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England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Exportadora Valle De Colina SA (t/a Exportadora Santa Elena) & Ors v A.P. Moller - Maersk AS (t/a Maersk Line) [2010] EWHC 3224 (Comm) (09 December 2010)
URL: http://www.bailii.org/ew/cases/EWHC/Comm/2010/3224.html
Cite as: [2010] EWHC 3224 (Comm)
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QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Strand, London, WC2A 2LL |
||
B e f o r e :
____________________
| (1) EXPORTADORA VALLE DE COLINA S.A. trading as EXPORTADORA SANTA ELENA (2) EXPORTADORA SEEDLESS VALLEY S.A. (3) WORLDWIDE GROWERS CHILE S.A. (4) HARS & HAGEBAUER LIMITED (5) EU FRUIT LOGISTICS B.V. |
Claimants |
|
| - and - |
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| A.P. MOLLER – MAERSK A/S trading as MAERSK LINE |
Defendant |
____________________
Timothy Young QC and Josephine Davies (instructed by TLT LLP) for the Defendant
Hearing dates: 15-17, 21-24 June 2010; 6-8 September 2010
____________________
Crown Copyright ©
- This case involves a series of disputes between the first three claimants who are Chilean growers and exporters of table grapes and the defendant ship owners and operators ("Maersk"), concerning the outturn condition of grapes from the 2005/2006 Chilean grape harvest, carried in no fewer than 57 Maersk reefer containers on 10 separate voyages from Chile to Europe (the United Kingdom, Holland and Sweden) in the period February to April 2006.
- The principal exporting company is the first claimant and the second and third claimants are owned and controlled by the same individuals as own and control the first claimant. No distinction can sensibly be drawn between the three companies as regards production techniques and quality. I will refer to them compendiously as "Santa Elena". The fourth and fifth claimants are the selling agents of Santa Elena in the UK and the Netherlands respectively, who account to Santa Elena net of expenses and commission. They appear to have been included as claimants out of an abundance of caution, but it is difficult to see what title to sue they have.
- As was confirmed by a number of the witnesses who gave evidence for the claimants (including its expert agronomist Ms Pinilla), Santa Elena is a premium producer so far as quality is concerned. It supplies all the UK supermarket chains, many via its selling agents the fourth claimants ("H&H"). Some 90% of the Santa Elena grapes sold for it by H&H were sold to supermarket chains, who demand the highest quality standards. This is a competitive market with a number of large producers of Chilean grapes, for example Unifrutti, Del Monte and Dole having dominated that market historically. In the 2005/2006 season, Santa Elena's share of the Chilean export market was about 2%.
- The 2005/2006 season was the first season in which Santa Elena exported grapes in reefer containers in substantial quantities. In previous seasons, apart from the relatively modest trade to Sweden where reefer containers were used, Santa Elena grapes were carried on a breakbulk basis in reefer vessels. Santa Elena was essentially persuaded to use Maersk's container services in that season on the grounds that container carriage facilitated land and sea transit door to door, reducing handling and ambient temperature factors which could adversely affect the fruit and ensuring that the fruit was kept at a constant temperature during carriage.
- Accordingly, in that season, some 35% of Santa Elena grapes were carried in Maersk containers, just under 250 in all, the rest of the grapes exported being shipped breakbulk in reefer vessels. The containers were all stuffed or stowed on behalf of Santa Elena at various cold stores by a company called Portuaria Andes, which had some previous experience of stowing grapes in refrigerated containers. Some containers were loaded with so called "standard pallets" (on which primarily 9kg cartons or boxes were stowed), 20 standard pallets being loaded in a container. Other containers were loaded with so called "Euro pallets" (on which primarily 4.5kg cartons were stowed and which apparently fitted better on continental road vehicles), 23 Euro pallets being loaded in a container.
- The stowage of Euro pallets involved free space within the containers, which necessitated the placing of a type of cardboard on the floor of the container to avoid short circuiting of air within the container. One of the issues in the case is to what extent there was short circuiting, particularly in containers of Euro pallets and to what extent that caused or contributed to damage to the grapes.
- In the case of each container, Portuaria Andes also inserted two thermographs or "temptales" in the container to measure transit temperatures, one at the end closer to the supply air from the refrigeration machinery ("the unit end") and the other at the door end of the container. Where exactly the door end temptale was placed varied. In some instances it was placed on the side of a carton at the top of the stow, in others on the side of a carton in the bottom pallet in the stow, in each case facing the door. At a later stage in the season, according to Mr Johns Aravena from Portuaria Andes, temptales were placed inside the cartons rather than on the outside of the cartons, because they were getting lost upon unstuffing at discharge, but it remains unclear to what extent the temptales on the containers with which this case is concerned were placed inside the stow.
- At the time of loading or stuffing, the temperature of the refrigeration machinery of each of the containers was set at the set point required by Santa Elena, as recorded in the Maersk bill of lading issued for each container or set of containers carried on a particular vessel. This was usually 31°F, occasionally 32°F or -0.8°C. The differences in set point instructions are not material for present purposes.
- The containers were then carried by road to the container terminal at San Antonio where they were delivered into the custody of Maersk, before being subsequently loaded onto a Maersk container vessel bound for Europe. Other containers were shipped to the United States, being discharged at Philadelphia. There are separate proceedings in the United States relating to those containers and this court is not concerned with those.
- In the case of containers bound for Sweden, these were transhipped onto feeder vessels at Rotterdam. It also emerged during the trial that, in the case of a number of the containers, they were subject to reconfiguration on board to accommodate other containers coming from Ecuador and Peru and to ensure the correct stowage plan for discharge. This took place at a Maersk terminal in Panama and it is evident that on occasion containers were discharged ashore to facilitate reconfiguration. Once they arrived in Europe, the containers were discharged from the various vessels into container terminals at the discharge ports, Felixstowe, Tilbury, Rotterdam or Gothenburg, Sweden. They passed out of Maersk custody when collected by road from the container terminal at the discharge port, except in the case of the Swedish containers, for which Maersk was responsible for road carriage from Gothenburg to the final place of delivery in Helsingborg.
- Almost immediately after the first containers arrived at the discharge ports, initially on outturn in Philadelphia, problems were encountered with the container shipments. Progressively, between early March and the middle of May 2006 problems were encountered on outturn in Europe, mainly in the United Kingdom, but also in Rotterdam and in Helsingborg.
- The initial manifestation of any problems seems to have been unusually high temperatures recorded on the temptales which had been placed in each container, of 1.5°C or more, usually but not exclusively at the door end, in circumstances where one would not expect the door end reading, all going well, to exceed 1°C. What had caused these high door end temperatures is very much in issue in this case, but high pulp temperatures of the cargo were also found on the majority of consignments. Where these were measured.
- There was also some manifestation on outturn of physical damage in the form particularly of decay or dehydration, but what was striking was the extent to which there was a rapid deterioration in the grapes in question once in ambient temperatures. This was shown by various informal "tests" carried out by H&H and by the fact that when the grapes were marketed in the usual way to the customers of H&H, they were rejected.
- The problem was not one which affected all containers or necessarily all pallets in a particular container, although there seemed to be a correlation between the high temperatures recorded on temptales and damaged grapes. The 57 containers the subject of these claims were only a proportion of the overall containers shipped by Santa Elena with Maersk to European ports in that season. The parties were not agreed as to the total figure for containers shipped to the UK and Europe, Santa Elena saying 231 (although it seems that figure may have included the US containers, in which case the total numbers of claimed containers rises to 109 out of 242 shipped) and Maersk saying 133. However, whichever is right, the total number of claimed containers is less than 50% of those shipped.
- A meeting was held between Maersk and Santa Elena in March 2006, at which Mr Tocornal, farming and marketing director of Santa Elena (who gave evidence at the trial) explained the temperature problems which were being experienced and the catastrophic effect this was having on the business. This led to a joint trial to establish the accuracy of the Santa Elena temptales on shipments on board the MAERSK HONG KONG. It was not suggested by Maersk after the joint trial that the Santa Elena temptales were inaccurate in measuring temperature, although as I have already indicated, at various stages of the case, Maersk has questioned the location of the temptales within the stow, particularly at the door end, and therefore has questioned exactly what the door end temptale was measuring and where.
- In any event, Maersk did not collect its side of the data from the joint trial and the temperature and event logs have apparently been lost. This was seen by Santa Elena as indicative of the dismissive attitude of Maersk to its complaints, the beginning of an evident distrust and antipathy between the parties which has unfortunately inhibited them from settling these disputes.
- There was a second meeting between Maersk and Santa Elena in April 2006, which led to a second joint trial on board the OLGA MAERSK to assess the impact of different stowage techniques. In the documentary and witness evidence on both sides a great deal of time and energy was expended on this joint trial, in the sense that Maersk was critical of Santa Elena for not having employed a Euro pallet stow on its trial container and Santa Elena's riposte was that it had not appreciated that Maersk wanted a Euro pallet stow, so that, because the ultimate customer was one who wanted cartons which would be stowed on standard pallets these were the pallets loaded in the relevant container.
- Ultimately, the trial did not seem to me of any real relevance to the issues I had to decide, save to the extent that it demonstrated that the Santa Elena (or more accurately the Portuaria Andes) method of stowage for standard pallets provided a tight stow which was as effective as the method of stowage for standard pallets employed by Maersk. Neither led to any heating up of cargo or cargo damage. However, apart from some reluctance on the part of Maersk's refrigerated carriage expert, Mr Richard Lawton, to relinquish completely the possibility that there might have been short circuiting on standard pallet stows, the reality is that Maersk's short circuiting case is restricted to the instances of Euro pallet stows and since, for better or worse, the joint trial did not involve such a stow, the second joint trial is of limited assistance.
- Following the joint trials, Santa Elena produced a report about the trials as well as about various other matters, including the failure of the vessel's generator on one of the voyages of the JEPPESEN MAERSK which resulted in substantial periods of time when the refrigerating machinery was not operating (so called "power offs"). Two of the containers carried on that voyage are the subject of the present claims (claims 55 and 56).
- What has emerged subsequently, through a somewhat protracted process of disclosure by Maersk, is that there were in fact periods of power off in respect of all the containers the subject of the claim for which Maersk has disclosed records. The detail of this is discussed below, but in summary, there are certain periods of power off during the carriage of refrigerated containers which are necessary and permissible for operational reasons, but in the case of almost all the containers in respect of which these claims arise, the actual periods of power off exceeded what was necessary or permissible. Santa Elena complains, with some justification, that Maersk did not disclose these power offs at the time of the meetings or the joint trials in 2006, but at all events, the extent of the power offs is now largely revealed, although an explanation has not been forthcoming from Maersk as to why permissible periods of power off were exceeded in any particular case or why, in some cases, there was a power off at all.
- An amicable solution to the disputes not having been reached, Santa Elena issued the three sets of proceedings before the court in 2007. Initially, given the relatively modest size of the claims, they were assigned to the Mercantile List.
- The containers were all carried on the terms of Maersk's standard bill of lading which so far as relevant provides as follows:
- It is common ground that the carriage of these containers by Maersk involved multimodal transport and that the stage of carriage where loss or damage occurred is "not known", so that the regime in clause 6.1 applies. Maersk's pleaded case is that any loss or damage to the grapes was caused by one or more of the matters which amount to exclusions under that clause, specifically (iii) insufficient or defective packing; (iv) bad stowage and (v) inherent vice.
- The wording of clause 6.1(b) closely mirrors that of Article 18(2) of the CMR Convention on International Carriage by Road. Applying the approach of the CMR, the phrase "could be attributed to" means that Maersk as carrier need only prove that one or more of those excluded matters relied upon could plausibly have caused the damage, not that on a balance of probabilities the excluded matter did cause the damage: see per Megaw LJ in Ulster-Swift v Taunton Meat [1977] 1 Lloyd's Rep 346 at 354 and Clarke: International Carriage of Goods by Road: CMR (5th edition 2009) pp249-253.
- If Maersk does show that one or more of the excluded matters relied upon could plausibly have caused the damage, then the presumption in clause 6.1(b) operates unless Santa Elena can rebut it. There was some debate during closing submissions as to whether it is sufficient to rebut the presumption that the claimant produces evidence to suggest but not prove (on a balance of probabilities) another hypothesis sufficiently plausible to reduce the plausibility of the carrier's alleged cause, which is what Professor Clarke suggests at pp253-4, or whether the presumption is rebutted only by the claimant showing on a balance of probabilities that the matter relied upon by the carrier did not cause the loss.
- Given that clause 6.1 is in a contract of carriage governed by English law, rather than an international convention such as CMR, I am inclined to the view that the words: "the Merchant shall however be entitled to prove that the loss or damage was not, in fact, caused wholly or partly by one or more of these causes or events" mean what they say. In other words, once the carrier sets up one of these causes or events as a plausible explanation, it is for the claimant to show on a balance of probabilities that the cause or event did not cause the loss or damage claimed.
- Fortunately however, for reasons which will become apparent during the course of this judgment, it is not necessary to resolve that issue finally, since even on the higher "balance of probabilities" test, I am satisfied that Santa Elena has proved that none of the three matters relied upon by Maersk was causative of the damage claimed.
- Apart from the exclusions in clause 6.1(a) (iii) (iv) and (v) to which the clause 6.1(b) presumption applies, the clause operates in a conventional manner in accordance with well-established principles of law, namely that, once the claimant has established that loss and damage has occurred whilst the cargo was in the custody of Maersk, even if the stage at which it occurred is not known (and the claimant establishes this in the normal way by showing loading in the container in good order and condition and discharge from the container in a damaged condition) then it is for Maersk to show that the loss or damage was caused by one of the other exceptions in clause 6.1. If it cannot do so, then it is liable for the loss and damage, because it is not "relieved of liability" within the opening words of the clause.
- In his written closing submissions (supplemented and explained by additional written submissions dated 2 December 2010 which I invited because the point had not been fully argued at trial) Mr Timothy Young QC for Maersk seems to be submitting that this analysis of the clause 6.1 regime is incorrect and that, even if the "attributable cause" exclusions do not apply, the burden is on Santa Elena to prove a positive case of causative breach by Maersk, i.e. that Maersk acted in breach of duty and that that breach caused recoverable loss.
- In my judgment, any such contention is wrong as a matter of law. To the extent that the grapes were in good order and condition on stuffing in the containers, but there was loss and damage to the grapes on outturn and none of the exclusions applies (either in the case of (iii) (iv) and (v) because Santa Elena has rebutted any presumption that they apply or, in the case of the other exclusions because Maersk cannot show the loss and damage was caused by that exclusion) Maersk is liable for that loss and damage. There is no requirement under the clause for Santa Elena to show what the cause of the loss and damage in fact was, if none of the exclusions applies.
- To that extent, apart from the "special" exclusions to which the clause 6.1(b) burden of proof regime applies, the clause and hence the bill of lading contract operate no differently from any other contract of bailment: if the claimant shows delivery of goods to the bailee in good order and condition and redelivery in a damaged condition, then a prima facie breach of the contract of bailment is established and the burden is on the bailee to show that all the relevant loss and damage was caused by a matter for which he was not responsible. If he cannot do so, he is liable for the loss and damage: see the analysis of the law by Hobhouse J as he then was in The Torenia [1983] 2 Lloyd's Rep 210 at 216-219.
