General average and cargo interests.

 

In Offshore Marine Services Alliance Pty Ltd v Leighton Contractors Pty Ltd and Another [2017] FCA 333 the Federal Court of Australia was called on to  decide whether parties interested in the cargo, other than the cargo owners at the date of the GA incident, were liable to contribute in general average. A tug and barge carrying construction materials grounded on its voyage from Henderson to Barrow Island and the disponent owner of the barge and tug incurred expenses and costs in securing the common safety of the barge and the cargo, including costs of some Aus $4m associated with stabilising the damaged hull of the barge, re-floating it and towing it back to Henderson with the cargo intact and undamaged.

The disponent owners claimed GA contributions from Leighton and Thiess who had supplied the cargo pursuant to contracts with Chevron. At the time of the incident ownership in the cargo had passed to Chevron, but the disponent owners claimed that Leighton and Thiess had a relevant interest in the goods because under their contracts they remained “on risk” in respect of the goods, and/or were “responsible for the care, custody, control, safekeeping and preservation of” the goods prior to their acceptance by Chevron.

McKerracher J held that a liability to contribute in GA attached only to the owner of the cargo that benefitted from the general average act, or someone contractually liable to contribute would be liable to contribute.

Pirates, ransom, and general average. There really is no alternative.

 

The Longchamp involved the allowance in General Average under Rule F of the York Antwerp Rules 1974 of expenses incurred by the shipowners while they were negotiating a ransom with Somali pirates over a period of some six weeks following the vessel’s seizure in the Gulf of Aden. Four items were claimed in respect of this period: crew wages, the high risk bonus due to the crew for being at sea in a high risk area, crew maintenance, bunkers consumed. Stephen Hofmeyr QC found that all items were allowable in general average. His finding has now been overruled by the Court of Appeal : [2016] EWCA Civ 708.

Rule F provides:

“Any extra expense incurred in place of another expense which would have been allowable as general average shall be deemed to be general average and so allowed without regard to the saving, if any, to other interests, but only up to the amount of the general average expense avoided.

The crux of the matter is whether these expenses were incurred “in place of another expense which would have been allowable as general average”. In this case, the shipowners claimed these expenses were incurred in place of an immediate payment of the demanded ransom at a higher figure than the ransom eventually negotiated. The Court of Appeal accepted cargo’s contention that in fact there was only one course open after the hijacking of the vessel (negotiation with the pirates to seek to achieve a release of the vessel and cargo) and the substituted expenses were incurred taking that course. There were only two available options to the owners once the vessel had been seized by pirates – abandon the vessel and cargo or engage with the pirates, negotiate and agree a ransom and pay it to effect release of ship, crew and cargo.  Rule F presupposes some real choice being made. Acceptance of the initial ransom demand is not a true alternative; nor is acceptance of any other ransom sum less than that initially demanded but greater than that eventually agreed.  Accordingly, the four expenses claimed by owners were not allowable in under Rule F.

The owners also claimed in respect of the costs of professional media response under Rule A in that they were incurred “for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure”.  At first instance, cargo interests argued that the costs must have been incurred for that sole purpose. The Judge rejected that argument and held that the costs were allowed.  On appeal they submitted that the costs must have been incurred for that predominant purpose. The Court of Appeal rejected this argument. It was enough that preserving the property from peril was an effective cause.

OK, YAR? BIMCO gives thumbs up to York Antwerp Rules 2016.

BIMCO has decided that all new and revised BIMCO charter parties, bills of lading and waybills will refer to general average being adjusted in accordance with the YAR 2016 adopted by the CMI earlier this month. The main features of the new rules are as follows.

The new rules revert to certain key provisions of the 1994 rules, as regards:

– salvage (art VI),

– inclusion of wages and maintenance of the master, officers and crew during the period a vessel is in a port or place of refuge undergoing repairs recoverable in general average (rule XI).

– removal of the cap, introduced in the YAR 2004, on the cost of temporary repairs of accidental damage at a port of refuge (rule XIV)

The new rules retain the time bar introduced in rule XXIII of the YAR 2004 and the abolition of the 2 per cent commission on owners’ disbursements under YAR 2004. However, rule XXI now provides for interest on general average expenditure, sacrifices and allowances to be calculated at an annual rate of LIBOR plus 4 percentage points.

Rule XVII now permits adjusters to exclude low value cargoes from contribution to general average where the cost of inclusion would be likely to be disproportionate to its contribution.