Memorandum for Claimant John Frost Ltd.

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Table of Contents

Statement of Facts
Arguments
Conclusion on substantive issues
Relief request
Reference List
Footnotes

Statement of Facts

Claimant

John Frost Ltd. is a company headquartered in Melbourne, Australia that provides services of Angus cross-cattle delivery and livestock carrier transport.

Respondent

Honest Dealers Ltd. is a company headquartered in Hong Kong, China that transports cattle to Indonesia and supplies cattle to Chinese supermarkets.

On 1 December 2009, the Claimant had contacted the Respondent via email to offer the delivery of cattle and to arrange for the transportation of livestock since the respondent transported cattle to Indonesia.

On 10 December 2009, the Respondent responded and sent the shipment and delivery terms to the Claimant.

On 15 December 2009 the Claimant accepted the shipment and delivery terms and it was awarded that only the stock of Angus cross-cattle and prices were determined in the spot price at the Melbourne Stock exchange to the Respondent.

On 20 December 2009, the Respondent ordered the first shipment of 25,000 cattle with a delivery date to Darwin not later than December 30 and its transported via the ship “Elders”.

On 21 December 2009, the Claimant accepted the Respondent’s arbitration clause and the cattle were inspected by Dr. Diddi Zeller. In addition, documentation was sent to the respondent’s bank.

On 21 January 2010, the Claimant sent their trade terms and arbitration clause via email to the Respondent.

On 7 March 2010, the Respondent made a consignment of 25,000 aged cows weighted plus or minus 800 kg, with a fat range of 7mm to 10 mm and carcass classification B.

On 10 March 2010, the Claimant advised the Respondent that the aged cattle consignment had already been sold.

On 23 April 2010, the Respondent confirmed through a phone conversation and looked forward to the next shipment of cattle with the Claimant.

On 23 June 2010, the Respondent notified the Claimant that the Heifer count was 12% and not the 10% allowed in the last shipment. Therefore, the Respondent deducted 5 cents per kilo of the whole shipment to cover all the extra costs of placing the meat at the relevant outlets.

On 10 July 2010, the Claimant responded to the Respondent in relation to the unilateral decision and offered reimbursement for any losses suffered by the Respondent. In addition, the Claimant argued that Respondent’s expenses had been covered due to the sale of the heifers in the live market and if the Respondent did not reply within 2 weeks, the Claimant would commence arbitration pursuant to their clause.

On 20 August 2010 Ms. Francis, Secretary-General of ICC, notified the Respondent that the Claimant had lodged a request to arbitration to take place in Melbourne on April 2011.

Arguments

Pre-conditions to arbitration provided in the agreement via email were properly fulfilled.

The Respondent challenged the jurisdiction of the Tribunal on the reasons why the cattle of the last shipment had a 12% of Heifer instead of the 10% allowed. Therefore, the decision to deduct 5 cents per kilo of the whole shipment was to cover extra costs of placing the meat in other outlets. Claimant rejected this assertion for the following reasons:

Respondent did not accept friendly indemnification.
Claimant fulfilled his pre-arbitral obligation

The Claimant was requested to send 25,000 cattle via Elders on the 20^th of December 2010 by email. Moreover, on the 21^st of December 2009 via email and by phone’s instructions about the cattle was sent and inspected by Dr. Diddi Zeller as per the Respondent’s request. Furthermore, the Respondent stated the following in relation to Claimant services,

First we are pleased with the quality of the last shipment¹
We must say the first shipment was very good and our customers are very satisfied²
Respondent did not accept friendly indemnification.

The Claimant offered an indemnification, stating that
We are happy to reimburse you any losses you would have occurred…”³
Moreover, the Claimant gave more than 2 weeks to reverse the unilateral decision otherwise arbitration would proceed.

If we do not hear anything from you within 2 weeks we will commence arbitration pursuant to our clause⁴
Respondent did not accept and reply to Claimant’s indemnification.

Respondent breached his obligation to pay the total amount agreed of delivery and shipment to the Claimant.

