Australia: Freight forwarders: liabilities, risks and responsibilities

In brief - What lessons can be learned from Li Lian International Ltd and Others v Herport Hong Kong Ltd and Anor [2019] KHCFI 826; HCAJ 160/2015?

This decision of the Honourable Ng in the High Court of Hong Kong, Special Administrative Region, is another recent example of the liabilities that freight forwarders, who are Non-Vessel Operating Common Carriers (NVOCCs) face when issuing their own bills of lading and taking on the risks and responsibilities that the actual carrier has.

The claims, which were made by seven plaintiffs, including cargo owners and their insurers against the freight forwarder, arose from the total loss of the container vessel "MOL Comfort" in the Indian Ocean in mid 2013, when the vessel fractured amidship, split into two halves and eventually sank with all the cargo on board.

The subject of the judgment was an application by the actual carrier, NYK, who had been joined to the proceedings by the freight forwarder Herport Hong Kong Limited.

Exclusive jurisdiction clause in bill of lading

The principal ground upon which NYK sought to justify the strike out of its joinder by the freight forwarder was made on the basis of the exclusive jurisdiction clause in the bill of lading which NYK had issued to Herport.

The exclusive jurisdiction clause provided as follows:

  1. (Governing Law and Jurisdiction)
    1. The contract evidenced by or contained in this Bill of Lading should be governed and construed by Japanese Law except as may be provided for herein, and
    2. Notwithstanding anything else contained in this Bill of Lading or in any other contract, any and all actions against the Carrier in respect of the Goods or arising out of the Carriage shall be brought before the Tokyo District Court in Japan to the exclusion of the jurisdiction of any other courts whilst any such actions against the Merchant may be brought before the said court or any other competent court at the Carrier's option...

The Hong Kong High Court had no difficulty in finding that the clause was a valid exclusive jurisdiction clause and the forwarder had failed to show any "strong reasons" why it should be allowed to act in breach of that clause by joining NYK to the proceedings in Hong Kong rather than pursuing it in the Tokyo District Court.

The consequence for the freight forwarder, as appears from the Judgment in this case, is that any proceedings in Japan were time barred by the time the hearing was taking place.

A question which does not appear to have arisen in the decision, and which was not relevant to the Hong Kong proceedings, is as to the effectiveness of such a claim of Article 3 rule 6 bis of the Hague Visby Rules which provides that:

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 should be not less than 3 months, commencing from the day when the person bringing such action for indemnity has settled the claim or has been served with a process in the action against himself.

That provision, if applicable in Japan, might have provided some relief to the freight forwarder in Japan, assuming that the carrier from which it had received the bill of lading comes within the description of "a third person".

The lesson to be learned from such a case is for those advising forwarders who have issued bills of lading as carriers to ensure, as soon as the casualty takes place, that their rights are protected pursuant to the terms of any bill of lading which they have received from the actual carrier.

Recent decisions in the UK concerning freight forwarders and carriers

Despite the fact that freight forwarders have been operating as principals in issuing bills of lading for a great many years it would seem that there are still a number of areas in which their position is different to that of the actual carriers.

This is highlighted in another recent case which related to freight forwarders: Globalink Transportation and Logistics Worldwide LLP v DHL Project & Chartering Ltd (2019) EWHC 225 (Comm). Globalink had been retained by DHL as its subcontractor to arrange the transportation of a refinery plant from Novorossiysk in Russia to Atyrau in Kazakhstan for Sinopec by a Freight Forwarding Services Contract, which had been entered into. There was a substantial delay because a barge on which the goods were being transported was unable to traverse the Ural-Caspian Canal due to the water level, and then the closure of the canal due to the onset of winter.

Globalink sought the recovery of USD$1.6 million from DHL, and DHL admitted the claim but counterclaimed for over USD$2.3 million. Globalink sought summary judgment in reliance on the principle that no deduction to the freight can be made by way of set off in relation to the transport of goods (The "Aries" (1977) 1 WLR 185).

The question for the High Court in London was therefore whether or not the contract between DHL and Globalink was a contract of carriage. It was held that the principle did not apply because Globalink's obligation was "an obligation to procure that carriage is achieved by others" (at [57]), and not one by which it was required to perform the contract itself. Globalink had not adduced evidence to establish that it had paid freight to a carrier.

Therefore, freight forwarders who have potential liabilities of actual carriers for late delivery leave themselves exposed to not being able to argue that the other contracting party cannot set off claims they might have in order to reduce or eliminate their liability to pay freight.

Another recent example is the decision at the end of last year in Volcafe Ltd and Others v Cia Sud Americana de Vapores SA (trading as CSAV) [2018] UKSC 61 in which the United Kingdom Supreme Court overturned 120 years of legal precedent in relation to the onus of proof in cargo litigation so far as it applies to carriers under bills of lading who are bailees. No consideration seems to have been given in that case to the position of freight forwarders, or indeed time charterers, who issue bills of lading as carriers but are not bailees. Presumably they are still subject in the United Kingdom to the more favourable regime, which has applied to the onus of proof since the late 19th Century.

Stuart Hetherington
Marine insurance
Colin Biggers & Paisley

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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