This was an appeal by the claimant voyage charterer under s 69 of the Arbitration Act 1996 (UK) in respect of three questions of law arising out of a final award by the arbitrator ordering the claimant charterer to pay the defendant disponent owner's claim. The claim arose from damage to Brazilian soya beans carried under a Congenbill form bill of lading that incorporated the Hague Rules.

The three questions of law arising in the appeal were as follows:

i) Did the words 'Clean on Board' and the words 'SHIPPED at the Port of Loading in apparent good order and condition' in the draft bill of lading presented to the agents for signature on behalf of the master amount to a representation or warranty by the shippers and/or the claimant as to the apparent condition of the cargo observable prior to loading or were they an invitation to the master to make a representation of fact in accordance with his/her own assessment of the apparent condition of the cargo?;

ii) In light of the answer to question (i), on the findings of fact made by the arbitrator is any statement in the bill of lading inaccurate as a matter of law?; and

iii) If so, are the claimants obliged to indemnify the defendants 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?

Held: Appeal allowed and award varied so that the owner's claim was dismissed:

i) 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/her own assessment of the apparent condition of the cargo.

ii) In light of the finding by the arbitrator that the damage from which the beans were suffering was not reasonably visible to the master or crew or the stevedores or any agent of the claimant at or during loading, the bill of lading was not inaccurate as a matter of law. It contained no more than a representation of fact by the master as to apparent condition that was not inaccurate because the master did not and could not reasonably have discovered the relevant defects because they were not reasonably visible to him/her or any other agent of the claimant at or during shipment.

iii) It follows that the answer to question (iii) is 'no'.

It is necessary to start with a summary of the purpose and effect of a ship's master's statement as to apparent condition. When the charterer or shipper on the charterer's 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, the charterer or shipper is inviting the shipowner by its agent the master to make a representation of fact as to the apparent condition of the goods on shipment - see The David Agmashenebeli [2003] 1 Lloyd's Rep 92, 103. It is not a warranty as to the accuracy of the represented facts, nor is the statement in the bill (once it is signed by the master) a representation as to the actual condition of the goods shipped. As Colman J put it in The David Agmashenebeli at 105: 'the master should make up his mind whether in all the circumstances the cargo in so far as he can see it in the course and circumstances of loading, appears to satisfy the description of its apparent order and condition in the bills of lading tendered for signature … [T]he shipowner’s duty is to issue a bill of lading which records the apparent order and condition of the goods according to the reasonable assessment of the master. That is not, as I have indicated, any contractual guarantee of absolute accuracy as to the order and condition of the cargo or its apparent order and condition.'

The obligation to record the apparent order and condition of the goods is owed by the shipowner to the shipper. The purpose of the representation is to record the carrier’s evidence as to the apparent condition of the goods when placed aboard the ship. It can 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 Hague Rules draw a clear distinction between the position in relation to information that appears in the bill of lading that is provided by the charterer or shipper on the charterer's behalf, which the carrier or master on its behalf is obliged to accept at face value and representations as to the apparent condition of cargo at shipment. Article 3.3 of the Hague Rules provides for the inclusion within a bill of lading of the 'leading marks necessary for 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 relates, critically, in each case, as that information is 'furnished in writing by the shipper'. In so far as the bill sets out this information, it is recording information supplied by the shipper. In this case this rule applied to the information that the cargo consisted of '63,366.150 metric tons Brazilian Soyabeans'.

However, again critically, the Rule goes on to provide that the bill should also set out 'the apparent order and condition of the goods'. That is not something that is to be 'furnished in writing by the shipper'. It is exclusively an assessment by the carrier (or the master on its behalf) of the goods at the point of shipment.

By art 3.5 of the Hague Rules a warranty is deemed to have been supplied by the shipper to the carrier in respect of the information 'furnished in writing by the shipper' pursuant to art 3.3 but there is no such guarantee deemed to be given in respect of the apparent order and condition of the goods. The reason for this is obvious from the terms of the Rules - the guarantee is deemed to have been given in respect of the information supplied by the charterer or shipper which the carrier is entitled and is perhaps obliged to accept at face value. It is not given in respect of apparent condition, because that is a representation by the shipowner or on behalf of the shipowner by the ship's master based on his/her assessment (or an assessment carried out on his/her behalf by an appropriate expert) of the apparent order and condition of the relevant goods. In making that assessment, the master does not act on the basis of the information provided to him by the shipper but makes his/her own independent assessment.

[For the unsuccessful appeal to the England and Wales Court of Appeal, see Noble Chartering Inc v Priminds Shipping Hong Kong Co Ltd ('Tai Prize') [2021] EWCA Civ 87 (CMI1176).]