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4/16/2018 CHAPTER 15 PRINCIPLES OF GENERAL AVERAGE

Chapter CHAPTER 15

PRINCIPLES OF GENERAL AVERAGE

1 INTRODUCTION
This chapter is intended to provide a concise overview of the principles applicable to general average. It sets out
only the elementary principles which derive from maritime law, equity and public policy. It is rather a sui generis
subject, and is relevant to contracts of carriage of goods by sea, and the losses that result from a general average
act are insurable as provided by the Marine Insurance Act 1906. Space does not permit a detailed treatment of
general average in this book, which can be found in specialist texts on the subject.

1 One should consult the leading authority in this field, Wilson, DJ, and Cooke, JHS, Lowndes & Rudolf: The Law of
General Average and the York-Antwerp Rules, 12th edn, 1997. See also a more recent text by Rose, FD, General
Average Law and Practice, 2nd edn, 2005.

To gain an insight into general average, readers are specifically referred to the bible of Carver.

2 13th edn, 1982, vol 2, para 1345.

In his introduction to the subject, he begins by explaining the difference between general average loss and
particular average, the latter being a partial loss sustained by individual interests, being exposed to particular
risks; such particular loss, or average, which is not a loss sustained for the preservation of the whole common
adventure, ‘lies where it has fallen’. By contrast, if an interest of the common adventure is sacrificed to avert a
danger which threatens the whole adventure, and the sacrifice is intentional for the benefit of the remainder, ‘the
whole burden of the loss occasioned is not left on the interest upon which it has fallen. It is imposed upon that and
all those others for whose benefit the sacrifice has been made, rateably, in proportion of the saved values’. That is
why the loss is said to be a general average loss, ‘and the contributions made to it by those benefited are general
average contributions’.

As a principle, therefore, general average applies where the common adventure is at risk and an interest of it is
sacrificed, or extraordinary expenditure is incurred, in order to preserve that property and other interests involved
in the same maritime adventure. The expenditure or sacrifice is the general average act and must be voluntary
(meaning intentional) and reasonable. The result is an entitlement to a general average contribution by the person
whose property has been sacrificed, or the expenditure incurred, against the other interests which are saved. The
word ‘average’ means ‘loss’. Such loss is claimed back as a rateable contribution (‘the general average
contribution’) of the saved values of those interests which have benefited as a result.

The obligation to contribute does not depend so much upon an implied term of a particular contract, since there
are many interests involved other than those of the contracting parties, but it depends upon a general rule of
maritime law, as a matter of natural justice.

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3 Simonds v White (1824) 2 B & C 805, 811, per Abbott CJ; Burton v English (1883) 12 QBD 218, p 200, per Brett
LJ; cf Lord Bramwell in Wright v Marwood (1881) 7 QBD 62 said that, to judge from the way in which contribution
is claimed in England, ‘it would seem to arise from an implied contract inter se to contribute by those interested.’
And in Strang Steel v Scott (1889) 14 App Cas 601, p 608, PC: ‘whether the rule ought to be regarded as matter
of implied contract, or as a canon of positive law resting upon the dictates of natural justice, is a question which
their Lordships do not consider it necessary to determine. The principle upon which contribution becomes due does
not appear to them to differ from that upon which claims of recompense for salvage services are founded. But, in
any aspect of it, the rule of contribution has its foundation in the plainest equity’.

The concept of general average is very ancient, having its roots in Rhodian law, being adopted into the ‘Digest of
Justinian’, and it is said that its origins date back to at least 1000 BC.

4 Op cit, Rose, fn 1, p 1; see also an interesting article: John Macdonald ‘General Average, Ancient and Modern’
[1995] LMCLQ 480.

Its justification is based mainly on equity as well as mercantile custom, common law, public policy and natural
justice.
5 Op cit, Rose, fn 1, pp 6–8.

These grounds are the same as in salvage. There are also some common elements between salvage and general
average, as they both arise in situations of necessity, and there is a benefit conferred to the property in danger.
Unlike in incidents of salvage, however, where a volunteer, being a third party to the adventure, saves property in
danger (see Chapter 13, above) the rights and obligations in general average arise only between those who are
involved in the ‘common maritime adventure’.

The ancient law of general average was, during the Christian era, incorporated into a number of national legal
systems. In the course of this process, it received a number of differing interpretations. Therefore, in the 19th
century enthusiasm for internationalisation, efforts were made to impose on its interpretation some measure of
uniformity. This resulted in what have become known as the York-Antwerp Rules (YAR). These Rules do not form
an international convention, but are incorporated by reference into contracts of carriage. This process has in fact
imposed a quite remarkable measure of uniformity on the basis of average adjustments around the world.

There have been various sets of YAR over the years; the most commonly known have been the 1890, the 1924,
the 1950 Rules, and the most recent editions, which have modernised general average, are YAR 1974 (as amended
in 1990), the 1994 and 2004 YAR.

Most general average adjustments are today drawn up on the basis of the YAR 1994, although some are still
prepared according to the YAR 1974 (as amended in 1990). The most recent set of Rules, dated 2004, were the
result of pressures imposed by cargo insurers. They have therefore found little favour with the remainder of the
maritime community, and are seldom encountered in contracts of carriage.

1.1 The York-Antwerp Rules (YAR)


The fact that a general average act can occur in any international waters, or on the high seas, raises the questions
of which law and jurisdiction should apply to the general average adjustments. But, if the Rules are incorporated
into the contract, they will govern the adjustment of general average. They provide a complete code and, by the
general rule of interpretation, they ‘shall apply to the exclusion of any law and practice inconsistent with them’, if
the parties to a contract have adopted them.

These Rules consist of a set of lettered rules, followed by a set of numbered rules. The lettered rules from A to G
state the general principles, while the numbered rules (I to XXIII) are specific and deal with commercial

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practicability; they qualify the general principles.

Where the lettered rules do not mention a specific item, but the numbered rules deal with it, the question arose in
Vlassopoulos v British and Foreign Marine Insurance Co (Makis)

6 [1929] 1 KB 187.

whether or not the circumstances that gave rise to the expenditure was general average. The underwriters argued
that, since the event which resulted in the expenses at the port of refuge was not covered by the lettered rules,
the specific numbered rules had no application. The shipowners, on the other hand, argued that the particular rules
should prevail over the general. The judge rejected both arguments, and said at pp 196, 198:

This is a matter of construction, and in my view the true construction of these Rules, general and particular, is not
precisely what either of the contending parties has contended for. In my view those who drew up the Rules
intended to provide a complete code which is to govern the law of general average for anybody who adopts it … It
may be that there are omitted cases not covered by the general or by the specific Rules. That I do not decide. Nor
do I decide any question as to the law apart from the Rules, because there is a finding that the parties by their
contract intended that the code which should govern their rights and obligations should be the York-Antwerp Rules
of 1924, and I treat that as conclusive for the present purpose and the common law of this or any other country as
being outside the scope of my consideration and my decision…

(The parties) may choose a self-contained code, and of this code, it may be observed, that although the general
Rules are not identical with the law of England, they approach much more nearly to the law of England than they
do to the laws of many other countries, and that is not perhaps surprising, having regard to the known and
admitted predominance that this country holds in maritime matters. But when that has been done, and a general
set of Rules provided laying down the general principles which are to operate, then the Rules go on to deal with
certain specific cases, and I am satisfied on the true construction of the Rules that those cases are dealt with not
by way of mere illustration, but in order to make definite and certain what the Rules decide about certain cases
which are on the border line, and which might be held to be on one side or the other of the line which is to be
drawn under the general Rules.

Thus, in construing the 1974 York-Antwerp Rules, the judge held that the lettered rules enunciate the general
principles, and the numbered rules settle how the general principles are to be applied in what might, otherwise, be
doubtful cases. Roche J further stated:

The York-Antwerp Rules, 1924, are framed in order that the parties, if they choose to adopt the Rules by way of
contract, may not be troubled with any question as to what, if any, general law is to apply … The Rules must be
read together and as a whole, and not as two codes one of which may contradict the other.

In any question of a lacuna in the lettered rules, therefore, or an issue of conflict between the lettered and the
numbered rules, the rules should be read as a whole, and the result in a particular case will be a matter of
construction of the rules in the context of the circumstances. Whether a literal and purposive approach of
interpretation, or a strict interpretation of the rules should be adopted, would depend on the circumstances of a
case.

7 The Bijela [1993] 1 Lloyd’s Rep 411 (CA), reversed [1994] 1 WLR 615 (HL) indicating a combination of a literal
and purposive approach; for the strict approach, see The Trade Green [2000] 2 Lloyd’s Rep 451.

Since the lettered rules enshrine the principles and the numbered rules enshrine commercial practicability, if
‘principle and commercial practicability are found to conflict, practicability should be preferred’.

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8 Macdonald, op cit, fn 4, at 493.

It should be noted that the scheme of the rules is governed by the rule of interpretation which, in the 1974 Rules,
provides that ‘except as provided by the numbered rules’ the lettered rules shall be applied.
9 Corfu Navigation Co v Mobil Shipping Co Ltd (The Alpha) [1991] 2 Lloyd’s Rep 515, p. 518.

A rule paramount has been added to the 1994 and the 2004 Rules, requiring the principle of reasonableness to
apply in any sacrifice or expenditure that might be incurred, which is not required in the 1974 Rules (see para 2.3
below). Thus, the rule of interpretation, in both the 1994 and 2004 Rules, has been amended and reads: ‘except
as provided by the Rule Paramount and the numbered Rules, general average shall be adjusted according to the
lettered Rules’.

A difficult point of construction arose in The Bijela.

10 Op cit, fn 7, and [1994] 2 Lloyd’s Rep 1 (HL).

The issue was whether the owners of The Bijela could claim general average contribution in respect of the cost of
temporary repairs carried out in the course of a voyage before the ship reached destination, in India. Hobhouse J’s
view, at first instance,
11 [1992] 1 Lloyd’s Rep 636, p 644.

was that the repairs in dry dock were not ‘necessary for the safe prosecution of the voyage’, thus the cost of
discharging, storing and reloading the cargo at Providence was not allowed in general average. The majority of the
Court of Appeal, Hoffmann LJ dissenting, agreed.

The question in the appeal by the owners to the House of Lords turned on the construction of the second
paragraph of Rule XIV of the YAR 1974.

On the facts, the shipowners’ vessel was chartered for the carriage of cargo from Providence, Rhode Island, to the
West Coast of India, under a charterparty which provided that general average was to be settled in London
according to the York-Antwerp Rules 1974. Whilst still in Rhode Island Sound, the vessel grounded and sustained
damage. She put into the port of Jamestown, where it was discovered that she could not safely reach New York,
the nearest port where permanent repairs could be carried out in dry dock, without discharging the whole of her
cargo. The shipowners elected to carry out temporary repairs in Jamestown, at a cost of US $282,606. The cost of
discharging, storing and reloading the cargo to allow permanent repairs in New York would have exceeded
$535,000. The vessel having completed her voyage to India, the shipowners declared a general average loss. The
adjusters did not allow the cost of the temporary repairs. The shipowners instructed a second firm of adjusters,
who included the cost of the repairs in general average as being less than the expense which would have been
incurred and allowed if the temporary repairs had not been effected, within rule XIV of the Rules of 1974. The
cargo owners refused to pay their contributions and the shipowners issued a writ for their recovery. The judge
dismissed the claim on the ground, inter alia, that rule X(b) of the Rules only allowed for the cost of discharging
and storing cargo in respect of repairs “necessary for the safe prosecution of the voyage;” and that since repairs in
dry dock had not been necessary, the cost of handling and storing the cargo in New York would not have been
allowed in general average and there had been no saving in expense. The Court of Appeal, by a majority,
dismissed the shipowners’ appeal.

