Effort Shipping Company Ltd v. Linden Management SA and Others

Factual and Procedural Background

On 18 November 1990, Company B shipped a consignment of ground-nut extractions from The City aboard Company A’s vessel for discharge at several Caribbean ports. The cargo, unbeknown to either party, was infested with khapra beetle. Quarantine authorities at subsequent ports ordered repeated fumigations, placed the vessel under detention and ultimately required jettison of the entire cargo, including an unrelated wheat shipment. The vessel was delayed for approximately 2½ months and incurred substantial costs.

Company A sought to recover the resulting losses. Judge Longmore in the Commercial Court and the Court of Appeal found in its favour. Company B appealed to the House of Lords, leading to the present judgment.

Legal Issues Presented

1. The meaning of “goods of an inflammable, explosive or dangerous nature” in Article IV rule 6 of the Hague Rules.
2. Whether a shipper’s liability under Article IV rule 6 is limited by the immunity in Article IV rule 3.
3. Whether section 1 of the Bills of Lading Act 1855 divests the original shipper of liability once the bill of lading is endorsed.
4. The nature of any implied common-law obligation concerning the shipment of dangerous goods.

Arguments of the Parties

Appellant’s Arguments (Company B)

• The ground-nut cargo was not “dangerous” because it posed no direct physical threat to other cargo or the vessel.
• Article IV rule 3 exonerates shippers unless loss is caused by their act, fault or neglect; none existed here.
• Section 1 of the Bills of Lading Act 1855 transferred liability to the bill-of-lading endorsee.
• At common law a shipper is only liable for dangerous goods if aware, or deemed aware, of the risk.

Respondent’s Arguments (Company A)

• “Dangerous” must be construed broadly; foreseeable quarantine, detention or dumping renders cargo dangerous within Article IV rule 6.
• Article IV rule 6 is a self-contained regime imposing strict liability, unaffected by rule 3.
• The Bills of Lading Act 1855 adds liabilities to endorsees but does not extinguish those of the original shipper.
• Common law imposes an absolute duty not to ship dangerous goods without notice.

Table of Precedents Cited

Court's Reasoning and Analysis

1. Dangerous nature of cargo. Applying the broad approach in Chandris, the House held that cargo liable to trigger quarantine or dumping is “dangerous,” even without direct physical interaction with other goods.

2. Interaction of rules 3 and 6. The Court applied the maxim generalia specialibus non derogant, determining that the specific, detailed regime in rule 6 overrides the general immunity in rule 3. Consequently, liability is strict and independent of the shipper’s knowledge or negligence.

3. Bills of Lading Act 1855. The statute transfers contractual rights to endorsees but merely adds, and does not substitute, liabilities. The original shipper therefore remains liable notwithstanding endorsement of the bill.

4. Common-law obligation. Upholding the majority in Brass v. Maitland, the House confirmed an absolute common-law duty not to ship dangerous goods without notice, aligning common law with the Hague Rules.

Holding and Implications

APPEAL DISMISSED.

The House of Lords affirmed liability of Company B for all damages and expenses caused by the undisclosed dangerous cargo. The judgment solidifies strict shipper liability under Article IV rule 6, clarifies that rule 3 affords no defence in such cases, and confirms that endorsement under the Bills of Lading Act 1855 does not relieve a shipper of accrued obligations. While not creating new doctrine, the decision provides authoritative guidance for international carriage disputes involving dangerous goods.