Examination Period: S1, 2022
EXAM CODES: BTX3110
TITLE OF PAPER: Mock Exam Semester 1, 2022
EXAM DURATION: For tutorial discussion
Rules
During an exam, you must not have in your possession any item/material that has not been authorised for your exam. This includes
books, notes, paper, electronic device/s, mobile phone, smart watch/device, calculator, pencil case, or writing on any part of your
body. Any authorised items are listed below. Items/materials on your desk, chair, in your clothing or otherwise on your person will
be deemed to be in your possession.
You must not retain, copy, memorise or note down any exam content for personal use or to share with any other person by any
means following your exam.
You must comply with any instructions given to you by an exam supervisor.
As a student, and under Monash University’s Student Academic Integrity procedure, you must undertake your in-semester tasks,
and end-of-semester tasks, including exams, with honesty and integrity. In exams, you must not allow anyone else to do work for
you and you must not do any work for others. You must not contact, or attempt to contact, another person in an attempt to gain
unfair advantage during your exam session. Assessors may take reasonable steps to check that your work displays the expected
standards of academic integrity.
Failure to comply with the above instructions, or attempting to cheat or cheating in an exam may constitute a breach of instructions
under regulation 23 of the Monash University (Academic Board) Regulations or may constitute an act of academic misconduct
under Part 7 of the Monash University (Council) Regulations.
Authorised Materials
OPEN BOOK YES NO
CALCULATORS Y
ES
NO
SPECIFICALLY PERMITTED ITEMS YES NO
if yes, items permitted are:
Instructions
This is an open access exam. You may bring blank paper, pens and pencils into the exam with you.
2
QUESTION ONE
After graduating from a Monash Business and Engineering degree, Mengxi Miao spent three years working in the
paper packaging and recycling industry in Melbourne. During this time, she designed a biodegradable, water-
resistant box made from recycled paper, which she has patented as the ‘Biobox’. The Biobox is a cheap,
environmentally friendly packaging alternative for a range of products.
Miao has negotiated a contract with an electronics manufacturer in Malaysia, Singsong MY Ltd, under which
Singsong will purchase the Biobox as packaging for a new line tablets. If successful, Singsong intends to use the
Biobox to replace plastic packaging of all its goods, saving millions of dollars per year, as well as boosting its
environmental credentials.
Singsong made its first order of 500,000 Bioboxes for delivery CFR Port Klang (Incoterms 2010). Delivery was to
b e no later than 15 September 2018. Singsong agreed to pay 6 cents per box, a total of $30,000 AU.
Miao contracted with an Australian carrier, Mask Shipping, for carriage aboard the MSK- Syliva, departing
Melbourne 12 September. On 8 September, Mask Shipping delivered a shipping container to Miao’s factory.
Before sending the container to the factory, Mask Shippng employee hurriedly inspected the exterior and
interior of the container. The employee failed to notice that the seals on the container doors had perished.
Miao’s employees packed the container with the 500,000 Bioboxes. The employees, thinking that the water-
resistant boxes would be ok inside a water-tight container, decided not to double-wrap the boxes in plastic wrap
to protect them from condensation inside the container as they would normally. On the same day, the container
was returned to Mask Shipping at the Port of Melbourne. On 11 September, Miao was issued a bill of lading,
which recorded the receipt of “1 x 20' general standard container STC water-resistant Bioboxes"
The sea journey was not without incident. The MSK-Sylvia encountered rougher storms and conditions than
usual. Huge waves washed over the containers for much of the journey and at the peak of the storm the ship
struck submerged rocks causing damage that required immediate repair. The MSK-Sylvia had to make an
unscheduled stop for repairs causing a delay of three weeks. When the shipping container arrived in Malaysia,
Singsong representatives discovered that 100,000 Bioboxes had been badly damaged by seawater and were
unusable. The amount of seawater was substantial and due to seawater’s caustic* properties, it is likely that it
would have eaten through any degree of plastic or other protective wrapping. The seawater appears to have
entered the container through the doors on account of the perished seals.
The CEO of Singsong is not happy. In addition to the damage to the Bioboxes, the factory was at a standstill for
two weeks due to their delayed arrival. The CEO has been in contact with the carrier - Mask Shipping - since
approximately 3 days after the delivery of the Bioboxes, complaining about the damage and delay. Mask
Shipping continues to deny any liability for the damage and delay of the cargo.