- The position is no different under the Hague or Hague-Visby Rules. It has been well-established since the earliest days of the Rules, that where the cargo owner establishes that the goods were shipped in good order and condition and have been delivered in a damaged condition, that is prima facie evidence of a breach of the shipowner's obligations under Art III rule 2 and the onus is then on the shipowner to show that the damage was due to one of the excepted causes in Art IV. If, or to the extent that, the cause of the damage is unexplained, the shipowner will be liable: see Gosse Millard v Canadian Government Merchant Marine [1927] 2 KB 432 at 434 and 437 per Wright J and [1929] AC 223 at 234 per Viscount Sumner. I will return to the significance of all this later in the judgment.
- Until closing speeches, Maersk pursued a generalised case of inherent vice as pleaded, namely that all Chilean grapes shipped in the 2005/2006 season had enhanced susceptibility to rot, decay and botrytis caused by unseasonable frosts and rain. However, ultimately that case was not pursued, largely because Maersk's own expert agronomist, Professor Apablaza, could not support it in his oral evidence. Accordingly, it is not necessary to consider that case further, notwithstanding that it took up a considerable amount of time and cost in factual and expert evidence, save to observe that it had always seemed to me from the very outset of the trial to be a hopeless case in terms of providing an explanation for the damage on outturn to some containers but not others. Despite abandoning that generalised case, Maersk continued to pursue a case throughout the trial that the particular grapes the subject of these shipments were not in good order and condition on shipment. This had what might be described as both a positive and a negative (or defensive) aspect.
- The latter aspect is to the effect that the burden of proof is upon Santa Elena to establish that the grapes were in good order and condition upon shipment. This is no doubt correct: as clause 11 of the Maersk bill of lading makes clear, in the case of "shipper-packed containers" such as these were, the bill of lading is only a receipt, from which it follows that it is for the shipper to establish the order and condition of the goods when they are handed over to Maersk, here at the San Antonio terminal. At its most stark, Maersk's case as put forward by Mr Young QC was that Santa Elena simply could not discharge that burden of proof and that the claim failed in limine on that basis. For reasons which are developed below, I cannot accept that submission.
- The positive aspect consists in large measure of the case put forward by late amendment to the Defence for which I gave leave on the third day of the trial, that the damage to the grapes was caused by one or more of (a) prolonged exposure to ambient temperature after picking but prior to cooling; (b) prolonged storage and/or time in cool chambers prior to shipment; (c) the "hot stuffing" of the grapes (a case which was in the original pleading); (d) the absence of a proper system of quality control and inspection after harvesting and palletisation and prior to shipment and (e) exposure at the time of stuffing to inappropriate ambient conditions such as to render heating or condensation or both likely to occur.
- These are all essentially aspects of a positive case that the grapes were not in such good order and condition upon shipment as to enable them to withstand the ordinary incidents of refrigerated container carriage. The amendments meant that there was more focus than there might otherwise have been on the systems which Santa Elena and the other exporters had in place in Chile. I will deal with the various allegations in detail below, but I should say at the outset that I am quite satisfied that, on analysis, there is nothing in any of them.
- Before dealing with the detail of the system of harvesting, cooling and storage prior to shipment, there is a general point which Mr Stewart Buckingham on behalf of Santa Elena emphasised in his submissions, which seems to me to have all the more force now that the generalised case of inherent vice has been abandoned. That is the point that, on the assumption that these consignments of grapes were damaged on outturn (an issue to which I return below) one of the tasks which faces the court is to ascertain whether that damage can be attributed to one particular cause.
- In circumstances where Santa Elena grapes are generally of a high quality, sold to all the major UK supermarket chains and the systems which Santa Elena has in place for harvesting, cooling, storage and quality control are essentially the same as those of other major Chilean grape exporters such as Unifrutti and Dole, it is difficult to see how poor condition upon shipment could be the cause of damage on outturn, unless there were evidence that those systems had broken down in the 2006 season. Otherwise the problems suffered by these consignments would have been suffered by all Santa Elena consignments in that season, which was not the case. There was clear and compelling evidence not only from Mr Tocornal himself but from Mr Russel Parkin, technical manager of H&H, to the effect that, apart from these problem consignments, the quality of the grapes in the 2005/2006 season was as good as in previous years.
- In the present case, the evidence of the systems in place comes not only from the documents such as quality control records, pre-cooling tunnel records and cold store records, but from Mr Tocornal who is not only familiar with the twenty or so farms at which the Santa Elena grapes are grown, but visits them on a regular basis throughout the season. That evidence was supplemented by that of Santa Elena's expert agronomist Ms Pinilla, who was familiar with Santa Elena and the systems it had in place.
- In contrast, Maersk's expert, Professor Apablaza, although an eminent academic agronomist, had no knowledge or experience of the Santa Elena farms and so did not and could not give direct evidence about the systems of quality control, cooling and storage that Santa Elena had in place in the 2005/2006 season. Maersk's criticisms of those systems are essentially derived not from direct evidence but from analysis of the documentary records and identification of anomalies or gaps. Whilst the analysis conducted by Maersk undoubtedly throws up some anomalies and gaps, it seems to me that what it certainly does not demonstrate is an absence of proper systems of quality control, cooling and storage or a complete breakdown of those systems, such as could have caused all the damage at outturn.
- In considering Maersk's case that the grapes were not in good order and condition upon stuffing in the containers, it is important to have in mind what that concept entails in the present case, which is that upon loading the grapes should be in such a condition as to withstand the ordinary incidents of multimodal transport in refrigerated containers so as to arrive in a condition where they are of a quality to be sold to supermarkets and have a sufficient remaining shelf life as to enable such sale. In other words, they should be in such order and condition on stuffing that on unstuffing, their shelf life is only shorter by the length of the carriage. On the basis of the evidence of Mr Parkin of H&H referred to in more detail below, this should mean that the grapes when stuffed are of sufficient quality and age to have a remaining shelf life of at least seven days upon unstuffing of the container.
- The system of harvesting, cooling and storage adopted by Santa Elena was described in detail by Mr Tocornal in his evidence, supplemented by the reports and evidence of Ms Pinilla. Harvesting of the grapes in the fields takes place between 8 am and 5.30 pm. Once picked, the bunches of grapes are cleaned and each is inspected, to ensure it fulfils Santa Elena's quality standards. If it does, it is placed in a plastic box or tray which is under the vines in the shade. When 400 boxes or trays have been filled which takes about half hour, those boxes are taken by truck to the pack house. Mr Young put to Ms Pinilla one photograph showing boxes under vines in dappled shade to suggest that the boxes had prolonged exposure to sunlight in the field before being taken to the pack house. Ms Pinilla did not think that photograph was representative, but even if it were, it is hardly direct sunlight and, in any event given that the maximum time any particular box is under the vines is half an hour, there is hardly prolonged exposure to whatever the temperature is under the vines.
- Upon arrival at the pack house, there is a second check for quality parameters carried out on a sample of the plastic trays coming in. If the grapes pass that, they are then graded by reference to size and colour in a temperature controlled environment, since, as Ms Pinilla said, most of the pack houses are air conditioned. They are then put in boxes or cartons. As already noted, there are different sizes of carton used depending on the customers in mind, mainly 4.5kg or 9kg, although there are sometimes 4kg cartons or other non-standard size of carton required. The carton has ventilation holes in the bottom and at the bottom of the sides. It is then lined with a permeable poly liner around the inside of the carton and a cushion of corrugated cardboard is put in the bottom to avoid fruit bruising.
- Each bunch or sometimes two bunches are put in a plastic bag, which has holes for ventilation. Ten to twelve bunches are then placed in a poly bag, which is then closed. Some grapes for Europe are placed in plastic punnets. A slow release sulphur pad is placed inside the carton. Two sheets of paper and another sheet of corrugated cardboard are placed on top of the carton and the poly liner is sealed with adhesives. As Mr Tocornal points out in his statement, although different Chilean exporters use slightly different boxes, the method of packaging is essentially the same and has been used for decades.
- Prior to palletisation, there is then a further quality control check when at least one box per pallet is opened and a document called the "Planilla Control Producto Terminado" is filled in. The size of the grapes is checked with sizing rings, and cleanliness and sugar levels are checked as are the appearance of the grapes. The inspection also takes account of matters which will affect the potential shelf life: the presence of any mould, slipped skin or other damage and the grapes are tested for dehydration and shatter.
- Maersk was critical of the extent to which the inspection recorded in the Planilla was scant, essentially of only one box per pallet, which Maersk said was unrepresentative and an insufficient sample. However it seems to me that this argument ignores the fact that there are two previous quality control procedures for the grapes, once when picked and once when packed. Whilst inevitably there will have been some problems which slip through the net, I agree with Mr Buckingham's submission that with three quality control checks, it is unlikely that significant problems would have avoided detection. It is also correct that, with the exacting standards required by the UK supermarkets, if there were laxity in Santa Elena's quality control procedures, that would be reflected in complaints and rejection by the supermarkets, but there is no evidence of that having occurred, let alone on a regular basis which is what would be occurring if there were generally inadequate quality control.
- If the grapes pass the Planilla inspection, they are palletised and labels indicating the final customer, such as a named supermarket chain, are placed on the pallet, which then moves to the pre-cooling tunnels. Much was made by Maersk of the time taken between picking of the grapes and their going into the pre-cooling tunnels. The analysis conducted by Maersk of the tunnel records shows that the vast majority of the grapes go into the pre-cooling tunnel between midnight and midday on the day after picking.
- Ms Pinilla accepted in cross-examination that on the assumption that grapes had been picked at 8am, they would not enter the pre-cooling tunnel until midnight which meant that they could be at ambient temperature for up to sixteen hours. She also accepted that this delay between harvesting and refrigeration may have a greater adverse effect on the grapes than delay at later times. Maersk contends that this supports its first specific allegation in its amended pleading, that the grapes had prolonged exposure to ambient temperature between picking in the fields and entry into the pre-cooling tunnels in the various pack houses.
- Mr Buckingham rightly pointed out that none of these matters which were put to Ms Pinilla had been put to Mr Tocornal, who would have been better placed to deal with the actual practice at the pack houses. Maersk was not in a position to suggest that the time taken between picking and entering the pre-cooling tunnels in the present case involved some breakdown of the procedures which Santa Elena normally had in place. The reality is that the time taken is part of the system employed by Santa Elena and it is a system which typically produces millions of perfectly good grapes for export. Furthermore, in her third report, Ms Pinilla demonstrated that the practice of Santa Elena in relation to the time between picking and pre-cooling is in line with that of other Chilean exporters, such as Subsole, Greenvic and Southern Fruit (ex Chiquita Brands). As Mr Buckingham put it, whilst in an ideal world, grapes would be picked and then pre-cooled immediately, in the real world that is neither possible nor commercially necessary.
- Ms Pinilla's evidence was that the ideal would be that the pre-cooling in the tunnel would get all faces of the grapes down to 0°C and this should take 8 to 14 hours. She accepted that the longer it took to cool the grapes down in the tunnel, the worse that would be. Maersk's analysis of the temperatures (where recorded, which they not always were) of the grapes coming out of the tunnels, contained in one of the schedules prepared by its junior counsel Miss Davies, shows that 0°C was something of an aspiration and that most of the grapes were at a slightly higher temperature, largely between 0° and 1°C. In fact Mr Tocornal said in his statement that it was impossible in practice to maintain uniformity of temperature between all the pallets, so that Santa Elena worked within a range of -1°C to 1°C for the temperature exiting the tunnels. The records where available were reviewed by Ms Pinilla who found that 97.9% of the pallets ended the pre-cooling process with temperatures equal to or less than 1°C.
- After leaving the tunnels the pallets were stored in cold stores set at -1°C, designed to lower the temperature slightly further and then stabilise the temperature of the grapes. The pallets were kept in the cold stores prior to being loaded into the refrigerated containers for export. In relation to both the pre-cooling tunnels and the cold stores, Mr Young put to Ms Pinilla in cross-examination various periods when there were power interruptions. There is no pleaded case about the efficiency of the pre-cooling or cold storage processes, and it is far too late for it to be raised now.
- However, in any event, there is nothing in the point. Ms Pinilla has considered the records in relation to pre-cooling and cold storage for the total number of cartons exported by Santa Elena to Europe in 2006 and found only 0.7% had been subject to power interruptions and 97% had experienced no anomalies at all in pre-cooling or cold storage. The equivalent figures for the claimed shipments are 0.8% and 98.3%, demonstrating nothing abnormal about how the claimed shipments were treated in pre-cooling tunnels and cold storage, both of which appear to have operated efficiently.
- The second allegation made by Maersk in its amended pleading is that there was prolonged storage or time in cool chambers prior to shipment. It is difficult to see that there is much basis for this allegation and it did not loom large in Mr Young's closing submissions. In fact, Ms Pinilla sets out the storage periods prior to shipment for the claimed shipments in her third report. 77.5% were stored for less than 10 days, 7.3% for 11 to 15 days and 7% for 16 to 25 days. Only 3.6% were stored for 26 to 35 days and 2% for more than 35 days. No records are available for 2.7% of the shipments.
- It is also worth noting that this pattern of time in cold storage is not indicative of some haphazard disorganisation, but is planned. As Mr Tocornal explained in evidence, during the season, the commercial and production personnel had a day-long meeting every Wednesday:
- When the transit time from Chile to Europe of some three to four weeks is taken into account, it is quite obvious that, contrary to what Maersk sought to suggest at various points in the trial, this is not a case where the fruit in respect of which the claim is made, if properly and carefully carried, would still have been too old in terms of shelf life upon outturn. This is borne out by the figures for "shelf life remain" set out in the submission schedules attached to Mr Buckingham's written closing submissions. Rather, the shelf life of the grapes upon outturn had been foreshortened by something other than their actual age.
- This is probably a convenient point at which to deal with the fourth pleaded allegation, of the absence of any properly implemented system of quality control or inspection after palletisation and prior to shipment regardless of the lapse of time. This is a reference to the point put to Mr Tocornal in cross-examination that the Santa Elena manual stated that grapes should be re-inspected after ten days in storage. Mr Tocornal's answer was that this was an unnecessary and arbitrary rule and that with fruit which had been packed after the quality controls which Santa Elena had in place and which had the shelf life of these various varieties of grape, it made no sense to go and inspect the fruit again later on.
- Maersk adduced no evidence, whether from Professor Apablaza or anyone else, that a re-inspection every ten days was a necessary aspect of an adequate system of quality control or inspection or that other Chilean exporters typically have such a requirement. In any event, as Ms Pinilla's analysis shows, since 77.5% of the fruit is shipped after less than ten days, such reinspection is neither possible nor necessary for most of the fruit.
