Deep Sea Maritime v Monjasa - The Alhani
Deep Sea Maritime Limited v Monjasa A/S (The “Alhani”)
English Commercial Court: David Foxton QC (sitting as a Deputy Judge of the High Court):  EWHC 1495 (Comm): 15 June 2018
Judgment Available on BAILII @ https://www.bailii.org/ew/cases/EWHC/Comm/2018/1495.html
Nevil Phillips and Tom Bird (instructed by Campbell Johnston Clark) for Deep Sea (Owners)
Stephen Kenny QC and James Watthey (instructed by E.G. Arghyrakis & Co.) for Monjasa (Shippers)
BILL OF LADING: CARGO MISDELIVERY WITHOUT PRESENTATION OF ORIGINAL BILL: CLAUSE 1 OF BILL INCORPORATING EXCLUSIVE ENGLISH JURISDICTION & LAW CLAUSE OF A CHARTERPARTY: CLAUSE 2 OF BILL INCORPORATING HAGUE RULES 1924: WHETHER ONE-YEAR TIME BAR IN ARTICLE III RULE 6 OF 1924 RULES APPLIES TO CARGO MISDELIVERY CLAIMS: WHETHER LEGAL PROCEEDINGS COMMENCED IN TIME IN WRONG (FOREIGN) FORUM CAN STOP TIME BAR EXPIRING IN CORRECT (ENGLISH) FORUM: WHETHER CARRIER (OWNERS) ENTITLED TO A DECLARATION OF NON-LIABILITY ON A SUMMARY JUDGMENT BASIS
In the context of an application by Owners for a declaration of non-liability for cargo claims, the High Court held that: (i) all of Shippers’ claims were subject to the one-year time bar in Article III Rule 6 of the Hague Rules, and (ii) save for any claim being pursued in certain Tunisian proceedings, to the extent that those proceedings continued to a judgment in Shippers’ favour, all of Shippers’ claims against Owners were extinguished by operation of Article III Rule 6.
Case note contributed by Jim Leighton, LLM (Maritime Law), LLB (Hons), BSc (Hons), Solicitor of England & Wales, LMAA Supporting Member and International Contributor to DMC’s Case Notes
Pursuant to a contract for the carriage of goods evidenced by a bill of lading, Owners’ tanker “Alhani” loaded about 4,346 mt of bunker fuel from Shippers (Monjasa) at Lome, Togo on 12 November 2011.
The bill of lading by clause 1 incorporated the exclusive English jurisdiction and law clause from a time charterparty, pursuant to which “Alhani” had been chartered-in by Charterers (Unitaes Energy Sources Co Ltd – later substituted by a charterparty addendum for Babecca Business Links Ltd to perform Charterers’ obligations) to perform their sale contract with Shippers.
The cargo was discharged on 18 November 2011 through a ship-to-ship transfer into tanker "Marida Marguerite" off Lome. Owners say this was done pursuant to Charterers’ instructions under the time charterparty, without production of the bill of lading.
Owners accepted that there was an arguable case that the cargo was not delivered to Shippers, as the lawful bill of lading holders, under circumstances where Charterers/Receivers did not come into possession of the bill of lading.
Shippers commenced multiple sets of proceedings in relation to the alleged misdelivery of the cargo, the pertinent details of which are set out below.
Shippers arrested “Alhani” in Tunisia on 12 April 2012 and further asserted that the Tunisian courts had jurisdiction to try the misdelivery claim. Owners posted security to release the vessel on the basis that this would answer either to a settlement made between the parties or a final and unappealable judgment of the Tunisian courts.
Owners challenged the jurisdiction of the Tunisian courts. The first instance court dismissed Shippers’ claim (on 7 July 2015) for want of substantive jurisdiction (without reference to the exclusive English jurisdiction and law clause incorporated into the bill of lading). The first appeal court later upheld the judgment of the first instance court (on 28 November 2016).
Shippers had only first seen a copy of the time charterparty in January 2015, from which the exclusive English jurisdiction and law clause could be identified (as incorporated by clause 2 of the bill of lading), some three years after the one-year time bar had expired.
Shippers thereafter further arrested “Alhani” in France (in January 2017). Owners again had to post security to release the vessel. The French courts also ordered Shippers to commence proceedings in a court of competent jurisdiction to seek substantive relief.
