North P&I Club supports members in overturning ‘detrimental’ cargo carriage judgment

North P&I Club, a leading global marine insurer providing P&I, FD&D, war risks and ancillary insurance to 131 million GT of owned tonnage, has helped restore the commercial balance between ship owners and cargo interests by successfully supporting a Member in its appeal against a UK High Court decision on 10 November 2016. The Court of Appeal overturned the 5 March 2015 decision in Volcafe Ltd and others v. CSAV, which has been viewed by the shipping community as widely detrimental to ship owners.

Chilean ship owner CSAV carried bagged coffee in 17 non-ventilated containers between Colombia and Germany in 2012. Despite lining the containers with two layers of kraft paper, as specified by the shippers, 2.6 percent of the cargo was found to have been damaged by condensation on arrival. The first instance judgment found CSAV liable, primarily because it could not empirically prove the lining was ‘a sound system’, even though it was in accordance with standard industry practice.

According to North claims executive Daniel Mayne, “The High Court decision effectively overturned 100 years of legal precedent relating to carriage of goods at sea. Had it been allowed to stand, ship owners would have faced a significant increase in claims relating to hygroscopic cargos such as rice, coffee and different types of grains as they would be unable to rely on the Hague Rules defence of ‘inherent vice’ in the cargo. They would have also been subject to an enhanced definition of ‘a sound system’ for carrying the cargo, effectively increasing their liability to that of a cargo insurer.”

Justice Flaux, an experienced shipping judge, was critical of the first instance judgment. He accepted expert evidence from Dr Martin Jonas of Brookes Bell at the first hearing that some wet damage to the cargo was inevitable in the climatic conditions and, even when following industry guidance, it was impossible for carriers to ensure no damage to cargo whatsoever. Taking this into account, he confirmed ship owners only need take ‘reasonable’ care of the cargo, which is by following industry practice, as CSAV had done.

Mayne said, “While the case has a clear relevance to any cargo claims involving hygroscopic cargoes, of which there are many, it also has wider implications for many other cargo claims. The Court of Appeal has confirmed the burden of proof lies on cargo interests to establish negligence or unseaworthiness where ship owners come within the ‘inherent vice’ exception under the Hague Rules.”

Mark Doyle from North’s legal adviser Mills and Co Solicitors said that is relatively rare for shipping cases to go before the Court of Appeal these days. “The judgment therefore provides welcome clarity from an experienced shipping judge in an appellate court that restores the balance between cargo interests and ship owners under the Hague Rules. It is this balance that has ensured the Hague Rules, and the later Hague-Visby Rules, continue to be used around the world since their inception in 1924.”

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