182 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

Bant have noted that, while recipients may not receive legal title to the property, they
do receive a valuable property right—a possessory right good against all but the true
owner (or a person with a better possessory title).42 The learned authors cite Professor
McInnes’ observation that “only a cold technicality can deny … that a thief is enriched
by the car that he steals. While title to the vehicle remains in the victim, it is the thief
who need not walk to work”.43
Those who argue that lack of consent or ignorance should not be recognised as an unjust
factor on this ground will need to consider how to respond to the unique facts of this case.
That is because, on registration of the DVI Shares in the Defendant’s name, he did acquire
legal title to the shares. It will be for future Singaporean Courts to deal with the conceptual
difficulties associated with recognising lack of consent as an unjust factor, which arise
where title does not pass. The decision is currently on appeal.

Mohammud Jaamae Hafeez-Baig* and Jordan English†

THE INTER-CLUB AGREEMENT: THE MEANING OF “ACT”,

CAUSATION AND THE BOUNDARIES OF THE AGREEMENT

The Yangtze Xing Hua

The Inter Club Agreement (“ICA”) is in form an agreement between the P&I clubs
which are members of the International Group (in their capacities as the P&I insurers
of shipowners and the Charterers’ Liability insurers of time-charterers) on the allocation
between them of cargo claims by third parties where the obligations of the owners and
charterers to one another are governed by a time charterparty on the New York Produce
Exchange (“NYPE”) form in any of its versions (NYPE 1946, Asbatime 1981, NYPE
1993, and any subsequent amendment, including the NYPE 2015 form). As between
the clubs, the ICA is not a binding agreement as to how claims shall be apportioned, but
only an agreement to “recommend to their Members without qualification” that cargo
claims be apportioned in accordance with the ICA. However, it is now usual for time
charterparties on any version of the NYPE form (including charters where the parties
are not insured by clubs within the International Group) to include an additional clause
providing that cargo claims shall be settled in accordance with one or other version of the
ICA, so that as between the owners and charterers the apportionment under that version
of the ICA is legally binding. Thus, the interpretation of the ICA is a matter of general
importance for the shipping industry and its liability insurers.
Burrows, 408. For a practical argument see R Stevens, “Three Enrichment Issues”, in Burrows & Rodger,
Mapping the Law: Essays in Memory of Peter Birks (2006) 49, 62–64.
42. Edelman & Bant, 58–59.
43. Ibid, 58, quoting M McInnes, “Restitution, Unjust Enrichment and the Perfect Quadration Thesis” [1999]
RLR 118, 125 fn.38.
* University of Queensland.
† University of Queensland.

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 CASE AND COMMENT 183

The Yangtze Xing Hua1 is a decision on the 1996 version of the ICA (“ICA 1996”).
Teare J holds that in the phrase “unless there is clear and irrefutable evidence that the
claim arose out of the act or neglect of one or the other” in cl.8(d), the word “act” does not
require any breach of contract by the party in question.

The facts of The Yangtze Xing Hua, and how one might naturally react to them
The vessel was under time charter2 from Yangtze Navigation (“Owners”) to Transgrain
Shipping (“Charterers”) for a trip to carry a cargo of soya bean meal. Charterers had the
vessel wait off the discharge port for over four months. During this time, part of the cargo
overheated; and, when the vessel was discharged, Owners had to settle a cargo claim,
which cost over €2.5 million. The arbitrators found that the damage to the cargo was
caused by a combination of the oil and moisture content of the cargo and the prolonged
period at anchor at the discharge port.
The arbitrators also found that Charterers had taken a decision to use the vessel as a
floating warehouse. They said in their award: “Cheap floating storage was one reason to
keep the goods on board. The other was that the goods could be diverted easily if they
remained on a vessel.”3
Given these facts, it is natural to say that Owners were entitled to recover from
Charterers the whole amount which they paid to settle the cargo claim. Under the NYPE
1946 form, the vessel is chartered for the purpose of carrying cargoes. This purpose
necessarily involves loading and discharging the cargoes, and so the purpose embraces
delays which occur in the course of waiting for berths and loading and discharging.
However, if the charterers instruct the vessel not to discharge but to wait off the discharge
port, this is an order which under the terms of the contract the charterers are entitled to
give, but such a period of waiting falls outside the purpose of the charterparty, and is not
a risk which the owners have agreed to accept. Therefore, the owners will be entitled to
be indemnified by the charterers in respect of the consequences of this delay.
Nevertheless, there is a question whether, within a time charter incorporating the ICA,
an express or implied general indemnity in favour of the owners in the time charter (“the
implied indemnity”) prevails over the incorporated ICA, or the ICA prevails and finally
determines the apportionment between the owners and charterers of “cargo claims” as
defined in the ICA. On one side, in at least one arbitration award the arbitrators appear
to have considered that the owners could recover from the charterers under the implied
indemnity in respect of the owners’ share under the ICA of the settlement of a cargo
claim.4 On the other side, ICA 1996, cl.2 states “the terms of this Agreement shall apply
notwithstanding anything to the contrary in any other provision of the charterparty”.

