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Transport

Recourse claim against executing carrier not time-barred

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Legal news
calendar 14 November 2021
globus Denmark

The Eastern High Court has decided an appeal case on limitation of suit time in a recovery claim against a performing carrier. The Maritime and Commercial High Court had initially found that the claim was time barred. The court had found that the limitation period began to run no later than a year after the original claim became time-barred. However, the contracting carrier maintained that the limitation period did not run until after the original claim had been paid. The High Court found that the rules of the Danish Merchant Shipping Act stated that the limitation period for a recovery claim did not begin to run until the original claim was paid. And so, the High Court overturned the Maritime and Commercial High Court’s decision.

The main issue of the case was the limitation of a recovery claim. After a ship had been out in bad weather, containers stowed with different cargoes were damaged. The contracting carrier paid compensation to the cargo interests and then filed a recovery claim against the performing carrier. In the Maritime and Commercial High Court, the performing carrier argued that the claim was out of time according to Section 501(2) of the Danish Merchant Shipping Act. The claim was time-barred because the recourse claim had been raised more than two years after the cargo had been delivered. The Act states that a contracting carrier has a year after paying a claim to commence a recovery. The Maritime and Commercial High Court agreed with the performing carrier that the claim then had to be commenced within a year of the time bar of the original claim and the recovery claim was out of time. The contracting carrier appealed this decision to the High Court of Appeal.

On appeal the contracting carrier argued that the one-year limitation period for the recovery claim only ran from the actual payment of the main claim. The contracting carrier had made the payment several years after the damage, partly because of settlement negotiations with the main carrier. On the other hand the recourse claim was raised less than a year after the main claim had been paid.

The limitation period ran from the payment of the main claim

The High Court found that the Danish Merchant Shipping Act did not provide any support for the limitation period to be calculated from an earlier date than the payment of the main claim. The Court noted that this type of damage would often involve a recovery claim against a subcarrier who would already know about the damage at the time of the injury. However, many carriers may be involved, so it may be a long time before the last carrier receives the claim.

The High Court also found that the general time limit of three years laid down in the Danish Statute of Limitations did not apply, as it had been replaced by the deadline for the Danish Maritime Act. In addition to the one-year period after payment of the claim, the only limitation period that applies is the absolute 10-year period laid down in the Danish Statute of Limitations.

IUNO’s opinion

The High Court’s decision reflects the letter of the law but does not take the origin of the provision into account. The provision is the Nordic version of a similar rule in the Hague-Visby rules, rule III.6bis. This leaves it to the individual states to draw up the rule regarding recourse. Like the Danish Merchant Shipping Act, it is not entirely clear when the deadline for the recourse claim will begin to run. However, it was probably not intended that the recovery claim could be outstanding for as long as has happened in this case, where the damage had been done several years before the claim against the performing carrier was raised. It is impractical in terms of documentation. A performing carrier presented with an old claim may also have problems with insurance coverage if their liability insurance has changed in the meantime. In addition, there are non-statutory rules on inaction that could become relevant.

IUNO, therefore, recommends pursuing known claims and having them reported to their insurance and not relying on a 10-year limitation period.

[The Maritime and Commercial High Court’s ruling in case BS-28465/2020-OLR of 7 June 2021]

The main issue of the case was the limitation of a recovery claim. After a ship had been out in bad weather, containers stowed with different cargoes were damaged. The contracting carrier paid compensation to the cargo interests and then filed a recovery claim against the performing carrier. In the Maritime and Commercial High Court, the performing carrier argued that the claim was out of time according to Section 501(2) of the Danish Merchant Shipping Act. The claim was time-barred because the recourse claim had been raised more than two years after the cargo had been delivered. The Act states that a contracting carrier has a year after paying a claim to commence a recovery. The Maritime and Commercial High Court agreed with the performing carrier that the claim then had to be commenced within a year of the time bar of the original claim and the recovery claim was out of time. The contracting carrier appealed this decision to the High Court of Appeal.

On appeal the contracting carrier argued that the one-year limitation period for the recovery claim only ran from the actual payment of the main claim. The contracting carrier had made the payment several years after the damage, partly because of settlement negotiations with the main carrier. On the other hand the recourse claim was raised less than a year after the main claim had been paid.

The limitation period ran from the payment of the main claim

The High Court found that the Danish Merchant Shipping Act did not provide any support for the limitation period to be calculated from an earlier date than the payment of the main claim. The Court noted that this type of damage would often involve a recovery claim against a subcarrier who would already know about the damage at the time of the injury. However, many carriers may be involved, so it may be a long time before the last carrier receives the claim.

The High Court also found that the general time limit of three years laid down in the Danish Statute of Limitations did not apply, as it had been replaced by the deadline for the Danish Maritime Act. In addition to the one-year period after payment of the claim, the only limitation period that applies is the absolute 10-year period laid down in the Danish Statute of Limitations.

IUNO’s opinion

The High Court’s decision reflects the letter of the law but does not take the origin of the provision into account. The provision is the Nordic version of a similar rule in the Hague-Visby rules, rule III.6bis. This leaves it to the individual states to draw up the rule regarding recourse. Like the Danish Merchant Shipping Act, it is not entirely clear when the deadline for the recourse claim will begin to run. However, it was probably not intended that the recovery claim could be outstanding for as long as has happened in this case, where the damage had been done several years before the claim against the performing carrier was raised. It is impractical in terms of documentation. A performing carrier presented with an old claim may also have problems with insurance coverage if their liability insurance has changed in the meantime. In addition, there are non-statutory rules on inaction that could become relevant.

IUNO, therefore, recommends pursuing known claims and having them reported to their insurance and not relying on a 10-year limitation period.

[The Maritime and Commercial High Court’s ruling in case BS-28465/2020-OLR of 7 June 2021]

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Rosenberg Overby

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Christopher Whitta-Jacobsen

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