On appeal by the shipowners, the House of Lords held, allowing the appeal, that rule XIV of the York-Antwerp
Rules 1974 was to be applied on the assumption that the temporary repairs had not been effected, and that
assumption was to be carried through when applying rule X of the Rules; that if the temporary repairs had not
been carried out, the shipowners’ vessel would have been required to discharge its cargo and go into dry dock in
New York for the repairs necessary to enable the vessel to proceed to India; and that, accordingly, since, on that
assumption, such repairs would have been necessary, within the meaning of rule X(b) of the Rules, for the safe
prosecution of the voyage, the shipowners had shown that the cost of handling and storing the cargo would have
been allowable in general average.

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Apparently the judge and the Court of Appeal misinterpreted the meaning of Rule X(b) and Rule XIV which have to
be read together. Unfortunately, the drafters of the 2004 Rules made Rule XIV(b) almost incomprehensible. The
Rules generally are not easy to follow, and their drafting leaves a lot to be desired.

As said earlier, the York-Antwerp Rules are voluntary. Therefore, where they are not incorporated into a
charterparty or bill of lading, they do not apply. The question therefore arises as to which jurisdiction a general
average act falls within, where no mention is made of the York-Antwerp Rules.

12 Although, in practice, most parties insert rider clauses into their charterparties which provide for the application
of the York-Antwerp Rules, there can be instances where this does not happen.

The authorities in this area are supportive of the view that, in the absence of any contrary agreement, general
average is governed by the law of the place where the maritime adventure ends,
13 Simonds v White (1824) 2 B & C 805.

although the parties can agree a different place.

1.2 Definition
The York-Antwerp Rules define general average in Rule A uniformly, thus:

There is a general average act when, and only when, any extraordinary sacrifice or expenditure is intentionally and
reasonably made or incurred for the common safety for the purpose of preserving from peril the property involved
in a common maritime adventure.

Where there is general average there is, of course, insurance to cover the losses that have resulted from a general
average act. Thus, the principle was codified in s 66 of the Marine Insurance Act 1906:

General Average Loss

(1) A general average loss is a loss caused by or directly consequential on a general average act. It includes
a general average expenditure as well as a general average sacrifice.
(2) There is a general average act where any extraordinary sacrifice or expenditure is voluntarily and
reasonably made or incurred in time of peril for the purpose of preserving the property imperilled in the
common adventure.
(3) Where there is a general average loss, the party on whom it falls is entitled, subject to the conditions
imposed by maritime law, to a rateable contribution from the other parties interested, and such contribution
is called a general average contribution.

It can, therefore, be said that there are four elements to satisfy for a general average act to occur: (1) a danger, or
peril, to the common adventure; (2) extraordinary sacrifice or expenditure; (3) voluntarily or intentionally and
reasonably made; and (4) preservation of the property involved in the danger. Before these elements are
examined under para 2, below, it is important to look at the issue of authority to act in general average.

1.3 Authority to act in general average


For an act to be considered as a general average act, the test was set by the court in Athel Line Ltd v Liverpool
& London War Risks Ins Assn Ltd

14 [1994] KB 87, p 94.

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, by Tucker J:

The rule (A) I think, clearly envisages the exercise by someone of his reasoning powers and discretion applied to a
particular problem with freedom of choice to decide to act in one out of two or more possible ways, and the
language is quite inappropriate to describe the blind and unreasoning obedience of a subordinate to the lawful
orders of a superior authority.

On the facts of this case, there was no general average act when the commodore of a convoy ordered the convoy
to a port of refuge under the orders of the admiralty in order to protect British ships from enemy acts.

On the point as to who should have ultimate authority to decide the act of sacrifice, the judge did not decide the
issue, but expressed his opinion that there was no clear authority as to whether the act giving rise to a general
average claim must be the act of the master, or some other member of the crew in case of his incapacity or
unavoidable absence, or whether the act may, in exceptional circumstances, be that of a stranger.

This raises an interesting question in a situation when a SOSREP orders the ship to a port of refuge for the safety
of the common adventure. Expenditure incurred by the parties to the adventure on account of salvage, whether
under contract or not, for the purpose of preserving the common adventure from peril is allowed in general
average (Rule VI), including expenses incurred at the port of refuge (Rule X). The SOSREP has statutory powers
and he takes control of a casualty; for this reason, it is submitted, his authority should be the authority of a proper
person to act. In the recent casualty, MSC Napoli, which was ordered to a port of refuge by the SOSREP, there was
unfortunately no general average declared, presumably because of the very many items of cargo carried on board
for various individuals, and the nature of the casualty.

In ordinary circumstances, the master’s authority in cases of necessity, in which he has to act for the interests of
all parties, and where there is no superior power involved, has not been doubted for an act of general average to
arise, and it was confirmed by the House of Lords in Morrison v Greystoke Castle (The Cheldale):

15 [1947] AC 265, p 281, per Lord Roche.

The shipowner through the master has imposed upon him other and super-added duties causing him to act as
agent for all the persons whose interests are endangered.

He is the person, according to the test stated earlier, to apply his reasoning and discretionary powers to a
particular problem of danger, and he has the authority to take reasonable steps in the circumstances, provided his
steps are for the interests of all parties involved in the adventure.

16 See further Papayianni v Grampian Ltd (1896) 1 Com Cas 448; Price v Noble (1811) 4 Taunt 123; Rose, op cit,
fn 1, discusses other possibilities of intervention at 31–35.

As to whether strangers can act, the view according to the principle of agency of necessity is that the master, who
is generally authorised to act on behalf of the ship owner and cargo interests, should be consulted.

17 Goff & Jones, The Law of Restitution, 6th ed, 2002; The Winson [1982] AC 939.

2 CONDITIONS GIVING RISE TO GENERAL AVERAGE


The subject matter of general average includes all the interests of the common adventure which are at risk. Such
interests are physical, namely the ship, the cargo, the bunkers, stores, personal effects; but there are also those

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interests which are dependent on the safety of the physical property, such as the freight, time charter hire (which
are earned upon the safe carriage of the cargo), and any other property involved which is at risk during a maritime
common adventure. The definition of general average, given above, identified four elements to be satisfied in order
for a general average act to occur. These elements are examined in more detail below, including how the YAR treat
the incidents of general average.

2.1 Danger or peril to the common adventure

Danger or peril
Under s 66(2) of the Marine Insurance Act 1906, no recovery can be made in general average unless there exists a
peril. The danger or peril must affect the whole adventure and not only one interest.

18 Nesbitt v Lushington (1792) 4 TR 783, where a mob took the corn loaded on board by threats to the master of
the ship.

English law has given a strict interpretation to this phrase in requiring such peril to be real and not imaginary.
19 Joseph Watson v Fireman’s Fund [1922] 2 KB 355.

Even a belief reasonably held will be insufficient for recovery.

The wording of Rule A of the York-Antwerp Rules does not include the phrase ‘in time of peril’. It refers instead to
‘preserving from peril’. It is doubtful whether, in practice, there is any difference between the two phrases; the
latter expresses the purpose of a general average act, while the former indicates the trigger of a general average
act.

There are difficulties of degree when it comes to deciding whether property is in peril. What should be the extent of
the peril, which threatens the common property, before the response to it can qualify as a general average act?
Although it is a requirement under English law that the peril must be real,

20 Vlassopoulos v British and Foreign Marine Insurance Co (The Makis) [1929] 1 KB 187, p 199.

it need not be immediate, in the sense of actually pressing at the moment, but it may be imminent. Indeed,
English law allows for the recovery in general average of taking precautionary measures that avert an imminent
peril.
21 Lawrence v Minturn (1854) 17 How 100; Société Nouvelle d’Armement v Spillers & Bakers Ltd [1917] 1 KB 865.

However, it is also clear that such peril must be substantial and not negligible.
22 The Makis, op cit, fn 20.

It is worth referring to the facts of the Vlassopoulos case (see also under 1.1 above) as it shows the degree of
danger required for an act to qualify as a general average act.

A ship was in the port of Bordeaux for the purpose of loading a cargo. While she was so engaged, the foremast
broke and fell on to the main deck doing damage, and in consequence of the breakage a derrick, which was
attached to the foremast, fell into a hold and was damaged. The casualty was an accidental and fortuitous occur-
rence, and the ship was not in consequence, thereof, at any time in any danger. The ship was then moved into a
wet dock for the purpose of repairs. After being repaired, the ship proceeded on her voyage to her destination.
While at sea she fouled some submerged wreckage and damaged the blades of her propeller, and was thereby
rendered unfit to encounter the ordinary perils of the sea, and accordingly she put into Cherbourg for inspection
and repairs, this being necessary for the common safety of the ship, cargo and freight. Both the charterparty and

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the policy of insurance in respect of the ship provided that average was to be adjusted according to the York-
Antwerp Rules 1924. A dispute arose between the shipowner and the underwriters with regard to liability for
certain expenses incurred, and payments made by the owner in the ports of Bordeaux and Cherbourg in
connection with the two casualties, namely wages and provisions of master, officers and crew during the time the
ship was being repaired; coal consumed in shifting the ship in and out of dock; handling cargo on board;
discharging cargo; towage in and out of port, mooring expenses and port charges. The dispute was referred to
arbitration, and the arbitrator held that none of these expenses was the subject of general average contribution,
but stated a case for the opinion of the High Court. It was held that:

(1) none of the above mentioned items of expenses incurred at the port of Bordeaux in connection with the first
casualty came within Rules X, XI or XX of the York-Antwerp Rules, 1924, and therefore they were not recoverable
in general average, because they were not incurred for the common safety for the purpose of preserving from peril
the property involved in a common maritime adventure, and Rule X did not apply to a case of the repair of
accidental damage and the shifting of cargo thereby caused where the ship was in no danger; (2) but that the
above mentioned items of expenses incurred at the port of Cherbourg in connection with the second casualty were
recoverable in general average under Rules X and XI, because they were expenses incurred for the common safety
for the purpose of preserving from peril the property involved in the common maritime adventure.

Threat
Another question that troubles the interpreters of the Rules is whether or not a general average act should be a
response to a physical threat to the property, or could a commercial threat to the completion of the voyage qualify
for the act to be a general average act? It is suggested that the Rules embody both threats, physical and
commercial, and the costs of releasing the common property from the solely commercial threat should form the
proper subject of a general average contribution.

23 Macdonald, J, op cit, fn 4, at 483–487; this is indicated by the scope of Rules X, XI and XIV, relating to ports of
refuge expenses and temporary repairs to the ship for the purpose of enabling it to continue the adventure.

