Supreme Court, UK
Lord Reed, Lord Wilson Dp, Lord Sumption, Lord Hodge And Lord Kitchin SCJJ
3, 4 October 2018; 5 December 2018
KEYWORDS
Bill of Lading – Cargo Claim – Burden of Proof
FACTS AND DECISION
A cargo of coffee beans was carried from Buenaventura[1] to Bremen[2] on LCL/FCL basis in unventilated containers over a period of time under a few bills of ladings. The carrier was responsible for stuffing the cargo into the containers and did so. The Hague Rules applied by incorporation of the same into the bill of lading. The bill rendered itself subject to English law and jurisdiction.
Coffee bean is a hygroscopic substance that will emit moisture when transferred from a warmer place to a cooler place, as it was in this case. The moisture, when carried on unventilated containers as in this case, will inevitably cause condensation on the walls of the container. The condensation will cause damage the coffee beans. Such damage by condensation will be mitigated by lining the container’s internal walls and roof with card or paper in order that the card or paper will absorb the moisture, which is a common practice. The carrier so lined the walls and roof. However, the cargo arrived damaged by water from condensation. The cargo owners[3] sued the shipowners as carriers for breach of Art. III(2) obligation and for breach of carrier’s duties as bailees, with the conventional proof that goods loaded in good state arrived in damaged condition. The cargo owners also pleaded that the carrier was negligent in not using sufficient or adequate paper. The carrier proved that it had lined the walls and roofs, but did not provide the details of the lining such as how thick the paper used was, how many layers were employed and what was the thickness and layers required in this case. Nor were the cargo owners able to adduce any evidence of them.
The carrier relied on Art. IV(m) exception, namely inherent vice of the goods. But the question was whether the cargo damage was attributable to inherent vice of the goods or to negligence of the carrier. Following this, the question that the court had to answer was whether the carrier had to prove no negligence on its part in order to successfully rely on the Art. IV(m). In other words, the question was whether as a matter of law[4] the burden was on the cargo owners to prove that the cargo was damaged by negligence rather than by inherent vice was on the cargo owner or the burden was on the carrier to prove that it was not negligence in order to rely on the inherent vice exception.
The court did not doubt that the carrier was a bailee for reward, subject to terms of the bailment, that is, the bill of lading in this case, and turned to the question of burden of proof for purposes associated with Art. IV(2)(m) of the Hague Rules, which will be common for all Art. IV(2)(c)-(q). The carrier argued that once it had proved that damage was caused by an exception, in this case the inherent vice, the burden was on the cargo owners to prove that it was attributable to the negligence of the carrier. The Court of Appeal, following the popular pre-Hague Rules case of The Glendarroch,[5] agreed with the carrier’s argument and held in favour of the carrier. In The Glendorroch, the Court of Appeal held that the burden of proving that an excepted peril had been occasioned by the carrier’s negligence lay on the cargo owner. Lopes LJ said this as follows:
Where a peril of the sea is set up it is sufficient for the defendant to prove the peril relied on, and he need not go on to shew that that was really not caused by him; but if the plaintiff says that it was, then he must set it up in his replication and must prove it.
The Supreme Court overturned the decision and overruled The Glendorroch,[6] holding that the burden of proving both discharge of Art. III(2) obligation and, if any, Art. IV(2) exception was on the carrier. The carrier will not be entitled to the benefit of Art. IV(2)(m) exception unless the carrier proves that the damage was not attributable to any negligence of the carrier. This ratio will apply to all Art. (2)(c)-(q) cases.
In order to arrive at the above conclusion, the court held or observed a number of important matters. First, on the question of exhaustiveness of the rules. The court held that the Hague Rules “are not exhaustive of all matters relating to the legal responsibility of carriers for the cargo”. The court also held that in general “the Rules do not deal with questions of evidence or the mode of proving a breach of the prescribed standard or the application of an exception”. Having held this, the court pointed out that “they are part of the law of evidence and the rules of procedure, which are liable to vary from one jurisdiction to another”. These observations will readily apply also to Hague-Visby Rules cases.
Second, the court observed that “the principle that the custodian of goods has a legal responsibility to justify their loss or redelivery in damaged condition is common to civil law jurisdictions as well” by reference to Scotland, France, Belgium, the Netherlands, Italy, Germany, Norway and Spain.
Third, and importantly, the court observed that at common law the burden was on the bailee for reward to disprove negligence[7] and that the Hague-Rules do not deal with or change this position. The court held that “nothing in the Hague Rules alters the status of a contract of carriage by sea as a species of bailment for reward on terms”.
