Voyage Charters. Deduction from Freight.

In both classes of cases, whether of loss of quantity or change in quality, the proper course seems to be the same, viz. to ascertain from the terms of the contract, construed by mercantile usage, if any, what was the thing for the carriage of which freight was to be paid, and by the aid of a jury to determine whether that thing, or any and how much of it, has substantially arrived.
Willes J. in Dakin v Oxley (1864) 15 CBNS 646 at 667.

Freight and Cargo Contamination

Arrival of the goods is a condition precedent to the shipowners’ right to freight. This rule, however, has one qualification. Freight will not be payable if on delivery of the goods they appear to be damaged and this damage is so severe as to transform the goods into a different type of goods altogether. In such case there is, in effect, a total loss of the cargo, and, therefore, no freight is payable.

The nature of a thing is not necessarily altered because the thing itself has been damaged; wheat or rice may be damaged, but may still remain the things dealt with as wheat or rice in business. But if the nature of the thing is altered, and it becomes for business purposes something else, so that it is not dealt with by business people as the thing which it originally was, the question for determination is whether the thing insured, the original article of commerce become a total loss… If they [dates] were totally lost as dates, no freight in respect of them became due from the consignee to the person to whom the bill of lading freight was payable…
Per Lord Esher MR in Asfar & Co v Blundell [1896] 1 QB 123 at pp.127-128

When the goods arrived damaged or contaminated an honest merchant has to qualify the description of the goods. The question then arising is, whether such qualification destroys the description. If this question is answered in positive then no freight is earned because no cargo has been delivered. In Montedison SpA v Icroma SpA (The Caspian Sea) [1979] 3 All ER 378, [1980] 1 WLR 48, [1980] 1 Lloyd’s Rep 91, the owners delivered a cargo of specific crude oil, ‘Bachaquero Crude’, contaminated. They contended, however, that unless the goods are a total or constructive total loss in insurance terms and they are worthless to the consignee the owners entitled to full freight. Extent of contamination of liquid petroleum cargoes can only be obtained from laboratory analysis and the owners will be entitled to the freight if what they had delivered could in commercial terms, bear a description which sensibly and accurately included the name of original product, e.g. ‘Bachaquero Crude contaminated with paraffin or low sulphur oil residues’.

In case The Petroleum Oil and Gas Corporation of South Africa (Pty) Ltd v FR8 Singaporte Pte Ltd [2008] EWHC 2480 (Comm) the cargoes of gasoil and mogas were found contaminated by inert gas at discharge port. Although extent of damage did not give the charterer a chance to pursue any claim for freight, it is worthy to note that, Steel J in the High Court found that combined effect of cll. 12.1,12.2 and 38.1 of BPVOY4 imposes on the shipowner no duties of bailees and/or carriers for reward to deliver the cargoes in the same good order and condition as they were in when shipped but limit such duties to obligation to exercise due diligence only (See also Bailee, Burden of Proof). Articles III and IV of the Hague-Visby Rules are to be deemed to be inserted ‘in extenso’ and give the owner full protection of the Articles in respect of ‘any claim’. It was also held that, failure to maintain IGS (Iner Gas System) valves shut during the voyage to prevent flow of IG between tanks with different grades of cargo, and in good technical condition cannot be categorised as neglect or default in the management of the ship and accordingly do not avail the owner with protection of Article IV r. 2(a) of the Hague-Visby Rules.

Indeed the "undertaking" in clause 1 to the effect that operations would be in accord with ISGOTT in fact sets a standard no higher than that of due diligence: ISGOTT simply contains advice and recommendations for the safe carriage of petroleum products.

The impact of Clause 12 was to guarantee the existence of an IGS as required for vessels over 20,000 dwt but there is no necessary conflict with either clause 1 or clause 38 in regard to the standard of care required in maintaining and operating the IGS. …

Whilst clause 38 is entitled "exceptions" and contains no express reference to it being a clause paramount, it provides that the provisions of Article III and IV are to be deemed to be inserted "in extenso" and further to the effect that the Owners are entitled to the protection of the Articles in respect "any claim".
Per Mr Justice David Steel in The Petroleum Oil and Gas Corporation of South Africa (Pty) Ltd v FR8 Singaporte Pte Ltd [2008] EWHC 2480 (Comm).

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