The fluctuating incidence of the burden of proof under the Hague-Visby Rules: the implications of Volcafe v CSAV [2019] AC 358 for the position in Australia

2019 Richard Cooper Memorial Lecture
Brisbane

Justice Stewart*    24 October 2019

RTF version - 250 kb

Introduction

1. It is a singular honour to have been invited by Professor Parkinson to deliver this lecture in memory of the late Honourable Justice Richard Cooper. I did not know Richard Cooper, and I may be the first person to deliver this lecture to have had no academic or professional interaction with him. From what I have learnt, my intellectual life is the poorer for it. I have long known of Richard Cooper's work through the role that this important lecture series plays in keeping the memory of it alive, and I have the privilege now to serve on the Court that Richard Cooper was serving at the time of his death, and in particular to exercise its admiralty jurisdiction which he exercised.

2. The inspiration for my topic this evening is the decision of the Supreme Court of the United Kingdom in the Volcafe case on 5 December last year.[1] It was one of the last judgments of Lord Sumption before his retirement from that Court four days later. Some might say that his Lordship went out with a bang. In less than 50 closely reasoned paragraphs more than 50 years' precedent on the incidence of the burden of proof under the Hague[2] and Hague-Visby Rules[3] was turned on its head. It has shaken up an essentially commonly accepted position between cargo and carrier.

3. True it is that few cargo claims are ultimately determined in a court on the burden of proof, but the incidence of that burden often plays a substantial role in their negotiation and settlement. Far and away most cargo claims are settled and never get to court. But it is a feature of cargo claims that evidence of just what caused the loss or the damage is hard to come by in an admissible form – the relevant events often took place far away from the court that might hear the case, or on the high seas, and what witnesses there may have been are likely not to be compellable if they can even be tracked down. In my experience, the settlement of such claims often turns on an evaluation of what evidence either side might be able to muster, and then on who has to prove what. The burden of proof is central to the latter question. The point at hand therefore has substantial practical importance.

History

4. It is perhaps useful to start with some context before framing the problem.

5. In the late 19th and early 20th centuries, most of the world's cargo tonnage was owned and operated by European, principally British, owners and operators. Far flung dominions, colonies and former colonies had the shippers but not the ships. It was also a time when freedom of contract was at its ascendency in the common law. Ship owners and operators were thus in a position to contract on very favourable terms, often excluding liability almost completely, even for their own negligence.[4] Most European and Commonwealth countries followed the British example of freedom of contract which allowed carriers to contract out of the relatively absolute liability that they would otherwise have in both common law and civil law.[5]

6. At the recent MLAANZ annual conference in Auckland, Dr Bevan Marten delivered a fascinating paper that dealt with some of this history in Australia and New Zealand.[6] It tells the story of two increasingly confident dominions standing up to British shipowners' unfair market practices. Committees were formed, resolutions adopted, and negotiations opened. The Dunedin and Sydney Chambers of Commerce emerged as key negotiators on behalf of shippers. By the autumn of 1896 the Dunedin Chamber was tired of the "apparently endless correspondence" on the "vexed question of the form of Bills of Lading", and their agent in London was writing to inform them that no further concessions could be gained from the Shipowners' Society. Attention turned to the local legislatures for relief.

7. Indeed, in 1893 the Harter Act had been adopted in the USA. It set minimum standards for shipowners in terms of providing a seaworthy ship and taking care of cargo. It prohibited any clause excluding such liability, and even made it a crime not to comply with the Act for all bills of lading signed in the United States.

8. Dr Marten reports that although the Australians were far more active proponents of reform, it was New Zealand that first adopted the Harter Act's ideas and legislation as part of the Shipping and Seamen Act 1903 (NZ). Australia adopted the Carriage of Goods by Sea Act 1904 (Cth) shortly thereafter. Both statutes were aimed at restoring some balance between shipper and carrier interests and imposed on carriers the obligation to take reasonable care of cargo although the Acts gave them various grounds of exemption and limitation of liability.

9. These types of developments were replicated in other parts of the world, including Canada with its Water Carriage of Goods Act 1910 (Can).[7] One of the difficulties was that the domestic legislation generally applied only to domestic and outbound shipments, and not to inbound international shipments with the result that exporters were protected from the rapacity of carriers but importers were not.[8] It was important to all parties, and perhaps in particular cargo insurers and carriers' liability insurers, that a more uniform system of risk allocation was developed.[9] This desire to restore international uniformity to the field ultimately produced the Hague Rules.[10]

10. There is no need to go further into the history in any detail for present purposes. It suffices to say that following a recommendation of the Dominion Royal Commission in 1917 there was active work by the British government which saw the resurrection of work by the International Law Association and work by the CMI and the International Chamber of Commerce. The International Law Association then held a conference at The Hague in September 1921. The Maritime Law Committee met in separate session to discuss a proposed draft of a set of rules. After four days of debate between cargo interests (including bankers and underwriters) and carrier interests, the members unanimously agreed on the text of what became known as "the Hague Rules of 1921" and their agreement was ratified by the full association in a plenary session at the end of the conference.[11] 

