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Eighteenth Annual International Maritime Law Arbitration Moot 2017 University of Exeter, Team 17 IN THE MATTER OF AN ARBITRATION UNDER THE INTERNATIONAL ARBITRATION ACT (CAP 143A, REV ED 2002) AND THE SINGAPORE CHAMBER OF MARITIME ARBITRATION RULES BETWEEN FURNACE TRADING PTE LTD …CLAIMANT AND INFERNO RESOURCES SDN BHD …RESPONDENT MEMORANDUM OF THE CLAIMANT Counsel: Louise Bouvery, Jack Brett, Kiu Cheng, Christopher Eames, Oliver Smith, Kyle Spencer
Table of Contents
V. THE TRIBUNAL HAS THE POWER AND JURISDICTION TO ORDER SALE
- ABBREVIATIONS
- LIST OF AUTHORITIES
- CASES
- STATUTE AND GUIDELINES
- OTHER MATERIALS
- I. STATEMENT OF FACTS
- II. THE NON-NOMINATION OF PORT OF DISCHARGE
- I. THE CONTRACTUAL TERMS
- II. NO VALID “HINDRANCE”
- III. BUSAN IS NOT A SAFE PORT
- IV. DUTY TO MITIGATE LOSS HAS BEEN FULFILLED
- THE CONTRACT III. NON-PAYMENT OF FREIGHT ALLOWS THE CLAIMANT TO TERMINATE
- I. THE OBLIGATION TO PAY FREIGHT IS A CONDITION
- II. FAILURE TO PAY AMOUNTS TO A REPUDIATORY BREACH
- III. THE RESPONDENT IS NOT READY AND WILLING TO PERFORM
- IV. THE CLAIMANT IS ENTITLED TO THE FREIGHT VALUE
- I. THE CLAIMANT HAS RIGHTS OF LIEN IN RESPECT OF FREIGHT AND SUB FREIGHT
- LADING II. THE VOYAGE CHARTERPARTY TERMS ARE INCORPORATED INTO THE BILL OF
- III. THE CLAIMANT HAS A RIGHT TO THE PROCEEDS OF SALE OF THE CARGO
- I. THE SALE OF THE CARGO IS NECESSARY
- II. THE NEED FOR SALE IS URGENT
- VI: PRAYER FOR RELIEF
List of Authorities
Cases
British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673. Bunge Corp v Tradax SA [1981] 2 Lloyd’s Rep 1 Castleton Commodities Shipping Company PTE Limited v Silver Rock Investments [2016] 1 Lloyd’s Reports 1 Cetelem SA v Roust Holdings Ltd [2005] 1 WLR 3555 Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38 Commodities Shipping Company PTE Limited v Silver Rock Investments [2015] EWHC 2584 Dry Bulk Handy Holding Inc and another v Fayette International Holding ltd [2012] 2 Lloyd’s Reports 594 Emilia Shipping Inc v State Enterprise for Pulp and Paper Industries [1991] 1 SLR(R) 411 Five Ocean Corporation v Cingler Ship Pte Ltd [2015] SGHC 311 Gill and Duffus v Riondda Furtures [1994] 2 Lloyd’s reports 67 Golden Endurance Shipping SA v RMA Watanaya SA [2015] 1 Lloyd’s Rep. 266 Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1961] EWCA Civ 7 ICS v West Bromwich [1998] 1 WLR 896 Itex Itagrani Export SA v Care Shipping Corporation and others (The “Cebu”) (No 2) [1990] 2 Lloyd’s Rep 316 at 321
Lidgett v Williams (1845) 4 Hare 456 Maldives Airport Co Ltd v GMR Male International Airport Pte Ltd [2013] 2 SLR 449 Miramar Maritime Corp v Holborn Oil Trading (The Miramar) [1983] 2 Lloyd’s Rep 319 Molthes Rederi Aktieselskabet v. Ellerman's Wilson Line Ltd. [1927] 1 K.B. 710 National Navigation Co v Endesa Generacion SA (The Wadi Sudr) [2009] 1 Lloyd’s reports 666 Nicolane ltd v Simmons [1953] 1 QB 543 Pacific Molasses Co and United Molasses Trading Co v Entre Rios Compania Naviera SA (The San Nicholas) [1976] 1 Lloyd’s Reports 8 Payzu v Saunders [1919] 2 KB 581 Pilkington v Wood [1953] Ch 770 Re Olympia and York Canary Wharf Ltd (No 2) [1993] BCC 159 Spar Shipping AS v Grand China Logistics Holding (Group) Co Ltd [2016] EWCA Civ 982 Tagart, Beaton & Co v James Fisher & Sons [1903] 1 KB 391 TB&S Batchelor & Co Ltd v Owners of the SS Merak (The Merak) [1964] 2 Lloyd’s Reports 527 The Archimidis [2008] EWCA Civ 175 The Eastern City [1958] 2 Lloyd’s Rep. 127 The Engedi [2010] 3 SLR 409
Other Materials
Carver on Carriage by Sea 4th ed. s. 155 (2017) Cooke et al, Voyage Charters (Informa Law, 4th Ed, 2014) (“Voyage Charters”) Scrutton on Charterparties (20th ed., Sweet and Maxwell, 1996) (see Art.38) (2015)
I. Statement of Facts
- The Claimant entered into a Time Charterparty with the Owners of the MV TARDY TESSA, IMLAM, dated 15 th February 2016. The Claimant, then as disponent owner, concluded with the Respondent a Charterparty, using the Coal-Orevoy form amended by the Parties with the terms of the email dated Thursday, 1 September, 2016 8:02 AM. The Charterparty provided (Box 16) that the Respondent had to nominate a port of discharge within a range of 8 ports in China once the vessel passed Singapore.