The distinguishing feature of general average is that the danger must be threatening to the common adventure;
there must be at least two interests

24 If there is only one interest in danger, this is known as ‘particular average loss’ which is not a general average
loss (s 64(1), MIA 1906); expenses incurred by the assured to preserve the subject matter insured, other than
general average and salvage charges, are called particular charges (s 64(2), MIA 1906).

exposed to danger, regardless of whether or not such interests belong to the same owner. The danger to the
common adventure will end when the property is brought to a safe place. Ideally, that place should be the place
where the delivery of the cargo was stipulated by the contract of carriage. But sometimes the cargo may have to
be taken off prior to reaching that place, and the ship may have to be taken to a safe place. Once the cargo is
taken off, it should not, in principle, be obliged to contribute to general average, or be entitled to general average
contribution, unless its removal formed part of complex salvage operations,
25 See some old authorities in Rose, op cit, fn 1, at 25.

but this goes beyond the scope of this chapter.

Common maritime adventure


The 1994 and 2004 YAR define, in Rule B, ‘common maritime adventure’ as including circumstances when one or
more vessels are towing or pushing another vessel or vessels, provided that they are all involved in commercial
activities and not in salvage operation. It further provides that a vessel is not in common peril with another vessel
or vessels if, by simply disconnecting from the other vessel or vessels, she is in safety; but, if the disconnection is
itself a general average act, the common adventure continues.

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Throughout the successive editions of the Rules, ‘adventure’ has been used in a way which naturally describes the
common enterprise represented by the carriage of goods by sea in which ship and cargo are both involved, while
‘voyage’ has been used to refer to the passage of the vessel from her first loading port to her final discharging
port.

26 See The Trade Green, op cit, fn 7.

2.2 Extraordinary expenditure or sacrifice


The ship-owner’s obligation to perform the voyage under the contract of affreightment is to deliver the cargo safely
to the port of destination upon payment of the agreed freight. He must have complied with his obligation to
provide a seaworthy ship at the commencement of the voyage.

27 For a recent example of no general average contribution to the ship owner, because of his actionable fault in
failing to provide a seaworthy ship as required by the contract, see Sunlight Mercantile Ltd v Ever Lucky Shipping
Co Ltd [2004] 2 Lloyd’s Rep 174.

Contribution for general average, when incurred for the common safety, does not absolve the parties from their
contractual rights and obligations. Only when the sacrifice or expenditure is beyond the contractual duties will it be
allowed in general average.
28 The Bijela [1993] 1 Lloyd’s Rep 411.

The term ‘extraordinary’ is of more relevance when looking at general average expenditures. This is because a
charterer or the holder of a bill of lading will have already paid freight in return for the shipowner bearing the costs
and expenses that are incidental to the voyage and which safeguards both the ship and the cargo.

The classic examples of an extraordinary sacrifice that will be allowed in general average is the jettisoning of part
of the cargo (Rule I); or causing damage to the ship or cargo for the purpose of making a jettison (Rule II); or
pouring water into the holds to extinguish a fire on board a ship and thereby damaging the cargo carried in such
holds, including damage by beaching or scuttling a burning ship (Rule III); or voluntary stranding (Rule V); or
damage done to machinery or boilers when the ship is aground (Rule VII); or ship’s materials and stores burnt for
fuel for the common safety (Rule IX).

The above are subject always to the operation of the York-Antwerp Rules. For example, Rule I of YAR states that:
‘No jettison of cargo shall be made good as general average, unless such cargo is carried in accordance with the
recognised custom of the trade’. Similarly, damage to the ship’s machinery or boilers shall only be allowed as
general average where such damage is occasioned in attempting to refloat her (Rule VII).

Generally, expenditure that will be allowed as general average will come under one of the following examples:

• Additional expenses which would not normally be allowed as general average, but which replace expenses
that would normally be classed as general average (Rule F)
• Expenses incurred in saving the ship and cargo from loss or damage. Classic examples include: the
engagement of salvage services following a stranding; the cost of employing lighters to transfer cargo in
order to lighten the vessel; and the employment of towage services (Rule X)
• Expenses incurred in lightening the ship when ashore (Rule VIII)
• Expenses for wages etc in port of refuge (Rule XI)
• Expenses for temporary repairs either at the port of loading or a port of refuge (Rule XIV)
• Port of refuge expenses.

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29 Many expenses that are incidental to port of refuge expenses are expressly provided for in Rules X and
XI of the York-Antwerp Rules.

2.3 Voluntary, or intentionally and reasonably made


The rule paramount which is found in YAR 1994 and 2004 (but not in the 1974 Rules) provides that: ‘In no case
shall there be any allowance for sacrifice or expenditure unless reasonably made or incurred’.

The word ‘voluntary’, in s 66 of the Marine Insurance Act 1906, has been replaced with the term ‘intentionally’ in
Rule A of the York-Antwerp Rules.

30 This appears in all three recent York-Antwerp Rules revisions: 1974, 1994 and 2004.

This emphasises the fact that, just because a decision was made under extreme pressure, when there was no
effective alternative, this will not of itself be enough for the act to lose its voluntary nature.

The requirement of intention means that the general average act must be made or incurred with the sole objective
of preserving the interests involved from peril.

31 Athel Line Ltd v Liverpool & London War Risks Ins Assn Ltd [1994] KB 87, p 94.

The requirement of reasonableness is a fetter on the master’s discretion as to what action to take in times of peril.
However, this fetter is not wide-ranging and would only bite when the master makes a decision that fails to benefit
the common adventure as a whole. He has complete freedom to choose which action to take in order to benefit the
common adventure. For example, the master will be able to enter into a contract for towage or salvage services on
standard terms which are widely used in practice.

32 See further commentary on standard form towage contracts (at Chapter 14, above) and salvage contracts (at
Chapter 13, above).

Such action will be reasonable. Even if the master enters into a contract for the provision of services on particularly
onerous terms, such losses flowing from this action will be recoverable in general average, provided there was no
reasonable alternative open to the master.
33 Australian Coastal Shipping Commission v Green [1971] 1 QB 456, p 483, per Lord Denning MR.

The fetter on the master’s discretion is examined in the context of having to make his choices in time of danger for
the ship and property on board for the purpose of preserving the common adventure.

It should be noted that Rule D provides that rights of contribution in general average shall not be affected if the
event giving rise to the sacrifice or expenditure is due to the fault of one of the parties to the adventure, but this
shall not prejudice any remedies or defences which may be open against or to that party in respect of such fault.

34 Goulandris Brothers v B Goldman & Sons [1957] 2 Lloyd’s Rep 207: the objects of Rule D were to keep all
questions of alleged fault outside the adjustment and to preserve, unimpaired, the legal remedy at the stage of
enforcement.

But the question of actionable fault will depend on the terms of the contract and, if the Hague Rules or Hague-
Visby Rules are incorporated, negligence in navigation or management of the ship is an excepted peril (Art IV, r (2)
(a)).

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However, if in the course of taking action for the purposes of general average, there is negligence in carrying out
the operation, which causes damage to the property on board, it may be actionable in a claim for breach of
contract.

35 See also The Oak Hill [1975] 1 Lloyd’s Rep 105: breach of contract was proved in handling the cargo carelessly
during discharge and storage after the vessel’s accident. See also The Hector [1955] 2 Lloyd’s Rep 218: the fact
that the master acts as agent of necessity does not relieve him of his duty to exercise reasonable care in the
preservation of the cargo; see also Goulandris Brothers, op cit, fn 34.

In addition, such negligence may break the chain of causation between the general average act and the loss, and
the expenditure may not be recoverable in general average.

For example, whether the master was negligent, in The Alpha case,

36 See Corfu Navigation Co v Mobil Shipping Co Ltd (The Alpha) [1991] 2 Lloyd’s Rep 515.

in putting the ship aground in the first place and in dealing with the resultant situation, whereupon he caused
damage to the engine of the ship, was irrelevant. He was criticised, however, for acting unreasonably in many
respects, when he was trying to refloat the vessel after grounding. The defendants, cargo owners, who were sued
by the owners of the ship for general average contribution, argued that either what the master did could not be
general average, or that the element of unreasonableness broke the chain of causation between the general
average act and the damage. The court held that, on the evidence, the risk of damaging the engine had been
appreciated by the master and the damage arose from an actual intention of the master to try to refloat the vessel
at risk of such damage. Therefore, the owners recovered general average contribution for the damage to the
engine.

The requirement of reasonableness appears in Rule A of YAR. However, if a general average act falls within one of
the numbered rules that does not impose a requirement for reasonableness, it follows that such losses that are
incurred will be recoverable in general average, even if such action that is taken is unreasonable.

37 Ibid. The rule of interpretation in the York-Antwerp Rules 1974 provides that, where the numbered and lettered
rules conflict, it is the numbered rules that prevail.

Such possible conflict has been remedied by the introduction of the rule paramount, in the York-Antwerp Rules
1994 and 2004 (mentioned above), which prevents recovery for sacrifice or expenditure unless reasonably made
or incurred. (See further about the rule of construction of the Rules under para 1.1 above.)

2.4 To preserve property imperilled


This requirement relates to the subject matter relating to general average recovery. Traditionally, general average
concerns the preservation of property involved in the ‘common adventure’, ie the ship,

38 The equipment on board the ship also qualifies as ‘property’ in general average.

bunkers, her cargo and freight (see para 2, above).

In order to be liable to contribute in general average, the freight has to be at the carrier’s risk. Therefore, once
freight has been earned, it does not contribute as an interest since it is no longer at risk to the carrier. However,
the cargo for which the freight has been earned will still be liable to contribute.

3 CAUSATION IN GENERAL AVERAGE AND FAULT


Rule C of the YAR states that only such losses, damages or expenses which are the direct consequence of the
general average act shall be allowed as general average; and Rule E provides that the onus of proof is upon the
party claiming in general average to show that the loss or expense claimed is properly allowable as general
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average. Section 66(1) of the Marine Insurance Act 1906 allows recovery in general average for losses ‘caused by
or directly consequential to’ a general average act.

Thus, the claimant has to prove that his loss was a direct consequence of a general average act to recover
contribution. The defendant has the burden of showing a break in the chain of causation.

39 Eg The Alpha, op cit, fn 36.

The right of contribution in general average shall not be affected if the event giving rise to the sacrifice or
expenditure is due to the fault of one of the parties to the adventure, but this shall not prejudice any remedies or
defences which may be open against or to that party in respect of such fault (Rule D and Goulandris v Goldman
under para 2.3 above).

In addition to the obvious sacrifices and expenditures incurred in general average, other losses resulting from
general average acts may qualify for recovery in general average. Whether they can or not is dependent upon
whether such losses are a direct result of the general average act. Should the loss have been foreseen, or would it
be enough if the loss was foreseeable to the general average act?

In Australian Coastal Shipping v Green,

40 [1971] 1 QB 456.

there were two vessels in peril. The ship owner contracted for two tugs to tow both vessels to safety, contracting
on UKSTC terms. In both cases, the towing line broke, rendering one tug a total loss, with the other tug claiming
salvage expenses. Under the UKSTC, the ship owner was liable to indemnify the towage company for all losses and
expenses suffered. The shipowner contended that these losses were recoverable by him in general average. Lord
Denning MR in the Court of Appeal held that they were, stating:

If the master, when he does ‘the general average act’, ought reasonably to have foreseen that a subsequent
accident of the kind might occur – or even that there was a distinct possibility of it – then the subsequent accident
does not break the chain of causation … If, however, there is a subsequent incident which was only a remote
possibility, it would be different.

