A cargo of 35,000 metric tonnes of urea was sold by Transmarine Ltd (Transmarine) to Agrosin Pte Ltd (Agrosin) and further onsold to Grand Prestige Enterprises of Hong Kong (Grand Prestige). This cargo was sold with specifications stating 'white colour, free flowing, free from contamination, prilled form, treated against caking, free from harmful substances'. This cargo was to be shipped on board the David Agmashenebeli. Agrosin chartered the ship from Baff Shipping (Baff), who chartered the ship from Meezan Shipping & Trading Inc (Meezan), who time chartered the ship from Georgian Shipping Co (the owners).

By way of cl 49 of the charterparty between Baff and Meezan, Meezan was obliged to sign and release 'clean on board' bills of lading upon confirmation that freight has been paid to Meezan. The charterparty between Baff and Agrosin also contained similar terms.

Three hours after loading began, the master of the vessel notified all parties that the cargo contained contaminants and insisted that the mate’s receipt be signed with the following wording: 'Cargo discoloured also foreign materials e.g. plastic, rust, rubber, stone, black particles found in cargo.' The master further refused to sign bills of lading without this wording.

Meanwhile, Grand Prestige had further on sold the cargo to Guangxi Publications Import & Export Co Ltd (Guangxi) and it was agreed that a documentary credit should be used to pay Agrosin directly.

As the master refused to sign clean bills of lading, a documentary credit could be not utilised and a deadlock ensued. Agrosin refused to pay freight to Baff who in turn withheld freight to Meezan, who in turn withheld charter hire to the owners. Agrosin eventually relented and agreed to the issuance of claused bills of lading, albeit under protest. However, when Agrosin presented the claused bills of lading to Guangxi's bank, they were not accepted for payment against the letter of credit. In the end, Guangxi accepted delivery of the cargo at a reduced price.

The claimants sued the owners and argued that pursuant to arts 3.3 and 3.4 of the Hague-Visby Rules the master was obliged to issue a bill of lading accurately recording the actual apparent order and condition of the goods and that it was not sufficient for the master to merely state what he honestly believed. Further, the claimants argued that the duty of the owners to issue on demand a bill of lading to the shippers was an unqualified, absolute contractual undertaking and should not be qualified by notions such as reasonableness or honest belief.

The owners countered that the Hague-Visby Rules did not require the clausing of the bill of lading to be objectively accurate and what was important was what a reasonably skilled master would honestly believe the apparent order and condition of the cargo was. Further, the owners argued that the clausing in a bill of lading as to the apparent condition is not a contractual promise or undertaking but an affirmation of fact by the master.

Held: The Court found in favour of the owners' argument but held that the owners did breach art 3.3 of the Hague-Visby Rules. However, the claimants did not suffer a loss and the claim failed.

The Court held that art 3.3 of the Hague-Visby Rules means that the clausing of a bill of lading should contain a description of the apparent order or condition of the cargo but this does not make the description itself a contractual term. It also does not impose upon the master an absolute obligation to give an accurate description. The standard imposed is that of a reasonable assessment of the master. The Court refrained from imposing any higher standard as this would lead to masters conducting unnecessarily detailed investigations into the condition of the cargo. The Court would not require the master to exercise a skill equivalent to that of an expert surveyor or have any greater knowledge or experience of the cargo than any other reasonably careful master.

Based on the evidence, the Court found that the master's description of the cargo as 'discoloured' was misleading as there was no indication that it referred to only about 1% of the whole cargo. The Court held that a reasonable master would have added some qualification to avoid creating an impression that a substantial part of the cargo was discoloured. As such, even though the owners’ arguments were accepted, they were still in breach of art 3.3 of the Hague-Visby Rules.

Notwithstanding the owners' breach, the claimants' claim failed. This was because even if the master had claused the bills of lading correctly to reflect the small portion of the cargo as discoloured, the claimants would still be unable to present the claused bills of lading in exchange for payment from the eventual buyer Guangxi.