FIMBank v KCH Shipping - The Giant Ace
DMC/SandT/23/09
England
FIMBank plc v KCH Shipping Co Ltd (The “Giant Ace”)
English Court of Appeal: Males, Popplewell and Nugee LJJ: [2023] EWCA Civ 569: 24 May 2023
Judgment Available on BAILII @ https://www.bailii.org/ew/cases/EWCA/Civ/2023/569.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 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 Court of Appeal, 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 bill of lading form was not to disapply the 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 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 ‘to order’ bills of lading on the Congenbill form issued for and on behalf of the Master of “GIANT ACE”. 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, which applies to claims against the contractual carrier under the 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, and alleged misdelivery of the cargo 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.
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 form did not disapply the Hague-Visby Rules time bar to the period after discharge. FIMBank appealed. The High Court dismissed the appeal. FIMBank then appealed to the Court of Appeal who, for the reasons below, also dismissed the appeal.
Judgment
The Court of Appeal’s opinion was given by Males LJ, with whom Popplewell and Nugee LJJ agreed. Having outlined the facts and the issues, and the parties’ submissions thereon, Males LJ commenced his legal analysis.
Discussion
Males LJ noted that Article III, Rule 6 was the only provision in the Hague Rules which refers to “delivery” as distinct from “discharge”. Discharge is the physical operation to remove the cargo from the ship. Delivery is the legal concept involving a full transfer of possession of the goods by the carrier to the receiver. As such, discharge and delivery may occur at different times.
Males LJ further noted that Article III, Rule 8 renders null and void any attempt by the carrier to avoid the liability for which the Hague Rules provide. It is the latter provision which ensures the Hague Rules comprise an irreducible minimum set of responsibilities and liabilities with which the carrier must comply.
The adoption of the Visby Protocol in February 1968 brought about, as Males LJ noted, a number of changes to the Hague Rules, the most important of which, for present purposes, was an amendment to Article III, Rule 6. The only amendment was to the third paragraph. Instead of providing for discharge from “all liability in respect of loss or damage”, the new rule provided for discharge “from all liability whatsoever in respect of the goods”. Both versions of the rule included the words “in any event” and the time was to run from the date of delivery or the date when the goods should have been delivered.
Males LJ noted that the correct approach to interpretation of the Hague-Visby Rules was, in summary, to be by reference to broad and general principles of construction, generally accepted internationally, including the principle laid down in Article 31.1 of the Vienna Convention:
“A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in light of its object and purpose.”
Further, in accordance with Article 32 of the Vienna Convention, recourse may be had to “supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion” in order “to confirm the meaning” or “to determine the meaning” when it is “ambiguous or obscure” or “leads to a result which is manifestly absurd or unreasonable”.
Males LJ also noted that the travaux préparatoires can only be determinative in limited circumstances, where “they clearly and indisputably point to a definite legal intention”. In short, nothing less than a “bull’s-eye” would do.
Finally, an international convention should “be interpreted in a uniform manner and regard should therefore be had to how [the Rules] have been interpreted by the courts of different countries”, particularly if there is shown to be a consensus among national courts in relation to the issue of interpretation in question.
In applying the above approach, Males LJ noted the Hague Rules clearly applied only to “carriage by sea”, which begins on loading and ends on discharge of the cargo from the vessel, without application outside that period. Outside that period it would be a matter of the parties’ contract or the law of bailment.
The result was that Article III, Rule 8 applies during that period but permits freedom of contract on matters outside that period. That was confirmed by Article VII, which states that nothing in the Hague Rules prevents the parties from entering into any agreement as to the carrier’s responsibilities before loading or after discharge, in line with the definitions in Articles I and II, limiting the application of the Hague Rules to the period from loading until discharge.
Males LJ concluded that the Hague Rules do not apply to misdelivery of cargo stored on land after discharge, where the misdelivery is not related to the discharge operation. On that basis, the question then arose whether there is anything in Article III, Rule 6 itself to demonstrate that the time bar was intended to apply to claims for breaches of obligations outside the scope of the Hague Rules. Males LJ considered it did not because the rule is part of the Hague Rules to which the contract is made subject by Article III, such that, logically, its application cannot extend beyond the scope of the Rules themselves as defined by Articles I and II.
Turning to Article III, Rule 6 in the Hague-Visby Rules, Males LJ identified that it was immediately apparent that the new rule was intended to be of wider scope than the original rule. In particular, the change from “all liability in respect of loss or damage” to “all liability whatsoever in respect of the goods” weakened or even removed the nexus with loss or damage to the cargo which was previously required. The word “whatsoever” was not merely emphasis, but indicated the absence of any limit on the term which it qualified, being “all liability”.
