Whether master presented by Shipper’s with clean BL to sign was provided with warranty that cargo shipped in good order and condition – Consideration of Article III rules 3 and 5 of the Hague Rules.

Facts 

The “Tai Prize” was time chartered to Noble Chartering Inc (‘Noble’), who in turn voyage chartered her to Priminds Shipping (HK) Co Ltd (‘Priminds’) for the carriage of a cargo of soyabeans from Brazil to China. The shipper’s agent drafted the bill of lading (‘BL’) with the information below, and invited the master to sign the same;

“63,366.150 metric tons Brazilian Soyabeans

Clean on Board          

Freight pre-paid.”

The BL 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 Hague Rules were incorporated into the BL as well as into the voyage charter.

On discharge, some of the cargo was found to have suffered heat and mould damage. The receivers brought a claim against the shipowners and was awarded by the Chinese Court a sum in excess of USD 1m.  The shipowners settled with the receivers and then claimed a 50% contribution to this settlement from Noble under the terms of the head charter.  Noble settled the shipowners’ claim and sought to be indemnified by Priminds in respect of its settlement with the shipowners and its associated costs. There was no express provision in the voyage charter on which Noble could rely. 

The arbitrator made a finding of facts that the cargo had been loaded in a pre-existing damaged condition; that the damage was not reasonably visible to the master on loading; but that the shippers would have been able to discover the condition of the beans by reasonable means.

The arbitrator rejected Noble’s claim to be entitled to a general implied indemnity from Priminds but nevertheless held Priminds liable to Noble on the following grounds:

(i) the shipper was Priminds’ agent and thus Priminds impliedly warranted the accuracy of any statement as to condition contained in the BL and/or impliedly agreed to indemnify Noble against the consequences of the inaccuracy of any such statement. Otherwise Noble would be left without recourse for the “wrongs of parties who were on the (charterers’) side of the line”; 

(ii) in inviting the master to sign the BL containing the statement as to apparent condition, Priminds, by their agent the shipper, had warranted that the cargo was “SHIPPED at the Port of Loading in apparent good order and condition”;

(iii) the cargo was not shipped “in apparent good order and condition” because its discolouration would have been visible on reasonable examination by the shipper even though it was not reasonably visible to the master or crew or the stevedores or any agent of Priminds at or during loading. 

Priminds appealed the arbitrator’s decision.

Judgment

The High Court was obliged to accept the arbitrator’s findings of facts above but allowed Priminds’ appeal for the following reasons;

(i)   Article III, rule 3 of the Hague Rules provided for the inclusion within a BL of the leading marks necessary for identification of the goods as the same are furnished in writing by the shipper …., the number of packages or pieces or the quantity or weight of the goods, as the case may be, as furnished in writing by the shipper, AND, the apparent order and condition of the goods.

(ii)   Article III, rule 5 of the Hague Rules then provides as follows, “The shipper shall be deemed to have guaranteed to the carrier the accuracy at the time of shipment of the marks, number, quantity and weight, as furnished by him, and the shipper shall indemnity the carrier against all loss, damages and expenses arising or resulting from inaccuracies in such particulars…”  No such guarantee is deemed given in respect of the apparent order and condition of the goods.  

(iii)   The apparent order and condition of the goods is something to be assessed by the carrier. When inviting the master to sign the BL, the shipper was doing no more than inviting the master to make a representation of fact in accordance with his own assessment of the apparent condition of the cargo.

(iv)   There was no finding by the arbitrator that the master failed to carry out an independent assessment or acted on any implied representation based on the tendering of the draft BL to him for signature.  The BL issued contained no more than a representation of fact by the master as to the apparent condition of the cargo which  was not inaccurate because the master did not and could not reasonably have discovered the relevant defects as they were not reasonably visible to him or to any other agent of Priminds at or during shipment.

(v)   As for the arbitrator’s concern that Noble would be left without recourse, the judge commented that this concern was misplaced. He pointed out that Noble’s liability did not arise as a result of the wrongs of anyone on “the charterer’s side of the line” because Noble’s liability to the shipowner was the result of Noble’s decision to pay the shipowner rather than to defend the claim by reference to the true condition of the goods.

Comments

The High Court judge noted that it was not a mistake that the BL was issued clean. The damage was not apparent at the time of loading. When damage was found at the port of discharge, the carrier could have rejected the claim then, which was what the shipowner did in this case, albeit unsuccessfully. 

No indemnity from the shipper is to be deemed with regards to the apparent order and condition of the goods. The Hague Rules had been incorporated into the voyage charter and the same only imposed on the charterer an indemnity in respect of information furnished by the charterer, and not in respect of statements concerning the apparent order and condition of cargo.  

It is for the master to assess the apparent order and condition of the goods, and to decide if the BL needs to be claused.  The standard to be applied to a master who is required to take such a decision is that of the ‘reasonable master’, and not that of an expert surveyor.  If the master requires assistance to ascertain the condition of the cargo during loading, his P&I Club would be able to appoint a surveyor to assist him. (see The David Agmashenebeli [2003]1 Lloyd’s Rep 92). 

The Judge also generally cautioned against implying terms, such an indemnity, into a contract which had been professionally drawn and negotiated. Terms are to be implied only if  it was necessary to do so in order to give the contract business efficacy or was so obvious that it went without saying.