Batavia Eximp & Contracting (S) Pte Ltd v Pedregal Maritime SA

The full English text of Article III rule 6 and rule 6 bis of the HVR is as follows:

“6.

Unless notice of loss or damage and the general nature of such loss or damage be given in writing to the carrier or his agent at the port of discharge before or at the time of the removal of the goods into the custody of the person entitled to delivery thereof under the contract of carriage, or, if the loss or damage be not apparent, within three days, such removal shall be prima facie evidence of the delivery by the carrier of the goods as described in the bill of lading.

The notice in writing need not be given if the state of the goods has, at the time of their receipt, been the subject of joint survey or inspection.

Subject to paragraph 6bis 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, however, may be extended if the parties so agree after the cause of action has arisen.

In the case of any actual or apprehended loss or damage the carrier and the receiver shall give all reasonable facilities to each other for inspecting and tallying the goods.

6 bis. An action for indemnity against a third person may be brought even after the expiration of the year provided for in the preceding paragraph if brought within the time allowed by the law of the Court seized of the case. However, the time allowed shall be not less than three months, commencing from the day when the person bringing such action for indemnity has settled the claim or has been served with process in the action against himself.”

In the French text the word “action” is used for proceedings referred to in rule 6 (“suit” in the English version) as well as for an action for an indemnity against a third person in rule 6 bis (and also for an action against the servant or agent of the carrier referred to in Article 4 bis). The potential relevance of that is discussed below.

Although the meaning of “suit” in Article III rule 6 has been considered in numerous authorities (both in relation to the Hague Rules and the HVR), they have not addressed, at least directly, whether that term encompasses proceedings purely seeking security (typically by the arrest of a vessel) for a subsequent substantive claim for loss or damage to the goods under carriage.

The question arises directly in the present case in relation to the Singaporean Proceedings, a claim in rem to arrest a sister ship of the Vessel. Although the Holders were required to plead the substantive claim in those proceedings in order to seek the arrest, the pursuit of the substantive claim in Singapore would have been in breach of the London arbitration clause and, for that reason, after security had been provided, the proceedings were stayed. The Holders accepted, given the established position in the authorities referred to below, that proceedings in breach of an exclusive jurisdiction clause or an arbitration clause are not brought in a “competent” jurisdiction, and so cannot be “suit” for the purposes of Article III rule 6. For consideration of whether they were “suit”, therefore, the Singaporean Proceedings must be regarded as a claim for security only, in which the substantive issues of liability of the Owners to the Holders under the HVR could not have been determined.

Both the Holders and the Owners argued that the authorities, whilst not definitive, support their preferred interpretation of Article III rule 6, or at least do not undermine the interpretation they contend is, in any event, to be derived from the text, object and purpose of the rule. It is therefore necessary to refer to the authorities in some detail.

The analysis of the one-year time bar in Article III rule 6 took a wrong turn in Compania Colombina de Seguros v Pacific Steam Navigation Co [1965] 1 QB 101, in which Roskill J (considering the Hague Rules) held at p. 126D that the words “unless suit is brought within one year” have the same effect as a limitation defence in English law, requiring that the suit before the court be brought within one year, regardless of whether proceedings had previously been brought elsewhere.

The premise of that approach was undermined by the decision of the House of Lords in Aries Tanker Corporation v Total Transport Ltd. [1977] 1 WLR 185, holding that the time bar in Article III rule 6 did not, like most English statutes of limitation, bar the remedy whilst leaving the claim in existence, but extinguished the claim itself. Lord Wilberforce added, at p. 188G, that to provide for the discharge of claims after 12 months meets an obvious commercial need, namely, to allow shipowners, after that period, to clear their books.

The Court of Appeal in The Kapetan Markos [1986] 1 Lloyd’s Rep 211 expressed the obiter view at p. 231 that, contrary to Roskill J’s approach, a defence under Article III rule 6 might be defeated by the fact that another suit had been brought elsewhere, giving as an example proceedings in New York which were stayed on the grounds that London was the more convenient forum.

