permitted time for Unloading to Cargo in Safe

[31] If the time for delivery is decided under the Charterparty, the Carrier should wait for the consignee

until that time expired and in the present case, .5 WWD was the agreed period of time. Instead of

leaving the Cargo under the heavy rain and the flood, the Respondent should have protected the Cargo

at least until the end of the .5 WWD. The Respondent discharged the Cargo before the Weather

Working Day has started.

[32] Also, in the Bristol44 the judge held that, before acting on his own, the shipowner has a duty to

wait the consignee to appear for discharging the cargo. Discharging the Cargo without waiting

Claimant’s agent or any order of the Claimant, would constitute a breach of the contract. The Claimant

would submit that the Respondent did not wait for the Claimant to appear at the port and discharged

the cargo without the order of the Claimant. For this reason, the water damage occurred due to the

breach of the Respondent for which the Respondent must be held liable.

B. REPLACEMENT COFFEE EXPENSES AND SETTLEMENT FEE

[33] The Respondent denies liability for charterers claims on replacement coffee expense, and

settlement fee even though it was caused by their own breach of contract. To be responsible against

the innocent party, one must breach their obligations and this breach has to be an effective cause of

the loss. Their responsibility is to be determined by the rules on remoteness.

I. The Respondent Breached the Contract by Deviating from the Route and Using an Unseaworthy

Vessel

i. The Respondent’s Vessel was Unseaworthy and did not Comply with Australia Navigation Act

Provisions

44 Bristol, ibid.; Eriksen v. Barkworth (1858) 3 H. & N. 601, 606; Procter, Garrett, Marston v. Oakwin SS. Co. [1926] 1

K.B. 244

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[34] The Vessel was deviated from its route and went to Spectre. This deviation caused a delayed

arrival to Dillamond which is the reason why the ship was caught in the storm. Even though this

deviation seems to be caused by the solar flares it was caused by the ship being unseaworthy. In the

e-mail that was sent to the Claimant on 27 July 0717h the owner admit that they did not have hard

copy maps to Dillamond. The threat of solar flares was reported by Cerulean Mail at 18 July that

makes the solar flare easily foreseeable. Clause 15(a)(i) of the Charterparty states that the ship must

be in accordance with the Commonwealth of Australia Navigation Act 2012 (“Act”) and the owner

violated the Act by not bringing a vessel in a fit state to encounter the ordinary perils of the voyage.45

Their duty to exercise due diligence to ensure seaworthiness of the ship did not only arise from the

Act yet also under Clause 17(6) of the Charterparty. Accordingly, both the Respondent failed to

comply the Act’s provisions as well as breached the Charterparty.

[35] The owner also did not have any hardcopy maps which constitutes yet another breach of the Act.46

Besides a prudent owner47 must have prepared hardcopy maps of the destination especially having

the knowledge of solar flares’ potential effect on the communication systems.48

ii. Solar Flare is not a Force Majeure Event under Clause 17(3) therefore the Deviation is not

Justifiable

[36] Clause 17(3) of the Charterparty does not justify this deviation. The argument of the Respondent

that the vessel contained a map only to Spectre and that they had to deviate to save property or lives

shall fail on the grounds that this paragraph is found under ‘force majeure’ title in Charterparty and

there was no force majeure event in the present case. This deviation clause only justifies deviations

under force majeure situations as the clause should be interpreted according to the “main object rule”.

45 Australian Navigation Act 2012 Chapter 1, Part 4, Art 23(1)(a)(i) “The vessel has to be in a fit state in every aspect to

encounter the ordinary perils of the voyage undertaken.” 46 Australian Navigation Act 2012 Chapter 6, part 6, division 5, Article 224 (1)(a)(I) “the vessel has to be supplied with

nautical charts (including charts in electronic form), of a suitable scale and properly corrected at the time of sailing

and nautical publications.” 47 MDC Ltd. v. NV Zeevaart Maatschappij Beursstraat [1962] 1 Lloyd’s Rep. 180, at p.186 (McNair J): “Would a

prudent shipowner, if he had known of the defect, have sent the ship to sea in that condition?” 48 McFadden v Blue Star Line [1905] 1 KB 697, at p.706

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49 The wording of the clause, regardless of how wide it is, must be interpreted with its main object

and purpose in mind and must be subordinated with the described voyage50.

