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The case concerned two appeals under s.69 of the Arbitration Act 1996 (s.69 AA) on points of law arising out of an arbitration award. The Commercial Court was asked to consider the definition of “suit” for the purposes of stopping the limitation clock and when cargoes are to be considered as being “carried on deck” in respect of the (exception in the) definition of “Goods” set out in the Hague Visby-Rules (HVR).
It is well established that live animals and cargo shipped as deck cargo, provided that it is in fact carried on deck, are excluded from the definition of “Goods” set out in the HVR. As such, the HVR do not apply to such cargoes, and the carrier is therefore free to carry such cargoes on special terms which are not affected by the HVR.
The background facts
Pedregal Maritime SA (Owners) were owners of the vessel Taikoo Brilliance (Vessel) and carriers under the bills of lading. Batavia Eximp & Contracting (S) Pte Ltd (Holders) were holders of four bills of lading issued by the Owners (Bills) in respect of a cargo of timber comprising 36,934 JAS CBM of New Zealand pine logs (Cargo).
The Cargo was transported on the Vessel from New Zealand to Kandla, India. Two of the Bills referred to some of the Cargo being carried on deck (one referring to 22,994 pieces and the other referring to 11,092 pieces).
The Vessel arrived at Kandla, and the Cargo was discharged on 16 September 2019. The Bills were not available and so discharge took place without the production of the Bills and against a letter of indemnity provided to the Owners by the charterer of the Vessel. The Holders subsequently alleged that the Cargo had been misdelivered.
An arbitration clause in the Bills provided that any dispute would be referred to arbitration. However, on 18 August 2020, the Holders issued a writ in the High Court of Singapore for the arrest of the Navios Koyo, a sister ship of the Vessel (Singaporean Proceedings). Security was provided for her release, and the Vessel was released from arrest on 25 September 2020.
The Owners applied for and obtained a stay of the Singaporean Proceedings. This was later confirmed by both the Singapore High Court and the Court of Appeal.
Arbitration proceedings
Arbitration proceedings were not commenced by the Holders until 22 or 24 December 2020, being more than a year after the delivery or alleged mis-delivery of the Cargo. Owners argued that the Holders’ claim was time-barred pursuant to Article III rule 6 of the HVR, which provide as follows:
"Subject to paragraph 6bis the carrier and 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…”
The Arbitrator decided that whilst the HVR time bar applied, this was only in respect of cargo carried under deck. The Arbitration Award was issued on 16 February 2023.
Appeal
On 26 June 2023, the Commercial Court granted permission to appeal pursuant to s.69 AA, to both the Holders and Owners on several question of law. Whilst the appeal was listed to be heard, it was adjourned and re-listed pending the decision of an appeal to the Supreme Court in the Fimbank PLC -v- KCH Shipping (Giant Ace) [2024] UKSC 38.
The decision in the Giant Ace did resolve some of the questions of law on which the Holders had been granted permission to appeal. However, the Commercial Court was asked to formally decide those issues in line with the Supreme Court’s conclusions to avoid the Holders having to concede those points. These points were not elaborated upon within the judgment.
The Commercial Court decision
The Commercial Court considered the approach to the interpretation of the HVR as summarised by the Supreme Court in the Giant Ace.
The questions of law which the Commercial Court was asked to consider were as follows:
Whether the Singaporean Proceedings constituted “suit” for the purpose of Article III rule 6 of the HVR.
It is well recognised, following the Giant Ace, that the purpose of this Article is “to achieve finality and to enable accounts and books to be closed.” The Court highlighted that the Singapore Proceedings were for security which is distinct from a determination of the merits of the mis-delivery claim which would, absent further agreement, require arbitration. The Court held that the word “suit” within Article III rule 6 of the HVR means proceedings that can decide the claim. If time is to stop running, substantive proceedings are required to establish liability.
Finding in Owners’ favour, the Court was not persuaded by the Holders’ argument that if a holder of a bill is seeking security through proceedings, then an owner should know that it is not safe to close its books. This would mean that a carrier would be required to leave its books open for an indefinite period, simply by security being sought, without any certainty that substantive proceedings would ensue.
What is required by the words “which by the contract of carriage is stated as being carried on deck” in the (exception in) the definition of “Goods” Article I (c) of the HVR.
Article 1 (c) of the HVR states as follows:
“Goods” includes goods, wares, merchandise and articles of every kind whatsoever, except live animals and cargo which by the contract of carriage is stated as being carried on deck and is so carried;”
The Court agreed with Owners that the purpose of this Article providing for a bill of lading to state that the cargo is carried on deck is to allow a holder to identify whether the goods carried fall within scope of the HVR.
In the present case, the arbitrator concluded that it was sufficient that the Bills identified the amount of cargo carried on deck. In particular, the arbitrator distinguished the matter from the Court of Appeal for British Columbia’s decision in Timberwest -v- Gearbulk Pool Ltd [2003] BCCA 39. In that case, there were two consignees who were purchasers from Timberwest of different numbers of packages of differing volume and value which were commingled to the extent that they were not separated during loading either on deck or under deck. The bills of lading demonstrated that stowage was 86% on deck and 14 % under deck. It was, therefore, not possible to identify the percentage of each consignment loaded on deck, or under deck, or the value of such consignments.
The Holders in the present case agreed that the Bills were sufficient to determine the value of the Cargo carried on deck and, therefore, the same issues did not arise.
The Owners averred that allowing the words “is stated as being carried on deck” to have a “fluid definition” with the exact requirements changing on a case-by-case basis was “a recipe for uncertainty”. The Holders considered that while the construction of the Article may not vary from case to case, what was required to satisfy it may vary from case to case.
The Court considered that the Article requires asking two factual questions and that “It may sometimes be useful to approach the matter in this way: where a bill of lading states that cargo is carried on deck, the focus is then on what cargo was carried on deck, and the back to the bill of lading to see whether the statement was sufficient in the circumstances.” It highlighted that whilst the requirement for a statement may have been undertaken imperfectly in the present case, the arbitrator had concluded that it was undertaken sufficiently and that his factual conclusion on that issue was to be respected.
The arbitrator was held not to be wrong in law to have concluded that the words “which by the contract of carriage is stated as being carried on deck“ in the exception in the definition of “Goods” in Article 1(c) of the HVR were satisfied.
The Court held that Owners succeeded on the first question. However, the Holders succeeded on the second question.
Comment
This case further clarifies the time bar position under the HVR for holders of bills of lading to advance claims. Steps taken in respect of security and which do not relate to the underlying merits of a bill of lading holder’s claim will not be sufficient to satisfy the requirement for a “suit” for the purposes of Article III rule 6 of the HVR.
As Article III rule 6 of the HVR discharges the carrier and ship from all liability should a claim not be brought in time, a consignee should seek advice before the expiry of the one-year period from delivery of the goods or the date when such goods should have been delivered and ensure a suit is brought within time. If the clock is to stop, substantive proceedings to establish liability are required.
This case also acts as a useful reminder to a carrier issuing a bill of lading that bills should be drafted clearly to promote greater certainty. If a cargo is carried both on deck and under deck, it is best practice to ensure that the cargo which is carried on deck is stated as “being carried on deck” and that the correct quantity is set out to enable a shipper to determine the extent of the risk presented by the cargo being stowed on deck.
