On 18 November 1990, Linden Management SA (the appellant) shipped a cargo of groundnut extractions under a bill of lading at Dakar in Senegal for carriage on the Giannis NK to Rio Haina in the Dominican Republic. The Giannis NK was owned by Effort Shipping Company Ltd (the respondent). The groundnut cargo was loaded in the no 4 hold and infested with khapra beetle at the time of shipment, but both the appellant and the respondent were unaware of this. There was no danger of the beetle infestation spreading to the cargo of wheat pellets loaded in nos 2 and 3 holds, but the infestation subjected the Giannis NK and its entire cargo to exclusion from the discharge destinations, San Juan, Puerto Rico and Rio Haina.

The Giannis NK partially discharged some of the wheat cargo at San Juan, proceeded to Rio Haina and was quarantined upon the discovery of insects in the no 4 hold. After two unsuccessful fumigations, it left San Juan to dump cargo at sea between 4-12 February 1991 before returning to San Juan for clearance to load. The inspection at San Juan uncovered 18 live khapra beetles and larvae in the no 4 hold. The Giannis NK was thus required to receive a further fumigation. The Giannis NK was eventually cleared to load for its next charter at Wilmington in North Carolina, but the fumigation has resulted in a delay of 2.5 months. The respondent claimed damages for loss caused by the delay and an entitlement to recover fumigation expenses against the appellant. The Hague Rules were incorporated into the bill of lading and the basis for the respondent's claim was art 4.6 of the Rules or, in the alternative, breach of an implied common law term.

There were four questions.

First, was the cargo of groundnut extractions 'dangerous' within the meaning of art 4.6 of the Hague Rules? The appellant submitted that it was not because it did not fall within the meaning of art 4.6 - it did not have a dangerous nature like inflammable and explosive goods and so could not directly cause physical damage to the ship or its cargo, eg by overheating or leakage. The respondent disagreed because the value or usefulness of the wheat cargo had been impaired.

Secondly, if the groundnut cargo constituted goods of a 'dangerous nature', was the appellant's liability for shipping dangerous goods under art 4.6 qualified by arts 3.5 or 4.3?

The appellant argued that it was wrong to focus on art 4.6 in isolation and that such an approach would be inconsistent with the express provisions of art 4.3. The shipment of beetle-infested cargo occurred without negligence on the part of the shippers, their servants or agents. The shippers should therefore be relieved of any liability under art 4.3. The appellant submitted that art 4.6 could not have been intended to cause shippers to incur unlimited liability for the shipment of dangerous goods when they did not know, and had no means of knowing, that the goods were infested. Shippers should only be liable if there was some fault or neglect on their part.

The respondent submitted that there was no tension between art 4.6 and art 3.5 or art 4.3. Article 3.5 imposed a free-standing and absolute obligation on shippers. Article 4.6 was not expressly made subject to art 3.5. Article 4.3 did not address the right of the carrier to land, destroy or render innocuous dangerous cargo. Article 4.6 must therefore apply irrespective of fault on the shipper's part.

Thirdly, could the appellant escape liability by relying on s 1 of the Bills of Lading Act 1855 (UK)?

Fourthly, what was the nature and scope of any implied obligation at common law as to the shipment of dangerous goods?

Longmore J (the trial judge) ruled that the infested groundnut cargo constituted 'goods of … [a] dangerous nature' under art 4.6 of the Hague Rules so as to impose strict liability on the shippers for the resulting damage, and that this liability was not transferred by virtue of section 1 of the Bills of Lading Act 1852 when the bill of lading was endorsed to the purchasers ([1996] 1 Lloyd's Rep 577). The Court of Appeal upheld that decision ([1994] 2 Lloyd's Rep 171). The appellant appealed.

Held: Appeal dismissed.

The groundnuts shipped by the defendants were 'goods of … [a] dangerous nature' within art 4.6 of the Hague Rules. The words 'goods of … [a] dangerous nature’ in art 4.6 of the Hague Rules should be interpreted broadly and there was no need to qualify the word 'dangerous' by reading in the word 'directly'. Lord Steyn added that it would be wrong to apply the ejusdem generis rule to the words 'goods of an inflammable, explosive or dangerous nature' in art 4.6. These were disparate categories of goods. The expression 'goods … of a dangerous nature' did not require substitution. Goods might be dangerous within the meaning of art 4.6 if they were dangerous to other cargo, even though they were not dangerous to the vessel itself. Additionally, the scope of these words would not just include goods liable to cause physical damage to other cargo directly, but also goods liable to cause physical damage to other cargo indirectly by causing it to be dumped at sea. Accordingly, the groundnut cargo was dangerous. Moreover, the respondent did not consent to its shipment with knowledge of its dangerous character. The shippers were therefore prima facie liable for the damage suffered, unless art 4.3 could apply.

Article 4.3 was not applicable because its qualification of art 4.6 would violate the maxim of generalia specialibus non derogant. The breadth of art 4.3 ('shall not be responsible for loss or damage … arising or resulting from any cause') means that an intention for it to qualify the specific provisions of art 4.6 was unlikely. Moreover, the framers of arts 3.5 and 4.3 had the appropriate language to phrase art 4.3 in a way that expressly made art 4.3 subject to art 4.6, as evidenced in art 2 (which was expressly made subject to art 6) and art 4 (which applied 'notwithstanding the provision of the preceding articles'). Furthermore, the appellant’s liability for shipping dangerous goods should not be made to depend on the state of its knowledge.

The obiter views of Mustill J in The Athanasia Cominnos [1990] 1 Lloyd's Rep 277 and Judge Diamond QC in Mediterranean Freight Services Ltd v BP Oil International Ltd (The Fiona) [1993] 1 Lloyd's Rep 257 supported the position that art 4.6 was not qualified by art 4.3. The United States decision of Serrano v US Lines Co [1965] AMC 1038 (DC SDNY) (which held that art 4.3 set out a general principle of non-liability of the shipper in the absence of fault) could not be relied on to prove that art 4.6 is subject to art 4.3 as it did not even refer to art 4.6.

Instead, art 4.6 created free-standing rights and obligations in respect of the shipment of dangerous cargo. Although the word 'act' in art 4.3 included an act of shipping dangerous goods without consent under art 4.6, the special provisions of art 4.6 would take priority over the general provisions of art 4.3 in the event of a conflict. Hence, art 4.3 would still not be available for the appellant to rely on for exemption from art 4.6 (which holds shippers of dangerous goods strictly liable), notwithstanding that there was neither fault nor neglect on its part.

Alternatively, the word 'act' in the phrase 'act, fault or neglect of the shipper' in art 4.3 could be read as encompassing shipments that involved neither fault nor neglect on the part of the shipper.

The appellant could not escape liability by relying on s 1 of the Bills of Lading Act 1855 (UK) because the passing of property in the goods by the endorsement of the bill of lading did not divest the shipper's liability for shipping dangerous goods.

The appellant would also be liable at common law. The liability was same as that arising under art 4.6 of the Hague Rules and did not depend on its knowledge or means of knowledge that the goods were dangerous.