[37] When the main object of the contract is looked at, it is obvious that the intention was not justifying

any kind of deviation to save life or property, but merely to justify the ones caused by force majeure.

Charterer informed the owner about the urgency of this delivery and tried to prevent any kind of

deviations as much as possible.51 To be classified as force majeure, an event has to be unforeseeable

as mentioned in the Charterparty Clause 17(2)(b) but, in our case, the Cerulean Mail reported the

solar flare in advance and it could therefore be avoided by just using hardcopy maps which proves the

deviation was clearly a breach of the contract.

iii. The Claimant is Entitled to be Compensated Regardless of Whether or not They Have Affirmed

the Contract

[38] After the unjustifiable deviation, the claimant choosing to affirm the contract does not mean they

cannot claim compensation.52 The reason for that is that even after the affirmation, the unjustifiable

deviation is still regarded as a breach,53 and the contract breaker is responsible for any non-remote

damages caused thereby. Moreover, the Respondent is liable for damages as they were unable to show

that the loss would occur in any event (whether or they had deviated) so the burden of proof is

reversed.54

iv. Even if it is Accepted that the Deviation is Justifiable; This does not Prevent Compensation

Claims

[39] Necessity does not affect claims for compensation and parties’ further obligations continue unless

the contract has been rescinded. In Kish v Taylor Lord Atkinson pronounced that the deviation being

49 Glynn v Margetson [1893] AC351 [1907] 1 KB 660 per Lord Herschell LJ: (The wording of the paragraph is not

enough to prove this but the Charterparty should be interpreted with its all text and purpose. “I think you are justified

in looking at the main object and intent of the contract and in limiting the general words used, having in view that

object and intent.”) 50 Frenkel v. MacAndrews & Co., Ltd., [1929] A.C. 545, 562 51 Moot Scenario, p.2 52 Killarney Investments Pty Ltd v Macedonian Community of WA (Inc) [2007] WASCA 180 / Hain Steamship

Company Ltd v Tate & Lyle Ltd [1936] 2 All ER 597, 602 53 Julian Cooke and others, Voyage Charters (4th edn, Informa 2014) at para 12.42 54 James Morrison & Co. Ltd. v Shaw, Savill and Albion Co Ltd [1916-1917] All E.R Rep 1068; [1916] 2 K.B. 783. Pg.

1071-1072

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justifiable only means the innocent party does not have the right to rescind the contract, but that they

can claim for damages.55 This is on the ground that the unseaworthiness itself was a breach and

enough to make the Owner liable if it is causally linked with non -remote damages.56 Notwithstanding

the fact that the Claimant did not rescind the contract yet only asked for compensation, deviation being

justifiable does not affect their claim.

II. Effective Causation

i. Initial Unseaworthiness and Deviation are the Effective Causes of the Expenses Incurred

[40] For the necessary causal link to be established, the breach does not have to be the sole cause. 57

58It does not even have to be the most effective cause. 59 So, deviation and initial unseaworthiness

make the owner responsible when they caused the damages jointly with the storm. “The ship owner

is responsible for loss or damage to the goods, however caused, if the ship was not in a seaworthy

condition when she commenced her voyage”.60 The previous passage paraphrased in Smith, Hogg &

Co., Ltd. v. Black Sea & Baltic General Insurance Company, Ltd provides that if the ship was initially

unseaworthy, any damages in connection with this seaworthiness, no matter what other causes

effected the damage, makes the owner responsible. According to Lord Wright, unseaworthiness being

“a cause” is enough to make the owner liable and “dominant cause” term should not be used. Later

he continues, “ I doubt whether there could be any event which could supersede or override the

effectiveness of the unseaworthiness if it was "a" cause.61 Thus, the law of the question is not whether

the storm or the initial unseaworthiness was the “dominant cause” of the damages, but rather it is

whether the initial seaworthiness was “a cause” of the damages or not. It was obviously “a cause”

because if the vessel was not unseaworthy, it would have already been at the port of destination when