11. These are the rules which in amended form were ultimately adopted by the Diplomatic Conference on Maritime Law in Brussels in August 1924, although they underwent certain amendments along the way particularly at a meeting of the CMI in London in October 1922.[12] It is the origin of the draft at the International Law Association conference at The Hague in 1921 which accounts for the Convention that was ultimately adopted being known as the Hague Rules despite major revision having been done in London and the ultimate adoption having taken place in Brussels.[13]

12. The Rules were later amended by the Visby Protocol done at Brussels in February 1968 with the amended Rules being known as the Hague-Visby Rules of 1968. There were also subsequently minor amendments by the SDR Protocol in December 1979. Neither set of amendments has any bearing on the burden of proof issues under discussion in this lecture.

13. The Hague-Visby Rules are without doubt the dominant standard terms and conditions for ocean carriage, and they are generally incorporated into charterparties and bills of lading worldwide.[14]

The relevant provisions

14. Articles III and IV of the Rules deal with the obligations and liabilities of the carrier. They are the Articles that are relevant to the burden of proof issues. The relevant particular rules are these. I will arrange them in two pairs for convenience.

15. Article III Rule 1 sets out the duties of the carrier before and at the beginning of the voyage to exercise due diligence to make the ship seaworthy, to properly crew, equip and supply the ship, and to make its holds and refrigeration spaces fit and safe for the reception, carriage and preservation of the cargo. This is the seaworthiness obligation.

16. Skipping to Article IV, its Rule 1 provides that neither the carrier nor the ship shall be liable for loss or damage arising or resulting from unseaworthiness unless caused by a failure to exercise the due diligence required by Article III Rule 1. It also provides that whenever loss or damage has resulted from unseaworthiness, the burden of proving the exercise of due diligence shall be on the carrier or other person claiming exemption under this Article.

17. Thus it can be seen that Rules 1 of Articles III and IV relate to each other; they go together. They both deal with seaworthiness. They also deal expressly with the burden of proof.

18. Article III Rule 2 is next. It is expressly subject to the provisions of Article IV, and provides that "the carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried". This is the obligation of proper and careful carriage.

19. Article IV Rule 2 enumerates 17 exceptions, or "excepted perils", to the duties in Article III Rule 2 by providing that neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from, amongst others, perils of the sea and inherent vice and latent defects.

20. Professor Martin Davies, writing before the decision of the Supreme Court in Volcafe, identifies that there are two burden of proof questions, each relating to these pairings of rules.[15] He describes the "traditional view" of the order of proof followed (at that time) in the United Kingdom and the United States as follows.

21. First, the cargo claimant must prove the contract of carriage and that goods which were shipped in apparent good order and condition were damaged on arrival or did not arrive at all. This proof of loss or damage is sufficient to raise a prima facie case that the carrier breached the obligation of proper and careful carriage imposed by Article III Rule 2. The onus then shifts to the carrier to rebut that inference of breach by establishing one of the exceptions in Article IV Rule 2 which involves showing which of the excepted perils caused the loss or damage. If the carrier succeeds in this, the onus shifts back to the cargo claimant who may displace that defence by proving affirmatively that the carrier breached Article III Rule 2 by failing to load, handle, stow, etc the goods "properly and carefully".

22. Second, and alternatively, the cargo claimant may prove that the cause of the damage or loss was the unseaworthiness of the carrying ship, which is a prima facie breach of Article III Rule 1. The onus then shifts to the carrier which can escape liability by establishing the defence in Article IV Rule 1 upon proof that the relevant unseaworthiness was not due to any want of due diligence on its part or on the part of its employees, agents or independent contractors.

23. I should make it clear at the outset that this lecture, arising as it does from the Volcafe decision, addresses the first of these questions; that is, the obligation of proper and careful carriage and its relationship to the excepted perils. Some of the cases also deal with the seaworthiness obligation but my focus will not be on those aspects.

The UK cases

24. I will turn now to look at a few of the key cases in the United Kingdom that preceded Volcafe in order that the consequences of Volcafe can be better understood.

The Glendarroch

25. Lord Esher MR's judgment in the Court of Appeal in 1894 in The Glendarroch[16] sets out the traditional view on the order of pleadings, and hence the burden of proof, in a sea cargo claim as follows: the plaintiff must first prove the contract and the non-delivery or the delivery in a damaged condition, to which the defendants may plead an exception, leaving it then to the plaintiffs to reply "there are exceptional circumstances, viz that the damage was brought about by the negligence of the defendants' servants". The onus is on the plaintiffs to make out the second exception.[17] This is sometime referred to as the exception to the exception.[18]

26. The Glendarroch preceded the Hague Rules by 30 years. It dealt with a bill of lading contract that contained the usual exceptions at that time including perils of the sea and did not exclude liability for negligence. The Court of Appeal expressly rejected the plaintiff's contention that in order for the carrier to bring itself within the exception it had to also prove absence of negligence on its part. It will be seen that more than 120 years later this was the principal issue in Volcafe.

