Liability for cargo damage caused in consequence of charterers’ orders to delay
(Article published by Britannia, Risk Watch Vol. 24, No.3)
Thomas Cooper Shipping team member, William Stansfield contributed to Britannia’s Claims & Legal Risk Watch publication on Cargo Damages. The article below is published with their kind permission.
A time charterer should think carefully about ordering a ship to wait outside a discharge port for a long period of time when the charterparty incorporates the Inter-Club Agreement 1996 (the ICA).
According to a recent decision of the High Court in The Yangtze Xing Hua [Transgrain Shipping (Singapore) Pte Ltd v Yangtze Navigation (Hong Kong) Co Ltd  EWHC 3132 (Comm)] such an order may be considered an ‘act’ within the meaning of clause 8(d) of the ICA. This means that if cargodamage occurs as a result of such an order, the ICA will allocate liability for any cargo claim 100% to charterers.
As they had not been paid for the cargo, the charterers ordered the ship to wait off the discharge port for more than 4 months. When the ship finally discharged the cargo in May 2013, cargo damage was discovered. A cargo claim was made against the ship. That claim was settled and the owners then brought a recourse action against charterers under the terms of the time charterparty.
It was common ground that liability (as between owners and charterers) for the cargo claim was to be apportioned in accordance with clause 8(d) of the ICA which had been incorporated into the charter.
Clause 8(d) provides that:
a) liability for all other cargo claims whatsoever are to be apportioned between owners and charterers 50/50;
b) but if there is clear and irrefutable evidence that the cargo claim arose out of the ‘act or neglect’ of one or the other, then that party shall bear 100% of the claim.
An arbitration tribunal held that the charterers’ decision to keep the ship at the discharge port anchorage for a prolonged period of time was an ‘act’ falling within clause 8(d) of the ICA and so liability for the cargo claim would be apportioned 100% to charterers.
The charterers appealed. The question of law for the court to decide was whether the term ‘act’ in clause 8(d) meant a culpable act in the sense of fault or whether it meant any act, whether culpable or not. In the court’s judgment, the word ‘act’ in clause 8(d) would reasonably be understood to bear its ordinary and natural meaning of any act without regard to questions of fault. In consequence, the court ruled that the tribunal’s construction of ‘act’ in clause 8(d) was correct and dismissed the charterers’ appeal.
It is understood that there is an appeal pending against the judgment.
If you have any queries about this article, or if you would like to discuss any of the issues raised in it, please contact William Stansfield, whose details appear below.