In brief - A decision by the English Court of Appeal recently decided that the time limitation provision in Article 3 rule 6 of the Hague Visby Rules still applied when there had been a wrongful delivery of the cargo by the carrier long after the discharge of the cargo had taken place. Surprisingly, no English Court had been asked previously to express an opinion on this issue.
This decision, in Fimbank PLC and KCH Shipping Co Ltd (Giant Ace) on 24 May 2023 has confirmed, as previously decided by way of preliminary issues, by the Arbitrators and Sir William Blair, the Judge at first instance, that the claim was time barred, under the one year time limit of the Hague-Visby Rules.
The facts
The proceedings were brought by the bills of lading holder against the demise charterer and contractual carrier under the bills of lading. The bills of lading, on the Congenbill (1994) form, incorporated the voyage charter party which contained Clause 13.10 which provided that:
"This Charterparty shall have effect subject to the Hague Visby Rules, which shall apply to any bill of lading issued under this Charterparty…"
Clause 2 (c) of the bills of lading excluded the carrier's liability for loss or damage prior to loading and after discharge of the cargo from the vessel.
The claimant bank, which was the appellant in the proceedings was the holder of 13 Bills of Lading issued in March 2018 in relation to a cargo of approximately 85,510 metric tonnes of steam (non-coking) coal shipped on the "Giant Ace" in Indonesia and discharged in India between 1 and 18 April 2018.
The cargo had been sold by Trafigura Maritime Logistics Pte Limited, the Voyage Charterer, to Farlin Energy & Commodities who had on sold to various sub-buyers. Farlin's purchase had been financed by the Fimbank who took security by way of a pledge of the bills of lading and had become the holders of those bills with rights pursuant to the Carriage of Goods by Sea Act 1992.
The cargo was delivered without production of the bills of lading and after discharge, with the claimant arguing that the cargo was misdelivered by the carrier. The allegation concerning wrongful delivery was yet to be proved when the preliminary issue as to the applicability of the time bar in circumstances of wrongful delivery having taken place after the discharge of the cargo was determined.
The first and only valid Notice of Arbitration had been given on 24 April 2020 which was more than a year after the dates when the goods were being delivered.
The principal issue
The issue, therefore, in the proceedings which, had never previously come before the English courts was whether Article 3 rule 6 of the Hague Visby Rules applied to a claim for misdelivery occurring after discharge of the cargo had been completed.
Under the Hague Rules the one year time bar was expressed to apply in the following circumstances:
"In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered."
Under the amendments made by the Hague Visby Rules, which were applicable in this case, the time bar was expressed as follows:
"Subject to paragraph 6 bis, 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…"
The Court of Appeal cited the decision of Mr David Foxton QC in Deep Sea Maritime Ltd v Monjasa A/S "The Alhani" [2018] EWHC 1495 (Comm) in which it was held that the words "in any event" and "all liability" of Article 3 rule 6 of the Hague Rules were wide enough to encompass liability for misdelivery and that the object of finality which the rule was intended to achieve would be seriously undermined if it did not apply to misdelivery claims. That however, was a case in which discharge and delivery took place simultaneously so the issue in this case was not determined. The Court of Appeal noted that Mr Foxton QC was careful to leave that issue open.
The Court of Appeal also referred to the history of the Hague Visby amendments and in particular to the work done by a sub-committee of the Comite Maritime International (CMI) which had suggested amendments to the Hague Rules and that they be incorporated in a Protocol. In 1963, the CMI adopted the text of a draft Protocol at a Plenary session of the CMI Stockholm Conference and in 1968 the final text was agreed at the February 1968 Brussels Diplomatic Conference.
The Court found that the travaux préparatoires of the Hague Visby Rules showed that the new rules were intended to apply even to cases of wrongful delivery. It found the position in that regard to have been accurately summarised in an article by Mr Anthony Diamond QC in a paper "The Hague-Visby Rules (1978) LMCLQ 225, 256 fn 88", which was quoted by Mr David Foxton QC in "The Alhani". The article quoted the explanation given to the CMI delegates at the Plenary session at which the draft Protocol was debated which read as follows:
"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."
