On 24 May 2023 the Court of Appeal delivered in its judgment in FIMBank PLC v KCH Shipping, Claim No. CA-2022-002168: the 12-month time bar for claims under the Hague Visby Rules applies to claims for misdelivery, even if the misdelivery in fact happens after discharge.
This decision is of interest to traders whose cargoes are discharged without presentation of bills of lading and to trade finance banks who rely on bills of lading as security, as well as to shipowners and charterers.
The Court of Appeal confirmed the earlier decisions in favour of the carriers by the High Court (in FIMBank v. KCH Shipping,  EWHC 2400 (Comm)), and by the arbitration tribunal. Reed Smith acted on behalf of the carriers, KCH Shipping.
Background to the case
A cargo of coal was shipped on the vessel GIANT ACE in March 2018 under bills of lading on the CONGENBILL form. Original bills of lading were not available at the discharge ports in India, so the cargo was discharged into stockpiles in mid-April 2018 against letters of indemnity issued to the carriers, KCH Shipping, by the charterers.
FIMBank had financed the purchase of this cargo, but was left unpaid under its financing arrangement. FIMBank therefore wanted to exercise what it alleged to be its security for financing the cargo by demanding delivery under the bills of lading. By the time FIMBank tried to exercise its security, the cargo had already been discharged from the vessel and collected from stockpiles at the Indian discharge ports by local receivers. FIMBank was left empty-handed and therefore brought a claim in arbitration against the carriers, KCH Shipping, under the bills of lading. However, FIMBank only commenced arbitration against KCH Shipping on 24 April 2020 - over 2 years after discharge. The issue of time bar was dealt with as a preliminary issue in the arbitration.
The timing of a misdelivery of a cargo is significant: an unappealable decision by the High Court in The Alhani ( EWHC 1495 (Comm)) confirms that the 12-month time bar applies where misdelivery of cargo occurs at the time of discharge from the vessel. Before the High Court’s decision on GIANT ACE, there had not been an English court decision on the common scenario where a cargo is misdelivered at some point after discharge (for example where it may have been in a stockpile or storage location in the carrier’s custody, pending collection by a receiver. KCH Shipping was content for the preliminary time bar issue to be decided on the assumed basis that misdelivery happened after discharge.
Both the arbitration tribunal and the High Court previously decided that FIMBank’s claim was time-barred because the 12-month time bar at Article III, Rule 6 of the Hague-Visby Rules applied, even assuming that the misdelivery happened after discharge. Article III, Rule 6 says “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”. FIMBank had argued unsuccessfully that its claim was not time-barred because the alleged misdelivery in this case had happened after discharge and the Hague-Visby Rules, including the time bar at Article III, Rule 6, did not apply after discharge. Fimbank therefore argued that there was no applicable 12-month time bar.