Gosse Millerd

27. Turning to the period after the adoption of the Rules, Justice Wright, subsequently Lord Wright, in Gosse Millerd v Canadian Government Merchant Marine[19] in 1927 addressed the burden of proof under the Rules, and concluded on the basis of bailment that the burden was on the carrier to disprove its negligence. His Lordship said: "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 … and to bring himself, if there be loss or damage, within the specified immunities."[20]

Albacora

28. Although that approach held sway for some time,[21] it was expressly disapproved of by the House of Lords in an appeal from the Court of Session in 1966 in Albacora v Westcott & Laurence Line.[22] The case concerned a shipment of wet salted ling from Glasgow to Genoa that went bad by a bacteria bloom during the voyage. The fish was carried in ventilated unrefrigerated holds which at that time was thought normal and adequate, it not being appreciated that at any temperature above 5°C (41°F) the bacteria would bloom. The claimant, or "pursuer" by the nomenclature of the Scottish courts, alleged a breach of Art III Rule 2 saying that the carrier had failed to "properly and carefully" stow and carry the cargo. The carrier relied on Art IV Rule 2(m), saying that even if it had failed in that regard it was exempted from liability by the inherent vice of the fish.

29. The case was decided on the first point, it being held that Art III Rule 2 required the adoption of a system which is sound in light of all the knowledge which the carrier has or ought to have about the nature of the goods, and that the damage to the goods does not prove a breach of that obligation.[23] However, Lord Pearce in his speech doubted the proposition that even if the cargo is shown to have suffered damage arising from an Art IV Rule 2 exception (relevantly, inherent vice), there remains an additional onus on the carrier to disprove negligence.[24] Lord Pearson was to similar effect, saying that there is no implied provision that the carrier is debarred as a matter of law from relying on an exception unless it proves absence of negligence on its part.[25]

Volcafe

30. I now turn to look at the Volcafe decision itself. It concerned a shipment of bagged Colombian green coffee beans from Buenaventura in Colombia to Bremen.[26] Coffee is a hygroscopic cargo: it absorbs, stores and emits moisture. When, as here, coffee beans are carried in unventilated containers from a warm to a cooler climate, the beans will inevitably emit moisture which will cause condensation to form on the walls and roof of the container. It is thus necessary to protect the coffee from water damage by lining the roof and walls with absorbent material, referred to as kraft paper.[27] On discharge at Bremen, bags in 18 of the 20 containers were found to have suffered water damage from condensation.[28]

31. The bills of lading were subject to English law and jurisdiction and incorporated the Hague Rules.[29] In the usual way, the cargo owners pleaded a breach of Art III Rule 2 in that the carrier had failed to "properly and carefully" stow, carry, care for etc the cargo. It was said that the carrier failed to use adequate or sufficient kraft paper to protect the cargo from condensation. The carrier joined issue on these points, and pleaded inherent vice of the cargo in reliance on Art IV Rule 2(m), as the carrier had done in Albacora.[30]

32. Insofar as the evidence was concerned, there was a paucity. This is no doubt what led to the case having to be decided on the burden of proof. It was found by the trial judge that the evidence did not establish how many layers of kraft paper were used, nor what thickness of paper ought to be used.[31]

33. Lord Sumption's starting point was to identify that the delivery of goods for carriage by sea is a bailment for reward on the terms of the bill of lading. Bailment is a transfer of possession giving rise to a legal relationship between the bailor and bailee which is independent of contract, although in practice it is commonly contractual and the terms of the contract will commonly modify its incidence. Two principles of the common law of bailment are fundamental. The first – leaving aside the position of common carriers which is now obsolete – is that the bailee's duty is limited to taking reasonable care of the goods.[32] The second is that although the obligation of the bailee is thus a qualified obligation to take reasonable care, at common law the bailee bears the legal burden of proving the absence of negligence.[33]

34. Importantly, Lord Sumption held that the duty of a depository to justify its inability to deliver the goods in the condition in which it received them is also a basic feature of the civil law.[34]

35. Against that background, Lord Sumption identified the real issue in the case to be whether the incidence of the burden of proof is different in a modern contract for carriage by sea incorporating the Hague Rules from what it is in bailment.[35]

36. Dealing first with the burden of proof on Art III Rule 2, the question was: must the cargo claimant prove a breach of the obligation to "properly and carefully" carry etc or, once the damage is proved, is the burden on the carrier to prove that it did "properly and carefully" carry etc?

