Bunge SA v ADM do Brasil Ltda [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr Justice Tomlinson |
| Judgment Date | 24 April 2009 |
| Neutral Citation | [2009] EWHC 845 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 24 April 2009 |
| Docket Number | Case No: 2008 Folio 193 |
[2009] EWHC 845 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
In the matter of the Arbitration Act 1996
And in the matter of an Arbitration
The Hon. Mr Justice Tomlinson
Case No: 2008 Folio 193
Steven Berry QC and Jeremy Brier (instructed by Messrs Holman Fenwick & Willan) for the Claimant
Michael Ashcroft (instructed by Messrs Middleton Potts) for the First to Fourth Respondents
Sara Cockerill (instructed by Messrs Reed Smith) for the Fifth Respondents
Nevil Phillips (instructed by Messrs Pysdens) for the Sixth to Eighth Respondents
Hearing date: 23 January 2009
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
The Hon. Mr Justice Tomlinson :
This is an appeal brought with permission of Aikens J granted pursuant to section 69 of the Arbitration Act 1996 against eight arbitration awards issued by maritime arbitrators in relation to a dispute concerning the shipment of allegedly dangerous cargo. The cargo in question was 44,337.515 tonnes of Brazilian soyabean meal pellets, “SBMP”, loaded on board the “Darya Radhe” at Paranagua by nine shippers between 20 and 27 January 2004. The arbitrators found that there had been introduced with this cargo during loading less than 20 and probably no more than 14 live rats. Discovery of the rats during loading was said by Bunge SA, (“Bunge”), who were the time charterers of the vessel, to have been responsible for their incurring extraordinary expenditure and delay in dealing with the matter in an appropriate way. Their loss was put at in excess of US$2 million. Bunge say that SBMP loaded with accompanying rats is a dangerous cargo. Bunge accordingly brought claims for damages against the nine shippers to each of which it had issued at least one bill of lading.
There were in fact thirty bills of lading in all. Each named the port of discharge as “Bandar Imam Khomeini or Bandar Abbas, Persian Gulf – Iran”. Each bill of lading incorporated the Hague Rules. The Hague Rules provide, by Article IV Rule 6:
“6. Goods of an inflammable, explosive or dangerous nature to the shipment whereof the carrier, master or agent of the carrier, has not consented, with knowledge of their nature and character, may at any time before discharge be landed at any place or destroyed or rendered innocuous by the carrier without compensation, and the shipper of such goods shall be liable for all damages and expenses directly or indirectly arising out of or resulting from such shipment.
If any such goods shipped with such knowledge and consent shall become a danger to the ship or cargo, they may in like manner be landed at any place or destroyed or rendered innocuous by the carrier without liability on the part of the carrier except to general average, if any.”
It was said by Bunge in the arbitrations that the shippers were liable for the losses which they had incurred as damages and expenses directly or indirectly arising out of or resulting from the shipment of the cargo. In the alternative, Bunge relied upon the term classically regarded as implied into a contract of affreightment, that the shipper of goods will not ship goods of a dangerous character of which the carrier could not by reasonable diligence have become aware before loading.
The arbitrations were heard together, with sensible co-operation as to representation and evidence. Two arbitrators, Mr David Farrington and Mr Christopher Moss, were common to all nine references. In fact there were ten references but one did not proceed to an award and can be ignored. In seven of the references the third member of the tribunal was Mr Anthony Scott. In the remaining two it was Mr Alan Burbidge and Professor Charles Debattista respectively. The arbitrators issued one set of Reasons which were common to all nine references. Bunge has not appealed against two of the awards – this is of no relevance.
The principal contest at the hearing of the arbitrations, which occupied seven days, concerned the factual question whether, as Bunge contended, the rats were introduced with the cargo or whether rather, as the shippers contended, the rats were present on board before loading commenced or had boarded the vessel via inadequately protected mooring ropes and gangways. On this issue the arbitrators considered a considerable body of both factual and expert evidence. In the light thereof the arbitrators, with Mr Burbidge and Mr Scott dissenting, found that the rats had entered with the cargo, and against that finding of fact there is naturally no appeal.
