QCR Summer 2020: Alianca Navegacao e Logistica Ltda v Ameropa SA (The Santa Isabella) [2019] EWHC 3152 (Comm)

Court clarifies what is a vessel’s “usual and customary route” and the owners’ obligation for cargo care.

Alianca Navegacao e Logistica Ltda v Ameropa SA (The Santa Isabella) [2019] EWHC 3152 (Comm)

The English Commercial Court has ruled in favour of the defendant charterers in a demurrage dispute that examined the choice of route and care for cargo.

Ameropa, the Charterers, voyage chartered the ship in June 2016 from Alianca, the disponent owner of the bulk carrier Santa Isabella, to carry a cargo of 44,000MT maize from Topolobampo, Mexico to Durban and Richard’s Bay, South Africa. The charterparty was on an amended Synacomex form, incorporating the Hague-Visby Rules. 

Upon arrival at Durban, it was discovered that the cargo had suffered extensive damage due to significant condensation (ship’s sweat) in the holds during the voyage. The authorities refused to allow the cargo to be discharged due to its apparent condition which included a suggestion that it included toxins. Considerable delays were incurred both at Durban and Richards Bay. 

The disponent owner claimed for around USD$ 800k in demurrage and associated expenses (liquidated damages for delay) for the time the vessel was in South Africa. The charterers sought to defend the claim, relying upon the rule in the 19th century case Budgett v Binnington [1891] 1 QB 35 that charterers will not be responsible for laytime or time on demurrage when such time has resulted from the fault of owners, in particular:

  1. The route taken by owners via Cape Horn was not the usual and customary route when the Panama Canal route was (about 2 per cent) shorter and less risky to the cargo. This amounts to a breach of the charterparty; 
  2. Alternatively that the route taken by the vessel amounted to a breach by the Owners of their obligation to care for the cargo pursuant to Article III Rule 2 of the Hague-Visby Rules; and
  3. Owners had failed to properly  and carefully ventilate the cargo in accordance with a sound system, resulting in damage and consequent delay.

Judgment

Andrew Henshaw QC, sitting as a judge of the Commercial Court, held for the purpose of identifying the contractual route that the route taken was a usual and reasonable route and did not amount to a deviation or a breach of the Hague-Visby Rules Article III Rule 2. He pointed out that owners may choose to take a longer route than the most direct route, but in order to comply with contractual obligations, it must be both usual and reasonable bearing in mind the interests of all concerned, including charterers and shippers. The cargo being carried may also be a relevant factor for consideration.  Owners must therefore demonstrate they have considered these interests. However, when seeking to establish a “usual” route, owners are not required to undertake a refined analysis of the climactic conditions likely to be experienced on the route.

On the basis that the route was usual and reasonable, the Court nevertheless found that the Owners had failed to properly and carefully ventilate the cargo in accordance with a sound system as per evidence of practice in the industry not least on night ventilation which P&I Club bulletins recommended.  Mr Justice Henshaw accepted the Charterer’s evidence that had the cargo been adequately ventilated to the extent possible during the voyage, the condition upon outturn would have been substantially improved and the delays largely avoided. He stated that “as a matter of common sense, the arrival in a seriously damaged condition of a cargo loaded in apparent good order and condition calls for an explanation”. The Court held that this failure was a breach of owners’ duty to care for the cargo. The Owner’s breach in this regard had resulted in cargo damage which had, in turn, caused the delays that led to the demurrage claim at the discharge port. The Charterer was not, therefore, liable for the demurrage.

The judge found that the vessel had not proceeded to Durban in accordance with her warranted speed, though on this occasion it was not possible to identify any particular element of damage or loss caused by that breach. After the vessel arrived at Durban, the cargo was found to have contained an insect infestation which was caused by inadequate cleaning of the topsides, which caused delays in discharging at Richards Bay. 

Comments

As the judge points out, although this is a demurrage claim for a relatively modest amount of money, the case raises certain significant issues regarding the duties of shipowners as to: (a) choice of voyage route; and (b) cargo care including the ventilation of corn and other hygroscopic cargoes. 

In the absence of a specific contractual provision, if voyage charterers would like owners to proceed on a particular route, they should ensure that this is clearly specified in the charterparty.

The case also clarified the owners’ obligations to show that they have a sound system for cargo care in place, including ventilation and disinfection where necessary, and that the system has been duly followed, and here the Volcafe decision was referred to. (For the Club’s summary of the Supreme Court’s decision in Volcafe in our QCRs Spring 2019, please click here.) If owners cannot do this, then delays and costs incurred as a result of such damage are not recoverable by owners from charterers.  

Finally, the judgment affirms the approach taken by courts in deciding quantum. The court will look at the losses suffered as a result of the breach when deciding on damages, and if it is not possible to attribute any particular degree of loss to the breach, then damages will not be awarded.