The Claimant sent the necessary documentation to the Respondent’s bank for the letter of credit on 21^st December 2009. This documentation was sent and prepared according to the Respondent’s instructions. Five months later the Respondent took the decision to discount 5 cent per kilo of the total shipment which meant a change of the letter of credit and the total price calculated in accordance to the Melbourne Stock exchange at the day of departure of the ship. The Respondent abided to terms and conditions.⁵

Respondent has the obligation to pay cost and risks after the shipment cross customs borders.

In the trade terms clause number 1 states that,
“The transport is pursuant to DES Incoterms 2010 via the usual ship the “Elders””.⁶

According to the DES Incoterms 2010 of the ICC is the responsibility of the Respondent to cover the cost and risk that it might have after the shipment arrives. Therefore, the Respondent should not discount the 5 cent per kilo of the all shipment.

The Des Incoterms 2010 of the ICC stated,

“Delivered Ex Ship means that the seller delivers when the goods are placed at the disposal of the buyer on board the ship is not cleared for import at the named port of destination’’⁶. “The seller has to bear all the costs and risks involved in bringing the goods to the named port of destination before discharging”.⁶ “If the parties wish the seller to bear the costs and risks of discharging the goods, then the DEQ term should be used”.⁷ This term can be used only when the goods are to be delivered by sea or…”⁷

According to art 4 num 1 of the Hamburg Rules,

“The responsibility of the carrier for the goods under this Convention covers the period during which the carrier is in charge of the goods at the port of loading, during the carriage and at the port of discharge”.⁸

According art 19 num 1 of the Hamburg Rules,

“Unless notice of loss or damage, specifying the general nature of such loss or damage, is given in writing by the consignee to the carrier not later than the working day after the day when the goods are handed over to the consignee”.⁸ Such handing over is prima facie evidence of the delivery by the carrier of the goods as described in the document of transport or, if no such document has been issued, in good condition”⁹

According art 19 num 2 of the Hamburg Rules,

“Where the loss or damage is not apparent, the provisions of paragraph 1 of this article apply correspondingly if notice in writing is not given within 15 consecutive days after the day when the goods were handed over to the consignee”¹⁰

Thus, Respondent has claim responsibility of the Claimant after 108 days since the shipment arrived.

Respondent breached the UCP 600 rule.

The trade terms number 2 agreed that letters of credit must be under the UCP 600 rule. “Therefore, the Respondent should not change or modify the amount already sent through the documentation on the 21 December 2009”.¹⁰

The UCP 600 in the article 2 state,

“Credit means any arrangement, however named or described, that is irrevocable and thereby constitutes a definite undertaking of the issuing bank to honour a complying presentation”.¹¹

Respondent breached our arbitration agreement.

“The Claimant sent the arbitration agreement to the Respondent which contracted the following in the trade term number 3”.¹²

“Any Dispute, controversy or claim arising out of, relating to or in connection with this contract, including any question regarding its existence, validity or termination shall be resolved by arbitration in accordance with the ICC Rules”.¹² The seat of Arbitration shall be Melbourne. The language shall be English”.¹²

Therefore, Respondent should not make any unilateral decision of discounting 5 cents from the total shipment.

The Claimant discussed the arbitration agreement by phone on the 15^th December 2009 which the Respondent accepted.

Respondent might not has any losses or extra costs of placing the meat at the relevant outlets.

The Claimant’s external sources announced that the Respondent had sold the heifers to the live market. Therefore, the Respondent’s losses were.¹³

The Arbitral Tribunal listened to the witnesses as well as other people who were selected for that work. ¹⁴

Conclusion on substantive issues

The tribunal found that (II) Respondent breached the obligation to pay the total amount agreed of delivery and shipment to Claimant due to discount 5 cent per kilo of the total shipment.

Moreover, the Tribunal held that (III) Respondent had the obligation to pay the costs and risks after shipment cross customs borders, according to DES Intercom and Hamburg rules. In addition, (IV) the Respondent breached the UCP 600 Rules due to changing the total price amount of the letter of credit. Furthermore, (V) Respondent breached our arbitration agreement due to the unilateral decision and did not follow the ICC arbitration rule.