The arbitrators unanimously concluded that Bunge's claims against each shipper failed, for two independent reasons, each of which is fatal to the claim. First, they concluded that Bunge was unable to prove that any of the shippers, who were wholly independent of each other, had been responsible for introducing even a single rat into the vessel's holds. There were, as the arbitrators neatly put it, by reference to the number of parcels loaded, “more shippers than rats” and Bunge was unable to show which shipper or shippers was or were responsible. Secondly, the arbitrators concluded that in this case a cargo “loaded with a rat” was not a dangerous cargo. They came to that conclusion in the light of findings of fact which included:
i) that fumigation of the cargo was entirely routine;
ii) that fumigation was a requirement of the sale contract between Bunge and the Iranian receivers;
iii) that fumigation could be expected to be 100% effective;
iv) that rats which are “mummified” as the result of phosphine fumigation may be regarded as no more than a cosmetic problem; and
v) that the cargo was not in fact rejected by the Iranian receivers.
In relation to this last finding the arbitrators observed that it was not clear whether this outcome was the result of the cargo being clean or whether it was because of the arrangement which Bunge reached with the receivers. There is no finding as to what those arrangements were. After successful fumigation at Paranagua the vessel had deviated to Lisbon from her expected voyage via the Cape where, at a facility in which Bunge had an interest, some of the cargo had been discharged and re-inspected and the entire cargo had again been fumigated, notwithstanding there was no basis for thinking that any live rats remained in it. Since the claim failed and the arbitrators had no need to decide quantum issues, they had no need to make a finding about this incident. However they indicated that had they needed to make a finding about it, they would have concluded that the main reason for deviating to Lisbon was a problem with the quality of the vessel's bunkers, and that diversion to Lisbon simply to conduct these cargo operations was entirely unjustified. The arbitrators did however observe that “the consequences of the vessel arriving in Iran with live rats were of such magnitude that it was difficult to criticise a decision to re-fumigate”. They also observed that it had to be recognised that Bunge has great experience in this field and that it had to be assumed that it would not have incurred these significant expenses without genuine and justifiable concern at the time that there was a continuing risk of live rats in the cargo. Nonetheless the arbitrators concluded that this risk was in fact non-existent. Bunge included a modest claim, US$4,485.00, for the cost of representation at the discharge port in Iran “to safeguard the interests of the vessel”. In relation to this the arbitrators said, at paragraph 129 of their Reasons:
“Experience proves that having the right person on the ground in such circumstances can be a crucial factor in avoiding potential disasters.”
The upshot is that despite the arbitrators' observation that it was not clear whether non-rejection of the cargo was a consequence of the cargo being clean or because of the arrangements which Bunge reached with the Receivers (Reasons paragraph 77) there are clear findings that the fumigation at Paranagua was successful and that the cargo was discharged at Bandar Khomeini without incident. There is no basis upon which it can plausibly be asserted that, but for the unspecified arrangements with the receivers, the cargo would have been rejected in Iran, still less that the receivers would have been justified in so doing.
Bunge sought leave to appeal on the following points of law:
“(1) does the presence of between 14 and 20 rats (or any lesser number of rats for which any individual Shipper is liable) in the cargo render the cargo either physically or legally 'dangerous'?
(2) if so a further issue may then arise, namely: 'what is the correct legal test for establishing whether any particular shipper is liable?', in particular:
(i) is Bunge required to show [that] each parcel of cargo loaded by a shipper contained a rat or is it enough for Bunge to show that a particular shipper loaded rats with the cargo? and
(ii) does Bunge need to show that on the balance of probabilities the rats were distributed evenly throughout the cargoes or does Bunge need to show that there was no possibility that the rats were distributed unequally throughout the cargoes?”
In granting permission to appeal Aikens J suggested refinements to the points of law. As redefined, the questions are:
“3. … 'Does the presence of between 14...
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