1. Transgrain Shipping (Singapore) Pte Ltd v Yangtze Navigation (Hong Kong) Co Ltd (The Yangtze Xing
Hua) [2016] EWHC 3132 (Comm) [2017] 1 Lloyd’s Rep 212 (Teare J).
2. On a form identified in the judgment only as “the New York Produce Exchange form”, which would
normally be understood as referring to NYPE 1946.
3. Quoted at [3].
4. London Arbitration 4/00 LMLN 538. The arbitrators rejected the owners’ claim for an indemnity in
respect of the owners’ share of a shortage claim at Hodeidah, not on the basis that the ICA prevailed over any
implied indemnity, but on the basis that the owners should be deemed to have accepted the risk of manufactured
shortage claims at Hodeidah.

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 184 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

Thus, the question is now: whether, when the ICA is incorporated into a charterparty, it
is incorporated as applying in accordance with its terms “notwithstanding anything to
the contrary in any other provision of the charterparty”, that is, as paramount; or that, as
between the P&I clubs which are the formal parties to the ICA, ICA 1996, cl.2 applies,
but when the ICA is incorporated into a charterparty it may be subject to other terms of
the charterparty including the implied indemnity.
At all events, in The Yangtze Xing Hua it was common ground that Owners’ claim
against Charterers fell to be determined under the terms of the ICA.5

Decision
ICA 1996, cl.8 includes:
“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 …
(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 …
(c) Subject to (a) and (b) above, claims for shortage or overcarriage:
50% Charterers
50% Owners
unless there is clear and irrefutable evidence that the claim arose out of pilferage or act or
neglect by one or the other (including their servants or sub-contractors) in which case that
party shall then bear 100% of the claim.
(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 (including their servants or sub-contractors) in which case that party
shall then bear 100% of the claim.”

The arbitrators treated Charterers’ decision not to have the cargo discharged as an “act”
falling within the wording of cl.8(d), so that Charterers were to bear 100 per cent of the
resulting cargo claim. In holding this, the arbitrators took the view that in cl.8(d) the word
“act” did not import any breach of contract on the part of a party.6
On appeal to the High Court, Teare J held that this view is correct. In the phrase “act
or neglect” in cl.8(d) the word “neglect” requires proof of something which might be
considered a “fault” on the part of a party, and as between the owners and charterers under
a time charterparty “fault” will have to mean breach of contract by the party. However, the
word “act” does not require proof of any fault, but only the answer to a factual question,
whether it was the act of a party which caused the cargo claim.
5. At [5].
6. At [9].

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 CASE AND COMMENT 185

It is submitted that this is correct as an interpretation of the ICA. As a matter of authority,

there are cases where in the pairing “act or neglect” the word “act” has been held to require
fault on the part of a party,7 and cases where in the same pairing the word “act” has been
held not to require any fault on the part of a party.8 Thus, the interpretation in this case will
have to be determined by the context in ICA 1996.
ICA 1996 is an allocation of shares of liability which does not depend on any breach
of any obligation under the contract. For example, cl.8(a) allocates to the owners’
account claims which in fact arise out of unseaworthiness, and takes no account of
whether the owners had exercised due diligence to make the vessel seaworthy, and
so (in the case of a time charterparty which incorporates the Hague or Hague-Visby
Rules) is taking no account of whether the owners were or were not in breach of their
obligations under the contract.9 Again, cl.8(a) allocates to the owners’ account claims
which arise out of error or fault in navigation or management of the vessel; but, where
the charterparty incorporates the Hague or Hague-Visby Rules, such errors or faults will
not place the owners in breach of the charterparty. Moreover, it has been held in previous
judgments10 that the ICA is intended as a “mechanical” allocation of liability between
the parties, which deliberately does not take account of whether a party is in breach of
its charterparty obligations.11
This interpretation also makes sense in that, in relation to “neglect”, it is impossible to
identify anything as an omission otherwise than by reference to some standard of what a
party ought to have done; but, by contrast, as Teare J says, “‘act’ can sensibly mean any
act, whether culpable or not”.12
However, this interpretation will raise one difficulty which Teare J mentions, and the
response to this difficulty which the judgment suggests will in fact not be satisfactory. To
arrive at a satisfactory interpretation of the ICA, we must impose a restriction on the scope
of the word “act”. There is also a further difficulty, as to whether the result in The Yangtze
Xing Hua can properly be obtained by applying the ICA to the facts of the case.