In The Nordglimt [1987] 1 QB 183 at 190C, Hobhouse J explained that the reasoning of Roskill J involved accepting that Article III rule 6 had essentially a procedural character (and applying authorities on the Limitation Acts accordingly), whereas it was authoritatively stated in Aries Tanker that the discharge given by the rule is substantive, not procedural. Hobhouse J accordingly held that in personam proceedings brought within one year in Belgium could be “suit”, capable of defeating a defence under Article III rule 6 of the HVR raised in respect of in rem proceedings brought in this jurisdiction after more than one year. Hobhouse J’s reasoning was expressly adopted by this Court in TheAmazona [1989] 2 Lloyd’s Rep 130.

Thereafter it has been regarded as settled that prior proceedings, including those in another jurisdiction, may be “suit” for the purposes of Article III rule 6 , and the contrary was not argued by the Owners in the present case. The characteristics of prior proceedings which do or do not so qualify as “suit” have been considered in a number of authorities.

The Kapetan Markos was not a case of prior proceedings, but one where an application to amend a technically defective claim in English proceedings for losses caused by breach of the Hague Rules was met with an argument that the reformulated claim was time-barred by Article III rule 6, the doctrine of relation back being inapplicable because the time-bar had extinguished the claim, not merely barred it procedurally. Parker LJ (delivering the judgment of the Court of Appeal) stated at p. 232 in relation to Article III rule 6:

““‘Discharged from all liability” must mean “discharged from all liability under the rules”. “Unless suit is brought” must therefore mean “unless suit to establish liability under the rules is brought”. “In respect of loss or damage” must mean “in respect of loss or damage to goods carried under a contract of carriage by sea”.

If, therefore, a shipowner wishes to rely on the r. 6 discharge from liability he must establish first that the goods were carried under a contract of carriage by sea, next that suit to establish liability under the rules in respect of loss of or damage to the goods carried under the contract has not been brought within a year.”

As the unamended claim, although technically defective, was in respect of carriage by sea under a contract of carriage by sea under a bill of lading incorporating the Hague Rules, breach of such rules and resulting damage, the time bar defence was rejected.

In the Nordglimt Hobhouse J held at p.192E that, in order to satisfy the criterion “suit is brought”, the action must have been brought by the person properly entitled to bring it in a competent court. At p. 193G he concluded that the Belgian proceedings, “having been started in Belgium within time and it being accepted that both the parties and the court were competent”, qualified as a “suit” for the purposes of Article III, 6.

In the Leni [1992] 2 Lloyd’s Rep 48 a claim under the HVR was brought within a year, but named the wrong company as plaintiff suing under the contract of carriage. HH Judge Diamond QC, a recognised expert in the field, expressed the view at p. 53 that, in order to preserve a claim against the time bar in Article III rule 6:

“…all that is necessary is that a suit must have been brought to enforce the claim within the one-year period. For the suit to qualify as one brought to enforce the claim it must, I think, be one to enforce a claim in respect of loss or damage arising under a “contract of carriage” as defined in Art. I (b) of the Convention and as also referred to in Art. II”.

Judge Diamond then went on to state that, free from authority, he would not have regarded a claim as a “non-suit” merely because it had been brought in the name of a party who turned out not to have title to sue. However, he recognised that Hobhouse J had decided the contrary in the Nordglimt and felt constrained to follow that decision given the importance of consistent interpretation of a private law convention.

In TheFinnrose [1994] 1 Lloyd’s Rep 559 a claim against carriers under a bill of lading was brought in time but not progressed. The carriers applied to strike out the claim for want of prosecution, whereupon the plaintiffs issued fresh proceedings, by then more than one year after discharge of the goods. The issue was whether the first claim would be “suit” for the purposes of Article III rule 6 (of the Hague Rules), despite being struck out, thereby preserving the second claim which would otherwise be time-barred. Rix J held that the first claim could not be relied upon in that way. At 572 he noted:

“..how surprising it would be as a matter of principle if a plaintiff could, merely by commencing suit within one year, automatically validate any further action brought (in England) within six years, however much the shipowner was prejudiced in the meantime in investigating or verifying the facts by reason of the plaintiffs’ lack of activity in the prosecution of his claim. Early notice and early suit would be of little avail, if the plaintiff could then drag out the proceedings with impunity.”

