Bunge SA v. ADM do Brasilia

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Bunge SA v ADM Do Brasilia Ltda and 7 Others (The "Darya Radhe")
English Commercial Court: Tomlinson J: [2009] EWHC 845 (Comm): 24 April 2009
Available on BAILII @
Steven Berry QC and Jeremy Brier (instructed by Holman Fenwick Willan) for the Time Charterer, Bunge
Michael Ashcroft (instructed by Middleton Potts) for the 1st to 4th Shippers
Sara Cockerill (instructed by Reed Smith) for the 5th Shipper
Nevil Phillips (instructed by Pysdens) for the 6th to 8th Shippers
‘Dangerous’ Goods
The Hague Rules, Article IV, Rule 6 and the common law implied term meaning of ‘dangerous’ goods was limited to goods likely to cause physical or legal danger to the vessel or the other goods onboard and did not extend to goods that were merely likely to cause delay to the voyage and additional expense without more. On the facts, the presence of mummified rats in the cargo (which were no more than a cosmetic problem) did not make the cargo ‘dangerous’ goods.

Factual Causation
The arbitrators approached their task in the orthodox and correct manner, by asking themselves "whether, if the rats had come on board the vessel with the cargo, there were rats present in every shipper’s cargo, or only some of them, and if so which?" On the facts, the arbitrators were right to find in favour of the shippers.

DMC Category Rating: Confirmed

Case note contributed by Jim Leighton, BSc (Hons), LLB (Hons), LLM (Maritime Law), International Contributor to DMC’s CaseNotes

This was an appeal by the time charterer of "Darya Radhe" ("Bunge") to the Commercial Court from the decision of maritime arbitrators (Mr David Farrington, Mr Christopher Moss, Mr Anthony Scott, Mr Alan Burbidge and Professor Charles Debattista) in eight awards, all based on one set of reasons, in favour of eight shippers to each of whom Bunge had issued at least one set of bills of lading for the same voyage. The dispute concerned the shipment of allegedly dangerous cargo.

Discovery of the rats during loading was said by Bunge to have been responsible for its incurring extraordinary expenditure and delay in dealing with the matter in an appropriate way. Bunge’s loss was put at in excess of US$2 million. Bunge said that SBMP loaded with accompanying rats was a dangerous cargo. Bunge accordingly brought claims for damages against the nine shippers, to whom in total 30 bills had been issued.

Each bill named the port of discharge as "Bandar Imam Khomeini or Bandar Abbas, Persian Gulf – Iran". Each bill incorporated the Hague Rules. The Hague Rules provide by Art. IV, Rule 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."

Bunge said in the arbitrations that the shippers were liable for the losses which it 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 arbitrators considered a considerable body of both factual and expert evidence and found that the rats had entered the ship with the cargo, rather than being present on board before loading commenced or having boarded the vessel via inadequately protected mooring ropes and gangways (a finding against which there could be no appeal).

However, the arbitrators unanimously concluded that Bunge’s claims against each shipper failed, for two independent reasons, each of which was fatal to the claim:

(1) 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, 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; and

(2) 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 that:

    1. fumigation of the cargo was entirely routine;
    2. fumigation was a requirement of the sale contract between Bunge and the Iranian
    3. fumigation could be expected to be 100% effective;
    4. rats which are "mummified" as the result of phosphine fumigation may be regarded as
      no more than a cosmetic problem; and
    5. the cargo was not in fact rejected by the Iranian receivers.

‘Dangerous’ Goods
The Judge held that the arbitrators had correctly applied the law to the facts as found, so that this ground of appeal failed.

The principles for determining whether a cargo was ‘dangerous’ had in large part recently been explored and restated by Longmore J, the Court of Appeal and the House of Lords in The "Giannis NK". There were two distinct but allied principles: (1) a shipper undertakes not to ship goods which are liable to cause damage to the vessel or other cargo shipped thereon without giving notice to the shipowner of the character of the goods, and (2) the shipper undertakes not to ship goods which are liable to cause delay to the vessel. The "Giannis NK" had held that goods may be ‘dangerous’ for the purposes of the Hague Rules if they have the capacity to cause physical damage in either a direct or an indirect manner.

