Australian Coastal Shipping Commission v Green
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE PHILLIMORE,LORD JUSTICE CAIRNS |
| Judgment Date | 02 December 1970 |
| Judgment citation (vLex) | [1970] EWCA Civ J1202-2 |
| Date | 02 December 1970 |
| Court | Court of Appeal (Civil Division) |
[1970] EWCA Civ J1202-2
In The Supreme Court of Judicature
Court of Appeal
A Appeal of first defendant from judgment of Mr. Justice Mocatta dated December 19th, 1969.
The Master of the Rolls (Lord Denning)
Lord Justice Phillimore and
Lord Justice Cairns
Mr. MICHAEL MUSTILL, Q.C., and Mr. S. OLSON appeared on behalf of the Appellant First Defendant.
Mr. CHRISTOPHER STAUGHTON, Q.C., and Mr. DAVID GRACE appeared on behalf of the Respondent Plaintiffs.
1. INTRODUCTORY
We so rarely have to consider the law of general average that it is as well to remind ourselves of it. It arises when a ship, laden with cargo, is in peril on the sea, such peril indeed that the whole adventure, both ship and cargo, is in danger of being lost. If the Master then, for the sake of all, throws overboard some of the cargo, so as to lighten the ship, it is unjust that the owner of the goods so jettisoned should be left to bear all the loss of it himself. He is entitled to a contribution from the shipowner and the other cargo owners in proportion to their interests. See the exposition by Lord Tenterden quoted in Hallett v. Wigram (1850 9 C.B.) at pages 607-608; and Burton v. English (1883 12 Q.B.D. 218). Likewise if the Master, for the sake of all, at the height of a storm, cuts away part of the ship's tackle (as in Birkley v. Presgrave (1801 1 East 220); or cuts away a mast (as in Attwood v. Sellars (1880 5 Q.B.D.280), or, having sprung a leak, puts into a port of refuge for repairs and spends money on them (as in Svensden v. Wallace (1885 10A.C. 404), it is unfair that the loss should fall on the shipowner alone. He is entitled to contribution from the cargo owners for the loss or expenditure to which he has been put. In all such cases the act done by the Master is called a "general average act": and the loss incurred is called a "general average loss".
The principles underlying these cases have been codified in the Marine Insurance Act 1906, which defines a "general average act" in Section 66(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".
And it defines a "general average loss" in Section 66(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".
These definitions, however, have been supplemented by the York-Antwerp Rules 1950 which replaced the 1924 Rules, and which by agreement, apply in the two cases now Before us. In those Rules a "general average act" is defined by Rule A:
"There is a general average act when, andonly 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".
And a "general average loss" is defined by Rule C:
"Only such losses, damages or expenses which are the direct consequence of the general average act shall be allowed as general average. Loss or damage sustained by the ship or cargo through delay, whether on the voyage or subsequently, such as demurrage, and any indirect loss whatever, such as loss of market, shall not be admitted as general average".
2. THE TWO CASES BEFORE US
(i) The Bulwarra
On 13th July 1960, the Bulwarra was moored in a port in New South Wales, laden with steel products. A violent storm arose. Her after mooring carried away. Her owners had an officer on shore. He saw the danger. He signalled for help to the Captain of a tug called The Hero. The tug got a line aboard and towed the Bulwarra for about ten minutes. Then the tow-line parted. It wrapped itself round the propeller of the tug and stopped it revolving. The tug drifted helplessly. Her anchors were useless. They were inboard and securely lashed to the bulwarks. They had no chains attached to them. The tug grounded and became a total loss. But the Bulwarra managed to get to safety.
The tug-owners had thus lost their tug by their own negligence. But they claimed to be indemnified by the owners of the Bulwarra, They said that they were engaged on the terms of the United Kingdom Standard Towing Conditions which contain this provision:
"The tug owner shall not, whilst towing, bear or be liable for damage of any description done by or to the tug or for loss of the tug, arising from any cause, including negligence at any time of the tug owner's servants or agents and the hirer shall pay"for all loss or damage and shall also indemnify the tug owner against all con sequences thereof Provided that any such liability for loss or damage as above set out is not caused by want of reasonable care on the part of the tug owner to make his tugs seaworthy".
