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The law of general average, English and foreign online

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with safety to all, to prevent. He has not an absolute



{(l) (1870), L. E. 5 C. P. 397; 39
L. J. (N. S.) C. P. 218.

(e) In Kni(jht\. Faith (ISoO), 15
Q. B. 649, where a ship had been
sold as a wreck, but because there
had been no notice of abandonment,
the underwriter was held to be not
liable for a total loss, he was yet
held liable for a particular average
based on the estimated cost of re-
pairing — this being a smaller amount
than the owner's actual loss by selling



the shij) — notwithstanding that the
cost of repairing had not been actually
incurred. " If," said Lord Campbell,
" the ship had been fairly sold to be
repaired, she must have sold for less
on account of the damaged state of
her bottom." (See also Lidgett v.
Sccretan (1871), L. E. 6 C. P. 616;
40 L. J. C. P. 257; Pitman y. Uni-
versal Mar. Ins. Co. (1882), 9 Q. B. D.
192 (C. A.) ; Marine Insurance Act,
1906, s. 69.)



264 PORT OF REFUGE EXPENSES. [CHAP. X.

riglit to make a complete repair of the ship at the port of
refuge, if a partial or temporary repair will suffice to
render her seaworthy to carry the cargo to its destina-
tion. Hence, if tliere be two courses open to him at the
port of refuge, by the first of which the ship will be
completely repaired, but there will be a long delay or a
considerable expense of general average, while by the
second this delay or expense will be diminished, and the
ship, though incompletely repaired, will be fit to sail on
her voyage with her whole cargo, the second course is
that which the master is legally bomid to adopt. Having
done so, he has no right to make a merit of his conduct,
and claim compensation from the cargo, on the ground
of his having rendered it a service by not having chosen
the more expensive course. In such a case, therefore, an
adjustment on the basis of "substituted expenses" would
be incorrect.

This is expressly determined by the decision in
Wilson V. T/ie Bank of Victoria[f). A dismasted ship,
having: an auxiliary screw, had o^one for refuo:e to the
port of Rio de Janeiro. She might have been completely
repaired there, so as to sail home, using her screw as
auxiliary only, but such a repair would have involved
a very considerable expense, a large part of wdiich would
have constituted a general average ; while she could be
rendered seaworthy to come home, under steam only,
by merely making some temporar}" repairs and laying in
a large stock of coal. This course, which was clearly
best for all, was adopted. The owner of the ship then
claimed that his outlay for the temporary repair and the
coal should be treated as a "substituted exj)ense;" that
is, should be divided rateably between the saving effected
to the general average, and that effected to himself as

(/) (1867), L. E. 2 a B. 203; 3G L. J. (Q. B.) 89.



SECT. LV.J DETAILS.

shipowner, by not having repaired at Rio. The court
decided, liowever, lirst, that the employment of the
auxiHarv screw in the manner described amounted to no
more than the using of the ship's own propelHng power
within the terms of the contract ; and, secondly, that,
the master being legally bound to adopt this more econo-
mical course, there was no rioht to claim anvthino- as
compensation or reward for not having adopted the
course which would have been more expensive.

In delivering the judgment of the court, Black-
burn, J., said : —

'■ Wc wish to guard ag-ainst being- supposed to sanctiou the
notiou that in a case like this the sliipowners could have charged
the owners of the cargo with any part of the expenses of unshipping-
and warehousing- the gold at Rio, supposing' the master had under
the circumstances adopted that course. Inasmuch as the master
could, by the exxDenditure of a comparatively small sum on temporar} -
repairs and coals, bring- the ship and cargo safely home, it was his
duty to do so; and, though we do not decide a point which does not
arise, we are not to be taken as deciding- that his owners would not
have been liable to the owners of the cargo if he had not taken this
course .

" But, passing- by this, we think that the expenses actually in-
curred must be apportioned according to the facts which actually
happened, and that there is no legal principle on which they can
be apportioned according- to what might have been the facts if a
different course had been pursued. No case or authority was cited
to support the principle contended for, nor are we aware of any.
If in a particular trade it has been found convenient to act on this
principle, and that has been done to such an extent as to create a
custom, tacitly making it part of the contract that this shall be the
principle applied, or if the parties to a charter-party stipulate that
it shall be so, and by words of reference to the charter-party in the
bills of lading and policy of insurance make it part of the contract
affecting everyone, the case would be different; but as it is, the
principle proposed is not, we think, tenable at law" {g).

