On 24 May 2023, the Court of Appeal handed down an important decision in The Giant Ace1, relating to discharge of cargoes without presentation of bills of lading, that will be of interest to traders, banks, shipowners and charterers alike.
In its judgment, the Court of Appeal confirmed that the one-year time bar in Article III rule 6 of the Hague-Visby Rules applies to claims for misdelivery, even if the misdelivery occurs after discharge of the cargo has been completed. In doing so, the Court of Appeal upheld the earlier decision of the Commercial Court2, on which we previously reported here.
Background
The claimant, FIMBank p.l.c. (“FIMBank”), was the holder of a number of bills of lading covering a cargo of coal that was shipped on board the vessel “GIANT ACE” in Indonesia and discharged in India. The respondent, KCH Shipping Co., Ltd (“KCH”), was the demise charterer of the vessel and the contractual carrier under the bills of lading. The bills of lading on the Congenbill (1994) form were subject to the Hague-Visby Rules, including the time bar in Article III rule 6 which provides that a claim should be brought within one year of delivery or of the date when the cargo should have been delivered.
Original bills of lading were not available at the discharge port in India and the cargo was discharged into stockpiles without production of bills of lading, against letters of indemnity issued to KCH by the charterers.
FIMBank had financed the purchase of the cargo and took security by a pledge of the bills of lading. FIMBank was left unpaid (and unable to exercise its security as holder of the bills) and brought a claim for damages against KCH under the bills of lading for misdelivery of the cargo to third parties.
Arbitration and Commercial Court Proceedings
In the arbitration proceedings, the tribunal determined that the claim was time-barred pursuant to Article III rule 6 of the Hague-Visby Rules because the arbitration had been commenced more than one year after the date when the goods should have been delivered (the claim was brought approximately two years after discharge).
FIMBank appealed the award, arguing that the time bar did not apply to a claim for misdelivery following discharge. FIMBank also argued that clause 2(c) of the Congenbill form (which essentially provided that the carrier was not to be responsible for loss or damage prior to loading and following discharge) disapplied the Hague-Visby Rules in respect of the period after discharge. The Commercial Court rejected these arguments and dismissed the appeal.
Court of Appeal Decision
FIMBank appealed to the Court of Appeal which held as follows:
1. Article III rule 6 of the Hague Rules did not apply to misdelivery after discharge but instead applied only in relation to liability in respect of loss or damage on the part of the carrier which arose during the period of responsibility under the Hague Rules. In other words, from the time when the goods are loaded on to the time they are discharged from the ship.
2. However, the position under the Hague-Visby Rules was different. In choosing a time limit deliberately expressed “in the broadest possible terms”, the drafters of the Visby amendments to the Hague Rules plainly intended that the limit should apply to misdelivery even occurring after discharge. It was highly unlikely that they intended the time limit to apply to misdelivery occurring during the voyage or simultaneously with discharge, but not to the typical case of misdelivery occurring after discharge.
3. Clause 2(c) of the Congenbill form did not disapply the Hague-Visby Rules time bar in respect of the period after discharge.
The Court of Appeal expressed “considerable doubt” that if Article III rule 6 of the Hague-Visby Rules did not apply to misdelivery after discharge on the text of the convention, there was nevertheless an implied term in the bills of lading to this effect. However, as the Court had already concluded that Article III rule 6 of the Hague-Visby Rules did apply on its own terms, it was unnecessary for it to reach a final conclusion on this issue.
The Court of Appeal refused permission to appeal to the Supreme Court.
This decision highlights the potential importance of determining whether the Hague or Hague-Visby Rules apply for the purposes of identifying the relevant time bar for a misdelivery claim against a contractual carrier under a bill of lading. The Court of Appeal has helpfully clarified that the one-year time bar under Article III Rule 6 applies to misdelivery after discharge under the Hague Visby Rules, but not under the Hague Rules. It appears that the additional word “whatsoever” in the Hague-Visby Rules made the difference here.
While shipowners and traders can take comfort from the certainty offered by this decision, financing banks will no doubt be increasingly vigilant in diarising 12 months from discharge of the cargo, irrespective of delivery.
The full case report is available online here.
1 FIMBank p.l.c. v KCH Shipping Co., Ltd [2023] EWCA Civ 569
2 FIMBank p.l.c. v KCH Shipping Co., Ltd [2022] EWHC 2400 (Comm)
Benita Cheung
Managing Associate
