This case concerns issues of limitation of actions pursuant to s 501(2) of the Merchant Shipping Act, which corresponds to art 3.6 bis of the Hague-Visby Rules, and provides:

For claims for recourse in respect of claims as mentioned in subsection (1)(ii), (v) and (vi), the period of limitation shall be one year from the day on which the claim was paid or the legal proceedings on it initiated. For right of recourse arising from claims consequential upon personal injury, cf. subsection 1(ii), the time limit for the claim for recourse shall be calculated from the day on which the compensation was paid.

The relevant recourse claims were raised by the North of England P&I Association Ltd (NE) on behalf of Green Feeder Ltd (GF) against Unifeeder A/S (U) in relation to damage to three containers caused during international sea transport as a result of water damage during a storm. Questions were also raised about the right plaintiff and the calculation of the claims.

United Arab Shipping Co (UA) was the main transporter for the transport of the goods from China to Sweden in the autumn of 2014. UA entered into an agreement with GF for the last leg of the transport from Hamburg, Germany, to Gothenburg, Sweden. GF then hired U to handle the transport from Hamburg to Gothenburg, and on 21 October 2014, U issued a bill of lading for this leg of the transport, which was carried out on the M/V Condor, which U had chartered.

GF submitted that U, as the contracting carrier, was liable for the damage to the containers. GF had one year to make recourse claims against U from the date of payment to UA, and the date of payment was 25 May 2018. The claims became time-barred on 25 May 2019. GF's recourse claims were therefore not obsolete, as the claim was brought on 15 April 2019. GF further alleged that NE, as a P&I Club, was not to be considered an insurance company, but rather an association of shipowners. NE was therefore not subrogated into GF's claims against U solely as a result of the internal transfer of funds in NE between GF and UA. The claims against U thus continued to accrue to GF, which was therefore also the right plaintiff.

U argued that GF was not the right plaintiff, and, in the alternative, that the recourse claim against U was obsolete, and, further in the alternative, that the recourse claim was not documented and contained items that could not be claimed for compensation. U alleged that NE, in its compensation payment to UA as P&I insurer for GF, was subrogated into GF's possible rights against U, and that GF was released from its liability to UA, and had its full loss covered by NE in the compensation payment. GF therefore had no recourse claim against U, and was not the right plaintiff. The right plaintiff would be NE.

In the alternative, the recourse claim against U was obsolete in accordance with s 501(2) of the Merchant Shipping Act. The provision granting an additional time limit for recourse claims must be interpreted as meaning that the limitation period occurs no later than one year after the expiry of the limitation period for the main claim in accordance with section 501(1)(vi) of the Merchant Shipping Act, ie no later than two years after delivery of the goods. The goods arrived and were handed over around 23 October 2014, and at least no later than 5 November 2014, which is why the recourse claim became obsolete no later than 5 November 2016, according to s 501(2). As the claim was only brought on 15 April 2019, it was obsolete.

This interpretation of s 501(2) of the Merchant Shipping Act was in accordance with the provision's background, ie art 3.6 bis of the Hague-Visby Rules, its preparatory works, and the purpose of the statute of limitations. GF's interpretation implied that the statute of limitations on the recourse claim could be postponed for many years without the knowledge of the person liable for recourse, let alone its participation, which was contrary to the purpose of the statute of limitations. The additional time limit for recourse claims could not simply run from GF's payment of the main claim, regardless of when that payment took place. It must be implicitly conditional on the payment being made before the main claim was obsolete in accordance with s 501(1)(vi) of the Merchant Shipping Act, which corresponds to art 3.6 of the Hague-Visby Rules, ie without taking into account any extension(s) of time which GF was granted by UA as the holder of the main claim. Even if GF's interpretation of s 501(2) were to be accepted, the recourse claim was obsolete, as the summons was only filed after the expiry of the ordinary limitation period of three years, pursuant to s 3 of the Limitation Act.

Held: Judgment for U.

It can be assumed that GF and UA were both members of NE, and were therefore subscribed to the same P&I Club. It can further be assumed that NE in this capacity, and in agreement with GF on 25 May 2018, carried out a payment transaction internally between the two members' accounts in the form of a credit note, whereby a compensation amount was transferred from GF to UA. This internal payment transaction, and the information provided in the case in general, do not provide a sufficient basis for establishing that NE should thereby be subrogated into GF's possible recourse claims against U, or have otherwise taken over these requirements. GF is therefore the right plaintiff for the claims raised, but this case has been brought by NE as an agent for GF.

The issue of obsolescence concerns the interpretation of s 501(2) of the Merchant Shipping Act on limitation of recourse claims, including recourse claims for compensation claims covered by s 501(1)(vi) of the Merchant Shipping Act. The main issue is from when the one-year limitation period for recourse claims in s 501(2) can be calculated at the latest, and in particular whether the time limit must be calculated from the time of the expiry of the one-year limitation period for the main claim (see s 501(1)(vi)), or possibly only from the time of the actual payment of the disputed main claim, regardless of whether that payment has taken place after the expiry of the one-year limitation period for the claim. The question arises in practice if the limitation period for main claims has been extended beyond one year by agreement between the parties in the main relationship, or if the debtor in the main relationship has for other reasons chosen to pay a main claim after the expiration of the limitation period, eg by way of a settlement.

In this case, the main claims were established in October 2014, but only paid on 25 May 2018, several years after the expiry of the one-year limitation period. It is not stated whether the payment after the expiry of the limitation period was due to the parties in the main relationship having agreed on extension(s) of the one-year period or other reasons. However, on the basis of the evidence, it can be assumed that the parties to the recourse did not agree on an extension of the limitation period. The issue is thus whether the parties in a main relationship, by agreeing to extend the limitation period for a main claim, can at the same time actually extend the limitation period for recourse claims by a corresponding period, or whether this requires consent from the debtor in the recourse relationship.

According to the wording of ss 501(2) and 501(1)(vi) of the Merchant Shipping Act, compared with the general purpose of rules on limitation, there is no basis for assuming that the time limit for limitation of recourse claims can be extended beyond the total limitation period of a total of two years - one year for main claims, and one year for recourse claims - without the consent of the debtor in the recourse relationship.

GF did not accept extension(s) of the limitation period for the recourse claims, or enter into an agreement with U in this regard, and the recourse claims were not raised until the filing of this case on 15 April 2019. The recourse claims are therefore obsolete.

[For the successful appeal to the Eastern High Court in North of England P&I Association Ltd v Unifeeder A/S, BS-28465/2020-OLR, see CMI1558.]