Alianca Navegacao E Logistica v Ameropa SA - The Santa Isabella
Alianca Navegacao E Logistica Ltda v Ameropa SA (The “M/V Santa Isabella”)
English Commercial Court: Andrew Henshaw QC (sitting as a High Court Judge):  EWHC 3152 (Comm): 22 November 2019
Judgment Available on BAILII @ https://www.bailii.org/ew/cases/EWHC/Comm/2019/3152.html
Jason Robinson (instructed by MFB Solicitors) for the Claimants, disponent owners (“Alianca” and “Owners”)
Stewart Buckingham (instructed by Birketts LLP) for Defendants, charterers (“Ameropa” and “Charterers”)
VOYAGE CHARTERPARTY: OWNERS CLAIM FOR DEMURRAGE:
CHOICE OF REASONABLE ROUTE: WHETHER OWNERS WERE IN BREACH OF ART III RULE 2 OF THE HAGUE RULES OR LIABLE FOR DEVIATION:
SPEED/REASONABLE DESPATCH: WHETHER THE VESSEL FAIILED TO PROCEED TO DURBAN WITH ALL CONVENIENT SPEED AND/OR IN ACCORDANCE WITH WARRANTED SPEED:
CARGO CARE: WHETHER THE CARGO WAS PROPERLY AND CAREFULLY VENTILATED IN ACCORDANCE WITH A SOUND SYSTEM
In the context of Owners’ claim for demurrage under a voyage Charterparty in respect of delay at ports in South Africa discharging a Cargo of white corn in bulk loaded in Mexico, the Judge held that:-
(i) Owners were not in breach of the Charterparty for having taken the Cape Horn route to Durban.
(ii) While the Vessel did not proceed to Durban in accordance with her warranted speed, this was not causative of any damage or loss.
(iii) Owners had breached their duty to care properly for the Cargo by failing to ventilate it properly and carefully it in accordance with a sound system. This caused additional damage to the Cargo which, in turn, caused long delays in discharging at Durban.
(iv) Owners had also breached their duty to care properly for the Cargo by failing to properly disinfest, the Vessel’s topsides, which caused insect infestations at Durban and Richards Bay and, in consequence, the delay in discharging at Richards Bay.
(v) But for Owners’ breaches as aforesaid, the discharge process at Durban would have been completed in 8.5 days (3.7 days in excess of laytime) and 3.4 days at Richards Bay (within the laytime). The demurrage claim by Owners would be reduced accordingly.
Case note contributed by Cindy Ko, LLB (Hons), Advocate & Solicitor of Singapore, International Contributor to DMC’s Case Notes
Ameropa chartered the M/V “Santa Isabella” (“Vessel”) from her disponent owners, Alianca, on a voyage charterparty (“Charterparty”) to carry a Cargo of 40,000 MT (+/- 10% at owners’ option) of white corn in bulk from Topolobampo in north-west Mexico to Durban and Richards Bay in South Africa.
The Charterparty consisted of a recap and an amended Synacomex Charterparty form and included, amongst others, the following provisions: a warranty that the speed of the Vessel was about 13.3 knots and an undertaking that
"Being so loaded, the vessel shall proceed with all convenient speed direct to 1/2 SB/SA Durban plus ½ SB/SA RICHARDS BAY…”
On 13 June 2016, Owners specifically instructed the Master to proceed to Durban via Cape Horn. The Cape Horn route was geographically slightly longer than routing via the Panama Canal, but avoided the fees and possible delays involved in the latter route.
Between 21 and 24 June 2016, the Vessel loaded about 44,000 MT of Mexican white maize in bulk (“Cargo”) in apparent good order and condition. The Vessel departed Topolobampo on the 24 June 2016 and proceeded via Cape Horn across the South Atlantic ocean to Durban, where she arrived on 1 August 2016.
On arrival, the Cargo was found to have suffered extensive damage from the condensation of ship’s sweat, including wetting and caking across the top surface. The affected Cargo had spoiled and was described as a very warm or hot. There were significant populations of adult insect grain pests. Owners’ expert noted that the Cargo was “wet, smelling and germinating”.
The parties’ expert agreed that the cause of the wetting and spoilage of the Cargo was “condensation (ships sweat)”.
After lengthy and difficult negotiations with the local authorities, permission to proceed with discharge was eventually granted on condition that the maize met the specification for human consumption.
During the course of discharge, the Vessel required re-fumigation on more than one occasion, had to vacate berth and wait at anchorage to accommodate other vessels, and experienced weather interruptions.
