On 5 May 2011, 18,000 mt of Indian maize (cargo) was carried on the MV Sur (formerly owned by Derya) from India to Jordan pursuant to a voyage charterparty on an amended BIMCO form. All five bills of lading for the cargo, issued in Mumbai on the Congen form, contained a general paramount clause, giving contractual effect to the the International Convention for the Unification of Certain Rules of Law relating to Bills of Lading 1924 (the Hague Rules). Article 3.6 of the Hague Rules provides for a one year time bar for claims. The bills of lading also incorporated the terms of the voyage charterparty which provided for London arbitration and English law.

The cargo was purchased by Dera (claimant) from Rika for USD 6,000,000. However, the cargo was damaged by rain during loading and was rejected by the Jordanian customs authorities at the port in Aqaba on 8 September 2011. The claimant proceeded in Jordan on 12 September 2011 against Derya (defendant), seeking damages of approximately USD 8,000,000. The claimant applied to the Jordanian customs authorities, unsuccessfully, for a reconsideration of the decision, but, successfully, for permission to fumigate the cargo on board the MV Sur to preserve its condition.

The defendant applied for an anti-suit injunction on 4 October 2011 to restrain the claimant from taking further steps in the Jordanian proceedings as it would breach the arbitration agreement. The claimant consented, and the Jordanian proceedings were struck out.

Next, the defendant applied, unsuccessfully, to the Jordanian Court for an order obliging the claimant and the Jordanian custom authorities to permit the discharge at another Jordanian port. Additionally, the American Club (defendant’s insurers) issued a letter of undertaking to secure the vessel in lieu of detention.

Subsequently, the MV Sur sailed to Türkiye with the cargo on board without the consent of the claimant or the Jordanian customs authorities. The cargo remained on board the MV Sur for five months after arriving the port of Mersin, before being discharged and sold pursuant to a judicial sale ordered by the Turkish court. The proceeds of the sale were, pursuant to two enforcement orders of the Turkish court, transferred to the defendant. Shortly after, the MV Sur was sold for scrap.

The LMAA tribunal comprising of Mr David Aikman (appointed by defendant’s insurers), Mr Edward Mocatta (appointed by claimant; the claimant’s counterclaim for damage to and/or loss of cargo (cargo claim) fell within the scope of Mr Mocatta’s appointment) and Mr James Baker was convened on 7 October 2011. However, no further formal procedural steps were taken by either side in the arbitration until March 2015. Notwithstanding this, the cargo claim was commenced within the one year time limit under art 3.6. The tribunal made an award on 13 June 2017, dismissing the cargo claim.

The award noted the issue of geographical deviation that was argued but not pleaded.

The tribunal determined two preliminary issues and struck out the cargo claim. The tribunal found:

1. The cargo claim was not extinguished by the Turkish court:

• The claimant did not submit to the jurisdiction of the Turkish court;

• The Turkish court did not consider the merits of the cargo claim;

• No issue or cause of action estoppel arose because the cargo claim, as particularised in the arbitration, had not been considered by the Turkish court; and

• There was no evidence of an unequivocal representation by the claimant or detrimental reliance by the defendant.

2. There had been inordinate and inexcusable delay on the part of the claimant which caused serious prejudice to the defendant, creating a substantial risk that it was not possible to have a fair resolution of the cargo claim.

• The applicable limitation period for the cargo claim should be the yardstick of inordinate delay. The applicable limitation period was, pursuant to art 3.6, one year, even in tort or serious breach of contract such as a geographical deviation.

• The wording ‘in any event’ under art 4.5 suggested that the limitation provision applied even in cases where the breach is of the obligation to stow cargo below deck. This applied to time bar cases under art 3.6 as well.

• The entire period (since accrual of the cargo claim) was to be taken into account when considering whether the delay was inordinate. There was no basis to exclude the period after commencement of the cargo claim but before the limitation period had expired.

• The claimant particularised the cargo claim in the Jordanian proceedings as early as 12 September 2011. The cargo claim was particularised in the arbitration on 1 June 2015. Hence, three years and nine months had lapsed.

• The delay was inordinate and inexcusable. It was inordinate for there was a period of three years and nine months with the one year limitation period applicable under the Hague Rules. It was inexcusable as the principal excuse for the delay proffered by the claimant was the claimant’s impecuniosity. The delay caused prejudice, threatening the fair resolution of the issues.

The claimant filed an application to challenge the award for serious irregularity (contending the tribunal’s failure to conduct the arbitration fairly and impartially) and points of law (the claimant was granted permission to appeal) (s 68 and 69 of the Arbitration Act 1996 (UK), respectively). The four points of law were:

1. Whether a claim which was particularised within the six year period applicable to contractual claims pursuant to s 5 of the Limitation Act 1980 (UK) could nevertheless be struck out for inordinate delay under s 41(3) of the Arbitration Act 1996 (UK) because the parties had contracted for a shorter period ie one year under art 3.6;

2. Whether, in a contract evidenced by a bill of lading subject to the Hague Rules, a geographic deviation precludes a carrier from relying on the one year time bar created by art 3.6;

3. Whether the period between the time that the cause of action arises and the expiry of the contractual time limit is to be taken into account when assessing whether the delay is ‘inordinate’ for the purpose of s 41(3), where the one year time bar created by art 3.6 applies; and

4. The proper order, burden and/or standard of proof applicable to a tribunal’s assessment of whether a delay is ‘inexcusable’ for the purpose of s 41(3).