Since all three courts in which The "Giannis NK" was considered concluded that the ground-nut cargo was the indirect cause of physical damage to the wheat cargo, it was unnecessary to decide whether goods which merely cause delay to the carrier fell within the Hague Rules definition of ‘dangerous’ goods. However nothing said in any of the judgments or speeches in The "Giannis NK" gave any encouragement to the view that the word ‘dangerous’ could in the Hague Rules carry this wider meaning. In both Carver and Scrutton it was considered that ‘dangerous’ in Article IV, Rule 6 probably meant physically dangerous, and did not extend to those cases where the ship suffered loss owing to legal obstacles to the carriage or discharge of goods.

The Judge considered that it was most unlikely that the word ‘dangerous’ could be intended, when used in Article IV, Rule 6 of the Hague Rules, to bear a meaning going beyond physical danger. As the Judge pointed out, the owner has the right under the Rule, at any time before discharge and without incurring a liability to pay compensation, to land ‘dangerous’ cargo at any place or to destroy it or to render it innocuous. Quite apart from the obvious pointer given by the expression "render it innocuous", it would be very surprising if the owner had the right without incurring any liability whatsoever either to land at a non-contractual destination or even to destroy cargo which posed no physical threat to either ship or other cargo carried.

Irrespective of the Hague Rules, there was at common law in a contract of carriage an implied term to the effect that the shipper would not ship dangerous goods without notice to the carrier. For the Judge, it was clear that the meaning of the word ‘dangerous’ in that term implied by the common law was the same as that which had been given to the same word in Article IV Rule 6 of the Hague Rules.

In relation to goods that were liable to cause delay to the vessel, Bunge had sought to rely upon Mitchell Cotts v Steel where Atkin J had said "upon a voyage that cannot be performed without the violation of the law of the land of the place to which the goods are to be carried – a shipment of goods which might involve the ship in danger of forfeiture or delay – is precisely analogous to the shipment of a dangerous cargo which might cause the destruction of the ship. I do not think there is any distinction between the two cases." However, the Judge considered that Atkin J.’s words should be read in their context and limited to the case where performance of the carriage contract became illegal. This approach was supported by other case law and a wider principle would in any event "open a wide vista of responsibility", which was undesirable.

As the Judge pointed out: "In truth, all or most cargo is at risk of rejection on discharge, whether justifiably or not, and the allocation of the risk of delay arising therefrom is dealt with in contracts of carriage quite independently of the regime as to dangerous cargo."

Factual Causation
The Judge held that the arbitrators approached their task in the orthodox and correct manner, so this ground of appeal failed.

The arbitrators had asked themselves "whether, if the rats had come on board the vessel with the cargo, there were rats present in every shipper’s cargo, or only some of them, and if so which?" The Judge considered this to be precisely the issue that the arbitrators had to decide and their findings were not to be disturbed. Bunge submitted that the proper test was to ask whether on the balance of probabilities each shipper probably loaded one rat. The Judge considered that there was no difference in substance between the two tests.

‘Dangerous’ Goods
Given the findings of the arbitrators and the review of the relevant law by the Judge, the dismissal of the appeal on this ground was predictable. It would be commercially undesirable to widen the categories of situation than would provide a carrier with grounds to obtain an indemnity or damages for the result of carrying ‘dangerous’ goods. The present categories are clear in their definition, application and evidentiary requirements and thereby provide certainty. If widened, they would muddy the waters without reasonable and necessary justification for so doing. As the Judge pointed out, what Bunge sought should be dealt with by provisions within the contracts of carriage relating to the allocation of risk of delay and loss, quite independently of the ‘dangerous’ goods regime.

Factual Causation
Given the circumstances, it was not surprising that Bunge were unable to prove factual causation in relation to any one shipper and were, therefore, unable to establish liability for breach of contract. The figures alone betray the difficulties: 30 bills, 24 parcels, 14 to 20 rats and nine shippers.

At first sight, the result perhaps seems unduly harsh because, as a matter of fact, the rats were loaded with the cargo and some shippers loaded more parcels and received more bills than others. But each shipper is only responsible for its parcels and not for those of other shippers. The law does not attribute collective responsibility to shippers in such circumstances, so the loss had to lie where it fell. It was, after all, only right to require a clear factual connection to be established between a parcel, a rat and a shipper, if a breach of contract was to be proven.

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