41 Ibid, 482.

As discussed under para 2.3 above, an intervening negligence during the general average act may or may not
break the chain of causation between the act and the loss.

Rule C of the 1974 and 1994 YAR specifically excludes losses caused by delay or loss of market. In addition to
these excluded losses, the 2004 YAR also excludes loss and expenses incurred with respect to damage to the
environment or connected with the escape or release of pollutant substances from the property involved.

4 WHEN THERE WILL BE NO LIABILITY TO CONTRIBUTE


As noted earlier, the rights and liabilities of the parties in general average are dealt with independently of fault of
the parties to the adventure, even if that fault brought about the event which gave rise to the expenditure or
sacrifice. But this shall not prejudice any remedies or defences which may be open against or to the claiming party
in respect of such fault (Rule D).

In Rule I, it is stated that no jettison of cargo shall be allowed as general average, unless such cargo is carried with
the recognised custom of the trade. Thus, if deck cargo is carried with the consent of the parties in accordance
with the custom of the trade, general average contribution will be allowed.

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In Strang Steel v Scott,

42 (1889) 14 App Cas 601, pp 608, 609.

the Privy Council expounded the exceptions to general average contribution:

There are two well-established exceptions to the rule of contribution for general average, which it is necessary to
notice.

When a person who would otherwise have been entitled to claim contribution has, by his own fault, occasioned the
peril which mediately gave rise to the claim, it would be manifestly unjust to permit him to recover from those
whose goods are saved, although they may be said, in a certain sense, to have benefited by the sacrifice of his
property. In any question with them he is a wrongdoer, and, as such, under an obligation to use every means
within his power to ward off or repair the natural consequences of his wrongful act. He cannot be permitted to
claim either recompense for services rendered, or indemnity for losses sustained by him, in the endeavour to
rescue property which was imperilled by his own tortious act, and which it was his duty to save. Schloss v Heriot is
the leading English authority upon the point. In that case, which was an action by the shipowner against the
owners of cargo for contribution in an average loss, a plea stated in defence, to the effect that the ship was
unseaworthy at the commencement of the voyage, and that the average loss was occasioned by such
unseaworthiness, was held to be a good answer to the claim by Chief Justice Erle, and Willes and Keating, JJ.

The second exception is in the case of deck cargo. The reason why relief by general contribution is denied to the
owners of goods stowed on deck, when these are thrown overboard in order to save the cargo under hatches, is
obvious. According to the rules of maritime law, the placing of goods upon the deck of a seagoing ship is improper
stowage, because they are hindrances to the safe navigation of the vessel; and their jettison is therefore regarded,
in a question with the other shippers of cargo, as a justifiable riddance of incumbrances which ought never to have
been there, and not as a sacrifice for the common safety. But the owner of deck goods jettisoned, though not
entitled to general contribution, may nevertheless have a good claim for indemnity against the master and owners
who received his goods for carriage upon deck; and the exception does not apply, either (1) in those cases where,
according to the established custom of navigation, such cargoes are permitted, or (2) in any case where the other
owners of cargo have consented that the goods jettisoned should be carried on the deck of the ship.

If the ship deviated from the voyage route without the consent of the contracting party, or without waiver of the
breach, and the deviation caused the general average act, there will be no general average contribution to the
owner.

43 Hain SS Co Ltd v Tate & Lyle Ltd (1936) 41 Com Cas 350.

As was stated earlier in Strang v Scott, a fault of the claimant which gave cause to the danger (and would give the
party from whom contribution is sought a cause of action against the claimant) will disentitle the claimant from
recovering contribution, on the basis of the principle that the claimant should not recover for the consequences of
his own wrong,

44 The rule against recovery is known as ‘equitable defence’: Goulandris Brothers Ltd v B Goldman & Sons Ltd
[1958] 1 QB 74.

for example when the ship was unfit for the voyage at the outset.
45 Schloss v Heriot (1863) 14 CB (NS) 59 (improper stowage).

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A few examples illustrate how the ship owner can be deprived of general average contribution.

In The Evje No 2,

46 [1976] 2 Lloyd’s Rep 714; see also The Aga [1968] 1 Lloyd’s Rep 431: ship had stability problem before she left
port, resulting in heavy listing, which necessitated beaching her.

the ship was found unseaworthy at the beginning of the voyage because there were insufficient bunkers or because
the bunkers were of the wrong quality and the unseaworthiness was the cause of the casualty, when the fuel ran
out and the ship needed towage. No general average contribution was due to the owners from the charterers.

In The Kasmar Voyager,

47 [2002] 2 Lloyd’s Rep 57.

the ship was carrying a cargo of soya beans under a contract of carriage evidenced by a bill of lading, which was
subject to the Hague Rules. Engine problems arose during the voyage, and the vessel was immobilised, needing
towage services to reach a repair port. Investigations revealed that there was a defect in manufacture of the piston
skirt which developed into a crack in the life of the piston. The major damage to the engine had been caused after
a spare piston had been fitted whose dimensions were not compatible with the main engine. Upon a claim by the
owners against the cargo insurers for general average contribution, the claim was resisted on the ground of the
owners’ failure to exercise due diligence to make the ship seaworthy before and at the beginning of the voyage. On
evidence, it was found that the service of the cylinder had been postponed, and the routine maintenance
prescribed had not been followed. The vessel was unseaworthy and the owners could not discharge the burden of
proof that they, or their agents, exercised due diligence before and at the beginning of the voyage.
48 The Muncaster Castle [1961] 1 Lloyd’s Rep 57 was applied.

Thus, the general average expenditure was caused by their actionable fault and they were unable to recover
general average contribution from the cargo interests.

By contrast, in The Torepo,

49 [2002] 2 Lloyd’s Rep 535; see also The Isla Fernandina [2000] 2 Lloyd’s Rep 15; The Lendoudis Evangelos II
[2001] 2 Lloyd’s Rep 304.

where the ship grounded due to various navigational faults and sought the assistance of salvage, the ship was not
found unseaworthy, even with the finding of discrepancy in the charts (being not causative of the grounding). The
owners were protected by the exception in Art IV, r 2(a) of the HVR (negligence in navigation). Therefore, upon a
claim by cargo interests against the owners to recover the amount they were obliged to pay to salvors and for the
return of their general average security, their claim failed.

As discussed in causation earlier, the defendant must show a causal link between the fault and the event giving
rise to the general average act and to the loss, as is shown in The Evje and The Kasmar Voyager, unless the
claimant of general average contribution proves that his liability for the fault is excluded.

50 Milburn & Co v Jamaica Fruit Co [1900] 2 QB 540 (CA), approved by the House of Lords in Louis Dreyfus & Co v
Tempus SS Co [1931] AC 726.

Similarly, when the shipper ships goods that he knows to be dangerous, which results in the jettison of the cargo
for the safety of the common adventure, he will not recover general average contribution.

51 Greenshields, Cowie & Co v Stephens & Sons [1908] AC 431: in this case, the owners of the coal were entitled
to claim against the ship contribution in general average in respect of the sacrifices voluntarily made for the
common advantage of all, the fire having been caused by the inherent qualities of the coal, or, in other words, by
spontaneous combustion, without default on the part of the shippers.

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Rule XIX also provides that ‘undeclared or wrongfully declared cargo’ loaded without the knowledge of the ship
owner or his agents, or goods wilfully mis-described at the time of shipment, shall not be allowed as general
average, if damage or loss is caused to them, but such goods shall remain liable to contribute, if saved.

5 THE CAUSE OF ACTION FOR GENERAL AVERAGE


CONTRIBUTION AND TIME LIMIT
The cause of action for contributions in general average under contractual provisions, which did no more than
require general average to be adjusted according to York-Antwerp Rules, accrues at the time when each general
average sacrifice is made or general average expense is incurred.

52 The Potoi Chau [1983] 2 Lloyd’s Rep 376 (PC); Chandris v Argo Insurance Co Ltd [1963] 2 Lloyd’s Rep 65
approved.

It was stated by the Privy Council in The Potoi Chau that:

The general average clause incorporated in a bill of lading creates a contractual liability on the part of the
consignee as indorsee of the bill of lading to pay general average contribution, if there be any chargeable on the
cargo shipped, whether it was he, the shipper or some intermediate indorsee of the bill of lading, who happened to
be owner of the goods, at the time when a general average sacrifice took place, or a liability for a general average
expenditure was incurred. Since this liability arises under a simple contract, the period of limitation is six years
from the accrual of the cause of action; but the clause is intended to regulate, and to transfer to whoever acquires
title to the consignment of cargo under the bill of lading, what would otherwise be a common law liability of the
owner of the cargo at the time of the general average act.

53 The Potoi Chau, p 379.

6 SECURITY
At the time of the ‘Digest of Justinian’, the obligation was upon the master of the vessel to have a general average,
arising on the voyage, adjusted. In modern times, this responsibility has devolved upon the ship owner. In order to
protect the rights of general average creditors, he is obliged

54 Crooks v Allan (1879) 5 QBD 38.

to obtain reasonable security from contributing interests. The law assists him in this by allowing him to exercise his
right of the common law possessory lien on the property until such security is given. The general average act gives
rise to a possessory, not maritime, lien on the property. The owner, therefore, through the master, may withhold
delivery of property at the destination until reasonable security has been provided.

Such reasonable security is usually construed as consisting of the following:

(i) an average bond signed by the consignee, and


(ii) either an average guarantee signed by the insurer of the cargo, or,
(iii) if the cargo is uninsured or the particular cargo insurer is not acceptable to the ship owner, a general
average deposit
55 Such cash deposits are provided for by YAR, Rule XXII.

– of an amount which is usually recommended by the average adjuster, which amount will be held by the
average adjuster, pending the completion of his adjustment.

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Where, during the course of the contracted voyage, cargo is forwarded by some other vessel or conveyance, the
ship owner will usually require that a non-separation agreement forms part of the average bond and the average
guarantee. If the contract of carriage provides that general average is to be adjusted according to the York
Antwerp Rules 1994 or 2004, a non-separation agreement wording will automatically apply. A non-separation
agreement provides that, although cargo has been separated, by forwarding, from the rest of the maritime
adventure, its contribution to the general average will be calculated as though it had not, but had remained with
the carrying vessel until its delivery. The agreement is between the ship owner and the cargo owner, and enables
the ship owner to recover his general average expenses as if the cargo had remained on board.

The average bond, as backed by an insurer’s guarantee or a cash deposit, is a new contract, being independent
from the contract of affreightment, between the ship owner and the owner of the other interest. The consideration
provided is the release of the possessory lien on the cargo by the ship owner and, as far as cargo interests are
concerned, the consideration is the assumption of personal liability to pay when the adjustment is presented.
Usually the parties agree the law and the jurisdiction to which the security will be subject for adjudication of any
disputes that might arise between the parties under the terms of the security.

The contractual obligation assumed by the cargo interests under the security is to make payment of a liquidated
sum at a future date, which will not arrive until the general average statement has been completed by an average
adjuster appointed by the shipowners. That is the earliest date at which the shipowners’ cause of action against
the consignees under the average bond for payment of general average contribution arose.

