On 18 December 2011, the vessel MV Ikan Jahan (the ship) grounded while en route from Newcastle, Australia to Tuticorin, India carrying, among others, a cargo of copper concentrate (the cargo). The grounding took place in poor sea conditions on Manuk Island during passage through the Banda Sea, Indonesia. The ship remained grounded for four weeks. The ship was salvaged by Fukada Salvage Marine Works Co Ltd (Fukada) after Ever Rock Navigation SA (Ever Rock) entered an agreement for the salvage of the ship and the cargo on 19 December 2011. However, the amount of salvage remuneration was not agreed until 16 October 2014 when a tripartite settlement agreement was entered into between Ever Rock, SAH & Co (who represented the owners and underwriters of the cargo) and Fukada. The amount payable by the copper cargo owners to Fukada was USD 2,718,675.24. This was paid by AEGIS Electric & Gas International Services Ltd (AEGIS) and formed part of the plaintiff’s claim against Ever Rock. No payment in respect of general average was made by the plaintiffs or their insurers.

The ship then proceeded to Singapore for repairs and resumed the voyage to India. The ship arrived there on 13 February 2012 and discharged the cargo.

At the time of the grounding, the ship was under time charter to PCL (Shipping) Pte Ltd (PCL). It was also under voyage charter from PCL as disponent owner to Tritton Resources Pty Ltd (Tritton). The signature provisions of the relevant bill of lading indicated that it was issued 'for and on behalf of Ever Rock' as the head owner. Therefore, Ever Rock was regarded as the carrier for the purposes of the plaintiffs’ claims.

There were three plaintiffs in the action. Tritton, Sterlite Industries (India) Ltd (Sterlite) and JP Morgan Metals and Concentrates LLC (JP Morgan) although that company name had changed during the action and was also variously called Freepoint Metals and Concentrates and Sempra Metals and Concentrates Corp. For convenience, the third plaintiff is referred to as JP Morgan.

The plaintiffs asserted that they could claim against Ever Rock under the bill of lading. Any such claim would therefore extinguish the cargo owners’ obligation to contribute to salvage and general average. Ever Rock asserted that the cargo owner who had title to sue was time barred by art 3.6 of the (Amended) Hague-Visby Rules which provides a limitation period of 12 months from the date of delivery or putative date of delivery. Ever Rock and the cargo owners’ insurer had negotiated over some years and during that time various extensions to the time bar were granted. However, Ever Rock argued that the limitation period was not extended in favour of the plaintiff who actually suffered the loss, the second plaintiff, Sterlite.

The first sale of the cargo (24 January 2007) was between Tritton, as seller, and JP Morgan, as buyer. The agreement required 90% payment within two days of the bill of lading date. JP Morgan paid the purchase price to Tritton on 14 November 2011 and received the bill of lading on 17 November 2011. The remainder was to be paid within 14 days of determination of the final weight, assays and prices. Title and risk of loss or damage passed from the seller to the buyer at the ship’s rail.

The second sale of the cargo (12 October 2011) was between JP Morgan, as seller, and Sterlite, as buyer on a CIF agreement The contracting parties agreed that title would pass to Sterlite when the first provisional payment was made. Sterlite made payment on 14 February 2012, the day after the ship arrived in India. However, the parties agreed that the risk of loss and damage would pass when the cargo was on board the ship at the port of loading. Therefore, at the date of the grounding, risk had passed to Sterlite but title had not. JP Morgan had insured the cargo through a Cargo Open Cover policy issued by Lloyd’s. There were several underwrites of the policy through the lead insurer AEGIS. JP Morgan was insured with respect to the cargo, as was Sterlite when it assumed risk under the CIF contract.

JP Morgan received the bill of lading around 17 November 2011. It endorsed the bill of lading in blank and provided it to Sterlite around 8 February 2012. Around 10 February 2012, Sterlite surrendered the original bill of lading to PCL in order to receive the cargo. PCL passed the request to Ever Rock’s agent and Sterlite received delivery from Ever Rock against presentation of the bill of lading.

The parties requested a determination on the following questions under r 30.1 of the Federal Court Rules 2011 which permits the Court to hear questions arising in the proceedings separately from the remaining issues in the litigation:

1. whether the defendant granted an extension of the limitation period under art 3.6 of the (Amended) Hague-Visby Rules to the plaintiffs to commence these proceedings;
2. whether the limitation period provided by art 3.6 applies by extension of time to these proceedings;
3. if any limitation applies to these proceedings, whether the defendant is estopped from relying on that defence;
4. what are each of the plaintiffs’ interests in the cargo and whether any of the plaintiffs has title to sue;
5. whether the plaintiffs are entitled to claim a loss in respect of the salvage agreement with Fukada.