55J. & E. Kish v Charles Taylor, Sons & Co [1912], AC 604, per Lord Atkinson “On the whole…. I am of opinion that a

master, whose ship is, from whatever cause, in a perilous position, does right in making such a deviation from his voyage

as is necessary to save his ship and the lives of the crew, and that while the right to recover damages from all breaches

of contract, and all wrongful acts committed either by himself or by the owners of his ship, is preserved to those who

are thereby wronged or injured….” 56 İbid. (n.55) 57 Heskell v Continental express Ltd. [1950] Q.B 137 58 Galoo v Bright Grahame Murray [1994] 1 W.L.R. 1360, at 1374-1375 59 County Ltd v Giorzentrale Securities [1996] 3 ALL E.R. 834, CA. 60 Smith Hogg & Co., LTD. V Black Sea & Baltic General Insurance Company, LTD [1940] LI.L.Rep Vol.67, pg. 258 61 ibid. (n.60), p.259

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the storm started; therefore, the unseaworthiness is causally linked with the replacement coffee

expense and the settlement fee which must be paid by the Respondent.

ii. Intervening Event (Storm) does not Break the Chain of Causation between the Breach of

Contract (Initial Unseaworthiness and Deviation) and the Expenses Incurred

[41] Causal link must be established between the breach and the damages incurred not between the

breach and the storm. Therefore, the question that should be asked is whether it was foreseeable that

the breach would cause the damages, but not the intervening event. Furthermore the question of

foreseeability is not a problem of causality, but a problem of remoteness as it was discussed in many

established cases.62 The foreseeability of damages by the contract breaker and the causal link between

the damages and the breach are different questions. Decisions where the foreseeability of the

intervening events were discussed63 were cases where the intervening events were the only

foreseeable causes for damages. Accordingly, if the intervening event was not foreseeable the

damages also were not.64 However in the current case, it was mentioned several times in the e-mails

that the shipment is urgent and for a coffee festival. 65 In a situation as this one, the owners should

have foreseen that using an unseaworthy ship and deviating from the contracted route might cause

delay. This required the Claimant to pay compensation to their own client and put them in a position

whereby they had to buy replacement coffee.

III. Remoteness of the Damages

[42] By the e-mail sent on 22 July, the claimant informed the Respondent about urgency of the

shipment and the quality of the coffee they are carrying.66 It is specifically said that the cargo, arriving

by 1900h on Friday is imperative because the claimant had promised their own client. With this

62 Hadley v Baxendale [1854] 9 Exch. 341 / The Victoria Laundry [1949], 2 K.B 539; Heron II [1969] A.C p.385 63 Monarch Steamshio Co. LTD v Karlshmans Oljefabriker (A/B) [1949] A.C. 196. (The owner delayed the delivery

because of the unseaworthiness and a war broke out. Because of the war the ship had to discharge the cargo to a different

port than what was agreed in the contract. According to the Lord Porter, if the likelihood of the war was foreseeable the

unseaworthiness and the following delay is an effective cause) 64 Monarch Steamshio Co. LTD v Karlshmans Oljefabriker (A/B) [1949] A.C. 196. (The war was the only foreseeable

posibility for expenses) 65 Moot Scenario, p.2; p.15 66 Moot Scenario, p.2

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particular knowledge, any reasonable and prudent owner would have expected that the delivery would

be late if they were to use an unseaworthy vessel where a solar flare was announced to occur.67

Accordingly it was also foreseeable that the innocent party would have to pay compensation to their

own client or to buy replacement coffee to honour their promise.

i. Replacement Coffee

a) Replacement Coffee Expense was Foreseeable and was not Remote

[43] Considering the urgency of the shipment and in reliance on the authority of Heron II68, from the

Owner’s perspective, it was not unlikely - when the contract was made - that if an unseaworthy ship

will be used, the Claimant would have to buy replacement coffee. Previous decisions69 apply a

different test by separating the knowledge of the contract breaker in two types, imputed and actual;

the former meaning naturally expected from a reasonable person and the latter being a knowledge of

special circumstances that would cause more loss whereby the contract breaker would be the party

being responsible only for the damages he could have foreseen, considering the relevant knowledge.