At p.574 Rix J further stated:

“Once, however, it is accepted that the inquiry is not simply whether the suit has been commenced within a year, but whether, at some subsequent time, that suit can survive a challenge, either jurisdictional (e.g. based on breach of an exclusive jurisdiction clause) or even upon the merits (no title to sue), I do not see that it makes any difference in principle that the defect in question cannot be necessarily predicted, but only contingently so. It is not as though the suit must be a nullity, for the proviso to the rule to go unfulfilled. A suit brought in breach of an exclusive jurisdiction clause is not a nullity, nor is one brought in breach of an arbitration clause. A suit brought in the name of the wrong party is not a nullity - it fails on the merits. It is rather that the Courts have, pragmatically, rather than on any essential principle of logic, regarded some suits, although commenced within a year, as not counting for the purpose of the rule.”

In The Pionier [1995] 1 Lloyd’s Rep 223 a shipper brought proceedings for damage to cargo under the Hague Rules, initially claiming in time against the carrier under a bill of lading, but then amending to assert, incorrectly, a claim under a charterparty to which the carrier was not party. The carrier applied to strike out the claim and resisted a cross-application to amend to revert to the original claim on the grounds that such a claim was at that point time-barred under Article III rule 6. Phillips J rejected the carrier’s contentions, stating at 227 as follows:

“the plaintiffs’ points of claim have, throughout, alleged breach of duty as bailees, negligence and breach of contract. The only material variation made by the amendment and the proposed reamendments has related to the ambit of the defendants’ duties. The object of the Hague Rules time limit is to protect shipowners from stale claims. Provided that a suit is brought by the party entitled to sue before a competent Court which alleges that the ship owner is liable for breach of duty owed in relation to the cargo carried it seems to me that the suit will suffice to satisfy the requirements of the Hague Rules.”

Thyssen Inc v Calypso Shipping Corporation SA [2000] 2 Lloyd’s Rep 243 involved facts similar to the present case. The receivers of cargo brought timely proceedings alleging damage to the cargo against the owner of the vessel in Texas, claiming both in rem (obtaining the arrest of the vessel) and in personam. The proceedings were transferred to New York, but were stayed by reason of a London arbitration clause incorporated in the bills of lading. As the arbitration proceedings were commenced more than one year after discharge of the cargo, the owners applied for a declaration that the claim was time-barred under Article III rule 6 of the Hague Rules. The claimants argued that the proceedings in the United States were “suit” as they were brought within one year by the right claimants, against the right defendant and in a court with jurisdiction to determine the merits.

At [14], David Steel J rejected that proposition as one of “breathtaking proportions”:

“It would mean, for instance, that if the claimants in the present case had instituted proceedings in rem in any jurisdiction in the world which was a party to the 1952 Convention on Arrest of Ships, or otherwise recognised jurisdiction in rem for cargo claims, regardless of whether the vessel was in the jurisdiction at the time, let alone whether, following arrest the proceedings were later stayed in the face of an arbitration clause, those proceedings would remain a suit for the purposes of art. III, r. 6.”

However, David Steel J’s ultimate decision that the claim was time-barred was based on the fact that the proceedings in the United States had been stayed on jurisdictional grounds (the point taken by the Owners in the Respondent’s Notice). He did not specifically consider whether the in rem claim was in itself suit, prior to being stayed.

In The Golden Endurance [2016] EWHC 2110 (Comm), subrogated insurers of cargo receivers relied upon prior proceedings against the owners of the vessel in Morocco (a Hamburg Rules jurisdiction) as “suit” for the purposes of Article III rule 6 of the Hague Rules. The owners, whilst recognising that the decision in The Kapetan Markos pre-dated the Hamburg Rules, relied on the dictum of this Court that “suit” means “suit to establish liability under the rules” to support an argument that proceedings under the Hamburg Rules did not qualify as suit for the purposes of the Hague Rules. I rejected that contention, holding at [62] that the true purposes of Article III rule 6, as clearly stated in the authorities, do not include requiring proceedings to be brought under the Hague Rules.

The starting point, as mandated by Article 31.1 of the Vienna Convention, is to ascertain the ordinary meaning of Article III rule 6. I propose to adopt the approach of the parties and to address first the language used and then to consider it in the context of the object and purpose of the HVR.