Address the following questions. In your responses you can assume that Australia’s Modified Hague Visby Rules
apply to this shipment of carriage, on account of the goods leaving an Australian port for an overseas port under a
valid sea carriage document.
1A. Under the relevant rules of the MHVR, discuss whether the carrier is liable for the damage and delay of
the cargo, including any applicable defences. Be sure to clearly identify any rules or cases that you use
to support your arguments. [Indicative marks: 15]
1B. Regardless of your response above, assume that Mask Shipping is liable for the damaged Bioboxes.
How much financial compensation will Mask Shipping have to pay to Singsong MY? Would it make a
difference if the Bill of Lading had included the following statement "1 x 20' Container: STC 500,000
Bioboxes" Be sure to clearly identify any rules or cases that you use to support your arguments.
[Indicative marks: 6]
*caustic means “capable of destroying or eating away by chemical action (also corrosive)”
3
QUESTION TWO
Happy Herbs Ltd (HH) is a manufacturer and distributer of natural and herbal remedies operating in the United
States. Australian Wholesome Life Supplies Ltd (AWLS) is a Melbourne distributer of health supplements
and natural remedies. In January 2018 AWLS ordered 30,000 boxes of Dr Sage’s Special Powders, a new
natural remedy to combat fatigue and stress, from HH. The powders have taken the US market by storm, and
AWLS believes they will be equally successful in Australia. The sale is agreed on terms FCA Los Angeles
(Incoterms 2010), for delivery between 1 February and 20 June 2018.
AWLS and HH agree that payment will made via a commercial, irrevocable letter of credit.
In early February 2018, HH informed AWLS that the product was ready for delivery. After receiving
notification from BLA that the credit is available, AWLS organised shipment of the goods with Los Angeles
Airways (LAA). On receipt of the goods from HH on 10 June, LAA issued an Air Waybill which details that
the goods would be carried on 12 June from Los Angeles to London on an LAA flight LAV451, and from
London to Kuala Lumpur and then onto Melbourne on a Qantas flight QA021 to arrive on the 14 June. The
Air Waybill recorded the receipt of 5 pallets and a total weight of the consignment as 545 kg.
On receipt of the goods on 14 June AWLS is not happy. AWLS has discovered that the consignment is not in
good condition. The powders are incredibly sensitive to moisture. While HH packed the goods with care and
as advised by LAA, it appears that moisture somehow contaminated the cargo. The most likely explanation
for the moisture’s presence is that the cargo-hold temperature on the flight from Los Angeles to London was
not properly regulated. Consequently, the powders have solidified. AWLS was able to sell these damaged goods
at a discounted price, but suffered losses, inclusive of loss of profits and the missing goods, amounting to
$180,000.
Note: The Montreal Convention 1999 applies to this shipment of goods by air. Drawing on the rules of this
convention and any relevant cases, respond to the following questions
2A. AWLS has contacted Qantas to complain about the damage. In response, Qantas has argued that it is
not liable for the damage on the following grounds:
• The goods when damaged were not the responsibility of Qantas, but LAA. Therefore, AWLS
should pursue LAA.
• AWLS will be unable to establish negligence of Qantas or any other carrier and therefore any claim
under Article 18 will be rejected.
Using the relevant provisions of the Montreal Convention and any relevant cases respond to these
claims by Qantas. In your response be sure to make clear whether you think AWLS has a valid claim
for the damage to its cargo. [Indicative Marks: 8]
2B. A representative of Qantas has informed. AWLS that even if there is liability on the part of the
carriers, the amount of compensation available will be limited. Regardless of your answers to
Questions 2A, assume that AWLS is entitled to compensation and explain what compensation AWLS
will be entitled to. In what circumstances would AWLS be entitled to full compensation from the
carriers. [Indicative Marks: 2]
2C. Consider the claimant’s obligations of timely notification and the following additional facts:
After inspecting most of the boxes on receipt on 14 June, AWLS immediately lodged a
complaint via email to Qantas’ cargo-claim unit detailing the moisture damage. However, on 1
July, AWLS opened boxes on the last pallet, before dispatching to its customer, and found that
four of the boxes were half empty. Close inspection revealed that HH’s original packing tape
on these boxes had been carefully removed and replaced. AWLS immediately lodged a
further complaint with Qantas via email.
