Mitsui & Company Ltd and Others v Beteiligungsgesellschaft LPG Tankerflotte mbH & Company KG and Another (mv Longchamp)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Hamblen,Sir Timothy Lloyd,Lord Justice Kitchin |
| Judgment Date | 13 July 2016 |
| Neutral Citation | [2016] EWCA Civ 708 |
| Docket Number | Case No: A3/2014/3710 (A) |
| Court | Court of Appeal (Civil Division) |
| Date | 13 July 2016 |
[2016] EWCA Civ 708
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
MR STEPHEN HOFMEYR QC (Sitting as a Deputy High Court Judge)
2013 FOLIO 1270
Royal Courts of Justice, Strand, London, WC2A 2LL
Lord Justice Kitchin
Lord Justice Hamblen
and
Sir Timothy Lloyd
Case No: A3/2014/3710 (A)
A3/2014/3710
Simon Croall QC and Paul Toms (instructed by Salvus Law Ltd) for the Appellants
Stephen Kenny QC and Richard Sarll (instructed by Stephenson Harwood LLP) for the Respondents
Hearing dates: 28 and 29 June 2016
Approved Judgment
Introduction
On 29 January 2009 the chemical carrier m.v. "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").
At 06.40 that day 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$6 million. The vessel's owners ("the owners") had meanwhile formed a crisis management team who had set a target settlement figure of US$1.5 million. 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 days and 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$1.85 million.
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.
The essential issue on appeal is whether the vessel operating expenses incurred during the period of negotiation ("the negotiation period expenses") are allowable in General Average. 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".
It is accepted that the ransom payment itself can be so allowed under Rule A of the York-Antwerp Rules. The main dispute between the Appellant cargo interests and the Respondent owners is whether the negotiation period expenses can be allowed as substituted expenses under Rule F. We are told that this is the first time that this Rule has been considered by the English courts.
The Rules
As stated in Scrutton on Charterparties (22 nd edition) at 12–043, at common law: "All loss which arises in consequence of extraordinary sacrifices made or expenses incurred in the preservation of the ship or cargo comes within the general average, and must be borne proportionately by all who are interested".
Nowadays rights in General Average are almost invariably governed by the York-Antwerp Rules, as made applicable by the contract of carriage. The York-Antwerp Rules date back to 1877 and there have been various versions of those Rules over the intervening period. The latest version of those Rules are the 2016 Rules, although it is the 1974 Rules which were made contractually applicable in this case.
The York-Antwerp Rules 1974 ("the Rules") comprise a Rule of Interpretation, seven lettered Rules (A-G) of general application, followed by 22 numbered Rules (I-XXII) dealing with various specific matters.
The Rules most relevant to the present case are the following:
" Rule of Interpretation
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.
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.
….
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 … shall not be admitted as general average.
….
Rule E
The onus of proof is upon the party claiming in general average to show that the loss or expense claimed is properly allowable as general average.
Rule F
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 Rule of Interpretation, which was introduced in 1950, makes it clear that if the numbered rules provide that an expense or loss is either to be allowed or not be allowed then it does not matter whether the requirements of the lettered rules are also met — see Lowndes and Rudolf, The Law of General Average and the York-Antwerp Rules, 14 th Ed (" Lowndes") at PRE.08.
However, the Rules are to be construed as a whole so that the numbered rules should be construed taking into account the general principles of the Rules stated in the lettered rules and the numbered rules shall override the lettered rules only to the extent that there is inconsistency — see Lowndes at PRE.09–10.
As to the lettered Rules, the scheme may be summarised as follows:
(1) Rules B and G address how the average adjustment is to be performed and not the circumstances in which there has been a General Average expenditure or sacrifice.
(2) Rule D makes clear that the adjustment should be performed without regard to the fault of any of the parties to the adventure and preserves the right of any party to rely upon that fault in defence to a claim for contribution.
(3) Rule E provides that the burden of proof is on the party claiming in General Average to show that the loss or expense claimed is "properly allowable" as General Average.
(4) Only Rules A, C and F address the circumstances in which a sacrifice or expenditure gives rise to an allowance in General Average.
The York-Antwerp Rules 1994 added a Rule Paramount after the Rule of Interpretation and before the lettered Rules. It provides that:
"In no case shall there be any allowance for sacrifice or expenditure unless reasonably made or incurred."
The Adjustment
In the first instance average adjusters applying the Rules will determine whether losses and expenditure arose in circumstances and are of a kind that requires a General Average contribution and the extent of that contribution from each of the interests. In this case there was an adjustment made by Mr Robin Aggersbury of Messrs Stichling Hahn Hilbrich ("SHH") dated 31 August 2011 ("the Adjustment").
The negotiation period expenses concern the following costs incurred during the negotiation period:
(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 (i.e. food and supplies).
(4) US$11,115.45 for bunkers consumed.
(5) US$20,639.30 for professional media response services.
The Adjustment found that these costs were recoverable in General Average under Rule F. The Adjuster's reasoning was as follows:
"Vessel's Owners and Managers together with the appointed Consultant negotiated successfully the initial demand of ransom in an amount of USD6.000.000,00 down to an amount of finally USD1.850.000,00 during a negotiation period of about 51 days, so that an amount of USD4.150.000,00 was saved in the common interest of all property owners concerned, which would have been otherwise recoverable in General Average as per Rule A of the York-Antwerp Rules 1974. We are of the considered opinion that the expenses, which were incurred during the period of negotiation over the ransom amount, can be allowed in General Average as substituted expense as per Rule F of the York Antwerp Rules 1974, but only up to the amount of General Average expense which has been avoided".
The cargo interests brought proceedings seeking repayment of their contribution towards the negotiation period expenses on the grounds that they are not allowable in General Average. The Judge held that items (i) to (iv) were allowable under Rule F and that item (v) was allowable under Rule A. That decision is challenged on various grounds as set out in amended grounds of appeal. Permission to amend and to appeal is needed for one of the amended grounds and is opposed by the Respondents.
The outline facts
At the trial there were various documents before the Judge, including documents contained in the Adjustment, and two Reports of the Advisory Committee of the Average Adjusters' Association. There were witness statements from Mr Chruscz, the Director of Finance of the vessel's Managers, Mr Riepen of the Manager's Operating and Chartering Department, and Mr Poetzsch of SHH. None of the witnesses gave oral evidence. Their evidence, which was not seriously challenged, is summarised at...
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