{</) (1S67), L. E. 2 Q. B. 203; 36 L. J. (Q. B.) 89.



265



266 POET OF REFUGE EXPENSES. [cHAP. V.

These decisions, taken together, indicate the limits
within which the method of adjustment as "substituted
expenses" must be restricted. Wilson v. The Bank of
Victoria shows us tliat this method is not to be adopted,
unless there has been something done, not merely involv-
ing loss or expense to the shipowner and reduction of
expense under the head of general average, but also in
excess of the shij^owner's duty under his contract. The
other cases cited show that when the course taken is in
excess of this duty, and when it involves a loss or expense
to the shipowner, w^hile it relieves the general average of
a charge which otherwise must have fallen upon it, the
cargo must not escape from liability altogether, on the
plea that the expense actually incurred is not itself
properly general average, wdiile the alternative expense,
which would have been such, has not actually been
incurred. The extent of the cargo's liability in such a
case has not yet been judicially determined ; but w^e
learn from the judgment just cited that it may be regu-
lated by custom.

We have now to consider, then, to what extent this
process of regulating the treatment of substituted ex-
penses by custom has been carried, or is in the process
of being carried.
Hire of hulks 1 . One sucli caso, as to wdiich the custom is old-

established and clearly settled, relates to the employment
of hulks or lighters as store-ships for the cargo at a port
of refuge. When the cargo has to be discharged, it is
sometimes found cheaper to leave it in lighters than to
send it ashore and place it in a warehouse. The hire of
the lighters may cost more than the warehouse rent alone,
and more than the cost of sending the cargo ashore alone,
yet less than these two expenses together. Hence has
arisen the custom of dividing' the li(>liter hire or hulk



SECT. LV.J DETAILS. ^t)7

hire between the geucral averajii-e, the cargo, and the
freight, in the proportions in which these several inte-
rests would have paid for the cost of landing, the ware-
house rent, and the cost of reshipment, had tlie ordinary
and more expensive course of landing the cargo been
adopted {gg).

This custom has been carried beyond the legitimate
limits of substituted expenses, as defined above. Even
in ports where no warehouses are to be had, and where a
cargo is on that account necessarily placed in a hulk, as
the only course practicable, the same rule [said Mr.
LowndesJ of dividing the hulk hire, though the basis of
apportionment is then purely fictitious, is adopted.

2. When cargoes, of which the value is small in Buying new

IT cargo to save

proportion to the bulk, such as coals, have to be dis- expense on
charged at a port of refuge, it sometimes is, to save
expense, arranged between the master and the shipper
that tlie cargo shall be sold from alongside, and a fresh
cargo purchased to take its place when the ship is ready
for it. In such a case, the loss on the sale and repur-
chase is treated as substitution for the expenditure saved
by the adoption of this course, and is divided in the
proportions in which that expenditure would have fallen.
This mode of dealing with the loss appears to be per-
fectly leHtimate.

t3. Sometimes, again, in order to save this expense Transhippiu
of landing and re-shipping a cargo, the master, with the
consent of the shippers, hires another vessel to take his
cargo from alongside, and carry it direct to its destina-
tion. If, having done this, he is obliged to fill up his
vessel at a lower rate of freight, this loss of freight,
together with the cost of the forwarding vessel, constitutes

{(](]) See Eules of Practice of the Average Adjusters' Association, No. 20 (f),
pust, App. Z.



entire cargo.



268 PORT OF REFUGE EXPENSES. [C'HAP. V-

a charge whicli is substituted for the expenses saved by
such a measure (h). If the substituted charge is greater
than the expenses saved, the master must of course bear
the difference himself ; but, to the extent of the saving,
he is held in practice, and rightly so, to be entitled to
claim as if the expenses of discharging are incurred.
His right so to claim seems to follow from the decision
in Lee v. The Southern Insurance Co. (i).
Tiansiiipping 4. Another case of substituted expenses arises, when

the choice lies between landlnof the entire caro;o and
making a complete repair of the ship, which will enable
her to carry on the whole cargo, or else transhipping,
and sending on in another vessel a portion of the cargo,
and sailing home unrepaired, or partially repaired, with
the remainder. This can be done when the unrepaired
ship, though not seaworthy to carry her whole cargo, is
capable of sailing if less deeply laden.