Claimants’ notification of the urgency of the shipment is a special knowledge that also fulfils the

mentioned tests.

b) Replacement Coffee Expense was Made Reasonably and should be Compensated

[44] Due to urgency of the shipment that is known by both Respondent and claimant, claimant had no

other choice than buying replacement coffee immediately for mitigating the loss. The claimant may

recover reasonable expenses incurred to mitigate the damage.70 The reasonable action is not

determined by looking at the market price of the substitute goods, but it is a unique matter of the

situation.71Moreover, even if there was a better alternative the reasonable costs can still be

67 Moot Scenario, p.35 68 Heron II [1969] A.C pg.385 per Lord Reid: “The crucial question is whether, on the information available to the

defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such

loss was sufficiently likely to result from the breach of contract… 69 Hadley v Baxendale [1854] 9 Exch. 341.; The Victoria Laundry [1949] 2 K.B 539-540 70 The Word Beauty [1970], p.144; British Racing Drivers’s Club Ltd v. Hextall Erskine & Co. [1996] 3 All ER 667 71 Voaden v. Champion (The Baltic Surveyor) [2002] 1 Lloyd’s Rep. 623 (In this case, the damage was not calculated

according to the market price; however, the specaial crcumstances of the case was considered)

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recovered.72 Claimant acting reasonably, bought replacement coffee as quickly as possible to mitigate

the damage and this is also beneficial for Respondent because it reduced the compensation paid to

Coffees of the World which otherwise would be recovered by the Respondent later. Therefore, the

expenses incurred was reasonable.

ii. Settlement Fee

a) Settlement Fee is Compensable According to the Ordinary Rules of Remoteness and

Causation

[45] Settlement fee paid to 3rd parties is a matter of remoteness and causation as it was explained.73

When the breach of contract caused innocent party to breach its other contracts with 3rd parties and to

be liable, the innocent party is entitled to recover the compensation paid.74 75 The extent of the liability

is determined by owners’ special knowledge and because the Respondent was aware of the contract

made with the 3rd parties, the settlement fee should be recovered.76 This is also compatible with the

rule of remoteness described in Heron II77 because the owner’s special knowledge when the contract

was made makes the settlement fee expense, from the owners perspective, not unlikely to occur. There

is also effective causation between the breach and the settlement fee as it was explained in the this

section/ part II (Effective Causation). Therefore, the Respondent is liable for the settlement fee.

b) Settlement Fee is Payable According to the Biggin Rule

[46] The Biggin rule indicates that when the innocent party made a settlement with the 3rd party out of

court, the recovery of the settlement fee also requires the proof of reasonableness beside the

remoteness and causation.78 The Biggin rule is criticized and should not be accepted in Australia

72 Gebruder Metelmann Gmbh v. NBR (London) Ltd [1984] 1 Lloyd’s Rep. 614, 634 73 Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd. [1998] HCA 38/34 McHugh J.: “Whether the plaintiff can

recover from the defendant monies paid in settlement of a third party action depends on ordinary principles of causation

and remoteness.” 74 Re.R. and H. Hall Ltd and W.H. Pim (Junior) & Co.’s Arbitration [1928] ALL E.R. Rep. 763, at 767, 769, HL / Grebert-

Borgnis v J. and W. Nugent [1885] 15 Q.B.D. 85. 75 Agius v. Great Western Colliery Co. [1899] 1 Q.B. 413. (The expense was recovered in this case where the breach was

late delivery.) 76 Grebert-Borgnis v J. and W. Nugent [1885] 15 Q.B.D. 85. 77 Heron II [1969] A.C pg.385 78 Biggin & Co.Ltd v. Permanite Ltd [1951] 2 K.B. 314.

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according to the Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd79 and the Claimant does

not have to prove the reasonableness of the settlement. Even if the tribunal decides to the contrary,

the settlement fee should be recovered because the settlement was made reasonably. The Claimant

settled for USD 5.000.000 even though the cost of the damaged coffee was 15.750.000 USD and the

fee were very low considering the seriousness of the breach because Coffees of the World were aiming

to sustain long term business relations with the Claimant.80

IV. Conclusion

[47] The owner breached the Charterparty by using an unseaworthy vessel and this breach is an

effective cause of the settlement fee and replacement coffee expenses. The Owner’s special

knowledge about urgency of the shipment makes all the expenses foreseeable and satisfies the rule of

remoteness. The replacement coffee was bought very urgently and that was the most reasonable

choice to mitigate the damage. Settlement fee was in accordance with the Biggin rule. Therefore, the

Claimant are entitled to claim for replacement coffee and settlement fee expenses which must be paid

by the Respondent.

DEFENCES TO THE CLAIMS OF RESPONDENT

A. THE RESPONDENT IS NOT ENTITLED TO FREIGHT

I. Delivery was not Made to Charterer or its Agents

[48] Owner discharged the goods to a random warehouse without providing possession to charterer or

its agents. Charterparty Clause 12(a) clearly states that the ship shall be consigned to charterer or its

agents which shows that the owner breached the contract and did not make a proper delivery. Freight

is earned only if there is “right and true delivery” and the concept contains delivering to the right

person.81 Delivery not made to the consignee makes the owner entitled to freight if only it is in a

79 Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38/34 McHugh J 80 Moot Scenario, p.29 81 Julian Cooke and others, Voyage Charters (4th edn, Informa 2014) at para 13.79

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manner approved by charterer.82 83 The charterer did not declare any kind of intention towards

acceptance of such delivery, on the contrary, it was agreed that delivery should be made to the

charterer or its agents. Thus, the Respondent are not entitled to freight.

II. Delivery was not Made on Time

[49] In the e-mail dated 22 July, charterer emphasized that it was imperative that the cargo had to be

discharged by 1900h on Friday, 28 July. The delivery time being agreed between the Parties meant

that any delay in delivery would have rendered that any such delivery utterly pointless as the charterer

required the delivery to honour a promise to their own client. Charterer’s client also needed the

delivery for a coffee festival starting on 29 of July and a late delivery would also be pointless for them.

Thus, from charterers perspective, late delivery is equal to non-delivery and the service in respect of

which the freight was contracted to be paid had not been performed at all. 84 The question, whether or

not the owner is entitled to freight should be answered in accordance with the previous distinction

mentioned85 and if the service is not performed at all the freight also should not be paid.

III. The Cargo were not in a Merchantable Condition when Delivered

[50] The Claimant left with damaged coffee with no willing buyers. Coffee in three containers was

completely water damaged as mentioned in DSM Surveyors report and was not merchantable. If the

cargo is damaged such that it lost its commercial identity, the freight does not remain payable.86 The

definition of losing commercial identity is being non-merchantable which no willing buyer would buy

and no honest seller would sell; and the Claimant’s acceptance of the delivery would not make any

difference in this regard.87 Unless the goods are not sellable as what they originally were, their

commercial identity is lost therefore the goods being sellable as something else would not entitle the

82 Bernard Eder and others, Scrutton on Charterparties and Bills of Lading (23rd edn, Sweet & Maxwell 2015), at p.409,

at para 16-014 83 Fenwick v Boyd (1846) 15 M. & W. 632 84 Bernard Eder and others, Scrutton on Charterparties and Bills of Lading (23rd edn, Sweet & Maxwell 2015), at p.403,

at para 16-001 85 Dakin v Okley [1864] 15 CBNS 646, at p.667 Willes J. : “In both classes of cases, whether of loss of quantity or change

in quality, the proper course seems to be the same, viz. to ascertain from the terms of the contract, construed by mercantile

usage, if any, what was the thing for the carriage of which freight was to be paid, and by the aid of a jury to determine

whether that thing, or any and how much of it, has substantially arrived.” 86 Julian Cooke and others, Voyage Charters (4th edn, Informa 2014) p.304, 13.81 87 Asfar v. Blundell [1896] 1 Q.B. 123.

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owner to claim for freight.88 In the present case, the owner would be entitled to the freight only if the

coffees were sellable as ‘exceptionally rare, high quality, specialty grade green coffee’89 and it is

obvious that this was impossible because 3 containers of coffee were completely water damaged.

Thus, the owner is only entitled to 25 percent of the freight corresponding to the amount that have not

lost its commercial identity even if our two previous arguments are not otherwise accepted by the

Tribunal.