Mr Eaton KC, for the Holders, submitted that the language used in the text of Article III rule 6 supported the contention that a claim purely for security for a claim would be “suit”. He first pointed to the fact that the term suit is not qualified in any way (at least expressly) whereas it would have been a simple matter to have stated that, in order to be “suit”, proceedings must be brought to enforce the liability in question, if that had been the intention. Although not contending that this was a case where recourse could be had to the travaux préparatoires of the Hague Rules or the HVR as a supplementary means of interpretation, Mr Eaton pointed to a proposal made by the delegate of the United States for the wording of what was to become Article III rule 6 of the Hague Rules as an example of how the meaning for which the Owners contended could readily have been achieved. The proposal was that the time bar be expressed as arising “unless suit be instituted to recover therefor within one year…”. It is recorded, however, that that proposal did not receive support (Footnote: ³).

I see little force in that contention. When text is reasonably open to different interpretations (whether in a treaty, a statute or a contract), it will often be possible to identify how the wording might have been made clearer in one direction or the other. Whilst considering how text might have been phrased to achieve a proposed meaning may in some circumstances be a useful exercise, it is no more than part of the task of interpreting the wording actually used. If the meaning of that wording is otherwise sufficiently apparent, the fact that it could have been made clearer is of no moment. Again, the fact that proposed wording was not adopted in the course of negotiating the terms of a convention does not mean that the wording that was adopted bears a different meaning in any particular respect to the formulation that was rejected.

Mr Eaton’s second argument was that there was significance in the fact that the word “action” is used in Article III rule 6 bis and Article 4 bis, but the word “suit” is used in the English text of the time bar wording in Article III rule 6. As it was common ground that the word “action” in each case referred to proceedings to enforce liability, he contended that the use of “suit” indicated a difference in meaning, on the Holders’ case a reference to proceedings including those in which liability was not necessarily to be determined.

I see no merit in that argument either. As mentioned above, the French text uses the same word (“action”) in all three places. Since it is common ground that the other two references are to claims to determine liability, the use of the same French word in Article III rule 6 provides strong support for the Owners’ case that that provision is also concerned with the same type of claim, and also undermines the contention that the word “suit” in the English text is used to denote a difference in meaning.

In my judgment the language of Article III rule 6 is relatively clear and points decidedly in one direction. The very fact that the term “suit” is not itself defined or qualified means that the nature and subject-matter of the proceedings to which the term refers must necessarily be ascertained from the context in which it is used; it could not be (and was not) suggested that “suit” means any proceedings without limit, so the relevant constraints must, in the first instance, be gleaned from the rule itself. In the context that the bringing of suit in time will prevent the carrier being discharged from all liability for loss and damage, the natural reading is that the suit must be one seeking to establish such liability. As I observed at [66] of The Golden Endurance, the nature and operation of a time-bar is well understood, requiring that the claim to establish liability be brought within a specified time, and that there is no reason to read Article III rule 6 as operating in a different way.

That was precisely the way in which Article III rule 6 was read by this Court in The Kapetan Markos and by Phillips J in The Pionier in the passages cited above. Further, the now well-established limitation that, to be suit, proceedings must be “competent” plainly proceeds on the basis that the relevant competence is to establish liability between the holder of the bill of lading and the carrier for damage to goods. As I observed in The Golden Endurance at [64]:

“…all of the cases proceed on the assumption that the suit contemplated by Article III r.6 is one brought against the shipowner, alleging liability for breach of duty in relation to the cargo….”

Mr Eaton submitted that the dictum of Parker LJ (giving the judgment of this Court) in The Kapetan Markos had “not stood the test of time”, in particular given my decision in The Golden Endurance. I see no force in that suggestion. Parker LJ stated that “suit” must mean “suit to establish liability under the rules”. Whilst the reference to “under the rules” may have been read down, in particular given the subsequent introduction of the Hamburg Rules, there is no basis for discounting the view that, in order to be “suit”, proceedings must be to establish liability.

The language of Article III rule 6, therefore, strongly indicates that “suit” means proceedings to establish liability, but it is necessary to review that provisional view in the light of the object and purpose of the rule.

In The Giant Ace, Lord Hamblen stated at [84]:

“With regard to the object and purpose of the Article III, 6 time bar, there are a number of authorities which emphasise that it is to achieve finality and to enable accounts and books to be closed. For example:

(1)

“to provide for the discharge of these claims after 12 months meets an obvious commercial need, namely, to allow shipowners, after that period, to clear their books” – per Lord Wilberforce in The Aries at p. 188.