37. The carrier argued that the relevant burden was on the cargo claimant and advanced three propositions in support of the argument. First, the Hague Rules constitute a complete code governing the care of the cargo. Second, an international Convention such as the Rules should not be construed in the light of particular features of domestic law. Third, Art III Rule 2, by imposing a positive obligation to take reasonable care of the cargo, displaces the English law rule about the burden of proof, because as a general rule they who assert must prove. Lord Sumption found each of the steps in the argument to be fallacious.[36]

38. As to the first, it was identified that the Hague Rules had effect in that case only by virtue of their contractual incorporation into the bill of lading; not only did they not have statutory force in that case, but they do not have any statutory force at all as only the Hague-Visby Rules have such force. Further, they are not exhaustive of all matters relating to the legal responsibility of carriers of the cargo, and matters arising from the law of evidence and the rules of procedure are for the law of the forum and are not covered by the Rules except where that is made express.[37]

39. As to the second, the principle that provisions derived from an international Convention are intended to have an international uniform effect and should not be construed by national courts with reference to principles of purely domestic application has no bearing on the present issue. That is because, so it was held, the Rules are not concerned with the incidence of the burden of proof save in limited respects. Second, the common law principles regarding the burden of proving negligence or the lack of it in the carriage of goods are not principles of purely domestic application but have a much wider application.[38]

40. As to the third, contrary to what was submitted the imposition of the duty of care on the carrier by Art III Rule 2 is consistent with the duty of care on a bailee at common law.[39]

41. For those reasons, Lord Sumption considered that in principle 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 Art III Rule 2 to take reasonable care, and what remained was to consider the authorities.[40]

42. Lord Sumption identified that the decision of Justice Wright in Gosse Millerd was the first case to address directly the burden of proof in relation to Art III Rule 2. It will be recalled that on the basis that the damage ascertained on outturn had not been explained, Justice Wright held the carrier liable because the burden of disproving negligence lay on it. One of the reasons given for this approach was that the carrier was a bailee and, as identified earlier, a bailee bears the burden of proving absence of negligence on its part as a cause of loss or damage.[41]

43. Lord Sumption then identified various other cases that followed that either adopted what Justice Wright had said in Gosse Millerd or in any event held to similar effect.[42]

44. Lord Sumption expressed the "true rule" to be that the carrier must show either that the damage occurred without fault in the various respects covered by Art III Rule 2, or that it was caused by an excepted peril enumerated in Art IV Rule 2.[43] If the carrier can show that the loss or damage to the cargo occurred without a breach of the carrier's duty of care under Art III Rule 2 it will not need to rely on an exception in Art IV Rule 2.[44]

45. His Lordship said that so far as that analysis has been doubted it is because of the dicta of Lords Pearce and Pearson in Albacora that I have already identified and dicta in the High Court of Australia in The Bunga Seroja.[45] I shall return to the latter case in more detail. In the meanwhile, Lord Sumption's conclusion was that these dicta involve an unexplained departure from the basic principles governing the burden of proof borne by a bailee for carriage by sea, and are out of line with English authority of long-standing. In his Lordship's view, so far as they suggest that the cargo owner has a legal burden of proving a breach of Art III Rule 2 they are mistaken.[46]

46. Lord Sumption then turned to address the burden of proof under Art IV Rule 2(m), the inherent vice exception. It was common ground that the carrier bears the burden of bringing itself within any exception in Art IV Rule 2 that it wishes to rely on.[47] The point for decision was whether, as the carrier contended in reliance on The Glendarroch, in order to defeat the carrier's reliance on an exception the claimant had the burden of proving that the established excepted peril had been occasioned by the carrier's negligence.[48]

47. Lord Sumption dismissed The Glendarroch as having rarely featured in the reasoning of subsequent case law, and that the basis on which it was decided is technical, confusing, immaterial to the commercial purpose of the exception and out of place in the context of the Hague Rules. His Lordship considered that the carrier has the legal burden of disproving negligence for the purpose of invoking an exception under Art IV Rule 2, just as it has for the purpose of Art III Rule 2.[49]

48. Drawing on the recognition in Albacora that whether there is an inherent defect or vice must depend on the kind of transit required by the contract, Lord Sumption held that in order to be able to rely on the exception for inherent vice, the carrier must show either that it took reasonable care of the cargo but the damage occurred nonetheless; or that whatever reasonable steps might have been taken to protect the cargo from damage would have failed in the face of its inherent propensities.[50]

49. The ultimate conclusion was that the carrier had the legal burden of proving that it took due care to protect the goods from damage, including due care to protect the cargo from damage arising from inherent characteristics such as its hygroscopic character. In the absence of evidence about the weight of the kraft paper employed, it was held that the carrier had failed to prove that the containers were properly prepared for the carriage of the coffee beans and the carrier was thus liable for the damage.[51]

The Australian position

50. I now turn to consider the position in Australia. It is convenient to do that with reference to two decisions of the High Court and then subsequent lower court decisions to see how the High Court decisions have been received and understood.

Gamlen Chemical Co

51. The first is The Shipping Corporation of India v Gamlen Chemical Co in 1980.[52] The leading judgment is that of Justices Mason and Wilson with whom Justices Gibbs and Aikin agreed. Gibbs J also agreed with Stephen J who wrote separately but supported the same result. It was a perils of the sea case, which is to say that the carrier relied on the exception in Art IV Rule 2(c) of the Hague Rules that applied by force of law, i.e. unlike in Volcafe, not by contractual incorporation.[53]

52. The relevant factual findings were that the damage to the goods was caused by the weather experienced on the vessel's voyage across the Great Australian Bight and, concurrently, the inadequate stowage of the cargo of drums of cleaning solvent that broke adrift. The carrier was thus unquestionably in breach of its Art III Rule 2 obligations to properly and carefully stow the cargo, but contended that it was not liable because of the Art IV Rule 2(c) exception.[54] It will be recalled that Art III Rule 2 is expressly subject to Art IV.