- The Respondent had also to pay the freight, according to Box 28, within 5 banking days after completion of loading and the signing/releasing of the Bill of Lading, this was due therefore on the 9 th^ October 2016.
- It is purported that then a sub-voyage charterparty between the Respondent and Idoncare was concluded. Idoncare was the named shipper of the coal loaded in the vessel according to the Bill of Lading (dated 4 th October 2016) issued by the Master of the vessel.
- After numerous emails from the Claimant asking for the payment of freight and the nomination of a port of discharge, the Respondent nominated Busan, South Korea on the 16 th October, a port outside of the listed ports provided in the Charterparty and after the Claimant’s refusal, nominated Ningbo on the 21st^ of October, 11 days after the vessel passed Singapore.
- Box 16 provides that: “1 spsb China (Dalian, Jinzhou, Yingkou, Yantai, Qingdao, Shanghai, Tianjin, Ningbo) CHOPT CHTRS to declare discharge port when vessel passes Singapore for bunkering.”^2
- The Charterparty provides directly above the signature box that: “In the event of a conflict of conditions, the provisions of PART I shall prevail over those of PART II to the extent of such conflict but no further.”^3
- Therefore, the contractual terms can be identified and interpreted as follows: a. The Respondent had to nominate one safe port safe berth within the eight ports named in the Charterparty. For the avoidance of doubt these are Dalian, Jinzhou, Yingkou, Yantai, Qingdao, Shanghai, Tianjin, Ningbo. b. The nomination of the safe port safe berth had to take place before or when the Vessel passed Singapore for bunkering.
- This is a straightforward exercise of contractual identification and interpretation ( ICS v West Bromwich^4 ). The Respondent did not nominate a port within the range given in the Charterparty before or upon the vessel reaching Singapore and is therefore in breach of (^2) Page 21 of the Moot Problem (^3) Page 25 of the Moot Problem (^4) ICS v West Bromwich [1998] 1 WLR 896
the Charterparty.^5 The Claimant therefore seeks damages for the daily hire and bunkering costs that continue to be accrued.
- Furthermore, the nomination of Ningbo on the 21 st October 2016 does not remedy the earlier breach. The Tardy Tessa has been drifting on the high seas up to this date and the damages have been suffered as a result of that. The nomination of Ningbo does not undo that. The termination of the Charterparty following the purported nomination of Ningbo is discussed below.
ii. No valid “hindrance”
- The nomination of Busan on the 16 th October 2016 is not a nomination which is open to the Respondent under clause 16 of the Charterparty which provides, so far as is relevant: “(a) If there is a strike or lock-out or any other cause referred to in Clause 24 (hereinafter the “hindrance”)… (b) If there is a hindrance affecting or preventing the actual discharging of the cargo on or after the Vessel’s arrival at or off port of discharge and same has not been settled within 48 hours, the Charterers shall have the option … of ordering the Vessel to a safe port where she can safely discharge without risk of being detained by a hindrance. Such orders to be given within 48 hours after the Master or the Owners have given notice to the Charterers of the hindrance affecting the discharge.”^6
- Clause 24 provides that: (^5) Page 50 of the Moot Problem. (^6) Page 29 of the Moot Problem.
iii. Busan is not a safe port
- Furthermore, even if the Tribunal finds that it was open to the Respondent to nominate an alternative port, Busan must not be considered a safe port and so cannot legitimately be nominated by the Respondent. The definition of a safe port has been laid down by Sellers LJ in The Eastern City 9 : “[A] port will not be safe unless, in the relevant period of time, the particular ship can reach it, use it and return from it without, in the absence of some abnormal occurrence, being exposed to danger which cannot be avoided by good navigation and seamanship.”