(2)

“The inference that the one year time bar was intended to apply to all claims arising out of the carriage (or miscarriage) of goods by sea under bills subject to the … Rules is in my judgment strengthened by the consideration that Article III, 6 is, like any time bar, intended to achieve finality and in this case enable the shipowner to clear his books” – per Bingham LJ in Cia Portorafti Commerciale SA v Ultramar Panama Inc (“The Captain Gregos”) [1990] 3 All ER 967, 973J-974A.”

Mr Eaton submitted that the object of enabling shipowners to close their books after one year is not achieved by requiring the commencement of proceedings to establish the liability within that period, as any such substantive proceedings will often not be concluded within one year and may take many years more, particularly in some jurisdictions. The key aspect of “finality” in this sense, he submitted, was notification that a claim was being made, including by proceedings solely seeking security, the absence of which would enable the shipowners to clear their books. Mr Eaton added that, given the “extreme” sanction of extinguishing the claim if proceedings were not commenced within the relatively short period of one year, no more should be required than that proceedings put the carrier on notice that a claim would be made. That was all the more the case, he argued, in circumstances where the holders of bills of lading may not be aware of an arbitration clause in the charterparty (incorporated into the bills by reference) when they seek security without wishing to put the carrier on notice, and so may be unaware that they are commencing proceedings in a jurisdiction which will not be regarded as competent.

In my judgment, however, the object of finality connotes more than simply the negative aspect of enabling books to be cleared if no claim has been notified within one year. The first sentence of Article III rule 6 provides for notification of loss or damage promptly after discharge. The requirement of bringing suit within a year thereafter is obviously designed to ensure more than merely notification, but the commencement of a claim for the loss or damage previously notified. As Rix J stated in The Finnrose at p. 574, “the whole purpose of the rule … is to ensure speedy notification of claims and the prompt pursuit of litigation”, echoing the view of Roskill J in Compania Columbiana at p. 123C(in a passage which has not been subject to criticism) that the whole purpose of the rule:

“…is to protect shipowners from being subjected to claims for loss of or damage to cargo which have not been promptly made and promptly pursued”.

The rule therefore does give 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. But it also ensures that claims are pursued promptly, as those which are issued but struck out will cease to count as “suit”, as per The Finnrose.

Indeed, if the Holders’ interpretation were correct, the rule, far from achieving finality, would give rise to extended or even completely open-ended claim periods. A claim purely for security would satisfy the sole time bar provision in the HVR, leaving it open to the Holders to commence substantive proceedings at any time thereafter, without limit as far as the rules are concerned. The only restraint would be domestic limitation provisions in the jurisdiction where substantive proceedings were eventually brought. As Rix J noted in The Finnrose at p.573, and as Mr Eaton did not dispute, the effect of section 39 of the Limitation Act 1980 may well be that there would be no applicable limitation period in this jurisdiction if the time bar in Article III rule 6 has been satisfied, although we are not required to decide that question. As David Steel J expressed in strong terms in Thyssen, it would be unacceptable if in rem claims for security in a non-competent jurisdiction remained “suit” for the purposes of Article III rule 6, enabling substantive proceedings to be brought at any time thereafter in a competent jurisdiction.

I do not consider that the practical matters mentioned by Mr Eaton weigh significantly in the balance. It is in the very nature of a time bar that the claim in question must be brought in a competent jurisdiction within the specified period, however long or short, and that a party who fails to ensure that they can proceed in the correct jurisdiction within that period will be caught by the provision. The existence of that risk is not a reason to interpret the time-bar as being satisfied by bringing proceedings for something other than the claim in question, permitting that claim to be brought at any time thereafter. Further, a one-year time bar is not exceptionally short in the context of contractual provisions of that nature. As David Foxton QC observed in The Alhani [2018] EWHC 1495 (Comm), [2018] 2 Lloyd’s Rep 563 at [20], the one year time bar in Article III rule 6 replaced the widely differing contractual time bars which featured in bills of lading. As these time bars were often very short, the one year time bar was in fact a benefit to holders of bills of lading.

I conclude that the object and purpose of the time bar in Article III rule 6 is to ensure the prompt making and pursuit of substantive claims for loss of or damage to goods. That is fully reflected in the language as analysed above and reinforces my judgment as to its meaning.

