A time to suit: lessons from The Taikoo Brilliance on carrier’s liabilities and deck cargo

In an important decision on the interpretation of the Hague-Visby Rules, the Court of Appeal has held that: (1) ‘suit’ for the purposes of Article III rule 6 means proceedings to establish the carrier’s liability, and not merely proceedings for security; and (2) where the cargo is comprised of items of differing value, the statement on the bill of lading must specifically identify the cargo to be carried on deck in order to engage the deck cargo exception in Article I(c).
 

BACKGROUND

Pedregal Maritime SA (“Owners”) were the owners of the vessel Taikoo Brilliance (the “Vessel”) and carriers under four bills of lading issued in respect of a cargo of New Zealand pine logs (the “Cargo”), carried from New Zealand to Kandla, India. The claimant and appellant, Batavia Eximp & Contracting (S) Pte Ltd (the “Holders”), held those four bills of lading (the “Bills”).

Importantly, the timber pieces varied in weight and therefore in value. Two of the four Bills recorded the number of pine logs carried on deck but did not identify the individual items. The Cargo was discharged at Kandla in September 2019 against a letter of indemnity provided by the charterer to one or more third parties. The Holders alleged misdelivery.

THE ARBITRATION

The Holders issued a writ in the High Court of Singapore for the arrest of a sister ship of the Vessel. The arrest was effected, security provided, and the sister ship released. Owners obtained a stay of the Singaporean proceedings in order to pursue arbitration in London, in accordance with the arbitration clause in the Bills. The Holders did not commence arbitration until over a year after delivery of the Cargo.

The Bills were compulsorily subject to the Hague-Visby Rules (the “HVR”) because the Cargo was shipped from New Zealand. The Owners submitted that the Holders’ claim was time-barred under Article III rule 6 of the HVR. The sole arbitrator held that the Singapore arrest proceedings were not “suit” within the meaning of the HVR and therefore did not stop time running. He also concluded that the statement on the Bills regarding the part of the Cargo carried on deck was sufficient, such that the Article I(c) exclusion applied and those goods did not fall within the HVR regime.

THE HIGH COURT DECISION

Mr Justice Knowles (the “Judge”) was asked to consider two questions: (1) whether the Singaporean proceedings fell within the definition of “suit” for the purposes of Article III rule 6 HVR; and (2) where cargo covered by a bill of lading is carried partly on and partly under deck, what statement must there be on the face of the bill to engage the exception in Article I(c) (i.e. the exclusion of deck cargo from the definitions of ‘Goods’).

The Judge dismissed the parties’ appeals, holding that: (1) “suit” means “substantive proceedings that can decide the claim”; and (2) while a clearer statement as to deck cargo might have been preferable, the Arbitrator’s finding regarding Article I(c) was not wrong in law.

THE COURT OF APPEAL

Question 1: Is an action for security (i.e. the Singaporean proceedings) “suit” under Article III rule 6 of the HVR?

The Court of Appeal dismissed the Holders’ appeal and held that “suit” in Article III rule 6 means proceedings to establish the carrier’s liability, not merely proceedings for security.

Lord Justice Phillips, who gave the leading judgment, undertook a thorough analysis of the language, the travaux préparatoires of the HVR, and the object and purpose of the provision in accordance with the approach to interpretation of the HVR laid down in the Supreme Court’s decision in The Giant Ace [2024] UKSC 38. The starting point was to ascertain the ordinary meaning of Article III rule 6. The term “suit” is not defined or qualified in Article III rule 6, so its meaning must be ascertained from the context in which it is used. In the present context, bringing suit within time prevents the discharge of the carrier from all liability for loss and damage. The natural reading is therefore that “suit” must be proceedings which are seeking to establish such liability.

The nature and operation of a time bar is well understood; it requires that the claim to establish liability be brought within a specified time. The Court held that there was no reason to read Article III rule 6 as operating differently, a conclusion supported by the Court of Appeal's decision in The Kapetan Markos [1986] 1 Lloyd’s Rep 211 and Phillips J's decision in The Pionier [1995] 1 Lloyd’s Rep 223. The Court emphasised that the Article III rule 6 time bar exists to ensure the prompt pursuit of substantive claims. If security proceedings alone sufficed to satisfy the time bar, claim periods would become open-ended, contrary to precedent that the time bar ‘give[s] the carrier the certainty that it can clear its books if a substantive claim has not been brought within one year, removing any uncertainty as to whether alleged loss or damage will result in a substantive claim.’

Question 2: what must be stated on the face of a bill of lading for cargo to be carried “on deck” pursuant to Article I(c)?

The cargo was comprised of individual pieces of timber varying significantly in weight and value. Two of the four Bills noted that some of the Cargo was carried on deck, but did not identify precisely which items. It was common ground that the HVR would apply to the entire Cargo unless there was an ‘effective statement’ that would confirm the status of the relevant goods as ‘deck cargo’ for the purposes of Article 1(c). The dispute on this point therefore concerned the requirements for such a statement.

Owners contended that an item of cargo would only be excluded from the HVR regime by application of Article 1(c) if it was specifically identified (e.g. by parcel number) as being carried on deck, and that the statements in the present case were not sufficient. Holders argued that it was sufficient if the statement enabled an assessment of ‘what is at risk’ on deck, which may not always require identification of specific items or parcels.

The Court held that purpose of Article I(c) is to exclude deck cargo, which is generally at higher risk than cargo carried below deck, from the ambit of the HVR. If cargo is carried on deck (and is stated to be deck cargo on the bill of lading) the carrier’s duties to exercise due diligence and care under Article III rules 1 and 2 do not apply, and neither do the exclusions and limitations of liability in Article IV and the time-bar in Article III rule 6. It therefore follows that the required statement must identify the cargo with sufficient specificity to enable the shipper and any subsequent holders of the bills of lading to manage their risks, including the arrangement of appropriate insurance. Where the cargo is comprised of items of differing value, the statement on the bill of lading must “specifically identify the cargo to be carried on deck, such as by parcel number or serial number” if the Article 1(c) exception is to be engaged.

The Court, granting the Owners’ appeal, held that the statement on the Bills did not satisfy Article 1(c) and therefore did not exclude the timber carried on deck from the HVR. Phillips LJ clarified that the Court’s finding did not apply to a situation where the cargo was homogenous or otherwise did not differ in value between constituent elements. That question therefore remains open.

Key Takeaways

• A “suit” which has the effect of stopping time under Article III rule 6 must be one brought in a competent forum to establish liability between the holder of the bill of lading and the carrier for loss of or damage to goods. The Singapore arrest (merely a claim for security in a forum which, given the arbitration clause, could not determine liability) was not a “suit” for these purposes.

• On the deck cargo issue, who wants the benefit of the HVR? Because the arbitration was commenced more than a year after delivery, the Owners argued that the on-deck cargo was covered by the HVR, so as to have the benefit of the time bar, and the bills of lading holders argued it was not. Commonly, the positions are reversed: carriers want deck cargo outside the HVR so that they can exclude liability on their own terms.

• The practical implication is that, where part only of a consignment is carried on deck and the specific pieces or items are different, the bill should specifically identify the on-deck cargo, such as by parcel or serial number. For homogeneous cargo, however, the point was left open, but given the doubts expressed the Master would be well advised to identify the on-deck cargo in every case to protect the Owners’ position in light of this decision.