The “Santa Isabella” - what is a contractual route?

April 2020

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Was the chosen route “usual and reasonable” and did it constitute a breach of duty to care for the cargo? 
 
In Alianca Navegacao E Logistica Ltda v. Ameropa SA (Santa Isabella) [2019] EWHC 3152 (Comm), the High Court provided useful guidance on the test for determining what constitutes a “usual and reasonable” route in the absence of a specific contractual provision.
 

Background

The “Santa Isabella” (“the vessel”) was fixed to carry a cargo of 44,000 MT white corn from Topolobampo, on the west coast of Mexico, to Durban and Richards Bay in South Africa. The charterparty did not contain any provision regarding the vessel’s route. Rather than taking the Panama Canal route, the vessel took the slightly longer route around Cape Horn. On arrival in South Africa, the cargo was found to be damaged, which led to complications and delays on discharge. Owners subsequently claimed against Charterers for demurrage.

Charterers relied on the rule in Budget v. Binnington [1891] 1 QB 35 to argue that they were not liable for demurrage as the delays had been caused by the fault of Owners. Amongst other things, Charterers argued that Owners had breached the charterparty by taking a non-contractual route, arguing that the route around Cape Horn was not a “usual and reasonable” route and that the longer voyage had caused the cargo to spoil, which in turn led to the delays upon discharge.

What is a ‘usual and reasonable’ route

Where the charterparty does not expressly provide for what route the vessel should take, the vessel should proceed by a “usual and reasonable” route, without unjustifiable departure from that route and with reasonable despatch.

The High Court identified a number of principles that were relevant considerations for the purpose of establishing what is a ‘usual’ route. In the absence of evidence to the contrary, it is presumed that the usual route is the direct geographical route, though the usual route frequently differs from the direct route and may be significantly longer than the direct route. Establishing the usual route does not require proof of a custom and the usual route can change over time; there may even be more than one usual route between two ports. Commercial and navigational reasons were also relevant considerations when determining which route is the usual route.

Charterers had argued that if a vessel takes the shortest geographical route, then it has taken a contractual route; but that if a vessel diverges in any respect from that route, then a full range of considerations, including the way in which the cargo is best protected, apply when deciding whether the route taken is a usual and reasonable route. On that basis, Charterers argued that the Cape Horn route was not a usual and reasonable route because: i) it was not the shortest geographical route; ii) it involved a voyage through colder temperatures, giving rise to an increased need for ventilation of the cargo; and iii) it involved a voyage through worse weather conditions, increasing the risk that the vessel would not be able to undertake ventilation due to bad weather.

The High Court identified a number of problems with that approach at paragraphs 85-90 of its judgment:

i) Charterers’ distinction between the shortest geographical route and all other routes seemed arbitrary. It would mean that as soon as any divergence occurred from the shortest route, then a wholly different set of factors would become relevant in deciding what is or is not a contractual route, including a detailed consideration of questions of cargo care and the relative merits of different routes from that point of view.

ii) The consequences for a carrier of being held to have deviated are severe, including loss of the right to claim freight and of the protection of exception clauses under the Bill of Lading. For such consequences to ensue because of the nature of the cargo where a vessel had taken a commonly used route between two ports (albeit a slightly longer one) would be a marked departure from the generally accepted position.

iii) In order to avoid such consequences, shipowners would have to comply with a highly uncertain standard. They would have to weigh up the costs and duration of alternative routes with their possible effects on particular cargoes. Problems would also arise where the vessel was carrying more than one type of cargo or in the context of voyage charters, which are frequently concluded without knowledge of the type of cargo to be carried, such that a shipowner might then have to undertake unprofitable voyages once the precise nature of the cargo and resulting routing implications had become clear.

For those reasons, the judge held that identifying the ‘usual and reasonable’ route did not entail the broad-ranging enquiry argued for by Charterers. On the facts, Cape Horn route was only very marginally longer than the Panama Canal route and was a relatively common route. Accordingly, the judge held that the vessel’s route was a usual and reasonable, and therefore contractual, route and did not amount to a deviation.

Whether choice of route was an aspect of the duty to care for the cargo

Charterers had framed their case on the alternative basis that the choice of route constituted an aspect of the shipowner’s duty to take care of the cargo. Charterers argued that in taking a route that exposed the cargo to a greater risk of condensation damage (see above), Owners had breached the obligation under Article III(2) of the Hague-Visby Rules to properly and carefully carry and care for the cargo.

The judge rejected this approach on the basis that it was not supported in the case law and would create considerable uncertainty:

“it would overlay the relatively clear and well-established principles for identifying the contractual route with a need for wide-ranging consideration of the subtleties of how one or more cargo being carried by the vessel may be affected by the length, likely temperatures/humidities and sea conditions of alternative routes, and of which factors prevail given potentially countervailing considerations of voyage time, cost, and the different needs of other cargoes that may be on board” [at para 121].

Accordingly, Owners had not breached Article III(2) by reason of the decision to take the Cape Horn route.

Comment

Although the High Court did ultimately find that Owners failed to properly ventilate the cargo in accordance with a sound system as required under Article III(2), with the result that Charterers were not liable for the demurrage, the High Court’s decision insofar as it concerns the vessel’s choice of route should be welcomed by Owners. For the approach suggested by Charterers would have been very onerous on Owners, requiring a refined (and uncertain) analysis of various considerations any time a vessel does not take the shortest route in order to avoid the potentially very severe consequences of a deviation.

Article by Constantin von Hirsch

Claims Syndicate Executive

Eastern Syndicate