The judge stated at [17] as follows:

“I recognise that the ordinary meaning of the word “suit” is capable of extending to validly brought proceedings for security. However, I do not accept that proceedings for security are within the ordinary meaning of the word in the context and in the light of the object and purpose of the treaty provision. Those show, in my judgment, that “suit” for the purposes of Article III, 6 means proceedings that can decide the claim.”

For the reasons I have given, I agree with that conclusion and, as indicated above, would dismiss the Holders’ appeal.

It is recognised that cargo carried on deck, at least aboard a traditional cargo ship, is exposed to much greater risk than that below deck, being exposed to the elements and at risk of going overboard. At common law it is a breach of the contract of carriage to carry goods on deck without express agreement, and such agreement often provides that carriage is at the shipper’s risk: see, for example, Bills of Lading 3^rd ed. Aikens et al, para 11.84

The HVR, by Article I(c), excludes deck cargo (stated to be such and in fact carried on deck) from its ambit, so that the irreducible duties of the carrier to exercise due diligence and care under Article III rules 1 and 2 do not apply, but neither do the exclusions andlimitations of liability in Article IV and the time-bar in Article III rule 6. The terms of the carriage of such deck cargo would be a matter of contract and applicable provisions of the common law.

It follows that cargo stated to be carried on deck will be subject to a significantly different risk profile, both of loss or damage and in relation to responsibility therefor, than that carried below deck, with a potentially significant impact on insurance terms and requirements. Where an entire consignment is stated to be carried on deck and is so carried, the applicable regime and risk profile will be clear cut. But where, as in the present case, part only of a consignment is to be carried on deck, there will potentially be two different regimes applying to a single consignment.

The question which arose on this appeal, and not previously addressed in any English authority, is what is required by way of statement on a bill of lading to take part of a consignment of cargo out of the ambit of the HVR, it being common ground that, absent an effective “statement”, the HVR would be applicable to the entire cargo.

The Owners contended that it is only if the cargo to be carried on deck is specifically identified (such as by precise parcel numbers or serial numbers, but not necessarily stating value) that that cargo will be excluded from the HVR. They submitted that the statements in the present case fell well short of that which was required. The two Bills indicating that cargo was carried on deck listed the Lot numbers shipped on board, and the number of pieces and weight of timber in each of those Lots, together with the total number of pieces and total weight. It is then stated that, of that total, a certain number of pieces were on deck at shipper’s risk. It was common ground that that statement did not identify which pieces from which Lots were on deck. Nor, because it was apparent that the weight of the pieces of timber varied (and therefore, it is to be presumed, their value), was it possible to ascertain the weight (or value) of the pieces on deck in absolute terms or relative to the total cargo.

The Holders, on the other hand, argued that a statement of what was carried on deck was sufficient if it enabled an assessment of “what is at risk” on deck. That might in some cases require identification of specific items carried on deck (such as where one of 10 paintings was the Mona Lisa), but in others, (such as where 100 of 1000 identical ingots were carried on deck), identifications of specific items was unnecessary: a pragmatic, practical and commercial approach is appropriate.

The purpose of Article I (c) of the Hague Rules (given effect by the Carriage of Goods by Sea Act 1924 in relation to any carriage of goods from a port in Great Britain or Northern Ireland) was explained in Svenska Traktor AB v Maritime Agencies (Southampton) [1953] 2 QB 295 by Pilcher J at p. 300:

“The policy of the Carriage of Goods by Sea Act, 1924, was to regulate the relationship between the shipowner and the owner of the goods along well-known lines. In excluding from the definition of “goods”, the carriage of which was subject to the Act, cargo carried on deck and stated to be so carried, the intention of the Act was, in my view, to leave the shipowner free to carry deck cargo on his own conditions, and unaffected by the obligations imposed on him by the Act in any case in which he would, apart from the Act, have been entitled to carry such cargo on deck, provided that the cargo in question was in fact carried on deck and that the bill of lading covering it contained on its face a statement that the particular cargo was being so carried. Such a statement on the face of the bill of lading would serve as a notification and a warning to consignees and indorsees of the bill of lading to whom the property in the goods passed under the terms of section 1 of the Bill of Lading Act, 1855, that the goods which they were to take were being shipped as deck cargo. They would thus have full knowledge of the facts when accepting the documents and would know that the carriage of the goods on deck was not subject to the Act.”

