Effort Shipping Company Ltd v Linden Management S.A. (Giannis NK)
| Jurisdiction | England & Wales |
| Judge | Ward L JJ.,Hirst,Morritt |
| Judgment Date | 30 January 1996 |
| Judgment citation (vLex) | [1996] EWCA Civ J0130-3 |
| Court | Court of Appeal (Civil Division) |
| Date | 30 January 1996 |
[1996] EWCA Civ J0130-3
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(Mr. Justice Longmore)
Before: Lord Justice Hirst Lord Justice Morritt Lord Justice Ward
MR. A. SCHAFF (instructed by Messrs. Bentley, Stokes & Lowless, Solicitors, London, E1) appeared on behalf of the (Plaintiffs) Respondents.
MR. E. BROADBENT (instructed by Messrs. Richards Butler, Solicitors, London, EC3) appeared on behalf of the (Second Defendant) Appellant.
Introduction
This is an appeal by the second defendant Sonacos (the shipper) against a judgment of Longmore J. delivered on 29th March 1994 (now reported at 1994 2 Lloyd's Law Reports 171) whereby he held the shipper liable to the plaintiff Effort Shipping Company Ltd (the owner) for damages of $477,848.38 plus interest. The first defendant Linden Management SA, the charterer, has played no part in the action and is not affected by the judgment.
The action arises out of the shipment of a cargo of ground-nut extraction meal pellets by the shipper at Dakar in Senegal in No 4 hold of the owner's vessel "GIANNIS NK", under a bill of lading dated 18th November 1990, which incorporated the Hague Rules (the Rules), for carriage to Rio Haina in the Dominican Republic.
Cargoes of bulk wheat pellets had earlier been loaded into other holds at the previous loading ports in Togo and the Ivory Coast.
As the learned judge held, and as is no longer challenged, the ground-nut cargo was at the time of shipment infested with Khapra Beetle (Trogoderma Granarium Everts), which originates in tropical areas, and which in its larval form is voracious, and will rapidly devour a cargo of feedstuffs. As a result a number of countries, including the Dominican Republic and the USA, take drastic steps to prevent this beetle's entry, including the exercise of statutory importation powers to exclude vessels and cargoes infested with it.
After discharging part of the wheat cargo at San Juan, Puerto Rico, the vessel proceeded to Rio Haina where, following inspection by the agricultural authorities which resulted in the discovery of insects, including the suspected presence of beetles, she was quarantined; there followed two separate fumigations but after each fumigation live insects were still found in No 4 hold, as a result of which she was ordered to leave the port with both the ground-nut cargo and the remainder of the wheat cargo still on board.
She then proceeded back to San Juan, where, following inspections by the US Department of Agriculture, in which further beetles were found, the vessel received a US DA Notice requiring the owners to remove all the cargoes from US ports or return them to their country of origin or dump them at sea 25 miles from shore; as a result the vessel sailed out to sea and jettisoned both the ground-nuts cargo and the balance of the wheat cargo. The vessel then returned to San Juan where further inspections took place, in which more beetles were found; a further chemical fumigation was required which was completed successfully, so that she was presented for her next voyage in North Carolina, having suffered a total two months detention and delay.
The issues
These are as follows:
(1) What is the impact of Article IV Rule 6 of the Hague Rules on the present case? This Rule provides as follows:
"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."
The learned judge concluded:
(i) That "goods of a dangerous nature" means goods that are liable to cause physical damage to some object other that themselves.
(ii) That the goods were not physically dangerous to the vessel.
(iii) That the goods were physically dangerous to the wheat cargo.
As a result he held that they fell within the ambit of Article IV Rule 6.
The shipper challenges (iii), and the owner by respondent's notice challenges (ii).