The defendant served particulars of their claim seeking, inter alia, a declaration of non-liability for the cargo claim and an order that the LOU be released (declaration claim).

Held: The court granted the claimant’s challenge under s 68 on the points of law raised under s 69.

The proper order, burden and/or standard of proof applicable to a tribunal’s assessment of whether a delay was ‘inexcusable’ for the purpose of s 41(3) lies on the applying party to prove on a balance of probabilities that the inordinate delay in question was inexcusable. Normally, it would be the responding party that identified a credible excuse for the delay, but each case was fact-specific.

First issue

The claim could be struck out for inordinate delay because the parties contracted for one year under art 3.6 which represented the commercial compromise between stakeholders in the maritime industry when the Hague Rules were agreed. Parties ought to proceed with despatch where they had agreed to the one year time bar in the Hague Rules. There was no reason why the one year rule was not objectively relevant for the purpose of assessing inordinate delay. The short limitation period was important to induce cargo owners to bring their suits. The judge in Deep Sea Maritime Ltd v Monjasa A/S [2018] EWHC 1495 (Comm) [49] (CMI154), citing Professor Michael Sturley, noted that the time of suit provisions were the cargo interests’ other big victory at the Hague Conference, with their effect being seen as guaranteeing a cargo claimant a full year in which to bring suit. Moreover, the limitation period under s 5 of the Limitation Act 1980 (UK) was merely 'a' yardstick, and not 'the' yardstick.

Second issue

The judge held that a geographic deviation under a contract evidenced by a bill of lading subject to the Hague Rules precluded a carrier from relying on the one year time bar created by art 3.6, but only because she was bound by Hain Steamship Company Ltd v Tate & Lyle Ltd [1936] 41 Com Cas 350, which was not impliedly overruled by the House of Lords’ later decisions in Suisse Atlantique and Photo Production.

It had not been conclusively decided whether deviation cases and the warehouse cases were dead and buried along with the doctrine of fundamental breach. The tenor of modern judicial and academic opinion seemed to favour retaining the Hague Rules protection even in cases of deviation owing to terms relating to claims procedures not being abrogated in the same way as exceptions clauses or other clauses germane to the loading, carriage and delivery of the goods. The alternate view, favoured by some judges, was that the fundamental breach doctrine had been abolished even for deviation so that, where charterer or goods-owner elected to terminate, the applicability of contractual exceptions clauses was a matter of construction, and that deviation cases were assimilated to the ordinary law of contract.

The judge favoured the alternate view and approached the applicability of contractual exception clauses as a matter of construction. She held that art 3.6 was sufficiently broad to apply to circumstances of a geographic deviation. This was clear from the use of the words ‘[i]n any event’ at the start of the clause. The most natural meaning of the words ‘in any event’ in art 3.6 was ‘in every case’. The Hague Rules, as an international convention, was to be construed on broad principles of general acceptance. The broad purpose underlying art 3.6 of the Hague-Visby Rules was that the time limit was of general applicability, which would promote certainty and predictability. Article 3.6 clearly applied to time limits - it provided that the carrier should in any event be discharged from all liability whatsoever unless suit was brought within one year.

Even though art 3.6 of the Hague-Visby Rules differed from that in Hague Rules with the addition of the word ‘whatsoever’, and therefore adopted an even wider language, it was neither necessary nor instructive to compare the wording of the Hague Rules with that of the Hague-Visby Rules. The terms of the Hague-Visby Rules could not conceivably affect the construction of the Hague Rules adopted 45 years earlier (The Aqasia [2018] 1 Lloyds LR 530 [59] (CMI123)). Additionally, the word ‘whatsoever’ broadened the nature of the ‘liability’, and not the triggering words ‘[i]n any event’.

Article 3.6 of the Hague-Visby Rules neither distinguished between fundamental and non-fundamental breaches of contract, nor between breaches which amounted to deviation and breaches which did not. There was no reason for unauthorised loading of deck cargo to be regarded as a special case. Accordingly, the deviation cases should now be assimilated into the ordinary law of contract.

However, following the ratio of Hain Steamship, as she was required to do, the judge held that a geographic deviation did preclude the defendant from relying on the one-year time bar created by art 3.6. Accordingly, the tribunal erred in law in concluding that, in a contract evidenced by a bill of lading subject to the Hague Rules, a geographic deviation did not preclude a carrier from relying on the one year time bar created by art 3.6.

Third issue

The assessment of whether the delay was ‘inordinate’ (s 41(3)) involved taking into account the period between the time that the cause of action arose and the expiry of the contractual time limit. Additionally, the inordinate and inexcusable delay by the plaintiffs within the limitation period could be relied upon to support the defendants’ applications to strike out after the expiry of the limitation period.

Fourth issue

The legal (or persuasive) burden of proof lay at all times on the defendant to establish (on a balance of probabilities) not only that there was inordinate but also inexcusable delay.