The owners of the Bulwarra acknowledged that, by the course of dealing, they hired the tug on those conditions. But they resisted the claim on the ground that the loss of the tug was caused by want of reasonable care on the part of the tug owners to make the tug seaworthy. They succeeded in the defence and were awarded costs against the tug owners. But in that action the ship-owners recovered only party and party costs. The shipowners had to pay to their own lawyers, the solicitor and client costs. This left them out of pocket $A.3396.31 or £1,313 5s. 4d. They claim that this was a general average expenditure. If this is right, they can recover their own proportion from the insurers and the rest from the cargo owners. But the insurers say it was not general average expenditure, and is, therefore, not recoverable from them.
At first sight, it seems strange that such costs should be regarded as general average expenditure. But I must notice an important arrangement that the parties have made. The insurers have agreed that, if the shipowners had lost the case brought by the tug-owners (and thus became liable to indemnify the tug- owners for the loss of the tug): and, if in that case the expenditure by way of indemnity would have been general average expenditure, then this sum of £1,313 5s. 4d. for costs (which they had to pay their own solicitors) should be treated as general average expenditure. The reason for this agreement is, no doubt, to encourage shipowners in like case to resist a claim by the tugowners.
(ii) "The Wangarra"
On 17th November 1961, the Wangarra sailed from Melbourne with a cargo of steel products for carriage to Auckland, New Zealand. Next day she grounded. Two shore officers of the owners engaged the tug Walumba to tow her off. Whilst the tugwas towing the Wangarra, the tow rope parted and wrapped itself round the propeller of the tug and the tug was damaged. A pilot vessel came to the assistance of the tug and towed it to safety. The Wangarra also got to safety. The pilot vessel claimed salvage remuneration from the owners of the tug and was awarded it.
The tug owners then claimed to be indemnified by the owners of the Wangarra. They relied on the United Kingdom Standard Towage Conditions. The conditions were again incorporated by the course of dealing. The owners of the Wangarra resisted the claim but were found liable. Their total expenditure came to $50,446.71 (£20,098 5s. 9d), made up of:
(a) The damage to the tug herself;
(b) The ealvage award payable by the tug to the pilot vessel;
(c) The costs payable to the tug owners;
(d) Their own costs of resisting the claim of the tug owners.
The owners of the Wangarra say that that expenditure was general average expenditure: and that they can recover their own proportion from the insurers and the rest from the cargo owners. The insurers say it was not general average expenditure. In each of the two cases, we must ask, first, what was the general average act? Second, what was the general average loss?
3. THE GENERAL AVERAGE ACT
The "general average act" was I think the contract made by the shipowners with the tug. In each case the vessel was in dire peril and the shipowners called upon the tug for help. If the tug had rendered salvage services on the usual terms of "no cure, no pay", the contract would undoubtedly have been a "general average act". If the services had been successful, the owners would have been liable to pay a very high reward: which would count as "general average expenditure". If the services had beenunsuccessful, they would have had to pay nothing, see The Tojo Maru (1969 3 W.L.R at./931). Instead of entering into such a contract, the shipowners made a towage contract on the United Kingdom Standard Towage Conditions. That was a very reasonable contract to make for both sides. It is well known that there is a substantial risk in towage operations that the tow rope may break and foul the propeller of the tug: and that, if that happens, the tug may run aground or be damaged and have to be rescued. In a salvage agreement, the tug owners take that risk on themselves in return for the chance of a very high salvage reward. In a hiring agreement, at a fixed rate of hire, they cannot be expected to take the risk on themselves. It is only right and fair that they should ask for and receive an indemnity. The benefit to the shipowners is that, if the service is successful, he pays much less than he would under a salvage award: but, in return, he has to give an indemnity to the tug owner. In these circumstances, I have no doubt that the towage contract is a "general average act". It was intentionally and reasonably made for the common safety: just as was the contract in The Gratitudine (1801 3 C. Rob.240) (for the hypothecation of the cargo); and in Anderson Tritton & Co. v. The...
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