Cargo claims and the burden of proof – Volcafe confirms that a carrier does not need to disprove negligence first in order to rely on the “inherent vice” defence

Supreme Court puts burden of proof on the carrier in cargo claims|BDM Blog|BDM LawCoffee beans were shipped from Columbia to Germany.  The beans were carried in bags in containers.   The carriage was on LCL/FCL (less than container load/full container load) terms, the effect of which was that the carrier’s stevedores were responsible for preparing the containers and stuffing the bags into them at the terminal.  Before stuffing, the bare corrugated steel of the containers was lined with Kraft paper. The bills of lading which incorporated the Hague Rules recorded that the cargo was shipped in apparent good order and condition.

On discharge, the cargo was found to have suffered condensation damage and the receivers brought claims against the carrier.  Moisture in warm air rising from the stow had condensed on contact with the cold roof of the container, fallen on the bags at the top of the stow and also run down the sides of the container, wetting the bags on the outside of the stow.

It was common ground that condensation was inevitable when a hygroscopic cargo, such as coffee beans, was carried from a warm climate to a cold climate, and that there was no certain way to prevent condensation damage when bagged coffee was carried in lined, unventilated containers.  It was also common ground that carriage in lined, unventilated containers was a widespread commercial practice.

The claimants alleged that the loss and damage was caused by the negligence of the defendant and/or its failure to properly and carefully load, handle, stow, carry, keep, care for, and discharge the cargoes in breach of the contract and of Article III Rule 2 of the Hague Rules.  They relied on the maxim “res ipsa loquitur” (the thing speaks for itself) and on the defendant’s alleged failure to use adequate and/or insufficient Kraft paper, strong corrugated paper or other insulating materials, to protect the cargoes from condensation.

At first instance, the judge held that the damage was caused by a breach of Article III Rule 2, and that the onus was on the defendant to establish inherent vice or inevitability of damage and to disprove negligence.   The Court of Appeal did not agree and held that, where the carrier set up a case within a relevant exception under the Hague Rules, the legal burden was on the cargo claimant to establish that the exception did not apply because of the carrier’s negligence.   Accordingly, once the defendant had shown a prima facie case for the application of the exception of inherent vice in article IV rule 2(m) the burden shifted to the claimants to establish that the exception did not apply because of the carrier’s negligence.

As for the carrier’s negligence, it is well-established that the obligation to “properly” care for and carry the goods under article III Rule 2 means “in accordance with a sound system”.  The Court of Appeal clarified this did not require the carrier to employ a system which would prevent damage.  One of the indications of a sound system was that it was in accordance with general industry practice.  The judge held that the claimants had failed to establish that the carrier’s system of lining the containers was not a sound system and, in those circumstances, the carrier’s defence under article IV rule 2(m) succeeded.

Also noteworthy in this judgment are the findings on the temporal scope of the Hague Rules.  The parties are free to determine what acts or services fall within the operation of “loading” and for which the carrier assumes responsibility.  The effect of the shipments being on LCL/FCL terms was that the carrier assumed responsibility for the dressing and stuffing of the containers by his stevedores at the container yard and that the Hague Rules applied to this stage of the voyage.

The full citation of this case is Volcafe Ltd and others v Compania Sud Americana de Vapores SA (trading as ‘CSAV’) [2016] EWCA Civ 1103, [2017] 1 Lloyd’s Rep 32

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