FIMBank plc v. KCH Shipping Co Ltd– Court of Appeal, 24 May 2023

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The vessel Giant Ace was the subject of a bareboat charter agreement between owners Mirae Wise SA (a Panamanian company) and charterer KCH (a Korean company). The charter involved transporting around 85,510 metric tons of coal in bulk, with KCH acting as the contractual carrier of the cargo. This case revolves around an appeal launched by FIMBank against the ruling of Sir William Blair in [2023] 1 Lloyd’s Rep 381. The central issue concerns the misdelivery of cargo and the application of the Hague-Visby Rules.

Farlin Energy & Commodities had purchased the coal from Trafigura, and in turn, FIMBank financed Farlin’s purchase. To secure this financing, FIMBank obtained a pledge over the bills of lading and the cargo itself, positioning itself similarly to the cargo owners. The voyage involved the issuance of thirteen sets of bills of lading on the Congenbill form, which incorporated the Hague-Visby Rules, including the time bar in article III, rule 6, which stated:

“… the carrier and the ship shall in any event be discharged from all liability whatsoever in respect of the goods, unless suit is brought within one year of their delivery or of the date when they should have been delivered. …”

Clause 2(c) of the Congenbill form provided that:

“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 or while the cargo is the charge of another Carrier, nor in respect of deck cargo or live animals.”

A key point of contention arose regarding the application of the time bar after the cargo’s discharge. FIMBank claimed that misdelivery occurred after the cargo’s discharge to port stockpiles according to delivery orders. FIMBank’s claim was based on the breach of contract by the carrier through delivery without the production of a bill of lading, thereby leading to a strict liability situation (see Glyn Mills Currie & Co v East and West India Dock Co (1882) 7 App Cas 591, Sze Hai Tong Bank Ltd v Rambler Cycle Co Ltd [1959] 2 Lloyd’s Rep 114, Motis Exports Ltd v Dampskibsselskabet AF 1912 A/S [2000] 1 Lloyd’s Rep 211 and UniCredit Bank AG v Euronav NV (The Sienna) [2023] EWCA Civ 471). FIMBank initiated arbitration against KCH after more than a year from the delivery of the goods, and KCH asserted that the time bar had removed it from liability due to the arbitration notice’s timing.

The tribunal’s Partial Final Award in September 2021 ruled that the Hague-Visby Rules’ time bar could potentially apply to claims of misdelivery post-discharge, and that clause 2(c) of the Congenbill form did not exempt the time bar’s application for the period after discharge. The tribunal’s reasoning was based on the notion that the carrier’s responsibilities extended beyond discharge under the terms of the bill of lading. This conclusion stemmed from the understanding that the carrier’s obligations persisted after discharge, consistent with the Hague-Visby Rules.

Upon granting permission to appeal, Sir William Blair considered two legal issues: (1) the applicability of article III, rule 6 of the Hague-Visby Rules to post-discharge misdelivery claims; and (2) whether clause 2(c) of the Congenbill form negated the Hague-Visby Rules’ time bar after discharge. The court examined various precedents and international interpretations of these rules, including Compania Portorafti Commerciale SA v Ultramar Panama Inc (The Captain Gregos) [1990] 1 Lloyd’s Rep 310, Transworld Oil (USA) Inc v Minos Compania Naviera SA (The Leni) [1992] 2 Lloyd’s Rep 48, Cargill International SA v CPN Tankers (Bermuda) Ltd (The OT Sonja) [1993] 2 Lloyd’s Rep 435, Linea Naviera Paramaconi SA v Abnormal Load Engineering Ltd [2001] 1 Lloyd’s Rep 763 and Trafigura Beheer BV v Mediterranean Shipping Co SA (The MSC Amsterdam) [2007] 2 Lloyd’s Rep 622.

In the subsequent Court of Appeal, the first issue revolved around the interpretation of article III, rule 6 of the Hague-Visby Rules concerning the time bar after discharge. The court analyzed the evolution of the rule’s wording, emphasizing the shift from “discharge” to “delivery.” The Court of Appeal concluded that the change in wording expanded the rule’s application to encompass liabilities beyond those during discharge, indicating that the time bar extended post-discharge as well.

An alternative argument put forth by KCH centered on an implied term within the bills of lading, suggesting that the Hague-Visby Rules, including article III, rule 6, would govern the parties’ relationship after discharge. While the Court of Appeal expressed skepticism about the possibility of implying such a term, they deemed it unnecessary to rule on this matter due to their determination on the broader issue of the time bar’s post-discharge applicability.

Regarding clause 2(c) of the Congenbill form, the Court of Appeal concluded that this clause did not come into play in the present context. This clause relieved the carrier from liability for loss or damage to the cargo after discharge. However, the court held that it did not sufficiently absolve the carrier of liability for misdelivery. Consequently, the question of the time bar’s application after discharge did not hinge on the effectiveness of clause 2(c), but rather on the broader interpretation of the Hague-Visby Rules.

It was decided that the case centered solely on the misdelivery of cargo and the interpretation of the Hague-Visby Rules, specifically the time bar provision, in the context of post-discharge events. The Court of Appeal ruled in favor of the time bar’s applicability beyond discharge and addressed the potential implications of related contractual clauses.