B. THE RESPONDENT IS NOT ENTITLED TO DEMURRAGE

I. Through the Exception Clause (Clause 8(e) of the Charterparty), the Claimant’s Duty to Pay

Demurrage is Waived in case of a Bad Weather

[51] Clause 8(e) of the Charterparty states that “… in the event of any … bad weather … the laytime

not to count … demurrage not to accrue even if the vessel on demurrage”. This exception clause is

clearly worded90 to give effect to the protection of the Claimant from demurrage.91 According to the

arguments given below, the Claimant reserve their right to rely on this exception clause.

II. Demurrage did not Accrue because 29 July could not be Considered as a Weather Working Day

(“WWD”)

[52] The laytime did not start, because the date of 29 July was not a WWD. While considering a day

as a WWD, the character of the day shall be considered,92 which means that, if another vessel of the

same general type is prohibited from discharging93 due to the weather conditions such as rain,94 then

the day shall not be considered as a WWD. As it is pointed out by the Respondent, according to the

88 Montedison S.p.A. v Icroma S.p.A. (the Caspian Sea) [1980] 1 Lloyd’s Rep. 91. 89 Charterer’s email sent on 22 July 2017 90 Islamic Republic of Iran Shipping Lines v Ierax Shipping Co. [1991] 1 Lloyd’s Rep. 81, at p.87 91 Triton Navigation Limited v Vitol S.A. (The Nikmary) [2003] EWCA Civ 1715 at para 20 92 Reardon Smith Line v Ministry of Agriculture, Fisheries and Food [1963] A.C. 691. at p.740 93 Dow Chemical (Nederland) v. B.P. Tanker Co. (The Vorras) [1983] 1 Lloyd’s Rep. 579 at p.584; Gebr. Broere v. Saras

Chimica [1982] 2 Lloyd’s Rep. 436. 94 Compania Naviera Azuero v. British Oil and Cake Mills [1957] 1 Lloyd’s Rep. 312.

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newspaper,95 the port was not operating for 12 hours on Friday, 29 July, and therefore the day shall

not be considered as a ‘WWD’.

III. Demurrage did not Accrue because the Laytime had not Expired

[53] A valid notice of readiness was tendered at 2042h on 29 July and the laytime permitted (.5WWD)

under the Charterparty was not exceeded. Notice of readiness cannot be served if it is not tendered

“within the legal, fiscal and administrative limits of the port”.96 Therefore, the e-mail sent at 0858h

on 29 July cannot be considered as a valid notice of readiness as it states that the Vessel was waiting

approximately 100 nm out at a remote point from the port of Dillamond.

[54] Furthermore, the e-mail sent at 1628h on 29 July cannot be considered as a valid notice of

readiness, because it is accepted that notices, which state that the ship will be ready at a given time in

the future, are invalid.97 Demurrage did accordingly not accrue between the discharge of the Cargo

(at 0002h on 30 July) and the tender of the valid notice of readiness (at 2042h on 29 July, when the

Vessel was physically ready to discharge cargo) were only 3 hours and 20 minutes. For the above

reasons, the Claimant is not liable for and denies paying USD100,000 for demurrage.

C. The Claimant is not Liable to Pay Cost of Repairs to Hull Damage

I. There was no General Average Act

[55] The Claimant submits that cost of repairs to hull damage could not be claimed as General Average

(“GA”) because there was no extraordinary loss or “real and not imaginary” 98 peril which are

prerequisites for a GA act to exist under Rule A of YAR 1994. Alternatively, the failure of the

Respondent to provide a seaworthy vessel prevents them from claiming GA under Rule D of YAR

1994.

95 Moot Scenario, p.21 96 Federal Commerce v. Tradax Export (The Maratha Envoy) [1978] A.C. 1. at. para. 13 97 Antclizo Shipping Corp. v. Food Corporation India (The Antclizo) (No.2) [1992] 1 Lloyd’s Rep. 558, at p.564.

