This case arose from damage to Brazilian soya beans carried under a Congenbill form bill of lading that incorporated the Hague Rules. The arbitrator ordered the charterer to pay the disponent owner's claim. The charterer appealed to the Commercial Court. HHJ Pelling QC held that: (1) by presenting the draft bill of lading to the master for signature, 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; (2) the bill of lading was not inaccurate as a matter of law; and (3) there was no room for the implication of an obligation to indemnify the owner. Accordingly, he allowed the appeal and varied the award so that the owner's claim was dismissed: see Priminds Shipping (HK) Co Ltd v Noble Chartering Inc [2020] EWHC 127 (Comm) (CMI673). The owner appealed, seeking to restore the arbitrator's award.

The owner argued that where charterers require the master to sign a bill of lading which misdescribes the cargo, including the condition of the cargo, and that misdescription cannot reasonably be discovered by the master, charterers are liable to indemnify owners against the consequences. The Judge erred by holding that the tender of a draft bill of lading describing the cargo as shipped in apparent good order and condition was only an invitation to the master to make his/her own assessment, when in fact it was also a representation that the cargo was in apparent good order to the shipper's and charterer's knowledge.

The charterer supported the reasoning of the Judge, submitting that it is long established that statements in a bill of lading as to the apparent good order and condition of the cargo are representations made by the master based on his/her own assessment of the cargo, from which it follows that a shipper presenting such a draft bill makes no representation and gives no warranty about the apparent order and condition of the cargo, particularly in a case governed by arts 3.3-3.5 of the Hague Rules. It followed from the arbitrator's findings of fact that the bill of lading in this case was not inaccurate, that is to say that the cargo was loaded in apparent good order and condition, because the damage was not apparent to the master.

Held: Appeal dismissed:

1. The words 'CLEAN ON BOARD' and 'SHIPPED in apparent good order and condition' in the draft bill of lading presented to the master did not amount to a representation or warranty by the shipper and/or charterer as to the apparent condition of the cargo observable prior to loading; they were merely an invitation to the master to make a representation of fact in accordance with his own assessment of the apparent condition of the cargo on shipment.
2. On the findings of fact made by the arbitrator, the statement in the bill of lading that the cargo was shipped in apparent good order and condition was accurate.
3. In these circumstances the third question, which assumes the existence of an inaccuracy in the bill of lading, did not arise. However, the Court agreed with the Judge that the charterer was not obliged to indemnify the owner against liability for the cargo claim and that to impose liability on the charterer based on the tender of a draft bill of lading containing a statement that the cargo was shipped in apparent good order and condition would be contrary to the scheme of the Hague Rules.

Articles 3.3-3.5 of the Hague Rules (and the Hague-Visby Rules) provide as follows:

3. After receiving the goods into his charge the carrier or the master or the agent of the carrier shall, on demand of the shipper, issue to the shipper a bill of lading showing among other things:

(a) The leading marks necessary for identification of the goods as the same are furnished in writing by the shipper before the loading of such goods starts, provided such marks are stamped or otherwise shown clearly upon the goods if uncovered, or on the cases or coverings in which such goods are contained, in such a manner as should ordinarily remain legible until the end of the voyage.

(b) Either the number of packages or pieces, or the quantity, or weight, as the case may be, as furnished in writing by the shipper.

(c) The apparent order and condition of the goods.

Provided that no carrier, master or agent of the carrier shall be bound to state or show in the bill of lading any marks, number, quantity, or weight which he has reasonable ground for suspecting not accurately to represent the goods actually received, or which he has had no reasonable means of checking.

4. Such a bill of lading shall be prima facie evidence of the receipt by the carrier of the goods as therein described in accordance with paragraph 3 (a), (b) and (c).

5. The shipper shall be deemed to have guaranteed to the carrier the accuracy at the time of shipment of the marks, number, quantity and weight, as furnished by him, and the shipper shall indemnify the carrier against all loss, damages and expenses arising or resulting from inaccuracies in such particulars. The right of the carrier to such indemnity shall in no way limit his responsibility and liability under the contract of carriage to any person other than the shipper.

It is notable that 'the apparent order and condition of the goods' is not something which is said to be 'furnished in writing by the shipper', even though it has long been the practice for shippers to prepare draft bills of lading for the master to sign, and that the guarantee and indemnity given by the shipper pursuant to art 3.5 does not extend to the apparent order and condition of the goods.

After reviewing the relevant case law, the Court summarised the legal position as follows.

1. A statement in a bill of lading as to the apparent order and condition of the cargo refers to its external condition, as would be apparent on a reasonable examination.
2. What amounts to a reasonable examination depends on the actual circumstances prevailing at the load port. The master's responsibility is to take reasonable steps to examine the cargo, but s/he is not required to disrupt normal loading procedures. If cargo is loaded at night, the master must do the best s/he can in the prevailing conditions. For example, s/he is not required to wait until daylight, when visibility would be better. In the same way, s/he is not required, if a grain cargo is loaded continuously from silos, to pause the loading from time to time in order to let the dust settle and examine the cargo in the vessel's holds. The arbitrator's comment that this 'was obviously not the modus operandi of loading soya beans' may be taken as meaning that it would not have been reasonable for the master to insist on this being done. With other kinds of cargo, however, it may be much easier for the master to observe the condition of the cargo without needing to disrupt the loading process. Steel cargoes are an example. In such cases the master will have an opportunity to observe the condition of the cargo as it is brought alongside and before it is loaded. In the case of bulk grain cargoes, however, s/he may only be able to observe the surface condition of the cargo after it has been loaded in each hold.
3. What matters is what is reasonably apparent to the master or other servants of the carrier. The bill of lading contains a representation by the master and says nothing about what may be apparent to anyone else, such as the shipper, who may have other means of examining the cargo.
4. The statement relates to the apparent order and condition of the cargo at the time of shipment, that is to say of receipt by the carrier, and not at any earlier time.
5. The statement is based upon the reasonable examination of the cargo which the master has (or should have) undertaken.

This understanding of what is (and is not) happening when a bill of lading is issued containing a statement that the cargo is in apparent good order and condition is confirmed by the Hague Rules. The Rules distinguish between information in the bill of lading which is provided by the shipper, as to which the shipper is deemed to have given a guarantee of its accuracy and has an obligation to indemnify the carrier in the event that the information is inaccurate, and the apparent order and condition of the cargo, which is not provided by the shipper and as to which the shipper gives no guarantee and undertakes no obligation to indemnify the carrier. That is because the statement of the apparent order and condition of the cargo is based exclusively on the examination carried out by or on behalf of the master acting on behalf of the carrier and does not depend on information provided by the shipper.