Web Alert: The Alhani - English High Court clarifies the applicability of the Hague Rules Time Limit to Misdelivery Claims

In an important judgment issued on 15 June 2018 the English High Court held that a shipowner who misdelivered cargo to a third party without production of the bill of lading can still avail himself of the time bar protection prescribed by Article III Rule 6 of the Hague Rules.

The Facts

The tanker Alhani was chartered to carry a cargo of bunker fuel. The cargo was carried under a bill of lading which incorporated the Hague Rules, as well as an exclusive jurisdiction clause in favour of the English High Court.    

In November 2011 the shipowner, following the charterer’s orders, discharged the cargo through a ship-to-ship operation without production of the bill.  The cargo owners (“Monjasa”) subsequently commenced proceedings against the owner for misdelivery of the cargo in various forums, including Tunisia where a claim on the merits was dismissed for lack of jurisdiction in July 2015. In January 2017 Monjasa arrested the ship in Le Havre where the French court allowed her release following the provision of security by the owner and ordered Monjasa to commence proceedings before a competent court. Pursuant to this order Monjasa sought to commence arbitration only to find that there was no applicable arbitration clause in the contract of carriage.

The owner commenced proceedings seeking a declaration of non-liability on the basis that Monjasa’s claims had been time barred in accordance with Article III Rule 6 of the Hague Rules.

The Judgment

Two issues had to be determined by the judge as follows:
⦁ Did Article III Rule 6 apply to misdelivery claims?
⦁ Were the commencement of proceedings in a foreign jurisdiction sufficient to interrupt the Article III Rule 6 one-year limitation, where the bill incorporates an exclusive jurisdiction clause in favour of the courts of another country?

On the first issue the judge concluded that the one-year limitation applied to misdelivery claims under the bill. The judgment was founded on the basis that Article III Rule 6 was drafted on wide enough terms to have this effect. By reference to the language of the clause, the judge held that ‘…the words “in any event” and “all liability” in respect of loss or damage’ are clearly wide enough to encompass liability for delivering the goods to someone not entitled to take delivery of the same”.

The application of Article III Rule 6 is not confined to claims for breach of the Hague Rules obligations, as such, but rather to claims capable of being pleaded as a breach of the Hague Rules. Misdelivery claims were accepted as being claims of this nature. They are, in essence, claims concerning the clearest breach of Article III Rule 2 obligation of the carrier to ‘properly and carefully care for, and discharge the goods carried’.

There is no fixed or settled interpretation to the contrary, either by authority or in the travaux preparatoires of the Rules to contrary effect, barring the application of the one-year prescription period in misdelivery claims.

The second question was more straight-forward, due to the incorporation in the Bill of the charter party exclusive jurisdiction clause in favour of the English High Court. The judge found that the commencement of proceedings in Tunisia was a breach of the exclusive jurisdiction agreement and therefore it did not constitute a “suit” brought before a competent court for the purposes of Article III Rule 6. Consequently, the judge concluded that the Tunisian proceedings were not able and, in fact, did not interrupt the Hague Rules time bar.

Comment

The court has confirmed the application of the Hague Rules one-year prescription period to claims for misdelivery of the cargo. It is the first case on this matter to be delivered by a court sitting in England, following a series of similar judgments on this matter in other Commonwealth jurisdictions[1].

It is interesting to note that, on the basis of the arguments put forward by David Foxton QC (sitting as Deputy Judge of the High Court), the result might have been the same had the Hague-Visby Rules been incorporated in the bill and applied, as the wording of the latter’s time bar clause is even more unequivocal, providing that the carrier shall “…in any event be discharged from all liability whatsoever in respect of the goods.”

Finally, the judgment has emphasised that the incorporation of exclusive jurisdiction or arbitration clauses in the bills of lading is of outmost importance and any proceedings brought in breach of such provisions shall not be considered as a “suit” interrupting the Hague Rules time bar, thus, offering an additional layer of protection to carriers, who have successfully negotiated the insertion of similar clauses in their charter parties.

This article intends to provide general guidance on the issues arising. It is not intended to provide legal advice in relation to any specific query. If in doubt, The Standard Club is always on hand to assist. Members requiring further information on this topic should direct their enquiries to either their usual contact at the club, or to the author(s).

[1] The New York Star [1981] 1 WLR 138, decision of the Privy Council; also, The Zhi Jiang Kou [1991] 1 Lloyd’s Rep 493, New South Wales Court of Appeal