Volcafe Ltd and others v Compania Sud Americana De Vapores SA

Where cargo is shipped in apparent good order but discharged damaged, the carrier bears the legal burden of proving compliance with its duty of reasonable care under Hague Rules article III.2, or that an article IV exception applies.

To invoke an article IV.2 exception, the carrier must prove both its effective causal operation and that the damage could not have been avoided by reasonable care. Inherent vice therefore exists only where the goods cannot withstand the ordinary incidents of the contracted carriage despite the care required from the carrier.

An appellate court may overturn factual findings only where the trial judge was shown to be wrong. It may not substitute its own assessment merely because it would have weighed the evidence differently.

The appellants owned nine consignments of bagged green coffee beans carried from Colombia to Germany in unventilated containers under bills of lading incorporating the Hague Rules. The carrier prepared and lined the containers. Eighteen containers sustained condensation damage.

A deputy High Court judge in the London Mercantile Court found that the evidence did not establish an accepted industry practice, the weight of the lining paper or that more than one layer had been used. The Court of Appeal, in Volcafe Ltd and others v Compania Sud Americana De Vapores SA [2016] EWCA Civ 1103, substituted findings that an accepted practice existed and had been followed.

The appeal raised two central questions: who bore the legal burden of proving compliance with article III.2 and absence of negligence under article IV.2(m); and whether the Court of Appeal was entitled to overturn the trial judge's factual findings.

1. Disposition. The appeal was allowed unanimously. Lord Sumption delivered the judgment, with which Lord Reed, Lord Wilson, Lord Hodge and Lord Kitchin agreed. The order of the deputy High Court judge was restored.
2. Common-law bailment. A contract for carriage by sea is a bailment for reward on the terms of the bill of lading. The carrier is not an insurer and owes a duty of reasonable care. Once non-delivery or delivery in a damaged condition is established, however, the bailee bears the legal burden of showing either that reasonable care was taken or that any want of care did not cause the loss. This is a legal burden, not merely an evidential presumption arising through res ipsa loquitur.
3. Article III.2. The Hague Rules regulate the carrier's standard of performance but do not generally prescribe how breach is to be proved. Questions of evidence and procedure remain governed by the law of the forum. Nothing in the Rules displaces the incidents of bailment. Accordingly, where cargo was shipped in apparent good order and discharged damaged, the carrier must prove that the damage was not due to breach of article III.2, or establish an article IV exception. The correct analysis in Gosse Millard v Canadian Government Merchant Marine Ltd [1927] 2 KB 432 was its reliance on bailment, not its treatment of proper discharge as an obligation to achieve an undamaged outcome.
4. Article IV.2. The carrier bears the burden of proving facts bringing the loss within an exception. That burden extends to effective causation and to showing that the damage could not have been avoided through reasonable care. The contrary allocation in The “GLENDARROCH” [1894] P 226 was technical, commercially immaterial and inconsistent with the scheme of the Rules. It should no longer be regarded as good law.
5. Inherent vice. Inherent vice under article IV.2(m) is assessed against the ordinary incidents of the kind of transit required by the contract and the degree of care which the carrier must exercise. If reasonable precautions could and should have prevented an inherent characteristic from causing damage, the exception does not apply. The carrier must prove either that reasonable care was taken but the damage occurred nonetheless, or that all reasonable protective measures would have failed.
6. Findings of fact. An appellate court may interfere only where the trial judge fundamentally misunderstood the issue or evidence, plainly failed to consider the evidence, or reached a conclusion that the evidence could not support. The Court of Appeal merely substituted its assessment of a body of evidence capable of supporting either view. The carrier consequently failed to prove that the containers had been properly dressed.

• United Kingdom Supreme Court: In Volcafe Ltd and others v Compania Sud Americana De Vapores SA [2018] UKSC 61, the court unanimously allowed the appeal and restored the deputy High Court judge's order.
• Court of Appeal: In Volcafe Ltd and others v Compania Sud Americana De Vapores SA [2016] EWCA Civ 1103, the court overturned the material factual conclusions and found that the containers had been lined in accordance with accepted industry practice.
• London Mercantile Court: David Donaldson QC, sitting as a deputy High Court judge, found that no sufficiently uniform industry practice had been proved and that the evidence did not establish the relevant weight or use of more than one layer of lining paper. His order was ultimately restored.