Discharge at Durban commenced on 16 October 2016, and was slow as it proceeded in tandem with skimming operations to remove the damaged Cargo. Degradation of the Cargo continued during the discharge. Discharge was completed at Durban on 12 November 2016, and had taken over three months.
The Vessel then arrived at Richards Bay to discharge the remainder of the Cargo. After further fumigation, the remaining Cargo was discharged with the damaged Cargo being removed by hand. Discharge at Richards Bay was completed on 21 November 2016.
Owners claimed against Charterers for demurrage at the discharge ports and associated expenses, totalling USD 757,561.66. Charterers resisted the claim and alleged that damage to the Cargo, and the delays at Durban and Richards’ Bay, were caused by:-
(a) The Vessel taking the Cape Horn route rather than the Panama Canal Route;
(b) Failure by the Vessel to ventilate the Cargo in accordance with a sound system;
(c) Failure by the Vessel to disinfest areas of the Vessel outside of the Cargo holds following loading at Topolobampo; and/or
(d) The Vessel proceeding to Durban at less than her warranted speed.
The judge first summarised the material facts (above), referred to the relevant clauses in the Charterparty, and summarized the key issues as set out below:-
1) Choice of Route: were Owners in breach of the Charterparty by reason of the route adopted to Durban?
2) Speed / Reasonable Despatch: did the Vessel fail to proceed to Durban with all convenient speed and/or in accordance with her warranted speed?
3) Ventilation: was the Cargo properly and carefully ventilated in accordance with a sound system?
4) Reinfestation: What was the cause of the reinfestation?
5) Quarantine: did the South African authorities quarantine the Cargo within the meaning of clauses 23(3) and/or 46 of the Charterparty – see footnote for the text of these clauses?
6) Delay: what was the cause of the delay at Durban and Richards Bay, and how long would discharge have taken, absent the alleged breach(es) on the part of Owners?
A. Choice of Route
(1) Reasonable Despatch and Deviation
The Judge first held that it was Charterers’ burden to show that, on a balance of probabilities, the damage suffered arose from a breach of contract by Owners. Charterers contended that in the absence of a contractual stipulation of the route, the owner must adopt a route that is both usual and reasonable. What then, is meant by “usual” and “reasonable”?
On usual route
Citing Reardon Smith Line Ltd v Black Sea & Baltic General Insurance Co Ltd  64 Lloyd’s LR 229, the Judge held that in the absence of evidence to the contrary, the usual route is presumed to be the direct geographical route. However, the usual route frequently differs from the direct route, for both navigational and commercial reasons and evidence is admissible to show that that is the usual or customary route between the loading and discharging port. The usual route can change over time, and may be significantly longer than the direct route. There can also be more than one “usual” route between two ports, and taking any of those routes would suffice for Owners to discharge their duties under the contract. A route may also be inferred to be the usual route if no objection is made by the charterer.
On reasonable route
The requirement of reasonableness arises in the context of determining what the contractual route is, before further considering whether there has been deviation from the contractual route. Whether a route is reasonable depends on the circumstances, taking into account, generally speaking, various considerations, commercial or navigational. There will be some room for the owner to determine what is reasonable, so long as it is not unreasonable in regard to the interest of the charterer or any other persons who might be concerned.
After analysis the authorities, the Judge summarized that: if a shipowner chooses to take a longer route than the direct sea track, then in order to be contractual (leaving aside any liberty clause) it must be both usual and reasonable bearing in mind the interests of all involved. Cargo considerations are relevant to the extent that a much longer voyage is likely to be detrimental to a perishable Cargo.
The parties’ experts were in agreement that the usual route was via the Strait of Magellan/Cape Horn, and a minority of vessels used the Panama canal route. Charterers relied heavily on arguments that the Cape Horn route has (i) far higher potential for the Cargo to be exposed to condensation, and (ii) more days when ventilation would have been restricted. Charterers also relied on evidence that Cargo care is relevant when considering the route of choice and in this case the nature of maize Cargo and the temperatures/weather likely to be experienced.
However, the Judge found that the considerations on Cargo care were not material to identifying the contractual route or what is a “usual and reasonable route”. The Judge therefore found that the Cape Horn route was a usual and reasonable route for identifying the contractual route, and therefore did not amount to a deviation.