Males LJ considered that unless the new rule applied in cases where the original rule did not, the amendment achieved nothing, which was not a conclusion which should be reached lightly. The question than then arose is in what cases where the original rule did not apply was the new rule intended to apply? Based on the conclusion on the Hague Rules, Males LJ considered it a reasonable inference that the new rule was intended to apply even in cases outside the sphere of the application of the Hague Rules. He was inclined to accept that this was the meaning the drafters of the new rule intended, but at least some ambiguity could be said to exist.
Turning to travaux préparatoires, Males LJ considered them to confirm that Article III, Rules 6 of the Hague Visby Rules was intended to apply to cargo misdelivery claims. He considered there were two points that left no room for doubt.
First, there was no settled understanding between the CMI members who proposed the Visby Protocol amendments on whether the time limit in the Hague Rules applied to cargo misdelivery claims at all. Second, the new rule was intended to apply to such claims, the position having been accurately summarised by Anthony Diamond QC, in The Hague-Visby Rules (fn.1):
“The recommendation of the bill of lading sub-committee was that art. III, r. 6 should be altered for this purpose and no other. (There is no evidence that they had in mind the position relating to deviations). They recommended a special two-year limit in the form of a proviso to art. III, r. 6 to read ‘provided that in the event of delivery of the goods to a person not entitled to them the above period of one year shall be extended to two years from the date of the Bill of Lading.’ However, the sub-committee were troubled as to ‘whether and to what extent wrong delivery may be covered by the Convention’ and they made a resolution to the effect that they expressed no view on whether delivery to the wrong person was ‘covered by the expression “loss or damage” in the Convention,’ (p. 78 of Report of 1963 Conference). The draft was altered partly because of objections to a separate two-year time limit and partly to meet the point that ‘loss or damage’ might not cover the wrong delivery of the goods. After being redrafted (the recommendation then read, as in the Protocol, ‘shall be discharged from all liability whatsoever in respect of the goods’), it was put before a plenary session of the CMI on June 14, 1963, with the explanation (p. 500) that: ‘The object of the aforesaid amendment is to give the text a bearing as wide as possible, so as to embody within the scope of application of the one year period, even the claims grounded on the delivery of the goods to a person not entitled to them, i.e. even in the case of what we call a wrong delivery.’ So, also, when the formal approval of the session was sought. The amendment was said (p. 508) to concern ‘the time limit in respect of claims for wrong delivery’ or ‘prescription en matierè de reclamations relatives a des délivrances à personnes erronées.’ There is no discussion of the matter in the Reports of the 1967 and 1968 Conferences.”
Males LJ also noted that the same statement (that the object of the amendment was “to give the text a bearing as wide as possible, so as to embody within the scope of application of the one year period, even the claims grounded on the delivery of the goods to a person not entitled to them, i.e. even in the case of what we call a wrong delivery”) was cited by Lord Justice Bingham in The Captain Gregos (fn.2).
The above, in Males LJ’s judgment, was the necessary bull’s-eye. That was reinforced by the reality that the Visby Protocol amendments drafters would have understood consignees rarely took delivery of the goods at the ship’s rail but would normally collect them after some period of storage on land. As such, considered Males LJ, in choosing a time limit deliberately expressed “in the broadest possible terms”, the drafters plainly intended that the limit should apply to misdelivery even occurring after discharge. It was, thought Males LJ, unlikely in the extreme 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.
As to the final issue, whether clause 2(c) of the standard Congenbill form (fn.3) disapplies the Hague-Visby Rules time bar so far as events occurring after discharge are concerned, Males LJ considered that if the carrier remained liable for misdelivery after discharge despite clause 2(c), which had to be assumed to be the case as the point would otherwise be irrelevant, there was no reason why the one-year time limit for such a claim should not apply.
Comment
This judgment affirms the first English law decision directly on point about whether or not the Hague-Visby Rules one year time bar applies to claims for the misdelivery of cargo occurring after it has been discharged from the vessel.
The conclusion drawn is, in the writer’s view, correct. That the Hague Rules as amended by the Visby Protocol do not explicitly spell out the answer in black and white suggests, to the writer, that the intention of the extent to which the Hague-Visby Rules would apply to post-discharge cargo misdelivery was considered to be obvious in the context of the debate and decision of the CMI members.
The judgment in this case has no doubt brought a greater degree of comfort in relying on this view, but the writer envisages that this question of law may possibly go to the UK Supreme Court in the future for a definitive decision.
Footnote 1:
[1978] LMCLQ 225, p256, fn88
Footnote 2:
[1990] 3 All ER 967, in which it was held that the rule applied to the misdelivery of cargo occurring during the voyage
Footnote 3:
“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.”
