Article: The Tai Prize Appeal

News & Insights 26 February 2021


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This case relates to a consignment of beans that were damaged before loading, where the shipper should have known about the condition of the cargo upon loading.

This case relates to a consignment of beans that were damaged before loading, where the shipper should have known about the condition of the cargo upon loading. When presented with a draft bill of lading describing the cargo as: 63,366.150 metric tons Brazilian Soyabeans Clean on Board Freight pre-paid, the master/owners issued the bill of lading without any reservations. The face of the bill of lading mentioned: 'SHIPPED at the Port of Loading in apparent good order and condition …[emphasis added by the undersigned…] on board the Vessel for carriage to the Port of Discharge' and 'Weight, measure, quality, quantity, condition, contents and value unknown …'

In 2020, the Commercial Court held in The Tai Prize[1] (article linked in the attachment box) that:  

  1. By presenting the draft bill of lading to the master for signature, the shipper was doing no more than inviting the master to make a representation of fact in accordance with his own assessment as to the apparent condition of the cargo,
  2. The bill of lading was not inaccurate as a matter of law; and
  3. There was no room for the implication of an obligation (upon the shipper) to indemnify the owners.

The judgment reinforced the view that it is the master who has the sole responsibility for assessing the apparent order and condition of the goods shipped on board his vessel. Where cargo damage is not reasonably visible to the master the representation that it was 'in apparent good order and condition' is not inaccurate; but the master should refrain from accepting this qualification if he is unsure about the condition of the cargo so loaded.

The cargo interests successfully brought their claim for cargo damage and owners were ordered to pay them damages. Owners, thereafter, recovered 50% from the disponent owners (time charterers) who, in turn, sought to recover this settlement down the contractual chain from the voyage charterer on the basis that the cargo should not have been described by shippers as being in 'apparent good order and condition' in the draft bill of lading. It was subsequently held that given the voyage charterparty incorporated the Hague Rules, the time charterer was not entitled to an implied indemnity from the voyage charterer and the disponent owners’ claim was dismissed.

The Comm. Court gave permission to appeal to the Court of Appeal and the disponent owners did so, seeking to restore the original arbitrator's award where the arbitrator held that the voyage charterer had to indemnify the disponent owner for their 50% contribution to the settlement with the head owner. In appeal, the disponent owners argued that:

'Where an owner incurs liability as a result of a misdescription of the apparent condition of the cargo in a draft bill of lading presented to the master for signature by or on behalf of the charterer, and the charterer knows or should know of the misdescription, is the owner entitled to an indemnity from the charterer if the master did not have reasonable means of discovering that the description was inaccurate?'

Disponent owners further argued that the Judge’s principal error was in holding that the tender of a draft bill of lading describing the cargo as shipped in apparent good order and condition was only an invitation to the master to make his own assessment, when in fact, disponent owners continued to argue, it was also a representation that the cargo was in apparent good order to the shippers' and charterers' knowledge.

Voyage charterers’ defence was that it is a long established held legal principal that statements in a bill of lading as to the apparent good order and condition of the cargo are representations made by the master based on his own assessment of the cargo, from which it follows that a shipper presenting such a draft bill makes no representation and gives no warranty about the apparent order and condition of the cargo. It follows, also, from the arbitrator's findings of fact that the bill of lading in this case was not inaccurate, in that the cargo was loaded in apparent good order and condition because the damage was not apparent to the master.

The Court of Appeal[2] upheld the Commercial’s Court decision and dismissed disponent owners’ claim on the basis that:

  1. The words 'CLEAN ON BOARD' and 'SHIPPED in apparent good order and condition' in the draft bill of lading presented to the master did not amount to a representation or warranty by the shippers and/or charterers as to the apparent condition of the cargo observable prior to loading. The words were merely an invitation to the master to make a representation of fact in accordance with his own assessment of the apparent condition of the cargo on shipment.
  2. On the findings of fact 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 Court of Appeal did leave open the question of what the result would have been had charterers/shippers actually known of the defective condition of the cargo, having some sympathy for owners’ submission that if that had been the case then it might be unfair for a charterer to escape liability.

 

[1] [2020] EWHC 127 (Comm) -) Priminds Shipping (HK) Co Ltd v Noble Chartering Inc (The 'Tai Prize')
[2] [2021] EWCA Civ 87

Categories: Bills of Lading

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