QCR Autumn 2021: Noble Chartering Inc V Priminds Shipping (HK) Co Ltd (The "Tai Prize") [2021] EWCA Civ 87 - Court of Appeal

Whether Master, presented by Shippers with a clean bill of lading to sign, was provided with a warranty that the cargo was shipped in good order and condition - Consideration of Article III rules 3 and 5 of the Hague Rules.

The Club had previously reported on the High Court’s decision in this case concerning a claim under a voyage charterparty on an amended NORGRAIN’ 73 form for the carriage of soya beans from Brazil to China.

The draft bill of lading presented by the shippers to the master for signature contained the statement that the cargo was “in apparent good order and condition.” The cargo was subsequently alleged to be damaged when the vessel arrived at the discharge port.

The arbitration tribunal held the voyage charterers, Priminds, liable to the disponent owners, Noble, on grounds including that the words “CLEAN ON BOARD” and “SHIPPED in apparent good order and condition” in the draft bill of lading amounted to a representation or warranty by the shippers and/or charterers that the cargo was shipped in apparent good order and condition.

The arbitral award was overturned by HHJ Pelling QC in the High Court but the disponent owner was given permission to appeal the decision to the Court of Appeal.

Please refer to our QCRs Spring 2020: The Tai Prize [2020] EWHC 127 (Comm) for additional details of the earlier decisions.

Court of Appeal Judgment

The Court of Appeal upheld the High Court’s decision and dismissed the disponent owners’ appeal. In doing so, the Court held that:

• the words “CLEAN ON BOARD” and “SHIPPED in apparent good order and condition” in the draft bill of lading presented to the master were merely an invitation to the master to make a representation of facts in accordance with his own assessment of the apparent condition of the cargo on shipment.
• on the findings of facts made by the arbitrator, the statement in the bill of lading that the cargo was shipped in apparent good order and condition was accurate.
• the tender of a draft bill of lading does not create an implied warranty in the charterparty that the statement in the draft bill is accurate. The criteria for implying a warranty was not met. Implying a warranty by shippers or charterers as to the apparent order and condition of the cargo would run counter to the scheme of the Hague Rules.

Lord Justice Males examined the meaning of “apparent good order and condition” in a bill of lading and clarified that,

1. a statement in a bill of lading as to the apparent order and condition of the cargo refers to its external condition, upon a reasonable examination.
2. what amounts to a reasonable examination depends on the actual circumstances prevailing at the load port.
3. what matters is what is reasonably apparent to the master or other servants of the carrier.
4. the statement relates to the apparent order and condition of the cargo at the time of shipment, that is to say of receipt by the carrier, and not at any earlier time.
5. the statement is based upon the reasonable examination of the cargo which the master has (or should have) undertaken.

The court held that the voyage charterer is not liable to the owners for losses caused by misdescription of cargo in bills of lading because the carrier has an obligation under Article III, Rule 3 of the Hague Rules (and Hague-Visby Rules) to accurately record the apparent order and condition of the cargo on the Bill of Lading when shipped on board.

The court, citing The Nogar Marin [1988] 1 Lloyd’s Rep 412, found that the statement of the apparent order and condition of the cargo is based exclusively on the examination carried out by or on behalf of the master acting on behalf of the carrier and does not depend on information provided by the shipper.

Lord Justice Males went on to explain that the Hague Rules distinguish between the statement of the apparent order and condition of the cargo and information in the bill of lading which is provided by the shipper.

Article III Rule 3 obliges the carrier to issue, upon the shipper’s demand, a bill of lading setting out certain information such as number of packages, leading marks, quantity, weight, and apparent order and condition of the goods, whilst Article III Rule 5 contains a guarantee and associated indemnity by the shipper to the carrier for the accuracy of all this information.

Comments

The Court of Appeal has re-emphasised that the master’s obligation to sign a bill of lading under Article III, Rule 3 of the Hague Rules must be performed upon his own reasonable examination of the cargo, and exercising his own judgement.

The arbitrator had taken the view that leaving the owner without recourse when damaged cargo is knowingly shipped would be an encouragement to charterers/shippers to mis-describe the condition of the cargo on a draft bill of lading, Lord Justice Males expressed his sympathy for owners in such a situation and noted that it may seem unfair.

On the facts of this case however, there was no finding of actual knowledge on the shippers or the charterers. He therefore left the question open, and limited his decision to the question of law which was the subject of the appeal.

Members may recall that the head charterparty incorporated a clause which required disponent owners to contribute to 50% of the cargo settlement but there was no similar clause in the voyage charter. Members are however reminded that where a bill of lading has been correctly issued as clean i.e. without remarks (as was the case here), Members as carrier are not prevented from seeking to rely upon the Hague Rules defences, including the defence of inherent vice, against a claim arising under the bill of lading if there is evidence to support such a defence.

The disponent owners are seeking permission to appeal this decision to the Supreme Court and this may therefore not be the last we hear of this case. The Club will monitor developments and update further in due course.