- The third allegation pleaded is that the grapes were permitted to experience rises in pulp temperature to over 1°C during and prior to stuffing. This is a refinement of the case of "hot stuffing" which had been part of Maersk's case and which it had appeared at one stage was not being pursued. By closing submissions, it remained unclear to what extent this case was still being pursued. Rather, Mr Young seemed to be making a different (and unpleaded) point, based upon evidence Ms Pinilla gave both in cross-examination and in answer to me that if grapes are not brought down to 0°C at whatever stage, that reduces the shelf life of the grapes. Accordingly, Mr Young made the point that if the grapes were stuffed at 1°C or higher, that was the lowest possible temperature that they will have reached since entering the pre-cooling tunnel, given that they have been through pre-cooling and cold storage.
- As a matter of logic this must be right but although the point is an interesting one, it is clear that grapes are regularly loaded at 1°C without any difficulty on outturn. Whilst Ms Pinilla's point is no doubt the counsel of perfection, in the real world, as Mr Tocornal explained in his witness statement, although setting the cold store at -1°C allows the fruit pulp temperature to be between -0.5°C and 0°C, there is a tolerance of 0.5° to 1°C in all the processes. Hence, loading in containers at 1°C must be perfectly normal and it was not suggested to Mr Tocornal in cross-examination that it was not.
- In so far as the case actually pleaded is concerned, that there were pulp temperatures in excess of 1°C on loading, in other words that containers were "hot stuffed" this is not borne out by the evidence. Ms Pinilla sets out the figures in her first report: 91.2% of the pallets in the claimed shipments were stuffed at temperatures equal to or below 1°C, with only 1.9% (25 pallets) stuffed at temperatures between 1.1°C and 1.5°C. Records are not available for the remaining 6.8% (88 pallets) but I agree with Mr Buckingham that it is reasonable to infer that their temperatures were in the same proportion as those where records are available. On the basis that the set point for the cooling air passed through the stow was 0°C or less (often -0.8°C or 31°F) it is difficult to see why, with proper and careful care of the cargo by Maersk, the grapes should not have been discharged at the same temperature as when loaded, if not somewhat lower.
- In my judgment Mr Buckingham is right to characterise this low incidence of "hot stuffing" as "vanishingly small" and to submit that, as a matter of common sense, that should be the end of any debate on the subject. This low incidence of "hot stuffing" could not possibly have presented any problems for Maersk. Mr Barfod who was reefer operations manager for South America for Maersk at the time, accepted in cross-examination that a loaded temperature of as a high as 5°C would present the container's refrigeration machinery with no difficulty in "pulling down" the temperature of the cargo to the set point which was, as I have said, usually either 31°F or -0.8°C. That must be all the more so if only one or two pallets in the container were at a temperature of no more than 2°C. In any event, as Mr Barfod also accepted, if Maersk had considered that the cargo temperature (as indicated by the return air temperature to the refrigeration machinery) was a problem when they checked it upon receipt of the container at the San Antonio terminal, they could and would have required a "hot stuffing clause" to be inserted in the relevant bill of lading. They never did so.
- The final pleaded allegation relied upon by Maersk as demonstrating that the grapes were not loaded in good order and condition is that at the time the containers were stuffed, they were exposed to inappropriate ambient temperatures such as to render heating or condensation or both likely to occur. Mr Tocornal's evidence was that the containers were stuffed either from the cold storage room itself or from an interconnecting room between the cold store and the outside and that the truck on which the container was already loaded would either pull into the facility or sometimes just outside.
- It is therefore correct that the stuffing process may involve a period when the grapes are exposed to temperatures greater than -1°C, at worst if they were in the interconnecting room and were taken outside for stuffing. However, Mr Tocornal's evidence was that the relevant process might take about ten minutes. Furthermore, he said that this method of loading was perfectly normal in Chile:
- I agree with Mr Buckingham that this puts into its proper context the process of stuffing the container and indicates that the possibility of any significant heating of the grapes themselves during the short time that the pallets are exposed to ambient temperatures is remote. Given that this is how millions of grapes which discharge in a sound condition are loaded in containers, it hardly provides any explanation for the damage which occurred.
- In relation to condensation, Mr Young latched onto a number of photographs taken of the inside of containers during the stuffing process which showed some condensation on the ceilings of containers, no doubt as a consequence of the differential in temperature between the outside air temperature and the temperature of the pallets and of the inside of the container. Mr Tocornal regarded this as perfectly normal and said it would be easily removed later on, presumably by the container's refrigeration machinery. In any event, the evidence of Mr Johns Aravena of Portuaria Andes was that there would be two supervisors in attendance, one of them inside the container. He would have the job of clearing up any condensation that formed.
- In the circumstances, it seems to me that this is a non-point. Mr Young submitted that if there was condensation on the roof of the container it is probable that there was also condensation on the surface of the grapes. It seems to me that this something of a "leap of faith". As Mr Buckingham pointed out, hot air rises, which is why condensation is seen on the ceilings of the containers. However, generally, no condensation was observed on the walls, floor or pallets themselves and, as Mr Imrie pointed out, once the fans were on in the container, any condensation would dry out, all of which suggests both that there is not some major problem of condensation within the containers and that the grapes are also unaffected. I agree that given the volume of exports, this limited incidence of condensation during stuffing cannot be regarded as something which imperils the quality or shelf life of the grapes.
- In conclusion on the issues concerned with the order and condition of the grapes on stuffing into the containers, I am quite satisfied on the weight of the evidence that there was nothing to distinguish these consignments of grapes from the many others successfully transported and outturned in sound condition in that and other seasons and that Santa Elena has established that the grapes were in good order and condition when shipped.
- Oral evidence about the condition at outturn of containers shipped to the United Kingdom was provided by Mr Parkin, who was an impressive, forthright and patently honest witness. He inspected pallets of grapes which were for sale by H&H and EUF UK at the cold store at Sheerness, to which the containers had been transported by road after discharge at Felixstowe or Tilbury. On de-stuffing, Santa Elena inspectors Michelle Steenkamp and Sebastian Fresno were present and they removed the Santa Elena thermographs or temptales from the container. Where the temperatures recorded were high, demonstrating that the grapes had been subjected to high temperatures during transit, they would report this to Mr Parkin. Somewhat surprisingly neither of them was called to give evidence or provided a statement, but I see no reason not to accept Mr Parkin's evidence that they would tell him when a container had a high temperature.
- What is clear from his evidence is that he was finding damage and reduction in shelf life in consignments before high temperatures were reported to him. In other words, as Mr Buckingham submitted, it was a case of Mr Parkin inspecting and finding evidence of "tiredness" of grapes and that being confirmed by high temperatures reported to him, rather than him reacting to high temperatures reported to him and then inspecting.
- He inspected the grapes at the Sheerness coldstore, on occasions when unloading of the containers had not finished. He would inspect six to ten pallets per container. It will be remembered that standard pallets were stowed 20 to a container and Euro pallets 23 to a container, so he was inspecting a substantial proportion of the pallets in each container, between a quarter and a half. He would take out the top box from a pallet and then inspect three or four boxes in each pallet. One of his tasks in inspecting the grapes was to assess whether they were suitable for storage under the marketing arrangements and strategy H&H had, which involved holding back some grapes until later in the season, when prices were higher.
- This strategy would have been feasible normally because of the long shelf life of the various varieties of grape. Mr Parkin, who was probably in the best position to know, gave these as for Princess 45-60 days, for Superior/Sugarone and Flame 60 days, for Thompson 60-75 days was "the norm", but up to 90 days and for Crimson 120 days. Most of the grapes H&H were selling were sold to the supermarket chains direct or via wholesalers. Supermarkets would want a "best before" date of three or four days after the grapes went on the shelf and one would allow for a further three days in the customer's fruit bowl, so there would need to be a shelf life after outturn of slightly in excess of seven days. In relation to grapes "held back" pursuant to the marketing strategy, they would need to have a correspondingly longer shelf life on arrival in the United Kingdom.
- Obviously, in the case of sound grapes, this marketing strategy would tie in with the decision made by Santa Elena themselves at their weekly marketing meetings as to which grapes to ship that week and which to retain in their cold stores. In fact, as I set out earlier in this judgment, contrary to the allegation made by Maersk of prolonged storage in Chile prior to shipment, 77.5% of the grapes in the claimed shipments were stored in Chile for less than 10 days and less than 10% for more than 25 days. Allowing for transit times of between three and four weeks, it can be seen that sound grapes (particularly of varieties with a longer shelf life) should have arrived with more than enough shelf life left to fit in both with sale to supermarkets immediately and in the near future with set "best before" dates and H&H's "holding back" marketing strategy.
- However, what Mr Parkin found on his inspections, as he described in general terms was as follows:
- What surprised Mr Parkin was how rapidly the grapes deteriorated when in an ambient temperature. He described having taken home some grapes for his daughter who was fussy about grapes and how they had found that the grapes deteriorated rapidly. He also described a trial which he agreed with Mr Pailes of Marine Management Surveys Ltd, surveyors acting for Maersk, which was carried out because no-one could believe the shelf life had deteriorated so much. He took three pallets back from the cold store to H&H's offices in Paddock Wood on a Friday and left them in the offices over the weekend at room temperature of about 16°C. When Mr Pailes' colleague, Mr Williams attended on the Monday, they were surprised at how rapidly the grapes had deteriorated.
- Mr Parkin's view was that the grapes which he saw which were damaged in the way he described were not, as Mr Young suggested to him, grapes that were too old, but grapes the shelf life of which had been reduced through temperature abuse in transit:
- He also said that he prepared written quality control reports in respect of the containers he inspected, which were on an A4 sheet. At the time that he gave evidence, these were apparently not available. After he had given evidence, Santa Elena disclosed thirteen grape quality reports prepared by Mr Parkin, nine of which related to containers for which a claim is being made. The comments in those bore out his evidence about the condition of the distressed grapes on outturn. Mr Young did not ask for Mr Parkin to be recalled for further cross-examination about the comments or about whether he had in fact only inspected thirteen containers or what had become of other reports. Rather he sought to take forensic advantage, as no doubt he was entitled to, of the absence of other reports.
- In fact there was at least one H&H quality control report which had already been disclosed, that relating to the earliest UK container for which a claim is being made, claim 13, carried on the OLIVIA MAERSK which discharged at Felixstowe on 6 March 2006. This referred to some dehydration and cracking, which is consistent with Mr Parkin's evidence generally. It seems likely that this is another container which he inspected and that he prepared the report, although I do not think he was asked about it.
- There are other quality control reports on EUF UK forms for some other containers, for example claim 39, discharged from the OLGA MAERSK on about 27 March 2006, the content and tone of which suggest they may have been written by Mr Parkin, who was inspecting containers on behalf of both his own company and EUF UK (the consignments in claims 21, 23, and 26 to 29 for which his grape quality reports have been disclosed were all consignments for which the receiver was EUF UK). In relation to one of the boxes in that container, which had an ASDA label, the inspector, whoever it was has written: "not for supermarket!!" This ties in with what Mr Parkin said in his evidence about the rapid deterioration and the shortened shelf life of the grapes he inspected.
- Although as I have said, Mr Young sought to make much in closing submissions of the absence of reports for a substantial number of the claimed UK containers setting out what damage had been observed, I was not ultimately impressed with that point for two reasons.
- First, it is clear that the thirteen containers for which grape quality reports have been produced do not represent the totality of containers inspected by Mr Parkin. That is demonstrated by Mr Parkin's own evidence of having inspected twenty three Maersk containers over a period of two days at one point in the season on the 21st and 22nd of a particular month. Although he could not remember which month that was, it seems to me likely that these were containers on the JOHANNES MAERSK which discharged at Felixstowe on 19 and 20 March 2006 and on which thirteen of the claimed UK containers were carried. In my judgment, it is more likely than not that Mr Parkin was the inspector of all the UK containers for which H&H and EUF UK were the selling agents. Since H&H or EUF UK were selling agents for 38 of the claimed UK containers (out of 45), it follows that Mr Parkin inspected many more containers with distressed grapes in them than the nine for which grape quality reports have been produced.
- Second, it is not correct to say that, in respect of the UK containers for which a grape quality report has not been produced, there is no evidence as to their condition on outturn and in particular as to observed damage. For nearly all the containers, there is some other evidence of poor outturn condition whether in the form of other quality control reports or survey reports from Mr Pailes' company or from John Butcher. Those record similar sort of damage to that noted by Mr Parkin, such as berry waste and dehydration.
- It is also noticeable that where those reports record pulp temperatures of the grapes, those temperatures are often as high as 2° to 3°C, in the case of containers 19 and 48 as high as 3.9°C and 3.7°C respectively. With very few exceptions, the pulp temperatures are far higher than the temperatures on stuffing and, equally, far in excess of the temperatures one would expect at outturn in grapes properly and carefully carried in containers with refrigeration machinery set at -0.8°C or 31°F or 32°F. As Mr Buckingham pointed out, those temperatures were taken by surveyors at the cold store when the grapes had had a period of cooling and probably understate the temperature they would have been at on outturn from the containers.
- Mr Young also sought to make much of the fact that a number of reports record limited damage, essentially in support of a case that Santa Elena and its agents had overreacted here and imposed an artificial "heated" outturn temperature of 1.5°C, above which grapes had not been marketed normally for fear of reputational damage. However, that case is not borne out by the evidence of Mr Parkin and of Mr Michael O'Leary, a director of H&H. I have already referred to Mr Parkin's evidence of seeing grapes which had lost their lustre and appeared tired and old and of the rapid deterioration observed in such grapes when at ambient temperature.
- Mr O'Leary gave graphic evidence when Mr Young sought to suggest to him that the grapes which had high temperatures at outturn, without any physical manifestation of damage at that stage, were not "distressed" but "treated as distressed", refuting that suggestion:
- Mr O'Leary stressed throughout his evidence the lengths to which they had gone to defend the product, notwithstanding the fact that it was distressed. He said that, if it had been up to him, he would have handed the fruit back to Maersk, but they (i.e Santa Elena and its agents) had a duty to mitigate so they tried to get the best price for the grapes, in many cases repackaging the fruit. He illustrated the lengths to which they had gone in their efforts to sell the grapes by reference to the fact that in relation to some distressed grapes being sold at a stall in Spitalfields market, they had received a verbal warning from a DEFRA inspector that the grapes were not fit for sale and any repetition of such sales would lead to prosecution.
- The evidence of both Mr O'Leary and Mr Parkin, which I accept, is that when H&H sought at first to market the grapes in the normal way to their customers, they received rejections. In those circumstances, it is perhaps not surprising that they did not try their luck with the supermarkets by trying to sell them grapes which had suffered temperature abuse, for fear of destroying the reputation of Santa Elena grapes. Mr O'Leary gave a graphic analogy of the discovery of a rat in a packet of cornflakes.
- Mr Parkin also gave some striking evidence as to why they would not try to sell grapes which had a reduced shelf life to the supermarket chains:
- It was not suggested by Maersk that Santa Elena had failed to mitigate any loss by not ploughing on regardless by seeking to sell to supermarkets, in circumstances where the selling agents such as H&H were getting rejections in respect of consignments which had suffered temperature abuse in transit. I consider that the selling agents were reacting to a real problem of reduction in shelf life caused by that temperature abuse (whatever its cause) rather than overreacting to a problem by imposing an artificial 1.5°C ceiling for sound cargo. To the extent that they were seeking to avoid reputational damage, that was no more than mitigation of the loss that was being suffered anyway as a consequence of the damage to the consignments of grapes.
