Volcafe Ltd & Ors v Compania Sud Americana De Vapores SA (t/a CSAV)

Under the Hague Rules, delivery of goods in a damaged condition establishes a sustainable cargo claim and places the legal burden on the carrier to establish an applicable exception. Once inherent vice is shown, the cargo claimant must prove negligence or want of care to defeat that exception. Inherent vice is distinct from inevitable damage and may arise from the natural qualities of ordinary cargo. The carrier’s duty to carry goods properly requires a sound system judged by the carrier’s actual or imputed knowledge. It does not require a system guaranteeing that damage will never occur or exceeding general industry practice. Contractual loading may include container preparation and stuffing undertaken by the carrier.

The claimants sought damages for condensation affecting nine consignments of washed Colombian coffee beans carried in lined, unventilated containers from Colombia to Germany. The bills of lading incorporated the Hague Rules and recorded shipment in apparent good order and condition.

The High Court judge inferred breach from delivery in a damaged condition, rejected the carrier’s reliance on inherent vice and inevitability of damage, and held that the carrier had not established a sound system for lining the containers. He also held that the Hague Rules applied to container preparation and stuffing performed by the carrier’s stevedores.

The carrier appealed on the burden of proof, the operation of the Article IV exceptions, the meaning of a sound system, inevitability of damage, and the temporal scope of the Hague Rules.

1. Disposition. The appeal was allowed in relation to the defences of inherent vice and inevitability of damage, but dismissed on the issue concerning the temporal scope of the Hague Rules.
2. Burden of proof. Delivery in a damaged condition, where the goods were acknowledged as received in apparent good order, establishes a sustainable cause of action. The carrier must then establish any Article IV exception. Once it has shown a prima facie case of inherent vice, the burden shifts to the cargo claimant to prove negligence or failure to comply with Article III rule 2. The carrier need not disprove negligence as a condition of relying on an exception. This analysis followed The Glendarroch [1894] P 226, and was supported by Albacora [1966] 2 Lloyd's Rep 53 and The Torenia [1983] 2 Lloyd's Rep 210.
3. Inherent vice. The judge’s analysis of complete circularity between Article III rule 2 and Article IV rule 2 was wrong. Inherent vice is an independent exception. It may arise from the natural qualities of an otherwise normal cargo and is distinct from inevitable damage. The relevant inquiry is whether the goods’ natural behaviour caused the loss in the circumstances in which they were expected to be carried, having regard to the carrier’s contractual obligations. The approach in Soya G.m.b.H v White [1982] 2 Lloyd's Rep 136 and Noten B.V. v Harding [1990] 2 Lloyd's Rep 283 supported that conclusion.
4. Sound system and application. A sound system need not prevent all damage, be supported by a scientific calculation, or depart from general industry practice. The evidence established a practice of lining containers with corrugated cardboard or kraft paper. One layer of 125 g/sq.m kraft paper, or two layers of 80 g/sq.m paper, was sufficient. The claimants failed to prove that the carrier’s system was unsound or negligent. The Article IV rule 2(m) defence therefore succeeded.
5. Inevitability and loading. The evidence also supported the alternative conclusion that minor condensation damage was endemic in the ordinary carriage of bagged coffee in unventilated containers. The Hague Rules applied to lining and stuffing because the parties had agreed that those services formed part of loading. The approach in Pyrene Co. Ltd. v Scindia Navigation [1954] 2 QB 402, approved in G.H. Renton v Palmyra Trading Corporation [1957] A.C. 149, governed.

• Court of Appeal (Civil Division) [2016] EWCA Civ 1103: allowed the appeal on inherent vice and inevitability of damage, but dismissed it on the temporal scope of the Hague Rules.
• High Court of Justice, Queen’s Bench Division, London Mercantile Court: rejected the carrier’s defences and held that the Hague Rules applied to the carrier’s container preparation and stuffing operations.