56 The Potoi Chau, op cit, fn 52, pp 382–383.

Rule XXIII of YAR 2004 provides that a claim for general average contribution, including any rights to claim under
general average bonds and guarantees, shall be extinguished, unless an action is brought by the party claiming
such contribution within a period of one year after the date upon which the general average adjustment was
issued. In no case shall such an action be brought after six years from the date of termination of the common
maritime adventure. The period may be extended upon the agreement of the parties after the termination of the
common maritime adventure.

At the end of the day, it is the insurers (for hull or cargo) of the respective parties involved in the common
adventure that pay for general average contributions which the parties can recover by way of indemnity under
their respective insurance contracts. This falls within the scope of marine insurance, and so detailed consideration
is outside the scope of this book.

This chapter is intended to provide a concise overview of the principles applicable to general average. It sets out
only the elementary principles which derive from maritime law, equity and public policy. It is rather a sui generis
subject, and is relevant to contracts of carriage of goods by sea, and the losses that result from a general average
act are insurable as provided by the Marine Insurance Act 1906. Space does not permit a detailed treatment of
general average in this book, which can be found in specialist texts on the subject.1 One should consult the leading
authority in this field, Wilson, DJ, and Cooke, JHS, Lowndes & Rudolf: The Law of General Average and the York-
Antwerp Rules, 12th edn, 1997. See also a more recent text by Rose, FD, General Average Law and Practice, 2nd
edn, 2005. To gain an insight into general average, readers are specifically referred to the bible of Carver.2 13th
edn, 1982, vol 2, para 1345. In his introduction to the subject, he begins by explaining the difference between
general average loss and particular average, the latter being a partial loss sustained by individual interests, being
exposed to particular risks; such particular loss, or average, which is not a loss sustained for the preservation of
the whole common adventure, ‘lies where it has fallen’. By contrast, if an interest of the common adventure is
sacrificed to avert a danger which threatens the whole adventure, and the sacrifice is intentional for the benefit of
the remainder, ‘the whole burden of the loss occasioned is not left on the interest upon which it has fallen. It is
imposed upon that and all those others for whose benefit the sacrifice has been made, rateably, in proportion of
the saved values’. That is why the loss is said to be a general average loss, ‘and the contributions made to it by
those benefited are general average contributions’. As a principle, therefore, general average applies where the
common adventure is at risk and an interest of it is sacrificed, or extraordinary expenditure is incurred, in order to
preserve that property and other interests involved in the same maritime adventure. The expenditure or sacrifice is
the general average act and must be voluntary (meaning intentional) and reasonable. The result is an entitlement
to a general average contribution by the person whose property has been sacrificed, or the expenditure incurred,
against the other interests which are saved. The word ‘average’ means ‘loss’. Such loss is claimed back as a
rateable contribution (‘the general average contribution’) of the saved values of those interests which have
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benefited as a result. The obligation to contribute does not depend so much upon an implied term of a particular
contract, since there are many interests involved other than those of the contracting parties, but it depends upon a
general rule of maritime law, as a matter of natural justice.3 Simonds v White (1824) 2 B & C 805, 811, per Abbott
CJ; Burton v English (1883) 12 QBD 218, p 200, per Brett LJ; cf Lord Bramwell in Wright v Marwood (1881) 7 QBD
62 said that, to judge from the way in which contribution is claimed in England, ‘it would seem to arise from an
implied contract inter se to contribute by those interested.’ And in Strang Steel v Scott (1889) 14 App Cas 601, p
608, PC: ‘whether the rule ought to be regarded as matter of implied contract, or as a canon of positive law resting
upon the dictates of natural justice, is a question which their Lordships do not consider it necessary to determine.
The principle upon which contribution becomes due does not appear to them to differ from that upon which claims
of recompense for salvage services are founded. But, in any aspect of it, the rule of contribution has its foundation
in the plainest equity’. The concept of general average is very ancient, having its roots in Rhodian law, being
adopted into the ‘Digest of Justinian’, and it is said that its origins date back to at least 1000 BC.4 Op cit, Rose, fn
1, p 1; see also an interesting article: John Macdonald ‘General Average, Ancient and Modern’ [1995] LMCLQ 480.
Its justification is based mainly on equity as well as mercantile custom, common law, public policy and natural
justice.5 Op cit, Rose, fn 1, pp 6–8. These grounds are the same as in salvage. There are also some common
elements between salvage and general average, as they both arise in situations of necessity, and there is a benefit
conferred to the property in danger. Unlike in incidents of salvage, however, where a volunteer, being a third party
to the adventure, saves property in danger (see Chapter 13, above) the rights and obligations in general average
arise only between those who are involved in the ‘common maritime adventure’. The ancient law of general
average was, during the Christian era, incorporated into a number of national legal systems. In the course of this
process, it received a number of differing interpretations. Therefore, in the 19th century enthusiasm for
internationalisation, efforts were made to impose on its interpretation some measure of uniformity. This resulted in
what have become known as the York-Antwerp Rules (YAR). These Rules do not form an international convention,
but are incorporated by reference into contracts of carriage. This process has in fact imposed a quite remarkable
measure of uniformity on the basis of average adjustments around the world. There have been various sets of YAR
over the years; the most commonly known have been the 1890, the 1924, the 1950 Rules, and the most recent
editions, which have modernised general average, are YAR 1974 (as amended in 1990), the 1994 and 2004 YAR.
Most general average adjustments are today drawn up on the basis of the YAR 1994, although some are still
prepared according to the YAR 1974 (as amended in 1990). The most recent set of Rules, dated 2004, were the
result of pressures imposed by cargo insurers. They have therefore found little favour with the remainder of the
maritime community, and are seldom encountered in contracts of carriage. The fact that a general average act can
occur in any international waters, or on the high seas, raises the questions of which law and jurisdiction should
apply to the general average adjustments. But, if the Rules are incorporated into the contract, they will govern the
adjustment of general average. They provide a complete code and, by the general rule of interpretation, they ‘shall
apply to the exclusion of any law and practice inconsistent with them’, if the parties to a contract have adopted
them. These Rules consist of a set of lettered rules, followed by a set of numbered rules. The lettered rules from A
to G state the general principles, while the numbered rules (I to XXIII) are specific and deal with commercial
practicability; they qualify the general principles. Where the lettered rules do not mention a specific item, but the
numbered rules deal with it, the question arose in Vlassopoulos v British and Foreign Marine Insurance Co (Makis)6
[1929] 1 KB 187. whether or not the circumstances that gave rise to the expenditure was general average. The
underwriters argued that, since the event which resulted in the expenses at the port of refuge was not covered by
the lettered rules, the specific numbered rules had no application. The shipowners, on the other hand, argued that
the particular rules should prevail over the general. The judge rejected both arguments, and said at pp 196, 198:
This is a matter of construction, and in my view the true construction of these Rules, general and particular, is not
precisely what either of the contending parties has contended for. In my view those who drew up the Rules
intended to provide a complete code which is to govern the law of general average for anybody who adopts it … It
may be that there are omitted cases not covered by the general or by the specific Rules. That I do not decide. Nor
do I decide any question as to the law apart from the Rules, because there is a finding that the parties by their
contract intended that the code which should govern their rights and obligations should be the York-Antwerp Rules
of 1924, and I treat that as conclusive for the present purpose and the common law of this or any other country as
being outside the scope of my consideration and my decision… (The parties) may choose a self-contained code,
and of this code, it may be observed, that although the general Rules are not identical with the law of England,
they approach much more nearly to the law of England than they do to the laws of many other countries, and that
is not perhaps surprising, having regard to the known and admitted predominance that this country holds in
maritime matters. But when that has been done, and a general set of Rules provided laying down the general
principles which are to operate, then the Rules go on to deal with certain specific cases, and I am satisfied on the
true construction of the Rules that those cases are dealt with not by way of mere illustration, but in order to make
definite and certain what the Rules decide about certain cases which are on the border line, and which might be
held to be on one side or the other of the line which is to be drawn under the general Rules. Thus, in construing
the 1974 York-Antwerp Rules, the judge held that the lettered rules enunciate the general principles, and the
numbered rules settle how the general principles are to be applied in what might, otherwise, be doubtful cases.
Roche J further stated: The York-Antwerp Rules, 1924, are framed in order that the parties, if they choose to adopt
the Rules by way of contract, may not be troubled with any question as to what, if any, general law is to apply …
The Rules must be read together and as a whole, and not as two codes one of which may contradict the other. In
any question of a lacuna in the lettered rules, therefore, or an issue of conflict between the lettered and the
numbered rules, the rules should be read as a whole, and the result in a particular case will be a matter of
construction of the rules in the context of the circumstances. Whether a literal and purposive approach of
interpretation, or a strict interpretation of the rules should be adopted, would depend on the circumstances of a
case.7 The Bijela [1993] 1 Lloyd’s Rep 411 (CA), reversed [1994] 1 WLR 615 (HL) indicating a combination of a
literal and purposive approach; for the strict approach, see The Trade Green [2000] 2 Lloyd’s Rep 451. Since the
lettered rules enshrine the principles and the numbered rules enshrine commercial practicability, if ‘principle and
commercial practicability are found to conflict, practicability should be preferred’.8 Macdonald, op cit, fn 4, at 493.
It should be noted that the scheme of the rules is governed by the rule of interpretation which, in the 1974 Rules,
provides that ‘except as provided by the numbered rules’ the lettered rules shall be applied.9 Corfu Navigation Co
v Mobil Shipping Co Ltd (The Alpha) [1991] 2 Lloyd’s Rep 515, p. 518. A rule paramount has been added to the
1994 and the 2004 Rules, requiring the principle of reasonableness to apply in any sacrifice or expenditure that
might be incurred, which is not required in the 1974 Rules (see para 2.3 below). Thus, the rule of interpretation, in
both the 1994 and 2004 Rules, has been amended and reads: ‘except as provided by the Rule Paramount and the
numbered Rules, general average shall be adjusted according to the lettered Rules’. A difficult point of construction
arose in The Bijela.10 Op cit, fn 7, and [1994] 2 Lloyd’s Rep 1 (HL). The issue was whether the owners of The
Bijela could claim general average contribution in respect of the cost of temporary repairs carried out in the course

