Priminds Shipping (HK) v Noble Chartering - The Tai Prize
Priminds Shipping (HK) Co Ltd v Noble Chartering Inc, the “Tai Prize”  EWHC 127 (Comm)
English Commercial Court (Queen’s Bench Division): HH Judge Pelling QC (sitting as a Judge of the High Court)
Mr Alexander Wright instructed by Penningtons Manches Cooper LLP for the Claimant
Mr James Leabeater QC instructed by Birketts LLP for the Defendant
SHIPPERS ACTING AS AGENTS FOR THE CHARTERERS PRESENTED ‘CLEAN ON BOARD’ BILL OF LADING FOR MASTER’S SIGNATURE: CARGO DID APPEAR TO BE IN GOOD ORDER SO BILL OF LADING ISSUED STATING CARGO IN APPARENT GOOD ORDER AND CONDITION:: ON DISCHARGE CARGO FOUND TO BE DAMAGED: WHETHER CHARTERERS LIABLE TO OWNERS AS CARRIER FOR MISREPRESENTATION: EFFECT OF INCLUSION OF HAGUE RULES IN BILL OF LADING
This was an appeal by Priminds Shipping (HK) Co Ltd as voyage charterer (“Priminds”) under s.69 of the Arbitration Act 1996 (“AA”) in respect of three questions of law arising out of a final award by a sole arbitrator (“the Arbitrator”) holding Priminds responsible to pay Noble Chartering Inc ("Noble”) a claim brought by them as disponent owners, in the sum of US$500,000 plus costs.
The High Court allowed the appeal. It found that the shippers’ statement on the bill of lading (as agents for Priminds) that the cargo was “clean on board” and “shipped at the Port of Loading in apparent good order and condition” did not constitute a warranty in respect of the condition of the cargo and that it was the master’s task to take reasonable steps to verify the condition of the cargo before signing any bill of lading presented by the charterers or shippers.
Case Note contributed by Sri Azali BB (Human Resource Management & Business Law), Paralegal at Penningtons Manches Cooper LLP Singapore.
Note: the judgment reported here has been upheld on appeal. A note on the decision of the Court of Appeal is here []
Noble Chartering Inc, disponent owners of the MV Tai Prize (“the Vessel”) voyage chartered the vessel to Priminds Shipping (HK) Co Ltd for the carriage of a cargo of heavy grains, soya and sorghum in bulk from Brazil to the People’s Republic of China (“PRC”) (“the Charterparty”).
The bill of lading which was presented for signature by or on behalf of the master of the vessel (“the Bill of Lading”) had been prepared by the shippers, acting as agents for Priminds. The Bill of Lading, which was on a standard GENCON 1994 form, incorporated the Hague Rules and described the cargo as being “clean on board” and “shipped at the Port of Loading in apparent good order and condition”. The Bill of Lading was signed as a clean bill by agents for and on behalf of the Master. The Bill of Lading was thus a contract between the shippers and the registered owners of the Vessel (the “Owners”).
During the unloading of cargo at the discharge port, receivers found that the cargo in two or the Vessel’s holds had suffered heat and mould damage. Receivers then commenced proceedings against the Owners in the PRC and were awarded the sum of US$1,086,564.70. Subsequently, the Owners commenced arbitration against Noble, claiming a 50% contribution to the sum paid to cargo receivers for the damage to cargo. In a negotiated settlement, Noble agreed to pay US$500,000 to the Owners in full and final settlement. In further arbitration proceedings, Noble then sought to be indemnified by Priminds for the amount paid to the Owners and the associated costs. There was no express provision in the Charterparty by which Noble was entitled to the indemnity.
