Effort Shipping Company Ltd v. Linden Management SA and Others

The House of Lords held that Article IV, rule 6 of the Hague Rules imposes strict liability on a shipper for goods "of an inflammable, explosive or dangerous nature" shipped without the carrier's informed consent, and that this liability is not qualified by Article IV, rule 3. "Dangerous" should be given a broad meaning and includes goods that are liable to cause loss to other cargo by natural and not unlikely consequences of their shipment (for example, necessitating dumping or quarantine). Section 1 of the Bills of Lading Act 1855 does not divest the original shipper of that liability; the endorsee acquires rights and is subject to the same liabilities but Parliament did not intend a statutory novation to extinguish the shipper's liabilities. The Appellate Committee also (obiter) endorsed the longstanding common-law view that a shipper's liability for shipping dangerous goods need not depend on the shipper's knowledge or means of knowledge of the dangerous nature.

The respondents (carriers) sought to recover damages for delay, the cost of fumigation and related losses after a cargo of ground-nut extractions infested with khapra beetle was shipped by the appellants (shippers). The infestation made the vessel and its cargo liable to quarantine and ultimately led to the dumping at sea of all remaining cargoes, including wheat loaded in other holds. At first instance Longmore J. found for the carriers and the Court of Appeal (Hirst L.J.) affirmed. The shippers appealed to the House of Lords.

The Appellate Committee addressed four issues:

• the meaning of "goods of an inflammable, explosive or dangerous nature" in Article IV, r. 6 of the Hague Rules;
• whether Article IV, r. 6 is qualified by Article IV, r. 3 (the general non-liability provision);
• whether liability of the shipper could be defeated by operation of section 1 of the Bills of Lading Act 1855 when property passed by endorsement of the bill of lading; and
• whether there is an implied common-law obligation about shipment of dangerous goods and whether knowledge is an element of liability.

The court reasoned that "dangerous" must be given a broad meaning and can include goods that, by natural and not unlikely consequence of their shipment, cause loss to other cargo (even if not directly physically damaging other cargo). Article IV, r. 6 is to be read as a free-standing, specific rule creating rights and liabilities in respect of dangerous goods and is not rendered subject to Article IV, r. 3; accordingly the shippers' liability under r. 6 is strict and does not depend on fault or knowledge. Section 1 of the Bills of Lading Act 1855 transfers rights to the endorsee but does not extinguish the original shipper's liabilities; that language and the legislative purpose show Parliament did not intend to divest the shipper of accrued liabilities. Finally, although not necessary to decide the case, the Lords (obiter) upheld the majority position in Brass v. Maitland that at common law the shipper's liability for dangerous goods does not depend on knowledge or means of knowledge.

Relief sought: recovery by carriers of damages and expenses for delay, fumigation and consequent losses. Issues framed: interpretation and interaction of Hague Rules provisions, statutory effect of the Bills of Lading Act 1855, and the scope of any common-law obligation. Outcome: appeal dismissed and carriers' entitlement to recover upheld on the stated grounds.

Appeal dismissed. The House of Lords held that (1) the ground‑nut cargo was "dangerous" within Article IV, r. 6 of the Hague Rules because it was liable, by natural and not unlikely consequence, to cause loss to other cargo; (2) Article IV, r. 6 is a free‑standing provision not qualified by Article IV, r. 3 and imposes strict liability on the shipper irrespective of knowledge or fault; (3) section 1 of the Bills of Lading Act 1855 does not divest the original shipper of liabilities under Article IV, r. 6; and (4) obiter, the common-law implied obligation also supports shipper liability without proof of knowledge.

First instance: Longmore J. ([1994] 2 Lloyd's Rep. 171) decided for the carriers. Court of Appeal: decision affirmed (Hirst L.J.) [1996] 1 Lloyd's Rep. 577. Leave to appeal to the House of Lords granted; appeal dismissed [1998] UKHL 1.