Mitsui & Company Ltd and Others v Beteiligungsgesellschaft LPG Tankerflotte MBH & Company KG and another
| Jurisdiction | England & Wales |
| Judge | Lord Neuberger,Lord Clarke,Lord Sumption,Lord Hodge,Lord Mance |
| Judgment Date | 25 October 2017 |
| Neutral Citation | [2017] UKSC 68 |
| Date | 25 October 2017 |
| Court | Supreme Court |
[2017] UKSC 68
Lord Neuberger
Lord Mance
Lord Clarke
Lord Sumption
Lord Hodge
Appellants
Stephen Kenny QC
Richard Sarll
(Instructed by Stephenson Harwood LLP)
Respondents
Simon Croall QC
Paul Toms
(Instructed by Salvus Law Limited)
Heard on 17 and 18 July 2017
(with whom Lord Clarke, Lord SumptionandLord Hodgeagree)
This appeal raises the issue whether the daily vessel-operating expenses of shipowners incurred while they were negotiating to reduce the ransom demands of pirates should be allowed in general average — ie whether those expenses should be shared proportionately between all those whose property and entitlements were imperilled as a result of that seizure — or whether they must be borne by the shipowner alone.
General average refers to the system of maritime law by which sacrifices of property made, and loss and expenditure incurred, as a direct result of actions taken for the purpose of preserving a common maritime adventure from peril are rateably shared between all those whose property is at risk in the adventure. The principle of rateable sharing of such losses between parties to a maritime adventure appears to date back at least to the law of the Rhodians. Having been adopted by the Romans, it passed on a customary basis into European sea laws of the Middle Ages, and thence into modern European Codes. It appears that the expression "general average" started to be used in English judgments around the end of the 18th century and was first authoritatively discussed judicially in this country by Lawrence J in Birkley v Presgrave (1801) 1 East 220, 228–229. It was first recognised statutorily in section 66 of the Marine Insurance Act 1906.
The York-Antwerp Rules are an internationally agreed sets of rules, the first set (under that name) propounded in 1877, since when they have gone through a number of versions. The latest version was agreed in 2016. The Rules are designed to achieve uniformity in ascertaining which losses fall within the principle, in determining the method of calculating those losses, and in deciding how they are to be shared. Although internationally agreed between relevant expert and interested bodies, the Rules are not the subject of English legislation or international convention, and they derive legal force only through contractual incorporation. In the present case the 1974 version of the Rules was contractually incorporated into the relevant carriage contract. I will refer to that version as "the Rules". The Rules are in English and French, and for the most part I shall confine myself to the English version.
The Rules are introduced by a "Rule of Interpretation", which states that:
"In the adjustment of general average the following lettered and numbered Rules shall apply to the exclusion of any Law and Practice inconsistent therewith.
Except as provided by the numbered Rules, general average shall be adjusted according to the lettered Rules."
The seven lettered Rules are shortly expressed and are plainly intended to be of general application, whereas most of the 22 numbered Rules are lengthier, a few of them much lengthier.
Three of the lettered Rules are of particular relevance to this appeal, namely Rules A, C, and F. Rule A is in these terms:
"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."
Rule C provides:
"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 whatsoever, such as loss of market, shall not be admitted as general average."
Rule F states:
"Any extra expense incurred in place of another expense which would have been allowable as general average shall be deemed to be general average and so allowed without regard to the saving, if any, to other interests, but only up to the amount of the general average expense avoided."
The numbered Rules play no part in these proceedings, save that some reliance has been placed on Rule XI. That Rule is concerned with "Wages and Maintenance of Crew and other expenses bearing up for and in a Port of Refuge etc", and is the second longest of the Rules. It provides among other things for crew wages and maintenance to be recoverable in general average where Rule XI applies.
On 29 January 2009 the chemical carrier MV Longchamp ("the vessel") was transiting the Gulf of Aden on a voyage from Rafnes, Norway, to Go Dau, Vietnam, laden with a cargo of 2,728.732 metric tons of Vinyl Chloride Monomer in bulk ("the cargo"). The cargo was carried under a bill of lading dated 6 January 2009 which stated on its face that "General Average, if any, shall be settled in accordance with the York-Antwerp Rules 1974".
