CLAIM FOR MISDELIVERY OF CARGO – LIABILITY OF THE CARRIER AND DEFENCE OF TIME BAR.

The Commercial Court, in September 2022, handed down the judgment in FIM Bank vs. KCH Shipping ([2022] EWHC 2400(Comm)), an Appeal under Section 69 of the Arbitration Act, 1996, holding that the time bar in Article III Rule 6 of the Hague Visby Rules can apply to claims in relation to misdelivery after discharge. This case marks a significant milestone since the English Court had never decided on this important question earlier.

In this case, 13 sets of Bills of Lading dated 04 and 14 March 2018 on the Congenbill Form were issued “TO ORDER” for and on behalf of the Master of the Vessel, M/V Giant Ace, for about 85,510 MT in aggregate of coal in bulk. KCH had bareboat chartered the Vessel from Mirae Wise SA (a Panama Company and registered owner of the Vessel). The consignment of coal was loaded in Indonesia and arrived at the Indian ports of Jaigarh and Dighi around two weeks later. The Original Bills of Lading were unavailable at the discharge port, so the cargo was discharged into stockpiles at Indian Ports between 01 and 18 April 2018 against the letter of Indemnity issued to the carriers, KCH Shipping, by the Vessel Charterers. Unbeknown to KCH Shipping, FIMBANK had financed its customer’s purchase of the coal cargo and had been left unpaid under its financing arrangement.

Joy Thattil
Maritime Lawyer & Partner @ Callidus
Dubai, Singapore & India
joy@calliduscmc.com

Art. III Rule 6 of Hague – Visby Rule reads as “the Carrier and the Ship shall, in any event, be discharged from all liability whatsoever in respect of the goods unless a suit is brought within one year of their delivery or of the date when they should have been delivered.” While deciding the matter, the Arbitration Tribunal stated that the claim was time-barred. FIM Bank brought an appeal to the High Court under Section 69 of the Arbitration Act, 1996, and dismissed the Appeal, making it clear that the Time bar provision applies to this case.

Not only in shipping but in any transport industry, the liability under misdelivery of the cargo can have a
significant impact on a carrier. A Bill of Lading is referred to as a document of title, which gives the holder of the Bill of Lading the right to possession of cargo carried under it, and the endorsement and delivery of the Bill of Lading transfer the right of possession of the cargo to the endorsee. Thereby it is settled law that a carrier who misdelivers the cargo (for any reason whatsoever) is liable for any consequential loss suffered by the holder of the Original Bill of Lading.

FIM Bank wanted to exercise what it considered to be its security for the financing by demanding the delivery of the cargo under the Bills of Lading, of which it claimed to be the lawful holder. Unfortunately for FIM Bank, by the time it tried to exercise its security, the cargo had already been discharged from the Vessel and had been collected by the local receivers. FIM Bank brought a claim in Arbitration under the Bills of Lading. However, FIM Bank commenced the Arbitration against KCH Shipping on 24 April 2020, following an apparent misunderstanding over the identity of the carrier. The preliminary issue in the Arbitration was the claim by FIM Bank was time-barred because the Arbitration commenced after more than 12 months from the date of delivery of the cargo.

However, this case by FIM Bank has marked a blessing to the Ship owners and the carriers under the Bills of Lading. It is also worth noting that one of the main purposes of the Visby Amendment to Article III Rule 6, which substituted the words “discharged from the liability whatsoever in respect of the goods” for the former expression “discharged from all liability in respect of loss or damage” in the Hague Rules was supposedly to ensure that the One-year time bar applied to cases of misdelivery (Deep Sea Maritime Ltd vs. Monjasa A/S, 2018).