Misdelivery of cargo and the Hague Rules time bar

Deep Sea Maritime Ltd v Monjasa A/S (2018)

The English High Court recently had to decide whether claims against the carrier for misdelivery are subject to the one-year time bar in Article III Rule 6 of the Hague Rules, which states that: “In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered”.

The facts

The Shipowner (“DSM”) agreed to carry a cargo of bunker fuel from Togo to Benin on the vessel “the Alhani”, shipped by Monjasa. The bill of lading included a paramount clause that contractually applied the Hague Rules, and also incorporated an English High Court exclusive jurisdiction clause. However, on 18 November 2011, the cargo was discharged by ship-to-ship transfer without production of the bill of lading and delivered to a company called Unitaes.

In April 2012, Monjasa arrested the vessel in Tunisia and commenced substantive proceedings in that jurisdiction. DSM challenged jurisdiction, but not by reference to the exclusive jurisdiction clause in the bill of lading. The Tunisian court dismissed the substantive claim for lack of jurisdiction, but that decision was still under appeal.

In February 2017 DSM commenced proceedings in England for negative declaratory relief, and applied for summary judgment, on the basis that any claims of Monjasa against DSM were time-barred under Article III Rule 6 of the Hague Rules.

The issues

The main two questions the court had to decide were:

1. Whether the time bar created by Article III Rule 6 applies to claims where the shipowner has delivered the cargo to a third party without production of the bill of lading; and
2. Whether suit had been brought within the one-year period for the purposes of Article III Rule 6.

The decision

As regards question (1), the court answered this in the affirmative. The words in Article III Rule 6 “in any event” and “all liability in respect of loss and damage” were wide enough to encompass claims for misdelivery. Moreover, although the obligation on the shipowner to only deliver against the production of the bill of lading was not one imposed by the Hague Rules, Article III Rule 6 still applies to breaches of other obligations of the shipowners which occur during the period of Hague Rules responsibility (which is from the time of loading to the time of discharge, according to Article1(e)), and which have a sufficient nexus with identifiable goods which are carried.

As regards question (2), the court held that the Tunisian proceedings, which were the only ones brought within the one-year time bar period, were in breach of the exclusive jurisdiction clause. As such, absent any exceptional circumstances, as far as the English claim was concerned, they did not constitute proceedings before a competent court.

However, as to whether Monjasa’s claim was time-barred in the Tunisian proceedings, there was insufficient evidence and, for reasons of comity, it was not appropriate for the English court to grant declaratory relief.

In summary, save for any claim being pursued in the Tunisian proceedings, Monjasa’s claims against DSM were time-barred under Art III Rule 6.

Comment

It may be somewhat surprising, with the centenary of the Hague Rules being only a few years away, that academic debate over the issue of time bar for misdelivery claims under Article III Rule 6 still remains, despite case law such as the New York Star [1980] supporting the position that it did apply to such claims. As the court pointed out in the Monjasa case, one of the purposes of the Visby amendment to Article III Rule 6, (which substituted the words “discharged from all 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 to ensure that the one-year time bar applied to cases of misdelivery. But there was no authority to the effect that Article III Rule 6 of the Hague Rules did not so apply.

This first-instance decision brings some much-needed clarity to the longstanding debate and given the similar wording of the Hague-Visby Rules amendment, one would expect the position to be the same for both sets of Rules, although it may be that debate will remain pending a Court of Appeal judgment on this issue.

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