Volcafe v Compania Sud Americana de Vapores 2018

by Ebi Oni

The recent Supreme Court decision in Volcafe v Compania Sud Americana de Vapores 2018 has shed important light on the burden of proof under the Hague and Hague Visby Rules, specifically Article III.2 which requires the carrier to “properly and carefully load, handle, stow, carry, keep, care for and discharge the goods carried” in the context of the Article IV.2(m) defence of inherent vice. The case overturned the decision in Glendarroch [1894] and provides guidance on the legal burden of proof on carriers seeking to rely on the inherent vice exception. 

Facts

The case concerned a shipment of 9 consignments of coffee beans from Colombia to Germany bills of lading incorporating the Hague Visby Rules. The bills were issued on LCL/FCL terms, so the carriers were contractually responsible for preparing and stowing the bags onto the containers for carriage. Coffee beans are a hygroscopic cargo, they absorb and store moisture which can cause condensation in containers when they are carried from warm to cool climates. This makes it necessary to line the containers with absorbent material such as cardboard or Kraft paper as was common commercial practice in 2012. In this case, upon arrival in Germany, 18 out of the 20 bags of coffee beans were found to have been water damaged by condensation.

Cargo owners pleaded their case in the way that had been standard for many years, that the carriers as bailees, failed to deliver the cargo in the same good order and condition as was recorded on the bill of lading on shipment. In addition, it was pleaded that in breach of Article III.2 of the Hague Visby Rules, the carriers failed to “properly and carefully load, handle, stow, carry, keep care for and discharge” the cargoes.

The carriers on the other hand argued that the cause of the damage was inherent vice under rule IV.2(m). In counter argument, cargo owners pleaded that the inherent characteristics of the cargo which resulted in the damage only did so because of the carrier’s negligence in taking preventative measures.

High Court Decision

The High Court found that the legal burden was on the carrier to disprove negligence where the goods were loaded in apparent good condition. There was no evidence on the thickness of paper that ought to have been used, or a given number of layers to avoid the condensation damage. The court held that the carrier had failed to discharge the burden of proving the exercise of due diligence.

Court of Appeal Decision

The Court of Appeal reversed the decision of the High Court and held that the carrier can establish the defence of inherent vice by proving that the moisture that caused the damage came from the cargo itself. It was then for the cargo owners to show that cause of the damage was not inherent vice, but a failure of the carrier to exercise reasonable care.

Supreme Court Decision

At the Supreme Court, there were two main issues to be decided. Firstly, whether under Article III.2, the legal burden was on the cargo owner to prove that the carrier was in breach, or whether the legal burden was on the carrier to prove that the loss did not arise in consequence of a breach of Art III.2. Secondly, whether under Article IV.2(m), the legal burden was on the cargo owner to prove that it was the carrier’s negligence which caused the inherent vice to damage the cargo, or whether it was on the carrier to disprove negligence.

On the first issue, the Supreme Court considered that although the Rules provided a complete code on the matters which they covered, they do not contain specific provisions relating to who bears the legal burden of proof. The Supreme Court observed that under English law, the delivery of goods for carriage by sea has historically been regarded as a bailment for reward on the terms of the bill of lading and that although the obligation of the bailee is thus a qualified obligation to take reasonable care, at common law he bears the legal burden of proving the absence of negligence.

Consistent with the law of bailment, it was held that where a cargo was loaded in apparent good condition but was found to be damaged upon discharge, the legal burden was on the carrier to prove that the damage was not caused by a breach of the duty of care imposed by Article III.2.

On the second issue relating to the inherent vice defence under Article IV.2(m), the Supreme Court usefully defined it as “the unfitness of goods to withstand the ordinary incidents of the voyage given the degree of care which the ship owner is contracted to exercise.” The decision in Glendarroch was overturned and it was held that to rely on this defence, the carrier bears the legal burden of proof to show that the damage arose from inherent vice and that it took reasonable care to protect the goods from damage, or that damage arose despite the exercise of due diligence to care for the cargo.

The Supreme Court has clarified the position on the burden of proof under the Art III.2 and therefore provided helpful guidance on the application of the Hague Visby Rules. It is no longer enough for the carrier to establish an excepted peril in Art IV.2, the carrier must now also show that the damage was incurred without a breach by the carrier of its duty of care.

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