- In the context of Mr Young's submissions to the effect that physical damage observed on outturn was limited, it is also worth bearing in mind that this was not a catastrophic problem, in the sense that not all the grapes in the containers for which claims are made had suffered damage and the grapes which were damaged had not been subjected to such excessive temperatures that they had suffered complete deterioration by the time the containers were de-stuffed. However, I am quite satisfied that, even though there might not have been a physical manifestation of deterioration, grapes which arrived in such a condition that their remaining shelf life was severely reduced, as described by Mr Parkin and Mr O'Leary, were not in "good order and condition" and were damaged. Maersk's attempt to argue the contrary is misconceived. I return to this point in more detail below.
- There are some containers amongst the UK shipments for which there is no specific evidence at all available as to outturn condition from survey reports, quality control reports or emails. In relation to all of these Mr Buckingham's helpful Submission Schedules simply record in the section headed "Damage at Outturn": "Evidence of Mr Russel Parkin". In the case of the containers in this category for which H&H was the receiver (the containers the subject of claims 30, 42, 43, 51, 52 and 57), I am prepared to accept that his evidence of the damaged condition at outturn is applicable to those containers as well, since he was the person who inspected the containers consigned to H&H. In fact Mr Buckingham's schedule has failed to pick up that there is a grape quality report for one of these containers, 57, which shows some damage through dehydration.
- Similarly in relation to container 20 for which EUF UK was the receiver I am prepared to accept that his evidence of the damaged condition is applicable to this container as well. This is because he almost certainly inspected this container, as he inspected six others from the same vessel, the JOHANNES MAERSK, on behalf of EUF UK, for which there are grape quality reports showing damage.
- That leaves container 40, for which GDL was the receiver and there is nothing to connect Mr Parkin to that container or to suggest he may have inspected it so the reference to his evidence does not assist me at all in relation to the condition of the grapes in that container. In fact, if Mr Buckingham's schedule is correct, the claim in respect of that container is a minus sum and the updated quantum spreadsheet to which I refer below makes it clear that there is no claim in respect of that container.
- Turning to the Swedish shipments (containers 1 to 9), Mr Young contends that the dearth of any material evidence of damage on out-turn is near fatal to these claims. In relation to the first two containers for which a claim is made (claims 1 and 2), which were carried on the OLIVIA MAERSK and transhipped at Rotterdam onto the GUDRUN MAERSK, arriving at Gothenburg on 18 April 2006, it is fair to say that the invoice from the selling agents Everfresh Group AB to Santa Elena relating to the containers carried on this voyage is not really indicative of much damage. It states "6 containers. I[n] general no problem beside of container MWCU 6185967 [claim 2] with smaller problems and lower result".
- However, Santa Elena also relies upon the findings (if not the opinion) of the cargo surveyor from Damco Survey AB who inspected the fruit from these two (and other) containers and concluded:
- Thus, what was revealed was a picture of some physical damage already observed, but in any event a reduction in shelf life of the grapes, essentially similar to what was observed by Mr Parkin on the UK shipments which he inspected. For the same reasons as I have given in relation to those shipments, I consider the grapes were outturned in a "damaged" condition given that reduction in shelf life, even if actual physical deterioration might have taken a few days to manifest itself.
- As regards the remaining seven Swedish containers, Mr Young submits that either there is no evidence at all as to condition at discharge (claims 5, 7 and 9) or such evidence as there is suggests quality or quality control problems such as too much fruit in the bags rather than damage caused in transit (claims 3,4, 6 and 8).
- In fact, for all but two of the other Swedish claims (claims 7 and 9), contrary to Mr Young's submissions, there is some evidence in the form of survey or quality control reports as to damage observed on outturn. This is detailed in the submission schedules served by Mr Buckingham with his closing submissions. These reports note similar waste or decay and dehydration to what was noted by Mr Parkin in relation to the UK shipments.
- So far as claims 7 and 9 are concerned, Mr Buckingham's submission schedules for these refer to the evidence of Mr Parkin in relation to damage at outturn (which cannot assist as to the condition of these grapes since there is no evidence he ever inspected Swedish shipments). However, in the case of claim 9 there is at least a document headed "Notification" from Everfresh, Santa Elena's selling agents (also referable to sales under claim 8) detailing the account sales, which includes an expense of 39,500 Swedish Kroner (SEK) (just under £4,000) for repacking/waste. There is also reference in the document to "repacking and waste [by] surveyor Borje according to enclosed specification". There is no enclosed specification but this document seems to me to provide some evidence that the grapes in this consignment were discharged in a damaged condition.
- In contrast, for claim 7 there is nothing at all to show that the grapes in this consignment were damaged. The equivalent "Notification" does not include anything for repacking/waste. It seems to me that in so far as the claim relates to that consignment, discharge in damaged condition is not made out.
- In any event the total amount claimed in respect of loss by reference to sound arrived value in respect of the Swedish consignments is very modest, the equivalent of some £13,000.
- There are claims in respect of three containers discharged at Rotterdam (claims 10, 11 and 12). Again the claim is a modest one, the loss by reference to sound arrived value being some €18,000. Although Mr Young again asserted a dearth of evidence on outturn, in fact there are emails from Mr Valenzuela of Santa Elena in relation to each of the containers referring to decay and dehydration in some cartons.
- For the container the subject of claim 12 there are also survey reports which also refer to decay and dehydration. The report of Rotterdam Fruit Surveyors states:
- This could hardly be described as a dearth of evidence. Furthermore, given that only two of the twenty pallets in the container had been stored at the cold store in Chile between harvesting and stuffing for longer than twenty days, all the grapes should still have had sufficient shelf life to be sold in the usual way.
- Notwithstanding this evidence of damage and reduction in shelf life on outturn, Maersk contended that Santa Elena could not establish that many of the shipments in respect of which it was claiming had suffered any damage because, particularly in the case of the later shipments, its claim related to containers which had shown temptale readings of 1.5°C or more. Maersk's case was that this made for an artificial dividing line between "damaged" and "undamaged" shipments, the justification for which had not been forthcoming in Santa Elena's evidence. Mr Young submitted that this became a "self-fulfilling prophesy", in effect shipments were deemed damaged if there had been temptale readings in excess of 1.5°C.
- Despite the enthusiasm with which this point was pursued, I do not accept it, essentially for reasons which I have already given, but the threads can be usefully drawn together as follows.
- First, in the case of the 45 claimed containers shipped to the United Kingdom, for all but 7 of those the selling agents were H&H or EUF UK. As I have already found, it is more likely than not that Mr Parkin inspected all those shipments at the cold store, despite the absence of many grape quality reports. Accordingly, it seems to me that the compelling evidence he gave about his findings of damage on outturn (such as decay and dehydration which he attributed to temperature abuse not the age of the grapes and, most significantly, rapid deterioration and loss of shelf life in ambient temperatures) is equally applicable to all these consignments. He said that, in the case of the majority of the containers where he had been told by Ms Steenkamp and Mr Fresno that there were high temperatures, he had observed the "ageing" he described in his evidence.
- Mr Young sought to argue that Mr Parkin's evidence was limited to the earlier shipments, but having re-read his witness statement and his oral evidence, he did not indicate any such limitation (nor was the point put to him). In any event, even if there had been anything in this point, it would be of limited assistance to Maersk, since (i) all but seven of the claimed UK containers for which H&H or EUF UK were the selling agents were discharged in March 2006 so to that extent the claims were for early shipments and (ii) one of the claimed containers for which there is a grape quality report showing damage such as dehydration consistent with Mr Parkin's evidence is the last claimed shipment to the UK (container 57) discharged from the OLGA MAERSK on 8 May 2006.
- Second, as I have also found, Mr Parkin's evidence was not the only evidence of damage or of loss of shelf life on outturn. I have already referred to the various quality control reports and survey reports usefully summarised in Mr Buckingham's submission schedules. It is striking that those survey reports did not suggest that Santa Elena's case that grapes were damaged and had a reduced shelf life was an illusory one. Of course many of them sought to attribute the damage and deterioration observed to inherent vice of the grapes (a case now abandoned by Maersk). However, as Mr Pailes accepted in cross-examination, when he and his colleagues inspected the shipments, they had no information about power off periods during Maersk's custody.
- Third, as I have also found, Maersk's suggestion that Santa Elena and its selling agents had simply taken all the containers where the temptales showed temperatures in transit of 1.5°C or more and made a claim in respect of those containers for fear of reputational damage, even though there was no actual damage or reduction in shelf life caused by high temperatures in transit, is against the weight of the evidence and, particularly, of the evidence of Mr O'Leary (whose evidence refuting this suggestion when it was put to him I have quoted extensively above) and Mr Parkin.
- Fourth, in so far as it was being suggested by Maersk that the temperature readings from temptales of 1.5°C or more were attributable to the position of the door end temptale within the container, I do not consider that is a plausible explanation for the high temperature readings. Whether the temptale was at the top or bottom of the stow or inside or outside a carton is unlikely to have made such a significant difference to the temperature as could explain the high temperature readings.
- Furthermore, that suggestion overlooks that the temptale readings are not the only evidence of high temperatures in the claimed containers during transit. In the case of the containers for which Maersk has disclosed its own temperature logs of the supply and return air of the refrigerating machinery, return air temperatures substantially in excess of 1.5°C are recorded, often correlating with periods of excessive power off, an issue to which I return in detail later in the judgment. In addition to those temperatures, there is the evidence (where available) of pulp temperatures of the grapes when inspected by the various surveyors in the cold store after discharge, which are considerably higher than would be expected if the grapes were properly and carefully carried and which are indicative of temperature abuse during transit, a matter to which, again, I return later in the judgment.
- All this evidence of actual damage and deterioration on outturn demonstrates, as Mr Buckingham submitted, that the 1.5°C "cut off" used by Santa Elena was ultimately of little consequence in the sense that it simply did not support Maersk's case that a reading of 1.5°C or more was not associated with any damage at all but was simply a reactive response to some limited damage on earlier shipments. On the contrary, the totality of the evidence demonstrated that the claimed consignments did suffer actual damage, whether decay or dehydration or the other physical manifestations of "tired" grapes or deterioration through reduction in shelf life, a conclusion which is not dependent on the temptale readings.
- In conclusion on the condition of the grapes the subject of the claims, despite Mr Young's strenuous submissions to the effect that any damage was somehow illusory or only reputational or that there was a dearth of evidence of damage, I am quite satisfied for the reasons I have given that (with the exception of claims 7 and 40) Santa Elena has shown on a balance of probabilities that there was actual damage upon outturn to the grapes the subject of the claims.
- As noted earlier in the judgment, in its pleaded case and until closing speeches, Maersk relied upon three of the exclusions in clause 6.1(a) of the bill of lading terms. However, in closing speeches, the general case of inherent vice, as in an enhanced susceptibility to rot, decay and botrytis caused by unseasonal frosts and rain in Chile, was abandoned. To the extent that Maersk relied upon its various allegations about the systems of harvesting, cooling and storage prior to shipment as also amounting to inherent vice, I have made it clear earlier in the judgment that I consider those allegations unfounded and that I am satisfied that the grapes were loaded in the containers in good order and condition. The two other exclusions relied upon by Maersk are those in clause 6.1(a) (ii) and (iii), insufficient or defective condition of packing and handling or stowage of the goods by the merchant or any person acting on his behalf. I will consider these in turn.
- So far as insufficient or defective packing is concerned, by the end of the trial, it was unclear to what extent, if at all, a free standing allegation was being made by Maersk about the packaging of the cartons. Mr Young's written closing submissions dealt with this so called "attributable" cause at the same time as handling of the goods. However so far as the latter point was concerned, the submissions really were about no more than condensation on the ceilings of the containers, a matter which I have already dealt with in the context of the allegations about condition on shipment and which seems to me to have no merit for the reasons I have given.
- However, at various stages of the case, Maersk appeared to be suggesting that the packaging employed by Santa Elena did not allow cooling air to pass through the grapes, a point made by Mr Lawton in his original expert report. However, there is nothing in this point. The packaging used by Santa Elena is normal and standard in Chile and has not given rise to any problems. As Mr Fraser Imrie, Santa Elena's carriage expert, said, the packaging is designed to allow air to permeate and circulate through the stow, as is evident from photographs of the packaging. Ultimately any suggestion that the packaging employed did not allow cooling air to permeate through the grapes did not seem to be being pursued. In fact in cross-examination, Mr Lawton said in terms that he was not suggesting that there was anything wrong with the packaging.
- There also seems to be a hint in paragraphs 25 and 26 of Mr Young's written closing submissions that prolonged storage in Chile in the cartons on the pallets might have contributed to dehydration. Leaving to one side that there was no prolonged storage, the third report of Ms Pinilla (produced after she had given evidence, in response to Maersk's amended pleading but in relation to which Maersk did not require her recall) emphasised the importance of the packaging in preventing dehydration. She concluded:
- I agree with Mr Buckingham that if any criticism of the packaging is still being made, it is fanciful. In terms of the presumption of non-responsibility, it does not even begin to be a plausible explanation for the damage which occurred.
- This leaves Maersk's allegation that the damage was attributable to the stowage of the containers by Portuaria Andes on behalf of Santa Elena, an allegation which has loomed large since the containers first began to outturn with grapes in a damaged or heated condition. The allegation being made is that there was short circuiting of air by reason of the stowage methods employed, in other words, the forced cooling air was not passing throughout the stow and being drawn back at the top of the stow into the refrigeration machinery but was being dissipated elsewhere, with the consequence that cooling air was not getting to various parts of the stow, particularly that closest to the door end of the container.
- The first point to note about this short circuiting case is that despite various suggestions by Mr Lawton that short circuiting might have occurred in both Euro pallet stows and standard pallet stows, the reality is that it is an allegation that has always been limited to Euro pallet containers. This is because the 20 pallet stow of standard pallets in a container, whether it was configured with the Maersk way of stowage or the Santa Elena/Portuaria Andes way of stowage was a tight stow, which does not lead to short circuiting, as the OLGA MAERSK trial demonstrated.
- Since the phenomenon is one which is thus limited to Euro pallet stows, put at its highest it could only provide an explanation for any damage to Euro pallet containers. Although it is correct that overall more of the claim relates to 4.5kg boxes shipped on Euro pallets, it remains the case that a substantial proportion of the shipments to which the claim relates were on standard pallets, on which 9kg boxes were shipped. Of the 57 containers to which the claim relates, 31 were stowed with Euro pallets, 24 were stowed with standard pallets and 2 were mixed. It follows that the "Euro pallet stow" of which Maersk complains is incapable of providing an explanation for all the damage which occurred.
