A-1927-83
Ellerman Lines Ltd. (Appellant) (Plaintiff)
v.
Gibbs, Nathaniel (Canada) Ltd., American
Motorists Insurance Company, American Manu
facturers Mutual Insurance Company, Lumber -
mens Mutual Casualty Company, Fidelity Life
Association, Federal Mutual Insurance Company,
Tetley Inc., Atlantic Mutual Insurance Co., and
Centennial Insurance Company (Respondents)
(Defendants)
INDEXED AS: ELLERMAN LINES LTD. v. GIBBS, NATHANIEL
(CANADA) LTD. (F.CA.)
Court of Appeal, Pratte, Stone and Lacombe JJ.—
Montreal, March 10; Ottawa, April 10, 1986.
Maritime law — General average — Affreightment contract
providing for shipment of goods to Toronto — Ship delayed in
Montreal for repairs — Goods delivered in Montreal — Trial
Judge holding conditions for general average not existing as
neither cargo nor vessel ever in peril — Appeal dismissed —
York-Antwerp Rules, 1974 applicable — Respondent not
liable to contribute in general average — General average
situation existing at Montreal under Rule XI(b) as repair of
engines "necessary for safe prosecution of voyage" — Absence
of evidence re: cause of damage preventing application of Rule
XI(b) proviso — American and British case law reviewed —
Delivery of cargo permanently severing connection between
cargo and vessel — Expenditures incurred subsequent to
delivery incurred for safety of ship alone — York-Antwerp
Rules, 1974, RR. A, XI(b) — York-Antwerp Rules, 1950, RR.
A, X(b), XI(b).
This is an appeal from a decision of the Trial Division [ 1984]
1 F.C. 411 on a stated case. The action is for a contribution in
general average. The respondent's goods were loaded on board
the appellant's vessel in India for delivery at Toronto. The
vessel was delayed in Montreal as repairs to its main engines
were required. The damage was discovered after the ship's
arrival in port. The respondent obtained delivery of the cargo at
Montreal pursuant to a mandatory injunction. The Trial Judge
was asked to decide whether a general average situation existed
immediately after the cargo was delivered, and whether the
defendants were obliged to contribute in general average for
expenses incurred after the cargo was discharged, but before
the ship reached Toronto. He dismissed the action, holding that
conditions required for general average never existed because
neither the cargo nor the vessel was ever in peril. He concluded
that, even if general average conditions had existed, the cargo
owners were justified in requiring that their cargo be dis
charged in Montreal on payment of the freight charges for the
entire voyage. They were not liable for expenses subsequently
incurred.
Held, the appeal should be dismissed.
Per Stone J. (Lacombe J. concurring): The respondents are
not liable to contribute in general average.
The contract of affreightment provided for the adjustment of
general average "according to the York-Antwerp Rules 1974".
Clearly the parties intended those Rules to apply both in
determining whether a general average situation existed and, if
it did, the respective amounts each party would be obliged to
contribute. The respondents submit that the parties agreed at
the hearing that the Rules were not of assistance and could be
ignored. This agreement was made only after the parties had
amended the question in the stated case by adding "immediate-
ly after the cargo was delivered". There was no need to consult
the Rules to determine whether that situation continued to exist
after delivery of the cargo. The parties agreed not to lead
evidence on the Rules, but that is not the same as saying that
they are to be ignored altogether when, plainly, they are part of
the contract. The Rules must be applied in determining wheth
er a general average situation existed before the cargo was
delivered. If one did exist, it must be determined whether it still
existed immediately after the cargo was delivered.
The York-Antwerp Rules, 1974 provide that general average
shall be adjusted according to the lettered Rules except as
provided by the numbered Rules. Rule A provides that there is
a general average act when any extraordinary expenditure is
intentionally incurred for the purpose of preserving from peril
the property involved in a common maritime adventure. Rule
XI(b) provides that when a ship is detained in port in conse
quence of accident, sacrifice or other extraordinary circum
stances to enable it to be repaired, if the repairs were necessary
for the safe prosecution of the voyage, general average applies.
The Trial Judge did not approach the question in light of the
Rules, thinking that the agreement between the parties preclud
ed him from doing so.
A general average situation existed at Montreal pursuant to
Rule Xl(b). Nothing in the record shows what caused the
damage, whether it was discovered "without any accident or
other extraordinary circumstance" connected with it "having
taken place during the voyage". Absence of evidence concern
ing the cause of the damage suggests that, in posing the
question in the stated case, the parties may have assumed that a
general average situation existed by reason of the detention and
the need to make repairs for the safe prosecution of the voyage.
