The Taikoo Brilliance:, NZ timber making law in the UK

Pedregal Maritime SA owned the Taikoo Brilliance, which carried a cargo of NZ pine logs from New Zealand to Kandla, India.  Logs were carried partly on and partly under deck.  Batvia Eximp & Contracting were holders of four bills of lading issued in respect of the cargo, which stated the quantity of logs that were to be carried on deck without specifically identifying those logs.  As the cargo was shipped from New Zealand, the bills of lading were compulsorily subject to the Hague-Visby Rules (HVRs) under the Maritime Transport Act 1994.

Batvia alleged misdelivery of the cargo in Kandla.  Despite the bills of lading being subject to a London arbitration clause, Batvia issued a writ in the High Court of Singapore for the arrest of a sister ship of the Taikoo Brilliance.  But Batvia did not commence London arbitration proceedings until more than one year after the delivery of the cargo.

Following conclusion of the arbitration, two novel points of law relating to the proper interpretation of the HVRs were appealed to the UK High Court, and then the UKCA.  These were:

1. Did Batvia’s action for security in Singapore amount to a “suit” for the purpose of Art III(6) of the HVRs?
2. Where cargo is carried partly above and partly under deck, what description is required on the bill of lading for the deck cargo to fall outside the definition of “Goods” under Art I(c)?

Art III(6) of the HVRs provides that, unless suit is brought within one year of the delivery of goods, the carrier will be discharged from liability.

This meant that, unless Batvia’s action for security in Singapore (namely the arrest of the Taikoo Brilliance’s sister ship) amounted to a “suit” brought within one year of delivery, Batvia would be barred from bringing a claim in respect of the cargo to which the HVRs applied.

The Court considered that the Art III(6) timebar has two purposes:

• Requiring cargo interests to promptly pursue claims for loss of or damage to goods.
• Enabling shipowners to “clear their books” if no claim has been brought within 12 months, removing commercial uncertainty as to whether a claim will be brought.

Those purposes would not be served by allowing “suit” to include proceedings which do not seek to establish liability on the part of the shipowner.  Otherwise, cargo interests could file an action for security within one year of delivery, and then be able to commence substantive proceedings at any time thereafter (subject only to domestic limitation provisions).

As such, the UKCA found that “suit” under Art III(6) is limited to proceedings that can decide the claim.  That did not include Batvia’s action for security, and so its claim under the HVRs was time-barred.

The HVRs exclude deck cargo (being cargo that the bill of lading states is being carried on deck and is so carried) from the definition of “Goods” under Art I(c).  This is because deck cargo is exposed to much greater risk than cargo carried below deck and so the HVRs’ allocation of risk between shippers and carriers is not appropriate. If the logs carried above deck were not “Goods” under Art I(c), the HVR timebar did not apply to Batvia’s claims in respect of that cargo.

For deck cargo to fall outside the HVR definition of “Goods”, they must be “stated” in the contract of carriage as being carried on deck.  In turn, this necessitates the alleged deck cargo to be identified or identifiable from the bill of lading as the cargo that is the subject of the dispute. If the entire cargo is carried above deck, then it will be deck cargo and outside the scope of the HVRs.  Difficulties arise where (as here) cargo is carried partly above and partly below deck.

In the case of goods that are not homogenous, or co-mingled cargoes shipped under different bills of lading to different consignees, the UKCA considered that the bill of lading must specifically identify which items are carried on deck, such as by parcel or serial number.  That allows a shipper to make an informed assessment of their risk and arrange insurance accordingly.  All other insufficiently identified cargo is deemed to be “goods” and subject to the HVRs.

While the bills of lading held by Batvia stated the total number of logs that were carried above and below deck, they did not specifically identify them.  The logs were of varying weights and therefore values.  As the specific logs stored below deck were not “stated” of the bill of lading, the NZ logs were all “goods” and subject to the HVRs.  Batvia’s claim was entirely time-barred.

The Court did not decide what the situation would have been if the cargo had been homogenous (such as gold ingots of an identical weight and value).  However, it did make obiter comments that suggest that even where cargo is homogenous, identification by serial number on the bill of lading may still be required.

The Taikoo Brilliance provides a cautionary tale for New Zealand cargo interests (and their insurers).

In a situation where loss or damage to goods has occurred, cargo interests should preserve their ability to pursue carriers under the HVRs by commencing substantive proceedings in a court of competent jurisdiction prior to the expiry of the Art III(6) timebar.  An action seeking security will not be enough.

Where the cargo includes cargo above and below deck, shippers should check whether that the bill of lading specifically lists the cargoes to be carried on deck by reference to serial or parcel number.  If it doesn’t, the cargo will by default be “Goods” subject to the limits imposed by the HVRs, despite the higher risk profile of the cargo carried on deck.

This publication is intended as a general overview and discussion of the content dealt with. It should not be used in any specific situation, in which case you should seek specific legal advice.