Lastly, the Tribunal found that (VI) the Respondent might not have any losses or extra costs of placing the meat at the relevant outlets due to sold-out heifers.

Relief request

The CLAIMANT respectfully requested that the Arbitral Tribunal found that:

Pre-conditions to arbitration provided in the agreement via email were properly fulfilled.
Respondent breaches its obligation to pay the total amount agreed of delivery and shipment
Respondent has the obligation to pay the costs and risks after shipment cross customs borders
Respondent breaches the UCP 600 Rules
Respondent breaches our arbitration agreement
The respondent might not have any losses or extra costs of placing the meat at the relevant outlets

Consequently, CLAIMANT respectfully requested the Arbitral Tribunal to order Honest Dealers Ltd:

To pay the total amount discounted which was 5 cents per kilo of the total shipment.
To pay any damages that the company might suffer in relation to this case.
To pay the costs of arbitration.

For John Frost Ltd.,

(Signed) __________________________________________, 20 August 2010.

The arbitration clause must be part of a contractual document because it is a system where disputes are solved privately. This means outside of any court system and the arbitration clause creates the rights to establish the process for resolving the dispute.¹⁵ Therefore, in the arbitration clause the parties must select the rules that will govern in the arbitral process, the language of arbitration, the location of arbitration and the law that will govern in the arbitration. Moreover, if parties do not have arbitration clause any dispute would not be solved through arbitration, unless both sides enter into an agreement after the dispute arises. This is known as submission agreement and after a dispute arise is highly difficult to obtain any arbitral agreement between both parties.¹⁶ Thus, arbitral clause is relevant to be established in the parties’ commercial contract. In addition, according to the New York Convention for the recognition and enforcement of an arbitral award parties must have an agreement in writing which shall include an arbitral clause and this arbitration agreement must be signed by both parties.¹⁷

In John Frost Ltd v/s Honest Dealers ltd, litigation is not possible because there is no clear arbitration clause and agreement and it has not been agreed it by both parties.

Reference List

Blake, D. (2010). The changing international arbitration framework in Australia. Web.

Jones, D. (2007). International Commercial Arbitration and Australia. Web.

Kalderimis, D. (2010) Australia Reforms International Arbitration Legislation. Web.

Moses, M.L. “The Principles and Practice of International Commercial Arbitration”, 2009. Page. 199.

The New York Convention. “Convention of the recognition and enforcement of foreign arbitral award. Trone, M. And Moens, G. (2007). Foundation for International Commercial Arbitration in Australia. Web.

UCP 600. Web.

UN Convention on the Carriage of Goods by Sea (1978). Web.

UNICITRAL Model Law. Web.

Zeller, B. (2010).Global Business Law. Web.

Footnotes

Email from Honest Dealers Ltd to John Frost Ltd on 7 March 2010.
Email from Honest Dealers Ltd to John Frost Ltd on 23 April 2010.
Email from John Frost Ltd to Honest Dealers Ltd on 10 July 2010.
Email from John Frost Ltd to Honest Dealers Ltd on 10 July 2010.
Email from John Frost Ltd to Honest Dealers Ltd on 15 December 2009 and 21 December 2009.
Email from John Frost Ltd to Honest Dealers Ltd on 21 January 2010 which include the trade terms.
Art 4 (1), UN Convention on the Carriage of Goods by Sea (1978). Web.
Art 19 (1), UN Convention on the Carriage of Goods by Sea (1978). Web.
Art 19 (2), UN Convention on the Carriage of Goods by Sea (1978). Web.
Art 2, UCP 600. Web.
Email from John Frost Ltd to Honest Dealers Ltd on 21 January 2010 which include the trade terms.
Email from John Frost Ltd to Honest Dealers Ltd on 10 July 2010.
Art 20 (3) ICC Rules of Arbitration.
Moses, M.L. “The Principles and Practice of International Commercial Arbitration”, pag. 17
Moses, M.L. “The Principles and Practice of International Commercial Arbitration”, pag. 17
Art II (1) (2) (3). The New York Convention. “Convention of the recognition and enforcement of foreign arbitral award.

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