We have reported on this case in our January 2017 issue – it concerned a routine shipment of bagged green coffee beans carried in unventilated containers from Colombia to Bremen. The carriers bore responsibility for preparing and loading the containers.
Since it is well known that the beans give off moisture which can condense on the interior surfaces of the container and damage the cargo, containers are generally lined with protective Kraft paper. The carriers did this. At discharge the cargo was found to be damaged and a cargo claim resulted. As is usual with such cases, the claimants argued that the carriers had failed in their duties as bailees of the cargo to deliver it in the same condition as recorded at loading on the bill of lading. Alternatively, they said, the carrier was in breach of their Article III, Rule 2 Hague Rules duty to “properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried”. Equally routinely, the carriers relied, in their defence, on the Article IV, Rule 2(m) “inherent vice” exception.
At trial the evidential issue was really a very simple one. Had the carriers used adequate or sufficient Kraft paper? At this juncture the really interesting point arises. The first instance judge had not been satisfied that the expert or factual evidence was sufficient to decide the question either way. Whilst the Court of Appeal had dealt with this by deciding to review the evidence themselves, this approach was disapproved of by the Supreme Court who looked at the problem on the basis of the findings of the trial judge.
As a result, the question the Supreme Court had to decide was: which party had the burden of proof?
Did the cargo owner have to prove the carrier was negligent? Or did the carrier have to prove they had not been negligent?
Lord Sumption gave the sole judgment of the court. He started by looking at what the position was prior to the Hague Rules. A contract for carriage by sea falls within the English common law bailment for reward. In this instance, that means a carrier takes the cargo into their custody and undertakes to transport it to the agreed destination in return for a payment.
Bailment, by itself, does not impose anything approaching strict liability for damage to the cargo. The requirement is to exercise reasonable care over the goods and importantly it places the burden on the carrier of showing that any damage was caused without their negligence.
The Hague Rules, of course, greatly modified this simplistic bailment relationship found at common law. For Lord Sumption though it was equally consistent to find that the carrier’s burden survived under a Hague Rules regime:
“When one examines the scheme of the Hague Rules, it is apparent that they assume that the carrier does indeed have the burden of disproving negligence albeit without imposing that burden on him in terms.”
The explanation for that is to be found in examining the way Articles III and IV work. The former contains the general duties of the carrier and the latter a varied list of carrier’s defences and exceptions, some of which expressly refer to negligent acts, which would otherwise constitute a clear breach of the Article III duties.
It is for a carrier to bring themselves within the Article IV exceptions. Lord Sumption’s reasoning is that this indicates that the burden of proof is also on the carrier in relation to the Article III duty.
In his words:
“It would be incoherent for the law to impose the burden of the proving the same fact on the carrier for the purpose of Article IV but on the cargo owner for the purposes of Article III.”
This answers the first part of the question. In relation to the Article III duties the carrier had to prove they had not been negligent rather than the cargo interests having to prove that they had been.
The next part of the question was how the Article IV Rule 2(m) “inherent…vice” exception affects the position and is to be applied. It is well known that green coffee beans absorb and give off moisture. The carrier had, therefore, no difficulty establishing this characteristic of the cargo. Equally however, there are well known precautions designed to avoid the damage caused by this characteristic. So, as Lord Sumption says:
“If…reasonable care would have prevented the cargo’s inherent propensity from causing damage, then the cargo is fit to withstand the ordinary incidents of the carriage contracted for and there is no inherent vice.”
It has to follow, therefore, that in order to show that it was the inherent vice in the cargo that caused the damage, the carrier must show they applied the appropriate standards of care in the preparation they took for its carriage. In this case, therefore, they again had the burden of showing they had not been negligent.
In the absence of cogent factual evidence one way or another on the point, the carriers could not bring themselves within the exception.
As said, this is a somewhat unusual case. There did seem to be contemporaneous survey evidence. It is perhaps surprising this left the evidential position so open. Nonetheless it does mean that the previously unanswered question on the burden of proof now has an answer and has helped to tidy up what existing case law there was in this area. It will also considerably strengthen the cargo claimant’s hand in similar circumstances. If nothing else, a much harder attitude to compromise and settlement can be expected.