FIMBank Plc v KCH Shipping Co - The Giant Ace
DMC/SandT/23/01
England
FIMBank plc v KCH Shipping Co Ltd (The “Giant Ace”)
English Commercial Court: Sir William Blair: [2022] EWHC 2400 (Comm): 28 September 2022
Judgment Available on BAILII @ https://www.bailii.org/ew/cases/EWHC/Comm/2022/2400.html
Steven Berry QC and Helen Morton (instructed by Campbell Johnston Clark Ltd) for FIMBank (Cargo Interests)
Simon Rainey QC and Matthew Chan (instructed by Reed Smith LLP) for KCH (Contractual Carriers)
BILLS OF LADING: MISDELIVERY OF CARGO: WHETHER TIME LIMIT FOR CLAIMS AGAINST THE CARRIER IN ARTICLE III, RULE 6 OF THE HAGUE VISBY RULES APPLIES TO CLAIMS FOR MISDELIVERY OF CARGO AFTER DISCHARGE FROM THE VESSEL: ARBITRATION ACT 1996 SECTION 69 APPEAL ON A POINT OF LAW
N.B. it is understood that there is a further appeal to the Court of Appeal, on whose judgment, if any, a further case note will be prepared in due course.
Summary
The High Court, in dismissing Cargo Interests’ appeal from a final arbitration award on a point of law, held that the one year time bar in Article III, Rule 6 of the Hague-Visby Rules applies to claims under bills of lading for the misdelivery of cargo after the discharge of the cargo from the vessel and, further, that the effect of clause 2(c) of the Congenbill form of bill of lading did not disapply the time bar either.
Case note contributed by Jim Leighton, LLM (Maritime Law), LLB (Hons), BSc (Hons), Solicitor Advocate of England & Wales, IMI Registered Mediator, LMAA Supporting Member and International Contributor to DMC’s Case Notes
Background
FIMBank were the financiers of one of the purchasers of a bulk cargo of coal shipped under 13 sets of ‘to order’ bills of lading on the Congenbill form issued for and on behalf of the Master of bulk carrier “GIANT ACE”, of which KCH were the bareboat charterers from Mirae Wise SA, the Panamanian registered owners.
The bills of lading were subject to the Hague-Visby Rules, including the one year limitation of liability (time bar) at Article III, Rule 6 as applies to claims against the contractual carrier under the bills.
The coal was loaded in Indonesia and arrived at the Indian ports of Jaigarh and Dighi around two weeks later, where the cargo was discharged ashore, between 1 and 18 April 2018, into stockpiles, against letters of indemnity which ran up the charterparty chain.
What actually happened to the cargo remained in dispute between the parties and the facts regarding the circumstances of the misdelivery of the cargo following its discharge ashore in India were not explored before the court.
FIMBank had taken a pledge over the bills of lading and the cargo, and so essentially stood in the same position as the cargo owners, and alleged misdelivery of the cargo from the stockpiles pursuant to delivery orders.
Due to a misunderstanding as to who were the carriers, FIMBank served notice of arbitration on KCH only on 24 April 2020, that is, more than one year after the delivery of the goods or the date when they should have been delivered – that being the time bar period.
The arbitration tribunal, consisting of Julia Dias QC, Sir Bernard Eder and Timothy Young QC, rejected FIMBank’s position, finding that: (i) the Hague-Visby Rules time bar can in principle apply to claims relating to misdelivery occurring after discharge; and (ii) clause 2(c) of the Congenbill form did not disapply the Hague-Visby Rules time bar to the period after discharge. FIMBank appealed.
Butcher J gave permission to appeal in respect of two of the five questions of law raised by FIMBank: (i) whether Article III, Rule 6 of the Hague-Visby Rules (fn.1) applies to claims for misdelivery of cargo after discharge (the “First Question”); and (ii) whether clause 2(c) of the Congenbill form (fn.2) disapplies the Hague-Visby Rules to the period after discharge (the “Second Question”).
Judgment
The judge first outlined the facts, the arbitral tribunal’s award and the parties’ rival contentions, before turning to (1) the nature of the delivery obligation, (2) the versions of the Article III, Rule 6 time bar in the Hague Rules and as revised in the Hague-Visby Rules, (3) the object and purpose of the time bar, (4) the key English cases, (5) the authorities from other common law jurisdictions, and (6) textbooks and academic material. The judge then proceeded to a discussion and conclusion.
