When does time start to run for an indemnity claim?

 

 

In London Arbitration 1/20 owners claimed an indemnity from voyage charterers in respect of payment of funds by their P&I Club to satisfy a judgment on a cargo claim brought against them in Brazil. The owners’ claim was brought under an express indemnity provision in the charterparty, clause 10, which read:

“Bills of Lading shall be presented and signed by the Master as per the ‘Congenbill’ Bill of Lading form, Edition 1994, without prejudice to this Charter Party, or by the Owners’ agents provided written authority has been given by Owners to the agents, a copy of which is to be furnished to the Charterers. The Charterers shall indemnify the Owners against all consequences or liabilities that may arise from the signing of bills of lading as presented to the extent that the terms or contents of such bills of lading impose or result in the imposition of more onerous liabilities upon the Owners than those assumed by the Owners under this Charter Party.”

The relevant time line was that discharge took place in 2006, with a first instance decision in the Brazilian courts in August 2010 which held owners liable. In September 2017 this was upheld on appeal and in October 2017 funds were remitted to cargo interests to satisfy the judgment. Owners commenced arbitration proceedings against charterers in August 2018.

There were various competing dates for starting the firing gun for the running of the six years under the Limitation Act 1980. If time started when the claim arose, or after the first instance judgment, then owners’ arbitration would be clearly barred. However, if the relevant time were that of the appeal decision or the payment of the judgment soon after, then owners would be in time.

The tribunal, by a majority, declined to follow the decision of McNair J in Bosma v Larsen [1966] 1 Lloyd’s Rep 22 in which McNairJ held that the cause of action under clause 9 of the Baltime form arose at the date when the facts came into existence which created a liability of the owners to the cargo owners or their insurers. That date was the date when the cargo was discharged damaged. The case had not been overruled but had not been followed on two subsequent occasions at first instance, in particular in The Caroline P [1984] 2 Lloyd’s Rep 466, where Neill J said:

“I have therefore come to the conclusion, though not without hesitation, that the … indemnity … did not become enforceable by action until at the earliest the liability of the owners to the receivers had been ascertained by the court of first instance …”

In the majority’s view, Neill J was saying that he preferred to run time from the date of the court adjudication at the earliest rather than from the time of discharge. In their view time started running when owners paid the judgment in favour of cargo interests sometime between 27 September and 6 October 2017.

Published by

Professor Simon Baughen

Professor Simon Baughen was appointed as Professor of Shipping Law in September 2013 (previously Reader at the University of Bristol Law School). Simon Baughen studied law at Oxford and practised in maritime law for several years before joining academia. His research interests lie mainly in the field of shipping law, but also include the law of trusts and the environmental law implications of the activities of multinational corporations in the developing world. Simon's book on Shipping Law, has run to five editions and is already well-known to academics and students alike as by far the most learned and approachable work on the subject. Furthermore, he is now the author of the very well-established practitioner's work Summerskill on Laytime. He has an extensive list of publications to his name, including International Trade and the Protection of the Environment. He has also written and taught extensively on commercial law, trusts and environmental law. Simon will be a member of the Institute of International Shipping and Trade Law, a University Research Centre within the School of Law, and he will teach on both the LLM (Carriage of Goods by Sea, Land and Air and Oil and Gas Law) and LLB programmes at Swansea.

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