UK Case law: Noble Chartering Inc v Priminds Shipping Hong Kong Co Ltd (The 'Tai Prize')  EWCA Civ 87
News & Insights 23 March 2021
Bills of Lading - 'Shipped in apparent good order and condition' - Who is representing what, and to whom - no implied indemnity by the shipper/charterer regarding statement of cargo’s apparent condition on loading. The recent...
Bills of Lading - 'Shipped in apparent good order and condition' - Who is representing what, and to whom - no implied indemnity by the shipper/charterer regarding statement of cargo’s apparent condition on loading.
The recent Court of Appeal decision on the Tai Prize, which upheld the decision of HHJ Pelling QC in the Commercial Court, summarises well established principles in relation to the representations that are made, or not made, by the shippers’ cargo description in bills of lading.
The dispute related to the carriage of a cargo of soyabeans from Brasil to China. On arrival at the discharge port the cargo was found damaged. The receivers alleged that the cargo had been shipped in a damaged condition, which was known to the shippers. Headowners (as carriers under the bills of lading) were held liable in Chinese proceedings and sought a contribution from disponent owners under the Inter-Club Agreement (ICA), which was eventually settled. Disponent owners then sought a recovery from the charterers, though they could not rely on the ICA or any express clause giving rise to an indemnity.
The arbitrator found in favour of the disponent owners on the basis that the cargo was not in apparent good order and condition when shipped (though the damage was not reasonably visible on loading) and that there was an implied warranty by the shippers that the statements on the bills of lading to this effect were true, which the shippers breached.
On appeal, HHJ Pelling QC in the Commercial Court overturned the arbitrators’ decision and dismissed the disponent owners’ claim. This decision was upheld by the Court of Appeal.
The Court of Appeal held that:
(1) A statement in a bill of lading as to the apparent good order and condition refers to its external condition, as would be apparent on a reasonable examination. It is only an invitation to the master to make a reasonable assessment of the cargo, but that does not require normal loading procedures to be disrupted.
(2) The presentation by the shippers of a draft bill of lading does not constitute a warranty or representation by the shippers that the facts stated in the draft bill as to the condition of the cargo are true; if the carrier does not want to make that representation the master should clause the bill of lading (having conducted his own reasonable examination).
(3) There was no necessity to imply an indemnity in the circumstances (as per the Nogar Marin  1 Lloyds Rep 412).
The decision of the CA is uncontroversial, however, some obiter considerations raise interesting questions. In particular, Males LJ left open the question of whether an implied warranty should be recognised in circumstances where the shippers had actual knowledge of the defective condition of the cargo. Are unusual factual circumstances needed and what might those be? On the present case, it was held that the shippers were not in fact aware that the cargo was actually in poor condition; however, the outcome may be different in another case, on different facts.
View the article on the Standard Club website here.
Link to commentary here.
Link to full judgement here.