Fimbank Plc v KCH Shipping Company Ltd “Giant Ace”
| Jurisdiction | England & Wales |
| Judge | Lord Justice Males,Lord Justice Popplewell,Lord Justice Nugee |
| Judgment Date | 24 May 2023 |
| Neutral Citation | [2023] EWCA Civ 569 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: CA-2022-002168 |
[2023] EWCA Civ 569
Lord Justice Males
Lord Justice Popplewell
and
Lord Justice Nugee
Case No: CA-2022-002168
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
KING'S BENCH DIVISION
COMMERCIAL COURT
Sir William Blair
[2022] EWHC 1765 (Comm)
Royal Courts of Justice
Strand, London, WC2A 2LL
Christopher Smith KC & Helen Morton (instructed by Campbell Johnston Clark Ltd) for the Appellant
Simon Rainey KC & Matthew Chan (instructed by Reed Smith LLP) for the Respondent
Hearing dates: 25 & 26 April 2023
Approved Judgment
This judgment was handed down remotely at 10.30am on Wednesday 24 th May 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
The issue arising on this appeal is whether the one year time limit in the Hague Visby Rules applies to claims for misdelivery of cargo after discharge from the vessel. The issue arises on an appeal from arbitrators under section 69 of the Arbitration Act 1996. In an award which decided a number of preliminary issues, the arbitrators (Julia Dias QC, Sir Bernard Eder and Timothy Young QC) held that the time limit did apply. The judge (Sir William Blair) agreed and dismissed the bills of lading holder's appeal, but gave permission for a further appeal to this court.
The facts
The claimant (FIM Bank), the appellant in this court, was the holder of 13 bills of lading dated either 4 th or 14 th March 2018 covering a cargo of approximately 85,510 metric tons of steam (non-coking) coal which was shipped in bulk on board the vessel “GIANT ACE” in Indonesia and discharged in India between 1 st and 18 th April 2018. The respondent (KCH Shipping Co Ltd) was the demise charterer of the vessel and the contractual carrier under the bills of lading (“the carrier”).
The bills of lading were on the Congenbill (1994) form and incorporated the terms of a voyage charterparty dated 20 th February 2018 between Classic Maritime Inc Ltd as owner and Trafigura Maritime Logistics Pte Ltd as charterer. The charterparty was governed by English law and provided, in clause 13.10, that:
“This Charterparty shall have effect subject to the Hague-Visby Rules, which shall apply to any bill of lading issued under this Charterparty. …”
Although there was an issue in the arbitration whether the Hague or Hague Visby Rules applied (clause 2(a) of the standard Congenbill provides for the Hague Rules to apply in some circumstances), the arbitrators held that the effect of clause 13.10 of the charterparty was to incorporate the Hague Visby Rules into the bills of lading. There is no appeal from that decision.
The cargo was discharged from the vessel between 1 st and 18 th April 2018 at Jaigarh, a port on the west coast of India.
The cargo had been sold by Trafigura to Farlin Energy & Commodities FZE, who in turn had on-sold it to various sub-buyers. Farlin's purchase of the cargo was financed by FIMBank (“the bank”), who took security by (among other things) a pledge of the bills of lading and who became the bill of lading holders with rights of suit pursuant to the Carriage of Goods by Sea Act 1992. However, all attempts by the bank to collect payment for the cargo have been unsuccessful and it remains unpaid. It claims damages from the carrier for misdelivery of the cargo to persons who are not entitled to receive it.
The award says nothing about how or in what circumstances the cargo came to be delivered without production of the bills of lading but, by agreement, the parties provided us with the bank's claim submissions in the arbitration which set out its case as to what occurred. With the qualification that these are allegations which have yet to be proved, this was helpful to put some flesh on the bare bones of the award.
Thus it is the bank's case that the vessel arrived at Jaigarh outer anchorage on 29 th March 2018 and commenced discharging operations on 1 st April 2018. The cargo was discharged over side onto the jetty, from where it was transferred by conveyor belts into a customs bonded stockpile owned and operated by JSW Jaigarh Port Ltd (“JSW”). This is the only stockpile at the port. There, it was unloaded into an assigned plot space, where it was kept apart from other cargoes, pending customs clearance and the submission of a delivery order to JSW. While it was awaiting customs clearance, it was under the control of JSW, on behalf of the carrier.