Based on the record, it cannot be said that the engine damage
falls within the Rule XI(b) proviso (i.e., when damages are
discovered in port without accident or other extraordinary
circumstance having taken place during the voyage, general
average does not apply). Besides, repairing the engines at
Montreal was "necessary for the safe prosecution of the voy-
age" to Toronto. It would normally follow that the respondents
must contribute in general average toward the extraordinary
expenses even though subsequently incurred. However, the
circumstances were altered by delivery of the cargo. The
respondents paid full freight to Toronto before taking delivery
of the cargo at Montreal. It has been held in England that
cargo removed from a stranded ship to a place of safety is not
liable in general average for expenses subsequently incurred,
unless its removal was part of one continuous operation to save
both the ship and the cargo rather than the cargo alone. While
the present case is not one of stranding, the respondents
contend that they are covered by the principle in that the cargo
was in a place of safety at the time the expenses were incurred,
and because delivery was not made for the purpose of saving
both the vessel and the cargo. By its delivery the cargo passed
out of the control of the vessel and into the custody and control
of the respondents. The legal effect was to sever permanently
the connection between the cargo and the vessel and to bring
the common adventure to an end. Expenditures incurred subse
quent to that separation were not incurred for the common
safety of the ship and cargo, but for the safety of the ship alone.
Nothing in the Rules or in the contract committed the respon
dents to contribute in general average toward such expenses.
Per Pratte J. (concurring): While the facts may not support
the conclusion that, under the York-Antwerp Rules, 1974, a
general average situation existed when the engines were found
to be damaged, the respondents were under no obligation to
contribute in general average for expenses incurred after they
had received delivery of their cargo.
CASES JUDICIALLY CONSIDERED
CONSIDERED:
Eagle Terminal Tankers, Inc. v. Ins. Co. of USSR, 1981
A.M.C. 137 (2d Cir. 1981); The "Julia Blake", 107 U.S.
418 (1882); Domingo de Larrinaga, 1928 A.M.C. 64
(S.D.N.Y. 1927); Royal Mail Steam Packet Company v.
English Bank of Rio de Janeiro (1887), 19 Q.B.D. 362.
REFERRED TO:
Job v. Langton (1856), 6 EP. & BP. 779; 119 E.R. 1054
(K.B.); Bedford Commercial Insurance Company v.
Parker et al., 2 Pick. 1; 19 Mass. 1 (1823); Pacific Mail
Steamship Co. v. New York, H. & R. Min. Co., 74 Fed.
564 (2d Cir. 1896); Walthew v. Mavrojani (1870), L.R. 5
Ex. 116; McAndrews v. Thatcher, 3 Wall. 347 (1865),
(S.C.).
COUNSEL:
Sean Harrington for appellant (plaintiff).
Vincent M. Prager for respondents (defen-
dants).
SOLICITORS:
McMaster, Meighen, Montreal, for appellant
(plaintiff).
Stikeman, Elliott, Montreal, for respondents
(defendants).
The following are the reasons for judgment
rendered in English by
PRATTE J.: I have had the benefit of reading the
reasons for judgment prepared by my brother
Stone J. While I am not satisfied that the facts
disclosed in the stated case are sufficient to sup
port his conclusion that, under the York-Antwerp
Rules, 1974 [British Shipping Laws, Volume 7,
The Law of General Average and the York-
Antwerp Rules, Tenth Edition] a general average
situation existed on April 14, 1976, I agree with
his further conclusion that, in any event, the
respondents were under no obligation to contribute
in general average for expenses incurred after they
had received delivery of their cargo.
I would, therefore, dispose of the appeal in the
manner suggested by Mr. Justice Stone.
* * *
The following are the reasons for judgment
rendered in English by
STONE J.: This appeal is brought from a deci
sion of the Trial Division [[1984] 1 F.C. 411] on a
case stated pursuant to Rule 475 [Federal Court
Rules, C.R.C., c. 663]. The action is for a contri
bution in general average. The amount in issue is
not large, yet we are told that important questions
of principle are raised.
Factual Background
The essential facts may be shortly stated. In
1976 a contract of affreightment for the carriage
of goods by sea was entered into by the appellant
as carrier and the first respondent as shipper, the
remaining respondents acquiring an interest in the
cargo as underwriters or in some other way. The
goods, consisting of cashews, were loaded on board
the vessel City of Colombo at the Port of Cochin,
India for delivery at the Port of Toronto pursuant
to several bills of lading dated February 17, 18 and
19, 1976. The following printed clauses appear in
each of the bills of lading:
28. GENERAL AVERAGE. General Average shall be adjust
ed according to York-Antwerp Rules 1974, supplemented
by the practice of English Average Adjusters on all points
on which such Rules contain no provision, save and except
that no loss of or injury sustained by live animals whether
by jettison or otherwise, shall be recoverable. Adjustments
shall be prepared at such port as shall be selected by the
Carrier. If a salving vessel is owned or operated by the
Carrier, salvage shall be paid for as fully as if the said
salving vessel or vessels belong to strangers. Such deposit
as the Carrier or his Agents may deem sufficient to cover
the estimated contribution of the goods and any salvage
and special charges thereon shall, if required, be made by
the Shippers, Consignees and/or owners of the goods to the
Carrier before delivery; provided that where an Adjust
ment is made in accordance with the law and practice of
the United States of America or of any other country
having the same or similar law or practice, the following
clause shall apply.
NEW JASON CLAUSE.
