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Volcafe v CSAV [2018] UKSC 61 - what changes are needed?

Introduction

This landmark case concerns the burden of proof under rule 2 of Articles III and IV of the Hague/Hague-Visby Rules.

Footnoting these above a sketch of the facts and the lower courts’ judgments, we first precis the final decision, with brief discussion and commentary. It is submitted that, though providing welcome clarity on an issue that has seen decades of wrangling, in terms of claimshandling the significance of this ruling will soon wane.

Decision

The Supreme Court held that:

  1. carriage of goods by sea is paid bailment, on terms, and nothing in the above Rules alters the common law burden of proof; so
  2. where goods shipped in apparent good order and condition show loss or damage on outturn, the carrier is liable under Article III rule 2 unless he can prove that, more likely than not, what happened was not due to breach of his obligation to take suitable care of the cargo; also
  3. to rely on an Article IV rule 2 exception, as well as proving that it applies, the carrier must also show that there was no fault on his part that caused the damage.

Under the (Article IV rule 2 (m)) “inherent vice” exception relied on here, a carrier must now show that either (a) he took reasonable care of the cargo but the damage still occurred or (b) whatever reasonable protective steps might have been taken would have failed, because of the inherent nature of the cargo.

Discussion

Two fundamentals remain. These are that (a) cargo interests must show that (i) on loading the goods were sound and (ii) on discharge they were lost or damaged (b) the actual evidence in any particular case will be the same, as to nature, extent, credibility, relevance and weight, a point that dovetails with Lord Sumption’s early remarks that “the courts very rarely decide issues of fact on the burden of proof. The trial judge is usually able to find some persuasive evidence … to break the impasse.” Only the rules on deployment of evidence, and the probable result of failure, have changed.

It is now clear that in claims based on alleged failure to carefully load, handle, stow, carry etc, the carrier must show that suitable care was used, and (if raising an Article IV rule 2 exception) that the loss or damage happened even though he took all required steps. In essence, having proved loss of or damage to sound cargo, those interests will force the carrier to offer, and now also prove, a valid answer.

This has prompted spotlight on (a) possible changes of emphasis in the way that many such claims are pleaded, argued and settled (b) the means by which vessel interests can capture, retain and retrieve evidence and (c) resulting increased carrier liability, as some predict.

Commentary

It is very likely that cargo interests will present Article III rule 2 claims differently, and that carrier defences will become more specific, positive and detailed. This will encourage focus and in some instances should - but not necessarily will - promote quicker disposal. Examining a case under a lens now seeming to favour cargo will not prevent carriers from tendering evidence that they consider an adequate counter. Again, there will be no change to the material that carriers have - the issue is the quality of their response to the new call to produce it.

And that is why obtaining, securing and marshalling evidence of who did what and when will now be vital. Carriers need to review their procedures and ensure as far as possible that all steps taken within their scope of duty are up to scratch, and that systematic records are retained for use if needed. That is the task set by this decision.

If that can be achieved it is not likely that, mid and long term, carrier liability will increase. There may be a temporary uplift on reappraisal of ongoing cases which might now be decided (and so will far more likely be settled) differently, but once carriers and their advisers recalibrate, so evidence itself becomes a key notion and a core commodity, claims are likely to be fought and concluded much as now.

Conclusion

This decision might lead to some cases settling quicker, and perhaps on less favourable terms for vessel interests, and should lead to carriers reassessing systems for handling cargo and, crucially, evidencing that.

As often, though, much depends on human input, and change needs time to set. The Supreme Court rightly said that the burden of proof is rarely the key to judicial decision, and likewise it is seldom uppermost in the minds of those - on the deck, in the hold, at the quayside and further ashore - who will probably now see their responsibilities widened. Carriers and their advisers must therefore regularly check, test and if necessary review any updated procedures, so new rules become regular habits.

If you need specific advice or would like generally to discuss any point or topic in this note please contact Helen Schlemminger (h.schlemminger@mtaher.com) or Tim Stephenson (t.stephenson@mtaher.com).

Footnote

Article III rule 2:

“Subject to the provisions of article IV, the carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.”

Article IV rule 2:

“Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from:
(a) Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship;
(b) Fire, unless caused by the actual fault or privity of the carrier;
(c) Perils, dangers and accidents of the sea or other navigable waters;
(d) Act of God;
(e) Act of war;
(f) Act of public enemies;
(g) Arrest or restraint of princes, rulers or people, or seizure under legal process;
(h) Quarantine restrictions;
(i) Act or omission of the shipper or owner of the goods, his agent or representative;
(j) Strikes or lockouts or stoppage or restraint of labour from whatever cause, whether partial or general;
(k) Riots and civil commotions;
(l) Saving or attempting to save life or property at sea;
(m) Wastage in bulk or weight or any other loss or damage arising from inherent defect, quality or vice of the goods;
(n) Insufficiency of packing;
(o) Insufficiency or inadequacy of marks;
(p) Latent defects not discoverable by due diligence;
(q) Any other cause arising without the actual fault or privity of the carrier, or without the actual fault or neglect of the agents or servants of the carrier, but the burden of proof shall be on the person claiming the benefit of this exception to show that neither the actual fault or privity of the carrier nor the fault or neglect of the agents or servants of the carrier contributed to the loss or damage.”

CSAV had transported various consignments of bagged coffee beans from Colombia to Northern Germany from January to April 2012. The bills of lading recorded receipt of the cargo in good condition, but on arrival that in 18 out of 20 unventilated containers had suffered wet damage due to condensation.

Coffee beans notoriously absorb and emit moisture, especially during a transit like this, and the bags had been protected by Kraft paper but the precise thickness used could not be shown.

The trial judge had decided in favour of the cargo owners, who had argued that there is a presumption that damage (to proven sound cargo) is caused by the fault of the carrier, who has the burden of showing that he has not breached any of the Article III rule 2 duties. However, the Court of Appeal overturned that, ruling that under Article III rule 2 and also Article IV rule 2 the burden of proof was on the cargo owner.



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