GENERAL AVERAGE EXPLAINED

Classic definition of general average given by an English Judge Lawrence J in Birkley v Presgrave :

All loss which arises in consequence of extraordinary sacrifices made or expenses incurred for the preservation of the ship and cargo come within general average and must be borne proportionately by all those who are interested

GA is now defined in MIA 1906 s 6

(1) GA loss is a loss caused by or directly consequential on a general average act. It includes
ageneral average expenditure as well as a general average sacrifice.

(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 propertyimperiled in the common adventure. Rule A of York Antwerp Rules 1994 which in practice apply to the adjustment of general average provides :

“ 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.

The result of a GA act is a GA loss. GA losses include : the loss suffered by virtue of a GA sacrifice; loss or liability incurred by a GA expenditure, or any losses directly consequent upon a GA act.
The person who suffers a GA loss is entitled to claim a contribution from those who benefit from it in proportion to the values of the interests which have been sacrificed and those which have been saved. The liability for such contributors may in turn be a loss for which they can claim against their own insurers and is also described as a general average loss.

Differences between Particular Average and Particular Charges

PA loss is a partial loss of the subject matter insured caused by a peril insured against, which is not a general average loss or a particular charge.

“Particular Charges” are expenses incurred by or on behalf of the assured for the safety and preservation of the subject matter insured, other than particular average or general average. They include expenses of services ‘ in the nature of salvage’ rendered by the assured or his agents.

Examples of GA

Jettisoning part of cargo or ship's stores, scuttling the ship, cutting away masts or cables, extinguishing a fire by pouring water into a hold, voluntary stranding, putting the cargo into lighters, engaging salvage services, paying money to secure the vessel's release from detention, sale of part of the cargo, additional fuel consumption, employment of towage services, tipping the vessel to repair the propellers, incurring damage to property belonging to third parties

General Average losses include expenses of ship repairs and reconditioning cargo.

York Antwerp Rules

Generally widely accepted as can be seen by their frequent incorporation into charterparties, B/L and marine insurance policies. YA Rules revised regularly, the most recent times was 1994, 2000 and 2004. Consist of 7 lettered rules and 22 specific rules. GA claims adjusted mainly on principles of lettered rules though reasonable consideration are given to the specific rules. GA Rules had been developed since mid 19 century for the purpose of removing differences between municipal laws and for reaching general agreement on matters of details and principles.

Claims Procedures

A person claiming GA contribution can assert a lien. The lien is released in return for the defendants providing an average bond, whereby he undertakes to pay the contribution due and to provide particulars of the value of his property and security in the form of either or both of a cash deposit or more commonly, a guarantee issued by his insurers.

The shipowners will then appoint a GA average adjuster, who in turn carries out a detailed and often lengthy assessment of the rights and liabilities of all interested parties, though unless otherwise agreed, his adjustment is not binding on them.

SPECIAL FEATURES

- The right only arises from a maritime adventure in the nature of a voyage

- There must be a real danger

- The danger must be to a common adventure and the action taken must be necessary for the safety of the common adventure or a direct consequence of such action

- Duration of the common adventure (eg if a portion of cargo is discharged and a GA event followed , the discharged cargo should not be called upon to contribute)

- Port of Refuge expenses [“ the going into port, the unloading, warehousing, and reloading of the cargo and the coming out of the port, are at all events part of one act or operation contemplated, resolved upon and carried through, for the common safety and benefit, and properly to be regarded as continuous.” By Thesiger LJ in Artwood v Sellar]

- There must be a sacrifice or expenditure of an extraordinary nature

- The sacrifice or expenditure must be real

- The GA act must be intentionally incurred for the benefit of the common adventure

- The action taken must be reasonable

- Contribution may be claimed from and only from an interest when it is successfully brought to the place of termination of the adventure

- Substituted Expenses (towage of a vessel from a port of refuge, forwarding of cargo from a port of refuge, temporary repairs, the extra expenses of drydocking with cargo onboard, additional overtime and air freighting spare parts.


Capt Lee Fook Choon