The Arbitrator found that:
(i) in relation to the heating, caking and discolouration found on discharge, the damaged beans had been loaded in a pre-existing heat damaged condition;
(ii) the mould damage found on discharge was caused by the loading of cargo in a pre-damaged condition;
(iii) the damage from which the beans were suffering was not reasonably visible to the Master or crew or the stevedores or the attending surveyors or any agent of Priminds at or during loading; but
(iv) on reasonable examination, the shippers would have been able to discover that the cargo was not in apparent good order and condition when shipped due to the discolouration of some of the beans at or before loading;
(v) Priminds was liable to Noble because the shippers, as Priminds’ agents (and hence Priminds) had impliedly warranted the accuracy of any statement as to condition contained in the Bill of Lading and/or had impliedly agreed to indemnify Noble against the consequences of the inaccuracy of any such statement on the basis that Priminds was liable for the consequences of the shippers’ acts.
Priminds appealed against the arbitral award to the High Court on the basis of the following three issues of law.
1. whether the statements in the draft Bill of Lading presented to the Vessel’s agents for signature on behalf of the Master amounted to a representation or warranty by the shippers and/or Priminds as to the apparent condition of the cargo observable prior to loading or whether they were an invitation to the Master to make a representation of fact in accordance with his own assessment of the apparent condition of the cargo;
2. whether any statement in the B/L was inaccurate as a matter of law;
3. was Priminds obliged to indemnify Noble against any consequences of that statement being inaccurate, whether pursuant to an implied indemnity arising by operation of law or an implied contractual warranty or term
1. Following the rule of law in The David Agmashenebeli  1 Lloyds Rep 92 per Colman J at 103 RHC, the judge held that, when the charterer or shipper on his behalf tenders a bill of lading for signature by the Master that contains a statement as to apparent condition in the same or similar terms to the wording in the Bill of Lading in this case, the charterer or shipper is inviting the Master to make a representation of fact as to the apparent condition of the goods on shipment.
Following a more recent case, The Saga Explorer  EWHC 3124;  1 Lloyds Rep 401 per Simon J, the judge held that the representation of fact made by the Master becomes the carrier’s evidence of the apparent condition of the goods when placed aboard the ship. This evidence can then be relied on by the consignee and all subsequent holders of the bill of lading as reflecting the reasonable judgment of a reasonably competent and observant master.
The Judge then went on to examine the Hague Rules (which were incorporated into the Charterparty as well as into the Bill of Lading) and found that there was a clear distinction between the information stated in a bill of lading but provided by the charterer or shipper on the charterer’s behalf, which the carrier or master on its behalf is obliged to accept, and the representations as to the apparent condition of the shipment.
Under Article III Rule 3 of the Hague Rules, the information to be included within a bill of lading to which the Rules apply was “the leading marks necessary for the identification of the goods as the same” and “the number of packages or pieces, or quantity or weight” both of which, clearly stated “as furnished in writing by the shipper”. Critically, the rule goes on to provide that the bill should also set out “the apparent order and condition of the goods” but did not state that this information was to be “as furnished in writing by the shipper”. It was therefore the Master’s task to verify the condition of the goods before he signs the B/L.
2. The Arbitrator had found that the damage to the cargo existed prior to shipment but was not reasonably visible to the Master or any agent of Priminds. In these circumstances, the Judge found that the representation of fact by the Master as to the apparent condition of the cargo was not inaccurate.
3. The Judge noted that Article III Rule 5 of the Hague Rules imposed an express indemnity obligation on the shipper in respect of the information that he “furnishes in writing” but not in relation to statements regarding “the apparent order and condition of the goods”. This was a clear distinction and therefore, there was no room for the implication of an implied guarantee or warranty as a result of any inaccuracy of those statements.
The judgment in this case makes very clear that the Master (on behalf of the carrier) has a responsibility to verify the condition of the goods with his own reasonably competent assessment, before signing any bill of lading presented by the charterer or shipper. He is to make a representation of fact as to the apparent condition of the goods.
It is also interesting to highlight that, contrary to the Arbitrator’s opinion that, absent an indemnity from Priminds, Noble would be left without recourse and “without protection from the wrongs of parties who were on the [claimant's] side of the line”, the Judge found that there was nothing unjust about the outcome - Noble’s ultimate liability to the Owners was the result of their decision to settle the Owners’ claim against them, rather than defend the claim by reference to the true condition of the goods.