Owners thereafter (on 15 February 2017) commenced proceedings before the English High Court to seek a declaration of non-liability on a summary judgment basis. There was at the time of the hearing before the English High Court understood to be a further appeal on the substantive jurisdiction point before the Tunisian courts, which had been made in time (on 11 May 2018) and remained pending.
The judge noted that Owners’ application (for a declaration that they were not liable to Shippers as regards claims under or in relation to the bill of lading under which the cargo in question was carried) raised two important key issues in relation to the law of the carriage of goods by sea, namely:
(1) Whether the time bar created by Article III Rule 6 of the Hague Rules applied to claims for wrongful misdelivery, where the shipowner has delivered the cargo to a third party without production of the bill of lading.
(2) Whether the requirement in Article III Rule 6 that “suit is brought within one year after delivery of the goods or the date when the goods should have been delivered” can ever be satisfied if proceedings are commenced in the courts of one country, when the bill of lading incorporates a clause from a charterparty giving exclusive jurisdiction to the courts of another country.
The judge noted that Owners only sought to obtain summary judgment on the basis of the first ground stated at (1) above.
Having provided a lengthy background introduction to the Hague Rules, the judge then turned to the first of the key issues that arose on Owners’ application.
The judge noted that Owners’ arguments were to the effect that Article III Rule 6 applies to the misdelivery of cargo because:
(a) of the general and all-embracing words used in the Rule;
(b) an expansive construction is supported by the purpose of the Rule;
(c) misdelivery is a clear breach of a central obligation (Article III, Rule 2); and
(d) its application to misdelivery claims is supported by Privy Council and NSW Court of Appeal authorities (fn.1).
The judge noted that Shippers’ arguments were to the effect that Article III Rule 6 does not apply to the misdelivery of cargo because:
(a) the obligation to deliver only against production of the bill of lading does not arise under and is not regulated by the Rules;
(b) there is a firm understanding that the Rule does not apply to misdelivery, given its amendment by the Visby Protocol and its travaux préparatoires; and
(c) the two case authorities cited, when properly understood, did not support Owners’ argument (particularly the majority in the second authority).
In the judge’s view the submissions raised three important questions being:
(i) Approached purely by reference to its language and purpose, is Article III Rule 6 capable of applying to misdelivery claims?
(ii) Is Article III Rule 6 limited in its application to breaches of the Hague Rules obligations?
(iii) Is there a settled understanding that Article III Rule 6 of the Hague Rules does not apply to misdelivery claims?
The judged answered the three questions (i) “yes”, (ii) “no”, and (iii) “no” for the following reasons:
As to (i), the words "in any event" are wide, and, in the context of Article IV Rule 5 of the Hague Rules, the courts have emphasised their width, and rejected arguments that they are insufficient to apply to particular types of breach. The same is true of the words “all liability”. As such, taken together, the words "in any event" and "all liability in respect of loss or damage" are clearly wide enough to encompass liability for delivering the goods to someone not entitled to take delivery of them. Further, the object of finality, which it had been held that Article III Rule 6 was intended to achieve, would be seriously undermined if the Rule did not apply to misdelivery claims.
As to (ii), the case authorities relied on by Shippers did not have the issue in question here in mind. With a general recognition that Article III Rule 6 is not limited in its application to claims formulated as an allegation of a breach of the Hague Rules, it is well-established that a cargo claimant cannot circumvent the limitations and exclusions in the Rules by suing the shipowner for the torts of negligence or conversion, or for breach of bailment. In any case, in the judge’s view, pumping the cargo out of “Alhani” into the hands of someone who was not in fact entitled to delivery seemed to be the plainest breach of the Article III Rule 2 obligation "properly and carefully [to] … discharge the goods carried". The time bar under the Hague (and Hague-Visby) Rules is an internationally accepted and universally understood condition of claims against carriers. The clarity of that position would be substantially undermined if its application turned on the fine distinctions sought by Shippers.
