When Is A 'Clean Bill' Not Clean?

Breffka & Hehnke GmbH & Co KG and others v. Navire Shipping Co. Ltd and others (Saga Explorer) [2012] EWHC 3124 (Comm)

Cargo interests brought a claim under the bills of lading in relation to a heavily rusted cargo of steel pipes. The pipes were in fact rusty on shipment, but the bills of lading contained a standard form RETLA clause (named after the US case, Tokio Marine & Fire Insurance v. Retla Shipping), on which the owners sought to rely in order to defeat the claim. The RETLA clause sometimes appears on the face of a bill of lading where the carriage involves iron, steel, metal products or timber. The aim of the clause is to qualify the term "apparent good order and condition" by clarifying that, when the cargo was received for shipment, it was not necessarily free of visible rust or moisture, staining, chaffing etc. This means the carrier can issue clean bills of lading, even though the mate's receipts have been claused. The decision of Mr Justice Simon in this case is the first time that the English courts have considered this clause. He disagreed with the reasoning behind the decision in Tokio Marine and held that the representation made in the bills as to the cargo's apparent condition was false.

The background facts

The vessel loaded a cargo of steel pipes at Ulsan, for carriage to Los Angeles, San Francisco and Vancouver. The bills of lading contained a US General Paramount Clause incorporating US COGSA. They also contained the usual statement that the goods were shipped "in apparent good order and condition". In addition, however, the bills included a RETLA clause, which provided in material terms as follows:

"If the goods as described by the Merchant are iron, steel [or] metal..., the phrase 'apparent good order and condition' set out in the preceding paragraph does not mean the Goods were received... free of visible rust or moisture... If the Merchant so requests, a substitute Bill of Lading will be issued omitting this definition and setting forth any notations which may appear on the mate's or tally clerk's receipt."

A load port survey contained a number of comments relating to rust staining and surface oxidisation of the steel pipes and recommended clausing the bills and mate's receipts. The mate's receipts also included a RETLA clause and specified that the condition of the cargo was as per the surveyor's report. The surveyor's report was not, however, attached. The relevant booking note stated that bills were to be...