What is required by way of such a statement was considered by the Court of Appeal of British Columbia in two related cases, the first being Timberwest Forest Ltd v Gearbulk Pool Ltd [2003] BCCA 39 (“Gearbulk I”). A cargo of lumber was sold to two consignees. The carrier’s agent issued two bills of lading in relation to the cargo. The bills indicated the number of pieces, the number of packages and the volume of the timber sold to each consignee. Both the bills also noted that 86% of the cargo was stowed on deck and 14% under deck. The bills did not, however, specify the proportion of cargo carried on deck for each consignee.

The cargo carried on deck was damaged. On the claim by the holders of the bills against the carrier, the question of whether the carrier could rely on contractual exclusion clauses depended on whether the cargo on deck had been “stated as being carried on deck” for the purposes of Article I(c), so that the HVR did not apply. The Court of Appeal held that there was no sufficient statement to that effect, Levine J.A. stating:

“46.

In my view, the conclusions reached by the trial judge reflect a construction of the definition of ‘goods’ that accords with practical affairs and business efficacy, in that certainty is necessary for the parties to commercial transactions to assess their respective risks and determine the appropriate price for their goods and services. …

47.

On the facts of this case as found by the trial judge the parties could not, when the bills of lading were issued, determine the value of the cargo that was stored on deck, and thus could not determine their respective risks. It is true that the parties know now that all of the damaged cargo was carried on deck, and Gearbulk saved some of the cargo from damage by storing it below. I agree with the trial judge, however, that a principled approach requires that the contract must be sufficiently clear so that the parties can determine their risks and responsibilities prospectively, not in light of subsequent circumstances.”

In Gearbulk Pool Ltd v Seaboard Shipping Co [2006] BCCA 552 (“Gearbulk II”) the carrier brought follow-on proceedings against its agent for an indemnity in respect of its liability to the holders of the bills. The Court of Appeal upheld a finding that the agent was not liable. Mackenzie J.A. rejected arguments that part of the reasoning in Gearbulk I was obiter in the following terms:

“19.

The rationale of [Gearbulk I] was a principled approach that required a description that would permit a shipper to determine the extent of the risk presented by the cargo stowed on deck. Quantity and value are the elements of that risk and both must be included in the cargo identification sufficiently to allow the extent of the shipper’s risk to be calculated…

20.

It was common ground that the simplest manner of providing an adequate description would have been to identify lumber by package number, as all of the dimensions of the lumber within the package could be ascertained and value readily determined. In my view, the evidence and the trial judge’s findings of fact supported his conclusion that the [carrier’s] liability was caused by the inadequate description of the on deck and under deck proportions of the cargo…”

The arbitrator concluded that the Bills did satisfy the requirements of Article I(c), such that the cargo carried on deck was not governed by the HVR, reasoning as follows:

The Award also contained an appendix assessing damages. That appendix purported to calculate the value of the cargo carried on deck, using the specious bills of lading that had been used to secure the misdelivery of the cargo at Kandla in September 2019, as well as other material [100].

The judge found that the arbitrator was “not wrong in law” to find that the on deck cargo was sufficiently “stated as being carried on deck” in the Bills, such that it fell outside the scope of the HVR [42]. His reasoning was as follows:

As a matter of the ordinary meaning of the wording of Article I (c), it would seem obvious that cargo can only be “stated” to be carried on deck if it is identified or identifiable as the cargo in question. If the whole of a consignment is to be carried on deck, then identification will not be an issue. It may also be (although I do not decide) that if some of an entirely homogeneous cargo is to be carried on deck, it would make linguistic sense to "state” that a portion or number of the total is carried on deck without specifying precisely which items are so carried.

But if (as in the present case) some items in a consignment of “goods, wares, merchandise or articles” which are not homogenous are carried below deck and some on deck, it is difficult to see how the latter can be “stated” to be on deck unless they are specifically identified. Otherwise the statement is not that certain cargo is carried on deck, but merely that some unidentified items of the total cargo are so carried.

