Priminds Shipping (HK) Co Ltd v Noble Chartering Inc

A bill of lading statement as to the apparent order and condition of goods records the master’s own reasonable assessment. Tendering a draft bill containing standard wording does not warrant the goods’ actual condition or create an automatic indemnity in favour of the owner. The distinction is between information furnished by the shipper, for which the Hague Rules impose a warranty, and apparent condition, which the master must independently assess. Where defects were not reasonably visible at shipment, the statement is not legally inaccurate. An indemnity or warranty will not be implied where the contractual scheme deliberately omits it, particularly in a professionally drafted commercial agreement.

The claimant, a voyage charterer, appealed under section 69 of the Arbitration Act 1996 against an award requiring it to indemnify the defendant disponent owner for sums paid to the vessel owner following cargo damage proceedings. The arbitrator found that the cargo had been pre-damaged, that the defects were not reasonably visible to the master or others attending loading, but that the shipper could have discovered them by reasonable means. The arbitrator nevertheless treated the claimant as liable for an inaccurate bill of lading statement and implied an indemnity or warranty. The appeal concerned the legal effect of the apparent-condition wording, whether the bill was inaccurate, and whether any indemnity or warranty arose.

The appeal succeeded on all three questions.

1. Apparent condition. By tendering the draft bill of lading, the shipper invited the master to make a representation according to his own assessment of the apparent condition of the cargo. The wording was not a warranty of actual condition. The master was not required to sign a clean bill merely because it was tendered, and was required to carry out a reasonable independent verification. The court applied The David Agmashenebeli, [2003] 1 Lloyds Rep 92, and The Saga Explorer, [2012] EWHC 3124; [2013] 1 Lloyds Rep 401.
2. Accuracy. Since the defects were not reasonably visible to the master, crew, stevedores or the claimant’s agents during loading, the bill’s statement as to apparent condition was not inaccurate as a matter of law. The arbitrator had erred by asking whether the cargo was factually defective without identifying the legal effect of the statement or the person making it.
3. Hague Rules. Article III, rules 3 and 5 distinguish shipper-furnished information, for which the shipper warrants accuracy, from apparent order and condition, which is the carrier’s or master’s assessment. The deliberate omission of an indemnity for apparent condition left no room for an implied guarantee or warranty.
4. Implied terms. The implication of a term requires necessity for business efficacy or obviousness, and fairness alone is insufficient. A term inconsistent with an express contractual scheme cannot be implied. Particular care is required in sophisticated, professionally drafted agreements incorporating carefully developed standard forms. The court applied Marks and Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) Limited, [2015] UKSC 72; [2016] AC 742, and Ali v Petroleum Company of Trinidad and Tobago, [2017] UKPC 2; [2017] ICR 531.
5. Earlier indemnity authorities. Elder, Dempster and Co v C.G Dunn and Co, (1909) 15 Com.Cas. 49, and Dawson Line Limited v Aktiengesellschaft Adler Fuer Chemische Industrie of Berlin, [1932] 1 KB 433, concerned shipper-furnished information such as marks or weights and did not govern apparent condition under the Hague Rules. The Nogar Marin, [1988] 1 Lloyds Rep 412, supported the conclusion that an indemnity depends on the precise request and causal connection; the tender here was only a request for the master’s independent assessment.

Question (iii) was therefore answered no. The award could not stand on the stated reasoning.

• Arbitration: An arbitrator’s final award dated 7 January 2019 ordered the claimant to pay the defendant US$500,000, potentially a further £35,000, costs and fees.
• High Court (Commercial Court): On 18 June 2019 Popplewell J granted leave under section 69 of the Arbitration Act 1996. The appeal was allowed and the three questions of law were answered in favour of the claimant.