(2) Was the owner entitled to rely on the undertaking implied at common law that a shipper will not ship goods of such a dangerous character that they are liable to cause physical damage to the vessel or its cargo, or to cause detention or delay, without giving notice to the owner of the character of the goods? And if so, what is the extent of the obligation, and in particular is it a strict obligation, or one which only applies when the shipper knew or ought to have known that there was such a risk?
The judge rejected the shipper's submissions that the implied term was overridden by Article IV Rule 6, and also held that the obligation is absolute and not qualified. Both these conclusions are challenged by the shipper.
(3) Was the shipper divested of liability by virtue of the section 1 of the Bills of Lading Act 1855 which together with the preamble and section 2 provides as follows:
"WHEREAS by the custom of merchants a bill of lading of goods being transferable by endorsement the property in the goods may thereby pass to the endorsee, but nevertheless all rights in respect of the contract contained in the bill of lading continue in the original shipping or owner, and it is expedient that such rights should pass with the property: and whereas it frequently happens that the goods in respect of which bills of lading purport to be signed have not been laden on board, and it is proper that such bills of lading in the hands of a bona fide holder for value should not be questioned by the master or other person signing the same on the ground of the goods not having been laden as aforesaid:
1. Every consignee of goods named in a bill of lading, and every endorsee of a bill of lading to whom the property in the goods therein mentioned shall pass, upon or by reason of such consignment or endorsement, shall have transferred to and vested in him all rights of suit, and be subject to the same liabilities in respect of such goods as if the contract contained in the bill of lading had been made with himself.
2. Nothing herein contained shall prejudice or affect any right of stoppage in transitu, or any right to claim freight against the original shipper or owner, or any liability of the consignee or endorsee by reason or in consequence of his being such consignee or endorsee, or of his receipt of the goods by reason or in consequence of such consignment or endorsement."
This point, which apparently arises directly for the first time 140 years or so after the passing of the Act, is still live in the present case, since, notwithstanding the repeal of the 1855 Act by the Carriage of Goods by Sea Act 1992 (the 1992 Act), the latter only applies to bills of lading issued after 16th September 1992, 18 months or so after the signing of the bill of lading in the present case.
The judge held that the shipper was not divested of liability, and this conclusion is also challenged by the shipper.
Article IV Rule 6 ("Rule 6")
The judge's conclusion was as follows:
"Since I have held that the owners are not without remedy even if the cargo was not physically dangerous, I will merely state my conclusion that there was not any physical damage to the vessel. There was, however, damage to the other cargo since it had eventually to be dumped at sea and was totally lost. It was known to the shippers that any cargo infested with khapra beetle would be very likely to be rejected at destination. The rejection and subsequent dumping of other cargo on board the same vessel seem to me to be a natural and not unlikely consequence of shipping khapra-infested cargo, which is thus dangerous in the sense of being liable to give rise to loss of other cargo shipped in the same vessel.
I therefore conclude that the ground-nuts shipped by the defendants were 'goods of a dangerous nature' within Art. 4, r.6 of the Hague Rules."
It will be noted from the above passage that the judge treated this Rule as creating an absolute liability, and this was indeed the basis on which the case was presented to him at the trial, and also the basis on which Mr Broadbent for the shipper presented his opening argument to us. However, following an intervention from the bench, Mr Broadbent in his reply sought leave to switch his position, and to contend that under Rule 6 liability is qualified, having regard to the provisions of Article IV Rule 3 (Rule 3) which provides as follows:
"The shipper shall not be responsible for loss or damage sustained by the carrier or the ship arising or resulting from any cause without the act, fault or neglect of the shipper, his agents or his servants."
This argument was obviously so fundamental that we thought it right to grant him leave to present it.
Mr Broadbent submitted that Rule 3 is completely general and unrestricted; the words "fault or neglect" connote negligence, and the word "act" must be read as connoting a positive intentional act on the shipper's part, and could not properly be interpreted as encompassing the mere act of shipment. So, he said, there must be either deliberate or negligent conduct. He contended that this accorded with the scheme of the Rules as a whole, and in particular...
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