- In The Evia (No. 2)^10 , it was clarified that this was an obligation of prospective safety. In other words, the charterer warrants that the port will be safe when the ship arrives. Here the evidence suggests that the Respondent cannot prospectively warrant Busan’s safety. In an email dated Monday 17th^ October 2016 09:54 AM, Gordon Grill says, “the time is not sufficient in order to make necessary arrangements for vsl to safely call at Busan i.e. arrange for armed guards, razor wires, antidotes etc”.^11 In The Archimidis^12 it was made clear that the safety of a port should be viewed in light of the characteristics of a particular port.
- In that case the port had become silted up and so vessels of a certain depth could not proceed up the channel without suffering damage to the ship. This case is analogous to our own. A vessel without the necessary safety equipment cannot proceed to Busan without suffering damage and Busan is therefore an unsafe port. (^9) The Eastern City [1958] 2 Lloyd’s Rep. 127 (^10) The Evia (No2) [1983] 1 AC 736 (HL) (^11) Page 58 of the Moot Problem. (^12) The Archimidis [2008] EWCA Civ 175
- Furthermore, in The Eastern City 13 Sellers LJ said: “ The safety of a port should be viewed in respect of a vessel properly manned and equipped, and navigated and handled without negligence and in accordance with good seamanship.”
- This quote makes clear that a ship should be properly manned and equipped. However, this does not include equipment needed to deal with any possible eventuality. It only includes equipment that a reasonable ship would be expected to carry. We submit that equipment needed to deal with a zombie attack is not that which would ordinarily be expected of a vessel, given the rarity of such attacks unless the owners had been previously told, or agreed, to carry such equipment. Therefore, the fact that there is no time to “ arrange for armed guards, razor wires, antidotes etc ” means that the port is not prospectively safe in the circumstances. 14
- In an email dated Monday 17 October 2016, 11:23 PM the Respondent says, “Busan is safe now as Korean military have secured the area. Recently few vsls under our TCT called Busan with no issues.” 15 This is not sufficient to discharge the burden of proof that is on the Respondent. The Respondent must prove that the port is safe because they warrant that the port shall be safe. It is its promise and so it is up to it to fulfil it. The Respondent must do more than simply point to a few ships that have been able to enter the port. A few ships reaching the port is not sufficient to show that a port is safe. (^13) The Eastern City [1958] 2 Lloyd’s Rep. 127 (^14) Page 58 of the Moot Problem. (^15) Page 60 of the Moot Problem.
has not intended to enter into a string of contracts with the Respondent. Forcing the Claimant to accept Busan in mitigation of its loss would mean that in the future the list of ports given in the Charterparty would be of little effect because they could be overridden by either party in a case where the loss should properly fall on them.
- Secondly, the Claimant believes that Busan is currently overrun with zombies. Whether the Tribunal finds in the Claimant’s favour of the safe port issue, in its eyes sending the ship to Busan would risk doing damage to the ship or having it impounded. Given that the question of mitigation is to be approached from the Claimant’s standpoint, this view should be taken into account.
III. Non-Payment of Freight Allows the Claimant to Terminate
the Contract
i. The Obligation to Pay Freight is a Condition
- In the absence of case law expressly deciding that the obligation to pay freight is an innominate term, it is appropriate for this tribunal to designate it as a contractual condition. Clause 15(a) of the Charterparty makes clear that freight is to be “ deemed earned ”.^20 This shows an intention of the Parties that the Claimant is entitled to the freight. If this were to be treated as a mere innominate term^21 , the term would be of no effect because the Respondent could simply wait to pay when they like knowing that the Claimant cannot cancel the contract. (^20) Page 29 of the Moot Problem. (^21) Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1961] EWCA Civ 7.
