Scroll to top
© 2020, NAU Pte Ltd | All Rights Reserved

General Average – Reasonableness

Jagan - December 27, 2022 - 0 comments

  1. We were invited by the Gujarat Maritime Universityi to participate in a webinar conducted on 20th Dec 2022 on “The Role of General Average in the Maritime Industry” . During the talk, one of the participants enquired on “the courts interpretation of the word reasonable” (this word is found  in S 66(2)ii of the English Marine Insurance Act 1906 and the first line of Rule A along with other numbered Rules (mentioned in 2 below) of York Antwerp Rules 1994 (YAR ’94)iii & iv .
  2. Following the talk, we relooked at the wordings of the YAR and note that the word “reasonably” or “reasonable” is mentioned 7times in the YAR ’94. The  earlier versions of the YAR did not have the Rule Paramount (“RP”) and which came into existence following the decision of the English Court in The Alphavi. Briefly, the court ruled that a claim under Rule VII for damage to machinery sustained during attempts to refloat a grounded ship was not subject to the requirement of reasonableness as provided in Rule A such that Owners were entitled to succeed even though the attempts to refloat by using the ship’s engines was unreasonable. The basis of the Courts decision is due to the second paragraph of the Rule of Interpretationvii which came into existence following the decision in the Makis caseviii and which provides for the numbered rules to override the lettered rules should there be a conflict. This being the case, there was no requirement of “reasonableness” as provided in Rule A for a claim made under Rule VII.
  3. What is reasonable?
    Whether the act is reasonable or not is largely treated in English Law as a “question of fact” and not a “question of law”ix. This being the case, the question of reasonableness is entirely dependent on the facts and the evidence presented to the trier of facts which would be a court of first instance. The burden of proving that the sacrifice or expenditure was reasonably made or incurred would lie upon the party claiming contribution in General Average, who would generally be the Owners. Given that decisions are taken by the Master when a casualty is developing, the Courts will give the benefit of doubt such that the sacrifice or expenditure would be deemed to have been reasonably made or incurred unless the contrary is established. If a party believes otherwise, their right to deny contributions is expressly provided in Rule Dx.
  4. Given that the YAR 1994 and later editions of the YAR expressly provide for the RP which has a requirement for reasonableness for both sacrifice and expenditure, it appears to us that the words “reasonable” in Rule A, X(c), XI(a) & (b) and XVIII(a) are surplusages and can be done away with. With respect to Rule XVIII(b), as it deals with depreciation, the RP may not be applicable. This being the case, we would suggest that the words of RP be expanded to cater for depreciation. These suggestions are made so that the future editions of the YAR can be crisper, clearer and easily understood by all in the shipping industry.

ii. 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.
iii. 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.
iv. We have considered 1994 version given that they still remain the most commonly used version – the subsequent editions, however, also have the same wordings with respect to this word.

v.    1. Rule Paramount: In no case shall there be any allowance for sacrifice or expenditure unless reasonably made or incurred.
      2. Rule A: 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.
    3. Rule X(c):Whenever the cost of handling or discharging cargo, fuel or stores is admissible as general average, the costs of storage, including insurance if reasonably incurred, reloading and stowing of such cargo, fuel or stores shall likewise be admitted as general average. The provisions of Rule XI shall be applied to the extra period of detention occasioned by such reloading or restowing.
    4. Rule XI(a): Wages and maintenance of master, officers and crew reasonably incurred and fuel and stores consumed during the prolongation of the voyage occasioned by a ship entering a port or place of refuge or returning to her port or place of loading shall be admitted as general average when the expenses of entering such port or place are allowable in general average in accordance with Rule X(a).
    5. Rule XI(b): When a ship shall have entered or been detained in any port or place in consequence of accident, sacrifice or other extraordinary circumstances which render that necessary for the common safety, or to enable damage to the ship caused by sacrifice or accident to be repaired, if the repairs were necessary for the safe prosecution of the voyage, the wages and maintenance of the master, officers and crew reasonably incurred during the extra period of detention in such port or place until the ship shall or should have been ready to proceed upon her voyage, shall be admitted in general average.
   6. Rule XVIII(a): When repaired or replaced: The actual reasonable cost of repairing or replacing such damage or loss, subject to deductions in accordance with Rule XIII;
   7. Rule XVIII(b): When not repaired or replaced, the reasonable depreciation arising from such damage or loss, but not exceeding the estimated cost of repairs. But where the ship is an actual total loss or when the cost of repairs of the damage would exceed the value of the ship when repaired, the amount to be allowed as general average shall be the difference between the estimated sound value of the ship after deducting therefrom the estimated cost of repairing damage which is not general average and the value of the ship in her damaged state which may be measured by the net proceeds of sale, if any.
vi. Corfu Navigation v Mobil Shipping (The Alpha) [1991] 2 Lloyd’s Rep. 515 
vii. Except as provided by the Rule Paramount and the numbered Rules, general average shall be adjusted according to the lettered rules.
viii. Vlassopoulos v British and Foreign Marine Insurance Co (The Makis) [1929] 1 K.B. 187
ix. See The Reasonable Person Standard by John Gardner
x. 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.
See also our earlier article, General Average – CMA CGM Libra and Rule D Defence which touches on this Rule.

Related posts

Post a Comment

Your email address will not be published. Required fields are marked *