53. The High Court held that the exceptions are only available where the loss or damage was not caused by the carrier's negligence.[55]

54. Because the negligence of the carrier had been established, the question of burden of proof did not arise. Nevertheless, the Court expressed agreement with the judgment of Samuels JA in the Court of Appeal in the judgment under appeal that the correct sequence of pleading is as set out in the judgment of Lord Esher as Master of the Rolls in The Glendarroch.[56]

55. That statement in Gamlen was high and respected authority coming as it did from the High Court confirming the NSW Court of Appeal's reliance on the Court of Appeal of England and Wales, but it was nevertheless obiter. That approach to the burden of proof – specifically that the cargo claimant bears the burden of proving the negligence of the carrier in order to negative the latter's reliance on an exception – was later adopted and followed by Sheller JA, with whom Cripps JA agreed, in the NSW Court of Appeal in Glebe Island Terminals v Continental Seagram (also known as The Antwerpen) in 1993.[57] That case concerned the unhappy loss by theft of two containers of Scotch whisky.

The Bunga Seroja

56. The High Court again came to consider the onus of proof questions 18 years later in The Bunga Seroja.[58] This is one of the cases that Lord Sumption identified as having cast doubt on the bailment approach of Justice Wright in Gosse Millerd. Like Gamlen, it was a case of heavy weather experienced during a voyage across the Great Australian Bight causing the carrier to rely on the perils of the sea exception.[59] The case concerned a shipment of aluminium coils consigned from Sydney to Keelung, Taiwan. The Hague Rules applied by statute.[60]

57. The trial judge, Carruthers J in the Supreme Court of New South Wales, found that, firstly, when the vessel sailed she was fit in all respects for the voyage, second, the carrier properly and carefully loaded, handled, stowed, carried, kept and cared for the subject cargo, and third, there was no neglect or default of the master or other servants of the carrier in the management of the ship or cargo. On that basis, the trial judge upheld the carrier's reliance on perils of the sea.[61]

58. The claimant contended that the exception does not apply if damage to cargo resulted from sea and weather conditions which could reasonably be foreseen and guarded against.[62] That contention was rejected on the basis that the fact that the weather that was encountered had been forecast does not deny the conclusion that the damage was occasioned by perils of the sea where there was no breach of the carrier's responsibilities under Art III.[63]

59. The plurality of Justices Gaudron, Gummow and Hayne, with reference to the trial judge's statement that the case did not turn "upon any nice question of onus of proof", held that nothing in the case turned on the allocation of the burden of proof. In their view it was therefore not necessary to consider those questions.[64] Their Honours did however emphasise the international nature of the Rules and say that they "very much doubt that principles established in cases like The Glendarroch can be used as an aid to construing the Hague Rules". That is, they raised doubt about the endorsement of that approach by the High Court in Gamlen. Also, and at odds with the approach of Lord Sumption in Volcafe, their Honours said that those are principles which apply in common law actions between bailor and bailee but that is very different from using them as some guide to understanding what the Hague Rules mean. Their Honours cited Lord Steyn's statement in Effort Shipping in the House of Lords in 1998 that "pro tanto the Hague Rules upon their enactment displaced the common law".[65]

60. The other three judges, Justices McHugh, Kirby and Callinan, agreed with the plurality on the perils of the sea question and that the appeal should accordingly be dismissed.[66] They however each wrote separately on the burden of proof question.

61. McHugh J followed Gamlen on the question of the relationship between Art III Rule 2 and Art IV Rule 2,[67] and then went on to consider the onus of proof. His Honour held that the delivery of the goods in a damaged state is evidence of a breach of Art III, and imposes an evidentiary burden on the carrier to show that no breach of Art III has occurred – but unlike the common law, failure to deliver the goods in the state received does not cast a legal onus on the carrier to prove that the state of, or non-delivery of the goods, was not due to the carrier's fault.[68]

62. Kirby J agreed that the appeal could be disposed of without reference to the onus question, but said that it was nevertheless appropriate to say something about it.[69] His Honour appears to have agreed with the approach in Gamlen to follow The Glendarroch on this point, although his Honour said that "a forensic burden, at least, rests on the cargo owner" to displace the conclusion that the loss occurred as a result of an excepted peril.[70] Callinan J adopted the approach of Justices Mason and Wilson in Gamlen without apparent reservation.[71]

63. The result is that what was said in The Bunga Seroja on the question of onus of proof is obiter. Nevertheless half the judges cast doubt on the applicability of the approach in The Glendarroch to the Rules and McHugh J would place an evidential burden on the carrier once loss or damage is established to show that no breach of Art III has occurred.

