Charterers’ agents instructed master to release cargo without production of bills of lading – charterers liable to indemnify shipowners.
The facts
Rice was shipped from India to two ports in China under a voyage charterparty.
At the second port in China, the agents of the time charterers prevailed upon the master to release the remaining cargo without the production of the bills of lading to persons other than the indorsees of the bills of lading. The indorsees, a Netherlands Bank, held the shipowners liable. The shipowners, in turn, sought to hold the time charterers liable either at “common law” or based on the express indemnity in the charterparty which read as follows:-
The captain (although appointed by the owners) shall be under the orders and direction of the charterers as regards employment, agency or other arrangements; and the charterers hereby agree to indemnify the owners from all consequences or liabilities that may arise from the captains signing bills of lading by the orders of the charterers or of the agents, or in otherwise complying with the same.
Findings
The court of first instance (Roche J) upheld the arbitrator’s decision to the effect that the time charterers were liable to indemnify the shipowners.
While the arbitrator found that the charterers were liable under the “common law” and the express employment and agency clause in the charterparty, the court preferred to base its opinion on what it referred to as the application of the common law.
Applying Kruger v Moel Tryvan Ship Company, the court found that by requesting the master to act in conflict with the provisions of the bills of lading, the charterers breached an implied term of the charterparty that they would not do so.
The Court of Appeal (Lord Hanworth MR, Lords Slesser and Romer LJJ) affirmed the decision of the trial court.
Commentary
The “common law principle” laid down in Betts v Gibbins (1834) would be viewed today as a term implied by the contract insofar as it was not covered by the “employment and agency” clause.
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