At first instance, the judge found in favour of the cargo owners. It was held that there was a factual presumption that damage to a previously undamaged cargo had been caused by the negligence of the carrier.
The Court of Appeal overturned the judge at first instance and, in applying The Glendarroch, found that if the carrier could establish a prime facie case of inherent vice, the burden would shift to the cargo owners to prove that the damage was caused by a failure to exercise reasonable care. The cargo owners appealed.
The Supreme Court held:
Comment from the UK
Perhaps the decision is not altogether surprising. It confirms that, where cargo is lost or damaged in carriage, the burden of proof lies on the carrier to demonstrate what occurred to the cargo if it wishes to rely on the defences under the HVR. Carriers subject to the HVR will, therefore, be treated in much the same way as other bailees of goods. This rule has been justified by explaining that the bailee of goods is best placed to say what occurred to those goods whilst in their custody.
What might, to some, be a little more surprising, is the impact of the decision when the carrier alleges a defence under Article IV.2 of the HVR (such as inherent vice, error in navigation or fire). It has often been proposed by carriers that, if they can establish one of these exceptions, that is the end of any claim. This decision, however, makes it clear that the carrier has the burden of proving both that the exception exists and that it caused the loss without a breach by the carrier of its duty of care to the cargo.
Using the example of inherent vice (which was the defence alleged in this case), for the carrier to rely on that defence, it must show that the cargo is unfit to withstand the ordinary incidents of the voyage. This must be assessed by reference to the degree of care that the carrier must exercise in its handling and carriage of that cargo. If a cargo is particularly sensitive, a “reasonable degree of care” may require a higher standard than with a less sensitive cargo. It is clear, following this decision, that if a carrier wishes to rely on the defence of inherent vice, the burden of proof will be on the carrier to show that it exercised a reasonable degree of skill and care and, notwithstanding this, the loss or damage occurred in any event.
Comment from the US
The ultimate result of Volcafe would probably be the same if decided under US law. The difference would be in how the court reaches its decision.
Where a carrier simply agrees to transport a shipper loaded and sealed container from origin to destination, the carrier will generally have no obligation with regard to how the cargo is stowed inside the container. Volcafe is not the “normal” containerised cargo case from a US perspective because in Volcafe the carrier undertook to stow the cargo in the container in preparation for carriage.
As with any other cargo damage case under the US Carriage of Goods by Sea Act, once the cargo plaintiff establishes its prima facie case the carrier would be able to assert the inherent vice of the green coffee cargo as a defence. At some point, however, the carrier would have to prove that it was not negligent when it decided to stow the bags of coffee in the unventilated containers. The burden could be expressed either as an affirmative (“the carrier exercised due diligence…”) or as a negative (“the carrier was not negligent…”) but the end result would likely be the same; if the choice of the stowing method and level of protection for the bags of coffee was improper, the carrier would be held liable.
This case review was co-authored by Natalie Seal, Trainee Solicitor, London.
Read other items in Marine Brief - December 2018