Taikoo Brilliance: The definition of suit and identifying deck cargo – CoA clarifies the position under The Hague Visby Rules

The holders of bills of lading (“Holders”) pursued a claim for misdelivery against Owners regarding a cargo of logs delivered at Kandla, India. The Court of Appeal (“COA”) found against the Holders in relation to both points of law that were being appealed. The COA reversed the High Court’s decision on what statement needed to be made on a bill of lading for the purposes of Article I(c) of the Hague/Hague Visby rules (“HVR”). As to what constituted “suit” under the HVR Article III(6), the COA agreed with the High Court, finding that arrest proceedings did not protect time for a substantive claim under Article III(6).

The COA found that arrest proceedings for security did not interrupt the HVR time bar. The definition of “suit” under Article III(6) was not broad enough to cover an action for security. “Suit” meant proceedings which are capable of establishing liability. In relation to deck cargo and the HVR regime being excluded, the cargo must be clearly identified on the bills, such as by parcel number or serial number. 

Background

Facts of case: This was a voyage for delivery of a cargo of logs from New Zealand to India. The vessel arrived in India and discharged the cargo. The cargo was discharged to various third parties without production of the bills of ladings and against letters of indemnity. The Holders alleged misdelivery against Owners.

History of proceedings: The Holders did not commence arbitration within a year of delivery of the cargo, pursuant to the arbitration clause incorporated into the bills of lading. Arrest proceedings in Singapore were initiated within a year of discharge and security was provided. The Singapore proceedings were not advanced after this. Arbitration proceedings were commenced by the Holders more than a year after discharge of the cargo in India. 

Arbitration: Holders’ argument that the claim was not time-barred failed on the basis that the Singaporean proceedings did not constitute “suit” for the purposes of HVR. Therefore, the one-year time bar in Article III (6) applied to the underdeck cargo. The claim regarding cargo which was carried on deck was not subject to the HVR time bar and therefore succeeded. 

High Court

Both parties issued a S.69 appeal.

The Holders said the Singaporean arrest proceedings constituted “suit” for the purposes of HVR and that none of the claim was time-barred. The Judge dismissed the appeal on the basis that “suit” here means substantive proceedings that can decide the claim.

As to whether the exclusion for deck cargo applied, the Judge found that the arbitrator had not been wrong. What was stated on the bill entitled the Holders to pursue their claim.  

Court of Appeal

The first question was: whether an action for security constituted “suit” within the meaning of the relevant sub-paragraph of Article III(6) of the Hague Visby Rules.

“…the carrier and the 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 second question was: what must be stated on the face of a bill of lading for cargo to be carried “on deck” pursuant to Article I(c) of the Rules, which states that:

“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”?

Judgment

The COA dismissed the Holders’ appeal regarding the Article III(6) time bar but allowed Owners’ appeal concerning how deck cargo is particularised on the bill of lading. 

Suit under Article III (6). Under the HVR, an arrest action for security did not constitute “suit”. The Judge concluded that the meaning of “suit” is dependent on the context in which it is used. The point of bringing suit here is to establish liability for loss and damage to the cargo. The Judge noted “the natural reading is that the suit must be one seeking to establish such liability” and “the language of Article III rule 6, therefore, strongly indicates that “suit” means proceedings to establish liability…” and that the purpose of the rules must be considered. In that respect, if the Holders’ view was correct then the rule could give rise to open ended claim periods for the commencement of substantive proceedings. The Judge’s view was that the claim for the underdeck cargo was therefore time barred, agreeing with the High Court Judge. 

Deck cargo under Article I(c). Cargo carried on deck can be excluded from the HVR liability regime on certain conditions. The question here is what statement must be made on the bill to exclude the applicability of the HVR.  The Judge found that the purpose of Article I(c) “…is to permit the shipper and anyone to whom the bills are endorsed, to have full knowledge of which items of the cargo to which they have title are being carried on deck and not subject to the HVR…”. The COA acknowledged that it might be commercially onerous to identify cargo in such a way. Here the bills did not sufficiently identify the cargo to be carried on the deck, and the time bar applied to all of the Holders’ claim not just the below deck cargo, and, therefore, overturned the High Court’s decision.

The Judge concluded that the “bill must specifically identify the cargo to be carried on deck, such as by parcel number or serial number.”

Conclusion

This is a significant case for both owners and cargo interests. First, to avoid being caught out by the one-year time bar for cargo claims under the HVR, parties must ensure that arbitration or court proceedings are properly commenced under the applicable contract. This may mean taking early steps to acquire any relevant contract that is incorporated into a bill of lading. Second, if a particular cargo is split and some of it is carried on deck, when the bill of lading is issued, the bill of lading will have to be particularised in such a way that any holder can make an informed decision. This is likely to be quite onerous on a party who issues a bill for non-homogenous cargoes, especially where there are various of parcels or lots. To an extent, an issuer will have to look through the eyes of an insurer or person who is having to assess the risk of carrying the cargo on deck to work out what needs to be stated. Preston Turnbull acted for the Holders.

Article prepared by Ed Mills-Webb and Tim Guyer.

The Court of Appeal’s judgment can be accessed here:  https://www.bailii.org/ew/cases/EWCA/Civ/2026/1158.html