The Giant Ace [2024] UKSC 38

The Giant Ace [2024] UKSC 38: Time bar for misdelivery claims under the Hague and Hague-Visby Rules

The Supreme Court with its recent judgment in The Giant Ace [2024] UKSC 38 has clarified the time-bar issue on misdelivery claims under the Hague and Hague-Visby Rules.

Background

The case relates to a carriage of non-coking coal cargo from Indonesia to India under bills of lading issued in March 2018. It revolves around a misdelivery claim brought by FIMBank p.l.c. (the “Bank”) as the holder of bills of lading against the contractual carrier KHC Shipping Co. Ltd. (the “Carrier”). The bills of lading were issued on the Congenbill 1994 form and were subject to the Hague-Visby Rules.

The cargo was discharged without production of the bills of lading against letters of indemnity issued by the charterer to the Carrier. The Bank had financed the purchase of the cargo and, as it was left unpaid, demanded delivery of the cargo under the bills of lading. By the time of the Bank’s demand, the cargo had already been discharged and was with the local receivers. Therefore, the Bank was left with the choice of pursuing the Carrier for misdelivery under the bills of lading.

The Bank served a notice of Arbitration on the Carrier over 2 years after the discharge and the issue of whether this claim was time barred was dealt with as a preliminary issue in Arbitration.

The Bank’s main argument was that the Hague-Visby Rules time bar – i.e. 1 year from the delivery of the goods – does not apply to misdelivery claims after discharge and, therefore, its claim was not time-barred.

The High Court decision

The first instance Court, agreeing with the Tribunal, held that the 1 year time bar under the Hague-Visby Rules continued to apply after discharge until delivery.

The High Court’s ratio was based on the carrier’s need for certainty as regards to their business affairs.

Permission to appeal before the Court of Appeal was granted.

The Court of Appeal decision

The Court of Appeal dismissed the appeal and held that in relation to the Hague Rules the 1 year time-bar does not apply to misdelivery after discharge, on the basis of the narrower (compared to the Hague-Visby Rules) wording of the time bar provision which would apply only during the Hague Rules period of responsibility (i.e. until discharge).

However, in so far as the Hague-Visby Rules are concerned, the Court of Appeal held that the 1 year time-bar does apply to misdelivery after discharge, as this is consistent with the preparatory works of the Visby protocol.

The Court of Appeal further held that clause 2 (c) of the Congenbill form (which effectively provides that the carrier shall not be responsible for loss or damage to cargo arising before loading and after discharge) was not helpful to the Bank’s case: It either completely excluded the Bank’s claim or meant that the Carrier remained liable for misdelivery after discharge, and the claim was time barred.

The Court of Appeal further noted that, although it was not necessary to decide the point, if the 1 year time bar did not apply to misdelivery after discharge then there was an implied term of the bills of lading to that effect.

The Supreme Court decision

The Court of Appeal’s decision was not the end of the matter, as the Supreme Court granted permission to appeal.

The Supreme Court handed down its judgment earlier this month, holding that the 1 year time bar for misdelivery after discharge applies both under the Hague Rules and the Hague-Visby Rules.

The Supreme Court’s reasoning revolved around the principles of the Hague Rules and in particular: the ordinary meaning of the words used (1), the context (2), the object and purpose (3), the preparatory works of the rules (4), English case law (5), international case law (6) and guidance from textbooks (7). The need for finality in contractual relationships was also stressed as the judgment highlights “the purpose of the time bar of ensuring finality and enabling accounts and books to be closed”.

Whilst under the Hague Rules there is indeed a ‘period responsibility’ during which the carrier has certain obligations and responsibilities, the Supreme Court rejected the argument that all of the rules were to be confined to that period.

As Lord Hamblen (with whom the rest of the Supreme Court Judges agreed) put it:

“There is no Hague Rules “nest” which requires all the rules to apply only during the period of responsibility.”

Given the position under the Hague Rules as set out above, Lord Hamblen’s judgment went on to confirm that the position under the Hague-Visby Rules should be the same. This was further supported by the wider wording adopted by the Hague-Visby Rules as far as the time bar provision is concerned.

The Supreme Court also dismissed the clause 2 (c) Congenbill argument by stressing that this clause is intended to protect the carrier and therefore would be against its purpose to preclude the carrier from relying on the time bar under the Hague and Hague-Visby Rules. It was further noted that clause 2(c) does not refer to the Hague and/or Hague-Visby Rules at all.

Conclusions

It is now clear that under the Hague and Hague-Visby Rules, the 1 year time-bar for claims brought against the carrier in respect of the goods applies also to misdelivery claims, even if misdelivery takes place after discharge.

Shipowners and contractual carriers will welcome this authority which provides clarity to such a crucial issue as a contractual time bar.

This decision serves also as a significant reminder for claimants to take appropriate steps to effectively record any upcoming time bars and/or liaise with their opponents seeking a time extension promptly.

Last but definitely not least, this case is an example of the risks associated with the often followed practice of discharging the cargo without production of the bills of lading against a letter of indemnity. As this case shows, the risk of a misdelivery claim is evident and one to be considered when deciding whether to facilitate such a request.

Additional Links

Find the judgment here: Fimbank Plc v KCH Shipping Co Ltd - Find Case Law - The National Archives