Paul Bugden, Bugden + Co., London
Ref: Fimbank Plc v KCH Shipping Co Ltd [2024] UKSC 38
The international carriage of goods by sea is almost invariably governed either by the Hague Rules, a 1924 international convention for the unification of rules of law relating to bills of lading, or the Hague Visby Rules, the Hague Rules as amended by the 1968 Brussels Protocol. The Hague or Hague Visby Rules have been ratified by more than 95 states across the world. Where not compulsorily applicable, they are widely contractually incorporated into bills of lading, charterparties and other contracts of affreightment, often through a clause paramount.
Both the Hague Rules and the Hague Visby Rules provide in article III, rule 6 that the carrier will be discharged from “all liability” unless suit is brought within one year of the delivery of the goods or the date when they should have been delivered. The central issue on this appeal was whether this one year time limit applies to claims which arise after discharge of the goods from the vessel and specifically to misdelivery claims where the carrier delivers the goods without production of the bill of lading to a person not entitled to receive them.
Although the contract of carriage in the present case was governed by the later Hague Visby Rules, it was common ground that the principal issue to be addressed on the appeal was whether the one year time limit in article III, rule 6 of the Hague Rules applied to the claims. If it did, then article III, rule 6 in the later Hague Visby Rules, which is more widely expressed, necessarily does so but if not then the issue was whether the amendments made to article III, rule 6 by the Protocol extend the application of the one year time limit to such claims.
The case came before the Supreme Court through arbitration proceedings against the Carrier on 24 April 2020, claiming damages for misdelivery of the Cargo. This was more than 12 months after the Cargo was delivered or should have been delivered within the meaning of article III, rule 6 of the Hague Visby Rules. The arbitral tribunal held that article III, rule 6 of both the Hague Rules and the Hague Visby Rules operated as time bar to the claim. An appeal against the award heard on 28 July 2022 before Sir William Blair sitting as a judge of the King’s Bench Division was dismissed and a further appeal to the Court of Appeal was also dismissed; though in relation to the Hague Rules the Court of Appeal held that article III, rule 6 did not apply to misdelivery after discharge reasoning that as article III, rule 6 is a part of the Rules to which the contract is made subject by article II, logically its application could not extend beyond the scope of the Rules themselves as defined by articles I and II. In relation to the Hague Visby Rules, however, the Court of Appeal held that article III, rule 6 did apply to misdelivery after discharge.
On appeal the Supreme Court held (reversing the Court of Appeal in this respect) that the article III, rule 6 time bar in the Hague Rules did apply to breaches of duty by the carrier which occur after discharge but before or at the time of delivery, including misdelivery and indeed equally to breaches of duty which occur before loading provided only that in all such cases it is shown that the claim has a sufficient nexus with identifiable goods carried or to be carried.
This conclusion was in the view of the Supreme Court supported, in particular, by the wide wording of article III, rule 6 and its application to breaches of obligation arising otherwise than under the Rules; the immediate context of article III, rule 6 which concerns matters occurring after discharge and focuses on the time and importance of delivery; the wider context of the Hague Rules containing rules which apply outside the period of responsibility; the purpose of the time bar of ensuring finality and enabling accounts and books to be closed; the English authorities on the width of the wording, the purpose of the time bar and on its application outside the period of responsibility; and perhaps above all by the fact that if it is intended to apply to misdelivery, as the wording and the English authorities make clear, one would reasonably expect it to apply to the paradigm case of misdelivery – that is misdelivery after discharge.
The Supreme Court thought there was nothing in the travaux, the English authorities, the international case law or the textbooks which called for, still less compelled, a contrary conclusion. Notable the Court observed that though there is a defined period of responsibility under the Rules during which there are minimum liabilities and responsibilities and minimum rights and immunities for the carrier, that does not mean that all the rules concern and operate only during that period and nothing which requires all the rules to apply only during the period of responsibility.
If the Hague Rules time bar applies to misdelivery occurring after discharge then the Hague Visby Rules time bar, one would assume, must also necessarily do so, given the much wider wording in a number of material respects of the later rules and that is what the Supreme Court held; observing that the Hague Visby Rules time bar applies to misdelivery after discharge notwithstanding that the period of responsibility under the Hague Visby Rules is defined in the same terms as under the Hague Rules. This supported the conclusion reached by the Court in relation to the Hague Rules that the period of responsibility under the Rules does not preclude the time bar from operating outside that period.
A subsidiary issue was whether clause 2(c) of the widely used 1994 Congenbill form of Bill of Lading (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 [or] while the cargo is in the charge of another Carrier, nor in respect of deck cargo or live animals.) had the effect of disapplying the provisions of the Hague Visby Rules (including the time bar in article III, rule 6) to events occurring after discharge was completed. The Court rejected this contention for a number of reasons.
First, clause 2(c) is a clause which is clearly intended to protect the carrier and relieve it from liability for loss or damage. It would be counter-intuitive, if not perverse, for it to have the effect of preventing the carrier from relying on an otherwise applicable time bar so as to increase rather than reduce the carrier’s liability.
Secondly, the clause does not refer to the Hague/Hague Visby Rules, still less to article III, rule 6 or the time bar.
Thirdly, the clause is consistent with the Hague/Hague Visby Rules period of responsibility and article VII, which allows for the carrier’s responsibility and liability for loss or damage to be reduced or exempted prior to loading and after discharge. As already held, that does not mean that other rules may not operate outside that period including, in particular, article III, rule 6.
Fourthly, the premise upon which this issue falls to be considered is that the clause did not exclude the carrier from liability for misdelivery. If so, there is no reason why the time bar should not apply to such a claim. If the language is not clear enough to exclude liability for misdelivery claims, it may be thought equally not clear enough to exclude reliance on the time bar in relation to such claims.