Charterers held liable for loading bags lost by shipowners through operation of bills of lading presented by the charterers.
A voyage charterparty provided for the shipment of wheat in bulk from Sydney to one safe port in Great Britain.
In spite of an agreement to ship a full load of wheat in bulk, the authorities limited the volume of wheat in bulk and required the rest of the ship’s load to be bagged.
There was a dispute between the parties regarding the responsibility for the cost of bagging which was decided in the charterers’ favour by an arbitrator in Sydney.
The charterers sold the wheat including the bags under a bill of lading.
The shipowners claimed the costs of their bags.
The court of first instance (Branson J) found that the arbitration took place on the basis that the bags would be lost to the shipowners. The dispute had therefore already been decided.
The Court of Appeal (Greer, Scott LJJ and Eve J) found that the shipowners were prejudiced by the bills of lading and that the charterers were liable to indemnify them for their loss.
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