UK: Court Considers Whether Carrier Adopted Sound System For Carriage Of Cargo

Volcafe Ltd and others v. Compania Sud Americana de Vapores SA [2015] EWHC 516 (Comm)

A recent decision offers guidance as to the courts' approach to a carrier's obligations under Article III(2) of the Hague Rules to properly and carefully load, carry and care for the cargo.

The background facts

The Claimants were consignees under the bills of lading issued in respect of nine consignments of washed Colombian green coffee beans transported by the Defendant container line from Buenaventura in Colombia to various destinations in North Germany, transhipped in Balboa, Panama.

Each of the consignments suffered damage from condensation. The bills of lading recorded receipt in apparent good order and condition. The containers were provided and stuffed by the Defendant carrier. The stevedores lined the containers with Kraft paper before stuffing.

The bills of lading contained a Clause Paramount making the carriage by sea subject to the Hague Rules from the time when the goods were loaded on the ship. The carrier disputed application of the Hague Rules on the basis that the stuffing of the containers by its stevedores occurred before the loading.

The Court considered whether the obligations imposed by the Hague Rules applied to the stuffing of the containers and, further, whether the carrier had breached its duty under Article III(2) of the Hague Rules to properly and carefully load, carry and care for the cargo. The cargo was found to be entirely typical, so the carrier could not rely on any particularities of this cargo to explain the damage.

The Mercantile Court decision

The Court found that, where cargo is loaded into a carrier's containers which are subsequently loaded onto the vessel, it is unrealistic to treat this as anything other than a single loading process. The Court further commented that even if that were not so, the parties are free to agree on what constitutes loading. In this case, the carrier assumed an obligation to stuff its own containers and therefore the contract of carriage included that as part of the loading process. In addition, the Court said that the proper analysis of the claim was that it did not relate to the stuffing process itself, but to the carrier's failure to protect cargo against damage during carriage, which is breach of a duty at the heart of the carriage. The Hague Rules therefore applied.

The Court then turned to consider the carrier's obligations under Article III(2) to properly and carefully care for the cargo. The word "properly" has previously been construed as "in accordance with a sound system." The word "carefully" was found to refer to the implementation of that system by the carrier. The Court commented that "properly" and "carefully" can be viewed as two aspects of a single duty of care and so it is not always necessary, or possible, to assign the breach to one or other of them in isolation.

In this case, the Court had to consider whether the carrier's precautions (namely lining the containers with Kraft papers) represented a sound system in preventing condensation damage to the cargo of coffee beans. The Court's starting point was that "if goods, acknowledged to have been received in apparent good order and condition, are delivered in a damaged state, that can without more be sufficient to justify the court in inferring a breach of Article III(2) and thus require evidence from the carrier to negate such a breach." The onus of proof regarding the use of a sound system was therefore found to lie with the carrier.

The Defendant carrier argued that no amount of Kraft paper would have prevented the condensation damage and that the claim must therefore fail for want of causation. The Claimants argued that the condensation damage could only have resulted from some inadequacy in the way that the carrier used the lining paper.

The Court considered the expert evidence and decided that the carrier failed to establish that no amount of lining with paper of any thickness could have prevented the damage. Even if the carrier succeeded on that argument, that would not be an answer to the claim. The Court commented that "since the 'soundness' relates to the prevention of damage to a normal cargo from the risks reasonably to be expected during the contracted carriage, it is no answer to an allegation of breach of that obligation to say that, since such damage is always unavoidable, no such system exists."

The Court also commented that, in order to conclude whether a particular system of protecting the cargo is a "sound system", the carrier has to demonstrate that there exists "a rational, adequate and reliable basis" in the form of studies and research for concluding that this particular system will prevent the damage. Evidence of general industry practice of using a particular system to prevent the damage will not suffice in the absence of any theoretical or empirical basis for such practice.

Further, even if the carrier had established that it adopted a sound system, the question would remain as to why this system still failed to prevent the damage. The carrier would therefore have to demonstrate that it has also exercised due care in implementing this system.

Comment

The case is a useful clarification of the carrier's duty of care under Article III(2) of the Hague Rules. It also demonstrates the difficulties that a carrier faces in proving that it has cared for the cargo properly and carefully where cargo, which was received in apparent good order and condition, is then delivered in a damaged state. The carrier cannot rely on industry practice alone to argue that it adopted a sound system to protect the cargo. The soundness of the system employed by the carrier must be based on suitable theoretical and empirical studies.

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