A recent Supreme Court decision seeks to lay to rest the way that the burden of proof may pass and be discharged under the Hague Rules, reversing the Court of Appeal decision. This is an update from the earlier report.

The Facts

CSAV carried a cargo of bagged green coffee beans in dry, unventilated containers from Colombia to Northern Europe.  CSAV's stevedores were responsible under LCL/FCL bills of lading for preparing and stuffing the containers.  During the carriage moisture in warm air rising from the stow condensed on contact with the cold roof of the container wetting the bags at the top and the sides.

This cargo is hygroscopic, meaning that it absorbs, stores and emits moisture.  It was common ground that condensation of this type is inevitable when it is carried from a warm to a cold climate and that industry guides recommend carriage in ventilated containers.  However, it was also common ground that carriage in lined, unventilated containers was a widespread commercial practice.

Applicable law

The bills of lading applied Hague Rules.  The resulting claim against CSAV for damage turned on both the common law of bailment and on the relationship between Hague Rules Article III(2), requiring the carrier to "properly and carefully load, handle, stow, carry, keep, care for and discharge the goods" and  Article IV(2)(m), which exempts the carrier from liability loss or damage arising from inherent vice. 

The Judgments

The claimant succeeded at first instance.  The judge characterised Art IV(2)(m) as one category of fact which can counteract the effect of Art III(2).  Both articles require the carrier to prove that the damage was not caused by its negligence.  On the facts, although the shipper had agreed to the use of unventilated containers, the carrier had failed to prove that it had adopted a sound system to prevent reasonably expected damage by using adequate (or any) lining, or that it had complied with accepted industry practice.  The carrier could therefore not rely on the Art IV(2)(m) defence of inherent vice.

The Court of Appeal reversed this judgment and found in favour of CSAV.  Once CSAV had shown a prima facie case of inherent vice under Article IV(2)(m), the burden shifted to the claimant to prove CSAV's negligence or breach of Article III(2).  Additionally, the court reopened the examination of the facts (to an extent by looking at photographs), finding, that, firstly, it was standard industry practice to line the container with two sheets of kraft paper of specified thickness and, secondly, that the carrier had actually done this. 

The Supreme Court reversed the judgment of the Court of Appeal and restored the judgment at first instance.  The Supreme Court found, as the first instance court had, that there was a bailment on terms for reward, creating a burden of proof which the Hague Rules were not sufficiently "exhaustive" to compromise, applying equally to both Art III(2) and Art IV.2(m). The application of different burdens to the two articles would be "incoherent".  In finding this, the Supreme Court overturned authorities, in particular, the Glendarroch ([1894] P226), on which the Court of Appeal had relied.  Finally, the Supreme Court declined to follow the Court of Appeal in interfering with the first instance findings of fact, in the absence of any clear evidence that the judge at first instance was wrong.

Comment

On a tactical level, the disagreement on the facts in this case illustrates the importance of accurate records in order to support persuasive evidence.

This case deals with an issue which has been debated in the courts and the textbooks since the introduction of the Hague Rules - and applies to the Hague-Visby Rules to the extent that the wording is the same.  Some commentators have however remarked that, although it clarifies the position on inherent vice, there remain questions around other Art IV.2 defences, in particular: (a) "error in navigation" and (b) "fire".

Finally, it was agreed at all three levels that, where the carrier assumes the obligation to stuff its own containers, the contract of carriage will include this as part of the loading, and Hague Rules will apply.  It is not clear what the position would have been if the carrier had not had this obligation, and this may have a limiting effect on the judgment. 

VOLCAFE & OTHERS v COMPANIA SUD DE VAPORES (CSAV)

[2018] UKSC 61

We hope that you will have found the above interesting. If you would like further information, or have any comments, please email us, or take this opportunity to forward to any colleagues who you may feel would be interested.

We look forward to hearing from you.

Peregrine Storrs-Fox
Risk Management Director, TT Club