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of a voyage before the ship reached destination, in India. Hobhouse J’s view, at first instance,11 [1992] 1 Lloyd’s
Rep 636, p 644. was that the repairs in dry dock were not ‘necessary for the safe prosecution of the voyage’, thus
the cost of discharging, storing and reloading the cargo at Providence was not allowed in general average. The
majority of the Court of Appeal, Hoffmann LJ dissenting, agreed. The question in the appeal by the owners to the
House of Lords turned on the construction of the second paragraph of Rule XIV of the YAR 1974. On the facts, the
shipowners’ vessel was chartered for the carriage of cargo from Providence, Rhode Island, to the West Coast of
India, under a charterparty which provided that general average was to be settled in London according to the York-
Antwerp Rules 1974. Whilst still in Rhode Island Sound, the vessel grounded and sustained damage. She put into
the port of Jamestown, where it was discovered that she could not safely reach New York, the nearest port where
permanent repairs could be carried out in dry dock, without discharging the whole of her cargo. The shipowners
elected to carry out temporary repairs in Jamestown, at a cost of US $282,606. The cost of discharging, storing
and reloading the cargo to allow permanent repairs in New York would have exceeded $535,000. The vessel having
completed her voyage to India, the shipowners declared a general average loss. The adjusters did not allow the
cost of the temporary repairs. The shipowners instructed a second firm of adjusters, who included the cost of the
repairs in general average as being less than the expense which would have been incurred and allowed if the
temporary repairs had not been effected, within rule XIV of the Rules of 1974. The cargo owners refused to pay
their contributions and the shipowners issued a writ for their recovery. The judge dismissed the claim on the
ground, inter alia, that rule X(b) of the Rules only allowed for the cost of discharging and storing cargo in respect
of repairs “necessary for the safe prosecution of the voyage;” and that since repairs in dry dock had not been
necessary, the cost of handling and storing the cargo in New York would not have been allowed in general average
and there had been no saving in expense. The Court of Appeal, by a majority, dismissed the shipowners’ appeal.
On appeal by the shipowners, the House of Lords held, allowing the appeal, that rule XIV of the York-Antwerp
Rules 1974 was to be applied on the assumption that the temporary repairs had not been effected, and that
assumption was to be carried through when applying rule X of the Rules; that if the temporary repairs had not
been carried out, the shipowners’ vessel would have been required to discharge its cargo and go into dry dock in
New York for the repairs necessary to enable the vessel to proceed to India; and that, accordingly, since, on that
assumption, such repairs would have been necessary, within the meaning of rule X(b) of the Rules, for the safe
prosecution of the voyage, the shipowners had shown that the cost of handling and storing the cargo would have
been allowable in general average. Apparently the judge and the Court of Appeal misinterpreted the meaning of
Rule X(b) and Rule XIV which have to be read together. Unfortunately, the drafters of the 2004 Rules made Rule
XIV(b) almost incomprehensible. The Rules generally are not easy to follow, and their drafting leaves a lot to be
desired. As said earlier, the York-Antwerp Rules are voluntary. Therefore, where they are not incorporated into a
charterparty or bill of lading, they do not apply. The question therefore arises as to which jurisdiction a general
average act falls within, where no mention is made of the York-Antwerp Rules.12 Although, in practice, most
parties insert rider clauses into their charterparties which provide for the application of the York-Antwerp Rules,
there can be instances where this does not happen. The authorities in this area are supportive of the view that, in
the absence of any contrary agreement, general average is governed by the law of the place where the maritime
adventure ends,13 Simonds v White (1824) 2 B & C 805. although the parties can agree a different place. The
York-Antwerp Rules define general average in Rule A uniformly, thus: There is a general average act when, and
only when, any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the
common safety for the purpose of preserving from peril the property involved in a common maritime adventure.
Where there is general average there is, of course, insurance to cover the losses that have resulted from a general
average act. Thus, the principle was codified in s 66 of the Marine Insurance Act 1906: General Average Loss (1) A
general average loss is a loss caused by or directly consequential on a general average act. It includes a general
average expenditure as well as a general average sacrifice. (2) There is a general average act where any
extraordinary sacrifice or expenditure is voluntarily and reasonably made or incurred in time of peril for the
purpose of preserving the property imperilled in the common adventure. (3) Where there is a general average loss,
the party on whom it falls is entitled, subject to the conditions imposed by maritime law, to a rateable contribution
from the other parties interested, and such contribution is called a general average contribution. It can, therefore,
be said that there are four elements to satisfy for a general average act to occur: (1) a danger, or peril, to the
common adventure; (2) extraordinary sacrifice or expenditure; (3) voluntarily or intentionally and reasonably
made; and (4) preservation of the property involved in the danger. Before these elements are examined under
para 2, below, it is important to look at the issue of authority to act in general average. For an act to be considered
as a general average act, the test was set by the court in Athel Line Ltd v Liverpool & London War Risks Ins Assn
Ltd14 [1994] KB 87, p 94., by Tucker J: The rule (A) I think, clearly envisages the exercise by someone of his
reasoning powers and discretion applied to a particular problem with freedom of choice to decide to act in one out
of two or more possible ways, and the language is quite inappropriate to describe the blind and unreasoning
obedience of a subordinate to the lawful orders of a superior authority. On the facts of this case, there was no
general average act when the commodore of a convoy ordered the convoy to a port of refuge under the orders of
the admiralty in order to protect British ships from enemy acts. On the point as to who should have ultimate
authority to decide the act of sacrifice, the judge did not decide the issue, but expressed his opinion that there was
no clear authority as to whether the act giving rise to a general average claim must be the act of the master, or
some other member of the crew in case of his incapacity or unavoidable absence, or whether the act may, in
exceptional circumstances, be that of a stranger. This raises an interesting question in a situation when a SOSREP
orders the ship to a port of refuge for the safety of the common adventure. Expenditure incurred by the parties to
the adventure on account of salvage, whether under contract or not, for the purpose of preserving the common
adventure from peril is allowed in general average (Rule VI), including expenses incurred at the port of refuge
(Rule X). The SOSREP has statutory powers and he takes control of a casualty; for this reason, it is submitted, his
authority should be the authority of a proper person to act. In the recent casualty, MSC Napoli, which was ordered
to a port of refuge by the SOSREP, there was unfortunately no general average declared, presumably because of
the very many items of cargo carried on board for various individuals, and the nature of the casualty. In ordinary
circumstances, the master’s authority in cases of necessity, in which he has to act for the interests of all parties,
and where there is no superior power involved, has not been doubted for an act of general average to arise, and it
was confirmed by the House of Lords in Morrison v Greystoke Castle (The Cheldale):15 [1947] AC 265, p 281, per
Lord Roche. The shipowner through the master has imposed upon him other and super-added duties causing him
to act as agent for all the persons whose interests are endangered. He is the person, according to the test stated
earlier, to apply his reasoning and discretionary powers to a particular problem of danger, and he has the authority
to take reasonable steps in the circumstances, provided his steps are for the interests of all parties involved in the
adventure.16 See further Papayianni v Grampian Ltd (1896) 1 Com Cas 448; Price v Noble (1811) 4 Taunt 123;
Rose, op cit, fn 1, discusses other possibilities of intervention at 31–35. As to whether strangers can act, the view
according to the principle of agency of necessity is that the master, who is generally authorised to act on behalf of

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the ship owner and cargo interests, should be consulted.17 Goff & Jones, The Law of Restitution, 6th ed, 2002;
The Winson [1982] AC 939. The subject matter of general average includes all the interests of the common
adventure which are at risk. Such interests are physical, namely the ship, the cargo, the bunkers, stores, personal
effects; but there are also those interests which are dependent on the safety of the physical property, such as the
freight, time charter hire (which are earned upon the safe carriage of the cargo), and any other property involved
which is at risk during a maritime common adventure. The definition of general average, given above, identified
four elements to be satisfied in order for a general average act to occur. These elements are examined in more
detail below, including how the YAR treat the incidents of general average. Danger or peril Under s 66(2) of the
Marine Insurance Act 1906, no recovery can be made in general average unless there exists a peril. The danger or
peril must affect the whole adventure and not only one interest.18 Nesbitt v Lushington (1792) 4 TR 783, where a
mob took the corn loaded on board by threats to the master of the ship. English law has given a strict
interpretation to this phrase in requiring such peril to be real and not imaginary.19 Joseph Watson v Fireman’s
Fund [1922] 2 KB 355. Even a belief reasonably held will be insufficient for recovery. The wording of Rule A of the
York-Antwerp Rules does not include the phrase ‘in time of peril’. It refers instead to ‘preserving from peril’. It is
doubtful whether, in practice, there is any difference between the two phrases; the latter expresses the purpose of
a general average act, while the former indicates the trigger of a general average act. There are difficulties of
degree when it comes to deciding whether property is in peril. What should be the extent of the peril, which
threatens the common property, before the response to it can qualify as a general average act? Although it is a
requirement under English law that the peril must be real,20 Vlassopoulos v British and Foreign Marine Insurance
Co (The Makis) [1929] 1 KB 187, p 199. it need not be immediate, in the sense of actually pressing at the
moment, but it may be imminent. Indeed, English law allows for the recovery in general average of taking
precautionary measures that avert an imminent peril.21 Lawrence v Minturn (1854) 17 How 100; Société Nouvelle
d’Armement v Spillers & Bakers Ltd [1917] 1 KB 865. However, it is also clear that such peril must be substantial
and not negligible.22 The Makis, op cit, fn 20. It is worth referring to the facts of the Vlassopoulos case (see also
under 1.1 above) as it shows the degree of danger required for an act to qualify as a general average act. A ship
was in the port of Bordeaux for the purpose of loading a cargo. While she was so engaged, the foremast broke and
fell on to the main deck doing damage, and in consequence of the breakage a derrick, which was attached to the
foremast, fell into a hold and was damaged. The casualty was an accidental and fortuitous occur-rence, and the
ship was not in consequence, thereof, at any time in any danger. The ship was then moved into a wet dock for the
purpose of repairs. After being repaired, the ship proceeded on her voyage to her destination. While at sea she
fouled some submerged wreckage and damaged the blades of her propeller, and was thereby rendered unfit to
encounter the ordinary perils of the sea, and accordingly she put into Cherbourg for inspection and repairs, this
being necessary for the common safety of the ship, cargo and freight. Both the charterparty and the policy of
insurance in respect of the ship provided that average was to be adjusted according to the York-Antwerp Rules
1924. A dispute arose between the shipowner and the underwriters with regard to liability for certain expenses
incurred, and payments made by the owner in the ports of Bordeaux and Cherbourg in connection with the two
casualties, namely wages and provisions of master, officers and crew during the time the ship was being repaired;
coal consumed in shifting the ship in and out of dock; handling cargo on board; discharging cargo; towage in and
out of port, mooring expenses and port charges. The dispute was referred to arbitration, and the arbitrator held
that none of these expenses was the subject of general average contribution, but stated a case for the opinion of
the High Court. It was held that: (1) none of the above mentioned items of expenses incurred at the port of
Bordeaux in connection with the first casualty came within Rules X, XI or XX of the York-Antwerp Rules, 1924, and
therefore they were not recoverable in general average, because they were not incurred for the common safety for
the purpose of preserving from peril the property involved in a common maritime adventure, and Rule X did not
apply to a case of the repair of accidental damage and the shifting of cargo thereby caused where the ship was in
no danger; (2) but that the above mentioned items of expenses incurred at the port of Cherbourg in connection
with the second casualty were recoverable in general average under Rules X and XI, because they were expenses
incurred for the common safety for the purpose of preserving from peril the property involved in the common
maritime adventure. Threat Another question that troubles the interpreters of the Rules is whether or not a general
average act should be a response to a physical threat to the property, or could a commercial threat to the
completion of the voyage qualify for the act to be a general average act? It is suggested that the Rules embody
both threats, physical and commercial, and the costs of releasing the common property from the solely commercial
threat should form the proper subject of a general average contribution.23 Macdonald, J, op cit, fn 4, at 483–487;
this is indicated by the scope of Rules X, XI and XIV, relating to ports of refuge expenses and temporary repairs to
the ship for the purpose of enabling it to continue the adventure. The distinguishing feature of general average is
that the danger must be threatening to the common adventure; there must be at least two interests24 If there is
only one interest in danger, this is known as ‘particular average loss’ which is not a general average loss (s 64(1),
MIA 1906); expenses incurred by the assured to preserve the subject matter insured, other than general average
and salvage charges, are called particular charges (s 64(2), MIA 1906). exposed to danger, regardless of whether
or not such interests belong to the same owner. The danger to the common adventure will end when the property
is brought to a safe place. Ideally, that place should be the place where the delivery of the cargo was stipulated by
the contract of carriage. But sometimes the cargo may have to be taken off prior to reaching that place, and the
ship may have to be taken to a safe place. Once the cargo is taken off, it should not, in principle, be obliged to
contribute to general average, or be entitled to general average contribution, unless its removal formed part of
complex salvage operations,25 See some old authorities in Rose, op cit, fn 1, at 25. but this goes beyond the
scope of this chapter. Common maritime adventure The 1994 and 2004 YAR define, in Rule B, ‘common maritime
adventure’ as including circumstances when one or more vessels are towing or pushing another vessel or vessels,
provided that they are all involved in commercial activities and not in salvage operation. It further provides that a
vessel is not in common peril with another vessel or vessels if, by simply disconnecting from the other vessel or
vessels, she is in safety; but, if the disconnection is itself a general average act, the common adventure continues.
Throughout the successive editions of the Rules, ‘adventure’ has been used in a way which naturally describes the
common enterprise represented by the carriage of goods by sea in which ship and cargo are both involved, while
‘voyage’ has been used to refer to the passage of the vessel from her first loading port to her final discharging
port.26 See The Trade Green, op cit, fn 7. The ship-owner’s obligation to perform the voyage under the contract of
affreightment is to deliver the cargo safely to the port of destination upon payment of the agreed freight. He must
have complied with his obligation to provide a seaworthy ship at the commencement of the voyage.27 For a recent
example of no general average contribution to the ship owner, because of his actionable fault in failing to provide a
seaworthy ship as required by the contract, see Sunlight Mercantile Ltd v Ever Lucky Shipping Co Ltd [2004] 2
Lloyd’s Rep 174. Contribution for general average, when incurred for the common safety, does not absolve the
parties from their contractual rights and obligations. Only when the sacrifice or expenditure is beyond the
contractual duties will it be allowed in general average.28 The Bijela [1993] 1 Lloyd’s Rep 411. The term

