DAVID AGMASHENEBELI: Bills of Lading Clausing and Beihai Berthing Dispute
From Kotka loading to Beihai berthing, the saga of the “DAVID AGMASHENEBELI” shows how a master’s words on the bills and a refusal to berth shaped the parties’ rights; the court traces the facts and delivers its final ruling.
On 13 January 1995 the Maltese bulk carrier DAVID AGMASHENEBELI was time-chartered by her owners, Georgian Shipping Company of Valletta, to Meezan Shipping and Trading Inc. of Toronto for a minimum of nine months and a maximum of eleven months on an amended NYPE form that included a clause requiring the Master to sign, if required by charterers, bills of lading “as presented, in conformity with mate’s or tally clerk’s receipts.” Under the trading plan that followed, the ship was fixed for a urea shipment from Kotka, Finland to South China. On 4 April 1995 Transmarine Ltd. of Columbus, Ohio sold 35,000 metric tons of prilled urea (white, free-flowing, free from contamination, treated against caking, production of Novgorod Acron) to Agrosin Pte Ltd. of Singapore at US$180 per metric ton FOB Kotka. The documents required for payment included either a bill of lading or a mate’s receipt issued to the order of Agrosin and a quality certificate from an independent inspector at the port of loading. On 10 April 1995 Agrosin agreed a sub-sale to Grand Prestige Enterprises of Hong Kong at US$238.75 per metric ton, C&F free out, one safe berth, one safe port in South China, with payment by letter of credit at 90 days’ sight that demanded a full set of clean on-board bills of lading and an independent quality certificate. On 13 April 1995 Agrosin prepaid US$3.15 million to Acron under the amended terms of the FOB purchase, while continuing to arrange the ship and the voyage charter chain needed to move the cargo. By 19 April 1995 Baff Shipping entered a voyage charter with Meezan for the DAVID AGMASHENEBELI to load “35,000 metric tons 10% more or less” of bulk prilled urea at Kotka and to discharge at one or two safe berths at one safe port in China, with clause 45 stating that “no damaged cargo” was to be loaded, the Master having the right to stop loading and requiring immediate notification so contaminants could be removed at charterers’ expense and time. The chain ultimately ran owners (Georgian) → time charterers (Meezan) → head voyage charterers (Baff) → sub-charterers (Agrosin), with an authorization clause for release of clean on-board bills when freight was paid.
The vessel arrived at Kotka, tendered notice at 09:30 on 24 April 1995, and berthed at 12:05. Pre-loading hold inspections quickly highlighted the seeds of a later dispute. Inspectorate Suisse’s man for Agrosin, Mr. Marius Kamper of Euroservice, and Mr. Smirnov for Acron rejected the holds because traces of the previous coal cargo and rust remained; they insisted more washing was necessary. Meezan appointed SGS, whose inspector Mr. Karlsson examined holds 1, 2, 3, 5, and 6 at about 14:30 on 25 April and found only a “small amount” of coal dust and some rust, calling the defects “minor” and “easily mended,” and later that day he accepted the holds as fit. The commercial pressure to start loading was intense. Discussions took place on 25–26 April among suppliers, charterers, and receivers about a path forward. The Master was pressed to issue clean mate’s receipts and clean bills and to sign a letter of indemnity in favor of Agrosin, but he refused to sign any indemnity. Even so, a message dated 26 April 1995 from Meezan’s Captain Hussain stated that a clean mate’s receipt and a clean bill of lading would be issued. Loading began at 06:30 on 27 April 1995.
Within three hours the Master broadcast his own account: the cargo, he said, contained rust, plastics, and other contaminants and was of a dirty color; any discharge-port claims would be for the account of charterers, suppliers, and Agrosin. A running debate with Mr. Kamper followed. The inspector maintained that the cargo was “generally acceptable,” pointing to minor single impurities from the rail wagons, small agglomerates of about 0.1%, and discolouration of about 0.1–0.2% of prills. The Master’s observations were more severe. Surveyors did agree that some contaminants were present, that coal dust fell from internal structures and hatches, and that cargo loaded on 28 April was off-white, with red and yellow contamination in certain holds. Cargo waiting quayside was reported as heavily contaminated with fragments and dirty water dripping down, with stripes of light pink urea (up to 300 metric tons) visible at the store, though not discernible in the hold after loading. The Master issued a letter of protest dated 28 April 1995 recording that “some part of cargo in all holds is moistured, discoloured,” with “yellow,” “rose,” and “nearest to grey” colors and contamination with plastics, glass, stones, and other materials. By 29 April Agrosin had either received that letter or learned of its contents via Baff. On 3 May Mr. Kamper reported that about 26,500 tons had been loaded and again described the cargo as “somewhat discoloured” (0.1–0.2% yellowish/beige) and “somewhat dirty” on the surface due to dirty trimming equipment. A meeting on 3 May among the Master, the Meezan port captain, Mr. Kamper, and Mr. Karlsson led, according to Captain Hussain, to the wording, “Cargo discoloured also foreign materials eg. plastic, rust, rubber, stone, black particles found in cargo,” as a description everyone supposedly accepted; Mr. Kamper denied agreeing that wording. Loading completed at 18:20 on 4 May 1995. The Master authorized the agents to sign a mate’s receipt with that wording; when Agrosin’s agent FIMAG refused, the shipowners’ protective agents, Oy Saimaa Lines, issued a mate’s receipt for 33,319.98 tons on 15 May 1995 claused in those terms, naming Acron as shipper and consignment “to the order of Agrosin.” On 16 May Agrosin insisted that a clean mate’s receipt must be issued, noting that if cargo were contaminated the Master should have exercised his right to stop loading. On 18 May FIMAG forwarded the original mate’s receipt to Agrosin. On 20 May Agrosin paid Acron US$1,000,000 as the balance due under the purchase contract.
