On 4 March 1994 Trengganu Forest Products Sdn Bhd (the plaintiff) entered a contract with Hebei Metals & Minerals Import & Export Corporation (the buyer) to supply 56 containers of plywood. The contract terms included the requirements that:

1. the shipment must be made before 30 April 1994;
2. the cargo must be loaded at a Malaysian port;
3. the cargo must be discharged at Xingang Port, China; and
4. payment must be made by irrevocable letter of credit.

The plaintiff entered a contract of carriage with Cosco Container Lines (the defendant) to deliver the cargo. The defendant issued a bill of lading on 30 April 1994 with the cargo shipped on board the Tuo He V.103 at Port Klang. The plaintiff submitted the documents, including the bill of lading, to the negotiating bank for payment under the letter of credit.

On 27 May 1994, the cargo arrived in Xingang and the cargo was discharged at the disposal of the buyer. Subsequently, the buyer rejected the cargo, rescinded the sale and obtained an injunction to stop the Bank of China from releasing funds pursuant to the letter of credit.

The plaintiff claimed against the defendant in respect of loss and damage suffered as a result of the fraudulent misrepresentation in the bill of lading by the defendant, which the plaintiff claimed had breached the implied terms of the contract of carriage.

The defendant applied to strike out the plaintiff’s writ and statement of claim on the ground that the plaintiff’s claim was time-barred by the Carriage of Goods by Sea Act 1950 (Act 527) (COGSA) incorporating the Hague Rules. The plaintiff argued that its claim was based on the tort of deceit and therefore fell outside the time bar limitation and instead was subject to the time limit of six years under the Limitation Act 1939 and not art 3.6 of the Hague Rules.

Held: The defendant’s application to strike out the plaintiff’s writ and statement of claim is allowed with costs.

The subject matter of the plaintiff’s claim is a shipping matter which involves the issuance of a bill of lading in Malaysia, therefore COGSA, which gives effect to the Hague Rules, applies. The Hague Rules apply compulsorily to an outward-bound journey (s 2 COGSA) to a contract of carriage covered by a bill of lading or similar document of title (art 1.b); to carriage of goods other than live animals and cargo carried on deck (art 1.c); and covers the period of time from when the goods were loaded to the time when they are discharged from the ship (art 1.c, Pyrene Co Ltd v Scindia Navigation Co [1954] 2 QB 402 (CMI2100)). As the plaintiff’s claim is based on the bill of lading in connection with the carriage of goods by sea on board a ship from Port Klang, Malaysia, outward bound to Xingang in China, the Hague Rules are compulsorily applicable.

Article 3.6 provides that ‘[i]n any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered.’ This provision means that any suit brought after one year is time-barred.

The cargo arrived on 27 May 1994 and was discharged at the disposal of the buyer. The date when the goods were delivered is 27 May 1994. The fact that the buyer rescinded the contract and rejected the goods does not change the status of the delivery of the goods for the purpose of art 3.6. Therefore, any action, claim or suit in respect of loss or damage against the defendant as carrier must be brought within one year after 27 May 1994. The present suit was brought in Malaysia on 28 July 1997, some three years later.  

The words ‘loss or damage’ in art 3.6 apply to loss or damage related to the goods. They do not refer only to physical loss or damage and must be given a wider construction because it is consistent with the purpose of the limitation provisions and the Hague Rules as a whole (Stag Line Ltd v Foscolo Mango & Co Ltd [1931] All ER Rep 666 and Cargill International SA v CPN Tankers (Bermuda) Ltd 'The Ot Sonja' [1993] 2 LLR 435).

The word 'suit' has been widely interpreted to cover proceedings by arbitration (The Merak [1964] 2 LLR 5127) and founded in tort (Anglo Irish Beef Processors International v Federated Stevedores Geelong [1997] 1 LLR 207). The phrase ‘all liability’ must be given its plain and ordinary meaning. It is clear that it discharges the carrier from each and every liability in respect of goods carried under a contract of carriage if a claim is not brought by the plaintiff within 12 months (The New York Star [1980] 2 LLR 317 and The Captain Gregos [1990] 1 LLR 310). It includes misdelivery of goods carried by sea which gives rise to the tort of conversion (The Jhi Jiang Kou [1991] 1 LLR 493). Therefore a claim for the tort of deceit, or a claim for backdating the bill of lading would be time barred under art 3.6 of the Hague Rules if the plaintiff did not file a claim within one year after the goods were delivered on 27 May 1994.

The purpose of the limitation provisions under art 3.6 is to provide finality to all claims against the carrier or ship. It is to protect ship owners from ‘stale claims’ (The Pioneer [1995] 1 LLR 223). The effect of art 3.6 is to extinguish both the claim and the remedy. It is a substantive time bar, not a procedural time bar, which extinguishes the remedy but not the substantive claim itself (The Aries [1977] 1 LLR 334 (CMI2194)).

Article 3.6 was designed to regulate the relationship between a carrier and a cargo-owner when goods were carried under a contract of carriage of goods by sea. In order to raise the defence of time bar under art 3.6, the shipowner must establish that the goods were carried under a contract of carriage by sea and that suit to establish liability under the Hague Rules in respect of loss or damage to the goods has not been brought within a year (The Kapetan Markos NL [1986] 1 LLR 211 (CA)).

Based on these considerations the court finds that the plaintiff’s claim falls under the purview of the Hague Rules and COGSA, and that the plaintiff’s claim against the defendant is time-barred under art 3.6 of the Hague Rules.