Discussion
The judge first considered the problems in FIMBank’s contentions. Most deliveries occur after discharge from the vessel and may take place in a number of different ways outside the control of the contractual carrier. He found it odd that the answer to Question 1 should turn – in the absence of any obvious analytical or sound commercial reason why it should - on the critical distinction between delivery and discharge, since the receiver has control over when and how it surrenders the bill of lading and organises the receipt of the goods ashore.
There were equally difficulties in determining when, in terms of time and practicalities, discharging operations were completed. In the judge’s opinion, the submissions made by FIMBank did not answer the arbitral tribunal’s view that there was no sound objective reason for applying fine distinctions to identify when exactly the watershed for the application or disapplication of the time bar occurred, not least given the underlying object of the time bar, namely, that of enabling the carrier to close its books.
Further, as in the present case, when the claimant does not present the bill of lading to the carrier or his agent when the vessel has arrived to give discharge, this meant the carrier either had to refuse to discharge for an undefined (and perhaps unindemnified) period or discharge into the custody of an agent and, on FIMBank’s case, lose all time bar protection. That was, as the judge noted, “not commercially sensible or even reasonable”, as the arbitral tribunal had stated.
Each of these considerations, in the judge’s view, seemed to be powerful in arguing for a more extensive scope to the time bar than FIMBank’s submissions allowed.
FIMBank considered the arbitral tribunal was in fundamental error when expressing the view that the contractual ‘custody’ (under Article II and Article III, Rule 2) of the cargo was an obligation that was naturally capable, in the normal course, of persisting after discharge, and thus an obligation squarely within the ambit of the Hague-Visby Rules. KCH submitted the arbitral tribunal’s reasoning was perfectly proper, as this was a contract of carriage that extended on its terms up to delivery and where Article III, Rule 6 of the Hague-Visby Rules does in terms contemplate delivery of the cargo. FIMBank’s retort was that the reference to delivery of the cargo in Article III, Rule 6 was solely there to provide a marker in time for the running of the one-year period. However, the judge did not find that a particularly convincing answer, given that other parts of Article III, Rule 6 are concerned with the delivery of the cargo more generally.
FIMBank also had two main objections to the arbitral tribunal following the judgment of Longmore LJ in The “MSC Amsterdam” at para [23] (fn.3), to the effect that, absent express agreement, the parties have impliedly agreed that the obligations and immunities contained in the Hague-Visby Rules continue after the actual discharge until the goods are taken into the custody of the receiver, which the arbitral tribunal preferred to express as the “proper construction of the contract in line with the Carver implied term” (fn.4).
The first objection was that neither the context nor the wording of the Hague-Visby Rules, nor Carver or Longmore LJ in The “MSC Amsterdam”, suggest this should apply in every case. The judge accepted that the Carver implied term does not apply to every contract of carriage under the Hague-Visby Rules, and he noted that the arbitral tribunal did not suggest otherwise in its own reasoning either. KCH in oral argument further sought to rely on the implication of the term being necessary and obvious in the context of this contract. KCH also submitted more generally that the implication was a finding of experienced maritime arbitrators on the basis of the evidence before them. With considerable hesitation the judge came to the conclusion that KCH were correct.
The second objection was based on the outcome in The “MSC Amsterdam”, as encompassed in the second question upon which Butcher J gave leave to appeal. The arbitral tribunal had concluded clause 2(c) did not present an obstacle because, first, Article III, Rule 8 made null and void and of no effect any terms purporting to relieve the carrier of liability in connection with the goods otherwise than in accordance with the Hague-Visby Rules and, secondly, the well established rule that such words as are in the bills of lading are insufficiently clear to relieve the carrier from liability for misdelivery. The contrary result in the arbitral tribunal’s view would have been odd, counterintuitive and wrong if a clause that did not deal with misdelivery should have the effect of taking misdelivery outside Article III, Rule 6.
The judge agreed it seemed counterintuitive that a clause intended to relieve the carrier of liability for loss or damage to the cargo after discharge from the vessel should have the effect of depriving the carrier of the benefit of a time bar which would otherwise be available, particularly given the objective of the time bar, to enable the carriers to clear its books, and which had been construed widely.
