UK Supreme Court Clarifies Burden Of Proof In Cargo Damage Cases Under The Hague Rules

The UK Supreme Court has clarified the nature of the burden of proof upon carriers of goods by sea who seek to rely upon the inherent vice exception under Article IV.2 of the Hague Rules, in a successful appeal by cargo interests represented by Andrew Nicholas and his team at Clyde & Co LLP.

Volcafe Ltd and others v Compania Sud Americana de Vapores SA [2018] UKSC 61 – reversing the decision of the Court of Appeal - confirms the relevance of bailment as a common law concept to the burden of proof in modern cases involving contracts for the carriage of goods by sea under the Hague Rules.

Lord Sumption, with whom the other Justices unanimously agreed, held that the carrier has the legal burden of proving that he took due care to protect the goods from damage, including due care to protect the cargo from damage arising from its inherent characteristics. As a result, in order to rely on the inherent vice exception under article IV.2(m) of the Hague Rules, the carrier must first disprove negligence by establishing that he took reasonable care to protect the cargo in relation to the anticipated contractual voyage.

Background to the case:

Between January and April 2012, nine consignments of bagged coffee beans were carried in 20 unventilated containers from Buenaventura, Colombia to Northern Germany. The bills of lading issued by the carrier incorporated the Hague Rules and recorded the carrier's receipt of the cargo in good order and condition. The bills were issued on LCL/FCL terms, meaning that the carrier was contractually responsible for preparing and stuffing the containers for the voyage.

Coffee beans are a hygroscopic cargo, i.e. the cargo absorbs, stores, and emits moisture. During carriage of such cargoes from warm climates to cooler climates in unventilated containers, condensation inevitably forms on the walls and roof of the containers. Therefore, it is necessary to line the roof and walls of the containers with an absorbent material – such as Kraft paper used in this case - to protect the cargo from water damage.

Upon delivery, it was discovered that the cargo in 18 of the 20 containers had suffered wet damage as a result of the condensation which had formed inside the containers dripping onto the bagged coffee beans.

Cargo interests brought claims against CSAV as carrier for the loss and damage to cargo, arguing under the common law of bailment that the carriers had failed to re-deliver the cargoes in the same good order and condition recorded on the face of the bills of lading, in breach of the carrier's duties as bailee. Alternatively, it was argued that the carrier had negligently breached its obligation under article III.2 of the Hague Rules to "properly and carefully load, handle, stow, carry, keep, care for and discharge" the cargoes. This negligence primarily concerned the...