This is a case as to which there is at present no
clearly-defined custom. It seems to stand on much the
same footing as that which may be called case No. 6,
and it must be reserved for discussion till we come to
the latter.
Temporary 5. Supposo that, instead of completely repairing at

gSrai"^^^^ the port of refuge, which will necessitate the discharge
of the cargo, the master saves this exj^ense by a tem-
porary repair, which renders the ship fit to sail home

(A) The editors submit that the 800/. instead of 1,000/. Therefore

substituted charge is the difference his loss, i.e., 200/., is the substituted

between the cost of the forwarding charge.

vessel and the freight which the If Mr. Lowndes' rule be literally

master earns by filling up the vessel applied, the calculation will be as

at a lower freight. For instance, let follows : —The loss of freight through

1,000/. be the original freight, TOO/. filling up at a lower freight is 1,000/.

the freight of the substituted ship, - o00/.=u00/. Therefore the substi-

500/. the freight earned by filling up. tuted charge is 500/. -f TOO/., i.e.,

The shipowner receives 1,000/. + 1,200/.!

500/., and he disburses TOO/. Ho (?) (18T0), L. R. 5 C. P. 39T, (("fe,

therefore receives the net sum of p. 263.



expense.



SECT. LV.J DETAILS. 269

with 1x11 her cargo, but is of no permanent value to her.
Can the cost of this temporary repair be treated as a
substituted expense, and charged, wholly or in part, to
general average ?

This is a very old (question. It was apparently
decided in the negative in the old Roman law (/;•). In
modern times, previously to the decision in Wilson v.
The Bank of Victoria (/), there has been a tendency to
look Avith favour on such claims. But that decision
must now be regarded as finally putting an end to them.
There is no real alternative in such a case : if the ship
can be made seaworthy to sail, without extraneous
assistance, with all her cargo, by adopting this cheaper
course, the master has no right to adopt one that is more
costly.

If, indeed, the ship can onl}^ be made seaworthy
for this purpose by being supplied with something which
does not fall within the shipowner's contract:, — for
example, if it is necessary to put on board extra hands
to work the pumps, — this additional assistance must be
treated either as a substituted expense or as general
average.

6. This leads us to the sixth case, which is one of Towing ship
frequent occurrence, and great practical importance. in piac^of*"''

Suppose a ship is at a port of refuge, at which she '"'^P''"'""-
can be completely repaired. She is not seaworthy to
sail from that port, unless so repaired : but she can be
safely towed from that port to her place of destination
by a steamer. If this course is adopted, who is to pay
for the steamer ?

Let us further suppose that the cost of the steamer
is a larger sum than the saving in the cost of dischar"ino'

{k) Leg. Ehod. de Jact. (lib. 14, Appendix A., sect. 7, infra.
tit. 2, fr. (i, 1 Pardessus, 108). See (/) Aufr, p. 264.



270 PORT OF REFUGE EXPENSES. [CHAP. V.

cargo and other general average expenses in the port of
refuge, and also larger than the saving to the shipowner
from having his repairs effected at home instead of at
the port of refuge ; hut not larger than these two
economies combined.

In such a case there seems no escape from the method
of adjustment by "substituted expenses." Is the whole
cost of the tug to be treated as general average ? The
owner of the cargo will object, that he would rather let
the ship be repaired on the spot. The master, having
once gone into port for the purpose of repairing, has no
right, he would say, unnecessaril}^ to change that purpose
to his detriment. The cost of towing in such a case is
not an expense necessarily incurred for the common
safety : the ship was already in safety, and it was not
necessary that she should be towed. Is, then, the whole
cost to fall on the shipowner ? That the shipowner might
as fairh^ object to: for the change of plan, by towing
instead of repairing, was on the whole judicious, and
the expenditure, taken altogether, was reduced by it.

Some equitable division must be made, then, of the
cost of towage ; and the fairest basis for it seems to be,
that each interest concerned should pay its share, in the
])roportions of the saving effected to each by towing
instead of discharging cargo and repairing at the port of
refuge.

A custom, however, it appears, is requisite, in order
to sanction this mode of treatment. [Such a custom,
Mr. Lowndes said, was in the process of formation at
the time when the last edition of this work was pub-
lished,] The advantage resulting from the employment
of tugs on such occasions is so obvious, that underwriters,
when consulted before the tug is hired, are always ready
to encourage the adoption of this course by agreeing to



SECT. LV.]



DETAILS.



271



pay an equitable share of the expense. It is a serious
inconvenience to be obliged to make bargains of this
nature in each particular case : and this inconvenience
seems to be leading to the establishment of a general
understanding, which will in time acquire the binding
force of a custom, that the cost of towing a disabled ship
from a port of refuge is to be apportioned on the basis
here indicated.