- It is essentially common ground that stowage of 23 Euro pallets in a container inevitably left free space which needed to be blocked, so as to enable circulation of air throughout the stow and to avoid short-circuiting. The method employed by Portuaria Andes, according to Mr Johns Aravena, was to use specially cut sheets of a substance called "carton piedra" made out of paper pulp and plaster and hence it would appear like particularly stiff cardboard. The carton piedra would be placed on the floor of the free area and held down at the corners by the adjoining pallets, although the edge nearest the wall of the container would not be held down.
- Maersk relied upon the fact that one of the corners was inevitably not held down, together with some photographs at discharge suggesting that gaps may have been left enabling air to pass though the floor which was not blocked by carton piedra, to suggest that this method was inadequate to prevent short circuiting. However, as a matter of common sense, problems with the "holding down" of the carton piedra can only have caused isolated as opposed to endemic problems. If this method of blocking free space and avoiding short circuiting were generally inadequate then, given the number of Euro pallets exported, this method would inevitably have caused problems on other shipments and would have been abandoned.
- Maersk relied upon the fact that the temperature graphs for the containers show high door end temperatures being measured by the door end temptale or thermograph as proving that there was short circuiting of air at the door end. On the basis that the supply air from the refrigeration machinery was at 0.5°C, with everything operating normally, the return air to the machinery should be about 1 degree higher. Depending upon precisely where the door end temptale was located (outside or inside a carton, at the top or the bottom of the stow) the temperature there might be somewhat higher. The eventual position of Mr Lawton was that he would expect the temperature there to be about 1.5 degrees higher than the supply air. However, the graphs showed a much greater disparity in temperature, which Maersk ascribed to short circuiting.
- I was not convinced by this argument. As Mr Lawton accepted, if short circuiting were occurring, it would do so throughout the period of carriage in the container, since it is a function of the stowage. In that event one would expect to see a complete disparity between the graphs of the temperature readings from the two temptales in each container, because whereas the one at the unit end would be measuring the temperature of the cooling air passing through the stow at the unit end, the one at the door end would be measuring air which was more in line with the external ambient temperature (wherever precisely it was located), since on this hypothesis no or very little cooling air would be passing through the stow at the door end.
- However with a few exceptions, that is not the picture which emerges from the temperature graphs. Rather what emerges is a degree of correlation or synchronicity between the two traces for the unit end temptale and the door end temptale, indicative of reasonable air flow through the stow, rather than short circuiting. It follows that, to the extent that high temperatures were measured at the door end, the explanation for that has to be something other than short circuiting. I agree with Mr Buckingham that the most likely explanation is that temperature problems in the container, for instance during power offs, are felt more at the door end where there is the greatest heat leakage (through the door seals).
- It is also striking that the evidence about damage to the grapes was not limited to the door end of containers, specifically it is not suggested that the pattern was of grapes at the door end outturned in a ruined condition such as one would expect to have happened if the principal cause of the damage were short circuiting. In his written closing submissions, Mr Young submitted that "Mr Parkin accepted that much of the degradation he saw was at the door end". I do not consider that submission reflects the relevant part of his evidence which was:
- That is hardly evidence which supports the proposition that much of the degradation was at the door end and it is also worth bearing in mind that it was only in some cases that Mr Parkin saw the pallets when they were still in the containers as opposed to after destuffing. That there was not "much of the degradation" at the door end was confirmed by Maersk's own expert Mr Lawton in his original report where he said:
- Of course, for reasons which I have already given, I have rejected Maersk's case of inherent vice and weakness in the grapes to the extent that case is pursued, and in any event that issue was outside Mr Lawton's expertise as a refrigerated carriage expert. Nonetheless, it is striking that Mr Lawton went on to conclude in his original report that he considered inherent vice the prime factor which led to the damage on outturn and that without such inherent vice the stowage techniques employed were not such as to damage the cargo, in other words the rises in temperature which those techniques would have led to would not have been so severe as to cause damage. He did not seek to resile from that position in his oral evidence.
- Whilst the views of a party's own expert do not preclude a party from running a case which goes beyond or contrary to that expert case, it is never a promising start if the case being sought to be run (as here) is very much dependent upon expert issues such as container stowage and its impact upon temperatures, but is not supported by the expert. In my judgment, Mr Lawton's view that the method of stowage was not of itself such as to explain the damage on outturn was entirely in accordance with common sense, for the reasons I have set out.
- In all the circumstances, I have reached the firm conclusion that Santa Elena has established on a balance of probabilities that the damage on outturn was not caused by any of the three matters relied upon by Maersk. Given that (apart from matters going to condition on shipment, which I have also rejected) Maersk has not put forward any other explanation for the damage on shipment which would afford it with a defence under clause 6.1 of the bill of lading terms (or for that matter under the general law of bailment or under the Hague or Hague-Visby Rules), I consider that Maersk is liable for the damage to the consignments, even if the positive case advanced by Santa Elena that the damage was caused by matters arising during the period of custody of Maersk (specifically excessive power offs of the containers) is not made out. Nonetheless, given the significance which that case assumed during the trial, it obviously needs to be dealt with in detail.
- Before dealing with power offs, I should just mention other issues about the containers and their carriage raised by Santa Elena. In his original expert report on behalf of Santa Elena, Mr Imrie identified a number of alleged anomalies in relation to the containers themselves or their carriage by Maersk. Since Mr Imrie accepted in cross-examination that (apart from power offs) these anomalies were not causative of any loss, it is not necessary to deal with any of those in this judgment save, briefly, alarms.
- Alarms were an issue relied upon by Mr Imrie which he and Santa Elena seemed reluctant to relinquish, notwithstanding that there was ultimately no evidence that problems with alarms had been causative of the loss. I suspect that what had occurred is the disclosure from Maersk showed some anomalies suggesting that alarms had sounded and it is clear that there was an issue about the computer software in relation to alarms. The specific point which was put in cross-examination demonstrated not that alarms were sounding but that a computer "response" had been activated on an hourly basis. In any event, in the end Mr Imrie accepted that any problem with alarms was not causative of any loss. In the circumstances, it is not necessary to delve into this topic further.
- Santa Elena's case was that the only consistent and thus plausible explanation for the consignments having suffered damage was excessive periods of "power off" of the refrigerating machinery whilst the containers were in the custody of Maersk.
- The starting point for a consideration of power offs is that it is accepted by Santa Elena that whilst the refrigerated containers were in the custody of Maersk, there will have been periods when the refrigerating machinery was switched off for legitimate operational reasons. These legitimate power offs fall into two categories. First, there are periods when the containers are being moved for one reason or another. There are a number of these periods in any given shipment. Second there are periods of defrost.
- So far as power offs for legitimate operational reasons are concerned, to begin with, when the container arrives at the San Antonio terminal on the back of a road vehicle attached to a generator set ("genset"), it has to be discharged and transferred to the container stack in the yard, where it is connected to shore power. Mr Thue Barfod of Maersk gave evidence about this. He accepted that if there were congestion at the terminal, the container should not be disconnected from the genset on the road vehicle until it was ready to be moved to the container stack. Accordingly, the period for which the container is disconnected from a source of power should not exceed half an hour to an hour.
- The next legitimate power off period is when the container is being moved from the container stack and loaded on the ship. Mr Barfod said this might take one to two hours with potential difficulties due to availability of cranes and logistical difficulties such as people not being permitted to manoeuvre the container under a crane. However, given that he said that the distance from the container stacking area to the quayside was only 500-700 metres and that, as he accepted, the container should be kept plugged in at the container stack until the last moment and plugged in on board the vessel as soon as possible, it seems to me that this power off should not be for more than about an hour. Ultimately Mr Barfod accepted that this would be the average.
- In addition there would be corresponding operational power offs at the discharge port of about an hour each for the discharge of the container from the vessel to a container stack and then its loading on a road vehicle and attachment to a genset prior to gating out and release from Maersk's custody.
- Two other periods of legitimate power off for operational reasons were identified by Mr Barfod in evidence. First, in many cases, there seems to have been a reconfiguration of cargo at the Maersk terminal at Panama with other containers from Ecuador and Peru being loaded. It would be necessary to move some of the San Antonio containers around on the vessel or even discharge them onto the quayside to ensure that containers for discharge at the various ports of discharge were in the right place on board the vessel. Again his evidence was that this might involve a power off of one to two hours, but when I pointed out that just moving containers around the vessel and otherwise plugging them in somewhere should mean a power off of no more than an hour, he was inclined to accept that.
- The second period of legitimate power off will have occurred in those cases where containers were transhipped from the ocean vessel onto a feeder vessel, which happened with all the containers bound for Sweden (claims 1 to 9), which were discharged and transhipped at Rotterdam. Again, this would involve two periods of an hour or so of power off during discharge from the ocean vessel and plugging into shore supply followed by unplugging from shore supply and loading on the feeder vessel. Both consolidation and transhipment were expressly permitted by clauses 19.1 and 19.2 of the Maersk bill of lading terms pursuant to which these containers were being carried.
- The second category of legitimate power off is whilst the refrigeration machinery is defrosting to remove any frost from the coils of the machinery which would impede the efficient delivery of cooling air by the machinery. The containers in the present case had three different makes of refrigeration machinery. Thirty one containers had Carrier machinery, three had Daikin machinery and the balance had Thermo King machinery, evidently the most sophisticated. Mr Barfod's evidence was that all three makes had automatic defrost. It was essentially common ground that the automatic defrost intervals would be every six hours and that each defrost would last about an hour, during which the refrigeration machinery would be off for an hour.
- This is a convenient point to deal with Santa Elena's pleaded allegation in the Supplementary Further Information served on 8 April 2010 that all the containers for which records have been disclosed had a defrost cycle that deviated from the recommended frequency of the automatic frost cycle of six hours. So far as the Thermo King containers are concerned, as Mr Lawton pointed out, the automatic defrost starts at six hourly intervals but if the sensors detect that frost is not building up around the coils every six hours, the defrost interval will be automatically extended by two hours to eight, ten or twelve hours as appropriate.
- So far as the Carrier and Daikin models are concerned it does appear that those on board the vessels set the defrost intervals for some or all of the time at different intervals than the automatic defrost. However, in all but one case, the defrost was set at twelve hourly intervals. As Santa Elena's expert, Mr Fraser Imrie, accepted, this meant that there were fewer power offs due to defrosts (i.e. two periods of an hour in every twenty four as opposed to four on automatic defrost setting) which he said could be beneficial to the temperature of the cargo. The exception was one container where the defrost was set for a period for every three hours before changing to six. However, as Mr Lawton pointed out, defrost every three hours would last for a shorter period of time, so that overall the power offs are unlikely to have been longer.
- It follows that, even if setting the defrosts at different settings than the automatic defrost settings could be criticised (and I am far from convinced that it can, given that there may have been any number of legitimate operational reasons why those on board chose these settings), there is nothing in any suggestion that the defrost settings were causative of any damage, as Mr Imrie ultimately accepted in cross-examination.
- Turning to the actual periods of power off whilst the containers were in the custody of Maersk, I do not propose to set out the detail of these for each individual container, as to do so would neither be proportionate nor productive. Whilst there was some dispute about particular periods, I consider that broadly the periods of power off are accurately set out in Appendix IV to Mr Imrie's second supplementary report and, so far as the significant periods are concerned, in graphic form in the graphs produced by Mr Buckingham at the beginning of the second stage of the trial in September 2010.
- In many cases, the precise reason for a power off is not possible to discern from the limited material available. However, with some exceptions (such as the JEPPESEN MAERSK, claims 55 and 56, which suffered a serious generator breakdown) the power offs do not seem to have occurred whilst the containers were actually on board the Maersk vessels.
- A number of the power offs seem to correlate with those periods of movement for operational reasons which I identified above, but these took a lot longer than the maximum periods for which Mr Barfod accepted such power offs should have been necessary. Mr Barfod accepted in cross-examination that, to the extent that the power offs for operational reasons were longer than they should have been (or there was no valid operational reason demonstrable for any particular power off), Maersk will have fallen below the standards it should have achieved. Equally a number of power offs remained wholly unexplained and Mr Barfod also accepted that where there was a power off other than for legitimate operational reasons which was unexplained, Maersk will have fallen below the standards it should have achieved.
- At least in those cases where the power offs were for valid operational reasons, it seems to me that, in assessing whether an excessive power off was in breach of contract, there must be some leeway allowed. Where a power off was only marginally longer than the hour which Mr Barfod accepted, it seems to me difficult to say that Maersk was in breach in that respect. A number of the power offs in some of the claims fall into that marginal category, for example the periods of power off for operational reasons in claim 32. I would be reluctant to conclude that in those cases of a power off for legitimate operational reasons which lasted between one and two hours rather than one hour, that was a breach of contract.
- However, when one looks at all the power offs identified by Santa Elena in Mr Imrie's Appendix IV and in the graphs produced by Mr Buckingham, the reality is that for nearly all the containers in issue, there are one or more periods of power off which either exceed any permissible period for a recognised operational power off or the reason for which remains unexplained. It is quite clear that those excessive or unexplained periods of power off constitute breaches by Maersk of its obligations under the contracts of carriage or as bailees.
- In considering whether that breach was causative of the loss and damage, the starting point is that it was essentially common ground between the carriage experts that power offs for any extended period of time, with consequent heating up of the container, leading to heating up of the cargo could lead to cargo damage, although they disagreed about the length of time required to do so. Mr Imrie in his original report had said any period of power off longer than three hours would be potentially causative of the loss, that period corresponding with the maximum period for a power off as set out in the Maersk manual. Mr Imrie accepted in cross-examination that he had no particular experience which had enabled him to reach the conclusion that three hours was appropriate. By the time he came to give evidence, that period had reduced to one hour. I had the distinct impression that this was chosen for no more scientific reason than that Mr Barfod had accepted in cross-examination that permissible power offs should be limited to about an hour.
- One of the problems with Mr Imrie's theory that any power off of longer than an hour could lead to damage to the cargo was that, as Mr Young submitted, it proved too much, since the standard period of defrost would be an hour or so, suggesting that grapes would sustain damage anyway even in a normal voyage where there were permissible defrosts and permissible power offs for container movement.
- At various points in the trial I floated the possibility that refrigerated containers might just not be suitable for the carriage of grapes (not that that would necessarily have relieved Maersk from liability in the present case for the reasons I have given). However on reflection, I do not see that as realistic, since were that the case, one would expect to see some evidence of damage to containers which had not suffered anything other than permissible power offs. The containers in respect of which the claim arises represent less than 50% of the total number of Maersk containers in which Santa Elena grapes were shipped in the 2005/2006 season and there is no evidence that the grapes in the balance of those containers suffered damage.
- In relation to the non-claimed Maersk containers, Maersk was unable to produce any temperature logs for the supply and return air to the refrigerating machinery so it is not possible to say what actual periods of power off those containers experienced. However, as a matter of common sense it seems to me highly unlikely that those grapes sustained damage during normal carriage with no more than the usual permitted power offs, including defrosts, otherwise one would expect to have seen some evidence of damage or complaints about damage on those shipments, but there is none.