Transgrain Shipping v. Global Transporte Oceanico (The Mexico I) [1990] 1 Lloyd’s Rep. 507. at p.509-510. 98 N. Geoffrey Hudson, M.A., Michael D. Harvey: York Antwerp Rules (4th ed,2017) p.37; J H S Cooke and R R

Cornah, Lowndes and Rudolf: The Law of General Average and the York-Antwerp Rules (Sweet & Maxwell, 13th edn,

2008) p.126 at para. A.110

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i. YAR 1994 should be Applied while Adjusting the GA Contribution.

[56] The Charterparty agreed was made on Gencon Form 1994.99 The GA clause contained in Gencon

form refers to YAR 1994 and accordingly the relevant YAR agreed in Clause 19 under the

Charterparty has to be taken to refer to YAR 1994. Furthermore, the terms of the YAR 2004 have not

widely been in use.100 For the above reasons, GA contributions must be calculated by reference to and

on the basis of YAR 1994.

ii. Repair Costs Incurred was not an Extraordinary Loss

[57] There is no general average loss if the expenses suffered are not extraordinary.101 Any GA

expenditures could be claimed if they arise beyond the fulfilment of ordinary obligations of the

carrier102 as they amount to an extraordinary expense. The Respondent was not entitled to claim

contribution for the cost of repairs because measures taken by the Respondent to avoid the rain did

not constitute extraordinary sacrifice and damages incurred were also not extraordinary.

iii. There was an Ordinary Peril when the Respondent Incurred Cost of Repairs.

[58] Sacrifices the sole interest of which is to escape from the ordinary consequence of an event do not

count as GA act.103 English courts held that contribution to GA can only be claimed if the peril of the

sea exists.104 In the present case the Vessel’s anchor tangled to a coral bed due to the storm. As the

Respondent clearly provide105 that the crew’s only possible conduct was to drop anchor as there was

no other option available to them in those circumstances, the Claimant would submit that the

Respondent contended to the fact that these types of conduct are ordinary to occur at sea. As a result,

the storm could not be considered as a peril of the sea, yet rather as an ordinary peril. Furthermore, it

is accepted that expenses incurred to avert an ordinary peril106 does not constitute a GA act. As Lord

Alverstone held that “The slipping of the anchor (…) was not a general average act; it was an ordinary

99 The relevant form is available in Julian Cooke and others, Voyage Charters (4th ed, 2014) at Appendix 5.4 100 White Michael, Australian Maritime Law (The Federation Press, 3rd edn, 2014) p.308 at para. 6.9.4 101 The Mary Thomas [1894] P 108; F. D. Rose; General Average (3rd ed,2017) p.44 102 The Bona [1895] P 125; Harrison v Bank of Australia (1872) LR 7 Ex 39. 103 Shepherd v Kottgen (1877) 2 C.P.D. 585 104 Falcke v. Scottish Imperial Ins Co (1886) 34 Ch D 234, 248–249, per Lord Bowen 105 Moot Scenario p.20 106 SA Nouvelle v Spillers [1917] 1 K.B. 865.

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measure taken in the ordinary course of navigation- a measure taken to avoid danger … ”.107 For all

the above mentioned reasons, the Claimant would submit that the hull damage did not occur at a time

of a peril amounting to GA and the Claimant are accordingly not liable for the costs of repairs.

iv. Fault of the Respondent Prevents them to Claim Contribution for GA.

[59] The party who is not at fault is not obliged to pay contribution to the party at fault.108 Unjustifiable

deviation due to unseaworthiness of the Vessel would therefore prevent the Respondent from

recovering their expenses on the ground of GA.109

II. Alternatively, the Respondent was not Entitled to Claim Total Amount of USD875,000.

[60] Even if the repair costs for hull damage are considered as GA loss, the Respondent did not have a

right to claim the total amount of the costs. The Respondent may only be entitled to claim contribution

from the Claimant for the amount that is to be calculated by reference to Rule XVII of YAR 1994.110

D. AGENCY FEES AND USAGE OF ELECTRONIC ACCESS

I. Agency Fee and Usage of Electronic Access at Port of Dillamond were Non-Contractual

[61] Agency fees at port of Dillamond was caused by the Owner’s breach and one cannot take

advantage of his own wrong.111 Owner discharged the Cargo without even waiting for the laytime.