Events moved east. Around 5 June 1995 the ship was off Singapore; on 3 June the Master announced an arrival draft in China of 11.1 meters, raising worries because a draft limit of about 10.5 meters had been reported at Beihai. On 7 June Grand Prestige advised that high tide from 10 June would be 4 meters over the normal 8-meter draft. On 7 June the Master asked for a different port, Zhanjiang, because of the uncertainty over Beihai’s draft. On 16 June 1995 the ship arrived at Beihai and tendered notice of readiness. The same day three original bills of lading, signed in London on behalf of the Master, were issued; they were claused with the same wording as the mate’s receipt and named Agrosin as shipper, with the box “Place and date of issue” stating “London UK” and “as at Kotka Finland Port 4/5/95.” Without clean bills, the sub-sale letter of credit could not be negotiated in the ordinary way. A deadlock typical of such cases developed: Agrosin withheld sub-charter freight; Baff withheld freight up the chain; Meezan withheld hire from owners, who threatened a lien on the cargo. With the ship off the port and discharge impossible without documents, English solicitors for Agrosin, Meezan, and the shipowners devised a structure in June 1995 that allowed discharge to begin: Agrosin presented the original claused mate’s receipt to the Meezan port captain at Beihai and accepted the claused bills under protest, then returned the bills to London to be marked “accomplished” so their function as negotiable title documents was exhausted while discharge could proceed to the buyer’s representative’s account. The Bank of China received the claused bills and documents on 26 June 1995 and did not accept them against the credit.
Discharge began at 01:00 on 26 June 1995. Early inspection reports at Beihai described a slightly wet surface in small areas and “very few” small coal pieces; both rust and coal dust appeared to have dropped from hatch covers; the effects were described as not serious. On 28 June SGS-CSTC reported rainwater with coal dust fell on a small part of the surface in one hold and that “most of the cargo was found in white colour, only a very small part was in yellowish colour,” later estimating less than 0.1% of the surface was yellowish and possibly caused by rust water. Photographs showed yellowish discoloration in places, not “dark yellow.” Captain Wood, a surveyor, found off-white cargo, some greyish cargo near the tank top, and isolated areas of brown-stained cargo he attributed to remnants of a previous oat cargo from the upper structure; he considered the “foreign matter” to amount to “a few kilos,” and he believed the majority of the cargo was white, that perhaps no more than 40% could be described as discoloured and that the vast majority of that was merely off-white, with 5–7% affected by greyish or yellowish tones, most of it in lower parts of the stow and aggravated by local cross-contamination during discharge. Commercially, the bank’s refusal to accept the claused bills, coupled with a falling market, forced renegotiation. On 8 July 1995 Grand Prestige confirmed a settlement: the invoice price to Guangxi Publications Import & Export Co. Ltd. would be reduced from US$250.80 to US$230.00 per metric ton C&F FO, CQD Beihai, with US$2.00 per ton commission to Grand Prestige, bank charges, and an import permit refund to be adjusted, producing a net US$223.45 per ton to Agrosin; there would be no further quality claims. Agrosin accepted those terms on 8 July 1995, and on 26 July 1995 it discounted the amended credit with HSBC.
Two legal fights took shape. First, “The Clausing Issue”: what is the Master’s duty when deciding whether to sign clean bills and, if not clean, what wording to use; did the apparent order and condition at loading justify the Master’s clausing; did the clausing breach the contract of carriage; and, if so, what loss flowed. Second, “Title to sue”: who had the right to claim under the bills and the contract of carriage after the unusual June–July documentation choreography. A third issue concerned berthing: whether the Master’s refusal to go into the berth designated by the Beihai Harbour Authority on the night of 19 June 1995 was a breach that caused Agrosin to pay money to reinstate quick-berthing priority.
