Fimbank p.l.c. v KCH Shipping Company, Ltd
| Jurisdiction | England & Wales |
| Judge | Sir William Blair |
| Judgment Date | 28 September 2022 |
| Neutral Citation | [2022] EWHC 2400 (Comm) |
| Docket Number | CL-2021-000563 |
| Court | Queen's Bench Division (Commercial Court) |
[2022] EWHC 2400 (Comm)
Sir William Blair
(Sitting as a High Court Judge)
CL-2021-000563
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (KBD)
IN THE MATTER OF THE ARBITRATION ACT 1996
AND IN ARBITRATION BETWEEN:
Royal Courts of Justice,
Rolls Building, 7 Rolls Buildings
Fetter Lane, London, EC4A 1NL
Steven Berry QC and Helen Morton (instructed by Campbell Johnston Clark Ltd) for the Claimant
Simon Rainey QC and Matthew Chan (instructed by Reed Smith LLP) for the Defendant
Hearing date: 28 July 2022
This appeal relates to claims made by the Claimant (“FIMBank”), which is a trade finance bank headquartered in Malta regulated by the Maltese Financial Services Authority, against the Defendant (“KCH”), which is a Korean-incorporated company. The appeal is brought by permission of Butcher J given on 22 December 2021 pursuant to s.69(2)(b) of the Arbitration Act 1996 against the Partial Final Award (the “Award”) of an Arbitral Tribunal dated 1 September 2021. FIMBank brings claims as holder of various bills of lading for misdelivery of cargo against KCH as carrier. The charterparty chain is described by Cockerill J in The Giant Ace [2020] 2 Lloyd's Rep 511 and need not be explained further for the purpose of the matters to be decided in this judgment. In short, the question of law that arises in this case is whether the limitation of liability in Article III, r.6 of the Hague Visby Rules applies to claims for misdelivery of cargo after discharge from the vessel. This question has not been decided previously by the courts in this jurisdiction, having been left open in The Alhani [2018] 2 Lloyd's Rep 563 at [86], and raises as Butcher J pointed out a matter of general public importance.
The Award decided certain preliminary issues, so that the background facts have yet to be ruled upon. In brief, 13 sets of bills of lading dated 4 and 14 March 2018 on the Congenbill form were issued ‘to order’ for and on behalf of the Master of the M/V GIANT ACE for about 85,510MT in aggregate of coal in bulk. KCH had bareboat chartered in the vessel from Mirae Wise SA (a Panama company and the registered owner of the vessel) and the claim is brought against KCH as carrier. By way of incorporation from the charterparty, the bills of lading (as the Arbitral Tribunal held) were subject to the Hague-Visby Rules (the “Rules” which term also includes the Hague Rules depending on context), including the time-bar in Article III rule 6 of one year after delivery which applies to claims against the carrier. The coal was loaded in Indonesia and arrived at the Indian ports of Jaigarh and Dighi around two weeks later. It was discharged between 1 and 18 April 2018 against letters of indemnity which ran up the charterparty chain. It was then placed in discharge port stockpiles. What actually happened to it has not been explored in the facts before the court, and is in dispute.
FIMBank is involved in the transaction as financer of one of the purchasers, pursuant to which in the usual way it is said to have taken a pledge over the bills of lading and the cargo – essentially it stands in the same position as the cargo owners. It claims misdelivery of the cargo after discharge from the stockpiles pursuant to delivery orders. In circumstances which it says led it to misunderstand the identity of the carrier, FIMBank served its Notice of Arbitration on KCH on 24 April 2020, which was more than one year after delivery of the goods or the date when they should have been delivered – that being the time bar period. If the time bar does not apply to misdelivery after discharge, then the arbitration revives to determine, amongst others, the question whether delivery did indeed take place after the end of the discharge operation which is in dispute. If it did, the claim is barred, and the bank must bear the loss.
Upon these facts, Butcher J gave permission to appeal in respect of two of the five questions of law raised by FIMBank:
i) Whether Art.III, r.6 of the Hague-Visby Rules applies to claims for misdelivery of cargo after discharge (the “first question”);
ii) Whether clause 2(c) of the Congenbill form disapplies the Hague-Visby Rules to the period after discharge (the “second question”).
