The “Tai Prize” was time chartered to Noble, who in turn voyage chartered her to Priminds for a voyage from Brazil to China with a cargo of soybeans. Clean bills of lading were issued for the cargo.
The B/L was executed by agents on behalf of the master without any reservations, stating that the cargo had been ‘SHIPPED at the Port of Loading in apparent good order and condition on board the Vessel for carriage to the Port of Discharge …Weight, measure, quality, quantity, condition, contents and value unknown …’
The B/L included the Hague Rules (HR) by operation of clause 2 on its reverse side. The contract of affreightment evidenced by the B/L was with the shipowner not the claimant.
The receivers in China brought a claim for heat, caking, and mould damage to the cargo, and obtained a court award against the Owners for over US$1 million.
Noble had to pay US$500,000 to settle the Owner’s indemnity claim under the time charter, and then claimed an indemnity for this amount from Priminds.
According to Noble, due to the fact that the shipper and shipper’s agents presented clean bills to the Master for signature, they had the right to be indemnified by Priminds.
The arbitrator, Sarra Kay, found that the cargo damage was because of its pre-shipment condition, which would have been reasonably apparent to the shippers, but would not have been reasonably apparent to the Master.
She determined that the shipper was Priminds agent and their presentation of clean bills of lading to the Master, for signature, amounted to a warranty by Primind that the cargo was in good order and condition, or that Primind had impliedly agreed to indemnify the Noble against the consequences of the inaccuracy of the statement of apparent good order in the bill of lading. The arbitrator decided that Priminds had to pay Noble’s claim of USD$500,000, plus costs.
After that, Priminds appealed to the High Court.
With the case now in the High Court, the latter had to accept the arbitrator’s findings of fact, that the shippers knew or were oblige to have known that the cargo was damaged prior to shipment and that the Master could not reasonably have detected the damage during the loading operation.
As a result, the High Court considered three questions of law arising out of the award:
- Did the words ‘clean on board’ and ‘apparent good order and condition’ on the draft bills of lading presented to the Master for signature amount to a warranty that the cargo was in good order and condition?
- Whether any of the statements on the Bills were inaccurate as a matter of law;
- If so, whether the Charterers were obligated to indemnify the Owners for the consequences of those statements being erroneous.
Judge Pelling QC, sitting as a judge in the High Court, overturned the arbitration award. As he stated, the presentation of the clean bill of lading for signature was merely an ‘invitation’ to the Master, from the shipper, to issue a clean bill, provided that he was satisfied that it was an accurate statement on the apparent cargo condition. The representation in the bill of lading is the record of the carrier’s evidence of the apparent cargo condition when shipped on board and it will be relied upon by the cargo receivers.
The Judge specified that the Master still has the obligation, according to the Hague Rules, to make his own assessment of the ‘apparent order and condition of the cargo.’
What is more, it was decided that there was no causal link between the alleged inaccurate representation by the Shipper and Noble’s loss because the Master did not depend on the representation on the draft bill.
The High Court also concluded that Noble was not entitled to an indemnity from Priminds. This was due to the fact that the Hague Rules Visby do not impose any obligation on the shipper in relation to statements regarding apparent order and condition of cargo. Therefore, an indemnity could not be implied.
Commenting on this decision, Lorna Watkin Syndicate Executive Claims European Syndicate, Steamship Mutual, says that:
When cargo is loaded onboard ship, the Master, or carrier, is obliged to ascertain the apparent order and condition of the cargo and issue clean or claused bills of lading accordingly
This means that even if the charterparty requires the Master to sign bills of lading ‘as presented,’ this does not require or permit the Master to sign clean bills if the condition of the cargo does not justify it.
The Master must make his own reasonable judgment of the order and condition of the cargo and clause the bills accordingly.