Hague and Hague Visby Rules: Clarity from the Supreme Court on the time bar applicable to claims for misdelivery

The Supreme Court has handed down judgment in Fimbank Plc v KCH Shipping Co Ltd on 13 November 2024, which examined the applicability of the time bar rule found within the Hague and Hague Visby Rules to a claim for misdelivery after cargo has been discharged from the vessel. The full judgement can be read here.

The facts

Article III, rule 6 of the Hague and Hague Visby rules will be familiar to many. It stipulates that the carrier of cargo will be exempted from “all liability” unless any claim against them is brought within 1 year of delivery of the goods, or the date when the goods should have been delivered. The bills of lading in this case were on the 1994 Congenbill form and incorporated the terms of a charterparty. The charterparty was subject to the Hague Visby Rules and those rules were stated to be equally applicable to any bill issued under the charterparty.

The cargo in question (85,510mt steam (non-coking) coal) was discharged from the vessel in April 2018. It was alleged by the Claimant Bank (the lawful holder of the bills) that misdelivery took place after the cargo was discharged. Arbitration proceedings were commenced in 2020, being over 12 months from the date of delivery or the date when the cargo should have been delivered within the meaning of article III, rule 6 of the Hague Visby rules.

The proceedings

1. This claim began in arbitration where the tribunal made a partial determination on a number of preliminary issues, including those focusing on the time bar question. Various rounds of appeals led the case to the UK Supreme Court in July 2024.

2. Prior to reaching the Supreme Court, the Court of Appeal held:

1. Article III, rule 6 of the Hague Rules did not apply to misdelivery after discharge, on the basis that a contract made subject to the Hague Rules cannot be subject to a rule (article III, rule 6) which extends beyond the scope of the rules defined in articles I and II.
2. In contrast, article III, rule 6 of the Hague Visby Rules did apply to misdelivery after discharge, being a conclusion which the CA found to be consistent with the language and purpose of those rules, and the preparatory work (the travaux perparatoires).

3. Permission to appeal was granted by the UKSC in October 2023 on the following 3 issues:

“(1) Does article III, rule 6 of the Hague Visby Rules apply to claims for misdelivery of cargo occurring after discharge has been completed?

(2) If so, does clause 2(c) of the 1994 Congenbill form of bill of lading have the effect of disapplying the provisions of the Hague Visby Rules (including the time bar in article III, rule 6) to events occurring after discharge was completed?

(3) If not, does the article III, rule 6 Hague Visby Rules time bar nevertheless apply contractually under the Bills of Lading to claims for misdelivery of cargo occurring after discharge?”

The judgment

1. In order to determine whether the time bar rule is applicable to claims for misdelivery after discharge under the Hague Visby Rules, the Supreme Court considered it necessary to first consider whether the time bar rules are equally applicable to the same claims under the Hague Rules. This was common ground. It was held that the wording of the article III, rule 6 time bar under the Hague Rules is wide and is applicable to a breach of duty by the carrier which occurs after discharge but before or at the time of delivery or misdelivery.

2. It was therefore held that the time bar at article III, rule 6 of the Hague Visby Rules equally applies to claims for misdelivery after discharge by necessity, due, in part, to the wide wording of both the Hague and Hague Visby Rules.

3. As to clause 2(c) of the 1994 Congenbill, the wording of the clause is 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 [or] while the cargo is in the charge of another Carrier, nor in respect of deck cargo or live animals.”

The Supreme Court remarked that this clause operates largely to protect the carrier. It was nonetheless held that the wording of the clause does not exclude liability for misdelivery, and it does not exclude the time bar from applying to such claims.

4. In light of the conclusions which the UKSC reached as to questions 1 and 2 above, the Court held that the issue at question 3 did not arise and did not need to be addressed.

5. Lord Hamblen delivered the above judgment (with unanimous agreement from the rest of the bench) and held that the time bar at article III, rule 6 in both the Hague Rules and Hague Visby Rules applies to claims for misdelivery occurring after discharge.

The Birketts view

This judgment provides helpful guidance as to the duration of the carrier’s responsibility and the time bar applicable to any claims which the bill of lading holder may have arising after discharge but before delivery. Importantly, it has made clear that any claims for misdelivery arising after discharge of the cargo are caught by the time bar rule and this is equally the case under the Hague Rules and the Hague Visby Rules.

The case reinforces the importance of the one-year time bar for cargo interests who have a potential claim under the bill of lading. It is therefore crucial for parties to be aware of the short window within which such claims must be brought against carriers. For carriers, the case is a useful reminder of the period of responsibility defined in the Hague and the Hague Visby Rules, being the period between commencement of loading and completion of the discharge. In some instances, the rules may nonetheless, and will, impose liability and obligations before loading (for example, to ensure the vessel is seaworthy) and/or beyond discharge of the cargo, and may persist up to delivery of the cargo (for example, in this case of misdelivery). The one-year time bar rule is applicable to claims alleging breach of responsibilities outside of this defined period.