Section 69 Arbitration Act 1996 provides a limited avenue for appeal to the court on a question of law arising out of an award (it is not a mandatory provision of the Act and is often disapplied in the rules of arbitral institutions, but it did apply in the present case). The relevant test is in s.69(3)(c)(ii), which applies where the question is one of general public importance and the decision of the tribunal is at least open to serious doubt. In giving permission, Butcher J said of the first question that there is no English authority directly on the point, and that, as the Tribunal itself recognised, its decision in the affirmative is contrary to the view expressed in two leading textbooks and the conclusions reached in certain other jurisdictions. As regards the second question, the judge referred to the decision in The MSC Amsterdam [2007] 2 Lloyd's Rep 622, stating in respect of both questions that the Tribunal's decision “can be said to be open to serious doubt” adding “though of course it may be correct”. I draw attention to that to make it clear that in giving permission to appeal the judge was not expressing a view as to the correctness or otherwise of the Tribunal's decision. It is clear from reading the Award that the Tribunal was concerned to explain and analyse the issues as a matter of law – the factual issues were largely not critical in this respect, indeed were not resolved. In particular, the facts as to delivery have not been resolved, and do not need to be on the Tribunal's approach to the case. The case is in this respect makes it particularly suitable for the exercise of the limited powers given to the court to permit appeals on points of law where it is important that the point in question is clarified.
It is apparent from the parties' submissions that these points of law are not only of considerable difficulty, but are potentially of considerable commercial significance. In short, FIMBank contends that the one-year time bar which applies to claims against the carrier does not apply at all to misdelivery after discharge, i) on the wording of the Hague-Visby Rules themselves, and ii) because clause 2(c) of the bills of lading prevents their implication or application. The Arbitral Tribunal decided to the contrary, on grounds both of the wording of the Rules, and the implication of a term, and KCH's case is that it decided correctly for either or both reasons, and that the appeal should be dismissed and the Award confirmed.
Having made these points, it is important to state that, as the Arbitral Tribunal recognised, whatever the wider ramifications, the appeal is concerned with the particular contract at issue in the present case. As it was put, the case is concerned with the contractual application of the Hague-Visby Rules “to any Bill of Lading issued under this charterparty” and the true construction of that term (Award § 110).
The Arbitral Tribunal's Award
The Award was issued in the underlying arbitration on 1 September 2021 following a hearing on various preliminary issues. The Tribunal, which comprised Julia Dias QC, Sir Bernard Eder and Timothy Young QC, all (as KCH points out) leading maritime arbitrators, rejected FIMBank's position on both the grounds which arise in this appeal. After an extensive analysis of the law, it found that: (i) the Hague-Visby Rules time bar can in principle apply to claims relating to misdelivery occurring after discharge; and (ii) Clause 2(c) of the Congenbill form did not disapply the Hague-Visby Rules time bar to the period after discharge. Accordingly, since there had not been the bringing of a “suit” within the meaning of Art.III, r.6 within the time period allowed, FIMBank's claim was time-barred, irrespective of whether delivery did occur after discharge as a matter of fact (KCH contending that misdelivery in this case was simultaneous with discharge).
The Arbitral Tribunal's reasoning was in summary that the contract of carriage covered by a bill of lading applies before loading, before the goods pass over the ship's rail, and persists after the goods pass over the ship's rail until right and true delivery. Delivery is contemplated by the Rules, even if not identified by name otherwise than in Art. III, r 6. Thus Art. II stipulates the carrier's “custody” obligation, which is replicated in Art. III, r. 2 in the form of the carrier's obligation to “keep” and “care for” the goods. Such an obligation of ‘custody’ is naturally capable in the normal course of persisting after discharge, and is thus an obligation squarely within the ambit of the Rules. Further, the parties contractually applied the Rules to “any Bill of Lading issued under this charterparty”. They therefore intended to apply the Rules to their rights and liabilities under the bills of lading and the contract contained in or evidenced by it, and not simply to the specific limited carriage by sea aspects of that contract.
Accordingly, the Rules were contractually incorporated in such a way as not to disapply them to functions performed after discharge. They applied in particular to the obligation of giving right and true delivery. On that basis, the Tribunal held that the conclusion that the Rules continued to apply after discharge is justified either (i) on a true construction of the bills of lading, or (ii) by implying a term to that effect as envisaged in a number of authoritative sources.
Art. III r.6 of the Hague-Visby Rules
The...
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