Web Alert: Transgrain Shipping (Singapore) PTE Ltd v Yangtze Navigation (Hong Kong) Ltd

In a recent High Court case[1] the court considered the proper construction of clause 8(d) of the Inter-club Agreement 1996 ('ICA'). Clause 8(d) of the ICA states that ‘all other cargo claims whatsoever’ shall be apportioned 50/50 between owners and charterers. However, if there is ‘clear and irrefutable evidence that the claim arouse out of the act or neglect of’ one of the parties then they shall bear 100% of the claim. The issue to be determined was whether the term ‘act’ in the phrase ‘act or neglect’ meant a culpable act or any act.

Background facts

The contracting parties entered into a time charter trip on the NYPE form which incorporated the ICA. The ship loaded soya bean meal in South America which was to be discharged in Iran. The ship arrived at the discharge port in Iran in December 2012. At the time of arrival the receiver had yet to pay for the cargo. Charterers ordered the vessel to wait outside the port until they received payment, which took around four months. During discharge the cargo was found damaged due to overheating resulting in a claim being brought against owners. Eventually the claim was settled for the sum of €2,645,328. Owners thereafter initiated arbitration proceedings against charterers and claimed the settlement sum, together with hire.

Arbitration

Liability was to be settled in accordance with the ICA as incorporated in the charterparty. The question put before the arbitrators was not whether clause 8(d) was applicable but whether charterers’ orders could be considered an ‘act’, meaning charterers would be 100% liable as per the caveat in clause 8(d), or if owners were liable for not properly monitoring the condition of the cargo.

The tribunal concluded that the cause of the damage was not as a result of a lack of monitoring by the owner. Instead, the damage was caused by the inherent nature of the cargo and the extended wait outside of the port following charterers’ order.
Consequently, the tribunal found that charterers should be 100% liable for the damage as the term ‘act’ did not require fault or neglect in order to be applicable.

High Court

The court upheld the tribunal’s findings and dismissed the appeal.

Charterers appealed the tribunals decision on the basis that there must be fault on the part of the charterer in order for the apportionment to be 100%. The court dismissed the appeal and took the view that the term ‘act’ should bear its ordinary and natural meaning and without regard to any question of fault.

The decision seems to be in line with original purpose of the ICA, namely a mechanical method that regulates the settlement of cargo claims as between owners and charterers.

Comments

This case provides useful guidance on the meaning of the word ‘act’ within clause 8(d) of the ICA in that it should now be considered to include any positive conduct regardless of fault.

Permission has been given for an appeal to the Court of Appeal.

This article intends to provide general guidance on the issues arising as a matter of English law. It is not intended to provide legal advice in relation to any specific query. The law is not static and if, in doubt, The Standard Club is always on hand to assist.

Members requiring further information on this topic should direct their enquiries to either their usual contact at the club or to the authors of this article.

--------------------------------------------------------------------------------

[1] Transgrain Shipping (Singapore) PTE Ltd v Yangtze Navigation (Hong Kong) Ltd [2016] EWHC 3132 (Comm)