On the duty to clause, the court explained that the shipowner’s duty under Article III rule 3 of the Hague-Visby Rules is to issue a bill that records the apparent order and condition of the goods according to the Master’s reasonable assessment as a reasonably observant master. That duty is not a contractual guarantee of absolute accuracy. The words used should “have a range of meaning which reflects reasonably closely the actual apparent order and condition of the cargo” and the extent of any defect that a reasonably observant master would consider it to have. The statement must reflect the Master’s honest and reasonable judgment at the time of receipt; it is not a warranty to shippers that the ship’s opinion will match theirs or the truth in some absolute sense. The court rejected the idea that a separate negligence-style duty of care exists requiring a carrier’s agents to state the apparent condition “accurately” for the shipper’s benefit, because both shipper and carrier possess knowledge of the cargo’s apparent condition and the Rules provide the standardized duty and evidential regime that buyers and banks understand and rely upon.
Applying that standard, the judge compared what the Master actually wrote with what a reasonably observant master should have written. The mate’s receipt described the goods as bulk urea “white” in the pre-printed description. Given that “white” was the formal description on the receipt and that the observed condition at loading included partial discolouration (off-white tones with very limited yellowing), a reasonably observant master would more likely than not have qualified the bills to refer to partial discolouration. However, a reference to “foreign materials eg. plastic, rust, rubber, stone, black particles” overstated the condition that was apparent on reasonable observation of cargo of this kind. On the judge’s analysis, if the Master had complied with Article III rule 3 in this case he still would have issued claused bills, but they would have been claused for partial discolouration rather than for generalized “contaminants.” From a causation point of view, that distinction mattered. Because either way the bills would not have been clean, Agrosin would not have been able to present the full set of conforming documents under the letter of credit. By the time the ship reached Beihai the market for urea had fallen, and it was more probable than not that Guangxi would have declined to waive the clean-bill requirement unless the price was reduced in a way similar to the July settlement. Accordingly, even though the Master failed to comply with Article III rule 3 in the specific sense that his wording went too far, the claimants did not prove that this failure caused their alleged loss; the hypothetical clean-bill world was not realistic on the facts, and the hypothetical compliant-but-still-claused bill would have produced the same commercial blockage.
The court spelled out that, had causation been established, the proper measure would have been the difference between Agrosin’s revenue actually obtained at the amended US$230.00 per ton and what Agrosin would have received had clean bills been issued at completion of loading, with necessary adjustments for already included 90-day interest and a separate claim of US$67,973.44 said to be interest; but because there was no causation, those accounting issues were left unresolved. The central point was that the failure to comply with Article III rule 3 did not translate into proven loss.
On “Title to sue,” the shipowners argued that any rights of suit had passed to Guangxi Publications under section 2(2) of the Carriage of Goods by Sea Act 1992, either because Guangxi became the lawful holder of the bills while they were still documents of title or because, even if the bills ceased to be documents of title as against the ship when accomplished, the proviso in section 2(2)(a) applied since Guangxi obtained the bills by virtue of transactions carried out under earlier contractual arrangements. The judge rejected that analysis on the facts. He found that by arrangements agreed around 14 June 1995, the contract of affreightment evidenced by the bills was deemed to be a contract between Agrosin as shipper and the shipowners as carrier from the commencement of loading (“Place and date of issue: London UK, as at Kotka Finland Port 4/5/95”), notwithstanding earlier references in other documents to Acron as shipper. The later July 1995 agreement among Agrosin, Grand Prestige, and Guangxi changed the commercial deal: the price dropped from US$250.80 to US$230.00 per ton; claused bills would be accepted; delivery was to be taken from Agrosin, not from the vessel; and the discharge port was fixed at Beihai. Those were new terms, not simply the original April arrangements. Because the transfer of the bills to the Bank of China and then to Guangxi in late June–July 1995 took place under these new arrangements, the proviso in section 2(2)(a) did not apply, so Guangxi acquired no rights of suit against the shipowners. Agrosin therefore remained the only party entitled to sue in this action.
