In September 1990, Star Reefers contracted with Banana Services to transport fruit from South America to Florida on the M/V Tasman Star. The contract between Banana Services and Star Reefers stated that Star Reefers accepted 'liability for any cargo carried in accordance with the U.S. Carriage of Goods by Sea Act'. The M/V Tasman Star was on time charter from the ship's owner and operator, Navegantes.

In June 1991, Banana Services delivered boxes of bananas and plantains to the vessel at Puerto Bolivar, Ecuador, and Turbo, Colombia. The cargo was accepted under clean bills of lading. On 9 June 1991, the vessel departed from Turbo en route to Port Manatee, Florida. A fire broke out in the engine room. Although the crew extinguished the fire, it damaged the ship’s refrigeration control panels.

The ship arrived at Port Manatee on 13 June 1991. The fruit was found to be unmarketable. Banana Services refused to take delivery, and Navegantes bore the costs of disposing of the cargo.

Banana Services sued Navegantes, Star Reefers for more than USD 1.1 million in damages resulting from the loss of the cargo. Banana Services argued that the carrier, under the Carriage of Goods by Sea Act, 46 USC ss 1300 ff (COGSA), must first demonstrate that it acted with due diligence to provide a seaworthy vessel for transport before it may invoke the 'fire defence' of s 1304(2)(b) of COGSA (which corresponds to art 4.2.b of the Hague Rules). The District Court held that COGSA does not limit the fire defence in this fashion, and entered judgment against Banana Services.

Banana Services appealed.

Held: Appeal dismissed. District Court judgment affirmed.

Under COGSA, a shipper seeking recovery from a carrier for damages to its cargo bears the initial burden of proving a prima facie case. The shipper establishes a prima facie case by demonstrating the cargo was loaded in an undamaged condition, and discharged in a damaged condition. A clean bill of lading creates a rebuttable presumption the goods were delivered to the carrier in good condition and thus satisfies this element of the plaintiff's prima facie case. Banana Services established its prima facie case.

Once a shipper establishes a prima facie case, the burden of proof shifts to the carrier to demonstrate either (1) it exercised due diligence to prevent the cargo damage, or (2) the damage was caused by an 'excepted cause' listed in s 1304(2).  Section 1304(2)(b) provides a carrier is not responsible for cargo damage resulting from a fire unless the damage is 'caused by the actual fault or privity of the carrier'.

The carrier does not need to prove due diligence in providing a seaworthy vessel as a condition precedent for invoking the fire defence under COGSA. The District Court correctly concluded that the cargo was destroyed by fire because the fire in the M/V Tasman Star's refrigeration panels prevented the ship from refrigerating the fruit. As a result, the cargo spoiled. A fire need not directly ignite the cargo to be the cause of damage under COGSA: see Westinghouse Elec Corp v M/V Leslie Lykes 734 F 2d 199, 206 (5th Cir).

There is conflicting authority on whether carriers must demonstrate due diligence as a prerequisite to invoking the fire defence of COGSA. The Ninth Circuit has reasoned that carriers must overcome this initial burden before they may raise the defence and shift the burden of proof back to the shipper: see Sunkist Growers Inc v Adelaide Shipping Lines 603 F 2d 1327, 1335-36 (9th Cir 1979). The Second and Fifth Circuits, disagreeing with the Ninth Circuit's reasoning in Sunkist, have concluded that COGSA does not condition a carrier's right to invoke the fire defence on proving due diligence. The reasoning of the Second and Fifth Circuits is persuasive. COGSA does not require carriers to demonstrate due diligence as a condition precedent to invoking the fire defence of s 1304(2)(b).