Priminds Shipping v Noble Chartering - the Tai Prize
Priminds Shipping (HK) Co Ltd v Noble Chartering Inc, the “Tai Prize”  EWCA Civ 87: Court of Appeal (Civ Div): Bean LJ, Males LJ and Rose LJ: 28 January 2021
James Leabeater QC and Rani Noakes, instructed by Birketts LLP, for the Disponent Owners
Alexander Wright, instructed by Penningtons Manches Cooper LLP, for the Charterers
VOYAGE CHARTERPARTY: SHIPPERS ACTING AS AGENTS FOR THE CHARTERERS PRESENTED ‘CLEAN ON BOARD’ DRAFT BILL OF LADING FOR MASTER’S SIGNATURE: CARGO APPEARED 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 DISPONENT OWNERS FOR MISREPRESENTATION
This was an appeal by Noble Chartering Inc ("Noble”) as disponent owners, of the decision of the High Court [] that voyage charterers, Priminds Shipping (HK) Co Ltd (“Priminds”) were not liable to indemnify them in respect of a contribution they had made to the settlement of a cargo claim in the context of an earlier arbitration brought against them by the registered owners of the vessel (the carrier under the bill of lading issued by agents for the Master. The High Court had held that Priminds – acting through the shippers as their agents -had not impliedly warranted the accuracy of any statement in the bill of lading as to the condition of the cargo, and that the Master was to make his own representation as to the apparent order and condition of the shipment loaded on board.
The Court of Appeal upheld the judgment of the High Court that the shippers’ statements on the draft bill of lading tendered to the Master 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 himself to verify the apparent condition of the cargo before signing any bill of lading presented by the charterers or shippers. The appeal was dismissed accordingly.
Case Note contributed by Sri Azali BB (Human Resource Management & Business Law), Paralegal at Penningtons Manches Cooper LLP Singapore
Noble, as disponent owners of the MV Tai Prize (“the Vessel”) voyage chartered the vessel to Priminds 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”).
At the discharge port, the cargo was found to be damaged. This led to a claim by the cargo receivers against the Owners in the PRC. Owners were held liable for a sum of US$1,086,564.70 and subsequently commenced arbitration against Noble for a 50% contribution to the settlement. Noble agreed to pay US$500,000 to the Owners in full and final settlement; however, they then sought an indemnity from Priminds in further arbitration proceedings.
The Arbitrator found that the cargo had been loaded in a pre-existing heat damaged condition which was not reasonably visible during loading. It would, however, have been discovered by the shippers on reasonable examination. Ultimately, the Arbitrator held that 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.
Priminds appealed the arbitral award to the Commercial Court and succeeded in overturning the decision of the Arbitrator. [] . Dissatisfied with the judgment, Noble appealed to the Court of Appeal.
Decision of the Court of Appeal
The Court of Appeal considered 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.
The Court stated that the meaning of “apparent good order and condition” in a bill of lading referred only to its external condition (at the time of shipment, that is, on. receipt by the carrier) apparent on a reasonable examination by or on behalf of the Master. What amounted to a reasonable examination depended on the circumstances prevailing at the load port. The Master’s responsibility was to take reasonable steps to examine the cargo but he was not required to disrupt the normal loading procedures. What mattered was what was reasonably apparent only to the Master or the servants of the carrier – not to anyone else, such as the shipper, who might have other means of examining the cargo. The Court found that the statement as to the apparent order and condition of the cargo was based upon the reasonable examination that should have been taken by the Master, following the rule of law in The David Agmashenebeli  1 Lloyds Rep 92 per Colman J at 103 RHC and Peter der Grosse, The (1875) 1 P.D. 414.
In terms of the accuracy of the statement in the Bill of Lading, the court found that the Bill of Lading issued and signed on behalf of the master in the instant case was indeed accurate because a statement as to the apparent order and condition of the cargo referred only to its external condition as that appeared on reasonable examination by the Master in the circumstances at the port. In the circumstances of this case, the damage was not reasonably visible to him.
Noble had submitted that the tender of the draft bill of lading which contained a statement as to the apparent order and condition of the cargo had constituted a representation such as to give rise to a warranty, as to the apparent order and condition of the cargo. There was a material difference between the statement in the draft bill and the statement in the bill of lading as issued. The statement in the bill of lading as issued referred to what was apparent to the Master based on his examination of the cargo at the time of shipment whereas the statement in the draft bill referred to what was apparent to the shippers based on an examination which they may have undertaken during a time prior to shipment.
Whilst it was possible that the tendering of the draft bill might amount to a representation by the shippers that they were not aware of any hidden defects or damage, which – if known to the Master – would mean that he could not properly sign the Bill of Lading as tendered, that was not how Noble put their case. |It would not have assisted them to do, seeing that the Arbitrator had found that the shippers had had no actual knowledge of the damage. It was “inherently unlikely” that the draft bill should be understood as saying something quite different from what the bill was well understood to say once it was signed by the Master. Moreover, Noble’s case was contrary to the decision in Naviera Mogor SA v Societe Metallurgique de Normandie (The Nogar Marin)  1 Lloyd's Rep. 412, that the tender of the draft bill of lading was merely an invitation to the Master to perform his own reasonable examination before signing the Bill, and did not give rise to any indemnity.
The Court therefore upheld the judgment of the High Court that the shippers’ (as agents of Priminds) presentation of the draft bill of lading was not a representation of the apparent order and condition of the cargo at the point of shipment, but an invitation to the Master to perform his own reasonable examination of the condition of the cargo. Priminds was therefore not liable to indemnify Noble for the cargo claim.
This decision confirms the general understanding in the industry that the Master (on behalf of the carrier) has a responsibility to verify the apparent condition of the goods with his own reasonably competent assessment, before signing any bill of lading presented by the charterer or shipper.
This case also allows for the possibility that a draft bill of lading may amount to a representation by the shippers in certain circumstances where the shippers were actually aware of the damage which, if known to the Master, meant that he could not properly sign the bill as tendered.