While FIMBank submitted that the present case did require a different result and the contractual provisions were in substance indistinguishable from The “MSC Amsterdam”, the judge concluded, with some hesitation, in agreement with the arbitral tribunal, that The “MSC Amsterdam” was distinguishable because:
(1) the courts in The “MSC Amsterdam” were considering the differently worded Article IV, Rule 5 on package limitation, which was a different context;
(2) the MSC standard form bills of lading in The “MSC Amsterdam” were in materially different terms to the bills of lading in the present case;
(3) the MSC bills made very specific provision for responsibility for loss of or damage to goods “after the end of the Hague Rules period”, and expressly provided that “discharge shall constitute due delivery of the goods under this Bill of Lading”;
(4) as the arbitral tribunal themselves noted, it was not surprising that the courts in The “MSC Amsterdam” held that the parties had agreed to a specific period of application of the Hague-Visby Rules ending with discharge; and
(5) clause 2(c), in particular, contained no reference, unlike the MSC bills, to any Hague-Visby Rules period, and so nothing was said in the bills of lading in the present case about the carrier’s ability to rely on its immunity under Article III, Rule 6 or about the applicability of the Hague-Visby Rules generally.
Conclusion
Accordingly, the judge held, in dismissing FIMBank’s appeal, thereby upholding the final arbitration award, that the one year time bar in Article III, Rule 6 of the Hague-Visby Rules applied to the claims under the bills of lading for the misdelivery of cargo after its discharge ashore from the vessel and, further, clause 2(c) of the Congenbill form of bill of lading did not disapply the time bar.
Comment
This judgment provides the first English law decision directly on point as to whether or not the Hague-Visby Rules one year time bar applies to claims for the misdelivery of cargo after the cargo has been discharged from the vessel.
The conclusion drawn is, in the writer’s view, correct but the lack of explicit clarity in the Hague-Visby Rules and their travaux préparatoires and the difficulties in grappling with the issue make the correct answer debatable.
That the Hague Rules as amended by the Brussels (Visby) Protocol do not clearly and explicitly spell out the answer suggests, to the writer, that the intention of the extent to which the Rules would apply was considered to be obvious.
The difficulty is in deciphering what was obvious – the travaux préparatoires suggest “it had not been intended in this international convention to consider anything other than the time the goods were on board the ship” (fn.5).
However, when the final text of Article III, Rule 6 of the Hague-Visby Rules includes wide words encompasing the possibility of a misdelivery, “the date when [the goods] should have been delivered”, there is a gap in the guidance.
On that basis, buttressing the answer with the so-called Carver implied term, to the effect that, absent express agreement, the Hague-Visby Rules apply until delivery, appears to have been a necessary move to strengthen the position.
Notably, if the answer were held to be the contrary, this would open the door to carriers expressly excluding liability for misdelivery after discharge of the cargo, without cargo interests being able to defeat such a term by relying on the provisions of Article III, Rule 8.
Accordingly, there is a sensible compromise in the time bar applying to carriers’ benefit whilst also protecting cargo interests from the risk of a contractually effective exclusion of carriers’ liability for post-discharge misdelivery.
Further consideration in the appellate courts would no doubt bring a greater degree of comfort in being able to rely on the answer, either way, and this is a case the writer envisages could go all the way to the UK Supreme Court.
Footnote 1:
“… the carrier and the ship shall in any event be discharged from all liability whatsoever in respect of the goods, unless suit is brought within one year of their delivery or of the date when they should have been delivered. …”
Footnote 2
“The Carrier shall in no case be responsible for loss and damage to the cargo, howsoever arising prior to loading into and after discharge from the Vessel of [which must mean “or”] while the cargo is the charge of another Carrier, nor in respect of deck cargo or live animals.”
Footnote 3:
[2007] 2 Lloyd’s Rep 622 (CA)
Footnote 4:
This is a reference to a discussion that appeared in Carver on Bills of Lading, by Sir Guenter Treitel and Professor Francis Reynolds, 4th ed (2017) at [9-130] where the learned authors state that the Rules may appear on their face to cease operation on discharge, but that consignees will normally collect [the goods] after some period of storage. It is arguable, they say, that the carriage contract continues, and that under English law the carrier still holds the goods under the contract of carriage and under the Rules, unless again, as is perfectly permissible, he alters his responsibility for this stage by a term in the contract of carriage.
Footnote 5:
See The Travaux Préparatoires of the Hague Rules and of the Hague-Visby Rules, p140 – available at https://comitemaritime.org/wp-content/uploads/2018/05/Travaux-Preparatoires-of-the-Hague-Rules-and-of-the-Hague-Visby-Rules.pdf
