M/V "TAI PRIZE" - Tendering A "Clean On Board" Bill Of Lading

• Published date: 07 July 2020
• Subject Matter: Transport, Marine/ Shipping
• Law Firm: Clyde & Co
• Author: Mr Ian Woods and Simon Culhane

Background

Between 24 and 29 July 2012 the vessel m/v "TAI PRIZE" ("the Vessel") loaded a cargo of 63,366.15 metric tonnes of Brazilian soya beans ("the Cargo"). A Bill of Lading in the 1994 Edition of the Congenbill form was drafted by the shipper and submitted for signature by or on behalf of the Master of the Vessel. Under the heading "Shipper's description of Goods" the Cargo was described as being "Clean on Board" The Bill of Lading was executed by agents on behalf of the Master without any reservations, and stated that 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..."

The Bill of Lading incorporated the Hague Rules by clause 2 on its reverse side.

The Vessel arrived at the port of discharge on 9 September 2012 Heating, discolouration and caking damage was found during discharge in Holds No.3 and 5. The receiver of the Cargo pursued a claim against the Owners of the Vessel (the contractual carriers under the Bill of Lading) in the Chinese courts and succeeded recovering US$1,086,564.70.

The Owners pursued a claim for a contribution of 50% from the time charterer in London arbitration, which was settled in the sum of US$500,000. The time charterer then pursued the voyage charterer for an indemnity in respect of this settlement.

The basis of this indemnity claim was that, the voyage charterer through the agency of the shipper had impliedly warranted the accuracy of any statement as to the condition of the Cargo contained in the Bill of Lading. That is, by the shipper tendering a Bill of Lading stating that the Cargo was "Clean on Board" and "in apparent good order and condition", the voyage charterer (because the shipper was their agent) had agreed to indemnify the time charterer against the consequences of the inaccuracy of any such statement.

The Arbitration

The Arbitrator found as fact that:

1. The relevant part of the Cargo suffered from two types of damage being (a) heating, caking and discolouration of some of the beans and (b) mould in some places;
2. The damaged beans had been loaded in a pre-existing heat damaged condition and the mould damage was caused by this;
3. The damage was not reasonably visible to the Master during loading; but
4. The shipper would have been able to discover the condition of the beans by reasonable means because some of the damaged beans were or would have been discoloured at or before loading.

On this basis, the Arbitrator...