(a) 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 Carrier is not
responsible, by statute, contract or otherwise, the goods,
Shippers, Consignees and/or Owners of the goods shall
contribute with the Carrier in general average to the
payment of any sacrifices, losses, 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
goods.
(b) If a salving vessel is owned and operated by the carrier,
salvage shall be paid for as fully as if the said salving
vessel or vessels belonged to strangers. Such deposit as the
Carrier or his Agents may deem sufficient to cover the
estimated contribution of the goods and any salvage and
special charges thereon shall, if required, be made by the
goods, Shippers, Consignees and/or Owners of the goods to
the Carrier before delivery.
Other cargoes were carried on board from other
Far Eastern and African ports to ports in Eastern
Canada including Montreal.
The vessel arrived at the Port of Montreal on
April 10. It was scheduled to depart that port for
the Ports of Toronto and Hamilton on April 24.
Departure was delayed, however, until July 2 and
when it materialized none of her cargo remained
on board. The delay was caused by repairs to the
vessel's main engines which were found to be
damaged on April 14. That damage is described in
the respective memoranda of fact and law filed by
the parties in these proceedings as "severe" and
"extensive". The stated case, as amended at the
hearing, contains the following account of what
transpired after discovery of that damage:
12. THAT for consideration an agreement was reached with
the other owners of cargo on board the said vessel destined
for Toronto, etc., to discharge their goods in Montreal and
forward them by means other than the City of Colombo to
their respective intended ports of discharge, but no such
agreement was reached with the Defendants;
13. THAT by letter dated April 26, 1976, the Plaintiff,
through the average adjusters it appointed, informed the
Defendants that the repairs would take in the region of one
and one-half months to complete. Plaintiff offered to limit
the delay by forwarding the cargo from Montreal to
Toronto by other means but only if the Defendants would
give as additional security to the average bond a "Non
Separation Agreement" which provided:
NON SEPARATION AGREEMENT:
It is agreed that in the event of the Vessel's cargo or
part thereof being forwarded to original destination
by other vessel, vessels or conveyances, rights and
liabilities in general average shall not be affected by
such forwarding, it being the intention to place the
parties concerned as nearly as possible in the same
position in this respect as they would have been in the
absence of such forwarding and with the adventure
continuing by the original vessel for so long as justifi
able under the law applicable or under the contract of
affreightment. The basis of contribution to general
average of the property involved shall be the values on
delivery at original destination unless sold or'other-
wise disposed of short of that destination: but where
none of her cargo is carried forward in the vessel she
shall contribute on the basis of her actual value on the
date she completes discharge of her cargo:
THAT the Defendants offered security in the form of an
average bond but refused to agree to the Non Separation
Agreement and demanded delivery of the cargo at Mon-
treal. The Plaintiff refused to deliver the cargo at Mon-
treal rather than at Toronto and further purported to
exercise a lien on the cargo to secure its claim for general
average contribution. Accordingly, on May 17, 1976,
Gibbs, Nathaniel (Canada) Ltd. took action in The Feder
al Court of Canada under No. T-1896-76 in which inter
alia, it applied for a mandatory injunction ordering Eller-
man Lines Ltd. to deliver the cargo at Montreal solely
against provision of general average security which did not
include a Non Separation Agreement.
THAT on the same day the Honourable Mr. Justice Walsh
granted the said injunction and ordered:
"Injunction to go subject to furnishing by Plaintiff of
general average bond referred to in paragraph 4 of
Affidavit and without deciding whether period of
general average will be extended from the time of
unloading in Montreal to the time the vessel would
have arrived in Toronto which question can if neces
sary be decided by the Court at a later date in
appropriate proceedings, costs in the event."
THAT thereafter general average security without the Non
Separation Clause was provided and the cargo was deliv
ered at Montreal;
14. THAT all general average expenses were incurred
thereafter;
15. THAT defendants took possession of their cargo at
Montreal and that there is no knowledge of what became
of it or where it went thereafter;
The questions submitted to the Court in the
emended stated case appear in paragraph 22
hereof:
22. THAT the sole questions to be determined between
Plaintiff and Defendants are as follows:
(a) Did a general average and/or a common adventure
situation exist immediately after the cargo was
delivered pursuant to the Court Order obliging
delivery?
(b) Were the Defendants entitled to demand and/or
take delivery of the cargo in Montreal, the port of
refuge, or could they be forced to await the repairs
of the vessel and the onforwarding of the cargo to
destination thereafter?
(c) Could the Plaintiff oblige the Defendants to sign a
Non-Separation Agreement before they took deliv
ery in Montreal?
(d) Was the contract of carriage frustrated at
Montreal?
(e) For all intents and purposes was the contract of
carriage completed at Montreal?
(f) Is there an obligation on the Defendants to contrib
ute in general average for expenses incurred after
the cargo was physically discharged from the vessel
but before the vessel reached her intended port of
destination?
