Apparent good order and condition: apparent to whom?

Shippers are in the nature of things in a position to know rather more about a cargo they are shipping than the carrier who transports them. This can cause problems, as appears from the Court of Appeal’s decision a couple of days ago in Noble Chartering v Priminds Shipping [2021] EWCA Civ 87. The Tai Prize, a 73,000 dwt bulker owned by Tai Shing Maritime, was voyage-chartered by Priminds from time-charterers Noble to carry a cargo of Brazilian soya beans from Santos to Guangzhou in southern China. They presented clean bills of lading to agents who signed it on behalf of the head owners Tai Shing. On arrival the beans were mouldy and damp; this was due to the fact they had been shipped too wet, something which the master had had no reason to suspect, but which Priminds ought to have realised.

The consignees sued Tai Shing in China and got $1 million (in round figures). Tai Shing claimed in turn from Noble, who settled the claim for $500,000. Noble then claimed this sum from Priminds. They relied on their right of indemnity under the charter and an allegation that a dangerous cargo had been shipped, and also argued that the bill of lading that Priminds had sent for signature had been inaccurate, since a cargo which Priminds had had reason to know was over-wet could not be said to have been shipped in apparent good order and condition. The first two claims were rejected by the arbitrator, and nothing more was heard of them; but the arbitrator allowed the third claim. HHJ Pelling on a s.69 appeal held that she had been wrong to do so (see [2020] EWHC 127 (Comm)). Noble appealed.

The issue was simple. “Apparent good order and condition” means good order and condition “as far as meets the eye” (e.g. Slesser LJ in Silver v Ocean SS Co [1930] 1 K.B. 416, 442). But whose hypothetical eye matters here? The master’s, or that of the shipper presenting the bill? The Court of appeal had no doubt: upholding HHJ Pelling, it decided that it was the former. The master here had had no reason to suspect anything wrong with the soya beans in Santos; Tai Shing had there therefore been entitled (and indeed bound) to sign a clean bill. It followed that the clean bill presented had been correct and not misleading, and equally that Priminds had not been in breach.

The arbitrator’s decision on this had, we suspect, been seen by most as heterodox. We agree, and join what we suspect will be the majority of shipping lawyers in welcoming the Court of Appeal’s decision. It is worth making three points, however.

First, this is actually a hard case, even though it does not make bad law. It is difficult not to have some sympathy for the head owners (and through them Noble). On any normal understanding of the law the head owners, having issued entirely legitimate clean bills, were not liable to the receivers at all. It is perhaps tactful not to inquire too closely into how judgment was given against them for $1 million. Priminds, by contrast, were pretty clearly liable for a breach of contract in shipping wet beans. One can see why the head owners’ P&I Club might have felt sore at becoming piggy-in-the-middle and bearing a loss that by rights ought to have fallen on the shippers who escaped scot-free.

Incidentally, it is worth noting one possibility in this respect. A consignee not infrequently has the option, in a case where it is alleged that a clean bill was improperly issued, to sue either the carrier for failing to deliver a cargo in good condition, or his seller for breach of contract in not shipping it in like good condition. It is in most cases more convenient to sue the carrier, if necessary by threatening to arrest the ship at the discharge port. Nevertheless all may not be lost for P&I interests. It seems at least arguable that they may be able to lay off at least some of the risk by bringing contribution proceedings against the seller as a person who, if sued by the consignee, might also have been liable for the same loss. They do not even have to show that they were in fact liable to the consignee: merely that the claim alleged against them was good in law (see s.1(4) of the Civil Liability (Contribution) Act 1978).

Thirdly, Males J in the Court of Appeal at [57] left open the possibility of the liability of a shipper who presented clean bills when he actually knew of hidden defects in the cargo. This will have to remain for decision on another day. But it is certainly hard to have much sympathy for such a shipper: particularly since there are suggestions that a carrier who knows that a cargo is defective cannot legitimately issue a clean bill merely by looking complacently at impeccable outside packaging and then sanctimoniously turning a Nelsonian blind eye to the horrors he knows lurk beneath it (see e.g. Atkinson J in Dent v Glen Line (1940) 67 Ll.L.L.R. 72, 85).