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

Clause 8(d) ICA 1996 “Act or Neglect” means any act, not any culpable act

The recent High Court judgement (on appeal from an arbitration award) in Transgrain Shipping (Singapore) Pte Ltd v Yangtze Navigation (Hong Kong) Co Ltd [2016] EWHC 3132 (Comm) provides important clarification of the effect of the Inter-Club Agreement 1996 (the “ICA”) which is widely incorporated into charterparties.

Where incorporated the ICA provides a “rough and ready” means of apportioning liability for cargo claims as between owners and charterers, reducing the potential for protracted and expensive multi party litigation which is a common feature of such disputes.

The dispute arose from cargo damage claims brought by cargo receivers against the owners of the MV “YAGTZE XIN HUA”.

The tribunal found that the cargo damage had been caused by inherent properties of the cargo combined with delay at the discharge port. The delay at the discharge port occurred when charterers (Transgrain Shipping) ordered the vessel to wait off the port pending full payment for the cargo by receivers.

Owners settled a claim by cargo interests in the sum of EUR 2,654,238 and sought to recover the full settlement sum under clause 8(d) of the ICA on the basis that the claim arose out of Charterer’s “act” in detaining the vessel off the port. Clause 8(d) states as follows:

(d) All other cargo  claims whatsoever (including claims for delay to cargo):

50% Charterers

50% Owners

Unless there is clear and irrefutable evidence that the claim arose out of the act or neglect of the one or the other (including their servants of sub-contractors) in which case that party shall then bear 100% of the claim.

However, Charterers argued that the word “act” in clause 8(d) of the ICA should take its “colour” from its context and its association with the word “neglect”. Charterers therefore asserted that “act” had to be read to mean “culpable act”.

The court held that the word “act” in this context did not require fault. Rejecting suggestions that this could result in unfairness the court relied heavily on the aim of the ICA regime to achieve a “more or less mechanical apportionment of liability” and in that context considered that “act” should bear its ordinary and natural meaning, without regard to questions of fault. 

It is not yet clear whether the judgement will be appealed but in the meantime parties concerned about the impact of the judgement may consider contracting on different terms.

Although on first glance the judgement would appear to achieve benefits in terms of commercial certainty, divorcing liability from fault, it may be questioned whether this approach simply moves the battleground from questions of “fault” to questions of “causation”. In any event however the case provides a useful summary of the principles of apportionment (as they currently stand) under the ICA generally and is therefore valuable reading material for those involved in ICA cargo claims.