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Web alert: High Court decision handed down regarding a carrier's care of coffee beans
News & Insights 30 March 2015
The case concerned condensation damage to coffee beans. The question in this case was whether, or to what extent, lining the container with Kraft paper was properly carried out and whether it was adequate to meet the threat of condensation.
Volcafe & others v CSAV  EWHC 516 (Comm)
The case concerned condensation damage to coffee beans carried by container from Buenaventura, Columbia to various ports North Germany. The carrier had lined the containers with Kraft paper to protect the cargo from this damage occurring. The question in this case was whether, or to what extent, this lining with Kraft paper was properly carried out and whether it was adequate to meet the threat of condensation. The judge held that the carrier could not demonstrate that it had adopted a sound system and was consequently liable for the damage.
The contractual position and the burden of proof
The Hague-Visby Rules applied to the carriage. The carrier was therefore under an obligation to 'properly and carefully load, handle, stow, carry, keep, care for and discharge the goods carried'. The Bills of Lading were on LCL/FCL terms, making the carrier responsible for providing and stuffing the containers but consignees responsible for unstuffing at discharge ports.
In order to discharge their care obligations in relation to this particular cargo (an 'entirely typical' cargo of coffee beans), the carriers took precautions against condensation damage. Condensation is a common occurrence when commodities such as coffee beans, grains and rice are carried in steel containers which are subjected to a significant fall in in external ambient temperature. Warm moist air rises up through the stow and condenses on the cooler roof of the container. The condensate falls onto the stow and runs down the wall of the container, wetting the bags it comes into contact with. To protect against this occurrence, the carrier lined the containers with Kraft paper. The judge found that lining the containers with Kraft paper reflected a well-documented industry awareness of such condensate damage as a general and significant risk in the unventilated containerised carriage of coffee beans.
In the course of this particular carriage, the cargo did suffer damage. As the beans were shipped 'in apparent good order and condition' and the carriers made no allegation that the beans had been shipped with excessive water content, the judge applied res ipsa loquitur - the thing speak for itself. The court inferred a breach of article III(2) of the Hague-Visby Rules and the onus was then on the carrier to demonstrate that no such breach occurred. In the absence of any relevant article IV defences, the carrier would have to demonstrate that they had 'properly and carefully' cared for the cargo, in other words, they had to demonstrate that they had applied a sound system.
A sound system?
The carrier argued that no thickness or multiple layering of the Kraft paper would have affected the damage which occurred. However, they were unable to prove this contention. Further, the judge held that even if they had demonstrated this it would not have helped, as the carrier was still obliged to employ a sound system under Article III(2), saying 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 carrier submitted that the lining was indeed in accordance with a sound system. The judge’s understanding of “sound system” being that there must exist a minimum of 'a rational, adequate and reliable basis for concluding that it will prevent the otherwise threatened damage'. In relation to this particular cargo, a not unusual cargo of coffee beans, the carrier had to demonstrate that the decision to line the container with Kraft paper was made on a rational, adequate and reliable basis.
The carrier failed to demonstrate this. They had no evidence of what paper had been used or why the weight and type had been chosen nor could they produce any recent publications discussing the same. Further to that, the judge pointed out that 'if the system was a proper one, why did it fail to prevent damage in all but two of the twenty containers'. The remaining possibility, that the system was sound but had been incorrectly implemented, would have required the carrier to show that this was not due to lack of care. However, the judge could not see how on the material before him it could have succeeded in doing so. As the carrier was unable to demonstrate that it had adopted a sound system it was held liable for the subsequent damage.
It is rare for cases concerning such frequent occurrences as cargo condensation damage to be heard by the High Court. The judge indeed commented that: 'ultrasensitive antennae are not required to detect that this litigation, effectively between cargo underwriters and the carrier’s P&I club, is concerned at least as much with the wider implications of its result as with any monetary recovery' (the judgement was for $62,500). It will, therefore, be useful for future analysis of cargo damage claims. In particular, it demonstrates that, if the usual contract of carriage provisions apply and the cargo is of a not unusual nature, the burden is on the carrier to demonstrate that it has a sound system in place for caring for the cargoes it is carrying.