Burden of proof under the Hague Rules – Confirmation from the Supreme Court17 December 2018

Background

In this case, a cargo of bagged coffee was carried in unventilated containers. Coffee absorbs, stores and emits moisture and so it has inherent characteristics which may cause it to perish by way of condensation. At the relevant time, the industry practice to protect against naturally occurring condensation was to line the containers with Kraft paper. The cargo was carried pursuant to a bill of lading incorporating the Hague Rules under which the owner was the carrier. Upon discharging the cargo, some of the cargo was found water damaged as a result of condensation.

The bill of lading holders/cargo owners pursued a claim for cargo damage against the shipowner. The breach they alleged was of the shipowner’s duty under article III.2 of the Hague Rules to properly and carefully load, handle, stow, carry, keep, care for and discharge the cargo. The required standard, which they said was not adhered to (because of the failure to use Kraft paper), is one of reasonable skill and care.

But Article IV.2 of the Rules states the carrier will not be responsible for any loss or damage to cargo resulting from a list of specified causes, one of which is inherent defect, quality or vice in the cargo (article IV.2(m)). Inherent defect in this context refers to inherent characteristics which render the cargo unfit to withstand the ordinary incidents of a voyage despite the exercise of reasonable skill and care by the shipowner in carrying the cargo. The owners pleaded the inherent vice defence.

On reaching the Supreme Court, the issues related to whether the burden of proof in relation to the article III.2 breach and the article IV.2 defence rested on the shipowner or on the cargo owner. In particular, the issues were as follows:

1. (Breach) whether article 2:

• requires the cargo owner to prove non-compliance (i.e. that the shipowner did not exercise reasonable skill and care in carrying the cargo); or
• requires the shipowner to prove compliance (i.e. that the shipowner did do so).

2. (Defence/excepted perils) whether article 2:

• requires the cargo owner, if the shipowner first proves the facts triggering the exception, to show that it was only because of the carrier’s negligence that the excepted peril applied (i.e. in this case it was the carrier’s negligence that led the cargo’s humidity propensity to result in damage); or

• requires the shipowner to prove that the damage resulted from one of the listed “excepted causes” despite the exercise of reasonable skill and care in carrying the cargo.

The rule

The Supreme Court concluded that scenarios 1(ii) and 2(ii) apply – the burden of proof is on the shipowner in both instances. Where cargo is loaded in apparently good order and condition and is found to have been damaged on discharge, and the shipowner is faced with a cargo damage claim under the Hague Rules, he must show that: (1) he took reasonable care of the cargo but that the cargo damage occurred nevertheless; or (2) whatever reasonable steps he might have taken to protect the cargo from damage would have failed because of its inherent characteristics.

Generally, the Hague Rules are not considered an integral part of English law but English courts recognise them as a set of rules that the contractual parties may choose to incorporate into their contracts of carriage. By virtue of the Carriage of Goods by Sea Act 1971, English law incorporates the Hague-Visby Rules and these rules will apply to contracts of carriage governed by English law unless the contractual parties choose to incorporate other rules (e.g. the Hague Rules). Articles

III.2 and IV.2 of both sets of rules are materially the same and so the same burden of proof principles should apply where the carrier’s duties are governed by the Hague-Visby Rules.