It may indeed be doubted whether such a custom
does not already actually exist (m).



( in ) The following rules of practice
have been laid down by the Average
Adjusters' Association : —

' ' That if a ship bo in a jioit of
refuge af which it is practicable to
repair her, and if, in order to save
expense, she be towed thence to some
other port, then the extra cost of such
towage shall be divided in proportion
to the saving of expense thereby oc-
casioned to the several parties to the
adventure."

"That if a ship bo in a port of
refuge at which it is jiracticable to
repair her so as to enable her to carry
on the whole cargo, but, in order to
save expense, the cargo, or a portion
of it, be transhipped by another ves-
sel, or otherwise forwarded, then the
cost of such transhipment (up to the
amount of expense saved) shall be
divided in proi)ortion to the saving
of expense thereby occasioned to the
several parties to the adventure."

"That if a ship be in a port of
refuge at which it is practicable to
repair her so as to enable her to
carry on the whole cargo, or such
portion of it as is fit to be carried on,
but, in order to save expense, the
cargo, or a portion of it, be, with the
consent of the owners of such cargo,
sold at the port of refuge, then the
loss by sale including loss of freight



on cargo so sold (up to the amount
of expense saved) shall be divided
in proportion to the saving of expense
thereby occasioned to the several
parties to the adventure ; i^rovided
always that the amount so divided
shall in no case exceed the cost of
transhipment and/or forwarding re-
ferred to in the preceding rule of the
Association."'

These rules are still in force and
acted on, as is likewise a resolution
interpretative of the rule respecting
substituted expenses, passed in 1877
and confirmed in 1.S7S, in order to
exclude what was found or thought
too vague and disputable in its con-
ditions, viz. : —

" That for the pm-pose of avoiding
any misinterpretation of the resolu-
tion relating to the apportionment of
substituted expenses, it is declared
that the saving of expense therein
mentioned is limited to a saving or
reduction of the actual outlaj-, in-
eluding the crew's wages and pro-
visions, if any, which would have
been incurred at the port of refuge,
if the vessel had been rei)aired there,
and does not include supposed losses
or expenses, such as interest, loss
of market, demurrage, or assumed
damage by discharging."



272



PORT OF EEFUGE EXPENSES. [CHAP. V.



Effect of con-
demnation of
ship at port
of refuge.



What justi-
iies condem-
nation.



§ 06. Up to this point, we have dealt with those
expenses at a port of refuge which are incurred when
the ship is made ready, at that port, to j^rosecute lier
voyage. We have now to consider those which are
incurred, when the ship is condemned at such a port as
not being worth repairing.

According to English law, if a ship is so damaged
by sea peril that, although it be possible to repair her,
the cost of the repairs necessary to enable her to com-
plete the voyage would be so great that it would be
unreasonable to expect the shipowner to incur it, the
owner is not bound to repair her. In such a case, his
undertaking to carry the cargo to its destination is
terminated by one of the accidents of navigation ex-
pressly excepted in the bill of lading (n).



{n) Assicuraziord Generale v. S.S.
Bessie Morris Co., [1S92] 2 Q. B.
652 (C. A.). Mr. Lowndes, citing
Moss V. Smith (1850), 9 C. B. 94,
laid down the rule that the owner is
not bound to repair, if ' ' the repair
will cost more than the shij) when
rejjaired, together with the freight
she will earn will be actually worth."
Neither Moss v. Smith, however, nor
the judgment of the Court of Appeal
in Assicurazioxi Generale v. S.S.
Bessie Morris Co., justifie^^ a hard-
and-fast rule, which implies that the
shipowner is bound to repair, if the
value of the ship when repaired and
the freight to be earned will together
exceed the cost of the repairs. Muss
V. Smith was an action against an
underwriter on freight, in which it
was contended that the as-ured could
claim for a tot:.! loss of freight if the
cost of repairing the ship exceeded
the freight ; and it became necessary
to discuss the extent of the shij:)-
owner's obligation to repair, as be-



tween himself and the owner of the
goods. Cresswell, J., in giving
judgment, said: — "The shipowner's
contract to carry the cargo would be
absolute, but for the exception in-
troduced into the bill of lading, —
unless prevented by perils of the sea.
Now, when is the shipowner said to
be prevented by perils of the sea
from fulfilling the contract he has
entered into ? When the ship is, bj-
a i^eril of the sea, rendered incapable
of performing the voyage. A ship
is not rendered incapable of perfonn-
ing the voyage when she is merely
damaged to an extent which renders
some repairs necessary : if that were
so, any, the most inconsiderable
damage, such as the loss of her
rudder, without which she could not
jjroceed, would render her incapable
of fulfilling the contract contained in
the bill of lading. But, if a ship
sustains so much sea damage that
she cannot be re2)aired, so as to be
rendered competent to. continue the



SECT. LVI.J



CONDEMNATION,



273



W lien the ship has been thus lawfully condemned, Rule for

' . , English ships.

the position of the owner of a ship under the British flag



adventure, then the owner is pre-
vented by a peril of the sea from
fulfilling "his contract." (9 0. B.
pp. 105-106.)