As to (iii), the principal material relied on to establish that settled understanding was extracts from the travaux préparatoires to the Visby amendments to the Hague Rules. The travaux to an amending convention are not necessarily the most fertile territory from which to establish a settled understanding of the pre-convention law. The travaux indicated there was a dispute as to whether or not the Hague Rules applied, or did not apply, to misdelivery at all. It made clear that the national legal systems of some delegates took the view that the Hague Rules did not apply at all to misdelivery but, in the judge’s view, the travaux did not reveal a settled consensus that Article III Rule 6 was so limited during the Hague Rules period of responsibility. As such, while accepting that there were informed observers who held the view that Article III Rule 6 did not apply to claims for misdelivery, what was noticeably absent was any authority from any jurisdiction to the effect that Article III Rule 6 did not so apply, or commentary recording the settled meaning for which Shippers contended.
Accordingly, on issue (1), the judge concluded that Article III Rule 6 of the Hague Rules does apply to misdelivery claims, where the misdelivery occurred during the period of the Hague Rules period of responsibility, and there was no fixed or settled interpretation of the Hague Rules to contrary effect which required the alternative conclusion.
The judge then, in view of his conclusion, necessarily had to consider issue (2); namely, whether suit was brought in time despite being commenced in the wrong forum or jurisdiction.
Having provided a lengthy consideration of the circumstantial permutations that may arise and the case law touching on this issue, the judge summarised the principles as follows:
First, where the claimant commences proceedings before a court of competent jurisdiction, but is then required to proceed in an alternative forum for reasons that are not the claimant’s responsibility, the first action will constitute the bringing of suit for the purposes of Article III Rule 6.
Second, if the first proceedings are brought in a particular court in breach of an agreement to bring claims in another forum, then, save perhaps in exceptional circumstances, they will not constitute proceedings before a competent court for the purpose of the last paragraph above.
Third, when the claimant commences proceedings before a court of competent (but non-contractual) jurisdiction, those proceedings will be capable of defeating an Article III Rule 6 time bar in another set of proceedings, providing that, at least at the time when the time bar defence is determined in the second proceedings:
a) the first set of proceedings remain effective proceedings; and
b) the shipowner is unable to prove on the balance of probabilities that the first set of proceedings will be found to be ineffective proceedings in the forum in which they were brought.
Fourth, the first set of proceedings will remain effective proceedings for the purpose of the last paragraph above if they have culminated in a judgment in the claimant’s favour on the merits.
Against that background, the judge identified that two questions arose for consideration, namely:
(i) Can the Tunisian Proceedings be relied upon by Monjasa as the bringing of suit for the purposes of Article III Rule 6 in other proceedings commenced outside the one-year period (including the English proceedings)?
(ii) Were the Tunisian proceedings brought within time for the purposes of Article III Rule 6?
As to (i), the answer was “no”, because the Tunisian proceedings were brought in breach of the exclusive jurisdiction clause and there were no exceptional circumstances (e.g. Owners refusing to provide a copy of the charterparty incorporated into the bill of lading on Shippers’ request) to justify a contrary conclusion. This was particularly so when the bill of lading clearly incorporated a dispute resolution clause from a charterparty identified therein, and where the original lawful holders of the bill of lading must be taken to have had access to the terms of the charterparty at the time when they entered into the contract.
As to (ii), this concerned whether the English High Court should declare the claim currently being litigated before the Tunisian courts extinguished. In this regard, the judge recognised that foreign courts may allow a claim to proceed because they adopt different tests for the incorporation of exclusive forum clauses or because of different concepts of public policy (on which there was no evidence before the judge). He therefore concluded, on grounds of international comity, that it was not appropriate for him to make the declaration that Owners sought.
Accordingly, having considered both issues, the judge held that (1) the time bar created by Article III Rule 6 of the Hague Rules applies to claims for wrongful misdelivery of the cargo, and (2) it was inappropriate for him, in the circumstances of this case, to declare that the Tunisian proceedings were extinguished, at least to the extent that Shippers were successful in their pending appeal in those proceedings.
The judgment is a veritable tour de force on the two key issues in dispute. While the judge modestly suggested that the reasons had been set out at too great a length, this underlined the fact that the issues addressed were complicated.
The result achieved by the judgment does have the feel of being right but is certainly not beyond reasonable dispute on all aspects. As such, further testing of the issues could be expected in the appeal courts in future disputes.
Footnote 1: The “New York Star”  1 WLR 138,  2 Lloyd’s Rep 317 and The “Zhi Jiang Kou”  1 Lloyd’s Rep 493