Subsequent cases

64. Turning now to subsequent case, in Hilditch v Dorval[72] in 2007, Justice Allsop said that "there is some less than clarity in the issue of onus of proof in cargo claims in Australia" following The Bunga Seroja, and referenced the plurality's view that an international Convention such as the Rules should not be construed based on English cases on bills of lading in the 19th century and, in particular, the English rules of pleading.[73]

65. A few weeks later the Full Court delivered its decisions in Stemcor.[74] Justices Ryan and Dowsett acknowledged that the decision of the High Court in The Bunga Seroja "casts doubt" upon the continuing authority of Gamlen insofar as it concerns the burden of proof. It was held that the judgments of the plurality and Justice McHugh suggest that the proper course is to identify negligence (usually a breach of Art III Rule 2) before considering the availability of exceptions pursuant to Art IV Rule 2, and the mere occurrence of loss or damage may not be sufficient to prove a breach of the former rule.[75]

66. A little later the same year, 2007, Justice Allsop in WK Marble & Granite v CASA China said in relation to onus or burden of proof that the operation of Articles III and IV of the Rules is "not straightforward" and "not finally settled".[76]

67. A few months later, in Hilditch v Dorval (No 2),[77] Rares J referred at length to Gamlen on the interaction between Art III Rule 2 and Art IV Rule 2, but did not deal expressly with the question of burden of proof.[78]

68. In Seafood v ANL in 2010,[79] Ryan J considered himself bound to take the same approach as he and Justice Dowsett had taken in the Full Court in Stemcor.[80]

Conclusions

69. So what does all of this mean for the burden of proof in relation to the interaction between Art III Rule 2 and Art IV Rule 2 in Australia?

Position not settled

70. The first point to make is that even before Volcafe the position was not settled. This is a point recently made by Chief Justice Allsop at a MLAANZ seminar. Volcafe has served to bring attention to that, and to offer a further powerful persuasive authority in the rich vein of authorities to mine in the search for the right answer.

71. The second point is that there isn't necessarily a right or wrong answer to the problem. It is really a choice that has to be made, a legal policy choice, and what it ultimately is may have little more to be said for it than a competing alternative, but what is important is that there is some clarity.[81] Parties need to know where they stand. As I have said, this issue does not arise much in court, but it has real practical significance in the settlement of cargo claims.

72. Third, I might venture to offer some thoughts and questions about the approach in Volcafe. At this stage, they are no more than that.

Bailment

73. At the heart of the analysis of Lord Sumption is bailment – the idea that the carrier is the bailee of the cargo and bears the onus of disproving its negligence, and that that is the backdrop to the adoption of the Rules. Also, that the position in the civil law is similar.

74. That is all well and good, and may serve as a useful framework of analysis, but it only goes so far. That is because it is very often the case that the carrier party to the contract to which the Rules apply is not a bailee. Every NVOCC – non-vessel owning (or operating) common carrier – is in such a position because they do not acquire possession of the cargo. The time-charterer carrier which issues bills of lading is in the same position. They merely subcontract the carriage to someone else, being another intervening NVOCC or time-charterer, or the actual carrier. The bailment analysis might be thought not to apply to an NVOCC or time-charterer carrier who is nevertheless caught by the Rules. The idea that such a carrier should bear the burden because the carrier has access to information on what occurred and the shipper or consignee does not, does not apply, although the NVOCC and time-charterer is in a position to access that information from, or to pass the liability on, up the chain.

75. It is also the case that the Rules are often incorporated into charterparties by way of a Paramount Clause.[82] It might be thought that there should be consistency in the incidence of the burden of proof at each stage of the contractual chain, including not only any bills of lading but also charterparties. An approach to that incidence that draws a distinction between when the Rules apply merely by incorporation and when they apply compulsorily, and between whether the carrier has possession and when it does not, is not necessarily supportive of that outcome.

76. It is also to be noted that Stuart Hetherington has argued in a recent paper[83] that the Rules are designed to apply to contracts of carriage – indeed, that is what they state in Article II – and that reference to bailment in construing them is therefore apt to mislead.

77. Perhaps the short point is this. As a matter of legal policy choice it may be that bailment is a useful tool of analysis and hence justification for the choice that is made. But, it might be thought to be unsound and undermining of the doctrinal coherence of the law – and certainly the object of the Rules – to construe the Rules in one way where they apply to a bailment and in another way where they apply to a relationship where there is no bailment.

International uniformity and the substantive/procedural divide

78. Another query that arises in relation to Lord Sumption's analysis is its eschewing of the idea that the Rules should be interpreted with an eye to international uniformity and its favouring of the domestic legal context in the task of construction. That approach is said to be justified on different bases.

79. First, it was said that in Volcafe the Hague Rules did not have statutory force but operated by incorporation into a contract governed by English law. Against that it might be said that there is significant value in the Rules being interpreted consistently whether they apply by way of incorporation or compulsorily by statutory force. Indeed, it might be thought that the parties in incorporating the Rules intended that they should be construed in that way.

