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Double triumph at the High Court for Penningtons Manches Cooper’s shipping practice

Posted: 31/01/2020


The shipping practice at leading law firm Penningtons Manches Cooper has succeeded in both winning and successfully defending arbitration appeals at the High Court this week.

Judgment was handed down this morning in The Tai Prize [2020] EWHC 127 (Comm). Specialist marine lawyers Darryl Kennard and Andrew Hawkins successfully appealed a London arbitration award under s69 of the Arbitration Act 1996 - the gateway for appeals on points of law. Being given permission to appeal under s69 is relatively rare; it is even more uncommon for these appeals to be successful.

The decision is likely to be of wide interest in the maritime sector – particularly to charterers and other users of standard form bills of lading such as the Congenbill 1994 form, and their insurers.

The dispute concerned owners’ entitlement to an indemnity under a voyage charter in respect of cargo damage claims brought in China. The London tribunal found that the cargo – soyabeans – was shipped in a damaged condition but that (as was common ground) the Master could not reasonably have observed such defects during the course of loading.

The core issue on appeal was the legal effect of presenting draft bills of lading for signature containing the words “clean on board” and/or “shipped in apparent good order and condition” in circumstances where, on the facts (as determined by the arbitrator), the shipper either knew or ought to have known that the cargo had suffered pre-shipment damage.

Partner Darryl Kennard commented: “The outcome of this appeal is unlikely to surprise regular users of standard form bills of lading designed for use in combination with charterparties. The judgment reinforces that it is the Master (as the servant of the owner/carrier) who has sole responsibility for assessing the apparent order and condition of goods upon shipment. This principle is one of the cornerstones of international trade, given the reliance placed by traders and bankers alike on the accuracy of statements contained in the bills of lading.”

In the second case, The Grand Fortune [2020] EWHC 147 (Comm), in which judgment was handed down yesterday, partner Mark Sachs successfully defended an appeal on behalf of Chinese-owned Cosco Bulk Carrier Ltd. This was a Section 67 appeal challenging an arbitration award on the basis that the Tribunal lacked jurisdiction. S67 applications are heard afresh and are not an appeal of an award but a re-hearing.

The dispute arose out of a charterparty chain. The head owners had chartered the vessel to Britannia Bulkers A/S and the vessel had been chartered out again to the claimants. Britannia Bulkers A/S was part of the Britannia Bulk group, which went into insolvency during the financial crisis of 2009.

The question for determination was whether the entity which had chartered the vessel to the claimants was Britannia Bulkers A/S or the head company in the group, Britannia Bulk PLC.

The court reached the same conclusion as the arbitrators: that the entity which chartered the vessel to the claimants was Britannia Bulkers A/S, notwithstanding that a pro forma charterparty naming Britannia Bulk PLC as charterers had been drawn up some months later.

Mark Sachs commented: “The judge clearly delineated the applicable legal principles as to when it is appropriate to consider extrinsic evidence to determine the parties to a contract. He rejected arguments that post contractual conduct was admissible to determine the parties to an agreement and the case is likely to be cited in subsequent cases where this issue arises.”

Notes

On The Tai Prize:

  • The tribunal had decided that, because the shippers would or ought to have known of the pre-shipment damage, it followed that the draft bills of lading presented for signature by their delegates (the shipper) containing the statement “Clean on Board” and noting the soyabeans to be in “Apparent good order and condition” were inaccurate and that, in consequence, the Charterers were liable to indemnify the Owners for the cargo claims, being a liability incurred (so the arbitrator found) by reason of such inaccuracy.
  • Judge Pelling QC accepted our client’s arguments, holding that the terms “clean on board” and “shipped in apparent good order and condition” were, insofar as concerned the order and condition of the goods described, simply an invitation by the Shippers/Charterers to the Master to sign bills of lading as presented if in his/her reasonable assessment the goods appeared upon shipment to be in good order and condition.
  • In coming to this conclusion, the judge noted that under Article III Rule 5 of the Hague Rules (which were incorporated into the charter) the charterers/shippers had deemed to have guaranteed the accuracy of certain specified details provided to the carrier, such as leading marks, numbers of packages or pieces, and quantity, and, there was no such corresponding guarantee in respect of the apparent order and condition of the goods. The reason for this, he said, was obvious; namely that everyone knows it is the master’s task to make his own independent assessment and then record in the bills of lading the apparent order and condition of the cargo shipped on board and that, in making that independent assessment, the master relies solely on his own examination of the cargo and has no regard to any information that may have been provided to him by the shippers.
  • Given this, the judge held there was no scope to imply an indemnity by the shipper/charterer in favour of the owner in connection with the apparent order and condition of the goods.

On The Grand Fortune:

  • The court’s primary finding was that although the charter recap as the document evidencing the contract did not sufficiently identity Britannia Bulkers A/S as the owner under the sub-charter, the extrinsic evidence as to what the parties did and said down to the time the contract was made showed that it was their intention that Britannia Bulkers A/S and not Britannia Bulk was the owner under the sub-charter. Post contractual conduct and statements were therefore not relevant. 
  • The court went on to find that if it were wrong, to the extent it was permissible to consider extrinsic evidence subsequent to the making of the contract, the available evidence did not ultimately support the claimant’s contention.  There were documents pointing both ways and the draft charter party naming Britannia Bulk PLC was likely drawn up in error.

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