On 5 December 2018, the Supreme Court set aside the Court of Appeal’s decision in ‘Volcafe & others v CSAV’  EWCA Civ 1103 that the burden of proof was on the cargo owner to show negligence on the part of the carrier which would prevent him from relying on defences under Article IV Rule on the Hague Rules.
This web alert should be read in conjunction with the club’s earlier publications, available on the right.
In the High Court the judge held that there is a circularity between Article III rule 2 and Article IV rule 2(m) of the Hague Rules. This would mean that once the claimants had shown that the coffee bags were delivered in a damaged condition, the onus was on the carrier to establish inherent vice or inevitability of damage and to disprove negligence.
In the Court of Appeal the judge criticised the High Court judge’s decision and held that once the carrier has shown a prima facie case for the application of the exception of inherent vice in article IV rule 2(m), the burden then shifts to the cargo claimant to establish negligence on the part of the carrier, such as to negate the operation of the exception.
The Supreme Court decision
Following a detailed review of the decisions in the first instance and on appeal, the Supreme Court overturned the Court of Appeal judgment.
The Supreme Court unanimously held that the carrier has the legal burden of disproving negligence for the purpose of invoking an exception under Article IV rule 2 of the Hague Rules just as he has for the purpose of Article III rule 2.
Lord Sumption looked at the common law rules on bailment and whether the incidence of the burden of proof is different in a modern contract for carriage by sea incorporating the Hague Rules. He held that nothing in the Rules alters the status of a contract of carriage by sea as a species of bailment for reward on terms and no difference is made to the incidence of the burden of proof in cases of bailment for carriage.
Applying this approach to the Rules, the carrier is therefore responsible for loss or damage during the voyage unless it can prove:
1. on a balance of probability that the loss or damage was not caused by any breach of Article III rule 2 (the duty to take reasonable care of the cargo) or
2. that one of the defences in article IV rule 2 applies. The carrier seeking to rely on one of these defences must also prove that there was no negligence on his part which caused the damage, despite any reasonable steps taken to care for the cargo.
In the context of inherent vice, if the carrier is to be able to rely on the Article IV rule 2(m) exception, it must show either:
1. that it took reasonable care of the cargo but the damage occurred nonetheless
2. that whatever reasonable steps might have been taken to protect the cargo from damage would have failed in the face of its inherent propensities.
The Supreme Court judgment also provides a good summary of the meaning of inherent vice and cases where the carrier is contractually responsible for preparing and preparing containers.
This article intends to provide general guidance on the issues arising as a matter of English law. It is not intended to provide legal advice in relation to any specific query. Members requiring further information on this topic should direct their enquiries to either their usual contact at the club, or to the authors of this article.
Defence cover is, by its very nature, discretionary in that the club must be satisfied as to the merits and quantum of the claim in question and the likelihood of achieving a successful outcome, if it is to lend support.
Source: The Standard Club
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