Burden of Proof in Cargo Claims under the Hague and Hague-Visby Rules

Volcafe v CSAV [2018] UKSC 61 – Burden of Proof in Cargo Claims under the Hague and Hague-Visby Rules – The Supreme Court in the UK clarifies the Legal Test

The Supreme Court in the UK recently held the carrier has the burden of proof to show cargo loss in transit was not caused by a breach of its carrying obligations.  This case clarifies what has been an uncertain legal test in the event of cargo damage in transit.

In December 2018 the Supreme Court in the UK gave a judgment which greatly assists in determining where the legal burden of proof lies in the event of cargo damage in transit. The Court has provided an authoritative and useful decision which clarifies, in particular, the duties on the ocean carrier to prove on the balance of probabilities that loss or damage to cargo was not caused by any breach of its obligation in relation to carriage of the cargo or that one of the defences in the Hague Rules applies.

The recent judgment therefore clarifies what was previously an uncertain legal test and is of assistance, in particular, to cargo interests where much of the evidence as to the cause of loss which occurred on the voyage is evidence over which the carrier has control, not the cargo interests.

In this case CSAV, the carrier, accepted to carry a consignment of Columbian coffee in containers from Columbia to Germany. They accepted they were responsible for preparing the containers for carriage and loading the bags of coffee into them. Coffee absorbs water, but they are carried in ventilated or unventilated containers. On this occasion they used unventilated containers. As it is inevitable that moisture will condense from the beans onto the walls and roof of the container, they must be protected with adequate lining of the container by an absorbent material such as cardboard, corrugated paper or kraft paper.

When the containers arrived in Bremen, the bags in 18 of them were found to have suffered water damage from condensation.

The cargo owners primary case was that in breach of their duties, the carriers failed to deliver the cargo in the same good order and condition as was recorded in the bill of lading on shipment. They pleaded the breach of the carrier’s duty as a bailee and/or a breach of Article III Rule 2 of the Hague Rules. The key allegation of negligence was that the carriers failed to use adequate or sufficient kraft paper to protect the cargoes from condensation.

The carriers, CSAV, pleaded that the coffee beans had an inherent vice and were unable to withstand the ordinary levels of condensation forming in containers during passages from warm to cool climates. In turn, the cargo owners pleaded that any inherent characteristics of the cargo which resulted in damage arose because of the carrier’s negligent failure to take proper measures for its protection.

The Court places emphasis on the duty of a carrier being the same as the duty of a “bailee”. The duty is limited to taking reasonable care of the goods but that at common law the bailee bears the legal burden of proving the absence of negligence and they took reasonable care of the goods or that want of reasonable care did not cause the loss or damage sustained. The principles applied equally to carriage of goods, and the carriers are in the same position as a bailee under general principles. The Court, therefore, stressed the importance of the legal characterization of a contract of carriage as a “bailment”. Both these provisions in the Hague Rules are considered:

• Article III(2) of the Hague (and/or Hague-Visby) Rules requires the carrier to properly and carefully load, handle, stow, carry, keep, care for and discharge the goods carried.
• Article IV sets out a number of perils, which if causative of the loss allows the carrier to absolve itself from liability for the cargo damage.
  In an analysis of the earlier decisions, the Supreme Court held that the true rule is that 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), then the carrier would not need to rely on an exception.

The key factual issue in dispute in this case was whether or not the carrier had taken proper care to protect the cargo from damage arising from its inherent characteristics, such as its hydroscopic character. It was the Court’s view that the carrier had the legal burden of proving that they took due care to protect the goods from damage.

The Court also confirmed that if the carrier then seeks to rely on one of the defences in Article IV(2) (assuming it can meet the burden of proof to show reasonable care was exercised under Article Rule III(2)), then the carrier must prove that the effective cause of the loss or damage was the excepted peril and not the carrier’s own negligence or breach of Article III(2).

The effect of the decision is that a cargo claimant is able to rely on proof of damage to the cargo as setting up a sustainable cause of action which then transfers the legal burden onto the carrier in all cases to disprove negligence.
This decision is helpful for both cargo interests and carriers as it clarifies in particular the legal burden of proof on carriers.

In the decision here the Supreme Court upheld the earlier finding that the carrier had failed to prove on the balance of probabilities that the containers were properly prepared for the carriage of this cargo. The carrier was, therefore, liable for the loss.