The Santa Isabella – Owners entitled to choose commercial route but in breach for failure to ventilate cargo


22 November 2019

Judgment was handed down today in the Commercial Court in the case of The Santa Isabella [2019] EWHC 3152 (Comm) in favour of the successful defendant charterers, in a demurrage dispute that examined the legal test for a ‘usual and customary route’ and the obligation on vessel owners to properly and carefully ventilate a cargo, in accordance with a sound system.

The vessel loaded a cargo of 44,000MT of maize in Topolobampo, Mexico in June 2016. She then proceeded via Cape Horn to discharge at Durban, South Africa where upon arriving it was discovered that the cargo had suffered extensive damage due to condensation (ship’s sweat) in the holds during the voyage.

Significant delays were experienced at Durban and subsequently Richards Bay while attempts were made to salvage the cargo by skimming damaged material from the surface of the stow during discharge operations. The claimant disponent owners claimed around US$800k in demurrage (liquidated damages for delay) for the time the vessel was in South Africa.

The charterers defended the claim on the basis that the delay was in fact caused by the owners’ breaches of the charterparty (the rule in Budgett v. Binnington applied), in particular:

  1. The route taken by the owners around Cape Horn was not the usual and customary route. There was a (slightly) shorter route available via the Panama Canal that would have posed a far lesser risk to the cargo.
  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(2) of the Hague Rules.
  3. Further, that the owners had failed to properly and carefully ventilate the cargo in accordance with a sound system, resulting in the damage to the cargo and consequent delay.

The Judge took the view that if a shipowner chooses to take a longer route than the direct sea track, then in order to be contractual, it must be both usual and reasonable bearing in mind the interests of all involved. Commercial considerations may be relevant, as may the care of the cargo. However, owners are not required to undertake a refined analysis of the climactic conditions likely to be experienced on route. Applying this analysis to the facts, it was held that the owners were entitled to take the route around Cape Horn and that this did not amount either to a deviation or a breach of Article III(2).

However, the Judge also held that owners were in breach of the charterparty by failing properly and carefully to ventilate the cargo, in accordance with a sound system. He accepted the charterers’ evidence that had the cargo been adequately ventilated to the extent possible during the voyage (including at night time), the condition upon outturn would have been substantially improved and the delays largely avoided.

The Judge made further findings that the owners’ failure to meet the warranted charterparty speed had exacerbated the problem (though it is unclear to what degree) and that an infestation that led to a further delay at Richards Bay was caused by inadequate cleaning of the deck by the crew.

Accordingly, the claim failed (but for the award of a nominal sum in demurrage on account of the short time it would have taken to remove a "light crust" of damaged cargo that would have inevitably been present in the circumstances of this voyage).

The case provides helpful guidance on issues of vessel owners’ choice of route and obligations in relation to the ventilation of grain cargoes.

Pequod Associates instructed Henry Adams and Tom Hodges of Birketts LLP and Stewart Buckingham of Quadrant Chambers as Counsel on behalf of the successful defendants.