Error in delivery by the carrier after the discharge and prescription of Article III, Rule 6: the “Alhani gap” is filled


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FIMBank plc v KCH Shipping Co., Ltd [2022] EWHC 2400 (Comm)

The Commercial Court (Sir William Blair) today delivered judgment in FIMBank plc v KCH Shipping Co.,Ltd, an appeal under section 69 of the Arbitration Act 1996, finding that the limitation period under Article III, Rule 6, of the Hague-Visby Rules may apply to claims relating to incorrect delivery after discharge. The Court’s decision resolves an important issue which had not yet been decided by the English courts and which has divided leading academic commentators as well as judges in other common law jurisdictions.

Background

The appeal relates to an action brought by FIMBank plc (“FIMBank”), as holder of bills of lading, for the alleged misdelivery of cargo by the contracting carrier, KCH Shipping Co., Ltd (“KCH”). The invoices were concluded on the Congenbill form and were subject to the Hague-Visby rules, including the limitation period of Article III r 6 of one year after delivery which applies to claims against carriers.

FIMBank served a Notice of Arbitration on KCH after the expiry of this period. Its position was that its claim was nonetheless not time-barred, arguing that: (a) in fact, delivery took place after unloading; and (b) at law, the statute of limitations did not apply to claims for misdelivery occurring after discharge. According to China, this was so since the Hague-Visby Rules do not govern a carrier’s obligation to deliver cargo (as opposed to the carriage of goods by sea) and relate only to a “period of responsibility” which ends with the unloading of the cargo. FIMBank further argued that the parties had, in any event, contractually waived the Rules with respect to the post-release period, insofar as clause 2(c) of the Congenbill form provided: “The Carrier shall in no event be liable for loss and damage caused to the cargo, whatever the cause, before the loading and after the unloading of the Vessel…”.

In an award on preliminary issues, the arbitral tribunal determined that FIMBank’s request was statute-barred that delivery be after the factual discharge (which remained an issue in dispute). Indeed: (i) the limitation of the Hague-Visby Rules may apply to claims for misdelivery occurring after discharge; and (ii) Clause 2(c) of the Congenbill form does not preclude the application of the Rules with respect to the period following release.

The reasoning of the Court

The Court upheld the tribunal’s decision on both issues and therefore dismissed the appeal.

On the first question, he concluded that, according to his true interpretation, Article III r 6 of the Hague-Visby Rules applies to claims for wrongful delivery of goods after unloading. The Court noted that this finding avoided the need to draw fine distinctions as to when unloading ended and was consistent with the purpose of the rule which was to achieve finality and allow the shipowner to clear his books. He further observed that, although certain common law authorities and commentaries could be taken to support the interpretation of Article III r 6 for which FIMBank argued (including Carver on charter parties and Travel charters), there was no international judicial or academic consensus to that effect.

The Court held that, even if its conclusion above was erroneous, the tribunal’s decision was in any event justified by its finding that the bills of lading contained an implied term providing that the obligations and immunities provided for by the Hague Rules -Visby must continue after the actual discharge and until delivery, in accordance with the reasoning of the Court of Appeal in MSC Amsterdam [2007] EWCA Civil 794.

On the second question, the Court held that, on a correct interpretation, clause 2(c) did not exclude the application of the Hague-Visby rules to the period following the discharge. Although FIMBank relied in this respect on MSC Amsterdamin which the express terms of the bill of lading in question were deemed to have violated the rules of The Hague after discharge, the judge considered that this decision did not justify a different result, insofar as it involved a bill of lading comprising materially distinct terms.

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

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