English Court clears owners’ obligations in cargo damage

The Standard Club provides the case of a ruling made by the English Commercial Court concerning Alianca Navegacao e Logistica Ltda v Ameropa SA (The Santa Isabella) [2019] vessel which arrived at the port of destination with damaged cargo.

This case provides useful guidance to parties involved in the bulk cargo trade, as:

1. the legal test for a usual and customary route;
2. owners’ obligation to ventilate and care for cargo.

Facts

Alianca, the disponent owner of the bulk carrier Santa Isabella, chartered the vessel back in 2016 to transmit cargo of corn and maize in bulk from Topolobampo, Mexico to Durban and Richard’s Bay, South Africa.

When the vessel arrived at Durban, authorities found a crucial condensation (ship’s sweat) to have damaged the cargo leading to the creation of a “light crust” on the surface of the cargo, which had to be removed. In light of the damaged cargo, the authorities prohibited its discharge, as it also included a suggestion of having toxins. The whole situation led to extensive delays to discharge operations, whereas considerable delays were incurred both at Durban and Richards Bay as a result of the condensation damage to the cargo.

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Following, the disponent owners issued a claim for demurrage and associated expenses for the time the ship was delayed 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 addition, the charterers stated that the whole cargo damage was the fault of the owners and in breach of their charter party obligations to care for the cargo. Their arguments included:

1. The route taken by owners via Cape Horn was not the usual and customary route when the Panama Canal route was shorter and less risky to the cargo. The choice of route had resulted in damage to the cargo;
2. Owners had failed to properly ventilate the cargo in accordance with a sound system, resulting in damage and delay; and
3. Owners had failed to properly disinfect the topsides outside the cargo holds following loading, resulting in insect infestations causing damage and delay.

On the contrary, the owners stated that:

1. The Cape Horn route was the usual and customary route and was permitted by the charter party;
2. Ventilation was properly carried out when it was safe to do so and when fumigation restrictions allowed. The weather and sea conditions prevented ventilation for the majority of the journey and that was not the fault of owners; and
3. The loadport fumigation operations used three times the recommended dose and owners had complied with their disinfection obligations.

Judgement

Following the reveals, Mr Justice Henshaw sitting in the English High Court found that the cargo had suffered extensive damage on arrival at Durban. He ruled that:

• Owners were entitled to take the route around Cape Horn

The Judge stated that the route was a usual and reasonable route for the purpose of identifying the contractual route and did not amount to a deviation, adding that owners are able to opt for a longer route than the most direct route, but to comply with the contractual obligations, it must be both usual and reasonable bearing in mind the interests of all involved.

Both commercial considerations and care of the cargo may be relevant. However, owners are not required to undertake a refined analysis of the climactic conditions likely to be experienced on route.

• Owners had failed to properly and carefully ventilate the cargo in accordance with a sound system

It was found that the cargo damage was a breach of the owners’ responsibility to care for the cargo. However, he ruled that there would have inevitably been a crust of damaged cargo and awarded nominal damages to owners for the demurrage attributable to removing this surface crust.

• Owners had failed to properly disinfect the topsides of the cargo holds which was the likely cause of the insect infestations discovered at Durban.

It was found that owners were in breach of Article III Rule 2 of the Hague Visby Rules, which were incorporated in the charterparty.

The Club comments that this case is an ideal example that a longer voyage route may still be contractual if it is usual and reasonable. When deciding whether a route taken by owners was usual and reasonable, the court will consider if it was reasonable in the interests of all concerned. This may include charterers and shippers and “cargo considerations may be relevant”.

Owners must therefore demonstrate they have considered these interests but are not required to conduct a detailed analysis of the climactic conditions of the route and how these will affect the need to ventilate the cargo.

Moreover, if cargo is found damaged during discharge operations, owners should be able to show that they have a sound system for cargo care in place, including ventilation and disinfection where necessary, and the system has been duly followed.

The Judge commented 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“.