The meaning of ‘loading’ and the carrier’s duty to put in place a ‘sound system’ for the proper and careful carriage of cargo.

These were some of the important issues before the London Mercantile Court in a relatively low value claim (US$62,500). As the judge recognised in Volcafe Ltd & Ors –v- Compania Sud Americana de Vapores [2015], the issues were hard fought, being of general importance in the context of cargo claims.

At the heart of the matter was the carriage of cocoa beans, shipped in hessian bags in containers, from Colombia to Germany in January-March 2012. All of the containers were transhipped at Panama, and some were further transhipped in Northern European ports for onward sea or road carriage to North Germany. On arrival, the consignees found that all of the consignments (but not all of the containers) had suffered some degree of condensation damage. Both the cargo claimants and the defendant carrier adduced expert evidence on the issues of condensation and the carriage of cocoa beans in containers, including the effectiveness of Kraft/lining paper. Containerised cargo and the Hague Rules: The meaning of ‘loading’ and the carrier’s duty to put in place a ‘sound system’ for the proper and careful carriage of cargo.

The bills of lading all acknowledged receipt of the consignments in apparent good order and condition. There was no suggestion that there had been an issue with the cocoa beans’ moisture content.

The following issues were raised:

1. Temporal scope of the Hague Rules

The carriage was on LCL/FCL terms, i.e. the carrier provides the containers and stuffs them with the bagged beans, and the consignee ‘unstuffs’ the containers at their final destination.

It was accepted that under the Clause Paramount found in the bills of lading, the Hague Rules applied to the carriage by sea, the latter defined as ‘the period from the time when the goods are loaded on to the time they are discharged from the ship’ (Article 1(e) of the Hague Rules).

The carrier argued that their stevedores had stuffed the containers before loading, so that the Hague Rules did not apply (and the carrier was free to rely on its own liability terms).

The judge was not persuaded, viewing the events as a single loading process. It did not even matter that there might be an interval between the loading of the cargo in the carrier’s containers and the loading of the containers onboard the ship. In any event, the parties were free to determine what constituted ‘loading’ under their contract. In this case, the judge was persuaded by the fact that the carrier had assumed liability to stuff its own containers: ‘I would have little difficulty in interpreting the contract of carriage as including that [stuffing] as part of the loading’.

The judge found further support for that view by his analysis of the carrier’s alleged breach. It was not that the containers were stuffed improperly: ‘the complaint is rather that the bags of cocoa beans were carried in the immediate physical environment of a steel container carelessly or inadequately prepared to protect the cargo against damage from condensation’.

2. A carrier’s duty to properly and carefully load etc: sound system

Article III(2) of the Hague Rules provides: ‘Subject to the provisions of Article IV, the carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried’.

Article IV(2) excludes the carrier’s liability in a number of scenarios including at subsection (m) damage arising from the inherent defect of the goods.

‘Properly’ at Article III(2) has been held to mean ‘in accordance with a sound system’; whilst the soundness of the system is to be considered ‘without reference to any “weaknesses and idiosyncracies of a particular cargo” since these are not matters of which a carrier ought normally to be aware’.

Here the cargo of cocoa beans was ‘entirely typical’, and the use of Kraft paper reflected the problems acknowledged in the industry relating to the carriage of beans in unventilated containers: ‘The question is whether the precautions taken against such damage were both appropriate in conception (proper) and implementation (careful)’.

It was recognised that in some instances this test might result in ‘properly’ and ‘carefully’ being considered as complementary aspects of a single duty of care, in other cases it was appropriate to consider them separately.

The judge further considered the standard against which the sound system was to be measured: ‘The concept of a sound system … must in my view require as a minimum that there exists a rational, adequate and reliable basis for concluding that it will prevent the otherwise threatened damage’.

3. Burden of proof: res ipsa loquitur

Having recognised the application of the Hague Rules, the judge accepted the claimants’ argument that the evidential principle of res ipsa loquitur was still available to them, on the basis that it was the defendant carrier who had knowledge of the underlying circumstances.

‘If goods, acknowledged to have been received in apparent good order and condition, are delivered in a damaged stage, 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.’

In the end, despite adducing expert evidence on the issues of condensation damage and Kraft paper, the judge concluded that the carrier had not been able to demonstrate either that no lining could have prevented the particular damage and/or that it had a sound system in place to prevent damage to normal cargo from the risks reasonably expected of the contracted carriage.

Comment

This case raises some interesting issues, notably as to the definition of ‘loading’ and both the legal and evidential burden of proof under the Hague Rules. No doubt there will be future debate on those very points.