FIMBank plc v. KCH Shipping Co Ltd (The “Giant Ace”) – QBD (Comm Ct), 3 July 2020
ARBITRATION TIME BAR – MISDELIVERY OF CARGO – ARBITRATION ACT 1996 – DEMISE CHARTERER
Trafigura Maritime Logistics Pte Ltd voyage-chartered the vessel Giant Ace from time charterers Classic Maritime Inc (Classic). Mirae Wise SA (MW) owned the vessel and demise-chartered it to KCH Shipping Co Ltd (KCH), who time-chartered it to Classic. Bills of lading were created “to order” for about 85,000 mt of coal to be transported from Indonesia to India.
The cargo was discharged despite the absence of bills of lading. The claimant FIMBank plc stated that it came to hold the bills as collateral for funds lent to Farlin. A London arbitration clause was incorporated into the bills between Classic and Trafigura. It also incorporated the article III rule 6 time-bar and the Hague or Hague-Visby Rules.
Classic’s solicitors had no idea the ship had been demise-chartered to KCH, so the Bank’s lawyers requested an extension from April 1, 2019, to July 1, 2019. KCH’s solicitors contacted the Bank’s lawyers to inform them that there was a demise charterparty in place and that KCH was the demise charterers. In the Bank’s view, MW and KCH had not granted the Bank an extension of time on March 27, 2019. If that’s correct, the original deadline of April 2019 (before the March 27, 2019, extension) had passed, barring any claims against KCH. They didn’t raise it and chose instead to sue MW in arbitration.
The Bank issued a notice of arbitration on June 25, 2019, and claims against MW became time-barred on July 29, 2019. The Bank sought an extension of time to initiate arbitration proceedings against KCH under Section 12 of the Arbitration Act of 1996.
The Bank relied on two parts of section 12(3):
(a) “that the circumstances are such that it would be just to extend the time,” or
(b) “that the conduct of one party makes it unjust to hold the other party to the exact terms of the provision in question.”
Specifically, the Bank argued that the parties could not have reasonably anticipated that third parties in the contractual chain other than KCH would contribute to deceive the Bank into believing that another party was liable as the carrier under those invoices.
The court found no evidence of misrepresentation. Although there was a causal error, the court felt it was appropriate to revisit the case to determine if it met the standards of that test, notwithstanding its causative error. No additional elements would elevate the case above the expected consequences of errors.
Relevant to this claim was: Harbour & General Works Ltd v Environment Agency  1 Lloyd’s Rep 65 and Haven Insurance Co Ltd v EUI Ltd  Lloyd’s Rep IR 128).
It was important to remember that owners had the right to remain silent, and if they did, the court would not grant an extension of time under Section 12. (3). (b) The applicant had to demonstrate that a respondent’s positive behavior rendered reliance on the time limit unjust
The main issue was whether Classic’s solicitors’ correspondences could be ascribed to KCH. They ruled that one of the communications was indeed attributed to KCH. Except for the March 6, 2019, request to KCH to affirm they were entitled to approve the time extension on KCH’s behalf and the 7 and 14 March 2019 replies from KCH. In other words, a restricted request for authority was granted. To communicate KCH permission for the time extension, Classic’s solicitors acted on KCH’s behalf on March 27, 2019.
An exact draft would have clarified everything, but the way it was written did nothing to dispel the Bank’s lawyers’ misperception of the situation. Causation was addressed because something was done for KCH that had a causal effect. But then what happened? They would have realized they received an extension from the correct person if complete facts were given out. The Bank’s lawyers produced confusion as of May 6, 2019. That was part of the context of the issue of unfairness. The agent of KCH did something that may theoretically engage the section. Concerning injustice, all factors were considered, including The Lake Michigan  2 Lloyd’s Rep 141 and Thyssen v Calypso  2 Lloyd’s Rep 243
In conclusion, the application failed due to a lack of jurisdiction.