The adjustment upon which the amount claimed is
based is not before us. Nor were we told how the
figure was arrived at. However, the parties are
agreed that the sum of $22,500 represents the
amount of the expenses referred to in paragraph
22(f) and that, if the claim is allowed, it should
bear interest "at the average bank prime rate"
from August 1, 1978.
The Decision Below
The learned Judge based his decision to dismiss
the action on two grounds. They are summarized
in his reasons for judgment as follows [at page
416]: ,
1. That conditions did not exist at any relevant time nor at
any time during the voyage, for that matter, for general
average to be declared because neither cargo nor the vessel was
ever in peril.
2. That, in any event, had general average conditions existed
and expenses relating to same existed following the arrival in
Montreal, the cargo owners were nevertheless fully justified in
requiring that their cargo be discharged forthwith in Montreal
on payment of the freight charges for the entire voyage. They
were not obliged to continue the voyage to Toronto nor can
they be held liable at law to contribute under a general average
claim for expenses subsequently incurred, whether they be
engine repairs or wharfage or other charges incurred during the
period of repairs.
In view of these conclusions he did not find it
necessary to deal with the remaining questions.
The appellant takes issue with that decision,
asserting that a general average situation did exist
at Montreal and, secondly, that the common
adventure could not be terminated there by the
action of the respondents in taking delivery of the
cargo pursuant to the order made by the Trial
Division on May 17, 1976. It is argued that the
respondents remained liable to contribute in gener
al average for the expenses incurred after delivery
of the cargo.
York-Antwerp Rules, 1974
I wish first to deal with a preliminary matter. It
concerns the relevance in these proceedings of the
York-Antwerp Rules, 1974 which are attached to
and form part of the stated case. Counsel for the
appellant relies on those Rules and on cases decid
ed under them. Counsel for the respondents says
that this cannot be done and relies on an agree
ment made by the parties at the hearing. It is, he
says, reflected in the following observations made
by the learned Judge in his reasons for judgment
[at page 412]:
Although the York-Antwerp Rules and the New Jason
Clause (ref. par. 3 of the case) are included, counsel for the
parties agreed at the hearing that there was nothing in these
provisions which would be of any assistance in determining the
issues before the Court and that they may therefore be ignored.
It was also agreed, as appears from paragraph 4 of the stated
case and as agreed by counsel at the hearing, that nothing turns
on the practice of English average adjusters.
Counsel for the appellant explains that the
agreement referred to by the learned Judge was
made only after the parties had amended the
question posed in paragraph 22(a) by adding the
words "immediately after the cargo was delivered
pursuant to the Court Order obliging delivery".
He submits that the Rules could not assist the
Court in determining whether a general average
situation existed immediately after the cargo was
delivered. If it existed at that time, he says, it was
only because it came into existence at an earlier
point in time while the cargo was still on board. It
is his contention that a general average situation
arose because the engine damage, discovered on
April 14, caused the vessel to be detained at
Montreal for repairs. There was, in my view, no
need to consult the Rules to determine whether
that situation continued to exist after delivery of
the cargo during the month of May. The question,
in reality, is whether the delivery of the cargo put
an end to the general average situation and to the
common adventure.
The wording of paragraph 4 of the amended
stated case is pointed to by counsel for the
respondents as furnishing additional evidence of an
intention that the Rules are to be ignored. By that
paragraph it was agreed:
Attached is a copy of the York-Antwerp Rules 1974. Neither
party in this case intends to lead any evidence either on the said
York-Antwerp Rules 1974 or on the practice of English Aver
age Adjusters;
I would not read those words as supporting that
suggestion. Agreeing not to lead evidence on the
Rules is not the same as saying that they are to be
ignored altogether when, plainly, they are part of
the contract. In any case, with the assistance of
counsel, we are in a position to interpret the Rules
even though no evidence on them was led at the
hearing. The practice of English average adjusters
can be of no assistance in view also of the fact that
it was not proven.
The contract of affreightment governing the
carriage provided for the adjustment of general
average "according to York-Antwerp Rules 1974".
It is clear from this that the parties intended those
Rules to apply both in determining whether a
general average situation came into existence and,
if it did, the respective amounts each interest
concerned would be obliged to contribute. In the
circumstances, I find counsel's explanation entirely
reasonable. Indeed, it would have been most sur
prising had the parties agreed that the Rules
should be utterly ignored. In my opinion, they
must be applied in determining whether a general
average situation came into existence before the
cargo was delivered, a question which requires an
answer before one can be given to the question
posed in paragraph 22(a).
Existence of General Average Situation
Before dealing with arguments on the questions
posed at the hearing below, it is necessary to
consider whether a general average situation exist
ed at any time. I have already expressed the
opinion that a general average situation, if one
existed, came about before the cargo was deliv
ered, and that in deciding that question we must
consult the York-Antwerp Rules, 1974. If we find
that one did exist, we must decide whether it was
still in existence immediately after the cargo was
delivered. I would note at the outset that the cause
of the engine damage is nowhere revealed in the
stated case. All that is said is that the damage was
discovered four days after the City of Colombo
arrived at Montreal and that, after some delay, it
was repaired there. The absence of evidence as to
the cause of the damage suggests that the ques
tions before the Court were presented on the basis
that a general average situation did exist when the
vessel was detained for repairs but that it remained
to be determined whether or not, in the circum
stances, it came to an end with regard to the cargo
at the time it was delivered.