Anthony Diamond QC continued:
"So also when the formal approval of the session was sought. The amendment was said to concern 'the time limit in respect of claims for wrongful delivery' or 'prescription en matière de reclamations relatives a des deliverances a personnes erronees.'"
At paragraph 75 of Lord Justice Males's judgment he refers to the above recitation of Anthony Diamond QC in the following terms: "This is, in my judgment, the necessary bulls-eye".
Notwithstanding a concession by the claimant's counsel that the object of the amendment was to ensure that the time limit applied to misdelivery claims, he sought to argue that it only applied to claims for misdelivery occurring during the voyage or simultaneously with discharge and not where the misdelivery occurred after discharge. In rejecting that submission Males LJ pointed to the words of Lord Wilberforce in the New York Star (1981) AC 138, 147E where his Lordship had said that it was even then:
"the practise that consignees rarely take delivery of goods at the ship's rail but will normally collect them after some period of storage on or near the wharf."
Males LJ then suggested that would have been understood by the drafters of the Visby amendments and had they intended to limit the new Article 3 rule 6 to cases of misdelivery occurring during carriage by sea (including the discharge operation itself), they might have been expected to say so.
Australian cases
In the course of the judgment a number of Australian cases were referred to. They included:
Teys Bros (Beenleigh) P/L v ANL Cargo Operations P/L [1990] 2 Qd.R. 288 in which the Queensland Supreme Court had allowed a party to substitute another defendant after the expiration of a time bar where cargo had been damaged before loading but while in the carrier's custody. The Court held that the Article 3 rule 6 time bar did not apply to any liability arising outside the period covered by the operation of the rules.
In PS Chellaram & Co Ltd v COSCO (the"Zhi Jiang Kou" )[1991] 1 Lloyds Rep. the facts were largely in line with the "Giant Ace", in that there had been a wrongful delivery of the cargo, the carriage was subject to the Hague Rules and there was an express provision excluding liability for loss or damage to the cargo prior to its receipt, or after delivery of the cargo. In addition the bill of lading expressly provided that the period of responsibility of the carrier extended to the time of delivery of the goods, and also that the carrier was discharged of all liabilities under the bill of lading unless proceedings were commenced within nine months after delivery of the cargo. Gleeson CJ held that the express time limitation clause clearly applied. The President of the Court of Appeal, Justice Kirby, however rejected the submission that Article 3 rule 6 did not apply to events occurring after discharge and referred to the "very wide language" of the rule and the practical implications of so holding.
In Kamil Export (Aust) P/L v NPL (Australia) P/L [1996] 1 VR 538 the question was whether the Hague Rules time limitation applied to claims for loss and damage to goods after discharge but before delivery in circumstances in which they had been delivered without presentation of a bill of lading. Two shipments were involved: one to Guam which Marks J in the appeal judgment commented that:
"It is not disputed that by the release in this way, other than on production of the Bill of Lading, which would have constituted proof of payment, the respondent was guilty of conversion of the goods…"
The evidence in relation to the other shipment to Nauru did not allow that statement to apply to it. Accordingly, it was only in relation to the Guam shipment that the carrier was found liable.
The "receipt for shipment" provision in the bill of lading, which recited the activities that would be carried out in relation to the goods by the carrier and the conditions under which they would be performed concluded with the words "and there to be delivered…".
Marks J. commented:
"It is not disputed that these words evidenced agreement that the carrier would not only transport the goods from port to port but would also "deliver" them. The bill of lading also provided that "the carrier shall not in any circumstances whatsoever be liable for any loss of or delay or damage to the goods howsoever caused occurring… after they are discharged at the ocean vessel's rail at the port of discharge."
