Transgrain Shipping (Singapore) v Yangtze Navigation (Hong Kong) Court of Appeal

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DMC/SandT/20/01

England

Transgrain Shipping (Singapore) Pte Ltd v Yangtze Navigation (Hong Kong) Co Ltd

English Court of Appeal: Longmore, Hamblen, Henderson LJJ: [2017] EWCA Civ 2107

Julian Kenny QC and Charlotte Tan (instructed by Clyde & Co) for the Charterers/ Appellants, “Transgrain”

Stewart Buckingham (instructed by Bentleys, Stokes and Lowless) for the Owners/ Respondents, “Yangtze Navigation”

CHARTERPARTY (TIME): NYPE INTER-CLUB AGREEMENT 1996, CLAUSE 8(D): WHETHER “ACT” REQUIRES FAULT

Summary

This was the unsuccessful appeal from [2016] EWHC 3122 (Comm), covered here in DMC/SandT/17/10 [[1]]. The Court of Appeal upheld Teare J’s decision that the word “act” in clause 8(d) of the Inter-Club Agreement 1996 bears the ordinary and natural meaning of “act” and does not require culpability.

This case note is contributed by Justin Gan.

Background

Transgrain chartered the “YANGTZE XING HUA” from Yangtze Navigation for a time charter trip carrying soya bean meal from South American to Iran. The charter incorporated the Inter-Club Agreement 1996 (“ICA”).

After arrival off the discharge port, Transgrain ordered the vessel to wait for more than 4 months. In that time part of the cargo overheated. Yangtze Navigation settled the resulting cargo claim and sought recovery from Transgrain under ICA clause 8(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… in which case that party shall then bear 100% of the claim”.

The Tribunal found that Yangtze Navigation was not at fault for the cargo overheating – 4 months’ delay was too long, given the characteristics of the cargo. Transgrain was also not at fault, presumably since Transgrain was entitled as charterers to give the orders it did, though those orders in all probability caused the damage.

The Tribunal found Transgrain 100% responsible. To the Tribunal, ICA clause 8(d) did not require fault. It was sufficient that Transgrain’s orders had led to the delay in discharge and therefore to the damage.

Transgrain argued before Teare J that “act” in ICA clause 8(d) referred to a culpable act. And, since it was entitled to give the orders it did under the charter, the proviso to ICA clause 8(d) was not engaged and liability should be split equally with Yangtze Navigation.

Teare J found the word “act” in ICA clause 8(d) to bear its natural and ordinary meaning, not requiring fault. In so doing he relied heavily on the scheme and intent of the ICA, to apportion liability for cargo claims on a “more or less mechanical basis”.

Transgrain appealed to the Court of Appeal, but without success.

Judgment on Appeal

Similarly, the Court of Appeal was mindful of the ICA’s intent to apportion liability for cargo claims on a “more or less mechanical basis” – and indicated its agreement with Teare J for the reasons he gave.

On appeal, Transgrain raised six arguments as to why this reading was wrong, each of which was rejected:

• Argument 1: Previous versions of the ICA referred to culpability; if it had been intended to change this, clear words would have been used.

The Court of Appeal noted that the wording of the 1996 ICA was materially different from previous versions. It said that it could get no assistance from comparing the present and the previous versions of the ICA “since they say different things.”

• Arguments 2-3: Sub-clauses (a) and (b) of the 1996 ICA both still required fault – see Fn.1 It would be consistent with this to read “act” in (d) as requiring fault.

The Court of Appeal did not agree, as a matter of construction. The wording of (a) and (b) included fault but was not confined to fault.

• Arguments 4-5: Reading “act” in sub-clause 8(d) as including both fault and “no fault” situations would give rise to difficult questions of causation, contrary to the intent of the ICA – since, in that case, even an initial order to load cargo could count as an “act”.

The Court of Appeal explained that one does not inquire into “causes of causes” and in any event it did not see any possible difficulty in determining causation as relevant to the construction of (d).

• Argument 6: There were cases in other contexts which had interpreted the words “act or neglect” as imputing a requirement of “fault”.

The Court of Appeal did not find this determinative, as everything depended on the context. The Court of Appeal also noted that

“such limited authority as there is on the construction of the words “act or omission of the shipper” in Art.IV rule 2(i) of the Hague-Visby Rules does not suggest that the relevant “act” has to be culpable before the shipowner can rely on it, see Ismail v Polish Ocean Lines [1976] QB 893, 903A per Lord Denning M.R.”

Comment

The Court of Appeal confirmed Teare J’s reading of “act” in ICA clause 8(d), which had previously been welcomed as clarifying the provision and helping to resolve cargo claims promptly and accurately, as intended by the ICA.

Fn.1 ”(8) Cargo claims shall be apportioned as follows:

a) Claims in fact arising out of unseaworthiness and/or error or fault in navigation or management of the vessel:

100% Owners

save where the Owner proves that the unseaworthiness was caused by the loading, stowage, lashing, discharge or other handling of the cargo, in which case the claim shall be apportioned under sub-Clause (b).

b) Claims in fact arising out of the loading, stowage, lashing discharge, storage or other handling of cargo:

100% Charterers unless the words “and responsibility” are added in Clause 8 or there is a similar amendment making the Master responsible for cargo handling in which case:

50% Charterers 50% Owners

save where the Charterers proves that the failure properly to load, stow, lash, discharge or handle the cargo was caused by the unseaworthiness of the vessel in which case: 100% Owners