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Knock for Knock and General Average


Jagan - November 30, 2017 - 0 comments

Legal Plus and International Malaysian Society of Maritime Law conducted the second Maritime Law Conference on 11/12 October 2017. This conference was very well attended and a wide variety of topics were discussed. Speakers who participated in the conference were not only from Malaysia but also from other jurisdictions. It was indeed an interesting event where a lot of knowledge was shared between the participants. Paul Aston of HFW Singapore (who is always a delight to hear) spoke on “Implied Terms and Indemnities” and left posing a question as to whether a Knock for Knock clause could deny Owners entitlement to a General Average? This article considers this question further.

  1. Knock for Knock clause in a contract originated from the Motor Insurance Industry wherein the Insurers agreed to deal with the claims falling under their own policy by their Insured’s and even though entitled to pursue for recovery against the party at fault (by way of subrogation), waiving this right so as to avoid litigation between the parties and simplify the insurance arrangements.
  2. “Knock for Knock” clauses are commonly used in the offshore industry and are found in Supplytime 2005 (Cl 14(b)2, Towcon 2008 (Cl 25)3 & Towhire 2008 (Cl 23)4. The intention of the “Knock for Knock” clause is that each party should bear the responsibility for any damage or loss to its own property, or accident or injury to its own staff and should not pursue a claim against the other party, even if they (the other party) are at fault. The English courts have recognized these clauses as market practices and have given effect to these clauses as seen in Caledonia North Sea Ltd v British Telecommunications plc [2002] 1 Lloyd’s Rep.553.
  3. From a review of the C/P wordings, we note that while Supplytime 2005 Cl 265 does provide for General Average (Supplytime 2017 interestingly does not have this clause), there is no corresponding clause in Towcon 2008 or Towhire 2008. Does this mean that Owners or Charterers have no right to seek contribution for General Average in Towcon 2008 or Towhire 2008?
  4. Clause 33 of Towcon 2008 and Clause 31 of Towhire 2008 is the BIMCO Dispute Resolution Clause5 and allows parties to choose English, United States or another law as the law governing the contract. Failure to choose any of the options (a, b or c) would result in English law as the law governing the contract. For the purpose of this article, we will consider the effect on the basis that English law is the law governing the contract (it is our understanding that a similar result would be reached under US Laws). 
  5. Absent any agreement by the parties, adjustment of General Average will be determined according to the law of the country in which the adventure ends. However, as the charter party expressly provides for a law governing the contract, General Average should be adjusted on this basis. General Average is available as of right under English Law6. In the circumstances, under English Law, a party could seek contributions from others involved in the same adventure . Alternatively, charter parties may incorporate, by way of rider clauses, York Antwerp Rules (1994 Rules is the most common followed by the 1974 Rules. The latest version is of 2016) and which deal with the adjustment of General Average. The difference between adjusting under English Law and York Antwerp Rules is that the former looks at attainment of safety while the later looks at the completion of adventure (and which would allow additional amounts to be put in the General Average pot). The other major point would be that under English Law, pollution liabilities arising out a General Average Act could be claimed whereas under York Antwerp Rules 1994, this is expressly excluded as provided in Rule C (there is however no such exclusion for Pollution under York Antwerp Rules 1974).
  6. The question would be whether a “Knock for Knock” clause would deny a party (Owner or Charterer) the entitlement to seek a General Average Contribution from the other. In order to consider this further, General Average must be differentiated from Particular Average.
    1. General Average: S66 of the English Marine Insurance Act 1906 deals with General Average. The relevant subsections are given below.
      1. A 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.
      3. Where there is a general average loss, the party on whom it falls is entitled, subject to the conditions imposed by maritime law, to a rateable contribution from the other parties interested, and such contribution is called a general average contribution.
    2. Particular Average: S64(1) of the English Marine Insurance Act 1906 defines “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.”The major difference between these two is that General Average is a loss incurred by design to avoid a greater loss and is not by chance. Although, it is generally the Master who would be making this decision (given that they are in control of the vessel), it is quite possible for others involved in the common adventure to also take this decision7 i.e. Charterers / Cargo Interests.
  7. Knock for Knock clauses are meant to ensure that each party deals with damages or losses to its own property arising from accidents (Particular Average). However, they do not state anything with respect to expenditures or sacrifices incurred either to avoid / minimize those losses. Should Knock for Knock clause apply to deal with such expenses, parties may prefer to do nothing (for instance – should their own loss be insignificant or they have a contractual defence or indemnity available) and allow the loss to fall to the Owners/Charterers or other parties as the case may be. In any event, as the Charter parties do not expressly exclude General Average Contributions, it is submitted that parties are entitled to seek contributions from the others involved in the maritime adventure.
  8. In conclusion
    1. Knock for Knock Clauses do not automatically oust the entitlement to General Average Contributions.
    2. Use of York Antwerp Rules 1994 or 2016, while beneficial to Owners in some instances, also limit pollution exposures to the Charterers (as provided in Rule C) and therefore should be incorporated in charter parties to deal with the adjustment of General Averages.