80. Second, it was said that the Hague Rules do not have any statutory force anymore as it is now the Hague-Visby Rules that have that force. Against that it might be said that since both sets of Rules use identical language in the respects currently relevant, there is some value in them being construed in the same way. Indeed, since the Visby amendments did not apparently intend to change those aspects of the Rules dealing with the carrier's obligations and exemptions, there might be some expectation that the Hague and the Hague-Visby Rules would be interpreted the same way on these issues.

81. Third, it might be thought rather glib to say that the question of onus is one of evidence and procedure and therefore under generally recognised principles of private international law, one for the forum. Not only is the dividing line between substance and procedure notoriously evasive and as often as not in the eye of the beholder, it was recalibrated by the High Court of Australia in John Pfeiffer v Rogerson.[84] But more significantly, such an approach leads to the potential for different outcomes on the same facts in different jurisdictions, which again serves to undermine the object and purpose of the Rules in creating uniformity. To the parties to a cargo claim it is the outcome that is significant, not whether it was the result of the application of a substantive or procedural rule.

Richard Cooper's thesis

82. Finally, to return to the memory of Richard Cooper, in 1981 he submitted a dissertation as part of the Master of Laws degree at the University of Queensland. It was titled "The Hamburg Rules and the Carriage of Goods by Sea". Discussing the Hague Rules, Richard Cooper wrote that it is important when considering the Rules to draw a distinction between an obligation to deliver goods in an undamaged condition and an obligation to exercise due care in and about their delivery. Wright J in Gosse Millerd was cited, and the rejection of that approach in Albacora. It was noted that the more recent authorities reject the bailor/bailee test and specifically reject any notion that a carrier cannot avail itself of any exception without proving an absence of fault on its part.[85] That was the state of the law at that time.

83. Richard Cooper's work as a student serves to remind us that nearly 40 years later we are grappling with the same issues.



* Judge of the Federal Court of Australia. This paper was delivered as the Richard Cooper Memorial Lecture, Federal Court of Australia, Brisbane, 24 October 2019. I gratefully acknowledge the assistance of my associate, James King, in the preparation of this paper. Any errors are my own.

[1] Volcafe Ltd v Cia Sud Americana de Vapores SA [2019] AC 358 ('Volcafe'). Lord Reed DPSC and Lords Wilson, Hodge and Kitchin JJSC agreed.

[2] International Convention for the Unification of Certain Rules of Law relating to Bills of Lading, and Protocol of Signature, opened for signature 25 August 1924, 120 LNTS 187 (entered into force 2 June 1931).

[3] Protocol to Amend the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading, opened for signature 23 February 1968, 1412 UNTS 127 (entered into force 23 June 1977).

[4] Michael F Sturley, "The History of the COGSA and the Hague Rules" (1991) 22 Journal of Maritime Law and Commerce 1, 5 and 18; Great China Metal Industries Co Ltd v Malaysia in International Shipping Corporation Berhad [1998] HCA 65; [1999] 1 Lloyd's Rep 512; (1998) 196 CLR 161 ('The Bunga Seroja'), 168 [11].

[5] Sturley (n 4) 4-5.

[6] Dr Bevan Marten 'Confronting British Bullies: Shipping Law Reform in Australia and New Zealand, 1888-1907' forthcoming in law&history, Journal of the Australian and New Zealand Law and History Society.

[7] Sturley (n 4) 18.

[8] Ibid.

[9] J I MacWilliam Co Inc v Mediterranean Shipping Co SA [2005] 2 AC 423, 445 [8]; The Bunga Seroja (n 4) 161, 169 [14].

[10] Sturley (n 4) 6.

[11] Sturley (n 4) 22; El Greco (Australia) Pty Ltd v Mediterranean Shipping Co SA [2004] FCAFC 202; (2004) 140 FCR 296, 333-334 [166]-[169].

[12] El Greco (n 11) 338 [184].

[13] Sturley (n 4) 22-32.

[14] Ingar Fuglevåg, 'The Rotterdam Rules – yet another failed attempt of replacing the Hague-Visby Rules?', Simonsen Vogt Wiig (Web Page) <https://svw.no/en/news/news/2018/march/the-rotterdam-rules--yet-another-failed-attempt-of-replacing-the-hague-visby-rules/>.

[15] Martin Davies and Anthony Dickey Shipping Law (Thomson Reuters, 4th ed, 2016) 247-248.

[16] [1894] P 226.

[17] Ibid 231.

[18] Glebe Island Terminals Pty Ltd v Continental Seagram Pty Ltd (1993) 40 NSLWR 206, 277E.

[19] Gosse Millerd Ltd v Canadian Government Merchant Marine Ltd (The Canadian Highlander) [1927] 2 KB 432. The case went on appeal to the Court of Appeal ([1928] 1 AC 717) and the House of Lords ([1929] AC 223) but the parties accepted the factual findings of Wright J so nothing further was said about the burden of proof.

[20] Ibid 435-436.