Time permitted for discharging was .5 WWD and even if it is accepted that the laytime had started

from the first notice which was issued at 0428h, on 29 July, the Cargo was discharged at 0002h on 30

July, which is only 8 hours after the start of the laytime. Therefore, the laytime had not ended when

the vessel left the port. The Charterer are entitled to keep the vessel for the whole laytime period, even

if the goods were loaded onto the ship and discharged from the ship in a shorter period of time.112 113

Owner were not entitled to discharge and caused non-contractual expenses that would not have

107 Hamel v P&O Steam Navigation Co [1908] 2 K.B. 298 108 F. D. Rose: General Average (3rd ed,2017) p.80 109 Schloss v. Heriot (1863) 14 CB(NS) 59. 110 York-Antwerp Rules 1994 r. XVII 111 Alghussein Establishment v Eton College [1988] 1 W.L.R.587 112 Margaronis Navigation Agency Ltd v Henry W Peabody & Co. Of Londan Ltd. [1965] 2 QB 430. 113 Eriksen v. Barkowrth [1853] 3 H. & N. 601, 606; Procter, Garatt, Marston v. Oakwin SS. Co. [1926] 1 K.B. 244;

Turner, Nott v. Bristol Corporation [1928] 31 L1. L. Rep. 359

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occurred had the Claimant collected the goods from the ship. Thus, the Claimant is not responsible

for the agency fees and usage of electronic access at port of Dillamond.

II. The Claimant shall not be Held Liable for the Agency Fee at Port of Spectre Because Clause

12(a) of the Charterparty does not Cover Devious Voyage

[62] Before the contract was made, the Claimant stated that the vessel must take the most direct route

to the port of Dillamond and that the discharge of the cargo by 1900h on Friday, 28 July was

imperative. Additionally, the Owner had to give notice to the Claimant before deviating from the

direct route.114 The answer to the question of whether or not the owner can rely on a clause of the

Charterparty for the devious voyage is a matter of construction115 and in the absence of clear indication

to the contrary, it is assumed that they were only intended to apply for the ordinary course.116

According to the intention of the Parties, the aim of the Charterer was to be only responsible for the

agency fees incurring on the ordinary course of the voyage, as following the most direct route was

especially specified. Moreover, the Respondent also confirmed those terms.117 The Respondent

cannot therefore now rely on the conditions which were only intended to be applicable when the

Respondent were acting in accordance with the contract.118 As it was explained above, the Respondent

were obviously in breach by deviating from the ordinary course because of the unseaworthiness of

the vessel.119 Thus, their contractual right for the devious route was abrogated120 and the Claimant

shall not be responsible for the agency fee at port of Spectre.

E. PRAYER FOR RELIEF

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

114 Moot Scenario, p.2 115 Suisse Atlantique Societe d'Armament SA v NV Rotterdamsche Kolen Centrale (“Suisse Atlantique”) [1967] 1 A.C.

361, 434.

116 Julian Cooke and others, Voyage Charters (4th edn, Informa 2014) at para 12.44 117 Moot Scenario p.14 118 Gibaud v. Great Eastern Rly [1921] 2 K.B. 426, 435. 119 Claimant Memorandum, Replacement of Coffee Expenses & Settlement Fee Part A 120 Thiess v. Australin SS. [1955] 1 Lloyd’s Rep. 459, 464. Rights of the owner was abrogated because of the deviation

according to this holding.

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DECLARE that it does have jurisdiction to hear these proceedings and

Further,

ADJUDGE that the Claimant is not liable to the Respondent for the following amounts claimed:

1. Freight agreed in the Charterparty of USD500,000

2. Agency fees at the port of Spectre of USD75,000

3. Cost of repairs to hull damages of USD875,000

4. Agency fee at the port of Dillamond of USD50,000

5. Demurrage accrued of USD100,000

6. Electronic access system fee at the port of Dillamond of USD10,000

ADJUDGE that the Respondent is liable to the Claimant for the following amounts claimed:

1. Damaged cargo of USD15,750,000

2. Replacement coffee payment of USD9,450,000

3. Settlement payment of USD5,000,000 and;

Further,

FIND that the Claimant does have an equitable lien on the Vessel to an amount of USD100,000.