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‘extraordinary’ is of more relevance when looking at general average expenditures. This is because a charterer or
the holder of a bill of lading will have already paid freight in return for the shipowner bearing the costs and
expenses that are incidental to the voyage and which safeguards both the ship and the cargo. The classic examples
of an extraordinary sacrifice that will be allowed in general average is the jettisoning of part of the cargo (Rule I);
or causing damage to the ship or cargo for the purpose of making a jettison (Rule II); or pouring water into the
holds to extinguish a fire on board a ship and thereby damaging the cargo carried in such holds, including damage
by beaching or scuttling a burning ship (Rule III); or voluntary stranding (Rule V); or damage done to machinery
or boilers when the ship is aground (Rule VII); or ship’s materials and stores burnt for fuel for the common safety
(Rule IX). The above are subject always to the operation of the York-Antwerp Rules. For example, Rule I of YAR
states that: ‘No jettison of cargo shall be made good as general average, unless such cargo is carried in
accordance with the recognised custom of the trade’. Similarly, damage to the ship’s machinery or boilers shall only
be allowed as general average where such damage is occasioned in attempting to refloat her (Rule VII). Generally,
expenditure that will be allowed as general average will come under one of the following examples: • Additional
expenses which would not normally be allowed as general average, but which replace expenses that would
normally be classed as general average (Rule F) • Expenses incurred in saving the ship and cargo from loss or
damage. Classic examples include: the engagement of salvage services following a stranding; the cost of
employing lighters to transfer cargo in order to lighten the vessel; and the employment of towage services (Rule X)
• Expenses incurred in lightening the ship when ashore (Rule VIII) • Expenses for wages etc in port of refuge (Rule
XI) • Expenses for temporary repairs either at the port of loading or a port of refuge (Rule XIV) • Port of refuge
expenses.29 Many expenses that are incidental to port of refuge expenses are expressly provided for in Rules X
and XI of the York-Antwerp Rules. The rule paramount which is found in YAR 1994 and 2004 (but not in the 1974
Rules) provides that: ‘In no case shall there be any allowance for sacrifice or expenditure unless reasonably made
or incurred’. The word ‘voluntary’, in s 66 of the Marine Insurance Act 1906, has been replaced with the term
‘intentionally’ in Rule A of the York-Antwerp Rules.30 This appears in all three recent York-Antwerp Rules revisions:
1974, 1994 and 2004. This emphasises the fact that, just because a decision was made under extreme pressure,
when there was no effective alternative, this will not of itself be enough for the act to lose its voluntary nature. The
requirement of intention means that the general average act must be made or incurred with the sole objective of
preserving the interests involved from peril.31 Athel Line Ltd v Liverpool & London War Risks Ins Assn Ltd [1994]
KB 87, p 94. The requirement of reasonableness is a fetter on the master’s discretion as to what action to take in
times of peril. However, this fetter is not wide-ranging and would only bite when the master makes a decision that
fails to benefit the common adventure as a whole. He has complete freedom to choose which action to take in
order to benefit the common adventure. For example, the master will be able to enter into a contract for towage or
salvage services on standard terms which are widely used in practice.32 See further commentary on standard form
towage contracts (at Chapter 14, above) and salvage contracts (at Chapter 13, above). Such action will be
reasonable. Even if the master enters into a contract for the provision of services on particularly onerous terms,
such losses flowing from this action will be recoverable in general average, provided there was no reasonable
alternative open to the master.33 Australian Coastal Shipping Commission v Green [1971] 1 QB 456, p 483, per
Lord Denning MR. The fetter on the master’s discretion is examined in the context of having to make his choices in
time of danger for the ship and property on board for the purpose of preserving the common adventure. It should
be noted that Rule D provides that rights of contribution in general average shall not be affected if the event giving
rise to the sacrifice or expenditure is due to the fault of one of the parties to the adventure, but this shall not
prejudice any remedies or defences which may be open against or to that party in respect of such fault.34
Goulandris Brothers v B Goldman & Sons [1957] 2 Lloyd’s Rep 207: the objects of Rule D were to keep all
questions of alleged fault outside the adjustment and to preserve, unimpaired, the legal remedy at the stage of
enforcement. But the question of actionable fault will depend on the terms of the contract and, if the Hague Rules
or Hague-Visby Rules are incorporated, negligence in navigation or management of the ship is an excepted peril
(Art IV, r (2)(a)). However, if in the course of taking action for the purposes of general average, there is negligence
in carrying out the operation, which causes damage to the property on board, it may be actionable in a claim for
breach of contract.35 See also The Oak Hill [1975] 1 Lloyd’s Rep 105: breach of contract was proved in handling
the cargo carelessly during discharge and storage after the vessel’s accident. See also The Hector [1955] 2 Lloyd’s
Rep 218: the fact that the master acts as agent of necessity does not relieve him of his duty to exercise reasonable
care in the preservation of the cargo; see also Goulandris Brothers, op cit, fn 34. In addition, such negligence may
break the chain of causation between the general average act and the loss, and the expenditure may not be
recoverable in general average. For example, whether the master was negligent, in The Alpha case,36 See Corfu
Navigation Co v Mobil Shipping Co Ltd (The Alpha) [1991] 2 Lloyd’s Rep 515. in putting the ship aground in the
first place and in dealing with the resultant situation, whereupon he caused damage to the engine of the ship, was
irrelevant. He was criticised, however, for acting unreasonably in many respects, when he was trying to refloat the
vessel after grounding. The defendants, cargo owners, who were sued by the owners of the ship for general
average contribution, argued that either what the master did could not be general average, or that the element of
unreasonableness broke the chain of causation between the general average act and the damage. The court held
that, on the evidence, the risk of damaging the engine had been appreciated by the master and the damage arose
from an actual intention of the master to try to refloat the vessel at risk of such damage. Therefore, the owners
recovered general average contribution for the damage to the engine. The requirement of reasonableness appears
in Rule A of YAR. However, if a general average act falls within one of the numbered rules that does not impose a
requirement for reasonableness, it follows that such losses that are incurred will be recoverable in general average,
even if such action that is taken is unreasonable.37 Ibid. The rule of interpretation in the York-Antwerp Rules 1974
provides that, where the numbered and lettered rules conflict, it is the numbered rules that prevail. Such possible
conflict has been remedied by the introduction of the rule paramount, in the York-Antwerp Rules 1994 and 2004
(mentioned above), which prevents recovery for sacrifice or expenditure unless reasonably made or incurred. (See
further about the rule of construction of the Rules under para 1.1 above.) This requirement relates to the subject
matter relating to general average recovery. Traditionally, general average concerns the preservation of property
involved in the ‘common adventure’, ie the ship,38 The equipment on board the ship also qualifies as ‘property’ in
general average. bunkers, her cargo and freight (see para 2, above). In order to be liable to contribute in general
average, the freight has to be at the carrier’s risk. Therefore, once freight has been earned, it does not contribute
as an interest since it is no longer at risk to the carrier. However, the cargo for which the freight has been earned
will still be liable to contribute. Rule C of the YAR states that only such losses, damages or expenses which are the
direct consequence of the general average act shall be allowed as general average; and Rule E provides that the
onus of proof is upon the party claiming in general average to show that the loss or expense claimed is properly
allowable as general average. Section 66(1) of the Marine Insurance Act 1906 allows recovery in general average
for losses ‘caused by or directly consequential to’ a general average act. Thus, the claimant has to prove that his
loss was a direct consequence of a general average act to recover contribution. The defendant has the burden of