(2) Care of Cargo
In the alternative, Charterers framed the argument on choice of route as a failure by Owners to take proper care of the Cargo in accordance with a sound system. Charterers argued that the choice of route is a central aspect of carrying, keeping, and caring for the Cargo and so adoption of a route that imperils the Cargo can constitute negligence and thus a breach of Article III rule 2.
This was rejected by the Judge, because, amongst others, it would augment and in reality displace the well-established law on contractual route and cannot be reconciled with long-established case law.
The Owners’ duty was to take proper care of the Cargo in accordance with a sound system. It was relevant to consider evidence of general practice in the industry to determine what a sound system is.
In this case, the Cargo would have required ventilation. On the evidence, it was found that the Cargo was ventilated for only one third of the time it required ventilation.
On the facts, the Judge found that the likely outcome - had there been proper ventilation - was that there would have been only 6 to 12 inches of dried crust at the top of the Cargo, as opposed to crust of up to 50cm.
C. Vessel Speed
The Judge found that while the Vessel did in fact proceed at 11.3 knots only, it was not possible to attribute any particular degree of damage or delay to this breach of contract, that is to say, that this would have caused any less than 6-12 inches of dry crust.
The Judge held on the facts that this was caused by inadequate cleaning of the topsides following loading and again following fumigation in Durban. This amounted to a breach of Article III rule 2 to properly and carefully handle, keep and care for the Cargo.
Charterers had alternatively relied on the quarantine exception in clause 23(3) and/or 46 of the Charterparty as a defence to the demurrage claim for the delays at Durban. The Judge took a narrow reading of the term “quarantine” and found that the events at Durban did not fall within the natural meaning of “quarantine” because of the absence of any real isolation of the Cargo, or any part of it, or of the Vessel or its crew.
F. Causes of the delays in discharging
The Judge found that the discharge process at Durban would have been completed in 8.5 days (3.7 days in excess of laytime) and 3.4 days at Richards Bay (within the laytime), taking into account the time to skim off 6 -12 inches of dry crust.
The additional delays at Durban were caused by the need to skim off more than 6-12 inches of dry crust owing to Owners’ breaches as set out above. The additional delays at Richards Bay were caused by the need for fumigation.
This judgment is significant for the comments provided by the English High Court on choice of route and Cargo care, and in particular, the Judge’s comments that a longer route may be contractual if it is usual and reasonable.
Adopting a commercial and pragmatic analysis, the Judge had rejected the Charterers’ submission that a direct sea track would be a contractual route, whereas a diversion from the direct sea track would have to be considered in the round before deciding if it were usual and reasonable. The Judge highlighted four reasons why the proposed approach was problematic. These included that it would lead to an arbitrary distinction where an owner could adopt the direct route without any further considerations, but would be saddled with a suite of considerations as soon as any diversion occurred (no matter how slight).The latter was a highly uncertain standard.
Instead, the Judge’s approach was to consider what the usual and reasonable route was, taking into account, amongst others, commercial or navigational considerations, and this might not be the direct sea track or the shortest route. This is a sensible approach and consistent with existing case authorities.
In this case, it was notable that parties’ expert evidence showed that the Cape Horn route was the usual route as opposed to the Panama Canal route. Further, the decision is helpful to owners as it gives them a fair amount of room to determine what the reasonable route is, so long as it is not unreasonable to the interest of the charterers or other persons who might be interested in the voyage. That said, it would still be best for owners that a route be expressly provided for in the charterparty.
The Judge’s discussion on the interplay between an owner’s choice of route and his duty to care for the Cargo under Article III rule 2 is also notable. These are two distinct parts of the owner’s duties.
Charterers had alternatively framed the argument of a poor choice of route as a failure in proper care for the Cargo, relying on a single authority from the Canadian Federal Court. However, the Judge confined the Canadian case to its own facts and the local weather conditions therein. Careful to avoid blurring the two duties into each other and potentially displacing the established law on choice of route, the Judge did not accept Charterers’ argument.
The Court’s approach to maintain the conceptual distinction between the two parts of owner’s duties is welcome.
Fn. 1 ”23. Responsibilities and immunities
… (3) Save to the extent otherwise in this Charterparty expressly provided, neither party shall be responsible for any loss or damage or delay or failure in performance hereunder resulting from…quarantine…restraint of princes, rulers and peoples or any other event whatsoever which cannot be avoided or guarded against.”
[Laytime at discharge]
46. …Any delays caused by ice, floods, quarantine or by cases of force majeure shall not count as laytime unless the Vessel is already on demurrage.”