This appeal raises the issue whether the daily vessel-operating expenses of shipowners incurred while they were negotiating to reduce the ransom demands of pirates should be allowed in general average – ie whether those expenses should be shared proportionately between all those whose property and entitlements were imperilled as a result of that seizure – or whether they must be borne by the shipowner alone. The Appellants submitted that the negotiation period expenses fell within the expression ‘expense incurred’ by the owners within Rule F and those expenses were incurred ‘in place of another expense’ (i.e. the $4.15m saved as a result of the negotiations with the pirates). Further, the negotiation period expenses were less than the ‘general average expense avoided’ and it thereby followed that they were properly allowable under Rule F.
Held: (Lord Mance dissenting on the facts) The appeal succeeded. The Courts below had incorrectly assumed that the owners had to establish that it would have been reasonable to accept the pirates’ initial demand in order to justify the contention that the negotiation period expenses were allowable under Rule F. If accepted, this would lead to odd results, meaning that, where a ship-owner incurs expense to avoid paying a reasonable sum, he can in principle recover under Rule F, but that if he incurs expense to avoid paying
an unreasonable sum (i.e. a larger sum), he cannot recover.
Lord Neuberger said: ‘the reference to an ‘expense which would have been allowable’ is to an expense of a nature which would have been allowable. First, the word ‘allowable’ in Rule F naturally takes one to Rule C, where the similar word ‘allowed’ is used, rather than Rule A, where there is no reference to anything being ‘allowed’ (the same point applies to the French version – ‘admissible’ in Rule F and ‘admis’ in Rule C). Unlike Rule A, Rule C is concerned purely with the type of expense, and not with quantum. Secondly, the opening part of Rule F is unlikely to be concerned with quantum, as that is dealt with in the closing part, which imposes a cap on a sum recoverable under Rule F, namely ‘only up to the amount of the general average expense avoided’. Thirdly, the interpretation assumed in the courts below imposes an unnecessary fetter on the allowability of an ‘extra expense’, as there is already a reasonable fetter in the concluding part of Rule F. Fourthly, the interpretation I favour produces an entirely rational outcome: whenever an expense is incurred to avoid a sum of a type which would be allowable, that expense would be allowable, but only to the extent that it does not exceed the sum avoided.’
Lord Sumption said: ‘The York-Antwerp Rules have a status in shipping law similar to that of the Uniform Customs and Practices in the law relating to documentary credits. They depend wholly on contractual incorporation for their binding force. But they are designed to create a body of principle applicable internationally in a uniform way, although incorporated in shipping agreements of different kinds, governed by different laws. It will therefore rarely if ever be appropriate to imply matter into them which is not apparent from the natural meaning of the words, unless the implication is necessary to make them workable or intelligible or to avoid absurdity. Rule F is simplicity itself. It provides for the allowance of expenditure which is not allowable as general average expenditure but has successfully mitigated expenditure or sacrifice which would have been allowable as general average. The cost of maintaining the ship and crew during a period of delay which would not have occurred but for the peril but was necessary to enable the ransom to be reduced, is deemed to be general average up to the amount of the reduction.’
Judges:
Lord Neuberger, Lord Mance, Lord Clarke, Lord Sumption, Lord Hodge
Citations:
[2017] UKSC 68, [2017] Bus LR 1909, [2017] WLR(D) 703, UKSC 2016/0164
Links:
Bailii, Bailii Summary, WLRD, SC, SC Summary, SC Summary Video, SC 20170717 am Video, SC 20170717 pm Video, SC 20170718 am Video, SC 20170718 pm Video
Statutes:
Jurisdiction:
England and Wales
Citing:
Cited – Birkley and Others v Presgrave 3-Feb-1801
An action upon promises lies by a ship owner to recover from the owner of the cargo his proportion of general average loss incurred by sacrificing the tackle belonging to a ship for an unusual purpose, or on an extraordinary occasion of danger, for . .
Cited – James Buchanan and Co Ltd v Babco Forwarding and Shipping (UK) Ltd HL 1978
A consignment of whisky was stolen whilst on consignemt from a bonded warehouse under CMR terms for Teheran. In bond, it was worth 7,000 pounds, and on export no excise duty was to be paid. Being stolen in the course of transit, excise duty of . .
Cited – Marida Ltd v Oswal Steel (The Bijela) CA 1993
Hoffmann LJ dissented . .
Cited – King v Bristow Helicopters Ltd; Morris v KLM Royal Dutch Airlines HL 28-Feb-2002
Psychiatric Injury under Warsaw Convention
The applicants were passengers who claimed damages for psychiatric injury, after accidents in aircraft.
Held: The Convention created strict liability on air carriers, but explicitly restricted damages to be payable for ‘bodily injury’. That . .
At First Instance – Mitsui and Co Ltd and Others v Beteiligungsgesellschaft Lpg Tankerflotte Mbh and Co Kg and Another QBD 2015
The sip had been taken by pirates. The parties disputed the burden of expenses while negotiations took place for its release.
Held: the hypothetical other expense must be one which would have been reasonably incurred in a sense ‘interpreted . .
At CA – Mitsui and Co Ltd and Others v Beteiligungsgesellschaft Lpg and Others CA 13-Jul-2016
The court was asked whether the general expenses incurred when a ship was taken by pirates were allowable in General Average while the negotiations for release took place. . .
Cited – Marida Ltd and Others v Oswal Steel and Others (The Bijela) HL 2-May-1994
Ship owners may claim for the cost of interim repairs in average, but still subject to the overall limits imposed by the rules. . .
Lists of cited by and citing cases may be incomplete.
Transport, Damages
Updated: 19 September 2022; Ref: scu.597669