Assuming that the question remains at large, I
shall deal with it on the merits. It seems to me that
the following provisions of those York-Antwerp
Rules, 1974 are relevant:
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 rea
sonably made or incurred for the common safety for the
purpose of preserving from peril the property involved in a
common maritime adventure.
Rule XI .. .
(b) When a ship shall have entered or been detained in any
port or place in consequence of accident, sacrifice or other
extraordinary circumstances which render that necessary for
the common safety, or to enable damage to the ship caused by
sacrifice or accident to be repaired, if the repairs were neces
sary for the safe prosecution of the voyage, the wages and
maintenance of the master, officers and crew reasonably
incurred during the extra period of detention in such port or
place until the ship shall or should have been made ready to
proceed upon her voyage, shall be admitted in general average.
Provided that when damage to the ship is discovered at a port
or place of loading or call without accident or other extraordi
nary circumstance connected with such damage having taken
place during the voyage, then the wages and maintenance of
master, officers and crew and fuel and stores consumed during
the extra detention for repairs to damages so discovered shall
not be admissible as general average, even if the repairs are
necessary for the safe prosecution of the voyage.
When the ship is condemned or does not proceed on her
original voyage, wages and maintenance of the master, officers
and crew and fuel and stores consumed shall be admitted as
general average only up to the date of the ship's condemnation
or of the abandonment of the voyage or up to the date of
completion of discharge of cargo if the condemnation or aban
donment takes place before that date.
Fuel and stores consumed during the extra period of deten
tion shall be admitted as general average, except such fuel and
stores as are consumed in effecting repairs not allowable in
general average.
Port charges incurred during the extra period of detention
shall likewise be admitted as general average except such
charges as are incurred solely by reason of repairs not allowable
in general average.
In concluding that "a general average situation
could not and did not at law exist" on April 14,
1976 at the time the engine damage was dis
covered, the learned Judge below relied on the
concept of general average recognized at common
law as illustrated by decided cases and by textwrit-
ers. He did not approach the question in light of
the York-Antwerp Rules, 1974 thinking, no doubt,
that the agreement made by the parties at the
hearing precluded him from doing so.
No Canadian or Commonwealth case interpret
ing the York-Antwerp Rules, 1974 has been
drawn to our attention. On the other hand I would
note that the second sentence to the Rule of Inter
pretation was commented upon as follows by the
learned authors of Lowndes & Rudolf, General
Average and York-Antwerp Rules (10th ed.),
British Shipping Laws, Volume 7, paragraph 548,
at pages 256-257:
Thus if the facts support a claim in general average under the
numbered Rules, it matters not that there has been no general
average act within the meaning of Rule A.
I am also assisted by an American case, Eagle
Terminal Tankers, Inc. v. Ins. Co. of USSR, 1981
A.M.C. 137 (2d Cir. 1981). In that case, the vessel
was on a voyage from Port Arthur, Texas to
Leningrad with a scheduled call at Rotterdam.
While manoeuvring off the English coast to pick
up a pilot a bump was felt on board. The next day
metallic scrapings were heard coming from the
stern. Shortly afterward the vessel arrived at Rot-
terdam where extensive propeller damage was
found. General average was declared. It was neces
sary to make repairs there before the voyage could
be resumed. When cargo declined to contribute in
general average, an action was brought in the
United States District Court for the Southern
District of New York against its insurer. The
contract of affreightment provided that "General
Average shall be payable according to York/
Anwerp Rules, 1950, and to be settled in New
York". It was held at first instance that no general
average situation existed, the Court being of the
view that the vessel had not been threatened by
any "peril" as required under traditional principles
of the law of general average and the Rules. It was
noted that the damage was discovered only after
the vessel was safely moored and that she "could
have remained moored indefinitely at Rotterdam
without incurring the slightest peril" to herself or
her cargo. The need for repairs for completing the
voyage was viewed as "irrelevant".
That decision was reversed by the Court of
Appeals for the Second Circuit. It based its deci
sion on the Rule of Interpretation, Rule A, Rule
X(b) and Rule XI(b) of the York-Antwerp Rules,
1950. As to the effect of the two latter Rules the
Court said (at pages 146 to 148):
Rules X(b) and XI(b), which in substance date back to the
original 1890 Rules, do appear to contemplate contribution in
general average toward expenses that might not qualify under
Rule A. This is particularly evident in the alternative basis of
recovery set out in the numbered Rules: recovery of expenses
incurred "to enable damage to the ship caused by sacrifice or
accident to be repaired, if the repairs were necessary for the
safe prosecution of the voyage..." (the safe prosecution
clause). Under this clause, repairs necessary for the safe con
tinuation of the voyage can be deemed general average acts,
even if they would not be so regarded under Rule A alone.
