Bunge SA v ADM DO Brasil Ltd & Ors

For the purposes of Article IV Rule 6 of the Hague Rules and the corresponding common-law obligation, dangerous goods ordinarily means goods capable of causing physical damage, directly or indirectly, to life, the ship or other cargo. Goods which merely create a risk of delay or rejection are not thereby dangerous under the Hague Rules.

A separate common-law principle may apply where carriage or discharge involves a specific legal obstacle, such as non-compliance with local law. A general possibility of rejection or detention is insufficient. On the facts, fumigated soyabean meal containing rats posed no relevant physical danger and no established legal obstacle.

Bunge, the time charterer and purchaser of Brazilian soyabean meal pellets, claimed damages from eight shippers after rats were found during loading of the vessel Darya Radhe. The bills of lading incorporated the Hague Rules, including Article IV Rule 6.

The arbitrators rejected the claims on two independent grounds. Bunge could not prove which shipper had introduced any particular rat. They also held that the cargo was not dangerous. Bunge appealed under section 69 of the Arbitration Act 1996, contending that the presence of rats created physical or legal danger and that the arbitrators had applied the wrong approach to proof.

1. The appeal was dismissed. The arbitrators had made no error of law. Their conclusion that Bunge could not establish liability remained correct even assuming that one or more shippers had introduced rats.
2. Under Article IV Rule 6 of the Hague Rules, dangerous goods may include goods capable of causing physical damage indirectly, including by creating a situation in which other cargo is liable to be destroyed or dumped. The common-law implied obligation concerning dangerous goods has the same meaning. The rule does not extend to goods which merely cause delay or expense.
3. A distinct allied principle concerns goods whose carriage or discharge involves a specific legal obstacle or violation of local law. Mitchell Cotts v Steel Brothers did not establish a general liability for cargo which might be rejected or cause delay. It was concerned with illegality in performance. A mere possibility of rejection at the discharge port was insufficient.
4. The arbitrators’ findings excluded physical danger. Fumigation was routine and expected to be completely effective. Any mummified rats were only a cosmetic problem. There was no finding that the maize was physically endangered, that the ship was threatened, or that quarantine, dumping or other legal consequences were required by a specific local law.
5. The arbitrators had also applied the correct burden of proof. Bunge had to establish, on the balance of probabilities, whether rats were present in each shipper’s cargo, or in the cargo of identified shippers. The number of rats exceeded the number of shippers, but that arithmetic did not establish that every shipper had introduced a rat. The distribution could not be assumed to be even, and statistical inference was not demonstrated.
6. Remission would have been futile. The case had not been argued before the arbitrators by reference to any specific local law, and the factual findings could not support such a case.

This was a section 69 appeal from eight arbitration awards. Permission to appeal was granted by Aikens J. The High Court dismissed the appeal against all eight awards.