Transgrain Shipping (Singapore) v Yangtze Navigation (Hong Kong)

DMC/SandT/17/10

England

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

English Commercial Court: Teare J: (2016) EWHC 3122 (Comm)

Julian Kenny QC and Charlotte Tan (instructed by Clyde & Co LLP) for the Appellant/Defendant, Transgrain

Stewart Buckingham (instructed by Bentleys, Stokes and Lowless) for the Respondent/Claimant, Yangtze Navigation

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

Summary

In the context of a claim by Owners against Charterers for indemnity under the Inter-Club Agreement in respect of cargo damage arising from delay at the discharge port, the Court held that the word “act” in clause 8(d) of the Inter-Club Agreement bore the ordinary and natural meaning of “act” and did not require that there should be fault. The Charterers’ action in ordering the vessel to wait off the discharge port for 4 months was an “act” for the purposes of that clause and therefore the Charterers should bear 100% of the cargo claim in accordance with the Inter-Club Agreement.

This case note has been contributed by Joanna Meadows, B.A (Hons), a solicitor admitted in England and Wales currently working in Singapore.

Background

The Charterers, Transgrain, had chartered the “YANGTZE XING HUA” from the carrier, Yangtze Navigation, by way of a charterparty dated 3 August 2012, for a time-charter trip carrying soyabean meal from South America to Iran. Upon arrival at the discharge port in Iran in December 2012, the Charterers ordered the vessel to wait, as they had not been paid for the cargo. In the event, the vessel waited for over four months during which time the cargo started to overheat. Damage was found when the vessel eventually went alongside, resulting in a cargo claim against the vessel, which was eventually settled for € 2,654,238. The Owners sought a 100% recovery of the cargo claim from the charterer under clause 8(d) of the Inter-Club Agreement.

Inter-Club Agreement

A large part of the case focused on the operation of the 1996 Inter-Club Agreement (“ICA”), of which there is now a 2011 amendment. The ICA was created to provide a mechanical approach to the apportionment of cargo claims, in order to avoid costly litigation over who was liable for cargo claims. The ICA It has been recommended by the International Group of P&I Clubs to its members and in turn has been transplanted into many charterparties and, in particular, into the NYPE charterparty. Clause 8 of the ICA 1996 sets out how cargo claims are to be apportioned (a)where the cargo claims have arisen out of the unseaworthiness of the vessel or (b) out of the loading, stowing and discharge of the cargo and (c) where there is shortage or overcarriage. The catch-all clause, clause (d), which was the subject of this dispute, provides:

“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 arbitration decision

Whilst the Charterers had sought to blame the crew for the damage to the cargo, arguing that theyw had not properly monitored the cargo temperatures, the arbitral tribunal had found, as a matter of fact, that the crew were not at fault and that the cause of the damage was a combination of the inherent nature of the cargo (its oil and moisture content) together with the prolonged period at anchor at the discharge port. The tribunal had also found that the Charterers were not in breach or at fault in loading the cargo, nor were they in “neglect”. It had concluded simply that the Charterers’ decision in delaying discharge was an “act” falling within clause 8(d) and, therefore, that liability fell 100% on them.

The High Court judgment

The Charterers appealed to the judge, Mr Justice Teare, on the basis that the tribunal had erred in their construction of the word “act”. They submitted that “act”, for the purposes of clause 8(d) of ICA, must mean a culpable act and that the phrase “act or neglect” must be read as a whole, with the two words having an equivalent and complementary meaning, with “act” meaning fault by commission and “neglect” meaning fault by omission.

However, in rejecting the Charterers’ appeal, the judge, whilst acknowledging that there are previous legal authorities on the construction of the phrase “act or neglect”, took the view that the meaning of “act or neglect” in clause 8(d) of the ICA must depend upon its context and must be construed having regard to the language of the ICA as a whole. Taking into account the scheme of the ICA, the fact that it enabled liability for cargo claims to be apportioned between owners and charterers on a “more or less mechanical basis” and the juxtaposition of clauses 8 (a) to (d), the judge concluded that the word “act” in clause 8(d) would reasonably be understood to bear its ordinary and natural meaning. Therefore, for the purpose of the ICA, “act” can mean any act whether culpable or not, without regard to questions of fault.

Comment

This judgment from the Commercial Court assists to clarify the meaning of clause 8(d) of the ICA, which deals with the apportionment of the cargo claims which are not caught by clauses (a) to (c) of clause 8. Whilst the starting point under clause 8(d) is that claims will be apportioned 50/50 between owners and charterers, the clause then goes on to apportion the claim 100% to the party by whose clear “act” or “neglect” the claim arose. As this judgment now gives a clear interpretation of what is meant by “act”, it will be very welcome to owners, charterers and their P&I Clubs and of great assistance in resolving cargo claims promptly and accurately – in accordance with the original objectives of the Agreement.