Buglass gives the following explanation:
[T]he York/Antwerp Rules adopted and legalized the
so-called "artificial general average" or "general average by
agreement" in the numbered rules by admitting as general
average port of refuge expenses incurred not only consequent
on putting into port "for the common safety," but also while
detained at a port of loading or call undergoing repairs
necessary for the safe prosecution of the voyage. [Knut]
Selmer, a Norwegian authority, rationalizes this by reason
ing that it is not the actual danger but rather the eventual
danger that might arise during the subsequent part of the
voyage which gave rise to the claim for general average
contribution. In short, the principles laid down by Rule A are
greatly modified; it is sufficient that a situation has arisen in
which the further prosecution of the voyage might entail
actual danger for vessel and cargo ... .
"It seems clear ... that under the York/Antwerp Rules, as
long as a peril does exist, not only need it not be imminent, it
is permissible that it be merely anticipated; and presumably,
as in other general average matters, the opinion of the master
will not be lightly challenged. In practice a situation of
reasonable apprehension, although not of actual danger, is
sufficient." L. Buglass, supra, at 123-24.
In effect, then, the safe prosecution clause is to be read not as
eliminating the requirement of peril but as presuming its
presence in cases where, because of accident or sacrifice, a
voyage cannot safely be resumed without repairs. Such a
presumption is entirely consistent with the modern interpreta
tion of the peril requirement in Navigazione Generale, supra,
which, as noted above, involves only a showing of "real and
substantial" danger even though ultimate catastrophe "may be
distant or indeed unlikely." Lowndes and Rudolf agree that the
safe prosecution clause "is a notable example of the occasions
where those who supported completion of the adventure as the
basis of general average prevailed over those who supported the
common safety." R. Lowndes & G. Rudolf, supra, par. 692.
(The authors do, however, play down to some extent the
distinction between the common safety and safe prosecution
clauses, asserting that "[t]he degree of damage to the ship
necessary to meet the requirements of the expression is the
same as—no less than—would be necessary to endanger the
`common safety' of the adventure if the vessel were at sea." As
an example of the requisite "damage," the authors cite the loss
of a propeller at sea, rendering a ship "unfit to encounter the
ordinary perils of the sea." Id. par. 692 at 330. Under such
circumstances, they note, "once within a port where repairs can
be effected, safety will have been attained"; the safe prosecu
tion clause "merely provides for a situation in port which, if the
ship were at sea, would endanger the common safety." Id.
This interpretation appears to reflect a narrower reading of
the safe prosecution clause than that contained in the previous
edition of the same work, which asserted that the clause
"contemplates repairs to avert a frustration of the adventure
and is to be contrasted with repairs `necessary for the common
safety' which is concerned with physical safety." R. Lowndes &
G. Rudolf, The Law of General Average par. 708 at 350 (9th
ed. J. Donaldson, C. Ellis, C. Staughton 1964). The earlier
edition also specifically recognized that the safe prosecution
clause would permit general average contribution under cir
cumstances "which would not be a general average act either at
common law or under Rule A unless incurred for the common
safety or as a direct consequence of a general average act." Id.
par. 671 at 336.
The change in emphasis in the 10th edition may reflect a
recent trend toward tightened definition of general average
acts. See, e.g. R. Lowndes & G. Rudolf (10th edition), supra,
par. 694 at 331, noting that at the 1974 Conference to amend
the Rules "some effort was made to reduce the incidence of
general average costs by increasing the stringency of the cri
teria by which it should be determined whether a general
average situation exists." But see G. Gilmore & C. Black,
supra, sec. 5-16 at 271.) We believe that this interpretation of
Rules X(b) and XI(b) gives proper effect to their language and
purpose.
Under this view of the Rules, we are satisfied that this record
establishes a prima facie general average claim. Although the
ship here had not lost its propeller, cf. note 5 supra, the record
shows that it has been seriously damaged and that its condition
was deteriorating. As indicated above, the damage report
revealed that the propeller "had backed down the taper of the
tailshaft by about 250 mm and the top of the taper was clearly
visible." As we read these facts, the ship's condition, allegedly
as the result of an accident at sea, presented a "real and
substantial" danger of loss or complete incapacitation of the
propeller—and consequent peril—if the ship had still been at
sea or if it returned to sea without repairs. Defendant implicitly
recognized this threat by conceding the necessity of the repairs
prior to the resumption of the voyage. Under these circum
stances, we believe the requirements for a prima facie claim
under Rules X(b) and XI(b) have been satisfied. (Compare
Empire Stevedoring Co. v. Oceanic Adjusters, Ltd., 1971 AMC
795, 315 F.Supp. 921 (S.D.N.Y. 1970), a case whose facts are
similar to those here and in which the validity of the general
average claim appears to have been assumed without consider
ation of the issue of peril.)
In my opinion a general average situation exist
ed at Montreal by reason of the detention of the
vessel at that port for repair of engine damage
required for the safe prosecution of the voyage.
