02 April 2025
6 min read
#Transport, Shipping & Logistics
Published by:
The English Supreme Court has provided much needed clarity on the application of the 1-year time bar in Article III Rule 6 of the Hague and Hague-Visby Rules. The Court held that the time bar will apply to all claims for breach of duty of the carrier before delivery, including claims for misdelivery after discharge. In reaching this decision, the Court also considered Australia’s approach to the application of Article III Rule 6. We discuss this judgement below and its possible implications.
In FIMBank Plc v KCH Shipping Co. Ltd (The Giant Ace) [2024] UKSC 38 (The Giant Ace), a claim of misdelivery was made against the carrier, KCH Shipping Co. Ltd, when a consignment of steam (non-coking) coal (the cargo) was delivered to the Indian ports of Jaigarh and Dighi between 1 and 18 April 2018 against a letter of indemnity (LOI) and without production of the original Bills of Lading. In shipping, its common practice for cargo to be delivered without production of an original Bill of Lading and there can be many reasons why the receiver of the cargo may not have the original documents to take proper delivery of the cargo. However, this can also expose the carrier to potential claims from third-parties who have a better right and title to the cargo, therefore enabling them to bring a claim of misdelivery against the carrier.
In The Giant Ace, a claim of misdelivery was brought by the cargo-financing bank, FIMBank Plc, alleging that it had taken security over the cargo by way of a pledge of the Bills of Lading, making it the holder of the Bills of Lading and entitled to the cargo. However, the misdelivery claim was brought more than 1 year after the misdelivery.
The bank’s case was that the carrier had misdelivered the cargo to people who were not entitled to receive it, without presentation of the original Bills of Lading. The bank further argued that such misdelivery occurred after discharge and therefore the 1-year time bar in Article III Rule 6 did not apply. The carrier argued the opposite.
The matter was first taken to arbitration before eventually reaching the English Supreme Court which held that the time bar in Article III Rule 6 applied to all claims for breach of duty of the carrier before delivery, including claims for misdelivery after discharge. The Court rejected the bank’s 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. In reaching this conclusion, the Court stated that 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 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 Court held further that, while it accepted that there was a ‘period of responsibility’ during which the carrier is subjected to minimum obligations and responsibilities under the Rules, this did not mean that all provisions of the Hague and Hague-Visby Rules were to be read as concerned only with that period.
Interestingly, the Court considered approaches by various international maritime jurisdictions on this point, including Australia and Malaysia. The Court observed that Australia’s approach to this issue differs from that taken by the English courts and that there is no international consensus that Article III Rule 6 does not apply after discharge.
The Court referred to the Supreme Court of Queensland case of Teys Bros (Beenleigh) Pty Ltd v ANL Cargo Operations Pty Ltd (1989) 2 Qd R 288, which concerned a claim for damage to cargo that occurred prior to loading. In that case, the Supreme Court of Queensland held that that the Hague Rules time bar could not be relied on by the carrier because its liability arose outside and before the period of responsibility covered by the operation of the Hague Rules. The Supreme Court of Queensland reasoned that the time bar only applies to liabilities “by virtue of the operation of the rules contained in Article III in respect of the risks contained in Article II” (at [296]) and also reasoned that the time bar only applies to “so much of the sea carriage which starts with the operation of loading and ends with the discharge of the goods from the ship” (at [296]).
The Court stated that this was the argument on which the bank relied and which it rejected. The Court also referred to the Supreme Court of Victoria Appeal Division judgement in Kamil Export (Aust) Pty Ltd v NPL (Australia) Pty Ltd [1996] 1 VR 538, which held that the time bar did not apply to claims for damage occurring after discharge.
Lastly, the Court referred to the NSW Court of Appeal case of PS Chellaram & Co Ltd v China Ocean Shipping Co (The Zhi Jiang Kou) [1991] 1 Lloyd’s Rep 493 which held, contrary to the Victorian and Queensland cases, that a claim for misdelivery after discharge was time-barred. However, the majority decision in that case held that there was a contractual time bar which applied, with only 1 judge stating that the applicable time bar was under Article III Rule 6. In The Giant Ace, the Court agreed with the single NSW judge but stated that, although the bank could derive some support from these Australian cases, the approach taken by the Australian courts differs from that taken by the English courts and none of the cases addressed the core arguments in The Giant Ace, nor did they establish a relevant international consensus.
The Giant Ace has provided some much-needed certainty around an issue which has divided academics and judges in various common law jurisdictions. Importantly, the case has distinguished the concept of the ‘period of responsibility’ of the carrier and how this is to be interpreted against the time bar in Article III Rule 6.
In reaching its conclusion on the case, the Court made it clear that Australia’s position in relation to Article III Rule 6 and the ‘period of responsibility’ under the Hague and Hague-Visby Rules is different to that of the UK. As a leading jurisdiction for maritime disputes and arbitration, the decisions of the UK courts are often looked at as authority on certain points of maritime law. In Australia, those decisions are often referred to with approval and are used to determine various issues under the lens of Australia’s modified Hague-Visby Rules. However, time will tell as to whether the Australian courts embrace the reasoning and approach laid out in The Giant Ace.
If you have any questions regarding this article, please get in touch with our team below.
Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.
Published by:
