General Average and the Rule D Defence

General Average and the Rule D Defence

1. As a general principle, the fact that a General Average (“GA”) act was necessitated by the fault of one of the parties to the common maritime adventure does not, of itself, relieve the other parties from their obligation to contribute to GA. There is, however, an important qualification. A party whose actionable fault¹ caused the casualty or circumstances giving rise to the GA act may ultimately be prevented from recovering GA contribution from the other innocent interests based on the Rule D² Defence as provided in the York Antwerp Rules 1994 (“YAR 94”).
2. Types of Loss: Losses can either be categorized as Particular Average³ (“PA”) or GA⁴ and this will depend on whether the loss or expenditure was deliberately incurred for the common safety/benefit or arose fortuitously.
   1. PA: Owners may be liable for the loss arising from the casualty unless they can establish the absence of fault or rely upon a defence available under the applicable law and/or contract⁵.
   2. GA:
      1. Owners, and in appropriate circumstances other interested parties, are entitled in the first instance to seek GA contributions and security from the other interests involved in the adventure. Requiring Owners to establish, before seeking GA security or contribution, that the casualty was entirely free from any causative fault on their part could substantially delay measures required for the common safety and discourage parties from taking prompt action for the common benefit. However, this does not mean that innocent parties lose their entitlement to resist contributing to the GA due to the actionable fault of the Owners. This is where Rule D of YAR 94 comes in and which address the issue by separating:
         1. the right to seek GA contribution; from
         2. the right of another party subsequently to resist that contribution, or pursue a remedy, based on actionable fault.
      2. Accordingly, the fact that the casualty which gave rise to the GA act may have resulted from Owners’ fault does not prevent GA contribution from being sought in the first instance. Equally, the payment or provision of GA security does not necessarily deprive cargo or other property interests of the right subsequently to rely upon Owners’ actionable fault as a defence to the contribution claimed.
3. Time Bars: The limitation periods applicable to claims for cargo damage and claims for GA contribution are not necessarily the same. They should therefore be considered separately.
   1. PA/Cargo Damage: Where the contract of carriage is subject to the Hague or Hague-Visby Rules, a cargo claim will ordinarily become time-barred unless suit is brought within one year from the date on which the goods were delivered or should have been delivered⁶. Cargo interests should therefore be particularly alert to the shorter limitation period applicable to PA claims.
   2. GA:
      1. The limitation period for GA contribution depends upon the contractual regime governing the adjustment. Where the York-Antwerp Rules 2004 or 2016 apply, Rule XXIII (a)(i) contains specific time-bar provisions⁷. Where those Rules do not apply, the applicable limitation period will generally depend upon the governing law of the relevant contract. If English law applies, and there is no contractual provision prescribing a shorter limitation period, an action founded on simple contract would generally be subject to the six-year limitation period under section 5 of the Limitation Act 1980.
      2. In practice, following a GA casualty, Owners or their average adjusters will ordinarily require cargo and other property interests to provide a GA bond and, where applicable, a guarantee or cash deposit. Such security would commonly contain an undertaking to pay any GA contribution that is ultimately and legally determined to be due. The wording of the particular GA bond or guarantee must therefore be considered carefully when determining when a cause of action arises and when time begins to run. In appropriate cases, publication of the GA adjustment may constitute the relevant contractual trigger⁸.
4. Options available to Property Interests:
   1. The appropriate course for cargo or other property interests will depend upon the circumstances of the casualty, including whether the property has suffered PA damage in addition to exposure to GA; the amount of the PA claim; the amount of GA security or contribution sought; the evidence available as to actionable fault; and whether the property interest is insured.
   2. Negligible PA Damage and Commercially Viable GA Security sought: Where the PA damage is negligible and the amount of GA security sought is not material⁹, property interests may decide to provide the requested security and adopt a “wait and watch” approach pending investigation and publication of the GA adjustment. Providing security should not, however, be treated as an acceptance that the contribution ultimately claimed is legally due.
   3. Material PA Damage together with GA Exposure:
      1. Where cargo has suffered a material PA loss, property interests should act promptly. Given the comparatively short limitation period that may apply to cargo claims, they should investigate whether there was any actionable fault on the part of Owners or another relevant party that would support recovery of the PA loss.
      2. If the evidence establishes actionable fault on the part of Owners, cargo interests should consider relying upon that evidence in support of their PA claim; as a defence to Owners’ claim for GA contribution; and where appropriate, to seek the release or return of GA security already provided. If Owners or their representatives refuse to release the security, property interests should consider the remedies available under the relevant contract and applicable law, including any appropriate proceedings for the return or release of the security¹⁰.
   4. GA Contribution only:
      1. Where there is no material PA claim and the exposure relates principally to GA contribution, the commercial significance of the security demanded becomes particularly relevant. If the amount is modest, providing security while reserving rights may be commercially preferable to immediately commencing potentially expensive investigations or proceedings.
      2. Where, however, the amount of security is substantial, property interests should consider investigating whether they have a Rule D defence to the contribution sought. This may be particularly important for uninsured cargo interests required to provide a cash deposit. Unlike an insurer’s average guarantee, a substantial cash deposit ties up working capital and may effectively operate as a “wasting asset”¹¹ for so long as the money remains unavailable to the cargo interest.
5. Owners’ P&I Cover:
   1. Where Owners are ultimately unable to recover GA contribution from cargo or other property interests because of Owners’ actionable fault, the resulting shortfall may, subject to the applicable terms and conditions, fall within Owners’ P&I cover¹². In practice, however, such cover may require Owners first to pursue GA contributions from the other interests involved in the adventure.
   2. This results in Owners seeking GA contribution or retaining GA security even when they are aware that cargo interests may have a substantial Rule D defence. Cargo interests should therefore not assume that the existence of an apparent actionable fault will automatically result in the release of their GA security. Where the evidence supports such a defence, they should pursue it actively.
6. Conclusion: Following a casualty involving PA and/or GA, property interests should consider both the amount of their cargo loss and the amount of GA security or contribution demanded. If the amounts involved are material/significant, then property interests should:
   1. Investigate the casualty promptly to determine whether actionable fault can be established against Owners or another relevant party.
   2. Protect any PA claim within the applicable limitation period, particularly where the Hague or Hague-Visby Rules apply.
   3. Rely upon any actionable fault identified both offensively and defensively – offensively, to recover PA damage, and defensively, under Rule D, to resist Owners’ entitlement to GA contribution.
   4. Seek the release or return of GA security where the evidence demonstrates that Owners are not legally entitled to recover the contribution claimed.
   5. And finally, consider appropriate contractual or legal proceedings where security is not released voluntarily.

¹ fault which, under the applicable contract and governing law, gives rise to a legally enforceable remedy or defence.

² Rights to contribution in general average shall not be affected, though the event which gave rise to the sacrifice or expenditure may have been 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.

³ See section 64(1) of the Marine Insurance Act 1906 in relation to particular average loss.

⁴ Under the English Marine Insurance Act 1906, a GA act involves a voluntary sacrifice or expenditure. When the GA is contractually governed by the York-Antwerp Rules 1994, Rule A requires the sacrifice or expenditure to be intentional. While there is a difference in the words used, the actual effect is the same except that in the case of GA’s governed by YAR 1994 or other editions, application of the numbered rules would override the effect of Rule A.

⁵ Such defences will commonly include those available under the Hague or Hague-Visby Rules where they apply compulsorily or by contractual incorporation.

⁶ See Article III Rule 6 of the Hague/Hague-Visby Rules.

⁷ Subject always to any mandatory rule on time limitation contained in any applicable law: (i) Any rights to 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 is issued. However, in no case shall such an action be brought after six years from the date of termination of the common maritime adventure.

⁸ See, as appropriate, the wording of the GA Bond and Guarantee approved by CMI, IUMI and ICS.

⁹ Whether an amount is material or not is necessarily fact-sensitive and will depend, amongst other things, on the amount demanded and the value of the property involved.

¹⁰ Where the relevant contract is with Owners, the contractual terms, including the dispute-resolution provisions, should be considered. This may not necessarily exclude security or other remedies available under the admiralty law of an appropriate jurisdiction.

¹¹ See our earlier articles Interest & Cash Deposit – York-Antwerp Rules and Salvage & General Average – Uninsured Cargo Interests.

¹² See, for example, Rule 41 of the Gard P&I Rules 2026.