FIMBank Plc v KCH Shipping Co. Ltd (The Giant Ace) [2024] UKSC 38

Summary

The Supreme Court today handed down judgment in FIMBank Plc. v KCH Shipping Co. Ltd, holding that the time bar in Article III rule 6 of the Hague and the Hague-Visby Rules will apply to claims in relation to misdelivery after discharge, as well as to any other breaches of duty by the carrier which occur after discharge but before delivery. The Court rejected the argument that the time bar only applies to liabilities incurred after loading and up to discharge, during the so-called “period of responsibility” under the Rules. 

As it was put by Lord Hamblen (at [107]) the Article III Rule 6 time bar applies “to breaches of duty by the carrier which occur after discharge but before or at the time of delivery, including misdelivery” and it “may equally apply to breaches of duty which occur before loading” where the claim has “a sufficient nexus with identifiable goods carried or to be carried”.

The Court’s decision finally resolves an important question which has divided leading academic commentators as well as judges in other common law jurisdictions and clarifies the concept of the so-called “period of responsibility” under the Rules, which had led the Court of Appeal to distinguish the position under the Hague and Hague-Visby Rules.

Background and procedural history

The appeal related to a claim 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 were subject to the Hague-Visby Rules, including the time bar in Article III Rule 6 of one year after delivery which applies to claims against carriers. FIMBank served a Notice of Arbitration on KCH after that time bar had expired. 

Its position was that its claim was nevertheless not caught by the time bar, contending that: (a) on the facts, delivery took place after discharge; and (b) 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 do not regulate a carrier’s obligation to deliver cargo (as opposed to the carriage of goods by sea), and only relate to a ‘period of responsibility’ which ends with the discharge of cargo. FIMBank further argued that the parties had, in any event, contractually disapplied the Rules in respect of the period after discharge, insofar as Clause 2(c) of the Congenbill form provided: “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 …”. 

In an Award on preliminary issues, the arbitral tribunal (Julia Dias KC; Timothy Young KC and Sir Bernard Eder) determined that FIMBank’s claim was time-barred irrespective of whether delivery post-dated discharge on the facts. This was because: (i) the Hague-Visby Rules time bar applies to claims relating to misdelivery occurring after discharge; and (ii) Clause 2(c) of the Congenbill form did not disapply the Rules in respect of the period after discharge. The Commercial Court (Sir William Blair) dismissed FIMBank’s appeal under section 69 of the Arbitration Act 1996, essentially for the same reasons as the arbitrators ([2022] EWHC 2400 (Comm)). Neither the Tribunal nor the Judge considered that there was any material difference between the two sets of Rules.

On appeal to the Court of Appeal ([2023] EWCA Civ 569) however, the Court of Appeal drew a distinction between the position of Article III Rule 6 under the Hague and the Hague-Visby Rules. Under the Hague Rules, it held that the operation of Article III Rule 6, like all other Rules, was indeed confined to liabilities arising within the “period of responsibility” (between loading and discharge) and that to hold otherwise would be to make Article III Rule 6 a “cuckoo in the Hague Rules nest”. 

But it held that, given the clear intention to apply the Hague-Visby Rules to misdelivery claims whenever arising, as shown by the relevant travaux préparatoires, Article III Rule 6 of those Rules did apply to misdelivery occurring after discharge and that FIMBank’s claim was time barred. It rejected the Article 2(c) Congenbill argument. 

The reasoning of the Supreme Court

The Supreme Court held that under both the Hague and Hague-Visby Rules Article III Rule 6 operated as a time bar in respect of all breaches of duty on the part of the carrier, including misdelivery of the goods, up to and including delivery of the goods by the carrier. There was no cut-off point at discharge.

The principal reasoning concentrated on the Hague Rules. The Court held that the language and purpose of Article III Rule 6 showed that it was concerned with the period up to delivery and with events occurring after discharge. Its purpose was finality, without factual niceties around when and how discharge was completed.

While it accepted that there was a “period of responsibility” during which the carrier is subjected to minimum obligations and responsibilities and maximum rights and immunities, the Court rejected the argument that therefore all of the Rules were to be read as concerned only with that “period”. There was no “nest”. 

The Court did not follow a line of contrary cases in Malaysia and Australia: in its view, they did not establish relevant international consensus, approached the matter in respects inconsistent with English law and did not address the core arguments.

Given the position under the Hague Rules, the position was therefore the same under the Hague-Visby Rules. However, the Court considered that the clear purpose of the Visby amendments supported a conclusion that the period of responsibility under the Hague Rules did not confine the wide operation of the Article III Rule 6 time bar.   

The Clause 2(c) Congenbill argument was again dismissed. 

Simon Rainey KC of Quadrant Chambers and Matthew Chan of Twenty Essex acted for the carriers, KCH, and were instructed by Kyri Evagora and Thor Maalouf of Reed Smith LLP.