1. http://www.hfw.com/Paul-Aston
2.Supplytime 2005 (Cl 14(b):(i) Owners. – Notwithstanding anything else contained in this Charter Party excepting Clauses 6(c)(iii), 9(b), 9(e), 9(f), 10(d), 11, 12(f)(iv), 14 (d), 15 (b), 18(c), 26 and 27, the Charterers shall not be responsible for loss of or damage to the property of any member of the Owners’ Group, including the Vessel, or for personal injury or death of any member of the Owners’ Group arising out of or in any way connected with the performance of this  Charter Party, even if such loss, damage, injury or  death is caused wholly or partially by the act, neglect, or default of the Charterers’ Group, and  even if such loss, damage, injury or death is caused 638 wholly or partially by unseaworthiness of any  vessel; and the Owners shall indemnify, protect,  defend and hold harmless the Charterers from any  and against all claims, costs, expenses, actions,  proceedings, suits, demands and liabilities whatsoever arising out of or in connection with such  loss, damage, personal injury or death.
(ii) Charterers. – Notwithstanding anything else contained in this Charter Party excepting Clause 11, 15(a), 16 and 26, the Owners shall not be responsible for loss of, damage to, or any liability arising out of anything towed by the Vessel, any cargo laden upon or carried by the Vessel or her tow, the property of any member of the Charterers’ Group , whether owned or chartered, including their Offshore Units, or for personal injury or death of any member of the Charterers’ Group or of anyone on board anything towed by the Vessel, arising out of or in any way connected with the  performance of this Charter Party, even if such loss, damage, liability, injury or death is caused wholly or partially by the act, neglect or default of the Owners’ Group, and even if such loss, damage, liability, injury or death is caused wholly or partially by the unseaworthiness of any vessel; and the Charterers shall indemnify, protect,  defend and hold harmless the Owners from any  and against all claims, costs, expenses, actions, proceedings, suits, demands, and liabilities whatsoever arising out of or in connection with such loss, damage, liability, personal injury or death.

3.Towcon 2008 (Cl 25):
(a)(i) The Tugowner will indemnify the Hirer in respect of any liability adjudged due or claim reasonably compromised arising out of injury or death of any of the following persons, occurring during the towage or other service hereunder, from arrival of the Tug at the pilot station or customary waiting place or anchorage at the Place of Departure (whichever is sooner), until disconnection at the Place of Destination, however such geographic and/or time limits shall not apply to sub-clause 25(a)(i)2. below:
(1) The Master and members of the crew of the Tug and any other servant or agent of the Tugowner;
(2) The members of the riding crew provided by the Tugowner or any other person whom the Tugowner provides on board the Tow;
(3) Any other person on board the Tug who is not a servant or agent of the Hirer or otherwise on board on behalf of or at the request of the Hirer.

(ii) The Hirer will indemnify the Tugowner in respect of any liability adjudged due or claim reasonably compromised arising out of injury or death occurring during the towage or other service hereunder of any of the following persons:

(b)
(1) The Master and members of the crew of the Tow and any other servant or agent of the Hirer;
(2) Any other person on board the Tow for whatever purpose except members of the riding crew or any other persons whom the Tugowner provides on board the Tow pursuant to its obligations under this Agreement.

4.Towhire 2008 (Cl 25):(i) The Tugowner will indemnify the Hirer in respect of any liability adjudged due or claim reasonably compromised arising out of injury or death of any of the following persons, occurring during the towage or other service hereunder, from arrival of the Tug at the pilot station or customary waiting place or anchorage at the Place of Departure (whichever is sooner), until disconnection at the Place of Destination, 266 however such geographic and/or time limits shall not apply to sub-clause 25(a)(i)2. below:
(1) The Master and members of the crew of the Tug and any other servant or agent of the Tugowner;
(2) The members of the riding crew provided by the Tugowner or any other person whom the Tugowner provides on board the Tow;
(3) Any other person on board the Tug who is not a servant or agent of the Hirer or otherwise on board on behalf of or at the request of the Hirer.