Held: The answer to question 1, is yes, the defendant granted an extension of the limitation period under art 3.6 of the (Amended) Hague-Visby Rules to the plaintiffs to commence these proceedings. The bill of lading is a contract to which the provisions of the Carriage of Goods by Sea Act 1991 (Cth) (COGSA) and the (Amended) Hague-Visby Rules set out in Schedule 1A apply. Section 11(1) of COGSA provides that the parties are taken to have intended the laws of the place of shipment are intended to apply to the contract. The place of shipment was New South Wales, therefore the Sea-Carriage Documents Act 1997 (NSW) applies to the bill of lading.

Art 3.6 of the (Amended) Hague-Visby Rules provides:

Subject to paragraph 6^bis  the carrier and the ship shall in any event be discharged from all liability whatsoever in respect of the goods, unless suit is brought within one year of their delivery or of the date when they should have been delivered.

This period may, however, be extended if the parties so agree after the cause of action has arisen.

In the absence of any extension of the limitation period, the limitation period would have expired on 18 December 2012. The ship’s P&I Club granted several extensions on behalf of Ever Rock at the request of the cargo insurers. Prior to the expiry of the last extension, the plaintiffs commenced proceedings alleging that Ever Rock breached the contract of carriage evidenced by the bill of lading and in particular breached its obligation to exercise due diligence to make the vessel seaworthy before and at the beginning of the voyage pursuant to its obligation under art 3.1 of the (Amended) Hague-Visby Rules. This obligation on the shipowner to exercise due diligence to make the vessel seaworthy is the same in tort and contract and subject to the defences in arts 3 and 4 of the Hague-Visby Rules.

The extensions granted fell into two tranches. The first group of extensions to 18 December 2015 were granted to all those interested in the cargo, and thus Sterlite would have had the benefit of them. The dispute arises from the extensions granted from 11 December 2015. Ever Rock asserted that each extension was, of itself, a new agreement which after 18 December 2015 became new agreements between different parties. However, the plaintiffs submit that each request and extension was a variation of the contract of carriage evidenced by the bill of lading.

Agreements between parties in highly specialised industries such as shipping must be construed in the commercial context in which they are negotiated. Here, the parties can be expected to know that AEGIS as the cargo insurer had indemnified the cargo owners and had an interest in any cause of action which vested in any of its insured in respect of the grounding.

The commercial and legal context also includes knowledge that cargoes are commonly transferred under CIF sales and insurance of such cargo is assigned by the seller by endorsement or other customary practice. In this respect, a reasonable person in the position of the parties would have been aware that the precise identity of the assured may not be readily apparent even though the liability of the insurer is clear.

Therefore it follows on proper construction of the agreement reached on 11 December 2015 that Ever Rock granted an extension to AEGIS for itself and its assureds in respect of actions arising in relation to the carriage of the cargo under the bill of lading. The extension was granted under art 3.6 of the (Amended) Hague-Visby Rules and the consideration was the forbearance of AEGIS commencing subrogated actions in the name of its assureds against Ever Rock. Further extensions in the same form permitted the commencement of these proceedings within the extended period.

The meaning of question 2 is ambiguous. However, if the question intended to be asked is ‘whether that limitation period or time bar is a good defence to any of the claims advanced by the plaintiffs?’, it should be answered ‘the time bar in art 3.6 of the (Amended) Hague-Visby Rules does not afford the defendant any defence to the plaintiffs’ claims in this action. The time bar was extended by the defendant in favour of all plaintiffs and the action was commenced within that extended period’.

It is not strictly necessary to consider the case based upon estoppel in light of the answers to questions 1 and 2; however, in the absence of any claim in contract, the representation made by the defendant and the plaintiffs’ reliance on it to their detriment would found a valid plea of estoppel.

In answer to question 4, Sterlite has title to sue under the bill of lading. JP Morgan is entitled to pursue its independent claim in tort where such cause of action arose when it had title to the cargo. Tritton has no identifiable cause of action against Ever Rock in relation to the cargo..

In answer to question 5, Sterlite and JP Morgan are entitled to sue in respect of any loss in respect of the salvage agreement. Tritton has no entitlement to make any claim in respect of it.