Transgrain Shipping (Singapore) PTE Ltd v Yangtze Navigation (Hong Kong) Co Ltd & Anor

The Inter-Club Agreement 1996 provides a broadly mechanical scheme for apportioning cargo claims between owners and charterers. Under clause 8(d), an act means any act in its ordinary sense, whether culpable or not. The word neglect concerns a failure to do what ought to have been done, but it does not colour act so as to require fault.

Clause 8(d) applies where the claim falls outside clauses 8(a) to 8(c). The default is equal apportionment. A party bears the whole claim only where there is clear and irrefutable evidence that the claim arose out of that party’s act or neglect. The clause is not to be construed by reference to hardship, moral culpability or the parties’ underlying contractual allocation of responsibility.

The charterers appealed an arbitration award concerning damage to soya bean meal carried under a time charter incorporating the Inter-Club Agreement 1996. The cargo had remained aboard the vessel for more than four months while awaiting discharge. The tribunal found that the damage resulted from the cargo’s inherent characteristics combined with the prolonged delay. It rejected fault-based allegations against the owners and found that the charterers were not in breach or neglect, but treated their decisions as an act under clause 8(d) and allocated 100% of the claim to them.

With leave granted by Burton J, the appeal raised a question of law concerning whether act in clause 8(d)’s phrase act or neglect meant a culpable act or any act, whether culpable or not.

1. Appeal dismissed. The tribunal had construed clause 8(d) correctly.
2. The Inter-Club Agreement 1996 is a scheme for broadly mechanical apportionment of cargo claims. Its clauses allocate claims by reference to their factual cause and the relevant party’s sphere of risk, rather than by investigating fault or applying the parties’ ordinary contractual responsibilities. Its incorporation into a charterparty does not alter that character. The approach in The Strathnewton, [1983] 1 Lloyd’s Reports 219, was preferred to the contrary first-instance analysis in The Strathnewton, [1982] 2 Lloyd’s Reports 296 (paras [11]-[13], [26], [29]).
3. Clause 8(d) is a sweeping-up provision for cargo claims outside clauses 8(a) to 8(c). The claim is ordinarily apportioned 50/50. The allocation shifts to 100% only where there is clear and irrefutable evidence that the claim arose out of one party’s act or neglect. This is a factual causation inquiry (paras [17]-[23]).
4. In that context, act bears its ordinary and natural meaning and includes any act, whether culpable or not. Neglect means a failure to do what the party ought to do. The juxtaposition of the words does not require act to mean fault by commission. The references to neglect and pilferage are exceptions to, rather than qualifications of, the Agreement’s general mechanical scheme (paras [22]-[23]).
5. The court rejected arguments based on the wording of the 1984 Agreement, alleged commercial unfairness, an American arbitration award, and the treatment of clause 8(d) as an indemnity. The 1996 wording had to be construed in its own context. The Agreement was not simply an indemnity provision and was not concerned with hardship or lack of moral culpability (paras [24]-[29]).

• Arbitration tribunal: Found that the cargo damage arose from the cargo’s inherent nature and the prolonged delay, but treated the charterers’ decisions as an act under clause 8(d) and allocated 100% of the claim to them.
• High Court (Commercial Court): Leave having been granted by Burton J, Teare J dismissed the appeal and upheld the tribunal’s construction of clause 8(d) (paras [1], [30]).