This would appear to follow from the provisions of
Rule XI(b) of the York-Antwerp Rules, 1974. I
come to this conclusion even though the 1974
version of Rule XI(b) is not identically worded to
that of 1950. For example, the proviso did not
appear in the 1950 version. There is nothing in the
record to show what caused the main engines to be
damaged and, in particular, whether it was dis
covered "without any accident or other extraordi
nary circumstance" connected with it "having
taken place during the voyage". The parties are
silent on the point. In paragraph 6 of the stated
case they say only that "for the purposes of this
cargo due diligence was exercised by the Plaintiff
to make the vessel seaworthy before, and at the
commencement of the subject voyage". Indeed,
absence of evidence concerning the cause of the
engine damage suggests that, in posing the ques
tion in paragraph 22(a), the parties may well have
assumed that a general average situation existed
by reason of the detention and the need to make
repairs for the safe prosecution of the voyage. In
any event, I would not be prepared to say on the
basis of the record that the engine damage falls
within the Rule XI(b) proviso. Besides, repairing
the engines at Montreal would seem "necessary for
the safe prosecution of the voyage" through the St.
Lawrence Seaway to Toronto as, otherwise, the
vessel might have been exposed to danger of
stranding, collision or other accident imperilling
herself and her cargo.
Delivery of Cargo at Port of Call
The learned Judge answered the question posed
in paragraph 22(a) of the stated case in the nega
tive by finding that a general average situation
could not and did not exist at any relevant time or
at any time during the voyage. As I have already
decided (on the basis of the York-Antwerp Rules,
1974) that a general average situation did exist, it
would normally follow that the respondents must
contribute in general average toward the extraor
dinary expenses even though subsequently
incurred. The question posed in paragraph 22(f),
however, requires an answer in light of the fact
that the circumstances were altered by delivery of
the cargo as described in paragraph 22(b).
The learned Judge answered the question in
paragraph 22(f) on the assumption that a general
average situation had existed. But, in doing so, he
rejected the plaintiff's argument that the voyage to
destination was a common adventure and, accord
ingly, that both the ship and its cargo "were
obliged to contribute to whatever mishap or misad
venture might occur during the entire voyage".
Nor did it matter, in his view, that the cargo had
not been parted with voluntarily. There was "a
simple and, in my view, unassailable answer to
that argument". He put it in this way at page 415
of his reasons for judgment:
... neither general contract law nor admiralty law obliges a
cargo owner to keep his cargo aboard a ship until the ultimate
destination provided for in the bill of lading is reached if he
pays in full the freight charges provided for therein for the
entire voyage and requests off-loading at any intermediate port
where the ship has docked and facilities are available. There
were no special clauses in the bills of lading in issue which
would change this state of affairs.
The American cases of The `Julia Blake", 107
U.S. 418 (1882) and the Domingo de Larrinaga,
1928 A.M.C. 64 (S.D.N.Y. 1927) are cited in
support. The `Julia Blake" was not concerned
with general average as such so it may be distin
guished in that way. Nevertheless, it is relied upon
for the following statement of principle which
found favour with the learned Judge. The Chief
Justice of the United States, speaking for the
Court, expressed the principle in the following
passage (at page 431):
It is contended, however, that the owner of the cargo has no
right to demand his property at an intermediate port unless the
voyage has been actually abandoned or the necessary repairs on
the vessel cannot be effected. The cargo owner is not bound to
help the vessel through with her voyage under all circum
stances. It is the duty of the vessel owner, and of the master as
his appointed agent, to do all that in good faith ought to be
done to carry the cargo to its place of destination, and for that
purpose the cargo owner should contribute to the expense as far
as his interests may apparently require; but he is under no
obligation to sacrifice his cargo, or to allow it to be sacrificed,
for the benefit of the vessel alone. He ought to do what good
faith towards the vessel demands, but need not do more. If he
would lose no more by helping the vessel in her distress than he
would by taking his property and disposing of it in some other
way, he should, if the vessel owner or the master requires it,
furnish the help or allow the cargo to be used for that purpose.
To that extent he is bound to the vessel in her distress, but no
further. When, therefore, a cargo owner finds a vessel, with his
cargo on board, at a port of refuge needing repairs which
cannot be effected without a cost to him of more than he would
lose by taking his property at that place and paying the vessel
all her lawful charges against him, we do not doubt that he may
pay the charges and reclaim the property. Otherwise he would
be compelled to submit to a sacrifice of his own interests for the
benefit of others, and that the law does not require. What
charges must be paid will depend on the circumstances of the
case. Sometimes they may include full freight, expenses at the
port of refuge, general average charges, and possibly more, and
sometimes less; but upon full payment of such as are in law
demandable, the cargo must be surrendered.
Here, the respondents assert that they paid full
freight to Toronto before taking delivery of the
cargo at Montreal. That assertion is not chal
lenged and the learned Judge appears, plainly, to
have proceeded on the basis that that was so.