First difficulty: the charterers’ order to load the cargo, and causation
While discussing the arguments presented by counsel for Owners, Teare J cites judgments
in which the phrase “act, fault or neglect” in the Hague Rules, [Link], r.3 has been construed
as including the shipment of a cargo as itself an act of the shipper.13 The judge also refers to
(and declines to follow) a New York arbitration award dealing with ICA 1996, cl.8(d),14 in

7. Eg, Anglian Water Services Ltd v Crawshaw Robbins & Co Ltd [2001] BLR 173, [93], cited by Teare J, [14].
8. Eg, Mediterranean Freight Services Ltd v BP Oil International Ltd (The Fiona) [1993] 1 Lloyd’s Rep 257
(Judge Diamond QC), 268–289; Effort Shipping Co Ltd v Linden Management SA (The Giannis NK) [1996] 1
Lloyd’s Rep 577 (CA), 582; both cited by Teare J, [15].
9. As Teare J says, at [18].
10. Eg, D/S A/S Idaho v Peninsular & Oriental Steam Navigation Co (The Strathnewton) [1983] 1 Lloyd’s
Rep 219 (CA), 225; cited by Teare J, [13].
11. At [13].
12. At [23].
13. At [15], referring to The Fiona [1993] 1 Lloyd’s Rep 257, 268–269 and The Giannis NK [1996] 1 Lloyd’s
Rep 577, 582.
14. At [27].

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 186 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

which the tribunal said: “we do not consider the act of the Charterer ordering or instructing
the Owner to carry the cargo in question (without any fault or negligence of Charterer) to
be an ‘act’ within the meaning of 8(d)”.15
The difficulty that will arise is that, if the act of the charterers in instructing the vessel
to load a cargo is to be treated as an “act” for the purposes of cl.8(d), then all cargo
claims may be treated as arising from the “act” of instructing the vessel to load the cargo
in question, and so every cargo claim which is not caught by cl.8(a) or (b) or (c) but
falls down into cl.8(d) will be apportioned 100 per cent to the charterers’ account. It is
submitted16 that this is a consequence to be avoided.
The response which Teare J would give becomes apparent from his consideration of
a different example given by counsel for Owners. Counsel put a case where a vessel
interrupts her voyage to assist another vessel in difficulty, delay ensues and the cargo
interests make a claim for this delay.17 To this, Teare J responds:18 “it must be arguable that
the claim does not arise out of the master’s actions, but out of the danger which reasonably
and foreseeably causes the master’s response, in the one case the other vessel being in
distress.”19
“Arises out of” is equivalent to “is caused by”, and Teare J’s response to the example is
that it can be dealt with by the use of an appropriate concept of causation. We may suppose
that in the same way the judge would consider that, applying an appropriate concept of
causation, it would not be that all cargo claims were caused by the charterers’ order to load
the cargo in question.
However, it may not be open to us to apply sophisticated concepts of “causation in law”
in the context of the ICA. Elsewhere, in order to allow the ICA to work in a rough and
ready, mechanical way, the court has countenanced the use, in the context of the ICA, of a
more mechanical concept of causation.
In The Kamilla20 the vessel had carried a cargo of lentils in bulk to Algeria. She was
unseaworthy, in that the hatchcovers of No.2 hold were not completely watertight, and
on the voyage a small amount of seawater entered the hold and wetted the cargo to the
extent of about 30 metric tonnes (“mt”). The crew removed the wetted cargo together
with some sound cargo, and following this separation about 2,765mt of sound cargo
remained. However, the receivers did not wish to take delivery of the cargo. The receivers
called in the Algerian authorities (“the DCP”) to inspect the cargo, and the DCP decided
to prohibit the import of the whole cargo. The owners applied to the Algerian court for
permission to discharge the cargo, but neither the charterers nor the receivers supported
this application, and the Algerian court refused it. The vessel was arrested and the owners
had to provide security for a cargo claim in the amount of the full value of the cargo, and
subsequently had to pay about US$380,000.