- I had other problems with Mr Imrie's explanation as to the mechanism by which the heating up and then cooling down of grapes in the containers would lead to damage. For example, his evidence was that this process would lead to condensation on the grapes because, as the container heated up when the power was off, moisture would be released from the grapes which the warmer air would be able to absorb, but as that air cooled down when the refrigeration machinery started operating again the moisture would migrate onto the grapes. It seemed to me that theory ignored the fact that, as Mr Lawton said, as the air cooled down, the moisture would migrate to the warmest point in the container which would be the coils in the refrigeration machinery. There was some evidence, for example from Mr Parkin's grape quality reports of "the bags having a degree of condensation" (claims 26 and 28) but since he was not recalled after these reports were produced, one can only speculate as to whether he was referring to the outside of the bags or the grapes inside the bags.
- I also had difficulty with Mr Imrie's theory about the "memory" of grapes expounded in his evidence, to the effect that grapes which had suffered temperature abuse would "remember" this. Given that grapes are non-climacteric and thus do not ripen after harvesting, I do not see how they can have a cellular memory after cutting from the vine such as Mr Imrie described. This all seemed to me rather fanciful.
- In one sense Mr Lawton's evidence was at the other extreme. He said that the impact of power offs would depend upon where the container was when the power off occurred. That makes sense, because obviously, although the containers are all insulated, once the power goes off for any extended period of time, the extent to which the inside of the container heats up will vary with location. A container which is in high ambient temperatures near the Equator, on occasions approaching 45°C, will heat up more quickly and to a greater heat than one which is in the ambient temperatures of a Northern European spring. Mr Lawton's evidence was that in relation to any power off which was more than six hours, he would start to ask questions depending on where the container was, but that power offs of up to twelve hours were unlikely to have a significant impact on the cargo.
- He made the point in that context that cargo would warm up in the container by about 0.13°C per hour when the power was off (although he accepted that the periphery of the stow would heat up more quickly, possibly twice as quickly at 0.26°C per hour) and would cool down with the plant running when power came on again at about 1°C per hour. By reference to various logs put to him in cross-examination he expressed the opinion that power offs cannot have led to a serious rise in temperature of cargo, otherwise the return air temperature to the refrigeration machinery would have taken a lot longer to come down to the levels it had been at before the power off.
- As sometimes happens with expert evidence, I suspect the true position lies somewhere between the extremes. Clearly, contrary to Mr Imrie's evidence, the regular permissible power offs during defrost and container movement are unlikely to lead to damage to the cargo, but by the same token I consider it likely that cargo would be heated up to an extent and potentially damaged by extended power offs of a shorter period than Mr Lawton would accept, certainly ones which lasted for three or four hours or longer, such as occurred with a large number of the containers in the present case.
- In this context, it seems to me that paragraph 8.23 (headed "Off Power") in Maersk's own operations manual is revealing:
- Although this constitutes generic instructions to Maersk personnel not specific to cargoes of refrigerated grapes, it states in terms that for chilled cargo such as these grapes were, the maximum allowable power off period is less than three hours. When confronted with this in cross-examination Mr Lawton suggested the three hour maximum was referable to frozen cargo. Although Mr Buckingham did not challenge him further on this, it is clear from the wording of the provision that Mr Lawton is mistaken and that the three hour maximum is applicable to a cargo such as these cargoes of grapes.
- Although there was no evidence from Maersk as to the genesis of the maximum times in the manual, it seems to me that in the case of such a major container ship operator, one is entitled to assume that it is based upon experience. This maximum power off period for reefer cargo rather suggests that Mr Lawton's six and twelve hour assessments are too favourable to Maersk and that the experience which has informed the maximum period set out in the manual has suggested that, after three hours of power off, there may be heating up of chilled cargo, which may lead to damage. It is also striking that, without setting out any scientific explanation, the manual recognises not only that a power off for chilled cargo should not exceed three hours but that power offs should be kept to a minimum precisely because temperature fluctuations can have an impact on product quality, a euphemism, if ever there was one, for such fluctuations causing damage to cargo.
- In the light of Mr Barfod's acceptance that operational power offs during container movement should be no longer than an hour, there is little doubt that with a few "marginal" exceptions, the claimed containers suffered power offs, often more than one, of considerably in excess of an hour, even if one can ascribe the relevant power off to a permitted container operation such as consolidation or transhipment. Many of the containers suffered power offs in excess of one hour for which no legitimate explanation has been put forward by Maersk.
- It is also worth pointing out that with a handful of exceptions (specifically claims 32 and 45) all the claimed containers for which Maersk has provided the relevant logs (there is no documentation for claims 4, 15, 30, 33, 41 and 43) experienced one or more power offs in excess of the Maersk manual maximum of three hours. That all demonstrates that, in relation to the vast majority of the claimed containers, the very situation which the manual says should not happen (a power off of more than three hours) has occurred, a situation which the manual recognises is likely to lead to cargo damage.
- Against this evidence that too many power offs (at least ones in excess of an hour) may well lead to cargo damage, Mr Young seeks to place considerable emphasis on the evidence of the containers carried on the JEPPESEN MAERSK, arriving in the UK on 25 April 2006. That vessel suffered major generator breakdowns on the voyage, as a consequence of which there were extensive periods of power off. In fact judging by the graphs for the two containers in respect of which claims arise, claims 55 and 56, certainly for the first two thirds of the voyage (when of course the vessel was passing through warmer ambient temperatures) the power seems to have been off as much as it was on.
- Mr Young makes the perfectly valid point that if it were periods of power off of more than three hours which were causing the damage on outturn, one might have expected to see fairly extensive and catastrophic damage within these containers. Yet, he submitted, the damage was isolated and no worse than in any of the other containers (indeed far less serious than many other containers which had suffered less extensive periods of power off). It is correct that the claim advanced on those two containers is very modest: £3,543 on claim 55 (of which £1,720 is repackaging costs) and £5,263 on claim 56 (of which £2,964 is repackaging costs). Furthermore, there were three other Santa Elena containers carried on that voyage for which no claim is being advanced.
- In a sense the point about the JEPPESEN MAERSK highlights one of the difficulties faced in a case with claims which do not relate to containers carried on one vessel but on ten vessels. For whatever reason, there has not been any evidence from those on board the vessels, either engineers or electricians, about what happened on board. This may be because, with the exception of the JEPPESEN MAERSK, most of the power offs were not whilst the containers were actually on board the vessels as opposed to being moved around on shore or held at terminals. However, this particular shipment is one where some evidence from those on board as to conditions generally, what steps were taken to protect the cargo and so forth, might have assisted a fuller understanding of what appears to be something of an anomaly in terms of damage to the cargo.
- It may be that the explanation is, as Mr Young also suggested, that the grapes in these two containers, all Thompson Seedless (with a shelf life according to Mr Parkin of 90 days) were "young" when stuffed, in the sense that, bar three pallets in the container in claim 55, they were all stuffed less than 20 days from harvesting, so that they were better able to withstand the increases in temperature sustained. However, it does not follow from that either that the claims for other containers should fail because grapes in those containers were "older" or that the overall cause of the damage on outturn on all these shipments was not excessive power offs. As I have already held, and as Mr Buckingham's submission schedules demonstrate, the grapes in respect of which the claims arise were all shipped with a sufficient remaining shelf life that, if carried properly without excessive power offs, they should have outturned in a sufficiently robust condition to have at least seven days shelf life left to enable sale and consumption in the normal way.
- In so far as Mr Young submits that the limited damage on the containers on the JEPPESEN MAERSK should lead to the logical conclusion that the cause of the damage to cargo in the other containers cannot have been excessive power offs, I cannot accept that submission. It is worth remembering, as Mr Buckingham points out, that on none of these shipments is one looking at catastrophic physical damage on outturn, but rather at some isolated physical damage, with the real problem being a significant reduction in shelf life. In the context of damage of that kind, perhaps the absence of a complete contrast between the outturn condition of the grapes in the containers the subject of claims 55 and 56 and the outturn condition of other grapes is less surprising.
- Furthermore, against the evidence of the outturn condition of the grapes from the JEPPESEN MAERSK one can set the evidence of the outturn condition of two of the containers carried on the MAERSK NAGOYA which arrived in the United Kingdom on 4 April 2006 and which, after the containers on the JEPPESEN MAERSK, seem to have sustained some the longest individual periods of excessive power off. These were (i) the container the subject of claim 47 which had a power off of 10 hours 18 minutes (albeit apparently after discharge at Felixstowe); (ii) the container the subject of claim 48 which had two periods of power off of 6 hour 59 minutes and 7 hours 27 minutes on 6 and 7 March 2006 when the container was at the San Antonio terminal in Chile prior to loading on the vessel on 12 March 2006.
- There are International Produce Limited quality control reports at outturn on both these consignments of grapes which show instances of damage similar to those observed by Mr Parkin in his inspections: mould, waste, discoloration and dehydration. In terms of claim, the quantum for these two consignments is amongst the highest for individual consignments, £20,296 on claim 47 and £16,600 on claim 48, nearly all of those sums consisting of losses on sales in the market. In both cases the grapes were Thompson Seedless, all stuffed less than ten days after harvesting. The temperatures on stuffing were between 0°C and 0.4°C in the case of consignment 47 and 0.1°C and 0.9°C in the case of consignment 48 so no question of "hot stuffing" arises. Consignment 47 was standard pallets and consignment 48 was Euro pallets. Given that the extent of damage on outturn seems to have been similar, it is difficult to see what explanation there can really be for the condition on outturn than the effect of excessive power offs.
- A similar exercise could be conducted not just with other containers on the same vessel which also had extended power offs such as the containers the subject of claims 50 and 52, but with other consignments in containers which experienced extensive power offs. Furthermore, where pulp temperatures are recorded by surveyors at the cold store after discharge, those are far in excess of the outturn temperature which would be expected with proper and careful carriage with only permitted periods of power off. Given the stuffing temperatures which were, as I have found, perfectly normal and not indicative of any hot stuffing, the pulp temperatures at the cold store after discharge (which as Mr Buckingham pointed out are probably lower than on actual outturn, given some cooling in the meantime) are indicative of temperature abuse during transit.
- Overall, it seems to me that the suggestion that the two containers from the JEPPESEN MAERSK disprove the case that the outturn condition of the grapes is attributable to excessive power offs is against the weight of the other evidence.
- In support of its case that periods of power off when there was some heating of the cargo would not be causative of damage on outturn, Maersk also relied upon the fact that on shipments to the USA at that time, for the last three days of a twelve day voyage, the temperature of the grapes was raised to at least 3.8°C or 40°F as required by the US Department of Agriculture ("USDA") for the purposes of fumigation by the USDA on arrival.
- I was not impressed by this point since, as Mr Tocornal explained, this was a controlled process whereby the refrigeration was turned off and warm air was injected into the container and the increase in temperature was stepped and gradual. This is very different, in terms of the likely effect on cargo, from the fluctuations in temperature in the present consignments caused by excessive power offs. Furthermore, as I understand it, there were instances where damage was caused to the grapes by this heating process, which is one of the reasons why the practice has now changed and the USDA conducts fumigation in Chile prior to shipment.
- In resisting the claim, Mr Young sought to derive assistance from the fact that Mr Imrie (who as I have said espoused a theory in his evidence that any period of power off of more than an hour, including a defrost, would lead to damage to the cargo) said in answer to both Mr Young and myself that it was impossible to say what proportion of any damage at outturn was attributable to impermissible power offs as opposed to permissible power offs. Mr Young submitted that in those circumstances, Santa Elena was unable to establish what proportion of any claim was attributable to breach, so that its claim must fail.
- I consider that there are a number of fundamental problems with this argument, both on the facts and as a matter of law. On the facts, it assumes, contrary to Maersk's own expert case and the evidence, that there was or inevitably would have been damage to these consignments of grapes attributable to "permissible" power offs. As I have already said, there is no evidence that consignments where the only power offs were permissible ones suffered damage. On the contrary, Ms Pinilla's analysis in her first expert report (on which, as Mr Buckingham points out, she was not cross-examined) showed clearly that proper and careful carriage of the containers of grapes resulted in those consignments being delivered in good order and condition. It seems to me that, in a very real sense, Maersk has seized upon Mr Imrie's somewhat extreme opinion that power offs of as short a period as one hour could cause damage as the basis for this argument. However, I have already indicated that I reject that opinion, which is against the weight of the other evidence.
- It is also to be observed that where permissible power offs occurred after one or more excessive or impermissible power off, it may well be the case that the deleterious effect of the permissible power off may have been exacerbated by the harm already done by excessive or impermissible power offs, so that permissible power offs may have caused damage in circumstances where, had they not been preceded by excessive or impermissible power offs, they would not have caused any damage at all. In those circumstances, in a real sense, the effective cause of all the damage will have been the excessive or impermissible power offs.
- Furthermore, even if those factual difficulties with this argument could be overcome, it seems to me that despite the enthusiasm and verve with which Mr Young advanced it, the argument is flawed as a matter of law. As I have already indicated earlier in the judgment, the law is clear that if goods are received by the carrier in apparent good order and condition but delivered in a damaged condition, the burden of proof is on the carrier to show that the damage is attributable to a cause or causes for which it is not responsible.
- If the carrier's case (as on this hypothesis it is here) is that some of the damage is attributable to a cause for which it is not liable (here damage which would inevitably have occurred as a consequence of permissible power offs) then the burden is on the carrier to show what proportion of the damage is attributable to that cause for which it is not responsible. To the extent that it cannot do so, the carrier is liable for the entirety of the damage which has occurred: see Gosse Millerd v Canadian Government Merchant Marine [1929] AC 223 at 241 per Viscount Sumner and The Torenia [1983] 2 Lloyd's Rep 210 at 218-9 per Hobhouse J.
- Mr Young seeks to distinguish those cases in his most recent written submissions, by contending that they were all dealing with situations where there were competing causes for the loss, an "excepted" cause (such as one of the exceptions in Article IV rule 2 of the Hague or Hague-Visby Rules) and a "non-excepted" cause. Mr Young argues that the present case is different, because the permissible power offs were not an excepted peril but an essential and inevitable element of the carriage process, as he put it, aspects of the duty of care rather than departures from it.
- In my judgment, this argument overlooks that those cases are applying a wider general principle, not limited to cases where the carrier relies upon contractual or common law exceptions, that where a cargo claimant shows a prima facie case of breach (as it does by demonstrating that the goods were loaded in good order and condition and that the goods were discharged in a damaged condition), the burden is on the carrier as bailee to prove either that all the loss and damage or an identified part of it is attributable to a cause or causes for which the carrier is not responsible. To the extent that the carrier cannot do so, it is liable for the entirety of the loss. The principle is not limited to cases where the cause for which the carrier contends it is not responsible is an excepted peril, but applies to all situations where (as here) the carrier contends that some or all of the loss is attributable to a cause for which it is not responsible. The wider scope of the principle is clear from the judgment of Hobhouse J in The Torenia [1983] 2 Lloyd's Rep 210 at 216-7, particularly his citation of the statement of the relevant principle in the judgment of Denning LJ in Spurling v Bradshaw [1956] 1 WLR 461 at 466.
