Alianca Navegacao e Logistica Ltda v Ameropa SA (the “Santa Isabella”) [2019] EWHC 3152 (comm) – clarity on ‘contractual route’ and owners’ obligation

24/07/2020

When there are no specific contractual provisions in place, what would be deemed a ‘usual and reasonable’ route for a vessel to take?

This was clarified in the “Santa Isabella” when the English Commercial Court presided over a dispute concerning demurrage liability and causation.

The charterers carried a cargo of 44,000MT of maize from west coast of Mexico to South Africa on a voyage charter basis incorporating the Hague-Visby Rules but omitted to specify any provision regarding the intended vessel route.

Instead of taking the Panama Canal route, the slightly longer route around Cape Horn was followed and upon arrival to the destination in South Africa, it was discovered the cargo was extensively damaged; it was later intimated that the cargo was contaminated with toxins. The South African authorities refused to permit discharge on this basis, and consequently demurrage costs were incurred for delay. 

The owners subsequently claimed against the charterers for demurrage and associated cost totalling US$757,561.66. The cargo damage consisted of condensation including wetting and caking largely across the top surface but at its worst the surface crust penetrated to a depth of 50cm.

Liability for demurrage charges was not at issue here, causation was.                                                          The charterers submitted that although they accepted the owners had a prima facie entitlement to claim demurrage, they relied on the rule in the older case of Budgett v Binnington [1891] 1 QB 35 that charterers cannot be responsible for demurrage when ‘such time has resulted from the fault of the owners’.

Where the expected route is not provided for in the charterparty, it is implied that the ‘usual and reasonable’ route should be taken. The charterers argued that the route taken by owners via Cape Horn was not the ‘usual and reasonable’ route taking into consideration the cargo risk and the understanding that the Cape Horn route was somewhat longer than the Panama Canal route, which resulted in the spoiled cargo and this amounted to a breach of the charter party.                                Additionally or in the alternative, the route taken amounted to a breach by the owners of their obligations to care for the cargo pursuant to Article III Rule 2 Hague Visby Rules as damage and consequent delay resulted from inadequate ventilation which the owners failed to properly and carefully maintain.  

In contrast, the owners argued that they were not responsible for the damage and subsequent delays. They contested that the vessel had taken the usual and contractually permitted route via Cape Horn and the inability to ventilate the cargo was due to fumigation restrictions as a result of the prevailing weather and sea conditions on route.

The court identified various considerations that needed to be taken into account when establishing a ‘usual’ route. Usually, this would be the most direct route and therefore the charterer’s position would be correct. However, the courts distinguished that routes other than the shortest geographical route should not be deemed a deviation, recognising that occasionally the ‘usual’ route can be significantly longer than the direct route taking into consideration the interests of all concerned, including the charterers and shippers. In this case, it would be unjustified to hold the owners responsible on the basis that they had not proceeded along the ‘usual’ route, when the route taken albeit longer, was a relatively common one. 

In holding them responsible, it would open the flood gates for the relevance of a wholly different set of factors in deciding what could be deemed a contractual route. Consequences for deviation are severe, and where the route taken is one which is commonly used it would be unfair to allege that they have deviated from the ‘expected’ route.

On the issue of inadequate ventilation, the charterer’s argument was that the route taken involved a voyage through colder temperatures and this was worse weather conditions than that which would have been experienced on the Panama Canal route, therefore increasing the need for more ventilation of the cargo given the added risk of condensation damage.

It was held that had there been proper ventilation, there would have only been 6 to 12 inch of dried crust at the top of the cargo and no further seepage.

In conclusion, the route taken was not a deviation or breach of the Hague Visby Rules; it was a ‘usual and reasonable’ route and therefore the contractual route, despite not being the most direct taking into consideration the interests of all concerned. However, in taking this colder route the Owners had failed to properly and carefully ventilate the cargo, consideration of which should be taken into account when choosing the route to proceed with and this was a breach of their obligations under Article III (2) of the Hague Visby Rules.

Although it was a ‘usual and reasonable’ route, the charterers position was favourable as the owners failure to properly ventilate the cargo resulted in the damage at destination and this in turn caused delays that subsequently led to the demurrage claim at discharge port. As such, the charterers were not liable for the demurrage and the owners claim for this had failed.

Given the useful guidance put forward by the court outlined above, should voyage charterers wish to avoid any potential deviation, it would be prudent for them to ensure there is a clearly specified route contained within the charter party.

Please share it