UK Supreme court issues landmark judgment in cargo claim – Volcafe v. CSAV

The United Kingdom Supreme Court has issued a landmark decision that provides authoritative comment on the burden of proof in marine cargo claims. This decision is likely to assist cargo interests in pursuing future claims.

The Facts

The claimants were the owners of nine consignments of bagged green coffee beans shipped from Colombia to Bremen in twenty separate unventilated containers. The bills of lading incorporated the Hague Rules, were subject to English law and jurisdiction and were on LCL/FCL (less than full container load/full container load) terms. Under these terms the carrier had responsibility for preparing the containers for reception of cargo.

Coffee is a hygroscopic cargo that absorbs, stores and emits moisture. In order to protect against the resulting condensation it was normal to “dress” the interior surfaces of the containers with Kraft paper or similar covering. This was done in the present case. However when the containers were opened after discharge it was found that the coffee beans in eighteen of the containers had been damaged by water.

Analysis by the Supreme Court

1. Carriage of goods by sea is a form of bailment

The Supreme Court confirmed that under English common law the legal relationship between a shipper and a carrier is one of bailment. In the words of the court:

“The delivery of goods for carriage by sea is a bailment for reward on the terms of the bill of lading. Bailment is a transfer of possession giving rise to a legal relationship between the bailor and the bailee which is independent of contract, although in practice it is commonly contractual and the terms of the contract will commonly modify its incidents”.

The court went on to state that as bailee the carrier:

(a) has a duty to take reasonable care of the goods; and

(b) in the event of loss or damage bears the legal burden of proving the absence of negligence

“He need not show exactly how the injury occurred, but he must show either that he took reasonable care of the goods or that any want of reasonable care did not cause the loss or damage sustained.”

The court remarked that this was not a peculiarity of the common law as the duty of a depositary to justify his inability to deliver the goods in the condition in which he received them is also a basic feature of the civil law.

2. Impact of the Hague Rules and the burden of proof

Was the position changed by the incorporation of the Hague Rules? Any previous statutory application of the Hague Rules under English law ended with their replacement by the Hague-Visby Rules under the Carriage of Goods by Sea Act 1971 which would not apply to this shipment. Accordingly the Hague Rules had effect only by virtue of their contractual incorporation into the bill of lading and not by operation of law.

The court held that nothing in the Hague Rules alters the common law status of the contract of carriage by sea as a species of bailment . Accordingly where goods were shipped in apparent good order and condition but were discharged damaged the carrier bears the burden of proving either that it was not due to its breach of the obligation in Hague Rules Article III.2 to take reasonable care or that it was caused by an excepted peril.

3. Hague Rules Article IV – Inherent vice

The further question was whether the damage was caused by an inherent characteristic of the cargo and thus carrier could exclude liability under Hague Rules Article IV.2. This states:

Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from …

(m) Wastage in bulk or weight or any other loss or damage arising from inherent defect, quality or vice of the goods.

The court commented that the mere fact that coffee beans are hygroscopic and emit moisture as the ambient temperature falls may constitute inherent vice if the effects cannot be countered by reasonable care in the provision of the service contracted for, but not if they can and should be.

“It follows that 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 else that whatever reasonable steps might have been taken to protect the cargo from damage would have failed in the face of its inherent propensities.”

In the present case the carrier had the burden of proving that it had applied sufficient layers of suitable lining paper in the containers to protect against condensation. It was could not discharge this burden and was accordingly unable to rely on the inherent vice exception in Article IV.2.

Comment

This decision provides clarity on the subject of burden of proof in cargo claims generally and on the subject of the inherent vice exception in particular. It will probably assist cargo interests in the pursuit of future claims for loss or damage.

 


¹ Volcafe v. CSAV [2018] UKSC 61

² Volcafe v. CSAV [2018] at para 19

³ Volcafe v. CSAV [2018] at para 37