The bank's case is that in order to take delivery from the JSW stockpile, a receiver would need to obtain two documents, a delivery order issued by the ship's agent on behalf of the carrier which would authorise JSW to deliver the coal to the receiver named in the delivery order, and a bill of entry issued by the customs authorities confirming that all duties and taxes had been paid. On presenting these documents to JSW, the receiver would be permitted to bring its trucks into the stockpile and remove the cargo. It is at this point that delivery of the cargo takes place. Thus we are not concerned in this case with a through bill of lading whereby the cargo was to be delivered inland after further transportation following discharge from the vessel.
The bank says that in the present case, there were three delivery orders issued by the ship's agent, dated 3 rd and 13 th April 2018, and that the customs duties were paid and bills of entry obtained, on various dates between 16 th April and 29 th May 2018. Accordingly the earliest date for delivery of any of the cargo was 16 th April 2018, while some of the cargo must have remained in the stockpile for at least six weeks after completion of discharge. On any view, therefore, whatever elasticity may be inherent in the concept of “discharge”, misdelivery in this case occurred after discharge had been completed.
The award gives no detail of the letters of indemnity provided to the carrier in order to persuade it to authorise the issue of delivery orders without production of the bills of lading, but the use of such letters of indemnity is common practice.
The issues
It is well established that delivery by the carrier without production of a bill of lading is a breach of the contract of carriage: Glyn Mills Currie & Co v East and West India Dock Co (1882) 7 App Cas 591; Sze Hai Tong Bank Ltd v Rambler Cycle Co Ltd [1959] AC 576; and, for a recent example, see Unicredit Bank AG v Euronav NV [2023] EWCA Civ 471 at [45]. Liability is strict, with no need for the bill of lading holder to prove a failure of due diligence or reasonable care on the part of the carrier: Motis Exports Ltd v Dampskibsselskabet AF 1912 Aktieselskab [2000] 1 Lloyd's Rep 211. Such liability can only be excluded by clear words: Motis Exports at [5] of the judgment of Lord Justice Mance.
The carrier contends that its liability, if any, was extinguished pursuant to Article III, rule 6 of the Hague Visby Rules because no suit against it was commenced within one year of the date when the goods should have been delivered. It was determined by the arbitrators as one of the preliminary issues that the bank only gave valid notice of arbitration on 24 th April 2020 which was more than “one year after … the date when the goods should have been delivered”, and the arbitrators also held that an in rem claim brought by the bank in Singapore did not qualify as the bringing of suit for the purpose of Article III, rule 6. There is no appeal from those rulings.
Accordingly it is necessary to determine whether Article III, rule 6 of the Hague Visby Rules applies to the bank's claim. If it does, the claim is extinguished: The Aries [1977] 1 WLR 185. If it does not, the ordinary six year period specified by the Limitation Act 1980 applies and the bank's claim is in time. The arbitrators held, and the judge agreed, that Article III, rule 6 applied, either on its own terms or pursuant to an implied term, and that its application was not excluded by clause 2(c) of the Congenbill form which provides as follows:
“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 of [sc. or] while the cargo is in the charge of another Carrier, nor in respect of deck cargo or live animals.”
In these circumstances there are three issues for decision:
(1) Does Article III, rule 6 of the Hague Visby Rules apply to a claim for misdelivery occurring after discharge of the cargo has been completed?
(2) If not, was there an implied term in the bills of lading to the effect that the Hague Visby Rules including Article III, rule 6 would apply to govern the parties' relationship after discharge of the cargo (referred to in argument as “the Carver implied term”)?
(3) If the answer to either of these questions is “yes”, does clause 2(c) of the Congenbill form have the effect of disapplying the time bar in Article III, rule 6?
Does Article III, rule 6 of the Hague Visby Rules apply to a claim for misdelivery occurring after discharge of the cargo has been completed?
Whether Article III, rule 6 of the Hague Visby Rules applies to a claim for misdelivery occurring after discharge has been much debated, but has not been decided in any English case, although it has been held that the rule applies to misdelivery occurring during the voyage ( The Captain Gregos [1990] 3 All ER 967).
The parties' submissions in outline
For the bank Mr Christopher Smith KC submitted that the Hague Visby Rules apply only to carriage by sea, which ends on discharge of the cargo from the vessel, and that they have no application thereafter. Accordingly the Rules, including Article III, rule 6, do not apply to...
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