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Lighthouse - July, 2020.

CHARTERER’S LIABILITY TOWARDS SHIPPER’S AFFIRMATION ON “APPARENT GOOD ORDER AND CONDITION”

One of the main challenges (or as might say “An Issue”) faced by any Shipping Line is when they have to carry the perishable goods from one port to another. Their main responsibility is to keep the Goods safe from damages due to temperature variance, moisture, ingress of seawater into the containers, etc. This shall mean a series of claims against the Carrier/Shipping Line by the Consignee/Shipper/Insurance Companies etc. To protect themselves from any such cargo claims, the Carrier/Shipping Line relies mostly on the reservations that they have included in the Bill of Lading to state, “Shipper’s Load, Stow and Count.” Including these types of reservations in the Bill of Lading lifted the burden of proof from the Carrier to the Shipper wherein the Shipper has to prove that the Cargo was well packed and was safe for the voyage when it was handed over to the Carrier/Shipping Line for loading. If the Bill of Lading does not have these types of reservation statements, usually, the Shipping Lines are held liable for the damaged cargoes. However, a recent case of 2020 took a slightly different view from the usual practice of holding the Shipping Line or the Carrier liable for the damaged goods, especially when there was no reservation made in the Bill of Lading by the Carrier/Shipping Line.

Joy Thattil
Maritime Lawyer & Partner @ Callidus
Dubai, Singapore & India
joy@calliduscmc.com

In the case, PRIMINDS SHIPPING (HK) CO. LTD Vs. NOBLE CHARTERING INC. TAI PRIZE [2020] EWHC 127 (Comm), the Vessel, “MV TAI PRIZE” was time chartered to M/s Noble Chartering Inc. (hereinafter the “Disponent Owners”), who then sub-voyage chartered the Vessel to M/s Priminds Shipping (HK) Co. Ltd (hereinafter the “Voyage Charterer”) for the carriage of the cargo “Soya Beans” from Brazil to China. The Cargo was loaded by the Shipper, and the Bill of Lading was prepared by the Shipper’s Agent, who described the Cargo as “…… Clean on Board… and Shipped in Apparent Good Order and Condition…” and the said Bill of Lading was executed by the Master’s Agent without any reservations.

At the port of discharge, the Consignee discovered that the Cargo’s portions suffered heat and mold damage. When the Consignee filed a case for the loss and damages incurred by them, the actual Vessel. The owner secured their claim by paying off their claim amount of around US$ 1 million, mainly to avoid the arrest of their Vessel. The actual vessel owners, in turn, brought the claim against the Disponent Owners, under the terms of the Time Charter Party seeking a contribution of half of the sum paid by them to the Consignee and the Disponent Owners settled the claim with the Actual Vessel Owners, by paying them the money. The present appeal was filed by the Voyage Charterer to challenge the impugned arbitral award pronounced in the London Arbitration Proceedings commenced by the Disponent Owners against the Voyage Charterer to recover the amount paid to the actual vessel owners and the costs of defending that claim since the Shipper was the Voyage Charterer’s agent and therefore the Voyage Charterer had impliedly warranted the accuracy of any statement as to the condition contained in the Bill of Lading or had impliedly agreed to indemnify the Disponent owner against the consequences of the inaccuracy of any such statement.

Before going to the Court’s interpretation of the wordings and issues involved in the case and the wordings used in the Bill of Lading, let us first see what is considered to be an “Apparent Order and Condition of the Cargo.” According to the Interpreters, the term refers to the condition of the Goods as would be apparent on reasonable examination, and not the internal condition of the Cargo on the shipment or their quality. Further, when a shipment is said to be in “apparent good order and condition” it also means that the Cargo is properly packed to withstand the ordinary incidents of the voyage. In case if Cargo is not sufficiently packed or if the Carrier or the Master thinks that the Cargo will not withstand the incidents of the voyage, then they must not issue a Bill of Lading, without any reservations. Usually, the reservations are like “Cargo has been shipped at the Port of Loading in apparent good order and condition on board the Vessel for the carriage to the Port of Discharge… Weight, Measure, Quality, Contents, and Value Unknown” OR “All Particulars as furnished by the Shipper but unknown to the Carrier.” These reservations are mentioned to given the Shipper, Consignee, or any party concerned a reasonable notice that there might be some defect or shortage in the goods which is not known to the Carrier. It is also to be noted that these reservations must be made on the front of the Bill of Lading and not elsewhere.

Above being the industry’s usual practice, in the case of PRIMINDS SHIPPING (HK) CO. LTD Vs. NOBLE CHARTERING INC. TAI PRIZE [2020] EWHC 127 (Comm), the Court took a slightly variant view while interpreting the wording by Shipper in the Bill of Lading, “Clean on Board” and “Shipped in apparent good condition” or the issue as to whether the Shipper’s presentation of the Bill of Lading with the aforementioned terms, leads to a representation or warranty by the Shipper as to the apparent good condition of the Cargo observable before the loading OR if it is only an invitation to the Master to make a representation of fact, in accordance with his assessment of the apparent condition of the Cargo. The Court opined that as per Article III Rule 3 of the Hague Rules (incorporated in both the Charter Party as well as the Bill of Lading of the subject case), the information regarding “leading marks necessary for the identification of the Goods” and “the number of packages or pieces or the quantity or weight” of the Goods constituting the Cargo, to which the relevant Bill of Lading is concerned, is the information furnished in writing by the Shipper and as far as this case is concerned this aforementioned provision of the Hague Rules applies to the information “63,366.150 metric tons Brazilian Soya Bean”. Further the Hague Rules also provide the “apparent order and condition of the Goods” but as per the Court, this information is not to be furnished by the Shipper, instead this part should be an exclusive assessment by the Carrier (or The Master) of the Goods at the point of shipment. Therefore while answering the aforementioned issue, the Court said that by presenting the draft Bill of Lading for signature by or on behalf of the Master, in relation to the statement concerning apparent good order and condition, 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. The Court also noted that The Hague Rules Article III Rule 5 imposes an express indemnity obligation on the Charterer in respect of the information that he “furnishes in writing.” A Charterer has no such obligation however, in relation to statements regarding the “apparent order and condition” of the Cargo. The Court also held that the Disponent Owner was not entitled to an Indemnity from the Voyage Charterers, because the Hague Rules, incorporated into the Voyage Charter Party between the Parties, do not impose on the Shipper in relation to the statement concerning apparent order and condition of Cargo.

Even though this decision is a boon to the Charterers as they will be relieved that a general implied indemnity was not owed to the Disponent Owners in respect of the statement concerning the apparent order and condition of Cargo, made by the Shipper, we are yet to see the outcome of the case, as the Disponent Owners are granted leave to file an appeal.

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