The berthing story at Beihai provided a separate and, ultimately, successful monetary claim. The Harbour Authority designated No. 3 berth for the night tide on 19 June 1995 and gave detailed assurances: three pilots and two tugs would assist; fairway depth was 7.8 meters plus the tide; the berth depth was 10.6 meters plus the tide; the highest tide at 23:17 would be 3.95 meters; and between 21:10 and 22:30 the tide would be 3.55–3.89 meters. With a southerly wind adding 0.2–0.25 meters and the vessel’s draft at about 11.1 meters, the figures showed adequate under-keel clearance if the ship proceeded on the designated tide. The pilots boarded at about 21:00, but the Master refused to berth, citing lack of a pilot’s letter of guarantee, his opinion that the pilots were inexperienced and the tugs too old, and his belief—later repeated to the owners—that the available depth at high water was only 9.4 meters. The Port Authority insisted it was safe; the Master still refused. The next day the Harbour Authority declared that the Master’s refusal breached Chinese port regulations requiring obedience to the Authority’s instructions. Because the attempt to berth had been wasted, the Authority warned that the ship would lose priority and might face about 20 days’ delay unless Agrosin paid compensation for the wasted operation, estimated at US$12,000–13,000, plus “something extra” to ensure future cooperation. Mr. Low, Agrosin’s representative, agreed to pay US$20,000 so the ship could regain a quick-berthing arrangement for a new slot on 25 June. The question was whether the Master’s refusal to berth on 19 June was a breach of the contract of carriage causing that payment to be made. The court weighed the contradictory information available to the Master about Beihai’s drafts in early June and then assessed the specific data for 19 June. It rejected the Master’s assertion that the available depth was only 9.4 meters and accepted the Port Authority’s evidence that the available draft between 21:10 and 23:17 on 19 June, with tide and wind considered, was 11.55–11.95 meters compared to the ship’s 11.12-meter draft. On those figures the ship could have been safely berthed. The request to berth was not so obviously wrong that any rational master would have been virtually certain the vessel would ground; the Master therefore was obliged to proceed as instructed. His refusal breached his duty under the contract, and the shipowners were liable for the proven loss, namely the US$20,000 paid to reinstate priority.
Putting the strands together, the narrative ran from careful drafting of sale and charterparty clauses and the need for clean bills, through messy reality at Kotka with off-white prills, limited yellowing, and minor debris, followed by a voyage in which paper solutions were created so that cargo could be delivered even though clean bills could not be obtained. The bank’s refusal to accept claused bills under the letter of credit and the falling market led to a negotiated price reduction on 8 July 1995. At trial the key legal questions were whether the Master had a duty to issue clean bills when faced with the cargo he saw, what his legal duty was when he believed the cargo was not perfectly white, whether his words on the mate’s receipt and bills exceeded what a reasonably observant master would say, whether any such excess caused the seller’s financial loss, who had the right to sue, and whether a separate refusal to obey a lawful berth instruction created a liability for the “shifting” money paid to regain priority. The court clarified the standard under Article III rule 3: the Master must record apparent order and condition as it reasonably appears to him; there is no absolute promise of accuracy, only a duty to reflect his reasonable assessment. On the facts, a reasonable master would have noted partial discolouration and not a broader list of contaminants. But even with proper wording the bills would still have been claused, the bank would still have rejected them, and Agrosin would still have had to negotiate with Guangxi in a falling market. Therefore, the causal link between the Master’s excessive wording and the reduction in price was not proved. As to title, the complex June–July documents did not transfer rights of suit to Guangxi under section 2(2), because the late-June/July transfer of bills occurred under a new July arrangement that changed core terms and made the proviso inapplicable; Agrosin, shown as shipper in the bills and party to the contract of carriage from loading, remained the correct claimant. On the Beihai night tide of 19 June, the Master’s refusal to berth in the face of adequate depth and authority instructions breached the contract of carriage, and the US$20,000 paid to restore quick-berthing status was recoverable as damages.
The result is precise. First, the court found that the Master’s wording went beyond what a reasonably observant master should have written and so did not comply with Article III rule 3, but the claim for the alleged loss on the sale failed for want of causation because even with correct wording the bills would still have been claused and the bank would still have refused them; there was no recoverable difference between the world of excessive clausing and the world of proper, but still non-clean, clausing. Second, on title to sue, Guangxi obtained no rights of suit under section 2(2) of the 1992 Act in the circumstances of the late-June/July transactions, so Agrosin was the only party entitled to pursue the claims. Third, on the berthing dispute, the Master’s refusal to follow the Harbour Authority’s instructions at Beihai on 19 June 1995 breached the contract of carriage, and the shipowners were liable to pay Agrosin US$20,000 as damages representing the money paid to reinstate berthing priority. Legally, the judgment fixes the standard for masters facing pressure to sign clean bills: their duty is to record what a reasonably observant master would see, not to under-state or over-state; it confirms that shippers cannot turn an honest and reasonable assessment into a strict warranty and that over-clausing does not produce liability without proof of causation. It also explains how section 2(2) of the 1992 Act works when bills are transferred after delivery arrangements change: if a later agreement replaces the original sale framework, the statutory proviso does not pass rights of suit to the new holder. Finally, it reinforces that a master must obey harbour authority berthing instructions unless the danger is so obvious that going in would be virtually certain to end in grounding; otherwise, refusal is a breach and any resulting, concrete expense—here the US$20,000 paid on 21–25 June 1995 to restore quick-berthing status at Beihai—is recoverable.