15. The Mustafa Nevzat (2 Jan 2004) SMA 3820.

16. Despite Teare J’s comments at [25].
17. At [26].
18. Ibid.
19. Teare J also has a second response, at [26], that, on a “more or less mechanical apportionment of liability”,
it may be that a cargo claim for delay arising from the vessel deviating to save life or property may properly
be apportioned 100 per cent to the owners’ account. This comment intends no criticism of the judge’s second,
bolder, response.
20. Kamilla Hans-Peter Eckhoff KG v A C Oerssleff’s EFTF A/B (The Kamilla) [2006] EWHC 509 (Comm);
[2006] 2 Lloyd’s Rep 238 (Morison J).

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 CASE AND COMMENT 187

It was also accepted as a fact (by the agreement of the parties for the purposes of
a preliminary issue in their arbitration) that, given the very small amount of cargo
wetted, such a request for inspection by an Algerian receiver was unusual and one
which would not normally have been made if the receiver had wished to take delivery
of the cargo.
Given these facts, the proximate cause (that is, the cause which in the circumstances
made it practically inevitable that the loss would occur21) of the owners’ loss was (if the
practice of the DCP was to prohibit the import of any cargo in which it had found any
part to be unfit for consumption) the decision of the receivers to call for an inspection,
or (if this was not the standard practice of the DCP) the decision by the DCP to prohibit
import in this particular case.
Also, it is submitted that neither the deficiency in hatchcover No.2 nor the resulting
wetting damage to about 30mt of cargo would normally be considered an effective cause
of the owners’ loss. The wetting damage would normally be considered only to have
provided the receivers with the opportunity to procure a prohibition on the import of the
cargo. Thus, the unseaworthiness and the wetting damage were “but for” causes (in Latin,
each was a causa sine qua non) but the wetting damage was only the occasion for the loss,
and not an effective cause. It would normally be considered that the effective causes of
the owners’ loss were whatever factors caused the receivers not to wish to take delivery of
the cargo (most probably, a movement in the price of lentils after the receivers had agreed
to buy this cargo) together with the receivers’ attitude, which led the receivers to take
advantage of this opportunity not to take delivery of the cargo.
However, in The Kamilla the arbitrators held that, for the purposes of the 1984 version
of the ICA, the owners’ loss was “due to unseaworthiness”. The arbitrators said:22
“it was impossible to deny that the cargo would not have been rejected (and the claim under the ICA
would not therefore have arisen) but for the unseaworthiness of the vessel. Since seaworthiness
is the sole responsibility of the Master, it was difficult to take issue with the Charterers in their
argument that there was no compelling commercial objection to concluding that as between the
parties to the charterparty, it was the Owners who should bear the loss.
…
Adopting the common-sense commercial approach which we believe from our own experience of
the operation of the ICA is required, we were bound to agree with the Charterers that provided the
unseaworthiness of the vessel could be said in a practical sense to be a cause of the loss, it was not
appropriate to embark upon a further enquiry as to whether it was the effective cause of the loss or
whether the connection between the unseaworthiness and the loss was so tenuous that the loss itself
could be said to be too remote.”

On appeal by the owners, Morison J upheld the arbitrators’ award. His judgment is not
straightforward to read, because of the way he uses the language of “proximate cause” and
“effective cause”. However, with regard to “proximate cause”, the way in which the judge
speaks betrays that (with respect) he has not grasped the concept correctly. Morison J
speaks far too glibly of “a ‘proximate cause’”.23 An enquiry for the proximate cause is

21. Cf MA Clarke The Law of Insurance Contracts (Informa, London, 2009), online edn, [25.4], text to
fnn 50–52.
22. Paragraphs 31 and 35 of the arbitrators’ award, quoted in The Kamilla at [12].
23. Eg, in The Kamilla, in the first and fourth sentences of [15].

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 188 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

a search for a single cause (in Latin, “proximus” is a superlative, so that the enquiry is a
search for the “nearest” cause, although under English law the search is not for the cause
nearest in time, but for the “most potent” cause). On occasions, it may be that this search is
defeated, because it is impossible to identify a single “most potent” cause, and there must
be said to be two causes of equal potency. However, the search does not begin by looking
for a plurality of “proximate causes”.
With regard to “effective cause”, Morison J interpreted the award (charitably)
as saying that the unseaworthiness was “an effective cause of the whole loss”. 24
However, in so doing Morison J not only ignores the common-sense view that, on
these facts, the unseaworthiness was not an effective cause but only gave rise to the
occasion for the loss, but also disregards the arbitrators’ own statement that they did
not consider it appropriate to enquire whether the unseaworthiness was the effective
cause of the loss.25
The practical effect of The Kamilla is that, in the context of the ICA, it licenses an
enquiry which looks for one of the causes specifically mentioned in the ICA26 and, if the
enquiry finds such a cause in the antecedents of a cargo claim as a “but for” cause, that
is enough. It is submitted that, given the mechanical way in which the ICA is intended to
operate, this is the appropriate concept of causation for the ICA.
Therefore, for the purposes of the ICA, the charterers’ instruction to load this cargo
must be specifically excluded as an “act” for the purpose of ICA 1996, cl.8(d). It
may be suggested that the need to impose such a restriction may show that something
has gone wrong, and it may appear that the language of the ICA is allowing it to
be extended to cover types of cause for which it was not intended: it may be said
that the ICA was intended to consider the causes of cargo claims in a way which
presupposes the decision to load a particular cargo, and so the enquiry into the cause
for the purposes of the ICA should be an enquiry which begins after the decision to
load the particular cargo.27

