Briefing

Hague-Visby Rules: Interpretation of “suit” and the deck cargo exception

The Court of Appeal has handed down its judgment in the case “TAIKOO BRILLIANCE”,¹ an interesting case involving a number of questions relating to the Hague-Visby Rules (HVR) time bar. It started with the arrest of the “NAVIOS KOYO” in Singapore in September 2020. The cargo interests arrested the vessel and commenced proceedings in the Singapore High Court for the purpose of obtaining security in support of a London arbitration. Although the Singapore court proceedings were commenced within time, the cargo interests did not commence arbitration within the time required by the arbitration agreement in the bill of lading.

The owners of the vessel applied for a stay of the Singapore court proceedings in favour of London arbitration, which the cargo interests opposed, arguing that any stay should be conditional upon owners waiving the time bar defence in the London arbitration proceedings. The court refused to exercise its discretion to impose the condition (see The Navios Koyo [2021] SGHC 131). The claimants, who were the endorsee holder of the bills of lading, were obliged to commence London arbitration out of time.

Dispute background

The underlying dispute arose from the carriage of a cargo of logs from New Zealand to India, carried partly on deck and partly below deck, which were delivered without production of the original bills of lading. The cargo interests brought a claim for damages for alleged misdelivery, to which the owners’ primary defence was that the cargo interests’ claim was time barred. The issues were first determined by an arbitral tribunal and subsequently appealed to the Commercial Court. In June 2023, both the cargo interests and the owners were granted permission to appeal under section 69 of the Arbitration Act 1996 on a number of questions of law.

The facts closely resembled those in FIMBank plc v KCH Shipping (“The Giant Ace“) [2024] UKSC 38, and raised similar questions regarding the HVR time bar. The Giant Ace resolved three of the appeal issues in The Taikoo Brilliance, leaving the Court of Appeal to determine two remaining questions, both concerning the proper interpretation of the HVR time bar.

What is “suit”?

The first was cargo interests’ appeal on the question of whether an action for security (such as in “The Navios Koyo” arrest) was “suit” within the meaning of Article III rule 6 of the HVR, i.e. was commencing proceedings to obtain security (anywhere, in any jurisdiction) sufficient to stop the running of time for the purpose of the HVR time bar. The Court of Appeal concluded that the answer is “no” – the object and purpose of the HVR time bar is “to ensure the prompt making and pursuit of substantive claims for loss of or damage to goods“. Cargo interests’ appeal was therefore dismissed.

Sufficiency of “carried on deck” statement

With the time bar still in play, owners’ appeal relating to deck cargo remained relevant. For the HVR time bar to apply to the cargo of logs carried on deck, that cargo would have to qualify as “goods” for the purpose of the HVR. To do so, it would need to fall within the HVR Article I(c) exception, i.e. be “cargo which by the contract of carriage is stated as being on deck and is so carried“. The second question to be determined by the Court of Appeal was therefore the owners’ appeal regarding what statement must appear on the face of the bill of lading to engage the Article I(c) exception. This was a question not previously addressed by the English courts.

The bills of lading were issued by owners for the carriage of timber logs. On their face, in the “shipper’s description” they identified and listed the Lot numbers shipped on board, and for each Lot, specified the number of “PCS” (pieces) and the corresponding weight in “JAS CBM” (Japanese Agricultural Standard cubic metres), together with the total number of pieces and total volume. The bills also stated that a specified number of pieces were carried on deck at the shipper’s risk. However, the deck cargo quantity (at shipper’s risk) was identified only by reference to a total number of “PCS”, without indicating which pieces from which Lots were carried on deck. It was therefore common ground that it was not possible to determine which pieces on deck were from which Lots. Moreover, because the pieces varied in size and volume, it was not possible to ascertain the volume or value of the deck cargo either in absolute terms or by reference to the cargo as a whole.

At arbitration, the arbitrator determined that the statement on the bills of lading was sufficient to exclude the amount of cargo carried on deck from the scope of the HVR. On appeal, the judge at first instance expressed the view that best practice might call for a clearer statement, but ultimately agreed with the arbitrator and dismissed the owners’ appeal. The Court of Appeal, however, reached a different conclusion and allowed owners’ appeal.

Identifying deck cargo

The key point is that cargo can only be “stated” to be carried on deck if it is identified or identifiable as the cargo in question. Accordingly, if some items in a consignment of “goods, wares, merchandise or articles” are carried below deck and some on deck, and those items are not homogenous (as in this case because the pieces of timber varied in weight and therefore in value significantly), the items carried on deck must be specifically identified in the bill of lading e.g. by Lot or parcel number. Otherwise, the statement in the bill of lading is not a statement that certain cargo is carried on deck, it is only a statement that some unidentified items of the total cargo are carried on deck.

The Court of Appeal judgment left open the question of what is required in the case of a homogenous cargo, where the constituent elements do not differ in value. An example was provided of a cargo of identical gold ingots, all of the same value, where a bill of lading is issued for the carriage of 1,000 gold ingots, of which 100 are said to be on deck, but without identifying exactly which 100? Cargo interests argued that, in such a case, the lack of identification would make no difference to the assessment of risk. The judgment does not answer the question, but leaves it open with a suggestion that it does matter.

HFW comments

As a practical “take away point”, for a carrier who wants to be sure that the Article I(c) exception applies, it would be prudent to ensure that it is possible to identify, with certainty, which constituent elements of the cargo (homogenous or otherwise) were carried on deck. So, for a cargo of gold ingots it would be sensible to record the serial numbers on the face of the bills of lading for those which are carried on deck, not just the total number of ingots.

To illustrate the point further, using a different example, if 50 apparently identical tractors were shipped and 10 were loaded on deck and 40 below, and the carrier wants the Article I(c) exception to apply, so that the deck cargo is not “goods” for the purpose of the HVR, it is recommended that the carrier identify on the bills of lading which 10 tractors were carried on deck, because once they are all discharged ashore, if one of them was damaged, it would be necessary to know which regime applies to that particular damaged tractor. So, the tractors’ chassis numbers would need to be identified on the bills of lading, or the tractors would need to be made identifiable by some other means e.g. a numbered seal or a tag. If it is not possible to identify which goods, wares, merchandise or articles” were carried on deck then the default position should be that they are “goods” and subject to the HVR.

HFW acted for the successful owners. If you require guidance on any of the issues addressed in this briefing, please do not hesitate to contact the author.

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