14/11/2024

Supreme Court holds that Hague and Hague-Visby Rules time bar applies to misdelivery after discharge

On 13 November 2024, the Supreme Court handed down judgment in FIMBank Plc v KCH Shipping Co., Ltd [2024] UKSC 38, holding that the time bar in article III, rule 6 of the Hague and Hague-Visby Rules applies to claims in relation to misdelivery after discharge, as well as to other breaches of duty by the carrier occurring after discharge but before delivery. The court therefore rejected the notion that the application of the time bar was limited to a “period of responsibility” between the commencement of loading and the completion of discharge.

This decision finally resolves an important question which has divided leading academic commentators as well as judges in other common law jurisdictions, and clarifies the scope of the so-called “period of responsibility” under the Rules.

Matthew Chan acted for the successful respondent.

Background

The appeal concerns claims brought by FIMBank Plc (FIMBank), as the holder of bills of lading, for the alleged misdelivery of cargo by the contractual carrier, KCH Shipping Co Ltd (KCH). The bills were concluded on the Congenbill form and subject to the Hague-Visby Rules, including the time bar in article III rule 6 of one year after delivery.

FIMBank served a Notice of Arbitration on KCH after that time bar expired, but contended that its claims were not caught by the time bar, because (i) on the facts, delivery took place after discharge, and (ii) as a matter of law, the time bar did not apply to claims for misdelivery occurring after discharge. In its submission, this was so given that the Hague-Visby Rules only relate to a “period of responsibility” commencing with loading and ending with discharge. FIMBank further argued that the parties had, in any event, contractually disapplied the Rules in respect of the period after discharge, because clause 2(c) of the Congenbill form provided that: “The Carrier shall in no case be responsible for loss and damage to the cargo, howsoever arising prior to loading into and after discharge from the Vessel.”

FIMBank’s arguments were rejected by the arbitral tribunal, the Commercial Court, and the Court of Appeal, which each held that: (i) the Hague-Visby Rules time bar can apply to claims relating to misdelivery occurring after discharge; and (ii) clause 2(c) of the Congenbill form does not disapply the Rules in respect of the period after discharge.

However, although the tribunal and the Commercial Court considered that there was no material difference between the two sets of Rules, the Court of Appeal ([2023] EWCA Civ 569) distinguished the position under the Hague Rules and the Hague-Visby Rules. It held that article III rule 6 of the Hague Rules only applied to liabilities arising within the “period of responsibility”, but that the corresponding provision in the Hague-Visby Rules was not so confined, having regard to its wider wording and the travaux préparatoires.

The Supreme Court’s decision

The Supreme Court’s reasoning focused on the Hague Rules. As a starting point, it observed that the time bar is widely worded, and relates to what is to happen at and from the time of delivery. Further, its object is to ensure finality for parties who can close their books once the deadline has passed; this object is best met if all claims arising out of the contract, whether occurring after discharge or not, are covered by the time bar.

While the court accepted that there is a “period of responsibility” during which the carrier is subjected to minimum obligations and responsibilities and maximum rights and immunities, it rejected the argument that the Rules are only concerned with that period. This was particularly because other rules relate to the period before loading and after discharge, and article III rule 6 is itself concerned with the period up to and including delivery.

The court therefore held that under the Hague Rules, the time bar in article III rule 6 does apply to breaches of duty by the carrier occurring after discharge but before delivery, including misdelivery, and might equally apply to breaches of duty that occurred before loading. The same is necessarily true of the time bar in the Hague-Visby Rules, which was more widely worded.

The argument based on clause 2(c) of the Congenbill was, again, rejected. Amongst other reasons, the provision made no reference to the Rules or to the time bar. Further, it would be counterintuitive, if not perverse, for a clause aimed at protecting the carrier to have the effect of preventing it from relying on a time bar which would otherwise apply.

Matthew Chan acted for the successful respondent, KCH, led by Simon Rainey KC of Quadrant Chambers and instructed by Kyri Evagora and Thor Maalouf of Reed Smith LLP. Matthew undertook the oral advocacy in the Supreme Court on the clause 2(c) issue.