Second difficulty: the unreliable foundation of the result in The Yangtze Xing Hua
In The Yangtze Xing Hua, the result, that Charterers were to bear 100 per cent of the cargo
claim, was reached because Charterers’ course of action was characterised positively, as a
decision to order the vessel to wait off the discharge port. However, Charterers’ course of
action might better be characterised negatively, as a failure to give orders for discharge, and
then Charterers’ course of action would justify a departure from the 50:50 apportionment
under ICA 1996, cl.8(d) only if Charterers’ course of action was a “neglect”, that is, if
Charterers were in breach of a contractual obligation under the charterparty. Under an

24. The Kamilla, [16].

25. Paragraph 35 of the arbitrators’ award, quoted supra, text following fn.22.
26. Presumably, one should look first for a cause within what in ICA 1996 are cl.8(a), (b) and (c); and only if
that search does not produce a cause should one go on to look for a cause within cl.8(d).
27. It is suggested that practitioners and arbitrators would (without thinking about the issue) generally accept
that the ICA is not intended to deal with liabilities for “dangerous cargo” at common law or under the Hague
Rules (or the other Rules which may apply to a particular contract of carriage).

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 CASE AND COMMENT 189

ordinary time charter it is not a breach of contract for the charterer not to give orders for
the discharge of the cargo.
Turning back to the loading of a cargo which has an inherent vice, it might be thought
that, if the meaning of “act” in cl.8(d) is restricted in the way suggested, nevertheless
if the cargo has an inherent vice which causes a cargo claim, the charterers’ instruction
to load this cargo could be treated not as an “act” but as “neglect” on the part of the
charterers for the purposes of cl.8(d). However, under an ordinary time charter it is not a
breach of contract for the charterer to instruct the vessel to load a cargo which is likely to
deteriorate during the carrying voyage. Therefore, once the meaning of “act” is restricted
in the way suggested, it will follow that the ICA does not provide a way of making
charterers liable as to 100 per cent in respect of cargo claims arising from inherent vice
of the cargo.
The proceedings in The Yangtze Xing Hua arose because shipowners are not content
for large cargo claims arising from charterers delaying discharge to be mechanically
apportioned by the ICA, if that means that the claims will be borne as to 50 per cent by
the owners’ P&I club entry, and because the owners’ clubs do not “recommend without
qualification” the application of the ICA in such cases but support their owner members.
In the same way, shipowners are not content for large cargo claims arising from inherent
vice of the cargo to be borne as to 50 per cent by the owners’ club entry.
However, if it is desired to make charterers liable for cargo claims resulting from
inherent vice and from deliberately delaying the berthing of a vessel for discharge,
the appropriate route is not by way of the ICA, which is designed to be operated
mechanically, and under which any order by the charterers must be characterised either
as an “act” (such that if the case falls under cl.8(d), the charterers will automatically be
liable as to 100 per cent) or as “neglect” (such that the charterers will be liable only if
the order was a breach of an obligation under the charterparty). Rather, the appropriate
route is by way of the implied indemnity, which involves a consideration, in relation
to the particular charterparty contract, of what risks the owners should be deemed to
have accepted.
It might not be appropriate for arbitrators to try to tidy up this area of time charter
law by imposing the interpretation by which, when the ICA is incorporated into a time
charterparty, the incorporated ICA will be subject to owners’ right to an indemnity in
respect of the consequences of complying with charterers’ orders.
If it is desired to make charterers liable for the consequences of their instructions to
load particular cargoes or to delay discharge, then, when the ICA is next revised, the clubs
in the International Group should expressly provide that, when the ICA is incorporated
into a charterparty, it is to prevail over the provisions of the charterparty governing
responsibility for cargo operations and resulting liabilities, but is not to prevail over the
implied/general indemnity in favour of the owners.

Robert Gay*

* Legal Director, Hill Dickinson LLP.

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