A vessel was chartered for the carriage of cargo from the Mediterranean to the UK on voyage terms. Clause 11 provided as follows:
“Any dispute arising from and in respect of this Charter Party shall be referred to and settled by arbitration in London … Any claims must be made in writing within 3 (three) months of final discharge and where this is not complied with, the claim shall be deemed to be waived and absolutely barred.”
Cargo was never in fact loaded. Charterers had terminated the charterparty on 24 November 2009 alleging the vessel was not in every way fitted for the voyage. Owners considered Charterers’ termination was wrongful and accepted the repudiatory breach on 27 November.
On 8 February 2010 Owners appointed an arbitrator and in response Charterers appointed an arbitrator on 26 February. However Charterers asserted that the claim was time-barred. On 1 March 2010, Owners for the first time indicated the nature of their claim, whilst at the same time denying that it was time-barred.
Whilst Owners accepted that no claim had been made “in writing” within the meaning of clause 11 until 1 March 2010 (i.e. more than three months after the latest date on which the charterparty was purportedly terminated), they contended that clause 11 would not be applicable to the claim as no cargo was loaded so there was no “final discharge”. In the alternative, they argued that time would run from the date on which discharge would have been completed as if the voyage had been performed.
Charterers argued that the words “final discharge” had to be given some other meaning when discharge never occurred.
The Tribunal held that the claim was in time.
The Charterers, inter alia, had sought to argue that it was the clear commercial intention of both parties that they would know within three months after the charter concluded whether any claims existed. But that was not what the clause said. It referred to final discharge and not the ending of the charter. It was not always the case that the two dates were the same. In the context of a contract of carriage, “final discharge” on any view meant of cargo. The conclusion that a six year limitation period would apply when there was no discharge of cargo was far from absurd and could not lead the Tribunal to find the parties did not intend what the clear words imported. There was no basis for implying any additional terms or wording. Since no cargo was loaded, there was no final discharge (of cargo) and the clause did not operate.
As has been discussed in a number of articles on the Steamship Mutual website, the draconian nature of time bars means they are more often than not, read strictly. Very clear words have to be used, and any ambiguity will be applied against the party seeking to rely on the provision.
The decision in this case - London Arbitration 10/14 - is yet another example of time bar clauses (which seek to promote certainty) being construed in-line with their precise wording.
But what if the claim had been by Charterers against Owners? The finding of the Tribunal would have been the same because there was no “final discharge” but would that have been an end to it? The answer confusingly is not necessarily.
Charterparties often incorporate a Clause Paramount into the charter itself. If that is the case, a Charterer needs to ask in relation to any category of loss or claim - is it connected to or would it likely be pleaded on the basis of breach(es) of Hague and Hague-Visby obligations of seaworthiness (which might arise at each port) or duties of care in loading carrying caring for and discharging the cargo?
If the answer is that it would, then there is a potential for that claim to be subject to a one year time limit.
Article III Rule 6 of the Hague Rules can cover proceedings by the charterers against the Owners (albeit not claims, by Owners against their Charterers). This Article provides:
“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.”
(our emphasis)
As alleged breach(es) of seaworthiness obligations tend to be the foundation stone on which many types of claims are laid then this can bring the operation of the Hague Rules one year time bar into more general effect.
In this respect it is noteworthy that Article III Rule 6 includes the words “or the date when the goods should have been delivered” which expressly deals with the point Charterers had sought to make in London Arbitration 10/14 – that the words “final discharge” should be given some wider meaning so as to deal with situation when no cargo is loaded.
In “The OT Sonja” [1993] 2 Lloyd’s Rep. the Court of Appeal held that Article III Rule 6 applies to claims in relation to goods even if not shipped. This decision was affirmed in Linea Naviera Paramaconi SA v Abnormal Load Engineering 2001 1LLR 763
So what does that mean? Probably that if Charterers had brought a claim, even though the three month time bar in clause 11 would not have been applicable, had the Hague or Hague Visby Rules been incorporated into the charter, their claim would have been subject to a 12 month time bar, not the much longer six year statutory time bar that might otherwise have been thought (and would for a claim brought by Owners) to apply.
This risk of different applicable time bars emphasises the need for Charterers to consider the nature of their claim and to take the following into consideration:
- Does the contract have general words of incorporation of a clause paramount or provision incorporating the Hague or Hague Visby Rules or variant in the standard form, or as an additional clause? Are there specific time limits incorporated for certain types of claim?
- If Hague or Hague Visby incorporation does exist, then a comprehensive analysis of the claims that may already exist or potentially might be made should be conducted.
- Any claims that are sufficiently closely connected to cargo may be subject to a 12 month time limit.
By way of example below are some of the claims that have been held to be sufficiently connected to cargo (“pure” cargo claims will of course be included) and therefore subject to the one year Hague or Hague Visby Rules time bar:-
(i) loss and delay at the loadport subsequent to hold failure;
(ii) additional cleaning expenses and stevedore standby time after vessel’s hold failure;
(iii) the costs of investigating an alleged contamination;
(iv) financial losses on an alternative fixture to that originally proposed but with the same cargo onboard;
(v) additional port costs of a substitute voyage;
(vi) the cost of hire of specialist loading equipment and expertise.
Another context in which the issue of time bars rears its head is where the Inter Club Agreement (“ICA”) is incorporated into the relevant charterparty. Clause 6 of the ICA provides for a time bar of 24 months from the date of delivery of the cargo or the date the cargo should have been delivered. Clause 2 states that the terms of the ICA “shall apply notwithstanding any provision of the charterparty or rule of law to the contrary”.
The operation of time bar clauses and the ICA 1996 was considered in "The Genuis Star 1" [2011] EWHC 3083 (Comm) [http://www.steamshipmutual.com/publications/Articles/GeniusStar0212.htm]. This case involved a claim for indemnity under the ICA. The charterparty incorporated the ICA 1996 (with its 24 month time bar and clause 2 conflict provision as above), contained an amended Centrocon arbitration clause which required a claim to be made in writing and an arbitrator to be appointed within 12 months of final discharge, and contained a clause paramount incorporating the Hague Rules.
Applying a “reasonable man” test, it was held that by operation of clause 2 of the ICA, the 24 month time bar in clause 6 prevailed over any other time bar provision incorporated into the charter, including any Hague or Hague Visby time bar.
The result of that case is that while in disputes not covered by the ICA other time bar provisions may take effect, where a cargo claim is to be apportioned under the ICA the 24 month time bar in clause 6 will prevail.
As ever time bars are potential traps for the unwary and have the propensity to raise many a thorny issue.
Article by Sian Morris