It must be borne in mind in this regard that the effect of the statement is that some of the cargo will be classified as “goods” and some will not be. This will result in the two parts of the cargo being subjected to two different contractual regimes, one incorporating the HVR (or Hague Rules) and one not. It is difficult to see how such division could logically be effected between items of differing characteristics unless the relevant items are ascertained and allocated to each category and each regime: that must entail identifying those stated to be carried on deck, the default being that all others are “goods” and therefore subject to the Rules. As Mr Smith KC, counsel for the Owners, pointed out, that is not an onerous task for the carrier, who will know which packages are carried in each location.

Mr Eaton accepted that in some circumstances precise identification of the cargo carried on deck would be necessary in order that it was “stated” to be so carried, such as where cargo comprised items of markedly different value. His contention was, however, that “[t]he more the facts move away from a homogenous cargo, the more information that is likely to be required to satisfy Article I(c)”, but that in many cases identification of precise parcel numbers would not be necessary.

In my judgment there is nothing in the language of Article I(c) that supports such an approach, which seems to me to be devoid of principle and lacking in the essential element of contractual certainty. At least in the case of a non- homogenous cargo, the language suggests that identification by parcel or serial number is required for some of the cargo to be stated to be carried on deck.

The purpose of requiring a statement on bills of lading that items of cargo are carried on deck is clear. As stated in the authorities referred to above, it is to permit the shipper and anyone to whom the bills are endorsed, to have full knowledge of which items of cargo to which they have title are being carried on deck and not subject to the HVR (or the Hague Rules), providing the necessary certainty so that they can protect their commercial interests and manage their risks.

Mr Eaton contended that the above purposes did not require identification of on deck cargo by parcel or serial number, pointing to the arbitrator’s finding at [97] of his award that it was possible to make an “informed estimate” of the risks of the adventure in the present case. He made the following further points:

It may be that Mr Eaton is right that it is unnecessary, and would be commercially onerous, to require identification of deck cargo by parcel number or serial number in every case, even where the cargo is not homogenous. However, the object and purpose of Article I (c) plainly requires that, if items of cargo vary in value to any extent, it is necessary for those carried on deck to be identified so that they can be distinguished from those carried below deck, such as by parcel number or serial number. That is essential to enable the shipper and any subsequent holders of the bill of lading to make an informed assessment of the risks and to arrange insurance accordingly. Focusing on that object and purpose results in a narrowing of the meaning I found on the pure linguisitic analysis above, but a consistent interpretation with that reached by the Court of Appeal in British Columbia, appropriately reaching a consensus on the interpretation of this provision of an international convention. I consider that the arbitrator and the judge both erred in taking a different view.

That finding is sufficient to determine the appeal in the present case, where the pieces of timber comprising the cargo varied in weight (and therefore value) significantly.

I would leave open for decision in a case in which it arises directly the question of precisely what is required in order to state that some cargo is carried on deck where the cargo is homogenous or otherwise does not differ in value between constituent elements. Mr Eaton submitted that there is no commercial purpose in identifying the items of such a cargo which are carried on deck. He gave the example of a cargo of 1000 identical gold ingots, with a statement on the bill of lading that 100 were on deck, but without identifying which ones. He submitted that the lack of identification made no difference to the assessment of risk, and that if one ingot was found to be missing on delivery, it could be established by evidence whether or not that particular ingot had in fact been carried on deck.

I am not convinced, however, that that analysis provides a satisfactory answer. If in fact 101 of the ingots were carried on deck, it would be impossible to say which 100 of those 101 had been “stated” to be on deck, and impossible to know whether the missing ingot was or was not subject to the HVR. Those assessing the risks would know that such difficulties in identification might arise. Such difficulties would not arise if those carried on deck had been identified by serial number. Further, resting the determination of whether an item of cargo was stated to be carried “on deck” upon evidence as to whether it was in fact so carried fails to give effect to the prospective requirement of stating that the relevant cargo is so carried, and is contrary to the principled approach rightly emphasised at [47] of Gearbulk I. I can see that such issues, counterbalanced against practical and commercial factors, will require detailed consideration in an appropriate case.

As indicated above, I would allow the Owners’ appeal and answer the question as follows. In order for the Article I (c) exclusion to be engaged in relation to part only of the cargo consigned by a bill of lading consisting of items of differing value, the statement on the bill must specifically identify the cargo to be carried on deck, such as by parcel number or serial number.