Effort Shipping Co Ltd v Linden Management SA

Goods may be dangerous under article IV, rule 6 of the Hague Rules although they neither threaten the vessel nor directly damage other cargo. It is sufficient that their shipment is naturally and foreseeably liable to cause the physical loss of other cargo, including through compulsory dumping.

Article IV, rule 6 is a specific provision imposing strict liability upon a shipper where the carrier did not consent with knowledge of the danger. Article IV, rule 3 does not make that liability dependent upon fault or knowledge. Endorsement of a bill of lading under section 1 of the Bills of Lading Act 1855 adds the endorsee's liabilities but does not extinguish those of the original shipper.

The shippers loaded ground-nut extractions infested with khapra beetle aboard the vessel Giannis N.K.. Neither the shippers nor the carriers knew of the infestation. Although it could not spread to the wheat carried in other holds, it caused quarantine measures and the compulsory dumping of all remaining cargo. The carriers sought the costs of fumigation and damages for delay.

Longmore J found for the carriers in the Commercial Court: [1994] 2 Lloyd's Rep. 171. The Court of Appeal upheld that decision: [1996] 1 Lloyd's Rep. 577. The issues before the House concerned the meaning of dangerous goods under the Hague Rules, the relationship between article IV, rules 3 and 6, and whether section 1 of the Bills of Lading Act 1855 extinguished the original shipper's liability. The House also considered, expressly obiter, the corresponding common-law obligation.

1. The appeal was dismissed unanimously. Lord Lloyd of Berwick delivered the leading speech. Lord Goff of Chieveley and Lord Clyde agreed with his reasons. Lord Steyn reached substantially the same conclusions, and Lord Cooke of Thorndon agreed with the essential reasoning.

2. Per Lord Lloyd and Lord Steyn, goods are not confined to inflammable or explosive goods, or to goods capable of causing direct physical damage through their inherent operation. The expression must receive its ordinary, broad meaning. The infested cargo was dangerous because its shipment was naturally and foreseeably liable to cause the loss of the other cargo through quarantine and compulsory dumping. It was unnecessary to decide whether goods could alternatively be characterised as merely legally dangerous because they caused delay through local law.

3. Per Lord Lloyd, article IV, rule 6 of the Hague Rules is a specific provision which is not qualified by the general protection in article IV, rule 3. The carrier's power to land, destroy or render innocuous dangerous goods cannot depend upon the shipper's knowledge. The liability for losses arising from the same shipment likewise does not depend upon knowledge, fault or neglect. Lord Steyn reached the same construction from the text, structure and historical context of the Rules.

   Lord Cooke agreed that rule 6 took priority but preferred to reconcile the provisions by treating the shipment of dangerous goods without consent as an “act” within rule 3. He left open the meaning of “act” in relation to non-dangerous goods.

4. Per Lord Lloyd and Lord Steyn, section 1 of the Bills of Lading Act 1855 transferred contractual rights to the consignee or endorsee but did not transfer or extinguish the original shipper's liabilities. The endorsee's liability was additional. Section 2's express preservation of liability for freight did not impliedly exclude liability for shipping dangerous goods.

5. Per Lord Lloyd, expressly obiter, the majority rule in Brass v Maitland (1856) 6 E. & B. 470 should not be overruled. When the common-law obligation concerning dangerous goods arises, the shipper's liability does not depend upon knowledge or means of knowledge of the danger.

1. House of Lords: In Effort Shipping Co Ltd v Linden Management SA [1998] UKHL 1; [1998] AC 605, the House unanimously dismissed the shippers' appeal.

2. Court of Appeal: The court upheld the decision for the carriers: [1996] 1 Lloyd's Rep. 577.

3. Commercial Court: Longmore J decided the issues in favour of the carriers: [1994] 2 Lloyd's Rep. 171.