In deciding the above point, the court found itself supported by, and endorsed, a number of precedents. The court agreed with the ratio of Wright J in the early Hague-Rules case of Gosse Millard v Canadian Government Merchant Marine Ltd.[8] In that case, Wright J held that the carrier liable for damage as a result of an outturn which was not explained, because “because the burden of disproving negligence lay on him”. The Supreme Court also endorsed the statement of Wright J, which was as follows:
I do not think that the terms of article III put the preliminary onus on the owner of the goods to give affirmative evidence that the carrier has been negligent. It is enough if the owner of the goods proves either that the goods have not been delivered, or have been delivered damaged. The carrier is a bailee and it is for him to show that he has taken reasonable care of the goods while they have been in his custody (which includes the custody of his servants or agents on his behalf) and to bring himself, if there be loss or damage, within the specified
immunities. It is, I think, the general rule applicable in English law to the position of bailees that the bailee is bound to restore the subject of the bailment in the same condition as that in which he received it, and it is for him to explain or to offer valid excuse if he has not done so. It is for him to prove that reasonable care had been exercised.
The court endorsed statement of Scrutton LJ in Silver and Layton v Ocean Steamship Co Ltd[9] in which Scrutton LJ agreed with Wright J’s observation that the Hague Rules had made no difference to the incidence of the burden of proof in cases of bailment for carriage.
The court approved the following statement of Hobhouse J in Aktieselskabet de Danske Sukkerfabrikker v Bajamar Compania Naviera SA (The Torenia):[10]
The relationship between the present parties is contractual. It follows … that the question of legal burden of proof has ultimately to be decided by construing the contract between them. … In ascertaining the effect of the contract one must take into account the nature of the contract. The contract here is a contract in a bill of lading; it is a contract of carriage – that is to say, a species of a contract of bailment.
… Nor do the Hague Rules contradict this conclusion.[11]
The court was in favour of Denning LJ in Spurling Ltd v Bradshaw[12] who held:
… A bailor, by pleading and presenting his case properly, can always put on the bailee the burden of proof. In the case of non-delivery, for instance, all he need plead is the contract and a failure to deliver on demand. That puts on the bailee the burden of proving either loss without his fault (which, of course, would be a complete answer at common law) or, if it was due to his fault, it was a fault from which he is excused by the exempting clause.
The court disagreed with Lord Pearce in The Albacora, where Lord Pearce doubted the correctness of Wright J’s view that the burden of disproving negligence lay upon the carrier, without giving reasons.
With the above, the court in effect concluded and pronounced the rule as to burden of proof associated with Art. III(2) and Art. IV(2)(c)-(q) to be that “where cargo was shipped in apparent good order and condition but is discharged damaged the carrier bears the burden of proving that that was not due to its breach of the obligation in article III.2 to take reasonable care”.
In a nutshell, the court regarded Art. III(2) as a codification of the bailor’s substantive duty to take reasonable care of the goods entrusted with it. This means it does not deal with who bears the legal burden of proof, as it quite plainly is the case. Hence, the question of the legal burden is left to the local laws and procedure as to evidence. Under English law, as is the case with most jurisdictions, the legal burden is generally on the party who asserts a fact. However, in the case of bailment, as per the court, the legal burden to disprove negligence is on the bailor, and that remains unaffected by the Rules. Notably, the court is not resorting to the local laws to determine any question of duties of a bailee that has been codified by the Rules, but only for purposes of proving discharge or breach of those duties.
OBSERVATION
Application of Volcafe in Malaysia and Singapore
The Volcafe’s determination as to who bears the legal burden under Articles III(2) and IV(2)(c)-(q) is in the context of local laws of evidence and procedure in England, where there is no Evidence Act or Contract Act covering bailment. In applying this case to Malaysia or Singapore, regard must be had to the provisions of the Contracts Act 1950 and Evidence Act 1950 in Malaysia, and Evidence Act in Singapore.[13] The discussion earlier as to burden of proof in bailment cases in Malaysia[14] and Singapore[15] will be applicable here.
