The decision in The Tai Prize [2020] EHWC 127 (Comm) is an appeal from a London arbitration award which provides useful guidance on the meaning of the words “SHIPPED in apparent good order and condition…” which are found in most standard form bills of lading including the Congenbill 1994 form.  William Stansfield provides the details. 

The facts in the case of The Tai Prize [2020] are not untypical.  The vessel was time chartered to Nobel Chartering (“Time Charterers”), who in turn chartered the vessel to Primands Shipping (“Voyage Charterers”) pursuant to a voyage charter to carry a cargo of soyabeans from Brazil to China.  The cargo was shipped pursuant to bills of lading on the Congenbill 1994 form, which stated that the cargo was:

“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…”

On arrival, the cargo was found to have suffered heat and mould damage. To avoid an arrest, the Head Owners and their P&I insurers put up security and submitted to the jurisdiction of the Chinese courts. The Head Owners defended the receivers’ claim but they were unsuccessful and judgment was given against the Head Owners.

The Head Owners claimed an indemnity from the Time Charterers for the amount that they had paid to the Chinese cargo receivers. That claim was settled by the Time Charterers agreeing to indemnify the Head Owners approximately 50% of the amount paid to the receivers.

The Time Charterers then sought an indemnity from their Voyage Charterers. 

The voyage charter contained no express indemnity provisions.  Whilst it is usually an express or an implied term of a time charterparty that a time charterer will indemnify their owners for the consequences of complying with the time charterers’ employment instructions, such an indemnity is rarely (if ever) implied into a voyage charter.

The Time Charterers argued they were entitled to an indemnity from the Voyage Charterers because when the shippers (who were acting as the Voyage Charterers’ agents for these purposes) presented draft bills of lading with the words “SHIPPED…in apparent good order and condition…”, the shippers gave a warranty or made a representation that the cargo was in good order on shipment (when it wasn’t). 

The Time Charterers’ indemnity claim against the Voyage Charterers succeeded in arbitration, but the Court overturned the arbitrator’s decision.

The court re-applied a long line of case law that holds that when a voyage charterer (through his agent, the shipper) presents draft bills of lading to the master that contains a statement as to the apparent condition, the voyage charterer/shipper is inviting the shipowner to make a representation as to the apparent condition of the goods on shipment based on the master’s own independent assessment of the apparent order and condition of the cargo.

This Court’s reasoning may initially appear difficult to justify, as in most cases the shipper will be in a better position than the master to make an assessment of the condition of the cargo loaded.  Indeed, the arbitrator made findings of fact that the cargo was not in good order or condition on shipment and this was not reasonably visible to the master or crew during loading but would have been reasonably apparent to the actual shippers. 

However, the decision will probably come as little surprise to those involved in the day-to-day carriage of goods by sea, where it is well known and understood that it is the master’s responsibility to form his own independent assessment of the cargo loaded and clause the bills of lading if necessary.

To an extent, the law protects the master, for the law only requires that the master has the same knowledge or experience of the cargo in question as any other reasonably competent master.  The master can also take comfort from the fact that whilst he is required to issue a bill of lading which records the apparent order and condition of the goods according to his own reasonable assessment, the master is not giving any sort of contractual guarantee of absolute accuracy as to the order and condition of the cargo.  In cases where defects in the goods are not apparent on reasonable inspection at the point of shipment, the master’s signature of the bill of lading without any qualification does not prevent the owner from defending a cargo damage claim by establishing the true condition of the goods upon loading.

The end result was the arbitrator’s award was overturned, but this may not be the end of the story just yet. The time charterers are reportedly seeking permission to appeal to the Court of Appeal, so there may still be another twist to this tale.

Article by William Stansfield, Senior Associate, CJC London.