Clausing a Bill of Lading – David A

Importance
One significant problem Masters and load port surveyors face is when to clause a bill of lading (B/L).

On the one hand, if the Master does not sign a ‘clean bill’, it might be a repudiatory breach of the
charterer’s cargo sales contract, of which the Owners might see themselves liable.

On the other, if the Master does sign the bill ‘clean’, Owners might be estopped from arguing the
goods were not in apparent good order and condition when loaded.

Background
A ‘clean bill’ is a B/L that has no cargo remarks. It does not mean the cargo is perfect or meets some
implied specifications. This is often alleged by the Receiver at the discharge port.

If the cargo does not fit the description inserted in the B/L by the Shipper (drafted), the Master may
‘clause’ the bill. This means he adds his comments to the cargo description other than that already
suggested by the Shipper.

Please note that Letters of Protest has no relevance at all against a third-party (buyer) in good faith.

The Hague-Visby Rules (HVR) or similar cargo regimes dictate that the Master “shall…. issue…. a Bill
of Lading showing…. the apparent good order and condition of the goods”.

The case David Agmashenebeli [2002] EWHC 104 (or David A for short) deals with this dilemma and
gives good guidance. It is regarded as the leading case on this topic.

Facts
The vessel was loading urea in Finland to be discharged in China. The cargo was eventually sold to a
third-party (in good faith), other than the original Shipper and Consignee on the B/L.

When the urea came on board, some debris and discolouring of the cargo was discovered. The
Master claused the bill. I will not dwell on the specifics of the case, because it case specific.

The problem was eventually solved without too much delay to the vessel operation, but there was a
legal battle to follow. The question was:

In what circumstances is a Master entitled to decline to sign a clean B/L?

Guiding principles
The two sides spent lot of time debating the general rights and obligations under the HVR, and I will
set out some of the passages of the judgment. They serve as guidance to Masters, Surveyors and
Claims Handlers. I have underlined to emphasise and only slightly edited the words to enhance
context.

“The Master should make up his mind whether in all circumstances the cargo, in so far as he can see
it in the course and circumstances of loading, appears to satisfy the description of its apparent order
and condition in the bills of lading tendered for signature”.

“He will be entitled to form his own opinion from his own observations and the failure to ask for
expert advice is unlikely to be a matter of criticism”.
“He need not possess any greater knowledge or experience of the cargo in question than any other
reasonable careful Master”.

“If he honestly takes the view that it is not or not at all in apparent good order and condition and
that is the view that could properly be held by a reasonable observant Master, then, even if not all or
even most masters would necessarily agree with him, he is entitled to qualify to that effect the
statement in the bill of lading”.

When it comes to what the Master can write, the judge said:

“The Master’s duty is that the words used should have a range of meaning which reflects reasonably
closely the actual apparent order and condition of the cargo…”

“What the HVR require is no more than that the bill of lading in its capacity of a receipt expresses
that which is apparent to the Master or other agent of the carrier, according to his own reasonable
judgment”.

Practical
1. The Master does not need to be an expert on the cargo.
2. He does not need to ask an expert for advice necessarily.
3. It is the Master’s decision. He does not need to be in agreement or receive confirmation. He
will of course be challenged afterwards but with a wide margin of discretion.
4. His decision does not have to be objectively correct. In other words, it might be that there is
nothing wrong with the cargo, but if it appears damaged, for a reasonable Master, he can
clause.
5. The Master cannot refuse to sign a bill of lading. He has to sign something, but he can make
any remarks subject to no. 6 below.
6. He has to describe the actual cargo he is loading, though, and he has to qualify his
description, in other words try to limit the clausing’s impact as much as possible. If only one
hold is affected, he needs to say that. He cannot say the cargo (as a whole) is affected.

Avoidance
One idea the Master came up with in order to avoid the discussion was to go have a look at the
cargo in the warehouse before loading. This is highly recommended, but please remember to bring
back evidence of the visit, including lots of pictures.

It is also very sensible for the Master to warn the Shipper in advance so to give the Shipper the
opportunity to avoid disputes. It is just common sense.

Final Judgment
The clausing was eventually found to be an error by the Master, but for reasons of not limiting his
clausing to what he saw. It was found that he was entitled to clause the bill (1-4) but not the way he
did it (6).