Report No. 21
Clause 67
Genetal.-This deals with general average loss.
Explanation of the various concepts of general average (i) act, (ii) loss, (iii) contribution.-Some amount of confusion results from the fact that the expression "general average" is used in several senses, which though related to each other, are not the same. First, there is a general average act; next, there is a general average loss; lastly, there is a general average contribution. The expression "general average" is used to cover all these three, which are explained below:-
In the topic of "general average", a general average act comes first. In time of peril, for the purpose of preserving property imperilled in common adventure, where extraordinary sacrifice or expenditure is incurred voluntarily and reasonably, there arises a general average act. The act thus denotes such
(i) sacrifice, or
(ii) expenditure.
When such an act is done, naturally, a loss is caused as a result thereof. If the loss is caused by or directly consequential on a general average act, the loss is called a general average loss.
Where such a loss arises, the question that naturally comes to mind is, who will pay for it? Section 66(3) of the English Act provides that the party on whom such loss falls is entitled to rateable contribution from the other parties interested; this contribution is called a general average contribution.
The chronological order of the various steps can be shown in the form of a chart as follows:-
Chart 21.80
CHART (General Average)
General average act
General average loss (i) sacrifice or
(ii) expenditure
General average contribution.
Recovery from insurer.-So far, we have been dealing with the assured and his rights to contribution from others. Marine insurance, however, also steps in by providing that if the general average loss was incurred in connection with a peril insured against, the assured can recover from the insurer the loss caused to him, subject to any express provision in the policy. Now, here the right to recovery can be dealt with under two heads:
(i) where the loss has itself occurred to the assured; and
(ii) where the loss has occurred to others and the assured has contributed as a contributory.
Further, in the first case there is some distinction if the loss is caused by "expenditure" as distinct from a loss caused by "sacrifice".
The following chart will illustrate the topic of recovery from the insurer:-
Chart-(Recovery for general average from the insurer)
Loss the has occurred to the assured.-(a) General average expenditure.-Proportion of the loss which falls upon the assured can be recovered from the insurer-section 66(4), earlier part.
(b) General average sacrifice.- Whole loss may be recovered from insurer, without enforcing contribution from others-section 66 (4), latter part.
Contribution paid or payable by the assured to others.-May be recovered from the insurer-section 66(5).
How general average loss differs from other losses-reasons behind the rule.-A general average loss is voluntary and is "deliberately designed to prevent greater losses"1 That is how it differs from other losses, which are caused purely by accident. A loss caused by accident lies where it falls, that is to say, it is borne by the owner whose cargo is lost. But a general average loss is effected purposely for the benefit of all persons interested, and hence other interests which have been saved must contribute to make good the loss. The doctrine "springs from a rule of law applicable to all who chance to have interests on board a ship at sea exposed to some common danger threatening the whole; it is founded upon justice, public policy and convenience".2
York-Antwerp Rules.-Since the working out of contribution under general average-what is called "average adjustment"-may have to be effected between persons belonging to different countries, and may give rise to problems of conflict of laws, ship-owners have evolved a standard set of rules relating to general average, known as York-Antwerp Rules. The Rules are incorporated in charter-parties and bills of lading, and differ on some points from the provisions in the Marine Insurance Act. It is not, however, necessary here to discuss the Rules in detail.3
Ingredients of general average Act.-Section 66 (2) of the English Act gives a definition of a general average act, and on analysis the definition will be found to yield the following ingredients:-
(i) Existence of actual danger, expressed may the words "in time of peril". Thus, a sacrifice made at a time when the master of the ship believes that there was fire on the hold while actually there was no danger, would not be a general average act.4-5
Departure from the English Act-in York-Antwerp Rules-Discussed.-It has been said that a mistaken belief in the existence of the danger, if reasonable, may turn the act into a general average act under the York-Antwerp Rules.5-6 The position, however, is by no means clear and conflicting opinions have been expressed. In the U.S.A. a reasonable apprehension of danger is sufficient.7 In view of the doubt existing an the subject even in England as to whether the York-Antwerp Rules strike a departure from the English Act, it is considered unnecessary to depart from the language of the section on this point.
(ii) There must be some extraordinary sacrifice or expenditure. The sacrifice or expenditure must not fall "within the compass of the ordinary duties of the ship-owner". If, for example, a sailing ship having an auxiliary engine loses her sailing power and has to use steam, thereby increasing the expenses, the increased expenditure is not extraordinary.8
The "sacrifice" may consist of "jettison", that is, throwing away of the cargo to lighten the ship, or it may consist of burning the cargo and spars as additional fuel for pumping water by the donkey engine where the coal runs short and the ship has sprung a leak.
(iii) The act must be voluntary. It must not be-
(a) an ad of God, for example, a storm which washes out the cargo but preserves the other property;
(b) an act of other person, for example, that of a mob which takes away the cargo of corn where the vessel is stranded.9
Query.-The York-Antwerp Rules, rule A, speaks of a sacrifice or expenditure which is "intentionally" made or incurred. The question has been raised whether this means a departure from the statutory expression "voluntary". The expression "intentionally" is also used in rule V of those Rules, though the marginal note to those rules is, curiously, "voluntary stranding".
(iv) The act must be reasonable in the circumstances of the case.
(v) The act must have been done for the purpose of preserving the property imperilled in the adventure. In rule A of the York-Antwerp Rules, the words "for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure" are used.
Success of the adventure.-It has been said, that both at Common Law and under the York-Antwerp Rules, contribution can be demanded only if the general average act is successful, that is to say, if the adventure as a whole has been saved.10 If no property escapes the dangers from which the sacrifice was intended to save it, there is no general average.
Departure from the English Act.-It has been suggested that in section 66 (5), (of the English Act) the word "subject" should be "subject-matter" or "interest" and in section 66 (7), it should be "interest".11 The suggestion appears to be reasonable and has been adopted.
1. Lord Chorley law of Shipping, 3rd Edn., p. 173.
2. Fire v. Middle Dock Co., (1881) 44 LT 426, cited in Dover Handbook to Marine Insurance, 1957 Edn., p. 419.
3. For the text of the rules, see
(i) Dover, p. 743 et seq.
(ii) Keate, p. 171 et seq.
4. Watson (Joseph) & Co. v. Firemen's Fund Insurance Co., (1922) 2 KB 355: 92 LJKB 31.
5. See Halsbury, 3rd Edn., Vol. 22, pp. 122 and 125.
6. The relevant rule is Rule A, York-Antwerp Rules, 1950 reproduced in Chalmers, p. 214 and Dover, p. 750.
7. See Lord Chorley Law of Shipping, 4th Edn., p. 182.
8. Wilson v. Bank of Victoria, 1867 LR 2 QB 203.
9. Lord Chorley Law of Shipping, 3rd Edn., p. 182.
10. Lord Chorley Law of Shipping, 3rd Edn., p. 185.
11. See Chalmers, p. 102, footnotes 1 and 3.
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