The UK’s Supreme Court has delivered a landmark judgment limiting the time cargo owners have to sue for misdelivery.
The nation’s highest court backed earlier rulings that the one-year time limit contained in the Hague-Visby Rules will apply even after a cargo is discharged.
The case arose from a 2018 shipment of 85,510 tonnes of steam coal from Indonesia to India on the 179,000-dwt capesize Giant Ace (built 2009), controlled by Korea Line Corp.
Claimant FIMBank held 13 bills of lading for the coal.
Vessel charterer KCH Shipping was the contractual carrier under the bills, which contained a charter incorporating the Hague-Visby Rules, the court said in its judgment.
The lender claimed damages for misdelivery after the coal went missing from a stockpile in Jaigarh.
The bank argued the Hague-Visby Rules apply only to carriage by sea, which ends on discharge.
Its claim could then fall within the six-year time limit set down in the Limitation Act of 1980.
KCH contended that Hague-Visby applies to all obligations undertaken by the carrier under the bill of lading contract up to and including delivery.
The bank had failed in its claim both in the High Court and the Court of Appeal.
Rejected at final hurdle
Its last chance was the Supreme Court, which rejected the appeal.
Simon Rainey, KC, of Quadrant Chambers, and Matthew Chan, of Twenty Essex, acted for KCH, instructed by Kyri Evagora and Thor Maalouf of UK law firm Reed Smith.
Transport partner Maalouf explained that the international carriage of goods by sea is almost always governed by one of two international conventions: the Hague Rules or the Hague-Visby Rules.
“This decision is a win for everyone involved in carrying, buying, selling and financing cargoes worldwide, because it confirms that parties will be able to ‘close their books’ within one year, rather than having to worry about misdelivery claims coming out of the woodwork up to six years later,” she added.
Evagora, global chair of Reed Smith’s energy and natural resources industry group, said: “Before the High Court’s decision on Giant Ace, there had not been an English court decision on the common scenario where a cargo is misdelivered at some point after discharge.”
He believes all parties can now benefit from the finality of the time bar.
“Once the deadline has passed, accounts or books can be closed. Trade finance banks that rely on bills of lading as security will need to be aware that a one-year time bar will apply even where cargo is discharged into storage which they consider to be in the custody of the carrier pending ultimate delivery,” he added.
“They should therefore make sure to diarise one year from discharge regardless of when ‘delivery’ is intended to take place,” the lawyer advised.