The principle enunciated in The `Julia Blake"
was applied by the United States District Court
for the Southern District of New York in the
Domingo de Larrinaga which was a case of gener
al average. A question of law was referred to a
Commissioner and, when his report came before
the Court for review, it was affirmed. The cargo
consisted of salted hides shipped from Buenos
Aires to New York via Boston. The Commissioner
found (at page 65) that, if the hull damage caused
by the stranding of that ship while inward bound
to Boston was permanently repaired at that port,
"all the cargo would have to be discharged and
stored". The alternative was to proceed to New
York in tow after temporary repairs and this was
decided upon. Consignees demanded delivery of
the cargo at Boston and, upon demand of shipown-
ers, gave a general average bond so as to secure
delivery there. Later they refused to contribute in
general average for expenses incurred after the
cargo was delivered. But it is evident, I think, that
the existence of serious risk of further damage to
the cargo occurring during the voyage was central
to the decision as it is heavily underscored in the
judgment of Thacher D.J. at page 69.
Other cases decided in England (Job v. Langton
(1856), 6 EP. & BP. 779; 119 E.R. 1054 (K.B.);
Royal Mail Steam Packet Company v. English
Bank of Rio de Janeiro (1887), 19 Q.B.D. 362)
and in the United States (Bedford Commercial
Insurance Company v. Parker et al., 2 Pick. 1; 19
Mass. 1 (1823); Pacific Mail Steamship Co. v.
New York, H. & R. Min. Co., 74 Fed. 564 (2d Cir.
1896)) are relied upon by the respondents as show
ing that they are under no obligation to contribute
toward expenses incurred after delivery of the
cargo. Those, of course, are cases of stranding.
Thus, it has been held in England that cargo
removed from a stranded ship to a place of safety
is not liable in general average for expenses subse
quently incurred unless its removal can be said to
have been part of one continuous operation to save
both the ship and the cargo rather than the cargo
alone. While the present case is not one of strand
ing, the respondents contend that they are covered
by the principle in that the cargo was in a place of
safety at the time the expenses were incurred and
because delivery was not made for the purpose of
saving both the vessel and the cargo. That is the
principle laid down in Job v. Langton (supra) and
applied in Walthew v. Mavrojani (1870), L.R. 5
Ex. 116 as well as in Royal Mail Steam Packet
case where Wills J. stated (at pages 370-371):
I take it to be settled now that the circumstances which
impose a liability in the nature of general average must be such
as to imperil the safety of ship and cargo and not merely such
as to impede the successful prosecution of the particular
voyage: Svensden v. Wallace 13 Q.B.D. 69; Harrison v. Bank
of Australasia Law Rep. 7 Ex. 39. I take it also to be settled
that if the cargo as a whole be landed and in safety the
expenses of getting the ship afloat incurred thereafter are not
general average: Job v. Langton 6 E. & B. 779, a case with
which Moran v. Jones 7 E. & B. 523 has been supposed to
conflict, but which does not seem to me, so far as principles are
concerned, to be open to that observation. It is the decisions, if
anything, which are at variance, not the principles upon which
they are based. The Master of the Rolls has stated in Svensden
v. Wallace 13 Q.B.D. 69, at p. 80 that the decision in Moran v.
Jones 7 E. & B. 523 cannot be supported, and I refer to the
case therefore only to shew that it has not been overlooked.
Where the cargo as a whole is safely landed, the shipowner has
his ship as she lies, either supposed to be worthless, in which
case she will be left where she is, or supposed to be worth
something to him, in which case he will be held to spend the
money necessary to rescue her on his own account and for his
own purposes only, in which case the expenditure cannot be the
subject of general average.
And see also the observations of the Supreme
Court of the United States to like effect in McAn-
drews v. Thatcher, 3 Wall. 347 (1865), per Clif-
ford J. at pages 368-369. For a discussion of these
and other cases, see Lowndes & Rudolf (supra),
paragraphs 261 to 269, at pages 130 to 136.
The respondents by their injunction proceedings
of May 1976 requested delivery of the cargo at
Montreal and, subject to giving a general average
bond, that request was granted. By its delivery the
cargo passed out of the control of the vessel and
into the custody and control of the respondents.
The legal effect, it seems to me, was to sever
permanently the connection between the cargo and
the vessel and to bring the common adventure to
an end. In my view, expenditures incurred subse
quent to that separation were not incurred for the
common safety of the ship and the cargo but for
the safety of the ship alone. I can find nothing in
the York-Antwerp Rules, 1974 or elsewhere in the
contract of affreightment that committed the
respondents to contribute in general average
toward such expenses. Nor can I find that the
respondents committed themselves to do so by
virtue of some other agreement entered into before
the cargo was delivered. The general average bond,
it may be assumed, guaranteed payment of an
amount that is properly payable. In any event, it is
not suggested that the bond provided a basis for a
contribution from cargo beyond that set forth in
the York-Antwerp Rules, 1974.
In summary, I would agree with the learned
Judge that the respondents are not liable to con
tribute in general average.
Disposition
In view of the above conclusion it becomes
unnecessary to discuss the remaining questions.
Accordingly, I would dismiss the appeal with costs.
LACOMBE J.: I concur.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.