Volcafe Ltd and Others v Compania Sud Americana de Vapores SA (t/a CSAV)

JurisdictionEngland & Wales
CourtSupreme Court
JudgeLord Reed,Lord Hodge,Lord Sumption,Lord Kitchin,Lord Wilson
Judgment Date05 December 2018
Neutral Citation[2018] UKSC 61
Date05 December 2018

[2018] UKSC 61

Supreme Court

Michaelmas Term

On appeal from: [2016] EWCA Civ 1103

Before

Lord Reed, Deputy President

Lord Wilson

Lord Sumption

Lord Hodge

Lord Kitchin

Volcafe Ltd and others
(Appellants)
and
Compania Sud Americana De Vapores SA
(Respondent)

Appellants

John Russell QC

Benjamin Coffer

(Instructed by Clyde & Co LLP)

Respondent

Simon Rainey QC

David Semark

(Instructed by Mills & Co Solicitors Ltd)

Heard on 3 and 4 October 2018

Lord Sumption

(with whom Lord Reed, Lord Wilson, Lord Hodge and Lord Kitchin agree)

Introduction
1

This appeal is about the burden of proof in actions against a shipowner for loss of or damage to cargo. It may seem strange that a species of litigation which has generated reported decisions over four centuries should not yet have returned a definitive answer to this question. The reason is probably to be found in the fact 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, however exiguous, to break the impasse. This case is, or may be, different.

2

The six claimants were the owners and bill of lading holders for nine separate consignments of bagged Colombian green coffee beans shipped at Buenaventura in Colombia between 14 January and 6 April 2012 on various vessels owned by the defendant shipowners for carriage to Bremen. They were stowed in a total of 20 unventilated 20-foot containers. These were transhipped at Balboa in Panama and discharged at Rotterdam, Hamburg or Bremerhaven for on-carriage to Bremen. Each consignment was covered by a bill of lading covering the entire carriage to Bremen.

3

The bills of lading, which were subject to English law and jurisdiction and incorporated the Hague Rules, were on LCL/FCL (less than full container load/full container load) terms. It is common ground that this means that the carriers were contractually responsible for preparing the containers for carriage and stuffing the bags of coffee into them. They employed two firms of stevedores to perform this function. Coffee is a hygroscopic cargo. It absorbs, stores and emits moisture. It can be carried in ventilated or unventilated containers. In 2012 both types of container were in widespread use for the carriage of bagged coffee, and the shippers had specified unventilated containers for these consignments. The use of unventilated containers is cheaper, but if they are used to carry coffee beans from a warm to a cooler climate, as they were in this case, the beans will inevitably emit moisture which will cause condensation to form on the walls and roof of the container. This makes it necessary to protect the coffee from water damage by dressing the containers, ie lining the roof and walls with an absorbent material such as cardboard, corrugated paper or “Kraft” paper. The use of Kraft paper was a common commercial practice in 2012, and it was employed in this case. When the containers were opened at Bremen, however, the bags in 18 of them were found to have suffered water damage from condensation.

4

The cargo owners pleaded their case in what has for many years been standard form. Their primary case was that in breach of their duties as bailees the carriers failed to deliver the cargoes in the same good order and condition as that recorded on the bill of lading on shipment. Alternatively, they pleaded that in breach of article III, rule 2 of the Hague Rules they had failed properly and carefully to load, handle, stow, carry, keep, care for and discharge the cargoes. A number of particulars of negligence was pleaded. For present purposes, the only relevant one is that the carriers failed to use adequate or sufficient Kraft paper to protect the cargoes from condensation. The carriers joined issue on all of these points, and pleaded inherent vice on the ground that the coffee beans were unable to withstand the ordinary levels of condensation forming in containers during passages from warm to cool climates. The cargo owners pleaded in reply that any inherent characteristic of the cargo which resulted in damage, did so only because of the carrier's negligent failure to take proper measures for its protection.

