Who Bears The Burden In cargo claims?
Legal News & Analysis - Asia Pacific - Shipping Maritime & Aviation - Dispute Resolution
14 December, 2018
Many would assume that the question of where the burden of proof lies would be established under English law, particularly in the often litigated area of Hague Rules cargo claims. Until last week however, that was not the case. As the Supreme Court pointed out in their judgment in Volcafe Ltd v CSAV SA  UKSC 61, the trial judge usually finds persuasive factual evidence which means that courts very rarely decide issues of fact on the burden of proof.
The dispute between Volcafe and CSAV over moisture damage to several consignments of coffee has finally reached a conclusion, with the Supreme Court ruling that where
(a) the Hague Rules apply
(b) cargo is shipped in apparent good order and condition but
(c) is discharged damaged, the carrier bears the burden of proving EITHER that the damage occurred without fault in the various respects covered by Article III, rule 2, OR that it was caused by an excepted peril within Article IV, rule 2 AND the carrier's negligence does not "negative" the Article IV rule 2 defence.
The bagged coffee beans were shipped in unventilated containers from Buenaventura, Colombia to Europe. The bills of lading incorporated the Hague Rules. The coffee was stuffed into the containers by the carrier. Before stuffing, the containers were lined with Kraft paper by the stevedores. On discharge, the cargo in most of the containers was found to have suffered damage from condensation.
In response to the cargo owners' claim, the carrier argued that because of an inherent vice in the goods (Article IV, r (2)(m)), namely the moisture being released from the coffee beans and condensing within the containers as the vessel entered cooler temperatures, the damage was inevitable and so
(a) the claim failed as a matter of causation and
(b) the carrier could rely on the Article IV, r (2)(m) defence.
At first instance David Donaldson QC held that the cargo claim succeeded, because the burden was on the carrier to prove that the damage was caused without negligence, or by an excepted peril (because of a factual presumption that damage ascertained on discharge was due to negligence). The carrier had failed to discharge this burden. The Court of Appeal allowed the carrier's appeal, including overturning the judge's factual conclusions.
Supreme Court Decision
The Supreme Court allowed the cargo owners' appeal, in a single unanimous judgment. They held that the carrier had the legal burden of proving that it took due care to protect the goods from damage, including reasonable care to protect the cargo from damage arising from inherent characteristics such as its hygroscopic character. So under both Article III rule 2 and Article IV rule 2 of the Hague Rules, the carrier has the burden of disproving negligence (which also corresponds with the duty of a common law bailee).
For Article III rule 2 "… the carrier must show either that the damage occurred without fault in the various respects covered by article III.2, or that it was caused by an excepted peril. If the carrier can show that the loss or damage to the cargo occurred without a breach of the carrier’s duty of care under article III.2, he will not need to rely on an exception." (paragraph 25). The Glendarroch  P 226 was therefore overruled.
For Article IV rule 2, it is well established (and was accepted by the carrier) that a carrier bears the burden of bringing himself within any of the exceptions listed there. Part of that burden is to disprove negligence for the purpose of invoking an exception, just as the carrier must do for the purpose of Article III, rule 2. If the carrier could and should have taken precautions which would have prevented some inherent characteristic of the cargo from resulting in damage, that characteristic is not inherent vice. Accordingly, in order to be able to rely on the exception for inherent vice, the carrier must show either that he took reasonable care of the cargo but the damage occurred nonetheless, or that whatever reasonable steps might have been taken to protect the cargo from damage would have failed in the face of its inherent properties.
The Court of Appeal was not justified in substituting its own findings of fact for those of the Judge at first instance. A trial judge's findings of fact should not be overturned simply because the Court of Appeal would have found differently. Therefore, the judge’s conclusions about
(a) the practice of the trade in the lining of unventilated containers for the carriage of bagged coffee and
(b) the absence of evidence that the containers were dressed with more than one layer of lining paper, would be reinstated. As a result, the carrier had failed to prove that the containers were properly dressed (i.e. that the carrier was not negligent), the appeal was allowed and the cargo owners succeeded against the carrier.
Whilst carriers may, of course, not be happy about the Supreme Court's conclusion, the clarity now provided is welcome. The judgment should serve as a reminder to carriers to ensure that they employ a sound system to care for each cargo and that the steps that they take to do so are well documented, in the event that they may be called upon to prove a lack of negligence.
For further information, please contact:
Andrew Rigden Green , Partner, Stephenson Harwood