[21] E.g. Silver v Ocean Steamship Co Ltd [1930] 1 KB 416, 424-425 (Scrutton LJ); Borthwick & Sons Ltd v New Zealand Shipping Co Ltd (1934) 49 Ll L Rep 19 per Roche J, 24 1st col; Phillips & Co (Smithfield) Ltd v Clan Line Steamers Ltd (1943) 76 Ll L Rep 58 per Atkinson J, 61 2nd col; Svenska Traktor Aktiebolaget v Maritime Agencies (Southampton) Ltd [1953] 2 Ll L Rep 124 per Pilcher J, 133 2nd col, citing Raoul Colinvaux, Carver's Carriage of Goods by Sea (Stevens, 9th ed, 1952) 185.

[22] Albacora SRL v Westcott & Laurence Line Ltd [1966] 2 Lloyd's Rep 53; 1966 SC (HL) 19 (Lord Reid).

[23] Ibid 22 (Lord Reid), 25 (Lord Guest), 27 (Lord Pearce), 29 (Lord Upjohn), 30 (Lord Pearson).

[24] Ibid 27.

[25] Ibid 31.

[26] Volcafe (n 1) [2].

[27] Ibid [3].

[28] Ibid.

[29] Ibid.

[30] Ibid [4].

[31] Ibid [5].

[32] Ibid [8].

[33] Ibid [9].

[34] Ibid [10].

[35] Ibid 11].

[36] Ibid [14].

[37] Ibid [15].

[38] Ibid [16].

[39] Ibid [17].

[40] Ibid [20].

[41] Ibid [21].

[42] Ibid [22]-[24].

[43] Ibid [25].

[44] Ibid.

[45] The Bunga Seroja (n 4).

[46] Volcafe (n 1) [26]-[27].

[47] Ibid [28].

[48] Ibid [28] and [31].

[49] Ibid [33].

[50] Ibid [35]-[37].

[51] Ibid [43].

[52] Shipping Corporation of India Ltd v Gamlen Chemical Co (A/asia) Pty Ltd [1980] HCA 51; (1980) 147 CLR 142.

[53] Ibid 150 (Stephen J); Ibid 156 (Mason and Wilson JJ).

[54] Ibid 163 (Mason and Wilson JJ).

[55] Ibid 164-165.

[56] Ibid 168. See Gamlen Chemical Co (A/asia) Pty Ltd v Shipping Corporation of India Ltd [1978] 2 NSWLR 12 at 23F.

[57] Glebe Island Terminals v Continental Seagram (n 18), 226F-228E.

[58] The Bunga Seroja (n 4).

[59] Ibid 166 [4] (Gaudron, Gummow and Hayne JJ).

[60] Ibid 166 [3].

[61] Ibid 167 [7]. See Great China Metal Industries Co Ltd v Malaysian International Shipping Corp Berhad (The Bunga Seroja) [1994] 1 Lloyd's Rep 455, 470-471 (Carruthers J).

[62] The Bunga Seroja (n 4) 167 [5] (Gaudron, Gummow and Hayne JJ).

[63] Ibid 181-182 [52]; Ibid 183 [58] (McHugh J).

[64] Ibid 182 [54] (Gaudron, Gummow and Hayne JJ).

[65] Ibid 171-172 [21]-[22]; Effort Shipping Co Ltd v Linden Management SA [1998] AC 605, 622F.

[66] The Bunga Seroja (n 4) 199 [102] (McHugh J).

[67] Ibid 196-197 [96].

[68] Ibid 197-198 [98].

[69] Ibid 220-222 [150] and [153] (Kirby J).

[70] Ibid 222-223 [155]-[156].

[71] Ibid 243-244 [228]-[229] (Callinan J).

[72] Hilditch Pty Ltd v Dorval Kaiun KK [2007] FCA 752.

[73] Ibid [9].

[74] CV Sheepvaartonderneming Ankergracht v Stemcor (A/sia) Pty Ltd [2007] FCAFC 77; (2007) 160 FCR 342.

[75] Ibid 361 [56].

[76] WK Marble & Granite Pty Ltd v CASA China Ltd [2007] FCA 1382; (2007) 244 ALR 396, 398 [6].

[77] Hilditch Pty Ltd v Dorval Kaiun KK (No 2) [2007] FCA 2014; (2007) 245 ALR 125.

[78] Ibid 142-145 [77]-[93].

[79] Seafood Imports Pty Ltd v ANL Singapore Pty Ltd [2010] FCA 702; (2010) 272 ALR 149.

[80] Ibid 167 [56].

[81] Paul Todd, 'The Hague Rules and the Burden of Proof' [2019] LMCLQ 183, 189.

[82] Julian Clarke et al Voyage Charters (Informa Law, 4th ed., 2014) 995 [85.1].

[83] Stuart Hetherington, 'The onus of proof in cargo claims: contract or bailment?' (2019) 25(2) Journal of International Maritime Law 105, and particularly in the second part of the article still forthcoming.

[84] John Pfeiffer Pty Ltd v Rogerson [2000] HCA 36; (2000) 203 CLR 503,543 [99].

[85] Richard Cooper The Hamburg Rules and the Carriage of Goods by Sea, dissertation as part of the Master of Laws Degree, University of Queensland, 1981, 19-20.


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