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

Under a standard-form cargo-claims apportionment agreement, act has its natural meaning of something done. It does not require culpability merely because it appears alongside neglect, although context may produce a different construction in another contract. The scheme allocates risk by reference to the cause of the cargo claim rather than legal or moral fault. Under the sweep-up provision, the act must be causative: the claim must in fact arise out of it, with clear and irrefutable evidence. The provision applies only where no specific apportionment governs and does not create an automatic indemnity for every act.

The appeal arose from a time-charter dispute concerning damage to soya bean meal after the vessel waited off the discharge port for more than four months. The owners settled the cargo claim and sought recovery from the charterers under the Inter-Club Agreement 1996, incorporated into the charterparty.

The arbitral tribunal found that the damage resulted from the cargo’s inherent characteristics together with the prolonged delay. It allocated 100% of the claim to the charterers under clause 8(d), treating their decision to keep the cargo aboard as an act, although not a breach, fault or neglect. Teare J upheld the award in [2016] EWHC 3132 (Comm). The central issue was whether act meant a culpable act or any causative act.

The appeal was dismissed. Longmore LJ gave the leading judgment. Hamblen LJ agreed with his reasons, and Henderson LJ agreed.

1. Clause 8(d) of the Inter-Club Agreement 1996 uses act in its natural sense. It means something done and does not connote culpability. Neglect does connote culpability, but whether that affects the meaning of act depends on context. In this agreement it did not.
2. The agreement is a mechanical allocation of cargo-claim liability by reference to cause and areas of risk, rather than legal or moral blame. The references in clauses 8(a) and (b) to unseaworthiness, error in navigation or management, and loading or handling do not necessarily require fault. Article III rule 1 of the Hague-Visby Rules was an example of unseaworthiness not requiring proof of a failure to exercise due diligence. The differing wording of earlier versions of the agreement therefore provided no assistance: see The Strathnewton at [1982] 2 Lloyd’s Reports 296 and [1983] 1 Lloyd’s Reports 219.
3. The controlling issue is causation. The claim must in fact arise out of the relevant act or neglect. An act is not sufficient merely because it occurred, and the agreement does not create an automatic indemnity. Causation, together with the requirement for clear and irrefutable evidence, limits the scope of clause 8(d). The provision is a sweep-up clause applying only where clauses 8(a), (b) and (c) do not apportion the claim.
4. Authorities construing similar words in different contexts did not require a different result. Anglian Water Services Ltd v Crawshaw Robbins & Co Ltd, [2001] BLR 173, was distinguishable because it concerned a different contractual indemnity. The Fiona, [1993] 1 Lloyds Rep 257, and Ismail v Polish Ocean Lines, [1976] QB 893, supported the possibility of a non-culpable act, but their contexts differed. The tribunal’s causation findings justified treating the charterers’ decision to delay discharge as the relevant act.
5. The charterers were ordered to pay the owners’ appeal costs of £40,000 within 14 days.

• Court of Appeal (Civil Division): dismissed the appeal and ordered the charterers to pay £40,000 in appeal costs.
• High Court, Queen’s Bench Division, Commercial Court: Teare J upheld the arbitral award and granted permission to appeal in [2016] EWHC 3132 (Comm).
• Arbitration: the tribunal found that the cargo damage was caused by the cargo’s inherent characteristics and the prolonged delay, and apportioned 100% of the claim to the charterers under clause 8(d).