Assuming that the carriers bear liability under Article 18 of the Montreal Convention 1999 for the
moisture damage and the new issue of the empty boxes, discuss whether AWLS still has the right to
recover compensation. [Indicative Marks: 5]
4
QUESTION THREE
In their contact of sale of Dr Sage's Special Powders, AWLS (Melbourne distributor of health supplements
and natural remedies) and Happy Herbs Ltd (US manufacturer and distributor of natural and herbal remedies)
agreed that payment would be by a commercial letter of credit. When Happy Herbs informed the purchaser,
AWLS, that the powders were ready for delivery, AWLS opened a letter of credit with the National Wealth Bank
and the Bank of Los Angeles (BLA) was named as the advising bank. The letter of credit specified that it
incorporated the UCP600 rules, and that presentation must be “made within 10 calendar days of the shipment
or before 15 July 2018, which is when the credit expires.”
AWLS organised for transport of the goods by air with Los Angeles Airways. On 10 June, after being advised
that the credit was opened by the Bank of Los Angeles, HH shipped to the goods to Los Angeles Airport, and
Los Angeles Airways took delivery of the goods, issuing an Air Waybill.
However, HH has encountered a problem in obtaining payment under its letter of credit. After shipping the
goods on 10 June, a HH representative presented documents and a request for payment on Friday, 21 June 2018.
On the following Wednesday the manager of the Bank of Los Angeles contacted HH and advised HH that the
Bank was refusing payment on the following grounds:
• The letter of credit described the goods as “100,000 units Dr Sage’s Special Powders. H o w e v e r , the
invoice presented describes the goods as 100,000 units Dr Sage’s Special Remedy Powders– lavender,
sage, cornflour not more than 30%”
• The presentation is too late
With reference to any relevant UCP600 Rules and any relevant cases, assess whether the banks are entitled to
refuse payment in these circumstances. Namely,
3A. Identify the Issuing Bank and the Advising Bank in this scenario. Explain the main differences
between their roles and obligations in this letter of credit. [Indicative Marks: 2]
3B. Discuss whether HH has made a complying presentation. [Indicative Marks: 8]
3C. Discuss whether the bank’s refusal complies with the requirements under the UCP600. [Indicative
Marks: 4]
5
QUESTION FOUR
AWLS and the carriers, Qantas and Los Angeles Airways have been unable to resolve their dispute over moisture
damage to a cargo of 'Dr Sage's Special Powders' en route from LA to Melbourne. AWLS argues that the cargo was
damaged due to moisture exposure during the flight.
As agreed in an arbitration clause included in their contract of carriage, AWLS and the carriers Qantas and Los
Angeles Airways agree to submit their dispute to arbitration proceedings by a sole arbitrator in Australia, under
the UNCITRAL Model Law. The airlines and the parties agree to the appointment of Mr Fish, a former lawyer
from the US, who recently began working as an arbitrator in Australia.
However, AWLS is unhappy with the way proceedings were conducted. A few days before the arbitration hearings
were concluded, AWLS discovered that Mr Fish had worked for Los Angeles Airways as an in-house senior lawyer
from 1998-2008 and that he continued to hold shares in the business that he accumulated during the ten years of
his employment there. Mr Fish did not disclose this information when he agreed to be the arbitrator. When AWLS
presented this evidence to Mr Fish during the proceedings and asked Mr Fish to step down, he refused.
Also, on the last day of the hearing, the airlines tabled expert evidence disputing the impact of the cargo-hold
temperatures on the powders and Mr Fish refused a request by AWLS for additional time to review this new
evidence. Mr Fish’s written decision clearly indicates that the new evidence influenced his finding in the airlines
favour.
Drawing on relevant rules from UNCITRAL or the IAA as appropriate, and using any cases that support your
arguments:
4A. Discuss whether Mr Fish is in breach of his duty of disclosure and whether he ought to have stepped down
as arbitrator. Your response should include discussion of what further action AWLS could have taken
against Mr Fish and the likelihood of its success. [Indicative Marks: 8]
4B. Qantas and LAA are now seeking to enforce the arbitration award against AWLS in the Australian Courts
under the provisions of the Model Law. Discuss how and on what grounds AWLS might challenge the
enforcement. [Indicative Marks:5]
4C. How would your response to 4B be different if the arbitration had taken place overseas in Singapore and the
airlines were now seeking to have the award recognized in the Australian courts? [Indicative Marks: 3]