The meaning (;f the term " cannot
be rej^aired " is explained by the
same leai'ned judge, and also by
Maule, J., to refer not to an absolute,
but also to a pecuniary impossibility.
' ' In matters of business," said Maule,
J., "a thing is said to be impossible
when it is not practicable ; and a
thing is impracticable when it can
only be done at an excessive or un-
reasonable cost. A man may be
said to have lost a shilling, when he
has dropped it into dec]) water ;
though it might be possible, by
some verj^ expensive contrivance, to
recover it. 8o. if a ship sustains
such extensive damage, that it would
not be reasonably practicable to re-
pair her, seeing that the expense of
rejiairs would be' such that no man
of common sense would incur the
outlay, the ship is said to be totally
lost." (lb. p. IDS.)

Wilde, C. J., said :— " We are
asked, AVould any man in his senses
spend 1,000/. upon the re2)airs of a
ship for the mere purpose of earning
500/. freight ? To this I answer. Cer-
tainly not : but this is not the true
question. If, by expending 1,000/.
upon the repairs, he gets, not only
500/. freight, but also a ship worth
0,000/., who will for a moment ques-
tion the prudence of the outlay ? "
(lb. p. lOS.)

Some dicta in more recent cases
might be cited as throwing doubt
on the rule laid down in Moss v.
Smith. In Worms v. Slorcij, Parke,
B., said: — "If the vessel sails in a
seaworthy state, and in the course of

L.



the voyage is damaged by perils of
the sea, the owner is not hound to
repair it, but if he does not choose
to repair, he ought not to go to sea
with the shij) in an unseaworthy
state, and so cause a loss of the
cargo : he ought either to repair or
stop." ((1S55), 11 Exch.427.) And
Willos, J., in referring to this judg-
ment in JJlasco v. Fletcher ( (1803),
14 C. B. (N. S.) 147, see p. 157),
and again in De Cuadra v. Swuun
((1864), 16 C. B. (N. S.) 795), ap-
pears to incline towards the opinion
that, if the ship was seaworthy at
starting, and has bsen rendered
unseaworthy by sea peril, the owner
is under no (jbligation towards the
freighter to incur expense in repair-
ing. It is conceived, however, that
these expressions of opinion, when
taken in conjunction with the deci-
sion of Moss v. Smith, can only
be regarded a-; confirmations of the
doctrine that the shipowner is not
under an absolute obligation to re-
pair at any cost. In confirmation of
this, see a remark of Brett, J., in
Mavro v. Ocean Marine Insurance Co.
(1874), L. R. 9C. P. at p. 601.

This subject has been further dis-
cussed in the cases of Atwood v.
Sel/ar, and Scendsen v. Wallace. See,
on the one hand, the dicta of Cock-
burn, C. J., in the former case
((1879), 4 Q. B. D. 342, at p. -^oS) ;
see ante, p. 224 ; and Lord Black-
burn's observations on the subject
in' Scendsen v. Wallace ((18S5), 10
App. Cas. 404, at p. 417; ante, p. 247).

In Assicurazioni Generale v. S.S.
Bessie Morris Co., [1892] 1 Q. B.
571, damages wei-e claimed by tho
charterers of the ship against her
owners for abandoning the voyage



274



PORT OF REFUGE EXPENSES.



fCHAP. V.



is as follows : He has the privileg-e of hiring another
vessel, and forwarding- the cargo in it to its destination,



at an intermediate port after she had
sustained damage, although she was
in fact repaired ; and Collins, J.,
delivered a judgment in which he
reviewed all the previoiis authorities,
and held that where a shipowner has
agreed by charterparty that his ship
shall proceed to a jiort of discharge
and there deliver the cargo unless
prevented by the excepted perils,
and the ship has to put into a
port of refuge for repairs, the ship-
owner is liable in damages for
abandoning the voyage without the
consent of the charterer, unless the
effect of the excepted i)erils was



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