- Furthermore, the case law on hire payments in the context of time charterparties are unhelpful in the case of voyage charterparties. 22 In time charterparties one party will always be seeking to set the contract aside to take advantage of a rising market. Such considerations do not apply to the case of a voyage charterparty.
ii. Failure to Pay Amounts to a Repudiatory Breach
- If the Tribunal rejects our submission that the payment of freight is a condition, in any event the non-payment of freight by the Respondent amounts to a repudiatory breach of contract. In commercial cases of non-payment, the question as to whether the breach is severe enough to be repudiatory depends on the severity of the breach and the circumstances surrounding payment – including contract terms and discussions between the parties concerning the expectation of the time for payment.
- Non-payment is to be considered a repudiatory breach if it can be implied from the nature of the contract or the surrounding facts that the parties intended that time for payment should be of the essence. Lord Wilberforce in Bunge Corp v Tradax SA 23 , establishes that this will usually be the case for so-called “mercantile” (or commercial) contracts – as in our case.
- In order to establish a repudiatory breach we must show that time has been made of the essence for the payment of freight. In the emails sent from Eric Yan to Gordon Grill concerning the Charterparty, it is established at point 19 that “100% FRT to be paid within five (5) banking days after completion of loading”. 24 This clearly establishes a (^22) Spar Shipping AS v Grand China Logistics Holding (Group) Co Ltd [2016] EWCA Civ 982. (^23) Bunge Corp v Tradax SA [1981] 2 Lloyd’s Rep 1 (^24) Page 22 of the Moot Problem.
payment. The case of Valilas v Januzai^27 held that for the breach to be repudiatory, the decisive question was whether it deprived the defendant of “substantially the whole benefit which it was the intention of the parties as express in the contract that he should obtain from performing [his] undertakings”. The whole benefit of the contract here is receiving timely payment, so as to be able to pay the vessel’s owners.
- In Spar Shipping AS v Grand China Logistics Holding (Group) Co Ltd 28 , the court found that whilst an obligation for punctual payment was not a strict condition of the charterparty, the charterers’ conduct amounted to a renunciation, as it demonstrated an intention not to perform the charterparties in a way which deprived the ship-owner of substantially their whole benefit.
iii. The Respondent is Not Ready and Willing to Perform
- In response to our notice of termination the Respondent claims that it has remained ready and willing to perform.^29 This is clearly not the case and amounts to no more than ex post facto rationalisation. In reality the Respondent has failed to pay freight or to nominate a legitimate discharge port. This shows that it has no intention of performing their obligations under the Charterparty and is a repudiatory breach of contract.
IV. The Claimant is entitled to the freight value
i. The Claimant has rights of lien in respect of freight and sub freight
- It is submitted that the terms containing the rights of lien in this case should be interpreted so as to confer rights in respect of the freight owed by the Claimant under the (^27) Valilas v Januzai [2014] EWCA Civ 436 (^28) Spar Shipping AS v Grand China Logistics Holding (Group) Co Ltd [2016] EWCA Civ 982 (^29) Page 69 of the Moot Problem.
Charterparty, and sub freight owed by Idoncare. This is the only reasonable interpretation to be given to the clause in the commercial context of this case.
- Clause 19 of the Charterparty (page 31) gives the Claimant (and IMLAM as an ‘Owner’ within the meaning of the provision) a contractual lien over the cargo in respect of freight due. It should however be construed broadly, because it implies a lien right over freight and sub freight. This follows from the facts of this case in being the only interpretation consonant with the intentions of the Claimant and Respondent. From the email between Eric Yan and Gordon Grill dated Saturday, 15 October, 2016 16:23 PM (page55/56) it can be discerned that the Respondent was aware that it would not be able to pay the Claimant without ‘the same from sub charterers’. The lien in respect of freight conferred by the provision was therefore premised on the assumption that payment would be obtained by the Respondent from Idoncare. Freight due ‘under this Charterparty of itself, in that context, therefore meant, by extension, freight payable by Idoncare. Construing that term to the effect that no lien over sub freight could exist would therefore deprive it of any useful effect.
- Furthermore, the term, as incorporated in the Bill of Lading (see below), must also have the effect thereunder that the Claimant can direct IMLAM to retain the cargo for the debt it is due by the Respondent, and by extension, Idoncare. Indeed, it is clear that IMLAM, as carrier (under the direction of the charterer), has a possessory contractual lien over the cargo, which it can exercise to detain it by dint of clause 19 having been incorporated into the Bill of Lading. It would be odd for a shipper to have the right to insist on the discharge of the cargo without freight having been paid. This would render its contractual obligations under the Bill of Lading nugatory. Hence, the Claimant, as charterer, should
