General average was declared after Star Antares made contact with an unknown submerged object and was damaged. However, a dispute subsequently arose as to which version of the York Antwerp Rules governed the rights and obligations of the parties, and in particular whether the 2016 version of the York-Antwerp Rules are a “subsequent modification” of the 1994 Rules. Maria Borg Barthet, Alistair Johnston and Deji Sasegbon summarise Star Axe I LLC v Royal and Sun Alliance Luxembourg S.A.- Belgian Branch and others.
Facts
The Star Antares [2023] EWCH 2784 (Star Axe I LLC v Royal and Sun Alliance Luxembourg S.A.- Belgian Branch and others (the “STAR ANTARES”) [2023] EWHC 2784 (Comm)) concerned a shipment of ferrochrome on board a bulk carrier which was being carried from ports in southern Africa to Asia. During the voyage, the vessel made contact with an unknown submerged object and was damaged. General average was declared, and the Defendant cargo insurers issued Average Guarantees to the Claimant, undertaking to pay any contributions to general average which were properly and legally due and payable in respect of the goods covered by the bills of lading. A dispute subsequently arose as to the version of the York Antwerp Rules which governed the rights and obligations of the parties.
Judgment
In the circumstances, the High Court was asked to consider whether the 1994 or the 2016 version of the York Antwerp Rules had been incorporated into the contract of carriage, which, being on Congenbill 1994 standard form bill of lading terms, provided:
“General Average shall be adjusted, stated and settled according to the York-Antwerp Rules 1994, or any subsequent modification thereof in London unless another place is agreed in the Charter Party.”
Adjusters and others in the industry have long considered that these words have the effect of incorporating the 1994 Rules on the basis that subsequent versions of the Rules are, they would argue, new rules and not “modifications”.
Mr. Justice Butcher disagreed. Approaching the matter largely on the basis of construction, he reached the conclusion that a reasonable person, without regard to the materials submitted on behalf of the carrier, would not have put faith in the ‘somewhat technical distinction’ between amendments to YAR 1994 and a new version of the YAR. Butcher J held that the word ‘modification’, as a matter of ordinary use of language, was sufficient to encompass subsequent versions of the YAR. He ultimately reached the conclusion that the YAR 2016 should be applied in the circumstances.
It is noteworthy that no expert evidence regarding the practice of adjusters was adduced by the Claimants in the case.
Discussion
Whilst there are numerous differences between the 1994 and 2016 Rules, perhaps one of the most significant is the 1-year time-bar introduced by the 2016 Rules. In this regard, an updated Rule XXIII provides, in relevant part:
“(a) Subject always to any mandatory rule on time limitation contained in any applicable law:
(i) Any rights to general average contribution including any rights to claim under general average bonds and guarantees, shall be extinguished unless an action is brought by the party claiming such contribution within a period of one year after the date upon which the general average adjustment is issued. However, in no case shall such an action be brought after six years from the date of termination of the common maritime adventure.
(ii) These periods may be extended if the parties so agree after the termination of the common maritime adventure”
In consequence, therefore, this decision has far-reaching implications. There will no doubt be adjustments in the process of being finalised in accordance with an incorrect version of the Rules, as well as similarly incorrectly issued adjustments, in respect to which contributions are currently being collected. In the absence of any agreement being reached, between the various parties involved in the general average, to proceed on the previously understood basis, these adjustments will have to be re-adjusted, perhaps at great cost and with adverse time implications.
Further, and in respect of contributions which have already been paid, where, had the adjustment been prepared in accordance with the 2016 Rules, no contributions would have been due (if, for example, the YAR 2016 1-year time-bar has elapsed) or a lesser amount would have been payable (in view of the differences between both sets of Rules), there may be a risk that parties to apparently settled claims will seek to find ways in which to reopen these in an attempt to recover sums not otherwise due. This will, of course, be subject to the terms of payment (for example, if a receipt and release has been signed, a paying party may be unable to recover any payments made).
Whilst the full effects of this judgment are yet to become apparent, the possibility that we will see litigation, commenced by parties seeking to recover general average contributions which they have paid, cannot be discounted.
However, parallels may be drawn between this judgment and Mitsui & Co and others (Respondents) v. Beteilgungsgesellschaft LPG Tankerflotte MHB &Co KG and another (Appellants) [2017 UKSC 68] (the “Longchamp”) which also changed an established adjusting practice (namely the way Rule F of the York Antwerp Rules is to be applied). It is noteworthy that the Longchamp does not appear to have encouraged an influx of litigation. As to why this may be the case, there are a number of possibilities:
1) settlement agreements, prohibiting any action to recover additional amounts by way of contribution, being entered into prior to the transfer of funds by a paying party;
2) prohibitively expensive costs of investigating the difference in the contribution which was paid and that which should have been paid;
3) a failure to commence proceedings within the limitation period for unjust enrichment claims.
Whilst points nos. 1 and 3 are likely to apply equally to a situation where a contribution has been paid in accordance with an adjustment based on an incorrect version of the York Antwerp Rules, point no. 2 may not. Where the issue is that the amount of the contribution is excessive, the paying party would similarly have to incur the (possibly great) expense of recalculating the general average with a view to understanding the prudence (or otherwise) of pursuing a recovery. On the other hand, where the issue is that a contribution has been paid notwithstanding an expiry of the YAR 2016 time-bar, it will likely be much less costly to reach a position whereby the costs and benefit of commencing proceedings can be assessed.
Concluding remarks
It is noteworthy that this is the second time in just over six years (see the Supreme Court judgment in the Longchamp, referred to above) where established adjusting practice has been reversed by the courts. Points of general average practice are rarely examined by the judiciary; largely because they are generally accepted by the market as established practice. Both this and the Longchamp judgments will undoubtedly encourage further challenges to adjusting principles long understood to be correct.
It is understood that the claimants in this case have decided not to appeal the judgment.
For further information, contact:
Maria Borg Barthet
Director
Maria@cjclaw.com
Alistair Johnston
Director
Alistair@cjclaw.com
Deji Sasegbon
Director
Deji@cjclaw.com