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showing a break in the chain of causation.39 Eg The Alpha, op cit, fn 36. The right of contribution in general
average shall not be affected if the event giving rise to the sacrifice or expenditure is due to the fault of one of the
parties to the adventure, but this shall not prejudice any remedies or defences which may be open against or to
that party in respect of such fault (Rule D and Goulandris v Goldman under para 2.3 above). In addition to the
obvious sacrifices and expenditures incurred in general average, other losses resulting from general average acts
may qualify for recovery in general average. Whether they can or not is dependent upon whether such losses are a
direct result of the general average act. Should the loss have been foreseen, or would it be enough if the loss was
foreseeable to the general average act? In Australian Coastal Shipping v Green,40 [1971] 1 QB 456. there were
two vessels in peril. The ship owner contracted for two tugs to tow both vessels to safety, contracting on UKSTC
terms. In both cases, the towing line broke, rendering one tug a total loss, with the other tug claiming salvage
expenses. Under the UKSTC, the ship owner was liable to indemnify the towage company for all losses and
expenses suffered. The shipowner contended that these losses were recoverable by him in general average. Lord
Denning MR in the Court of Appeal held that they were, stating: If the master, when he does ‘the general average
act’, ought reasonably to have foreseen that a subsequent accident of the kind might occur – or even that there
was a distinct possibility of it – then the subsequent accident does not break the chain of causation … If, however,
there is a subsequent incident which was only a remote possibility, it would be different.41 Ibid, 482. As discussed
under para 2.3 above, an intervening negligence during the general average act may or may not break the chain of
causation between the act and the loss. Rule C of the 1974 and 1994 YAR specifically excludes losses caused by
delay or loss of market. In addition to these excluded losses, the 2004 YAR also excludes loss and expenses
incurred with respect to damage to the environment or connected with the escape or release of pollutant
substances from the property involved. As noted earlier, the rights and liabilities of the parties in general average
are dealt with independently of fault of the parties to the adventure, even if that fault brought about the event
which gave rise to the expenditure or sacrifice. But this shall not prejudice any remedies or defences which may be
open against or to the claiming party in respect of such fault (Rule D). In Rule I, it is stated that no jettison of
cargo shall be allowed as general average, unless such cargo is carried with the recognised custom of the trade.
Thus, if deck cargo is carried with the consent of the parties in accordance with the custom of the trade, general
average contribution will be allowed. In Strang Steel v Scott,42 (1889) 14 App Cas 601, pp 608, 609. the Privy
Council expounded the exceptions to general average contribution: There are two well-established exceptions to
the rule of contribution for general average, which it is necessary to notice. When a person who would otherwise
have been entitled to claim contribution has, by his own fault, occasioned the peril which mediately gave rise to
the claim, it would be manifestly unjust to permit him to recover from those whose goods are saved, although they
may be said, in a certain sense, to have benefited by the sacrifice of his property. In any question with them he is
a wrongdoer, and, as such, under an obligation to use every means within his power to ward off or repair the
natural consequences of his wrongful act. He cannot be permitted to claim either recompense for services
rendered, or indemnity for losses sustained by him, in the endeavour to rescue property which was imperilled by
his own tortious act, and which it was his duty to save. Schloss v Heriot is the leading English authority upon the
point. In that case, which was an action by the shipowner against the owners of cargo for contribution in an
average loss, a plea stated in defence, to the effect that the ship was unseaworthy at the commencement of the
voyage, and that the average loss was occasioned by such unseaworthiness, was held to be a good answer to the
claim by Chief Justice Erle, and Willes and Keating, JJ. The second exception is in the case of deck cargo. The
reason why relief by general contribution is denied to the owners of goods stowed on deck, when these are thrown
overboard in order to save the cargo under hatches, is obvious. According to the rules of maritime law, the placing
of goods upon the deck of a seagoing ship is improper stowage, because they are hindrances to the safe navigation
of the vessel; and their jettison is therefore regarded, in a question with the other shippers of cargo, as a
justifiable riddance of incumbrances which ought never to have been there, and not as a sacrifice for the common
safety. But the owner of deck goods jettisoned, though not entitled to general contribution, may nevertheless have
a good claim for indemnity against the master and owners who received his goods for carriage upon deck; and the
exception does not apply, either (1) in those cases where, according to the established custom of navigation, such
cargoes are permitted, or (2) in any case where the other owners of cargo have consented that the goods
jettisoned should be carried on the deck of the ship. If the ship deviated from the voyage route without the
consent of the contracting party, or without waiver of the breach, and the deviation caused the general average
act, there will be no general average contribution to the owner.43 Hain SS Co Ltd v Tate & Lyle Ltd (1936) 41 Com
Cas 350. As was stated earlier in Strang v Scott, a fault of the claimant which gave cause to the danger (and would
give the party from whom contribution is sought a cause of action against the claimant) will disentitle the claimant
from recovering contribution, on the basis of the principle that the claimant should not recover for the
consequences of his own wrong,44 The rule against recovery is known as ‘equitable defence’: Goulandris Brothers
Ltd v B Goldman & Sons Ltd [1958] 1 QB 74. for example when the ship was unfit for the voyage at the outset.45
Schloss v Heriot (1863) 14 CB (NS) 59 (improper stowage). A few examples illustrate how the ship owner can be
deprived of general average contribution. In The Evje No 2,46 [1976] 2 Lloyd’s Rep 714; see also The Aga [1968]
1 Lloyd’s Rep 431: ship had stability problem before she left port, resulting in heavy listing, which necessitated
beaching her. the ship was found unseaworthy at the beginning of the voyage because there were insufficient
bunkers or because the bunkers were of the wrong quality and the unseaworthiness was the cause of the casualty,
when the fuel ran out and the ship needed towage. No general average contribution was due to the owners from
the charterers. In The Kasmar Voyager,47 [2002] 2 Lloyd’s Rep 57. the ship was carrying a cargo of soya beans
under a contract of carriage evidenced by a bill of lading, which was subject to the Hague Rules. Engine problems
arose during the voyage, and the vessel was immobilised, needing towage services to reach a repair port.
Investigations revealed that there was a defect in manufacture of the piston skirt which developed into a crack in
the life of the piston. The major damage to the engine had been caused after a spare piston had been fitted whose
dimensions were not compatible with the main engine. Upon a claim by the owners against the cargo insurers for
general average contribution, the claim was resisted on the ground of the owners’ failure to exercise due diligence
to make the ship seaworthy before and at the beginning of the voyage. On evidence, it was found that the service
of the cylinder had been postponed, and the routine maintenance prescribed had not been followed. The vessel
was unseaworthy and the owners could not discharge the burden of proof that they, or their agents, exercised due
diligence before and at the beginning of the voyage.48 The Muncaster Castle [1961] 1 Lloyd’s Rep 57 was applied.
Thus, the general average expenditure was caused by their actionable fault and they were unable to recover
general average contribution from the cargo interests. By contrast, in The Torepo,49 [2002] 2 Lloyd’s Rep 535; see
also The Isla Fernandina [2000] 2 Lloyd’s Rep 15; The Lendoudis Evangelos II [2001] 2 Lloyd’s Rep 304. where the
ship grounded due to various navigational faults and sought the assistance of salvage, the ship was not found
unseaworthy, even with the finding of discrepancy in the charts (being not causative of the grounding). The owners
were protected by the exception in Art IV, r 2(a) of the HVR (negligence in navigation). Therefore, upon a claim by
cargo interests against the owners to recover the amount they were obliged to pay to salvors and for the return of

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4/16/2018 CHAPTER 15 PRINCIPLES OF GENERAL AVERAGE
their general average security, their claim failed. As discussed in causation earlier, the defendant must show a
causal link between the fault and the event giving rise to the general average act and to the loss, as is shown in
The Evje and The Kasmar Voyager, unless the claimant of general average contribution proves that his liability for
the fault is excluded.50 Milburn & Co v Jamaica Fruit Co [1900] 2 QB 540 (CA), approved by the House of Lords in
Louis Dreyfus & Co v Tempus SS Co [1931] AC 726. Similarly, when the shipper ships goods that he knows to be
dangerous, which results in the jettison of the cargo for the safety of the common adventure, he will not recover
general average contribution.51 Greenshields, Cowie & Co v Stephens & Sons [1908] AC 431: in this case, the
owners of the coal were entitled to claim against the ship contribution in general average in respect of the
sacrifices voluntarily made for the common advantage of all, the fire having been caused by the inherent qualities
of the coal, or, in other words, by spontaneous combustion, without default on the part of the shippers. Rule XIX
also provides that ‘undeclared or wrongfully declared cargo’ loaded without the knowledge of the ship owner or his
agents, or goods wilfully mis-described at the time of shipment, shall not be allowed as general average, if damage
or loss is caused to them, but such goods shall remain liable to contribute, if saved. The cause of action for
contributions in general average under contractual provisions, which did no more than require general average to
be adjusted according to York-Antwerp Rules, accrues at the time when each general average sacrifice is made or
general average expense is incurred.52 The Potoi Chau [1983] 2 Lloyd’s Rep 376 (PC); Chandris v Argo Insurance
Co Ltd [1963] 2 Lloyd’s Rep 65 approved. It was stated by the Privy Council in The Potoi Chau that: The general
average clause incorporated in a bill of lading creates a contractual liability on the part of the consignee as
indorsee of the bill of lading to pay general average contribution, if there be any chargeable on the cargo shipped,
whether it was he, the shipper or some intermediate indorsee of the bill of lading, who happened to be owner of
the goods, at the time when a general average sacrifice took place, or a liability for a general average expenditure
was incurred. Since this liability arises under a simple contract, the period of limitation is six years from the accrual
of the cause of action; but the clause is intended to regulate, and to transfer to whoever acquires title to the
consignment of cargo under the bill of lading, what would otherwise be a common law liability of the owner of the
cargo at the time of the general average act.53 The Potoi Chau, p 379. At the time of the ‘Digest of Justinian’, the
obligation was upon the master of the vessel to have a general average, arising on the voyage, adjusted. In
modern times, this responsibility has devolved upon the ship owner. In order to protect the rights of general
average creditors, he is obliged54 Crooks v Allan (1879) 5 QBD 38. to obtain reasonable security from contributing
interests. The law assists him in this by allowing him to exercise his right of the common law possessory lien on
the property until such security is given. The general average act gives rise to a possessory, not maritime, lien on
the property. The owner, therefore, through the master, may withhold delivery of property at the destination until
reasonable security has been provided. Such reasonable security is usually construed as consisting of the
following: (i) an average bond signed by the consignee, and (ii) either an average guarantee signed by the insurer
of the cargo, or, (iii) if the cargo is uninsured or the particular cargo insurer is not acceptable to the ship owner, a
general average deposit55 Such cash deposits are provided for by YAR, Rule XXII. – of an amount which is usually
recommended by the average adjuster, which amount will be held by the average adjuster, pending the completion
of his adjustment. Where, during the course of the contracted voyage, cargo is forwarded by some other vessel or
conveyance, the ship owner will usually require that a non-separation agreement forms part of the average bond
and the average guarantee. If the contract of carriage provides that general average is to be adjusted according to
the York Antwerp Rules 1994 or 2004, a non-separation agreement wording will automatically apply. A non-
separation agreement provides that, although cargo has been separated, by forwarding, from the rest of the
maritime adventure, its contribution to the general average will be calculated as though it had not, but had
remained with the carrying vessel until its delivery. The agreement is between the ship owner and the cargo owner,
and enables the ship owner to recover his general average expenses as if the cargo had remained on board. The
average bond, as backed by an insurer’s guarantee or a cash deposit, is a new contract, being independent from
the contract of affreightment, between the ship owner and the owner of the other interest. The consideration
provided is the release of the possessory lien on the cargo by the ship owner and, as far as cargo interests are
concerned, the consideration is the assumption of personal liability to pay when the adjustment is presented.
Usually the parties agree the law and the jurisdiction to which the security will be subject for adjudication of any
disputes that might arise between the parties under the terms of the security. The contractual obligation assumed
by the cargo interests under the security is to make payment of a liquidated sum at a future date, which will not
arrive until the general average statement has been completed by an average adjuster appointed by the
shipowners. That is the earliest date at which the shipowners’ cause of action against the consignees under the
average bond for payment of general average contribution arose.56 The Potoi Chau, op cit, fn 52, pp 382–383.
Rule XXIII of YAR 2004 provides that a claim for general average contribution, including any rights to claim under
general average bonds and guarantees, shall be extinguished, unless an action is brought by the party claiming
such contribution within a period of one year after the date upon which the general average adjustment was
issued. In no case shall such an action be brought after six years from the date of termination of the common
maritime adventure. The period may be extended upon the agreement of the parties after the termination of the
common maritime adventure. At the end of the day, it is the insurers (for hull or cargo) of the respective parties
involved in the common adventure that pay for general average contributions which the parties can recover by way
of indemnity under their respective insurance contracts. This falls within the scope of marine insurance, and so
detailed consideration is outside the scope of this book.

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