View source for FIMBank plc v KCH Shipping Co Ltd (The “Giant Ace”)

DMC/SandT/24/17

'''England'''

'''FIMBank plc v KCH Shipping Co Ltd (The “Giant Ace”)'''

'''United Kingdom Supreme Court: Lords Hodge, Sales, Hamblen, Leggatt and Richards: [2024] UKSC 38: 13 November 2024'''

Judgment Available on BAILII @ https://www.bailii.org/uk/cases/UKSC/2024/38.html

Christopher Smith KC and Helen Morton (instructed by Campbell Johnston Clark Ltd) for FIMBank (Cargo Interests)

Simon Rainey KC 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 (AND THE HAGUE RULES) APPLIES TO   CLAIMS FOR MISDELIVERY OF CARGO AFTER DISCHARGE FROM THE VESSEL: ARBITRATION ACT 1996 SECTION 69 APPEAL ON A POINT OF LAW'''

'''Summary'''

The Supreme Court, in dismissing Cargo Interests’ appeal from a decision of the Court of Appeal upholding a final arbitration award on a point of law, held that the Article III, Rule 6 one year time bar in the Hague Rules and the Hague-Visby Rules applied to claims under bills of lading for the misdelivery of cargo after discharge from the vessel, and that clause 2(c) of the Congenbill form did not have the effect of disapplying that time bar.

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 Deputy Editor of DMC’s CaseNotes

'''Background'''

FIMBank plc were the financiers of one of the purchasers of a bulk cargo of coal shipped under ‘to order’ bills of lading on the Congenbill form issued for and on behalf of the Master of the vessel “GIANT ACE”.  KCH Shipping Co Ltd were the bareboat charterers of the vessel 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, which applies to claims against contractual carriers under bills of lading.

The coal was loaded in Indonesia and discharged in India, where the cargo was discharged ashore, into stockpiles, against letters of indemnity.  Thereafter, there was a misdelivery of the cargo, the facts of which remained in dispute.

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. FIMBank alleged that the cargo had been misdelivered from the stockpiles pursuant to delivery orders.

Due to a misunderstanding as to who were the contractual carriers under the bills of lading, FIMBank served notice of arbitration on KCH 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 of Article III, Rule 6 of the Hague-Visby Rules. In the arbitration, FIMBank maintained that the time bar period was irrelevant to their claim, as it did not apply to misdelivery of cargo after discharge from the vessel.

The arbitration tribunal rejected FIMBank’s position, finding that (i) the Hague-Visby Rules time bar could apply to claims relating to cargo misdelivery occurring after discharge, and (ii) clause 2(c) of the Congenbill bill of lading form used did not disapply that time bar.  FIMBank appealed.  The High Court (fn.1) and the Court of Appeal (fn.2) dismissed the appeals.  FIMBank then appealed to the Supreme Court which, for the reasons set out below, also dismissed the appeal.

'''Judgment'''

Lord Hamblen gave the Supreme Court’s unanimous judgment.  He provided an introduction to the case and addressed the factual background, the proceedings to date, the issues to be determined and the relevant legal framework.

Lord Hamblen identified that in addressing the key issue – whether Article III, Rule 6 of the Hague-Visby Rules applied to claims for cargo misdelivery occurring after discharge from the vessel had been completed – it was necessary first to address, under the seven headings set out below, whether Article III, Rule 6 of the Hague Rules would apply to such claims.

(1) Ordinary Meaning

The wording of the Rule indicated that it was intended to have wide application: applying “in any event”, to “all liability”, to claims “in respect of loss or damage”, with all liability to be “discharged”, which involves absolute finality.

(2) Context

The Rule focuses on what is to happen at and from the time of “delivery” as a whole, with delivery and discharge being different concepts and the former often happening after the latter.  The Rule also addresses other matters that may occur after discharge, like notices of loss or damage and joint surveys or inspections.

(3) Object & Purpose

The purpose of the Rule is finality; it ensures that the need for a factual investigation is identified reasonably close to the event, and that accounts or books can be closed once the deadline has passed.  That intent is best met if all claims arising out of the contract, whether before or after discharge, are covered.  That has the effect of avoiding practical difficulties concerning whether the time bar operates.

(4) The Travaux Préparatoires (fn.3)

The travaux show there was an intention for there to be a period of minimum responsibilities and maximum rights specified by the Rules, commencing on loading and ending on discharge, outside of which contractual carriers would enjoy freedom to contract.  However, the Rules do not address whether this means that none of the Rules apply outside of that period, and the Rules do provide indications that the time bar was meant to be all-embracing.

(5) English Authorities

The wide wording of the Rule has been emphasised by the English judgments, together with the importance of finality, and the undesirability of having a split regime of time bars.  This has included applying the time bar to events before loading, to cargo that was never loaded, and to misdelivery of cargo arising before or on completion of discharge.

(6)  International Authorities

The international judgments reviewed did not demonstrate an international consensus on the issue, there being foreign common law decisions both ways.

(7)  Textbooks & Commentaries

The leading textbooks and commentaries reviewed did not specifically address the issue so far as it related to the Hague Rules, most focusing on the Hague-Visby Rules.

Conclusion

Lord Hamblen concluded that the Hague Rules Article III, Rule 6 time bar does apply to breaches of duty by contractual carriers which occur after discharge but before or at the time of delivery, including misdelivery.  He also concluded that the time bar may equally apply to breaches of duty which occur before loading.  However, in all such cases it needs to be shown that the claim has a sufficient nexus with identifiable cargo carried or to be carried.

Lord Hamblen further concluded that, because the Hague Rules time bar applies to breaches of duty after discharge including at the time of delivery, and given that the time bar wording is wider in the Hague-Visby Rules (all liability “whatsoever” and to claims “in respect of goods”), it followed that the position under the Hague-Visby Rules is the same.

Finally, in agreement with the Court of Appeal, Lord Hamblen also accepted that clause 2(c) of the standard Congenbill form (fn.4) did not disapply the Hague-Visby Rules time bar to events occurring after discharge.  That clause, thought Lord Hamblen, was clearly intended to protect contractual carriers and relieve them from liability for loss or damage, before loading and after discharge.  So, saying that the effect of the clause was to disallow reliance on the time bar was counter-intuitive, if not perverse, since it would have increased carriers’ liability.

'''Comment'''

This judgment finally determines the issue of whether or not the Hague Rules and the Hague-Visby Rules one year time bar applies to claims for cargo misdelivery occurring after the cargo has been discharged from the vessel.

The conclusion drawn is, in the writer’s view, correct and pragmatic.  The judgment is thorough and detailed in its treatment of the issues decided, and, so the writer hopes, will also be accepted by foreign judges and arbitrators.

Footnote 1:

The case note on the High Court decision (which also includes a link to the judgment) can be found at: [[FIMBank Plc v KCH Shipping Co - The Giant Ace]] 

Footnote 2:

The case note on the Court of Appeal opinion (which also includes a link to the judgment) can be found at: [[FIMBank v KCH Shipping - The Giant Ace]]

Footnote 3:

Travaux préparatoires is a French phrase that refers to the documentary evidence of the negotiations, discussions, and drafting of a Convention.

Footnote 4:

“The Carrier shall in no case be responsible for loss of or damage to the cargo, howsoever arising prior to loading into and after discharge from the Vessel of [sc. or] while the cargo is in the charge of another Carrier, nor in respect of deck cargo or live animals.”