The PS Chellarem ("Zhi Jiang Kou") decision of the New South Wales Court of Appeal, was distinguished by the Victorian Court, in particular because it was not a case of deliberate misdelivery or theft by the carrier and therefore the exemption clauses could be read down in this case. Fullagar and Ormiston JJ agreed with the judgment of Marks J., who also relied on the fact that there was no express exemption clause imposing the time bar for post delivery circumstances and held that the weight of authority supported the view that the Hague Rules be confined in their application to the period between loading and discharge. So, it was only the bill of lading provisions that applied and they were held as a matter of construction not to apply to protect the carrier where the goods had in effect been converted by the carrier/its agents.
In relation to another NSW Court of Appeal decision, Nikolay Malakhov Shipping Co Ltd v SEAS Sapfor Ltd [1998] NSWLR 371, Males LJ noted that the decision was to the same effect as that of the Victorian decision in the Kamil Export case. That is correct in the sense that the carrier could not rely on the time bar defence but it did so because the wrong party had initially been sued as the carrier and the claimant had been permitted to add or substitute the correct carrier. The late joinder was held not to permit the carrier to assert that its entitlement was any different to the party that had been incorrectly sued, but within time. The facts of this case are therefore similar to that of Teys Bros, namely it was dealing with the addition or substitution of a party after the relevant Hague Rules time limitation had expired. The NSW Court of Appeal held that it was appropriate for such an order to have been made in this case too and thus the new party could avail itself of the fact that proceedings against the original defendant had been commenced within time. There was therefore no issue as to the effect of wrongful delivery on the Hague Rules time bar.
Males LJ's comment is also correct in the sense that the Court took the view that the carrier's liability ceased under the Hague Rules at the time of discharge, which it held included the carrier's activities which involved the arrangements it made for cartage and storage of the cargo in a bond store at the Port of discharge where they sustained damage. This was a case in which the carrier's bill of lading sought to exclude it from liability "after the goods leave the ship's deck in discharging port, howsoever such loss or damage arises" (which Sheller JA pointed out might fall foul of Article 3 rule 8), and also contained a provision by which the goods were said to be "at the sole risk of the merchant" after discharge and "the carrier shall not be liable for loss or damage arising or resulting from any cause whatsoever". The carrier was therefore successful in its defence. The Kamil Export decision of the Victorian Supreme Court Appeal Division does not seem to have been referred to.
Secondary issue
The English Court of Appeal also rejected a submission that clause 2(c), which seeks to provide carriers with an exclusion of liability from responsibility for the loss or damage of cargo arising prior to loading and after discharge does not have the effect of disapplying the time bar in Article 3 Rule 6.
Rotterdam Rules
It is somewhat ironic that one of the criticisms of the Rotterdam Rules at the time when it was agreed in 2008 was that it would add to litigation. Here we are 55 years after the Visby Rules were agreed and there is litigation in the heart of maritime litigation in London having to determine whether the time limitation provisions (only slightly amended in 1968 from the 1924 Hague Rules regime) apply to claims arising from misdelivery after discharge.
As has been seen in the Hague Rules the words "carriage of goods" are defined as covering "the period from the time when the goods are loaded on to the time they are discharged from the ship", that is tackle to tackle. There is no equivalent definition in the Rotterdam Rules. However it expressly specifies in Article 12 that the "Period of responsibility of the carrier" begins "when the carrier or a performing party receives the goods for carriage and ends when the goods are delivered."
Article 62 does not repeat the Hague Visby wording of "in any event" or " all liability whatsoever" and simply says "No judicial or arbitration proceedings in respect of claims or disputes arising from a breach of an obligation under this Convention may be instituted after the expiration of a period of two years." And goes on to confirm that the period commences on the day on which the carrier has delivered the goods or, if they are not delivered or partly delivered, from the last day on which they should have been delivered.
Problems such as those which this case in the English Court of Appeal, and the others to which it has referred are therefore less likely to occur under the Rotterdam Rules regime and the Court of Appeal in England has given a strong lead in showing that the Hague Visby Rules, at least, were drafted with the clear intention that the time bar was intended to apply even where misdelivery occurs.