John Habergham, Myton Law, Hull U.K.

The Court of Appeal has held that the one-year limitation period under Hague-Visby Rules applies to misdelivery after discharge

The claimant, FIMBank, had taken a pledge over the bills of lading and cargo as security. It stood in the same position as the cargo owners.

KCH was the contractual carrier who had issued a number of “order” bills of lading . The bills of lading incorporated the terms of a voyage charterparty which in turn included the Hague-Visby Rule of which the time bar in article III, rule 6 was the main focus of the Court of Appeal.

It reads:

“… 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 cargo, coal was discharged between 1 and 18 April 2018 against letters of indemnity. It was then placed in discharge port stockpiles.

The bank claimed misdelivery of the cargo after discharge from the stockpiles pursuant to delivery orders. It was unable to recover the cargo or to recover payment for its loss. It was accepted between the parties that delivery by the carrier without production of a bill of lading was a breach of contract with strict liability,

The bank served a notice of arbitration on the carrier on 24 April 2020, which was more than one year after delivery of the goods ie after the expiry of the one-year time bar. Guess what – the vessel claimed that it had for that reason been discharged from liability.

The bank argued that the time bar had no application to post-discharge losses – the Rules are there to regulate the carriage of goods by sea and not the delivery obligations and the period of their application ends on discharge from the vessel.

The Court disagreed, largely on the grounds of the change in text between the Hague Rules (where the Court found that, on balance, article III.6 did not apply to misdelivery after discharge) and the Hague Visby Rules.

The wide language of the latter – “from all liability whatsoever in respect of the goods” was the tipping point. It was noted that in the majority of instances, delivery took place after discharge and not coterminous with it. From this, the Court inferred that the change in the time bar wording must have been drafted to capture delivery after discharge.

There was another issue regarding the effect of a clause on the bill and whether it had the effect of disapplying Rules but the finding on the time bar was the core of the case and one which closed a gap in existing case law which has left open the application of the time bar to delivery after discharge.