5

The case was tried in the London Mercantile Court by David Donaldson QC, sitting as a deputy High Court judge. He held that there was no legal burden on the carrier to prove that the damage to the cargo was caused without negligence or by an excepted peril. There was only a factual presumption that damage ascertained on discharge was due to negligence. The critical issues of fact, as they emerged at the trial, concerned the weight of paper and the number of layers that (i) were, and (ii) should have been used. The deputy judge's conclusions were as follows:

(1) Bagged coffee can be (and at the time routinely was) carried without damage from warm to cooler countries in unventilated containers lined with Kraft paper, provided that a sufficient thickness of paper or number of layers is used.

(2) The evidence did not establish what weight of paper was used for these shipments, except that it was more than 80 gsm. Nor did it establish how many layers were used, except that the photographs appeared to the judge to show that there was only one.

(3) There was no evidence to show what thickness of paper ought to be used for a given number of layers, in order to avoid condensation damage.

(4) There was no generally accepted commercial practice on point (3).

It was not suggested that the paper had been improperly fixed by the stevedores.

6

These conclusions were criticised on a number of grounds by the Court of Appeal, which proceeded to make its own findings. I shall return to the Court of Appeal's treatment of the facts later in this judgment. But for the moment I shall proceed on the basis of the deputy judge's conclusions, for it is those which give rise to the major issue of law on this appeal. On whom was the burden of proving whether the cargoes were damaged by (i) negligent preparation of the containers, or (ii) inherent vice?

Bailment at common law
7

The bills of lading in this case incorporated the Hague Rules. It is, however, necessary to examine the common law position apart from the Rules, first, because it is an essential part of the legal background against which they were drafted; and, secondly, because the common law position had been considered in a number of authorities decided before the Rules were promulgated, which have remained influential since and indeed were relied upon on this appeal.

8

The delivery of goods for carriage by sea is a bailment for reward on the terms of the bill of lading. Bailment is a transfer of possession giving rise to a legal relationship between the bailor and the bailee which is independent of contract, although in practice it is commonly contractual and the terms of the contract will commonly modify its incidents. Two principles of the common law of bailment are fundamental. The first is that a bailee of goods is not an insurer. His duty is limited to taking reasonable care of the goods. This has been true of bailees generally for as long as bailment has existed as a recognised source of legal responsibility at common law: see S Stoljar, “The early history of bailment”, American Journal of Legal History, vol i (1957), p 5, and the landmark decision of Chief Justice Holt in Coggs v Bernard (1703) 2 Ld Raym 909, 917–918. In the 19th century some shipowners, especially in the liner and tariff trades, were common carriers, bearing a more onerous responsibility at common law. The characteristic feature of a common carrier was that he held himself out as accepting for carriage the goods of all comers on a given route, subject to capacity limits. As such, he was strictly liable at common law for loss of or damage to the cargo subject only to exceptions for acts of God and the Queen's enemies. The absence of negligence was irrelevant. But although the position of common carriers is commonly referred to by way of background in the case law, as it was in the judgments below, it is no longer a useful paradigm for the common law liability of a shipowner. Common carriers have for many years been an almost extinct category. For all practical legal purposes, the common law liability of a carrier, unless modified by contract, is the same as that of bailees for reward generally.

9

The second principle, which is equally well established, is that although the obligation of the bailee is thus a qualified obligation to take reasonable care, at common law he bears the legal burden of proving the absence of negligence. He need not show exactly how the injury occurred, but he must show either that he took reasonable care of the goods or that any want of reasonable care did not cause the loss or damage sustained. As Cockburn CJ put it in Reeve v Palmer (1858) 5 CBNS 84, 90:

“The jury have found that he lost it: and I am of opinion that that must be taken to mean, in the absence of any explanation, that he lost it for want of that due and proper care, which it was his duty to apply to the keeping of it, unless it is qualified by circumstances shewing that the loss of the deed could not have been prevented by the application of ordinary care.”

The law was declared in this sense and applied to carriage by water by the House of Lords in Dollar v Greenfield, The Times, 19 May 1905, and Morison, Pollexfen & Blair v Walton (10 May 1909), which is unreported but the relevant parts of which were set out and adopted by the Court of Appeal in Joseph Travers & Sons Ltd v Cooper [1915] 1 KB 73, 88. Lord Loreburn said in his judgment in that case that once damage was ascertained on outturn,

“I cannot think it is good law that in such circumstances he should be permitted to saddle upon the parties who have not broken their contract the duty of explaining how things went wrong. It is for him...

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