At 06.40, seven heavily armed pirates boarded the vessel. The pirates commanded the master to alter course towards the bay of Eyl, Somalia, where she arrived and dropped anchor at 10.36 on 31 January 2009. At 14.05 on 30 January 2009 a negotiator for the pirates boarded the vessel and demanded a ransom of US$6m. The vessel's owners ("the owners") had meanwhile formed a crisis management team who had set a target settlement figure of US$1.5m. On 2 February 2009 an initial offer of US$373,000 was put to the pirates. Negotiations between the pirates' negotiators and the owners' crisis management team continued over the following seven weeks with various offers and counter-offers being made.
Eventually on 22 March 2009, after a negotiation period of 51 days, a ransom was agreed in the amount of US$1.85m. On 27 March 2009 the ransom sum was delivered by being dropped at sea. At 07.36 on 28 March 2009 the pirates disembarked and at 08.00 that day the vessel continued her voyage.
It is accepted that the US$1.85m ransom payment itself can be allowed under Rule A. It is also accepted that the costs and expenses of the negotiator in relation to the ransom, Captain Ganz, and the costs and expenses of his special advisers, NYA International, are allowable. There was a dispute about the allowability of a sum of around US$20,640 in respect of media expenses but that is no longer challenged by the cargo interests.
The essential issue on this appeal is whether the vessel-operating expenses incurred during the period of negotiation ("the negotiation period expenses") are allowable in general average under Rule F. Those sums are:
(1) US$75,724.80 for crew wages paid to the crew.
(2) US$70,058.70 for "high risk area bonus" paid to the crew by reason of the fact that the vessel was detained within the Gulf of Aden. These are additional wages which the crew were entitled to under their contract of employment whilst at sea within a "high risk area".
(3) US$3,315 for crew maintenance (ie food and supplies).
(4) US$11,115.45 for bunkers consumed.
In this judgment, I shall treat the aggregate sum as being US$160,000.
The average adjuster, Mr Robin Aggersbury of Stichling Hahn Hilbrich, considered that the negotiation period expenses were allowable under Rule F on the basis that they were incurred "during a negotiation period of about 51 days" which enabled "an amount of US$4,150,000 [to be] saved in the common interest of all property owners concerned, which would otherwise have been recoverable as per Rule A". The 51-day period to which he referred was, as explained above, from 30 January to 22 March 2009. The cargo was valued at destination at US$787,186 and the value of the vessel was assessed at US$3,947,096; so cargo interests were liable for 14.44% of the total general average expenditure. Following publication of the adjustment, the cargo interests requested and obtained a report ("the Report") from the Advisory Committee of the Association of Average Adjusters. The Report set out the facts in considerable detail, and concluded, by a majority of four members to one, that the negotiation period expenses did not fall within Rule F.
The cargo interests had previously made payments on an account of general average, but following the publication of the adjustment they issued proceedings challenging (in accordance with the Report) the adjuster's conclusion that the negotiation period expenses fell within Rule F, and seeking an appropriate repayment.
The owners' argument involves the following steps. First, it is rightly common ground that the US$1.85m ransom paid to the pirates for the release of the vessel was expenditure which was "a general average act" within Rule A. Secondly, the negotiation period expenses claimed fell within the expression "expense incurred" by the owners within Rule F. Thirdly, those expenses were "incurred in place of another expense", namely the US$4.15m saved as a result of the negotiations. Fourthly, those expenses, being US$160,000, are less than "the general average expense avoided", namely the US$4.15m (and for the sake of simplicity I will treat this as the saving, although the actual saving was somewhat less by virtue of expenses such as those paid to Captain Ganz and NYA). Fifthly, it follows from this that the negotiation period expenses are properly allowable under Rule F.
The cargo interests raise a number of points in answer to this argument, and those points (which I shall take in...
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