Priminds Shipping (HK) Co Ltd v. Noble Chartering Inc (The “Tai Prize”) – QBD (Comm Ct), 31 January 2020

BILL OF LADING – DAMAGED CARGO – LIABILITY FOR DAMAGED CARGO – INDEMNITY – DISPONENT OWNERS – TIME CHARTER – HAGUE RULES

Noble Chartering was the head time charterer and disponent owner for the vessel Tai Prize. Noble sub-chartered the vessel to Priminds Shipping (the charterer) for the carriage of a cargo of soybeans from Brazil to the People’s Republic of China (PRC) (the sub-charterer). 

At loading, the shipper presented the master with a bill of lading for signature. The B/L contained the heading “Shipper’s description of Goods,” which described the cargo as: 

“63,366.150 metric tons Brazilian Soyabeans

Clean on Board

Freight pre-paid.”

The bill of lading was executed by the master without any reservations, stating the cargo had been:

“SHIPPED at the Port of Loading in apparent good order and condition on board the Vessel for carriage to the Port of Discharge… Weight, measure, quality, quantity, condition, contents and value unknown …”

The bill of lading incorporated the Hague Rules, and the contract of carriage was with the shipowner, not the charterers.

When the vessel commenced unloading in China, part of the cargo showed heat and mold damage. The receivers filed a claim against the shipowner, which the Chinese courts upheld. The shipowner was ordered to pay the receivers a sum equivalent to US$ 1,086,564.70.

The shipowner then commenced an arbitration in London against Noble, as the disponent owner and head time charter, for 50 percent of the amount it owed the receivers, US$ 543,282.35. After a settlement agreement, Noble paid the shipowner US$ 500,000. 

Noble subsequently began London arbitration proceedings against Priminds, claiming the right to be indemnified for the amount they paid the shipowner plus the costs of defending the claim. However, Noble did not cite an express provision under which it was entitled to indemnity.

The arbitration tribunal discovered that the cargo suffered from heat damage, discoloration, and mold and concluded the damaged cargo was loaded in this state. Further, it determined the damage was not reasonably visible to the master or crew or the stevedores or any agent of the sub-charterer at or during loading. While the shipper would have been able to discover the condition of the beans by reasonable means, it did not take any measure to assess the cargo. 

The tribunal rejected Noble’s claim that it was entitled to the benefit of a general implied indemnity from the charterer. The tribunal held Priminds liable to Noble for the following actions of its shipper:

(i) Giving an implied warranty for the accuracy of information in the bill of lading; 

(ii) Stating the cargo was “SHIPPED at the Port of Loading in apparent good order and condition” at the time it invited the master to sign the B/L; and

(iii) Failing to discover the damages by reasonable examination even though the defect was not readily visible to others at or during loading.

The charterer appealed to the High Court.

The High Court held that when Priminds’ shipper presented the bill of lading to the master for signature, it asked the master to confirm the stated condition of the cargo.  This action did not constitute a warranty of the accuracy of the statement nor a representation of the actual condition of the goods shipped (see The David Agmashenebeli [2003] 1 Lloyd’s Rep 92 and The Saga Explorer [2013] 1 Lloyd’s Rep 401).

In addition, Noble’s prime obligation was to deliver the goods at the contractual destination in the same condition as when shipped. Even though the damaged cargo was not easily visible by reasonable inspection, this did not prevent the owner from assessing the actual condition of the cargo by other means necessary. (The Nogar Marin [1988] 1 Lloyd’s Rep 412).

The High Court also examined the Hague Rules as they were incorporated into the bill of lading. In its interpretation of Article III, rules 3 and 5, the Court ruled that while the bill of lading should set out “the apparent order and condition of the goods,” this was not something that had to be “furnished in writing by the shipper.” The evaluation of the cargo was exclusively an assessment by the carrier (or the master on its behalf) (see The Galatia [1979] 2 Lloyd’s Rep 450 and The Nogar Marin). 

Since the tribunal ruled the damaged cargo was not reasonably visible at or during loading, the Court found the bill of lading was not inaccurate as a matter of law. It was a representation of fact by the master as to the apparent condition of the cargo. This representation was not false because the master did not and could not have reasonably discovered the damaged cargo since the defects were not readily visible at or during shipment.

Upon examining the sub-charter, the High Court found a deliberate omission. The sub-charter incorporated the Hague Rules and made specific provisions for what indemnities applied. While an express indemnity obligation existed for the charterer concerning information furnished, there was no such provision or obligation regarding statements about the condition of cargo; Thus, there was no implied guarantee or warranty. (Marks & Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2016] AC 742, Ali v Petroleum Company of Trinidad and Tobago [2017] ICR 531 and UTB LLC v Shefield United Ltd [2019] EWHC 2322 (Ch) considered)

The Court ruled that Noble’s liability did not arise because of wrongs by Primind or the charterer’s agents; Rather Noble’s liability was the result of its decision to pay the shipowner, instead of defending the claim based on the actual condition of the cargo.

The appeal would be allowed.