Pre-Volcafe cases in Malaysia and Singapore
In Malaysia, Hague Rules apply by virtue of Carriage of Goods by Sea Act 1950. Hague-Visby Rules have not been ratified. In 1955, in P Odernamall & Co v American President Lines Ltd And Penang Harbour Board (No 1),[16] the Malaysian High Court followed Gosse Millard, holding “Even if I am wrong in concluding that the loss occurred in the ship then on the alternative possibility that the cause of the damage has not been explained I think that following the case of Gosse Millard … the shipowners are still liable”. This will align the Malaysian position with Volcafe. However, the court made no reference to the Evidence Act 1950 or Contracts Act 1950. Had the court made such reference, the court would have arrived at the same decision.[17]
In Singapore, Hague-Visby Rules apply by virtue of Carriage of Goods by Sea Act of 1972 (Cap. 33). Prior to this, Hague-Rules applied. Gosse Millard had been followed. In Successors of Moine Comte & Co Ltd v East Asiatic Co Ltd,[18] the Singapore High Court in 1954 held that “the burden of proof lay upon the [carriers] to show that they were not negligent in carrying and handling the cargo …: Gosse Millard …”. Similarly in Yeo Goon Nyoh and another v Ocean Steamship Co Ltd,[19] the Singapore High Court in 1967 held as follows:
The plaintiffs sued the defendant claiming damages for breach of contract or duty and/or for negligence in and about the carriage of the plaintiffs goods on the defendant’s vessel. The defendant denied any breach of duty or reasonable care on their part in the loading or carriage of the plaintiffs’ goods by allowing the goods to come in contact with sea water. The defendant maintained that the plaintiffs must prove not only damage to the goods but that the damage was caused by sea water as specifically pleaded in the statement of claim. It was not in dispute that the goods were damaged. It was also not in dispute that they were shipped in apparent good order and condition.
…
… I am, nevertheless, of the opinion that all the plaintiffs need prove is damage and it is not fatal to their case if the damage was caused other than by sea water. To hold otherwise so it seems to me would be to flout the application of the provisions of the Carriage of Goods by Sea Act 1924 and the rules comprised in the schedule thereto to which of course the bill of lading was subject. Under Article III rule 2 it is enough if the owner of the goods proves either that the goods have not been delivered or have been delivered damaged.
The above decisions will align the Singapore position with Volcafe. However, the court made no reference to the Evidence Act or Contracts Act. Had the court made such reference, the court would have arrived at the same decision.[20]
Case Overview by ARUN KASI
[1] In Colombia.
[2] In Germany.
[3] Holder of the bills of lading.
[4] When the legal burden is on someone, it is different from a case in which the principle of res ipsa loquitur applies. Res ipsa loquitur does not shift the legal burden, but it only imposes the evidential burden on the party who has knowledge of the facts to speak up. If he does not, then an adverse inference will be drawn against that party. But throughout the case, the legal burden remains on the party who is asking the court for a judgment in its favour.
[5] [1894] P 226.
[6] Literally, the need to overrule The Glenddaroch may not be there as it was a pre-Hague Rules decision.
[7] The duty of a bailee for reward, in general, was well said by Cockburn CJ in Reeve v Palmer (1858) 5 CBNS 84, 90 as this: “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.” This was adopted in the context of carriage of goods by sea by cases such as Joseph Travers & Sons Ltd v Cooper [1915] 1 KB 73 (CA). In this case, Lord Loreburn said “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 to explain the loss himself, and if he cannot satisfy the court that it occurred from some cause independent of his own wrong-doing he must make that loss good.” Lord Halsbury said “It appears to me that here there was a bailment made to a particular person, a bailment for hire and reward, and the bailee was bound to shew that he took reasonable and proper care for the due security and proper delivery of that bailment; the proof of that rested upon him.” Atkin LJ in The Ruapehu (1925) 21 Ll L Rep 310, 315 followed the same school of thought.
[8] [1927] 2 KB 432.
[9] [1930] 1 KB 416 (CA), 424-425.
[10] [1983] 2 Lloyd’s Rep 210, 216-217.
[11] Lord Hobhouse repeated this point in Homburg Houtimport BV v Agrosin Pte Ltd [2003] 1 AC 715, at [138].
[12] [1956] 1 WLR 461, 466.
[13] There is no Contract Act in Singapore, where the common law in relation to contracts is applicable.
[14] See chapter 2.4(i)(b).
[15] See chapter 2.4(i)(c).
[16] [1956] 1 MLJ 6.
[17] See chapter 2.4(i)(b).
[18] [1954] MLJ 11317.
[19] [1965 – 1967] SLR(R) 783; [1967] 2 MLJ 290
[20] See chapter 2.4(i)(c).