- The applicable contractual regime under clause 6 of the bills of lading leads to the same result. The relevant provisions are set out earlier in this judgment, but what is clear is that in cases where (as is common ground here) the stage of the carriage as defined during which the loss and damage occurred is "not known", on the basis that the cargo claimant shows loss and damage to the cargo during the carriage (which Santa Elena can do here for the reasons I have given in the case of the vast majority of containers), it follows that save in cases where the carrier can demonstrate the application of one of the specific exceptions in clause 6.1(a), the carrier is liable for that loss and damage.
- Applying those provisions, unless Maersk as carrier could demonstrate that one of those exceptions applied, Maersk would be liable for any loss and damage to the relevant cargoes carried in the containers, irrespective of whether, in the circumstances, Santa Elena could establish that the cause of the loss and damage was illegitimate power offs during carriage as opposed to anything else. In other words, once Santa Elena establishes that the grapes were loaded into the containers in good order and condition and that upon outturn they were in a damaged condition, the burden of proof is upon Maersk to demonstrate that one of the exclusions applies.
- This is no more than an application of the general principle, already stated, that, if the cargo claimant can demonstrate that loss and damage has occurred during the period when the goods are in the custody of the bailee, the burden rests on the bailee to show that either all the damage or an identifiable portion of the damage is attributable to matters for which it was not responsible. In a sense, the importance of the general principle is demonstrated in the case by the point I have already alluded to, that the impact of permissible power offs may be adversely affected by the excessive or impermissible power offs, although one can see that in a given case, that might be difficult to establish one way or the other. Given those sort of potential problems, there is all the more reason why the burden should be on the carrier to prove what proportion of the damage which has occurred whilst the goods are in its custody is attributable to matters for which it is not responsible, rather than being able to pass the burden to the cargo claimant, as Mr Young's argument seeks to do.
- In conclusion on the question of power offs, I am quite satisfied that with a handful of exceptions, all the claimed containers for which records are available sustained extensive periods of power off in excess of the three hour maximum in the Maersk manual and that Santa Elena has established in the case of all those containers that on a balance of probabilities the damage sustained at outturn was caused by those excessive power offs.
- However, even if that were wrong, it would not assist Maersk. At best the position would be that there was damage to the grapes whilst in the custody of Maersk, for which Maersk has failed to provide an explanation and in relation to which none of the defences relied upon operates. Even though on this hypothesis, Santa Elena has no explanation for the damage on outturn, Maersk would be liable for the damage sustained. This is in any event the position for the containers for which no records have been provided by Maersk.
- In relation to the assessment of loss and damage suffered as a consequence of the arrival of the consignments of grapes in a damaged condition, Santa Elena did not put forward its claim on the basis of the loss suffered as a consequence of it and its selling agents such as H&H having been deprived of the marketing strategy they would have employed if the grapes had arrived as they should with the expected shelf life, of holding back some grapes for sale to the supermarkets later in the season. It was suggested on behalf of Santa Elena that a claim on that basis might have been greater, so that the basis of claim actually advanced was "favourable" to Maersk. It may be correct that a claim on that basis would have been for a larger sum, but it would inevitably have run into difficulties over issues of foreseeability and remoteness.
- Accordingly, the correct measure of damages is indeed the one adopted by Santa Elena, namely the difference between the sound arrived value of the consignments of grapes and their actual arrived value, that is the sale price actually achieved, together with any expenses incurred in achieving that sale price which would not have been incurred but for the breach.
- In order to calculate the losses suffered on that basis, Santa Elena prepared a spreadsheet for each destination (Sweden, Rotterdam and the United Kingdom) which was attached to and explained in Mr Tocornal's witness statement. This set out for each month in relation to each variety of grape shipped in different columns for each type or size of grape (Gold, Jumbo, R13 and V11) the prices achieved for the different sizes of cartons (mainly 4.5kg and 9kg although there were some 4kg) from each shipment. This was done in separate sections of the spreadsheet for each month for both "Claimed" cartons and "Non-Claimed" cartons.
- As explained by Mr Tocornal, for each individual shipment the price per kg was calculated by dividing the total price achieved by the total weight of the consignment. In relation to the Non-Claimed sections, in order to calculate the sound arrived value for each variety and size each month, Santa Elena took the prices for all non-claimed consignments (whether in containers or shipped on reefer vessels) for each month and calculated the average price for that month for each size and variety.
- Santa Elena then calculated the difference between the price per kg for a particular claimed shipment and the average price per kg for the non-claimed section and applied the difference between the two to the total weight of boxes claimed for that shipment to arrive at the claimed diminution in market value. This approach seems correct in principle but there were two particular difficulties with the approach which were exposed in the cross-examination of Mr Tocornal.
- First, as Mr Young pointed out and Mr Tocornal accepted, the "Non-Claimed" sections included consignments which were temperature affected but for which claims had not been advanced, either because it was thought that they were time-barred or for some other reason. The prices achieved on those consignments were sometimes low and anomalies sometimes occurred, in that the price achieved for some of the claimed consignments was higher than for equivalent non-claimed consignments.
- In one sense what that point demonstrates is that it is not correct to include shipments which only achieved a lower price than others, because they were temperature affected, as part of a calculation of average "sound arrived value", given that by definition they are unsound even though non-claimed. However, despite the anomalies, this is essentially an approach to the calculation of sound arrived value which favoured Maersk, since it led to a lower sound arrived value than would otherwise apply and hence a lower overall claim.
- The other difficulty identified by Mr Young was a more serious one. That was that Santa Elena had not done separate calculations of actual prices achieved and for sound arrived value of each size of carton (4kg, 4.5kg and 9kg) but had in each case calculated an average for all sizes of cartons. However, from the sound arrived values achieved, different sized cartons attracted a different market price per kg. By and large the 9kg boxes which were apparently for supermarkets with fixed dates achieved more per kg than the 4.5kg boxes.
- Mr Tocornal explained that it was the 4.5kg boxes which were normally kept back for late in the season. That marketing strategy could not be followed in this season for the reasons given by Mr Parkin and Mr O'Leary, but since the claim is not being advanced on the basis of loss of the opportunity to adopt that marketing strategy, it does not matter what the reason for the difference in sound arrived value per kg between 4.5kg and 9kg boxes was, just that there was that difference. On the other side of the calculation, the proportions of 4.5kg boxes to 9kg boxes for claimed shipments in each variety and size is inevitably not the same as for non-claimed shipments. As a consequence as I see it the comparison is between apples and oranges, to adopt a mixed fruit metaphor.
- When the trial resumed on 6 September 2010, Santa Elena produced a series of revised spreadsheets attached to a witness statement from Mr Larranaga, chief executive officer of Santa Elena, who had been involved in the preparation of the original spreadsheets. Mr Larranaga explained the changes from the previous spreadsheet. One was that the sound arrived value is now calculated by reference to boxes of the same size as claimed, avoiding that second difficulty.
- The other change at first appeared more controversial in that it appeared to be being said that the unclaimed consignments had been carved out of the calculation of sound arrived value. In fact on analysis, all that has been taken out of that calculation is those cartons which were temperature damaged (and therefore achieved a lower price than they would have done if undamaged) but for which no claim was made either because any claim was thought to be time barred or for some other reason. Since, as I have already said, those cartons were not in truth "sound" at all, it seems to me that their removal from the calculation of sound arrived value is justified in principle, although it means the overall sound arrived value increases.
- In the circumstances, I was prepared to allow Santa Elena to advance its claim in respect of loss of market value on the basis of these revised spreadsheets. As set out in these, the claim for UK shipments is £215,244 which is actually less than the amount in the original spreadsheet, no doubt because the "apples and oranges" anomaly has been removed. There is a separate claim for three of the containers (31, 47 and 49) which contained Thompson Seedless grapes which had been sold under a fixed price contract to ASDA in US dollars. Due to damage to the grapes on outturn, they were rejected and losses were suffered on the sale of some of the grapes. The claim in relation to those consignments is calculated in the same way as the other shipments and is for a total sum of US$54,860.30.
- So far as the Sweden and Europe shipments are concerned, similar amendments have been made to the spreadsheets for these as for the UK shipments. From the claim for Sweden needs to be taken out any claim for container 7, which according to the spreadsheet totals SEK14,392.23. Deducting this, the total losses on sales in the market are SEK 95,549.36. For the three Rotterdam consignments, the claim for losses on sales in the market is €17,941.66.
- In my judgment, these sums are recoverable as damages for loss suffered by diminution in value caused by delivery in damaged condition. As part of that claim for diminution in value of each consignment, it seems to me that, in principle, Santa Elena would also be entitled to recover any genuine mitigation expenses, that is costs and expenses incurred in effecting the marketing and sale of distressed grapes, to the extent that these would not have been incurred but for Maersk's breach. In relation to all the UK shipments, these mitigation expenses are claimed in Mr Buckingham's submission schedules as £1,233 per consignment (or $2,244 in the case of the ASDA direct sale claims, which I imagine is the dollar equivalent). Similarly SEK16,502 is claimed for each Swedish consignment and €1,795 in the case of each Rotterdam consignment.
- These standard sums are claimed rather than the expenses actually deducted from the sales by selling agents, which were often greater than this £1,233 or similar figure. Since there was no explanation proffered by Santa Elena in its evidence, closing submissions or submission schedules as to how this figure had been arrived at, although mitigation expenses would be recoverable in principle, I invited further submissions from Maersk on this issue before determining it finally. In response to that invitation, Mr Young submitted that Santa Elena had simply failed to produce any evidence at trial to support this head of claim, on which basis I should simply dismiss it.
- Mr Buckingham argued in response that under CPR 32.1, the court has power to allow or invite further evidence before judgment, which in effect I have done. He has now explained how the £1,233 or equivalent figure for each shipment was arrived at. The original claim included various claims for consequential losses, dealt with in more detail below. These are said to have now been stripped out of the original claim except for the additional pay and fees of various employees and their corresponding travel expenses. The total of those claims was then divided equally between the containers, giving the sum of £1,233 or equivalent.
- Having considered the so-called "mitigation expenses" in fact claimed by Santa Elena, it seems to me that this is very much an attempt to recover through the back door consequential losses which are not recoverable through the front door, after I had indicated during the course of Mr Young's cross-examination of Mr Tocornal that I considered these items were not recoverable as damages. I propose to deal with this aspect of the claim below in the context of the claim for consequential losses.
- In addition to those losses, Santa Elena claims the cost of sorting and repackaging damaged fruit, US$102,497.50 in respect of the UK shipments (only claimed on some shipments according to Amended Schedule 2 to the Particulars of Claim) and US$1,829 for container 9 shipped to Sweden. So far as the UK shipments are concerned, it is clear from the evidence of Mr Parkin and Mr O'Leary that such sorting and repackaging had to take place, as part of the task of H&H trying to get the best price for the fruit and thus mitigate Santa Elena's losses. In a very real sense, those are genuine "mitigation expenses", recoverable in principle. However, there are a number of problems with the claim as currently presented.
- First, although Mr Tocornal's witness statement says that these repackaging costs have been passed on to Santa Elena by the selling agents, it emerged in his evidence and that of Mr O'Leary that although they both appear to have regarded Santa Elena as liable to reimburse H&H for these costs, H&H has not in fact pressed for payment of those costs or "passed them on". Having said that, in the case of the shipments where repackaging costs were incurred, Mr Anthony Sahota, logistics manager of H&H wrote letters of claim (since there is no addressee it is unclear whether these were to Santa Elena's own cargo insurers or to Maersk) setting out and claiming the repackaging costs for that shipment. However, in each case, unsurprisingly since the costs were incurred in the UK, the costs are claimed in sterling.
- Mr O'Leary said in his witness statement that H&H had engaged the services of local companies such as August Pitts and Dettling Cold Store to perform the sorting and repackaging. In his oral evidence he seemed to be saying either that Dettling Cold Store had not performed the task or that they had not invoiced H&H, but he did say August Pitts had invoiced H&H, although no invoice has been disclosed. He said that this question of repackaging costs had been dealt with by Mr Sahota to whom he had spoken recently just before giving his evidence. Mr Sahota estimated that 30,000 cartons had been sorted and repackaged, a lot of them on stands. The costs had been apportioned between the consignments and when Mr O'Leary had pointed out to Mr Sahota that this meant they didn't know the exact costs, Mr Sahota said this was the absolute minimum they would be. Mr O'Leary was unable to explain why the pleaded claim was put forward in US dollars.
- The whole matter of repackaging costs is frankly a mess and it was quite clear that the one person who could have provided a more coherent explanation was Mr Sahota, but he was not called to give evidence. It is somewhat unsatisfactory to have to piece together what seems to have happened by reference to hearsay evidence as to what Mr Sahota told Mr O'Leary four years after the event. Understandably, Mr Young submitted that I should simply dismiss this element of the claim on the basis that the repackaging costs had not been proved and, in any event, Santa Elena had not paid them.
- I am certainly tempted to take that course, but I am satisfied on the evidence before the court that repackaging costs were incurred by H&H, even if the precise amount has not been clarified. H&H were of course named as claimants in the Claim Form, although since they acted only as selling agents, I cannot see how they have title to sue. On any view, there is no basis for any recovery in dollars rather than sterling. It seems to me that as matters stand, the most that Santa Elena would be entitled to is a declaration that Maersk is liable to indemnify it in respect of any liability for reasonable repackaging costs.
- However, I am not currently prepared to make such a declaration. If Santa Elena wants to pursue its claim for such an indemnity, I consider that it and H&H must provide a proper explanation in the form of a witness statement from Mr Sahota of what packing costs were in fact incurred and how they were allocated between consignments, together with disclosure of all invoices from August Pitts, DCS or anyone else relating to these costs and disclosure of documentary proof that those invoices were in fact paid by H&H. The costs of that exercise will be for Santa Elena in any event. If that evidence is produced but it is not possible to agree the amount of any indemnity, then the parties should refer the matter back to me. If a further hearing is necessary, I will almost certainly remit the matter to the Mercantile Judge or to the Admiralty Registrar for an assessment of damages.
- So far as the claim of US$1,829 for repackaging costs in Sweden is concerned, that figure is wholly unexplained. It only relates to container 9 but bears no relation to the figure of SEK 39,500 set out in the Everfresh Notification. There is no explanation as to whether this sum has been passed on to Santa Elena and since there is a limit to how much indulgence the court is prepared to grant, I propose to disallow this item.
- In addition to loss of value and repackaging costs there is a pleaded claim for what are described in the Amended Particulars of Claim in each action as "additional consequential losses expenses" which have been apportioned between the three actions. These consist of (i) survey costs; (ii) costs of Chilean and US lawyers and attendance of quality control engineers and grape experts; (iii) travel and telephone costs and (iv) the salaries of directors and employees whose time was diverted to dealing with the damaged grape cargoes. In fact the claim for survey costs was abandoned in Mr Buckingham's opening Skeleton Argument and Mr Tocornal abandoned the claim for Chilean and US lawyers' fees during his evidence.
- So far as the other items are concerned, since on the face of the pleading these are correctly described as "consequential losses" the short but conclusive answer to all of them is that pursuant to clause 8.2 of the Maersk bill of lading terms, consequential loss and damage is not recoverable.
