General Average

Law and Practice

Francis Rose

• Publisher: Informa Law from Routledge
• Year: 2017
• ISBN:
  9781351584319
• Edition: 3
• Topic: Law
• Subtopic: Maritime Law
• Index: Law

An account of the underlying law and the practical rules which govern the adjustment of rights and liabilities between parties to a maritime adventure when extraordinary measures have been incurred for the benefit of the common adventure. The third edition incorporates international case law developments to bring the text up to date and analyses the revision of the basic practical rules underlying general average adjustment internationally. It is essential for all those involved with maritime affairs to understand the implications of these new rules and how they fit with existing law and practice.

Chapter 1
The Nature of General Average¹

I Definition

1.1 It is stated in Justinian’s Digest² that:

The Rhodian law decrees that if in order to lighten a ship merchandise is thrown overboard, that which has been given for all shall be replaced by the contribution of all.

This statement in Justinian’s Digest is one of the earliest definitions of a principle that has existed in relation to the carriage of goods by sea from time immemorial.³ The classic definition of general average given by an English judge is that of Lawrence J in Birkley v. Presgrave:⁴

All loss which arises in consequence of extraordinary sacrifices made or expenses incurred for the preservation of the ship and cargo come within general average and must be borne proportionately by all those who are interested.

1.2 General average is now statutorily defined by the Marine Insurance Act 1906, s.6:⁵

• (1) 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.

1.3 Rule A of the York-Antwerp Rules, which in practice apply to the adjustment of general average,⁶ provides:⁷

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.

1.4 The word “average” means loss. As a general rule, any loss or damage suffered by a particular interest, whether resulting from a danger which is peculiar to itself or to other interests as well, must be borne by that interest alone:⁸ in marine insurance parlance, it is particular average. A general average situation occurs where a danger threatening a common maritime adventure justifies action taken for the benefit of all the interests imperilled—“a general average act”. General average acts are of two types: extraordinary sacrifices and extraordinary expenditures. An extraordinary expenditure may be either expenditure actually made or the incurring of liability to make payment.⁹ The result of a general average act is a general average loss. General average losses include: the loss suffered by virtue of a general average sacrifice; the loss or liability incurred by virtue of a general average expenditure; or any other loss directly consequent upon a general average act.¹⁰ The person who suffers a general average loss is entitled to claim a contribution from those who benefit from it (hereafter “contributors”) in proportion to the values of the interests which have been sacrificed and those which have been saved. Since a fundamental object of the law and practice of general average is equal treatment of all parties to the common maritime adventure, both claimants and other contributors may be described collectively as “the general interest”,¹¹ though it is not a term that it is habitually used. The liability of contributors may in turn be a loss for which they can claim against their own insurers and is also described as a general average loss.

1.5 The expression “general average” is therefore used in a number of senses, sometimes precisely and sometimes loosely. Thus, since “average” means loss, the expression “average loss” is strictly tautologous. Likewise, the York-Antwerp Rules have traditionally referred to losses being “admitted” or “made good” “in” general average, whereas the York-Antwerp Rules were consciously modernised, or tidied up, in 2004 so as generally to refer to losses being “allowed” “as” general average.¹² In fact, examples of former practices survive in the 2004 Rules; but, although inconsistency may be regrettable, no advantage should be gained by attempting to discern unintended distinctions rather than seeking a sensible construction of the terms used.

II Partial Losses¹³

1.6 Losses arising during maritime adventures are almost invariably the subject of marine insurance contracts. The treatment of general average under the law of marine insurance is dealt with specifically below.¹⁴ It is, however, convenient at this stage to outline the classifications of loss employed. For purposes of marine insurance, a loss may be either total or partial.¹⁵ A loss occurring for the purpose of general average may be total—for instance, where the whole of a single consignment of cargo is sacrificed by jettison, or where the vessel becomes a total loss as a result of a voluntary stranding but cargo is saved—though general average losses are generally grouped by the Marine Insurance Act 1906 under the heading of “Partial losses (including salvage and general average and particular charges)”.¹⁶ There are three types of partial loss, namely particular average losses, general average losses, and particular charges.

1.7 A “particular average” loss is a partial loss of the subject-matter insured, caused by a peril insured against, and which is not a general average loss or a particular charge.¹⁷ The charges recoverable under maritime law by a salvor independently of contract are called “salvage charges” by the Marine Insurance Act 1906.¹⁸ Subject to any express provision in the policy, salvage charges incurred in preventing a loss by perils insured against may be recovered as a loss by those perils.¹⁹

1.8 “General average” has been defined above.²⁰ General average losses include the expenses of services in the nature of salvage rendered by any person employed for hire by the assured or his agents for the purpose of averting a peril insured against²¹—i.e. they include salvage services provided under contract and not classifiable as “salvage charges” payable under the maritime law.

1.9 “Particular charges” are expenses incurred by or on behalf of the assured for the safety or preservation of the subject-matter insured, other than particular average or general average.²² They include²³ the expenses of services “in the nature of salvage”²⁴ rendered by the assured or his agents.²⁵ Under the Marine Insurance Act 1906²⁶ or by a contractual “sue and labour clause”²⁷ it is generally the duty of the assured to take such measures as may be reasonable for the purpose of averting or minimising an insured loss. Expenses thereby incurred—other than general average losses and contributions and salvage charges²⁸—are generally subject to a separate indemnity under the policy.²⁹ Particular charges are expenses incurred for the benefit of the assured’s own interest, rather than for the common adventure.

1.10 The legal status of services in the nature of salvage which are rendered under contract is not obvious.³⁰ The Marine Insurance Act 1906, s.65(2) states that “salvage charges” means the charges recoverable under maritime law by a salvor independently of contract and do not include the expenses of services rendered by any person employed for hire by the assured or his agents, which may be recovered as particular charges or as a general average loss according to the circumstances. In practice, services in the nature of salvage rendered under a contract are unlikely to fall within the definition of general average, since salvage contracts generally provide that each interest is separately liable for the service rendered in respect of his interest,³¹ rather than, say, that the shipowner is liable for a service rendered to the common adventure (for which he may claim a general average contribution from the other interests).³² One view is that “salvage charges” includes services in the nature of salvage obtained under contract so long as the relations...