(ii) The Hirer will indemnify the Tugowner in respect of any liability adjudged due or claim reasonably compromised arising out of injury or death occurring during the towage or other service hereunder of  any of the following persons:
(b)
(1) The Master and members of the crew of the Tow and any other servant or agent of the Hirer;
(2) Any other person on board the Tow for whatever purpose except members of the riding crew or any other persons whom the Tugowner provides on board the Tow pursuant to its obligations under this Agreement.
(i) The following shall be for the sole account of the Tugowner without any recourse to the Hirer, his servants, or agents, whether or not the same is due to any breach of contract, negligence or any other fault on the part of the Hirer, his servants or agents:
(1) Save for the provisions of Clause 16 (c), loss or damage of whatsoever nature, howsoever caused to or sustained by the Tug or any property on board the Tug.
(2) Loss or damage of whatsoever nature caused to or suffered by third parties or their property by reason of contact with the Tug or obstruction created by the presence of the Tug.
(3) Loss or damage of whatsoever nature suffered by the Tugowner or by third parties in consequence of the loss or damage referred to in (1) and (2) above.
(4) Any liability in respect of wreck removal or in respect of the expense of moving or lighting or buoying the Tug or in respect of preventing or abating pollution originating from the Tug.

The Tugowner will indemnify the Hirer in respect of any liability adjudged due to a third party or any claim by a third party reasonably compromised arising out of any such loss or damage. The Tugowner shall not in any circumstances be liable for any loss or damage suffered by the Hirer or caused to or sustained by the Tow in consequence of loss or damage howsoever caused to or sustained by the Tug or any property on board the Tug.

(ii) The following shall be for the sole account of the Hirer without any recourse to the Tugowner, his servants or agents, whether or not the same is due to any breach of contract (including as to the seaworthiness of the Tug), negligence or any other fault on the part of the Tugowner, his servants or agents:
(1) Loss or damage of whatsoever nature, howsoever caused to or sustained by the Tow.
(2) Loss or damage of whatsoever nature caused to or suffered by third parties or their property by reason of contact with the Tow or obstruction created by the presence of the Tow.
(3) Loss or damage of whatsoever nature suffered by the Hirer or by third parties in consequence of the loss or damage referred to in (1) and (2) above.
(4) Any liability in respect of wreck removal or in respect of the expense of moving or lighting or buoying the Tow or in respect of preventing or abating pollution originating from the Tow.

The Hirer will indemnify the Tugowner in respect of any liability adjudged due to a third party or any claim by a third party reasonably compromised arising out of any such loss or damage but the Hirer shall not in any circumstances be liable for any loss or damage suffered by the Tugowner or caused to or sustained by the Tug in consequence of loss or damage, howsoever caused to or sustained by the Tow.

(c) Save for the provisions of Clauses 17, (Permits & Certification); 18, (Tow-worthiness of the Tow); 19, (Seaworthiness of the Tug); 22 (Termination by the Hirer) and 23 (Termination by the Tugowner), neither the Tugowner nor the Hirer shall be liable to the other party for
(i)  any loss of profit, loss of use or loss of production whatsoever and whether arising directly or indirectly from the performance or non performance of this Agreement, and whether or not the same is due to negligence or any other fault on the part of either party, their servants or agents, or
(ii)  any consequential loss or damage for any reason whatsoever, whether or not the same is due to any breach of contract, negligence or any other fault on the part of either party, their servants or agents. 


(d) Notwithstanding any provisions of this Agreement to the contrary, the Tugowner shall have the benefit of all limitations of, and exemptions from, liability accorded to the owners or chartered owners of vessels by any applicable statute or rule of law for the time being in force and the same benefits are to apply regardless of the form of signatures given to this Agreement.

5.Cl 26 of Supplytime 2005 – General Average and New Jason Clause

General Average shall be adjusted and settled in London unless otherwise stated in Box 31, according to York-Antwerp Rules, 1994.

Hire shall not contribute to General Average. Should adjustment be made in accordance with the law and practice of the United States of America, the following provision shall apply:

“In the event of accident, danger, damage or disaster before or after the commencement of the voyage, resulting from any cause whatsoever, whether due to negligence or not, for which, or for the consequence of which, the Owners are not responsible, by statute, contract or otherwise, the cargo, shippers, consignees or owners shall contribute with the Owners in General Average to the payment of any sacrifices, loss or expenses of a General Average nature that may be made or incurred and shall pay salvage and special charges incurred in respect of the cargo.

If a salving vessel is owned or operated by the Owners, salvage shall be paid for as fully as if the said salving vessel or vessels belonged to strangers. Such deposit as the Owners, or their agents, may deem sufficient to cover the estimated contribution of the cargo and any salvage and special charges thereon shall, if required, be made by the cargo, shippers, consignees of owners of the cargo the Owners before delivery”.

6Birkley v Presgrave 1 East 220.

7.Australian Coastal Shipping Commission v Green [1971] 1 Q.B.456 – The tugs were summoned by the Plaintiff’s shore officers and not the masters of the two vessels concerned.  See also Papayanni v Grampian S.S.Co (1896) 1 Com. Cas. 448 where the defendants ship which was on fire was scuttled by the order of the captain of the port when he came on board.

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