- However there are other problems with this claim. Whilst in principle (were it not for clause 8.2) the travel expenses of Santa Elena personnel such as Mr Larranaga who had to travel to the UK and Europe to deal with the effects of the condition on outturn might be recoverable as an expense which would not otherwise have been incurred, the same cannot be said to be true of the salaries of such personnel (for which a staggering amount of US$158,100.60 is claimed). These would have been paid in any event and are simply not recoverable. So far as fees paid to outside personnel which would not have otherwise been paid and fees for the attendance of experts are concerned, the costs of those could only be recoverable, if at all, as costs of the actions.
- As I have indicated above, Mr Buckingham sought to avoid the conclusion that the additional salaries and fees and travel expenses were not recoverable for one or other of the reasons I have indicated by arguing that these were mitigation expenses. He submitted that these expenses were not excluded by clause 8.2 of the bill of lading terms precisely because they were mitigation expenses which should be accounted for in the assessment of diminution in value.
- However, it does not seem to me that this re-labelling of the salaries, fees and travel expenses (even if the salaries in particular could be demonstrated to be additional to what would have been earned anyway, which at the moment they cannot) as "mitigation expenses" alters their true character. Even if shown to be true "additional" expenses, they are nonetheless what they have always been, consequential losses, and as such excluded by clause 8.2. Overall, I consider that none of these items of claim for "additional consequential losses expenses" is recoverable. In so far as "mitigation expenses" are claimed, only repackaging and marketing costs which would not have been incurred but for Maersk's breach, are recoverable in principle.
- In conclusion, the claim succeeds and Santa Elena is entitled to recover as damages the sums set out in the previous section of the judgment, subject to the outstanding matters relating to repackaging costs to which I have referred. I will hear submissions on consequential issues such as interest and costs.
The Honourable Mr Justice Flaux:
Background and overview
The relevant provisions of the bills of lading and the applicable legal regime
6. Carrier's Responsibility – Multimodal Transport
6. Where Carriage is Multimodal Transport, ... save as is otherwise provided for in this bill of lading, the Carrier shall be liable for loss or damage occurring during the Carriage only to the extent set out below:
6.1 Where the stage of Carriage where loss or damage occurred is not known:
(a) Exclusions
The Carrier shall be relieved of liability for any loss or damage where such loss or damage was caused by:
(i) an act or omission of the Merchant or Person acting on behalf of the Merchant other than the Carrier, his servant agent or Subcontractor,
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(iii) insufficient or defective condition of packing or marks,
(iv) handling, loading, stowage or unloading of the Goods by the Merchant or any Person acting on his behalf,
(v) inherent vice of the Goods,
(b) Burden of Proof
The burden of proof that the loss or damage was due to one or more of the causes or events specified in this clause 6.1 shall rest upon the Carrier. Save that if the Carrier establishes that in the circumstances of the case, the loss or damage could be attributed to one or more of the causes or events specified in clause 6.1(a)(iii), (iv) or (v), it shall be presumed that it was so caused. The Merchant shall, however, be entitled to prove that the loss or damage was not, in fact, caused either wholly or partly by one or more of these causes or events.
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6.2 Where the stage of Carriage where the loss or damage occurred is known. Notwithstanding anything provided for in clause 6.1 ... the liability of the Carrier in respect of such loss or damage shall be determined:
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(c) by the Hague Rules Articles 1-8 only inclusive ... if the loss or damage is known to have occurred during Carriage by sea;
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7. Compensation and Liability Provisions
7.1 Subject always to the Carrier's right to limit liability as provided for herein, if the Carrier is liable for compensation in respect of loss of or damage to the Goods, such compensation shall be calculated by reference to the invoice value of the Goods plus Freight and Insurance if paid. If there is no invoice value of the goods or if any such invoice is not bona fide, such compensation shall be calculated by reference to the value of such Goods at the place and time they are delivered or should have been delivered to the Merchant. The value of the Goods shall be fixed according to the current market price, by reference to the normal value of goods of the same kind and/or quality
8. General
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8.2 Save as is otherwise provided herein, the Carrier shall under no circumstances be liable for direct or indirect or consequential loss or damage arising from any other cause whatsoever or for loss of profits.
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11. Shipper-packed Containers
If a Container has not been packed by the Carrier:
11.1 This bill of lading shall be a receipt only for such Container;
11.2 The Carrier shall not be liable for loss of or damage to the contents … if such loss of or damage to the contents … has been caused by all matters beyond his control including, inter alia, without prejudice to the generality of this exclusion.
(a) the manner in which the Container has been packed; or
(b) the unsuitability of the Goods for carriage in Containers; or
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(d) the unsuitability or defective condition of the Container provided that, if the Container has been supplied by the Carrier, this unsuitability or defective condition could have been apparent upon reasonable inspection by the Merchant at or prior to the time the Container was packed.
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11.4 The Shipper shall inspect Containers before packing them and the use of Containers shall be prima facie evidence of their being sound and suitable for use
12. Perishable Cargo
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12.2 The Merchant should note that refrigerated Containers are not designed
(a) to freeze down cargo which has not been presented for stuffing at or below its designated carrying temperature and the Carrier shall not be responsible for the consequences of cargo being presented at a higher temperature than that required for the Carriage; nor
12.3 The term "apparent good order and condition" when used in this bill of lading with reference to goods which require refrigeration, ventilation or other specialised attention does not mean that the Goods, when received were verified by the Carrier as being at the carrying temperature humidity level, or other condition designated by the Merchant.
12.4 The Carrier shall not be liable for any loss or damage to the Goods arising from ... stoppage of the refrigerating ... or/any other specialised machinery, plant insulation and or apparatus of the Container vessel or conveyance and any other facilities, provided that the Carrier shall before and at the beginning of the Carriage exercise due diligence to maintain the Container supplied by the Carrier in an efficient state.
13. Inspection of Goods
The Carrier shall be entitled, but under no obligation, to open and/or scan any Package or Container at any time and to inspect the contents. … The Carrier in exercising the liberties contained in this clause shall not be under any obligation to take any particular measures and shall not be liable for any loss, delay or damage howsoever arising from any action or lack of action under this clause.
14. Description of Goods
14.1 This Bill of Lading shall be prima facie evidence of the receipt by the Carrier in apparent good order and condition ... of the total number of Containers or other packages or units indicated in the box entitled "Carrier's Receipt" on the reverse side hereof.
14.2 No representation is made by the Carrier as to the weight, contents, measure, quantity, quality, description, condition, marks, numbers or value of the Goods and the Carrier shall be under no responsibility whatsoever in respect of such description or particulars.
Condition of grapes on shipment
"...we have all the packing list in front of us, actually in the computer and with a projector, and we review different factors, and we make the decision of loading or not loading fruit that is carrying some -- fruit that can be not absolutely normal. We analyse that and for me the authorisation of loading pallets of more than ten days is every Wednesday in that meeting, that is a regular meeting, which is not in the manual, where the commercial area allows to load the pallets who needs to make a special decision."
"....this area I know very well, the pallets stay a small period of time, while it is located into a container, and it has absolutely nothing wrong, and these fruit represent what normally is done in Chile, a hundred million boxes in Chile are loaded this way, a hundred million boxes are loaded exactly the same way, and there is not any injury or damage reported by having, let's say, ten minutes or whatever amount of time the fruit there, you know.
Actually, I would like to add that Chile loads more than 90 per cent of the fruit and grapes in open vessels, yes, in conventional vessels, and the system is that you carry the fruit in a truck, not in a container to the port, you open the truck, you take the pallet, and you move the pallet into the vessel, it's exactly probably two or three more times than this operation, yes, and it's something absolutely normal that has been done all the years and all the fruit suffered the same procedure."
Damage on outturn
"One of my tasks is to ascertain whether the grape is suitable for storage under the marketing arrangements and strategy that we as a company have. So I would look at containers and you would see a slight dulling, the berries would have lost their lustre, a little bit of their lustre and the stems may be slightly dehydrated, going a sort of khaki colour and the bunches may have slumped in the box. It is very difficult to explain, but they may only have dropped a quarter of an inch or so, but they looked a little bit slightly older and as -- I would then -- if I saw anything like that, I would explain to Michelle and Sebastian, who were the QC people employed by Santa Elena in Europe, that I thought there would be -- there may be an issue with that container."
"Q. They gave the appearance of grapes that had been a long time off the vine, would that be fair?
A. No, they gave the appearance of grapes that – in previous seasons, grapes that we had cut and harvested earlier and had been stored in Chile and then shipped later had arrived looking very good. If you put a good grape in and it is kept the right temperature, kept correctly, then you should expect a good grape out. What a cold store isn't is a hospital and when you put the good grape in the container, in my view, if it is kept at under 1 degree, about anywhere between 31 and 33 -- which is old money -- but they are, I believe, the best temperatures for transporting grapes, then when it comes out the other end it will still have a good life. If that suffers some form of distress and abuse on that journey, however it is caused, then when it comes out the shelf life is reduced and that is in my view what we saw with that year."
Q. One of the problems that we have in this case –well I say "we", being the defendants -- is trying to distinguish between those grapes which were simply apparently subjected to a high temperature but had no manifested effect upon their order and condition upon out-turn, and those where there was an apparent temperature problem and a manifested condition on out-turn, do you see the issue?
A. I think, first of all, everything that had a high temperature had a problem.
Q. Now, forgive me, everything at a high temperature had a problem, is that because -- the mere fact that there had been a high temperature was the problem?
A. I would say, yes.
Q. I see. And that's a high temperature only as of theTempTale reading?
A. Well, that is what we would be guided by, to start with.
Q. I see.
A. We would then obviously inspect the produce, but the thing that we could not get away from was delivering produce to the customers, within a few days we had a massive problem, the problem got progressive, the marketing side of the problem got progressive, because we put a lot of pressure on people for the highest possible price we could get, and then they wouldn't take -- or they would take the produce again but we had to market it in a very, very, very weakened condition.
......
Q. As the season wore on, you had seen problems emerging, which seemed to be related to high temperatures on the TempTales.
A. That's correct.
Q. And gradually, as the season wore on, as soon as you had a high TempTale reading, then you thought: oh no, not again, we'd better treat these grapes as if they are about to go off.
A. No. It doesn't work like that, anyway, because if you are trying to sell produce to somebody, you say, "this fruit is a problem parcel", people don't want this any more.
Q. I'm not saying that you should tell them there was a problem parcel.
A. Our mindset wasn't like that, because every time we started on it, we tried as best we could to get the price up, reorganise it. There's only 10 per cent of the market that we said which is non-supermarket. Of that 10 per cent, there's probably a quarter per cent that wants poor produce.
.....
A. Well, the chain of events would be these [Ms Steenkamp and Mr Fresno] would be the first people to look at it. They would tell us if there were high temperatures; because we are representing their company it is better for us to know and be aware. Would that affect our initial marketing? No. Mr Parkin looked at the fruit and, in all honesty Mr Parkin thought that they might even be wrong on this. Not the actual TempTales, but he said there's not really a lot wrong with it, slight problems, and we was extremely surprised at the rapid deterioration. And that set the tone for the season: not mindset, the tone.
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Q. So far as you were concerned then, the cargoes were not distressed, as such, merely by virtue of the high temperatures being recorded on the TempTales. Is that right?
A. Any fruit that arrives at high temperature is distressed.
Q. Right. When you say any fruit which arrives at a high temperature is distressed, what about any fruit arriving with a high TempTale reading is treated as distressed?
A. No, I said the fruit is distressed, not we treat it as distressed.
Q. Fine. You see, there's a difference between a high temperature reading, a high temperature of a cargo as it's unloaded, it's at something in excess of 4 degrees Fahrenheit, say, then you can say that's above the appropriate transport temperature and it's distressed. What I'm asking about is, if fruit arrives in apparent good order and condition, but there is a high TempTale reading that Miss Steemkamp or Mr Fresno has told you about, is that container then treated as distressed for these purposes?
A. No, it's not treated as distressed.
Q. Is it distressed?
A. High temperature produce is distressed.
"The thing is, once the pallet came out of the cold store, which was running at between 31 and 33 degrees, all of a sudden you get that change of air and you give it plenty of oxygen, and it is just going to go "whoopee", right? The thing is if we supply to someone like a multiple, they have a best before of three days or even four days at that time of the year, plus the fact they also, sort of an unwritten rule in their things, is that you are going to give the customer a couple of days, because it is not like a punnet, where you buy your punnet and it has "display until the 22nd, best before the 25th". This is a bag of grapes. You give it to the supermarket, they then have three days to sell it. Within that three days that grape has deteriorated. If we had supplied that to one of our customers who had then supplied it on to the multiple, it had gone into the multiple and it had died on the shelf within the three days, they would have received the most almighty rollicking. The fruit would have been recalled from the shelf and there would have been a huge fight levelled at someone."
"the grapes…being attacked by moulds and rot to various degrees and the general quality/condition of the grapes was varying considerably from one box to a neighbouring box in one end and the same pallet…. Due to above noted very uneven and to a large extent poor condition of the examined grapes the said grapes had lost a considerable part of its expected remaining storage/shelf life hence to mitigate the loss as much as possible it was deemed necessary by Everfresh to have all the shipments marketed as soon as possible. In order to successfully do that the price would have to be considerably reduced."
"Examination of a significant number of cartons, disclosed the condition of the grapes to be moderate and overall weak and dangerous. With both varieties [Sugarone and Flame] the condition of the claimed pallets was fairly similar, viz inspections revealed that fruit was reasonable in quality but weakened by the consistent presence of decay, consistency, shatter, stem necrosis etc."
The cause of the damage
"This protection allows for the fruit to remain for a longer period of time than in unprotected fruit conditions without having dehydration problems, since the packaging materials produce a micro-environment effect of high relative humidity in conjunction with the sulphur dioxide pad".
"Q. Yes, did you discern any difference within containers as to pallets that had been close to the refrigeration machinery, for example, as opposed to those which had been near the doors? Did you notice any difference in the condition that you saw?
A. In some of the containers, yes.
Q. In some, but not all?
A. Not all, no.
Q. In some there was a uniform –
A. Degradation.
Q. Degradation, as you saw it. I suppose you don't remember -- no, of course you don't remember which ones --
A. No."
"If the overall cargo temperature was reflected by the customer loggers, then we would expect to detect patterns of deteriorated cargo more prevalent towards the doors. This was not the case despite the temperature variation caused by the loading plan. A more likely explanation is inherent vice and consequent weakness in the grape."
Problems related to the containers and their carriage
Power offs
"Off power must be kept at a minimum as temperature fluctuations can have an impact on the product quality. Therefore when reefers are handled at terminal (or on board a vessel) it is of the utmost importance that reefers are plugged in immediately and disconnected as late as possible before being handled. This can only be achieved by close communication between the vessel and the terminal...
Please find below the maximum allowable off power time for various reefer cargoes:
Cold Treatment, Controlled Atmosphere, Super Freezer, Chilled meat and special shipments off power periods should not exceed 1 hour.
Chilled cargo: Less than 3 hours.
Frozen cargo: Less than 8 hours."
Quantum
Conclusion