Fraudulent Representation - Date, Quantity, Quality Statements
It is necessary to remember that, when the master issues a bill of lading containing cargo figures or description which he knows to be false, he issues dishonest bill and by doing so, makes fraudulent representation for which an action for deceit will most probably lie. Lord Justice Evans in Standard Chartered Bank v Pakistan National Shipping Corporation & Anor (2)  EWCA Civ 3028 pointed out that:
This requirement of honest commerce is stringently enforced by the English Courts. If a false bill of lading is knowingly issued by the master or agent of the shipowner, and if the claimant was intended to rely on it as being accurate, did rely upon it and as a result of doing so has suffered loss, then the shipowner is liable in damages for the tort of deceit.
Therefore when in some instances, the charterers require the master to sign bills of lading ‘for any cargo in such form as charterers direct’ the question of extent of such authority may be brought up. In Mendala III Transport v Total Transport Corp (The Wilomi Tanana) 2 Lloyd’s Rep 41, where 7 bills of lading were issued with a wrong date, it was held that ‘provided that the owners do not go so far as to issue fresh bills of lading and to do so in a form that is inconsistent with the charter-party or the instructions that have been given by the charterers … charterers cannot forbid the owners to correct an error in a bill of lading with the concurrence of the shippers or so as to protect themselves from a potential liability to a subsequent holder of the bill of lading.’
In Brown Jenkinson v Percy Dalton  2 QB 621 Morris LJ examined at p. 632 legal consequences of situation when the carrier consents to issue a "clean" bill of lading for the cargo in damaged condition, because it is offered by the shipper an indemnity against any liability to any subsequent holder of the bill of lading:
at the request of the defendants, the plaintiffs made a representation which they knew to be false and which they intended should be relied upon by persons who received the bill of lading, including any banker who might be concerned. In these circumstances, all the elements of the tort of deceit were present. Someone who could prove that he suffered damage by relying on the representation could sue for damages. I feel impelled to the conclusion that a promise to indemnify the plaintiffs against any loss resulting to them from making the representation is unenforceable. The claim cannot be put forward without basing it upon an unlawful transaction. The promise upon which the plaintiffs rely is in effect this: if you will make a false representation, which will deceive indorsees or bankers, we will indemnify you against any loss that may result to you. I cannot think that a court should lend its aid to enforce such a bargain.
Another didactic example of incorrect and misleading data in bill of lading represents case of Breffka & Hehnke GmbH & Co KG & Ors v Navire Shipping Co Ltd & Ors  EWHC 3124 (Comm). The cargo of steel pipes was carried on The Saga Explorer from Ulsan in Korea to ports on the West Coast of North America and was found damaged on arrival. Bills of Lading described the cargo as "SHIPPED in apparent good order and condition, weight, measures, marks, numbers, quality, contents, and value unknown, for carriage to the Port of Discharge…", which remain, by virtue of Article III, rule 3 of the Hague and Hague-Visby, the most common form of words used to evidence receipt on board a vessel, in good condition. Additionally, Bills of Lading included a RETLA Clause:
RETLA CLAUSE: If the Goods as described by the Merchant are iron, steel, metal or timber products, the phrase ‘apparent good order and condition’ set out in the preceding paragraph does not mean the Goods were received in the case of iron, steel or metal products, free of visible rust or moisture or in the case of timber products free from warpage, breakage, chipping, moisture, split or broken ends, stains, decay or discoloration. Nor does the Carrier warrant the accuracy of any piece count provided by the Merchant or the adequacy of any banding or securing. If the Merchant so requests, a substitute Bill of Lading will be issued omitting this definition and setting forth any notations which may appear on the mate’s or tally clerk’s receipt.
The main issue in that case was about the nature of the representation as to the condition of the pipes on shipment, whether it was relied on and what damage flows from any breach.
On completion of loading Recommendation Letter was submitted to the Master signed by the KOSAC (Korea Surveyors and Adjusters Co. Ltd) Surveyor and the Chief Officer as follows:
As a result of the survey, we found that all the shipments loaded on board the vessel to be in apparent good order & condition except the shipments mentioned on the ‘Cargo Damage/Exception List’ attached hereto. With regard to the noted damages/exceptions to the shipments, we recommend that they shall be claused in or appended to the relevant Mate’s Receipt and Bills of Lading.
The shippers realised that if the Bills of Lading were claused they would not be paid and persuaded the owners’ agent that the master should issue clean bills of lading in exchange for the Letter of Indemnity, which the master did. On arrival at discharge ports the cargo was found to be rusted to a greater or lesser extent.
In reply to cargo damage claim the owners heavily relied on RETLA clause, which assumed to have an effect, reading the bill of lading fairly as a whole, that the term 'good order and condition' was qualified by the clause defining the term with respect to iron, steel or metal products, i.e. that the RETLA clause applies to all rust of whatever severity. The judge held that:
The RETLA clause can and should be construed as a legitimate clarification of what was to be understood by the representation as to the appearance of the steel cargo upon shipment. It should not be construed as a contradiction of the representation as to the cargo’s good order and condition, but as a qualification that there was an appearance of rust and moisture of a type which may be expected to appear on any cargo of steel: superficial oxidation caused by atmospheric conditions. The exclusion of ‘visible rust or moisture’ from the representation as to the good order and condition is thus directed to superficial appearance of a cargo which is difficult, if not impossible, to avoid. It is likely to form the basis of a determination as to whether there has been a further deterioration due to inherent quality of the goods on shipment under s.4(2)(m) of US COGSA, or Article 4(2)(m) of the Hague-Visby Rules.
On the other side the owners’ position was grossly undermined by the finding that none of the numerous surveyors who examined the cargo on discharge or soon after (including those appointed on behalf of Owners) considered that the damage to the cargo was ‘normal’ or ‘to be expected’. On the contrary, they all noted extensive oxidation, described as ‘moderate to severe’ and ‘severely oxidised.’ On that basis the court held that:
The decision to issue and sign clean Bills of Lading involved false representations by the Owners which were known to be untrue and intended to be relied on. What occurred was not an ‘honest and reasonable non-expert view of the cargo as it appeared,’ but a deceitful calculation made on behalf of the Owners by their authorised agent at the request of the Shippers and to the prejudice of those who would rely on the contents of the Bills of Lading.
Thus all four elements of deceit were present in this case: (a) the making of a representation of fact, (b) which was false, (c) which was known to be false, (d) with intent that it should be acted upon. There were, in my view, three crucial points in this decision:
1. Surveyor and the Chief Officer signed a Recommendation Letter to the Master with clear indication that part of cargo damaged and does not corresponds to description of ‘apparent good order & condition’.
2. False overreliance on RETLA clause since COGSA § 3(8) explicitly prohibits any clause lessening a carrier’s liability ‘otherwise than as provided in this Act,’
3. Although enforceability of LOI was not at issue, it is evident that this agreement is void for illegality and the owners were probably over-ready to issue clean bills of lading in exchange for the useless Letter of Indemnity.
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