Case law: FIMBank v KCH Shipping [2022] EWHC 2400 (Comm)

Giant Ace – 12-month time bar applies to claims for misdelivery of cargo, whether or not delivery is after discharge

Background

The MV Giant Ace (‘the vessel’) was transporting a cargo of coal under bills of lading on CONGENBILL form. As the original bills of ladings were not available at the discharge ports, the cargo was discharged against Letters of Indemnity (‘LOIs’) that the charterers issued to KCH Shipping (‘the carriers’).

The claimant, financiers of part of the cargo (‘FIMBank’) had been left unpaid under the financing agreement, and accordingly sought to exercise their right for security by demanding delivery of the cargo under the bills of lading. However, the carriers had already discharged the cargo to the local receivers.

FIMBank commenced arbitration proceeding against the carriers claiming misdelivery of the cargo. Arbitration

The carriers relied on Article III r. 6 of the Hague Visby Rules (‘HVR’) , incorporated into the bills of lading, to argue that the claim was time barred on the basis that proceedings had been commenced after the 12 month time bar from delivery of the cargo.

FIMBank argued that the claim was not time barred as:

1) on the facts, delivery took place after discharge; and,

2) as a matter of law, the HVR did not apply after discharge.

The tribunal found in favour of the carriers and held that the claim was time barred irrespective of whether delivery post-dated discharge.

High Court

FIMBank brought an appeal to the High Court under section 69 of the Arbitration Act 1996 on two grounds:

1) That the 12 month time bar does not apply to claims for misdelivery where delivery takes place after discharge; and,

2) That the 12 month time bar did not apply as parties had disapplied the HVR in respect of the period after discharge by way of clause 2(c), which provides that ‘the Carrier shall in no case be responsible for loss and damage to the cargo, howsoever arising prior to loading and after discharge from the Vessel..’.

The court upheld the tribunal’s decision on both points and dismissed the appeal. In particular, the court:

1) held that Article III r. 6 of the HVR continues to apply after discharge and until delivery. Such conclusion enables the carrier to ‘close his books’ and prevents any discussion or distinction as to which point in time discharge ended or delivery began;

2) referred to The MSC Amsterdami, to support that the parties to the bills of lading may have impliedly agreed that the HVR terms continued after the actual discharge and until delivery; and,

3) rejected the argument that clause 2(c) would deprive the carrier of the benefit of a time bar that would otherwise be available.

Comment

This is a much-welcomed decision from the shipping community as it confirms that, absent clear wording suggesting otherwise, the 12 month timebar of the HVR applies to misdelivery claims under bills of ladings when delivery takes place after discharge.

Equally, issuers of LOIs can benefit from this decision as they are likely to be absolved from liability to indemnify the carriers for misdelivery, if claims have not been brought within 12 months from delivery.

Once again, the case serves as a reminder to parties that clarity in contracts is essential.

• Link to commentary by Reed Smith can be found here
• Link to judgment can be found here

Category: Caselaw